7/30/2019 Chapter 1 (Repaired)
1/70
PROJECT REPORT
ON
IMPACT OF MICROFINANCE ON LIVING STANDARD,
EMPOWERMENT AND POVERTY ALLEVIATION
Submitted in the partial fulfillment for the degree of Masters
in Business Administration (2011-2013)
SUBMITTED TO: SUBMITTED BY:
Dr.Gurcharan Singh Balkarnvir Singh
Project Guide Roll No: 6299
MBA 2nd
Year
SCHOOL OF MANAGEMENT STUDIES
PUNJABI UNIVERSITY, PATIALA
7/30/2019 Chapter 1 (Repaired)
2/70
PREFACE
Someone has rightly said that practical experience is far better and closer to the real world
than mere theoretical exposure. The practical experience helps the students to view the real
business world closely, which in turn widely influences their perceptions and arguments their
understanding of the real situation.
Research work constitutes the backbone of any management education programme. A
management student has to do research work quiet frequently during his entire span.
The research work entitled IMPACT OF MICROFINANCE ON LIVING STANDARD,
EMPOWERMENT AND POVERTY ALLEVIATION.
MBA is the stepping stone to management care in order to reach practical and concrete
results. Our contemporary lives have been influenced by the advancement and growth in e-
services being provided by the banks nowadays.
The course deals with matters, which are basic and should be known in relation to
Microfinance with special reference to the impact on living standard, women empowerment
and poverty alleviation.
7/30/2019 Chapter 1 (Repaired)
3/70
ACKNOWLEDGEMENT
A person always requires guidance and help of other to achieve success in his mission;
similarly it was not possible for me to complete my assignment. I am indeed very much
thankful to all the people who have helped me to complete the project.
I am gratefully indebted to Dr. Gurcharan Singh, my project guide for providing me all the
necessary help and required guidelines for the completion of my project and also for the
valuable time that he gave me from his busy schedule.
Last but not least I am thankful to all my friends, who have been a constant source of
inspiration and information for me.
Balkarnvir Singh
Roll No: 6299
SEM IV, MBA
(Regular)
7/30/2019 Chapter 1 (Repaired)
4/70
Executive Summary
Micro-finance interventions are well-recognized world over as an effective tool for poverty
alleviation and improving socioeconomic status of rural poor and women empowerment. In
India too, micro-finance is making headway in its effort for reducing poverty and
empowering rural women. Micro-finance through the network of cooperatives, commercial
banks, regional rural banks, NABARD and NGOs has been largely supply-driven and a
recent approach. Micro-finance institutions are, other than banks, are engaged in the
provision of financial services to the poor. There are three types of lending technologies:
(i) The document based and asset based conventional technology, being followed by all
banks.
(ii) The group lending, which is of various shapes and forms with advantages drawbacks
attached.
(iii) Individual based lending is one where the Micro-finance institutions have to be very
careful in assessing the repayments capacity of the borrowers.
The above technologies are focused on micro-finance through SHGs, however, credit
accessibility to poor through SHGs has enhanced tremendously and recovery is
comparatively higher. Rural women play a significant role in the domestic and
socioeconomic life of the society and therefore, national development is not possible without
developing this segment of the society. The review of studies related to credit accessibility to
women simply demonstrates that the direct access to institutional credit to rural women is
very limited and there is sex bias in extending the credit to them. However, women from the
non-farm sector have better access to banks than the women working in the farm sector.
Even, male members of women borrowers have greater influence on accessibility to credit
utilization and its repayment.
The SHGs became a regular component of the Indian financial system since 1996. The
SHGs are small, informal and homogenous groups. These groups have proved as cyclic
agents of development in both the rural and urban areas. The SHGs after being formed start
collecting a fixed amount of thrift from each member regularly. After accumulating a
reasonable amount of resource, the group starts lending to its members for petty consumption
needs. If the bank is satisfied with the group interms of (i) genuineness ofdemand for credit;(ii) credit handling capacity of the members; (iii)repayment behaviour within the groups; and
7/30/2019 Chapter 1 (Repaired)
5/70
(iv) the accountingsystem and maintenance of the records, it extends a term loan ofsmaller
amount to the group. Thus, financing through SHGs effects quite a few benefits like; (i)
savings mobilized by the poor; (ii)access to the required amount of appropriate credit by the
poor; (iii)meeting the demand and supply of credit structure and opening ofnew market for
financing institutions; (iv) reduction in transactioncost for both lenders and borrowers; (v)
tremendous improvement inrecovery; (vi) heralding a new realization of subsidy less and
corruption-less credit; and (vii) remarkable empowerment of poor women.
This study based on 6 chapters, the first chapter is introductory chapter which highlights
what is microfinance, features and models of microfinance and chapter one also contains the
information about poverty alleviation, living standard, and women empowerment and it
variables. Chapter 2 contains literature reviews of microfinance it contains fifteen studies
related with microfinance and chapter 3 is research methodology in which need of study
,scope of study ,objective of study ,research design ,data collection etc are included and forth
chapter is data analysis and discussions ,in which factor analysis is used as statistical tool for
measuring impact of microfinance on living standard ,poverty alleviation and empowerment,
factor analysis was performed on SPSS version 16 and the data used in factor analysis is
primary data which is collected through a structured questionnaire . in factor analysis the 5
factors extracted ,these factors contains variables which are correlated to each other. and
chapter 5 is findings and recommendations which highlighted what I find about my topic
during research or which things I analyze from my data is presented in this chapter .
From the analysis of data, I found that microfinance has the positive impact on the standard
of living of the poor people and on their life style. It has not only helped the poor people to
come over the poverty line, but has also helped them to empower themselves.
So in brief I can say that the microfinance has great impact on increase the living standard of
people and it helps in poverty alleviation and women empowerment. Self help group model
of microfinance is helped the poor women to start their work and generate income from them
and increase their standard of living.
7/30/2019 Chapter 1 (Repaired)
6/70
DECLARATION
I hereby declare that the Research Project entitled IMPACT OF
MICROFINANCE ON LIVING STANDARD, EMPOWERMENT AND POVERTY
ALLEVIATION. Submitted for MBA degree is my original work carried out
under the supervision of Dr. Gurcharan Singh Professor School of
management Studies, Punjabi University, Patiala, Punjab and up to the best
of my knowledge.
The research project has not formed the basis for the award of any other
degree.
BALKARNVIR SINGH
ROLL NO: 6299
MBA FINANCE
School of Management Studies
(Punjabi University, Patiala, Punjab)
7/30/2019 Chapter 1 (Repaired)
7/70
CERTIFICATE
This is to certify that the project entitled IMPACT OF MICROFINANCE ON LIVING
STANDARD, EMPOWERMENT AND POVERTY ALLEVIATION submitted by
Balkarnvir Singh in the partial fulfillment for Master of Business Administration (M.B.A) in
School of Management Studies, Punjabi University, Patiala is bonafide piece of research
work conducted under my supervision and guidance and no part of this project has been
submitted for any other degree.
Project Guide
Dr. Gurcharan Singh
Reader, Professor
School of management studies
Punjabi University
Patiala.
7/30/2019 Chapter 1 (Repaired)
8/70
INDEX
Chapter No. Title Page No.
Declarationi
Acknowledgement ii
Preface iii
ChapterIINTRODUCTION
1-23
2
2-3
3
4
4
4
4
5-6
6
7
7
8-20
21-22
22
22
Chapter-II REVIEW OF LITERATURE 23-26
Chapter-III RESEARCH METHODOLOGY 27-29
Objectives of study 28
Nature of data: & data sources 28-29
Sampling design 29
7/30/2019 Chapter 1 (Repaired)
9/70
Chapter-IV DATA ANALYSIS AND INTERPRETATION 30-41
Conclusion 42-44
Limitation 45-46
Bibliography 47
Annexure QUESTIONNAIRE 48-51
7/30/2019 Chapter 1 (Repaired)
10/70
CHAPTER 1
INTRODUCTION
7/30/2019 Chapter 1 (Repaired)
11/70
Introduction:
Poor and low income people all over the world have been connected with money lenders who
provide easy access to credit but at higher cost. The interest cost generally ranges from 36%
to as high as 120%.there are two main approaches to financing the poor ,the poverty lending
approach through credit that funded by donors and patrons , government and other
concessional dispensations .many organizations using the poverty lending approach to
provide credit to poor borrowers at low cost . But in long run these very institutions are not
sustainable primarily because their interest rates are just too low for their full cost recovery
.and the another approach the financial system approach focuses on commercial
intermediation for the economically active poor and they offer easy access to credit at a
reasonable and an affordable cost. Their credit portfolio is financed by savings commercial
debts and for profit investment in varying proportions, these two approaches providing
financial service to the poor people.(-1)
Microfinance is extension of small loans to entrepreneur to poor to quality for traditional
bank loans .it has proven as an effective and popular measure in the ongoing struggle against
poverty, enabling those without access to lending institutions to borrow at affordable interest
rates and start small business.
