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Role of Microfinance in rural development of India

* Om Prakash Jaiswal ** Dr.V.k.L. Srivastava

ABSTRACT The concept and role of microfinance for the social upliftment and rural development is well known. Micro financing involves the provision of financial services such as saving, loans and insurance to poor people who are unable to obtain such services from the formal banking system. Microfinance is the new mantra for rural financing. Thephenomenal growth of micro finance evident form the fact that SHG has increased over 2 million. At present it is estimated that present minimum requirement of microcredit is over 70,000 crore. Micro financing institutions are playing more significant role in inclusive growth of the country by alleviating poverty and helping in rural development. InIndia various agencies are working to provide microcredit to the poor. The present paper discuss in detail role play by the microfinance in the rural development by focusingon its impact on poverty, women empowerment, technology application and household level. INTRODUCTION Microfinance plays an imported role in the developing country of the world. In India it significantlycontributes in the developing of employment, output and improving the livings of people especially in rural. Microfinance refers to loans, savings,insurance, transfer services and other financial product targeted at low income peoples who farm or fish or head ;who operatesmaller micro enterprises where goods are provided, recycled,repair or traded, provided services for wages and commission, gain income from renting out of small amount of land in both rural and urban area. The credit policy for the poor involves many practical difficulties arises from the operation followed by financial institutions and financing need of the low income of the households. They look for collateral with a clear title-which many low-income household do not have; in addition bankers lend to consider low income households a bad risk imposing exceedingly high information monitoring costs on operation.The concept and role of microfinance is for social upliftment as well as for the development of rural backward area. The
* Research scholar, Department of commerce, D.A.V. Post Graduate College, BHU, Varanasi-221005 ** Associate professor, Department of commerce, D.A.V. Post Graduate College, BHU, Varanasi-221005

microfinance is based upon the philosophy to help to the poor and backward, mutual cooperation and equality. Micro financing is considered to be an adequate tool for financing small scale activities in the rural area because of the following features: 1. It provide credit for investment in small scale activateschosen by poor

2. Empower the poor to build self confidence 3. Allow the develop opportunities for self-employment to the underserved people

4. Have the broader utility and the least cost per beneficiary The principal of micro financing are as follows: 1. Offer flexible customer friendly services preferred by low income group 2. Opportunities for streamlining operations and reducing costs 3. Operate in market basis charging market interest rates and fees CLIENTS OF MICRO FINANCE Microfinance clients are generally poor and low incomepeople that do not have access to other formal financial institutions. Microfinance clients are usually self-employed, house hold basedentrepreneurs. In rural area they are engage in small income generating activities such as food processing and small trade. Micro finance clients are poor and vulnerable non poor who do not have stable source of income. THE INDIAN MICRO FINANCE CONTEXT India has one of the largest poor populated countries of the world. India has been natural candidate for experiencing with microfinance as a tool for poverty alleviation. In 1954, the report of rural credit survey found that rural poor had indebtednessand very limited bank access. The state bank of India was setup 1955 as facilitator to provide to banking services to poor population and in 1982 NABARD was set up to meet the credit needs and rural development. A lot of regional rural bank were created primarily to cater credit needs of the poor. MFI has increased rapidly in India. At present, more than2 million SHG are working in India and playing very active role in meeting the credit needs of the poor.

There are three accepted models in Indiain micro financing 1. Self Help Group 2. Grammen model 3. Individual banking model operated through micro financing institute The requirement of the micro credit has increased sharply. Within India,western and southern India has received most attention. Indian microfinance NGO- SHARE, MYRADA and PRADAN are some of the NGOswhich are gaining attention. Today there are so many schemes for the upliftment of poor in India. Micro credit programs are run by primarily byNABARD in the field of agriculture and SIDBI in the field of industry, service and business. Indian government role can play critical role in expending reach of the schemes ensuring long term sustainability of NGOs/MFIs and development of viable projects. Features of Microfinanceprogram of govt. of India 1. Arranging fix deposit from MFIs/NGOs :under this scheme govt. of India arrange money to MFIs/NGOs for credit to poor 2. Training and studies on Microfinance program: Govt. of India would help SIDBI in meeting the training needs of NGOs, SHGs in meeting the training needs of NGOs, intermediaries and entrepreneur and also enhancing awareness about the program. 3. Budged provision to the MRIs: There is a budgetary provision in 11th year plane to the schemes for microfinance. 4. Administrative arrangement: A committee has been formed to control and monitor the administrative arrangement of MFI/NGO ROLE OF MICROFINANCE IN RURAL DEVELOPMENT Microfinance plays a very significant role in the economic development of any country. In India where more than 60% of the population is living in village, to achieve inclusive and sustainable growth of the country, it is indispensable to achieve ruralgrowth of the country.

