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Micro Finance – Anguishes & Auspicious of Rural Poor
Lalitha Bhavani. Kondaveeti B. Vamsi Krishna
M. HRM, MBA, Research Scholar M.COM, MBA, Research Scholar Asst. Professor Asst. Professor Ramachandra College of Engineering Ramachandra College of Engineering Eluru, Andhra Pradesh Eluru, Andhra Pradesh [email protected] T. Dileep
Asst. Professor Ramachandra College of Engineering Eluru, Andhra Pradesh
ABSTRACT
The biggest challenge to any civilized society is the economic deprivation of a major population.
“Self – realization and self – initiative” is the two most powerful weapons to eradicate poverty
from the world map. The failure of formal credit reaching the poor, due to the imperfect
knowledge of other borrowers and the associated transaction costs for the banks, informal sector
with the virtue of perfect information on the poor borrowers, established a good credit market.
Micro finance is powerful instrument for enhancing production and productivity and also for
alleviating poverty. Microfinance refers to small scale financial services for both credits and
deposits- that are provided to people who farm or fish or herd; operate small or micro enterprises
in both rural and urban areas. The study interprets and discussed impact of microfinance on
social conditions of rural poor in Eluru, Andhra Pradesh. The sample constituted 156
beneficiaries selected. The study was based on primary data collected through structured
questionnaire schedule as well as secondary data. In this regard an analysis has been made with
the help of the following parameters i.e. age, education, religions, marital status, social status,
type of the family, size of the family.
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Key Words: Economic Deprivation, Micro finance, Rural poor, Poverty, Formal and
informal credit, Empowerment.
INTRODUCTION
Poor section of people living in poverty, like everyone else, need a diverse range of financial
products and services to sustain their livelihood, productive finance to run their business, build
assets positions for both production and consumption, and to protect themselves against risks and
uncertainties. Financial services needed by the poor include working capital loan, consumption
credit, and savings, pension, insurance, provident funds, money transfer services etc. Micro
finance target those people who are denied credit from formal financial and banking institutions
because of lack of awareness as well as formal rules which they have to follow to get a credit
from these institutions. Micro finance can be considered as a tool for empowerment as well as
for social protection (saving, Insurance and remittances). Microfinance can also be used to
develop new generation entrepreneurs among the rural poor by providing other necessary skills
required. Micro finance is powerful instrument for enhancing production and productivity and
also for alleviating poverty. In order to build the capacities of poor and facilitate the process of
empowering them many organizations are working in India Micro finance play a vital role to
bridge the gap between demand and supply of financial services among the rural poor.
An estimated of about 300 millions in India and around 1.2 billion population world wide live in
absolute poverty. They are unable to meet their most basic human needs for food, clothing,
shelter and minimum health care. Since 1947, the absolute number of poor has doubled despite
the significant growth in agriculture production and employment over the past five decades of
development planning. Rural poverty continues to pose the greatest challenge in India.
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Micro-finance programmes in the recent past have become one of the more promising ways to
use scarce development funds to achieve the objectives of poverty alleviation. Furthermore,
certain micro-finance programmes have gained prominence in the development field and beyond.
The basic idea of micro-finance is simple: if poor people are provided access to financial
services, including credit, they may very well be able to start or expand a micro-enterprise that
will allow them to break out of poverty.
On an average, there is at least one retail credit for about 5000 rural people or every 1000
households. Rural credit from non-institutional sources (informal credit) was more than 36 per
cent, indicating the role of money lenders in the rural credit system.
