micro-finance study in jalandhar

8/9/2019 Micro-finance study in Jalandhar

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IMPACT OF MICRO-CREDIT

STUDY BASED IN SEMI URBAN AREA OF

JALANDHAR

Submitted to Lovely Professional University

In partial fulfillment of the requirements for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by: Supervisor:

Group No: T034 Mr. Ramandeep Singh DeolArshpreet Singh RTI803A14 Lecturer in LIM

Karan Wadhera RT1803A16

Sunny RT1803A18Seema Bhatia RT1803A19

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITYPHAGWARA

(2008-2010)


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TO WHOMSOEVER IT MAY CONCERN

This is to certify that the project report titled Impact of Micro-credit-Study based

in semi-urban area of Jalandhar carried out by our group consisting of Arshdeep,

Karan Wadhera, Sunny and Seema has been accomplished under my guidance &

supervision as a duly registered MBA student of the Lovely Professional

University,Phagwara.This project is being submitted by them in the partial

fulfillment of the requirements for the award of the Master of Business

Administration from Lovely Professional University. Their dissertation represents

their original work and is worthly of consideration for the award of the degree of

Master of Business Administration.

___________________________________

(Name & Signature of the Faculty Advisor)Date:


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DECLARATION

We, hereby declare that the work presented herein is genuine work, done originally

by us and has not been published or submitted elsewhere for the requirement of a

degree programme. Any literature, data or works done by others and cited within

this dissertation has been given due acknowledgement and listed in the reference

section.

Arshdeep Singh_______________________

Karan Wadhera_______________________

Sunny ______________________________

Seema______________________________

Date:__________________


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ACKNOWLEGEMENT

We express our deep sense of gratitude & indebtedness to Mr. Ramandeep Singh Deol (Faculty

Advisor & Lect. in LIM ), for his invaluable guidance and help in improving the standard and

quality of this report.

We are very glad to express our utmost gratitude to Mr. Jagit Singh , Mr.

Amit Dutt ( lect. in LIM) for their invaluable guidance and help for using SPSS for conducting

our research.

We are also very thank full to Ms. Sukhwinder Kaur and Mr. Amrit Pal ( Lect. in LIM )

for their guidance regarding the submission of the capstone project.

Arshdeep singh

Karan Wadhera.

Sunny

Seema


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TABLE OF CONTENTS

S.NO. CHAPTER P.No.

1. Executive summary 6-7

1. 1.Introduction to Micro-Finance8

i. Activities in Micro-Finance...8ii. Who are the clients of Micro-Finance?......................................................8-9

iii. Micro-Finance Models.....9-11iv.

Legal forms of MFIs in India12

8-12

2. Review of Literature 13-15

3. Need,Objectives,Scope and methodology 16-18

4. Data Analysis & interpretations 19-42

5. Findings & Suggestions 43-44

6. Conclusion 45

7. References 46

8. Appendix(Questionnaire)


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EXECUTIVE SUMMARY

OBJECTIVEOFTHESTUDY

Microfinance has proved to be a successful step towards poverty alleviation and empowerment

in rural area and now the time is for semi-urban areas.

The objective of this study is to find out how feasible will the replication of micro finance model

be in semi-urban area. It also tries to gauge the openness of semi-urban people towards

microfinance. The study also compares the effectiveness of microfinance vis--vis various

sources of finance available, which sources the clients, prefer & which factor do they consider

before taking micro-credit & problem faced by people while opting for micro-credit in jalandhar

semi-urban area.

Micro Financing has greatest scope in India especially in developing semi -urban cities like

Jalandhar because many of the people dont have high income resulting in low purchasing power

and Micro Finance institutions target market as low income group and it is common impression

is that the poor people need and use a variety of financial services including deposits, loans etc.

they use financial services for some reason like

Seize business opportunities To fulfill their need of necessities Improve their standard of living Deal with emergencies like illness etc.

Primary data was collected through questionnaire from people of semi-urban area

Semantic Differential Scale was used to understand the degree of satisfaction of below Rs.

15,000 Income level per month regarding various sources of finance.

Secondary data was collected through government websites and various websites of banks,

newspapers, magazines etc.

Analysis was conducted with the help of SPSS software by using One-Way Anova at

significance level of 0.05 & MS-Excel


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INTRODUCTION TO MICROFINANCE

Microfinance can be defined as financial services targeting and catering to clients who are

excluded from the traditional financial system on account of their lower economic status.

Microfinance can include micro-credit, micro-savings, micro-insurance and payment services.

ACTIVITIES IN MICROFINANCE

Microcredit: It is a small amount of money loaned to a client by a bank or otherinstitution. Microcredit can be offered, often without collateral, to an individual or

through group lending.

Micro savings: These are deposit services that allow one to save small amounts ofmoney for future use. Often without minimum balance requirements, these savings

accounts allow households to save in order to meet unexpected expenses and plan for

future expenses.

Micro insurance: It is a system by which people, businesses and other organizationsmake a payment to share risk. Access to insurance enables entrepreneurs to concentrate

more on developing their businesses while mitigating other risks affecting property,

health or the ability to work.

Remittances: These are transfer of funds from people in one place to people in another,usually across borders to family and friends. Compared with other sources of capital that

can fluctuate depending on the political or economic climate, remittances are a relatively

steady source of funds.

