Micro-finance in Rural India: Challenges for the Future

Micro-finance in Rural India: Challenges for the Future Submitted by: Aishik Chakraborty Aritra Datta Shubham Chowdhury Snehashish Saha INTRODUCTION Rural India is home to about two-thirds of the Indias 125 crore population. This population is mostly engaged in agriculture that contributes 17.2 percent to Indias GDP. However, this dependence on agriculture is gradually diminishing with small-scale cottage industries and self-help groups gaining prominence in rural economy. This is clearly reflected by the contribution of industry in rural economy which has grown to 30.2 percent in the recent years. However the self-help groups and cottage industries often have to depend on the local moneylenders for financing of its activities with most large scale banks yet to make a foray into rural markets. In such circumstances, micro-finance gains prominence in financing activities of such industries. Micro-finance is a critical factor in uplifting rural economy. However this sector suffers from various challenges. It is imperative that the challenges are studied in order to ensure the Indian growth story to continue. This study will analyze the prevalent challenges and recommend strategies to overcome these bottlenecks. LITERATURE REVIEW Micro-finance refers to small scale financial services provided by financial institutions to the financially backward classes. These services include savings, credit, insurance, etc. The conditions for a financial service to be termed as micro-finance is that the transaction should be small and the customers should be financially weak. Jeffrey Sachs, the renowned economist once claimed that â€Å"The key to ending extreme poverty is to enable the poorest of the poor to get their foot on the ladder of development.† The concept of micro-finance was introduced in India during the 1990s. The country is home to about a third of the world’s poor, most of who do not have access to commercial banking services. The key problem areas in rural financial markets included a lack of credit in rural areas, absence of modern technology in agriculture, low savings capacity in rural areas and prevalence of usurious moneylenders. In such circumstances, micro-finance provides financial inclusion to the under-privileged sections of the society. In absence of micro-finance, the poor in rural India would fall prey to the money-lenders who charge a very high rate of interest on credit and thereby rob the poor of their savings. Micro-finance differs from conventional banking as unlike conventional banks, micro-financing lays more emphasis on the principles of co-operation, equality and mutual self-help. Micro-finance targets mostly the women of rural India, with more than 90% of its customers being women belonging to self-help groups. Micro-credit is mostly used for direct investments by self-help groups and facilitates access to credit by clients who need small amounts of credits but are less credit-worthy for larger loans. However, MFIs in India are susceptible to a number of challenges including political interference. They compete with both politicians and government backed lending programs for the same target segment. The ability of the Indian MFI industry to mitigate this risk is a crucial factor in determining its success. An example of a crisis in the micro-finance sector was when Andhra Pradesh found itself at the center of a debacle thatwas triggered by a the highly successful MFI, SKS Microfinance, which tactfully covered up cases of suicides among MFI borrowers. While it has not been clearly established whether indebtedness or coercive MFI tactics triggered the suicides, the political backlash was intense. In order to counterbalance the political criticism, the state government hastily pushed through a legislation that effectively crippled the MFI industry in the state. RBI established a committee, headed by Y.H. Malegam, to review the various issues and to recommend regulatory steps needed to prevent these incidents from recurring. Released in January 2011, we the recommendations will have wide ranging impacts on the industry. Some of the key impacts include: Creation of entry and operational barriers through higher net worth, capital adequacy, loan portfolio allocation requirements with a possibility of some banks absorbing some of the MFIs. Implementation of industry specific corporate governance standards, greater oversight by the RBI, tailoring NPA definitions in accordance with industry standards will improve corporate governance and transparency . Establishment of a fully fledged credit bureau, limitations on the number of loans to each household, conditions on procedures for loan sanctioning and repayments will reduce the incidence of over-borrowing and multiple-lending . The World Bank has also taken major steps in the sector of micro-finance. Formation of Consultative Group to Assist the Poor (CGAP) in 1995 as a consortium of 33 Public and private development agencies and establishment of Microfinance Management Institute(MAFMI) in 2003 are significant landmarks. Regional multilateral development banks like Asian Development Bank also champion the cause of commercial micro-finance. Nationalization of existing private commercial banks, massive expansion of branch network in rural areas, mandatory directed credit to priority sectors of the economy, subsidized rates of interest and creation of