Microfinance is defined as any activity that includes the provision of financial services such
as credit, savings, and insurance to low income individuals which fall just above the
nationally defined poverty line, and poor individuals which fall below that poverty line, with
the goal of creating social value. The creation of social value includes poverty alleviation and
the broader impact of improving livelihood opportunities through the provision of capital for
micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
A large variety of sectors provide microfinance in India, using a range of microfinancedelivery methods. Since the ICICI Bank in India, various actors have endeavored to provide
access to financial services to the poor in creative ways. Governments also have piloted
national programs, NGOs have undertaken the activity of raising donor funds for on-lending,
and some banks have partnered with public organizations or made small inroads themselves
in providing such services. This has resulted in a rather broad definition of microfinance as
any activity that targets poor and low-income individuals for the provision of financial
services. The range of activities undertaken in microfinance include group lending, individuallending, the provision of savings and insurance, capacity building, and agricultural business
7/30/2019 Chapter 1 (Repaired)
12/70
development services. Whatever the form of activity however, the overarching goal that
unifies all actors in the provision of microfinance is the creation of social value.
Microfinance Definition
The reserve bank of India has defined microfinance as a provision of thrift, credit and other
financial services and products of very small amount to the poor in rural, semi urban and
urban areas for enabling them to raise their income level and improve level of living
standards. Microfinance institutions are those that provide those facilities. (2)
According to International Labor Organization (ILO), Microfinance is an economic
development approach that involves providing financial services through institutions to low
income clients.
"The poor stay poor, not because they are lazy but because they have no access to capital."
The dictionary meaning of finance is management of money. The management of money
denotes acquiring & using money. Micro Finance is buzzing word, used when financing for
micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal to
empower under-privileged class of society, women, and poor, downtrodden by naturalreasons or men made; caste, creed, religion or otherwise. The principles of Micro Finance are
founded on the philosophy of cooperation and its central values of equality, equity and
mutual self-help. At the heart of these principles are the concept of human development and
the brotherhood of man expressed through people working together to achieve a better life for
themselves and their children.
Traditionally micro finance was focused on providing a very standardized credit product. The
poor, just like anyone else, (in fact need like thirst) need a diverse range of financial
instruments to be able to build assets, stabilize consumption and protect themselves against
risks. Thus, we see a broadening of the concept of micro finance--- our current challenge is to
find efficient and reliable ways of providing a richer menu of micro finance products. Micro
Finance is not merely extending credit, but extending credit to those who require most for
their and familys survival. It cannot be measured in term of quantity, but due weightage to
quality measurement. How credit availed is used to survive and grow with limited means.
7/30/2019 Chapter 1 (Repaired)
13/70
Concept and Features of Micro-finance:
1. It is a tool for empowerment of the poorest.
2. Delivery is normally through Self Help Groups (SHGs).
3. It is essentially for promoting self-employment, generally used for:
(a)Direct income generation
(b)Rearrangement of assets and liabilities for the household to participate in
future opportunities and
(c)Consumption smoothing.
4. It is not just a financing system, but a tool for social change, specially for women.
5. Because micro credit is aimed at the poorest, micro-finance lending technology needs
to mimic the informal lenders rather than the formal sector lending. It has to:
(a)Provide for seasonality
(b)Allow repayment flexibility
(c)Fix a ceiling on loan sizes.
Microfinance approach is based on certain proven truths which are not always
recognized. These are:
1. That the poor are bankable; successful initiatives in micro finance demonstrate that
there need not be a tradeoff between reaching the poor and profitability - micro
finance constitutes a statement that the borrowers are not weaker sections in need of
charity, but can be treated as responsible people on business terms for mutual profit .
2. That almost all poor households need to save, have the inherent capacity to save small
amounts regularly and are willing to save provided they are motivated and facilitated
to do so.
3. That easy access to credit is more important than cheap subsidized credit which
involves lengthy bureaucratic procedures - (some institutions in India are already
lending to groups or SHGs at higher rates - this may prevent the groups from enjoying
a sufficient margin and rapidly accumulating their own funds, but members continue
to borrow at these high rates, even those who can borrow individually from banks).
4. 'Peer pressure' in groups helps in improving recoveries.
7/30/2019 Chapter 1 (Repaired)
14/70
Role of Microfinance:
The micro credit of microfinance prename was first initiated in the year 1976 in Bangladesh
with promise of providing credit to the poor without collateral , alleviating poverty and
unleashing human creativity and endeavor of the poor people. Microfinance impact studies
have demonstrated that(3)
1. Microfinance helps poor households meet basic needs and protects them against risks.
2. The use of financial services by low-income households leads to improvements in
household economic welfare and enterprise stability and growth.
3. By supporting womens economic participation, microfinance empowers women, thereby
promoting gender-equity and improving household well being.
4. The level of impact relates to the length of time clients have had access to financial
services.
Activities in Microfinance:Micro credit: It is a small amount of money loaned to a client by a bank or other institution.
Micro credit can be offered, often without collateral, to an individual or through group
lending.
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 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.
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.
7/30/2019 Chapter 1 (Repaired)
15/70
Product Design: The starting point is: how do MFIs decide what product s to offer? The
actual loan products need to be designed according to the demand of the target market.
Besides the important question of what risks to cover, organizations also have to decide
whether they want to bundle many different benefits into one basket policy, or whether it is
more appropriate to keep the product simple. For marketing purposes, MFIs sometimes
prefer the basket cover, since it can make the policies sound comprehensive, but is that the
right approach for the low-income market? After picking products, one must also understand
how they are priced. What assumptions do the organizations make with regard to operating
costs, risk premiums, and reinsurance, and how did they come to those conclusions? Would
their clients be willing to pay more for greater benefits? From price, the logical next set of
questions involves efficiency. Indeed, given the relative high costs of delivering large
volumes of small policies, maximizing efficiency is a critical strategy to ensuring that the
products are affordable to the low-income market. One way is to make the products
mandatory, which increases volumes, reduces transaction costs and minimizes adverse
selection. What does an organization lose by offering mandatory insurance, and how does it
overcome the disadvantages? MFIs can combine a mandatory product with some voluntary
features to make the service more us to mar-oriented while.
Techniques of Product Design: To design a loan product to meet borrower needs it is
important to understand the cash pattern of the borrowers. Cash pattern is important so far as
they affect the debt capacity of the borrowers. Lenders must ensure that borrowers have
sufficient cash inflow to cover loan payments when they are due efficiency depends less on
the delivery model than on the simplicity of the product or product menu. Simple products
work best because they are easier to administer and easier for clients to understand. Another
efficiency strategy is to use technology to reduce paperwork, manual processing and errors.
MFIs need to conduct a costing analysis to determine how much they need to earn in
commission to cover their administrative expenses.
7/30/2019 Chapter 1 (Repaired)
16/70
Microfinance Social Aspects
Micro financing institutions significantly contributed to gender equality and womens
empowerment as well as poor development and civil society strengthening. Contribution to
womens ability to earn an income led to their economic empowerment, increased well beingof women and their families and wider social and political empowerment.
Microfinance programs targeting women became a major plank of poverty alleviation and
gender strategies in the 1990s. Increasing evidence of the centrality of gender equality to
poverty reduction and womens higher credit repayment rates led to a general consensus on
the desirability of targeting women. (4)
Self Help Groups (SHGs): Self- help groups (SHGs) play today a major role in poverty
alleviation in rural India. A growing number of poor people (mostly women) in various parts
of India are members of SHGs and actively engage in savings and credit (S/C), as well as in
other activities (income generation, natural resources management, literacy, child care and
nutrition, etc.). The S/C focus in the SHG is the most prominent element and offers a chance
to create some control over capital, albeit in very small amounts.
