A MAJOR RESEARCH PROJECT

ON
“IMPACT OF MICROFINANCE ON LIVING
STANDARD, EMPOWERMENT AND POVERTY
ALEVIATION”
Submitted in partial fulfillment of the requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION

(2013-2015)

Supervised By: Submitted by:

Dr. B.B Singla Simranjeet Kaur

MBA – 2nd year Sec A

Roll No. 130423318

SCHOOL OF MANAGEMENT STUDIES

PUNJABI UNIVERSITY, PATIALA

1
 CERTIFICATE

This is to certify that Ms. Simranjeet Kaur a student of MBA 2nd year, Section A, Roll No.
130423318 batch 2013-15, has successfully completed her project entitled “IMPACT OF
MICROFINANCE ON LIVING STANDARD, EMPOWERMENT AND POVERTY
ALLEVIATION” under my guidance.

Date: 29 / 04 / 2015 Project Guide

Dr. B.B Singla

Asst. Professor
School of management studies,
Punjabi University, Patiala.

2
 DECLARATION

I, Simranjeet Kaur, a student of MBA 2nd year, Section A, Roll No. 130423318 hereby
declare that the Project entitled “IMPACT OF MICROFINANCE ON LIVING
STANDARD, EMPOWERMENT AND POVERTY ALLEVIATION” submitted in
the partial fulfilment of requirement for the degree of Masters of Business
Administration, under the guidance of Dr. B.B Singla, Asst. Professor,
School of management Studies, Punjabi Universit y, Patiala, is m y original
work and has not been submitted elsewhere for the award of any other
degree, diploma, fellowship, or any other similar title.

Date: 29 / 04/ 2015 SIMRANJEET KAUR

ROLL NO: 3318

MBA FINANCE

School of Management Studies

(Punjabi University, Patiala, Punjab)

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 PREFACE

Someone has rightly said that practical experience is far better and closer to the real world
than mere theoretical exposure. The practical experience helps the students to view the real
business world closely, which in turn widely influences their perceptions and arguments their
understanding of the real situation.

Research work constitutes the backbone of any management education programme. A

management student has to do research work quiet frequently during his entire span.

The research work entitled “IMPACT OF MICROFINANCE ON LIVING STANDARD,

EMPOWERMENT AND POVERTY ALLEVIATION”.

MBA is the stepping stone to management care in order to reach practical and concrete
results. Our contemporary lives have been influenced by the advancement and growth in e-
services being provided by the banks nowadays.

The course deals with matters, which are basic and should be known in relation to
Microfinance with special reference to the impact on living standard, women empowerment
and poverty alleviation.

4
 ACKNOWLEDGEMENT

A person always requires guidance and help of other to achieve success in his mission;
similarly it was not possible for me to complete my assignment. I am indeed very much
thankful to all the people who have helped me to complete the project.

I am gratefully indebted to Dr. B.B Singla, my project guide for providing me all the
necessary help and required guidelines for the completion of my project and also for the
valuable time that he gave me from his busy schedule.

Last but not least I am thankful to all my friends, who have been a constant source of
inspiration and information for me.

Simranjeet Kaur

Roll No: 3318

SEM IV, MBA

(Regular)

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 Executive Summary
Micro-finance interventions are well-recognized world over as an effective tool for poverty
alleviation and improving socioeconomic status of rural poor and women empowerment. In
India too, micro-finance is making headway in its effort for reducing poverty and
empowering rural women. Micro-finance through the network of cooperatives, commercial
banks, regional rural banks, NABARD and NGO’s has been largely supply-driven and a
recent approach. Micro-finance institutions are, other than banks, are engaged in the
provision of financial services to the poor. There are three types of lending technologies:
(i) The document based and asset based conventional technology, being followed by all
banks.
(ii) The group lending, which is of various shapes and forms with advantages drawbacks
attached.
(iii) Individual based lending is one where the Micro-finance institutions have to be very
careful in assessing there payments capacity of the borrowers.

The above technologies are focused on micro-finance through SHG’s, however, credit
accessibility to poor through SHG’s has enhanced tremendously and recovery is
comparatively higher. Rural women play a significant role in the domestic and socio
economic life of the society and therefore, national development is not possible without
developing this segment of the society. There view of studies related to credit accessibility to
women simply demonstrates that the direct access to institutional credit to rural women is
very limited and there is sex bias in extending the credit to them. However, women from the
non-farm sector have better access to banks than the women working in the farm sector.
Even, male members of women borrowers have greater influence on accessibility to credit
utilization and its repayment.

The SHG’s became a regular component of the Indian financial system since 1996. The
SHG’s are small, informal and homogenous groups. These groups have proved as cyclic
agents of development in both the rural and urban areas. The SHG’s after being formed start
collecting a fixed amount of thrift from each member regularly. After accumulating a
reasonable amount of resource, the group starts lending to its members for petty consumption
needs. If the bank is satisfied with the group in terms of (i) genuineness of demand for credit;
(ii) credit handling capacity of the members; (iii) repayment behaviour within the groups; and

6
(iv) the accounting system and maintenance of the records, it extends a term loan of smaller
amount to the group. Thus, financing through SHG’s effects quite a few benefits like; (i)
savings mobilized by the poor; (ii)access to the required amount of appropriate credit by the
poor; (iii)meeting the demand and supply of credit structure and opening of new market for
financing institutions; (iv) reduction in transaction cost for both lenders and borrowers; (v)
tremendous improvement in recovery; (vi) heralding a new realization of subsidy less and
corruption-less credit; and (vii) remarkable empowerment of poor women.

This study based on 6 chapters, the first chapter is introductory chapter which highlights what
is microfinance, features and models of microfinance and chapter one also contains the
information about poverty alleviation, living standard, and women empowerment and it
variables. Chapter 2 contains literature reviews of microfinance it contains fifteen studies
related with microfinance and chapter 3 is research methodology in which need of study
,scope of study ,objective of study ,research design ,data collection etc are included and forth
chapter is data analysis and discussions ,in which factor analysis is used as statistical tool for
measuring impact of microfinance on living standard ,poverty alleviation and empowerment,
factor analysis was performed on SPSS version 16 and the data used in factor analysis is
primary data which is collected through a structured questionnaire . In factor analysis the 5
factors extracted, these factors contains variables which are correlated to each other. And
chapter 5 is findings and recommendations which highlighted the major findings about
research topic according to the objectives.

From the analysis of data, it was found that microfinance has the positive impact on the
standard of living of the poor people and on their life style. Microfinance not only helped the
poor people to come over the poverty line, but also helped them to empower themselves.Self
help group model of microfinance is helping the poor women to start their work and generate
income from them and increase their standard of living.

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 INDEX
CHAPTER NO. TITLE PAGE NO.

Certificate
Declaration
Preface

Acknowledgement

Executive summary

Chapter – I 1-21
INTRODUCTION
Introduction to microfinance 2-4
Role and activities in microfinance 5-6
Microfinance social aspects 7

The need in India 8-9

Models of microfinance in India 9-11
Poverty alleviation 11-15
Living standard and its indicators 16-17
Women empowerment and indicators 18-19
Chapter-II REVIEW OF LITERATURE 22-29

Chapter-III RESEARCH METHODOLOGY 30-36

Introduction 31

Need of study 31-32

Objective of study 32

Scope of study 32-33

Research design 33

sample size 33

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 Sampling technique 33

Sample selection and data collection procedure 33-34

Sources of data 34-35

Tools and technique for analysis 35

Limitation of the study 35-36

Chapter-IV DATA ANALYSIS AND INTERPRETATION 38-54

Chapter-V FINDINGS AND RECOMMENDATIONS 56-59

Chapter-VI BIBLIOGRAPHY 61-64

Annexure QUESTIONNAIRE 65-68

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 CHAPTER 1
INTRODUCTION

10
INTRODUCTION:

Poor and low income people all over the world have been connected with money lenders who
provide easy access to credit but at higher cost. The interest cost generally ranges from 36%
to as high as 120%.There are two main approaches to financing the poor ,the poverty lending
approach through credit that funded by donors and patrons , government and other
concessional dispensations .Many organizations using the poverty lending approach to
provide credit to poor borrowers at low cost . But in long run these very institutions are not
sustainable primarily because their interest rates are just too low for their full cost recovery
and the another approach the financial system approach focuses on commercial
intermediation for the economically active poor and they offer easy access to credit at a
reasonable and an affordable cost. Their credit portfolio is financed by savings commercial
debts and for profit investment in varying proportions, these two approaches providing
financial service to the poor people.[1]

Microfinance is extension of small loans to entrepreneur to poor to quality for traditional

bank loans .It has proven as an effective and popular measure in the ongoing struggle against
poverty, enabling those without access to lending institutions to borrow at affordable interest
rates and start small business.

Microfinance is defined as any activity that includes the provision of financial services such
as credit, savings, and insurance to low income individuals which fall just above the
nationally defined poverty line, and poor individuals which fall below that poverty line, with
the goal of creating social value. The creation of social value includes poverty alleviation and
the broader impact of improving livelihood opportunities through the provision of capital for
micro enterprise, and insurance and savings for risk mitigation and consumption smoothing.
A large variety of sectors provide microfinance in India, using a range of microfinance
delivery methods. Since the ICICI Bank in India, various actors have endeavored to provide
access to financial services to the poor in creative ways. Governments also have piloted
national programs, NGOs have undertaken the activity of raising donor funds for on-lending,
and some banks have partnered with public organizations or made small inroads themselves
in providing such services. This has resulted in a rather broad definition of microfinance as
any activity that targets poor and low-income individuals for the provision of financial

11
services. The range of activities undertaken in microfinance include group lending, individual
lending, the provision of savings and insurance, capacity building, and agricultural business
development services. Whatever the form of activity however, the overarching goal that
unifies all actors in the provision of microfinance is the creation of social value.

MICROFINANCE DEFINITION

The reserve bank of India has defined microfinance as a provision of thrift, credit and other
financial services and products of very small amount to the poor in rural, semi urban and
urban areas for enabling them to raise their income level and improve level of living
standards. Microfinance institutions are those that provide those facilities[1]

According to International Labor Organization (ILO), “Microfinance is an economic

development approach that involves providing financial services through institutions to low
income clients”.

"The poor stay poor, not because they are lazy but because they have no access to capital."

The dictionary meaning of ‘finance’ is management of money. The management of money

denotes acquiring & using money. Micro Finance is buzzing word, used when financing for
micro entrepreneurs. Concept of micro finance is emerged in need of meeting special goal to
empower under-privileged class of society, women, and poor, downtrodden by natural
reasons or men made; caste, creed, religion or otherwise. The principles of Micro Finance are
founded on the philosophy of cooperation and its central values of equality, equity and
mutual self-help. At the heart of these principles are the concept of human development and
the brotherhood of man expressed through people working together to achieve a better life for
themselves and their children.

Traditionally micro finance was focused on providing a very standardized credit product. The
poor, just like anyone else, (in fact need like thirst) need a diverse range of financial
instruments to be able to build assets, stabilize consumption and protect themselves against
risks. Thus, we see a broadening of the concept of micro finance--- our current challenge is to
find efficient and reliable ways of providing a richer menu of micro finance products. Micro
Finance is not merely extending credit, but extending credit to those who require most for

12
their and family’s survival. It cannot be measured in term of quantity, but due weightage to
quality measurement. How credit availed is used to survive and grow with limited means.

CONCEPT AND FEATURES OF MICRO-FINANCE:

1. It is a tool for empowerment of the poorest.

2. Delivery is normally through Self Help Groups (SHGs).
3. It is essentially for promoting self-employment, generally used for:
(a) Direct income generation
(b) Rearrangement of assets and liabilities for the household to participate in
future opportunities and
(c) Consumption smoothing.
4. It is not just a financing system, but a tool for social change, specially for women.
5. Because micro credit is aimed at the poorest, micro-finance lending technology needs
to mimic the informal lenders rather than the formal sector lending. It has to:
(a) Provide for seasonality
(b) Allow repayment flexibility
(c) Fix a ceiling on loan sizes.

