“IMPACT OF MICROFINANCE ON LIVING EMPOWERMENT AND

POVERTY ALLEVIATION OF POOR PEOPLE”

A Project Submitted to
University of Mumbai for partial completion of degree of
Bachelor of Management Studies
Under the Faculty of Commerce

By:

SAHIL RUSHIKESH DHATRAK

Under the guidance of:

PROF. OMPRAKASH KUMAWAT

MODERN EDUCATION SOCIET’S

D.G RUPAREL COLLEGE OF ARTS, SCIENCE & COMMERCE
MATUNGA (WEST), MUMBAI-400016

MARCH, 2022

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 Declaration by learner

I the undersigned Mr. Sahil Rushikesh Dhatrak here by, declare that the work embodied
in this project work titled, Impact of Microfinance on Living Standards Empowerment
And Poverty Alleviation of Poor Women forms my own contribution to the research
work carried out under the guidance of PROF. OMPRAKASH KUMAWAT is a result of
my own research and has not been previously submitted to any other University for any
other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all the information provided in the project is true and to
the best of my knowledge.

CERTIFIED BY

________________ _________________
PROF. Omprakash Kumawat

DATE:

PLACE:

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 MODERN EDUCATION SOCIETY’S
THE D.G. RUPAREL COLLEGE OF ARTS, SCIENCE & COMMERCE

Matunga (W), 400016

Certificate

This is to certify that Mr. Sahil Rushikesh Dhatrak has worked and duly completed her
Project Work for the degree of Bachelor of Management Studies under the Faculty of
Commerce in the subject of Finance and her project is entitled, Impact of Living
Standard Empowerment And Poverty Alleviation Of Poor Women under my
supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted for any Degree or Diploma of any University.

It is her own work and facts reported by her personal findings and investigation.

_________________________ ____________________
PROF. OMPRAKASH
KUMAWAT EXTERNAL EXAMINER

PROJECT GUIDE

___________________ _____________________
DR. NEETA TATKE COLLEGE SEAL

VICE PRINCIPAL

Date of Submission: ___/___/_____

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 Acknowledgement

To list who all have helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank my I/C Principal, Dr. Dilip Maske for providing the necessary
facilities required for completion of this project

I take opportunity to thank our Coordinator Dr. Neeta Tatke for her moral support and
guidance.

I would like to express my sincere gratitude towards my project Mentor Prof. Omprakash
Kumawat whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

I would also like to thank my Parents and Peers, without their support I won’t be able to
complete my project.

Last but not the least, I would like to sincere thanks to all those people who have left
unmentioned here, but have helped me directly or indirectly by their contribution to give me a
sharp and rewarding insight about the successful completion of this project.

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 ABSTRACT

The term "microfinance" describes the range of financial products (such as

microloans, micro savings and micro-insurance products) that microfinance
institutions (MFIs) offer to their clients. Microfinance began in the 1970s when social
entrepreneurs began lending money on a large scale to the working poor. Muhammad
Yunus is the father of Micro Finance.

Microfinance is defined as, financial services such as savings accounts, insurance

funds and credit provided to poor and low income clients so as to help them increase
their income, thereby improving their standard of living. The system of micro finance
has been viewed as a powerful tool for uplifting the economic conditions of the poor
through group approach that ensures greater involvement of the various stakeholders.
It provides a paradigm shift in the strategy for resolving the socio-economic
deprivations of the poor. Sustainability and outreach are the twin fold objectives that
microfinance institutions had to achieve. It's a key strategy in helping people living in
poverty to become financially independent, which helps them become more resilient
and better able to provide for their families in times of economic difficulty.
Considering nearly half the world survives on less than $2 a day, microfinance is a
vital solution. The idea is to provide extremely poor people with small loans so they
can start and operate a business. The borrowers are able to save money and pay back
the loan over time.

Microfinance helps support financial security because it is not just a donation.

However, empirical studies examining the impact of microfinance on poverty
reduction and lifestyles have drawn mixed conclusions on the effectiveness
of microfinance as a poverty reduction tool. Microfinance is the provision of a broad
range of financial services such as deposits, loans, payment services, money transfers,
and insurance to poor and low-income households and, their microenterprises
informal sources such as money lenders and shopkeepers.

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 TABLE OF CONTENTS

Page Title Page No.

1 Cover Page 1

2 Declaration by learner 2

3 Certificate 3

4 Acknowledgement 4

5 Abstract 5

6 Index 6

Ch. 1 Introduction to the Study 7

Ch. 2 RESEARCH METHODOLOGY 35

Ch.3 Review of Literature 41

Ch.4 Analysis of Primary Information 57

Ch.5 Conclusion and suggestion 75

Ch.6 Bibliography 78

Ch.7 Annexure (Questionnaire Blank Copy) 79

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 CHAPTER 1

Introduction to the Topic

Introduction:

Microfinance, also called microcredit, is a type of banking service that is

provided to unemployed or low-income individuals or groups who otherwise would
have no other access to financial services. While institutions participating in the area
of microfinance most often provide lending, many banks offer additional services, such
as checking and savings accounts, and micro-insurance products; and some even
provide financial and business education. Ultimately, the goal of microfinance is to
give impoverished people an opportunity to become self-sufficient. It 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. Microfinance is a category of financial services targeted at individuals and
small businesses who lack access to conventional banking and related services.
Microfinance includes microcredit, the provision of small loans to poor
clients; savings and checking accounts; micro insurance; and payment
systems. Microfinance services are designed to be more affordable to poor and socially
marginalized customers and to help them become self-sufficient. 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 inroads
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

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of activity however, the overarching goal that unifies all actors in the provision of
microfinance is the creation of social value.

Microfinance initially had a limited definition - the provision of microloans to poor

entrepreneurs and small businesses lacking access to credit. The two main mechanisms
for the delivery of financial services to such clients were:

(1)relationship - based banking for individual entrepreneurs and small businesses;

(2) group-based models, where several entrepreneurs come together to apply for loans
and other services as a group.

Over time, microfinance has emerged as a larger movement whose object is "a world
in which as everyone, especially the poor and socially marginalized people and
households have access to a wide range of affordable, high quality financial products
and services, including not just credit but also savings, insurance, payment services,
and fund transfers”.

In developing economies and particularly in 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. This is often the case when people need the services money can
provide but do not have dispensable funds required for those services, forcing them to
revert to other means of acquiring them. In their book The Poor and their money, Stuart
Rutherford and Sukhwinder Arora cite several types of needs:

 Lifecycle Needs: such as weddings, funerals, childbirth, education, home building,

widowhood and old age.
 Personal Emergencies: such as sickness, injury, unemployment, theft, harassment
or death.
 Disasters: such as wildfires, floods, cyclones and man-made events like war or
bulldozing of dwellings.
 Investment Opportunities: expanding a business, buying land or equipment,
improving housing, securing a job, etc.

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According to International Labor Organization (ILO), “Microfinance is an economic
development approach that involves providing financial services through institutions
to low - income clients”.

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

The dictionary meaning of finance is management of money. The management of

money denotes acquiring & using money. 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 underprivileged class 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, (in fact need like thirst) need a diverse range
of financial instruments to be able to build assets, stabilize consumption and protect
themselves against risks. Thus, we see a broadening of the concept of micro finance--
- our current challenge is to find efficient and reliable ways of providing a richer menu
of micro finance products. Micro Finance is not merely extending credit, but extending
credit to those who require most for their and families survival. It cannot be measured
in term of quantity, but due weightage to quality measurement. How credit availed is
used to survive and grow with limited means.

Concept and Features of Micro-finance:

1. It is a tool for empowerment of the poorest.

2. Delivery is normally through Self Help Groups (SHGs).

3. It is essentially for promoting self-employment, generally used for:

(a) Direct income generation

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 (b) Rearrangement of assets and liabilities for the household to participate
in future opportunities and
(c) Consumption smoothing.

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

5. Because micro credit is aimed at the poorest, micro-finance lending technology

needs to mimic the informal lenders rather than the formal sector lending. It
has to:
(a) Provide for seasonality (b) Allow repayment flexibility (c) Fix a
ceiling on loan sizes.

