Chapter 1 (Repaired)

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PROJECT REPORT

ON

IMPACT OF MICROFINANCE ON LIVING STANDARD,

EMPOWERMENT AND POVERTY ALLEVIATION

Submitted in the partial fulfillment for the degree of Masters

in Business Administration (2011-2013)

SUBMITTED TO: SUBMITTED BY:

Dr.Gurcharan Singh Balkarnvir Singh

Project Guide Roll No: 6299

MBA 2nd

Year

SCHOOL OF MANAGEMENT STUDIES

PUNJABI UNIVERSITY, PATIALA


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PREFACE

Someone has rightly said that practical experience is far better and closer to the real world

than mere theoretical exposure. The practical experience helps the students to view the real

business world closely, which in turn widely influences their perceptions and arguments their

understanding of the real situation.

Research work constitutes the backbone of any management education programme. A

management student has to do research work quiet frequently during his entire span.

The research work entitled IMPACT OF MICROFINANCE ON LIVING STANDARD,

EMPOWERMENT AND POVERTY ALLEVIATION.

MBA is the stepping stone to management care in order to reach practical and concrete

results. Our contemporary lives have been influenced by the advancement and growth in e-

services being provided by the banks nowadays.

The course deals with matters, which are basic and should be known in relation to

Microfinance with special reference to the impact on living standard, women empowerment

and poverty alleviation.


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ACKNOWLEDGEMENT

A person always requires guidance and help of other to achieve success in his mission;

similarly it was not possible for me to complete my assignment. I am indeed very much

thankful to all the people who have helped me to complete the project.

I am gratefully indebted to Dr. Gurcharan Singh, my project guide for providing me all the

necessary help and required guidelines for the completion of my project and also for the

valuable time that he gave me from his busy schedule.

Last but not least I am thankful to all my friends, who have been a constant source of

inspiration and information for me.

Balkarnvir Singh

Roll No: 6299

SEM IV, MBA

(Regular)


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Executive Summary

Micro-finance interventions are well-recognized world over as an effective tool for poverty

alleviation and improving socioeconomic status of rural poor and women empowerment. In

India too, micro-finance is making headway in its effort for reducing poverty and

empowering rural women. Micro-finance through the network of cooperatives, commercial

banks, regional rural banks, NABARD and NGOs has been largely supply-driven and a

recent approach. Micro-finance institutions are, other than banks, are engaged in the

provision of financial services to the poor. There are three types of lending technologies:

(i) The document based and asset based conventional technology, being followed by all

banks.

(ii) The group lending, which is of various shapes and forms with advantages drawbacks

attached.

(iii) Individual based lending is one where the Micro-finance institutions have to be very

careful in assessing the repayments capacity of the borrowers.

The above technologies are focused on micro-finance through SHGs, however, credit

accessibility to poor through SHGs has enhanced tremendously and recovery is

comparatively higher. Rural women play a significant role in the domestic and

socioeconomic life of the society and therefore, national development is not possible without

developing this segment of the society. The review of studies related to credit accessibility to

women simply demonstrates that the direct access to institutional credit to rural women is

very limited and there is sex bias in extending the credit to them. However, women from the

non-farm sector have better access to banks than the women working in the farm sector.

Even, male members of women borrowers have greater influence on accessibility to credit

utilization and its repayment.

The SHGs became a regular component of the Indian financial system since 1996. The

SHGs are small, informal and homogenous groups. These groups have proved as cyclic

agents of development in both the rural and urban areas. The SHGs after being formed start

collecting a fixed amount of thrift from each member regularly. After accumulating a

reasonable amount of resource, the group starts lending to its members for petty consumption

needs. If the bank is satisfied with the group interms of (i) genuineness ofdemand for credit;(ii) credit handling capacity of the members; (iii)repayment behaviour within the groups; and


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(iv) the accountingsystem and maintenance of the records, it extends a term loan ofsmaller

amount to the group. Thus, financing through SHGs effects quite a few benefits like; (i)

savings mobilized by the poor; (ii)access to the required amount of appropriate credit by the

poor; (iii)meeting the demand and supply of credit structure and opening ofnew market for

financing institutions; (iv) reduction in transactioncost for both lenders and borrowers; (v)

tremendous improvement inrecovery; (vi) heralding a new realization of subsidy less and

corruption-less credit; and (vii) remarkable empowerment of poor women.

This study based on 6 chapters, the first chapter is introductory chapter which highlights

what is microfinance, features and models of microfinance and chapter one also contains the

information about poverty alleviation, living standard, and women empowerment and it

variables. Chapter 2 contains literature reviews of microfinance it contains fifteen studies

related with microfinance and chapter 3 is research methodology in which need of study

,scope of study ,objective of study ,research design ,data collection etc are included and forth

chapter is data analysis and discussions ,in which factor analysis is used as statistical tool for

measuring impact of microfinance on living standard ,poverty alleviation and empowerment,

factor analysis was performed on SPSS version 16 and the data used in factor analysis is

primary data which is collected through a structured questionnaire . in factor analysis the 5

factors extracted ,these factors contains variables which are correlated to each other. and

chapter 5 is findings and recommendations which highlighted what I find about my topic

during research or which things I analyze from my data is presented in this chapter .

From the analysis of data, I found that microfinance has the positive impact on the standard

of living of the poor people and on their life style. It has not only helped the poor people to

come over the poverty line, but has also helped them to empower themselves.

So in brief I can say that the microfinance has great impact on increase the living standard of

people and it helps in poverty alleviation and women empowerment. Self help group model

of microfinance is helped the poor women to start their work and generate income from them

and increase their standard of living.


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DECLARATION

I hereby declare that the Research Project entitled IMPACT OF

MICROFINANCE ON LIVING STANDARD, EMPOWERMENT AND POVERTY

ALLEVIATION. Submitted for MBA degree is my original work carried out

under the supervision of Dr. Gurcharan Singh Professor School of

management Studies, Punjabi University, Patiala, Punjab and up to the best

of my knowledge.

The research project has not formed the basis for the award of any other

degree.

BALKARNVIR SINGH

ROLL NO: 6299

MBA FINANCE

School of Management Studies

(Punjabi University, Patiala, Punjab)


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CERTIFICATE

This is to certify that the project entitled IMPACT OF MICROFINANCE ON LIVING

STANDARD, EMPOWERMENT AND POVERTY ALLEVIATION submitted by

Balkarnvir Singh in the partial fulfillment for Master of Business Administration (M.B.A) in

School of Management Studies, Punjabi University, Patiala is bonafide piece of research

work conducted under my supervision and guidance and no part of this project has been

submitted for any other degree.

Project Guide

Dr. Gurcharan Singh

Reader, Professor

School of management studies

Punjabi University

Patiala.


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INDEX

Chapter No. Title Page No.

Declarationi

Acknowledgement ii

Preface iii

ChapterIINTRODUCTION

1-23

2

2-3

3

4

4

4

4

5-6

6

7

7

8-20

21-22

22

22

Chapter-II REVIEW OF LITERATURE 23-26

Chapter-III RESEARCH METHODOLOGY 27-29

Objectives of study 28

Nature of data: & data sources 28-29

Sampling design 29


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Chapter-IV DATA ANALYSIS AND INTERPRETATION 30-41

Conclusion 42-44

Limitation 45-46

Bibliography 47

Annexure QUESTIONNAIRE 48-51


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CHAPTER 1

INTRODUCTION


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Introduction:

Poor and low income people all over the world have been connected with money lenders who

provide easy access to credit but at higher cost. The interest cost generally ranges from 36%

to as high as 120%.there are two main approaches to financing the poor ,the poverty lending

approach through credit that funded by donors and patrons , government and other

concessional dispensations .many organizations using the poverty lending approach to

provide credit to poor borrowers at low cost . But in long run these very institutions are not

sustainable primarily because their interest rates are just too low for their full cost recovery

.and the another approach the financial system approach focuses on commercial

intermediation for the economically active poor and they offer easy access to credit at a

reasonable and an affordable cost. Their credit portfolio is financed by savings commercial

debts and for profit investment in varying proportions, these two approaches providing

financial service to the poor people.(-1)

Microfinance is extension of small loans to entrepreneur to poor to quality for traditional

bank loans .it has proven as an effective and popular measure in the ongoing struggle against

poverty, enabling those without access to lending institutions to borrow at affordable interest

rates and start small business.

