CRITICAL ANALYSIS ON MICROFINANCE LOANS PROVIDED BY MICROFINANCE INSTITUTIONS FOR WOMEN EMPOWERMENT IN GORAKHPUR
Vishal singh
1Dr. Ugrasen
2MBA student (2nd year), Assistant Professor Centre for Management Studies12
Madan Mohan Malaviya University of Technology, Gorakhpur, Uttar Pradesh
ABSTRACT
Microfinance is considered as one of the most practicable tools which is used to reduce poverty and empower women through financing them. We all know that without upliftment of the condition of women in a society, a nation can not be developed in a competitive world. An empowered woman will be one who is self-confident, one who critically analyses her environment and exercises control over decision that affect her life, it means to empower women, they need adequate social and economic facilities and if women are empowered in terms of individual, social, political and economic aspects, they could contribute significantly to the progress of the society and nation.
It has been seen that during the past few years, microfinance institutions have reported a jump in average loan size per customer that indicated needy people require more loans from microfinance institutions in order to accelerate their small businesses therefore generating more income from it. Various microfinance institutions have been significantly contributing in providing various other services such as capacity building initiatives, preventive healthcare, sanitation, training, education, and financial literacy in order to promote, aware and empower the women as a whole. The RBI guidelines for the microfinance institutions has also a positive impact for transforming the microfinance sector and led to several benefits for MFIs.
And thus, through this research paper, efforts have been made to analyses the impact and contribution of microloans provided by MFIs on women empowerment through each aspect in Gorakhpur region. it also aims to know about what is the loopholes and drawbacks in the process of microfinance and for reducing them what should be the possible measures and guidelines opted with reference to future perspective in order to improve the services of MFIs in Gorakhpur
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Keywords
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capacity building initiative, Empowered women, Microfinance, small businesses, Upliftment1.INTRODUCTION
Microfinance is considered as one of the most practicable and successful tools which is used for reduce the poverty and empower the women by providing them option of entrepreneurship, thus we can say that the microfinance is a financial service which fight against the poverty in the way of financing people and helping economically weak and socially disadvantaged women financially in less developed region.
Microfinance also help women to gain respect in her family and realize more self confident. microfinance institutions also play an important role in financial inclusion and societal development, financial inclusion refers to that individuals and businesses have access to useful and affordable access to financial products .it means it provides affordable access to financial services in an effective and efficient manner for all needy people.
Microfinance has permitted giving microloan to poor people who were not given the credit by financial institutions reason for lacking of collateralizable assets. The main aim of microfinance is to serve needy people and empower them to get to credit and fight against poverty.
1.1 HOW DEVELOPMENT OF MFIs HAVE TAKEN PLACE IN INDIA
The microfinance sector started in India in 1970s and in this time the informal self-help group(SHG) have also emerged. Microfinance provide access to credit service to SHG in order to empower the needy people especially poor women. The microfinance witnessed strong growth following the liberalization of the Indian economy in 1991, since private sector organizations increasingly extended credit to microfinance companies. During 2005- 2010, the microfinance sector witnessed strong growth incorporated by strong demand for loans from borrowers who neglected by traditional banking system, and also the unorganized sectors of loan providers have charged more lending rate compare to formal sectors of loan providers. This is also the main reason of growth of microfinance institutions in India, now the government as well as RBI have tried to create a policy and regulatory requirements for MFIs to expand and achieve the goal of women empowerment through providing entrepreneurship options as expand the agenda of financial inclusion in India.
2. RECENT TRENDS IN MFIs LENDING SECTOR
Microfinance institutions(MFIs) have now started extending larger loans to their clients. The past trends show that needy people require more loans from micro-finance institutions in order to accelerate their businesses and to achieve more and more profit from that. Initially, MFIs typically provided small-ticket income generation loans to their new customers. As customers mature with time loan cycles, the focus moves from small income-generating loans to larger size loans in order to generate more income. During the past few years, MFIs have reported a jump in average loan size per customer.
some industry experts have ascertained the high growth pattern to the rise in clients, increase in general income levels and ease of lending rules by the RBI.
