Jhui Mircorfinance Project123

8/11/2019 Jhui Mircorfinance Project123

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Project On Microfinance

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CHAPTER 1

INTRODUCTION

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

delivery 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, individual

lending, the provision of savings and insurance, capacity building, and agricultural business

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

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

development approach that involves providing financial services through institutions to low

income clients.

In India, Microfinance has been defined by The National Microfinance Taskforce, 1999 as

provision of thrift, credit and other financial services and products of very small amounts to

the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and

improve living standards.

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


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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 natural

reasons 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.

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.


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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 - microfinance 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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INDUSTRY PROFILE

The Origin of Microfinance

Although neither of the terms microcredit or microfinance were used in the academic

literature nor by development aid practitioners before the 1980s or 1990s, respectively, the

concept of providing financial services to low income people is much older.

While the emergence of informal financial institutions in Nigeria dates back to the 15th

century, they were first established in Europe during the 18th century as a response to the

enormous increase in poverty since the end of the extended European wars (1618 1648). In

1720 the first loan fund targeting poor people was founded in Ireland by the author Jonathan

Swift. After a special law was passed in 1823, which allowed charity institutions to become

formal financial intermediaries a loan fund board was established in 1836 and a big boom

was initiated. Their outreach peaked just before the government introduced a cap on interest

rates in 1843. At this time, they provided financial services to almost 20% of Irish

households. The credit cooperatives created in Germany in 1847 by Friedrich Wilhelm

Raiffeisen served 1.4 million people by 1910. He stated that the main objectives of these

cooperatives should be to control the use made of money for economic improvements, and

to improve the moral and physical values of people and also, their will to act by themselves.

In the 1880s the British controlled government of Madras in South India, tried to use the

German experience to address poverty which resulted in more than nine million poor Indians

belonging to credit cooperatives by 1946. During this same time the Dutch colonial

administrators constructed a cooperative rural banking system in Indonesia based on the

Raiffeisen model which eventually became Bank Rakyat Indonesia (BRI), now known as the

largest MFI in the world.


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EVOLUTION OF MICROFINANCE IN INDIA (1960 TO TODAY)

Microfinance in India emerged as an effort to reach out to the un-banked, lower income

segments of the population

1960 to 1980 1990 2000

Phase 1: Social Banking Phase 2: Financial Systems

Approach

Phase 3: Financial Inclusion

1.Nationalization of private

commercial banks

1.Peer-pressure 1.NGO-MFIs and SHGs

gaining more legitimacy

2.Expansion of rural branch

network

2.Establishment of

MFIs,typically of non-profit

origins

2.MFIs emerging as strategic

partners to diverse entities

interested in thelow-income

segments

3.Extension of subsidized

credit

3.Consumer finance emerged

ashighgrowth area

4.Establishment of Rural

Regional Banks

4.Increased policy regulation

5.Establishment of apex

institutionssuch as National

Bank for Agricultureand

Rural Development and

SmallIndu- stries

Development Bank of India

5.Increasing

commercialization

Table 3.1

Phase 1:In the 1960s, the credit delivery system in rural India was largely dominated by the

cooperative segment. The period between 1960 and 1990, referred to as the social banking

phase. This phase includes nationalization of private commercial banks, expansion of rural

branch networks, extension of subsidized credit, establishment of Regional Rural Banks

(RRBs) and the establishment of apex institutions such as the National Bank for Agriculture


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and Rural Development (NABARD) and the Small scale Industries Development Board of

India (SIDBI).

Phase 2:After 1990, India witnessed the second phase financial system approach of creditdelivery. In this phase NABARD initiated the Self Help Group (SHG) - Bank Linkage Bank

Linkage program, which links informal women's groups to formal banks. This concept held

great appeal for non-government organizations (NGOs) working with the poor, prompting

many of them to collaborate with NABARD in the program. This period also witnessed the

entry of Microfinance Institutions (MFIs), largely of non-profit origins, with existing

development programs.

Phase 3:In 2000, the third phase in the development of Indian microfinance began, marked

by further changes in policies, operating formats, and stakeholder orientations in the financial

services space. This phase emphasizes on inclusive growth and financial inclusion. This

period also saw many NGO-MFIs transform into regulated legal formats such as Non-

Banking Finance Companies (NBFCs). Commercial banks adopted innovative ways of

partnering with NGO-MFIs and other rural organizations to extend their reach into rural

markets. MFIs have emerged as strategic partners to individuals and entities interested in

reaching out to India's low income client segments.

