microfinance and microentrepreneurship

MICROFINANCE AND MICROENTREPRENEURSHIP Edited by Surender Mor

DEPARTMENT OF ECONOMICS BHAGAT PHOOL SINGH MAHILA VISHWAVIDYALA

Microfinance and Microentrepreneurship

Edited by

Surender Mor

Bhagat Phool Singh Mahila Vishwavidyalaya Khanpur Kalan, Sonepat, Haryana

Vista International Publishing House DELHI-110053 (INDIA)

© Publisher First Edition : 2013 ISBN : 978-93-81604-78-6

Vista International Publishing House V-196, Near Shiv Sadhna Mandir, C-11, Yamuna Vihar, Delhi-110053 Phone : (011) 22921212, 22917141 E-mail : [email protected]

Disclaimer The articles published in this book are purely personal views and judgments of the authors and do not reflect the views of the Editor/Publisher/Printer. The Editor/Publisher/Printer has delivered their best in presenting the original views of the authors in this book. However, they will not be responsible for any errors caused by oversight or otherwise. The authors themselves are responsible for grammatical mistakes, if any. The Editor of this book will not take any responsibility for any issue arising out of the contents, such as copyrights, plagiarism, self-plagiarism, etc. The authors themselves are full responsible for contents as endorsed by them in the transfer of copyright to the Editor. —Surender Mor, Editor

PRINTED IN INDIA

Published by Vista International Publishing House and printed at Himanshu Printers, Maujpur, Delhi-110 053.

Dedicated to my most revered teacher

Dr. T.R. Kundu Professor Emeritus Kurukshetra University, Kurukshetra

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Foreword It gives me pleasure and the sense of satisfaction to share my views through this foreword on the important subject of ‘Issues and Challenges in Microfinance and Microentrepreneurship’. Indeed the global economy is increasingly becoming dependent on microfinance and developing entrepreneurship at micro level. The developing economies like that of India need sustainable sincere efforts in strengthening small entrepreneurship through affordable finance options. Notwithstanding financial institutions, academic institutes can play a very important role in devising and disseminating the benefits of microfinance and micro entrepreneurship by creating an interface between society and universities. In fact capacity building through community engagement shall be an integral part of curriculum prescribed in colleges and universities. I feel privileged to share and recommend ‘Society-University Interface Model’ developed by Bhagat Phool Singh Mahila Vishwavidyalaya. This model has truly created sustainable micro entrepreneurship avenues for the marginalized sections of society and has emerged as a powerful instrument for poverty alleviation. The deliberations in the International Conference on “Microfinance and Micro entrepreneurship: Issues and Challenges” being organized at this juncture will certainly reinforce the subject. The scholarly presentations included in this book enrich our understanding of areas like Microfinance, Economic Growth, Rural Development, Role of Self-Help Groups, Women Empowerment, Social Entrepreneurship, Microinsurance, Crop Insurance, Small and Medium Enterprises, Use of Technology, Mobile Banking, Management Information System and entrepreneurship etc. The eclectic nature of areas covered in the book makes it an important source of reference for future researchers and policy makers. I convey my compliments to the participating scholars, paper contributors and collaborating institutions for enabling the thought-provoking discourse on microfinance and microentrepreneurship. The commendable efforts put in place by the editorial team in bringing out this book are appreciable and noteworthy.

Dr (Mrs) Pankaj Mittal Vice-Chancellor Bhagat Phool Singh Mahila Vishwavidalya, Khanpur Kalan, Sonepat, India

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Acknowledgments I have been inspired by quite a number of personalities at home and abroad but Prof. T. R Kundu deserves special mention. I wish to express my deep gratitude to my esteemed teacher for guiding at each stage of life and academic career. Next I owe a deep debt of gratitude to Prof. Arvind Astha of Banque Populaire Chair in Microfinance of the Burgundy School of Business, France for initiating the idea of organizing an International Conference at BPSMV, Khanpur Kalan and publication of this book. I also wish to place on record the continuous support and blessings I received from Dr. (Mrs.) Pankaj Mittal, Vice-chancellor, BPSMV, Khanpur Kalan. Without the continuous support of reviewers, it is impossible for me to maintain the academic quality of this book. I am thankful to all colleagues, members of various committees, the authors, and the university administration and staff for helping me at each step for timely completion of this book. The financial assistance received from Research and Development Fund of National Bank for Agriculture and Rural Development (NABARD) towards publication/printing of this edited book is greatly acknowledged. Finally my thanks to Mr. Harvinder Singh who has always been ready to assist in editing and proof reading of the manuscripts included in this book.

—Surender Mor

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Preface This book is based on the papers received for the International Conference on the theme Microfinance and Microentrepreneusrship: Issues and Challenges held on August 08-09, 2013. This book is dedicated to Dr. T.R. Kundu, Professor Emeritus and my esteemed teacher. The book focuses on the role of microfinance in promoting economics, growth, rural development, entrepreneurship and social entrepreneurship, microenterprises, microinsurance, and technology etc. in the world especially in the developing countries. The book is divided into four sections and each section highlights a particular aspect related to the microfinance. Section I deals with articles devoted to Microfinance and Economic Growth in Indian sub-continent. Bharat Ram Dhungana and Prashant Kumar in their paper discuss the scenario of financial inclusion in South Asian region, while Mahesh Ghimire and Narayan Prasad Paudel highlight the impact of microfinance socio-economic issues in Nepal. Arti Gaur et al. discuss the importance of SHG-Bank linkage programme in promoting microfinance in India, while Surender Ahlawat reveals the impact of microfinance on income and expenditure pattern of beneficiaries in Haryana. The article by Parmod Kumar Agarwal and Harleen Kaur portrays the structure and impact of Microfinance in South Asia, whereas Mandeep Kumar in his research shows that microfinance by NABARD proved a boon for farmers in Himachal Pradesh. The manuscript by Manpreet Arora and Swati Singh highlights the contribution of microfinance institutions in inclusive growth of the country. Charan Singh’s paper explores the demand and scope for microfinance, whereas Anju Rani analyses the growth and Challenges of microfinance in India. Neera Verma et al. examine the role of government for promoting microfinance institutions in India while Savita Bhagat in her paper focuses on the Challenges of Financial Inclusion in the country. The paper by Kiran Lamba highlights the progress and sustainability of SHG-Bank linkage Model in India, whereas Shelly Dahiya credits NABARD for promoting MFIs in India. Vikram in his research paper examines the regulatory framework for MFIs across the world, while Ruchi and Preeti in their paper comment on the linkages of microfinance and economic growth. Sudipta De in her study explores the impact of micro-credit on women’s decision making power in West Bengal, whereas N.C Jain and Smriti Pathak in their paper consider microfinance as a new paradigm for emerging markets in India. Section II consists of articles related to Microfinance, Entrepreneurship and Social Entrepreneurship in India. Srikant Kalamkar and Dimple Tresa Abraham found a challenge in the continuity of microenterprises operated by SHGs, whereas G Krishnamoorthy and E. Hemavathi in their study analyse the growth of entrepreneurship in microfinance in Cuddalore District of Tamil Nadu. Garima Malik and Amit Jain focus on social entrepreneurship in Rural India, whereas Jagannath Ghosh explores the contemporary issues of Microentrepreneurship in Eastern India. Tanvi Gupta in her paper attributes promotion of women entrepreneurship a step towards balanced regional sustainability, while Anuradha examines the prospects and challenges of social entrepreneurship through microfinance in India. The paper by Shobna Goyal et al. analyse the fact whether SHG model is a right tool to promote entrepreneurial activities among women in India, whereas Kiran Sharma and Nishant Mor portray the impact of microfinance on development of Micro and Small Enterprises in India. Amit Kumar Singh and Chandra Sekhar credit social entrepreneurship as a novel cause for evolving business, while Achana Singhal highlights the role of social entrepreneurship in changing the life of poor. Section III contains with articles related to Microfinance, Rural Development and Women Empowerment in India. Pankaj Kumar in his paper discusses the role of MFIs in Rural Development of India, whereas Vijith Krishnan et al. explore various dimensions of performance of microfinance in India. Veena Dada and Rajni Saluja analyse the role of NABARD’s SHG linkages programme in India, while Suman Shokeen relates life economics to women empowerment. Bahnisikha Ghosh and Debasish Joddar highlight the sustainability of Microenterprises under various rural development programmes in India, whereas, Hansa Shukla and Sharmila (ix)

(x) Saha in their case study of Mahima Mahila SHG found the case of women empowerment through formation of SHGs. Pushpa M Savadatti and Triyogi Nath Pandey in their article attributes SHGs as a tool for women empowerment in rural India, while Vikas Batra in his manuscript assesses the impact of microfinance on household welfare of rural women in Haryana. Manisha Raj assesses the role of MFIs in women emancipation, while Mriganka Saikia and Pankaj Saikia in their paper analyse the case women empowerment of TIWA tribal women in Assam. Shazia Manzoor et al. explore the possibility of women empowerment by globalization of microfinance, whereas Wakar Amin et al. focus on empowering women via SHGs in India. Rajkiran Prabhakar and Shilpi Raj analyse the case of women empowerment through SHG in Varanasi District of Uttar Pradesh Section IV of the book is devoted to the manuscripts related to Microfinance, Microinsurance and Use of Technology in microfinancing. Rabindra Ghimire and Prashant Kumar discuss the prospects of agricultural insurance in Nepal, while Sarav Mangla and Geetu Gupta’s paper deals with some conceptual issues in M-Banking. Manesh Choubey highlights the use of MIS by MFIs, whereas Babita Jharia analyses the spread of mobile banking services in the country. The paper by Kuldeep Goyal analyse the risk and benefits of mobile banking, while Silender Singh Hooda and Payal Sharma explains the effectiveness of various model of microinsurance. Harjender Singh in his paper discusses the idea of mobile agent, while the paper by Sumitra Devi assesses the convergence between technology and business. Karam Singh portrays the trends in the use of MIS in Microfinance, whereas Jagdish Gupta and Pankaj Chaudhary in their case study of Panipat emphasize the social empowerment through microinsurance.

(Surender Mor)

List of Contributors Anil Kumar: National Centre for Agricultural Economics and Policy Research (NCAP), New Delhi Amit Kumar Singh: ABV-Indian Institute of Information Technology and Management Gwalior, Madhya Pradesh Amit Jain: Amity Business School, Amity University, Noida, Uttar Pradesh Anju Rani: Department of Economics, BPSMV, Khanpur Kalan, Sonepat, Haryana Anuradha: Smt. A.A.A. Govt. P.G College, Kalka, Haryana Archana Singhal: Saraswati Mahila Mahavidyalaya Palwal, Haryana Arti Gaur: Department of Business Administration, Chaudhary Devi Lal University, Sirsa, Haryana Aarthi, L.R: Division of Agricultural Economics, New Delhi Ashok Kumar: National Centre for Agricultural Economics and Policy Research (NCAP), New Delhi Ashok Kumar Gupta: Govt. Commerce College, Kota, Rajasthan Babita Jharia: Department of Management, MATS University, Raipur, Chhattisgarh Bahnisikha Ghosh: Department of Economics, University of Kalyani, Nadia, West Bengal Bharat Ram Dhungana: School of Business, Pokhara University, Nepal Charan Singh: Department of Management, Panipat Institute of Engineering and Technology, Panipat, Haryana Chandra Sekhar: ABV-Indian Institute of Information Technology and Management Gwalior, Madhya Pradesh Debasish Joddar: Department of Economics, University of Kalyani, Nadia, West Bengal Dimple Tresa Abraham: Gokhle Institute of Politics and Economics, Pune, Maharashtra Deepali Mathur: Department of Social Work, BPSMV, Khanpur Kalan, Sonepat, Haryana D.R. Singh: Indian Agricultural Statistical Research Institute, Pusa, New Delhi E.Hemavathi: Department of Economics, University of Madras, Chennai, Tamil Nadu Garima Malik: Amity Business School, Amity University, Noida, Uttar Pradesh Geetu Gupta: Department of Economics, Punjabi University, Patiala, Punjab Gian Mehra: Department of Social Work, BPSMV, Khanpur Kalan, Sonepat, Haryana G.Krishnamoorthy: Anna Centre for Public Affairs, University of Madras, Chennai, Tamil Nadu Harjender Singh: Department of Computer Science, Maharaja Surajmal Institute, New Delhi Hansa Shukla: Swami Shri Swaroopanand Saraswati Mahavidyalaya, Bhilai, Chhattisgarh Harleen Kaur: Department of Economics, Punjabi University, Patiala, Punjab Jagannath Ghosh: Department of Commerce and Business Management, Ranchi University, Ranchi, Jharkhand Jagdish Gupta: Arya College Panipat, Haryana Karam Singh: Department of Computer Science,Singhania University,Rajasthan Kiran Sharma: Department of Business Administration, Chaudhary Devi Lal University, Sirsa, Haryana (xi)

(xii) Kiran Lamba: Department of Economics, BPSMV, Khanpur Kalan, Sonepat, Haryana Khushbu Singla: Department of Business Administration, Chaudhary Devi Lal University, Sirsa, Haryana K.R. Chaudhary: National Centre for Agricultural Economics and Policy Research (NCAP), New Delhi Kuldeep Goyal: Chaudhary Devi Lal University, Sirsa, Haryana Mandeep Kumar: Department of Economics H.P. University Shimla, Himachal Pradesh Mahesh Ghimire: Nepal Commerce Campus, Tribhuvan University,Kathmandu, Nepal Manesh Choubey: Department of Economics, Central University of Sikkim, Gangtok, Sikkim Manisha Raj: Department of Management, Amity University, Noida, Uttar Pradesh Manpreet Arora: Department of Accounting and Finance, Central University of Himachal Pradesh, Dharamshala, Himachal Pradesh Meenu Maheshwari: Department of Commerce and Management, University of Kota, Kota, Rajasthan Mriganka Saikia: Department of Economics, Dhing College, Dhing, Assam N. C. Jain: Faculty of Commerce, B.U. Bhopal Neera Verma: Department of Economics, K.U.Kurukshetra, Haryana Nishant Mor: Department of Business Administration, Chaudhary Devi Lal University, Sirsa, Haryana Narayan Prasad Paudel: Kathmandu University School of Management, Kathmandu, Nepal Pankaj Chaudhary: Department of Commerce, Arya College Panipat, Haryana Pankaj Kumar: Department of Economics, Patna Muslim Science College, Patna, Bihar Pankaj Saikia: Deptartment of Economics, Dhing College, Dhing, Nagaon, Assam Parmod Kumar Agarwal: Deptartment of Economics, Punjabi University, Patiala, Punjab Payal Sharma: Department of Commerce, Chaudhary Devi Lal University, Sirsa, Haryana Prashant Kumar: Department of Commerce, Banaras Hindu University, Varanasi, Uttar Pradesh Prawin Arya: Indian Agricultural Statistical Research Institute, Pusa, New Delhi Preeti: Department of Economics, BPSMV, Khanpur Kalan, Sonepat, Haryana Pushpa M Savadatti: Department of Economic Studies and Planning, Central University of Karnataka, Gulbarga, Karnataka Rabindra Ghimire: Department of Commerce, Pokhara University, Nepal Rajni Saluja: Department of Economics, St. Soldier (Co-Ed) College, Jalandhar, Punjab Rajkiran Prabhakar: Department of Commerce, Banaras Hindu University, Varanasi, Uttar Pradesh Rishi Vaidya: Department of Economics, Devi Ahilya Vishwavidyalaya, Indore, Madhya Pradesh Ruchi: Department of Commerce, Maharshi Dayanand University, Rohtak, Haryana Saloo: Water Technology Centre, SRL, New Delhi Sarav Mangla: Department of Economics, Punjabi University, Patiala, Punjab Sarina Saharan: Department of Economics, Kurukshetra University Kurukshetra, Haryana Satyawan: HDFC Bank, Gurgoan, Haryana Savita Bhagat: Department of Economics, DAV Centenary College, Faridabad, Haryana Silender Singh: Department of Commerce, Chaudhary Devi Lal University, Sirsa, Haryana

(xiii) Sharmila Saha: Department of Economics, Pt. Ravi Shankar Shukla University, Raipur, Chhattisgarh Shazia Manzoor: Department of Social Work, University of Kashmir, Srinagar, J&K Shelly Dahiya: Department of Economics, Punjabi University, Patiala, Punjab Shilpi Raj: Department of Commerce, Banaras Hindu University, Varanasi, Uttar Pradesh Shiv Kumar: National Centre for Agricultural Economics and Policy Research (NCAP), New Delhi Shobhna Goyal: Department of Commerce, Aggrawal College, Ballabgarh, Haryana Smriti Pathak: Indira Gandhi College of Science and Commerce, Puna. Srikant Kalamkar: Agro Economic Research Centre, H.M. Patel Institute of Rural Development, Sardar Patel University, Vallabh Vidyanagar, Anand, Gujarat Suman Shokeen: Department ofManagement, Jagannath International Management School, New Delhi Sumitra Devi: Institute of Teacher Training & Research, BPSMV, KhanpurKalan, Sonepat, Haryana, Sunita Yadav: Department of Economics, K.U.Kurukshetra, Haryana Surender Ahlawat: Department of Economics, Central University of Haryana, Mahendergarh, Haryana Swati Singh: Department of Accounting and Finance, Central University of Himachal Pradesh, Dharamshala, Himachal Pradesh Tanvi Gupta: Department ofManagement, Jagannath International Management School, New Delhi Triyogi Nath Pandey: Department of Economic Studies and Planning, Central University of Karnataka, Gulbarga, Karnataka Vikram: Department of Economics, Panjab University, Chandigarh Vikas Batra: Department of Economics, Indira Gandhi (PG) Regional Centre, Rewari, Haryana Veena Dada: St. Soldier (Co-Ed) College, Jalandhar, Punjab Vijith Krishnan k: Division of Agricultural Economics, New Delhi Wakar Amin: Department of Social work, University of Kashmir, Srinagar, J&K

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Dr. T.R. Kundu Professor Emeritus Kurukshetra University, Kurukshetra Professor T.R. Kundu did his master’s degree in economics with distinction from Kurukshetra University, Kurukshetra in 1970. Soon afterwards, he had one year stint as a regular research scholar at Delhi School of Economics, University of Delhi where he worked with Prof. A.L. Nagar—a leading econometrician of his times. He started his teaching career as a lecturer at N.M. College Hansi in 1971. He got University Grant Commission Faculty Improvement Teacher Fellowship in 1977 and did his Ph.D. under the supervision of Prof. P. Chander—a former Director of Indian Statistical Institute, Delhi Centre, and an economist of international standing. He joined the Department of Economics at Kurukshetra University, Kurukshetra in 1985 and was selected as reader in 1987 and then Professor in 1994. Prof. Kundu has published more than 30 quality research papers in Journals of national and international repute. He has made research contributions both in the theoretical and the applied fields of economics and his papers have been cited widely. The broad areas of his theoretical interest include general equilibrium, decentralized planning and development economics. He has suggested new procedures for the computation of equilibrium prices in an economy approximated by the generalized leontief model due to Samuelson and has formally shown how such an economy can eventually reach equilibrium through the celebrated Walrasian tatonnement process under conditions of perfect competition. He has also given a general theorem which characterizes the procedures in terms of their rates and modes of convergence behaviour. In the area of decentralized planning, he has given a model of multilevel planning where horizontal information flows form an integral part of the planning procedure. He has established the comparative advantages of this procedure over other procedures in the literature that use vertical information flows only. He has also developed a general iterative planning procedure which allows for decentralization of information as well as of decision-making and possesses operational flexibility to work under alternative organisational structures of practical significance. In the domain of development economics, Prof. Kundu has reviewed the existing development paradigms under two broad approaches namely the Neoclassical/equilibrium analysis of development and the Neo-Marxist/ disequilibrium analysis of development. He has also examined the goal of development with human face in its historical perspective and proposed a strategy for the simultaneous pursuit of economic growth and basic needs. In the field of applied economics, he has used the exact index number approach to measure total factor productivity in the organised manufacturing sector of India by assuming a flexible (translog) functional from for the producer’s production function and deriving an index number formula consistent (exact) with this functional form. He has used the translog price possibility frontier to measure the extent of inter-intermediate input substitution possibilities in Indian agriculture and explained also the channels to realize the same in practice. In yet another important paper, he has examined the impact of new diary technology on employment and income of rural households in Haryana. The study has employed a multistage stratified random sampling technique for collection of data and Lorenz and Gini concentration ratios for examining the impact of new technology on income distribution of rural households. He has also done a major research project on “Rural Indebtedness Amongst the Farmers in Haryana”. Moreover, Prof. Kundu has supervised the following (Twelve) Ph.D thesis on various aspects of Haryana and Indian Economy: •

Some Economic Aspects of Poultry Farming in Haryana, (by Surat Singh)

•

An Analysis and Comparison of Industrial Performance before and after Economic Liberalization in India, (by Neera Verma) (xv)

(xvi) • • • • • • • • • •

Impact of Intensive Cattle Development Project on the Rural Households of Haryana, (by Anil Kumar) Input use Efficiency in Haryana Agriculture, (by Surender Singh ) Economics and Ecology of Alternative Cropping Systems in Haryana, (by Amita) An Analysis of Growth & Performance of Manufacturing Industries in Haryana, (by Pawan Kumar Gaba) Socio-Economic Dimensions of Gender-Bias: A Study in relation to Working Women in Haryana (by Pratibha Jyoti) A study of Factor Productivities and Substitution Possibilities in Haryana Manufacturing Industries Before and After Economic Liberalization (by Hemlata Sharma) Power Sector reforms in India: A study with special Reference to Haryana (by Maha Singh) Banking Sector Reforms and Performance of Public and Private Commercial Banks in India (by Hukum Singh) WTO and Indian Agriculture: A study of Implications and Future Strategies, (by Ramphool). Decentralization of Governance and Rural Development since 1990s; A study of Rural Development Programmes in Haryana (by Puran Singh)

Prof. Kundu has attended more than 50 national and international seminars/ conferences at home and abroad including one each in USA, Poland, Germany, Italy and France. His contribution in the field of decentralized planning was specifically acknowledged as a significant contribution in the Proceedings of the 26th Annual Conference of the Indian Econometric Society held at Bombay in Jan. 1989. At the 25th Dairy Industry Conference held in Kolkata in 2006, he was presented ‘Best Paper Award’ for his article with Dr. A.K. Chauhan published in Indian Journal of Diary Sciences, 2005. Prof. Kundu has been the Editor of Journal of Haryana studies, Kurukshetra University, Kurukshetra from 2002-2007. He has also been member of various professional and University bodies including: • Life Member, The Indian Econometric Society. • Life Member, The Indian Economic Association • Member, The Haryana Economic Association • Member, University Court, Kurukshetra University, Kurukshetra, 2005-10. • Member, Academic Council, Kurukshetra University, Kurukshetra, 2007-10. • Member Secretary, College Development Council, Kurukshetra University, Kurukshetra, 2005-10. • Member, Board of Residence, Health & Discipline, Kurukshetra University, Kurukshetra, 2004-06. • Member, Advisory Committee of the WTO Cell, Kurukshetra University, Kurukshetra. Prof. Kundu possesses rich and varied administrative experience in university matters. His important administrative assignments in the past included those as: • Deal of Colleges, Kurukshetra University, Kurukshetra, 2005-2010. • Founder Chairman of Department of Business Economics, Kurukshetra University, Kurukshetra, 1994-95. • Chairman of Department of Economics, Kurukshetra University, Kurukshetra, 1997-2000. • Director, Mahatma Gandhi All India Services Coaching Institute, Kurukshetra University, Kurukshetra, 1999-2000. • Chief Warden, Kurukshetra University, Kurukshetra, 2005. • UGC, Co-ordinator, Kurukshetra University, Kurukshetra 1999-2000. Prof. Kundu has been a visiting fellow at Indian Statistical Institute Delhi Centre, in 1996, and earlier at MDU, Rohtak in 1992. Recently, he has been awarded Emeritus Fellowship (2012-13) by the UGC and is now Professor Emeritus with the Department of Economics, Kurukshetra University, Kurukshetra.

Contents Foreword

(v)

Acknowledgements

(vii)

Preface

(ix)

List of Contributors

(xi)

Prof. T.R. Kundu : Biographic Profile and Academic Achievements

(xv)

Section I MICROFINANCE AND ECONOMIC GROWTH 1. Financial Inclusion in South Asian Region — Prashant Kumar and Bharat Ram Dhungana*

1

2. Impact of Microfinance on Socio-Economic Issues in Nepal — Mahesh Ghimire* and Narayan Prasad Paudel

8

3. Microfinance through SHG-Bank Linkage Programme in India: An Appraisal — Arti Gaur, Khushbu Singla* and Satyawan

24

4. Impact of Micro Finance on Income and Expenditure Level: Evidence From Jhajjar District of Haryana State in India — Surender Ahlawat

33

5. Microfinance in South Asia: Structure and Impact — Parmod Kumar Agarwal and Harleen Kaur*

39

6. Microfinance through NABARD:A Boon in Himachal Pradesh under Swaranjayanti Gram SwarojgarYojana and NABARD — Mandeep Kumar

46

7. Inclusive Growth of Microfinance Institutions and Bank Linkage Programme in India — Manpreet Arora and Swati Singh*

53

8. Microfinance: Purpose, Demand and Its scope in India — Charan Singh

60

9. Growth and Challenges of Microfinance in India — Anju Rani

66

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(xviii) 10. Microfinance Institutions and Role of Government in India — Neera Verma, Sunita Yadav* and Sarina Saharan

77

11. Financial Inclusion: Challenges Ahead — Savita Bhagat

86

12. Progress and Sustainability of SHG Bank Linkage Model in India — Kiran Lamba

95

13. NABARD: Leveraging Microfinance In India — Shelly Dahiya

104

14. The Regulatory Framework of Microfinance Institutions: A Global Experience — Vikram

116

15. The Role of Microfinance in Economic Growth — Preeti and Ruchi*

122

16. Impact of Micro Credit on Women’s Decision Making Power: Case Study of Self Help Group Participation In West Bengal — Sudipta De

130

17. Microfinance as a new paradigm of Emerging Markets in India — N. C. Jain and Smriti Pathak*

149

Section – II MICRO FINANCE, ENTREPRENEURSHIP AND SOCIAL ENTREPRENEURSHIP 18. Micro Enterprises of SHGs and Challenges to Continuity — S S Kalamkar and Dimple Tresa Abraham*

153

19. A Study on Growth of Entrepreneurship in Microfinance with special reference to CuddaloreDistrict — G Krishnamoorthy and E.Hemavathi*

163

20. Social Entrepreneurship in Rural India — Garima Malik and Amit Jain*

172

21. Contemporary Issues of Micro Entrepreneurship-Its growing Economic Role, Challenges and Prospects: Strategic initiatives of Eastern India — Jagannath Ghosh

178

22. Promotion of Women Microentrepreneurs in Rural India : A Step Towards Balanced Regional Sustainability (Reference to SEWA) — Tanvi Gupta

187

23. Social Entrepreneurship through Microfinance Prospects and Challenges in India — Anuradha

195

(xix) 24. Do SHGs a tool of promoting Entrepreneurial activities among Women? — Meenu Maheshwari, Ashok Kumar Gupta and Shobna Goyal*

204

25. Impact of Microfinance on Development of Micro and Small Enterprise — Kiran Sharma and Nishat Mor*

210

26. Social Entrepreneurship: A Cause To Evolving Businesses — Amit Kumar Singh and Chandra Sekhar*

213

27. Social Entrepreneurship in India—Changing The Life of the Poor — Archana Singhal

222

Section – III Micro Finance, Rural Development & Women Empowerment 28. Microfinance Institutions for Rural Development — Pankaj Kumar

228

29. Prevailing Practices of Paddy Collective Farming under Kudumbashree Mission in Kerala: An Economic Investigation — Vijith Krishnan K, Shiv Kumar*, D.R. Singh, Aarthi, L.R, Anil Kumar, Prawin Arya, Shaloo Lohcab, K.R. Chaudhary

237

30. An Analysis of NABARD’s SHG—Bank Linkage Programme in India — Veena Dada and Rajni Saluja*

245

31. Women Etrepreneurship and Life Economics: Challenges and Opportunities — Suman Shokeen

254

32. Sustainability of Microenterprises under Rural Development Programme: An Empirical Analysis — Bahnisikha Ghosh and Debasish Joddar*

258

33. Self Help Group and Women Empowerment: Case Study of Mahima Mahila SHG of Durg — Hansa Shukla and Sharmila Saha*

271

34. Self Help Group as an Imperative to Women Empowerment and Rural Development — Pushpa M Savadatti and Triyogi Nath Pandey*

277

35. Impact of Microfinance on Household Welfare of Rural Women: An Assessment of NGO in Haryana — VikasBatra

283

36. Role of Microfinance Institutions in Women Emancipation — Manisha Raj

294

37. Women Empowerment through Self Help Group : A case study of Tiwa Tribal Women of Bhurbondha Block of Morigaon District, Assam — Mriganka Saikia and Pankaj Saikia*

302

(xx) 38. Globalisation and Microfinance: Exploring possibilities for Women Empowerment — Shazia Manzoor, Wakar Amin* and Gian Mehra

311

39. Empowerment of Women and Self Help Groups : Case of India — Wakar Amin, Shazia Manzoor*, and Deepali Mathur

316

40. Women Empowerment through Self Help Group—A Study of Varanasi District in Uttar Pradesh — Rajkiran Prabhakar and Shilpi Raj*

325

Section – IV MICROFINANCE, MICRO INSURANCE AND TECHNOLOGY 41. Agriculture Insurance in Nepal: Prospects and Challenges — Rabindra Ghimire* and Prashant Kumar

336

42. M-banking: Conceptual Issues and Its importance in India — SaravMangla and Geetu Gupta*

347

43. Management Information System in Microfinance: An Overview — Manesh choubey

352

44. Trends in Mobile Banking Services — Babita Jharia

365

45. Mobile Banking : An Analysis of Benefits and Risk — Kuldeep Goyal

372

46. An Analysis of Effectiveness of the Working Model for Microinsurance — Silender Singh Hooda*and Payal Sharma

378

47. “An Analytical of study of Mobile Agents: Are they a good Idea?” — Harjender Singh

383

48. Moving Towards Convergence: Technology and Business — Sumitra Devi

390

49. Management Information System and Microfinance:Trends and Prospect in India — Karam Singh

393

50. Social Empowerment through Microinsurance: A Case Study of Panipat District in Haryana — Jagdish Gupta and Pankaj Chaudhary*

400

*Corresponding Author

Financial Inclusion in South Asian Region By Prashant Kumar and Bharat Ram Dhungana

Introduction A sound and stable financial system is considered as a key factor for the economic growth of the nation. A well-developed financial institution promotes the level of capital formation and encourages for investment by identifying and financing productive business opportunities. Economists have generally reached a consensus on the significant role of financial institutions in economic development. Financial inclusion is a significant issue in the case of developing countries where the large number of people is still far from the access of formal banking services. It is a major aspect of finance that covers various financial services such as savings, insurance, payments and remittance facilities to those who have been excluded by the formal financial system. Marginalized, disadvantaged and vulnerable people, who have been exploited by the informal lending system and unable to pledge any physical collateral for the loan, are the major target of financial inclusion. Micro-finance (MF) is a tool of financial inclusion to the people having low-income as well as lack of formal banking and financial service access. The goal of MF is to give low-segment people an opportunity to become self-sufficient by providing a means of saving and credit activities. It provides services to the communities who have no collateral to offer against the loans they take but have indigenous skills and strong desire to undertake economic activities for self employment and income generation. Micro-finance industry is considered as a significant and emerging issue in developing countries because it is taken as a tool of financial inclusion as well as poverty reduction for the marginalized and disadvantaged people of rural sectors. The micro-finance industry has generated a great deal of interest among academicians, researchers, policy makers and economists around the developing countries. The main objective of this paper is to analyze the recent scenario of financial inclusion in South Asia. This paper is based on the secondary data provided by different government and non government institutions, Asian Development Bank and World Bank. Descriptive statistics has been applied for the analysis of the data. This research has been confined to the financial inclusion of South Asian countries. Development of Micro-finance Industry MF has been developed steadily and rapidly over the last twenty years. The antecedents of MF include cooperative and community endeavors in the 19th century in Germany and elsewhere in Europe. It emerged in the 1970s as social innovators began to offer financial services to the poor and marginalized people those who were previously considered un-bankable due to the lack of collateral. If an opportunity is provided to the poor and disadvantaged people, the MFIs can expand their businesses and increase their incomes. Moreover, the high repayment rates demonstrated that the poor are capable of transforming their own lives, given the chance. This model of lending disproved all conventional thinking about banking (Matthaus-Maier and Von Pischke, 2009). MF became possible on a broad scale through a convergence of events. The most important was the liberalization of financial markets in the 1980s and beyond. Liberalization facilitated the emergence of new types of formal financial institutions dedicated to the bottom end of the market. Finally, the participation of bilateral and multilateral development cooperation and technical cooperation agencies helped to spread the MF activities all over the world. 1

The rapid development of formal MF started in Bangladesh in the 1970s. It was initiated by Professor Muhammad Yunus, an economist of Bangladesh who was conscious of hardship the poor faced, especially the women, in his country. Professor Yunus began the practice of micro-lending by giving out collateral-free loans from his own pocket to women villagers in Jobra who were involved in income generating activities such as weaving bamboo stools and making pots. This later became the Grameen Bank, which now serves more than 7 million clients and is a model for many all over the world. The award in the year 2006 of the Noble Prize to Professor Yunus and his Grameen Bank of Bangladesh has directed world attention to the phenomenon of micro-finance (Pant, 2009). Successes in the early 1980s on the social front of MF in Bangladesh and on the commercial front in Indonesia provided basic institutional models: respectively, the maximalist or “finance plus” and the minimalist or “finance only” schools that continue to contest. In fact, the international year of micro-credit in 2005 and the Nobel Prize for Professor Yunus in 2006 highlighted the importance of MF over the world. Today number of MFIs and their offspring around the world continue to provide a very large volume of credit and other financial services to households and tiny businesses. General Profile of South Asia South Asia is the home of around 1.60 billion people which is about 20 percent of total population of the world. More than 40 percent of the poor people live in this region. The Issues of MF in SAARC countries cannot be studied without having adequate knowledge about the member countries. The general profile of South Asian countries has been presented through the following table: Table 1: A Profile of South Asian Countries Particulars Total area ('000 Sq.Km)

Afghanistan Bangladesh Bhutan

India

Maldives Nepal

Pakistan

Sri Lanka

652.23

144.00

38.39

3287.26

0.30

147.18

796.10

65.61

Population in millions

26.59

142.32

0.71

1,210.19

0.33

26.62

177.10

20.86

Annual Population Growth rate (%) 2009 – 2011

1.9

1.3

1.8

1.6

1.7

1.4

2.1

1.0

Population in urban areas (%) 2010

24.8

28.1

36.8

30.1

40.5

17

37

15.1

Population living on less than $1.25 (PPP) a day (%)

NA

43.3

10.2

32.7

1.5

24.8

21

7

Population living below the national poverty line (%)

36.0***

31.5

23.2**

29.8

15.0

25.2

22.3*

8.9

GNI Per Capita (US $)

410

700

NA

1,270

NA

490

1,050

2,240

GDP growth (% change per year)

5.7

6.7

8.3

6.9

7.5

3.5

2.4

8.3

HDI Ranking (2011)

172

146

141

134

109

157

145

97

Source: Asian Development Bank, Basic Statistics 2012. * 2006, ** 2007 and *** 2008 NA: Not Available

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India occupies around 76 percent population of the South Asia. Pakistan has higher population growth rate and Sri Lanka has the lowest in the SAARC region. The people living in the rural areas in Sri Lanka are higher and Maldives have lower. Moreover, the population living on less than $ 1.25 (PPP) a day in Bangladesh is higher and Maldives have lower in the region. As per HDI ranking 2011, Sri Lanka is in the 97th (first position in the region) and Afghanistan is in the 172nd (the last position in the region). Figure 1: Population Living below the National Poverty Line in South Asian Countries

22.30%

Afghanistan *** Bangladesh

8.90%

36%

Bhutan **

25.20%

31.50% 15%

29.80%

India Maldives

23.20%

Nepal Pakistan * Sri Lanka

Source: Asian Development Bank, Basic Statistics 2012. * 2006, ** 2007 and *** 2008

The national poverty line in Afghanistan is higher as compared to other member of SAARC countries. Sri Lanka has the lowest level of population living below the national poverty line in the region. Financial Inclusion in the World There is a big disparity of financial inclusion between high-income and developing economies. The financial inclusion is also varying in different region of the world by individual characteristics such as gender, education level, age, and rural/urban residence. The share of adults in high-income economies with an account at a formal financial institution is more than twice that in developing economies. Figure 2: Account Penetration: Adults with an Account at a Formal Financial Institution (%) 120% 100% 80% 60% 40% 20% 0%

No Account

11% 45% 89%

55%

55% 45%

HighEast Asia & Europe and Income Pacific Central Economies Asia

61%

67%

39%

33%

Latin South Asia America and Caribbean

76%

82%

24%

18%

SubSaharan Africa

Middle East and North Africa

Source: The World Bank, Measuring Financial Inclusion: The Global Findex Database, 2012

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Account Penetration

The level of account penetration differs extremely between high-income (89 percent) and developing economies (41 percent) of adults reporting that they have an account at a formal financial institution. The Middle East and North Africa has the lowest account penetration, with only 18 percent of adults reporting a formal account. In several economies around the world including Cambodia, the Democratic Republic of Congo, Guinea, the Kyrgyz Republic, Turkmenistan, and the Re-public of Yemen—more than 95 percent of adults do not have an account at a formal financial institution. Globally, more than 2.5 billion adults do not have a formal account, most of them in developing economies. More than 99 percent of adults in Denmark have a formal account while virtually none do in Niger (The World Bank, 2012). Figure 3: Account Penetration by Gender: Adults with an Account at a Formal Financial Institution (%) High Income Economies

87%

East Asia & Pacific Europe & Central Asia

40% 44% 35% 41%

Latin America & Caribbean South Asia

25% 22%27%

Sub-Saharan Africa Middle East & North Africa 10%

58% Male Female

23%

13% 0%

52% 50%

92%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Source: The World Bank, Measuring Financial Inclusion: The Global Findex Database, 2012

There is a significant disparity in account penetration by gender. In developing economies, 46 percent of male and 37 percent of female have an account at a formal financial institution. The gender gap is particularly large in South Asia and the Middle East and North Africa. But it is relatively small in Sub-Saharan Africa, where 27 percent of male and 22 percent of female have an account. The gender gap is statistically significant in all regions. In developing economies, female are less likely to have a formal account than male (The World Bank, 2012). Figure 4: Account Penetration in Urban and Rural Areas: Adults with an Account at a Formal Financial Institution (%) 89% 88%

High Income Economies East Asia & Pacific Europe & Central Asia Latin America & Caribbean Sub-Saharan Africa

21%

39% 43% 35% 38%

50% 53%

69% Urban Rural

31%37%

South Asia Middle East & North Africa

9% 0%

19% 20%

40%

60%

80%

100%

Source: The World Bank, Measuring Financial Inclusion: The Global Findex Database

There is also a disparity of financial inclusion on the basis of urban and rural areas. In all regions, adults living in urban are significantly more likely than those living in rural areas to have a formal account in the Middle East and North Africa, more than twice as likely. 63 percent of urban adults and 69 percent of rural adult still do not have an account at a formal financial institution in South Asian region. 4

Financial Inclusion in South Asia The MF program among the SAARC region started at different period of time and pattern of development is not uniform. Though there are few common features but some differences in models and approaches that were adopted. The modern MF system has been initiated from Bangladesh and grown with an astonishing speed. The self help groups (SHGs) model of MF is more popular in India. The other region of South Asia started the practices of MF later and though most of them have now fully active MF programs, they vary in nature and depth of outreach. All MF programs in India are targeted for the poor and members involved with the program are primarily in the low income category. In Bangladesh, the biggest segment of rural households falls under moderately poor category. In Nepal, the poorest and the vulnerable groups of hills and mountains have less benefited from MFIs. There is significant divergence regarding estimates about the extent to which MF actually reaches the poor in Pakistan. In Sri Lanka, program seems to have served many non-poor households (Badruddoza, 2011). Table 2: Micro-finance Scenario in South Asian Countries for the Year 2011 Particulars

Afghanistan

Bangladesh

Bhutan

India

Maldives

Nepal

Pakistan

Sri Lanka

Loans (USD Million)

100.2

2,800

85.8

4,300

NA

201.4

232

212

Active borrowers (in Millions)

0.105

20.9

0.028

26.5

NA

0.807

1.4

0.597

Deposits (USD Million)

113.7

2,200

43.3

105.5

NA

86.5

156.5

164.8

15

81

1

192

NA

47

38

26

MFIs

Source: www.mixmarket.com and state of micro-finance of various countries of SAARC NA: Not Available

The MF scenario of South Asia shows that MFI of India made the highest amount of loan disbursement to the clients where as Bhutan has the lowest. Similarly, the number of active borrowers in India is also significantly higher (26.5 millions) and the Bhutan has the lowest (0.028 millions). The deposit made by MFIs in Bangladesh is higher and Bhutan is in the lowest category. Table 3: Commercial Banks’ Outreach in South Asia Country

Accounts per thousand adults

Average value of account as a percentage of per capita income

Branches per hundred thousand adults

Afghanistan

3.98

NA

1.13

Bangladesh

42.37

13.75

5.21

India

123.78

4.53

9.27

Nepal

38.27

NA

3.19

Pakistan

47.10

8.89

7.50

Sri Lanka

487.03

1.11

9.12

Source: Micro-finance in SAARC Countries, Overview Report, 2010

The table shows that Sri Lanka has the highest outreach of commercial bank's accounts per thousand adults where as Afghanistan has the lowest. On the basis of branches per hundred thousand adults, India has the highest branches (9.27), closely followed by Sri Lanka (9.12) and the Afghanistan has the lowest (1.13) in the region. 5

Figure 5: Commercial Banks' Accounts per Thousand Adults in South Asia 3.98

Afghanistan

42.37

Bangladesh

123.78

India

38.27

487.03

Nepal

47.1

Pakistan Sri Lanka Source: Micro-finance in SAARC Countries, Overview Report, 2010.

The government initiated SHG (Bank Linkage Programs) models of MFIs is quite popular in India. Many MFIs now follow a mixed approach customised to their target segment and area of operation. There are many models of MFIs practiced in Sri Lanka, of which the most prominent one Community Banking Model. The prominent models of micro-finance in Nepal are Cooperative, Grameen Bank and NGO based MFIs model. Micro-finance industry in Bangladesh has been dominated by Grameen model. In Afghanistan, most are following group methodology (solidarity groups). Despite wide variety of MF providers in Pakistan, the lending methodology is surprisingly uniform. Table 5: Different Models of MFIs in South Asian Countries Particulars

Afghanistan

Bangladesh

NGO-MFIs

Dominant

Dominant

SHGs

India Emerging

Nepal Dominant

Pakistan

Sri Lanka

Dominant

Dominant

Cooperatives

Dominant

Source: Micro-finance in SAARC Countries, Overview Report, 2010

MF is now globally recognized as an effective tool of poverty alleviation. It has shown positive outcome in many countries. However, MF services have not yet deepened down to reach the neediest poor. There are still huge masses of people who are deprived of financial services in most developing countries. There are a number of challenges faced by MFIs, some of them are: sustainability of MFIs, appropriate MF regulation, institutional and HR development and finally increasing use of IT in managing MFI programs. MF programs in SAARC countries have come a long way. Bangladesh has made most impressive progress, starting from a mono-lending product with required savings in small amounts. Over time, more flexible products emerged to meet the various financial-service needs of the poor better. Introducing more flexible financial products would help address a broader set of critical needs, including managing cash flows, coping with risks, and accumulating large sums over time. Sri Lanka and India have also done well going somewhat in different routes, where all other countries are in different stages of progress. Concluding Remarks Financial inclusion is a significant issue in the case of developing countries where the large number of people is still far from the access of formal banking services. South Asia is the home of around 1.60 billion people which is about 20 percent of total population of the world. More than 40 percent of the poor people live in this region. The national poverty line in Afghanistan is higher as compared to other member of SAARC countries. Sri Lanka has the lowest level of population living below the national poverty line in the region. Globally, more than 2.5 billion adults do not have a formal account, most of them in developing economies. There is a big disparity of financial inclusion that 67 percent adults do not have still an account at a formal financial 6

institution in South Asia. On the basis of gender, 59 percent of male and 75 percent of female do not have an account at a formal financial institution in the region. Moreover, 63 percent of urban adult and 69 percent of rural adults still do not have an account at a formal institution. Sri Lanka has the highest outreach of commercial bank's account per thousand adults where as this ratio in Afghanistan has the lowest. On the basis of branches per hundred thousand adults, India has the highest branches (9.27), closely followed by Sri Lanka (9.12) and the Afghanistan has the lowest (1.13) in the region. There are still huge masses of people who are deprived of financial services in most developing countries for which, MFIs like Grameen Bank Model, Self Help Groups, Saving and Credit Cooperatives has been useful as a new modalities of financial inclusion in South Asian countries. So, there is need of public-private partnership in the financial sector to expand the outreach of micro-finance services that will ensure financial inclusion to the marginalized and vulnerable people of South Asia. References •

ADB (April 2012). Fact-sheet of South Asian Countries.

•

Alamgir, Dewan A. H. (2009). State of Micro-finance in Bangladesh. Institute of Micro-finance.

•

Asian Development Bank (2012). Basic Statistics 2012. Economic and Research Department, Development Indicators and Policy Research Division.

•

Atapattu, A. (2009). State of Microfinance in Sri Lanka. Institute of Micro-finance.

•

Badruddoza, S. (2011). Microfinance in SAARC Countries. Institute of Microfinance (InM), Dhaka, Bangladesh. PP. 2-26 available at http://mpra.ub.uni- muenchen.de/38011/

•

Institute of Micro-finance (2010). Micro-finance in SAARC Countries, Overview Report, Dhaka, Bangladesh

•

Hussein, M. H. (2009). State of Micro-finance in Afghanistan. Institute of Micro-finance.

•

Hussein, M. H. (2009). State of Micro-finance in Bhutan. Institute of Micro-finance.

•

Hussein, M. H. (2009). State of Microfinance in Pakistan. Institute of Micro-finance.

•

http://www.adb.org/various SAARC countries

•

http://www.adb.org/publications/series/asian-development-outlook

•

http://www.mixmarket.com

•

Matthaus-Maier, I. and Von Pischke, J.D. (2009). New Partnerships for Innovation in Micro-finance. Kfw, Germany, PP. 1-379.

•

Pant, H. D. (2009). Micro-finance Business in Nepal. Nepalese Financial System: Growth and Challenges, pp. 85 – 91.

•

RMDC (2009). State of Microfinance in Nepal. Kathmandu, Nepal.

•

Sinha, F. (2009). State of Micro-finance in India. Institute of Micro-finance.

•

Sinha, F. (2009). State of Micro-finance in Maldives. Institute of Micro-finance.

•

The World Bank (2012). Measuring Financial Inclusion. The Global Findex Database. Policy Research Working Paper, The World Bank Development Research Group Finance and Private Sector Development Team, PP. 1-58.

7

Impact of Microfinance on Socio-Economic Issues in Nepal By



Mahesh Ghimire and Narayan Prasad Paudel

Introduction The origin of microfinance can be traced back to 1976 A.D., when Prof. Muhammad Yunus set up the Grameen Bank, as an experiment, in Bangladesh. Since then, several microfinance institutions have come and succeeded in reaching the poorest of the poor, and have devised new ground-breaking strategies over time. According to RFSA (2010) there are 547000 group members and 436000 borrowers enrolled in micro-credit development banks (MFDBS) as of mid July 2009 in Nepal. Commercial banks and other financial institutions are also providing deprived sector credit to the poor directly or indirectly through different cooperatives and NGOs. Consequently, it is estimated that nearly 400000 poor people are enjoying microcredit facilities. Microfinance clients, the loan portfolio outstanding, and savings are in increasing trend. The loan outstanding in MFDBs is growing rapidly reaching to Rs. 9,795,232 thousand in Mid-July 2010. As stated in the Nepal Rastra Bank (NRB) report (2008), the formal microfinance sector in Nepal started at 1974 A.D., when the NRB directed Nepal Bank Limited (NBL) and Rastrya Banijaya Bank (RBB) to lend at least 5 percent of their deposits under a "priority sector credit" scheme. The target sectors under the scheme included agriculture, cottage industries and services. NRB report (2008) outlined that for nearly four decades in Nepal various agencies have been active in microfinance with the help of NRB, playing a pivotal role in policymaking decisions. RFSA (2010) report states that NRB is responsible for licensing, regulating and supervision of Banks and financial institutions along with financial intermediaries. The main objective of regulation on micro finance is to ensure the sustainability of micro finance institutions in order to maintain continuous micro finance services to rural poor. To ensure regular financial services to the poor with easy and affordable cost, NRB introduced deprived sector credit for banks and financial institutions. NRB has made a provision of deprived sector credit directives under unified directives. NRB further stressed that financial instability hurts the poor the most. Microfinance Focus (2009) reports that extreme poverty affects at least 10 per cent of the population in many parts of the Asia and Pacific region. The report lists 19 economies where more than 10 percent of the populations were living on less than $1.25 a day in the subsequent year. It further highlights that 6 of the 19 economies are from the former Soviet Union. It also reveals that 5 of the economies China, Pakistan, Tajikistan, Turkmenistan, and Vietnam have at least halved the percentages of their population living on less than $1.25 a day while 4 other economies — Georgia, Kyrgyz Republic, Mongolia, and Uzbekistan — have experienced rising poverty rate. Banerjee et al. (2009) evaluated the impact of introducing microcredit in a new market. It presents results of a study in Hyderabad, India, involving a sample of 104 slums. They have concluded that in the short-term, microcredit may not be the miracle that it is sometimes claimed to be. It, however, does allow households to borrow, invest, and create and expand businesses. Dhaka (2007) has outlined that the size of the potential market matters in defining appropriate role for the state in developing microfinance sector. Geographical aspects and population density influences the size of potential market and significantly determines the role of the state.

8

Statements of the problem and rationale of the study The microfinance industry is characterized by to many small-scale suppliers with a relatively large potential market. A majority of small-scale service providers are unable to diversify their risks adequately across space and activities that they finance. In case of Nepal, the rule to keep 10 percent of a bank’s reserves specifically for micro-finance has largely been ignored. It is widely believed that, this is because the banks would rather spend their resources with large investments that have a more secure payout than dealing with a population that are generally under educated, more likely to default on their loan and will yield a much lower return on investment. Despite of gradual development of microfinance activities in Nepal, it still has experienced some fundamental problems in microfinance: including problems in identifying target groups, identifying potential projects that can be easily managed by the client’s needs, misunderstanding about the interest rates used by some MFIs, lack of coordination across the MFIs, lack of microfinance related trainings to the clients. Despite the long history of microfinance and the large number of institutions involved in providing microfinance facilities in Nepal, their effectiveness in alleviating poverty in the country is not clear. Though there exist few studies on impact of microfinance on households’ level in Nepal, there is a dearth of literature which explores the wider dimension of effect of microcredit on the living standards of households. Hence, this study attempts to fill the current gap in identifying the effects of microfinance on various socio-economic dimensions of the beneficiaries.. This study examines the movements in level of households’ expenditure, income along with net saving of households. The author believe, it is imperative to examine the existing problems in microfinance operations and to create awareness on the microfinance program and promote cooperation among all types of stakeholders both at local and national level. Research objectives The broad objective of the study is to explore the effects of microfinance in socio-economic status of Nepalese households. Specific objectives of the study include:  Too examine the effects of microfinance on living standards of household,  To explore the level of changes in households’ income, net savings and households expenditure pattern,  To examine the volume of asset acquired by microfinance clients, (land ownership status), and  To examine the effects of microfinance on child education and welfare of the clients. Framework on Data Management The research is primarily based on survey data 3 districts of Nepal (Kaski, Banke and Surkhet) in 2010 A.D.. The primary unit of analysis in this research is household. To supplement the information base, secondary information was also collected from publicly available sources and various expert interactions.. Survey questionnaire consisted of both open and close-ended questions to identify qualitative as well as quantitative aspects of microfinance performance.. The survey interviews mainly focused in getting information on the effects of micro-credit that the respondents had received in the form of income (cash), consumption, assets etc.. The questions asked about the current situations of households were also referred to the recollections of respondents from one and two years past. The questions that were particularly useful for this study were the ones that pertained to status of dwelling, fuel consumption, qualities of drinking water, child’s enrollment status, household expenditure and income changes, initial loan amount and the severity of households’ business problems. Data Sample and Limitations The researcher identified NGOs and rural microfinance institutions, commercial banks, and microfinance banks that provide microfinance services across the region of the country. In addition to the survey, data is gathered from publicly available sources, such as organizational web sites and annual reports, and from supporting organizations, such as the RMDC, NRB. Data on the overall size and outreach of the microfinance industry was based on a large, fairly representative sample. 9

Thus, the scope of the study is strictly confined only to the 3 different districts. Researcher primarily confined on socioeconomic aspects of microfinance. The study has pooled the opinion of 91 microfinance experts and practitioners from across the various representative microfinance institutions. Research Design One of the most important aspects of microfinance is economic and social empowerment, which is the primariy domain of this study. in detail during the study. Besides these, effective source of borrowing, interest rate structure, purpose of saving, severity of microfinance problems, major income activities of the MF clients are also discussed and analyzed. The researcher used survey research design for primary data collection to explore the socio-economic conditions of current microfinance subscribers. The current study is a survey based descriptive study on the present socio-economic conditions of microfinance subscribers. Procedure of data collection and analysis Unlike contemporary studies on micro-finance, this study is unique in nature that it has initiated an effort to reach out to the grass-roots level and engage microfinance clients in defining the impact of microfinance as a poverty alleviation strategy and clients welfare improvement. In order to examine the relationship between human development/poverty alleviation and microfinance, both quantitative and qualitative data collection methods have been used. Stratified sampling is used to choose the respondents. Researcher further, has chosen his sample districts based on the stratified sampling technique, 3 districts, from 2 different region of the country, i.e. (Kaski, Banke and Surkhet, districts) were selected as a representative sample of the study. Due to the nature of the study, not surprisingly, the accuracy of the analysis heavily relies on the information provided by the respondents.. Interviews were conducted using structured and semi-structured questionnaires in the mid 2010 A.D. Researcher used an indicator-based method, first identified a set of indicators that are strongly tied to poverty levels; next designed the survey to collect the needed indicators from individual households; and finally, summarized the data for comparisons. Examples of the indicators those are used in the study include the type or quality of housing, and amount of wealth or assets etc. Data and Analysis Tools As per the need of the study researcher used percentage, mean, standard deviation, linear regression and multiple regression, correlation and correlation matrix, coefficient of determination (R squared), variance of standard error. These tools facilitated to determine the relationship between dependent and independent variables, assists in testing the error in data analysis. In few of the cases, an experimental group(where researcher evaluated the implementation of program) and control group (area with no exposure to microfinance program) is identified. Result and discussions Level of households earning and food sufficiency Analysis of the data reveals that household food sufficiency for experimental group households increased by more than 11 months for 55 percent of households when their level of income increased over 0-25 percent, followed by 21 percent of households who have food access for more than 11 months despite of their current level of monthly income stayed the same in comparison to one year back income. The result further indicates that when the level of income increased by 0-25 percent for 45 percent of households (out of 20 households) food sufficiency can be noticed for less than 3 months. Same is the case for 20 percent of households (out of 20 households) even if the monthly income increased by 25-50 percent in comparison to one year back monthly income. But the case of control group is different, meaning is that when the level of income of control group households increased by 25-50 percent, household food sufficiency from household production increased by 8-10 months for the majority of respondent. The above result led to conclude that the household food sufficiency from household production is more pronounced in experimental group (microcredit beneficiaries) than in the control group (non beneficiaries of microcredit). The above result led to conclude that the household food sufficiency from household production is 10

more pronounced in experimental group (microcredit beneficiaries) than in the control group (non beneficiaries of microcredit). Sensitivity of households’ one year back annual total income (Y1TI) In order to determine the impact of various sources of income on one year back annual total income of households, the following regression model is estimated and tested. Sources of income from sale of various agriculture products including the other source of income (income from the business in few of the cases, and remittance income of the households in other cases) are treated as predictors and the annual total income as dependent variable. Predictors in the model are of the following: Y1SI1, Y1SI2, Y1SI5, Y1SI9, Y1SI7. Y1TI = β1Y1SI1+ β2Y1SI2 + β5Y1SI5 + β7Y1SI7+ β9Y1SI9+ €i1 Where: Y1TI = One year back annual total income, β= beta Y1SI=Sources of income of last year from sale of various products: Y1SI1= crops, Y1SI2= Vegetables, Y1SI5= Cattle (Dairy), Y1SI7= Jobs, Y1SI9= Others €i1= error term The linear regression model established the following relationship in between the dependent variable and the predictors. Y1TI = 0.182 Y1SI1+ 0.228 Y1SI2 + 0.109 Y1SI5 + 0.253 Y1SI7+ 0.912 Y1SI9+€i1 ……….(Model 1) While deriving the model 1 the variableY1SI3, Y1SI4, Y1SI6, and Y1SI8 were excluded due to very insignificant contribution in the model. Model 1 is significant at 0.00 levels and F value of the model is 593.368. The adjusted R squared is 0.916, meaning that the dependent variable YITI is highly explained by predictors. The impact of autocorrelation has been ignored while determining the R squared. While observing the Model 1 it is apparent that the one year back annual total income (YITI) was highly dependent (i.e. .912) on Y1SI9 (other income ie. income from foreign employment), followed by income from jobs (0.253, Y1SI7). The contribution of sale of various agricultural products, including Crops (0.182, Y1SI1), Vegetables (0.228, Y1SI2), and Cattle/Dairy (0.109, Y1SI5) were very insignificant. The percentage contribution of each sources of income to form a total income includes 10.8 % of Y1SI1 (Crops), 13.5 % of Y1SI2 (Vegetables) 6.4% of Y1SI5 (Cattle/Dairy), 15 % of Y1SI7 (income from jobs) and 54 % of Y1SI9 (other sources of income). The above results lead to conclude that the role of microfinance to increase the level of annual total income of microfinance client is quite insignificant for experimental group. Sensitivity of two year back annual total income (Y2ATI) In order to determine the effects of various sources of income on two year back annual total income of the household clients, the following regression model is estimated. Sources of income from sale of various agriculture products including the other source of income (income from the business in few of the cases, and remittance income of the clients in other cases) are considered as predictors and the annual total income of households as dependent variable. Predictors in the model are of the following: Y2SI9, Y2SI5, Y2SI7, Y2SI1, Y2SI2. Y2ATI = β1Y2SI1+ β2Y2SI2 + β5Y2SI5 + β7Y2SI7+ β9Y2SI9+ €i2 Where: Y2ATI = Two year back annual total income, β= beta Y2SI=Sources of income of last year from sale of various products:

11

The linear regression model established the following relationship in between the dependent variable and the predictors. Y2ATI = 0.184 Y2SI1+ 0.110 Y2SI2 + 0.107 Y2SI5 + 0.319 Y2SI7+ 0.884 Y2SI9++€i1……. (Model 2) While deriving the model 2 the variableY2SI3, Y2SI4, Y2SI6, and Y2SI8 were excluded due to very insignificant contribution in the model. Model 2 is significant at 0.00 levels and F value of the model is 383.206. The adjusted R squared is 0.883, meaning is that the dependent variable Y2ATI is highly explained by predictors. Observing the Model 2 it is obvious that the Y2ATI (two year back annual total income) is highly dependent (55.11 percent) on Y2SI9 (other income: income from the business in few of the cases, and remittance income of the clients in other cases), followed by income from jobs (Y2SI7) 19.88 percent. The contribution of sale of various agricultural products including Y2SI1 (Crops), Y2SI2 (Vegetables), Y2SI5 (Cattle/Dairy) were very insignificant. The percentage contribution of each sources of income to form a total income is Y2SI1 (Crops) 11.47 percent, Y2SI2 (Vegetables) 6.85 percent, Y2SI5 (Cattle/Dairy) percent 6.67. The above results lead to conclude that the contribution of households’ income, relating to microcredit activities, to uplift the level of two year back annual total income was very insignificant. Inferences from one year back and two year back regression model It is evident from the above regression model 1 and 2 that the level of contribution of Y1SI2 (vegetable farm income) in determining the total income of household is in increasing trend (increased by 6.68 % in the later year than in the previous year). Meaning is that income from sale of vegetables in the subsequent years is in increasing trend and rest of the income source in forming the total income are in declining trend. The above result leads to conclude that the marginal effect of microfinance in determining the level of total income is in decreasing trend in the subsequent years in comparison to the preceding years. It is apparent from both the model that the income from other sources (income from the business in few of the cases, and remittance income of the clients in other cases) is also decreased insignificantly in the later years in comparison to the previous year. Overall, the contribution of other income in forming the total income of household is very significant in comparison to agriculture and farm income raised through the microcredit facilities. Effects of predictors’ on households’ net monthly saving We have estimated the level of effects of predictors: including initial loan amount (ILA), percentage change in two year back income (Y2INCOM), two year back annual total income (Y2ATI), two year back monthly income (Y2MIT), and two year back households monthly expenditure (Y2MET) on two year back net monthly saving (Y2MST). Different alternative models are estimated to optimize the effects of predictors ILA, Y2INCOM, Y2ATI, Y2MIT, and Y2MET on dependent variable (Y2MST). Following liner regression model is determined to estimate the level of sensitivity of predictors: ILA, Y2INCOM, Y2ATI, Y2MIT, and Y2MET on two year back monthly households net saving (Y2MST). Y2MST = β1ILA + β2Y2INCOM –β3Y2ATI +β4Y2MIT –β5Y2MET+ €i2 Y2MST = 0.002 ILA + 0.000 Y2INCOM – 0.001 Y2ATI +2.014 Y2MIT – 1.438 Y2MET+ €i2 … (Model 1) Model 1 is significant at 0.00 levels and F value of the model is 2276. The adjusted R squared is 0.976, meaning that the dependent variable Y2MST is significantly explained by predictors: ILA, Y2INCOM, Y2ATI, Y2MIT, and Y2MET. Model 2 is estimated to optimize the result. Y2MST = β1Y2MIT –β2Y2MET+ €imst2