a new set of rural banks at district level and an Apex bank for Agriculture and Rural Development (NABARD20) at national level are some of the organizations working in micro-finance. The initial micro-credit innovations in Bangladesh, Bolivia and Indonesia demonstrated the success of micro-lending. However the popularity of micro-finance in India stemmed from its ability to reach the poor without collateral and near full recovery rates. Micro-finance is contributing significantly to the financial activities of the poor. Various initiatives and programs have been launched to fortify the position of micro-finance in India. The speed of enforcement and the degree to which these recommendations are implemented will determine how much the industry will change and how likely it is to succeed. CONCEPTUAL FRAMEWORK Microfinance suffers from various challenges from its competitors and also from the issues stemming from the mismanagement of various micro-finance companies. The study will enable us to recommend the future strategies and build the way forward for MFIs in India by addressing the following issues. What is microfinance and how does it impact rural India? What are the challenges faces by MFIs in India? What are its implications on the various stakeholders (villagers, money-lenders, banks, Govt. and the MFI institutions) What are the possible solutions to these challenges? Action plan for the recommendations. RESEARCH DESIGN The research will be based on the following methodologies. Identification and interpretation Identify the major issues and challenges. Formulate relevant questions keeping in mind these issues. Gather information from primary and secondary sources. Interpret the solutions to the issues Support and supplement the findings from research data. Data Analysis Gather data from self help groups and find whether they are involved in Micro Finance, and how micro finance has contributed to their business and rural India in general. Challenges that they face while getting the requisite loan from the Micro Finance Institutions. What are the viable alternatives to Micro Finance. The strategic importance of Micro Finance Institutions to their organization. How Micro Finance has impacted their lives and whether the impact is positive or negative. EXPECTED CONRIBUTION The study will consider all the dimensions of Micro Finance in Rural India and provide the following value additions to the field. Appreciate the importance of Micro Finance in rural India and explain their significance. Understand the perceptions of the rural population about Micro Finance in India. Remove the apprehensions about Micro Finance and communicate the benefits of Micro Finance to the rural population. Understand and comprehend the challenges that Micro Finance Institutions face in rural India. Elucidate how the challenges impact the MFI’s. Analyze and evaluate the challenges critically. Develop strategies for overcoming the current challenges and sustaining them. Analyze the competitors and their strategies. How can MFI’s handle the challenges and maintain their customer base. Design the future path of development for Micro Finance in India. Existing micro-finance models in India The following micro-financing models are prevalent in India. Each of these models have their own advantages and disadvantages. SHG-Bank Linkage Model: In this model the SHGs get credit directly from the co-operative banks, regional rural banks, NABARD, etc. This model provides credit to SHGs at lower rates of interest. However this model reduces the credit worthiness of the SHGs and increases the risk of default for the banks. Bank-MFI Linkage Model: In this model, the MFIs act as intermediaries and guarantors for the SHGs and receive financing from banks for further lending it to the SHGs. This model helps in improving the credit worthiness of the SHGs and reduces the risks for the banks. However the SHGs have to pay a higher rate of interest to MFIs in this model. Challenges faced by the Micro-finance sector in India Through extensive study and discussions with relevant stakeholders, the following have been identified as being the foremost challenges to the micro-finance sector in India. There is extreme skewness in distribution of micro-finance services in India. 52% clients of micro-financing come from southern India while 23% come from eastern India. The share of micro-finance beneficiaries from North, West, Central and North-East India stand at an abnormally low level of 9%, 12%, 3% and 3% respectively. This disparity clearly shows that micro-financing services are unevenly spread and is not available to many people who need it. Micro-finance is mostly concerned with micro-credit to SHGs. However other financial services such as insurance, savings schemes are not provided. Also it serves the SHGs, individual businesses don’t benefit through micro-finance. Micro-finance is considered as a social/charitable business rather than a profitable one. Consequently, almost 90% MFIs are dependent on subsidies and suffer from a high debt-equity ratio. The loan sizes are generally small and involves high transaction and processing costs. Consequently the interest rates are higher. There is high turnover of MFI employees. The reasons are poor salary, lack of incentives and working mostly in rural areas with limited opportunities. The employees also lack in financial and technical training. The MFIs lack control