UNITEDWORLD SCHOOL OF BUSINESS

BUSINESS RESEARCH PROJECT

ON

POTENTIALS OF MICROFINANCE IN RURAL AREAS :

A STUDY OF GANDHINAGAR

SUBMITTED BY: SURBHI SHARMA

ENROLLMENT NO: 18PG098
SECTION – 2
PGDM BATCH:-2018-20

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 ACKNOWLEDGEMENT

In preparation of my project report, I had to take the help and guidance of some respected persons,
who deserve my deepest gratitude. As the completion of this assignment gave me much pleasure,
I would like to show my special thanks of gratitude to my professor, project supervisor Dr. Kishor
Bhanushali, for having given me his valuable guidance for the project. Without his help it would
have been impossible for me to complete the project.. I would also like to expand my gratitude to
all those who have directly and indirectly guided me in completing the project.

I would be failing in my duty if I do not acknowledge with a deep sense of gratitude the sacrifices
made by my parents and friends and thus have helped me in completing the project work
successfully.

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EXECUTIVE SUMMARY

This project report has been prepared for the requirement of the subject:Business Research
Methods of the programme PGDM (Sem 2) in the academic year 2018-20.

Microfinance service is promoted as a poverty relieving tool with a noble cause for many
developing countries and economies in the last decade. It has directed the path of growth and
development to many backward economies. Though there have been a large number of studies on
microfinance regulations and policies, the purpose of this study is to find out the POTENTIALS
OF MICROFINANCE IN RURAL AREAS : A STUDY OF GANDHINAGAR. Therefore, the
present study assumes great importance in micro-finance industry The study will discuss about the
awareness level of microfinance and availing of the services. It further focuses on the satisfaction
level of microfinance users of rural people towards MFIs services. For the purpose of study, 25
articles were reviewed first and then primary data of sample 100 was collected from rural people
living in the gandhinagar. The survey was accomplished using questionnaire, observation and
interview method and based on the survey results analysis and interpretation of the data received
was done. Analysis was done on the basis on univariate, bivariate and hypothesis testing, followed
by findings and recommendations.

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 LIST OF CONTENTS
1.Introduction
1.1 Introduction to microfinance...........................................................................1-7
1.2 Microfinance products.......................................................................................7
1.3 Meaning of Self Help Group (SHG) ..............................................................7-8
1.4 Self Help Group movement in India................................................................8-9
1.5 SHG as a part of digital world- EShakti.........................................................9-10
1.6 Progress of SHG – Bank Linkage Programme..............................................10-11
2.Review of Literature ......................................................................................12-23
3. Research Methodology ....................................................................................24
3.1Introduction.......................................................................................................24
3.2 Objective of the research..................................................................................24
3.3 Type of research used.......................................................................................24
3.4 Methods of Data Collection..............................................................................25
3.5 Sample plan .....................................................................................................26
3.6 Techniques of data collection:..........................................................................26
3.7 Data analysis tools:...........................................................................................26
3.8 List of hypothesis..............................................................................................27
3.9 Importance of the study....................................................................................28
3.10Limitations of the study...................................................................................28
3.11 Chapter scheme...............................................................................................29
4. Data analysis
4.1 Univariate Analysis.........................................................................................30-44
4.2 Bivariate Analysis...........................................................................................45-49
4.3 Hypothesis Testing..........................................................................................50-53
5. Findings, recommendations and conclusion
5.1 Findings............................................................................................................54
5.2 Recommendation..............................................................................................55
5.3Conclusion.........................................................................................................56
6. References........................................................................................................57-59
7. Annexure..........................................................................................................60-62

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LIST OF TABLES
TABLE TABLE OF CANTENTS PAGE
NO NO
1 CLASSIFICATION OF GENDER 30
2 DISTRIBUTION OF AGE OF RESPONDANTS 31
3 LEVEL OF OCCUPATION OF THE RESPONDENTS 32
4 INCOME OF RESPONDANTS 33
5 AWARENESS OF MICROFINANCE AMONG RESPONDANTS 34
6 AVAILING OF MICROFINANCE FACILITY 35
7 SOURCE OF INFORMATION AND AWARENESS OF MICROFINANCE 36
SERVICES
8 AWARENESS REGARDING VARIOUS SERVICES OF MICROFINANCE 37

9 EASY ACCESS OF LOANS 38

10 LOW INTEREST 39
11 MATCHING THE CREDIT NEED OF BORROWERS 40
12 REPAYMENT FACILITY 41
12 AVAILABILITY OF MICROFINANCE 42
14 PURPOSE OF AVAILING MICROFINANCE 43
15 IMPROVEMENT OF OVERALL SOCIOECONOMIC STATUS OF THE 44
RESPONDANTS
2.1 OCCUPATION* ARE YOUNAVAILING ANY MICROFINANCE 45
FACILITY CROSSTABULATION
2.2 AGE OF RESPONDANT * ARE YOU AVAILING ANY MICROFINANCE 46
FACILITY CROSSTABULATION
2.3 GENDER OF RESPONDANT* SOURCE OF AWARENESS OF SHGs 47
SCHEME CROSSTABULATION
2.4 GENDER OF RESPONDANT* MICROFINANCE SERVICES 48
AFFORDABOLITY OF MICROFINANCE CROSSTABULATION
2.5 MICROFINANCE SERVICES REPAYMENT FACILITIES* AGE OF 49
RESPONDANT
3.1 CHI-SQUARE TESTS 50
3.2 INDEPENDENT T-TEST 51
3.3 ANOVA 52
3.4 COORELATIONS 53

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LIST OF GRAPHS

GRAPH TABLE OF GRAPHS PAGE

NO. NO
1 CLASSIFICATION OF GENDER 30
2 DISTRIBUTION OF AGE OF RESPONDANTS 31
3 LEVEL OF OCCUPATION OF THE RESPONDENTS 32
4 INCOME OF RESPONDANTS 33
5 AWARENESS OF MICROFINANCE AMONG RESPONDANTS 34
6 AVAILING OF MICROFINANCE FACILITY 35
7 SOURCE OF INFORMATION AND AWARENESS OF 36
MICROFINANCE SERVICES
8 AWARENESS REGARDING VARIOUS SERVICES OF 37
MICROFINANCE
9 EASY ACCESS OF LOANS 38
10 LOW INTEREST 39
11 MATCHING THE CREDIT NEED OF BORROWERS 40
12 REPAYMENT FACILITY 41
12 AVAILABILITY OF MICROFINANCE 42
14 PURPOSE OF AVAILING MICROFINANCE 43
15 IMPROVEMENT OF OVERALL SOCIOECONOMIC STATUS OF THE 44
RESPONDANTS
2.1 OCCUPATION* ARE YOUNAVAILING ANY MICROFINANCE 45
FACILITY CROSSTABULATION
2.2 AGE OF RESPONDANT * ARE YOU AVAILING ANY 46
MICROFINANCE FACILITY CROSSTABULATION
2.3 GENDER OF RESPONDANT* SOURCE OF AWARENESS OF SHGs 47
SCHEME CROSSTABULATION
2.4 GENDER OF RESPONDANT* MICROFINANCE SERVICES 48
AFFORDABOLITY OF MICROFINANCE CROSSTABULATION
2.5 MICROFINANCE SERVICES REPAYMENT FACILITIES* AGE OF 49
RESPONDANT
3.1 CHI-SQUARE TESTS 50
3.2 INDEPENDENT T-TEST 51
3.3 ANOVA 52
3.4 COORELATIONS 53

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 CHAPTER 1
INTRODUCTION TO MICROFINANCE

1.1 Introduction

Microfinance emerged as a noble substitute for informal credit and an effective and Powerful
instrument for poverty reduction among people, who are economically active, but financially
constrained and vulnerable in various countries. Microfinance is a way of living and a source of
livelihood to the poor. It has been proved through different kind of researches that microfinance
aims at providing different kinds of financial products and services to the poor. Such products and
services include Micro credits, Micro savings, Micro insurances, Financial and Social
intermediations (subsidies, grants), Business Development Services (business training and skill
development, backward and forward linkages, technology services), etc. Micro financing is an
endeavor supported by the Government, government agencies, nationalized banks, NABARD,
cooperative banks and various Microfinance institutions in the present economic system intending
to alleviate poverty, provide better facilities to poor and improvement of standard of living of the
poor and all round development of poor, especially poor women. For overall development of the
country, women who constitute half of the population of country should grow in order to develop
society as a whole. In India, Micro finance is of an ancient origin. Traditionally, Money lenders,
zamindaars (landlords), traders, etc have provided micro credit to poor borrowers in rural areas at
exorbitant rates of interest ( Debadutta Panda,2009).There was no regulation on this kind of
lending as it was informal in nature and it led to exploitation and difficulties for the poor. As a
result of this, poor in rural areas faced lot of hardships and became poorer and poorer because of
the burden of loan. Further, non-repayment of loans, unemployment, bonded labor, child labor,
exploitation of women and unlawful and obligatory transfer of claim on assets added to their woes.
As a result of this, the landless and poor farmers got more and more entangled in the vicious cycle
of poverty. However, in today‘s scenario, the entire concept of Microfinance has changed. It does
not include any unfair, unreasonable practices or harassment to the poor. Rather, it is more about
alleviating poverty, organizing the poor especially women into groups called Self Help Groups

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(SHG)‘, providing credit facilities at subsidized rates and providing employment opportunities by
helping them set their own microenterprise.

Microfinance is also the idea that low-income individuals are capable of lifting themselves out of
poverty if given access to financial services. While some studies indicate that microfinance can
play a role in the battle against poverty, it is also recognized that is not always the appropriate
method, and that it should never be seen as the only tool for ending poverty. Microfinance is
defined as any activity that includes the provision of financial services such as credit, savings, and
insurance to low income individuals which fall just above the nationally defined poverty line, and
poor individuals which fall below that poverty line, with the goal of creating social value. The
creation of social value includes poverty alleviation and the broader impact of improving
livelihood opportunities through the provision of capital for micro enterprise, and insurance and
savings for risk mitigation and consumption smoothing. A large variety of actors provide
microfinance in India, using a range of microfinance delivery methods. Since the ICICI Bank in
India, various actors have endeavored to provide access to financial services to the poor in creative
ways. Governments also have piloted national programs, NGOs have undertaken the activity of
raising donor funds for on-lending, and some banks have partnered with public organizations or
made small in roads themselves in providing such services. This has resulted in a rather broad
definition of microfinance as any activity that targets poor and low-income individuals for the
provision of financial services. The range of activities undertaken in microfinance include group
lending, individual lending, the provision of savings and insurance, capacity building, and
agricultural business development services. Whatever the form of activity however, the
overarching goal that unifies all actors in the provision of microfinance is the creation of social
value.

Microfinance is a form of financial services for entrepreneurs and small businesses lacking access
to banking and related services. The two main mechanisms for the delivery of financial services
to such clients are: (1) relationship-based banking for individual entrepreneurs and small
businesses; and (2) group-based models, where several entrepreneurs come together to apply for
loans and other services as a group. For some, microfinance is a movement whose object is a world
in which as many poor and near-poor households as possible have permanent access to an

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appropriate range of high quality financial services, including not just credit but also savings,
insurance, and fund transfers. Many of those who promote microfinance generally believe that
such access will help poor people out of poverty. For others, microfinance is a way to promote
economic development, employment and growth through the support of micro-entrepreneurs and
small businesses. Microfinance is a broad category of services, which includes microcredit.
Microcredit is provision of credit services to poor clients. Microcredit is one of the aspects of
microfinance and the two are often confused. Critics may attack microcredit while referring to it
indiscriminately as either 'microcredit' or 'microfinance'. Due to the broad range of microfinance
services, it is difficult to assess impact, and very few studies have tried to assess its full impact.
Proponents often claim that microfinance lifts people out of poverty, but the evidence is mixed.
What it does do, however, is to enhance financial inclusion.

