IMPACT OF MICRO-CREDIT

“STUDY BASED IN SEMI URBAN AREA OF

JALANDHAR”

Submitted to Lovely Professional University

In partial fulfillment of the requirements for the award of degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted by: Supervisor:

Group No: T034 Mr. Ramandeep Singh Deol
Arshpreet Singh RTI803A14 Lecturer in LIM
Karan Wadhera RT1803A16
Sunny RT1803A18
Seema Bhatia RT1803A19

DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA
(2008-2010)

1
 TO WHOMSOEVER IT MAY CONCERN

This is to certify that the project report titled “Impact of Micro-credit-Study based
in semi-urban area of Jalandhar” carried out by our group consisting of Arshdeep,
Karan Wadhera, Sunny and Seema has been accomplished under my guidance &
supervision as a duly registered MBA student of the Lovely Professional
University,Phagwara.This project is being submitted by them in the partial
fulfillment of the requirements for the award of the Master of Business
Administration from Lovely Professional University. Their dissertation represents
their original work and is worthly of consideration for the award of the degree of
Master of Business Administration.

___________________________________
(Name & Signature of the Faculty Advisor)
Date:

2
DECLARATION

We, hereby declare that the work presented herein is genuine work, done originally
by us and has not been published or submitted elsewhere for the requirement of a
degree programme. Any literature, data or works done by others and cited within
this dissertation has been given due acknowledgement and listed in the reference
section.

Arshdeep Singh_______________________
Karan Wadhera_______________________
Sunny ______________________________
Seema______________________________

Date:__________________

3
 ACKNOWLEGEMENT

We express our deep sense of gratitude & indebtedness to Mr. Ramandeep Singh Deol (Faculty
Advisor & Lect. in LIM ), for his invaluable guidance and help in improving the standard and
quality of this report.

We are very glad to express our utmost gratitude to Mr. Jagit Singh , Mr.
Amit Dutt ( lect. in LIM) for their invaluable guidance and help for using SPSS for conducting
our research.

We are also very thank full to Ms. Sukhwinder Kaur and Mr. Amrit Pal ( Lect. in LIM )
for their guidance regarding the submission of the capstone project.

Arshdeep singh

Karan Wadhera.

Sunny

Seema

4
 TABLE OF CONTENTS

S.NO CHAPTER P.No.

.

1. Executive summary 6-7

1. 1.Introduction to Micro-Finance……………………………………………………8 8-12

i. Activities in Micro-Finance…………………………………………….…..8
ii. Who are the clients of Micro-Finance?......................................................8-9
iii. Micro-Finance Models……………………………………………….....9-11
iv. Legal forms of MFIs in India……………………………………………12

2. Review of Literature 13-15

3. Need,Objectives,Scope and methodology 16-18

4. Data Analysis & interpretations 19-42

5. Findings & Suggestions 43-44

6. Conclusion 45

7. References 46

8. Appendix(Questionnaire)

5
 EXECUTIVE SUMMARY
OBJECTIVE OF THE STUDY

Microfinance has proved to be a successful step towards poverty alleviation and empowerment
in rural area and now the time is for semi-urban areas.

The objective of this study is to find out how feasible will the replication of micro finance model
be in semi-urban area. It also tries to gauge the openness of semi-urban people towards
microfinance. The study also compares the effectiveness of microfinance vis-à-vis various
sources of finance available, which sources the clients, prefer & which factor do they consider
before taking micro-credit & problem faced by people while opting for micro-credit in jalandhar
semi-urban area.

Micro Financing has greatest scope in India especially in developing semi -urban cities like
Jalandhar because many of the people don’t have high income resulting in low purchasing power
and Micro Finance institutions target market as low income group and it is common impression
is that the poor people need and use a variety of financial services including deposits, loans etc.
they use financial services for some reason like –

 Seize business opportunities

 To fulfill their need of necessities
 Improve their standard of living
 Deal with emergencies like illness etc.

Primary data was collected through questionnaire from people of semi-urban area
Semantic Differential Scale was used to understand the degree of satisfaction of below Rs.
15,000 Income level per month regarding various sources of finance.

Secondary data was collected through government websites and various websites of banks,
newspapers, magazines etc.

Analysis was conducted with the help of SPSS software by using One-Way Anova at
significance level of 0.05 & MS-Excel

6
MAJOR FINDINGS

The research stated that, “The micro-finance is feasible in Jalandhar region”. And most of the
people are availing micro-credit in order to do business and to deal with emergencies. For
reliable source of finance private and public banks have been regarded as the most suitable one
comprising of ICICI bank , HDFC bank , Punjab National Bank and State Bank of Patiala.

SUGGESTIONS

Its required by banks to open their own MFI in Jalandhar region so that it will be more suitable
for the needy people to avail the micro-credit service through it. More of NGO’s should come
forward in Jalandhar region inorder to help the poor and needy people to satisfy their needs.the
interest rates charged on micro finance should not be more than 15 %.

IMPLICATIONS

If a micro-finance institution plans to launch micro finance service in semi-urban areas, it may be
successful in terms of having little non-performing assets, however it will first have to popularize
the concept, so that the target customers are more open to the idea and understand the relative
benefits that it will have over existing sources of finance.

CONCLUSION

 To conclude we can say that its just the beginning of the micro-credit in Jalandhar region
and it will of more success when people will rely more towards organized sector for
micro-credit such as Public and Private sector banks.
 There is need for opening of MFI’s in Jalandhar region so that micro-credit can be
provided with more of ease
 Micro-credit can be regarded as tool which will help to eradicate poverty
 Help for women upliftment by making them more independent and monitory fit.
 Help poor to set—up businesses and earn their livelihood.