12

Y2MST = 2.014 Y2MIT – 1.438 Y2MET+€imst2 ………… (Model 2) Y2INCOM, Y2ATI, and ILA have been excluded from the model 2 due to co-linearity statistics 0.951 and 0.981 and 0.969 respectively. Model 2 is significant at 0.00 levels and F value of the model is 5751. The adjusted R squared is 0.976. Meaning is that the dependent variable Y2MST is significantly explained by predictors Y2MIT and Y2MET. While observing the model 1 and 2 it is evident that model 2 attempts to explain the better relationship across the predictors and dependent variables. Meaning is that, two year back net monthly saving (Y2MST) is highly influenced by two year back monthly income and two year back monthly expenditure. The effect of rest of the predictor in the model either positively or negatively is not significant. Effects of predictors in estimating land ownership status of household Sensitivity of predictors including initial loan amount (ILA), changes in monthly households income in comparison to two year back income (Y2INCOM), two year back annual total income (Y2ATI), two year back monthly income (Y2MIT), two year back monthly expenditure (Y2MET) and two year back monthly net saving (Y2MST) is estimated in determining the two year back land ownership status (Y2LWI) using the following liner regression model. Y2LWI = β1ILA + β2Y2INCOM + β3Y2ATI + β4 Y2MIT –β5Y2MET+ β6Y2MST+ €ilwi2 Fitting the value of βs in the above model the following model is estimated. Y2LWI = 0.023 ILA + 0.022Y2INCOM + 0.134 Y2ATI – 0.134 Y2MET+ 0.167 Y2MST+ €ilwi2….(Model 1) Model 1 is significant at 0.008 levels and F value of the model is 3.173. The adjusted R squared is 0.038 meaning is that the dependent variable is insignificantly explained by predictors: ILA, Y2INCOM, Y2ATI, Y2MET and Y2MST. Y2MIT is excluded from the model 2 due to co-linearity statistics (0.006). Above results lead to conclude that the land ownership status of households is increasingly dependent on Y2MST and Y2ATI. Sensitivity of predictors in estimating the current land ownership status of household Sensitivity of predictors, including initial loan amount (ILA), one year back net monthly saving (Y1MST) one year back annual total income (Y1TI), household current monthly income (Y1HHI) estimated in determining the current land ownership status of households (Y1LWI). Following liner regression model is developed to determine the level of effect of predictors: ILA, Y1MST, Y1TI, and Y1HHI on current land ownership status of household (Y1LWI). Y1LWI = β1ILA + β2 Y1HHI + β3Y1TI + β4Y1MST+ €ilwi1 Y1LWI = 0.065 ILA - 0.096 Y1HHI + 0.232 Y1TI + 0.140 Y1MST+ €ilwi1 …… (Model 2) Model 2 is significant at 0.00 levels and F value of the model is 6.593. The adjusted R squared is 0.075, meaning is that the dependent variable Y1LWI is very insignificantly explained by predictors ILA, Y1MST, Y1TI, Y1HHI. While observing the model 2 it is apparent that Y1LWI is more sensitive on one year back annual total income (Y1TI) and one year back monthly households’ net saving (Y1MST). Composition of two year back monthly households expenditure Effects of predictors including expenditure on poultry business (Y2ME1), bee farm expenses (Y2ME2), vegetable farm expenses (Y2ME4), and expenditure on fertilizer/crops (Y2ME5) is estimated in determining composition of two year back total monthly household expenditure (Y2MET). Following liner regression model is established to determine the level of effect of predictors: Y2ME1, Y2ME2, Y2ME4, and Y2ME5 on monthly household expenditure (Y2MET). Y2MET = β1Y2ME1 + β2 Y2ME2+ β3Y2ME4 + β4Y2ME5 + €imet2 13

Y2MET = 0.635 Y2ME1 + 0.310 Y2ME2+ 0.124 Y2ME4 + 0.391 Y2ME5 + €imet2……………… (Model 1) Model 1 is significant at 0.00 levels and F value of the model is 2391. The adjusted R squared is 0.973. Meaning is that the dependent variable Y2MET is significantly explained by predictors Y2ME1, Y2ME2, Y2ME4, and Y2ME5. It is evident from the model 1 that two year back households total monthly expenditure is composed of different predictors including expenditure on poultry business (Y2ME1), bee firm expense (Y2ME2), vegetable farm expenses (Y2ME4), expenditure related to fertilizer/crops (Y2ME5) and others. The contribution of poultry business expenditure is 43.49 percentage, bees firm expenditure is 21.23 percentage, vegetable farm expenditure is 8.49 percentage and, contribution of fertilizer/ crops related expenditure is 26.78 percentage on the total monthly households expenditure . Expenditure pattern reveals that the majority of monthly revenue of household tends to be spent in managing poultry business, followed by fertilizer, and crops related activities. Least amount of total monthly households’ expenditure incurred to operate the vegetable farming related activities. Composition of one year back monthly households’ expenditure Effect of predictors including expenditure on poultry business (Y1ME1), bee farm expenses (Y1ME2) vegetable farm expenses (Y1ME4), and expenditure on fertilizer/crops (Y1ME5) on one year back total monthly household expenditure (Y2MET) is estimated using the following liner regression model. Y1MET = β1Y1ME1 + β2 Y1ME2+ β3Y1ME4 + β4Y1ME5 + €imet2 Y1MET = 0.764 Y1ME1 + 0.204 Y1ME2+ 0.162Y1ME4 + 0.366 Y1ME5 + €imet2 ……………. (Model 2) Model 2 is significant at 0.00 levels and F value of the model is 2.391E3. The adjusted R squared is 0.973 meaning is that the dependent variable Y2MET is significantly explained by predictors Y2ME5, Y2ME4, Y2ME1, and Y2ME2. It is evident from the model 2 that one year back monthly household expenditure is allocated across the farm related activities (predictors) including expenditure on poultry business (Y1ME1), bee firm expenses (Y1ME2), vegetable farming expenses (Y1ME4), expenditure relating to fertilizer/crops (Y1ME5) and others. The contribution of poultry business expenditure is 51.06 percentages, bee firm expenditure is 13.63 percentages, vegetable farm expenditure is 10.82 percentages and, contribution of fertilizer/ crops related expenditure to the total monthly expenditure is 24.46 percentages. Expenditure pattern reveal that majority of monthly revenue of household is spent to manage poultry business, followed by fertilizer/crops related activities. Least amount of total monthly expenditure is incurred to operate the vegetable farm related activities. It is evident from the above model 1 and 2 that one year back monthly expenditure relating to poultry business is in increasing trend in comparison to the two year back, followed by expenditure related to vegetable farm. The fertilizer/crops related expenditure and expenditure related to bee firm is in decreasing trend. Level of households earning (ELAM) and the status of male child enrollment in public school (MCE1) It is evident from the analysis that male child school enrollment (MCE1) has not been changed significantly either with the high level of earning or same level of earning. Meaning is that one male child is enrolled in public school for each 10 households followed by 9 households’ each enrolled their one male child irrespective of changes in their level of earning. It is further evident that number of male child enrollment in public school (MCE1) is slightly increased (two child enrolled) for each 11 households at the time of earning more. Another 10 households each enrolled two male children at the same level of earning. Majority of households (222 households) either did not enrolled their male child in public school (MCE1) or did not provided data on child enrollment irrespective of changes in their level of earning. Changes in level of household earning (ELAM) and the male child enrollment in private school (MCE2) It is apparent from the analysis (i.e. shown in the appendix table) that male child enrollment in private school (MCE2) changed significantly either with the high level of earning or same level of earning. Meaning is that one male child enrolled in private school (MCE2) for 85 household each at the time of earning more, followed by 20 households enrolled 1 male child each, when they earn about the same. It is further evident that number of male 14

child enrollment in private school (MCE2) is slightly increased (two child enrolled) for 20 households at the time of high level of earning and 9 households sent their male child in private school at their same level of earning. Majority of households (115) either did not enroll their male child in private school (MCE2) or did not provided the data on child enrollment irrespective of changes in their level of earning. Changes in level of households earning (ELAM) and status of female child enrollment in public school (FCE1) It is obvious that FCE1 did not change significantly either with the high level of earning or same level of earning. It implies that one female child enrolled in public school for 17 households followed by 9 households enrolled their one child irrespective of changes in their level of earning. It is further evident that number of female child enrollment in public school (FCE1) has slightly decreased (two child enrolled) for 9 household at the time of high level of earning and 12 households enrolled 2 child at the same level of earning. Majority of household (218) either did not enroll their female child in public school (FCE1) or did not provide the child enrollment data irrespective of their changes in level of earning. Level of households earning (ELAM) and status of female child enrollment (FCE2) in Private School The results show that the status of female child enrollment in private school changed significantly irrespective of level of earning of households. Meaning is that above result justifies that the change in female child enrollment in private school is in progressive trend. Out of total household surveyed 82 of them were able to enroll one female child in private school when their earning is in increasing trend followed by 18 household who were able to enroll one female child in private school even when they earn about the same. It is further evident that number of female child enrollment in private school (FCE2) has slightly increased (two child enrolled) for 18 households at the time of high level of earning and 7 households enrolled two child at the same level of earning. Majority (128 household) of households (microfinance clients) did not enroll their female child in private school (FCE2) irrespective of changes in their level of earning (χ2=55.806, p10th standard (iii) Total

277(69) 125(31) 402(100)

(i) Scheduled Caste (Nos.) 84 (20.9) (ii) OBC (Nos.) 279 (69.4) (iii) General (Nos.) 39 (9.7) No. of BPL members (Nos.) 317.5 (79.3) Total Sample Size (i+ii+iii) 402 (100) Source: Field Survey 2011-12, Note- Figure in parenthesis indicates the percentage.

118(72) 45(28) 163(100) 57 (35) 96 (58.9) 10 (6.1) 137 (84.5) 163 (100)

Ensuring that funding systems are equitable is a fundamental policy goal. At the root of the Kudumbashree, there exists an aspiration that support system should achieve equal access to support for group with equal need, where ‘need’ takes into account the dependency of the groups and their givers. The groups having more equity funds are generally perceived to be more sustainable compared to the others. Only thirty percent of the JLGs had an unequal equity contribution in group corpus but a preference for equal and joint liability which was a common practice in collective paddy farming enterprise. The major contribution of the members remain the contribution made through own labour supply. The JLGs with unequal equity contribution showed better economic performance measured by average profits generated per hectare. The difference in profit levels could be attributed to better input management and resource mobilization primarily by the larger equity holders in the group. Kudumbashree has proved a positive means for improving their economic welfare. Moreover, financial participation is potential solution to problems and issues such as the difficulties of securing work force co-operation. Incentive to share information with others enhances changes in worker behaviour. This might be seen as a payoff for direct participation. A critical aspect of Kudumbashree Mission is the mechanism for sharing of profits arising from group paddy farming. In case the equity is equally shared, the allocation of profits is also straightforward. Most of the JLGs (70 per cent) followed this pattern. There exists another dimension to profit sharing in JLGs. This was related to the retention of generated profits for reinvestment. The JLGs could either disburse the entire profits generated or retained a part of it towards cost of cultivation in the next season. We could notice two major type of sharing practices. In the first system, the group disbursed entire realised return to the members without keeping a common 240

fund. It was observed that majority (77 percent) of the kudumbashree units opted to disburse the entire revenue generated from sale proceeds immediately after realization. The second type of group kept aside a percentage of return for the next season. Only 23% of the units kept aside funds from current revenue for the next season. This behaviour has implications for cash flow of these JLGs. The fund for next cropping season was raised afresh each time. This increased the transaction cost of arranging finances for paddy group farming in collective mode. This also indicates a lack of faith in continuity of the group for the next season. The absence of assured land tenure in the leased land was one of the major reasons cited. The low rate of return on investment in rice farming could be another reason for failure to keep funds for next season. Dev (2010) found that the profitability of rice cultivation to be one of the lowest in the country. The poor asset base of the farmers involved in the JLGs forces them to opt for pledging of assets to raise the fund which when pooled constitute the groups’ equity amount. The pressure of redeeming their pledged ornaments like ornaments is cited as one major reason for complete disbursal of realised returns. Pattern of Financing and Financial Performance of Collective Farming Group Bringing independent landless poor women under Kudumbashree Mission has not only brought economic power to the families of Kudumbashree, but it has inflicted some hardships/problems also. Besides production of paddy in field, they now have to perform post harvest operation and other off farm business functions like marketing of their products, organisation of supply, credit services, advice etc. when the competition in the market increases. Here women farmers have to work as labour, producer, manager, businessmen and entrepreneur at their own farms. By group action approach, women farmers have to pay enough attention to both improving production performance and promoting efficient business operations. Funding systems should support diversity in the supply of services to ensure that a range of services are available to cater to the various circumstances, wishes and preference of service users. Initially each group has to contribute an amount to their respective group corpus regularly. After at least six months from the formation of group, each JLG/NHG has to appear in a gradation test. The performance of each group depends on the average number of meeting arranged by the groups in a particular month, the regularity of the monthly contributions by group members, and the regularity of repayment of loans by the borrowing members. Table 4. Pattern of Financing and financial performance of collective farming Group Pattern of financing Source

Share Own funds 46% (I)* Reinvested Profits 15% (III) Govt Subsidies/Grants 4%(IV) Institutional credit 33%(II) Non-Institutional Credit 2%(V) Average Institutional Credit/Group (Rs)

Financial performance Ratio Mean Current ratio 1.06(0.48)+ Debt-equity ratio 0.36(0.21) Capital turnover ratio 2.82(1.17) Gross ration 0.66(0.16) Liability/member(Rs) 11,706 Average liability/ha(Rs) 9,351 51,092

(Source: Field survey), *indicates rank/relevance, + figure in parenthesis indicates standard deviation

This gradation test is conducted to minimize the adverse selection problem. It may arise when the borrowers have characteristics that are unobservable to the lenders and that may affect loan repayment. After passing the test, the group becomes eligible to get a revolving fund. Consequently, the group has to go through a second gradation test, and ultimately becomes eligible to receive a back-ended subsidy. Almost half of the cost for farming was raised from own funds by JLGs in collective farming. This indicates the sound financial health of the members. One third of the cost of cultivation on an average is provided by institutional credit agencies. This could be possible because of eligibility of landless women farmers after forming and registering joint liability group with financial institutions. Thus JLGs command the sound borrowing power from financial institutions. Some of the JLGs have business oriented approach because they are saving a part of net income and reinvesting. Government subsidies and other non-institutional agencies contribute roughly 20 percent of the total financial requirements. 241

Decisions regarding the use of borrowed money reflect women’s agency in translating loans into impact. The financial performance of collective farming groups as measured by financial ratios are presented in Table 4. Current ratio of more than one shows that the group is able to meet immediate financial obligation easily. Since debt-equity ratio is less than one, liabilities are less compared to the equity. This ratio is having high significance for the banker in providing credit to the farmer groups. Again the gross ratio, which is less than one, shows that the gross income is higher compared to total expenses of the collective farming group. The capital turnover ratio is on the higher side showing the poor investment by collective farming of JLGs. On an average, each JLG is receiving a loan amount of Rs 50,000 indicating a moderate borrowing ability of the group. The liability per member amounted to Rs 11,000. The cost of cultivation per ha for rice by Kudumbashree farming group is Rs 27,910. One third of total cost of cultivation (33.5%) amount is financed by banking institutions. The power of collective action of JLG/NHG has brought in economic stability of paddy farming with the support of Kudumbashree. Marketing of Produce by Kudumbashree Collective Farming Groups The goal of JLG/NHG is to promote higher incomes for its members, enhance group access to capital and new technology and help to lower marketing costs. Three marketing channels viz. (i) Producer – Civil supply corporation – Consumer; (ii) Producer – Cooperative marketing society – Consumer; and (iii),Producer – Private Miller – Wholesaler – Retailer – Consumer have been identified. The civil supply corporation (known as Supplyco); cooperative marketing society; and private miller, wholesaler, retailer; are involved in between the farmer and the consumer in these channels, respectively. The thirty collective farming groups together produced 654 tonnes of rice in a year. Most of the farming groups preferred to sell to the civil supplies corporation almost 37 percent of the total produce. The other two marketing channels were opted by lesser number of groups equally (each constitutes roughly 30%). Marketing through civil supplies corporation provided the producer, maximum share in consumers’ rupee (65%). Though this channel provides a major share of producer in consumer’s rupee but protest is registered by the collective farming groups against the Supplyco because of red-tapism in the process of credit disbursement on ostensible grounds. Table 5: Price spread and marketing efficiency of marketing channels in Palakkad district of Kerala, 2011-12 Marketing Channel

Sample size

Farmer's share in consumer’s rupee(%)

Quantity transacted (Kg)

Producer -Supplyco-Consumer

11 (37)

65.2

2,37,200 (36.2)

Producer–Co. Society–Consumer

10 (33)

60.8

2,08,600 (31.8)

Producer– Pvt. Miller–Wholesaler–RetailerConsumer

9 (30)

52.2

2,08,900 (31.9)

30(100.00)

--

6,54,700 (100.00)

Total quantity transacted Kudumbashree Farmer’s share

61.73

Kerala Average farmer’s share

48.26

Source: Computed by Author using field survey data-2011-12

While comparing the net income through group farmer vis-a-vis state average, the highest average net income of Rs 13,305 per ha was found in the Kudumbashree collective farming group and was almost 2.5 times more than state average (Rs. 5,463 per ha). Similarly, for Kudumbashree collective farming, group farmer’s share in consumer’s rupee was found to be about 62%, while it was about 48% in state average. This shows the significant role of Kudumbashree in reducing price spread between producer and consumer in the marketing channel. Simply, women farmers in group action reaped more benefits and has brought in somewhat economic stability of paddy farming with the support of Kumadumbashree like better involvement, timely availability of credit, labour and building self-esteem, and self efficacy through group activities with other women. 242

Conclusions Kudumbashree offered almost unmatched economic opportunity in terms of cash income that it has offered to landless women. It also acts as a part of the government‘s arm engaged directly in service delivery in collective paddy farming. It is having a well knit structure that helps in creating an enabling environment for the decentralisation to take place, and its benefits extend to the poor for expansion of their entitlements, living on the margins of the society. Given the number of women members, Kudumbashree can exert considerable influence on policy formulation and implementation. The JLGs provision in microfinance has enabled the landless poor women to become owner of paddy production. This has brought optimism in the viability and sustainability of collective mode of farming. Hence JLGs command the sound borrowing power from financial institutions. The JLGs are slowly shifting the channels from Supplyco; and from co-operative marketing society to the channel involving private miller. The government needs to take immediate steps to avoid this alarming tendency. Kudumbashree has not only reduced price in marketing channel but also has enhanced 2.5 times more net income than the state average. Thus women farmers in group action reaped more benefits and has stabilized paddy farming economically. The major fault of taking excessive time for payments needs to be addressed urgently. Corrective steps for improving the efficacy of delivery of inputs and services with the help of government, NGOs and other agencies must be taken on priority to make collective rice farming more profitable and relevant. The organisation relies heavily on governmental resource, patronage and support from other stakeholders. In addition, the absence of assured land tenure leased- in land and poor asset base of farmers made JLG/NHG to disburse the entire revenue generated from sale proceeds immediately after realization. This raised doubt in the minds of stakeholders about long term sustainability of paddy farming in collective mode. Given the relative degree of success of the state’s attempt, in terms of spatial spread, number of women covered under the network, and the economic achievements, there also remains the question of replication of the model to other regions in the country. Every state in India has the differential socio-political construct that makes its environment unique; and therefore, calls for modifications and reconfiguration, prior to adoption by other regions/states in the country. Kudumbashree Mission needs to create a durable asset base of JLG/NHG that could generate a continuous stream of income from the enterprise. Moreover, the viability and sustainability of many of the required market supporting schemes need be analysed based on systematic research. Appendix NOTES NHG, JLG and ADS 1 Neighborhood Groups (Ayalkoottam in Malayalam) which is abbreviated as NHG is lowest tier in the three tier organizational structure of Kudumbashree. The NHGs comprised of 10-20 women members selected in such a way that there is only one adult woman from a family. The NHGs meet once in a week where all members bring their thrift. The thrift amount will be deposited in a bank account operated jointly by the president and secretary of the NHG. Small savings thus created will be recycled back to the system by way of sanctioning loans to their members. 2 Joint Liability Group: For performing collective farming, 4-10 NHG members are organized in to a group called Joint Liability Group. The JLG are working based on the idea developed by NABARD. The JLGs will be working under Area Development Societies (ADS). The JLG group can be formed either from single ADS or from a combination of few ADS. The JLGs should be registered with ADS. 3 Area Development Society, the second tier, is formed at ward level of Panchayat/ municipality by federating 10-15 NHGs. Area Development Society functions through general body and governing body. As general body consists of the President, Secretary and 3 sectoral volunteers such as Health, Income Generation and infrastructure volunteers of federated NHGs, governing body constitutes President, Secretary and five members elected from among the general body. 4 The formula for computing the farmer’s share in consumer rupee. FS = [(RP – MC)*100]/RP FS = Farmer’s share in consumer price; RP = Retail Price MC = Marketing Costs

243

References •

Aggarwal, B. (2009). Rethinking Collectivities: Group farming, community forestry and strategic alliances. Lecture delivered on the occasion of the degree of doctoral honoris causa to Bina Aggarwal at Lustrum ceremony of the 55th anniversary of the Institute of Social Studies, The Hague, The Netherlands, and October.

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Dev, Mahendra.S and Rao, Chandrasekhara.(2010). Agricultural price policy, farm profitability and food security. Economic and Political Weekly, 25:174-182.

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Erwer, M (2003). Challenging the gender paradox: Women’s collective agency and the transformation of Kerala politics. Goteburg, Sweden: Department of Peace and Development Research, Goteburg University.

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Government of India, Ministry of Women and Child Development. (2001). National Policy for the empowerment of women 2001. Retrieved May 1, 2012. from http://wcd.nic.in/empwome.htm.

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Kabeer, N. (1999). Resources, agency, achievements: Reflections on the measurement of women’s empowerment. Development and Change, 303(3): 435-464.

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Kudumbashree Annual Report. (2009-2010). Kudumbashree Mission, Kerala State Planing Board.

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Kudumbashree, (2012). Empowerment Programmes. Collective farming. Available at :http://www.kudumbashreee. org/=leaseandfarm.

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Kumar, Shiv., Chand, Puran, Dabas, J.P.S. and Singh, Harvinder.(2010). Characteristics and Determinants of Contract Design of Wheat Seed farming in India: A Basis of Decision Making. Indian Journal of Agriculture Economics. 65(4):621638.

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Kumar, Shiv; Devender, Chakravarty, Kavita, Chand, Puran and Dabas, JPS (2007). Mode of Operation and Performance of Contract Cotton farming in Haryana. Agricultural Economics Research Review (India). 20 (Jan-June): 99-116.

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Kumar, Shiv and Chand, Puran (2004). Prevailing Practices and Dimensions of Contract Wheat Seed Production in Haryana State. Agricultural Economics Research Review (India) 17(2): 149-161.

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Millennium Development Goal of the United Nations Summit in September 2000. MGD goal no. 3 aims to promote gender equality and empower women. Available at :http://www.mdgun.org/=genderequal.

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Moser, C; & Moser, A. (2005). Gender mainstreaming since Beijing: A review of success and limitations in international institutions. Gender and Development, 13(2): 11-22.

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United Nations (UN). 2009. World survey on the role of women in development, Report of the Secretary-General: women’s control over economic resources and access to financial resources, including microfinance. 64th session, New York.

244

An Analysis of NABARD’s SHG-Bank Linkage Programme in India By Veena Dada and Rajni Saluja

Introduction Reaching the unreached is the primary focus of Indian economy as well as Indian banking. Growth with Equity is the major concern of the economy. Upliftment of the poor strata of the society is thrust area of the government welfare policies. A very large number of the poorest of the poor continue to remain outside the field of formal banking system. Banks are still not able to serve a vast section of the society. SHG- Bank Linkage Programme (SHG-BLP) was introduced as core strategy to supplement credit delivery mechanism. The SHG- Bank Linkage Programme launched by NABARD in 1992 is an important strategy in promoting financial inclusion and inclusive growth. It could be used by the banking system in India for increasing their outreach to the poorest of the poor. SHG has been recognised as a decentralised, cost effective and fastest growing microfinance initiative in the world. It enabled over 103 million poor household’s access to a variety of sustainable financial services from the banking system by becoming members of a nearly 8 million SHGs. The present paper examines the progress of SHG- Bank Linkage Programme in India. Objectives of the study • To study the origin and growth of SHG- Bank Linkage Programme. • To examine progress of SHGs region-wise, agency-wise and state-wise. • To identify challenges in the working of SHGs and give recommendations to overcome them. Methodology & Database The present study is descriptive and analytical in nature. The study is based on secondary data. The data is collected from various publications, print and electronic of government and non-government agencies such as National Bank for Agriculture and Development, Reserve Bank of India. The time period of the study is from 200809 to 2011-12. Simple statistical tools like percentage, average and simple growth rate is being used. This paper traces progress of SHGs in five states namely Chattisgarh, Jharkhand, Uttarakhand, West Bengal and Odhisa in terms of SHG coverage ratio. Origin & Growth of SHG- Bank Linkage Programme in India The birth of microfinance movement in India can be traced to 70s. The basic idea was to enable poor to access the financial services so that poor can have an asset base and initiate income generation activities. The first official interest in an informal group lending in India took shape during 1986-87 on the initiative of NABARD. NABARD initiated certain research projects on Self Help Groups (SHGs) as a channel for delivery of microfinance in the late 1980. Amongst these the action research project sponsored by Mysore Resettlement Credit Management of SHGs was partially funded by NABARD in 1986-87. 245

The NABARD SHG- Bank Linkage Programme promoted by NGOs, banks and government agencies which are acting as self- help promoting institutions (SHIP). This programme is also beneficial for the banks, specially the Regional Rural Banks. Microfinance by non-formal financial organizations can be traced to the initiative undertaken by the Self- Employed Women’s Association (SEWA), owned by women of petty trade groups for providing services to the poor women employed in the unorganized sector of Ahemdabad.SHG- Bank Linkage Model was launched by NABARD IN 1992. There is an increasing trend in the number of SHGs financed by banks during the last 20 years. Under the SHG Model, the members, usually women in villages are encouraged to form groups of around 10-15. The members contribute their savings in the group periodically and from these savings small loans are provided to the members. The group members meet periodically when the new savings come in, recovery of past loans are made from the members and also new loans are disbursed. The small beginning of linking only 500 SHGs to banks in 1992 had grown to over 0.5 million SHGs by March 2002 and further to 8 million SHGs by March 2012.

Studies conducted by various experts show that programme has indeed helped in the social and economic empowerment rural folk especially women. It has resulted in significant upscaling of social capital while at the same time delivering crucial financial services. Thus it has proved to be a successful model wherein the outreach has expanded substantially leading to many disadvantages like micro savings, timely repayment of loans, reduction in transaction costs to SHG members and banks etc. SHGs have become the common vehicle of development process converging all development programmes. SHG- Bank Linkage Model is considered as the largest microfinance programme in terms of outreach in the world and many other countries are keen to replicate this model. The development planners including the Government of India and the State Governments also recognised the real potential of the SHG movement in development of the poor and it was made an essential ingredient of all poverty alleviation programmes of the government. Two decades hence the SHG- Bank Linkage Programme (SHG- BLP) continues to be the mainstay of the Indian microfinance scene. 74 lakh SHGs covering over 10 crores households saving with the formal banking system. Analysis and Interpretation

Overall Progress under SHG- BLP: Progress of SHGs over period of 4 years from 2008-09 to 2011-12 is indicated in table 5.1. SHG savings with Banks as on 31st March has shown positive growth rate both in terms of No. of SHGs and amount except in the year 2011-12 the savings amount has declined negatively that is -6.7 percent. In terms of loans disbursed to SHGs the No. of SHGs declined negatively in 2010-11 and 2011-12. The amount of loans disbursed has also declined negatively in 2011-12 (-13.7%). Loans outstanding against No. of SHGs also declined negatively in 2011-12. Overall progress of SHG-BLP is satisfactory over the given time period. Table 5.1 Overall Progress under SHG- BLP (Amt in Rs. Cr & No. in Lakhs) Item/Year

2008-09 No. of Amount SHGs SHG savings with 61.21 5545.62 Banks as on 31st (22.2%) (46.5%) March Loans Disbursed 16.10 12253.51 to SHGs during (31.1%) (38.5%) the year Loans outstanding 42.24 22679.84 against SHGs as (16.5%) (33.41 %) on 31st March

2009-10 No. of Amount SHGs 69.53 6198.71 (13.6%) (11.8%)

2010-11 No. of Amount SHGs 74.62 7016.30 (7.3 %) (13.2%)

2011-12 No. of Amount SHGs 79.60 6551.41 (6.7%) (-6.7%)

15.87 (-1.4%)

14453.3 (17.9 %)

11.96 (-24.6%)

14547.73 (0.01%)

11.48 (-4%)

16534.77 (-13.7%)

48.51 (14.8%)

28038.28 (23.6 %)

47.87 (1.3%)

31221.17 (1.4%)

43.54 (-9.0%)

36340.00 (16.4%)

Source: Status of Microfinance in India, NABARD, Various issues.

246

Region-wise Analysis: Region-wise Analysis is done in order to look into disparities in distribution of SHGs and saving amount of SHGs. Table 5.2 (a) does the region-wise analysis of savings of SHGs with Banks as on 31st March over the period of time 2008-09 to 2011-12. In percentage terms, Southern region has highest no. of SHGs and saving amount. On average, no. of SHGs is 46.4 percent and saving amount is 51.8 percent. Next to Southern region, is Eastern region which has on average 20.2 percent SHGs and saving amount 20.3 percent. The average is lowest in case of North Eastern region that is no. of SHGs is 4.27 and saving amount is 1.99 percent. Table 5.2 (a) Region-wise savings of SHGs with Banks as on 31 March (%) Region /Year

2008-09

2009-10

2010-11

2011-12

Average

No. of SHGs

Saving Amount

No. of SHGs

Saving Amount

No. of SHGs

Saving Amount

No. of SHGs

Saving Amount

No. of SHGs

Saving Amount

Northern

5.08

4.09

5.05

5.52

4.99

4.68

5.14

3.86

5.07

4.54

North Eastern

3.92

1.84

4.20

1.96

4.35

1.86

4.61

2.33

4.27

1.99

Eastern

20.15

28.79

19.76

18.07

20.47

20.07

20.42

14.46

20.2

20.3

Central

11.65

6.97

11.02

8.29

10.53

8.59

10.21

9.37

10.8

8.31

Western

13.01

11.98

13.59

14.95

12.87

11.82

13.34

13.31

13.2

13.0

Southern

46.19

46.32

46.36

51.21

46.76

52.96

46.28

56.68

46.4

51.8

All India

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Source: Calculated values

Table 5.2 (b) indicates region-wise loans disbursed during the year. Southern region indicates highest number of SHGs and loans disbursed over a given time period. On average, no. of SHGs is 62.8 percent and loans disbursed are 75.8 percent. The next region is eastern region having on average 17.6 percent of SHGs and loans disbursed 10.4 percent. The lowest average is in case of Northern region that is 2.81 percent of SHGs and 2.30 percent of loans disbursed. Table 5.2 (b) Region-wise Bank Loans disbursed during the year Region /Year

2008-09

2009-10

2010-11

(%)

2011-12

Average

No. of SHGs

Loans Disbursed

No. of SHGs

Loans Disbursed

No. of SHGs

Loans Disbursed

No. of SHGs

Loans Disbursed

No. of SHGs

Loans Disbursed

Northern

2.65

2.47

2.36

2.12

3.55

2.59

2.68

2.02

2.81

2.30

North Eastern

2.21

2.01

3.11

1.98

3.29

2.21

4.44

2.73

3.26

2.23

Eastern

14.72

10.10

17.48

10.66

20.70

11.13

17.53

9.82

17.6

10.4

Central

6.28

6.38

4.91

4.37

4.07

4.17

5.09

4.29

5.08

4.80

Western

7.78

4.77

9.39

4.48

7.68

4.30

8.80

4.55

8.41

4.53

Southern

66.37

74.27

62.75

76.39

60.69

75.59

61.45

76.58

62.8

75.7

All India

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Source: Calculated values

Table 5.2 (c) indicates region-wise bank loan outstanding against SHGs as on 31st March over a given period of time that is 2008-09 to 2011-12. In terms of loans outstanding against SHGs, the Southern region dominates having average no. of SHGs equal to 54.5 percent and loans outstanding 68.3 percent. The lowest average is in case of north eastern region that is 3.08 percent of No. of SHGs and loans outstanding 2.36 percent. 247

Table 5.2 (c) Region-wise Bank Loan Outstanding against SHGs as on 31st March Region /Year

2008-09 No. of SHGs

2009-10

2010-11

2011-12

Loans No. of Loans No. of Loans No. of outstanding SHGs outstanding SHGs outstanding SHGs

Average

Loans Outstanding

No. of SHGs

Loans outstanding

Northern

3.94

2.99

3.14

2.91

4.05

6.42

4.87

3.24

4.00

3.89

North Eastern

2.78

2.07

2.76

2.40

3.13

2.23

3.66

2.73

3.08

2.36

Eastern

22.09

13.3

21.18

13.18

23.09

13.46

22.63

12.74

22.3

13.2

Central

7.86

9.02

10.26

8.78

7.49

7.58

8.09

7.65

8.43

8.26

Western

9.32

6.84

9.43

4.88

6.62

3.99

6.65

3.75

8.01

4.87

Southern

53.99

65.75

53.22

67.84

56.54

69.85

54.09

69.88

54.5

68.3

All India

100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Source: Calculated values

Agency-wise Analysis: Agency-wise analysis is done to mark the contribution of commercial banks, regional rural banks and co-operative banks towards SHGs. Table 5.3 (a) shows agency-wise savings of SHGs with banks as on 31st March over a given period of time. It is clear from the table that in case of commercial banks on average no. of SHGs is 58.05 percent and savings amount is 58.6 percent. Regional Rural Banks has on average 26.52 percent and 24.29 percent and lower average is observed in case of co-operative banks that is 15.42 percent No. of SHGs and 17.82 percent savings amount. Commercial banks play a major role in SHGs- BLP. Table 5.3 (a) Agency-wise Savings of SHGs with Banks as on 31st March Agency /Year

2008-09

2009-10

2010-11

(%)

2011-12

Average

No. of SHGs

Savings Amount

No. of SHGs

Savings Amount

No. of SHGs

Savings Amount

No. of SHGs

Savings Amount

No. of SHGs

Savings Amount

Commercial Banks

58.0

50.00

58.28

60.72

57.94

60.29

58.01

63.39

58.05

58.6

Regional Rural Banks

26.6

35.9

26.19

20.96

26.58

20.46

26.72

19.84

26.52

24.29

Co-operative Banks

15.4

15.5

15.52

19.79

15.98

19.25

15.26

16.76

15.42

17.82

100.00

100.00

100.00

100.00

100.00

100.00

100.00

Total 100.00 Source: Calculated values

Table 5.3 (b) shows agency-wise bank loans disbursed to SHGs during the year. Over a period of time, in case of commercial banks no. of SHGs has increased and loans disbursed have declined. On average, no. of SHGs in case of commercial banks is 58.08 percent and loans disbursed 65.11 percent. In case of Regional Rural Banks, the average no. of SHGs is 25.07 percent and loans disbursed 25.38 percent. Co-operative banks have lowest average in terms of no. of SHGs and loans disbursed that is 16.82 percent and 9.53 percent respectively. Table 5.3 (b) Agency-wise Bank loans disbursed to SHGs during the year Agency/Year

2008-09 No. of Loans SHGs Disbursed

2009-10 No. of SHGs

Loans Disbursed

2010-11 No. of SHGs

Loans Disbursed

(%)

2011-12 No. of SHGs

Loans Disbursed

Average No. of SHGs

Loans Disbursed

Commercial Banks

6.24

65.8

61.6

67.67

55.99

66.85

52.34

60.13

58.08

65.11

Regional Rural Banks

2.52

26.1

23.7

23.06

24..81

21.98

26.55

30.39

25.07

25.38

Co-operative Banks

12.4

8.2

14.6

9.27

19.19

11.17

21.10

9.47

16.82

9.53

100.00

100.00

100.00

100.00

100.00

100.00

Total 100.00 100.00 Source: Calculated values

248

Table 5.3 (c) shows agency wise bank loans outstanding against SHGs as on 31st March over period of time. On average, the No. of SHGs in case of commercial banks is 64.43 percent and loans outstanding is 71.04 percent. Regional rural banks have on average 25.58 percent no. of SHGs and 23.1 percent loans outstanding. No. of SHGs and loans outstanding on average in case of Co-operative banks is 9.98 percent and 5.84 percent. Table 5.3 (c) Agency- wise Bank Loans Outstanding against SHGs as on 31st March Agency /Year

2008-09 No. of SHGs

2009-10

2010-11

2011-12

Average

Loans Outstanding

No. of SHGs

Loans Outstanding

No. of SHGs

Loans Outstanding

C o m m e r c i a l 67.1 Banks

71.12

66.73

71.92

63.79

70.09

60.10

71.02

64.43

71.04

Regional Rural 23.1 Banks

23.0

22.76

21.91

26.77

23.79

29.71

23.70

25.58

23.1

Co-operative 9.8 Banks

5.8

10.51

6.17

9.44

6.11

10.18

5.27

9.98

5.84

100.00

100.00

100.00

100.00

100.00

100.00

Total 100.00 100.00 Source: Calculated values

No. of SHGs

(%)

Loans Outstanding

No. of SHGs

Loans Outstanding

State-wise Analysis: State-wise analysis is done by taking into account five major states that is Chattisgarh, Jharkhand, Odhisa, West Bengal and Uttarakhand. Uttarakhand is considered as highest priority state. Chhattisgarh SHG Coverage Ratio In Chattisgarh, potential rural households to be covered is 25.92 lakhs. Rural households covered is 16.88 lakh. Districts with low coverage of SHGs is 13 out of 18 districts. Average savings per SHG is 5694 as compared to national average 8230 and highest priority state Uttarakhand 12283. Average credit disbursed per SHG is 91790. Table 5.4 (a) shows Chattisgarh SHGs that is loans issued no. of SHGs, loans issued and loan outstanding. These have shown rising trend. Gross NPAs have declined which is good sign. SGSY and SHG (non SGSY) has declined at -0.59 and -0.11 respectively. No. of Women SHG districts are 10. Table 5.4 (a)

Chhattisgarh- SHGs

(Amt. Rs. Cr & No. in lakhs)

Item/Year

2010-11

2011-12

Loans issued No. of SHGs Loans issued Loan Outstanding Gross NPAs SGSY SHG (non SGSY) No. of WSHG districts

0.09 58.99 187.93 17.91 11.10 6.81

0.10 92.59 202.60 10.51 4.45 6.06 10

Growth rate (2011-12 over 2010-11)* 0.11 0.56 0.08 -0.42 -0.59 -0.11

Source: Status of Microfinance in India, NABARD, 2011-12 & * Calculated values

Jharkhand SHG Coverage Ratio In Jharkhand, potential rural households to be covered are 27.86 lakh. Rural households covered (SHG- saving linked) is 11.65 lakh. Districts with low coverage of SHGs are 23 out of 24 districts. Average savings per SHG Rs. 7502. Average credit disbursed per SHG is 105823. Table 5.4 (b) shows Jharkhand SHGs. Loans issued No. of SHGs and loans outstanding have shown rising trend whereas loan issued has declined by -.111. Gross NPAs has increased by 0.73 which is bad sign. SGSY and SHG (non SGSY) has increased by 0.53 and 2.02 respectively. No. of WSHG districts are 18.

249



Table 5.4 (b) Jharkhand- SHGs Item/Year

(Amt. In Rs. Cr & No. in lakhs)

2010-11

2011-12

Growth rate (2011-12 over 2010-11)*

0.11

0.12

0.09

Loan issued

143.33

127.41

-.111

Loan Outstanding

321.97

359.56

0.117

Gross NPA

15.91

27.54

0.73

SGSY

13.85

21.30

0.53

SHG (non SGSY)

2.06

6.24

2.02

Loans issued No. of SHGs

No. of WSHG districts

18

Source: same as 5.4 (a) & * Calculated values

Odhisa SHG Coverage Ratio In Odhisa, potential rural households to be covered are 51.11 lakh. Rural households covered (SHG- saving linked) is 70.20 lakhs. Districts with low coverage of SHGs are 3 out of 30 districts. Average savings per SHG is Rs. 6692. Average credit disbursed per SHG is Rs. 108562. Table 5.4 (c) shows Odhisa SHGs. Loans issued No. of SHGs and loans issued has declined by -0.31 and -0.06 respectively. Loan outstanding and gross NPAs has increased. SGSY has declined by -0.02 and SHG (non SGSY) has declined by 2.12. No. of WSHG districts in Odhisa are 19.

Table 5.4 (c) Odhisa- SHGs Item/Year Loans issued No. of SHGs

2010-11

(Amt. In Rs. Cr & No. in lakhs)

2011-12

Growth rate (2011-12 over 2010-11)

0.72

0.50

-0.31

574.92

540.98

-0.06

1579.48

1653.39

0.05

Gross NPA

98.56

196.09

0.98

SGSY

52.07

51.06

-0.02

SHG (non- SGSY)

46.49

145.03

2.12

Loans issued Loan Outstanding

No. of WSHG districts

19

Source: same as 5.4 (a) & * Calculated values

West Bengal- SHG Coverage Ratio In West Bengal, potential rural households to be covered are 61.75 lakh. Rural households covered (SHG: Savings linked) are 89.11 lakh. The figure related to districts with low coverage of SHGs is not available. Average savings per SHG is Rs. 5499. Average credit disbursed per SHG is Rs. 55,581. Table 5.4 (d) shows West Bengal SHGs. Loans issued no. of SHGs and loans issued has declined by -0.25 and -0.04 respectively. Loans outstanding has increased by 0.05. Gross NPAs has increased. SGSY and SHG (non SGSY) has increased No. of WSHG districts in West Bengal are 6.

250



Table 5.4 (d) West Bengal Item/Year Loans issued No. of SHGs Loans issued Loans outstanding Gross NPAs SGSY SHG (non SGSY) No. of WSHG districts

2010-11

2011-12

1.32 575.90 1499.25 34.20 19.69 14.51

0.99 551.37 1570.03 48.90 27.99 20.91 6

(Amt. In Rs. Cr & No. in lakhs) Growth rate (2011-12 over 2010-11)* -0.25 -0.04 0.05 0.43 0.42 0.44

Source: same as 5.4 (a) & * Calculated values

Uttarakhand – SHG Coverage Ratio In Uttarakhand, potential rural households to be covered are 5.92 lakh. Rural households covered (SHG: Savings linked) are 6.26 lakh. Districts with low coverage of SHGs are 9 out of 13. Average savings per SHG is Rs. 12283. Average credit disbursed per SHG is Rs. 12283. Average credit disbursed per SHG is Rs. 148155. Table 5.4 (e) shows Uttarakhand SHGs. Loans issued no. of SHGs and loans issued has increased by 0.25 and 0.55 respectively. Loan outstanding and gross NPAs has increased. SGSY and SHG (non SGSY) has increased by 0.41 and 0.85 respectively. No. of WSHG districts in Uttarakhand is 2

Table 5.4 (e) Uttarakhand Item/Year

2010-11

Loans issued No. of SHGs Loans issued Loan Outstanding Gross NPAs SGSY SHG (non SGSY) No. of WSHG districts

0.04 48.98 106.93 6.00 4.02 1.98

2011-12 0.05 75.93 131.84 9.34 5.66 3.68 2

(Amt. In Rs. Cr & No. in lakhs) Growth rate (2011-12 over 2010-11)* 0.25 0.55 0.23 0.56 0.41 0.85

Source: same as 5.4 (a) & Calculated values

From the state-wise analysis, it is found that growth rate in case of loan issued no. of SHGs and loan issued is maximum in case of Uttarakhand. SGSY and SHG (non SGSY) has also increased in case of Uttarakhand. Impact of Microfinance on Poor in India Microfinance plays a very important role and it had following impact on the poor: • Microfinance has reduced incidence of poverty. It provides a range of benefits that poor household highly value including long term increases in income and consumption. • Microfinance helps in increasing the financial self sustainability among the poor. Access to credit helps the poor to smooth cash flows and develop in them habit of savings. • Microfinance contributes towards women empowerment. It enhances their contribution to household income and generally gives them better control over decisions affecting their lives. • Microfinance has led to better education and improved health facilities. Families participating in the programme have reported better school attendance and lower drop- out rates. Child mortality has reduced and maternal health has improved. 251

• Microfinance has lessened social evils like child marriage, child labour, dowry and other anti-social activities. • Microfinance has developed various entrepreneurial skills among rural and urban poor. • It has saved especially rural poor from the clutches of the village moneylenders. Challenges in way of SHGs The Indian Microfinance sector has seen unprecedented growth in this decade. The growing scale has brought with its own set of challenges. Some of the key challenges are: • Widening outreach: One of the fundamental principles of microfinance is serving a large number of clients. It is very important to analyse if microfinance service providers are reaching down to those most in need and those not serviced by formal financial institutions. There are regional imbalances in spread of SHGs. State governments have to play a significant role and found out reasons for low outreach. • Financial illiteracy: One of the major obstacles in the growth of the microfinance sector is the financial illiteracy of the people. This creates difficulty in creating awareness about microfinance. It also creates greater difficulty of serving poor illiterates as microfinance clients. • Credit risk: There is danger that borrowers are not able or not willing to repay their loans on time. In other words, there is greater risk in deterioration of the loan portfolio. In order to overcome this problem, people’s mindset has to be changed. • Legal & regulatory framework: Currently there is no proper regulatory body for the supervision of SHGs. Many SHGs and microfinance institutions neither have effective internal control systems nor do they have incentive to put such systems in place. There is a need of setting up enabling legal and regulatory framework. • High Administrative Costs: The increasing administrative costs of SHGs must be reduced properly by various methods including setting up the performance levels in advance, proper business planning, removal of political favoritism and corruption etc. • Inability to generate sufficient funds: Inability of SHGs to raise sufficient fund remains one of the important concerns in the microfinance sector. SHGs sector largely comprise of not-for-profit companies which mainly rely on donations and grants from Government and apex institutions like NABARD and SIDBI. • Over-Indebtedness: Due to competition among SHGs and capturing each other’s market share, SHGs are giving multiple loans to same borrowers. This in some cases lead to over-indebtedness of the borrower. SHGs are getting affected because borrowers are failing to make payments and hence their recovery rates are falling. Over-Indebtedness in some cases may force borrowers to commit suicide. • Other challenges: The training of large number of stakeholders, maintaining the quality of groups also poses a big challenge. Further ensuring poor book keeping at the SHG level, innovations in savings and credit products, graduation from livelihood enterprises to economic enterprises establishing market linkages for products by members of SHGs are some other problems being faced which need to be tackled properly. Recommendations • All the members of the Self-help groups are not equally educated so they may not have the same level of understanding capacity. NGOs should play a significant role in providing basic education and training. • There exists huge demand-supply gap. Diverse channels are needed to get diverse financial services into the hands of diverse range of people who are currently excluded. • Government should try to organize small fairs at regular intervals of time to market the products produced by the members of SHGs. • Most of SHGs are operating in urban and semi-urban areas. SHGs should be encouraged for opening new branches in areas of low microfinance penetration by providing financial assistance. This will help in increasing rural penetration. 252

• Proper monitoring and regulatory framework should be initiated which will put check on the performance of SHGs and will encourage SHGs to abide by proper code of conduct and work more efficiently. • Usage of technological innovations in SHGs will help to reduce operating costs and will make the entire system more transparent and efficient. • Integrated network of banks, governments, semi-governmental or non-governmental organizations, social workers are needed to make microfinance a great success. Conclusions The Indian microfinance sector has made tremendous strides during the last decade. SHG-Bank Linkage programme has also grown rapidly and is considered as the single largest microfinance programme globally. Microfinance is seen as a tool to reach the poorest section of the society and to provide them with services and resources that will uplift their economic well being both in India as well as at global level. The greatest barrier is that of regional imbalances in client outreach, loan portfolios and distribution of branches among various regions in India. The various challenges need to be addressed and would go a long way in making the Indian microfinance sector more inclusive, vibrant and sustainable. Microfinance is the most effective way to achieve the goal of financial inclusion because it distributes credit in a more democratic way to the poor masses. It can be concluded that microfinance has effectively graduated from an experiment to a widely-accepted paradigm of financial inclusion in India. References •

Alhaseen Abdul Razak & Akudugu Mamudu Abunga (2012), Impact of Microcredit on Income Generation Capacity of the Women in the Tamale Metropolitian Area of Ghana, Journal of Economics & Sustainable Development, Vol. 3, No. 5, pp.41-48.

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Chakrabarti Rajesh & Ravi Shamika (2011), At the Crossroads Microfinance in India, ICRA Bulletin, Money & Finance, July, pp. 125-148

•

Champatiray Amulya Krishna, Agarwal Parul& Sadhu Santadarshan (2010), Map of Microfinance Distribution in India, IFMR Centre for Microfinance Research, pp. 1-42.

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Dutta Pinky (2011), The Growth and Impact of NABARD’s SHG-Bank Linkage Programme in India, Indian Journal of Finance, December, pp. 38-43.

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Kaur Kuljeet (2012), Microfinance & SHG-Bank Linkage, Contemporary Innovative Practices in Management, pp. 50-55.

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Mahendra M.V.S (2011), Empowerment of Women Through Microfinance- A Case Study of Ranga Reddy District, Andhra Pradesh, October, pp. 21-27.

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Mahajan Priya&ChawlaJasleen (2012), Microfinance- A Sustainable Tool for Poverty Alleviation, Contemporary Innovative Practices in Management, pp. 288-293.

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Mehrotra Nirupam, Puhazhendi V, Nair G Gopakumaran, Sahoo B.B (2009), Financial Inclusion- An Overview, Occasional Paper 48, Department of Economic Analysis and Research National Bank for Agriculture and Rural Development.

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NABARD, Status of Microfinance in India, 2011-12.

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Sreenivas N &Sarma V.V Subramanya (2012) Microfinance: The Sour Grape, Arthshastra Indian Journal of Economics & Research, September-October, pp.38-48.

253

Women Entrepreneurship and Life Economics: Challenges and Opportunities By Suman Shokeen

Introduction Across centuries and across times, the role of women remains rooted into eternity. It forever remains the same and at the same time goes through many transitions. It takes centuries for women’s role to unfold in different forms, shapes and sizes and to move in new directions. There are some locales where women live in a bygone century chained and shackled to the social structures and coding and wishes of others who carve a code of conduct on stone. Whereas there are other locales where women struggle to find freedom and space to define their roles in a new context with new occupations and forge a new path for their lives. Once upon a time the large part of the world was designed such that men could only set up enterprises. Then there were women who by compulsions of circumstances took up income generating activities to sustain themselves and their family. The men of these women were either not there or if they were there would not or could not take the responsibilities of sustaining their family. Succession planning, leaving on heir, an inheritor and a community of the lineage is for men and their sons and their sons. It is rare for a man to plan for handing over to the daughter or the daughter’s daughter. The reality of women entrepreneur and passing the enterprise to a daughter will become a new reality and phenomenon of Indian business. The role of Indian women has ranged from that of a deity to that of a devdasi, from being pure to being vulgar, from being supreme to being downtrodden, etc. The role of Indian women has undergone dramatic and drastic changes from era to era, while within the eras themselves there have existed simultaneous contradictions. This in itself has created problems for contemporary women in experiencing a continuity of their identity within the society. Women, traditionally have been playing a crucial role in the family as well as in the farm, shop, factory and in the society, but their contribution has not been duly acknowledged. The involvement and participation in the process of development is sine-qua-non for the upliftment of women to boost their status in the society. Women Entrepreneurship Women in India have been playing an active and direct role in the nation’s economic and political fields. Women entrepreneurs are gaining momentum all over the country. They have achieved recognition and are making valuable contribution to the National Economy.  Women Entrepreneurs of 70s –

The women opened up new frontiers. They had not only aspiration but ambition.

 Women Entrepreneurs of 80s –

Women were educated in highly sophisticated, technological and professional education. They became equally contributing partners.

254

 Women Entrepreneurs of 90s –

This was the first time when the concept of best rather than male heir was talked about.

 Women Entrepreneurs of 21st Century – “Jill of all trades”. COSTS – Women as Entrepreneurs Women become entrepreneurs at times to fulfill personal desires and at times due to circumstances. Consequently, we can consider the reasons for women as entrepreneurs as costs born by self. Apart from the repeatedly discussed factors there are some umpteen problems faced by women at various stages beginning from their initial commencement of enterprise, in running their enterprise. The problems have a bearing on the women as costs for being an entrepreneur. These are as follows:• Diversion of mind from being familial to being a businesswoman. • Left isolated to prove as “successful”. • Dwindling moral support. • Challenge to prove successful. • Sacrifices and compromise. • Stress on mind. • Emotions and feelings suppressed and overlooked. • Looked down upon for being out – Girl’s income. • Break ups and divorces if let down or deliberately put down. • Ego, attitude, non-cooperation and differences in opinion. These have an emotional bearing on the minds of the women as entrepreneurs. Therefore, they have to think many a times before actually taking such a big step or a decision. It’s going to take a round about of their lives, careers and future. Moreover, they are badly stucked in between the push and the pull factors of being an entrepreneur. PROFITS – Being Successful Women Entrepreneurs Since the 21st century, the status of women in India has been changing as a result of growing industrialization and urbanization, spasmodic mobility and social legislation. The industrial structure and the enterprises are undergoing a radical change. Information Technology has transformed the very technique of doing business. Over the years, more and more women are going in for vocational education and self-employment. Individually, business ownership provides women with the independence they crave and with economic and social success they need. Nationally, business ownership has great importance for future economic prosperity. Globally, women are enhancing, directing, and changing the face of how business is done today. Ultimately, female business owners must be recognized for who they are, what they do, and how significantly they impact the world’s global economy. Hence, we need to consider the benefits-cum-profits of women being successful entrepreneurs generally at the individual level. These could be as follows: • Improved self confidence • Self-made status • Independent • Command and respect • Say in familial decisions • Role model in locales • Self-sufficient • Exposure 255

• Social links and relationships • Worthy competition • Extended help Women are increasingly becoming conscious of their existence, their rights and their work situations. Today, women entrepreneurs represent a group of women who have broken away from the beaten track and are exploring new avenues of all-round participation. Myths for Women Entrepreneurs The role of the entrepreneur did not conform to the traditional roles that women were expected to play in society. However, for women there are several handicaps to enter into and manage business ownership due to the deeply embedded traditional mindset and stringent values in the Indian society. Apart from several known issues which are tangible enough, there are still many intangible issues. These intangibles called as myths about Women as Entrepreneurs counts much for deliberate attention. They are infact embedded in the mind by birth at the initial stages and by the society at large at the later stages. Their typical form is pre-decided. They are slowly being reformed, but they are yet to be renewed. Some of these myths are as follows:1. Always a liability. 2. Dependent forever. 3. Born to be dominated. 4. Born to obey. 5. Not born to command. 6. Can’t think creatively. 7. Not born to do business and earn money. 8. Joint Hindu Family – Why ‘KARTA’ and not ‘KARTI’? 9. Only born to look after the house and the children. 10. Decision making – Is it reliable? The list is still thoughtful. Some of them relate to women as entrepreneurs and some relate to entrepreneurs as women. Moreover, it has to be accepted at any cost that if encouraged, women are expected to come out in much bright colours. Therefore, myths need to be reengineered. Conclusion Women constitute around half of the total world population. So is in India also. They are therefore, regarded as the better half of the society. In traditional societies they were confined to the four walls of houses performing house hold activities. In modern society they have come out of the four walls to participate in all sorts of activities. The Indian women are no more treated as beautiful showpieces. They are also enjoying the fruit of globalization marking an influence in the domestic and international sphere. They have carved a niche for themselves in the male dominated world. Indian women well manage both burden of work in household front and meeting the deadlines at the work place. In a recent survey it is revealed that the female entrepreneurs from India are generating more wealth than the women in any part of the world besides being small in numbers. In Hindu scriptures, woman has been described as the embodiment of ‘Shakti’ which means source of power. Thus, Women have the right potential and the determination to set up, uphold and develop their own enterprises in a very systematic manner. But still much is required to be manifested so as to bear with the costs, flourish with the profits and to do away with the myths. Appropriate support and encouragement from the Society in general and family members in particular is required to help these women scale new heights in their business ventures. The right kind of assistance from family, society and Government can make these Women Entrepreneurs a part of the mainstream of national economy. 256

References •

Belcourt, M, Burket, R.J., Lee-Gosselin, H. (1991) The Glass Box: Women Business Owners in Canada. Background paper published by the Canadian Advisory Council on the Status of Women.

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Bowen, D., and Hisrich, R. (1986) "The female entrepreneur: A Career Development Perspective", The Academy of Management Journal, 11, 2, 393-406.

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Das, Mallika. (2000-01) “Women Entrepreneurs From India: Problems, Motivations and Success Factors”, Journal of Small Business and Entrepreneurship, Volume-15, No.-4, Pg.67-82.

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Dhameja, S K. (2002) “Women Entrepreneurs: Opportunities, performance, problems”, Deep Publications (p) Ltd, New Delhi, p-11.

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Goffee, R and Scase, R. (1985) Women in Charge: The Experiences of Women Entrepreneurs, London: Allen & Irwin.

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6.http://www.articlesbase.com/entrepreneurship articles/is-the-women-entrepreneur-empowered-inindia-

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3147613.html#ixzz15PmH5WNy

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Jha, Nagendra. (2012) “Development of Women Entrepreneurship – Challenges and Opportunities-A Case Study of Bihar”, 9th AIMS International Conference on Management, Jan. 1-4.

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Mishra, J.M., Harsh Vardhan, K. and Mishra, V. (1986) "Women Managers in India and US: An Analysis of Attitudes, Myths and Skills (Parts 1)" Indian Management, 25, (3), 25-30.

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Parikh, Indira J., & Kollan, Bharti, ”Women Managers – From Myths to Reality”, Working Paper No. 2004-03-06, IIMAhmedabad, March 2004.

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Stevenson, L.A. (1986) "Against All Odds: The Entrepreneurship of Women". Journal of Small Business Management, October, 30-44.

