IJRCM Dec 12 PDF

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/291350396
MICROFINANCE IN INDIA: CHALLENGES AND OPPORTUNITIES
Article in International Journal of Commerce and Management · December 2012
CITATIONS READS
0 1,766
1 author:
Ravi S
Periyar university constituent college of arts and science, Idappadi
10 PUBLICATIONS 1 CITATION
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
Micro finance View project
All content following this page was uploaded by Ravi S on 22 January 2016.
The user has requested enhancement of the downloaded file.

VOLUME NO. 3 (2012), ISSUE N O. 12 (DECEMBER) ISSN 0976-2183
A Monthly Double-Blind Peer Reviewed (Refereed/Juried) Open Access International e-Journal - Included in the International Serial Directories
Indexed & Listed at:
Ulrich's Periodicals Directory ©, ProQuest, U.S.A., EBSCO Publishing, U.S.A., Cabell’s Directories of Publishing Opportunities, U.S.A.,
Open J-Gage, India [link of the same is duly available at Inflibnet of University Grants Commission (U.G.C.)],
Index Copernicus Publishers Panel, Poland with IC Value of 5.09 & number of libraries all around the world.
Circulated all over the world & Google has verified that scholars of more than 1866 Cities in 152 countries/territories are visiting our journal on regular basis.
Ground Floor, Building No. 1041-C-1, Devi Bhawan Bazar, JAGADHRI – 135 003, Yamunanagar, Haryana, INDIA
http://ijrcm.org.in/
CONTENTS
Sr. Page
No. TITLE & NAME OF THE AUTHOR (S) No.
1. AN INSIGHT ON CONSUMER CHOICE AND MARKETING OPPORTUNITIES FOR BREAKFAST- CEREALS 1
SIMI SIMON & DR. MURALI MANOHAR
2. RECOGNITION OF THE INCOME TAX DEPARTMENT OF THE DISCLOSED PROFITS LISTED ACCORDING TO THE LEGISLATIONS OF THE COMMISSION 4
OF REGULATING THE BUSINESS OF THE JORDANIAN INSURANCE COMPANIES
DR. SULEIMAN HUSSIEN AL-BESHTAWI
3. A CRITICAL ASSESSMENT OF THE CONTRIBUTION OF MARINE INSURANCE TO THE DEVELOPMENT OF NIGERIAN ECONOMY 10
DR. I. A. NWOKORO
4. APPLICATION OF ‘BALANCED SCORECARD’, IN PERFORMANCE MEASUREMENT OF NATIONAL OIL-RICH SOUTH COMPANY 17
ESMAIL HAMID
5. FIRMS’ CHARACTERISTICS AND CAPITAL STRUCTURE: A PANEL DATA ANALYSIS FROM ETHIOPIAN INSURANCE INDUSTRY 21
SOLOMON MOLLA ABATE
6. IMPACT OF CELEBRITY ENDORSEMENT ON BRAND EQUITY WITH MEDIATING ROLE OF BRAND TRUST 28
SABIR HUSSAIN, RAJA WASIF MEHMOOD & FAIZA SAMI KHAN
7. PERCEPTION OF EXPORT DIFFICULTY IN SMEs AND EXPORT PERFORMANCE: A STUDY OF NIGERIAN SMEs IN THE LEATHER INDUSTRY 33
ABUBAKAR SAMBO JUNAIDU
8. INVESTORS PERCEPTIONS ON PUBLIC AND PRIVATE LIFE INSURANCE COMPANIES IN INDIA - WITH SPECIAL REFERENCE TO LIFE INSURANCE 37
INVESTORS IN KARNATAKA
DR. SREENIVAS.D.L & ANAND M B
9. MICROFINANCE IN INDIA: CHALLENGES AND OPPORTUNITIES 46
S.RAVI & DR. P. VIKKRAMAN
10. DIFFERENCES IN ORGANIZATIONAL COMMITMENT IN PRIVATE AND PUBLIC SECTOR BANK EMPLOYEES 50
DR. SARITA SOOD, DR. ARTI BAKHSHI & SHIKHA SHARMA
11. FINANCIAL INCLUSION AND WOMEN EMPOWERMENT: A STUDY ON WOMEN’S PERCEPTION OF EAST GODAVARI DISTRICT, ANDHRA PRADESH 53
DR. PULIDINDI VENUGOPAL
12. A STUDY ON UNDERSTANDING THE LEVELS OF JOB SATISFACTION, JOB MOTIVATION, ORGANIZATIONAL COMMITMENT, PERCEIVED 58
ORGANIZATION SUPPORT AMONG FRESHER’S AND EXPERIENCED ACADEMICIANS
DR. M. S. PRIYADARSHINI & S. PADMANATHAN
13. IMPACT OF FII’s INVESTMENT ON THE INDIAN CAPITAL MARKET 61
DR. K. B. SINGH & DR. S. K. SINGH
14. RETAIL BANKING: EFFECT OF FACTORS ON CUSTOMER SWITCHING BEHAVIOUR 64
NEETHA J. EAPPEN & DR. K. B. PAVITHRAN
15. PATTERN OF CAPITAL STRUCTURE IN AMARA RAJA BATTERIES LIMITED, TIRUPATI - AN ANALYSIS 68
K. KALYANI & DR. P. MOHAN REDDY
16. PROSPECTS OF MEDICAL TOURISM - A STUDY ON THE MANAGEMENT TRENDS AND PRACTICES OF THE PROMINENT PARTICIPANTS OF 73
HOSPITAL SECTOR IN SOUTH INDIA
DR. BINDI VARGHESE
17. IMPACT OF LEADERSHIP STYLES ON ORGANIZATIONAL EFFECTIVENESS IN HANDLOOM SECTOR 77
DR. SOPNA V. MUHAMMED
18. STRATEGIC IMPLICATIONS IN AGRO-TOURISM WITH SPECIAL REFERENCE TO PUNJAB 81
DR. SARITA BAHL
19. LIQUIDITY ANALYSIS OF INDIAN HOTEL INDUSTRY 85
DR. K. KARTHIKEYAN & K. RAMASAMY
20. SATISFACTION LEVEL OF ADVERTISING AWARENESS AMONG COLLEGE STUDENTS – A FACTOR ANALYSIS 92
S. JEYARADHA, DR. K. KAMALAKANNAN & V. SANGEETHA
21. FACET OF GLOBAL RISKS 94
SURANJAN BHATTACHERYAY
22. A CASE STUDY ON THE GAPS BETWEEN EXPECTATIONS AND EXPERIENCES OF THE EMPOYEES IN APHDC LTD ON ‘PERFORMANCE APPRAISAL’ 101
LALITHA BHAVANI KONDAVEETI & B. VAMSI KRISHNA
23. DO PEOPLE PLAN? WHY ARE THEY SO NEGLIGENT ABOUT THEIR OWN FINANCES 104
VISHWAS SRINIWAS PENDSE
24. STRATEGIC ANALYSIS AND IMPLEMENTATION OF SELF EMPLOYMENT GENERATION SCHEMES IN JAMMU AND KASHMIR STATE 108
AASIM MIR
25. ENTREPRENEURSHIP IN NORTH EASTERN REGION OF INDIA-THE MSME PERSPECTIVE 111
DR. KH. DEVANANDA SINGH
26. CONTEMPLATION OF ISLAMIC BANKING IN LUCKNOW: A CRITICAL ANALYSIS 116
IMRAN SIDDIQUEI, TUSHAR SINGH & SAIF REHMAN
27. FDI IN ORGANIZED RETAIL IN INDIA: LOOK TO THE MULTIBRAND OPPORTUNITIES 122
MOHD. IMTIAZ & SYED AHMED WAJIH
28. NON PERFORMING ASSETS MANAGEMENT IN KARNATAK CENTRAL CO-OPERATIVE BANK LTD. DHARAWAD 126
DR. RAMESH.O.OLEKAR & CHANABASAPPA TALAWAR
29. A CRITICAL EVALUATION OF FINANCIAL PERFORMANCE OF RAJASTHAN TOURISM: A CASE STUDY OF RAJASTHAN TOURISM DEVELOPMENT 131
CORPORATION
DR. LAXMI NARAYAN ARYA & DR. BAJRANG LAL BAGARIA
30. GREEN INVESTMENT BANKS: A NEW PHASE OF CORPORATE INVESTMENT 138
NISCHITH.S
REQUEST FOR FEEDBACK 144
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT ii

