Management Thesis-1

ON
“A study on Microfinance: An Initiative to Promote
Social Welfare in Akola dist. With special reference to
SBI”

SUBMITED TO Mrs. Smita Kulkarni

(FACULTY GUIDE)

INC AKOLA

SUBMITED BY: Amol S Chincholkar

INC AKOLA

0801211081

1
 Management Thesis-1
ON
“A study on Microfinance: An Initiative to Promote
Social Welfare in Akola dist. With special reference to
SBI”

Submitted By

Amol S Chincholkar
(0801211081)
MBA SEM III (2008-2010)
ICFAI NATIONAL COLLEGE
AKOLA
A report submitted in partial fulfillment of the requirement of

MBA Program (2008-2010) ICFAI NATIONAL COLLEGE

2
 CERTIFICATE

This is to certify that the Management Thesis-I titled “A study

on Microfinance: An Initiative to Promote Social Welfare in Akola

dist. With special reference to SBI” submitted by Amol S

Chincholkar. Enroll No: 0801211081 during Semester-III of the PG

Program (Class of 2010) embodies original work done by him.

Signature of the Faculty Supervisor Signature of the Princapal

Name: - Mrs. Smita Kulkarni Mr. Rajendra Dongre
Designation: - Faculty Guide INC Akola
Center: INC – Akola

DECLARATION

3
 I hereby declare that this project work entitled “A study on

Microfinance: An Initiative to Promote Social Welfare in Akola dist. With

special reference to SBI” is my work, carried out under the guidance of my

faculty guide Mrs. Smita Kulkarni. This report neither full nor in part has ever

been submitted for award of any other degree of either this university or any

other university.

Amol S Chincholkar
(0801211081)

ACKNOWLEDGEMENTS

4
 At the outset, I would like to thanks to State Bank of India for giving me

the approval to do this project in the organization. I am grateful to Mr.

P.S.Bahirseth Akola (ADB) Branch Manager State Bank of India, and Mr.

Washekar in Akola Panchyat Samity for the moral support, encouragement and

generous assistance.

I especially thanks to my faculty guide Mrs. Smita Kulkarni and Mrs.

Usha Wankhade and Principal Mr. Rajendra Dongre, for coordinating the

project work and giving me the guidance. This project would not have been

possible without their help.

A heartfelt thanks to the many respondents surveyed whose ideas, critical

insights and suggestions have been invaluable in the preparation of this report.

Last but by no means the least I would like to convey my special thanks to all

the faculty members of ICFAI NATIONAL COLLEGE, Akola for giving me the

opportunity to work on this project and for providing us the computer lab and

library facilities.

Amol S Chincholkar

(0801211081)

Index

Chapters Page No.

5
I Cover Page………………………………………………...…………1&2

II Certificate……………………………………………...……...….……..3

III Declaration……………………………………………..……......…….4

IV Acknowledgement……………………………………...……...….…..5

Chapter-1: Introduction………………………………………..…......….9

1.1 Introduction about topic…………………..…………..……....…10

1.2 Objectives ………………………………...…………………...….11

1.3 Limitations ……………………………………….……....……....12

1.4 Research Methodology………………………...………….….…..13

Chapter-2: Industry Profile……………………………………….…....14

2.1 History of Banking in India ………………………...….…..

…...15
2.2 History of State Bank of India ……………..………..……..
…..18

2.3 Introduction of State Bank of India (SBI). .….…….……….....21

2.4 List of Banks in India …………………..………….…..………

24

2.5 Current Indian Banking Scenario ………………………….…..26

Chapter-3: Microfinance ………………………………………………33

3.1 Introduction of Microfinance …………………….…..…………34

3.2 Definition of Microfinance ……………………………….…......35

3.3 History of Microfinance ……………………………...….….…..37

6
 3.4 Weaknesses and Strength of Microfinance ……….…...............39

3.5 Working Method for Microfinance Institutions ………..….......40

3.6 Products of Microfinance ……………………………..…..……42

3.7 Introduction of SHG…………………………….….….……..…..46

3.8 Activities of the SHG……………………………….....…............49

3.9 Objectives of SHG……………………………….………...........50

Chapter-4: Microfinance Model……………………..………………....51

4.1 Micro finance Institutions (MFIs) …………….………..

……….52

4.2 Bank Partnership model ………………………………..………

52

4.3 Banking correspondents …………………………………..……

53

4.4 Service Company Model …………………………………..

…...53

Chapter-5: Role of Financial Institution ……………………………...54

Chapter-6: Impact of microfinance……………………………….…...63

6.1 Impact studies of microfinance on income …………………….…64

6.2 Impact studies of microfinance on expenditure ……………...…..66

6.3 Impact studies of microfinance on wealth ……………...….....….67

6.4 Impact studies of microfinance on educational status ..……..…..68

6.5 Impact studies of microfinance on health …………...……….…..68

7
6.6 Impact studies of microfinance on empowerment ...……..…...…69

Chapter-7: Literature Review………………………….………….…...70

Chapter-8: Marketing of Microfinance Products….…………………79

8.1 Contract Farming and Credit Bundling ……………….

………..80

8.2 Agree Service Centre- Rabo India ……….……………..…….

…80

8.3 Non Traditional markets ……………………………….….……

80

8.4 Apani Mandi …………………………………………….

………81

Chapter-9: Data Analysis………………………………………………82

Chapter- 10 Findings…………………………………………………..86

CONCLUSIN……….…………………………………………………..89

ABBREVIATIONS……………………………………………………..90

REFERENCES………………………………………………….……..91

APPENDIX……………………………………………………….…….92

8
9
Chapter-1: INTRODUCTION

1.1 Introduction about Topic

10
 My title of Management thesis is “A study on Microfinance: An Initiative to

Promote Social Welfare in Akola dist. With special reference to SBI” In this thesis I will

take customers Preference towards Microfinance with special reference to State Bank of

India, ADB Jathar Peth Branch, and Akola. This study also helps to understand the current

situation and impact of Microfinance in Akola Dist. And the feature of the poverty.

The Microfinance in India has tremendous growth in last few years and offers

differentiated products for different segments of the society. A lot of people are living under

poverty, but with microfinance they have the chance to lift themselves out of poverty.

Microfinance provides financial resources like loans, savings, insurances and business

training to help people build businesses

Now days advertising are playing the important role towards the awareness of the

Microfinance in the society. Study conduct about what are the strategy are use by Banking

or Financial Institutions and also the local advertising to attract the customer towards using

the Products of Microfinance it also study about the new strategies implemented by the

Financial Institutions. Study is conducting with the help of Mr. P.S.Bahirseth ADB Jathar

Peth Branch Manager Akola. And special guidance from Mrs. Smita Kulkarni and Mrs.

Usha Wankhade both are the Faculty member of ICFAI NATIONAL COLLEGE, Akola.

Both are guiding me on present scenario of Microfinance in India.

1.2 Objectives

11
 To Study the Microfinance & its Support to the Small Scale Business.

 To study the importance of Microfinance in Social Welfare.

 To study the Microfinance Model & Schemes offered in Nationalized

Bank.

1.3 Limitations

There are some limitations to complete the above project.

12
  Rules & Regulation of State Bank of India for Primary Data

 Less Availability of Secondary data.

 Limited time Period.

1.4 Research Methodology

Sample Size: - 100

1) Defining objectives
2) Developing action plan.

13
 3) Collection of data.
4) Analysis of data.

1) Defining objectives:-
Objectives of this thesis are to find out for the social welfare with Small
Scale Business & with Special reference to Nationalized Bank.

2) Developing action plan:-

Data for the analysis will be collected by meeting target customer face to
face by using Questionnaire

3) Collection of data :
All the data will collect with the help of Primary Data and
Secondary Data.

 Primary Data:-
Primary data is collected with the help of prepared Questionnaire

by getting it filled by people in face to face interview.

 Secondary Data:-
Secondary data is collected from following sources.

 Internet
 Journals
 Magazines
 Books
4) Analysis of data:-
The collected data will be evaluated to come on the conclusion.

14
Chapter-2: Industry Profile

15
 Introduction of Sector

2.1 HISTORY OF BANKING IN INDIA

Banking – Definition:

Section 5 (b) of Banking Regulation Act 1949

“Accepting for the purpose of lending or investment, of deposits of money

from the public repayable on demand or otherwise, and withdrawal by
cheque, draft, order or otherwise”

Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans
or cosmopolitans in India. In fact, Indian banking system has reached even to the remote
corners of the country. This is one of the main reasons of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with the
nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft
or for withdrawing his own money. Today, he has a choice. Gone are days when the most
efficient bank transferred money from one branch to other in two days. Now it is simple as
instant messaging or dials a pizza. Money has become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till

16
today, the journey of Indian Banking System can be segregated into three distinct phases.
They are as mentioned below:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
Reforms.
• New phase of Indian Banking System with the advent of Indian Financial & Banking
Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase
III.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.
These three banks were amalgamated in 1920 and Imperial Bank of India was established
which started as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913,
Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank
of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline
the functioning and activities of commercial banks, the Government of India came up with
The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949
as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as the Central Banking Authority.

During those day’s public has lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal

17
department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In
1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale
especially in rural and semi-urban areas. It formed State Bank of India to act as the principal
agent of RBI and to handle banking transactions of the Union and State Governments all over
the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th
July, 1969, major process of nationalization was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were
nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with
seven more banks. This step brought 80% of the banking segment in India under Government
ownership.

The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

• 1949: Enactment of Banking Regulation Act.

• 1955: Nationalization of State Bank of India.
• 1959: Nationalization of SBI subsidiaries.
• 1961: Insurance cover extended to deposits.
• 1969: Nationalization of 14 major banks.
• 1971: Creation of credit guarantee corporation.
• 1975: Creation of regional rural banks.
• 1980: Nationalization of seven banks with deposits over 200 crore.

2.2 History of State Bank of India

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Shri Arun Kumar Purwar is Chairman, State Bank of India. He has more
than three decades of experience in banking having Successfully handled
significant Assignments. His earlier stint sat the bank Included; Deputy
Managing Director and Chief Credit Officer of the bank responsible For
streamlining the working of the credit Process of the bank; chief executive
officer Of the Tokyo branch. He is also the chairman of the associate banks
of SBI.

State Bank of India (SBI) is India’s largest and oldest bank.

 Measured by the number of branch offices and employees, SBI is the largest bank in the

world outside China.

 State Bank of India is originated as “Bank of Calcutta” in 1806, more than 200 years ago.

Received Charter and renamed as “Bank of Bengal” in 1809.

 Bank of Bombay (1840) and Bank of Madras (1843) were established later.

 These 3 banks were known as Presidency Banks and they were even allowed to issue

currency notes.

19
 In 1811, Bank of Bengal decided to pay some forged notes because they felt a refusal to

pay would be injurious to the acceptability bank notes. The culprits responsible for the

forgeries went undetected for a long time.

 ''This was the bank to do business with which would not violate its rules in the smallest

particular for the Governor General himself" said Lord William Bentick Governor

General (ruler of India) when his cheque was returned for a shortage of 4 annas (1/4th of

One Rupee) in 1835 by the Bank.

 The presidency Banks of Bengal, Bombay and Madras with their 70 branches were

merged in 1921 to form the Imperial Bank of India.

 The new bank took on the triple role of a commercial bank, a banker's bank (role of

central bank) and a banker to the government.

 The establishment of the Reserve Bank of India (RBI) as the central bank of the country

ended the quasi-central banking role of the Imperial Bank and Imperial Bank started

acting as RBI’s representative.

 Imperial Bank was nationalised and State Bank of India was established under State Bank

of India Act 1955 passed by the parliament with Sri John Mathai-the then Finance

Minister of India as first Chairman.

 Business Standard has Awarded ‘The Banker of the Year Award’ to Shri O P Bhatt

chairman for his initiative to re-energise the Bank. June ‘08

 State Bank of India Ranking in The Banker Top 1000 World Banks Improved to 57 from

70 as Compared to the Ranking of 2007, only Indian Bank among the Top 100 Banks in

the World.

20
 CNN IBN Network 18 has selected Shri O P Bhatt Chairman SBI as Indian of the Year –

Business 2007.

 Ranked 8th in Top 10 Banks of Asia, only Indian bank to find a place in the Fortune

Global 500 list -Up from 495 last year to 380 this year (+115 ), Seventh highest gainer.

