Vibhu Babbar Caps

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ROLEOF MICRO-CREDITINERADICATING

POVERTY

STUDYBASEDINRURALAREAOFJALANDHAR

Submittedto Lovely Professional University

In partial fulfillment of the requirements for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by:

Group No RF08

VIBHU BABBAR Roll No.RR1902A12

RAMJEE PANDEY Roll No. RR1902A13

GAURAV FANDA Roll No. RR1902A14

RAJIV KUMAR RR1902A17

Supervisor:

SWETA SINGH

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA

{Sep 2010-April 2011}


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Table Of Contents

EXECUTIVE SUMMARY

Sr.

No.

Contents Page

No.

1 Executive summary 5-6

2 Introduction of Microfinance 7-21

3 Need of the study 22

4 Objective of the study 22

5 Scope of the study 23

6 Review of Literature 23-30

7 Research Methodology 31

8 Data Analysis & Interpretation 32-48

9 Findings & Recommendations 49-50

10 Conclusion 51

11 References 52-53

12 Questionnaire 54-56


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OBJECTIVEOFTHE STUDY

Microfinance has proved to be a successful step towards poverty alleviation and empowerment

in rural area.

i. To measure the effectiveness of microfinance in region.

ii. To check the awareness of various sources available for the micro-finance credit.

iii. To know the various source of the clients prefers the most to avail the facility of micro-

credit.

iv. To know the major factors for which people are taking micro-credit.

v. To know the problems faced by clients while opting for micro-credit.

SCOPE OF THE STUDY:

Micro Financing has greatest scope in India especially in developing semi -urban cities like

Jalandhar because many of the people dont have high income resulting in low purchasing power

and Micro Finance institutions target market as low income group and it is common impressionis that the poor people need and use a variety of financial services including deposits, loans etc.

they use financial services for some reason like

a) Seize business opportunities

b) To fulfill their need of necessities

c) Improve their standard of living

d) Deal with emergencies like illness etc.

MAJOR FINDINGS

The research stated that, The micro-finance is feasible in Jalandhar region. And most of the

people are availing micro-credit in order to do business and to deal with emergencies. For


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reliable source of finance private and public banks have been regarded as the most suitable one

comprising of ICICI bank , HDFC bank , Punjab National Bank and State Bank of Patiala.

SUGGESTIONS

Its required by banks to open their own MFI in Jalandhar region so that it will be more suitable

for the needy people to avail the micro-credit service through it. More of NGOs should come

forward in Jalandhar region in order to help the poor and needy people to satisfy their needs. The

interest rates charged on micro finance should not be more than 15 %.

IMPLICATIONS

If a micro-finance institution plans to launch micro finance service in semi-urban areas, it may be

successful in terms of having little non-performing assets, however it will first have to popularize

the concept, so that the target customers are more open to the idea and understand the relative

benefits that it will have over existing sources of finance.

CONCLUSION

To conclude we can say that its just the beginning of the micro-credit in Jalandhar region

and it will of more success when people will rely more towards organized sector for

micro-credit such as Public and Private sector banks.

There is need for opening of MFIs in Jalandhar region so that micro-credit can be

provided with more of ease

Micro-credit can be regarded as tool which will help to eradicate poverty

Help for women upliftment by making them more independent and monitory fit.

Help poor to setup businesses and earn their livelihood.


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Introduction

Microfinance can be defined as financial services targeting and catering to clients who are

excluded from the traditional financial system on account of their lower economic status.

Microfinance can include micro-credit, micro-savings, micro-insurance and payment services.

Poverty reduction will be attempted

substantial flow of investment in physical infrastructure like roads, water supply and social

infrastructure like health, education and nutrition.

Special efforts for generation of adequate employment and creation ofdurable community

assets to improve the rural people especially the small farmers, marginal farmers, rural

artisans etc., through programmes like Sampoorna Grameen Rozgar Yojana (SGRY).

Decentralization of the process of planning by entrusting major role to the Panchayat raj

bodies in the preparation of local level planning.

Improving the efficiency and capacity of the offsicials and elected local body

representatives.

Monitorable Targets for Tenth Plan

i. Reduction of Poverty to 10% by 2006-07 and near elimination by 2012.

ii. All weather roads to rural habitation shaving population above 500 by 2004.

iii. Formation of 1.25 lakh Self Help Groups.

iv. Integrated Sanitary Complex for women in all Panchayats by 2003.

v. Augmentation of water storage capacity of 12,618 village panchayat tanks through

renovation.

vi. Training to 63,044 local bodies elected representatives including SHGs & Official to

improve skill and capacity building.

vii. Programmes for accelerating the development process through special schemes like

Village Self-sufficiency scheme etc.


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viii. Emphasis will be given for the maintenance of the assets created under various

schemes.

Rural Development (PLANS)

Tenth Five Year Plan proposals

The schemes / programmes proposed to be implemented during the Tenth plan period to achieve

the above cherished objectives are:

A. Centrally Sponsored Schemes

I. Poverty Alleviation programmes

1. Swarnajayanthi Gram Swarozgar Yojana (SGSY)

The magnitude of poverty and disparities that existed between the various social groups

necessitated planned state intervention to provide succour and relief particularly to the

disadvantaged and marginalised groups such as SC/ST, women etc. Keeping this in view and

having regard to the positive aspects as well as deficiencies, the earlier self employment

programmes like TRYSEM, SITRA, GKY, DWCRA, IRDP and MWS were merged and a new

self employment programme viz., SGSY was launched w.e.f.1-4-1999.

viz., organization of the rural poor into Self Help Groups (SHGs), their capacity building,

planning of activity clusters, infrastructure build up, technology, credit and marketing etc. The

main objective of the programme is to bring the existing poor families above the poverty line.

Among the rural poor, special emphasis will be given for the welfare of SCs/STs, women

and disabled.

The programme lays emphasis on organization of poor into Self Help Groups (SHGs) and

their capacity building. The SHGs may consist of 10 to 20 persons. 4 to 5 key activities will be

identified in each block based on the resource endowments, occupational skills of the people and

availability of markets and these activities will be implemented in clusters. 10% of the SGSY

fund will be set apart for training, wherein emphasis will be given for skill development through

well designed courses. SGSY is a Credit cum Subsidy programme with the involvement of


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banking and financial institutions. The expenditure under SGSY is shared by the Centre and the

States in the ratio of 75:25. Subsidy will be provided at 30% of the project cost subject to a

maximum of Rs. 7,500 and 50% for SC/ST subject to a maximum of Rs. 10,000. For groups, the

subsidy is 50% subject to a ceiling of Rs. 1.25 lakhs.

During the Tenth Five Year Plan under SGSY it has been proposed

(i) To form 1.25 lakhs Self Help Groups benefiting 25 lakh women beneficiaries in rural areas.

SGSY Methodology

1) Group Approach

2) Organisation of rural masses into self-help groups

3) Establishment of Micro enterprises

4) Training for improvement of skill and capacity building

5) Credit linkages

6) Market support

Provision of infrastructure facilitybuild up, technology, credit and marketing etc. The main

objective of the programme is to bring the existing poor families above the poverty line. Among

the rural poor, special emphasis will be given for the welfare of SCs/STs, women and disabled.

