A

RESEARCH PROJECT REPORT

On

PROGRESS OF MICROFINANCE OF INDIA

Report submitted in partial fulfillment of the requirements of

the degree of Master of Business Administration of

Guru Gobind Singh Indrarprastha University, New Delhi

Batch: 2014-16

Submitted to: Submitted by:

Prof.Deepak Bansal Deepak Kumar Bal

Faculty Guide Roll No. 08518003914

MBA (IV Semester)

DELHI TECHNICAL CAMPUSGREATER NOIDA, UTTAR PRADESH

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DECLARATION

I hereby declare that this research project report entitled "Progress of Microfinance in

India” submitted by me for the partial fulfillment of the degree of Master of Business

Administration, submitted to Indraprastha University and is an original work done by me.

I also hereby declare that this project report has not been submitted at any time to any other

university or institute for the award of any Degree or Diploma.

(DEEPAK KUMAR BAL)

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CERTIFICATE

This is to certify that the thesis entitled, “Progress of Microfinance in India”, being submitted by Mr. DEEPAK KUMAR BAL to the Delhi Technical Campus, Indraprastha University, for the award of the degree of Master of Business Administration is a record of bonafide research work carried out by him.

The matter presented in this report has not been submitted for the award of any other degree of this or any other institute.

This is to certify that the above statement made by the candidate is correct and best of our knowledge.

Mr. DEEPAK BANSAL

(RESEARCH GUIDE)

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ACKNOWLEDGEMENTThe project on “Progress of Microfinance in India ’’ would not have seen the light of the

day without the following people and their priceless support and cooperation. Hence I extend

my gratitude to all of them.

I would also like to express my sincere thanks to DR. DEEPAK BANSAL

(PROFESSOR –DTC IP UNIVERSITY for supporting me and being always there for me

whenever I needed.

During the actual research work, He and other office staff who set the ball rolling for my

project. They had been a source of inspiration through their constant guidance; personal

interest; encouragement and help. I convey my sincere thanks to them.  In spite of their busy

schedule they always found time to guide me throughout the project. I am also grateful to

them for reposing confidence in my abilities and giving me the freedom to work on my

project. Without their invaluable help I would not have been able to do justice to the project.

I express my sincere gratitude to my mother for showering all her blessings on me.I would

also like to thank my friends and colleagues for their valuable suggestions & making this

project successful.

Last but not the Least, My Almighty, who supported me in every situation to make sure I

complete this project within stipulated time.

(DEEPAK KUMAR BAL)

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PREFACE

As an MBA Student of Indraprastha University, I was required to undergo Research

Project as an integral part of curriculum. To accomplish this project as “Progress of

Microfinance in India” there is need to become familiar with the project.

It can be possible through theoretical inputs as well as practical exposure in which my

practical knowledge is helpful acquired at the college. I have also done this study from

secondary sources.

DEEPAK KUMAR BAL

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CONTENTS

Chapter No.

Chapter Name Page number

1 Conceptual Framework of MicrofinanceIntroductionClientsRoleServices

1-12

2 Literature Review 13-25

3 Research and Methodology 26-29

4 Results of Data Analysis 30-48

5 Main Findings and Conclusion 49-53

Bibliography 54-56

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CHAPTER-1

CONCEPTUAL FRAMEWORK OF

MICROFINANCE

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INTRODUCTION

Microfinance means providing very poor families with very small loans (micro credit) to help

them engage in productive activities /small businesses. Over time, microfinance has come to

1 include a broader range of services (credit, savings, insurance, etc.) as we have come to

realize that the poor and the very poor who lack access to traditional formal financial

institutions require a variety of financial products. The Twelthth Five Year Plan aims at

inclusive growth and faster reduction of poverty. Micro Finance can contribute immensely to

the financial inclusion of the poor without which it will be difficult for them to come out of

the vicious cycle of poverty. There is a need to strengthen all the available channels of

providing credit to the poor such as SHG- Bank Linkage programs, Micro Finance

Institutions, Cooperative Banks, State financial corporations, Regional Rural Banks and

Primary Agricultural Credit Societies. The strength of the micro finance industry lies in its

informality and flexibility which should be protected and encouraged. Landlords, local

shopkeepers, traders, suppliers and professional money lenders, and relatives are the informal

sources of micro-credit for the poor, both in rural and urban areas. The sector which is still in

its infancy faces shortage of experienced consultants/manpower/experts. There is a need to

have good quality professionals, trained in best practices in governance for effective

corporate governance. A need-based capacity building program me to meet the requirements

of all categories of Micro Finance Organizations (MFOs) is essential to bring about

sustainability in the sector. Some of the important areas where capacity building is needed are

transformation, best practices, interest rate management, delivery management, managing

growth, risk mitigation, product designing, market research etc.

Microfinance Definition

According to International Labor Organization (ILO), “Microfinance is an economic

development approach that involves providing financial services through institutions to low

income clients”.

In India, Microfinance has been defined by “The National Microfinance Taskforce, 1999” as

“provision of thrift, credit and other financial services and products of very small amounts to

the poor in rural, semi-urban or urban areas for enabling them to raise their income levels

and improve living standards”.

"The poor stay poor, not because they are lazy but because they have no access to capital."

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The dictionary meaning of ‘finance’ is management of money. The management of money

denotes acquiring & using money. Micro Finance is buzzing word, used when financing for

micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal to

empower under-privileged class of society, women, and poor, downtrodden by natural

reasons or men made; caste, creed, religion or otherwise. The principles of Micro Finance are

founded on the philosophy of cooperation and its central values of equality, equity and

mutual self-help. At the heart of these principles are the concept of human development and

the brotherhood of man expressed through people working together to achieve a better life for

themselves and their children.

Traditionally micro finance was focused on providing a very standardized credit product. The

poor, just like anyone else, (in fact need like thirst) need a diverse range of financial

instruments to be able to build assets, stabilize consumption and protect themselves against

risks. Thus, we see a broadening of the concept of micro finance--- our current challenge is to

find efficient and reliable ways of providing a richer menu of micro finance products. Micro

Finance is not merely extending credit, but extending credit to those who require most for

their and family’s survival. It cannot be measured in term of quantity, but due weightage to

quality measurement. How credit availed is used to survive and grow with limited means.

Concept and Features of Micro-finance:

1. It is a tool for empowerment of the poorest.

2. Delivery is normally through Self Help Groups (SHGs).

3. It is essentially for promoting self-employment, generally used for:

(a) Direct income generation

(b) Rearrangement of assets and liabilities for the household to participate in

future opportunities and

(c) Consumption smoothing.

4. It is not just a financing system, but a tool for social change, especially for women.

5. Because micro credit is aimed at the poorest, micro-finance lending technology needs

to mimic the informal lenders rather than the formal sector lending. It has to:

(a) Provide for seasonality

(b) Allow repayment flexibility

(c) Fix a ceiling on loan sizes.

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Microfinance approach is based on certain proven truths which are not always recognized.

These are:

1. That the poor are bankable; successful initiatives in micro finance demonstrate that

there need not be a tradeoff between reaching the poor and profitability - micro

finance constitutes a statement that the borrowers are not ‘weaker sections’ in need of

charity, but can be treated as responsible people on business terms for mutual profit .

2. That almost all poor households need to save, have the inherent capacity to save small

amounts regularly and are willing to save provided they are motivated and facilitated

to do so.

3. That easy access to credit is more important than cheap subsidized credit which

involves lengthy bureaucratic procedures - (some institutions in India are already

lending to groups or SHGs at higher rates - this may prevent the groups from enjoying

a sufficient margin and rapidly accumulating their own funds, but members continue

to borrow at these high rates, even those who can borrow individually from banks).

4. 'Peer pressure' in groups helps in improving recoveries.

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Who are the clients of micro finance?

The typical micro finance clients are low-income persons that do not have access to formal

financial institutions. Micro finance clients are typically self-employed, often household-

based entrepreneurs. In rural areas, they are usually small farmers and others who are

engaged in small income-generating activities such as food processing and petty trade. In

urban areas, micro finance activities are more diverse and include shopkeepers, service

providers, artisans, street vendors, etc. Micro finance clients are poor and vulnerable non-

poor who have a relatively unstable source of income.

Access to conventional formal financial institutions, for many reasons, is inversely related to

income: the poorer you are the less likely that you have access. On the other hand, the

chances are that, the poorer you are, the more expensive or onerous informal financial

arrangements. Moreover, informal arrangements may not suitably meet certain financial

service needs or may exclude you anyway. Individuals in this excluded and under-served

market segment are the clients of micro finance.