7
INTRODUCTION TO MICROFINANCE
Microfinance can be defined as financial services targeting and catering to clients who are
excluded from the traditional financial system on account of their lower economic status.
Microfinance can include micro-credit, micro-savings, micro-insurance and payment services.

ACTIVITIES IN MICROFINANCE

 Microcredit: It is a small amount of money loaned to a client by a bank or other

institution. Microcredit can be offered, often without collateral, to an individual or
through group lending.
 Micro savings: These are deposit services that allow one to save small amounts of
money for future use. Often without minimum balance requirements, these savings
accounts allow households to save in order to meet unexpected expenses and plan for
future expenses.
 Micro insurance: It is a system by which people, businesses and other organizations
make a payment to share risk. Access to insurance enables entrepreneurs to concentrate
more on developing their businesses while mitigating other risks affecting property,
health or the ability to work.
 Remittances: These are transfer of funds from people in one place to people in another,
usually across borders to family and friends. Compared with other sources of capital that
can fluctuate depending on the political or economic climate, remittances are a relatively
steady source of funds.

WHO ARE THE CLIENTS OF MICRO FINANCE?

 The typical micro finance clients are low-income persons that do not have access to
formal financial institutions. Micro finance clients are typically self-employed, often
household-based entrepreneurs.
 In rural areas, they are usually small farmers and others who are engaged in small
income-generating activities such as food processing and petty trade.

8
  In urban areas, micro finance activities are more diverse and include shopkeepers, service
providers, artisans, street vendors, etc. Micro finance clients are poor and vulnerable non-
poor who have a relatively unstable source of income.

Access to conventional formal financial institutions, for many reasons, is inversely related to
income: the poorer you are the less likely that you have access. On the other hand, the chances
are that, the poorer you are, the more expensive or onerous informal financial arrangements.
Moreover, informal arrangements may not suitably meet certain financial service needs or may
exclude you anyway. Individuals in this excluded and under-served market segment are the
clients of micro finance.

MICRO FINANCE MODELS

I. Micro 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
considerably today. While there is no published data on private MFIs operating in the country,
the number of MFIs is estimated to be around 800.
II. 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.

9
 A sub - variation of this model is where the MFI, as an NBFC, holds the individual loans on its
books 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 then inhibit such funding of MFIs by commercial banks through the
securitization structure.

III. 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 savings of gullible public and then vanish with them. It remains
to be seen whether the mechanics of such relationships can be worked out in a way that
minimizes the risk of misuse.

IV. Service Company Model

Under this model, the bank forms its own MFI, perhaps as an NBFC, 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 books them. But in 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 partnership model, MFIs may
contract with many banks in an arms length relationship. In the service company model, the MFI
works specifically for the bank and develops an intensive operational cooperation between them
to their mutual advantage.

10
(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 a more advantageous cost structure for microfinance.

V. SHGs-Bank Linkage Model

NABARD is presently operating three models of linkage of banks with SHGs and NGOs:

Model – 1: In this model, the bank itself acts as a Self Help Group Promoting Institution (SHPI).
It takes initiatives in forming the groups, nurtures them over a period of time and then provides
credit to them after satisfying itself about their maturity to absorb credit. About 16% of SHGs
and 13% of loan amounts are using this model (as of March 2002).

Model – 2: In this model, groups are formed by NGOs (in most of the cases) or by government
agencies. The groups are nurtured and trained by these agencies. The bank then provides credit
directly to the SHGs, after observing their operations and maturity to absorb credit. While the
bank provides loans to the groups directly, the facilitating agencies continue their interactions
with the SHGs. Most linkage experiences begin with this model with NGOs playing a major role.
This model has also been popular and more acceptable to banks, as some of the difficult
functions of social dynamics are externalized. About 75% of SHGs and 78% of loan amounts are
using this model.

Model – 3: Due to various reasons, banks in some areas are not in a position to even finance
SHGs promoted and nurtured by other agencies. In such cases, the NGOs act as both facilitators
and micro- finance intermediaries. First, they promote the groups, nurture and train them and
then approach banks for bulk loans for on-lending to the SHGs. About 9% of SHGs and 13% of
loan amounts are using this model.

11
LEGAL FORMS OF MFIs IN INDIA
Table 4.1 Legal forms of MFIs in India
Types of MFIs Estimated Legal Acts under which Registered
Number*
1.  Not for Profit MFIs 400 to 500 Societies Registration Act, 1860 or similar
Provincial Acts
a.) NGO - MFIs
Indian Trust Act, 1882
b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956

2. Mutual Benefit MFIs 200 to 250 Mutually Aided Cooperative Societies Act
a.) Mutually Aided Cooperative enacted by State Government
Societies (MACS) and similarly
set up institutions

3.  For Profit MFIs 6 Indian Companies Act, 1956

a.) Non-Banking Financial Reserve Bank of India Act, 1934

Companies (NBFCs)
Total 700 - 800  

Source: NABARD website

12
REVIEW OF LITERATURE

1. Sayma Rahman, (2010) Consumption difference between Micro-credit borrowers and

Non-Borrowers: A Bangladesh Experience. The Journal of Developing areas, Vol.43, Iss 2;
p.g. 313, 14 pgs

This paper investigates the consumption behavior of borrowers of two major microcredit
institutions in Bangladesh and compares that with non-borrowers. Primary data has been
collected from borrowers of the Grameen Bank and Bangladesh Rural Advancement Committee
(BRAC) operating in three major districts in Bangladesh. Along with borrowers, non-borrowers
data has also been collected from non-program village to avoid endogeneity. Control-group
method (non-borrowers from non-program villages) has been used to compare the differences in
consumption patterns between the two groups. This study analyses the impact of per capita
monthly expenditure and other household characteristics on the budget share of eleven items
(food and non-food) consumed by borrowers and non-borrowers. Results from the estimation on
linear and quadratic model suggest that borrowers of microcredit programs are better off in terms
of consumption than non-borrowers.