Microfinance is defined as any activity that includes the provision of financial services such

as credit, savings, and insurance to low income individuals which fall just above the

nationally defined poverty line, and poor individuals which fall below that poverty line, with

the goal of creating social value. The creation of social value includes poverty alleviation and

the broader impact of improving livelihood opportunities through the provision of capital for

micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.

A large variety of sectors provide microfinance in India, using a range of microfinancedelivery methods. Since the ICICI Bank in India, various actors have endeavored to provide

access to financial services to the poor in creative ways. Governments also have piloted

national programs, NGOs have undertaken the activity of raising donor funds for on-lending,

and some banks have partnered with public organizations or made small inroads themselves

in providing such services. This has resulted in a rather broad definition of microfinance as

any activity that targets poor and low-income individuals for the provision of financial

services. The range of activities undertaken in microfinance include group lending, individuallending, the provision of savings and insurance, capacity building, and agricultural business


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development services. Whatever the form of activity however, the overarching goal that

unifies all actors in the provision of microfinance is the creation of social value.

Microfinance Definition

The reserve bank of India has defined microfinance as a provision of thrift, credit and other

financial services and products of very small amount to the poor in rural, semi urban and

urban areas for enabling them to raise their income level and improve level of living

standards. Microfinance institutions are those that provide those facilities. (2)

According to International Labor Organization (ILO), Microfinance is an economic

development approach that involves providing financial services through institutions to low

income clients.

"The poor stay poor, not because they are lazy but because they have no access to capital."

The dictionary meaning of finance is management of money. The management of money

denotes acquiring & using money. Micro Finance is buzzing word, used when financing for

micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal to

empower under-privileged class of society, women, and poor, downtrodden by naturalreasons or men made; caste, creed, religion or otherwise. The principles of Micro Finance are

founded on the philosophy of cooperation and its central values of equality, equity and

mutual self-help. At the heart of these principles are the concept of human development and

the brotherhood of man expressed through people working together to achieve a better life for

themselves and their children.

Traditionally micro finance was focused on providing a very standardized credit product. The

poor, just like anyone else, (in fact need like thirst) need a diverse range of financial

instruments to be able to build assets, stabilize consumption and protect themselves against

risks. Thus, we see a broadening of the concept of micro finance--- our current challenge is to

find efficient and reliable ways of providing a richer menu of micro finance products. Micro

Finance is not merely extending credit, but extending credit to those who require most for

their and familys survival. It cannot be measured in term of quantity, but due weightage to

quality measurement. How credit availed is used to survive and grow with limited means.


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Concept and Features of Micro-finance:

1. It is a tool for empowerment of the poorest.

2. Delivery is normally through Self Help Groups (SHGs).

3. It is essentially for promoting self-employment, generally used for:

(a)Direct income generation

(b)Rearrangement of assets and liabilities for the household to participate in

future opportunities and

(c)Consumption smoothing.

4. It is not just a financing system, but a tool for social change, specially for women.

5. Because micro credit is aimed at the poorest, micro-finance lending technology needs

to mimic the informal lenders rather than the formal sector lending. It has to:

(a)Provide for seasonality

(b)Allow repayment flexibility

(c)Fix a ceiling on loan sizes.

Microfinance approach is based on certain proven truths which are not always

recognized. These are:

1. That the poor are bankable; successful initiatives in micro finance demonstrate that

there need not be a tradeoff between reaching the poor and profitability - micro

finance constitutes a statement that the borrowers are not weaker sections in need of

charity, but can be treated as responsible people on business terms for mutual profit .

2. That almost all poor households need to save, have the inherent capacity to save small

amounts regularly and are willing to save provided they are motivated and facilitated

to do so.

3. That easy access to credit is more important than cheap subsidized credit which

involves lengthy bureaucratic procedures - (some institutions in India are already

lending to groups or SHGs at higher rates - this may prevent the groups from enjoying

a sufficient margin and rapidly accumulating their own funds, but members continue

to borrow at these high rates, even those who can borrow individually from banks).

4. 'Peer pressure' in groups helps in improving recoveries.


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Role of Microfinance:

The micro credit of microfinance prename was first initiated in the year 1976 in Bangladesh

with promise of providing credit to the poor without collateral , alleviating poverty and

unleashing human creativity and endeavor of the poor people. Microfinance impact studies

have demonstrated that(3)

1. Microfinance helps poor households meet basic needs and protects them against risks.

2. The use of financial services by low-income households leads to improvements in

household economic welfare and enterprise stability and growth.

3. By supporting womens economic participation, microfinance empowers women, thereby

promoting gender-equity and improving household well being.

4. The level of impact relates to the length of time clients have had access to financial

services.

Activities in Microfinance:Micro credit: It is a small amount of money loaned to a client by a bank or other institution.

Micro credit can be offered, often without collateral, to an individual or through group

lending.

Micro savings: These are deposit services that allow one to save small amounts of money for

future use. Often without minimum balance requirements, these savings accounts allow

households to save in order to meet unexpected expenses and plan for future expenses Micro

insurance: It is a system by which people, businesses and other organizations make a

payment to share risk. Access to insurance enables entrepreneurs to concentrate more on

developing their businesses while mitigating other risks affecting property, health or the

ability to work.

Remittances: These are transfer of funds from people in one place to people in another,

usually across borders to family and friends. Compared with other sources of capital that can

fluctuate depending on the political or economic climate, remittances are a relatively steady

source of funds.


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Product Design: The starting point is: how do MFIs decide what product s to offer? The

actual loan products need to be designed according to the demand of the target market.

Besides the important question of what risks to cover, organizations also have to decide

whether they want to bundle many different benefits into one basket policy, or whether it is

more appropriate to keep the product simple. For marketing purposes, MFIs sometimes

prefer the basket cover, since it can make the policies sound comprehensive, but is that the

right approach for the low-income market? After picking products, one must also understand

how they are priced. What assumptions do the organizations make with regard to operating

costs, risk premiums, and reinsurance, and how did they come to those conclusions? Would

their clients be willing to pay more for greater benefits? From price, the logical next set of

questions involves efficiency. Indeed, given the relative high costs of delivering large

volumes of small policies, maximizing efficiency is a critical strategy to ensuring that the

products are affordable to the low-income market. One way is to make the products

mandatory, which increases volumes, reduces transaction costs and minimizes adverse

selection. What does an organization lose by offering mandatory insurance, and how does it

overcome the disadvantages? MFIs can combine a mandatory product with some voluntary

features to make the service more us to mar-oriented while.

Techniques of Product Design: To design a loan product to meet borrower needs it is

important to understand the cash pattern of the borrowers. Cash pattern is important so far as

they affect the debt capacity of the borrowers. Lenders must ensure that borrowers have

sufficient cash inflow to cover loan payments when they are due efficiency depends less on

the delivery model than on the simplicity of the product or product menu. Simple products

work best because they are easier to administer and easier for clients to understand. Another

efficiency strategy is to use technology to reduce paperwork, manual processing and errors.

MFIs need to conduct a costing analysis to determine how much they need to earn in

commission to cover their administrative expenses.


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Microfinance Social Aspects

Micro financing institutions significantly contributed to gender equality and womens

empowerment as well as poor development and civil society strengthening. Contribution to

womens ability to earn an income led to their economic empowerment, increased well beingof women and their families and wider social and political empowerment.

