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Figure 4.1 Analysis potential customers......................................................................59

Figure 4.2 Analysis Women Borrowed Loans.............................................................60
Figure 4.3 Analysis of prefer for Tenure......................................................................60
Figure 4.4 Analysis of repay the loans.........................................................................61

Table 1.1 Apply in Form FC - 1A................................................................................17
Table 1.2 Devlopment Process through Microfinance.................................................30
Table 1.3 Micro Finance interventions through Different Organisations....................32



1. Introduction
1.1. Introduction---------------------------------------------------------------- 7
1.2. General Overview of Microfinance ------------------------------------ 19
1.3. Purpose of Study --------------------------------------------------------- 43
1.4. Scope of Study------------------------------------------------------------ 44
1.5. Objectives of Study------------------------------------------------------ 44
1.6. Area of Study------------------------------------------------------------- 44
2. Company Profile-----------------------------------------------------------------46
Other operational detail---------------------------------------------------------49
3. Methodology---------------------------------------------------------------------56
3.1. Design of Study----------------------------------------------------------- 56
3.2. Data collection Source and methods------------------------------------56
3.3. Field work detail-----------------------------------------------------------57
3.4. Limitation of Study--------------------------------------------------------57
4. Findings and Interpretation---------------------------------------------------59
5. Conclusion and recommendation---------------------------------------------63
6. Annexure------------------------------------------------------------------------ 64

About NGO
General overview of Microfinance
Purpose of study
Scope of study
Objective of study
Area of study

1.1 About NGO
A non-governmental organization (NGO) is any non-profit, voluntary citizens' group
which is organized on a local, national or international level. Task-oriented and driven
by people with a common interest, NGOs perform a variety of service and
humanitarian functions, bring citizen concerns to Governments, advocate and monitor
policies and encourage political participation through provision of information. Some
are organized around specific issues, such as human rights, environment or health.
They provide analysis and expertise, serve as early warning mechanisms and help
monitor and implement international agreements. Their relationship with offices and
agencies of the United Nations system differs depending on their goals, their venue
and the mandate of a particular institution. A NGO is a legally constituted
organization created by private organizations or people with no participation or
representation of any government. In the cases in which NGOs are funded totally or
partially by governments, the NGO maintains its non-governmental status insofar as it
excludes government representatives from membership in the organization.
Nongovernmental organizations are a heterogeneous group. A long list of acronyms
has developed around the term 'NGO'.These includes:

BINGO is short for business-oriented international NGO or big international

CSO, short for civil society organization.
ENGO, short for environmental NGO.
GONGOs are government-operated NGOs.
INGO stands for international NGO.
QUANGOs are quasi-autonomous non-governmental organizations.

TANGO, short for technical assistance NGO.

The primary purpose of an operational NGO is the design and implementation of

development-related projects. One frequently used categorization is the division into
'relief-oriented' or 'development-oriented' organizations. They can also be classified
according to whether they stress service delivery or participation or whether they are
religious or secular and whether they are more public or private-oriented. Operational
NGOs can be community-based, national or international.
The primary purpose of an Advocacy NGO is to defend or promote a specific cause.
As opposed to operational project management, these organizations typically try to
raise awareness, acceptance and knowledge by lobbying, press work and activist
USAID refers to NGOs as private voluntary organizations (PVO). However many
scholars have argued that this definition is highly problematic as many NGOs are in
fact state and corporate funded and managed projects with professional staff.

Public relations
Non-governmental organizations need healthy relationships with the public to meet
their goals. Foundations and charities use sophisticated public relations campaigns to
raise funds and employ standard lobbying techniques with governments. Interest
groups may be of political importance because of their ability to influence social and
political outcomes. At times NGOs seek to mobilize public support such as by the
NGO Global Warming Alliance.
Project management
There is an increasing awareness that management techniques are crucial to project
success in non-governmental organizations. Generally, non-governmental
organizations that are private have either a community or environmental focus. They
address varieties of issues such as religion, emergency aid, or humanitarian affairs.
They mobilize public support and voluntary contributions for aid; they often have
strong links with community groups in developing countries, and they often work in
areas where government-to-government aid is not possible. NGOs are accepted as a
part of the international relations landscape, and while they influence national and
multilateral policy-making, increasingly they are more directly involved in local
Legal status
NGOs are not subjects of international law, as states are. An exception is the
International Committee of the Red Cross, which is subject to certain specific matters,
mainly relating to the Geneva Convention.
The Council of Europe in Strasbourg drafted the European Convention on the
Recognition of the Legal Personality of International Non-Governmental
Organizations in 1986, which sets a common legal basis for the existence and work of
NGOs in Europe. The European Convention on Human Rights protects the right to
freedom of association, which is also a fundamental norm for NGOs.
Any organization working for a social, cultural, economic, educational or religious
cause is termed as an NGO. NGOs have made favorable indents to needy sections of
Indian society at par with a constantly changing socio-economic climate. NGOs have
reached out to all sections of society including women, children, pavement dwellers,
unorganized workers, youth, slum-dwellers and landless laborers. NGOs are viewed
as vehicles of legitimization of civil society.
Citizen organization
There is a growing movement within the non-profit and non-government sector to
define itself in a more constructive, accurate way. Instead of being defined by non
words, organizations are suggesting new terminology to describe the sector. The term
civil society organization (CSO) has been used by a growing number of
organizations, such as the Center for the Study of Global Governance. The term
citizen sector organization (CSO) has also been advocated to describe the sector
as one of citizens, for citizens. This labels and positions the sector as its own entity,
without relying on language used for the government or business sectors. However

some have argued that this is not particularly helpful given that most NGOs are in fact
funded by governments and business.
Any organization working for a social, cultural, economic, educational or religious
cause is termed as an NGO. NGOs have made favorable indents to needy sections of
Indian society at par with a constantly changing socio-economic climate. NGOs have
reached out to all sections of society including women, children, pavement dwellers,
unorganized workers, youth, slum-dwellers and landless laborers. NGOs are viewed
as vehicles of legitimization of civil society.
An NGO can be formed under various legal identities:
(i) Society registered under Societies Registration Act, 1860.
(ii) Trust (Formed under the Trust deed and registered with Income Tax Authority.)
(iii) Limited company incorporated under section 25 of the Companies Act, 1956
The most common form of non-profit organizations in India is a Society. A Society is
formed when people come together to do something with some common purpose,
which is legal and useful for others. A society should generally not get into profit
making activities.
1. Seven persons enjoin for a common purpose
The first step in forming a society requires the coming together of seven (or more)
person who has agreed to pursue a common objective. Please note that the seven
members or more may be comprised of one or all foreigners, a limited company, a
partnership firm or another registered society.
2. Society's Objective to be literary, scientific or charitable Section 20 enumerates the
purposes for which a society may be registered under the Act.
3. Naming the society
The members can arrive a suitable name which gives a clue as to the character of the
society, which does not amount to an improper use of any name, emblem, official seal
specified in the Emblems and Names (Prevention of Misuse) Act, 1950, does not
offend or mislead people, which is not the name of a society already existing. The
registrar will object to names containing words like government, ministry, bank,
suggesting involvement with the government, which is not allowed. The name of a
society can also end with the word "Trust".
4. Drafting the Memorandum of Association and enrolment of members

The Memorandum of Association ("MOA") is perhaps the most important document

of a registered Society since it contains the conditions of association of the members
and its Objects Clause dictates what can and cannot be done by the members of the
Society. As a Charter of the Society it should ideally include name, objects, details of
Governing Body and signatures of subscribers.
5. Registration of Society
The registration of a society is important to give the society a legitimate identity and a
legal status and particularly more so when viewed from the consequences and benefits
which flow from such fulfilling the legal formality of registration of society.
The three parties (settlor, trustee and beneficiary of trust) are linked by a trust deed
which documents the relationship inter se and vis-a-vis the trust property. Trusts are
commonly classified as private/family and public trusts. The main difference between
a private and public trust is that while the beneficiary of a private trust is one or a few
individual (mostly family members of the donor), the beneficiary of a public trust is
the general public. For the purposes of forming an NGO enuring public benefit a
public trust can be formed.
There are two statutes relevant to functioning of Trusts in India: The Indian Trusts
Act, 1882; and Charitable and Religious Trusts Act, 1920. Public trusts are however
governed by general law, though the principles forming the basis of the Indian Trusts
Act can be applied in the case
Features of a Trust
A Trust is created when a donor attaches a legal obligation to the ownership of certain
property based on his confidence placed in and accepted by the donee or trustee, for
the benefit of another.
The persons who intends to create the trust with regard to certain property for a
specified beneficiary and who places his confidence in another for this arrangement is
called the Author of the Trust; the person who accepts the confidence is called the
Trustee; the person whose benefit the confidence is accepted is called the Beneficiary;
the subject matter of the trust is called Trust Property.
Charity is a matter for State control, so different States of India have their own
legislation in the form of Trusts or Endowment Acts to govern and regulate public
charitable NGOs. Endowment is the dedication of property by gift or devise to
religious or charitable uses and in a generalized context trusts include endowments
also. A religious endowment or trust is one that has for its object the establishment,
maintenance or worship, of an idol or deity, or any object or purpose subservient to
The Trustees control the trust's assets and decide how the income (and capital) of the
trust is to be distributed, and ensure that it is in line with the charitable purposes of the

