Micro-finance in rural credit

By Group 1

What is micro-finance?Need for micro-finance

Criticisms of the present system

Role in eradicating poverty

Our Suggestions for improvement

What is Microfinance?

Microfinance is the provision of financial services to low-income clients or lending groups including consumers and the self-employed who traditionally lack access to banking and related services.

Best example of microfinance:

Nobel prize winner, Mohammad Yunus who founded the Grameen Bank

Need for Microfinance

What happens in India?

Without banking facilities, the poor farmers go to money-lenders who give them loans and exploit them with high interest rates by taking advantage of their situation and also their lack of education.

What happens in India?

The earning of the farmers is so meager that they don’t have any savings and are highly prone to the sudden need of credit.

How microfinance helps:

Microfinance come useful to poor households as they cushion them against external shocks like crop failure etc, and prevent unwanted incidents of farmer suicides and other activities, by providing them with micro-credit at low interest rates.

Can you believe it?

How microfinance helps:

Subsidies from donors and government can be successfully channelized by micro-finance institutions to the correct people who actually need them.

How microfinance helps:

It also helps the poor to develop saving habits by letting them save the smallest of amounts that are feasible for them to save. In this way, they can use the savings in times of need and would not need outside financial assistance.

Problems with

the present system

Less Penetration

• Unfortunately, microfinance for some is just a

source of easy money and they mismanage their

financial affairs and increase over-indebtedness. •When the government buys

produce from the farmers, the corrupt officials charge their commission too, thus exploiting the farmers.

•Often, the loans are spent in marriage, dowry and

other activities as there is no forced use of the money.

•Once again, due to corruption, half the money doesn’t reach the right people and is eaten up in the various stages of the process.

Unproductive use of rural credit:

•Since women get loans at low rates people obtain credit from MFIs for unproductive purposes through their medium.

Can it eradicatepoverty?

No, because:

OCredit may be a trigger for eradicating poverty, but eradicating poverty requires all round development.

OIt wont trigger growth in a country like India where there is poor governance and insecurity of exploitation.

No, because:

ODespite major structural changes in credit institutions, the exploitation of the rural masses in the credit market is one of the most pervasive and persistent features.

OThus, NO……it cannot solve the problem of mass poverty in India.

Our suggestionsfor betterment

Our suggestions for betterment

OEffective steps should be taken to remove corruption and stop exploitation of the poor people by the credit institutions.

OForced use of credit for only productive purposes should be implemented.

Our suggestions for betterment

OMicrofinance institutions can patch up with other institutions which guides farmers on how to use their land properly. This will ensure more repayment of loans and greater productivity.

Data provided by:

Akash Gain (1) Ankit Duggar (12) Gurkirat Singh Matharoo (23) Pratik Rai (34) Vishal Saraf (56)

Powerpoint Presentation by:

Soham Hazra

(45)

Your Questions please!