Table 3

Advantages and Disadvantages of Micro Finance:

Advantages-

The biggest advantage is bringing financial services to poor people and making it
financial sustainable by the economies of scale effect. In India the National Bank for
Agriculture and Rural Development (NABARD) finances more than 500 banks that
on lend funds to self -help groups (SHG). SHGs comprise twenty or fewer members,
of whom the majority are women from the poorest castes and tribes. Nearly 1.4
million SHGs comprising approximately 20 million women now borrow from banks,

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which makes the Indian SHG-Bank Linkage model the largest microfinance program
in the world. Similar programs are evolving in Africa and Southeast Asia with the
assistance of organizations like Opportunity International, Catholic Relief Services,
CARE, APMAS and Oxfam. Also helps in the development of an economy by giving
everyday people the chance to establish a sustainable means of income. Eventual
increases in disposable income will lead to economic development and growth.

Disadvantages-

There´s not much research done on the actual effectiveness of microfinance as a tool
for economic growth. Some argue that there´s too much focus on microfinance which
will motivating less spending in other helping assistances as public health, welfare,
and education.

Some are doubting microfinance really have that impact on poverty as the practioners
would submit. Other describes micro crediting as a privatization of public safety net
programs. There´s also some microfinance institutions charging excessive interest
rates.Questions against the Grameen Bank was raised in a Wall Street Journal article.
It was regarding the repayment rate, collection methods and questionable accounting
practices.

Studies of microcredit programs have found that women often act as collection agents
for their husbands and sons, such that the men spend the money themselves while
women are saddled with the credit risk. Some borrowers have become dependent on
loans for household expenditures rather than capital investments, The key debate
about microfinance is whether it should focus on improved welfare or financial
sustainability. The two different approaches are usually named as “poverty lending”
or “the welfarist approach” and “the institutional approach” or “financial system
approach”. The welfarist approach could be for example supplying the customer with
education and health wilts the institutional focus only on the financial service. The
reason for that is only with total focus on financial sustainability the huge demand can
be met. MFIs with the welfarist approach are for example the Grameen Bank and

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Women´s World Banking. Examples of institutional are ACCION International and
BRI Unit Desa.

History Of Micro Finance:

The history of microfinancing can be traced back as long to the middle of the 1800s
when the theorist Lysander Spooner was writing over the benefits from small credits
to entrepreneurs and farmers as a way getting the people out of poverty. But it was at
the end of World War II with the Marshall plan the concept had a big impact.

The today use of the expression microfinancing has its roots in the 1970s when
organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer
Mohammad Yunus, where starting and shaping the modern industry of
microfinancing. Another pioneer in this sector is Akhtar Hameed Khan. At that time a
new wave of microfinance initiatives introduced many new innovations into the
sector. Many pioneering enterprises began experimenting with loaning to the
underserved people. The main reason why microfinance is dated to the 1970s is that
the programs could show that people can be relied on to repay their loans and that it´s
possible to provide financial services to poor people through market- based
enterprises without subsidy. Shore bank was the first microfinance and community
development bank founded 1974 in Chicago.

An economical historian at Yale named Timothy Guinean has been doing some
research on Friedrich Wilhelm Raiffeisen´s village bank movement in Germany
which started in 1864 and by the year 1901 the bank had reached 2million rural
farmers. Timothy Guinean means that already then it was proved that microcredit
could pass the two tests concerning peoples pay back moral and the possibility to
provide the financial service to poor people.

Another organization, the caisse popularize movement grounded by Alphone and

Dorimène Desjardins in Quebec, was also concerned about the poverty, and passed
those two tests. between 1900 to 1906 when they founded the first caisse, they passed

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a law governing them in the Quebec assembly, they risked their private assets and
must have been very sure about the idea about microcredit.

Today the World Bank estimates that more than 16 million people are served by some
7000 microfinance institutions all over the world. CGAP experts means that about
500 million families benefits from these small loans making new business possible. In
a gathering at a Microcredit Summit in Washington DC the goal was reaching 100
million of the world´s poorest people by credits from the world leaders and major
financial institutions.

The year 2005 was proclaimed as the International year of Microcredit by The
Economic and Social Council of the United Nations in a call for the financial and
building sector to “fuel” the strong entrepreneurial spirit of the poor people around the
world.

The International year of Microcredit consists of five goals:

• Assess and promote the contribution of microfinance to the MFIs

• Make microfinance more visible for public awareness and understanding as a very
important part of the development situation

• The promotion should be inclusive the financial sector

• Make a supporting system for sustainable access to financial services

• Support strategic partnerships by encouraging new partnerships and innovation to

build and expand the outreach and success of microfinance for all

The economics professor Mohammad Yunus and the founder of Grameen Bank were
awarded the Nobel Prize 2006 for his efforts. The press release from nobelprize.org
states:

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“The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for
2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their
efforts to create economic and social development from below. Lasting peace cannot
be achieved unless large population groups find ways in which to break out of
poverty. Micro-credit is one such means. Development from below also serves to
advance democracy and human rights. Muhammad Yunus has shown himself to be a
leader who has managed to translate visions into practical action for the benefit of
millions of people, not only in Bangladesh, but also in many other countries. Loans to
poor people without any financial security had appeared to be an impossible idea.
From modest beginnings three decades ago, Yunus has, first and foremost through
Grameen Bank, developed micro-credit into an ever more important instrument in the
struggle against poverty. Grameen Bank has been a source of ideas and models for the
many institutions in the field of micro-credit that have sprung up around the world.
Every single individual on earth has both the potential and the right to live a decent
life. Across cultures and civilizations, Yunus and Grameen Bank have shown that
even the poorest of the poor can work to bring about their own development.
Micro-credit has proved to be an important liberating force in societies where women
in particular have to struggle against repressive social and economic conditions.
Economic growth and political democracy cannot achieve their full potential unless
the female half of humanity participates on an equal footing with the male.
Yunus long-term vision is to eliminate poverty in the world. That vision cannot be
realized by means of micro-credit alone. But Muhammad Yunus and Grameen Bank
have shown that, in the continuing efforts to achieve it, micro-credit must play a
major part.”

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 are
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

14
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’s 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’s model which eventually became Bank Rakyat
Indonesia (BRI), now known as the largest MFI in the world.

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EVOLUTION OF MICROFINANCE IN INDIA (1960 TO 2000):

Microfinance in India emerged as an effort to reach out to the un-banked, lower

income segments of the population.

1960 – 1980 1990 2000

Phase 1: Social Banking Phase 2: Financial System Phase 3: Financial

Approach Inclusion

Nationalization of private Peer pressure. NGO-MFIs and SHGs

commercial banks. gaining more
legitimacy.

Expansion of rural branch Establishment of MFIs MFIs emerging as a

network. typically of non- profit strategic partner to
origins. diverse entities
interested in the low -
income segments.

Extension of subsidized Consumer finance

credit. emerged as a high
growth area.

Establishment of Rural Increased policy

Regional Banks. regulations.

Establishment of apex Increasing

institution as National Bank commercialization.
for Agriculture and Rural
Development and Small
Industries Development
Bank of India

Table 4

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Phase 1: In the 1960‟s, the credit delivery system in rural India was largely
dominated by the cooperative segment. The period between 1960 and 1990, referred
to as the “social banking” phase. This phase includes nationalization of private
commercial banks, expansion of rural branch networks, extension of subsidized
credit, establishment of Regional Rural Banks (RRBs) and the establishment of apex
institutions such as the National Bank for Agriculture and Rural Development
(NABARD) and the small - scale Industries Development Board of India (SIDBI).

Phase 2: After 1990, India witnessed the second phase “financial system approach”
of credit delivery. In this phase NABARD initiated the Self Help Group (SHG) -
Bank Linkage Bank Linkage program, which links informal women's groups to
formal banks. This concept held great appeal for nongovernment organizations
(NGOs) working with the poor, prompting many of them to collaborate with
NABARD in the program. This period also witnessed the entry of Microfinance
Institutions (MFIs), largely of non-profit origins, with existing development
programs.

Phase 3: In 2000, the third phase in the development of Indian microfinance began,
marked by further changes in policies, operating formats, and stakeholder
orientations in the financial services space.

This phase emphasizes on “inclusive growth” and “financial inclusion.” This period
also saw many NGO-MFIs transform into regulated legal formats such as Non-
Banking Finance Companies (NBFCs). Commercial banks adopted innovative ways
of partnering with NGO-MFIs and other rural organizations to extend their reach into
rural markets. MFIs have emerged as strategic partners to individuals and entities
interested in reaching out to India's low -income client segments.

Policy Attention to Microfinance After 2000:

1999 - Official definition of microfinance by RBI.

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August 2000 - 'Micro Credit/Rural Credit' included in the list of permitted non-
banking financial company (NBFC) activities considered for Foreign Direct
Investment (FDI).

