Microfinance Impact on Borrowers and Challenges of Karnataka Cooperative Apex Bank Ltd
-
Upload
prashanth-banu -
Category
Documents
-
view
47 -
download
1
description
Transcript of Microfinance Impact on Borrowers and Challenges of Karnataka Cooperative Apex Bank Ltd
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
INTRODUCTION
INDIAN FINANCIAL SYSTEM
The economic development of a nation is reflected by the progress of the
various economic units, broadly classified into corporate sector, government and
household sector. While performing their activities these units will be placed in a
surplus/deficit/balanced budgetary situations.
There are areas or people with surplus funds and there are those with a
deficit. A financial system or financial sector functions as an intermediary and
facilitates the flow of funds from the areas of surplus to the areas of deficit. A
Financial System is a composition of various institutions, markets, regulations and
laws, practices, money manager, analysts, transactions and claims and liabilities.
Financial System;
The word "system", in the term "financial system", implies a set of complex
and closely connected or interlined institutions, agents, practices, markets,
transactions, claims, and liabilities in the economy. The financial system is
concerned about money, credit and finance-the three terms are intimately related
yet are somewhat different from each other. Indian financial system consists of
Page 1
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
financial market, financial instruments and financial intermediation. These are
briefly discussed below;
FINANCIAL MARKETS
A Financial Market can be defined as the market in which financial assets
are created or transferred. As against a real transaction that involves exchange of
money for real goods or services, a financial transaction involves creation or
transfer of a financial asset. Financial Assets or Financial Instruments represents a
claim to the payment of a sum of money sometime in the future and /or periodic
payment in the form of interest or dividend.
Money Market- The money market ifs a wholesale debt market for low-risk,
highly-liquid, short-term instrument. Funds are available in this market for periods
ranging from a single day up to a year. This market is dominated mostly by
government, banks and financial institutions.
Capital Market - The capital market is designed to finance the long-term
investments. The transactions taking place in this market will be for periods over a
year.
Forex Market - The Forex market deals with the multicurrency requirements,
which are met by the exchange of currencies. Depending on the exchange rate that
is applicable, the transfer of funds takes place in this market. This is one of the
most developed and integrated market across the globe.
Credit Market - Credit market is a place where banks, FIs and NBFCs purvey
short, medium and long-term loans to corporate and individuals.
Page 2
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
The functions performed by these Banks are
1. Commercial Banks
Commercial Banks perform all the business transactions of typical Bank.
Commercial Banks accept three types of deposits, like Saving Bank Deposits,
Fixed Deposit and Current Deposits. They provide funds of short-term needs of
trade of commerce.
2. Investment or Industrial Banks
Investment Banks are those Banks, which provide fund for long-term
industries. These Banks have specialized in providing long term loans to industries
with a view to buy plant and machinery. The investment Banks obtain funds
through share capital plus, debentures and long term deposits from public.
3. Exchange Banks
These Banks are known as foreign exchange Banks. They provide exchange
for import trade. Their main function is to make international payment through
purchased Bank of exchanges Bills.
4. Co-operative Banks
They are promoted to meet the Banking requirements of consumers. They
established not only in the urban areas but also in the rural areas. In the rural areas
these Banks supply finance to agriculture while in these urban areas they provide
finance to consumer goods.
Page 3
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
5. Land Mortgage Banks
Whenever agriculturist requires investment loans, they have to approach
land development Banks, where loans are given on long term basis. They provide
loans on the security of the land.
6. Central Banks
Central bank is an apex bank in the country, which keeps the entire Banking
system unified, controlled and regulated. It regulates the note issue. RBI is the
Central Bank of India.
FINANCIAL INSTRUMENTS IN INDIA
We took a look at the players in the financial markets earlier. Let us now
look at the Financial Instruments these players have. They van be braodly classified
into Government securities and Industrial securities.
Government Securities( G-Sec ) :
In India G- Sec are issued by the Central Government , State Governments
and Semi Government Authorities such as municipalities, port trusts, state
electricity boards and public sector corporations. The Central and State
Governments raise money through these securities to finance the creation of new
infrastructure as well as to meet their current cash needs. Since these are issued by
the government, the risk of default is minimal. Therefore, interest rates on these
securities often serve as a benchmark for the level of interest rates in the economy.
Other issues may price their offerings by `marking up’ this benchmark rate to
reflect the credit risk specific to them.
These securities may have maturities ranging from five to twenty years.
Page 4
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
These are fixed income securities, which pay interest every six months. The
Reserve Bank of India manages the issues of the securities. These securities are
sold in the primary market mainly through the auction mechanism. The RBI
notifies issue of a new tranche of securities. Prospective buyers submit their bids.
The RBI decides to accept bids based on a cut off price.
The G -sec are primarily bought by the institutional investors. The biggest
investors are commercial banks who invest in G-secs to meet the regulatory
requirement to maintain a certain percentage of Statutory Liquidity Ratio (SLR) as
well as an investment vehicle. Insurance companies, provident funds, and mutual
funds are the other large investors. The Primary Dealers perform the function of
market makers through buying and selling activities.
The Government of India also borrows short term funds for up to one year.
This is through the issue of Treasury Bills which are sold at a discount to the face
value and redeemed at the full face value.
Industrial Securities:
These are securities issued by the corporate sector to finance their long term
and working capital requirements.
The Major Instruments that fall under Industrial Securities are
• Debentures,
• Preference Shares And
• Equity Shares.
Page 5
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Debentures
Debentures have a fixed maturity and pay a fixed or a floating rate of
interest during their lifetime. The company has an obligation to pay interest and the
principal amount on the due dates regardless of its profitability position. The
debenture holders are not members of the company and do not have any say in the
management of the company. Since these carry a predefined rate of return, there is
no scope for any major capital appreciation. However, in case of fixed rate
debentures, their market price moves inversely with the direction of interest rates.
The debenture issues are rated by the professional credit rating agencies regarding
the payment of interest and the repayment of the capital amount. Apart from the
`plain vanilla’ variety of debentures (periodic payment of interest during their
currency and repayment of capital on maturity), a number of variations have been
devised. For example, zero coupon bonds are issued at a discount to their face
value and redeemed at the full face value. The difference constitutes return for the
investor.
Preference Shares
Preference Shares carry a fixed rate of dividends. These carry a preferential
right to dividends over the equity shareholders. This means that equity share
holders cannot be paid any dividends unless the preference dividend has been paid
in full. Similarly on the winding up of the company, the preference share holders
get back their capital before the equity share holders. In case of cumulative
preference shares, any dividend unpaid in past years accumulates and is paid later
when the company has sufficient profits. Now all preference shares in India are
Page 6
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
`redeemable’, i.e. they have a fixed maturity period. Thus, preference shares are
sometimes called a `hybrid variety’ – incorporating features of debt as well as
equity.
Equity Shares
Equity Shares are regarded as high return high risk instruments. These do
not carry any fixed rate of return and there is no maturity period. The company
may or may not declare dividend on equity shares. Equity shares of major
companies are traded on the stock exchanges. The major component of return to
equity holders usually consists of market appreciation.
Call Money Market:
The loans made in this market are of a short term nature – overnight to a
fortnight . This is mostly inter-bank market. Those banks which are facing a
short term cash deficit, borrow funds from the cash surplus banks. The rate of
interest is market driven and depends on the liquidity position in the banking
system.
Commercial Paper (CP) and Certificate of Deposits (CD) :
CPs are issued by the corporates to finance their working capital needs.
These are issued for short term maturities. These are issued at a discount and
redeemed at face value. These are unsecured and therefore only those companies
who have a good credit standing are able to access funds through this instrument.
The rate of interest is market driven and depends on the current liquidity position
and the creditworthiness of the issuing company.
Page 7
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
The characteristics of CDs are similar to those of CPs except that CDs are
issued by the commercial banks.
RESERVE BANK OF INDIA
The central bank of the country is the Reserve Bank of India (RBI). It was
established in April 1935 with a share capital of Rs. 5 crores on the basis of the
recommendations of the Hilton Young Commission. The share capital was divided
into shares of Rs. 100 each fully paid which was entirely owned by private
shareholders in the begining. The Government held shares of nominal value of Rs.
2,20,000.
Reserve Bank of India was nationalised in the year 1949. The general
superintendence and direction of the Bank is entrusted to Central Board of
Directors of 20 members, the Governor and four Deputy Governors, one
Government official from the Ministry of Finance, ten nominated Directors by the
Government to give representation to important elements in the economic life of
the country, and four nominated Directors by the Central Government to represent
the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New
Delhi
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935.
The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the
Bank.
Page 8
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
The Bank was constituted for the need of following:
To regulate the issue of banknotes
To maintain reserves with a view to securing monetary stability and
To operate the credit and currency system of the country to its advantage.
Functions of Reserve Bank of India
The Reserve Bank of India Act of 1934 entrust all the important functions of a
central bank the Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole
right to issue bank notes of all denominations. The distribution of one rupee notes
and coins and small coins all over the country is undertaken by the Reserve Bank
as agent of the Government. The Reserve Bank has a separate Issue Department
which is entrusted with the issue of currency notes. The assets and liabilities of the
Issue Department are kept separate from those of the Banking Department.
Originally, the assets of the Issue Department were to consist of not less than two-
fifths of gold coin, gold bullion or sterling securities provided the amount of gold
was not less than Rs. 40 crores in value. The remaining three-fifths of the assets
might be held in rupee coins, Government of India rupee securities, eligible bills of
exchange and promissory notes payable in India. Due to the exigencies of the
Second World War and the post-was period, these provisions were considerably
modified. Since 1957, the Reserve Bank of India is required to maintain gold and
foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores
should be in gold. The system as it exists today is known as the minimum reserve
system.
