Microfinance is a flexible means to widen access to financial services, both to help alleviate poverty and to encourage private sector activity. The principal objective of this is to raise incomes and broaden financial markets by providing financial services (principally credit) to small-scale entrepreneurs who otherwise lack access to capital markets. Some of the programs have primarily social missions, focusing on outreach to women and measuring success in terms of poverty alleviation.
A range of financial and social justifications underpin micro-finance. Mayoux (2003) has described three paradigms of micro-finance: The three paradigms constitute distinct discourses arising from different political and value premises.
The three paradigms are,
• The Financial Sustainability paradigm: This argues that group lending is good business for banks.
• The Poverty Alleviation paradigm: This aims for communitarian self organized development.
• The Feminist Empowerment paradigm: This argues that women need to organize themselves to escape their double oppression, both as women in the patriarchal gender order and within the working class
Now, the success of a microfinance programme cannot be measured only from the standpoint of high repayment ratio but also from the perspective of how far self-sufficiency has been achieved. Four basic factors that influence the consumption behaviour of marginalized people, which impinge on the success of microfinance, are,
• Awareness: Lack of awareness is the first structural hurdle. Awareness has to be created among beneficiaries so that they become motivated and cognizant of the outcome of empowerment. Beneficiaries need to be aware of opportunities through empowerment and understand the incentives that allow them to lead a better quality of life. Most of the people are not aware of their power to bargain for a lower interest rate from the banks, which have low default rates, unlike blue-chip corporate bodies that have high credibility and which borrow from banks at only 6-7% per annum.
• Self-esteem: Traditionally the trade carried out by individuals in rural areas is hereditary, and this imposes informal constraints on their lives. This continuous negligence by society leaves them in a state of very low self-worth. Inculcating a feeling of self-esteem in them will generate a much greater success of the programme.
• Dependence: It has been observed that social beliefs and customs are too strong for individuals to appreciate the benefits of self-reliance. For instance, it is believed that sons must support their parents in their old age; this is a deep rooted phenomenon in Asia, where family ties are strong. This dependence on familial ties for succour is a deterrent to independence. There are innumerable cases where the members cannot make consumption of investment decisions without the SHG’s help
• Sustainability: This can only be achieved when the micro financer ensures that the source of income is self-generating. The inability to sustain income flow is a major impediment to empowerment. Dropouts from SHGs are an indication of the failure of the microfinance programme, this is a result of direct or indirect result of the inability of microfinance programmes in such a way that the client comes out of poverty.
Hypothesis: “Is microfinance empowering the poor and helping India grow across all the sectors of society”
The success of micro financing can be measured in terms of the following dependent variables,
• No. of beneficiaries.
• Amount of credit disbursed.
• Recovery Rates.
• Profit flows.
• Ability to provide continuous sustained employment and earning.
• Socio-economic status.
This study also intends to do a secondary analysis on all available sources of financing and their comparison.
A range of financial and social justifications underpin micro-finance. Mayoux (2003) has described three paradigms of micro-finance: The three paradigms constitute distinct discourses arising from different political and value premises.
The three paradigms are,
• The Financial Sustainability paradigm: This argues that group lending is good business for banks.
• The Poverty Alleviation paradigm: This aims for communitarian self organized development.
• The Feminist Empowerment paradigm: This argues that women need to organize themselves to escape their double oppression, both as women in the patriarchal gender order and within the working class
Now, the success of a microfinance programme cannot be measured only from the standpoint of high repayment ratio but also from the perspective of how far self-sufficiency has been achieved. Four basic factors that influence the consumption behaviour of marginalized people, which impinge on the success of microfinance, are,
• Awareness: Lack of awareness is the first structural hurdle. Awareness has to be created among beneficiaries so that they become motivated and cognizant of the outcome of empowerment. Beneficiaries need to be aware of opportunities through empowerment and understand the incentives that allow them to lead a better quality of life. Most of the people are not aware of their power to bargain for a lower interest rate from the banks, which have low default rates, unlike blue-chip corporate bodies that have high credibility and which borrow from banks at only 6-7% per annum.
• Self-esteem: Traditionally the trade carried out by individuals in rural areas is hereditary, and this imposes informal constraints on their lives. This continuous negligence by society leaves them in a state of very low self-worth. Inculcating a feeling of self-esteem in them will generate a much greater success of the programme.
• Dependence: It has been observed that social beliefs and customs are too strong for individuals to appreciate the benefits of self-reliance. For instance, it is believed that sons must support their parents in their old age; this is a deep rooted phenomenon in Asia, where family ties are strong. This dependence on familial ties for succour is a deterrent to independence. There are innumerable cases where the members cannot make consumption of investment decisions without the SHG’s help
• Sustainability: This can only be achieved when the micro financer ensures that the source of income is self-generating. The inability to sustain income flow is a major impediment to empowerment. Dropouts from SHGs are an indication of the failure of the microfinance programme, this is a result of direct or indirect result of the inability of microfinance programmes in such a way that the client comes out of poverty.
Hypothesis: “Is microfinance empowering the poor and helping India grow across all the sectors of society”
The success of micro financing can be measured in terms of the following dependent variables,
• No. of beneficiaries.
• Amount of credit disbursed.
• Recovery Rates.
• Profit flows.
• Ability to provide continuous sustained employment and earning.
• Socio-economic status.
This study also intends to do a secondary analysis on all available sources of financing and their comparison.
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