1.

1 INTRODUCTION

Microfinance is defined as any activity that includes the provision of financial services such
as credit, savings, and insurance to low income individuals which fall just above the
nationally defined poverty line, and poor individuals which fall below that poverty line, with
the goal of creating social value. The creation of social value includes poverty alleviation and
the broader impact of improving livelihood opportunities through the provision of capital for
micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
A large variety of sectors provide microfinance in India, using a range of microfinance
delivery methods. Since the ICICI Bank in India, various actors have endeavored to provide
access to financial services to the poor in creative ways. Governments also have piloted
national programs, NGOs have undertaken the activity of raising donor funds for on-lending,
and some banks have partnered with public organizations or made small in roads themselves
in providing such services. This has resulted in a rather broad definition of microfinance as
any activity that targets poor and low-income individuals for the provision of financial
services. The range of activities undertaken in microfinance include group lending,
individual lending, the provision of savings and insurance, capacity building, and
agricultural business development services. Whatever the form of activity however, the
overarching goal that unifies all actors in the provision of microfinance is the creation of
social value.

Microfinance Definition

According to International Labor Organization (ILO), “Microfinance is an economic

development approach that involves providing financial services through institutions to low
income clients”.

In India, Microfinance has been defined by “The National Microfinance Taskforce, 1999” as
“provision of thrift, credit and other financial services and products of very small amounts to
the poor in rural, semi-urban or urban areas for enabling them to raise their income levels
and improve living standards”.

"The poor stay poor, not because they are lazy but because they have no access to capital."

Micro Finance is buzzing word, used when financing for micro entrepreneurs. Concept of
micro finance is emerged in need of meeting special goal to empower under-privileged class

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of society, women, and poor, downtrodden by natural reasons or men made; caste, creed,
religion or otherwise. The principles of Micro Finance are founded on the philosophy of
cooperation and its central values of equality, equity and mutual self-help. At the heart of
these principles are the concept of human development and the brotherhood of man expressed
through people working together to achieve a better life for themselves and their children.

Traditionally micro finance was focused on providing a very standardized credit product. The
poor, just like anyone else, need a diverse range of financial instruments to be able to build
assets, stabilize consumption and protect themselves against risks

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.
4. It is not just a financing system, but a tool for social change, especially 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.

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 Microfinance approach is based on certain proven truths which are not always recognized.
These are:
1. That the poor are bankable; successful initiatives in micro finance demonstrate that
there need not be a tradeoff between reaching the poor and profitability - micro
finance constitutes a statement that the borrowers are not ‘weaker sections’ in need of
charity, but can be treated as responsible people on business terms for mutual profit .
2. That almost all poor households need to save, have the inherent capacity to save small
amounts regularly and are willing to save provided they are motivated and facilitated
to do so.
3. That easy access to credit is more important than cheap subsidized credit which
involves lengthy bureaucratic procedures - (some institutions in India are already
lending to groups or SHGs at higher rates - this may prevent the groups from enjoying
a sufficient margin and rapidly accumulating their own funds, but members continue
to borrow at these high rates, even those who can borrow individually from banks).
'Peer pressure' in groups helps in improving recoveries.

1.2 RESEARCH OBJECTIVES

• To study the impact of micro finance in empowering the social economic status of
women and developing of social entrepreneurship.
• To know about the working and effectiveness of SHG’s members, micro finance
banks and entrepreneur’s women.
• To clarify the limitation of microfinance programmes as the tool for women’s
empowerment and the type of support service necessary to maximize the contribution
of microfinance service.
• To study potential hurdles in the development of women entrepreneurship.

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1.3 REVIEW OF LITERATURE

Microfinance has a very important role to play in development according to proponents of

microfinance. UNCDF (2004) states that studies have shown that microfinance plays three
roles in Development.

• Helps very poor households meet basic needs and protects against risk,
• Is associated with improvements in households economic welfare,
• Helps to empower women by supporting women’s economic participation and so
promotes gender equity.

Mohammed Anisur Rahaman (2012)

Has examined that about microfinance and to investigate the impact of microfinance on the
poor people of the society with the main focus on Bangladesh. We mainly concise our thesis
through client’s (the poor people, who borrowed loan from microfinance institutions)
perspective and build up our research based on it. Therefore, the objective of this study is to
show how microfinance works, by using group lending methodology for reducing poverty
and how it affects the living standard (income, saving etc.) of the poor people in Bangladesh.
Microfinance has the positive impact on the standard of living of the poor people and on their
life style. It has not only helped the poor people to come over the poverty line, but has also
helped them to empower themselves.

Susy Cheston (2012)

Has examined that Microfinance has the potential to have a powerful impact on women’s
empowerment. Although microfinance is not always empowering for all women, most
women do experience some degree of empowerment as a result. Empowerment is a complex
process of change that is experienced by all individuals somewhat differently. Women need,
want, and profit from credit and other financial services. Strengthening women’s financial
base and economic contribution to their families and communities plays a role in empowering
them. Product design and program planning should take women’s needs and assets into
account. By building an awareness of the potential impacts of their programs, MFIs can
design products, services, and service delivery mechanisms that mitigate negative impacts
and enhance positive ones.

Linda Mayoux (Feb 2011)

Has examined that Micro-finance programmes not only give women and men access to
savings and credit, but reach millions of people worldwide bringing them together regularly
in organized groups. Through their contribution to women’s ability to earn an income, micro-
finance programmes can potentially initiate a series of ‘virtuous spirals’ of economic
empowerment, increased well-being for women and their families and wider social and
political empowerment Banks generally use individual rather than group-based lending and

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may not have scope for introducing non-financial services. This means that they cannot be
expected to have the type of the focused empowerment strategies which NGOs have

Eoin Wrenn (2010)

Has examined 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 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. 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.

Fields, G.S. (2010)

This article is based on Fields (forthcoming) and on NCEUS(2009).The first part of the paper
about global poverty and how the world‘s poor work. As many as six-and- a-half times the
number of the unemployed are the working poor, which indicates that the world has on
employment problem. So does India. The second part of the paper is about combating
poverty in India and Internationally. The policies discussed here are work place protections,
harnessing the energies of the private sector, economic growth, labour market policies for
generating more paid employment, the raising self-employment earnings.

Dr. Jyotish Prakash Basu (2008)

Has examined that the two basic research questions. First, the paper tries to attempt to study
how a woman’s tendency to invest in safer investment projects can be linked to her desire to
raise her bargaining position in the households. Second, in addition to the project choice,
women empowerment is examined with respect to control of savings, control of income,
control over loans, control over purchasing capacity and family planning in some sample
household in Hooghly district of West Bengal. The empowerment depends on the choice of
investment of project. The choice of safe project leads to more empower of women than the
choice of uncertain projects. The Commercial Banks and Regional Rural banks played a
crucial role in the formation of groups in the SHGs -Bank Linkage Program in Andhra
Pradesh whiles the Cooperative Banks in West Bengal.

Anand Kumar,T.S.; Praseeda,S.and Jeyanth K.N.(2008)

They explained in their paper titled "Operational guidelines for sustainable housing micro-
finance in India" that housing micro- finance is emerging globally as an important financial
activity to help alleviate the housing needs of economically vulnerable people. Micro-
finance institutions(MFIs) planning to include housing product must carefully assess
whether they have the management and technical capacity to do so. The purpose of this paper
is to give practical guidance to MFIs in adopting the housing programme, in addition to their

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existing line of micro-finance services. The paper finds that MFIs should also ensure that
housing micro-finance suits their strategy from institutional and financial perspectives.

Jennifer Meehan (2007)

Has examined that it will need to do three things simultaneously. First, it will need to rapidly
scale up, in key markets, like India, home to high numbers of the world’s poor. Second, in
this process, clear priority is needed for philanthropic, quasi-commercial and commercial
financing for the business plans of MFIs targeting the poorest segments of the population,
especially women. Third, microfinance will need to realize its possibility as a broad platform
and movement, more than simply an intervention and industry. The pioneering financings
completed by leading, poverty-focused MFIs have shown the industry what is possible –
large amounts of financing that allows for rapid expansion of financial services to new poor
customers. The MFIs offer a model to others that are interested in tapping the financial
markets. If leading MFIs continue on their present course and adopt some or all of the
suggestions offered, financial market interest – or more specifically, debt capital market
interest – in leading, poverty-focused MFIs is expected to grow.

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1.4 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the problem. It is a game plan for
conducting research. In this we describe various steps that are taken by the researcher.

Research in a common parlance is a search for knowledge. Research is an art of scientific and
systematic investigation. Thus research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating data,
making deductions and reaching conclusions.

A survey-based methodology was used for the study. A questionnaire was formed after
careful study of various factors related to banking and customer satisfaction.

The main objective is to determine the role of microfinance in women empowerment. To

address the mentioned objectives, data has been collected from respondents using a
questionnaire.

1.4.1 RESEARCH DESIGN

A framework or blueprint for conducting the research project. It specifies the details of
the procedures necessary for obtaining the information needed to structure and/or solve
research problems. A good research design lays the foundation for conducting the project. A
good research design will ensure that the research project is conducted effectively and
efficiently.

Descriptive Research: Descriptive research includes surveys and fact-finding enquiries of

different kinds. Descriptive research design is a scientific method which involves observing
and describing the behaviour of a subject without influencing it in any way.

A Survey research design is used for this study. The survey research design is a very valuable
tool for assessing opinions and trends. Even on a small scale, such as local government or
small businesses, judging opinion with carefully designed surveys can dramatically change
strategies.

1.4.1.1 Sampling Technique

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Convenience Sampling Method is used for the survey of this project. It is a non-probability
sampling method. It is least reliable method but normally the cheapest and easiest to conduct.
In this method researcher have the freedom to choose whomever the find, thus the name
convenience. Example includes informal pools of friends and neighbours, colleagues etc.

1.4.1.2 Population

A research population is generally a large collection of individuals or objects that is the main
focus of a scientific query. It is for the benefit of the population that researches are done.
However, due to the large sizes of populations, researchers often cannot test every individual
in the population because it is too expensive and time-consuming.

The population considered for this survey is all the customers who use banking services and
the banking service providers.