257

Sustainability of Microenterprises under Rural Development Programme: An Empirical Analysis By Bahnisikha Ghosh and Debasish Joddar

Introduction Entrepreneurship is the driving force that brings innovations to the marketplace and establishing a community within an economy in such a way that can contribute significantly to its prosperity. Entrepreneurship lies at the centre of economic development and it involves more and more extraction of natural resources along with creation of employment opportunities and development of human resources. As it is characterised by the scope of selfemployment and positive contribution towards the national income of a country, it is accepted as a necessary condition for long-term sustainable economic development in developing economy. The issue of micro entrepreneurship in a developing country is not only relevant as a contribution to further development of academic knowledge regarding the relationship between micro entrepreneurship and rural development, but is also significant for policy formation due to its capital crunch and acute unemployment problem. This issue has gained momentum in the development policy dialogue of Third World Economies since the year 2000 with the announcement of Millennium Development Goals (MDGs) by United Nations Organisation (UNO). The most critical Millennium Development Goal (MDG) under UNDP is to reduce extreme poverty and hunger by half within 2015 around the globe. Several approaches are promoted by UNDP emphasizing the significance of equity, social inclusion, empowerment and human rights for poverty reduction. An efficient financial system would ensure that large number of poor and vulnerable people can enjoy consistent access to financial services through which they would be included in the mainstream of development. This access can be a weapon of poverty alleviation and hence a key element of economic growth. Micro-finance presents itself as a mechanism with a set of financial services towards meeting MDGs especially in developing world. In the history of micro finance the 1980s represented a turning point with the shift in the paradigm from old to new demand-based programme (Robinson, 2001). The new microfinance operates on the basis of principle ‘Borrower knows best’. Under the new microfinance, the operational strategy involves several features-such as, simple procedures for reviewing and approving loan applications, delivery of credit and credit – related services in a convenient and user friendly way at commercial rates of interest, quick disbursement of small and short term loans; clear loan repayment procedures, maintenance of high repayment rate; incentives if access to large loans immediately following successful repayment of first loan etc. (Micro Credit Summit,1997,Draft declaration). One of the expectations from the introduction of this new microfinance approach was that it would facilitate the start of new businesses and adoption of new practices. The social development approach of micro-finance is based on the premise that people would earn money by investing in viable micro-enterprises, they would earn profit from their enterprises, major share of the profit would be reinvested in enterprises for their growth and the other share of the profit would be spent on social development i.e. health, education, housing, sanitation etc. Dictionary meaning of micro enterprise is “very small-scale business, esp. owner-operated with few employees” (Websters New Milleniam Dictionary of English, 2003-2005). The word ‘micro enterprise’ can be defined in a variety of ways using the factors like the number of employees, the volume of sales, the capital value 258

of an endeavour, the level of capital costs per workplace. According to Indian MSMED (Micro, Small and Medium Entrepreneurship Development) Act, 2006 a micro-enterprise is one where the investment in plant and machinery does not exceed Rs. 25 lakhs and in service category, the investment of microenterprise does not exceed Rs. 10 lakhs. The working definition for the purpose of this study is that the rural micro enterprises are small, informal and privately-owned business of small-scale farm households ranging in size up to about ten workers and consisting mostly of family members. It includes non-crop agricultural activities (e.g. livestock) but not crop production. Most of these types of enterprises have only rudimentary skills in management, limited access to capital as well as low market opportunity; technologies used are a mix of traditional and moder Indian Scenario The dominant characteristic of the Indian economy is the large number of unemployed rural youth traditionally dependent on agriculture and gradually becoming redundant in the wake of increasing mechanization of farming operations on the one hand and the continued fragmentation of agricultural land on the other. Lacking the motivation and skills needed to earn a decent livelihood, many of them opt to migrate to urban areas. Employment is one of the most significant issues in terms of the living conditions of the people of rural India to-day. There are not enough jobs for all the people who are willing to work. The rate of employment generation, in terms of aggregate main work, has been lower compared to the rate of expansion of the population, and substantially, lower than the rate of income growth. In order to reduce the social unrest of the marginalized sections and income inequality, resource sustaining and employment oriented industrialization through promotion of modern micro and small-scale industries and modernization of the traditional industries may be considered as the ideal development paradigm. Against this backdrop, NABARD visualized a greater role for developing the labour-intensive rural non-farm sector. Development of rural artisans; tiny, village & cottage industries; agro-industries; handicrafts; handlooms; other small scale industries and service enterprises in rural areas is, therefore, given thrust by NABARD. With a view to providing supplementary credit for this purpose to the poorest of the poor in rural area NABARD introduced the pilot project in 1992-93 for linking SHGs with formal credit institution. With IRDP being subsumed in Swarnajayanti Gram Swarajogar Yojana (SGSY), effective from 1st April, 1999, formation of SHGs has become the principal mode of poverty alleviation through self-help and development of micro enterprise. The apex bank of rural economy has been formulated a package of refinance schemes for banks and promotional programmes for all stakeholders including facilitators like NGOs so that balanced rural development can be achieved. NABARD realized that along with credit support, the growth and development of RNFS (Rural Non Farm Sector) significantly depends upon building up / supply of competent entrepreneurs who catalyze resources and manage them to establish viable and sustainable employment generating ventures in rural areas. With this credo in mind, Rural Entrepreneurship Development Programmes (REDPs), have been supported by NABARD during the more than past two decades. It has been recognized as a decentralized, more cost effective and fastest growing microfinance process in the world that enabled over 103 million of poor household’s under 8 million SHGs to get access a variety financial services from the banks (NABARD, 2011-12). This linkage has provided not only savings and/ or credit but also created a platform through which they could earn a decent livelihood. The Micro Enterprise Development Programme (MEDP) for skill development was launched in March 2006 by NABARD with the basic objective to enhance the capacities of the members of matured SHGs to take up micro enterprises through appropriate skill upgradation/ development in existing or new livelihood activities both in farm and non-farm sectors by way of enriching knowledge of participants on enterprise management, business dynamics and rural markets programme. From the inception nearly 5000 skill up gradation training programmes have been conducted under MEDP covering 2lakh members of the matured SHGs up to 2011-12. West Bengal, Tamil Nadu and Chttisgarh are major states where maximum numbers of SHG members were given this training and most of them have been started entrepreneurial activity by availing loan from SHGs (NABARD, 2011-12) Research Question and Objective A critical issue of performance of microenterprise is its effectiveness in reaching the intended client group and in responding to their needs, preferences and demands (Sebsted, 1998:17). Given the expansion of microenterprise 259

programme as a strategy of rural development by reducing poverty and the level of donor support provided to these programmes, the question of sustainability and desired impact are generally agreed to be important. Donors want to know whether their support to microfinance institutions conforms to the poverty alleviation and whether the impacts justify the financial support given. Practitioners desire to know whether they are reaching their programme objectives and how to improve their services in question of sustainability of their clients. The social researchers have been visited repeatedly this issue until and unless there has been made a concrete and honest effort by the concerned intuitional or organizational authorities. Thus the concerns of policy makers, donors, practitioners and researchers coincide in the sense that they all want each and every unit microenterprise or income generating activities under microfinance programme would be lasting and must have a positive impact on their family. Thus, in order to achieve rural development goals, it is necessary to maintain financial sustainability of entrepreneurs and organisations beyond the short run. Studies, regarding the sustainability of rural livelihood, the concept of sustainable credit provision in case of developing countries having low per capita and high level of poverty assume high significance. Though it is not easy to define the concept of sustainability, various social thinkers expressed the concept from different points of view. Sustainability is permanence to some of these thinkers (Navajas et.al.2000).It means the ability of micro finance organization to repeat performance through time (Schreiner,2000). In most of the literature, institutional sustainability is defined as the continuous service provision to clients profitably or recovering full cost and aims building microfinance institutions that can last in the future without relying on govt. subsidies or donor funds (Conning, 1999; Ledgerwood, 1999). Kumaran (2002) opined that due to technological training and spot services provided to the entrepreneur, the micro-enterprises set up by the members of the SHG promoted by NGOs and banks were more viable and sustainable as compared to those formed by DRDA in Orissa. According to Nair (1998), institutional and programme sustainability is achieved at the cost of the sustainability activities promoted by the poor borrowers. This phenomenon can be seen as resulting in two depressing scenarios of (1) the poor clients getting trapped in perpetual indebtedness (to the institution ) without any significant rise in their income levels and (2) their loan financed microenterprises becoming vulnerable to any marginal change in the immediate environment. Vincent (2004), in his paper, expresses two aspects of sustainability-economic sustainability as well as environmental sustainability-which are closely related to the notion of sustainable micro entrepreneurship. Pati(2009) has attempted to see whether subsidy has an impact on the operational and financial sustainability of SHGs using a primary data set for 177 SHGs operating in the state of Meghalaya under SGSY scheme. The study throws some light towards possible impact of financial subsidy on sustainability of SHG. Sarker and De, (2005) conducted an empirical study in West Bengal for the measurement of cost-efficiency of micro-credit programme, by using following five output indicators. They suggested that higher rate of recovery was tied with higher interest rate which led to higher degree of self -sustainability of microfinance institutions .But it indicates higher cost to the borrowers as well as ridiculous pressure to repay the loan, as a result of which loan users might be trapped into debtcycle. In the practical sense it is to be mentioned that in most of the research works environmental sustainability is not so important due to the nature of the livelihood microenterprises operated in rural economy. Hence, the environmental aspect is not included in present study. On the basis of the above literature, it can be concluded that sustainability had been measured at the institutional level as well as group level. But very limited research work has been undertaken related to the measurement of sustainability of individual micro-entrepreneur or unit micro-entrepreneur. In the light of the research question, an attempt has been made in the present paper to search the determinants of sustainability of microenterprises in West Bengal as well as to measure and compare the sustainability index among different categories of enterprises. Study Area and Survey Design We have selected West Bengal for our present study on the ground that microfinance movement was initiated later in this state as compared to southern states but it has gained a momentum quickly and has secured its position in the schedule of priority states in India. Both bank-led and NGO-led self-help groups are working in the state during almost two decades. During 2007-08 to 2011-12, the number of deposit-linked SHGs increased from 522201 to 685448 i.e. by 1.31 times while that of credit – linked SHGs increased at a marginally higher rate from 52558 to 260

99379 i.e. by1.89 times. During this period, the number of credit –linked SHGs out of the total number of savingslinked SHGs increased from 10.06 to 14.5 per cent i.e. by 4.5%. As regards employment, SHGs of female category in West Bengal are almost working in self-employed traditional village and household / cottage industries which are agro based like khadi, handlooms, handicraft, sericulture, coir, wool or wool silk, spinning, leather and leather product, tailoring, agarwati, candle-making and other rural micro industries related to the processing of cereals and pulses, gur, molasses, processing of food and fruits, animal husbandry etc. The Micro and Small Enterprises sector (MSEs) in West Bengal is one of the key sectors in the State’s economy. The Directorate of Micro & Small Scale Enterprises under the Department of Micro & Small Enterprises and Textile, Govt. of West Bengal is an important agency for the growth and promotion of MSEs in West Bengal. The main objective of the Directorate is to facilitate growth and promote MSEs and to impart training to new and old entrepreneurs. There is enormous potential for employment generation in this sector, about 9.63 percent of the total MSEs of the country is in operation in West Bengal and it accounts for 9.81 percent of the total employment in this sector of the country (W.B, 2011). After the introduction of MSMED Act -2006, the process of registration was replaced with the filling of Entrepreneur Memorandum (EM). EM-I relates to proposed units and EM-II relates to established units. As on 31.03 2010, there are 25.56 lakh numbers of MSEs which provide employment to 62.84 lakh numbers of persons in West Bengal. The number of EM-II field registered MSEs are 85336 generating employment of 8,17,290 persons. There are 24.71 lakh numbers of unregistered MSEs generating employment of 54.66 lakh persons in West Bengal. The share of medium enterprises in MSME sector is only 0.25 per cent. As far as Microenterprise Sector is concerned, the number of micro enterprises of West Bengal economy, increase from 7635 (2nd October, 2006) to 36734 ( 31st March, 2009)micro enterprises. The growth rate was 8.76% in 2007-08 over 2006-07 and this had changed significantly in 2008-09 as 20.14% over the previous year (W.B, 2011). The study is based on the data obtained from field survey (primary source) conducted on 400 microenterprise owner households. As per the secondary data of district wise progress of EM-II in West Bengal, (2011-12) the survey is conducted in Howrah, Hooghly, North 24 Paraganas, Birbhum, Coochbehar and Nadia districts. Moreover districts are selected in such a way that at least one district should selected in the study area from the four industrial zones ( Howrah, Durgapur, Siliguri and Berhampur) of West Bengal. The microenterprise owner households for survey are selected those who exist five years or more. The selection has been done keeping in mind that all most major categories of unorganized rural microenterprises should captured in the primary survey. The Primary survey has been conducted between March, 2010 and August, 2011. District, Block and Panchayet wise distribution of samples of is in following ways. Districts Howrah

Blocks

No. of Panchayets

Total No. of Microenterprise owner Households 70

Uluberia-I Uluberia-II

01 01

Bagnan-I

02

Singur Bolagarh Brasat-I Machlandpur Maureswar-I Mahmad Bazar Tufan Gunj-I Dinhata-I

02 02 03 01 02 02 02 02

60

Nadia

Ranaghat-I

03

69

6 Districts

10 Blocks

23 Panchayets

Hooghly North 24 Parganas Birbhum Coochbehar

261

70 61 70

Total =400 Households

Methodology and Hypothesis The sustainability of microenterprises is basically determined by different qualitative elements. In order to asses the level of sustainability six (6) main elements- entrepreneurial quality, entrepreneurial ability, entrepreneurial power, entrepreneurial trait, capability to start enterprise and efficiency of enterprise have been selected. Then the sustainability of microenterprise has been measured by 30 indicators under the above six basic elements. A scheme representation of elements together with its various indicators for assessing sustainability of enterprise is presented in the following Structure: I. Elements of Entrepreneurial Quality (EEQ) 1. Education (EEQ1) 2. Traing and Experience (EEQ2) 3. Knowledge of Bookkeeping (EEQ3) 4. Scientific Knowledge (EEQ4) 5. Family Background (EEQ5) II. Elements of Entrepreneurial Ability (EEA) 1. Perform Basic Duties (EEA1) 2. Resolve Conflict (EEA2) 3. Analytical Skill (EEA3) 4 Negotiations and Communication Skill (EEA4) 5. Leadership(EEA5) III. Elements of Entrepreneurial Power (EEP) 1. Innovative Power (EEP1) 2. Decision Making Power (EEP2) 3. Risk Taking Power (EEP3) 4. Marketing Power (EEP4) 5. Bargaining Power (EEP5) IV. Elements of Entrepreneurial Trait (EET) 1. Self-Confidence (EET1) 2. Attitude (EET2) 3. Commitment (EET3) 4. Ethical View (EET4) V. Elements of Capability to Start Enterprise (EEC) 1. Pre Start-up Market Survey (EEC1) 2. Support Services (EEC2) 3. Supply of Raw-Material (EEC3) 4. Nature of Output (EEC4) 5. Competitiveness (EEC5) VI. Elements of Efficiency of Enterprise (EEE) 1. Operational Efficiency (EEE1) 2. Efficiency in Use of Marketing Tools and Costs (EEE2) 3. Efficiency in Use of Finance (EEE3) 4. Efficiency in Application of Pricing Method (EEE4) 5. Efficiency in Application of Production Technique (EEE5) 6. Efficiency in Use of Growth Potential (EEE6) 262

263

Every qualitative variable of sustainability has been measured in five- point Likert scale: very high (5), high (4), medium (3), fair (2) and low (1). All the elements of sustainability are assumed to have equal weights. There are six basic elements of ‘Sustainability’ (EES) under which five indicators of ‘Quality’ (EEQ), five indicators of ‘Ability’ (EEA), five indicators of ‘Power’ (EEP), for indicators of ‘Trait’ (EET), five indicators of ‘Capability’ (EAC) and six indicators of ‘Efficiency. As for example an individual entrepreneur who scores “very high” on all indicators of “sustainability” element, she has a total score of 30 (5 multiplied by 6), while that who scores “low” on all indicators of “sustainability” element, has a total score of 6 (1 multiplied by 6). But the average score (simple arithmetic mean) for the former is 5 (total score divided by total indicators of sustainability), while the latter is 1 ((total score divided by total indicators of sustainability). The study assumes that if the level of sustainability be greater than or equal to 4(80% on and above), the enterprises would be considered to be highly sustainable. If the level of sustainability be less than 4 and greater than 3 (60% to 80%of scale), the enterprises would be regarded as moderately sustainable. Otherwise, the enterprises would be considered as unsustainable having index value less than 3. But the practical experience tells us that all the indicators do not have equal weights and equal weighting implies perfect substitutability between components of a index. Hence in order to find out the factors responsible for high sustainability of enterprises and to determine their relative importance, the Principal Component Analysis (PCA) is used. The PCA has been used in two stages to determine the composite index of sustainability. At the first stage, six (6) sub-indices have been constructed on the basis of 30 variables of sustainability by dividing into 6 categories according to their nature of relation with enterprise and entrepreneur through PCA. These indices include-Entrepreneurial Quality Index (EQI), Entrepreneurial Ability Index (EAI), Entrepreneurial Power Index (EPI), Entrepreneurial Trait Index (ETI), Enterprise Capability Index (ECI) and Enterprise Efficiency Index (EEI). Finally, in the second stage, Composite Sustainability Index (CSI*) is determined on the basis of the value of the above six sub-indices. In constructing indices, PCA extracted only one component with 50% or more variance in most of the cases. Hence, component weights have been calculated on the basis of first component alone. In order to compare the sustainability among different groups the sample of 400 microenterprises has been categorized according to gender (female owned and male owned), level of labour employment (hired labour and family base) and their needs and constraints they face (survival and growth oriented). Results and Discussions Six important elements namely – quality, ability, power, trait, capability and efficiency of an entrepreneur have been adopted to measure the level of sustainability of enterprises of this study (as mentioned in the Methodology Part). The first category includes Female owned 225 enterprises and Male owned 175 enterprises. In the computation of Composite index (CSI*), the weights of six sub-indices range from 0.156 to 0.171 for female owned enterprises and range from 0.160 to 0.173 for male owned enterprises. It indicates that all of the six sub-indices are more or less equally important for both Female and Male group to determine the Composite Sustainability Index (CSI*). The Composite Sustainability Index CSI* of female and male owned enterprises(Table-1)shows that the male owned enterprises are more sustainable compared to female owned enterprise group: 25% of male owned enterprises are highly sustainable (CSI*>4) as opposed to only 11.1% of female owned enterprises. The percentages of moderate sustainable enterprises of male and female group are 39% and 35.5% respectively. It indicates that unsustainability increases in female enterprises (53.3%) compared to that in male owned enterprises (36% only). Now turning to sub-indices step wise, it is found for the first index –EQI, the weights of the 4 variables ‘education’, ‘training & experience’, ‘book-keeping’ and ‘scientific knowledge’ of female owned enterprises are relatively high (the weights being from 0.208 to 0.258) but the fifth variable i.e. family background is not important for the determination of EQI for both group of enterprises. But it is worthwhile to note that ‘training and experience’ is important for female group compared to that of male group. This distinction arises due to the difference in the nature of works done by the two groups and the average result (Table-2) indicates that average EQI is better for male group compared to female group. At the second stage for the determination of EAI, the weights of 5 variables namely-‘ability to perform basic duties’, ‘ability to resolve conflict’, ‘analytical ability’, ‘ability of negotiation and 264

communication’ and ‘leadership ability’ are good for two groups but the overall ability is better for male compared to female. The third index (EPI) explains that in Female owned enterprise group, the variable ‘decision making power’ carries lowest value (weight 0.152) i.e. less important compared to other four variables( ‘innovative power’, risktaking power’, ‘marketing power’and ‘bargaining power’) having weights ranging from 0.188 to 0.226. Among these four high- weighted variables, ‘the risk taking power’ and ‘the bargaining power of entrepreneur’ carry highest weights but the variables ‘marketing power’ and ‘innovative power’ carry moderate weights. Similarly, in the Male group enterprises, the weight of ‘decision making power’ is lowest and four others have weights ranging from0.202 to 0.229, i.e. four variables except ‘decision making power’ is more or less equally important. But it is evident from the result that the ‘bargaining power’ of male group carries highest loading (weight being 0.229) whereas ‘risk taking power’ in female group has highest loading 0.892(weight being 0.226).The descending order of importance of variables are ‘bargaining power’, ‘risk taking power’, ‘innovative power’ and ‘marketing power’ for the determination of EPI and average EPI (table-2) of male enterprise group is moderate whereas female group has low range of indices. For the computation of fourth index i.e. ETI of female group, the first three variables namely ‘self-confidence’, ‘attitude’ and ‘commitment’ are equally important having higher weights. The average value of ETI in Table-2 shows same range of sustainability both for the male group and female group. The computation of fifth sub index (ECI) for female group indicates that, for female group the variables ‘pre start-up market survey’ and ‘supply of raw material’ are of highest weights whereas ‘support service’ and ‘competition’ are of moderately high weights. But the variable ‘nature of output’ is less important as determining factor of ECI as its component loading having lowest value among 5 variables of ‘capability to start of enterprise’ for the female group. In the computation of ‘EEI’, the weights of the variables of female group highlight that the variables ‘efficiency of growth potential’ and ‘operational efficiency’ are most important factors for the determination of EEI according to their weights (weights being 0.205 and 0.204 respectively). The ‘efficiency in marketing tools and costs’ is moderately important(weight 0.171) whereas the other three variables ‘financial efficiency’, ‘pricing efficiency’ and ‘technical efficiency’ having lower weights imply less important factors regarding the computation of EEI for female enterprise group. As per the result of Male group (regarding the computation of EEI), ‘the growth potential’, ‘operational efficiency’ and ‘technical efficiency’ are of high loadings (weights being 0.200, 0.197 and 0.191 respectively) compared to other three variables,(the weights ranging from 0.09 to 0.171 ) which indicates that these are most important factors for the determination of EEI. The influence of ‘efficiency in marketing tools and costs’ is relatively low in male group compared to above three high-weighted variables. The variables ‘financial efficiency’ and ‘pricing efficiency’ having lowest weights imply that they are less important compared to other four variables of the male group. Both ECI and EEI for two groups have same range (Table-2) of sustainability. The disparity between two groups arises due to several factors. The practical scenario tells that the income of male entrepreneurs is the main source of family income. All members of the male entrepreneurs’ family may support the mail entrepreneurial activity for running the enterprise. In some cases,there exists family history of entrepreneurship in case of male owned enterprises and the family members possess some knowledge and skills regarding the entrepreneurship activity which might help to sustain and improve the quality of the present activity. But this picture is quite different in female entrepreneurial activity: most of the female enterprises provide only supportive type income (not the primary income) to the family. The lack of adequate knowledge of entrepreneurship of female entrepreneurs themselves and also of their family members cannot help them to run the particular entrepreneurial activity. In most of the cases, the male members of female entrepreneurs’ family may not support the entrepreneurial activity due to their fulltime involvement in the other primary income generating activity of the family. The innovative power is another differential factor between male and female entrepreneurs in sustainability concern. Male entrepreneurs have relatively high innovative power compared to that of female entrepreneurs. This happens because male entrepreneurs, being a primary source income earner, are always motivated to search the innovative idea in order to sustain their enterprise. But the female owners are happy in existing situation of low level 265

of income to support the family and they do not show any urge to motivate themselves for searching innovative idea to sustain or to increase existing income. Finally, there exists another difference in above category regarding the use of production technique in enterprise. Most of the activities where female entrepreneurs are engaged are lagging behind in terms of application of modern production technique. They are engagement in traditional and tiny enterprises which do not require improved or modern technique for their incremental income. The second category comprises enterprises with Hired Labour and Family Base enterprises (no hired labour). The sample has also been categorized on the basis of nature of labour –‘hired labour’ or ‘family based labour’ – engaged in the enterprise. The composite sustainability index (Table-3) reveals that 63.7% of enterprises run with hired labour are considered to be sustainable (CSI* more than 3) as contrary to 52% of family-based enterprises. The result also indicates that almost 30% of hired- labour enterprises and 15% of family based enterprises (which is almost half of the hired labour enterprise) are highly sustainable (CSI*>4). As far as Entrepreneurial Quality Index (EQI) and Entrepreneurial Ability Index (EAI) are concerned, almost equal weights for all respective variables in both categories of samples are found and average value (Table-4) shows same range of sustainability. In the computation of Entrepreneurial Power Index (E P I ), the weights of ‘innovative power’, ‘risk taking power’, ‘marketing power’ and ‘bargaining power’ are relatively high in ‘enterprises with hired labour’ compared to those in ‘family-based enterprises’. The enterprises running with hired labour operate relatively in a large scale and driven by especially male entrepreneurs which signify that the aforesaid powers are relatively high in ‘enterprises with hired labour ’category. The determination of Entrepreneurial Trait Index (ETI) demonstrates that the weights of ‘self-confidence’ and ‘ethical view’ are relatively high in ‘hired labour enterprises’ compared to those in ‘family-based enterprises’. On the other hand, the variables ‘attitude’ and ‘commitment’ are relatively low in hired labour enterprises than those in family-based enterprises. As a result, no difference in weight of ETI average (table-4) is observed same for both categories. Enterprise Capability Index (ECI): the weights of ‘pre start up market survey’, and ‘support service’ are relatively high in enterprise having hired labour compared to that in family-based enterprises. These type of enterprises, being of relatively large scale, always survey before starting the enterprise. They, being more educated, possess the adequate knowledge of surveying the market and implement it in a proper way. They also try to get sufficient advice regarding price, marketing, how to mitigate risk, as well as legal advice which would help sustain the enterprises. So the ECI caries (Table-4) better level of sustainability for male compared to female. In Enterprise Efficiency Index (EEI) of ‘pricing method’ and ‘production technique’ are quite high in hired labour enterprises compared to the family- based enterprise. These type of enterprises are driven by profit-seeking motive as their level of investment is quite high compared to family-based enterprises. Hence they’re always conscious regarding pricing method of product or services. But the family-based entrepreneurs do not bother about supernormal profit .In most of the cases, they do not have any knowledge regarding pricing method and are mostly concerned with the subsistence level of income for their survival. As far as use of production technique is concerned, the enterprises run with hired labour are more capable and more conscious to apply modern tools and techniques for the qualitative and quantitative improvement of the product and services compared to family-based enterprises. The third category of microenterprises is most useful from the policy point of view with respect to their needs and the constraints they face. This classification is made between “survival” (subsistence) enterprises on one hand and “viable” (growth) on the other. A “survival” enterprise is said to be one into which the entrepreneur is often pushed for more profitable alternative or due to death of father/husband or because no other way of earning. On the other hand one is attracted or pulled into a “viable” enterprise as an entrepreneur by choice and by consideration of more profitable alternative. Here CSI* (Table-5) shows growth oriented enterprises are far better compared to survival enterprises regarding the percentage of sustainable enterprises. CSI* shows 47.6% of growth oriented enterprises are highly sustainable whereas only 13% of other group are highly sustainable. Only 13% of growth oriented enterprises are unsustainable compared more than half (51.3%) of survival enterprises. The all most all sub-indices of growth oriented group have high component weights compared to survival group. Table-6 shows that average of two sub-indices are very high and four others are moderate whereas for survival enterprises three 266

are moderate but others three are low. The disparity arises due to better entrepreneurial power, ability and quality of growth oriented entrepreneurs and their enterprises are so good in respect capability and efficiency. Conclusions and Policy Implications The concept of sustainable Microentrepreneurship is neither formal, nor derived, but rather a development process combining the three aspects of microfinance, entrepreneurship and sustainability. An attempt has been made to point out the critical issues and challenges regarding these three aspects of development through the present empirical analysis. There is no doubt that, with the intervention of the microfinance programme access to formal credit by the vulnerable section of rural society increases in a significant manner and thereby participation in microenterprise or income generating activities increases progressively. But from the empirical results it is evident that major percentages of microenterprises are unsustainable. Thus the goal of sound long term rural development with the improvement of standard of living of the poorest of the poor seems to be unsatisfactory though, sometimes entrepreneurs are engaged in the present non-farm activity as like as wage labour since they have no transfer income. The client level unsustainability is the main challenge to microfinance programme. There are different entrepreneurship development programmes run by central governments, state authorities and NGOs side by side. But the co-ordination at the institutional level is very poor and it is also surprising that the training programmes are not designing on the basis of local resource base, local market, local problems and potentials. Moreover those who engaged in microenterprises are facing different problems like non availability of formal loan according to their need and proper support services. As a result of such type of negligence and poor coordination of institutional level microenterprise development programme is not seem to be very fruitful and in future it should not easy to our economies to carry them on their shoulders at the cost of tax payers. Thus the policy should frame in such a specific manner that entrepreneurship activities would long last which intern help to reconstruct the rural society. And finally, Tagore’s dream of social reconstruction would materialize, as he tried to reconstruct the rural life not by credit alone but by the way that would help to achieve self-reliance and self-respect so that he/ she would be a ‘man with complete entity. It is the notion of microfinance. Table: 1 Percentage of Sustainable Enterprises in Female & Male Owned Enterprises Percentage Indices

% of Sustainable Enterprises under Female Owned Enterprises

% of Sustainable enterprises under Male Owned Enterprises

High

Moderate

Low

High

Moderate

Low

EQI

16.5

39.1

44.4

25.7

39.4

34.9

EAI

24.4

33.8

41.8

50.9

23.4

25.7

EPI

12.5

30.2

57.3

36.0

31.4

32.6

ETI

26.2

41.3

32.5

17.1

30.9

52.0

ECI

08.0

25.8

66.2

10.3

37.1

52.6

EEI

02.2

20.9

76.9

07.4

31.5

61.1

CSI*

11.1

35.6

53.3

25.0

39.0

36.0

Source: Sample Survey No. of Observations-400 (225 Female Owners +175 Male Owners)

267

Table: 2 Average Level of Sustainability of Female & Male Owned Enterprises Average Indices

Sustainability in Female Owned Enterprises High Moderate Low

Sustainability in Male Owned Enterprises High Moderate Low

EQI

-

3.06

-

-

3.36

-

EAI

-

3.21

-

-

3.70

-

EPI

-

2.85

-

3.46

-

ETI

-

3.38

-

-

3.80

-

ECI

-

-

2.75

-

-

2.99

EEI

-

-

2.59

-

-

2.81

CSI*

-

-

2.97

-

3.35

-

Source: Sample Survey No. of Observations-400 (225 Female Owners +175 Male Owners)

Table 3 Sustainable Enterprises under Family Base & with Hired Labour Enterprises Percentage % of Sustainable Enterprise under Indices Family Base Enterprises High Moderate Low

% of Sustainable Enterprise with Hired Labour Enterprises High Moderate Low

EQI

17.8

39.6

42.6

24.5

38.2

37.3

EAI

33.5

29.9

36.6

45.1

20.6

34.3

EPI

50.3

27.2

22.5

30.4

36.3

33.3

ETI

31.5

40.3

28.2

50.0

29.4

20.6

ECI

09.7

25.2

65.1

19.6

31.4

49.0

EEI

03.7

20.8

75.5

07.8

37.3

54.9

CSI*

15.0

37.0

48.0

28.4

35.3

36.3

Source: Sample Survey No. of Observations-400 (298 Family Base+102 Hired Labor )

Table: 4 Average Level of Sustainability under Family Base & with Hired Labour Enterprises Average Indices

Sustainability under Family Base Enterprises High Moderate Low

Sustainability with Hired Labour Enterprises High Moderate Low

EQI

-

3.13

-

-

3.36

-

EAI

-

3.36

-

-

3.61

-

EPI

-

3.04

-

-

3.40

-

ETI

-

3.48

-

-

3.79

-

ECI

-

-

2.77

-

3.15

-

EEI

-

-

2.60

-

-

2.96

CSI*

-

3.06

-

-

3.36

-

Source: Sample Survey No. of Observations-400 ( 298 Family Base+102 Hired Labour)

268

Table: 5 Percentage of Sustainable Enterprises under Survival & Growth Oriented Enterprises Percentage Indices

% of Sustainable Enterprise under Survival Enterprises High Moderate Low

% of Sustainable Enterprise under Growth Oriented Enterprises High Moderate Low

EQI

15.1

40.7

44.2

45.9

44.3

09.8

EAI

30.1

30.4

39.5

67.2

24.6

08.2

EPI

18.9

29.8

51.3

50.8

32.2

18.0

ETI

32.7

38.1

29.2

31.1

62.3

06.6

ECI

07.7

24.2

68.1

34.4

41.0

24.6

EEI

03.2

32.2

64.6

16.4

45.9

37.7

CSI*

13.0

35.7

51.3

47.6

39.3

13.1

Source: Sample Survey No. of Observations-400 (339 Survival +61 Growth Oriented)

Table: 6 Average Level of Sustainability under Survival & Growth Oriented Enterprises Average Indices

Sustainability under Family Base Enterprises High Moderate Low

Sustainability with Growth Oriented Enterprises High Moderate Low

EQI

-

3.06

-

-

3.91

-

EAI

-

3.27

-

4.22

-

-

EPI

-

-

2.99

-

3.83

-

ETI

-

3.45

-

4.16

-

-

ECI

-

-

2.72

-

3.63

-

EEI

-

-

2.59

-

3.23

-

CSI*

-

3.02

-

-

3.83

-

Source: Sample Survey No. of Observations-400 (339 Survival +61 Growth Oriented)

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270

Self-Help-Group in Women Empowerment: A Study of Mahima Mahila SHG of Durg By Hansa Shukla and Sharmila Saha

Introduction A Self Help Group (SHG) is defined as “a voluntary group valuing personal interaction and mutual aid as means of altering or ameliorating problems perceived as alterable, pressing and personal by most of its participants”. Over the last few years, the self help approach has been utilized in a growing number of projects and programmes. As lf help group consists of 10-20 members drawn from a relatively homogeneous economic class (i.e. poor), self selected on the basis existing affinities and mutual trust; members meet regularly at a fixed time and place and pool their savings into a common fund from which they take need based loans. The group develops its own rules and regulations and sanctions for violations; the meeting procedures and processes, leadership change norms, intensive training and handholding, are designed to enable SHGs to function in a participatory and democratic manner. Self Help Groups have emerged as a means of providing poor people with the credit that they need to emerge from poverty. These groups were formed to help women meet their needs for friendly credit. The groups initially draw on their own savings at an interest fixed by themselves to lend within the group and later get linked to the formal credit system. The Grameen Bank was started in 1976 by Professor Mohammed Yunus in response to this need for capital by the poor. The Grameen Bank disbursed loans to groups consisting of five women; six to ight groups formed a centre. They have been recognized as useful tool to help the poor and as an alternative mechanism to meet the urgent credit needs of poor through thrift (V. M. Rao 2002). SHGs enhance the equality of status of women as participants, decision-makers and beneficiaries in the democratic, economic, social and cultural spheres of life.  (Ritu Jain 2003). Role of SHG SHG are an innovative experiment in women’s thrift and credit. The major roles of SHGs are listed below: To encourage poor women to save and utilize their savings by lending it to other women in the group. o To reduce dependency on money lenders.

o To build up confidence and mutual support for women who are striving for social change.

o To establish a forum in which women can critically analyse their situation and devise collective strategy to solve their problems. o To provide opportunities for income generation through self employment or group activities in order to achieve economic self- reliance among the women members. o To establish gender equality in society.

o To develop social status of women in family and society. 271

o To establish linkage with banks, government infrastructure and other related institutions for socio economic development. Stages in Group Development Studies conducted have suggested that groups move through stages but that these not different groups. Groups are shown to be in four stages : o Group Formation

-        0-6 months

o Self reliance

-        13-18 months

o Group stabilization

-        7-12 months

o Institutionalization

-        19-24 months

constant across

Status of SHGs At present, SHG is widely used as an instrument to empower women socially and economically. Enhancing income earning opportunities through the formation of SHGs is a viable pathway for empowerment of women. According to a survey conducted by Centre for Bharatiya Marketing Development (CBMD), the highest number of SHGs is found in the southern states. On an average southern state constitutes 65% SHGs, eastern 13%, central 11%, northern 5% and western 6% at the national scene. Women Empowerment Empowerment in the context of women’s development is a way of defining, challenging and overcoming barriers in a woman’s life through which she increases her ability to shape her life and environment. It is an active, multidimensional process, which should enable women to realize their full identity and power in all spheres of life. The indicators of women empowerment as identified by The Canadian International Development Agency (CIDA) has been classified into economic, social, political and qualitative. SHG and Women Empowerment The concept of Self Help Groups (SHGs) is proving to be a helpful instrument for the women empowerment. SHG is an organization of rural poor, particularly of women that deliver micro credit to undertake the entrepreneurial activity. Entrepreneurship development and income generating activities are a feasible solution for empowering women. It generates income and also provides flexible working hours according to the needs of homemakers. Economic independence is the need of the hour. Participation in income generating activities helps in the overall empowerment of women. SHG in Chhattisgarh and Women Empowerment In 2001, just a year after Chhattisgarh was born and carved out of Madhya Pradesh, the so-called self-help group movement—organizations of between nine and 10 locals who save and extend credit to members—took off in this district of Rajnandgaon, bordering Madhya Pradesh, to empower women and stave off local money lenders Chhattisgarh sees great promise in women’s groups as this one to help meet a dual demand provide year-round employment and encourage greater involvement in decision making Women in Chhattisgarh are visible in every walk of life, be it in agriculture, collection and processing of the State’s rich forest wealth or in construction / wage work in urban areas. To meet these objectives, the State has identified specific initiatives, which include:  Creating a responsive statutory and institutional mechanism.  Integrating Gender perspective in Economic development.  Creating an enabling environment for Social Development of women.

272

The State has set up a Committee for policy review and implementation to be headed by Minister–in-charge with representatives from the Department of Women and Child Development, State Women Commission, NGOs, community based organisations, other Government departments, etc. This committee would work in coordination with various departments to draw up detailed action plan for every sector in line with the initiatives outlined in this policy. The State recognises the need for increased participation of women for achieving rapid social, economic and cultural development of the state, which is one of the stated agenda About 7,000 self-help groups operate in Rajnandga on district alone, where more than half of the 1.2 million people are women. The idea has advanced across the state, with more than 75,000 self-help groups in operation. The SHGs get financial support from various government departments like Agricultural Department, Forest Department, District Urban Development Agency (DUDA) and mainly from Chhattisgarh Women and Child Development Department (DWCD). Study Area The paper focuses on Mahima Mahila SHG is situated in Utai, Bhilai, Chattisgarh. Bhilai known as “Mini India” for Industrial development, social harmony and cultural diversity is a twin city of Durg. Utai is a Nagar Panchayat and has 15 wards with a population around. The total population of Utai is 8847 with 4992 Male and 3855 Female. Mahima Mahila SHG was registered in the year 2007 and it started with 20 members and now the membership has reached 200. Objectives 1. To study the income, expenditure and savings of the members before and after joining SHG. 2. To know the role of SHG in providing credit. Methodology This study is compiled with the help of the primary and secondary data. The primary data was collected with the help of specially prepared interview schedule. The schedule includes the questions related to the general information about the SHGs members, income, expenditure, savings and loan schemes available to SHGs members. Totally 60 respondents were selected from the SHG (200 total members) simple random sampling method. The sample size was 1/3 of the total members in the SHGs. This is purely a descriptive study. Therefore no complicated models and tools were used, only percentage is used for the analysis. Analysis and Interpretation Age Group of Members of SHGs Age and socio-economic activities are inter-related. Women Self Help Group. This study area, SHGs age limit is normally 18 to 19 years. The young and middle age group people can actively participate in the socio-economic activities, which is true in the activities of SHGs in the study area (Fig. 1). The women age groups 40-50 are actively participated in the SHGs activities. Because these age groups members are mostly committed in the various family responsibilities. The age group between 20-30 and 30-40 are very important for SHGs.

273

Reasons for Joining SHGs Figure 2: Mahima Mahila Self Help Group Reason for Joining

Income Level of the Members Income is the major determinant of the standard of living of the people. Depending upon the educational qualification, they settle in a particular occupation and accordingly earn income. The SHGs member income has been increased after joining the SHG. Hence women members of the groups are independent to meet their personal expenditure, and they contribute more to their household income. Many housewives did not earn anything before joining SHG, but after becoming a member of the SHG, they are also earning reasonably. This increases the willingness to participate in the SHGs’ activities (Table– 3). From this table, we infer that women after joining the SHGs earn more money and increase their income level in the range Rs.2000- 3000 from (20%) to (25%) and there has been 8% increase in the income range Rs. 3000 - 4000 and 5% increase in the range above 4000. This shows that most of the members can earn average of Rs.100 to Rs.150 every day. Many women members independently involve in the economic activities individually and with other group members after joining SHGs. Therefore they are now economically independent and contribute to increase their household income. Figure 3: MahimaMahila Self Help Group Members Monthly Income (Before and after Joining)

Expenditure of the SHG members Family The family expenditure has been increased due to the positive change in the SHGs members’ income. The increased income not only enhances the expenditure of the family but also promote the savings of the family after 274

they join in the SHGs. Here the objective of the SHGs is fulfilled. This is an achievement of the women SHGs in the study area (Table – 4 ). Moreover the women of the SHG have savings enough to spend on their basic needs and other requirements during festivals, marriage etc. Figure 4: MahimaMahila Self Help Group Members Monthly Expenditure (Before and after joining)

Credit and SHGs One of the reasons for joining SHG for women of this area is to avails credit, which is true in the present study area. As money lenders lend money at very high rate of interest. In this situation SHGs are the boon to the people, because instead of approaching individual, SHG members can avail credit from the group at low interest rates with easy repayment facility. Therefore members repay the loan in time. The loans can be used by individual group members for their personal needs, sometime the group may invest on any economic activities, as in the case of MahimaMahila Self Help Group loan is given to its members and they also get loan from Mahila Kosh of States Women and Child Department to promote their business of ready to eat food and to involve in new business activities of paper plates. The maximum loan amount per members is decided by the general body meeting. Figure 5: Mahima Mahila Self Help Group Members Loan Availed

Regarding the loan repayment 83% members of the group repay loan in time and only 3% delay the repayment and nearly 8% people are in position to repay in advance they get some relaxation in the amount refunded. Conclusions The analysis of the study area has brought to light the following conclusions. The women joining SHGs age limit is normally 18 to 19 years. The women age groups 40-50 are actively participated in the SHGs activities. Because these age groups members are mostly committed in the various family responsibilities. Many women 275

joined the SHG for getting loan, promoting their personal savings, in addition to get social status. In the study area many women (35%) joins the SHGs for social status. 30% of the respondents join for improving their savings. There has been 8% increase in the income range 3000 – 4000 and the expenditure has also increased considerably basic needs and other requirements during festivals, marriage etc. SHGs can easily approach the banks and other institutions to get loan. All the members are responsible to repay the loan to the banks. Therefore members are repay the loan in time and the credit taken from banks and other government institutions is also repaid in time. The various purposes for which loans obtained by the respondents are to start business, to educate their children, to meet medical expenses, to meet marriage expenses, to maintain house expenses, to redeems other loans and to meet festival expenses. These study area women are get awareness after joining the SHGs. The government of Chhattisgarh is also keen in promoting SHGs and in turn supporting women empowerment in the state. Recently Chhattisgarh government has reduced the rate of interest on business loans given to women self-help groups (SHGs) from 6.5 per cent to 3 per cent. “It will benefit over nine lakh women associated with 74,000 women SHGs of the state”. Now, women SHGs can avail loan facility of up to Rs 2 lakh from Chhattisgarh MahilaKosh as well as other commercial and cooperative banks at 3 per cent. The initiative will allow the women SHGs to easily avail the loan facility for self-employment and thereby become self-dependent. Refrences •

APMAS, Optimizing SHGs, October 2005

•

Bhuyanke Goth” a quarterly journal of CG Women and Child Develoment Department

•

Finance India, The quarterly journal of Indian Institute of Finance.

•

Gurumoorthy T.R. 2000 “Self Help Groups-Empower Rural Women”. Kurukshetra

•

http://chhattisgarh.nic.in/schemes/mahila_kosh.htm

•

http://cgwcd.nic.in/

•

Kapoor, Pramilla (2001), Empowering the Indian Women, Publications Division, Ministry of Information and Broadcasting, Government of India.

•

Lalitha N & Nagaraja B.S.( 2002) “ Self Help Groups in Rural Development “Dominant

•

Malhotra, Meenakshi (2004), Empowerment of Women, Isha Books, Delhi.

•

Pattanaik, Sunanda, “Smaranika, 2003”, Empowerment through SHG: A Case Study of Gajapati District.

•

Vol. 48,(2000)

•

Publishers and Distributers, New Delhi,

•

Ritu Jain, (2003), “Socio-Economics Impact through Self Help Groups”, yojana, 47(7), pp.11-12

•

Sahu and Tripathy (2005), Self-Help Groups and Women Empowerment, Anmol Publications Pvt. Ltd., New Delhi.

•

Veena Kumar “Social- Economics Status of Women in India”. Southern Economist, August 1999

•

Vinayagamoorthy “A Women Empowerment through Self Help Groups: A Case Study in the North Tamil Nadu”.

•

Vilakshan, XIMB journal of Management.

•

Yojana, A Development Monthly

276

Self Help Group as an Imperative to Women Empowerment and Rural Development By Pushpa M Savadatti and Triyogi Nath Pandey

Introduction Power is the authority to exercise knowledge, ability, and experience effectively. It can neither be transacted nor extended in charity. It has to be acquired through discipline, dedication devotion and determination. Once acquired it has to be cherished sustained and utilized for the social benefit. Hitler and Gandhi both were powerful but in a different way one through violence another through nonviolence. Empowerment means “to give power or authority” and ‘to enable or permit”. Women Empowerment is a process, wherein women are able to organize themselves to increase their own Self–Reliance, to assert their independent right to make choice, and also to control resources which will assist in challenging and eliminating their subordination” Keller and Mbwewe (1991). There are three dimensions to the women empowerment [Ranjani et al 2002, Kabeer (1998) and Peggy (1989)]. They are 'power to', 'power with' and 'power within'. The 'power to' e.g. freedom to move, interact take decision. The 'power with’i.e collective power of women members against market, community, means capacity to effect the outcome of the decision. The third dimension 'power within' indicates the strategic gender awareness, and institutional basis. E.g. challenge gender related attitude. It is felt when women challenge the existing norms and culture, to effectively improve their well being. The important fact being that if women were able to understand their own condition, knew their rights and learnt skills traditionally denied to them, empowerment would follow. Objectives of the Study 1. To analyse the Status of Women in different institutions 2. Examine the effect of SHG in six states, three from the top five states vis-à-vis three from selected three from the priority 13 states. Microfinance through Self Help Group Microfinance through Self Help group helps in reduction of the vulnerability of the marginalised.Micro finance institutes provide banking products and services which Formal rural banking are not able to reach. It is provided by either of the two models: SHG-Bank Linkages or MFI-SHG linkage. In both the cases, SHG forms an integral part. Self Help Group is formed on three basic principles of (i) Self Help is the best help, (ii) United we stand divided we fall, (iii) we can form our own bank .In one research (www.XIMB.ac.in) there was a positive correlation between credit availability and women empowerment. Women’s agency is an important constituent of women’s empowerment. “Women’s agency can be said to be operative when it results in a fundamental shift in perceptions, or “inner transformation” so that women are able to define self-interest and choice, and consider themselves as not only able, but entitled to make choices (A Sen 1999; G Sen 1993; Kabeer 2001; Rowland’s 1995; Nussbaum 2000).

277

The UNDP’s Human Development Report of 1995 considered five indices for consideration of women empowerment; 1.Share of seats held by women in parliamentary assemblies 2.The share of supervisory posts, high administrative posts and technical posts assumed by women. 3.The estimated share of income from work of women compared to that of men.4.(NEW Introduction): The Gender-related Development Index (GDI) which measures the inequalities between men and women in terms of access to basic needs.5.Gender Empowerment Measure (GEM). which evaluates women’s access to political and economic posts. Based on Amartaya Sen’s work, the UNDP makes the distinction between the measure of inequality and empowerment. The GDI focuses on the extension of capabilities; the GEM is concerned with the use of those capabilities to take advantage of the opportunities of life. The UNDP found a very strong correlation between its gender empowerment measure and gender-related development indices and its Human Development Index. Preference for sons is associated with some of the strongest indicators of gender discrimination on the Indian sub-continent. Whereas, other believe that investing in women’s capabilities empowers them to make choices which is a valuable goal in itself but it also contributes to greater economic growth and development. It has been well-documented that an increase in women’s resources results in the well-being of the family, especially children (Mayoux, 1997; Kabeer, 2001; Hulme and Mosley, 1997).Another view stresses that an increased access to financial services represents an opening/opportunity for greater empowerment. Microfinance institutes offer its products and services preferably to women since they feel women are reliable borrowers.MFI products and services not only helps women to alleviate poverty but indirectly acts as a tool in the fight for the women’s rights and independence. Increased esteem does not automatically lead to empowerment it does contribute decisively to a women’s ability and willingness to challenge the social injustices and discriminatory systems that they face (Cheston and Kuhn, 2002).They gain abundant self-confidence and self esteem through SHG movement. Economic poverty along with social and gender issues can be tackled effectively through SHG’s (Chiranjeevulu 2003).Finally, it is important to realise that empowerment is a process and a positive impact on the women empowerment may take time. The Praxis Globally it is accepted that 30% female representation in key political decision-making positions is needed for women to bring about significant and meaningful change. There are countries like Nepal and New Zealand where women participation has achieved the necessary threshold of 30% while there are some countries like Azerbaijan where their contribution is more than men (101%) and Lao Peoples democratic Republic(102%) and Russian federation 101%) .(UN Women, Fourth World Conference on Women, Beijing, 1995. Beijing Declaration and Platform for Action (A/CONF.177/20/Rev.1).(Statistical yearbook for Asia and the Pacific 2011.1-people)Women need to participate actively in Political leadership, it not only make their presence felt Internationally but also reflects good of the nation. The Politics Table 1 below shows the representation of women in LokSabha, RajyaSabha and state politics in selected states. It shows that Andhra Pradesh has only five people in both the houses in national politics while their role is only about 12% in state assembly. Utter Pradesh leads the list by 11 members in the National politics while there are 35 out of 403 members in state politics which is less than 9%. Kerala has only two women representing their state in National Politics and 7 out of 140 in the state politics which is about 5% stands at the lowest with only 5%. The Bureaucracy In the same table it can be seen that even the representation of women in Strategic jobs of decision making in IAS fluctuates around 10.4% but The IPS services are around 3.3%.Hence it can be construed that although there is some representation of women in each decision making institutions but it is significantly so low that they can never ever even think of making any contribution to women empowerment. Also Higher bureaucratic jobs either may not be interesting or attractive .However jobs other than Govt seems to be more attractive business like Banking sector continues to be more attract e.g ICICI has more than 10,000 women employees out of 40,000 employees (ktwop. wordpress.com/2010/09/19/women-highly-successful-in-indian-banking-and-in-india-inc/). 278

Table 1 : Women representation in 15thLokSabha and RajyaSabha and State politics in selected states States

AP

Kerala

TN

UP

Chhattisgarh MP

Total women from all states/total strength of …

2

1

2

9

-

4

58/545 = 11%(approx)

3

1

3

2

1

3

27/244 = 11%(approx)

36/295 =12.2%

7/140 =5%

14/234 =6%

35/403 =9%

11/90 =12%

25/232 =11%

128/1394=.09%

Women in IAS, 1985

15/301 =5%

8/143 =5.6%

32/280 =11.4%

35/487 =7.2%

27/346 =7.8%

331/4284=7.7

IAS May 2000

33/314=10.5% 21/178=11.8% 37/325=11.3%

51/535=9%

54/396=13.6% 535/4624=10.4%

IPS May 2000

11/190=1%

10/391=.02%

9/282=3%

Lok Sabha Rajya Sabha State Politics MLA’s

2/116=1%

7/183 =3%

110/3191=3.3%

Source: Loksabha and rajyasabhawebsite,isidev.nic.in/pdf,(adapted from table 12 page 164 Alkasaxena(2011)Situational analysis of women in Politics,Akhand Publishing House.

Standard of Living A study by NABARD in 2002 covering 560 household from 223 SHG’s in 11 states in India elucidated that Standard of Living in case of SHG members improved in case of asset ownership, saving and borrowing capacity, Income Generation Activity and living standard. Housing facilities improved. Every member of house developed saving habits. The Per Capita Income Table 2 shows the number of SHG-Bank Linkages from 2009 to 2012 along with the Per Capita Income of Selected states .It reveals that the Per Capita income of Andhra Pradesh had the minimum of Rs 51025/- (20092010)which went up to Rs 71540/- in 2011-2012.The highest Per Capita Income of the (Priority sector states) is Rs 46573/- of Chatisgarh in the year 2011-2012 which Andhra Pradesh already had crossed in 2009-2010 itself.It also reveals that the number of SHG-Bank Linkages also continued to rise. Hence it can be construed that forming more and more SHG’s in rural marginalized area can not only lead to poverty alleviation but Standard of living provide Income generation activities leading to self reliance and women empowerment. Table 2 : SHG Bank linkages and PCI of Selected States from 2010-2012 Year AP Kerala Tamil nadu

2009-2010 SHG Bank Linkages

PCI

2010-2011 SHG Bank Linkages

PCI

2011-2012 SHG Bank Linkages

PCI

1447560

51025

1466225

62912

1495904

71540

534997

59179

493347

71434

615714

83725

65357

943098

72993

925392

84058

824966

UP

429775

23395

470157

26355

471184

29417

Madhya Pradesh

178226

27250

153817

32222

163588

-

Chhattisgarh

113982

38059

118167

41167

129854

46573

279

Literacy Literacy is a vital component for sustenance of SHG. Investing in girls' education is one of the most effective ways to reduce poverty. An investment in secondary school education for girls yields especially high dividends. Education helps girls and women to know their rights and to gain confidence to claim them. However, women’s literacy rates are significantly lower than men’s in most developing countries. Table 3 shows the ratio of Girls to boys in primary and secondary schools public and private. It shows the target set by the MDG for developed and developing countries. India already overtook the set target of 94% in 2008.However the overall female literacy rate staggers at 65.4% (Table: 4& 5) A comparison between the two set of states shows that among the top three states (with MFI penetration) Andhra Pradesh had female literacy rate of 59.7% which was the lowest while the highest female literacy rate was 60.6 % of Chhattisgarh among the priority states. Hence SHG plays an important role in percolation of literacy as well leadind to women Empowerment. Table 3: Ratio of Girls to Boys in Primary and Secondary Schools (Public and Private) Year

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

India

78.4

78.8

79.1

81.4

89.7

90.0

90.3

90.3

92.2

94.9

Target:Developed region1999and 2007

100

_

-----

-----

-----

-----

-----

-----

------

Target:developing region 1999 and 2007

84

------

------

------

-------

-----

-----

------

------

100 94

Source: Data Bank.worldbank.org and Millenium development goals report 2007

Table 4 : Female Literacy Rate in percentage 1951-2011(India) Year

1947

1951

1961

1971

1981

1991

2001

2011

%age of Literacy

8

8.6

15.35

21.97

29.76

39.29

53.67

65.4

% age increase

-

7

79

43

35

32

36

21

Press information bureau, GOI

Table 5 : Female Literacy Rate in percentage 2001-2011 (Selected states Year

2001

2011

AP

51.17

59.70

KERALA

87.86

92.0

TN

64.45

74.90

UP

42.98

59.30

CHATISGARH

52.4

60.6

MP

50.28

60.0

Source: Census 2011

The Entrepreneur Self Help Groups (SHGs) have been successful in empowering rural women through entrepreneurial activities. Increase in income, expenditure and saving habits of rural women were observed. The SHGs had major impact on social and economic life of rural women. The study revealed an increase in social recognition of self, status of family in the society, size of social circle and involvement in intra family and entrepreneurial decision making. There 280

was an increase in self confidence, self reliance and independence of rural women due to the involvement in the entrepreneurial and other activities of SHGs. (Indian Res. J. Ext. Edu. 8 (1), January 2008 46 Women Empowerment through Entrepreneurial Activities of Self Help Groups Preeti Sharma1 and Shashi Kanta Varma2). It can also be seen from Table: 6 that the Govt initiative of MGNREGA have contributed significantly in the three states which have high penetration of SHG.The minimum participation of women in these states is 55% or more, while in the priority states (U P, Chhattisgarh, MP) the highest Women person days itself is 49% .Hence Govt needs to scale up MGNREGA activities as well. Table 6 : Women Participation in MGNREGA WPD 2006-07

WPD 2007-08

WPD 2008-09

WPD 2009-10

WPD 2010-11

WPD 2011-12

AP

55

58

58

58

57

58

KERALA

66

71

85

88

90

93

TN

81

82

80

83

83

74

UP

17

15

18

22

21

17

CHATISGARH

39

42

47

49

49

45

MP

43

42

43

44

44

43

Lowest 55% participation in Andhra in 2006-07

Highest 49 percentage participation in chatisgarh from 2009-2011

Source: MGNREGA sameeksha 2006-2012

Table 7 & 8 shows that in 2008-2009,48.6 lakhs women SHG managed over 4434 crores of fund which increased to 62.9 lakhs SHG managing over 5104.33 crores of funds in the year 2011-2012.This shows that not only more and more number of women need to be brought under the gambit of SHG but also they are capable to manage funds. The next table shows the share of women in non agricultural sector in India. It showed that in 1990 only 12.27% of women participated in non agricultural sector which increased to 18.6% in 2009 Table 7: Number of Women SHG’s Formed(in Lakhs) /amount Handled(in Crores) 2008-2009

Prticulrs

No (SHG)

Total no of 48.64 SHG

2009-2010 Amount 4434.03

No (SHG)

2010-2011 Amount 4498.66

53.10

No (HG) 60.98

2011-2012 Amount 5298.65

No(SHG)

Amount 5104.33

62.99

Source: NABARD data 2010-2011-2012

12.27 13

13.3 13.7 14.1 14.4 14.9 15.5 16

16.3 16.6 16.8

17.3 17.6

2009

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Table 8 : Share of women in wage employment In India in the non agricultural sector in percentage

17.9 18.1 18.6

Source: Official UN site for MDG indicators as on 12/9/201

Table 9 shows that NPA of RRB’s remained to be the least .Hence Expanding activities of RRB also can be an option to reduce marginalization and women Empowerment. Hence it can be concluded that a combination of the above factors can not only lead to Women empowerment but also rural development and reducing marginalization. 281

Table : 9 AGENCY WISE NPAs of Bank Loans to SHG’s

(in crores) Agency

CB Pub Sector

Loan Out Standing against SHG as Amount of NPA on

Percentage of NPA to Loan as on

31.3.2010

31.3.2011

31.3.2012

31.3.2010

31.3.2011

31.3.2012

31.3.2010

19724.42

21412.75

24406.57

513.53

1019.90

1581.05

2.60

Change in NPA CB Pvt Sector

31.3.2011 31.3.2012 4.76

6.48

2.16

1.72

10.10

5.30

440.29

470.51

1403.72

23.93

47.09

74.37

5.44

4.66

-4.8

6144.58

7430.05

8613.58

218.53

272.82

426.34

3.56

3.67

4.95

.11

1.28

1728.99

1907.86

1916.14

67.04

134.30

130.97

3.88

7.04

6.84

Total 28038.28 Source : NABARD DATA.

31221.7

823.04

1474.11

2212.73

2.94

Change in NPA RRB Change in NPA Co-op Bank Change in NPA

3.16

.2

4.72

6.09

References •

ktwop.wordpress.com/2010/09/19/women-highly-successful-in-indian-banking-and-in-india-inc/

•

Preeti Sharma1 and ShashiKantaVarma(2008 Women Empowerment through Entrepreneurial Groups, Indian Res. J. Ext. Edu. 8 (1), January 2008 46)

•

Ranjula Bali swain “Can Microfinance Empower Women Self-Help Groups in India Department of Economics, Uppsala University

•

(UN Women, Fourth World Conference on Women, Beijing, 1995.Beijing Declaration and Platform for Action (A/ CONF.177/20/Rev.1).(Statistical yearbook for Asia and the Pacific 2011.1-People.