The SHG system has proven to be very relevant and effective in offering women the
possibility to break gradually away from exploitation and isolation.
Savings services help poor people: Savings has been called the forgotten half of
microfinance. Most poor people now use informal mechanisms to save because they lack
access to good formal deposit services,. They may tuck cash under the mattress; buy animals
or jewelry that can be sold off later, or stockpile inventory or building materials.
These savings methods tend to be riskycash can be stolen, animals can get sick, and
neighbors can run off. Often they are illiquid as well one cannot sell just the cows leg
when one needs a small amount of cash. Poor people want secure, convenient deposit
services that allow for small balances and easy access to funds. MFIs that offer good savings
services usually attract far more savers than borrowers.
7/30/2019 Chapter 1 (Repaired)
17/70
The Need in India
India is said to be the home of one third of the worlds poor; official estimates range from 26
to 50 percent of the more than one billion population.
About 87 percent of the poorest households do not have access to credit.
The demand for micro credit has been estimated at up to $30 billion; the supply is less than
$2.2 billion combined by all involved in the sector. Due to the sheer size of the population
living in poverty, India is strategically significant in the global efforts to alleviate poverty and
to achieve the Millennium Development Goal of halving the worlds poverty by 2015.
Microfinance can also be distinguished from charity. It is better to provide grants to families
who are destitute, or so poor they are unlikely to be able to generate the cash flow required to
repay a loan. This situation can occur for example, in a war zone or after a natural disaster.
While India is one of the fastes t growing economies in the world, poverty runs deep
throughout country. About two thirds of Indias more than 1billion people live in rural
areas and almost 170 million of them are poor.
For more than 21 percent of them, poverty is a chronic condition. Three out of four of
Indias poor live in rural areas of the country. Poverty is deepest among scheduled
castes and tribes in the countrys rural areas.
The micro-finance scene in India is dominated by Self Help Groups (SHGs) - Banks
linkage program for over a decade now. As the formal banking system already has a
vast branch network in rural areas, it was perhaps wise to find ways and means to
improve the access of rural poor to the existing banking network. This was tried by
routing financial.
Indian microfinance is poised for continued growth and high valuation but faces pressing
challenges and opportunities thatleft unaddressedcould negatively impact the long-term
future of the industry.
7/30/2019 Chapter 1 (Repaired)
18/70
The industry needs to move past a single-minded focus on scale, expand the depth and
breadth of products and services offered, and focus on the double bottom line and over
indebtedness to effectively address the risks facing the industry.
Models of Microfinance in India
The SHG model
The self help group model has evolved in the NGO sector. A variety of models arise out of
NGO nurturing among which SHGs have become the most popular.
SHGs are small informal groups comprising of membership of 10-20 persons. The
composition of membership is mostly exclusively male or exclusively female. The members
are self selected with a liberty to choose their group depending on their level of affinity with
the other potential members. The group meets regularly at an appointed time and place and
carries out its financial transactions of savings and credit. The roles and norms of the group
are determined by the members themselves. The NGO provides them with support services,
training and developing linkages.(5)
However, there are certain features of SHG that need to be looked into:
The group promotion process is long and the poor have to wait for long periods.
The amounts available in the beginning are very small and all the members cannot
take loans at the same time.
The functioning of the group relies completely on group dynamics which are very
difficult to build in.
Conflicts arise on seemingly trivial reasons which can lead to the break-down of the
group and it is difficult to rebuild it.
Despite these few disadvantages SHG still is a popular model for micro finance in India.
Federated SHG approach
The federated SHG approach builds upon the unique features of SHG based micro finance
and contributes to factors that improve the sustainability of SHGs. Federations increase the
opportunity offered by the SHGs, expands empowerment through leadership building and
7/30/2019 Chapter 1 (Repaired)
19/70
addresses the component of security through insurance services. Federations usually come
under the Societies Registration Act. PRADAN and MYRADA, two large NGOs that
pioneered the concept of SHGs.-(7)
The Grameen Bank Model
The grameen bank methodology which was a case of exceptional success first evolved in
Bangladesh and was launched by many other organizations in India with slight variations.
Some of the features are as follows:
Homogeneous groups of 5 members are formed at village level
The field worker facilitates the process of group forming
All the group members undergo a 7 day compulsory training
Some groups undergo the group recognition test
8 joint liability groups affiliate together to form a centre
The centre meets every week at a defined time and a bank assistant attends the
meetings.
Group discipline is enforced through peer pressure. Collateral is replaced by peer pressure.
The incentive to timely repayment is repeat loans and continuous access to increasing credit
from the bank. A field worker maintains a check on loan utilization.(6)
Non Banking Finance Companies
The NBFCs has emerged as a nearest substitute for those MFIs who want to go the for-profit
route. Since getting registered as a bank is costly and the local area bank idea has not been
pursued beyond the initial approvals, the NBFC route is increasingly being chosen by profit
driven MFIs. They can also enter the capital markets. Since the poor are bankable and
lending to them can be commercially viable it is not necessary to depend on low cost funds to
lend to them. Secondly, since the amounts required are huge, the financial markets are the
only way to mobilize resources. This would mean mobilizing debt at market rates of interest.
The for-profit NBFC route is currently the best way to operate in the capital markets. For
regulatory purposes, NBFCs have been classified into 3 categories-(8)
(a) Those accepting public deposits,
7/30/2019 Chapter 1 (Repaired)
20/70
(b) Those not accepting public deposits but engaged in financial business
(c) Core investment companies with 90 per cent of their total assets as investments in the
securities of their group/holding/subsidiary companies.
My research topic is to measure the impact of microfinance on living standard , women
empowerment and poverty alleviation .so in this chapter I want to explain about these three
concepts and want to discuss the variables which are determine the living standard ,
empowerment and poverty alleviation .these three are explained following:
POVERTY ALLEVIATION
Introduction:
The concept of poverty is multi-dimensional. It covers not only income and consumption but
also health, education, vulnerability, risk, and marginalization and exclusion of the poor from
the main stream society-(9) one of the earliest absolute definitions of poverty was that of
dandekar-rath, who defined it as an expenditure of Rs.15 per capita per month for the Indian
rural population and Rs.18 per capita per month for urban population. And in 1993 a new
poverty line Rs 49 per person per month in rural areas and Rs 57 in urban areas .In the urban
areas according to the 1973-74 prices .the government of India conduct via the national
sample survey NSS, annual survey of consumption expenditure and income on Indian
households .in addition to NSS the national council for applied economic research (NCAER)
run occasionally survey of consumption and income of Indian households. in 1993-94
according to the planning commission only 19% ofIndias population was below poverty line
this was official estimate. Estimates based on consumer expenditure survey carried out
regularly by the NSSO, however placed the proportion of Indias population below poverty
line at 36% .
Trends in poverty in India:
Theearly poverty estimates of Detts -(10) show that rural poverty increased to above 40% in
1992 and 1995. On the other hand, urban poverty had declined significantly to about 30 % n
1997 as compared to 36% in 1987. Guptas -(11)estimates also show similar trend on rural
poverty. but according to him, the rural the rural poverty had shown a surge in year 1998 and
7/30/2019 Chapter 1 (Repaired)
21/70
had increased to 45%. The 55th round results 1999-2000 took everyone by surprise .the
poverty ratio came down from 36% in 1993-94 to 26% in 1999-2000 i.e. a clear 10% decline
in just 5 years the reform programme of government was a magic wand. According to NSSO
55th round data the rural poverty line of 327 in 1999-2000 corresponds not to 2400 kcal but to
1868 kcal. The rural poverty line would corresponds to 200 kcal is Rs. 567 and corresponding
poverty ratio is 74.9% of our rural population could not afford 2400 kcal. In 2006 planning
commission estimation of population below poverty line is 27.8%, the estimated number of
poor is estimated to be approximately 300 million in 2004-05, larger than the official estimate
of 1999-2000.it may be recalled that the official estimate for poverty in 1999-2000 was
26.1% for country as a whole and 260 million were estimated as poor-(12) .the world
development report (2001) outline a comprehensive anti-poverty intervention strategy. This
involves complimentary policies towards (i) promoting opportunities, (ii) facilitating
empowerment and (iii) providing security to poor. Opportunities are provided to the poor
with the creation of employment, credit, infrastructure, efficient markets, schools, drinking
water and sanitation. Facilitating empowerment involves laying political and legal basis for
development and in proving security to poor providing wages and self- employment
opportunities, microfinance, micro insurance, initiating programmes to prevent macro shokes
and develop capacity to respond to them and designing systems of social risk management
complementary to pro growth policies are some of the specific initiatives needed to provide
economic and social security to the poor and the marginalized.
