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1.1 MEANING OF MICROFINANCING

Microfinance is defined as any activity that includes the provision of financial services such
as credit, saving 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 saving for risk mitigation and consumption something. A
large variety of actors provide microfinance in India, using a range of delivery methods.
Since the founding of Grameen Bank in Bangladesh, various actors have endeavored to
provide access to financial services to the poor in creative ways. Governments 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 target 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 saving 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.

DEFINITION:

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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, 1990” as
“provision of thrift, credit and other financial services and products of very small amount to
the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and
improve living standards”.

1.2 FEATURES OF MICROFINANCE

Microfinance services are aimed at the poor clients, who do not have access to formal financial
sources. Microfinance has its unique features, which are follows:

 Mostly it is collateral free.

 MFIs go to clients rather than clients going to MFIs.

 Simplified savings and loan procedures.

 Small size of loans and savings.

 Repeat loans.

 Loan size increases in the repeated loans or subsequent cycles.

 Interest rate is usually in between money lenders and formal banks.

 Free use of loans (no restrictions on specified purpose).

 Repayment considers incomes from business as well as other sources.

 Loans and saving products within manageable numbers.

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MICROFINANCE STANDARDS AND PRINCIPLES:

(A group of Indian women have assembled to make bamboo products that they intend to

resell)

Poor people borrow from informal moneylenders and save with informal collectors. They
receive loans and grants from charities. They buy insurance from state-owned companies.
They receive funds transfers through formal or informal remittance networks. It is not easy to
distinguish microfinance from similar activities. It could be claimed that a government that
orders state banks to open deposit accounts for poor consumers, or a moneylender that
engages in usury, or a charity that runs a heifer pool are engaged in microfinance. Ensuring
financial services to poor people is best done by expanding the number of financial
institutions available to them, as well as by strengthening the capacity of those institutions. In
recent years there has also been increasing emphasis on expanding the diversity of
institutions, since different institutions serve different needs

Some principles that summarize a century and a half of development practice were
encapsulated in 2004 by CGAP and endorsed by the Group of Eight leaders at the G8 Summit
on June 10, 2004:

1. Poor people need not just loans but also savings, insurance and money

transfer services.
2. Microfinance must be useful to poor households: helping them raise income, build up
assets and/or cushion themselves against external shocks.
3. "Microfinance can pay for itself. Subsidies from donors and government are scarce
and uncertain and so, to reach large numbers of poor people, microfinance must pay
for itself.
4. Microfinance means building permanent local institutions.

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 5. Microfinance also means integrating the financial needs of poor people into a
country's mainstream financial system.
6. "The job of government is to enable financial services, not to provide them."
7. "Donor funds should complement private capital, not compete with it."
8. "The key bottleneck is the shortage of strong institutions and managers." Donors
should focus on capacity building.
9. Interest rate ceilings hurt poor people by preventing microfinance institutions from
covering their costs, which chokes off the supply of credit.
10.Microfinance institutions should measure and disclose their performance—both
financially and socially.

Microfinance is considered a tool for socio-economic development, and can be clearly

distinguished from charity. Families who are destitute, or so poor they are unlikely to be able
to generate the cash flow required to repay a loan, should be recipients of charity. Others are
best served by financial institutions.

SCALE OF MICROFINANCE OPERATIONS:

Two women talk about financial matters. The woman on the right is a loan officer for
the Small Enterprise Foundation (SEF). The conversation shown is taking place in Tzaneen,
South in February 2010.

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No systematic effort to map the distribution of microfinance has yet been undertaken. A
benchmark was established by an analysis of 'alternative financial institutions' in the
developing world in 2004. The authors counted approximately 665 million client accounts at
over 3,000 institutions that are serving people who are poorer than those served by the
commercial banks. Of these accounts, 120 million were with institutions normally understood
to practice microfinance. Reflecting the diverse historical roots of the movement, however,
they also included postal savings banks (318 million accounts), state agricultural
and development banks (172 million accounts), financial cooperatives and credit unions (35
million accounts) and specialized rural banks (19 million accounts).

Regionally, the highest concentration of these accounts was in India (188 million accounts
representing 18% of the total national population). The lowest concentrations were in Latin
America and the Caribbean (14 million accounts representing 3% of the total population)
and Africa (27 million accounts representing 4% of the total population, with the highest rate
of penetration in West Africa, and the highest growth rate in Eastern and Southern Africa  ).
Considering that most bank clients in the developed world need several active accounts to
keep their affairs in order, these figures indicate that the task the microfinance movement has
set for itself is still very far from finished.

By type of service, "savings accounts in alternative finance institutions outnumber loans by

about four to one. This is a worldwide pattern that does not vary much by region."

An important source of detailed data on selected microfinance institutions is the Micro

Banking Bulletin, which is published by Microfinance Information Exchange. At the end of
2009, it was tracking 1,084 MFIs that were serving 74 million borrowers ($38 billion in
outstanding loans) and 67 million savers ($23 billion in deposits).

Another source of information regarding the environment of microfinance is the Global

Microscope on the Microfinance Business Environment, prepared by the Economist
Intelligence Unit (EIU), the Inter-American Development Bank, and others. The 2011 report
contains information on the environment of microfinance in 55 countries among two
categories, Regulatory Framework and the Supporting Institutional Framework. This
publication, also known as the Microscope, was first developed in 2007, focusing only on
Latin America and the Caribbean, but by 2009, this report had become a global study.