WHO ARE THE CLIENTS OF MICRO FINANCE?

The typical micro finance clients are low-income persons that do not have access toformal financial institutions. Micro finance clients are typically self-employed, often

household-based entrepreneurs.

In rural areas, they are usually small farmers and others who are engaged in smallincome-generating activities such as food processing and petty trade.


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In urban areas, micro finance activities are more diverse and include shopkeepers, serviceproviders, artisans, street vendors, etc. Micro finance clients are poor and vulnerable non-

poor who have a relatively unstable source of income.

Access to conventional formal financial institutions, for many reasons, is inversely related to

income: the poorer you are the less likely that you have access. On the other hand, the chances

are that, the poorer you are, the more expensive or onerous informal financial arrangements.

Moreover, informal arrangements may not suitably meet certain financial service needs or may

exclude you anyway. Individuals in this excluded and under-served market segment are the

clients of micro finance.

MICRO FINANCE MODELS

I. Micro Finance Institutions (MFIs):MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and

cooperatives. They are provided financial support from external donors and apex institutions

including the Rashtriya Mahila Kosh (RMK), SIDBI Foundation for micro-credit and NABARD

and employ a variety of ways for credit delivery.

Since 2000, commercial banks including Regional Rural Banks have been providing funds to

MFIs for on lending to poor clients. Though initially, only a handful of NGOs were into

financial intermediation using a variety of delivery methods, their numbers have increased

considerably today. While there is no published data on private MFIs operating in the country,

the number of MFIs is estimated to be around 800.

II. Bank Partnership ModelThis model is an innovative way of financing MFIs. The bank is the lender and the MFI acts as

an agent for handling items of work relating to credit monitoring, supervision and recovery. In

other words, the MFI acts as an agent and takes care of all relationships with the client, from first

contact to final repayment. The model has the potential to significantly increase the amount of

funding that MFIs can leverage on a relatively small equity base.


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A sub - variation of this model is where the MFI, as an NBFC, holds the individual loans on its

books for a while before securitizing them and selling them to the bank. Such refinancing

through securitization enables the MFI enlarged funding access. If the MFI fulfils the true sale

criteria, the exposure of the bank is treated as being to the individual borrower and the prudential

exposure norms do not then inhibit such funding of MFIs by commercial banks through the

securitization structure.

III. Banking CorrespondentsThe proposal of banking correspondents could take this model a step further extending it to

savings. It would allow MFIs to collect savings deposits from the poor on behalf of the bank. It

would use the ability of the MFI to get close to poor clients while relying on the financial

strength of the bank to safeguard the deposits. This regulation evolved at a time when there were

genuine fears that fly-by-night agents purporting to act on behalf of banks in which the people

have confidence could mobilize savings of gullible public and then vanish with them. It remains

to be seen whether the mechanics of such relationships can be worked out in a way that

minimizes the risk of misuse.

IV. Service Company ModelUnder this model, the bank forms its own MFI, perhaps as an NBFC, and then works hand in

hand with that MFI to extend loans and other services. On paper, the model is similar to the

partnership model: the MFI originates the loans and the bank books them. But in fact, this model

has two very different and interesting operational features:

(a) The MFI uses the branch network of the bank as its outlets to reach clients. This allows the

client to be reached at lower cost than in the case of a standalone MFI. In case of banks which

have large branch networks, it also allows rapid scale up. In the partnership model, MFIs may

contract with many banks in an arms length relationship. In the service company model, the MFI

works specifically for the bank and develops an intensive operational cooperation between them

to their mutual advantage.


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(b) The Partnership model uses both the financial and infrastructure strength of the bank to

create lower cost and faster growth. The Service Company Model has the potential to take the

burden of overseeing microfinance operations off the management of the bank and put it in the

hands of MFI managers who are focused on microfinance to introduce additional products, such

as individual loans for SHG graduates, remittances and so on without disrupting bank operations

and provide a more advantageous cost structure for microfinance.

V. SHGs-Bank Linkage Model

NABARD is presently operating three models of linkage of banks with SHGs and NGOs:

Model 1: In this model, the bank itself acts as a Self Help Group Promoting Institution (SHPI).

It takes initiatives in forming the groups, nurtures them over a period of time and then provides

credit to them after satisfying itself about their maturity to absorb credit. About 16% of SHGs

and 13% of loan amounts are using this model (as of March 2002).

Model 2: In this model, groups are formed by NGOs (in most of the cases) or by government

agencies. The groups are nurtured and trained by these agencies. The bank then provides credit

directly to the SHGs, after observing their operations and maturity to absorb credit. While the

bank provides loans to the groups directly, the facilitating agencies continue their interactions

with the SHGs. Most linkage experiences begin with this model with NGOs playing a major role.

This model has also been popular and more acceptable to banks, as some of the difficult

functions of social dynamics are externalized. About 75% of SHGs and 78% of loan amounts are

using this model.

Model 3: Due to various reasons, banks in some areas are not in a position to even finance

SHGs promoted and nurtured by other agencies. In such cases, the NGOs act as both facilitators

and microfinance intermediaries. First, they promote the groups, nurture and train them and

then approach banks for bulk loans for on-lending to the SHGs. About 9% of SHGs and 13% of

loan amounts are using this model.


