1.1 Microfinance an overview. 1.2 Statement of Problem. 1.4 Objectives of the study. 1.5 Hypothesis. 1.6 Research Methodology. 1.7 Research Framework

Transcription

1 1 CHAPTER- 1 INTRODUCTION 1.1 Microfinance an overview 1.2 Statement of Problem 1.3 Review of Literatures and Research Gap 1.4 Objectives of the study 1.5 Hypothesis 1.6 Research Methodology 1.7 Research Framework 1.8 Scope and Limitation of study 1.9 Chapter Plan

2 2 Chapter-1 Introduction 1.1. Microfinance an overview Microfinance in recent times has been recognized and accepted as one of the new development paradigms for alleviating poverty through social and economic empowerment of the poor people especially women. Being one of the most effective and friendly tools to alleviate poverty, it also takes into account the social dimension aspect in doing away poverty to a great extent. It has increasingly become a very popular and indispensable tool to address poverty issues and women empowerment across the globe. Started in Bangladesh in early 1980s, it has spread to virtually every corner of the globe and has experienced a considerable growth during 1990s. Micro finance is an important sector and has been playing a vital role in fulfilling the eight Millennium Development Goals (MDGs) of reducing 50 percent of the absolute poverty of about 1.2 billion people living on less than US$1 per day by World Bank reported that about 7,000 institutions have been involved in some form of micro-finance operations. Microfinance operations are reportedly growing by 30 percent in a year and repayment rates are as high as 97 percent in many parts of the world (Patel,

3 2002). 1 A quote by Prof. Md. Yunus may be reflected upon to consolidate this. 3 Poverty is not created by poor people. They are very hard working and intelligent people. Poverty is created by the system that we built, the system that we learnt in our University classes. If we change the system, poverty will be gone because it is not the fault of the person. It is externally imposed phenomenon and not internally generated phenomenon Microfinance in general refers to a broad range of financial services such as savings, deposits, loans, money transfers and insurance extended to the poor, low income households and micro-enterprises. According to Task Force (NABARD), microfinance is defined as provision of thrift, credit, and other financial services and products of very small amounts to the poor in rural, semi-urban areas for enabling them to raise their income levels and improve living standards. 2 Bangladesh has been recognized as the origin of microfinance. With his outstanding contribution to eradicate global poverty and to help improve the lives of tens of millions of people, Prof. Mohammed Yunnus, popularly 1 Patel, A.R. (2002). Micro finance and Micro finance institutions-need for Bank s initiative & Commitment, National Bank News Review, April-June, pp NABARD (2000), Summary and Recommendations of Task Force on Supportive Policy and Regulatory Framework for Microfinance. Mumbai

4 4 known as father of modern micro-credit system, lent out 27 US dollars to 42 people in 1976 and started a research project in Bangladesh in 1979 and came out with the idea of micro-credit that resulted in the establishment of Grameen Bank in As a result the microfinance sector today in Bangladesh is strong and vibrant and its outreach extends to all corners of the country reaching to about 8.3 millions of every single villager in Bangladesh. Out of the four principle Micro Finance Institutions operating in Bangladesh - BRAC, Grameen Bank, ASA and PROSHIKA, the Grameen Bank has a special status in banking set up, the other three are NGOs (Non Government Organisations). The first initiative of micro credit/finance in India was taken up by NABARD in when it supported and funded an action research project on saving and Credit Management of Self Help Groups (SHGs) of Mysore Settlement and Development Agency (MYRADA). Microfinance movement was formally launched in 1992 with NABARD s pilot project for linking Self Help Groups (SHGs) with Banks. Some notable NGOs like Association of Serva Seva Farm (ASSEFA), People Rural Education Movement (PREM), Professional Assistance for Development Action (PRADAN), Community Development Society (CDS), etc. have done excellent works in the promotion of SHGs and mobilization of thrift and disbursement of credit during the pilot project periods.