As we broaden the notion of the types of services micro finance encompasses, the potential

market of micro finance clients also expands. It depends on local conditions and political

climate, activeness of cooperatives, SHG & NGOs and support mechanism. For instance,

micro credit might have a far more limited market scope than say a more diversified range of

financial services, which includes various types of savings products, payment and remittance

services, and various insurance products. For example, many very poor farmers may not

really wish to borrow, but rather, would like a safer place to save the proceeds from their

harvest as these are consumed over several months by the requirements of daily living.

Central government in India has established a strong & extensive link between NABARD

(National Bank for Agriculture & Rural Development), State Cooperative Bank, District

Cooperative Banks, Primary Agriculture & Marketing Societies at national, state, district and

village level.

The Need in India:-

India is said to be the home of one third of the world’s poor; official estimates range

from 26 to 50 percent of the more than one billion population.

About 87 percent of the poorest households do not have access to credit.

The demand for microcredit has been estimated at up to $30 billion; the supply is less

than $2.2 billion combined by all involved in the sector.

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Due to the sheer size of the population living in poverty, India is strategically significant in

the global efforts to alleviate poverty and to achieve the Millennium Development Goal of

halving the world’s poverty by 2015. Microfinance has been present in India in one form or

another since the 1970s and is now widely accepted as an effective poverty alleviation

strategy. Over the last five years, the microfinance industry has achieved significant growth

in part due to the participation of commercial banks. Despite this growth, the poverty

situation in India continues to be challenging.

Some principles that summarize a century and a half of development practice were

encapsulated in 2004 by Consultative Group to Assist the Poor (CGAP) and endorsed by the

Group of Eight leaders at the G8 Summit on June 10, 2004:

Poor people need not just loans but also savings, insurance and money transfer

services.

Microfinance must be useful to poor households: helping them raise income, build up

assets and/or cushion themselves against external shocks.

“Microfinance can pay for itself. “Subsidies from donors and government are scarce

and uncertain, and so to reach large numbers of poor people, microfinance must pay

for itself.

Microfinance means building permanent local institutions.

Microfinance also means integrating the financial needs of poor people into a

country’s mainstream financial system.

“The job of government is to enable financial services, not to provide them.”

“Donor funds should complement private capital, not compete with it.”

“The key bottleneck is the shortage of strong institutions and managers.” Donors

should focus on capacity building.

Interest rate ceilings hurt poor people by preventing microfinance institutions from

covering their costs, which chokes off the supply of credit.

Microfinance institutions should measure and disclose their performance – both

financially and socially.

Microfinance can also be distinguished from charity. It is better to provide grants to families

who are destitute, or so poor they are unlikely to be able to generate the cash flow required to

repay a loan. This situation can occur for example, in a war zone or after a natural disaster.

Financial needs and Financial services:-

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In developing economies and particularly in the rural areas, many activities that would be

classified in the developed world as financial are not monetized: that is, money is not used to

carry them out. Almost by definition, poor people have very little money. But circumstances

often arise in their lives in which they need money or the things money can buy.

In Stuart Rutherford’s recent book The Poor and Their Money, he cites several types of

needs:

Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding,

widowhood, old age.

Personal Emergencies: such as sickness, injury, unemployment, theft, harassment or

death.

Disasters: such as fires, floods, cyclones and man-made events like war or bulldozing

of dwellings.

Investment Opportunities: expanding a business, buying land or equipment,

improving housing, securing a job (which often requires paying a large bribe), etc.

Poor people find creative and often collaborative ways to meet these needs, primarily through

creating and exchanging different forms of non-cash value. Common substitutes for cash vary

from country to country but typically include livestock, grains, jewellery and precious metals.

As Marguerite Robinson describes in The Microfinance Revolution, the 1980s demonstrated

that “microfinance could provide large-scale outreach profitably,” and in the 1990s,

“microfinance began to develop as an industry”. In the 2000s, the microfinance industry’s

objective is to satisfy the unmet demand on a much larger scale, and to play a role in reducing

poverty. While much progress has been made in developing a viable, commercial

microfinance sector in the last few decades, several issues remain that need to be addressed

before the industry will be able to satisfy massive worldwide demand.

The obstacles or challenges to building a sound commercial microfinance industry include:

Inappropriate donor subsidies

Poor regulation and supervision of deposit-taking MFIs

Few MFIs that mobilize savings

Limited management capacity in MFIs

Institutional inefficiencies

Need for more dissemination and adoption of rural, agricultural microfinance

methodologies

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Role of Microfinance:-

The micro credit of microfinance progamme was first initiated in the year 1976 in

Bangladesh with promise of providing credit to the poor without collateral , alleviating

poverty and unleashing human creativity and endeavor of the poor people. Microfinance

impact studies have demonstrated that

1. Microfinance helps poor households meet basic needs and protects them against risks.

2. The use of financial services by low-income households leads to improvements in

household economic welfare and enterprise stability and growth.

3. By supporting women’s economic participation, microfinance empowers women,

thereby promoting gender-equity and improving household well-being.

4. The level of impact relates to the length of time clients have had access to financial

services.

Strategic Policy Initiatives

Some of the most recent strategic policy initiatives in the area of Microfinance taken by the

government and regulatory bodies in India are:

Working group on credit to the poor through SHGs, NGOs, NABARD, 1995

The National Microfinance Taskforce, 1999

Working Group on Financial Flows to the Informal Sector (set up by PMO), 2002

Microfinance Development and Equity Fund, NABARD, 2005

Working group on Financing NBFCs by Banks- RBI

Activities in Microfinance

Microcredit: It is a small amount of money loaned to a client by a bank or other institution.

Microcredit can be offered, often without collateral, to an individual or through group

lending.

Micro savings: These are deposit services that allow one to save small amounts of money for

future use. Often without minimum balance requirements, these savings accounts allow

households to save in order to meet unexpected expenses and plan for future expenses.

Micro insurance: It is a system by which people, businesses and other organizations make a

payment to share risk. Access to insurance enables entrepreneurs to concentrate more on

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developing their businesses while mitigating other risks affecting property, health or the

ability to work.

Remittances: These are transfer of funds from people in one place to people in another,

usually across borders to family and friends. Compared with other sources of capital that can

fluctuate depending on the political or economic climate, remittances are a relatively steady

source of funds.

Legal Regulations

Banks in India are regulated and supervised by the Reserve Bank of India (RBI) under the

RBI Act of 1934, Banking Regulation Act, Regional Rural Banks Act, and the Cooperative

Societies Acts of the respective state governments for cooperative banks.

NBFCs are registered under the Companies Act, 1956 and are governed under the RBI Act.

There is no specific law catering to NGOs although they can be registered under the Societies

Registration Act, 1860, the Indian Trust Act, 1882, or the relevant state acts. There has been a

strong reliance on self-regulation for NGO MFIs and as this applies to NGO MFIs mobilizing

deposits from clients who also borrow. This tendency is a concern due to enforcement

problems that tend to arise with self-regulatory organizations. In January 2000, the RBI

essentially created a new legal form for providing microfinance services for NBFCs

registered under the Companies Act so that they are not subject to any capital or liquidity

requirements if they do not go into the deposit taking business. Absence of liquidity

requirements is concern to the safety of the sector.

SERVICES PROVIDED BY MICRO FINANCE BANK:

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So many services provide by MFI. Providing loans; car financing; home financing, personnel

loans, and education loans.

PROVIDING LOANS:

The important service is provided by Microfinace is to give loan. These loans are provided

from some productive activities like; starting new business, expansion of business; improving

life etc.

CAR FINANCING:

Microfinance also assist those people who cannot pay total amount at once. So, these

institutions provides them car on installments like UBL car financing scheme is too popular

and too many people taking advantage from this scheme.

HOME FINANCING:

Many of the people who can not purchase houses or are falling short of some money, these

aspects are well taken care by Microfinance institutions by providing them housing loans

.

PERSONAL LOANS:

Microfinance Institutions also provide personal loans for those people who have permanent

employment and stable jobs. This credit facility depends on the income of an individual.

EDUCATION LOANS:

Microfinance Institutions also provide financial aid to the students who cannot bare

educational expenses but want to study. MFI assist them in return of some security and it

would have to pay after completing the education.

MUDRA BANK

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MUDRA (Micro Unit Development and Refinance Agency) was launched by Prime Minister

Narendra Modi on 8th april 2015- one of the earliest scheme from the budget 2015. The

Initial corpus was set at 20000 crores where the initial refinancing rate was around 6.7%. The

corpus was to be used for four years.

