1
CHAPTER- 1
INTRODUCTION
1.1 Microfinance – an overview
1.2 Statement of Problem
1.3 Review of Literatures and Research Gap
1.4 Objectives of the study
1.5 Hypothesis
1.6 Research Methodology
1.7 Research Framework
1.8
Scope and Limitation of study
1.9
Chapter Plan
2
Chapter-1
Introduction
1.1. Microfinance – an overview
Microfinance in recent times has been recognized and accepted as one of
the new development paradigms for alleviating poverty through social and
economic empowerment of the poor people especially women. Being one
of the most effective and friendly tools to alleviate poverty, it also takes
into account the social dimension aspect in doing away poverty to a great
extent. It has increasingly become a very popular and indispensable tool to
address poverty issues and women empowerment across the globe. Started
in Bangladesh in early 1980s, it has spread to virtually every corner of the
globe and has experienced a considerable growth during 1990s.
Micro finance is an important sector and has been playing a vital role in
fulfilling the eight Millennium Development Goals (MDGs) of reducing 50
percent of the absolute poverty of about 1.2 billion people living on less
than US$1 per day by 2015. World Bank reported that about 7,000
institutions have been involved in some form of micro-finance operations.
Microfinance operations are reportedly growing by 30 percent in a year and
repayment rates are as high as 97 percent in many parts of the world (Patel,
3
2002).1 A quote by Prof. Md. Yunus may be reflected upon to consolidate
this.
“Poverty is not created by poor people. They are very hard working and
intelligent people. Poverty is created by the system that we built, the system
that we learnt in our University classes. If we change the system, poverty
will be gone because it is not the fault of the person. It is externally
imposed phenomenon and not internally generated phenomenon”
Microfinance in general refers to a broad range of financial services such
as savings, deposits, loans, money transfers and insurance extended to the
poor, low income households and micro-enterprises. According to Task
Force (NABARD), microfinance is defined as provision of thrift, credit,
and other financial services and products of very small amounts to the poor
in rural, semi-urban areas for enabling them to raise their income levels and
improve living standards.2
Bangladesh has been recognized as the origin of microfinance. With his
outstanding contribution to eradicate global poverty and to help improve
the lives of tens of millions of people, Prof. Mohammed Yunnus, popularly
1 Patel, A.R. (2002). “Micro finance and Micro finance institutions-need for Bank‟s initiative &
Commitment”, National Bank News Review, April-June, pp32-38 2 NABARD (2000), “Summary and Recommendations of Task Force on Supportive Policy and
Regulatory Framework for Microfinance.” Mumbai
4
known as father of modern micro-credit system, lent out 27 US dollars to
42 people in 1976 and started a research project in Bangladesh in 1979 and
came out with the idea of micro-credit that resulted in the establishment of
Grameen Bank in 1983. As a result the microfinance sector today in
Bangladesh is strong and vibrant and its outreach extends to all corners of
the country reaching to about 8.3 millions of every single villager in
Bangladesh. Out of the four principle Micro Finance Institutions operating
in Bangladesh - BRAC, Grameen Bank, ASA and PROSHIKA, the
Grameen Bank has a special status in banking set up, the other three are
NGOs (Non Government Organisations). The first initiative of micro
credit/finance in India was taken up by NABARD in 1986-87 when it
supported and funded an action research project on saving and Credit
Management of Self Help Groups (SHGs) of Mysore Settlement and
Development Agency (MYRADA). Microfinance movement was formally
launched in 1992 with NABARD‟s pilot project for linking Self Help
Groups (SHGs) with Banks. Some notable NGOs like Association of Serva
Seva Farm (ASSEFA), People Rural Education Movement (PREM),
Professional Assistance for Development Action (PRADAN), Community
Development Society (CDS), etc. have done excellent works in the
promotion of SHGs and mobilization of thrift and disbursement of credit
during the pilot project periods.
5
Micro-credit system thereafter has gained recognition and has been
considered as an important instrument to provide credit for self
employment and other financial and income generating business activities
which also includes savings and technical assistance to very poor people.
NABARD‟s pilot phase of the SHG-Bank linkage program in 1992 can
thus be considered as the land mark development in the history of
microfinance in India.
India is known for its large banking networks consisting of Public Sector
Commercial Banks Private Sector Commercial Banks, Regional Rural
Banks, State Cooperative Banks and District Central Cooperative Banks.
