A.ANITHA Assistant Professor in BBA, Sree Saraswathi Thyagaraja College, Pollachi

THE ROLE OF PARALLEL MICRO FINANCE INSTITUTIONS IN POVERTY ALLEVIATION IN RURAL TAMILNADU A STUDY WITH SPECIAL REFERENCE TO UDUMALPET TALUK, TIRUPUR DISTRICT A.ANITHA Assistant Professor in BBA, Sree Saraswathi Thyagaraja College, Pollachi INTRODUCTION Microfinance has built a solid track record as a critical tool in the fight against poverty and has entered the financial mainstream. The rapid growth of the industry over the past 15 years has reached approximately 130 million clients according to recent estimates. Yet microfinance still reaches less than 20 percent of its potential market among the world s three billion or more poor. The evolution of the industry has been driven by many factors which include the transformation of microfinance providers, the sizable supply gap for basic financial services, the expansion of funding sources supporting the industry and the use of technology. As the industry has developed, there has been a shift from specialized NGOs to an increasing number of regulated and licensed MFIs which stress that sustainability and impact go hand in hand. Furthermore, The World Bank Group is working with private microfinance institutions and stakeholders to incorporate responsible finance practices into all aspects of business operations. When done responsibly, private microfinance can have significant development impact and improve people s lives. Parallel micro finance institutions: In Parallel micro finance model, organization offers financially self-sustaining microfinance services through specialist microfinance staff at the same time as offering other sector services (usually subsidy-dependent) through other staff to the same clients. While the specialist staffs may be managed in legally distinct entities (like a regulated MFI and a nonfinancial NGO), the multi-purpose organization typically controls them all. If there are few available services in an area, and an organization can afford a long-term commitment to provide two or more services with different specialist staffs, then it makes sense to deliver a variety of complementary services in parallel. In parallel, Microfinance providers (MFIs), which are active in supporting and financing new entrepreneurs who are not served by the formal banking sector and belong to vulnerable and high-risk groups, currently have a limited capacity to meet growing demand for financing and coaching services from new entrepreneurs. Micro Finance and poverty alleviation: Micro finance is an important contribution for reducing poverty in India. Millions of rural people have a poor even in basic needs and wants. They do not have access to the basic savings and credit services that most people take for granted. And this makes it much harder for the poor to rise out of poverty. Liquid cash is very important and it is most needed for the satisfaction of their basic needs. Micro finance is a tool for effective poverty reduction by improved access of saving, credit facilities for a poor to grow and develop their micro enterprises. www.icmrr.org 9 icmrrjournal@gmail.com

Economic Gender disparity: Gender inequalities or disparity is pervasive in India especially in the poorest rural areas of the country. Impoverished women in these areas are targeted by microfinance programs because of such programs proven success in increasing women s financial stability and decision-making power, which results in more resources for their families and development within their communities. Micro finance is a tool for reducing gender disparity in the rural Tamil Nadu. STATEMENT OF THE PROBLEM Rural women is still need the empowerment to improve their financial position, the parallel micro finance institution is one of the best alternative source of financial services for improving their income, it helps to reduce the poverty at a certain level. Various reviews and literature are concluding that parallel microfinance plays a significant role in reducing poverty that too more in women headed families. TamilNadu is one of the developing states in India; meanwhile Udumalpet Taluk is more depending on the agriculture and very few industries sector. Investment in purchase of tools for cultivation is one of the major needed activities. Therefore, this study helps to find out how parallel microfinance institution helps to reduce poverty and gender disparity. OBJECTIVES OF THE STUDY: Main objectives: The main objective of the research is to study the role of Parallel Micro finance institutions (PMFI) in reducing rural poverty in Udumalpet Taluk. Specific objectives: 1. To identify the parallel micro finance institutions 2. To study the methods adopted to collect interest amount from the borrowers. 3. To analyze the role of PMFI to reduce poverty in rural Tamil Nadu SCOPE OF THE STUDY The study tries to find out the impact of Parallel micro finance Institution in the poverty reduction and gender disparity in Udumalpet Taluk. Poverty and Men domination is a major evil in many developing areas. Parallel microfinance is one of the tool helps to reduce poverty in a certain level. The study the major issue like problem faced in repayment of loan amount, the improvement in the life style of the family, etc REVIEW OF LITERATURE Anis Chowdhury (2009), in his paper Microfinance as a Poverty Reduction Tool A Critical Assessment, attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as a universal poverty reduction tool. It argues that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt. Microfinance, however, certainly plays an important role in providing safety-net and consumption smoothening. The borrowers of microfinance possibly also benefit from learning-by-doing and from self-esteem. However, for any significant dent on poverty, the focus of public policy should be on growth-oriented and equityenhancing programs, such as broad-based productive employment creation. www.icmrr.org 10 icmrrjournal@gmail.com

