A MAJOR PROJECT REPORT ON STUDY THE IMPACT OF MICRO CREDIT IN RURAL AREA OF CHITTORGARH

(SUBMITTED IN THE PARTIAL FULFILLMENT OF THE TWO YEAR FULL TIME MBA PROGRAMME) (2007-2009)

SUBMITTED TO: Mrs. Pratibha Pagariya Dr. Snehal Mangeshkar

SUBMITTED BY: Trisha Das MBA-II

VISION SCHOOL OF MANAGEMENT Udaipur Road, Chittorgarh Email-info@visionmanagement.org www.visionmanagement.org

PREFACE The project report is on STUDY THE IMPACT OF MICRO CREDIT ON RURAL AREA OF CHITTORGARH. The objective of the study is to see the impact of Micro-Credit on farmers, on self employment opportunities, improving the living standard of poor people & removing poverty. The contents of various chapters are as follows: Chapter 1: Introduction- In this chapter I have mentioned about micro-credit & its importance. Chapter 2: Theoretical framework- In this there is about the growth & challenges faced by the micro-finance & development through micro-finance. Chapter 3: Review of Literature- In this I have mentioned different articles about micro-credit given by different thinkers. Chapter 4: Research Methodology- In this I have given about different research methods used. Chapter 5: Data Analysis & Interpretation: In this I use pie-charts & made interpretations. Chapter 6: Findings & Suggestions Bibliography Annexure

ACKNOWLEDGEMENT It gives me immense pleasure and a sense of honor to express my feeling of gratitude to all those who have helped me in the successful completion of the present project. I pay sincere gratitude to Dr. A.L. Jain (Director of Vision School of Management), faculty members of the college, Mrs. Snehal Maheshkar, Mrs. Pratibha Pagariya who always inspire and guided me in completion of this task. I also pay sincere gratitude to my parents and my friends who inspired and guided me in completion of this task. At the last, but not the least I am thankful to the farmers who helped me lot & gave me opportunity to complete the project on time.

(TRISHA DAS)

EXECUTIVE SUMMARY Micro-Credit is defined as provision of thrift, credit & other financial services & products of very small amount to the poor in rural, semi-urban & urban areas for enabling them to raise their income levels & improve living standards. Micro-Finance Organizations are those which provide Micro-Credit facilities. Micro-finance is expected to play a significant role in poverty alleviation & development. In India, a variety of micro-finance schemes exist & various approaches have been practiced by both Gos & NGOs. In the developing economy, credit has been viewed as one of the missing inputs & therefore, a growing emphasis on re-strengthening & re-formulating micro credit program is observed. There are several micro-finance implementing organizations, which provide small loans. In India some of them have successfully expanded their services to thousands of borrowers. Most of these borrowers would not have no excess to formal financial institutions & that these borrowers utilize the loans to enter & / or expand their informal sector micro enterprises, and that this sector continues to be an important source of livelihood for many poor people. The term Micro Finance Organization

(MFOs) has been used for all types of implementing organizations facilitating savings & credit as well as financial activities at individual or group level. Some of these organizations have evolved from small NGOs to become important provider for financial services. Realizing the potentially important role that MFOs play in deepening the benefits of economic growth it is necessary that these MFOs should be strengthened by providing them experience sharing opportunities, materials & training.

Micro-Credit is defined as provision of thrift, credit & other financial services and products of very small amount to the poor in rural, semi-urban & urban areas for enabling them to raise their income levels & improve living standards. Micro-Credit institutions are those, which provide these facilities. According to World Bank figures (2001), about three billion people in the world, or half its population, live on less than two dollars a day. Poor people in developing countries are more often than not trapped in poverty because on the one hand commercial banks will not lend them money as they are often neither in a position to offer collaterals nor are they considered creditworthy enough; while on the other, local money-lenders, who are often their only source of credit, charge exorbitantly high interest rates, thereby depleting them of whatever little possible savings they can manage. In such a scenario, microcredit comes as a blessing because micro-credit institutions lend small sums of money at a reasonable interest rate without any collateral to people who need it the most. This money is then used to set up or boost an independent entrepreneurial activity that can provide a sufficient income for the borrower to easily repay the loan & generate enough profit for a better standard of living. The poor people, especially women in poor families, gain the most. MicroCredit facilitates greater wealth & asset creation, lifting poor people out of poverty to a higher standard of living & access to better health & education facilities.

With the help of the study, we will be able to understand: That how much people are aware of micro-credit system. That how much benefit does farmers are getting from it. That how many banks are providing this system. Micro-Credit programs provide a two-tiered approach to poverty alleviation: credit for the purchase of capital inputs in order to promote self-employment & non-credit services & incentives. These non-credit aspects may be an important component of the success of micro-credit programs. However, because they are costly to deliver & their contribution to the success of the programs is difficult to measure.

Growth and Challenges Faced in Micro-Finance: Trends and Future Outlook

Almost half of the worlds population- three billion people- live on less than $2 per day. Poverty is a global problem & micro-finance is an innovative solution. In the development paradigm micro-finance has evolved as a need based policy & program to cater to for neglected target groups viz. women, poor, rural, deprived etc. Its evolution is based on the concern of all developing countries for empowerment of the poor & the alleviations of poverty. Provision of credit to poor people has been one of the main concerns of policy planners in India since independence. During the past 30years micro-finance has been proved to be powerful alleviations tool. It is one of the only development tools with the potential to be financial self-sustaining. Furthermore, certain micro-finance programs have gained prominence in the development field & beyond. The basic idea of microfinance is simple. If poor people are provided access to financial services including credit, they may very well be able to start or expand a micro enterprise that will allow them to breakout of poverty. However after more than 30years of Industry effort, 80% of the working poor (more than 400 million families) are still without access to micro-finance services. At the current growth rates the gap will not be closed for decades. For micro-finance to achieve its potential as poverty alleviation tool, the micro-finance industry must grow to scale.

Understanding the Development Process to Micro-finance Micro-finance is expected to play a significant role in poverty alleviation & development. In India, a variety of micro-finance schemes exist & various approaches have been practiced by both Gos & NGOs. In the developing economy, credit has been viewed as one of the missing inputs & therefore, a growing emphasis on re-strengthening & re-formulating micro credit program is observed. The development process through a typical micro-finance intervention can be understood with the help of the chart: Micro-finance Implementing Organizations There are several micro-finance implementing organizations, which provide small loans. In India some of them have successfully expanded their services to thousands of borrowers. Most of these borrowers would not have no excess to formal financial institutions & that these borrowers utilize the loans to enter & / or expand their informal sector micro enterprises, and that this sector continues to be an important source of livelihood for many poor people. The term Micro Finance Organization (MFOs) has been used for all types of implementing organizations facilitating savings & credit as well as financial activities at individual or group level. Some of these organizations have evolved from small NGOs to become important provider for financial services. Realizing the potentially important role that MFOs play in deepening the benefits of economic growth it is necessary that these MFOs should be strengthened by providing them experience sharing opportunities, materials & training.