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LEGAL FORMS OF MFIs IN INDIA

Table 4.1 Legal forms of MFIs in India

Types of MFIs Estimated

Number*

Legal Acts under which Registered

1. Not for Profit MFIs

a.) NGO - MFIs

400 to 500 Societies Registration Act, 1860 or similar

Provincial Acts

Indian Trust Act, 1882

b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956

2. Mutual Benefit MFIs

a.) Mutually Aided Cooperative

Societies (MACS) and similarly

set up institutions

200 to 250 Mutually Aided Cooperative Societies Act

enacted by State Government

3. For Profit MFIs

a.) Non-Banking Financial

Companies (NBFCs)

6 Indian Companies Act, 1956

Reserve Bank of India Act, 1934

Total 700 - 800

Source: NABARD website


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REVIEW OF LITERATURE

1. Sayma Rahman, (2010) Consumption difference between Micro-credit borrowers and

Non-Borrowers: A Bangladesh Experience. The Journal of Developing areas, Vol.43, Iss 2;

p.g. 313, 14 pgs

This paper investigates the consumption behavior of borrowers of two major microcredit

institutions in Bangladesh and compares that with non-borrowers. Primary data has been

collected from borrowers of the Grameen Bank and Bangladesh Rural Advancement Committee

(BRAC) operating in three major districts in Bangladesh. Along with borrowers, non-borrowers

data has also been collected from non-program village to avoid endogeneity. Control-group

method (non-borrowers from non-program villages) has been used to compare the differences in

consumption patterns between the two groups. This study analyses the impact of per capitamonthly expenditure and other household characteristics on the budget share of eleven items

(food and non-food) consumed by borrowers and non-borrowers. Results from the estimation on

linear and quadratic model suggest that borrowers of microcredit programs are better off in terms

of consumption than non-borrowers.

2. Masahiro Shoji. Does Contingent Repayment in Microfinance Help the Poor During

Natural Disasters?The Journal of Development Studies. London: Feb 2010. Vol. 46, Iss.

2; pg. 191Microfinances in Bangladesh introduced a contingent repayment system beginning in 2002,

which allowed rescheduling of savings and instalments during natural disasters for affected

members. This paper is one of the first attempts to evaluate the system employing a unique

dataset. In using evidence from a flood in 2004, the author found that rescheduling plays the role

of a safety net by decreasing the probability that people skip meals during negative shocks by 5.1

per cent. This effect is even higher on the landless and females. This study attempts to contribute

to the issue regarding the poverty reduction effect of microfinances.


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3. Sayma Rahman, Rafiqul Bhuyan Rafiq, Mo Vaziri. Microcredit Programs and

Consumption Behaviour of the Borrower: Evidence from Bangladesh. Journal of American

Academy of Business, Cambridge. Hollywood: Mar 2009. Vol. 14, Iss. 2; p. 83 (10 pages)

Microcredit program in Bangladesh provides small loans to rural people especially to women

with the purpose of eradicating poverty. This study investigates the impact of microcredit on

consumption pattern of borrowers and compares if the impact is the same for non-borrowers.

Primary data has been collected from the Grameen Bank and the Bangladesh Rural

Advancement Committee (BRAC) borrowers of some selected villages from three major districts

in Bangladesh. Data of non-borrowers are collected from the same cohort to provide a control

group for comparison with borrowers. To estimate the impact of per capita monthly expenditure

and other household characteristics on budget share of items consumed by borrowers and non-borrowers the study relies on An Almost Ideal Demand System (AIDS) model. The estimated

results of Iterative Seemingly Unrelated Regression (SURE) suggest that borrowers of

microcredit programs are better off in terms of consumption of most of the food and non-food

items compared to non-borrowers.

4. Yunus, Banker to the Poor: The Story of Grameen Bank. The Lahore Journal of

Economics. Lahore: Summer 2009. Vol. 14, Iss. 1; pg. 173, 3 pgs

Loans are given for income-generating work and initially it was decided to influence the clients

on their choice of work. The principle of the Grameen Bank system is that the people should not

have to go to the bank, rather the bank should go to the people. In comparing Grameen to

conventional banks, Yunus states that the difference for one, lies in the fact that their clients do

not need to show how large are their savings and how wealthy they may be, instead they need to

prove how poor they are and how meagre are their savings. Further, the success of the bank is

gauged not by bad debt figures or repayment rates, although this is necessary for their internal

records, but whether or not the lives of the clients have improved and they have been extricated

from the evils of poverty.

The author's economic philosophy is another chapter of great interest. Although not considering

himself to be a follower of capitalism per se, he does believe in the global free market economy

and the power of the free market. He does not think it right to offer unemployment benefits to


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redress the problem of the poor. All the poor need, he holds, is financial capital. He also

advocates competition as a driving force for all innovations. Yunus proposes that we replace the

limited profit maximization principle of capitalism with a generalized principle - an entrepreneur

who maximizes both profit and social returns. In this way an entrepreneur could run social

services such as a health care service for the poor, if financially viable. Such entrepreneurs

would be steeped in social consciousness. A willing suspension of disbelief is called for here, as

even though one would wish to endorse his views on the goodness of human nature, sadly his

philosophy seems to border on the idealistic and ephemeral rather than being a true depiction of

man's inherent nature.

