Professional Documents
Culture Documents
Debabrata Das
Reader, Department of Commerce
Gauhati University
Guwahati-781014
Email: ddas_gu@rediffmail.com
Cell 9435015074
1. The Context
Asian Development Bank’s recent estimates indicate that Asia is still home to the
majority of the worlds poor. Despite significant progress in poverty reduction during last
decade, about 2 billion ‘poor’ people (380 million households) live in the region which
includes 690 millions ‘extremely poor’1 people (138 million Households). The World
Summit on Micro Enterprises (2001) and Consultative Group to Assist the Poorest
(CGAP)2 highlighted the serious concern of the international community to reduce the
levels of poverty, both in terms of income levels and deprivation of basics needs for a
decent living. It was broadly accepted that ‘robust economic growth that is labour-
intensive and equitable, combined with larger outlays of social expenditures, especially
directed towards the poor (estimated at 1. 3 billion people), are a winning combination in
the fight against poverty’ (UN, 2007). In this context, Micro finance has been recognized
and accepted as one of the new development paradigms for alleviating poverty through
social and economic development of the poor in general and women in particular. The
idea of micro credit was inculcated by Nobel Laureate Prof. Muhammad Yunus who
initiated imagining the poorest of the poor in to self-help groups and makes them realize
the very basic theory of survival way back in 1976. The inability of formal financial
institutional set-up to deal with the credit requirements of the poorest class effectively has
led to the emergence of micro credit system. Micro credit is developed to be an
alternative credit delivery system, which can cater to the needs of the poor locally
involving them in the system itself3.
The micro credit approach received increased attention in the mid 1990 after the World
Summit for Social Development held at Copenhagen in March 1995.4 Emphasizing the
importance of easy access to credit for the poorest section, the Summit urged
governments of nations to give a new thought to their legal, regulatory and institutional
frameworks in order to make credit easily accessible to the poor. Subsequently, in 1997
the World Micro Credit Summit at Washington DC announced a global target of ensuring
delivery of credit to 100 million of the world’s poorest families, especially the woman of
these families by 2005 which was achieved well ahead in time.
Since the launch of the Millennium Development Goals (MDGs)5 at the
Millennium Summit in New York in September 2000, the MDGs have become a widely
accepted yardstick of development efforts. The first and foremost goal, among others, is
to eradicate extreme poverty and hunger. This goal targeted to halve the proportion of
people whose income is less then US$ 1 a day and the proportion of people who suffer
from hunger between 1990 and 2015(UN,2001). Almost all the countries in the world,
including India have committed themselves to attaining the targets by 2015 as embodied
in the Millennium Declaration. Resorting to these resolutions, many developing countries
have put micro finance in their agenda as a tool of reaching the MGDs.
2. Best Practices
Over the past decade, microfinance institutions have adopted innovative ways of
providing credit and savings services to the entrepreneurial poor. An innovative approach
that has been used successfully by Grameen Bank's credit-delivery system is "peer-group
monitoring" to reduce lending risk, although some studies have suggested that the reason
for the Grameen Bank's high repayment rates is also partly due to the practice of weekly
meetings - at which attendance is compulsory - for the repayment of loan installments
and the collection of savings. It is reported that the meetings reinforce a culture of
discipline, routine repayments and accountability. Not all microfinance institutions use
peer-group monitoring. Other institutions such as the Bank Rakyat of Indonesia, which
serves 2.5 million clients and 12 million small savers, rely on character references and
locally recruited lending agents in place of physical collateral. Thailand's Bank of
Agriculture and Agricultural Cooperatives serves approximately 1 million micro-
borrowers and 3.6 million micro-savers. Newcomers such as the Association for Social
Advancement of Bangladesh, with half a million clients, and the People's Credit Funds of
Vietnam with more than 200,000 members or clients, are other examples of the potential
for growth in the industry. Other institutions such as the Association of Cambodia Local
Economic Development Agencies, Buro-Tangail of Bangladesh, the Self-Employed
Women's Association Bank of India, and Amanah Ikhtiar Malaysia are also reported to
be making good progress (UN, 2007). The microfinance institutions ‘revolutionalized’
traditional views by showing that the poor are bankable and it is only because of the
conventional banking practices they were categorized as non-bankable (Nagarajan and
Meyer, 2005).