2005 - MFIs acknowledged for the first time in the Budget Speech by the finance
minister “Government intends to promote MFIs in a big way. The way forward, I
believe, is to identify MFIs, classify and rate such institutions, and empower them to
intermediate between the lending banks and the beneficiaries.”

January 2006 - Announcement of the business correspondent model.

February 2006 - Budget Speech by the finance minister promises a formal statutory
framework for the promotion, development and regulation of the microfinance sector.

March 2006 - Comprehensive guidelines by RBI on loan securitization.

July 2006 - RBI master circular allows NGOs involved in microfinance to access
External Commercial Borrowings (ECB) up to USD 5 million (INR 20.25 crores)
during a year.

March 2007 - Finance Minister introduces the “Micro Finance Sector Development
and Regulation Bill 2007” in Lok Sabha.

Entities in Micro Finance:-

Indian Microfinance dominated by two operational approaches:

o SHG
Initiated by NABARD through SHG Bank Linkage Program.
Largest outreach to microfinance clients in the world.

o 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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SHGs and MFIs disbursement till 2007- USD 3.7 billions

SHGs comprise twenty or fewer members, of whom the majority are women from the
poorest castes and tribes. Members save small amounts of money, as little as a few
rupees a month in a group fund. Members may borrow from the group fund for a
variety of purposes ranging from household emergencies to school fees. Banks
typically lend up to four rupees for every rupee in the group fund. Groups pay a
reasonable 12-24% annual rate of interest. Nearly 1.4 million SHGs comprising
approximately 20 million women now borrow from banks, which makes the Indian
SHG-Bank Linkage model the largest microfinance program in the world.

MFI is an organization that offers financial services to low income populations.

Almost all of these offer microcredit and only take back small amounts of savings
from their own borrowers, not from the general public. Term refers to a wide range of
organizations - NGOs, credit unions, cooperatives, private commercial banks and
non-bank financial institutions.

Need for Micro-Finance: The gap between Demand and Supply

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

19
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.

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.

The Need in India:

India is said to be the home of one third of the worlds 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 worlds 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.

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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.

“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.

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.

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.

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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.

Legal Regulations:
Banks in India are regulated and supervised by the Reserve Bank of India (RBI)
under the RBI Act of 1934, Banking Regulation Act, Regional Rural Banks Act, and
the Cooperative Societies Acts of the respective state governments for cooperative
banks.

NBFCs are registered under the Companies Act, 1956 and are governed under the
RBI Act. There is no specific law catering to NGOs although they can be registered
under the Societies Registration Act, 1860, the Indian Trust Act, 1882, or the relevant
state acts.

Micro Finance Interventions through different Organizations:

National Government Donors/

Financial Banks Funded Bilateral
Institutions Programmes Projects

Implementing
Organizations

Resource or Directly Indirectly engaged

support engaged in in Micro Finance
organizations Micro Finance

22

SHGs
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.

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

23
agriculture (which contribute around 22-25% of GDP) and Manufacturing sector.
Rural people have very low access to institutionalized credit (from commercial bank).

Poverty alleviation programmes and conceptualization of Microfinance:

There has been a continuous effort of planners of India in addressing the poverty.
They have come up with development programmes like Integrated Rural
Development programmes (IRDP), National Rural

Employment Programme (NREP), Rural Labor Employment Guarantee Programme

(RLEGP) etc. But these programmes have not been able to create massive impact in
poverty alleviation. The production- oriented approach of planning without altering
the mode of production could not but result of the gains of development by owners of
instrument of production. The mode of production does remain same as the owners of
the instrument have low access to credit which is the major factor of production.
Thus in Nineties National bank for agriculture and rural development (NABARD)
launches pilot projects of Microfinance to bridge the gap between demand and supply
of funds in the lower rungs of rural economy.

Distribution of Indebted Rural Households: Agency wise

Credit Agency Percentage of Rural Households

Government 6.1
Cooperative Societies 21.6
Commercial Banks and RRBs 33.7
Insurance 0.3
Provident Fund 0.7
Other Institutional Sources 1.6
All Institutional Agencies 64.0
Landlord 4.0
Agricultural Moneylenders 7.0
Professional Moneylenders 10.5
Relatives and Friends 5.5

24
 Others 9.0
All Non - Institutional Agencies 36.0
All Agencies 100.0
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 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.

Functions of Self Help Groups

 They try to build the functional capacity of poor and marginalized sections of
society in the domain of employment and income-generating activities.

 They offer collateral-free loans to sections of people that generally find it hard
to get loans from banks.

 They also resolve conflicts via mutual discussions and collective leadership.

 They are an important source of microfinance services to the poor.

 They act as a go-through for formal banking services to reach the poor,
especially in rural areas.

 They also encourage the habit of saving among the poor.

Need for Self Help Groups

 One of the chief reasons for rural poverty is the lack of access or limited access
to credit and financial services.

 The Rangarajan Committee Report highlighted four major reasons for lack of
financial inclusion in India. They are:

o Inability to give collateral security

25
 o Weak credit absorption capacity

o The insufficient reach of institutions

o Weak community network

 It is being recognized that one of the most important elements of credit linkage
in rural areas is the prevalence of sound community networks in Indian villages.

 SHGs play a vital role in giving credit access to the poor and this is extremely
crucial in poverty alleviation.

 They also play a great role in empowering women because SHGs help women
from economically weaker sections build social capital.

 Financial independence through self-employment opportunities also helps

improve other development factors such as literacy levels, improved healthcare
and better family planning.

Advantages of Self Help Groups

 Financial Inclusion – SHGs incentivize banks to lend to poor and marginalized

sections of society because of the assurance of returns.

 Voice to marginalized – SHGs have given a voice to the otherwise

underrepresented and voiceless sections of society.

 Social Integrity – SHGs help eradicate many social ills such as dowry,
alcoholism, early marriage, etc.

 Gender Equality – By empowering women SHGs help steer the nation towards
true gender equality.

 Pressure Groups – SHGs act as pressure groups through which pressure can be
mounted on the government to act on important issues.

 Enhancing the efficiency of government schemes – SHGs help implement and

improve the efficiency of government schemes. They also help reduce
corruption through social audits.

 Alternate source of livelihood/employment – Sha help people earn their

livelihood by providing vocational training, and also help improve their existing
source of livelihood by offering tools, etc. They also help ease the dependency
on agriculture.

26
  Impact on healthcare and housing – Financial inclusion due to SHGs has led to
better family planning, reduced rates of child mortality, enhanced maternal
health and also helped people fight diseases better by way of better nutrition,
healthcare facilities and housing.

 Banking literacy – SHGs encourage people to save and promote banking

literacy among the rural segment.

Types Of Organizations:

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
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 2124%.

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.

27
 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.

Grameen Bank:

The Grameen Model which was pioneered by Prof Muhammed Yunus of Grameen
Bank is perhaps the most well-known, admired and practiced model in the world. The
model involves the following elements.

Homogeneous affinity group of five

Eight groups form a Centre

Centre meets every week

Regular savings by all members

Loan proposals approved at Centre meeting

Loan disbursed directly to individuals

28
 All loans repaid in 50 installments

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.

Key Benefits
The part that microfinance plays in economic development is noteworthy. Some of
the key benefits of MFIs include the following:

 It enables people expand their present opportunities – The income

accumulation of poor households has improved due to the presence of

microfinance institutions that offer funds for their businesses.
 It provides easy access to credit – Microfinance opportunities provide people

credit when it is needed the most. Banks do not usually offer small loans to
customers; MFIs providing microloans bridge this gap.
 It makes future investments possible– Microfinance makes more money

available to the poor sections of the economy. So, apart from financing the
basic needs of these families, MFIs also provide them with credit for

29
 constructing better houses, improving their healthcare facilities, and
exploring better business opportunities.
 It serves the under-financed section of the society – Majority of the

microfinance loans provided by MFIs are offered to women. Unemployed

people and those with disabilities are also beneficiaries of microfinance.
These financing options help people take control of their lives through the
betterment of their living conditions.
 It helps in the generation of employment opportunities – Microfinance

institutions help create jobs in the impoverished communities.