Yet, so successful has been this venture that it has been replicated with greater or lesser success

in other countries of Asia, Africa, Latin America and now even in the US. It has also expandedits spheres of activities to ventures such as housing loans, fisheries and retirement schemes.

To conclude, a word on Pakistan's experience with micro finance. Unfortunately this has not

been as salubrious as the experience of Bangladesh thus far, for whatever reason. Yet the

intended outreach this fiscal year is 3 million poor, up from last year's 2 million.

We all live with rampant poverty and our reaction is invariably one of apathy, indifference or

resignation that individually there is very little if at all we can do about it. Yunus is that rareindividual who not only believes that the evil of poverty can be eradicated but has devoted his

entire life's work to realizing this dream.


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NEEDS FOR MICROFINANCE

y Poor people need not just loans but also savings, insurance and money transferservices.

y Microfinance must be useful to poor households: helping them raise income, build upassets and/or cushion themselves against external shocks.

y Microfinance can pay for itself.Subsidies from donors and government are scarceand uncertain, and so to reach large numbers of poor people, microfinance must pay

for itself.

y Microfinance means building permanent local institutions.y Microfinance also means integrating the financial needs of poor people into a

countrys mainstream financial system.

y The job of government is to enable financial services, not to provide them.y The key bottleneck is the shortage of strong institutions and managers. Donors

should focus on capacity building.

y Interest rate ceilings hurt poor people by preventing microfinance institutions fromcovering their costs, which chokes off the supply of credit.

y Microfinance institutions should measure and disclose their performance bothfinancially and socially.

SCOPE:

Micro Financing has greatest scope in India especially in developing semi -urban cities like

Jalandhar because many of the people dont have high income resulting in low purchasing power

and Micro Finance institutions target market as low income group and it is common impression

is that the poor people need and use a variety of financial services including deposits, loans etc.

they use financial services for some reason like

Seize business opportunities To fulfill their need of necessities Improve their standard of living Deal with emergencies like illness etc.


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OBJECTIVE OF THE STUDY

Microfinance has proved to be a successful step towards poverty alleviation and empowerment

in rural area.

The objective of this study is to find out how feasible will the replication of micro financemodel be in semi-urban area of Jalandhar. We will also try to gauge the openness of

people towards microfinance.

The study shall also measure the effectiveness of microfinance. It is a feasibility studywhich we intend to share with the people who wish to implement microfinance in

Jalandhar region.

What are the various sources available for the micro-finance credit in Jalandhar. Which source the clients prefers the most to avail the facility of micro-credit. What are the major factors for which people are taking micro-credit. What are the problems faced by clients while opting for micro-credit.

HYPOTHESIS

y Micro-Finance is feasible in Jalandhar city.


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RESEARCH METHODOLOGY

y RESEARCH TOPIC- IMPACT OF MICRO-CREDIT STUDY BASEDIN SEMI URBAN AREA OF JALANDHAR

y RESEARCH TYPE- Descriptive researchy DATA COLLECTION TOOLS;

-SECONDARY DATA: With the help of websites of various banks and

Govt. websites, magazines, news-papers etc.

-PRIMARY DATA: By direct interaction with clients and local

Non- Banking institutes and money-lenders

and with help of questionnaire.

y SAMPLING TECHNIQUE: Convenience samplingy SAMPLING UNIT: Jalandhar region(Semi-urban area)y SAMPLE SIZE: 60 Respondentsy TOOLS USED FOR THE STUDY:

y Open Ended & Closed Ended Questionnairewith the help of Semantic Differential Scale

y TECHNIQUES OF ANALYSISQuantitative: One-way Anova & MS-Excel


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DATA ANALYSIS AND INTERPRETATION

Part-I

I. Have you ever taken micro-credit?OPTION NO. OF RESPONDENTSYES 50

N0 10

Interpretation:-

This shows that most of the respondents we cover were availing the service of micro-credit and

thus shows that micro-credit is playing vital role in their life in some or the other way.

YES

83%

NO

17%

Micro-Credit Availed


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II. What is your occupation?Occupation

No. of respondents percentage

Farmer 3 5%

Auto/rikshaw puller 9 15%

Business 22 37%Service 18 30%

Others 8 13%

Interpretation:-

This shows that most of the respondents were indulged in the business and service classcontributing about 67% of the total respondents where respondents like farmers are low i.e. just

5% , with auto/rikshaw puller form 13 and 15% respectively.

service

30%

bussiness

37%

autorikshawpuller

15%

farmer

5%

others

13%

occupation


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III. What is your income level (Per Month)?Income level No. of respondents Percentage %

Below Rs. 5000/- 7 12

Rs.5000-10,000/- 17 28

Rs.10,000-15,000/- 21 35More Than Rs.15,000/- 15 25

Interpretation:-

The basic purpose to ask this question was to know the respondents who belong to income group

more than 15000/- were not availing much of the micro-credit facility this question further

helped us to conduct our study as only 6 people among this group are availing the service of

micro credit where as people belonging to the lowest income group i.e. 7 all are availing this

service.