1.4.1.3 Sample Size

The Sample Size denotes the number of elements selected from the population for the study.
For the present study, 67 respondents were selected at random from a respective part of a
universe and the conclusions are drawn out on that basis for the entire universe.

1.4.2 DATA COLLECTION

A combination of both primary and secondary methods of collecting data was used.

Primary or original data was collected by the researcher from the field personally for the
purpose of the research work. It was carried out mainly through the use of questionnaire and
interviews to obtain original data for the purpose of answering the research questions or
problems.

Secondary data was used to ensure completeness of the research work. It involved the
consultation and use of articles from the Daily newspapers, management’s reports and from
the internet.

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The secondary data was to supplement the information and explanations which the source
could not provide for the research work.

PRIMARY DATA

Primary data are those collected by the investigator himself for the first time and thus they are
original in character, they are collected for a particular purpose. A well-structured
questionnaire was personally administrated to the selected sample to collect the primary data.

SECONDARY DATA

Secondary data are those which have already been collected by some other persons for their
purpose and published.

1.4.2.1 Instrument of data collection

For the purpose or the merits of this research work, a questionnaire were used. A
questionnaire is a list of highly structured questions written and handed over to respondents
to provide relevant answers or solution to the questions.

The questionnaire used for this purpose is closed-ended product. Closed-ended questions
provide a way of alternatives or simple answer categories for respondents to make a choice
from. This provide an easy basis to analysis responses from respondents.

1.5 LIMITATIONS

1. The sample size is limited.

2. The primary data has been collected through questionnaire

3. The complete analysis is based on the response of limited no. of respondents.

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

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The Origin of Microfinance

Although neither of the terms microcredit or microfinance were used in the academic
literature nor by development aid practitioners before the 1980s or 1990s, respectively, the
concept of providing financial services to low income people is much older.
While the emergence of informal financial institutions in Nigeria dates back to the 15th
century, they were first established in Europe during the 18th century as a response to the
enormous increase in poverty since the end of the extended European wars (1618 – 1648). In
1720 the first loan fund targeting poor people was founded in Ireland by the author Jonathan
Swift. After a special law was passed in 1823, which allowed charity institutions to become
formal financial intermediaries a loan fund board was established in 1836 and a big boom
was initiated. Their outreach peaked just before the government introduced a cap on interest
rates in 1843. At this time, they provided financial services to almost 20% of Irish
households. The credit cooperatives created in Germany in 1847 by Friedrich Wilhelm
Raiffeisen served 1.4 million people by 1910. He stated that the main objectives of these
cooperatives “should be to control the use made of money for economic improvements, and
to improve the moral and physical values of people and also, their will to act by themselves.”
In the 1880s the British controlled government of Madras in South India, tried to use the
German experience to address poverty which resulted in more than nine million poor Indians
belonging to credit cooperatives by 1946. During this same time the Dutch colonial
administrators constructed a cooperative rural banking system in Indonesia based on the
Raiffeisen model which eventually became Bank Rakyat Indonesia (BRI), now known as the
largest MFI in the world.

Entities in Micro Finance:-

Indian Microfinance dominated by two operational approaches:

v SHG
• Initiated by NABARD through SHG Bank Linkage Program.
• Largest outreach to microfinance clients in the world.
v MFIs
• Emerged in the late 1990s to harness social and commercial funds.
• Today the number of Indian MFIs has increased and crossed 1000.

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Need for Micro-Finance

Since independence, various governments in India have experimented with a large number of
grant and subsidy based poverty alleviation programmes. These programmes were based on
grant/subsidy and the credit linkage was through commercial banks only.
Hence was adopted the concept of micro-credit in India. Success stories in neighboring
countries, like Grameen Bank in Bangladesh, Bank Rakiat in Indonesia, Commercial &
Industrial Bank in Philippines etc, gave further boost to the concept in India in the 1980s.
India thus adopted the similar model of extending credit to the poorest sector and took a no.
of steps to promote micro-financing in the country. Since the 1950s, various governments in
India have experimented with a large number of grant and subsidy based poverty alleviation
programmes. Studies show that these mandatory and dedicated subsidized financial
programmes, implemented through banking institutions, have not been fully successful in
meeting their social and economic objectives:

The common features of these programmes were:-

• Target orientation
• Based on grant/subsidy, and
• Credit linkage through commercial banks.

These programmes:-
• Were often not sustainable
• Perpetuated the dependent status of the beneficiaries
• Depended ultimately on government employees for delivery
• Led to misuse of both credit and subsidy and
• Were treated at best as poverty alleviation interventions.

Who are the clients of micro finance?

The typical micro finance clients are low-income persons that do not have access to formal
financial institutions. Micro finance clients are typically self-employed, often household-
based entrepreneurs. In rural areas, they are usually small farmers and others who are
engaged in small income-generating activities such as food processing and petty trade. In
urban areas, micro finance activities are more diverse and include shopkeepers, service

11
providers, artisans, street vendors, etc. Micro finance clients are poor and vulnerable non-
poor who have a relatively unstable source of income.
Access to conventional formal financial institutions, for many reasons, is inversely related to
income: the poorer you are the less likely that you have access. On the other hand, the
chances are that, the poorer you are, the more expensive or onerous informal financial
arrangements. Moreover, informal arrangements may not suitably meet certain financial
service needs or may exclude you anyway. Individuals in this excluded and under-served
market segment are the clients of micro finance.
As we broaden the notion of the types of services micro finance encompasses, the potential
market of micro finance clients also expands. It depends on local conditions and political
climate, activeness of cooperatives, SHG & NGOs and support mechanism.

The Need in India

• India is said to be the home of one third of the world’s poor; official estimates range
from 26 to 50 percent of the more than one billion population.
• About 87 percent of the poorest households do not have access to credit.
• The demand for microcredit has been estimated at up to $30 billion; the supply is less
than $2.2 billion combined by all involved in the sector.

Due to the sheer size of the population living in poverty, India is strategically significant in
the global efforts to alleviate poverty and to achieve the Millennium Development Goal of
halving the world’s poverty by 2015. Microfinance has been present in India in one form or
another since the 1970s and is now widely accepted as an effective poverty alleviation
strategy. Over the last five years, the microfinance industry has achieved significant growth
in part due to the participation of commercial banks. Despite this growth, the poverty
situation in India continues to be challenging.
Some principles that summarize a century and a half of development practice were
encapsulated in 2004 by Consultative Group to Assist the Poor (CGAP) and endorsed by the
Group of Eight leaders at the G8 Summit on June 10, 2004:

• Poor people need not just loans but also savings, insurance and money transfer
services.
• Microfinance must be useful to poor households: helping them raise income, build up
assets and/or cushion themselves against external shocks.

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 • “Microfinance can pay for itself.” Subsidies from donors and government are scarce
and uncertain, and so to reach large numbers of poor people, microfinance must pay
for itself.
• Microfinance means building permanent local institutions.
• Microfinance also means integrating the financial needs of poor people into a
country’s mainstream financial system.
• “The job of government is to enable financial services, not to provide them.”
• “Donor funds should complement private capital, not compete with it.”
• “The key bottleneck is the shortage of strong institutions and managers.” Donors
should focus on capacity building.
• Interest rate ceilings hurt poor people by preventing microfinance institutions from
covering their costs, which chokes off the supply of credit.
• Microfinance institutions should measure and disclose their performance – both
financially and socially.

Microfinance can also be distinguished from charity. It is better to provide grants to families
who are destitute, or so poor they are unlikely to be able to generate the cash flow required to
repay a loan. This situation can occur for example, in a war zone or after a natural disaster.

Financial Needs

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:
• 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.

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 • Investment Opportunities: expanding a business, buying land or equipment,
improving housing, securing a job (which often requires paying a large bribe), etc.

Obstacles of Microfinance

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 mobilize savings
• Limited management capacity in MFIs
• Institutional inefficiencies
• Need for more dissemination and adoption of rural, agricultural microfinance
methodologies

Role of Microfinance:-

The micro credit of microfinance progamme was first initiated in the year 1976 in
Bangladesh with promise of providing credit to the poor without collateral , alleviating
poverty and unleashing human creativity and endeavor of the poor people. Microfinance
impact studies have demonstrated that

1. Microfinance helps poor households meet basic needs and protects them against risks.
2. The use of financial services by low-income households leads to improvements in
household economic welfare and enterprise stability and growth.
3. By supporting women’s economic participation, microfinance empowers women,
thereby promoting gender-equity and improving household well-being.
4. The level of impact relates to the length of time clients have had access to financial
services.

Activities in Microfinance

Microcredit: It is a small amount of money loaned to a client by a bank or other institution.

Microcredit can be offered, often without collateral, to an individual or through group
lending.

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Micro savings: These are deposit services that allow one to save small amounts of money for
future use. Often without minimum balance requirements, these savings accounts allow
households to save in order to meet unexpected expenses and plan for future expenses.
Micro insurance: It is a system by which people, businesses and other organizations make a
payment to share risk. Access to insurance enables entrepreneurs to concentrate more on
developing their businesses while mitigating other risks affecting property, health or the
ability to work.
Remittances: These are transfer of funds from people in one place to people in another,
usually across borders to family and friends. Compared with other sources of capital that can
fluctuate depending on the political or economic climate, remittances are a relatively steady
source of funds.

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 Development Process through Micro Finance

Donors and Banks Micro-Finance Government and Banks

Implementing Organizations

Individual Awareness/Promotional Work Individual

Promotion and Formation of

SHGs

Micro Enterprise Consolidation of SHGs Micro Enterprise

Savings

Consumption Needs Credit Delivery Production Needs

Recovery

Follow-up Monitoring

Income Generation
Farm Related (Sustainable & Growth Non-Farm Related
Oriented)

Self-Sustainability of SHGs

Economic Empowerment
through use of Micro-Credit as
an entry point for overall
Figure
Empowerment

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 Micro-finance interventions through different organizations

National Government Donors/Bilate

Financial Banks Funded ral Projects
Institutions Programmes

Implementing
Organizations

Resource/Supp Indirectly
ort engaged in
Organizations Directly Micro-
engaged in Finance
Micro-Finance

Individuals

SHGs

Members

Figure

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Microfinance in India

At present lending to the economically active poor both rural and urban is pegged at around
Rs.7000 crores in the Indian banks’ credit outstanding. As against this, according to even the
most conservative estimates, the total demand for credit requirements for this part of Indian
society is somewhere around Rs.2,00,000 crores.

