1) Microfinance institutions provide small loans and financial services to low-income populations, playing a key role in creating economic opportunities for the poorest. 2) The Self Help Group (SHG) - Bank linkage program was conceived to develop supplementary credit services for the unreached poor, build trust between bankers and the poor, and encourage banking activity among the poor. 3) Through SHGs, over 22 million poor households have gained access to formal banking, with nearly 90% being women's groups. Banks have provided over $2 billion in loans to SHGs.

1. International Indexed & Referred Research Journal, April, 2012. ISSN- 0975-3486, RNI-RAJBIL 2009/30097;VoL.III *ISSUE-31
Research Paper—Commerce
Micro Finance - Bank Linkages
April, 2012 * Prof. S. S. Gavane
* Assot. Prof. Dept. of Commerce,R. B. Attal College, Georai, Dist. Beed.
Introduction: care and children are more likely to attend school.
Micro finance, the development buzzword of the nine-
A microfinance institution is an organiza-
ties was meant to cure the illness of rural poverty.
tion that offers financial services to low income popu-
Micro finance was launched to bridge the gap between
lations. Microfinance institutions have a key role to
demand and supply of funds in the rural area. This
play in creating economic opportunities for the poor-
initiative was taken to develop a credit delivery mecha-
est sections of the society by broadening their out-
nism basically in the rural area. In the recent years,
reach. A great scale of organizations is regarded as
most of the countries are to promote micro finance
microfinance institutes. They are those that offer credits
institutions not only as a rural development tool but
and other financial services to the representatives of
also as a rural development panacea. The success of
poor population. Micro-finance is increasingly being
micro credit institutions in developed countries, the
considered as one of the most effective tools of reduc-
developing economies have increasingly become en-
ing poverty. Micro-finance has a significant role in
thusiastic in the promotion of micro credit as a rural
bridging the gap between the formal financial institu-
development intervention. Although the basic philoso-
tions and the rural poor. The Micro Finance Institu-
phy behind the micro credit movement is to eradicate
tions accesses financial resources from the Banks and
other mainstream Financial Institutions and providepoverty as it stimulates the growth of micro enterprises
financial and support services to the poor. by developing new markets and by promoting a culture
Micro Finance: of entrepreneurship among the rural people.
SHG - Banks linkage program:
India inherited a problem of mass poverty in
rural areas along with its independence. Poverty in The SHG - Banks linkage program was con-
ceived with the objectives of developing supplemen-
rural India has declined substantially. In recent times,
tary credit delivery services for the unreached poor,
micro-finance has been proposed as a strategy for self-
employment through the promotion of micro-enter- building mutual trust & confidence between the bank-
ers and the poor and encouraging banking activity
prises. Micro-finance has gained considerable impor-
both on thrift as well as credit and sustaining a simple
tance in the last two decades as a tool of poverty reduc-
and formal mechanism of banking with the poor. The
tion. It is also emerged as a powerful tool for rural
linkage program combines the flexibility, sensitivity
development. Micro-finance is generally seen as small
and responsiveness of the informal credit system with
loans to poor people in general and rural poor in par-
ticular for self-employments that generate income the technical, administrative capabilities and finan-
cial resources of the formal financial sector. It is a
allowing them to care for them selves. Micro-finance
design relying heavily on collective strength of the
is providing of small loans that are repaid within short
poor, closeness of NGOs to people and large financial
periods of time and are essentially used by low income
resources of banks. Further, the SHGs have also under-
households. Sometimes little assistance from outside
will speed up the process. taken effective social mobilization functions contrib-
The micro-finance through SHGs has un- uting to an overall empowerment process. The banks
doubtedly begun to make significant contribution inhave externalized what would otherwise have been
poverty alleviation and empowerment of the women. high transaction costs for mobilizing savings of the
Micro-financing through SHGs has transferred the poor, appraisal and sanction of loans and improved
real economic power in the hands of women and has loan recovery through the financial intermediaries role
considerably reduced their dependence on men. It isplayed by SHGs. During the year 2005-06, 6.20 lakh
new SHGs were financed by banks to the tune of Rs.
not only a financial system but also a tool for social
change. Microfinance provides the economic element 44.99 billion by way of loans. Cumulatively, banks
to development. Rural people can earn income and have lent Rs. 113.97 billion to 22.39 lakh SHGs.
NABARD has extended a refinance of Rs. 10.68 bil-
build assets, families eat better, they can afford health
lion to banks during 2005-06 bring the cumulative
90 RESEARCH AN ALYSI S AND EVALU ATION

2. International Indexed & Referred Research Journal, April, 2012. ISSN- 0975-3486, RNI-RAJBIL 2009/30097;VoL.III *ISSUE-31
refinance amount to Rs. 41.60 billion. 44,362 branches poor rural people under SGSY. SGSY is being imple-
of 545 banks (Commercial banks- 47; Regional Rural mented by the DRDA with the active participation of
banks-158; & Cooperative banks - 340) situated in Panchayat Raj Institutions, the Banks and Non-Gov-
583 districts in 30 states of the country are participat- ernment Organization. In India, a variety of micro-
ing in the programme. About 32.98 million poor house- finance schemes exist and various approaches have
holds have gained access to formal banking system been practiced by both GOs and NGOs.
through SHG bank linkage programme. Nearly 90 per NABARD is one of the foremost institutions
cent of the groups are women groups. promoting micro-finance activities and supporting
Conclusions: them on a large scale through bank-linkage program.
Micro-Finance can be a powerful instrument SBI is maintaining its position as a leader among Com-
initiating a cyclical process of growth and develop- mercial Banks in credit linking of SHGs and is a prime
ment. Micro finance is expected to play a significant driver for the movement. RRBs were established with
role in poverty alleviation and development. Micro- a view to developing the rural economy by providing,
Finance activity improved access of rural poor to fi- for the purpose of development of agriculture, trade,
nancial services, both savings and credit. Micro-fi- commerce, industry and other productive activities in
nance has gained considerable importance in the last the rural areas, credit and other facilities, particularly
two decades as a tool of poverty reduction. SHG has to small and marginal farmers, agricultural labourers,
gradually received necessary support from the institu- artisans and small entrepreneurs. The Government
tional structure. Central Government should be pro- can help by creating a flexible architecture for
moted SHGs in a very large way to extend credit to the microfinance innovations, including through a more
enabling policy, legal, and regulatory framework.
R E F E R E N C E
1. Anupam Hazra - Poverty in Rural India: Jeopardizing the Future Alleviation - Himalaya Publishing House, New Delhi.
Growth - KURUKSHETRA - A Journal on Rural Development, Min- 4. Prasada Rao - Rural Poor and Institutional Credit - Rural Resources
istry of Rural Development, Vol.58, No. 1, Nov. 2009. and Development Initiatives - The Associated Publishers, Ambala.
2. Debendra Kumar Das - Rural Sector and Development - Deep & 5. Sagar Mondal & G.L. Ray - Rural Development - Kalyani Publish-
Deep Publications, New Delhi. ers, New Delhi.
3. Kamdar Sangita - Micro-Finance Self-Employment and Poverty
RESEARCH AN ALYSI S AND EVALU ATION
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