Sources: -MFIN micrometer, may 2016 and June 2018, note: - based on data for NBFC- MFIs reporting to MFIN .
Now, the RBI has been following a structured approach and has focused on inclusive growth through policies such as selective credit control, priority lending norms, lending to weaker sections of the society, financial literacy initiatives, etc. now microfinance institutions also form a key part of the RBI’s inclusion drive. As banks hesitate to expand in remote areas due to high operational costs involved, MFIs have emerged as an alternative to provide financial services to low-income clients, who are otherwise excluded from formal credit channels.
Lending to micro-enterprises, it means the micro and small enterprises(MSEs) are playing and considered to be vital for the economy and according to fourth census of the MSME sector, around 93% of MSME units in India did not have any access to finance and depended on self-finance, and there fore MFIs can play a key role in fulfilling the funding gap in this sector, which seems to have begun based on recent trends in average loan tickets extended by micro finance institutions. MFIs have disbursed around 35% of the total loans extended by MUDRA Banks. The significant disbursal of MUDRA loans by micro-lenders reflects the maturity of MFIs’ credit delivery models, reach and last mile connectivity, particularly in rural areas.
Evolving base of borrowers, from below figure shows the industry’s outreach to urban clients was increasing every year and in FY15, for the first time in its history, Indian MFIs reported more urban clients than rural ones. The share of rural customers has drastically declined from 69% in FY12 to 33% in FY15.This shift in the customer base of MFIs has been due to several factors-strong growths of many MFIs and reluctance of banks to lend to small borrowers.
The rise in urban clients of MFIs also underlines reluctance of banksto lend to small borrowers. In spite of the presence of banking infrastructure in urban areas, there is a strong demand from the unorganized sector and migrants for microfinance loans.
Source: - Bharat Microfinance Report, 2017
A very interesting trend is seen in the rural-urban focus of MFIs. The share of rural clientele which was 69 % in 2012 decreased to 56 % in 2014 and has drastically come down to 33 %. The proportion of rural to urban clients for the year 2014-15 is 33% to 67%. In the year 2015-16, there was a slight improvement in the share of rural clientele which increased to 38% because of exclusion of Bandhan. In 2016-17, the trend of rural to urban is the reverse of trend of 2015-16 because of exclusion of 6 SFBs. One of the key findings from our research shows that small sized of MFIs are rural centric
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2.1 OUTREACH TO SPECIAL SEGMENT OF BORROWERS (WOMEN, SC/ST, AND MINORITIES): -
World over the focus of microfinance has always been on serving women. In India as an alternate vehicle of credit, microfinance serves a large segment of people from Scheduled Castes, Scheduled Tribes and Minorities.
Women clients constitute 96% of the total clients of MFIs. Similarly, SC/ST borrowers also constitute a substantial chunk (20%) of the clients. A trend analysis of women borrowers, SC/ST borrowers and minority borrowers is shown in numbers using a table.
For the first time, in 2016-17, data for borrowers having personal Bank A/c and borrowers having BPL Card has been collected. Borrowers having personal Bank A/c and borrowers having BPL Card constitute only 22% and
11% of the total respectively. The reason for a low coverage under these heads is the non-collection of such data at MFI level.
Focusing on microfinance services towards women, SC/ST and minorities, MFIs are contributing significantly to the wellbeing of the underprivileged, leading to a rise in their welfare and assisting with the financial inclusion agenda.