Microfinance changing the face of poor India

Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new
economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks
linkage Programme, aimed at providing a cost effective mechanism for providing financial
services to the 'unreached poor'. In the Indian context terms like "small and marginal
farmers", " rural artisans" and "economically weaker sections" have been used to broadly
define micro-finance customers. Research across the globe has shown that, over time,
microfinance clients increase their income and assets, increase the number of years of
schooling their children receive, and improve the health and nutrition of their families.
A more refined model of micro-credit delivery has evolved lately, which emphasizes the
combined delivery of financial services along with technical assistance, and agricultural
business development services. When compared to the wider SHG bank linkage movement in
India, private MFIs have had limited outreach. However, we have seen a recent trend of
larger microfinance institutions transforming into Non-Bank Financial Institutions (NBFCs).
This changing face of microfinance in India appears to be positive in terms of the ability of
microfinance to attract more funds and therefore increase outreach.
In terms of demand for micro-credit or micro-finance, there are three segments, which
demand funds. They are:

• At the very bottom in terms of income and assets, are those who are landless and
engaged in agricultural work on a seasonal basis, and manual labourers in forestry,
mining, household industries, construction and transport. This segment requires, first
and foremost, consumption credit during those months when they do not get labour
work, and for contingencies such as illness. They also need credit for acquiring small
productive assets, such as livestock, using which they can generate additional income.

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 • The next market segment is small and marginal farmers and rural artisans, weavers
and those self-employed in the urban informal sector as hawkers, vendors, and
workers in household micro-enterprises. This segment mainly needs credit for
working capital, a small part of which also serves consumption needs. This segment
also needs term credit for acquiring additional productive assets, such as irrigation
pump sets, bore wells and livestock in case of farmers, and equipment (looms,
machinery) and work sheds in case of non-farm workers.

• The third market segment is of small and medium farmers who have gone in for
commercial crops such as surplus paddy and wheat, cotton, groundnut, and others
engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment
includes those in villages and slums, engaged in processing or manufacturing activity,
running provision stores, repair workshops, tea shops, and various service enterprises.
These persons are not always poor, though they live barely above the poverty line and
also suffer from inadequate access to formal credit.

Present Scenario of India:

India falls under low income class according to World Bank. It is second populated country
in the world and around 70 % of its population lives in rural area. 60% of people depend on
agriculture, as a result there is chronic underemployment and per capita income is only $
3262. This is not enough to provide food to more than one individual. The obvious result is
abject poverty, low rate of education, low sex ratio, exploitation. The major factor account for
high incidence of rural poverty is the low asset base. According to Reserve Bank of India,
about 51 % of people house possess only 10% of the total asset of India .This has resulted
low production capacity both in agriculture (which contribute around 22-25% of GDP) and
Manufacturing sector. Rural people have very low access to institutionalized credit (from
commercial bank).

Self Help Groups (SHGs)

Self- help groups (SHGs) play today a major role in poverty alleviation in rural India. A
growing number of poor people (mostly women) in various parts of India are members of
SHGs and actively engage in savings and credit (S/C), as well as in other activities (income
generation, natural resources management, literacy, child care and nutrition, etc.). The S/C

19
focus in the SHG is the most prominent element and offers a chance to create some control
over capital, albeit in very small amounts. The SHG system has proven to be very relevant
and effective in offering women the possibility to break gradually away from exploitation and
isolation.

How self-help groups work

NABARD (1997) defines SHGs as "small, economically homogenous affinity groups of rural
poor, voluntarily formed to save and mutually contribute to a common fund to be lent to its
members as per the group members' decision".
Most SHGs in India have 10 to 25 members, who can be either only men, or only women, or
only youth, or a mix of these. As women's SHGs or sangha have been promoted by a wide
range of government and non- governmental agencies, they now make up 90% of all SHGs.
The rules and regulations of SHGs vary according to the preferences of the members and
those facilitating their formation. A common characteristic of the groups is that they meet
regularly (typically once per week or once per fortnight) to collect the savings from members,
decide to which member to give a loan, discuss joint activities (such as training, running of a
communal business, etc.), and to mitigate any conflicts that might arise. Most SHGs have an
elected chairperson, a deputy, a treasurer, and sometimes other office holders.
Most SHGs start without any external financial capital by saving regular contributions by the
members. These contributions can be very small (e.g. Rs.10 per week). After a period of
consistent savings (e.g. 6 months to one year) the SHGs start to give loans from savings in
the form of small internal loans for micro enterprise activities and consumption. Only those
SHGs that have utilized their own funds well are assisted with external funds through
linkages with banks and other financial intermediaries.

TYPES OF ORGANIZATION
These organizations are classified in the following categories to indicate the functional
aspects covered by them within the micro finance framework. The aim, however, is not to
"typecast" an organization, as these have many other activities within their scope:
Microfinance providers in India can be classified under three broad categories: formal,
semiformal, and informal.
• Formal Sector

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 The formal sector comprises of the banks such as NABARD, SIDBI and other
regional rural banks (RRBs). They primarily provide credit for assistance in
agriculture and micro-enterprise development and primarily target the poor. Their
deposit at around Rs.350 billion and of that, around Rs.250 billion has been given as
advances. They charge an interest of 12-13.5% but if we include the transaction costs
(number of visits to banks, compulsory savings and costs incurred for payments to
animators/staff/local leaders etc.) they come out to be as high as 21-24%.

• Semi - formal Sector

The majority of institutional microfinance providers in India are semi-formal

organizations broadly referred to as MFIs. Registered under a variety of legal acts,
these organizations greatly differ in philosophy, size, and capacity. There are over 500
non-government organizations (NGOs) registered as societies, public trusts, or non-
profit companies. Organizations implementing micro-finance activities can be
categorized into three basic groups.

I. Organizations which directly lend to specific target groups and are carrying
out all related activities like recovery, monitoring, follow-up etc.
II. Organizations who only promote and provide linkages to SHGs and are not
directly involved in micro lending operations.
III. Organizations which are dealing with SHGs and plan to start micro-finance
related activities.

• Informal Sector

In addition to friends and family, moneylenders, landlords, and traders constitute the
informal sector. While estimates of their importance vary significantly, it is
undeniable that they continue to play a significant role in the financial lives of the
poor. These are the organizations that provide support to implementing organizations.
The support may be in terms of resources or training for capacity building,
counseling, networking, etc. They operate at state/regional or national level. They
may or may not be directly involved in micro-finance activities adopted by the
associations/collectives to support implementing Organizations.

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Marketing of Microfinance Products:-

1. Contract Farming and Credit Bundling

Banks and financial institutions have been partners in contract farming schemes, set
up to enhance credit. Basically, this is a doable model. Under such an arrangement,
crop loans can be extended under tie-up arrangements with corporate for production
of high quality produce with stable marketing arrangements provided – and only,
provided – the price setting mechanism for the farmer is appropriate and fair.
2. Agri Service Centre – Rabo India
Rabo India Finance Pvt. Ltd. has established agri-service centres in rural areas in
cooperation with a number of agri-input and farm services companies. The services
provided are similar to those in contract farming, but with additional flexibility and a
wider range of products including inventory finance. Besides providing storage
facilities, each centre rents out farm machinery, provides agricultural inputs and
information to farmers, arranges credit, sells other services and provides a forum for
farmers to market their products.
3. Non Traditional Markets
Similarly, Mother Dairy Foods Processing, a wholly owned subsidiary of National
Dairy Development Board (NDDB) has established auction markets for horticulture
producers in Bangalore. The operations and maintenance of the market is done by
NDDB. The project, with an outlay of Rs.15 lakh, covers 200 horticultural farmers
associations with 50,000 grower members for wholesale marketing. Their produce is
planned with production and supply assurance and provides both growers and buyers
a common platform to negotiate better rates.
4. Apni Mandi
Another innovation is that of The Punjab Mandi Board, which has experimented with
a ‘farmers’ market’ to provide small farmers located in proximity to urban areas,
direct access to consumers by elimination of middlemen. This experiment known as
"Apni Mandi" belongs to both farmers and consumers, who mutually help each other.
Under this arrangement a sum of Rs.5.2 lakh is spent for providing plastic crates to
1000 farmers. Each farmer gets 5 crates at a subsidized rate. At the mandi site, the
Board provides basic infrastructure facilities. At the farm level, extension services of
different agencies are pooled in. These include inputs subsidies, better quality seeds
and loans from Banks. Apni Mandi scheme provides self-employment to producers

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 and has eliminated social inhibitions among them regarding the retail sale of their
produce.

Commercial banks as Microfinance Vehicles

Commercial banks recently have stepped into the realm of microfinance. They have taken
tentative but very important steps toward distributing Microfinance loans to the poor. One
advantage of these institutions is that they bring in the risks management practices that they
regularly use in their commercial operations risk management practices that they regularly
use in their commercial operations. The other important aspect they bring in is the
professional credit appraisal practices that are used in their normal operations. These
important features combined with a mission to provide the poor entrepreneurs will enhance
the social lives and they can run their business effectively with proper access to credit. In
some cases, successful microfinance NGOs have transformed themselves into for profit
commercial banks (BancoSol of Bolivia is a prime example of a microfinance NGO that has
successfully transformed itself into a for-profit commercial bank). This transformation from a
not-for-profit institution into for-profit organization has increased the focus of these
organizations on financial self-sufficiency. This transformation has been possible because
commercial banks have entered this arena bringing in key concepts like self-sufficiency,
proper credit appraisal and risk management practices. But there are some issues that have to
be dealt with by the banks before embarking on the Microfinance journey.
They are:

1. Banks Outreach
2. Clarity in objectives

Banks outreach is one of the most crucial aspects that must be critically examined by them
before entering into microfinance sector. One reason for it is that most of the commercial
banks have little or no rural presence with rate exceptions such as India, where rural banking
was a priority and there is a significant presence of commercial banks in the rural areas. They
have to decide whether to start their own branches in rural areas if they do not have any or
partner with other banks or other microfinance institutions in order to get a foothold in the
rural finance sector. The other issue that has to be resolved is the clarity in the bank in
dealing with its microfinance operations. They have to decide whether it will be completely
independent operation or it will be part of their existing rural banking framework. For
example, ICICI bank’s microfinance operation is a completely independent operation and it

23
does not have any link with its commercial banking operation. Once these major issues are
sorted out commercial banks will have enough leverage to approach the microfinance sector
with confidence.