Policy Attention to Microfinance After 2000

1999--- Official definition of microfinance by RBI

August 2000 --- 'Micro Credit/Rural Credit' included in the list of permitted non-banking

financial company (NBFC) activities considered for Foreign Direct Investment (FDI)

2005 --- MFIs acknowledged for the first time in the Budget Speech by the Finance Minister

Government intends to promote MFIs in a big way. The way forward, I believe, is to

identify MFIs, classify and rate such institutions, and empower them to intermediate between

the lending banks and the beneficiaries.

January 2006--- Announcement of the business correspondent model

February 2006 --- Budget Speech by the Finance Minister promises a formal statutoryframework for the promotion, development and regulation of the microfinance sector


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March 2006--- Comprehensive guidelines by RBI on loan securitization

July 2006--- RBI master circular allows NGOs involved in microfinance to access External

Commercial Borrowings (ECB) up to USD 5 million (INR 20.25 crores) during a year.

March 2007 --- Finance Minister introduces the Micro Finance Sector Development and

Regulation Bill 2007 in LokSabha

Entities in Micro Finance:-

Indian Microfinance dominated by two operational approaches:

SHG

Initiated by NABARD through SHG Bank Linkage Program.

Largest outreach to microfinance clients in the world.

MFIs

Emerged in the late 1990s to harness social and commercial funds.

Today the number of Indian MFIs has increased and crossed 1000.

SHGs and MFIs disbursement till 2007- USD 3.7 billions

SHGs comprise twenty or fewer members, of whom the majority are women from the poorest

castes and tribes. Members save small amounts of money, as little as a few rupees a month in

a group fund. Members may borrow from the group fund for a variety of purposes ranging

from household emergencies to school fees. Banks typically lend up to four rupees for every

rupee in the group fund. Groups pay a reasonable 12-24% annual rate of interest. Nearly 1.4

million SHGs comprising approximately 20 million women now borrow from banks, which

makes the Indian SHG-Bank Linkage model the largest microfinance program in the world.MFI is an organization that offers financial services to low income populations. Almost all of

these offer microcredit and only take back small amounts of savings from their own

borrowers, not from the general public. Term refers to a wide range of organizations - NGOs,

credit unions, cooperatives, private commercial banks and non-bank financial institutions.


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Microfinance Today

In the 1970s a paradigm shift started to take place. The failure of subsidized government or

donor driven institutions to meet the demand for financial services in developing countries let

to several new approaches. Some of the most prominent ones are presented below.Bank

Dagan Bali (BDB) was established in September 1970 to serve low income people in

Indonesia without any subsidies and is now well-known as the earliest bank to institute

commercial microfinance. While this is not true with regard to the achievements made in

Europe during the 19th century, it still can be seen as a turning point with an ever increasing

impact on the view of politicians and development aid practitioners throughout the world. In

1973 ACCION International, a United States of America (USA) based non-governmentalorganization (NGO) disbursed its first loan in Brazil and in 1974 Professor Muhammad

Yunus started what later became known as the Grameen Bank by lending a total of $27 to 42

people in Bangladesh. One year later the Self-Employed Womens Association started to

provide loans of about $1.5 to poor women in India. Although the latter examples still were

subsidized projects, they used a more business oriented approach and showed the world that

poor people can be good credit risks with repayment rates exceeding 95%, even if the interest

rate charged is higher than that of traditional banks. Another milestone was the

transformation of BRI starting in 1984. Once a loss making institution channeling

government subsidized credits to inhabitants of rural Indonesia it is now the largest MFI in

the world, being profitable even during the Asian financial crisis of 1997 1998.In February

1997 more than 2,900 policymakers, microfinance practitioners and representatives of

various educational institutions and donor agencies from 137 different countries gathered in

Washington D.C. for the first Micro Credit Summit. This was the start of a nine yearlong

campaign to reach 100 million of the world poorest households with credit for self-

employment by 2005. According to the Microcredit Summit Campaign Report 67,606,080

clients have been reached through 2527 MFIs by the end of 2002, with 41,594,778 of them

being amongst the poorest before they took their first loan. Since the campaign started the

average annual growth rate in reaching clients has been almost 40 percent. If it has continued

at that speed more than 100 million people will have access to microcredit by now and by the

end of 2005 the goal of the microcredit summit campaign would be reached. As the president

of the World Bank James Wolfensohn has pointed out, providing financial services to 100

million of the poorest households means helping as many as 500600 million poor people.


