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ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING

Peer Reviewed and Refereed Journal ISSN No. 2456-1037 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) Vol. 05, Issue 08,August 2020 Available Online: http://www.ajeee.co.in

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STUDY ON MICRO FINANCE IN POVERTY ERADICATION

Dr. Neh Srivastava, New Delhi

Abstract - India is a country suffering from severe poverty. In the 2010 World Bank Survey, about 1.2 billion people globally live below poverty, while India is the world's most vibrant.

In the past, numerous recovery services were implemented, but no significant impacts have been identified. Several cooperative banks and regional rural banks have been developed to address poverty in developing countries. Complete micro-credit demand was calculated in the country at Rs. 50,000 crores. Poverty reduction for the Indian government has been a critical objective; microfinance is one of the main instruments in all its initiatives. India's microfinance continues to differ from that of other Microfinance organizations.

Keywords: Microfinance, Microcredit, Self Help Group, 1. INTRODUCTION

Microfinance is a broad range of services to indigent clients. There is a need for an all-around effort to enhance the Microfinance Industry's range of services to the critical poor and deciding the gap between outreach and sustainability. The revolution of Microfinance acted as a tool of poverty eradication where institutional failed, but their awareness is not so remarkable. Microfinancing not only generates income and employment but also creates a platform for shelter and house improvement. It is a means to several resolutions and not an end.

Microfinancing is a measure to fulfill the deprived needs of the Measurement of poverty in the World Bank is envisaged as a renowned income. The base of Measurement that defined the term

“poverty” as a person earning than $1 is envisioned as "very poor" and making between $1 and $2 per day is "poor" one that makes more than $2 is planned as

"non poor" (UNDCF, 2004). There is no universal definition of poverty because it depends on political conditions (Chaudhry, 2003). It has been calculated by the World Bank in 2010 that approximately 2.7 billion live on less than US$ 3 a day, while 1.39 billion live on less than US$ 2 a day. 35% live on much less than US$ 1 a day in India and 85% live on less than US$ 2 a day.

1.1 Measurement of Poverty in India Planning Commission measures the poverty in India. Below the chairmanship of Dr. C. Rangarajan in 2014, the estimates of poverty are decided at the national or state level categorized under rural and urban regions. The occurrence of debt is calculated by the poverty line concerning the income of an individual over per capita consumption expenditure

per month. According to the commission survey, Rs 48 in urban areas and Rs 33 in rural areas would be the current poverty line. Rs 26 for rural India and Rs 34 for Urban India were the earlier poverty line number. In the last year's list of Suresh Tendulkar committee formula about 93.7 million more poor were added by the Rangarajan report today, from 270 million in 2012-13, the total number of poor has exceeded 364 million. The increase in the poverty line's income threshold means that 93.7 million more households are currently below the poverty line (BPL).

1.2 Major Determinants of Poverty Although income is one of the significant determinants of poverty, yet consumption, savings, expenditure, employment also plays a crucial role in determining the poverty status of the economy. The poverty line was measured by the expert group of Planning commission under the chairmanship of Prof. Suresh Tendulkar committee in terms of poor in percentage and numbers separated in rural and urban areas between 2004-05, 2009-10 and 2011-12. The poverty line per month per person in 2004-05 was Rs 447 in rural and Rs. Five hundred seventy-nine in urban areas, 2009-10 Rs 673 and Rs 860 and 2011-12 Rs 816 and 1000 respectively.

The poverty estimates of the year 2011-12 under the Tendulkar Committee upheld significant criticism in India. It was noted for further revision through expert group under the chairmanship of the C Rangarajan Committee to submit the revised estimates. The Committee submitted its report in the year August 2014. Rangarajan Report Rs 801 in rural and Rs 1198 in urban areas in 2009-10

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8 against Tendulkar Report Rs 673 in rural and Rs 860 in urban areas. The year 2011-12 marked a significant difference in both the reports of the Committee.

Rangarajan reported Rs 972 (Rs 32.4 per day) in rural and Rs 1407(Rs. 47 per day) in urban areas in 2011-12.

1.3 Micro Finance

According to Otero (2001), "Micro-finance consists of the procurement of various financial goods or services for the poor and very poor self-employed. According to Ledger Wood (1998), Micro Finance's business services include deposits, billing, and capital and insurance transfers. Schreiner (2002 ) concluded that "Micro finances are the effort to provide disadvantaged people with access to the financial system that traditional or industrial banks declare cashlessly or refuse. “Microfinance encompasses other financial services that are unaffected by the financial system as a whole. Delgado (2006) says micro-finance is a system in which a short time scale and other financial resources are extended, including deposits and insurance, to alleviate poverty by lending for small businesses.

1.4 Microcredit and Micro Finance The term got prominence in the journey of the 1970s. Previously during the 1950s, provision of credit was subsidized through rural credit schemes, but somehow it ruined into losses, major defaults, and not accessible to poor rural households.