Page 9
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Banker to Government
The second important function of the Reserve Bank of India is to act as
Government banker, agent and adviser. The Reserve Bank is agent of Central
Government and of all State Governments in India excepting that of Jammu and
Kashmir. The Reserve Bank has the obligation to transact Government business,
via. to keep the cash balances as deposits free of interest, to receive and to make
payments on behalf of the Government and to carry out their exchange remittances
and other banking operations. The Reserve Bank of India helps the Government -
both the Union and the States to float new loans and to manage public debt. The
Bank makes ways and means advances to the Governments for 90 days.
Bankers' Bank and Lender of the Last Resort
The Reserve Bank of India acts as the bankers' bank. According to the
provisions of the Banking Companies Act of 1949, every scheduled bank was
required to maintain with the Reserve Bank a cash balance equivalent to 5% of its
demand liabilites and 2 per cent of its time liabilities in India. By an amendment of
1962, the distinction between demand and time liabilities was abolished and banks
have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit
liabilities.
The scheduled banks can borrow from the Reserve Bank of India on the basis
of eligible securities or get financial accommodation in times of need or stringency
by rediscounting bills of exchange. Since commercial banks can always expect the
Page 10
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Reserve Bank of India to come to their help in times of banking crisis the Reserve
Bank becomes not only the banker's bank but also the lender of the last resort.
Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to
influence the volume of credit created by banks in India. It can do so through
changing the Bank rate or through open market operations. According to the
Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular
bank or the whole banking system not to lend to particular groups or persons on the
basis of certain types of securities. Since 1956, selective controls of credit are
increasingly being used by the Reserve Bank.The Reserve Bank of India is armed
with many more powers to control the Indian money market. Every bank has to get
a licence from the Reserve Bank of India to do banking business within India, the
licence can be cancelled by the Reserve Bank of certain stipulated conditions are
not fulfilled. Every bank will have to get the permission of the Reserve Bank
before it can open a new branch. Each scheduled bank must send a weekly return
to the Reserve Bank showing, in detail, its assets and liabilities. This power of the
Bank to call for information is also intended to give it effective control of the credit
system.
As supreme banking authority in the country, the Reserve Bank of India,
therefore, has the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and qualitative
Page 11
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
controls.
(c) It controls the banking system through the system of licensing, inspection and
calling for information.
(d) It acts as the lender of the last resort by providing rediscount facilities to
scheduled banks.
Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of
exchange. According to the Reserve Bank of India Act of 1934, the Bank was
required to buy and sell at fixed rates any amount of sterling in lots of not less than
Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank
was able to maintain the exchange rate fixed at lsh.6d. though there were periods
of extreme pressure in favour of or against the rupee. After India became a member
of the International Monetary Fund in 1946, the Reserve Bank has the
responsibility of maintaining fixed exchange rates with all other member countries
of the I.M.F. Besides maintaining the rate of exchange of the rupee, the Reserve
Bank has to act as the custodian of India's reserve of international currencies. The
vast sterling balances were acquired and managed by the Bank. Further, the RBI
has the responsibility of administering the exchange controls of the country.
Page 12
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Supervisory functions
In addition to its traditional central banking functions, the Reserve bank has certain
non-monetary functions of the nature of supervision of banks and promotion of
sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation
Act, 1949 have given the RBI wide powers of supervision and control over
commercial and co-operative banks, relating to licensing and establishments,
branch expansion, liquidity of their assets, management and methods of working,
amalgamation, reconstruction, and liquidation. The RBI is authorised to carry out
periodical inspections of the banks and to call for returns and necessary
information from them. The nationalisation of 14 major Indian scheduled banks in
July 1969 has imposed new responsibilities on the RBI for directing the growth of
banking and credit policies towards more rapid development of the economy and
realisation of certain desired social objectives. The supervisory functions of the
RBI have helped a great deal in improving the standard of banking in India to
develop on sound lines and to improve the methods of their operation.
Promotional functions
With economic growth assuming a new urgency since Independence, the range of
the Reserve Bank's functions has steadily widened. The Bank now performs a
varietyof developmental and promotional functions, which, at one time, were
regarded as outside the normal scope of central banking. The Reserve Bank was
asked to promote banking habit, extend banking facilities to rural and semi-urban
Page 13
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
areas, and establish and promote new specialised financing agencies. Accordingly,
the Reserve Bank has helped in the setting up of the IFCI and the SFC; it set up the
Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the
Industrial Development Bank of India also in 1964, the Agricultural Refinance
Corporation of India in 1963 and the Industrial Reconstruction Corporation of
India in 1972. These institutions were set up directly or indirectly by the Reserve
Bank to promote saving habit and to mobilise savings, and to provide industrial
finance as well as agricultural finance. As far back as 1935, the Reserve Bank of
India set up the Agricultural Credit Department to provide agricultural credit. But
only since 1951 the Bank's role in this field has become extremely important. The
Bank has developed the co-operative credit movement to encourage saving, to
eliminate moneylenders from the villages and to route its short term credit to
agriculture.
Classification of RBIs functions
The monetary functions also known as the central banking functions of the
RBI are related to control and regulation of money and credit, i.e., issue of
currency, control of bank credit, control of foreign exchange operations, banker to
the Government and to the money market. Monetary functions of the RBI are
significant as they control and regulate the volume of money and credit in the
country.
Equally important, however, are the non-monetary functions of the RBI in the
context of India's economic backwardness. The supervisory function of the RBI
may be regarded as a non-monetary function (though many consider this a
monetary function). The promotion of sound banking in India is an important goal
Page 14
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
of the RBI, the RBI has been given wide and drastic powers, under the Banking
Regulation Act of 1949 - these powers relate to licencing of banks, branch
expansion, liquidity of their assets, management and methods of working,
inspection, amalgamation, reconstruction and liquidation. Under the RBI's
supervision and inspection, the working of banks has greatly improved.
Commercial banks have developed into financially and operationally sound and
viable units.
INTRODUCTION TO CO-OPERATIVE BANK
The Co-operative Banks in India started functioning almost 100 years ago.
The Co-operative Bank is an important constituent of the Indian financial system,
judging by the role assigned to Co-operative, the expectations the Co-operative is
supposed to fulfill, their number, and the number of offices the Co-operative Bank
operate. India plays an important role even today in rural financing. The business
of Co-operative Bank in the urban areas also has increased phenomenally in
recent years due to the sharp increase in the number of primary Co-operative
Banks.
Co-operative Banks in India are registered under the Co-operative societies
act. The Co-operative Bank is also regulated by the RBI. They are governed by the
banking regulations Act 1949 and Banking laws. At the end of March, 2000 in the
states in there were 28,708 Co-operatives of different types with the membership
of 1.51 crores. Their working capital was Rs. 16,868.45 crores and total deposits
were Rs.9356.50 crores.
Page 15
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
HISTORY OF THE CO-OPERATIVE MOVEMENT
Co-operation dates back as far as human beings have been organizing for
mutual benefit. Tribes were organized as Co-operative structures, allocating jobs
and resources among each other, only trading with the external communities. Post-
industrial European is home to the first Co-operatives from an Industrial context.
In 1761, the Fenwick weaver’s society was formed in Fenwick, East
Ayrshire, and Scotland to sell discounted oatmeal to local workers. Its services
expanded to include assistance with savings and loans, emigration and education.
In 1810, Welsh social reformer Robert Owen, from Newtown in mid-Wales, and
his partners purchased New Lanark mill from Owen’s father-in –law and
proceeded to introduce better labour standards including discounted retail shops
where profits were passed on to his employees.
The Rockdale Society of Equitable Pioneers, founded in 1844, is usually
considered the first successful Co-operative enterprise used as a model for modern
co-opx, following the Rochdale principles’. A group of 28 weavers and other
artisans in Rochdale, England set up the society to open their own store selling
food items they could not otherwise afford. Within ten years there were over 1,000
co-operative societies in the United Kingdom.
Other events such as the founding of a friendly society by the Tolpuddle
Martyrs in 1832 were key occasions in the creation of organized labour and
consumer movements.
Page 16
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
FEATURES OF CO-OPERATIVE BANK
Some distinguishing characteristics of the Co-operative Bank are as follows:
i. They function on “no profit, no loss” basis.
ii. They are organized and managed on the principles Co-operation, self-help
and mutual help. They function with the rule of “1 member, 1 vote”.
iii. Co-operative Bank performs all the main banking function on deposits,
mobilization of funds.
iv. Co-operative Bank perhaps the 1st government sponsored financial agency
in India.
v. Co-operative Bank belongs to the money market as well as to capital market.
vi. Co-operative Bank do banking business mainly in the agriculture and rural
sector.
vii. Co-operative Bank are subject to CRR and liquidity requirements as other
scheduled and non-scheduled banks.
Page 17
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
STRUCTURE OF BANKING SYSTEM INDIA
Page 18
RBI
NON-SCHEDULE BANK
SCHEDULE BANK
COMMERCIAL
BANKCO-OPERATIVE
BANK
CO-OPERATIVE
BANK
COMMERCIAL BANK
INDIAN BANK
FOREIGN BANK
PUBLIC SECTOR BANKS
PRIVATE SECTOR BANKS
REGIONAL RURAL BANKS
OTHER NATIONALIZED
BANK
STATE BANK OF MYSORE AND its
ASSOCIATE
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
INTRODUCTION TO MICROFINANCE:
Today, Microfinance is playing a vital role in development of the economy
in any Country. Moreover, microfinance has moved all beyond its roots in
developing countries. Micro Finance is emerging as a powerful instrument for
poverty alleviation in the new economy. Micro Finance for the poor and women
has received extensive recognition as a strategy for poverty reduction and for
economic and women empowerment. Micro finance means helping people in
providing small financial assistance to poor families to strengthen their financial
position and social status.