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Micro Finance Models

1. Micro Finance Institutions (MFIs):

MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and

cooperatives. They are provided financial support from external donors and apex

institutions including the RashtriyaMahilaKosh (RMK), SIDBI Foundation for micro-

credit and NABARD and employ a variety of ways for credit delivery.

Since 2000, commercial banks including Regional Rural Banks have been providing

funds to MFIs for on lending to poor clients. Though initially, only a handful of

NGOs were into financial intermediation using a variety of delivery methods, their

numbers have increased considerably today. While there is no published data onprivate MFIs operating in the country, the number of MFIs is estimated to be around

800.

Legal Forms of MFIs in India

Types of MFIs Estimated

Number*

Legal Acts under which Registered

1. Not for Profit MFIs

a.) NGO - MFIs

400 to 500 Societies Registration Act, 1860 or

similar Provincial Acts

Indian Trust Act, 1882

b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956

2. Mutual Benefit MFIs

a.) Mutually Aided Cooperative

Societies (MACS) and similarly

set up institutions

200 to 250 Mutually Aided Cooperative Societies

Act enacted by State Government

3. For Profit MFIs

a.) Non-Banking Financial

Companies (NBFCs)

6 Indian Companies Act, 1956

Reserve Bank of India Act, 1934

Total 700800

Table 3.3


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2. Bank Partnership Model

This model is an innovative way of financing MFIs. The bank is the lender and the MFI

acts as an agent for handling items of work relating to credit monitoring, supervision

and recovery. In other words, the MFI acts as an agent and takes care of all

relationships with the client, from first contact to final repayment. The model has the

potential to significantly increase the amount of funding that MFIs can leverage on a

relatively small equity base.

A sub - variation of this model is where the MFI, as an NBFC, holds the individual

loans on its books for a while before securitizing them and selling them to the bank.

Such refinancing through securitization enables the MFI enlarged funding access. If the

MFI fulfills the true sale criteria, the exposure of the bank is treated as being to the

individual borrower and the prudential exposure norms do not then inhibit such funding

of MFIs by commercial banks through the securitization structure.

3. Banking Correspondents

The proposal of banking correspondents could take this model a step further

extending it to savings. It would allow MFIs to collect savings deposits from the poor

on behalf of the bank. It would use the ability of the MFI to get close to poor clients

while relying on the financial strength of the bank to safeguard the deposits. This

regulation evolved at a time when there were genuine fears that fly-by-night agents

purporting to act on behalf of banks in which the people have confidence could

mobilize savings of gullible public and then vanish with them. It remains to be seen

whether the mechanics of such relationships can be worked out in a way that minimizes

the risk of misuse.

4. Service Company Model

Under this model, the bank forms its own MFI, perhaps as an NBFC, and then works

hand in hand with that MFI to extend loans and other services. On paper, the model is

similar to the partnership model: the MFI originates the loans and the bank books them.

But in fact, this model has two very different and interesting operational features:

The MFI uses the branch network of the bank as its outlets to reach clients. This

allows the client to be reached at lower cost than in the case of a standalone MFI.


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In case of banks which have large branch networks, it also allows rapid scale up. In

the partnership model, MFIs may contract with many banks in an arms length

relationship. In the service company model, the MFI works specifically for the bank

and develops an intensive operational cooperation between them to their mutual

advantage.

The Partnership model uses both the financial and infrastructure strength of the

bank to create lower cost and faster growth. The Service Company Model has the

potential to take the burden of overseeing microfinance operations off the

management of the bank and put it in the hands of MFI managers who are focused

on microfinance to introduce additional products, such as individual loans for SHG

graduates, remittances and so on without disrupting bank operations and provide a

more advantageous cost structure for microfinance.

Bank Led Model

The bank led model was derived from the SHG-Bank linkage program of NABARD.

Through this program, banks financed Self Help Groups (SHGs) which had been promoted

by NGOs and government agencies.

ICICI Bank drew up aggressive plans to penetrate rural areas through its SHG program.