Under the microfinance programme, loans are extended to the ‘Self Help Groups (SHG)’who
pool a part of their income into a common fund from which they can borrow. The members of
the group decide on the minimum amount of deposit which ranges from Rs20 to Rs 100 per
month depending upon the size of the group. The group funds are deposited with a Micro
Finance Institution (MFI) against which they usually lend (The deposits are usually placed with a
bank by the MFI) at a credit deposit ratio of 4:1 but the ratio improves with account performance
record i.e. prompt repayment of loans. The group funds are the way ‘micro savings’ are
enforced, though it may seem like collateral. The loan ticket sizes are usually Rs 2000/- to Rs
15,000/-(Source: Field Survey by Author and Impact Assessment of Microfinance in India-
Frances Sinha and the impact assessment team: EDA Rural Systems Pvt. Ltd, Gurgaon, 2003)
The growing realization among the rural poor to collectively pool their small savings so as to
create a corpus of funds to cater to their emerging credit needs underlined the emergence of
SHG's and other group related saving and credit activities in many developing countries
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In developing economies and particularly in the rural areas, many activities that would be
classified in the developed world as financial are not monetized: that is, money is not used to
carry them out. Almost by definition, poor people have very little money. But circumstances
often arise in their lives in which they need money or the things money can buy.
In Stuart Rutherford’s recent book The Poor and Their Money, he cites several types of needs:[18]
• Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding,
widowhood, old age.
• Personal Emergencies: such as sickness, injury, unemployment, theft, harassment or
death.
• Disasters: such as fires, floods, cyclones and man-made events like war or bulldozing of
dwellings.
• Investment Opportunities: expanding a business, buying land or equipment, improving
housing, securing a job (which often requires paying a large bribe), etc.
Poor people find creative and often collaborative ways to meet these needs, primarily through
creating and exchanging different forms of non-cash value. Common substitutes for cash vary
from country to country but typically include livestock, grains, jewelry, and precious metals.
As Marguerite Robinson describes in The Microfinance Revolution, the 1980s demonstrated that
"microfinance could provide large-scale outreach profitably," and in the 1990s, "microfinance
began to develop as an industry" (2001, p. 54). In the 2000s, the microfinance industry's
objective is to satisfy the unmet demand on a much larger scale, and to play a role in reducing
poverty. While much progress has been made in developing a viable, commercial microfinance
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sector in the last few decades, several issues remain that need to be addressed before the industry
will be able to satisfy massive worldwide demand. The obstacles or challenges to building a
sound commercial microfinance industry include:
• Inappropriate donor subsidies
• Poor regulation and supervision of deposit-taking MFIs
• Few MFIs that meet the needs for savings, remittances or insurance
• Limited management capacity in MFIs
• Institutional inefficiencies
The impact of microfinance is commendable in courage, self-confidence, self worthiness, skill
development, awareness about environment, peace in the family, reduction of poverty improving
rural savings, managerial ability decision making process and group management.
In other variables the impact is moderate. As a result of participation in microfinance through
the SHG programmes there is observed a significant improvement of managerial skills,
psychological well being and social empowerment. It is recommended that the SHGs may be
granted legal status to enhance the performance.
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Ways in which poor people manage their money
Rutherford argues that the basic problem poor people as money managers face is to gather a 'usefully
large' amount of money. Building a new home may involve saving and protecting diverse building
materials for years until enough are available to proceed with construction. Children’s schooling
may be funded by buying chickens and raising them for sale as needed for expenses, uniforms,
bribes, etc. Because all the value is accumulated before it is needed, this money management
strategy is referred to as 'saving up'.
Often people don't have enough money when they face a need, so they borrow. A poor family
might borrow from relatives to buy land, from a moneylender to buy rice, or from a microfinance
institution to buy a sewing machine. Since these loans must be repaid by saving after the cost is
incurred, Rutherford calls this 'saving down'. Rutherford's point is that microcredit is addressing
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only half the problem, and arguably the less important half: poor people borrow to help them
save and accumulate assets. Microcredit institutions should fund their loans through savings
accounts that help poor people manage their myriad risks
Saving down
Most needs are met through mix of saving and credit. A benchmark impact assessment of
Grameen Bank and two other large microfinance institutions in Bangladesh found that for every
$1 they were lending to clients to finance rural non-farm micro-enterprise, about $2.50 came
from other sources, mostly their clients' saving. This parallels the experience in the West, in
which family businesses are funded mostly from savings, especially during start-up.
Recent studies have also shown that informal methods of saving are unsafe. For example a study
by Wright and Mutesasira in Uganda concluded that "those with no option but to save in the
informal sector are almost bound to lose some money – probably around one quarter of what
they save there.”
