Dr. Gaur Hari Singhania Institute of Management & Research
Kamla Nagar, Kanpur-208005
1. Need of Microfinance in India:
India is a land of farmers in which most of them are poor. Some farmers have even hundred acres of land while most of them have either small areas of land or no land that are generally referred as landless farmers. The small farmers or landless farmers are not able to sustain their livelihood from agriculture. The farmers need a lot of money at the time of sowing seeds, any incidental need for agriculture or private purpose. At that moment of time when they require money they go to mahajans or sahukars or money lenders for the desired amount. The mahajans or sahukars take the benefit of the dire need and charge high interest from the needy peoples. The poor villagers are not able to return the money on time and the interest increases with the passage of time. The interest increases manifold due to compound interest and the debt transfers from one generation to another.
The situation of the urban areas is not different from the rural areas. In the urban areas, the poor people need money for their small business like hawkers, fruit peddlers, milk sellers etc. For the business purpose they require money and from here they come in the clutches of mahajans.
Microfinance has a very prominent role to play in developing economy. Microfinance is beneficial not only in urban areas but also in rural areas. There are nationalised and private banks in urban areas; the condition is not similar in the rural areas. Therefore, the rural areas require more prominence. The majority of Indian population are illiterate and deprived; therefore not easy for them to understand the formal banking procedures. Due to these reasons, the needy people easily become a prey to the claws of greedy money lenders, who charge them a very high interest rates which are sometimes above 10% per month and thereby they are never being able to repay the debts taken by the moneylenders.
The micro-finance institutions provided the services in order to stop the exploitation of the poor people in the rural and urban areas. Several government and non government organisations came forward with the concept of microfinance like NABARD, SIDBI, MYRADA, PRADAN, BANDHAN, BASIX, SKS, SHARE, SPANDANA and others.
We can't think of microfinance without remembering the successful Bangladesh Grameen Bank of Prof. Muhammad Yunus which earned him a Nobel Peace Prize in 2006 for the same. Prof. Muhammad Yunus started his concept of microfinance through Bangladesh Grameen Bank in 1970's and help the poor people for self employment. Asian Development Bank (ADB) also helped the Bangladesh Grameen Bank for achieving their objective. Now, the bank gets the financial assistance from the international bodies for their mission.
3. Women Empowerment:
Women Empowerment is defined as the processes by which women take control and ownership of their lives through expansion of their choices. Thus, it is the process of acquiring the ability to make strategic life choices in a context where this ability has previously been denied. The core elements of empowerment have been defined as the ability to define one's goals and act upon them, awareness of gendered power structures, self-esteem and self-confidence (Kabeer, 2001). Empowerment can take place at a hierarchy of different levels – individual, household, community and societal.
4. Microfinance and Women Empowerment:
Self-help groups intermediated by microcredit have been shown to positive effects on women. They have played valuable roles in reducing the vulnerability of the poor, through asset creation, income and consumption smoothing, provision of emergency assistance, empowering and emboldening women by giving them control over assets, increased self-esteem and knowledge (Zama, 2001). Several recent assessment studies have also generally reported positive impacts (Simanowitz and Walker, 2002). One important indicator of empowerment is the ability to make decisions within the household. The field studies conducted under the International Fund for Agriculture Development (IFAD) gender mainstreaming review, many women interviewed indicated that
they could decide on spending their own income, although men were often consulted. In some countries, where mobility outside the home is often restricted, women have reported increased mobility, simply having to inform male heads of household instead of soliciting their permission.
In the realm of self-confidence and self-esteem, the feedback from the IFAD gender mainstreaming review has been very positive. Reports indicate that women are more able to articulate their views and were able to command attention and respect within the household, and often within the community. Increased self-confidence was especially pronounced when women had been exposed to training on women rights, social and political issues.
India desires to stand among the comity of developed nations; there is no denying the fact that poverty alleviation & reduction of income inequalities has to be the top most priority. India's achievement can be counted only when halving the population of poor as well as achieving a broad based economic growth also hinges on a successful poverty alleviation strategy. In this background, the impressive gain made by SHG - Bank linkage programme in coverage of rural population with financial services offers a ray of hope. The article argues for mainstreaming of impact assessment and incorporation of local factors in service delivery to maximize impact of SHG – Bank linkage programme on achievement of reducing the poverty.
Considering the example of Bangladesh Grameen Bank, we have to build up the system in such a transparent and accountable manner that the poor people are benefited and the numbers of people who are living below the poverty line are reduced and the country got the recognition of developed nation by 2020.
Microfinance proves to be a magical wand only when we adopt accountability, transparency and the firm determination to eradicate the poverty as well as the needy and desired people are able to get benefited from the SHG - Bank linkage programme.
6. Future Prospects of Microfinance:
Indian rural finance sector is at crossroads today. The financial sector reforms with its emphasis on profitability as the key performance benchmark. Banks are increasingly shying away from rural lending as well as rationalizing their branch network in rural areas. Burgess & Pande (ibid) have brought out the fact in their study by stating that while between 1977 and 1990 (pre-reform period) more bank branches were opened in financially less developed areas, the pattern was reversed in post reform period. Thus, access of credit to the rural people has reduced in post reform period; the policy recommendation is to fill this gap through micro credit. The SHG-Bank linkage programme has witnessed phenomenal growth and the current strategy is to focus on 13 underdeveloped states as also graduate the existing SHG's to the next stage of micro enterprises.
At this stage, if SHG-Bank linkage programme has to contribute in poverty reduction, there is an imperative need for integrating impact assessment as a necessary design feature of the programme. The significance of bringing the focus back to 'people' from 'institutions' and adoption of localized people centric approach can hardly be overemphasized. Main streaming of impact assessment in the SHG-Bank linkage programme will call for extra efforts and resources as also create conflict with the present focus on numerical growth. Realisation of a substantial trade off between sustainable economic impact and exponential growth, calls for courageous public policy decisions.
The SHG-Bank linkage programme at present has no explicit social or economic benchmarks for inclusion of members into groups to be credit linked in line with the flexible approach of the programme. However, as seen above the extension of credit is infertile in local context has negligible chances of leading to productive investment. Similarly, inclusion of core poor in the programme, who had little experience of economic activities, also limits productive use of capital. Segmentation of credit demand based on economic and social status is the key to optimum utilization of scarce resources. Therefore, the future prospect of microfinance in India is very bright and enriched.
Randhir Kumar Singh
Category: Payday loans