Microfinance programs targeting women became a major plank of poverty alleviation and

gender strategies in the 1990s. Increasing evidence of the centrality of gender equality to

poverty reduction and womens higher credit repayment rates led to a general consensus on

the desirability of targeting women. (4)

Self Help Groups (SHGs): Self- help groups (SHGs) play today a major role in poverty

alleviation in rural India. A growing number of poor people (mostly women) in various parts

of India are members of SHGs and actively engage in savings and credit (S/C), as well as in

other activities (income generation, natural resources management, literacy, child care and

nutrition, etc.). The S/C focus in the SHG is the most prominent element and offers a chance

to create some control over capital, albeit in very small amounts.

The SHG system has proven to be very relevant and effective in offering women the

possibility to break gradually away from exploitation and isolation.

Savings services help poor people: Savings has been called the forgotten half of

microfinance. Most poor people now use informal mechanisms to save because they lack

access to good formal deposit services,. They may tuck cash under the mattress; buy animals

or jewelry that can be sold off later, or stockpile inventory or building materials.

These savings methods tend to be riskycash can be stolen, animals can get sick, and

neighbors can run off. Often they are illiquid as well one cannot sell just the cows leg

when one needs a small amount of cash. Poor people want secure, convenient deposit

services that allow for small balances and easy access to funds. MFIs that offer good savings

services usually attract far more savers than borrowers.


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The Need in India

India is said to be the home of one third of the worlds poor; official estimates range from 26

to 50 percent of the more than one billion population.

About 87 percent of the poorest households do not have access to credit.

The demand for micro credit has been estimated at up to $30 billion; the supply is less than

$2.2 billion combined by all involved in the sector. Due to the sheer size of the population

living in poverty, India is strategically significant in the global efforts to alleviate poverty and

to achieve the Millennium Development Goal of halving the worlds poverty by 2015.

Microfinance can also be distinguished from charity. It is better to provide grants to families

who are destitute, or so poor they are unlikely to be able to generate the cash flow required to

repay a loan. This situation can occur for example, in a war zone or after a natural disaster.

While India is one of the fastes t growing economies in the world, poverty runs deep

throughout country. About two thirds of Indias more than 1billion people live in rural

areas and almost 170 million of them are poor.

For more than 21 percent of them, poverty is a chronic condition. Three out of four of

Indias poor live in rural areas of the country. Poverty is deepest among scheduled

castes and tribes in the countrys rural areas.

The micro-finance scene in India is dominated by Self Help Groups (SHGs) - Banks

linkage program for over a decade now. As the formal banking system already has a

vast branch network in rural areas, it was perhaps wise to find ways and means to

improve the access of rural poor to the existing banking network. This was tried by

routing financial.

Indian microfinance is poised for continued growth and high valuation but faces pressing

challenges and opportunities thatleft unaddressedcould negatively impact the long-term

future of the industry.


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The industry needs to move past a single-minded focus on scale, expand the depth and

breadth of products and services offered, and focus on the double bottom line and over

indebtedness to effectively address the risks facing the industry.

Models of Microfinance in India

The SHG model

The self help group model has evolved in the NGO sector. A variety of models arise out of

NGO nurturing among which SHGs have become the most popular.

SHGs are small informal groups comprising of membership of 10-20 persons. The

composition of membership is mostly exclusively male or exclusively female. The members

are self selected with a liberty to choose their group depending on their level of affinity with

the other potential members. The group meets regularly at an appointed time and place and

carries out its financial transactions of savings and credit. The roles and norms of the group

are determined by the members themselves. The NGO provides them with support services,

training and developing linkages.(5)

However, there are certain features of SHG that need to be looked into:

The group promotion process is long and the poor have to wait for long periods.

The amounts available in the beginning are very small and all the members cannot

take loans at the same time.

The functioning of the group relies completely on group dynamics which are very

difficult to build in.

Conflicts arise on seemingly trivial reasons which can lead to the break-down of the

group and it is difficult to rebuild it.

Despite these few disadvantages SHG still is a popular model for micro finance in India.

Federated SHG approach

The federated SHG approach builds upon the unique features of SHG based micro finance

and contributes to factors that improve the sustainability of SHGs. Federations increase the

opportunity offered by the SHGs, expands empowerment through leadership building and


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addresses the component of security through insurance services. Federations usually come

under the Societies Registration Act. PRADAN and MYRADA, two large NGOs that

pioneered the concept of SHGs.-(7)

The Grameen Bank Model

The grameen bank methodology which was a case of exceptional success first evolved in

Bangladesh and was launched by many other organizations in India with slight variations.

Some of the features are as follows:

Homogeneous groups of 5 members are formed at village level

The field worker facilitates the process of group forming

All the group members undergo a 7 day compulsory training

Some groups undergo the group recognition test

8 joint liability groups affiliate together to form a centre

The centre meets every week at a defined time and a bank assistant attends the

meetings.

Group discipline is enforced through peer pressure. Collateral is replaced by peer pressure.

The incentive to timely repayment is repeat loans and continuous access to increasing credit

from the bank. A field worker maintains a check on loan utilization.(6)

Non Banking Finance Companies

The NBFCs has emerged as a nearest substitute for those MFIs who want to go the for-profit

route. Since getting registered as a bank is costly and the local area bank idea has not been

pursued beyond the initial approvals, the NBFC route is increasingly being chosen by profit

driven MFIs. They can also enter the capital markets. Since the poor are bankable and

lending to them can be commercially viable it is not necessary to depend on low cost funds to

lend to them. Secondly, since the amounts required are huge, the financial markets are the

only way to mobilize resources. This would mean mobilizing debt at market rates of interest.

The for-profit NBFC route is currently the best way to operate in the capital markets. For

regulatory purposes, NBFCs have been classified into 3 categories-(8)

(a) Those accepting public deposits,


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(b) Those not accepting public deposits but engaged in financial business

(c) Core investment companies with 90 per cent of their total assets as investments in the

securities of their group/holding/subsidiary companies.

My research topic is to measure the impact of microfinance on living standard , women

empowerment and poverty alleviation .so in this chapter I want to explain about these three

concepts and want to discuss the variables which are determine the living standard ,

empowerment and poverty alleviation .these three are explained following:

POVERTY ALLEVIATION

Introduction:

The concept of poverty is multi-dimensional. It covers not only income and consumption but

also health, education, vulnerability, risk, and marginalization and exclusion of the poor from

the main stream society-(9) one of the earliest absolute definitions of poverty was that of

dandekar-rath, who defined it as an expenditure of Rs.15 per capita per month for the Indian

rural population and Rs.18 per capita per month for urban population. And in 1993 a new

poverty line Rs 49 per person per month in rural areas and Rs 57 in urban areas .In the urban

areas according to the 1973-74 prices .the government of India conduct via the national

sample survey NSS, annual survey of consumption expenditure and income on Indian

households .in addition to NSS the national council for applied economic research (NCAER)

run occasionally survey of consumption and income of Indian households. in 1993-94

according to the planning commission only 19% ofIndias population was below poverty line

this was official estimate. Estimates based on consumer expenditure survey carried out

regularly by the NSSO, however placed the proportion of Indias population below poverty

line at 36% .

Trends in poverty in India:

Theearly poverty estimates of Detts -(10) show that rural poverty increased to above 40% in

1992 and 1995. On the other hand, urban poverty had declined significantly to about 30 % n

1997 as compared to 36% in 1987. Guptas -(11)estimates also show similar trend on rural

poverty. but according to him, the rural the rural poverty had shown a surge in year 1998 and


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had increased to 45%. The 55th round results 1999-2000 took everyone by surprise .the

poverty ratio came down from 36% in 1993-94 to 26% in 1999-2000 i.e. a clear 10% decline

in just 5 years the reform programme of government was a magic wand. According to NSSO

55th round data the rural poverty line of 327 in 1999-2000 corresponds not to 2400 kcal but to

1868 kcal. The rural poverty line would corresponds to 200 kcal is Rs. 567 and corresponding

poverty ratio is 74.9% of our rural population could not afford 2400 kcal. In 2006 planning

commission estimation of population below poverty line is 27.8%, the estimated number of

poor is estimated to be approximately 300 million in 2004-05, larger than the official estimate

of 1999-2000.it may be recalled that the official estimate for poverty in 1999-2000 was

26.1% for country as a whole and 260 million were estimated as poor-(12) .the world

development report (2001) outline a comprehensive anti-poverty intervention strategy. This

involves complimentary policies towards (i) promoting opportunities, (ii) facilitating

empowerment and (iii) providing security to poor. Opportunities are provided to the poor

with the creation of employment, credit, infrastructure, efficient markets, schools, drinking

water and sanitation. Facilitating empowerment involves laying political and legal basis for

development and in proving security to poor providing wages and self- employment

opportunities, microfinance, micro insurance, initiating programmes to prevent macro shokes

and develop capacity to respond to them and designing systems of social risk management

complementary to pro growth policies are some of the specific initiatives needed to provide

economic and social security to the poor and the marginalized.