2. Sampoorna Grameen Rozgar Yojana (SGRY)

Creation of sustained employment opportunities for securing a minimum level of employment

and income for the rural poor necessitated continuous need for special employment programmes.

Keeping the above aim and to strengthen the need based infrastructure at the village level to

boost the rural economy the erstwhile wage employment programmes JGSY and EAS were

merged and a new scheme namely SGRY was launched from 15th August 2001. The main

objective of the new programme is to provide additional wage employment in the rural areas as

food security by creation of durable community social and economic assets and infrastructure

development in rural areas.Towards this end the SGRY envisages distribution of food grains @ 5 kg per manday to

the workers as part wages. While the cash component will be shared by the Centre and States in

the ratio of 75:25, the Central Government will supply the food grains free of cost to the States.

The scheme will be implemented in two streams. The first stream will be implemented at the

District and Panchayat Union levels. 50% of the funds and food grains available under the


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programme will be distributed between the District Panchayat and the Panchayat Union in the

ratio of 40:60. The second stream will be implemented at the Village Panchayat level.

The entire allocation under this stream will be distributed among the Village Panchayats

through the DRDAs / District Panchayats. To augment the storage capacity of the tanks

maintained by the local bodies towards increasing the availability of water for drinking, irrigation

and other purposes it has been proposed to renovate one tank per panchayat under this scheme.

During Tenth Plan, the State's share will be Rs. 303.80 crores.

Rural Housing

The aim of the State Government is to provide a dwelling for each family giving special

emphasis to rural poor and deprived. The on going rural housing programmes will be given a

new thrust.

1. Indira Awaas Yojana With a view to meeting the housing needs of the rural poor, Indira

Awaas Yojana (IAY) was launched in May 1985 as a sub- scheme

of Jawahar Rozgar Yojana.

It is being implemented as an independent scheme since 1 January 1996. It aims at helping

below poverty line rural households belonging to SCs/STs, free bonded labourers, widows of

next- of kind of defence personnel, ex-servicemen and retired members of the paramilitary forces

and also non SC/ST rural poor by providing them with grant-in-aid for construction of new

dwelling units and upgradation of existing unserviceable kutcha houses. 3% of funds are reserved

for the benefit of disabled poor below the poverty line in rural areas. The assistance ceiling for

each house in plain area is fixed at Rs. 20,000/- and for hill/ difficult areas Rs. 22,000. In order to

enable fire proof RCC roofed houses to be provided, the State Government provides additionally

Rs. 12,000 per house as additional cost apart from its usual matching share to the Central grant.

The expenditure towards provision of RCC roofing is met under Adi-dravida Welfare head.

Therefore, the unit cost including sanitary latrine under this scheme is Rs. 32,000/- in normal

terrain and Rs. 34,000 in difficult terrain. 80% of the IAY funds is earmarked for constructionnew houses and 20% is towards upgradation of unserviceable kutcha houses at the rate of Rs.

10,000/- per unit.

Credit cum Subsidy Scheme


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The Credit-cum-Subsidy Scheme has been conceived for rural households having an

annual income upto Rs. 32,000/-. Subsidy upto Rs. 10,000/- and loan up to Rs. 40,000/- from

commercial or co-op. banks is provided to eligible households for construction of houses. Out of

the total outlay of Rs. 9.15 crores, 25% share of the State Government will be Rs. 2.29 crores.

The physical target under the scheme will be 914.

Rural Housing Schemes

Indira Awass Yojana - for below poverty line rural housing

i. Construction of New Houses.

ii. Upgradation of Unserviceable kutcha Houses.

iii. PMGY - to supplement the effort in rural housing.

iv. Credit cum Subsidy Scheme for rural households having Annual income


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Pradhan Mantri Gramodaya Yojana (PMGY) (Rural Shelter Component)

This scheme has been introduced by the Government of India under additional Central

assistance for providing shelter in the rural areas to supplement the efforts in the sphere of rural

housing considering the magnitude of the task. The guidelines of Indira Awaas Yojana are

applied for this scheme also. 60% of the total allocation is earmarked for SC/ST beneficiaries.

During Tenth Plan it has been proposed to construct 34,475 rural shelters with an allocation of

Rs. 111.14 crores.

Pradhan Manthri Gram Sadak Yojana (PMGSY)

The Pradhan Mantri Gram Sadak Yojana (PMGSY) is a Government of India Scheme

introduced in the year 2000-2001 with the objective of providing road connectivity through good

all weather roads to all unconnected rural habitations having population above 1000 by 2003 and

all unconnected habitations having population of 500 and above by end of Tenth Plan period

(2007). Under this programme the approved works are grouped into packages costing more than

Rs. 1 crore but less than Rs. 5 crores and executed through tender system. The guidelines

stipulate that district master plans would be prepared. A District Rural Road Plan is prepared for

each district indicating the habitations in each block with the existing status of road connectivity.

The scheme will be fully funded by the Government of India and an allocation of Rs. 750 crores

has been proposed for the Tenth Plan, which will be shown under the chapter Rural Roads.

Our financial programs support such essential public facilities and services as water and sewer

systems, housing, health clinics, emergency service facilities and electric and telephone service.

We promote economic development by supporting loans to businesses through banks andcommunity-managed lending pools. We offer technical assistance and information to help

agricultural and other cooperatives get started and improve the effectiveness of their member

services. And we provide technical assistance to help communities undertake community

empowerment programs.


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We have an $86 billion dollar portfolio of loans and we will administer nearly $16 billion in

program loans, loan guarantees, and grants through our programs.

Rural Development achieves its mission by helping rural individuals, communities and

businesses obtain the financial and technical assistance needed to address their diverse and

unique needs. Rural Development works to make sure that rural citizens can participate fully in

the global economy.

Programs Administered

1.Guaranteed loans. These are "lender-driven" programs, whereby business loans (generally

made by commercial banks) receive a Federal loan guarantee. The guarantee is designed to

support and incentivize rural business lending and to support rural job creation and retention. The

primary program in this category is the Business & Industry (B&I) guaranteed loan

program.

2. Direct loans. Direct loans are made to intermediary economic development groups who will

in turn assist private rural business development through the re-lending of these funds. Note that

the Agency does not make loans directly to for-profit businesses or individuals.

3. Grants to nonprofits & public bodies. Typically these grants are made to

nonprofit economic development groups, towns, or tribes who will undertake some project in

support of private rural business development.s

4. Grants to private rural businesses & agricultural producers. These grants

are narrowly targeted and competitively awarded in support of value-added agricultural ventures

and in support of renewable energy and energy efficiency projects. Matching funds from 50-75%

are typically required.

Self- Help Group

It is a registered or unregistered group of micro entrepreneurs having homogeneous social andeconomic background voluntarily, coming together to save small amounts regularly, to mutually

agree to contribute to a common fund and to meet their emergency needs on mutual help basis.


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The group members use collectively wisdom and peer pressure to ensure proper

end-use of credit and timely repayment thereof. In fact peer pressure has been

recognized as an effective substitute for collaterals.

One major advantage of the Indian SHg approach to micro finanace ist its reliance

on the existing very large network of banks. Which are already legally and

institutions able to mobilize deposits and make loans. The SHG system does not

require new MFI ( microfinance institutions) which are slow and expensive to

develop and whose competence and financial strength may be questionable.

