Microfinance - A Development Strategy and an Industry 17

save some amount. Thus the poor people come out the vicious cycle of poverty and the nation shows
the signs of development.
The Government of India has initiated various poverty alleviation and employment generation
programmcs like Prime Minister Rojzgar Yojana (PMRY), Pradhan Mantrí Gramodaya Yojana
(PMGY), Swarna Jayanti Gram Swarojgar Yojana (SGSY), Swarna Jayanti Shahari Rojgar Yojana
(SJSRY), ndira Awas Yojana (IAY), Prime Minister Employment Generation Programme (PMEGP),
where in the government is providing the subsidics and the banks are providing loans to the eligible
people. Beside thesc programmes the banks and the MFls are providing direct loans to the people for
financing their various activities. These programmes and the micro credit provided by the banks and
MFls are helping to reduce thc poverty to a larger extent, This is evident from the fact that according
toNSSO survey poverty has been reduced to 21.8% in the year 2004 - 05 from 36% in the year 1993
-94.
Poor People ’ Microfinance Financial (fcasible &viable) Activity Generating Economic
Surplus Loan Repayment Savings ’ Investments ’ Income Rising Above Poverty Line
Breaking Vicious Cycle of Poverty.
3.2.2 Microfinance as an Industry and Revolution: Microfinance is a widely recognized
as regards the provision of financial services including extending outreach and revolution
Insurance etc is concerned. It has emerged as a Revolution and is being regarded as anproviding
Industry.
credit,
There
is huge growth of microfinance in the country as large number of bank branches and
MFIs
associated with this movement and making expansion in rural areas. These are simplifying the loaning are
procedure and formalities. The financial inclusion is widening the coverage.
The access to financial services like savings, micro credit, micro insurance and
an element of human development. The microfinance is providing the funds transfer, is
access to these financial
services to those people deprived of these services. Hence it is a development strategy.
The SHG- Bank Linkage Programme being implemented by the commercial banks,
cooperative banks has emerged as the major microfinance programme in the country. UnderRRBs the
and
- Bank Linkage Programme as on 31 - 03 -2009 more than 61 lakh SHG
SHGs held saving bank account
with total saving of ? 5546 crore. Thus more than 8 crore poor household were
programme. India microfinance equity fund of 100 crore with SIDBI in the year associated with this
2011 - 12 has been
proposed.
Microfinance ’ MFIs / RRBs / Banks’ SHGs / NGOs / Direct Financing ’ Increased
Outreach’ Industry ’ Revolution
Microfinance ’ Central Govt. / State Govt. /Bank ’ RSETIs / FLCCs ’ BFs / BCs ’
Financial Inclusion Full
RSETIs ’ Skill Up-gradation ’ Innovation ’ Women
Linkages ’ Microfinance. Empowerment ’ Training ’ Credit
FLCCs ’ Promoting Awareness ’ Customer
Debt Re - structuring ’ Transparent Terms & Rights’’ Fair Banking Practices Codes ’
Conditions Microfinance
The Banks including RRBs and MFIs provide
directly to the people. The outreach to financial microfinance through NGOs / SHGs and even
services is increasing through financial inclusion
initiatives. The agriculture industry and business sector are fast
The government initiative to open RSETIs and developing in remote rural areas even.
more people to avail microfinance. FLCCs at each district headquarter is encouraging
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3.2.3 Micro Insurance for Poor People: Micro Insurance provides compensation for Microfinance
specific suchfutureas
losses at a very low premium. Microfinance is the provision of affordable financial services
loans, saving, insurance and funds transfer for people living in poverty. Microfinance has
accepted as a deevelopment strategy particularly for the up liftment of poor people in the ruralbeenareas.widely
The Government of India has initiated social scheme Aam Admi Bima Yojana nder,
cover of 75,000 in case of death and 37,500 in case of disability is available for the Aam which
The premium of ? 200 per annum is paid by the central govt. and state govt. equally. This Admi.
schemean
ensures the risk coverage. Rashtriya Swasthya Bima Yojana has been introduced for BPL workers
their families in the unorganized sector, where in smart cards are provided for cashless
healthcare to the extent of ? 30,000 per family. The premium of ? 750 is paid by the
oftransactions
central and state
govt. in 75:25 ratios.
Rashtriya Krishi Bima Yojana has been introduced for some crops like wheat and barley where
in 62 to 80% of the average threshold field is considered as coverage. The landless, small and
marginal farmers have to pay 50% premium. These all schemes are covering the life and activity ris
of the poor people and augmenting development.
Insurance Regulatory and Development Authority (IRDA), the regulating body for insurance
emphases microfinance in rural sector with population of less than five thousand and having poo
people dealing with small agriculture and allied activity. The social sector covering unorganized
informal, economically poor and backward people is also accorded priority for micro insurance. IRDA
has directed all the insurance companies to initiate micro insurance schemes and products to the pOOr
people.
3.2.4 Economic Development of People: The banks, financial institutions and microfinance
institutions provide small loan to the poor people for carrying out economically viable activities. The
loans and their assets financed are insured under micro insurance against the future risks. By carrying
out the activities at increased level and by improved tools and machinery, they generate economic
surplus. By repaying the loan installments and meeting the expenses, they also generate some savings
for future investment, children education, medical facilities, consumption and meeting other
contingencies. Thus their economic conditions are improved. The improvenents in the economic
conditions of the masses give rise to development of the economy and hence this is an excellent
development strategy.
3.2.5 Poverty Reduction Strategy: Microfinance is an efective strategy of poverty reduction. It
helps in reduction of poverty through affordable financialservices. By getting activities financed, their
scale of operations increases and thus profit level also increases which helps them to come out of the
vicious cycle of poverty. The Banks are financing SHGs, NGOs and MFIs which are providing micro
finance to the poor people. The Farmer Clubs are being formulated for the awareness of the various
programmes and activities in the area. These are contributing in reduction of poverty.
3.2.6 Development Strategy for Banks and MFIs: Microfinance provides development strategy to
the Banks, Financial Institutions, NGOs, SHGs, and MFIs by increasing their level of financing the
various economic activities. The excellent recovery of microfinance helps these banks and MFIs to
take care of operation costs of the microfinance. The provision of financial services like micro credit
and micro insurance provide business to the banks and MFIs. Besides, this helps in development of the
people in area. The business size of the banks and microfinance is enhances through microfinance
sector financing.
3.2.7 Women Empowerment: Microfinance is a development strategy for women's economic, social
and political empowerment which induces women entrepreneurship and results into women econome