282

Activities of Self Help

Impact of Microfinance on Household Welfare of Rural Women: An Assessment of NGO in Haryana By Vikas Batra

Introduction In the process of economic and social development, multiple agencies are involved such as, Government, Corporate Sector, Cooperatives, Non Governmental Organizations and Self-Help Groups etc. Among these agencies, development researchers and practitioners recognized the crucial role played by Non- Governmental Organizations in this process. It is claimed that Non-Governmental Organization plays a vital role in the shaping and implementation of various development programmes through providing innovative and alternative cost effective models for development. They mobilize people for constructive community work and reach the most marginalized and vulnerable sections of society and contribute to the socio-economic development of the country. In India, the NGOs and Voluntary action have been part of the historical legacy. In early 20th century, several voluntary efforts were started in the fields of education, health etc. The NGOs became prominent after independence, especially after 1970s. Development practitioners, government officials and foreign donors consider that Non-Governmental organizations by the virtue of being small- scale, flexible, innovative and participatory, are more successful in reaching the poor and in poverty alleviating. Non-Governmental Organizations and Microfinance in India In this context of poverty and livelihood promotion in rural areas, credit emerged as one of the main components of various strategies of NGOs. The rationale behind these approaches is to strengthen the income generating capacity of women and equip them to access all the development requirements to escape the multifaceted dimensions of poverty. In India, Community based organizations and NGOs are working in two different ways, in the first case some NGOs are mainly engaged in promoting self-help groups (SHGs) and their federations at a cluster level, and linking SHGs with banks, under the National Bank for Agriculture and Rural Development (NABARD) scheme. Other NGOs are lending directly to borrowers, who are either organized into SHGs or into Grameen Bank style groups and centers. These NGOs borrow bulk funds from Rashtriya Mahila Kosh, SIDBI, FWWB and various donors. Taking into consideration the failure of various attempts by formal credit unions, cooperatives and the RRBs, NGOs started organizing them into community based organizations known under different names, like Credit Unions, Mahila Mandals, and Mahila Samajams etc. The institutions which engage in microfinance services in India follow three types of approaches, namely, the Grameen Bank approach, the SHG approach and the Co-operative Societies approach. There are also various international NGOs working in India in the area of microfinance. With the SHG linkages programme introduced in 1992, the NGO sector has been recognized as a crucial partner in the process. Social Centre for Rural Initiatives and Advancement SCRIA is a community based organization working in Rewari, Mahendragarh and Jhajhar districts in southern Haryana & Alwar, Bikaner, Churu districts in northern Rajasthan. SCRIA has been promoting microfinance activities 283

through its Samridhi programme. The Samridhi programme acts as an umbrella for four specific initiatives aimed at rural women – Promotion of rural entrepreneur, micro credit support for livelihood enterprise, organize and assist rural craft persons during pre production – production – postproduction stages and promote fair trade. Under the programme, Sangathan (women’s’ group) is the basic village level unit headed by a leader. Credit support to Sangathans members is provided for micro enterprises managed by women on their own or with the help of family. SCRIA Sangathan members are involved in policy and executive decisions through a three tier federating structure at village, block and district level. All Sangathan members are members of general body that meets once a year. The cluster/ block level federating body is called Sangh and consists of all the Sangathan leaders. Sangh members meet once in two months and are responsible for preparing cluster level fund request and its subsequent disbursement. At area level the federating body is called Nirnaayak Samiti (governing body) and the body meets once in three months and is responsible for preparing area level fund request and its subsequent disbursement. All the decisions regarding the management of program, interest rate - loan types - etc., are taken by the Samitis. The decisions taken by the Samitis are ratified in the program’s yearly Aam Sabha(General body meeting). Review of Literature In India, various researchers have documented the role of microfinance services of NGOs on its members. Rajasekar (2003) analysed the impact of microfinance programme of SHARE (an NGO in Tamilnadu) on the economic aspects such as on poverty reduction. The economic programmes had contributed to increased savings and income of the women. However, the member group was not found to be significantly different from the comparison group in terms of control over income and decision-making. Murthy et. al. (2005) studied the South Asia Poverty Alleviation programme in Andhra Pradesh. It was observed that members of SHGs had better access than non-members with respect to almost every basic need. There was substantial reduction in poverty and causes of poverty and gender disparities among members were less than non-members. However, there was uneven access to basic needs between different castes, classes and religions. Srinivasan (2005) studied Dhan Foundation’s Kalanjiam project which is one of the largest community banking programmes in India. Small loans below Rs. 2000 were utilized for consumption purposes (38.09 per cent) of loan disbursed followed by health, debt redemption and social obligations and festivals and the rest utilized for small businesses. In the case of big loans above Rs. 2000, the highest utilization was in debt redemptions followed by agriculture and livestock, consumption and social obligations. Least was used for health purposes. The researcher found that the average loan taken was Rs. 19,975 by the members below five years and Rs. 38,476 for the members having more than five years of membership. The saving pattern and systems were regular in these cases. The members were involved mainly in livestock, small petty shop, tailoring, hawking and improving their earlier activities. The study found that groups were successful in mobilizing the funds for different purposes and this reduced the dependence on moneylenders to a large extent. Gangaiah et. al. (2006) studied the Rashtriya Seva Samithi in village Karakambadi in the state of Andhra Pradesh. The average loan provided to each member was Rs. 9960.09. The major amounts of loans were disbursed for agriculture followed by dairy and cloth businesses. The Income generation activities helped the beneficiaries to generate employment. On an average, the loan received generated 184 person days of employment. The highest number of employment was generated in agriculture followed by dairy and tailoring. The study found that loan provide to SHGs had a favorable impact on income. On an average, each selected family could get an income of Rs. 19578. The highest increase was noticed in agriculture, followed by flower vending, dairy, and tailoring and cloth business. It was also observed that micro-credit had a quality improving effects on the families with productive utilization of income. Abdul Raheem (2009) in his study tried to find out constraints in SHGs with differentt dimensions viz. personal, social, economic and financial. Using factor analysis, Abdul concluded that personal constraints were found to be more important followed by social, financial and economic constraints. According to the study, the existence of these constraints negatively affects the groups. Here he also suggested that NGOs, government agencies and social activists should play a very active role to benefit these women and explore the entrepreneurial abilities among women. Objectives of the Study • To study the impact of microfinance services on household welfare in terms of income level • To assess the impact of microfinance on assets generation • To study the impact of microfinance services on household expenditure on food, health and education 284

Data and Research Methodology The study is based on primary data collected through field surveys. In addition to the schedules, the case study method has also been used in the study and information has been collected through discussions with NGO officials in the study area. The selected is one community based organization in the southern part of Haryana named as Social Centre for Rural Initiatives and Advancement (SCRIA). In the study, Ateli and Kanina blocks were selected in Mahendergarh district because the organization initiated and scaled up its operations only in these two blocks. Later on it was decided to include Khol block of the Rewari district where SCRIA had initiated the group movement. After the selection of blocks, the list of villages was prepared with comparatively high numbers as well as matures SHGs. Through geographical clustering exercise, villages were randomly selected. SHGs were selected through screening of a list provided by the NGO officials. A purposive and random sampling technique was used to select SHGs. For this, separate lists of SHGs under SCRIA were prepared and out of these lists, those SHGs which had existed for two or more years on 1.1.2009 were separated out to form the lists of SHGs eligible to be selected for this study (assuming that the benefits from the microfinance programmes are more or less stabilized). From the list 20 SHGs under SCRIA were randomly selected for the study. SHG members were selected from each of the selected SHGs randomly. A total of 80 members became the final sample frame. Results and Discussions Age, Size, Length of Membership and Position Table 3 shows that the average age of all SHGs as of January 2009 was 5.7 years and average number of members per SHG in the sample was 12.6. This fits in well with the ideal size of a SHG, which is between 10 and 15 members, the reason being that in a bigger group; members may find it more difficult to participate actively. The length of membership was 5.7 years. The study selected group members on a random basis and without making any distinction among the members based on their position in the group. In was observed that 74.4 per cent respondents were ordinary members, followed by presidents (14.7 per cent), secretary (6.1 per cent) and cashiers (4.3 per cent). Table 1: Profile of Sampled Self Help Groups Particulars No of Sampled SHGs Average age of the group Average number of the group members Structure of the group

No of Respondents 20 5.7 12.6

Same Caste Different Caste Length of Membership and Position of the Member in the Group

2(10.0) 18(90.0)

Position in the Group Average years

5.7

President

17 (21.3)

Secretary

4 (5.0)

Cashier

2 (2.5)

Ordinary member

57 (71.3)

Source: Computed from the Field Survey

Saving and Credit Utilization Patterns One of the basic principles of SHGs is that even the very poor may save small amounts, and that the additional incentives of getting bank loans at lower rates of interest, particularly among those who are otherwise ineligible for getting bank loans, will inculcate and strengthen the habit of saving. The members of SHGs also save a fixed amount 285

periodically, depending upon the convenience of the members of the SHG. Table 4 provides information regarding the periodicity of saving activities and the amount of savings by members of SHGs for the three programmes. Saving on a monthly basis seemed most popular as one hundred per cent of SHGs preferred monthly savings. Based on the financial strength of the members, each SHG fixes a certain amount as mandatory savings. In the present sample, the average monthly saving per member amounted to Rs. 73. So far as the frequency of group loans is concerned, it was 3.8 and the average rate of interest charged by SHGs was around 14.2 per cent per annum. The average interest rate was kept much below than the rates charged by moneylenders, but also prohibited members from taking loans unnecessarily. The group members were asked whether they had taken any loan from bank/MFI and group. All the respondents stated that they had taken a bank/MFI loan. On the issue of the source of the loan, only 1.3 per cent members registered that they have taken only MFI loan and only 2.5 per cent members submitted that they have taken only group loan. The majority of the members (96.2 per cent) stated they had taken on a loan both from an MFI and the group. In all the programmes, no collateral was used to take the loan and, again in all cases, the loan amounts were used only for individual-based income generation activities (7.13). The mean amount of bank loan in all groups found to be Rs. 27515. In the same way, the average group loan was calculated for all programmes and the average amount was found in Rs.7783. Apart from production needs, the SHG members are always in need of money to meet their current family needs, such as domestic consumption, medical expenses, education of the children, and meeting social obligations. The members have to depend on the village moneylenders every time and have had to pay very high interest. The SHGs are thus a major source of alternative financing. The members take loans frequently from SHGs to make their payments for small and urgent production and consumption, as well as domestic needs. In the study, households were asked to indicate the actual use of the loans taken. The main purpose of this set of questions was to find out the type of use, categorized by production-oriented or consumption-oriented loans. It may be observed from Table 4that 86.3 per cent of members stated that they had used the loan amount on consumption expenditure followed by health contingencies (48.8 per cent), investment in livestock (47.5 per cent), purchase of food (42.5 per cent), education for children (41.3 per cent), asset building (37.5 per cent), fodder for animal (36.3 per cent), improvement to dwelling (35.0 per cent), marriage and social events (30.0 per cent), repayment of earlier debts (26.3 per cent), husband/son’s business (18.8 per cent), investment in agriculture (11.3 per cent), self-employment (7.5 per cent) and Jhhujhhak/ Bhat (6.3 per cent). The pattern of the utilization of loans within households shows that in the majority of cases, the loan amount was used in non-income generation activities; and within IGAs, it was used mainly for the activity either common to household or for the husband/son. Most loanees started with small loans, but as the relationship with the organization improved, more loans were given to the same person, thus making their interaction and relationship last for the long-term. Table 2 : Savings and Credit Utilization Pattern Savings Pattern

No of Respondents

Mean Value of Saving Average Frequency of group loan Interest rate (%) charged per annum by SHGs How pay saving amount

62.50 3.8 14.2

From owned earned money From husband’s income From home expenses Purpose of Savings

15 (18.8) 2 (2.5) 63 (78.8)

To meet emergency Agriculture development To meet medical expenses Education for children

80 (100) 12 (15.0) 76 (95.0) 74 (92.5)

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Savings Pattern

No of Respondents

Asset building Marriage and other events Festivals Credit Utilization Pattern

69 (86.3) 37 (46.3) 44 (55.0)

Whether loan taken Yes Source of Loan

80 (100)

Only Bank Only Group Both Mean Amount of Bank Loan (in Rs.) Std. Deviation of Bank Loan (in Rs.) Coefficient of Variance Mean Amount of Group Loan (in Rs.)

1 (1.3) 2 (2.5) 77 (96.3) 27,515 12083 43.9 7723

Std. Deviation of Group Loan (in Rs.) Coefficient of Variance Mean Frequency of Bank Loan Std. Deviation of Bank Loan Coefficient of Variance Mean Frequency of Group Loan Std. Deviation of Group Loan Coefficient of Variance Actual Utilization of Loan

5651 73.2 3.23 1.237 38.3 2.76 1.20 43.48

Investment in livestock Self Employment For Husband/son Business Investment in agro activities Purchase fodder for animal To meet health contingency Marriage and other social events For consumption expenditure Education for children Repayment of earlier debts Make improvement to dwelling Jhujhak/Bhat Purchase of Food

38 (47.5) 6 (7.5) 15 (18.8) 9 (11.3) 29 (36.3) 39 (48.8) 24 (30.0) 69 (86.3) 33 (41.3) 21 (26.3) 28 (35.0) 5 (6.3) 34 (42.5)

Source: Same as Table1

Pre-SHGs Occupational Status and Involvement in Income Generation Activities Rural households are engaged in different occupations to earn their livelihood. An understanding of the occupational distribution of the members is important in order to have an idea about the involvement of the SHG members and to know about their livelihood support systems. In SCRIA, 81.3 per cent of women were housewives, followed by seasonal agricultural labourers (6.3 per cent), seasonal non-farm labourers (6.3 per cent), sewing (2.5 287

per cent) and dari-making (1.3 per cent). From the data, it was observed that the SHGs members were involved in just a few occupations and hence the SHGs were homogenous from the occupation point of view. Secondly, the majority of the members were not involved in any kind of activity before joining the group. Questions were asked about the initiation of income generation activities after involvement in the groups. Main activities adopted by the members’ households were buffalo-rearing (31.4 per cent), followed by husband/son’s business activity (23.6 per cent), goatry (21.0 per cent), sewing (10.5 per cent) and handloom (5.2 per cent). Very few households invested the loan amount for agricultural development, live stock such as camel and horse. All the respondents who had initiated the income generation activity were doing on an individual basis. Microfinance activities of the Organisation and Income level Household income is central to any economic impact analysis of microfinance programme. It is one of the most important indicators of development. Members of SHGs are expected to be able to increase their income generating activities and subsequently the income of their households through improved access to financial services. In order to assess this dimension of the programmes, respondents were asked about their experiences in the changes in the levels of income. Table 3 shows that mean income was found Rs.1300 mainly through livestock and non-farm activities. In the study, it was commonly found that those households who purchased livestock, especially buffaflo, could not make the purchase solely with the loan amount. The households then arranged the remaining amount of money from other sources. So it is very difficult to conclude that whatever the increase in the income level these households experienced was only because of microfinance services. In the case of other non-farm activities, the impact is clear and easy to calculate as the amount of investment required on petty business and other selfemployment activities was comparatively low. For example, many of the SCRIA members purchased padi and then sold it. The amount of profit these households gained was calculated on a yearly basis and then averaged amount was calculated on monthly basis. Accumulation of Productive and Physical Capital Lack of assets is one indicator of deprivation for low-income households. Productive assets represent an economic opportunity to improve income. Improved housing and the ability to purchase household assets reflect consumption to enhance quality of life. As indicated in the literature section of the thesis, microfinance is expected to improve the long-term economic welfare of clients’ households with respect to accumulation of assets. In this study, an attempt was made to examine whether this scenario ascertains in Haryana. The type of assets reported range from chairs, tables, fans, gas-stove, animals and additional room in the house, etc. In SCRIA groups 76.2 per cent members reported an increase in assets base. The mean value of the assets was found Rs. 12727. The study further distinguished the source of income for acquiring these assets. In groups, only 13.1 per cent of members acquired assets from the earned income, 77.1 per cent from loan amount and 9.8 percent from both sources (Table 3). Table 3: Kind of Income Generation Activity undertaken, Income earned and assets acquired Selection of IGA Yes No Kind of IGA Buffalo rearing Goatry Camel Handloom Ago Development Padi Horse

37(46.2) 43(53.8) No of Respondents 9(23.6) 8(21.0) 1(2.6) 2(5.2) 1(2.6) 3(7.8) 1(2.6)

288

Selection of IGA Husband/son business Sewing Mean Income (in Rs.)

9(23.6) 4(10.5) 1300

Standard Deviation (in Rs.)

761

Coefficient of Variance (in %age)

58.5

Assets Acquired by the Households HH Assets Acquired Yes No Source of Finance and Mean Value of Assets Acquired

61(76.2) 19(23.8)

From Income

8(13.1)

From Loan

47(77.1)

From both Income and Loan

6(9.8)

Mean Value of Assets Acquired (in Rs.)

12727

Standard Deviation (in Rs.)

8728

Coefficient of Variance (in %age)

68.6

Source: Same as Table 1

Expenditure on Food Items The qualitative aspect of food expenditure was also covered in this study. Questions were asked about the role of microfinance in improving access of households to food items. Nearly, 67.5 per cent of the members claimed an improved expenditure on food items and 32.5 per cent of members had experienced no improvement. 38.8 per cent of the members submitted that the improved expenditure was due to more increased income and 53.7 per cent of respondents stated the improve expenditure was because of loans. Only 7.4 per cent of the respondents claimed the improved status from both income and loan. The study further analyzed the degree of satisfaction about the improvement in the food expenditure. Around 51.8 per cent of the members registered very limited improvement, followed by improvement to some extent (42.5 per cent) and significant improvement (5.5 per cent).The results shows that almost 60 per cent of the members reported very limited improvement, and this certainly minimized the impact (Table 4). Table 4 : Consumption Expenditure on Food Items Particulars Can you purchase more food items now

No of Respondents

Yes No Contribution in Food

54(67.5) 26(32.5)

From income

21(38.8)

From Loan

29(53.7)

Both

4(7.4)

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Particulars Degree of Improvement in Food expenditure

No of Respondents

Significant Some extent Very limited

3(5.) 23(42.6) 28(51.9)

Source: Same as Table 1

Expenditure on Education and Health Care All the selected households were asked to indicate their perception about the connection, if any, between improved expenditure on children’s education and their becoming members of the SHG. Table 5 shows that 66.3 per cent of the members maintained the improved expenditure, 60.4 per cent with loan amount, 32.1 per cent with earned income and 7.5 per cent with both loan and income.The level of satisfaction among the members was also studied. About 49.1 per cent of the members were satisfied to some extent, followed by limited satisfaction (28.3 per cent) and significantly satisfaction (10.1 per cent). On the issue of access to health services and expenditure on health, 63.8 per cent of members claimed improved expenditure, 68.6 per cent with loans, 25.4 per cent with earned income and 5.8 per cent with both the sources. As regards the level of satisfaction with the group contribution to health services, 56.8 per cent of members reported improvement to some extent. This was followed by very limited (31.4 per cent) and significant (11.8 per cent). Table 5 : Expenditure on Children Education and Health More Expenditure on Education

No of Respondents

Yes No Contribution in Education From income From Loan Both Degree of Improvement in Education Significant Some extent Very limited Expenditure on Health Care Particulars More Expenditure on Health Yes No Contribution in Health service From income From Loan Both Degree of Satisfaction Significant Some extent Very limited

53(66.3) 27(33.8) 17(32.1) 32(60.4) 4(7.5) 12(22.6) 26(49.1) 15(28.3)

51(63.8) 29(36.2) 13(25.5) 35(68.6) 3(5.9) 6 (11.8) 29 (56.8) 16(31.4)

Source: Same as Table 1

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Major Problem Areas The process of SHG formation and management is not an easy thing. The members have to face different problems within groups, with promoting agencies, income generation activities, interacting with financial institutions and even some village level problems also. It was found that in most of the SHGs, the financial assistance provided by SCRIA was not adequate to meet their actual financial requirements. The overall loan amount was good but members were keen to avail loans in one or two installment rather in small ones. In the study, it was found that some members joined the groups only to avail the loan facilities and not with the objective of livelihood generation. This sense of insincerity among some members distorted the larger objective of the group. There were irregularities in the use of loan and it was observed that actual utilization of the loans had not been in the same areas as those which were approved. These loans were sanctioned for income generation activities but the group members used them for their domestic and social consumption and in many cases for debt repayments to local moneylender also. The study found that a large amount of group loans was disbursed for personal and domestic purposes such as consumption, Jhujhak, Bhat, marriage, etc. and a minor part of group loans was disbursed for income generation activities. In the case of bank /MFI loans, group members were keener to take the loan for consumption than for investment purpose. These consumption loans of course are very important but to increase and sustain the income level, investment loans are necessary. However the study observed that in many cases, group members were not keen to take up economic activities and they spent the bank as well as group loan for consumption purposes. The study noticed that SCRIA ignored the poorest of the poor households. While they did involve poor households from scheduled and backward castes, the ratio was comparatively low. In the case of SCRIA, their targeting of this segment was comparatively low as compared to other programmes in the area. In the case of selection of various economic activities for SHGs, it was found that proper resource planning exercise not conducted. Without focusing on the local resources, occupational skills and market potential, it is difficult to sustain economic activities. Due attention was not paid to initiating and scaling up the best income generation activities. It was found that the element of monitoring and evaluation of the group activities was just satisfactory. Although the numbers of visits of SCRIA’s officials were satisfactory but their monitoring and evaluation mechanism was also weak. The training facilities were supposed to be given to the members of SHGs in the specific areas of financial literacy and orientation. This pattern was not uniform in all the groups of SCRIA. In some groups, 10 per cent of the members were also not confident enough to do their basic financial exercises and were dependent on the support of the male members of their households. The study found that the range of activities for which loans were available was quite narrow and the organization had not focused on the diversification of income generation activities. The loan amount was also not high and this leads to adoption of only patty business and small scale activity such as purchase of livestock for sale and goatry. The returns on investment were not attractive in certain groups due to high cost of production. In the case of milk production, many respondents were unhappy with the increased cost of rearing cattle as this certainly reduced their profit margins. Petty business owners claimed that due to competition and low amounts of investment, their sales were lower than other businessman in the village. In some cases, due to these problems, those members who had taken up economic activities surrendered in a later period as the activity became less profitable. In the study it was observed that the majority of the group members who used the loans to purchase livestock faced the problems of obtaining fodder and other supplements. This reduced their expected level of income. In the study, none was found to be working on a group basis. This pattern is entirely against the spirit, philosophy and objectives of SHGs. If the households are more dependent on loan amounts, it may affect them negatively in the long run as this is in fact a debt and should be used for livelihoods generation. Using loan amount on items other than IGA will ultimately squeeze the capital base of the poor households. Conclusion and Recommendations The study brings mixed results of the impact of microfinance on household welfare, vulnerability and women access to credit and community. In SCRIA, the majority of members could not earn good income as the loan amount was low and the members put the amount in livestock not for milk but for trading. In the case of income generation activities, members are performing them at the individual or family level and we the study did not find even a single group working collectively. The study observed improvement in assets base among the members however 291

many members had not purchased any productive items. Loan from SCRIA as well as group was the main source of finance to acquire these assets. Member experienced improvement in food, health and education expenditure but again in many cases, the loan amount had been providing main assistance rather than income. Further, on the level of improvement in these areas among these households, the satisfaction was quite below. To streamline the current situation, it is recommend shifting from individual-based income generation activities to group based activities and the other is to identify and promote the members with entrepreneurial skills. Those who are not keen to start economic activities should be provided some different and innovative financial product such as consumption loans, house loans, insurance, etc. which help them to suffice their requirements. For the majority of SHG members, consumption loans were far more important than production loans. Many people did not want to become entrepreneurs or self employed at least in the short run. A need of financial products, especially small scale emergency consumer loans, was expressed by most of the members. Expressed needs include loan for school fees, health and livestock insurance, house loan and emergencies loans etc. Proper training and guidelines should be prepared to help women to take up income generation activities. The SCRIA must ensure that SHG members are helped thoroughly to have knowledge on the process of establishing an enterprise, management and marketing. If these inputs are not supported strongly then women are least likely to succeed in taking up any income generation activity on sustainable basis even after having a desire and need for such activity. The organization should experiment with new livelihoods. This facilitates the group members over a period of time to diversify from a narrow choice of local skill and trade like livestock rearing and petty trading to more commercial activities. There is a need for micro-level planning to identify key livelihood activities. Village potential mapping with a sub-sectoral analysis would play a substantial role in the development income generation activities. The future emphasis of should be on group based income generation activities. This will enhance the capacities of the group members as well as social solidarity. Proper monitoring exercises should be undertaken to identify various aspects such as group requirements, group management and governance, income-generation activities, use of loans, etc. It can help by providing necessary guidance to the group to make every meeting meaningful and to take objective decisions regarding inter-loaning, setting of interest rates, loan recovery, bank linkages, etc. SCRIA should initiate the exercise of economic and social rating of SHGs through some competent rating agency. References •

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Holvoet, N.(2004). Impact of microfinance program on children’s education: Do the gender of the borrower and the delivery model matter? Journal of Microfinance, 6(2): 27-49.

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Krishana, M. & Anant Kumar Sharma. (2007). Impact of SGSY on income and employment generations: A case study. Journal of Economic and Social Development, Vol. 3 (1)

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Kumaran, K.P.(1997). Self Help Groups: An alternative to institutional credit to the poor. A case study in Andhra Pradesh. Journal of Rural Development, 16(3).

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Manimekalai, M., & Rajeshwari, G. (2001). Nature and performance of informal self help groups – A case from Tamil Nadu. Indian Journal of Agricultural Economics, Vol. 56 (3).

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Murthy, Ranjani. K et al. (2005). Towards women’s empowerment and poverty reduction: Lesson from the Andhra Pradesh South Asia poverty alleviation programme. In NeeraBurra et al. (Eds), Micro-Credit Poverty and Empowerment. Sage Publication, New Delhi.

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Navajas, S.et.al. (2000). Microcredit and the poorest of the poor: Theory and evidence from Bolivia. World Development, 28(2), 333-346.

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Nirmala, V. et al. (2004). SHGs for poverty alleviation in Pondicherry. Journal of Rural Development, Vol. 23(2)

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Raheem, A. (2009). Factors determining women self help group members and their sustainability: A micro study. Economic Affairs, Vol. 4, No 1&2, pp 61-72.

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Rahman, A. (1999). Micro-credit initiative for equitable and sustainable development: Who pays? World Development, Vol.27 (1), pp. 67-82.

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Rajasekhar, D. (2000). Micro-finance programmes and women’s empowerment: A study of two NGOs from Kerala. Journal of Social and EconomicDevelopment, Vol. III, Jan- June.

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Rajasekhar, D. (2004). Micro- finance and poverty alleviation: Issues relating to NGO programmes in South Asia. Working Paper No. 146, Institute for Social and Economic Change, Bangalore.

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Rajasekhar, D. et.al (2007). Good governance and poverty alleviation: A study of SGSY programme. Concept Publishing Company, New Delhi

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Role of Microfinance Institutions in Women Emancipation By Manisha Raj

Introduction With changing time and penetrating technology it has been obvious that women empowerment is the buzzword. Especially in developing countries like India economic growth is a myth if women are not equally placed at par with the male population. Micro finance is a financial setup which caters to the needs of the weakest sections of the society especially the weaker sex who in particular has to struggle against the repressive social and economic conditions in order to enhance entrepreneurship among them. The loans forwarded are for a small span of time given to meet the requirements of the poor without any collateral security and blessed to be at a generous rate of interest. MFIs are a process to associate the weaker sections of the society to avail the existent financial resources so that the poor can also realize their potential and add to the growth taking place in the economy. Most of the micro credit institutions all over the world focus on women in developing countries because they are half of the population and if women actively become engaged in economic activities then in the long term there can be huge contribution to economic growth world over. Stuart Rutherford in one of his recent books (The Poor and Their Money) cities several types of needs that can be met via MFIs. These are: a)

Lifecycle needs: wedding, funeral, education etc.

b)

Personal emergencies: sickness, injury, unemployment etc.

c)

Disasters: fires, floods, cyclones, war etc.

d)

Investment opportunities: expanding a business, buying land or equipment, improving housing, securing a job etc.

For all these above mentioned needs, the poor have been exploited by the moneylenders especially in the developing countries and women requirement does not find any obvious place in the list directly. It is high time that formal social institutions should pave the path towards strong existence with full infrastructural setup and a comparatively responsible and sensitive regulatory body. Cultural and social norms have to streamline with the changing time so that women find their space in the economic units. Recent policy changes, broadness of the society and women zeal to step out of home has provided examples to the society. To name a few eye-opener small scale industries in India SHRI MAHILA GRIHA UDHYOG LIJJAT PAPAD, popularly known as “Lijjat”, needs no introduction. Lijjat is woman’s organization manufacturing different products of village industries, having its central office at Mumbai. Lijjat is spread all over India. MAA SARADA SEVA SAMITY, started by a small group of seven women residing in Chetla in the year 1999- ’00, got registered in the year 2001.and President is Mrs Sandhya Ghosh. Further small scale industries have diversified its products with time, Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal are some of the traditional small-scale industries in India. The modern small industries offer a wide range of products starting from simple items like hosiery products, garments, leather products, fishing hook etc to more sophisticated items like television sets, electronics control system, various engineering products especially as ancillaries to large industrial undertakings. In India the categorization of these industries have varied according to the investment limits as envisaged by the government from time to time. Apparently 294

these limits are indirectly relating to the overall growth of the economy, i.e., as our gross domestic product became more and more resilient, the government has increased the limit and brought about changes in its categorization also (For e.g. in 1950s when our GDP grew at 3.6%1 the capital investment in SSIs was 5lakhs, and during 20002010 when our GDP grew at around 8%, the investment limit was raised to 25 lakhs and it was renamed as micro enterprises).Financial assistance required for women: Central and State universities have come up with a number of schemes to help women entrepreneurs.2The schemes of the Govt. of India include the Support for Training and Employment Programme (STEP) aims to raise the incomes of d women by updating their ski& in the traditional sectors, such as dairy development, animal husbandry sericulture, handloom and social forestry. Since the inception of the programme in 1987 about 3.32 lakh women have been benefited through 61 projects as at the end of March 2000. The Government in 1998 launched a new scheme, called the Trade-Related Entrepreneurship assistance and Development (TREAD). it was designed to generate self-employment for 45,000 women in rural and urban areas. The package involves financial assistance and services through NGOs in the non-farm sector. Indira MahilaYojana (IMY) was launched in 1995 in over 200 blocks of India, for the holistic empowerment of women. IMY is being implemented in 238 blocks and till now, 40,000 women's groups have been formed under the scheme. Of these, 3,000 groups were formed in 1999-2000. Microfinance Institutions Targeting India The World Bank (2001) has established a positive correlation between, on the one hand, its measures of women’s empowerment and the indices of development and, on the other hand, the Index of Human Development. Gender equality promotion is a key element of every anti poverty and development strategy. Microfinance programs give women priority because, by giving them access to monetary and educational funds, microfinance helps to mobilize female productive capacities, thereby reducing poverty and maximizing economic output. In the Human Development Report 2008, UNDP stated that “70 percent of the world’s population living on less than 1 us dollar a day are women and that more than 75 percent of women are working in the informal sector. In addition, not only are women poorer than men but they also have an inherent vulnerability (due to thepatriarchal norms of our societies) which maintains them in a situation of impotence and poverty”. Baden and Milward (1994) note that “although women are not always poorer than men, based on their poorer education they are generally more vulnerable and, when they are poor, they have fewer options for escaping it. As Kabeer (1999) notes:” poor men are as powerless as women with regard to access to material resources but they remain privileged within the patriarchal familial structure.” Socio-Economic Problems Faced By Women Entrepreneurs Women entrepreneurs face many problems especially in a developing country like India where the problems are of different magnitudes and dimensions. Also a large number of women’s enterprises are operating on an informal basis and many a times not identified in the economic activities of the country. 3Some psycho-social factors impede the growth of women entrepreneurs are as follows: 

Poor self-image of women



Inadequate motivation



Discriminating treatment



Faulty socialization



Role conflict



Cultural values



Lack of courage and self-confidence



Inadequate encouragement



Lack of social acceptance 295



Unjust social, economic and cultural system



Lack of freedom of expression



Afraid of failures and criticism



Susceptible to negative attitude



Low dignity of labour

A majority of women entrepreneurs are from the middle class families who have low technical education, less family responsibilities but desire to become entrepreneurs. This potential should be identified and tapped. 1. The greatest deterrent to women entrepreneurs is that they are women. A kind of patriarchal – male dominant social order is the building block to them in their way towards business success. Male members think it a big risk financing the ventures run by women. 2. The financial institutions are skeptical about the entrepreneurial abilities of women. The bankers consider women loonies as higher risk than men loonies. The bankers put unrealistic and unreasonable securities to get loan to women entrepreneurs. According to a report by the United Nations Industrial Development Organization (UNIDO), "despite evidence that women's loan repayment rates are higher than men's, women still face more difficulties in obtaining credit," often due to discriminatory attitudes of banks and informal lending groups (UNIDO, 1995b). 3. Entrepreneurs usually require financial assistance of some kind to launch their ventures - be it a formal bank loan or money from a savings account. Women in developing nations have little access to funds, due to the fact that they are concentrated in poor rural communities with few opportunities to borrow money (Starcher, 1996; UNIDO, 1995a). The women entrepreneurs are suffering from inadequate financial resources and working capital. The women entrepreneurs lack access to external funds due to their inability to provide tangible security. Very few women have the tangible property in hand. 4. Women's family obligations also bar them from becoming successful entrepreneurs in both developed and developing nations. "Having primary responsibility for children, home and older dependent family members, few women can devote all their time and energies to their business" (Starcher, 1996, p. 8).The financial institutions discourage women entrepreneurs on the belief that they can at any time leave their business and become housewives again. The result is that they are forced to rely on their own savings, and loan from relatives and family friends. 5. Indian women give more emphasis to family ties and relationships. Married women have to make a fine balance between business and home. More over the business success is depends on the support the family members extended to women in the business process and management. The interest of the family members is a determinant factor in the realization of women folk business aspirations. 6. Another argument is that women entrepreneurs have low-level management skills. They have to depend on office staffs and intermediaries, to get things done, especially, the marketing and sales side of business. Here there is more probability for business fallacies like the intermediaries take major part of the surplus or profit. Marketing means mobility and confidence in dealing with the external world, both of which women have been discouraged from developing by social conditioning. Even when they are otherwise in control of an enterprise, they often depend on males of the family in this area. 7. The male - female competition is another factor, which develop hurdles to women entrepreneurs in the business management process. Despite the fact that women entrepreneurs are good in keeping their service prompt and delivery in time, due to lack of organisational skills compared to male entrepreneurs women have to face constraints from competition. The confidence to travel across day and night and even different regions and states are less found in women compared to male entrepreneurs. This shows the low level freedom of expression and freedom of mobility of the women entrepreneurs.

296

8. Knowledge of alternative source of raw materials availability and high negotiation skills are the basic requirement to run a business. Getting the raw materials from different souse with discount prices is the factor that determines the profit margin. Lack of knowledge of availability of the raw materials and low-level negotiation and bargaining skills are the factors, which affect women entrepreneur's business adventures. 9. Knowledge of latest technological changes, know how, and education level of the person are significant factor that affect business. The literacy rate of women in India is found at low level compared to male population. Many women in developing nations lack the education needed to spur successful entrepreneurship. They are ignorant of new technologies or unskilled in their use, and often unable to do research and gain the necessary training (UNIDO, 1995b, p.1). Although great advances are being made in technology, many women's illiteracy, structural difficulties, and lack of access to technical training prevent the technology from being beneficial or even available to females ("Women Entrepreneurs in Poorest Countries," 2001). According to The Economist, this lack of knowledge and the continuing treatment of women as second-class citizens keeps them in a pervasive cycle of poverty ("The Female Poverty Trap," 2001). The studies indicates that uneducated women do not have the knowledge of measurement and basic accounting. 10. Low-level risk taking attitude is another factor affecting women folk decision to get into business. Lowlevel education provides low-level self-confidence and self-reliance to the women folk to engage in business, which is continuous risk taking and strategic cession making profession. Investing money, maintaining the operations and ploughing back money for surplus generation requires high risk taking attitude, courage and confidence. Though the risk tolerance ability of the women folk in day-to-day life is high compared to male members, while in business it is found opposite to that. 11. Achievement motivation of the women folk found less compared to male members. The low level of education and confidence leads to low level achievement and advancement motivation among women folk to engage in business operations and running a business concern. 12. Finally high production cost of some business operations adversely affects the development of women entrepreneurs. The installation of new machineries during expansion of the productive capacity and like similar factors dissuades the women entrepreneurs from venturing into new areas. Women Enterprises and SSI Units Managed By Women The total number of women enterprises in the Total SSI Sector was estimated at 10,63,721 (10.11 %). The estimated number of enterprises actually managed by women was 9,95,141 (9.46 %). In the States of Mizoram, Orissa, Karnataka, Goa, Lakshadweep, Kerala, Tamil Nadu and Pondicherry, the share of women employment was significantly higher (more than 20 %). The position of women entrepreneurships and women enterprises is given State-wise in the following table: TABLE 1: Participation of Women In Management/Ownership in SSI Sector, State-Wise. S. No. 1 2 3 4 5 6 7 8 9

Name of State/ UT

No. of Enterprises Managed By Women

No. of Women Enterprises

5640 30190 8706 13368 29785 54491 38170 71847 11766

5742 29068 8804 14383 36371 72667 49443 69625 10034

Jammu & Kashmir Punjab Uttaranchal Delhi Rajasthan Uttar Pradesh Bihar West Bengal Chhattisgarh

297

10 11 12 13 14 15

Gujarat Maharashtra Andhra Pradesh Karnataka Kerala Andaman & Nicobar Island

55361 80662 77347 101264 137561 53

53703 100670 77166 103169 139225 110

SOURCE:http://dcmsme.gov.in/ssiindia/census/ch11.htm Note: selective states are taken from the mentioned source for analysis. At all India level according to the third census of small scale industries done in 2001-02,the number of enterprises managed by women are 995141 and the number of enterprises owned by women are 1063721.

About 13 % of the women enterprises were in the registered SSI sector and the remaining 87 % were in the unregistered SSI sector. With regard to the enterprises managed by women, 11.5 % were in the registered SSI sector and 88.5 % were in the unregistered SSI sector.The share of the units managed by women in terms employment was 7.14. The employment generated per Rs. one lakh investment in the units managed by women was 2.49. Principal Characteristics of SSI units managed by women are presented in the following table. Table 2: Principal Characteristics of SSI Units Managed By Women For units No. of units managed by women Regd. SSI 114362 Sector Percentage to 8.32 total of the respective category Unregd. SSI 880780 Sector Percentage to total of the respective category Total SSI Sector Percentage to total of the respective category

Market Value of fixed assets 33624570500

Original Value Of plan& machinery

Employment

Gross output

Exports

11047852474

349342

60316833602

_

3.66

3.64

5.67

2.97

2.69

37763317590

11496115541

1429962

37324824839

_

9.63

6.04

4.68

7.62

4.72

0.28

995142

71387888090

22543968015

1779304

97641658441

_

9.46

4.63

4.11

7.14

3.46

2.37

Source::http://dcmsme.gov.in/ssiindia/census/ch11.htm

The third census shows that the total number of female employees in the SSI sector is estimated at 33,17,496. About 57.62 % of the female employees were employed in the SSI units located in the States of Tamil Nadu, Kerala, Karntaka, West Bengal and Andhra Pradesh. The State-wise details further shows that west bengal has the highest number of unregistered units(304969) and sikkim having the lowest share(9). If we draw our attention towards the registered sector then tamil nadu tops the list with maximum units amounting to 270936. Lakshadweep has the least registerred units (26). Though Sikkim is a very small state and doesnot has an even landscape,it has 212 registered units. The ratio of women employees in the total employment of MSMEs was 13.31%. In the States of Mizoram, Orissa, Karnataka, Goa, Lakshadweep, Kerala, Tamil Nadu and Pondicherry, the share of women employment was 298

significantly higher (more than 20 %) compared to the total employment in the respective States. For detailed analysis of sector-wise distribution of women entrepreneurs in india we have to depend on limited samples sizes as no specific analysis of the sectoral breakdown is available in Indian context. Resaerchers also vary in their classification of sectors. For instance (Mali,1995) saw the study of sample as having either resource based, demand based or skill based enterprises. (Iyer, 1993) used the categorization of job-work, service oriented, public relations and advertising.Singh & Sengupta(1990) divided the respondents as ancilliary products, printing, chemical industries, handloom, leather and food items. So to derive any indicative trend among women onwed industries, we can refer to the following data given below. Table 3: Women Entrepreneurship and Sector-Wise Distribution • • • • • • • • • • • • • • • •

PRODUCT electrical electronic food products textiles and garments leather & allied plastic and rubber chemical pharmaceutical services and trading glass and ceramics Wood Mechnical & engineering Construction Agro-based Paper others

NO.OF ENTERPRISES 7 10 66 98 15 44 53 9 75 6 18 33 7 7 14 9

PERCENTAGE 1.49 2.12 14.00 28.00 3.18 9.54 11.25 1.92 15.92 1.28 5.83 7.0 1.49 1.49 2.98 1.91

471

100.00

Source: Factors Affecting Women Entrepreneurship in Small and Cottage Industries by Dr. S.P. Mishra. Internaltional Labour Organization. November 1996.

It is evidently clear from the data that the concentration of women entrepreneurs (about 28%) is in the textiles and garment sectors, followed by service and trading (16%) and food products (14%). In general prespective also these areas are thought to be prime traditional choices for women entrepreneurs and many other researchers also support this view that women are mainly concentrated in these areas. For e.g. singh et.al (1990) reported the maximum number of women(20.8%) in their sample to be in the handloom and garment sector. Similarly, (Padaki, 1994) mentioned that 35% of the sample to be in the textile and related entrepreneurial sector, and the next important contributor was business/service sector(34%) and food processing (17%). The most important fact that can be drawn from this table is that the remaining about 50% women chose the non-traditional enterpriseswhich are innovative and require high level of technological skill in areas like chemicals, plastics, rubber, mechinical and metal-ware etc. In terms of over-all participation/entrepreneurship of women in MSMEs there has been a steadily increasing trend over a period of time, espcially since 1980s when it has grown from 8.25% to 9.85% during early 1990s and later around 13% in the late 1990s. Further the basic problem about the concerned analysis is that though women entrepreneurs maintaining registered units acorrding to the misnistry of MSMEs is around 114362 and for unregistered units is around 880780, they donot get the required support from the government and the familialsocial conditions. Government Initiative To Boost Women Empowerment: In the most recent budget 2013 the government has come up with a new initiative called “Nirvaya Fund” worht Rs. 1000cr for women safety and empowerment.But the moot issue is that why are females still so vulnerable 299

even after nearly seven decades of independence.It is high time that the govermnet as well as the educated and responsible citizens of india should step up to maintain congenial social and economic environment for the weaker section of the society. Further Micro-finance provide the needed opportunity for entrepreneurs to start or improve business in order to make profit and improve their lives (Allen et al., 2008; Brana, 2008; Lans et al., 2008; Majumdar, 2008; Roslan & Mohd, 2009; Salman, 2009; Shane, 2003; Tata & Prasad, 2008). The ability of women entrepreneurs to make use of the opportunity provided by micro-finance factors to ensure enterprise performance depends on their attitude to risk; that is their ability to access information and willingness to act on the information (Shane, 2003). Thus, credit, savings, training and social capital could have positive impact on opportunity for entrepreneurial activity of women entrepreneurs which could lead to business performance; depending on the entrepreneur’s attitude to risk (Crisp & Turner, 2007; Shane, 2003; Vob & Muller, 2009). 4

Also other forms of financial assistance should be provided to the women so that they can spread their arms in external business environment and live a better dignifiied life.All India financial alliance should be their to uplift women and make them independent.Even the ministry of micro,small and medium enterprises have come up with Entrepreneurship Development Programmes (EDPs) to help women. SIDBI also provides training for credit utilisation as also credit delivery skills for the executives of voluntary organisations working for women. Grant for setting up a production unit is also available under Socio-Economic Programme of Central Social Welfare Board.

So finally it can be assumed that if government keeps extending its hands for women then they can together revolutionize the entrepreneurship arena and add to the growth and prosperity of the nation. Notes 1 2 3 4

http://www.scribd.com/doc/25775393/Small-Scale-Industries-in-India http://shodhganga.inflibnet.ac.in/bitstream/10603/367/12/12_chapter4.pdf ENTREPRENEURIAL CHALLENGES AND OPPORTUNITIES: AN INDIAN SCENCE. The Effect of Microfinance Factors on Women Entrepreneurs’ Performance in Nigeria: A Conceptual Framework Isidore Ekpe1 NorsiahBinti Mat 2 RazliChe Razak3 College of Business, Universiti Utara Malaysia,

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Women Empowerment through Self-Help Groups: A Case Study of Tiwa Tribal Women in Assam By Mriganka Saikia and Pankaj Saikia

Introduction Nearly half the planet, some three billion people, lives on less than US$2 a day and nearly one billion live on less than US$1 a day. When it comes to women which represent nearly half of the world’s population are lagging far behind the male segment in many ways. The situation is even more discouraging among the tribal women and it is no less true with the tribal women of India, in particular, and specially, Assam. It is obvious that without a parallel upliftment of women along with that of men, no real development can take place in a society (Das,2012:). The policymakers and practitioners who have been trying to improve the lives of poor and underprivileged people face an uphill battle. Moreover, despite decades of aid, communities and families appear to be increasingly fractured, offering a fragile foundation on which to build. Amid the dispiriting news, excitement is building about a set of unusual financial institutions prospering in distant corners of the world—especially Bolivia, Bangladesh, and Indonesia. The hope is that much poverty can be alleviated and that economic and social structures can be transformed fundamentally by providing financial services to low-income households. These institutions, united under the banner of microfinance, share a commitment to serving clients that have been excluded from the formal banking sector. Microfinance broadly encompasses providing a range of financial services such as micro credit, deposit, money transfers, micro insurance and micro pension to the deprived and low-income households for a better livelihood. It enables them to engage in micro enterprises and other economic activities. Eventually it empowers the underprivileged and brings them into mainstream financial system and development process. The paradigm of group based micro-finance which gained considerable currency during the concluding years of the last century was conceived to be an appropriate to handle this problem. Consequently, the idea of SHGs came into being (Pitta,2010). SHGs in its present form of development, owed its origin to the starting of the Grameen Bank, founded by Mohamed Yunus of Bangladesh, the noble prize winner of peace for 2006.SHG is agroup of rural poor who had volunteered to organize themselves into groups for the eradication of poverty among the members. The initiative of 1992 to make the traditional and formal banks to extend financial services to deprived sections through informal Self Help Groups (SHGs), has now blossomed into a “monolith” micro Finance initiative. It has been recognized as a decentralized, cost effective and fastest growing microfinance initiative in the world, enabling over 103 million poor households’ access to a variety of sustainable financial services from the banking system by becoming members of SHGs. The linkage with banks has provided the members of the Groups the facility of not only pooling their thrift /savings and access to credit from the banking system, but also created a Platform through which they could launch a number of livelihood initiatives and also facilitate the empowerment process. Origin of the Research Problem Empowerment refers to increasing the spiritual, political, social or economic strength of individuals and communities. It often involves the empowered developing confidence in their own capacities. Women’s empowerment 302

is another term that needs clarification. Women empowerment means the process through which women, who are currently most discriminated against, achieve gender equity. This will include support for men to change those aspects of their behavior, roles and privileges which currently discriminating against women. The experts inform that there are five levels of the women’s empowerment framework, namely, welfare, access, conscientisation, mobilization and control (Suguna,2006). For the development of the society there is need for equitable and balanced progress of all the sections of the human communities and for this perspective, it is imperative to bring the weaker, deprived and discriminated sections such as Schedule Tribes (STs) in to the mainstream of national development. But, the process of globalization delegitimizes the role of state on collective welfare system and strongly argues for free market economy. It recommends only minimum level of social protection. It has brought instability and insecurity among the people and under mines the capacity of the government to provide education, health care and social protection. It gives much priority to the commercialization of entire economy and neglects the social aspects especially in the informal economy of rural areas. Since 1970s, the idea and practice of self help has developed world wide as a major social phenomenon. It has been widely acknowledged in the development literature that SHGs is one of the means to empower women by providing easy access to credits. Accessibility of women to credit will enable them into income generating activities by establishing microenterprises which will provide additional income to the household (Moulick, 2008). The ability to generate own income will perhaps help them to have more power and choices related to household decision making with regards to household’s consumption, education and health, as well as participation in the political process. Now, Self Help Group model has become one of the most widely adopted means for alleviating rural poverty. It is used as a channel for both individual and community development through people’s self effort and selfreliance (Sabhlok, 2011:241-142). The main intention is to empower women within organization or group to create innovative solutions to the problems facing them (Zubair, 2003: 23).It is a vital subject of research to find out the impact and influences of SHGs on empowering tribal women in a state like Assam which has diverse castes and tribes across it. It is a vital subject of research to find out the impact and influences of SHGs on empowering tribal women in a state like Assam which has diverse castes and tribes across it. Limitation of the Study Every study has some limitations. This study is not an exception. For this study, data is to be collected from Morigaon district of Assam only. Besides, only Tiwa Tribal women will be taken into account in this study. Thus data are only for Tiwa Women that may not generalize to the whole Tribal Women of the state. SHGs usually do not have a proper system of record keeping or Management Information Systems (MIS). Consequently, the data procured from the respondents consists of raw data and approximated data. Methodology Sources of Data Purposively, Morigaon district of Assam was selected as the district has more than 65% of total Tiwa people. The district covers an area of 10, 83,165 Bighas and Lessas, (1450.02 Sq.Kms) which is located almost in the middle of the State. It is situated between 26.15 Degrees North and 26.5 degrees North latitude and between 92 degrees east longitude. The district is 78 Km away from Dispur, the State Capital. For the purpose of this study, only Bhurbondha Block of Morigaon district was selected as it is one of the flood prone areas of the State. Besides, the block has about 28% of Total Tiwa Population. The study was based on collection of data and information both from primary and secondary sources. The primary data was collected through random sample with the help of well structured questionnaires. Secondary data was obtained from various published and unpublished records, books, journals and information given by the Blocks and district offices. Further, qualitative method was also used through focused group discussions (FGD) for gathering information regarding the general functioning of the groups and feeling of empowerment of the respondents. 303

The random sampling technique was used for selection of respondents of the study. The SHGs were selected from the block which had been registered under SGSY scheme since 01.04.1999 to 31.03.2012. Data was collected from 1st October to 31st November 2012. The total number of registered women SHGs in Bhurbondha block was 139. On the basis of continuity of their functioning, Block Development offices had provided the data of only 76 groups with proper address. Out of 76 SHGs, four groups were selected and each member from each group is interviewed for the study. Methodology Empowerment must be quantified and measured in terms of different variables used in this study. In these context statistical tools like MCNCMER test, Sign test, and Chi-square test have been used to test our null hypotheses. Literature Review The relationship between the financial system and economic growth has been scrutinized by a large number of studies in India and abroad. Financial development is considered as a cause of economic growth (Schumpeter 1911; Hicks 1969). Hicks (1969) argued that without financial innovation the industrial revolution would not have taken place. The level of financial development predicts future economic growth and future productivity advances (King and Levine,1993).Greenwood and Jovanovic (1990) discussed how financial intermediaries may induce people to change their savings from unproductive liquid assets to productive illiquid ones and in this way promote capital accumulation. Financial intermediaries make it possible for small savers to pool funds and allocate them to the highest return investment, and then to provide capital for investing in costly new technology According to Levine (1997) reported that a well developed financial system reduces information and transaction costs and influence saving rates, investment decisions, technological innovation and longrun growth rates. In this context, microfinance has emerged as a financial innovation tool to serve themillions of poor households that are out of reach of the formal banking and financial institutions. The microfinance revolution, particularly the success stories of institutions like Grameen Bank in Bangladesh, Banco Sol in Bolivia, and Bank Rakyat in Indonesia, attracted several economists to study microfinance in the latter half of the 1990s. Some studies argue that microfinance has very beneficial economic and social impacts (Holcombe, 1995; Hossain, 1988; Otero and Rhyne, 1994; Remenyi, 1991; Schuler, Hashemi and Riley, 1997). "Microcredit is a critical anti-poverty tool and a wise investment in human capital. Now that the nations of the world have committed themselves to reduce by half by the year 2015 the number of people living on less than $1 a day, we must look even more seriously at the pivotal role that sustainable microfinance can play and is playing in reaching this Millennium Development Goal." (United Nations Secretary General Kofi Annan at Global Microcredit Summit 2006). The United Nations named the year 2005, the International Year of Microcredit and the founder of the Grameen Bank won the Nobel Prize for Peace for his efforts at empowering rural women through credit access in Bangladesh. The international community seems to have finally caught the microfinance fever. In recent years, Microfinance has branched out to incorporate private sector partnerships and integration with international capital markets. These trends mean that the worldwide estimated 500 million small scale entrepreneurs may soon have greater opportunities to become economic engines for lifting their communities out of poverty. (NmachiJidenma, 2007).The emerging microfinance revolution with appropriate designed financial products and services enable the poor to expand and diversify their economic activities, increase their incomes and improve their social wellbeing (Bennett and Cuevas, 1996; Ledgerwood, 1999). Past studies of many researchers found that microfinance has very beneficial economic and social impacts (Holcombe, 1995; Hossain, 1988; Otero and Rhyne, 1994; Remenyi, 1991; Schuler, Hashemi and Riley, 1997). Most of the recent studies showed that micro finance has improved the economic condition of the respondents significantly. ZubairMeenai (2003), S. Galab and N. ChandrasekharaRao (2003) Sahu and Tripathy,(2005) UmashankarDeepti (2006) Suguna B. (2006) Reddy C.S. & Reddy M.B.S., (2008) Jayasheela, Shriprasad H. and Dinesha P. T.(2009) Dhavamani P. (2010) Usha Pitta (2010) Vasanthakumari P (2011) Dolly Sunny and Marina Pereira (2011) Sushil Kumar Mehta, HariGovind Mishra &Amrinder Singh (2011) Manonmani.I.K and Prabhakaran.V.P (2011) Manga B.V.L.A (2011) SoroushmehrHoma (2012) etc. studies revealed that Self help groups (SHGs) plays very important role in socio-economic and political empowerment of people. It also revealed 304

that SHGs generates self employment, increasing their confidence and improved the access of women to credit. This has helped women in reducing their dependence on moneylenders. A recent study by Emma Svensson examines microfinance movement for economic growth by exploring the linkages of microfinance, the financial system and economic growth. He found some evidence of the microfinance clients engaging in growth enhancing economic activities. There has been change in income and productivity in micro-enterprises and the economic sectors relevant to microfinance clients. He also found that the character of the informal sector seems to be inhibiting for microenterprise growth. Very few studies are conducted on microfinance at the north-eastern region of India. Most of the studies focus on Self-Help Groups (Agarwal, Shalini 2007; Gopisetti, Rambabu 2007; Gaonkar, Maya Sairoba 2008; Sarkar, Soumitra 2008; Nagarajan, P.S 2009). Some studies are also conducted on poverty reduction and empowerment (Prakash, Jayasheela 2009).Khoboung (2012) study shows that the empowerment process through SHG movement in Manipur is yet to make any notable impact on tribal women in all aspects – economic, social and political.Das (2011) research paper found that lack of knowledge about government subsidies and technical knowhow were major cognitive constraints reported by the respondents. Increased organizational constraints, lack of technical training and power failure, credit, etc. were major infrastructural constraints and lack of quality control through competition from larger and established units and lack of technology were major marketing constraints reported by the respondents.Ahmad (1999) through a case study on Thrift Groups in Assam, highlighted that women are coming to the administration directly for their just rights and to address their grievances boldly. It proved that Self Help Groups are successful in North East India even in the midst of insurgency.Barbara and Mahanta (2001) in their paper maintained that the SHG's have helped to set up a number of micro-enterprises for income generation. RastriyaGraminVikasNidhi's credit and saving programme in Assam has been found successful as its focus is 15 exclusively on the rural poor. It adopted a credit delivery system designed especially for them with the support of a specially trained staff and a supportive policy with no political intervention at any stage in the implementation of the programme. Objectives of Study The main objectives are 1) To measure the economic and political empowerment of women. 2) To know about the impact of SHGs on domestic decision making. 3) To find out the problems of empowerment and make suggestions for effective working of SHG. Hypothesis 1. SHGs hardly make women members’ empower economically. 2. SHGs fail to empower socially and politically. Socio-Economic Background Socio-economic status of the respondents: The socio-economic background here included are age group, Marital Status, Educational level and size group. These are shown in following tables Table 1 : Classification of SHGs on the basis of Age Sl. No. 1.

CHARATERISTICS AGE GROUP (Below 30) Middle (30-60) Old(60 Above)

SHG-II n= 8

SHG-I n= 9 2 7 0

1 7 0

305

SHG-III n= 7 2 4 1

SHG-IV n= 6 1 5 0

TOTAL N= 30 6 23 1

Age is an important demographic variable with which social status is associated in traditional societies. About 76% of respondents’ were aged between 30 and 60 years. More than 75% of respondents of SHG-I, SHG-II and SHG-III were in middle age group. On the other hand, just only 3% of the members of SHGs have old people. Table 2 : Classification of SHGs on the basis of Marital Status Sl. No.

CHARATERISTICS

SHG-I n= 9

SHG-II n= 8

SHG-III n= 7

SHG-IV n= 6

2.

MARITAL STATUS Married Unmarried Divorced/Widow

6(66.6) 2() 1(11.2)

6(75.5) 2(25.5) 0(0.00)

5(71.43) 2() 0(0.00)

1() 3() 2

TOTAL N= 30

18 9 3

Table-2 shows marital status in all the SHGs studied, about 60% of the respondents were married. More than 70% of respondents of SHG-II and SHG-III were married. And 30% of the respondents were unmarried, while 33% of the respondents of SHG-IV were unmarried. Table 3 : Classification of SHGs on the basis of Education Sl. No.

CHARATERISTICS

3.

EDCATION STATUS Illiterate Primary Passed High School Passed HSC and above

SHG-I n= 9

SHG-II n= 8

SHG-III n= 7

SHG-IV n= 6

3(33.33) 1(11.11) 2(22.22) 3(33.33)

2(25.5) 2(25.5) 2(25.5) 2 (25.5)

1(14.28) 1(14.28) 3(42.86) 2(28.58)

1(16.67) 1(16.67) 2(33.33) 2(33.33)

TOTAL N= 30

7(23.34) 5(16.66) 9(30.0) 9(30.0)

Education plays a vital role in development and is a major component of empowerment of any individual. About 23% members were illiterate as a whole while 33.33% of SHG-I, 25% of SHG-II were found illiterate. And about 75% of members were literate where more than 25% were HSC passed and higher educated members found. Table 4 : Classification of SHGs on the basis of Position in a Group Sl. No.

4.

CHARATERISTICS

SIZE OF FAMILY SMALL(Below 3) Medium(4-6) Large(above 6)

SHG-I n= 9

2(22.22) 3(33.33) 4(44.45)

SHG-II n= 8

0(0.00) 5(62.5) 3(37.5)

SHG-III n= 7

0(0.00) 5(71.4) 2(29.6)

SHG-IV n= 6

0(0.00) 3(50.0) 3(50.0)

TOTAL N= 30

2(6.67) 16(53.33) 12(40.0)

The size of the family is one of the very important institutions of a society. It reveals the structure of family. Majority of the members across the groups belonged to the medium size of family. About 71% of SHG-III and 62% of SHG-II belonged to medium size. The family size of 40%, on an average, has large family size. SHG-IV has 50% members’ belonged to large size while SHG-I and SHG-II have about 44.4% and 37.5% belonged to large family size. 306

RESPONDENTS POSTION AND DURATION OF MEMBERSHIP IN SHGs : The respondents position in SHGs and duration of their membership are important characteristics that are expected to affect their perception and behavior. Table 5 : Classification of SHGs on the basis of Position in a Group Sl. No.

5.

CHARATERISTICS

POSITION GROUP Member Office Bearer

SHG-I n= 9

IN 6(66.67) 3(33.33)

SHG-II n= 8

6(75.0) 2(25.0)

SHG-III n= 7

5(71.42) 2(28.58)

SHG-IV n= 6

4(66.67) 2(33.33)

TOTAL N= 30

23(76.67) 7(23.33)

About 76.67% of the members on the whole were members in group. In SHG-II and SHG-II, 75% and 71.42% were member while SHG-I and SHG-IV and 66.67% was member. Table 6 : Classification of SHGs on the basis of duration of Membership Sl. No.

6.

CHARATERISTICS

DURATION MEMBERSHIP 1 year 2 year 3year 4year and above

SHG-I n= 9

OF 1(11.11) 2(22.22) 4(44.45) 2(22.22)

SHG-II n= 8

1(12.5) 2(25.0) 3(37.5) 2(25.5)

SHG-III n= 7

0(0.00) 0(0.00) 3(42.86) 4(57.14)

SHG-IV n= 6

0(0.00) 1(16.67) 0(0.00) 5(83.33)

TOTAL N= 30

2(6.67) 5(16.67) 10(33.33) 13(43.33)

As regards to the duration of membership, majority had experienced 4 years and even above of that. About 83.3% of SHG-IV and 57.14% of SHG-III experienced 4 years and more than 4 years. Again 44.45% of SHG-I, 37.5% of SHG-II and 42.86% of SHG-III members had of experience of 3 years membership in their group. A very insignificant of 6.67% on a whole had of experience of just 1 year membership in their group. Analytical Framework of Empowerment through SHGs The meaning of the concept of empowerment varies widely with the different people giving different definition. The dictionary meaning of the word empowerment is “to give power, to give capacity, to perform some physical or mental activity to delegate authority to give a legal right” .In the context of women and development, the definition of empowerment should include the expansion of the choices for women and an increase in women’s ability to exercise those choices (Manimekalai, 2004:45). The empowerment of women in the present study had been measured on terms of their decision-making capacity, which had been classified into three aspects, namely on the basis of her own-self; both and husband alone. These three aspects are applicable for eight variables which are identified for measuring the decision making power of women. The identified variables were: •

Preparation of family budget

•

Education o the Children

•

Health and medicine

•

Purchase of assets

307

•

Purchase of home appliances

•

Gifts of others

•

Personal needs such as Jewels and

•

Purchasing of cloth

The response had been obtained from the sample members of SHGs on three aspects for each variable. The responses obtained for each variable have been scored. To secure the total empowerment score of the SHGs members, three points were given to “Self”; two points were given to “both” and one point for “husband alone” responses. The total score of a member was obtained by adding up the scores for all the eight variables. In order to test the relationship between the empowerment and the socio-economic factors, the Chi-square test was used. McNemer Test In order to test whether there was any significance difference or not in self worth among the sample members before and after joining the SHGs, the following null hypothesis was framed. “There was no difference in self-worth among the sample members before and after joining the SHG.” To test the null hypothesis, the Mcnemer test was applied. The results of the test had been presented in below table Sl. No. Measures of Self-worth 1. Gaining confidence 2. Confidence to face financial crisis 3. Helping neighbors’ 4. Decision on important matters 5. Treatment in the family

Calculated value of X

Table value at 1% level

32.23 34.45 23.65 43.23 12.34

6.635 6.635 6.635 6.635 6.635

SOURCE: Computed Value.