 Wall Street Journal Asia survey of top 5 companies In India In terms of financial

reputation, 1st rank SBI.

 SBI has bagged the awards for ‘Most Preferred Bank’ and ‘Most Preferred Brand for

Home Loan’ of CNBC Consumer Awards, Sept.’08(third year in a row)

 Winner of Readers Digest Trusted Brands Awards 2008 (Gold).

 Awarded the ‘Bank of the Year 2008 –India’ by The Banker Magazine, London

 SBI was the only Indian institution to figure in the top 100 rankings in "Brand Finance

Global Banking 500" list of Top Global Finance Brands (2009). Ranked 69th.

21
 2.3 Introduction of State Bank of India (SBI)
The evolution of State Bank of India can be traced back to the first decade of the 19th
century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806.
The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was
the first ever joint-stock bank of the British India, established under the sponsorship of the
Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840)
and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These
three banks dominated the modern banking scenario in India, until when they were
amalgamated to form the Imperial Bank of India, on 27 January 1921.

An important turning point in the history of State Bank of India is the launch of the first Five
Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in
general and the rural sector of the country, in particular. Until the Plan, the commercial banks
of the country, including the Imperial Bank of India, confined their services to the urban
sector. Moreover, they were not equipped to respond to the growing needs of the economic
revival taking shape in the rural areas of the country. Therefore, in order to serve the
economy as a whole and rural sector in
particular, the All India Rural Credit Survey Committee recommended the formation of a
state-partnered and state-sponsored bank.

The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of
India, and integrating with it, the former state-owned or state-associate banks. Subsequently,
an Act was passed in the Parliament of India in May 1955. As a result, SBI was established
on 1 July 1955. This resulted in making the State Bank of India more powerful, because as
much as a quarter of the resources of the Indian banking system were controlled directly by
the State. Later on, the SB I (Subsidiary Banks) Act was passed in 1959. The Act enabled the
State Bank of India to make the eight former State-associated banks as its subsidiaries.

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480
offices comprising branches, sub offices and three Local Head Offices, inherited from the
Imperial Bank. Instead of serving as mere repositories of the community's savings and
lending to creditworthy parties, the State Bank of India catered to the needs of the customers,

22
by banking purposefully. The bank served the heterogeneous financial needs of the planned
economic development.
Branches
The corporate center of SBI is located in Mumbai. In order to cater to different functions,
there are several other establishments in and outside Mumbai, apart from the corporate
center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices,
located at major cities throughout India. It is recorded that SBI has about 10000 branches,
well networked to cater to its customers throughout India.

ATM Services
SBI provides easy access to money to its customers through more than 8500 ATMs in India.
The Bank also facilitates the free transaction of money at the ATMs of State Bank Group,
which includes the ATMs of State Bank of India as well as the Associate Banks – State Bank
of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also
transact money through SBI Commercial and International Bank Ltd by using the State Bank
ATM-cum-Debit (Cash Plus) card.

Subsidiaries
The State Bank Group includes a network of eight banking subsidiaries and several non-
banking subsidiaries. Through the establishments, it offers various services including
merchant banking services, fund management, factoring services, primary dealership in
government securities, credit cards and insurance.

The eight banking subsidiaries are:

 State Bank of Bikaner and Jaipur (SBBJ)

 State Bank of Hyderabad (SBH)
 State Bank of India (SBI)
 State Bank of Indore (SBIR)
 State Bank of Mysore (SBM)
 State Bank of Patiala (SBP)
 State Bank of Saurashtra (SBS)
 State Bank of Travancore (SBT)

23
Products and Services

Personal Banking

 SBI Term Deposits SBI Loan For Pensioners

 SBI Recurring Deposits Loan Against Mortgage Of Property
 SBI Housing Loan Against Shares & Debentures
 SBI Car Loan Rent Plus Scheme
 SBI Educational Loan Medi-Plus Scheme

Other Services

 Agriculture/Rural Banking
 NRI Services
 ATM Services
 Demat Services
 Corporate Banking
 Internet Banking
 Mobile Banking
 International Banking
 Safe Deposit Locker
 RBIEFT
 E-Pay
 E-Rail
 SBI Vishwa Yatra Foreign Travel Card
 Broking Services
 Gift Cheques

24
 2.4 List of Nationalized Banks in India

 Allahabad Bank Andhra Bank

 Bank of Baroda Bank of India

 Bank of Maharashtra Canara Bank

 Central Bank of India Corporation Bank

 Dena Bank Indian Bank

 Indian Overseas Bank Oriental Bank of

Commerce

 Punjab and Sind Bank Punjab National Bank

 State Bank of Bikaner State Bank of Hyderabad

 State Bank of Mysore State Bank of Patiala

 State Bank of Saurashtra State Bank of Travancore

 Syndicate Bank The State Bank of India

 The State Bank of Indore Uco Bank

 Union Bank of India United Bank of India

 Vijaya Bank

25
 Private Banks of India

 Bank of Punjab Bank of Rajasthan

 Catholic Syrian Bank Centurion Bank
 City Union Bank Development Credit
Bank
 Dhanalakshmi Bank Federal Bank
 HDFC Bank ICICI Bank
 IDBI Bank Indusind Bank
 ING Vyasya Jammu and Kashmir
Bank
 Karnataka Bank Karur Vysya Bank
 Laxmi Villas Bank Nainital Bank Ltd
 Sbi Commercial and International Bank Ltd South Indian Bank
 Tamilnad Mercantile Band Ltd The Ratnakar Bank Ltd
 United Western Bank Uti Bank

Co-operative Banks

 The Akola Urbank Co-operative bank Limited, Akola.

 The Akola Junta Co-operative bank, Akola.

Foreign Banks in India

26
  ABN AMRO Bank Abu Dhabi Commercial Bank

 Bank of Ceylon BNP Paribas Bank

 Citi Bank China Trust Commercial Bank

 Deutsche Bank HSBC Bank

 JPMorgan Chase Bank Standard Chartered Bank

 Scotia Bank Taib Bank

2.5 Current Indian Banking Scenario:

Banking scenario has changed rapidly since 1990s. The decade of 90s has witnessed a sea
change in the way banking is done in India. Technology has made tremendous impact in
banking. 'Anywhere banking' and 'Anytime banking' have become a reality.

Nationalized banks such as State Bank of India (SBI), though pygmies in the international
banking market are banking behemoths of India. They have branches spread over the entire
length and breadth of the country. SBI in particular is all-pervasive enjoying a sprawling
network of 9000 branches. Its blue and white shingle is visible to the smallest hamlet. It has
assets understood to be worth about Rs2,22,500 crore ($52 billion). SBI has a very
conservative approach to accounting particularly when it comes to declaration of its assets.
Probably modesty does not permit the bank to exhibit its strengths. In particular, it has real
estate properties some of which are heritage sites all over the country. These are estimated to
collectively command a value of Rs.30,000 crores. This, it is believed, does not get reflected
in its book of accounts.

SBI enjoys a monopoly of the government business. The Reserve Bank of India owns about
60% of the bank’s equity. To its credit, SBI mobilized $4.2 billion through the Resurgent
India Bonds (RIB) issue in just 3 months down the post-Pokhran sanction period. This was
the difficult time when the international credit rating agencies had downgraded the country.
SBI, time and again, does a rescue act in the fore market to contain any volatility of the
rupee.

27
SBI was formed under the SBI Act in 1955 with the takeover of Imperial Bank and
amalgamation of Bank of Bengal, Bank of Bombay, and Bank of Madras. The government
mopped up around 93% of the equity, leaving 7% to private ownership. By this act the equity
of RBI cannot be diluted below 55%.

SBI enjoys a pool of best managerial talent, assured government business, a countrywide
network of branches and strong brand credibility in the Indian market.

But, that numerous Uno position is sliding with the entry of sleeker private and foreign banks
into the Indian Banking scene. The bank is continuously restructuring itself and for this, they
even hire the services of foreign consultants but the pace has to be hastened.

With the government offering an assured business, nationalized banks and State Bank of
India in particular should not take a complacent view. They should evolve service-intensive
products and make their employees customer-friendly. With competition from private and
foreign banks knocking at the door, the banks should realize, size is no more an insurance
against the onslaught of competition from sleek private and foreign banks. A revolutionary
approach to privatize ownership is the need of the hour.

Virtual Banking:

SBI has yet to computerize its operations and network all its branches. The computers
currently available serve only to relieve the burden of the clerical staff of maintaining manual
ledgers and not to penetrate into areas of customer service. ATMs, Anytime-Anywhere,
round the clock and telephone banking is still a far cry. These computers at the best remain
only as desk ornaments. With the New Telecom Policy (NTP) almost in place, telecom sector
will soon be revolutionized. E-commerce, telephone banking, consumer banking, Internet
banking, insurance et al are waiting just around the corner. At least in major metros, virtual
banking wills soon take-over from the brick-mortar banks.

Privatization and Credit disbursement:

Talks about privatization of the bank’s ownership have been initiated but the SBI act of 1955
does not permit RBI’s ownership to be diluted to below 55%. This act is outdated and needs
to be re-addressed. However, efforts have been initiated by SBI to privatize its non – banking
subsidiaries like SBI Caps, SBI Gilts, and SBI Funds Management, where SBI’s holding is

28
about 85% of the equity. But the pace has to be hastened so that investments thus released
can migrate to more important areas like development of new technologies and products in
customer service and service intensive areas. Privatization also helps to professionalize the
banks’ day-to-day operation, which will allow the management more freedom in decision
making during credit disbursement.

To aid privatization and effect a better price realization, the bank is attempting to change –
over its accounting and reporting procedures to comply with US – GAAP norms. This is a
prerequisite for trying out the ADR route, as it is known that US market is by far the
undisputed biggest market and can offer the best price. At the moment, the SBI stock is
undervalued at Rs.240 whereas experts expect Rs.300 would be a more realistic value.
Action on this front at blitzkrieg pace is the need of the hour.

Manpower Retraining and not Retrenchment:

As a hangover of the past socialistic mindset, all the nationalized banks have excess
workforce. This is indeed a hot potato for the management of many enterprises and is
therefore being handled with kid gloves. In India, it is everyone’s worry to look at business
as a source of employment, while making money is secondary. In this ocean of manpower,
every institution does have its share of highly skilled and talented manpower, which
contribute to asset building. It is the semi skilled manpower having outdated skills, which
form the excess baggage. All banks must invest in re-training the manpower so that they can
migrate from the areas that will be vacated by computerization. The level of Non-
Performing-Assets (NPAs) is still at very high levels and to start with, some of this excess
manpower can cover areas of debt recovery.

At the same time, one should also take note of the flight of talent from these nationalized
banks to newly set-up private and foreign banks. And, it is these new banks’ top officials
after migrating from the government banks are targeting at the top corporate clients and thus
poaching into the corporate business, which has been the mainstay of the nationalized banks.
This will soon become a problem of serious proportion unless the banks initiate steps to stem
the flow. It is difficult, to exclusively address the problem of excess manpower by schemes
such as voluntary retrenchment scheme (VRS) because while attempting to remove dead
wood, talent also takes an exit. Many industries have faced this problem. Also it will be over
simplicity to state that the salaries should be raised because that will only start a wage war.

29
Instead, the banks should involve the services of international consultants specialized in this
field and take a holistic view of the problem. Retraining and Rationalization of manpower
commands higher priority over Retrenchment of manpower.

New Products and New technologies:

Nationalized banks have generally been preoccupied with treasury business. The new product
areas that require greater penetration are personal banking, housing finance, consumer
durable finance, auto-finance, internet banking, insurance, telephone banking et al.
Development of these new areas call for heavy investments and this cash - flow can only
generated by privatization. In addition, surplus manpower once retrained can be absorbed in
the new ventures.

All nationalized banks and SBI in particular has the advantage of vast network of branches
and can therefore carry the new business to the remotest corner, but to make this presence felt
the banks have to move at blitzkrieg pace.

The bottom line is that, even when all political parties are committed to privatization,
somehow there is no exhibition of pace. It is time to be taken in by a revolution called
"Privatization of Ownership".

