To Study the Present Scenario of Micro Financing in India

INTRODUCTION

Although microfinance and microcredit are sometimes used interchangeably, they are two distinct concepts. While the latter encompasses everything from savings to credit to insurance to money transfers to equity transactions, the former is more focused on those who are poor and low-income. While the latter refers to a small-loan facility for low-income individuals, these goods come with financial literacy and business management training as well. In a nutshell, microcredit focuses only on credit activities, while microfinance encompasses both credit and non-credit operations. Microfinance, as a whole, includes microcredit as a component. The term "microcredit" refers to non-profit organizations‘ tiny lending programmes, which do not have a financial motivation. According to Remeyi and Quinones, 2000, microfinance refers to profit-making businesses, which does not match the criteria of an NGO. The provision of savings, credit, and other financial services and products of modest quantities in order to boost the income levels of customers and improve their living standards" As defined by the ILO, microfinance is a strategy for economic development that entails offering low-income individuals and families access to credit via established organisations.[1] "Microfinance services-as opposed to financial services in general-are retail financial services that are very tiny considering the income of a normal person." Microfinance, according to CGAP, is the provision of loans, savings, and other basic financial services to the poor. "Banking and / or other financial services geared to low and moderate-income enterprises or families, including the supply of credit," ACCION defines microfinance as. "Small-scale financial services primarily credit and savings given to individuals who farm, fish or herd," according to Robinson (2001), and he goes on to say that "microfinance refers to all forms of financial services supplied to low-income families and businesses." It is possible to describe microfinance as "the provision of a wide variety of financial services to low income customers, impoverished families both

For the purposes of the proposed Microfinance Services Regulation Bill, "offering financial help to a person or an eligible client, either directly or via a group mechanism for:"[2] • a payment not to exceed Rs. 50,000 per person for small and micro businesses, agriculture, and related activities (including for consumption purposes of such individual) or • less than one Lakh fifty thousand rupees per person in aggregate for housing reasons • as well as additional monies, for any of the aforementioned reasons, or for any other purpose, as may be specified," According to NABARD (2008),

These low-income individuals are eligible for a microfinance programme since they do not have collateral and hence cannot use the bank's banking and related services. It is the goal of microfinance to increase the incomes of the poor and provide them with accounts for saving and borrowing money. The term "microfinance" refers to formal programmes aimed at increasing the financial security of the poor by providing them with easier access to savings and loans. While both informal finance and microfinance serve poor people without bank accounts, informal finance arises from the grassroots, bottom-up demand of the poor for adequate financial services, while microfinance derives from donor-driven, top-down supply from the donor community (Schreiner M., 2001). Microfinance was launched with the main goal of alleviating poverty and supporting women's empowerment by generating income, enhancing their present income level, and delivering financial and non-financial services to impoverished people with the assistance of expanding financial market tools. Economically active poor are targeted by microfinance programmes that help them grow wealth, acquire assets, and increase their income for consumption.[3]

As it becomes more difficult for the poor to get startup capital from conventional sources, they are encouraged to turn to alternative funding sources such as friends, family, and money lenders. If this source is unreliable and costly (as the interest rate is greater), it may have a negative impact on the business's early stages, Access to cash for new

Due to a lack of start-up money, it is difficult for poor individuals to implement new company ideas. They are helped by a microfinance programme that provides them with enough money to launch a viable business. Their firm is profitable and they are able to repay the loan amount and develop it further with fresh loans.

Microcredit gives financial security to the recipients and may also lead to saving, rather than simply surviving, rather than a life of dependency. Saving money is an important part of their financial routine since it protects them in case of an emergency. Higher education and better nutrition for family members, as well as a better quality of life and fewer illnesses, are all benefits of saving money. As a result, they are able to pay for their healthcare and may use the money they would have spent on medical expenses to improve their lives.

Microfinance programmes mostly benefit women. Women traditionally make up a smaller share of the workforce in India than males do. For women who want to establish a company, a microfinance programme offers them with financial assistance. The goal is to empower people to make their own decisions and become financially self-sufficient. A worsening of violence against women has been documented by microfinance institutions, according to the International Consultative Group for the Poor.

There are many microfinance providers who are also concerned about the health and well-being of their customers' communities. Businesses that have been founded with the help of microfinance may provide jobs for the people who live in their communities, which is beneficial for everyone.

