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  1. 1. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 3, March (2014), pp. 73-77 © IAEME 73 ROLE OF MICRO FINANCE IN POVERTY ALLEVIATION C. T. MANJUNATHA1 , Dr. E.A.PARAMESWARA GUPTA2 1 M.Com, M.Phil., Lecturer in C.P, Dept. Technical Education,Bangalore, 2 Ph.D., M.Com Co-ordinator, AIMS College, Bangalore, ABSTRACT Microfinance is a powerful provision of financing assistance to the poor. People who are living in remote areas, slum areas and rural areas, whose income is just sufficient to eat, unstable and non-secure have less access convention financial assistance. In India it is seen that credit needs are maintaining and supply is scarce. The banks still they feel that these people are non collateral and unproductive and unable to repay. Unfortunately though there exist better net workings of commercial banks, money lenders are still dominating in disbursement of loans at higher rate. Poverty alleviation in possible when the programme touches the need and benefits him. In India self help groups bank linkage programme is the largest microfinance programme in the world. But as per the NABARD data the latest trends in the SHGs growth is not happy and SHG Bank Linkage programme should succeed in the better interest of poor. KEYBOARDS: NABARD, Poverty, Savings, NPAs, SHGs. 1. INTRODUCTION Microfinance is a powerful tool of poverty alleviation. It is a provision of financial services provided to low income, poor and very poor self employed who are not allowed to access formal financial services since 60 years of independence. These financial services consist of credits, savings, insurance, fund transfers. The modern form of microfinance emerged in 1970s with innovation of self help groups. The shift took place from the credits to savings. Microfinance sector with huge client base and increasing innovative financial services for low income groups. Over the years it is experienced that conventional finance institutions hesitate to lend down market to serve the needs of deserving, depressed low income families. It is found that the lack of access to credit for the poor is because of discrepancy between the made of operation followed by financial institutions and the economic characteristics and financing needs of low income households. Commercial banks demand security and should posses stable source of earnings and out INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 5, Issue 3, March (2014), pp. 73-77 © IAEME: www.iaeme.com/ijm.asp Journal Impact Factor (2014): 7.2230 (Calculated by GISI) www.jifactor.com IJM © I A E M E
  2. 2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 3, March (2014), pp. 73-77 © IAEME 74 of these earnings principal and interest can be paid. But many of the self employed household income are not regular and uniform. A big size amount of loans is needed to finance the poor, but the lenders feel heavy sums of loan disbursement with collateral security. The pendency of taxing the poor heavily in the form of cost of operation with bad risk should be eliminated and an equitable opportunity should be given to the poor for their upliftment. Microfinance through its innovative products is proving as an effective poverty reducing strategy. Microfinancial institutions became financially viable, self sustaining, and an integral part of providing operational services. They have the potential to attract more and more resources and expand services to clients. Microfinance offers a promising institutional structure to provide access to credit poor. Rural penetration of banks in India is very low around 18% of the million deposit accounts in the country, 30% are in rural areas. 36% of the poor still utilize informal sources of credit. Most of the banks have largely ignored the bottom of the pyramid (BOP) because of low income and perceived less credit worthiness and low profitability. 2. GROWTH OF SHGS Table-1 shows the growth patterns in the number and volume of savings, bank loan disbursed and bank loan outstanding. The number of SHGs and pooled savings in SHG reveals an increased growth till 2009, since then it has declined. Exactly the same trend is reported in the case of bank loans disbursement and the volume of loans disbursed to SHGs. Further research has to be conducted to know exactly despite SHGs better recovery rates savings and loans disbursed have declined. The study probes the details regarding the above and comes to the following conclusion. (1) Lack of awakens of SHGs objectives, group formation its operations and activities and credit details. (2) Lack of homogeneity. (3) Irregular conduct of meetings. (4) Poor recovery (5) Improper maintenance of books. 3. MICROFINANCE AND REGIONAL IMBALANCES At the end of 2009 there were more than 6 lakhs of SHGs operating in India. There exists skewed growth of SHGs across all the regions. There is heavy concentration of SHG in Southern region of India. Table-2 reveals that out of 6121147 SHGs nearly 2827243 are operating forming 46.19% of total in Southern region only. Further the table reveals that 46.31 of total savings, 74.28% of loan disbursement, 65.75 loans outstanding belongs to Southern region. The eastern region also records 20.15% of SHGs functioning with savings creation of 28.8%, 10.10% of loan disbursement to the total and 13.33% loans sanctioned remained outstanding. 4. NON-PERFORMING ASSETS (NPAS) Table-2 shows the agency wise of banks against loans to SHGs during 2009-10 and 2010-11. It is seen that through table-3 reveals that the amount of NPAs has gone up from Rs. 823.04 crores during 2009-10 (2.94%) to 1474.11 crores as on 31-3-2011 (4.72%). The percentage of outstanding