The SHG system uses existing marketing channels, thebank , to bring formal

financial services to a new market, namely the SHG itself, and these new

intermediaries have to be developed.

In an ideal world, the banks would themselves be expected to take on this

marketing channel development task, without any assistance.

SICK UNITS (SSI)

Under SICA (SICK INDUSTRIAL COMPANIES ( special provision ) ACT 1985)

An industrial co which is registered under companies act for not less than 5 years and which haveaccumulated losses at the end of any financial year equal to or exceeding its net worth is a sick

company

SLIPPAGE PREVENTION TASK FORCE

For prevention of slippage of quality in advance accounts , bank has constituted a SLIPPAGE

PREVENTION TASK FORCE (SPTF). The SPTF team members can expected to perform the

following major tasks as per existing guidelines.

1) Maintain database of potential sick accounts of rs. 1 crore and above

2) Addressing disturbing features in each of these accounts and work out strategy to

overcome problems in co-ordination with the branches heads.


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3) Visit of critical branches once in 3 months for spot study of key features like submission

of stock/ book debt statements , adequate dp, valuation of fixed assets , review of

accounts, creation of charges, document verification , advers comments of inspecting

officer / auditors etc. and suggest corrective action measures.

4) Continuous review of progress etc.

SMALL BORROWER

Any borrower having the banks funded and non- funded exposure of rs. 2 lakh and below.

SMALL CORPRATE

Any company, incorporated under the companies act , 1956 or under any other STATUTORY

LAW /ACT, for the purpose of carrying out a business activity , with annual sales turnover

below rs. 100 crore.

List of some MFI in India

ActionAid

Activists for Social Alternatives

AKRSP (Aga Kahn Rural Support Programme)

Annapurna Mahila Mandal

Asha Sadan

AWAKE (Association of Women Entrepreneurs in Karnataka)

Bridge Foundation

Canara Bank

CDF (Cooperative Development Foundation)

Childreach

Christian Children's Fund

Christian Children's Fund New Delhi


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Community Development Society

CUPCI (CU Promotion Committee)

Dharmapuri Women's Development Project

Evangelical Fellowship of India

Federation of Thrift and Credit Association

FWWB (Friends of Women's World Banking India)

Institute of Rural Management

Jeevan Jyoti

Kadamalai Vattara Kalanjia

Katch Mahila Vikas Mandal

ACTIVITIES IN MICROFINANCE

a) Micro Credit: 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.

b) 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.

c) 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 developing their businesses while mitigating other risks affecting property,

health or the ability to work.

d) 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.

WHO ARE THE CLIENTS OF MICRO FINANCE?


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i. 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.

ii. 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.

iii. 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.


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Financial needs of poor people

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 Rutherfords 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.

MICRO FINANCE MODELS

I. Micro Finance Institutions (MFIs):

MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and

cooperatives. They are provided financial support from external donors and apex institutions

including the Rashtriya Mahila Kosh (RMK), SIDBI Foundation for micro-credit and NABARD

(National Bank of Agriculture and Rural Development) and employ a variety of ways for credit

delivery.Since 2000, commercial banks including Regional Rural Banks have been providing funds to

MFIs for on lending to poor clients. Though initially, only a handful of NGOs were into

financial intermediation using a variety of delivery methods, their numbers have increased

considerably today. While there is no published data on private MFIs operating in the country,

the number of MFIs is estimated to be around 800.


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II. Bank Partnership Model

This model is an innovative way of financing MFIs. The bank is the lender and the MFI acts as

an agent for handling items of work relating to credit monitoring, supervision and recovery. In

other words, the MFI acts as an agent and takes care of all relationships with the client, from first

contact to final repayment. The model has the potential to significantly increase the amount of

funding that MFIs can leverage on a relatively small equity base.

A sub - variation of this model is where the MFI, as an NBFC, holds the individual loans on its

books for a while before securitizing them and selling them to the bank. Such refinancing

through securitization enables the MFI enlarged funding access. If the MFI fulfils the true sale

criteria, the exposure of the bank is treated as being to the individual borrower and the prudential

exposure norms do not then inhibit such funding of MFIs by commercial banks through the

securitization structure.

III. Banking Correspondents

The proposal of banking correspondents could take this model a step further extending it to

savings. It would allow MFIs to collect savings deposits from the poor on behalf of the bank. It

would use the ability of the MFI to get close to poor clients while relying on the financial

strength of the bank to safeguard the deposits. This regulation evolved at a time when there were

genuine fears that fly-by-night agents purporting to act on behalf of banks in which the people

have confidence could mobilize savings of gullible public and then vanish with them. It remains

to be seen whether the mechanics of such relationships can be worked out in a way that

minimizes the risk of misuse.

IV. Service Company Model

Under this model, the bank forms its own MFI, perhaps as an NBFC, and then works hand in

hand with that MFI to extend loans and other services. On paper, the model is similar to the

partnership model: the MFI originates the loans and the bank books them. But in fact, this model

has two very different and interesting operational features:


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(a) The MFI uses the branch network of the bank as its outlets to reach clients. This allows

the client to be reached at lower cost than in the case of a standalone MFI. In case of

banks which have large branch networks, it also allows rapid scale up. In the partnership

model, MFIs may contract with many banks in an arms length relationship. In the service

company model, the MFI works specifically for the bank and develops an intensive

operational cooperation between them to their mutual advantage.

(b) The Partnership model

This uses both the financial and infrastructure strength of the bank to create lower cost and

faster growth. The Service Company Model has the potential to take the burden of overseeing

microfinance operations off the management of the bank and put it in the hands of MFI managers

who are focused on microfinance to introduce additional products, such as individual loans for

SHG graduates, remittances and so on without disrupting bank operations and provide a more

advantageous cost structure for microfinance.

V. SHGs-Bank Linkage Model

NABARD is presently operating three models of linkage of banks with SHGs and NGOs:

Model 1: In this model, the bank itself acts as a Self Help Group Promoting Institution (SHPI).

It takes initiatives in forming the groups, nurtures them over a period of time and then provides

credit to them after satisfying itself about their maturity to absorb credit. About 16% of SHGs

and 13% of loan amounts are using this model (as of March 2002).

Model 2: In this model, groups are formed by NGOs (in most of the cases) or by governmentagencies. The groups are nurtured and trained by these agencies. The bank then provides credit

directly to the SHGs, after observing their operations and maturity to absorb credit. While the

bank provides loans to the groups directly, the facilitating agencies continue their interactions

with the SHGs. Most linkage experiences begin with this model with NGOs playing a major role.

This model has also been popular and more acceptable to banks, as some of the difficult


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functions of social dynamics are externalized. About 75% of SHGs and 78% of loan amounts are

using this model.

Model 3: Due to various reasons, banks in some areas are not in a position to even finance

SHGs promoted and nurtured by other agencies. In such cases, the NGOs act as both facilitators

and microfinance intermediaries. First, they promote the groups, nurture and train them and

then approach banks for bulk loans for on-lending to the SHGs. About 9% of SHGs and 13% of

loan amounts are using this model.