However, rather than spending time in developing rural infrastructure of its own, in 2000,

ICICI Bank announced merger of Bank of Madura (BoM), which had significant presence in

the rural areas of South India, especially Tamil Nadu, with a customer base of 1.9 million and

87 branches. Bank of Madura's SHG development program was initiated in 1995. Through

this program, it had formed, trained and initiated small groups of women to undertake

financial activities like banking, saving and lending. By 2000, it had created around 1200

SHGs across Tamil Nadu and provided credit to them.


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MICROFINANCE INSTITUTIONS

Microfinance institutions are perhaps one of the most important vehicles to reach the rural

poor. These institutions can act as very important tool to provide the rural entrepreneurs with

micro-loans, which will help them to start their own businesses and sustain them. One

advantage that these institutions have over other financial services delivery vehicles is the

focus. While NGOs have to straddle with various non-financial and financial services

activities and commercial bank with other operations. MFIs can solely focus on providing the

financial service to the poor since the very objective of starting this kind of institution is to

provide financial services in the rural areas. There are many examples of MFIs that has done

some stellar work in this area such as ACCION International, BancoSol and Grameen Bank.

These institutions have helped many people in enhancing their lives and achieving a decent

social status in the societies that they are living in. The key advantages that they have over

the other forms of microfinance are:

Focus is solely on providing financial services.

It can provide whole gamut of services from loans to insurance.

However, it has also some advantages like sustainability of these institutions. Most of the

MFIs including Grameen bank are still donor supported organization and many of them still

depend on outside funds for their survival. Only some have like BancoSol have made

successful transition from donor supported financially self-sustained organization.

Apart from these there are several other important mechanisms through while microfinance is

provided like mutual community groups, regional woman group like Development of Women

and Child in Rural Area (DWCRA) and other local organizations. However, they have not

played a significant role in the microfinance movement till now and they can play a major

role in providing rural financial services in the long run.


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CHAPTER 2

LITRATURE REVIEW

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.

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 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.

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 ability to earn an income, micro-

finance programmes can potentially initiate a series of virtuous spirals of economic


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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

EoinWrenn (2005)

Has examined that microfinance creates access to productive capital for the poor, which

together with human capital, addressed through education and training, and social capital,

achieved through local organization building, enables people to move out of poverty (1999).

By providing material capital to a poor person, their sense of dignity is strengthened and this

can help to empower the person to participate in the economy and society. The impact of

microfinance on poverty alleviation is a keenly debated issue as we have seen and it is

generally accepted that it is not a silver bullet, it has not lived up in general to its expectation

(Hulmeand Mosley, 1996). However, when implemented and managed carefully, and when

services are designed to meet the needs of clients, microfinance has had positive impacts, not

just on clients, but on their families and on the wider community.

Cheston& Kuhn (2004)

Has examined that in their study concluded that micro-finance programmes have been very

successful in reaching women. This gives micro-finance institutions an extraordinary

opportunity to act intentionally to empower poor women and to minimize the potentially

negative impacts some women experiences. We also found increased respect from and better

relationships with extended family and in-laws. While there have been some reports of

increased domestic violence, Hashemi and Schuler found a reduced incidence of violence

among women who were members of credit organizations than among the general

population.

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,


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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.

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 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.

Hunt, J &Kasynathan (2002)

Has examined that poor women and men in the developing world need access to

microfinance and donors should continue to facilitate this. Research suggests that equity and

efficiency arguments for targeting credit to women remain powerful: the whole family is

more likely to benefit from credit targeted to women, where they control income, than when

it is targeted to men. Microfinance must also be re-assessed in the light of evidence that the

poorest families and the poorest women are not able to access credit. A range of microfinance

packages is required to meet the needs of the poorest, both women and men. Donors need to

revisit arguments about the sustainability of microfinance programmes. Financial

sustainability must be balanced against the need to ensure that some credit packages are

accessible to the poorest.


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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.

Reginald Indon (2007)

Has examined that informal businesses represent a very large cross-section of economic

enterprises operating in the country. Informal businesses may be classified as either the

livelihood/ survival type or the entrepreneurial/ growth-oriented type. Livelihood enterprises

are those which show very limited potential for growth in both income and employmentgeneration. There are existing policies, program and services that directly/ indirectly cover

informal. Variety of support programs, services and information are currently being offered

by different institutions. These programs and support services fail to reach or remain

inaccessible to informal business operators and owners. This is borne out of and perpetuated

by lopsided economic policies and poor governance that inadvertently encumber informal

businesses from accessing mainstream resources and services.