Microfinance approach is based on certain proven truths which are not always
recognized. These are:

1. That the poor are bankable; successful initiatives in micro finance demonstrate that
there need not be a tradeoff between reaching the poor and profitability - micro
finance constitutes a statement that the borrowers are not ‘weaker sections’ in need of
charity, but can be treated as responsible people on business terms for mutual profit .
2. That almost all poor households need to save, have the inherent capacity to save small
amounts regularly and are willing to save provided they are motivated and facilitated
to do so.
3. That easy access to credit is more important than cheap subsidized credit which
involves lengthy bureaucratic procedures - (some institutions in India are already
lending to groups or SHGs at higher rates - this may prevent the groups from enjoying

13
 a sufficient margin and rapidly accumulating their own funds, but members continue
to borrow at these high rates, even those who can borrow individually from banks).
4. 'Peer pressure' in groups helps in improving recoveries.

ROLE OF MICROFINANCE:

The micro credit of microfinance prename was first initiated in the year 1976 in Bangladesh
with promise of providing credit to the poor without collateral , alleviating poverty and
unleashing human creativity and endeavor of the poor people. Microfinance impact studies
have demonstrated that[2]

1. Microfinance helps poor households meet basic needs and protects them against risks.

2. The use of financial services by low-income households leads to improvements in

household economic welfare and enterprise stability and growth.

3. By supporting women’s economic participation, microfinance empowers women, thereby

promoting gender-equity and improving household well being.

4. The level of impact relates to the length of time clients have had access to financial
services.

ACTIVITIES IN MICROFINANCE:

Micro credit: It is a small amount of money loaned to a client by a bank or other institution.
Micro credit 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 of money 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 organizations make a

14
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.

Product Design: The starting point is: how do MFIs decide what product s to offer? The
actual loan products need to be designed according to the demand of the target market.
Besides the important question of what risks to cover, organizations also have to decide
whether they want to bundle many different benefits into one basket policy, or whether it is
more appropriate to keep the product simple. For marketing purposes, MFI‘s sometimes
prefer the basket cover, since it can make the policies sound comprehensive, but is that the
right approach for the low-income market? After picking products, one must also understand
how they are priced. What assumptions do the organizations make with regard to operating
costs, risk premiums, and reinsurance, and how did they come to those conclusions? Would
their clients be willing to pay more for greater benefits? From price, the logical next set of
questions involves efficiency. Indeed, given the relative high costs of delivering large
volumes of small policies, maximizing efficiency is a critical strategy to ensuring that the
products are affordable to the low-income market. One way is to make the products
mandatory, which increases volumes, reduces transaction costs and minimizes adverse
selection. What does an organization lose by offering mandatory insurance, and how does it
overcome the disadvantages? MFI‘s can combine a mandatory product with some voluntary
features to make the service more us to mar-oriented while.

Techniques of Product Design: To design a loan product to meet borrower needs it is

important to understand the cash pattern of the borrowers. Cash pattern is important so far as
they affect the debt capacity of the borrowers. Lenders must ensure that borrowers have
sufficient cash inflow to cover loan payments when they are due efficiency depends less on
the delivery model than on the simplicity of the product or product menu. Simple products
work best because they are easier to administer and easier for clients to understand. Another
efficiency strategy is to use technology to reduce paperwork, manual processing and errors.

15
MFIs need to conduct a costing analysis to determine how much they need to earn in
commission to cover their administrative expenses.

MICROFINANCE SOCIAL ASPECTS

Micro financing institutions significantly contributed to gender equality and women’s

empowerment as well as poor development and civil society strengthening. Contribution to
women’s ability to earn an income led to their economic empowerment, increased well being
of women and their families and wider social and political empowerment.

Microfinance programs targeting women became a major plank of poverty alleviation and
gender strategies in the 1990s. Increasing evidence of the centrality of gender equality to
poverty reduction and women’s higher credit repayment rates led to a general consensus on
the desirability of targeting women.

Self Help Groups (SHGs): Self- help groups (SHGs) play today a major role in poverty
alleviation in rural India. A growing number of poor people (mostly women) in various parts
of India are members of SHGs and actively engage in savings and credit (S/C), as well as in
other activities (income generation, natural resources management, literacy, child care and
nutrition, etc.). The S/C focus in the SHG is the most prominent element and offers a chance
to create some control over capital, albeit in very small amounts.

The SHG system has proven to be very relevant and effective in offering women the
possibility to break gradually away from exploitation and isolation.

Savings services help poor people: Savings has been called the “forgotten half of
microfinance.” Most poor people now use informal mechanisms to save because they lack
access to good formal deposit services,. They may tuck cash under the mattress; buy animals
or jewelry that can be sold off later, or stockpile inventory or building materials.

These savings methods tend to be risky—cash can be stolen, animals can get sick, and
neighbors can run off. Often they are illiquid as well – one cannot sell just the cow’s leg
when one needs a small amount of cash. Poor people want secure, convenient deposit

16
services that allow for small balances and easy access to funds. MFIs that offer good savings
services usually attract far more savers than borrowers.[3]

THE NEED IN INDIA

India is said to be the home of one third of the world’s poor; official estimates range from 26
to 50 percent of the more than one billion population.

• About 87 percent of the poorest households do not have access to credit.

• The demand for micro credit has been estimated at up to $30 billion; the supply is less than
$2.2 billion combined by all involved in the sector. Due to the sheer size of the population
living in poverty, India is strategically significant in the global efforts to alleviate poverty and
to achieve the Millennium Development Goal of halving the world’s poverty by 2015.

Microfinance can also be distinguished from charity. It is better to provide grants to families
who are destitute, or so poor they are unlikely to be able to generate the cash flow required to
repay a loan. This situation can occur for example, in a war zone or after a natural disaster.

While India is one of the fastest growing economies in the world, poverty runs deep
throughout country. About two thirds of India’s more than 1billion people live in rural
areas and almost 170 million of them are poor.

For more than 21 percent of them, poverty is a chronic condition. Three out of four of
India’s poor live in rural areas of the country. Poverty is deepest among scheduled
castes and tribes in the country’s rural areas.

The micro-finance scene in India is dominated by Self Help Groups (SHGs) - Banks
linkage program for over a decade now. As the formal banking system already has a
vast branch network in rural areas, it was perhaps wise to find ways and means to
improve the access of rural poor to the existing banking network. This was tried by
routing financial.

17
Indian microfinance is poised for continued growth and high valuation but faces pressing
challenges and opportunities that—left unaddressed—could negatively impact the long-term
future of the industry.

The industry needs to move past a single-minded focus on scale, expand the depth and
breadth of products and services offered, and focus on the double bottom line and over
indebtedness to effectively address the risks facing the industry. [4]

MODELS OF MICROFINANCE IN INDIA

THE SHG MODEL

The self help group model has evolved in the NGO sector. A variety of models arise out of
NGO nurturing among which SHGs have become the most popular.

SHGs are small informal groups comprising of membership of 10-20 persons. The
composition of membership is mostly exclusively male or exclusively female. The members
are self selected with a liberty to choose their group depending on their level of affinity with
the other potential members. The group meets regularly at an appointed time and place and
carries out its financial transactions of savings and credit. The roles and norms of the group
are determined by the members themselves. The NGO provides them with support services,
training and developing linkages.

However, there are certain features of SHG that need to be looked into:

 The group promotion process is long and the poor have to wait for long periods.
 The amounts available in the beginning are very small and all the members cannot
take loans at the same time.
 The functioning of the group relies completely on group dynamics which are very
difficult to build in.
 Conflicts arise on seemingly trivial reasons which can lead to the break-down of the
group and it is difficult to rebuild it.

Despite these few disadvantages SHG still is a popular model for micro finance in India.

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FEDERATED SHG APPROACH

The federated SHG approach builds upon the unique features of SHG based micro finance
and contributes to factors that improve the sustainability of SHGs. Federations increase the
opportunity offered by the SHGs, expands empowerment through leadership building and
addresses the component of security through insurance services. Federations usually come
under the Societies Registration Act. PRADAN and MYRADA, two large NGOs that
pioneered the concept of SHGs.

THE GRAMEEN BANK MODEL

The grameen bank methodology which was a case of exceptional success first evolved in
Bangladesh and was launched by many other organizations in India with slight variations.
Some of the features are as follows:

 Homogeneous groups of 5 members are formed at village level

 The field worker facilitates the process of group forming
 All the group members undergo a 7 day compulsory training
 Some groups undergo the group recognition test
 8 joint liability groups affiliate together to form a centre
 The centre meets every week at a defined time and a bank assistant attends the
meetings.

Group discipline is enforced through peer pressure. Collateral is replaced by peer pressure.
The incentive to timely repayment is repeat loans and continuous access to increasing credit
from the bank. A field worker maintains a check on loan utilization.

NON BANKING FINANCE COMPANIES

The NBFCs has emerged as a nearest substitute for those MFIs who want to go the for-profit
route. Since getting registered as a bank is costly and the local area bank idea has not been
pursued beyond the initial approvals, the NBFC route is increasingly being chosen by profit
driven MFIs. They can also enter the capital markets. Since the poor are bankable and
lending to them can be commercially viable it is not necessary to depend on low cost funds to
lend to them. Secondly, since the amounts required are huge, the financial markets are the
only way to mobilize resources. This would mean mobilizing debt at market rates of interest.

19
The for-profit NBFC route is currently the best way to operate in the capital markets. For
regulatory purposes, NBFCs have been classified into 3 categories.

(a) Those accepting public deposits,

(b) Those not accepting public deposits but engaged in financial business

(c) Core investment companies with 90 per cent of their total assets as investments in the
securities of their group/holding/subsidiary companies.[5]

This research is done to measure the impact of microfinance on living standard, women
empowerment and poverty alleviation .so in this chapter explanation about these three
concepts are given and variables which are determine the living standard , empowerment and
poverty alleviation are explained following:

POVERTY ALLEVIATION

INTRODUCTION

The concept of poverty is multi-dimensional. It covers not only income and consumption but
also health, education, vulnerability, risk, and marginalization and exclusion of the poor from
the main stream society[6]one of the earliest absolute definitions of poverty was that of
dandekar-rath, who defined it as an expenditure of Rs.15 per capita per month for the Indian
rural population and Rs.18 per capita per month for urban population. And in 1993 a new
poverty line Rs 49 per person per month in rural areas and Rs 57 in urban areas .In the urban
areas according to the 1973-74 prices .the government of India conduct via the national
sample survey NSS, annual survey of consumption expenditure and income on Indian
households .in addition to NSS the national council for applied economic research (NCAER)
run occasionally survey of consumption and income of Indian households. in 1993-94
according to the planning commission only 19% of India’s population was below poverty line
this was official estimate. Estimates based on consumer expenditure survey carried out
regularly by the NSSO, however placed the proportion of India’s population below poverty
line at 36% .

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TRENDS IN POVERTY IN INDIA

The early poverty estimates of Dett’s[7]show that rural poverty increased to above 40% in
1992 and 1995. On the other hand, urban poverty had declined significantly to about 30 % n
[8]
1997 as compared to 36% in 1987. Gupta’s estimates also show similar trend on rural
poverty. but according to him, the rural the rural poverty had shown a surge in year 1998 and
had increased to 45%.The 55th round results 1999-2000 took everyone by surprise .the
poverty ratio came down from 36% in 1993-94 to 26% in 1999-2000 i.e. a clear 10% decline
in just 5 years the reform programme of government was a magic wand. According to NSSO
55th round data the rural poverty line of 327 in 1999-2000 corresponds not to 2400 kcal but to
1868 kcal. The rural poverty line would corresponds to 200 kcal is Rs. 567 and corresponding
poverty ratio is 74.9% of our rural population could not afford 2400 kcal. In 2006 planning
commission estimation of population below poverty line is 27.8%, the estimated number of
poor is estimated to be approximately 300 million in 2004-05, larger than the official estimate
of 1999-2000.it may be recalled that the official estimate for poverty in 1999-2000 was
26.1% for country as a whole and 260 million were estimated as poor[9].the world
development report (2001) outline a comprehensive anti-poverty intervention strategy. This
involves complimentary policies towards “(i) promoting opportunities, (ii) facilitating
empowerment and (iii) providing security to poor. Opportunities are provided to the poor
with the creation of employment, credit, infrastructure, efficient markets, schools, drinking
water and sanitation. Facilitating empowerment involves laying political and legal basis for
development and in proving security to poor providing wages and self- employment
opportunities, microfinance, micro insurance, initiating programmes to prevent macro shokes
and develop capacity to respond to them and designing systems of social risk management
complementary to pro growth policies are some of the specific initiatives needed to provide
economic and social security to the poor and the marginalized.

