abhishek mrp

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CONTENTS Sr. No. Particula rs Page Nos. 1 Introduction Of Microfinance 2 – 7 2 Review Of Literature 8 – 9 3 Rationale Of The Study 10 4 Objective Of The Study 10 5 Methodology 1 1 6 Poverty In Indore & Their Needs 12- 14 7 Remittance Requirement 1 5 8 Microfinance Terminology 16- 18 9 Data Analysis & Interpretation 19- 28 10 Service Volume 29- 42 11 Challenge For Microfinance 43- 44 12 Suggestion 4 5 13 Conclusion 4 6 14 Bibliography & Webliography 47- 48 15 Questionnai 49- 1 | Page

Transcript of abhishek mrp

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CONTENTSSr. No. Particulars Page Nos.

1 Introduction Of Microfinance 2 – 7

2 Review Of Literature 8 – 9

3 Rationale Of The Study 10

4 Objective Of The Study 10

5 Methodology 11

6 Poverty In Indore & Their Needs 12-14

7 Remittance Requirement 15

8 Microfinance Terminology 16-18

9 Data Analysis & Interpretation 19-28

10 Service Volume 29-42

11 Challenge For Microfinance 43-44

12 Suggestion 45

13 Conclusion 46

14 Bibliography & Webliography 47-48

15 Questionnaire 49-50

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INTRODUCTION

Microfinance is the provision of financial services to those who

are excluded from conventional commercial financial services

since most are too poor to offer much - or anything - in the way

of collateral.  It presents a series of exciting possibilities for

extending markets, reducing poverty and forecasting social

change.

The concept of microfinance originated in the mid-1970s in

Bangladesh through a pioneering experiment by Dr. Muhammad

Yunus, then a Professor of Economics.  His aim was to offer

poor people:

financial services

entrepreneurship opportunities

an end to mistreatment by money lenders

a system where they could produce, manage and maintain

their own finances

CONCEPT AND FEATURES OF MICRO-FINANCE

a) Micro-

credit:

Small loans; primarily for income generation

activities, but also for consumption and

contingency needs.

b) Micro-

savings

:

Thrift or small savings from borrowers ‘own

resources.

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The main features of the micro-finance services

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

income and better the asset position of the borrower, the

lower the incremental benefit from further equal doses of

micro-credit is likely to be.

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

3. It is essentially for promoting self-employment; the

opportunities of wage employment are limited in

developing countries - micro finance increases the

productivity of self-employment in the informal sector of

the economy - generally used for (a) direct income

generation (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 - it does not spring from

market forces alone - it is potentially welfare enhancing -

there is a public interest in promoting the growth of micro

finance - this is what makes it acceptable as a valid goal

for public policy.

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

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(b) Allow repayment flexibility

(c) Eschew bureaucratic and legal formalities

(d) Fix a ceiling on loan sizes.

"Microfinance institutions (MFIs) are those which provide

thrift, credit and other financial services and products of very

small amounts mainly to the poor in rural, semi-urban or urban

areas for enabling them to raise their income levels and improve

living standards".

 MFIs have emerged broadly under three categories:

i). Not-for-Profit MFIsSocieties registered under Societies Registration Act, 1860 or

similar State Acts

Public Trusts registered under the Indoren Trust Act, 1882

Non-profit Companies registered under Section 25 of the

Companies Act, 1956

ii). Mutual Benefit MFIs

State credit cooperatives

National credit cooperatives

Mutually Aided Cooperative Societies (MACS)

iii). For-Profit MFIs

Non Banking Financial Companies (NBFCs) registered under

the Companies Act, 1956Banks which provide MF along with

their other usual banking services could be termed as mF service

providers.

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INDORE OVERVIEW

An official Census 2011 detail of Indore, a district of Madhya

Pradesh has been released by Directorate of Census Operations

in Madhya Pradesh. Enumeration of key persons was also done

by census officials in Indore District of Madhya Pradesh. 

In 2011, Indore had population of 3,272,335 of which male and

female were 1,700,483 and 1,571,852 respectively. There was

change of 32.71 percent in the population compared to

population as per 2001. In the previous census of Indore 2001,

Indore District recorded increase of 34.30 percent to its

population compared to 1991. The initial provisional data

suggest a density of 839 in 2011 compared to 633 of 2001. Total

area under Indore district is of about 3898 s.q. k.m. Average

literacy rate of Indore in 2011 were 82.32 compared to 75.15 of

2001. If things are looked out at gender wise, male and female

literacy were 89.22 and 74.89 respectively. For 2001 census,

same figures stood at 84.60 and 64.81 in Indore District. Total

literate in Indore District were 2,358,338 of which male and

female were 1,324,967 and 1,033,371 respectively. In 2001,

Indore District had 1,575,436 in its total region. 

With regards to Sex Ratio in Indore, it stood at 924 per 1000

male compared to 2001 census figure of 912. The average

national sex ratio in Indore is 940 as per latest reports of Census

2011. 

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In census enumeration, data regarding child under 0-6 age were

also collected for all districts including Indore. There were total

407,536 children under age of 0-6 against 369,546 of 2001

census. Of total 407,536 male and female were 215,446 and

192,090 respectively. Child Sex Ratio as per census 2011 was

892 compared to 908 of census 2001. In 2011, Children under 0-

6 formed 12.45 percent of Indore District compared to 14.99

percent of 2001. There was net change of -2.54 percent in this

compared to previous census of Indore.