LEGAL FORMS OF MFIs IN INDIA

Types of MFIs Estimated

Number*

Legal Acts under which Registered

1. Not for Profit MFIs

a.) NGO - MFIs

400 to 500 Societies Registration Act, 1860 or similar

Provincial Acts

Indian Trust Act, 1882

b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956

2. Mutual Benefit MFIs

a.) Mutually Aided Cooperative

Societies (MACS) and similarly set

up institutions

200 to 250 Mutually Aided Cooperative Societies Act

enacted by State Government

3. For Profit MFIs

a.) Non-Banking Financial

Companies (NBFCs)

6 Indian Companies Act, 1956

Reserve Bank of India Act, 1934

Total 700 - 800


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Source: NABARD website

Needs For Microfinance

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

services.

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

assets and/or cushion themselves against external shocks.

iii. Microfinance means building permanent local institutions.

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

countrys mainstream financial system.v. The job of government is to enable financial services, not to provide them.

vi. Interest rate ceilings hurt poor people by preventing microfinance institutions from

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

vii. Microfinance institutions should measure and disclose their performance both

financially and socially.

OBJECTIVEOFTHE STUDY

Microfinance has proved to be a successful step towards poverty alleviation and empowerment

in rural area.

vi. To measure the effectiveness of microfinance in region.

vii. To check the awareness of various sources available for the micro-finance credit.


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viii. To know the various source of the clients prefers the most to avail the facility of micro-

credit.

ix. To know the major factors for which people are taking micro-credit.

x. To know the problems faced by clients while opting for micro-credit.

SCOPE OF THE STUDY:

Micro Financing has greatest scope in India especially in developing semi -urban cities like

Jalandhar because many of the people dont have high income resulting in low purchasing power

and Micro Finance institutions target market as low income group and it is common impression

is that the poor people need and use a variety of financial services including deposits, loans etc.

they use financial services for some reason like

e) Seize business opportunities

f) To fulfill their need of necessities

g) Improve their standard of living

h) Deal with emergencies like illness etc.

REVIEW OF LITERATURE

Buckley, G. (1996) Microenterprises in the informal sector in Kenya, Malawi and Ghana. It

seeks to provoke critical reflection on the uncritical enthusiasm that lies behind much

proselytizing of Micro-Finance for informal sector microenterprise. It questions whether the


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extensive donor interest in microenterprise finance really addresses the problems of micro

entrepreneurs or whether it offers the illusion of a quick fix. It suggests that the real problems

are more profound and cannot be tackled solely by capital injections but require

fundamental structural changes of the socioeconomic conditions that define informal sector

activity and a fuller understanding of the ''psyche'' of informal sector entrepreneurs

Livermore, M. (1997) Microenterprise development by social workers as a social

development strategy. The origins of microenterprise development are reviewed, both as a

social development strategy and as a social work intervention. By providing an implementation

framework that addresses psychological, economic and social components, the author argues

that social workers are ideally placed to design and participate in these programs. A number

of issues that affect social work involvement in the field are discussed.

Evans, T. G., A. M. Adams,. (1999)Mi cr o- Cr ed it schemes as a means of poverty

alleviation, their accessibility to the poorest is of obvious concern. This paper examines a

targeted Micro-Credit program in Bangladesh to assess its coverage among the poor, and to

identify program- and client- related barriers impeding participation. Rates of participation in

Micro-Credit are higher among poorer households. Multivariate analysis identifies lack of female

education, small household size and landlessness as risk factors for nonparticipation, based on a

7% random sample of this population. The implications of these findings for poverty alleviation

policies and programs are discussed.

Aghion, B. A. and J. Morduch (2000)Micro lending is growing in Eastern Europe, Russia

and China as a flexible means of widening access to financial services, both to help alleviate

poverty and to encourage private-sector activity. We describe mechanisms that allow these

programmes to successfully penetrate new segments of credit markets. These features

include direct monitoring, regular repayment schedules, and the use of non-refinancing

threats.

Rosengard, J.K et al. (2001) The Bank Rakyat Indonesia (BRI) unit system is

recognized as one of the largest and most successful Micro-Finance institutions in the world.

Indonesia has been more drastically affected by the East Asian monetary crisis than other

countries in the area. It is therefore worthwhile looking at the BRI experience during the

crisis-not only the experience in microenterprise credit, but also in small, medium and


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corporate credit and in savings mobilization.

Snow, D. R. and T. F. Buss (2001)Micro-Credit is a concept that has gained widespread

acceptance by international development agencies and major donors. It is viewed as a way

to correct both governmental and market failure in Sub-Saharan Africa. Many view Micro-

Credit as a method for linking the formal and informal sectors of African economies to increase

the reach of the formal sector. Extending the reach of the formal economy through Micro-

Credit is possible, and desirable, depending on macroeconomic reforms, respect for traditional

financing relationships, and local control of institutions.

Bhatt, N. and S. Y. Tang (2001)Three major controversies in the Micro-Finance field:

vehicles, technologies, and performance assessments for financial service delivery. Then it

proposes that these controversies be resolved by a perspective emphasizing institutional

plurality and external and internal efficiencies for individual programs. Questions for

further research are discussed in the conclusion.

Pretes, M. (2002) The work of the Village Enterprise Fund, an US nongovernmental

organization, in East Africa as a case study in "equity" based Micro-Finance in low-income

countries. Many small businesses established in high-income countries rely on some form of

equity capital to fund the startup phase and much of the growth of the business. The success

of startup grants and equity financing in high-income countries suggests that this method

might also be applicable in low- income countries.

McKernan, S. M. (2002) Micro-Credit programs provide a two-tiered approach to poverty

alleviation: credit for the purchase of capital inputs in order to promote self-employment

and noncredit services and incentives. These noncredit aspects may be an important

component of the success of Micro-Credit programs. However, because they are costly to

deliver and their contribution to the success of the programs is difficult to measure, they may

not be properly valued. This paper uses primary data on household participants and

nonparticipants in Grameen Bank and two similar Micro-Credit programs to measure the total

and noncredit effects of Micro-Credit program participation on productivity.

MkNelly, B. and M. Kevane (2002) We summarize lessons learned by a credit


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program for women in Burkina Faso. Three observations are made regarding program

design: (a) high membership turnover means mutual guarantee groups should be smaller and

more central to non-repayment penalties; (b) high turnover in economic activities implies more

training in best practices and more variety and experimentation in credit and savings

mechanisms; and (c) high degrees of stocking activity suggests the need to develop

instruments to mitigate commodity price risk at the individual and program level

Cohen, M. and K. Wright (2003) The Micro-Finance agenda is increasingly market-driven

and, therefore, client-focused. The renewed interest in clients is driven by the industry's

concern over competition and drop-outs. This increasing awareness that the customer matters

has led MFOs to be more attentive to who their clients are, learning how they use financial

services and identifying appropriate products and services that better match the customer's

preferences. However, market-led Micro-Finance is not limited to products. For institutions to

better serve their clients, organisational restructuring may be required to ensure that their

systems and modes of Micro-Finance delivery are more client-responsive.

