Status of Satisfaction Level for Saving & Credit Activities amongst Clients of Sewa Bank

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1 13 Status of Satisfaction Level for Saving & Credit Activities amongst Clients of Sewa Bank Dr. Sneha S. Shukla, Associate Prof. N. R. Institute of Business Management Microfinance in India is approaching a historic 'tipping point' that could lead to a massive poverty reduction in the next five to ten years." - Grameen Foundation US "Microfinance is not a charity. It is a way to extend the same rights and services to low-income households that are available to everyone else. It is recognition that poor people are the solution, not the problem." - Kofi Annan, Secretary General, United Nations INTRODUCTION Microfinance is small-scale financial services primarily credit and savings provided to people who farm, fish or herd and adds that it refers to all types of financial services provided to low-income households and enterprises. Microfinance in India started in 1974 in Gujarat as Shri Mahila SEWA (Self Employed Women s Association) Sahakari Bank. Registered as an Urban Cooperative Bank, they provided banking services to poor women employed in the unorganized sector. Microfinance later evolved in the early 1980s around the concept of informal Self Help Groups (SHGs) that provided deprived poor people with financial services. From modest origins, the microfinance sector has grown at a steady pace. Now in a strong endorsement of microfinance, the National Bank for Agriculture and Rural Development (NABARD) and Small Industries Development Bank of India (SIDBI) has committed themselves to developing microfinance. LITERATURE REVIEW Microfinance in India: A State of the Sector Report, 2006, a report prepared by Prabhu Ghate and published by Microfinance India and jointly sponsored by Care, Ford Foundation and Swiss Agency for Development & Cooperation, says that microfinance in India has emerged as a powerful tool for financial inclusion, reaching out to a fifth of all poor households who have yet to be reached by the formal financial sector. The larger of the two main models, the Self- Help Group Bank Linkage Programme (SBLP) covered about 143 million poor households in March 2006 and provided indirect access to the banking system to another 14 million. The other, microfinance institution (MFI) model, served 7.3 million households, of which 3.2 million were poor. Apart from the scorching pace of growth, the report highlights several trends in Indian microfinance. First and, perhaps, most important, the rapid spread of microfinance has provided competition to rural money lenders. ICICI Bank has catalyzed the creation of over 100 microfinance partners and has been able to extend micro-loans from clients in 2003 to 3 million clients by March, Microfinance will emerge as an important development tool that will enable the financial inclusion of rural and urban poor. A study by Robin Burguess & Rohini Pande; LSE, Yale University (Aug 2003) in Do Rural Banks Matter? Evidence From The Indian Social Banking Experiment reveals that lack of access to finance is often cited as a key reason why poor people remain poor. This paper uses data on the Indian rural branch expansion program to provide empirical evidence on this issue. Between 1977 and 1990, the Indian Central Bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations Blue Ocean Research Journals 13

2 14 with no bank branches. We show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse is true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion program significantly lowered rural poverty, and increased non-agricultural output. The researchers from the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT and the Indian Centre for Micro Finance worked with Spandana to randomize the roll-out of its microcredit operations in Hyderabad, India s fifth-largest city. Spandana chose 104 areas of the city to expand into eventually, rejecting some districts as having too many construction workers, who come and go and might take Spandana s money with them. In Spandana started lending in a randomly chosen 52 of the 104. Researchers followed up by surveying more than 6,000 households between August 2007 and April 2008, restricting their visits to families that seemed more likely to borrow: ones that had lived in the area at least three years and had at least one working-age woman. The surveyors made sure not to visit an area until Spandana had been there at least a year. They surveyed in treatment areas (ones where Spandana worked) and control ones (where it did not yet). MICROFINANCE CYCLE: RESEARCH METHODOLOGY Objectives of the study: To know the savings scheme provided by SEWA bank and their effectiveness in creating savings of clients. To know the objective for which loan is taken by clients. To identify change in standard of living of clients after taking loan. To determine the independence and self sufficiency of women after SEWA bank initiatives. Approach to the study: The approach to the study was quantitative. The survey of the respondents was descriptive in nature and was aimed at measuring the satisfaction of the clients procuring loan at SEWA Bank. It was structured. Blue Ocean Research Journals 14