Responsibilities of Mudra Bank

Laying down policy guidelines for micro/small enterprise finance business.

Registration and Regulation of MFI (Micro-Finance Institutions) entities.

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Accreditation/rating of MFI entities

To assist the lower income groups to develop and grow their small businesses.

To help in increasing the access of finance to the un-banked and to also bring down

the cost of finance.

To provide access to Institutional Finance for Small Business Units (SBU).

Laying down responsible financing practices to prevent over indebtedness, ensuring

client protection principles and methods of recovery.

Development of standardized covenants governing last mile lending to micro/small

enterprises.

Formulating and running a credit guarantee scheme for providing guarantees to the

loans which are being extended to micro-enterprises.

MUDRA bank will also be responsible for regulating and refinancing all micro-

finance institutions (MFIs) which are in the business of lending to micro or small

business entities engaged in manufacturing, trading and services activities.

To give priority to SC/ST enterprises in lending.

MUDRA PRODUCTS & OFFERINGS

Businesses or Entrepreneurs would include proprietorship or partnership firms running as

small manufacturing units, shopkeepers, fruits or vegetable sellers, hair cutting saloon, beauty

parlours, transporters, truck operators, hawkers, co-operatives or body of individuals, food

service units, repair shops, machine operators, small industries, artisans, food processors, self

help groups, professionals and service providers etc. in rural and urban areas with financing

requirements up to Rs.10 lakh. The primary product of MUDRA will refinance for lending to

micro businesses or units under the aegis of the Pradhan Mantri MUDRA Yojana. It has been

proposed to fund the units based on the stage of growth and funding needs of an entrepreneur

or a micro unit. The initial products and schemes have already been created and the

interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth

or development and funding needs of the beneficiary micro unit or entrepreneur as also

provides a growth for the entrepreneur to aspire for:

Shishu: covering loans up to Rs. 50,000 this is the first stage when the business is

just starting up.

Kishor: covering loans above Rs. 50,000/- and up to Rs. 5 lakh

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Tarun: covering loans above Rs. 5 lakh and up to Rs. 10 lakh

Apart from these products, the other products are initially being launched as

sector/activity specific schemes are like business activities in Land Transport,

Community, Social & Personal Services, Food Product and Textile Product sectors.

Schemes would similarly be added for other sectors / activities which are as follows:

Micro Credit Scheme (MCS)

Refinance Scheme for Regional Rural Banks (RRBs) / Scheduled Co-operative

Banks

Mahila Uddyami Scheme

Business Loan for Traders& Shopkeepers

Missing Middle Credit Scheme

Equipment Finance for Micro Units

CHAPTER-2

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REVIEW OF LITERATURE ON

MICROFINANCE

LITERATURE REVIEW

Ravi Puliani and Mahesh Puliani (2015) writes a book entitled “Manual of Non-Banking

Financial Companies” . The book discussed the glossary of terms that are used in banking

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operations and non-banking activities. The book covers the circulars and directions issued by

Reserve Bank of India from time to time to control, manage and regulate the business of

NBFCs.

Taxmann’s (2014) published “Statutory Guide for Non-Banking Financial Companies”

is published by Taxmann’s Publications, New Delhi. The book listed the laws relating to

Non-Banking Financial Companies. The rules and laws governing the kinds of businesses

undertaken by different types of NBFCs are also discussed. The book has also given

regulations on foreign exchange management, issue of certificates of deposits by NBFCs,

issue of commercial papers, foreign direct investments in NBFCs, etc.

Jafor Ali Akhan (2014) writes on “Non-Banking Financial Companies (NBFCs) in

India”. The book discussed the financial system in India. It covers the financial

intermediaries including commercial banks, regional rural banks, cooperative banks and Non-

Banking Financial Companies in India. The book is good source in getting information on

businesses, classification, management of assets, risk coverage, etc of the NBFCs in India.

Naresh Makhjani (2014) writes on “Non-Banking Finance Companies: Time to

Introspect” in ‘Analytique’ . Over the last few years the Non Banking Finance Companies

(NBFC) sector has gained significant advantages over the banking system in supplying credit

under-served and unbanked areas given their reach and niche business model. However, off

late the Reserve Bank of India has introduced and suggested various changes in the existing

regulatory norms governing NBFCs with a view to bring NBFCs regulations at par with the

banks. The ongoing and proposed regulatory changes for the NBFCs in terms of increased

capital adequacy, tougher provision norms, removal from priority sector status and changes in

securitization guidelines could bring down the profitability and growth of the NBFC sector.

NBFCs will need to introspect and rethink their business models as they will now not only

have to combat stringent regulatory norms but also have to face the challenge of rising cost of

funds, scare capital and direct competition from banks.

Shail Shakya (2014) published a working paper entitled “Regulation of Non-banking

Financial Companies in India: Some Visions & Revisions” . Non-Banking Financial

Companies constitute an important branch of the finance sector. They pioneer in their cash

deployment, accessibility to the markets and others to count. Tremendous progress during the

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1980s and 1990s was due to rigorous efforts of the NBFCs world over. These instances also

led to blurring dividing lines between banks and NBFCs with some privileges being reserved

for the commercial banks. NBFCs are known for their higher risk taking capacity than the

banks. Despite being an institution of attraction for the investors, NBFCs have played a

significant role in the financial system. Many specialized services such as factoring, venture

capital finance, and financing road transport were championed by these institutions. NBFC

sector has more significantly seen a fair degree of consolidation, leading to the emergence of

large companies with diversified activities. However, the recent financial crisis has

highlighted the importance of widening the focus of NBFC regulations to take particular

account of risks arising from the regulatory gaps, from arbitrage opportunities and from inter-

connectedness of various activities and entities associated with the financial system. The

regulatory regime is lighter and different than the banks. The steady increase in bank credit to

NBFCs over the recent years means that the possibility of risks being transferred from more

lightly regulated NBFC sector to the banking sector in India can’t be ruled out.

Bhargavi (2014) conducted a project on “A Study on Performance of NBFCs

Engaged in Leasing Business with Special Reference to Sundaram Finance Ltd,

Chennai” . The methodology includes index analysis on the comparative financial statement

of Sundaram Finance Ltd; common size analysis is well being used for better analysis of the

proportions. Ratio analysis of individual company separately as well as comparing them with

the industry average is used to do support the analysis. Some of the important financial ratios

were calculated for this purpose. The index method and time series analysis are used on the

financial statements of the Sundaram Finance Ltd in order to analyze the trend that is

followed during the past five years of the company. It was found from the analysis that all the

companies taken for consideration had been performing well except Tata Finance Ltd.

Though these companies had faced recession during the period 2000-01, they had revived or

in the revival stage currently. Even in such a situation the companies had recorded a better

performance because of the fact that they have diversified their activities. The main reasons

that had contributed to the downfall of leasing industry is that the capital intensive industry

which required huge plants and machineries are hit badly with recession affecting the

industry for consecutive fifth year. The other reason is that companies started to mobilize

funds through loans and capital issues for the purpose of procuring the assets required. The

availability of fund through foreign investments and other tie-ups with the MNCs help the

companies in doing the same.

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Ranjini (2013) conducted a project entitled “Market for Non-Banking Financial

Companies in India” . NBFCs in India are registered companies conducting business

activities similarly to regular banks. Their banking operations include making loans and

advances available to customers, acquisition of marketable securities, leasing of hard assets

like automobiles, hire purchase and insurance business. Though they are similar to banks,

they differ in a couple of ways, they cannot accept demand deposits, they cannot issue

cheques to customers and deposits with them are not insured by DGIC. Both RBI and SEBI

regulate NBFCs in India. NBFCs have been around in India for a long time, but have recently

gained popularity amongst institutional investors, since they facilitate the finance and loans

for rural and semi-rural areas where the traditional banks are still to reach. NBFCs have also

played a huge part in developing small businesses and infrastructure in India, through local

presence and strong customer relationships.

Madhvi Julka (2013) writes on “Conversion of NBFC’s in to Banks in Indian

Prospective” in ‘IOSR Journal of Business and Management’ . With growing pace of life

and shortage of time youths’ try to save each second. Their curiosity to have funds easily at

short notice to shape or give final touch to their ideas is also rising. So to raise the spanner of

raising funds raising means, the government has initiated the RBI draft guidelines as on

august 2010, which encloses the laws and regulations that would govern NBFC’s conversion

in to banks. The main motive behind this is the consolidation and the convergence of

financial systems globally. In this study the author has made an effort to know the perception

of the managers towards this suggestion. That whether this initiative would be a success or

failure. Abreast what should be the minimum capital requirements and lock in period for such

NBFC’s. The respondents (managerial cadre persons) for this are taken from both public and

private banks located in Jalandhar and Ludhiana locality of Punjab.