As yet there are no studies that indicate the scale or distribution of 'informal' microfinance
organizations like ROSCA's and informal associations that help people manage costs like

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weddings, funerals and sickness. Numerous case studies have been published, however,
indicating that these organizations, which are generally designed and managed by poor
people themselves with little outside help, operate in most countries in the developing world.

1.3 HISTORY OF MICROFINANCING

The history of micro financing can be traced back as long to the middle of the 1800s when
the theorist Lysander Spooner was writing over the benefits from small credits to
entrepreneurs and farmers as a way getting the people out of poverty. But it was at the end of
World War II with the Marshall plan the concept had an big impact.

The today use of the expression micro financing has it roots in the 1970s when organizations,
such as Garmin Bank of Bangladesh with the microfinance pioneer Mohammad Yunus,
where starting and shaping the modern industry of micro financing. Another pioneer in this
sector is Akhtar Hameed Khan. At that time a new wave of microfinance initiatives
introduced many new innovations into the sector. Many pioneering enterprises began
experimenting with loaning to the underserved people. The main reason why microfinance is
dated to the 1970s is that the programs could show that people can be relied on to repay their
loans and that it´s possible to provide financial services to poor people through market based
enterprises without subsidy. Shore bank was the first microfinance and community
development bank founded 1974 in Chicago .

An economical historian at Yale named Timothy Guinnane has been doing some research on
Friedrich Wilhelm Raiffeises´s village bank movement in Germany which started in 1864 an
by the year 1901 the bank had reached 2 million rural farmers. Timothy Guinnane means that

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already then it was proved that microcredit could pass the two tests concerning peoples pay
back moral and the possibility to provide the financial service to poor people.

Another organization, The caisse populaire movement grounded by Alphone and Dorimène
Desjardins in Quebec , was also concerned about the poverty, and passed those two tests.
Between 1900 to 1906 when they founded the first caisse, they passed a law governing them
in the Quebec assembly, they risked their private assets and must have been very sure about
the idea about microcredit.

Today the World Bank estimates that more than 16 million people are served by some 7000
microfinance institutions all over the world. CGAP expert means that about 500 million
families benefits from these small loans making new business possible. In a gathering at a
Microcredit Summit in Washington DC the goal was reaching 100 million of the world´s
poorest people by credits from the world leaders and major financial institutions.

The year 2005 was proclaimed as the International year of Microcredit by The Economic and
Social Council of the United Nations in a call for the financial and building sector to “fuel”
the strong entrepreneurial spirit of the poor people around the world.

The International year of Microcredit consists of five goals:

• Assess and promote the contribution of microfinance to the MFIs

• Make microfinance more visible for public awareness understanding as a very important
part of the development situation

• The promotion should be inclusive the financial sector

• Make a supporting system for sustainable access to financial services

• Support strategic partnerships by encouraging new partnerships and innovation to build and
expand the outreach and success of microfinance for all

The economics professor Mohammad Yunus and the founder of Grameen Bank were
awarded the Nobel Prize 2006 for his efforts. The press release from nobelprize.org states:

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“The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006,
divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to
create economic and social development from below. Lasting peace cannot be achieved
unless large population groups find ways in which to break out of poverty. Micro-credit is
one such means. Development from below also serves to advance democracy and human
rights. Muhammad Yunus has shown himself to be a leader who has managed to translate
visions into practical action for the benefit of millions of people, not only in Bangladesh , but
also in many other countries. Loans to poor people without any financial security had
appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has,
first and foremost through Grameen Bank, developed micro-credit into an ever more
important instrument in the struggle against poverty. Grameen Bank has been a source of
ideas and models for the many institutions in the field of micro-credit that have sprung up
around the world.

Every single individual on earth has both the potential and the right to live a decent life.
Across cultures and civilizations, Yunus and Grameen Bank have shown that even the
poorest of the poor can work to bring about their own development. Micro-credit has proved
to be an important liberating force in societies where women in particular have to struggle
against repressive social and economic conditions. Economic growth and political democracy
cannot achieve their full potential unless the female half of humanity participates on an equal
footing with the male. Yunus’s long-term vision is to eliminate poverty in the world. That
vision cannot be realised by means of micro-credit alone. But Muhammad Yunus and
Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must
play a major part.”

ABOUT MICROFINANCE

Microfinance is a general term to describe financial services to low-income individuals or to

those who do not have access to typical banking services. Microfinance is also the idea that
low-income individuals are capable of lifting themselves out of poverty if given access to
financial services. While some studies indicate that microfinance can play a role in the battle
against poverty, it is also recognized that is not always the appropriate method, and that it
should never be seen as the only tool for ending poverty.

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I. The history of modern microfinance

Credit unions and lending cooperatives have been around hundreds of years. However, the
pioneering of modern microfinance is often credited to Dr. Mohammad Yunus, who began
experimenting with lending to poor women in the village of Jobra, Bangladesh during his
tenure as a professor of economics at Chittagong University in the 1970s. He would go on to
found Grameen Bank in 1983 and win the Nobel Peace Prize.

Since then, innovation in microfinance has continued and providers of financial services to
the poor continue to evolve. Today, the world bank estimates that about 160 million people
in developing countries are served by microfinance.

II. Microfinance providers

Microfinance Institutions
A microfinance institution (MFI) is an organization that provides microfinance services.
MFIs range from small non-profit organizations to large commercial banks.

Historical context can help explain how specialized MFIs developed over the last few
decades. Between the 1950s and 1970s, governments and donors focused on providing
subsidized agricultural credit to small and marginal farmers, in hopes of raising productivity
and incomes. During the 1980s, micro-enterprise credit concentrated on providing loans to
poor women to invest in tiny businesses, enabling them to accumulate assets and raise
household income and welfare. These experiments resulted in the emergence of non
governmental organizations (NGOs) that provided financial services for the poor. In the
1990s, many of these institutions transformed themselves into formal financial institutions in
order to access and on-lend client savings, thus enhancing their outreach."