Meaning of Microfinance:-
Microfinance refers to small savings, credit and insurance services extended
to socially and economically disadvantaged segments of society. Micro finance, a
concept that is helping the poor to avail of and create economic growth
opportunities.
Microfinance is the provision of financial services to low-income clients,
including consumers and the self-employed, who traditionally lack access to
banking and related services.
Definition:-
The important definitions of microfinance are as follows:-
According to International Labor Organization (ILO), “Microfinance is
an economic development approach that involves providing financial services
through institutions to low income clients”.
Page 19
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
In India, Microfinance has been defined by “The National Microfinance
Taskforce, 1999” as “provision of thrift, credit and other financial services and
products of very small amounts to the poor in rural, semi-urban or urban areas for
enabling them to raise their income levels and improve living standards”.
"The poor stay poor, not because they are lazy but because they have no access to
capital."
History of the Microfinance Movement
In 1974, famine struck Bangladesh. At the time, Dr. Muhammad Yunus was
a professor of economics at the University of Chittagong. Disillusioned by the
elegant theories of economics that could not explain the thousands of poor people
dying of starvation on the streets; he was determined to find a practical way to help
the poor. During a visit to the nearby village of Jorba, he was astounded to find
that a sum of $27 could radically change the lives of 42 people in the village. This
was the sum of money they collectively needed to buy bamboo to make the stools
they sold to make a living. He took $27 from his pocket and made 42 loans to the
stool makers in this tiny village. They were able to pay him back with interest and
take a step towards lifting themselves out of poverty.
Page 20
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
This simple idea that the poor could use credit to lift themselves out of
poverty, led Dr. Yunus to create The Grameen Rural Bank in 1983. Since its
inception, it has made over $8.96 billion in loans to over eight million borrowers.
Its methodologies have become the cornerstone of the microfinance industry. In
2006, The Grameen Bank and Dr. Yunus were awarded the Nobel Peace Prize.
Explosive Growth
In the 1970s and 80s, inspired by Grameen’s success, social innovators and
organizations around the world began to experiment with different programs to
bring financial services to the poor. Microfinance institutions proved that it was
actually possible to build viable businesses through lending to the poor. The
number of microfinance institutions increased rapidly.
The 2006 Microfinance Summit Campaign Report estimates that there are now
more than 3,000 microfinance institutions, serving more than 100 million poor
people in developing countries. The total cash turnover of these institutions world-
wide is estimated at $2.5 billion and the potential for new growth is outstanding.
Indian scenario in Micro Finance
Traditionally, banks in India have not provided financial services, such as
loans, to clients with little or no cash income. Banks incur substantial cost to
manage a client account, regardless of how small the sums of money involved. The
fixed cost of processing loans of any size is considerable as assessment of potential
borrowers, their repayment prospects and security, administration of outstanding
loans, collecting from delinquent borrowers, etc., has to be done in all cases. There
is a breakeven point in providing loans or deposits below which banks lose money
Page 21
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
on each transaction they make. Poor people usually fall below that breakeven
point. A similar equation resists efforts to deliver other financial services to poor
people.
It is then, the concept of micro finance institutions came into the picture.
This has gained considerable importance in Indian Scenario. Approximately 665
million client accounts are maintained with over 3,000 institutions that are serving
people who are poorer than those served by the commercial banks. Of these
accounts, 120 million were with institutions normally understood to practice
microfinance like the postal saving banks, development banks, cooperatives and
credit unions and specialized rural banks.
In India, Micro finance has fueled the efforts at rural development, woman
empowerment and wealth generation by providing small scale savings, credit,
insurance and any other financial services to poor and low-income households.
Microfinance sector has traversed a long journey from micro savings to
micro credit and then to micro enterprises and now entered the field of micro
insurance, micro remittance and micro pension. This gradual and evolutionary
growth process has given a great opportunity to the rural poor in India to attain
reasonable economic, social and cultural empowerment, leading to better living
standard and quality of life for participating households. Financial institutions in
the country continued to play a leading role in the microfinance programme for
nearly two decades now. They have joined hands proactively with informal
delivery channels to give microfinance sector the necessary momentum. During the
current year too, microfinance has registered an impressive expansion at the grass
root level.
Page 22
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Self Help Promoting Institutions (SHPIs), Revolving Fund Assistance
(RFA) to MFIs, equity/ capital support to MFIs to supplement their financial
resources and provision of 100 per cent refinance against bank loans provided by
various banks for microfinance activities.
Page 23
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Table : 1.1
Participating Banks in providing Micro finance
Participating Banks Number
Public sector commercial Banks 27
Private sector commercial Banks 19
Regional Rural Banks 81
Co-Operative Banks 318
Small Industries Development Bank of
India
1
DIFFERENT MODEL OF MICRO FINANCE:-
1. SHG- Bank linkage model:- This model involes the SHGs financed directly
by the banks viz., Commercial Banks (Public sector and private sector),
Regional Rural Banks and and Co-operative Banks.
2. Micro Finance Institutions – Bank linkage model:- This model covers
financing of MFIs by banking agencies for onlending to SHGs.
SHGs- Meaning
Page 24
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
SHG is a small, homogenous affinity group of rural poor agriculture
labourers, marginal and small farmers and micro-enterprises which is voluntarily
formed. It can be formal or informal. SHGs are formed by the members, of the
members and for the members.
They are encouraged to practice voluntary thrift on a regular basis. The SHG
generally a minimum of 5 members and not exceeding 20 members. Members save
and contribute to common fund from which small loans are met to needy member
as per the decisions of the group.
There are four stages in SHG formation:-
Forming = 0-2 months
Storming = 2-3 months
Norming = 4-6 months
Functioning = 6-12 months
Objective of SHGs
To evolve a supplementary credit strategy for reaching the rural poor.
To build mutual trust and confidence between banks and rural poor
To encourage banking activities both thrift as well as credit in way to SELF
HELP.
Methodology adopted
Page 25
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Direct or Indirect finance
Maximum 4 times of Deposit
Minimum 6 months of functioning
100% NABARD Refinance on outstanding
To open a SB account with Bank
Notable figures of Micro finance in India
Table 1.2
SHGs Savings linked with banks
Total No.of SHGs Savings linked with banks Rs.69.53 lakh
Out of Total (of which) exclusive Women SHGs Rs.53.10 lakh
Total savings amount of SHGs with banks as on
31-3-10
Rs.6198.71
crore
Out of total savings of exclusive women SHGs Rs.4498.66
crore
Estimated number of families covered upto 31-
3-2010
Rs.97 million
Table 1.3
Page 26
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
SHGs Credit linked with banks in the year 2009- 10
Total No.of SHGs credit linked during the year
2009-10
Rs.15.87
lakh
Out of Total (of which) exclusive Women SHGs
credit linked
Rs.12.94
lakh
Table 1.4
Loan amount disbursed and loan outstanding in the year
2009- 10
Total amount of loan disbursed to SHGs Rs.14453.30
crore
Out of Total loan disbursed exclusive to
Women SHGs
Rs.12429.37
crore
Total amount of loans outstanding against
SHGs
Rs.28038.28
crore
Out of total loans outstanding against women
SHGs
Rs.23030.36
crore
Average loan amount outstanding per SHG as
on March 2010
Rs. 57,795
Average loan amount outstanding per member Rs. 4,128
Page 27
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
as on 31-3-10
Microfinance Institutions (MFIs) :-
Microfinance Institutions are seen as key players in delivering financial
services to the poor people. They are increasingly seen as a solution to the ever
increasing problem of poverty and an indispensable toot to provide poor but
entrepreneurial people with necessary finances to start their own businesses.
These institutions play a key role in providing a whole range of financial
services to the poor rural households that have been ignored till now by the
mainstream financial institutions because of their inability to provide collateral.
This article discusses the unique characteristics of the microfinance institutions
and the challenges they have to face in order to survive and thrive in the future.
A microfinance institution is generally defined as “as an institution that
provides financial services to the poor”. These institutions play a crucial role in
the economic empowerment of the poor people especially in the rural areas.
These institutions generally include credit unions, co-operatives and financial
NGOs. MFIs provide microfinance services to those people who are inability to
produce guarantees that are required to gain credit from formal financial
institutions.
Microfinance Institutions in India.
Microfinance institutions (MFIs) have emerged over the past three decades
to address this market failure and provide financial services to low-income
clients. Most of the early pioneer organizations in the modern microfinance
Page 28
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
movement operated as non-profit, socially motivated non-governmental
organizations (NGOs). They developed new credit techniques: instead of
requiring collateral, they reduced risk through group guarantees, appraisal of
household cash flow, and small initial loans to test clients. Experience since
then has shown that the poor repay uncollateralized loans reliably and are
willing to pay the full cost of providing them: access is more important to them
than cost.
More than 10,000 micro-lending organizations are today providing loans to
25 million poor people throughout the world, most of them women. The
number of these organizations grew dramatically during the 1990s, spurred by
the notion of ‘Self – help’ and a faith in the creditworthiness and
entrepreneurial potential of the poor. Microfinance for the poor has emerged as
an idea that appeals to several sections of people. In principle, even the world’s
poorest people can acquire savings and investment if they have access to
capital.