2. Masahiro Shoji. Does Contingent Repayment in Microfinance Help the Poor During
Natural Disasters? The Journal of Development Studies. London: Feb 2010. Vol. 46, Iss.
2; pg. 191

Microfinance’s in Bangladesh introduced a contingent repayment system beginning in 2002,

which allowed rescheduling of savings and instalments during natural disasters for affected
members. This paper is one of the first attempts to evaluate the system employing a unique
dataset. In using evidence from a flood in 2004, the author found that rescheduling plays the role
of a safety net by decreasing the probability that people skip meals during negative shocks by 5.1
per cent. This effect is even higher on the landless and females. This study attempts to contribute
to the issue regarding the poverty reduction effect of microfinance’s.

13
3. Sayma Rahman, Rafiqul Bhuyan Rafiq, Mo Vaziri. Microcredit Programs and
Consumption Behaviour of the Borrower: Evidence from Bangladesh. Journal of American
Academy of Business, Cambridge. Hollywood: Mar 2009. Vol. 14, Iss. 2; p. 83 (10 pages)

Microcredit program in Bangladesh provides small loans to rural people especially to women
with the purpose of eradicating poverty. This study investigates the impact of microcredit on
consumption pattern of borrowers and compares if the impact is the same for non-borrowers.
Primary data has been collected from the Grameen Bank and the Bangladesh Rural
Advancement Committee (BRAC) borrowers of some selected villages from three major districts
in Bangladesh. Data of non-borrowers are collected from the same cohort to provide a control
group for comparison with borrowers. To estimate the impact of per capita monthly expenditure
and other household characteristics on budget share of items consumed by borrowers and non-
borrowers the study relies on An Almost Ideal Demand System (AIDS) model. The estimated
results of Iterative Seemingly Unrelated Regression (SURE) suggest that borrowers of
microcredit programs are better off in terms of consumption of most of the food and non-food
items compared to non-borrowers.

4. Yunus, Banker to the Poor: The Story of Grameen Bank. The Lahore Journal of
Economics. Lahore: Summer 2009. Vol. 14, Iss. 1; pg. 173, 3 pgs

Loans are given for income-generating work and initially it was decided to influence the clients
on their choice of work. The principle of the Grameen Bank system is that the people should not
have to go to the bank, rather the bank should go to the people. In comparing Grameen to
conventional banks, Yunus states that the difference for one, lies in the fact that their clients do
not need to show how large are their savings and how wealthy they may be, instead they need to
prove how poor they are and how meagre are their savings. Further, the success of the bank is
gauged not by bad debt figures or repayment rates, although this is necessary for their internal
records, but whether or not the lives of the clients have improved and they have been extricated
from the evils of poverty.

The author's economic philosophy is another chapter of great interest. Although not considering
himself to be a follower of capitalism per se, he does believe in the global free market economy
and the power of the free market. He does not think it right to offer unemployment benefits to

14
redress the problem of the poor. All the poor need, he holds, is financial capital. He also
advocates competition as a driving force for all innovations. Yunus proposes that we replace the
limited profit maximization principle of capitalism with a generalized principle - an entrepreneur
who maximizes both profit and social returns. In this way an entrepreneur could run social
services such as a health care service for the poor, if financially viable. Such entrepreneurs
would be steeped in social consciousness. A willing suspension of disbelief is called for here, as
even though one would wish to endorse his views on the goodness of human nature, sadly his
philosophy seems to border on the idealistic and ephemeral rather than being a true depiction of
man's inherent nature.

Yet, so successful has been this venture that it has been replicated with greater or lesser success
in other countries of Asia, Africa, Latin America and now even in the US. It has also expanded
its spheres of activities to ventures such as housing loans, fisheries and retirement schemes.

To conclude, a word on Pakistan's experience with micro finance. Unfortunately this has not
been as salubrious as the experience of Bangladesh thus far, for whatever reason. Yet the
intended outreach this fiscal year is 3 million poor, up from last year's 2 million.

We all live with rampant poverty and our reaction is invariably one of apathy, indifference or
resignation that individually there is very little if at all we can do about it. Yunus is that rare
individual who not only believes that the evil of poverty can be eradicated but has devoted his
entire life's work to realizing this dream.

15
NEEDS FOR MICROFINANCE

 Poor people need not just loans but also savings, insurance and money transfer
services.
 Microfinance must be useful to poor households: helping them raise income, build up
assets and/or cushion themselves against external shocks.
 “Microfinance can pay for itself.” Subsidies from donors and government are scarce
and uncertain, and so to reach large numbers of poor people, microfinance must pay
for itself.
 Microfinance means building permanent local institutions.
 Microfinance also means integrating the financial needs of poor people into a
country’s mainstream financial system.
 “The job of government is to enable financial services, not to provide them.”
 “The key bottleneck is the shortage of strong institutions and managers.” Donors
should focus on capacity building.
 Interest rate ceilings hurt poor people by preventing microfinance institutions from
covering their costs, which chokes off the supply of credit.
 Microfinance institutions should measure and disclose their performance – both
financially and socially.