Viral V. Acharya, et al (2013) published a paper entitled “The Growth of a Shadow

Banking System in Emerging Markets: Evidence from India” in ‘Journal of

International Money and Finance’ . Here the authors studied the determinants of the

growth of those non-deposit taking non-bank financial corporations (NBFCs) which are

regarded by the Reserve Bank of India as being systemically important and have grown

substantially in India over the past decade. The authors document that bank lending to

NBFCs (i) forms a significant proportion of the NBFC liabilities; (ii) fluctuates in line with

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bank allocation to priority lending sectors; (iii) decreases as the banks expand in the rural

areas relative to urban areas; but, (iv) is virtually non-existent for the largest state-owned

bank, namely State Bank of India (SBI) and its affiliates which have significant rural branch

network. Starting with the financial crisis of Fall 2008, bank lending to NBFCs experienced a

permanent contraction shock related to the shift of term deposits toward SBI away from other

banks. These bank-NBFC linkages are present primarily for and affect the credit growth of,

those NBFCs that do loans or asset financing but not the investment companies. Overall, the

findings suggest that in contrast to the prevailing views of shadow banking in the Western

economies, lending to NBFCs in India is viewed by banks as a substitute for direct lending in

the non-urban areas of the Indian economy, but this substitution is constrained by distortions

in bank deposit flows due to the perceived differential government support of different

banking groups.

Sohrab Uddin and Anupam Das Gupta (2013) published on “Concentration and

Competition in the Non-Banking S ector: Evidence from Bangladesh” in ‘Global

Journal of Management and Business Research’ . The development of non-banking

financial institution as a financial intermediary complementary to commercial bank is

noticeable not only in developed countries but also in developing countries and Bangladesh is

no exception. Started in 1981, the size of the non-banking sector has been increased in both

absolute and relative terms. However, the research on the sector remains substantially

insignificant. Most importantly, analysis of the market structure of the non-banking industry

has been a lacking in the available existing literature. Keeping this in mind, the paper aims at

addressing the market structure of the sector and its change over time by adopting

concentration and competition measures based on asset and loan figures with a sample period

of 14 years from 1997-2010. The findings report a highly concentrated market in 1997 and

over the years there has been a considerable reduction in concentration, which means an

increase of competition during the sample period.

The paper entitled “Development Impact of Non-Bank Financial Intermediaries on

Economic Growth in Malaysia: An Empirical Investigation” published in ‘International

Journal of Business and Social Sciences’ by Mohd. Aminul Islam and Jamil bin Osman

(2012) aims to empirically examine the development impact of Non-Bank Financial

24

Intermediaries on economic growth in Malaysia using time series data over the period

spanning 1974 to 2012. The study employs bounds testing approach to co-integration and

error correction mechanism to investigate the existence of a long run equilibrium relationship

between NBFIs and economic growth. The study finds evidence of a long run co-integrating

relationship between NBFIs and real per capita income. The empirical results indicate that the

development of NBFIs positively and significantly influences per capita income in Malaysia.

In addition, the CUSUM and CUSUMSQ tests confirm the stability of the model.

Shailendra Bhushan Sharma and Lokesh Goel (2012) write on “Functioning and

Reforms in Non-Banking Financial C ompanies in India” . Non-Banking Financial

Companies do offer all sorts of banking services, such as loans and credit facilities,

retirement planning, money markets, underwriting and merger activites. The number of non-

banking financial companies has expanded greatly in the last several years as venture capital

companies, retail and industrial companies have entered the lending business. These

companies play an important role in providing credit to the unorganized sector and to the

small borrowers at the local level. Hire purchase finance is by far the largest activity of

NBFCs. NBFCs have been the subject of focused attention since the early 1990s. The rapid

growth of NBFCs has led to a gradual blurring of dividing lines between banks and NBFCs,

with the exception of the exclusive privilege that commercial banks exercise in the issuance

of cheques. NBFCs are widely dispersed across the country and their management exhibits

varied degrees of professionalism. Furthermore, the depositors have varied degrees of

perceptions regarding safety of their deposits while making an investment decision. This

paper provides an exhaustive account of the functioning of and recent reforms pertaining to

NBFCs in India.

Subina Syal and Menka Goswami (2012) writes on “Financial Evaluation of Non-

Banking Financial Institutions: An Insight” in ‘Indian Journal of Applied Research’

. The Indian financial system consists of the various financial institutions, financial

instruments and the financial markets that facilitate and ensure effective channelization of

payment and credit of funds from the potential investors of the economy. Non-banking

financial institutions in India are one of the major stakeholders of financial system and cater

to the diversified needs by providing specialized financial services like investment advisory,

leasing, asset management, etc. Non-banking financial sector in India has been a considerable

25

growth in the recent years. The aim of the present study is to analyze the financial

performance and growth of non-banking financial institutions in India in the last 5 years. The

study is helpful for the potential investors to get the knowledge about the financial

performance of the non-banking financial institutions and be helpful in taking effective long-

term investment decisions.

Md. Nehal Ahmed and Mainul Islam Chowdhury (2011) published working paper

entitled “Non-Bank Financial Institutions in Bangladesh: An Analytical Review” . Non-

Banking Financial Institutions (NBFIs) in Bangladesh are gaining increased popularity in

recent times. Though the major business of most NBFIs is leasing some are also diversifying

into other lines of business like term lending, housing finance, merchant banking, equity

financing and venture capital financing. The purpose of this paper is to highlight different

features of NBFIs, their contribution to the overall economy and the product base of NBFIs.

The paper describes the performance of NBFIs as measured by different financial indicators,

along with the effects of banks’ entry into the non-bank financing area. Special emphasis has

been given to identify the challenges faced by NBFIs in Bangladesh and finally, development

of NBFIs as well as their role in strengthening the financial system of Bangladesh has been

discussed. It is found that despite several constraints, the industry as a whole is performing

reasonably well. Given appropriate support, NBFIs will be able to play a more significant

role in financial intermediation.

Md. Mosharref Hossain and Md. Mahabbat Hossain (2011) writes on “Cost of

Funds of Non-Bank Financial Institutions in Bangladesh: Internal Factors Analysis”

in ‘Asian Business Review’ . Non-Bank Financial Institutions (NBFIs) are increasingly

being recognized as complementary to the banking system and perform a diversified range of

functions through offering various financial services to individual, corporate and institutional

clients. Nevertheless, the cost of funds of NBFIs is significantly higher than the banks as

banks are the prime sources of funds for them. On the other hand, the availability of funds

from banks is becoming inadequate day by day due to involvement of banks with some

similar functions of NBFIs. The study intended to to identify the current scenario of the cost

of funds of different groups of NBFIs and to find out the causal relationship of the internal

factors with the cost of funds of NBFIs. The study finds that NBFIs established before 1990

shows higher equity contribution and total asset size which shows their ability to generate

funds at low cost for the reputation and public confidence. On the other hand, due to the high

26

equity contribution, large asset size and high EPS of the group of joint venture NBFIs

compared to local NBFIs are able to raise relatively low cost of funds. From the multiple

regressions analysis current study finds that only the variables of age and earning per share

are statistically significant at 5% level. The other two factors, equity contribution and interest

earning asset conform the theoretical sign although they are not statistically significant. The

other variable, size of business that is measured by total asset, neither conform the expected

sign nor is statistically significant.