The policy makers had suggested subsidized credit schemes for the poor, assuming that the poor
cannot have the funds to repay the loans at the usual rate of interest, i.e. the interest rate at which
loans are disbursed to the higher strata of society. However, the subsidized credit schemes did not
help the government in alleviating poverty. This made them realize that the access to credit, and
not to cost of credit, helps in bringing down the number of people living Below Poverty Line
(BPL). Since independence, India has initiated many schemes and projects to make the financial
services reachable and accessible to the poor. Various poverty alleviation schemes like Swarna
Jayanti Gram Swarozgar Yojana (SGSY), Jawahar Gram Samridhi Yojana(JGSY), Employment
Assurance Scheme (EAS), National Social Assistance Programme(NSAP), National Old Age
Pension Scheme (NOAPS), National Maternity Benefit Scheme (NMBS), Annapurna, Rural
Housing – Indira Awaas Yojana (IAY), Area Development Programmes: Drought Prone Area
Programme (DPAP), Desert Development Programme (DDP) And Integrated Wastelands
Development Programme (IWDP). Apart from these schemes, Government has initiated various
priority sector lending schemes.

According to RBI, the most important priority sector lending schemes with respect to microfinance
lending are:-

(a) Agriculture (Direct and Indirect finance): Direct finance to agriculture shall include short,
medium and long term loans given for agriculture and allied activities directly to individual
farmers, Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) of individual farmers without

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limit and to others (such as corporate, partnership firms and institutions) up to Rs. 20 lakh, for
taking up agriculture/allied activities. Indirect finance to agriculture shall include loans given for
agriculture and allied activities e.g. Loans to food and agro-based processing units, Finance for
setting up of Agri clinics and Agribusiness Centers.

(b) Micro Credit: Provision of credit and other financial services and products of very small
amounts not exceeding Rs. 50,000 per borrower to the poor in rural, semi-urban and urban areas,
either directly or through a group mechanism, for enabling them to improve their living standards,
will constitute micro credit.

Loans provided to distraught urban poor to repay their arrears to lenders in the informal sector
would be entitled for categorization in priority sector. Urban poor for this purpose may include
those families in the urban areas who are below the poverty line. Such loans to urban poor may be
classified under weaker sections within the priority sector. Various schemes have been launched
but they were not very effective to reach out to the poor and eradicate poverty.

The successful implementation of these schemes required the willing co-operation of the formal
financial sector, particularly, the banking sector, which did not dare to provide financial assistance
to the poor and low-income group people reason being, that these people are considered non
bankable because they have no collaterals to offer or they have very little or nothing in the name
of savings. So providing finance to these people has always been perceived as highly risky venture.
That is why the poor mostly depend on the informal source of finance like moneylenders, which
in turn leads to exploitation and lifetime indebtedness, specifically, in the rural areas. Microfinance
sector can be treated as an important instrument for providing social protection for the poor, mainly
the individuals who are living in rural areas. So the implementation of microfinance program as a
social protection tool for the rural poor may help the rural households to reduce their vulnerability.
The Government of India has initiated microfinance program among rural women under
Swarnjayanti Gram Swarozgar Yojana (SGSY) scheme through group-lending system.
Microfinance helps the poor households to meet basic financial services such as savings and
getting credit during emergency. Credit can be utilized as working capital for initiating or
expanding any income-generating activity which can provide economic stability to the micro
borrowers. Microfinance programs generally target poor village women by providing financial

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services only through women, making women responsible for repayment of loan and making
savings a regular habit, thereby playing an important role to improve household economics.

Microfinance group members periodically contribute savings that are used to build a revolving
fund from which they are encouraged to borrow to meet their consumption and short- 9 term
production needs. Access to consumption credit enables them to strengthen income-generating
activities. SGSY scheme wants to provide self-employment and sustainable increase in the income
of the poor. It adopts a group approach, working through a cluster of villages and the formation of
Self-Help Group (SHG). Crucial to the success of the program is social mobilization of the poor,
organizing them into SHGs, motivating them and building their capacity for development (Kundu,
A., 2011).

The primary objective of microfinance programs is to eliminate poverty and empower women by
way of income generation, raising existing income levels and to widen financial markets by
providing financial and non-financial services to the poor. Microfinance aims at economically
active poor in the society to assist them generate wealth, build up assets and raise income for
consumption. The following are other objectives of micro finance:

 Provide Access to Funds:

Traditionally, poor used to acquire funds through loans from money lenders and other informal
lenders. These loans were being lent at a very high cost and poor had to undergo many exploitative
practices. With the SHG bank linkage programme of NABARD, these exploitative practices came
to an end. Poor started getting loans from banks. However, apart from banks, MFIs also provide
small loans but it is usually at a high interest rate.

 Encourage Entrepreneurship and Self-Sufficiency:

Poor people may have certain profitable business ideas, but due to lack of sufficient capital, they
cannot put them into action. Microcredit loans provide clients with money, fund their business
ideas and generate income for a better living. They can then pay off their micro-loan and continue
to gain income from their venture indefinitely.

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  Empower Women:

Microfinance provides women with the financial backing they need to start business ventures and
actively participate in the economy. It gives them confidence, improves their status and makes
them more active in decision-making, thus encouraging gender equality.

The main reason for considerable percentage of population below the poverty line and India still
remaining a developing country with lot of problems is due to the human resources not being used
at the optimum level. The first Prime Minister of Independent India, Pandit Jawaharlal Nehru, has
rightly said that, ―the women of India should play a vital role in building strong nation‖
(Manimekalai, N. and G. Rajeswari (2000). Further, the Father of the Nation, Mahatma Gandhi
has said, ―the development of every village is nothing but the development of nation‖ (Awasthi
P K, Rathi D and Sahu V (2001). It is a well-known fact that the growth of women in turn develops
first her family, and then village and thereby leading to national development. Since women
constitute 48.15% of total population of India as per census 2001, it is very essential to employ
this resource optimally in the interest of the nation in general and her family in particular. In the
past, women were not ready to undertake any work, job and business due to shyness, fear and male
dominance in the society.

However, of late, Indian women have come out of the four walls of the kitchen and are more
willing to take up entrepreneurial activities. Women today want more economic independence,
their own identity, achievements, equal status in the society and greater freedom. Further, many
women have proved that they are more productive than men in contributing to the growth of the
economy. Just as we need two hands for the smooth functioning of human work, similarly both
men and women should be involved in productive activities to build a strong nation. Besides, India
has been facing the problem of unemployment and underemployment. To 11 mitigate this problem,
women are needed not only to generate employment, but also to provide employment to others.
They have to undertake entrepreneurial activities to create additional wealth for the nation and to
solve the problem of unemployment and poverty. Entrepreneurship development among women,
particularly among rural women, will strengthen the rural and national economy. Increasing the
amount of savings through Self Help Groups can develop the self reliance of the women of
microfinance program and further help them in investing their income and also undertaking
increasing the income-generating activity . The Ministry of Women and Child Development

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(MWCD), 2012-13 report on economic empowerment show that an average percentage of
women‘s work force is increased only to 25.7% from 22.5% between 1991 and 2001. This change
is due to poverty being feminized, technology dominated sector, unviable traditional sector and
inadequate security cover.

1.2 Micro finance products

(a) Micro credit: According to RBI, ―Micro credit can be defined as provision of thrift, credit
and other financial services and products of very small amount to the poor in rural, semi-urban and
urban areas for enabling them to raise their income levels and improve living standards.

(b) Micro savings: Micro savings can be referred to as the mobilization of very small savings
from the poor. According to SEWA bank,‘ Poor women do not have a basic instinct for saving.
they can and do save , if motivated and facilitated.

(c) Micro insurance: Micro insurance can be defined as ― financial arrangements to protect poor
and low income households against natural and artificial disasters and calamities and shocks
through a specific structured mechanism for the exchange of regular premium payments
proportionate to the likelihood and cost of risk involved‖ (Debadutta kumar Panda,2009).

1.3 Meaning of Self Help Group (SHG)

The SHGs are small, informal and homogenous groups. These groups have proved as cyclic agents
of development in both the rural and urban areas. In simple words, they are small groups of women
formed into groups of ten to twenty and operate a savings-first business model whereby the
member‘s savings are used to fund loans. Also, SHGs can be described as a voluntary association
of people formed to attain goals both social and economical (Hema Bansal, 2003).

The SHGs after being formed start collecting a fixed amount of thrift from each member regularly.
After accumulating a reasonable amount of savings, the group starts lending to its members for
petty consumption needs. If the bank is satisfied with the group in terms of (i) genuineness of
demand for credit; (ii) credit handling capacity of the members; (iii) repayment behavior within
the groups; and (iv) the accounting system and maintenance of the records, it extends a term loan
of smaller amount to the group.

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Thus, financing through SHGs provides for quite a few benefits like; (i) savings mobilized by the
poor; (ii) access to the required amount of appropriate credit by the poor; (iii) meeting the demand
and supply of credit structure and opening of new market for financing institutions; (iv) reduction
in transaction cost for both lenders and borrowers; (v) tremendous 15 improvement in recovery;
(vi) heralding a new realization of subsidy less and corruption-less credit; and (vii) remarkable
empowerment of poor women (Gadkari, R., & Ramkishen,Y, 2011).

In India, three types of SHG models have emerged:

1. Bank-SHG-Members: The bank itself acts as a self-help group promoting institution SHPI).

2. Bank-Facilitating Agency-SHG-Members: Facilitating agencies like NGOs, government

agencies, or other community-based organizations form groups.

3. Bank-NGO-MFI-SHG-Members: NGOs act both as facilitators and microfinance

intermediaries. First they promote groups, nurture them, and train them, and then they approach
banks for bulk loans for lending to the SHGs (Dr. Satish Ailawadi ,Prof. Rupali Gadkari Paranjpe
& Shunmugasubburaja K Pandian,2013)

1.4 Self Help Group movement in India

National Bank for Agriculture and Rural Development (NABARD) is an Apex Development Bank
in India for financing and promoting agriculture, small scale industries, cottage and village
industries, handicrafts and other rural crafts so as to promote integrated rural development.
NABARD had undertaken an initiative in 1992 for extending help to informal SHGs, which has
turned out to be a great initiative named SHG-BANK Linkage Programme. SHG movement
mainly aims at promoting SHG as an intermediary between poor women and the bank. Poor
normally are reluctant to approach bank for their credit needs. But due to easy access to credit
facility that the members of SHG enjoy, poor willingly join SHG and become a part of mainstream.
It also reduces the transaction cost for the banks.