CHIEF PATRON
PROF. K. K. AGGARWAL
Chancellor, Lingaya’s University, Delhi
Founder Vice-Chancellor, Guru Gobind Singh Indraprastha University, Delhi
Ex. Pro Vice-Chancellor, Guru Jambheshwar University, Hisar
FOUNDER PATRON
LATE SH. RAM BHAJAN AGGARWAL
Former State Minister for Home & Tourism, Government of Haryana
Former Vice-President, Dadri Education Society, Charkhi Dadri
Former President, Chinar Syntex Ltd. (Textile Mills), Bhiwani
CO-
CO-ORDINATOR
DR. SAMBHAV GARG
Faculty, M. M. Institute of Management, MaharishiMarkandeshwarUniversity, Mullana, Ambala, Haryana
ADVISORS
DR. PRIYA RANJAN TRIVEDI
Chancellor, The Global Open University, Nagaland
PROF. M. S. SENAM RAJU
Director A. C. D., School of Management Studies, I.G.N.O.U., New Delhi
PROF. M. N. SHARMA
Chairman, M.B.A., HaryanaCollege of Technology & Management, Kaithal
PROF. S. L. MAHANDRU
Principal (Retd.), MaharajaAgrasenCollege, Jagadhri
EDITOR
PROF. R. K. SHARMA
Professor, Bharti Vidyapeeth University Institute of Management & Research, New Delhi
CO-
CO-EDITOR
DR. BHAVET
Faculty, M. M. Institute of Management, MaharishiMarkandeshwarUniversity, Mullana, Ambala, Haryana
EDITORIAL ADVISORY BOARD