Poverty ratio of Punjab is less than 15% as compared to Orissa 46.4%. and in Punjab 9.1 %
of rural population live in poverty and 7.1% urban population live in poverty according to
BPL based URP consumption (2004-05).

21
POVERTY ALLEVIATION TOOLS

The key to alleviation the poverty is how effectively the tools of food, shelter, basic
education, opportunity for employment, health and medical services, infrastructure, markets
and communication are deployed either singularly or severally to the poor. credit is a
powerful tool that could be effectively deployed when it made available to the credit worthy
among the economically active poor. When credit is provided to the very poor, the may not
be in a position to effectively deploy the loan as they lack the opportunity for self employed
and the risks associated with the deployment of credit may be high . poor households living
in extremely isolated areas without any access to proper and basic infrastructure will find it
difficult to deploy the credit that would enable them to repay the principle along with
interest. Poor who do not have food will deploy the credit to buy food and this in turn would
lead to humiliation and diminishing of an already low self esteem.

The poorest of the poor is certainly not to look out for the formal financial system. In general,
the extremely poor are those living on less than 1dollar a day , while economically active
poor have sufficient means of earning their income to meet their basic needs .the lower
middle class segment have a relatively reliable income , better standards of health, nutrition ,
housing , education , a selection of consumer durables health conscious and some forms of
statutory investment microfinance is , thus more appropriate not only for the economically
active poor but also for the lower middle income class category[10]

Speaking at SAFMA in august 2007 .Prof. Yunus said his grameen bank experience of
lending to the poor to enable them to attain their optimum earning capacity has convinced
him that a poverty free world is feasible if there are collective belief and will. Since Grameen
bank was born in 1984 the bank has lent 6.3 million dollar to the marginalized community
with 98.61% recovery rate. As per survey of the bank 64% of its borrowers have crossed the
poverty line.

One aspect of microfinance that distinguishes it from the traditional financial system is the
“joint liability concept,” where groups of individuals, usually women, group together to apply
for loans, and hold joint accountability for repayment of the loan. The premise is that
providing low SES individuals access to financial services will better enable poor households
to move away from subsistence living, to a future oriented outlook on life and an increased
investment in nutrition, education, and living expenses. Furthermore, microfinance is unique

22
as a development tool because of its potential to be self-sustaining (both reducing poverty and
maintaining a profitable business).

Microfinance programs can be an effective way to provide low-cost financial services to poor
individuals and families. Second, such programs have been shown to help in the development
and growth of the local economy as individuals and families are able to move past
subsistence living and increase disposable income levels.

Microfinance programs were able to reduce poverty through increasing individual and
household income levels, as well as improving healthcare, nutrition, education, and helping to
empower women. For example, standard of living increases, which help to eradicate extreme
poverty and hunger, have occurred at both the individual and household levels as a result of
microfinance programs. Furthermore, it has been demonstrated by some research that
microfinance programs increase access to healthcare, making preventative healthcare
measures more affordable to the poor. In addition, more children are being sent to school and
staying enrolled longer. Finally, it has been shown that such programs can help borrowers to
develop dignity and self-confidence in conjunction with loan repayment, and self-sufficiency
as a means for sustainable income becomes available. Since microfinance services are
primarily focused on women, it is argued that this leads to the empowerment of women and
the breaking down of gender inequalities, through providing opportunities for women to take
on leadership roles and responsibilities.

Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new

economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks
linkage Programme, aimed at providing a cost effective mechanism for providing financial
services to the 'unreached poor'. In the Indian context terms like "small and marginal
farmers", " rural artisans" and "economically weaker sections" have been used to broadly
define micro-finance customers. Research across the globe has shown that, over time,
microfinance clients increase their income and assets, increase the number of years of
schooling their children receive, and improve the health and nutrition of their families.
A more refined model of micro-credit delivery has evolved lately, which emphasizes the
combined delivery of financial services along with technical assistance, and agricultural
business development services. When compared to the wider SHG bank linkage movement in

23
India, private MFIs have had limited outreach. However, we have seen a recent trend of
larger microfinance institutions transforming into Non-Bank Financial Institutions (NBFCs).
This changing face of microfinance in India appears to be positive in terms of the ability of
microfinance to attract more funds and therefore increase outreach.

In terms of demand for micro-credit or micro-finance, there are three segments, which
demand funds. They are:

 At the very bottom in terms of income and assets, are those who are landless and
engaged in agricultural work on a seasonal basis, and manual labourers in forestry,
mining, household industries, construction and transport. This segment requires, first
and foremost, consumption credit during those months when they do not get labour
work, and for contingencies such as illness. They also need credit for acquiring small
productive assets, such as livestock, using which they can generate additional income.

 The next market segment is small and marginal farmers and rural artisans, weavers
and those self-employed in the urban informal sector as hawkers, vendors, and
workers in household micro-enterprises. This segment mainly needs credit for
working capital, a small part of which also serves consumption needs. This segment
also needs term credit for acquiring additional productive assets, such as irrigation
pump sets, bore wells and livestock in case of farmers, and equipment (looms,
machinery) and work sheds in case of non-farm workers.

 The third market segment is of small and medium farmers who have gone in for
commercial crops such as surplus paddy and wheat, cotton, groundnut, and others
engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment
includes those in villages and slums, engaged in processing or manufacturing activity,
running provision stores, repair workshops, tea shops, and various service enterprises.
These persons are not always poor, though they live barely above the poverty line and
also suffer from inadequate access to formal credit.

Well these are the people who require money and with Microfinance it is possible. Right now
the problem is that, it is SHGs' which are doing this and efforts should be made so that the big
financial institutions also turn up and start supplying funds to these people.

24
LIVING STANDARD

INTRODUCTION
Standard of living refers to the level of wealth, comfort, material goods and necessities
available to a certain socioeconomic class in a certain geographic area. And we can also say
that Standard of living is defined as the level of welfare available to individual or to the group
of people. It concerns goods and services people are able to consume and the resources they
have access to. It depends on the quality and quantity of available goods and services and the
way they are distributed within the population.

INDICATORS
There are various indicators for measuring living standard. One approach is to use “direct”
measures, such as income, expenditure or consumption. The most popular measures of living
standards are income and consumption. In general terms, income refers to the earnings from
productive activities and current transfers. It can be seen as comprising claims on goods and
services by individuals or households. In other words, income permits people to obtain goods
and services.-[11]

In contrast, consumption refers to resources actually consumed. Although many components

of consumption are measured by looking at household expenditures, there are important
differences between the two concepts. First, expenditure excludes consumption that is not
based on market transactions. Given the importance of home production in many developing
countries, this can be an important distinction. Second, expenditure refers to the purchase of a
particular good or service. However, the good or service may not be immediately consumed,
or at least there may be lasting benefits. This is the case, for example, with consumer
durables. In this case, consumption should ideally capture the benefits that come from the use
of the good, rather than the value of the purchase itself
According to Marks (1981) Living Standard represents the level at which public are able to
gather capital and to get better their living standard with such income for foods,
communication, housing, education, transport, health and clothing, etc

Plato (1983) Living standard is an approach to which a person’s needs are fulfilled. The term
need consists of food, water, shelter, clothes, education, health, transport, entertainment etc.

25
IMPACT

Microfinance has great impact on improving living standard of members of self help groups.
Members able to get loans and they utilize these loans to generate self employment, they
generally starts works like dairy farming, making pickles, etc. and by working in these groups
the able to generate income, and when they become able to generate profits from their
business it impact on their living standard because by getting income they able to spend more
amount on consumption and able to acquire new assets like two wheelers, washing machines
etc, and there living standard improves.

Income is one of the important elements of living standard of the poor people as well as
saving. Mohammed and Mohammed (2007) The Microfinance Banks are to provide loans to
the poor not only the increase their income but also to mobilize their savings . Apart from
these other factors that contribute to human development, like education, empowerment are
also included as variables indicating a level of standard of living. Microfinance programs
target both economic and social poverty, and in essence it is important to assess the success
of Microfinance Bank. With raising people’s incomes, employment opportunities,
consumption, building of assets and accumulating savings the microfinance facility able to
increase the living standard.

26
 WOMEN EMPOWERMENT
INTRODUCTION
Empowerment literally means to equip or supply with ability, however, empowerment has
various meaning and differs from person to person. We often keep complaining about the
status of Indian women and lots of other things related to them but we are more liberated than
the women of Middle-East nation or rather the Muslim countries where women are not
allowed to move out without a veil or rather the parda system exist in those societies.

Dependent women are not empowered women. If women think just that being highly
educated and employed they are empowered, it is a myth. Everyone must understand that
empowering women doesn’t mean empowering them in technical area only. Women should
remember that they are also rational, intelligent and thinking human beings. [12]

MICROFINANCE AND WOMEN EMPOWERMENT

Women as micro and small entrepreneurs have increasingly become the key target group for
micro finance programs. Consequently, providing access to micro finance facilities is not
only considered a pre-condition for poverty alleviation, but also considered as a strategy for
empowering women. In developing countries like INDIA micro finance is playing an
important role, promoting gender equality and is helping in empowering women so that they
can live quality life with dignity.
The study conducted by FINCA Client Poverty Assessment conducted in 2003 revealed that
of the interviewed clients 81 percent were women, and it was found that food security was 15
percent higher among their village banking clients than non-clients. The report also showed
clients to have 11 percent more of their children enrolled in school with an 18 percent
increase in healthcare benefits. Clients’ housing security was reported as 18 percent higher
than non-clients. The assessment concluded that microfinance improved the wellbeing of
women clients and their families.[13]
Microfinance has a positive effect on the empowerment of women by creating an
“empowerment indicator”.

27
INDICATORS
I consider following variables for measuring impact of microfinance on women
empowerment in my research:.

 Involvement in major household decisions.

 Relative freedom from domination within the family.
 Political and legal awareness.
 Involvement in political campaigning and protests..
 They become more confident.
 They get a better control of the resources.
 Increase in self-esteem, individual and collective confidence
 Increase in articulation, knowledge and awareness on health, nutrition reproductive
rights, law and literacy
 Increase an decrease in personal leisure time and time for child care;
 Increase on decrease of workloads in new programmes
 Change in roles and responsibility in family & community.
 Positive changes in social attitudes
 Awareness and recognition of women's economic contribution within and outside the
household;
 Women’s decision-making over her work and income[14]

28
 REFERENCES

1. Somanath,V.S,(2009)“Microfinance :Redefining the future”,Excel books, New Delhi, page

no.1-4

2.AggarwalVijender, AggarwalRachna and KhannaParu (2012),”journalon microfinance and

risk management for poor India” Vol. 1(2), page no.104-107

3.Davies, A. and Quinlivan, G.(2006) ,”A Panel Data Analysis of the Impact of Trade on
Human Development, Journal of Socio-Economics” Vol. 35(5), pages 868-876

4.MahantaPadmalochan, panda gitanjali(2012) ,”status of microfinance in india,international

journal of marketing, financial services & management research” vol.1(11)page no.144

5.Dr.Sadyojathaapas (2012),”International journal of social sciences and interdisciplinary

research” vol.1(6) pages 1-7

6. Chelliah and sudarshan (1999), “Income – poverty and beyond: human development in
India,vol 42(5), page no.8.

7. DattG(1999),”Has poverty declined since economic reforms ? Statistical data analysis”,

special article, economic and political weekly. vol.34 (8)

8. Bhallasurjit s (2002),”Growth and poverty in India – myth and reality”, development,

poverty and fiscal policy “,vol 9(2) page no. 20

9. Fr. Joy Vattoly , Mary LiyaK.A. (2009) ,”Catalyst: Microfinance and poverty alleviation.”
vol.7(1),page no.14-17

10.Somanath,V.S(2009), “Microfinance :Redefining the future”,Excel books, New Delhi,

page no.48-49

11. Mokyr, J (1990),”Living standards in Ireland before the Famine," Economic History
Review, vol. 41. Page no. 209-215.

29
12. Mitchell, T.(1973) “Motivation and Participation: an Integration”, Academy
ofManagement Journal,Vol. 16,(4), page no. 670-679.