Financial sector reforms were initiated as part of overall economic reforms in the
country and wide ranging reforms covering industry, trade, taxation, external sector, banking
and financial markets have been carried out since mid1991. A decade of economic and
financial sector reforms has strengthened the fundamentals of the Indian economy and
transformed the operating environment for banks and financial institutions in the country.
The sustained and gradual pace of reforms has helped avoid any crisis and has actually
fuelled growth. As pointed out in the RBI Annual Report 2001-02, GDP growth in the 10
years after reforms i.e. 1992-93 to 2001-02 averaged 6.0% against 5.8% recorded during
1980-81 to 1989-90 in the pre-reform period. The most significant achievement of the
financial sector reforms has been the marked improvement in the financial health of

30
commercial banks in terms of capital adequacy, profitability and asset quality as also greater
attention to risk management. Further, deregulation has opened up new opportunities for
banks to increase revenues by diversifying into investment banking, insurance, credit cards,
depository services, mortgage financing, securitization, etc. At the same time, liberalization
has brought greater competition among banks, Both domestic and foreign, as well as
competition from mutual funds, NBFCs, post office, etc. Post-WTO, competition will only
get intensified, as large global players emerge on the scene. Increasing competition is
squeezing profitability and forcing banks to work efficiently on shrinking spreads. Positive
fallout of competition is the greater choice available to consumers, And the increased level of
sophistication and technology in banks. As banks benchmark themselves against global
standards, there has been a marked increase in disclosures and transparency in bank balance
sheets as also greater focus on corporate governance.

Major Reform Initiatives

Some of the major reform initiatives in the last decade that have changed the face of the
Indian banking and financial sector are:

 Interest rate deregulation. Interest rates on deposits and lending have been
deregulated with banks enjoying greater freedom to determine their rates.
 Adoption of prudential norms in terms of capital adequacy, asset classification,
income recognition, provisioning, and exposure limits, investment fluctuation reserve,
etc.
 Reduction in pre-emotions – lowering of reserve requirements (SLR and CRR), thus
releasing more lendable resources which banks can deploy profitably. Shri Arun
Kumar Purwar is Chairman, State Bank of India. He has more than three decades of
experience in banking having Successfully handled significant assignments. His
earlier stints at the bank included; Deputy Managing Director and Chief Credit
Officer of the bank responsible for streamlining the working of the credit process of
the bank; chief executive officer of the Tokyo branch. He is also the chairman of the
associate banks of SBI.
 Government equity in banks has been reduced and strong banks have been allowed to
access the capital market for raising additional capital.

31
 Banks now enjoy greater operational freedom in terms of opening and swapping of
branches, and banks with a good track record of profitability have greater flexibility
in recruitment.
 New private sector banks have been set up and foreign banks permitted to expand
their operations in India including through subsidiaries. Banks have also been allowed
to set up Offshore Banking Units in Special Economic Zones.

 New areas have been opened up for bank financing: insurance, credit cards,
infrastructure financing, leasing, gold banking, besides of course investment banking,
asset Management, factoring, etc.
 New instruments have been introduced for greater flexibility and better risk
management: e.g. interest rate swaps, forward rate agreements, cross currency
forward contracts, forward cover to hedge inflows under foreign direct investment,
liquidity adjustment facility for meeting day-to-day liquidity mismatch.
 Several new institutions have been set up including the National Securities
Depositories Ltd., Central Depositories Services Ltd., Clearing Corporation of India
Ltd., Credit Information Bureau India Ltd.
 Limits for investment in overseas markets by banks, mutual funds and corporate have
been liberalized. The overseas investment limit for corporate has been raised to 100%
of Net worth and the ceiling of $100 million on prepayment of external commercial
borrowings have been removed. MFs and corporate can now undertake FRAs with
banks. Indians Allowed to maintain resident foreign currency (domestic) accounts.
Full convertibility for deposit schemes of NRIs introduced.
 Universal Banking has been introduced. With banks permitted to diversify into long-
term finance and DFIs into working capital, guidelines have been put in place for the
evolution of universal banks in an orderly fashion.
 Technology infrastructure for the payments and settlement system in the country has
been strengthened with electronic funds transfer, Centralized Funds Management
System, Structured Financial Messaging Solution, Negotiated Dealing System and
move towards Real Time Gross Settlement.
 Adoption of global standards. Prudential norms for capital adequacy, asset
classification, income recognition and provisioning are now close to global standards.
RBI has Introduced Risk Based Supervision of banks (against the traditional

32
 transaction based approach). Best international practices in accounting systems,
corporate governance, payment and settlement systems, etc. are being adopted.
 Credit delivery mechanism has been reinforced to increase the flow of credit to
priority sectors through focus on micro credit and Self Help Groups. The definition of
priority sector has been widened to include food processing and cold storage,
software up to Rs 1 crore, housing above Rs 10 lakh, selected lending through
NBFCs, etc.

 RBI guidelines have been issued for putting in place risk management systems in
banks. Risk Management Committees in banks address credit risk, market risk and
operational risk. Banks have specialized committees to measure and monitor various
risks and have been upgrading their risk management skills and systems.

 The limit for foreign direct investment in private banks has been increased from 49%
to 74% and the 10% cap on voting rights has been removed. In addition, the limit for
foreign institutional investment in private banks is 49%.

 Wide ranging reforms have been carried out in the area of capital markets. Fresh
investment in CPs, CDs are allowed only in dematerialized form. SEBI has reduced
the settlement cycle from T+3 to T+2 from April 1, 2003 i.e. settlement of stock deals
will be completed in two trading days after the trade is executed, taking the Indian
stock trading system ahead of some of the developed equity markets. Stock
exchanges will set up trade guarantee funds. Retail trading in Government securities
has been introduced on NSE and BSE from January 16, 2003. A Serious Frauds
Office is proposed to be set up. Fungibility of ADRs and GDRs allowed.

33
34
 Chapter-3: Microfinance
3.1Introduction of Microfinance

A lot of people are living under poverty, but with microfinance they have the
chance to lift themselves out of poverty. Microfinance provides financial resources like
loans, savings, insurances and business training to help people build businesses.

Microfinance has a beguiling simplicity and a record of success not just in

promoting financial resilience but in achieving other social objectives – reaching the
excluded, empowering women and developing the capacity of small groups of people to
take control of their own lives.

Contrary to a common impression poor people need and use a variety of financial
services, including deposits, loans and other services. They use financial services for the
same reasons as anyone else to seize business opportunities, improve their homes, deal
with other large expenses, and cope with emergencies.

Microcredit belongs to the group of financial service innovations under the term of
microfinance, other services according to microfinance is micro savings, money transfer
vehicles and micro insurance. Microcredit is an innovation for the developing countries.
Microcredit is a service for poor people that are unemployed, entrepreneurs or farms who
are not bankable. By helping people with microcredit’s it gives them more available
choices and opportunities with a reduced risk. It has successfully enabled poor people to
start their own business generating or sustain an income and often begin to build up
wealth and exit poverty

35
 3.2 Definition of Microfinance

“Microcredit, or microfinance, is banking the unbankables, bringing credit, savings and other
essential financial services within the reach of. Millions of people who are too poor to be
served by regular banks, in most cases because they are unable to offer sufficient collateral.
In general, banks are for people with money, not for people without.” (Girt van Maanen,
Microcredit: Sound Business or Development Instrument, Oikocredit, 2004)

“(Microcredit) is based on the premise that the poor have skills which remain unutilized or
underutilized. It is definitely not the lack of skills which make poor people poor….charity is
not the answer to poverty. It only helps poverty to continue. It creates dependency and takes
away the individual’s initiative to break through the wall of poverty. Unleashing of energy
and creativity in each human being is the answer to poverty.” (Muhammad Yunus,
Expanding Microcredit Outreach to Reach the Millennium Development Goals, International
Seminar on Attacking Poverty with Microcredit, Dhaka, Bangladesh, January, 2003)

Microcredit belongs to the group of financial service innovations under the term of
microfinance, other services according to microfinance is micro savings, money transfer
vehicles and micro insurance. Microcredit is an innovation for the developing countries.
Microcredit is a service for poor people that are unemployed, entrepreneurs or farms who are
not bankable. The reason why they are not bankable is the lack of collateral, steady
employment, income and a verifiable credit history, because of this reasons they can´t even
meet the minimal qualifications for a ordinary credit. By helping people with microcredit’s it
gives them more available choices and opportunities with a reduced risk. It has successfully
enabled poor people to start their own business generating or sustain an income and often
begin to build up wealth and exit poverty.

Microcredit fits best to those with entrepreneurial capability and possibility. This translates to
those poor who work in growing economies, and who can undertake activities that generate
36
weekly stable incomes. For those who don´t qualify because they are extreme poor like
destitute and homeless almost every microcredit institution have special safety programs that
offer basic subsistence and later endeavors to graduate this members in their microfinance
program making ordinary microcredit’s available.

Microcredit plays an important role in fighting the multi-dimensional aspects of poverty.

Microfinance increases household income, which leads to attendant benefits such as
increased food security, the building of assets, and an increased likelihood of educating one’s
children. Microfinance is also a means for self-empowerment. It enables the poor to make
changes when they increase income, become business owners and reduce their vulnerability
to external shocks like illness, weather and more.

Microcredit has widely been directed by the non-profit sector while commercial lenders
require more conventional forms of collateral before making loans to microfinance
institutions. But now it´s successfully growing bigger and getting more credibility in the
traditional finance world. Due to that the traditional banking industry has begun to realize
that this borrower fits more correctly in a category called prebankable. T he industry has
realized that those who lack access to traditional formal financial institutions actually require
and desire a variety of financial products. Nowadays the mainstream finance industry is
counting the microcredit projects as a source of growth. Before almost everyone where
neglecting the success of microcredit in the beginning of the 1970s when pilot projects such
as ACCION where released until the United Nations declared 2005 the International Year of
Microcredit.

The most of the microcredit institutions and agencies allover the world focuses on women in
developing countries. Observations and experience shows that women are a small credit risk,
repaying their loans and tend more often to benefit the whole family. In another aspect it´s
also seeing as a method giving the women more status in a social economic way and
changing the current conservative relationship between gender and class when women are
able to provide income to the household. Women are in most cases responsible for children,
and in poor conditions it results in physical and social underdevelopment of their children.
1.2 billion People are living on less than a dollar a day. There are many reasons why women
have become the primary target of microfinance services. A recent World Bank report
confirms that societies that discriminate on the basis of gender pay the cost of greater

37
poverty, slower economic growth, weaker governance, and a lower living standard for all
people. At a macro level, it is because 70 percent of the world’s poor are women. Women
have a higher unemployment rate than men in virtually every country and make up the
majority of the informal sector of most economies. They constitute the bulk of those who
need microfinance services.

3.3 History of Microfinance

A lot of people are living under poverty, but with microfinance they have the chance
to lift themselves out of poverty. Microfinance provides financial resources like loans,
savings, insurances and business training to help people build businesses.

Microfinance has a beguiling simplicity and a record of success not just in promoting
financial resilience but in achieving other social objectives – reaching the excluded,
empowering women and developing the capacity of small groups of people to take control of
their own lives.

Contrary to a common impression poor people need and use a variety of financial
services, including deposits, loans and other services. They use financial services for the
same reasons as anyone else to seize business opportunities, improve their homes, deal with
other large expenses, and cope with emergencies.

Microcredit belongs to the group of financial service innovations under the term of
microfinance, other services according to microfinance is micro savings, money transfer
vehicles and micro insurance. Microcredit is an innovation for the developing countries.
Microcredit is a service for poor people that are unemployed, entrepreneurs or farms who are
not bankable. By helping people with microcredit’s it gives them more available choices and
opportunities with a reduced risk. It has successfully enabled poor people to start their own
business generating or sustain an income and often begin to build up wealth and exit poverty

38
Microfinance Inductor Structure

39
 3.4 Weaknesses and Strength of Microfinance

Strength:

The biggest strength is bringing financial services to poor people and making it financial
sustainable by the economies of scale effect. In India the National Bank for Agriculture and
Rural Development (NABARD) finances more than 500 banks that on lend funds to self help
groups (SHG). SHGs comprise twenty or fewer members, of whom the majority is women
from the poorest castes and tribes. Nearly 1.4 million SHGs comprising approximately 20
million women now borrow from banks, which make the Indian SHG-Bank Linkage model
the largest microfinance program in the world. Similar programs are evolving in Africa and
Southeast Asia with the assistance of organizations like Opportunity International, Catholic
Relief Services, CARE, APMAS and Oxfam. Also helps in the development of an economy
by giving everyday people the chance to establish a sustainable means of income. Eventual
increases in disposable income will lead to economic development and growth.