DR. RAJESH MODI
Faculty, YanbuIndustrialCollege, Kingdom of Saudi Arabia
PROF. SANJIV MITTAL
UniversitySchool of Management Studies, Guru Gobind Singh I. P. University, Delhi
PROF. ANIL K. SAINI
Chairperson (CRC), Guru Gobind Singh I. P. University, Delhi
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT iii

DR. SAMBHAVNA
Faculty, I.I.T.M., Delhi
DR. MOHENDER KUMAR GUPTA
Associate Professor, P.J.L.N.GovernmentCollege, Faridabad
DR. SHIVAKUMAR DEENE
Asst. Professor, Dept. of Commerce, School of Business Studies, Central University of Karnataka, Gulbarga
ASSOCIATE EDITORS
PROF. NAWAB ALI KHAN
Department of Commerce, Aligarh Muslim University, Aligarh, U.P.
PROF. ABHAY BANSAL
Head, Department of Information Technology, Amity School of Engineering & Technology, Amity
University, Noida
PROF. V. SELVAM
SSL, VIT University, Vellore
PROF. N. SUNDARAM
VITUniversity, Vellore
DR. PARDEEP AHLAWAT
Associate Professor, Institute of Management Studies & Research, MaharshiDayanandUniversity, Rohtak
DR. S. TABASSUM SULTANA
Associate Professor, Department of Business Management, Matrusri Institute of P.G. Studies, Hyderabad
TECHNICAL ADVISOR
AMITA
Faculty, Government M. S., Mohali
FINANCIAL ADVISORS
DICKIN GOYAL
Advocate & Tax Adviser, Panchkula
NEENA
Investment Consultant, Chambaghat, Solan, Himachal Pradesh
LEGAL ADVISORS
JITENDER S. CHAHAL
Advocate, Punjab & Haryana High Court, Chandigarh U.T.
CHANDER BHUSHAN SHARMA
Advocate & Consultant, District Courts, Yamunanagar at Jagadhri
SUPERINTENDENT
SURENDER KUMAR POONIA
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT iv

CALL FOR MANUSCRIPTS

We invite unpublished novel, original, empirical and high quality research work pertaining to recent developments & practices in the area of
Computer, Business, Finance, Marketing, Human Resource Management, General Management, Banking, Insurance, Corporate Governance
and emerging paradigms in allied subjects like Accounting Education; Accounting Information Systems; Accounting Theory & Practice; Auditing;
Behavioral Accounting; Behavioral Economics; Corporate Finance; Cost Accounting; Econometrics; Economic Development; Economic History;
Financial Institutions & Markets; Financial Services; Fiscal Policy; Government & Non Profit Accounting; Industrial Organization; International
Economics & Trade; International Finance; Macro Economics; Micro Economics; Monetary Policy; Portfolio & Security Analysis; Public Policy
Economics; Real Estate; Regional Economics; Tax Accounting; Advertising & Promotion Management; Business Education; Management
Information Systems (MIS); Business Law, Public Responsibility & Ethics; Communication; Direct Marketing; E-Commerce; Global Business;
Health Care Administration; Labor Relations & Human Resource Management; Marketing Research; Marketing Theory & Applications; Non-
Profit Organizations; Office Administration/Management; Operations Research/Statistics; Organizational Behavior & Theory; Organizational
Development; Production/Operations; Public Administration; Purchasing/Materials Management; Retailing; Sales/Selling; Services; Small
Business Entrepreneurship; Strategic Management Policy; Technology/Innovation; Tourism, Hospitality & Leisure; Transportation/Physical
Distribution; Algorithms; Artificial Intelligence; Compilers & Translation; Computer Aided Design (CAD); Computer Aided Manufacturing;
Computer Graphics; Computer Organization & Architecture; Database Structures & Systems; Digital Logic; Discrete Structures; Internet;
Management Information Systems; Modeling & Simulation; Multimedia; Neural Systems/Neural Networks; Numerical Analysis/Scientific
Computing; Object Oriented Programming; Operating Systems; Programming Languages; Robotics; Symbolic & Formal Logic and Web Design.
The above mentioned tracks are only indicative, and not exhaustive.
Anybody can submit the soft copy of his/her manuscript anytime in M.S. Word format after preparing the same as per our submission
guidelines duly available on our website under the heading guidelines for submission, at the email address: infoijrcm@gmail.com.
GUIDELINES FOR SUBMISSION

SUBMISSION OF MANUSCRIPT
1. COVERING LETTER FOR SUBMISSION:
DATED: _____________
THE EDITOR
IJRCM
Subject: SUBMISSION OF MANUSCRIPT IN THE AREA OF .
(e.g. Finance/Marketing/HRM/General Management/Economics/Psychology/Law/Computer/IT/Engineering/Mathematics/other, please specify)
DEAR SIR/MADAM
Please find my submission of manuscript entitled ‘___________________________________________’ for possible publication in your journals.
I hereby affirm that the contents of this manuscript are original. Furthermore, it has neither been published elsewhere in any language fully or partly, nor is it
under review for publication elsewhere.
I affirm that all the author (s) have seen and agreed to the submitted version of the manuscript and their inclusion of name (s) as co-author (s).
Also, if my/our manuscript is accepted, I/We agree to comply with the formalities as given on the website of the journal & you are free to publish our
contribution in any of your journals.
NAME OF CORRESPONDING AUTHOR:

Designation:
Affiliation with full address, contact numbers & Pin Code:
Residential address with Pin Code:
Mobile Number (s):
Landline Number (s):
E-mail Address:
Alternate E-mail Address:
NOTES:
a) The whole manuscript is required to be in ONE MS WORD FILE only (pdf. version is liable to be rejected without any consideration), which will start from
the covering letter, inside the manuscript.
b) The sender is required to mention the following in the SUBJECT COLUMN of the mail:
New Manuscript for Review in the area of (Finance/Marketing/HRM/General Management/Economics/Psychology/Law/Computer/IT/
Engineering/Mathematics/other, please specify)
c) There is no need to give any text in the body of mail, except the cases where the author wishes to give any specific message w.r.t. to the manuscript.
d) The total size of the file containing the manuscript is required to be below 500 KB.
e) Abstract alone will not be considered for review, and the author is required to submit the complete manuscript in the first instance.
f) The journal gives acknowledgement w.r.t. the receipt of every email and in case of non-receipt of acknowledgment from the journal, w.r.t. the submission
of manuscript, within two days of submission, the corresponding author is required to demand for the same by sending separate mail to the journal.
2. MANUSCRIPT TITLE: The title of the paper should be in a 12 point Calibri Font. It should be bold typed, centered and fully capitalised.
3. AUTHOR NAME (S) & AFFILIATIONS: The author (s) full name, designation, affiliation (s), address, mobile/landline numbers, and email/alternate email
address should be in italic & 11-point Calibri Font. It must be centered underneath the title.
4. ABSTRACT: Abstract should be in fully italicized text, not exceeding 250 words. The abstract must be informative and explain the background, aims, methods,
results & conclusion in a single para. Abbreviations must be mentioned in full.
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT v

5. KEYWORDS: Abstract must be followed by a list of keywords, subject to the maximum of five. These should be arranged in alphabetic order separated by
commas and full stops at the end.
6. MANUSCRIPT: Manuscript must be in BRITISH ENGLISH prepared on a standard A4 size PORTRAIT SETTING PAPER. It must be prepared on a single space and
single column with 1” margin set for top, bottom, left and right. It should be typed in 8 point Calibri Font with page numbers at the bottom and centre of every
page. It should be free from grammatical, spelling and punctuation errors and must be thoroughly edited.
7. HEADINGS: All the headings should be in a 10 point Calibri Font. These must be bold-faced, aligned left and fully capitalised. Leave a blank line before each
heading.
8. SUB-HEADINGS: All the sub-headings should be in a 8 point Calibri Font. These must be bold-faced, aligned left and fully capitalised.
9. MAIN TEXT: The main text should follow the following sequence:
INTRODUCTION
REVIEW OF LITERATURE
NEED/IMPORTANCE OF THE STUDY
STATEMENT OF THE PROBLEM

OBJECTIVES
HYPOTHESES
RESEARCH METHODOLOGY
RESULTS & DISCUSSION

FINDINGS
RECOMMENDATIONS/SUGGESTIONS
CONCLUSIONS
SCOPE FOR FURTHER RESEARCH
ACKNOWLEDGMENTS
REFERENCES
APPENDIX/ANNEXURE
It should be in a 8 point Calibri Font, single spaced and justified. The manuscript should preferably not exceed 5000 WORDS.
10. FIGURES & TABLES: These should be simple, crystal clear, centered, separately numbered &self explained, and titles must be above the table/figure. Sources
of data should be mentioned below the table/figure. It should be ensured that the tables/figures are referred to from the main text.
11. EQUATIONS:These should be consecutively numbered in parentheses, horizontally centered with equation number placed at the right.
12. REFERENCES: The list of all references should be alphabetically arranged. The author (s) should mention only the actually utilised references in the preparation
of manuscript and they are supposed to follow Harvard Style of Referencing. The author (s) are supposed to follow the references as per the following:
• All works cited in the text (including sources for tables and figures) should be listed alphabetically.
• Use (ed.) for one editor, and (ed.s) for multiple editors.
• When listing two or more works by one author, use --- (20xx), such as after Kohl (1997), use --- (2001), etc, in chronologically ascending order.
• Indicate (opening and closing) page numbers for articles in journals and for chapters in books.
• The title of books and journals should be in italics. Double quotation marks are used for titles of journal articles, book chapters, dissertations, reports, working
papers, unpublished material, etc.
• For titles in a language other than English, provide an English translation in parentheses.
• The location of endnotes within the text should be indicated by superscript numbers.
PLEASE USE THE FOLLOWING FOR STYLE AND PUNCTUATION IN REFERENCES:

BOOKS
• Bowersox, Donald J., Closs, David J., (1996), "Logistical Management." Tata McGraw, Hill, New Delhi.
• Hunker, H.L. and A.J. Wright (1963), "Factors of Industrial Location in Ohio" Ohio State University, Nigeria.
CONTRIBUTIONS TO BOOKS
• Sharma T., Kwatra, G. (2008) Effectiveness of Social Advertising: A Study of Selected Campaigns, Corporate Social Responsibility, Edited by David Crowther &
Nicholas Capaldi, Ashgate Research Companion to Corporate Social Responsibility, Chapter 15, pp 287-303.
JOURNAL AND OTHER ARTICLES
• Schemenner, R.W., Huber, J.C. and Cook, R.L. (1987), "Geographic Differences and the Location of New Manufacturing Facilities," Journal of Urban Economics,
Vol. 21, No. 1, pp. 83-104.
CONFERENCE PAPERS
• Garg, Sambhav (2011): "Business Ethics" Paper presented at the Annual International Conference for the All India Management Association, New Delhi, India,
19–22 June.
UNPUBLISHED DISSERTATIONS AND THESES
• Kumar S. (2011): "Customer Value: A Comparative Study of Rural and Urban Customers," Thesis, Kurukshetra University, Kurukshetra.
ONLINE RESOURCES
• Always indicate the date that the source was accessed, as online resources are frequently updated or removed.
WEBSITES
• Garg, Bhavet (2011): Towards a New Natural Gas Policy, Political Weekly, Viewed on January 01, 2012 http://epw.in/user/viewabstract.jsp
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT vi

MICROFINANCE IN INDIA: CHALLENGES AND OPPORTUNITIES
S.RAVI
ASST. PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES
VIVEKANANDHA INSTITUTE OF INFORMATION AND MANAGEMENT STUDIES
TIRUCHENGODE
DR. P. VIKKRAMAN
DIRECTOR
SCHOOL OF MANAGEMENT STUDIES
COIMBATORE REGIONAL CENTRE
ANNA UNIVERSITY
CHENNAI
ABSTRACT
In India, Self Help Groups (SHGs) represent a unique approach to financial intermediation. The approach combines access to low-cost financial services with a
process of self management and development for the women who are SHG members through microfinance. SHGs are formed and supported usually by Non
Government Organisations (NGOs) by Government agencies. Linked not only to banks but also to wider development programmes, SHGs are seen to confer many
benefits, both economic and social. SHGs enable women to grow their savings and to access the credit which banks are increasingly willing to lend. SHGs can also
be community platforms from which women become active in village affairs, stand for local election or take action to address social or community issues.
Microfinance has evolved over the past quarter century across India into various operating forms and to a varying degree of success. One such form of
microfinance has been the development of the self-help movement. Based on the concept of “self-help,” small groups of women have formed into groups of ten
to twenty and operate a savings-first business model whereby the member’s savings are used to fund loans. The results from these self-help groups (SHGs) are
promising and have become a focus of intense examination as it is proving to be an effective method of poverty eradication. With a more enabling environment
and surge in economic growth, the next few years promise to be exciting for the delivery of financial services to poor people in India. The supply side of
microfinance in India is still presently grossly inadequate to fill the gap between demand and supply but it holds the promise to act as a great opportunity for the
financial sector and the economy as a whole. The paper aims to analyse the challenges and opportunities of micro finance in India.
KEYWORDS
Microfinance, self help groups.
INTRODUCTION
icrofinance is defined as any activity that includes the provision of financial services such as credit, savings, and insurance to low income individuals
M which fall just above the nationally defined poverty line, and poor individuals which fall below that poverty line, with the goal of creating social value.
The creation of social value includes poverty alleviation and the broader impact of improving livelihood opportunities through the provision of capital
for micro enterprise, and insurance and savings for risk mitigation and consumption smoothing. A large variety of actors provide microfinance in India, using a
range of microfinance delivery methods. Since the founding of the 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. The range of activities undertaken in
microfinance include group lending, individual lending, the provision of savings and insurance, capacity building, and agricultural business development services.
Whatever the form of activity however, the overarching goal that unifies all actors in the provision of microfinance is the creation of social value.
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who
traditionally lack access to banking and related services. Microfinance is a broad category of services, which includes microcredit. Microcredit is provision of
credit services to poor clients. Although microcredit is one of the aspects of microfinance, conflation of the two terms is endemic in public discourse. Critics
often attack microcredit while referring to it indiscriminately as either 'microcredit' or 'microfinance'. Due to the broad range of microfinance services, it is
difficult to assess impact, and very few studies have tried to assess its full impact.
EXEMPLAR OF MICRO FINANCE

The concept of micro-financing the self-employment activity in rural areas has developed considerably over the last twenty years. Strategically micro-finance
relies on rotational investment done to motivate poor to empower themselves and to save for the future and use those resources during the time of need.
Theoretically, micro-finance or micro-credit or micro-lending means provision of smaller working capital loans to the self-employed or self-employment seeking
poor. Such loans may be provided even for the activities like cotton and wool to weave raw material for handicrafts, milch cattle and the like. It is viewed that
provision of microfinance may be seen more as logical extension of the managerial and programmatic approach to poverty reduction. But with regard to
financial perspective credit is an effective tool the level of that helps the poor to tackle the problem of deprivation, improve their welfare and social acceptance
and credibility.
HISTORY OF MICRO FINANCE