The SHG - Bank Linkage Programme is a strategy for delivering financial services to the poor in
a sustainable manner. It is considered as a decentralized, cost effective and fastest growing
microfinance initiative in World. The search for such alternatives begin with the prior knowledge

8
regarding the innovations which the poor had been traditionally making to meet their financial
services needs. It was observed that the poor wanted to come together in various ways, mostly
informal in nature for pooling their savings and getting small and unsecured loans at varying costs,
lending to group members on the basis of their requirement. The linkage with banks has provided
the members of the Groups the facility of not only pooling their thrift /savings and access to credit
from the banking system, but also created a platform through which they could launch a number
of livelihood initiatives and also facilitate the empowerment process (NABARD- 2011-12). The
SHG – Bank Linkage Programme was started as an Action Research Project in 1989 which was
the offshoot of a NABARD initiative during 1987 through sanctioning Rs. 10 lakh to MYRADA
as seed money assistance for experimenting Credit Management Groups. In the same year, the
Ministry of Rural Development provided PRADAN with support to establish self-help groups in
Rajasthan. The experiences of these early efforts led to the approval of a pilot project by NABARD
in 1992. The pilot project was designed as a partnership model between three agencies, viz., the
SHGs, banks and NGOs. This was reviewed by a working group in 1995 that led to the evolution
of a streamlined set of RBI approved guidelines to banks to enable SHGs to open bank accounts,
based on a simple ―inter-se‖ agreement. This was coupled with a commitment by NABARD to
provide refinance and promotional support to banks for the SHG - Bank Linkage Programme
(NABARD, 2011-2012).

There was a net addition of 6.73 lakh SHGs during the year increasing the number of SHGs having
savings linkage to 85.76 lakh as on 31 March 2017. The savings outstanding of SHGs with banks
as on 31 March 2017 has reached an all-time high of R16114.22 crore. During the year, banks
have disbursed loan of R38781.16 crore, recording 4% increase over the last year despite the
impact of demonetisation which slowed down loan disbursement post October 2017. The total
bank loan outstanding to SHGs also increased by 7.81% and stood at R61581.30 crore against
R57,119 crore as on 31 March 2016. The gross NPA of bank loans to SHGs marginally increased
by about 5 basis points from 6.45% as on 31 March 2016 to 6.50% as on 31 March 2017. This was
achieved in a year when there was overall deterioration in quality of assets and mounting NPAs in
the banking sector.

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1.5 SHG as a part of digital world- EShakti

In the recent years, with the entire banking sector embracing technology, there is a smooth and
seamless flow of data, both of transaction and information, across the banking system. However,
the microfinance sector was more or less left out from the technology platform. It was therefore
felt that SHGs should not be left behind and should evolve to be able to leverage upon technology.
Digitisation of Self Help Groups is a step towards systematic and faster achievement of the avowed
goals of SHG movement. Keeping this in mind, NABARD attempted digitisation of SHGs under
a project called EShakti to take advantage of the available technology to address the problem of
book keeping, capturing the credit history of SHG members, generating SHG grading report based
on its financial and nonfinancial records and making them available to all important stakeholders.
The stakeholders especially bankers can now take informed decisions for extending credit linkages
on the basis of reports generated through EShakti

Project EShakti envisages mapping of the existing SHGs in a district (bank wise, branch wise) by
capturing financial and non-financial information of the SHG and its members and uploading the
transactions including minutes of meetings, through an “App” loaded on Android based Tablets/
Mobiles to a dedicated website viz. https://eshakti.nabard.org/. To address the regional GPRS
connectivity issues across the country, provision is made for uploading of data through both online
and offline modes. Stakeholders like SHG members themselves, Government Agencies, Banks,
NGOs, etc. can access the data on the basis of login accounts. Encouraged by the positive response
of the stakeholders in Phase I in Ramgarh (Jharkhand) and Dhule (Maharashtra) districts, the pilot
project was expanded to 23 more districts under Phase II across various States. Data of 1.3 lakh
SHGs has since been digitized in the pilot project and credit linkage of SHGs has shown handsome
increase.

1.6 Progress of SHG – Bank Linkage Programme

SHG - Bank Linkage Programme has traversed twenty-five years of unabated journey towards
empowering the rural poor, in general and rural women in particular. Taking a big leap from a
pilot in 1992, SHG Bank Linkage Programme has now become the largest community based
microfinance initiative with 85.77 lakh SHGs as on 31 March 2017 covering more than a hundred
million rural households. There was a net addition of 6.73 lakh savings linked SHGs during 2016-
17, a major portion (70.4%) from priority States indicating the urge for connecting the poor

10
households in less developed States with the development process through SHG-BLP. Coordinated
efforts by NABARD and NRLM to enhance the coverage of eligible SHGs under NRLM fold has
resulted in a net addition of nearly 2.9 lakh SHGs under its fold during the year. The domain of
SHGs consists of 85.4% women groups and is the mainstay programme for empowerment of the
poor rural women in the country. Table 4.1 gives an account of savings, credit disbursement and
credit outstanding of total SHGs and under NRLM and NULM during the past three years. SHG -
Bank Linkage Programme is a strong intervention in economic enablement and financial inclusion
for the bottom of the pyramid. A proven platform initially conceived for increasing the outreach
of banking services among the poor has since graduated to a programme for promotion of
livelihoods and poverty alleviation. All the major parameters viz. the number of SHGs with
savings bank accounts, amount of credit disbursed during the year, the bank loans outstanding as
well as the quantum of savings outstanding had shown positive growth during the past three years
The year 2016-17 has proved particularly positive for the growth of SHGs.

REGION WISE DISTRIBUTION OF LOANS TO SHGs 2016-2017

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 CHAPTER 2

REVIEW OF LITERATURE

2.1 Introduction

This chapter compiles the literature reviewed pertaining to the field of study. Initial review of the
literature primarily focused on understanding the concept of microfinance, its evolution and its
acceptance, applicability, impact and potential as a tool of financial inclusion and poverty
alleviation in the global context. It also centred on studies relating to microfinance in India with
focus on SelfHelp Groups. The literature consists of both theoretical and empirical studies
published in leading journals along with articles and reports by government and recognised
national and international agencies and institutions.

1. Basu, P, & Srivastava, P. (2005). has examined that the current level of pattern ans access to
finance for india’s rural poor and examines some of the key microfinance approaches in India,
taking a close look at the most dominant among these, the Self Help Group (SHG) Bank linkage
initiative. It empirically analyse the success with which SHG Bank linkage has been able to reach
to the poor, examines the reasons behind this and the lessons leraned. The analysis in this paper
draws heavily on a recent rural access to finance survey of 6000 households in india, undertaken
by the authors.

2. Mohammed, O. (2007). This study proposes a two-pronged strategy, based on the dichotomy
between livelihood and growth enterprises, The paper focuses on the provision of Shariah-
compliant financial services to microenterprises. It examines: Livelihood enterprise financing by
MFIs in Bangladesh and its impact on poverty alleviation,Financial services approach to
microenterprise development in Indonesia and linkages among various components of the
financial system at micro levels.

3. Christuraj, P, & Saraswathy, S. (2009). in their study focused on the socio-economic changes
and empowerment of the SHG members. The socio-economic changes were measured with the
help of twenty parameters with parameter rated on a scale of one to five.. The study also found

12
that membership of SHGs made the access of members easier to a wide variety of services and
enabled them to voice their concerns-against issues like - exploitation, living conditions and other
matters.. It would be apt to say that SHGs are creating space for marginalized and poor women
members to explore new spheres.

4. Fields, G.S. (2010)this article is based on Fields (forthcoming) and on NCEUS (2009). The first
part of the paper about global poverty and how the world‘s poor work. As many as six-anda-half
times the number of the unemployed are the working poor, which indicates that the world has on
employment problem. So does India. The second part of the paper is about combating poverty in
India and Internationally. The policies discussed here are workplace protections, harnessing the
energies of the private sector, economic growth, labour market policies for generating more paid
employment, the raising self-employment earnings.

5. Sarmah, G. N and Das, D. K. (2012). tries to analyze the rule of microfinance and Self-Help
Groups (SHG) for the socio economic growth of the poor people in Lakhimpur District of National
Journal of Multidisciplinary Research and Development 334 Assam. Primary data was collected
from 50 SHGs of 5 members each SHG (50*5=250 respondents). The outcome of the study was
that after joining the SHGs the poor rural people can increase their income and improve their
standard of living by performing income generating activities independently.

6. Mohammad, K, and Sridharan, P. (2012). Micro-finance or micro-credit, both used

interchangeably, is an important tool for the growth of the economy of our country. The present
paper focuses on the challenges and opportunities of micro-finance activities in rural areas of our
country. The motto of this paper is also to test the role of micro-finance in the empowerment of
downtrodden people especially women and the realization of financial inclusion in rural India.
With increasing demand for rural finance, and the shortages of formal sources, the MFIs have
tremendous challenges and opportunities in micro-finance in India. Some suggestions are given
how MFIs should be administered with better exploration in terms of finance and technology as
well as social responsibility.

13
7. Tripathy, K. K. and Jain, S.(2012). In addition to reviewing agricultural credit policies
followed in India and assessing the trends and progress in the credit flow and access, this paper
aims at examining the suitability of government-directed microfinance activities as an alternate
tool to the formal credit delivery mechanism in rural areas. Drawing upon the field surveys
conducted in four districts of two federal states in India, the paper not only indicates the wide
recognition the program has gained within the rural community but also reflects the inequitable
impact of microfinance initiative, and highlights a few prominent flaws in program implementation
and administrative mismanagement which reduce the effectiveness of the program.

8. Nasir, S (2013) attempts to outline the prevalent condition of the microfinance in India in the
light of its advent till now and its aim is to provide a cost effective mechanism for providing
financial services to the poor. The research finding determines the gap in functioning of MFIs such
as practices in credit delivery, lack of product diversification and suggestions to overcome the
issues and challenges related with microfinance in India.

9. Gundappa, & Mudakappa. (2014). In this paper the role played by Microfinance in women’s
empowerment are considered into three dimensions namely psychological, social and economical.
Analysis showed that there is a gradual increase in the all the three factors among rural women’s.
From the interaction among the respondents it is noticed that some members are expecting the
NGO to come up with more training sessions in income generating activities. All they need is a
way to develop their skills and talents by participating in various training programs. There is a
definite improvement in psychological well being and social empowerment among rural women as
a result of participating in micro finance through SHG program.

10. Jha, S. (2016). This paper is a modest effort to understand the unique role of MFIs in social
development especially in Indian context..MFIs in India have been involved in capacity building,
financial literacy, livelihood promotion, preventive healthcare, education and training, water and
sanitation, etc. The paper provides a comprehensive review of some of the interventions triggered
by MFIs in India so as to empower the people living on the fringes without any hope of redemptionIt
is important that the MFIs expand their social development interventions in terms of reach, quality,
and overall impact on the people who are living on the margins.

14
11. Dr. K, Rajendran (2012). Micro insurance is specifically designed for the protection of poor
who form the bottom of the pyramid, with affordable insurance products to help them cope with
and recover from stress and shocks. The study concludes that the level of participation in micro
insurance is very low and the main reason is the lack of awareness. Even though micro insurance
is treated as a part of micro finance programme the reality is poor participation in micro insurance
programme among the participants micro finance. The study concludes that the level of
participation in micro insurance is very low and the main reason is the lack of awareness. Mostly
life related products are common among rural women and they consider investments in life
insurance products as saving instruments for future. Even though micro insurance is treated as a
part of micro finance programme the reality is poor participation in micro insurance programme
among the participants micro finance.

12. Hans, V. (2012) The main objective of this paper, therefore, is to shift the focus from mere
financial access to poverty eradication and people’s empowerment, sifting the ‘performance’ of
Microfinance Institutions (MFIs) from their ‘popularity’. For microfinance, therefore there is
ethical and economic justification for looking beyond income poverty or to move from financial
intermediation to social intermediation. So today we need to not only evolve new products or
services under the gamut of microfinance but also explore new frontiers of development, social
and economic. Several MFIs have recognised the need to be socially relevant and active in order
to be commercially viable and useful. The Kalanjiam and the DWCRA have shown what
microfinance can do besides eradiating income poverty. A symbiotic relationship between
financial intermediation and social intermediation is possible and profitable even while dealing
with the vulnerable. Happily India has now acquired an “access to growth” agenda. It is India’s
unfinished agenda (Hans, 2008b).