In spite of presence of a wide network of rural bank branches that
implemented specific poverty alleviation schemes and self-employment
initiatives through bank credit for almost the past two decades, a large
number of poor continued to remain outside the fold of the formal banking
system. As per the report of All India Debt and Investment Survey 1991
there are approximately 24 percent of the Rural Household who accessed
debt with formal or informal sources of which 36 percent had to still
depend on informal credit systems namely loan sharks, shopkeepers etc for
meeting their credit requirements.
6
The SHG-Bank linkage program under the initiatives and advocacy of
NABARD and RBI has witnessed an exponential growth in terms of
progress resulting to growth of total nos. of SHGs accessing bank credit
from 32,995 in 1992-1999 to 4,35,40,000 in 2011-12. There has also been
a remarkable progress in respect of the total bank loan amount outstanding
to SHGs which has increased from Rs.571 million in 1992-1999 to Rs.
3,63,400 million in the year 2011-12.3 A congenial environment is required
to fuel the healthy growth of microfinance sector in the country. A high
level meeting on Microfinance held on August 6, 2003 and chaired by the
Deputy Governor of RBI, Shri Vepa Karmesaram to review and discuss the
issues of microfinance on following parameters - Structure and
Sustainability, Funding, Regulation and Capacity Building recommended
to have multiple agencies as intermediary, treating SHG finance as priority
sector lending, capacity building of SHGs and partner agencies, creation of
separate national microfinance development fund, etc. The Reserve Bank
of India also instructed banks to relax certain banking norms while dealing
with SHG clients in regard to KYC (Know Your Customer) norms. A
separate fund as a result called Microfinance Development Fund (MFDF)
with corpus of Rs.100 crores was created by Govt. of India in order to
promote microfinance movement in India. MFDF was re-designated as
3 NABARD (2012).”Status of Microfinance in India 2011-12”, www.nabard.org.
7
Micro Finance Development and Equity Fund (MFDEF) in the Union
Budget for 2005-06 and also raised its corpus to Rs.200 crores which is
maintained by NABARD. This clearly indicates that the Govt. is keen and
actively involved in the promotion of microfinance sector as a means to
alleviate poverty and to proliferate inclusive growth.
The SHG Bank Linkage programme with better access to credit brings in
its wake increased income to the SHG members. The government
undertakes several self-employment as well as wage employment
programmes to eradicate poverty from the masses. The SHG Bank Linkage
programme is one such programme, which has its impact on poverty
alleviation through group effort, which emanates from their own savings
and timely credit from various institutional agencies.4 The programme
however is not free from problems such as uneven spread across and within
different states, inadequate response from the banks, rapid promotion of
SHGs leading to large number becoming defunct and prevalence of high
rate of interest charged to ultimate borrowers raising questions about the
ability of the intervention for poverty alleviation.
4 SHG-Bank Linkage Programme for Rural Poor – an impact assessment by Puhazhendhi, V. and
Badatya, K.C. Copyright © 2002 by NABARD. Paper presented at the seminar on SHG-bank
Linkage Programme at New Delhi on 25th
& 26th
Nov‟ 2002, pp 38-41.
8
The eight states of India‟s North East namely Arunachal Pradesh, Assam,
Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura cover an
area of 2, 62,179 sq.km constituting 7.9 per cent of the country‟s total
geographical area, but have only 45 million people or about 3.7 per cent of
the total population of the country (2011 census).5 The region has about
4500 km of international borders with Bhutan, China, Myanmar, Tibet and
Bangladesh. Most of the land has a rough terrain and mountainous
periphery. The density of population in the region is 158 per sq.km. The
total literacy rate according to 2011 census varies from 66.95 per cent in
Arunachal Pradesh to 91.58 per cent in Mizoram. The region is
predominantly rural with over 84 per cent of the population living in the
countryside.
Endowed with rich natural resources, the region is identified as one of the
world‟s biodiversity hotspots; it hosts species-rich tropical rain forests and
supports diverse flora and fauna and several crop species. Despite being
rich in natural resources the region lags behind from the rest of the country
in terms of development. The overall economic development of all the
states of north east is found to be very low by any set of indicators as
compared to the other states of India mainly due to inadequate
5 DONER & NEC “North East Region Vision 2020”, www.mdoner.gov.in
9
infrastructure. The average Per Capita Income (PCI) of the NER for the
year 2010-11 is Rs. 49,228 as compared to the national average of Rs.
53,331 at the price level of 2004-05.6 Poverty ratio in NE region for the
year 2009-10 is 25.06 percent as compared to the national average of 29.8
percent. According to RBI, the region has also lagged far behind in the CD
(credit deposit) ratio at 32.03 as against the national average CD ratio at
78.1 in 2011-12.