Akanji (2001) in her paper on microfinance as a strategy for poverty reduction enunciated the following principles: simplify services, offer small initial loan, offer short term loan, localize services, focus on scale, short turn around time, motivate repayment, and recognize that the poor do save. Imoisi, Anthony Ilegbinosa, Godstime Ikechukwu Opara (2012) in their research article, Microfinance and its Impact on Poverty Alleviation: A Case Study of some Microfinance Banks in Edo State, Nigeria, he examines the relationship microfinance and poverty alleviation in Nigeria, to understand the effectiveness of micro credit within the context of its current practice in Edo State in particular, and the nation as a whole as a tool for wealth creation and capital accumulation among the poverty stricken populace and low income earners. The study made use of primary data obtained through field survey from the selected microfinance banks in Edo State and utilized quantitative tools to analyze these data so as to bring out any existing relationship between microfinance and poverty alleviation. The results obtained showed that microfinance has the potential of alleviating poverty by ensuring wealth creation and its attendant self-sufficiency. From our result, about 70% of the sampled population agreed that there is a positive relationship between microfinance and improved standard of living of the recipients of these micro credits; 78% attested that they obtained some sort of credit from microfinance banks to set up their small scale businesses, without which it would be impossible to do so; about 67% said they have used loan collected to expand their business while 24% said they used the loan collected to invest on new technology for their business and the remaining 9% of the respondents obtained loans to facilitate the export of their products. Based on these findings, we could see that Microfinance has helped in alleviating poverty in the country by helping individuals to start up their business, expand their existing business, increase the level of employment and raise the standard of living in the country Focus of microfinance programmes in poor communities for it to be meaningful; a massive educational drive on the importance of microfinance in fighting widespread poverty should be launched in the country; etc were some of the recommendations made in this study. Malhotra (2002) constructed a list of the most commonly used dimensions of women s empowerment, drawing from the frameworks developed by various authors in different fields of social sciences. Allowing for overlap, these frameworks suggest that women s empowerment needs to occur along multiple dimensions including: economic, socio-cultural, familial/interpersonal, legal, political, and psychological. Priyanka Ramath & Preethi,(2014) in his article, Micro Finance in India - -for Poverty Reduction, Microfinance is generally defined as financial services for poor and low- income clients. Microfinance is a source of financial services for entrepreneurs and small businesses lacking access to bankingand related services. The two main mechanisms for the delivery of financial services to such clients are: (1) relationship-based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group. Microfinance is used to describe the supply of financial services to low-income employees, which is closer to the retail finance model prevalent in mainstream banking. Microfinance is a broad category of services, which includes microcredit. Microcredit is provision of credit services to poor clients. Microcredit is one of the aspects of microfinance and the two are often confused the Microfinance revolution in India as a powerful tool for poverty alleviation. Where institutional finance failed www.icmrr.org 11 icmrrjournal@gmail.com