Year Women
Borrow- ers
SC/ST Borrow- ers
Minority Borrowe- rs
Differently Abled Borrowers
Borrowe- rs Having Aadhar Card
BC Borrow- ers
Indvi- Dual Borrow- ers
Borrw -ers havin- g perso- nal accou- nt
Borr owe- rs havin g BPL Card 2011 94%
2012 95% 20% 23%
2013 96% 21% 23%
2014 97% 19% 14%
2015 97% 28% 18% 0.05% 10%
2016 97% 30% 27% 4% 18% 15% 3%
2017 96% 20% 10% 0.12% 52% 23% 3% 22% 11%
Note: Data for SC/ST and Minorities is being collected from 2012; data for Differently abled borrowers and Borrowers having Aadhaar Card is being collected from 2015, data for BC Borrowers and Individual Borrowers is being collected from 2016 whereas data for borrowers having personal Bank A/c and borrowers having BPL Car started from 2017.
Source: - Bharat microfinance report 2017
As we have seen, the Microfinance sector has been significantly contributing in providing various other services such as capacity building, empowerment of the community (especially for the women), education, financial literacy, housing, health and sanitation, training, livelihoods support etc. The reported MFIs undertake several developmental activities. The number of MFIs engaged in such activities is indicated in below figure.
Sources: -Bharat Microfinance Report 2017
3.REGULATORY CHANGES IN THE MFIs
After the crisis in Andhra Pradesh, the RBI took several measures to give more regulatory certainty to the MFIs sector
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3.1 RBIs guidelines for the MFIs industry
Standard form of loan agreement and a loan card, stating rate of interest and other loan conditions, should be issued to all borrowers.
Not more than two MFIs can lend to the same borrower.
Set INR100,000 as maximum level indebtedness of a borrower and loan amount restricted to INR60,000 for the first disbursement cycle (from April 2015 onward)
Loans to be extended without collaterals; tenure should not be less than 2 years and borrower could repay loans in weekly, fortnightly or monthly instalments according to their choice.
Processing charges should be less than 1% of gross loan amount.
These rules laid the ground work for transforming the microfinance sector and led to several benefits for MFIs.
The two-lender rule, drove MFIs to spread their activities to new territories and widen their customer base, instead of focusing on captive borrowers. Microfinance companies also gained popularity with borrowers, since they were the only source of non-collateralized debt. Moreover, with the pricing cap in place, MFIs have started focusing on reducing costs and increasing loan volumes
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4.MICROFINANCE INSTITUTIONS AND WOMEN EMPOWERMENT IN GORAKHPUR
we know that Women in most societies are subject to discrimination. Discrimination is a form of inequality and issue for women in different countries, regions, and communities in the world. Generally, women have been found to have lesser access to land, property, and business. They have constrained access to labour markets and are subject to discrimination in the matter of wages and remuneration for their labour. As a result, it affects the capacity and self confidence of women to participate freely and fully in society and in turn brings psychological harmful. But now some how the scenario has been changed since past few years and women are showing their interests to perform entrepreneurship skills in order to generate income for their family livelihood by the help of micro-loans provided by microfinance institutions. It means to empower women, they need adequate social and economic facilities, employment opportunities in order reduce poverty and increase wealth for their family.
The various micro finance institutions operating in Gorakhpur, uttar Pradesh in order to support and provide micro loans to women entrepreneurs are Bandhan, Utkarsh, janlakshmi, Margdarshak, cashpor, saija, bharat financial inclusion limited(BFIL), Bhartiya micro credit(BMC), SVCL, Satin, Sonata, spandana, asirvad microfinance etc. The source of information of about these MFIs operating in Gorakhpur are from bharat microfinance report 2017 and from associated persons in MFIs sector in Gorakhpur region.
In my study, I have considered two organization named as Bandhan bank microfinance and Utkarsh small bank finance and their role and contribution towards empowerment of women through microfinance.Utkarsh small finance bank offered group loans in microloans category through joint liability group. This structure helps you take a loan in a group (5 women members) where each member will equally liable for repayment.These are the various microloans structure offered by Utkarsh small finance bank
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a) UTKARSH PRAGATI JOINT LIABILITY GROUP LOAN Key features under this are
24% interest per annum
Loans available up to Rs. 25000
Weekly/fortnightly/monthly repayment options available
The age group for such loan is 21-55 and only married women applicable for such loans.
b) UTKARSH KIRAN JOINT LIABILITY GROUP LOAN
Loans available up to Rs. 60,000
c) UTKARSH ASHA JOINT LIABILITY GROUP LOAN
Loans available up to Rs. 100000.