Government of India in its effort to bring the region at par with other states
in the country has given emphasis on the development of infrastructure,
generation of employment and alleviation of poverty in the rural areas. A
number of schemes like Sampoorna Gram Rozgar Yojana (SGRY), Indira
Awwas Yojana (IAY), Pradham Mantri Gramodaya Yojana (PMGY),
Integrated Wasteland Development Programme (IWDP), Pradhan Mantri
Gram Sadak (PMGSY), etc, had been launched but the result has not been
very encouraging.
Microfinance program then started in the mid 90s after NABARD‟s strong
propagation of the concept throughout the region. Prior to that SIDBI had
started funding some NGOs for lending to groups but then it was premature
and so default rate was high. Rashtrya Grameen Vikas Nidhi (RGVN)
6 Pib.nic.in; http://www.mdoner.gov.in/content/poverty-estimates
10
during the early 90s played a pivotal role in supporting small NGOs in
developing SHGs through its NGO support programme. It started the
Credit Support Programme (CSP) in 1996-97and began working in various
clusters in Assam and Meghalaya by providing revolving fund to many
groups.
Many commercial banks such as Regional Rural Banks (RRBs) and co-
operative banks operating in the NER region with the support and
assistance from NABARD, started giving financial assistance to self help
groups formed by NGOs since 1999-2000. Under the NABARD‟s scheme
of SHG-Bank Linkage programme, nos. of SHGs accessing bank credit
rose from 34,238 in 2004-05 to 1,59,416 in 2011-12, registering growth
rate of about 365 per cent over the last eight years. Progress of SHG-Bank
linkage programme in the region is recorded comparatively higher in terms
of growth rate i.e. about 45 per cent per year. However, 1.59 lakh SHGs in
the North East Region is about 3.65 per cent only as compared to 43.54
lakh SHGs in all over India7. Regional and state imbalances in the growth
of micro-finance have raised many questions about its model and strategies
of the programmes.
7 NABARD (2012). ”Status of Microfinance 2011-12”, www.nabard.org.
11
Manipur is one of the most economically backward states within the North
Eastern Region as indicated by various socio-economic parameters and is
remotely located from mainland India. It covers a geographical area of
22,327 sq. km and has a population of about 27.22 lakh people as per 2011
census8. Imphal valley which constitutes 10 per cent of the state area
accommodates about 90 per cent of the populations. Literacy rate is 79.85
per cent which is higher than all India average of 74.04 per cent. The per
capita income of the state is Rs. 29,684/- as compared to all India average
of Rs. 53,331 in 2010-2011. Poverty ratio of the Manipur states stood at
47.1 per cent in 2009-2010 as against the all India average of 29.8 per cent.
The state has poor infrastructure in terms of power, road communication,
etc. The state had witnessed a slow pace of progress and development in
the last two decades due to poor governance, insurgency problems and
fluid law and order situation.
The number of scheduled commercial bank branches as on 31st March 2009
in Manipur is 80 as compared to all India bank branches of 79735. Average
population per branch is 33000 as compared to all India average of 15000
populations per branch indicating poor banking facilities in the state9. CD
ratio for the state is also low at about 30.1 as compared to the national
8 Economic Survey of India, 2011-12, Directorate of Economics and Statistics, Manipur.
9 Source: RBI statistics on Branch Banking 2009.
12
average of 78.1 as on March 31, 201210
. Therefore, many people are still
outside the banking system. In the absence of any well established NGO or
NBFC, microfinance is still at the initial stage with most of the NGOs
involved in the microfinance activities relatively new and small with few
staffs that generally depend on grant or subsidy from Donors or funding
agencies for taking up various social activities. Microfinance movement is
becoming increasingly popular in the rural areas of Manipur though it is
comparatively new as in the other parts of country. SHG formation has
become a movement in rural areas and as on 31-March-2012, 5807 nos. of
SHGs in Manipur have been provided credit link with banks with loan of
about Rs. 2300.18 lacs under SHGs-Bank linkage programme 11
. There are
about 900 NGOs in Manipur out of which about 75 NGOs are actively
involved in micro finance program. Many funding agencies, banks and
financial institutions such as SIDBI, RMK, RGVN, NEDFi, etc. of late
have also started funding to NGOs in Manipur for on-lending to SHGs.