13. Sinha, A. K.(2013) Microfinance Institutions have provided a viable option for poor especially
in rural areas where people find it difficult to avail financial services like micro credit, savings
account etc. in absence of various documents and collateral. The sustainability of demand, of the
MFI’s mission, of its ownership and governance structure and the legal and regulatory framework

15
under which it works, are all contributory to overall here, the sustainability of an MFI by itself
may not be enough unless a full-fledged micro-finance sector (MFS) is established on sustainable
lines. In this paper authors have made an attempt to examine what comes in the way of making
Indian MFIs sustainable and how can a good regulatory framework may facilitate this. In this paper
we will focus on Sustainability of micro financial institutions their genesis, current ambit of
regulations on them. Challenges faced by MFI’s. Therefore the challenges faced areas follows-
High OSS(operating self-sufficiency) Lack of credit verifiable history, Lack of alternative
channels to raise low cost funds, Investor pressure. Though the Regulatory guidelines are an effort
to empower the MFI’s to generate low cost funds from alternative sources, a new set of regulatory
frame work should be built exclusively for MFI’s.

14. Casini, P. & Vandewalle, L.& Wahhaj, Z. (2015)Self-help groups (SHGs) are the most
common form of microfinance in India. The authors provide evidence that SHGs, composed of
women only, undertake collective actions for the provision of public goods within village
communities. this paper shows that an elected official, whose aim is to maximize reelection
chances, exerts higher effort in providing public goods when private citizens undertake collective
action and coordinate their voluntary contributions towards the same goods. Results are important
in light of the attention given to SHGs in anti-poverty programs in India. For example, the National
Rural Livelihood Mission puts forward the creation of groups as a first step in its poverty
alleviation program. An additional and interesting research question is whether the phenomena we
observe are related or not to the financial role of SHGs. Potentially, similar outcomes could be
attained by different types of groups. However, this should not lead to understatements on the role
of microfinance in India. In the context of our survey region, where the social role of women is
restrained, intra-household interactions may play an important role. In this respect, the explicit
financial aim of SHGs can make the difference by providing a socially acceptable reason for
women to meet regularly.

15. Islam, N. (2015) The self-help group (SHG) model with bank lending to groups without
collateral has become an established part of rural finance. The government and financial institution
have accepted this and have highlighted the SHG model and take initiatives to work along with
NGOs. Million of SHGs have been linked to banks over the years but still most of the states are

16
not doing well to established the development process of the poor and also do not link up and
nurtured the various schemes of the Govt. The paper also discuss the why rural poor easily get the
loan from the private players and not with the rural banks. NABARD has played a crucial role in
the development of the SHG microfinance program. It has been focusing, perhaps justifiably given
the slow initial progress of the program, on increasing the outreach of SHGs and strengthening
their linkage with the banking system. However, given the exponential increase in the program in
the recent years and similar trends observed in other microfinance programs around the world
(including that of Grameen Bank) (World Bank 2003), the focus needs to shift to sustaining the
benefits provided by SHGs.. The extent of sustainability and factors determining sustainability are
not known. Knowledge on impact is also inadequate. The need to investigate these issues is long
overdue. Factors those are likely to make the benefits of SHGs sustainable need to be identified.

16. J, Taiwo. (2016) SMEs all over the world play a strong role in national development. This
study explored the roles of these micro finance banks and institutions on small and medium
enterprises as well as the extent to which the small businesses have benefited from the credit
scheme of microfinance banks. Primary data was obtained via interviews conducted in 15 small
businesses across Lagos state with their responses summarized in tables. This study advocates the
recapitalization of microfinance banks to enhance their capacity to support small business growth
and expansion and also to bring to the knowledge of the management of microfinance banks and
institutions the impact of the use of collaterals as a condition for granting credit to small businesses.
Small businesses in Nigeria need access to funding for their businesses to flourish on a sustainable
basis. Although, small businesses promote the development of an economy, it has not been given
adequate recognition that corresponds with intensity of its contribution. It is noteworthy to state
that both financial and non-financial services provided by microfinance banks and institutions. The
implication of this study is that, micro-financing significantly promotes businesses by reducing
the resource gap for small businesses. Microfinancing has a huge potential for increasing the
performance of small businesses through the frequent contributions in micro-financing and
provision of non-financial services.

17
17. Visconti, R . M (2017) This survey reviews some of the main aspects of microfinance in
underdeveloped countries, describing why it has succeeded in reaching the poor while traditional
bank have not, using innovative devices such as short repayments installments and small loans.
After the pioneer experiment of Grameen Bank some 25 years ago, microfinance has entered the
adult age and thousands of mostly small MFIs are competing in a market where demand for
financial services from the poorest is potentially unlimited, while supply is not. Academic research,
both on theoretical and empirical grounds, is broad and it is proving useful in a field where
flexibility and financial innovation, to overcome problems that make the poorest unbankable
according to commercial banking standards, are greatly needed. The life cycle growth of MFIs that
are surviving a Darwinian selection allows them to reach commercial banking status, being
enabled to collect deposits and – in the best cases – to have links with international funders, mainly
through Microfinance Investment Vehicles. For the few MFIs that until now have been able to
jump on the train of global financial markets, smart opportunities of lower funding costs and more
sophisticated financial services are on hand. Further research and on field application is strongly
needed to make substantial progress in meeting the core needs of the destitute and underserved.
Since the poorest are naturally humble, even scientists and practitioners addressing their problems
should accordingly be.

18. Ayayi, A.G & Sene, M.(2018) This paper surveys recent research on microfinance and suggests
directions for future research. New empirical evidence has emerged, and new theoretical models
have resolved some issues. The paper selectively examines recent findings, particularly theoretical
and empirical works that deal with the financial and social goals that microcredit must fulfill to
provide long-term sustainable poverty reduction. Finally, because the goal of microfinance is
poverty reduction, and its primary target clients are those that cannot provide a backup for their
loans, we strongly believe that other financial contract mechanisms that do not require interest
payment to funnel capital to poor micro-entrepreneurs to nurture and to sustain the growth of their
micro-business should be investigated. One such financial mechanism might be micro-equity
(Ayayi (2009b).

18
19. Cull, R & Morduch, J (2017) The microfinance sector has grown quickly since the 1990s,
paving the way for other forms of social enterprise and social investment. But recent evidence
shows only modest average impacts on customers, generating a backlash against microfinance.
This paper reconsiders the claims about microfinance, highlighting the diversity in evidence on
impacts and the important (but limited) role of subsidies. The paper concludes by describing an
evolution of thinking: from microfinance as narrowly construed entrepreneurial finance toward
microfinance as broadly construed household finance. In this vision, microfinance yields benefits
by providing liquidity for a wide range of needs rather than solely by boosting business income.
Beyond demonstrating the possibility of new kinds of financial institutions, microfinance has
inspired innovations adopted in other sectors, including health, education, and energy. Early efforts
to build social businesses and foster social investment owe their inspiration to the pioneers of
microfinance (Yunus 2008, Conning and Morduch 2011). The evidence described in this paper
poses challenges for microfinance. The data show modest subsidies and modest impacts. They
show growing scale, but a shift away from the poorest. And they show regional differences in the
kinds of populations served by microfinance. If microfinance has been a clear success
institutionally, how to ensure impacts on customers is far less clear. Investors and entrepreneurs
have difficult choices to make in enabling the next steps for microfinance. One vision, provoked
by evidence from financial diaries, opens up the possibility of extending the ideas of microfinance
to hundreds of millions of potential customers, many in urban areas and most with jobs, who lack
a strong interest in business investment. They instead seek finance to help manage cash flows and
seize opportunities requiring lumpy sums.

20. Rajendran, K and Raya, P (2008-09) Empowerment leads to economic development which
results in poverty reduction and sustainable development and micro finance through SHG is
considered as a tool for empowerment. The purpose of this paper is to critically analyse the real
impact of microfinance on the changes in income, expenditure and consumption pattern in rural
households, empowerment of women and constraints. The study reported that there is a significant
increase in income, expenditure and consumption pattern and there is an appreciable empowerment
in political space than economic empowerment and negligible social empowerment of women as
result of participating in micro finance through SHG programme. Delay in sanction of loan and
inadequacy of the loan amount are the major challenges. Natrampalli and Nemili blocks in Vellore

19
district (Tamil Nadu) were selected for the study; these two blocks have similarities in number of
SHGs, families below poverty line and population below poverty line. Respondents were
interviewed and data were collected during 2008-09 with the pre tested and well structured
interview schedule. This study is a descriptive one and the variables are identified from the earlier
research studies. Findings are that Micro finance is effective in the development of weaker sections.
Micro finance is effective in bringing social assertiveness and social interaction. Micro finance is
effective in human development through improved education, enhanced skills, improved
knowledge and awareness on health, food and nutrition, self employment, acquisition of self
confidence and courage to face problems and challenges, participation in decision making and
awareness of environmental protection.

21. Luzzi, G & Weber, S. (2006) Measuring the performance of microfinance institutions (MFIs)
is not a trivial task. Indeed, looking at the financial sustainability of an MFI only gives one feature
of its performance This paper illustrates how some statistical tools can offer new insights in the
context of MFIs’ performance evaluation. Factor analysis is used in a first step to construct
performance indices based on several possible associations of variables without posing too many
a priori restrictions. The base variables are thus combined to produce different factors, each one
representing a distinct dimension of performance. Then individual scores are ascribed to each MFI
on each factor as the dependent variables of a simultaneous-equations model and present new
evidence on the determinants of MFIs’ performance. Microcredit is often promoted as an efficient
tool to help the poor, since it is based on sound economic principles. Rates of return of small scale
investments can be very high and explain why some people are ready to pay high interest rates in
order to finance them. However, market failures and relatively high transaction costs can prevent
a substantial part of these investments to be realized through private financial intermediaries,
especially in remote rural areas. MFIs’ ambition is to fill the gap. As discussed earlier, they can do
so either by focusing on the poor and expanding their outreach, or they may prioritize their
financial viability.

20
22. Nair, A. (2005) A few promoter organizations have, however, developed federations of SHGs
that provide these services to the SHGs and others that SHG members need, but which SHGs
cannot feasibly provide. Using a case study approach, this paper explores the merits and
constraints of federating. Three SHG federations that provide a wide range of services are studied.
The findings suggest that federations could help SHGs become institutionally and financially
sustainable because they provide the economies of scale that reduce transaction costs and make
the provision of these services viable. However, their sustainability is constrained by several
factors – both internal, related to the federations themselves and external, related to the other
stakeholders. The paper concludes by recommending some actions to address these constraints.
This study explores the potential of SHG federations in providing sustainability to SHGs. SHG
federations studied here provide a wide variety of services including financial services. These
federations are more difficult to manage and govern than other federations that provide a narrower
range of services; they are also more difficult to develop. The operational self-sufficiency of the
SHGs indicates the percentage of operational costs of SHGs met by its operational income.
However, the estimates for SHGs only indicate the combined profitability of all SHGs.