SCOPE:

Micro Financing has greatest scope in India especially in developing semi -urban cities like
Jalandhar because many of the people don’t have high income resulting in low purchasing power
and Micro Finance institutions target market as low income group and it is common impression
is that the poor people need and use a variety of financial services including deposits, loans etc.
they use financial services for some reason like –

 Seize business opportunities

 To fulfill their need of necessities
 Improve their standard of living

16
  Deal with emergencies like illness etc.

OBJECTIVE OF THE STUDY

Microfinance has proved to be a successful step towards poverty alleviation and empowerment
in rural area.

 The objective of this study is to find out how feasible will the replication of micro finance
model be in semi-urban area of Jalandhar. We will also try to gauge the openness of
people towards microfinance.
 The study shall also measure the effectiveness of microfinance. It is a feasibility study
which we intend to share with the people who wish to implement microfinance in
Jalandhar region.
 What are the various sources available for the micro-finance credit in Jalandhar.
 Which source the clients prefers the most to avail the facility of micro-credit.
 What are the major factors for which people are taking micro-credit.
 What are the problems faced by clients while opting for micro-credit.

HYPOTHESIS
 Micro-Finance is feasible in Jalandhar city.

17
RESEARCH METHODOLOGY

 RESEARCH TOPIC- “IMPACT OF MICRO-CREDIT STUDY BASED

IN SEMI URBAN AREA OF JALANDHAR”
 RESEARCH TYPE- Descriptive research

 DATA COLLECTION TOOLS;

-SECONDARY DATA: With the help of websites of various banks and
Govt. websites, magazines, news-papers etc.
-PRIMARY DATA: By direct interaction with clients and local
Non- Banking institutes and money-lenders
and with help of questionnaire.
 SAMPLING TECHNIQUE: Convenience sampling
 SAMPLING UNIT: Jalandhar region(Semi-urban area)

 SAMPLE SIZE: 60 Respondents

 TOOLS USED FOR THE STUDY:
 Open Ended & Closed Ended Questionnaire
with the help of Semantic Differential Scale
 TECHNIQUES OF ANALYSIS

Quantitative: One-way Anova & MS-Excel

18
 DATA ANALYSIS AND INTERPRETATION

Part-I

I. Have you ever taken micro-credit?

OPTION NO. OF RESPONDENTS

YES 50
N0 10

Micro-Credit Availed

NO
17%

YES
83%

Interpretation:-

This shows that most of the respondents we cover were availing the service of micro-credit and
thus shows that micro-credit is playing vital role in their life in some or the other way.

19
II. What is your occupation?

No. of respondents percentage

Occupation
Farmer 3 5%
Auto/rikshaw puller 9 15%
Business 22 37%
Service 18 30%
Others 8 13%

occupation

others
13%

farmer service
5% 30%

autorikshawpuller
15%

bussiness
37%

Interpretation:-

This shows that most of the respondents were indulged in the business and service class
contributing about 67% of the total respondents where respondents like farmers are low i.e. just
5% , with auto/rikshaw puller form 13 and 15% respectively.

20
III. What is your income level (Per Month)?

Income level No. of respondents Percentage %

Below Rs. 5000/- 7 12
Rs.5000-10,000/- 17 28
Rs.10,000-15,000/- 21 35
More Than Rs.15,000/- 15 25

Income level
Below Rs. 5000/-
12%

More Than Rs.15,000/-

25%

Rs.5000-10,000/-
28%

Rs.10,000-15,000/-
35%

Interpretation:-

The basic purpose to ask this question was to know the respondents who belong to income group
more than 15000/- were not availing much of the micro-credit facility this question further
helped us to conduct our study as only 6 people among this group are availing the service of
micro credit where as people belonging to the lowest income group i.e. 7 all are availing this
service.

21
IV. Which source you rely the most while taking micro-credit?(50 respondents)

Source No. of respondent Percentage %

Local-Money Lenders 11 22
Public Banks 13 26
Self-Help Groups 0 0
Co-Operative banks 2 4
Private Banks 16 32
Peers 3 6
NBFI’s 4 8
others 1 2

Reliable Source
others
NBFI’s 2%
8%
Local-Money Lenders
22%
Peers
6%

Public Banks
26%
Private Banks
32%

Co-Operative banks
4%

Interpretation:-

This shows that most of the respondents rely on private banks followed by public banks
contributing about 58% as the reliable source for taking micro-credit and then local money
lenders i.e. 22% where as others i.e. NBFC, peers, others contributes about 20% for total
respondents where as self-help groups have just 0% showing that self-help groups should be
formed in Jalandhar region as we know that self help groups have played a very significant role
in the South India for success of micro-finance there.

22
V. What are the reasons for which you have taken micro-finance?(50 respondents)

Reasons No. of respondents Percentage %

Seize business opportunities 22 44
to fulfill needs of necessities 10 20
Improve standard of living 4 8
Deal with emergencies like 14 28
illness etc.

REASONS

Deal with emergencies like illness etc.

28%

Seize business opportunities

44%

Improve standard of living

8%

to fulfill needs of necessities

20%

Interpretation:-

This shows that most of the respondents takes micro-credit to do some business so that they
could earn their livelihood for business the respondents contributes about 44% of the whole
respondents followed by to deal with emergencies i.e. 28% where as to improve standard of
living and to fulfill necessities contributes about 28% of the total.