over how efficiently the money is used after lending. This often leads to bad investments by SHGs and results in default. MFIs are aware of this risk and keep the interest rates high in absence of a collateral. Micro-finance has reached only a small fraction of the people who need it. The micro-finance sector lags behind from technological perspective that would allow it to disburse loans more effectively. Absence of best practices norms in the industry often leads to coercive recovery of loans. The poor in urban areas cannot avail micro-finance services. Hence these services should be extended for the urban poor as well. Micro-finance institutions have a very low rate of customer retention. This is because clients are not properly educated about the services available from the MFIs. Recommendations Based on the findings, the following steps are recommended for reviving micro-finance sector in India and turning it into a tool for poverty alleviation and financial inclusion. Micro-finance reaches a very small fraction of the people who need it. Hence an overall scaling up of micro-finance sector is imperative. The initiative can be in form of public ventures, private banks or PPP model. The MFIs and NBFCs are to be brought under a regulatory authority to ensure standardization and enforce best practices. The micro-finance sector should diversify its portfolio from being a money-lending entity into an sector that provides holistic financial services such as insurance and savings to its clients. It should also try to widen its client base from SHGs in rural areas to the deserving urban poor who require financial inclusion. Greater use of technology and analytics can negate some issues that arise out of asymmetric information while sanctioning a loan and provide better risk analysis. This will allow MFIs to lower the risk of default while the poor will benefit from lower interest rates due to less chances of default. There employees should be provided with better incentives and given proper training to educate the rural people with the benefits of services provided by the MFIs. They should also be provided with technical and financial training to better assess the credit worthiness of the client. The perception of MFIs should change from being social or charitable organizations into being sustainable and profitable organizations. This would allow MFIs access into financial markets and investments and end their dependency on subsidies. Appendix The following questions were asked to hostel and mess staff and security guards of IMI who were likely to have been exposed to the Micro-finance sector. The questionnaire and responses are as follows. Are there any SHGs operating your native village? Do you have any close relative associated to SHGs? Which part of the country your native village is situated at? Are you aware of the services that micro-finance institutions provide? Do you have access to micro-finance institutions in your village? What is the preferred source of credit in your village? Has micro-finance institutions uplifted the rural class? REFERENCES Microfinance in India: Empirical Evidence, Alternative Models and Policy Imperatives Rajaram Dasgupta Access, Use and Contribution of Microfinance in India: Findings from a National Study Frances Sinha Microfinance in India K.G. Karmakar ISBN: 978-0-7619-3626-8 Microfinance in India: Mission or Misery? Jaideep Singh Panwar The Microfinance Sector in India: Which Way Now? Savita Shankar and Mukul G. Asher Issues and Challenges Relating to Microfinance in India Dr. Sandeep Bansal Microfinance in India: Contemporary Issues and Challenges Sibghatullah Nasir

A Synopsis of the Movie The Graduate

A world without rebels would be a world with no change. If specific groups didn't escape the status quo, life would essentially go on as if it were put on repeat. Nothing would ever change, and nothing new would ever be accomplished. And most importantly, there would be no distinguishing factors between any two generations. Generations are shaped by the exclusive social changes that transpire over a given time period. Each generation desperately wants to set themselves apart by challenging the values and morals of the ones who came before them.They rebel against everything they were once taught in order to be independent and live a appy life. These rebellions have shaped American society for decades. Mike Nichol's film, The Graduate, tells the story of a young man's rebellion against his family and against society. The story unfolds in the nineteen sixties during a time of a major cultural change. In The Graduate, Benjamin Braddock consistently rebels against everything he believes i n, which doesn't stray far from the typical behavior of most youth in the nineteen sixties. Rebellion is a recurring theme throughout Nichol's film.The main character, Benjamin Braddock, had Just graduated college and had no definite plan for his uture endeavors. On the other hand, Benjamin's overbearing parents practically had his life laid out for him. As soon as he returned home from graduating college they constantly pestered him about attending graduate school. At the time, the thought of attending graduate school or starting a career stressed Benjamin out, and he admitted that he was nervous about his future. At his graduation party he told his father that he wishes that his future could be â€Å"different†, but his father did not seem to care