23. Rajendran, K. (2012 ) The experience across India and other countries has shown a robust
potential of Microfinance to integrate with the development issues thereby significantly impacting
the lives of poor. This paper critically reviews the various empirical studies carried out in India
and it will help the researchers in the field of SHG and microfinance. Studies carried out in India,
as evident from this paper, indicates that micro finance and Self Help groups, by and large
contributed to the development of core poor in terms of economic well being, alleviating poverty
and empowerment leading to over all development of rural poor. Studies covered by the researcher
in this study, only 6 researches has stated that there is no so positive effective of SHG and
microfinance and nearly 90% of the studies reported positive impact of the microfinance and SHG.
Findings are the micro finance revolution, a recent product of development, ensures the availability
of institutional credit and financial inclusion to the poor, who were so for excluded from the
institutional credit system. In India, as evident from the study that most of the literature on micro
finance revolves around four southern states where Governments and Non Governmental
Organisations are taking lead in the spread of micro finance. Studies carried out in India, as evident
from the above literature review, indicated that micro finance and Self Help groups, by and large

21
contributed to the development of core poor in terms of economic well being, alleviating poverty
and empowerment leading to over all development of rural poor.

24. Ngeresa, P & Mokaya, S & Gikunda, R. (2018) The study sought to determine the extent to
which access to microcredit was a significant predictor of growth of microenterprises in Tanzania.
A descriptive survey was conducted to applied to gather data from clients and employees of Vision
Fund Microfinance. Data was collected from a sample of 80 participants who comprised of
microenterprise owners, credit officers and credit committee members selected through stratified
random sampling. A semi-structured questionnaire was utilized as a means of data collection.
Before it’s administration the instrument had been checked for face and content validity, and its
internal consistency determined through Cronbach alpha. Logistic regression was conducted to
assess if credit access was a significant predictor of the likelihood of microenterprises growth. The
study revealed that credit access accounted for 23.3% variance in growth of microenterprises. The
results indicated that credit access was a significant significant predictor of growth of
microenterprises . This implies that odds of predicting the likelihood of growth of microenterpises
improves by .05 units for each unit increase in access of credit facilities. In conclusion, microcredit
access is a key ingredient to growth of microenterprises. In order to improve upon access to credit
access, MFIs (microfinance institutions) should look on possibilities of reducing costs of
microcredit to make it accessible to entreprenuers. This would include but not limited to
diversification of credit services and reviewing collateral requirements. There has been growth in
sales volume, labour size, stock volume and profit among microenterprises whose operations are
supported by credit from VFT in Tanzania. However, a few are at the verge of collapsing due to
the diversion of sales and credit to cater for owners daily needs. The study revealed a negative
correlation between access to microcredit and growth of microenterprises due to the a
forementioned reasons and also servicing a credit for a long period would hurt the growth of
business as argued by Nanor (2008).

22
25. Krishnan, L. & Sequeira, M. (2008) the study analyzed the formation and functioning of SHGs
and the impact on socioeconomic status of underprivileged women. A pre-tested structured
schedule was administered to collect the primary data from 350 SHG members and 30 animators.
The study revealed that women come together as SHGs as they are able to get hassle-free and
timely loans to meet emergence needs with thrift. Team sprit is acting as a binding factor to bring
unity and cohesiveness among the group members. The SHG approach, apart from generating
incremental income, helped them to upgrade the economic and social status along with a sense of
recognition contributing to the process of empowerment. Objectives is to analyze the formation of
SHGs and mobilization of savings from the members and to determine the changes in economic
and social status of SHG women by analyzing the role of NGOs in formation of SHGs. The study
concluded that the poor women’s collective initiative based on savings is ultimately leading to
soci-economic empowerment. The head of the NGO brings about dedication and discipline among
the NGO staff and SHG members. The empowerment process would be effective if hygiene and
literacy activities are dovetailed with health camps and insurance schemes. The microfinance depth
and outreach should be expanded to provide financial service to the poorest of the poor with
separate allocations consumptive needs with different repayment.

23
 CHAPTER 3
RESEARCH METHODOLOGY

3.1 INTRODUCTION

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. Researchers
need to know, which of the methods or techniques, are relevant and which are not, and what
would they mean and indicate and why. Researcher also need to understand the
assumptions underlying v a r i o u s t e c h n i q u e a n d t h e y n e e d t o k n o w t h e c r i t e r i a
b y w h i c h t h e y c a n d e c i d e t h a t c e r t a i n techniques and procedure will be applicable to
certain problems and others will not.

3.2 RESEARCH OBJECTIVES

1. To study the awareness level of the people of Micro Finance.

2. To study the safisfaction of the rural people about availing the microfinance facility and
concept of Microfinance.
3. To examine whether microfinance facilities have access for rural areas.
4. To investigate the impact of microfinance on income level of beneficiaries before and after
the accessibility of microfinance in the rural area.

3.3 TYPE OF RESEARCH USED

In the study exploratory design has been used as it tries to understand the subject of the study in a
preliminary way. Research design usually depend upon direct observation of a small section of
what is to be studied. It allows the researcher to achieve a better understanding of a problem or
situation. It is the early research so the focus of this study is on exploring new knowledge/

24
3.4 TYPE OF DATA COLLECTION

Research is a process of collecting and analyzing marketing information and ultimately to arrive
at certain conclusion. The purpose of this research is to describe the research procedure. Research
Methodology is the mean to plan out the working process or the course of action to action to reach
the objective.

After the research method has been identified and selected the next step is to gather the requisite
data.

Types of data-

1. Primary
2. Secondary

Our approach for conducting this research includes a combination of both primary and
secondary data.

 Primary method :
- Observation method
- Interview method
- Questionnaire method
 Secondary sources-
- Books
- Websites
- Journals

25
3.5 SAMPLING PLAN

Target Segment : Rural areas

Sample Size : 100

Area Covered : Different Rural Areas In Gandhinagar- Dabhoda, Vavol, Adalaj and few
respondants from Uvarsad

3.6 Techniques Of Data Collection

Data Collection Method : Interview, Observation And Questionnaire

Type Of Questionnaire : Open Ended Question and Multiple Choice Questions

3.7 DATA ANALYSIS TOOLS

The different types of tools used in data analysis were

 Excel
 SPSS

26
3.8 LIST OH HYPOTHESIS
HYPOTHESIS 1:
H0 - Availing of microfinance and awareness of microfinance are independent.
H1 - Availing of microfinance and awareness of microfinance source are not independent.

HYPOTHESIS 2:
H0 – There is no significant difference between gender and awareness of
microfinance schemes and services.
H1 -- There is a significant difference between gender and awareness of
microfinance schemes and services.

HYPOTHESIS 3:
H0 – There is no significant difference between the occupation and satisfaction on improvement
of the overall socio-economic status due to microfinance.

H1 -- There is a significant difference between the occupation and satisfaction on improvement

of the overall socio-economic status due to microfinance

HYPOTHESIS 4:
H0 – There is no significant difference between ease of taking loans and availing microfinance
for the purpose of business.
H1 -- There is no significant difference between ease of taking loans and availing microfinance
for the purpose of business.

27
3.9 IMPORTANCE OF THE STUDY

Today micro finance/micro-credit access has become an important tool for rural development and
poverty reduction.

 This study will disclose the awareness about microfinance among rural people and their
perceptions on it.
 The study is to undertake how much has been microfinance induced rural economic
development and their needs.
 The research focuses on the potentials to microfinance of rural households and impact, and
repayment of loan with analysis of econometric technique tool.

3.10 LIMITATIONS OF THE STUDY

 This study is carried out in one particular area (Gandhinagar) of Gujarat because of limited
time.
 Respondant bias was one of the major limitation of research, and their might not be perfect
positive response from all the respondants.
 Another limitation of the study is that, findings of the study is based on the fact that the
respomndants have given correct answer.

28
3.11 CHAPTER SCHEME
CHAPTER 1:-INTRODUCTION

The FIRST chapter is about introduction of microfinance, its brief history, and current status of
microfinance. It talks about the background of microfinance and its improvements. It also talks
about the various products of microfinance as well as the facilities provided by them. It also covers
how microfinance proved to be a boon for rural women therefore the concept of SelfHelp Groups
and the progress of it is also explained along with the objectives of microfinance.
CHAPTER 2:-LITERATURE REVIEW

The SECOND chapter talks about the theoretical background and the literature review of the past
25 research papers. The collected research papers are related to microfinance financing, SHGs,
impact of microfinance on income, employment, economic conditions etc.

CHAPTER 3:-RESEARCH METHODOLOGY

The THIRD chapter of this study deals with the research methodology used to carry out this project
in which the source of the data, type of data used, area covered, sample of collecting data and
collection of the data is described. The objective of the study, hypothesis sampling, the importance
of the study and its limitations are also mentioned in this chapter.

CHAPTER 4:-DATA ANALYSIS

The FOURTH chapter of the study is divided based on three types of analysis.

 Univarient analysis
 Bivariant analysis
 Hypothesis testing( using chi-square, ANOVA,T-test and co-relation)

It shows the above analysis of primary data and its interpretation which is based on the
questionnaire.

CHAPTER 5:-FINDINGS, RECOMMENDATIONS AND CONCLUSION

The FIFTH chapter is all about the findings drawn from the analysis of data. It also talks about the
recommendations suggested from interpretation of the data followed by providing the conclusion
of the study.

29
 CHAPTER 4
DATA ANALYSIS AND INTERPRETATION
4.1 UNIVARIANT ANALYSIS
4.1.1 CLASSIFICATION OF GENDER
Gender plays an important part in data interpretation. Gender classification is required in order to
have proper understanding towards microfinance in terms of gender classification. Total sample
of 100 were selected in order to find out the gender classification of potential of microfinance in
rural areas. The further classification is shown as below.

Table no. 1

GENDER Percent

Male 60.0
Female 40.0
Total 100.0

Gender of respondants

40% male
60% female

Fig no. 1

INTERPRETATION- From the above figure and table it can be seen that from the total sample
of 100 respondants, 40% of the total respondants are female and 60% of the total respondants are
male. The frequency of male is 60 and female is 40. It is quite clear that out of the total respondents
investigated for this study, overwhelming majority 60% of them were males whereas about 40%
were found to be females. In a Indian social conditions the households are normally headed by the
males and head of the household was the unit for data collection, from the given sample very few
households are headed by the females and that too, due to various unavoidable and unique
conditions and not because of any attitudinal change per se hence large number of respondents are
males by gender in this study.

30
4.1.2 DISTRIBUTION OF AGE OF RESPONDANTS

Age of the respondents is one of the most important characteristics in understanding their views
about the particular problems; by and large age indicates level of maturity of individuals in that
sense age becomes more important to examine the response. Therefore, here age of the respondants
tells us about the distribution of respondants regarding awareness and availing of microfinance
services and facilities in rural areas.

Table no 2

Age of respondent Frequency Percent

less than 30 7 7
between 31-39 43 43
between 40-49 43 43
between 50-59 6 6
Greater than 60 1 1
Total 100 100

Fig no 2

AGE OF RESPONDANTS
50 43 43
40
30
%age

20
7 6
10 1
0
less than 30 between 31-39 between 40-49 between 50-59 greater than 60
Age in years

INTERPRETATION- It is evident from the Table and graph that all microfinance users fall under
different age groups. 43% of the people out out of 100% are between 31-49 years of age, 6% of
the respondants are between 50-59 and 7% of the respondants are less than 30 years of age while
only 1% of the respondants is greater than 60. Therefore it can be interpreted that their has a
connection with the awareness and availing of the microfinance respondants between the age group
31-49 than the respondants above 50 years of age. The feature of this data is that young and middle
age pepple are more oriented microfinance in order to support their their living in rural areas.