23
VI. If you are taking the micro-credit from banks which bank you prefer the most?
(50respondents)

Banks No. of respondents Percentage %

ICICI 12 24
PNB 3 6
HDFC 3 6
State Bank of Patiala 18 36
Punjab Grameen Bank 2 4
NBFI’S 4 8
Others 8 16

BANKS

Others
16% ICICI
24%

NBFI’S
8%

Punjab Grameen Bank PNB

4% 6%

HDFC
6%

State Bank of Patiala

36%

Interpretation:-

This shows that about 32% of the respondents are taking micro-credit from State Bank of Patiala
i.e. for 36% of total respondents followed by ICICI Bank contributing about 24% of total where

24
 as for others its about 44% which is of NBFI’s, Punjab Grameen Bank , PNB ,HDFC and others
sources.

VII. Rate the essence of micro-finance on the scale of 1-5?(60 respondents)

Significant Scale 1 2 3 4 5 Insignificant

No. 31 17 8 3 1
Respondent
s

scaling 1to5
35

30

25

20 Series 1

15

10

0
Significant 1 2 3 4 5 Insignificant

Interpretation:-

25
 This shows that as most of the people lie between 1 to 2 rating on scale i.e. about 48 number of
respondents therefore we can say that micro-credit will have significant at present in Jalandhar
region as people at scaling rate of 4 and 5 are very low i.e. about 4 out of 60 respondents.

VIII. How much Interest rates are charged by micro-credit providers? (50 respondents)

Interest rates No. of respondents Percentage %

Below 5% Nil Nil
5-10 27 54
10-15 13 26
15-20 3 6
20-25 6 12
More than 25 1 2

more than 25%

2%

20 to 25%
12%

15 to 20%
6%

5 to 10%
54%

10 to 15%
26%

Interpretation:-
26
 This show that most of the respondents are undertaking the micro-credit at the interest rate of
5 to 10 % that contributes about 54% of the total respondents followed by 10 to 15% interest
rates which are about 26 % of the respondents. It shows that respondents mostly prefer to
take micro-credit at the rate of 5 to 15 percent which accounts for 80% of the total
respondents. Whereas micro-credit is not available at a low interest rate of less than 5%.

IX. How will you rate the present interest rates being charged on you for taking micro-credit?
(50 respondents)

Significant Scale 1 2 3 4 5 Insignificant

No. 23 14 8 3 2
Respondent
s

scaling 1to5
25

20

15
Series 1

10

0
Satisfactory 1 2 3 4 5 Unsatisfactory

27
 Interpretation:-

This shows that most of the respondents are satisfied with the present interest rates charged on
micro-credits as most of the respondents lie between the rating scale of 1 to 2 i.e. about 37 out of
50 respondents who have undertaken the micro-credit.

X. According to you which factor will be more crucial for the growth of micro-finance in
Jalandhar city? (50 respondents)

FACTOR NO.OF RESPONDENTS PERCENTAGE %

LOW INTEREST RATES 8 16
TIME PROCESSING 12 24
INSTALLMENT FACTOR 2 4
AVAILABILITY 7 14
BUSINESS ASSISTANCE 18 36
OTHERS 3 6

Factor's

LOW INTEREST RATES

17%

BUSINESS ASSISTANCE
38%

TIME PROCESSING
26%

AVAILABILITY
15%

INSTALLMENT FACTOR
4%

28
 Interpretation:-

This show that most of the respondents take micro-credit not only to get money for their business
but also to get business assistance to run their business successfully, here about 36% of the
respondents have stated that the business factor is the most important factor of the micro-credit
facility followed by time for processing which is about 26%, then availability, installment factor
and low interest rates forms about 38% of the total respondents.

XI. Do you think micro-finance is a tool to eradicate poverty? (60 respondents)

No. of respondents Percentage %

Yes 39 59
No 15 23
Can’t say 6 18

Can't say
18%

No Yes
23% 59%

Interpretation:-

29
 Most of the respondent feels that micro-finance will help to eradicate poverty i.e. about 59% of
the respondents as it have helped them to earn their livelihood where as 23% says no and rest 18
% were not able to make their judgment on this issue.

XII. Do you think that micro-finance can be helpful for unemployed youth? (60 respondents)

No. of respondents Percentage %

Yes 25 42
No 27 45
Can’t say 8 13

Can’t say
13%

Yes
42%

No
45%

30
 Interpretation:-

This shows that majority of the respondents say no i.e. about 45% but 42% says yes it can help
youth to remove unemployment as the variation between the two is quite low thus it will be
difficult to say whether micro-finance will help to eradicate the problem of unemployment
among the youth or not .

XIII. Do you think micro-finance can be helpful for women upliftment?(60 respondents)

No. of respondents Percentage %

Yes 41 64
No 11 25
Can’t Say 8 11

Can't Say
11%

No
25%

Yes
64%

Interpretation:-

31
 This shows that most of the respondents says that micro-credit will help in the upliftment of the
women as more than 64% of the respondents agree with this statement only 25 % doesn’t agree
with it as the variation is quite high thus we can say that it will help for women upliftment.

XIV. How do you anticipate future for micro-finance , rate it between 1-5 ?

Prosperous Dim
Rating 1 2 3 4 5
scale
No. of 26 14 9 7 3
respondent
s

32
 scaling 1to5
30

25

20

Series 1
15

10

0
Prosperous 1 2 3 4 5 Dim

Interpretation:-

This shows that the future of the micro credit in Jalandhar region is going to be prosperous as
most of the respondents are between the scaling rate of 1 to 2 i.e. about 40 out of 60 respondents.