For achieving this target microfinance is proving to be a milestone. Microfinance helps and support to poor and protect them against risk exposed. It create access to productive capital for the poor together withhuman capital,address through education and training and social capital achievedthrough levelorganization building enable people to move out of poverty. Microfinance play very important role in Povertyalleviation, technology application, women entrepreneurship and household level IMPACT OF MICROFINANCE ON POVERTY ALLEVIATION In India where 350 million people are below poverty line ,95% have no access to microfinance,56% people still borrow informal sources,70%of dont have any deposit account,87% no access to credit from formal source. Microfinance provided credit to make the agribusiness profitablebyfinding for their basic and small needs. Microfinance providesvariety of financial services tailored to their need for the improving their financial position and insuring their income security. In all over the world the role of microfinance in rural development and programpoverty alleviation is well known. It has been found that well going micro financing have helped in achieving sustainable rural development and progress and poverty alleviation. During the 11th five year plan govt. of India also emphasizeddevelopment of rural sector through property alleviation and achieved more than 8%growth. Referring to the various projects running in whole world has shown very positive impact of micro finance in reducingproperty. IMPACT OF MICROFINANCE TECHNOLOGY APPLICATION This erais the era of technology. In India there are number of R & D,scientificorganization like Indiancouncil for Agriculture Research (ICRA), Indian Institute of Technology(IIT), conventional universities etc. and number of privet industrial organization are contributing invention of technology which are eco-friendly,improving the living standard of therural like bio-gas plant water conservation , rejuvenations and plantation etc. Now, it is become need of the hour to impart these technologiesas these are play significant role in the development of rural.

Micro financing is verymuchneeded for the application of the technology. Integration of microfinance and technology application are now stimulating the growth and overall development of rural Indian and simplifying the lives of the rural. WOMEN EMPOWERMENT During the planning process it was expected that women will have equal right but in spite of the development measures women have lagged behind in almost all sector. Globalization and liberalizationhave made the life of the bad to worse as the most of the woman who were engaged in various self-employed activities have lost their livelihood.Despite the tremendous contribution of women to the agriculture sector, their work is considered just extension of household domain and remains non-monetized.One of the key objectives of the microfinance is to empower and improve the condition of women. Micro financing is a powerful instrument of emancipation of women. Microfinanceprovides them training and helps to cope up various challenges which place them into disadvantageposition. The role of microfinance in women empowerment accepted throughout the world. In India,microfinance is dominated by SHG ( Self Help Group) program as an effective mechanism for providing financial services which has been successful not only women meeting financial needs of the poor women but also strengthening collectively. Women indicator of empowerment through microfinance 1. Ability to influence or make decision 2. Ability to save and access loans 3. Skills for income generation 4. Better status and role in household 5. Role in community development activity 6. Increased confident 7. Decision-making within household Rapid progress of SHG is now turning into an empowerment movement among women across the country. SHG are necessary to overcomeexploitation.Create confidence for the economic

self-reliance of rural poor, particularly among woman who are mostly invisible in the social structure. The SHG is the most popular form of micro financing. It is a small voluntary association. The main advantage of SHG lies in their joint liability and consequent peer monitoring of member borrowed it helps in building mutual trust. It provide small loan for a short period. For meeting the financial needs the SHG depends upon various cooperative, commercial and regional rural banks. IMPACT OF MICROFINANCE ON HOUSEHOLD LEVEL The study showed that micro credit has increased household income of the rural. Access to the financial services enables the client to change their asset mix. Microcredit credits were used for land acquisition, housing construction or improvement, purchase of animal and consumer durables. Asses to micro finance enable the client to manage the risk better and take advantage of opportunities. In non-financial impact of microfinance, the health and education services seems to improve where microfinance instrument were working. It was found that MFI clients children go study and stay longer then non MFIsclients.They expense more on education andhealth. Microfinance helped them to lead quality life. The program has a positive impact on the social status and living condition. CONCLUSION Microfinance plays an important role in the integrated ruraldevelopment. The study shows that microfinance has resulted increased income, improve health, household expenditure. The microfinance have found one effective instrument for lifting the poor above the level of poverty , providing them increased self-employment opportunities , support them in improving their social and economic status. Thus, microfinance also pay significant role in inclusive growth of the country by all round rural development in the country. The key challenge that the people belonging to rural area that theyare still unaware of the banking policy and credit system. They are lacking knowledge of the availability and how to use microfinance. So, NGOs should communicate them to share their view. Bank should convert and building up professional system into social banking system for poor micro institution.

Govt. of India and state govt. should also provide support for capacity building initiative and insure transparency and enhance credibility through disclosers.

REFERENCES
Role of Micro-Financing in Alleviation of Poverty Public opinionsurveys, June 2004 Impact of Microfinance; A critical Survey Economic and political Weekly, Feb, 10, 2007 Role of Micro Finance in Different Societies Commerce & Business Studies, Vol no.1, July 2008 Microfinance as an Anti PovertyVaccine for Rural India International Review of Business and Finance, Volume 2number 1(2010) Microfinance And Poverty Reduction inn India (A Comparative Study with Asian Countries), Africa Journal of Business Management Vo.3 (4) April, 2009 Role of Microfinance institute in Rural DevelopmentInternational Journal of Information Technology and Knowledge Management, Volume 2, July-December 2010 WEBSITES VISITED www.google.com www.aptsource.in/admin/resources/1273818040_SHGs-keystone-paper.pd http://www.articlesbase.com/wealth-building-articles/role-of-microfinance-for-promotingintegrated-rural-development-

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