Kapoor and Vinita Mittal (2011) writes on “Globalization, Growth, Impact and

Development of Micro Finance Institution in India” in ‘International Journal of

Business Economics & Management Research’ . While financial services in India can be

traced to the era of Kautilya in the fourth century BC the age of organized sector finance in

India is generally acknowledged to have started with the Cooperative Credit Societies Act of

1904. The cooperative credit societies were based on the models of the German cooperative

movement, in particular the Raiffeisen and the Schulze-Delitsch cooperatives. The objective

of the Act was “to facilitate promotion o f cooperative societies, for the promotion of thrift

and self-help among agriculturists, artisans and persons of limited means.” To the extent that

the wording of this objective could be applied to the objects of many MFIs today, this Act is

a true precursor to modern microfinance in the country. The true expansion of financial

services in India started with the nationalization of all banks in the country during the late

1960s. This was reinforced with the establishment of Regional Rural Banks (RRBs) in 1976

and directed credit became the mantra of the Indian financial sector. In the meantime, the

cooperative sector infrastructure had developed through the creation of an apex banking

structure at the district and state levels to ensure the smooth flow of capital in the cooperative

system. Yet, the entire network of primary co-operatives in the country and the RRBs,

established to meet the needs of the rural sector in general and the poor in particular, has not

proved to be successful. The cooperatives suffered from mismanagement, leadership by the

privileged, and corruption and were gradually smothered by state patronage and protection, in

many cases including management by ill-motivated government-appointed persons. This

article aims on the analysis of micro finance institutions in the development of Indian

Economy in global perspective

Suresh Vadde (2011) published on “Performance of Non- BankingFinancial

27

Companies in India: An Evaluation” in ‘Researchers World’ . Non-banking

financial and investment companies operate as an important adjunct to the banking sector in

financial intermediation. They provide support to the capital market through investment

holding, share trading and merchant banking activities, to the credit market through short and

medium-term loans and also help in acquiring long-term assets through lease and hire

purchase activities. This article analyses the performance of non-government financial and

investment companies (other than banking, insurance and chit-fund companies) during the

year 2008-09. The study is based on the audited annual accounts of 1,215 companies, which

closed their accounts during the period April 2008 to March 2009. The segment of financial

and investment companies in the private corporate sector is highly skewed. The presence of a

large sized company, viz., Housing Development Finance Corporation (HDFC) Limited in

the study would exert considerable influence on the overall performance of the companies in

this group in terms of various quantitative measures. In view of such marked skewness in the

size structure, the analysis presented in the article excludes results of HDFC. Further, it is

observed that the results of three other companies are in large variance with the remaining

companies and accordingly these companies are also kept outside the scope of the study.

Thus, the present analysis is confined to 1,211 companies. However, the data on all the select

1,215 companies including HDFC and other three outlier companies are separately presented.

The study also presents comparable data for the preceding two years 2006-07 and 2007-08

for the same set of companies, based on the analysis of their accounts for the respective years.

Qun Gao (2010) writes on “Study on the Transfer Payment Policy about the Low-

Income Housing in China” in ‘International Journal of Economics and Finance’ . The

current low-income housing system in China is the security system giving priority to the low-

rent housing and the economically affordable housing. The housing security system includes

the systems and measures that the government uses the national and social power to provide

the basic housing for those difficult housing groups by the transfer payment policy and

realize the equalization of the public service in the domain of real estate.

Tajul Ariffin Masron and Hassan Gholipour Fereidouni (2010)

published a paper entitled “Performance and Diversification Benefits of housing

Investment in Iran” in ‘International Journal of Economics and Finance’ . The objective

of this study is to examine the effectiveness of housing as an investment instrument in Iran.

In this paper, the performance and diversification benefits of housing over 1993-2008 are

28

examined. Risk-to- reward ratio is used to assess the risk-adjusted performance of housing

and other financial assets (stocks, gold coin and US dollar). Correlation analysis is also used

to examine the portfolio diversification benefits of housing. Additionally, the relationship

between housing performance and inflation is investigated. The results show that housing is

an effective property investment vehicle as it delivers the lowest risk-to-reward ratio when

compared with three major assets over this study period. In addition, the results suggest that

adding housing in properties can provide more diversification benefits. Moreover, housing

returns exceed the rate of inflation and also there is a positive and significant relationship

between housing returns and the rate of inflation. This study has some implications for

Iranian investors who seek to include housing in their portfolio

Andrew C. Worthington (2010) writes on “The Determinants of Non-Banking

Financial Institution Efficiency: A Stochastic Cost Frontier Approach” in ‘Applied

Financial Economics’ . A two-stage estimation procedure is employed to evaluate non-bank

financial institution efficiency. In the first stage, maximum-likelihood estimates of an

econometric cost function are obtained for a cross-section of one hundred and fifty Australian

credit unions. The results indicate that a typical credit union’s costs in 2009 were only some

seven percent above what could be considered efficient. The second stage uses limited

dependent variable regression techniques to relate credit union efficiency scores to structural

and institutional considerations. The results indicate that non-core commercial activities are

not a significant influence on the level of cost inefficiency, though asset size, capital

adequacy regulation and branch and agency networks are. A primary influence on credit

union efficiency would appear to be the industrial or community associational bond under

which they were created and to a lesser the state-based regulatory framework.

Xiaoqiang Cheng and Hans Degryse (2009) published a paper entitled “The Impact of

Bank and Non-Bank Financial Institutions on Local Economic Growth in China” in

‘Journal of Financial Services Research’ . The paper provides evidence on the

relationship between finance and growth in a fast growing country, such as China.

Employing data of 27 Chinese provinces over the period 1995-2009, the authors study

whether the financial development of two different types of financial institutions- banks and

non-banks- have a (significantly different) impact on local economic growth. The findings

indicate that banking development shows a statistically significant and economically more

29

pronounced impact on local economic growth.

Sibghatullah Nasir (2008) published on “Microfinance in India: Contemporary Issues

and Challenges” in ‘Middle-East Journal of Scientific Research’. Microfinance refers to

small savings, credit and insurance services extended to socially and economically

disadvantaged segments of society. It is emerging as a powerful tool for poverty alleviation in

India. This working paper tries to outline the prevailing condition of the Microfinance in

India in the light of its emergence till now. The prospect of Micro-Finance is dominated by

SHGs (Self Help Groups) - Banks linkage Program. Its main aim is to provide a cost effective

mechanism for providing financial services to the poor. Recently Union Rural Development

Minister Jairam Ramesh wanted the help of SHGs for the establishment of DRDO designed

bio-toilets in rural areas. This paper discovers the prevailing gap in functioning of MFIs such

as practices in credit delivery, lack of product diversification, customer overlapping and

duplications, consumption and individual loan demand with lack of mitigation measures, less

thrust on enterprise loans, collection of savings/loans and highest interest rate existing in

micro finance sector. All these are clear syndromes, which tell us that the situation is moving

without any direction. Finally paper concludes with practicable suggestions to overcome the

issues and challenges associated with microfinance in India.

Vijayakumar and Jayachitra (2007) published a paper entitled “Shadow banking in

India: Features and Progress” in ‘ZENITH International Journal of Business

Economics & Management Research’ . The global developments in the context of

financial crisis shook the entire world, and the consequent overhaul of the regulatory

framework. Both the regular banking system and the shadow banking system have come

under greater regulatory focus on account of gaps in the respective regulatory frameworks

and also, most importantly, on account of inter-linkages between both the systems. The

shadow banking system that had burgeoned in the run up to the global financial crisis was

one of the major causes of the global turmoil and quite understandably, the regulators are

revamping its regulation to ensure financial stability. This paper focuses on the conceptual

framework of shadow banking, the recent guidelines issued by Reserve Bank of India based

on the recommendations of the Working Group on NBFCs, the global shadow banking sector

along with the recent international initiatives in the regulation of the sector, trace the genesis

and development of the NBFC sector in India as well as the evolution of its regulatory

30

framework and finally the thought process which led to the setting up of the Working Group.

Dash Saroj K, et al (2007) writes on “Housing Loan Disbursement in India:

Suggestive Metrics to Prevent Bad Debts” in ‘International Journal of Management, IT

and Engineering’ . One of the most important factors in credit processing is to understand

the need of the customer before actually processing of the loan. This is true for every kind of

loan. Since the point of discussion of this paper is only of housing loan, we would adopt a

perspective towards this type of loan only. The sub prime crisis in the United States has

shown the entire world the fallout, which the mortgage market can create when the lending

goes wrong. It has thus become imperative for each and every country to review their policies

towards the same. Taking a leaf further, each and every company, be it a Non-Banking

Financial corporation (NBFC) or a bank in each of the countries involved in the business of

lending mortgage loans also took stock of their policies and terms & conditions. Critics and

some experts might argue that given the technologically advanced systems in place to do

credit scoring, it is enough to have certain set of quantitative parameters to do a check. The

parameters, which are discussed in the credit scoring software, are primarily quantitative

parameters and some qualitative features whose measurements are also quantified. However

certain subjective parameters also are required to gauge the complete credentials of the

individual (or the set of individuals) applying the said loan. Given the fallout that the world

just saw, it is imperative that these qualitative points should also be taken into consideration

while doing the analysis. Needless to say, the subjective parameters can surely be used to

strengthen the objective parameters.

