Micro Finance in India

375 Pages·2012·4.41 MB·English

Micro Finance in
India
By
Dr. Kaustubh Jain
MBA,M.Com., Ph.D.
Assistant ProfessorAISECTUniversity,Bhopal.
Dr. Sanjeev Dubey
Professor,DepartmentofCommerce,
Govt.ArtsandCommerceCollege,Sagar.
FirstEdition:2015
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PREFACE
There is a correlation between the direction of economic growth
and the percentage of people below the poverty line. Since the poverty
percentage calculations ignore the human poverty index parameters that
determine the standards of living. Micro finance was a little known
concept till seventies. Professor Muhammad Yunus, a Nobel Prize
Winner is the main architect, who has revolutionized the credit delivery
system in Bangladesh. Micro finance cannot be defined without
identifying its category. The main objective of micro finance is to
improve thequality oflifeofpoorandweakersections ofthesociety.
Micro finance in recent times come to be recognized as one of the
new development paradigms for alleviating poverty through social and
economic empowerment ofthepoor, withfocus onempowering women.
Experiences of different anti-poverty and other welfare programmes
within the country and elsewhere have shown that the key to its success
lies in the participation of community based organisations at the
grassroots level. People’s participation in credit delivery, recovery and
linking of formal credit institutions to borrowers through the
intermediation of SHGs have been recognised as a supplementary
mechanism forproviding credit support tothe ruralpoor. NABARD has
pioneered the concept and implemented the SHG-Bank Linkage
programme since 1992 for providing easy access of institutional credit
to rural poor. Since one decade of the programme implementation has
elapsed, there is an imperative need for putting in place a system of
evaluating the impact of the programme and provide continuous feed
backonthemagnitude ofbenefitsaccruingtothepeople.
Generally, loans are given through NGOs or through institutions
owned by the borrowers. Interest rates are kept commensurate with the
sustainability of the programme rather than bringing attractive return to
the investors. The aim of Grameen credit is to give high priority on
building socialcapital.It ispromoted through formulation of groups and
centres developing leadership quality through annual election of group
or centre leaders, electing board members when the institutions owned
by the borrowers. The micro finance services to the very poor envisage
coverage of one-third of the rural poor of the country, i.e., a population
of about 100 million through one million SHGsby the year2007-08. In
order to have uniform coverage across the regions, NABARD has
devised region specific strategies and interventions. Accordingly,
special focus was given to the North Eastern region and backward areas
like Kalahandi-Bolangir-Koraput region in Orissa by encouraging small
NGOs and micro finance agencies for enhancing the coverage of SHG
BankLinkage. As aresult,therewasrapidprogress intheprogramme in
the eastern areas of the country and significant achievements mainly in
terms ofgroups linked with banks andproviding creditsupport toSHGs.
With a view to studying the impact of micro finance channelised
through this programme in areas where growth has been rapid during
recent years,study wasconducted byDepartment ofEconomic Analysis
and Research of NABARD covering states of Orissa, Jharkhand and
Chhattisgarh.
Bangladesh isoperating with‘sixteen principles’;Discipline, Unity,
Courage and hard work in all walks of life; Always ready to help each
other;Breachofdiscipline nottobetolerated. Gotothecentretorestore
discipline; Take part in all social activities collectively. The specialty of
microcredit movement inBangladesh isnot only acredit movement but
alsoasocialmovement launchedtoimprove thequalityoflifeofpeople,
particularlywomen.
The future sustainability of SHG banking hinges on five factors:
(a) A sound self-supporting institutional framework is in place.
(b) Despite exceptionally low interest rates, linkage banking was found
to be viable and profit-making for all financial institutions and SHGs;
however, many rural banks require restructuring. (c) SHGs have
substantially increasedtheirlevelofself-reliance anddeposited reserves,
while banks are constrained by high statutory liquidity requirements.
(d) Given the lowinflation rate, preservation of the value of resources is
no major issue, except in distressed banks. (e) With continually
increasing internal funds, effective supervision of SHGs through a
delegated system, together with the enforcement of prudential norms in
banks and cooperatives, emerges as a major challenge to the long-term
sustainability ofSHGbankingandruralfinanceinIndia.
The present study attempts to assess the impact of micro finance
problems and prospects. The SHG has made significant contribution to
social and economic improvement of the member households of SHGs,
reference to size, homogeneity, conduct and attendance of meetings,
record-keeping, etc., was broadly discussed in conformity with the
guideline of the programmes. The backward class constituted 83 per
cent of the total sample and coverage of this social group has shown an
increasing trend during the recent years. While there was no change in
asset structure in 52 per cent of the households, about 45 per cent of
them are registered increase in assets between pre- and post-SHG
situations.
Grameen Bank wants to bring financial services to the poor,
particularly women and the poorest to help them fight poverty, stay
profitable and financially sound. Conventional banks focus on men.
Grameencredit’sfocus iswomen and97percent borrowers arewomen.
Unlike other banks, micro credit offered by Grameen reaches the
doorsteps of clients. Borrowers do not go to the bank, bank goes to the
people instead. Grameen systems pays lot of attention to monitoring
education of the children, housing, sanitation, access to clean drinking
water and their coping capacity for meeting disasters and situations. It
helps borrowers to build their own pension funds and other types of
savings. There is a built-in insurance programme and no liability is
transferredtothefamily.
Swaranjayanthi Gram Swarozgar Yojana SGSY is objectives
integrated initiatives for providing infrastructural, credit, marketing, etc.,
for promoting self-employment, gender equality, community development
projects, and overall empowerment of the poor, convergence of various
resourcesofotherprogrammesaimedatpovertyalleviation.
The Grameen model is widely accepted by lndian MFIs. However,
do we really know what would happen if we made fixed repayment
schedules flexible, or if we moved from joint to individual liability?
New products may attract more clients, lead to higher impact while
keeping default rates unchanged. “Thefullpromise of microfinance can
be only realized by returning to the early commitments to
experimentation, innovation and evaluation.” Experimenting with
various components of credit products will help understand which ones
work best and develop new designs that successfully solve information
problems whilebeinginnovative andclosertotheclients’needs.
Authors