31
 4.1.2 LEVEL OF OCCUPATION OF THE RESPONDENTS

The quality of life is also determined by an individual’s occupation and the incomes he derives
from it. In other words the person’s response towards microfinance is possibly determined by the
type of occupation he is engaged in and hence variable occupation was investigated and data
pertaining to occupation is presented in Table 3

OCCUPATION Percent
Agriculturist 26
Service 14
Employee 27
Business 33
Total 100
Fig no. 3

OCCUPATION OF RESPONDANTS
40 33
30 26 27
%age

20 14
10

0
Agriculturist service employee business
occupation

INTERPRETATION- From the above table and graph it can be seen that out of the total 100
sample 33% of respondants are in business, this shows that most of the respondants have their small
business like retail shop or are selling vegetables, fruits, snacks, artificial accessories etc, followed by 27 % who
are employees, 26% are agriculturist and are landless agricultural laborers and totally dependents on
agriculture and 14% of the total respondants are in service sectors doing service as school peon,
household worker, etc.

32
 4.1.4 INCOME OF THE RESPONDENTS

Income of a person plays an important role in shaping the economic conditions of an individual
which in turn is likely to have bearing on the responses about availing of the microfinance facility.
Therefore in this study attempted to investigate the income as variable and the data related to
income of the respondents is presented in Table. 4 below.

Monthly income Frequency Percent

less than 10000 43 43
10001-20000 48 48
20001-30000 9 9
Total 100 100

INCOME OF RESPONDANTS
60 48
43
40
%age

20 9
0
less than 10000 10001-20000 20001-30000
INCOME IN RS.

Fig no 4

INTERPRETATION- The above table and graph shows that more than half of the users of
microfinance are in low income group. 48% of the respondants earn a monthly income between
10000-20000, 43% earn less than 10000 and only 9% of the respondants have a monthly income
between 20000-30000. Therefore it is observed that most of the people having monthly income
less than 20000 find it difficult to run their houdsehold therefore they need a support in order to
survive their livelihood hence opt for microfinance.

33
 4.1.5 AWARENESS OF MICROFINANCE AMONG RESPONDANTS

One of the objective of the research is to find out awareness level of microfinance among
beneficiaries. Awareness level such as, how did they aware, from where they got microfinance etc.
The below table no 5 shows the awareness level of the respondants in rural areas about
microfinance and its schemes.

Table no 5

Awareness of microfinance and its schemes Frequency Percent

Yes 97 97
No 3 3
Total 100 100

Fig no 5

AWARENESS LEVEL OF MICROFINANCE

3%

yes
97% no

INTERPRETATION- From the above table and pie chart it is observed that as per awareness of
microfinance concern, out of 100 respondent, 97% of the people are very much aware about the
microfinance and out of 100 respondent 03% people are unaware about microfinance. It means
most of the people are aware about the microfinance. The awareness level of the rural poor people about
the concept of Micro Finance is high. Therefore, spreading proper awareness of facilities and policies is imperative.

34
 4.1.6 AVAILING OF MICROFINANCE FACILITY
As people are aware about microfinance facility, they are also availing the facilities provided by
microfinance. Hence, the table and graph below shows the percentage and frequency of the
respondants availing microfinance facilities.

Figure no 6

Availing of microfinance facility Frequency Percent

yes 90 90
no 10 10
Total 100 100

Fig.no 6

Availing of microfinance facility

10%
yes
no

90%

INTERPRETATION- From the above table and pie chart it is observed that as per availing of
microfinance facility is concerned, out of 100 respondent, 90% of the people are very much
availing the microfinance facility and out of 100 respondent 10% people are not availing the
facility. Therefore, it is clear that there are potentials of microfinance in rural areas as large number
of people are availing the service and only 10% are not.

35
 4.1.7 SOURCE OF INFORMATION AND AWARENESS OF MICROFINANCE
SERVICES
The table and graph below shows that the rural people have awareness about micro finance
from various sources which encouraged them to avail microfinance.
Table no 7

SOURCES RESPONDANTS
People of locality 93
SHGs Representatives 79
Bank Representatives 14

Fig no 7

Source of information and awareness of microfinance services

93
100 79
80
%age

60
40
14
20
0
People of locality SHGs Representatives Bank Representatives
sources

INTERPRETATION- From the above table and graph it is observed that the maximum number
of respondents 93%came to know about microfinance from people of locality including friends or
relatives, 79% came to know with the help of SHGs representatives, 14% were told about
microfinance by bank representatives. Therefore, it is interpreted that people of locality or the
word of mouth plays the most important role in making the people availing tha microfinance
facilities. Hence, the bank representatives and even the village panchayat should spread awareness
about the various schemes and facilities provided by microfinance.

36
 4.1.8 AWARENESS REGARDING VARIOUS SERVICES OF MICROFINANCE

Along with the awareness of microfinance and availing the service, rural people are also aware
about various service provided by microfinance. The table and graph below shows the awareness
of the respondants about different products of microfinance.

Table no. 8

SERVICE RESPONDANTS
Microfinance credit 82
Microfinance savings 14
Microfinance insurance 26
Microfinance housing 94
Finance to SHGs 93
Microfinance training 14
Fig no.8

AWARENESS REGARDING VARIOUS SERVICES OF

MICROFINANCE

94 93
82
%age

14 26 14

MICROFINANCE MICROFINANCE MICROFINANCE MICROFINANCE FINANCE TO SHGS MICROFINANCE

CREDIT SAVINGS INSURANCE HOUSING TRAINING
services

INTERPRETATION- The above table and graph shows also that rural people have awareness
about micro finance from various sources. It has been analyzed that 82% of the sample are aware
about micro credit schemes, 26% of the sample are aware about micro insurance schemes, 14%
are aware about saving schemes and 94% are aware about housing, and 93% of the SHGs and 14%
are aware about microfinance training. It is quite evident from the results of the survey that
maximum poor people had knowledge of the microfinance housing scheme and they mostly opted
for the same. The lowest percentage i.e 14% were knowledgeable about the finance for training
and saving. It means there has been least exposure in this area regarding the special schemes for
them offered by MFIs.

37
RATING OF THE FOLLOWING FACTOR RELATING TO THE MICROFINANCE
SERVICES

4.2 EASY ACCESS OF LOANS

Table no 9

Rating Frequency Percent

strongly satisfied 33 33
Satisfied 52 52
Neutral 5 5
Total 90 90
Fig no .9

Easy access of loans

60
50
52
40
%AGE

30
33
20
10
5
0
strongly satisfied satisfied neutral
DEGREE OF SATISFACTION

INTERPRETATION- From the above table and figure we observe that 52% of the total
respondants are satisfied with the ease of loans, 33% of the respondants are strongly satisfied and
5% of the respondants reviewed it to be neutral. Therefore it is seen that more than half of the
people are satisfied with the readiness of loans provided by microfinance institutions. Hence, ease
of loan may be one of the factors of which people of rural areas are encouraged to avail
microfinance facility.

38
4.1.10 LOW INTEREST

Table no 10

Rating Frequency Percent

strongly satisfied 27 27.0

Satisfied 52 52.0
Neutral 11 11.0
Total 90 90.0

Low interest
60

50
52
40
%AGLE

30
27
20

10
11
0
strongly satisfied satisfied neutral
DEGREE OF SATISFACTION
Fig no 10

INTERPRETATION- From the above table and figure we observe that 52% of the total
respondants are satisfied with low interest, 27% of the respondents are strongly satisfied and 11%
of the respondants reviewed it to be neutral. Therefore, we can see that more than half of the
respondants are satisfied with the service of low interest. This can be identified as one of the factors
of availing the microfinance facility by the rural people as they are not pressurised with the burden
of high interest.

39
4.1.11 MATCHING THE CREDIT NEED TO BORROWERS

Table no 11

Ratings Frequency Percent

strongly satisfied 27 27.0

satisfied 60 60.0
neutral 3 3.0
Total 90 90.0

Fig no 11

Matching credit need to borrowers

70
60
60

50

40

30 27

20

10 3
0
strongly satisfied satisfied neutral

INTERPRETATION- From the above table and figure we observe that 60% of the total
respondent are satisfied with matching of credit need to borrowers, 27% of the respondents are
strongly satisfied and 3% of the respondents reviewed it to be neutral. Therefore, we can see that
more than half of the respondents are satisfied with matching needs or requirement with the
services of microfinance. Therefore, this is the reason rural people avail for microfinance services
as they get loans easily according to their needs and requirements.

40
4.1.12 REPAYMENT FACILITY

Table no 12

Ranking Frequency Percent

strongly satisfied 27 27.0
satisfied 56 56.0
neutral 7 7.0
Total 90 90.0

Fig no 12

Repayment facilities
60 56

50

40
%AGE

30 27

20

10 7

0
strongly satisfied satisfied neutral
DEGREE OF SATISFACTION

INTERPRETATION- From the above table and figure we observe that 56% of the total
respondent are satisfied with repayment facilities, 27% of the respondents are strongly satisfied
and 7% of the respondents reviewed it to be neutral. Therefore, we can see that more than half of
the respondents are satisfied with repayment facilities with the services of microfinance. People
have convenience in repayment of installment of loan taken, as installment amount is taken on
weekly basis within the range of Rs.200-500.

41
4.1.13 AVAILABILITY OF MICROFINANCE

Table no 13

Ranking Frequency Percent

strongly satisfied 33 33.0
satisfied 54 54.0
neutral 3 3.0
Total 90 90.0

Availability of microfinance
60
50 54
40
%AGE

30
33
20
10
3
0
strongly satisfied satisfied neutral
DEGREE OF SATISFACTION

Fig no 13

INTERPRETATION- From the above table and figure we observe that 54% of the total
respondent are satisfied with availability of microfinance, 33% of the respondents are strongly
satisfied and 3% of the respondents reviewed it to be neutral. Therefore, we can see that more than
half of the respondents are satisfied with availability of microfinance with the services of
microfinance. The most critical factor for availing microfinance is the availability as still there is
lack of marketing of microfinance products among the rural people.

42
4.1.14 PURPOSE OF AVAILING MICROFINANCE
People in rural areas take loans for one or more than one purpose also. Therefore, the study also
states the purposes for which people take more loans so that more support and schemes can come
up taking that into consideration the table and graph below reflects the various purposes for which
more microfinance is used.

Table no 14
PURPOSE OF AVAILING MICROFINANCE MEAN
CONSUMPTION 3.77
EMERGENCIES 3.08
EDUCATION 2.51
MARRIAGE 4.88
HOUSING/HOUSING REPAIRS 2.1
TOOLS/MACHINES/EQUIPMENTS 2.58
BUSINESS 1.44
AGRICULTURE 2.4

Fig no 14

PURPOSE OF AVAILING MICROFINANCE

6 4.88
5 3.77
4 3.08
mean

2.51 2.1 2.58 2.4

3 1.44
2
1
0

purpose

INTERPRETATION- The purpose of taking loan from MFIs is different. In the above figure
mean has been calculated in order to find out the purpose of taking microfinance. Therefore, lower
the mean higher will the ranking. From the research it is observed that majority of people take loan
for business i.e using funds for establishing small business or for growth of their existing business.
Followed by business, people take loans for building or repairing houses as it ia again a critical
factor. People also take loan for agriculture purpose such as for buying equipments or for insurance
and then for education of their children also loans from MFIs are taken followed by emergencies
and consumption and marriage.

43
4.1.15 IMPROVEMENT OF OVERALL SOCIOECONOMIC STATUS OF THE
RESPONDANTS

Microfinance has been worldwide established as a major development tool to battle poverty and
more specifically aimed at economically empowering the poor thereby increasing the socio
economic conditions of the rural people. The table and figure below shows the satisfaction level
of the respondents towards their increase in the economic cinditions due to microfinance.

