HISTORY AND CHANGING TRENDS AND PRACTICES IN MICROFINANCE

Poverty is one of the common obstacles in achieving higher growth and promoting livelihood of the people. In the developing country like India, where majority population resides in rural areas, rural development becomes imperative for the economic development of that nation and rural development, poverty reduction needs to be the focus of all development programs. India falls under low income class according to World Bank. It is second populated country in the world and around 70 % of its population lives in rural area. Micro-Finance is emerging as a powerful instrument for poverty eradication in the new economy. In India, micro-Finance aimed at providing a cost effective mechanism for providing financial services to the 'unreached poor'. Microfinance is the provision of financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services. The dynamic growth of the microfinance industry has been promoted not only by market forces but also by conscious actions of national governments, Non-Governmental Organizations (NGOs), and the donors who view microfinance as an effective tool for eradicating poverty. The powerful push behind this huge and increasing support for microfinance indicated that national economic and social impacts are significant and it needs to be understood more closely. Those who promote microfinance generally believe that such access will help poor people out of poverty. Microfinance has been found to be effective in lifting the poor in India above poverty level by providing them increased self-employment opportunities and making them credit worthy. MFI serve over 24 million clients who maintain Rs. 19676/-crores in loan outstanding as of March 2010. In India there were only two MFI and their outreach is up to 3066 clients and the number is increased up to the 112 MFI and their client number was 390362 up to 2011. The study aims at understanding concept of micro finance, features, role of micro finance in India, and micro finance as an effective instrument of poverty elevation, women empowerment and rural development in India. This paper argues that microfinance can be considered an important element for an effective poverty reduction strategy. It shows that access and efficient provision of microcredit can enable the poor to smooth their consumption, manage their risks better, gradually build their assets, develop their micro enterprises, enhance their income earning capacity and enjoy an improved quality of life.

The Nobel Prize winning model of micro-lending to the poor has triggered the rapid growth of microfinance industry and it is largely projected as a key enabler for poverty alleviation and supports macro economic growth for the poor regions. This view is challenged by many academic scholars and the press, based on analysis and empirical evidence to support their arguments. Some even argue that microfinance is counterproductive and works against global poverty programs. Based on studying some of these reports, I present a summary view of the concept, growth and the evolution of the microfinance industry and submit that while microfinance initiatives do support the poor and provide a safety-net, these alone cannot provide the benefits in the long run and may even be counterproductive, unless they are implemented and managed as part of other state-driven poverty programmes.

2008

Microfinance has been widely accepted as a viable policy option for poverty reduction by the donor community, international organizations, governments and nongovernmental organizations. In order to investigate this underlying premise, this study examined empirical evidence in Ethiopia to check if microfinance is a good poverty reduction strategy. For this purpose, the two cases (ACSI and Wisdom) were analyzed based on Design, outreach, financial performance, sustainability and impact framework. The study found that Microfinance is indeed a strategy for poverty reduction in Ethiopia. However, the contribution of cases depends on their approach. ACSI is efficient, profitable, and sustainable MFI and best reflects the business approach. However, it is less effective in achieving its development mission and reaching the poorest clients in the region. Although Wisdom is financially less efficient, productive and sustainable, its strong link with WVE helps to work relatively better in its development objectives.

Executive Overview Microfinance is an emerging phenomenon that opens access to capital for individuals previously shut out from financial services. In its direct engagement with the poor, microfinance represents a new way for financial capital to potentially stimulate economic growth in developing countries. However, microfinance is poorly understood, and it remains unclear whether it delivers on its promises. The goal of this paper is to introduce the topic of microfinancing to a wider audience of management researchers and to identify opportunities for future research in this new and growing area.

Oxford Development Studies, 2013

Microfinance (MF) has grown over the last two decades into an important sub-field of development studies. This special issue of Oxford Development Studies explores the contributions of MF, drawing particularly on research conducted in India. After a brief overview of the emergence of MF as a research field, this introduction develops three themes. First, we argue that MF interventions generally involve, and assume a process of transformation of, financially excluded people and groups who are not fully dominated by the logic of market exchange but have histories, culture, social relationships and politics structured by other kinds of authority and dynamics. Second, we argue that understanding MF interventions at the local level requires the social and political analysis of global development architecture, while MF may also play a role in consolidating or cementing global political economy at its base. Third, we argue that MF interventions have provided fertile ground for research into the causes and consequences of poverty. The introduction ends with summaries of the contents of the special issue.