Mallory A. Owen (2006)

Has examined that microfinance has signaled a paradigm shift in development ideology.

Using my experiences with microfinance in a fishing village in Senegal, this study will

address the claims driving the microfinance movement, debate its pros and cons and pose

further questions about its validity and widespread implementation. Instead of lifting people

out of poverty and empowering women, microfinance may have regressive long term

potential for borrowers. How loans get used is a central theme of this essay. Howmicrofinance and the notion of the entrepreneur fit into the rural, Senegalese cultural


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context is also addressed. Microfinance programs should be implemented with

complementary measures that challenge the systematic causes of inequality examined in this

article. The microfinance model (group lending based on joint liability) uses the social capital

generated by group membership to ensure that loans get re-financed. If one woman fails to

pay back her loan, she puts her entire loan group at jeopardy. As a result, Womens

participation in microenterprise does not show any signs of creating the new forms of

solidarity among women that the advocates of empowerment desire. Instead, women are

placed under enormous pressure to maintain existing modes of social relationships, on which

depends not only the high rates of loan repayments but also the survival of families.

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.

Jacob Levitsky and Leny van Oyen (1999)

Has examined that micro-businesses to large corporations, located in large urban centres, in

rural areas and in the formal and informal sectors. Financing needs are therefore of varying

nature. In describing experiences, a link is made between size of enterprises, financing

schemes/instruments and typical delivery channels. When referring to enterprises in this

paper, focus is predominantly on businesses, both existing and potential, in the manufacturing

sector and related services. It is clear from this paper that increasing the volume of finance

available and the delivery of such funds in various appropriate forms, to support enterprises


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in Africa, is a difficult challenge. Central banks have to be given more independence,

strengthened with qualified, experienced personnel, able to fulfil adequately the role of

supervising and monitoring the performance of commercial banks in the provision of loans to

those enterprises able to make effective use of them. Formal financial institutions such as

commercial banks and, in a few cases, development banks, have to be encouraged and

pressed to make appropriate loans to those who have proved themselves by paying off a

number of loans they have received from NGOs or from formal financial institutions. The

minimalist credit approach has clear limitations, and for credit schemes to be effective and

have impact, complementary services are needed.

Marguerite S. Robinson (1995)

Has examined that HIID's role in the formulation of the initial hypotheses and HIID's

contributions in planning and coordinating the underlying research, advising on the policies

and implementation strategies that put concept into practice, analysing the results, and

disseminating the findings. Drawing on work in Asia, Africa, and Latin America, the paper

analyses the paradigm shift in microfinance from government and donor-funded subsidized

credit to sustainable financial intermediation. This shift has occurred because of the work of

many people in many countries. This paper, however, is limited to HIID's contribution. The

policy implications of the 'new microfinance' for governments, donors, banks, and NGOs are

explored. HIID is advising BRI on its program for international visitors. In addition, HIID is

analysing and teaching - in universities, financial institutions, donor agencies, bank

superintendences, and NGOs - the principles and the results of the new microfinance

paradigm.

Pillai (1995)

Has examined that the emergence of liberalization and globalization in early 1990's

aggravated the problem of women workers in unorganized sectors from bad to worse as most

of the women who were engaged in various self-employment activities have lost their

livelihood. Microfinance is emerging as a powerful instrument for poverty alleviation in the

new economy. In India, Microfinance scene is dominated by Self Help Group (SHGs)-Bank

Linkage Programme as a cost effective mechanism for providing financial services to the

"Unreached Poor" which has been successful not only in meeting financial needs of the rural


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poor women but also in strengthening collective self-help capacities of the poor leading to

their empowerment. 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. Micro finance can contribute to solving the problems of

inadequate housing and urban services as an integral part of poverty alleviation programmes.

The challenge lies in finding the level of flexibility in the credit instrument that could make it

match the multiple credit requirements of the low income borrower without imposing

unbearably high cost of monitoring its end use upon the lenders.

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.

Fehr, D. and G. Hishigsuren. (2006)

Has examined that microfinance institutions (MFIs) provide financial services to the poorest

households. To date, funding of MFI activities has come primarily from outright donor

grants, government subsidies, and often debt capital, including debt with non-market terms

favorable to the MFI. These traditional sources of MFI financing may not be sufficient to

allow MFIs to provide maximum services. There is a subset of the pool of mainstream equity

investors who would consider investing in MFI opportunities, even knowing that they would

not expect to earn the full economic rate of return that such investments would otherwise

require. However, as part of their investment evaluation process, these investors would ask:

What would the market determine required expected rate of return for my MFI investment

be? What return on investment (ROI) do I expect to earn on my MFI investment? Is the

difference in the above two returns acceptable given my level of social motivation? How will


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I "monetize" my investment and when? The purpose of this article is to employ modern

corporate finance techniques to address these questions.