Below Rs.5000/-

12%

Rs.5000-10,000/-

28%

Rs.10,000-15,000/-

35%

More ThanRs.15,000/-

25%

Income level


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IV. Which source you rely the most while taking micro-credit?(50 respondents)Source No. of respondent Percentage %

Local-Money Lenders 11 22

Public Banks 13 26

Self-Help Groups 0 0Co-Operative banks 2 4

Private Banks 16 32

Peers 3 6

NBFIs 4 8

others 1 2

Interpretation:-

This shows that most of the respondents rely on private banks followed by public banks

contributing about 58% as the reliable source for taking micro-credit and then local money

lenders i.e. 22% where as others i.e. NBFC, peers, others contributes about 20% for total

respondents where as self-help groups have just 0% showing that self-help groups should be

formed in Jalandhar region as we know that self help groups have played a very significant role

in the South India for success of micro-finance there.

Local-MoneyLenders

22%

PublicBanks

26%

Self-HelpGroups

0%

Co-Operativebanks

4%

PrivateBanks

32%

Peers

6%

NBFIs

8%

others

2%

Reliable Source


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V. What are the reasons for which you have taken micro-finance?(50 respondents)Reasons No. of respondents Percentage %

Seize business opportunities 22 44

to fulfill needs of necessities 10 20

Improve standard of living 4 8Deal with emergencies like

illness etc.

14 28

Interpretation:-

This shows that most of the respondents takes micro-credit to do some business so that they

could earn their livelihood for business the respondents contributes about 44% of the whole

respondents followed by to deal with emergencies i.e. 28% where as to improve standard of

living and to fulfill necessities contributes about 28% of the total.

Seizebusiness

opportunities

44%

tofulfillneedsof

necessities

20%

Improve

standardofliving

8%

Dealwith

emergencieslike

illnessetc.

28%

REASONS


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VI. If you are taking the micro-credit from banks which bank you prefer the most?(50respondents)

Banks No. of respondents Percentage %

ICICI 12 24

PNB 3 6

HDFC 3 6

State Bank of Patiala 18 36

Punjab Grameen Bank 2 4

NBFIS 4 8

Others 8 16

Interpretation:-

This shows that about 32% of the respondents are taking micro-credit from State Bank of Patiala

i.e. for 36% of total respondents followed by ICICI Bank contributing about 24% of total where

as for others its about 44% which is of NBFIs, Punjab Grameen Bank , PNB ,HDFC and others

sources.

ICICI

24%

PNB

6%

HDFC

6%StateBankofPatiala

36%

Punjab Grameen

Bank

4%

NBFIS

8%

Others

16%

BANKS


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VII. Rate the essence of micro-finance on the scale of 1-5?(60 respondents)

Significant Insignificant

Interpretation:-

This shows that as most of the people lie between 1 to 2 rating on scale i.e. about 48 number of

respondents therefore we can say that micro-credit will have significant at present in Jalandhar

region as people at scaling rate of 4 and 5 are very low i.e. about 4 out of 60 respondents.

0

5

10

15

20

25

30

35

Significant1 2 3 4 5 Insignificant

scaling 1to5

Series1

Scale 1 2 3 4 5

No.Respondents 31 17 8 3 1


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VIII. How much Interest rates are charged by micro-credit providers? (50 respondents)Interest rates No. of respondents Percentage %

Below5% Nil

5-10 27 54

10-15 13 2615-20 3 6

20-25 6 12

Morethan25 1 2

Interpretation:-

This show that most of the respondents are undertaking the micro-credit at the interest rate of

5 to 10 % that contributes about 54% of the total respondents followed by 10 to 15% interest

rates which are about 26 % of the respondents. It shows that respondents mostly prefer to

take micro-credit at the rate of 5 to 15 percent which accounts for 80% of the total

respondents. Whereas micro-credit is not available at a low interest rate of less than 5%.

below5%

0%

5to 10%

54%

10 to 15%

26%

15to20%

6%

20 to25%

12%

morethan25%

2%


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X. According to you which factor will be more crucial for the growth of micro-finance inJalandhar city? (50 respondents)

FACTOR NO.OF RESPONDENTS PERCENTAGE %

LOW INTEREST RATES 8 16

TIME PROCESSING 12 24INSTALLMENT FACTOR 2 4

AVAILABILITY 7 14

BUSINESS ASSISTANCE 18 36

OTHERS 3 6

Interpretation:-

This show that most of the respondents take micro-credit not only to get money for their business

but also to get business assistance to run their business successfully, here about 36% of the

respondents have stated that the business factor is the most important factor of the micro-credit

facility followed by time for processing which is about 26%, then availability, installment factor

and low interest rates forms about 38% of the total respondents.

LOWINTEREST

RATES

17%

TIMEPROCESSING

26%

INSTALLMENT

FACTOR

4%

AVAILABILITY

15%

BUSINESS

ASSISTANCE

38%

Factor's


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XI. Do you think micro-finance is a tool to eradicate poverty? (60 respondents) No. of respondents Percentage %

Yes 39 59

No 15 23

Cant say 6 18

Interpretation:-

Most of the respondent feels that micro-finance will help to eradicate poverty i.e. about 59% of

the respondents as it have helped them to earn their livelihood where as 23% says no and rest 18

% were not able to make their judgment on this issue.

Yes

59%

No

23%

Can'tsay

18%


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XII. Do you think that micro-finance can be helpful for unemployed youth? (60 respondents) No. of respondents Percentage %

Yes 25 42

No 27 45

Cant say 8 13

Interpretation:-

This shows that majority of the respondents say no i.e. about 45% but 42% says yes it can help

youth to remove unemployment as the variation between the two is quite low thus it will bedifficult to say whether micro-finance will help to eradicate the problem of unemployment

among the youth or not .

