Microfinance Intervention : Performance Adaptive and Effect

M. Sanjoy Singh*, Manisha Prajapati**

S. K. Baral***

ABSTRACT
Microfinance is all about giving an opportunity to build better lives for the people at the bottom of the pyramid. It has become
one of the most important aspects of growth and development in the country. The aim of this study was to identify the present
trends and the status of microfinance through SHG in the context of Madhya Pradesh. Over the past decade, various initiatives
have been taken up by the government to promote empowerment in rural areas. One such initiative is the microfinance
intervention. The findings revealed that the current number of SHGs in Madhya Pradesh now stands at 256178. The savings of
the SHGs amount to 30067.45 increase of almost 10.10 percent. While saving with SHGs showed an increase, the number of
loans disbursed to SHGs fell down 39.29 percent to an amount of 17984.38 lakhs.Microfinance has now and again made credit
reliance and repeating obligation and has given a bane to the poor individuals who are living underneath the neediness line.
Keywords: Microfinance, Poverty, SHGs, Empowerment and Intervention.

INTRODUCTION
The advanced idea of microfinance has been considered during the 1970s from that point forward numerous
nations have been beginning microfinance. Among the pioneer MFIs, the MFIs inAsian area stands the most
noteworthy entertainer on the planet. Of which India and Bangladesh rose the most amazing in the area. Despite the
fact that various nations shaped their own microfinance models as per the reasonableness of their monetary, social
and geographical condition they likewise follow some basic model, for example, Self Help Group (SHG) model, Joint
Liability Group (JLG) model, and so on. Microfinance is likewise playing a significant job in various fields, for
example, economy, employment, education, social status of the people and so forth. Microenterprise is a kind of
independent venture, which is frequently unregistered and kept running by a poor individual or gathering. For the
most part, a microenterprise is characterized as an independent venture having five or fewer workers and seed
capital is little. Microenterprises contribute significantly to economic growth, social stability, and equity.
Microenterprise division is one of the most significant vehicles through which low-income individuals can escape
from the grasps of poverty and make independently employed and monetary opportunity with limited skills and
education.
Ms. Brinda Karat MP CPI (M) said that the government had not made any corrections to the MFIs Regulation Bill
as proposed by the Parliamentary Standing Committee. The board had prescribed, in addition to other things, a top
on the loan costs. The rates couldn't be past the financed rates at which advances were being given to self-improvement
gatherings and MFIs ought not to become vehicles of benefits. "The large scale plunder for the sake of small scale
money ought not to be permitted," Ms. Karat said. The statement given by Karat has various implications and it
ought not to be trifled with in the event that we truly thinking for the needy individuals. Former PM of Bangladesh,
Sheik Hasina Wazed said micro lenders were "sucking blood from the poring the name of poverty alleviation," and
she requested an examination concerning Grameen Bank, which had spearheaded microcredit and which, alongside
its originator, was granted the Nobel Peace Prize in 2006. We should take genuine note on the remark given by
Hasina due to her disappointment and request for examination concerning such association who had got the Nobel
Peace Prize on its top. Telugu Desham Party president, Mr. N. Chandrababu Naidu, brought up that the government
has lost control on the undertakings of MFIs and washed its hands off the issue by simply proclaiming an Ordinance.
Without fixing interest rates and regulatory measures, the statute would not fill any need, he said. Microfinance
pioneer and Nobel Laureate, Dr. Muhammad Yunus has raised a few worries over SKS Initial open contributions in
a selective meeting. After the dubious IPO discharge from Compartamos from Mexico, SKS is the second Microfinance
Institution to issue IPOs and a lot more MFIs might pursue the pattern.

*Assistant Professor, Department of Commerce, Indira Gandhi National Tribal University, Amarkantak, Madhya Pradesh, India
**Research Scholar, Department of Commerce, Indira Gandhi National Tribal University, Amarkantak, Madhya Pradesh, India
***Professor, Department of Commerce, Indira Gandhi National Tribal University, Amarkantak, Madhya Pradesh, India