1.2. Statement of the Problem
Microfinance as a strategic tool for poverty alleviation has become
increasingly popular in the rural, semi urban and urban areas of Manipur as
10
Reserve Bank of India – www.rbi.org.in 11
NABARD (2012).”Status of Microfinance 2011-12”, www.nabard.org.
13
in other parts of the country for enabling them to raise their income levels
and improve living standards. SHGs formation has become a vital
movement for rural development. The state of Manipur is still in the
nascent stage in regard to micro finance activities and the main concern of
practicing micro finance is its sustainability. In spite of SHG movement
spearheaded by ICM, Imphal and other Agencies, no much growth has
been visible in the area of micro finance programme. Moreover, it is
observed that the state government has not taken up any major steps for
introduction of any major schemes for SHGs in line with Rashtrya Mahila
Kosh, RGVN, SIDBI, NEDFi and other ICICI correspondents which have
given credit access to number of NGOs thereby linking many SHGs.
There are many other problems such as lack of awareness, lack of
commitment, lack of efforts on the part of implementing agencies, lack of
good and viable NGOs in the state, lack of motivation for women in
forming SHGs, lack of nursing and management, lack of proper training to
banks, NGOs and government officials, lack of co-ordination between
bank and block officials, non-delegation of adequate powers to branch
managers and weak credit structure of bank which hinder the progress of
SHGs. The microfinance market in India is not well developed
14
The Self Help Group model will remain as a dominant model for
microfinance in India for some time based primarily on the fact that the
Government still places emphasis on the SHG and its linkage programs as
the best means of channeling funds to the poor in rural areas even though
there are limitations in this model in terms of sustainability.
Micro finance program in Manipur is not up to the mark as compared to
other parts of the country in spite of government‟s efforts in the form of
SHG-Bank linkage program with its performance not satisfactory. It is
therefore imperative to know what really is happening at the grass root
level of the program. It is also important to know why NGOs are not
coming forward to the expected level in spite of many NGOs operating in
Manipur. The researcher wanted to understand the profile of SHGs in the
state of Manipur who are actively involved in microfinance. The researcher
also wanted to know the socio-economic impact on the SHG members due
to the microfinance programme interventions. Finally, the researcher would
like to know whether there is significant increase in overall socio-economic
empowerment of SHG members after joining microfinance programme of
MFIs in the state of Manipur.
15
Therefore, there is a need to study the impact of micro-finance program in
Manipur in terms of social and economic improvement due to microfinance
programme intervention.
1.3. Review of Literatures and Research Gap
The researcher read various articles on micro-credit models adopted around
the world and also reviewed various literatures on micro-finance activities
with reference to India. The researcher also reviewed various research
studies conducted on socio-economic impact of SHGs in India for better
understanding of microfinance sector in India. Relevant studies conducted
on various reports of Committee appointed by Reserve Bank of India (RBI)
were also referred for in depth understanding of current issues and
concerns in this sector. The researcher also conducted some background
studies on theoretical issues concerning the political, social and economic
history of Manipur with a focus on poor women.
Puhazhendhi and Satyasai under NABARD conducted the first impact
study on SHG-bank linkage programme in 2000. The study assessed the
impact of microfinance on socio-economic conditions of 560 household
members from 223 SHGs located in 11 states. The results of the above
study suggest that lifestyles of members have changed after getting into the
16
SHG –bank linkage program in social and economic terms. The average
value of assets per household (including consumer durables and livestock)
was Rs. 6,843 during the pre-SHG period, which increased by 72.3 per cent
to Rs. 11,793 in the post-SHG period. Only 23 per cent of the members had
some savings during the pre-SHG period in contrast to almost all
interviewed members who saved during the post-SHG period. The average
household saving was merely Rs. 460 during the pre-SHG period, which
increased manifold to Rs. 1,444. Similarly, average borrowings rose from
Rs. 4,282 during the pre-SHG period to Rs. 8,341 in the post- SHG period.
Most significantly, this increase was spent for income generating purposes
by a large number of households during the post-SHG period. With regard
to social aspects, the study found that becoming members of SHGs and
associating in its activities had significantly contributed to improving the
self-confidence of the participating women. In addition, the study stated
that the composite index of different socio-economic parameters increased
from 40 to 65 from the pre-SHG to post-SHG period.
A study by MYRADA (2002)12
on women‟s empowerment of SHG
members commenced in 2002 for the southern region‟s states. In all, 130
12
MYRADA (2002), „Impact of Self Help Groups (Group process) on the Social/Empowerment
status
of Women members in Southern India‟, paper presented at the seminar on SHG-bank Linkage
Programme at New Delhi on 25th and 26th November 2002.