about Benjamin's uncertainties.Therefore, he followed what most kids is age were doing in the sixties and rebelled against conformity. In the nineteen sixties the youth rebellion was in full swing. The youth wanted freedom from th e previous ways of the generation before them, so they began to rebel. The rebellion was massive because the current youth was comprised of the baby-boomer generation (â€Å"Rebellion and Reaction†). In fact it was so big that it gave the nineteen sixties the common nicknames of â€Å"the rebellious decade† and â€Å"the period of turmoil† (Bodroghkozy).The nineteen sixtys counterculture rebelled in various ways, but defying parental authorities was among the most popular. They wanted to ensure that their values and behaviors deviated from those of their parents. It was important to them that they made a new life for themselves that was for their own happiness and not for their parent's happiness (â€Å"Rebellion and Reaction†). They were striving to make their futures different Just like Benjamin Braddock wanted his future to be. Parents were always trying to map out their children's futures, but the rebellious youth of the nineteen sixties were all but willing to allow that to happen.Benjamin Braddock did everything he could to escape from his parent's high expectations. They were constantly telling him what to do and when to do it. However, Benjamin continued to ignore their constant demands and did the exact opposite of what he was told. He rebelled because he wanted to make himself happy betore pleasing his parents He was not ready to s tart a career or turtner his education; all he wanted to do was relax by his parent's pool and not worry about his future Just yet. The scene at his 21st birthday party finally allowed him to tune out the sound of his parents.He was given a scuba suit and was forced to test it out in front of everyone who was at his party. After he was forced into the pool, he found himself standing still at the bottom. He was finally alone and was not able to hear any of the noise coming from above the water. The camera angle shifted and was now from the perspective of Benjamin. It showed him looking up out of the water at his parents shouting at him, but he was not able to comprehend any of the words being yelled at him. This was Just the start of his rebellion against his parents.The fact that he was underwater symbolized that Benjamin felt like his parents were drowning him in all of their expectations. He was suffocating and was finally able to be at peace at the bottom of the pool. The majority of the youth at this time was searching for peace, and the only way of obtaining it was to rebel against the conformity of their parents. They all felt like they were being drowned; therefore they continued to rebel in ways that disgusted their parents and even disgraced society. The nineteen sixties was a time to experiment. The youth was trying so hard to change society and find a new identity for themselves.They did everything they could to stray away from what was considered normal. Drugs and sex played a major role in the youth's rebellion against society, and it was definitely a culture shock. During this time period, casual sex became more acceptable and a majority of the youth participated in it. It became so popular that it earned the name â€Å"free sex† and everyone was made aware of it (â€Å"Rebellion and Reaction†). It was mostly popular among the younger generation, but that didn't stop Benjamin Braddock from pursuing an older woman. He engaged himself in a long-term affair with one of his parent's friends.In the beginning he was very hesitant and nervous about the affair ut soon realized that it was the nineteen sixties and it was the start of the â€Å"free love† era. He became more comfortable with the affair as the movie went on. By committing adultery with Mrs. Robinson, Benjamin Braddock clearly destroyed all moral values of the generation that came before him. This kind of behavior was not acceptable for the previous generation but became a trend during his time. The counterculture strayed far away from the traditional values of their parents and â€Å"this marked the beginning of the sexual revolution† (â€Å"Primary Menu†).It was one of the iggest societal changes during the sixties. The affair between Mrs. Robinson and Benjamin Braddock was a little different from what was actually acceptable in the nineteen sixties. â€Å"Free sex† was acceptable; however, affairs were not. He soon realized that what he was doing was wrong and immediately put a stop to the affair. Even though he ended the affair, it was still understandable as to why he got himself into that position in the first place. Benjamin Braddock was Just trying to fit in with the rest of his generation in the sixties by rebelling against conformity.The sexual evolution was among the most rebellious acts of the nineteen sixties. The more Benjamin Braddock's parents pushed him, the more he rebelled. Not only did he rebel against going to graduate school and starting a career but he also had a scandalous long-term affair with one of his parent's close friends. Both acts were done to rebel against the contormity ot his parents and against society . Instead of conforming to the high expectations of his parents and society, Benjamin Braddock took a different path to ensure his own happiness. He follows his own heart and defies the path that was mapped out for him.