According to microfinance, impoverished people's savings are collected and loans are given to those in need. Small savings may be channelled into some kind of income-generating activity in order to improve the socio-economic situation of the impoverished. The majority of the participants in this initiative are female farmers. In general, it is accepted that a rise in the economic status of women has a positive impact on family poverty via improved health, nutrition, and education for their children. Two and a half decades have elapsed

throughout this time period. Microfinance in India has been examined in this chapter, with an emphasis on the flow of funds. One may see how much money is saved, how much credit is issued and how many bank loans are outstanding by looking at this report. Different kinds of informal microfinance existed in India before. When merchant banking was common in India, interest rates varied depending on the caste of the borrower. Small-scale financing became prominent in the mediaeval era thanks to chit fund businesses and ROSCA (Rotating Saving and Credit Associations). In the early 1970s, non-governmental organisations (NGOs) began to participate in the financial sector in order to benefit the underprivileged. By forming a labour union for women in the unorganized sector, SEWA pioneered. In the city of Ahmedabad in Gujarat state, the Women's Bank (SEWA Bank), an urban co-operative bank, was established in order to provide financial services to women in the unorganized sector. MYRADA in Bangalore, Working Women's Forum (WWF) in Chennai, PRADAN Tamil Nadu, Adithi in Patna SPARC Hyderabad, ASA Trichy etc. developed and became engaged directly or indirectly in giving microcredit to impoverished people.[4] India's government and Reserve Bank of India officially recognized microfinance as a tool for alleviating poverty and including rural women in economic development initiatives in the 1990s. The success of MYRADA in 1987 encouraged NABARD to expand on the SHG model by establishing a two-year countrywide pilot project in 1992 to connect 500 SHGs with nationalized commercial banks in order to promote relationship banking. The following were the goals of this project: By combining the flexibility, responsiveness, and sensitivity of an informal credit system with the power of formal credit institutions' technical and administrative skills and financial resources, supplemental credit solutions may be developed to address the credit demands of the poor (ii). Building trust and confidence between lenders and the rural poor(iii). Among order to increase banking activity, both on the savings and credit sides, in a part of the population that the conventional financial institutions normally find difficult to reach (Report on Trend and Progress of Banking in India, 2007-08). The programme has not only been a huge success, but it has also become the most popular type of microfinance. RBI thus classed banks' lending to SHGs as a mainstream activity under its priority sector lending. Union Budget of 1999 likewise gave it high emphasis. The Reserve Bank, the Government of India, NABARD, and the engagement of microcredit institutions, such as commercial banks, Regional Rural Banks (RRBs), together with NGOs and NBFCs, have helped the programme develop significantly in terms of both coverage and outreach. initial success of the microfinance programme. Some non-profit organisations have also gained MFI status as a result of this transition.[5]

I am certain that microfinance is firmly established in India, thanks to the government's assistance of NABARD as well as the Reserve Bank of India. This may be seen in the number of members and the quantity of loans that have been given out. Loans paid by banks are shown in Table 1.1, and they're still due. Since 2012-13, the number of loans issued has remained around 12 lakh. There were 14 lakh in 2013-14 and now 18 lakh in 2015-16. Previously there had been 8 million. There has been a significant rise in the quantity of loans disbursed from Rs.22100 crore to Rs.58100 crore since 2010. (Increased by 2.5 times). The number of loans issued has increased by around 37% between 2014-15 and 2015-16. An rise in the average loan amount from less than Rs.2 lakh to more than Rs.3 lakh occurred between 2010 and 2011. It suggests that impoverished customers and banks have developed a level of trust. This may be shown in the amount of debt the company. Even while the outstanding loan balance has remained stable, the total amount of credit outstanding has almost doubled. During 2010-11, the budget was Rs. 41900 crore; in 2015-16, it was Rs. 82800 crore. It has risen from an average loan amount of Rs.87255 in 2010-11 to an average loan amount of Rs.176, 095 in 2015-16[6]

Two fundamental models of capital flow under microfinance are used in India. (I) SHG-Bank Linkage (SBL) model (II) Microfinance Institutions (MFI) model These models are discussed as below.