If I talked about poverty ratio of Punjab is less than 15% as compared to Orissa 46.4%. and in
Punjab 9.1 % of rural population live in poverty and 7.1% urban population live in poverty
according to BPL based URP consumption (2004-05).
Poverty alleviation tools:
The key to alleviation the poverty is how effectively the tools of food, shelter, basic
education, opportunity for employment, health and medical services, infrastructure, markets
and communication are deployed either singularly or severally to the poor. credit is a
powerful tool that could be effectively deployed when it made available to the credit worthy
among the economically active poor. When credit is provided to the very poor, the may not
be in a position to effectively deploy the loan as they lack the opportunity for self employed
and the risks associated with the deployment of credit may be high . poor households living
7/30/2019 Chapter 1 (Repaired)
22/70
in extremely isolated areas without any access to proper and basic infrastructure will find it
difficult to deploy the credit that would enable them to repay the principle alongwith interest.
Poor who do not have food will deploy the credit to buy food and this in turn would lead to
humiliation and diminishing of an already low self esteem.
The poorest of the poor is certainly not to look out for the formal financial system. In general,
the extremely poor are those living on less than 1dollar a day , while economically active
poor have sufficient means of earning their income to meet their basic needs .the lower
middle class segment have a relatively reliable income , better standards of health, nutrition ,
housing , education , a selection of consumer durables health conscious and some forms of
statutory investment microfinance is , thus more appropriate not only for the economically
active poor but also for the lower middle income class category
Speaking at SAFMA in august 2007 .Prof. Yunus said his grameen bank experience of
lending to the poor to enable them to attain their optimum earning capacity has convinced
him that a poverty free world is feasible if there are collective belief and will. Since Grameen
bank was born in 1984 the bank has lent 6.3 million dollar to the marginalized community
with 98.61% recovery rate. As per survey of the bank 64% of its borrowers have crossed the
poverty line.-(13)
One aspect of microfinance that distinguishes it from the traditional financial system is the
joint liability concept, where groups of individuals, usually women, group together to apply
for loans, and hold joint accountability for repayment of the loan. The premise is that
providing low SES individuals access to financial services will better enable poor households
to move away from subsistence living, to a future oriented outlook on life and an increased
investment in nutrition, education, and living expenses. Furthermore, microfinance is unique
as a development tool because of its potential to be self-sustaining (both reducing poverty and
maintaining a profitable business).
Microfinance programs can be an effective way to provide low-cost financial services
to poor individuals and families. Second, such programs have been shown to help in the
development and growth of the local economy as individuals and families are able to move
past subsistence living and increase disposable income levels.
7/30/2019 Chapter 1 (Repaired)
23/70
Microfinance programs were able to reduce poverty through increasing individual and
household income levels, as well as improving healthcare, nutrition, education, and helping to
empower women. For example, standard of living increases, which help to eradicate extreme
poverty and hunger, have occurred at both the individual and household levels as a result of
microfinance programs. Furthermore, it has been demonstrated by some research that
microfinance programs increase access to healthcare, making preventative healthcare
measures more affordable to the poor. In addition, more children are being sent to school and
staying enrolled longer. Finally, it has been shown that such programs can help borrowers to
develop dignity and self-confidence in conjunction with loan repayment, and self-sufficiency
as a means for sustainable income becomes available. Since microfinance services are
primarily focused on women, it is argued that this leads to the empowerment of women and
the breaking down of gender inequalities, through providing opportunities for women to take
on leadership roles and responsibilities.-(14)
Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new
economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks
linkage Programme, aimed at providing a cost effective mechanism for providing financial
services to the 'unreached poor'. In the Indian context terms like "small and marginal
farmers", " rural artisans" and "economically weaker sections" have been used to broadly
define micro-finance customers. Research across the globe has shown that, over time,
microfinance clients increase their income and assets, increase the number of years of
schooling their children receive, and improve the health and nutrition of their families.
A more refined model of micro-credit delivery has evolved lately, which emphasizes the
combined delivery of financial services along with technical assistance, and agricultural
business development services. When compared to the wider SHG bank linkage movement in
India, private MFIs have had limited outreach. However, we have seen a recent trend of
larger microfinance institutions transforming into Non-Bank Financial Institutions (NBFCs).
This changing face of microfinance in India appears to be positive in terms of the ability of
microfinance to attract more funds and therefore increase outreach.
In terms of demand for micro-credit or micro-finance, there are three segments, which
demand funds. They are:
7/30/2019 Chapter 1 (Repaired)
24/70
At the very bottom in terms of income and assets, are those who are landless and
engaged in agricultural work on a seasonal basis, and manual labourers in forestry,
mining, household industries, construction and transport. This segment requires, first
and foremost, consumption credit during those months when they do not get labour
work, and for contingencies such as illness. They also need credit for acquiring small
productive assets, such as livestock, using which they can generate additional income.
The next market segment is small and marginal farmers and rural artisans, weavers
and those self-employed in the urban informal sector as hawkers, vendors, and
workers in household micro-enterprises. This segment mainly needs credit for
working capital, a small part of which also serves consumption needs. This segment
also needs term credit for acquiring additional productive assets, such as irrigation
pumpsets, borewells and livestock in case of farmers, and equipment (looms,
machinery) and worksheds in case of non-farm workers.
The third market segment is of small and medium farmers who have gone in for
commercial crops such as surplus paddy and wheat, cotton, groundnut, and others
engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment
includes those in villages and slums, engaged in processing or manufacturing activity,
running provision stores, repair workshops, tea shops, and various service enterprises.
These persons are not always poor, though they live barely above the poverty line and
also suffer from inadequate access to formal credit.
Well these are the people who require money and with Microfinance it is possible. Right now
the problem is that, it is SHGs' which are doing this and efforts should be made so that the big
financial institutions also turn up and start supplying funds to these people.
7/30/2019 Chapter 1 (Repaired)
25/70
LIVING STANDARD
Introduction:
Standard of living refers to the level of wealth, comfort, material goods and necessities
available to a certain socioeconomic class in a certain geographic area. And we can also say
thatStandard of living is defined as the level of welfare available to individual or to the group
of people. It concerns goods and services people are able to consume and the resources they
have access to. It depends on the quality and quantity of available goods and services and the
way they are distributed within the population.
Indicators:
There are various indicators for measuring living standard. One approach is to use direct
measures, such as income, expenditure or consumption. The most popular measures of living
standards are income and consumption. In general terms, income refers to the earnings from
productive activities and current transfers. It can be seen as comprising claims on goods and
services by individuals or households. In other words, income permits people to obtain goods
and services.-(15)
In contrast, consumption refers to resources actually consumed. Although many components
of consumption are measured by looking at household expenditures, there are important
differences between the two concepts. First, expenditure excludes consumption that is not
based on market transactions. Given the importance of home production in many developing
countries, this can be an important distinction. Second, expenditure refers to the purchase of a
particular good or service. However, the good or service may not be immediately consumed,
or at least there may be lasting benefits. This is the case, for example, with consumer
durables. In this case, consumption should ideally capture the benefits that come from the use
of the good, rather than the value of the purchase itself.
According to Marks (1981) Living Standard represents the level at which public are able to
gather capital and to get better their living standard with such income for foods,
communication, housing, education, transport, health and clothing, etc
http://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Wealth7/30/2019 Chapter 1 (Repaired)
26/70
Plato (1983) Living standard is an approach to which a persons needs are fulfilled. The term
need consists of food, water, shelter, clothes, education, health, transport, entertainment etc.-
(16)
Impact
Microfinance has great impact on improving living standard of members of self help groups.