Yes

42%

No

45%

Cantsay

13%


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XIII. Do you think micro-finance can be helpful for women upliftment?(60 respondents) No. of respondents Percentage %

Yes 41 64

No 11 25

Cant Say 8 11

Interpretation:-

This shows that most of the respondents says that micro-credit will help in the upliftment of the

women as more than 64% of the respondents agree with this statement only 25 % doesnt agree

with it as the variation is quite high thus we can say that it will help for women upliftment.

Yes

64%

No

25%

Can'tSay

11%


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XIV. How do you anticipate future for micro-finance , rate it between 1-5 ?

Prosperous Dim

Interpretation:-

This shows that the future of the micro credit in Jalandhar region is going to be prosperous as

most of the respondents are between the scaling rate of 1 to 2 i.e. about 40 out of 60 respondents.

0

5

10

15

20

25

30

Prosperous 1 2 3 4 5 Dim

scaling 1to5

Series1

Ratingscale

1 2 3 4 5

No. ofrespondents

26 14 9 7 3


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33

Part II

SCALE RATING (50-respondents)

PEERS

Interpretation:-

This show that for peer , most of the respondents for peers are towards the positive side only thus

we can say that it can be seen as the favorable source for the taking micro-credit.

1

45 6

8

11

15

0

23

6

9

13

17

23

14

7 4

3

1

0

1

2

3

6

9

11

18

7 911 7

6

7

3

low7 6 5 4 3 2 1 high

RATING SCALE

TIME AVAILABILITY EXPLOITATIVE COURTEOUS EFFICIENT


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LOCAL MONEY LENDERS

Interpretation:-

This shows that in terms of availability the local-money-lenders are easy for accessing

microfinance but it is highly exploitive in nature, thus it cant be regarded as reliable source for

poor people who have low wage rate.

1 25 5

8

12

17

01

2 3

8

15

21

1 2

2

4

7

14

20

12 97

5

6

7

4

119 8 7

6

7

2

low7 6 5 4 3 2 1 high

RATING SCALE



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35

CO_OPERATIVE CREDIT SOCIETIES/ SHGs

Interpretation:-

Through the research we came to know that the general awareness of people towards the SHG is

quite low in Jalandhar reign and there is very few SHG here in Jalandhar. The best for suchsource of micro-credit is that its highly efficient and courteous one and most suitable for poor

people.

2

5

7

17

5

7 7

2

3

5

6

11

14

910

12 8

11

5

3

1

12

1110

7

43

3

3

3 4

7

8

11

14

low7 6 5 4 3 2 1 high

RATING SCALE



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PRIVATE BANKS

Interpretation:-

This shows that all the respondents are at the high side , which shows that private banks such as

ICICI has been regarded as the most effective and efficient in terms of time and availability for

the micro-credit.

13 3 6

8

1316

2 4 4

78

11

24

1

13

4

8

12

21

3

4

7

7

8

9

12

2

5

6

7

6

9

15

low7 6 5 4 3 2 1 high

RATING SCALE



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PUBLIC BANKS

Interpretation:-

This shows that most of the respondents are satisfied with the way the Public banks like PNB,

Bank of Patiala , all these are moderately rated by the respondents in term of micro-creditfacility.

10

7

32

8

10 10

24 8

8

7

8

1312

8

6

2

3

4

54

6

13

12

83

446

8

129

7

4

low7 6 5 4 3 2 1 high

RATING SCALE



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38

PART-III

TEST FOR HYPOTHECATION Hypothesis 1: Micro-finance is feasible in jalandhar city

Descriptives

Sources on peopleRely

N Mean

Std.

Deviation Std. Error

95% Confidence Interval

for Mean

Minimum MaximuLower Bound Upper Bound

low interest rate 8 1.00 .000 .000 1.00 1.00 1

time for processing

and sactioning of

loans

12 1.75 .452 .131 1.46 2.04 1

installment factors 2 2.00 .000 .000 2.00 2.00 2

Availability 7 2.29 .488 .184 1.83 2.74 2

Business assistance 18 4.11 .676 .159 3.77 4.45 3

Others 3 4.33 2.887 1.667 -2.84 11.50 1

Total 50 2.72 1.485 .210 2.30 3.14 1

ANOVA

SourceOnPeopleRely

Sum of Squares df Mean Square F Sig.

Between Groups 79.957 5 15.991 25.019 .0

Wit

hin Groups28.123 44 .639

Total 108.080 49


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39

Contrast Coefficients

Contra

st

FactorCrucialForGrowthInJalandhar

low interest rate

time for

processing and

sactioning of

loans

installment

factors availability

Business

assistance others

1 1 2 3 -4 1 -3

Contrast Tests

Contr

ast

Value of

Contrast

Std.

Error t df

Sig. (2-

tailed)

SourceOnPeopleRely

Assume equalvariances

1 -7.53 2.566 -2.935 44 .005

Does not assume

equal variances

1-7.53 5.063 -1.487 2.103 .039

MEANS PLOT


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POST Hoc Tests ; multiple comparisons

(I)

FactorCrucialF

orGrowthInJala

ndhar

(J)

FactorCrucialF

orGrowthInJala

ndhar

Mean

Differen

ce (I-J)

Std.