A trust must be created for a lawful purpose. The author of the trust must indicate
with reasonable certainty the following:

Intention to create trust

Purpose of the trust
Beneficiaries of the trust, and
The trust property

A public trust is of permanent and indefinite character. A public trust benefits the
public at large or at least a section of the community. The property forming subject
matter of the trust must be capable of being transferable to the beneficiary - thus
property that is inalienable by virtue of public policy or statute does not form valid
subject matter for a trust. In terms of section 8 of the Indian Trusts Act, there cannot
be as a trust of a beneficial interest under a trust i.e. there cannot be a trust upon a
Flexibility in naming Trust
Trust can be named as family name, or name of an honorable person. The organisation
can also be called a "foundation" or "charity" or any similar terms as these words are
practically interchangeable in a legal sense.
A Non-Profit Company can be formed for any non-profit activity. It is identical to an
ordinary company in all respects except that it is not established for profit and
commercial gain. It is also called a Section 25 Company and is a voluntary
association of people, registered under the Indian Companies Act, 1956. The
accountability aspect of a non-profit company because of statutory disclosure
requirements is a relevant advantage of a company's operational transparency and
ability to invoke and maintain public faith.
Objectives of a Non-profit company: Objectives of a non-profit company can be including promotion of commerce, art,
science, religion, charity or any other useful object. Profits are applied for promoting
only the objects of the company and no dividend is paid to its members. (Section 25
(1) (a) and (b) of the Companies Act, 1956). A non-profit company may be Public or
Private. If the non-profit company is a private company a minimum of only two
members are required to form it. However, if the non-profit from is for a public
purpose, then a minimum of seven are needed. A 'Section 25 company' and is eligible
for certain exemption from provisions of law and concessional rate of fees etc.
Steps for establishing a section 25 Company
1. Application for a name
Applying for availability of name to the Registrar of Companies is the first step
towards registration of the non-profit company. Four names are to be suggested to the
Registrar in prescribed Form.

2. Memorandum and Articles

Memorandum and Articles of the non-profit company are required to be approved by
the Regional Director and the ROC. The documents required for submission of
application are:
i) Three printed copies of the memorandum and articles of association of the applicant
company, signed by all the promoters with full name, address and occupation (No
stamp duty is payable on the Memorandum and Articles of Association)
ii) A declaration by an advocate or a chartered accountant that the memorandum and
articles of association have been drawn up in conformity with the provisions of the
Act and that all the requirements of the Act and the rules made there under have been
duly complied with, in respect of registration;
iii) List of the names, addresses and occupation of the promoters, members of board
of directors, name of companies, associations and other institutions in which
promoters of the applicant company are directors or hold positions, description of the
positions held by them (three copies)
iv) A statement of assets and liabilities
v) Source of income of the Applicant Company and estimate of annual expenditure;
vi) A statement giving a brief description of the work, if any, already done by the
association and of the work proposed to be done by it after registration in pursuance
of section 25;
vii) A statement on grounds on which the application is made under section 25 of the
Companies Act, 1956;
viii) A declaration by each of the persons making the application that he/she is of
sound mind, not an undercharged solvent, not convicted by a court for any offence
and does not stand disqualified under section 203 of the Companies Act, 1956 for
appointment as director.
3. License under section 25
An application for the license under 25 for the company is to be submitted to the
Regional Director (Department of Company Affairs). The license essentially permits
the word 'Limited' or 'Private Limited' to be deleted from name of the company. It
could take upto 12 weeks after application to receive the license under section 25 of
the Companies Act 1956. Pursuant to application to the Regional Director (within
seven days thereafter), the applicant company has to publish a notice in a newspaper

where the registered office is situate and certified copy of the notice to filed with the
Regional director.
4. Registration with ROC
Registration certificate is normally granted within one month after filing section 25
Converting existing company to section 25 company
The Companies Act, 1956 also facilitates the conversion of an existing company to a
non-profit company.
Foreign Director
There is no bar under Indian law for a foreigner to be a Director in a section 25
company, (relevant permissions prescribed under the Foreign Exchange Management
Prior Permission always :
The Foreign Contribution (Regulation) Act, 1976 (FCRA) requires all Indian NGOs
that receive foreign contributions to receive clearance from the Ministry of Home
Affairs, in the form of either permanent FCRA registration or prior permission on a
case-to-case basis.
If a foreign donor agency opens a branch office in India, the Indian office needs
FCRA registration or prior permission. Further, the second, third, fourth, fifth and all
the subsequent receivers of foreign funds need FCRA registration or prior-permission.
It is said that the colour of money never changes and in this regard it is interesting to
note that the foreign funds remain 'foreign' in the hands of NGO at all time, its foreign
origin does not change with transfer - only when it is spent or given to individual
beneficiaries, the funds become Indian. An NGO would need prior permission in the
following four situations:
The NGO does not have permanent FCRA registration;
The FCRA number has been cancelled by the Government;
The NGO has been asked to get prior-permission under section 10(b).
The FCRA number is 'frozen' due to change in Governing Body.
FCRA conditions for accepting foreign funds:
An NGO seeking to receive foreign funds is statutorily required to do the following:
(a) Register with the Central Government;

(b) Intimate the Central Government of (i) the amount of each foreign contribution
received by it; (ii) source; (iii) manner in which foreign contribution is to be received;
and (iv) purposes for which and the manner in which such foreign contribution is to
be utilized by it.
Those NGOs, which are not registered, with the Central Government can accept
foreign contribution only after obtaining the prior permission from the Central
Government and should also give intimation to the Central Government as the
registered association does.

The procedure for obtaining prior permission from the FCRA is as follows :
Apply in Form FC - 1A
Applicant (s) to file Form FC - 1A alongwith required documents.

Field Inquiry
Official from the Intelligence Bureau visits your main office, may inspect accounts
and ask questions, can also visit the field area, inquire at local police station and
thereafter he prepares confidential report to FCRA Department.

FCRA permission
Within 90 days thereafter, you will receive a registered letter from the Department
either granting the permission or stating rejection of your request.

Appeal against rejection

Applying again

You can re-apply after ascertaining andOne party can apply for prior
rectifying objections on your file. You canpermission more then once if needed also file an appeal in the High Court withinconsidering that projects are varied and
60 days of the date of letter.
or are under different agencies.

Table 1.1 Apply in Form FC - 1A

When FCRA permission is not needed:
Prior permission from the FCRA is not required for receiving amounts in
the following forms :(a) Salary, wages or other remuneration either to individual or payment for business
(b) Payment for international trade or for business transacted by him outside India.
(c) By way of a gift or presentation received as member of any Indian delegation.
(d) Gift not exceeding Rs. 8,000/- per annum.
Profit-oriented organizations are not covered by FCRA.

Bank Account for foreign funds.

An NGO is required to open and use bank account exclusively for foreign funds under
Income Tax Benefits on foreign funds
1. Benefits for the NGO:
Income receive by any religious or charitable trust or institution registered with the
income tax authorities, is not taxable as long as this income is applied for the objects
of the organization
2. Benefits to Donors:
The donors are also entitled to get an exemption on their donation which exemption
can be 50% or 100% depending on category of organizations.
Illustrative example of NGOs handling foreign money/materials :
Sponsorships by foreign parties :An occasion can arise where a moneyed foreign person agrees to kindly sponsor an
NGOs annual charity festival and the foreign funds are forwarded directly to the
printers for printing of catalogues for this festival by them, the NGO accepting the
catalogues has accepted foreign contribution and is under an obligation to intimate the
Central Government. If the NGO does not have requisite FCRA registration or prior
permission it cannot accept the sponsorship in the first place.
Remember :

If the foreign funds are already laying on your account, do not spend the
money till you receive permission.
Form FC-3 is to be filed at the end of each financial year (by 31st July). Filing
required to be done annually till such time the FCRA funds are exhausted.
Always make two complete sets of documents - one for filings with the
FCRA, the other for the NGO records. Wherever documents have been
delivered by hand, to obtain written acknowledgment with date, stamp and
signatures (when documents are sent by registered post - to retain proof of
posting and acknowledgment card (when received back) carefully.
Documents to attach with Form FC-8 - Attach one copy of each of the
following documents

1. Certificate
Government/Ministry or Department of Central Government;
2. Activity report for past three years;
3. Audited Statements of Account for past three years;