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WHY DON'T BANKS SERVE POOR PEOPLE?

Formal financial institutions were not designed to help those who don't already have financial
assets - they were designed to help those who do. So what do poor people do?

Credit is available from informal commercial and non-commercial money-lenders but usually
at a very high cost to borrowers. Savings services are available through a variety of informal
relationships like savings clubs, rotating savings and credit associations, and mutual
insurance societies that have a tendency to be erratic and insecure.

Some banks do provide these services, however. Grameen Bank in Bangladesh was formed
out of a project providing small loans to women in the village of Jobra. Bancosol, a
commercial bank in Bolivia, is also a bank which provides microfinance services for the poor
of Bolivia.

However, the majority of formal banks do not provide microfinance products as microfinance
is an expensive enterprise - you can make a lot more money on a large loan than a small loan,
and you won't make much money holding savings accounts with very little funds in them.
Banks can make more money if they only provide financial services to those who already
have money.

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III. COSTS, INTEREST RATES AND SUSTAINABILITY

INTEREST RATES (THEY'RE HIGH)

Sikiratou Salami is from Togo,

she took a loan out to purchase
supplies for her cosmetics
business and plans to use part
of her profits to finance the
schooling of her three
children.

There are three kinds of costs the MFI has to cover when it makes microloans. The first two,
the cost of the money that it lends and the cost of loan defaults, are proportional to the
amount lent. For instance, if the cost paid by the MFI for the money it lends is 10%, and it
experiences defaults of 1% of the amount lent, then these two costs will total $11 for a loan
of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers
both these costs for either loan." The third type of cost, transaction costs, is not proportional
to the amount lent. The transaction cost of the $500 loan is not much different from the
transaction cost of the $100 loan. Both loans require roughly the same amount of staff time
for meeting with the borrower to appraise the loan, processing the loan disbursement and
repayments, and follow-up monitoring. Suppose that the transaction cost is $25 per loan and
that the loans are for one year. To break even on the $500 loan, the MFI would need to
collect interest of $50 + 5 + $25 = $80, which represents an annual interest rate of 16%. To
break even on the $100 loan, the MFI would need to collect interest of $10 + 1 + $25 = $36,
which is an interest rate of 36%. At first glance, a rate this high looks abusive to many
people, especially when the clients are poor. But in fact, this interest rate simply reflects the

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basic reality that when loan sizes get very small, transaction costs loom larger because these
costs can't be cut below certain minimums.

Profitability and sustainability of MFIs

Some worry that an excessive concern for profit in microfinance will lead MFIs away from
poor clients to serve better-off clients who want larger loans. It is true that programs serving
very poor clients are somewhat less profitable than those reaching better-off clients, but this
may say more about managers' objectives than an inherent conflict between serving the very
poor and profitability. MFIs serving the very poor are showing rapid financial improvement.
Microfinance programs like Bangladesh Rural Advancement Committee and ASA in
Bangladesh have already demonstrated that very poor clients can be reached profitably: both
institutions had profits of more than 4% of assets in 2000.

There are cases where microfinance cannot be made profitable, for example, where potential
clients are extremely poor and risk-averse or live in remote areas with very low population
density. In such settings, microfinance may require continuing subsidies. Whether
microfinance is the best use of these subsidies will depend on evidence about its impact on
the lives of these clients."

IV. MICROFINANCE IMPACT AND OUTCOMES

EVIDENCE THAT MICROFINANCE WORKS

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"Gun Keshari has become a
regular borrower of [an MFI]
and over time, with the support
of small, low-interest loans,
Gun Keshari has seen a
dramatic improvement in the
living standards of her family."
- Polly Banks Kiva Fellow,
Nepal

According to CGAP, "Comprehensive impact studies have demonstrated that: Microfinance

helps very poor households meet basic needs and protect against risks; The use of financial
services by low-income households is associated with improvements in household economic
welfare and enterprise stability or growth; By supporting women's economic participation,
microfinance helps to empower women, thus promoting gender-equity and improving
household well-being; For almost all significant impacts, the magnitude of impact is
positively related to the length of time that clients have been in the program."

Poor people, with access to savings, credit, insurance, and other financial services, are more
resilient and better able to cope with the everyday crises they face. Even the most rigorous
econometric studies have proven that microfinance can smooth consumption levels and
significantly reduce the need to sell assets to meet basic needs. With access to micro
insurance, poor people can cope with sudden increased expenses associated with death,

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serious illness, and loss of assets. Access to credit allows poor people to take advantage of
economic opportunities. While increased earnings are by no means automatic, clients have
overwhelmingly demonstrated that reliable sources of credit provide a fundamental basis for
planning and expanding business activities. Many studies show that clients who join and stay
in programs have better economic conditions than non-clients, suggesting that programs
contribute to these improvements. A few studies have also shown that over a long period of
time many clients do actually graduate out of poverty.

By reducing vulnerability and increasing earnings and savings, financial services allow poor
households to make the transformation from "every-day survival" to "planning for the
future." Households are able to send more children to school for longer periods and to make
greater investments in their children's education. Increased earnings from financial services
lead to better nutrition and better living conditions, which translates into a lower incidence of
illness. Increased earnings also mean that clients may seek out and pay for health care
services when needed, rather than go without or wait until their health seriously deteriorates.
Empirical evidence shows that, among the poor, those participating in microfinance programs
who had access to financial services were able to improve their well-being-both at the
individual and household level-much more than those who did not have access to financial
services.