Error Sig.

95% Confidence Interval

Lower

Bound Upper Bound

low interest rate time for

processing and

sactioning of

loans

-.750*

.365 .046 -1.49 -.01

installment

factors-1.000 .632 .121 -2.27 .27

Availability -1.286*

.414 .003 -2.12 -.45

Business

assistance-3.111

*.340 .020 -3.80 -2.43

Others -3.333*

.541 .031 -4.42 -2.24

time for

processing and

sactioning of

loans

low interest rate .750*

.365 .046 .01 1.49

installment

factors-.250 .611 .034 -1.48 .98

Availability -.536 .380 .036 -1.30 .23

Businessassistance

-2.361* .298 .031 -2.96 -1.76

Others -2.583*

.516 .025 -3.62 -1.54

installment

factors

low interest rate 1.000 .632 .121 -.27 2.27

time for

processing and

sactioning of

loans

.250 .611 .034 -.98 1.48

Availability -.286 .641 .050 -1.58 1.01

Business

assistance-2.111* .596 .001 -3.31 -.91

Others -2.333*

.730 .003 -3.80 -.86

Availability low interest rate 1.286*

.414 .003 .45 2.12


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41

time for

processing and

sactioning of

loans

.536 .380 .036 -.23 1.30

installmentfactors

.286 .641 .050 -1.01 1.58

Business

assistance-1.825

*.356 .021 -2.54 -1.11

Others-2.048

*.552 .001 -3.16 -.94

Business

assistance

low interest rate 3.111* .340 .020 2.43 3.80

time for

processing andsactioning of

loans

2.361* .298 .031 1.76 2.96

installment

factors2.111

*.596 .001 .91 3.31

Availability 1.825*

.356 .021 1.11 2.54

Others -.222 .499 .050 -1.23 .78

Others low interest rate 3.333*

.541 .031 2.24 4.42

time for

processing and

sactioning of

loans

2.583*

.516 .025 1.54 3.62

installment

factors2.333

*.730 .003 .86 3.80

Availability 2.048*

.552 .001 .94 3.16

Business

assistance.222 .499 .050 -.78 1.23

*. The mean difference is significant at the0.05 level.


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INTERPRETATION:-

Null hypothesis is rejected as sign 2-tailed value is less than 0.05. Thus, Micro-finance is feasible in Jalandhar city.

DESCRIPTIVE: There is more difference in mean of low interest rate & other factors which has the

potential for growth of micro-credit in semi-urban area of jalandhar.

ANOVA TABLE: As the sign 2 tailed value is less than 0.05 i.e. 0.021 ,null hypothesis is rejected and

therefore Micro-finance has the potential for growth in Jalandhar,there is more

variation between groups

CONTRAST TEST: As the sign 2 tailed value is less than 0.05,null hypothesis is rejected.

MEAN PLOT DIAGRAM: As we can see there is significant difference in lower interest rate & others factors

which people think has the potential for growth of micro-finance in jalandhar.


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FINDINGS & SUGGESTIONS

FINDINGS H1: micro-credit is feasible in Jalandhar region, as proved by Anova test.

Most of the respondents below the income group of more than Rs. 15000/- are takingmicro-credit in order to start business, meet need of necessities or to meet certain

emergencies.50 out of 60 respondents are under taking this facility of micro-credit.

Most of the respondents are taking micro-credit to start business in order to earntheir livelihood and so that they generate some regular source of income for their

families. These are about 44 % of the total respondents followed by ot deal with

emergencies such as illness etc. which is about 28%.

Most of the respondents rely on both public and private i.e. about 58% of totalrespondents collectively followed by Local-money lender i.e. about 22%. Showing

that respondents reliability towards public and private sector banks is maximum.

Most of the respondents have taken micro-credit from State Bank of Patiala i.e.about 36 % followed by ICICI bank which is about 24 % where as PNB, HDFC and

Punjab Grameen Bank are not being regarded as better source for taking micro-credit

in Jalandhar.

As the range of micro-credit interest rates is between 5% to 25 % , most of therespondents are paying interest rates between 5 to 15 % which forms about 80% of

the total respondents.

Majority of the respondents are happy with the present interest rates being chargedon micro-credit.

The business assistance factor has been regarded as the most significant factor of themicro-credit which form about 62 % of the total respondents followed by time taken

and availability of micro-credit.

About 59% of the total respondents say that, it will help to remove the poverty so itcan be seen as tool to remove poverty from Jalandhar region.

For being helpful for unemployed youth 45% says no and 42% says yes , as thevariation between the two is quite low thus its difficult to judge , therefore we can

say it has neutral effect for helping unemployed youth.


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About 64% of the respondents says that , it will help in women upliftment thereforeit can be said it can play a vital role for women upliftment.

Peers as the source of micro-credit has been regarded as the most favorable one interms of time, availability and effectiveness.

Local-money-lenders are high at availability but these are highly exploitive. Private Banks such as ICICI, HDFC etc. has been regarded as highly courteous,

efficient and but these are a bit high at exploitive part too.

Public Banks such as Punjab National Bank, State Bank of Patiala are moderatelyrated

Self Help Groups and Co-operative Societies are highly moderate in nature.

