The Impact of

Microfinance on alleviation of
rural poverty and social
upliftment

Dr.N.Moogana Goud
Prof and Director
SJC Institute of Technology
CHICKBALLAPUR
INTRODUCTION

In the world today,

1.2 billion, 20% of the worlds
population, live on less
than one dollar per day,
325 million boys and girls
do not have access to
primary education, 856 million
adult are illiterate of which
64 percent are women
 WHAT IS POVERTY?
Poverty is a situation or a condition of people
where it
deprives people of their security and well-
being; 
deprives people not only of safe water and
adequate food, clothing and shelter, but also
education and healthcare
takes away people’s rights, and their freedom,
dignity and peace of mind;
Puts people's lives in danger and robs them of
their future.
As of 2010,more than 37%of India’s
population of (1.35 billion) still lives below
the poverty line. More than 22% of the
entire rural population and 15% of the
urban population of India exists in this
difficult physical and financial predicament
(economy watch)
 WHAT IS MICROFINANCE?

Poor people usually depend mostly on informal delivery

channels of finance that is offered at a high rate of
interest involving the stringent recovery measures.

The poor and downtrodden has a rare accessibility to

organized financial institutions, since they are unable to
meet the minimum stipulation of the banks.
Forget about availing loan, they are even finding it
difficult to open their savings bank account as the banks
insist for the introducer to open an account
In this contest the Microfinance is a boom for the poor
and downtrodden.
WHAT IS MICROFINANCE?

Micro credit and

microfinance are
relatively new terms
in the field of
development, first
coming to
prominence in the
1970s
Microfinance offers

• basic financial services such as

loans, savings, money transfer
services and micro insurance.
means for self-empowerment.
• It enables the poor, especially
women, to become economic
agents of change
• they increase income, become
business-owners and reduce
their vulnerability to external
shocks
MICROFINANCE AND MICRO
CREDIT.
In the literature, the terms micro
credit and microfinance are
often used interchangeably
• Micro credit refers to small
loans
• whereas microfinance is
appropriate where NGOs and
MFIs1 supplement the loans
with other financial services
(savings, insurance, etc)”.
 PURPOSE OF STUDY

Analyze the impact of micro finance in

alleviation of poverty and achieving economic
growth of developing nations.
To study and understand the role micro finance
in alleviation of poverty and achieving socio-
economic development of the developing nations
with special reference to india
 LITARATURE REVIEW
The researcher has reviewed the following
works from different Researchers
• Robinson (2001) world Bank Report
• Finca Client Assessment—2003)
• Fernando. A. December 1999
• (Robin.B and Rohini Pande, August 2003).
• Abijit. V.Banerji July 2009
• Mohammad Arifujjaman Khan and Mohammed Anisur
Rahaman, 2007
• Etc
Micro Finance in India
Microfinance has made
tremendous strides in India
over the years
Self Help Groups (SHGs) have
become the common vehicle of
development process,
converging all development
programmes
• SHG–Bank Linkage Programme
launched by NABARD way back
in synthesis of formal financial
system and informal sector has
become a movement
throughout the country
The banks operating, presently, in the formal financial system
comprises of Public Sector Commercial Banks (27), Private Sector
Commercial Banks (28), Regional Rural Banks (86), State
Cooperative Banks (31) and District Central Cooperative Banks
(371).
It is observed that most of the banks participating in the process
of microfinance have reported their progress under the
programme.
Table: 1- Overall Progress under Microfinance during the
last three years in India (Rs in crores )
Particulars 2006-07 2007-08 2008-09
No. of Amount No. of Amount No. of Amount
SHGs SHGs SHGs
A. SHG-Bank Linkage Model
Savings of 4160584 3512.71 5009794 3785.39 6121147 5545.62
SHGs with (20.4) (7.8) (22.2) (46.5)
Banks as on
31 March
Bank 1105749 6570.39 1227770 8849.26 1609586 12253.51
Loans (11.0) (34.7) (31.1) (38.5)
disbursed
to SHGs
during the
year
Bank Loans 2894505 12366.49 3625941 16999.91 4224338 22679.84
outstanding (25.3) (37.5) (16.5) (33.4)
with SHGs
as on 31
March