This strategy of offering microfinance services to the country's underprivileged has arisen from NABARD's SHG-Bank Linkage Program (SBLP). Formal financial institutions (FIs) and informed self-help groups (ISGs) are aimed at establishing this relationship (SHGs). SBLP is therefore a flexible method for facilitating access to financial services for the disadvantaged. economic background, who come together for the purpose of saving small amounts of money, contributing to a common fund, and generating low-interest loans. The group is limited to a maximum of 20 members.[7] Only one individual from each family is allowed to join the group in order to encourage participation from as many families as possible. Self-Help Group development may be facilitated by Promoting Institutions (SHPIs), Promoting Implementing Agencies (PIA), generally an NGO, the MFI or bank itself or government agency like DRDA, or it may emerge from a conventional rotating savings and credit groups (ROSCA) or other locally generated groups. Members of SHG meet on a regular basis, perhaps weekly or monthly. The conference is where all significant decisions on saving and lending are made. Additionally, the members of the group discuss and exchange information about common issues. As a result, SHG gatherings offer a venue for bridging knowledge gaps. Collective knowledge and skill are used by the members of the group to make wise use of credit and timely repayment of debts. In addition, members of the group work together to find solutions to their individual and collective economic and social issues, Stages of Group Formation A systematic and scientific approach is applied to have long term sustainability of any friendly community-based organizations. SHGs pass over distinct phases since its inception to maturity. Forming, storming, norming and performing are four separate development stages which are characterized by the specific focus attributed by the groups during each stage and the related consequences on the behavior of the members.[8] Forming stage: It is marked by initial interaction towards each other in a group, that is, the euphoria of coming together, chaos and uncertainty, Storming stage: It is characterized by the expression of various thoughts by the individual members, which reflect the current conflict and confusion in the group. This stage is completed by evaluation of leadership and decision-making capabilities within the group. The procedures, rules, and roles are established. Norming stage: In this stage, the group evolves group norms, and the group solidarity comes into force. There is trust development among the group members, and the group becomes more cohesive and development oriented as gradually the individualistic techniques are replaced by collectiveness. established, role clarity is developed and the group behaves in a unified manner to achieve its mission with the help of collective action. Obtaining a loan does not need any kind of collateral since SHG relies on peer pressure and shared responsibility as its primary mechanisms of action. Groups typically employ peer pressure as an effective tool for enforcing prudent loan usage and timely repayment, since shared obligation may place an enormous strain on other members. They're more likely to pay back their debts, which increases their credit score and opens the door to other borrowing opportunities. Deterring defaults is one of their main purposes. As an alternative for collateral6, peer pressure might be considered. According to the research, SHGs may serve as an alternative to the "collateral security" that banks often need in the form of other types of "collateral."

The democratically chosen group leader arranges the meeting, keeps track of the group's activities, and aids with banking and other financial and social relations. It is the guiding principle of all SHGs: "savings first, credit afterwards." It encourages members to save money and develop a sense of financial responsibility. Members of the SHG sign a group resolution to create a savings account in the name of the SHG after just one or two meetings. Any two members of the SHG may operate the account at the same time. The SHG receives a passbook after the necessary bank procedures have been completed. After saving for a minimum of two to three months, the group begins making private loans from the common savings fund on conditions and at predetermined interest rates. Loans for both production and consumption are often available, with interest rates ranging from 2% to 4% per month. It is only after six months that the SHG seeks external borrowing from the bank since the members have acquired a savings habit and learnt how to handle and return their loans. On the basis of many factors, such as how often they meet, how much they save, how they use their money and how many loans they have recovered, the bank evaluates their success as a group. To ensure the group's existence, a bank offers a loan to the SHG in its name. As long as prior loans have been returned on time and if the bank is happy with the SHG's performance, it may be possible to acquire a larger credit amount. Need and intent of expenditure define a candidate's eligibility for a loan, What the goal is might be anything from acquiring assets for a business to meeting immediate necessities, such as an illness, marriage, or a child's birth. It is put in the account as part of the collective money.[9]