The work of Rutherford, Wright and others has caused practitioners to reconsider a key aspect of
the microcredit paradigm: that poor people get out of poverty by borrowing, building
microenterprises and increasing their income. The new paradigm places more attention on the
efforts of poor people to reduce their many vulnerabilities by keeping more of what they earn
and building up their assets. While they need loans, they may find it as useful to borrow for
consumption as for microenterprise. A safe, flexible place to save money and withdraw it when
needed is also essential for managing household and family risk.
Impacts at a household level
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Health and education are two key areas of non-financial impact of microfinance at a household
level. Wright (2000, p.31) states that from the little research that has been conducted on the
impact of microfinance interventions on health and education, nutritional indicators seem to
improve where MFIs have been working. Research on the Grameen Bank shows that members
are statistically more likely to use contraceptives than non-members thereby impacting on
family size (ibid.). Littlefield, Murduch and Hashemi (2003, p.3) also acknowledge the sparse
specific evidence of the impact of microfinance on health but where studies have been conducted
they conclude, “households of microfinance clients appear to have better nutrition, health
practices and health education than comparable non-client households”. Among the examples
they give is of FOCCAS, a Ugandan MFI whose clients were given health care instructions on
breastfeeding and family planning. They were seen to have much better health care practices
than non-clients, with 95% of clients engaged in improved health and nutrition practices for
their children, as opposed to 72% for non-clients.
Microfinance and its impact in Development
microfinance plays three key roles in development. It:
♦ helps very poor households meet basic needs and protects against risks,
♦ is associated with improvements in household economic welfare,
♦ helps to empower women by supporting women’s economic participation and so promotes
gender equity.
Otero (1999, p.10) illustrates the various ways in which “microfinance, at its core combats
poverty”. She states that microfinance creates access to productive capital for the poor, which
together with human capital, addressed through education and training, and social capital,
achieved through local organization building, enables people to move out of poverty (1999). By
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providing material capital to a poor person, their sense of dignity is strengthened and this can
help to empower the person to participate in the economy and society (Otero, 1999).
The aim of microfinance according to Otero (1999) is not just about providing capital to the poor
to combat poverty on an individual level, it also has a role at an institutional level. It seeks to
create institutions that deliver financial services to the poor, who are continuously ignored by the
formal banking sector. Littlefield and Rosenberg (2004) state that the poor are generally
excluded from the financial services sector of the economy so MFIs have emerged to address this
market failure. By addressing this gap in the market in a financially sustainable manner, an MFI
can become part of the formal financial system of a country and so can access capital markets to
fund their lending portfolios, allowing them to dramatically increase the number of poor people
they can reach (Otero, 1999).
Empowerment of Women
A key objective of many microfinance interventions is to empower women. Mosedale (2003,p.1)
states that if we want to see people empowered it means we currently see them as being
disempowered, disadvantaged by the way power relations shape their choices, opportunities and
well-being. She states that empowerment cannot be bestowed by a third party but must be
claimed by those seeking empowerment through an ongoing process of reflection, analysis and
action (2003).
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Kabeer, quoted in Mosedale (2003, p.2) states that women need empowerment as they are
constrained by “the norms, beliefs, customs and values through which societies differentiate
between women and men”. She also states that empowerment refers to the “process by which
those who have been denied the ability to make strategic life choices acquire such an ability”,
where strategic choices are “critical for people to live the lives they want (such as choice of
livelihood, whether and who to marry, whether to have children, etc)” (Kabeer, 1999, p.437).
Therefore MFIs cannot empower women directly but can help them through training and
awareness-raising to challenge the existing norms, cultures and values which place them at a
disadvantage in relation to men, and to help them have greater control over resources and their
lives.
Key Players in the Micro Finance System
The structure of rural financial market in India has both formal and informal financial
intermediaries. It is widely accepted that formal financial sector is not effectively serving the
rural poor in developing countries. The performance of formal financial institutions in India
especially in lending the poor has been unsatisfactory. There are a number of constraints viz.
limited land and small economic activity but the demand for credit has been increasing with the
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growing family size, higher consumption expenditure and social obligation and so on. The
following are the key players in Micro Finance System.