Weakness:

There´s not much research done on the actual effectiveness of microfinance as a tool for
economic growth. Some argue that there´s too much focus on microfinance which will
motivating less spending in other helping assistances as public health, welfare, and
education.

Some are doubting microfinance really has that impact on poverty as the practioners would
submit. Other describes micro crediting as a privatization of public safety net programs.
There´s also some microfinance institutions charging excessive interest rates.

40
Questions against the Grameen Bank were raised in a Wall Street Journal article. It was
regarding the repayment rate, collection methods and questionable accounting practices.

Studies of microcredit programs have found that women often act as collection agents for
their husbands and sons, such that the men spend the money themselves while women are
saddled with the credit risk. Some borrowers have become dependent on loans for household
expenditures rather than capital investments.

The key debate about microfinance is weather it should focus on improved welfare or
financial sustainability. The two different approaches are usually named as “poverty lending”
or “the welfares approach” and “the institutions approach” or “financial system approach”.
The welfares approach could be for example supplying the customer with education and
health wilts the institutionists focus only on the financial service. The reason for that is only
with total focus on financial sustainability the huge demand can be met. MFIs with the
welfares approach are for example the Grameen Bank and Women´s World Banking.
Examples of institutionists are ACCION International and BRI Unit Desa.

3.5 Working Method for Microfinance Institutions

When choosing a village the MFI conduct a comprehensive survey to brief the potential for
operations and the local conditions in a village. The MFI are evaluating some key factors like
village population, degree of poverty, road accessibility, political stability and safety. When a
village has been selected, the MFI introduces its mission, methodology and the services they
are offering.

After the informational presentation interested women are gathered in group formations.
They have to be in the age between 18 and 59. The women put them self together in groups
of five to serve as guarantors for each other. Earlier experience has shown that a group of
five persons is small enough to create group pressure between the members, enforcing them
to be loyal to each other. In case someone of the group members is not able to repay the loan
the group is big enough to help with the payments. The company does not influence the

41
selection of group members nor the decision regarding the income generation activity nor the
loan amount they intend to take. Group members must live close to each other and cannot be
related to each other.

If a borrower defaults on her loan, the entire group typically is penalized and sometimes
barred altogether from taking further loans. This peer pressure encourages borrowers to be
very selective about their peer group members and to repay loans in full and on time.

Then the group training begins, usually as a five day program. The purpose is to educate the
members in the procedures of the financial products, delivery methods, calculation of interest
rates, business development skills and how to sign their names. The members are also taught
in quality management, to identify an income generation activity, how to set prices and how
to market. They field staff also build a culture of credit discipline and collective
responsibility. The field staff makes sure the members qualifies for the program and collects
data for future analysis. Within the village, a center is created collecting the groups. The
center is responsible for the payments of all groups, enabling a dual liability system. When
the village center is created the financial transactions can begin.

The groups meet weekly in the village center where they can discuss new loan applications,
loan utilization, and community issues. The field staff of the MFIs conducts the meetings
with rigid discipline in order to sustain the credit discipline of the group. All financial
transactions are conducted during the meetings.

Microfinance is a relatively new segment of the market economy that is why institutions
created in this segment have short experience in their activities, and their personnel is not
sufficiently experienced and qualified. Taking this into consideration, staff of these institutes
is recommended to follow the internationally recognized principles of microfinance:

 thorough examination of potential clients of the microfinance institution;

 thorough estimation of business viability and also factors which can positively or
negatively affect the results of work in specific conditions;
 thorough registration of documents and contracts related to loan issuance and
microfinance services providing;
 keep in touch with client in combination with monitoring of the terms of paying a
credit, interests payments and with the aim to find out potential and real problems;

42
  setting of interest rates for microfinance services compatible with market ones;
 quick reaction to any problems which can complicate the perspectives of getting of
issued credit played back

3.6 Products of Microfinance

MFIs also have big personnel and administration costs. Field staff managers must perform
village surveys before entering a village, conduct interviews with potential borrowers,
educate the borrowers in credit discipline, travel to the villages every week to collect interest
and distribute loans and control that the loans are being used for the given purpose.

The microcredit loan cycles are usually shorter than traditional commercial loans with terms
from typically six months to a year with payments plus interest, played weekly. Shorter loan
cycles and weekly payments help the borrowers stay current and not become surprised by
large payments. Clearly the transaction-intense nature of weekly payment collections, often
in rural areas, is more expensive than running a bank branch that provides large loans to
economically secure borrowers in a metropolitan area. As a result, MFIs must charge interest
rates that might sound high.

In order to be able to lend out money, the microfinance institutions must in addition borrow
from the traditional finance sector with commercial perspective. There´s always about 1-2%
loss on loans due to people not paying back. To be able to expand business the MFIs must
also make some profit, at least 1-2%. All in all it´s easier to understand why the MFIs charge
their customer interest rates which in first sight might appear high. With a growing market,
better economics of scale and increasing efficiency the cost will reduce and lower interest
rates are able.

43
For a financial institution to scale and remain sustainable, at a bare minimum it has to cover
its costs. A large bank can charge lower rates in order to recoup its costs. Because of smaller
loan size and more transactions, the MFI has to charge higher minimum rates.

Data from the Micro Banking Bulletin reports that 63 of the world’s top MFIs had an average
rate of return, after adjusting for inflation and after taking out subsidies programs, of about
2.5% of total assets. This lends to the hope that microfinance can be sufficiently attractive for
investors, as well as the mainstream in the retail banking sector.

Typical microcredit products look like this (the numbers are only
hypothetical):

Product Purpose Terms Interest rate

Income Generation Income generation, asset 50 weeks loan paid 12.5% (flat) 24%
Loan (IGL) development weekly (effective)
Mid-Term Loan Same as IGL, available at 50 weeks loan paid 12.5% (flat) 24%
(MTL) middle (week 25) of IGL weekly (effective)
Emergency Loan All emergencies such as 20 weeks loan 0% Interest free
(EL) health, funerals,
hospitalization
Individual Loan (IL) Income generation, asset 1-2 years loan 11% (flat) 23%
development repaid monthly (effective)

The Income Generating Loan is used for a variety of activities that generate income for their
families. Clients submit a loan application and based on approval receive the loan after one
week. Loans are paid in 50 equal, weekly installments. After completion of a loan cycle, the
client can submit a loan application for a future loan. The approach with smaller short-term
loan is to avoid long-term economic problems with bigger loans.

The Mid Term Loan is available to clients after 25 weeks of repaying their IGL loan. A client
is eligible for a MTL if the client has not taken the maximum amount of the IGL. The

44
residual amount can be taken as a MTL. The terms and conditions of the MTL are otherwise
exactly the same as IGL.

The Emergency Loan is available to all clients over the course of a fiscal year. The loan is
interest free and the amount and repayment terms are agreed upon by the MFI and the client
on a case by case basis. The amount is small compared to the income generating products
and is only given in times of dire need to meet expenses such as funerals, hospital
admissions, prenatal care and other crisis situations.

The Individual Loan is designed for clients and non clients that have specific needs beyond
the group lending model. Loans are given to an individual outside of the group lending
process. Amounts are typically higher than that of the income generating loan and
repayments are less frequent. Applicants must complete a strict business appraisal process
and have both collateral and a guarantor.

Microfinance is not panacea from all troubles; this also means that not any poor person can
obtain the loan. In particular, representatives of very poor population, lacking stable income,
living by means of chance earnings, and particularly having debts (in relation to community
facilities, relatives, friends, etc…) cannot be clients of microfinance, since in case of
microcredit non-repayment they will have more debts, becoming poorer. For such people
special programs of social assistance are needed, which are able to support main needs of
people living in the poorest dwellings, lacking garments and food.

There are some restrictions regarding what the money is used for. Usually micro credits can´t
be used for the purposes like:

• Payments of other loans or other debts;

• Production of tobacco and liquor;
• Forming turnover capital of trade and intermediary business;
• Organization or purchasing products for gambling or entertainment services for the
population;
• Establishing trading points;
• Purchase of property that´s not used for business.

45
In the microfinance sector there´s other services expanding as well. The poor need, like all of
us, a secure place to save their money and access to insurance for their homes, businesses and
health. Microfinance institutions are now innovating new products to help meet these needs,
empowering the world’s poor to improve their own lives. Products common used in the
microfinance sector today is:

• Micro savings – A possibility to save money without any minimum balance. Allows
people to retain money for future use or for unexpected costs. In SHGs the members
save small amounts of money, as little as a few rupees a month in a group fund.
Members may borrow from the group fund for a variety of purposes ranging from
household emergencies to school fees. As SHGs prove capable of managing their
funds well, they may borrow from a local bank to invest in small business or farm
activities. Banks typically lend up to four rupees for every rupee in the group fund;
• Micro insurance – Gives the entrepreneurs the chance to focus more on their core
business which drastically reduces the risk affecting their property, health or working
possibilities. The is different types of insurance services like life insurance, property
insurance, health insurance and disability insurance. The spectrum of services in this
sphere is constantly expanded, as schemes and terms of providing insurance services
are determined by each company individually.

• Micro leasing – For entrepreneurs or small businesses who can´t afford buy at full
cost they can instead lease equipment, agricultural machinery or vehicles. Often no
limitations of minimum cost of the leased object.

• Money transfer – A service for transferring money, mainly overseas to family or

friends. Money transfers without opening current accounts are performed by a
number of commercial banks through international money transfer systems such as
Western Union, Money Gram, and Anelik. On the surface they may seem like small
money transfers, but when one considers that such transactions take place millions of
times around the world each week, the numbers start to become impressive.
According to the World Bank, the annual global market for remittances - money

46
 transferred home from migrant workers - is around 167 billion US dollars. The
estimated total is closer to 230 billion dollars if one counts unregulated transactions.
Remittances are also an important source of income for many developing countries
including India, China and Mexico, all of which receive over 20 billion dollars each
year in remittances from abroad.

3.7 Introduction of SHG

Self-help groups, also known as mutual help, mutual aid, or support groups, are groups of
people who provide mutual support for each other. In a self-help group, the members share a
common problem, often a common disease or addiction. Their mutual goal is to help each
other to deal with, if possible to heal or to recover from, this problem. While Michael K.
Bartalos (1992) has pointed out the contradictory nature of the terms “self-help” and
“support,” the former U.S. surgeon general C. Everett Koop has said that self-help brings
together two central but disparate themes of American culture, individualism and cooperation
(“Sharing Solutions” 1992).

In traditional society, family and friends provided social support. In modern industrial
society, however, family and community ties are often disrupted due to mobility and other
social changes. Thus, people often choose to join with others who share mutual interests and
concerns. In 1992, almost one in three Americans reported involvement in a support group;
more than half of these were Bible study groups (“According to a Gallup Poll” 1992). Of
those not involved in a self-help group at the time, more than 10 percent reported past
involvement, while another 10 percent desired future involvement. It has been estimated that
there are at least 500,000 to 750,000 groups with 10 million to 15 million participants in the

47
United States (Katz 1993) and that more than thirty self-help centers and information
clearinghouses have been established (Borman 1992).

