INTRODUCTION TO THE PROJECT

Microfinance is the provision of financial services to low-income clients or solidarity lending

groups including consumers and the self-employed, who traditionally lack access to banking and
related services.
Microfinance is not just about giving micro credit to the poor rather it is an economic
development tool whose objective is to assist poor to work their way out of poverty. It covers a
wide range of services like credit, savings, insurance, remittance and also non-financial services
like training, counseling etc.

1.1Concept and Features of Micro-finance:

1.It is a tool for empowerment of the poorest.
2.Delivery is normally through Self Help Groups (SHGs).
3.It is essentially for promoting self-employment, generally used for:
(a)Direct income generation
(b)Rearrangement of assets and liabilities for the household to participate in future opportunities
(c)Consumption smoothing.
4.It is not just a financing system, but a tool for social change, specially for women.
5.Because micro credit is aimed at the poorest, micro-finance lending technology needs to mimic
the informal lenders rather than the formal sector lending. It has to:
(a)Provide for seasonality
(b)Allow repayment flexibility
(c)Fix a ceiling on loan sizes.

1.2Gaps in Financial system and Need for Microfinance

According to the latest research done by the World Bank, India is home to almost one third of the
worlds poor (surviving on an equivalent of one dollar a day). Though many central government
and state government poverty alleviation programs are currently active in India, microfinance
plays a major contributor to financial inclusion. In the past few decades it has helped out
remarkably in eradicating poverty. Reports show that people who have taken microfinance have
been able to increase their income and hence the standard of living.

About half of the Indian population still doesnt have a savings bank account and they are
deprived of all banking services. Poor also need financial services to fulfill their needs like
consumption, building of assets and protection against risk. Microfinance institutions serve as a
supplement to banks and in some sense a better one too. These institutions not only offer micro
credit but they also provide other financial services like savings, insurance, remittance and nonfinancial services like individual counselling, training and support to start own business and the
most importantly in a convenient way. The borrower receives all these services at her/his door
step and in most cases with a repayment schedule of borrowers convenience. But all this comes
at a cost and the interest rates charged by these institutions are higher than commercial banks and
vary widely from 10 to 30 percent. Some claim that the interest rates charged by some of these
institutions are very high while others feel that considering the cost of capital and the cost
incurred in giving the service, the high interest rates are justified

1.3 Strategic Policy Initiatives

Some of the most recent strategic policy initiatives in the area of Microfinance taken by the
government and regulatory bodies in India are:
Working group on credit to the poor through SHGs, NGOs, NABARD, 1995
The National Microfinance Taskforce, 1999
Working Group on Financial Flows to the Informal Sector (set up by PMO), 2002
Microfinance Development and Equity Fund, NABARD, 2005
Working group on Financing NBFCs by Banks- RBI

1.4
FINDINGS

Micro financial institutions play a very important role today to provide the micro finance
to the women entrepreneure. Mostly MFI provide the assistance to the women

entrepreneur through MFI- bank linkage programme.

SKS is the largest micro financial institute which providing the micro finance through
different ways. It also coming up with their IPO to get the more capital to increase their

functioning
From the current situation we can understand that today the main focus of micro finance
industry is to empower the woman thats why more loans are provided to woman and on

easy terms.
From the total SHG more SHG are coming in which only women are member because

women can better run a business and his family.

Narega and SGSY Swaranjyanti Gram SwarojgarYojna are one of the schemes which are
introduced by the government to help the poor people Schemes are provided by the

government to poor people but there is less people who avail the benefit from these

schemes.
There are many challenges face by women to doing the business as entrepreneur like lack
of capital, networking problems etc. But these challenges can be overcoming with the
help of Provide micro credit for livelihood support and to micro enterprises development,

establishing sources of credit.

With the help of relationship data we can see that there are more percentage of women

SHGs out of total SHGs. So that is good indicator for women entrepreneur.
The loan distributed data show increase the % of loan amount to women as compare to
last year. This show the economic development of women entrepreneur.

LIMITATIONS

TIME CONSTRAINT
Shortage of time was a very big constraint due to which some area of micro finance has
been included in the study.

RESOURCE CONSTRAINT
Availability of data was a constraint due to which only secondary data is

considered,

which is available, and also there are some MFIs whose data was not available

SECONDARY DATA
All the information available was from secondary sources and data was very vastto
analyze properly & accurately

WIDE AREA TO STUDY

Study being conducted was very wide & analysis require expertise knowledge &
skills which was lacking

NO DIRECT SOURCE OF INFORMATION AVAILABLE

The information is collected from indirect sources so in some information data is not
available

FUTURE ANALYSIS

The whole study was based on historical data which was not much useful in analysis of
present and prediction of future.