Indore District population constituted 4.51 percent of total

Madhya Pradesh population. In 2001 census, this figure for

Indore District was at 4.51 percent of Madhya Pradesh

population. 

Indore district major population is also live in villages. But only

five villages has been considered for the research work. Talking

about the Rau, which is a first village where the research

program is conducting. Rau is a developing industrial area of

Indore. Where live around three - four thousand people. Main

income of source of people is farming, laboring and business.

Chitawad is second village villages where the research program

is conducting with circulate questionnaire. It’s also rural and

developing area of Indore district. People of this village are

working on his farm and some people also working in factory as

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a labour. It’s a small village where live around two thousand

people.

Devguradiya is third village villages where the research program

is conducting. It’s a religious and rural backward area, where

people totally devoting to God. Where live around one thousand

people.

Mangalaya is our next village where conducting all research

program. It’s a well developing area and also part of Indore city.

In this village petroleum companies are establishing his refinery

and it’s also source of people of village. Mangalaya is also part

of Indore city than people are going to city for income. It’s a

develop village where live around four – five thousand people.

Lasudiya mori is our last place villages where the research

program is conducting. It’s also a big and developing village

where people well known about microfinance. This is famous

for showroom of automobile companies. The main source of

income of people is farming & business. Where live around five

thousand people.

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REVIEW LITERATURE

These literatures include books written on the subject by experts

and also journals, manuals etc. In fact, there are very few

literatures available, regarding socio-economic, political and

entrepreneurial development of women.

Dr.C.Rangarajan (2006) in his topic ‘Microfinance and its

future directions’ in the introductory part of the book, outline

the evolution of SHG through microfinance evolve through in

three stages. First, to meet survival requirement need, in the

second stage is to meet the subsistence level through investing

in tradition activities and in the final stage by setting up of

enterprises for sustainable income generation.

Robert Peck Christen (2006) in his paper “Microfinance and

Sustainable International Experience and lesson for Indore”, he

articulates the changing general perception of bankers, that

SHGs are profitable clients or bank.

Lanmdau Mayoux’s study (1998) on Participatory Learning

for Women’s Empowerment in Micro Finance Programs

proposes a participatory approach for integrating women’s

empowerment concerns into ongoing programs learning, which

itself would be a contribution to empowerment. Micro finance

programs for women are currently promoted not only as a

strategy for poverty alleviation but also for women’s

empowerment.

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Article of G. Buckley (1997) microenterprises in the informal

sector in Kenya, Malawi Ghana. It seeks to provoke critical

reflection on the uncritical enthusiasm that lies behind much

proselytizing of microfinance for informal sector

microenterprise. It questions whether the extensive donor

interest in microenterprise finance really addresses the problems

of micro entrepreneurs.

Vinay K Srivatava and Arvind Singh (2010) in their article

stated that the micro finance has contributed to its success is its

credit-plus approach – where the focus has not only been on

providing adequate and timely credit to low income groups, but

to integrate it with other developmental activities. He says it is

important to understand that the concept of microfinance is not

new. The precedence for microfinance lies in the numerous

traditional and informal systems of credit.

Robert peck christen 2006 in his paper “microfinance and

sustainable international experience and lesson for India” he

articulate the changing general perception of bankers that SHGs

are profitable clients are banks.

In the above context, various are the view points given by

researchers in the field of Microfinance. Here, in the present

Study the focus is on villages of Indore, to know the awareness

of microfinance among poor peoples and how the people of

Indore get the benefit of Microfinance.

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RATIONALE OF THE STUDY

Indore’s rural poor are overwhelmingly dependent on

agriculture as their primary source of income; the majority is

marginal or small farmers, and the poorest households are

landless. The financial needs of Indore’s rural poor reflect the

volatile, uncertain and irregular income streams and expenditure

patterns of these households. Many Banks providing Micro

financing aimed at empowering women so that they can be able

to create their own business. Microfinance industry not only

helps them pull themselves out of poverty, but it also promotes

gender equity throughout out the world. Microfinance loans

helps to create sustain impact by educating recipients on how to

create their own business and how to properly manage and grow

their money. Microfinance allows the poor to gate the loans they

need to save invest and create a sustainable life style of financial

independence and growth these loans are used productively by

the poor to create there owns business.

OBJECTIVES OF THE STUDY

1. To measure effectiveness of microfinance on village People of Indore

2. To study how micro financing empower women.

3. To analyze how microfinance reduce poverty in Indore.

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RESEARCH METHODOLOGY

The Study: The present study “an impact of microfinance on

poverty in related to villages of Indore” is exploratory in nature.

Data Collection: Research is based on primary data. Secondary

data is also used. Primary data has been collected by interacting

with various people, through structured Questionnaire. The

secondary data has been collected through various journals,

magazines, website.etc.

Analysis of the Data: The analysis of data has been done on

percentage basis. Graphic representation of the data has been done

through Pie Charts.

Sample size: The sample size is of 100 People of village in Indore

district.

Sampling Method: The method used for sample technique was

stratified random sampling method.