1. National Bank for Agricultural and Rural Development (NABARD)
NABARD is an apex institution, accredited with all matters concerning policy, planning and
operations in the fields of credit for agriculture and other economic activities in rural areas in
India.
2. Reserve Bank of India
Considerable work had been done by RBI in this sector since 1991. In 1991-92 a pilot project for
linking up SHGs with banks was launched by NABARD in consultation with the RBI. In 1994,
the RBI constituted a working group on SHGs.
3. Self Help Groups
SHG are considered a new lease of life for the women in villages for their social and economic
empowerment. SHG is a suitable means for the empowerment of women.
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4. Micro Finance Institutions (MFIs)
A range of institutions in public sector as well as private sector offers the micro finance services
in India. Based on asset sizes, MFIs can be divided into three categories:
1. 5-6 institutions which have attracted commercial capital and scaled up dramatically when last
five years.
2. Around 10-15 institutions with high growth rate, including both News and recently form for-
profit MFIs.
3. The bulk of India’s 1000 MFIs are NGOs struggling to achieve significant growth.
5. Non Government Organizations (NGOs)
The Non Government Organizations involved in promoting SHGs and linking them with the
Formal Financial Agencies
OBJECTIVES OF STUDY
The main objectives of the study are as follows:
I. To review the genesis, formation and development of SHG’s in India and particularly in Eluru
region.
II.To studies the status of micro-finance and its implications in selected areas of Eluru.
III.To study the accessibility of rural women institutional and non-institutional credit and
problems faced in administration of SHG’s;
IV.To analyze the impact of micro-credit on socio economic empowerment of rural women in
Eluru
METHODOLOGY
The present study has been conducted in Eluru with the objective of studying Auspicious and
Anguishes of rural poor. The sample constituted 78 beneficiaries selected in Eluru. The study
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was based on primary data collected through structured questionnaire schedule as well as
secondary data. The information was also collected through discussion with development
functionaries.
REVIEW OF LITERATURE
Namboodiri and Shiyani (2001) reported that the SHGs that are promoted by the NGOs had a
better saving performance compared to that of SHIP. However, the repayment performance of
the SHGs promoted by the SHIP was superior to that of NGOs.
Pankaj (2001) reported that the SHG-bank linkage programme launched by NABARD in 1992 is
activities land mark in the field of micro financing in India. This programme aims to organize
SHGs 10 to 20 persons from the economically homogenous strata regularly same the amounts
from their earnings.
Manimekalai and Rajeshwari (2001) in their paper highlighted that the provision of micro-
finance by the NGO's to women SHG's has helped the groups to achieve a measure of economic
and social empowerment. It has developed a sense of leadership, organizational skill,
management of various activities of a business
Puhazhendhi (1999) analyzed the functioning of SHG's, in performance, sustainability,
empowerment of women, economic impact on the members, future potentials etc. He observed
that SHG's in Tamil Nadu are performing well towards social change and transformation. The
emerging trends are leading to positive direction of empowerment of members and promotion of
micro finance.
Dr.C.Rangarajan (2006) in his topic ‘Microfinance and its future directions’ in the introductory
part of the book, outline the evolution of SHG through microfinance evolve through in three
stages. First, to meet survival requirement need, in the second stage is to meet the subsistence
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level through investing in tradition activities and in the final stage by setting up of enterprises for
sustainable income generation.
Yaron [1994), Besley, (1994)11, underlined that the micro finance institutions remain most
successful ones in terms of outreach and performance in delivering credit services to the poorest
of the poor women, and small artisans in the rural and urban areas, reduction in adverse selection
of borrowers, development of collateral substitutions, offering cost effective approaches to
formal institutions.
Morduch Jonathan(1999) :The Microfinance Promise pp 1569-1614 in Journal Of Economic
Literature, 37 (December) defines ‘Microfinance schism’ meaning that the majority of the
poorest cannot pay high interest rates regularly, in which case it is a choice between self
sufficiency and targeting the poor.