5 5 Micro-credit system thereafter has gained recognition and has been considered as an important instrument to provide credit for self employment and other financial and income generating business activities which also includes savings and technical assistance to very poor people. NABARD s pilot phase of the SHG-Bank linkage program in 1992 can thus be considered as the land mark development in the history of microfinance in India. India is known for its large banking networks consisting of Public Sector Commercial Banks Private Sector Commercial Banks, Regional Rural Banks, State Cooperative Banks and District Central Cooperative Banks. In spite of presence of a wide network of rural bank branches that implemented specific poverty alleviation schemes and self-employment initiatives through bank credit for almost the past two decades, a large number of poor continued to remain outside the fold of the formal banking system. As per the report of All India Debt and Investment Survey 1991 there are approximately 24 percent of the Rural Household who accessed debt with formal or informal sources of which 36 percent had to still depend on informal credit systems namely loan sharks, shopkeepers etc for meeting their credit requirements.

6 6 The SHG-Bank linkage program under the initiatives and advocacy of NABARD and RBI has witnessed an exponential growth in terms of progress resulting to growth of total nos. of SHGs accessing bank credit from 32,995 in to 4,35,40,000 in There has also been a remarkable progress in respect of the total bank loan amount outstanding to SHGs which has increased from Rs.571 million in to Rs. 3,63,400 million in the year A congenial environment is required to fuel the healthy growth of microfinance sector in the country. A high level meeting on Microfinance held on August 6, 2003 and chaired by the Deputy Governor of RBI, Shri Vepa Karmesaram to review and discuss the issues of microfinance on following parameters - Structure and Sustainability, Funding, Regulation and Capacity Building recommended to have multiple agencies as intermediary, treating SHG finance as priority sector lending, capacity building of SHGs and partner agencies, creation of separate national microfinance development fund, etc. The Reserve Bank of India also instructed banks to relax certain banking norms while dealing with SHG clients in regard to KYC (Know Your Customer) norms. A separate fund as a result called Microfinance Development Fund (MFDF) with corpus of Rs.100 crores was created by Govt. of India in order to promote microfinance movement in India. MFDF was re-designated as 3 NABARD (2012). Status of Microfinance in India ,

7 7 Micro Finance Development and Equity Fund (MFDEF) in the Union Budget for and also raised its corpus to Rs.200 crores which is maintained by NABARD. This clearly indicates that the Govt. is keen and actively involved in the promotion of microfinance sector as a means to alleviate poverty and to proliferate inclusive growth. The SHG Bank Linkage programme with better access to credit brings in its wake increased income to the SHG members. The government undertakes several self-employment as well as wage employment programmes to eradicate poverty from the masses. The SHG Bank Linkage programme is one such programme, which has its impact on poverty alleviation through group effort, which emanates from their own savings and timely credit from various institutional agencies. 4 The programme however is not free from problems such as uneven spread across and within different states, inadequate response from the banks, rapid promotion of SHGs leading to large number becoming defunct and prevalence of high rate of interest charged to ultimate borrowers raising questions about the ability of the intervention for poverty alleviation. 4 SHG-Bank Linkage Programme for Rural Poor an impact assessment by Puhazhendhi, V. and Badatya, K.C. Copyright 2002 by NABARD. Paper presented at the seminar on SHG-bank Linkage Programme at New Delhi on 25 th & 26 th Nov 2002, pp

8 8 The eight states of India s North East namely Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland, Sikkim and Tripura cover an area of 2, 62,179 sq.km constituting 7.9 per cent of the country s total geographical area, but have only 45 million people or about 3.7 per cent of the total population of the country (2011 census). 5 The region has about 4500 km of international borders with Bhutan, China, Myanmar, Tibet and Bangladesh. Most of the land has a rough terrain and mountainous periphery. The density of population in the region is 158 per sq.km. The total literacy rate according to 2011 census varies from per cent in Arunachal Pradesh to per cent in Mizoram. The region is predominantly rural with over 84 per cent of the population living in the countryside. Endowed with rich natural resources, the region is identified as one of the world s biodiversity hotspots; it hosts species-rich tropical rain forests and supports diverse flora and fauna and several crop species. Despite being rich in natural resources the region lags behind from the rest of the country in terms of development. The overall economic development of all the states of north east is found to be very low by any set of indicators as compared to the other states of India mainly due to inadequate 5 DONER & NEC North East Region Vision 2020,