Selection of Study Area: The research has been conducted on

People of village. The sample size used here was 100 people of

villages in Indore district, who belongs to different Villages of

Indore. The study has been conducted by considering 5 villages

of Indore namely Rau, Chitawad, devguradiya, Mangalaya and

Lasudiya mori etc. regarding Microfinance services used in

villages of Indore.

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Poverty in Indore

Poverty in Indore and Indore is still rampant despite an

impressive economic growth. An estimated 0.65 million people

are below the poverty line and approximately 63 per cent of

them are in the rural areas. In general, poverty can be defined as

a situation when people are unable to satisfy the basic needs of

life. The definition and methods of measuring poverty differs

from country to country. According to the definition by

Planning Commission of Indore, poverty line is drawn with an

intake of 2400 calories in rural areas and 2100 calories in urban

areas. If a person is unable to get that much minimum level of

calories, then he/she is considered as being below poverty line.

Causes of Poverty in Indore

High level of dependence on primitive methods of

agriculture

High population growth rate

High Illiteracy (about 27% of adult population)

Regional inequalities

Protectionist policies pursued till 1991 that prevented high

foreign investment.

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Problems Faced by village people of Indore

One of the major problems with poverty alleviation programs is

their implementation. Rajiv Gandhi once said that out of 100

paisa allocated for poor only 14 paisa reaches them. But in spite

of their weaknesses, poverty alleviated program can be credited

for their success in alleviating poverty to an extent. Greater

public-private partnership and committed and efficient

bureaucratic machinery is required to tackle poverty.

Since its independence, the issue of poverty within Indore has

remained a prevalent concern. According to the common

definition of poverty, when a person finds it difficult to meet the

minimum requirement of acceptable living standards, he or she

is considered poor.

Many people in Indore are unable to meet these basic standards,

and according to government estimates, in 2008 there were

nearly 0.22 million people living below the poverty line.

Nearly 18.9% of the entire rural population and 21% of the

urban population of Indore exists in this difficult physical and

financial predicament.

The poverty ratios illustrated here are divided in two types:

urban and rural. Specific reasons for poverty vary in the urban &

rural setting; A number of factors are responsible for poverty in

the rural areas of Indore. Rural populations primarily depend on

agriculture, which is highly dependent on rain patterns and the

monsoon season. Inadequate rain and improper irrigation

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facilities can obviously cause low, or in some cases, no

production of crops.

Additionally, the Indoren family unit is often very large, which

can amplify the effects of poverty. The government has planned

and implemented poverty eradication programs, but the benefits

of all these programs have yet to reach the core of the country.

Poor’s and their needs

With the rapid growth of big cities, slums, the breeding grounds

of urban squalor and Poverty, swell primarily due to increased

migration of the poor from the villages in search of better

employment opportunities and improved standard of living. All

poor, however, do not live in slums. In fact, the urban poor

population in the country is estimated to be nearly eight crore

whereas the slum population hovers around four crore. Most of

the working population in urban areas work under utterly

deplorable conditions in unorganized sector with a very few

livelihood options.

The deprivation of urban poor is further accentuated as more

than 40 percent of adult Indoren urban population has no access

to a bank account (this figure would be more if multiple

accounts held by individuals are factored), and, thereby

depriving them of savings, credit, remittance and other financial

service facilities from the formal financial system.

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Against this background, this paper tries to study the issues and

options involving financial inclusion of the urban poor.

Managing savings well by the urban poor is critically important

but often neglected leading to absence of a secured source of

finance to meet life cycle as well as Investment needs.

REMITTANCE REQUIREMENT

In Indore, huge flow of migrants, poor and the not-so-poor,

crises-cross the country in search of a better life for themselves

and their families who mostly stay behind in their villages. They

take up non-contractual and nonpermanent jobs, such as, house

help, security guards, daily wage laborers, hawkers, beggars

staying on the streets and petty workers working in and around

the industrial areas in cities.

These migrants need a fast, low cost, convenient, safe and

widely accessible remittance service to send money to their

families and dependents to meet their consumption needs and

other life cycle needs in particular, medical emergencies. Safe,

speedy and affordable means of remittance, however, remains a

major problem for the migrant domestic lab our in urban, many

of whom unlike overseas migrants do not even have bank

accounts either at their native places or their work places.

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MICROFINANCE TERMINOLOGY

Micro credit: This is a small amount of money loaned to a

client by a bank or other institution. Micro credit can be offered,

often without collateral, to an individual or through group

lending.

Microfinance: This refers to loans, savings, insurance, transfer

services and other financial products targeted at low-income

clients

Micro insurance: This is a system by which people, businesses

and other organizations make payments to share risk. Access to

insurance enables entrepreneurs to concentrate more on growing

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 money that can

fluctuate depending on the political or economic climate,

remittances are a relatively steady source of funds.

Micro savings: These are deposit services that allow people to

store small amounts of money for future use, often without

minimum balance requirements. Savings accounts allow

households to save small amounts of money to meet unexpected

expenses and plan for future investments such as education and

old age. Inclusive financial sectors: It allows poor and low

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income people to access credit, insurance, remittances and

savings products. In many countries, the financial sectors do not

provide these services to the lower income people. An inclusive

financial sector will support the full participation of the lower

income levels of the population.