Table no 15

Degree of satisfaction Frequency Percent

strongly agree 9 9
Agree 76 76
Neutral 5 5
Total 90 90

IMPROVEMENT OF OVERALL SOCIOECONOMIC

STATUS OF THE RESPONDANTS
76
80
60
%AGE

40
20 9 5
0
strongly agree agree neutral
DEGREE OF SAISFACTION

Fig no 15

INTERPRETATION- There are several reasons for improvement of socioseconomic condition

of microfinance users. From the above figure it is seen that 76% of the respondents agree with the
fact that microfinance has helped them to improve their socio-economic conditions as the loan
taken from microfinance facilitate income earning. While 9% of the respondents strongly agree
with this and 5% are neutral.

44
 4.2 BIVARIANT ANALYSIS
4.3 4.2.1 Occupation * Are you availing any microfinance facility Crosstabulation
In this study the research has been conducted to find out and study all the factors relating to
microfinance. Therefore, now we compare two variables in order to get more clear picture about
the respondents view taking into consideration the sample of 100 out of which 90% avails the
service and the rest 10% does not. The table below shows the crosstabulation of occupation and
relation of availing the microfinance facility.Table no 2.1

Are you availing any microfinance facility Total

Yes no
Occupation Agriculturist 26 0 26
Service 10 4 14
Employee 25 2 27
Business 29 4 33
Total 90 10 100
Fig no 2.1

Occupation * Are you availing any microfinance facility

Crosstabulation
40
30
20 26 29
25
10 0 10 4 2 4
0
Agriculturist service employee business
Occupation

Are you availing any microfinance facility yes Are you availing any microfinance facility no

INTERPRETATION- From the above table and graph it is observed that business 29%
profession are more users of microfinance followed by agriculturist 26%, employee 25% and
service10%. It is observed that majority of people take loan for business i.e using funds for
establishing small business or for growth of their existing business.The agriculturist take loan to
purchase equipments and for farming purpose and even for consumption purpose. Employees also
takes microfinance for investing in other things and for education. Banks and MFIs should keep
on introducing more and more schemes under the microfinance net as per the requirements of the
rural poor and should increase the fund allocation towards the same.

45
4.2.2 Age of respondant * Are you availing any microfinance facility Crosstabulation

From the above data we observed that the respondents among 30-49 years of age are more users
of microfinance. Therefore now we compare the same using two variables.

Table no 2.2

Are you availing any microfinance facility Total

yes no
Age of less than 30 6 1 7
respondant between 31-39 41 3 44
between 40-49 37 6 43
between 50-59 6 0 6
Total 90 10 100

Figno2.2.

Age of respondant * Are you availing any microfinance

facility Crosstabulation
50 41
37
40
30
20
6 3 6 6
10 1 0
0
less than 30 between 31-39 between 40-49 between 50-59
Age of respondant

Are you availing any microfinance facility yes Are you availing any microfinance facility no

INTERPRETATION- From the above table and graph it is observed that less than 30 years of
age only 6 respondants avail the service rest does not. Maximum respondents are between 31-49
years of age. Due to the minimum earning capacity of the rural people they often to fulfil even
small of their demands, hence the microfinance suffice their needs. Therefore, people of age group
31-49 have much more awareness than the other age group and they avail the microfinance due
to affordibality, low interest and better repayment facilities.

46
4.2.3 Gender of respondant * Source of information and awareness of such schemes
SHG_representative Crosstabulation

Table no 2.3
Source of information and Total
awareness of such schemes
SHG_representative
Yes No
Gender of respondant male 46 14 60
female 34 6 40
Total 80 20 100

Fig no 2.3

Gender of respondant * Source of information and

awareness of such schemes SHG_representative
Crosstabulation

60 46
34
40 14
20 6
0
Yes No
Source of information and awareness of such schemes SHG_representative

Gender of respondant male Gender of respondant female

INTERPRETATION- From the above table and graph it is observed that males have more
awareness about SHGs i.e 46 respondents whereas only 14 respondents are unaware. On the other
hand femamle respondents are only 34 who are aware about the SHGs. It has been observed that
the women are less participative in financial services as compared to men, therefore there is a need
that the women come forward to take up some economic activities to be economically liberated
and contribute to the family income. There are several schemes offered for them with the banks
and MFIs

47
4.2.4 Gender of respondant * Factors relating to the microfinance services affordability_of_microfinance
Crosstabulation

Table no 2.4
Factors relating to the microfinance Total
services
affordability_of_microfinance
strongly satisfied neutral
satisfied
Gender of respondant male 21 32 1 54
female 12 22 2 36
Total 33 54 3 90

Figno2.4

Gender of respondant * Factors relating to the

microfinance services affordability_of_microfinance
Crosstabulation
40 32
30 21 22
20 12
10 1 2
0
strongly satisfied satisfied neutral
Factors relating to the microfinance services affordability_of_microfinance

Gender of respondant male Gender of respondant female

INTERPRETATION – From the above table and graph it can be observed that 32% of the male
are satisfied with the affordibality of microfinance service while 22% of the female are satisfied
with the affordibality of microfinance service. It is clear that more number of male are satisfied
than than the female. The reason is most of the females are unaware about the various schmes of
,microfinance. They are even unaware about SHGs for women. Bankers or representatives can
motivate women by providing them special arrangements. More efforts need to be made in this
regard because despite offering special services women seem to be hesitant and less motivated and
satisfied as compared to the males.

48
4.2.5 Factors relating to the microfinance services repayment_facilities * Age of respondant

Age of respondants
DEGREE OF SATISFACTION less than 30 between 31-39 between 40-49 between 50-59

strongly satisfied 33.3% 22.0% 40.5% 16.7%

Satisfied 66.7% 65.9% 56.8% 66.7%
Neutral 0.0% 12.2% 2.7% 16.7%
Table no 2.5
Fig no 2.5

factors relating to the microfinance services

repayment_facilities * Age of respondant
80.0% 66.7% 66.7%
65.9%
56.8%
60.0%
40.5%
40.0% 33.3%
22.0%
16.7% 16.7%
20.0% 12.2%
0.0% 2.7%
0.0%
less than 30 between 31-39 between 40-49 between 50-59

strongly satisfied satisfied Neutral

INTERPRETATION- From the above table and graph it can be seen that people of the age group
less than 30 -39 and 50-59 are more satisfied with the repayment facilities followed by people of
age group 40-49. Banks and MFIs should keep on introducing more and more schemes under the
microfinance net as per the requirements of the rural poor and should increase the fund allocation
towards the same. Sufficient repayment time should be given to the borrowers as most of the
micro-loans are given for startups and they might need some time for regular income generation.

49
4.3 HYPOTHESIS TESTING

HYPOTHESIS 1:
H0 - Availing of microfinance and awareness of microfinance are independent.
H1 - Availing of microfinance and awareness of microfinance source are not independent.

Chi-Square Tests
Table no 3.1

Value df Asymp. Sig. Exact Sig. Exact Sig.

(2-sided) (2-sided) (1-sided)
Pearson Chi-Square 27.835a 1 .000
Continuity Correctionb 18.480 1 .000
Likelihood Ratio 14.731 1 .000
Fisher's Exact Test .001 .001
Linear-by-Linear 27.557 1 .000
Association
N of Valid Cases 100
a. 2 cells (50.0%) have expected count less than 5. The minimum expected count is .30.

INTERPRETATION- From the above results of Chi-SquareTest, one can say that in Hypothesis
1 the H0 or the null hypothesis is rejected. This this because the Asymp. Sig.(p) is less than 0.05
i.e 0.000. Therefore, it is accepted that H1 is validated. From the above result we can say that the
Availing of microfinance and awareness of microfinance source are not independent. Therefore,
with the awareness of microfinance sources only people avail the service. This depends on the fact
that the Microfinance facilities are made accessible to the needy easily. Setting up MFIs in several
areas in the country is not sufficient, spreading proper awareness of facilities and policies is
imperative.

50
HYPOTHESIS 2:
H0 – There is no significant difference between gender and awareness of
microfinance schemes and services.
H1 -- There is a significant difference between gender and awareness of
microfinance schemes and services.
Table no 3.2 Independent Samples Test

Levene's Test t-test for Equality of Means

for Equality
of Variances
F Sig T df Sig. Mean Std. Error 95%
. (2- Differenc Differenc Confidence
tailed e e Interval of the
) Difference
Lowe Uppe
r r
Are you Equal 9.19 .00 1.43 98 .154 .050 .035 -.019 .119
aware about variance 5 3 6
microfinanc s
e and its assumed
schemes Equal 1.76 59.00 .083 .050 .028 -.007 .107
variance 2 0
s not
assumed

INTERPRETATION- From the above results of T-test , one can say that in Hypothesis 2 the H0
or the null hypothesis is accepted. This this because the Asymp. Sig.(p) is greater than 0.05 i.e
0.154 when equal variance are assumed and 0.834 when equal variance are not assumed.
Therefore, it is accepted that H0 is validated. From the above result we can say there is no
significant difference between gender and awareness of microfinance schemes and services. The
awareness level of the reral poor people about the various schemes and concept of Micro Finance
is high. The primary initiative can be taken by the banks is to spread financial literacy among the
poor in rural areas. They should establish direct communication with the rural poor. This can be
done by organizing awareness campaigns by sending representatives to villages to make the rural
people aware of the benefits of the services offered.

51
HYPOTHESIS 3:

H0 – There is no significant difference between the occupation and satisfaction on improvement

of the overall socio-economic status due to microfinance.
H1 -- There is a significant difference between the occupation and satisfaction on improvement of
the overall socio-economic status due to microfinance

Descriptives
Do you agree that microfinance has improved your overall socio-economic status
N Mean Std. Std. 95% Confidence Minimum Maximum
Deviation Error Interval for Mean
Lower Upper
Bound Bound
Agriculturist 26 1.92 .272 .053 1.81 2.03 1 2
Service 10 2.10 .316 .100 1.87 2.33 2 3
Employee 25 1.92 .493 .099 1.72 2.12 1 3
Business 29 2.00 .378 .070 1.86 2.14 1 3
Total 90 1.97 .381 .040 1.89 2.05 1 3

ANOVA
Do you agree that microfinance has improved your overall socio-economic status
Sum of Squares df Mean Square F Sig.
Between Groups .314 3 .105 .715 .546
Within Groups 12.586 86 .146
Total 12.900 89
Table no 3.3

INTERPRETATION- From the above results of ANOVA test , one can say that in Hypothesis 3
the H0 or the null hypothesis is accepted. This this because the Asymp. Sig.(p) is greater than 0.05
i.e in this case it is .546. Therefore, it is accepted that H0 is validated. There is no significant
difference between two categories. From the above result we can say there is no significant
difference between the occupation and satisfaction on improvement of the overall socio-economic
status due to microfinance. Microfinance has been worldwide established as a major development
tool to battle poverty and more specifically aimed at economically empowering the poor people of
rural areas increasing the socio economic conditions. Therefore, Banks and MFIs should keep on
introducing more and more schemes under the microfinance net as per the requirements of the
rural poor and should increase the fund allocation towards the same.