Key Items for a College Grocery List

Whether its a lack of space, appliances, or time to cook, eating well as a college student can be tricky. With the help of a smart grocery list, spending and eating wisely in college can be much easier. Breakfast on the Go It would be dreamy to have the time, energy, money, and ability to make a delicious breakfast of pancakes, bacon, eggs, and fruit every morning. But breakfast in college—when and if it happens—often looks completely different, even though nearly everyone agrees on the importance of breakfast. When grocery shopping, look for items you enjoy that can easily be taken to go and require little to no prep time: Granola or breakfast barsYogurtCereal (put in a bag or container to eat dry)Bagels (and peanut butter, cream cheese, jam, etc.)Fruit Having breakfast may be a challenge sometimes, but it can make all the difference in your energy level and ability to focus. Keeping things on hand that are tasty and easy to enjoy on your way to class will make it more likely that youll get something in your stomach before the day begins. Easy-to-Make Small Meals or Snacks Food doesnt have to be fancy to fill you up, provide nutrition, and taste good. You can make lots of tasty and filling meals with inexpensive ingredients and a microwave: Macaroni and cheeseRamenOatmealSoupEggs (can be scrambled in the microwave)BreadSandwich items (peanut butter, jelly, cold cuts, cheese) There are several ways to prepare these items to help prevent you from getting bored with your options. Ramen noodles, for example, can be sprinkled raw on a salad for some extra pep, cooked with butter and cheese, or added to your favorite soup. Add fruit, nuts, or peanut butter to your oatmeal for a different flavor and texture. Nutritious Snacks That Wont Expire for a While When buying snacks, go for items that pack a punch nutritionally without expiring too soon. You can also opt for frozen foods that are ready-to-eat when thawed. PopcornWhole-wheat crackersMixed nutsDried fruitFrozen blueberriesFrozen edamame Perishable Items That Will Last for at Least a Week Even if you have a tiny fridge in your residence hall, its still a fridge, right? Treat yourself and your body to some healthy snacks that, although perishable, will last longer than just a few days: Baby carrotsApplesCherry tomatoesMilkSalsa (dont forget the chips)HummusCheese (bonus: string cheese is a great grab-and-go snack) You can use milk for your macaroni and cheese recipe or for cereal. (Pro tip: keep chocolate syrup in the fridge so you can prepare chocolate milk when you want a treat.) Baby carrots can be a snack on their own or a nice side to your main meal. Slice cherry tomatoes for your sandwich or dip them in hummus. Buying perishable things can be smart if you know how to use each item in more than one way. Flavor Enhancers You dont need a full-fledged kitchen to experiment with new flavors. Having a few items on hand that can change the taste of a snack or dish can be an easy—and inexpensive—way to mix up your menu and give it a boost. Salt and pepperItalian dressingSrirachaMustardKetchupBarbecue sauce A bottle of Italian dressing will last a long time in your fridge and can be used as a dip for veggies or as a tasty topping on a sandwich. Other spicy sauces and condiments (wasabi mayo, anyone?) can be added to various items to switch up the flavor on an otherwise simple meal. Of course, you dont need to buy all these items at once. (Where would you put them, anyway?) Be realistic when making your grocery list and make an effort to use what you have before heading back out to the store to prevent wasting both food and money.

Im Kaufhaus - Beginner German Reading Lesson