Microfinance delivered, but the outreach is too small. There is a question mark on the viability of the Microfinance Institutions. There is a need for an all round effort to help develop the fledgling Microfinance Industry while tackling the trade-off between outreach and sustainability. The paper argues for mainstreaming impact assessment in evaluation of programmes for realizing the full potential of microfinance in achievement of Millennium Development Goals (MDGs). Government of India considered micro finance is the major tool for reducing the poverty and support to the lower income people for self employment. RESEARCH METHODOLOGY The study used descriptive survey design. Survey design was used because of its in depth analysis on collecting personal information from both micro finance providers and the borrowers that helps for analyzing the role of micro finance in poverty alleviation and economic gender disparity in the udumalpet area. Source of data Collection The main data collection tool was the questionnaire which was used to collect data from the Micro finance providers. For this study a sample 56 microfinance provider was chosen. The questionnaire contains a both qualitative and quantitative item which was a closed end questions and rating scale. Statistical Tools Simple percentage and weighted average ranking tools were used for analyzing data and establishing relationship among variables. ANALYSIS AND INTERPRETATION TABLE NO 1: SOCIO - DEMOGRAPHIC FACTORS S.No Variables Category No of Respondents Percentage 1 Nature Of Business Registered 20 36 Not registered 36 64 2 Area of Operations Within locality 42 75 Outside locality 14 25 3 Type of Agency One person firm 40 71 Partnership 12 22 Other type 4 7 4 Source of Income Own Money 28 50 Parents Money 18 32 Money from 8 14 Relatives Others 2 4 5 Formalities for providing Loans Reference 23 41 Mortgage by the 12 21 property Bond Paper 14 25 No security 7 13 www.icmrr.org 12 icmrrjournal@gmail.com

6 No of Borrowers Upto 10 12 21 11-50 31 55 51-100 11 20 More than 100 2 4 7 Maximum amount of loan by Upto 10,000 11 20 your agency 10001-50000 28 50 50001-100000 13 23 More than 1 Lakh 4 7 8 Frequency in collection of loan Daily 18 32 Weakly 16 29 Bi monthly 12 21 Monthly 10 18 The table indicates a microfinance providers as their nature of business is classified into registered and not registered business. Maximum microfinance providers are not registered as it lies at 64% out of 56 sampled microfinance providers, where as remaining 36% of microfinance providers are comes under registered classification. The table area of operation exhibits that maximum 75% of microfinance providers are within locality and 25% of microfinance providers lies in area of operation @ outside locality. In type of agency one person firm achieved 71%, partnership type of agency at 21% and other type held at only 7%. Hence it denotes that one person firm type of agency is leading then others. Source of Income for microfinance providers indicates a maximum of 50% from their own money followed by 32% from their parents money on their other hand minimum of 14% and 4 % from their relatives and others Source of Income for microfinance providers. Formalities for providing loans to borrowers, maximum member of microfinance providers is following the rules of reference with 41%, mortgage by the property with 21%, bond paper category with 25%and no security cadre of microfinance providers with 13%. Maximum amount of loan sanctioned within the limit of Rs. 10000 to Rs. 50000 as 50% and 7% of members received Maximum amount of loan morethan 1 lakh from a sampled total of 56 microfinance providers. The above table represents frequency in collection of loan and it is listed in period wise as daily, weekly, bimonthly and monthly. It is inferred that 18 members of microfinance providers collect on daily basis, 12 and 10 members of microfinance providers collect loan amount on bimonthly and monthly basis. Hence it indicates that most of the microfinance providers collect the loan amount in frequency on daily basis. www.icmrr.org 13 icmrrjournal@gmail.com

TABLE NO 2: PURPOSE OF LOAN Rank 1 2 3 4 5 6 Weighted Rank Score 6 5 4 3 2 1 Score Business 12 8 14 10 8 4 218 3 Children 14 15 14 6 7 3 235 2 Education Health 6 9 7 13 9 12 178 5 issue Family 14 15 13 6 5 3 242 1 Function Purchase 4 4 3 10 15 20 186 4 of Cattle Purchase of Asset 6 8 5 11 12 14 167 6 By using the method of rank for the purpose of loan reflects that first priority is for a family function followed by next for children education. Third and fourth rank on purpose of loan is for doing a business and purchase of cattle thereby fifth and sixth position of rank on purpose of loan due to health issue and purchase of asset. Hence most of the microfinance providers quoted that purpose of loan is provided more for a family function. TABLE NO : 3 ANNUAL RATE OF INTEREST S.No Rate of Interest No of Respondents Percentage 1 5-10% 5 9 2 11-20% 41 73 3 21-30% 9 16 4 Above 30% 1 2 56 100 Annual rate of interest from the total sampled 56 microfinance providers states that 73% of microfinance providers lies between 11% -20% as rate of interest and only a few members asmof 1.8% of microfinance providers lies on 30% as rate of interest. TABLE NO 4: REASON FOR THE BORROWER CHOOSING PMFI S.No Reasons No of Respondents Percentage 1 Flexible credit 34 61 2 Lack of bank Awareness 13 23 3 Less formalities 6 10 4 Others ( Relatives) 3 6 56 100 www.icmrr.org 14 icmrrjournal@gmail.com