52
HYPOTHESIS 4:

H0 – There is no significant difference between ease of taking loans and availing microfinance
for the purpose of business.
H1 -- There is a significant difference between ease of taking loans and availing microfinance for
the purpose of business.
Table no 3.5
Correlations
factors relating to the Purpose Business
microfinance services
Easy_access_to_loans

factors relating to the Pearson 1 .120

microfinance services Correlation
Easy_access_to_loans Sig. (2-tailed) .442
N 90 43

Purpose Business Pearson .120 1

Correlation
Sig. (2-tailed) .442
N 43 43

INTERPRETATION- From the above results of correlation , one can say that in Hypothesis 5 is
the H0 or the null hypothesis is accepted. This this because the Asymp. Sig.(p) is greater than 0.05.
Therefore, it is accepted that H0 is validated. From the above result we can say there is no
significant difference between ease of taking loans and availing microfinance for the purpose of
business. In the above case the co-relation is .442 i.e less than .5. Therefore it implies that there is
a weak co-relation between ease of taking loans and availing microfinance for the purpose of
business. But the co-relation is positive this suggests that both ease of taking loans and availing
microfinance for the purpose of business. are moving in the same direction. Hence, we can
conclude that one of the reasons for availing microfinance service for doing business is the ease of
loans. Therefore transperancy should be maintained and hastle service should be given to the
borrowers as most of the micro-loans are given for startups and they might need some time for
regular income generation.

53
 CHAPTER 5
FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1 FINDINGS
There have been some objectives while conducting the research and these have been verified. The
findings includes the findings of the analysis, literature review as well as findings from the field
work.

 The study has focused on the awareness level of microfinance. The study shows that the
awareness level about micro finance of the sample studied is 97%. The awareness level of
the rural people about the various schemes and concept of Micro Finance is hence very
high.. The study also shows that people in rural areas have awareness about micro finance
from various sources like people of locality, SHGs and bank representatives.
 The monthly income of more than half of the sample respondents is very low i.e less than
10000 while their family members are more which means that there is an urgent need to
inform them regarding the schemes offered by microfinance in order to raise their standard
of living. They should be made aware of the other non-financial services of microfinance
so that they can invest in income generating activities rather than using the available funds
for consumption purposes.
 Though the level of awareness of microfinance in the sample area is quite high yet there
seems to be low level of awareness regarding the various schemes.
 It has been observed that majority of people take loan for business i.e using funds for
establishing small business or for growth of their existing business.
 It has been observed that the women are less participative in financial services as compared
to men due to lack of knowledge of certain schemes. While we through review of literature
we found that several researchs are already upon the role played by Microfinance in women’s
empowerment are considered into three dimensions namely psychological, social and
economical.
 It has been reviewed in one of the article the analyze of the rule of microfinance and Self-
Help Groups (SHG) for the socio economic growth of the poor people. Therefore through
this study also we came to know that people of rural areas agree with the fact that
microfinance has helped in the improvemrnt of their socio-economic conditions.

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5.2 RECOMMENDATIONS
5.2.1 For banks and MFIs
 Training should be imparted to the borrowers for making utmost utilization of the available
funds.
 Interest rates should be reduced to encourage more and more applicants to avail
microfinance facilities.
 The Poverty Alleviation Programme should be restructured to meet the needs of the less
privileged members of the society mostly the women that are in serious need for
microfinance.
 The primary initiative to be taken by the banks is to spread financial literacy among the
poor in rural areas. They should establish direct communication with the rural poor. This
can be done by organizing awareness campaigns by sending representatives to villages to
make the rural people aware of the benefits of the services offered.
 Sufficient repayment time should be given to the borrowers as most of the micro-loans are
given for startups and they might need some time for regular income generation.

5.2.2 Recommendations for beneficiaries

To ensure a successful implementation of MFI programs the beneficiaries should hold an

equal responsibility. Few recommendations are listed hereunder-
 The beneficiaries should unite themselves into groups. This can be very effective if they
can develop mutual trust among the group members. The group will provide them a
medium to save out of their small earnings and get the loan out of the pooled savings when
required. For this the group first gets linked to the bank and the bank then enables the group
to procure cheaper finance.
 The beneficiaries should make only productive use of the micro credit by investing in
income generating activities instead of indulging in unnecessary expenditures for
upgrading their social status.

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5.3 CONCLUSION
This study shows awareness and potentials of microfinance among the rural people. The
significance of microfinance in emerging countries like India cannot be underrated. Microfinance
as a tool of poverty reduction has been making commendable struggles and giving hopes to the
poor who are able and willing to save but are deprived of the adequate finance at reasonable terms
It plays a vital role for socioeconomic up liftment of poor and low income strata of the society.
Based on the above analysis and findings it can be concluded from the study that microfinance is
playing important role in social and economical empowerment of rural poor people in India. The
study is carried out in the rural areas of Gandhinagar. Collection of sample data and its analysis
shows that the services of existing MFIs are more or less satisfactory to the users of microfinance.
The study was a great learning and it enhanced my knowledge on the research topic.

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6.REFERENCES

1. Basu,P., Srivastava, P. (June 2005) Scaling-Up Microfinance for India's Rural Poor. World B
Mohammed ank Policy Research Working Paper No. 3646. https://ssrn.com/abstract=757389
2. Mohammed, O. (May 1, 2007). Role of Microfinance in Poverty Alleviation: Lessons from
Experiences in Selected IDB Member Countries. : https://ssrn.com/abstract=1506077
3. Christuraj, P, J. and Saraswathy, S. (2009) Employment Growth in Rural India: Distress.
Driven?, Economic and .... P(Eds.) , Micro Finance and Poverty .
4. Fields, G.S.(2010) ―Earning their way out of poverty: A Brief Overview,‖ The Indian Journal
of Labour Economics, Vol. 53, I.No.1,
5. Sarmah, G,N.,& Das, D,K,(2012), Micro finance, self help groups and the socio economis
development of rural people( A case study with special reference to Lakhimpur district of
Assam). Asian Journal of Research in Business Economics and Management , 2(4),145-159.
6. Kashif, Mohammad and Sridharan, P., (November15,2012) Microfinance: The Challenges
andOpportunitiesinRuralIndia(November15,2012). https://ssrn.com/abstract=2333145 or http
://dx.doi.org/10.2139/ssrn.2333145
7. Tripathy, K. K. and Jain, Sudhir, (May 22, 2012). A Study of Microfinance as an Innovative
Credit Delivery Mechanism in Rural India.The IUP Journal of Agricultural Economics, Vol.
VIII, No. 3, pp. 38-58, July 2011
8. Nasir, S.(2013). Microfinance in India: Contemporary issues and challenges. Middle East
Journal of Scientific Research,15(2),191-199
9. Gundappa, Mudakappa,( September 2014) Micro Finance and Empowerment of Women: An
Impact Study of SHGs (September 1, 2014). Indian Streams Research Journal, Vol. 4,
No.: https://ssrn.com/abstract=2498842
10. Jha, Srirang, (May 8, 2016) Role of Microfinance Institutions in Social Development. Apeejay
School of Management --Centre for Public Policy & Governance Discussion Paper # 3.
https://ssrn.com/abstract=2777155
11. Dr Rajendran, K. (July 2012) LEVEL OF PARTICIPATION OF RURAL WOMEN IN
MICRO INSURANCE: EVIDENCES FROM THE FIELD. Volume 2/Issue 7/Article No-
13/1237-1247 SSRN-id2513716
12. Hans, V. (2012), INNOVATIONS IN MICROFINANCE – LOOKING BEYOND

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 INCOME POVERTY http://ssrn.com/abstract=1392623
13. Sinha, A. K.(2013) Building Sustainable & Profitable Microfinance Institution in India in
Changing Regulatory Environment : http://ssrn.com/abstract=2403381

14. Casini, P., Vandewalle, L., and Wahhaj, Z. (aug 2015), Public Good Provision in Indian Rural
Areas The Returns to Collective Action by Microfinance Groups tion to development policy
discussions around the world http://econ.worldbank.org
15. Islam, N. (2015) Indian SHG Microfinance experience - endeavors and Challenges SSRN-
id1864705
16. J, Taiwo. (2016) (April 2016) The Role of Microfinance Institutions in Financing Small
Businesses. (http://www.icommercecentral.com)
17. Vinconti, R.( September 26th, 2015) Department of Business Administration, Università
Cattolica del Sacro Cuore largo A. Gemelli, 1 –20123 Milano, Ital
roberto.morovisconti@morovisconti.it
18. Ayayi, A.G & Sene, M.(2018) Recent developments in microfinance and beyond Electronic
copy available at: http://ssrn.com/abstract=1954216
19. Cull, R & Morduch, J (2017) Microfinance and Economic Development.
http://econ.worldbank.org
20. Rajendran, K and Raya, P (2008-09) Micro Finance: Achievements, Challenges and Future in
India. (An Empirical Study in Vellore District, Tamil Nadu) http://ssrn.com/abstract=2513717
21. Luzzi, G & Weber, S. (2006) Measuring the Performance of Microfinance Institutions
http://ssrn.com/abstract=918750
22. Nair, A. (2005) Sustainability of Microfinance Self Help Groups in India: Would Federating
Help? http://econ.worldbank.
23. Rajendran, K. (2012 ) MICRO FINANCE THROUGH SELF HELP GROUPS –A SURVEY OF RECENT
LITERATURE IN INDIA. at www.indianresearchjournals.com
24. Ngeresa, P & Mokaya, S & Gikunda, R. (2018) ECONOMIC EMPOWERMENT OF RURAL
WOMENBY SELF HELP GROUPTHROUGH MICROCREDIT.
http://ssrn.com/abstract=2193045
25. Krishnan, L. & Sequeira, M. (2008) EMPOWERMENT OF UNDERPRIVILEGED WOMEN
THROUGH SELF-HELP GROUPS, http://ssrn.com/abstract=2034182

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26. National Journal of Multidisciplinary Research and Development
27. www.worldbank.org/gender/prr/engendersummary.pdf
28. Rural Credit and Self Help Groups- Microfinance needs and Concepts in India- K.G.Karmakar
1999
29. http://www.aptsource.in/admin/resources/1273818337_UNPAN024232. pdf (Microfinance in
India: A critique by RajarshiGhosh
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31. www.nationaljournals.com
32. www.nabard.org

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7. ANNEXURE

7.1 QUESTIONNAIRE
POTENTIALS OF MICROFINANCE IN RURAL AREAS :
A STUDY OF GANDHINAGAR
1. GENDER : Male Female 2. AGE :

3. LEVEL OF EDUCATION
(a) Primary school (b) Secondary school (c) Higher secondary (d) Graduates (e) Postgraduate

4. OCCUPATION
(a) Agriculturist (b) Service (c) Employee (d) Business (e) Others (please specify)

5. INCOME LEVEL
(a) Less than Rs.10,000 (b) Rs.10,001-20,000 (c) Rs.20,001-30,000 (d) Above 30000

6. Are you aware about microfinance and its various schemes?

(a) Yes (b) No

7. What is the source of information and awareness of such services and schemes?
(a) Media (b) People of locality (c) SHG representatives (d) Bank representatives (e) Others

8. If yes, then mark (√) the following microfinance services which you are aware of ?
(a) Microfinance credit (b) Microfinance Savings (c) Microfinance Insurance
(d) Housing Microfinance (e) Finance to SHGs (f) Microfinance training

9. Are you availing any microfinance facility?

a) Yes b) No

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10. What is the purpose of availing microfinance facility? Rank the following in increasing order
of their use by assigning
1 to the most commonly used purpose.
a. Consumption
b. Emergencies
c. Education
d. Marriages
e. Housing/housing repairs
f. Tools/Equipments/Machines
f. others _________

11. How would you rate the following factors relating to the microfinance services ?

Strongly Satisfied Neutral Dissatisfied Strongly

Satisfied Dissatisfied
(a)Easy acess to
loans
(b)Low interest

(c)Matching credit
need of borrowers
(d)Repayment
facilities
(e) Affordability of
Microfinance

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12. Do you agree that microfinance services has improved you overall socio-economic status?

Strongly agree Agree Neutral Disagree Strongly

disagree

Thank you so much for your time and cooperation!!!!

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