  3. 3. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 3, March (2014), pp. 73-77 © IAEME 75 growth is fund to be high in private commercial banks (10.10%) as on 31-3-2011 when compared to other banks. Further the loan outstanding in cooperative bank stood out 7.04% followed by 4.70% in public commercial banks. There is a decline in SHGs during 2010-11 but NPAs are on the increase as a percentage to NPAs to loans outstanding. 5. CHALLENGES REMAIN As per the study by world bank assessing access to financial institutions found that amongst rural households in Andhrapradesh and Uttar Pradesh, 59% lack access to deposit account and 78% lakh access to credit. In the light of 360 million poor households who have no access to formal financial services the number of customers to be reached and the variety and quantum of services to be provided are really large. Some of MFIs charges high rate of interest despite asking not to resort to that tactics. The greatest challenge is that high cost of financing. It is felt by leaders that high rate of interest should not be charged which is higher than commercial banks since the poor can not be charged a higher rate of interest banks do feel shyness to enter this retail market. Microfinance activities are concentrating in only southern India and there is stagnation in the areas of Eastern, Central and North Eastern India. Microfinance on its own is unlikely to be able to address overgrowing challenges of underdevelopment, poor infrastructure and governance.1It is estimated at present that 90 million farm holdings, 30 million non-agricultural enterprises and 50 million landless households in India collectively need approximately US$ 30 billion credit annually. This is about 5% of India’s GDP and does not see an unreasonable estimate. 6. FIGURES & TABLES TABLE – 1 1.1. SHG BANK LINKAGE PROGRAMME (NOs) Particulars 2006-07 2007-08 2008-09 2009-10 Growth % Y-O-Y 2008 2009 2010 Savings of SHGs with Banks 3204267 3806724 4615566 5259340 18.80% 21.25% 13.95% Bank Loans Disbursed 916787 981121 1344933 1319419 7.02% 37.08% -1.90% Bank Loans Outstanding 2207293 2708963 3247451 3605962 22.73% 19.88% 11.04% Source: NABARD Reports 2006-2010
  4. 4. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 3, March (2014), pp. 73-77 © IAEME 76 1.2. SHG BANK LINKAGE PROGRAMME (Amount in Rs. Crores) Particulars 2006-07 2007-08 2008-09 2009-10 Growth % Y-O-Y 2008 2009 2010 Savings of SHGs with Banks 2755.21 2975.88 3982.24 4906.09 8.01% 33.82% 23.20% Bank Loans Disbursed 5159.37 6991.52 10238.29 12255.3 35.51% 46.44% 19.70% Bank Loans Outstanding 9093.46 12183.04 16818.12 21787.2 33.98% 38.05% 29.55% Source: NABARD Reports 2006-2010 TABLE-2 REGION-WISE SAVINGS, LOANS DISBURSEMENT AND LOANS OUTSTANDING OF SHGs IN INDIA (MARCH 31, 2009) Region No. of SHGs Savings Loans Loans Disbursement Outstanding Northern 310998 22703.92 30243.24 67891.97 (5.08) (4.09) (2.97) (2.99) North Eastern 240094 10574.17 24641.79 46930.53 (3.92) (1.91) (2.01) (2.07) Eastern 1233635 159688.03 123766.82 204533.13 (20.15) (28.8) (10.10) (13.33) Central 712915 38315.2 78140.82 204533.33 (11.65) (6.91) (6.38) (9.02) Western 796262 66428.46 58392.85 155144.73 (13.01) (11.98) (4.76) (6.84) Southern 2827243 256852.1 910166.66 1491213.56 (46.19) (46.31) (74.28) (65.75) Total 6121.47 554561.88 1225351.4 2267987.24 (100) (100) (100) (100)
  5. 5. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 3, March (2014), pp. 73-77 © IAEME 77 TABLE-3 AGENCY WISE NDAS OF BANK LOANS TO SHGS (Amount in Rs.(Crores) Agency Loans o/s against amount NDAs (Rs.) Percentage of NDAs, SHGs (Rs.) As on 31-3-2010 As on 31-3-2011 As on 31-3-2010 As on 31-3-2011 As on 31-3-2010 As on 31-3-2011 Commercial Banks 19724.42 21412.75 513.53 1019.90 2.6 4.76 Public Sector Commercial Banks 44029 470.51 23.93 47.09 5.44 10.10 Private Sector Commercial Banks 6144.58 7430.05 218.53 272.82 3.56 3.67 Co-operative banks 1728.99 1907.86 67.04 134.30 3.0 7.14 Total 28038.28 31221.17 823.04 1474.11 2.94 4.72 Source: NABARAD, Mumbai 7. CONCLUSION Microfinance acts like a catalyst in the live of the poor. It is a powerful means of poverty alleviation and social education. Microfinance is a means of meeting the needs of the poor in the unorganised sector hitherto untouched by any formal agency. The present agrarian crisis and globalisation are main reasons for agricultural indebtedness leading to agriculturist committing suicide. Suicides of agriculturists are reporting from different district of Karnataka. Microfinance not only helps the deserving but also provides a fair chance to share the views and act accordingly. The members of the SHGs will identify the needy and cooperate with one another to take a loan and in turn help the individual to earn. Though SHG Bank linkage programme viewed a phenomenal growth over the years, still there is a large portion of society that is denied access to financial services. 8. REFERNCES 1. Santhosh Sadar.(2012), MF Programme for poverty alleviation Pravara Management Review, Vol. 11, No. 2, P. 20. 2. Duggal Bikram & Singhal Amit (2002), Extending banking to the poor in India.Accessed from http:/www.icici social initiatives/org. 3. Kandale Rao Devarapalli and Jyothi Gunktaka (2014), SHG Bank Linkage programme. A study: Southern Economist Vo. 52, No. 18, P. 39. 4. Muralikrishna B. & Ravikumar B. (2007), M. Infinity, Journal of Management, Vol. 2, No. 1, P. 37. 5. Punithavathy, Pandian & R. Eswaran, (2002): Empowering Women through Micro Credit‘, Yojana, November, p. 49. 6. Puhazhendi, V. and K. J. S. Satyasai, (2000): Microfinance for Rural People: An Impact Evaluation , National Bank for Agriculture and Rural Development (NABARD), Mumbai, India.