Part –II

SCALE RATING (50-respondents)

 PEERS

33
 RATING SCALE
TIME AVAILABILITY EXPLOITATIVE COURTEOUS EFFICIENT

3
18

6 11
7 9 17
0
11 7 9
1
23 1
13
2 6
14 3
3 9
7 4 15
6 11
3 8
2 5 6
4
1
0
low 7 6 5 4 3 2 1 high

Interpretation:-

This show that for peer , most of the respondents for peers are towards the positive side only thus
we can say that it can be seen as the favorable source for the taking micro-credit.

 LOCAL MONEY LENDERS

34
 RATING SCALE
TIME AVAILABILITY EXPLOITATIVE COURTEOUS EFFICIENT

2
4
20
7

14
21
6

6
15
11 8 7
9 7

7 5 8 17
12 9
4 12
2 3 8
2
2 5 5
1 1
2
1
0
low 7 6 5 4 3 2 1 high

Interpretation:-

This shows that in terms of availability the local-money-lenders are easy for accessing
microfinance but it is highly exploitive in nature, thus it can’t be regarded as reliable source for
poor people who have low wage rate.

 CO_OPERATIVE CREDIT SOCIETIES/ SHG’s

35
 RATING SCALE
TIME AVAILABILITY EXPLOITATIVE COURTEOUS EFFICIENT

7
11
3 4 11 8 14
11 10
3
12 3
4 3
6
12 8 5 14 3
17 11 1
9
10
5
3 7 7 7
2 5 5
2
low 7 6 5 4 3 2 1 high

Interpretation:-

Through the research we came to know that the general awareness of people towards the SHG is
quite low in Jalandhar reign and there is very few SHG here in Jalandhar. The best for such
source of micro-credit is that its highly efficient and courteous one and most suitable for poor
people.

 PRIVATE BANKS

36
 RATING SCALE
TIME AVAILABILITY EXPLOITATIVE COURTEOUS EFFICIENT

15

12

21

9
24
6
12
7 8

6 7 8 11

5 7 4 8 16
4 7 13
2 3
3 1
4 4 8
6
1
2 3 3
1
low 7 6 5 4 3 2 1 high

Interpretation:-

This shows that all the respondents are at the high side , which shows that private banks such as
ICICI has been regarded as the most effective and efficient in terms of time and availability for
the micro-credit.

 PUBLIC BANKS

37
 RATING SCALE
TIME AVAILABILITY EXPLOITATIVE COURTEOUS EFFICIENT

8
12 4
9

4 7 4
6
13
4 5
8
6 3
12 12
13
4

8
3 8
6
7

2 2
4 8
10 8 10 10
8
7

3
2

low 7 6 5 4 3 2 1 high

Interpretation:-

This shows that most of the respondents are satisfied with the way the Public banks like PNB,
Bank of Patiala , all these are moderately rated by the respondents in term of micro-credit
facility.

PART-III

 TEST FOR HYPOTHECATION

38
  Hypothesis 1: “Micro-finance is feasible in jalandhar city”

Descriptives

Sources on people 95% Confidence Interval

Rely for Mean
Std.
N Mean Deviation Std. Error Lower Bound Upper Bound Minimum Maximum
low interest rate 8 1.00 .000 .000 1.00 1.00 1 1
time for processing
and sactioning of 12 1.75 .452 .131 1.46 2.04 1 2
loans
installment factors 2 2.00 .000 .000 2.00 2.00 2 2
Availability 7 2.29 .488 .184 1.83 2.74 2 3
Business assistance 18 4.11 .676 .159 3.77 4.45 3 6
Others 3 4.33 2.887 1.667 -2.84 11.50 1 6
Total 50 2.72 1.485 .210 2.30 3.14 1 6

ANOVA
SourceOnPeopleRely
Sum of Squares df Mean Square F Sig.
Between Groups 79.957 5 15.991 25.019 .021
Wit
28.123 44 .639
hin Groups
Total 108.080 49

39
 Contrast Coefficients
FactorCrucialForGrowthInJalandhar
time for
processing and
Contra sactioning of installment Business
st low interest rate loans factors availability assistance others
1 1 2 3 -4 1 -3

Contrast Tests
Contr Value of Std. Sig. (2-
ast Contrast Error t df tailed)
SourceOnPeople Assume equal 1
-7.53 2.566 -2.935 44 .005
Rely variances
Does not assume 1
-7.53 5.063 -1.487 2.103 .039
equal variances

MEANS PLOT

40
 POST Hoc Tests ; multiple comparisons

(I) (J) 95% Confidence Interval

FactorCrucialF FactorCrucialF Mean
orGrowthInJala orGrowthInJala Differen Std. Lower
ndhar ndhar ce (I-J) Error Sig. Bound Upper Bound
low interest rate time for
processing and
-.750* .365 .046 -1.49 -.01
sactioning of
loans
installment
-1.000 .632 .121 -2.27 .27
factors
Availability -1.286* .414 .003 -2.12 -.45
Business
-3.111* .340 .020 -3.80 -2.43
assistance
Others -3.333* .541 .031 -4.42 -2.24
*
time for low interest rate .750 .365 .046 .01 1.49
processing and installment
sactioning of -.250 .611 .034 -1.48 .98
factors
loans
Availability -.536 .380 .036 -1.30 .23
Business
-2.361* .298 .031 -2.96 -1.76
assistance
Others -2.583* .516 .025 -3.62 -1.54
installment low interest rate 1.000 .632 .121 -.27 2.27
factors time for
processing and
.250 .611 .034 -.98 1.48
sactioning of
loans
Availability -.286 .641 .050 -1.58 1.01
Business
-2.111* .596 .001 -3.31 -.91
assistance
Others -2.333* .730 .003 -3.80 -.86
Availability low interest rate 1.286* .414 .003 .45 2.12