is discouraged by peer pressure. Group members have the same kind of unfettered access to sensitive information as informal lenders. Because the organisation utilizes the funds to meet its own requirements, there is less of a mismatch between the demand and supply of cash. ―The repayment schedule of the individual to the group does not have to match that of the group to the bank, increasing the flexibility of the loan payback. If the organisation has regular income-generating activities, the promotional institution may provide training programmes for such activities. SBLP decreases transaction costs for both lenders and borrowers throughout the savings and lending process, making it a win-win situation for everyone involved. Financial institutions have to deal only with one SHG account, whilst SHG members save money on travel (to and from the branch or other locations for completing requirements) and time spent campaigning for loans by being part of a SHG. Three techniques are used in the SBL model to move money: (i) SHGs created and sponsored by banks: Banks themselves take on the effort of developing and fostering the groups, opening their savings accounts, and offering them bank loans after satisfied themselves as their maturity to absorb credit. Here, the bank serves as the SHPI. (ii) NGOs and other official institutions in the area of microfinance help organize, create, and nurture SHGs, as well as teach its members in thrift and credit management. SHGs founded by these agencies are directly supported by banks. SHGs are directly loaned money by banks after they have studied their operations and determined that they are mature enough to take on new debt. Direct bank loans to organisations are made, although intermediaries like facilitating agencies continue to work with self-help groups. This strategy is used to fund around 75% of all SHGs. Indian SHG-Bank connection is most popular since some of the social dynamics' negative functions are externalized. (iii) SHGs sponsored by banks via non-profit organisations and other financial intermediaries: : For a variety of reasons, banks in certain regions cannot even support SHGs developed and fostered by other organisations. Microfinance intermediaries are often employed by non-profit organisations as facilitators. SHGs are cultivated and trained before they approach

When a bank lends a little amount of money to an individual, it is known as micro-credit. It is possible to get a micro-loan from an individual or from a lending organisation without putting up any collateral. Micro-savings: These are deposit services that enable you to store little sums of money for future usage. These savings accounts, which sometimes have no minimum balance restrictions, allow families to save money aside for unexpected needs and future investments. Micro-insurance is a system in which individuals, companies, and other groups pay a fee in exchange for sharing risk. Entrepreneurs may focus more on their company while limiting risks to their property, health, or capacity to work, thanks to insurance.

Remittances are money sent from one country to another, usually to relatives and friends who live on the other side of the world. Remittances are a reliable source of income when compared to other funding options, which might vary with changes in the country's political or economic circumstances.[10]

There has been a significant rise in the MFI model in India, since the SBLP model is the most popular in India. This concept is based on borrowing significant amounts of money from financial institutions, donors and banks, which are then used to give out money directly to people or organisations. There are several MFIs that provide financial services to individuals or groups, such as SHGs. Through the Joint Liability Group idea, these organisations provide assistance (JLG). Diverse institutional and legal frameworks define the Indian MFI model. Non-banking financial institutions (NBFIs) in India include trusts registered under the Indian Trust Act of 1882 or the Public Trust Act of 1920, societies established under the Mutually Aided Cooperative Societies Acts of the States, and NBFCs registered with the Reserve Bank of India. These MFIs are dispersed around the nation because of the several recording agencies. Despite the fact that most MFIs only joined the microfinance market after SBLP had become well-established, their operations move considerably more quickly than those of the former. To reach rural impoverished people, MFIs use more aggressive and inventive methods than traditional banks, such as well-oiled distribution networks.[11] is desired. Efficacy is measured in terms of the comparison of outcomes to goals. The basic objective of microfinance is to alleviate poverty. It is necessary to investigate whether or whether the microfinance program's goal of alleviating poverty is met, and to what degree. Efforts have been made to employ development resources to increase the financial inclusion of women in order to improve poverty education and gender equality. Community transformation may be achieved via alleviation of economic hardship and empowerment of women through microfinance initiatives. Microfinance initiatives help people in the informal sector get the money they need to stay afloat. The studies indicate that microfinance is a vital poverty reduction approach, as well as a tool for gender equality. The United Nations Capital Development Fund (2005) highlights that microfinance has an active role in creating economic equality because of the interconnectedness between financial power, poverty, and women, It is also a difficulty for micro-credit programmes to make rural non-farm activities visible. A majority of non-farm items are sold in the urban market. Urban standards are not met by the items made by rural women. There is a paucity of quality goods due to a lack of knowledge, exposure, and other factors. In addition to distance, there is also a marketing expense. Borrower interest and loan repayments cannot be met by rural non-farm activities. Poor women are generally left out of group loan programmes because of their lack of administrative and commercial skills, access to markets and knowledge, and propensity to be entrepreneurs.