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MICROFINANCE INSTITUTIONS

Microfinance institutions are perhaps one of the most important vehicles to reach the rural
poor. These institutions can act as very important tool to provide the rural entrepreneurs with
micro-loans, which will help them to start their own businesses and sustain them. One
advantage that these institutions have over other financial services delivery vehicles is the
focus. While NGOs have to straddle with various non-financial and financial services
activities and commercial bank with other operations. MFIs can solely focus on providing the
financial service to the poor since the very objective of starting this kind of institution is to
provide financial services in the rural areas. There are many examples of MFIs that has done
some stellar work in this area such as ACCION International, BancoSol and Grameen Bank.
These institutions have helped many people in enhancing their lives and achieving a decent
social status in the societies that they are living in. The key advantages that they have over
the other forms of microfinance are:

• Focus is solely on providing financial services.

• It can provide whole gamut of services from loans to insurance.

Apart from these there are several other important mechanisms through while microfinance is
provided like mutual community groups, regional woman group like Development of Women
and Child in Rural Area (DWCRA) and other local organizations. However, they have not
played a significant role in the microfinance movement till now and they can play a major
role in providing rural financial services in the long run.

ICICI Bank launches new initiative in micro-finance

§ ICICI Bank has taken a stake of under 20 per cent in Financial Information Network
and Operations Private Ltd (FINO), which was launched on Thursday, July 13, 2001.
§ FINO would provide technological solutions as well as services to finance providers
to reach the underserved in the country. ICICI Bank is the lead facilitator.
§ According to Mr. Nachiket Mor, Deputy Managing Director, ICICI Bank, FINO is an
independent entity. "We would reduce our stake in the company when required," he
said.

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 § ICICI Bank expects to target 200 micro-finance institutions (MFIs) by March 2007,
he said, speaking on the sidelines of the press conference to launch FINO. At present,
the bank has tie-ups with 100 MFIs.
§ FINO is an initiative in the micro-finance sector. It would target 300-400 million
people who do not have access to basic financial services, said Mr. Manish Khera,
CEO, FINO. The company has an authorized capital of Rs.50 crore. MFIs, NBFCs,
RRBs, co-operative banks, etc. would directly or indirectly tie up with FINO to use its
services, he said. FINO would charge Rs.25-30 per account every year.

Core banking products

FINO has partnered with IBM and i-flex to offer core banking products. It would also provide
credit bureau services, which includes individual customer credit rating and analytics based
on transaction history. It also launched biometric cards for customers, which would be a
proof of identity and give collateral to them. The card would also offer multiple products
including savings, loans, insurance, recurring deposits, fixed deposits and remittances

Financial Institutions and banks

Microfinance has been attractive to the lending agencies because of demonstrated
sustainability and of low costs of operation. Institutions like SIDBI and NABARD are hard-
nosed bankers and would not work with the idea if they did not see a long term engagement –
which only comes out of sustainability (that is economic attractiveness).

Perhaps the most important factor that got banks involved is what one might call the policy
push. Given that most of our banks are in the public sector, public policy does have some
influence on what they will or will not do. In this case, policy was followed by diligent, if
meandering, promotional work by NABARD. The policy change about a decade ago by RBI
to allow banks to lend to SHGs was initially followed by a seven-page memo by NABARD
to all bank chairmen, and later by sensitization and training programmes for bank staff across
the country. Several hundred such programmes were conducted by NGOs alone, each
involving 15 to 20 bank staff, all paid for by NABARD. The policy push was sweetened by
the NABARD refinance scheme that offers much more favorable terms (100% refinance,
wider spread) than for other rural lending by banks. NABARD also did some system setting
work and banks lately have been given targets. The canvassing, training, refinance and close
follow up by NABARD has resulted in widespread bank involvement.

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Moreover, for banks the operating cost of microfinance is perhaps much less than for pure
MFIs. The banks already have a vast network of branches. To the extent that an NGO has
already promoted SHGs and the SHG portfolio is performing better than the rest of the rural
(if not the entire) portfolio, microfinance via SHGs in the worst case would represent
marginal addition to cost and would often reduce marginal cost through better capacity

The RBI will now directly regulate microfinance sector

The Reserve Bank of India has now decided to bunch together the beleaguered microfinance
sector as a niche segment within the category of non-banking financial companies (NBFC).
This means it will now be the direct regulator of this sector – in line with the
recommendations of the Malegam Committee which made recommendations in this regard
after the Andhra microfinance fiasco.
Under guidelines issued on Friday, the RBI has directed all existing microfinance institutions
(MFIs) who can meet its new regulatory norms to register as NBFC-MFIs by April 2012.
Those who do not meet the norms cannot, henceforth, lend more than 10 percent of their total
assets to the sector.
The conditions set for NBFC-MFIs include the following:

• They must have minimum net owned funds of Rs.5 crore (Rs.2 crore if they operate in
the North-East).
• Their capital adequacy ratio (CAR) has to be 15 percent. This ratio is the measure of a
bank’s capital weighed against its risk assets (loans). Since MFIs in Andhra are stuck
up to their necks in bad debts, the RBI has given them a one-year concession in
capital adequacy. MFIs with more than 25 percent exposure to Andhra Pradesh need
to maintain only 12 percent CAR in the first year.
• MFIs cannot lend at more than 26 percent interest, and margins on borrowed funds
cannot exceed 12 percent. This means if MFIs can borrow cheap – say at 10 percent –
the interest rate cap on lending is 22 percent, and not 26 percent.
• As far as lending is concerned, not more than two MFIs can lend to the same
borrower while one borrower cannot be a member of two groups simultaneously. The
frequency of repayment installments can be decided by the borrower.
• MFIs should have higher cutoffs for lending in urban and semi-urban areas.

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 • MFIs have to start provisioning for defaults, and loans that are not serviced for more
than 90 days should be classified as non-performing.

The Reserve Bank has had to step in because states were beginning to impose their own
regulations. This is what happened in Andhra Pradesh, where the state issued an ordinance
last October when reports of borrower suicides and unfair debt collection methods were
reported. The MFI boom collapsed immediately after the Andhra law was imposed.
In its recent report on “Trend and Progress of the Banking in India, 2011-12″, the RBI had
expressed concern over states bringing in their own regulations. This was queering the pitch
for big MFIs with business across several states since they would have to follow different
laws in different states.

Role of Microfinance Services

1. Do not restrict loan use
Access to financial services provides the poor with the opportunity to accumulate assets, to
reduce their vulnerability to shocks (such as illness or death in the household, crop failure,
theft, dramatic price fluctuations, the payment of dowries) and to invest in income-generation
activities. It also enables them to improve the quality of their lives through better education,
health and housing. One of the most important roles of access to credit is that it enables the
poor to diversify their incomes. Most poor households do not have one source of income or
livelihood. Instead they pursue a mix of activities, depending on the season, prices, their
health and other contingencies. This may include growing their own food, working for others,
running small production or trading businesses, hunting and gathering, and accessing loans.
What to do?
Microfinance organizations should allow for the fact that micro entrepreneurs have a variety
of uses for funds, not only for the activity for which a loan is formally given but also for
household operations and other family enterprises. It would be too risky for the poor,
particularly the poorest of the poor, to invest all their income in a single activity. If the single
activity or enterprise failed, the consequences of this would be much greater than if they had
several sources of income. Providers of quality financial services recognize this and place
relatively few restrictions on loan use. Most microfinance organizations do not monitor client
loans to ensure that the loan is being used for its stated purpose because they recognize that it
is part of the survival strategy of poor clients to make an on-going stream of economic
choices and decisions. The clients themselves know how best to manage their funds.

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Example: Kamala Rani's diversified activities (Bangladesh). Kamala Rani is an experienced
borrower. She has taken loans three times. She invested her small, first loan (1,000 taka) in
her husband's business. He trades in bamboo and sells bamboo products in his shop. Kamala
also provides labour to make bamboo mats. When she obtained her second loan (2,000 taka),
she used it to make large containers for storing crops and other products, which she sells from
home to wholesalers and villagers. Next she borrowed another 4,000 taka, primarily to buy a
cow. She can repay her loan from her profits from selling milk and from her investment in
her husband's business. She still makes mats and other bamboo products, which she plans to
sell at the end of the year, when the price of the mats will go up. She can take advantage of
this increase in the price of the mats because she has other sources of income to make her
weekly loan installment payments. Like other low- income clients, Kamala Rani’s diversified
activities enable her to maximize returns from investment.

2. Provide access to financial services, not subsidies

For microenterprises, the most common constraint is the lack of access to working capital to
grow their business. Low-income entrepreneurs want rapid and continued access to financial
services rather than subsidies, and they are able – and willing – to pay for these services from
their profits. Most micro entrepreneurs borrow small amounts for short-term working capital
needs. The returns from their economic activities are normally sufficient to pay high interest
rates for loans and still make a profit.
Micro entrepreneurs value the opportunity to borrow and save with MFIs since they provide
services that are cheaper than those that would normally be available to poor clients or that
would be entirely unavailable to them. Moneylenders charge very high interest rates, often
many times the rate charged by MFIs, and the moneylenders' terms may not be suited to the
borrower. Micro entrepreneurs have consistently demonstrated that they will pay the full
interest cost to have continued access to financial services from MFIs.
What to do?
MFIs cannot afford to subsidize loans. If the organization is to provide loans on an on-going
basis, it must charge interest rates that allow it to cover its costs. These costs tend to be high
because providing unsecured, small loans costs significantly more than loans in traditional
banking. The costs to the institution include operating costs, the cost of obtaining the funds
for loans, and the cost of inflation. MFIs cannot rely on governments and donors as long-term
sources of funding. They must be able to generate their own income from revenues, including
interest and other fees. Since the poor seek continued and reliable access to financial services

29
and are able and willing to pay for it, it is advantageous to both the institution and the clients
to charge interest rates that cover the cost of the services
Examples: Client demand as an indicator. If clients repay their loans, pay full-cost interest
rates and remain in a programme as borrowers or savers, it is a very good indication that they
value these services. A detailed, independent review of the microfinance activities of the
United Nations Capital Development Fund (UNCDF) in Africa, Asia and Latin America
found evidence that poor clients were willing to pay the interest rates necessary to provide
these services. “Even when they have to pay the full cost of those services, they use them and
come back to use them again and again.” Continued and reliable access to credit and savings
services is what is most needed. “Subsidized lending programs provide a limited volume of
cheap loans. When these are scarce and desirable, the loans tend to be allocated
predominantly to a local elite with the influence to obtain them, bypassing those who need
smaller loans. In addition, there is substantial evidence from developing countries worldwide
that subsidized rural credit programs result in high arrears, generate losses both for the
financial institution administering the programs and for the government or donor agencies,
and depress institutional saving and, consequently, the development of profitable, viable rural
financial institutions."