3 15 Sources of data: The data sources used for the project were both primary and secondary. The secondary data relating to the past surveys and research work published in magazines and journals. The primary data was collected from respondents of Ahmedabad city only. Methods of the data collection: The information from the end users was obtained using the survey method. A structured questionnaire was administered. The questions were closed ended. Sampling Elements: The sample elements for the Respondent survey were respondents who have procured loan from Sewa Bank. Sampling Design: Simple Random Sampling was used to collect the data. Sample Size: Sample of 100 from Ahmedabad city were taken for the study. FINDINGS OF THE STUDY 37% of women are illiterate, 31% women have just attended just primary education and 24% women have attended secondary education and higher secondary just attended by just 8% of women. So literacy level is very low amongst those women. (Details in Table 10) The study provides that the household income of the women is about an average of Rs 8000 to There are only 38% Accounts of Jivan Asha, 14% Chinta Nivaran Yojana, 9% have Kishori Gold Yojana and no account for Mangal Prasang Yojana, Ghar Fund Yojana and Regular Recurring Scheme. This shows that still women are not so active in saving money for the future. (Details in Table 2) 8-8.5% interest rate is given on all saving schemes provided by Sewa bank (except Jeevan Asha which is 3%). Sewa bank is also providing the pension Schemes (UTI and NPS) which is effectively adopted by the clients. Only 51 women have savings more than Rs Among them, only 17 women have savings of more than Rs. 1000, which shows that still savings are very less.( Details in Table 3) SEWA Bank provides personal loan on an average of Rs The maximum amount of working capital loan given is up to Rs The interest rate charged by the SEWA Bank is % for all the loans. All women pay their loan installment monthly basis.(details in Table 6) All women have said that they repaid the installment regularly on monthly basis which shows that poor women are trustworthy and responsive.(details in Table 7) There are 98 women have taken loan for business purpose (working capital loan). Loan for other purpose like ornament loan, housing loan, fixed deposit over draft, house repair are very less. Or almost nil. The main reason behind mortgage and security required for the loan is lacking for those women. (Details in Table 4) After the initiatives of SEWA Bank, the income has increased amongst these women. 26 women said that their income increased by Rs. 1000, 36 women said that their income increased by Rs. 2000, 24 women said that their income increased by Rs. 3000, and 12 women said that their income increased by Rs (Details in Table 8) After the initiatives of the SEWA Bank, women are becoming more independent. The standard of living of these women is improved and they are becoming self sufficient. (Details in Table 9) 94% women are satisfied with the microfinance facilities provided by the SEWA bank Blue Ocean Research Journals 15

4 16 It is noticed that all the respondents agreed that micro finance brought courage and self confidence and improved their skill and self worthiness. CONCLUSION ANNEXURES Table: 1 Medium of awareness about SEWA Bank No of respondents Through existing members of SEWA bank 78 Through SEWA organizers who work in 10 the field and are came in personal contact with self-employed women Through word of mouth 12 For microfinance to achieve its potential as a global poverty alleviation tool, the microfinance industry must grow to scale. At the end of March 2011, the number of MFI borrower accounts was 20% higher than the previous year. This was considerably lower than the growth of 43% in but indicates the continuing demand for door-to door financial services amongst the poor. This graph shows that out of the total number of micro-credit accounts in India, MFIs have the second largest number, and three times more than those of the rural banks. Only self help groups have facilitated more loans than MFIs. Thus MFI outreach is high and could play an important role in trimming down poverty. To achieve this noble objective, microfinance institution (MFIs) like SEWA Bank plays a major role. The role of state government is also crucial in augmenting farm investment, micro financing, micro insurance, facilitating private investment and spreading institutions. This would help the poor in realizing inclusive growth of India. It will help in improving the farm level productivity and generate employment for youth. Table: 2 Preference for Savings products provided by SEWA Bank Saving Schemes Regular Saving Scheme 100 Jivan Asha - (Daily recurring 38 scheme) Chinta Nivaran Scheme 14 (worry riddance scheme) Kishori Gold Yojana (Special 9 occasion scheme) Mangal Prasang Yojana 0 (House fund scheme) Ghar Fund Yojana (House 0 Fund scheme) Regular recurring scheme 0 Table: 3 Savings per month by clients Monthly Savings Rs Rs Rs Blue Ocean Research Journals 16

5 17 Rs Rs or more 17 Table: 4 Types of loan preferred by clients of Sewa Bank Secured Loan Loans Ornaments loan 5 NSc Housing loan Fixed deposit overdraft Recurring overdraft Unsecured loan Working capital loan 88 Repayment of old debt 2 Buying assets Housing repairs 7 Joint liability group loan 10 Table -5 Loan amount given to clients Loan amount Rs Rs Rs Rs Rs Table: 7 Missed to pay installment Yes 0 No 100 Table: 8 The amount of increase in Income Rs Rs Rs Rs or more 12 Table: 9 Standard of living improved or not Yes 100 No 0 Table: 10 Qualifications of Women Qualification Not studied 37 Primary education 31 Secondary education 24 Higher Secondary 8 education Table: 6 Duration of time preferred for installment payment Time duration Weekly 0 Monthly 100 Quarterly 0 Yearly 0 Blue Ocean Research Journals 17

6 18 REFERENCES [1] Ayayi Ayi Gavriel and Sene Maty, What Drives Micro finance Institution's Financial Sustainability, The Journal of Developing Areas, 44(1), (2011) [2] Sanjay Sinha and Shweta Banerjee, India s Micro-Finance Industry: An Anatomy of Risk, CGAP Microfinance Blog, May 2012 [3] t-micro.pdf [4] ofinance%20industry%20in%20india.pd f [5] /wp89_2009.pdf [6] cial/chap_viii.pdf [7] ull-and-final-micro-finance [8] Article1.pdf [9] [10] [11] PDFs/Top%2050%20Microfinance%20Insti tutions%20in%20india.pdf Blue Ocean Research Journals 18