Table-reveals that the calculated values of the Chi-square test for self worth were found to be more than the table value () at the 1%level of significance and hence the null hypothesis were rejected. Hence it could be conducted that here was a significant difference in self worth among the sample members before and after joining the SHGs. McNemer Test for Reaction to Social Evils : To test whether there was any significant difference in the reaction to the social evils among the sample members and after becoming members, the following null hypothesis was framed. “There is no difference in the reaction to the social evils among the members before and after joining the SHGs.”The McNemer Test was used to test the above null hypothesis .The results are presented in below table Sl. No. Protesting 1. Abuse of women 2. Husband beating the wife 3. Gambling 4. Child Labour 5. Demanding dowry

Calculated value of X

Table value at 1% level

23.56 43.34 12.54 54.45 11.21

6.635 6.635 6.635 6.635 6.635

SOURCE: Computed Value.

Above table shows that the calculated value for all kind of social evils before and after joining SHGs were found to be higher than the table value at the 1% level of significance. Therefore the null hypothesis was rejected at .So, there was a significant difference in the reaction to social evils among the sample members before and after their joining in SHGs as members.

308

Sign Test on Reaction of Members to Behavioural Changes: In order to test the null hypothesis there is significant difference in the behavioural changes of the members in the problematic situations before and after joining the SHGs. The Sign test was used to prove this hypothesis. The results of sign test is shown in below table Sl. No.

Z value

1. Verbal abuse 2. Physical violence 3. Ignoring 4. Psychological and emotional abuse

Table value at 1% level

6.34 6.63 5.25 11,23

2.58 2,58 2.58 2.58

SOURCE: Computed Value.

It is evident from the table that the calculated values of Z for all the various types of abuses were found to be higher than the table value () at the 1% level of significance .Hence the null hypothesis was rejected. So it could be concluded that there was some difference in the reactions of the members to behavioural changes before and after their joining the SHGs. McNemer Test for Availing of Amenities by Member: McNemer test was used to know about the availability of amenities of members before and after joining in SHGs. The results of the test is shown in below table Sl. No. Particulars 1.Health care facilities 2.Sanitary facility within the house 3.Sanitary facility within the village 4.Water facility in the house 5.Water supply in the house 6.Water supply within the residential locality 7.Educational facility 8.Market facility

Calculated value of X 12.23 13.34 6.71 11.45 11.45 10.12 15.54 10.23

Table value at 1% level 6.635 6,635 6.635 6.635 6.635 6.635 6.635 6.635

SOURCE: Computed Value.

Political Empowerment: In order to know about political empowerment of the respondents, the McNemer test was Sl. No. Particulars 1. Awareness on government schemes 2. Taking independent decision on vote 3. Involving public/governmental activities 4. Participation in political process 5. Participating in the activities of Panchyati raj institution 6. Increases awareness in legal and political matters 7. Participation in decision making process

Calculated value of X 11.35 10.67 11.43 13.45 7.43 6.73 8.43

Table value at 1% level 6.635 6.635 6.635 6.635 6.635 6.635 6.635

SOURCE: Computed Value.

Conclusions The economic empowerment has been measured by the improvement in the members’ participation in group activities which was quantified through a comparison of the different parameters before and after they had joined as members of the SHGs. The analysis had shown that all the six variables measuring the social impact had been found out a significant impact. The involvement in the group had contributed significantly towards improving the selfconfidence and the communication skills of the respondents. The study had further shown that there was a positive improvement in their access to facilities after their joining the SHGs as members. It was also evident that there had been a positive impact on the political participation before and after joining the SHGs. 309

Policy Implications This study is policy oriented. So, following suggestions were given in order to successful operation of SHGs. 1. The respondents share the view that the government is apathetic towards them. Sometimes they faced delay in sanctioning and disbursement of loan to SHGs. Efforts should be made to avoid delay in sanctioning revolving fund and loan. 2. Unlike elsewhere in India very few NGOs are active organizing and facilitating SHGs in the study area. Involvement of NGOs is the need of the hour in order to make SGHs as vehicles of empowerment of tribal women. 3. There are few women SHGs found operating in this study area. Some of them are registered but not functioning properly. As in other parts of the country here also SHGs need to play vital role in the empowerment of women. 4. The problem of marketing of the products also is emerging as critical among the SHGs. 5. The leader of the SHGs requires to be provided training properly to run their different projects dynamically and effectively. Encouragement should also be given by the state to those SHGs who perform better in running their projects. 6. SHG concept is not fully covered actual members especially those are Below Poverty Line in the villages. So members should make aware about the actual role of SHGs and how these groups can be capable to empower them. 7. Another important problem that found in the course of this study is that of the lack of a coordinated government effort to organize the microfinance sector in tribal region. So, the state should take every step to coordinate between banks, NGOs and SHGs so that the levels of confidence move forward in the minds of the members of SHGs. Reference • •

• • • • • • • • • • • • •

Ahmad, M.A.(1999), Women Empowerment: Self Help Groups, Kurukshetra, 4(7): 23-28 Barbara, S., & Mahanta, R.(2001), Micro Finance Through Self Help Groups And It's impact : A Case Of Rashtriya Gramina Vikas Nidhi - Credit And Saving Programme In Assam, Indian Journal Of Agricultural Economics, 56 (3):34-43. Das, M (2012), Tribal Women of Assam - A Social Geographical Perspectives, EBH Publishers, Guwahati. Kabeer, N.(2005), Is Microfinance a 'magic bullet' for women's empowerment? Analysis of findings from South Asia, Economic and Political Weekly, 40(4):31-34. Das, S. K. (2011) Women Empowerment and Self Help Group: An Analytical study of Constraints in Karbi Anglong District of Assam, Journal of North-east India Studies, 1(1):1-22. Khobung,V.(2012) Women Empowerment and Self-Help Group : The Case of Tribal Women in the Hill Areas Of Manipur, International Journal of Research in IT & Management 2(10):12-19 . Manimekalai, K. (2004), Economic Empowerment of Women Through Self-Help Groups, Third Concept, 1(1):4554. Meenai Z.(2003), Rural Women: An approach to empowering women through credit-based Self Help Groups, Aakar books, New Delhi. Moulick, M. (2008). Understanding and responding to the savings behaviour of the low income people in the north east region of India. Retrieved from http://www.microfinancegateway.org/gm/document-1.9.30446/33.pdf. Sabhlok.G. S.(2011), Development and women: The role of trust in Self Help Groups, Indian Journal of Gender Studies, SAGE Publication, Los Angeles, London, New Delhi, Singapore, Washington DC, 18(2):241-242. Suguna,B.(2006), Empowerment of Rural Women through Self Help Groups, Discovery Publishing House, New Delhi. Usha, P.(2010), Empowerment of women and Self Help Groups, Sonali Publications New Delhi. Vasanthakumari, P.(2011), Study on performance of self help groups in India, Madhav Books, Gurgaon, Haryana. Verma B. S., M. K. Sharma and N.K. Sharma (2008), Better Quality of Rural Life, Sarup&Sons,New Delhi .

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Globalization and Microfinance: Exploring possibilities for Women Empowerment Dr Shazia Manzoor, Wakar Amin and Gian Mehra

Microfinance in India- An Introduction Microfinance is the provision of financial services to those excluded from the formal financial system. It is a process which includes financial intermediation such as supplying credit, savings and insurance products with a goal towards social intermediation such as reducing poverty and enabling empowerment. Among the real and potential clients of microfinance, women are seen as the most appropriate targeted beneficiaries, since it is argued that in contrast to men, the entire household benefits when the loans are given to women. It is further claimed that microfinance empowers women since it accords economic independence and instills confidence by virtue of their participation in groups as well as their undertaking and expanding economic activities.It is important to understand that there is an acute need among the poor for credit, both for consumption and production, which often forms the deciding line between survival and succumbing to poverty. In other words, credit is sought for basic requirements such as food, as well as income generating activities. The rationale of microcredit is based on the hypothesis that the poor can be relied upon to return on time the money that they borrow. It has been proved that the poor are capable of thrift and savings (Rutherford, 2000a).Microfinance thus emerged as a tool for breaking the vicious cycle as it does not require any collateral. And there lies the wider appeal of microfinance as a way of doing business with the population which was considered “unbankable”. Before the idea of microfinance gained momentum the sources of credit for the poor were relatives, friends, moneylenders, traders, landlords and the state owned banks such as Regional Rural Banks etc. The informal commercial lenders are characterised by easy access but are available at exorbitant interest rates. The state owned banks, on the other hand, aimed at targeted lending through heavily subsidized schemes which were eventually siphoned off by local elites and educated households. This lead to high default rates and the banks suffered large losses. Microfinance was therefore well positioned to fill this gap between the large loss making subsidized state schemes and expensive and sometimes exploitative informal lenders. In other words microfinance appears to deliver the holy trinity of outreach, impact and sustainability. Microfinance and Women Empowerment: Promises and Disparities Empowerment is a concept and a construct which indicates the increased activities for women’s advancement. The concept of empowerment has been the subject of much intellectual discourse and analysis. Thereby it has come to the centre stage of the political and administrative systems of the society. Empowerment is defined as the processes by which women take control and ownership of their lives through expansion of their choices. Thus, it is the process of acquiring the ability to make strategic life choices in a context where this ability has previously been denied. The core elements of empowerment have been defined as agency ( the ability to define one’s goals and act upon them), awareness of gendered power structures, self-esteem and self-confidence (Kabeer 2001). Empowerment can take place at a hierarchy of different levels- individual, family and community level and is facilitated by providing encouraging factors such as exposure to new activities which can build capacities and 311

removing inhibiting factors such as lack of resources, skills and gender stereotype. Two vital processes have been identified as important for empowerment. The first is social mobilisation and collective agency, as poor women often lack the basic capabilities and self confidence to counter and challenge existing disparities and barriers against them. Second, the process of social mobilisation needs to be accompanied and complemented by economic security. As long as the disadvantaged suffer from economic deprivation and livelihood security, they will not be in a position to mobilize (UNDP 2001). According to the feminist paradigm, empowerment goes beyond economic betterment and well-being, to strategic gender interests. Mayoux’s (2000) definition of empowerment relates more directly with power, as “a multidimensional and interlinked process of change in power relations”. It consists of: (1 ) ‘Power Within’: enabling women to articulate their own aspirations and strategies for change; (2) ‘Power to’, enabling women to develop the necessary skills and access the necessary resources to achieve their aspirations; (3) ‘Power With’, enabling women to examine and articulate their collective interests, to organise them and to link with other women and men’s organizations for change; and (4) ‘Power Over’, changing the underlying inequalities in power and resources that constrain women’s aspirations and their ability to achieve them. These power relations operate in different spheres of life (e.g., economic, social, political) and at different levels (e.g., individual, household, community, market, institutional). A majority of microfinance programmes target women with the explicit goal of empowering them. There are underlying reasons for pursuing women empowerment. Some argue that women are amongst the poorest and the most vulnerable of the underprivileged and thus helping them should be a priority. The founder of Grameen Bank in Bangladesh. Dr Muhammad Yunus was asked several times to clarify the logic of keeping women in the centre of microfinance focus. He mentions, “Loans made to women bring more benefits to the household, as women tend to be farsighted and more concerned for the long term security of the household (Yunus, 2007). In India microfinance through self help groups caters to the immediate economic needs of the families of SHG members. At present, SHGs have become synonymous with women’s groups. Evolved in the1990s as an alternative to cooperatives, SHGs today account for 1/3rd of the total customers in rural banks and hold about 1/4th of the rural banking business. In many developing countries especially in South Asia one strategy which has been found to be promising is participatory institution building in the self-help groups, often coupled with savings and microcredit loans. With SHGs, women found path to public domain as against the traditional role which confined them to the private domain. By joining an SHG, women get a forum to come together, meet often, talk about self, share concerns about family situation and so on. They have also played valuable role in reducing the vulnerability of the poor, through asset creation, income and consumption smoothing, provision of emergency assistance, and empowering and emboldening women by giving them control over assets and increased self-esteem and knowledge (Zaman 2001). This has greatly helped the socially and culturally marginalised women to break through the oppressive and deep rooted patriarchal values. Several recent assessment studies have also generally reported positive impacts Impact assessment studies point to asset creation as one of the main indicators, measurable by empirical data. The financial services, especially microcredit, provided to self help groups have brought about an increase in household income. Advocates of microcredit claim that the very process of forming SHGs is empowering and a critical mass is formed which can be harnessed to pull households out of poverty traps. For example the 2000 United Nations Common country Assessment for Bangladesh felt that microcredit had lessened the severity of poverty and helped to increase total income per household by 29 percent. In India, microcredit studies done on groups dealing with dairy farming have noted positive profit levels and short payback periods for loans (Lalitha and Nagarajan 2002). For some women microfinance programmes have indeed set in motion a process of empowerment where all the empowering elements have been mutually reinforcing. The greatest power of microfinance lies in the social, network and institutional capital that is unleashed in the processes of providing microfinance. Getting women to form groups of their own choosing to engage with a formal institution is itself a redefinition of a contract that has been traditionally patriarchic. The act of staff who are socio-economically of a higher status going to the door steps of these women to transact with them, seeking their help in solving problems, carries significant meaning and is the beginning of a redefined relationship among socio-economic hierarchies, and between formal institutions and the poor women. In an institutional environment that is generally exclusionary, uncertain, unpredictable and at times hostile to the poor, the clockwork-like, almost ritualistic, rule bound process followed by microfinance opens up the possibility of a new culture of expectation from engagement between the poor and external institution (Dichter 2007). 312

Another set of indicators, which are more intrinsic, revolves around changing gender relations within the household. Reports have shown that women who generated increased income through self help groups reported that they gained greater respect within the household, often with perceptible attitudinal change. Men have been reported to offer little resistance towards the enhanced economic activity of women because such activities were seen as contributing to household wellbeing. Hashemi, Schuler and Riley (1996) explored the impact of microfinance on a number of indicators of empowerment: the reported magnitude of women’s economic contribution, their mobility in the public domain, their ability to make large and small purchases, their ownership of productive assets, freedom from family domination, and the political awareness. While women’s control over all aspects of their lives has improved, there are differences regarding aspects of their lives over which they have greater control. On the whole, women seem to have greater control over their savings and jewellery, mobility, friendship, ability to invest or visit their parents when they want, and decide whom they want to vote for. On the other hand they have lesser control over their reproductive work, immovable property of the household and reproductive rights. Many questions are raised about the degree to which women keep a control over assets acquired as a result of microfinance. It is in this context one needs to question the assumed interlinkages between access to savings and credit per se and empowerment since in some cases microfinance programmes may have disempowered women. Women may simply be used as low cost and reliable intermediaries between programme staff and male family members. Microfinance—Not a panacea of all ills There is a widespread acceptance that availability of financial services, improves the lives of the poor. However, this belief is mostly backed by anecdotes which unfortunately are not a substitute for careful statistical evaluation. In 1999, Jonanthan Murdoch noted that the ‘WIN-WIN’ rhetoric promising poverty alleviation with profits has moved far ahead of the evidence and even the most fundamental claims remain unsubstantiated. There are very few impact studies and their results are far more subdued. There are studies that have shown that while some clients thrive and some remain unchanged, there are also some that will slip backwards. Nevertheless, despite the patchy nature of information and debates about the impact of microfinance and women empowerment, it is clear that: • Providing effective microfinance services to poor people is part of a poverty reduction strategy –but only a part. • Microcredit schemes have not been able to lift women out of abject poverty as they cannot transform social relations and the structural causes of poverty. In some reported cases, women do not even know that men have taken loan in their names. • Many programmes have had negative impact on women. Where women have set up enterprises this has often led to small increase in access to income at the cost of heavier workloads and repayment pressures. In many cases the loans have been used by men to set up enterprises over which women have little control. In some cases they have been employed as unpaid family workers with little benefit. In some cases women’s increased autonomy has been temporary and led to withdrawal of male support. In some programmes there are increasing fears that women’s small increase in income are leading to a decrease in male contribution to certain types of household expenditure. • In some contexts schemes mainly benefited women who were already better off. In some cases only group leaders enjoyed the fruits. And members continue being marginalised. • Researchers have expressed concerns that women’s microfinance programmes use women as unpaid debt collectors mediating between development agencies and male family members, increasing their dependency on men and conflicts between women to fulfil repayment targets (Goetz and Sen. Gupta 1996). • Poverty targeting does not necessarily contribute to empowerment as poverty targeting may leave out many disadvantaged women who do not belong to very poor households. It may also bypass women who have skills and experience to contribute as role models for other women.

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• Overemphasis on small savings and small consumption loans fails to enable women to graduate to higher income activities. It also risks making women responsible for saving mobilisation and loan repayment, leaving men’s responsibilities unchanged. • The emphasis on self help often fails to recognize the costs to women of participation in terms of time and resources. It does not necessarily provide the opportunity for them to articulate and develop strategies for empowerment. The mix up of gender and poverty concerns confines women to group based programmes with marginal contribution to incomes growth. • Even when women retain full or significant control over their loans, they commonly use them to provide for traditional women’s activities such as raising livestock and poultry, rather than new uses i.e. low investment and low return. • In the case of project failures it may lead to serious reprimand and additional negative sanctions against the woman especially if household resources have to be diverted to repay outstanding debt. • Women may be forced to cut their own already inadequate expenditure on food and health for savings or to repay loans. • Microfinance programmes may increase tensions within the household as men withdraw their own income. In some reported cases, this leads to divorce, abandonment and domestic violence (Rahman 1999, Mayoux 1999b). Way Forward To maximise the contribution of microfinance to women’s empowerment requires equality in access to all microfinance services and also an adequate and non-discriminatory regulatory framework. There is a need to promote a much more diversified microfinance sector. The assumptions of automatic beneficial impacts of micro finance can thus at worst be used as a pretext for withdrawing support for other empowerment and poverty alleviation measures. It is crucial that donors make their commitment to women’s empowerment explicit through inclusion of questions on gender policy and empowerment as a criterion for funding. In order to effectively address the constraints of microfinance and women empowerment following recommendations are required: • Women’s empowerment requires fundamental change in the macro- level development agenda as well as explicit support for women to challenge gender subordination at the micro level. • Microfinance should be promoted as an entry point in the context of a wider strategy for women’s economic and socio-political empowerment. In addition to financial interventions. Other complementary activities should be supported. These may include addressing strategic needs such as advocacy. These in turn could address other related issues. Indeed the important issue is not what complementary activity is provided, but how the activity is determined and implemented. Participation of the women themselves in determining what and how these are provided is key if they are to be maintained and sustained • If the poorest women are to be supported in their productive role, strategies that help them balance their domestic responsibilities should be simultaneously developed. • Hard-nosed market research is required to identify microenterprises in which women have a strong niche and stand to gain good financial returns. This will considerably reduce incentives for powerful male relatives to commander the newly available resource to their own benefit. • Women’s property rights on the newly financed asset should be clearly established and enforced. • Microfinance programs have to respond to pre-existing social and cultural constraints. • Auxiliary services such as business development services, business planning, marketing, accounting and technology are needed in addition to microcredit to make the transition out of poverty. 314

• Complementary non financial services can enable microcredit to play a greater role in reducing poverty and vulnerability. • Ultimately women’s empowerment requires fundamental changes in society that call for more direct policy instruments. New policies should renegotiate property rights, replace rules sustaining gender inequality and improve access to and quality of education References •

Ditcher, T.(2007). Can microcredit make an already slippery slope more slippery? Some lessons from the social meaning of debt In Ditcher, & Harper, What’s wrong with microfinance? : Practical Action Publishing.

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Goetz, A., & Gupta, R.(1996). Who takes the Credit? Gender, Power and Control over loan use in rural credit programs in Bangladesh.World Development. 24(1), 45-63

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Hashemi, S., Schuler, S., & Riley, A.(1996). Rural Credit Programs and Women’s empowerment in Bangladesh World Development, 24(4).

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Kabeer, N. (2001). Conflicts over credit: Re-evaluating the empowerment potential of loans to women in Rural Bangladesh. World Development.

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Mayoux, L.(1999b). Questioning Virtuous Spirals: Microfinance and Women’s Empowerment in Africa. Journal of International Development, 11, 957-984

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Murdoch, J.(1999). The Microfinance Promise.Journal of Economic Literature, 37(4), 1569-1614

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Rahman, A.(1999). Microcredit initiatives for equitable and sustainable development: Who pays? World Development.27(1).

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Rutherford, S. (2000). The need to save. In R.Stuart, The poor and their money New Delhi: Oxford University Press.

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UNDP (2001).United Nations Development Programme: Participatory Governance, People’s Empowerment and poverty Reduction. UNDP Conference Paper Series.

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Yunus, M.(2007). The Grameen Bank Story: Rural Credit in Bangladesh .In A.Krishna, N.Uphoff, &M.Esman,Reasons for Hope: Instructive experiences in Rural Development(pp. 9-24) Connecticut Kumarian Press

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Zaman, H. (2001).Assessing the poverty and vulnerability impact of microcredit in Bangladesh: A case study of BRAC, World Bank Development Report 2000/2001 Washington

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Empowerment of Women and Self Help Groups: Experiences from India By Wakar Amin, Shazia Manzoor and Deepali Mathur

Introduction Today Poverty alleviation has become a matter of major concern for the policy makers world over. Inspite of a large number of alternative development approaches explored and promoted earlier, it has been found that a perceptible change has not taken place at the grassroots. In the direction of poverty the Human Development Reports and other United Nations/World Bank Reports have identified South Asia as one of the most deprived regions in the World. The Region has the largest number of people in the World living in absolute poverty. A great majority of these people constitute to be women, with limited access to basic needs. The overall burden of poverty and human deprivation is faced by women. The poor souls have been at the receiving end. The issues of gender and equity point to the double burden women have to bear: that of being poor and being a woman. In India ensuring women’s access to credit through micro financing is presently a major strategy for both poverty alleviation and women’s empowerment. Self Help Groups (SHGs) have been set up across the country by NGOs and through Governmental Programs for extending the facility of micro financing to the marginalized groups. In the post-independence era, it has been a consistent endeavour of our State to formulate situation specific poverty alleviation policies and programmes for generation of a minimum level of income for poor. Planners and policy makers assumed that the State would provide the lead role in formulating and implementing these programmes. Credit infusion in the rural sector was considered to be the most significant initiative. As experiences accumulated about the constraints within and outside the Government, a new understanding began to emerge. Alternative development approaches were explored so that the credit reached the poor in such a way which was result oriented and sustainable. The fall in the availability of credit from the formal financial system, resulted in the growth of informal systems to fill the gap. The inability of the existing programmes to reach the poor led to the emergence of microfinance or micro-credit as an alternative poverty alleviation program for the poor. Micro financing is understood in India as the ‘provision of thrift, credit and other financial services and products of very small amounts to the poor enabling them to raise their income levels and improve living standards’ (NABARD 2000; RBI 1999) Many Non Governmental Organisations in different areas of the country did work in this direction. Their experiences were illustrative of comprehensive programs enabling rural and urban poor particularly women to move out of poverty into sustainable development. Our planners at this stage were attracted by the experiments of SEWA, WWF and other organisations. Meanwhile there emerged Grameen experiment. The module introduced by Mohammad Yunus was a turning point in the history of microfinance. Grameen’s group lending module was replicated even in the developed countries. In lending credit to the poor the concept of group formation was derived from Grameen Module While studying these new experiments, the Government of India introduced different schemes from time to time for attending poverty. But the schemes such as IRDP, TRYSEM, DWCRA etc fractured the Indian society making them dependent on the subsidy and concession culture which has meant considerable ill for the Indian banking system. It led to a decline in portfolio quality and neglect of monetary saving facilities in the rural sector (ACRC, 1993). It was argued that such interventions have not only allowed leakage of benefits to undeserving households but also underestimated 316

the ability of the poor to save or pay market rate of interest (Majumdar, 1998). However following the success of micro-financing through Bank linkage model of NABARD in particular, Government perceived the importance of SHGs and consequently embraced the group approach as one important mechanism to target and reach the poor. Starting with Rashtriya Mahila Kosh (RMK) and Indira Mahila Yojana the group concept got further consolidation in the Swarnajayanti Gram SwarozgarYojana (SGSY) and Swarna Jayanti Shahri Rozgar Yojana (SJSRY). The implementation of micro financing through self-help groups (SHGs) provides a paradigm shift in the strategy for resolving the socio-economic deprivations of the poor both in rural and urban areas. The marginalized women are its thrust target. Women get a way out of gender discrimination and inequality as well as for exploiting their entrepreneurial talents. The non-governmental organisations (NGOs) occupy a pivotal role. In micro-financing the focus of self help groups is to develop the capacity of the marginalized groups, particularly women, and to organise them, so that they can deal with socio-political and socio-economic issues that affect their lives. The self help groups are participatory in nature, based upon cooperative principles of joint endeavour for thrift and mobilisation of financial assistance. Majority of micro-financing in India is under the SHG Bank Linkage Model (SBL), which is considered as a landmark development in the banking with the poor. The important SHG network in the country are Swarnjayanti Gram SwarozgarYojana (SGSY) and SwarnjayantiShahariRozgarYojana (SJSRY) under the ministry of Rural and Urban Development respectively. These schemes launched by the Government of India have been routing credit to SHGs through the DUDA/DRDAs with the involvement of banks and other interventions. All these initiatives lead to empowerment of women which refers to increasing the political, social or economic strength of Women. The most common explanation of “Women’s Empowerment” is the ability to excise full control over one’s actions.(Narayan, 2002). The empowerment of women occurs in reality, when women achieve increased control and participation in decision making that leads to their better access to resources it often involves the empowered developing confidence in their own capacities. The growing social awareness across the globe has brought a number of issues to the fore among which gender equality and empowerment of women are very significant. In traditional societies the need of empowerment is immense. Empowerment is a multi-dimensional process, which should enable women or group of women to realize their full identity and power in all spheres of life. The empowerment occurs through a number of ways and the SHG is one of the significant methods which ensure overall empowerment of rural women. Self-Help Group is a small voluntary association grouping of 10-20 members to form a group which is a home grown model for poverty reduction which simultaneously works to empower and improve the lives of its members. (Shylendra, 1994) The basic principles of the SHGs are group approach, mutual trust, organization of small and manageable groups, group cohesiveness, sprit of thrift, demand based lending, collateral free, women friendly loan, peer group pressure in repayment, skill training capacity building and empowerment. (Kabeer, 2001).Self Help Groups play an important role in empowering the women in India. Self Help Groups through microfinance has helped the rural women in transforming them from local village Ladies in to Women entrepreneurs. The SHG's act as a support group developing courage and offering mutual solace and comfort to the members. Against the above background, the present study was carried out to make a comparative analysis of women beneficiaries of DUDA- DRDA Projects. This study will evaluate the impact of SHG’s on the empowerment of women throughdetailed the analysis at individual, family and community level. It also aims to reveal the role of the empowerment approach (through SHG’s) aimed at empowering women in traditional societies through greater self-reliance and internal strength. Literature Review: A large number of studies have examined the various dimensions of microfinance programmes, microcredit, self help groups and women empowerment. An attempt is here made to give a brief account of literature related to microfinance, micro credit, self help groups and women empowerment. ZubairMeenai (2003), in his book 'Empowering Rural Women: An approach to empowering women through credit-based Self Help Groups' tried to elucidate and simplify the approach to women’s empowerment through credit-based Self Help Groups, by both providing the theoretical perspectives as well as practical guidance and tips 317

to operationalise the same. He portrayed credit-based Self Help Groups, as an integrated approach where credit is only an entry point and an instrument to operationalise other aspects of group dynamics and management. Yunus (1999) believes that the poverty has not been created by the poor people. It has been created by the institutions we have built and the policies we have pursued. If only we looked at our well established institution with the eyes of the poor and examined our policies from their angle we would have easily detected how they have been creating and sustaining poverty. It is failure of human societies which condemn some people to poverty and make the whole society accept the situation without any qualm. The primary responsibility of every human society is to ensure human dignity to all members of that society. Poverty is the denial of human dignity to a person.It is not consistent with civilized human society. Our region, the south Asia is where most of the world’s poor live. If we can lead the way by creating poverty- free south Asia, the whole world will be free from poverty. Datta and Raman (2000) highlighted that SHGs are characterized by heterogeneity in terms of social and economic indicators. The success of SHGs in terms of high repayment is mostly related to the exploitation of prevailing social ties and cohesion found among women members. Social cohesiveness among members spring not only from their diverse background of knowledge base, skills occupations and income levels, but also due to the dynamic incentive system of progressive lending to the groups on the successful completion of loan repayment. However SHGs are heavily dependent on external financial agencies for their pending operations. Nagayya(2000) highlighted that an informal arrangement for credit supply to the poor through SHGs is fast emerging as a promising tool for promoting income-generating enterprises. He has reviewed the initiatives taken at the national level with a view of institutional arrangements to support this programme for alleviation of poverty among the poor, with focus on women. He said NABARD and SIDBI are playing an important role at various stages of implementation of this programme. There are other national level bodies also supporting NGO’s vizRashtriyaMahilaKosh (RMK), RashtriyaGraminVikasNidhi (RGVN) etc. He called for an imperative need to enlarge the coverage of SHGs in advance. Portfolio of banks as part of their corporate strategy, to recognize perceived benefits of SHGs financing in terms of reduced default risk on transaction costs. Satish (2001) in his paper raised certain issues related to the functioning of SHGs Adequate care should be taken to ensure homogeneity of socio economic status of the members, while forming SHGs. The process of SHG formation has to be systematic whether a bank or an NGO forms it. He emphasized that SHGs experiment has to be spread throughout India rather than being concentrated in a few pockets of the country. NGO’s are more suited for forming and nurturing of the SHGs and therefore it is essential to strengthen them and their resources so that they should increasingly undertake this work. Manimekalai& G Rajeshwari (2001) in their paper highlighted that the provision of microfinance by the NGO’s to women SHGs has helped the groups to achieve a measure of economic and social empowerment. It has developed a sense of leadership, organizational skills management of various activities of a business, right from acquiring finance, identifying raw material, market and suitable diversification and modernization. Littlefield, Murdoch and Hashemi (2003) opine microfinance and the impact it has, go beyond just business loans. The poor use financial services not only for business investment in their micro enterprises but also to invest in health and education to manage household emergencies and to meet a wide variety of other cash needs that they might encounter. Furthermore, since many microfinance programmes have targeted women as clients they have not only helped empower women who appear more responsible and show a better repayment performance but also shown that women are more likely to invest increased income in the household and family well being. Therefore microfinance has both economic as well as social effects. AliyaKhawari (2004) comments that the microfinance movement has come a long way and on its way has immensely changed the financial landscape around the world. It has inspired new banking concepts that have given hope to the poor households for the betterment of their livelihoods through their own efforts and labour. In the process of the development of the microfinance ideology, the development of the rhetoric of making profits while reducing poverty simultaneously (win win situation), however, has moved much faster than the empirical evidence and the claims have yet to be really substantiated. The most important purpose that the microfinance idea has served 318

is the acknowledgement of the shortcomings of the existing mechanisms of banking and added to the perception of rethinking the poverty paradigm. This in turn has brought about the need for institutional innovation. In particular, the MFIs have proved that despite the absence of collateral and high transaction costs, lending to low income households can be profitable. Holvoet(2005) in her study of women in rural Kenya finds that in direct bank-borrower minimal credit, women do not gain much in terms of decision-making power within the household. However, when loans are channelled through women’s groups and are combined with more investment in social intermediation, substantial shifts in decision-making patterns are observed. This involves a remarkable shift in norm-following and male decision-making towards more bargaining and sole female decision-making within the household. She finds that the effects are even more striking when women have been members of a group for a longer period and especially when greater emphasis has been laid on genuine social intermediation. Social group intermediation had further gradually transformed groups into actors of local institutional change. Pitt et al (2006) in a comprehensive study used Item Response Theory (IRT), where the element of analysis is the whole pattern of a set of binary indicators that proxy for woman’s autonomy, decision-making power, and participation in household and societal decision making. They find that credit programs lead to women taking a greater role in household decision making, having greater access to financial and economic resources, having greater social networks, more bargaining power vis-à-vis their husbands and having greater freedom of mobility. Additional services like training, awareness raising workshops and other activities over and above the minimalist (financial services only) microfinance approach are also an important determinant of the degree of its impact on the empowerment process of women. The most of the findings of the present study correspond with the results appearing in the review of literature on the subject of micro financing and marginalized groups. The studies carried out by various authorities/ scholars also establish that women are the most marginalized groups amongst the poor population of our country.The researcher has at various levels empirically opined that the marginalized women are the right targets in the process of micro financing. Providing credit to the women changes the life style of their families. The women happen to be capable financial managers and prudent investors. Well being of the children is their most important priority. The above studies carried out in various parts of India and around the globe give an idea about the role of SHGs,Microcredit result in the empowerment of women using cultural, social, economical, political variables to different variables at the behavioural level. Objectives of the Study 1. To understand the process of micro-financing in DUDA and DRDA projects. 2. To analyse the profile and functioning of sampled Self Help Groups (SHGs) and their members under DUDA and DRDA. 3. To make a comparative analysis of SHGs under DUDA and DRDA projects. 4. To explore the attitude and experiences of marginalized groups (women). 5. To measure the impact of DUDA and DRDA micro-financing on individual SHG women member’s selfgrowth and development. 6. To measure the impact of DUDA and DRDA micro-financing on changes in individual SHG women member’s role and place in family affairs and decision- making. 7. To measure the Impact of DUDA and DRDA micro-financing on changes in individual SHG women member’s interaction pattern in the community.

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Methodology The methodology applied for the present study is primarily descriptive and evaluative in nature. It attempts to explore the role of micro-financing it’s functioning through self-help groups and the benefits that are likely to accrue to poor women. The Present study is also an exploratory cum diagnostic, based upon primary, secondary and tertiary sources. Exploratory in the sense that the researcher is trying to explore the role of micro-financing, it’s functioning through self-help groups and the benefits that are likely to accrue to marginalized groups. In the study marginalized groups refer to poor women. The universe of study is the Baramulla district of Jammu and Kashmir State. The locale of study has been DUDA and DRDA, under which urban and rural self-help groups are functioning. Due to the scarcity of data regarding the number of women self-help groups (WSHGs) and other allied information available with the DUDA authorities This situation created a problem in sampling. In order to overcome this limitation the Snowball sampling was used to arrive at the desired sample. ). The researcher sought the help from key informants that is the DUDA/DRDA authorities, CDSs/NGOs, Block and ward officers etc in identifying the women groups. Once the groups were identified, meetings were arranged with the women members. At this stage the approach of the researcher was to take all the members coming to the meetings and finally stop at the point when the number touched 150 women both in SHGs of DUDA and DRDA. Through this method the researcher finally covered 24 DUDA women self-help groups (WSHGs) and 21 DRDA women self-help groups (WSHGs) These groups covered 300 women SHG members i.e. 150 members of DUDA SHGs and 150 members of DRDA SHGs. The position of sample size is as under: Table 1 : Sample Characteristics S.No

Sample Size

1. 2.

No of SHGs No of members

Agency DUDA 24 150

DRDA 21 150

Total 45 300

The data from primary, secondary and tertiary sources was obtained. The Primary sources are based upon structured interview schedule. Secondary sources include the publications of Government of India, Plan documents, Census reports etc. Tertiary sources include text books, journals and reports. A structured interview schedule was developed and pre-tested by a pilot test. The shortcomings noted during the pilot study were removed from the schedule. Two different interview schedules were used for the SHG and its members. The data thus collected from a sample of 45 groups (24 DUDA SHGs and 21 DRDA SHGs) and 300 members (150 DUDA SHG women and 150 DRDA SHG women) has been analysed and statistically tested by using both parametric and non-parametric tests in order to arrive at a definite conclusion. Apart from quantitative analysis of the problem certain case studies have been prepared from the SHG members of DUDA and DRDA in order to support and authenticate the results drawn by quantitative analysis. The results and insights from case studies/field impressions, facts from key informants and informal discussions, have been used to overcome the limitation of limited statistical use. Major Findings The empowerment of women in DUDA and DRDA SHG groups has been analysed in the following three context: 1. Impact on Women self growth and development (individual level). 2. Impact on Women’s position in family system (family level). 3. Impact on Women’s Interaction patterns in the community (community level) At the individual level, the evaluative measures of the above frame work focus on the issues of awareness of SHG members on social issues, knowledge and concern towards health care, functional literacy, freedom of movement, attitudes and perceptions, access to recreational avenues, self-confidence and knowledge of financial matters. At the family level focus has been laid on the issues of control over economic decisions, education of children 320

particularly that of girl child, health care, family planning, marriage of children and mobility. At the community level, the framework points towards participation and involvement in community affairs such as functioning of schools, health centres, anganwadicentres, construction of roads, water management, sanitation, eradication of social evils and attending meetings with the elected bodies. With regard to the impact on SHG women’s self growth and development, their role and place in the family decision making and their interaction pattern in the community, the following findings have been made: Individual Self Growth and Development  It has been found that there has been more progress relating to the awareness of social issues in DUDA SHG members as compared to their counter parts in DRDA. In urban segment there has been found marked shift in having the awareness of legal rights. This awareness can normally be expected from the members as they are putting up in an urban setting. The shortfall in the rural scene is because of abject poverty, illiteracy, lack of interactive opportunities, communication deficiencies and gender discrimination.  The members of DRDA SHGs have shown a marked progress in their knowledge and concern towards personal health and hygiene, child vaccination, nutritious diet, family planning services and sanitary services. In the changed scene there has been shift in the diet patterns and eating arrangements within the households. The progress indicates that the SHGs are administered properly by DRDA and all this has been possible due to right interventions of NGOs/facilitators. The progress in these areas has also been found in DUDA SHG members as well which is because of adequate health infrastructures available to them in urban area. Inspite of this the achievement on the rural side is viewed as encouraging because of the lack of adequate health infrastructure.  The confidence level of the DRDA members in talking to outsiders, voicing concerns, participation in decision making has registered a substantial increase. The marked progress observed in DRDA SHG members is a result of their frequent interaction with DRDA functionaries, Block officers, NGOs, Panchayat members and Bank authorities. This in turn has helped them in voicing their concerns on different issues and participating in decision making. On the other hand the progress shown by the DUDA SHG members has not been found more pronounced. Normally the urban SHG members should have exhibited more confidence as compared to rural women. The main reason behind this handicap is that Urban Aligarh is predominantly muslim dominated area. The women live in a closed society and do not like to freely interact with the strangers. This is one of the main impediments in the way of their self confidence. Moreover the interventions of facilitators appear limited leaving little scope for the growth and development of SHG members..  Freedom of movement has been found more pronounced in DRDA SHG members. The rural members rarely moved alone out of their locality in the past. The DUDA SHG members are also showing progress in the freedom of movement although they were used to move out of their houses in the past as well.  The attitude and perception towards education and small family has been found positive both in rural and urban SHG members. The women now have been found opposing early marriage.  There has been improvement in the functional literacy of DRDA SHG members. They have now been found able to write their names instead of affixing thumb impressions. In view of higher literacy rate in the urban areas the DUDA SHG members already possessed some functional literacy. They are now showing improvements in this area.  DRDA SHG members due to bank linkage have shown progress in the knowledge of banking activities as compared to DUDA SHG members. This is because of the fact that DRDA SHG members are in their later cycles of loans, which has directly impacted upon their knowledge of banking activities. On the other hand due to absence of bank linkage DUDA SHG members have not been found to be possessing knowledge of banking activities.  The members both in urban and rural areas have been found to be showing a strong interest in watching television.Some of the members have been found listening to radio. Due to illiteracy the members have not been found interested in newspaper reading. 321

 It is observed that micro-financing has helped in empowering marginalized women with regard to their self growth and development. The participatory role of women in SHGs activities has exposed them to different arenas of life to which they were not hither to accustomed. There have been some deficiencies here and there. But by and large there has been a perceptible change in their lives. In the changed scenario the women now exhibit more mobility, change of attitude and perception, increase in the level of self confidence and even enjoying their leisure time in recreational activities by watching television and listening to radio programmes. The activities of DUDA SHGs as compared to DRDA SHGs are not adequately articulated. The impact should have been conspicuous in urban women as compared to rural women. The poor performance in DUDA SHG members has resulted due to absence of bank linkage and non involvement of NGOs at the grassroots resulting in the fall of their self growth and development. The researcher observed that DUDA SHG members seemed introvert, gloomy and disinterested during interview sessions. On the other hand DRDA SHG members were found more open, cheerful and participated warmly during the interview sessions. Position of SHG women members in decision making at family level  It has been found that urban women were deciding on many matters even before their joining SHGs. The impact after their joining is visible but not so pronounced. The urban member during interviews said that they had been deciding the matters themselves and there was no contribution on this part from the SHG. On the other hand the rural women seldom decided on family matters before joining the SHGs but after they joined SHGs the overall impact in deciding the family matters is more visible as compared to urban women. The poor performance shown by DUDA SHG member’s inspite of higher literacy as compared to rural women is due to poor implementation of the SHG activities by DUDA, lack of interventions at grass roots, absence of bank linkages and inadequate monitoring. Moreover in the urban area the reasons for not showing strong impact is the result of structural impediments and problems which are often reinforced by culture and tradition Interaction Pattern of SHG women members in Community  DRDA SHGs have started expressing their concern in the community affairs. The reason of poor impact in some areas seemed to be the preoccupation of these women with their daily survival activities including their micro enterprises, which left them with little time and energy to devote to public good. The lack of political consciousness and awareness of rights has contributed to this lack of activism on their part. The provision of credit alone has little impact on the economic status of poor women. A holistic approach incorporating awareness creation and group organisation, struggle for the fair implementation of various legislations in their support, legal aid are some of the key elements that need to go hand in hand with the availability of the credit. To make this happen, political space has to be found and the programmes themselves will help to further widen that space.  Micro-financing through SHGs has impacted upon the DRDA SHG members as compared to the DUDA SHG members. It has been observed that in the rural scene the SHG programme is adequately monitored through interventions by the NGOs and effectively administered by the DRDA. On the other hand in the urban side the implementation seems fragmented, less coordinated as no sustainable development appears to be touching the grass roots. The marginalized women in the rural SHGs have been involved in microincome generating activities. The credit what- so -ever availed is being utilised by them both in the area of consumption and production. We notice an increase (though slight) in the earnings of marginalized rural women who are associated with the self help groups. Small traces of empowerment do now exhibit in the lives of these marginalized rural women. The data reveals that the upliftment of their economic status is empowering them in the affairs of their lives. Small income generating units of the women have been noticed to contribute greatly in the growth and development of entire families. This can be seen as a greater achievement in the area of self help groups working in the rural areas. We do not mean that micro financing is a panacea for all ills. We shall have to accelerate our efforts for reaching to the women who are poorest of poor. 322

Recommendations In the light of data analysis, case studies and field impressions following are the suggestions for making improvements in rural and urban SHGs .The researcher has observed that the women in DUDA SHGs are demotivated. In the course of time most of the groups have disintegrated after first year of their formation. Once they have received revolving fund after first year of their formation the women have not been seen there after interested with the group activities. This is because of the fact that women at this stage are asked to start their income generating activities which they are unable to do due to their economic constraints. On an average the women in the groups receive beneficiaries one thousand each out of the revolving fund. This is quite insufficient for initiating any income activity.Interloaning during first year of their group formation has not been found so visible. No skill development, training has been imparted to the groups. From out of 24 sampled SHGs only 5 groups have been extended loan facility to start income generating activity. All these things point to the fact that the groups are not being attended at the grass roots and there are no credit injections given to the groups at some regular intervals of time. CDSs do not appear to be having the professional expertise to attend the groups. The authorities may work out some strategy so that more credit injections are given to the women SHGs. The interventions of professional NGOs will help in motivating the women. The authorities can draw some experiences from rural SHGs for making the groups more functional. At the very formation of the groups, interventions of professional NGOs must be available so that cohesive and manageable groups are formed. It needs to be ensured that only eligible beneficiaries are included in the groups so that no undeserving women enter the groups. The interventions at this stage should be informal and the role played by the professionals must be participatory in nature. Efforts be made more to listen to these poor women. Imposing ideas without involving them may prove to be counter productive. The needs of women at the micro level be discussed in detail. Imparting training is a successful intervention for empowering women. The poor women need to be imparted new skills so that they are able to assume the roles which are expected from them after they become SHG members. Training modules have to make women recognise clearly how society structures their perceptions. The employment provided as a result of skills imparted should not interrupt women’s household tasks or take them away from their homes. Training sessions which look at marketing should be arranged. Funds provided for training must be utilised in full. The training courses may be repeated periodically. The women may be taken for exposure trips to such of the SHGs which are found to be successful. Authorities need to monitor that the funds on account of training are not diverted for any other purposes. Key activities may be identified thoughtfully and such activities must involve local resources and the skill of the women. The involvement of line departments should be ensured. The infrastructure required for the key activities needs to be taken care of before starting any activity. Efforts require to be made so that the poor women get involved in a diverse range of activities. The credit doses may be made available to the poor women in time. There should not be any procedural delay in the matter. It needs to be ensured that the credit given through interloaning has been invested for the development of the family as a whole. The credit through interloaning is always on need prioritisation. It also needs to be ensured that the loans given for income generating activities are not utilised for consumption purposes. The procedure for applying, seeking and releasing of credit from the banks needs to be streamlined urgently. It should be made more easy and simple for marginalized women. Bankers have a definite role in the field of micro financing. They must be aware of this fact that the poor are credit worthy. The banks right from the formation of SHG should be aware of the group activities and observe professionally the profile of every women member in a group. Bankers may now have to leave their chambers and reach these poor clients in their little hutments. They must change their attitude towards small loans to poor women and consider it a social obligation to treat them as potential business entrepreneurs. Bankers have been seen primarily concerned with the repayment performance than the growth and diversification of the SHG projects. Due to this low level of participation, they are not able to appreciate the growing credit needs of SHGs. There is need to evolve new products by the banks commensurate with the requirement of poor women. There should be interventions for conducting frequent meetings of the group members particularly in the initial phase of group formation. It will provide communication opportunities to the group members. It will be more innovative and beneficial if the meetings are conducted on a rotation basis in the household of every group member. Apart from credit related issues, social problems should also form part of the meeting agenda. It may be ensured that all the members participate in these meetings. The implementing agencies at the district level may arrange the services of education, health and social welfare department for integrating SHG program Adult education classes may be introduced in 323

the groups once a week so that their functional literacy improves. These women can also serve as volunteers during immunization programs. These departments should from time to time organize awareness camps so that the poor women increase their awareness about education, health and social issues of the society. Documentaries on these issues will be of great use in creating awareness among the poor women. Micro-credit can play a greater role in poverty reduction when it is complemented by ancillary services. Such service would take care of health related problems of self help group members. Micro-insurance can be introduced for health care which would be most useful for mitigating risks in poor households that are devastated by illness. Electronic media particularly television has to play its role in helping the marginalized women. Doordarshan can help a lot in empowering these women if the programs based upon the success stories of SHGs in other parts of the country are telecast regularly. Strong marketing network is called for effective and proper marketing of product and services of micro enterprises linked SHGs. They need marketing support and institutional capacity to handle marketing activities independently. Along with the provision of credit these auxilliary services are very important for promoting the micro-enterprises initiated by the self-help groups.It has been noticed with concern that poor women have not control over immovable assets (land, house). This exclusion of poor women from property rights is detrimental to the interests of these women. The tragedy is that the movable assets created by them from their income are sometimes snatched from them. The authorities may evolve some mechanism so that loan is being provided to the poor women with title deeds to the land on which the houses are built. The marginalized women require large amounts to come out of abject poverty. Government may allocate substantial funds in the area of self help groups so that the poverty alleviation initiatives gain a strong momentum. References • • • • • • • • • • • • • • • • •

ACRC.(1993). A Review of Agricultural Credit System in India. Mumbai: Reserve Bank of India. Datta, S., & Raman, M. (2001). Can heterogenity and social cohesion coexist in self help groups-An evidence from group lending in A.P in India. Indian Journal of Agriculture Economics, 56 (3). Halvoet, N. (2005). The Impact of Microfinance on decision-making agency:Evidence from South Asia. Development and Change, 36 (1). Kabeer, N. (2001). Conflicts over Credit:Re-evaluating the empowerment potential of loans to women in Rural Bangladesh. World Development, 29 (1), 63-84. Khawari, A. (2004). Microfinance:Does it hold its Promises? A Survey of recent Literature;Discussion Paper 276 Hamburg Institute of International Economics (HWWA). Littlefield, E., Morduch, J., &Hashemi, S. (2003). Is microfinance an effective strategy to reach the millennium development goals, CGAP.Retrieved October 21 2008, from http://www.assortis.com/ newsletter/ download/mcf001021.pdf. Majumdar, N. (1998). Overhauling the Somnolent Rural Credit System.Economic and Political Weekly, 32, 2707-10. Manimekalai, M., &Rajeshwari, G. (2001).Nature and Performance of Informal Self Help Groups-A Case from Tamil Nadu.Indian Journal of A gricultural Economics, 56 (3). Meenai, Z. (2003). Empowering Rural Women:An approach to empowering women through credit based self-help groups. Delhi: Aakar Books. NABARD (2000). Impact of Self Help Groups on the Social Empowerment_Status of Women Members in Southern India,Paper presented at the seminar on SHG Bank Linkage Program,New Delhi. Naggayya, D. (2000). Microfinance for self-help groups.Kurukshetra. Narayan, D. (2002). Empowerment and Poverty Reduction:A Source Book. Washington: World Bank. Pitt, M., Khandker, S., & Cartwright, J. (2006). Empowering Women with microfinance:Evidence from Bangladesh. Economic Development and Cultural Change, 791-831. RBI. (1999). Report on Micro Credit,Micro Credit Special Cell,Central Office, Mumbai. Satish, P. (2001). Some Issues in the Formation of SHGs. Indian Journal of Agricultural Economics, 56 (3). Shylendra, S. (1994). Institutional Reforms and Rural Poor:The Case Study of a RRB's, Working Paper No 71. Anand: Institute of Rural Management (IRMA). Yunus, M. (1999).Banking to the Poor:Micro Lending and the battle against World Poverty. New York: Pacific Affairs.

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Women Empowerment through Self Help Group: A Study of Varanasi District in Uttar Pradesh By Rajkiran Prabhakar and Shilpi Raj

Introduction Self-Help Group is a small voluntary association of poor people preferably from the same socio-economic back drop. The micro-credit given to them makes them enterprising. It can be all women group, all-men group or even a mixed group. However, it has been the experience that women’s groups perform better in all the important activities of SHGs. Origin of SHGs in India In 1976, Prof. Mohammed Yunus of Bangladesh started women’s groups in Bangladesh and developed thrift and savings among the poorest. Now it has developed into a bank named Bangladesh Grameen Bank. Its report in February 1998 states that the bank has 1138 branches and covers 39572 villages. It has 2367503 members of which only 124571 are men. The bank has disbursed a cumulative amount of US $ 2714.61 Million whereas the savings of the members has reached US $ 202.73 Million. With the success of BGB and similar organisations elsewhere, the concept of Micro credit has gained momentum in India. Based on this success many Non-Governmental Organisations (NGOs) in our country are involved in organising SHGs and they serve as an agent between the bank and the poor. 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, as well as in other activities (income generation, natural resources management, literacy, child care and nutrition, etc.). The 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. In our country the pioneer in this field is Self-Employed Women's Association (SEWA). Without the Grameen model SEWA was started in 1972. Though started as a Trade union for women in the unorganised sector, today SEWA boasts of running the first Women's Bank in the country. By the year 2000 SEWA has a membership of 209250. The SEWA Bank has 87263 depositors, and 41757 borrowers whose loan outstanding us Rs.887 lakhs 4 as on March 1998. SEWA has also networked many co-operatives and emerged as the largest federation of co-operatives in the country. In Southern India organisations like PRADAN, MYRADA, ASSEEFA, MALAR etc. have entered into this rural credit system. PRADAN has a membership of 7000 women who have availed 40000 loans worth $ 600000 as on March 1997. MYRADA has 62769 members who have saved RS.48 lakhs and availed loan to the tune of Rs.2.90 crores. MALAR has a membership of 15000 women who have saved RS.86 lakhs and availed loan to the tune of Rs.2.23 crores. NABARD refinances the banks, which lend to SHGs. As per NABARD's Annual Report 1998-99, banks have financed 30447 SHGs with a finance of Rs. 53 crores as on 31st March 1999. The repayment is excellent. The Finance Minister in his budget speech has asked NABARD and SIDBI to increase the number of SHGs to 100000. Even this number will be minuscule as it will cover only 2000000 people in our country which has nearly 38 Crores of people below poverty line. MALAR has 325

emerged as a new self-reliant model for our nation. An offshoot of the Total Literacy Campaign in Kanyakumari

District, MALAR has emerged as an organisation of poor women who share the interest income to sustain a full time structure, office and training schedule. This has kindled a new hope. Already 10 districts in Tamilnadu have undergone training at MALAR and started similar organisations for micro-credit. Revamping of the rural credit system has already started. The banks Regional Rural Banks, Co-operatives and SHGs linked with Non-Governmental Organisations (NGOs) have a role to play. There is need for closer study to support the system. So that the country can eradicate poverty at least in the beginning of the next millennium. NABARD introduced a Pilot Programme for starting and lending to SHGs in 1992 based on the experience of BGB and MYRADA. Now seeing the success in repayment many banks are eager to lend to SHGs and because of the pressure from Govt. NABARD has started giving targets to Banks. NABARD also provides training support, Grant cum Aid support for micro credit under it's different schemes. SIDBI has entered this field late but now SIDBI has formed a Micro-credit foundation, which gives loans to NGOs after rating them by an external agency. The minimum loan is Rs.50 lakhs and it is to be used only for micro enterprises. Rashtriya Mahila Kosh - an organisation promoted by Govt. Of India also gives direct loans to NGO's for on lending with incentives for proper repayment. All Banks including co-operative Banks and Private Banks lend to SHGs based on their savings at the ratio of 1:1 initially and this can go upto 1:4. Suddenly World Bank and IMF have found a way to reach the poor through NGOs and they see this an opportunity to reduce poverty and also to prevent the poor from agitation because of the ill effects of their Economic policies. The Government of India, which is under IMF and WB guidance, has launched schemes scrapping Integrated Rural Development Programme, Scheme for Urban Micro enterprises, Prime Ministers, Urban Poverty alleviation programme and TRYSEM. The Schemes are known as (1). Swarnajayanti Gram Swarozgar Yojana – SGSY. (2). Swarnajayanti Sahahari Swarozgar Yojana – SJSRY The former is for Gram Panchayats and the latter for Town Panchayats, Municipalities and corporations. According to this scheme, the Panchayats will select the good group with assistance from BDO, Bank and NGOs and provide Rs.10000/- as revolving fund -free of Interest and then banks will provide loan to the group - seeing the performance. There is an individual subsidy of 30% for those who do individual enterprises and 50% subsidy for Group enterprises. After the introduction of this scheme NGOs and Panchayat are forming groups or trying to get control of the Groups and funds. The scheme has a trap. If the repayment under this scheme is less than 70% in a Panchayat, nobody will get loan in this Panchayat. After the Micro Credit summit held at Washington WB, IMF and many foreign funding agencies have directed their projects towards micro-credit. Now Govt. of India has also directed CAPART and other funding agencies to focus on micro credit because of which all NGOs are running after people to for SHGs so that they can get funds. Thus a slow and steady SHG movement started during 1990s in India truly representing the concerns of the poorest of the poor. Self Help Groups (SHGs) in India, have emerged as a serious alternative to private microfinance institutions (MFIs). Recent figures indicate that SHG members (47.1 million) comprise more than three times those of MFI members (14.1 million) (Srinivasan, 2009). Researchers face the difficulty of properly evaluating the SHG programs both due to their national scale and measuring impact on current borrowers. However, up to now impact studies of SHGs have limited themselves to pre-post evaluations, which do not pass minimum evaluation criteria (NCAER, 2008). In this paper we will provide a practical methodology which will measure the impact SHGs on women empowerment. For women to turn out to be a flourishing entrepreneur, she needs way in to capital, managerial knowledge and market. The spirit to authorize rural women lies in catalyzing suitable economic activities at the grass root level and thus by creating new opportunities for them to earn higher income. This improves their standard of living. This purpose could be proficient by establishing enterprises that are based on the locally available resources. Consequently, it is imperative and extremely necessary to make rural women empowered in taking decisions to enable them to take them in the central part of any human development process.

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Women Empowerment In India, the trickle down effects of macroeconomic policies have failed to resolve the problem of gender inequality. Women have been the vulnerable section of society and constitute a sizeable segment of the povertystruck population. Women face gender specific barriers to access education health, employment etc. Micro finance deals with women below the poverty line. Micro loans are available solely and entirely to this target group of women. There are several reason for this: Among the poor, the poor women are most disadvantaged –they are characterized by lack of education and access of resources, both of which is required to help them work their way out of poverty and for upward economic and social mobility. The problem is more acute for women in countries like India, despite the fact that women’s labour makes a critical contribution to the economy. This is due to the low social status and lack of access to key resources. Evidence shows that groups of women are better customers than men, the better managers of resources. If loans are routed through women benefits of loans are spread wider among the household. Since women’s empowerment is the key to socio economic development of the community; bringing women into the mainstream of national development has been a major concern of government. The ministry of rural development has special components for women in its programmes. Funds are earmarked as “Women’s component” to ensure flow of adequate resources for the same. Besides Swarnajayanti Grameen Swarozgar Yojana (SGSY), Ministry of Rural Development is implementing other scheme having women’s component .They are the Indira Awas Yojana (IAJ), National Social Assistance Programme (NSAP), Restructured Rural Sanitation Programme, Accelerated Rural Water Supply programme (ARWSP) the (erstwhile) Integrated Rural Development Programme (IRDP), the (erstwhile) Development of Women and Children in Rural Areas (DWCRA) and the Jowahar Rozgar Yojana (JRY).Economic empowerment results in women’s ability to influence or make decision, increased selfconfidence, better status and role in household etc. Micro finance is necessary to overcome exploitation, create confidence for economic self-reliance of the rural poor, particularly among rural women who are mostly invisible in the social structure. Review of literature Some evaluations paint a positive picture of the impact of credit programs on women's lives (Kabeer 2001). Access to savings and credit can initiate or strengthen a series of interlinked and mutually reinforcing ‘virtuous spirals’ of empowerment (Mayoux, 2000). The first set of assessments point out that women can use savings and credit for economic activity, thus increasing incomes and assets and control over these incomes and assets (Mayoux, 2000). Rahman (1986) established that “active” women loanees had higher consumption standards and a role in household decision-making, either on their own or jointly with their husbands, than ‘passive’ female loanees. Both in turn had significantly higher consumption standards and were more likely to partake in household decision-making than women from male loanee households or from households who had not received credit. Similarly, Self-help groups through microcredit have an important role in lessening the vulnerability of poor by creating assets, income and consumption smoothing, providing emergency assistance, and empowering and making women confident by giving them control over assets and increased self-esteem and knowledge (Zaman 2001). A World Bank study found that a 10 per cent increase in borrowing had led to an increase in women’s non-land assets by 2 per cent for loans from the Grameen Bank and 1.2 per cent for loans from the Bangladesh Rural Advancement Committee (BRAC) (World Bank 1998). In India, microcredit studies done on groups dealing with dairy farming have noted positive profit levels and short payback periods for loans (Lalitha and Nagarajan 2002). During the South East Asian economic crisis, self-help groups proved to be important cushions and safety nets; a high proportion of the funds made available for self-helpmicro credit schemes were utilized by women, facilitating them to meet the subsistence requirements of their families during those hard economic times (ESCAP 2002). Another group of evaluations have tried to establish that economic contribution may increase their role in economic decision making in the household, leading to greater well being for women and children as well as men (Mayoux, 2000). A study by Pitt and Khandker (1995) in exploring the impact of female membership of credit programs found that women's preferences carried greater weight (compared to households where either men received the loans or in households where no loans had been received) in determining decision-making outcomes 327

including the value of women's no land assets, the total hours worked per month for cash income by men and women within the household, fertility levels, the education of children as well as total consumption expenditure. It has also been studied that women’s increased economic role may lead to change in gender roles and increased status within households and communities (Mayoux, 2000). Hashemi, Schuler, and Riley (1996) explored the impact of credit on a number of indicators of empowerment: (i) the reported magnitude of women's economic contribution; (ii) their mobility in the public domain; (iii) their ability to make large and small purchases; (iv) their ownership of productive assets, including house or homestead land and cash savings; (v) involvement in major decision making, such as purchasing land, rickshaw or livestock for income earning purposes; (vi) freedom from family domination, including the ability to make choices concerning how their money was used, the ability to visit their natal home when desired and a say in decisions relating to the sale of their jewellery or land or to taking up outside work; (vii) political awareness such as knowledge of key national and political figures and the law on inheritance and participation in political action of various kinds; and finally, (viii) a composite of all these indicators. They found that women's access to credit was a significant determinant of the magnitude of economic contributions reported by women; an increase in asset holdings in their own names; an increase in their purchasing power; their political and legal awareness and their composite empowerment index. BRAC loanees report significantly higher levels of mobility and political participation. Grameen members reported higher involvement in “major decision-making”. The study also found that access to credit was associated with anoverall reduction of the incidence of violence against women; women's participation in the expanded set of social relationships as a result of membership of credit organizations rather than increases in their productivity per se were responsible for reductions in domestic violence. Research Design The financial institution in India has not been able to reach the poor households particularly women in the unorganised sector. Structural rigidities and overheads led to high cost in advancing small loans. Experience in implementing different anti-poverty and other welfare programmes has shown that key to success lies in starting appropriate community- based organisations with participation at the grass-root level. Moreover, the group approach may be one of the effective ways to remove the difficulties of small businessmen and agriculturist. Motivating individual farmers, artisans and entrepreneurs to form small groups to pool their resources to handle selected operations may lead to great success. The distinguishing feature of the SHGs is creating social and economic awareness among the members. The social awareness enables the members to lead their lives in a sound hygienic environment and pursue a better living. The women members involve themselves more in taking decisions regarding the education of their children, the investment of the family, managing the economic assets of the family and bringing up cohesion among the members of the family and others for a better living. Hence the present study is undertaken to study the performance of SHG in Varanasi district of Uttar Pradesh in India. Further an attempt is also made to evaluate the social and economic benefits accruing to the women of the society who are members of SHGs Objectives of the study 1. To evaluate the performance of the selected SHGs in Varanasi district. 2. To analyse the impact of participation in self-help groups on women empowerment. Area of the study For selection of the sample respondent the researcher has selected three blocks of Varanasi District namely Chiraigaon, Cholapur and Kashi Vidyapeeth. Varanasi district is located in Uttar Pradesh in India. 157 members of different self-help groups from these three blocks were selected by adopting simple random sampling as the sample for the study.