If I talked about poverty ratio of Punjab is less than 15% as compared to Orissa 46.4%. and in

Punjab 9.1 % of rural population live in poverty and 7.1% urban population live in poverty

according to BPL based URP consumption (2004-05).

Poverty alleviation tools:

The key to alleviation the poverty is how effectively the tools of food, shelter, basic

education, opportunity for employment, health and medical services, infrastructure, markets

and communication are deployed either singularly or severally to the poor. credit is a

powerful tool that could be effectively deployed when it made available to the credit worthy

among the economically active poor. When credit is provided to the very poor, the may not

be in a position to effectively deploy the loan as they lack the opportunity for self employed

and the risks associated with the deployment of credit may be high . poor households living


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in extremely isolated areas without any access to proper and basic infrastructure will find it

difficult to deploy the credit that would enable them to repay the principle alongwith interest.

Poor who do not have food will deploy the credit to buy food and this in turn would lead to

humiliation and diminishing of an already low self esteem.

The poorest of the poor is certainly not to look out for the formal financial system. In general,

the extremely poor are those living on less than 1dollar a day , while economically active

poor have sufficient means of earning their income to meet their basic needs .the lower

middle class segment have a relatively reliable income , better standards of health, nutrition ,

housing , education , a selection of consumer durables health conscious and some forms of

statutory investment microfinance is , thus more appropriate not only for the economically

active poor but also for the lower middle income class category

Speaking at SAFMA in august 2007 .Prof. Yunus said his grameen bank experience of

lending to the poor to enable them to attain their optimum earning capacity has convinced

him that a poverty free world is feasible if there are collective belief and will. Since Grameen

bank was born in 1984 the bank has lent 6.3 million dollar to the marginalized community

with 98.61% recovery rate. As per survey of the bank 64% of its borrowers have crossed the

poverty line.-(13)

One aspect of microfinance that distinguishes it from the traditional financial system is the

joint liability concept, where groups of individuals, usually women, group together to apply

for loans, and hold joint accountability for repayment of the loan. The premise is that

providing low SES individuals access to financial services will better enable poor households

to move away from subsistence living, to a future oriented outlook on life and an increased

investment in nutrition, education, and living expenses. Furthermore, microfinance is unique

as a development tool because of its potential to be self-sustaining (both reducing poverty and

maintaining a profitable business).

Microfinance programs can be an effective way to provide low-cost financial services

to poor individuals and families. Second, such programs have been shown to help in the

development and growth of the local economy as individuals and families are able to move

past subsistence living and increase disposable income levels.


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Microfinance programs were able to reduce poverty through increasing individual and

household income levels, as well as improving healthcare, nutrition, education, and helping to

empower women. For example, standard of living increases, which help to eradicate extreme

poverty and hunger, have occurred at both the individual and household levels as a result of

microfinance programs. Furthermore, it has been demonstrated by some research that

microfinance programs increase access to healthcare, making preventative healthcare

measures more affordable to the poor. In addition, more children are being sent to school and

staying enrolled longer. Finally, it has been shown that such programs can help borrowers to

develop dignity and self-confidence in conjunction with loan repayment, and self-sufficiency

as a means for sustainable income becomes available. Since microfinance services are

primarily focused on women, it is argued that this leads to the empowerment of women and

the breaking down of gender inequalities, through providing opportunities for women to take

on leadership roles and responsibilities.-(14)

Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new

economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks

linkage Programme, aimed at providing a cost effective mechanism for providing financial

services to the 'unreached poor'. In the Indian context terms like "small and marginal

farmers", " rural artisans" and "economically weaker sections" have been used to broadly

define micro-finance customers. Research across the globe has shown that, over time,

microfinance clients increase their income and assets, increase the number of years of

schooling their children receive, and improve the health and nutrition of their families.

A more refined model of micro-credit delivery has evolved lately, which emphasizes the

combined delivery of financial services along with technical assistance, and agricultural

business development services. When compared to the wider SHG bank linkage movement in

India, private MFIs have had limited outreach. However, we have seen a recent trend of

larger microfinance institutions transforming into Non-Bank Financial Institutions (NBFCs).

This changing face of microfinance in India appears to be positive in terms of the ability of

microfinance to attract more funds and therefore increase outreach.

In terms of demand for micro-credit or micro-finance, there are three segments, which

demand funds. They are:


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At the very bottom in terms of income and assets, are those who are landless and

engaged in agricultural work on a seasonal basis, and manual labourers in forestry,

mining, household industries, construction and transport. This segment requires, first

and foremost, consumption credit during those months when they do not get labour

work, and for contingencies such as illness. They also need credit for acquiring small

productive assets, such as livestock, using which they can generate additional income.

The next market segment is small and marginal farmers and rural artisans, weavers

and those self-employed in the urban informal sector as hawkers, vendors, and

workers in household micro-enterprises. This segment mainly needs credit for

working capital, a small part of which also serves consumption needs. This segment

also needs term credit for acquiring additional productive assets, such as irrigation

pumpsets, borewells and livestock in case of farmers, and equipment (looms,

machinery) and worksheds in case of non-farm workers.

The third market segment is of small and medium farmers who have gone in for

commercial crops such as surplus paddy and wheat, cotton, groundnut, and others

engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment

includes those in villages and slums, engaged in processing or manufacturing activity,

running provision stores, repair workshops, tea shops, and various service enterprises.

These persons are not always poor, though they live barely above the poverty line and

also suffer from inadequate access to formal credit.

Well these are the people who require money and with Microfinance it is possible. Right now

the problem is that, it is SHGs' which are doing this and efforts should be made so that the big

financial institutions also turn up and start supplying funds to these people.


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LIVING STANDARD

Introduction:

Standard of living refers to the level of wealth, comfort, material goods and necessities

available to a certain socioeconomic class in a certain geographic area. And we can also say

thatStandard of living is defined as the level of welfare available to individual or to the group

of people. It concerns goods and services people are able to consume and the resources they

have access to. It depends on the quality and quantity of available goods and services and the

way they are distributed within the population.

Indicators:

There are various indicators for measuring living standard. One approach is to use direct

measures, such as income, expenditure or consumption. The most popular measures of living

standards are income and consumption. In general terms, income refers to the earnings from

productive activities and current transfers. It can be seen as comprising claims on goods and

services by individuals or households. In other words, income permits people to obtain goods

and services.-(15)

In contrast, consumption refers to resources actually consumed. Although many components

of consumption are measured by looking at household expenditures, there are important

differences between the two concepts. First, expenditure excludes consumption that is not

based on market transactions. Given the importance of home production in many developing

countries, this can be an important distinction. Second, expenditure refers to the purchase of a

particular good or service. However, the good or service may not be immediately consumed,

or at least there may be lasting benefits. This is the case, for example, with consumer

durables. In this case, consumption should ideally capture the benefits that come from the use

of the good, rather than the value of the purchase itself.

According to Marks (1981) Living Standard represents the level at which public are able to

gather capital and to get better their living standard with such income for foods,

communication, housing, education, transport, health and clothing, etc
http://en.wikipedia.org/wiki/Wealthhttp://en.wikipedia.org/wiki/Wealth


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Plato (1983) Living standard is an approach to which a persons needs are fulfilled. The term

need consists of food, water, shelter, clothes, education, health, transport, entertainment etc.-

(16)

Impact

Microfinance has great impact on improving living standard of members of self help groups.