3. Financial services contribute to women’s empowerment

Women entrepreneurs have attracted special interest from MFIs because they almost always
make up the poorest segments of society, they have fewer economic opportunities, and they
are generally responsible for child-rearing, including education, health and nutrition. Given
their particularly vulnerable position, many MFIs seek to empower women by increasing
their economic position in society. Experience shows that providing financial services
directly to women aids in this process. Women clients are also seen as beneficial to the
institution because they are seen as creditworthy. Women have generally demonstrated high
repayment and savings rates.
What to do?
MFIs interested in serving women should understand the specific needs of women clients and
attract women as customers. Women often have fewer economic opportunities than men.
Women also face cultural barriers that often restrict them to the home (for example, the
institution of the veil, or purdah), making it difficult for them to access finance services.
Women have more traditional roles in the economy and may be less able to operate a
business outside of their homes. Women also tend to have disproportionally large household

30
obligations. Loan sizes may need to be smaller, given that women’s businesses tend to be
smaller than men's. They tend to focus on trade, services and light manufacturing. Women's
businesses are often based in the home and frequently use family labour. Loans to women
should allow women to balance their household and business activities, for example, by not
requiring that too much time be spent in meetings and holding meetings in convenient
locations. The gender of loan officers may also affect the level of female participation in
financial services, depending on the social context.
Examples:
Women and empowerment. Regardless of culture or national context, impact assessments
have found positive results for women with access to financial services. For instance, a study
on the impact of microfinance on poverty alleviation in East Africa, conducted by the UNDP
Micro Save-Africa programme, found that participation in a microfinance institution
"typically strengthens the position of the woman in her family. Not only does access to credit
give the woman the opportunity to make a larger contribution to the family business, but she
can also deploy it to assist the husband's business and act as the family's banker - all of which
increase her prestige and influence within the household." Access to networks and markets
giving wider experience of the world outside the home, access to information and
possibilities for development of other social and political roles
• Enhancing perceptions of women's contribution to household income and family
welfare, increasing women's participation in household decisions about expenditure
and other issues and leading to greater expenditure on women's welfare
• More general improvements in attitudes to women's role in the household and
community
• Many programmes have had negative as well as positive impacts on women. Where
women have set up enterprises this has often led to small increases in access to
income at the cost of heavier workloads and repayment pressures.
• Within schemes, impacts often vary significantly between women. There are
differences between women in different productive activities and between women
from different backgrounds.
• Positive impact on non-participants cannot be assumed, even where women
participants are able to benefit. Women micro-entrepreneurs are frequently in
competition with each other and the poorest micro-entrepreneurs may be
disadvantaged if programmes do not include them.

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MICROFINANCE AND WOMEN EMPOWERMENT

Women as micro and small entrepreneurs have increasingly become the key target group for
micro finance programs. Consequently, providing access to micro finance facilities is not
only considered a pre-condition for poverty alleviation, but also considered as a strategy for
empowering women. In developing countries like INDIA micro finance is playing an
important role, promoting gender equality and is helping in empowering women so that they
can live quality life with dignity.
The study conducted by FINCA Client Poverty Assessment conducted in 2003 revealed that
of the interviewed clients 81 percent were women, and it was found that food security was 15
percent higher among their village banking clients than non-clients. The report also showed
clients to have 11 percent more of their children enrolled in school with an 18 percent
increase in healthcare benefits. Clients’ housing security was reported as 18 percent higher
than non-clients. The assessment concluded that microfinance improved the wellbeing of
women clients and their families.
Microfinance has a positive effect on the empowerment of women by creating an
“empowerment indicator”.
These indicators can be based on the following factors:

• Mobility.
• Economic security- enables poor women in making them economic agents of change
by increasing their income and productivity.
• Ability to make small purchases.
• Ability to make larger purchases.
• Involvement in major household decisions.
• Relative freedom from domination within the family.
• Political and legal awareness.
• Involvement in political campaigning and protests.
• To access to markets and information.
• They become more confident.
• They get a better control of the resources.
• They can confront systemic gender inequalities

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CHALLENGES FACED BY THE WOMEN ENTREPRENEURS

Challenges are faced by the women entrepreneurs due to many reasons. Some of the
challenges faced by the women entrepreneurs include-

• Intense competition from similar products, limited knowledge, production and quality
standards as well as low confidence and morale.
• Many women started their own business due to the adverse circumstances, such as
loss of spouses, divorce or financial hardship.
• Lack of follow up and holding support (i.e. Capital, market linkages, technical
information and marketing techniques) after receiving Entrepreneurship development
training.
• A risk averse mindset.
• Inadequate capital.
• Networking problem (i.e. with raw supplier to buyer of products)
• Insufficient management and marketing skills.
• Low level of motivation and courage.
• Lack of support from male members (of the families) as well as banks
• Large magnitude of the target group of poor people.
• Attitudinal rigidities.
• Difficulty in creating awareness among people.
• Limited resources with the NGOs.
• Large requirements of training and sensitization of issues.
• Limited number of experienced intervention agencies.
• Diversities of situations due to wide coverage.

OVERCOMING THE CHALLENGES

The challenges faced by the women entrepreneurs can be overcome with the help of the
following measures-

• Creating the Importance of Entrepreneurship program and skills training, and MF and
support under single roof.

33
• Training programme operating in several states helped NGOS-MFIs provide their
microfinance clients different set of skills for successfully running enterprises.
• Provide micro credit for livelihood support and to micro enterprises development.
• Encouraging women entrepreneur to utilize the loans for productive purposes and
have the potential to become entrepreneur.
• Establishing a network of SHG to serve as a “self-help community” for micro
enterprises development activities.
• Social recognition of women leading an enterprise.
• Developing female mentors, trainers and advisors.
• Establishing sources of credit.

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WOMEN’S EMPOWERMENT AND MICRO FINANCE: DIFFERENT PARADIGMS
Concern with women’s access to credit and assumptions about contributions to women’s
empowerment are not new. From the early 1970s women’s movements in a number of
countries became increasingly interested in the degree to which women were able to access
poverty-focused credit programmes and credit cooperatives. In India organizations like Self-
Employed Women’s Association (SEWA) among others with origins and affiliations in the
Indian labour and women’s movements identified credit as a major constraint in their work
with informal sector women workers.

a) Feminist Empowerment Paradigm

The feminist empowerment paradigm did not originate as a Northern imposition, but is firmly
rooted in the development of some of the earliest micro-finance programmes in the South,
including SEWA in India. It currently underlies the gender policies of many NGOs and the
perspectives of some of the consultants and researchers looking at gender impact of micro-
finance programmes (e.g. Chen 1996, Johnson, 1997).
Here the underlying concerns are gender equality6 and women’s human rights. Women’s
empowerment is seen as an integral and inseparable part of a wider process of social
transformation. The main target group is poor women and women capable of providing
alternative female role models for change. Increasing attention has also been paid to men's
role in challenging gender inequality.

b) Poverty Reduction Paradigm

The poverty alleviation paradigm underlies many NGO integrated poverty-targeted
community development programmes. Poverty alleviation here is defined in broader terms
than market incomes to encompass increasing capacities and choices and decreasing the
vulnerability of poor people.
The main focus of programmes as a whole is on developing sustainable livelihoods,
community development and social service provision like literacy, healthcare and
infrastructure development. There is not only a concern with reaching the poor, but also the
poorest. Although term 'empowerment' is frequently used in general terms, often synonymous
with a multi-dimensional definition of poverty alleviation, the term 'women's empowerment
is often considered best avoided as being too controversial and political.

35
c) Financial Sustainability Paradigm
The financial self-sustainability paradigm (also referred to as the financial systems approach
or sustainability approach) underlies the models of microfinance promoted since the mid-
1990s by most donor agencies and the Best Practice guidelines promoted in publications by
USAID, World Bank, UNDP and CGAP.
The ultimate aim is large programmes which are profitable and fully self-supporting in
competition with other private sector banking institutions and able to raise funds from
international financial markets rather than relying on funds from development agencies. The
main target group, despite claims to reach the poorest, is the ‘bankable poor': small
entrepreneurs and farmers.

Micro Credit and Women's Empowerment

Before 1990's, credit schemes for rural women were almost negligible. The concept of
women's credit was born on the insistence by women oriented studies that highlighted the
discrimination and struggle of women in having access to credit. However, there is a
perceptible gap in financing genuine credit needs of the poor especially women in the rural
sector.
There are certain misconceptions about the poor people that they need loan at subsidized rates
of interest on soft terms, they lack education, skills, capacity to save, credit-worthiness and
therefore are not bankable. Nevertheless, the experiences of several SHGs (self-help groups)
reveal that rural poor are actually efficient managers of credit and finance. Availability of
timely and adequate credit is essential for them to undertake any economic activity rather
than credit subsidy.
The Government measures have attempted to help the poor by implementing different
poverty alleviation programmes but with little success. Since most of them are target-based
involving lengthy procedures for loan disbursements, high transaction costs, and lack of
supervision and monitoring. Banks often suffer from poor repayment leading to a high level
of non-performing assets NPAs (non-performing assets).
Since the credit requirements of the rural poor cannot be adopted on project lending approach
as it is in the case of organized sector, there emerged the need for an informal credit supply
through SHGS. The rural poor with the assistance from NGOs have demonstrated their
potential for self-help to secure economic and financial strength. Various case studies show
that there is a positive correlation between credit availability and women's empowerment.

