MICROFINANCE PERCEPTION A STUDY WITH SPECIAL REFERENCE TO SALALAH, SULTANATE OF OMAN

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1 49 ABSTRACT MICROFINANCE PERCEPTION A STUDY WITH SPECIAL REFERENCE TO SALALAH, SULTANATE OF OMAN DR. M. KRISHNA MURTHY*; S.VARALAKSHMI** *Salalah College of Technology, Department of Business Studies, Salalah, Sultanate of Oman. **Queen Mary s College, Post Graduate and Research Department of Commerce, Chennai, Tamil Nadu, India. Microfinance is the provision of financial services to low income clients, solidarity lending groups and self employed who traditionally lack access to banking and related services. Microfinance also plays in a significant role in improving the small entrepreneurs lives and secures a better future. Microfinance aims to stimulate entrepreneurship community to develop the small business and thus improve status of their families and their children in term of standard of living on the one hand and level of access to social service on the other. Microfinance institutions are able to make significantly positive impact on the poverty level of their clients.. The study helps the young business community to avail the facilities to explore in the business ambiance. It is suggested that the awareness programs should be conducted in each educational institution to explain the benefits of microfinance. It is crucial that more microfinance institutions should be set up to provide loans all over the country. Microfinance should be made easy for the microfinance seekers to go for it and flourish the business environment. The study concluded that microfinance institutions are not only contributing significantly to the development of finance sector in their respective countries, but also they play an important role to eradicate poverty by providing much needed capital to low income people which are able to generate tremendous return on the investment. KEYWORDS: Microfinance, standard of living, development, entrepreneurs, respondents, interest rates and environment. INTRODUCTION Microfinance was grounded in the year 1974 by Mr. Yonus who provided a small loan to forty two people and they not only paid back their loans but also took significant steps to improve their lives and secure a better future. The success facilitated many organizations to embark small loans to the poor in developing countries. The loans are small and suitable to the business being supported and interest rates are below those found in ordinary financial channels in the countries. Microfinance is small loan which aims to alleviate poverty and it is finance for the poor. Microfinance helps the poor to save, to borrow and to repay the loans which are world of microfinance. Microfinance refers to small scale financial services for both credits and deposits that are provided to people. It helps the micro enterprises or small operating firms to produce, recycle, trade, provide services in developing countries in both rural and urban areas. The study is important for the new and innovative business entrepreneurs to lead large business atmosphere.

2 50 NEED AND IMPORTANCE OF THE STUDY Microfinance is most common in the developing world, it started in Bangladesh in the year Microfinance credits are usually either interest free or carry interest that does not compound. Microfinance is a financial system that gives very small loans to working poor in developing countries to allow them to improve their business without having to pay unmanageable interest rates. People who receive the loan use the money to establish or expand businesses that create income for their families to feed, house, educate and provide health care for their children. They can also put aside money for a better future. Microfinance is the provision of financial services to low income clients, solidarity lending groups and self employed who traditionally lack access to banking and related services. The study helps the young business community to avail the facilities to explore in the business ambiance. FREQUENCY TABLE CLASSIFICATION OF RESPONDENTS BASED ON GENDER TABLE NO. 1.1 Gender Frequency Valid Percent Cumulative Percent "Female" "Male" The distribution of sample respondents according to sex perceived on the Salalah City is shown in table No.1.1. It reveals out of the total 150 respondents 24 are Female occupying 16% and 126 in Male category occupying 84%. It is clear that the majority of the respondents are male. CLASSIFICATION OF RESPONDENTS BASED ON AGE TABLE NO. 1.2 Age Frequency Valid Percent Cumulative Percent "below 25 years" "26 to 35 years" "36 to 45 years" "46 to 55 years" "above 55 years

3 51 From the table 1.2, it is found the distribution of respondents based on age. Respondents belonging to the age group of below 25 years are found 13 forms 8.7% followed by 68 respondents occupying 45.3% in the age group of respondents 26.7% from the age group between 36-45, 15 respondents constituting 10% in the age group of years. 14 respondents occupying 9.3% are above 55 years. CLASSIFICATION OF RESPONDENTS BASED ON EDUCATIONAL QUALIFICATION TABLE NO. 1.3 Education Frequency Valid Percent Cumulative Percent "upto school" "Certificate" "Diploma" "Higher Diploma" "Bachelor" "Post Graduate" "Others" The table No.1.3 exposes the number of respondents on the basis of educational background. The study has considered 19 respondents consisting 12.7% with qualification up to school, 40 respondents occupying 26.7% with certificate level, followed by 59 respondents with 39.3% in Diploma, 18 respondents with 12% in Higher Diploma. It is also found that 6 respondents forming 4% are with bachelor degree, and 4 respondents constituting 2.7% each in post graduation and other professional category respectively. CLASSIFICATION OF RESPONDENTS BASED ON OCCUPATION