Members able to get loans and they utilize these loans to generate self employment, they

generally starts works like dairy farming, making pickales, etc.and by working in these

groups the able to generate income, and when they become able to generate profits from their

business it impact on their living standard because by getting income they able to spend more

amount on consumption and able to acquire new assets like two wheelers, washing machinesetc, and there living standard improves.

Income is one of the important elements of living standard of the poor people as well as

saving. Mohammed and Mohammed (2007) The Microfinance Banks are to provide loans to

the poor not only the increase their income but also to mobilize their savings . Apart from

these other factors that contribute to human development, like education, empowerment are

also included as variables indicating a level of standard of living. Microfinance programs

target both economic and social poverty, and in essence it is important to assess the success

of Microfinance Bank. With raising peoples incomes, employment opportunities,

consumption, building of assets and accumulating savings the microfinance facility able to

increase the living standard.-(16)


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WOMEN EMPOWERMENT

Introduction:

Empowerment literally means to equip or supply with ability, however, empowerment has

various meaning and differs from person to person. We often keep complaining about the

status of Indian women and lots of other things related to them but we are more liberated than

the women of Middle-East nation or rather the Muslim countries where women are not

allowed to move out without a veil or rather the parda system exist in those societies.

Dependent women are not empowered women. If women think just that being highly

educated and employed they are empowered, it is a myth. Everyone must understand that

empowering women doesnt mean empowering them in technical area only. Women shouldremember that they are also rational, intelligent and thinking human beings. (17)

Microfinance and women empowerment

Women as micro and small entrepreneurs have increasingly become the key target group for

micro finance programs. Consequently, providing access to micro finance facilities is not

only considered a pre-condition for poverty alleviation, but also considered as a strategy for

empowering women. In developing countries like INDIA micro finance is playing an

important role, promoting gender equality and is helping in empowering women so that they

can live quality life with dignity.

The study conducted by FINCA Client Poverty Assessment conducted in 2003 revealed that

of the interviewed clients 81 percent were women, and it was found that food security was 15

percent higher among their village banking clients than non-clients. The report also showed

clients to have 11 percent more of their children enrolled in school with an 18 percentincrease in healthcare benefits. Clients housing security was reported as 18 percent higher

than non-clients. The assessment concluded that microfinance improved the wellbeing of

women clients and their families.

Microfinance has a positive effect on the empowerment of women by creating an

empowerment indicator.


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Indicators:

I consider following variables for measuring impact of microfinance on women

empowerment in my research:.

Involvement in major household decisions.

Relative freedom from domination within the family.

Political and legal awareness.

Involvement in political campaigning and protests..

They become more confident.

They get a better control of the resources.

Increase in self-esteem, individual and collective confidence

Increase in articulation, knowledge and awareness on health, nutrition reproductive

rights, law and literacy

Increase an decrease in personal leisure time and time for child care;

Increase on decrease of workloads in new programmes

Change in roles and responsibility in family & community.

Positive changes in social attitudes

Awareness and recognition of women's economic contribution within and outside the

household;

Womens decision-making over her work and income -(19)

1. Somanath, V.S, microfinance redefining the future, first edition 2009, p.no 1-4

2. Reserve bank of India, Micro credit: a lifeline for the poor, http://www.rbi.org.inaccessed on 12 April 2013

3.Aggarwal Vijender, Aggarwal Rachna and Khanna Paru, Vol. 1(2), 104-107, Feb. (2012)

journalon microfinance and risk management for poor India

4. Indian Journal of Finance, Microfinance Empower Rural Women? An Empirical Study

In Vellore District, Tamil Nadu By Associated Management Consultants (P) Ltd.

5 . http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=10932.
http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=10932http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=10932


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6. R Srinivasan and M S Sriram Microfinance in India:Discussion

7.Bhavani, R V.The bank-SHG model of microfinance in India

8. George, M. A Primer on Microfinance in India posted on 4 June 2008

9. Chelliah and sudarshan, income poverty and beyond: human development in India,

social science press, new Delhi (1999, pp xiii).

10. Datt G.(1999),Has poverty declined since economic reforms ? Statistical data analysis,

special article, economic and political weekly, vol.34 (50)

11. Gupta S.P (1999),tricle down theory revisited: the role of employment and poverty,

V.P. Singh memorial lecture, 41st annual conference of the Indian society of labor economics

, Mumbai

12. Bhalla surjit s.,growth and poverty in India myth and reality, development, poverty

and fiscal policy , decentralization of institutions, edited by Rao Govinda M, oxford

university press new Delhi ,(2002, pp 20)

13. Yunus Mohammad.Poverty can be eradicated, the Hindu pg14, august 19, 2007.

14.Jonathan h .Westover, Theimpact of microfinanceprogrammes on poverty reduction

15.Deaton, A. and M. Grosh, Consumption, in Designing Household Survey Questionnaires

for Developing Countries: Lessons from 15 Years of the Living Standards Measurement

Study, M. Grosh and P. Glewwe, Editors. 2000, The World Bank.: Washington, D. C.

16. Ghalib, A.K (2007) Measuring the impact of microfinance intervention: A conceptual

framework of social impact assessment (Impact Assessment research centre (IARC)

University of Manchester IARC working papers series No 24/2009

17.Ruth Alsop , Nina Heinsohn :Measuring Empowerment in Practice: Structuring Analysis

and Framing Indicators, World Bank Policy Research Working Paper 3510, February 2005.
http://infochangeindia.org/livelihoods/microfinance/the-bank-shg-model-of-microfinance-in-india.htmlhttp://infochangeindia.org/livelihoods/microfinance/the-bank-shg-model-of-microfinance-in-india.htmlhttp://infochangeindia.org/livelihoods/microfinance/the-bank-shg-model-of-microfinance-in-india.html


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18. Kabeer, Naila. 2001. Reflections on the measurement of womens empowerment. In

Discussing Womens Empowerment-Theory and Practice. Sida Studies No. 3. Novum

Grafiska AB: Stockholm.

19. Jejeebhoy, Shireen J. 2000. Womens autonomy in rural India: Its dimensions,

determinants, and the influence of context. In Womens Empowerment and Demographic

Processes: Moving Beyond Cairo. Harriet Presser and Gita Sen, eds. New York: Oxford

University Press.


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CHAPTER 2

LITRATURE REVIEW


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Muhammad Yunus (1998)Has examined that this approach to poverty reduction at the

macro-level is inadequate. The primary causes of poverty are not lack of human capital or

lack of demand for labor. Lack of demand for labor is only a symptom, not a cause, of

poverty. Poverty is caused by our inadequate understanding of human capabilities and by our

failure to create enabling theoretical frameworks, concepts, institutions and policies to

support those capabilities. My main argument is that economics as we know it is not only

unhelpful in getting the poor out of poverty; it may even be a hindrance. In this paper, I

would like to explore those institutions that perpetuate poverty, share my experiences with an

effective poverty alleviation institution, and present my thoughts on the future of poverty

alleviation. Before addressing these points, however, I would like to provide a useful

framework to define the concept of "the poor" more concretely.-(1-2)

Monique Cohen (2002)Has examined that the ideas presented in this paper are designed to

direct the arena of discourse towards a more holistic market driven or client focused

microfinance agenda. Currently, the debate on market-driven microfinance is primarily

framed by the problems of competition and dropouts among established MFIs. The

solutions to the problems are defined in terms of more responsive products, the creation of

new products, and the restructuring of existing ones. Appropriate products will not only

benefit the operations of an institution they will also have a positive impact on the wellbeing

of the client, reducing the risk of borrowing and the poors vulnerability. In presenting

current thinking on a client-led agenda, this paper finds itself in a precarious position in the

midst of this debate. Client-led models are still in their infancy, and the fact that this topic is

the theme of this special edition of the Journal of Development Studies is itself an important

milestone. When this author began to focus on clients in microfinance six years ago, the

notion that clients deserved a voice in the design and delivery of services was dismissed out

of hand.(3)

SusyCheston (2002)Has examined that Microfinance has the potential to have a powerful

impact on womens empowerment. Although microfinance is not always empowering for all

women, most women do experience some degree of empowerment as a result. Empowerment

is a complex process of change that is experienced by all individuals somewhat differently.