DATA ANALYSIS
The study interprets and discussed the results of the investigation focused on the impact of
microfinance on rural poor in Eluru, the results pertaining to the hypotheses and their detailed
discussions were presented in this study. Finally the comprehensive discussion is presented.
1. AGE
Age is an important element in the personality of individual and plays an important
role to opt for membership in MFIs. It has been observed that youngest are generally
more energetic, change prone, progressive, innovative and career oriented.
Therefore, an analysis is made to examine the age-wise distribution of members of
micro-finance institutions.
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1. Age wise Distribution of the Respondents Particulars No. of. Respondents % of Respondents
21 to 25 years 4 5.128
26 to 30 years 11 14.102
31 to 35 years 11 14.102
36 to 40 years 22 28.205
41 to 51years 22 28.205
52 to 60 years 08 10.256
TOTAL 78 100
Interpretation
The data in Table shows that largest proportion of the respondents to the extent of 28 per cent
was in the age group of 36-40 years followed by again 28 per cent in the age group of 41-52
years.
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2. EDUCATION
Education is an important determinant of social class. It is an important instrument of increasing
and betterment of the change on the rural poor employability. It enables them to think for
themselves making confident and also to develop the capacity of recognizing. Education has
been reported as crucial factor for developing rural poor and also empowers them.
2. The Educational level of the respondents
Particulars No. of. Respondents % of Respondents
Illiterate 21 26.923
Up to s.s.c 44 56.410
Higher Secondary 9 11.538
Degree 4 5.128
78 100
Interpretation
The data in Table reveals the educational qualification of the respondents. There are 44 per cent
of respondents who have studied up to 10th class including those who can only sign.
3. MARITAL STATUS
Marriage has a role to play in deciding the social status and living conditions of poor in India
particularly the rural women. As the society is by and large, the husband’s social status defined
the social status of women.
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3. Martial status
Particulars No. of. Respondents % of Respondents
Unmarried 1 1.282
Married 74 94.872
Separated 1 1.282
Widow 2 2.564
78 100
Interpretation
The data in Table shows that the married MFI members were large in majority 94 percent and
only 1.282 per cent are of respondents were un-married.
4. TYPE OF FAMILY
The type of the family is classified into two categories viz, joint family and nuclear family and
the details of the respondents shown in the table 4. An analysis of the type of family-wise
distribution of respondents is presented in the table.
4. Type of Family
Particulars No. of. Respondents % of Respondents
Joint family 4 5.128
Nuclear family 74 94.872
TOTAL 78 100
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Interpretation
The type of the family is classified into two categories viz., joint family and nuclear
families and given in 4 table that majority of the respondents stake holders live in nuclear
families with 95 per cent and 5 per cent of them were living in joint families. It is true
that the tendency to move to nuclear families in rural areas has been in practice which is true
in this study.
5. INCOME GROUP
The type of the family is classified into 4 categories viz, below poverty line, poor, middle
income group and upper middle class shown in the table 5. An analysis of the type of income
distribution of respondents is presented in the table 5.
5. Income Group
Particulars No. of. Respondents % of Respondents
Below Poverty line 01 01.282
Poor 04 05.128
Middle Income Group
65 83.333
Upper Middle Class 08 10.256
TOTAL 78 100
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Interpretation
The data in Table reveals the income group of the respondents. There are 83 per cent of
respondents was in the middle income group followed by again 10 per cent in the upper middle
class.
6. FORMATION OF SELF HELP GROUP
The formation of self help group classified into 6 categories viz, Bank & Government
Department, N.G.O & Government Department, N.G.O &Neighboring SHGs, N.G.O &
Own interest, N.G.O & Relatives, N.G.O & Neighbors presented in the table 6.
6. Formation of self help group
Particulars No. of. Respondents % of Respondents
Bank & Government Department 54 69.230
N.G.O & Government Department
1 1.282
N.G.O &Neighboring SHGs 4 5.128
N.G.O &Own interest 10 12.820
N.G.O & Relatives 3 3.846
N.G.O & Neighbors 6 7.692
TOTAL 78 100
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Interpretation
The data in Table reveals the formation of self help group. There are 69 per cent of respondents
said that the self help group are formed by bank and government department.