The size and types of implementing NGOs range from very small to
moderately big organizations involved in savings and/or credit activities for
individuals and group. These NGOs adopt a variety of approaches, and tend to
operate within a limited geographical range. A few like PRADAN, ICECD,
MYRADA, SEWA operate on a larger scale and have been successful in
replicating their experiences in other parts of the country, they also act as
resource organizations. While a few lending most organizations do lend directly
to borrowers, rely on SHGs to provide the linkage the borrowers
Page 29
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Table 1.6
Refinance Support from NABARD
Refinance to banks during 2009-10 Rs.3173.56 crore
Cumulative refinance released upto 31-3-10 Rs.12861.65
crore
Microfinance: Strategy adopted by NABARD
The National Bank for Agriculture and Rural Development (NABARD)
have played a significant role in promoting micro finance. NABARD has been
instrumental in facilitating various activities under microfinance sector,
Page 30
Table 1.5
Support from NABARD
Capacity building of partner institutions in the year 2009- 10
Number of programme conducted during 2009-10 6804
No, of Participants covered during 2009-10 Rs.2.54 lakh
Cumulative no. of participants trained upto March
2010
Rs.24.55
lakh
Grant support during the year 2009-10 Rs.9.92
crore
Cumulative fund support upto March 2010 Rs.45.02
crore
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
involving all possible partners at the ground level in the field. NABARD has
been encouraging voluntary agencies, bankers, socially spirited individuals,
other formal and informal entities and also government functionaries to
promote and nurture SHGs. The focus in this direction has been on training and
capacity building of partners, promotional grant assistance to Self Help
Promoting
With a view to developing a supplementary credit delivery mechanism to
reach the poor in cost- effective and sustainable manner, the NABARD
introduced in 1992 a pilot project for linking 500 SHGs.
NABARD is adopted the following strategies to spread the outreach of
SHG- Bank Linkage programme:-
Widening spatial distribution and intensity of the Programme with
district oriented planning and strategy.
Evolving district- wise plan of action/ strategy in consultation with
existing stakeholders aiming at promotion and linkage of a minimum of
500 SHGs per district every year.
Training and exposure programmes for the staff of the stakeholders.
Providing promotional assistance to partners for promoting and nurturing
the SHGs generally on a ‘add-on’ basis.
Widening the range of SHG promoting agencies.
Page 31
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Involving banks at their corporate level, organizing training programmes
for the regional/ zonal managers of commercial banks in association with
their central offices.
Establishing the financing of SHGs as a business proposition for banks.
Increasing the participation of the co-operative banks by encouraging
them to finance SHGs as “Financing cooperatives within the co-
operative”.
Associating village communities, people’s institutions, rural volunteers
and individuals to participate in the programme as SHG promoters.
Increasing the quality of the exisiting SHGs by propagating “Self- rating”
tools.
Large- scale dissemination of the concept and approach among the rural
masses.
Encouraging NGOs to play an important role in correcting the regional
imbalance in spread of SHG-Bank linkage programme.
Supportive policies of RBI for linkage programmes
The SHG – Bank linkage was further extended to Regional Rural Banks
(RRBs) and cooperative banks in 1993 and is now permitted by the RBI as a
component of priority sector lending. RBI extends full support to NABARD’s
initiatives in introducing and implementing the linkage programme. The
supportive policies of RBI are :-
Interest rates of banks to the micro-credit institutions or by the micro-
credit institution to SHGs or their members deregulated.
Page 32
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Complete freedom to banks to choose their models.
Freedom in designing, lending and savings products.
Maximum flexibility provided in lending norms.
Making micro finance an integral part of banks corporate credit plans.
Micro finance has been hailed as the best method of creating additional
employment and for removing poverty. NABARD has been playing a catalytic role
in terms of promotional support to NGOs and also in nurturing quality SHGs.
Credit sanctioned by the Micro financial institutions have vast market in the rural
as well as in the urban areas. Successful marketing of microfinance to SHGs will
further strengthen the movement. The NGOs therefore needs to be given priority
for standardizing the quality of service. Indian micro finance has recorded
substantial achievements over the past few years. India’s leading MFIs are now
highly regarded all over the world. Linking of SHGs with banks play a vital role
for women development.
RESEARCH DESIGN
TITLE OF THE PROJECT
Page 33
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
“A STUDY ON MICROFINANCE IMPACT ON BORROWERS AND
CHALLENGE OF KARNATAKA STATE CO-OPERATIVE APEX BANK
LIMITED”.
STATEMENT OF THE PROBLEM.
Microfinance has proven to be a very effective development tool because it
provides empowerment instead of charity. Typically, microfinance clients are self
employed house hold entrepreneurs who lack the resources to invest in their
business their future and thus cannot escape the grips of extreme poverty. So the
study will determine the impact of micro finance on barrowers of three different
programmes of Karnataka state co-operative Apex bank ltd.(KSCABL)
OBJECTIVES OF THE STUDY
To know the evolution of microfinance as bought up by KSCABL.
To understand the role played by KSCABL and its achievements in
microfinance.
To understand the impact of microfinance on the borrowers of selected
programs.
To explore the challenges faced by KSCABL for microfinance.
To give some study based suggestions to KSCABL.
RESEARCH METHODOLOGY OF THE STUDY .
There are many microfinance programs that work through solidarity
groups, the primary focuses of most implementing agencies remains on the
progress of the individual rather than community, they pronounce the success of
Page 34
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
each woman, each borrower. Rather than seeing the individual with in the context
of community. With all good intent, this study shall eye on SHG – bank linkage
programme, the most successful microfinance programme, backed by cooperatives
with reference KSCABL. And the facts, figures and other relevant materials, past
and present, serving has bases for the study and analysis will be determined from
the primary data and secondary data.
Primary data
The primary data for the study shall be triggered by the following available
sources.
Bank’s Representatives.
Personal interviews
Observations etc
Secondary data
The secondary data shall be pulled out from the following available sources.
Newspapers and magazines
Company reports/records
Monodrama year book – 2010
Standard reference text books
Various websites etc…
The facts, figures collected from the respondents are classified and tabulated and
analyzed by using some available statistical tools.
ANALYSIS AND INTERPRETATION.
Page 35
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Analysis of the study shall be purely based on classifiable and tabulate data
analysis in the form theory that can be interpreted in accordance with the help of
comparative and percentile analysis and other simple method of statistics to make
the readers understand the analysis. Bar charts, pie diagrams, multiple bar
diagrams etc.
LIMITATIONS OF THE STUDY.
The study has major limitations of the time and resources.
The study is limited to know the benefits of SHG – BLP since its inception, in
brief.
The study is limited to only KSCABL.
Analysis of the data will be done by assuming that the information provided by
the representatives is genuine.
PROFILE OF KARNATAKA STATE CO-OPERATIVE APEX BANK LTD.
Our bank
Page 36
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Co-operative sector has a long history of more than a century. In the Co-
operative movement agriculture credit sector has acquired a special importance in
order to avoid the exploitation of poor farmers from the middlemen and
moneylenders and to provide suitable assistance to the eligible farmers. As our
nation is basically an agriculture country, agriculture credit system plays an
important role in the development of this sector. Through this system, the credit
sector is extending helping hand to the farmers in its own way to boost the
agriculture production in the state in particular and in the country at large.
Karnataka State Co-operative Apex Bank over the 95 years, since its
inception has always come forward to extend its assuring hand to the farmers of
the state through District Central Co-operative Banks, Primary Agriculture Co-
operative Societies working under three tier Agriculture Co-operative Credit
System . Besides the bank is providing the needed financial assistance for
development of human resources, training, computerisation and all other
encouragement from time to time to the DCC Banks and PACS.
The Government of Karnataka has accepted Prof. Vaidyanathan's Committee
recommendations for revival of Co-operative Credit Institutions and Apex Bank is
committed to its successful implementations in the state.
PREAMBLE:
The Karnataka State Co-operative Apex Bank Limited.., established in the
year 1915 with deposits of Rs 1.26 lakh, owned funds of Rs.0.54 lakh and working
Page 37
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
capital of Rs.1.80 lakh is extending its continued service for the past 95 years to its
members and customers. The Bank which had a humble beginning in the year 1915
grew over the years and achieved a significant development in the Co-operative
Banking sector and became a Pioneer State Co-operative Bank, among the State
Co-operative Banks in the Nation. Apex bank rendering its service in the Co-
operative Sector, very particularly in the Agriculture Credit Sector known for its
commitment for the development of farmers in the state and credit Co-operative
institutions. The primary objective of the Bank is to provide Short term and
Medium term loans to farmers through DCC Banks and PACS, to the farmers so as
to help them in managing their agricultural activities. The Bank is also extending
loans to sugar sector, marketing and schematic activities, which are linked with
agriculture.
NATURE OF BUSINESS:
The business carried by the bank is generally related with providing short
term and long term agricultural loans. It also accepts deposits from the public.
Apex bank also provides loans to processing, marketing and consumer co-
operatives as well as sugar factories in Karnataka and working capital loans to state
level and national level institutions.
Board of Directors:
The management of the affairs of the bank shall vest in a committee called
the board of directors consisting of 23 members including the president of the
bank.
Page 38
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
a) Nineteen directors to be elected by the board of directors of each District
Credit Co-operative Bank affiliated to the Apex bank from among themselves at
the rate of one person for each District Credit Co-operative Bank.
b) Nominees of State Government shall not exceed three of whom one shall be a
banking expert who shall also be the managing director of the bank.
The president of the Karnataka State Credit Agriculture and Rural
development Bank Limited Bangalore, shall be an exofficio member of the board,
He need not be a member of the bank.
Term of office of the Board
The term of office of the elected members of the board shall be deemed to
empire on the date of the annual general meeting of the bank but they will continue
in office until their successors are elected.
Powers and Duties of Board of Directors.
Without prejudice to the general powers conferred by these bye laws the
following powers are conferred on the duties entrusted to the Board of directors.
Admission of members.
To purchase, take on lease or otherwise acquire any building or land whether
freehold, leasehold, or otherwise from any person for the Bank's purpose in
Bangalore or elsewhere and build or to sell or alter any building or
buildings, house or houses, shops or godowns, office or offices or a
residence for the president, Member of the Parliament, Secretary or General
Manager or any other person in the employ of the bank and to pay for such
Page 39
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
land and/or buildings whether purchased, leased, acquired, built or
constructed by the bank either in cash or otherwise and to purchase all
furniture and other things necessary or convenient for carrying on the
business of the bank.
