Role of Microfinance and Entrepreneurship Development in India

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1 130 Role of Microfinance and Entrepreneurship Development in India Dr. Sushil K. singh* Ram Pravesh** Abstract The entrepreneurship development in any country leads to the employment generation and poverty eradication. That s why every country continuously tries to speed up the entrepreneurship. In the scenario of India small entrepreneurs need small fund to boost up the small business but government sector financial lending institutions are now failed to do it. Therefore this creates the dependency of micro entrepreneur on microfinance lending institution. It is seeing in structure of micro enterprise lending. Bangladesh is a pertinent example of, role of microfinance in economic development after that Bangladesh became a model of economic development through micro finance, now developing country applying this modal for economic development. In the same line India is also applying and experimenting the flourish outcome of microfinance. microfinance playing a vital role in economic development by entrepreneurship development in India. The success of small business in India depends upon the accessibility of working capital. It is only possible by microfinance lending. This paper is prepared by use of secondary data. The researcher used internet as source of collection of secondary data. Tables and simple percentage were use in data presentation. For analysis the two broad variables keep in center in the study. First is entrepreneurship development as a dependent variable and second is microfinance as an independent variable. The research paper is divided in three sections. First section reveals the success of microfinance in different across the country for entrepreneurship development. The second section discloses the relationship between microfinance and entrepreneurship development in the country. The third section concludes the result of the research that is there is positive impact of microfinance institution lending on entrepreneurship development in India. Keywords- Entrepreneurship, Microfinance, Lending, Development, Financial Institution etc

2 131 Introduction The process of industrialization of India was start in second five year plan with the objective of employment generation and to fulfill the hope demand of individuals. Although it was centralized to only a group of industry that why a mass of Indian remain excluded by entrepreneurial orientation because of they have not any idea to do something even does not have finance to initiate. About 90 percent of people in developing countries lack access of financial services from institution either in form of credit or saving ( Robinson et all 2002). Therefore so many rural people migrate to big city for employment. After globalization so many multinational companies spread their business in India at rural level but rural people remain unemployed. It is sure that our success of development since independence is not satisfactory. Unemployment, poverty, low living of standard, satisfaction level even our happiness level is very low in rural. Poverty and mass unemployment is very big challenge for us irrespective of immense opportunity of entrepreneurship in agriculture and rural non- form sector. It is well known that institutional financing system to poor in India is unable to fulfill their credit needs in response of that micro finance is growing. Microfinance is playing a instrumental role in improving the quality of life and eradication of poverty by meeting the needs of credit of rural poor. microfinance has already made a positive impact on quality of life of millions of poor people by providing greater access to credit, saving, insurance, transfer remittances, and other financial services which would otherwise be untouchable. 1 Success of microfinance in Bangladesh to provide livelihood opportunity to rural people have been became an instrument in several less developed countries like Uganda, Bangladesh, Nigeria, and so on for sustainable entrepreneurship development. In India rural people have low capacity to finance their enterprise so productivity is limited, income is low, respectively domestic saving remain low and again any increase in productivity is impossible. Skewed distribution of microfinance institution in India is also breaking the rural people to engage in new entrepreneurial activity, hinder economic growth, which inhibit the sustainability of entrepreneurial activity. Anyhow microfinance acts as a tool to empower the rural people. Therefore now we have to focus on, to what extent microfinance empowers the entrepreneurship in rural people? And what is its contribution to economic development? The economic development is the process of improving the quality of all human lives (Todaro 1994). So the economic development consider three characteristic namely growth in income and consumption, speeding self-esteem by institution that enhance human pride, and increasing freedom of people. So it considers the all aspects of human development that is possible by only microfinance, if we talk about poor people. When the income of poor people rise then they improve their nutrition and send their children to school (Robinson 2002). Guy Vincent says it is fundamental to economic development, but also financial services help the poor to expand their economic activities and increase their income and assets, their self-confidence grow simultaneously i International journal of college science, 3: 2 July 2009, Tiyas Biswas and P. P. Sengupta

3 132 Objective 1. To analyze the development of micro financing in India. 2. To analyze the entrepreneurship development in the context of microfinance. Context of micro finance in India From past to present microfinance sector of India reveal the cash-cow growth pattern. It is fact that 8 MFI have approval to open small finance bank by reserve bank of India and one MFI has already worked as bank. The MFI in India generally covered those areas which are not now covered by main stream financial institution and for those it playing a vital role for financial inclusion. Now microfinance program have the take up the world wide campaign to provide credit to poor by designing product and channels that fulfills the needs of the poor. The economic situation and increasing earning of microfinance institution reveal that poor had great repayment potential and also reveal by extension of its credit to women. at the end of March MFI were functioning in 33 state including Union Territory and 568 District in India and has been reach to 33 million clients with 490 billion credit portfolio among them 40 percent functioning in southern and 25 percent in eastern. The contribution of NBFC-MFI is 85 percent of the total clients and 88 percent of the outstanding portfolio further remains contributed by NGO-MFI. The 97 percent of the client of MFI is women and 67 percent is urban at the end of 2015 March. Region wise Selp-Help Group across the country According to report of status of microfinance in India ( NABARD) there are every of India except southern have good potential to open SHGs because huge range of village are not covered by existing SHGs in that. In the northern of the country SHGs is currently functioning but several village was not covered by them and and potential of the to formation of new SHGs is around The north eastern of the India has also good potential of new SHGs formation around Present time SHGs is functioning in this. The number of functioning SHGs in eastern of the country is Here it is notable that it covering only half of total need of SHGs in the. The has great potential to new SHGs formation around that is second biggest potential to open new SHGs. This has major market for SHGs across all s in the country. The central of the country has SHGs. That cap only small portion of the potential of the. The has biggest potential of new SHGs formation across the entire of the country, which is number of The western of the country has second greater number of SHGs. Now SHGs is working in this. The potential of