9 9 infrastructure. The average Per Capita Income (PCI) of the NER for the year is Rs. 49,228 as compared to the national average of Rs. 53,331 at the price level of Poverty ratio in NE region for the year is percent as compared to the national average of 29.8 percent. According to RBI, the region has also lagged far behind in the CD (credit deposit) ratio at as against the national average CD ratio at 78.1 in Government of India in its effort to bring the region at par with other states in the country has given emphasis on the development of infrastructure, generation of employment and alleviation of poverty in the rural areas. A number of schemes like Sampoorna Gram Rozgar Yojana (SGRY), Indira Awwas Yojana (IAY), Pradham Mantri Gramodaya Yojana (PMGY), Integrated Wasteland Development Programme (IWDP), Pradhan Mantri Gram Sadak (PMGSY), etc, had been launched but the result has not been very encouraging. Microfinance program then started in the mid 90s after NABARD s strong propagation of the concept throughout the region. Prior to that SIDBI had started funding some NGOs for lending to groups but then it was premature and so default rate was high. Rashtrya Grameen Vikas Nidhi (RGVN) 6 Pib.nic.in;

10 10 during the early 90s played a pivotal role in supporting small NGOs in developing SHGs through its NGO support programme. It started the Credit Support Programme (CSP) in and began working in various clusters in Assam and Meghalaya by providing revolving fund to many groups. Many commercial banks such as Regional Rural Banks (RRBs) and cooperative banks operating in the NER region with the support and assistance from NABARD, started giving financial assistance to self help groups formed by NGOs since Under the NABARD s scheme of SHG-Bank Linkage programme, nos. of SHGs accessing bank credit rose from 34,238 in to 1,59,416 in , registering growth rate of about 365 per cent over the last eight years. Progress of SHG-Bank linkage programme in the region is recorded comparatively higher in terms of growth rate i.e. about 45 per cent per year. However, 1.59 lakh SHGs in the North East Region is about 3.65 per cent only as compared to lakh SHGs in all over India 7. Regional and state imbalances in the growth of micro-finance have raised many questions about its model and strategies of the programmes. 7 NABARD (2012). Status of Microfinance ,

11 11 Manipur is one of the most economically backward states within the North Eastern Region as indicated by various socio-economic parameters and is remotely located from mainland India. It covers a geographical area of 22,327 sq. km and has a population of about lakh people as per 2011 census 8. Imphal valley which constitutes 10 per cent of the state area accommodates about 90 per cent of the populations. Literacy rate is per cent which is higher than all India average of per cent. The per capita income of the state is Rs. 29,684/- as compared to all India average of Rs. 53,331 in Poverty ratio of the Manipur states stood at 47.1 per cent in as against the all India average of 29.8 per cent. The state has poor infrastructure in terms of power, road communication, etc. The state had witnessed a slow pace of progress and development in the last two decades due to poor governance, insurgency problems and fluid law and order situation. The number of scheduled commercial bank branches as on 31 st March 2009 in Manipur is 80 as compared to all India bank branches of Average population per branch is as compared to all India average of populations per branch indicating poor banking facilities in the state 9. CD ratio for the state is also low at about 30.1 as compared to the national 8 Economic Survey of India, , Directorate of Economics and Statistics, Manipur. 9 Source: RBI statistics on Branch Banking 2009.

12 12 average of 78.1 as on March 31, Therefore, many people are still outside the banking system. In the absence of any well established NGO or NBFC, microfinance is still at the initial stage with most of the NGOs involved in the microfinance activities relatively new and small with few staffs that generally depend on grant or subsidy from Donors or funding agencies for taking up various social activities. Microfinance movement is becoming increasingly popular in the rural areas of Manipur though it is comparatively new as in the other parts of country. SHG formation has become a movement in rural areas and as on 31-March-2012, 5807 nos. of SHGs in Manipur have been provided credit link with banks with loan of about Rs lacs under SHGs-Bank linkage programme 11. There are about 900 NGOs in Manipur out of which about 75 NGOs are actively involved in micro finance program. Many funding agencies, banks and financial institutions such as SIDBI, RMK, RGVN, NEDFi, etc. of late have also started funding to NGOs in Manipur for on-lending to SHGs Statement of the Problem Microfinance as a strategic tool for poverty alleviation has become increasingly popular in the rural, semi urban and urban areas of Manipur as 10 Reserve Bank of India 11 NABARD (2012). Status of Microfinance ,