Demirguc-Kunt, A. and Martinez, P.M.S. (2005)

Has examined that this paper (i) presents new indicators of banking sector penetration across

99 countries, based on a survey of bank regulatory authorities, (ii) shows that these indicators

predict household and firm use of banking services, (iii) explores the association between the

outreach indicators and measures of financial, institutional, and infrastructure development

across countries, and (iv) relates these banking outreach indicators to measures of firms

financing constraints. In particular, we find that greater outreach is correlated with standard

measures of financial development, as well as with economic activity. Controlling for these

factors, we find that better communication and transport infrastructure, and better governance

are also associated with greater outreach. Government ownership of financial institutions

translates into lower access, while more concentrated banking systems are associated with

greater outreach. Finally, firms in countries with higher branch and ATM penetration and

higher use of loan services report lower financing obstacles, thus linking banking sector

outreach to the alleviation of firms financing constraints.

Srinivasan, Sunderasan (2007)

Has examined that micro banking facilities have helped large numbers of developing country

nationals by supporting the establishment and growth of 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.

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


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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, the medium-term strategy to scale-up access tofinance 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.

Robinson, M. (2001)

Has examined that the timing of this book is excellent it has few close substitutes in terms of

its sweeping overview of the terrain, and the revolution is now so advanced that the time is

right for a history, or at least a retrospective. As with any revolution, however, splits have

emerged within the movement. On one side are those who argue that the way forward is to

require microfinance institutions to meet the test of financial sustainability essentially,

requiring these institutions to cover their costs, even if this means that the very poorest of the

poor remain under-served. Against this, the poverty lending approach emphasizes the

importance of outreach, especially to the very poorest borrowers, as a poverty fighting

approach.


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Gallardo, Joselito (1999)

Has examined that the Bank should maximize opportunities to expand the use of leasing as an

approach to financial intermediation in Bank projects to promote the development of smallbusinesses and microenterprises. In most developing countries, capital markets are relatively

undeveloped and banks are often unable or unwilling to undertake term lending. Operations

in microenterprises and small businesses are cash-flow-oriented but rarely have organized

historical financial records or the assets needed for collateral for conventional bank financing.

Gallardo explores the potential of leasing as an option to expand small businesses' access to

medium-term financing for capital equipment and new technology. In a lease-financing

contract, the lessor-financier retains ownership of the asset, lease payments can be tailored to

fit the cash-flow generation patterns of the lessee-borrower's business, and the security

deposit is smaller than the equity stake required in conventional bank financing. Other small

businesses require medium-term financing to acquire the tools and equipment needed to

support production growth and expansion. Gallardo examines and compares the Bank's

experience: Lease financing was used to promote the development of small businesses in

Pakistan, as part of a microenterprise development loan project. For a Bank-supported

alternative-energy project in Indonesia, a variant of lease financing-the hire-purchase

contract-is being used in marketing and distribution by private distributors of photovoltaic

solar home systems. Lease financing was used by Grameen Trust in Bangladesh to finance

the purchase of small tools and equipment and in other countries to promote the growth of

alternative energy systems. This paper-a product of the Development Research Group-is part

of a larger effort in the group to identify appropriate policies for environmental regulation in

developing countries. The study was funded by the Bank's Research Support Budget under

the research project "The Economics of Industrial Pollution Control in Developing

Countries"

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


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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.

Ashta, A. & De Selva, R. (2009)

Hass examined that the relationship between microfinance and religion, and provides future

research directions in this area. Religious institutions often play a crucial role in establishing

microfinance systems, but interactions between microfinance and religion have received little

attention of researchers. Some of the topics addressed by articles reviewed in this paper

include the impact of the Great Irish Famine on Irish loan funds, indigenization within

support groups for chronically ill Haitian women, impact of religion on borrowing patterns of

Jordanian micro-entrepreneurs, Islamic microfinance in Pakistan and Indonesia, spirituality

as an asset in a Christian initiative role of religious leaders in identifying entrepreneurial

talent, microfinance and charity in Thailand and the Philippines, and extensive socio-

economic studies in Bangladesh and India.