In Bangladesh, Bangladesh Rural Advancement Committee (BRAC) clients increased

household expenditures by 28% and assets by 112%. The incomes of Garmin members were
43% higher than incomes in non-program villages.

In El Salvador, the weekly income of FINCA clients increased on average by 145%.

In India, half of SHARE clients graduated out of poverty.

In Ghana, 80% of clients of Freedom from Hunger had secondary income sources, compared
to 50% for non-clients.

In Lombok, Indonesia, the average income of Bank Rakyat Indonesia (BRI) borrowers
increased by 112%, and 90% of households graduated out of poverty.

In Vietnam, Save the Children clients reduced food deficits from three months to one month."

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Microcredit may be inappropriate where conditions pose severe challenges to loan
repayment. For example, populations that are geographically dispersed or have a high
incidence of disease may not be suitable microfinance clients. In these cases, grants,
infrastructure improvements or education and training programs are more effective. For
microcredit to be appropriate, the clients must have the capacity to repay the loan under the
terms by which it is provided.

1.4 BENEFITS OF MICROFINANCING:

Microfinance involves extending small loans, savings and other basic financial services to
people that don’t currently have access to capital. It’s a key strategy in helping people living

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in poverty to become financially independent, which helps them become more resilient and
better able to provide for their families in times of economic difficulty. Considering nearly
half the world survives on less than $2 a day, microfinance is a vital solution. Here are six
benefits of microfinance:

1. Access:- Banks simply won’t extend loans to those with little or no assets, and generally
don’t engage in the small size of loans typically associated with micro financing. Micro
financing is based on the philosophy that even small amounts of credit can help end the cycle
of poverty.

2. Better loan repayment rates :- Microfinance tends to target women borrowers, who are
statistically less likely to default on their loans than men. So these loans help empower
women, and they are often safer investments for those loaning the funds.

3. Extending Education :- Families receiving micro financing are less likely to pull their
children out of school for economic reasons.

4. Improved health and welfare :- Micro financing can lead to improved access to clean
water and better sanitation while also providing better access to health care.

5. Sustainability :-  Even a small working capital loan of $100 can be enough to launch a
small business in a developing country that could help the benefactor pull themselves and
their family out of poverty.

6. Job creation :- Micro financing can help create new employment opportunities, which has
a beneficial impact on the local economy.

1.5 PRODUCTS OF MICROFINANCE:

Products common used in the microfinance sector today is:

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 Micro savings – A possibility to save money without any minimum balance. Allows people
to retain money for future use or for unexpected costs. In SHGs the 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. As SHGs prove capable of managing their funds well, they may borrow from a local
bank to invest in small business or farm activities. Banks typically lend up to four rupees for
every rupee in the group fund;

 Micro insurance – Gives the entrepreneurs the chance to focus more on their core business
which drastically reduces the risk affecting their property, health or working possibilities. The
is different types of insurance services like life insurance, property insurance, health
insurance and disability insurance. The spectrum of services in this sphere is constantly
expanded, as schemes and terms of providing insurance services are determined by each
company individually;

 Micro leasing – For entrepreneurs or small businesses who can´t afford buy at full cost they
can instead lease equipment, agricultural machinery or vehicles. Often no limitations of
minimum cost of the leased object;

 Money transfer – A service for transferring money, mainly overseas to family or friends.
Money transfers without opening current accounts are performed by a number of commercial
banks through international money transfer systems such as Western Union, Money Gram,
and Anelik. On the surface they may seem like small money transfers, but when one
considers that such transactions take place millions of times around the world each week, the
numbers start to become impressive. According to the World Bank, the annual global market
for remittances – money transferred home from migrant workers – is around 167 billion US
dollars. The estimated total is closer to 230 billion dollars if one counts unregulated
transactions. Remittances are also an important source of income for many developing
countries including India, China and Mexico, all of which receive over 20 billion dollars each
year in remittances from abroad.
2.1 RESEARCH METHODOLOGY:

Research means search for knowledge. Research is, thus, an original contribution to the
existing stock of knowledge making for its advancement. It is the pursuit of truth with the

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help of study, observation, comparison and experiment. In short, the search for knowledge
through objective and systematic method of finding solution to a problem is research. In other
words research methodology is the systematic process of finding the solution of any research
problem.

2.2 NEED OF THE STUDY:

The need of this study is to know the loan requirements of poor people’s for setting up small
businesses and research also increases our knowledge. If we want to study the Micro-
financing facilities to poor people then we have to get their responses towards micro
financing. So I can say that this study on Micro financing is important for me to get the
knowledge about micro financing.

2.3 SCOPE OF THE STUDY:

The scope of my study is restricted to Solan area only. I have conduct research in Solan area
and get the response of people regarding micro financing that what they think about micro
financing and what is the need of improvement in micro financing activities in Solan.

2.4 OBJECTIVES OF THE STUDY:

 To study the awareness level of people towards Micro financing.

 To study the benefits provided thorough Micro financing.

 To study microfinance as a tool to fight against poverty.

2.5 RESEARCH DESIGN:

Decisions regarding what, where, when, how much, by what means concerning an inquiry or
a research study constitute a research design. It constitute blueprint for the collection,

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measurement and analysis of data. “A research design is the arrangement of conditions for
collection and analysis of data in a manner that aims to combine relevance to the research
purpose with economy in procedure.”

I have used descriptive research design for the present study.