4. List of state or districts of focus of work;

5. Note on socio-economic background of the beneficiaries and of the region to be
6. Where NGO is a society, then also attach certified copy of Registration Certificate
issued by the Registrar of Societies;
7. Certified copy of registered Trust Deed (if NGO is a Trust);
8. Certified copies of (a) Memorandum and Articles of Association, (b) registration
certificate issued by the Registrar of Companies, (c) section 25 license issued by the
Regional Director, Department of Company Affairs (if NGO is a non-profit
9. FCRA does not allow mixing up of Indian funds and FCRA funds. This means both
funds are to be maintained separately.
General Overview of Microfinance
Frequently Asked Questions about Microfinance
What is microfinance?
Sometimes called banking for the poor, microfinance is an amazingly simple
approach that has been proven to empower very poor people around the world to pull
themselves out of poverty. Relying on their traditional skills and entrepreneurial
instincts, very poor people, mostly women, use small loans (usually less than
US$200), other financial services, and support from local organizations called
microfinance institutions (MFIs) to start, establish, sustain, or expand very small, selfsupporting businesses. A key to microfinance is the recycling of loan dollars. As each
loan is repaidusually within six months to a yearthe money is recycled as another
loan, thus multiplying the value of each dollar in defeating global poverty, and
changing lives and communities.
What do local microfinance institutions (MFIs) do?
These front line organizations reach out to the very poor and deliver microfinance
services to local clients daily. They educate local communities about the opportunity
to improve their lives with microfinance; make micro loans and provide other
financial services such as savings accounts and insurance; collect weekly loan
payments; and assist clients in solving some of the life challenges they may face.
Many also provide social services, such as basic health care for clients and their
MFIs differ in size and reach: some serve a few thousand clients in their immediate
area, while others serve hundreds of thousands of very poor people through hundreds
of branches covering large regions. Grameen Bank of Bangladesh, which was founded
by 2006 Nobel Peace Laureate Dr. Muhammad Yunus, is the worlds largest and most
successful MFI. It serves more than seven million clients.

Where do MFIs get the money for loans?

Grameen Foundation provides funding for MFIs through direct loans, grants, loan
guarantees and other innovative financing techniques. Other funding comes from
individuals, philanthropists, foundations, and governments and international
institutions such as the World Bank. MFIs also borrow funds from traditional banks to
loan to their clients. In addition, the interest paid by clients on microfinance loans
goes back into the program to cover costs and fund more loans.
One of the most attractive features of microfinance is the goal of self-sufficiency for
both micro entrepreneurs and MFIs. Grameen Foundation is spearheading several
initiatives to give MFIs access to the private market financing options available to
traditional banks. By combining access to private market financing with more
efficient management and technology, MFIs can begin to move from reliance on
philanthropy to self-sufficiency. Grameen Bank in Bangladesh has proven that this
can be accomplished. It is totally self-supporting and accepts no grants or donations.
Why is this different from other loan programs?
Unlike other loan programs, clients are not required to provide collateral to receive
loans. This allows people who would not qualify for loans at traditional financial
institutions to receive credit. MFIs are also very client-friendly; most usually go to
their clients to provide loans and receive payments, rather than requiring their clients
to come to them. A few of them also use focal centers where clients gather to conduct
financial transactions and receive other social services. The peer support system
practiced by many microfinance programs is another unique feature. When clients
gather weekly at center meetings to make loan payments, or informally in smaller
support groups, they share successes and discuss ideas for solving business and
personal problems. Maybe most importantly, they empower each other to stay on the
path out of poverty. This mutual support strengthens their resolve.
In addition, MFI staff members share vital information and resources to improve their
clients well being. This might include bringing in local nurses to provide health and
nutrition counseling, or providing help with literacy.
Are these people really poor?
Grameen Foundations MFI partners serve very poor people, many of whom are in
rural areas and live on only a dollar or so a day. While the exact dollar figures for
measuring their level of poverty may vary from country to country, one thing is
constant: they are literally struggling to live from day to day.
What is the difference between micro credit and microfinance?
Micro credit refers specifically to loans and the credit needs of clients, while
microfinance covers a broader range of financial services that create a wider range of
opportunities for success. Examples of these additional financial services include
savings, insurance, housing loans and remittance transfers. The local MFI might also
offer microfinance plus activities such as entrepreneurial and life skills training, and

advice on topics such as health and nutrition, sanitation, improving living conditions,
and the importance of educating children.
Why do you focus on women?
Women have proven to be the best poverty fighters. Experience and studies have
shown that they use the profits from their businesses to send their children to school,
improve their families living conditions and nutrition, and expand their businesses.
Can very poor people actually start and run a successful business?
Absolutely. Many poor people have skills that can quickly become an income
producing activity. With small sums of money, they are able to purchase the inventory,
supplies and tools needed to start or expand micro businesses that range from
weaving, sewing, grinding grain, reselling produce, and growing and selling
vegetables, to catching and selling fishing, wholesaling dried fish, raising chickens to
sell eggs, and breeding livestock. We also help the rural poor start technology micro
businesses, such as selling cell phone time to other villagers, which also provides
valuable means of communications and access to vital information.
These small ventures can grow into vibrant community businesses. One micro
entrepreneur in the Philippines dried fish caught by her husband and sold them to
local markets. The demand grew quickly and she then hired her neighbors to help.
Now, nearly 20 neighbors earn an income from her family fish business, and her
entire community is benefiting.
Do very poor people repay their loans?
Yes, microfinance clients are excellent credit risks. The repayment rate is between 95
and 98 percent. In fact, it is higher than the repayment rate of student loans and credit
card debts in the United States. They value the opportunity to improve their lives.
Do people really get out of poverty?
Microfinance is not a silver bullet. It will not defeat global poverty by itself. But, it is
an important part of the solution. Microfinance provides a stable and sustainable
source of income that enables clients to climb steadily out of poverty, while providing
better living conditions and opportunities for their families. For some, that progress
means moving from a house made of mud to one made of wood. For others, it means
better nutrition and the money to finally send their children to school. A 1998 World
Bank study showed that, in Bangladesh, Grameen Banks clients were escaping
poverty at the rate of 10,000 per month.
Ive heard that MFIs charge a high rate of interest for the loans. Is that so?
Like other financial institutions, microfinance institutions (MFIs) charge interest for
the loans they make to their clients. The interest covers the high cost of making very
small loans and personally servicing each client every week. It also covers the cost of
managing the center meetings; the peer support group process; and providing
information on social services, personal development, health and other critical

information that helps clients improve their lives and the future of their families. Their
rates are also largely influenced by the rates MFIs themselves pay for borrowing the
funds that they in turn lend to their clients. MFI interest rates can range from 18 to 60
percent, depending on the conditions in each MFIs service area. Without
microfinance programs, the most common alternative for very poor people is the local
money lenders, who regularly charge between 120 and 300 percent.
Microfinance - a powerful poverty-fighting tool: Microfinance helps people to
escape poverty by giving them collateral-free loans and other financial services to
support income-generating businesses. As each loan is repaid, the money is
redistributed as loans to others, thereby multiplying its impact.
We support microfinance programs that enable the poor, mostly women, to lift
themselves out of poverty and make better lives for their families. To do this, we
partner with a worldwide network of microfinance institutions. Our work focuses on
four key areas:
Supporting microfinance institutions
Our partner microfinance institutions (MFIs) work on the front lines daily, meeting
the needs of clients and reaching out to others who can benefit from microfinance. To
help them be efficient and effective and increase their outreach, we provide
microfinance program support in the form of funding, technical assistance, training
and new technology.
Harnessing the power of technology
Grameen Foundation's Technology Center is the leader in information and
communications technology (ICT) initiatives that are dedicated exclusively to
advancing microfinance. To help microfinance reach its full potential, we are driving
industry-changing innovations that increase the efficiency of microfinance
institutions' operations, create new micro business opportunities for the poor, and
provide telecommunications access for the world's rural poor.
Connecting microfinance institutions with capital markets
Our Capital Management and Advisory Center is harnessing the vast resources of
local and international capital markets to bring new financial resources to our
microfinance institution partners. With more than 400 million poor people cut off
from financial services, there is a huge, unmet need for microfinance. To reach them,
MFIs need capital beyond the traditional philanthropic support to rapidly expand their
operations and increase outreach.
Expanding microfinance industry knowledge
New ideas and innovative thinking will drive the expansion and effectiveness of
microfinance. Knowledge sharing is an important component of our work. To have
the greatest impact on global poverty, we are committed to sharing ideas and
innovations with the wider microfinance community. We hope this "open-sourcing" of