The concept of self-help group

Experience in many countries demonstrates that poor women make investments wisely and
earn returns (Human Resource Development, 1995). However, the flow of financial
assistance to them was too marginal, if at all, to enable them to cross the poverty line. The
need to create a grassroots organizational base to enable women to come together, to analyze
their issues and problems themselves, and to fulfill their needs was strongly advocated. In
fact, experience shows that some of the successful ‘group-based participatory programmers’
have made significant improvement in the conditions of living poor women. The concept of
self-help groups gained significance, especially after 1976 when Prof. Mohammed Yunus of
Bangladesh began experimenting with micro-credit and women SHGs. The strategy made a
quiet revolution in Bangladesh in poverty eradication ‘by empowering the poor women’.
SHGs are small informal associations created for the purpose of enabling members to reap
economic benefit out of mutual help, solidarity, and joint responsibility. The benefits include
mobilization of savings and credit facilities and pursuit of group enterprise activities. The
group-based approach not only enables the poor to accumulate capital by way of small
savings but also helps them to get access to formal credit facilities (Shylendra, 1998). These
groups by way of joint liability enable the poor to overcome the problem of collateral
security and thus free them from the clutches of moneylenders. The joint liability not only
improves group members’ accessibility to credit, but also creates mechanisms like peer
monitoring leading to better loan recoveries (Stieglitz, 1993). Besides, some of the basic
characteristics of SHGs like small size of membership and homogeneity of composition bring
about cohesiveness and effective participation of members in the functioning of the group
(Fernandez, 1994). In general, SHGs created on the above lines of functioning have been
able to reach the poor effectively, especially women and help them obtain easy access to
facilities like savings and credit and empower them (National Bank, 1995). Studies reveal
that certain elements become crucial or critical for the successful formation and functioning
of the groups. These include voluntary nature of the group, small size and homogeneity of
membership, transparent and participative decision-making and brisk use of funds for micro-
enterprise creation. (Fernadez, 1994). Regular meeting of the members fosters meaningful
relationship among them and issues other than thrift and credit, issues on gender and social

48
problems also get a platform for discussion. Empirical evidence has shown that women as a
group are consistently better in promptness and reliability of repayment. Targeting women in
these ‘male stream’ programmers has been a very effective method of ensuring that the
benefits of increased income accrue to the general welfare of the family, and particularly of
children. At the same time, women themselves benefit from the higher status they achieve
when they are able to get new income (RESULTS, 1997)

Self-help groups are comprised of people who share the same problem, life situation or
Crisis. Members provide emotional support to one another; learn new ways to cope, discover
strategies for improving their condition, and help others while helping themselves. People
find in self help group’s individuals much like themselves who are able to share pragmatic,
experience tested insights gained from first-hand experience with the same situation.
Self-help groups are generally self-governed, cost-free and readily available for every Major
disease listed by the World Health Organization (Gartner and Riessman, 1977), For
emotional problems, physical disabilities, eating disorders, habits or addictions,
Bereavement, parenting, and for family members of those experiencing illnesses or
Difficulties. Self-help groups are increasingly being recognized as viable, efficient methods
of Supplementing and extending the present health and mental health care system to the
Point of being characterized as an "emerging social movement" (Borkman, 1990; Katz,
1981). Recent research conservatively estimates that 10 million Americans are Currently
using self-help groups and that as many as 25 million have been involved in A group
sometime in their life (Kessler, Mickelson, & Zhao, 1997). While the most well Known type
of self-help group is Alcoholics Anonymous, there are over 500,000 Self-help groups in the
United States (Jacobs & Goodman, 1989). Currently, the Network provides services to over
500 Wichita area support groups and an additional 1400 groups available in other Kansas
communities to persons of all ages, ethnic Groups and income levels who are suffering from
substance abuse, chronic physical And medical health problems, family problems, mental
health concerns, and more. Numerous research studies have concluded that self-help groups
are effective in Helping group members, both short term and long term. Self help groups
have been Shown to improve health conditions and prevent problems associated with
chronic Illness. Through a ten year longitudinal study involving 86 women randomly
assigned to Group support and standard treatment or the standard treatment only, Spiegel,
Bloom, Kraemer and Gottheil (1989) found that offering long-term group support to women

49
with Metastatic breast cancer significantly extended life. Women participating in the self-
Help groups not only had fewer mood swings, less phobia and reduced pain (Spiegel, Bloom
& Yalom, 1981), but lived an average of 36.6 months compared to women in the
Randomized control group who lived only 18.9 months.

3.8 THE ACTITVITIES OF THE SELF-HELP GROUP

The members of self-help groups often need information on precise issues. To answer your
members’ questions and to make the group more interesting, a variety of activities are
possible.

Discussions on specific themes

When your members suggest discussing a specific them, be sure to consider it. If time
doesn’t permit, take note of it and come back to it at the next meeting. In the event that your
group is short of ideas, here is a list of possible themes:

 Self-esteem
 Problem solving
 Creativity
 Nutrition and lifestyle
 Relationship with family and friends
 Social integration: work, studies, volunteering

50
 3.9 Objectives OF SHG

 To sensitize women of target area for the need of SHG and its relevance in their
empowerment process.
 To create group feeling among women.
 To enhance the confidence and capabilities of women.
 To develop collective decision making among women.
 To encourage habit of saving among women and facilitate the accumulation of their
own capital resource base.
 To motivate women taking up social responsibilities particularly related to women
development.

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52
 Chapter 4: Microfinance Model

4.1Micro finance Institutions (MFIs):

MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and
cooperatives. They are provided financial support from external donors and apex institutions
including the Rashtriya Mahila Kosh (RMK), SIDBI Foundation for micro-credit and
NABARD and employ a variety of ways for credit delivery.

Since 2000, commercial banks including Regional rural Banks have been providing funds to
MFIs for on lending to poor clients. Though initially, only a handful of NGOs were “into”
financial intermediation using a variety of delivery methods, their numbers have increased.
Considerable today. While there is no published data on private MFIs operating in the
country, the number of MFIs is estimated to be around 800.

4.2 Bank Partnership model:

This model is an innovative way of financing MFIs. The bank is the lender and the MFI acts
as an agent for handling items of work relating to credit monitoring, supervision and
recovery. In other words, the MFI acts as an agent and takes care of all relationships with the
client, from first contact to final repayment. The model has the potential to significantly
increase the amount of funding that MFIs can leverage on a relatively small equity base.

A sub-variation of this model is where the MFI, as an MBFC holds the individual loans on
its bolos for a while before securitizing them and selling them to the bank. Such refinancing
through securitization enables the MFI enlarged funding access. If the MFI fulfils the “true
sale” criteria, the exposure of the bank is treated as being to the individual borrower and the
prudential exposure norms do not hen inhibit such funding of MFIs by commercial banks
through the securitization structure.

53
4.3 Banking correspondents:

The proposal of “banking correspondents’ could take this model a step further extending it to
savings. It would allow MFIs to collect savings deposits from the poor on behalf of the bank.
It would use the ability of the MFI to get close to poor clients while relying on the financial
strength of the bank to safeguard the deposits. This regulation evolved at a time when there
were genuine fears that fly-by-night agents purporting to act on behalf of banks in which the
people have confidence could mobilize saving of gullible public and then vanish with them.
It remains to be seen whether the mechanics of such relationship scan be worked out in a way
that minimizes the risk of misuse.

4.4 Service Company Model:

Under this model, the bank forms its own MFI, perhaps as an MBFC, and then works hand in
hand with that MFI to extend loans and other services. On paper, the model is similar to the
partnership model: the MFI originates the loans and the bank bolos them. But I fact, this
model has two very different and interesting operational features:

(a) The MFI uses the branch network of the bank as its outlets to reach clients. This
allows the client to be reached at lower cost than in the case of a stand-alone MFI. In case of
banks which have large branch networks, it also allows rapid scale up. In the service
company model, the MFI works specifically for the bank and develops an intensive
operational cooperation between them to their mutual advantage.

(b) The Partnership Model uses both the financial and infrastructure strength of the
bank to create lower cost and faster growth. The Service company Model has the potential to
take the burden of overseeing microfinance operations off the management of the bank and
put it in the hands of MFI managers who are focused on microfinance to introduce additional
products, such as individual loans for SHG graduates, remittances and so on without
disrupting bank operations and provide amore advantageous cost structure for microfinance.

54
55
 Chapter-5: Role of Financial Institution

Role, functions and Working Mechanism of Financial Institutions

ICICI Bank

“ICICI Bank is one bank that has developed a very clear strategy to expand the provision of
financial products and services to the poor in India as a profitable activity”

ICICI’s microfinance portfolio has been increasing at an impressive speed. From 10,000
microfinance clients in 2001, ICICI Bank is now (2007) lending to 1.8 million clients
through its partner microfinance institutions, and its outstanding portfolio has increased from
Rs. 0.20 billion (US$4.5 MILLIN) TO Rs. 9.98 billion (US$227 million). A few years ago,
these clients had never been served by a formal lending instituting.

There is an increasing shift in the microfinance sector from grant miner should be limited to
the creation of facilitative infrastructure. “We need to stop sending government and funding
agencies the signal that microfinance is not commercially viable system”, says Nachiket
more, Executive Director of ICICI Bank.

As a result of banks entering the game the sector has changed rapidly. “There is no dearth of
funds today, as banks are looking into MFIs favorably, unlike a few years ago”, says
Pandmaja Reddy, the CEO of one of IICI Bank’s major MFI partners, Spandana.

56
 Bank Led Model

The bank led model was derived from the SHG-Bank linkage program of NABARD.
Through this program, banks financed self Help Groups (SHGs) which has been promoted by
NGOs and government agencies.

ICICI Bank drew up aggressive plans to penetrate rural areas through its SHG
program. However, rather than spending time in developing rural infrastructure of its own, in
2000, ICICI Bank announced merger of Bank of Madura (BoM), which had significant
presence in the rural areas of South India, especially Tamil Nadu, with a customer base of
1.9 million 87 branches.

Bank of Madura’s SHG development program was initiated in 1995. Through this program,
it had formed, trained and initiated small groups of women to undertake financial activities
like banking, saving a lending. By 2000, it had created around 1200 SHGs across Tamil
Nadu and provided credit to them.

Partnership Model

A model of microfinance has emerged in recent years in which a microfinance

institution (MFI) borrows fro banks and on-lends to clients; few MFIs have been able to
grow beyond a certain point. Under this model, MFIs are unable to provide risk capital in
large quantities, which limits the advances fro banks. L in addition, the risk is being entirely
borne y the MFI which limits its risk-taking.

This model aimed at synergizing the comparative advantages and financial strength of
the bank with social intermediation, mobilization power and infrastructure of MFIs and
NGOs. Through this model, ICICI Bank could save on the initial costs of developing rural
infrastructure and micro credit distribution channels and could take advantage of the
expertise of these institutins in rual areas. Initially, ICICI Bank started off by lending to
MFIs and NGOs in order to provide the necessary financial support to their activities. Later,
ICICI Bank came up with a plan where the NGO/MFI continued t promotes their
microfinance schemes; wile the bank met the financial requirements of the borrowers.

57
 Other Microfinance Initiatives

As a part of microfinance initiatives in the agriculture sector, ICICI Bank developed

Farmer services enters (FSC). An FSC was managed buy an agricultural input supply
company which supplied inputs like seeds and technical knowhow to the farmers.

FSCs were also managed by an extension service organization which provided inputs,
credit and technology or by an NGO that provided all the services that farmers needed for
their agricultural needs. Working in close association with farmers, FSCs provided them
with services like advice on seeds, sowing techniques, pest control, weed control, usage and
dosage of herbicides, pesticides and fertilizers and other services associated with agriculture.
The FSCs also provided crop-related information and services to farmers, apart from
facilitation the sale of agricultural produce. The FSCs arranged to procure the produce
through agents and sold it in organized agricultural markets thus getting better realization.

The Future

These agents contact several borrowers, thus expanding the reach of ICICI Bank at a
low cost. Taking the FSC initiative further, ICICI Bank plans to provide farmers credit fro
sugar companies, seed companies, dairy companies, NGOs, Micro-credit institutions and
food processing.

Sig HAS BEEN INBOLVED IN a PROJECT IN THE SOUTHERN STATE OF

Tamil Nadu to find out how wireless technology can be applied in the development of low
cost models of banking. Another plan to increase the reach in rural areas is to launch mobile
ATM services. ICICI Bank branded trucks has started carrying ATMs through a number of
villages.

58
 Some Articles of News Paper:

1. ICICI Bank to offer micro-finance to sex-workers

Mumbai, March 14: In a novel way to help sex-workers to live more meaningfully,
country’s largest private sector bank, ICICI Bank is planning to offer financial assistance to
them though the micro-finance route.

For starters, the bank plans to launch the programmed in Kolkata by entering into a tie-up
with Durbar Mahila Samwanaya samitee, an NGO working for the welfare of around 65,000
sex-workers in and around the city.

Source: (Press Trust of India) Posted online: Wednesday, March 14, 2007 at 20:54 hours
IST.

2. ICICI Bank launches new initiative in micro-finance

ICICI Bank has taken a stake of under 20 percent in financial information Network and
Operations Private Ltd (FINO), WHICH WAS LAUNCHED ON Thursday, July 13, 2001.