13.M. Hashemi, R. R. Schuler, and A. P. Riley (2010), “Rural Credit Programs and
Women’s Empowerment in Bangladesh”vol 24(4) page no. 53.

14.Jill S Sscheneiderman (2010)”Microfinance and women’s empowerment :international

journal of social policy research and development” vol.1(2) page no. 85-90

30
 CHAPTER 2
LITRATURE REVIEW

31
Muhammad Yunus (1998)Has examined that this approach to poverty reduction at the
macro-level is inadequate. The primary causes of poverty are not lack of human capital or
lack of demand for labor. Lack of demand for labor is only a symptom, not a cause, of
poverty. Poverty is caused by our inadequate understanding of human capabilities and by our
failure to create enabling theoretical frameworks, concepts, institutions and policies to
support those capabilities. The main argument is that economics as we know it is not only
unhelpful in getting the poor out of poverty; it may even be a hindrance. In this paper, he
explores those institutions that perpetuate poverty, share his experiences with an effective
poverty alleviation institution, and present thoughts on the future of poverty alleviation.
Before addressing these points, however, he would provide a useful framework to define the
concept of "the poor" more concretely.[1]

Monique Cohen (2002)has examined that the ideas presented in this paper are designed to
direct the arena of discourse towards a more holistic market driven or client focused
microfinance agenda. Currently, the debate on market-driven microfinance is primarily
framed by the ‘problems’ of competition and dropouts among established MFIs. The
solutions to the problems are defined in terms of more responsive products, the creation of
new products, and the restructuring of existing ones. Appropriate products will not only
benefit the operations of an institution they will also have a positive impact on the wellbeing
of the client, reducing the risk of borrowing and the poor’s vulnerability. In presenting
current thinking on a client-led agenda, this paper finds itself in a precarious position in the
midst of this debate. Client-led models are still in their infancy, and the fact that this topic is
the theme of this special edition of the Journal of Development Studies is itself an important
milestone. When this author began to focus on clients in microfinance six years ago, the
notion that clients deserved a voice in the design and delivery of services was dismissed out
of hand.[2]

SusyCheston (2002)Has examined that Microfinance has the potential to have a powerful
impact on women’s empowerment. Although microfinance is not always empowering for all
women, most women do experience some degree of empowerment as a result. Empowerment
is a complex process of change that is experienced by all individuals somewhat differently.
Women need, want, and profit from credit and other financial services. Strengthening
women’s financial base and economic contribution to their families and communities plays a
role in empowering them. Product design and program planning should take women’s needs

32
and assets into account. By building an awareness of the potential impacts of their programs,
MFIs can design products, services, and service delivery mechanisms that mitigate negative
impacts and enhance positive ones.[3]

Yunus (2003) Has examined that count 130 McMaster School for Advancing Humanity on
women to spread the word to their neighbors and friends about the success of these loans.
The testimony is expected to convince others to seek out Grameen for help. Yunus also
encourages members to save some of their money in case they fall on hard times, such as
natural disasters, or to use this money for other opportunities. In 1977, Yunus founded
Grameen Bank after working for six months to get a loan from the Janata Bank. Yunus
realized that having groups of people take out a loan was a better plan for success than giving
loans to individuals. He describes the process by which Grameen Bank lends money. Loan
repayments are to be made in very small amounts, and in the first project, Yunus chose a
villager to be in charge of collecting the repayments.[4]

Jennifer Meehan (2004) Has examined that it will need to do three things simultaneously.
First, it will need to rapidly scale up, in key markets, like India, home to high numbers of the
world’s poor. Second, in this process, clear priority is needed for philanthropic, quasi-
commercial and commercial financing for the business plans of MFIs targeting the poorest
segments of the population, especially women. Third, microfinance will need to realize its
possibility as a broad platform and movement, more than simply an intervention and industry.
The pioneering financings completed by leading, poverty-focused MFIs have shown the
industry what is possible – large amounts of financing that allows for rapid expansion of
financial services to new poor customers. The MFIs offer a model to others that are interested
in tapping the financial markets. If leading MFIs continue on their present course and adopt
some or all of the suggestions offered, financial market interest – or more specifically, debt
capital market interest – in leading, poverty-focused MFIs is expected to grow. [6]

Ernest Aryeetey (2005) Has examined that informal finance and microfinance suitable for
financing growing small to medium size enterprises (SMEs) in Sub-Saharan Africa? First, he
present the characteristics of informal finance, focusing on size, structure, and scope of
activities. Informal finance has not been very attractive for the private sector. Indeed, the
informal sector has considerable experience and knowledge about dealing with small
borrowers, but there are significant limitations to what it can lend to growing micro
businesses. Second, he discuss some recent trends in microfinance. While externally driven
33
microfinance projects have surfaced in Africa, their performance relative to small business
finance has not been as positive as in Asia and Latin America. Third, he introduce some
possible steps toward a new reform agenda that will make informal and microfinance relevant
to private sector development, including focusing on links among formal, semi-formal and
informal finance and how these links can be developed.

Basu, P., Srivastava (2005)Has examined that the current level and pattern of access to
finance for India's rural poor and examines some of the key microfinance approaches in
India, taking a close look at the most dominant among these, the Self Help Group (SHG)
Bank Linkage initiative. It empirically analyzes the success with which SHG Bank Linkage
has been able to reach the poor, examines the reasons behind this, and the lessons learned.
The analysis in the paper draws heavily on a recent rural access to finance survey of 6,000
households in India, undertaken by the authors. The main findings and implications of the
paper are as follows: India's rural poor currently have very little access to finance from
formal sources. Microfinance approaches have tried to fill the gap. Among these, the growth
of SHG Bank Linkage has been particularly remarkable, but outreach remains modest in
terms of the proportion of poor households served. The paper recommends that, if SHG Bank
Linkage is to be scaled-up to offer mass access to finance for the rural poor, then much more
attention will need to be paid towards: the promotion of high quality SHGs that are
sustainable, clear targeting of clients, and ensuring that banks linked to SHGs price loans at
cost-covering levels. At the same time, the paper argues that, in an economy as vast and
varied as India's, there is scope for diverse microfinance approaches to coexist. Private sector
micro financiers need to acquire greater professionalism, and the government, too, can help
by creating a flexible architecture for microfinance innovations, including through a more
enabling policy, legal and regulatory framework. Finally, the paper argues that, while
microfinance can, at minimum, serve as a quick way to deliver finance to the poor, the
medium-term strategy to scale-up access to finance for the poor should be to 'graduate'
microfinance clients to formal financial institutions. The paper offers some suggestions on
what it would take to reform these institutions with an eye to improving access for the poor.[7]

Linda Mayoux (Feb 2006)Has examined that Micro-finance programmes not only give
women and men access to savings and credit, but reach millions of people worldwide
bringing them together regularly in organized groups. Through their contribution to women’s
ability to earn an income, micro-finance programmes can potentially initiate a series of

34
‘virtuous spirals’ of economic empowerment, increased well-being for women and their
families and wider social and political empowerment Banks generally use individual rather
than group-based lending and may not have scope for introducing non-financial services.
This means that they cannot be expected to have the type of the focused empowerment
strategies which NGOs have [8]

Dr. Jyotish PrakashBasu (2006)Has examined that the two basic research questions. First,
the paper tries to attempt to study how a woman’s tendency to invest in safer investment
projects can be linked to her desire to raise her bargaining position in the households. Second,
in addition to the project choice, women empowerment is examined with respect to control of
savings, control of income, control over loans, control over purchasing capacity and family
planning in some sample household in Hooghly district of West Bengal. The empowerment
depends on the choice of investment of project. The choice of safe project leads to more
empower of women than the choice of uncertain projects. The Commercial Banks and
Regional Rural banks played a crucial role in the formation of groups in the SHGs -Bank
Linkage Program in Andhra Pradesh whiles the Cooperative Banks in West Bengal. [9]

NidhiyaMenon (2006)Has examined that this paper studies the benefits of participation in
micro-finance programs, where benefits are measured in terms of the ability to smooth the
effect of seasonal shocks that cause consumption fluctuations. It is shown that although
membership in these programs is an effective instrument in combating inter-seasonal
consumption differences, there is a threshold level of length of participation beyond which
benefits begin to diminish. Returns from membership are modelled using an Euler equation
approach. Fixed effects non-linear least squares estimation of parameters using data from 24
villages of the Grameen Bank suggests that returns to participation, as measured by the
ability to smooth seasonal shocks, begin to decline after approximately two years of
membership. This implies that membership alone no longer has a mitigating marginal effect
on seasonal shocks to per capita consumption after four years of participation. Such patterns
suggest that the ability to smooth consumption as a function of length of membership, need
not accrue indefinitely in a linear fashion.; Reprinted by permission of Frank Cass & Co. Ltd.

Srinivasan, Sunderasan (2007)Has examined that micro banking facilities have helped large
numbers of developing country nationals by supporting the establishment and growth of
microenterprises. And yet, the microfinance movement has grown on the back of passive
replication and needs to be revitalised with new product offerings and innovative service
35
delivery. Renewable Energy systems viz., solar home systems, biogas digesters, etc., serve to
improve indoor air quality, provide superior light and extend working and study hours. Such
applications are not inherently income generating and returns on such investments accrue
from cost avoidance, but should qualify for micro funding, as such 'quality of life'
investments, reflect borrower maturity and simultaneously contribute to MFI sustainability.[10]

Mohammed AnisurRahaman (2007)Has examined that about microfinance and to

investigate the impact of microfinance on the poor people of the society with the main focus
on Bangladesh. We mainly concise our thesis through client’s (the poor people, who
borrowed loan from microfinance institutions) perspective and build up our research based on
it. Therefore, the objective of this study is to show how microfinance works, by using group
lending methodology for reducing poverty and how it affects the living standard (income,
saving etc.) of the poor people in Bangladesh. Microfinance has the positive impact on the
standard of living of the poor people and on their life style. It has not only helped the poor
people to come over the poverty line, but has also helped them to empower themselves.

Crabb, P. (2008)Has examined that the relationship between the success of microfinance
institutions and the degree of economic freedom in their host countries. Many microfinance
institutions are currently not self-sustaining and research suggests that the economic
environment in which the institution operates is an important factor in the ability of the
institution to reach this goal, furthering its mission of outreach to the poor. The sustainability
of the micro lending institutions is analyzed here using a large cross-section of institutions
and countries. The results show that microfinance institutions operate primarily in countries
with a relatively low degree of overall economic freedom and that various economic policy
factors are important to sustainability.

