LOOKING BEYOND INCOME POVERTY THROUGH MICROFINANCE (Case Study of PAHAL an NGO in Uttarakhand)

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1 LOOKING BEYOND INCOME POVERTY THROUGH MICROFINANCE (Case Study of PAHAL an NGO in Uttarakhand) Aanchal Singhal* & Dr. Bindu Arora** ABSTRACT Microfinance is the provision of a broad range of financial services such as deposits, loans, payments services, money transfers, and insurance to poor and low-income households and their micro-enterprises. Microfinance can be a crucial element of an effective poverty reduction strategy. Improved access and efficient provision of savings, credit and insurance facilities in particular can enable the poor to smooth their consumption, manage their risks better, build their assets gradually, develop their micro-enterprises, enhance their income earning capacity, and enjoy an improved quality of life. Microfinance is one of the products of new developmental thinking and policy-making. It is a unique amalgamation of industrial and institutional reforms in the present scenario of development economics. For the developing countries like India it has come as a breakthrough in the philosophy and practices of poverty eradication, economic empowerment and inclusive growth. Yet given the enormity of economic compulsions and complexities in these countries, microfinance is an unfinished agenda. The main objective of this paper, therefore, is to shift the focus from mere financial access to poverty eradication and people s empowerment, sift the performance of Microfinance Institutions (MFI s) from their popularity. Keywords: Microfinance, Poverty, Microfinance Services, poverty reduction strategy. INTRODUCTION The typical microfinance clients are low-income persons who do not have access to formal financial institutions. Therefore, there is a tendency among development thinkers and practitioners to gauge the impact of MFIs purely in monetary terms, i.e. eradication of income poverty. This is not only a partial view of the potential and purpose of microfinance but also a cause of * Assistant Professor, JSS Academy of Technical Education, Noida. (India). (AKTU, Lucknow). aanchalsinghal.ddun@gmail.com, ** Professor, Kanya Gurukul, II Campus-Gurukul Kangri University, 47 Sewak Ashram Road, Dehradun. binduarora17@rediffmail.com,

2 12 Aanchal Singhal and Dr. Bindu Arora unbridled growth of MFIs. MFIs have the capacity and responsibility of empower the most vulnerable, such as women, rural artisans etc; to allow the not-yet-economically-active to become so; and to create community-based structures that build mutual support and trust. The argument in this paper is that MFIs by realizing the true potential of its members though social intermediation can ensure building an inclusive society. MFIs have the advantage of combining the good features of both formal and informal credit, even improving productivity and creditworthiness through the ethics of repayment. Microfinance Services It was for a long time the development agencies, programs and projects were interested in the merits of the minimalist credit approach or credit-alone services rather than in providing credit-plus services. However, later they acknowledged the role of appropriate training and technical assistance linked with the credit. This they called microfinance-plus services (Berger, 1989). According to Tendler (1989), microfinance-plus services provide social and other services in addition to plain credit. Consequently, the microfinance programme also acknowledges the necessity of the microfinance-plus services in improving the social and economic welfare of poor households. The various microfinance services are The Credit Services: Microcredit is most common credit product in microfinance. It is provided to the clients of microfinance at a fixed rate of interest for various purposes without any physical collateral under the principle of joint-liability. Generally, these loans are provided for the short-term credit needs and, sometimes, even for medium to long term. Savings Services: A possibility to save money without no minimum balance allows people to retain money for future use or for unexpected costs. In SHGs the members save small amounts of money, as little as a few rupees a month in a group fund. Members may borrow from the group fund for a variety of purposes ranging from household emergencies to school fees. As SHGs prove capable of managing their funds well, they may borrow from a local bank to invest in small business or farm activities. Banks typically lend up to four rupees for every rupee in the group fund Micro-Insurance Services: Gives the entrepreneurs the chance to focus more on their core business which drastically reduces the risk affecting their property, health or working possibilities. There are different types of insurance services like life insurance, property insurance, health insurance and disability insurance. The spectrum of services in this sphere is constantly expanded, as schemes and terms of providing insurance services are determined by each company individually Micro-enterprise Development or Self-employment: The rural poor in general and women in particular lack the skill and education to find jobs in commerce and industry, or, as is mostly the case, very few jobs in the wage economy. Given this worst-case situation in the rural economy, the new paradigm of microfinance has contributed to the promotion of microenterprises or self-employment through business training, production training, or marketing and technology services. Health Care Services: Although MFIs and SHGs are meant for financial intermediation, often they work as social institutions for the welfare of the poor. One such social services Vol. 11, No. 1, June 2017