Poverty is a serious issue which is faced by masses around the world. This study aims to determine whether the microfinance institutions established for the purpose of reduction of poverty have been successful in achieving their objective or not. Primary data was collected for the proposed research study through structured questionnaires. In order to analyze the collected data multiple liner regression and paired t-test were applied. Results show that microfinance has a strong positive impact on children education and enterprise financial performance. However, there is mixed evidence found on food security, household expenditures and household assets. No impact has been observed on housing and income smoothening of enterprise. Among other independent variables, it was revealed that number of salaried persons was found to be very important variable contributing to the wellbeing of the microfinance clients. This research has made a significant contribution in unraveling some of the myths of microfinance hence advancing literature and research on this important issue. INTRODUCTION Poverty is defined relatively to the standards of living in a society. People live in poverty when they are denied for their social needs, inadequate resources; sufficient income while these circumstances also starved of them to participate fully in accepted daily life as well. On the whole, the poverty line in a country is terminating annual income below which households are gone into poor. A loan given to poor community used to be an inappropriate concept. Millions of poor people are living on welfare and unbanked household want economic facilities. They find a multiple variety of services including savings, loans, insurance, and facility of receiving and sending money. Families use economic services to build incomes, decrease possibility, and keep against liability often increase by economic crises, sickness, and natural disaster. The purchase assets reduce the poverty help to increase the living standard support the health and education services increase. Mostly the Commercial banks do not help these households. But the conventional banks failed to help this market for many reasons like for microfinance business the business model unable to suit this structure characterized by high-volume, low-value transactions. Secondly, they hire traditional advancing technologies based on security requirements (to which the unbanked generally don't have access). The conventional banks believe the unbanked are unable to repay save money or loans. Mostly the developing countries have a large number of peoples they do not approach to avail the credit that is the major cause of poverty. Globally, Poverty is an inadequate income or a shortage of resources with which to meet needs (Alkire and Foster, 2011). Poverty manifests itself as material deprivation and often leads to poor physical and mental health, restricted social and economic mobility, social isolation and powerlessness. All over the world, in different nations, poverty has always been under consideration. The causes containing a loss of individual responsibility, bad state policy, profiteering by people and businesses with power and influence, some compound of these and other aspect. In Britain, people in poverty are instead more likely to describe their everyday experiences as , limited, constrained, full of

2018

Now a days the formal banks are dominated due to financial institutions as they provide the services which are widely accepted by the poor due to easy procedures. These institutions can be governmental, non governmental based. There is common problem with these finances that is interest rate being so high which is faced by all the poor people as they approach the Microfinance institutions (MFIs )for the easy process of taking micro loan but they end having more money for repayment due to high interest rates. The purpose of this study is to analyse the performance of microfinance provided service to people, organizations. This study reveal The performance of micro finance in previous years and at present. Microfinance is an individual focused financial services provided to the poor and small scale businesses who lack access to the mainstream finances.

United Nations, Department of Economic and …, 2009

This paper attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as a universal poverty reduction tool. It argues that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt. Microfinance, however, certainly plays an important role in providing safety-net and consumption smoothening. The borrowers of microfinance possibly also benefit from learning-by-doing and from self-esteem. However, for any significant dent on poverty, the focus of public policy should be on growth-oriented and equity-enhancing programs, such as broad-based productive employment creation.

Feminist Economics, 2009

1998

Our knowledge about microfinance in developing countries has been greatly enriched in recent years by the experience of numerous institutions. Different sound technologies and practices of financial services to all segments of the population have emerged; there is no single best practice or optimal approach that could be simply replicated. People and institutions have to find out what suits them best. Through trial and error, they gain the experience which may then be cast into lasting innovations. Five case studies are presented, each with its own lessons concerning viability, sustainability, and outreach: two from Indonesia, two from Nepal, and one from India. In addition, lessons are drawn from the recent financial crisis in Indonesia concerning the importance of a triad of framework conditions: prudential deregulation, macroeconomic stability, and adequate bank supervision. The data are largely based on the author?s field research and consultancy work. --