17
SHGs were surveyed and it covered four professionally managed NGOs
(DHAN, RASS, CHASS and MYRADA), one from each state. The
“empowerment” of a SHG member is defined in terms of her influence
over the family‟s economic resources and her participation in its economic
decision-making. In addition, the influence made by her on her own
development as an individual, power over local polity and participation in
socio-political decision-making and influence over other decisions
pertaining to general welfare of the family are considered.
A study by Prabhu Ghate (2007)13
highlighted the findings of recent studies
on the SHG-Bank Linkage Programme (SBLP)-microfinance institutions
model in India and in other countries. The study also presented the overall
view of microfinance in India, progress under SHG Bank linkage
progreammes, MFI performance, social performance, micro insurance, use
of technology, microfinance bill and regulation.
Moyle, Dollard and Biswas (2006)14
assessed the economic and personal
empowerment of 100 women aged between 16 and 65 years, participating
13
Ghate, P. (2007). “Microfinance in India: A state of sector Report,2007”, Ford Foundation,
Delhi 14
Moyle, Dollard and Biswas (2006), „Personal and Economic empowerment in Rural Indian
women:
A Self-help Group Approach‟, International Journal of Rural Management, 2, Sage
Publications.
18
in SHGs from two villages (Delwara and Shishvi) in Rajasthan. Based on
qualitative data, the study found that after joining SHGs, the members
achieved both economic and personal empowerment in terms of collective
efficiency, pro-active attitudes, self-esteem and self efficacy. The study
also reported that most of the women experience pressure, challenges and
stress due to extra work and more responsibilities.
A nation-wide Impact Assessment Study of its micro finance programme
was conducted by SIDBI (2008)15
from 2001-2007 covering 4510
households comprising 3253 households and 1257 non-client households
of 25 MFIs. The study highlights the benefits received by the client
households from their association with micro finance, in terms of
expansion of diversification of livelihood activities, growth in employment
opportunities, income growth, asset-acquisition, savings, access to loans,
reduction in vulnerability and enhancement of women empowerment.
The study of Sinha and Roy (2008)16
assesses the impact and sustainability
of SHG bank linkage on the socio-economic conditions of the individual
15
SIDBI (2008), “Assessing Development Impact of Micro Finance Programmes: Findings and
Policy
Implications from a National Study of Indian Micro Finance Sector”
16
Sinha, A, Roy, P.K., et.al (2008). “ Impact and sustainability of SHG Bank Linkage
Programme”, GTZ-NABARD.
19
members and their households in the pre-SHG and post-SHG scenarios.
The study was conducted for India as a whole covering six states (Andhra
Pradesh, Karnataka, Maharashtra, Orissa, Uttar Pradesh and Assam) from
five different regions, namely the south, west, east, central and north-east.
The overall findings of the study suggest that SBLP has significantly
improved the access to financial services of the rural poor and had
considerable positive impact on the socio-economic conditions and the
reduction of poverty of SHG members and their households. It has also
reportedly empowered women members substantially and contributed to
increased self-confidence and positive behavioural changes in the post-
SHG period as compared to the pre-SHG period.
The study of Archana Sharma (2002) on “Working of Self Help Groups and
their impact on women, Assam State Resource Center, Guwahati’”
analyzed the size, composition and characteristic of the SHGs in Assam.
The work of Swapan Kumar Sinha (2000) on “Micro Finance through Self
Help Group and its impact on socio, economic empowerment of the poor, A
case study of Kamrup district of Assam” emphasized impact of micro
finance programme as lending by the three sample NGOs only.
20
The study of Dr. Amiya Sharma (2005), NEDFi on “Self Help Groups of
Assam, funded by UNICEF through the Department of Panchayat & Rural
Development, Govt. of Assam”- discussed the profile of SHGs of Assam in
term of locations, number of groups, gender composition saving, internal
and external lending of the groups and linkages with other financial
organizations.
The work of Richard I Meyer (2002) on “Microfinance Poverty, Alleviation
and Improving Food Security, Implication for India” discussed merit &
demerit of SHGs linkage with bank & various other models.
The study of IIBM, Guwahati on “Expanding outreach to underserved
regions: Microfinance in the North East Region” gave the over view of the
current status of sector, sustainability of NGO-MFIs, informal or
traditional institutions and also examine the policy environment of micro
finance sector in the NE region.
