IMPACT OF MICROFINANCE ON THE DEVELOPMENT OF RURAL WOMEN

OF BIHAR WITH SPECIAL REFERENCE TO PATNA DISTRICT

THESIS

SUBMITTED TO

PATNA UNIVERSITY,PATNA

FOR THE AWARD OF THE DEGREE OF

DOCTOR OF PHILOSOPHY

IN THE FACULTY OF COMMERCE

PATNA UNIVERSITY

2014

Under the Supervision of: Submitted by:

Dr. Shashank Bhushan Lall Reshu Krishna

Associate Professor in Commerce Research Scholar

Vanijya Mahavidyalaya Patna University,Patna

Patna University, Patna

PREFACE

To undertake a research project, on a topic of wider economic and social

significance, which governs the fate of the entire society at the time when

everyone is talking about Women Empowerment is a challenging job. It is

very difficult to think about the overall development of the society without

the development of the villages of the country like India where still nearly

2/3rd of the population lives in villages. The entire analysis and investigation,

therefore, relates to the development of Rural Women by Microfinance which

is a highly sensitive sector of the country at the wake of the globalization,

liberalization and industrialization.

I wish to place on record my most sincere thanks to Dr. Shashank Bhushan

Lall, Associate Professor, Vanijya Mahavidyalaya, Patna University, Patna who

has been a continues source of guidance, inspiration and supervision to the

present assignment. But for his affection, direction, motivation and

cooperation, I would not have been able to translate my dream project into a

reality. I am indeed grateful to Dr. S. B. Lall for all his academic associations

with my research investigation.

I am also thankful to my respected teachers Prof. (Dr.) Umesh Mishra, Prof.

(Dr.) Chandrama Singh, Prof. (Dr.) Brahmanand Pandey, Prof. (Dr.) Jyoti Shekhar,

Dr.A.L.Chakraborty, Dr.N. K. Jha, Dr. M.C.Prasad, who taught me the true

understanding of the art of Management as a subject.

I also extend my gratitude to the officials of Different Microfinance

Institutions, viz, Sri Anjani Sinha who helped me a lot and provided relevant

information and also data to carry on with my research work. I also

especially pay my gratitude to sir Mr A.K. Ganguly , Chartered Accountant for

his personal and official help.

My personal gratitude goes to the members of my family who extended

their full support and cooperation in collection of data and also gave moral

support to carry my research. I also show my personal gratitude to my

mother Smt Renu Krishna who is a source of inspiration for me in the pursuit

of my academic achievements. I would also like to show my gratitude to

my father Sri Ramendra Krishna Prasad and brother Er Roshan Krishna who have

always showed their love and affection to me. Without the support the

beloved ones it is very difficult to carry such a massive project

At the end I express my gratitude to the author of all the materials which I

consulted in the course of my enquiry, the vast amount of articles ,

publications, internet information and entrepreneur borrowers who permitted

me to develop my thought on the subject in a candid manner.

It is now my privilege to offer and present these for a wider assessment and

evaluation.

(RESHU KRISHNA)

CONTENTS

Page

no.