information will guide other organizations in improving the industry's outreach to the
more than one billion people living in abject poverty.
An effective poverty reduction strategy
Microfinance is often considered one of the most effective and flexible strategies in
the fight against global poverty. It is sustainable and can be implemented on the
massive scale necessary to respond to the urgent needs of those living on less than $1
a day, the Worlds poorest.
Microfinance consists of making small loans, usually less than $200, to
individuals, usually women, to establish or expand a small, self-sustaining
business. For example, a woman may borrow $50 to buy chickens so she can sell
eggs. As the chickens multiply, she will have more eggs to sell. Soon she can sell the
chicks. Each expansion pulls her further from the devastation of poverty.
Microfinance, the Grameen way, includes several support systems that
contribute greatly to its success. Microfinance institutions offer business advice and
counseling, while clients provide peer support for each other through solidarity
circles. For example, if a client falls ill, her circle helps with her business until she is
well. If a client gets discouraged, the support group pulls her through. This contributes
substantially to the extremely high repayment rate of loans made to microfinance
An equally important part of microfinance is the recycling of funds. As loans are
repaid, usually in six months to a year, they are re-loaned. This continual reinvestment
multiplies the impact of each dollar loaned.
Microfinance has a positive impact far beyond the individual client. The vast
majority of the loans go to women because studies have shown that women are more
likely to reinvest their earnings in the business and in their families. As families cross
the poverty line and micro-businesses expand, their communities benefit. Jobs are
created, knowledge is shared, civic participation increases, and women are recognized
as valuable members of their families and communities.
Technology Programs
Why Focus on Technology?
Technology increases the efficiency of microfinance institutions (MFIs), eventually
resulting in lower interest rates to borrowers and new loan programs that attract
additional clients and expand opportunities for the MFI and the borrower to become
self sufficient. We are transforming the microfinance sector through innovations and
collaborations that improve the delivery of financial services to the poor and integrate
microfinance with the global financial system.
Information and communication technology (ICT) provides unparalleled opportunities
to improve the lives of the worlds poorest people. It can create jobs, improve access
to health care, education and other services, and connect far-flung communities to
each other which can boost local economies. However, without a conscious effort to
develop and champion breakthrough applications of ICT to reduce global poverty, its
potential can go unrealized.

Technical Assistance to Microfinance Institutions

Microfinance institutions (MFIs) are dedicated to alleviating poverty by offering
financial services to the poor, including loans, savings accounts, micro-insurance, and
money transfers. Many MFIs are also integrating other social empowerment strategies
into their operations, including healthcare and nutrition, financial literacy, and
environmentally-friendly technologies, such as solar energy and biogas. Such
strenuous programs and innovations require constant growth in skills and capacity.
It is committed to assuring the success of our partner MFIs in reaching out to more of
the worlds poorest people and ensuring that those clients get out of poverty quickly.
We look to the Grameen Bank as a model in piloting new approaches to leveraging
the microfinance infrastructure to promote accelerated poverty reduction.
Innovative financing solutions and strategies to expand the capacity and efficiency of
our partner MFIs provide a direct impact on the lives of the poor, and advance the
microfinance industry as it moves toward even higher standards in terms of antipoverty impact and financial performance. Its success is intricately linked with the
success of our partners and ultimately, the clients accessing microfinance.

We have developed a track record of helping our MFI partners evolve into
institutions that:

Effectively target the poorest of the poor and women.

Utilize cost-effective tools to measure progress out of poverty for existing
clients, thus advancing the goal of developing standards and metrics for social
impact performance.
Increase efficiencies in the delivery of financial services.
Achieve full cost-recovery and profitability, and utilize profits to provide
better and more economical services to clients.
Use microfinance as a platform for broad social change by delivering a wider
array of financial and non-financial products and services in pursuit of poverty

Our Technical Assistance Program offers a variety of products and services to MFIs
to help them reach these goals
Education Scholarship Program
Educational Scholarship Program promotes education for rural, financially
disadvantaged girls and boys . Public education requires families to pay fees for
books, tuition, school uniforms, and other expenses. The current cost of sending
children to public schools in range from $1,000 to $1,200 per student . The

scholarship program covers these fees so rural and poor children of microfinance
borrowers can attend school and have a chance to break out of the cycle of poverty.
Mission Statement: The microfinance mission is to enable the poor, especially the
poorest, to create a world without poverty.
With tiny loans, financial services and technology, we help the poor, mostly women,
start self-sustaining businesses to escape poverty. Founded in 1997 by a group of
friends who were inspired by the work of Grameen Bank in Bangladesh, our global
network of 55 microfinance institution (MFI) partners, including our Growth
Guarantee partners, has touched more than 34 million people in 24 countries. Our
partners reach 6.8 million clients, and in addition, we introduced and now sustain
technology initiatives (Mifos and Village Phone) in Cameroon, Kenya, Rwanda, and
Uganda, bringing our total country outreach to 28.

In the development paradigm, micro-finance has evolved as a need-based policy

and programme to cater to the so far neglected target groups (women, poor, rural,
deprived, etc.). Its evolution is based on the concern of all developing countries
for empowerment of the poor and the alleviation of poverty. Development
organisations and policy makers have included access to credit for poor people as
a major aspect of many poverty alleviation programmes.

Micro-finance programmes have, in the recent past, become one of the more
promising ways to use scarce development funds to achieve the objectives of
poverty alleviation. Furthermore, certain micro-finance programmes have gained
prominence in the development field and beyond. The basic idea of micro-finance
is simple : if poor people are provided access to financial services, including
credit, they may very well be able to start or expand a micro-enterprise that will
allow them to break out of poverty.

There are many features to this seemingly simple proposition which are quite
attractive to the potential target group members, government policy makers, and
development practitioners. For the target group members, the most obvious
benefit is that micro-finance programmes may actually succeed in enabling them
to increase their income levels. Furthermore, the poor are able to access financial
services which previously were exclusively available to the upper and middle
income population. Finally, the access to credit and the opportunity to begin or to
expand a micro-enterprise may be empowering to the poor, especially in
comparison to other development initiatives which often treat these specific target
group members as recipients.

For development practitioners, the success of micro-finance programmes is

encouraging. Too often in the past, costly large-scale development initiatives have
failed to achieve any sustainable benefits, especially after funds have dried up.

Thus, micro-finance has became one of the most effective interventions for
economic empowerment of the poor.

Understanding the Development Process through Micro-finance

Micro finance is expected to play a significant role in poverty alleviation and

development. The need, therefore, is to share experiences and materials which will
help not only in understanding successes and failures but also provide knowledge
and guidelines to strengthen and expand micro finance programmes. In India, a
variety of micro-finance schemes exist and various approaches have been
practised by both GOs and NGOs. In the development sector, credit has been
viewed as one of the missing inputs and therefore, a growing emphasis on reformulating and re-strengthening micro credit programmes is observed. There are
examples of spectacular successes and there are also examples of not-sosuccessful programmes which experienced high default rates and were unable to
provide financial services in the long run. Ultimately the aim is to empower the
poor and mainstream them into development. Amongst different approaches of
micro-finance schemes, the process and stages remain more or less the same.

The development process through a typical micro-finance intervention can be

understood with the help of Chart - 2. The ultimate aim is to attain social and
economic empowerment. Successful intervention is therefore, dependent on how
each of these stages have been carefully dealt with and also the capabilities of the
implementing organisations in achieving the final goal, e.g., if credit delivery
takes place without consolidation of SHGs, it may have problems of selfsustainability and recovery. A number of schemes under banks, central and state
governments offer direct credit to potential individuals without forcing them to
join SHGs. Compilation and classification of the communication materials in the
directory is done based on this development process.


Table 1.2 Devlopment Process through Microfinance

Classifying Micro-Finance Interventions

There are several Micro-Finance implementing organisations which provide small
loans in India. Some of them have successfully expanded their services to thousands
of borrowers. Given the fact that most of these borrowers would not have had access
to formal financial institutions, that many of the borrowers utilise the loans to enter
and/or expand their informal sector micro enterprises, and that the informal sector
continues to be an important source of livelihood for many poor people, these Micro
Finance Organisations (MFOs) may very well have had a major impact on improving
the living standards of millions of poor persons as well as on promoting economic


The term MFO has been used for all types of implementing organisations facilitating
savings and credit and financial activities at individual and/or group level, not going
into details of legal and technical aspects of MFOs.