Members able to get loans and they utilize these loans to generate self employment, they
generally starts works like dairy farming, making pickales, etc.and by working in these
groups the able to generate income, and when they become able to generate profits from their
business it impact on their living standard because by getting income they able to spend more
amount on consumption and able to acquire new assets like two wheelers, washing machinesetc, and there living standard improves.
Income is one of the important elements of living standard of the poor people as well as
saving. Mohammed and Mohammed (2007) The Microfinance Banks are to provide loans to
the poor not only the increase their income but also to mobilize their savings . Apart from
these other factors that contribute to human development, like education, empowerment are
also included as variables indicating a level of standard of living. Microfinance programs
target both economic and social poverty, and in essence it is important to assess the success
of Microfinance Bank. With raising peoples incomes, employment opportunities,
consumption, building of assets and accumulating savings the microfinance facility able to
increase the living standard.-(16)
7/30/2019 Chapter 1 (Repaired)
27/70
WOMEN EMPOWERMENT
Introduction:
Empowerment literally means to equip or supply with ability, however, empowerment has
various meaning and differs from person to person. We often keep complaining about the
status of Indian women and lots of other things related to them but we are more liberated than
the women of Middle-East nation or rather the Muslim countries where women are not
allowed to move out without a veil or rather the parda system exist in those societies.
Dependent women are not empowered women. If women think just that being highly
educated and employed they are empowered, it is a myth. Everyone must understand that
empowering women doesnt mean empowering them in technical area only. Women shouldremember that they are also rational, intelligent and thinking human beings. (17)
Microfinance and women empowerment
Women as micro and small entrepreneurs have increasingly become the key target group for
micro finance programs. Consequently, providing access to micro finance facilities is not
only considered a pre-condition for poverty alleviation, but also considered as a strategy for
empowering women. In developing countries like INDIA micro finance is playing an
important role, promoting gender equality and is helping in empowering women so that they
can live quality life with dignity.
The study conducted by FINCA Client Poverty Assessment conducted in 2003 revealed that
of the interviewed clients 81 percent were women, and it was found that food security was 15
percent higher among their village banking clients than non-clients. The report also showed
clients to have 11 percent more of their children enrolled in school with an 18 percentincrease in healthcare benefits. Clients housing security was reported as 18 percent higher
than non-clients. The assessment concluded that microfinance improved the wellbeing of
women clients and their families.
Microfinance has a positive effect on the empowerment of women by creating an
empowerment indicator.
7/30/2019 Chapter 1 (Repaired)
28/70
Indicators:
I consider following variables for measuring impact of microfinance on women
empowerment in my research:.
Involvement in major household decisions.
Relative freedom from domination within the family.
Political and legal awareness.
Involvement in political campaigning and protests..
They become more confident.
They get a better control of the resources.
Increase in self-esteem, individual and collective confidence
Increase in articulation, knowledge and awareness on health, nutrition reproductive
rights, law and literacy
Increase an decrease in personal leisure time and time for child care;
Increase on decrease of workloads in new programmes
Change in roles and responsibility in family & community.
Positive changes in social attitudes
Awareness and recognition of women's economic contribution within and outside the
household;
Womens decision-making over her work and income -(19)
1. Somanath, V.S, microfinance redefining the future, first edition 2009, p.no 1-4
2. Reserve bank of India, Micro credit: a lifeline for the poor, http://www.rbi.org.inaccessed on 12 April 2013
3.Aggarwal Vijender, Aggarwal Rachna and Khanna Paru, Vol. 1(2), 104-107, Feb. (2012)
journalon microfinance and risk management for poor India
4. Indian Journal of Finance, Microfinance Empower Rural Women? An Empirical Study
In Vellore District, Tamil Nadu By Associated Management Consultants (P) Ltd.
5 . http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=10932.
http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=10932http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=109327/30/2019 Chapter 1 (Repaired)
29/70
6. R Srinivasan and M S Sriram Microfinance in India:Discussion
7.Bhavani, R V.The bank-SHG model of microfinance in India
8. George, M. A Primer on Microfinance in India posted on 4 June 2008
9. Chelliah and sudarshan, income poverty and beyond: human development in India,
social science press, new Delhi (1999, pp xiii).
10. Datt G.(1999),Has poverty declined since economic reforms ? Statistical data analysis,
special article, economic and political weekly, vol.34 (50)
11. Gupta S.P (1999),tricle down theory revisited: the role of employment and poverty,
V.P. Singh memorial lecture, 41st annual conference of the Indian society of labor economics
, Mumbai
12. Bhalla surjit s.,growth and poverty in India myth and reality, development, poverty
and fiscal policy , decentralization of institutions, edited by Rao Govinda M, oxford
university press new Delhi ,(2002, pp 20)
13. Yunus Mohammad.Poverty can be eradicated, the Hindu pg14, august 19, 2007.
14.Jonathan h .Westover, Theimpact of microfinanceprogrammes on poverty reduction
15.Deaton, A. and M. Grosh, Consumption, in Designing Household Survey Questionnaires
for Developing Countries: Lessons from 15 Years of the Living Standards Measurement
Study, M. Grosh and P. Glewwe, Editors. 2000, The World Bank.: Washington, D. C.
16. Ghalib, A.K (2007) Measuring the impact of microfinance intervention: A conceptual
framework of social impact assessment (Impact Assessment research centre (IARC)
University of Manchester IARC working papers series No 24/2009
17.Ruth Alsop , Nina Heinsohn :Measuring Empowerment in Practice: Structuring Analysis
and Framing Indicators, World Bank Policy Research Working Paper 3510, February 2005.
http://infochangeindia.org/livelihoods/microfinance/the-bank-shg-model-of-microfinance-in-india.htmlhttp://infochangeindia.org/livelihoods/microfinance/the-bank-shg-model-of-microfinance-in-india.htmlhttp://infochangeindia.org/livelihoods/microfinance/the-bank-shg-model-of-microfinance-in-india.html7/30/2019 Chapter 1 (Repaired)
30/70
18. Kabeer, Naila. 2001. Reflections on the measurement of womens empowerment. In
Discussing Womens Empowerment-Theory and Practice. Sida Studies No. 3. Novum
Grafiska AB: Stockholm.
19. Jejeebhoy, Shireen J. 2000. Womens autonomy in rural India: Its dimensions,
determinants, and the influence of context. In Womens Empowerment and Demographic
Processes: Moving Beyond Cairo. Harriet Presser and Gita Sen, eds. New York: Oxford
University Press.
7/30/2019 Chapter 1 (Repaired)
31/70
CHAPTER 2
LITRATURE REVIEW
7/30/2019 Chapter 1 (Repaired)
32/70
Muhammad Yunus (1998)Has examined that this approach to poverty reduction at the
macro-level is inadequate. The primary causes of poverty are not lack of human capital or
lack of demand for labor. Lack of demand for labor is only a symptom, not a cause, of
poverty. Poverty is caused by our inadequate understanding of human capabilities and by our
failure to create enabling theoretical frameworks, concepts, institutions and policies to
support those capabilities. My main argument is that economics as we know it is not only
unhelpful in getting the poor out of poverty; it may even be a hindrance. In this paper, I
would like to explore those institutions that perpetuate poverty, share my experiences with an
effective poverty alleviation institution, and present my thoughts on the future of poverty
alleviation. Before addressing these points, however, I would like to provide a useful
framework to define the concept of "the poor" more concretely.-(1-2)
Monique Cohen (2002)Has examined that the ideas presented in this paper are designed to
direct the arena of discourse towards a more holistic market driven or client focused
microfinance agenda. Currently, the debate on market-driven microfinance is primarily
framed by the problems of competition and dropouts among established MFIs. The
solutions to the problems are defined in terms of more responsive products, the creation of
new products, and the restructuring of existing ones. Appropriate products will not only
benefit the operations of an institution they will also have a positive impact on the wellbeing
of the client, reducing the risk of borrowing and the poors vulnerability. In presenting
current thinking on a client-led agenda, this paper finds itself in a precarious position in the
midst of this debate. Client-led models are still in their infancy, and the fact that this topic is
the theme of this special edition of the Journal of Development Studies is itself an important
milestone. When this author began to focus on clients in microfinance six years ago, the
notion that clients deserved a voice in the design and delivery of services was dismissed out
of hand.(3)
SusyCheston (2002)Has examined that Microfinance has the potential to have a powerful
impact on womens empowerment. Although microfinance is not always empowering for all
women, most women do experience some degree of empowerment as a result. Empowerment
is a complex process of change that is experienced by all individuals somewhat differently.
