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20628500-Micro-Finance.ppt

Microfinance aims to provide small loans, savings, and other financial services to poor individuals who lack access to traditional banking services. It has been successful in empowering disadvantaged groups and alleviating poverty, but some challenges remain. The Indian microfinance sector is growing rapidly but still faces issues like regional imbalances, promoting livelihoods over just credit, optimal government involvement, and ensuring long-term sustainability and outreach of microfinance institutions. Addressing these challenges could help microfinance better achieve its goals.

Economy & Finance◦
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MICRO FINANCE- EMPOWERMENT OF SOCIALLY DISADVANTAGES GROUP; CHALLENGES AHEAD • Supervisor’s name – Prof. Sunita Agarwal • The name(s) - Veena Mahesh Baghel • Affiliations(s) - Research Scholar-PAHER Society, Udaipur 4-2-2011 MICROFINANCE 1
Microfinance • Microfinance is defined as the provision of saving, credit and other financial services and products of small amount to the poor for enabling them to raise their income level and improve living. • The institution that provides these services to the poor is called as Microfinance Institution. 2 MICROFINANCE
INTRODUCTION As suggested by the name, micro finance, most transactions involve small amounts of money, frequently less than Rs.5,000. Some governmental organizations define micro finance as amounts below Rs.25,000. Microfinance has been hailed as one of the greatest innovations in attempts to alleviate poverty in the third world in the recent history. 3
Current secenrio MICROFINANCE 4 The Indian microfinance sector is expected to grow nearly ten times by 2011 to a size of about Rs250 billion from the current market size of Rs27 billion, at a compounded annual growth rate of 76%.
Research methodology • Methodology • The study is based on secondary data derived from various published sources. The required data has been collected from NABARD reports on Banking, journals and books. The collected data is compiled and analyzed for the purpose of the study. MICROFINANCE 5
Impact of Microfinance on women • Increasing women’s income level • Control over income leading to greater levels of economic independence. • Enhancing perceptions of women’s contribution to household income and family welfare • Increasing women’s participation in household and decision making. • Access and control over assets. 6 MICROFINANCE
Determinants of empowering women • Microfinance influences the following determinants of empowering low income women: • participation in household decision making, • self confidence, • status in the family, • involvement in the community, • Awareness of rights. MICROFINANCE 7
SELF HELP GROUPS(SHGs) • Major role on poverty alleviation in rural india • Actively engage in saving and credit • Create some contorl over capital-very small amounts • Gradually away form explotation and isolation Definition-NABARD (1997) defines SHGs as "small, economically homogenous affinity groups of rural poor, voluntarily formed to save and mutually contribute to a common fund to be lent to its members as per the group members' decision". The programme has reached to linking of 69.5 lakh saving-linked SHGs and 48.5 lakh credit-linked SHGs and thus about 9.7 crore households are covered under the programme fromformal financial system and informal sector. 8
Models of micro finance  SHG - Bank Linkage Model-three are three models in this : • Model – I: BANK –SHG-Member; Formation and promotion of SHG IS done by Bank by opening a saving account & then provide credit. • Model – II: BANK (Facilitating Agency) – SHG – Members; NGOs, Government Agencies (DRDA/DWDA/COOPERATIVES) or Community based organizations act as facilitating agencies to form SHGs. Seventy % SHG are linked with this. • Model – III: Bank- NGO –MFI- SHG – Members; Here SHGs are nurtured, promoted and financed by NGOs Who worked as facilitator and Micro finance intermediaries (MFIs).  M FI Bank linkage model MICROFINANCE 9
Types of Microfinance Institutions Formal / Banks Comprises of Apex Development Financial Institutions, Commercial Banks, Regional Rural Banks, and Cooperative Banks providing micro finance services in addition to their general banking activities - referred to as microfinance service providers Informal /Non-Banks Informal institutions that undertake micro finance services as their main activity are generally referred to as micro Finance Institutions (MFIs)
Challenges ahead • Regional Imbalances • From credit to enterprise • Impact of SGSY • Role of State Governments • Emergence of Federations • Financial inclusion of rural women • Livelihood promotion • Capacity building • Low bank loan per SHG • Micro Insurance products • Loan repayment MICROFINANCE 11
My Findings are, • Govt should concentrate on the structure of micro finance institutions and its functions by monitoring, regulating, providing subsidy component in different schemes, such as SGSY Govt. providing subsidy of Rs 15000, it has dampened the impact on SHG-BLP switch over the clients due to subsidy component. • Private and foreign banks should open their branches in rural sectors. • Grameen bank has repayment system of 50 weekly equal installments; it’s not feasible as rural women do not have stable work so pressure on high repayment may drive them to money lenders that defeat the micro finance concept. RRBs lacks due to collateral based lending, inequitable distribution of assets resulted skewed distribution of institutional credit and access, less extension of branches, lack of motivation of staff in rural areas is a major problem. MICROFINANCE 12
Findings • The SHG Bank-Linkage programme needs to introspect whether it is sufficient for SHGs to only meet the financial needs of their members, or on their part to meet the non-financial requirements necessary for setting up businesses and enterprises. • SHGs are local institutions having an inherent potential to flower as decentralized platform for development, but multiple expectations could overload them, impair their long-term sustainability. • Appropriate legal structures for the structured growth of microfinance operations. • Ability to attract and retain professional and committed human resources. • Ability to innovate, adapt and grow. 5/23/2023 MICROFINANCE 13
conclusion • The principles of Self Help and micro credit thus hold the key to economic and socio-cultural freedom for India’s millions of poor undoubtedly have long term socio economic benefits by serving human enterprise. Only spreading the outreach of micro finance will bring down the cost of capital and the operating cost and to strengthen the bonding between micro finance and the formal financial system. • Microfinance in India appears to be positive remains a powerful tool for development. It may not be a panacea, but it has brought a sea of change in the lives of many. Effort must be made to ensure that microfinance institutions are efficient, well resourced and structured in other to sustain the institution. MICROFINANCE 14