Chintamani Prasad Patnaik (March 2012)Has examined that microfinance seems to have
generated a view that microfinance development could provide an answer to the problems of
rural financial market development. While the development of microfinance is undoubtedly
critical in improving access to finance for the unserved and underserved poor and low-
income households and their enterprises, it is inadequate to address issues of rural financial
market development. It is envisaged that self-help groups will play a vital role in such
strategy. But there is a need for structural orientation of the groups to suit the requirements of
new business. Microcredit movement has to be viewed from a long-term perspective under
SHG framework, which underlines the need for a deliberate policy implication in favour of
36
assurance in terms of technology back-up, product market and human resource
development.[11]

R.Prabhavathy (2012)Has examined that collective strategies beyond micro-credit to

increase the endowments of the poor/women enhance their exchange outcomes the family,

markets, state and community, and socio-cultural and political spaces are required for both

poverty reduction and women empowerment. Even though there were many benefits due to

micro-finance towards women empowerment and poverty alleviation, there are some

concerns. First, these are dependent on the programmatic and institutional strategies adopted

by the intermediaries, second, there are limits to how far micro-credit interventions can alone

reach the ultra-poor, third the extent of positive results varies across household headship,

caste and religion and fourth the regulation of both public and private infrastructure in the

context of LPG to sustain the benefits of social service providers.[12]

37
 REFERENCES

1.Yunus, Muhammad; Jolis, Alan(2007). “Banker to the Poor: micro-lending and the battle
against world poverty”,vol 3(1) page no. 46–49.

2. Cohen, Monique (2002),” Microfinance Revolution: Creating Customer Centered

Microfinance Institutions”,vol.14,page no 335-350

3.Cheston, Susy and Kuhn, Lisa (2002), “Empowering Women through Microfinance”, vol.9
page no. 10‐12

4.RajdeepSengupta and Craig P. Aubuchon(2008),” The Microfinance Revolution: An

Overview”,vol.90(1)page no.9-30

5.J. Morduch (2000), “The Microfinance Shism”, vol. 28, no. 4, page no 617-629.

6. Barclay O,Brien(2006),“Valuing Microfinance Institutions” vol.30 no.3,pp 275

7. Honold, L(1997). “A review of the literature on employee empowerment”, Vol. 5, No. 4,

page no..202-212.

8.Abosede, A. J. (2007),An Examination of Literature. Nigerian Journal of Business

Administration” Vol. 9, No. l&2, page no..163-175.

9. James C. Brau, Gary M. Woller (2004)“An examination of Microfinance: A

Comprehensive Review of the Existing LiteratureJournal of Entrepreneurial Finance and
Business Ventures, Vol. 9, pp. 1-26

10. Wilkinson, A (1998) “Empowerment: theory and practice”.Vol. 27, No.1, pp. 40-56.

11.R. Prabhavathy.(2012),“self help groups and poverty alleviation,Indian Streams Research

Journal“Vol.2, pp.1-4

12.Venkata Vijay Kumar P, V K Gupta(2O11),”Research Journal of Finance and

Accounting” Vol 2, No 3, pp.12-14

38
 CHAPTER 3
RESEARCH METHODOLOGY

39
INTRODUCTION

Research in common parlance refers to a search for knowledge. Once can also define research
as a scientific and systematic search for pertinent information on a specific topic. In fact,
research is an art of scientific investigation. And Research methodology is a way to
systematically solve the problem. It is a game plan for conducting research. It describes the
various steps that are taken by the researcher. This chapter includes the need, objective,
scope, type of research, sampling technique, sample size, sample selection and data collection
procedure, sources of data, tools and techniques of analysis and limitations of study.

NEED OF THE STUDY

The research report investigates the impact of microfinance on living standard, women
empowerment and poverty alleviation. An attempt has been made to find how microfinance
helps in reduce poverty and increase living standard of poor population in India. Poverty is a
major issue in the country, In 2006 planning commission estimation of population below
poverty line is 27.8%, the estimated number of poor is estimated to be approximately 300
million in 2004-05, larger than the official estimate of 1999-2000.it may be recalled that the
official estimate for poverty in 1999-2000 was 26.1% for country as a whole and 260 million
were estimated as poor.[1]Credit is a powerful tool that could be effectively deployed when it
made available to the credit worthy among the economically active poor. Self Help Group
model of microfinance serves well to reduce poverty and improve living standard. The SHG’s
are small, informal and homogenous groups. These groups have proved as cyclic agents of
development in both the rural and urban areas. The SHG’s after being formed start collecting
a fixed amount of thrift from each member regularly. After accumulating a reasonable
amount of resource, the group starts lending to its members for petty consumption needs and
group members by taking loans from bank and other institutions starts their own work or
work collectively in other words they got employment and these groups helps them to
increase their income and savings ,when income is increased they become able to fulfill their
basic needs and able to increase they living standard by acquiring new assets ,increase in
expenditure on health, food, entertainment etc and ,increase in consumption. This study
brings out the importance of microfinance in developing countries or in poor nations. This
study is conducted to know whether there is improvement in living standard, income of
members of self help groups and women members got empowerment or not. Basically this

40
research is done to know is there any difference in living standard, poverty and empowerment
of members of SHG before and after joining the group.

OBJECTIVES OF THE STUDY

The main objective of the study is to find the impact of microfinance on living standard,
women empowerment and reducing poverty and to study how microfinance activity helps the
members of self help group to enhance their living standard in terms of income, saving access
to health and education. And empowering woman in terms of their Involvement in major
household decisions, Increase in self-esteem etc. The objective is divided into following four
parts.

 . To understand the concept of Microfinance.

 To study the impact of microfinance on living standard
 To study the impact of micro finance in empowering the social economic status of
women and developing of social entrepreneurship.
 To study the impact of microfinance on poverty alleviation

SCOPE OF STUDY

This study is exclusively on the microfinance to analyze and obtain insights into the impact
of microfinance on living standard, poverty alleviation and empowerment. It was carried out
within Fatehgarh Sahib over a period of two months. In Fatehgarh Sahib there are large
number of self help groups coming into existence and they help their members to generate
income and improve their living standard, these groups helps women’s to increase their
involvement in decision making and other aspects and they helps in women empowerment
.This research topic has its own importance because In our country poverty, unemployment
are major problems and this research is conducted to study how microfinance is able to
remove these problems and up to what extent. In this report 3 aspects are covered one is
living standard, women empowerment and poverty alleviation and impact of microfinance on
these three are identified with the help of using factor analysis. This study helps to know
microfinance has any impact on all variables which are related with living standard,
empowerment and poverty alleviation. From this primary study it has been found that

41
microfinance activity helps a lot to poor population to get employment and increase their
income and make them able to better assessment of health, food and clothing needs.

RESEARCH DESIGN

This study is DESCRIPTIVE in nature. It helps in breaking vague problem into smaller and
precise problem and emphasizes on discovering of new ideas and insights. Research design
constitutes the blue print for the collection, measurement and analysis of data. The present
study seeks to identify the impact of microfinance on living standard, poverty alleviation and
women empowerment. The research is to be conducted on members of self help groups
specially women’s within Fatehgarh Sahib. For the selection of the sample, convenient
sampling method was adopted and an attempt has been made to include all the age groups
and gender within the class.[2]

SAMPLE SIZE:

It indicates the numbers of people to be surveyed. Though large samples give more reliable
results than small samples but due to constraint of time and money, the sample size is
restricted to 100 respondents. The sample size is selected by considering characteristics of
interest and objectives of the study. The respondents most of were the women members of
Self Help Groups.

SAMPLING TECHNIQUE:

The sampling technique used for judgment is convenience.

SAMPLE SELECTION AND DATA COLLECTION PROCEDURE

The population for this study encompasses the people who have been engaged in
Microfinance activities at least from two years and members of self help groups who live in
Fatehgarh Sahib, Punjab. The people’s who have long experience in Self Help Groups they
are well informed and know much about the pros and cons about its activities, so they can
reflect better to study related questionnaire. A structured questionnaire is used for collecting
the data by interviewing the clients which are members of self help groups in Fatehgarh
Sahib district. The people for the interview were selected randomly. To get the address and
particulars of the interviewees in different areas, the list of self help groups which are

42
currently operating in this district is obtained from B.D.O office and from the local people of
the particular areas. The data collection procedure starts from Guru Kirpa SHG village
BassiPathana , and continued to Saheed Bhagat Singh SHG village Amloh , Guru Nanak
SHG village BadaliAla Singh, and Sahibzada baba fatehSingh SHG of village Nabipur.

SOURCES OF DATA:
Following are the methods of sources of data:

PRIMARY SOURCES

Questionnaire is used to collect primary data from respondents. The questionnaire is

structured type and contained questions relating to microfinance impact on living standard,
empowerment and poverty alleviation. The five point likert scale is used in questionnaire.

QUESTIONNAIRE DESIGN
The questionnaire comprised with the questions related to measuring the living standards of
members of self help group it includes questions related to income, saving, education ,health,
food and outwear expenditure and questionnaire also includes questions related to measuring
impact of microfinance on empowerment it includes questions related to home management
,consumption level, recognition, decision making power , social status , confidence level and
social awareness and for study impact on poverty alleviation questions like acquisition of
assets, poverty reduction, borrowing power included in questionnaire. ‘Likert Scale’ have
been used (considered on 1-5points scale) to measure the respondents’ perceptions based on
27 statements to perceive the impact of microfinance on their overall living standards,
empowerment and poverty alleviation The points of the scale indicate the degree of
satisfaction or agreement level of the household or a person after he or she has joined the self
help group. ‘1’ represents the lowest level of satisfaction or high disagreement, whereas ‘5’
represents the highest level of satisfaction or high agreement.[3]

TOOLS AND TECHNIQUES OF ANALYSIS

43
Statistical Package for Social Sciences (SPSS) 16.0 was used to analyze the data. The
following tools were applied:

 Factor Analysis

The data so collected will be analyzed through the application of statistical techniques, such
as Principal component Analysis (PCA) notably Factor Analysis.The principle component
analysis is performed with varimax rotation, a method which is very frequently used. And in
descriptives option the KMO measure , coefficients ,determinant and intial solution are used
.In extractions the command is given that theeigen values over 1 are selected. And in factor
analysis options the values suppress by .4 and sorted by size option is used so there is blank
spaces appear in rotated component matrix, The key statistics associated with factor analysis
are Bartlett’s test of sphercity, Meyer-Olkin (KMO) measure of sampling adequacy, and in
principal factor analysis includes total variance explained, communality, component matrix,
factor loadings in rotated component matrix and scree plot.

LIMITATIONS OF THE STUDY

There are number of limitations in this study. Firstly, the respondents were limited (100
respondents or samples) in terms of size and composition. Secondly, the data collection was
restricted only within the Fatehgarh Sahib district of Punjab, which may fail to represent the
actual scenario of the whole country. While interviewing the people, there are problems like
explaining the questions to people, who are involved in microfinance program and members
of self help groups because they are illiterate. Therefore, it was too difficult to make them
understand some of the technical terms: like income etc. and some respondents are not able to
understand the objective of the study and they think this all information which is in the
questionnaire are needed to CDPO (child development project officer) to know which self
help groups are working properly or which are not so it become hard to collect more adequate
data.

Moreover, theories were other problem when theoretical framework is written. Because, no
established theories were particularly defined in microfinance field yet Grameen model has
been used as an ideal theory for microfinance. Besides this, some other related things to
microfinance like, saving mobilizations, solidarity, etc. were also used in theoretical

44
framework. Finally, the accuracy of the analysis heavily relied on the data provided by the
members of self help groups in Fatehgarh Sahib district of Punjab.

REFERENCES

1.Chawla, Dr.Deepak and Sondhi, Dr.Neena (2011),”Research methodology: concept and

cases”Vikas Publishing house Pvt Ltd, Noida, page no. 3
2. MalhotraK.Naresh, Dash satyabhuson (2011), “Marketing Research: An orientation”,
Pearson Education Inc. sector-62 Noida,page no.67
3. Kothari C.R (2010), “Research methodology”: Methods and techniques, wishwaprakashan,
New Delhi, Page no.147

45
 CHAPTER 4

ANALYSIS AND DISCUSSIONS

FACTOR ANALYSIS

46
Factor analysis is a multivariate technique in which there is no distinction between dependent
and independent variables. In factor analysis, all variables under investigation are analyzed
together to extract the underlined variables. Factor analysis is a data reduction method. It is
primarily used for data reduction and summarization .It is very useful method to reduce large
number of variables resulting in data complexity to a few manageable factors. These factors
explain the most part of the variations of the original set of data.