Johnson, S. (2004) The direct impact of Micro-Credit provision on users to examine

whether Micro-Finance institutions (MFIs) have had wider impacts within the local financial

markets in which they are operating. It considers the potential for both competition and

demonstration effects on other financial providers. The paper concludes that changing

macroeconomic conditions have been the main driver increasing competition for middle and

lower income clients and that few competition or demonstration effects resulting from the MFIs

are in evidence

Weber, H. (2004) The rise of the 'new economy' in many of the advanced capitalist states

since the 1970s has entailed a re-organization of global social and political relations

generally. These changes become apparent in analyses that focus on trends and shifts in the

global political economy. In the context of these adjustments, discourses of 'poverty

reduction' have come to prominence, with a particular financially steered strategy emerging

as a key approach to 'poverty reduction' on a global scale, namely Micro-Credit. I argue that

the Micro-Credit approach to poverty reduction is strategically embedded in the global

political economy.


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Johnson, S. (2004) The role of institutions-rules and norms-in markets is increasingly

recognized in development discourse. This paper considers the role of gender relations for

rules and norms in financial markets. Using evidence from Central Kenya it develops a

framework for establishing the influence of gender on the demand for and access to financial

services, so explaining the gender differentiated use of rotating savings and credit

associations (ROSCAs).

Akula, Vikram (2007-08) , In this study he states that the demonstrating why he was chosen as one

of Time magazines 100 most influential people in 2006, described how his company empowers

the poor and spurs economic development in rural India by providing them with small business

loans rather than a handout. He told the story of one of SKS first borrowers, a woman who lived

in a remote village in India and earned, along with her husband, about $2 a day. Their 12-year-

old son had been forced into bonded labor in order for the family to eat. The woman borrowed

$20 from SKS to buy vegetables to sell. After paying off her initial loan, she went on to borrow

more money to lease fruit trees and later purchase fishing nets for her husband and his friends.

Today she sells vegetables, fruit and fish, and her son is no longer an indentured servant.

Sharma, Rakesh (2009) Poverty is an evil. It's the creator of so many socio-economic problems.

A hungry man can go to any extreme. Eradicating world poverty is the greatest challenge of our

age, and the freatest weapon we have to fight poverty is knowledge. We can not afford to have

poor people around.

India is said to be the home of one third of the world's poor; official estimates range from 26%

to 50% of the more than one billion population.About 87% of the poorest households do not have

access to credit.

We would like to state that- it is time to recognise that in this unified world poverty is our

collective enemy. we must fight it because it is morally repugnant, and because its existence is

like a cancer- weakening the whole of the body not just the parts directly affected.

We have to do something for the people who are at the bottom of the pyramid. One answer tothis problem is Microfinance. We have started a research on this field so that more and more

information can be gathered on the subject which can further be used to frame certain policies or

any other step can be taken.


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Akula , Vikram 2009 The co. dont believe we are creating new demand among poor Indians

but rather, that we are catering to an unmet demand that already exists. And even if the demands

of the poor are being met, they usually have to pay a poverty premium, meaning higher prices

for everything fromwater to consumer goods. Our collaborations with part- ners like Metro give

our borrowers access to quality goods and services at fair prices they deserve.Weve had great

success with a micro-insurance product through Bajaj Allianz that we offer to our borrowers. We

initially talked to our borrowers and found that they wanted insurance policies with weekly

installments of Rs 20.

Ujjivan Financial Service, 2010 Ujjivan Financial Services has entered agriculturally advanced

Punjab to provide micro-credit to women of the state with the objective of reducing the economic

disparities and to cover the areas which have remained deprived of access to financial services

till date. Punjab has a large number of big cities & towns along with the presence of large

number of needy working women.

Ujjivan has started its Punjab operations with two branches in Bhatinda & Abohar. Though

Punjab ranks very high in the poverty index as against the Indian average, there are large sections

of the society who are underprivileged and struggling with poverty. Ujjivans expansion into

Punjab is not an ad hoc decision but has been done after a detailed and meticulous feasibility

study of microfinance in Punjab by a multidisciplinary team in Nov Dec 2009. A pioneer and

leader in the urban microfinance space, Ujjivan Financial Services entered Punjab with an

objective to serve poor who have so far been paying surprisingly high interest rates of 5-20% per

month. People of Punjab are very hard working but the high cost of credit becomes bottleneck to

their efforts in the business.

Sayma Rahman, (2010) This paper investigates the consumption behavior of borrowers of two

major microcredit institutions in INDIA and compares that with non-borrowers. Primary data has

been collected from borrowers of the Grameen Bank and INDIA Rural Advancement Committee

(BRAC) operating in three major districts in INDIA. Along with borrowers, non-borrowers data

has also been collected from non-program village to avoid endogeneity. Control-group method

(non-borrowers from non-program villages) has been used to compare the differences in

consumption patterns between the two groups. This study analyses the impact of per capita

monthly expenditure and other household characteristics on the budget share of eleven items

(food and non-food) consumed by borrowers and non-borrowers. Results from the estimation on


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linear and quadratic model suggest that borrowers of microcredit programs are better off in terms

of consumption than non-borrowers.

Masahiro Shoji. 2010 Microfinances in INDIA introduced a contingent repayment system

beginning in 2002, which allowed rescheduling of savings and instalments during natural

disasters for affected members. This paper is one of the first attempts to evaluate the system

employing a unique dataset. In using evidence from a flood in 2004, the author found that

rescheduling plays the role of a safety net by decreasing the probability that people skip meals

during negative shocks by 5.1 per cent. This effect is even higher on the landless and females.

This study attempts to contribute to the issue regarding the poverty reduction effect of

microfinances.

Sayma Rahman,2010. Microcredit program in INDIA provides small loans to rural people

especially to women with the purpose of eradicating poverty. This study investigates the impact

of microcredit on consumption pattern of borrowers and compares if the impact is the same for

non-borrowers. Primary data has been collected from the Grameen Bank and the INDIA Rural

Advancement Committee (BRAC) borrowers of some selected villages from three major districts

in INDIA. Data of non-borrowers are collected from the same cohort to provide a control group

for comparison with borrowers. To estimate the impact of per capita monthly expenditure and

other household characteristics on budget share of items consumed by borrowers and non-

borrowers the study relies on An Almost Ideal Demand System (AIDS) model. The estimated

results of Iterative Seemingly Unrelated Regression (SURE) suggest that borrowers of

microcredit programs are better off in terms of consumption of most of the food and non-food

items compared to non-borrowers.

Yunus, Banker to the Poor: The author's economic philosophy is another chapter of great

interest. Although not considering himself to be a follower of capitalism per se, he does believe

in the global free market economy and the power of the free market. He does not think it right to

offer unemployment benefits to redress the problem of the poor. All the poor need, he holds, is

financial capital. He also advocates competition as a driving force for all innovations. Yunus

proposes that we replace the limited profit maximization principle of capitalism with a

generalized principle - an entrepreneur who maximizes both profit and social returns. In this way

an entrepreneur could run social services such as a health care service for the poor, if financially

viable. Such entrepreneurs would be steeped in social consciousness. A willing suspension of
http://proquest.umi.com/pqdweb?RQT=572&VType=PQD&VName=PQD&VInst=PROD&pmid=14865&pcid=50354751&SrchMode=3http://proquest.umi.com/pqdweb?RQT=572&VType=PQD&VName=PQD&VInst=PROD&pmid=14865&pcid=50354751&SrchMode=3


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disbelief is called for here, as even though one would wish to endorse his views on the goodness

of human nature, sadly his philosophy seems to border on the idealistic and ephemeral rather

than being a true depiction of man's inherent nature.Yet, so successful has been this venture that

it has been replicated with greater or lesser success in other countries of Asia, Africa, Latin

America and now even in the US. It has also expanded its spheres of activities to ventures such

as housing loans, fisheries and retirement schemes.To conclude, a word on Indias experience

with micro finance. Unfortunately this has not been as salubrious as the experience of INDIA

thus far, for whatever reason. Yet the intended outreach this fiscal year is 3 million poor, up from

last year's 2 million.