FINO would provide technological solutions as well as services to finance providers to

reach the understand in the country. ICICI Bank is the lead facilitator.

According to Mr. Nachiket Mor, Deputy Managing director, ICICI Bank, FINO IS AN
INDEPENDENT ENTITY. “We would reduce our stake in the company when required,’ he
said.

59
ICICI Bank expects to target 200 micro-finance institutions
(MFIs) by March 2007, he said, speaking on the sidelines of the press conference to launch
FINO. At present, the bank has tie-ups with 100 MFIs.

FINO is an initiative in the micro-finance sector. It would target 300-400 million people
who do not have access to basic financial services, said Mr. Manish Khera, CE, and FINO.
The company has an authorized capital of Rs. 50 crore. MFIs, NBFCs, RRBs, co-operative
banks, etc. would directly or indirectly tie up with FINO TO USE ITS SERVICES, HE
SAID. Fino WOULD CHARGE Rs.25-30 per account every year.

Core Banking Products

FINO has partnered with IBM and I-flex to offer core banking products. It would also
provide credit bureau services, which includes individual customer credit rating and
analytics based on transition history. It also launched biometric cards for customers, which
would be a proof of identity and give collateral to them. The card would also offer multiple
products including savings, loans, insurance, recurring deposits, fixed deposits and
remittances. The company world as\also build-up customer database, thus bringing them
into mainstream banking.

“There was a need for automated structured data system like FINO;” SAID Mr. Mor.
“Essential pieces of infrastructure are missing in India. We lack credit-tracking mechanism;
therefore there was a need for an intervention like FINO.”

The company expects to reach 25 million customers in five years and two million customers
by the end of 2007.

60
FINO aims bringing scale to “micro” business lading to lowering of costs for the local
financial institutions (LFIs) and act as an internal technology department for he LFIs, said
Mr. Khera.

The company is working on providing technological solutions in insurance, \especially the

health insurance sector to the under-privileged,” he said. It is interacting with Nabard,
SIDBI and other banks to gie shape to what FINO does, said Mr. Kher.

3. ICICI Bank’s thrust on micro-finance

CHENNAI,MARCH 9. ICICI Bank has entered into partnerships with various microfinance
institutions (MFI) and non-government organizations (NGOs) to scale up its micro lending
business. Addressing presspersons her, today, Nachiket Mor, executive director, ICICI
bank, said, the partnership model would provide assured source of funding to NGOs and
MFIs. The bank had extended advances to the tune of Rs. 150 croes as on February 29, the
year, under this scheme, Mr. Mor said.

The back had acquired a network of self-help groups (SHG) developed by the erstwhile
Bank of Madura after its merger with ICICI Bank. Since then the SHG programmed had

61
grown substantially and 10,175 groups had been promoted reaching our to 2.03 lakh women
spread across 2,398 villages, the Executive director said.

One of the micro finance institutions, ‘Microcredit foundation of India’, established by K.M.
Thiagarajan, former chairman of Bank of Madura inn 2002, had initiated a programmed for
microcredit through self-help groups.

ICICI Bank has entered into a memorandum of understanding with Microcredit foundation to
outsource SHG development, maintenance of groups, credit linkage and recovery o flans.

Securitization

Another way to enter into partnership with MFIs is to securitize microfinance portfolios. In
2004, the largest ever securitizing deal in microfinance was signed between ICICI Bank and
SHARE Microfinance Ltd, a large MFI operating in rural areas of the state of Andra Pradesh.
Technical assistance and the collateral deposit of US$325,000 (93% OF The guarantee
required by ICICI) were supplied by Grameen foundation USA . Under this agreement,
ICICI purchased a part of SHARE’s microfinance portfolio gains a consideration calculated
by computing the Net present Value of receivables amounting to Rs. 215 million (US$ 4.9
million) at an agreed discount rater. The interest paid by SHARE is almost 4% less than the
rate paid in commercial loans. Partial credit provision was provided by SHARE in the form
of a guarantee amounting to0 8% of the receivables under the portfolio, by way of a lien on
fixed deposit. This deal frees up equity capital, allowing SHARE to scale up its lending. L
on the other had, it allows ICICI Bank to reach new markets. And by trading this high
quality asset in capital markets, the bank can hedge its own risks.

Beyond Microcredit

Microfinance does not only mean microcredit, and ICICI does not limit itself to lending.
ICICI’s social Initiative Group, along with the World bank and ICICI Lombard, the
insurance company set up by ICICI and Canada Lombard have developed India’s first index-
based insurance product. This insurance policy compensates the insured against the

62
likelihood of diminished agricultural output/yield resulting from a shortfall in the anticipated
normal rainfall within the district, subject to maximum of the sum insured. The insurance
policy is linked to a rainfall index.

Technology

One of the main challenges to the growth of the microfinance sector is accessibility. The
Indian context, in which 70% of the production lives in rural areas, requires new, inventive
channels of delivery. The use of technologies such as kiosks and smartcards will
considerably reduce transaction costs while improving access. The ICICI Bank technology
team is developing a series of innovative products that can help reduce transaction costs
considerable. For example, it is piloting the usage of smart cards with Sewa Bank in
Ahmadabad. To maximize the benefits of these innovations, the development of a high
quality shared banking technology platform which can be used by MFIs as well as by
cooperatives banks and regional rural banks is needed ICICI is strongly encouraging such an
effort to take place. Wipro and Infosys, I-Flex, 3 InfoTech, some of the best Indian
information technology companies specialized in financial services, and others, are in the
process of developing exactly such a platform. At a recent technology workshop at the
Institute for Financial management research in Chennai, the ICICI Bank Alternate Channels
team presented the benefits of investing in a common technology platform similar to those
used in mainstream banking to some of the most promising MFIs.

The Center for Microfinance Research

ICICI Bank has created the Centre for microfinance Research (CMFR) at the Institute
for Financial Management Research (IFMR) in Chennai. Through research, research –based

63
advocacy, high level training and strategy building, it aims to systematically establish the
links between increased access to financial services and the participation of poor people in
the larger economy. The CMFR Research Unit supports initiatives aimed at understand fin
and analyzing the following issues: impact of access to financial services; contract and
product designs; constraints to household productivity; combination of microfinance and
other development interventions; evidence of credit constraints; cost and profitability of
microfinance organizations; impact of MFI policies and strategies; people’s behavior and
psychology with respect to financial services; economies of micro-enterprises; and the effect
of regulations.

Finally, the CMFR recognizes that while MFIs air to meet the crditneeds to poor households,
there are other missing markets and constraints facing households, such as heal there,
infrastructure, and give in knowledge. These have implications in rearms of the scale and
profitability of client enterprises and efficiency of household budget allocation, which in turn
impacts household will-being. The CMFR microfinance Strategy Unit will address these
issues through a series of workshops which will bring together MFI practitioners and sectoral
experts (in energy, water, roads, health, etc). The latter will bring to the table knowledge of
best practices in their specific areas, and each consultation workshop will result in long-term
collaboration between with MFIs for implementing specific pilots.

64
 CHAPTER 6:
Impacts of Microfinance

65
 Most existing studies on the impact of microfinance examine two sets of indicators –
economic and social indicators – at different levels. Despite the variation In the methods used
and the results of studies conducted in various countries, the main Impact of microfinance
impact is on change in income, expenditure, assets, educational Status, health as well as
gender empowerment. The studies that have examined the impact of microfinance on these
indicators are discussed below.

Impact studies of microfinance on different economic and social indicators

6.1 Impact studies of microfinance on income

The effect on income has been analyzed at the individual, household and Enterprise
levels. Hulme and Mosley (1996), conducted various studies on different Microfinance
programs in numerous countries, and found strong evidence of the positive Relationship
between access to a credit and the borrower’s level of income. The authors Indicated that the
middle and upper poor received more benefits from income-generating Credit initiatives than
the poorest. McKernan (2002), moreover, evaluated three Significant microcredit programs
in Bangladesh and discovered that the profit for self-employed Activities of households can
be increased by program participation. These 11 Economic indicators are normally
measurements for microfinance impact as income, level and patterns of expenditure,
consumption and assets. Social indicators to measure the impact of microfinance became
Popular in the early 1980s as educational status, access to health services, nutritional levels,
anthropometric Measures and contraceptive use, for example (Hulme, 2000).
12 Hulme (2000) identified levels of assessment in different units as individual, enterprise,
household, community, institutional impacts and household economic portfolio such as
households, enterprise, Individual and community. programs were also examined at the
village-level impacts in the study of Khandker etal. (1998) which showed that they have
positive impact on average households’ annual Income, especially in the rural non-farm

66
sector. Copes take et al. (2001), estimated the Effect of an urban credit programmed – a
group-based microcredit programmed – in Zambia, And found that microcredit has a
significant impact on the growth in enterprise profit and household income in case of the
borrowers who have received a second loan. Sichanthongthip’s study (2004) also pointed to a
positive impact of microcredit on the income level of individual borrowers. This can be seen
from the higher monthly income earned after the member accessed credit, in the empirical
study of Lao microfinance on Saithani case. Shaw (2000) studied two microfinance
institutions (MFIs) in Southeastern Sri Lanka and showed that the less poor clients’ micro
business that accessed loans from Microfinance programs could earn more income than those
of the poor do. Mosley (2001) Evaluated the impact of loans provided by two urban and two
rural MFIs on poverty in Bolivia. He found that the net impact of microfinance from all
institutions, at the average Level, was positive in relation to borrowers’ income, even though
that net impact for Poorer borrowers might be less than the net impact on richer borrowers.
Copes take (2002) conducted the case study of the Zambian Copper belt, applying the village
bank Model to investigate the effect on income distribution at the household and enterprise
Levels. The study showed that the impact on income distribution depends on who obtains the
loan, who move on to larger loans and who exits the program: group dynamics was also an
important factor. As he discovered, “Some initial leveling up of business Incomes was found,
but the more marked overall effect among borrowers was of income Polarization.”
(Copestake, 2002: 743).

6.2 Impact studies of microfinance on expenditure

Expenditure is another indicator to measure the impact of microfinance. Pitt and Khandker
(1996 and 1998) estimated the effect of microcredit obtained by both males And females for

67
the Grameen Bank and two other group-based microcredit programs in Bangladesh on
various indicators. They showed that the clients of the programs could gain from
participating microfinance programs in many ways. It can be seen that income per capita
consumption could be increased by accessing a loan from a microcredit Program such as the
Grameen Bank. Khandker (2003) also conducted research on the Long-run impacts of
microfinance on household consumption and poverty in Bangladesh by identifying types of
impact in six household’s outcomes as outlined bellow:

 Per capita total expenditure;

 Per capita food expenditure;
 Per capita non-food expenditure;
 The incidence of moderate and extreme poverty;
 Household non-land assets

The author found that the microfinance effects of male borrowing were much weaker than
the impact of female borrowing and there was decrease in return to borrowing all the time.
Moreover, he noted that the impact on food expenditure was less pronounced than the one on
non-food expenditure. Besides, he showed that the poorest gained benefits from microfinance
and microfinance had a sustainable impact in terms of poverty reduction among program
participants. In addition, the author discovered that there was spillover effect of microfinance
to reduce poverty at the village level. In contrast, the impact was less noticeable in reducing
moderate rather than extreme poverty. Murdoch (1998), however, argued that the eligible
households that participated in these three Microfinance programs have strikingly less
consumption levels than the eligible Households living in villages without the programs.

6.3 Impact studies of microfinance on wealth

68
 A further indicator of the impact microfinance is wealth. Montgomery et al (1996)
examined the performance and impact of two microfinance programs in Bangladesh. They
found that there were positive impacts of a microcredit program, such As the Bangladesh
Rural Advancement Committee’s (BRAC’s) Rural Development Program (RDP), on both
enterprise and household assets. Clearly, even though total value of household assets had a
slight increase after the borrowers obtained last loans, there had Significant increase in the
value of productive assets. Pitt and Khandker (1996 and 1998) also noted that the microcredit
had a positive impact on women’s non-land assets. Mosley (2001) also pointed out that there
was positive impact of microfinance on asset levels. He further stated that accumulation of
asset and income status was generally highly correlated, which led to extreme correlation
between income poverty and asset poverty. Coleman (1999) investigated the impact of a
village bank on borrower welfare in Northeast Thailand. He found that there was a slight
impact of program loans on clients’ Welfare. However, he discovered that the village bank
had a positive and significant impact on the accumulation of women’s wealth, particularly
landed wealth but this result included bias from measured impact (discussed in methodology
below). In contrary to the Positive results, Mckernan (2002) found an inverse relationship
between participation in Program and household assets. Mckernan also found that households
with fewest assets benefit most from participating in a program.