Micro entrepreneurs: These are people who own small scale

businesses that are known as micro enterprises. These

businesses usually employ less than 5 people and can be based

out of the home. They can provide the sole source of family

income or supplement other forms of income. Typical micro

entrepreneur activities include retail kiosks sewing workshops,

carpentry shops and market stalls.

Bankable: These people are those deemed eligible to obtain

financial services that can lead to income generation, repayment

of loans, savings, and the building of assets.

Unbanked: This describes people who have no access to

financial services through any type of financial sector

organization such as banks, non-bank financial institutions,

financial cooperatives and credit unions, finance companies, and

NGOs. Implicit in this definition is that financial services are

usually available only to those individuals termed

"Economically active" or bankable.

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MICROFINANCE DELIVERY METHODOLOGIES

The sheer geographical size of the country, a wide range of

social and cultural groups, the large spectrum of economic

classes and a variety of NGOs movement has contributed

towards the diversity of microfinance models in Indore.

Some of the common models used in Indore are

1) Self help group model

2) Grameen model

3) Cooperative/mutually aided cooperative model

4) Non banking company finance model

5) Bank using other agencies for distribution of microfinance

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DATA ANALYSIS & INTERPRETATION

(i) Number of people having knowledge about Microfinance:

People Response (in %)

Yes 36

No 64

Chart: - 1

Interpretation-

The above chart shows that 36% of the respondents were having

knowledge about Microfinance and 64% of the respondents were not

having any knowledge about Microfinance. Thus the research work

includes people knowledge about Microfinance.

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(ii) Facilities of Microfinance schemes using

by people:

People Respondents (in

%)

Yes 34

No 66

Chart:-2

Interpretation-

This reveal that 34% of the respondents were using Microfinance

schemes & services and 66% of the respondents were not using

Microfinance schemes & services. Thus the research work includes

use of Microfinance schemes by people.

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(iii)Microfinance schemes reduce the poverty:

People Respondents (in %)

Yes 48

No 28

Don’t know 24

Chart:-3

Interpretation-

According to Bar chart, 48% of the respondents were says that

Microfinance schemes are helps to reduce poverty, 28% of the

respondents were not says that Microfinance schemes are helps to

reduce poverty and 24% respondents were don’t know about this.

Thus the research work includes help of Microfinance schemes for

reduce poverty.

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(iv) Source of income of people:

Farming Self Generated Laboring Business Others

54% 09% 27% 03% 07%

Chart:-4

Interpretation-

This chart exhibits that 54% of the respondents engaged in farming

for income, 09% of the respondents are self employed, 27% of the

respondents do laboring for his income, 03% of respondents engaged

in their business for his income and 24% respondents are doing other

work for his income. Thus the research work includes source of

income of the people.

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(v) The Source of Microfinance:

Informal Source 10%

SHG 45%

Banks 36%

Others 09%

Chart:-5

Interpretation:

The above chart represent that 10% of the respondents says that

informal source is a microfinance source, 45% of the respondents says

that SHG is source of microfinance, 36% of the respondents says that

Banks are source of microfinance and 09% respondents says that

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others groups are source of microfinance. Thus the research work

includes source of microfinance.

(vi) How do you know about microfinance:

Family member &

Relatives

Friends & Peers Magazines &

Generals

Others

15% 22% 36% 27%

Chart:-6

Interpretation-

About 15% of the respondents say that family member & relatives are

give knowledge about microfinance, 22% of the respondents says that

Friends & Peers are give knowledge about microfinance, 36% of the

respondents says that Magazines & Generals are give knowledge

about microfinance and 27% of the respondents says that others are

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give knowledge about microfinance. Thus the research work includes

knowledge of microfinance.

(vii) How long the people availing Microfinance Schemes:

None 36%

0 years to 2 years 27%

2 years to 3 years 18%

More than 3 year’s 19%

Chart:-7

Interpretation-

36% of the respondents says they aren’t use microfinance schemes,

27% of the respondents says they are use microfinance during 0-2

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years, 18% of the respondents says they are use microfinance during

2-3 years and 19% of the respondents says they are use microfinance

more than 3 years. Thus the research work includes use of

microfinance with time duration by people.

(viii) Main & basic objective of microfinance:

Reduce Poverty 54%

Increasing Income 09%

Empowering of women 27%

Self Employment 10%

Chart:-8

Interpretation-

The above chart shows around 54% of the respondents reveal that

‘reduce poverty’ is basic object of microfinance schemes, 09% of the

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respondents says that ‘Increasing Income’ is basic object of

microfinance, 27% of the respondents says that ‘Empowering of

women’ is basic object of microfinance and 10% of the respondents

says that ‘Self Employment’ is basic object of microfinance. Thus the

research work includes Basic object of microfinance.

(ix) Factors which is influencing the growth of microfinance:

Availability of

loan

Flexibility Low interest

rate

Installment

Availability

47% 11% 24% 18%

Chart:-9

Interpretation-

This shows that 47% of the respondents says that ‘Availability of

loan’ is a factor which influencing microfinance, 11% of the

respondents says that ‘Flexibility’ is a factor which influence

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microfinance, 24% of the respondents says that ‘Low interest rate’ is

a factor of microfinance and 18% of the respondents says that

‘Installment Availability’ is a factor of microfinance. Thus the

research work includes about factors whose is influencing growth of

microfinance.