Researchers in the past have already given a significant breakthrough to microfinance, but their minor lies difference between microcredit and the term microfinance. (Robinson, 2001) Microcredit includes services limited to providing a loan facility of small amounts to the poor and more miserable. Micro finance is a broader term that includes not only the provision of loan facility but also facilitates services of savings, insurance, payment, and pension services through MFI and NGOs (Okiocredit, 2005). The decade of 1980 gave major thrust to altogether the MFI industry.

Grameen Bank promoted small savings and credit services on a large scale basis profitably. They were commercially developed and gained broad access to clients over the entire field of operation.

1.5 Women Empowerment

The number of Microfinance program furnishes assistance to most women to empower them. Women had been the most vulnerable section of the society of underprivileged. Keeping this belief to investigate their capabilities means allowing them to make choices that are a valuable input of accelerating growth and development. It is also evident from the study that an increase in resources raises the family's economic condition, particularly children. A rising amount of Microfinance envisaged women as a reliable borrowers and thereby contributing to financial viability. As per U.N. (2002), the empowerment of women is the mechanism by which women manage and own their lives by extending their choices. As per the World Bank (2001), empowerment as an extension of freedom of choice and freedom of action expanded autonomy and influence over wealth and decision-making that impact our lives. Empowerment of women is the equality of growth and opportunity.

2. REVIEW OF LITERATURE

According to Goetz and Sen Gupta, (1996), there had been negative impacts on women empowerment due to increased work pressure, stress and tension of family repercussions and prolonged inertness of Microfinance availed from different sources. However, micro-credit and micro-savings also uplifted the living standard of poor women. According to Puhanzhendi and Satya Sai's (2001) observation, the social effect of the Bank association Program on households had been much more effective rather than producing economic impact. In his study, S.K. Singh (2004) observed that planned caste women in UP or Uttarakhand are aware of their rights, entitlements, and development programs and facilitated them to start income generation activities and self-employment. These programs have also given a breakthrough to women for active participation and decision making capacity at domestic and market fronts. Bassem (2012), reviewed Microfinance is a tool for most of the debt obligations and economic instability in developing countries. Microcredit is mostly utilized to finance self-employment opportunities and a low-income group of urban and rural micro-entrepreneurs who

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9 have limited access to formal channels of financial services.

In the past scenario, the relevant studies in 23 the area of Microfinance have been conducted to date; Puhazhend and Badatyain (2002) analyzed the impact of SHG members in the eastern states like Orissa, Jharkhand, and Chattisgarh. It was highlighted in the study that there had been essential differences in the savings, income for SHG members after they have joined groups. Up to 45 percent of members have given their positive results. NGO's micro-financing schemes for women SHG have enabled them to gain economic and social empowerment.

This has inspired such leadership skills, communication competence, management of various projects, financial flexibility, raw material recognition, business diversification and industrialization (Manimekalai and Rajeshwari, 2002)

Generally, those who are poor have no parents/guardians, no literacy, no food, clothes, and proper health.

Mukharjee (2007) stated that probable invention in poverty alleviation was to approach the poorest of the poor, living in rural areas. Hence, microfinance institutions are mandatory at the central level to look into the poor's financial needs at the ground level. Hulme and Mosley (1996) analyzed different Microfinance projects that can mitigate the segregation of women when they join groups with ample opportunities and disseminate the information and develop a bond that was not there previously.

Microfinance institutions can bring significant improvement in the income of the upper poor and non-borrowers who are near poverty lines.

3. DATA AND METHODOLOGY

The present study is carried out through the field survey method of the questionnaire. We contain the chosen two regions of eastern Uttar Pradesh that are Mirzapur or Ghazipur for our study.

These two selected districts cover a relatively high number of SHGs under the SGSY program. To collect information about SHGs existing in neighborhoods, a pilot study is done. This helped us recognize 2 blocks- Lalganj in Mirzapur and Manihari in Ghazipur, where SHGs are working smoothly. Around 26 SHGs with 331 members are operational. Based on women workers' attributes in SHGs,

these blocks were joined together and segregated into different strata. Through a random sampling method, some members were chosen from every level. That is how we obtained a total of 109 research participants.

The pertinent data relating to our research was collected by using a structured questionnaire from the sampled respondents. We have utilized the method of „previous to and after approach to study the role of Microfinance in socio-economic upliftment of rural poor through SHGs. For analysis tools like paired sample t-test, ANOVA has been used.

4. CONCLUSION

The primary purpose of this research is to examine the role of Microfinance in mitigating poverty in regions of eastern U.P. Consecutive government in the U.P.

have developed national development policy frameworks to execute these plans in minimizing the level of debt and uplifting the economic condition of the people. We set out to examine how Microfinance has facilitated in mitigating the level of debt in UP. The research paper envisages a descriptive research methodology, and a structured questionnaire was used to collect information from the respondents. The outcome of the investigation explains that there is a significant improvement in income, education, and cooking fuel.

These factors have reported improvements and reduction in levels of poverty.

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