Women need, want, and profit from credit and other financial services. Strengthening

womens financial base and economic contribution to their families and communities plays a

role in empowering them. Product design and program planning should take womens needs


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and assets into account. By building an awareness of the potential impacts of their programs,

MFIs can design products, services, and service delivery mechanisms that mitigate negative

impacts and enhance positive ones.-(4)

Yunus (2003) Has examined that count 130 McMaster School for Advancing Humanity on

women to spread the word to their neighbors and friends about the success of these loans.

The testimony is expected to convince others to seek out Grameen for help. Yunus also

encourages members to save some of their money in case they fall on hard times, such as

natural disasters, or to use this money for other opportunities. In 1977, Yunus founded

Grameen Bank after working for six months to get a loan from the Janata Bank. Yunus

realized that having groups of people take out a loan was a better plan for success than giving

loans to individuals. He describes the process by which Grameen Bank lends money. Loan

repayments are to be made in very small amounts, and in the first project, Yunus chose a

villager to be in charge of collecting the repayments.

Jennifer Meehan (2004) Has examined that it will need to do three things simultaneously.

First, it will need to rapidly scale up, in key markets, like India, home to high numbers of the

worlds poor. Second, in this process, clear priority is needed for philanthropic, quasi-

commercial and commercial financing for the business plans of MFIs targeting the poorest

segments of the population, especially women. Third, microfinance will need to realize its

possibility as a broad platform and movement, more than simply an intervention and industry.

The pioneering financings completed by leading, poverty-focused MFIs have shown the

industry what is possible large amounts of financing that allows for rapid expansion of

financial services to new poor customers. The MFIs offer a model to others that are interested

in tapping the financial markets. If leading MFIs continue on their present course and adopt

some or all of the suggestions offered, financial market interest or more specifically, debt

capital market interestin leading, poverty-focused MFIs is expected to grow.

Ernest Aryeetey (2005)Has examined that informal finance and microfinance suitable for

financing growing small to medium size enterprises (SMEs) in Sub-Saharan Africa? First, I

present the characteristics of informal finance, focusing on size, structure, and scope of

activities. Informal finance has not been very attractive for the private sector. Indeed, the

informal sector has considerable experience and knowledge about dealing with small

borrowers, but there are significant limitations to what it can lend to growing micro

businesses. Second, I discuss some recent trends in microfinance. While externally driven


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microfinance projects have surfaced in Africa, their performance relative to small business

finance has not been as positive as in Asia and Latin America. Third, I introduce some

possible steps toward a new reform agenda that will make informal and microfinance relevant

to private sector development, including focusing on links among formal, semi-formal and

informal finance and how these links can be developed.

Basu, P., Srivastava (2005) Has examined that the current level and pattern of access to

finance for India's rural poor and examines some of the key microfinance approaches in

India, taking a close look at the most dominant among these, the Self Help Group (SHG)

Bank Linkage initiative. It empirically analyzes the success with which SHG Bank Linkage

has been able to reach the poor, examines the reasons behind this, and the lessons learned.

The analysis in the paper draws heavily on a recent rural access to finance survey of 6,000

households in India, undertaken by the authors. The main findings and implications of the

paper are as follows: India's rural poor currently have very little access to finance from

formal sources. Microfinance approaches have tried to fill the gap. Among these, the growth

of SHG Bank Linkage has been particularly remarkable, but outreach remains modest in

terms of the proportion of poor households served. The paper recommends that, if SHG Bank

Linkage is to be scaled-up to offer mass access to finance for the rural poor, then much more

attention will need to be paid towards: the promotion of high quality SHGs that are

sustainable, clear targeting of clients, and ensuring that banks linked to SHGs price loans at

cost-covering levels. At the same time, the paper argues that, in an economy as vast and

varied as India's, there is scope for diverse microfinance approaches to coexist. Private sector

micro financiers need to acquire greater professionalism, and the government, too, can help

by creating a flexible architecture for microfinance innovations, including through a more

enabling policy, legal and regulatory framework. Finally, the paper argues that, while

microfinance can, at minimum, serve as a quick way to deliver finance to the poor, themedium-term strategy to scale-up access to finance for the poor should be to 'graduate'

microfinance clients to formal financial institutions. The paper offers some suggestions on

what it would take to reform these institutions with an eye to improving access for the poor.--

(6,7)

Linda Mayoux (Feb 2006) Has examined that Micro-finance programmes not only give

women and men access to savings and credit, but reach millions of people worldwide

bringing them together regularly in organized groups. Through their contribution to womens


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ability to earn an income, micro-finance programmes can potentially initiate a series of

virtuous spirals of economic empowerment, increased well-being for women and their

families and wider social and political empowerment Banks generally use individual rather

than group-based lending and may not have scope for introducing non-financial services.

This means that they cannot be expected to have the type of the focused empowerment

strategies which NGOs have -(8)

Dr. JyotishPrakashBasu (2006) Has examined that the two basic research questions. First,

the paper tries to attempt to study how a womans tendency to invest in safer investment

projects can be linked to her desire to raise her bargaining position in the households. Second,

in addition to the project choice, women empowerment is examined with respect to control of

savings, control of income, control over loans, control over purchasing capacity and family

planning in some sample household in Hooghly district of West Bengal. The empowerment

depends on the choice of investment of project. The choice of safe project leads to more

empower of women than the choice of uncertain projects. The Commercial Banks and

Regional Rural banks played a crucial role in the formation of groups in the SHGs -Bank

Linkage Program in Andhra Pradesh whiles the Cooperative Banks in West Bengal.(9)

NidhiyaMenon (2006) Has examined that this paper studies the benefits of participation in

micro-finance programs, where benefits are measured in terms of the ability to smooth the

effect of seasonal shocks that cause consumption fluctuations. It is shown that although

membership in these programs is an effective instrument in combating inter-seasonal

consumption differences, there is a threshold level of length of participation beyond which

benefits begin to diminish. Returns from membership are modelled using an Euler equation

approach. Fixed effects non-linear least squares estimation of parameters using data from 24

villages of the Grameen Bank suggests that returns to participation, as measured by the

ability to smooth seasonal shocks, begin to decline after approximately two years of

membership. This implies that membership alone no longer has a mitigating marginal effect

on seasonal shocks to per capita consumption after four years of participation. Such patterns

suggest that the ability to smooth consumption as a function of length of membership, need

not accrue indefinitely in a linear fashion.; Reprinted by permission of Frank Cass & Co.

Ltd.-(10)

Srinivasan, Sunderasan (2007) Has examined that micro banking facilities have helped

large numbers of developing country nationals by supporting the establishment and growth of


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microenterprises. And yet, the microfinance movement has grown on the back of passive

replication and needs to be revitalised with new product offerings and innovative service

delivery. Renewable Energy systems viz., solar home systems, biogas digesters, etc., serve to

improve indoor air quality, provide superior light and extend working and study hours. Such

applications are not inherently income generating and returns on such investments accrue

from cost avoidance, but should qualify for micro funding, as such 'quality of life'

investments, reflect borrower maturity and simultaneously contribute to MFI sustainability.-

(10)

Mohammed AnisurRahaman (2007) Has examined that about microfinance and to

investigate the impact of microfinance on the poor people of the society with the main focus

on Bangladesh. We mainly concise our thesis through clients (the poor people, who

borrowed loan from microfinance institutions) perspective and build up our research based on

it. Therefore, the objective of this study is to show how microfinance works, by using group

lending methodology for reducing poverty and how it affects the living standard (income,

saving etc.) of the poor people in Bangladesh. Microfinance has the positive impact on the

standard of living of the poor people and on their life style. It has not only helped the poor

people to come over the poverty line, but has also helped them to empower themselves.