13 13 in other parts of the country for enabling them to raise their income levels and improve living standards. SHGs formation has become a vital movement for rural development. The state of Manipur is still in the nascent stage in regard to micro finance activities and the main concern of practicing micro finance is its sustainability. In spite of SHG movement spearheaded by ICM, Imphal and other Agencies, no much growth has been visible in the area of micro finance programme. Moreover, it is observed that the state government has not taken up any major steps for introduction of any major schemes for SHGs in line with Rashtrya Mahila Kosh, RGVN, SIDBI, NEDFi and other ICICI correspondents which have given credit access to number of NGOs thereby linking many SHGs. There are many other problems such as lack of awareness, lack of commitment, lack of efforts on the part of implementing agencies, lack of good and viable NGOs in the state, lack of motivation for women in forming SHGs, lack of nursing and management, lack of proper training to banks, NGOs and government officials, lack of co-ordination between bank and block officials, non-delegation of adequate powers to branch managers and weak credit structure of bank which hinder the progress of SHGs. The microfinance market in India is not well developed

14 14 The Self Help Group model will remain as a dominant model for microfinance in India for some time based primarily on the fact that the Government still places emphasis on the SHG and its linkage programs as the best means of channeling funds to the poor in rural areas even though there are limitations in this model in terms of sustainability. Micro finance program in Manipur is not up to the mark as compared to other parts of the country in spite of government s efforts in the form of SHG-Bank linkage program with its performance not satisfactory. It is therefore imperative to know what really is happening at the grass root level of the program. It is also important to know why NGOs are not coming forward to the expected level in spite of many NGOs operating in Manipur. The researcher wanted to understand the profile of SHGs in the state of Manipur who are actively involved in microfinance. The researcher also wanted to know the socio-economic impact on the SHG members due to the microfinance programme interventions. Finally, the researcher would like to know whether there is significant increase in overall socio-economic empowerment of SHG members after joining microfinance programme of MFIs in the state of Manipur.

15 15 Therefore, there is a need to study the impact of micro-finance program in Manipur in terms of social and economic improvement due to microfinance programme intervention Review of Literatures and Research Gap The researcher read various articles on micro-credit models adopted around the world and also reviewed various literatures on micro-finance activities with reference to India. The researcher also reviewed various research studies conducted on socio-economic impact of SHGs in India for better understanding of microfinance sector in India. Relevant studies conducted on various reports of Committee appointed by Reserve Bank of India (RBI) were also referred for in depth understanding of current issues and concerns in this sector. The researcher also conducted some background studies on theoretical issues concerning the political, social and economic history of Manipur with a focus on poor women. Puhazhendhi and Satyasai under NABARD conducted the first impact study on SHG-bank linkage programme in The study assessed the impact of microfinance on socio-economic conditions of 560 household members from 223 SHGs located in 11 states. The results of the above study suggest that lifestyles of members have changed after getting into the

16 16 SHG bank linkage program in social and economic terms. The average value of assets per household (including consumer durables and livestock) was Rs. 6,843 during the pre-shg period, which increased by 72.3 per cent to Rs. 11,793 in the post-shg period. Only 23 per cent of the members had some savings during the pre-shg period in contrast to almost all interviewed members who saved during the post-shg period. The average household saving was merely Rs. 460 during the pre-shg period, which increased manifold to Rs. 1,444. Similarly, average borrowings rose from Rs. 4,282 during the pre-shg period to Rs. 8,341 in the post- SHG period. Most significantly, this increase was spent for income generating purposes by a large number of households during the post-shg period. With regard to social aspects, the study found that becoming members of SHGs and associating in its activities had significantly contributed to improving the self-confidence of the participating women. In addition, the study stated that the composite index of different socio-economic parameters increased from 40 to 65 from the pre-shg to post-shg period. A study by MYRADA (2002) 12 on women s empowerment of SHG members commenced in 2002 for the southern region s states. In all, MYRADA (2002), Impact of Self Help Groups (Group process) on the Social/Empowerment status of Women members in Southern India, paper presented at the seminar on SHG-bank Linkage Programme at New Delhi on 25th and 26th November 2002.