41
 time for
processing and
.536 .380 .036 -.23 1.30
sactioning of
loans
installment
.286 .641 .050 -1.01 1.58
factors
Business
-1.825* .356 .021 -2.54 -1.11
assistance
Others
-2.048* .552 .001 -3.16 -.94

Business low interest rate 3.111* .340 .020 2.43 3.80

assistance time for
processing and
2.361* .298 .031 1.76 2.96
sactioning of
loans
installment
2.111* .596 .001 .91 3.31
factors
Availability 1.825* .356 .021 1.11 2.54
Others -.222 .499 .050 -1.23 .78
Others low interest rate 3.333* .541 .031 2.24 4.42
time for
processing and
2.583* .516 .025 1.54 3.62
sactioning of
loans
installment
2.333* .730 .003 .86 3.80
factors
Availability 2.048* .552 .001 .94 3.16
Business
.222 .499 .050 -.78 1.23
assistance
*. The mean difference is significant at the
0.05 level.

42
INTERPRETATION:-

 Null hypothesis is rejected as sign 2-tailed value is less than 0.05.

 Thus, “Micro-finance is feasible in Jalandhar city”.

 DESCRIPTIVE:
 There is more difference in mean of low interest rate & other factors which has the
potential for growth of micro-credit in semi-urban area of jalandhar.
 ANOVA TABLE:
 As the sign 2 tailed value is less than 0.05 i.e. 0.021 ,null hypothesis is rejected and
therefore Micro-finance has the potential for growth in Jalandhar,there is more
variation between groups
 CONTRAST TEST:
 As the sign 2 tailed value is less than 0.05,null hypothesis is rejected.
 MEAN PLOT DIAGRAM:
 As we can see there is significant difference in lower interest rate & others factors
which people think has the potential for growth of micro-finance in jalandhar.

43
 FINDINGS & SUGGESTIONS
 FINDINGS
 H1: micro-credit is feasible in Jalandhar region, as proved by Anova test.
 Most of the respondents below the income group of more than Rs. 15000/- are taking
micro-credit in order to start business, meet need of necessities or to meet certain
emergencies.50 out of 60 respondents are under taking this facility of micro-credit.
 Most of the respondents are taking micro-credit to start business in order to earn
their livelihood and so that they generate some regular source of income for their
families. These are about 44 % of the total respondents followed by ot deal with
emergencies such as illness etc. which is about 28%.
 Most of the respondents rely on both public and private i.e. about 58% of total
respondents collectively followed by Local-money lender i.e. about 22%. Showing
that respondent’s reliability towards public and private sector banks is maximum.
 Most of the respondents have taken micro-credit from State Bank of Patiala i.e.
about 36 % followed by ICICI bank which is about 24 % where as PNB, HDFC and
Punjab Grameen Bank are not being regarded as better source for taking micro-credit
in Jalandhar.
 As the range of micro-credit interest rates is between 5% to 25 % , most of the
respondents are paying interest rates between 5 to 15 % which forms about 80% of
the total respondents.
 Majority of the respondents are happy with the present interest rates being charged
on micro-credit.
 The business assistance factor has been regarded as the most significant factor of the
micro-credit which form about 62 % of the total respondents followed by time taken
and availability of micro-credit.
 About 59% of the total respondents say that, it will help to remove the poverty so it
can be seen as tool to remove poverty from Jalandhar region.
 For being helpful for unemployed youth 45% says no and 42% says yes , as the
variation between the two is quite low thus it’s difficult to judge , therefore we can
say it has neutral effect for helping unemployed youth.

44
  About 64% of the respondents says that , it will help in women upliftment therefore
it can be said it can play a vital role for women upliftment.
 Peers as the source of micro-credit has been regarded as the most favorable one in
terms of time, availability and effectiveness.
 Local-money-lenders are high at availability but these are highly exploitive.
 Private Banks such as ICICI, HDFC etc. has been regarded as highly courteous,
efficient and but these are a bit high at exploitive part too.
 Public Banks such as Punjab National Bank, State Bank of Patiala are moderately
rated
 Self Help Groups and Co-operative Societies are highly moderate in nature.

 SUGGESTIONS
 People should be make aware about Self-Help Groups and various steps should be
taken by various Private and Public banks to form Self Help Groups among
masses.
 Various NGO’s should come forward to help poor people by helping them to
provide micro-credit at low interest rates and provide them business assistance.
 People’s reliability over Local-money-lenders should be tried to decrease as they
exploit poor by not only charging high interest rates but also in compounded
form.
 The interest rates charges shouldn’t be more than 15% for micro-credit as it
should be regarded as a tool for poor’s upliftment.
 Public and Private sector Banks should try to open their own MFI’s in Jalandhar
region.
 There should be MFI’s such as SSK working in South India, which is not only
working successful but also main reason for the success of microfinance in South
India.

45
 CONCLUSION

 To conclude we can say that its just the beginning of the micro-credit in Jalandhar region
and it will of more success when people will rely more towards organized sector for
micro-credit such as Public and Private sector banks.
 There is need for opening of MFI’s in Jalandhar region so that micro-credit can be
provided with more of ease
 Micro-credit can be regarded as tool which will help to eradicate poverty
 Help for women upliftment by making them more independent and monitory fit.
 Help poor to set—up businesses and earn their livelihood.