Chart 1 Development Process Through Micro-Finance

Donors & Banks Micro-Finance Government and Banks

Implementing Organizations

Individual

Awareness/ Promotional Work

Individual

Promotion & Formation of SHG

Micro-Enterprise

Consolidation of SHG

Micro-Enterprise

Savings Consumption Needs Credit Delivery Recovery Follow-up Monitoring Production Needs

Farm Related

Income Generation Self-Sustainability of SHG

Non-farm Related

Economic Empowerment through use of microcredit as an entry point for overall Empowerment

Furthermore, the relative success of many MFOs, refute the claims that of some people that the poor are non-bankable or some say that MFOs are waste of scarce development funds. In fact, it would be difficult to find any other developmental initiative, which has been relatively effective & in India there exist a variety of MFOs in government as well as non-government sectors. Leading national financial institutions like the Small Industries Development Bank of India (SIDBI), the National Bank for Agriculture & Rural Development (NABARD), & the Rashtriya Mahila Kosh (RMK) have played a significant role in making micro credit a real movement in India the size & types of these organizations range from very small to moderately big organizations involved in saving or credit activities either for individuals or groups. They tend to operate within a geographical range. Many organizations are involved with SHGs not only for credit but also for other purposes like agriculture, watershed etc. Almost all national funding organization like NABARD, RMK as well as other government schemes advocate forming of Self-Help Groups & thus providing & linking with credit. There are many organizations that provide individual finance directly (Chart 2). The SHG Bank linkage program is the flagship micro-finance intervention of NABARD. Starting with the NABARD lead pilot project in 1992 that aimed at promoting & financing 500 SHGS across the country, the SHG- Bank Linkage strategy has come a long way. Nearly 2.23million SHG were provided bankcredit of over Rs.1, 13,975 million by March2006. Almost 90% of groups are women groups. Over 35,290 bank branches at 48 commercial banks, 117RRBs & 329 co-operatives were involved in financing these groups.

Chart 2 Micro-Finance Interventions through different organizations

National Functional Institutions

Banks

Government Funded Programs

Donor/ Bilateral Projects

Implementing Organization

Resource/ Support Organizations Directly engaged in Micro-Finance

SHG Individuals Members

Challenges Faced by Micro-Finance Industry

1. poor:

MFIs are financially sustainable, so can they built assets for the Financial self-sustaining of MFIs needs to be examined. Even the best cases took too long to there. (E.g. Grameen Bank of Bangladesh in its first 20 years) or got there by shedding their NGO avatar which needed early subsides (E.g. PRODEM before it became Bancosol) Indias SHG program has grown big on the basis of external support to the one-time costs of group formation & on going group support costs. With political pressure to lower interest rates on loans to SHG, even the variable costs are not being met in most places. CGAP says about a 100 of the 10,000 odd MFI round the world are financially self-sufficient.

2.

Most MFI lack the capital to grow: Even though the industry has demonstrated that MFI can be selfsustaining businesses, most still rely on a limited pool of donor dollars. Without access to capital, growth traditionally stops once initial grant money is distributed as micro-credit loans. To scale rapidly, MFI must access large amounts of capital to expand their operations & provide loans & other financial products to dramatically more clients. These large amounts of capital are accessible only through the formal capital markets, & currently most MFI have neither the track record nor the clearly articulated business plan to attract this funding.

3.

Most MFI lack large-scale internal operation capacity: Without sufficient internal operating capacity, growth stops, once a program reaches several thousand clients. Adequate internal operating capacity includes improvements in areas such as information technology infrastructure, internal controls, new product development, & human resources. When MFI rely on donor dollars, there is rarely enough money to make the necessary investments in these key areas to create an operation that is well run & has the ability to grow on a sustainable basis. Thus, most MFI are small & stay small.

4.

Quality of SHG: One of the major challenges is how to ensure the quality of SHG in a scenario where the numbers are growing at a fast pace.

5.

Promotion of micro-enterprise among SHG members: There is a need to promote livelihood diversification among the members of mature. SHG so that they can cross poverty line.

6.

Regional Imbalances: The spread of micro-finance sector is quite uneven. Even within a region there are large packets unaffected by the efforts of the sector. Millions of poor families are unable to get the new initiatives of the sector for the lack of workable institutions.

7.

Short Tenures and NGO Debt Trap: The tenure of micro-credit products mostly restricted to one year. Restrictive tenures & high interest rates have renewed the debt trap conditions suffered by the poor when they were borrowing from moneylenders. The question is if whatever they earn goes in loan servicing, is micro-credit of any use to them?

8.

Application of technology: To increase the efficiency & to reduce the cost of services the state of the art technology has to be introduced. How to develop their expertise when each financial provider feels that he has a unique product requiring unique technology. Range of Services: Although there is a greater flow of credit, providing a viable small savings product has remained to be the major concern. Poor people have small amounts to save & at frequent intervals. The costs of these transactions are too high. To provide the saving services at a reasonable/affordable rate is still a major concern. Micro insurance to protect the lives, assets, hospitalization expenses & health for poor, effective pension for the aged are some urgently needed products. Micro-Finance sector in India has shown a phenomenal growth in the recent years & led the emergence of two new delivery channel viz. SHG-Bank Linkage Model and MFI-Bank Linkage Model has emerged as the largest micro-finance program in the world. There is an immense scope of growth of MFI particularly under the banked areas.

Commercial Micro-Finance: The Emerging Paradigm The involvement of the private sector (in micro finance) has been very encouraging. Indeed, micro finance offers an excellent platform for privatepublic partnerships in which everyone wins. Poor people gain new choices & a chance to increase their wealth. Societies benefit in their efforts to defeat hunger & achieve other development goals such as child education, better nutrition & gender equity. And private businesses profit from access to new markets &, not least, from the boon to their reputations that comes with offering services that have a positive social impact. -RetiredUN SecretaryGeneral Kofi Annan, Geneva Private Capital Symposium Micro finance, the idea rediscovered by Nobel Laureate Muhammad Yunus, has traversed three decades of development. It has touched the lives of millions, uplifted many poor families & has improved their living standards with respect to nutrition, housing & education. It has reduced income inequalities by funding the entrepreneurial spirit of low-income groups. The poor mans finance has been successful in leading the real inclusive financial system by providing micro credit, micro insurance & deposit services to the marginalized & neglected sections of the society.

Micro-Finance Institutions (MFI) has been successful in reaching funding scarce pockets of economy through the conventional model. They have made capital available to those sections of the society which commercial for-profit set-ups of mainstream banking/non-banking financial sector considered unworthy of finance. The sector has witnessed considerable evolution in the past three decades; it has undergone a transition from an informal sector to a regulated formal sector. With the expansion of operations, networks & its presence, the sector achieved a global outreach of nearly 100million clients in 2006.