(x)Microfinance is also doing changes in standard of living:

Strongly

Agree

Agree Neutral Disagree Strongly

Disagree

18% 39% 11% 23% 09%

Chart:-10

Interpretation-

This chart represent tha18% of the respondents are strongly agree

about changes in standard of living by microfinance, 39% of the

respondents agree about changes in standard of living by

microfinance, 11% of the respondents are Neutral about changes in

standard of living by microfinance, 23% of the respondents

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disagree about changes in standard of living by microfinance and

09% of the respondents are strongly disagree about changes in

standard of living by microfinance. Thus the research work includes

about changes in standard of living by microfinance schemes.

SERVICE VOLUMES

In the financial year 2008/09, Microfinance in Indore through

its two major channels – SBLP and MFIs – served over 3.5

million Indoren, up by 0.9 million over the previous financial

year. 4 out of 5 microfinance clients in Indore are women. Per

31st March 2011, the outstanding micro-credit portfolio of

Indore Microfinance was about Rs. 2,200 crore. 75% are

accounted for by SBLP, 20% by large MFIs and 5% by medium

and small MFIs.

SBLP reports over Rs. 350 crore savings of SHG-members

(2006/07). MFIs are prohibited from accepting savings;

however, one third of their clients are served under the SHG-

model and thus encouraged to save among themselves and/or

open savings accounts with banks. The MFI KBS Local Area

Bank reports about Rs. 40 crore savings portfolio for its 1 lack

clients (2007/08).

From The Bharat Microfinance Report 2010:

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* SHG-Bank Linkage Programme is spearheaded and implemented By NABARD. Figures in italics are estimates; see Sa-Dhan (2008) for details.

** The total has been reduced by 15% of MFI-figure, assumed to be the overlap with SBLP.

Highlights of the Bharat Microfinance Report - Quick-Data

2008-09

Sa-Dhan Quick-data set is the most timely – the quickest – of

any segment of the financial sector. Indore Microfinance is

proud to take once again the lead in disclosing performance over

the last financial year which ended on 31st March 2008.

Highlights recorded are

Growth of MFI- loan portfolios passed 70% annually between

March2008 and March 2011. The strongest impulse came from

medium – often urban – MFIs in 2008/09 and from large MFIs

in 2008/09.

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Outstanding Portfolio (in Rs. Crore)

SBLP* 1,064 1,690

Sa-Dhan, 223 MFIs 356 554

Total** 1,420 2,244

Client Outreach (in million persons)

SBLP* 16.01 21.57

Sa-Dhan, 223 MFIs 10.04 14.1

Total** 24.55 33.55

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Indoren MFIs are true to their mission of serving the poor

strata of society. A stable 8 out of 10 clients have been provided

loans sized less than Rs. 10,000.

The loan segment between Rs. 5,000 and Rs 10,000 has been

growing strongest. This can be explained by two impulses: On

one hand, microfinance customers mature to bigger loans over

the loan cycles. On the other hand, urban microfinance starts

with comparatively bigger loans than rural finance.

From The Bharat Microfinance Report 2008-09:

Indorian MFIs serves 0.41 million clients from the SC/ST

background. The reported number of SC/ST has been growing

alongside the rate of total outreach, thus the SC/ST-share is

stable at 3 out of 10 clients.

From The Bharat Microfinance Report 2009:

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Large MFIs are particularly active in expanding their

operations to the poorest districts; many of them serving poorest

than other districts.

Urban Microfinance is emerging as a strong growth driver;

between March 2006 and March 2008, 1 out of 3 new clients

was from the urban background. One Quarter of all MFI clients

is from the urban background.

THE MICROFINANCE INSTITUTIONS (MFIS)

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For its 2011-Quick-Report SA-Dhan collected and validated

data from 231 MFIs. Ultimately, between 216 and 223 were

validated for analysis, up from 129 in the previous Quick-

Report. Most MFIs are societies and trusts. Among the large

MFIs, most are NBFCs, but not-for-profit organizations are also

counted in this category. Most of the cooperative banks in the

sample are urban-based. Out of 4 Local Area Banks licensed by

RBI, AP-based KBS is included in the sample.

From The Bharat Microfinance Report 2011:

MFIs

with Loan

Portfolio

up to 5

crore

MFIs with

Loan

Portfolio

>5 to 50

crore

MFIs with

Loan

Portfolio

over 50

crore

Total

No

of

MFIs

Society 87.7 543.8 478.3 1,109.7 104

Trust 24.0 149.8 225.4 399.3 31

Cooperative

Bank8.3 - - 8.3 8

MACS 5.2 11.0 - 16.2 10

Section 25

Company11.6 127.4 543.6 682.6 22

NBFC 10.6 197.3 3,312.1 3,520.0 25

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LAB or any

other13.6 13.7 134.7 1,62.0 16

Total 161.0 1,043.0 4,694.1 5,898.2

No of MFIs 137 57 22 216

MFI PERFORMANCE IN INDORE: 2008 – 2011

A 2008 - 2011 survey of Indore’s leading 15 MFIs shows the

industry’s strength in both size and growth. While MFIs

globally and within the region average less than 20,000 clients

per institution, well managed Indoren micro finance institutions

already rank top in outreach, despite their relative young age;

with nearly a decade more experience, only Bangladeshi

institutions reach more borrowers.