The various loans offered by Bandhan bank microfinance under microloans category in Gorakhpur are as follows
a)
SUCHANAIt is designed to fulfil your aspirations with additional revenue.it provides an opportunity to create an additional source of income for your family by starting a co-owned, co-run business with other aspiring women like you,
financed by the suchana loan. you can now easily access group capital at your doorsteps and repay it conveniently with your other group members.
Minimum loan amount: Rs 1,000 Maximum loan amount: Rs 25,000 Loan tenure: Up to 1 year
Rate of interest per annum: 18.80%
b)
SRISHTIIt is designed to meet the growing demand of your business. its helps to scale up your home -based business by hiring more helping hands, buying better equipment and investing in the raw material required to meet the growing demand of your business. With Bandhan bank’s Srishti loan- a group based individual loan, you can now access more funds, grow faster and repay more comfortably with your other group members.
Minimum loan amount: Rs 25,001 Maximum loan amount: Rs 1,50,000 Loan tenure: Up to 1 year
Rate of interest per annum: 18.80%
5. REVIEW OF LITERAURE
Emergence of micro-financial institutions and self-help groups have played an important role in economic development of the nations and their subjects. The micro-credit has turned to be micro finance which results into poverty alleviation. Women empowerment includes in its ambit the respect social, political, economical, and psychological aspects which are urgent requirement of modern society. Women have become more confident and stable with microfinance through SHGs,in micro-credit system the members are responsible for loan of each other. This created the feeling of responsibility and authority which is an essence for empowerment. (Mayank Tiwari and komal jeet kaur,2018).
P.Bhargavi(2015) highlighted that Microfinance sector has grown rapidly over the past two decades and has helped women to gain economic empowerment and improve quality of their life. Microfinance has occupied centre stage as a promising channel for extending financial services to unbanked sections of population. According to her, the micro-finance programmes are aimed to increase women’s income levels and control over income leading to greater levels of economic independence. They also enhance perceptions of women’s contribution to household income and family welfare, increasing women’s participation in household decisions about expenditure and other issues . Microfinance programs have significant potential for contributing to women's economic, social and political empowerment in developed and developing countries. In India the government should focus to examine the structure of microfinance schemes and suggest some recommendation for the proper functioning of MFIs.
Pashmeen kaur(2015) studied that MFI sector is still in growing stage, there is need to curb the challenges and ensure regulatory measures for smooth processing. Micro financial institutions are elevating its strength
year by year and this ultimately up gradation of lower section and women of the society. The need of the hour is to know what the financial needs of the poor and no poor can die because of no finance. Bandhan and some other MFIs are performing better but there is still some untouched remote places where the requirement of finance is more but such services are not yet reached. Government should support such micro financial institutions so that there need of capital can be fulfilled. Involving women and providing them loans also help in reducing gender discrimination in our country.
There is no doubt that this industry has great potential in the future. If the plans for microfinance are executed then India will definitely have new dimension to it. It will increase India’s standard and make it one of the powerful nations of the world economically. (Mr. Ravi Verma and Ms Rajni Sinha)
(Kotir and Obeng-Odoom, 2009) argue that micro-credit by-passes the poor and rarely reaches to the poor to help them out. They found that there is no positive impact of micro finance on extreme poverty due to greater needs of consumption loans and their limited range of investment in securities or assets.Microfinance helps to get credit through membership in group. The amount of borrowing at initial stage is very small but as soon as the borrow repay the loan amount, he would be able to access the further loan from the same microfinance institutions
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6. RESEARCH OBJECTIVES
To study aboutthe impact of microloans provided by microfinance institutions on women in Gorakhpur.