ACKNOWLEDGEMENTS
It is a hard working and patient full task which I achieved only
by the grace and blessings and faith on Goddess of knowledge. I
express my heartiest gratitude to the who have rendered their active
and significant help to me in shaping the present study. I find myself
unable to recompense the help bestowed upon me by these elite
personalities through my pen picture.
I express first and foremost my sincere and deep sense of
gratitude to my supervisor Dr. Sanjeev Dubey, Professor of Govt.
Arts and Commerce College, Sagar for his valuable guidance,
meticulous care, constant inspiration and encouragement towards me
throughout the progress of this work. I am proud to have such esteem
supervisor and feel scare of words to express my indebtedness to him
from the core ofmy heart.
This is my profound pleasure to express my thanks to my
teachers of the Department and the school for their support, blessings,
and encouragement during the period of research. I again express my
thanks to all teaching andnon-teaching faculty members.
My hearty thanks to esteemed professors of repute on the subject
who have very kindly suggested me the different methods of
resolving issues in connection with this work.Their support in written
and other form is meaningful. They all deserve to recognise as
academic leaders of my career. The head department of business
management and commerce is also thankful for their moral support
and academic guidance. I take this opportunity to thank the librarians
of different Indian Universities and institutes who have given me the
personal and congenial environment of study. The respondents, Heads
of MFIs, bank personnels and SHGs group leaders are also thankful
for their valuable time and support with their original views. Ishall be
failing in my duty if I do not acknowledge my gratitude to my parents
who have always been the source of inspiration. It will be an
opportunity for me to thank my younger sister who has given her
different kind of moral and academic support in giving the shape of
this work. Last but not the least, my beloved friends, companions,
scholars, neighbours support is also noteworthy for the completion of
this work.
KAUSTUBH JAIN

CONTENTS
PageNo.
Chapter1: Introduction 1–41
Chapter2: SHGBanking 42–81
Chapter3: MadhyaPradeshMicroFinanceProgress 82 – 124
andProspects
Chapter4: MadhyaPradeshMFIsStatus 125–165
Chapter5: SampleMFIs 166–219
Chapter6: MicroFinance Regulation 220–255
Chapter7: MicroFinance Scenario 256–282
Chapter8: Socio-technoofMFIs 283–306
Chapter9: Problems andProspectsofMicroFinance 307–330
Chapter10: Conclusions 331–355
Acronyms 356–359
Bibliography 360–365