Crabb, P. (2008) Has examined that the relationship between the success of microfinance

institutions and the degree of economic freedom in their host countries. Many microfinance

institutions are currently not self-sustaining and research suggests that the economic

environment in which the institution operates is an important factor in the ability of the

institution to reach this goal, furthering its mission of outreach to the poor. The sustainability

of the micro lending institutions is analyzed here using a large cross-section of institutions

and countries. The results show that microfinance institutions operate primarily in countries

with a relatively low degree of overall economic freedom and that various economic policy

factors are important to sustainability-(12)

Chintamani Prasad Patnaik (March 2012) Has examined that microfinance seems to have

generated a view that microfinance development could provide an answer to the problems of

rural financial market development. While the development of microfinance is undoubtedly

critical in improving access to finance for the unserved and underserved poor and low-

income households and their enterprises, it is inadequate to address issues of rural financial

market development. It is envisaged that self-help groups will play a vital role in such


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strategy. But there is a need for structural orientation of the groups to suit the requirements of

new business. Microcredit movement has to be viewed from a long-term perspective under

SHG framework, which underlines the need for a deliberate policy implication in favour of

assurance in terms of technology back-up, product market and human resource development.

R.Prabhavathy (2012) Has examined that collective strategies beyond micro-credit to

increase the endowments of the poor/women enhance their exchange outcomes the family,

markets, state and community, and socio-cultural and political spaces are required for both

poverty reduction and women empowerment. Even though there were many benefits due to

micro-finance towards women empowerment and poverty alleviation, there are some

concerns. First, these are dependent on the programmatic and institutional strategies adopted

by the intermediaries, second, there are limits to how far micro-credit interventions can alone

reach the ultra-poor, third the extent of positive results varies across household headship,

caste and religion and fourth the regulation of both public and private infrastructure in the

context of LPG to sustain the benefits of social service providers.-(11)

1.ACCION International, FINCA, Grameen Foundation, Opportunity International,

UNITUS, and Womens World Banking (2010) Measuring the Impact of Microfinance: Our

Perspective.

2.Ahmad, Mokbul M. 2003 "Distant Voices: The Views of the Field Workers of NGOs in

Bangla-desh on Microcredit" Geographical Journal 169 (1), 65-74.

3.Journal of International Development, Special Issue: The Second Microfinance

Revolution: Creating Customer Centered Microfinance Institutions Volume pages 335350,

April 2002

4. Susy Cheston &Lisa Kuhn, Empowering Women through Microfinance, Pathways Out

of Poverty: Innovations in Microfinance for the Poorest Families, (Kumarian Press, 2002).

5. Tapping financial markets for microfinance: grameen foundationUSA fostering this

emerging trend, Jennifer Meehan director of capital markets grameen foundation USA,

presented on 2004, published in 2005


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6.J. Morduch, The Microfinance Shism, World Development, vol. 28, no. 4, pp. 617-629,

2000.

7. P. Basu and P. Srivastava, Scaling-up microfinance forIndias rural poor, World Bank

Policy Research Working Paper 3646, June, 2005.

8. Abosede, A. J. (2007), Should Microfinance be Gender Bias in the Context of Millennium

Development Goals? An Examination of Literature. Nigerian Journal of Business

Administration, Vol. 9, No. l&2, pp. 163-175.

9. James C. Brau, Gary M. Woller An examination of Microfinance: A ComprehensiveReview of the Existing Literature Journal of Entrepreneurial Finance and Business Ventures,

Vol. 9, Issue 1, 2004, pp. 1-26

10. Jonathan Morduch, Journal of Economic Literature Vol. XXXVII (December 2000), pp.

15691614.

11.R. Prabhavathy. Indian Streams Research Journal Vol.2, Issue.III/April; 12pp.1-4 ISSN:-

2230-7850.Article as : Indian Streams Research Journal (April ; 2012) self help groups and

poverty alleviation

12. Venkata Vijay Kumar P, V K Gupta: Research Journal of Finance and AccountingISSN

2222-1697 (Paper) ISSN 2222-2847 Vol 2, No 3, 2011


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CHAPTER 3

RESEARCH METHODOLOGY


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INTRODUCTION

Research in common parlance refers to a search for knowledge. Once can also define research

as a scientific and systematic search for pertinent information on a specific topic. In fact,

research is an art of scientific investigation. The Advanced Learners Dictiona ry of Current

English lays down the meaning of research as a careful investigation or inquiry especially

through search for new facts in any branch of knowledge.1. Redman and Mory define

research as a systematized effort to gain new knowledge.2. Some people consider research

as a movement, a movement from the known to the unknown. It is actually a voyage of

discovery. We all possess the vital instinct of inquisitiveness for, when the unknown

confronts us, we wonder and our inquisitiveness makes us probe and attain full and fuller

understanding of the unknown. This inquisitiveness is the mother of all knowledge and the

method, which man employs for obtaining the knowledge of whatever the unknown, can be

termed as research.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the problem. It is a game plan for

conducting research. In this we describe various steps that are taken by the researcher.

Research methodology is a framework for the study and is used as a guide in collecting and

analyzing the data. It is a strategy specifying which approach will be used for gathering and

analyzing the data. it also includes time and cost budget since most studies are done under

these two constraints. The research methodology includes overall research design, the

sampling procedure, the data collection method and analysis procedure.

TYPE OF RESEARCH

This study is DESCRIPTIVE in nature. It helps in breaking vague problem into smaller and

precise problem and emphasizes on discovering of new ideas and insights.

RESEARCH DESIGN

Research design constitutes the blue print for the collection, measurement and analysis of

data. The present study seeks to identify the impact of microfinance on living standard,

poverty alleviation and women empowerment. The research is to be conducted on members


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of self help groups specially womens within Ludhiana. For the selection of the sample,

convenient sampling method was adopted and an attempt has been made to include all the

age groups and gender within the class.

NEED OF THE STUDY

The research report investigates the impact of microfinance on living standard, women

empowerment and poverty alleviation. An attempt has been made to find how microfinance

helps in reduce poverty and increase living standard of poor population in India. Poverty is a

major issue in the country, In 2006 planning commission estimation of population below

poverty line is 27.8%, the estimated number of poor is estimated to be approximately 300

million in 2004-05, larger than the official estimate of 1999-2000.it may be recalled that the

official estimate for poverty in 1999-2000 was 26.1% for country as a whole and 260 million

were estimated as poor. Credit is a powerful tool that could be effectively deployed when it

made available to the credit worthy among the economically active poor. Self Help Group

model of microfinance serves well to reduce poverty and improve living standard. The SHGs

are small, informal and homogenous groups. These groups have proved as cyclic agents of

development in both the rural and urban areas. The SHGs after being formed start collectinga fixed amount of thrift from each member regularly. After accumulating a reasonable

amount of resource, the group starts lending to its members for petty consumption needs and

group members by taking loans from bank and other institutions starts their own work or

work collectively in other words they got employment and these groups helps them to

increase their income and savings ,when income is increased they become able to fulfill their

basic needs and able to increase they living standard by acquiring new assets ,increase in

expenditure on health, food, entertainment etc and ,increase in consumption. This studybrings out the importance of microfinance in developing countries or in poor nations. This

study is conducted to know whether there is improvement in living standard, income of

members of self help groups and women members got empowerment or not. Basically this

research is done to know is there any difference in living standard, poverty and empowerment

of members of SHG before and after joining the group.