To raise, borrow such sums of money as may be required from time to time
for the purpose of the bank in accordance with and subject to the provisions
of these bye-laws and the act or rules framed these under.
To draw, accept, endorse, negotiate and sell bills of exchange and other
negotiable instruments with or without security.
To make laws and advances to members at such rates of interest as the board
may deem fit either without taking any security for the repayment thereof or
upon security of property whether movable or immovable or of document of
title or otherwise, subject, however to the condition that the rates of interest
charged to Co-operative Societies on loans for agriculture and non-
agriculture which are refinanced by the Reserve Bank of India/ National
Board of Agriculture Rural Development of India at a concessional rate of
interest shall not exceed the ultimate lending rates prescribes in that respect
by the said lending institutions.
To make advances to members of this bank and to allow them overdrafts in
their current accounts with this bank either without security or upon the
security of money which may have at the time when such advances are made
or overdrafts allowed, been deposited by them with this bank on fixed
deposit or upon the deposit of securities, specified in clauses(a), (b), (c)and
(d) of section 20 of the Indian Trusts Act of 1882 or upon the pledge of
Page 40
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
agricultural produce, requisites and finished products of small scale and
village industries or gold and silver ornaments belonging to them.
To give guarantee to Co-operative Societies which are members of this bank
in respect of advances to their own members or the loans granted by the
Government or any other agencies subject to such conditions as are laid
down in this regard and charge commission thereon.
To establish and to support or aid in the establishment of funds calculated to
benefit of employees at ex-employers of the bank.
To execute all deeds, agreements, extracts receipts and other documents that
may be necessary or expedient for the purpose of the bank.
To call for periodical reports and returns from District Central Co-operative
Banks and affiliated societies and to prescribe forms for such returns.
To undertake liquidation work of affiliated societies indebted to the bank on
conditions laid down by the registrar with a view to facilitate recoveries
from the affiliated societies.
The Executive Committee.
a) There shall be an Executive Committee consisting of Seven members as
follows:-
The President.
Page 41
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
The Vice-President.
The Managing Director.
One nominee of the State Government other than the Managing Director.
Three members to be elected by the board.
b) The members of the Executive Committee shall hold office only so long as
they continue to be the members of the board. A members of the Executive
Committee shall cease to hold office if he absents himself committee but he may
be reinstated in office by the committee for sufficient reasons to be recorded in
writing. Any interim vacancy by resignation or otherwise occuring among elected
members of the committee shall be filled up by election by the board.
c) Four members of the Executive Committee shall form the quorum.
Management.
Annual General Meeting.
a) Subject to the provisions of the Karnataka Co-operative Societies Act of
1959, the Karnataka Co-operative Societies Rules 1960 and the bye-laws of the
bank, the final authority of the bank shall vest in the General Body of Members;
provided that nothing contained in this bye-law shall affect the exercise by the
Board or the Executive Committee or such officers by the act or the rules or the
bye-laws.
b) The Annual General Meeting of the bank shall be held at the Registered
office of the bank and shall be held once in a year within a period of three months
Page 42
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
after the co-operative year for the purpose of:
Approval of the program of the activities of the bank including the budget
estimate prepared by the board for the ensuring year.
Elections if any, in the prescribed manner of the members of the board other
than the nominated members.
Considerations of the latest audited Profit and Loss account and Balance
Sheet and consideration of the Annual Report, the latest available Audit
Report and disposal of the net profits.
Consideration of the amendment or repeal of any existing bye-laws or to
adopt new bye-laws.
Consideration of any other matter which may be brought forward in
accordance with the bye-laws.
Provided that with the general or special order of the Registrar the period for
holding such meeting may be extended by a period not exceeding six
months.
Study on functional departments of the Karnataka State Co-operative Apex
Bank Limited.
I. Administration and Development Department:
This department is headed by Chief General Manager which is sub divided into
two main department namely:
Page 43
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
a) Planning, development, administration and establishment department:
This department is concerned with formulating and implementing various
plans and strategies for development of Apex bank, District Central Co-operative
Banks and Primary Agriculture Co-operatives. It formulates development action
plans for District Co-operatives and Business Development Plans for Primary
Agriculture Co-operatives. This department comprises of planning and
development, statistics and development action plan.
b) Human Resource Department:
The service conditions of the employee of the bank are governed by
subsidiary rules of the Bank. As per subsidiary rules, all appointments will be
made direct recruitment after notifying vacancies in daily news papers. The
recruitment committee is headed by the president of the bank and the managing
director of the bank will be the member secretary, the recruitment will be made as
per the recruitment rules issued by Government of Karnataka from time to time.
The Apex bank has established Agricultural Co-operative Staff Training
Institute (ACSTI) for imparting training to staff of the Apex bank, District Central
Co-operative Banks and Primary Agriculture Co-operative Societies and urban
banks in the state in order to enhance the skills of the managerial staff in the light
of diversification of business in the competitive environment. The programs
mainly focus on systems and procedures including improvement in management
information system.
Apart from providing training to the staff of the staff of the bank at ACSTI,
the officers will be deputed for the training programs conducted by training college
of NABARD, regional training centre, Mangalore. Vykunta Mehta National
Page 44
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Institute of Co-operative Management, Pune.
II. Finance and Audit Department:
This department is headed by Chief General Manager which is sub divided into
two namely:
a) Inspection and Audit Department:
The bank has a separate audit and inspection department to conduct
concurrent audit of the branches. In addition to this, conducting annual inspection
of the bank's branches and complaints is obtained from them. The complaints will
be reviewed with reference to the observations made in the report and a list of
important observations will be placed before of inspection and monitoring
committee meeting for review. The concerned branch manager is also invited to be
present in the said meeting and branch manager concerned is suitably advised.
b) Banking Department:
This department functions in general banking business of accepting
deposits, giving loans and advances, providing credit facilities to farmers,
processing working capital requirements of various institutions, managing day to
day general banking activities.
Page 45
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
VISION, MISSION AND QUALITY POICY:
VISION:
As a state co-operative bank, Apex bank shall be a dominant financial
institution in the state, leading the state to economic prosperity.
They shall be the model of an effective, protective, dynamic and financial
sound organization, respectively to state goals and aspiration.
They shall maintain highly trained and motivated professionals committed to
the highest standards of ethics and excellence.
They shall contribute to building progressive and standard of co-operative
societies in the service of farmers and rural mass.
MISSION:
Ensuring the best quality of life and success of their farmers, agricultural co-
operative societies, district central co-operative banks, clients and employees who
are the reasons for their being.
For their Farmers:
They shall continue to improve their socio-economic status through timely
financial and technical support.
For their Clients:
They shall deliver innovative and advanced products and services in productive
and effective manner to meet their local demands.
Page 46
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
For their PACS and DCC banks:
They shall ensure mutual co-operation and compliment action to achieve optimum
gains in an environment of confidence and trust.
For their Employees:
They shall ensure a work atmosphere of mutual respect and team work team work
within a system of recognition and regards. They shall continue to provide
appropriate training and value enhancement to ensure the highest degree of
professionalism and integrity. They shall hold their organization composed of
highly competent people driven by superior technology.
For the People of Karnataka:
They commit their unvarying loyalty and dedicated service in the pursuit of state
farmer’s interest.
Quality Objectives:
To serve as a state co-operative bank and as a balancing center in the state of
Karnataka for registered co-operative societies.
To raise funds by way of deposits, loans, grants donations, subscription,
subsidies etc for financing the members by way of loans, cash credits,
overdrafts and advances.
To develop, assist and co-ordinate the member DCCBs and other co-
Page 47
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
operative societies and secure financial assistance for them.
To arrange/hold periodical co-operative conferences of the DCCBs and other
members of the bank and to take action for the growth and development of
the co-operative credit movement.
To serve as a State Co-operative Bank and as a Balancing center in the State
of Karnataka for registered co-operative societies.
To participate in financing Co-operative and other institutions who are
members of the bank directly or through consortium of Bankers.
To participate in the schematic lending and to provide loans for which
refinance facility is available with term lending institutions.
Ta arrange for the inspection and supervision of the affiliated District
Central Co-operative Banks and other Co-operative Societies and guide
them in their working.
To buy and sell securities for the legitimate investment of surplus funds and
act as a agents for buyers and sellers of securities of Central/State.
To carry on general business of banking and other banking activities to the
members and customers.
To purchase, acquire or raise or otherwise obtain moveable or immovable
property for the own use of the bank and also to dispose them of when not
required
To promote and undertake Co-operative Research and Co-operative
Developement.
To manage, sell or release any property which may come into the possesion
Page 48
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
of the bank in satisfaction of or part satisfaction of any of its claims.
To promote economic interest of the members of the bank in accordance
with the principles of cooperation.
To do such other things as are incidental or conductive to the promotion and
advancement of the business of the bank.
Functions of Apex Bank Ltd:
Financing of short-term loans to seasonal agricultural operation and marketing
of crops repayable within one year.
Advancing cash credit loans to meet working capital for processing, marketing
and consumer co-operative including co-operative sugar factories in Karnataka.
Sanctioning advances to the non-farm sector to develop cottage industries,
small scale industries and rural artisans.
Participating in financing processing co-operatives for block capital under
consortium arrangement.
Providing loan facilities like consumer durable loans, installment loans, vehicle
loans, housing loans and safe deposit locker facilities to the consumer of the
bank.
Supporting the primary agriculture credit societies under the business
development programs and District Central Co-opertive Bank under the
development plan.
Advancing medium term loans for development of agriculture infrastructure
Page 49
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
such as life irrigation, dairy, poultry, plantations, gobar gas etc., under the
schematic lending.
It also gives advances to oil seeds, weavers and staff of Apex bank.