Some of these organisations have evolved from small NGOs to become

important providers of financial services. Realising the potentially important
role that MFOs play in deepening the benefits of economic growth, it is
necessary that these MFOs should be strengthened by providing them
experience-sharing opportunities, materials and training. Furthermore, the
relative success of many MFOs soundly refute the claims of some that "the
poor are non-bankable" or that MFOs are a waste of scarce development
funds. In fact, it would be difficult to find another type of developmental
initiative which has been relatively effective on such a large scale in recent

In India, there exist a variety of micro finance organisations in government as

well as non government sectors. Leading national financial institutions like the
Small Industries Development Bank of India (SIDBI), the National Bank for
Agriculture and Rural Development (NABARD) and the Rashtriya Mahila
Kosh (RMK) have played a significant role in making micro credit a real
movement. In India, the size and types of implementing organisations range
from very small to moderately big organisations involved in savings and or
credit activities for individuals and groups. These groups also adopt a variety
of approaches. However, most of these organisations tend to operate within a
limited geographical range. There are a few exceptions like PRADAN,
ICECD, MYRADA, SEWA who have been successful in replicating their
experiences in other parts of the country and act as Resource Organisations.
Also, many organisations are involved with SHGs, not only for credit, but for
other purposes like watershed, agriculture, etc.

Micro-finance interventions can be identified based on their span of activity,

source of funds, route through which it reaches the poor or the coverage.
However, it seems that one of the most common practices and approaches
prevalent is providing credit through Self-Help Groups. The approach is to
make SHGs the main focal point to route all credit to members. Almost all
national funding organisations (NABARD, RMK) as well as other
Government schemes advocate forming of Self-Help Groups and thus
providing or linking with credit. However, many organisations providing
individual finance directly also exist. It has been explained in Chart - 3.


Table 1.3 Micro Finance interventions through Different Organisations

The Participating Organisations

The preparation of this resource directory covered about 450 organisations

involved in micro-finance activities in 11 states of India. These organisations are
classified in the following categories to indicate the functional aspects covered by
them within the micro finance framework. The aim, however, is not to "typecast"
an organisation, as these have many other activities within their scope :

1. Organisations implementing micro-finance activities

2. Resource organisations or support agencies


3. Formal financial institutions - Banks and development organisations, like

NABARD, SIDBI, Association of MFOs etc.

1. Organisations Implementing Micro Finance Activities

Organisations implementing micro-finance activities can be categorised into three

basic groups.

I) Organisations which directly lend to specific target groups and are carrying out
all related activities like recovery, monitoring, follow-up etc. Some of these
organisations are graduating to become exclusive MFOs, but such cases are few.

II) Organisations who only promote and provide linkages to SHGs and are not
directly involved in micro lending operations.

III) Organisations which are dealing with SHGs and plan to start micro-finance
related activities.

2. Resource Organisations or Support Agencies

These are the organisations who provide support to implementing organisations.

The support may be in terms of resources or training for capacity building,
counselling, networking, etc. They operate at state/regional or national level. They
may or may not be directly involved in micro-finance activities.

A few associations to bring such MFOs on one platform have also been initiated in
India. Experience sharing through newsletters and/or meetings/ seminars/training
are the methods adopted by the associations/collectives to support implementing

3. Formal Financial Institutions - Banks

Commercial Banks, Gramin Banks and Rural Banks provide funds to SHGs and
also operate their accounts. Funding agencies and development institutions
channelise credit through these FIs. Building gender sensitivity and developmental
dimensions amongst these agencies is a major need. Banks prefer to route credit
through SHGs, though they directly lend to individuals also.

Development Agencies/Nodal Agencies in India, development agencies like

NABARD, SIDBI and RMK provide funds for credit. They support MFOs and
have separate allocations for SHGs and micro-credit. These organisations have
developed guidelines and training materials to help MFOs implement micro-credit
activities covered under their preview.

Micro Finance Scheme

Introduction: The people in North East India are predominantly in the farming
sector. For trading and production purposes, small borrowers still depend on the local
moneylenders whose interest rates are normally very high. It becomes rather heavy on

the borrowers who are poor, illiterate and do not understand the intricacies involved in
formal lending. Therefore, they do not approach banks despite their needs.
With the help of Non Government Organisation (NGOs), individuals can be organised
under Self Help Groups (SHGs) for the purpose of on-lending from financial
institutions. Also, linkages can be established for networking with these SHGs with
the formal banking sector.
Despite the vast expansion of the formal credit system in the country, it has not been
able to cover adequately the need of small loan requirement of the rural poor. The
banks have not been involved much in lending of this kind as it encompasses high risk
& high transaction cost and too many small borrowers. Faced with such constraints,
the unreached small borrowers can be helped by NEDFi through the provision of
small loan through intermediaries. It will lead to creation of informal savings and help
in inculcating the habit of borrowing and repaying.
NEDFis Objective: There is a need to target small and mid size agriculturist, self
employed personnel, entrepreneur; not so much as a measure of poverty alleviation
but as a measure of productivity/efficiency building mechanism to support the greater
goal of overall development of the region.
Hence, NEDFi would look towards developing & supporting NGOs/Voluntary
Agencies (VA) with good track record for on-lending to the "needy" for taking up
productive activities. The program would envisage extending financial assistance to
NGOs/VAs for on-lending to the people for self-employment projects that generate
income, allowing them to care for themselves and the families.
The Proposal: The approach would focus on identifying micro finance institute
(MFI) as long tern partners and providing credit support for their micro credit
initiatives. The MFIs may be well-organised Non Government Organisation (NGO)
with good networks or other micro finance organisations. The MFIs would be selected
on the basis of their credibility, track record, professional expertise and management
practices, credit rating, field visits etc.
Operational Strategy: The approach to assistance under NMFS will be different
from that of conventional lending under other programs of NEDFi in as much lending
decisions under NMFS will be governed by the track record, capabilities of reach of
MFIs rather than the security offered and promoters stake.
Operational Modalities: The operational modalities of the NMFS will be as follows:
Eligible Borrower: Well managed NGOs/VAs/Cooperative Societies, Village
Councils that::

are in existence for at least 3 years

have experience in developing SHG
have good track record
have proper system of book keeping
adequate financial management ability
well-organised SHGs engaged in income generating activities.


Minimum amount that can be given to a SHG is Rs 20 thousand and maximum

up to Rs. 4 lakh.
NEDFi would lend the amount at Prime Lending Rate (PLR) + 0.5 %
(administrative charge).
NGOs to lend it to the SHGs/individuals at a rate determined by them after
discussing with NEDFi. In no case more than 4% above NEDFis PLR.
Repayment period by the NGO would depend on the projects. Maximum
period is 5 years including a reasonable moratorium period. The repayment
period by the ultimate borrower will be 1-3 years.
Some feasibility study of the projects sent by the SHGs should be done by the
NGOs before being accepted by NEDFi. The individual projects would be
prepared by the NGOs with details.
NEDFi would help SHGs, NGOs in identifying activities and in conducting
seminars, trainings, workshops etc..
NGO will apply as per NEDFi application format .
NGO's to please use checklist.

Activities to be financed:

Income generation through agriculture (including farm implements).

Other farming activities mainly : Piggery, Poultry, Fishery, Dairy etc.
Micro industries.
Service Sector including transportation etc.

Ultimate Target Group :

Farmers - Petty Traders

Women - Youth
Capacity Building of NGOs


Loan Agreement.
Deed of Hypothecation.
Promissory Note.
Resolution of executive body accepting the terms and conditions for availing
the loan.


Hypothecation of all the movable assets of the NGO.

Promissory note from the NGO.

SHGs and Microfinance

The focus of Hand in Hands Self Help Group (SHG) and Microfinance Project is to
alleviate rural poverty and empower women. This is done by forming women into
Self Help Groups, training them in capacity building and skills development, and
helping them build sustainable livelihoods for themselves and their families.
Hand in Hand links Self Help Groups to banks and thereby facilitates access to
alternative sources of cheap credit. When bank loans are inaccessible, insufficient, too
costly, or too rigid, Hand in Hand tries to bridge the gap by providing cheap credits
for enterprise creation. Thus, the credit flow towards enterprise creation for Self Help
Group members is twofold: through banks, and through Hand in Hand.
Hand in Hand believes that when loans are given to women for asset creation and
income generation, it increases their status and strengthens their position in the family.
Consequently, as women are empowered, household poverty reduces and the health
and education standards in the family as a whole increases. Further, with the creation
of enterprises, women migrate from poorly paid work or unpaid household work, to
self-employment and entrepreneurship.