The Status Quo & Emerging Paradigm Outreach Today, after 30years of its existence, the sector has attained a remarkable global outreach of nearly 100million clients. But the conventional model followed by the MFI has certain inherent limitations, which have confined their outreach. The outreach is phenomenal in absolute terms & can be considered to have had a positive impact on living standards of millions. But in relative terms, as per the World Bank statistics, this outreach caters to only 4% of the worlds demand for micro finance and moreover, micro finance is not accessible to almost half a billion of the worlds most poor. The region-specific penetration has not been noteworthy; as per the Consultative Group to Assist the Poor (CGAP) estimate, the service has achieved 2.5% penetration in the South-Asian countries & only 0.5% penetration in Central Asia & Eastern Europe.

Trends in Demand As per Meta-analysis with Interactive Explanation (MIX) Market analysis of the top 100 MFI, these MFI are witnessing a year-on-year increase in the client base by 26%. From a larger perspective, the current demand for micro credit is $50bn and it is also expected to grow by 1530% per annum. This demand comes from about 500million people, largely micro entrepreneurs, seeking micro funds. Source of Funds So far, the micro finance sector has been mainly funded by donor money. In some cases, voluntary deposits (i.e. savings deposits) also form funding source. The donor money & voluntary deposits have proven to be inadequate to meet not only the current but also the growing demand for micro finance. The emerging alternative sources of funding are private capital-local & foreign, venture capital, debt & equity capital, & other exotic funding sources like securitization. Sustainability and Scalability The micro-finance sector has not yet attained efficiency with factors like high operating costs, inefficient branch networks & concentration of services in smaller pockets plaguing the industry.

The intermediaries charge high interest rates to cover their costs, operating expenses, etc. but with the growing convergence of capital markets with the micro-finance sector, alternative & cheaper funding sources are gaining popularity & the same has started having a positive impact on the net effective interest rate charged.

Dominance of Governments As per the CGAP researchers Adrian Gonzalez & Richard Rosenberg, governments dominate the micro credit industry as the major funding sources. This phenomenon has allowed even the loss making programs to obtain funds. In the recent past, the sector has witnessed dramatic increase in the share of International Financial Institutions (IFIs) & Micro-finance Investment Vehicles (MIVs) as new funding sources. IFIs are the private sector arm of public finance institutions, while the MIVs are the private micro-finance funds. Trend towards Commercialization: New Developments & Concerns The micro-finance sector is witnessing commercialization in a fragmented manner. Commercialization of the sector is altering all the equations of sourcing & delivering models in micro-finance. The micro-finance sector has so far been under-leveraged. But the commercialization transformation has made the MFIs to increase their base of debt & borrowings & leverage their positions further. Leading participants are involving themselves in innovative deals for procuring funds at competitive rates & increasing their leverage.

Banco Compartamos of Mexico, Developing World Markets (DWM) & Blue Orchard, Pro-Credit Bank of Bulgaria, Building Resources Across Communities (BRAC), Swayam Krushi Sangam (SKS) Micro-Finance & SHARE Micro fin of India, are some prominent MFI, which have tapped capital markets & private equity funding sources. Banco Compartamos has been the first-ever MFI in Mexico & the third-ever in the world to make Initial Public Offering (IPO). It made a secondary market offering of 30% of its equity stake, & the IPO was oversubscribed by 13 times. The innovative deals in the micro-finance sector, & more so, the success of Banco Compartamos IPO, have drawn a lot of critism from the sector participants. The major concern is that the commercialized MFI favor investors at the cost of vulnerable borrowers. However, considering the growing demand for micro-finance & insufficiency of grants or savings, the equity & debt capital are the most economical & reliable sources of funds. Sophistication: The Way Forward Commercialization on larger scale may require MFI, other participants & regulatory bodies to address new issues. Commercialized MFI may require dedicated exchanges for listing & trading. Commercialization will demand better support system with respect to information exchange & tracking of performance. Introduction of new participants like credit-bureaus will make the appraisal of clients & respective portfolios more sophisticated. The performance tracking will require services of

credit rating agencies. They will have a larger role to play, with introduction of more complex offerings & higher risks associated with innovative methods

like securitization. The credit bureaus & the credit rating agencies will help the commercialized sector attain sophistication by addressing concerns of information irregularity & lack of credit history.

Micro Credit: The Poverty Business Micro credit offers a profit-making tool, which ensures that poverty does not interfere with our normal life burdening us with a crippling sense of guilt. -Dr.Sudhirendar Sharma Poverty, a big business Small change, as micro credit is sometimes called, has become a big business. With a sizeable number of the poor in the country, India is probably the largest market for micro-finance services. Reports indicate that of the Rs.40,000cr annual rural demand, barely Rs2,000cr is currently being met by the existing system. In reality, the demand could be five times over if a minimum need of Rs.25,000per household per year for 100million households is taken into account. No wonder, major retail banks are entering the fray, as they smell the fortune of opportunity amidst the countrys poor.

Prime facie evidence indicates that micro credit is less about sustaining a financial service industry that thrives on poverty. Development agencies & practitioners are often uncomfortable with such paradoxes, as they are enslaved by the ideology of micro credit that promises to remove cobwebs like global capitalism & class exploitation. But with the society already celebrating growth, poverty is being redefined as an opportunity in the world of plural democracy that is deeply entrenched in global capitalism. The tragedy is that normal politics, normal journalism & normal social sciences now consider the concern with poverty somewhat pass. Social scientist Ashis Nandy considers this as somewhat disturbing but nevertheless inevitable. It is becoming more obvious that all large multi-ethnic societies, after attaining the beatific status of development, lose interest in removing poverty, especially when poverty is associated with groups that lack or lose political clout. Indebtedness, the new culture The idea of indebtedness has emerged as a new culture. With the definition of poverty going through a significant shift, indebtedness has been presented as a virtue to pull the poor out of the poverty trap. It is indeed dramatic, as not too long ago, being indebted was considered a social curse. Poverty is as much a state of mind. Once convinced, it is easy to trap the unsuspecting poor into the micro credit trap. Once into it, it is difficult for the poor to escape. Micro credit is designed to keep the savings low, such that the credit cycle can move uninterrupted & continue to keep the poor trapped.

Issues Output/Price/Income

A Matrix of Issues Demand Supply

1. Increased 1. Yield risk because of weather, pests quality & of is water & power unavailability, spurious inputs not 2. Price subsidies countries. 3. Low tariff in India. 4. Minimum support price not always functional. 5. Futures market- a virtual platform with price volatility being the basis through which hedger/ speculator can operate volatility distortion by due to global prices. through developed

among others. 2. Cultivation profitable. 3. Income not sufficient. It is difficult to meet higher education need of wards, medical requirements of family members & other social obligations.