The Bank’s core processes
Credit and
Lending
Investments and
Deposits
Transactions and Payments
Business banking
- Loans
Commercial instruments
- Purchase of
commercial paper for
Accounts
Page 50
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
- Overdrafts
- Asset based
finance
- Bank
assurance
Corporate and
Institutional Finance
-
Loans/Syndicate
d Loans
- Overdrafts
- Structured
finance
- Line of
credits
- Structured
Finance
- Guarantees
Term Loan
Working Capital
Project Finance
Refinance
Retail banking
- Personal loans
- Debt
bank portfolio
- Purchase of
commercial paper for
customers
- Bank acceptances
- Time and call
deposits
- Short term deposits
- S&L fixed deposits
Government securities
- Treasury bills and
bonds
Inter-bank operations
- Money market
- Savings
- Personal
- Account management
- Certificate of depositor
Cash operations
- Money transfers
- Cash and cheques receipts
- Draft payments
- Direct debit payments
Card products
- Prepaid
- Post paid
Page 51
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
management
Mortgage Lending
- Mortgage
financing
- House
development
bonds
SERVICE PROFILE OF THE BANK:
The Karnataka State Co-Operative Apex Bank Limited provides following
services to the societies:
Financing of short term loans
Financing of medium term loans
Financing of Kisan credit card scheme/loan
Credit facilities to self help groups. Advancing medium term loans economic
development and providing cash loans
Advancing workshop capital loans
Collection of cheques and drafts
Loans through various schemes
Personal banking
Services provided by the bank in detail:
Financing of short term loans:
Financing of short term loans for seasonal agricultural operations and for
marketing of crops. These loans are repayable within one year.
Page 52
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Financing of medium term loans:
These loans are sanctioned for agricultural purpose and non-agricultural
purpose
.
Financing of Kisan credit card schemes/loan:
Kisan credit card aims at providing timely and adequate credit support to
farmers for their cultivation including investment credit needs in a flexible and cost
effective manner. All DCC banks in the state have implemented the kisan credit
scheme.
Credit facilities to self help groups:
All the DCCBs have taken keen interest in the formation of self help groups
in co-ordination with PACS. Self help groups mobilize their savings and avail
credit facilities from DCCBs and PACS.
Advancing medium term loans with economic development:
These loans are advanced for the agricultural infrastructures such as lift
irrigation, diary, poultry, plantation, gobar gas etc that constitutes schematic
lending.
Providing cash credit loans:
Providing cash credit loans to processing marketing and consumer co-
operatives as well as sugar factories in Karnataka and also term loans to sugar
factories under consortium agreement.
Advancing working capital loans:
Page 53
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Advancing working capital loans to state level co-operatives like
MARKFRED, KCCF and to the national level co-operatives like IFFCO and
KRIBHCO. The bank provide similar facilities to public sector undertakings like
Karnataka Silk Marketing Board, Karnataka Handloom Development Corporation,
Karnataka Small Scale Industries Development Corporations, Food Corporations
of India directly and also through consortium arrangements through commercial
banks.
Collection of Cheques and Drafts:
The bank extends finance to the non-farm sector and to the development of
cottage industries, small scale industries and rural artisan weavers. It is a scheduled
bank in all aspects including remittance of funds, demand drafts, mail transfers,
collection of cheques and drafts.
Loans through various schemes: Such as:
Vehicle loans
Housing loans
Mortgage loans
Installment loans
Jewel loans
Other loans
Personal Banking:
Apex bank provides the following deposit schemes to the customers:
Fixed Deposits:
In this account, the customer deposits money period up to 10 years.
Current deposits:
Page 54
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
In this type, the individuals or businessmen operate. This account is kept open for
the entire day. The customer can make any number of deposits and withdrawals in
a day during business hours.
Saving Bank Deposits:
In this deposit, the low income class groups and marginal customer deposits the
money.
AREA OF OPERATION
Apex bank works in the regional level only. It does not work in national
level. The area of operation covers the entire Bangalore. It has 31 branches in
Bangalore and head quarter is situated in Chamarajpet. The branch offices of bank
are adequately delegated with power of sanction of disbursements. If the loans are
to be provided upto 10 lakhs it is handled by concerned branch offices but if it is
more than 10 lakhs then it is handled by concerned branch offices but if it is more
than 10 lakhs then it is handled by main branch.
BRANCHES AT BANGALORE:
Head office Branch- Chamarajpet.
Ashoka Pillar.
Banashankari.
Basaveshwara nagar.
Girinagar.
Gokula.
Gandhinagar.
Agra- HSR Layout.
Page 55
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Indiranagar.
Jayanagar Market Complex.
Jayanagar 9th Block.
J.P nagar.
Kalpatharu Super Bazaar.
Koramangala.
Kengeri Satellite Town.
Lakkasandra.
Magadi Road.
Ganganagar.
Padmanabha nagar.
Public Utility Building.
Rajajinagar.
R.P.C Layout.
Vijayanagar.
Vidhana Soudha.
Legislators’ Home.
M.S Building.
Mahalakshmipuram.
Vyalikaval.
Chandra Layout.
Vivekananda College (Ext. counter).
R.T Nagar.
OWNERSHIP PATTERN
Apex bank is state co-operative bank established by the state government in
the year 1915 under the organization of Primary Agricultural Co-Operative Credit
Page 56
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
Societies (PACS) in villages and Urban Co-Operative Banks in towns and cities
offer passing the co-operative credit societies at 1904 to meet mainly short and
medium term financial needs of farmers.
COMPETITORS INFORMATION
The major competitors are:
Land bank (Agricultural based finance).
Amanath Scheduled Co-operative Bank.
Sham Rao Vittal Co-operative Bank.
Commercial Banks.
Small Industrial Service Institution.
Small Industrial Development Bank of India.
Corporate Banks.
Some local Co-operative Banks.
ACHIEVEMENTS/AWARDS:
1) Bank is able to lend 75% of the farmers in the state and it covers all sugar
factories in Karnataka.
2) Apex bank is habituated to get awards at National levels year after year.
Similarly NABARD has been giving best performance award and even PACS have
not have logged behind in getting National recognition. All DCC banks and merely
80% of PACS have proved themselves to be financially viable.
INFRACTRUCTURAL FACILITIES
The new administrative building at a cost of around Rs. 800 lakhs completed
in 2002 provides additional impetus to a new work culture and new mindset of all.
The gigantic building with granite cladded façade having circular and rectangular
Page 57
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
columns suggesting strengths and stability reflects the character of the
organization. This four storied block caters mainly to the administrative
requirement of the bank along with the hi-tech banking hall on the ground floor.
The architects M/s.Zechariah consultant effectively conceptualize the vision of the
corporate head office floated by the Directors of the Board. The built up area of
“UTHUNGA” has been 67,820 Sq. ft. the civil cost has come to Rs. 888 per sq. ft.
and interiors all inclusive worked out at Rs. 357 per sq. ft. They believe that their
members are always behind them not only to encourage but also to guide them in
case they go wrong. They are grateful to them. Similarly they are grateful to the
Government of Karnataka, RBI, NABARD and all other sister Co-Operative in the
state for what they are today.
WORK FLOW MODEL
Page 58
APEX BANK
DCC BANKS
PRIMARY CO-OPERATIVE BANKS
FARMERS
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
FUTURE GROWTH AND PROSPECTUS:
The Honorable Union Minister for finance has already announced and
introduced and instructed all the banks in the country for building the agriculture
credit in 3 years. The Co-operatives too, in the state have to increase the
agriculture credit to farmers by 30% during the years 2006-07. The state
government in its budget proposals also announces to issue agricultural loans at
4% interest. The Apex bank will endeavor to further increase in the agriculture
loans from 1258.20 crores of total agricultural loans portfolio in the year 2005-06
to 1450.00 crores to the end of 31st march 2007. Accordingly a target has been set
to mobilize additional resources to the extent of Rs.166.05 crores through the bank
branches. NABARD also inform apex bank and District Central Co-operative
banks to take appropriate action to mobilize additional resources to utilize such
funds to increase the seasonal agricultural operations.
Page 59
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
ANALYSIS AND INTERPRETATION OF DATA
TABLE-1
OPINION REGARDING AWARENESS OF MICROFINANCE
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 38 76%
2 NO 12 24%
TOTAL 50 100
Page 60
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
ANALYSIS
From the following information it is clear that 76% are aware of microfinance and 24% of not aware of microfinance.
NO OF RESPONDENT
76%
24%
1 YES
2 NO
INFERENCE:
From the above graph it can be inferred that 76% of the respondents are positive opinion and rest of 24% respondents shows negative attitude towards the awareness of microfinance.
Page 61
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-2
OPINION REGARDING MICROFINANCE SERVING THE RURAL AND POOR PEOPLE.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 10 20%
2 AGREE 10 20%
3 CANNOT SAY 20 40%
4 DISAGREE 7 14%
5 STRONGLY DISAGREE 3 6%
TOTAL 50 100
Page 62
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
ANALYSIS:
From the above table we can analyse that microfinance serves the poor and rural people it is therefore clear that 40% of the respondents are neutral (cannot say) and 20% of the respondents strongly agree, 20% of the respondents are agree, 14% of the respondents disagree and 6% of the respondents strongly disagree.
NO OF RESPONDENT
20%
20%
40%
14%
6% 1 STRONGLYAGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
INFERENCE:
Page 63
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
The respondents were asked whether the microfinance serves the poor and the rural population as 40% of the people were not sure about it we can analyse that the microfinance is not helping them effectively.