Women need, want, and profit from credit and other financial services. Strengthening
womens financial base and economic contribution to their families and communities plays a
role in empowering them. Product design and program planning should take womens needs
7/30/2019 Chapter 1 (Repaired)
33/70
and assets into account. By building an awareness of the potential impacts of their programs,
MFIs can design products, services, and service delivery mechanisms that mitigate negative
impacts and enhance positive ones.-(4)
Yunus (2003) Has examined that count 130 McMaster School for Advancing Humanity on
women to spread the word to their neighbors and friends about the success of these loans.
The testimony is expected to convince others to seek out Grameen for help. Yunus also
encourages members to save some of their money in case they fall on hard times, such as
natural disasters, or to use this money for other opportunities. In 1977, Yunus founded
Grameen Bank after working for six months to get a loan from the Janata Bank. Yunus
realized that having groups of people take out a loan was a better plan for success than giving
loans to individuals. He describes the process by which Grameen Bank lends money. Loan
repayments are to be made in very small amounts, and in the first project, Yunus chose a
villager to be in charge of collecting the repayments.
Jennifer Meehan (2004) Has examined that it will need to do three things simultaneously.
First, it will need to rapidly scale up, in key markets, like India, home to high numbers of the
worlds poor. Second, in this process, clear priority is needed for philanthropic, quasi-
commercial and commercial financing for the business plans of MFIs targeting the poorest
segments of the population, especially women. Third, microfinance will need to realize its
possibility as a broad platform and movement, more than simply an intervention and industry.
The pioneering financings completed by leading, poverty-focused MFIs have shown the
industry what is possible large amounts of financing that allows for rapid expansion of
financial services to new poor customers. The MFIs offer a model to others that are interested
in tapping the financial markets. If leading MFIs continue on their present course and adopt
some or all of the suggestions offered, financial market interest or more specifically, debt
capital market interestin leading, poverty-focused MFIs is expected to grow.
Ernest Aryeetey (2005)Has examined that informal finance and microfinance suitable for
financing growing small to medium size enterprises (SMEs) in Sub-Saharan Africa? First, I
present the characteristics of informal finance, focusing on size, structure, and scope of
activities. Informal finance has not been very attractive for the private sector. Indeed, the
informal sector has considerable experience and knowledge about dealing with small
borrowers, but there are significant limitations to what it can lend to growing micro
businesses. Second, I discuss some recent trends in microfinance. While externally driven
7/30/2019 Chapter 1 (Repaired)
34/70
microfinance projects have surfaced in Africa, their performance relative to small business
finance has not been as positive as in Asia and Latin America. Third, I introduce some
possible steps toward a new reform agenda that will make informal and microfinance relevant
to private sector development, including focusing on links among formal, semi-formal and
informal finance and how these links can be developed.
Basu, P., Srivastava (2005) Has examined that the current level and pattern of access to
finance for India's rural poor and examines some of the key microfinance approaches in
India, taking a close look at the most dominant among these, the Self Help Group (SHG)
Bank Linkage initiative. It empirically analyzes the success with which SHG Bank Linkage
has been able to reach the poor, examines the reasons behind this, and the lessons learned.
The analysis in the paper draws heavily on a recent rural access to finance survey of 6,000
households in India, undertaken by the authors. The main findings and implications of the
paper are as follows: India's rural poor currently have very little access to finance from
formal sources. Microfinance approaches have tried to fill the gap. Among these, the growth
of SHG Bank Linkage has been particularly remarkable, but outreach remains modest in
terms of the proportion of poor households served. The paper recommends that, if SHG Bank
Linkage is to be scaled-up to offer mass access to finance for the rural poor, then much more
attention will need to be paid towards: the promotion of high quality SHGs that are
sustainable, clear targeting of clients, and ensuring that banks linked to SHGs price loans at
cost-covering levels. At the same time, the paper argues that, in an economy as vast and
varied as India's, there is scope for diverse microfinance approaches to coexist. Private sector
micro financiers need to acquire greater professionalism, and the government, too, can help
by creating a flexible architecture for microfinance innovations, including through a more
enabling policy, legal and regulatory framework. Finally, the paper argues that, while
microfinance can, at minimum, serve as a quick way to deliver finance to the poor, themedium-term strategy to scale-up access to finance for the poor should be to 'graduate'
microfinance clients to formal financial institutions. The paper offers some suggestions on
what it would take to reform these institutions with an eye to improving access for the poor.--
(6,7)
Linda Mayoux (Feb 2006) Has examined that Micro-finance programmes not only give
women and men access to savings and credit, but reach millions of people worldwide
bringing them together regularly in organized groups. Through their contribution to womens
7/30/2019 Chapter 1 (Repaired)
35/70
ability to earn an income, micro-finance programmes can potentially initiate a series of
virtuous spirals of economic empowerment, increased well-being for women and their
families and wider social and political empowerment Banks generally use individual rather
than group-based lending and may not have scope for introducing non-financial services.
This means that they cannot be expected to have the type of the focused empowerment
strategies which NGOs have -(8)
Dr. JyotishPrakashBasu (2006) Has examined that the two basic research questions. First,
the paper tries to attempt to study how a womans tendency to invest in safer investment
projects can be linked to her desire to raise her bargaining position in the households. Second,
in addition to the project choice, women empowerment is examined with respect to control of
savings, control of income, control over loans, control over purchasing capacity and family
planning in some sample household in Hooghly district of West Bengal. The empowerment
depends on the choice of investment of project. The choice of safe project leads to more
empower of women than the choice of uncertain projects. The Commercial Banks and
Regional Rural banks played a crucial role in the formation of groups in the SHGs -Bank
Linkage Program in Andhra Pradesh whiles the Cooperative Banks in West Bengal.(9)
NidhiyaMenon (2006) Has examined that this paper studies the benefits of participation in
micro-finance programs, where benefits are measured in terms of the ability to smooth the
effect of seasonal shocks that cause consumption fluctuations. It is shown that although
membership in these programs is an effective instrument in combating inter-seasonal
consumption differences, there is a threshold level of length of participation beyond which
benefits begin to diminish. Returns from membership are modelled using an Euler equation
approach. Fixed effects non-linear least squares estimation of parameters using data from 24
villages of the Grameen Bank suggests that returns to participation, as measured by the
ability to smooth seasonal shocks, begin to decline after approximately two years of
membership. This implies that membership alone no longer has a mitigating marginal effect
on seasonal shocks to per capita consumption after four years of participation. Such patterns
suggest that the ability to smooth consumption as a function of length of membership, need
not accrue indefinitely in a linear fashion.; Reprinted by permission of Frank Cass & Co.
Ltd.-(10)
Srinivasan, Sunderasan (2007) Has examined that micro banking facilities have helped
large numbers of developing country nationals by supporting the establishment and growth of
7/30/2019 Chapter 1 (Repaired)
36/70
microenterprises. And yet, the microfinance movement has grown on the back of passive
replication and needs to be revitalised with new product offerings and innovative service
delivery. Renewable Energy systems viz., solar home systems, biogas digesters, etc., serve to
improve indoor air quality, provide superior light and extend working and study hours. Such
applications are not inherently income generating and returns on such investments accrue
from cost avoidance, but should qualify for micro funding, as such 'quality of life'
investments, reflect borrower maturity and simultaneously contribute to MFI sustainability.-
(10)
Mohammed AnisurRahaman (2007) Has examined that about microfinance and to
investigate the impact of microfinance on the poor people of the society with the main focus
on Bangladesh. We mainly concise our thesis through clients (the poor people, who
borrowed loan from microfinance institutions) perspective and build up our research based on
it. Therefore, the objective of this study is to show how microfinance works, by using group
lending methodology for reducing poverty and how it affects the living standard (income,
saving etc.) of the poor people in Bangladesh. Microfinance has the positive impact on the
standard of living of the poor people and on their life style. It has not only helped the poor
people to come over the poverty line, but has also helped them to empower themselves.