Input

1. Supplier-induceddemand is on the rise. This intensive is & creditan

1. No link between publicly funded research & its extension. 2. Technological substantial increasing & change there is on is an the

important reason for putting the farmer in a quagmire indebtedness 2. There is deskilling. With new technology of

reliance

private suppliers. 3. Inadequate public investment in unregulated agriculture (spread of irrigation in arid regions has been a casualty)

come new methods of cultivation. 3. Greater investments in assets like bore wells in Andhra Pradesh not only increase cost but also led to a tragedy when the investments failed. 1. Formal sources not timely. 2. Repayment price shocks. 3. Instead of getting them out of credit, the system draws them into it. 4. Difficulties in meeting consumption requirements & other social obligations. 5. An increase in market induced consumerism 1. Political dominance of moneylender &/or input dealer & output buyer. 2. Higher family size: more greater burden. 3. Lack of social support daughtersdowry difficult during crop loss &

Credit

1. Formal sources: Decline in the number of branches, decline in agricultural credit/direct finance to agriculture as a percentage of net bank credit, & there is a shift to value addition activities. 2. Increasing dependence on informal sources-relatively more among smaller farmers.

Other Issues

1. Interlinked

credit,

input

&

output markets. 2. Non-farm income opportunities limited. 3. Public health response to occupational health hazards of farming is wanting. 4. Easy availability of pesticides & other hazardous substances.

According to A Hollis, A Sweet man (1998) The regulatory concerns of micro finance sector lies in the special nature of these institutions, which caters the needs of those who have been marginalized from the formal financial sector. The paper underlines the importance of an appropriate regulatory framework to support sustainable delivery of diversified micro finance services such as savings & insurance. The paper explores the rationale for regulation in the micro-finance sector, & followed by a review of major regulatory approaches & its impact on the micro-finance sector. The sector specific regulations along with prudential reforms may facilitate & environment, which allows micro-finance institutions to mobilize savings & reduce the problems in enforcing normal banking regulations. The paper also emphasizes the need to encapsulate the specifications of macro-economic environment & different stages of development. According to Bhatt Nitin, (1998). Micro enterprise development has received much attention as being a participatory strategy that can potentially alleviate poverty by including the excluded in the process of development. But recent controversies regarding the purposes, processes & profitability of alternative micro enterprise development techniques suggest that participation means different things to different people. A review of three types of micro enterprise development institutions suggests that while some programmed policies discourage participation; others encourage inclusion only in token. Only a few programmers support genuine participation of the entrepreneurial poor.

According to Mayoux Linda, (2001). There are three basic views on the link between micro-finance & womens empowerment: There are those who stress the positive evidence & are essentially optimistic

about the possibility of sustainable micro-finance programs worldwide empowering women. Another school of thought recognizes the limitations to empowerment, but

explains those with poor program design. Then there are those who see micro-finance programs as a waste of resources.

According to Gary M. Waller, (2001) The failure of top-down development policies in the Third World War has given rise to a variety of grass roots, or bottom-up, development strategies to combat the severe poverty that continues to plague developing countries. Among these grass- roots approaches, micro-credit has grown rapidly in popularity, scope, & impact over the last two decades. Micro-credit provides financial capital for poor entrepreneurs who toil in the informal, poverty sectors in developing country economies. In addition to the thousands of predominantly non-governmental organizations that offer micro-credit programs, many national governments in the Third World are now seeking to integrate microcredit strategies into their development policy & planning. Accordingly, this article examines the micro-credit movement, including its rationale & underlying premises, its impact on the poor, & its role in development policy.

According to CL Anderson, L Locker, (2002). The paper presents a conceptual scheme for understanding the impact of microcredit small loans to poor borrowers- on common pool resources. Impacts on common pool resources are posited to occur through changes in household production & consumption, the focus on women, & the social capital created from group training, decision-making, & risk bearing with the group lending techniques characteristics of many micro-credit programs. Enhanced human & social capital can improve environmental outcomes. A non-random survey of micro-finance organizations suggests increased environmental awareness & potential CPR stewardship through micro-credit, but empirical research is needed to demonstrate actual impacts.

According to Mary McKiernan, (2002). Micro-Credit programs provide a two-tiered approach to poverty alleviation: credit for the purchase of capital inputs in order to promote self-employment & non-credit services & incentives. These non-credit aspects may be an important component of the success of micro-credit programs. However, because they are costly to deliver & their contribution to the success of the programs is difficult to measure, they may not be properly valued. This paper uses primary data on household participants & non-participants in Grameen Bank & two similar micro-credit programs to measure the total & non-credit effects of micro-credit program participation on productivity. The total effect is measured by estimating the profit equation conditional on productive capital. Productive capital & program participation are treated as endogenous variables in the analysis. I find large positive effects of participation & the non-credit aspects of participation on self employment profits.

According to Frances Sinha, (2003)

This paper presents the interim findings of a national level impact assessment of Micro-Finance in India. The study aims to assess on a national scale the outreach & development of MFI programs in relation to different product designs & delivery systems in various parts of India. In India there is a diversity of approaches to Micro-Finance, involving banks, government agencies, NGO. The focus of this study-is the specialized MFI who provide financial services whilst building their own financial sustainability. Most MFI use groups as intermediaries for financial transactions, but there are different ways of working with groups. These may be broadly classified as the Self-Help Groups Model (SHG), the Grameen replicators & Co-operatives. In each of the models, the group usually assumes joint liability for loan taken by its members, but there are significant differences in the services offered & in the extent of client responsibility in financial transactions. A small number of MFI have an individual banking approach According to Mahmud Simeen, (2003).. The effect of micro-credit program participation on womens empowerment by applying an analytical framework that recognizes the conceptual shift in the definition of empowerment, from notions of greater well being of women to notions of womens choice & active agency in the attainment of greater well being. The author finds that micro-credit program participation has only a limited direct effect in increasing womens access to choice-enhancing resources, but has a much stronger effect in increasing womens ability to exercise agency in intra-house hold processes.

According to Littlefield Elizabeth,Murduch, (2003) The UN MDG (Millennium Development Goals) has galvanized the development community with an urgent challenge to improve the welfare of the worlds neediest people. Micro-finance & the impact it produces go beyond just business loans. The poor use financial services not only for business investment in their micro enterprises but also to invest in health & education, to manage household emergencies & to meet the wide variety of other cash needs that they encounter. The range of services includes loans, savings facilities, insurance, transfer payments & even micro-pensions. According to M Chowdhury, P Mosley (2004) Analysis of the poverty impacts of micro-finance is almost exclusively focused on the direct impacts on micro-finance clients. The Imp-Act programmed emphasizes the need to also consider the wider impacts achieved through nonclient beneficiaries of micro-finance aspires wider impacts need to be assessed & programs designed to achieve these outcomes. This volume introduces methodologies, in most cases developed by practitioners, which measure wider or social impacts & use the results as a point of departure for understanding what institutional & policy interventions are required to make them more propoor. The principal wider impacts discussed are health, community governance, postwar reconstruction, labor & finance markets & in relation to Bolivia & Indonesia, the economy as a whole. We represent research into such wider impacts as a public good which is beneficial for all micro-finance institutions in particular for their public relations & for the poverty impact of the sector as a whole, but which the individual institutions typically do not have the resources to assess.