7.RESEARCH METHODOLOGY
Research Design: descriptiveempowermentSampling technique: Non-Probability, Convenience sampling
Sample size: 100 women (50 women from Bandhan bank microfinance and 50 women from Utkarsh small finance bank who have already taken microloan from these institutions)
Data collection: - Primary data through questionnaire and Secondary data are collected from the research papers, dissertations of the scholars, books of references, standard publication and reports by institutes and organizations, magazines, periodicals, internet sources etc.
8.FINDINGS AND OBSERVATION
I have taken two institutions for my research study, and Based on my questionnaire, direct observation, concern with employee of both the institution and secondary data likes various journals, article and others associated topics, these are the findings and observations.
Findings and observation from Bandhan bank microfinance
It is found that most of thewomen (76%) engaged with doing small business and small trading.
It is found that 44% women earn in range of Rs. 10001-15000 and 40% earn above 15000 therefore it shows that microfinancing has contributed in improvement of income level and they alsoneed more microloans in order to generate more income through entrepreneurship options.
It is found that mode of repayment of microloan in Bandhan bank microfinance is weekly
It is found that 46% women have loan amount about in between Rs. 30 to 50 thousand and 34 % in between Rs. 10 to 30 thousand.
It is found that 46% women have loan amount about in between Rs. 30 to 50 thousand and 34 % in between Rs. 10 to 30 thousand.
Tenure of the loan is up to 1 years.
It is found that in case of non-repayment of loan of any member in a group, guarantor would repay their repayment.
It is found that 64% of the women strongly agree that microfinancing has contributed inimprovement of consumption level.
It is found that 40% of women agree thatmicrofinancing has contributed in improvement of their social status.
It is found that 44% of women believe that microfinance has helped in building confidence of the borrower.
It is found that 38% of women agree that microfinancing has contributed in increasing thedecision- making power of the user.
It is found that 40% of women strongly agree that microfinancing has resulted in enhancing recognition in the family.
About 84 percent women think that microfinance helpful in the progress of women empowerment
Till FY 18 its customer base in microfinance is 10.6 million while in FY17 its customer base in microfinance is 9.08 million in all over India, which also shows its progressive improvement in direction of achievement of financial inclusion.
Bandhan’s commitment to financial inclusion is also reflected from the fact that it offered loans to 1386976 new borrowers in FY 17-18. The growth of over 30% in the aggregate micro-banking asset portfolio from Rupees 21,418 crore to Rupees 27,670 crore during FY 2017-18, is another indicator of Bandhan’s commitment.
Findings and observation from Utkarsh small finance bank
It is found that most of thewomen (54%) engaged with doing small business, and 26% of women engaged with agri and agri allied business.
It is found that 54% women earn in range of Rs. 10001-15000 and 46% earn above 15000 therefore it shows that microfinancing has contributed in improvement of income level and they also need more microloans in order to generate more income through entrepreneurship options.
It is found that mode of repayment of microloan in Utkarsh small finance bank is fortnightly in Gorakhpur.
It is found that 54% women have loan amount about in between Rs. 10 to 30 thousand and 28 % in between Rs. 30 to 50 thousand.
Tenure of the most of the loan is up to 2 years.
It is found that in case of non-repayment of loan of any member in a group, guarantor would repay their repayment. Family members also include as a guarantor.
It is found that 48% of the women strongly agree that microfinancing has contributed in improvement of consumption level.
It is found that 38% of womenagree that microfinancing has contributed in improvement of their social status.
It is found that 50% of women believe that microfinance has helped in building confidence of the borrower.
It is found that 34% of women agree that microfinancing has contributed in increasing the decision- making power of the user.
It is found that 42% of womenagree that microfinancing has resulted in enhancing recognition in the family.
About 90 percent women think that microfinance helpful in the progress of women empowerment.
9.SUGGESTIONS
1.
Basic financial literacy, capacity building initiatives, water and sanitation, preventive healthcare, education and small business Training programmes to the women can be provided for the better performance of their business activities and apart from providing loans these services should be also benefitted to the group members in order to empowered them from each and every aspect.2.Should open branches and doorstep service Centres (DSCs), specially in remote areas in order to grow customer base for microloans and reduce service time.