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Methodology The present study is based on an empirical analysis of the impact of participation in self help group on women empowerment. Primary data is collected with help of questionnaires. Secondary data has also been taken from books, journals and magazines. Limitations The report has been prepared on the basis of data collected from the field and published secondary data. The study findings and recommendation given are based on the limited coverage of only 3 blocks of Varanasi district. Poor availability of secondary sources of data was also a big constraint to the study. Self Help Groups in Uttar Pradesh: Coverage Ratio Demographic characteristics of sample respondents Table 1 : Age wise classification of sample members Age Less than 30 30-40 More than 40 Total

No. of members 73 39 45 157

Percentage (%) 46.50 24.84 28.66 100

Source primary data

Table 1 shows the distribution of the sample members according to their age. It can be seen that majority of the sample members are of less than 30 years i.e, 46.5% and 24.84 % of age between 30-40 while only 28.66% of sample members are above 40 years. There is no maximum age limit for joining SHGs but minimum age limit is 18 years. Table 2 : Occupational status of the sample members Category Labourer Farmers Self-employed Other Total Source primary data

No. of members 63 49 22 23 157

Percentage (%) 40.12 31.21 14.01 14.64 100

It can be seen from table 2, 40.12% of sample members are labourers while 31.21% are farmers, 14.01 % are self-employed and 14.64% are engaged in some other type of occupation. Before joining the SHGs most of the members were housewives and they were engaged only in household activities but now after joining the SHGs their role in economic activities have become significant. Table 3 : Category wise classification of sample members Community Schedule caste Backward class Forward class Total

No. of members 77 53 27 157

Source primary data

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Percentage (%) 49.1 33.7 17.2 100

Table 3 shows the category wise classification of the sample members. The sample consists all different types of communities of the society. There is 49.1% schedule caste, 33.7 percent backward class, and 17.2% forward class. Women belonging to any community can become a member. Table 4: Literacy level of the sample members Literacy level Illiterate Can sign Up to standard V Up to standard XII Graduate Total

No. of members 79 65 6 7 0 157

Percentage (%) 50.31 41.40 3.82 4.45 0 100

Source primary data

The above shown table 4 shows the literacy level of the sample respondents where 50.31% respondents are illiterate, while 65 out of 157 members can sign, 6 of them are educated upto std V, and 7 of the have studied upto std XIIth and none of them are graduate. Table 5: Marital status of the sample members Marital status Married Widow Total

No. of members 134 23 157

Percentage (%) 85.35 14.65 100

Source primary data

Table 5 shows the marital status of the sample members where 85.35% of the respondents are married while 14.65 are widow. it is interesting to notice that none of the sample members are not members. Table 6: Opinions of the sample members regarding self-worth before and after joining the SHGs Response Could realise their worth Could not realise their worth Total

Before joining 33 (21.01) 124(78.98)

After joining 150(95.54) 7(4.45)

157

157

Figures in brackets indicate percentage to total

The above table shows the opinion of sample members about the self worth before and after joining the group. It shows how these members perceive themselves. It was found that 33 out 157 members could realise their worth while the rest 124(78.98%) were not aware of their potential before joining the group and after joining the group 94.90% of the sample members were able to realise their worth. And not only had this also helped the members to get an improved status and increase in respect within the household. Table 7: Distribution of members based on their confidence to face the financial crisis before and after joining the SHGs Response Confident Not confident Total

Before joining 19 (12.10) 138 (87.89) 157

Figures in brackets indicate percentage to total

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After joining 153 (97.45) 4 (2.54) 157

Before joining the self help group the members were unaware of the government assistance programmes and schemes but after joining the group they have more information about the government programmes due to their exposure and can apply for them for their own betterment and the benefit of the community as it is very much evident from the table 7, after joining 97.45% of the sample members were confident to face the financial crisis. Such a confidence have been achieved by learning through different training programmes through the self help groups Table 8: Distribution of members according to response in helping neighbours Response Willing to help Not willing to help Total

Before joining 67 (42.67) 90 (57.32) 157

After joining 139 (88.53) 18 ( 11.46) 157

Figures in brackets indicate percentage to total

The self-help group is a group entity no one can run such groups in isolation. It requires a lot of group effort for smooth and successful running of the group. It can be seen very clearly that after joining the group 88.53% of the members are willing to help their neighbours. Group activities have also helped them to recognise the benefits of team work. Table 9: Distribution of members according to response on decision on important matters taken by themselves before and after joining the SHGs Response Could take decision Could not take decision Total

Before joining 16 (10.19) 141 (89.80) 157

After joining 148 (94.26) 9 (5.73) 157

Figures in brackets indicate percentage to total

Table 9 shows the contribution of the female members of the household in decision making on the important matter in the family. Exposure to information have helped them increase their participation in decision-making within the household to issues that were usually considered outside the domain of woman. It is very much evident in the table before joining only 10.19 of the sample members were able to take decision on important matter while after joining the group a major portion of the sample i.e, 94.26% members were able to participate in decision making in important matters. Table 10: Distribution of members according to nature of communication in meeting before and after joining SHGs Response Hesitant Can talk freely Total

Before joining 126 (80.25) 31 (19.74) 157

After joining 29 (18.47) 128 (81.52) 157

Figures in brackets indicate percentage to total

Table 10 shows that joining of the group have helped the members a lot overcome their hesitation. After joining the group 81.52% of sample members feel fearless, open and confident, while talking to the male persons in their village, which they were not confident to do before because of cultural reasons.

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Table 11: Protest against husbands’ harassment before and after joining the SHGs Response Protesting Not protesting Total

Before joining 37 (23.56) 140 (89.17) 157

After joining 143 (91.08) 14 (8.91) 157

Figures in brackets indicate percentage to total

Table 11 shows that before joining the group only 23.56% of sample members could protest against husbands’ harassment on the other hand after joining the group 91.08 % protest against husbands’ harassment the sample members women. The sample members could Table 12: Protest against drinking alcohol and gambling Response Protesting Not protesting Total

Before joining 43 (27.38) 114 (72.61) 157

After joining 152 (96.81) 5 (3.18) 157

Figures in brackets indicate percentage to total

Table 12 shows that before joining SHGs 27.38% of the sample member were able to protest against drinking alcohol and gambling while after joining SHGs 96.81% of sample members were able to protest against drinking alcohol. Exposure to information has enabled the women to react against drinking alcohol and gambling Table 13: Protest against child labour before and after joining SHGs Response Protesting Not protesting Total

Before joining 48 (30.57) 109 (69.42) 157

After joining 123 (78.34) 34 (21.65) 157

Figures in brackets indicate percentage to total

Table 13 shows that before joining SHGs only 30.57% of the sample members were able to protest against child labour and after joining 78.34% of the sample members were able to protest against child labour. Joining the SHGs have made them aware about the legal rights and have also enabled them to oppose to activities which are unlawful. Table 14: Protest against female infanticide before and after joining the SHGs Response Protesting Not protesting Total

Before joining 16(10.19) 141(89.80) 157

After joining 146(92.99) 9(5.73) 157

Figures in brackets indicate percentage to total

Table 14 shows that 92.99% of the sample members can protest against female infanticide while only 10.19% of them could protest before joining SHGs because of the social customs and conventions female child are considered as liabilities so many illiterate parents tend to kill their female child. But the SHGs have created awareness about the importance of females in society and family that has helped in strengthening the voice against female infanticide.

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Table 15: Distribution of members protesting against demand of dowry Response Protesting Not protesting Total

Before joining 45(28.66) 112(71.33) 157

After joining 147(93.63) 10(6.36) 157

Figures in brackets indicate percentage to total

Tables 15 shows that after joining SHGs 93.63% of the sample members were able to raise their voice against dowry while before joining the group only 28.66% of the members could protest against dowry Table 16: Availing medical facilities by sample members Response Availing medical facilities Not availing medical facilities Total

Before joining 53(33.75) 104(66.24)

After joining 154(98.08) 3(1.91)

157

157

Figures in brackets indicate percentage to total

Table 16 shows that before joining the SHGs only 33.75% of the sample members were availing medical facilities while after joining SHGs 98.08% of the sample members are availing medical facilities. This is due to the awareness created by the SHGs about the health and hygiene facilities. Table 17: Members having sanitary facilities within their houses Response Having facility Not having facility Total

Before joining 42(26.75) 115(73.24) 157

After joining 152(96.81) 5(3.18) 157

Figures in brackets indicate percentage to total

Table 17 shows that before joining SHGs only 26.75% of the sample members were having sanitary facilities within their houses but after joining 96.81% of the sample members were having sanitary facilities within their houses. Table 18: Members having water supply within their houses Response Having Hot having Total

Before joining 49(31.21) 108(68.78) 157

After joining 157(100) 0(0) 157

Figures in brackets indicate percentage to total

Table 18 shows before joining only 31.21% of the members were having water supply within their houses but after joining SHGs 100% of the members are having water supply within their houses.

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Table 19: Distribution of member on literacy level before and after joining Literacy level No. of members Illiterate Can sign Up to standard V Up to standard XII Graduate Total

Before joining 79(50.31) 65(41.40) 6(3.82) 7(4.45) 0 157

after joining 0 144 (91.71) 6(3.82) 7(4.45) 0 157

Figures in brackets indicate percentage to total

Table 19 shows the difference achieved in literacy level of the members before and after joining the group. All group members learn to sign their names as it is very much evident from the above table as it shows before joining SHGs 50.31% of the sample was illiterate and only 41.40% of them could sign but after joining SHGs 100% of them are literate and can sign Table 20: Responses of members regarding sending their children to school and colleges Response Sending Not sending Total

Before joining 63(40.12) 94 (59.87) 157

After joining 155(98.72) 2(1.27) 157

Figures in brackets indicate percentage to total

The table 20 shows after joining SHGs 98.72% of the sample are sending their children to school and colleges while earlier only 40.12% of the sample members were sending their children to school and colleges. People have realised the importance of education and now members are actively participating in the decision to send their children to school and colleges. Table 21: Exercising the voting right in elections Response Exercising the voting right Not exercising the voting right Total

Before joining 21(13.37) 136(86.62)

After joining 157(100) 0

157

157

Figures in brackets indicate percentage to total

Table 21 shows before joining SHGs only 13.37% of the sample members could exercise their voting rights but after joining SHGs 100% of them can exercise voting rights. Awareness about politics have helped the members to understand their legal rights and getting engaged in political participation by way of voting Conclusion The study shows that SHGs has touched every aspect of the members’ life whether personal, social, or economical and thus SHGs are contributing effectively in the process of making women socially and economically empowered. The SHGs, which are linked with the NGOs provide support in financial services and specialized training to the groups, have a greater ability to make a positive impact on women empowerment. Studies related to credit accessibility to women demonstrates that the direct access to institutional credit to rural women is very limited and also suffers from the sex bias in extending it to them. These groups have proved as cyclic agents of development in both the rural and urban areas. The SHG’s after being formed started collecting a fixed amount of thrift from each member regularly. After accumulating a reasonable amount of resources, the group starts lending to its members for pretty consumption needs. If the bank is satisfied with the group in terms of (i) authenticity of 334

demand for credit; (ii) ability of the members to handle the credit; (iii) repayment behaviour within the groups; and (iv) the accounting system and maintenance of the records, it extends a term loan of smaller amount to the group. Micro-finance interventions through SHGs programmes are well-recognized world over as an effective tool for empowering women. Micro-finance through the network of cooperatives, commercial banks, regional rural banks, NABARD and NGO’s has been largely a supply driven recent approach. Numerous traditional and informal system of credit that was already in existence before micro finance came into vogue. Viability of micro finance needs to be understood from a dimension that is far broader- in looking at its long-term aspects too. Very little attention has been given to empowerment questions or ways in which both empowerment and sustainability aims may be accommodated. Failure to take into account impact on income also has potentially adverse implications for both repayment and outreach, and hence also for financial sustainability. An effort is made here to present some of these aspects to complete the picture. References •

Biswas, T. 2007 “ women empowerment through micro finance: A boon for development” paper presented on Gender issues & Empowerment of women, Indian Statistical Institute 1-2-Feb 2007

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Kabeer, N (2001) Conflicts over credit: Re-evaluating the empowerment potential of Loans to women in rural Bangladesh. World Development, vol 29,issue 1, 63–84

•

Lalitha, N. and B.S. Nagarajan(2002) Self-help Groups in Rural Development. NewDelhi, Dominant Publishers and Distributors

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M.Anjugam and C. Ramasamy, (2007) “Determinants of Women’s participation in Self-Help Group led micro finance programme in Tamil Nadu, Agricultural Economics Research Review, 2007, vol. 20, issue 2

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Mayoux, L. (1999). Questioning virtuous spirals: Microfinance and women’s empowerment in Africa. Journal of International Development, 11, 957–84 NABARD. 2003. SHG-Bank Linkage in India. Mumbai, NABARD.

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Rahman, R. I. 1986. Impact of Grameen Bank on the situation of poor rural women. BIDS Working Paper No. 1, Grameen Evaluation Project. Dhaka: Bangladesh Institute of Development Studies

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NABARD Report On Status of Microfinance In India 2011-2012

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Subrahmanyam .N, (2009-10), “Micro Finance and SHG-Bank Linkage: Regional Analysis and Perspectives”, Prajnan, Vol.XXXVIII, No.3, pp 183-202

•

S.Subramanian, A.Soundra Rajan and P. AmirthaGowri,2013 “Social Change And Development Of Women Through SGHS- An Empirical Research” Journal of Marketing and Communication,vol 8, issue 3

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Venkatesh.J and Kala.K, “Upholding Of Microfinance Self Help Groups”, JM International Journal Of Management Research January, 2011,vol 1, issue 2, 172-175

•

Zaman, H. 2001. Assessing the poverty and vulnerability impact of micro-credit in Bangladesh: a case study of BRAC. In World Bank, World Development Report 2000/2001, Washington, World Bank.

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Agriculture Insurance in Nepal: Prospects and Challenges By Rabindra Ghimire and Prashant Kumar

Introduction Nepal is situated in the lap of the Himalayas and landlocked between India (South, East and West) and China (North) having area of 1,47,181 Km2 which is divided into three distinct ecological zones running East-West; the Terai in the South, the hills and mountains in the middle and the Himalayas to the North. The unique and varied topography, whilst undoubtedly beautiful, renders 80% of the land uncultivable; this places even greater emphasis and importance on the way the small percentage of cultivable land is managed and utilized. The total population of the country is 26.6 million, where male to female ratio is 94.4 percent and population growth rate is 1.4 percent. Almost four fifth of the population (83%) is living in villages (CBS, 2012). The size of economy (Nominal GDP in producer's price) in 2011/12 was US $18 billion and growth rate was 3.9 percent while agriculture and forestry sector grew by 4.5 percent. Per capita income of the same period was US $ 712 (Economic Survey, 2012). According to the National Survey, 25.2 percent of population is below the poverty line (NLSS III, 2011) and the Gini Index, which depicts income inequality, coming down to 0.33 percent. Agriculture is the mainspring of Nepal's economy. It provides a livelihood for the majority of the population, employing four-fifths of the total labour. Nepal is predominantly an agricultural country and hence the development of this sector in order to promote equity and justice in the country is extremely important. The percentage of GDP generated from agriculture and forestry sector was 35% (Economic Survey, 2012). Arable land in Nepal is only 17 percent (3091,000 hector cultivated and 1030,000 hector uncultivated) which is more concentrated in the southern terai (plain) region. Once an exporter of rice, Nepal now has a food deficit (MOAD, 2012).Despite rich water resources in Nepal with over 6,000 big and small rivers, irrigation facilities are minimal, and the investment of modern means of production on the land nominal comparing other sectors. Even though, agriculture sector occupies one third space in country's GDP and provides employment opportunities to two third of its populace, the sector could not be increased its productivity as expected despite the fact (Sharma et al, 1996). The livelihood of almost 3.7 million household (76.3 percent of population) depends on agriculture out of them three fourth of the population has less than 1 hector land holding which covers almost 68 percent of total arable land. Seventy-eight percent farm holdings have been reported to be producing mainly for home consumption. The proportion of holdings that produce mainly for sale is not even 1 percent, while little over 21 percent farm families use their farm produce almost equally for both sale and home consumption (CBS, WB, DFID, & ADB, 2006). Nepal’s agriculture is largely based on low-value cereals and subsistence production, with a mere 13 percent of output traded in markets. Only about one-fifth of irrigable land has access to year round irrigation (Sharma, 1999). Livestock is an important agricultural sub-sector in Nepal, accounting for approximately 29 percent of agricultural GDP and about 11.5 percent of total GDP. Estimated livestock population for in Nepal was as follows: goats 8,762,000, cattle 7,199,000, buffalo 4,832,000, pigs 1,062,000, and sheep 797,000. Buffalo contributed 1,066,000 MT (71.3%) of the total milk production, and 162,213 MT (65.3%) of the total meat production in 2009/2010. Coinciding with human population, there is a proportionate increase in the buffalo population in last 30 years in Nepal (Economic Survey, 2010). 336

There are different views regarding the increase in productivity of agriculture sector. One view is reformist that believes on effective land management, enhancement of irrigation facility, easy availability of chemical fertilizers, agricultural tools and improved seeds and seedlings, extension of agriculture credit facility, marketing of agricultural produces in order to ensure the availability of essentiality of agricultural inputs, providing insurance facilities etc. The another view is revolutionary view that believe on transfer the ownership of land from nonworker owner peasants and real working farmer than after reforms on agricultural practices would increase the productivity. Agriculture development is the foundation for the sustainable economic development and the major source of income for the people. Though, insurance itself may not be the ultimate and decisive solution to increase the productivity agriculture sector, it plays vital role to maintain the financial stability and mitigate the risk of insurers in adverse situation. The paper aims to review the existing Microinsurance regulatory framework and practices of Nepal and suggest appropriate delivery model of agriculture insurance in the context of Nepal on the basis of existing resources and structure. Furthermore, it sheds light on prospect and challenges of agriculture insurance in Nepal. The paper is organized into five sections. After this introductory section, section two summarizes the relevant literature on agriculture insurance, section three outlines methodology adopted in this research while section four discuss the current scenario and proposed model and the paper concludes in section five.Micro-insurance is a subset of insurance that provides financial protection to the poor for certain risks in a way that reflects their cash constraints and coverage requirements (Chandani, 2009). It is risk management system involving low-income groups in which individuals, businesses, or other organizations pay a certain sum of money know as premium, in exchange for guaranteed compensation for losses resulting from certain perils under specified conditions. The general concept of Microinsurance is not different from the concept of insurance in an “ordinary” insurance market. It is considered to be the provision of insurance to low-income households that otherwise do not have access to insurance (Churchill 2006 ). Microinsurance represents an opportunity for low-income families and groups to manage their financial vulnerabilities. The Microinsurance includes the insurance of poor, low income groups' health, agriculture, livestock, climate change, natural catastrophes or composites thereof suitable for the local environment. A vast majority of the poor work in informal or agricultural sectors and do not have access to formal finance (ILO, 2001).There are various models to provide Microinsurance. Traditionally, the two most frequently used models for providing micro insurance to the poor have been the “partner/agent” model and the “mutual” or “cooperative” model. Depending on the level of insurance knowledge, financial infrastructure and regulatory environment, each of the models has its strengths and weaknesses and challenges (Reinhard, 2009). A properly designed and implemented crop insurance programme will protect the numerous vulnerable small and marginal farmers from hardship, bring in stability in the farm incomes and increase the farm production (Bhende, 2002). In agriculture sector, crop losses due to extreme weather events are a common phenomenon in agriculture, including losses in developing countries and emerging markets. The majority of these losses, estimated at 70 to 80 percent – are attributable either to a lack of rain or excess of moisture (either rain or flood) ( Herbold, 2012). Smith et al referring the research of Gardner and Kramer, 1986; Hazell et al, 1986; Goodwin and Smith, 1995; Goodwin and Smith, 2009 state that multiple peril crop insurance, insurance that protects farmers against yield or revenue losses from multiple sources of risk on their own farms, has never been successfully offered by the private sector on a purely commercial basis (Smith et al, 2011). In India and Mexico, weather based crop insurance has been developed on a large scale to protect farmers against the vagaries of the weather. Many other countries have investigated the feasibility of agricultural insurance, and some have implemented pilot programs (Raju et al, 2009). Agricultural insurance is a complex line of business that requires highly technical expertise, both in development and operational phases. Private insurance markets have proved to be efficient, without public intervention, for dealing with non-systemic risk and large farmers, but purely commercial insurance may not be viable for systemic risks or smaller farmers. The primary role of governments should be to address market and regulatory imperfections in order to encourage participation by the private insurance and reinsurance industry (Mahul et al., 2010). There are several challenges facing by the developing countries while implementing the agriculture insurance. A general lack of knowledge of the operation of the agricultural class of business in respect to underwriting, claims, and loss adjustment, Non-acceptance or low voluntary uptake by farmers, hence a low premium base. Those who did insure 337

were generally in high-risk locations (the type of adverse selection that ultimately dooms any insurance program that only uses estimates of area yield), and a lack of underwriting skill resulted in an accumulation of insured crops; the benefits paid by government in the event of major natural disasters undermined any insurance initiatives; and adequate financial support from both reinsurance and directly through government subsidy. Microinsurance, however is a social business doing by commercial insurers to fulfill their social responsibility as well as to earn profit. The supply chain of Microinsurance service is quite long from the general practice insurance product. The risk exposure should be in large numbers and basically policy is sold on group basis. So, delivery channel is an additional component. Supply chain of typical Microinsurance program depicts in figure 1. Insurers reach to ultimate policyholder through social agents (delivery channel) and get reinsurance service by reinsurers. So, unlike to general insurance, Microinsurance has one additional channel. Fig 1: Microinsurance Supply Chain

Source: Microinsurance Center, 2010

There are several views and model for crop insurance, basically an indexed basis (claims are a function of a defined index chosen to be a good proxy for incurred crop loss) and or an indemnity basis (claims are based on actual crop losses) and there not consensus amongst academics or practitioners as to the best form for crop Microinsurance but leading contenders include weather index insurance, area yield index insurance and group stop loss indemnity insurance. Methodology The study is based on the secondary data sources. Basically data are obtained from official publication of Insurance board of Nepal, Deposit Insurance and Credit Guarantee Corporation, Ministry of Finance Health and Population, Agriculture and Cooperatives of Nepal, Insurance companies of Nepal, FINGOs, Involve as a Microinsurance agents, Microinsurance Academy, Foreign regulatory body of insurance including IRDA, IAIS, ILO and so on. Large body of literature published in national and international journals are obtained in physical form and electronic version, Acts, Rules and directives of Insurance Board has reviewed. Information for this research study basically obtained from concerned official websites. Couple of researches report carried out on microinsurance in Nepal has consulted. Since the paper is qualitative in nature, existing policies and program documents are reviewed and analyzed. On the basis of the analysis conclusion has been drawn. Insurance Industry in Nepal The organized history of insurance goes date back to 1947. The ever first non-life insurance company is Nepal Insurance Companies (1947) and the first life insurance company is Rastriya Beema Sansthan (1968). During six and half decades, altogether 25 insurers (1 life and nonlife, 16 non-life and 8 life) are established. Besides, one Insurance Pool (reinsurer of RSMDST risk1) established by public private partnership and one Deposit and Credit Guarantee Corporation (insurer up to Rs. 2,00,000 of each deposit and credit) are also providing insurance services. Total assets/liabilities of the insurance companies reached to Rs. 67 billion, investments reached to Rs. 57 billion and the premium amount for FY 2011/12 was Rs. 17.48 billion. The penetration of insurance is 1.41 percent (2011/12) and density is US $ 7.9 (2009/10). Currently around 3,200 staffs and 1, 00,000 agents are getting employment. Out of 75 administrative districts, insurance companies have established their 453 branch offices in 67 districts. Still, there is no reinsurer and no separate institution to sale the micro insurance products (IB, 2012). 1 Riots, Sabotage, Miscellaneous Damage , Strike and Terrorism

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Following the legacy of Insurance Committee (established under Insurance Act, 1968) Insurance Board of Nepal was established in 1992 as an autonomous and semi judicial regulatory body to regulate and development of the industry in Nepal. Insurance Act, 1992 was promulgated in 1992. Over the six and half decade history of insurance industry, the insurance growth in Nepal is sluggish compare to neighboring countries. Urban focused activities of insurers, lack of innovative products and aggressive marketing strategies, lack of technically sound manpower, low capital base, lack of enforcement by regulator to enter into rural and deprived sector are basic characteristics of Nepalese insurance industry. Nepal is one of the least developing countries in the world where almost half of the population live below the poverty line. Majority of the farmers have experienced the loss of their crops due to the natural calamities (drought, cyclone, heavy rainfall, flood, snowfall, landslide, short span of life etc.) and manmade problems (use of more pesticides, spurious seed, price changes, problem of market access). So, agriculture has always been a risky business. Unlike the industrial sector, it is totally depends on the weather. The variations in productivity bring by nature cannot be fully maintained by farmers. It is true that since time immemorial farmers have devised measures to limit these risks: crop rotation and diversification, inter-cropping, use of low yield but hardy varieties, tillage systems, share tenancy, contractual inter-linking, development of non-farm sources of income (UNCTAD, 1994). A growing body of evidence shows that climate change is set to increase the frequency and intensity of natural hazards. A recent UN report asserts a global increase of 87% in the number of hydro-meteorological hazards (as droughts, floods and hurricanes) in the last 20 years (UN, 2007). The World Bank had conducted intensive research on feasibility of agriculture insurance in Nepal in 2009. It has suggested for the implementation pilot program on agricultural insurance for a formal assessment of the demand for agricultural insurance from small and marginal farmers in Nepal (World Bank, 2009). With a vast majority of farmers growing rain-fed crops and therefore being vulnerable to the vagaries of the monsoon rains, agricultural risk management products become particularly important for Nepal. The annual average nationwide crop yield losses vary significantly from year to year, as shown in Figure 1. In addition, this national aggregation masks a large heterogeneity among crops, where annual average losses for crops like barley, oilseed and potato can exceed 6 percent of the total value. The reasons behind the losses are insufficient rainfall, access rainfall, hail, mist, flood, landslides, lack of fertilizers, lack of pesticides, replant defects etc. Figure 1.1: Annual Average Crop Losses in Nepal (In Percentage)

Till 2012, there was no separate microinsurance related regulation. To address the necessity of microinsurance, GoN Nepal announced in budget speech of 2011/12 to provide subsidies of 50 percent in agriculture insurance 339

premium from January 2013 (MOF, 2011). "Crops and Livestock Insurance Directives, 2012" was released by Insurance Board. The directive mentioned about three categories of agriculture insurance products: (a) Crop (b) Cattle and (c) Bird, which includes crop, vegetables, horticulture, livestock, poultry and fisheries. Besides, insurer can sale other types of microinsurance products but they should need to get prior approval of Insurance Board. The directive has 6 chapters, 21 clauses, and one annex. The directive has clearly stated the upper and lower ceiling of sum to be assured of each livestock. The lower limits are Rs. 400 and 1200 and upper limits are Rs. 10,000 and 150,000 for cattle and birds respectively. The premium is 5 percent of the total sum assured (6 percent for commercial poultry) and commission amount is 15 percent of total premium. The premium for poultry is 2 percent (15 percent discount if modern technology is adopted). Similarly, for crop and horticulture insurance, the minimum area of land shouldn’t be less than ½ Ropani in hill and mountain region and 1 Kathha in Terai region. The amount of premium of the crop is 5 percent of total value insured. Group insurance of each scheme will get 15 percent discount on aforementioned premium amount. The loss bearing ratio is fixed 90 percent and 10 percent by insurer and insured respectively. (Directives, 2012) Microinsurance Practices in Nepal Insurance is more prudential supervision required business like bank and financial institution but in Nepal, in the name of sustainable poverty reduction for the poor and disadvantaged group, many microinsurance scheme have been implemented. They do not take into account the prevailing legal and regulatory framework and operated under different name such as relief scheme or protection scheme or welfare scheme in a subsistence or semi-commercial mode by different microfinance institutions (CED, 2012). Government of Nepal has provided basic health service to all citizens and treatment of special disease to elder citizens on free of cost. But, the modality is not under the insurance norms and contract. This is delivered as a duty of government to its citizen. The credit of microinsurance ultimately goes to bilateral and multilateral international development organizations, World Bank and financial institutions. Their initiation in the field of research and implementation of the small and pilot schemes inspire to the Nepalese government and commercial insurer to carry out the microinsurance program under the institutional and legal framework. Some voluntary and noncommercial schemes already practices in Nepal, are briefly illustrated below. 1. Pilot Project for Microfinance Users: Microfinance institutions have remarkable contribution to introduce microinsurance program. They are doing so to secure their loan. In the first time, Center for Micro Finance started a pilot project in Nepal in 2002 in coordination with National Life Insurance Company and other several Micro Finance Institutions ( Bindhabasini cooperative, Nirdhan Utthan Bank , Madhyamanchal Grameen Bank, Pashchimanchal Grameen Bank.) 2. Mircroinsruance through MFI: Microfinance policy, 2006 includes microinsurance as one of the microfinance services and there is no separate policy and act to regulate, supervise and mainstream microinsurance operation in Nepal and donor agency. Under the same policy, Micro Finance Institutions (MFIs) are selling microinsurance policies coordination with different non-life insurance companies. 3. Crop insurance: Crop insurance is being piloted by ADBL and yet to be tested for full scale operation. In 2008 with technical and financial assistance from Ministry of Agriculture and some cooperatives started pilot project as peril crop insurance for their members in Nawalparasi district. Currently these crop insurance programs are being implemented on a very small scale. 4. Livestock insurance: Livestock insurance is community based (milk operatives) and promoted and implemented by different agencies such as Small Farmers Cooperatives Limited s and Milk Producers Cooperatives under the technical backstopping support of different integrated community development program with mixed success. In contrast, health insurance scheme is implemented by NIRDHAN and DEPROSC under the financial support of Save the Children USA, with encouraging early successes. 5. Credit Link Insurance: Since last 20 years, credit linked livestock insurance has been offered through the Deposit Insurance and Credit Guarantee Corporation, Agricultural development banks, Small Farmer Cooperative Ltd, Community Livestock Development Project. Now, NGOs are also offering livestock insurance to its members. 340

6. Health Insurance by INGO: The oldest microinsurance scheme in Nepal started with the establishment of local health posts by the United Mission to Nepal through Lalitpur Medical Insurance Scheme. The scheme mainly covers the costs of essential drugs supplied to the health posts, beneficiaries pay an annual premium to receive free essential drugs and a range of promotional and preventive health care at nominal fees. For serious illnesses, the health posts have a provision to refer patients to Patan Hospital in Lalitpur district. 7. Health Insurance by Hospital: BPKIHS has the largest membership of any insurance scheme in Nepal, covering both the formal and informal economy. The scheme is now marketed by more than 30 Village Development Committees, municipalities, schools and colleges, socio-cultural organizations and other local community groups, as well as I/NGOs. These organizations represent 18,000 members. 8. Community Health Insurance: Other several Non-Governmental Organizations and hospitals are voluntarily providing micro health insurance program in community level and to their members of the organization. Geofont (a trade union organization) provides health insurance to its member collaboration with Model Hospital, Kathmandu and financial support of ILO. PHECT Nepal (NGO) is delivering health insurance to the member of five health cooperatives and one Health Information and Service Centre to the community through local clinics. (ILO,2001) 9. Health Insurance by NGOs: DEPROSC Nepal Nirdhan Uthan Bank (NGOs) are also providing health insurance in support of Micro Insurance Academy, India for the three years period (2009 -2013). Around 5000 people are getting member of such health insurance in the name of "Saubhagya Microhealth insurance". The program is limited in two districts: Dhading and Banke. (MIA, 2013) 10. Credit Insurance through Cooperatives: National Federation for Savings and Credit Union Nepal (NEFSCUN) in partnership with selected Savings and Credit Cooperatives (SCCs) has implemented credit insurance to its members. 11. Insurance by Commercial Insurers: Private commercial insurers enter into livestock insurance within limited coverage however; the crop sector does not seem to be very attractive to insurance companies. Only seven out of the 17 companies in the country entering the field of agriculture insurance. Service Delivery Model of Agriculture Insurance in Nepal The model is proposed for the effective implementation of agriculture insurance in Nepal with the coordination between Ministry of Agriculture Development, Insurance Board and Insurance Companies as well as institutional agents ( NGOs/CBOs/ FI/ Farmers self help groups and voluntary organizations which depicts in figure 3. i. Ministry of Agriculture Development (MOAD): Government's bureaucracy mechanism is huge and effective since it has 75 Agriculture Development Office (ADO) all over the country (each district has one office). ADO has Agriculture Specialist and medium level technicians and 378 Service centre where Technicians are available round the year. They may certify farmers' agriculture products (crop, horticulture and livestock) to be insured. MoAD provides subsidies amount to Insurance Board and Board distribute the subsidy to insurance company as per the claim made by them. ii. Insurance Board of Nepal : Regulates the microinsurance industry through releasing the rules, guidelines, directives and policies, publish materials to increase awareness about the microinsurance giving focus to poor and vulnerable community, provide training to agents and staffs, scan and monitor the environment through appropriate data, provide subsidies to insurers. Board need to assist on product designing and marketing

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Fig 3: Service Delivery Model of Agriculture insurance in Nepal (in a Existing Scenario)

iii. Agency / Intermediaries/ facilitator: Access to each and every farmer's field and house is not possible to insurer due to time, cost and resources constraints so that agency based marketing system is popular in insurance. The agents may be registered NGOs, CBOs, farmers' self help group, cooperatives, Micro finance institution, socially active groups, micro-credit groups and private companies which help farmers to get insurance policy. They are working in each VDC2s and Municipalities3. They have sound knowledge of local product, meteorology, hydrology, climate and weather pattern, geographical fragileness, flood and landslide, epidemiological pattern etc. who provide authentic suggestion to insurer. “The companies might use local co-operatives that are already in existence  at the local level to issue the policies and collect premiums along with creating awareness regarding insurance making it less costly for the insurance companies. 2 There are currently 3913VDCs. VDC are bottom level administrative unit, it is divided in to 9 wad. 3 There are currently 58 municipalities and additional 41 are announced

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iv. Commercial Insurers: Currently 17 insurers are doing non-life insurance business. They are equipped with technology, capital and resourceful staffs but they need to increase their expertise on microinsurance sector especially on product design and risk assessment, underwritings, loss assessment. They are the real players of the market. They issue policy through intermediaries. They get sufficient cooperation from intermediaries while designing and marketing the products, risk assessment, loss assessment and settlement of claims. v. Clients / Insured / Policyholders / Beneficiaries: More than 3.7 million households have some lands and they are involving in cultivating crops, keeping cattle and poultry. They are target customers of microinsurance disregarding the geographical regions, caste and income level. They have strong need of risk management and protection on their crops and livestock which is only the means of their livelihood. If they loss these things, they will be suffered from famine year the round. They will get subsidies by government if they purchase agriculture insurance policy. The subsidy is proposed in a range of 100 to 50 percent. Ultra poor deserves 100 percent subsidy whereas average farmer gets 50 percent. The level of poverty is determined by various factors (regular cash flow, annual income, property, physical health, number of family members etc.). On the basis of his personal details, Insurance Board will categorize clients level of poverty and determine the percentage of subsidy. Subsidy on premium is to be paid to insurers by Insurance Board from Agriculture Insurance Pool and beneficiary gets financial compensation against the loss when named peril occurs. In case of huge catastrophe loss, government should manage the catastrophe fund which can be pooled from the various sources. The international technical as well as financial support also can be sought. Figure 3 exhibits the proposed Agriculture insurance delivery mechanism for Nepal. The model will be workable nationwide but it can be further modified as per the requirement of local settings. The model is flexible to form the coordination team among the commercial insurers in national level, district level and village level as per the requirement of the situation. In district level a coordination committee can be formed among the District Agriculture Development Office, Institutional Agents and commercial insurers so that effective marketing, implementation, monitoring and claim settlement could be possible. Figure 2 exhibits the synopsis of responsibilities of all players involves in agriculture microinsurance industries (AMI). The proposed model will be feasible for short period until new microinsurance company establish. The proposed company should be established in collaboration with government and private sector insurers. During the initial phase company needs more government fund for subsidies and administrative expenses. After long period, government subsidies will be gradually decreased to certain level while private sector able to financially sustain in microinsurance product line. Fig 2: Responsibilities of Different Players of Microinsurance Industry

Source: Developed by author based on various literatures

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Challenges Ahead Obviously, challenges are ahead but these can be minimized through strong regulatory framework, clear vision and policies, government commitment and strong motivation of insurer. It is observed that Nepal also has to face the following challenges: i.

Institutional Challenge: Due to lack of Acts, Rules, Policies and institutional build up, it takes time to implement the program. Further, political instability and uncertainty are major challenges for the new business. Similarly, insurers institutional strength also not enough to cope the new and ever challenging business particularly for rural and remote poor.

ii.

Technical Challenge: Due to lack of proper pre and post information, data management, specific knowledge on identifying the risk exposures, assessing the actual loss and valuation of property, lack of using appropriate risk management tools for agriculture may cause to insurer reluctant to go further.

iii.

Operational Challenge: Due to lack of business orientation and adoption of systematic product development process, lack of client’s education and poor planning, lack of effective human resources, technically sound and unprejudiced agency and intermediaries, there may be substantial challenges in this field.

iv.

Geo-Climatic Challenge: Due to the diverse climatic zones, and geographically difficult to access in hill and mountainous area in time may lingering in the decision making on underwriting to, claim settlement procedures. Climate change and global warming are most difficult and complex challenges of Himalayan countries.

v.

Diversity in Risk Exposure: Due to uniformity on risk exposure over the ecological zone, the insurance product may vary place to place and season to season which may increase the cost of product design and reduce the similar types of large number of risk exposures.

vi.

Lack of Trustworthiness: Still, public are not confident on the product "insurance" and there are more misunderstandings on insurance. Insurance companies ready to overcome such a challenges

vii.

High Cost: Nepalese villages are scatter in a big area so that distance is the major factor to increase the cost. Moreover, the cost will be increased to design unique products to address the small landholdings, diversity in crops and cattle.

viii.

Other Challenges: Fail to meeting expectation of the clients, wrong mission and intension of financial institutions and agents, fail to reaching the poor and disadvantaged groups, integrated versus stand-alone services, and ensuring proper balance between business objectives versus social responsibility.

Conclusions and Suggestions Agriculture insurance in Nepal is new phenomena to farmers; it is additional burden of social responsibility to government and challenging but long term sustainable business to insurers. For commercial insurers, they can sell varieties of products. There is immense market possibility of crop insurance in Nepal since more than 3.7 million of Households are engaged in any sorts of farming and almost all household are keeping any sort of livestock (cattle, pig, poultry or fishery). Due to the large economies of scale, insurer can earn reasonable profit from this sector. Government is spending billions of amounts to rural poor for different development activities to uplift their living standard, to reduce poverty and to rescue from the natural calamities. Comparing to the accumulated annual expenditure in different head the subsidies amount of premium would be negligible. The significance of insurance is not counted in monetary value since its impact goes for long time ahead. Policy of imposing minimum coverage requirement to insurance service providers in deprived and agriculture sector is needed as IRDA guideline 5 percent of total insurance should be collecting from such deprived sector. Insurance Board needs to play key role to implement the microinsurance by increasing the awareness to farmers as well as motivating the insurers. A sound and vibrant environment is needed for the smooth operation of the microinsurance business and to cope with the various challenges discussed in this paper. 344

Since there is no alternative of agriculture insurance, and this is the only way to uplift the socio economic status of farmers and marginalized community, commercial insurers have to move ahead with new business plan. Insurance board may declare it mandatory to all insurers to play a part in microinsurance business. The above proposed model would also make a sustainable business model, as it reduces different types of hazards and risk, the transaction costs for the many small and marginal farmers scattered all over the Nepal. References •

Ayeh, R.(2009). Performance of the Microinsurance Industry in Ghana: The Role of Partner Agent Model retrieved 20 June 2013 http://www.microfinancegateway.org/p/site/m/template.rc/1.9.43135/

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Bhatta, G.D., Doppler W., KC, K.B. (2009). Spatial Distribution of Farm-Family Resources in the Mid-Hills of Nepal. Asian Journal of Agriculture and Development, Vol. 8, No. 2 43

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Bhende, M.J.(2002). An analysis of Crop Insurance Scheme in Karnataka. Bangalore: Agricultural Development and Rural Transformation Unit, Institute for Social and Economic Change (ISEC).

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Brown, Warren and Churchill, C. (2000), ‘Providing insurance to low-income households: Parts I and II’, Microenterprise Best Practices Project, Development Alternatives Inc. Bethesda, MD, Small Enterprise Development Vol.12 No.1,March 01

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CBS, WB, DFID, and ADB, 2006 as cited in Karkee, M. (August, 2008). Nepal Economic Growth Assessment Agriculture retrieve http://nepal.usaid.gov/downloads/all-downloads/category/16-evaluation-reports.html?download=228%3Anepal-economic-growth-assessment-agriculture

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CBS. (2012). Central Bureau of Statistics. Kathmandu.

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CBS (2011). Nepal Living Standard Survey III, Central Bureau of Statistics. Kathmandu.

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Centre for Empowerment and Development (2012). Study on Commercialisation of Microinsurance in Nepal, Kathmandu.

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Chandani, T. (2009), “Microinsurance Business Models” World Bank, Washington DC.

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Churchil C. (2006), “Protecting the Poor: A Microinsurance Compendium” ILO, Geneva, Switzerland.

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Churchill, C. (2006a). What is insurance for the poor? In C. Churchill (Ed.), Protecting the poor – A microinsurance compendium. Munich/Geneva: Munich Re Foundation.

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DFID (2013). Regional Dimensions of Poverty and Vulnerability in Nepal Summary Report Discussion Paper UK Department for International Development, May 2013

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Reinhard, D.(2009 ). Potentials and Limitations of Microinsurance for Protecting the Poor retrieved on 25 June 2013 http://link.springer.com/chapter/10.1007%2F978-94-007-4540-7_22#page-1 and http://www.heritage.org/index/country/ nepal

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GON (1992), “Insurance Act of Nepal 2049 (1992)” Kathmandu, Nepal.

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GON (1993), “Insurance Regulation of Nepal 2049 (1993)” Kathmandu, Nepal.

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Insurance Board (2012). Current Situation of Insurance Industry and Analysis of Trends. Kathmandu, http://www.bsib. org.np/

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Insurance Board (2012). Crops and Cattle Insurance Directives ( Bali tatha Pashupanchhi Beema Nirdehsika ), 2012. Kathmandu.

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Landmann, A (2008). World Development Report 2008: Agriculture for Development. World Bank, Washington, D.C.

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Options for Developing Countries. The World Bank, Washington.

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Markus F.(2013). Can microinsurance help prevent child labor? An impact evaluation from Pakistan, International Labour Office, Geneva.

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Mechler, R., Linnerooth, B., and Peppiat, D. (2006). Disaster insurance for the poor: A review of microinsurance for natural disaster risks in developing countries. Paper published by the ProVention Consortium & International Institute for Applied Systems Analysis

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M-banking: Conceptual Issues and Its importance in India By Sarav Mangla and Geetu Gupta

Introduction The revolution is mobile banking-the use of mobile phones to make financial transactions. Mobile money or branchless banking schemes are sprouting across the world. Information and communication technologies (ICT) fuel the greatest wave of technical innovation currently spreading across the globe, affecting new areas of social and economic activity. Unsurprisingly, financial businesses everywhere have been in the throes of organizational changes and innovation based on new possibilities opened up by ICT. Money, after all, is “just” information about who owes what to whom. Much innovation happens in advanced economies yet new technology has the potential to unleash radical change in developing economies like India. The scale at which Mobile banking has the potential to grow can be gauged by looking at the pace users are getting mobile in these big Asian economies. According to the Cellular Operators' Association of India (COAI) the mobile subscriber base in India hit 667.56 million in the April 2013. The mobile banking has important implications for the emerging economy like India in which savings can help poor people to invest in productive assets like livestock, a loan may help to expand business activities, and insurance can provide income for a family if a breadwinner becomes sick(large no of small and marginal farmers). In many developing countries, however, 9 out of 10 people do not have a bank account or access to basic financial services. Poor people are often not considered viable customers by the formal financial sector as their transaction sizes are small, and many live in remote areas beyond the reach of banks branch networks. In order for banks to view the poor as viable customers, new ways of serving them profitably need to be explored. Extending branch networks is often too expensive, but the development of appropriate technologies can provide one answer to this problem. Offering banking products through mobile phones is one option that offers great potential for reaching poor people. Many poor people already have access to mobile phones. A positive aspect of mobile phones is that mobile networks can reach remote areas at low cost. The poor often have greater familiarity and trust with mobile phone companies than formal banking institutions. Furthermore a mobile handset can easily be adapted to handle banking transactions. Objective of the Study 1) To highlight the importance of mobile banking in India. 2) To understand the challenges involved in using m-banking as a business tool and appreciate the advantages and disadvantages therein. Mobile Banking Business Models A wide spectrum of Mobile/branchless banking models is evolving. However, no matter what business model, if mobile banking is being used to attract low-income populations in often rural locations, the business model will 347

depend on banking agents, i.e. retail or postal outlets that process financial transactions on behalf telecoms or banks. The banking agent is an important part of the mobile banking business model since customer care, service quality, and cash management will depend on them. These models differ primarily on the question that who will establish the relationship (account opening, deposit taking, lending etc.) to the end customer, the Bank or the Non-Bank (Telecommunication Company). Another difference lies in the nature of agency agreement between bank and the Non-Bank.

Bank-focused Model The bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels to provide banking services to its existing customers. Examples range from use of automatic teller machines (ATMs) to internet banking or mobile phone banking to provide certain limited banking services to banks customers. This model is additive in nature and may be seen as a modest extension of conventional branch-based banking. Trends of ATM in Indian Public sector banks are as follows:

60000 50000 40000 30000 20000 10000 0

Series1

20 05 -0 20 6 06 -0 20 7 07 -0 20 8 08 -0 20 9 09 -1 20 0 10 -1 1

ATM no.

Trend in ATM

Year

Source: Calculated

Above graph clearly indicates rising trend of technology in public sector banks in India from 2005 to 2010. Bank-Led Model The bank-led model offers a distinct alternative to conventional branch-based banking in that customer conducts financial transactions at a whole range of retail agents (or through mobile phone) instead of at bank branches or through bank employees. This model promises the potential to substantially increase the financial services outreach by using a different delivery channel (retailers/ mobile phones), a different trade partner (Telco / chain store) having experience and target market distinct from traditional banks, and may be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented by either using correspondent arrangements or by creating a joint venture between Bank and Telco/non-bank. In this model customer account relationship rests with the bank.

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Non-Bank-Led Model The non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeper of surplus funds) and the non-bank (e.g. Telco) performs all the functions. Function of Mobile Banking

Mobile Banking Services

Account Information • Mini-statements and checking of account history • Alerts on account activity or passing of set thresholds • Monitoring of term deposits • Access to loan statements • Access to card statements • Mutual funds / equity statements • Insurance policy management • Pension plan management Payments & Transfers • Domestic and international fund transfers • Micro-payment handling • Mobile recharging • Commercial payment processing • Bill payment processing Investment Detail • • • • • •

Portfolio management services Real-time stock quotes Personalized alerts and notifications on security prices support Status of requests for credit, including mortgage approval, and insurance coverage Check cheque book and card requests Exchange of data messages and email, including complaint submission and tracking

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Content Services • General information such as weather updates, news • Loyalty-related offers • Location-based services Advantages of Mobile Banking Reduction in cost The biggest advantage that mobile banking offers to banks is that it drastically cuts down the costs of providing service to the customers. For example an average teller or phone transaction costs about $2.36 each, whereas an electronic transaction costs only about $0.10 each. Additionally, this new channel gives the bank ability to cross-sell up-sell their other complex banking products and services such as vehicle loans, credit cards etc. Improving Customer Services Service providers are increasingly using the complexity of their supported mobile banking services to attract new customers and retain old ones. A very effective way of improving customer service could be to inform customers better. Credit card fraud is one such area. A bank could, through the use of mobile technology, inform owners each time purchases above a certain value have been made on their card. This way the owner is always informed when their card is used and how much money was taken for each transaction. Similarly, the bank could remind customers of outstanding loan repayment dates, dates for the payment of monthly installments or simply tell them that a bill has been presented and is up for payment. The customers can then check their balance on the phone and authorize the required amounts for payment. Provide Additional Information The customers can also request for additional information. They can automatically view deposits and withdrawals as they occur and also pre- schedule payments to be made or cheque to be issued. Similarly, one could also request for services like stop cheque or issue of a cheque book over one’s mobile phone. There are number of reasons that should persuade banks in favor of mobile phones. They are set to become a crucial part of the total banking services experience for the customers. Also, they have the potential to bring down costs for the bank itself. Value Added Services at lower cost Through mobile messaging and other such interfaces, banks provide value added services to the customer at marginal costs. Such messages also bear the virtue of being targeted and personal making the services offered more effective. They will also carry better results on account of better customer profiling. 24 x 7 Banking Yet another benefit is the anywhere/anytime characteristics of mobile services. A mobile is almost always with the customer. As such it can be used over a vast geographical area. The customer does not have to visit the bank ATM or a branch to avail of the bank’s services. Research indicates that the number of footfalls at a bank’s branch has fallen down drastically after the installation of ATMs. As such with mobile services, a bank will need to hire even less employees as people will no longer need to visit bank branches apart from certain occasions. Automatic Information The banks add to this personalized communication through the process of automation. For instance, if the customer asks for his account or card balance after conducting a transaction, the installed software can send him an automated reply informing of the same. These automated replies thus save the bank the need to hire additional employees for servicing customer needs.

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Disadvantages of Mobile Banking Regulatory aspects In many regards, the telecommunication and financial sectors are similar. Both are crucial for economic and social development, and both have only a few players (oligopolies) and need to be regulated in the public interest. Security Concerns The biggest challenge in mobile banking is to ensure high levels of security and trust. The loss of a mobile handset and security passwords were the biggest security concerns among consumers which resist them to use banking services on mobile. Other Challenges Slow speed in customer adoption, data quality and lack of interoperability were other challenges faced by m-banking. Conclusions and Suggestions Mobile technology is transforming the global banking and payment industry by providing added convenience to existing bank customers in developed markets, and by offering new services to the un-banked customers in emerging markets. This has the potential to unlock a large untapped market. Developments in the banking sector, e.g. increased competition on account of technological developments coupled with the process of globalization have produced new challenges for banks. Mobile Banking presents an opportunity for banks to retain their existing, technology-savvy customer base by offering value-added, innovative services. It might even help attracting new customers and chance to generate additional revenues. Next-generation mobile banking services will deliver significant improvements with user-friendly icon driven instructions, instant access, security and immediate transaction processing all at a lower cost. Banks will attain higher levels of customer satisfaction and increased loyalty by providing anywhere, anytime banking. References •

Barnes,S.J.and Corbitt, B. (2003), “Mobile banking: concept and potential,”International Journal of Mobile Communications, Vol. 1, No.3, pp 273-288.

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Baddeley, M. (2004), "Using E-cash in the New Economy: An Economic Analysis of Micro payment System," Journal of Electronic Commerce Research, Vol. 5, No. 4, pp 239-253.

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Daniel, E.M. and H.M. Wilson, (2003), “The Role of Dynamic Capabilities in E-Business

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transformation,” European Journal of Information Systems, Vol.12, pp282-296.

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Leeladhar, V. (2006), “Taking banking services to the common man-financial inclusion,” Reserve Bank of India Bulletin.

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Pooja Malhotra, B. S. (2009). The Impact of Internet Banking on Bank Performance and Risk: The Indian Experience, Eurasian Journal of Business and Economics, pp43-62.

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Sathye,M. (1999), “Adoption of Internet banking by Australian customers,” International Journal of bank marketing, Vol. 17, No. 7, pp. 324-334.

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Management information system in Microfinance: An overview By Manesh Choubey

Introduction The microfinance sector has grown exponentially in the last decade with a turnover estimated at US$2.5 billion worldwide, and it is expected to grow further with the introduction of mobile banking. The World Bank has estimated 7000 MFIs globally serving 16 million people in developing countries; and 13 million are microcreditors with US$7 billion in outstanding loans with a repayment rate of more than 95% (Kashyap, 2009).Technology can help microfinance institutions to reduce costs, improve efficiency, and increase outreaches. Modern technology based solution proves proficient in enabling micro financing institutions to conceptualize, develop and operate projects for financial inclusion. It supports sector initiatives, which are aimed at enabling rural and remote unbanked areas to enjoy the benefits of formal financial products and services. The entry of technology has opened more options in the field of finance that lead to lower costs, greater efficiency, real time information and better customer service. Micro finance offers a great, largely untapped market for modern technology and a chance to make a big difference in outreach, sustainability and its impact. In a survey (CGAP, 2008), 62 financial institutions in 32 countries report using technology channels such as automated teller machines (ATMs), POS terminals, and mobile phones to handle transactions for poor customers. Some are using new technology to better serve existing customers. But other institutions are using technology to develop ‘branchless’ channels that reach new clients in areas where setting up a bank branch may be too costly.  The widespread use of mobile has offered a gateway for handling financial transactions. After a number of years where the innovative products in developed markets stalled, there are number of innovations that have found in developed markets. It was observed that that around 45% of existing microfinance institutions still track and record their operations and accounting in excel sheets or even completely manually.  Over the past 5 to 10 years, microfinance institutions (MFIs) have been paying increasing attention to information systems, particularly management information systems (MIS). As both practitioners and donors have become aware of the great need for formal and informal financial institutions to manage large amounts of data, the drive to improve the manipulation and understanding of these data has grown. To monitor the quality, sustainability, and efficiency of the loan portfolio, to measure its development impact, and properly manage the administration tasks of an MFI, computerised Management Information Systems comes in very handy. MIS are the most fundamental aspect of an MFI’s hi-tech infrastructure and  it is difficult for an MFI to upscale significantly and maintain the accuracy and transparency of its loan portfolio without an MIS that can grow with the institution. There is no denying the fact that an appropriate backoffice MIS is the backbone of ICT innovation for the delivery of microfinance services. However, for MIS to really contribute to the efficiency of the MFI, it has to be accurate, and up to date. MFIs find it difficult to maintain updated records as they have their offices in remote locations which rely on manual dataentry and paper based transaction records. ICT innovations like mobile computing applications and palmtops at the hands of the loan officers who can directly record the transaction into the MIS can make this system more efficient 352

and up to date. The data entered into the palmtop computers is typically uploaded to the MIS at the end of the day, either directly in the branch office or via a remote communications link. Furthermore, the roll-out of wireless broadband infrastructure will enable these systems to be always online resulting in true real-time data collection and monitoring of the loan portfolio at branch and institutional levels. It is noted that MFIs serve as better avenues for providing microfinance services to the disadvantaged members of society and small and medium enterprises (SMEs), than the well established financial institutions (Parikh, 2006). Yet, MFIs face a lot of challenges, as most of their served customers depend on agriculture which is subject to weather risks, seasonality and poor productivity, and involve weak SMEs. The customers are mostly rural dwellers and live in geographically dispersed areas with sparse population, and have limited financial transactions. Other customers live in urban areas which have very poor infrastructure. These challenges increase transactions costs for services provided by the MFIs. To succeed, MFIs should be efficient through the use of technological innovations. Management information system has become an essential part of microfinance institutions. Major task of manager in microfinance institutions is to create a system that shapes the transformation of data into information. The MIS involves all aspects of gathering, storing, tracking, retrieving and using information within a business or organization. A microfinance institution has to prepare filed reports, operational reports, financial reports, and general reports. These MIS reports are needed to the funding agencies like rating agencies, banks and other donor agencies Data and methodology The data were collected from 20 microfinance institutions and 10 technology providers from various regions in India. The detailed regarding MIS software and its feature, MFI clients, costs of installation and maintenance were collected from interviewing officials from microfinance institutions and MIS software providers. Results and discussions Worldwide MIS software adoption by MFIs The data regarding worldwide MIS softwares have been collected from different secondary sources and presented. Figure 1: MIS technologies employed worldwide

Source: C Gap Survey, 2008

Worldwide, 46% of MFIs still have very low-tech systems, either manual or spreadsheet-based MIS. The remaining 56% have more advanced systems, either custom outsourced systems (24% of the institutions surveyed), systems built in-house (20%), or applications purchased off the shelf (10%). Major MIS softwares used world wide are South Asia major Apparent Microfinance Manager, Common Cents 101 Micro Finance Software, Southtech Ascend Banking, BEACONIMP@CT, BankSoft, W-Bank, MFASYS-Mobile Enabled Micro Finance, Micro Financer Standard Edition, ThemeproTM Universal Micro Finance Solution (UMFS), Finance SolutionsMcFinancier, Microfin360.