Reason for the borrowers choosing PMFI 236indicates that most of the microfinance providers have a reason of flexible credit where it has 34 members from the sampled 56 members of microfinance providers. TABLE NO 5: METHODS ADOPTED FOR COLLECTING INTEREST AMOUNT S.No Category No of Respondents Percentage 1 Personal visit 25 45 2 Sending notice 9 16 3 Telephone calls 21 37 4 Others 1 2 56 100 Methods of collecting money are split led as personal visit, sending notice, telephone calls and others. From 25 sampled microfinance providers opined that they follow a method of personal visit for collecting money. And 21 sampled microfinance providers opined that they follow a method of telephone calls for collecting money, where as a members of microfinance providers send a notice. TABLE NO 6: PERCENTAGE OF DEFAULTERS S.No Rate No of Respondents Percentage 1 Less than 5% 11 20 2 6-10% 18 32 3 11-5% 19 34 4 More than 15% 9 14 56 100 Rate of defaulters are lies in criteria between 6-10% and 11%-15% as maximum of 32% and 34% of microfinance providers on the other side rate of defaulters are lies in criteria of more than 15% and less than 5% as 14.3% and 19.6% of microfinance providers. TABLE NO 6: CONTRIBUTION OF PMFI FOR REDUCING OF POVERTY S.No Particulars Fully Satisfied Satisfied Not Satisfied Total 1 Improved Standard of Living 34 17 5 56 2 Reduced Poverty 38 15 3 56 3 Improved Decision making power 27 21 8 56 From the above table, out of 56 respondents, most of them are highly satisfied with all factors like improved standard of living, Reduced Poverty and improved decision making power in the family. www.icmrr.org 15 icmrrjournal@gmail.com

FINDINGS AND SUGGESTION: Most of the respondents are highly satisfied with the PMFI and they are accepted and realizing that Microfinance brings a real chance in their financial position thereby it reduces the poverty in rural area. But the regulation regarding amount providing and the repayment of interest and amount should be made. We need to understand when and in what form microfinance is appropriate for the poorest; the delivery channel, methodology and products offered are all inter-linked and in turn affect the prospect and promise of poverty alleviation. In general, formal financial institutions show a preference for urban over rural sectors, large-scale over small scale transactions, and non-agricultural over agricultural loans. So this Microfinance is highly needed in the poor rural economy for the developed of nation. CONCLUSION Microfinance is a way for fighting poverty, particularly in rural areas, where most of the world s poorest people live rural development and poverty reduction are commonly related to the issue of rural employment. Rural households livelihood strategies comprise several options, including farming and nonfarm activities, local self-employment and wage employment, and migration. Microfinance has proven to be an effective and powerful tool for rural development and poverty reduction. REFERENCE 1. Ghalib, Asad K. (2007), Measuring the Impact of Microfinance Intervention: A Conceptual Framework of Social Impact Assessment, The Singapore Economic Review Conference 2. Priyanka Ramath & Preethi Micro Finance in India- for Poverty Reduction, International Journal of Research and Development - A Management Review (IJRDMR). 3. Imoisi, Anthony Ilegbinosa1, Godstime Ikechukwu Opara2, Microfinance and its Impact on Poverty Alleviation: A Case Study of some Microfinance Banks in Edo State, Nigeria, American Journal of Humanities and Social Sciences, 2014 4. Bulama, B. (2006): Economic Growth, Inequality and Poverty in Nigeria. An essay posted on http / www.allfreeessys.com 5. Anis Chowdhury, Microfinance as a Poverty Reduction Tool A Critical Assessment, UN/DESA Working Papers, 2009 www.icmrr.org 16 icmrrjournal@gmail.com