According to James C. Brau, (2004) Although the word finance is in the term micro-finance & the core elements of micro-finance are those of the finance discipline, micro-finance has yet to break into the mainstream or entrepreneurial finance literature. The purpose of this article is to introduce the finance academic community to the discipline of micro-finance & micro-finance institutions. Through out the world, poor people are excluded from formal financial systems. Exclusion ranges from partial exclusion in developed countries to full or nearly full exclusion in lesser developed countries. Absent access to formal financial services, the poor have developed a wide variety of informal, community based financial needs. In addition, over the last two decades, an increasing number of formal sector organizations have been created for the purpose of meeting those some needs. Micro-Finance is the term that has come to refer generally to such informal & formal arrangements offering financial services to the poor. According to Mahajan Vijay, (2005) Over 2000 people from nearly 100 countries around the world met in Washington DC for three days in February, 1997 at what was called the MicroCredit Summit. The summit was organized to launch a global movement to reach 100million of the worlds poorest families, especially the women or those families, will credit for self-employment & other financial & business services, by the year 2005.

According to T Arun, (2005) The regulatory concerns of micro-finance sector lies in the special nature of these institutions, which caters the needs of those who have been marginalized from the formal financial sector. The paper underlines the importance of an appropriate regulatory framework to support sustainable delivery of diversified micro-finance services such as savings & insurance. The paper explores the rationale for regulation in the micro-finance sector, & followed by a review of major regulatory approaches & its impact on the micro-finance sector. The sector-specific regulations along with prudential reforms may facilitate & environment, which allows micro-finance institutions to mobilize savings & to reduce the problems in enforcing normal banking regulations. According to Sharon Shinn, (2007) The microfinance revolution began when Bangladeshi economics professor Muhammad Yunus first handed over a few dollars to an impoverished basket weaver in 1974. Since then, the movement toward microfinancethe granting of very small loans to the poorest people in the world to enable them to run small businesses that will lift them out of povertyhas won passionate supporters across the globe. Last year, Yunus and the microfinance institution he founded, Grameen Bank, shared the Nobel Peace Prize. As organizations ranging from the World Bank to privately funded enterprises devote more resources to microfinance initiatives, business schools are responding by offering electives and programs designed to teach students how to function in this specialized area of business. According to Michael Chu, senior lecturer at Harvard Business School in Cambridge, Massachusetts,

Microfinance is a lead-ing example of why business schools have a huge role to play in impacting global poverty. The bulk of global poverty is concentrated in the developing world, which is where the state and the government have many challenges in functioning well. Some schools teach microfinance as a component of social enterprise, a way of doing well through business. Others focus on its commercial applicationsthe high rate of return on loans, the profit potential inherent in partnering with the poor. No matter what the approach, those in the vanguard see the topic as one that is critical to business, business schools, and the world. According to Astha Arvind, (2007) The paper examines why capital didnt flow from the rich to the poor. The problems identified are categorized in three broad categories: lack of complementary human capital, information asymmetries & transaction costs for small loan sizes. It explains how moneylenders solve the information asymmetry problems. It then shows that recently, micro-credit has taken the world by storm. This development has considerably impacted economies at the grass root levels. The paper therefore examines how Micro-Credit Institutions have overcome the obstacles to mobility of capital, notably those relating to information asymmetry & transaction costs, but also, in some cases, those related to complementary human capital.

According to Dean S. Karlan, (2007) Expanding credit access is a key ingredient of development strategies worldwide. Micro-Finance practitioners, policymakers, & donors have ambitious goals for expanding access & seek efficient methods for implementing & evaluating expansion. There are fewer consensuses on the role of consumer credit in expansion initiatives. Some micro-finance institutions are moving beyond entrepreneurial credit & offering consumer loans. But many practitioners & policymakers are skeptical about unproductive lending. These concerns are fuelled by academic work highlighting behavioral biases that may induce consumers to over borrow. We estimate the impacts of a consumer credit supply expansion using a field experiment & follow-up data collection. We estimate the resulting impacts using new survey data on applicant households & administrative data on loan repayment, as well as public credit reports one & two years later. We find that the marginal loans produced significant benefits for borrowers across a wide range economic & well-being outcomes. We also find some evidence that the marginal loans were profitable for the lender. The results suggest that consumer credit expansions can be welfare improving.

According to C Ahlin, N Jiang, (2008)

We examine the long-run effects of micro-credit on development in an occupational choice model similar to Banerjee & Newman (JPE, 1993). Microcredit is modeled as a pure improvement in the credit market that opens up selfemployment options to some agents who otherwise could only work for wages or subsist. Micro-Credit can either raise or lower long-run GDP, since it can lower use of both subsistence & full-scale industrial technologies. It typically lowers long-run inequality & poverty, by making subsistence payoffs less widespread. Thus, an equity-efficiency tradeoff may be involved in the promotion of micro-credit. However, in a worst-case scenario, micro-credit has purely negative long-run effects. The key to micro-credit long-run effects is found to be the graduation rate, defined as the rate at which the self-employed build up enough wealth to start full-scale firms. We distinguish between two avenues for graduation: winner graduation (of those who earn above-average returns in self-employment) & saver graduation (due to gradual accumulation of average returns in self-employment). Long run development is not attainable via micro-credit if winner graduation is the sole avenue for graduation. In contrast, if the saving rate & self-employment returns of the average microborrower are jointly high enough, then micro-credit can bring an economy from stagnation to full development through saver graduation. Thus, the lasting effects of micro-credit may partially depend on simultaneous facilitation of micro saving. Eventual graduation of the average borrower, rather than indefinite retention, should be the goal of micro-banks if micro-credit is to be a stepping stone to broad-based development rather than at best an anti-poverty tool.

According to A.K.Singh, (2008). Micro-credit in India hinges on four pillars i.e. micro saving, inter loaning, micro-enterprise & micro-insurance. The whole micro-credit system has led to empower women to a great extent & initiate small enterprises. On these lines a study named Impact of Participatory Micro-Credit on Integrated Community Development was planned with objectives to study different components of participatory micro-credit. Two major systems of micro-credit were existing in the study area. Though the SHG was central in both systems, NGO were selfhelp group promoting institution. According to Bruce Wydick, (2008) Microfinance has become an increasingly widespread tool for fostering economic growth among the poor in developing countries. This study tracks the progress of 239 borrowers in a Guatemalan microfinance institution from 1994 to 1999. Results from the study show that rapid gains in employment within the sample enterprises after initial credit access were followed by a protracted period of stagnation in employment growth. Other results highlight gender differences in response to credit access, showing surprisingly that the longrun growth in hired labor for female entrepreneurs was slightly greater than that for male entrepreneurs.

According to Jaideep Roy, (2008).