7. THE REASONS FOR JOINING IN SHGS
The reasons for joining in SHGs are an important determinant of social class. An analysis of
the reasons for joining in SHGs is presented in the table 7.
7. The reasons for joining in SHGS
Particulars No. of. Respondents % of Respondents
To Save 13 16.666
To avail loan 30 38.461
Supplement family income 28 35.897
Save & employment 6 7.692
Save & social status 1 1.282
TOTAL 78 100
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Interpretation
The above table shows that 38 percent of the respondents expressed that the reasons for
joining in SHGs is to avail loan that is provided by the micro finance institutions and other
35 percent respondents said that it is the supplement family income.
8. AVAILABILITY OF LOAN AMOUNT
The availability of loan amount attracts the respondents to join in SHGs. It improves the life
income level of the poor people and also brings better changes in the life style of the rural
poor. An analysis of the availability of loan amount is presented in the table
8. Availability of Loan Amount
Particulars No. of. Respondents % of Respondents
Up to 5,000 17 21.795
5,001 to 9,999 1 1.282
s10,000 to 54,999 19 24.359
25,000 to 50,000 18 23.077
50,001 to 1,00,000 4 5.128
Above 1,50,000 19 24.359
TOTAL 78 100
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Interpretation
The above table reveals that 24 percent of the respondent said that between Rs.10000 to upto
Rs.55000 loan amount is available to them followed by 24 percent opined that above Rs.150000
available to them.
9. OPINION REGARDING RATE OF INTEREST
Rate of interest is one of the drawbacks to attract less people to join in SHGs. The following
table shows the opinion of the respondents regarding rate of interest on availability of loan
amount.
9. Opinion regarding Rate of Interest
Particulars No. of. Respondents % of Respondents
Low 12 15.385
Moderate 11 14.102
High 15 19.231
Satisfactory 34 43.589
Not Satisfied 6 7.692
TOTAL 78 100
Interpretation
The data in above table depicts that nearly 44 percent of the respondents said that they are
satisfied with the rate of interest that is charged by the micro financial institutions and followed
by 19 percent opined that the rate of interest is high.
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10. PURPOSE OF LOAN
The main purpose of taking loan is an improving livelihood of the people. The purpose of
loan is shown in the following table.
10. Purpose of Loan
Particulars No. of. Respondents
% of Respondents
Animal Husbandry( Sheep, Milk Animals, Poultry)
40 51.282
Consumption expenses( Medical expenses, children education)
19 24.359
Traditional activities(Agriculture, handlooms) 11 14.103
Services( cable T.V, Suppliers, Tailoring)
1 1.282
Micro and Small business(Cut piece sales, Cattle feed sales, Construction material sales, Small Business(Cart Sales, Sandy Sales))
3 3.846
Provision Shops and Sales 4 5.128
TOTAL 78 100
Interpretation
The data in table 10 shows that 51 percent of the respondents reported that the loan can be
invested in the animal husbandry business. And another 24 percent said that the loan used for
medical expenses and children education etc.
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11. ROLE OF NGO
The emphasis on reaching the ‘poorest of the poor’ may be flawed. There may be a need to focus
more specifically on providing loans to entrepreneurs, rather than treating everyone as a potential
entrepreneur. NGO’s plays a vital role in micro finance. It encourages the rural poor to join in
SHGs and avail the loan amount. The role of NGOs presented in the table 11.
11. Role of NGO
Particulars No. of. Respondents % of Respondents
NGO encourage women to form
SHGs 54
69.231
NGO link SHGs with Banks 24 30.769
TOTAL 78 100
Interpretation
The table 11 depicts that the role of NGOs in Micro Finance. 69 percent respondents said that
NGO encourages women to form SHGs. Another 31 percent opined that NGO Link with SHGs
with Banks.
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FINDING OF THE STUDY
Age: The largest proportion of the respondents (28%) was in the age group of 36-40 years
followed by 28 per cent in the age group of 41-51 years
Education: There are 56 per cent of respondents who have studied up to 10th class and 27 per
cent of the respondents were illiterate. This indicates that educational qualifications are very
important to take an activity, but is not up to the expected level.