TABLE-3
OPINION REGARDING MICROFINANCE CONTRIBUTION TO
ENTERPRISES GROWTH.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 8 16%
2 AGREE 10 20%
3 CANNOT SAY 25 50%
4 DISAGREE 5 10%
5 STROGNLY DISAGREE 2 4%
Page 64
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TOTAL 50 100
ANALYSIS:
From the above table we can analyze that the 50% of the people were not sure whether microfinance contributes the enterprise growth. 20% of the respondents agree, 16% of the respondents strongly agree, 10% of them disagreed and 4% of the strongly disagreed.
NO OF RESPONDENT
16%
20%
50%
10%4% 1 STRONGLY
AGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
INFERENCE:
Page 65
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
The respondents were not sure that microfinance will help for the growth and development of the enterprise were as 36% of the respondents agreed that they helps in growth and very few respondents disagreed.
TABLE-4
OPINION REGARDING MICROFINANCE HELPS RURAL WOMEN TO TAKE EMPOWERMENT.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 4 8%
2 AGREE 10 20%
3 CANNOT SAY 30 60%
4 DISAGREE 4 8%
5 STROGNLY DISAGREE 2 4%
TOTAL 50 100
Page 66
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
ANALYSIS:
From the above table we observe that 60% of respondents are not sure that microfinance help rural women to take a empowerment. 20% of respondent agree, 8% of the respondents strongly agree, 8% of the respondents disagree, 4% of the respondents strongly disagree.
NO OF RESPONDENT
8%20%
60%
8% 4%
1 STRONGLYAGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
INFERENCE:
As majority of the people are not sure about we can analyze that microfinance is not very much helpful for the financial development of rural population.
Page 67
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-5
OPINION REGARDING MICROFINANCE LEAD TO POOR ALLEVIATION.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 3 6%
2 AGREE 8 16%
3 CANNOT SAY 27 54%
4 DISAGREE 7 14%
5 STROGNLY DISAGREE 5 10%
TOTAL 50 100
ANALYSIS:
Page 68
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
From the above data it is analyze that the microfinance lead to poor alleviation 54% cannot say, 16% agree and 6% strongly agree.
NO OF RESPONDENT
6%
16%
54%
14%
10% 1 STRONGLYAGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
INFERENCE:
Microfinance does not help much for the financial development of the poor population because majority of the respondents were not sure it at all microfinance helped them in alliving the poverty.
Page 69
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-6
OPINION REGARDING EDUCATIONAL OPPORTUNITY FOR THE POOR CHILDREN BY THE MICROFINANCE.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 2 4%
2 AGREE 10 20%
3 CANNOT SAY 30 60%
4 DISAGREE 6 12%
5 STROGNLY DISAGREE 2 4%
TOTAL 50 100
ANALYSIS:
From the above data it is analyze that the microfinance take advantage of educational opportunity for the poor children 60% cannot say, 20% agree and 4% strongly agree.
Page 70
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
4%20%
60%
12% 4%
1 STRONGLYAGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
INFERENCE:
Microfinance should provide educational benefits to the poor children as it helps in the development privileged children.
Page 71
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-7
OPINION REGARDING LEVEL OF INCOME IN THE SOCIETY THROUGH MICROFINANCE.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 10 20%
2 AGREE 15 30%
3 CANNOT SAY 20 40%
4 DISAGREE 4 8%
5 STROGNLY DISAGREE 1 2%
TOTAL 50
ANALYSIS:
From the above data it is analyzed that the microfinance helps in improving level of income in the society 30% agree, 20% strongly agree and 40% cannot say.
Page 72
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
INFERENCE:
Many of the respondents were not sure hence we can inferred that microfinance does not help in improving the economic status of the society.
Page 73
NO OF RESPONDENT
20%
30%
40%
8% 2% 1 STRONGLY AGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-8
OPINION REGARDING INCREASE IN CONTROL OF WOMEN OVER RUNNING FAMILY ENTERPRISES.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 STRONGLY AGREE 6 12%
2 AGREE 25 50%
3 CANNOT SAY 10 20%
4 DISAGREE 6 12%
5 STROGNLY DISAGREE 3 6%
TOTAL 50
ANALYSIS:
From the above data it is analyzed that the microfinance enable increase in control of women over running family enterprise 50% agree, 12% strongly agree and 20% cannot say.
Page 74
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
12%
50%
20%
12%
6% 1 STRONGLY AGREE
2 AGREE
3 CANNOT SAY
4 DISAGREE
5 STROGNLYDISAGREE
INFERENCE:
Microfinance help the women to start up their own business and get self-employed which will help them to run there family.
Page 75
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-9
OPINION REGARDING AWARENESS OF KISAN CREDIT SCHEME LOANS
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 40 80%
2 NO 10 20%
TOTAL 50
ANALYSIS:
From the above table it is clear that 80% of the respondents are aware of kisan credit scheme loan and 20% of the respondents are not aware of this scheme.
Page 76
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
80%
20%
1 YES
2 NO
INFERENCE:
Kisan credit loans are provided to the farmers as the majority of the respondents agreed that they are satisfied with the availability of kisan credit loans.
Page 77
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-10
OPINION REGARDING SATISFACTION WITH MICROFINANCE FACILITIES.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 27 54%
2 NO 23 46%
TOTAL 50
ANALYSIS:
From the above table it is clear that 54% of the respondents are satisfied with the micro financing facilities provided by the bank and 46% of the respondents not satisfied.
Page 78
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
54%
46%1 YES
2 NO
INFERENCE:
Facilities provided by the bank are been satisfied by the majority of customer. So it is observed that bank provide good facilities to the customers.
Page 79
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-11
OPINION REGARDING MICROFINANCE HEOP TO DEVELOP ENTERPRISES
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 17 34%
2 NO 33 66%
TOTAL 50
ANALYSIS:
From the above table it is clear that 66% of the respondents does not help to develop the enterprise and 34% of the respondents help to develop the enterprise.
Page 80
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
34%
66%
1 YES
2 NO
INFERENCE:
Microfinance is for the people who are in need which helps the women and farmers for the economic development.
Page 81
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-12
OPINION REGARDING SECTOR THAT BENEFITS THE MOST
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 AGRICULTURE 23 46%
2 ENTERPRISES 3 6%
3 SELF EMPLOYED 17 34%
4 OTHERS 7 14%
TOTAL 50
ANALYSIS:
From the above table it is clear that 46% of the respondents share their view that agricultural sector will be more beneficial and 34% of the respondents share their view that self employment will be more beneficial, 6% of the respondents agree that enterprise will be more beneficial and 14% of the respondents share their view agreed that the other sector will be beneficial for microfinance.
Page 82
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
46%
6%
34%
14%
1 AGRICULTURE
2 ENTERPRISES
3 SELF EMPLOYED
4 OTHERS
INFERENCE:
Microfinance is beneficial for the agricultural and self employed sector as the people get employed and credit facilities are provided to the farmers.
Page 83
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-13
OPINION REGARDING AWARENESS OF THE NEWLY EMERGING FACILITIES.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 13 26%
2 NO 37 74%
TOTAL 50
ANALYSIS:
From the above table it is clear that 74% of the respondents are not aware of equity investment and 26%of the respondents are aware of equity investment.
Page 84
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
26%
74%
1 YES
2 NO
INFERENCE:
Karnataka apex bank has come up with the new emerging microfinance which is still not popular among the customers of the bank as they are not educated.
Page 85
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-14
OPINION REGARDING THE POWERFUL INSTRUMENT FOR SELF EMPOWERMENT OF RURAL WOMEN.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 30 60%
2 NO 20 40%
TOTAL 50
ANALYSIS:
From the above table it is clear that 60%of the respondents are accepted it is a powerful instrument and 40% of the respondents does not accept it is a powerful instrument.
Page 86
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
60%
40%
1 YES
2 NO
INFERENCE:
Micro financing is helpful for the rural women as it provides self employment opportunity for the women which will help them to improve there per capita income.
Page 87
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-15
OPINION REGARDING NABARD SIGNIFICANTE ROLE IN PROMOTING MICROFINANCE.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 19 38%
2 NO 31 62%
TOTAL 50
ANALYSIS:
From the above table it is clear that 62% of the respondents does not agree that NABARD play a significant role in promoting microfinance and 38%of the respondents agree that NABARD play a significant role in promoting microfinance.
Page 88
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
38%
62%
1 YES
2 NO
INFERENCE:
NABARD play a significant role because it provides loans to the formers and other facilities.
Page 89
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-16
OPINION REGARDING AWARNESS OF THE PROCEDURE FOR LOAN.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 34 68%
2 NO 16 32%
TOTAL 50
ANALYSIS:
From the above table it is clear that 68% of the respondents are aware of procedure for applying micro finance loans and 32% of the respondents are not aware of their procedure.
Page 90
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
68%
32%
1 YES
2 NO
INFERENCE:
It is therefore inferred that majority of the people are aware of the procedure for applying for loan for microfinance.
Page 91
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-17
OPINION REGARDING SATISFACTION WITH SERVICES.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 28 56%
2 NO 22 44%
TOTAL 50 100
ANALYSIS:
From the above table it is clear that 56% of the respondents are satisfied with services provided by the bank and 44% of the respondents are not satisfied with services provided by the bank.
Page 92
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
56%
44% 1 YES
2 NO
INFERENCE:
When enquired the respondents majority of the customers were extremely satisfied with services that is provided by the bank.
Page 93
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-18
OPINION REGARDING EARLIER BORROWED OF LOAN FROM THUS BANK.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 31 62%
2 NO 19 38%
TOTAL 50 100
ANALYSIS:
From the above table it is clear that 62% of the respondents had borrowed micro financing loan from the bank and 38% of the respondents had never borrowed a micro financing loan from the apex bank.
Page 94
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
62%
38%
1 YES
2 NO
INFERENCE:
Microfinance helps a lot of people because of the many of the rural folk are satisfied with microfinance as well the women as self employed.