We all live with rampant poverty and our reaction is invariably one of apathy, indifference or

resignation that individually there is very little if at all we can do about it. Yunus is that rareindividual who not only believes that the evil of poverty can be eradicated but has devoted his

entire life's work to realizing this dream.

Shetty, Samit Shankar MFIs charge higher interest rates than banks, but perform a crucial

service. They deliver small-ticket, non-collaterised loans for the rural poor, without any red-tape.

With some regulation and self-correction, the sector can do better.MFIs need toarrive at the right

balance between strictly enforcing group liability and allowing exceptional defaults, while

keeping the group mechanism relevant. There has been extraordinary media spotlight on micro

finance institutions (MFIs), from about the time SKS Microfinance was listed. The contribution

made by SKS in particular, and the MFI industry in general, in projecting a model that allows the

poor to access mainstream capital is stellar. The turbulence of the last couple of months has

rewound the clock and taken us back to where the politicians and babus wanted us to be. MFI's

charge 24-30 per cent interest rate and operate with a spread of 12-16 per cent; this amounts to

Rs 600-800 more than what a bank would charge on an average Rs 10,000 micro finance loan

over one year. In the period of a year the customer has to be serviced 50 times, which is Rs 16

per visit. The higher cost of Rs 800 compared to a bank, comes with doorstep service for small,

convenient instalment repayments, speedy, non-bureaucratic loan disbursals and access to

borrowing without collaterals. The opportunities for investment for the poor in the countryside

are mind-boggling. A young goat bought at Rs 2,000 can be sold at Rs 5,000 in six months of

fattening. That is a 300 per cent annualised return. A Rs 15,000 investment in a cow can fetch a


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revenue of Rs 200 a day on milk and a profit of Rs 3,000 per month. That is more than 100 per

cent returns annualised, even accounting for non-lactating periods. The rate of interest on MFI

loans should be viewed against this perspective

HYPOTHESIS

Micro-Finance is feasible in Jalandhar city.

RESEARCH METHODOLOGY

a) Research Type - Descriptive Research

b) Data Collection Tools;

i. Secondary Data : With the help of websites of various banks and Govt. websites,

magazines, news-papers etc.

ii. Primary Data: By direct interaction with clients and with help of questionnaire.

a) Sampling Technique : Convenience sampling

b) Sampling Unit : Jalandhar region(Rural area)

a. Sample Size :100 Respondents

c) TOOLSUSED FORSTUDY: Open Ended & Closed Ended Questionnaire

D) TECHNIQUESOF ANALYSIS:


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-Quantitative: One-way Anova & MS-Excel

DATA ANALYSIS AND INTERPRETATION

Part-I

I. Have you ever taken micro-credit?

OPTION NO. OF RESPONDENTS

YES 50

N0 10


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Interpretation:-

This shows that most of the respondents we cover were availing the service of micro-credit and

thus shows that micro-credit is playing vital role in their life in some or the other way.

II. What is your occupation?

Occupation

No. of respondents Percentage

Farmer 3 5%

Auto/rikshaw puller 9 15%

Business 22 37%

Service 18 30%

Others 8 13%


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service

30%

bussiness37%

auto/rikshawpuller15%

farmer5% others

13%

occupation

Interpretation:-

This shows that most of the respondents were indulged in the business and service class

contributing about 67% of the total respondents where respondents like farmers are low i.e. just

5% , with auto/rikshaw puller form 13 and 15% respectively

III. What is your income level (Per Month)?

Income level No. of respondents Percentage %

Below Rs. 5000/- 7 12

Rs.5000-10,000/- 17 28

Rs.10,000-15,000/- 21 35

More Than Rs.15,000/- 15 25


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Interpretation:-

The basic purpose to ask this question was to know the respondents who belong to income group

more than 15000/- were not availing much of the micro-credit facility this question furtherhelped us to conduct our study as only 6 people among this group are availing the service of

micro credit where as people belonging to the lowest income group i.e. 7 all are availing this

service.

IV. Which source you rely the most while taking micro-credit?(50 respondents)

Source No. of respondent Percentage %

Local-Money

Lenders

11 22

Public Banks 13 26

Self-Help Groups 0 0

Co-Operative banks 2 4

Private Banks 16 32


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Peers 3 6

NBFIs 4 8

Others 1 2

Local-MoneyLenders

22%

Public Banks

26%

Self-Help Groups

0%

Co-Operative banks

4%

Private Banks32%

Peers6% NBFIs

8%

others2%

Reliable Source

Interpretation:-

This shows that most of the respondents rely on private banks followed by public bankscontributing about 58% as the reliable source for taking micro-credit and then local money

lenders i.e. 22% where as others i.e. NBFC, peers, others contributes about 20% for total

respondents where as self-help groups have just 0% showing that self-help groups should be

formed in Jalandhar region as we know that self help groups have played a very significant role

in the South India for success of micro-finance there.

V. What are the reasons for which you have taken micro-finance?(50 respondents)

Reasons No. of respondents Percentage %

Seize business opportunities 22 44

to fulfill needs of necessities 10 20

Improve standard of living 4 8

Deal with emergencies like

illness etc.

14 28


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Interpretation:-

This shows that most of the respondents takes micro-credit to do some business so that they

could earn their livelihood for business the respondents contributes about 44% of the whole

respondents followed by to deal with emergencies i.e. 28% where as to improve standard ofliving and to fulfill necessities contributes about 28% of the total.

VI. If you are taking the micro-credit from banks which bank you prefer the most?

(50respondents)

Banks No. of respondents Percentage %

ICICI 12 24

PNB 3 6

HDFC 3 6

State Bank of Patiala 18 36

Punjab Grameen Bank 2 4

NBFIS 4 8


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Others 8 16

ICICI24%

PNB6%

HDFC6%

State Bank of Patiala

36%

Punjab GrameenBank4%

NBFIS8%

Others16%

BANKS

Interpretation:-

This shows that about 32% of the respondents are taking micro-credit from State Bank of Patiala

i.e. for 36% of total respondents followed by ICICI Bank contributing about 24% of total where

as for others its about 44% which is of NBFIs, Punjab Grameen Bank , PNB ,HDFC and others

sources.

VII. Rate the essence of micro-finance on the scale of 1-5?(60 respondents)

Scale 1 2 3 4 5

No.

Respondents

31 17 8 3 1


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0

5

10

15

20

25

30

35

Significant 1 2 3 4 5 Insignificant

scaling 1to5

Series 1

Interpretation:-

This shows that as most of the people lie between 1 to 2 rating on scale i.e. about 48 number of

respondents therefore we can say that micro-credit will have significant at present in Jalandhar

region as people at scaling rate of 4 and 5 are very low i.e. about 4 out of 60 respondents.