DESCRIPTIVE RESEARCH DESIGN:

The objective of such a study is to answer the “who, what, when, where and how” of the
study under investigation, descriptive studies are well structured and tend to be rigid and its
approach can’t be changed every now and then. It is therefore, necessary that the researcher
give sufficient thought to farming research question and deciding the type of data to be
collected and procedure to be used for this purpose.

In other words descriptive research studies are those studies which are concerned with
describing the characteristics of a particular individual, or a group.

2.6 SAMPLING DESIGN:

Sampling is the part of statistical practice concerned with the selection of a subset of
individuals intends to yield some knowledge about the populations of concerns especially for
the purpose of making predictions based on statistical inference. Researchers rarely survey
the entire populations for two reasons. The cost is too high, and the population is dynamic in
that the individuals making up the population may change over time.

2.7 SAMPLE SIZE:

I have taken 50 people as sample size.

2.8 SAMPLING TECHNIQUE:

I have used convenience sampling technique for the present study.

CONVEVIENCE SAMPLING:

A statistical method of drawing representative data by selecting people because of the ease
of their volunteering or selecting units because of their availability or easy access.

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2.9DATA COLLECTION:

Data collection is a systematic approach to gathering information from a variety of sources to

get a complete and accurate picture of an area of interest.  

KINDS OF DATA:

 Primary data: - Primary data is that type of data which is collected by the researcher
from its origin. And it’s a fresh data.

 Secondary data: - Secondary data is that type of data which is easily available and it
can be collected from books magazines journals etc.

I have used primary as well as secondary data for the present study.

2.10 DATA ANALYSIS TOOL:

Percentage method: percentage analysis is the method to represent raw streams of data as a
percentage (a part in 100 percent) for better understanding of collected data.

A tool used for selection of data is questionnaire. A survey was conducted (by way of
questionnaire) to find out whether the customers are satisfied with the existing system.
Opinions were also sort for improving the efficiency in the system.

P = Q/R*100

WHERE

P= Reading in percentage

Q= Number of respondents falling in a specific category to be measured

R= Total no of respondents or it is the populations as a whole

2.11 LIMITATIONS OF THE STUDY:

 Lack of time to conduct research.

 It is very difficult to observe the whole population.

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  It is very difficult to get the relevant responses.
 The sample may not be true representative of the entire population.

In table no. 3.1 an attempt has been made to classify the respondents on the basis of age.
Majority of the respondents i.e. 50% falls under the age group 20-30 years followed by i.e.
30% falls under the age group above 40 years and least i.e. 20% of the respondents falls
under the age group 30-40 years.

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 Table no. 3.1

Classification of the respondents on the basis of age

Sr. No. Age No. of respondents Percentage

1 20-30 25 50
2 30-40 10 20
3 Above 40 15 30
Total 50 100
Source: Data collected through questionnaire.

Classification of the respondents on the basis of age

30%
20-30
30-40
50% Above 40

20%

Fig.3.1

Interpretation:-

Hence it is concluded that majority of respondents i.e. 50% falls under the age group 20-30
years.

In table no. 3.2 an attempt has been made to classify the respondents on the basis of gender.
Majority of the respondents i.e. 80% falls under the category of male and rest of the
respondents i.e. 20% falls under the category of female.

Table no. 3.2

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 Classification of the respondents on the basis of gender

Sr. No. Gender No. of respondents Percentage

1 Male 40 80
2 Female 10 20
Total 50 100
Source: Data collected through questionnaire.

Classification of the respondents on the basis of gender

20%

Male
Female

80%

Fig.3.2

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 80% are males.

In table no. 3.3 an attempt has been made to classify the respondents on the basis of
occupation. Majority of the respondents i.e. 50% are self employed followed by the
respondents i.e. 40% are farmers and least i.e. 10% of the respondents falls under the
category of govt. employee.

24
 Table no. 3.3

Classification of respondents on the basis of occupation

Sr. No. Occupation No. of respondents Percentage

1 Farmer 20 40
2 Self employed 25 50
3 Govt. employee 5 10
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of occupation

10%

Farmer
40% Self employed
Govt. employee

50%

Fig.3.3

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 50% falls under the category of self
employed.

In table no. 3.4 an attempt has been made to classify the respondents on the basis of
awareness towards micro financing schemes. Majority of the respondents i.e. 80% are aware
about the micro financing schemes and rest of the respondents i.e. 20% are not aware about
micro financing schemes.

25
 Table no. 3.4

Classification of respondents on the basis of awareness towards micro financing

schemes.

Sr. No. Response No. of respondents Percentage

1 Yes 40 80
2 No 10 20
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of awareness

towards microfinancing schemes

20%

YES
No

80%

Fig.3.4

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 80% are aware about micro
financing schemes.

In table no. 3.5 an attempt has been made to classify the respondents on the basis of
awareness towards financial institution / bank. Majority of the respondents i.e. 60% are aware
about the financial institution / bank which provides micro financing loans and rest of the
respondents i.e. 40%are not aware about micro financing institution / bank.

26
 Table no. 3.5

Classification of respondents on the basis of awareness towards financial institution /

bank.

Sr. No. Response No. of respondents Percentage

1 Yes 30 60
2 No 20 40
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of awareness

towards financial institution / bank

Yes
40% No

60%

Fig.3.5

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 60% are aware about the financial
institution / bank which provides micro financing loans.

In table no. 3.6 an attempt has been made to classify the respondents on the basis of
awareness towards getting micro financing loan. Majority of the respondents i.e. 60% are
aware about the procedure of getting the micro financing loan and rest of the respondents i.e.
40%are not aware about the procedure of getting the micro financing loan.