On Research paper of V. Puhazhendhi & K.J.S. Satyasai, National Bank
News Review (Jun2002) “ Empowerment of Rural Women through Self
Help Groups-An Indian Experience” on 223 SHGs in 11 states found that
microfinance programme have positively contributed for the economic and
social empowerment of rural poor.
21
On research paper of H.S. Shylendra with the title” The SHG-Bank Linkage
Programme” published in Journal of Rural Development Vol 23(4) pp
411-433, NIRD, Hyderabad critically examined the Assam SHG-Bank
linkage on its approach and the strategy and the possible ways to take it
forward.
Some of the literatures reviewed for better understanding of concept of
impact assessment methodologies and techniques are:
Chen and Snodgrass (1999)17
carried out impact assessment study of
SEWA Bank in India at three different levels i.e. at household level, at
enterprise level and at individual level. Study reveals that participation in
microenterprises services leads to an increase in the level of household
income, improvement in housing, increase in microenterprise revenues,
increase in self-esteem and self-confidence etc.
Barnes, Morris and Gaile (1998)18
have taken following broad four
parameters for their baseline study in Uganda i.e. 1) improvements in the
17
Chen, M.A. and Snodgrass, D. (1999), “An Assessment of the impact of SEWA Bank in
India-Base line findings”, AIMS, USAID, Washington D.C.
18
Barnes, C., Morris,C. and Gaile,G. (1998). “An assessment of impact of microfinance services
in Uganda, Baseline findings”, AIMS, USAIDS, Washington, D.C.
22
economic welfare of households; 2) enterprise growth or stability; 3)
increase in empowerment, especially among women; and 4) strengthened
social and rural networks.
Cohen and Chen (1997)19
explained their framework for core hypothesis
for measuring impact of microfinance at individual level. The framework is
based on following broad parameters: material change (income, earning
capacity, resources control, basic needs etc), cognitive change (knowledge,
skills and awareness), perceptual change (self esteem, self confidence,
future vision and respect) and relational change (decision making,
bargaining power, participation, self reliance and organizational strength).
Cohen and Dunn (2002)20
described the core impact hypotheses into three
broad categories: Impacts at the household (H) level; increase in household
income, assets, improvement in housing, increase in expenditure on
children education and food, increase in ability in coping with shocks, etc.,
Impacts at the enterprise (E) level; increase in microenterprise revenue,
fixed assets, employment generation, business relationships, etc. and
Individual(I) level; increase in control over resources and income, self
19
Cohen, M. and Chen, M.A.(1997). “A Guide for assessing the microenterprise services at the
individual level” AIMS, USAID, Washington, D.C
20
Cohen, M. and Dunn, E. (2002). “Research Strategy for the AIMS Core Impact Assessment”,
AIMS
23
esteem and respects, increase in personal savings, increase self confidence
,etc.
David Hulme (1997)21
described various methodologies of impact
assessments such as sample surveys, rapid appraisal, participant
observation, case study and participatory learning and action along with
their strengths and weaknesses. The choice of methods is based on
objectives, costs and feasibility.
The researcher also reviewed some of the reports of Committee set up by
Govt. of India for better understanding of microfinance sector from the
perspective of policy makers or regulatory authorities. The Task Force on
Supportive Policy and Regulatory Framework for Micro finance (Task
Force) chaired by NABARD (1999) had, recommended a classification of
MFIs based on whether they offered deposit facilities or not and a graded
system of external supervision depending on the amount and source of
deposits. The Internal Group on Micro Finance Regulatory Issues (2003)
set up by RBI looked at the micro finance sector as a multi-tiered structure
consisting of SHGs, NGOs, Micro Credit Institutions and Micro Finance
Institutions. It favoured the lending agency to intensify monitoring of the
21
David Hulme,1997, “ Impact Assessment Methodologies for microfinance: a review”, AIMS,
University of Manchester
24
SHGs so as to ensure that the groups do not lend outside the group,
establish maximum exposure norms per individual in the group and annual
rating by the banks to ensure that there are no slippages. In case of the
NGOs, it recommended that the entities that have started lending convert
themselves as cooperative societies under Mutually Aided Cooperative
Societies (MACS) or section 25 companies or NBFCs. It advised that the
NGOs should stop taking deposits, place a credit cap of Rs. 50,000/- per
member and have transparency in pricing. It also recommended that micro
finance institution may be allowed to become an NBFC with a reduced
entry level capital of Rs. 25 lakh if they are exclusively financing SHGs
but may be permitted to accept deposits only if the capital is Rs. 200 lakh.
