Micro Finance and Rural Poverty Reduction: The Case of Swamjayanti Gram Swarozgar Yojana

Abstract

In India, an innovative integrated development programme was initiated in 1980 with a view to generating employment and income in rural areas through self-employment. This programme was called Integrated Rural Development Programme (IRDP). Acting on the recommendations of a high-powered committee1 of Government of India, IRDP and its allied programmes2 were re-structured and re-designed into a single and holistic micro finance (MF) driven self-employment programme called Swarnjayanti Gram Swarozgar Yojana (SGSY), and implemented throughout India with effect from 01.04.1999. SGS Y is designed to mobilise physical and financial resources in rural areas so as to transfer these to identifiable groups of poor by forming small informal groups in rural areas motivated to evade chronic socio-economic crises and vulnerability of various sorts. It is a holistic programme of self-employment covering the implementation of micro enterprises through organisation of the poor into self-help groups (SHGs), provision of timely and adequate credit, training, technology and marketing. The MF component of the programme is referred to as a small-scale financial intermediation, inclusive of savings, credit, insurance, business services and technical support. With the prime objective of alleviation of poverty, the SGSY tries to bring beneficiary families above the poverty line3 through an integrated action of various district and village level agencies — District Rural Development Agencies (DRDAs), banks, line departments, Panchayati Raj Institutions4, non-governmental organisations (NGOs) and other semi-government organisations, popularly known as Self- Help Promoting Organisations (SHPI)5. This paper explores the possibility of improving the Government-run micro finance programme, SGSY, drawing upon the findings of the study of a coastal district of Orissa. Based upon the secondary data, literature review and field research, it is possibledo document chronic difficulties faced by the client beneficiaries of the programme. The paper is organised in six sections, the first of which is introductory. Section II is an overview of poverty alleviating MF initiatives in India and the status of their implementation. Section III discusses research design and methodology of the study. Section IV highlights the performance and outreach of SGSY model of MF programme. Section V evaluates the performance of the SGSY model drawing upon the field survey, and discusses problems and issues faced by the group members in the implementation of the programme. Section VI concludes, recommending certain policy changes in the design and implementation procedure of the programme.