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 microbusinesses. Second, I discuss some recent

trends in microfinance. While externally driven 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.


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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 testimonyis 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.

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 definedin 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.

Shannon Doocy, Dan Norell, ShimelesTeffera, and Gilbert Burnham (2005)

Has examined that Management decision making in MFIs is becoming increasingly tied to

collecting information about social performance. This paper examines the impact of

participation in an Ethiopian microfinance program on indicators of socioeconomic statusincluding wealth, income, and home or land ownership. A survey assessing these outcomes


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was conducted in May 2003 in two predominantly rural sites in Southern Ethiopia and

included 819 households. The article discusses management decisions made as the result of

survey findings about socioeconomic status and food security to increase retention rates and

to facilitate client savings. Additionally, the management was prompted to increase the

number of female clients and raise the proportion of female loan officers. This paper

illustrates how data from routine monitoring and evaluation can be linked to MFI

management decision making, which ultimately results in providing better microfinance

services. Household asset data indicates that participation in the WISDOM microfinance

program did not result in increased household wealth. Significant differences in household

income were not observed between participant groups in either survey site and client status

was not a significant predictor of income in univariate or multivariate regression models.

John A. Brett. (2006)

Has examined that having borrowed money from a microfinance organization to start a small

business, many women in El Alto, Bolivia are unable to generate sufficient income to repay

their loans and so must draw upon household resources. Working from the women's

experience and words, this article explores the range of factors that condition and constrain

their success as entrepreneurs. The central theme is that while providing the poor access to

credit is currently very popular in development circles, the social and structural context

within which some women operate so strongly constrains their productive activity that they

realize a net income loss at the household level instead of the promised benefits of

entrepreneurship. This paper explores the social and structural realities in which women seek

out and accept debt beyond their capacity to repay from the proceeds of their business

enterprise. By examining some of the "hidden costs" of microfinance participation, this paper

argues for a shift from evaluation on outcomes at the institutional level to outcomes at the

household level to identify the forces and factors that condition women's success as micro-

entrepreneurs. While there has been much discussion on the benefits of microcredit lending

and increasing critique of it on both ideological and substantive grounds, there have been few

ethnographically informed studies on consequences to users.


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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 shocksthat 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.


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Area of Study

ULHASNAGAR a small town somewhere in thane district. A PLACE which is nowhere left

behind. A PLACE full of crowd with mostly SINDHI COMMUNITY and other communities

too. A PLACE where doing business is in the BLOOD of people living here.

ULHASNAGAR being called as BUSINESS HUB, divided in five camps , nearby

ambernath and kalyan.

Ulhasnagar, which is once a military camp area for Sindhi refugees migrated from

Pakistan,is now heavily populated with this community people. The city is also known as

Sindhunagar and it is very famous from economic aspect. Ulhasnagar is a very good

business centre not only in Thane district, but also in Maharashtra State. It is a city located on

the coast of West India, which is nearly 60 kilometers northeast of the city ofMumbai.

Birla temple, furniture market, gajanand market, jeans market, Century rayon factory, shiv

mandir etc are the important places in Ulhasnagar.

Br ief description:

Ulhasnagar-1 (W): It is also known as Ulhasnagar camp-1 and it is located on the west side

of railway stations. The main center here is a market with famous landmarks like Goal

maindan where many people visit from nearby areas like kalyan, ambernath, badalpur,

dombivili, thane, titvala etc for shopping.

Ulhasnagar-2 (W): The other name of this place is Ulhasnagar Camp-2. It is a market with

popular landmarks like Gajanand market and it is famous for clothing, electrical and

electronics etc. Nehru Chowk is the main centre here.
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Ulhasnagar-3 (W): it has another name as Ulhasnagar Camp-3. It is mainly a market and it is

located on the west side of railway stations. The famous landmarks here are furniture bazaar,

RKT College, Sapna theatre, Ashok-Anil Multiplex etc. it is mainly a furniture and

electronics market.

Ulhasnagar 5 (E): This locality, which is also known as Ulhasnagar Camp-5, is located on

the eastern side of railway stations and it is mainly a residential area. You can see several

jean making small scale industries here. Jhulelal Mandir, Swami Sarvanand School, Swami

Shantiprakash Chowk, Nethaji Garden, etc are the famous landmarks here. This locality is

heavily populated with Sindhi community people.