17 17 SHGs were surveyed and it covered four professionally managed NGOs (DHAN, RASS, CHASS and MYRADA), one from each state. The empowerment of a SHG member is defined in terms of her influence over the family s economic resources and her participation in its economic decision-making. In addition, the influence made by her on her own development as an individual, power over local polity and participation in socio-political decision-making and influence over other decisions pertaining to general welfare of the family are considered. A study by Prabhu Ghate (2007) 13 highlighted the findings of recent studies on the SHG-Bank Linkage Programme (SBLP)-microfinance institutions model in India and in other countries. The study also presented the overall view of microfinance in India, progress under SHG Bank linkage progreammes, MFI performance, social performance, micro insurance, use of technology, microfinance bill and regulation. Moyle, Dollard and Biswas (2006) 14 assessed the economic and personal empowerment of 100 women aged between 16 and 65 years, participating 13 Ghate, P. (2007). Microfinance in India: A state of sector Report,2007, Ford Foundation, Delhi 14 Moyle, Dollard and Biswas (2006), Personal and Economic empowerment in Rural Indian women: A Self-help Group Approach, International Journal of Rural Management, 2, Sage Publications.

18 18 in SHGs from two villages (Delwara and Shishvi) in Rajasthan. Based on qualitative data, the study found that after joining SHGs, the members achieved both economic and personal empowerment in terms of collective efficiency, pro-active attitudes, self-esteem and self efficacy. The study also reported that most of the women experience pressure, challenges and stress due to extra work and more responsibilities. A nation-wide Impact Assessment Study of its micro finance programme was conducted by SIDBI (2008) 15 from covering 4510 households comprising 3253 households and 1257 non-client households of 25 MFIs. The study highlights the benefits received by the client households from their association with micro finance, in terms of expansion of diversification of livelihood activities, growth in employment opportunities, income growth, asset-acquisition, savings, access to loans, reduction in vulnerability and enhancement of women empowerment. The study of Sinha and Roy (2008) 16 assesses the impact and sustainability of SHG bank linkage on the socio-economic conditions of the individual 15 SIDBI (2008), Assessing Development Impact of Micro Finance Programmes: Findings and Policy Implications from a National Study of Indian Micro Finance Sector 16 Sinha, A, Roy, P.K., et.al (2008). Impact and sustainability of SHG Bank Linkage Programme, GTZ-NABARD.

19 19 members and their households in the pre-shg and post-shg scenarios. The study was conducted for India as a whole covering six states (Andhra Pradesh, Karnataka, Maharashtra, Orissa, Uttar Pradesh and Assam) from five different regions, namely the south, west, east, central and north-east. The overall findings of the study suggest that SBLP has significantly improved the access to financial services of the rural poor and had considerable positive impact on the socio-economic conditions and the reduction of poverty of SHG members and their households. It has also reportedly empowered women members substantially and contributed to increased self-confidence and positive behavioural changes in the post- SHG period as compared to the pre-shg period. The study of Archana Sharma (2002) on Working of Self Help Groups and their impact on women, Assam State Resource Center, Guwahati analyzed the size, composition and characteristic of the SHGs in Assam. The work of Swapan Kumar Sinha (2000) on Micro Finance through Self Help Group and its impact on socio, economic empowerment of the poor, A case study of Kamrup district of Assam emphasized impact of micro finance programme as lending by the three sample NGOs only.

20 20 The study of Dr. Amiya Sharma (2005), NEDFi on Self Help Groups of Assam, funded by UNICEF through the Department of Panchayat & Rural Development, Govt. of Assam - discussed the profile of SHGs of Assam in term of locations, number of groups, gender composition saving, internal and external lending of the groups and linkages with other financial organizations. The work of Richard I Meyer (2002) on Microfinance Poverty, Alleviation and Improving Food Security, Implication for India discussed merit & demerit of SHGs linkage with bank & various other models. The study of IIBM, Guwahati on Expanding outreach to underserved regions: Microfinance in the North East Region gave the over view of the current status of sector, sustainability of NGO-MFIs, informal or traditional institutions and also examine the policy environment of micro finance sector in the NE region. On Research paper of V. Puhazhendhi & K.J.S. Satyasai, National Bank News Review (Jun2002) Empowerment of Rural Women through Self Help Groups-An Indian Experience on 223 SHGs in 11 states found that microfinance programme have positively contributed for the economic and social empowerment of rural poor.

