Micro-finance: A tool for fight against poverty in rural India through self-help group formation

Abstract

Prosperity of India lies in the prosperity of its villages. In spite of being an agrarian economy, the rural scenario of our country projects a rather despondent picture. A large chunk of the rural population still remains in abject misery and poverty. Economic independence and empowerment of rural poor are major challenges faced by the government. Since 1991, the government has intensified its efforts for inclusive growth with its outreach programs. Banks and financial institutions are engaged in massive financial inclusion programs. Although, the percentage of rural population living below the poverty line declined significantly from 27.09% in 1999-2000 to 22.7 in 2004-2005, but still the millions of rural people are living in perpetual bondage write down the specific source. For alleviating rural poverty and freeing the rural people from the vicious cycle of poverty, credit has long been identified as one of the most crucial inputs as access to credit can generate economic activity, growth and development. During the year 2005-2006, National Bank for Agriculture and Rural Development (NABARD) has re-designated Micro-Finance Development Fund (MFDF) as Micro-Finance Development and Equity Fund (MFDEF) and enhanced the fund size from Indian Rupees (Rs.) 100 to 200 crore. An amount of Rs. 113.50 million from MFDEF was utilized during the year towards up-scaling of SHG-Bank Linkage Programme. Under the SHG-Bank linkage programme, over 103 million rural households now have access to regular savings through 7.96 million SHGs linked to banks. About 27% of these SHGs are savings linked, the Swarnajayanti Gram Swarojgar Yojana (SGSY) programme–the rural poverty alleviation programme of the Government of India where predominantly households below the poverty line are admitted as members. Microfinance in India is characterized by a high advancement and has brought a number of people above the poverty line. But the coverage is uneven with high numbers of people in rural hinterland still remaining out of the ambit of the outreach programs. Southern region accounts for more than 2/3rd of the total microfinance through SHGs in the country. Key words: Microfinance, poverty, self-help groups, income, employment generation.