Originally, known as Kalyan Military transit camp(or Kalyan Camp), Ulhasnagar was set

up especially to accommodate 6,000 soldiers and 30,000 others during World War II.

Sindhis, in particular, began life anew in the new land.The area was converted into a

township in 1949, and named Ulhasnagar by the thenGovernor-general of India, C.

Rajagopalachari(literally 'city of joy'; ulhas = joy; nagar = city). On August 8, 1949 the first

and lastGovernor-General of India,C. Rajagopalachari,laid the foundation stone.

As said earlier, ULHANAGAR is a place which is nowhere left behind because each and

everything is available here, as it is good in providing services likeEDUCATION,

HOSPITALITY, BANKING AND INSURANCE SECTOR, TOURS AND TRAVELS,

BEING IMPROVED IN INFRASTUCTURE ALSO , ETC.

Education:

The city has colleges and an industrial-training institute like institute of technology, Holy

family Convent High School, New English (at camp no.5), SSTCollege of Arts and
http://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/rajajihttp://www.answers.com/topic/rajajihttp://www.answers.com/topic/rajajihttp://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/rajajihttp://www.answers.com/topic/rajajihttp://www.answers.com/topic/rajajihttp://www.answers.com/topic/rajajihttp://www.answers.com/topic/governor-general-of-india-1http://www.answers.com/topic/rajajihttp://www.answers.com/topic/rajajihttp://www.answers.com/topic/governor-general-of-india-1


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Commerce etc. Smt. Chandibai Himatmal Mansukhani college and R. K. Talreja are two

major colleges.

Growth:

Ulhasnagar, one of the busiest business centers in Maharashtra, has several jewellery

showrooms. Some of the popular jewellery showrooms in the city are listed here.

We can watch the gradual development of Ulhasnagar to a shopping hub and business centre

from a military camp area in the pre-independence era only with wonder. Sindhis, who

migrated to this land from Pakistan, has significant role in the growth of Ulhasnagar in the

business field. Even though they came to the city with minimal resources, now most of the

small and big shops in Ulhasnagar are under owned by them. It is nothing else but their hard

work and talent that made them able to develop this city to a mini-Japan during the last five

decades.

Specialities:

Ulhasnagar, which is the most popular industrial and commercial township ofThane district,

is famous for shops of wedding costumes, jeans and other readymade garments. Sindhi

people, who live other parts of India such as Gujarat, Goa and Madhya Pradesh, visit

Ulhasnagar to do their wedding purchase. There are many shops, which are exclusively

aimed for wedding costumes

The city is also famous for jeans manufacturing. Jeans and ready made garments

manufactures at Ulhasnagar 5 are sold in all markets of the country. Many popular jeans

brand have factories in Ulhasnagar.

The most busy commercial and shopping center here are Ulhasnagar 2 & 3.
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Tour ist Attractions in Ulhasnagar:

There are several tourist attractions in Ulhasnagar including beautiful locations, religious

places and historical monuments etc. Some of the famous temples in Ulhasnagar including

Chaliho Sahib, Birla Mandir, haji Malang, Jhulelal Temple, Saint Satram Dham and

Swami Shanti Prakash Temple etc.

ICICI Bank launches new initiative in micro-finance

ICICI Bank has taken a stake of under 20 per cent in Financial Information Network

and Operations Private Ltd (FINO), which was launched on Thursday, July 13, 2001.

FINO would provide technological solutions as well as services to finance providers

to reach the underserved in the country. ICICI Bank is the lead facilitator.

According to Mr. NachiketMor, Deputy Managing Director, ICICI Bank, FINO is an

independent entity. "We would reduce our stake in the company when required," he

said.

ICICI Bank expects to target 200 micro-finance institutions (MFIs) by March 2007,

he said, speaking on the sidelines of the press conference to launch FINO. At present,the bank has tie-ups with 100 MFIs.

FINO is an initiative in the micro-finance sector. It would target 300-400 million

people who do not have access to basic financial services, said Mr. Manish Khera,

CEO, FINO. The company has an authorized capital of Rs.50 crore. MFIs, NBFCs,

RRBs, co-operative banks, etc. would directly or indirectly tie up with FINO to use its

services, he said. FINO would charge Rs.25-30 per account every year.

Jhui Mircorfinance Project123

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