21 21 On research paper of H.S. Shylendra with the title The SHG-Bank Linkage Programme published in Journal of Rural Development Vol 23(4) pp , NIRD, Hyderabad critically examined the Assam SHG-Bank linkage on its approach and the strategy and the possible ways to take it forward. Some of the literatures reviewed for better understanding of concept of impact assessment methodologies and techniques are: Chen and Snodgrass (1999) 17 carried out impact assessment study of SEWA Bank in India at three different levels i.e. at household level, at enterprise level and at individual level. Study reveals that participation in microenterprises services leads to an increase in the level of household income, improvement in housing, increase in microenterprise revenues, increase in self-esteem and self-confidence etc. Barnes, Morris and Gaile (1998) 18 have taken following broad four parameters for their baseline study in Uganda i.e. 1) improvements in the 17 Chen, M.A. and Snodgrass, D. (1999), An Assessment of the impact of SEWA Bank in India-Base line findings, AIMS, USAID, Washington D.C. 18 Barnes, C., Morris,C. and Gaile,G. (1998). An assessment of impact of microfinance services in Uganda, Baseline findings, AIMS, USAIDS, Washington, D.C.

22 22 economic welfare of households; 2) enterprise growth or stability; 3) increase in empowerment, especially among women; and 4) strengthened social and rural networks. Cohen and Chen (1997) 19 explained their framework for core hypothesis for measuring impact of microfinance at individual level. The framework is based on following broad parameters: material change (income, earning capacity, resources control, basic needs etc), cognitive change (knowledge, skills and awareness), perceptual change (self esteem, self confidence, future vision and respect) and relational change (decision making, bargaining power, participation, self reliance and organizational strength). Cohen and Dunn (2002) 20 described the core impact hypotheses into three broad categories: Impacts at the household (H) level; increase in household income, assets, improvement in housing, increase in expenditure on children education and food, increase in ability in coping with shocks, etc., Impacts at the enterprise (E) level; increase in microenterprise revenue, fixed assets, employment generation, business relationships, etc. and Individual(I) level; increase in control over resources and income, self 19 Cohen, M. and Chen, M.A.(1997). A Guide for assessing the microenterprise services at the individual level AIMS, USAID, Washington, D.C 20 Cohen, M. and Dunn, E. (2002). Research Strategy for the AIMS Core Impact Assessment, AIMS

23 esteem and respects, increase in personal savings, increase self confidence,etc. 23 David Hulme (1997) 21 described various methodologies of impact assessments such as sample surveys, rapid appraisal, participant observation, case study and participatory learning and action along with their strengths and weaknesses. The choice of methods is based on objectives, costs and feasibility. The researcher also reviewed some of the reports of Committee set up by Govt. of India for better understanding of microfinance sector from the perspective of policy makers or regulatory authorities. The Task Force on Supportive Policy and Regulatory Framework for Micro finance (Task Force) chaired by NABARD (1999) had, recommended a classification of MFIs based on whether they offered deposit facilities or not and a graded system of external supervision depending on the amount and source of deposits. The Internal Group on Micro Finance Regulatory Issues (2003) set up by RBI looked at the micro finance sector as a multi-tiered structure consisting of SHGs, NGOs, Micro Credit Institutions and Micro Finance Institutions. It favoured the lending agency to intensify monitoring of the 21 David Hulme,1997, Impact Assessment Methodologies for microfinance: a review, AIMS, University of Manchester

24 24 SHGs so as to ensure that the groups do not lend outside the group, establish maximum exposure norms per individual in the group and annual rating by the banks to ensure that there are no slippages. In case of the NGOs, it recommended that the entities that have started lending convert themselves as cooperative societies under Mutually Aided Cooperative Societies (MACS) or section 25 companies or NBFCs. It advised that the NGOs should stop taking deposits, place a credit cap of Rs. 50,000/- per member and have transparency in pricing. It also recommended that micro finance institution may be allowed to become an NBFC with a reduced entry level capital of Rs. 25 lakh if they are exclusively financing SHGs but may be permitted to accept deposits only if the capital is Rs. 200 lakh. The Internal Group to examine the issues relating to rural credit and microfinance headed by H.S. Khan (2005), RBI recommended Business Facilitator Model and Business Correspondence Model for linking banks and external entities to provide comprehensive financial services to rural people. From review of the above studies and literatures, it was found that while several studies discussed mainly various socio-economic parameters of SHG members related to the situation during pre-shg and post- SHG

