The Scenario of Retail Industry in India: Its Growth, Challenges and Opportunities

Presented
By
* K.Chandra Sekhar

* * Shaik Gowsya

Abstract

Microfinance as the provision of thrift, saving, credit and financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve their standard of living. MFIs must be able to sustain themselves financially in order to continue pursuing their lofty objectives, through good financial performance. The present paper discusses conceptual framework of a microfinance institution in India. Key Words: Microfinance, Financial performance.

Introduction

Most poor people manage to mobilize resources to develop their enterprises and their dwellings slowly over time. Financial services could enable the poor to leverage their initiative, accelerating the process of building incomes, assets and economic security The lack of access to credit for the poor is attributable to practical difficulties arising from the discrepancy between the mode of operation followed by financial institutions and the economic characteristics and financing needs of low income households. Despite the success of microfinance institutions, only about2% of worlds roughly 500 million small entrepreneurs is estimated to have access to financial services

Strategic Issues Related to Micro-Finance

Is there a prevailing paradigm for micro-finance? Are there clearly visible pattern across the country? Is there clearly defined foundation building blocks such as organizing principles, gender preferences and operational imperatives? What are methodological issues?

Institutional Issues Related to Micro-Finance

Is there a need for a new institution? Should it operate all India or in a state? Where should it be located? Who can lead an institution of this sort? What will its contextual interconnections be? Who will be its beneficiaries?

Connectivity Issues Related to Micro-Finance

How should the Corporate Financial Sector be involved? What is the role of donor agencies? How should communities be involved? Are there political issues that should be explicitly considered? Are there government policy issues?

Micro-Finance Institutional credit and poverty alleviation

In India, institutional credit agencies (banks) made an entry in rural areas initially to provide an alternative to the rural money lenders who provided credit support, but not without exploiting the rural poor Their role in poverty alleviation was more appreciated when the Government, as a major paradigm shift, decided to launch a direct attack on poverty, through its special employment generation strategies and productive asset creation programs like Integrated Rural Development Program (IRDP). The micro-finance scene in India is dominated by Self Help Groups (SHGs) Banks linkage program for over a decade now. The SHG - Banks linkage program was conceived with the objectives of developing supplementary credit delivery services for the unreached poor, building mutual trust & confidence between the bankers and the poor and encouraging banking activity both on thrift as well as credit and sustaining a simple and formal mechanism of banking with the poor.

Community Driven Development Activities commonly taken up by the SHGs members:

Cleaning the village road, village pond and village school; To solve the drinking water problem, arrange a tube-well in the village; Helping to start a school for their own children and children of the village; Building a bridge over a small rivulet, thereby connecting the village road To the outside world. They did this by taking a contract from the local Authorities and using their own and other villagers free labour; Build a small patch of the village road;

Findings

Micro-Finance can be a powerful instrument initiating a cyclical process of growth and development. Micro-Finance activity improved access of rural poor to financial services, both savings and credit. Increased access signifies overcoming isolation of rural women in terms of their access to financial services and denial of credit due to absence of collateral. The pool of savings generated out of very small but regular contributions improved access of the poor women to bank loans. It could also help in strengthening poor families resistance to external shocks and reducing dependence on moneylenders.

Conclusion

First of all, the poor repay their loans and are willing to pay for higher interest rates than commercial banks provided that access to credit is provided. Secondly, the poor save and hence microfinance should provide both savings and loan facilities. Consumption loan is found to be especially important during the gestation period between commencing a new economic activity and deriving positive income. Careful research on demand for financing and savings behavior of the potential borrowers and their participation in determining the mix of multi-purpose loans are essential in making the concept work.

Thanking You