2. PRESENTATION OUTLINE
•OVERVIEW OF INDIA’S RURAL CREDIT
MARKET
•LOOPHOLES
•NEED FOR THIRD SECTOR PARTICIPATION
•NGO-MFI
•GROWTH AND ISSUES
•NGO CONTRIBUTION IN OTHER SECTORS
•CONCLUSION
3. INDIA is home to about 25 percent of the
world's hungry poor
INDIA ranks 126th of 177 countries in UNDP
human developmental index.
OVERVIEW
87% have no access to credit from
a formal source
70% of the marginal farmers do not have a
bank account
36 % of rural indebted households are still
dependent on informal sector
4. LOOPHOLE IN RURAL CREDIT MARKET
Majority of the cooperatives and RRBs are weak due to under-capitalization and high level
of NPAs
Microfinance institutions are facing the problem of recovery of loans due to their high
interest rates
Procedures for opening an account or seeking of loan are cumbersome and costly with high
rejection rate
Most of the government dominated rural banks work on incentives like setting priority
sector credits targets, for example –agriculture,
67% of the credit needs of the poor people in India are for consumption,
5. 14
58.9
32
63
21
48.9
0
10
20
30
40
50
60
70
Percentage that are unprofitable Percentage that are undercapitalised
RRBs
DCCBs
StCBs
Source: K.G.KARMAKAR, MICRO-FINANCE IN INDIA (2008)
Note: RRBs- Regional Rural Banks-(196)
DCCBs- District Central Cooperative Bank-(367)
StCBs- State Cooperative Bank-(29).Figures in brackets represent total no. of rural banks
Status of Rural Banking in India
7. 1]NGOs have a strong international prestige as organizations
that are:
1. Committed to the poor;
2. Are usually non-political in nature;
3. Are trusted as “honest-brokers”, intermediating the needs and concerns of local
Communities with government, the private sector and the donor community;
4. Work directly with and for the people with only a minimum of bureaucracy.
5. They are good at reaching and mobilizing the poor and remote communities
6. They help empower poor people to gain control of their lives, and they work with and
strengthen local institutions;
7. They promote sustainable development
[1] Robert carter, paper presents on microfinance and NGOs, China (2001)
9. NGO- MFI AND COMMUNITY DEVELOPMENT
A vast majority of MFI in India is non- profit MFI which is registered as Societies or
trust, corporate under Section 25 of company’s act, 1956
They undertake micro credit activities but do not take deposits.
SL. No PARTICULARS REGULATED
BY RBI
NOT REGULATED BY RBI
NBFCs TRUSTS SOCIETI
ES
COOP
S.
Sec 25
Cos.
TOTAL
1 No. of MFIs
Percentage to
total
5 28 167 96 8 304
2 9 54 32 3 100
2. Loan
outstanding
(Rs crore)
Percentage to
the total
398.3 29.5 152.4 20.8 56.5 657.5
60 5 23 3 9 100
Source: K.G.KARMAKAR, MICRO FINANCE IN INDIA (2008)
Note : The figures are estimation of Advisory Committee (2004) as suggested to NABARD.
NBFC- Non-Banking Financial Companies, COOPs- Cooperatives, RBI- Reserve Bank of India,
Sec 25 Cos- Section 25 of Company Act (1956)
10. HOW INCLUSIVE IT IS?
There are 3 delivery mechanisms tried so far in last 35 years :
• Emphasis on priority sector/weaker section/government schemes
• The SHG-NGO-BANK linkage programs
• Bulk loans from banks and various specialized institutions
11. • Promotes collective action to create a demand system
• Promotes self governance
• Capacity building to strengthen local management
• Promotion and development of new products
• Working through nested institution leads to economies of scale and sharing
of
resources
• Promotes self regulation through SHG’s linkage involving peer pressure as
collateral
• Innovation and Technology advancement
• Bridging the gap between formal credit sources and credit demands.
• Socio-economic development
BENEFITS
13. Survey in Villages
Raw material
resources
Skills, Technology
Infrastructure,
finance, support
services
Haat bazaar
Own Village
Shops,
venders,
traders
Hand holding
services
Interventions
Infrastructure
Sustainable
micro
enterprisesTown
market
Identification of
viable micro
enterprises
Supply support Demand pattern market (local) Income opportunity Enabling environment
Source: User Manual for 3M Micro Enterprise Model, an internal publication of MART, New Delhi.
APPOACHES TOWARDS LIVELIHOOD
PROMOTION
FIGURE 2
14. BEYOND MICROFINANCE
IBTADA
INDO- GERMAN WATERSHED
DEVELOPMENT PROGRAMME
RYTHU MITHRA GROUPS
COLLABERATION WITH OTHER
GOVERNMENT SCHEMES
VILLAGE GRAIN BANK SCHEMES
16. CONCLUSION
NGOs are the commandments of the 65% of the poor population of INDIA, who
know exactly what are their need and demand of time. They may lack business
approach but are standing strong at emotional capital. NGOs through programs and
functions, such as microfinance, capacity building and self-reliance help community
to be empowered, and finally contribute towards sustainable community
development.
17.
18. REFERENCE
K. G. KARMAKAR- MICRO-FINACE IN INDIA (2008), introduction – rural household
ineptness 36%, p.g.-3.
Traditional Haat and Melas in India, 1995 by Pradeep Kashyap, X- The Positive change,
Market access to haats, p.g.-19.
K. G. KARMAKAR - MICRO-FINACE IN INDIA (2008), VI- How inclusive is they ?
3 delivery mechanism, p.g.-10.
K. G. KARMAKAR- MICRO-FINACE IN INDIA (2008), VII- Success model and
issues - Sanghmitra, p.g.-13.
K. G. KARMAKAR- MICRO-FINACE IN INDIA (2008), VIII- Suggestions, 3 M
MODEL by MART, p.g-15.
Hedayat Allah Nikkhah and Ma’rof Bin Redzuan, University Putra Malaysia.
Figure-1 ,p.g.-8.