 It inculcates the discipline of saving – When the basic needs of people are met,

they are more inclined to start saving for the future. It is good for people
living in backward areas to inculcate the habit of saving.
 It brings about significant economic gains – When people participate in

microfinance activities, they are more likely to receive better levels of

consumption and improved nutrition. This eventually leads to the growth of
the community in terms of economic value.
 It results in better credit management practices – Microloans are mostly taken

by women borrowers. Statistics prove that female borrowers are less likely
to default on loans. Apart from providing empowerment, microloans also
have better repayment rates as women pose lesser risk to borrowers. This
improves the credit management practices of the community.
 It results in better education – It has been noted that families benefiting from

microloans are more likely to provide better and continued education for
their children. Improvement in the family finances imply that children may
not be pulled out of school for monetary reasons.

Groups Organized by Microfinance Institutions in India

There are several types of groups organized by microfinance institutions for offering
credit, insurance, and financial training to the rural population in India:

1. Joint Liability Group (JLG)

This is usually an informal group that consists of 4-10 individuals who seek loans
against mutual guarantee. The loans are usually taken for agricultural purposes or
associated activities. Farmers, rural workers, and tenants fall into this category of

30
borrowers. Each individual in a JLG is equally responsible for the loan repayment in a
timely manner. This institution does not need any financial administration, as it is
simple in nature.

2. Self Help Group (SHG)

A Self Help Group is a group of individuals with similar socio-economic

backgrounds. These small entrepreneurs come together for a short duration and create
a common fund for their business needs. These groups are classified as non-profit
organizations. The group takes care of the debt recovery. There is no requirement of a
collateral in this kind of group lending. The interest rates are generally low as well.
Several banks have had tie-ups with SHGs with a vision to improve financial
inclusion in the rural parts of the country.

The NABARD SHG linkage programmed is noteworthy in this regard, as several Self
Help Groups are able to borrow money from banks if they are able to present a track
record of diligent repayments.

3. Grameen Model Bank

The Grameen Model was the brainchild of Nobel Laureate Prof. Muhammad Yunes in
Bangladesh in the 1970s. It has inspired the creation of Regional Rural Banks (RRBs)
in India. The primary motive of this system is the end-to-end development of the rural
economy. However, in India, SHGs have been more successful as MFIs when
compared to Grameen Banks.

4. Rural Cooperatives

Rural Cooperatives were established in India at the time of Indian independence. The
resources of poor people were pooled in and financial services were provided from
this fund. However, this system had complex monitoring structures and were
beneficial only to the creditworthy borrowers in rural India. Hence, this system did
not find the success that it sought initially.

31
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.
 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.

Micro Finance 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

32
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.

 Women make up 49% of the world population and 52% of the labour market
globally (UN 2010).
 Most of the participation by women has been a part of the informal economy,
further increasing their exposure to inequality.
 India has the second largest population in the world, with 49.5 % women
population and surprisingly only 33 % of women labour force contributes to
the economy, which is far below the global average of 50% (IMF WP2015).
33
 Over the period of time, with slow changes in the social structure and increasing
demand for better lifestyle, the participation and economic contribution of
women population is steadily increasing.
 Commercial banks and formal financial sector most often focus on men and
formal businesses, neglecting the women who make up a large and growing
segment of the informal economy.
 Microfinance on the other hand often targets women, in some cases
exclusively.
 World over the focus of microfinance has always been on serving women.
 Women clients constitute 97% of the total clients of MFIs .(Bharat
Microfinance Report 2015).

34
 Chapter 2

RESEARCH METHODOLOGY

Introduction:

This chapter focuses on the methodology & the techniques used for the collection,
classification & tabulation of data. It light on the research problem, the objective of
study & its limitations.

Research methodology is considered as the nerve of the field work or any project.
Without proper well organized research plan, it is impossible to complete the project
and reach to any conclusion.

The project was based on the survey plan. The main objective of survey was to collect
appropriate data, which work as a box for drawing conclusion and getting result.
Therefore, research methodology is the way to systematically solve the search
problem.

Research methodology not only talks of the methods but also logic behind the
methods used in the context of a research study and it explains why a particular
method has been used in the preference of the other methods.

Exploratory research includes the reviewing and analysis of the articles, research
papers, interviews and other published information in order to gain a
deeper understanding of the prevailing scenario.

35
Research methodology is a way to systematically study the research problem. It
explains the statement of the research problem, objectives, chapter scheme, need,
scope, hypothesis, source, period and sample of study.

Also, the statistical tools and techniques which are used to analyze the data have been
discussed. Indian banking sector tremendously moving towards Digitalization.
Cooperative Banks are making remarkable contribution towards the achievements of
objective of financial inclusion.

After in-depth study of literature on UCB and other cooperative banks, it was clear
that there is huge scope for study in the area of the banks fund management and
treasury management activities which happens as a daily routine work in all the
banks. There are better opportunities available for the banks to conduct their
investment and sourcing of funds in increasing the mobility of funds to make much
profit. But still these cooperative banks are restricted themselves in to specific area of
business and this has to be promoted well to develop the UCB’s so that they can
compete with the other commercial banks

These banks focus on reaching towards small merchants and low-income group of
people. Even though RBI has taken many initiatives to reach all the sectors of people,
to make India, a cashless economy, the complete knowledge about banking services is
very much essential for the people. The research methodology under the present study
is summarized below:

1.1 Objective of the Study:

 To study the impact of micro finance in empowering the social economic

status of women and developing of social entrepreneurship.
 To know about the relationship between Self Help Group Members, Micro
Finance Banks and Women.
 To study potential hurdles in the development of women entrepreneurship.

36
  To clarify the limitations of micro finance programmed as the tool for
women’s empowerment and the type of support service necessary to maximize
the contribution of micro finance services.

1.2 Hypothesis:
Hypothesis 1: Participation in Microfinance increases the income of the
beneficiary member.
 H0 = There is no association between number of loan cycle and the income of
SHG/JLG member beneficiary.
 H1= There is an association between number of loan cycle and the income of
SHG/JLG member beneficiary.

Hypothesis 2: Participation in microfinance increases the saving of the

member beneficiary household.
 H0 = There is no association between number of loan cycle and the savings of
the beneficiary household.
 H1= There is an association between number of cycle and the savings of the
beneficiary household.

Hypothesis 3: Participation in Microfinance changes the major source of

income of the member beneficiary.
 H0 = There is no significant association between number of loan cycle and
major source of income of SHG/JLG member beneficiary.
 H1 = There is a significant association between no. of loan cycle and major
source of income of SHG/JLG member beneficiary.

Hypothesis 4: Participation in Microfinance programmed increases the

number of working days of the member beneficiary.
 H0 = There is no significant association between number of loan cycles and
no. of working days of SHG/JLG member beneficiary.
 H1 = There is a significant association between number of loan cycles and no.
of working days of SHG/JLG member beneficiary.

37
1.3 Limitations to the Study:

 Difficulty in getting responses from the respondents.

 The sample size is limited.

1.4 Methodology and Sources of Data:

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.

“All progress is born of inquiry. Doubt is often better than overconfidence, for it
leads to inquiry and inquiry leads to invention.”

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.
Research methodology is the arrangement of condition for collection and analysis of
data in a manner that aims to combine relevance to the research purpose with
economy in procedure. Research Methodology is the conceptual structure within
which research is conducted. It constitutes the blueprint for the collection
measurement and analysis of the data.

Research methodology is a framework for the study and is used as a guide in

collecting and analyzing the data. It is a strategy specifying which approach will be
used for gathering and analyzing the data. It also includes time and cost budget since
most studies are done under these two constraints. The research methodology
includes overall research design, the sampling procedure, the data collection method
and analysis procedure.

38
Type Of Research used-
Descriptive Research
In the study descriptive research design has been used. As descriptive research design
is the description of state of affairs, as it exists at present. In this type of research ,
the researcher has no control over the variables; he can only report what has
happened or what is happening

Descriptive research designs are those design which are concerned with describing
the characteristics of particular individual or of the group. In descriptive and
diagnostic study the researcher must be able to define clearly what he wants to
measure and must find adequate method for measuring it.

Method Of Data Collection-

After the research problem has been identified and selected the next step is to gather
the requisite data. While deciding about the method of data collection to be used for
the researcher should keep in mind two types of data i.e. primary and secondary.

Types of Data

Primary Secondary
Data Data

Table 1

39
Primary Data-

The primary data are those, which are collected afresh and for the first time, and thus
happened to be original in character. We can obtain primary data either through
observation or through direct communication with respondent in one form or another
or through personal interview.

Observation Interview Questionnaire Schedule

Method Method Method Method

Table 2

Secondary Data-

The secondary data on the other hand, are those which have already been collected by
someone else and which have already been passed through the statistical processes.
When the researcher utilizes secondary data then he has to look into various sources
from where he can obtain them. For e.g. books, magazine, newspaper, internet,
publications and reports.