Table no. 3.6

27
 Classification of respondents on the basis of awareness towards procedure of getting
micro financing loan.

Sr. No. Response No. of respondents Percentage

1 Yes 30 60
2 No 20 40
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of awareness

towards procedure of getting micro financing loan

Yes
No
40%

60%

Fig.3.6

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 60% are aware about the procedure
of getting the micro financing loan.

In table no. 3.7 an attempt has been made to classify the respondents on the basis of purpose
of micro financing loans. Majority of the respondents i.e. 50% are fully aware about micro
financing purposes as Household emergency followed by i.e. 30% ofthe respondents are
partially aware and least i.e. 20% of the respondents are not aware about micro financing
purposes as Household emergency.

28
Majority of the respondents i.e. 50% are partially aware about micro financing purpose as
starting small scale industry followed by i.e. 40% of the respondents are fully aware and least
i.e. 10% of the respondents are not aware about micro financing purpose as starting small
scale industry.

Majority of the respondents i.e. 60% are fully aware about micro financing purpose as school
fee followed by i.e. 30% of the respondents are partially aware and least i.e. 10% of the
respondents are not aware about micro financing purpose as school fee.

Table no.3.7

Classification of respondents on the basis of purpose of micro financing loans.

Sr. No. Purpose of Microfinance Fully aware Partially aware Not aware Total

1 Household emergency 25(50%) 15(30%) 10(20%) 50(100%)

2 Starting Small Scale 20(40%) 25(50%) 5(10%) 50(100%)

Industry
3 School fee 30(60%) 15(30%) 5(10%) 50(100%)

Source: Data collected through questionnaire.

70%
60%
60%
50% 50%
50%
40%
40% Household emergency
30% 30% Starting Small Scale Industry
30%
School fee
20%
20%
10% 10%
10%

0%
Fully aware Partially aware Not aware

Fig.3.7

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 50% are fully aware about the
micro financing purpose as household emergency.

29
Majority of the respondents i.e. 50% are partially aware about micro financing purpose as
starting small scale industry.

Majority of the respondents i.e. 60% are fully aware about micro financing purpose as school
fee.

In table no. 3.8 an attempt has been made to classify the respondents on the basis of their
response regarding microfinance institutions. Majority of the respondents i.e. 50% are fully
aware about Annapurna Microfinance Pvt. Ltd. followed by i.e. 30% of the respondents are
partially aware and least i.e. 20% of the respondents are not aware about Annapurna
Microfinance Pvt. Ltd.

30
Majority of the respondents i.e. 50% are not aware about Disha Microfinance Pvt. Ltd.
followed by i.e. 30% of the respondents are fully aware and least i.e. 20% of the respondents
are partially aware about Disha Microfinance Pvt. Ltd.

Majority of the respondents i.e. 50% are fully aware about Grameen-Financial Services
followed by i.e. 30% of the respondents are partially aware and least i.e. 20% of the
respondents are not aware about Grameen-Financial Services.

Table no.3.8

Classification of respondents on the basis of their response regarding microfinance

institutions.

Sr. Microfinance Institutions Fully Partially Not Total

No. aware aware aware
1 Annapurna Microfinance Pvt. Ltd. 25 (50%) 15 (30%) 10 (20%) 50
2 Disha Microfinance Pvt. Ltd. 15 (30%) 10 (20%) 25 (50%) 50

3 Grameen-Financial Services 25 (50%) 15 (30%) 10 (20%) 50

4 Janalakshami Financial Services 5 (10%) 20 (40%) 25 (50%) 50

Pvt. Ltd.
5 Rashtriya Seva Samiti 10 (20%) 15 (30%) 25 (50%) 50

(Note: figures in the parenthesis represents percentage)

Source: Data collected through questionnaire.

60%
50% 50% 50% 50%50%
50%
40%
40%
Annapurna Microfinance Pvt. Ltd.
30% 30% 30% 30% Disha Microfinance Pvt. Ltd.
30%
Grameen-Financial Services
20% 20% 20% 20% Janalakshami Financial Services
20%
Pvt. Ltd.
10% Rashtriya Seva Samithi
10%

0%
Fully aware Partially aware Not aware

Fig.3.8

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 50% are fully aware about
Annapurna Microfinance Pvt. Ltd.

Majority of the respondents i.e. 50% are not aware about Disha Microfinance Pvt. Ltd.

31
Majority of the respondents i.e. 50% are fully aware about Grameen-Financial Services.

In table no. 3.9 an attempt has been made to classify the respondents on the basis of benefit
availed under micro financing scheme. Majority of the respondents i.e. 60% have not availed
the benefit of micro financing scheme and rest of the respondents i.e. 40% haveavailed the
benefit.

Table no. 3.9

32
 Classification of respondents on the basis of benefit availed under micro financing
scheme.

Sr. No. Response No. of respondents Percentage

1 Yes 20 40
2 No 30 60
50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of benefit availed

under micro financing scheme

Yes
40% No

60%

Fig.3.9

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 60% have not availed the benefit of
micro financing schemes.

In table no. 3.10 an attempt has been made to classify the respondents on the basis of type of
benefit availed under micro financing scheme. Majority of the respondents i.e. 50% are those
who get the benefit for the purpose of paying the school fee of their child’s followed by i.e.
20% of the respondents are those who get the benefit for the purpose of meeting the
household emergency least i.e. 10 percent are those who get the benefit for the purpose of
agriculture or purchasing vehicle.