36
Microfinance refers to the provision of financial services to low-income clients, including
consumers and the self-employed. Microfinance programmes are currently being promoted as
a key strategy for simultaneously addressing both poverty alleviation and women's
empowerment. Where financial service provision leads to the setting up or expansion of
microenterprises there are a range of potential impacts including:

• Increasing women's income levels and control over income leading to greater levels of
economic independence
• Access to networks and markets giving wider experience of the world outside the
home, access to information and possibilities for development of other social and
political roles.
• Enhancing perceptions of women's contribution to household income and family
welfare, increasing women's participation in household decisions about expenditure
and other issues and leading to greater expenditure on women's welfare.

The other dimensions of the microfinance approach are:-

• Savings/Thrift precedes credit

• Credit is linked with savings/thrift
• Absence of subsidies
• Group plays an important role in credit appraisal, monitoring and recovery.

EMPOWERMENT: FOCUS ON POOR WOMEN

Women have been the vulnerable section of society and constitute a sizeable segment of the
poverty-struck population. Women face gender specific barriers to access education health,
employment etc. Micro finance deals with women below the poverty line. Micro loans are
available solely and entirely to this target group of women. There are several reason for this:
Among the poor , the poor women are most disadvantaged –they are characterized by lack of
education and access of resources, both of which is required to help them work their way out
of poverty and for upward economic and social mobility. The problem is more acute for
women in countries like India, despite the fact that women’s labor makes a critical
contribution to the economy. This is due to the low social status and lack of access to key
resources. Evidence shows that groups of women are better customers than men, the better

37
managers of resources. If loans are routed through women benefits of loans are spread wider
among the household. Since women’s empowerment is the key to socio economic
development of the community; bringing women into the mainstream of national
development has been a major concern of government. The ministry of rural development has
special components for women in its programmes. Funds are earmarked as “Women’s
component” to ensure flow of adequate resources for the same. Besides Swarnagayanti
Grameen Swarazgar Yojona (SGSY), Ministry of Rural Development is implementing other
scheme having women’s component .They are the Indira Awas Yojona (IAJ), National Social
Assistance Programme (NSAP), Restructured Rural Sanitation Programme, Accelerated
Rural Water Supply programme (ARWSP) the (erstwhile) Integrated Rural Development
Programme (IRDP), the (erstwhile) Development of Women and Children in Rural Areas
(DWCRA) and the Jowahar Rozgar Yojana (JRY).

38
MICRO FINANCE INSTRUMENT FOR WOMEN’S EMPOWERMENT

Micro Finance is emerging as a powerful instrument for poverty alleviation in the new
economy. In India, micro finance scene is dominated by Self Help Groups (SHGs) – Bank
Linkage Programme, aimed at providing a cost effective mechanism for providing financial
services to the “unreached poor”. Based on the philosophy of peer pressure and group savings
as collateral substitute , the SHG programme has been successful in not only in meeting
peculiar needs of the rural poor, but also in strengthening collective self-help capacities of the
poor at the local level, leading to their empowerment. Micro Finance for the poor and women
has received extensive recognition as a strategy for poverty reduction and for economic
empowerment. Increasingly in the last five years , there is questioning of whether micro
credit is most effective approach to economic empowerment of poorest and, among them,
women in particular. Development practitioners in India and developing countries often argue
that the exaggerated focus on micro finance as a solution for the poor has led to neglect by
the state and public institutions in addressing employment and livelihood needs of the poor.
Credit for empowerment is about organizing people, particularly around credit and building
capacities to manage money. The focus is on getting the poor to mobilize their own funds,
building their capacities and empowering them to leverage external credit. Perception women
is that learning to manage money and rotate funds builds women’s capacities and confidence
to intervene in local governance beyond the limited goals of ensuring access to credit.
Further, it combines the goals of financial sustainability with that of creating community
owned institutions.
Before 1990’s, credit schemes for rural women were almost negligible. The concept of
women’s credit was born on the insistence by women oriented studies that highlighted the
discrimination and struggle of women in having the access of credit. However, there is a
perceptible gap in financing genuine credit needs of the poor especially women in the rural
sector. There are certain misconception about the poor people that they need loan at
subsidized rate of interest on soft terms, they lack education, skill, capacity to save, credit
worthiness and therefore are not bankable. Nevertheless, the experience of several SHGs
reveals that rural poor are actually efficient managers of credit and finance. Availability of
timely and adequate credit is essential for them to undertake any economic activity rather
than credit subsidy. The Government measures have attempted to help the poor by
implementing different poverty alleviation programmes but with little success. Since most of
them are target based involving lengthy procedures for loan disbursement, high transaction

39
costs, and lack of supervision and monitoring. Since the credit requirements of the rural poor
cannot be adopted on project lending app roach as it is in the case of organized sector, there
emerged the need for an informal credit supply through SHGs. The rural poor with the
assistance from NGOs have demonstrated their potential for self-help to secure economic and
financial strength. Various case studies show that there is a positive correlation between
credit availability and women’s empowerment

A real life Examples:-

Lakshmi, a 22-year-old school dropout, lived in a remote village of Tamil Nadu. Instead of
getting married and starting a family like any other village girl of her age in India, she wanted
to set up on her own business. Lakshmi started an Internet kiosk in her village, offering
services like e-mail, Internet chat and tips on health and education. The kiosk was partially
financed by ICICI Bank and was set up in association with n-Logue Communications. Latha,
a 29-year-old married woman with three children borrowed Rs.18000 to set up a small
provision store in Kothaipalli, a small village, in the north of Andhra Pradesh. Within a year,
she started earning Rs.3500 a month from the store. With this money, she was able to provide
her children a good education at a local private school. She was a part of a self help group in
Andhra Pradesh which received financial assistance from ICICI Bank. These are real-life
examples to illustrate how the micro-lending initiatives of ICICI Bank affected the lives of
poor women in India.

40
 1. What is the amount of loan you have received in micro-finance?
(a) Below Rs. 10,000
(b) Rs . 10,001-20,000
(c) Rs . 20,001-50,000
(d) Rs . 50,001-80,000
(e) Rs. 80,000 and above

Amount of loan received

9, 14% 6, 9%

18, 27%
19, 28%

15, 22%

Below 10,000 10,001-20,000 20,001-50,000 50,001-80,000 80,000 and above

INTEPRETATION:

When the respondents were asked about the amount of loan they have received from the
micro-institutions, Out of 67 respondents, 6 respondents said that they received loan below
rs.10,000, 18 respondents said that they received loan between rs.10,001-20,000, 15
respondents said that they received loan between rs.20,001-50,000, 19 respondents said that
they received loan below between rs.50,001-80,000 and 9 respondents said that they received
loan above 80,000.

This means that 9% of the respondents claimed that they received loan below rs.10,000 from
the micro-institutions where on the other hand, 27% respondents said that they received loan
between rs.10,001-20,000, 22% respondents said that they received loan between rs.20,001-
50,000, 28% respondents said that they received loan below between rs.50,001-80,000 and
14% respondents said that they received loan above 80,000.

41
 2. Is the rate of interest of microcredit provided by the institution
reasonable?
(a) Strongly disagree
(b) Disagree
(c) Neither agree nor disagree
(d) Agree
(e) Strongly agree

The rate of interest of microcredit provided by the

institution is reasonable?
1; 2% 4; 6%
15; 22%

18; 27%

29; 43%

Strongly Disagree Disagree Neither Agree Nor Disagree Agree Strongly Agree

INTEPRETATION:

When the respondents were asked if the rate of interest of microcredit provided by the
institution is reasonable or not, out of 67 respondents, 1 respondent appear to strongly
disagree to microcredit being reasonable, 4 respondents appear to disagree to microcredit
being reasonable, 18 respondents appear to neither agree nor disagree to microcredit being
reasonable whereas 29 respondents appear to agree to microcredit being reasonable and 15
respondents appear to strongly agree to microcredit being reasonable.

Thus, 2% respondents appear to strongly disagree to microcredit being reasonable, 6%

respondents appear to disagree to microcredit being reasonable, 27% respondents appear to
neither agree nor disagree to microcredit being reasonable whereas 43% respondents appear
to agree to microcredit being reasonable and the remaining 22% respondents appear to
strongly agree to microcredit being reasonable.

42
 3. What was the loan repayment period allotted to your SHG? (in Year).
(a) Less than 1 year
(b) Between 1- 2 years
(c) Between 2-4 years
(d) Between 4-6 years

Loan Period

9, 14%
26, 39%
13, 19%

19, 28%

Less than 1 year between 1-2 years between 2-4 years between 4-6 years

INTEPRETATION:

When the respondents were asked what was the loan repayment period allotted to them, out
of 67 respondents, 9 respondents said that the loan repayment period allotted to them was less
than 1 year, 13 respondents said that the loan repayment period allotted to them was between
1-2 years whereas 19 respondents said that the loan repayment period allotted to them was
between 2-4 years and 26 respondents said that the loan repayment period allotted to them
was between 4-6 years.

Thus, 14% respondents said that the loan repayment period allotted to them was less than 1
year, 19% respondents said that the loan repayment period allotted to them was between 1-2
years whereas 28% respondents said that the loan repayment period allotted to them was
between 2-4 years and the remaining 39% respondents said that the loan repayment period
allotted to them was between 4-6 years.

43
 4. What is the purpose of getting microfinance?
(a) Personal (e) Medical
(b) Agricultural (f) To meet emergency
(c) Business (g) Payment of old loan
(d) Education (h) Marriage

Use of Loan

9; 13% 9; 14%
4; 6%
11; 16%
12; 18%
7; 11%
6; 9% 9; 13%

personal agricultural Business education

Medical To meet emergency Payment of Old loan Marriage

INTEPRETATION: When the respondents were asked where the loan amount has been used, out
of 67 respondents, 9 respondents said that the loan amount has been used for personal reasons, 4
respondents said that the loan amount has been used for agriculture reasons, 12 respondents said
that the loan amount has been used for business reasons, 9 respondents said that the loan amount
has been used for education purposes, 6 respondents said that the loan amount has been used for
medical reasons, 7 respondents said that the loan amount has been used to meet emergencies, 11
respondents said that the loan amount has been used for payment of old loan and the remaining 9
respondents said that the loan amount has been used for marriage.