The Internal Group to examine the issues relating to rural credit and
microfinance headed by H.S. Khan (2005), RBI recommended Business
Facilitator Model and Business Correspondence Model for linking banks
and external entities to provide comprehensive financial services to rural
people.
From review of the above studies and literatures, it was found that while
several studies discussed mainly various socio-economic parameters of
SHG members related to the situation during pre-SHG and post- SHG
25
periods, other studies assessed more specific type of issues such as role of
SHG federations in providing sustainability of SHGs, economic and
personal empowerment of women and role of microfinance in poverty
eradication.
Many relevant studies were conducted on micro finance specially SHG-
Bank linkage programmes in India, however a few research was done on
microfinance activities in the North East India more particularly in the state
of Manipur. It is also observed that none of the study really addressed its
impact on socio economic well being of SHG members for sustainable
growth of microfinance industries in the future.
Therefore, more research studies are needed for in depth understanding of
microfinance operation of NGO-MFIs and its socio-economic impact on
SHG member or clients which will help the policy makers or practitioners,
funding agencies, etc. for making the sector healthy and sustainable.
1.4. Objectives of the study
In view of increasing microfinance activities by banks and NGO-MFIs,
there is a need to study the socio-economic impact of micro-finance
program on SHG members in the state of Manipur. In order to understand
26
and explore the ground reality and impact of the microfinance intervention
program, the main objectives of the research study were as follows:
a) To draw the profile of the SHG members assisted by MFIs in
Manipur.
b) To examine the economic impact of microfinance on SHG members
assisted by MFIs in Manipur
c) To examine the social impact of microfinance on SHG members
assisted by MFIs in Manipur.
d) To summarize the major findings and to recommend for improving
the products & services of MFIs.
1.5. Hypothesis
The main hypothesis governing the study was:
“There is significant increase in overall socio-economic empowerment of
SHG members after joining microfinance programme of MFI in the state
of Manipur”.
1.6. Research Methodology
a) Type of research
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The nature of the research used for the study was exploratory research to
understand the real scenarios of microfinance activities at the grass root
level and also to test the hypothesis formulated for the proposed study.
b) Universe of Study
In Manipur, there were about 75 NGOs which were directly associated
with microfinance. So, the universe of the study consists of SHGs members
of 75 NGOs. The universe of the individual SHG members were all the
SHG members of the NGOs selected for the study.
c) Sample Size
For the purpose of study, only 20 NGOs which is 26 per cent of 75 NGOs
which were directly involved in microfinance were considered. So the
sample size of NGOs was 20.
In all there were 15,018 individual members of 20 NGOs. With the help of
sample size determination software, the calculated sample size was found
to be 120 SHG members at 8.91 per cent of confidence interval. So the
sample size was 120 SHG members.
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d) Sampling Method
A multistage sample design was adopted for selecting the sample SHGs
and sample SHG members to be interviewed in the survey.
First stage: 20 NGOs were selected from 75 NGOs by using simple
random sampling with replacement which comes under Probability
sampling method.
Second stage: From each of selected NGOs, 3 SHGs were again chosen
by using simple random sampling method. Thus, 60 SHGs were taken for
the study.
Third stage: 2 individual SHG members were selected to be included in
the sample by using simple random sampling from each of the 60 SHGs
identified. Therefore, in all there were 120 SHG members which were
covered under the study.
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e) Sources of data and data Collection method
Both primary and secondary data were used for the study with secondary
data collected from various Government Departments, Financial
Institutions, and Banks. The primary data were collected through interview
schedule from SHG members promoted by NGO-MFIs. Focus group
discussion and observation method were also used apart from the interview
schedule to collect data.
In order to assess the impact of microfinance, the “before and after”
approach was primarily followed. A structured questionnaire targeting
SHG members was completed using the focus group discussion method,
which facilitated the collection of qualitative data from the group, as well
as quantitative data from the records maintained by SHGs. Feedback
collected from the functionaries of NGOs associated with the SHGs
facilitated cross-checking of data.
The responses on problems faced by the SHGs and their suggestions on
improvement of the SHGs‟ performance were gathered through
discussions. Relevant data were also collected through pre-structured
questionnaires, covering the qualitative and quantitative aspects of SHGs
and their members before and after bank linkage. The consistency of data
30
collected from primary sources was ascertained by using different styles of
questions to capture the same information. The validity of the information
was crosschecked through NGOs to get reliable information on the pre-
SHG situation.
f) Research Framework
Considering the objectives and scope of study, the research framework was
formulated to allow in depth study of microfinance activities on SHG
members. Comprehensive study was done using standard statistical tools
and techniques.