More than 310,000 women have been organised into over 21,000 Self Help
Groups in 13 districts of Tamil Nadu as well as in Pondicherry

More than 168,000 women have been assisted in setting up new or

strengthening already existing family-based enterprises by skills training and
access to credit

760 medium-sized enterprises have been supported

2,620 women have been trained and 1,900 women have been employed in two
of the leading garment industries in Tamil Nadu
76,109 women have received functional literacy training
Since the start up of microcredit lending in September 2004, Hand in Hand has
disbursed credits to the tune of INR 1,119 million, out of which INR 549 million
has been direct Hand in Hand credit and INR 570 million bank linkage

Hand in Hands Self Help Group and Microfinance Project is holistic and
comprehensive, covering Self Help Group formation, access to microcredits, as well
as credit plus services such as training and capacity building and promotion of

i. Group Formation
Hand in Hand has adopted a systematic and thorough approach when it comes to
forming and supporting Self Help Groups (SHGs) and all communities are assessed

using Participatory Rural Appraisal (PRA) methods. When a new group is being
formed, we try to make it as homogeneous as possible; preferably, the members
should belong to the same socio-economic class. Our target is here the most
disadvantaged, marginalised, and poor sections of society. Among the poor women in
these categories, we give priority to women who head households, widows, and
deserted women.
ii.Training and Capacity Building
Training and capacity building forms one of the cornerstones in the Self Help Group
and Microfinance Project. Training programmes are designed after doing a Training
Needs Assessments and training manuals and curriculums are designed in consultation
with various project partners, such as government departments and agencies, other
nongovernmental organisations (NGOs), and participating banks.
Hand in Hand stresses the need for finance management and banking skills. We
promote financial discipline amongst members through savings and thrift as well as
encourage internal lending. Another important part is to help familiarize the members
with banking procedures such as interest rates and loan repayment. The women also
receive training in books keeping, accounting, and insurance coverage, as well as the
principles behind the Self Help Group approach with meetings, minutes, and bylaws.
2.The Hybrid Model
Hand in Hand views microfinance as the entry point for income generating activities
and poverty reduction. Access to microcredits helps households generate surpluses
and slowly expand into multiple activities, thus countering seasonal and activity based
risks. With the creation of enterprises, women migrate from poorly paid work or
unpaid household work, to self-employment and entrepreneurship.
To facilitate the strengthening of existing family based activities, Hand in Hand has
adopted a hybrid of the Grameen bank model and the Self Help Group approach.
Within two to three months of group formation, Hand in Hand offers smaller loans,
without any collateral, for the start up of new, or for the consolidation of already
existing, family based activities for one-third of the members. Credit is thereafter
provided to the remaining members in a phased manner. Hand in Hand strives to
ensure that 80 percent of the Self Help Group women have their own enterprise within
18 months of group formation.
Hand in Hand has implemented solid systems to ensure that members do not squander
their loans on trivial consumption needs, but rather invest in income generating
activities. The women have a collective borrower responsibility and there is a certain
peer pressure within the group. The repayment rate is extremely high with credit
losses around mere 0.5-1 percent!
Hand in Hand encourages Self Help Groups to access continuous credit from banks
by facilitating procedures to ensure the same. It is encouraging to note that while
initially the Self Help Group women take loans to build on their existing family
businesses, after two to three dozes of loans they become enterprising enough to take
bigger loans from banks and invest in new or already existing family business.
3.Credit Plus

Hand in Hand believes that credit alone cannot lead to the empowerment of women
unless it is accompanied by certain credit plus interventions such as literacy
training, gender training, entrepreneurial training, vocational training, provision of
insurance, and etcetera.
i. Literacy Crash Course
With the high level of illiteracy among the Self Help Group women, it becomes
important to engage in adult education. Hence, Hand in Hand offers an intensive, 100day literacy and arithmetic crash course to all illiterate women. More than half of the
women acquire basic reading, writing, and arithmetic skills by the end of the 100
days. By adding another month, the success rate is 90 percent.
ii. Entrepreneurial Training
Entrepreneurial training is introduced to help and encourage members start up new or
improve already existing businesses. Apart from basic things such as cost calculation
and pricing, we focus on marketing and distribution. A manual for 50 different types
of enterprises has been developed, including market overview and capacity, plant and
machinery, manufacturing process, raw materials, labour, total fixed investments,
working capital, and etcetera.
iii. Gender Training
Women do not become empowered merely by gaining access to credit; financial
assistance though a necessary condition for empowerment is not sufficient alone.
Gender sensitive microfinance policies accompanied by training provide the enabling
environment needed for holistic empowerment.
Hand in Hands gender awareness programmes are planned and imparted to first
sensitise the women, and thereafter the communities, about gender. The programmes
help the poor, suppressed women reflect about their disadvantaged position and then
take corrective and collective action to change the same. Another step is the formation
of Womens Rights Protection Committees (WRPC) engaging village volunteers.
iv. Vocational Training
Hand in Hand is committed to training individuals and equipping with the tools
needed to build sustainable livelihoods for themselves. With this objective in mind,
we have initiated several vocational courses for women.
Aina Tailoring Centre offers six-month courses in tailoring and embroidery, taking
through more than 500 women per year. The main target groups are widows and
unemployed young women. Hand in Hand has signed contracts with two of the
leading garment industries in Tamil Nadu; three-fourths of all tailors from Aina
Tailoring Centre have guaranteed jobs after the termination of the course, and the
remaining will be self-employed.
In order to build on and take advantage of the old weaving traditions in
Kancheepuram, Hand in Hand has set up a weaving centre. The centre offers sixmonth courses in weaving, dying, and printing, as well as functions as a satellite unit
for export production. By spearheading new technologies in a 1000-year-old trade, we
hope to create job opportunities for women.

4. Jobs for Growth

Hand in Hand believes that economic empowerment is the key to social and political
empowerment. Hand in Hand aims at organising 1.3 million poor, rural women into
Self Help Groups by the year 2010 and generate employment opportunities for them.
Hence, everything in and around the Self Help Group and Microfinance Project serves
one purpose: creating sustainable enterprises and jobs, thereby raising the income of
poor families and villages. Our firm emphasis on job creation makes us stand out
among all other nongovernmental organisations (NGOs) in Tamil Nadu.
i. Agricultural Family Based Enterprises
Farming is both a way of life and the principal means of livelihood for half of the
people living in Tamil Nadu. The average farm size is growing smaller and smaller
each year, and the cost-risk-return ratio is becoming adverse, resulting in a growing
number of highly indebted farmers. Farmers who decide to quit have little option but
to move into urban slums. The livelihoods of pastoralists and smallholder farmers are
also threatened by the progressive loss of grazing land for their animals, limitations to
mobility, inadequate or inappropriate government polices, and a lack of animal health
The support system facilitated by Hand in Hand is based on the above problems
through input supply, training, and handholding in marketing and distribution.
Interventions include group farming, crop-livestock mixed farming, creating multiple
livelihood opportunities, and forming cooperatives. Examples of agricultural
enterprises are organic vegetable cultivation, animal husbandry, and dairy production.
ii. Non-Agricultural Family Based Enterprises
Apart from agricultural enterprises, our Self Help Group members also run nonagricultural enterprises such as embroidery, weaving, sewing, petty shops,
vermicompost, rabbit rearing, cottage industries, bakery, paper cup production, and
etcetera. Hand in Hand provides technical support and training in product
maintenance, quality control, pricing, marketing, market assessments, and so forth.
iii. Medium-Sized Enterprises
Most of the enterprises run by Self Help Group members are small family based
enterprises. However, Hand in Hand also supports medium-sized, group based
enterprises, which could be either agricultural or non-agricultural. The investment for
such enterprises usually lies between Rs 200 000 and Rs 500 000. Examples of
agricultural medium-sized enterprises are dairy, organic vegetable cultivation, vermin
compost, fishing, and etcetera. Hand in Hand has also facilitated several nonagricultural enterprises, for instance bakery, paper-cup production, sanitary napkin
production, liquid-soap and detergent-powder production, macro weaving,
embroidery, tailoring, canteen, and etcetera.
Enterprises are selected after rigorous market surveys assessing feasibility, demand,
and supply of products. Hand in Hand then organises experts to provide training to the
Self Help Group members in maintaining books of accounts, quality control, price
setting, and etcetera. Intensive training is also given as regards procurement of raw
materials, marketing, networking, conflict resolution, attitudinal change, crisis

management, and etcetera, in order to strengthen the women and help them manage
the unit without Hand in Hands support. Additional support from Hand in Hand
includes preparation of bankable proposals in English and Tamil with information
about capital investment, raw materials, manufacturing processes, cost and benefit
analysis, marketing scope, and etcetera. Hand in Hand also provides free workplace
and electricity, transportation, as well as marketing linkages for an initial period of
one year.
C. Strategy

Target women below the poverty line, and, among them, give preference to
women heading households, widows, and deserted women. Poor, rural women
account for 70-80 percent of all group members.

Form active and cohesive Self Help Groups of women from similar socioeconomic backgrounds.

Train the Self Help Groups members in habit of thrift, savings, internal
rotation, leadership skills, group dynamics, capacity building, basic arithmetic and
literacy skills, and etcetera.

Give the Self Help Group members access to credit through the groups from
rural banking services as well as through Hand in Hand.

Provide skill training and entrepreneurial development training in the specific

area of skill and interest.

Promote the establishment of family- and group-based enterprises and

facilitate forward, backward, and marketing linkages.

Arrange insurance cover for the micro enterprises.