NOTE: Data in the bracket furnished indicate the percentage of growth to previous year
Table: 2- Overall Progress under Microfinance during the last three
years (Rs in crores)
Particulars 2006-07 2007-08 2008-09
No. of Amount No. of Amount No. of Amount
SHGs SHGs SHGs
B. MFI-Bank Linkage Model
Bank Loans 334 1151.56 518 1970.15 581 3732.33
disbursed (55.1) (71.1) (12.2) (89.4)
to MFI’s
during the
year
Bank Loans 550 1584.48 1109 2748.84 1915 5009.09
outstanding (101.6) (73.5) (72.7) (82.2)
with MFI’s
as on 31
March
SELF HELP GROUP (SHG) - BANK LINKAGE

Savings of SHGs with Banks

As on 31 March 2009, total 61,21,147
SHGs were having saving bank
accounts with the banking sector with
outstanding savings of Rs.5,545.62
crore as against 50,09,794 SHGs having
savings of Rs.3785.39 crore as on 31
March 2008, thereby having growth
rate of 22.2% and 46.5% respectively.
SELF HELP GROUP (SHG) - BANK LINKAGE
Bank loans disbursed to SHGs
During the year 2008-09, the banks
financed 16,09,586 SHGs, including
repeat loan to the existing SHGs, with
bank loan of Rs.12,253.51 crore as
against 12,27,770 SHGs with bank loan
of Rs. 8,849.26 crore during 2007-08
registering a growth rate of 31.1% (No.
of SHGs) and 38.5% (Bank Loan
disbursed).
SELF HELP GROUP (SHG) - BANK LINKAGE

Recovery performance of Bank

Loans to SHGs
On the basis of data reported by banks, out of
267 banks which have reported the recovery
data, 181 banks (67.8%) had more than 80%
recovery of SHG loans as on 31 March 2009
which is observed to be the same as on 31
March 2008.
LESSONS FROM BANGLADESH
Bangladesh is currently the eighth most
populous country in the world with the
highest population density—about 950
people per square kilometre.
Eighty percent of its population lives in
rural areas and half of its population stills
lives below the poverty line
Bangladesh is a champion of Micro
finance
The average annual growth rate in the
microfinance sector in Bangladesh over
the five years 2003–2008 was 23 percent.
It is expected to reach 25 percent
annually over the next three years (2009–
2012) as a result of growing demand for
larger loan sizes.
The Indian micro-finance sector has
many lessons to learn from the
Bangladesh experience.
 They offer a wider choice of financial services,

savings,
micro-credit
pension,
insurance
loans for
business
agriculture,
housing
disaster
management
guardians of
street children
Bangladesh Performance
As on 2008
S.L.NO Particulars Amt in USD

1 Gross loan portfolio 2.0 billion

2 Number of active borrowers 20.7 million

3 Average loan balance per 93.1

borrower
4 Deposits 1.4 billion

5 Total assets 3.0 billion

6 Number of depositors 25.2 million

 IMPACT OF MICRO FINANCE ON
SOCIO ECONOMIC DEVELOPMENT

• microfinance made a big impact in bringing socio

economic reformation in developing countries.
• The poor and downtrodden has a accessibility to
organized financial institutions
• Microfinance sector has covered a long journey
from micro savings to micro credit and then to
micro enterprises and now entered the field of
micro insurance, micro remittance, micro pension
and micro livelihood.
• They have joined hands proactively with informal
delivery channels to give microfinance sector the
necessary momentum
• Littlefield, Murduch and Hashemi (2003, p.4) state that
access to MFIs can empower women to become more
confident, more assertive
• Microfinance interventions have also been shown to
have a positive impact on the education of clients’
children.
• Robinson (2001) in a study of 16 different MFIs from all
over the world shows that having access to microfinance
services has led to an enhancement in the quality of life
of clients, an increase in their self-confidence, and has
helped them to diversify their livelihood security
strategies and thereby increase their income.
• the NABARD Data on Microfinance shows that
– There is substantial growth in respect of savings of
the people through SHG’s i.e. 46.5% in 2008-09 only
against the growth of 7.8% in the year 2007-08.
– The loan disbursement and loan disbursement is also
growing at the rate of 35% and above.
CONCLUSION
The emergence of microfinance concept in the
year 1972 has brought new hopes to the
people living in the developing countries.
More specifically it had a definite strategy at
empowering rural women who were hitherto
the unsung leaders in the rural economy in
different developing nations. India and
Bangladesh have seen the tremendous
turnaround in their rural economy due to the
impact of microfinance. Thus microfinance
has played a vital role in alleviation of rural
poverty and social upliftment in many
developing nations.