Page 95
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-19
OPINION REGARDING OF PROCEDURE TO REPAY THE LOAN.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 39 78%
2 NO 11 22%
TOTAL 50 100
ANALYSIS:
From the above table it is clear that 78% of the respondents are aware of the procedure of paying back the loan after borrowing and 22% of the people not aware of this procedure.
Page 96
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
78%
22%
1 YES
2 NO
INFERENCE:
It is therefore inferred that 78% of the people are aware of the procedure of paying back the loan.
Page 97
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-20
OPINION REGARDING MEDIUM OF AWARENESS OF MFI’s
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 THROUGH AGENCIES 4 8%
2 RRBS 26 52%
3 CO-OPERATIVE BANKS 17 34%
4 ANY OTHERS 3 6%
TOTAL 50
ANALYSIS:
From the above table it is clear that 52% of the respondents are aware of MFI’s through regional rural banks, 34% of the respondents are aware of MFI’s through co-operative banks, and 8% of the people are aware of this bank through agencies and 6% of the respondents are aware of this bank from other sources.
Page 98
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
8%
52%
34%
6%1 THROUGHAGENCIES
2 REGIONAL RURALBANK
3 CO-OPERATIVEBANK
4 ANY OTHER
INFERENCE:
When asked majority of the awareness is from rural bank and co-operative societies.
Page 99
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-21
BANK FROM WHICH BORROWED LOAN RESPONDENTS.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 APEX BANK 4 8%
2 NABARD 17 34%
3 COMMERCIAL BANK 9 18%
4 CO-OPERATIVE BANK 13 26%
5 RRBS 7 14%
TOTAL 50 100
ANALYSIS:
From the above table it is clear that 34% of the respondents have borrowed microfinance loan from NABARD, 26% of the respondents borrowed from co-operative bank, 18% of the respondents have borrowed microfinance loan from the commercial bank, and 14% of the respondent have borrowed microfinance loan from RRBS, and 8% of the respondents have borrowed microfinance loan from the apex bank.
Page 100
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
8%
34%
0%18%
26%
14%
1 APEX BANK
2 NABARD
2
3 COMMERCIALBANK
4 CO-OPERATIVEBANK
5 RRBS
INFERENCE:
As microfinance is helpful for the rural and poor population but still majority of the people opt NABARD because change less interest compared to NGO’s.
Page 101
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-22
OPINION REGARDING MICROFINANCE IS A TOOL TO A ERADICATE POVERTY.
SL.NO OPINION NO OF RESPONDENT PERCENTAGE
1 YES 34 68%
2 NO 16 32%
TOTAL 50 100
ANALYSIS:
From the above table it is clear that 68% of the respondents agree that microfinance is a tool to eradicate poverty and 32% of the respondents do not agree that microfinance is a tool for eradicate the poverty.
Page 102
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
68%
32%
1 YES
2 NO
INFERENCE:
Microfinance is a part of eradicate of poverty as it does not reach some of the needy because they are not aware of the facilities given by the bank as only 3/4 of the people enjoy the facility and1/4 of them are unaware of the benefits.
Page 103
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
TABLE-23
OPINION REGARDING IMPROVED STANDARD OF LIVING AMONG THE RURAL POPULATION.
SL.NO OPINION NO OF RESPONDENT
PERCENTAGE
1 YES 33 66%
2 NO 17 34%
TOTAL 50 100
ANALYSIS:
From the above table it is clear that 66% of the respondents has shared their view that MFI’s will increase the standard of living of the rural population and 34% of the respondents has share their view that MFI’s will does not help in increase in the standard of living of the rural people.
Page 104
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
NO OF RESPONDENT
66%
34%
1 YES
2 NO
INFERENCE:
Standard of living has been improved as the customers do have the facilities which will help them to get employed and finance to raise better crops.
Page 105
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
SUMMARY OF FINDINGS:
Majority of the people opinioned say that they are aware of microfinance.
Majority of the people are not sure that microfinance serves the rural
population.
50% of the respondents are not sure that microfinance will contribute in
growth and development of enterprise.
Majority of the women are not sure that microfinance helps rural women to
take a self employment.
Microfinance does not lead to evaluation of the poor people as majority of
the people are unaware microfinance.
Majority of the people disagree that microfinance provides educational
benefits to the poor children.
Microfinance does not help in the economic development of many
unprivileged population.
50% of the respondents are aware of kisan credit loans schemes.
Majority of the respondents are the satisfied with the microfinance facilities
provided by the bank.
Decrease in the repayment of microfinance loans causes in losses.
Banks has to provide microfinance to agriculture and non-agricultural sector.
Majority of microfinance is a powerful instrument for self empowerment for
rural peoples.
Procedure for applying for micro financing loan is easier than compare to
long term loans.
Sanctioning of microfinance loans is easier compare to long term loan.
Page 106
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
CONCLUSION
The main idea behind Microfinance is that poor people, who can provide no
collateral, should have access to some sort of financial services. Microfinance
began with microcredit: the provision of small loans to very poor families to help
them engage in productive and self-sustaining activities.
Microfinance has proven to be a very effective development tool because it
provides empowerment instead of charity. Typically, microfinance clients are self-
employed household entrepreneurs who lack the resources to invest in their
business and their future and thus cannot escape the grip of extreme poverty.
From the research we can conclude that majority of the respondents agree that
“microfinance is a powerful instrument for rural people for self-empowerment”,
“help in the economic development of many unprevilised population” etc.,
Majority of the people are aware about the microfinance but, however few of the
people not sure that microfinance serves the rural population, does not lead to
evaluations of the poor people & partially sanctioning of microfinance takes times
but not much time as compared to long term loan.
Majority of the respondents are satisfied with microfinance facilities provided by
the bank & most of the respondents are aware about the kisan credit loans schemes.
Page 107
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
SUGGESSTIONS
Campaign through media on the advantage of microfinance through Co-
operative Banks viz., Radio, TV, Local News Paper, Pamphlets, Posters,
etc., can increase the awareness among SHGs.
Village wise door-to-door surveys can be conducted through PACS to
identify those families which are not yet involved in any SHGs and motivate
them to form new SHGs.
Efforts may be made to promote SHGs in the Districts like Koppal, Bellary,
Chamarajnagar, Bagalkot, Kolar and Dharwad where the development of
SHGs-BLP is less
Few of the rural population are not aware of the microfinance such people
should be educated about the benefits provided to them
The interest rate should be subsidized to the people who come under below
poverty line
It is suggested that bank should develop a standiszed recovery system
Microfinance is misused a lot so their should be a proper procedure while
allotting the finance.
It should help the needy and not the enterprises.
It should help the people below the poverty line
Page 108
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
ANNEXURE
QUESTIONNAIRE FOR “MICROFINANCE IMPACT ON BORROWERS AND
CHALLENGES OF KARNATAKA COOPERATIVE APEX BANK LTD”.
Dear sir/madam.
MEMBER INFORMATION:
(Please tick whichever is applicable)
NAME:
AGE:
a) 22-31 years ( )
b) 32-41 years ( )
c) 42-51 years ( )
d) More than 51 years ( )
GENDER:
a) Male ( )
b) Female ( )
1) Are you aware of microfinance?
a) Yes ( ) b) No ( )
2) Does microfinance serve poor and rural people?
Page 109
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
3) Does microfinance contribute to enterprise growth and income?
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
4) Does microfinance helped rural women to take an empowerment.
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
5) Does microfinance lead to poor alleviation?
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
6) Does microfinance take advantage of educational opportunity for the poor
children?
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
7) Microfinance helps in improving levels of income in the society.
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
8) Microfinance enables increase in control of women over running family
enterprises.
Page 110
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )
d) Disagree ( ) e) strongly disagree ( )
9) Are you aware of kisan credit scheme loans provided by KSCABL?
a) Yes ( ) b) No ( )
10) Are you satisfied with the micro financing facilities provided by the bank?
a) Yes ( ) b) No ( )
11) Does microfinance help only to develop enterprises?
a) yes ( ) b) No ( )
12)which sector does microfinancing benefits the most.
a)Agriculture( ) b)Enterprises( ) c)Self
employed( )
d)others( )
13)Are you aware of the newly emerging microfinance facilities (equity
investment).
a)yes( ) b)No( )
14)Is microfinancing powerful instrument for self empowerment for rural women.
a)yes( ) b)No( )
15)Does NABARD play a significant role in promoting microfinance.
a)yes( ) b)No( )
Page 111
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
16)Are you a ware of the procedure for receiving the microfinance loans from the
bank.
a)yes( ) b)No( )
17)Are you satisfied services provided by the bank.
a)yes( ) b)No( )
18)Have you ever borrowed microfinancing loan from thus bank.
a)yes( ) b)No( )
19)Are you aware of the procedure involved for paying back the loan after
borrowing.
a)yes( ) b)No( )
20)medium of awareness of MFIs.
a)Through agencies( ) b) Regional Rural Bank ( )
c) Co-operative bank ( ) d)Any other( )
21)From which institutions you taken from microfinance.
a)Apex bank( ) b)NABARD( )c)Commercial Bank( )
d)Co-operative bank( ) e)Regional Rural Bank( )
22)Do you think microfinance is a tool to eradicate poverty.
a)yes( ) b)No( )
23)Has the standard of living improved among the rural population because of
MFIs
Page 112
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
a)yes( ) b)No( )
BIBILIOGRAPHY
REFERENCES:
To obtain more information regarding this project report and to substantiate it with
theoretical proof, the following references were made:
Page 113
MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL
BOOKS REFERRED:
Review of SHG-Bank linkage in Karnataka Apex Bank Limited 2009-2010
Publications by KSCABL
Journals’ & Magazines’ of KSCABL
WEBSITES VISITED:
WWW.nabard.org
WWW.karnatakaapex.com
WWW.microfinancegateway.com
WWW.grameenfoundation.org
WWW.google.com
Page 114