The history of microfinancing 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 that the concept
had a big impact. The today use of the expression microfinancing has it roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the
microfinance pioneer Muhammad Yunus, were starting and shaping the modern industry of microfinancing. Another pioneer in this sector is Akhtar Hameed
Khan.
ACTIVITIES IN MICROFINANCE
Microcredit: It is a small amount of money loaned to a client by a bank or other institution. Microcredit can be offered, often without collateral, to an individual
or through group lending.
Micro savings: These are deposit services that allow one to save small amounts of money for future use. Often without minimum balance requirements, these
savings accounts allow households to save in order to meet unexpected expenses and plan for future expenses.
INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT 46

Micro insurance: It is a system by which people, businesses and other organizations make a payment to share risk. Access to insurance enables entrepreneurs to
concentrate more on developing their businesses while mitigating other risks affecting property, health or the ability to work.
Remittances: Compared with other sources of capital that can fluctuate depending on the political or economic climate, remittances are a relatively steady
source of funds.
PRINCIPLES OF MICRO FINANCE

Microfinance is considered as 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. Some
principles that summarize a century and a half of development practice were encapsulated in 2004 by Consultative Group to Assist the Poor (CGAP) and
endorsed by the Group of Eight leaders at the G8 Summit on June 10, 2004 are given below
• Poor people need not just loans but also savings, insurance and money transfer services.
• Microfinance must be useful to poor households: helping them raise income, build up assets and/or cushion themselves against external shocks.
• "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.
• Microfinance means building permanent local institutions.
• Microfinance also means integrating the financial needs of poor people into a country's mainstream financial system.
• The job of government is to enable financial services, not to provide them.
• Donor funds should complement private capital, not compete with it.
• The key bottleneck is the shortage of strong institutions and managers.
• Donors should focus on capacity building.
• Interest rate ceilings hurt poor people by preventing microfinance institutions from covering their costs, which chokes off the supply of credit.
• Microfinance institutions should measure and disclose their performance – both financially and socially.
TYPES OF MICRO FINANCE PRODUCTS
BENEFITS OF MICRO FINANCE

CHALLENGES OF MICRO FINANCE
The obstacles or challenges to building a sound commercial microfinance industry include:
• Inappropriate donor subsidies
• Poor regulation and supervision of deposit-taking MFIs
• Few MFIs that meet the needs for savings, remittances or insurance
• Limited management capacity in MFIs
• Institutional inefficiencies
• Need for more dissemination and adoption of rural, agricultural microfinance methodologies
Traditionally, banks have not provided financial services, such as loans, to clients with little or no cash income. Banks incur substantial costs to manage a client
account, regardless of how small the sums of money involved. For example, although the total gross revenue from delivering one hundred loans worth $1,000
each will not differ greatly from the revenue that results from delivering one loan of $100,000, it takes nearly a hundred times as much work and cost to manage
a hundred loans as it does to manage one. The fixed cost of processing loans of any size is considerable as assessment of potential borrowers, their repayment
prospects and security; administration of outstanding loans, collecting from delinquent borrowers, etc., has to be done in all cases. There is a break-even point in
providing loans or deposits below which banks lose money on each transaction they make. Poor people usually fall below that breakeven point. A similar
equation resists efforts to deliver other financial services to poor people.
In addition, most poor people have few assets that can be secured by a bank as collateral. This means that the bank will have little recourse against defaulting
borrowers. Because of these difficulties, when poor people borrow they often rely on relatives or a local moneylender, whose interest rates can be very high. An
analysis of 28 studies of informal moneylending rates in 14 countries in Asia, Latin America and Africa concluded that 76% of moneylender rates exceed 10% per
month, including 22% that exceeded 100% per month. Moneylenders usually charge higher rates to poorer borrowers than to less poor ones. While
moneylenders are often demonized and accused of usury, their services are convenient and fast, and they can be very flexible when borrowers run into
problems. Hopes of quickly putting them out of business have proven unrealistic, even in places where microfinance institutions are active. Although much
progress has been made, the problem has not been solved yet, and the overwhelming majority of people who earn less than $1 a day, especially in the rural
areas, continue to have no practical access to formal sector finance. Microfinance has been growing rapidly with $25 billion currently at work in microfinance
loans. It is estimated that the industry needs $250 billion to get capital to all the poor people who need it. The industry has been growing rapidly, and concerns
have arisen that the rate of capital flowing into microfinance is a potential risk unless managed well. As seen in the State of Andhra Pradesh, these systems can
easily fail. Some reasons being lack of use by potential customers, over-indebtedness, poor operating procedures, neglect of duties and inadequate regulations
CHALLENGES TO MICRO FINANCE INSTITUTIONS