3.Since the repayment of loan among the members of the groups is quick; therefore, the microfinance institutions may reduce the rate of interest on such a loan.
4.Should continuously work in order to enhance digital and technology platform to drive customer satisfaction, customer retention and reduce costs. This will also help to reduce lending rate.
5.Develop more and more products and services that actively suits to poor women.
6.The Government may announce presentations and awards to the best Performing group at the district and state level in order to encourage and promote their work.
7.I found that that in Bandhan microfinance,nearly 10% of women would not use their loan amount for actual purpose for which they have taken, so there should be a control mechanism by the Micro Finance Institutions to control this.
8.Government should provide separate financial funds for women’s entrepreneur with special benefits, subsidy, and lower interest rate on loans, this will help to promote and attract them to start their own small businesses.
9.Government should organize trade fairs and create environment to promote the work of women entrepreneurs in the rural areas, as well as urban area.
10. At present, the repayment period of loan starts within one week and fortnight from the date of disbursement of loan, my suggestion is that the repayment should not be started till 3 months. In this period, the borrower should establish their business completely and after that they repay their loan easily in weekly and fortnightly mode
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10.CONCLUSION
Microfinance institutions is playing an important role in order to provide and Promote entrepreneurship option for women in Gorakhpur region.
Microfinance loans and its productive utilization found to be having a profound role and impact on women empowerment through women entrepreneurship.
Micro finance is accepted a key mantra for attaining and maintaining the sustained and long term economic growth in all over world.
microfinance is playing a vital role to perform financial inclusion in Gorakhpur.
Microfinance institutions are playing a pivotal role in order to uplift the sociallydisadvantaged and economically exploited women in Gorakhpur region.
Bandhan Micro finance and Utkarsh small finance bank is capable of helping the poor women to upscale themselves to a better living standard.
Bandhan microfinance and Utkarsh small finance bank both are also helping to reduce the gender discrimination and enhance the women decision-making ability.
At last I want to say that there are still some untouched remote areas where the requirement of finance is more and services are not yet reached. Government should support more to these MFIs in order to need and fulfilment of capital is possible as they required.11.LIMITATION OF STUDY
The limitation of my study,that is restricted to two microfinance institutions branch of Gorakhpur district and apart from these, there are also some microfinance institutions currently working in Gorakhpur region so as the area of study needs more enquiry and project study should be spread over entire Gorakhpur district specially in more remote areas as well as urban areas.
12.REFERENCES
1.Evolving landscape of micro finance institutions in India July 2016(Assocham India).
2.Srinivasan, M.S (2017), Inclusive finance India report 2017, Sage Publication.
3.The Bharat Microfinance Report 2017
4.Growth of Micro Finance in India: A Descriptive Study by swati sharma.
5.Mayank Tiwari and komaljeet kaur (2018), Microfinance and Its Impact on Women Empowerment, 11th international conference on research in science, technology and management, Osmania university, Hyderabad 6.P. Bhargavi (2015), Micro Finance and Empowerment of Women Entrepreneurship in India, International Journal of Multidisciplinary Advanced Research Trends, Volume Ii, Issue 2(3), 2015.
7.Pashmeen Kaur (2015), Microfinance – An Emerging Financial Instrument of Financial Inclusion for Social Upliftment and To Eradicate Poverty: A Case Study Based approach, IOSR Journal of Business and
Management (IOSR-JBM)
8.Mfin-Micrometer as of 30 June 2018.
9.Role of microfinance on socio economic development: A study of western development region Nepal”, by Bharat Ram Dhungana.
10.Microfinance - Evolution, And Microfinance-Growth, Of. India By Vivek Kumar Tripathi.
11.http://www.bandhanmf.com/bn_default.aspx.
12.https://www.bandhanbank.com.
13.www.utkarsh.bank