Marital Status: The married MFI members were large in majority 94 percent and only 1.282 per
cent are of respondents were un-married.
Family: Majority of the respondents stake holders live in nuclear families with 95 per cent
and 5 per cent of them were living in joint families.
Income group: There are 83 per cent of respondents was in the middle income group followed
by again 10 per cent in the upper middle class.
Formation of SHGs: There are 69 per cent of respondents said that the self help group are
formed by bank and government department.
Reasons for joining in SHGs: 38 percent of the respondents expressed that the reasons for
joining in SHGs is to avail loan that is provided by the micro finance institutions and other 35
percent respondents said that it is the supplement family income.
Availability of Loan Amount: 24 percent of the respondent said that between Rs.10000 to upto
Rs.55000 loan amount is available to them followed by 24 percent opined that above Rs.150000
available to them.
Rate of Interest: 44 percent of the respondents said that they are satisfied with the rate of
interest that is charged by the micro financial institutions and followed by 19 percent opined that
the rate of interest is high.
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Purpose of Loan: 51 percent of the respondents reported that the loan can be invested in the
animal husbandry business. And another 24 percent said that the loan used for medical expenses
and children education etc.
Role of NGOs: 69 percent respondents said that NGO encourages women to form SHGs. An
SUGGESTIONS
• All in all the government should keep an eye on the MFIs and facilitate their working
through making a structured regulatory framework for NGOs/SHGs and other
microfinance institutions.
• The members of all the self-help groups need to undergo training programmes related to
accounting, motivation etc. It helps them in better understanding of need of relation
between micro financing and members for smooth functioning.
• It is there must be a minimum period of moratorium between the grant of the loan and the
commencement of its repayment.
• Discriminations by the official shall be stopped.
• Government can consider fixing low interest rates on lending by the banks to MFIs both
as the primary sector / weaker section and special interest subvention so that the MFIs
can balance their high cost of operation and lend to the poor clients at reasonable rate of
interest.
CONCLUSION
There is need to accept that rural poor needs are not only for self-employment. The
programmes should be designed on the basis of the needs of rural poor at the micro level.
Planning for self-employment for rural poor needs a multi-pronged strategy.
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Microfinance through has reached the un-reached rural poor. There is need to evolve an
informal micro financing through formal financial institutions. The massive growth of
microfinance has paved the way for immediate financial accessibility for the poor who
are too far away from this accessibility and microfinance. Microfinance is an alternative
system of credit delivery for the poorest of the poor. It would help in improving the
quality of life in rural India. The government of India can play vital role in encouraging.
MFI should come forward and extend facilities especially in empowering rural poor by
providing education (training), motivation, and financial help and so on. MFI bring unity
and integrity among the members. It improves general welfare of family and community.
MFI assist the rural poor to perform traditional roles better and to take up micro
entrepreneurship. Key challenges facing MFIs today that are affecting their impact on
poverty alleviation were seen to be an over-emphasis on financial sustainability over
social objectives, and a failure of many MFIs to work with the poorest in society.
Therefore, there is a greater need for MFIs to carefully design services that meet the
needs of the poor and this can only be done when MFIs understand their needs and the
context within which the poor are working (Morduch, 2004). If MFIs are to meet their
overall development objectives then they need to ensure financial sustainability and
outreach of financial services designed to meet the needs of those most in need of such
services.
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The impact of microfinance on poverty alleviation is a keenly debated issue as we have seen
and it is generally accepted that it is not a silver bullet, it has not lived up in general to its
expectation (Hulme and Mosley, 1996). However, when implemented and managed carefully,
and when services are designed to meet the needs of clients, microfinance has had positive
impacts, not just on clients, but on their families and on the wider community. There is however
a need for greater assessment of these wider impacts if the true value of microfinance to
development is to be understood (Zohir and Matin, 2004). One such tool for measuring wider
impact is a livelihood security analysis based on a livelihoods framework which analyses how a
project impacts on the livelihoods of beneficiaries.
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