In this study data have been taken from various secondary sources like:

 Internet
 Books
 Newspapers

40
 CHAPTER 3

Review Of Literature

Pillai (1995)

Has examined that the emergence of liberalization and globalization in early 1990's
aggravated the problem of women workers in unorganized sectors from bad to worse
as most of the women who were engaged in various self-employment activities have
lost their livelihood. Microfinance is emerging as a powerful instrument for poverty
alleviation in the new economy. In India, Microfinance scene is dominated by Self Help
Group (SHGs)-Bank Linkage Programme as a cost- effective mechanism for providing
financial services to the "Unreached Poor" which has been successful not only in
meeting financial needs of the rural poor women but also in strengthening collective
self-help capacities of the poor leading to their empowerment. Micro finance is
necessary to overcome exploitation, create confidence for economic self-reliance of the
rural poor, particularly among rural women who are mostly invisible in the social
structure. Micro finance can contribute to solving the problems of inadequate housing
and urban services as an integral part of poverty alleviation programs.

Marguerite S. Robinson (1995)

Has examined that HIID's role in the formulation of the initial hypotheses and HIID's
contributions in planning and coordinating the underlying research, advising on the
policies and implementation strategies that put concept into practice, analyzing the
results, and disseminating the findings. Drawing on work in Asia, Africa, and Latin
America, the paper analyses the paradigm shift in microfinance from government and
donor-funded subsidized credit to sustainable financial intermediation. This shift has
occurred because of the work of many people in many countries.

Muhammad Yunus (1998)

Has examined that this approach to poverty reduction at the macro-level is inadequate.
The primary causes of poverty are not lack of human capital or lack of demand for
labor. Lack of demand for labor is only a symptom, not a cause, of poverty. Poverty is

41
caused by our inadequate understanding of human capabilities and by our failure to
create enabling theoretical frameworks, concepts, institutions and policies to support
those capabilities. My main argument is that economics as we know it is not only
unhelpful in getting the poor out of poverty; it may even be a hindrance. In this paper,
I would like to explore those institutions that perpetuate poverty, share my experiences
with an effective poverty alleviation institution, and present my thoughts on the future
of poverty alleviation. Before addressing these points, however, I would like to provide
a useful framework to define the concept of "the poor" more concretely.

Jacob Levitsky and Leny van Oyen (1999)

Has examined that micro-businesses to large corporations, located in large urban

centers, in rural areas and in the formal and informal sectors. Financing needs are
therefore of varying nature. In describing experiences, a link is made between size of
enterprises, financing schemes/instruments and typical delivery channels. When
referring to enterprises in this paper, focus is predominantly on businesses, both
existing and potential, in the manufacturing sector and related services.

Gallardo, Joselito (1999)

Has examined that the Bank should maximize opportunities to expand the use of
leasing as an approach to financial intermediation in Bank projects to promote the
development of small businesses and microenterprises. In most developing countries,
capital markets are relatively undeveloped and banks are often unable or unwilling to
undertake term lending. Operations in microenterprises and small businesses are cash-
flow-oriented but rarely have organized historical financial records or the assets needed
for collateral for conventional bank financing. Gallardo explores the potential of
leasing as an option to expand small businesses' access to medium-term financing for
capital equipment and new technology. Other small businesses require medium-term
financing to acquire the tools and equipment needed to support production growth and
expansion. Gallardo examines and compares the Bank's experience: Lease financing
was used to promote the development of small businesses in Pakistan, as part of a
microenterprise development loan project. This paper-a product of the Development
Research Group-is part of a larger effort in the group to identify appropriate policies

42
for environmental regulation in developing countries. The study was funded by the
Bank's Research Support Budget under the research project "The Economics of
Industrial Pollution Control in developing countries”.

Robinson, M. (2001)

Has examined that the timing of this book is excellent it has few close substitutes in
terms of its sweeping overview of the terrain, and the revolution is now so advanced
that the time is right for a history, or at least a retrospective. As with any revolution,
however, splits have emerged within the movement. On one side are those who argue
that the way forward is to require microfinance institutions to meet the test of financial
sustainability essentially, requiring these institutions to cover their costs, even if this
means that the very poorest of the poor remain under-served.

Susy Cheston (2002)

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.

Hunt, J & Kasynathan (2002)

Has examined that poor women and men in the developing world need access to
microfinance and donors should continue to facilitate this.

Research suggests that equity and efficiency arguments for targeting credit to
women remain powerful: the whole family is more likely to benefit from credit
targeted to women, where they control income, than when it is targeted to men.
Microfinance must also be re-assessed in the light of evidence that the poorest
families and the poorest women are not able to access credit. A range of microfinance

43
packages is required to meet the needs of the poorest, both women and men. Donors
need to revisit arguments about the sustainability of microfinance programmes.
Financial sustainability must be balanced against the need to ensure that some credit
packages are accessible to the poorest.

Monique Cohen (2002)

Has examined that the ideas presented in this paper are designed to direct the arena of
discourse towards a more holistic market driven or client focused microfinance
agenda. Currently, the debate on market-driven microfinance is primarily framed by
the „problems‟ of competition and dropouts among established MFIs. The solutions
to the problems are defined in terms of more responsive products, the creation of new
products, and the restructuring of existing ones. Client-led models are still in their
infancy, and the fact that this topic is the theme of this special edition of the Journal
of Development Studies is itself an important milestone

Malcolm Harper (2002)

In his paper titled ‘Grameen bank groups and self- help groups; what are the
differences showed the advantages and disadvantages of both the system. The paper
described and explained each system and compared their sustainability, their outreach
and impact on the poor and their institutional feasibility. The paper concluded by
summarizing the pros and cons of both the system in a table. The summary table
includes the pluses and minuses for both clients and banks and also the suitable
conditions for both the system to operate smoothly.

Ajay Tankha (2002)

He prepared a study report titled ‘Self- help groups as financial intermediaries in

India: Cost of promotion, sustainability and impact’ for ICCO and Cordaid,
Netherlands. The study analyzed the role and development of SHGs in financial
intermediation in rural India and contributed to a consistent and relevant funding
policy for ICCO and Cordaid. The study addressed three main issues that were
efficiency, effectiveness and sustainability. The study was based on a review of
44
literature on SHGs, the experiences of seven leading NGOs involved in the formation
of SHGs and interviews with chief executives and staff of a dozen other major
NGOs/projects promoting SHGs.

Yunus (2003)

Has examined that count 130 McMaster School for Advancing Humanity on women
to spread the word to their neighbors and friends about the success of these loans.
The testimony is expected to convince others to seek out Grameen for help. Yunus
also encourages members to save some of their money in case they fall on hard times,
such as natural disasters, or to use this money for other opportunities. In 1977, Yunus
founded Grameen Bank after working for six months to get a loan from the Janata
Bank. Yunus realized that having groups of people take out a loan was a better plan
for success than giving loans to individuals. He describes the process by which
Grameen Bank lends money. Loan repayments are to be made in very small amounts,
and in the first project, Yunus chose a villager to be in charge of collecting the
repayments.

Cheston& Kuhn (2004)

Has examined that in their study concluded that micro-finance programmes have
been very successful in reaching women. This gives micro-finance institutions an
extraordinary opportunity to act intentionally to empower poor women and to
minimize the potentially negative impacts some women experiences. We also found
increased respect from and better relationships with extended family and in-laws.
While there have been some reports of increased domestic violence, Hashemi and
Schuler found a reduced incidence of violence among women who were members of
credit organizations than among the general population.

Jennifer Meehan (2004)

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

45
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.

World Bank document (2004)

Has published the report titled ‘Scaling-up access to finance India’s Rural prepared
by finance and private sector development unit of South Asian region. The report was
divided into five sections. The first section was of introduction, second section was
access to rural finance in India – the evidence, the third section was what constrains
access to finance for India’s rural poor, fourth section was on recent efforts in India
to improve rural access to finance: the role of formal – informal linkages and new
products and fifth section was on meeting the challenge of scaling-up access to
finance India’s rural poor – the policy agenda. The report mentioned the agenda to
make the formal financial sector better at banking the rural poor and also mentioned
the role of government policy.

Eoin Wrenn (2005)

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 (Hulmeand Mosley, 1996).