Factor analysis used to measure the impact of microfinance on living standard, women
empowerment and poverty reduction. Factor analysis is done on SPSS 16 version, there are
27 statements or variables in questionnaire but 23 variables are used which are inter-
correlated, 4 variables are reduced in data cleaning process.

ANALYSIS AND INTERPRETATIONS

The first step involves calculation of correlation matrix which exhibited the interrelationship
among the observed variables. To extract minimum number of factors, principle component
analysis (PCA) with varimax rotation was used .A principle component analysis is a factor
model in which the factor are based on total variance. In addition to selecting the factor
model, specify how the factors are to be extracted in such a way that each factor is
independent of all other variables .Therefore, the correlation between factors is arbitrarily
determined to be zero.

Further to decide number of factors to be extracted, the most commonly used technique is
referred as the latent root (Eigen values) representing the extent of variance in data. Now
interpret the factors i.e. with factor loadings which were greater than 0.30 (ignoring negative
signs) and loaded them in extracted factors. A factor loading is the correlation between
original variables and factors squared factor loading indicates what percentage of the variance
is an original variable explained by a factor. Finally, the factors which are extracted in rotated
component matrix used for interpretation were suitably named. They strongly influence the
name or level selected to represent a factor. The 24 variables used for factor analysis
.moreover to study the appropriateness of factor analysis Kaiser-Meyer-Olkin (KMO) and
Bartlett’s test statistic was used ,if the KMO value is greater than 0.6 is considered as
adequate .Further KMO measure the magnitude of observed correlation coefficients. .A value

47
of greater than 0.5 is desirable. Bartlett’s test measures the correlation of variables. A
probability of less than 0.5 is acceptable.[1]

TABLE :1- KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .753

Bartlett's Test of Sphericity Approx. Chi-Square 1.825E3

Df 253

Sig. .000

Source: Primary data

From the table-1 it can be seen that KMO value is acceptable .the Bartlett’s test result also
show that the value were significant and thus acceptable. The items in the respective category
were individually subjected to principal component analysis (PCA) with varimax rotation and
Kaiser Normalization using SPSS (Version 16)

The items having factor loading less than 0.30 were eliminated .Finally 5 factors comprising
24 items, all having Eigen values of unity and above were extracted and the result are shown,
further, in order to access the appropriateness of data for factor analysis, the commonalities
derived from the factor analysis were reviewed. These were relatively larger (greater than
0.5), suggesting that the data were appropriate. The individual dimensions of proposed
instruments explained total variance exceeding 60%, suggesting appropriateness of the
process.

There liability of items is also used computing the coefficient alpha (cronbach alpha)
measuring internal consistency of items. Reliability of 27 items is tested and data of 20
respondents are taken to measure the validity and reliability of questionnaire. And in this
study alpha coefficient value was .780 (Table 2) indicating good consistency among items
and for a measure is acceptable.

Table 2

48
 Case Processing Summary

N %

Reliability Statistics
Cases Valid 20 100.0

Cronbach's Alpha N of Items Excludeda 0 .0

.780 27 Total 20 100.0

a. Listwise deletion based on all variables in the procedure.

Source : Primary Data

Further 23 variables used to factor analysis were coded (table 3) using likert scale ranging
from 5 to 1. For example , “Strongly agree’ was ranked 5 followed by ‘Agree’ with 4,
‘Neutral’ with 3 , ‘Disagree’ with 2 and ‘Strongly Disagree’ with 1
23 variables are used for analysis out of 27, and 4 variables are eliminated in data cleaning
process.

TABLE -3: Variables for measuring microfinance impact on living Standard, women
empowerment and poverty alleviation (with code)

Family income ( Q1), Entertainment expenditure (Q2),Health expenditure(Q3).Expenditure

on food(Q4), Education expenditure(Q5) ,Expenditure on outwear(Q6), Acquisition of new
assets(Q7), Acquire room cooler (Q8),Acquire two wheeler(Q9),Purchase washing
machine(Q10),Able to acquire refrigerator(Q11), Increase in consumption level(Q12),Poverty
reduction (Q13), Money borrowing (Q14) Improvement in social status (Q15), Increase in
savings (Q16), Recognition in family (Q17), Freely expression of views(Q18), Start
attending social meetings (Q19), Decision making (Q2O), Better management of household
chores (Q21) Awareness regarding social issues (Q22) ability to talk with village
panchyats(Q23)

49
PRINCIPAL FACTORS:

The inter correlation analysis suggests that out of 23 variables 5 were closely related as the
values of correlation co-efficient were relatively high in their cases, this indicated that all
variables could reduced to 5 factors. These variables’ demonstrated higher correlation
coefficients and were statistically significant at 5 Percent level. The meaningful way was to
look for substantive significance by deciding on minimum contribution a factor should make
5 %.

The table 4 represents the results of factor analysis performed to set of data by principle
component analysis with varimax rotation – a method which is very frequently used
procedure is factoring original correlation to determine the number of factors which the sum
squares(Eigen values) of loading for all variables on each factor exceeds 1.0 separately . This
was an Eigen value specification, which sets a minimum. A factor explains at least the
amount of variance that a truly independent variable could contribute and then each variable
would be a factor.

In table 4 SPSS identify the 23 liner components within the data set the Eigen value
associated with each factor represent the variance explained by particular linear component
and SPSS also display the Eigen values in terms of percentage of variance explained the
factor 1 shows 26.482 % variance of total variance and factor 2 shows 17.947 % variance ,it
is clear in the table the first few factors show relatively high percentage of variance, whereas
The subsequent factors show only small amount of variance .The SPSS extract the all those
factors which are Eigen values greater than 1 which leaves 5 factor with us.[2] The Eigen
value associated with these factors are again display in the column labeled Extraction sums of
squared loadings the value in this part of table are the same as the value before extraction,
except that the value for discarded factors are ignored. In the final part of table name rotation
sums of squared loadings, the Eigen values of the factor after rotation are displayed, rotation
has the effect of optimizing the factor structure and one consequence for these data is that the
relative importance of the five factors is equalized.

50
 Table :4 -:Total Variance Explained

Extraction Sums of Squared Rotation Sums of Squared

Initial Eigenvalues Loadings Loadings

Compo % of Cumulative % of Cumulati % of Cumulati

nent Total Variance % Total Variance ve % Total Variance ve %

1 6.091 26.482 26.482 6.091 26.482 26.482 4.854 21.105 21.105

2 4.128 17.947 44.429 4.128 17.947 44.429 3.908 16.989 38.095

3 3.093 13.448 57.877 3.093 13.448 57.877 3.397 14.768 52.863

4 2.129 9.258 67.135 2.129 9.258 67.135 3.034 13.192 66.054

5 1.494 6.497 73.632 1.494 6.497 73.632 1.743 7.578 73.632

6 .984 4.279 77.911

7 .847 3.682 81.594

8 .606 2.636 84.230

9 .530 2.303 86.533

10 .477 2.073 88.606

11 .431 1.875 90.481

12 .368 1.600 92.081

13 .337 1.464 93.545

14 .265 1.154 94.699

15 .225 .978 95.677

16 .216 .940 96.618

17 .193 .840 97.458

18 .152 .659 98.117

19 .132 .574 98.691

20 .122 .530 99.221

21 .083 .363 99.584

22 .064 .278 99.861

23 .032 .139 100.000

Extraction Method: Principal Component Analysis.

Source : Primary data

51
Before rotation factor 1 accounted considerably more variance than the four (26.482%, as
compared to four factors 17.947,13.448, 9.258, 6.497) .however after extraction it accounts
for only 21.105% as compared to other 4 is (16.989, 14.768, 13.192 and 7.578) the
cumulative percentage of sum of squared loadings is 73.632% it is satisfactory or significant
this means loss of only 27% of information contained in the original variables.

Table 5Shows communalities before and after extraction principle component analysis works
on the initial assumption that all variance common; therefore before extraction the
communalities are all are 1 the communalities in the column lablled extraction reflect the
common variance in data structure. Table 5 shows that 65.4 % variance associated with
question 1 is common or shared variance .another way to take these communalities is in terms
of proportion of variance explained by the underlying factors after extraction some of the
factors discarded and some information is lost. The amount of variance in each variable that
can be explained by the retained factor is represented in communalities after extraction.

This output also shows the component matrix (table 6) before rotation. This matrix contains
the loadings of each variable onto each factor. By default SPSS displays all loadings;
however, if command is given that all loadings less than 0.4be suppressed in the output so
there are blank spaces for many of the loadings. This matrix is not particularly important for
interpretation.

At this stage SPSS has extracted five factors. Factor analysis is an exploratory tool helps in
taking various decisions. One important decision is the number of factors to extract. By
Kaiser's criterion five factors are extracted.

52
 Table 5 :Communalities
Initial Extraction

Family income 1.000 .654

Entertainment expenditure 1.000 .518

Health expenditure 1.000 .609

Expenditure on food 1.000 .403

Education expenditure 1.000 .800

Expenditure on outwear 1.000 .910

Acquisition of new assets 1.000 .512

Acquire room cooler 1.000 .855

Acquire two wheeler 1.000 .829

Purchase washing machine 1.000 .766

Able to acquire
1.000 .720
refrigerator

Increase in Consumption
1.000 .589
level

Poverty reduction 1.000 .785

I have borrowed money

1.000 .721
from friends

Improvement in social
1.000 .856
status

Increase in savings 1.000 .824

Recongnition in family 1.000 .834

Freely expression of views 1.000 .724

Starts attending social

1.000 .835
meetings

Awareness regarding
1.000 .796
social issues

Better management of
1.000 .788
household chores

Decision making power 1.000 .819

Able to talk with village

1.000 .788
panchyats
Extraction Method: Principal Component Analysis.

53
 Table 6 :Component Matrixa

Component

1 2 3 4 5

Recongnition in family .862

Improvement in social status .849

Increase in savings .828

I have borrowed money from

.775
friends

Poverty reduction .711 .402

Increase in Consumption
.694
level

Able to acquire refrigerator .685 .408

Freely expression of views .618 .455

Acquire two wheeler .576 .549

Acquisition of new assets .536

Awareness regarding social

.870
issues

Starts attending social

.861
meetings

Decision making power .824

Better management of
.807
household chores

Able to talk with village

.739 .490
panchyats

Expenditure on outwear .439 -.761

Education expenditure .410 -.721

Family income .404 -.643

Purchase washing machine .486 .719

Acquire room cooler .520 .514 .528

Entertainment expenditure .601

Health expenditure -.433 .529

Expenditure on food .519

Extraction Method: Principal Component Analysis.

a. 5 components extracted.

54
FACTOR ROTATION

Table 7 shows the rotated component matrix (also called the rotated factor matrix in factor
analysis) which is a matrix of the factor loadings for each variable onto each factor. This
matrix contains the same information as the component matrix in table 6 except that it is
calculated after rotation. There are several things to consider about the format of this matrix.
First, factor loadings less than 0.4 have not been displayed because these loadings to be
suppressed. Second, the variables are listed in the order of size of their factor loadings
because the command is given for the output to be sorted by size. Finally, for all other parts
of the output suppressed the variable labels (for reasons of space) but for this matrix the
command is given to allowed the variable labels to be printed to aid interpretation. Compare
this matrix with the unrotated solution. Before rotation, most variables loaded highly onto
the first factor and the remaining factors didn't really get a look in. However, the rotation of
the factor structure has clarified things considerably: there are 7 factors and variables load
very highly onto only one factor. Factor rotation matrix table is displayed on the next page.