Table.3.10

33
Classification of respondents on the basis of availing thetype of benefits under different
schemes of micro financing

Sr. No. Response No. of respondents Percentage

1 Poultry farm 2 10
2 Household emergency 4 20
3 School fee 10 50
4 Agriculture machinery or 2 10
vehicles
5 Micro insurance 2 10
Total 20 100
Source: Data collected through questionnaire.

Classification of respondents who avail the benefit

10% 10%

Poultry farm
10% Household emergency
20% School fee
Agriculture machinery or vehicles
Micro insurance

50%

Fig.3.10

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 50%get the benefit for the purpose
of paying the school fee of their children.

In table no. 3.11 an attempt has been made to classify the respondents on the basis of change
in income / living standard after availing the benefit of micro financing scheme. Half of the
respondents i.e. 50% increase their income / living standard after availing the benefit of micro
financing scheme and 50% of respondents doesn’t increase their income / living standard
after availing the benefit of micro financing scheme.

Table no. 3.11

34
 Classification of respondents on the basis of change in income / living standard after
availing the benefit of micro financing scheme.

Sr. No. Response No. of respondents Percentage

1 Yes 10 50
2 No 10 50
Total 20 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of change in

income / living standard

Yes
No
50% 50%

Fig.3.11

Interpretation:-

Hence it is concluded that half of the respondents i.e. 50% increase their income / living
standard after availing the benefit of micro financing scheme.

In table no. 3.12 an attempt has been made to classify the respondents on the basis of benefit
they availed under micro financing scheme. Majority of the respondents i.e. 40% get the
benefit of less interest rate followed by i.e. 30% get the benefit of more payment period, 20%
respondents get the benefit of easily availability of loans and least i.e. 10 percent respondents
are those who get all the benefits (less interest rate, more payment period and easily
availability).

Table.3.12
35
 Classification of respondents on the basis benefits particularly they availed.

Sr. No. Response No. of respondents Percentage

1 Less interest rate 8 40
2 More payment period 6 30
3 Easily available 4 20
4 All above 2 10
Total 20 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of benefits

10%
Less interest rate
More payment period
20% 40% Easily available
All above

30%

Fig.3.12

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 40% get the benefit of less interest
rate.

In table no. 3.13 an attempt has been made to classify the respondents on the basis of subsidy
or credit they received from government. Majority of the respondents i.e. 65% doesn’t get
any subsidy or credit from the side of government under micro financing scheme and rest of
the respondents i.e. 35% are getting the subsidy from govt.

Table no. 3.13

Classification of respondents on the basis of subsidy or credit they received from

government.

36
 Sr. No. Response No. of respondents Percentage
1 Yes 7 35
2 No 13 65
Total 20 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of subsidy or

credit they received from government

35% Yes
No

65%

Fig.3.13

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 65% doesn’t get any subsidy or
credit from the side of government under micro financing scheme.

In table no. 3.14 an attempt has been made to classify the respondents on the basis increasing
the standard of living through micro financing. Majority of the respondents i.e. 80% says that
micro financing is really helpful in increasing the standard of living and rest of the
respondents i.e. 20% says that micro finance isn’t helpful in increasing the standard of living.

Table no. 3.14

Classification of respondents on the basis of increasing the standard of living through

micro financing.

37
 Sr. No. Response No. of respondents Percentage
1 Yes 40 80
2 No 10 20
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis increasing the

standard of living through micro financing

20%
Yes
No

80%

Fig.3.14

Interpretation:-

Hence it is concluded that Majority of the respondents i.e. 80% says that micro financing is
really helpful in increasing the standard of living.

In table no. 3.15 an attempt has been made to classify the respondents on the basis of their
response towards micro finance as a tool to fight against poverty. Majority of the respondents
i.e. 60% says that micro financing is really a tool to fight against poverty and rest of the
respondents i.e. 40% says that microfinance isn’t a tool to fight against poverty.

Table no. 3.15

Classification of respondents on the basis of their response towards micro finance as a

tool to fight against poverty.

38
 Sr. No. Response No. of respondents Percentage
1 Yes 30 60
2 No 20 40
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of their response

towards micro finance as a tool to fight against poverty

Yes
No
40%

60%

Fig.3.15

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 60% says that micro financing is
really a tool to fight against poverty.

In table no. 3.16 an attempt has been made to classify the respondents on the basis of micro
finance schemes implementation. Majority of the respondents i.e. 66% says that micro
financing schemes of govt. of India are implemented properly and rest of the respondents i.e.
34% says that implementation of micro financing schemes is not proper.

Table no. 3.16

Classification of respondents on the basis of their response towardsimplementation of

micro financing scheme.

39
 Sr. No. Response No. of respondents Percentage
1 Yes 33 66
2 No 17 34
Total 50 100
Source: Data collected through questionnaire.

Classification of respondents on the basis of their response

towards implementation of schemes

Yes
34% No

66%

Fig.3.16

Interpretation:-

Hence it is concluded that majority of the respondents i.e. 66% says that micro financing
schemes of govt. of India are implemented properly.

In table no. 3.17 an attempt has been made to classify the respondents on the basis of hurdles
in implementations in micro financing scheme. Majority of the respondents i.e. 30% says that
lack of knowledge of people is main hurdle in implementation of microfinance scheme.

20% of the respondents says Legal formalities to provide finance to poor is hurdle in
implementation of microfinance scheme.

15% of the respondents says that ability of poor people to save hurdle in implementation of
microfinance scheme.

40
 Table no. 3.17

Classification of respondents on the basis of their response towards hurdles in

implementations in micro financing scheme.