Making a modest beginning in the year 1992 by linking 255 SHGs with banks and
disbursing credit of Rs. 29 lakhs the programme has showed a great success. The number
of SHGs linked to bank rose to 50 lakhs with bank loan of Rs. 17000 corers as on 31 st
March 2008, which covered over 7 crores poor households. State like Andhra Pradesh,
Tamil Nadu, Karnataka, Orissa, Uttar Pradesh, Maharastra and West Bengal remained in
the forefront followed by other states such by Rajasthan, Kerala and Madhya Pradesh
with encouraging trend. Performance is excellent, and impact is deeply felt by the
members, the vast majority of them women (Seibal, 2005). The SHG banking model
evolved into one of the rural microfinance models with widest outreach in the world
(Yedra, 2007). Institutions involved in the delivery of microfinance services are
commercial banks, rural banks, cooperative institutions, credit unions and non-
governmental organizations, NBFCs under Section 25 of Indian companies act and
NBFCs registered under Indian companies act and RBI.
4. Women Empowerment
Majority of world’s poor (70%) are women. Women, especially in the rural areas have
fewer opportunities than men due to gender biases in their societies, unequal
opportunities of access to education, employment and asset ownership.7 They have less
occupational mobility, weaker skills and less access to training. Many micro-credit
programmes have targeted one of the most vulnerable groups in society - women who
live in households that own little or no assets. By providing opportunities for self-
employment, many studies have concluded that microfinance have significantly increased
women's security, autonomy, self-confidence and status within the household. Linda
Mayoux (1999) identified three paradigms on microfinance and women empowerment.
Firstly, the Financial Sustainability Programme which focuses on the cost effective
functioning of the credit operation in order to ensure financial sustainability. This results
in greater outreach to the financially excluded and the poor. Women are targeted because
of their high recovery rate. Secondly, Poverty alleviation Programme which is
implemented through women because they are believed to be responsible for wellbeing of
the household. Further additional income with women brings in ‘multiplier effect’ to
multiple generations. Thirdly, Feminist Empowerment Programme aiming at bringing
about ‘change in the lives of women’ focusing gender equity and human rights. This is
reflected in increased income, skills and self confidence and mobility (Bali, 2006)8.
References:
1. Asian Development Bank, (2000), Finance for the Poor: Microfinance Development
strategy, Manila. www.adb.org.
2. Bali,S(2006),Microfinance and Women Empowerment:Evidence from SHG-Bank
linkage programme in India,ART No:SIDA30632en,Division for market Development.
3. CGAP, "(1997) The Micro-credit Summit Report", Communique issued by the Council
of Heads of State and Government at the Micro-credit Summit.
4. Dadhich, C.L. (2001), “Micro Finance- A Panacea for Poverty Alleviation”, A Case Study of
Oriental Grameen Project in India”, Indian Journal of Agricultural Economics, Vol. 56, No. 3
July Sept. Mumbai.
5. Kalam, A.P.J.Abdul (2004), Multi-Dimensions of Banking, Bank Quest, Vol.75, No.4, Oct-
Dec.
6. Linda, M.(2005),Women’s empowerment Through sustainable Microfinance: Rethinking Best
Practice, Gender and Microfinance,www.genfinance.net.
7. NABARAD, (1999) the NABARD Task Force on Supportive Policy and Regulatory
Framework for Micro Finance,
8. ---------------- (2008), Progress of SHG-Bank Linkage in India 2004-05, Micro-credit
Innovations Department (NABARD), Mumbai.
9. Seibel, Hans Dieter, (2005), SHG Banking in India, The evolution of a rural financial
innovation and the contribution of GTZ, GTZ, Germany
10. Solutionexchange,,www.solutionexchange-un.net.in
11. United Nations Capital Development Fund, (1997), Microfinance and Anti-Poverty
Strategies, A Donor Perspective.
12. United Nations publications, (1995), Report of the World Summit for Social Development,
Copenhagen 6-12 March, 1995, Series NO. E.96.IV.8).
13. World Bank, (2004) The Millennium Development Goals: Will Asia and Pacific achieve
Them? In ADB Review, Manila.
14. Yendra, R.C. (2007) Rural Financial Innovations and Best Practices in Asia,IFAD-APRACA
fin-power programme.
15. Yunus, Muhammad (1998) Poverty Alleviation: Is Economics Any Help? Lessons from the
Grameen Bank Experience, Journal of International Affairs, Vol.52 No. 1
16. ________________, (2001), "Towards creating a poverty-free world", by, Newsletter No. 1.
Consultative Group to Assist the Poorest and World Bank.
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