55
Table 7: Rotated
component matrix Component

1 2 3 4 5

Recongnition in family .855

I have borrowed money from

.828
friends

Improvement in social status .822

Increase in savings .818

Poverty reduction .803

Increase in Consumption level .757

Freely expression of views .696

Decision making power .903

Better management of household

.877
chores

Starts attending social meetings .877

Able to talk with village panchyats .863

Awareness regarding social issues .852

Expenditure on outwear .939

Education expenditure .885

Family income .800

Acquire two wheeler .863

Acquire room cooler .808

Purchase washing machine .795

Acquisition of new assets .648

Able to acquire refrigerator .412 .586

Health expenditure .729

Expenditure on food .597

Entertainment expenditure .586

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 6 iterations.

56
INTERPRETATION:

In a sample size of 100 respondent factor loading of 0.55 and above are significant ,however
in a sample size 50 ,factor loading of 0.75 is required in comparison with rule of thumb
,which donated all loadings of 0.30 and above as having practical significance ,this approach
would consider loadings of .30 significant only for sample sizes of 350 or greater .

For this study 100 respondents from Self Help Groups were considered, hence all loadings
(ignoring signs)of 0.55 and above are taken into consideration.

1. It is noticed from the above table that recognition in family, I have borrowed money
from friends, Improvement in social status, Increase in savings, Poverty reduction,
Increase in consumption level, Freely expression of views had loadings 0.855, 0.828,
0.822, 0.818, 0.803, 0.757, 0.696 .respectively on factor 1 (F1) which suggested that
factor 1 was a combination of these 7variables.

2. Again factor 2(F2) is a group of 5variables include decision making power, Better
management of household chores, Starts attending social meetings, Able to talk with
village panchayts, Awareness regarding social issues had loads 0.903,0.877,0.877,
0.863, and 0.852.

3. The 3rd factor (F3) constitutes of expenditure on outwear, education expenditure and
Family income had loads 0.939, 0.885, and 0.800 respectively.

4. The 4th factor F(4) is a combination of five variables like able to acquire two wheeler,
Able to acquire room cooler, able to acquire washing machine, acquisition of new
assets level had loads 0.863, 0.808,0.795,0.648, 0.586.

5. The 5thfactor F(5) is a combination of 3 variables health expenditure, expenditure on

food ,entertainment expenditure which had loads.0.729, 0.597, 0.586.

57
 Determinants of microfinance impact on living standard, women
empowerment and poverty alleviation:
The table 8 exhibited the factor loadings along with Eigen values with 5 underlying factors.

Table 8
Factor 1 Factor 2 Factor 3 Factor 4 Factor 5
Social factor Empowerment Income and Assets Service
factor Expenditure Acquisition expenditure
Factor factor factor
Recognition in Decision Expenditure on Able to acquire Health
family(Q11) making outwear(Q6) two wheeler(Q9) expenditure(Q3)
power(Q20)
Borrow money Better Education Able to acquire Expenditure on
from management of expenditure(Q5) room cooler(Q8) food(Q4)
friends(Q14) household
chores(Q21)
Improvement in Starts attending Family Able to acquire Entertainment
social social income(Q1) washing expenditure(Q2)
status(Q15) meetings(Q11) machine(Q10)
Increase in Able to talk with Able to acquire
savings(Q16) village new assets(Q7)
panchayts(Q23)
Poverty Awareness Able to acquire
reduction(Q13) regarding social refrigerator(Q11)
issues (Q22)
Increase in
consumption
level(Q12)
Freely
expression of
views(Q18)

58
It was extracted from the above table that 23different variables based upon their
appropriateness for representing the underlying dimensions of a particular factor have been
summarized into five factors: the factors were named as under:

Factor 1: Social factor (it is the grouping of recognition in family, borrow money from
friends, improvement in social status, increase in savings, poverty reduction, increase in
consumption level, freely expression of views)

Factor 2: Empowerment factor (it is combination of decision making power, better

management of household chores, starts attending social meetings, able to talk with village
panchayts, awareness regarding social issues)

Factor 3: Income and Expenditure factor (it is combination of Expenditure on outwear,

education expenditure, family income)

Factor 4: assets acquisition factor (it is combination of acquire two wheeler, acquire room
cooler, acquire washing machine, acquisition of new assets, able to acquire refrigerator)

Factor 5: Service expenditure factor (it is combination of health expenditure, expenditure on

food, entertainment expenditure)

Table 9: Influencing factors of Living standard, Women Empowerment and Poverty

Alleviation with Eigen values:

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5

Social Empowerment Income and Assets Service
factor factor Expenditure acquisition expenditure
factor factor factor
Eigen 6.091 4.128 3.093 2.129 1.494
Value(EV)
Total 26.482 17.947 13.448 9.258 6.497
variance (%)
Cumulative 26.482 44.429 57.877 67.135 73.632
EV(CEV)
% of CEV 9.824 16.482 21.471 24.905 27.316
Index value 1.15 1.93 2.51 2.91 3.20
Index value=[CEV/23(i.e. the number of variables)]

59
The forgoing discussion revealed that the factor affecting the microfinance impact on living
standard, women empowerment and poverty alleviation in the study were grouped in the
Social factor, empowerment factor, income and expenditure factor, assets acquisition factor
and service expenditure factor.

 The table was showing the Eigen values of the factors. Each value indicates relative
importance of each factor in accounting for the particular set of variables .The
cumulative total Eigen value for factor 1 was 26.482, hence, the index i.e.
26.482/23=1.15, shows how well factors account for all variables taken together .A
high value of index shows that the variables were related with each other and a low
value of index shows that the variables were unrelated with each other. Based on the
Eigen value ,it indicated that social factor ranked first followed by empowerment
factors ,income and expenditure factor, assets acquisition factor, and service
expenditure factor respectively it was inferred from the analysis that respondents were
emphasizing more on social factor of microfinance in the area under study.

 The Eigen value of social factor ranked the highest (Eigen value =6.091) indicating
the impact of microfinance in regard to recognition In family, money borrowing from
friends ,improvement in social status , increase in savings , poverty reduction ,
increase in consumption level and freely expression of views ,this factor has 26.482
% variance which is highest from all other factors. Factor 1 indicates that
microfinance has more impact on increasing social status of members of self help
group. This factor explain that people’s are often used to borrow money from their
friends for the fulfillment of their needs when they are not a part of these Self Help
groups because at that time they have not any source of income, and when they
become member of SHG their condition survived. According to factor 1, there is
significant reduction in poverty because they become able to generate income by
getting self employment, with this increased income their savings are also increases
and their consumption level has increased. There social status improved and women’s
able to get recognition in their family because they starts doing work for their family
survival and they also become able to express their views in front of others. so in
conclusion of first factor it tells microfinance has positive impact on living standard
,poverty reduction and women empowerment.

60
 The empowerment factor which was second in the list (Eigen value=4.128) it indicate
that microfinance has high impact on women empowerment. It means women’s able
to get empowerment after joining self help group. Their Decision making power has
improved because now they become able to take their own decision regarding to their
work, or other activities and they also get involvement in household decisions their
confidence level increased after joining SHG and they starts attending social meeting
like meeting regarding celebrating festival or organize a village fair. Their awareness
regarding social issues has improved and know they become able to talk with village
panchatys for fulfillment of there need .its means microfinance helps lot to empower
women’s .

 In the context of income and expenditure factor (Eigen value=3.093) again high
impact of microfinance on living standard and poverty reduction. It includes
expenditure on outwear, education expenditure and family income. It means that after
joining SHG the family income of group members increased, they generate income
from doing work like dairy farming, pickles making etc and this increased income
help them to better access of education to their children’s and their expenditure on
outwear or cloths has also increased they become able to wear good quality cloths and
able to provide education to their children’s. This factor explains that microfinance
helps the poor population to increase their living standard and helps them to reduce
their poverty.

 The assets acquisition factor (Eigen value=2.129) which includes ability of members
to acquire two wheeler, room cooler, washing machine, refrigerator or any other new
assets. This factor generates slight impact of microfinance on assets acquisition,
because members of self help groups are not able to acquire more costly assets they
only able to purchase low priced assets like bicycle, room cooler, refrigerator with the
help of microfinance but they become able to fulfill their basic needs and reduce their
poverty. Eigen value indicate slight impact on assets purchase ability of group
members because their income is not increased up to that level which make them able
to purchase assets like four wheeler, gold jewelry etc. They hardly become able to
purchase low price assets.

61
 Service expenditure factor (Eigen value=1.494) again impact of microfinance is
slight. It includes health expenditure, expenditure on food and Entertainment
expenditure. The members of self help groups become able to acquire health services
up to some extent , and their expenditure on food not much increased they only
become able to fulfill their basic need of food they not able to use heath supplements,
nutrients etc.

In the conclusion of above discussion the microfinance impact on living standard,

women empowerment and poverty alleviation is based on above five factors, these
five factors explain that with joining SHG women got empowerment, there savings
increased and poverty reduces, and factor two explains women empowerment through
microfinance .According to this study microfinance serves as a tool to reduce poverty
and women empowerment. Factor 2 basically related with women empowerment and
factor 3 tells family income of group members increased with this increased income
their expenditure on outwears and education also increased. Factor 4 totally related
with assets ,this factor indicates that members of SHG able to acquire low priced
assets like two wheeler , washing machine , room cooler etc microfinance has slight
impact on assets acquisition power of members .Last factor 5 is related with service
expenditure, and there is slight impact of microfinance on service expenditure there is
slightly increase in expenditure on health, food and entertainment.

62
Figure-1-: Scree Plot showing the Eigen values:

The scree test was used to identify the optimum number of factors that can be extracted
before the amount of unique variance begins to dominate the common variance structure, the
scree test was derived by plotted the latent roots against the number of factors in their order
of extraction and the shape of the resulting curve was used to evaluate the cutoff point. The
scree plot demonstrated (Figure1) the Eigen values for initial 23 components or factors
extracted in the study. Starting with the first factor, the plot slopes steeply downward initially
and then slowly became an approximately horizontal line. The point at which the curve first
begins to straighten out was considered to indicate the number of factors to extract, in present
case, 5 factors have been considered. All factors beyond 1 which these Eigen value level off
were excluded from consideration.

REFERENCES

1. Biswas,Dr.Nigmananda(2012),”Determinants of Customer Satisfaction in Bank: An

Empirical Investigation ,Anvesha ,A journal of IES management college & research centre”
vol.5(1), page no.1-10.

2. Field, Dr. Andy (2005),”Research Methods :Factor analysis on SPSS”,vol. 3(1) page no.6

63
 CHAPTER 5
FINDINGS AND
RECOMMANDATIONS

64
 FINDINGS

The study was undertaken with a view to know impact of microfinance on living standard,
women empowerment and poverty alleviation. It has been observed that there are many
factors which influence the microfinance impact like expenditure on food, entertainment,
health, education, and income, consumption, involvement in decision making, social factors
like recognition in family, improvement in social status, increase in savings etc. A structured
questionnaire was designed to collect the required data. The objective is divided into
following four parts.
 . To understand the concept of Microfinance.
 To study the impact of microfinance on living standard
 To study the impact of micro finance in empowering the social economic status of
women and developing of social entrepreneurship.
 To study the impact of microfinance on poverty alleviation

After analyzing the data the following findings have been arrived at:

1. Microfinance has more impact on social factor; it includes recognition in family,

improvement in social status and it tells the consumption level of members of self help group
is increased and SHG’s helps in reduce the poverty.

2.The social impact of the SHG program increased involvement in Decision-making, women
members of SHG starts taking their own decisions regarding their work and their
involvement in household decisions also increased like decisions regarding children’s
education ,assets acquisition etc.

3.Savings of members of SHG increased this is one of the primary benefits of participation in
a SHG is the opportunity to save regularly, access formal savings institutions and participate
in the management of these savings. They save regularly, have their own bank accounts and
make deposits into these accounts. SHG is having a good impact on members, in their ability
to save their hard earned money.

65
4.There is a Change in the attitude of male members of the families, now they are convinced
about the concept of SHG and encourage women to participate in the meetings and women
reported that they have savings in their name and it gives them confidence and increased self
respect. Within family the respect and status of women has increased.