TOP MICRIFINANCE INSTITUTES IN INDORE

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Not to be left behind, Indoren institutions top the charts of all 78

countries surveyed in 2008 for their phenomenal growth rates,

the median leading MFI doubling coverage in a single year. In

fact, five of the top 20 fastest growing MFIs in 2005 were

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Indoren, from a survey of nearly 450 institutions worldwide.

While global microfinance talks about increasing commercial

capital available to MFIs and of integrating with local financial

markets, Indoren microfinance defines the forward lines of this

movement. Within Asia and around the globe, Indoren MFIs are

more leveraged than institutions in any other sector. Compared

to other markets in South Asia, the Importance of local financial

institutions is readily apparent. Bangladeshi and Pakistani MFIs

have built large institutions on the backs of soft money. Indoren

MFIs, on the other hand, deprived of shareholder capital or legal

access to public deposits, have funded growth through

Commercial loans from local banks and development finance

institutions. Tapping local financial markets leaves the sector

well poised to continue its rapid growth.

Loans to Indoren MFIs fulfill more than priority sector lending

requirements; they also fulfill the need for returns. Leading

MFIs offer slim, but positive margins. Hardly the high returns

presented in recent media coverage, leading institutions

averaged just less than 1% return on assets

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BANKS INITIATIVES

Banks need to take up the financial inclusion efforts not only as

a part of their corporate social responsibility but as a vibrant

business model. A few banks like the Union Bank of India,

Indian Bank and Citi Bank have now launched pilots using such

ICT tools to financially include disadvantaged groups in

cities/towns. Union Bank of India is covering the hawkers in

Mumbai (Box 6) and Indian Bank has launched the programme

to open “no-frills” accounts at the door step of the migrants

staying in Dharavi slums in Mumbai with the assistance of the

local community leaders, NGOs (“Nirman”) and provide ATM

facility and smart cards to them in association with technology

provider like FINO.

With rapid growth of urbanisation, social engineers have been

compelled to give attention to providing financial services to

meet the savings, credit, remittance and other financial

requirements of the urban poor and not so poor engaged in the

informal/unorganized sectors. Financial inclusion should not

begin and end with opening of bank accounts. In fact, product

innovation in financial services keeping in view their life cycle

needs is the need of the hour. Rolling out of an innovative

financial product, however, should not be undertaken without

adopting a systematic approach that involves conducting market

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research on the financial needs, developing a proto type,

analysing the associated risks, pilot testing of the product, etc..

MICROFINANCE-A TOOL TO IMPROVE SOCIO-

ECONOMIC STATUS OF INDORE PEOPLE

Indore has the one of the fast developing country in the world.

Indore’s ‘first world’ economy is oriented to the very highest

standards of globalize consumption, and formal sector incomes

and lifestyles reflect this. By contrast, the real incomes and

‘lifestyles’ of the very poor, particularly in rural areas, are

comparable very low. Micro-finance is often advocated as a

solution to multiple social problems in Indore. Poor Persons

with access to credit can make investments in enterprises that

bring them out of poverty.

Over the last few years, savings and credit groups have also

helped to manage some important social programs of the

Indoren government, such as the distribution of food grains and

school meals in state primary schools.

Income in Indore is closely linked to social and economic status:

whilst the upper and middle classes inhabit the ‘formal’ income

from their formal ventures and employment,

in other hand the poorest and low income status are largely

‘informally’ employed. Low income households are not usually

involved in regular income and therefore waiting for job

creation strategies to absorb them; they ‘permanently inhabit’ a

dependent segment of the so called developing Indoren

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economy, in which opportunities for jobs, or for independent

and self sustaining entrepreneurial capital accumulation, are

minimal. Though poverty reduction has long been a high

priority for the Government of Indore, microfinance is a still

experimental tool in its overall strategies. Indore’s microfinance

experiments are much differ from the more substantial

microfinance institutions and programmes of its neighbors

countries. The United Nations system was perhaps the first

international partner to Indore’s new experiment with small

scale credit schemes.

Most of poor people manage to optimize resources over a time

to develop their enterprises. Financial services could enable the

poor to leverage their initiative, accelerating the process of

generating incomes, assets and economic security. However,

conventional finance institutions seldom lend down-market to

serve the needs of low-income families and women-headed

households.

They are very often denied access to credit for any purpose,

making the discussion of the level of interest rate and other

terms of finance irrelevant. Therefore the fundamental problem

is not so much of unaffordable terms of loan as the lack of

access to credit itself. The impact of microfinance on poverty

reduction has been measured in terms of several dimensions,

such as improved income, employment and household

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expenditure, and reduced vulnerability to economic and social

crises.

These measurements have tended to focus on a specific

geographic area, an institution or a small client group and are

difficult to generalize or draw conclusions that reach across

borders, income levels, gender or socio-economic status. Even

though many of these anecdotal studies clearly support a role for

microfinance in achieving the Millennium Development Goals,

a key challenge in measuring the impact of microfinance is

obtaining reliable data. Sometimes clients are recipients of more

than one product, which are provided by more than one

microfinance institution (MFIs). MFIs, it becomes hard to obtain

measures on the exact impact of their services and products on

their clients' lives. We also do not have the answer to the

question of what proportion of the population even has access to

credit and savings

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FEW SCHEME OF MICROFANANCE

There are so many schemes for the upliftment of poor In Indore.