Crabb, P. (2008) Has examined that the relationship between the success of microfinance
institutions and the degree of economic freedom in their host countries. Many microfinance
institutions are currently not self-sustaining and research suggests that the economic
environment in which the institution operates is an important factor in the ability of the
institution to reach this goal, furthering its mission of outreach to the poor. The sustainability
of the micro lending institutions is analyzed here using a large cross-section of institutions
and countries. The results show that microfinance institutions operate primarily in countries
with a relatively low degree of overall economic freedom and that various economic policy
factors are important to sustainability-(12)
Chintamani Prasad Patnaik (March 2012) Has examined that microfinance seems to have
generated a view that microfinance development could provide an answer to the problems of
rural financial market development. While the development of microfinance is undoubtedly
critical in improving access to finance for the unserved and underserved poor and low-
income households and their enterprises, it is inadequate to address issues of rural financial
market development. It is envisaged that self-help groups will play a vital role in such
7/30/2019 Chapter 1 (Repaired)
37/70
strategy. But there is a need for structural orientation of the groups to suit the requirements of
new business. Microcredit movement has to be viewed from a long-term perspective under
SHG framework, which underlines the need for a deliberate policy implication in favour of
assurance in terms of technology back-up, product market and human resource development.
R.Prabhavathy (2012) Has examined that collective strategies beyond micro-credit to
increase the endowments of the poor/women enhance their exchange outcomes the family,
markets, state and community, and socio-cultural and political spaces are required for both
poverty reduction and women empowerment. Even though there were many benefits due to
micro-finance towards women empowerment and poverty alleviation, there are some
concerns. First, these are dependent on the programmatic and institutional strategies adopted
by the intermediaries, second, there are limits to how far micro-credit interventions can alone
reach the ultra-poor, third the extent of positive results varies across household headship,
caste and religion and fourth the regulation of both public and private infrastructure in the
context of LPG to sustain the benefits of social service providers.-(11)
1.ACCION International, FINCA, Grameen Foundation, Opportunity International,
UNITUS, and Womens World Banking (2010) Measuring the Impact of Microfinance: Our
Perspective.
2.Ahmad, Mokbul M. 2003 "Distant Voices: The Views of the Field Workers of NGOs in
Bangla-desh on Microcredit" Geographical Journal 169 (1), 65-74.
3.Journal of International Development, Special Issue: The Second Microfinance
Revolution: Creating Customer Centered Microfinance Institutions Volume pages 335350,
April 2002
4. Susy Cheston &Lisa Kuhn, Empowering Women through Microfinance, Pathways Out
of Poverty: Innovations in Microfinance for the Poorest Families, (Kumarian Press, 2002).
5. Tapping financial markets for microfinance: grameen foundationUSA fostering this
emerging trend, Jennifer Meehan director of capital markets grameen foundation USA,
presented on 2004, published in 2005
7/30/2019 Chapter 1 (Repaired)
38/70
6.J. Morduch, The Microfinance Shism, World Development, vol. 28, no. 4, pp. 617-629,
2000.
7. P. Basu and P. Srivastava, Scaling-up microfinance forIndias rural poor, World Bank
Policy Research Working Paper 3646, June, 2005.
8. Abosede, A. J. (2007), Should Microfinance be Gender Bias in the Context of Millennium
Development Goals? An Examination of Literature. Nigerian Journal of Business
Administration, Vol. 9, No. l&2, pp. 163-175.
9. James C. Brau, Gary M. Woller An examination of Microfinance: A ComprehensiveReview of the Existing Literature Journal of Entrepreneurial Finance and Business Ventures,
Vol. 9, Issue 1, 2004, pp. 1-26
10. Jonathan Morduch, Journal of Economic Literature Vol. XXXVII (December 2000), pp.
15691614.
11.R. Prabhavathy. Indian Streams Research Journal Vol.2, Issue.III/April; 12pp.1-4 ISSN:-
2230-7850.Article as : Indian Streams Research Journal (April ; 2012) self help groups and
poverty alleviation
12. Venkata Vijay Kumar P, V K Gupta: Research Journal of Finance and AccountingISSN
2222-1697 (Paper) ISSN 2222-2847 Vol 2, No 3, 2011
7/30/2019 Chapter 1 (Repaired)
39/70
CHAPTER 3
RESEARCH METHODOLOGY
7/30/2019 Chapter 1 (Repaired)
40/70
INTRODUCTION
Research in common parlance refers to a search for knowledge. Once can also define research
as a scientific and systematic search for pertinent information on a specific topic. In fact,
research is an art of scientific investigation. The Advanced Learners Dictiona ry of Current
English lays down the meaning of research as a careful investigation or inquiry especially
through search for new facts in any branch of knowledge.1. Redman and Mory define
research as a systematized effort to gain new knowledge.2. Some people consider research
as a movement, a movement from the known to the unknown. It is actually a voyage of
discovery. We all possess the vital instinct of inquisitiveness for, when the unknown
confronts us, we wonder and our inquisitiveness makes us probe and attain full and fuller
understanding of the unknown. This inquisitiveness is the mother of all knowledge and the
method, which man employs for obtaining the knowledge of whatever the unknown, can be
termed as research.
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the problem. It is a game plan for
conducting research. In this we describe various steps that are taken by the researcher.
Research methodology is a framework for the study and is used as a guide in collecting and
analyzing the data. It is a strategy specifying which approach will be used for gathering and
analyzing the data. it also includes time and cost budget since most studies are done under
these two constraints. The research methodology includes overall research design, the
sampling procedure, the data collection method and analysis procedure.
TYPE OF RESEARCH
This study is DESCRIPTIVE in nature. It helps in breaking vague problem into smaller and
precise problem and emphasizes on discovering of new ideas and insights.
RESEARCH DESIGN
Research design constitutes the blue print for the collection, measurement and analysis of
data. The present study seeks to identify the impact of microfinance on living standard,
poverty alleviation and women empowerment. The research is to be conducted on members
7/30/2019 Chapter 1 (Repaired)
41/70
of self help groups specially womens within Ludhiana. For the selection of the sample,
convenient sampling method was adopted and an attempt has been made to include all the
age groups and gender within the class.
NEED OF THE STUDY
The research report investigates the impact of microfinance on living standard, women
empowerment and poverty alleviation. An attempt has been made to find how microfinance
helps in reduce poverty and increase living standard of poor population in India. Poverty is a
major issue in the country, In 2006 planning commission estimation of population below
poverty line is 27.8%, the estimated number of poor is estimated to be approximately 300
million in 2004-05, larger than the official estimate of 1999-2000.it may be recalled that the
official estimate for poverty in 1999-2000 was 26.1% for country as a whole and 260 million
were estimated as poor. Credit is a powerful tool that could be effectively deployed when it
made available to the credit worthy among the economically active poor. Self Help Group
model of microfinance serves well to reduce poverty and improve living standard. The SHGs
are small, informal and homogenous groups. These groups have proved as cyclic agents of
development in both the rural and urban areas. The SHGs after being formed start collectinga fixed amount of thrift from each member regularly. After accumulating a reasonable
amount of resource, the group starts lending to its members for petty consumption needs and
group members by taking loans from bank and other institutions starts their own work or
work collectively in other words they got employment and these groups helps them to
increase their income and savings ,when income is increased they become able to fulfill their
basic needs and able to increase they living standard by acquiring new assets ,increase in
expenditure on health, food, entertainment etc and ,increase in consumption. This studybrings out the importance of microfinance in developing countries or in poor nations. This
study is conducted to know whether there is improvement in living standard, income of
members of self help groups and women members got empowerment or not. Basically this
research is done to know is there any difference in living standard, poverty and empowerment
of members of SHG before and after joining the group.
7/30/2019 Chapter 1 (Repaired)
42/70
SCOPE OF STUDY:
This study is exclusively on the microfinance to analyze and obtain insights into the impact of
microfinance on living standard, poverty alleviation and empowerment. It was carried out within
Ludhiana city over a period of two months. I selected this particular city for my research because
there is large number of self help groups in Ludhiana as compared to some other districts in Punjab.
and in present scenario there are large number of self help groups coming into existence and they
help their members to generate income and improve their living standard, these groups helps
womens to increase their involvement in decision making and other aspects and they helps in
women empowerment .I choose this topic for my research because In our country poverty,
unemployment are major problems and I want to do research how microfinance able to remove
these problems and up to what extent. In this report there are 3 aspects are covered living standard,
women empowerment and poverty alleviation and impact of microfinance on these three are
identified with the help of using factor analysis. This study helps to know microfinance has any
impact on all variables which are related with living standard, empowerment and poverty alleviation.