Thus, 14% respondents said that the loan amount has been used for personal reasons, 6%
respondents said that the loan amount has been used for agriculture reasons, 18% respondents
said that the loan amount has been used for business reasons, 13% respondents said that the
loan amount has been used for education purposes, 9% respondents said that the loan amount
has been used for medical reasons, 11% respondents said that the loan amount has been used
to meet emergencies, 16% respondents said that the loan amount has been used for payment
of old loan and the remaining 13% respondents said that the loan amount has been used for
marriage.

44
 5. Is there any increase in the saving of yours after taking microfinance?
(a) Strongly disagree

(b) Disagree

(c) Neither agree nor disagree

(d) Agree

(e) Strongly agree

Is there any increase in the saving of yours after taking

microfinance?
2; 3% 5; 8%
16; 24%
11; 16%

33; 49%

Strongly Disagree Disagree Neither Agree Nor Disagree Agree Strongly Agree

INTEPRETATION: When the respondents were asked Is there any increase in the savings after
taking microfinance, out of 67 respondents, 2 respondents strongly disagree that there is an
increase in savings after taking microfinance, 5 respondents disagree that there is an increase in
savings after taking microfinance, 11 respondents neither agree nor disagree that there is an
increase in savings after taking microfinance, 33 respondents agree that there is an increase in
savings after taking microfinance and 16 respondents strongly agree that there is an increase in
savings after taking microfinance.

Thus, 3% respondents said that they strongly disagree that there is an increase in savings
after taking microfinance, 8% respondents said that they disagree that there is an increase in
savings after taking microfinance, 16% said that they respondents neither agree nor disagree
that there is an increase in savings after taking microfinance, 49% said that they respondents
agree that there is an increase in savings after taking microfinance and the remaining 24%
said that they respondents strongly agree that there is an increase in savings after taking
microfinance.

45
 6. What is you main purpose of saving?
(a) Social security
(b) Marriage
(c) Food Security
(d) Emergencies
(e) Education
(f) Asset building
(g) Self respect

Purpose of Saving

8; 12% 15; 22%

9; 13%
8; 12%
10; 15%
5; 8%
12; 18%

Social security Marriage Food Security Emergencies

Education asset building Self respect

INTEPRETATION: When the respondents were asked what is their main purpose of savings, out
of 67 respondents, 15 respondents said that their main focus for savings is for social security, 8
respondents said that their main focus for savings is for marriage, 5 respondents said that their main
focus for savings is for food security, 12 respondents said that their main focus for savings is for
emergencies, 10 respondents said that their main focus for savings is for education, 9 respondents
said that their main focus for savings is for asset building, 8 respondents said that their main focus
for savings is for self respect.

Thus, 22% respondents claimed that their main focus for savings is for social security, 12%
respondents said that their main focus for savings is for marriage, 8% respondents said that
their main focus for savings is for food security, 18% respondents said that their main focus
for savings is for emergencies, 15% respondents said that their main focus for savings is for
education, 13% respondents said that their main focus for savings is for asset building and the
remaining 12% respondents said that their main focus for savings is for self respect.

46
 7. What is your Reason for Non-Repayment of loan ?
(a) Natural Calamity
(b) Health/illness problems
(c) lack of co-operation from family
(d) lack of interest
(e) Lack of Income and Savings
(f) none

Reason for Non-Repayment of loan

2; 3%
11; 16% 8; 12%

10; 15%

22; 33%

14; 21%

Natural Calamity Health/illness problems lack of co-operation from family

lack of interest Lack of Income and Savings none

INTEPRETATION:

When the respondents were asked what is their Reason for Non-Repayment of loan, out of 67
respondents, 2 respondents said that their reason is because of natural calamity, 8 respondents said
that their reason is because of health/illness problems, 10 respondents said that their reason is
because of lack of co-operation from family, 14 respondents said that their reason is because of lack
of interest, 22 respondents said that their reason is because of lack of income and savings and 11
respondents said that they don’t have any reason.

Thus, 3% respondents said that their reason is because of natural calamity, 12% respondents said
that their reason is because of health/illness problems, 15% respondents said that their reason is
because of lack of co-operation from family, while 21% respondents said that their reason is because
of lack of interest, 33% respondents said that their reason is because of lack of income and savings
and the remaining 16% respondents said that they don’t have any reason.

47
 8. What is the quality of response you have received from the society?
(a) Very poor
(b) Poor
(c) Medium
(d) Strong
(e) Very strong

response from society

9; 14% 13; 19%

11; 17%

15; 22%

19; 28%

very poor poor medium strong very strong

INTEPRETATION:

When the respondents were asked what is the response from the society, out of 67 respondents, 13
respondents labelled the societies response as very poor, 15 respondents labelled the societies
response as poor, 19 respondents labelled the societies response as medium, 11 respondents
labelled the societies response as strong and 9 respondents labelled the societies response as very
strong.

Thus, 19% respondents labelled the societies response as very poor, 22% respondents labelled the
response of the society as poor, 28% respondents labelled the response of the society as medium,
17% respondents labelled the response of the society as strong and the remaining 14% respondents
labelled the response of the society as very strong.

48
 9. Has your confidence level increased?
(a) Strongly disagree

(b) Disagree

(c) Neither agree nor disagree

(d) Agree

(e) Strongly agree

Increase in confindence level

5; 8%
21; 31% 9; 14%

17; 25%
15; 22%

strongly disagree disagree neither agree noe disagree agree strongly agree

INTEPRETATION:

When the respondents were asked has their confidence level increased after taking microfinance,
out of 67 respondents, 5 respondents said they strongly disagree that their confidence level has
increased, 9 respondents said they disagree that their confidence level has increased, 17
respondents said they neither agree nor disagree that their confidence level has increased, 15
respondents said they agree that their confidence level has increased and 21 respondents said they
strongly agree that their confidence level has increased.

Thus, 8% respondents claimed they strongly disagree that their confidence level has increased, 14%
respondents claimed they disagree that their confidence level has increased, 25% respondents
claimed they neither agree nor disagree that their confidence level has increased, 22% respondents
claimed they agree that their confidence level has increased and 31% respondents claimed they
strongly agree that their confidence level has increased.

49
 10. What is your present working status?
(a) Employer
(b) Employee

Present working status

29; 43%
38; 57%

employer employee

INTEPRETATION:

When the respondents were asked about their present working status, 29 respondents out of
total 67 respondents said that they have become employers themselves and yet on the other
hand 38 respondents out of total 67 respondents said that they are still employees working
under someone.

Thus, 43% respondents said that they have become employers themselves and yet on the
other side 57% respondents said that they are still employees working under someone

50
 11. How would you rate your involvement in decision making in your family?
(a) Very poor

(b) Poor

(c) Medium

(d) Strong

(e) Very strong

Involvement in decision making in family

7; 11%
18; 27%
10; 15%

17; 25% 15; 22%

very poor poor medium strong very strong

INTEPRETATION:

When the respondents were asked about their involvement in decision making in family, out of 67
respondents, 18 respondents labelled their involvement as very poor, 15 respondents labelled their
involvement as poor, 17 respondents labelled their involvement as medium, 10 respondents labelled
their involvement as strong and 7 respondents labelled their involvement as very strong.

Thus, 27% respondents labelled their involvement as very poor, 22% respondents labelled their
involvement as poor, 25% respondents labelled their involvement as medium, 15% respondents
labelled their involvement as strong and the remaining 11% respondents labelled their involvement
as very strong.

51
 12. Has your asset increased with the help of microfinance?
(a) Yes
(b) No

Asset increase

24; 36%

43; 64%

yes no

INTEPRETATION:

When the respondents were asked whether their assets have increased or not, 43 respondents
out of total 67 respondents said that they have an increase in their assets while on the other
hand 24 respondents out of total 67 respondents said that they do not have an increase in their
assets.

Thus, 64% respondents out of total respondents said that they have an increase in their assets
while on the other hand 36% respondents out of total respondents said that they do not have
an increase in their assets.

52
 13. What is your opinion towards psychological well-being?
Neither increase
Highly Increased
Psychological Factors nor decrease
increased

Self-confidence

Awareness on children education

Awareness on health service

Awareness to sanitation facility

Awareness on food nutrition

Family planning awareness

Interaction with outsiders

opinion of respondents towards psychological well-being

40
35 34
35
30 29
30 28 28
26
23 24
25 22 22 22
21 21
18 18 19
20
15 14
15
11
9
10

0
Self-confidence Awareness on Awareness on Awareness to Awareness on Family Interaction
children health service sanitation food nutrition planning with outsiders
education facility awareness

Highly increased Increased Neither increase nor decrease

53
INTEPRETATION:

When the respondents were asked about their opinions towards psychological well-being, out of 67
respondents, 30 respondents said that they have highly increased self confidence, 22 respondents
said that they have increased self confidence and 15 respondents said that they have neither
increased nor decreased self confidence.

28 respondents said that they have highly increased awareness on children education, 21
respondents said that they have increased awareness on children education and 18 respondents said
that they have neither increased nor decreased awareness on children education.

18 respondents said that they have highly increased awareness on health service, 21 respondents
said that they have increased awareness on health service and 28 respondents said that they have
neither increased nor decreased awareness on health service.

22 respondents said that they have highly increased awareness to sanitation facility, 19 respondents
said that they have increased awareness to sanitation facility and 26 respondents said that they have
neither increased nor decreased awareness to sanitation facility.

9 respondents said that they have highly increased awareness on food nutrition, 23 respondents said
that they have increased awareness on food nutrition and 35 respondents said that they have
neither increased nor decreased awareness on food nutrition.

11 respondents said that they have highly increased family planning awareness, 22 respondents said
that they have increased family planning awareness and 34 respondents said that they have neither
increased nor decreased family planning awareness.

29 respondents said that they have highly increased interaction with outsiders, 24 respondents said
that they have increased interaction with outsiders and 14 respondents said that they have neither
increased nor decreased interaction with outsiders.

54
 14. What is your opinion towards economic improvement?
Improvement Highly Increased Neither increase
increased nor decrease

Credit available

Asset building

Individual income

Reduction Poverty

Opinion of Respondents towards Economic Improvement

40
36
34
35 32
30 27
25 23
21 20 19
20 17
14 13
15 12
10

0
Credit available Asset building Individual income Reduction Poverty

Highly increased Increased Neither increase nor decrease

55
INTEPRETATION:

When the respondents were asked about their opinions towards economic improvement, out of 67
respondents, 32 respondents said that credit availability has highly increased, 21 respondents said
that credit availability has increased and 14 respondents said that credit availability has neither
increased nor decreased.