Microfinance is widely accepted as a means of reducing poverty by providing credit to the unbanked and otherwise underserved members of society. By making financial services like savings, loans, and insurance more accessible for women, the initiative hopes to increase their economic involvement. They are able to take back control of their financial resources, get the freedom to make their own decisions, find new possibilities and alternatives, and make the greatest use of their creative abilities in order to generate revenue and lift their families out of poverty. Since these initiatives foster social capital, people are more eager to support one another and have more confidence in one other. When it comes to microfinance, a group is involved. A SHG's affiliation to official financial institutions and use of banking facilities provides numerous possibilities for women to engage, expose themselves, and improve self-esteem and self-confidence via the use of banking facilities. Micro-financing for poverty reduction via the engagement of women in the financial sector helps women in a variety of ways. within,' due to greater contacts with diverse people. People who express themselves freely are happier and more connected with others, says Sanyal (2009). As a result of these weekly sessions, women are able to participate in more comprehensive social processes and to build a sense of self. They also encourage social empowerment since they provide people a chance to learn more about social and political concerns. New concepts and ideals may be introduced to women via regular contact with the programme personnel and other members of the social network. As a result, they are more confident and forceful than women who have not had the same experience. When women members assume leadership positions in their groups and centers, they get a greater feeling of self-worth and self-confidence.[12]

To sum up, it can be noticed from overall analysis that there is significant impact of microfinance activities on improvement of the living standard of the family not only in economic term but also in social term. From this study, the researchers have come to the conclusions that there is a noticeable and positive impact of microfinance activities on the living standards, empowerment and poverty alleviation among the poor people in the society. In the findings of the primary survey conducted in the districts of Nadia, North 24 Parganas and Howrah, it was revealed that the microfinance linkage has significant achievement in increasing the awareness level among the SHG members and promoting their livelihood related activities. It was also implied that the MFIs act as social inter-mediators for the SHG members, which means entrepreneurial development, management development and financial training. These services enable the SHG members to overcome poverty. Women empowerment can be done through income generating activities. In the study it has been understood that women play dual roles in the family: the productive role adopted in helping their husbands by taking in to paid work or other livelihood related or income generating activities. The other role that women play is reproductive, Micro-finance Institutions (MFIs) are those, which provide thrift, credit and other financial services and products of very small amounts mainly to the poor in rural, semi urban or urban areas for enabling them to raise their income level and improve living standards. From the findings, some basic ideas about the purpose and need of the SHGs in rural areas may be drawn. The main purpose of taking loans is to run a small business. The reason may be that the need of loans is much higher in agriculture compared to petty business. There is a definite indication of benefit of belonging in SHG groups in terms of income and profit. In

positive role in generating higher income of the members

1. Jain Dhiraj & Ms. Jain Bhagyashree (2012), ―Does Microfinance Empower Rural Women? A Empirical Study in Udaipur District, Rajasthan‖, pp. 76-89. 2. Mahanta Padmalochan, Panda Gitanjali and Sreekumar (2012) Status Of Microfinance In India-A Review. International Journal of Marketing, Financial Services & Management Research Vol.1, Issue 11, pp. 142155 3. Kumar, D. R. (January 2016). Contribution of micro finance in empowering the women entrepreneurs in Amravatia city . International journal of business quantitative economics and applied management research., 2(8), pp. 98. 4. Swapna, K. (2017). Impact of Microfinance on Women Entrepreneurship. Ph.D. Thesis. Kalinga University, Raipur. 5. Das, S. (2012b). Micro finance and women empowerment: Does self-help group empowers women? 6. Malleswari, B. (2010). Micro-Finance and Women Empowerment. New Delhi: Serials Publications. 7. L.Vachya(2015). Microfinance Livelihood Initiatives and Women Empowerment in Selected Villages of Andhra Pradesh. NIRD & PR, Journal of Rural Development. Volume 34, Issue 1, January-March 2015 8. Youssef Lamrani Alaoui and Mohamed Tkiouat (2017). Assessing the performance of microfinance lending process using AHP-fuzzy comprehensive evaluation method: the Moroccan case study. International Journal of Engineering Business Management Volume 9: pp. 1–11. 9. Faisal Tehseen Shah, Abeer Imam, R W Qureshi and SehrishHanif (2014), ―Comparison of Microfinance Institutions: Akhuwat Foundation VsGrameen Bank‖, Science International, pp. 1851-1854. 10. Lalit, Kumar Sharma, (2011). ―Self Help Group as an Effective Strategy and Feasible Approach to Empower Women in India‖, 11. Naveen Kumar H, Dr. S J Manjunath, Srikanth H S (2012) ―Microfinance: A Comparative Study of Bangladesh and India‖, IOSR Journal of Business and Management, Volume 5, Issue 6, pp. 27-35. 12. B. Vijaya and Murugesh. T. M. (2014). ―Performance of SHGs Bank Linkage Programme in Amravatia District of Karnataka‖ Tactful Management Research Journal.

Research Scholar, Kalinga University, Raipur