This paper examines publicprivate partnerships in micro-finance, whereby NGOs can help in channelizing credit to the poor, both in borrower selection, as well as in project implementation. We argue that a distortion may arise out of the fact that the private partner, i.e. the NGO, is a motivated agent. We find that whenever the project is neither too productive, nor too unproductive, reducing such distortion requires unbundling borrower selection and project implementation, with the NGO being involved in borrower selection only. According to Ronny Manos, (2008) Measuring the performance of providers of financial services to poor individuals and to micro and small enterprises is a relatively new phenomenon, and the paper discusses the reasons for this. It is argued that using traditional financial ratios to assess performance of microfinance institutions (MFIs) is inappropriate, owing to the high level of subsidies popular in the industry, which these measures ignore. In contrast, two performance measures that are becoming increasingly popular in the microfinance industry do attempt to adjust for subsidies granted to MFIs. These two performance measures, financial self sufficiency (FSS) and the subsidy dependence index (SDI), are compared and contrasted. The paper points to the superiority of the SDI over the FSS, and suggests the use of the outreach index alongside the SDI, to measure the degree to which the MFI has achieved social objectives.

According to P.Sharath Chandra Rao, (2009) More than 72% of India's population resides in rural India and it also has a high concentration of people living under abject poverty. Of the total rural population 27.128.3% lives below the poverty line (BPL). A lack of energyfinance options is hampering the quality of life of the BPL community. The members of this disadvantaged household which forms 27.1% and 23.6% of the India's rural and urban population has no ready access to mainstream finance or knowhow of sustainable energy products nor do they have access to energy service providing agency. This lack of energy-finance options has provided the marginalized population little means to break the conventional energy paradigm and the corresponding poverty cycle. Considering the afore-mentioned problem we propose an energy-microfinance intervention or a model that encompasses two independent entities. One has an energy expertise and the other possesses finance management skills. Alternately, we also propose a special purpose entity that comprises of these two entities. This entity fosters different institutional, technical and financial engineering approaches to the provision of energy, finance and infrastructure services necessary for poverty alleviation.

According to Roy Mersland, (2009). We examine the relationship between firm performance and corporate governance in microfinance institutions (MFI) using a self-constructed global dataset on MFIs collected from third-party rating agencies. Using random effects panel data estimations, we study the effects of board and CEO characteristics, firm ownership type, customer-firm relationship, and competition and regulation on an MFIs financial performance and outreach to poor clients. We find that financial performance improves with local rather than international directors, an internal board auditor, and a female CEO. The number of credit clients increase with CEO/chairman duality. Outreach is lower in the case of lending to individuals than in the case of group lending. We find no difference between non-profit organisations and shareholder firms in financial performance and outreach, and we find that bank regulation has no effect. The results underline the need for an industry specific approach to MFI governance.

Q.1

Are you aware about Micro-Credit facility?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 75 5 80

PERCENTAGE 93.75 6.25

6%

yes no

94%

From the above chart we can say that 94% of the people in rural areas are aware of Micro-Credit facility. Only 6% are not aware of it.

Q.2 Do you have any account in the bank?

OPTIONS SAVING a/c CURRENT a/c TOTAL

No. OF RESPONDANTS 49 31 80

PERCENTAGE 61.25 38.75

39% SAVING CURRENT 61%

In the chart we see that 61% of the people are having saving account in the banks & 39% are having current account.

Q.3 Does your bank provide Micro-Credit facility?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 54 26 80

PERCENTAGE 67.5 32.5

33%

YES NO

67%

The chart shows that 67% of the banks are providing Micro-Credit facility to their customer & 33% of the banks are not providing & even dont know about this facility.

Q.4 Do you ever-used Micro-Credit facility?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 39 41 80

PERCENTAGE 48.75 51.25

49% YES NO 51%

From the chart we can say that only 49% of the people were knowing about Micro-Credit facility & were using it. But 51% of the people didnt know about this & so they were not using it.

Q.5 How much loan you have taken from bank?

OPTIONS 8000 8000-12000 12000-16000 16000-Above TOTAL

No. OF RESPONDANTS 0 37 33 10 80

PERCENTAGE 0 46.25 41.25 12.5

13%

0%

46%

8000 8000-12000 12000-16000 16000-Above

41%

The chart shows that 46% of the people get loan upto 8000-12000 from their bank. 41% of the people can get 12000-16000 loan & 13% get above 16000.

Q.6 Do you think that Micro-Credit facility is useful for you?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 56 24 80

PERCENTAGE 70 30

30%

YES NO

70%

The chart shows that 70% of the people think that Micro-Credit facility is useful for them & 30% think that it is not.

Q.7 What is the purpose for the loan taken by you?

OPTIONS AGRICULTURE HOUSE-HOLD USE EDUCATION OTHERS TOTAL

No. OF RESPONDANTS 46 3 28 3 80

PERCENTAGE 57.5 3.75 35 3.75

4% 35% AGRICULTURE HOUSE-HOLD USE EDUCATION 57% 4% OTHERS

In this diagram we see that 50% of the people use micro-credit facility for agriculture purpose. 35% of the people use it for education & remaining 8% of the people are using it for house-hold & others (i.e. 4% & 4%).

Q.8 Is Micro-Credit facility help in improving the living standard of the Farmers?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 46 34 80

PERCENTAGE 57.5 42.5

43% YES NO 57%

The following diagram shows that 57% of the people think that Micro-Credit help in improving the living standard of the farmers. But 43% think that it does not help in improving it.

Q.9 How Micro-Credit is different from other credit?

OPTIONS INTEREST RATE TIME AMOUNT OTHERS TOTAL

No. OF RESPONDANTS 40 5 35 0 80

PERCENTAGE 50 6.25 43.75 0

0% 44%

INTEREST RATE TIME 50% AMOUNT OTHERS

6%

From the diagram we can say that 50% of the people think that Micro-Credit differs from other credit system in interest rate. 44% think it differs in amount & remaining 6% think it differ in time.

Q.10 Should the upper limit of Micro-Credit be raised?

OPTIONS

No. OF

PERCENTAGE

YES NO TOTAL

RESPONDANTS 47 33 80

58.75 41.25

41% YES NO 59%

The diagram shows that 59% of the people think that the credit giving limit should be raised & 41% think it should not be raised.

Q.11 Should the terms & conditions of loan be made liberal?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 51 29 80

PERCENTAGE 63.75 36.25

36% YES NO 64%

In this 64% people say that the terms & conditions of taking loan should be made liberal & 36% say that it should not.

Q.12 Do you use Micro-Credit facility for productive work?

OPTIONS YES NO TOTAL

No. OF RESPONDANTS 47 33 80

PERCENTAGE 58.75 41.25

41% YES NO 59%

The chart shows that 59% people use Micro-Credit facility in productive work & 41% use it in other than productive work.

Q.13 Do you use Micro-Credit facility for ceremony or other rituals?

OPTIONS

No. OF

PERCENTAGE

YES NO TOTAL

RESPONDANTS 42 38 80

52.5 47.5

48% YES NO 52%

From the above chart we can say that 52% people use Micro-Credit facility for ceremony or other rituals but 48% people dont use it in these work & use it in productive & in agriculture work.

Q.14. Is there any kind of trouble in taking Micro-Credit facility?