34 respondents said that asset building has highly increased, 20 respondents said that asset building
has increased and 13 respondents said that asset building has neither increased nor decreased.

36 respondents said that their individual income has highly increased, 19 respondents said that their
individual income has increased and 12 respondents said that their individual income has neither
increased nor decreased.

17 respondents said that reduction in poverty has highly increased, 23 respondents said that
reduction in poverty has increased and 27 respondents said that reduction in poverty has neither
increased nor decreased.

56
 15. What is your opinion towards credit?

Credit Low Very low Moderate

Access to Credit Sources

Availability of Credit

Opinion of Respondents Towards Credit

35 32
30
30

25
20 20
20 17
15
15

10

0
Access to Credit Sources Availability of Credit

Low Very low Moderate

INTEPRETATION:

When the respondents were asked about their opinions towards credit, out of 67 respondents, 20
respondents said that access to credit sources is low, 32 respondents said that access to credit
sources is very low and 15 respondents said that access to credit sources is moderate.

While on the other side, 30 respondents said that availability of credit is low, 20 respondents said
that availability of credit is very low and 17 respondents said that availability of credit is moderate.

57
 16. Are you doing any business after taking microfinance?
(a) Strongly disagree
(b) Disagree
(c) Neither agree nor disagree
(d) Agree
(e) Strongly agree

Doing any business after taking microfinance.

3; 5% 4; 6%
8; 12%

35; 52%

17; 25%

Strongly Disagree Disagree Neither Agree Nor Disagree Agree Strongly Agree

INTEPRETATION:

When the respondents were asked if they were doing any business after taking microfinance, out of
total 67 respondents, 3 respondents strongly disagree that they are doing any business, 4
respondents disagree that they are doing any business, 8 respondents neither agree nor disagree
that they are doing any business, 17 respondents agree that they are doing any business and 35
respondents strongly agree that they are doing any business.

Thus, 5% respondents strongly disagree that they are doing any business, 6% respondents disagree
that they are doing any business, 12% respondents neither agree nor disagree that they are doing
any business and on the other hand 25% respondents agree that they are doing any business, 52%
respondents strongly agree that they are doing any business after taking microfinance.

58
 17. Do you think the procedure of obtaining loan from microfinance
institutions is easier than conventional banking?
(a) Strongly disagree

(b) Disagree

(c) Neither agree nor disagree

(d) Agree

(e) Strongly agree

The procedure of obtaining loan from microfinance

institutions is easier than conventional banking.
1; 2% 3; 4%
11; 16%

34; 51%

18; 27%

Strongly Disagree Disagree Neither Agree Nor Disagree Agree Strongly Agree

INTEPRETATION:

When the respondents were asked about the procedure of obtaining loan from
microfinance institutions is easier than conventional banking, out of total 67 respondents,
1 respondent strongly disagree that the procedure of obtaining loan from microfinance

institutions is easier than conventional banking, 3 respondents disagree and 11

respondents neither agree nor disagree.
While on the other hand, 18 respondents agree that the procedure of obtaining loan
from microfinance institutions is easier than conventional banking and 34 respondents
strongly agree.
2% respondent strongly disagree that the procedure of obtaining loan from
microfinance institutions is easier than conventional banking, 4% respondents disagree
and 16% respondents neither agree nor disagree.While on the other hand, 27% respondents
agree that the procedure of obtaining loan from microfinance institutions is easier
than conventional banking and 51% respondents strongly agree.

59
 18. After taking microfinance did you notice any good improvement in your
lifestyle, and basic necessities?
(a) Strongly disagree

(b) Disagree

(c) Neither agree nor disagree

(d) Agree

(e) Strongly agree

After taking microfinance did you notice any good

improvement in your lifestyle, and basic necessities?
1; 2% 3; 5%
13; 19%

19; 28%

31; 46%

Strongly Disagree Disagree Neither Agree Nor Disagree Agree Strongly Agree

INTEPRETATION:

When the respondents were asked if they noticed any good improvement in their lifestyle and basic
necessities, out of total 67 respondents, 1 respondent strongly disagree that there is any good
improvement in their lifestyle and basic necessities, 3 respondents disagree and 19 respondents
neither agree nor disagree. While on the other hand, 31 respondents agree that there is good
improvement in their lifestyle and basic necessities and 13 respondents strongly agree.

Thus, 2% respondent strongly disagree that there is any good improvement in their lifestyle and
basic necessities, 5% respondents disagree and 28% respondents neither agree nor disagree. While
on the other hand, 46% respondents agree that there is good improvement in their lifestyle and
basic necessities and the remaining 19% respondents strongly agree.

60
FINDINGS

The respective findings of the project report are mentioned in brief below:
• Micro financial institutions play a very important role today to provide the micro
finance to the women entrepreneur. Mostly MFI provide the assistance to the women
entrepreneur through MFI- bank linkage programme.
• From the current situation we can understand that today the main focus of micro
finance industry is to empower woman that’s why more loans are provided to woman
and on easy terms.
• From the total SHGs, more SHGs are coming in which only women are members
because women can better run a business and their family.
• NREGA and SGSY (Swaranjyanti Gram Swarojgar Yojna) 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.
• In case of amount of loan received, the maximum preference is between Rs. 50,000-
80,000 and minimum is below Rs. 10,000.
• The majority of the people agree that the rate of interest of microcredit provided by
the micro-institutions are reasonable.
• It is discovered that the majority share of women get micro-finance for their business,
followed by payment of old loan and for personal reasons etc.
• It can be seen that majority of the people agree that there is an increase in the savings
after taking micro-finance.
• One of the main purpose of saving is highlighted as social security, followed by
emergencies and education etc.
• In case of non-repayment of loan, the majority lies with lack of interest and lack of
income & savings.
• The quality of response received from the society is medium atmost.

61
• The report shows that there is a definite increase in the confidence department for
women.
• Even after taking micro-finance, the majority is still working as an employee.
• The involvement of women in decision making is still lacking in many ways.
• It can be seen that assets have increased with the help of micro-finance.
• Many women can be seen doing business after taking micro-finance.
• The majority definitely thinks that the procedure of obtaining loan from micro-finance
institutions is a lot easier than conventional banking.
• According to the report, the majority agrees that they have noticed good improvement
regarding lifestyle and basic necessities.

62
CONCLUSION

Traditionally women have been marginalized. A high percentage of women are among the
poorest of the poor. Microfinance activities can give them a means to climb out of poverty.
Microfinance could be a solution to help them to extend their horizon and offer them social
recognition and empowerment. Numerous traditional and informal system of credit that was
already in existence before micro finance came into vogue. Viability of micro finance needs
to be understood from a dimension that is far broader- in looking at its long-term aspects too.

A conclusion that emerges from this account is that micro finance can contribute to solving
the problems of inadequate housing and urban services as an integral part of poverty
alleviation programmes. The challenge lies in finding the level of flexibility in the credit
instrument that could make it match the multiple credit requirements of the low income
borrower without imposing unbearably high cost of monitoring its end use upon the lenders.
A promising solution is to provide multipurpose lone or composite credit for income
generation, housing improvement and consumption support. Consumption loan is found to be
especially important during the gestation period between commencing a new economic
activity and deriving positive income.

India is the country where a collaborative model between banks, NGOs, MFIs and Women’s
organizations is furthest advanced. It therefore serves as a good starting point to look at what
we know so far about ‘Best Practice’ in relation to micro-finance for women’s empowerment
and how different institutions can work together.

It is clear that gender strategies in micro finance need to look beyond just increasing
women’s access to savings and credit and organizing self-help groups to look strategically at
how programmes can actively promote gender equality and women’s empowerment. On the
other hand, thank to women's capabilities to combine productive and reproductive roles in
microfinance activities and society has enabled them to produce a greater impact as they will
increase at the same time the quality of life of the women micro-entrepreneur and also of her
family.

63
RECOMMENDATIONS

• Credit is important for development but cannot by itself enable very poor women to
overcome their poverty.
• Making credit available to women does not automatically mean they have control
over its use and over any income they might generate from micro enterprises.
• In situations of chronic poverty it is more important to provide saving services than to
offer credit.
• A useful indicator of the tangible impact of micro credit schemes is the number of
additional proposals and demands presented by local villagers to public authorities.
• Globalization will not be allowed to expand the gap between the rich and the poor.
Affluent countries cannot continue to dump aid on needy nations; developing
countries must not be permitted to ignore the needs of their impoverished population.
• As the poor are vulnerable it is not sufficient for us just to provide micro credit, but to
have a series of support systems provided at the appropriate time.

Government can contribute most effectively by setting sound macroeconomic policy that
provides stability and low inflation.

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BIBLIOGRAPHY

BOOKS

1. Prema Basargekar, N., “How Empowering is Micro Entrepreneurship Developed through

Microfinance”, Asia-Pacific Business Review, Vol. V. pp. 67-76

2. R.Amundha N, “Micro Finance – A Tool For Elevation of Social Entrepreneurship through

Women Empowerment”, Asia-Pacific Business Review, Vol. V. pp. 78-86

3. Pawan Garga, N, “A Comparative Study of Opportunities, Growth and problems of

Women Entrepreneurs”, Asia-Pacific Business Review, Vol. V. pp. 87-94

4. J.Suganthi, N, “Influence of Motivational Factors on Women Entrepreneurs in SMEs”,

Asia-Pacific Business Review, Vol. V. pp. 95-104

5. Vidya Sekhri, N. “Growth and Challenges Faced in Micro –Finance”, Journal of IMS
Group, Vol. (3), pp. 71-76

7. Malhotra, Meenakshi, Empowerment of Women, Isha Books, Delhi.

8. Kothari, C.R., Quantitative Techniques, New Delhi, Vikas Publishing House Pvt. Ltd.,
1978.

WEBSITES

www.rbi.org

www.microfinancefocus.com

www.worldbank.org

www.microfinance.com

www.grameen.org

www.microfinancegateway.com

www.nabard.org

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