4 52 TABLE NO. 1.4 Occupation Frequency Valid Percent Cumulative Percent "Ministry" "Private Sector" "Business" From the table No.1.4, it is found the distribution of respondents based on employment 25 respondents (16.7%) belongs to employees working in ministry, 95 respondents (63.3%) belongs to private sector and 30 respondents (20%) belong to business class. CLASSIFICATION OF RESPONDENTS BASED ON MARITAL STATUS TABLE NO. 1.5 Marital Status Frequency Valid Percent Cumulative Percent "Married" "Unmarried" From the table No.1.5, it reveals that 116 respondents occupying 77.3% belongs to the married category and 34 respondents possessing 22.7% belongs to single category are considered for the study CLASSIFICATION OF RESPONDENTS BASED ON INCOME TABLE NO. 1.6 Income Frequency Valid Percent Cumulative Percent "RO below 500" "RO 501 to 750" "RO 751 to 1000"

5 53 "RO above 1000" The table No.1.5 divulged the number of respondents on the basis of their respective income levels, 27 respondents occupying (18%) belongs to the category of income below R.O 500 out of the total 150 respondents considered for the study. This is followed by 96 respondents (64%) belonging to the income group of R O 501 to 750 and 21 respondents (14%) belonging to R O It is also observed that 6 respondents (4%) belonging to the income category of RO above QUESTIONS RELATING TO AWARENESS OF MICRO FINANCE INSTITUTIONS CLASSIFICATION OF RESPONDENTS BASED ON NATURE OF ACCOUNT TABLE NO. 2.1 Account Frequency Valid Percent Cumulative Percent Savings Bank Account Current Account Deposit Account Loan Account From the table No.2.1, it is found that 120 respondents constituting 80% holds savings bank account, 17 respondents forming 11.3% holding current account. It is also seen that 6 respondents possessing 4% holding deposit account and 7 respondents forming 4.7% holding loan account. CLASSIFICATION OF RESPONDENTS BASED ON RATE OF INTEREST TABLE NO. 2.2 Rate of Interest Frequency Valid Percent Cumulative Percent "Yes" "No"

6 54 It is found from the table No.2.2 that 143 respondents out of 150 respondents (95.3%) agree that the rate of interest charged by microfinance institutions are appropriate and 7 respondents (4.7%) disagree that the rate of interest charged by the micro finance institutions are apt. CLASSIFICATION OF RESPONDENTS BASED ON SCOPE FOR MICROFINANCE TABLE NO. 2.3 Scope Frequency Valid Percent Cumulative Percent "Yes" "No" It is seen from the table No. 2.3 that the most of the respondents 118 (78.7%) accepts that the community has good scope through microfinance which would enhance the standard of the society. 32 (21.3%) do not believe that the microfinance boost up the community in large. CLASSIFICATION OF RESPONDENTS BASED ON PREFERENCE FOR OBTAINING MICROFINANCE TABLE NO. 2.4 Preference Frequency Valid Percent Cumulative Percent "MFI" "Bank" It is derived from the table No.2.4 that 23 respondents (15.3%) felt that the MFI would be opt for getting microfinance and 127 respondents (84.7%) choose banking company to avail microfinance to augment their position. CLASSIFICATION OF RESPONDENTS BASED ON CRUCIAL FACTORS

7 55 TABLE NO. 2.5 Crucial Factors Frequency Valid Percent Cumulative Percent Low Interest Availability Processing and Sanctioning Instalment Factor From the table No.2.5, it is found that 30 (20%) out of 150 respondents believed the low interest rate is the crucial factor for the development of Microfinance Institutions. 73 (48.7%) respondents understood that the availability of loan itself is very important for the development of Microfinance Institutions. 40 respondents (26.7%) and 7 respondents (4.7%) are in the opinion that the processing and sanctioning and Instalment factors are very much important for rapid growth of Microfinance Institutions. CLASSIFICATION OF RESPONDENTS BASED ON HELPING UNEMPLOYMENT TABLE NO. 2.6 Helps Unemployment Frequency Valid Percent Cumulative Percent "Yes" "No" It is outlined from the table No.2.6 that 113 respondents (75.3%) are in the view that the microfinance could lead to help unemployment problem in the country and 37 respondents (24.7%) assumed that the microfinance would not help for reducing unemployment problem in urban area.