Thilakam and Saravanan (2006) writes on “CAMEL Analysis of NBFCs in Tamil Nadu”

in ‘International Journal of Business and Administration Research Review’ . Financial

intermediation is a crucial function of Banks, Non Banking financial companies (NBFCs) and

Development Financial Institutions (DFIs) the post reform period in India is characterized by

phenomenal growth of NBFCs complementing the role of banks in mobilizing funds and

making it available for investment purposes. During the last decade NBFCs have undergone

wide volatility and change as an industry and have been witnessing considerable business

upheaval over the last decade because of market dynamics, public sentiments and regulatory

environment. To evaluate the soundness of NBFCs in Tamil Nadu over a decade, the authors

made an attempt of CAMEL criteria for analysis of selected Companies. For this purpose, out

of 36 NBFCs in Tamil Nadu 4 Government Companies, 13 Small Companies and 13 Small

31

Companies and another 13 Top Companies were selected as sample respondents on the basis

of multi-stage random sampling, To evaluate soundness of each NBFCs through Capital

Adequacy, Asset Quality, Management quality, Earnings and Liquidity, Based on findings

the suggestions were offered to overcome the difficulties face by selected NBFCs in their

development.

Sornaganesh and Maria Navis Soris (2005) published on “A Fundamental Analysis of

NBFCs in India” in ‘Outreach’ . The study was made to analyze the performance of five

NBFCs in India. The annual reports of these companies are evaluated so as to ascertain

investments, loans disbursed, growth, return, risk, etc. To sum up, the study is concluded that

the NBFCs are earning good margins on all the loans and their financial efficiency is good.

Shariq Nisar and Mohsin Aziz (2004) presented a paper entitled “Islamic Non Banking

Financial Institutions in Indi a: Special Focus on Regulation” . Indian Muslims have

always been trying to manage their economic affairs within the framework of Shariah. This

paper aims to highlight the attempts made by Indian Muslims in this regard and how some of

the later developments since mid eighties affected their functioning. The paper focuses on

how the period of late 1980s and early 1990s saw the proliferation of Non Banking Finance

Companies (NBFCs) in India and the subsequent failures of a large number of finance

companies caused by the depressed economic scenario in early 1990s and the highly

changing regulatory environment in the late 1990s. Some prominent Islamic NBFCs of India

are taken for detailed case studies.

.

CHAPTER-3

RESEARCH METHODOLOGY32

Introduction to Research Methodology

This chapter focuses on the methodology & the techniques used for the collection,

classification & tabulation of data. It puts light on the research problem, the objective of

study & its limitaions.

33

OBJECTIVES OF THE STUDY:

To study the impact of micro finance in empowering the social and economic status of

women and developing of social entrepreneurship.

To know about the percentage of loans disbursed across different regions.

To clarify the limitation of microfinance programmes as the tool for women’s

empowerment and the type of support service necessary to maximize the contribution

of microfinance service.

To study about the performance of MUDRA banks in providing credit.

To know about the actual number of skill development programmes and the total

number of clients covered.

To know about SHGs penetration into different region.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the problem. It is a game plan for

conducting research. In this we describe various steps that are taken by the researcher.

“All progress is born of inquiry. Doubt is often better than overconfidence, for it leads to

inquiry and inquiry leads to invention.”

Research in a common parlance is a search for knowledge. Research is an art of scientific and

systematic investigation. Thus research comprises defining and redefining problems,

formulating hypothesis or suggested solutions; collecting, organizing and evaluating data,

making deductions and reaching conclusions. Research methodology is the arrangement of

condition for collection and analysis of data in a manner that aims to combine relevance to

the research purpose with economy in procedure. Research Methodology is the conceptual

structure within which research is conducted. It constitutes the blueprint for the collection

measurement and analysis of the data.

Research methodology is a framework for the study and is used as a guide in collecting and

analyzing the data. It is a strategy specifying which approach will be used for gathering and

analyzing the data. it also includes time and cost budget since most studies are done under

these two constraints. The research methodology includes overall research design, the

sampling procedure, the data collection method and analysis procedure.

34

PRIMARY DATA

SECONDRY DATA

TYPES OF DATA

OBSERVATION METHOD

QUETIONAIRE METHOD

INTERVIEW METHIOD

SCHEDULE METHOD

PRIMARY DATpA

METHOD OF DATA COLLECTION

After the research problem has been identified and selected the next step is to gather the

requisite data. While deciding about the method of data collection to be used for the

researcher should keep in mind two types of data i.e. primary and secondary.

Figure 3.1

Primary Data

The primary data are those, which are collected afresh and for the first time, and thus

happened to be original in character. We can obtain primary data either through observation

or through direct communication with respondent in one form or another or through personal

interview.

Figure 3.2

Secondary Data

The secondary data on the other hand, are those which have already been collected by

someone else and which have already been passed through the statistical processes. When the

researcher utilizes secondary data then he has to look into various sources from where he can

obtain them. For e.g. books, magazine, newspaper, internet, publications and reports.

35

PRIMARY DATA

TYPE OF RESEARCH USED:-

Descriptive Research

In the study descriptive research design has been used. As descriptive research design is the

description of state of affairs, as it exists at present. In this type of research the researcher has

no control over the variables; he can only report what has happened or what is happening

Descriptive research designs are those design which are concerned with describing the

characteristics of particular individual or of the group. In descriptive and diagnostic study the

researcher must be able to define clearly what he wants to measure and must find adequate

method for measuring it.

.In this study data have been taken fromvarious secondary sources like:

Internet:- Websites such as Wikipedia.com, grameen-info.org, rbi.org.in, investopedia

etc proved to be immense help to acquire valuable information about Microfinance.

Books :- Books such as The Microfinance Revolution : An overview by Sengupta,

Rajdeep, Pathways out of Peverty : Innivations in Microfinance for the Poorest

Families by Sam Daley- Harris, The Microfinance Revolution by Marguerite S.

Robinson, Housing Microfinance : A Guide to Practice by Franck Daphnis; Bruce

Ferguson, etc are some to mention out of the rest.

Magazines,Newspapers & Journals also played an important role to give exact data

and information regarding the above mentioned topic.

CHAPTER- 4

RESULTS OF DATA

36

ANALYSIS

DATA ANALYSIS & INTERPRETATION OF DATA

Objective 1:-To study the impact of micro finance in empowering the social economic status

of women and developing of social entrepreneurship.

Table 4.1: Total No. of Loans disbursed

Number in Lakhs

37

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15

Total SHGS 69.53 74.62 79.60 73.18 74.30

All Women SHGs 53.10 60.98 62.99 59.38 62.52

% of Women

Group

79.5 81.7 79.1 81.1 84.15

Table 4.1 indicates the total numbers of applicants to whom loans were disbursed in SHGs.

During 2010-11 total number of loans disbursed were 69.53 lakhs out of which women SHGs

constituted 79.5% of the total loan i.e 53.10.In 2011-12, it was 60.98 lakhs out of 74.62 lakhs

and the percentage allocation to women were 81.7 %. In 2012-13, it was 62.99 lakhs out of

79.60 lakhs and the percentage stood out to be 79.1%. In 2013-14, it was 59.38 lakhs out of

73.18 lakhs and the percentage was 81.1%. But in the last year i.e 2014-15 the numbers were

slightly different from the past years. The total numbers of loan disbursed were 74.30 lakhs

out of which women SHGs accounted for 62.52 lakhs and the percentage was 84.15 % ,

higher than the previous years.

From the table we can conclude that there is an immense increase of numbers in Women

SHGS due to the fact that nowadays most of the women are applying for these loans so as to

empower themselves for a better future.

.

Total SHGs All Women SHGs0

10

20

30

40

50

60

70

80

90

2010-112011-122012-132013-142014-15Am

ount

in La

khs

Figure 4.1

38

Total number of SHGs who availed Microfinance services

Table 4.2: Total Amount of loans disbursed

Amount in CroresParticulars 2010-11) 2011-12 2012-13 2013-14 2014-15

Total SHGs 6198.71 7016.30 6551.41 8217.25 9897.42

All women SHGs 4498.66 5298.65 5104.33 6514.86 8012.89

% of Women SHGs 72.6 75.5 77.9 79.3 80.96

Table 4.2 Indicates that the amount of loans getting disbursed from the period of 2010- 2015.