Although the importance of microfinance in the process of poverty eradication is realized, it faces multiple problems. This is because offering credit to the poor
is a complicated process and the sector is still in its experimental stage.
PERCEIVED HIGH RISK OF MICRO ENTREPRENEURSHIP AND SMALL BUSINESSES
Micro entrepreneurs usually have no collateral to offer to microfinance providers against loans, they usually lack an alternate source of income, and have little, if
any, formal education or training in the area of their business. As a result, commercial banks attribute a high credit risk to micro entrepreneurs and steer clear of
this sector.
Microfinance institutes (MFIs) are compelled to compensate for this risk by charging interest rates on loans (read 10 determinants of interest rates in
microfinance). Fortunately, the challenge can be resolved through the idea of group lending (social collateral against loans) which ensures good repayment
rates.
HIGH COSTS INVOLVED IN SMALL TRANSACTIONS/ MICRO LENDING
The small size of micro enterprises increases the transaction cost for MFIs because they cannot process loans in bulk (unless good management information
systems are in place). This denies MFIs the benefit of economies of scale; hence, they are forced to cover their costs through high interest rates on loans (read 4
ways to control high interest rates).
According to a study conducted by Asian Development Bank, microfinance providers in the Asia-Pacific region charge interest rates on micro-sized loans ranging
from 30 to 70% a year, which is much higher than rates offered by commercial banks (Fernando, 2006). However, there are instances where the interest rates
charged were too low for the MFIs’ sustainability. There is, however, possible solutions to this problem – by improving the technology model used by
microfinance institutes, their operational costs can be significantly lowered and efficiencies may be gained during automated loan processing.
LACK OF DEBT AND EQUITY FUNDS FOR MFIs TO PASS ON TO THE POOR
Capital availability for microfinance is hardly a problem owing to the rapid growth in the microfinance sector, which has been fueled by attention from the media
and development agencies. Even though there are plenty of financing options available for MFIs, there is an emerging shortage of money because of the current
financial crisis across the globe. Another reason for this shortfall is the lack of awareness of funding sources by MFI managers.
DIFFICULTY IN MEASURING THE SOCIAL PERFORMANCE OF MFIs
Microfinance is delivering the economic returns its proponents promised, but there are only a handful of tools available that measure the social return of loan
programs for the poor. To add to the problem, the tools use proxies to estimate the amount of poverty and social change surrounding micro entrepreneurs. This
makes the gathering of funds a challenge because donors may question the actual impact made my microfinance.
MIXING CHARITY WITH BUSINESS
Since credit without strict discipline is nothing but charity (Professor Yunus), if microfinance providers fail to protect themselves against loan delinquency, they
will, in effect, prioritize social objectives at the expense of financial sustainability. Improper delinquency management is a result of inadequate implementation
of corporate governance principles, and formal as well as semi-formal microfinance providers often suffer from this. As a result, looser controls over
microfinance deals will lead to higher default rates. Read more about the difficulty inmixing charity with business.
LACK OF CUSTOMIZED SOLUTIONS FOR THE POOR
Inappropriate targeting of poor households by microfinance programs is a common problem because MFIs fail to understand the varied needs of micro
entrepreneurs. MFIs must spend time in the field with their clients and his/her business, and then use this research to develop customized microfinance tools for
each micro entrepreneur. Generalized solutions may work for large companies dealing dealing with large homogeneous customer groups, but microfinance
providers need to serve the varied needs of individuals in each micro market segments.
LACK OF MICROFINANCE TRAINING FOR HUMAN RESOURCE IN MICROFINANCE INSTITUTIONS
Working in the microfinance sector is a different ball game compared to the traditional financial sector. For instance, microfinance officers and volunteers need
to talk a different language, build lasting relationships with individual micro entrepreneurs, understand the unique needs of the poor, evaluate the borrower’s
sustainability, and grasp the cultural nuances of the borrower’s communities It’s no surprise microfinance providers need special training to ensure they avoid
problems such as intimidating or under-serving clients.
POOR DISTRIBUTION SYSTEM OF MICROFINANCE INSTITUTIONS AND LACK OF INFORMATION ABOUT MICROFINANCE INVESTMENT OPPORTUNITIES
Firstly, microfinance providers may be complacent with their client base in certain cities and feel no economic need (ignoring the social need to eradicate
poverty) to spread out their distribution system to cater to the poorest of households. Secondly, micro entrepreneurs are sprawled over large geographical
areas, often in remote places, which often make them inaccessible to MFIs. This is a slight problem because even though there are over 10,000 MFIs around the
world, they may not know about the existence and needs of certain micro entrepreneurs.