VIII. How much Interest rates are charged by micro-credit providers? (50 respondents)

Interest rates No. of respondents Percentage %

Below 5% Nil Nil

5-10 27 54


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10-15 13 26

15-20 3 6

20-25 6 12

More than 25 1 2

below 5%0%

5 to 10%

54%10 to 15%

26%

15 to 20%6%

20 to

25%12%

more than 25%2%

Interpretation:-

This show that most of the respondents are undertaking the micro-credit at the interest rate of

5 to 10 % that contributes about 54% of the total respondents followed by 10 to 15% interest

rates which are about 26 % of the respondents. It shows that respondents mostly prefer to

take micro-credit at the rate of 5 to 15 percent which accounts for 80% of the total

respondents. Whereas micro-credit is not available at a low interest rate of less than 5%.


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IX) How will you rate the present interest rates being charged on you for taking micro-credit?

Interpretation:-

This shows that most of the respondents are satisfied with the present interest rates charged on

micro-credits as most of the respondents lie between the rating scale of 1 to 2 i.e. about 37 out of

50 respondents who have undertaken the micro-credit.

Scale 1 2 3 4 5

No.

Respondents

23 14 8 3 2


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IX. According to you which factor will be more crucial for the growth of micro-finance in

Jalandhar city? (50 respondents)

FACTOR NO.OF RESPONDENTS PERCENTAGE %

LOW INTEREST RATES 8 16

TIME PROCESSING 12 24

INSTALLMENT FACTOR 2 4

AVAILABILITY 7 14

BUSINESS ASSISTANCE 18 36

OTHERS 3 6

Interpretation:-

This show that most of the respondents take micro-credit not only to get money for their business

but also to get business assistance to run their business successfully, here about 36% of the

respondents have stated that the business factor is the most important factor of the micro-credit

facility followed by time for processing which is about 26%, then availability, installment factor

and low interest rates forms about 38% of the total respondents.


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X. Do you think micro-finance is a tool to eradicate poverty? (60 respondents)

No. of respondents Percentage %

Yes 39 59

No 15 23

Cant say 6 18

Interpretation:-

This show that most of the respondents take micro-credit not only to get money for their business

but also to get business assistance to run their business successfully, here about 36% of the

respondents have stated that the business factor is the most important factor of the micro-credit

facility followed by time for processing which is about 26%, then availability, installment factor

and low interest rates forms about 38% of the total respondents.


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XI. Do you think micro-finance is a tool to eradicate poverty? (60 respondents)


Yes 39 59

No 15 23

Cant say 6 18

Interpretation:-

Most of the respondent feels that micro-finance will help to eradicate poverty i.e. about 59% of

the respondents as it have helped them to earn their livelihood where as 23% says no and rest 18

% were not able to make their judgment on this issue.


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XII. Do you think that micro-finance can be helpful for unemployed youth? (60 respondents)


Yes 25 42

No 27 45

Cant say 8 13

Interpretation:-

This shows that majority of the respondents say no i.e. about 45% but 42% says yes it can help

youth to remove unemployment as the variation between the two is quite low thus it will be

difficult to say whether micro-finance will help to eradicate the problem of unemployment

among the youth or not .

XIII. Do you think micro-finance can be helpful for women upliftment?(60 respondents)


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Yes 41 64

No 11 25

Cant Say 8 11

Interpretation:-

This shows that most of the respondents says that micro-credit will help in the upliftment of thewomen as more than 64% of the respondents agree with this statement only 25 % doesnt agree

with it as the variation is quite high thus we can say that it will help for women upliftment.

XIV. How do you anticipate future for micro-finance , rate it between 1-5 ?


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Interpretation:-

This shows that the future of the micro credit in Jalandhar region is going to be prosperous as

most of the respondents are between the scaling rate of 1 to 2 i.e. about 40 out of 60 respondents.

Rating

scale

1 2 3 4 5

No. of

respondents

26 14 9 7 3


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ANOVA

Sum of Squares df Mean Square F Sig.

occupations of the

respondents

Between Groups 50.768 3 16.923 66.667 .000

Within Groups 14.215 56 .254

Total 64.983 59

have you taken microcredit Between Groups 5.000 3 1.667 28.000 .000


Total 8.333 59

reasons for which you hav

taken micro finance

Between Groups 56.083 3 18.694 27.805 .000


Total 93.733 59

factor will be more crucial for

the growth of micro finance

Between Groups 99.528 3 33.176 28.551 .000

Within Groups 65.072 56 1.162

Total 164.600 59

micro finance is a tool to

eradicate poverty

Between Groups .686 1 .686 3.619 .072


Total 4.286 20

gender of the respondents Between Groups 9.257 3 3.086 33.600 .000


Total 14.400 59

source you rely the most

while taking micro credit

Between Groups 146.989 3 48.996 27.181 .000


Total 247.933 59

banks you prefer most for

micro credit

Between Groups 111.323 3 37.108 14.266 .000


Total 256.983 59

rate the essence of micro

finance on scaling

Between Groups 42.333 3 14.111 54.877 .000


Total 56.733 59

intrest rate charged by micro

credit porovider

Between Groups 28.145 3 9.382 8.636 .000


Total 88.983 59


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INTERPUTATION:-As we applied Anova test on this research ,we found that micro finance is

feasible in jalndher area and it is also a tool to eradicate the poverty. Because the rule of Anova

test the answer should be more than or equal to the significance level i.e 0.05 and the answer is .

072 .

FINDINGS & SUGGESTIONS

FINDINGS


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i. H1: micro-credit is feasible in Jalandhar region, as proved by Anova test.

ii. Most of the respondents below the income group of more than Rs. 15000/- are taking

micro-credit in order to start business, meet need of necessities or to meet certain

emergencies.50 out of 60 respondents are under taking this facility of micro-credit.

iii. Most of the respondents are taking micro-credit to start business in order to earn their

livelihood and so that they generate some regular source of income for their families.

These are about 44 % of the total respondents followed by ot deal with emergencies

such as illness etc. which is about 28%.

iv. Most of the respondents rely on both public and private i.e. about 58% of total

respondents collectively followed by Local-money lender i.e. about 22%. Showing

that respondents reliability towards public and private sector banks is maximum.

v. Most of the respondents have taken micro-credit from State Bank of Patiala i.e. about

36 % followed by ICICI bank which is about 24 % where as PNB, HDFC and Punjab

Grameen Bank are not being regarded as better source for taking micro-credit in

Jalandhar.

vi. As the range of micro-credit interest rates is between 5% to 25 % , most of the

respondents are paying interest rates between 5 to 15 % which forms about 80% of

the total respondents.

vii. Majority of the respondents are happy with the present interest rates being charged

on micro-credit.

viii. The business assistance factor has been regarded as the most significant factor of the

micro-credit which form about 62 % of the total respondents followed by time taken

and availability of micro-credit.

ix. About 59% of the total respondents say that, it will help to remove the poverty so it

can be seen as tool to remove poverty from Jalandhar region.