3 Looking Beyond Income Poverty through Microfinance 13 is health care-conducting medical camps, treatment for various diseases in government/ private hospitals, tests for and awareness on HIV/AIDS and other diseases, special medical camps for the children, mothers and the disabled, and awareness on alcoholism and smoking. Training and Awareness: In recent years, microfinance groups have been the platform for the capacity building in the rural poor women. The members of the groups at various levels have been getting training and awareness on banking literacy, importance of thrift and savings, credit norms and procedures, zero tolerance of non-repayment and significance of joint liability or collective action in managing the groups. Further, the groups have also trained their members on leadership, self-employment or micro-enterprise development, health care, sanitation and nutrition, strengthening public speaking skills and spreading awareness on social and political problems. Social Networks: The poverty of people in rural areas has kept them completely outside the network of the social, political, and economic institutions in the community. However, microfinance innovations have helped develop networking with various formal and informal institutions, like financial institutions, NGOs, panchayats, milk cooperatives, SHG clusters and federations, and so on. This networking will contribute to the development of social capital among the people in the community and will further improve the social and economic life of the poor. For microfinance, therefore there is ethical and economic justification for looking beyond income poverty or to move from financial intermediation to social intermediation. So today we need to not only evolve new products or services under the scope of microfinance but also explore new frontiers of development, social and economic. Keeping this in mind a case study is undertaken to know the role and performance of Microfinance not only in terms of the stated objective of poverty eradication but also in terms of the goal of overall economic, social and cultural development of the poor. CASE STUDY AND ITS OBJECTIVE With this background a study of microfinance activities of a voluntary organization working in the field of Microfinance, PAHAL in Uttarakhand is undertaken. The main objective of the study : To examine the role and performance of microfinance not only in terms of the stated objective of poverty eradication but also in terms of the goal of overall economic, social and cultural development of the poor. DISCUSSION Microfinance and PAHAL PAHAL is a voluntary organization working in the field of Microfinance, Livelihood Support, Rural & Slum area Sustainable Development, Environment Protection, Microenterprise, Capacity building of the Marginalized Community (esp. women), Awareness Programs, Co-operation & Co-ordination. At PAHAL, they work towards nurturing and unleashing the untapped potential that resides in rural India. They aim at long-term solutions to problems that exist at the grass root Global Journal of Business Management