I find from my primary study microfinance activity helps a lot to poor population to get employment
and increase their income and make them able to better assessment of health, food and clothing
needs.
OBJECTIVES OF THE STUDY:
The objective of my study is to find the impact of microfinance on living standard, women
empowerment and reducing poverty and to study how microfinance activity helps the
members of self help group to enhance their living standard in terms of income, saving access
to health and education. And empowering woman in terms of their Involvement in major
household decisions, Increase in self-esteem etc. I divided my objective into following three
parts.
.
To Study the impact of microfinance on living standard
To study the impact of micro finance in empowering the social economic status of
women and developing of social entrepreneurship.
To study the impact of microfinance on poverty alleviation
7/30/2019 Chapter 1 (Repaired)
43/70
SAMPLING TECHNIQUE: The sampling technique used for judgment is convenience.
SAMPLING UNIT: It defines the target population that will be sampled i.e. it answers who
is to be surveyed. In this study, the sampling unit is the members of self help groups in
Ludhiana district.
SAMPLE SIZE:
It indicates the numbers of people to be surveyed. Though large samples give more reliable
results than small samples but due to constraint of time and money, the sample size is
restricted to 100 respondents. The sample size is selected by considering characteristics of
interest and objectives of the study. The respondents most of were the women members of
Self Help Groups.
SAMPLE SELECTION AND DATA COLLECTION PROCEDURE
The population for my study encompasses the people who have been engaged in
Microfinance activities for at least two years and members of self help groups and live in
district Ludhiana, Punjab. I choose the people with a long experience in Self Help Groups
because they are well informed and know much about the pros and cons about its activities,
so they can reflect better to my questionnaire. I have used structured questionnaire for
collecting the data by interviewing the clients which are members of self help groups in
Ludhiana. The people for the interview were selected randomly. To get the address and
particulars of the interviewees in different areas, I took help from the video office of district,
and I got list of self help groups which are currently operating in that district and from thelocal people of the particular areas I able to know which self help groups are working and
The data collection procedure started from Dhan Dhan Baba Nand Singh SHG village
Ghumait, and continued to Ruby SHG Rattangarh, Sant Ashram Mahila kainder. Baba Jogi
Peer SHG village Chahalan, Mai Bhago, and Mahila SHG village Kullewal ,Guru Arjun dev
ji SHG Bhagwanpura, Namdev mahila kainder Village Dhindsa, Baba Nanak SHG village
Kot Gangu Rai, and Sahibzada baba fateh Singh SHG of village Rupalon.
7/30/2019 Chapter 1 (Repaired)
44/70
SOURCES OF DATA:
Following are the methods of sources of data:
Primary sources
Questionnaire is used to collect primary data from respondents. The questionnaire is
structured type and contained questions relating to microfinance impact on living standard,
empowerment and poverty alleviation. The questions included in the questionnaire will be on
five points likert scale.
Questionnaire design
The questionnaire comprised with the questions related to measuring the living standards of
members of self help group it includes questions related to income, saving, education ,health,
food and outwear expenditure and questionnaire also includes questions related to measuring
impact of microfinance on empowerment it includes questions related to home management
,consumption level, recognition, decision making power , social status , confidence level and
social awareness and for study impact on poverty alleviation questions like acquisition of
assets, poverty reduction, borrowing power included in questionnaire. And I used Likert
Scale (considered on 1-5points scale) to measure the respondents perceptions based on 27
statements to perceive the impact of microfinance on their overall living standards,
empowerment and poverty alleviation The points of the scale indicate the degree of
satisfaction or agreement level of the household or a person after he or she has joined the self
help group. 1 represents the lowest level of satisfaction or high disagreement, whereas 5
represents the highest level of satisfaction or high agreement.
Secondary Sources Collections
Although the result of the research is highly dependent on the primary sources that I have
gathered from the structured interview, but it also required some secondary sources to
understand the concepts, definitions, theories and empirical results. I have used several
books, research literatures, articles, journals and thesis, as secondary sources for our study.
Internet sources were also used as a secondary source for my project. Since the internet
sources are less reliable, I have limited the use of those sources to the web pages of
prominent organizations like NABARD. However, it is not always easy to find out the
appropriate research materials for the project. Many studies have been conducted onmicrofinance over the last few decades.
7/30/2019 Chapter 1 (Repaired)
45/70
Nevertheless, from them I had to choose the most appropriate literature for my project.
For this reason, I had to go through numerous references related to this topic, to find
the suitable materials. These materials were mainly collected from the university library
and using available search tool.
TOOLS AND TECHNIQUES OF ANALYSIS:
The data so collected will be analyzed through the application of statistical techniques, such
as Principal component Analysis (PCA) notably Factor Analysis.
Statistical Package for Social Sciences (SPSS) 16.0 was used to analyze the data. The
following tools were applied:
Factor Analysis
LIMITATIONS OF THE STUDY
There are number of limitations in this study. Firstly, the respondents were limited (100
respondents or samples) in terms of size and composition. Secondly, the data collection was
restricted only within the Ludhiana district of Punjab, which may fail to represent the actual
scenario of the whole country. While interviewing the people, I have faced problems in
explaining the questions as most of the people, who are involved in microfinance program
and members of self help groups, are illiterate and living in villages. Therefore, it was too
difficult to make them understand some of the technical terms: like income etc. and some
respondents are not able to understand my objective of study and why I collected all
information which is mentions in the questionnaire and some respondents think I am a
research officer which is send by CDPO to know which self help groups are working
properly or which are not so it become hard to collect more adequate data.
Moreover, theories were other problem when i wrote the theoretical framework. Because, no
established theories were particularly defined in microfinance field yet.Grameen model has
been used as an ideal theory for microfinance. Besides this, some other related things to
microfinance like, saving mobilizations, solidarity, etc. were also used in theoretical
framework. Finally, the accuracy of the analysis heavily relied on the data provided by the
members of self help groups in Ludhiana district of Punjab.
7/30/2019 Chapter 1 (Repaired)
46/70
1. Chawla, Dr.Deepak and Sondhi Dr. Neena Research methodology: concept and cases,
vikas publishing house pvt ltd.
2. Malhotra K.Naresh, Dash satyabhuson, marketing research: An orientation, Pearson
prentice hall.
3. Kothari C.R, Research methodology: Methods and techniques, wishwa prakashan.
.
7/30/2019 Chapter 1 (Repaired)
47/70
CHAPTER 4
ANALYSIS AND DISCUSSION
7/30/2019 Chapter 1 (Repaired)
48/70
Factor analysis
Factor analysis is a multivariate technique in which there is no distinction between dependent
and independent variables. In factor analysis, all variables under investigation are analyzedtogether to extract the underlined variables. Factor analysis is a data reduction method. It is
primarily used for data reduction and summarization .It is very useful method to reduce large
number of variables resulting in data complexity to a few manageable factors. These factors
explain the most part of the variations of the original set of data.
I used factor analysis to measure the impact of microfinance on living standard, women
empowerment and poverty reduction. Factor analysis is done on SPSS 16 version, there are
27 statements or variables in my questionnaire but I used 23 variables which are inter-
correlated ,4 variables are reduced in data cleaning process and I used SPSS in following
way:
Running the analysis:
Access the main dialog box by using the Analyze----data reduction----factor and I select the
variables which I want to analyze. And several options available the first which can be
accessed by click on descriptives .the coefficient option produces the R matrix and
significance level option will produce the matrix indicating the significance value of each
correlation in the R-matrix. I also used the determinant option and this option is vital for
testing for multicollinearity or singularity. The determinant of the matrix should be greater
than 0.00001: if it is less than this value then look through the correlation matrix for
variables that correlate vary highly(r>.8) and consider eliminating one of the variables
before proceeding.
KMO and Bartletts test of sphericity produces the Kaiser-MeyerOlkin measure of sampling
adequacy and Ba