In 2010 6198.71 crores were disbursed and Women SHGs received 4498.66 crores and the

percentage of Women SHGs stood out to be at 72.6%. In 2011-12 7016.30 crores were

distributed to all the SHGs out of which 5298.65 crores were distributed to Women SHGs

and the percentage was 75.5%. In 2012-13 , 6551.41 crores loans were disbursed out of

which Women SHGs availed 5104.33 crores and the percentage was 77.9%. In 2013-14,

8217.25 crores loans were disbursed and women SHGs got 6514.86 crores and the percentage

was 79.3 %. But in 2014-15, there was marginal increase in the amount of loans being

disbursed. The amount was 9897.42 crores out of which Women SHGs availed 8012.89

crores and the % of Women SHGs was 80.96 5. So we can conclude women SHGs are

trustworthy and initiate timely repayment of loans that is why there is an increase in the

disbursment of loans over the years. Table 4.2 shows the relationship of Total SHGs and all

Women SHGs.

39

Total SHGs All Women SHGs0

2000

4000

6000

8000

10000

12000

2010-112011-122012-132013-142014-15

Amou

nt in

Cro

res

Figure 4.2Total Amount of loans disbursed

Objective 2:-To know about percentage of loans disbursed across different region.

Table 4.3: Disbursement of Loans across different regions

Amount in CroresNorthern North Eastern Central Western Southern

40

Region Eastern

Region

Region Region Region Region

During 2013-14 186.56 201.05 694.72 394.04 241.65 2837.54

During 2014-15 353.62 291.45 1277.93 709.17 426.41 3717.15

% increase in

regionwise Loan

disbursement

89.54 % 44.96 % 83.94 % 79.93 % 76.45 % 30.99 %

Table 4.3 shows the amount of loan disbursed to different regions across India. We can

clearly conclude from the table that Southern region has the highest amount of disbursements

as the demand of loans were quite high during 2013-14 but the percentage increase stands to

just 30.99 % which is the lowest of the group. Northern region has a substantial increase in

the disbursement in loans in 2014-15 as compared to 2013-14. Figure 4.3 shows the graphical

representation of comparison of loans being disbursed in the past 2 years of different regions.

During 2013-14 During 2014-150

500

1000

1500

2000

2500

3000

3500

4000

Northern regionNorth Eastern regionEastern regionCentral regionWestern regionSouthern region

Figure 4.3Disbursement of Loans across different regions

41

Objective 3:- To clarify the limitation of microfinance programmes as the tool for

women’s empowerment and the type of support service necessary to maximize the

contribution of microfinance service.

Source :- IFC/World bank (2007) research.

42

Figure 4.4Perceptions of Areas of Difficulties as a Woman

CHALLENGES FACED BY THE WOMEN ENTREPRENEURS

Challenges are faced by the women entrepreneurs due to many reasons. Some of the

challenges faced by the women entrepreneurs include-

Intense competition from similar products, limited knowledge, production and quality

standards as well as low confidence and morale.

Many women started their own business due to the adverse circumstances, such as

loss of spouses, divorce or financial hardship.

Lack of follow up and holding support (i.e. Capital, market linkages, technical

information and marketing techniques) after receiving Entrepreneurship development

training.

A risk averse mindset.

Inadequate capital.

Networking problem (i.e. with raw supplier to buyer of products)

Insufficient management and marketing skills.

Low level of motivation and courage.

Lack of support from male members (of the families) as well as banks

Large magnitude of the target group of poor people.

Attitudinal rigidities.

Difficulty in creating awareness among people.

Limited resources with the NGOs.

Large requirements of training and sensitization of issues.

Limited number of experienced intervention agencies.

Diversities of situations due to wide coverage.

OVERCOMING THE CHALLENGES

The challenges faced by the women entrepreneurs can be overcome with the help of the

following measures-

43

Creating the Importance of Entrepreneurship program and skills training, and MF and

support under single roof.

Training programme operating in several states helped NGOS-MFIs provide their

microfinance clients different set of skills for successfully running enterprises.

Provide micro credit for livelihood support and to micro enterprises development.

Encouraging women entrepreneur to utilize the loans for productive purposes and

have the potential to become entrepreneur.

Establishing a network of SHG to serve as a “self-help community” for micro

enterprises development activities.

Social recognition of women leading an enterprise.

Developing female mentors, trainers and advisors.

Establishing sources of credit.

Objective 4 :- Performance of MUDRA Banks in providing Credit

(cumulative data from April 8 to October 8, 2015)

Table 4.4: Number of Borrowers & Disbursement (In crores) under Pradhan Mantri

Mudra Yojana as on October 8, 2015

No. of Borrowers Disbursment in Rs.(crores)

SBI & Associates (6) 1,89,752 2,741.96

Public sector banks (21) 20,44,366 11,486.46

Private sector banks (13) 1402715 7,531.43

Foreign banks (2) 253 10.58

Regional Rural banks (56) 531108 4,358.35

Total 4168194 26,128.78

As of 8th October 2015, Public sector was in the lead position with 21 banks with the total

number of depositors were 20,44,366 and disbursments was done by them stands close to

11,486.46.

44

On the other side, the least banks to take part in Mudra yojna were Foreign Banks where only

2 Banks were providing the credit and the number of borrowers were 253 and total

disbursments made by them were 10.58 crores.This shows the reliability and trust people

have towards Public sector banks to avail credit.

State wise Data ( data till january 15)

As of Januray 15 2016 , banks have disbursed Rs. 81,004 crores under the Pradhan Mantri

Mudra Yojana, benefiting more than 2 crores micro and small entreprenuers with Karnataka,

Maharashtra , Tamil Nadu, Bihar and West Bengal accounting for 43 % of loans made

available through this scheme.

Table 4.5: Disbursement of Loans to different states of India by Banks Under MUDRA yojna as on January 15, 2016

Amount in crores

Karnataka 9626.89

Maharashtra 8382.94

Tamil Nadu 7835.67

Bihar 4705.79

West Bengal 4413.66

Other States 46039

The data clearly reveals that the southern states of Karnataka, Tamil Nadu, Maharashtra,

Andhra Pradesh and Kerala have been able to create an entrepreneur-friendly system. West

Bengal and Rajasthan have also set up structures to nurture startups by launching incubation

centres and funding support. The “Startup India, Stand Up India” scheme can play a big role

in extending start-up culture across the country by promoting the required blend of suitable

policies, access to finance, incubation and an inclusive ecosystem.

Figure 4.5 showing the graphical representations of disbursements to various states under the

mudra scheme.

45

Amount (In crores)

KarnatakaMaharashtraTamil NaduBiharWest BengalOther States

9626.89

8382.94

7835.67

4705.79

4413.66

46039

Figure 4.5Disbursement of Loans to different states of India by Banks under MUDRA Yojna

Objective 5 :- To know about the actual number of skill development training

programmes and the total number of clients covered.

Table 4.6: Number of skill development training programmes and total number of

clients covered

Particulars 2008-09 2009--10 2010-11 2011-12 2012-13 2013-14 2014-15

Number of skill

development

programmes

conducted

428 879 1530 1958 1914 2059 1638

Number of

SHGs clients

covered

9741 19220 38313 60160 56292 52875 50059

From the table 4.6 , we can conclude that there is a substantial increase in the skill

development programmes from 2008 but there has been slight reduction in the year 2014-15

as compared to 2013-14 but overall performance of the skill development programme is

good.

46

Nearly 10,600 skill upgradation training programmes have been conducted under this

initiatives covering about 2.91 lakh members of matured SHGs up to 31st March, 2015.

Figure 4.6 shows the graphical relationship between Number of skill development

programmes and Number of SHGs clients covered.

Figure 4.6

Relationship between number of skill development trainings conducted and number of

SHGs clients covered

Source – Nabard Microfinance report 2015

47

Objective 6 :- To know abot SHGs penetration into different regions.

Region-wise analysis shows that Southern Region with 11679 savings linked SHGs per lakh

BPL population is well above the rest, the lowest being the Central Region with 724 SHGs.

The corresponding figures of credit linked SHGs are 7018 and 443. The skewness in the

penetration of SHGs is quite evident as shown in Fig. 4.7

Figure 4.7

Penetration of SHG in different regions of India

Source – Nabard Microfinance report 2015

48

Intra region penetration – Northern Region

Himachal Pradesh has very high penetration compared to all states in the region (6732 SHGs

savings linked per lakh BPL population) while Jammu & Kashmir the lowest at 66 SHGs

only. Rajasthan with 2500 SHGs is the second most SHG covered state in the region. Figure

4.8 shows the SHGs penatration – Northern Region.