Thus, we can say that micro-credit is of great significance and it will help poor for their
upliftment.

46
References:

 Nabard website

 Anil K Khandelwal, “Microfinance Development Strategy for India”, Economic and

Political Weekly, March 31, 2007

 R Srinivasan and M S Sriram, “Microfinance in India- Discussion”

 Shri Y S P Thorat, Managing Director, NABARD, “Innovation in Product Design, Credit
Delivery and Technology to reach small farmers”, November, 2005

 Shri Y S P Thorat, Managing Director, NABARD, “Microfinance in India: Sectoral

Issues and Challenges”, May, 2005

 Report, “Status of Microfinance in India 2006-2007”, NABARD

 http://www.microfinancegateway.org/p/site/m/
 http://www.microfinancegateway.org/p/site/m/
 brijj.com/group/microfinance-in-india--presentation--Nabard-And-Microfinance
 http://www.infibeam.com/Books/info/PRABHU-GHATE/MICROFINANCE-IN-INDIA-
A-State-of-the/9788178298931.html

 http://www.merinews.com/article/microfinance-fact-and-fiction/147023.shtml
 http://www.rediff.com/money/2007/nov/08micro.htm
 http://www.axisbank.com/corporate/credit/microfinance/Micro-Finance.asp

47
 QUESTIONAIRE

Part -I

SECTION I:

The answers to your survey will remain anonymous and confidential. The answers are meant for
survey purpose only to help us understand the impact of micro-credit on livelihood of people.

Personal Information

NAME: __________________________________________

ADDRESS: ____________________________________________________________

_____________________________________________________________

AGE: ________________

SEX: MALE FEMALE

SECTION II:

XV. Have you ever taken micro-credit?

Yes No

XVI. What is your occupation?

Farming Auto-rickshaw

Business Servicemen other____________

XVII. What is your income level (Per Month)?

Below Rs. 5000/- Rs.5000-10,000/-

Rs.10,000-15,000/- More Than Rs.15,000/-

48
XVIII. Which source you rely the most while taking micro-credit?

Local-Money Lenders Public Banks

Self-Help Groups Co-Operative banks

Private Banks Peers

Non-Banking Financial Institute’s others____________________

XIX. What are the reasons for which you have taken micro-finance?

Seize business opportunities to fulfill needs of necessities

Improve standard of living Deal with emergencies like illness etc.

XX. If you are taking the micro-credit from banks which bank you prefer the most?

ICICI PUNJAB NATIONAL BANK

HDFC STATE BANK OF PATIALA
PUNJAB GRAHMIN BANK NON-BANKING FINANCE CORPORATIONS
Others________________________

XXI. Rate the essence of micro-finance on the scale of 1-5?

1 2 3 4 5
Significant Insignificant

XXII. How much Interest rates are charged by micro-credit providers?

Below 5%
5% - 10%
10% - 15%
15% - 20%
20% - 25%
Above 25%

XXIII. How will you rate the present interest rates being charged on you for taking micro-credit?

49
 1 2 3 4 5
Significant Insignificant

XXIV. According to you which factor will be more crucial for the growth of micro-finance in
Jalandhar city?

Low interest rates

Time for processing and sanctioning of loans
Installment factor
Availability
Business assistance
Others _____________________

XXV. Do you think micro-finance is a tool to eradicate poverty?

Yes No Can’t say

XXVI. Do you think that micro-finance can be helpful for unemployed youth?

Yes No Can’t say

XXVII. Do you think micro-finance can be helpful for women upliftment?

Yes No Can’t say

XXVIII. How do you anticipate future for micro-finance , rate it between 1-5 ?

Prosperous Dim

1 2 3 4 5

50
 PART- II

OBJECTIVE

To understand the degree of satisfaction of people having income level below Rs.15,000 per

month regarding various sources of finance:

Local-Money lender

7 6 5 4 3 2 1
Timely Not Timely

Easy (to get) 7 6 5 4 3 2 1 Difficult (to get)

7 6 5 4 3 2 1
Not Exploitative Exploitative

7 6 5 4 3 2 1
Courteous Not courteous

7 6 5 4 3 2 1
Efficient Inefficient

Co-op Credit Societies/ SHG’S

7 6 5 4 3 2 1
Timely Not Timely

51
 Easy (to get) 7 6 5 4 3 2 1 Difficult (to get)

7 6 5 4 3 2 1
Not Exploitative Exploitative

7 6 5 4 3 2 1
Courteous Not courteous

Efficient 7 6 5 4 3 2 1 Inefficient

Private Banks

7 6 5 4 3 2 1
Timely Not Timely

7 6 5 4 3 2 1
Easy (to get) Difficult (to get)

7 6 5 4 3 2 1
Not Exploitative Exploitative

7 6 5 4 3 2 1
Courteous Not courteous

7 6 5 4 3 2 1
Efficient Inefficient

Public Banks

7 6 5 4 3 2 1
Timely Not Timely

52
 Easy (to get) 7 6 5 4 3 2 1 Difficult (to get)

7 6 5 4 3 2 1
Not Exploitative Exploitative

7 6 5 4 3 2 1
Courteous Not courteous

7 6 5 4 3 2 1
Efficient Inefficient

Peers

7 6 5 4 3 2 1
Timely Not Timely

7 6 5 4 3 2 1
Easy (to get) Difficult (to get)

7 6 5 4 3 2 1
Not Exploitative Exploitative

7 6 5 4 3 2 1
Courteous Not courteous

7 6 5 4 3 2 1

Efficient Inefficient

53