69
 6.4 Impact studies of microfinance on educational status

Many impact studies of microfinance have focused on educational status. Chowdhury

and Bhuiya (2004), studied the impact of a microfinance program, BRAC Poverty alleviation
program, in Bangladesh, and found that both member and nonmember Groups of BRAC had
improved in educational performance. However, the BRAC member households benefited
much more than poor non-member households. Furthermore, girls gained more than boys.
Holvoet (2004) investigated the effects of Microfinance on childhood education by
examining two microfinance programs in South India – one with direct bank-borrower credit
and another one with group mediated credit. The author showed that loans to women,
through women’s groups, had a significant Positive impact on schooling and literacy for
girls, whereas it remained mainly Unchangeable in the case of boys. However, in case of
direct individual bank-borrower Lending, there was no improvement in educational inputs
and outputs for children. Pitt and Khandker (1996) found that a credit to the participants
provided by a microfinance Institution like the Grameen Bank could grow school enrolment
for children. They found, for example, that in case of the Grameen Bank and Bangladesh
Rural Development Board’s (BRDB) Rural Development RD-12 program, credit lending to
women had a significantly positive impact on schooling for boys (Pitt and Khandker, 1998).

6.5 Impact studies of microfinance on health

Indicators related health issues are also applied as proxies to examine the impact of
microfinance. Chowdhury and Bhuiya (2004) found that microfinance program, led to a good
improvement in child survival and nutritional status. Pitt and Khandker (1996) also noted that
there was a rise in contraceptive use and decrease in fertility in case of the participants
obtaining a credit provided by the Grameen Bank. However, there was no evidence to prove
that an increase in contraceptive use or a decrease in fertility resulted from the participation
of women in group-based credit programs. But fertility reduction was observed and
contraceptive use slightly increased in case of men’s participation (Pitt et al., 1999).

70
6.6 Impact studies of microfinance on empowerment

Microfinance also leads to the empowerment of women. Hashemi et al. (1996)

studied two main microfinance programs in Bangladesh, the Grameen Bank and the
Bangladesh Rural Advancement Committee (BRAC). They noted that the participation of the
programs had important positive impacts on eight different dimensions of women’s
Empowerment:

 Mobility,
 Economic security,
 Ability to make small purchases,
 Ability to make larger purchases,
 Involvement in major household decisions,
 Relative freedom from domination by the family (especially, women’s
Ownership of productive assets),
 Political and legal awareness,
 Participation in public protest and political campaigning.

In another study, Pitt and Khandker (1998) found that the behavior of poor households was
significantly changed in case of women’s participation in the program credit, in Bangladesh.
It, for example, could be seen that every 100 additional taka credit provided to women by the
microcredit programs, namely the Grameen Bank, BRAC and BRDB, increased yearly
expenditure for household consumption by 18 taka, whereas that provided to men from the
same programs grew yearly household consumption Expenditure by 11 taka. However, there
exists a counter argument that microcredit Programs inflicted extreme pressure on women by
forcing them down to meet difficult loan repayment schedules (Goetz and Gupta, 1996).
Besides the microfinance impact on the indicators mentioned above, one study Tried to
examine how the savings group in Laos affects the behavior of member of a Village savings
group. It showed that the behavior of the village savings group members was changed as a
result of participating in a program. While previously savings were kept in the form of gold,
livestock, jewelry, deposits in the bank and savings at home, members now saved in the
savings group (Kyophilavong and Chaleunsinh, 2005). Different methodologies have been

71
adopted to analyze the impact of microfinance Programs. These are discussed in the next
section.

72
 Chapter-7: Literature Review

Microfinance
A Windows of Opportunities
Microfinance provides an opportunity for the banks to reach rural poor in groups for
extending various financial services and ensure financial inclusion. It should not be viewed
as a government program by the banks, but as a desirable long-term strategy for growth.

A Self-Help Group (SHG) is a socially and economically homogenous group of 10 to

15 people who voluntarily come together to achieve common goals. For he past fie decades
offer independence, the State is the planner and the implementer of anti-poverty programs.
Working of the political system and administrative machinery has been inadequate and the
number of people below the poverty line has not been appreciably reduced. The focus has
shifted to local participatory micro-development organizations known as SHG. In India,
22million SHGs were financed by the banks up to March 2006.a total of 165 million poor
people have gained access to bank credit. More than 90%of the members involved are
women. In Orissa, 1.8 lakh SHG had credit linkage with banks as on march 31, 2006 they
had been financed about Rs.452cr.State Bank of India (SBI) has credit-linked about 11 lakh
SHGs, most of them are women SHGs & provided an assistance of Rs.279cr.The institute of
management & information science (IMIS), Bhubaneswar, has undertaken a survey of SHGs,
incidentally, all women SHGs, in Puri District (Orissa)

Objectives:-
 To study the changes that took place in the economic status of the SHG members
after credit –linkage with the bank.

 To examine the nature of the economic activities undertaken by the SHG before &
after credit –linkage.

 To examine the efficiency of credit provided by the bank.

73
Methodology:-

The study is based on the primary data collected through a questionnaire. The questionnaire
consists of different aspects.

 General Information about SHG. Initial credit –linkage & subsequent repeat finance.

 Management Aspects:-leadership, maintenance of books & accounts, grading of the

financial group.

 Economic Aspects: - income before & after linkage, size of the assets, economic
activities undertaken, end use of loan.

 Socio – political aspects: - social initiatives taken by SHGs, political consciousness

awareness of group members.

 SHG linkage with Non-Government organization (NGO), village panchayats ,etc

 Future plan –Land –based activities & ancillary business like small business
activities, miscellaneous works such as SBI recovery agent.

 Response of other villages to the activities of SHG.

The Questionnaire is supply minted with door to door interview of member of SHG
Random method is employed to conduct the survey in 52 SHG spread over five
gram panchayats & national Advisory council & having 662 member.

Hypothesis –

 SHG has eliminated moneylenders & reduced the cost of debt which ranges
from 60% to 100% per annum in the countryside.

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  SHG has provided productive employment to hitherto unemployed women.

 Co –operative –Synergy effect is evidenced.

 NGO have development & government have provided adequate training to the
members of the group.

Analysis & observations

Money lenders have been successfully eliminated by all the SHG as mentioned in the
report .the member lend among them selves, the current rate of interest being 36 % per
annum .institutions should not took at askance at this rate as this is basically market –based
.one of the members of the SHG at Nauseas village commented: “we are grateful to the bank
that the loan enables us to lend & borrow. The rate is immaterial; we are at least giving the
interest to ourselves, not outsiders.”

Another SHG met a member medical expenses which would have required

Outside borrowing. No major social functions like marriage or funeral rites were conducted
in the houses of the members. Hence, they were not under the pressure of moneylenders.

Youth SHG

Keeping in view the unsatisfactory experience of banks, particularly in respect to self-

employment scheme for educated unemployed youth &Prime Minister Rozgar yojana loans
which were literally taken as political grants by the beneficiaries, banks, encouraged women
SHG.

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 Their individualistic orientation.

 Search for a ‘secure’ job, preferably urban-oriented low-skilled job or desk- bound
job.

 Easy susceptibility to political designs &needs.

Participation in fairs /festivals:-

Most of the SHG which were surveyed expressed their interest in joining block level fair for
selling their products. But very few had a chance to participate.

Favoritism, including illegal gratification is the allegations made against some government
agencies, particularly Orissa Rural Development & marketing Society (ORMAS). Wider
participation will reduce favoritism, if any, on this score.

Group Dynamics:-

The group had a leader who had good interpersonal skill, information skills which included
liaison with customers, bank & others who where outside organizations

 The following characteristics are delineated in SHG leaders in varying

degrees.

 Intelligent

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  Confident

 Integrity

 Sociable

 Positive outlook

 Good judgment

 Willing to learn

 Solves problems

 Decisive

 Determined

 Communicate

 Attentive

 Includes not excludes

 Courageous

 Realistic

Training:-

Capacity –building training was organized by nabard, & also occasionally by bank like the
SBI. This has to be done on a regular basis. Training that is providing by the government is
inaugurate. Even central village level or block-level stair is not organized regularly.

This is quite a lesson on disaster management. But a false step or non-cooperation among
them would have resulted in breakdown of the group or economic / social ruin of that
member. Marketing / leadership

Training can be imparted through Reg. Regan’s, founders of action learning for managers,
fundamental equation.

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 L= P+Q +A+R

Where

L = Learning

P = Program learning

Q = Questioning

A = Action

R = Reflection

The members will learn with & from one another, so also the NGO trainer.
The inner experiential cycle would be as given below.

Desire to change – Risk-taking (courage &responsibility) – Insight –Transformation.

Process Model:-

The process model of SHG is given below

1) Members of SHG

2) SHG as a group

3) Village community

4) The panchayats

5) Higher bodies-district state

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6) NGO

7) SBI

The intersection on the concentric circles represents the environments that

get influenced by the SHG.

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Case Study:-

Self Help Group and Women Empowerment-A case Study of

Swa- Shakti Project

Author Supervisor
Kavita Siradhna Dr.Bharti Sharma (Retd.)
Department of Social Work
Jamia Millia Islamia
New Delhi.

A comparative study of member and non-member women along a set of six common
agriculture including their greater control over the agricultural land. This along with lack
Amava and Bachrawa. The study was also conducted at the level of the non-member
amongst the member women and their relatively greater access to social, economic and any
material differences along a set of common empowerment parameters amongst as a key
programmatic strategy in various women development initiative. In order to at individual and
community level; 3) to understand the effect of the programmed awareness of field
functionary of partner NGO, Sarvodaya Ashram promoting SHG in being increasingly
viewed as an instrument of women’s empowerment and incorporated contextual factors in
terms of poor resource availability and development conditions also control over resources;
4) to find out if there has been a transformation of relations of credit activities have resulted
in increasing women’s economic self-reliance thereby Development Association (IDA) and
Govt. of India initiative on women empowerment . Empowerment indicators showed higher
awareness on social issues and mobility in Rae Bareli district of Uttar Pradesh. The sample
comprises of sixty-six member initiative of International Fund for Agricultural Development
(IFAD), International interventions on the position of women members in their families;
whether project It is believed that as women affinity groups SHG by mobilizing women
around thrift and larger society 5) to suggest measures for making SHG an effective
instrument of member and non-member women owing to participation in group processes.

80
Gender members on property right, wife-beating, preference for male child, and male bias in
members were also covered. Purposive and criteria sampling along with random methods
have been used to enrich the qualitative study. The study has been conducted non-member
women was drawn from non-project villages to understand if there were of education
severely restricts women’s ability to be genuinely empowered. The of SHG s; 2) to
understand how the group processes of SHG can impact empowerment participation has led
to greater autonomy, decision-making power and their greater political resources. The SHG
membership and access to credit has ensured amongst processes exhibited partly in terms of
higher empowerment levels of its leaders. Lack of relying on the SHG model was conducted.
Resulting in women’s increasingly greater control over other spheres of life. The SHG has
role on credit related matter, education of children and family planning matter. The study
sampling methods were used at various stages of sampling. Severely limits empowerment
outcome. At the level of the group, participation in group showed the limited role of SHG in
bringing about a change in the social structures of some women members the necessary
confidence and assertiveness to play a proactive subordination between men and women,
change in power relations at the level of the subordination including patriarchy. This is
reflected in the perceptions of women the main objectives of the study have been 1) to
understand the genesis of the formation the project district of Rae Barelli was studied.
Families of thirty –four individual women the study addresses women empowerment through
Self Help Group in the rural setting. The study adopts a mixed model approach to study the
research problem. Quantitative understand how SHG empowers women a case study of Swa-
Shakti Project a joint women drawn from ten Self Help Groups drawn from three blocks of
Maharajganj, women, partner NGO and family member of individual member. A sample of
sixty-six insurance of assets created through loan, lack of registration of assets in the name of
women borrower, lack of male accountability, proxy loaning and autonomy in SHG
functioning emerged as critical issues of concerns at the level of the group having
implications for empowerment of its women members.