4 14 Aanchal Singhal and Dr. Bindu Arora level. Tools of Microfinance, Livelihood Services and General Rural Development are a broad classification of the work that they do. They believe that rural India needs a change to be brought about and they are working towards it. PAHAL was established in 1988, with the object of Social Welfare, Environment Protection & Rural Development by some development workers. It is worth mentioning that from its very inception the society has paid special attention towards income generation activities, in the area, for the sustainable development of weaker section of society. PAHAL is using SHG tool of Micro Saving & Micro Financing and has formed more than 500 NABARD sponsored Self Help Groups. From 2007 they have started direct Micro finance to SHG s under the aegis of PAHAL Community Micro finance Services. ICICI Bank, Nainital Bank NMDFC, SIDBI, UMFI, IGS and RMK has extended support of total Rs. 240 Lakhs to them for direct lending to unprivileged & unserved section of society. Earlier they have worked on SHG Bank Linkage model and arranged more than 500 Lakhs liquidity from SBI, NA KG Bank & other banks, to this section. PAHAL is a alone partner and member of two prestigious international micro credit institutions one is Microcredit Campaign USA and another is Planet Finance France/India for poverty alleviation in Uttarakhand. PAHAL has promoted highest number of NABARD s SHGs in Uttarakhand. These groups are also being used for social Mobilization. PAHAL has been awarded Micro Finance Process Excellence Award and Micro Finance Continuous Process Excellence Award by ABN Amro Bank and Planet Finance for Micro Finance services and PAHAL supported one SHG named SURABHI SHG has been chosen as best performing SHG in Uttarakhand by NABARD. This SHG has been awarded by Union Finance Minister, Mr. P. Chidambaram in New Delhi. This award was given to the 13 best performing SHG s in all over India. PAHAL has been also facilitated by Honorable Chief Minister of Uttarakhand and SBI Dehradun region for remarkable micro finance services to the disadvantage section of society. In 1992 PAHAL had started a unique initiative anti Polythene carry bags Awareness Movement for the Environment protection & pollution control in area under National Environment Awareness Campaign. They have conducted so many seminars, rallies, competition on hazards of non biodegradable waste, demonstration of safe disposal of non biodegradable, promotion of use of paper s shopping bags & Exhibition on these issues. Before their interference no one was aware about these hazards in their area. Till now its impact has spread all over the region. Main Services of PAHAL SHG Bank Linkage It is worth mentioning from the very inception, that, the society has paid special attention towards income generation activities, in the area, for the sustainable development of weaker section of society. PAHAL has initiated micro finance in Uttarakhand in 1994 & till now formed more than 550 Self Help Groups. (Highest in Uttarakhand). PAHAL is using SHG tool of Micro Saving & Micro Financing. Community Micro finance Services From February 2007, they have started direct Microfinance to SHG s under the aegis of PAHAL Community Micro Finance Services & have provided 275 Lakhs credit support to micro Vol. 11, No. 1, June 2017

5 Looking Beyond Income Poverty through Microfinance 15 credit to their members with the support of NMDFC, ICICI Bank, Nainital Bank & SIDBI & Uttarakhand Micro Finance Institution. PAHAL is a alone partner and member of two prestigious international micro credit institutions, one is Micro-credit Campaign USA and another is Planet Finance France/India for poverty alleviation in Uttarakhand, apart from Sadhan net work & Credibility Alliance. PAHAL has promoted highest number of SHGs with the support of National Bank for Rural and Agriculture Bank (NABARD) in Uttarakhand. These groups are also being used for social Mobilization. PAHAL has been awarded Micro Finance Process Excellence Award And Micro Finance Continuous Process Excellence Award by ABN Amro Bank and Planet Finance for Micro Finance services and PAHAL supported an SHG named SURABHI SHG, which has been chosen as best performing SHG in NABARD. This SHG has been awarded by Union Finance Minister Mr. P. Chidambaram in New Delhi. This award was given to the 13 best performing SHG s in all over India. PAHAL has been also facilitated by Honorable Chief Minister of Uttarakhand Mr. Narayan Dutt Tewari and State bank of India Dehradun Region for remarkable micro finance services to the disadvantage section of society. Livelihood Support Services This is an ambitious plan initiated by the PAHAL by their own sources. Under these services, they identify most vulnerable section of society in term of livelihood in security & provide them livelihood support as per their capacity & skill. They have selected more than 500 families in Haldwani & Bhimtal Block & linked them to small income generation activities like paper bag, stone crafts, woolen work, Embroidery etc. Pahal is working to resolve livelihood problems Under this concept, Pahal has selected activities like Paper Bags/Envelope making, Candle making, Embroidery work, Crochet work, Sweater weaving, Vegetable dehydration, Sustainable Vegetables Organic farming, Mini Poultry, Mini Goatry, Mini Dairy, Stone Crafts, Wooden crafts and Kids garments. Micro Enterprise Development Programmes Under this programme they are providing micro enterprise training to their SHG members who want to start their small enterprises or cottage unit with the support of NABARD, more than 300 members from SHG got training & support to start their small units. Skill Development Initiative They are facilitating unemployed youth to start self employment, with the support of NABARD under this programme. They have provided skill trainings like Motor Winding House wiring, Embroidery work, Candles, making, Typing to unemployed youth & supported to start their ventures. Marketing & Design Development Support They are providing design support & up dated marketing trend to their artisans who are involved in different handicraft & small work. DC handicraft, NMDFC & other institutions are providing support for this purpose. Global Journal of Business Management