25 25 periods, other studies assessed more specific type of issues such as role of SHG federations in providing sustainability of SHGs, economic and personal empowerment of women and role of microfinance in poverty eradication. Many relevant studies were conducted on micro finance specially SHG- Bank linkage programmes in India, however a few research was done on microfinance activities in the North East India more particularly in the state of Manipur. It is also observed that none of the study really addressed its impact on socio economic well being of SHG members for sustainable growth of microfinance industries in the future. Therefore, more research studies are needed for in depth understanding of microfinance operation of NGO-MFIs and its socio-economic impact on SHG member or clients which will help the policy makers or practitioners, funding agencies, etc. for making the sector healthy and sustainable Objectives of the study In view of increasing microfinance activities by banks and NGO-MFIs, there is a need to study the socio-economic impact of micro-finance program on SHG members in the state of Manipur. In order to understand

26 and explore the ground reality and impact of the microfinance intervention program, the main objectives of the research study were as follows: 26 a) To draw the profile of the SHG members assisted by MFIs in Manipur. b) To examine the economic impact of microfinance on SHG members assisted by MFIs in Manipur c) To examine the social impact of microfinance on SHG members assisted by MFIs in Manipur. d) To summarize the major findings and to recommend for improving the products & services of MFIs Hypothesis The main hypothesis governing the study was: There is significant increase in overall socio-economic empowerment of SHG members after joining microfinance programme of MFI in the state of Manipur Research Methodology a) Type of research

27 27 The nature of the research used for the study was exploratory research to understand the real scenarios of microfinance activities at the grass root level and also to test the hypothesis formulated for the proposed study. b) Universe of Study In Manipur, there were about 75 NGOs which were directly associated with microfinance. So, the universe of the study consists of SHGs members of 75 NGOs. The universe of the individual SHG members were all the SHG members of the NGOs selected for the study. c) Sample Size For the purpose of study, only 20 NGOs which is 26 per cent of 75 NGOs which were directly involved in microfinance were considered. So the sample size of NGOs was 20. In all there were 15,018 individual members of 20 NGOs. With the help of sample size determination software, the calculated sample size was found to be 120 SHG members at 8.91 per cent of confidence interval. So the sample size was 120 SHG members.

28 28 d) Sampling Method A multistage sample design was adopted for selecting the sample SHGs and sample SHG members to be interviewed in the survey. First stage: 20 NGOs were selected from 75 NGOs by using simple random sampling with replacement which comes under Probability sampling method. Second stage: From each of selected NGOs, 3 SHGs were again chosen by using simple random sampling method. Thus, 60 SHGs were taken for the study. Third stage: 2 individual SHG members were selected to be included in the sample by using simple random sampling from each of the 60 SHGs identified. Therefore, in all there were 120 SHG members which were covered under the study.

29 29 e) Sources of data and data Collection method Both primary and secondary data were used for the study with secondary data collected from various Government Departments, Financial Institutions, and Banks. The primary data were collected through interview schedule from SHG members promoted by NGO-MFIs. Focus group discussion and observation method were also used apart from the interview schedule to collect data. In order to assess the impact of microfinance, the before and after approach was primarily followed. A structured questionnaire targeting SHG members was completed using the focus group discussion method, which facilitated the collection of qualitative data from the group, as well as quantitative data from the records maintained by SHGs. Feedback collected from the functionaries of NGOs associated with the SHGs facilitated cross-checking of data. The responses on problems faced by the SHGs and their suggestions on improvement of the SHGs performance were gathered through discussions. Relevant data were also collected through pre-structured questionnaires, covering the qualitative and quantitative aspects of SHGs and their members before and after bank linkage. The consistency of data

30 30 collected from primary sources was ascertained by using different styles of questions to capture the same information. The validity of the information was crosschecked through NGOs to get reliable information on the pre- SHG situation. f) Research Framework Considering the objectives and scope of study, the research framework was formulated to allow in depth study of microfinance activities on SHG members. Comprehensive study was done using standard statistical tools and techniques. Impact Assessment of Individual SHG Members The success of any development program is generally judged based on the impact assessment of program i.e. how the program has really benefited the target group over the years. Thus, the impact assessment of microfinance programs of NGO on the individual SHG members is one very important concern for the implementing agencies, funding agencies, policy makers, regulators, govt. agencies, etc.