Create solid community structures by empowering rural poor women in
forming federation

1.2 Purpose of study

The purpose of this study, to a practical training in a NGO sector. The intention of
this study is to know the practical knowledge about Microfinance. And how the theory
of Microfinance,i.e.,loan facility helps in the improvement of womens status in the
Indian society.
1.3 Scope of study
The scope of the study helped me to know about the key elements of
EMPOWERMENT, which plays a vital role in NGO sectors.
The whole study is concentration on the Economic Growth of Women Empowerment
through MICROFINANCE and the study also indicates the success of women in
meeting requirements of the organization. There was constant effort given to find out
whether there is any relation between NGOS Microfinance and womens economic
growth in the society.


1.4 Objectives of study

The main objective of the project is to acquire some practical knowledge about
Economic Growth of women through Microfinance at PREM. The particular study
has been taken up with the following objectives:
1. To learn how the Microfinance works in NGO sectors.
2. To study the how the Economic Growth of women through microfinance at
3. To know the utilization of finance provided by banks through NGOs to poor
people and women.
1.5 Area of study

The area of the summer training project paper report entitled Economic Growth of
Women Empowerment through Microfinance in PREM; Berhampur.The area of the
study is not confined to the economic growth of women but also to see how loans are
sanctioned and how collections are made out. The project started with understanding
the organizations operations like data flow, cash flow, technology used and other
operational activities under Berhampur region. After getting clear picture of the
organization I tried to locate some of the women customer who are in the need of such
type of loan. I met some of the field co-coordinators and other employees and
interaction with them helped me a lot of understanding the organizations policy
implementation. To get more rich information I collected information from the
various customers and NGO related institutions.



A small group of social activists of Berhampur in Orissa State,India initiated rural
development programmes in villages of Mohana block in Gajapati district in
1980.They started 15 adult education centres in the tribal dominated hilly region of
South Orissa and the initial success led them to expand their activities to the fisherfolk and dalit people living in the backward areas of Gajapati and ganjam
districts.That is how Peoples Rural Education Movement,in short PREM,took its
roots and formally got itself register under the society registration act in 1984.With
its primary objective to uproot illiteracy,poverty and economic disparity,evolving a
value-based social structure, PREMs development programmes have been extended
to 5,000 villages benefiting approximately 8,40,000 people throughout the states of
Orissa and Andhra Pradesh by the year 2007.
The goal of Peoples Rural Education Movement (PREM) is the creation of a new
social order in which the present unorganized and marginalized people have a say in
decision making, in which education creates awareness and develops skills and fosters
the growth of talents,in which women and menare totally liberated from all
dehumanizing and oppressive forces, and the decisions of individuals and
communities are based on the values of social justice , equality, truth, freedom and the
dignity of human life.
Keeping women and children as the focal groups PREM engineers developmental
programmes among the weaker sections of the society to:

Develop peoples organization at various levels for collective mobilization of

people to interact with various forces for mitigation of evils.

Strengthen individual and community assets to help people meet their needs.

Develop long term , sustainable approaches for livelihood and community


Develop alternative ways to address the issues of illiteracy and ill-health of

the communities, especially of the women and children. Ensure childs right
to primary education, child hood and physical well being.


Participate in the process of advocacy to achieve the above mentioned


Formation of peoples organizations at village, panchayat, block, district and

state level.

Education of children for gainful and creative engagement.

Promotion & Protection of womens rights and interests.

Rural health programme.

Control & management of natural resources.

Active participation in the democratic institutions.

Promotion & Protection of forest and sea ecology.

Creation of alternative credit system.

Research, Training & Advocacy in support of the marginalized people.

Promotion of income generating activities.

Promotion of Agro & Agro based activities.

Intervention in natural calamities.

PREM uses a range of interconnected and interactive strategies to achieve its
objectives which are non-linear, mutually supportive and can be categorized as :

Awareness generating education ,organization building , support and

promotion .

Helping with material development in the form of health ,education,

agriculture, food,security.incomr generation etc.

Promotion of peoples initiatives such as self help groups,micro-credit,grain

banks,grop enterprises etc.

Initiating programmes for capacity building among rural folk in managing

natural resources and grassroot level democratic institutions such as Gram
Sabha and Palli Sabha.

Research,training and advocacy in support of the tribals and traditionally

marginalized groups.

As a result of implementation of its programmes in the past two decades, PREM has
successfully changed the lives of the people in its project areas:

It has facilitated the development of 42 peoples organizations among which

34 are fully autonomous.

The activities of peoples organizations include over 3,800 fully organized

villages covering 8,40,000 people.

The peoples organizations in the process of achieving their objectives of

emancipation and empowerment of marginalized people ,lobby for the rights
of tribals and for protection of livelihood of traditional fisher folk.

Such organizations which have facilitated the achievement of considerable

material improvements in the lives of tribal people include 183 schools which
7,800 pupils attend , 144 health camps ,1,500 seed and grain banks , 4
vocational training centres, 15,000 acres of fruit free plantation, hundreds of
roads, tube-wells and ponds and a credit and saving society with over 31,000

PREM has both professional and trained activists to carry out different development
programmes. Most of its activists hail from the community and women are visible at
all levels.
For the past 15 years PREM has been playing an active role in networking with the
NGOs , social activists on issue related to tribal welfare and development in Orissa. It
may be noted here that due to PREMs well thought-out and well-planned strategy, a
state level tribal forum Orissa Adivasi Manch functioned between 1995 to 2000. The
movement, pearheaded by this forum at the state and national levels,has moved the
governments to legislate both at the centre and state levels giving powers to people to
shape their own destiny through Gram Sabhas(village assemblies)
PREM strongly believes in the tribal peoples right to self- determination. Its multipronged intervention aims at :

Organization of the tribal communities, fisher people and the


Capacity building

Building up collective leadership

Participation of the tribal people in all processes of their


Creating strong base for networking among them for their own
lobbying and advocacy
Throughout its intervention PREMs special focus has been the
development of women and children, most vulnerable among
the tribal population.

Polarization of Panchayat Raj


The 73rd Amendment to the constitution of India called for the promotion of grass root
level democratic system. PREM actively engages itself in capacity building at
panchayat,block, zilla parishad levels. It includes organizing training programmes at
different levels and workshops on issues pertaining to grassroots level democracy.
PREM believes in the political vision of Mahatma Gandhi and, in collaboration with
its network partner NGOs active in 42 blocks in 15 districts of Orissa, undertakes
various programmes for popularization of the concept of Gram Sabhas.
Empowerment of Gram Sabha
PREM believes that it is important to strengthen the grassroot level democratic
institutions in tht tribal areas in order to enable the indigenous people to exercise their
control over the resources. The emphasis should be on providing information and
training to the communities. Much attention is needed to be given to educate and train
women, so that they can participate effectively and meaningfully in decision making
process. Womens role should change from the present passive spectator to
intelligent and smart actor. It is also imperative to intervene for protection and
preservation of the indigenous peoples tradition, culture, values and their customary
Convinced that political empowerment becomes a meaningful reality only when there
is social-economic well being, PREM has identified its areas of activity with
distinctly defined objectives:
1. All children should have access to the minimum level learning facility by the first
two decades of the 21st century.
2. All adults , especially women, should have access to functional literacy centers
located in their habitats.
3. Vocational training in the appropriate areas, particularly agro-based, should be
given due importance for intervention.
4. Both formal and non-formal education systems, controlled and managed by the
Gram Sabha, should be strengthened in the tribal areas to achieve the desired
1.Infant and mothers morality rates, as well as cases of malnutrition,
malaria,TB,sickle-cell and water borne diseases should be reduced.
2. Health education should be provided to women and children through appropriate
3. The indigenous peoples knowledge and skill in the application of herbals should be
4. Provision of Safe drinking water and sanitation should be ensured.
5. The importance of Insurance should be driven home.