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x. For being helpful for unemployed youth 45% says no and 42% says yes , as the

variation between the two is quite low thus its difficult to judge , therefore we can

say it has neutral effect for helping unemployed youth.

xi. About 64% of the respondents says that , it will help in women upliftment therefore

it can be said it can play a vital role for women upliftment.

xii. Peers as the source of micro-credit has been regarded as the most favorable one in

terms of time, availability and effectiveness.

xiii. Local-money-lenders are high at availability but these are highly exploitive.

xiv. Private Banks such as ICICI, HDFC etc. has been regarded as highly courteous,

efficient and but these are a bit high at exploitive part too.

xv. Public Banks such as Punjab National Bank, State Bank of Patiala are moderately

rated

xvi. Self Help Groups and Co-operative Societies are highly moderate in nature.

SUGGESTIONS

a) People should be make aware about Self-Help Groups and various steps should be

taken by various Private and Public banks to form Self Help Groups among

masses.

b) Various NGOs should come forward to help poor people by helping them to

provide micro-credit at low interest rates and provide them business assistance.

c) Peoples reliability over Local-money-lenders should be tried to decrease as they

exploit poor by not only charging high interest rates but also in compounded form.


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d) The interest rates charges shouldnt be more than 15% for micro-credit as it

should be regarded as a tool for poors upliftment.

e) Public and Private sector Banks should try to open their own MFIs in Jalandhar

region.

f) There should be MFIs such as SSK working in South India, which is not only

working successful but also main reason for the success of microfinance in South

India.

CONCLUSION

i. To conclude we can say that its just the beginning of the micro-credit in Jalandhar region

and it will of more success when people will rely more towards organized sector for

micro-credit such as Public and Private sector banks.

ii. There is need for opening of MFIs in Jalandhar region so that micro-credit can be

provided with more of ease

iii. Micro-credit can be regarded as tool which will help to eradicate poverty

iv. Help for women upliftment by making them more independent and monitory fit.

v. Help poor to setup businesses and earn their livelihood.

Thus, we can say that micro-credit is of great significance and it will help poor for their

upliftment.


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References:

Johnson, S. (2004). "Gender norms in financial markets: Evidence from Kenya." World

Development 32(8): 1355-1374.

Cohen, M. and K. Wright (2003). "How do Micro-Finance organizations become more client-

led? - Lessons from Latin America." Ids Bulletin-Institute of Development Studies 34(4): 94-+.

Pretes, M. (2002). "Micro equity and Micro-Finance." World Development 30(8): 1341-1353.

McKernan, S. M. (2002). "The impact of Micro-Credit programs on self-employment profits:

Do noncredit program aspects matter?" Review of Economics and Statistics 84(1): 93-115.

MkNelly, B. and M. Kevane (2002). "Improving design and performance of group lending:

Suggestions from Burkina Faso." World Development 30(11): 2017-2032.

Patten, R. H., J. K. Rosengard, et al. (2001). "Micro-Finance success amidst macroeconomic

failure: The experience of Bank Rakyat Indonesia during the East Asian crisis." World

Development 29(6): 1057 1069.

Snow, D. R. and T. F. Buss (2001). "Development and the role of Micro-Credit." Policy

Studies Journal 29(2): 296-307.

Bhatt, N. and S. Y. Tang (2001). "Delivering Micro-Finance in developing countries:

Controversies and policy perspectives." Policy Studies Journal 29(2): 319-333


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de Aghion, B. A. and J. Morduch (2000). "Micro-Finance beyond group lending." Economics

of Transition 8(2): 401-420.

Evans, T. G., A. M. Adams, et al. (1999). "Demystifying nonparticipation in Micro-Credit: A

population-based analysis." World Development 27(2): 419-430.

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issues for implementation." Journal of Applied Social Sciences 21(1): 37-44.

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18, 2010

Anil K Khandelwal, Microfinance Development Strategy for India, Economic and Political

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R Srinivasan and M S Sriram, Microfinance in India- Discussion

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Delivery and Technology to reach small farmers, November, 2005

Shri Y S P Thorat, Managing Director, NABARD, Microfinance in India: Sectoral Issues and

Challenges, May, 2005

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Microcredit, Poverty, and Empowerment: Exploring the Connections:- Sujata Shetty.

Perspectives on Global Development and Technology. Leiden: 2010. Vol. 9, Iss. 3/4; pg. 356

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p.g.313,14pgs.

World News: India To Track Microloan Borrowers:- Eric Bellman. Wall Street Journal. (Eastern

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Does contingent repayment in microfinance help the poor during the national disastes? :-

Masahiro Shoji, The Journal of Development studies, London, Feb 2010, Vol.46,Iss 2; pg.191

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Samit Shankar Shetty, Business Daily from THE HINDU group of publications, Thursday, Nov

18, 2010

Learning from failures in microfinance: What unsuccessful cases tell us about how group-based

programs work:- Michael J V Woolcock. The American Journal of Economics and Sociology.

Malden: Jan 1999.

States: LIC targets urban poor for micro-insurance products:- Anonymous: Business Line,

Chennai: July 11:2008.

Microfinance: Lessons for the subprime world: Each women must have a support system of five

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National Mortgage News, New York, Dec 3, 2007. Vol.32, Iss:10, p.g.9

QUESTIONAIRE

SECTION I:

The answers to your survey will remain confidential. The answers are meant for survey

purpose only to help us understand the impact of micro-credit on livelihood of people.

Personal Information

NAME: __________________________________________

ADDRESS: ____________________________________________________________

_____________________________________________________________

AGE: ________________

SEX: MALE FEMALE

SECTION II:

XV. Have you ever taken micro-credit?

Yes No

XVI. What is your occupation?


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Farming Auto-rickshaw

Business Servicemen other____________

XVII. What is your income level (Per Month)?

Below Rs. 5000/- Rs.5000-10,000/-

Rs.10,000-15,000/- More Than Rs.15,000/-

XVIII. Which source you rely the most while taking micro-credit?

Local-Money Lenders Public Banks

Self-Help Groups Co-Operative banks

Private Banks Peers

Non-Banking Financial Institutes others____________________

XIX. What are the reasons for which you have taken micro-finance?

Seize business opportunities to fulfill needs of necessities

Improve standard of living Deal with emergencies like illness etc.

XX. If you are taking the micro-credit from banks which bank you prefer themost?

ICICI PUNJAB NATIONAL BANK

HDFC STATE BANK OF PATIALA


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PUNJAB GRAHMIN BANK NON-BANKING FINANCE CORPORATIONS

Others________________________

XXI. Rate the essence of micro-finance on the scale of 1-5?

Significant

Insignificant

XXII. How much Interest rates are charged by micro-credit providers?

Below 5%

5% - 10%

10% - 15%

15% - 20%

20% - 25%

Above 25%

XXIII. How will you rate the present interest rates being charged on you for taking micro-credit?

Significant Insignificant

1 2 3 4 5

1 2 3 4 5


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XXIV. According to you which factor will be more crucial for the growth of micro-finance in

Jalandhar city?

Low interest rates

Time for processing and sanctioning of loans

Installment factor

Availability

Business assistance

Others _____________________

XXV. Do you think micro-finance is a tool to eradicate poverty?

Yes No Cant say

XXVI. Do you think that micro-finance can be helpful for unemployed youth?

Yes No Cant say

XXVII. Do you think micro-finance can be helpful for women upliftment?

Yes No Cant say

XXVIII. How do you anticipate future for micro-finance , rate it between 1-5 ?

Prosperous Dim

1 2 3 4 5


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