OPTIONS

No. OF

PERCENTAGE

YES NO TOTAL

RESPONDANTS 36 44 80

45 55

45% YES NO 55%

In this chart we see that 45% people are saying that they face trouble while taking Micro-Credit facility, but 55% people say that they dont face any kind of problem while using Micro-Credit facility.

Microfinance came into limelight when Muhammad Yunus, founder of the Grameen Bank, won the Nobel Peace Prize in 2006 for his development initiatives in extending small loans to the villagers in Bangladesh at reasonable rates. It refers to the provision of financial services to the poor or low-income

clients to have permanent access to financial services, including credit, savings, insurance and funds-transfer. Poor people find it difficult to avail loans due to lack of collaterals. In the book, Creating a World Without Poverty, Muhammad Yunus writes, None of us likes the idea of apartheid. We object when we hear about such a system in any form, anywhere. We all understand that no one should suffer because s/he happened to be born in a certain race, class or economic condition. But our financial institutions have created a worldwide system of apartheid without anyone being horrified by it. If you dont have collateral, you are not credit-worthy. Microfinance got its first official recognition with Indira Gandhis bank nationalization drive launched in 1969, requiring commercial banks to open rural branches to extend financial-aid to the poor. It was further extended through the Integrated Rural Development Program (IRDP) introduced in 1978, the main thrust of which was to alleviate poverty through provision of loans in the form of subsidized credit. But the final boost came in 1991 under the New Economic Policy, which brought about the liberalization of Indias financial system. It was characterized by financial policy reforms and new microfinance approaches, the most notable being the self-help groups (SHGs). These were created to link informal local groups created by NGOs to commercial banks like the National Bank for Agriculture and Rural Development (NABARD).

While the Indian economy grows at above 8 per cent, the fact remains that almost 75 million poor households continue to remain outside the reach of financial services, not to mention social security and livelihood opportunities. Out of these, 60 million are in rural areas, half of them landless, and two-thirds

illiterate. Alarmingly, in the context of increasing rural migration to urban India, the urban poor are becoming the fastest-growing section, and by 2010, they will constitute a large portion of the poor. Microfinance in India in the last decade-and-a-half has been able to reach a considerable segment of this population, largely because of the linkage between Nabard; self help groups (SHG) and banks. As on March 2006, there were 2.2 million SHGs covering 32.98 million poor households. A cumulative disbursement of Rs 11,398 crore has been achieved with a growth rate of 51 per cent in priority states. In addition, microfinance institutions (Sa-Dhan members) reached out to 7.3 million households with Rs 2,070 crore. But the annual demand for microfinance services is estimated to be somewhere between Rs 75,000100,000 crore. The gap is gigantic.

Micro Finance Emerging Trends in Financial Management Micro Finance 2007

Poor people often have just hand to mouth existence and have few reserves for major expenses such as illness, weddings, house repairs or education. They are unable to build their savings and are forced to borrow at exorbitant rates. This further adds to their burden and worsens their economic situation. Because the poor have little money, making the most of what they do have is vital. The poor rarely access services through the formal financial sector. They address their need though village moneylenders who exploit them by charging high interest rates. Most poor people need and use financial services all the time. Buying goods on credit is far more expensive than paying in cash. They need to save and borrow to take advantage of business opportunities, invest in home repairs and improvements, and meet seasonal expenses. But conventional borrowings have serious limitations in terms of cost, risk, and convenience. Lending institutions will not lend to people unless they have some kind of security, or collateral, for the loan, to ensure that if it is not paid back, the bank or other institution will be able to recover part of the debt. Micro finance can be defined as small loans that help poor people who wish to start or expand their small businesses but are not able to get banks to lend to them. Micro credit is the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. It is helping millions of poor people,

especially poor rural women, with tiny loans so they can start small, create selfemployment and improve their lives.

Micro finance is the supply of loans, savings, and other basic financial services to the poor. The idea of micro finance was developed as a survival strategy for the poor. Ela Bhatt in India and Professor Muhammad Yunus of Bangladesh are the pioneers in this field. In 2007, India experienced a commendable growth-rate of over 9% and in 2008, above 7%, thus becoming the fastest growing economy, only second to China. However, this growth has not translated into better standards of living for the destitute. The fact that last year many Indians made it to the Forbes list of the worlds richest men is praise-worthy; however, the listing completely ignores the plights of the poor, which have also increased simultaneously. India is a quintessential for the slip between the cup and the lip. Being an agrarian economy, a large part of the population is employed in the agricultural sector. However, monsoon failures, sugar crisis, high inflation rates, pass technology, lack of basic infrastructure, unavailability of credit and inaccessibility to markets have adversely affected the lives of the poor, who are entirely dependent on agriculture for their sustenance. The Vidarbha crisis brought to the forefront the basic problems underlying the Indian agricultural sector. Thus, as agriculture forms the backbone of the rural economy, developments in this field have a major role to play in the poverty alleviation programmes, of which microfinance forms an integral part.

Micro credit in India2009

Mondal of Bengal, Rangappa of Karnataka, Ilamkar of Maharashtra, or Cherian of Keralanone are lucky enough to have a secure job. Each is destined for self-employment. They are scattered over different locations in India. Their trades are varied too. But they are tied by a common needthe need for credit, or rather micro credit, as it is popularly called today. If only I had some more capital is a common refrain that echoes through the small ventures of India. Micro credit means loans to artisans, tiny and small industries, grocers, vegetable vendors, rickshaw pullers, roadside retailers and the like. Other activities include farming, poultry, cattle rearing, piggery, and fishery. Micro credit has its origins in the early eras of civilization. It was out of necessity that man became aware of the benefits of lending and borrowing. Much before the advent of money and banking, the practice of lending was prevalent in kind. For example, a farmer gave some seeds to another on the condition that the recipient would return the seeds with some extra quantity. This little extratoday known as interestwas the cost of micro borrowing. The world witnessed the first organized system of lending with the establishment of the Bank of Venice in Italy, way back in 1157. Born in 1694, the Bank of England brought about an improvement. Much later, India joined the league in 1786 when the General Bank of India came into existence. Before this, the indigenous bankers better known as private moneylenders controlled the entire unorganized banking sector. Obviously, the borrowers were always exploited. Exorbitant rates of interest and unscrupulous practices

often drove borrowers to the point of destitution. Particularly, the takers of micro credit the poor farmers and small traders were the worst sufferers. In India, the gap between the haves and the have-nots is always alarmingly high. Vices like superstition, illiteracy, caste system and the greed of the rich and powerful do not allow the principle of equality to set in. Consequently, India is unable to get rid of poverty and unemployment. It was with the objective of alleviating poverty and generating employment that the role of small finance came into the limelight. Even the great visionary like poet Rabindranath Tagore utilized his Nobel Prize money to start a rural bank to extend financial assistance to small farmers and traders. Unfortunately, the bank did not last long. With more than 220 million starving people, India must continue to exploit the great potential of micro credit. The posh shopping malls, the multiplexes and the capital- intensive big industries can provide livelihood only to a few educated urbanites. The rest have to live on small ventures and agriculture. These segments can never survive without small loans. Micro credit creates a huge purchasing power. This, in turn, gives impetus to industrial growth and finally leads to a higher GDP. The contribution of micro credit towards social reforms cannot be overlooked either. Antisocial persons, ex-prisoners or even prostitutes may find an easy route of rehabilitation with a small credit.