Preface A-B

List of Abbreviations i-iii

List of Tables I-III

List of Graphs - 1 -

Chapter I 1-32

INTRODUCTION

1. Introduction

2. Rationale of the study

3. Objectives of the study

4. Hypothesis

5. Research methodology

6. Review of the literature

7. Expected contribution from the study

8. Limitations

9. Framework of research

10. References

Chapter II

MICROFINANCE AND RURAL WOMEN 33-61

1. Introduction

2. Women and Microfinance

3. Context in India

4. Context in Bihar

5. Status of Women in Bihar

6. Focus on poor women in India

7. Goal of Microfinance

8. Objectives of Microfinance

9. Microfinance in Bihar

10. Indicators of Women Development

11. Microfinance Institutions

12. Inclusive Financial System

13. Micro Finance and Financial Inclusion

14. Microfinance Providers

15. Classification of the providers of Microfinance

16. Microfinance Banks

17. Sources of Financing 18. Conclusion

19. References

Chapter III 62-95

ROLE OF MICROFINANCE IN UPLIFTMENT OF RURAL WOMEN

1. Introduction

2. Sustainability of MFI

3. Micro Finance Instrument For Women’s Development

4. Sustainability in Microfinance in Bihar

5. Concept of Empowerment

6. Women Empowerment

7. Context In India

8. Empowerment of Women Through Microfinance

9. Development Effects

10. Women Development in Bihar

11. Microfinance and development

12. Facilities provided by MFIs

13. Satisfaction level of beneficiaries on various facilities

14. Case Studies

15. Conclusion

16. References

Chapter IV 96- 148

MICROFINANCE AND RURAL WOMEN IN PATNA DISTRICT

1. Introduction

2. The Macro Economy

3. The microfinance industry in India

4. Status of Microfinance in India

5. Progress under Microfinance during 2011-12

6. SHG-Bank Linkage Programme

7. MFI-Bank Linkage Programme

8. Bihar : At a Glance

9. The Current State of Microfinance in Bihar

10. Microfinance Institutions And Programme In Bihar

11. Bihar : SHG coverage

12. Legal Status of MFIs working in Bihar

13. Outreach of Micro-financing Institutions as on 31 March 2009(Rs. In lakh)

14. Outreach of Micro-financing Institutions as on 2010-11(Rs. In lakh)

15. Mode of Financing by MFIs

16. Financial Service Offered by MFIs

17. Patna-At a Glance

18. Women Development Through Microfinance in Patna District

19. Economical Development

20. Socio-cultural and Familial Development

21. Political Development

22. Impact of credit

23. Tenure of Loan, Repayment Periodicity and Recovery Performance

24. Interest Rate and Other Charges levied by MFIs

25. Analysis of Interest Rate Structure

26. Case Study

27. Conclusion

28. References

Chapter V

ANALYSIS OF PERFORMANCE OF MICROFINANCE IN 149- 184

ERADICATION OF POVERTY AND UPLIFTMENT OF RURAL WOMEN

1. Ratio Analysis of MFIs operating in Bihar

2. Capital Structure Ratios

3. Debt Ratio

4. Capital Adequacy ratio

5. Return on assets (ROA)

6. Risk weighted assets to working fund

7. Cost and Profitability Ratio

8. Financial Margin

9. Net Financial Margin

10. Efficiency and Growth Ratios

11. Interest Coverage Ratio

12. Financial Sustainability

13. Yield on Portfolio

14. Analysis and Interpretation

15. Cost function analysis

16. Analysis of Variance (ANOVA)

17. Conclusion

18. References

Chapter VI 185-217

CHALLENGES AND BOUNDARIES

1. The Current State of the Indian Microfinance Industry

2. Andhra Pradesh—dream turns nightmare

3. The Andhra Pradesh Government’s Response

4. RBI and the Government of India initiatives - Malegam Committee

5. Key recommendations of Malegam Committee

6. Key Issues in Microfinance in India

7. Microfinance: Challenges

8. System and process issues in Microfinance

9. Challenging Economic Development

10. Challenging Well Being and Intra Household Relation

11. Challenging Social and Political Development12. Milestone and Challenge

13. Constraints to Growth of Microfinance in Bihar

14. Development of Rural Women In Bihar

15. Improvement

16. Strategies for development of Rural Women through microfinance

17. Conclusion and Suggestions

18. References

Chapter VII 218-245

CONCLUSION AND SUGGESTIONS

1. Main findings of the present study

2. Indian Microfinance in Focus

3. Positive and Negative impacts of MFI assistance

4. Key Strategies and Way Forward

5. Delivery of Micro Finance through mainstream formal banks in Bihar

6. Strategy for Microfinance Promotion in Bihar

7. Future of MFIs

8. Recommendations

9. Dream of Equality

10. References

Bibliography

Annexure –I Questionnaire for NGOs/MFIs

Annexure –II Questionnaire for Banks, LDMs, DDMs, NABARD, SIDBI

Annexure –III Questionnaire for SHGs/JLGs member

LIST OF ABBREVIATIONS

MFIs

RBI

SHG

NABARD

NGOs

MPI

SGSY

IAJ

DWCRA

JRY

NSAP

RRBs

SACBs

DCCBs

PACS

SIDBI

Microfinance Institutions

Reserve Bank of India

Self- Help Groups

National Bank for Agriculture and Rural

Development

Non- governmental organizations

Multi-dimensional Poverty Index Swarnagayanti Grameen Swarazgar Yojona

Indira Awas Yojona

Women and Children in Rural Areas

Jowahar Rozgar Yojana National Social Assistance Programme

Regional Rural Banks

State Agriculture Cooperatives Banks.