Impact Assessment of Individual SHG Members
The success of any development program is generally judged based on the
impact assessment of program i.e. how the program has really benefited the
target group over the years. Thus, the impact assessment of microfinance
programs of NGO on the individual SHG members is one very important
concern for the implementing agencies, funding agencies, policy makers,
regulators, govt. agencies, etc.
31
Impact Assessment of Individual SHG Members is generally measured
using AIMS‟s Core Impact Assessment technique which is based on
three levels i.e. household level, enterprise level and individual level. The
major economic impact parameters used for the study were - change in
personal income from enterprise, household income, household savings,
household expenditure, access to credit and micro insurance products.
Whereas, the parameters used for measuring the social impact were self
confidence level, ability to take decision, social awareness and social
responsibility, skill development, access to better health services and other
social infrastructure facilities.
g) Data Analysis
Descriptive statistics were used for summarizing the data. Correlation
Analysis, Independent Sample t test and ANOVA test were used for
analyzing the data. SPSS, a standard statistical software tool was used for
analyzing the data.
h) Period of study
For analyzing the profile and socio economic impact of SHG members,
primary data was collected during the period 2011-2012. Therefore, the
reference year of the study is 2011-12.
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i) Report Presentation
The report of the findings of the present study is presented by using
tabulation and descriptive style of presentation for easy grasping and
understanding of the findings. Wherever possible, graphs & charts are also
used.
1.7. Research Framework
Considering the objectives of research work and hypothesis, a suitable
research frame work has been developed. The research frame work is based
on study of socio-economic impact on SHG members associated with MFIs
and the main hypothesis is formulated to test significant improvement in
their socio-economic empowerment index after joining the microfinance
programme. The research frame work based on which the study was
carried out is depicted as given in the figure:
33
Fig 1.1
1.8. Scope and Limitation of the Study
The research was restricted to 20 NGOs only and 120 SHG members
promoted by NGOs of Manipur. The study therefore was limited to only
NGOs & SHGs who were involved in micro-finance activities. The study
did not attempt to study other organization or voluntary organizations
EEI-Economic Empowerment Index
SEI-Social Empowerment Index
SHG
Members
EEI SEI
Research Framework (Model)
MFIs/NGOs
Hypothesis
Testing
Socio-Economic
Impact
34
involved in social development activities. The study did not attempt to
cover SHGs promoted by other agencies such as Banks, Govt. Agencies
etc. Therefore, no attempt was made to generalize the finding for other
region or for India as whole.
1.9. Chapter Plan
Chapter-1: Introduction
This chapter with the heading “Introduction” describes about the overview
of microfinance and its progress in India, statement of problems, review of
literature, research gap, research methodology and the chapter plan.
Chapter-2: Conceptual review of Microfinance
This chapter with the caption “Conceptual review of Microfinance” gives
snap shots of microfinance sector after review of various literatures
relevant to the study. Historical background of microfinance, concept of
microfinance and Self Help Groups (SHGs), credit delivery models of
microfinance, evolution and progress of microfinance in India,
microfinance movement in North Eastern region and Manipur in particular
and impact assessment methodology of SHG members are briefly
discussed in this chapter.
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Chapter-3: Profiles of Self Help Group members in Manipur
With the title “Profiles of Self Help Groups in Manipur”, this chapter
describes the nature and characteristics of sample Self Help Group
members of Manipur in terms of age, gender, marital status, monthly
income, housing etc.
Chapter-4: Economic Impact on SHGs Members
In this chapter, economic impact of microfinance intervention programs on
SHG members is studied in term of improvement in business income,
house hold income, household savings, etc before and after joining the
program.
Chapter-5: Social Impact on SHGs Members
Non-Governmental Organization (NGOs) being non-profit organization
with social development objectives have been important player as
facilitator or intermediary in microfinance movement in India. NGO-MFIs
have been playing significant roles in supporting and nurturing SHGs by
not only extending credit or other financial services to SHGs but also in
many ways. This chapter describes about research findings of social
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impact on SHG members in terms of self confidence, decision making,
skill development etc.
Chapter-6: Socio-Economic Empowerment Index
The findings on analysis of change in socio-economic empowerment index
of the SHG members after joining microfinance are presented in this
chapter.
Chapter-7: Summary Findings and Recommendations.
In this last chapter with the tile “Summary Findings and
Recommendations” briefs about the summary of major findings of the
study and recommendations for improving the products and services of
MFIs.