Figure 4.8

SHG Penetration in Northern Region

Source – Nabard Microfinance report 2015

49

Intra region Penetration- North Eastern Region

States like Assam, Meghalaya and Tripura top among the states. While Assam has reported

2817 SHGs Savings linked per lakh BPL population, Mizoram is at the lowest with only 92

SHGs. NE States have also lesser number of SHGs credit linked compared to SHGs savings

linked when compared to other regions. Fig 4.9 shows the SHG penetration in the North

eastern region.

Figure 4.9

SHG Penetration in North Eastern Region

Source – Nabard Microfinance report 2015

50

Intra Region SHG penetration - Eastern Region

While Odisha has more number of savings linked SHGs(3735 SHGs) followed by West

Bengal (3197 groups), it has less number of SHGs credit linked (1801 as compared 2555 in

West Bengal). Bihar has 750 Savings linked SHGs per lakh BPL population, while Jharkhand

has the lowest at 695 SHGs.

Figure 4.10

Penetration of SHG in Estern Region

Source – Nabard Microfinance report 2015

51

Intra Region SHG penetration – Central Region

The most significant Central Region, is the least penetrated region in the country with the two

most populated States – Madhya Pradesh and Uttar Pradesh – reporting less than 700 Savings

linked SHGs per lakh BPL population while another resource poor state – Chattisgarh

reporting a little over 1000 SHGs. Only Uttarakhand has a higher density of over 3000 SHGs

in the region.

Figure 4.11

Penetration of SHG in Central Region

Source – Nabard Microfinance report 2015

52

Intra Region SHG penetration – Western Region

Except for the urbanized State of Goa, the penetration of savings linked SHGs in Western

Region is only moderate with Maharashtra with about 3500 SHGs and Gujarat only 2000

SHGs. The credit linkage is also very low in this region with hardly 30% of savings linked

SHGs accessing credit from banks.

Figure 4.11

Penetration of SHG in Western Region

53

Source – Nabard Microfinance report 2015

Intra Region SHG penetration – Southern Region

The Southern Region, which has the highest penetration of SHGs accounting for over 50% of

all SHGs organized under SHG-BLP, too shows wide variations. Although Kerala with over

25000 Savings linked SHGs per lakh BPL population tops the states, it has less penetration in

the number of credit linked SHGs (less than 5000) while Andhra Pradesh having nearly

18000 SHGs per lakh BPL population boasts of credit linkage of over 16500 SHGs.

Karnataka, though, was the pioneer state under the SHG-BLP when the programme started

over two decades back, is the lowest in terms of linkages with only 5500 SHGs per lakh BPL

population.

54

Figure 4.11

Penetration of SHG in Southern Region

Source – Nabard Microfinance report 2015

CHAPTER -5

MAIN FINDINGS

AND

CONCLUSION

55

56

FINDINGS

Micro financial institutions play a very important role today to provide the micro

finance to the small enterpreneur and . Mostly MFI provide the assistance to the these

people through MFI- bank linkage programme.

From the current situation we can understand that today the main focus of micro

finance industry is to empower the woman that’s why more loans are provided to

woman and on easy terms.

On an average 81.11 % loans were disbursed to women by Microfinance Institutions.

Out of the Rs 75,000 crore of loans extended by the banking system under the

scheme, 50% has been given to new entrepreneurs while the remaining has gone to

units extending their businesses

There is still a gender biasness in India that women can’t start new business but these

all the constraints have been proved wrong by all those women by timely repayment

and active participation.

Loans worth Rs. 1.09 Crore have been disbursed under the Mudra scheme till January

to small enterprenuers.

The banking sector has been allocated an overall disbursement target of about Rs.

1.22 lakh crore during 2015-16 for MUDRA loans.

MFIs which are creating wider outreach, in terms of breadth, which is more

desirable..

Highest performers in SHGs include Himachal Pradesh, Assam, Uttrakhand, Goa and

Kerela from Northern, North Eastern , Central, Western and Southern regions

respectively

Lowest performers in SHGs include Jammu Kashmir,Mizoram, Uttar Pradesh, Gujrat

and Karnataka from Northern, North Eastern , Central, Western and Southern regions

respectively.

57

LIMITATIONS

TIME CONSTRAINTShortage of time was a very big constraint due to which some area of micro finance has been included in the study.

RESOURCE CONSTRAINTAvailability of data was a constraint due to which only secondary data is considered, which is available, and also there are some MFIs whose data was not available.

SECONDARY DATAAll the information available was from secondary sources and data was very vast to analyze properly & accurately.

WIDE AREA TO STUDY

Study being conducted was very wide & analysis require expertise knowledge & skills which was lacking.

NO DIRECT SOURCE OF INFORMATION AVAILABLEThe information is collected from indirect sources so in some information data is not available.

FUTURE ANALYSISThe whole study was based on historical data which was not much useful in analysis of present and prediction of future.

58

Conclusion

Traditionally women have been marginalized. A high percentage of women are among the

poorest of the poor. Microfinance activities can give them a means to climb out of poverty.

Microfinance could be a solution to help them to extend their horizon and offer them social

recognition and empowerment. Numerous traditional and informal system of credit that was

already in existence before micro finance came into vogue. Viability of micro finance needs

to be understood from a dimension that is far broader- in looking at its long-term aspects too.

A conclusion that emerges from this account is that micro finance can contribute to solving

the problems of inadequate housing and urban services as an integral part of poverty

alleviation programmes. The challenge lies in finding the level of flexibility in the credit

instrument that could make it match the multiple credit requirements of the low income

borrower without imposing unbearably high cost of monitoring its end use upon the lenders.

A promising solution is to provide multipurpose lone or composite credit for income

generation, housing improvement and consumption support. Consumption loan is found to be

especially important during the gestation period between commencing a new economic

activity and deriving positive income.

India is the country where a collaborative model between banks, NGOs, MFIs and Women’s

organizations is furthest advanced. It therefore serves as a good starting point to look at what

we know so far about ‘Best Practice’ in relation to micro-finance for women’s empowerment

and how different institutions can work together.

It is clear that gender strategies in micro finance need to look beyond just increasing

women’s access to savings and credit and organizing self-help groups to look strategically at

how programmes can actively promote gender equality and women’s empowerment. On the

other hand, thank to women's capabilities to combine productive and reproductive roles in

microfinance activities and society has enabled them to produce a greater impact as they will

increase at the same time the quality of life of the women micro-entrepreneur and also of her

family

Apart from Women, other msme and entrepreneur are also getting help by the Mudra scheme

where they can are getting credit at an afforable rate of 6.75 % and in the coming years, it

will be really one of the boons from the government in providing affordable credit.

59

SUGGESTION Presently there is no distinctive regulatory framework for the MFIs in India.

Regulation of the MFIs is largely in the purview of the state governments. So there is

the need for an exclusive regulation to regulate MFIs in India.

Credit is important for development but enough risk analysis must be done so as to

minimize the risk of outstanding payments from this sector.

MFIs may attempt to ascertain clients are borrowing from multiple MFI’s.

MFIs can also study to what degree they track clients who drop out of the program

(i.e., complete a loan cycle and choose not to take out subsequent loans).High dropout

rates may be a sign that clients are having bad experiences and/or finding that the

benefits of loans don’t compensate for the (often high) interest rates.

MFI’s can also do in depth study about the requirement of loan by the clients and

inspect his track records.

Government must ensure that MFIs are performing well and poor and below poverty

people are getting the required loans.

In situations of chronic poverty it is more important to provide saving services than to

offer credit..

Globalization will not be allowed to expand the gap between the rich and the poor.

Affluent countries cannot continue to dump aid on needy nations; developing

countries must not be permitted to ignore the needs of their impoverished population.

As the poor are vulnerable it is not sufficient for us just to provide micro credit, but to

have a series of support systems provided at the appropriate time.

If the initial set of borrowers stay true to their repayment terms, it will increase the

confidence level of banks to cast wider net when approving MUDRA loans in the

future.

Government can contribute most effectively by setting sound macroeconomic policy that

provides stability and low inflation.

Proper training for the clients must be done so that they can know each and every aspects

about their debt.

Government must ensure that there is an uniform distribution of funds in all the urban and

rual states of India.

60

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ABBREVIATIONS

SHG- Self Help Groups.

NGO- Non Government Organization

PMO- Prime minister office

RBI- Reserve Bank of India

SBI- State bank of India

NBFI- Non Banking Financial Institutions

BPL- Below Poverty Line

AVG. - Average

64