31 Impact Assessment of Individual SHG Members is generally measured 31 using AIMS s Core Impact Assessment technique which is based on three levels i.e. household level, enterprise level and individual level. The major economic impact parameters used for the study were - change in personal income from enterprise, household income, household savings, household expenditure, access to credit and micro insurance products. Whereas, the parameters used for measuring the social impact were self confidence level, ability to take decision, social awareness and social responsibility, skill development, access to better health services and other social infrastructure facilities. g) Data Analysis Descriptive statistics were used for summarizing the data. Correlation Analysis, Independent Sample t test and ANOVA test were used for analyzing the data. SPSS, a standard statistical software tool was used for analyzing the data. h) Period of study For analyzing the profile and socio economic impact of SHG members, primary data was collected during the period Therefore, the reference year of the study is

32 32 i) Report Presentation The report of the findings of the present study is presented by using tabulation and descriptive style of presentation for easy grasping and understanding of the findings. Wherever possible, graphs & charts are also used Research Framework Considering the objectives of research work and hypothesis, a suitable research frame work has been developed. The research frame work is based on study of socio-economic impact on SHG members associated with MFIs and the main hypothesis is formulated to test significant improvement in their socio-economic empowerment index after joining the microfinance programme. The research frame work based on which the study was carried out is depicted as given in the figure:

33 33 Research Framework (Model) MFIs/NGOs Socio-Economic Impact SHG Members Hypothesis Testing EEI SEI EEI-Economic Empowerment Index SEI-Social Empowerment Index Fig Scope and Limitation of the Study The research was restricted to 20 NGOs only and 120 SHG members promoted by NGOs of Manipur. The study therefore was limited to only NGOs & SHGs who were involved in micro-finance activities. The study did not attempt to study other organization or voluntary organizations

34 34 involved in social development activities. The study did not attempt to cover SHGs promoted by other agencies such as Banks, Govt. Agencies etc. Therefore, no attempt was made to generalize the finding for other region or for India as whole Chapter Plan Chapter-1: Introduction This chapter with the heading Introduction describes about the overview of microfinance and its progress in India, statement of problems, review of literature, research gap, research methodology and the chapter plan. Chapter-2: Conceptual review of Microfinance This chapter with the caption Conceptual review of Microfinance gives snap shots of microfinance sector after review of various literatures relevant to the study. Historical background of microfinance, concept of microfinance and Self Help Groups (SHGs), credit delivery models of microfinance, evolution and progress of microfinance in India, microfinance movement in North Eastern region and Manipur in particular and impact assessment methodology of SHG members are briefly discussed in this chapter.

35 35 Chapter-3: Profiles of Self Help Group members in Manipur With the title Profiles of Self Help Groups in Manipur, this chapter describes the nature and characteristics of sample Self Help Group members of Manipur in terms of age, gender, marital status, monthly income, housing etc. Chapter-4: Economic Impact on SHGs Members In this chapter, economic impact of microfinance intervention programs on SHG members is studied in term of improvement in business income, house hold income, household savings, etc before and after joining the program. Chapter-5: Social Impact on SHGs Members Non-Governmental Organization (NGOs) being non-profit organization with social development objectives have been important player as facilitator or intermediary in microfinance movement in India. NGO-MFIs have been playing significant roles in supporting and nurturing SHGs by not only extending credit or other financial services to SHGs but also in many ways. This chapter describes about research findings of social

36 impact on SHG members in terms of self confidence, decision making, skill development etc. 36 Chapter-6: Socio-Economic Empowerment Index The findings on analysis of change in socio-economic empowerment index of the SHG members after joining microfinance are presented in this chapter. Chapter-7: Summary Findings and Recommendations. In this last chapter with the tile Summary Findings and Recommendations briefs about the summary of major findings of the study and recommendations for improving the products and services of MFIs.