6 16 Aanchal Singhal and Dr. Bindu Arora Mahila Empowerment Programmes They are supporting, mobilizing to Women members of SHGs on various socio-economic issues i.e. income generation, different vocational training, women rights, MNREGA, Literacy, ICDS Programme, NRHM, PRIs etc. Health Support Services They are working in different community Self Help Groups, Joint Liabilities Groups, Civil Societies, NGO s, Mohalla committee, Panchayati Raj Institutions etc. They are facilitating to their clients, Beneficiaries & associates for better health services & organizing support system for accessing proper health services, institution delivery, Medical camp facilities. They have a experience to run RCH services (Reproductive and Child Health Services) so they are using their experiences for better delivery of health services provided by government & other institutions. Education Support Services Under this service they are mobilizing their clients from marginalized community for improving their primary education & motivating them for more enrollments in school. Those families whose children are nominating first time in primary school are provided school bag & kit for their wards from PAHAL. CONCLUSION PAHAL is working for the purpose of poverty reduction and social development of poor through integrated development programmes. For microfinance, therefore there is ethical and economic justification for looking beyond income poverty or to move from financial intermediation to social intermediation. So today we need to not only evolve new products or services under the scope of microfinance but also explore new frontiers of development, social and economic. The positive signs are already visible. Several MFIs have recognized the need to be socially relevant and active in order to be commercially viable and useful. The activities of PAHAL is a case in the point. REFERENCES Basil Hans. V (2009). Innovations in Microfinance-Looking Beyond Income Poverty. Electronic Copy available at : abstract= Basu, P. and P. Srivastava (2005). Scaling-up Microfinance for India s Rural Poor World Bank Policy Research Working Paper Washington, DC: World Bank. Darling Selvi V. (2004). Sustainability through Self Help Groups. First All India Conference of Kanyakumari Academy of Arts and Science, Scott Christian College, Nagercoil, September. Elaine, Edgcomb & Barton, Laura (1998). Social Intermediation and Microfinance Programmes: A Literature Review, USA: Micro-Enterprises Best Practices. The SEEP Network. Fisher, Thomas, Mahajan, Vijay & Singha, Ashok (1997). The Forgotten Sector: Non-Farm Employment and Enterprises in Rural India. New Delhi: Oxford & IBH Publishing Co. Pvt. Ltd. Karmakar, K.G. (1999). Rural Credit and Self-Help Groups: Micro-finance Needs and Concepts in India. New Delhi: Sage Publications. Manimekalai and Rajeshwari, M. (2001). Socio economic background of SHG woken in rural micro enterprises. Indian Journal of Agricultural Economics, pp 56, 486 Tejmani Singh, N (2009), Microfinance Practices in India: An Overview. International Review of Business Research Papers, Vol.5. No.5 www. Pahal.defindia.org. retrived on 13 January Vol. 11, No. 1, June 2017

CHAPTER VII SUMMARY, CONCLUSIONS AND SUGGESTIONS

CHAPTER VII SUMMARY, CONCLUSIONS AND SUGGESTIONS CHAPTER VII SUMMARY, CONCLUSIONS AND SUGGESTIONS The present study has been carried out to examine the role of NGOs in the economic and community development