Demirguc-Kunt, A. and Martinez, P.M.S. (2005)

Has examined that this paper (i) presents new indicators of banking sector
penetration across 99 countries, based on a survey of bank regulatory authorities, (ii)
shows that these indicators predict household and firm use of banking services, (iii)

46
explores the association between the outreach indicators and measures of financial,
institutional, and infrastructure development across countries, and (iv) relates these
banking outreach indicators to measures of firms „financing constraints. In particular,
we find that greater outreach is correlated with standard measures of financial
development, as well as with economic activity.

Basu, P., Srivastava (2005)

Has examined that the current level and pattern of access to finance for India's rural
poor and examines some of the key microfinance approaches in India, taking a close
look at the most dominant among these, the Self Help Group (SHG) Bank Linkage
initiative. It empirically analyzes the success with which SHG Bank Linkage has
been able to reach the poor, examines the reasons behind this, and the lessons
learned. The analysis in the paper draws heavily on a recent rural access to finance
survey of 6,000 households in India, undertaken by the authors. The main findings
and implications of the paper are as follows: India's rural poor currently have very
little access to finance from formal sources. The paper recommends that, if SHG
Bank Linkage is to be scaled-up to offer mass access to finance for the rural poor,
then much more attention will need to be paid towards: the promotion of high quality
SHGs that are sustainable, clear targeting of clients, and ensuring that banks linked to
SHGs price loans at cost-covering levels. At the same time, the paper argues that, in
an economy as vast and varied as India's, there is scope for diverse microfinance
approaches to coexist.

Ernest Aryeetey (2005)

Has examined that informal finance and microfinance suitable for financing growing
small to medium size enterprises (SMEs) in Sub-Saharan Africa? First, I present the
characteristics of informal finance, focusing on size, structure, and scope of activities.
Informal finance has not been very attractive for the private sector. Indeed, the
informal sector has considerable experience and knowledge about dealing with small
borrowers, but there are significant limitations to what it can lend to growing
microbusinesses. Second, I discuss some recent trends in microfinance.

Shannon Doocy, Dan Norell, Shimeles Teffera, and Gilbert Burnham (2005)

47
Has examined that Management decision making in MFIs is becoming increasingly
tied to collecting information about social performance. This paper examines the
impact of participation in an Ethiopian microfinance program on indicators of
socioeconomic status including wealth, income, and home or land ownership. A
survey assessing these outcomes was conducted in May 2003 in two predominantly
rural sites in Southern Ethiopia and included 819 households. The article discusses
management decisions made as the result of survey findings about socioeconomic
status and food security to increase retention rates and to facilitate client savings.
Additionally, the management was prompted to increase the number of female clients
and raise the proportion of female loan officers. This paper illustrates how data from
routine monitoring and evaluation can be linked to MFI management decision
making, which ultimately results in providing better microfinance services.

Bindu Ananth (2005)

In her paper titled ‘Financing microfinance – ICICI Bank partnership model’

analyzed the partnership model of financing microfinance institutions. The paper
compared three financing models for microfinance. The three models were Self-
help group bank linkage model, financial intermediation by microfinance institutions
and the partnership model – MFI as a servicer. The paper described in detail the need
for partnership model and the description of how the model worked. The researcher
said that the model was unique in that it combines both debt as well as mezzanine
finance to the MFI in a manner that rapidly lead to the increase in outreach, while it
unlocked large amounts of wholesale funds available in the commercial banking
sector in India. It concluded by highlighting key enablers for an environment of rapid
microfinance growth including regulator support for hybrid models of outreach and
investments in training and funding of initial expenses of new or emerging MFIs.

Linda Mayoux (Feb 2006)

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.

48
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 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.

Dr. Jyotish Prakash Basu (2006)

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.

Mallory A. Owen (2006)

Has examined that microfinance has signaled a paradigm shift in development

ideology. Using my experiences with microfinance in a fishing village in Senegal,
this study will address the claims driving the microfinance movement, debate its pros
and cons and pose further questions about its validity and widespread
implementation. Instead of lifting people out of poverty and empowering women,
microfinance may have regressive long- term potential for borrowers. How loans get
used is a central theme of this essay. How microfinance and the notion of the
“entrepreneur” fit into the rural, Senegalese cultural context is also addressed.
Microfinance programs should be implemented with complementary measures that
challenge the systematic causes of inequality examined in this article. The
microfinance model (group lending based on joint liability) uses the social capital
generated by group membership to ensure that loans get re-financed. If one woman
fails to pay back her loan, she puts her entire loan group at jeopardy. As a result,

49
“Women’s participation in microenterprise does not show any signs of creating the
new forms of solidarity among women that the advocates of empowerment desire.

Fehr, D. and G. Hishigsuren. (2006)

Has examined that microfinance institutions (MFIs) provide financial services to the
poorest households. To date, funding of MFI activities has come primarily from
outright donor grants, government subsidies, and often debt capital, including debt
with non-market terms favorable to the MFI. These traditional sources of MFI
financing may not be sufficient to allow MFIs to provide maximum services. There is
a subset of the pool of mainstream equity investors who would consider investing in
MFI opportunities, even knowing that they would not expect to earn the full
economic rate of return that such investments would otherwise require. However, as
part of their investment evaluation process, these investors would ask: What would
the market determine required expected rate of return for my MFI investment be?
What return on investment (ROI) do I expect to earn on my MFI investment? Is the
difference in the above two returns acceptable given my level of social motivation?
How will I "monetize" my investment and when? The purpose of this article is to
employ modern corporate finance techniques to address these questions.

John A. Brett. (2006)

Has examined that having borrowed money from a microfinance organization to start
a small business, many women in El Alto, Bolivia are unable to generate sufficient
income to repay their loans and so must draw upon household resources. Working
from the women's experience and words, this article explores the range of factors that
condition and constrain their success as entrepreneurs. This paper explores the social
and structural realities in which women seek out and accept debt beyond their
capacity to repay from the proceeds of their business enterprise. By examining some
of the "hidden costs" of microfinance participation, this paper argues for a shift from
evaluation on outcomes at the institutional level to outcomes at the household level to
identify the forces and factors that condition women's success as micro-
entrepreneurs.

50
Nadiya Menon (2006)

Has examined that this paper studies the benefits of participation in micro-finance
programs, where benefits are measured in terms of the ability to smooth the effect of
seasonal shocks that cause consumption fluctuations. It is shown that although
membership in these programs is an effective instrument in combating inter-seasonal
consumption differences, there is a threshold level of length of participation beyond
which benefits begin to diminish. Returns from membership are modelled using a
Euler equation approach. Fixed effects non-linear least squares estimation of
parameters using data from 24 villages of the Grameen Bank suggests that returns to
participation, as measured by the ability to smooth seasonal shocks, begin to decline
after approximately two years of membership.

Mohammed Anesu Rahman (2007)

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 clients (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.

Reginald Andon (2007)

Has examined that informal businesses represent a very large cross-section of

economic enterprises operating in the country. Informal businesses may be classified
as either the livelihood/ survival type or the entrepreneurial/ growth-oriented type.
Livelihood enterprises are those which show very limited potential for growth in both
income and employment generation. There are existing policies, program and
services that directly/ indirectly cover informal. Variety of support programs,
services and information are currently being offered by different institutions. These

51
programs and support services fail to reach or remain inaccessible to informal
business operators and owners. This is borne out of and perpetuated by lopsided
economic policies and poor governance that inadvertently encumber informal
businesses from accessing mainstream resources and services.

Srinivasan, Sunder Asan (2007)

Has examined that micro banking facilities have helped large numbers of developing
country nationals by supporting the establishment and growth of microenterprises.
And yet, the microfinance movement has grown on the back of passive replication
and needs to be revitalized with new product offerings and innovative service
delivery. Renewable Energy systems viz., solar home systems, biogas digesters, etc.,
serve to improve indoor air quality, provide superior light and extend working and
study hours. Such applications are not inherently income generating and returns on
such investments accrue from cost avoidance, but should qualify for micro funding,
as such 'quality of life' investments, reflect borrower maturity and simultaneously
contribute to MFI sustainability.

Crabb P. (2008)

Has examined that the relationship between the success of microfinance institutions
and the degree of economic freedom in their host countries. Many microfinance
institutions are currently not self- sustaining and research suggests that the economic
environment in which the institution operates is an important factor in the ability of
the institution to reach this goal, furthering its mission of outreach to the poor. The
sustainability of the micro lending institutions is analyzed here using a large cross-
section of institutions and countries. The results show that microfinance institutions
operate primarily in countries with a relatively low degree of overall economic
freedom and that various economic policy factors are important to sustainability.