District Central Cooperatives Banks.

Primary Agriculture Cooperatives Societies.

Small Industries Development Bank of India

BDT Bihar Development Trust

BIRD Bankers Institute of Rural Development

BISWA Bharat Integrated Social Welfare Agencies

RMK

Rashtriya Mahila Kosh

CFIs

PSBs

WEP

CAR

SEP

PDS

ICDS

MDM

TSC

JLGs

ANOVA

IWEP

NBFCs

MIS

AP

NMFF

SMCS

BDT

ROA

Cooperative financial institutions

Postal savings banks

Women’s Economic Programme

Capital Adequacy Ratio

Socio- Economic Programme

Public Distribution Scheme

Integrated Child Development Scheme

Mid Day Meal Scheme

Total Sanitation Campaign

Joint liability groups

Analysis of Variance

Integrated Women’s Empowerment

Programme

Non Banking Finance Companies

Management Information Systems

Andhra Pradesh

Nidan Micro-Finance Foundation

Swayam shree micro credit services

Bihar Development Trust

C-DOT

DDMs District Development Manager

INR Indian Rupees

Return on assets

Centre for Development Orientation and

Training

JLG Joint Liability Group

KYC Know Your Customer

LDCs Least Developed Countries

LDMs Lead District Manager

SBLP SHG Bank Linkage programme

LIST OF TABLES

Table

No.Title

Page

No.

Chapter

1.1 Savings growth by SHGs, 2008–12 (` billion) 10 I

1.2 Poverty Headcount Ratio (2010) 12 I

1.3Loan and deposit accounts per 10,000 persons, for

women and men16

I

1.4Amount of credit and deposits per capita, for women

and men17

I

2.1 Indicators of Women Empowerment 47 II

3.1

Commonly used dimensions of empowerment and

potential operationalization in the household,

community, and broader arenas

80

III

3.2 Facilities provided by the MFIs to the beneficiaries 84 III

3.3 Satisfaction level of beneficiaries on various facilities 85 III

3.4 Different mode of financing by MFIs. 86 III

4.1 Bihar : At a Glance 106 IV

4.2 Bihar 108 IV

4.3 Legal Status of MFIs working in Bihar 114 IV

4.4Outreach of Micro-financing Institutions as on 31

March 2009(Rs. In lakh)115-117

IV

4.6 Mode of Financing by MFIs 121 IV

4.7Financial Services offered by MFIs

122IV

4.8 Patna-At a Glance 124-125 IV

4.9 JSI Six Domains of Empowerment 127 IV

4.10 Decision making process regarding credit 133 IV

4.11

Frequency of distribution of loan taken by

beneficiaries 134

IV

4.12Benefit of loan taken by beneficiaries from MFIs

135-136IV

4.13 Tenure of Loan and Recovery Performance 137-138 IV

4.14 Interest Rate Structure 140-141 IV

5.1 Capital Structure Ratio

150-151V

5.2Capital Structure Ratio 2010-11

152-153V

5.3 Category – wise MFIs 154 V

5.4Cost and Profitability Ratio Year (2009-10)

159-161V

5.4 B Cost and Profitability Ratio Year (2010-11) 162-163 V

5.5 A Cost and Profitability Ratio Year (2010-11) 169-170 V

5.5 B Efficiency and Growth Ratio 2010-11 170-172 V

5.6 Awareness Level about Microfinance 176 V

5.7 Information Links Regarding Microfinance 177 V

5.8 Views Regarding Interest Rate Policy 177 V

5.9 Awareness and Satisfaction of Respondents about SHGs Performance

178 V

5.10 A Factors influencing transaction cost to working funds

180-181 V

5.10 B Analysis of variance 182 V6.1 Malegam Committee recommendations and RBI

regulation—a comparison192-193 VI

6.2 Progress of MFIs 194 VI6.3 The top 10 MFIs by outreach (` billion) 194 VI6.4 Swot Analysis of SHG -Bank Linkage Programme 200-201 VI

LIST OF GRAPHS AND EXHIBITS

Graph

No.Title Page No.

1.1 Income Comparative Graph 19

4.1 Mode of Financing by MFIs 122

4.2 Financial Services offered by MFIs 123

4.3 Frequency of availment of loan 135