Advocacy and Lobbying

A strong political will is needed to bring about changes in the existing socio-economic
conditions of the indigenous people. Hence the tribals, with out any gender bias
,should be given regular training to equip themselves to carryout constantly the
advocacy & lobbying activities. They should possess the skills to influence the
executives, press and legislators and to efficiently plead in judicial interventions to
protect and promote their interests. There should be e support base at national level
with branches at the state levels for strengthening the advocacy and lobbying
activities and also establishing /strengthening the self-rule system in tribal village.
An innovative programme of agro-forestry has been undertaken in 175 selected tribal
villages extending to 16,000 hectares for a period of 5 years.
The objectives of the programme are :
1. Improvement of socio economic and environmental conditions of the target
2. Increase in and diversification of agricultural production and increase in the
capacity of the population to manager their resources sustainably.
3. Development and regeneration of resources such as farming land ,water ,soil and
vegetation etc. in the project area .
4. Popularization of sustainable farming methods and community structure to provide
support to the farmers.
Community Resource management forums have been organized in all the project
villages and awareness has been created among the farmers regarding the sustainable
use of land, water etc. Efforts have been made for land development, implementing
soil and water conservation methods and the farmers are being encouraged to take up
farm diversification and vegetable cultivation. A number of small water harvesting
structures have been constructed and nurseries are being raised for plantation.
PREMs efforts in popularization of savings among the project population resulted in
formation in 1992 of Utkal Mahila Sanchaya Bikas, a separate registered society
formed and managed by women and governed by 32 board members. At present it has
31,000 members spread over 12 blocks of Orissa and 4 blocks in Andhra Pradesh. The
programmed launched at first in Ganjam district encouraged women to save small
amounts regularly for 2 years and take credit afterwards with a minimum rate of
interest. The self help group (SHG) organized by village women for co-operative
agriculture or trading etc. are given interest free loans and loans to the individuals are
limited to
a maximum of Rs.5,000. International donor agencies PLAN
International,Community Aid Abroad alongwith NABARD and the other commercial
banks support the programme in raising the funds.
Water Supply & Sanitation


PREMs operation is concentrated in hilly and terrain areas, which get enough water
during the summer days. PREM aims at developing permanent sources of water
supply employing innovative techniques such as collection of water through siphon
system the door step of tribal villages.
Capacity Building
The tribals, dalits and Fisher-folk, the marginalized sections of the society need to
be trained to actively participate in the functioning of democratic institutions. PREM
initiates activities for capacity building, especially among the women, youth and
children. Community based organizations are encouraged and the people are trained
in planning, budgeting, monitoring and evaluation of all developmental
Childrens Rights
PREM promotes and protects childrens fundamental rights to education, health,
information, communication, play and recreation with various educational, health and
cultural activities- like children festivals, picnics, and formation of balpanchayat,
childrens parliament, etc.
PREM/Plan child centered project
PREM, in association with donor agency PLAN International, has undertaken a
unique child centered project since 1996. About 7,500 tribal children and their
families in Gajapati district living inside the lagoons of chilika lake have been
identified as the beneficiaries of the PREM/Plan project. It is being operated through
seven sector offices situated at Gilakuta, Rayagada, Mohana,Parimala,Nuagada,Adava
and Gumma, covering 550 programme villages.
The project strives to achieve lasting improvements in the quality of the life of the
deprived children through a process of enabling them, their families and their
communities to meet their basic needs and to increase their ability to participate in
and benefit from their societies. It also aims at promoting the rights and interests of
the worlds children.
The project is designed to ensure that all children in the age group of 6-14 years go to
school, and a few adolescents are enrolled in training centres to be taught vocational
courses such as tailoring for girls and agriculture, masonry for boys etc. As a direct
result of the implementation of the project the enrollment of girls in primary schools
in the area has increased. Some tribal children who never had a chanced to attend
schools have started to provide better service to children.
Bridge course for Children
PREM has initiated an innovative project of bridge course for such tribal children of
school going age in its prgramme village who are not going to school. The programme
has been scheduled for a period of 3 months and 3 batches of children undergo the
course in an academic year. The children are provided with board & lodging, clothing,
study material and medical care. The course consist of curricular and co-curricular
activities managed by well-trained education facilitators.


The bridge course aims at creating interest and confidence in minds of children,
especially school dropouts and child workers to pursue higher education. It bridges
the gap between two courses the course the child has discontinued due to various
reasons and future course to which the child will be introduced. Further, it provides a
second opportunity to all those who do not have access to primary education.
The bridge course has been functioning at the premises of Bapuji Gramya Kalyan
( BGKS ) campus at Mohana since 1999 and so far 2300 tribal children
which include 50% of girls have been benefited by the programme.
Bal Panchayats
PREM in collaboration with Plan International and the other child focused
developmental organizations envisages programmes to monitor the involvement of
children in Gram Sabha and Panchayat Raj system. It encourages children to form
village level councils, Bal Panchayats and district level childrens parliaments. In the
process awareness is being created about the rights of the children.


Design of study
Data collection source and method
Fieldwork details
Limitations of the study

Design of study:
The study was designed in such a way so to obtain a desired objective. From
the beginning to end of the project every thing is done on a well planned
format. In the early stage of the project my plan is to get acquainted with the
organization where I am doing the project. After that I search for the best
available data in that organization. On the basis of the available data I choose
Economic Growth of women Empowerment Through Microfinance as my
topic. In the third week I started my study on Economic Growth of women
Empowerment through Microfinance by gathering valuable information form
different departments. I had collected information by having valuable
discussion with the Organizations project co-coordinators and field cocoordinators. To make my data more reliable I took the help of direct
questionnaires. This is all about the frame work of my study.

Data collection source:

The data which are obtained for the study has to be divided into two groups:i.

Primary data


Secondary data

Primary data comprises of information obtained from the stores record. The other
relevant procedures are collected from discussion with the concerned executives and
Secondary data comprises of information obtained from various
journals, annual reports, and professional books.
The data collection is from the following:(i) NGO institutions (SWAD, SOVA etc.)

(ii) NGO Manual

(iii) Annual reports of PREM
(iv) Records

Fieldwork detail:
The project is done in the Peoples Rural Education Movement ( PREM ),Berhampur.
All works are done in the office premises with the guidance of expert coordinators.
Data is collected form different departments situated in PREM. They are,

Accounts department

System Department

Development Project Department

The following are the limitations of the study:
More dependence on published data rather actual data, because financial data
are confidential in nature.
Major activities like procurement of funds like Rural development and Relief
& Reconstruction programme under the Head Office.
The topic is so profound to be comprehensively completed in this a short
period of time.
The project is confined only in Berhampur Branch, so I cannot able to collect
much more information.


a. By this above Microfinance project we know how this loan sanctioned
procedure and loan amount helps in the upliftment of the womens financial
status in rural societies.
b. And also know the development status of womens empowerment.
c. Microfinance generated funds from the international organizations, banks and
govt. organizations & In the basis of ,they are sanctioning the loan to the
d. Tenure of the loan, rate of interest and the repayment mode affect the womens
financial status and growth of the small scale business.
e. Microfinance institutions development by providing small funds to the
womens in the rural society and also helps in SHG formed by the womens.
ANALYSIS:The Pie-Charts and graphs drawn under represents the different types of employees
of the company about disbursement loan and effects, who were their potential
customers, utilization of funds in different purposes, tenure of loan and how did they
prefer to repay the loan .
A. Who were their potential customers?





Figure 4.1 Analysis potential customers


B. How women utilize their borrowed loans ?

Figure 4.2 Analysis Women Borrowed Loans

C. Tenure of loan the women prefer for?

Figure 4.3 Analysis of prefer for Tenure


D. How did womens prefer to repay the loans?

Figure 4.4 Analysis of repay the loans

a. The funds are placed in a bank against the groups account in a joint account
of three members two members from the group and one from the
organization. This is to ensure a proper withdrawal system with mutual
knowledge about the existing bank balances.
b. It cannot be expected that the credit can be used for long term productive
purposes,as its size is not large enough.
c. If a member decides to leave, she will given back her contribution towards the
group savings but forfeits the interest on it. At no time is the money disbursed
among the group members or for a common purpose.
d. The programme has had a positive impact on the life styles of women in the
area which have their operation and have received the grant from the
organization or functioning well and are able to render a positive change
among the Women.
e. Mini-bank is an important exercise, giving money management authority and
experience to women.



The organization should give more and more loans to the the women through
bank and collect in a proper scheme system.


When the loan sanctioned, then it has to be well identified by the employee
about the women.


The loan installment should be increased wherever status of the women in

stage of growing up.


Proper transaction of the loan is a huge success of women empowerment.


Whenever the loan is sanctioned then there have some securities guaranteed
for repayment of loan.


In some cases the amount of loan has to be raised for whom will pay the loan
with in a short period of time, because the interest of growth of small scale
business of women are to be also increased.

Microfinance follows from the above that for a credit system to deliver the goods to
the poor, it is desirable to lend the loanable funds for productive purposes, select
short-term and medium-term loans only, and ensure the end utilization of the credit
for the specific purpose that it is extended. By this the standard of living of the target
group quickly reaches the higher state of equilibrium where one can experience a
perceptible change in the life style of the people. On the other hand, long-term credit
needs of the community can be met by integrating the credit system with the formal
financial system, so that the benefits of the formal system start flowing to the credit
system. At this stage the members can borrow long-term loans for digging a well,
developing an orchard or a watershed. The credit system should be linked to the
banking system and the members of the credit group should be encouraged to use
bank instruments like cheques, demand drafts and savings account books so that they
would be familiarized with the functioning of the banking network. By the use of
these instruments their money transactions are properly recorded without any
ambiguity. There is every possibility of the system becoming part of the lives of the
people and thereby meeting all the credit requirements of the members.