Microfinance Intervention : Performance Adaptive and Effect l 56

Context of Microfinance in Madhya Pradesh:
The NSSO's Round 66 data by Tendulkar1 presents the rural poverty of MP at 37.8% and urban poverty at 19.7%.
The projections in this report are based on information from 'Progress out of Poverty Index (PPI) - A simple
Poverty Score Card for India", the 'Census 2011 statistics' and the observations and opinions of various stakeholders
met individually as well as through two consultative meetings in addition to secondary data accessed through various
references. Growth of various forms of groups but predominantly Self Help Groups is taken into account while
estimating demand and supply of credit. Weak, defunct and overlapping groups are factored into. Though currently
SHGs are more, the JLG concept is also now growing in the state. Within the SHG itself it is estimated that about 70%
are poorer than about the rest. According to the planning commission report (2014), in 1999-2000 about 69.0
percent of India's rural poor live in five high poverty states alone, including Madhya Pradesh. Madhya Pradesh is the
second-largest Indian state in an area with a population of 72 million size with an area of 308,252 sq. kms. It has 52
districts, 341 tehsils, 318 blocks, 23412 panchayats, and 55393 villages. It has a sex ratio of 931 females per 1000
males. The poverty rate in Madhya Pradesh stands at 48.6% and literacy rate at 75% which reflects a significant
scope for improvement in terms of several human development indicators. Poverty and lack of livelihood
opportunities act as a huge constraint for MP, with about 68% of the state's population being poor. The total
population of Madhya Pradesh is 72626809 persons, 51.1 percent are males. Almost 73.5 percent of its population
lives in rural areas and 26.5 percent in urban areas. The literacy rate is 70.6 percent (male literacy level is 80.5
percent and female literacy level is 60.0 percent). Census 2011, highlighted the workforce in the state constitutes
43.47 percent of its total population, of which 71.9 percent are main workers and 28.1 percent are marginal
workers. Out of the total workforce (main and marginal), 31.2 percent workers are cultivators, 38.6 percent are
agricultural laborers, 3 percent are workers in household industries, and 27.2 percent workers are engaged in other
activities.
The challenges face by the people are lack of awareness of banking / financial literacy, inadequate bank reach result
in high clientele per bank branch (23,000 per bank branch-2011 Census) leaves a high number, about 65% of
unbanked population in the state.

REVIEW OF LITERATURE
In the process of study, various literature works have been counseled to know the effect of microfinance on the two
angles. Among the different works and explanation of analysts, the following couple of writing has been imitated to
help the present study.
Goyal(2018) concluded that the SHGs in rural areas are performing very well. Microfinance creates the confidence,
skill and courage in the marginalized section of society. It leads them to participate in all type of welfare activities
with good cooperation. The wholesale privatization of social welfare institutions and increase in the cost of living puts
a lot of pressure on the poor.
Reddy (2017) mentioned that the Microfinance Institution moved to formal banking sector like Bandhan Bank Ltd,
which received banking license by Reserve Bank of India in 2014. Equitas Microfinance has become the first
microfinance company to have draft red herring prospectus with SEBI to do an IPO in 2015. Moreover, ESAF
Microfinance and SKS Microfinance also were listed in IPOs and showing tremendous financial performance. State
Bank of India set up a specialized microfinance branch in Asia's largest slum area, Dharavi in 2010. This is the second
such branch opened by the bank in the country the first at Bhopal, which it established in 2008.
Singh& Singh, (2017) Impact of microfinance on empowerment of women has given mixed results. According to Le
and Raven, microfinance has helped many women in their businesses, but has a limited effect on empowering
women, creating upward mobility and contributing to long-term economic growth. In Indian context, microfinance
was found to have a positive influence on women's social capital and normative influence, facilitating women's
collective empowerment.
Bori (2017) Study revealed that after joining the SHG the income and expenditure of the members has significantly