One of them Micro-credit programmes is run primarily by

NABARD in the field of agriculture and SIDBI in the field of

Industry, Service and Business (ISB). The success of Micro-

credit programme lies in diversification of services. Micro

Finance Scheme of SIDBI is under operation since January,

1999 with a corpus of Rs. 100 crore and a network of about 190

capacity assessed rated MFIs/NGOs. Under the programme,

total amount of Rs. 191 crore have been sanctioned upto 31st

December, 2003, benefiting over 9 lakh beneficiaries.

Under the programme, NGOs/MFIs are supposed to provide

equity support in order to avail SIDBI finance. But they find it

difficult to manage the needed equity support because of their

poor financial condition. The problem has got aggravated due to

declining interest rate on deposits. The office of the

development commissioner (Small Scale Industries) under

Ministry of SSI is launching a new scheme of Micro Finance

Programme to overcome the constraints in the existing scheme

of SIDBI, whose reach is currently very low. It is felt that

Government’s role can be critical in expanding reach of the

scheme, ensuring long term sustainability of NGOs / MFIs and

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development of Intermediaries for identification of viable

projects.

IMPORTANCE OF MICROFINANCE

In Indore, economic reforms with a human face have been

accepted as the guiding principle of sustainable development.

Keeping the poor at center stage, the policies need to be

reoriented so as to develop and optimize the potential of such a

large segment of the population and enable them to contribute in

the growth process significantly in terms of output, income,

employment and consumption. Viewed from this angle, our

survey results show that

1. Micro-Finance can be a powerful instrument initiating a

cyclical process of growth and development.

2. Micro-Finance activity improved access of rural poor to

financial services, both savings and credit.

3. Increased access signifies overcoming isolation of rural

women in terms of their access to financial services and

denial of credit due to absence of collateral.

4. The pool of savings generated out of very small but

regular contributions improved access of the poor women

to bank loans.

5. It could also help in strengthening poor families’

resistance to external shocks and reducing dependence on

moneylenders.

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6. The observed support for consumption smoothening would

not have been possible, but for the SHGs internal support.

Possibilities could be of explored for using SHGs as a strong

conduit for purveying crop cultivation loans to very small and

marginal farmers to step up crop loan finance.

IMPACT ON THE BANKS

The participatory approach to micro-finance has improved the

cost-effectiveness of poverty alleviation strategy by

substantially lowering transaction costs. While commenting on

the performance and impact of the project, the UNOPS

Supervision Mission observed: 'there is a transformation in the

attitude and approach of the participating banks to rural financial

services and especially rural clients. The innovative

methodology of MRCP has taken root and is now being

perceived by bankers to be a cost effective, efficient and viable

alternative for rural banking. Participating banks have become

more confident and skilled in extending credit to the rural poor

through groups and to individual clients'. A study of branch

level operations conducted by NABARD revealed that the SHGs

turned out to be a channel for social mobilization and women

empowerment, as also new business with quality clients and

significantly increased goodwill. Externalization of operating

costs in deposit mobilization, credit management and recovery

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through Village development Councils and SHGs were other

benefits which had a positive impact on the working results of

the branch.

CHALLENGES FOR MICROFINANCE

Microfinance has no doubt improved the lives of the poor in

Indore but sometimes it leads people to borrow too much, to the

extent that over indebtness can lead to suicides in extreme cases,

The main challenge facing the sector is identified as the need to

enhance borrower, public and regulatory support and

understanding, by increasing transparency in dealings with

borrowers and by educating the poor.

The sector is growing rapidly, both in the scale and in the

diversity of actors, and is sitting on the cusp of regulation. It is,

therefore, in the midst of rapid flux,"

For some time now, there has been a growing demand by

practitioners, financial institutions, policy makers, regulators,

the research community, the media and the development

community generally for a periodic, comprehensive and up-to-

date account of the sector.

Saying bankers and social venture capitalists are vitally

dependent on the success of the efforts of the training and

capacity-building service providers in easing human resource

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constraints facing the sector, and would like to know more about

their activities.

Insurance companies are interested in opportunities offered by

self help group (SHG) bank linkage programme, just as bankers

are curious about the opportunities that might lie in money

transfers.

"Additionally, not enough is known about the unfolding

priorities of the donors. Everyone is affected by what the

regulators in turn need to know more about the sector they are

charged with regulating,"

Indorian microfinance has continued growing rapidly towards

the main objective of financial inclusion, extending outreach to

a growing share of poor households and to the approximately 80

per cent of the population, which has yet to be reached directly

by the banks the self help group bank linkage programme -

covered about 14 million poor households in March 2006 and

provided indirect access to the banking system to another 14

million, including the borderline poor.  

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SUGGESTION

There should be a favorable scheme of microfinance,

where there is no or less rate of interest on credit and

people can take loan easily which is convenient for the

poor people.

Develop small businesses that produce saleable goods,

such as traditional handicrafts.