Sr. No. Response No. of respondents Percentage

1 Lack of knowledge of 6 30
people
2 Illiterate or less educated 3 15

3 Legal formalities to 4 20
provide finance to poor
4 More articulate people 2 10
may cheat poor
5 Ability of poor people to 3 15
save
6 Inflation rates 1 5

7 All above 1 5

Total 20 100

Source: Data collected through questionnaire.

Classification of respondents on the basis of their response

towards hurdles in implementations in micro financing
scheme
 

Lack of knowledge of people Illiterate or less educated

5 Legal formalities to provide
% finance to poor
5% More articulate people may cheat Ability of poor people to save
poor
30% Inflation rates
15% All above

10%
15%
20%

Fig.3.17

Interpretation:-

41
Hence it is concluded that majority of the respondents i.e. 30% says that lack of knowledge of
people is main hurdle in implementation of microfinance scheme.

4.1 SUMMARY

Microfinance is defined as any activity that includes the provision of financial services such
as credit, saving 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 saving for risk mitigation and consumption something.

“Microfinance is an economic development approach that involves providing financial

services through institutions to low income clients”.

Poor people borrow from informal moneylenders and save with informal collectors. They
receive loans and grants from charities. They buy insurance from state-owned companies.
They receive funds transfers through formal or informal remittance networks. It is not easy to
distinguish microfinance from similar activities. It could be claimed that a government that
orders state banks to open deposit accounts for poor consumers, or a moneylender that
engages in usury, or a charity that runs a heifer pool are engaged in microfinance. Ensuring

42
financial services to poor people is best done by expanding the number of financial
institutions available to them, as well as by strengthening the capacity of those institutions.

4.2 FINDINGS

 Majority of respondents fall under the age group 20-30 years.

 Majority of respondents are male.

 Majority of respondents are self-employed.

 Majority of respondents are aware about micro financing schemes.

 Majority of respondents are aware about financial institutions or banks which provide
micro financing loans.

 Majority of respondents know the procedure of getting micro financing loans.

43
 Majority of respondents are fully aware about purpose of micro financing as
household emergency.

 Majority of respondents are partially aware about purpose of micro financing as

starting small scale industry.

 Majority of respondents are fully aware about purpose of micro financing as school
fee.

 Majority of respondents are fully aware about Annapurna Microfinance Pvt. Ltd.

 Majority of respondents are not aware about Disha Microfinance Pvt. Ltd.

 Majority of respondents are fully aware about Grameen Financial Services.

 Majority of respondents are not aware about Janalakshami Financial Services Pvt.
Ltd.

 Majority of respondents are not aware about RashtriyaSevaSamithi.

 Majority of respondents doesn’t availed benefit micro financing scheme.

 Majority of respondents availed the benefit for paying the school fee of their children.

 Half of the respondentsi.e.20 increased their living standard.

 Majority of respondents availed the benefit of less interest rate on their loans.

 Majority of respondents doesn’t receive any subsidy from the side of government.

 Majority of respondents increased their living standard through micro financing.

44
  Majority of respondents says that micro financing is really a tool to fight against
poverty.

 Majority of respondents says that micro financing scheme of govt. is implemented

properly to eradicate poverty.

 Majority of respondents says that lack of knowledge of people is main hurdle in

implementation of micro financing scheme.

4.3 SUGGESTIONS

 Micro financing institutions should expand its coverage up to a every age group.

 Micro financing institutions should design some schemes exclusively for women so it
can increase the women customer base.

 Awareness level regarding micro financing schemes should increase.

45
  Micro financing institutions should increase the particular benefits comes under micro
financing schemes.

 Number of micro financing institutions should be increased in the market.

 Micro financing schemes is working as a tool to increase the standard of living and
income base of people so it should be implemented at large scale.

 Government should properly execute the subsidy and credit policies so that every
customer can avail the benefit of these things.

 Micro financing institutions should improve the implementation of schemes in the

wide spread geographical area.

 The implementation of micro financing schemes can be improved by increasing the

knowledge of people regarding these schemes so somewhere there is a need to
improve the awareness level and education level of public.

BIBLIOGRAPHY

Books
 Kothari, C. R.”Research Methodology” Wishwa Prakashan
 R, Nargundkar. “ Marketing Reasearch “TMH, new Delhi,2nd Edition
 Journals of business economics & management

Web sites

 www.microfinacing.com
46
  www.microfinancinginstitutes.com
 www.microfinancinghistory.com
 www.microfinancingwikipedia.com

ANNEXURE
QUESTIONNAIRE:

Dear Respondent,

I AM VIKAS SHARMA STUDENT OF SUS TANGORI (PTU) PURSUING MBA AND

DOING PROJECT ON “A STUDY ON MICROFINANCING”. I WILL BE VERY
THANKFUL TO YOU PROVIDE ME THE REQUIRED INFORMATION.

47
Personal Details

Name of customers-------------

City -----------------------------------

Age

Sex

Occupation

1. Are you aware about micro financing scheme?

Yes No

2. Do you know which financial institution/bank provide Micro financing loans?

Yes No

3. Do you know the procedure of the getting Micro financing loan ?

Yes No

4. Have you ever availed any benefit under microfinance scheme?

Yes No

5. Is there any change in your income / living standard after availing the benefit of
microfinance?

48
 Yes No

6. Did you get any subsidy, credit benefit from the government in Micro financing?

Yes No

7. Do you think that Micro financing is really helpful in increasing the standard of living?

Yes No

8. Do you think that Micro financing really a tool to fight against poverty?

Yes No

9. Do you think that the microfinance schemes of govt. of India are implemented properly to
eradicate poverty?

Yes No

49