57 l Splint International Journal of Professionals I ISSN : 2349-6045 I Vol. -VI, Issue-03, July-September 2019
increased. But in case of saving it was found that there was no vast difference between saving of the members in pre-
SHG and post-SHG period. As a result income and expenditure in post-SHG period has increased significantly than
that of pre-SHG period. From these findings it can be concluded that SHGs positively improved the economic
empowerment of women in the study area.
Rao &Soni, (2016) Micro Finance due to its inherent qualities of timely supply of financial services and flexibility of
products can give impetus to potential sectors such as animal husbandry, wool and mutton processing, Information
Technology, tourism etc. In addition to harnessing potential sectors of development, microfinance helps in reaching
out to the vulnerable segments of the society like Women, SC and ST, which are outside the purview of formal
financial institutions.
Poddar(2015) considered microfinance intervention is an initiative step taken by the many government and non
government organization to promote women empowerment focused on rural area. In this paper he attempts to
understand the role of microfinance in socio-economic empowerment of women in Thane district of Maharashtra.
He concluded that good habit of females as maximum number of women respondent were having saving bank
accounts and post office saving but there are so many obstacles faced by women due to lack of awareness regarding
to micro financing services being provided by the banks and some are unaware about opening zero minimum
balance saving account.
Gangadhar CH, (2015) Here it is argued that, although the widespread complacency about the automatic benefits of
microfinance for women needs to be questioned, the shortcomings of existing practice should stimulate the search
for improvement and innovation, rather than provide the basis for cynical inaction. It is not microfinance per se
which is the problem, but the ways in which 'best practice' has become dominated by concerns of financial
sustainability.
Chauhan & Rajdev, (2014)Microfinance in India origins back to the early 1970s when the Self Employed Women's
Association (SEWA) of the state of Gujarat formed an urban cooperative bank, called the Shri Mahila SEWA
Sahakari Bank, with the objective of providing banking services to poor women employed in the unorganized sector
in Ahmedabad City, Gujarat Financial institutions in India continued to play a leading role in the microfinance
programme for nearly two decades now.
Pankajakshi& Shailaja, (2015) Microfinance is a type of banking service that is provided to unemployed or low-
income individuals or groups who would otherwise have no other means of gaining financial services. Micro finance
through Self Help Group (SHG) has been recognized internationally as the modern tool to combat poverty and for
development of rural women. Micro finance and SHGs are being effective in decrease in poverty, empowering
women and creating awareness which will ultimately result in sustaining competitive environment and development
of the nation. The micro financing main focus is to empower women.
Rajendran (2012) NABARD has defined micro finance as follows: "Micro finance is all about provision of thrift,
credit and other financial services and products of very small amount to the poor in rural, semi urban and urban
areas for enabling them to raise their standard of living." UN declared the year 2005 as year of micro credit since the
policy makers of UN supported the view that micro finance is an instrument to fight against poverty. According to
Nobel Committee, micro finance can help the people to break poverty, which in turn is seen as an important
prerequisite to establish long last peace.
Sarumathi, Mohan, Sarumathi, & Mohan, (2011) The study concludes that microfinance brought psychological and
social empowerment than economic empowerment. Impact of micro finance is appreciable in bringing confidence,
courage, skill development and empowerment. The SHG members feel free to move with their groups and leaders.
It leads them to participate on various social welfare activities with good co-operation.
Hussain &Yaqub(2010) revealed that the major influencing behind entering into the micro-business venture was
self-employment. Employment of family member is also an important factor that influences the micro-entrepreneurs
to launch a venture.
Bali Swain, Ranjula& Wallentin, (2007) concluded many strides have been made in the right direction and women

Microfinance Intervention : Performance Adaptive and Effect l 58

are in the process of empowering themselves and NGOs that provide support in financial services and specialized
training, have a greater ability to make a positive impact on women empowerment.
The objective of the study
1. To study the status of microfinance through SHG in Madhya Pradesh.
2. To study the present trends of microfinance in the country with the context of Madhya Pradesh.
RESEARCH METHODOLOGY
The study is a specific assessment and quantitative analytical study dependent on new pattern and examples happened
in operational strategies for Microfinance. The idea of the study is exploratory thusly information has been gathered
through secondary sources ordinarily from Bharat Microfinance report, NABARD yearly report and Status of
microfinance of India and so forth.
Microfinance growths in India
While the nongovernment organizations are pioneers in promoting SHGs in Madhya Pradesh, state-sponsored
programs such as Swa-Shakti, Tejaswini, and SGSY have played a major role in different phases in promoting the
SHG-BLP. Despite Madhya Pradesh being part of NABARD's list of priority states, it appears that the SHGBLP is yet
to be at par with the SHGs' performance in other states.
The performance of SHG-BLP has declined over a period of time with a compound annual growth rate (CAGR), in
terms of a number of credit-linked SHGs, for the period 2002 to 2007 of 44%. Further, in subsequent years,
from2008-10 the CAGR reduced to 12.8% and in the recent past (2011-12), SGHBLP has witnessed a negative
growth of 17.1%.(Groups, n.d.)
Half of the districts in the state have less than 50% coverage of rural household by the SHG-BLP. The average
savings is INR 6,864 per SHG and average credit disbursement is INR 1,09,064 per SHG. These figures are less than
the national average in the year 2011- 12. Further, outstanding loans to savings ratio of 10.2 as of March 2010 went
down to 7.9 as of March 2011, which is a good sign. The SHG-BLP is also facing high NPA of 7.08% as reported in
March 2013. Percentage of NPA went up by 26% in the year 2012-13(Satish, 2013). During the financial year
2017-18, 46439 SHGs were credit-linked and 13320 SHGs were savings linked by the banks. In Madhya Pradesh,
as many as 2.38 lakh SHGs have been savings linked with an outstanding savings amount of Rs. 648 crore and 1.15
lakh have been credit linked with a loan outstanding of Rs 904 crore as on 31st March 2018.
Outreach and profitability performance of microfinance programs
Indian Microfinance Sector has witnessed tremendous growth over the past 18 years. As of March, the quantum of
Rs. 46,842 crore credits made available to the poor and financially excluded clients and the number of clients
benefitted is close to 29 million. The outreach this industry fell by 26% and loan outstanding grew by 27% over the
last year. The southern region still continues to have the highest share of both outreach and loans outstanding
followed by East. However, growth rates are higher in the Northeastern and Central regions (Satish, 2013)
The overall outreach and profitability of Microfinance sectors and institutions in the last four years have been given
below.
Table-1: Outreach and profitability performance of microfinance programs:
Performance of MFIs 2017-18 2016-17 2015-16 2014-15 2013-14
Client outreach in lakh 295 399 371 330 275
Rural client (%) 61 38 33 56 67
Number of branches 10233 11644 12221 11687 10697
ROA (%) 2.4 2.2 1.73 1.94 1
ROE (%) 13.31 11.6 8.19 9.25 4.8
No of SHG linked (in lakh) 85.77 79.03 77.12 74.29 73.17
Operating expense ratio(%) 10.50 10.2 11.45 12.08 12.00
Source: Consolidated data from the Bharat Microfinance reports 2017-18 to 2013-14