References: Mary Mc Kernan, Feb2002- The impact of micro credit programs on self

employment profits: Do Non Credit Programs Aspects Matter. (tamu.edu) Littlefield E, Murdoch J,2003- Is micro finance an effective strategy to

reach the Millennium Development Goals (ifmr.ac.in) Waller GM, Woodworth W,2001- Micro credit as a grass-roots policy for

development (interscience.wiley.com) Brau JC, 2004-Micro Finance: A comprehensive review of the existing

literature (marriottschool.byu.edu) Mahmud Simeen, Sept2003-Actually how Empowering is Micro-Credit?

(ingentaconnect.com) Gulli H,1998- Micro finance & poverty: Questioning the conventional

wisdom (books.google.com)

Karlan DS, Zinman J,2007- Expanding credit access: Using randomized

supply decision to estimate the impacts (papers.ssrn.com)

Mahajan Vijay, 2005- From Micro-Credit to Livelihood Finance. (microfinance gateway.org) Mayoux Lindsay, 2001- Poverty Elimination & the Empowerment of (impact.org.uk) Astha Arvind, Dec1, 2007- An introduction to micro credit: Why Money

Women.

is flowing from the Rich to the Poor. (papers.ssrn.com) C L Anderson, L loicker, 2002(World Development) - Micro-credit,

social capital & common pool resources. T Arun, 2005- regulating for development: The case of micro finance. A Hollis, A Sweetman, 1998 (World Development)-Micro Credit: What

can we learn from the past? (ufmg.br) M Chowdhury, P mosley,2004 (Journal of International Development)(interscience.wiley.com)

Introduction

C Ahlin, N Jiang, 2008 (Journal of Development Economics) - Can

micro-credit bring development? (vanderbillt.edu)

 (insead.edu)

J Morduch,2000 (World Development)-The micro-finance schism

Bruce Wydick,2008- Micro-Finance among the Maya: Tracking the

Progress of Borrowers P Sharath Chandra Rao, John B Byrne,2009- Micro finance intervention

for Below Poverty Line households in India Roy Mersland,2009- Performance & governance in micro finance

institutions

Ronny Manos, Jacob Yaron, 2008- Measuring the performance of micro

finance providers: An assessment of past & present practices.

TABLE OF CONTENTS

S. No

PARTICULARS Certificate Self declaration Preface Acknowledgement Executive Summary

1 2

Introduction Theoretical Framework a). Micro-Credit in India 2009 b). Growth & Challenges Faced in MicroFinance: Trends & Future Outlook c). Understanding the Development Process to Micro- Finance d). Micro-Finance Implementing Organization e). Challenges Faced by Micro-Finance Industry f). Micro- Finance: Emerging Trends in Financial Management (2007) g). Commercial Micro-Finance: The Emerging Paradigm h). The Status Quo & Emerging Paradigm i). Trend towards Commercialization: New Development & Concerns j). Sophistication: The Way Forward k). Micro-Credit: The Poverty Business l). Indebtedness the new culture

3 4 5 6

Review of Literature Research Methodology Data Analysis & Interpretation Findings & Suggestion Bibliography Annexure

Materials & Methods 1. Research Methodology

Research Methodology gave me proper platform to carry out research in a systematic manner & undertake up proper diagnosis & interprete accurately. For every comprehensive research a proper research methodology is indispensable & it has to be properly conceived. 2. Data I have collected data from two sources: Primary Data In this I have prepared questionnaire & then it was filled up by the farmers. Secondary Data I have collected the secondary data through different sources: a). Articles b). Journals c). Visiting Websites

3.

Sampling a). Sample Area : Chittorgarh

b). Sample Unit

Persons from Rural Area of Chittorgarh

c). Sample Size

80

d). Sample Technique :

Stratified Random Sampling

e). Sample Tools

Percentage Method

FINDINGS

From the following project my findings are as follows:

1)

94% of the farmers are aware of the Micro-Credit facility. 61% of the farmers are having saving account in their banks. 67% of the banks are providing the Micro Finance facility. 49% of the farmers are using Micro Credit from beginning & remaining

2) 3) 4)

doesnt know anything about it. 5) 46% of the banks provide loans upto 12000 & only 13% of the banks

provide loan more than 16000. 6) 7) 70% of the farmers say that Micro Credit facility is useful for them. 57% of the farmers are using Micro Credit facility for agricultural

purpose. 35% farmers use this facility for educational purpose & remaining use it for household & other purpose like for their cows & buffaloes etc.

8)

57% of the farmers say that Micro Credit facility is helping them to

improve their living standard & remaining think that it doesnt.

9)

50% of the farmers think that the Micro Credit scheme differs from other

credit schemes from interest rate.

10)

59% of the farmers say that the limit of loan taking should be increased

so that it will be easy for them.

11)

64% of the farmers think that the terms & conditions of loan taking

should be made liberal & remaining think that it should not.

12)

59% of the farmers use Micro Credit facility for productive use & 41%

use it for other than productive use. 13) 52% of the farmers use Micro Credit facility for ceremony & other rituals

& 48% doesnt use it for this purpose. 14) 45% of the farmers say that they have to problems while using Micro

Credit facility & 55% doesnt have to face problem.

QUESTIONNAIRE General Information

Name Age Occupation Address : :

: :

Questions: 1) Are you aware about Micro Credit facility? Yes No

2)

How many banks are there in your village?

15) Is there any kind of trouble in taking Micro Credit facility? Yes No

16) Which sort of problems you generally face while taking the loan? a) b) c) d)

17) Suggestions:

SUGGESTIONS Many suggestions were given by the farmers about the Micro Credit facility. After going through these suggestions I conclude the following:

1)

This is a new scheme & only some banks are aware of this & are

providing it. More banks should provide this facility. 2) 3) 4) done less. 5) 6) 7)
8)

Amount of loan should be raised. Process of taking loan should be made easy. Loan should be received in time. The paper work & formalities should be

Enquiry about the customers should be limited. Interest on loan should be minimum. Work in the banks should be done fast. Every one should be made aware of it.

SELF DECLARATION

I myself declare that I have completed my project i.e. Impact Of Micro Credit On Rural Area Of Chittorgarh. I used primary source of data for further findings. All work in the project is original. I also took help from various journals and from different sites.

(TRISHA DAS)

Websites Visited: www.yahoo.com www.ask.com www.google.com

Journals: Journal of IMS Group: Volume 3 No. 1, Jan-June 2007 The ICFAI University Press: The Analyst, Jan 2008 The ICFAI University Press: Professional Banker, May 2008