5. It was found that women’s Participation in local government is increased Because of SHG,
women know about their local political institutions such as the Gram Panchayats and have
better knowledge of where to report certain types of grievances. Though the SHGs generate
positive impact on the rural economy through empowering women and enhancing the rural
income of those participant households.

6. There is significant increase in expenditure on education, Children Education has improved

significantly. Especially girl education was very low but now SHG members are sending their
children including girls to school.

7. Expenditure on clothing is also increases because they start purchasing good quality of
clothes as compared to their condition before joining SHG.

8. The another finding of this study is that there is slightly increase in health expenditure.
Now women are taking treatment from qualified doctors, even if they have to travel to nearby
towns. Members are now confident enough to raise social status.

9. Microfinance movement is having a good impact on members, in their ability to express

their feelings and has made people more confident to express themselves.

10.The group formation brought out the hidden talent and leadership qualities among the
members. Therefore, it can be concluded that after joining the SHG the members have
improved their status in family, become helpful in family finance and sometimes helped
others too. Most of the SHG people feel that they get more respect.

11.The microfinance has positive impacts on empowerment and nutritional intake. Female
social and economic empowerment in program areas increased irrespective of participation
status. Evidence of higher consumption is not income or asset formation. The microfinance’s

66
main economic impact had been through consumption smoothing and diversification of
income sources rather than exploitation of new income sources.

12. The another finding of this study is that there is slight impact on assets acquisition power
of members of self help group. They become able to acquire assets like washing machine,
room cooler, two wheeler etc but they not become able to purchase highly costly assets.

13. It was found that there is significant increase in income of family after joining SHG.
Members of SHG able to generate more income by doing different kind of works like pickles
making, dairy farming etc.

RECOMMENDATIONS

1. Microfinance is important for development and it serve as a tool of poverty alleviation but
it cannot by itself enable very poor women to overcome their poverty. Microfinance helps
only economically poor people to reduce their poverty but I suggest that if credit is given to
very poor women at very low rate of interest to start their work than then microfinance
becomes more effective tool to remove poverty.

2. Making credit available to women does not automatically mean they have control over its
use and over any income they might generate from micro enterprises. So there is proper
training is given to women’s to improve their management ability. Proper meetings and
training programmes should be conducted by group members. In this task, role of NGO’s,
Panchayats, Women’s organizations etc. may be enhanced to impart training, skill
development and technical knowledge.

3. In situations of chronic poverty it is more important to provide saving services than to offer
credit.

4. A useful indicator of the tangible impact of micro credit schemes is the number of
additional proposals and demands presented by local villagers to public authorities.

5. As the poor are vulnerable it is not sufficient for us just to provide micro credit, but to have
a series of support systems provided at the appropriate time.

67
6. There is proper marketing channel provided to members of self help groups which helps
them to easily sale their products in market at reasonable prices.

7. There is also the need to evolve new products by the banks commensurate with the
requirement of rural women. The customer contact programmes, specially for women, should
be organized to disseminate information of various schemes and financial requirements of
women.

8.There are some self help groups which are not working properly The factors responsible for
poor performance of microfinance and functioning of SHG’s should be investigated,
Examined and analyzed scientifically and systematically to resolve the emerging problems,
difficulties and challenges being faced by NGO’s, SHP’s, SHG’s dealing with microfinance.

9. Training in legal literacy, rights and gender awareness are important complements to
micro-credit for the empowerment of women. The members should be given necessary
training and guidance for the successful operation of the group.

10. The bank should advance adequate credit to the SHG according to their needs. And the
procedure of the banks in sanctioning credit to SHG should be simple and quick.

11. Govt. and other institutions need to implement their development projects through SHG so that
the members of the SHG get ample scope for getting empowered in both social and psychological
sphere.

12. The office bearers managing the group should be given nominal financial benefits, which
will enable them to be more involved in the activities of the Group.

68
 CHAPTER 6
BIBLIOGRAPHY

69
 BIBLIOGRAPHY
 BOOKS

Chawla, Dr.Deepak and Sondhi, Dr. Neena(2011),” Research methodology: concept and
cases”Vikas Publishing house Pvt Ltd, Noida, page no. 3

Kothari C.R (2010), “Research methodology”: Methods and techniques, wishwaprakashan,

New Delhi, Page no.147

MalhotraK.Naresh, Dash satyabhuson (2011), “Marketing Research: An orientation”,

Pearson Education Inc. sector-62 Noida,page no.67

Somanath,V.S (2009), “Microfinance :Redefining the future”,Excel books, New Delhi, page
no.1-4

 JOURNALS AND RESEARCH PAPERS:

Abosede, A. J. (2007),An Examination of Literature. Nigerian Journal of Business

Administration,Vol. 9, No. l&2, page no.. 163-175.

AggarwalVijender, AggarwalRachna and KhannaParu (2012),”journalon microfinance and

risk management for poor India”Vol.1(2), page no.104-107.

Ahmad, Mokbul M.(2003), "Distant Voices: The Views of the Field Workers of NGOs in
Bangladesh on Microcredit", vol.5, page no 65-74.

Biswas, Dr.Nigmananda (2012),”Determinants of Customer Satisfaction in Bank: An

Empirical Investigation ,Anvesha ,A journal of IES management college & research centre”
vol.5(1), page no.1-10.

70
Bhallasurjit s.(2002),” Growth and poverty in India – myth and reality”, development,
poverty and fiscal policy “ vol 9(2) page no. 20

Barclay O,Brien(2006)“Valuing Microfinance Institutions” vol.30 no.3,pp 275

Cohen, Monique (2002),” Microfinance Revolution: Creating Customer Centered

Microfinance Institutions”vol.14,page no 335-350

Cheston, Susy and Kuhn, Lisa (2002), “Empowering Women through Microfinance”,vol.9
page no. 10‐12

Chelliah and sudarshan (1999), “Income – poverty and beyond: human development in
India,vol. 42(5), page no. 8.

.Dr.Sadyojathaapas(2012),”International journal of social sciences and interdisciplinary

research” vol.1(6) pages 1-7

Datt G (1999),”Has poverty declined since economic reforms ?Statistical data analysis”,
special article, economic and political weekly. vol.34 (8)

Davies, A. and Quinlivan, G.(2006) ,”A Panel Data Analysis of the Impact of Trade on
Human Development, Journal of Socio-Economics” Vol. 35(5), pages 868-876

Fr. Joy Vattoly , Mary Liya K A(2009) ,”catalyst: Microfinance and poverty
alleviation.”vol.7 (1),page no.14-17

Field, Dr. Andy(2005),”Research Methods :Factor analysis on SPSS”,vol. 3(1) page no.6

Honold, L.(1999) “A review of the literature on employee empowerment”,Vol. 5, No. 4, page

no.. 202-212

J. Morduch (2000), “The Microfinance Shism”, vol. 28, no. 4, page no 617-629

James C. Brau, Gary M. Woller (2004), “An examination of Microfinance: A Comprehensive

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Ventures,Vol. 9, pp. 1-26

71
Jill S Sscheneiderman(2010),”Microfinance and women’s empowerment :international
journal of social policy research and development”vol.1(2) page no. 85-90

MahantaPadmalochan, panda gitanjali (2012) ,”status of microfinance in india,international

journal of marketing, financial services & management research”vol.1(11)page no.144

Mokyr, J (1990)”Living standards in Ireland before the Famine," Economic History Review,
vol. 41. Page no. 209-215.

Mitchell, T.(1973) “Motivation and Participation: an Integration”, Academy ofManagement

Journal, Vol. 16,(4), page no. 670-679.

M. Hashemi, R. R. Schuler, and A. P. Riley (2010), “Rural Credit Programs and Women’s
Empowerment in Bangladesh”vol 24(4) page no. 53.

RajdeepSengupta and Craig P. Aubuchon(2008),” The Microfinance Revolution: An

Overview”,vol.90(1)page no.9-30

R. Prabhavathy(2012),”Indian Streams Research Journal, self help groups and poverty

alleviation”Vol.2, pp.1-4

Venkata Vijay Kumar P, V K Gupta(2011),” Research Journal of Finance and Accounting”

Vol 2, No 3, pp.12-14

Wilkinson, A.(1998), “Empowerment: theory and practice”.Vol. 27, No.1, pp. 40-56.

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72
  SITES:
http://rmk.nic.in/chap1.htm

http://www.evancarmichael.com/African-Accounts/1676/Who-are-the-clients-of-microfinance-
FAQ.html

http://ifmr.ac.in/cmf

http://www.microfinancefocus.com

http://www.sa-dhan.net

http://www.microfinancesouthasia.net

http://www.themix.org

http://www.worldbank.org

http://www.microfinance.com

http://www.grameen.org

http://www.microfinancegateway.com

http://www.cgap.org

http://www.adb.org/Microfinance/default.asp

http://www.nabard.org

http://www.rbi.org.in/scripts/PublicationsView.aspx?Id=10932.13.

73
 Annexure
QUESTIONNAIRE
Dear sir/madam I am a student of school of management studies, Punjabi university Patiala. I
am doing a major project on finding the Impact of Microfinance on living standard,
Empowerment and Poverty Alleviation. Kindly extend your cooperation in filling up this
questionnaire. Your participation in this study is completely voluntary.

----------------------------------------------------------------------------------------------------------------

Name of respondent………………………………………

Gender……………………………………………………

Name of SHG……………………………………………

1. There is significant increase in income of your family after joining the group

Strongly Agree Agree Neutral Disagree Strongly Disagree

2. Increase in entertainment expenditure after joining the group

Strongly Agree Agree Neutral Disagree Strongly Disagree

3. Satisfactory increase in total expenditure on health after joining the group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

4. There is rise in total expenditure on food after joining the group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

5. There is significant increase in expenditure on education after joining the group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

74
6. You are able to spend more amount on outwear after joining the SHG

Strongly Agree Agree Neutral Disagree Strongly Disagree

7. You are able to acquire new assets after joining the SHG like machinery, vehicle etc.

Strongly Agree Agree Neutral Disagree Strongly Disagree

8. There is increase in savings after you joined the group

Strongly Agree Agree Neutral Disagree Strongly Disagree

9. You are able to manage household chores in better way after joining the group

Strongly Agree Agree Neutral Disagree Strongly Disagree

10. There is change in political ideas and views after joining the SHG

Strongly Agree Agree Neutral Disagree Strongly Disagree

11. SHG has helped in poverty reduction

Strongly Agree Agree Neutral Disagree Strongly Disagree

12. There is improvement in consumption level of your family after joining the group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

13. You are able to acquire room cooler after joining the group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

14. You are able acquire two wheeler after coming into group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

75
 15. Your decision making power has improved over the period of time after joining the SHG

Strongly Agree Agree Neutral Disagree Strongly Disagree

16. Your social status has improved since you have joined the group

Strongly Agree Agree Neutral Disagree Strongly Disagree

17. You become able to express your views more freely in front of others.

Strongly Agree Agree Neutral Disagree Strongly Disagree

18.You started attending social meetings for organising village faires and celebrating festivals
after joining SHG.

Strongly Agree Agree Neutral Disagree Strongly Disagree

19. You become able to talk with village panchayats for fulfilling your needs.

Strongly Agree Agree Neutral Disagree Strongly Disagree

20.You are able to purchase washing machine after coming into SHG.

Strongly Agree Agree Neutral Disagree Strongly Disagree

21. Your awareness regarding social issues after joining the group have improved

Strongly Agree Agree Neutral Disagree Strongly Disagree

22.I have got the recognition in my family after joining the group

Strongly Agree Agree Neutral Disagree Strongly Disagree

76
23.You are able to acquire refrigerator after joining SHG.

Strongly Agree Agree Neutral Disagree Strongly Disagree

24. I have borrowed money from friends/relatives before joining the group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

25. SHG provide financial help in case of illness or death of family member.

Strongly Agree Agree Neutral Disagree Strongly Disagree

26. You feeling more work load after joining self help group.

Strongly Agree Agree Neutral Disagree Strongly Disagree

77
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