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SCOPE OF STUDY:

This study is exclusively on the microfinance to analyze and obtain insights into the impact of

microfinance on living standard, poverty alleviation and empowerment. It was carried out within

Ludhiana city over a period of two months. I selected this particular city for my research because

there is large number of self help groups in Ludhiana as compared to some other districts in Punjab.

and in present scenario there are large number of self help groups coming into existence and they

help their members to generate income and improve their living standard, these groups helps

womens to increase their involvement in decision making and other aspects and they helps in

women empowerment .I choose this topic for my research because In our country poverty,

unemployment are major problems and I want to do research how microfinance able to remove

these problems and up to what extent. In this report there are 3 aspects are covered living standard,

women empowerment and poverty alleviation and impact of microfinance on these three are

identified with the help of using factor analysis. This study helps to know microfinance has any

impact on all variables which are related with living standard, empowerment and poverty alleviation.

I find from my primary study microfinance activity helps a lot to poor population to get employment

and increase their income and make them able to better assessment of health, food and clothing

needs.

OBJECTIVES OF THE STUDY:

The objective of my study is to find the impact of microfinance on living standard, women

empowerment and reducing poverty and to study how microfinance activity helps the

members of self help group to enhance their living standard in terms of income, saving access

to health and education. And empowering woman in terms of their Involvement in major

household decisions, Increase in self-esteem etc. I divided my objective into following three

parts.

.

To Study the impact of microfinance on living standard

To study the impact of micro finance in empowering the social economic status of

women and developing of social entrepreneurship.

To study the impact of microfinance on poverty alleviation


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SAMPLING TECHNIQUE: The sampling technique used for judgment is convenience.

SAMPLING UNIT: It defines the target population that will be sampled i.e. it answers who

is to be surveyed. In this study, the sampling unit is the members of self help groups in

Ludhiana district.

SAMPLE SIZE:

It indicates the numbers of people to be surveyed. Though large samples give more reliable

results than small samples but due to constraint of time and money, the sample size is

restricted to 100 respondents. The sample size is selected by considering characteristics of

interest and objectives of the study. The respondents most of were the women members of

Self Help Groups.

SAMPLE SELECTION AND DATA COLLECTION PROCEDURE

The population for my study encompasses the people who have been engaged in

Microfinance activities for at least two years and members of self help groups and live in

district Ludhiana, Punjab. I choose the people with a long experience in Self Help Groups

because they are well informed and know much about the pros and cons about its activities,

so they can reflect better to my questionnaire. I have used structured questionnaire for

collecting the data by interviewing the clients which are members of self help groups in

Ludhiana. The people for the interview were selected randomly. To get the address and

particulars of the interviewees in different areas, I took help from the video office of district,

and I got list of self help groups which are currently operating in that district and from thelocal people of the particular areas I able to know which self help groups are working and

The data collection procedure started from Dhan Dhan Baba Nand Singh SHG village

Ghumait, and continued to Ruby SHG Rattangarh, Sant Ashram Mahila kainder. Baba Jogi

Peer SHG village Chahalan, Mai Bhago, and Mahila SHG village Kullewal ,Guru Arjun dev

ji SHG Bhagwanpura, Namdev mahila kainder Village Dhindsa, Baba Nanak SHG village

Kot Gangu Rai, and Sahibzada baba fateh Singh SHG of village Rupalon.


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SOURCES OF DATA:

Following are the methods of sources of data:

Primary sources

Questionnaire is used to collect primary data from respondents. The questionnaire is

structured type and contained questions relating to microfinance impact on living standard,

empowerment and poverty alleviation. The questions included in the questionnaire will be on

five points likert scale.

Questionnaire design

The questionnaire comprised with the questions related to measuring the living standards of

members of self help group it includes questions related to income, saving, education ,health,

food and outwear expenditure and questionnaire also includes questions related to measuring

impact of microfinance on empowerment it includes questions related to home management

,consumption level, recognition, decision making power , social status , confidence level and

social awareness and for study impact on poverty alleviation questions like acquisition of

assets, poverty reduction, borrowing power included in questionnaire. And I used Likert

Scale (considered on 1-5points scale) to measure the respondents perceptions based on 27

statements to perceive the impact of microfinance on their overall living standards,

empowerment and poverty alleviation The points of the scale indicate the degree of

satisfaction or agreement level of the household or a person after he or she has joined the self

help group. 1 represents the lowest level of satisfaction or high disagreement, whereas 5

represents the highest level of satisfaction or high agreement.

Secondary Sources Collections

Although the result of the research is highly dependent on the primary sources that I have

gathered from the structured interview, but it also required some secondary sources to

understand the concepts, definitions, theories and empirical results. I have used several

books, research literatures, articles, journals and thesis, as secondary sources for our study.

Internet sources were also used as a secondary source for my project. Since the internet

sources are less reliable, I have limited the use of those sources to the web pages of

prominent organizations like NABARD. However, it is not always easy to find out the

appropriate research materials for the project. Many studies have been conducted onmicrofinance over the last few decades.


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Nevertheless, from them I had to choose the most appropriate literature for my project.

For this reason, I had to go through numerous references related to this topic, to find

the suitable materials. These materials were mainly collected from the university library

and using available search tool.

TOOLS AND TECHNIQUES OF ANALYSIS:

The data so collected will be analyzed through the application of statistical techniques, such

as Principal component Analysis (PCA) notably Factor Analysis.

Statistical Package for Social Sciences (SPSS) 16.0 was used to analyze the data. The

following tools were applied:

Factor Analysis

LIMITATIONS OF THE STUDY

There are number of limitations in this study. Firstly, the respondents were limited (100

respondents or samples) in terms of size and composition. Secondly, the data collection was

restricted only within the Ludhiana district of Punjab, which may fail to represent the actual

scenario of the whole country. While interviewing the people, I have faced problems in

explaining the questions as most of the people, who are involved in microfinance program

and members of self help groups, are illiterate and living in villages. Therefore, it was too

difficult to make them understand some of the technical terms: like income etc. and some

respondents are not able to understand my objective of study and why I collected all

information which is mentions in the questionnaire and some respondents think I am a

research officer which is send by CDPO to know which self help groups are working

properly or which are not so it become hard to collect more adequate data.

Moreover, theories were other problem when i wrote the theoretical framework. Because, no

established theories were particularly defined in microfinance field yet.Grameen model has

been used as an ideal theory for microfinance. Besides this, some other related things to

microfinance like, saving mobilizations, solidarity, etc. were also used in theoretical

framework. Finally, the accuracy of the analysis heavily relied on the data provided by the

members of self help groups in Ludhiana district of Punjab.


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1. Chawla, Dr.Deepak and Sondhi Dr. Neena Research methodology: concept and cases,

vikas publishing house pvt ltd.

2. Malhotra K.Naresh, Dash satyabhuson, marketing research: An orientation, Pearson

prentice hall.

3. Kothari C.R, Research methodology: Methods and techniques, wishwa prakashan.

.


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CHAPTER 4

ANALYSIS AND DISCUSSION


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Factor analysis

Factor analysis is a multivariate technique in which there is no distinction between dependent

and independent variables. In factor analysis, all variables under investigation are analyzedtogether to extract the underlined variables. Factor analysis is a data reduction method. It is

primarily used for data reduction and summarization .It is very useful method to reduce large

number of variables resulting in data complexity to a few manageable factors. These factors

explain the most part of the variations of the original set of data.

I used factor analysis to measure the impact of microfinance on living standard, women

empowerment and poverty reduction. Factor analysis is done on SPSS 16 version, there are

27 statements or variables in my questionnaire but I used 23 variables which are inter-

correlated ,4 variables are reduced in data cleaning process and I used SPSS in following

way:

Running the analysis:

Access the main dialog box by using the Analyze----data reduction----factor and I select the

variables which I want to analyze. And several options available the first which can be

accessed by click on descriptives .the coefficient option produces the R matrix and

significance level option will produce the matrix indicating the significance value of each

correlation in the R-matrix. I also used the determinant option and this option is vital for

testing for multicollinearity or singularity. The determinant of the matrix should be greater

than 0.00001: if it is less than this value then look through the correlation matrix for

variables that correlate vary highly(r>.8) and consider eliminating one of the variables

before proceeding.

KMO and Bartletts test of sphericity produces the Kaiser-MeyerOlkin measure of sampling

adequacy and Ba

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