DUAL MISSION OF MICROFINANCE INSTITUTIONS TO BE FINANCIALLY SUSTAINABLE AS WELL AS DEVELOPMENT ORIENTED
Microfinance providers tend to forget their main objective is social development and not profit creation. The principle of ‘one micro entrepreneur – one micro
loan’ is overlooked by profit-hungry MFIs who end up targeting the same individual for many loans and cause multiple borrowing (also known as credit
pollution). This is a major problem because at the end of the day, that individual gets burdened by mounting interest payments and is pushed deeper into the
folds of poverty. Poor governance on the side of MFIs as well as the micro entrepreneur is to blame for this.
All these problems broadly fall into either financial or operational in nature and we can therefore see that they should not be impossible to solve as the
microfinance sector moves towards it optimal performance level in the next several years. In other words, despite these problems, the prospects of
microfinance are quite bright. In the coming weeks, we will look at potential solutions to all these problems, which aren’t difficult to adopt (a couple have been
already been mentioned above).
CONCLUSION
Microfinance is not yet at the centre stage of the Indian financial sector. The knowledge, capital and technology to address these challenges however now exist
in India, although they are not yet fully aligned. With a more enabling environment and surge in economic growth, the next few years promise to be exciting for
the delivery of financial services to poor people in India. The supply side of microfinance in India is still presently grossly inadequate to fill the gap between
demand and supply but it holds the promise to act as a great opportunity for the financial sector and the economy as a whole.
REFERENCES
1. Andhra Pradesh Mahila Abhivruddhi Society (APMAS),” Self Help Groups in India A study of the lights and shades” www.apmas.org , 2006
2. Archana Prasad, ”India: Microfinance and Its Emerging Challenges” January 18, 2011 www.politicalaffairs.net
3. Dr. Hans Dieter Seibel and Harishkumar R. Dave, Commercial Aspects of SHG Banking in India, Microcredit Innovations Department, National Bank for
Agriculture and Rural Development, Mumbai, 2002, www.nabard.org
4. Dr. Mohammad Tarique, “Growth of Micro-Credit in India: An Evaluation” http://amu-in.academia.edu
5. Dr. Mohammad Tarique, “Growth of Micro-Credit in India: An Evaluation” http://amu-in.academia.edu
6. Frances Sinha, “Microfinance Self Help Groups In India; Living Up to Their Promise?” Practical Action Publishing, Feb 2010.
7. Frances Sinha, “Microfinance Self Help Groups In India; Living Up to Their Promise?” Practical Action Publishing, Feb 2010.
8. M. Muthu Gopalakrishnan, “A Study on the Socio Economic Conditions of the Members of Self Help Groups in Krishnagiri District” www.indianmba.com
9. Purna Chandra Parida and Anushree Sinha, “Performance and Sustainability of Self-Help Groups in India: A Gender Perspective, Asian Development Review,
vol. 27, no. 1, pp. 80–103
10. Sambangi, “Self Help Group As an Effective Strategy and Doable Approach to Empower Women in India” www.redbeatle.com
11. The Hindu, “SHG concept ushers change in socio-economic status of rural masses” 20th November, 2007
12. Vikas Singh, Jagjeet Kumar Mittal, Atul Kumar, and Abhishek Narain Sharma,” Status of Different Micro-finance Models in India, www.articlesbase.com
13. Von Amit Roy and Suhrita Chakrabarty, “Evolution of Self Help Groups: An Empirical Investigation in India” LAP Lambert Academic Publishing, Kartoniert
2010. ISBN 978-3-8433-7835-2 www.buchoffizin.de

REQUEST FOR FEEDBACK

Dear Readers
At the very outset, International Journal of Research in Commerce and Management (IJRCM) acknowledges
& appreciates your efforts in showing interest in our present issue under your kind perusal.
I would like to request you to supply your critical comments and suggestions about the material published
in this issue as well as on the journal as a whole, on our E-mail i.e. infoijrcm@gmail.com for further
improvements in the interest of research.
If you have any queries please feel free to contact us on our E-mail infoijrcm@gmail.com.
I am sure that your feedback and deliberations would make future issues better – a result of our joint
effort.
Looking forward an appropriate consideration.
With sincere regards
Thanking you profoundly
Academically yours
Sd/-
Co-ordinator

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT I

View publication stats

IJRCM Dec 12 PDF

Uploaded by

Copyright:

Available Formats

IJRCM Dec 12 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IJRCM Dec 12 PDF

Uploaded by

Copyright:

Available Formats

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

MICROFINANCE IN INDIA: CHALLENGES AND OPPORTUNITIES

Article in International Journal of Commerce and Management · December 2012

Micro finance View project

The user has requested enhancement of the downloaded file.

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT ii

EDITORIAL ADVISORY BOARD

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT iii

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT iv

CALL FOR MANUSCRIPTS

GUIDELINES FOR SUBMISSION

Subject: SUBMISSION OF MANUSCRIPT IN THE AREA OF .

(e.g. Finance/Marketing/HRM/General Management/Economics/Psychology/Law/Computer/IT/Engineering/Mathematics/other, please specify)

NAME OF CORRESPONDING AUTHOR:

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT v

STATEMENT OF THE PROBLEM

RESULTS & DISCUSSION

PLEASE USE THE FOLLOWING FOR STYLE AND PUNCTUATION IN REFERENCES:

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT vi

EXEMPLAR OF MICRO FINANCE

HISTORY OF MICRO FINANCE

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT 46

PRINCIPLES OF MICRO FINANCE

TYPES OF MICRO FINANCE PRODUCTS

BENEFITS OF MICRO FINANCE

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT 47

CHALLENGES TO MICRO FINANCE INSTITUTIONS

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT 48

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT 49

REQUEST FOR FEEDBACK

improvements in the interest of research.

Looking forward an appropriate consideration.

With sincere regards

Thanking you profoundly

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT 50

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE & MANAGEMENT I

You might also like