SUGGESTIONS People should be make aware about Self-Help Groups and various steps should be

taken by various Private and Public banks to form Self Help Groups among

masses.

Various NGOs should come forward to help poor people by helping them toprovide micro-credit at low interest rates and provide them business assistance.

Peoples reliability over Local-money-lenders should be tried to decrease as theyexploit poor by not only charging high interest rates but also in compounded

form.

The interest rates charges shouldnt be more than 15% for micro-credit as itshould be regarded as a tool for poors upliftment.

Public and Private sector Banks should try to open their own MFIs in Jalandharregion.

There should be MFIs such as SSK working in South India, which is not onlyworking successful but also main reason for the success of microfinance in South

India.


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CONCLUSION

To conclude we can say that its just the beginning of the micro-credit in Jalandhar regionand it will of more success when people will rely more towards organized sector formicro-credit such as Public and Private sector banks.

There is need for opening of MFIs in Jalandhar region so that micro-credit can beprovided with more of ease

Micro-credit can be regarded as tool which will help to eradicate poverty Help for women upliftment by making them more independent and monitory fit. Help poor to setup businesses and earn their livelihood.

Thus, we can say that micro-credit is of great significance and it will help poor for their

upliftment.


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References:

Nabard websiteAnil K Khandelwal, Microfinance Development Strategy for India, Economic and

Political Weekly, March 31, 2007

R Srinivasan and M S Sriram, Microfinance in India- DiscussionShri Y S P Thorat, Managing Director, NABARD, Innovation in Product Design, Credit

Delivery and Technology to reach small farmers, November, 2005

Shri Y S P Thorat, Managing Director, NABARD, Microfinance in India: SectoralIssues and Challenges, May, 2005

Report, Status of Microfinance in India 2006-2007, NABARDhttp://www.microfinancegateway.org/p/site/m/http://www.microfinancegateway.org/p/site/m/brijj.com/group/microfinance-in-india--presentation--Nabard-And-Microfinancehttp://www.infibeam.com/Books/info/PRABHU-GHATE/MICROFINANCE-IN-INDIA-

A-State-of-the/9788178298931.html

http://www.merinews.com/article/microfinance-fact-and-fiction/147023.shtmlhttp://www.rediff.com/money/2007/nov/08micro.htmhttp://www.axisbank.com/corporate/credit/microfinance/Micro-Finance.asp


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QUESTIONAIRE

Part -I

SECTION I:

The answers to your survey will remain anonymous and confidential. The answers are meant for

survey purpose only to help us understand the impact of micro-credit on livelihood of people.

Personal Information

NAME: __________________________________________

ADDRESS: ____________________________________________________________

_____________________________________________________________

AGE: ________________

SEX: MALE FEMALE

SECTION II:

XV. Have you ever taken micro-credit?Yes No

XVI. What is your occupation?Farming Auto-rickshaw

Business Servicemen other____________

XVII. What is your income level (Per Month)?Below Rs. 5000/- Rs.5000-10,000/-

Rs.10,000-15,000/- More Than Rs.15,000/-

XVIII. Which source you rely the most while taking micro-credit?Local-Money Lenders Public Banks

Self-Help Groups Co-Operative banks

Private Banks Peers


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Non-Banking Financial Institutes others____________________

XIX. What are the reasons for which you have taken micro-finance?Seize business opportunities to fulfill needs of necessities

Improve standard of living Deal with emergencies like illness etc.

XX. If you are taking the micro-credit from banks which bank you prefer themost?

ICICI PUNJAB NATIONAL BANK

HDFC STATE BANK OF PATIALA

PUNJAB GRAHMIN BANK NON-BANKING FINANCE CORPORATIONS

Others________________________

XXI. Rate the essence of micro-finance on the scale of 1-5?


XXII. How much Interest rates are charged by micro-credit providers?Below 5%

5% - 10%10% - 15%

15% - 20%

20% - 25%

Above 25%

XXIII. How will you rate the present interest rates being charged on you for taking micro-credit?


1 2 3 4 5

1 2 3 4 5


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XXIV. According to you which factor will be more crucial for the growth of micro-finance inJalandhar city?

Low interest rates

Time for processing and sanctioning of loans

Installment factor

Availability

Business assistance

Others _____________________

XXV. Do you think micro-finance is a tool to eradicate poverty?Yes No Cant say

XXVI.

Do you think that micro-finance can be helpful for unemployed youth?

Yes No Cant say

XXVII. Do you think micro-finance can be helpful for women upliftment?Yes No Cant say

XXVIII. How do you anticipate future for micro-finance , rate it between 1-5 ?Prosperous Dim

1 2 3 4 5


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50

PART- II

OBJECTIVE

To understand the degree of satisfaction of people having income level below Rs.15,000 per

month regarding various sources of finance:

Local-Money lender

Timely Not Timely

Easy (to get) Difficult (to get)

Not Exploitative Exploitative

Courteous Not courteous

Efficient Inefficient

Co-op Credit Societies/ SHGS

Timely Not Timely



7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1


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51



Private Banks

Timely Not Timely





Public Banks

Timely Not Timely


7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1


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Peers

Timely Not Timely





7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

7 6 5 4 3 2 1

micro-finance study in jalandhar

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