353

The various software used in Africa are Delta-Bank, e-Finance, El Mohassil 1.3, ELOGE BANK, Delta Loan Tracking System, eMerge 1.0, EVOLAN PACK for Financial Companies, Fin@ncia, FINCORESOFT, FinnOne Loans, GLOBAL BANK, Kredits 5.5503, Kredits 5.5539, LMS (Loan Management System, Loan Performer, Loan Tracker, Loan Traking System (LTS), M2, Margill Loan Manager (MLM), MaxiSoftCB Banking Software, MBWin - FAO-GTZ MicroBanking System, Microbank Information System 2.00, MICROFINA, Microfins, Mifos, MLAS (Microloans Administration System), Octopus Micro Finance Suite, OMNIEnterprise Microfinance Solution, Orbit, Orbit-R, ORCHID Microfinance, PERFECT, Perfeczion Microfinance Software, PharaFinance, PowerFinance, SASA-PRO VISION SQ212, SAVCO,. Savings Plus,. SIM.net – Sistema, Informático para Microfinanzas, SML VISION SQ212, SYSDE SAF, The Exceptional Assistant (TEA), Total Microfinancing, UMVA Bank, Xpertek Loan Administration System, ADbanking, Abacus OneWorld, AICHA, Bankers Realm, Bankers Realm MFO, Bankers Realm SACCO, Bank Micro, CorePlus, Cubis 8, Datafinance, Delphix. In Europe and central Asia also various MIS software are used. Major software is AchidBanker2, Afropack Financial Enterprise Manager. In Latin America major softwares used are BANTOTAL COBIS, Conexus, CoopLeader, eSIACOM, eConx, Emortelle, SIFCO, Topaz Microfinance, Orion, SIMCO PLUS, eConx, SIFC Net etc. In North America the various microfinance institutions were using various kinds of software. Major software used are Mercury, Down Home Loan Manager 2.05, SYSDE BANCA, Mimota etc. These software are suitable for various sizes of microfinance institutions. These MIS software help microfinance institutions in Accounting, Loan Portfolio management, Deposits/Savings Management, Client information, Relationship Management, pay roll preparation etc. Information regarding Management Information System Software used in India by MFIs was collected and presented in table 1. It is obvious from the table that different mFIs uses different software according to their need and availability of software. FIMO developed by Jayam Solution was major MIS software used by different mFIs. Other software were FAMIS developed by BASIX and Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata, mf Expert developed by RM IT solution. Other MIS softwares were Banker Realm used by Ujjivan, by LMS version by TMS. Grameen Koota and Jan Laxmi use Tally and FINO for their MIS management. Basix has developed Delphix Nano as their MIS application software. SKS and Bandhan Financial services have developed their own MIS software. SKS has designed and deployed a web-based Business Intelligence portal using stateof-art technology and a highly flexible and scalable platform to support the business growth and operations. SKS Microfinance has also built an integrated and encrypted MPLS communication network encompassing a world class Data Centre delivering mission critical services and enhancing collaboration across the organisation, thus ensuring superior service quality to its customers. SKS has entered into strategic partnerships with various technology leaders and innovators like Microsoft, Wipro, Reliance, HCL and Sify to establish an agile and scalable technology architecture that is capable of handling the challenges specific to the microfinance sector. Table 1: MIS Software used in the various MFI institutions Sl. No. Microfinance institutions

Name of the software

1 2

SKS BFSPL

In house developed   In house developed  

3 4 5 6

Cashpor Microcredit Basix Share Microfinance Ushodaya Integrated Urban and Rural Development

TR account Delphix Nano   Mf Expert by RM IT solution FIMO, MIFOS

7

Krishna Bhima Samrudhhi Local Area Bank Ltd.

BALM

8

BWDA Finance Ltd, Tamil Nadu

FAXFRO

9

Agricultural Science Foundation, Hyderabad

FIMO developed by Jayam Solution

354

10 11

Sambandh Finserve Pvt. Ltd. Nano Financial Services India Private Limited Chennai

FIMO, Tally erp 9.0 FIMO developed by Jayam Solution

12

Star Microfin Service Society (SMSS)

FIMO & Tally erp 9.0

13 14

Bihar Development Trust Spandan Sphoorty Finance ltd.

FAMIS, Tally Rm IT Solution  

15 16 17 18

SRFS Janlaxmi Gramin Koota IDF financial service Pvt. Ltd.

Micro vision FINO, Tally Tally, FINO Micro Financer

19

Ujjivan Finance Service Pvt. Ltd.

Banker Relm

20

Trust Microfinance Services, Muzaffarpur

LMS Version 2

Source: Primary survey

Management Information software companies Management information system softwares companies for Microfinance Institutions of India are follows: 1. RM IT solution, Hyderabad 2. Jayam Solution, Hyderabad 3. BASIX /Sathguru, Hyderbad 4. Elitser IT Solutions, Hyderabad 5. Force ten Technology, Kolkata 6. Graditum IT Bangalore 7. Craft Silikan, Bangalore 8. Surya Software Solution, Bangalore 9. EKO financial services, Delhi 10. Zero Mass foundation, Delhi Microfinance and Banking technology providers in India Both primary and secondary data were collected by interviewing different MIS technology providers Table 2: Microfinance and Banking technology providers in India Software

Technology providers

Institution size

Centralised web Craft Silikan, Bangaluru based application

Small mFIs

FIMO

Small and Medium mFIs

Jayam Solution, Hyderabad

355

Clients CEFI Delhi, Sahayaga Microfinance Jaipur, Lok Birdari Trust Indore, Vista livelihood Finance Bangalore, MIMO Finance Delhi, India shelter finance Gurgaon, Saadhana Microfin Society, Kurnool, AP AMMACTS, V.Kota, AP Sharadha's Women's Association for weaker section, Hyderabad, AP Star Microfin Service Society, Velugodu, AP CReSA, Rajahmundry, AP and others

Software

Technology providers

Institution size

Clients

Delphix – Nano BASIX / Sathguru Enterprise Solution for Micro Finance MicroFinancerTM Elitser IT Solutions, 2.0 Hyderabad

Large, medium and small mFIs

Basix, Chaitnya microfinance

Small and medium mFIs

Business Force ten Technology, Information Kolkata Justified and Logically Integrated (BIJLI) “mf Expert” RM IT solution, Hyderabad MF resolve Graditum, IT Banglore BALM (Bank Surya Software Solution, Asset & liability Banglore Management)

Small and medium mFIs

ECLOF - CHENNAI, Chennai Swayam Shree Micro Credit Society, Bhubaneshwar Pragathi Mutually Aided Cooperative Credit and Marketing Federation Ltd., Warangal, (Elitser has given hand held device to Pragati) Life bank inc ilio phillipines, Village welfare society, West Bengal, Sree Ma Mahila Samity, West Bengal and others

SimpliBank EKO financial Services Banking Platform Smart card Zero Mass foundation

Banking BC of SBI, ICICI Correspondence Banking BC of SBI Correspondence

Large mFIs

Ashmita, Micro -support, Share Microfinance

Large Bank Large Banks

Axis Bank, PNB – Rural Axis Bank, OBC, United Bank of India, Sri Sudha Cooperative Bank

Source: Primary Survey

“mf Expert” RM IT has implemented a sound information system “mf Expert” to help MFIs to make informed decisions. RMIT solution has domain expertise, in system utility software, CRM, Micro Finance, Insurance, Loyalty, Education and Accounting among others. “mf Expert” opens the doors to micro finance institutions to operate modern information technology with the capabilities and the power which was previously only available for larger banks. Mf-Expert software with window based application software having client-server based architecture with Microsoft.Net Framework 3.5 as Front end and MS SQL Server 2005/2008 as the back end. The software uses StimulSoft as reporting tool. The software integrates portfolio management, HR and Accounting and is flexible to customization of any new product development. Networking the branches and Head Office server to have real time data with the service providers like Reliance, Tata Tele Services. Benefits of using mf expert are Swift development of business, Thrive to have a better economic organization, Reduce operating cost, Reduce unnecessary work, Help restructure the work force proficiently, boost the development and performance of the business, extremely portable, adaptable, flexible, scalable and customizable, Improve Field Level and Branch Level Operational Efficiency, Help provide better service to clients, Offer high level of authorization, data security and integrity. Key Features of mf Expert at Administrative Level are Role Based Access for various Management Levels, User Management with Enhanced Security Features, Scheduling and Auto E-Mai, Alert Management System, Portfolio Aging & Quality Analysis, Integrity with Accounting Software, Consolidate Reports from H.O, Data Access through Online and/or Offline Network and Data Maintenance (Accessing, Storing) through H.O. Key Features at User Level are Multi-Level Branch Creations, Handling all required financial transactions, Unlimited ‘Branch Group’ creation, Auto consolidation of all financial statements, Column wise comparative statements, Unlimited templates provision for each financial statement, Branch specific Account Ledger creation 356

Clients: Ashmita, Micro -support, Share Microfinance Customisation and set up of MIS package for head office and 5 branches is Rs. 3lakh and annual maintenance cost – Rs. 1 lakh. FIMO FIMO software for microfinance institutions has been developed by Jayam Solution. FIMO is a software package purely designed for the complete needs of the micro finance organizations. The full form of FIMO “Financial Information and Monitoring Organizer” Package provides MIS, HRM, Financial Accounting. Micro Finance Organizations can use FIMO to maintain and update the day-to-day information of their operational activities. The information is analyzed and the MIS information is provided by FIMO automatically. Progress and the performance will be checked continuously. It has also have the well-furnished support of the integrated Accounts module and the HRM module, FIMO supports the Micro Finance Organizations to maintain Baseline information, Loan Information, Savings Information, Insurance Information, HRM Information, MIS Information, & Accounts Information through this project. Currently it is available in English & Telugu languages. Customisation and set up of MIS package for head office and 5 branches is Rs. 3.5 lakh and annual maintenance cost – Rs. 1 lakh. It has the following features: • Baseline and Client Information: Users can record the primary information of their clients and the baseline information of the hierarchy of the organization such as Area, Center etc. • Loan Information: Loan system is tracked entirely with loan issues, accurate interest calculations and automatic generation of the instalment demand. • Savings Information: FIMO supports both the Voluntary savings and the being used in the MF sector. •

compulsory savings that are

Insurance Information: In FIMO, Insurance can be linked with the Loan system. Insurance amounts can be deducted at the time of Loan Disbursements. Users can maintain the following information of the Insurance: Insurance Policy numbers of the members.

• HRM Information: Relating to these users can maintain the human resource information. • MIS Information: MIS is proved compulsory for MFIs. FIMO stands as a source for the demand of MIS in MFIs. The demand for MIS is driven by the outputs - performance reports for the funding agencies, analytic reports for management, and operational reports for the staff and the clients. MIS in FIMO is generated automatically and is automatically updated with the operational information recorded in the project daily. FIMO provides the following MIS information. a. Progress of the organization - such as, how many Members joined newly, how many loans are sanctioned, how much loan amount distributed, amount collected as on selected date, etc. b. Performance of various portfolios of the organization - such as No of Areas in a Branch, No of Centres in an Area, and No of Groups in a Centre, No of Loans disbursed per Area or Centre etc. c. Ageing Analysis reports that gives clear idea on the Loan outstanding status, Portfolio risk, and Loan Loss reserve to maintain etc. Partial list of Clients i.

Saadhana Microfin Society, Kurnool, AP

ii.

AMMACTS, V.Kota, AP

iii.

Sharadha's Women's Association for weaker section, Hyderabad, AP

iv.

Star Microfin Service Society, Velugodu, AP 357

v.

CReSA, Rajahmundry, AP

vi.

Sharadha MACTS Ltd, Hyderabad, AP

vii.

AWARE MACTS Ltd, Hyderabad, AP

viii.

The Max Wealth Trust, Hyderabad, AP

ix.

Sagar MACTS ltd, Chittor, AP

x.

SEWA federation, Hyderabad, AP

xi.

Bhagya nagar MACTS Ltd, Hydrerabad, AP

xii.

Sai Ram MACTS Ltd, Hyderabad, AP

xiii.

SIRI MACTS Ltd, Kurnool, AP

xiv.

Ushodaya Macts, Hyderabad, AP

xv.

SKC Macs, Vizag, AP

xvi.

Partner Macts, Kadapa, AP

Karnatka i.

Nirantara Community Services, Bidar, Karnatakas

ii.

Pravardha, Bidar, Karnataka

Orissa i.

Gramoddan, Orissa

ii.

Bhoomika, Orissa

iii.

ADIKAR, Bhubaneswar, ORISSA

Uttaranchal i.

MIMO, Dehradoon, Uttaranchal

Assam i.

IIRM, Tejpur, Assam

Nano Enterprise Solution for Micro Finance Industries An integrated enterprise resource solution for Micro Finance Industry, dovetailing all critical business process unique to that industry and incorporating some of the best practices adopted in that industry. BASIX in collaboration with technology service provider, Sathguru Management Consultants, a software named “FAMIS: (Financial Accounting and Management Information Systems) was designed with FOXPRO as a database. It is used as a bridge to transfer all business transactions during the day to financial accounting, resulting in scrolls like any other bank. Later in 2000, inspiration came from our team visit to Desjardins, Canada, where it harnessed their IT capabilities, in particular their MIS called an “Alerte” system. Inspired by this BASIX launched its own Core Livelihood Solutions called “Delphix,” Enterprise-wide Resource Planning software with Developer 2000 as a front-end form on Oracle database. Delphix outputs were superior due to the adoption of new processes to overcome certain deficiencies in FAMIS. In the year 2001, RBI gave a banking license to BASIX, and it was decided to buy banking software and Banksoft of Processware Systems Pvt. Ltd., Bangalore. Features of Nano Enterprise Solution for Micro Finance Industries It has five modules e.g, Operations, financial Management, Human Resources Management, Payroll and Head Office Consolidation. Its operations module covers entire spectrum of lending and borrower management of the 358

enterprise from the stage of identification to loan closure. Financial Management Module covers entire spectrum of accounting, budgeting, investment management and financial management. Based on industry standard based practices and supports all microfinance models such as individual, JLG, Grameen, and SHG including institutional lending. It is highly flexible, Multi user and multi- functional solution,. It help in Registration of a Beneficiary, Application for loan request, Recommendation and sanction of loan, Documentation and loan collateral control, Disbursement of loan, direct and through hand held device integration, Managing loan portfolio, Managing repayment, direct as well as receipt through hand held devices, Auto classification of Non-performing assets, monitoring and reversal thereof, Loan linked and non-linked insurance delivery, Life and Non-life insurance product integration, Portfolio analysis and recovery, Loan closure and release of collaterals, Managing Customer relationship, Portfolio split and merge facility and Variety of control, analysis, review and regulatory reports. Its installation charge is 4 lakh (for headquarter + 3 branches) and maintainance cost is Rs. 50000 per year. It has Expert technical support available at Ranchi, Bhubneshwar, Bhopal, Calcutta, and Hyderabad. Execution support team available at Hyderabad. It has provided hand held device at KBS Branch, Mahboobnagar in Andhra Pradesh, and Jaipur in Rajasthan 17 branches. Basix uses mobile version BASIX 1.5.0M. The device is compatible with NOKIA, 3110 and NOKIA 2710 model. Hand held device had battery backup and online configuration. In mobile banking HOLOGRAM is pasted in clients pass book. Through this paper consumption was less. MicroFinancerTM 2.0, Elitser’s solutions combine latest technologies, training, consulting and technical support in microfinance and banking. Elitser IT Solutions India Pvt Ltd’s has developed MicroFinancerTM 2.0, an integrated software system exclusively designed and developed for Management of Information and Financial Accounting for Micro Finance Credit Societies. MicroFinancerTM 2.0 provides powerful tools to customers need to succeed in the modern Micro Finance environment. Microfinancer 2.0 is custom built for Micro Finance Institutions. It caters to large and medium credit societies where the membership is more than 5000 with large transactions. It can incorporate various Micro Finance models like Grameen, MACTS, SHG, and Federation. It can incorporate the latest CGAP ratios and standard Accounting formats. Its Graphical User Interface (GUI) offers screens in the familiar Microsoft Windows format. It offers customized MIS as per the requirement of the client and fully supported by a strong after sales Technical Support Team. It has technology partners ILITSER ILHA consulting private limited, Cethar consultancy, Image point, Nova Terra. It has Innovative Solutions for Microfinance Operations & General Accounting Solutions and Livelihoods Operations & Monitoring Software. Micro Financer is a A comprehensive Financial Accounting & MIS software solution. Its eLOMS is a Livelihoods Operation Information System for Livelihoods promoting funding agencies and Government Agencies. eGAP is a General Accounting Software Solution for all types of Business. Its establishment cost is Rs. 3-5 lakh on the basis of specification and Annual maintenance cost = Rs. 50000 to 1 lakh. National Clients i.

ECLOF - CHENNAI, Chennai

ii.

Swayam Shree Micro Credit Society, Bhubaneshwar

iii.

Pragathi Mutually Aided Cooperative Credit and Marketing Federation given hand held device to Pragati)

iv. Sangatitha Federation, Warangal v. OAZOANE, Aranthangi vi. Youth For Action, Hyderabad vii. Krushi AP - , Karimnagar 359

Ltd.,

Warangal, (Elitser has

International Clients i. Federal Capital Investment and Finance Ltd, Kingston, Jamaica ii. Life Bank - Philippines iii. ECLOF - Philippines iv. Sun Rise Bank – Philippines v. Golden Bough Inc – Philippines vi. Bangko – Kabayan – Philippines vii. Cooperative Rural bank of Bulacan, Bulacan – Philippines viii. G7 Bank, Naga City – Philippines ix. Malasiqui Rural Bank – Malasiqui, Philippines x. Dian Mandiri – Indonesia xi. Permodalam Nasional Madani Bank – Indonesia Business Information Justified and Logically Integrated (BIJLI) It provides range of services like corporate training, System integration and consultancy, Software development, Data Processing on any platform and digitization of Engineering Drawings. The software uses RDBMS development tools, SQL server, Visual basic, and ASP.net. It helps in Production Plan, Accounts, HR (Payrole and ADMIN), Sales, purchase, inventory, Microfinance, Insurance, Supply chain. Its installation charges is 5-8 lakh depending upon size and features and customization and maintenance cost is 1.25 lakh to 2 Lakh. One of the very interesting about the Force Ten technologies is that the company is proving technology solution not only to Indian Microfinance institutions but also country like Philippines. Its mFIs -Clients are the followings 1. Life bank inc ilio Phillipines 2. Village welfare society- West Bengal 3. Sree Ma Mahila Samity - West Bengal 4. Sahara Uttarayan- West Bengal 5. Disari Finnacial services -West Bengal 6. Sahara Utsarga- West Bengal 7. Gram Vikas Kendra – West Bengal 8. Kalighat society- West Bengal 9. Ajiwika- West Bengal 10. Vedika Credit capital- Jharkhand 11. Nav Bharat Jagriti Kendra 12. YUV – Manipur 13. PANI – Faizabad 14. RGVN – CSP – Assam 15. RFVN – Main- Assam 16. Grameen Sahara- Assam 17. NER fin service – Assam

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18. NERCOP project Shillong – Meghalaya 19. UNACO- Assam 20. Satin credit care network – Delhi 21. Sikhar Development foundation Delhi 22. Fusion microcredit – Delhi 23. Sulaxmi Private Limited – Delhi 24. ODC- Orissa 25. Access Foundation – Orissa 26. PSMS- Indore 27. Kamal Auto finance- JAIPUR 28. Disha Finance - Ahmedabad 29. PRAYAS – Ahmedabad MF Resolve Gradatim, an international provider of technology services to microfinance institutions and insurers. Gradatim, which has operations in India, Australia and Singapore, offers which is a credit and savings management platform for microfinance institutions. Its MFInsure product offers insurance providers tools for deploying new products, expanding distribution networks and managing policies in real time. Component of technology: • MF resolve for banks, mF resolve for mFI, • MF- insurer for insurance Cost of each component Hand held devices connected with internet- Rs. 7000 each. PC- Rs. 40000 to 50000 Internet – Rs. 15000 to Rs. 18000 Establishment cost-Nil No need to buy hardware/ software Working as software as service model on demand platform Model for 1 lakh clients with 5 branches- hard net – 5, computer 5 Operational cost: Rs. 4 lakh per year. Charges for managing account Gramin model: Rs. 30 per clients Asha model – Rs. 40 clients Individual/ JLG / SHG clients – Rs. 29 clients Clients: Axis Bank, PNB – Rural Bankers Realm Software developed by Craft Silikan, Bangaluru Banker’s realm MFO is full-fledged software offering solution for microfinance institutions. Craft Silicon, in recognition of the bright prospects and the opportunities, has developed BRmfs (Bankers Realm Core Microfinance 361

Solution) that helps manage small to large customer records, volumes of transactions, portfolios, and profits and also analyze the risk factors. BR MFS Solution is now running on our high end web platform - BR .Net. Its component of technology are Service Model- Servor, Operating System Window Microsoft, data base, connectivity, Web based solution, Users-computer, connectivity, Software Craft Silicon's MFI offering also provides its partners with alternate channels such as POS and mobile banking that allows businesses to provide online, real time and secure services to customers even in remote areas. The limitless scope and convenience offered could be testified by over 200 satisfied Micro Finance Institutions (MFIs), in over 32 countries around the world. It is providing integrated solution Using our BR Electronic Fund Switch solution and other switch vendors as well as bridges, our BR MFS solution has been tested and proven to integrate on financial inclusion with ATM, POS , Internet Banking, Mobile Banking and Other Vendor solutions. The MIS Software works as service model-hosted site. All back end is maintained by craft silicon. It is maintained at tier IV data centre. It Offer to MFI on monthly subscription The software has the following features:  Multi currency/ multilingual user definable  CRM module: captures all customer information  Custom fields and forms  More than 100 standard reports  Regulatory bank reporting  Credit scoring module  Group meetings and schedules synchronization  Client group exits tracking – reinstatement and savings refunds  Recurring deposits  Salaried loans eligibility set up  Detailed loan management (from application – write off / pay off)  Loan repayment performance highlights  Insurance details tracking  Rescheduling / restructuring loans  Refinancing loans / top-ups  Batch disbursements / rescheduling / pay offs  Loan history tracking  Customizable Event Driven Interest Procedure (EDIP)

It has following benefits to customers  With easy integration to alternate channels, customers can access the financial services at their convenience  Faster and convenient processing of transactions, loans and member registration  Flexible interest rates and rescheduling of loans for individual customer  Provides friendly integration of group meetings with group loan schedule for repayments

To Businesses  With a user friendly customer query and dash board, users can view variety of business and customer in-

formation all in one screen

 Increased customer margin with easy integration to alternate channels such as POS, ATM and Mobile

banking

362

 Increased customer service efficiency, with faster transaction, loan and group processing  Very fast and easy to import and export data in any format  Customizable interest procedure that allows customers and businesses to enjoy the changing interest rates

in the market.  Accurate and efficient MIS Reports for analysis of profits and loss for the business.  Consolidatable balance sheet for different branches.

Cost of each component under Service model Signup cost of certain portion of portfolio subject to a minimum of Rs. 2.5 lakh and monthly subscription-0.05 % of outstanding. Its establishment cost of the technology under service model Sign up cost based on model and portfolio size -0.5% of Monthly subscription and profit or nonprofit based company outstanding. Its maintenance cost/year is Service model-Nil and Software model-18% of cost. The major microfinance institutions using Bankers Realm Software are CEFI Delhi, Sahayaga Microfinance Jaipur, Lok Birdari Trust Indore, Vista livelihood Finance Bangalore, MIMO Finance Delhi, India shelter finance Gurgaon, Land T finance, IASC Coimbatore, Rores microfinance Srinivaspur Kolar, Midland Microfinance Jalandhar, Ujjivan, Fultron Chennai, India, Swadhar Microfinance Mumbai. In abroad also it has clients like ACSI Ethiopia, Afribank Nigeria, Asusu Niger, Bimas Kenya, Eclof Kenya, EZI Nigeria, FBN Nigeria, Fides Namibia, Harambee Kenya.Apart from this there is open source software. Open source packages are MIFOS by Grameen Foundation Octopus Microfinance. ASOMI is a microfinance institution in Assam using MIFOS. The microfinance organisation officials stated that use of MIS software is not cost effective. The small microfinance institutions cannot afford it. There is lack of awareness and mindset of decision makers in the microfinance institutions. Availability of technical staff-was also a major problem faced by MFIs. Conclusions It is obvious from the table that different MFIs use different software according to their need and availability of software. Most of the banks except few RRBs have CBS system. Major MIS software used by Banks was Finacle. Other MIS software was provided by HCL in case of Uttar Bihar Grammeen Bank, CBS by IBM in case of Canara Bank, FINO used by Union bank of India, FLEX –Q used by Syndicate bank and B@NCS24 by Samastipur Grameen Bank. Different mFIs used different MIS softwares. FIMO developed by Jayam Solution was major MIS software used by different mFIs. Other software were FAMIS developed by BASIX and Sathguru, Hyderabad, BIJLI developed by Force ten Technology, Kolkata, mf Expert developed by RM IT solution. Other MIS softwares were Banker Realm used by Ujjivan, by LMS version by TMS. Grameen Koota and Jan Laxmi use Tally and FINO for their MIS management. Basix has developed Delphix Nano as their MIS application software. SKS and Bandhan Financial services have developed their own MIS software. SKS has designed and deployed a web-based Business Intelligence portal using state-of-art technology and a highly flexible and scalable platform to support the business growth and operations. SKS Microfinance has also built an integrated and encrypted MPLS communication network encompassing a world class Data Centre delivering mission critical services and enhancing collaboration across the organisation, thus ensuring superior service quality to its customers. SKS has entered into strategic partnerships with various technology leaders and innovators like Microsoft, Wipro, Reliance, HCL and Sify to establish an agile and scalable technology architecture that is capable of handling the challenges specific to the microfinance sector. It is clear from the above that there is no uniformity of use of software in different microfinance institutions. The MIS requirement of microfinance varied widely. There is no uniform reporting system in India. Due to various natures of microfinance institutions they report to various agencies. NBFC has to report to RBI and Society has to register with state society registration act. The other legal form like Co-operative and trust has different kinds of compliance system. Recommendations • Infrastructure support like increasing power supply and increasing connectivity may be adequately provided for increasing use of technology. Capacity of micro financial institutions has to be increased by providing them technical and financial support. 363

• Awareness about technology should be increased by capacity building of different stakeholders. • Due to high initial cost micro financing institutions were not able to adopt latest technology. Costs can be shared by assisting technology provider with financial support which will reduce the cost by scaling up of technology. MFIs may get technology at subsidized/ reduced costs. Incentive should be provided to MFIs who adopts technology. It will help them in to scale up their business. • Appropriately staffing should be done by the MFIs to handle latest technology. Recruitment of technical staff and their regular training on updates of latest technology would help in adoption of technology. • Regular feedback should be provided to the service provider regarding functioning of the software and other technology tools. • Requirement of MFIs differ amongst MFIs according to size, organizational form, technical competency and adequacy of the technical staff. Tailor made solution should be provided according to the need of MFIs. • Systems should be introduced to make for transparent reporting regarding their loan portfolio and produce reports. It will help MFIs in timely and appropriate decision making. • In choosing an appropriate technology, it is highly recommended that MFIs get their core MIS right first before building any kind of delivery system on top of it. Technology provider should address the problem of MFIs promptly. •

MFIs should set realistic expectations with respect to what technology will do and cost. mFIs should manage the nature and pace of change associated with technology solutions. Legal and regulatory constraints that impede an MFI’s ability to implement technology solutions; should be removed.

• Research done on MFIs about those who have successfully introduced new technologies should share the finding with others which will help in penetration of technology. • MFIs should choose the option that gives them the most cost effective access to their chosen technology solution. • MFIs should consider kind of quality of software and its price. • In banks one problem with technology like ATM is non-functioning of ATM and very irregular services in different banks. The improvement in service will help adoption of technology faster. • Some people feared fraud in banking sector like unauthorised withdrawal of money from others account is a great concern. Security system should be build-up while handling technology in banking sector. References •

CGAP (2006), Using Technology to build inclusive financial systems, Focus Note 32, January 2006.

•

Kashyap, S. (2009), Microfinance: Leveraging Information Communication Technology. Retrieved from Web site:

•

http://www.indiamicrofinance.com/microfinance/microfinance-technology/microfinanceleveraginginformationcommunication-technologyict-part-i.html

•

Parikh, T. (2006). Rural Microfinance Service Delivery: Gaps, Inefficiencies and Emerging solutions. Retrieved from Web site:

•

http://www.ruralfinance.org/cds_upload/1122398273591_rural_mf_service_delivery.pdf.

364

Trends in Mobile Banking Services By Babita Jharia

Introduction Mobile usage has seen an explosive growth in most of the Asian economies like India, China and Korea. In fact Korea boasts about a 70% mobile penetration rate and with its tech-savvy populace has seen one of the most aggressive rollouts of mobile banking services.Still, the main reason that Mobile Banking scores over Internet Banking is that it enables ‘Anywhere Banking'. Customers now don't need access to a computer terminal to access their banks, they can now do so on the go – when they are waiting for their bus to work, when they are traveling or when they are waiting for their orders to come through in a restaurant. The scale at which Mobile banking has the potential to grow can be gauged by looking at the pace users are getting mobile in these big Asian economies. According to the Cellular Operators' Association of India (COAI) the mobile subscriber base in India hit 40.6 million in the August 2004. In September 2004 it added about 1.85 million more. The explosion as most analysts say, is yet to come as India has about one of the biggest untapped markets. China, which already witnessed the mobile boom, is expected to have about 300 million mobile users by the end of 2004. South Korea is targeted to reach about 42 million mobile users by the end of 2005. All three of these countries have seen gradual roll-out of mobile banking services, the most aggressive being Korea which is now witnessing the roll-out of some of the most advanced services like using mobile phones to pay bills in shops and restaurants. Mobile banking is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant. Mobile banking differs from mobile payments, which involve the use of a mobile device to pay for goods or services either at the point of sale or remotely, analogously to the use of a debit or credit card to effect an EFTPOS payment. The earliest mobile banking services were offered over SMS, a service known as SMS banking. With the introduction of smart phones with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform to their customers.Mobile banking has until recently (2010) most often been performed via SMS or the mobile web. Apple's initial success with iPhone and the rapid growth of phones based on Google's Android (operating system) have led to increasing use of special client programs, called apps, downloaded to the mobile device. With that said advancements in web technologies such as HTML5, CSS3 and JavaScript have seen more banks launching mobile web based services to complement native applications. A recent study (May 2012) by Mapa Research suggests that over a third of banks have mobile device detection upon visiting the banks' main website. A number of things can happen on mobile detection such as redirecting to an app store, redirection to a mobile banking specific website or providing a menu of mobile banking options for the user to choose from. Meaning and Definition With RBI issuing guidelines for mobile banking services, a number of banks are rolling out mobile banking (m-banking) solutions. M-Banking has rendered a new meaning to the concept of anytime, anywhere banking. You can now literally carry your bank in your pocket! No matter where you are, you can do almost all transactions by just pressing a few buttons. 365

M-banking know-hows Presently, this service is available on GSM handsets, while efforts are underway to extend it to CMDA handsets as well. Subscribers are required to download a mobile banking application (for instance, i-Mobile of ICICI Bank) on their handsets to access m-banking services. For GPRS enabled mobile handsets, the application can be downloaded by sending an SMS to a specified number, after which the application is sent to the handset and can be immediately installed. For non-GPRS handsets, the application may be downloaded on a laptop/PC from the Bank's website and then transferred to the handset using a data cable or Bluetooth device. Once the application is installed, users can carry on transactions using a unique 4-digit (or 6-digit) PIN (m-PIN). What's on offer? While ICICI Bank offers its services on GPRS and secure SMS, Barclays Bank's Hello Money is based on unstructured supplementary service data (USSD) platform, which is independent of GPRS, WAP and SMS. The service is presently available on GSM handsets only and it requires subscribers to dial a certain number, after which they are guided to a mobile-based menu with a number of options. Thereafter, users can conduct their transactions using their m-PIN. Safety Norms Though RBI has specified norms for the banks to provide secure technology and ensure 'confidentiality, integrity, authenticity and non-reputability', security remains a major concern as well as a hurdle. However, with a few precautions and safety measures, users can have a safer m-banking experience. The m-PIN, which is issued by the bank, should be memorized and the PIN-mailer destroyed immediately. Change your M-PIN regularly and do not share it with anyone. The PIN is valid only for the corresponding phone number, which means users cannot access their accounts using other handset. Thus, in case of a loss/theft of mobile phone, inform the mobile phone operator as well as the bank to block the banking application. Similarly, you should also inform the bank if you change your handset or SIM card. Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information." According to this model mobile banking can be said to consist of three inter-related concepts: • Mobile accounting • Mobile brokerage • Mobile financial information services Most services in the categories designated accounting and brokerage are transaction-based. The non-transactionbased services of an informational nature are however essential for conducting transactions - for instance, balance inquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module. Mobile banking may also be used to help in business situations as well as financial Mobile Banking Services All the governmental and non-governmental banks provide different mobile banking services to their customers. This made their work easy and efficient with assurance. Mobile Banking transactions in India - Operative Guidelines for Banks by Reserve Bank of India. Mobile phones as a delivery channel for extending banking services have off-late been attaining greater significance. The rapid growth in users and wider coverage of mobile phone networks have made this channel an important platform for extending banking services to customers. With the rapid growth in the number of mobile 366

phone subscribers in India (about 261 million as at the end of March 2008 and growing at about 8 million a month), banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. Some banks have started offering information based services like balance enquiry, stop payment instruction of cheques, transactions enquiry, and location of the nearest ATM/branch etc. Acceptance of transfer of funds instruction for credit to beneficiaries of same/or another bank in favor of pre-registered beneficiaries have also commenced in a few banks. In order to ensure a level playing field and considering that the technology is relatively new, Reserve Bank has brought out a set of operating guidelines for adoption by banks. For the purpose of these Guidelines, “mobile banking transactions” is undertaking banking transactions using mobile phones by bank customers that involve credit/debit to their accounts. It also covers accessing the bank accounts by customers for non-monetary transactions like balance enquiry etc. Regulatory & Supervisory Issues  Only banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer mobile banking services.  The services shall be restricted only to customers of banks and holders of debit/credit cards issued as per the extant Reserve Bank of India guidelines.  Only Indian Rupee based domestic services shall be provided. Use of mobile banking services for cross border transfers is strictly prohibited.  Banks may also use the services of Business Correspondent appointed in compliance with RBI guidelines, for extending this facility to their customers.  The guidelines issued by the Reserve Bank on ‘Risks and Controls in Computers and Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th February 1998 will apply mutatis mutandis to mobile banking.  The guidelines issued by Reserve Bank on “Know Your Customer (KYC)”, “Anti Money Laundering (AML)” and combating the Financing of Terrorism (CFT) from time to time would be applicable to mobile based banking services also.  Only banks who have implemented core banking solutions would be permitted to provide mobile banking services.  Banks shall file Suspected Transaction Report (STR) to Financial Intelligence Unit – India (FID-IND) for mobile banking transactions as in the case of normal banking transactions. Registration of customers for mobile service  Banks shall put in place a system of document based registration with mandatory physical presence of their customers, before commencing mobile banking service.  On registration of the customer, the full details of the Terms and Conditions of the service offered shall be communicated to the customer. Technology and Security Standards  Information Security is most critical to the business of mobile banking services and its underlying operations. Therefore, technology used for mobile banking must be secure and should ensure confidentiality, integrity, authenticity and non-repudiability. An illustrative, but not exhaustive framework is given at Annex-I. Inter-operability  Banks offering mobile banking service must ensure that customers having mobile phones of any network operator is in a position to avail of the service. Restriction, if any, to the customers of particular mobile operator(s) is permissible only during the initial stages of offering the service, up to a maximum period of six months subject to review. 367

 The long term goal of mobile banking framework in India would be to enable funds transfer from account in one bank to any other account in the same or any other bank on a real time basis irrespective of the mobile network a customer has subscribed to. This would require inter-operability between mobile banking service providers and banks and development of a host of message formats. To ensure inter-operability between banks, and between their mobile banking service providers banks shall adopt the message formats like ISO 8583, with suitable modification to address specific needs. Clearing and Settlement for inter-bank funds transfer transactions  To meet the objective of a nation-wide mobile banking framework, facilitating inter-bank settlement, a robust clearing and settlement infrastructure operating on a 24x7 basis would be necessary. Pending creation of such a national infrastructure, banks may enter into bilateral or multilateral arrangement for inter-bank settlements, with express permission from Reserve Bank of India, wherever necessary. Customer Complaints and Grievance Redressal Mechanism  The customer /consumer protection issues assume a special significance in view of the fact that the delivery of banking services through mobile phones is relatively new. Some of the key issues in this regard are given at Annex-II. Transaction limit  A per transaction limit of Rs. 2500/- shall be imposed on all Mobile Banking transactions. Subject to an overall cap of Rs. 5000/- per day, per customer.  Banks may also put in place monthly transaction limit depending on the bank’s own risk perception of the customer. Board approval  Approval of the Board of Directors (Local Board in case of foreign banks) for the product as also the related security policies must be obtained before launching the scheme. Approval of Reserve Bank of India  Banks wishing to provide mobile banking services shall seek prior one time approval of the Reserve Bank of India, by furnishing full details of the proposal. Annex- I Technology and Security Standards 1. The security controls/guidelines mentioned in this document are only indicative. However, it must be recognised, the technology deployed is fundamental to safety and soundness of any payment system. Therefore, banks are required to follow the Security Standards appropriate to the complexity of services offered, subject to following the minimum standards set out in this document. The guidelines should be applied in a way that is appropriate to the risk associated with services provided by the bank and the system which supports these services. 2. Banks are required to put in place appropriate risk mitigation measures like transaction limit (per transaction, daily, weekly, monthly), transaction velocity limit, fraud checks, AML checks etc. depending on the bank’s own risk perception, unless otherwise mandated by the Reserve Bank. 3. Authentication Banks providing mobile banking services shall comply with the following security principles and practices for the authentication of mobile banking transactions: a) All mobile banking shall be permitted only by validation through a two factor authentication. 368

b) c) d)

One of the factors of authentication shall be mPIN or any higher standard. Where mPIN is used, end to end encryption of the mPIN shall be ensured, i.e mPIN shall not be in clear text anywhere in the network. The mPIN shall be stored in a secure environment.

4. Proper level of encryption and security shall be implemented at all stages of the transaction processing. The endeavor shall be to ensure end-to-end encryption of the mobile banking transaction. Adequate safe guards would also be put in place to guard against the use of mobile banking in money laundering, frauds etc. The following guidelines with respect to network and system security shall be adhered to: a)

Implement application level encryption over network and transport layer encryption wherever possible.

b) Establish proper firewalls, intruder detection systems (IDS), data file and system integrity checking, surveillance and incident response procedures and containment procedures. c) Conduct periodic risk management analysis, security vulnerability assessment of the application and network etc at least once in a year. d) Maintain proper and full documentation of security practices, guidelines, methods and procedures used in mobile banking and payment systems and keep them up to date based on the periodic risk management, analysis and vulnerability assessment carried out. e) Implement appropriate physical security measures to protect the system gateways, network equipments, servers, host computers, and other hardware/software used from unauthorized access and tampering. The Data Centre of the Bank and Service Providers should have proper wired and wireless data network protection mechanisms. 5. The dependence of banks on mobile banking service providers may place knowledge of bank systems and customers in a public domain. Mobile banking system may also make the banks dependent on small firms (i.e mobile banking service providers) with high employee turnover. It is therefore imperative that sensitive customer data, and security and integrity of transactions are protected. It is necessary that the mobile banking servers at the bank’s end or at the mobile banking service provider’s end, if any, should be certified by an, accredited external agency. In addition, banks should conduct regular information security audits on the mobile banking systems to ensure complete security. 6. for channels which do not contain the phone number as identity, a separate login ID and password shall be provided to ensure proper authentication. Internet Banking login IDs and Passwords shall not be allowed to be used for mobile banking. Annex-II Customer Protection Issues 1. Any security procedure adopted by banks for authenticating users needs to be recognized by law as a substitute for signature. In India, the Information Technology Act, 2000, provides for a particular technology as a means of authenticating electronic record. Any other method used by banks for authentication is a source of legal risk. Customers must be made aware of the said legal risk prior to sign up. 2. Banks are required to maintain secrecy and confidentiality of customers' accounts. In the mobile banking scenario, the risk of banks not meeting the above obligation is high. Banks may be exposed to enhanced risk of liability to customers on account of breach of secrecy, denial of service etc., on account of hacking/ other technological failures. The banks should, therefore, institute adequate risk control measures to manage such risks. 3. As in an Internet banking scenario, in the mobile banking scenario too, there is very limited or no stop-payment privileges for mobile banking transactions since it becomes impossible for the banks to stop payment in spite of receipt of stop payment instruction as the transactions are completely instantaneous and are incapable of being reversed. Hence, banks offering mobile banking should notify the customers the timeframe and the circumstances in which any stop-payment instructions could be accepted. 369

4. The Consumer Protection Act, 1986 defines the rights of consumers in India and is applicable to banking services as well. Currently, the rights and liabilities of customers availing of mobile banking services are being determined by bilateral agreements between the banks and customers. Taking into account the risks arising out of unauthorized transfer through hacking, denial of service on account of technological failure etc. banks providing mobile banking would need to assess the liabilities arising out of such events and take appropriate counter measures like insuring themselves against such risks, as in the case with internet banking. 5. Bilateral contracts drawn up between the payee and payee’s bank, the participating banks and service provider should clearly define the rights and obligations of each party. 6. Banks are required to make mandatory disclosures of risks, responsibilities and liabilities of the customers on their websites and/or through printed material. 7. The existing mechanism for handling customer complaints / grievances may be used for mobile banking transactions as well. However, in view of the fact that the technology is relatively new, banks should set up a help desk and disclose the details of the help desk and escalation procedure for lodging the complaints, on their websites. Such details should also be made available to the customer at the time of sign up. 8. In cases where the customer files a complaint with the bank disputing a transaction, it would be the responsibility of the service providing bank, to expeditiously redress the complaint. Banks may put in place procedures for addressing such customer grievances. The grievance handling procedure including the compensation policy should be disclosed. 9. Customers complaints / grievances arising out of mobile banking facility would be covered under the Banking Ombudsman Scheme 2006 (as amended up to May 2007). 10. The jurisdiction of legal settlement would be within India. Mobile banking services: Mobile banking services may include: 1. Account information-Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management 8. Pension plan management 9. Status on cheque, stop payment on cheque 10. Ordering cheque books 11. Balance checking in the account 12. Recent transactions 13. Due date of payment (functionality for stop, change and deleting of payments) 14. PIN provision, Change of PIN and reminder over the Internet Blocking of (lost, stolen) cards 15. Locating nearest bank branch, ATMs 16. Payments, deposits, withdrawals, and transfers 17. Cash-in, cash-out transactions on an ATM Domestic and international fund transfers 370

18. Micro-payment handling 19. Mobile & Direct to Home package recharging 20. Purchasing tickets for travel and entertainment 21. Commercial payment processing 22. Bill payment processing 23. Peer to Peer payments (e.g., Pop money, Isis) 24. Withdrawal at banking agent 25. Deposit at banking agent Future and Challenges Presently, this service is available on GSM handsets, while efforts are underway to extend it to CMDA handsets as well. Subscribers are required to download a mobile banking application (for instance, i-Mobile of ICICI Bank) on their handsets to access m-banking services. For GPRS enabled mobile handsets, the application can be downloaded by sending an SMS to a specified number, after which the application is sent to the handset and can be immediately installed. For non-GPRS handsets, the application may be downloaded on a laptop/PC from the Bank's website and then transferred to the handset using a data cable or Bluetooth device. Once the application is installed, users can carry on transactions using a unique 4-digit (or 6-digit) PIN (m-PIN). With the advent of technology and increasing use of Smartphone and tablet based devices, the use of Mobile Banking functionality would enable customer connect across entire customer life cycle much comprehensively than before. With this scenario, current mobile banking objectives of say building relationships, reducing cost, achieving new revenue stream will transform to enable new objectives targeting higher level goals such as building brand of the banking organization. Emerging technology and functionalities would enable to create new ways of lead generation, prospecting as well as developing deep customer relationship and mobile banking world would achieve superior customer experience with bi-directional communications. Among digital channels, mobile banking is a clear IT investment priority in 2013 as retail banks attempt to capitalize on the features unique to mobile, such as location-based services Conclusions and Suggestions With the globalization and liberalization and advancement of the technology the mobile banking system had made the life smooth and easy. The life has become a mobile. Now mobile banking is reachable to each and every person whether rich or poor. Everybody knows how to use mobile banking services. This had made transfer of money very easy from one place to another just on one click. But with that the threat and challenges had been increased. Misuse of this system is rising which is harmful for the society. The hacking system on internet by knowing one’s account details is rising day by day. A tight security is needed although the banks alert the customers from their side about these types of incidents. It is suggested that while operating and using the mobile banking services the customers should be alert from every type of loss. They should follow the instructions very strictly provided by the banks. Most of the customers avoid reading the instructions given by the Banks. References 1. 2. (http://en.wikipedia.org/wiki/Mobile_banking. 2. http://www.icicibank.com/mobile-Banking. 3. State Bank of India Site. 4. Kotak Bank Site. 5. http://www.tutorial-reports.com/mobile/mobile- banking/introduction.php. 6. News Papers and Magazines.

371

Mobile Banking: An Analysis of Benefits and Risks By Kuldeep Goyal

Introduction Mobile banking is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant. Mobile banking differs from mobile payments, which involve the use of a mobile device to pay for goods or services either at the point of sale or remotely, analogously to the use of a debit or credit card to effect an EFTPOS payment.The earliest mobile banking services were offered over SMS, a service known as SMS banking. With the introduction of smart phones with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform to their customers. Mobile banking has until recently (2010) most often been performed via SMS or the mobile web. Apple's initial success with iPhone and the rapid growth of phones based on Google's Android (operating system) have led to increasing use of special client programs, called apps, downloaded to the mobile device. With that said, advancements in web technologies such as HTML5, CSS3 and JavaScript have seen more banks launching mobile web based services to complement native applications. A recent study (May 2012) by Mapa Research suggests that over a third of banks have mobile device detection upon visiting the banks' main website. A number of things can happen on mobile detection such as redirecting to an app store, redirection to a mobile banking specific website or providing a menu of mobile banking options for the user to choose from. Typical mobile banking services may include Account information 1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management Payments, deposits, withdrawals, and transfers 1. Cash-in, cash-out transactions on an ATM 2. Domestic and international fund transfers 3. Micro-payment handling 4. Mobile & Direct to Home package recharging 372

5. Purchasing tickets for travel and entertainment 6. Commercial payment processing 7. Bill payment processing 8. Withdrawal at banking agent 9. Deposit at banking agent A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account. Mobile banking is becoming more and more prevalent in India thanks to its convenience. Month-on-month transactions carried out through mobile banking are surging both in volume and value terms.

(Source RBI)

According to Reserve bank of India (RBI) data, a total of 3.7 crore mobile transactions took place between February and November 2012, jumping around 1.7 times in volumes over this 10-month period. These transactions saw nearly a three-fold increase in value over the same period. Increasing Smartphone adoption and initiatives such as media promotions and customer education programmes for mobile banking have led to this uptrend. For customers, mobile banking is convenient while banks benefit through a low-cost channel. The SBI group dominates this space in volume terms with an overall share of 67.4 per cent in total volumes. Private and foreign banks follow, with an overall share of 30.1 per cent in November.

Source: RBI

However, the SBI group has a lower share in value terms compared to the private and foreign banks. "In an evolving market, which is in its nascent stage, these developments are bound to happen when more banks get into the space," said an official from the bank, in an emailed response.Among banks, SBI leads the race with 65.4 per cent share in the total number of mobile transactions carried out in November, followed by ICICI Bank with a 14.2 per cent share, Axis with 9.4 per cent and Citi bank with 3.5 per cent. 373

Source: RBI

Around three per cent of SBI's total customer base is into mobile banking transactions. For ICICI Bank, over 10 million customers have currently registered for mobile banking. Prepaid mobile recharges, DTH recharges, ticket bookings (movies/travel) are among the fast growing transactions in mobile banking. "With multiple modes of remittances being made available now, the number of fund-transfer transactions (P2P) is also increasing steadily," said the SBI email. Currently there is no cap on per-day transactions for encrypted transactions in banking channels, including mobile banking. These limits are set by individual banks depending on their risk perception of the respective channels. However, for unencrypted transactions, such as those through SMS, the RBI has set a limit of Rs 5,000 per day.

With mobile phone penetration of over 80 per cent, India has a huge potential for mobile banking. But on the global landscape, mobile payments have a long way to go in India. According to the MasterCard Mobile Payments Readiness Index (MPRI), India ranked 21st among 34 countries with the score of 31.4 on a scale of 100. The index is a data-driven survey of the global mobile payments landscape. It relies on an analysis of 34 countries and their readiness to use three types of mobile payments: person to person, mobile e-commerce and mobile payments at the point of sale (POS).The index also points out that consumers in India have not yet fully embraced mobile payments. Only 14 per cent of Indian consumers are familiar with both P2P and m-commerce transactions, and 10 per cent are familiar with POS transactions. Singapore topped the charts with a score of 45.6 followed by Canada and the US with scores of 42 and 41.5, respectively. 374

Mobile Payments is a new and alternate mode of payment using mobile phones. Instead of using traditional methods like cash, cheque, or credit cards, a customer can use a mobile phone to transfer money or to pay for goods and services. A customer can transfer money or pay for goods and services by sending an SMS, using a Java application over GPRS, a WAP service, over IVR or other mobile communication technologies. In India, this service is Bank-led. Customers wishing to avail themselves of this service will have to register with Banks which provide this service. Currently, this service is being offered by several major banks and is expected to grow further. Mobile Payment Forum of India (MPFI) is the umbrella organisation which is responsible for deploying mobile payments in India. On Nov 22 2010 NPCI launched Immediate Payment Services (IMPS) to offer an instant, 24X7, interbank electronic fund transfer service through mobile phones. IMPS facilitate customers to use mobile instruments as a channel for accessing their bank accounts and put high interbank fund transfers in a secured manner with immediate confirmation features.With 900+ million mobile subscriber and robust payment infrastructure, IMPS is well positioned to fulfill its objectives of enabling bank customers to use mobile instruments as a preferred channel for accessing their banks accounts, remit funds and also sub-serve the goal of electronification of retail payments. More than 54 Banks already offer IMPS services to their customers. The basic aim of IMPS is to also enable micro payments on low-end mobile devices which support only voice and text, in addition to higher end phones which could support web-browsing or Java application capabilities. A person who has subscribed to a mobile payment service should be able to send money to any other person who has subscribed as well. This should be independent of the mobile network and the bank to which either of the persons belong. This is referred to as interoperability and is a key concern for any major technology to be successful. In India, the model for the delivery of IMPS will be bank-linked; This implies that customers wishing to avail themselves of this service should have: •

Initially, a registered mobile phone account with any network operator in the country, and

•

A Bank account

•

Register for the Mobile Payment service with the Bank

In contrast, in economies such as Kenya the mobile network operators lead the development of mobile financial services. Choosing a bank-linked model enables offerings of a variety of value added financial service built on top of the basic mobile payment transaction. The idea of mobile financial solutions will only then permeate to all levels of society; customers, merchants, business houses and the government. The technical standards are set up by MPFI, which are implemented by the various participating entities after being ratified by the RBI. The transaction flow for IMPS can be simply described as 'customer-bank-bank-customer'. When a customer initiates a transaction by sending an SMS to the bank's gateway, this SMS is processed by a Mobile Payment Provider (MPP). The role of MPP is defined in the standards document. After appropriate checks with the customer's bank, the transaction is forwarded to a central switch. The role of the switching agency is played by the National Payments Corporation of India (NPCI). NPCI routes transaction to the payee's bank based on the MMID. A transaction is initiated by sending the following details: • Mobile number of the payee • The 7-digit MMID of the payee • Amount of money to be transferred • The 4-digit PIN of the payer Depending on the type of the transaction, either both parties (payer and payee) or only a single party is notified about the transaction. A successful transaction will be notified by an SMS to both parties. The communication between the MPP's and the banks takes place using ISO 8583 message format, which is the standard message format for all financial messages in India. In order to test the compliance and conformance to the standards set and the message formats, a Certification Lab is being set up at IIT Madras. 375

Risks in Mobile Banking The rising popularity of mobile technology in financial institutions has brought with it an increased threat from cyber criminals. Financial institutions need to ensure they not only have the correct procedures and policies in place to deal with the risks, but that senior management set the correct tone from the top. Consumer mobile electronic devices such as smart phones and tablet computers have increasingly been incorporated into their users' professional lives. The practice of ‘bring your own device' (BYOD) to work is expected to grow 105% in the next three years in the UK, US, China, Brazil, Germany and India, according to a survey by Cisco Internet Business Solutions Group (IBSG), the consultancy arm of US network specialist Cisco. In financial institutions, the introduction of mobile devices has brought with it numerous advantages, including increased productivity and employee satisfaction. Consumers, too, are drawn to banks that can offer ease of transactions through mobile banking applications. However, as the popularity of mobile technology increases, so does the threat. Increasing the number of devices within an organisation widens the potential attack space for cyber-crime to occur. Financial institutions need to ensure they have the correct procedures and controls in place to mitigate risks. It is essential the correct tone over the use of such devices is set from the top, with senior executives expected to take the lead in setting the example. Increasingly, companies of all kinds are either issuing devices to employees or allowing them to use their own personal devices at work. The principal explanation behind this is not necessarily related to the needs of the business – mobile devices are a desirable solution in search of a business justification, says Ben Ramduny, a manager in KPMG's information protection and business resilience team in London. "Ultimately, the reason that this is being done to such a large extent across all business sectors are that the senior executives wants their cool toys. They get the technology and after that they start to work out how they can actually use it to improve the business function and ongoing processes and actually develop those benefits that people often tout." Offering BYOD facilities to more junior employees can also help to attract high-quality candidates. "There's a lot of talk right now about the millennium children who simply won't work in an environment where they can't use what device they choose to," says Matthew Gyde, global head of security at IT service provider Dimension Data. He adds, however, that this is a trend not solely related to the younger generation: "A lot of people have preferences for their devices and are pushing ahead with that regardless of what the organisation wants to do." Smartphone technology, thanks to consumer demand, is poised to become the most significant technology disrupter since the Internet and will forever change how banks serve their customers. Smart phones appeal to bank executives because of their labor-saving potential and because they provide another point of competitive distinction as banks race to create innovative handheld applications. Given the recent cyber-attacks on U.S. banks however, one might ask "how safe is Smartphone banking?" The answer to that question – indeed to the overall profitability of Smartphone banking itself – lies with the customers. One threat challenging the success of Smartphone applications has to do with the physical location of the customer. If their Smartphone are operated through cellular data networks, then customers are, for the most part, immune to cyber-attacks. That's because major carriers are adding encryption to their voice and data service in anticipation of a spike in Smartphone-based activity. The new encryption initiatives will support Smartphones and tablets. If, however, Smartphone connections are made through Wi-Fi networks, such as wireless access points in the home, at coffee shops or in airport lounges, then the risks of unsafe networks emerge. It is the endpoint of any Internet connection where risks rise dramatically and, for Smartphone users, Wi-Fi can make customers vulnerable to hacking attacks that may result in the theft of their login credentials. Public Wi-Fi hotspots are also problematic because they expose the bank's internal networks to another potential entry point. Since these web access sites are not necessarily maintained with the latest software updates and the vast majority of routers are open (i.e., not requiring passkeys) or have trivial passkeys that are easily guessed, Wi-Fi connections represent a significant weakness that the bank's risk management team must address. Connecting to a corporate network through a public Wi-Fi connection that has not had its firmware updated is like getting into an elevator that has not been inspected since installation – anything could go wrong. Another concern for Smartphone-based banking applications involves the encryption protocol used by the Wi-Fi device to transmit customer data between the phone and the access point: WPA2, or Wi-Fi Protected Access, 2nd generation, is most 376

secure, WPA (version 1) is somewhat secure, and WEP, or Wired Equivalent Privacy, is insecure. For Smartphone banking to work as promised, banks need to educate customers to understand the preferred protocol to use. A third weakness involves the Bluetooth communications protocol used by smartphones to pair with devices such as wireless earpieces. Since it provides access to the phone's operating system, successfully guessing a 4-digit pin to unlock Bluetooth gives hackers access to all the data going in and out of the device. Here too, customers run the risk of login credential theft. Hence, banks run the risk of fraudulent transactions by imposters. For Smartphone applications to meet expected profit levels, banks must inform customers of these weaknesses and provide basic advice that can help protect parties. This advice can include switching off Bluetooth when not in use or frequently changing PIN codes. Finally, common Smartphone attacks such as eavesdropping (recording the Smartphone’s signal for later replay and offline descrambling), shoulder surfing (to steal passwords), Trojan horse attacks (setting up fake hotspots to steal login credentials) and outright Smartphone theft all represent profit-robbing risks that banks need to consider. When planning Smartphone initiatives, banks need to integrate information security strategy with their business strategy to ensure a smoother outcome. To summarize, no single information security technology can protect banks from wireless hijacking so it's important to educate customers on safe Smartphone use, connecting only to trusted Wi-Fi access points, installing antivirus and using strong passwords. Smartphone banking applications promise too much payoff to skimp on implementation of sound IT security practices Mobile Phone Security Security of financial transactions, being executed from some remote location and transmission of financial information over the air, are the most complicated challenges that need to be addressed jointly by mobile application developers, wireless network service providers and the banks' IT departments. The following aspects need to be addressed to offer a secure infrastructure for financial transaction over wireless network : 1. Physical part of the hand-held device. If the bank is offering smart-card based security, the physical security of the device is more important. 2. Security of any thick-client application running on the device. In case the device is stolen, the hacker should require at least an ID/Password to access the application. 3. Authentication of the device with service provider before initiating a transaction. This would ensure that unauthorized devices are not connected to perform financial transactions. 4. User ID / Password authentication of bank’s customer. 5. Encryption of the data being transmitted over the air. 6. Encryption of the data that will be stored in device for later / off-line analysis by the customer. One-time password (OTPs) are the latest tool used by financial and banking service providers in the fight against cyber fraud. Instead of relying on traditional memorized passwords, OTPs are requested by consumers each time they want to perform transactions using the online or mobile banking interface. When the request is received the password is sent to the consumer’s phone via SMS. The password is expired once it has been used or once its scheduled life-cycle has expired. Because of the concerns made explicit above, it is extremely important that SMS gateway providers can provide a decent quality of service for banks and financial institutions in regards to SMS services. Therefore, the provision of service level agreements (SLAs) is a requirement for this industry; it is necessary to give the bank customer delivery guarantees of all messages, as well as measurements on the speed of delivery, throughput, etc. SLAs give the service parameters in which a messaging solution is guaranteed to perform.

377

An Analysis of Effectiveness of the Working Model for Microinsurance By Silender Singh Hooda and Payal Sharma

Introduction Sustainable Economic development depends on social protection which refers to the benefits that government provides for it’s economically weaker, disability benefits, universal healthcare maternity benefits etc. However, there is no effective mechanism to reach them to poor and to unorganized sector. Micro insurance can construct delivery mechanism to extend government programme to informal sector. The risk faces by the poor such as death, illness, injury and accident are no different from those faces by others but they are more vulnerable to such risks because of their economic circumstances. On contrary, loan providing financial institutions face bad debts problems resulting nonperforming assets proportionately increases. In order to balanced socio-economic growth it become necessary that poor should be included in economic mainstream and should be get insured as a significant percentage of population i.e. 32.7 per cent (ILO Report, 2006) fall below the poverty line. Micro insurance policy according to Insurance Regulatory Development Authority (IRDA) is, “A general or life insurance policy with a sum assured of Rs.50, 000 or less.” In other word Micro insurance is for person working in informal economy, insurance involving low level of premium, with small benefits and risk pooling instruments for the protection for low-income households. The risk themselves are by no means ‘micro’ to the households. Presently available micro insurance could cover a variety of different risk including illness, death, property loss basically any risk that is insurable and it is covered in term of life policy. Micro insurance is insurance that is accessed by low income population, provided by a variety of different entities, but run in accordance with generally accepted insurance practices and policy is managed based on premiums. It does not include government social welfare as this is not funded by premium relating to the risk, and benefits are not paid out of a pool of funds that is managed based on insurance and risk principles. When we compare our staying in this sector as indicators we takes insurance penetration and Insurance density ratio, both increased significantly over the years, especially with opening up of the insurance industry to the private sector. However the increase has been marginal as far as the non-life insurance sector is concerned. While the density of life insurance in India grew from US$ 9.1 in 2001 to US$ 50 in 2012, the density in non-life insurance industry for the same period grew from US$2.4 to US$ 10. Similarly penetration in life insurance sector increased from 2.15% in 2001 to 4.6% in 2009 and non-life insurance sector from 0.56% to 0.60%. The study has focused of micro insurance is often referred to as insuring the ‘Bottom of Pyramid’ for shift it in a new market. This refers to a wealth pyramid, shaped similarly to the age pyramid where the youngest or the least wealthy are the largest group and thus the foundation on which the older or wealthier stand. The prospect of 200 to 350 million clients in India alone and 1.5 to 3 billion worldwide has attracted commercial interest beyond the established insurance companies. Leapfrog Investment which calls itself the world first Micro insurance fund has just collected USD 112 million to be invested in Micro insurance venture and to make money from it. CGAP stated that “some strong laws and regulations should be adapted which support the evolution of more inclusive insurance system by encouraging existing insurer to serve low-income segment or by allowing micro insurance to evolve and integrate with the formal insurance sector. The supervision of micro insurance may be 378

mandated under the insurance law or some other.”Ahuja R. and Ghna B. (2005) reported that “low income people became sizable sector of the population and who are mostly without any social security cover. By serving these people institutions could make a sound economic gain. Flexibility in premium collection and encouraging micro insurance among micro finance institutions aid the development of micro insurance.” Churchill Craig revealed that “poor households have informal means to manage risk which cover a small portion of the loss so micro insurance should be provided to them as a risk management tools that help poor to manage risk.” The guru behinds the articulation of the “New Market” i.e. BOP market perspective is C.K. Prahalad (2006), who illustrate in his book ‘The Fortune at the Bottom of the Pyramid’ that the private sector in its desire to gain market coverage will invent new systems depending on the nature of the market. Prahalad identifies the more than four billion persons living on less thanUS$2 per day as a market opportunity if the providers of products and services , including multination corporations innovate new business model and create low income consumers. Even though he does not analyze insurance case studies, Prahalad’s “Twelve Principle of Innovation for Bottom of Pyramid (BOP) Markets” are remarkable applicable to the provision of micro insurance. 1. New understanding of price-performance relationship:Obviously the poor can’t afford to pay high prices but that does not mean that they deserve poor quality products. For micro insurance it could be argued that the low-income market requires a better quality product e.g. quick claims settlements to overcome their apprehension about paying up-front for some undetermined future benefits. 2. Combine advanced technologies with existing infrastructure: Micro insurance institutions should experiment with technologies like ATMs, Smartcard, Palm pilots and Point of sale devices to enhance efficiency and productivity. 3. Scale of operation: In a BOP business per unit profit is minor but when it is multiplied across a huge number of sales, the return can become attractive to shareholders. This attribute is a perfect fit for insurance and law of large numbers, whereby actual claims experience should run much closer to the projected claims when the risk pool is larger. When projections can be estimated with a high degree of confidence, then the product pricing does not have to include a large margin for error, making it more affordable to the poor. 4. Eco Friendly: All innovations must minimize packaging and consider the impact of the product on the environment. This principle may not be directly applicable to micro insurance however there is a connection. Many catastrophic risks to which the poor are vulnerable are associated with climate change. 5. Requires different functionality: Product and services for the BOP market can’t just be scaled down or less expensive version of traditional products with micro insurance; for example, insights into how low-income households might use an insurance payout illustrate key differences with the conventional insurance market. For example, instead of a lump sum of cash, the poor might prefer in kind benefits possibly spread over a period of time. 6.