Consult start-up microfinance programs that struggle with

operational, financial, or institutional sustainability.

Provide entrepreneurial skills training to conduct

feasibility studies, perform cost/benefit analyses, write

business plans, acquire financing, and initiate start-ups.

Research and analyze numerous topics that include local

economic conditions, migration patterns, obstructions to

economic growth, and efficacy of microfinance programs.

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CONCLUSION

In order to ensure that the poorest benefit from this growth, and

also contribute to it, the expansion and improvement of the

microfinance sector should be a national priority.

The impact of microfinance on the poorest is greater than on the

poor, and yet another that non-participating members of

communities where microfinance operates experience socio-

economic gains — suggesting strong spillover effects.

Moreover, well-managed microfinance institutions (MFIs) have

shown a capacity to wean themselves off of subsidies and

become sustainable within a few years. Microfinance is

powerful, but it is clearly no panacea. Our experience in the

business world has taught us that solutions marketed as cure-alls

to complex societal problems rarely if ever pan out as promised.

Microfinance does not directly address some structural problems

facing Indoren society and the economy, and it is not yet as

efficient as it will be when economies of scale are realized and a

more supportive policy environment is created.

The rest of Indore is catching on and catching up. According to

Sa-Dhan, the overall outreach is 6.5 million families and the

sector-wide loan portfolio is Rs 2,500 crore. Indore district is the

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most developing district in all over Madhya Pradesh, but people

of Indore is doing have any knowledge about Microfinance.

Than main cause behind lack of knowledge about Microfinance

is unawareness.

Bibliography

Researches

Dr.C.Rangarajan (2006) in his topic ‘Microfinance and its future

directions’.

Robert Peck Christen (2006) in his paper “Microfinance and

Sustainable International Experience and lesson for Indore”,

Lanmdau Mayoux’s study (1998) on Participatory Learning for

Women’s Empowerment in Micro Finance Programs (IDS

Bulletin, Vol. 29 No.4, 1998)

Elahi, K.Q. and C.P. Danopoulos (2004). "Microfinance and

third world development: A critical analysis." Journal of

Political & Military Sociology 32(1): 61-77.

Archana, S (2002) Types of SHGs and Their Work. Social

Welfare Issue, February: 16.

In Jerinabi, U. (2006) Micro Credit Management by Women’s

Self Help Groups.

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Discovery Publishing House: New Delhi

Edelsonbos, J. and Van Burren, A. (2005) the Learning

Evaluation: a Theoretical and Empirical Exploration.

Evaluation review

Fisher, T and Shiram, M.S (2002) Micro-Credit: Putting

Development Back into Micro-Finance. New Delhi, Vistaar

Publications.

Harper, M. (2002) Grameen Bank Groups and Self-Help

Groups; what are the

Books

CGAP, September, Financial Access 2010: The State of

Financial Inclusion through the Crisis

Economist Intelligence Unit October 2010; Global Microscope

on the Microfinance Business Environment

Kumar Ranjit (2008),Research Methodology; A Step By

Step Guide for Beginners, Pearson publication.

Microfinance perspectives and operation (2003), Indian institute

of banking and finance,Macmillan publication.

Websites

www.microfinance.org ,

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www.gdrc.org

www.sa-dhan.org

www.microfinancegateway.org QUESTIONNAIRE

Dear Respondent,

I am student of Maharaja Ranjit Singh College

of Professional Science (MRSC) and pursuing MBA. This

survey is designed for the village People of Indore to determine

the benefits provided by Microfinance services.

Kindly spare your precious time to make my study complete.

SECTION A:Name of Respondent:City :

Gender : Male □ Female □Age : ≥ 25 25-35 35-50 50 ≥

INCOME ABOVE: upto1-LAKH upto2-LAKH 4-5-LAKH MORE THAN 5LAKH

SECTION B: Q.1) Do you have any knowledge about microfinance?

(a) Yes □ (b) No □ If No then why……………. Q.2) Do you avail the facilities of microfinance schemes?

(a) Yes □ (b) No □ Q.3) Do you think Microfinance help to reduce poverty?

(a) Yes □ (b) No □ (c) Don’t Know □

Q.4) what are the Source of income?

(a) Farming □

(b) Self Generated □ (c) Labouring □

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(d) Business □ (e) Others □

Q.5) what is the source of Microfinance?

(a) Informal Source □ (b) SHG Groups □ (c) Banks □ (d) Others □ Q.6) from where you come to know about Microfinance?

(a) Family member & Relatives □ (b) Friends & Peers □ (c) Magazines & Generals □ (d) Others □ Q.7) how long have you been using Microfinance?

(a) None □ (b) 0 year to 2 years □ (c) 2 years to 3 years □ (d) More than 3 year’s □

Q.8) what is your basic objective at the use of microfinance?

(a) Reduce Poverty □ (b) Increasing Income □ (c) Empowering of women □ (d) Self Employment □ Q.9) Which Factors influencing the growth of microfinance?

(a) Availability of loan □ (b) Flexibility □ (c) Low interest rate □ (d) Installment availability □

Q.10) Do you find any change in standard of living after using microfinance scheme?

(a) Strongly Agree □ (b) Agree □ (c) Neutral □ (d) Disagree □ (e) Strongly Disagree □

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