Ashta, A. & De Selva, R. (2009)

Hass examined that the relationship between microfinance and religion, and provides
future research directions in this area. Religious institutions often play a crucial role

52
in establishing microfinance systems, but interactions between microfinance and
religion have received little attention of researchers.

Bhole B. and Ogden S (2010)

In their paper titled ‘Group lending and individual lending with strategic default’ had
compared the presence of strategic default between group lending and individual
lending. Secondary data was considered for the purpose of the study. The study found
out results by developing its own strategic model. The paper concluded that unless
group members could impose sufficiently strong social sanctions on their
strategically default partners, or unless the bank used cross reporting mechanism,
group lending can perform worse than individual lending. It was showed that when
certain restrictions on group lending contract were relaxed then group lending yielded
higher welfare than individual lending even in the absence of any social sanctions or
cross reporting.

Brijesh Rupapara and Jitendra Patoliya (2012)

Have written book titled ‘Problems faced by Microfinance Institutions and measures
to solve it’. The book has been divided into seven chapters namely basics of
microfinance, self - help group, microfinance institutions performance, urban and
rural microfinance, micro insurance, technology and microfinance and lastly business
models for microfinance. The book described in depth the history and meaning of
microfinance and various terms related to microfinance.

Sa-Dhan (2012)

Has published a report titled ‘Financial Inclusion – A study of the efficacy of banking
correspondent model’ with an objective to study different models of BCs, identify its
challenges and evaluate different products and services offered by BCs. The study
included various legal forms of BCs like SHG Federations, Societies, Trusts, Not-for-
profit companies and special purpose vehicles promoted by technology provided
companies and all other important stakeholders including the regulators – the banks,
technology providers, clients, non-clients, training institutions and the other
promotional agencies.

53
Chintamani Prasad Patnaik (March 2012)

Has examined that microfinance seems to have generated a view that microfinance
development could provide an answer to the problems of rural financial market
development. While the development of microfinance is undoubtedly critical in
improving access to finance for the unserved and underserved poor and low-income
households and their enterprises, it is inadequate to address issues of rural financial
market development. It is envisaged that self-help groups will play a vital role in such
strategy. But there is a need for structural orientation of the groups to suit the
requirements of new business. Microcredit movement has to be viewed from a long-
term perspective under SHG framework, which underlines the need for a deliberate
policy implication in favor of assurance in terms of technology back-up, product
market and human resource development.

R. Prabhavathy (2012)

Has examined that collective strategies beyond micro-credit to increase the

endowments of the poor/women enhance their exchange outcomes the family,
markets, state and community, and sociocultural and political spaces are required for
both poverty reduction and women empowerment. Even though there were many
benefits due to micro-finance towards women empowerment and poverty alleviation,
there are some concerns

Zuzana Harmincova and Karel Janda (2014)

In their paper titled ‘Microfinance around the world – regional SWOT Analysis’
compared the functioning of microfinance in various developing regions of the world
and analyzed the overall functioning, effectiveness, strengths and weaknesses,
potential threats and opportunities in the microfinance markets. Regions were chosen
according to mixmarket.org data. The paper concluded that political situation in a
country was one of the important aspects that played a role in microfinance
development. The paper analyzes that the different levels of costs per borrower,
return or efficiency indicators point out not only to the cultural and environmental
differences, but also to the different stages of the microfinance industry development
in each of the regions.

54
Throughout the years, woman was considered only as a housewife whose main job is
to cook food and care about the children and the husband, due to this perception, she
was unjustly treated and faced with many difficulties and obstacles in most societies.
This leads to limiting their capabilities, restricting their mobility, reducing their
freedom and losing their opportunities to contribute to household income and its
improvement. In spite of this unfair treatment, women have proved to be an effective
element in many societies. As time passes, women, to some extent, were able to change
this negative attitude about them, presently, women are competing with men at
everywhere and getting jobs. Women play a double role in every community, they work
in productive and reproductive activities to support men and to attain better living
standard.

It is believed that in Asia and Pacific Ocean, there is a loss of around USD 42-47
Billion every Year due to the barriers imposed over women’s participation in work; it
was also revealed that an approximate amount of USD 16-30 Billion is lost every year
because of the gab available among gender in education sector (United nation women,
nd). It was reported further that in Middle East and North Africa, there is only 40% of
women recognized as active in economic against 100 men (Center for Women Policy
Studies, 2003). In another record by the united nation for women, it reported the
followings , 53% of women work in vulnerable employment, women get 70-90% of the
men’s income in big countries; women represent 9% in the construction sector, 12% in
engineering, 15% in business and finally 24% in production.

In India as an alternate vehicle of credit, microfinance serves a large segment of people

from Scheduled Castes, Scheduled Tribes and Minorities. The structure of
Microfinance is based on two aspects: The peer group lending with public repayment
and Progressive Lending (Lott 2009). Presently in India (2015-16), MFIs operate in 29
States, 4 Union Territories and 588 districts in India. As on 31 March, 2016, the total
number of clients served by MFIs stood at 39 million. Majority of these clients are
being served by NBFC-MFIs (85.18%), primarily the larger ones. MFIs with
outstanding portfolio above `500 crore are responsible for reaching out to 82.21% of
the clients in the industry.

In Yemen, the conservative Muslim country, surrounded by many political and

economic obstacles due to some internal conflicts that lead to huge increase in the

55
poverty rate reaching up to 54% and 60% for unemployment among youth (World
Bank, 2014). The country has been also categorized as one of the fastest growing
countries in population with annual growth rate of 3.2 (SFD, 2008). Thus, there was an
attempt by the government of Yemen in cooperation with some international donors to
alleviate poverty and unemployment in Yemen through the empowerment of
disadvantaged women by providing them with different types of small and micro loans
and other services to help them get rid of poverty and create good job opportunities.
The concept of microfinance was introduced in 1997 by the establishment of the social
fund for development, the SFD created a specialized unit called Small and Micro
Enterprise Development Unit (SMED). This Unit established two separate entities; the
Yemen Microfinance Network (YMN) and Small and Micro Enterprises Promotion
Service Agency (SMEPS) for the purpose of providing different kinds of technical
training and support to various Microfinance Institutions, Small and Micro enterprises,
entrepreneurs and also promoting of microfinance industry in the country. Currently
there around 13 MFIs operating in Yemen varies from Microfinance Banks, Programs,
foundations, companies and others. The current outstanding portfolio is USD 9, 5900
Million and the number of active clients is 99,726 as per the 2013 annual Report of the
social fund for development. These institutions provide different types of Microfinance
loans and services to unbanked people in the country.

This initiative enabled women clients to start their own enterprises or expand their
existing businesses, increase the level of confidence and self - esteem in the society.
Women felt more glad, free and proud because they could notice a change in their
household standard of living. The SFD (2008) study revealed that the share of women
in Microfinance industry has reached to 82% , other studies stated that only 3% of
microfinance market has been penetrated in Yemen leaving more than 2 million clients
un-served (Grameen-Jameel n.d). The current study is an attempt to investigate the role
of microfinance in empowerment of women in Yemen.

56
 CHAPTER 4

Analysis and Findings

Observation:-

As shown in the above pie chart 43.3 percent people are male and 56.7 percent are
female .

MALE FEMALE
56.7% 43.3%

57
Observation:-

Self Employed 16.5%

Entrepreneur 6.2%
Employee 17.5%
Retired 2.1%
Student 57.7%

Occupations is an important factor in investment decision making process.

58
Observation:-

In above diagram 19.6% are married and 80.4% are unmarried

Married 19.6%
Unmarried 80.4%

59
Observation:-

In this pie diagram 63.9% are nuclear family and 36.1% are joint family .

Joint family Nuclear family

36.1% 63.9%

60
61
62
 .

Observation:-

Yes No
95.9% 4.1%

From the above pie chart, we can see that 95.9% of the respondents has Account
in bank and are availing the services provided by them.

And about 4.1% of the respondents they do not have bank account in cooperative
bank .

Now a day’s people are still not using these types of services thinking that it is
not safe and secure and are afraid of any frauds.

63
Bank Account 64.9%
Cash at home 113%
Post office savings account 12.4%
Gold / Silver 11.3%

64
Observation:-

This diagram explains us that there are 61.9% people save their income monthly .
20.6 % people save their income quarterly .9.3 % people save it year wise whereas,
8.2 % people save there income on weekly basis .