Process innovation: While designing product for BOP market process should also be considered with product with product. In one must recognize that the premium is not the only expenses. The indirect costs of accessing and using that product, including transportation and opportunity cost of lost wages may be much higher than the actual cost.

7. Deskilling work: Service industries are naturally labor-intensive, labor-cost can represent over half of the total operating expenses, one strategy to contain costs is to simplify the operations so that products can be sold and service by less expensive workers. Such an approach is quite appropriate for micro insurance because the customers also want simple, easy to understand products. 8. Significant investments in educating customer: Prahalad is explicit about the importance of creating BOP consumers through education and raising of awareness, using innovative mechanisms to reach person in ‘Media Dark Zones.’ This has also been the experience of micro insurer which need to explain to their clients how insurance works and how they will benefit from it. 379

9. Designed for hostile conditions: The product and services designed for the BOP market must take into consideration the unsanitary conditions and limited infrastructure. For micro insurance providers, this involves investing in low-prevention measures such as promoting low-risk behavior, water purification and hygiene in order to reduce claims for health and life insurance. 10. User-friendly interface: The heterogeneous BOP market speaks a myriad of languages with a variety of different literacy level. For micro insurance, sales person should interact with people in their local dialect and application form should be short and perhaps completed by sale persons and claims documentation should be simplifies. 11. Distribution: One of the great challenges in serving BOP consumers is to get the product to the market, yet insurance companies are particularly weak at distribution. The main solution to this problem to this problem is to collaborate with another organization that already has financial transaction with low-income households so the insurer can leverage existing infrastructure to reach the poor. 12. Challenge the Conventional wisdom: In order to serve low-income market, insurers have to think differently about customer’s needs, product design, delivery system and even business models. There is a viable market out there if insurers are willing to learn about the market and develop new paradigms for serving it. As company offer service to low-income households by developing an appropriate business model that enables the poor to be a profitable market segment for commercial or cooperative insurer. Objective of the Study To evaluate and suggests the working model of micro insurance and its effectiveness to tap the market at bottom of pyramid in economy Data Collection and Methodology The study has used data collected from IRDA reports, IFMR Research centre for Microfinance, NABARD and Ministry of Corporate Affairs. Simple percentage has been used to analysis and interpretation purpose. Analysis, Conclusions and suggestions Distribution Channels of Micro insurance Product in India: Micro insurance can be delivered through a variety of institutional arrangement. It includes Partner-Agent model, Charitable Insurance model, De-linked model and Service Provider model. Partner-Agent Model: ln this model approved intermediary organization act as insurance agents. It identifies the customer, negotiate with insurance companies about the adequacy of products and premium rates to be paid and collect the premium from client on behalf of insurer. This model assists in clients in claim processing and settlement. In India, Institutions follow this model are Vimo-SEWA and ICICI Lombard, Karuna Trust and National Insurance Company etc. Charitable Insurance Model: Charitable insurance model cover a wide range of institutional options, which all share two important features one is being non-profit and another is not putting the risk on the insured. Provider of this kind of insurance can be NGOs, religious associations or any other well-meaning organization. Vimo SEWA operated its health insurance under this model from 1996 to 2002, but after the 2001 earthquake in Gujarat, the limits of being a small-scale stand-alone insurer became obvious and thus it terminate to follow this model onwards. In India Yeshasvini Trust follows this model with service-Provider model. Service Provider Model: NGOs generally provide basic health care facilities to the rural population since necessary amenities were simply not present in their area of operations. Instead of premium, the service providers charge a membership fees to partly cover their costs. De-Linked Model: It is community based insurance facility where NGO, MFI or federation of the group acts as insurer. In this, coverage of risk remains with the insurer. Presently of selling micro insurance done through mixed system and position of this model is also vulnerable: 380

Table 1.1: State-wise Institutions working as Agent and total Institutions (in Numbers) MICRO INSURANCE – Channel State / Union Territory

Total No. Total Total no. of Micro Finance SHGs Micro NGOs Work- of NGOs Intuitions Working SHGs with Finance ing as Agent registered Working as as Agent Banks* in Sec 25 Company In States Intuitions for Micro Agent for Mifor Micro States and Branchinsurance and U.T. in cro insurance insurance U.T. in India India. es** 1448216 2977 2205 7 710 40 1 218352 1421 339 20 215 8  0 140824 2272 519 6 457 6 1 113982 464 180 48 307 14  0 6745 65 6 2 8 0  0 168180 2461 161 12 293 11 4 36762 738 51 1 91 1 0  50182 267 10 3 75 10 0  4366 533 0 0 88 0  0 79424 915 182 3 225 2  0 534588 2218 836 4 475 9  0 394197 1202 118 34 906 55 0  770695 4846 631 30 494 78 4 10831 1102 6   14 1  0 178226 2139 410 41 467 24  0 11787 119 9 0 1  0  0 5097 60 1 0 3  0  0 5926 267 7 0 26 0   0 2191 3266 55 2 165 5  0 503172 2320 778 10 402 45  0 45005 932 5 50 151 3  0 213295 1848 215 7 480 2  0 2428 43 10 0 6 0  0 826710 2897 1100 2 610 6 1 31349 198 60 0 41   0  429760 8122 591 20 1336 5 2 43997 655 78 13 317 1  0 647059 5058 1402 58 876 47 1 373 9239 373 14 Total=2749# 6420204 49405 9965 .00006 18.70 3.74 100.00 100.00 100.00 .0051 100.00

Andhra Pradesh Assam Bihar Chhattisgarh Goa Gujarat Haryana Himachal Pradesh J&K Jharkhand Karnataka Kerala Maharashtra Manipur Madhya Pradesh Meghalaya Mizoram Nagaland N Delhi Orissa Punjab & Chandigarh Rajasthan Sikkim Tamil Nadu Tripura Uttar Pradesh Uttrakhand West Bengal Total Percentage of Total Source: Secondary. *SHGs with Commercial, Regional Rural and Cooperative Banks, NABARD Report on Status of Micro Finance in India, 2011. ** IFMR Research, Centre for Microfinance, 2011. # Ministry of Corporate Affair, India, 2012

Table 1.1 shows that SHGs and NGOs are main institutions working as agent in micro insurance. But on the contrary it is found that only .00006 per cent SGHs companies registered under company’ act 25 are very small number (373) out of 64.20 lacs SHGs working in different states and union territories in India. NGOs are working as agents for micro finance is showing encouraging figure, 18.70 per cent followed by micro finance institutions with 3.74 percent. But, this segment of agents also not fully utilized till date. It shows such efforts are very bleak to provide financial risk to below poverty line India has a very large chunk of population living below poverty line the Table 1.2 reveals that total lives covered under individual policies and group insurance schemes in 2007-08 were 131.80 and it has made a progress till 2009-10 with lives covered 198.26. But, after this financial year 2010-11 and 2011-12 it has shown a declining position. Same was found in case of percentage total live covered under micro insurance to total population below poverty line. It is concluded that these 381

effort will not be good for sustainable economic development of India and for programs run by government. In it support it is also found (NABARD, Status of Micro Finance in India, 2009-12) that banks those are working micro finance their total non-performing assets to total loans given to SHGs are increasing continuously from 2.90 per cent in 2009 to 6.09 per cent in 2012. As it is concluded to avoid NPAs microfinance institutions should tie with/ work as agency of micro insurance to tap the microfinance untapped market without NPAs Table: 1.2: Year-Wise Percentage of Life Cover under Micro Insurance to Total below Poverty Population in India Year

No. of Premium (Rs. in Group No. individual Crores) of Lives policies (l in (Lacs) Lacs) 2007-08 9.38 18.23 122.42 2008-09 21.52 36.56 125.51 2009-10 29.84 158.22 168.42 2010-11 36.51 130.40 155.23 2011-12 46.20 115.67 101.94 Source: Secondary *Planning Commission, Government of India, 2012.

Premium (Rs. in Total Lives Cover Crores) under Micro Insurance (A) in Lacs 201.27 131.80 205.95 147.03 234.81 198.26 155.23 191.23 109.82 148.14

Population Below Poverty Line (No. in Crores)*(B) 37.38 36.41 35.46 34.47 33.50

Percentage (%) A/B 3.53 4.04 5.59 5.54 4.42

Further Area for Research This study has checked the sustainability of micro insurance and how to make high-quality microfinance with it. Study has not taken the customers variables, demands pattern and cost and profitability scale of insurers. It can be taken for further research. References: •

ILO report 2006 on “Protecting the Poor a Micro Insurance Compendium” edited by Craig Churchill Pp 17-19 and Pp 403-414.

•

NCAER report 2011 on “Pre-launch Survey Report of Insurance Awareness Campaign” Pp 5-6.

•

NABARD Reports (2009 to 2012) Status of Micro Finance In India.

382

An Analytical Study of Mobile Agents: Are they a Good Idea? By Harjender Singh

Introduction An agent is defined as “a person whose job is to act for, or manage the affairs of, other people”. In the context of computers, software agents refer to programs that perform certain tasks on behalf of the user. Imagine that you want to go on a trip to a new holiday destination. You contact your travel agent program and describe your preferences and your constraints (such as how much money you are willing to spend, when you want to travel, etc.). The travel agent program suggests where you can spend your holidays after consulting several information sources such as tourist guides and flight schedules and verifying the availability of airline tickets and hotel rooms. When you confirm your Destination, the program books the flight tickets and reserves the hotel rooms for you. Thus the software agent acts as your personal assistant. Mobile agents are defined as active objects or clusters of objects that have behavior, state and location. The different features like of autonomy, social ability, learning, and most importantly, mobility. Autonomy: The agents themselves decide the sequence of actions to be performed to achieve the user’s task. This autonomy enables agents to operate without requiring human intervention. i.e. Agent itself decides when and where to migrate next. Social ability: The ability to navigate every situation that involves more than one person (group for young adults between the age of 19 and 20) Learning: The acquisition of knowledge or skills through experience, practice, or study. i.e. Acquiring new, or modifying existing, knowledge, behaviors, skills, values, or preferences and to improve different types of information Mobility: Mobility increases the functionality of the mobile agent and allows the mobile agent to perform tasks beyond the scope of static agents.( Static agents achieve their goal by executing on a single machine). For example, a travel agent program may visit several hosts such as an airline reservation system, a hotel resources host, etc. in order to achieve its function. A mobile agent is a program which represents a user in a computer network, and is capable of migrating autonomously from one computer to another computer, and to perform some computation on behalf of the user. Mobile agents decide when and where to move. Movement is often evolved from RPC methods. When a mobile agent decides to move, it saves its own state, transports this saved state to the new host, and resumes execution from the saved state.

383

Working of Mobile Agents & how its work: Mobile Agents

A mobile agent consists of the program code and the program execution state. Initially a mobile agent resides on a computer called the home machine The agent is then dispatched to execute on a remote computer called a mobile agent host (a mobile agent host is also called mobile agent platform or mobile agent server). When a mobile agent is dispatched the entire code of the mobile agent and the execution state of the mobile agent is transferred to the host. The host provides a suitable execution environment for the mobile agent to execute. The mobile agent uses resources (CPU, memory, etc.) of the host to perform its task. After completing its task on the host, the mobile agent migrates to another computer. The life cycle of a Mobile Agent : 1. The mobile agent is created in the Home Machine. 2. The mobile agent is dispatched to the Host Machine A for execution. 3. The agent executes on Host Machine A. 4. After execution the agent is cloned to create two copies. One copy is dispatched to Host Machine B and the other is dispatched to Host Machine C. 5. The cloned copies execute on their respective hosts. 6. After execution, Host Machine B and C send the mobile agent received by them back to the Home Machine. 7. The Home Machine retracts the agents and the data brought by the agents is analyzed the agents are then disposed. 384

Attributes of Mobile Agent: • •

•

•

Code: The program (in a suitable language) that defines the agent's behavior. State: The agent's internal variables etc., which enable it to resume its activities after moving to another host. – Execution state – Object state Attributes: Information describing the agent, its origin and owner, its movement history, resource requirements, authentication keys etc. Part of this may be accessible to the agent itself, but the agent must not be able to modify the attributes. The attributes are – Identifier – Authority – Agent system type Location: Agent systems may be grouped in regions. A region represents a security domain where network-wide resources are accessed following a uniform policy.

MOBILE AGENT TECHNOLOGIES Mobile Agent, namely, is a type of software agent, with the feature of autonomy, social ability, learning, and most important, mobility and programs that can migrate from system to system within a network environment. Agent decides when and where to move next .It performs some processing at each host. In mobile applications data may be organized as collections of objects, in which exchange between mobile and static hosts. Besides introducing stationary agents in the path between the mobile client and the server, mobile agents have also been used to accomplish tasks required by mobile. It reduces bandwidth usage Reduce total completion time and Reduce latency. Mobile agents should be able to execute on every machine in a network and the agent code should not have to be installed on every machine the agent could visit. Therefore Mobile Agents use mobile code systems like Java and the Java virtual machine where classes can be loaded at runtime over the network.

Mobile Agents model Events in Mobile Agent’s life-time The mobile agent uses resources (CPU, memory etc.) of the host to perform its task. • Creation: a brand new agent is born and its state is initialized. • Dispatch: an agent travels to a new host. 385

• Cloning: a twin agent is born and the current state of the original is duplicated in the clone • Deactivation: an agent is put to sleep and its state is stored on a disk of the host. • Activation: a deactivated agent is brought back to life and its state is restored from disk. • Retraction: an agent is brought back from a remote host along with its state to the home machine. • Disposal: an agent is terminated and its state is lost forever • Communication: Notifies the agent to handle messages incoming from other agents , which is the primary means of inter-agent correspondence. Applications of Mobile Agents : Although no universally used application (normally called killer application) has been developed for them, mobile agents are suitable for the following applications. Electronic Commerce : Mobile agents can travel to different trading sites and help to locate the most appropriate deal, negotiate the deal and even finalize business transactions on behalf of their owners. A mobile agent can be programmed to bid in an online auction on behalf of the user. The user himself need not be online during the auction. Parallel Computing: Solving a complex problem on a single computer takes a lot of time. To overcome this, mobile agents can be written to solve the problem. These agents migrate to computers on the network, which have the required resources and use them to solve the problem in parallel thereby reducing the time required to solve the problem. Data Collection: Consider a case wherein, data from many clients has to be processed. In the traditional clientserver model, all the clients have to send their data to the server for processing resulting in high network traffic. Instead mobile agents can be sent to the individual clients to process data and send back results to the server, thereby reducing the network load. Personal Assistance : An agent can act as a personal assistant to the user and perform tasks for user on a remote host regardless of whether or not user is connected to the network. Distributed information retrieval : Mobile agent technology provides efficient information retrieval. Telecommunication networks services : Mobile agents provide an effective and flexible solution to the management of advanced telecommunication services by providing dynamic network reconfiguration and user customization Monitoring and notification: As a local representative for remote services, an agent can perform tasks on behalf a user irrespective of whether or not user is connected to the network. For instance, a user can dispatch a mobile agent to the internet to monitor the stock prices and to notify him/her only when certain thresholds are reached Languages support for mobile agent: The first language for programming mobile agents called TeleScript was introduced in 1994. One of the popular languages for implementing mobile agents is Java. Infact, Concordia, Odyssey and Voyager are all implemented in Java, but java language is the most popular because it is Platform independence, Create once, go everywhere, Object-oriented feature and Security model. Some Other languages that support MA are TCL D’Agents, SMIA C/C++ Omniware Miscellaneous 386

Telescript Lisp, Scheme, custom, etc. Challenges in implementing Mobile Agents: 1) Security: Security is one of the major issues that need to be implemented in MA. One properties of a mobile agent is, it can roam on an relating network and can execute its code on a remote server system. This property also makes it vulnerable to malicious attacks from other agents and servers. There are two areas in mobile agent security: a) Protection of host nodes from malicious agents: mobile agent system is an open system, it can easily be attacked. Attacks can be in the form of leakage, tampering, stealing of resources and vandalism. The host executes mobile agent’s code, and then mobile agent has access to the resources of a host. This access gives the mobile agent the power to attack to other local agents and generate viruses, worms or deny the services to other agents etc. there are partial solution under these categories like authentication, verification, authorization, digital signatures etc. b) Protection of Agents from malicious hosts: It is very more difficult to protect an agent from malicious hosts than to protect a host from malicious agents, because the hosts execute the mobile agents and they can see the agent’s code and data. So it’s easier for the host to tamper the agent’s code or terminate them. There are some ways that can protect the agents from the host like limited amount of confidential data supplied to the agent, routing them to in secure zones, use of cryptographic algorithm or tamper proof hardware, enforcing good host behavior etc. 2) Portability and Standardization: Mobile agent technology allows program to migrate freely from one host to another among heterogeneous machines. The code compiled into platform independent such as java byte codes is either executed inside an Interpreter or compiled into native code. Standardization is required to make this code portable across mobile-code systems. Advantages of Mobile Agents The advantages of Mobile Agents are depending on their goals or on the tasks they have to achieve. 1. The main advantage is to work locally on a system and not to be dependent on a connection to this system. This can improve the monitoring of systems or processes, which can be done locally on a machine. 2. The collecting and processing of information : The collecting of information is still done in a very centralized way. This means that you have a central point which collects all information and then processes it on the central machine. This is very dependent on a good connection to all of the information providers. If the connection fails, then the result is probably unusable. With the use of Mobile Agents you get a much more rough version to collect information. 3. Mobile Agent with the knowledge how to update the systems, this task will be done without human interaction. The Agent should have enough intelligence to choose the best installing method on every machine depending on the information it gets from its environment. This method is not limited to computers, it can be used for any kind of Mobile Agents enabled devices e.g. network components like routers, switches etc. 4. Overcome network latency : Consider a manufacturing plant in which many critical real time systems are controlled through a network. Controlling many systems through a network involves significant delays, which are not acceptable for critical real time systems. To overcome this problem, mobile agents can be directly dispatched from the central controller in the manufacturing plant to the real time systems. 5. Remove old / unused capabilities 6. Structure systems around mobile code 7. Highly Dynamic and Flexible Systems 8. Open Services Gateway Initiative (Remove old / unused capabilities 387

Disadvantages of Mobile Agents 1. Mobile agent may try to corrupt host computer, or consume too much resource – Need to check code as it arrives – Need to execute with constrained resources – Maybe need limit what mobile agent can do – e.g. no file store access 2. Destruction of data, hardware, current environment 3. Denial of service block execution, take up memory, prevention of access to resources/network 4. Station may try to corrupt mobile agent – Difficult to guard against – In general we have to trust stations just as we trust shops that take our credit card details over the phone. Stations could be certified as safe havens 5. Repudiation ability to deny an event / action ever happened 6. Breach of privacy / theft of resources obtain/transmit privileged information use of covert channels. 7. Harassment / Display of annoying/offensive information

Current trends lead to mobile agents Information overload

Increased need for personalization

“Customization” Diversified population

Bandwidth gap Mobile users and devices

Server-side Too many unique, dispersed clients to handle

Proxy-based

Mobile code to server or proxy

Multiple sites to visit Mobile Agents

Avoid large transfers

Mobile code to client

Disconnected Operation

Avoid “star” itinerary High latency

Conclusions This technology is a Revaluation in the field of Mobile Computing. Mobile agent is an effective paradigm in the area of distributed programming. Distributed computing involving several computers in a network can be achieved using message passing or remote procedure calls (RPC). Experts suggest that mobile agents will be used in many Internet applications in the years to come. The MA Security is too big concern, Overhead for moving code is too high, Not backward compatible with Fortran, C etc, Treats data and code symmetrically, Multiple-language support possible, Supports disconnected networks in a way that other technologies cannot and a unifying framework for making many applications more efficient. Several technical and non-technical Challenges such as security still remain and need to be resolved. In this paper we will explain how mobile Agents are working its Applications, Advantages, Disadvantages, Languages Used for Mobile Agents. 388

Reference

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Michael Knapik and Jay Johnson, Developing Intelligent Agents for Distributed Systems: Exploring Architectures, Techniques, and Applications, McGraw-Hill Professional Publishing, 1997. Joseph P Bigus, Jennifer Bigus and Joe Bigus, Constructing Intelligent Agents Using Java: Professional Developer’s Guide, 2nd Edition, John Wiley & Sons, 2001. Maria Gini, Agents and other Intelligent Software for e-commerce, http://wwwusers. cs.umn.edu/~gini/csom.html. http://www.trl.ibm.com/aglets

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http://www.cs.dartmouth.edu/˜agent/

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389

Moving Towards Convergence: Technology and Business By Sumitra Devi

Introduction In primitive age humans knew trade and business with different names viz., bartering, give and take etc. In fact, business is inseparable part of human life and life itself virtually is a business of living. It all started with eating the fruit of knowledge by Adam and Eve which implies that knowledge is the basis of all trade and business, as well as life. The evolution of human relationships and formation of societies is part of the business of living which has flourished due to advancement of knowledge. Organizations were formed to cater to various needs of humans and their societies. So, the activity of demand and supply went increasing with the increase of human knowledge and the so called organizations came to be known as the business houses. During this era of expansion of human activity, the motive of profit became the central theme of all business. With a view to maximize the profit by expanding business, the need to discover tools for minimizing costs and investments came to the forefront . Consequently, issues life transportation, marketing and advertising were address. In earlier times, it used to take months and years to transport goods from one nation to the other or even within a country. The apparent factor of huge cost involved in marketing and transporting goods was eating into profits which so frequently resulted into reduction of quality. Then come the era of industrialization and collaboration. This could be made possible with advanced human knowledge, consolidation of information and its proper utilization and opening of new channels of boosting sales and investment. Such development in the area of Trading and business necessitated the use of technology as its primary tool with simplified manipulation of skills required for the same. Advancement in technology enhanced its application in business and both these areas tended to converge. Technology, therefore, has become the password for business, bringing the world and all of its knowledge to the businessmen as fast as the click of a mouse. Technology plays so vital a role in human life these days that we, despite our diverse religions, cultures and attitudes to life, have come to call the world a global village. Information can be gathered without any trouble through the use of computers, televisions, mobile phones, fax machines, printers, digital cameras, satellites etc. Technology has become user friendly and its manipulation can be learned without much effort. Computers are updated at the manufacture level with several management programmes such as accounting; data storage and analysis; keeping a record of employees; work hours and salary, financial and banking transactions, business monitoring, inventory records, promotion and marketing etc. The use of computer saves paper work, manpower etc. The computer function and database keeps track of every role in an organization like communication, spread sheets, networking and relaying information, collaboration, advertising, financial and banking details, stock position, research etc. Computers possess large folders with clear cataloguing of dates and events. Software technology allows business owners and managers to have a close overview of strategic functions that have a direct bearing on business results. Design, management and development remain pre-delivered in a business PC. Hence, technological equipments have simplified every step involved in business activity bringing many resources to one location for user facility. The time and resource consuming tools like typewriters, books, letters, envelopes, address and telephone diaries and ledger books have been replaced by computer. E-mail has replaced lengthy process like mailing of letters and waiting for response. Competition and consumer desire can be conveniently evaluated and investigated by technology users at home or office. Due to such use of the computer, the performance of business organizations has considerably enhanced and 390

improved. Businesses run smoother and operate with maximum advantage by putting time and money to economical use. With the help of modern technology, business functions more effectively, swiftly and efficiently by timely responding the markets and clientele. All such pre-conceived software programmes are password protected and company secrets cannot go out. The domain, operation, working style, product selection, target segment, costing layout, purchase capacity of target consumers, competitive scenario, team of working professionals, loan schemes, which are important parts of the basic business-plan, can all be computed quickly by using modern technology, the most crucial component is again knowledge of the field a businessman wants to work in. Every aspect of life, and so the business, have greatly been impacted by technology. Discussion The modern technology has pressed the business together to a great extent. It has penetrated into all spheres of business compelling us to say that technology is business and business is technology. All the tools of technology work as impellent in business. A successful organization that is using modern technology as a tool for success is obviously in touch with the fact that communication is key to a business that survives. The common rule in the business market is that the customers and/or suppliers need to know instantly the quality and the price of a product. So, communication is the most vital part of business today. A successful business organization that relies on modern technology will definitely have internet facility. It facilitates advertisement and customer communication. The world being a fast business global village, if an organizationis not on the net, it is basically not in business because an organization without technological information system is just like a blind man. Survival of a business today is directly linked with information technology. Use of modern technology in business reduces wastage and resource consumption. Performance is also ensured through the use of computers, electronic commerce and Internet and it also helps in quick decision making. Before the advent of modern technology, all aspects of business used to be handled manually including even the making of machines. The computer revolution changed the entire scene. Now, the technologically improved business processes satisfy consumer requirements. Operational results of an organization are also drastically improved. However, every new invention in the field of information technology does not come without risk and problems. The business have to be skeptical about the effectiveness of information technology as a whole as has been seen in the past decades. The impact of huge investments in information technology on productivity is still arguable. The excessive use of computers in business so often leads to generation of unneeded information, superfluous work and it encourages shoddy thinking as well as spurious details. Sometimes it leads to building castles in the air ultimately leading to failures. Then there is the colossal serpent of hacking. In 1960s, there were few people who could make computes work faster of differently. They were known as hackers. Such people were programmers who could break into a computer to see its code i.e. the statement written by original programmers to specify computer performance. These people were visionaries who could give the computer industry the shape we see today. But hacking acquired a bad name around 1970s when people like John Draper devised the technique of breaking into national and international phone networks for using phones without paying. The word hacking so acquired the meaning of unauthorized access of computers and computer networks. The film “War Games” first time introduced the general public to the world of computer hacking. It gained notoriety in 1989 when Karl Koch and his team hacked U.S. Military computers and sold the information to the KGB. Two groups of hackers surfaced i.e. Black Hats who exploited computer systems and White Hats who were hired by various companies to work on genuine and ethical hacking for improving network security. Jonathan James of the Black Hats group cracked into NASA computers to steal away million dollar software. Adrian Lamo used to break into the websites of big corporations like Yahoo, Bank of American and Citigroup to find the network hole. In 1993 Kevin Paulsen hacked the system of a ratio Station in LOS Angeles. Intruding into e-mail is also possible via hacking. The users can also be fooled into establishing a link with a rogue entity rather than connecting to the legitimate server. Julian Assange is a hot example of hackers’ world that could put in jeopardy not only business but also national and international security. Denial of service attacks is also possible which could hamper the progress of business. So, trade secrets of an organization can be thrown on road by hackers thereby paralyzing the functioning of hunted organizations. Such kind of data breach costs very clear to the companies and it spoils the business. The use of technology has also increased total dependency. 391

Conclusions and Suggestions While there are several misuses and abuses of technology in business, there is innumerable benefits foot. In fact, technology and business have not remained separate and independent entities. Without the help of modern technology, the routine business activities would consume more than double the time and resource. Use of technology has made possible round the clock functioning of business and effectively at that. Business has actually not only conveyed but seems to be merged in technology. The concept of multiple tasking has become possible in business only after advent of modern technology and its uses in business. The use of technology in business has thrown great opportunities and its uses in business. The use of technology in business has thrown treat opportunities for new technological advances. Other opportunities like software developed and business consultancy have arisen due to the fusion of business and technology. References •

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392

Management Information System and Microfinance: Trends and Prospects By Karam Singh

Introduction The microfinance industry has seen remarkable advancement in technology solutions in recent times. These include Management Information Systems (MIS), mobile banking, hand-held devices, ATM kiosks and smart cards, and hold great potential to act as an enabler of financial inclusion and a catalyst for Microfinance Institutions (MFIs) aiming to scale up their offerings to the poor. Technology has been referred to as a “game-changer” by those within the microfinance sector, and indeed, it holds a lot of promise. However, there are many challenges before this promise can be converted into tangible benefits. An earlier global study (October 2009) conducted by Microfinance Insights on the use of Information and Communication Technology (ICT), which assessed how technology solutions aid the growth of microfinance, found a growing interest among MFIs on adopting the technology. One of the main findings of the study was that while more MFIs were embracing ICT, mobile banking, and other technologies, adoption rates were being held back by limitations of infrastructure such as electricity, internet reach, and telecom networks that did not quite reach the “last mile.” For instance, during a recent visit to a remote region in Bihar, one of India’s poorest states, the research team found that there was no electricity supply for the better part of a day. The only MFI that operates in the area understands the benefits of technology and laments its inability to avail of them. Yet another interesting finding from the October 2009 study was that while MFIs had a vague idea of the advantages of MIS, many were unclear about the exact cost-benefit equation. Of the MFIs that were using MIS, the top concerns were staff training, technical complications, and a lack of after-sales service. As ICT is a relatively new subject in the field of microfinance, there have been very few assessment studies on the impact of MIS and how best it can be used to improve financial inclusion under such trying conditions. The rationale for this study is to provide a better understanding of the role MIS can play in India’s financial inclusion efforts through microfinance. Toward this end, Microfinance Insights conducted a pan-India research study to examine the range of MIS being used by MFIs. The factors examined included reach, quality, affordability, ease-of-use, and after-sales service availability. Secondly, the research tried to understand how, and to what extent, MFIs were able to leverage the available technology given their current constraints and resources. The research also considered operational improvements in terms of efficiency, cost-benefits, outreach, and service offerings as a direct result of MFIs’ use of MIS. The team found that there is no longer any hesitation among MFIs about the benefits of adopting MIS, and they are going all out to invest in, expand and enhance their current systems. Most Indian MFIs spoken to and/or surveyed for this study displayed a keen awareness of the benefits of MIS and have been taking significant steps to embrace technology in a big way. The present study is devised to explore MFIs’ understanding and appreciation of MIS. It aims to build upon the researcher’s initial efforts with the ICT survey and delve deeper into the subject – this time with a focus on MIS 393

and India, which is Microfinance Insights’ home base and one of the poorest and fastest growing markets in Asia. This research effort attempts to address the following question: How best can MIS be utilized to help MFIs address the challenges of financial inclusion in a country as vast, diverse and poor as India. Research Methodology The research process included an online survey, which was live from mid-July through August and received 49 responses from MFIs across the country. The aim of this online survey was to obtain quantitative data on the current adoption rate of MIS, usage of these systems, overall assessment of the impact of these systems, and challenges therein. This was followed up by a secondary research of literature on the subject. While the online survey was in progress, Microfinance Insights undertook a qualitative survey consisting of one-on-one interviews with CEOs, COOs, and CTOs of 10 MFIs around the country. The rationale behind this exercise was to assess MFIs’ experience (if current users) or level of their interest (if not current users) with MIS. During this process, the team obtained deeper insights, opinions, and qualitative data regarding risk perceptions, user experiences, and operational challenges. The identity of the MFIs that responded and the vendors/products has been kept confidential upon the MFIs’ request. Profile of MFIs The survey sample included a diverse mix of young and old, and large and small MFIs from around the country. The effort received 49 responses to the online survey, and officials at 10 MFIs were interviewed, which brought the sample size close to 59, or about 40% of the MFI population in the country, according to Mix Market data. This large sample, the team believes, is truly representative of India’s microfinance industry.

A bulk of the responses (61%) were from for-profit NBFCs, followed by NGOs, Section 25 companies (nonprofit equivalents), and a smattering of societies and cooperatives. A majority of the MFIs surveyed have been in business between one to five years, followed by a significant number (31%) of older, established MFIs among the respondents. The sample also included a fair amount (14%) of MFIs that are very young and have been around for less than a year. In terms of their portfolio size, most MFIs (57%) had a gross loan portfolio (GLP) of less than US$ 10m, while a quarter of the MFIs were bigger with a GLP ranging between US$ 11m and US$ 50m. At the other end of the spectrum, there were eight large MFIs with a GLP of more than US$ 100m. The response mix also had a fair amount of geographic diversity albeit with a greater response rate from the country’s south, which also reflects the prevalent distribution mix of MFIs in India. Two-thirds of the MFIs that responded to the survey are active in the south - a region known for its concentration of MFIs - and about 30% of them are active in equal measure across the other three zones. 394

Of the MFIs that responded to the survey, 82% are active in rural areas, while two-thirds lend to the poor in semi-urban areas, with almost a quarter of them also active in remote rural areas. 57% of the respondents are active in India’s cities and serve the urban poor. ASSESSMENT OF MISUSAGE While up-and-coming MFIs are slowly tiptoeing into the world of MIS, large MFIs are taking aggressive strides in an all-out effort to embrace the technology. Of the MFIs that responded that they had not invested in MIS, none had an operating budget over US$ 50 million, and almost one half had an operating budget of less than US$ 5 million. Larger MFIs, after outgrowing their basic MIS, are increasingly considering more comprehensive systems such as core-banking solution. The CEO of a small, yet fast-growing MFI in New Delhi says the microfinance industry will need systems that more closely resemble the ones used by the formal banking sector. The COO of a large south India-based MFI said they were the first MFI to adopt a core-banking solution in May 2008. Now, the MFI provides its clients with smart cards enabled with biometrics technology, and their field staffs use point-of-sale devices. This experience is in line with the 2009 CGAP study, which found that “lack of funding is perceived as a major contributor to weak information systems among small MFIs.”An MFI official said they started the vendor selection process by considering about “six to 10 vendors, of which the top five were [prohibitively] expensive. For a startup MFI, it becomes difficult to rationalize this cost. So, you have to settle for other vendors whose credibility and product features may not be the best.” MFIs’ are also concerned that such an investment could increase the borrowing costs for their clients. The general manager of a Chennai-based MFI, which has taken advantage of funds from SIDBI to finance its MIS expenditure, said: “Ultimately, an MFI will charge the [cost of the MIS] to the borrowers, which we don’t want to. So we are trying to identify other sources to fund this technology. If [we are not successful at raising funds], we will try not to exceed 0.5% to 1% of our portfolio size.” Future Investments Out of total the respondents, 91% plan to increase their MIS budgets in the next two years. On average, MFIs spent about INR 3.5m (about US$ 75,000) every year on MIS. More than 30% of the respondents plan to increase their expenditure on MIS by 6% to 10% over the next couple years; almost 25% of them plan to spend 11% to 20% more on MIS; and 8% said they would spend more than 20% on MIS. The top three areas of MIS that MFIs intend to invest in include upgrading or changing their existing systems, upgrading their internet and telecom infrastructure, and building or expanding the in-house IT team. About two-thirds of the MFIs reported having a dedicated in-house IT team. Other items on the to-do list include computerizing more branches, training staff to use the MIS, and incorporating technologies such as hand-held devices. Six MFIs stated they would spend the money to install an MIS for the first time. Currently, two-thirds of the MFIs surveyed spend less than 5% of their total costs on MIS, and one-third spend between 6% to 15%. Although the expenditures varied, all segments reported around 80% satisfaction with their current MIS systems. This suggests that cost isn’t the best measure of a strong MIS.

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MIS Usages More than half of the MFIs had retained the same MIS over the years, while the remainder had experimented with other systems before settling on their current MIS. While most of the MFIs that reported changing their MIS had done so once, there were a handful that had switched their systems up to four times over the past three years. The systems used by the MFIs in the past range from basic, plain-vanilla Excel spreadsheets to more complex database management software, either bought from external vendors or built by their in-house technology team. While 14 MFIs reported using systems that were developed by their in-house technology teams, and three reported using Excel spreadsheets, the bulk of them relied on external vendors. There was no clear market leader, and no one system was used by more than 10% of the respondents. Considering that 35% of the MFIs said they use a system designed in-house, this could imply that vendors are struggling to meet clients’ requirements. Almost two-thirds said they need moderate to extensive customization, which is easier with an in-house team. This could indicate that computerization in the microfinance industry is a moving target and that best practices and processes are evolving continuously. Sure enough, many MFIs pointed to the breadth of reports required by different stakeholders and the challenges in getting their systems to keep up with the constantly changing reporting requirements. Sr. No. 1 2

Particulars Minimum Customization Moderate to Extensive Customization

Indication % 35 65

For instance, a large national MFI which began operations four years ago and adopted an MIS from day one for two years, the vendor and the MFI ran beta-testing on the software, fine-tuning it as they went along. However, as the organisation began to grow exponentially, investors, regulators, and auditors began demanding new reports. And the system, which was “strong in the field but not in back-end MIS reporting” could not keep up, and the MFI had to resort to producing reports in Excel. This led the organisation to launch a search for another vendor. Six months and more than a dozen software evaluations later, the MFI selected a vendor and began a customisation process that had still not been concluded by August 2010 - 18 months after the selection. Ninety percent of the MFI’s current system works on an open-source Linux platform. The company plans to move away from a client-server based system to a web-based system with an aim to integrate branch-level data and decentralise the data gathering. As MFIs go, this particular one is well suited to take on a project of this magnitude. The MFI spends 8% to 10% of its total budget on an IT team of more than 20 people who manages a network of 700 computers at more than 300 branches. The company also has a tie-up, according to the CTO, with IBM and HCL, which provide server and hardware support. Another oft-heard sentiment was that there is a paucity of affordable choices, and predictably, this concern was voiced mainly by the smaller MFIs. This was also borne out by the findings of the survey which showed most of the vendors listed by the participating MFIs are small, with only a handful of big names. 396

An urban MFI based in Mumbai, which is at the vanguard of the technology movement, is fortunate to have the know-how from another of its founder’s ventures - a technology company. So it worked out well when the MFI found its external vendor’s product inadequate to meet its growing needs. The MFI’s founder said that current products and licenses for core-banking systems were “too costly” and that there were “too few vendors that really understand MFIs’ needs and core operations.” His contention is that the current crop of vendors and developers are not keen on bringing in new technologies. The handful of pioneers notwithstanding, most MFIs are still relatively late adapters with the constraints and special needs of the sector having, perhaps, delayed the process of adoption, but this is set to change. Almost 95% of them have been using an MIS for less than five years, 40% of whom have adopted MIS less than a year ago. Only two MFIs reported using an MIS for more than five years, while none had used one for more than 10 years. This is especially significant when viewed in the light of the MFIs’ age. As noted earlier, 43% of MFIs have been in business for more than five years, and almost a third have been around for more than 10 years. It is reasonable to conclude that the awareness of an MIS’ benefits has only very recently started to resonate within the sector, although the adoption rates are picking up rapidly. The next hurdle to overcome will be blending the needs of the MFIs and the offerings of the service providers. Impact on Operational Efficiency MFIs are experiencing a growing confidence in their current MIS systems. A large majority (89%) of MFIs reported that using an MIS had “improved”, and a respectable 25% said it had “greatly improved” their operational efficiencies. But MFIs’ comments, which point to the way MFIs think when it comes to assessing an MIS, indicate a preference for a system that is built to evolve with the business: “Even though present software is advanced, updating is necessary.” “It helps to take stock periodically and improve the efficiency.” “All the information is realtime, cuts down duplication of work and improves efficiency at all levels.” “Online reports were available, which resulted in quick and effective decision by the operational managers.” One Bangalore-based MFI had this to say about operational efficiency and risk mitigation: “The mere fact that I’m able to capture a transaction as its taking place, or at the nearest point in time to that, is a risk mitigator to a certain extent. And fund management becomes more efficient.” Another large MFI based in Bangalore listed effective budgeting, cash management, and a reduced turnaround time - which has in turn resulted in lower operating costs - as some of the biggest benefits of the organisation’s MIS. The MFI is looking to further reduce turnaround times with the help of their new document management system and after the implementation of their new MIS. A Chennai-based MFI also lauded the benefits of its new Oracle-based software, which helped the organisation grow from a portfolio size of INR 2.9CR to INR 100CR1. 1 CR = Crore, which is 10 million “Such is the efficiency. And we don’t have to worry about converting documents from Word, Excel or PowerPoint,” the MFI’s general manager said. Impact on Cost On the issue of cost-benefit analysis, almost a third of the MFIs saw “great cost benefits,” about 44% were slightly less enthusiastic in their review and said they saw “relatively good cost benefits.” 11% of respondents said they saw “little cost benefits” while an equal number reserved judgment stating it was “too early to assess.” This underlines a significant concern that there are not many value-for-money products available currently. Some of the feedback received from MFIs in response to an open-ended question included concerns about a lack of timely after-sales support that decreased performance while others rejoice in the paperless transactions and online report generation feature that an MIS enables at a “single click.” Other advantages that MFIs cited were the savings in manpower usage resulting in higher productivity. Another MFI noted that it owned the “best software in budget.” This points, at once, to the constraints and challenges, especially with regards to cost, MFIs face in adopting a useful MIS, and the paucity of good value-for-money products in the market. More cost-related concerns are addressed in the section on Challenges.

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Impact on Outreach While most commercial MFIs are answerable to their investors for their profitability, there remains a distinct social motive to the business, which highlights the double bottom-line as a very real concept that frequently comes under scrutiny. Scale, measured in terms of how many clients an MFI reaches and in what geographies, is a crucial part of the social bottom-line and the financial inclusion agenda. The study asked MFIs to assess MIS’ potential in helping them on this count.The responses were promising; almost 87% of respondents stated that MIS had either “greatly improved” or “improved” their outreach to more clients in absolute terms. At the same time, 86% of MFIs said using an MIS had helped them improve their geographical coverage. To paraphrase a few open-ended responses, MFIs are happy that MIS is enabling a faster, efficient, and more accurate reporting system, which frees up the time of their field staff from laborious manual data entry. Thus unburdened from a time-consuming task, field officers are now free to reach out to more clients over a wider area. One of the biggest criticisms of present-day microfinance is that there are too few products in the market that do justice to the various needs of its clients at the bottom of the pyramid. Another criticism, and perhaps a more critical and existential one, is that there is no significant body of data available that justifies microfinance’s relevance as a poverty alleviation tool. Although MFIs have been making an effort in recent times to adopt a more diverse product mix, most critics (and even MFIs themselves) argue that most MFIs are functioning on different versions of the age-old, single-product Grameen Bank model. However, MIS may have a role to play in improving the status quo. About 78% of the MFIs surveyed said MIS had helped improve their service offerings, of which about 8% went further to say that MIS had “greatly improved” their service offerings. About a tenth of the MFIs said there was no change while an equal number said it was too early to assess the impact. A robust MIS is one that allows MFIs to function more efficiently at lower operating costs and thus bring down interest rates. It will also help capture and store a wide range of data, which will then lead to advantages such as credit scoring and transparent pricing. MFIs also expressed an interest to explore merging their MIS with the mainstream banking sector, which will help them offer services such as ATM access and remittances.

There were almost similar findings for the question about MIS’ impact on social data tracking. While 69% of MFIs said MIS had improved this capability, 11% said there was no change. A greater percentage (17%) than earlier said it was too soon to know if MIS was helping or not.

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Conclusions and Suggestions It can be concluded that respondents indicated that MIS can improve efficiency and productivity to a large extent if the organization as a whole understands and gives equal importance to technology. The study found that MIS was helping MFIs assess the all-important measure - Portfolio at Risk (PAR), and in turn, improve their ability to produce credit scores and analyse them. MFIs also noted that they were using MIS to integrate their branches and manage their field staff better. Quite a few MFIs credited their MIS for reducing the paperwork for their loan officers who could then focus on acquiring new clients and follow up on outstanding payments. CRM was another area in which MFIs said MIS was proving useful because it enabled them to introduce features such as smart cards (carried by borrowers) and hand-held devices (carried by loan officers) that help record transaction data directly into the main system without manual intervention. Such integration is not possible with an Excel-based system. While this study shows that more MFIs are recognizing the value of a robust MIS system, there are many challenges that prohibit MFIs from investing in MIS. The challenges include things that are beyond an MFI’s direct control - such as infrastructure and after-sales support. Cost is the biggest challenge of them all that MFIs have to surmount before investing in MIS. This continues to top the list of concerns for MFIs. Predictably, smaller MFIs worry more about this aspect than larger MFIs. While the latter have the financial wherewithal to make large investments, most small MFIs seem to get caught in trying to make a compromise between investing too much money on a system they might soon outgrow and settling for a less-than-ideal system just because they could afford it. References •

Chen, Greg. Tuesday, March 31, 2009. “Innovation in India: Microfinance and Information Systems (MIS)” CGAP. http:// technology.cgap.org/2009/03/31/innovation-in-india-microfinance-and-information-systems-mis/

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Christen, Robert Peck and Mark Flaming. 2009. “Due Diligence Guidelines for the

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Review of Microcredit Loan Portfolios: A Tiered Approach.” CGAP.

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CGAP. May 19, 2009. “Microfinance Technology Survey—Key Takeaways.” http://www.cgap.org/p/site/c/template. rc/1.26.10622/

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Johnson, Doug. January 2008. “CMF Focus Note: Management Information Systems in Indian Microfinance.” Center for Microfinance. http://ifmr.ac.in/cmf/wp-content/uploads/2008/02/mis-in-indian-microfinance.pdf

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Dossani, Rafiq, and D.C. Misra, and Roma Jhaveri. November 2005. “Enabling ICT for Rural India.” Stanford University and National Informatics Centre. http://cisac.stanford.edu/publications/20972

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Parikh, Tapan S., 2006. “Rural microfinance service delivery: Gaps, inefficiencies and emerging solutions” Department of Computer Science. University of Washington.

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Srinivasan, N. 2009. “Microfinance India: State of the Sector Report 2009.” Access Development Series.

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Social Empowerment through Microinsurance: A Case Study of Panipat District By Jagdish Gupta and Pankaj Chaudhary

Introduction Microinsurance is the protection of low income people against specific losses in exchange for premium. It is a service which is useful and affordable for the weaker section of the society. Microinsurance is designed with the objective of protecting poor people according to their needs. It is an innovation in the field of traditional insurance markets. Microinsurance is an attempt to provide insurance to poor people both urban and rural at affordable cost. Thus, Microinsurance is to keep trade-off between insurance product, price and social obligations. Most of the population of India is living in rural areas. So the IRDA (Insurance Regulatory and Development Authority) has main focused on the rural and socially excluded people. The IRDA defines rural sector as: • A population of less than five thousand • A density of population of less than four hundred per square kilometer • More than 20% of the male working population is engaged in agricultural pursuits like cultivators, agricultural labourers, workers in livestock, forestry, fishing, hunting and plantations, orchards and allied activities. The Social Sector defined by the IRDA as: • Unorganized sector • Informal Sector • Economically vulnerable or backward classes and • Other categories of persons both in rural and urban areas. In order to fulfill of poor socially excluded people. All insurance companies have designed products for the weaker sections and low income households. Because of lack of affordability prevents their demand for expressing itself in the market. Thus low income people play an important role in creating both the demand as well as cost effective insurance products. Understanding Microinsurance is influenced by awareness, knowledge and skills as shown in figure 1 below:

400

Figure 1: Understanding Microinsurance

(Source: www.ilo.org)

Review of Earlier Studies Prathma Ranjan (2011) gave a detailed understanding of the RSBY (Rastriya Swastya Bima Yojna) scheme by conducting several rounds of interviews with both FINO and ICICI Lombard. Intense primary and secondary research was involved during the process to ensure unbiased analysis. Oscar Joseph Akotey, Kofi A. Osei, albert Gamegah (2011) investiaged using the probit model indicates that premium flexibility, income level and nodal agency are significant determinants of micro-insurance demand. Insurance knowledge, expectation (trust) and marital status were also found to have positive and significant impact on the demand for Micro insurance. The analysis showed that formal education is not a significant determinant; rather one’s level of insurance knowledge has a positive and significant impact on micro-insurance demand. Syed Abdul Hamid & Robets & Paul Mosley (2010), in the study shows that there is a positive impact of micro health insurance in the reduction of poverty among rural households of Bangladesh. Micro health insurance has a significant beneficial effect on food sufficiency of poor’s and has a dynamic improvement in the health status of poor rural households. Venkta Raman Rao (2008), the study reveals that Microinsurance is not an opportunity but a responsibility and to serve this responsibility good. Awareness campaign is need. Microinsurance is offering real solutions to the billions of rural poor that raises the awareness of Microinsurance as a key issue in coming future. Micro-Insurance Regulation in the Indian Financial Landscape (2008) a report of M-CRIL says that conscious of the relatively recent experience of insurance regulation and the lack of its own capacity to implement a strong regulatory regime, the regulator - The Insurance Regulatory and development Authority (IRDA) - Has limited the scope within which micro-insurance may be offered. Anuradha K. Rajivan (2007), the study reveals that planned actual steps to address constraints like poverty will help express that insurability of the poor in the future and study also shows that Microinsurance is on the edge of floating take off in India. However, according to insurance companies Microinsurance is so investment from their ride is limited and efforts from few NGO’s and MFI’s have resulted in the introduction of Microinsurance as an add on to their existing micro credit projects and utilities for the rural poor’s. World Bank (2011) estimates that 1.2 (20%) of the world population lives on less than $1/- day (extreme poverty), another 1.8% billion (30%) lives on less than $2/- day (moderate poverty) of these poor only 2%-3% has access to any type of insurance products. What happens when a poor family’s breadwinner dies or hospitalized or become homeless or become victim of natural disaster? That’s why ‘Micro insurance’ came into existence. While over 60% of the population of India is exposed to many risks in life such as low penetration, absence of a savings culture and low incomes with the inclusion of Microinsurance. Thus the paper attempts to study awareness about Microinsurance, Coverage of Microinsurance in India, Problems and prospects of Microinsurance and formulation of strategies for the growth of Microinsurance. 401

Objectives of the Study 1. To study the awareness of microinsurance in India. 2. To study the coverage of microinsurance in India. 3. To study the initiatives adopted by insurance companies for the growth of microinsurance. 4. To study the study the problems with microinsurance in India. 5. To make recommendation for the growth of microinsurance. Research Methodology As we all know Panipat is an Industrial town. Several workers and labours are working here. Thus a study is conducted to know about awareness of Microinsurance, problems and prospects. A well-structured questionnaire is framed and applied to 50 people in Panipat district in May 2013 to know the awareness about the microinsurance. Primary data is collected through questionnaire and secondary data is gathered through journals of IRDA, Newspapers and websites. Sampling Frame Type of Sampling Research Type Research Technique Sample Unit

: Panipat District : Random Sampling : Descriptive : Survey, Interview and Likert’s Scale : Individual

Data Analysis and Interpretation Chart 1

(Source: Compiled from Primary Data)

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Chart 2

(Source: Compiled from Primary Data)

Chart 3

(Source: Compiled from Primary Data)

Table:1 Awareness about Microinsurance Response Yes No

No. of Respondents 42 8 50

(Source: Compiled from Primary Data)

403

Percentage 84 16 100

Chart 4

(Source: Compiled from Primary Data)

Chart 5

(Source: Compiled from Primary Data)

Chart 6

(Source: Compiled from Primary Data)

404

Chart 7

(Source: Compiled from Primary Data)

Chart 8

(Source: Compiled from Primary Data)

Table 2: Considerations while taking an Insurance Policy



Considerations

No. of Respondents

Percentage

Returns

25

50

Premium Amount

08

16

Safety

15

30

Liquidity

02

4

50

100

(Source: Compiled from Primary Data)

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Findings of the Study • Most of the respondents were belong to age group of 30-50 years. • Majority of the respondents were educated till matriculation and intermediate level. • Most of the respondents belong to income group of Rs. 30,000 to Rs. 50,000. • 84% respondents don’t aware about microinsurance. • 60% respondents get information about microinsurance from television followed by 30% through newspapers. • Only 10% of the respondents have microinsurance policy. • Most of the respondents prefer LIC for holding a microinsurance policy. • Majority of the respondents want to pay premium i.e. 78% bi-annually. • Maximum number of respondents i.e. 70% go with traditional plans. • 84% of the respondents want to invest in bank deposits. The reason behind this is security. • 50% of the respondents consider returns while taking an insurance policy. Coverage of Micro insurance in India: At a Glance The growth of microinsurance is decent yet the volume is still too small. A major percentage of microinsurance business in 2007-08 was procured for Rs. 18.23 crore under 9.38 lakh life policies. Some of the highlights of coverage of microinsurance in India as under: Table 3: Micro Insurance Agents : Life Insurers Insurers LIC Pvt. Life Insurance Companies Industry Total

(Source: IRDA Annual Report 2009-10)

Agents (01.04.2009) 6647 603 7250

Agents (31.03.2010) 7906 770 8676

Table 4: Growth of Insurance Business in Rural and Social Sector (2007-08) Companies LIC Birla ICICI Max New York Reliance SBI Aviva

Target Achieved Rural Sector (% of policies) 16 21.67 19 21.6 18 22 19 22 18 19.24 18 22 18 19

Target Achieved Social Sector (No. of lives) 20,00,000 90,43,413 35,000 86,138 25,000 1,17,000 35,000 81,961 25,000 54,934 25,000 2,80,000 25,000 4,64,918

(Source: Individual Company Reports; (2008-09))

Initiatives adopted by insurance companies for the growth of microinsurance Several companies whether Public or Private have taken initiatives to accelerate the growth of microinsurance policies in India. Some of them are given below: Company : LIC Policy Name : Jeevan Madhur, Jeevan Mangal Sum Assured : Min. Rs. 5000 and Max. Rs. 30,000 406

Term of Policy : Min. 5 years and Max. 10 years Premium Payment Options : Monthly, Quarterly, Half Yearly, Annually Amount of Premium : Min. Rs. 25 and Max. Rs. 250 Company : ICICI Prudential Policy Name : Sarv Jan Surakasha Sum Assured : Min. Rs. 5000 and Max. Rs. 50,000 Term of Policy : Min. 5 years and Max. 5 years Premium Payment Options : A nnually Amount of Premium : Min. Rs. 50 and Max. Rs. 500 Company : Birla Sun Life Policy Name : Bimakavach, Bimasuraksha Super, BimaDhanSanchay Sum Assured : Bimakavach : Min Rs. 5000 and Max. Rs. 20,000 Bimasuraksha Super : Min Rs. 5000 and Max. Rs. 50,000 BimaDhanSanchay : Min Rs. 5000 and Max. Rs. 50,000 Term of Policy : Bimakavach : Min 3 years and Max. 3 years Bimasuraksha Super : Min 5 years and Max. 15 years BimaDhanSanchay : Min 5 years and Max. 10 years Premium Payment Options : Bimakavach : Single Premium Bimasuraksha Super : Mthly, Qtly, HY, Yrly BimaDhanSanchay : Mthly, Qtly, HY, Yrly Amount of Premium : Bimakavach : Min Rs. 50 and Max. Rs. 200 Bimasuraksha Super : Varies BimaDhanSanchay : Min Rs. 435 and Max. Rs. 2550 Company : IDBI Federal Life Insurance Policy Name : IDBI Federal group life Insurance plan Sum Assured : Min. Rs. 5000 and Max. Rs. 50,000 Term of Policy : Min. 5 years and Max. 5 years Premium Payment Options : Monthly, Quarterly, Half Yearly, Annually Amount of Premium : Min. Rs. 450 and Max. Rs. 5000 Company : SBI Life Policy Name : Grameen Shakti Sum Assured : Min. Rs. 5000 and Max. Rs. 50,000 Term of Policy : Min. 5 years and Max. 10 years Premium Payment Options : Annually Amount of Premium : Varies Problems/Challenges with Microinsurance Micro insurance is still at the nascent stage. So, it has the following problems: • Risks are not covered fully such as protection of old age; hazardous working conditions are not covered; • Most of underprivileged people are illiterate and cannot understand that how to approach insurance agencies; • Underdeveloped network of agents. • Lesser support of MFIs and NGOs. • Coverage of Micro insurance cannot be sold like standalone product. • Distribution cost is very high. Conclusions and Suggestions He insurance industry plays a critical role in the growth and development of the overall economy. Insurance companies have been making increasing efforts to provide products to low income segments of the markets. 407

Opportunities are very high in informal sector and low income people but there is an urgent need to literate and motivate them so that the low income households and socially excluded people can understand the need of insurance for mitigating risks and secure their future. There is need to create awareness about microinsurance products amongst the target customers and the regulator can play an important role in enabling an environment that is conducive. Definitely, Micro-insurance can be a game changer not only in India but also across the globe. • Expanding the existing network for micro-insurance. • Formulation of such a mechanism which can tap the potential market. • Widening the outreach of microinsurance products. • State Governments should come forward with the schemes which can improve earnings of the poor and protect the poor against the risks. • Innovations based key to growth of microinsurance such as o Customer related innovations : improving customer awareness through NGOs and SHGs o Distribution related innovations: to sell and service insurance policies through new innovative channels like postal services, automobile companies, social networks. o Financial innovations: improving operational efficiency through cost effectiveness and risk management. o Human Resource related innovations: State of the art training facilities should be developed by insurers which are able to bridge the gap between business and technology. o Marketing Innovations: Integrated marketing efforts such as creating customized risk appetite products, differentiation through customer centricity products for sustainable growth and development of brand loyalty, social networking advertising. o Strategic Innovations: To carve out niche areas of operations to get protect ion against the new entrants, implementing intelligence platform etc. o Technology based innovations: mobile based network to improve the viability of microinsurance. • Connecting micro-credit and microinsurance. • Increasing financial literacy among the people. • Claim settlement to be timely, simple and transparent. • Should be developed cost effective and efficient microinsurance products. • The microinsurance products aim to include the less privileged people. • Microinsuer’s institutional system enables social performance system. • Mechanism for complaint resolution system. References •

Andres W.H. (2010). The Private Sector Insurance Industry in India, Retrieved from http://www.indiainsurancereview. com

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Lyengar Vijayaragavan, Introduction to Banking, Excel Books, Ist Edition, 2007.

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Matul Michal, Dalal Aparna, De Bock Ombeline & Gelade Wouter, “Why People Do not buy Microinsurnace & What Can we do about it”: Micro insurance Paper No. 20, Geneva: International Labour Organization, 2013.

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Micro-Insurance regulation in the Indian Financial Landscape- Case Study, by M-CRIL, Micro Credit Ratings International Limited, 2008.

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Mishra, M.N., S.B., Insurance Principles and Practice, Sultan Chand, 16th Edition, 2009.

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Prathima Rajan, “Micro insurance to the Last, the Least and the Lost – a case study of Rural India”, Report published by Celent, a division of Oliver Wyman, inc., 2011.

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Singh Kirti, Gangal Kumar Vijay., “Micro Insurance- A Tool for Upliftment of Rural India”, International Journal of Multidisciplinary Research, 3, Vol. 1, pp.131-144, 2011.

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Sivakumar N., “Innovation-based Growth Pardigm”, IRDA Journal, pp. 35-38, 2013.

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Srijanani. D., “Micro insurance in India-A Safety Net for the Poor”, International Journal of Management & Business Studies, 1, Vol. 3, pp. 52-56, 2013.

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Syed Adbul Hamid & Roberts & Paul Mosley (2010). “Can micro health insurance reduce poverty: Evidence from Bangladesh” Sheffiled economic research paper series no. 2010001.

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World Bank (2011). Poverty and Inequality Analysis, Retrieved from http://web.wrold bank.org/

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