8 56 CLASSIFICATION OF RESPONDENTS BASED ON ERADICATION OF POVERTY TABLE NO. 2.7 Eradicate Poverty Frequency Valid Percent Cumulative Percent "Yes" "No" It is opined from the table No. 1.5 that 126 (84%) of the respondents alleged that microfinance could reduce poverty in the society whereas 24 respondents (16%) of the total respondents do not think that the microfinance would wipe out poverty. FINDINGS AND SUGGESTIONS It is observed from the study that the majority of the respondents participated in the survey analysis are male category. The most of the respondents are in the age group of years and 36 to 45 years respectively. It is also found that the majority of the respondents possess Diploma and Certificate level education and maximum number of respondents working in private sector. It is seen that the most of the respondents are married and falls between the income levels of RO 501 to 750. It is analysed from the study that the majority of the respondents holds savings bank account for their banking transactions and also felt that the banking channels provides most of the microfinance loans to the community in general. The respondents agreed that the rate of interest charged by the microfinance institutions and banking institutions is appropriate. They also accepted that there is more scope for microfinance which would lead to the development of their standard of living and community in general. Majority of the respondents revealed that the availability of microfinance might be one of the crucial factors for the development of microfinance institutions. It is also emerged from the study that the microfinance helps to reduce the employment problem in the country and also helps to get rid of poverty in the country. Microfinance aims to stimulate entrepreneurship among these who suffer from poverty to self employment and develop that small business and improve their status and social and thus improve status of their families and their children in term of standard of living on the one hand and level of access to social service on the other. Microfinance institutions are able to finance rapid growth to stay profitable by charging corresponding interest rates and still have a significantly positive impact on the poverty level of their clients. It is suggested that the awareness programs should be conducted in each educational institution to explain the benefits of microfinance. It is very much important to know the ways and means of getting microfinance loans for small business entrepreneurs to improve their standard of life. It is crucial that more microfinance institutions should be set up to provide loans all over the country. It is vital to analyse the crucial factors required to get microfinance as of interest rates, processing,

9 57 availability and instalment factors. It should be made easy for the microfinance seekers to go for it and flourish the business environment. CONCLUSION The most important finding in the last two decades in the world of finance did not come from the world of the rich or the relatively well off, it has come from the countries encourages microfinance. Microfinance makes a loan which facilitates a small firm that startup capital which is necessary to sell. It is urged that ministry also necessitate the banks to provide microfinance loan to tiny business and enterprises. An innovative and socially conscious banking institution enters the microfinance market on their own because of the growth opportunities. Recently microfinance seekers not only highly motivated to repay the loans but their success also spurs others to seek loan. Microfinance is arguably the most innovative strategy to address the problem of global poverty. It is the practice of offering small, collateral free loans which otherwise would not have access to the capital which is necessary to begin a small business or other income generating activities. It has been observed that microfinance institutions are not only contributing significantly to the development of finance sector in their respective countries, but also they play an important role to eradicate poverty by providing much needed capital to low income people which are able to generate tremendous return on the investment. BIBLIOGRAPHY Adams, Dale W., Douglas H. Graham & J. D. Von Pischke, Undermining Rural Development with Cheap Credit. Westview Press, Boulder & London, 1984, Pp.89. Brian & Janette Klaehn, Striking the Balance in Microfinance: A Practical Guide to Mobilizing Savings. PACT Publications, Washington, 2002, Pp.111. Dowla, Asif and Dipal Barua, The Poor Always Pay Back: The Grameen II Story. Kumarian Press Inc., Bloomfield, Connecticut, 2006, Pp.164. Khandker, Shahidur R and Fighting Poverty with Microcredit, Bangladesh edition, The University Press Ltd, Dhaka, 1999, Pp.87. Sapovadia and Vrajlal K, Micro Finance: The Pillars of a Tool to Socio-Economic Development. Development Gateway, 2006, Pp.133. Wright and N. Microfinance Systems: Designing Quality Financial Services for the Poor. The University Press, Dhaka, 2000, Pp.156. Yunus and Muhammad, Creating a World without Poverty: Social Business and the Future of Capitalism. Public Affairs, 2008, Pp.96.

10 58 QUESTIONNAIRE MICROFINANCE PERCEPTION A STUDY WITH SPECIAL REFERENCE TO SALALAH, SULTANATE OF OMAN 1.1 Name (Optional) : 1.2. Locality (Optional) : 1.3. Gender : Male _ Female 1.4. Age : Below 25 years years years years above 55 years 1.5. Educational Qualification : Up to school Certificate Diploma Higher Diploma Bachelor Post Graduation Other Professional 1.6. Occupation : Ministry Private Sector

11 59 Business 1.7. Marital Status : Married Unmarried 1.8. Monthly Income : below RO 500 RO RO Above RO QUESTIONS RELATING TO AWARENESS OF MICRO FINANCE INSTITUTIONS 1. What is the nature of account do you have? : Savings account Current account Deposit account Loan account 2. Do you think interest rate charged by Microfinance Institution s (MFI s) is appropriate? : Ye s No 3. Do you think the community has good scope from Microfinance? 4. Would you prefer to take loan from banks or MFI s? : Yes No : MFI Bank

12 60 5. According to you which factors are more crucial for rapid growth of MFI s? : a. Low interest rate b. Availability c. Processing & sanctioning d. Instalment Factor 6. Microfinance Institutions can help unemployed urban youth? : Yes No 7. Do you think Microfinance is a tool to eradicate poverty? : Yes No