Monthly 61.9%
Quarterly 20.6%
Year 9.3%
Weekly 8.2%

65
Observation:-

In this diagram of micro finance service 25.8% people don’t know that banks provide
micro finance whereas , 74.2% people know that banks provide micro finance facility.

Do Provide Service Percentage

Yes 74.2%
No 25.8%

66
In this analysis,, 75.3% people received micro credit for first time, 19.6 % people for
second time and only 5% for third time .

First time 75.3%

Second time 19.6%
Third time 5%

67
Advertisement 51
Word of mouth 20
Bank representative 26
Total 97

68
Consumption 29
Education 30
Others 38
Total 97

69
38.1 % people taken loan of rupees 10000 to 30000, 29.9% people have taken loan of
rupees 70000 and above, 18.6% people taken loan of rupees 50000 to 70000 and 13.4
% people have taken loan of rupees 30000 to 50000.

10000 to 30000 37
30000 to 50000 13
50000 to 70000 18
70000 and above 29

70
1 – 3 years 62.9 %
3 – 5 years 30.9%
5 – 7 years 3.1%

71
This diagram shows 63.9% people have paid their loan partly on the other side 36.1 %
people have paid their loan fully .

Partly paid 62
Fully paid 35
Total 97

72
42.3% people borrow fund from micro finance banks , 46.4% people borrow from
Non- governmental organization and only 11.3% people borrow fund from Non –
banking financial companies .

Non- Governmental Organization 45

Micro finance banks 41
Nonb- Banking 11
Total 97

73
 Assets given as security will be 42
confiscated
Legal action will be taken 39
Someone else would pay like guarantor 16

In this pie chart 43.3% says that some legal actions will be taken .40.2% says that
assets given as security will be taken and 16.5% says that someone else would pay
like guarantor .

74
 Chapter 5

CONCLUSION

India still is the home to the largest population of the poor in the world and about 37%
of population is below poverty line . The levels of poverty are high and because of
this problem self- help groups movement occupies a significant agenda in the poverty
reduction and empowerment of women for poor people . Micro finance program are
important institutional devices for providing small credit to the rural people in order
to alleviate poverty and SHG bank linkage , have the potential to minimize the
problems of inadequate access of banking services to the poor . Many studies
highlighted that SHGs have inculcated savings habits in poor . Many studies reveal
that increased availability of micro credit to the poor through SHG bank linkage
program will help rural people to take up larger productive activities and decrease the
dependence on money lenders .

In spite of the impressive figures of micro finance in India as have exposed in tables .
It is still too small to create a massive impact in the poverty alleviation However,,
Indian experience in the case of micro finance and SHG is shown that this strategy is
suitable strategy for developing and underdeveloped countries against poverty .

The Indian Economy at present is at a crucial juncture on one hand ,the optimists are
talking of India being among the top 5 economies of the world by 205046 and on the
other is the presence of 260 million poor forming 26 % of the total population . The
enormity of the task can be gauged from the above numbers and if India is to stand
among the comity of developed nations there is no denying the fact that poverty
alleviation and reduction of income inequalities has to be the top most priority .
India’s achievement of the MDG of halving the population . The impressive gains
made by micro finance programme in coverage of rural population with financial
service offers a ray of hope . The paper argues for mainstreaming of impact
assessment and incorporation of local factors in service delivery to maximize impact
of SHG bank linkage program on achievement of MDGs and not letting go this
opportunity . So far the micro credit programs through self- help groups ( SHGs)
have evoked mixed reactions and responses . There are two divergent views . One
being that ardent supporters of the programme who celebrates the victory of micro
credit programme .On the other side trenchant critics who fail to see anything positive

75
in the programme . While making a conclusion one has to exercise cautions .There are
very few balanced impact studies done on this programme ; the available micro level
studies are inadequate to come to a conclusion . Hence it is not fair to generalize . but,
it is safe to conclude that there are changes , especially in the rural areas where
women are more visible and mobile .Only a through study based on the baseline data
the present situation can tell us how far the micro credit programme has succeeded in
alleviating poverty . This is not deny the potential that the programme has to achieve
this end .

SUGGESTION

1 .Supporting microfinance institutions to ensure funds for low-income borrowers.

Microfinance institutions (MFIs) across Asia and the Pacific struggle to get
commercial funding to provide financial services to their borrowers. ADB partners
with international and domestic financial institutions to support MFIs. ADB’s
Microfinance RiskParticipation and Guarantee Program facilitates local currency
lending to the microfinance sector. Since 2010 the program has assisted 35 MFIs that
have provided microfinance services to over six million borrowers in Bangladesh,
Cambodia, India, Indonesia and Myanmar. As a part of ADB’s COVID-19 pandemic
relief and recovery response, the program’s size has been increased to help support
microfinance in difficult conditions. Source: Microfinance

2. Delivering access to education as well as finance for rural women.

Microfinance services are helping rural women gain financial independence and
empowering them to make good decisions. In the People’s Republic of China (PRC),
around 45% of the rural population lacks credit access, especially women who usually
have neither physical collateral nor the education needed to organize their finances.
ADB’s partnership with CD Finance Management (previously called CFPA

76
Microfinance Management) provides microcredit to poor rural households, targeting
at least 121,000 women borrowers and includes measures to improve their financial
planning skills and literacy.

3 . Helping to rebuild post-conflict communities and revive women’s livelihoods.

Women are often the most severely affected when communities are disrupted by
armed conflict and by persistent regional economic disparities. In parts of Visayas and
Mindanao, the central and southern regions of the Philippines, decades of lagging
economic growth and conflict have hampered development and lowered income
levels to below the national average. ADB is financing one of the country’s largest
microfinance providers, ASA Foundation Philippines Inc., that focuses on women
owners of micro-enterprises in these challenging regions to enhance their access to
finance and build their economic base. Through this project, women are getting better
access to credit, allowing them to improve their living conditions and help rebuild
their communities. The financing was released during the COVID-19 pandemic,
bolstering ASA’s resources at a critical period for on-lending to women suffering
severe economic distress in these fragile regions.

4.Leveraging microfinance to help businesses and livelihoods outside capital cities.

Small businesses in regional towns need financing sources to help them maintain
operations, invest in technologies, and grow businesses. In Georgia, more than 60% of
people live in secondary towns and rural areas, where small businesses and
agricultural livelihoods can generate jobs and raise incomes. ADB supports banks in
Georgia that primarily provide microfinance services to help develop businesses
outside of Tbilisi.

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BIBLIOGRAPHY

https://www.wikipedia.org/

https://shodhganga.inflibnet.ac.in/

https://www.researchgate.net/

https://scholar.google.com/

https://shodhgangotri.inflibnet.ac.in/

https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2900

https://www.rbi.org.in/

Banks:-
https://www.saraswatbank.com/
https://www.cosmosbank.com/
https://www.tjsbbank.co.in/
https://www.svcbank.com/
https://www.abhyudayabank.co.in/

https://razorpay.com/
https://unacademy.com/content/bank-exam/study-material/general-
awareness/cooperative-banks/

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Annexure

Name *

Your answer

E-mail address

Your answer

Age*

Your answer

Gender*

Male
Female
Other

Current Occupation *

Self - Employed
Entrepreneur
Employee
Retired
Student

1: Marital status *

Married
Unmarried

2: Types of family?*

Joint family
Nuclear family

3: How many members are there in your family?*

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Your answer

4: How many members in your family are earning?*

Your answer

5: Do you have Bank Account?*

Yes
No

6: What type of savings do you have? *

Bank Account
Cash at Home
Post office Savings Account
Gold/Silver

7: How do you save your Income? *

Weekly
Monthly
Quarterly
Yearly

8: Do you know that bank are providing micro finance services? *

Yes
No

9: How many times you have received micro credit? *

First time
Second time
Third time

10: What is the source of information and awareness of services? *

Advertisement
Word of mouth
Bank representative

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11: What is the purpose of loan? *

Consumption
Education
Others

12: What amount of loan you have taken?*

10000 - 30000
30000 - 50000
50000 - 70000
70000 and above

13: What is the duration of your loan?*

1 - 3 years
3 - 5 years
5 - 7 years

14: How much loan you have repaid till now? *

Partly Repaid
Fully Repaid

15: What is the interest rate on your loan?*

Your answer

16: From where did you borrowed the funds?*

Non-Governmental Organization
Micro Finance Banks
Non-Banking Financial Companies

17: What will be the consequences in case of non-repayment?*

Assets given as security will be confiscated

Legal action will be taken
Someone else would pay like guarantor or Self Help Group Members

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