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Social Work Intervention strategies
At the level of the group it is important to harness the strength of the collective to nurture the
potential of its individual members. It is important to ensure participation of individual
members in the group processes through measures such as periodic change in leadership, and
democratic functioning. Compulsory insurance of assets created out of loan and its
registration in the name of the women borrower, are measures that can have positive
implications for empowerment of women members. Strategy for education of women,
convergence with other development programmed and making women empowerment a part
of the overall development paradigm are imperative to have any lasting empowerment
outcome. It is important to utilize the SHG forum in enlightening the women in challenging
the wider structures of women’s social and psychological subordination without which the
role of SHG in women empowerment remains circumscribed

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83
 Chapter-8: Marketing of Microfinance Products

8.1 Contract Farming and Credit Bundling

Banks and financial institution have been partners in contract farming schemes, set up
to enhance credit, basically, this is a double model. Under such an arrangement, crop loans
can be extended under tie-up arrangements which corporate for production of high quality
produce with stable marketing arrangement provided – and only, provided – the price setting
mechanism for the farer is appropriate and fair.

8.2 Agree Service Centre- Rabo India

Rabo India Finance Pvt Ltd. Has established agree-serviced centers I rural areas in
cooperation with a number of agree-input and farm services companies. The services
provided are similar to those I contract farming, but with additional flexibility and a wider
range of products including inventory finance. Besides providing storage facilities, each
centre rents out farm machinery, provides agricultural inputs and information to farmers,
arranges credit, sells other services and provides a form for farmers arranges credit, sells
other services and provides a forum for framers to market their products.

8.3 Non Traditional markets

Similarly, Mother Dairy Foods Processing, a wholly owned subsidiary of National

Dairy Development Board (NDDB) has established auctions markets for horticulture
producers in Bangalore. The operations and maintenance of the market is done by NDDB.
The project with an outlay of Rs. 15 lakh covers 200 horticultural farmers associations with
50,000 grower members for wholesale marketing. Their produce is planned with production
and supply assurance and provides both growers and buyers a common platform to negotiate
better rates.

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8.4 Apani Mandi

Another innovation is that of the Punjab Mumbai Board, which has experimented
with a ‘farmers’ market to provide small farmers located in proximity to urban areas, direct
access to consumers by eliminating of middlemen. This experiment known as “Apani
Mandi” belongs to both farmers and consumers, who mutual help each other. Under this
arrangement a sum of /rs. 5.2 laks is spent for providing plastic crates to 1000 farmers. Each
farmer gets 5 crates at a subsidized rate. At the mandi site, the Board provides basic
infrastructure facilities. At the farm level, extension services of different agencies are pooled
in. These include imp juts subsidies, better quality seeds and loans from Bank. Apni Mandi
scheme provides self-employment to producers and has eliminated social inhibitions among
them regarding the retail sale of their produces.

85
86
 Chapter 9:- Data Analysis

The completion of this Management Thesis required all the Primary Data has collected
from the personal interview of Mr. Washekar in Akola Panchayat Samity.

Total 178 Villages comes under Akola Panchayat Samity to handle or spread the SHGs
activities. According to that villages total 110 Grampanchyat also comes under the Akola
Panchayat Samity. Total 59,230 families out of those 28,475 families come under BPL
(Below Poverty Line).

From the Government side Swarna Jayanti Gram Swa rojgar yojana this is the main
scheme offered by the Government. The origin of the Microfinance mainly for the BPL and
secondly APL (Below Poverty Line and Above Poverty Line)

Financial Institutions

Micro Finance Institution i.e. DRD (Dist. Rural Development Agency). In Akola
Dist. to handle the all Self Help Group activities the Microfinance Institutions DRD are
separately for one Dist. This is situated in Ramdas Peth, Akola. There is one link of source
of finance to provide to the end user. First the member has to open an A/C in any bank in
group of Nationalized Banks Co-operative Banks and Gramin Banks. Then they have to
make case in Akola Panchayat samity of their document and their program that they are
actually are going to do, then from the Akola Panchayat Samity the case send to the DRD
office to sanction the amount for their business, then after the sanction of amount the cheque
of their lone is again send to the particular mention bank to distribute to the group for their
activities. The maximum limit of lone to sanction them is between 2,50,000 to 3,00,000.
This all the lone activities are sanction only on the basis of their record and performance.

So according to this way the process of sanction the lone is conducted by the
Government.

87
 SHG (Self Help Group)

The purpose of forming SHGs is to make financial services available to those who are
otherwise likely to be bypassed by the formal banking system. This reduces the dependence
of the members of the group thus formed on moneylenders who generally charge exorbitant
rates of interest. The SHGs provide the members, in particular women, with a launch pad to
gain confidence, skills and power to promote their interests. By making credit available, it
provides opportunities to people belonging to the weaker sections to start income generating
activities and empower themselves by improving their economic status.

Mahila Bachat Gats:-

Mahila Bachat Gats steps were taken to finance women who intend to support their
families or want to be independent earners. The concept of micro credit is based on extension
of small loans as working capital to these women who lack right resource and direction, are
not eligible for conventional bank loans for self-employment, thereby utilizing their
potential.

SOURCE OF FUNDS AND EXTERNAL BORROWINGS FOR THE

SHGS
The SHGs use their own funds for internal lending among their members and generally
charge interest at the rate of 1 - 2 per cent per month on these lending. These rates are still
lower than that charged by moneylenders. Apart from this, some SHGs (e.g. SHGs consisting
of members only from SC/ST families, with all members from BPL families) also get
subsidies from the government depending on their loan repayment pattern, and these
additional amounts of money due to the subsidies also get added to the SHG funds.

88
 Training:
To make or prepare the one small group of 10 to 15 members there is one comity
from the Government to train those members for SHG or Mahila Bachat Gats. Following are
the three types of training to those people that are.

• Basic Orientation Program for 2 Days

• Technical Training for 3 Days

• Business Training for 7 Days

 Basic Orientation Program for 2 Days:-

Basic Orientation program only for the 2 days because in this program the
members are trained to make a group of for SHG and know about the activities of the group
that they will going to do.

 Technical Training for 3 Days:-

The second important training to the group is Technical Training for 3 days in
that the members are trained about the technical activities among the group like that opening
the A/C in Bans for their transactions and handling the all documentation activities. In this
training the group have to select one business that they are actually will going to do as a
SHG.

 Business Training for 7 Days:-

This is the most important training for the member because in this trainer
taught them about detail of their selected business like how to do, how to improve, how to
co-ordinate to each other, how to get profit and how to expansion their business.

 Scheme:
• Government provides SUBSIDY Rs. 1, 00,000 to 1, 25,000
according to member of group for BPL but no SUBSIDY for APL.

• Also the rate of interest i.e. up to 7% for three year.

• Training center at the door step.

 Banks:
• Co-operative Banks

• Nationalized Banks

89
• Gramin Banks

90
 CHAPTER- 10
FINDINGS
Followings are the major findings on the completion of the Management Thesis.

 Net household income:-

I Implementation of SHG significantly contributed to the increase of net household
incomes. The analysis of net household income has the significant contribution in the growth
National Income.

 Consumption expenditure pattern:-

The SHG has influenced the consumption pattern of member households. The average
annual growth rate of consumption expenditure on food items is increase.

 Changes in savings:-
The average level of savings per household increased significantly after joining or doing
activities in SHG or Bachat Gats. Total savings, which includes financial and physical
savings.
 Self-confidence:-
Questions related to the self-confidence of women were asked, such as, travelling alone
to the nearest town/district, going alone to hospitals, handling certain amount of money and
addressing a forum. The share of women members reporting significant improvement in their
self-confidence level for all indicators has gone up in the SHG period.

 Positive Behavioral changes:-

In behavioral changes, the study found that more than 70 per cent of women respondents
reported improvement, or even significant enhancement, in their ability to face problems;
women reported that they could handle problems related to health, resolving family disputes.
On the question of control over use of money, women reported significant improvement in
the acquisition of consumer durable assets during work with SHG period. Similarly, more

91
than 50 per cent women reported an increase in control over use of money on buying of
physical assets, and also they manage their expenditure on family/social functions and
expenditure on children’s education.

Qualitative Findings

During the collection of Primary Data the special finding is 50 to 60 % families of the
list of BPL are not come under the list of BPL. According to the rules and regulation of the
government the family’s annual income should be the less of Rs. 15,000/- but not more than
that, if the annual income of any family is Rs. 15,001 or more than that then that family
comes under APL (Above Poverty Line) and the MICROFINANCE not provide any subsidy
to APL. And during the survey I found that maximum family’s annual income is more than
Rs. 15,001/-. So here I can say that if the management of Government is efficient then the
ratio of BPL will decrease up to maximum level.

Problems

Before 1995 the Government has gone through big problem related to recovery of
their lone, the reason behind that at that time in a group maximum male was there. Male
usually was doing the more embezzlement and they was not doing any business and that
time recovery was only 20 to 30 % but after the experiment of 4 year on Mahila Bachat Gats
every thing is going to increasing rapidly even recovery is near to 95% of the total amount
of lone. So then Government has decided on giving them subsidy on interest rate also i.e. 7%.

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 CONCLUSION
The objective of this research has completed by the researcher and the researcher has
collected data from different sources. During this completion researcher has study the micro
study of MICROFINACE and their INSTITUTIONS. The MICROFINANCE has
originally origin for the BPL (Below Poverty Line) and secondly for the APL (Above
Poverty Line) and for the small Scale Business. Microfinance provides different types of lone
to different business with different subsidies.

The innovations in Microfinance sector has made a dramatic change in the supply of
credit to the neediest, neglected sector by formal financial institutions. The most important
innovation that has come up is that societal upliftment and social development is no longer
grant based. People have realized that the formal credit is more important and yielding than
grants. The most important impact of this innovation is the development of confidence
among poor and their realization to grow according to their own plan rather than the
grant/assistance provider.

For the social welfare with small scale business the MICROFINANCE as like as
BOON. In the form of SHG (Self Help Group) there is a small group of female of 10 to 15
members, with the help of small group for development of whole society MICROFINANCE
provide different lone facilities. So that the contribution of Microfinance is very much
important.

With the help of different institution MICROFINANCE conduct their activities

towards the completion of their objectives. Like DRD (Dist. Rural Development Agency)
Akola Dist. Akola Panchayat Samity, and Co-operative bank, Nationalized Banks and
Gramin Banks. With the help of them Government provide to them different scheme like
subsidy up to 1,00,000 to 1,25,000 for the lone amount of 2,50,000 to 3,00,000 for the
period of 3 years. And government also provides the subsidy in the rate of interest of that
lone up to 7% on the basis of their performance.

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 Apart from all the above, Govt. believe in providing good scheme & services to
convert BPL into APLwhich is a key factor for increase Par Capita Income.

Abbreviations

DRD : Department for International Development

MFI : Microfinance Institution

NABARD : National Bank of Agriculture & Rural Development

NGO : Non-Government Organization

RRB : Regional Rural Banks

SIDBI : Small Industry Development Bank of India

SHG : Self Help Group

SHPI : Self-Help Promotion Institution

SGSY : Swaran jayanti Gram Swarazagar Yojana

IRDP : Integrated Rural Development Program

NB : Nationalized Bank

CO-B : Co-Operative Bank

GB : Gramin Bank

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 References

Secondary Data:

 Books: Microfinance, Challenges and Opportunities edited by S. Rajagopalan

 Internet:

http://www.scribd.com/doc/11946430/Report-on-Micro-Finance

http://www.microfinanceinfo.com/history-of-microfinance

http://www.microfinanceinfo.com/the-definition-of-microfinance

http://www.microfinanceinfo.com/weaknesses-and-strengths

http://www.microfinanceinfo.com/working-method-for-microfinance-institutions

http://www.microfinanceinfo.com/microfinance-products

http://www.info2india.com/finance/banks/nationalised-banks/index.html

 Primary Data:

• Personally visited to the Akola Panchyat Samity and data collected through
the interview of Mr. Washekar.

• Also I visited at the Umri Grampanchayat for the list of BPL families.

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Appendix

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