59 l Splint International Journal of Professionals I ISSN : 2349-6045 I Vol. -VI, Issue-03, July-September 2019
The table.1 shows that the client outreach in 2017 is 295 lakh, whereas it was 399 lakh in 2016, out of it 61% belongs
to rural clients. Operating Expense ratio (OER) during 2016-17 showed a gradual increase in 2017, which is only
10.50% and second-lowest over the last five years
SBLP and MFIs- the Microfinance Drive-In Madhya Pradesh.
The growth of SBLP and MFIs in Madhya Pradesh has been slow as compared to other parts of the country.
In table 2 the entire view of the entire picture of microfinance in India is given. It has given. It has been observed that
the number of SHGs has steadily increased between the periods of 2013-18. However, the saving of the SHG
increased to 1959211.52 lakh, i.e., an increase of 21.58. It can be seen that the number of savings of SHG increase
with 23.79 percent in the year 2015-16 which was highest over the year. Similarly, the amount of the loan disbursed
to SHG also shows a steady increase with the year 2017-18 registering an increase of 21.67 percent. It can also be seen
from the table that the number of SHGs which have loan outstanding increased from 2013 to 2018 and an increase
of loan outstanding is 3.55 percent in the year of 2017-18.Nonperforming assets against Bank loans to SHGs Stood
at an amount of 462805.51 reflecting 6.12 percent of NPAs to loan outstanding.
Table-2: Performance of SHGs and Microfinance in India (Amount in Lakhs)

Sources: NABARD, Status of Microfinance in India, of various year

In table 3, the performance of SHGs and microfinance in Madhya Pradesh is presented. Though there has been an
increase in the number of SHGs in the state, the increase in number have been dismal and the year 2016-17 in fact

Microfinance Intervention : Performance Adaptive and Effect l 60

registered a fall in the number of SHGs. The current number of SHGs in Madhya Pradesh now stands at 256178. The
savings of the SHGs amount to 30067.45 increase of almost 10.10 percent. While saving with SHGs showed an
increase, the number of loans disbursed to SHGs fell down 39.29 percent to an amount of 17984.38 lakhs. Also, the
bank loans outstanding against SHG increased 13.46 and Non- performing-Asset stood at 19.74 percent of the loan
outstanding.
By comparing both the figures in table 1 and table 2, it is inferred that the microfinance activities in Madhya Pradesh
are on the verge of elimination and become ineffective in eliminating the poverty same from the state. The downward
trend and negative growth not only impaired the effectiveness of the MF instrument in providing a sustainable
livelihood to the poor but also made them vulnerable masse financially excluded from the mainstream.
Table-3: Performance of SHGs and Microfinance in Madhya Pradesh (Amount in Lakhs)

Sources: NABARD, Status of Microfinance in India, of various years

CONCLUSION
In the course of the most recent couple of decades, there have been many overviews, both in India and abroad with
regards to the effect of microfinance on the lives of the poor individuals it is expected to reach. The outcomes have
been both conflicting and confusing; it has been seen that microfinance has now and again made credit reliance and
repeating obligation and has given a bane to the poor individuals who are living underneath neediness line. Questions
have additionally been communicated with respect to in the case of loaning offices have in all cases stayed focused
on the objective of battling poverty or whether they are exclusively inspired by monetary profit. A solid administrative
body to manage the miniaturized scale account industry, which will indirectly help in the alleviation of poverty, is

61 l Splint International Journal of Professionals I ISSN : 2349-6045 I Vol. -VI, Issue-03, July-September 2019
much excitedly anticipated by the small scale business people from the Reserve Bank of India and the Government
of India. The program owes this degree of inclusion to its capacity to prepare masses of rural individuals, put forth for
the Govt. machinery and draw developmental agencies all things considered. This Program is a strong intervention
in monetary enablement and budgetary consideration for the base of the pyramid. A demonstrated stage at first
imagined for expanding the effort of banking administrations among the poor has since graduated to a program for
the promotion of livelihoods and poverty alleviation.

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