4 133 formation of new SHGs in the is The has second lowest potential for new SHGs formation across entire the of the country. The southern of the country is rich and enough by number SHGs. The has SHGs as on 31 March Number of SHGs in the is more greator than scenario of SHGs among all the of the country. It is only one of the country which has enough number of SHGs by number of population. The has zero potential for new SHGs formation. Table-1: Region wise context o f SHGs in India: Sl. No. Region No. of SHGs Potential for SHGs formation 1 Northern North eastern Eastern Central Western Southern Total Source NABARD ( ) status of microfinance in India No. of SHGs 5% 4% 20% 48% 11% 12% Northern North eastern Eastern Central Western Southern Potential of SHG 0% 6% 16% 41% 33% 4% Northern North eastern Eastern Central Western Southern Progress of Micro Finance Program

5 134 The National Bank of agricultural and Rural Development (NABARD) still continues to extend credit to NGOs, RRBs, district central Cooperative Bank and Individual Rural Volunteers (IRV) for accelerating and fostering the SHGs. The NABARD sanctioned crore to these institutions during in the form of financial assistance. A crore cumulative grant sanctioned to various agencies to promote the 7.19 Lakh SHG until the end of March As on 31 March At the end of March crore grant sanctioned to 4.85 newly formed SHGs. The Non-Government Organization (NGO) worked as most dominant player to promote SHGs. NABARD is helping them to train and enhance the capacity of the stakeholders by various microfinance programs. It has conduct 4402 training programs to train around 1.61 Lakh individuals, stakeholders during As on 31 March 2015 around individuals was trained that playing as a strong back up group for execution of the program. It is impressive that around 1087 training program with participants were conducted by the assistance of Women Selp-Help Group (WSHG) fund. Although, government and Reserve Bank of India is continue to emphasizing to to promote SHGs-BLP for financial inclusion like Prime Minister s Jan Dhan Yojana. Despite of that all, the government of India continue all poverty eradication programs by means. Table 2: Growth of Bank Linkage SHGs: S Year No. of Selp- Help Group Linked to Growth rate.no. bank Average

6 Growth rate of Bank Linkage SHGs growth rate The table-2 reveals that the growth rate of Bank linkage SHGs is in 1990 and in 2015 with the average of The progress of microfinance in the context of selp-help group with Bank Linkage Program is the good indicator of progress of microfinance. Under the selp help group bank linkage program SHGs had linked at the end of 31 March 2015 and they had loaned by Rs billion during the year even they refinanced by Rs billion as on 31 March The huge amount of lending by microfinance institution to SHG and again refinance them if they had need show that there is immense opportunity to expand the field of microfinance market in the country. The Selp- Help Group Bank Linkage Program (SHG-BLP) was first initiated on pilot scale in 1992 has expanded significantly. At the end of March 2014 it reached to Lakh saving linked SHG that cover over 9.7 crore poor households with the saving of crore Lakh credit linked with SHG under the program. Table 3: Growth of Bank Loan to SHGS (Amount in Billion) S. No. Year Bank Loan to SHGs Growth rate (in billions)

7 Average Source NABARD) Growth Rate of Bank Loan to SHGS Bank Loan The table-3 reveals that average growth of bank loan to SHGs is during 1990 to The trend of growth rate is follow decreasing order. Table depict that percent growth rate in 1990 and it is continuously going downward direction, reach at in The average amount of bank loan is billion during 1999 to The amount of bank loan is follow increasing trend but growth rate is follow decreasing trend because the number of SHGs is increase and amount of loan is not increasing according to that. Table -4: Growth of Refinance Assistance to SHGs S. Year Refinance Assistance Growth rate No. (in billions)

8 Average Growth Rate of Refinanace Assistance to SHGS Growth Rate of Refinanace Assistance to SHGS Table-4 reveals that percent growth rate in 1990 and percent in 2015 with the average of From 1998 to 2015 around billion had refinanced to various SHGs across the country. The amount of refinance assistance during 1998 to 2011 was in increasing order. The amount of refinance in the 2012 was decreased as compared to previous year, in this year Rs billion was refinanced. The amount of refinance was same during the 2009 to Further it is continue to increase in all succeeding year up to March The growth rate of refinance assistance to SHGs in is zero and it is respectively and during and Table-5 Progress of micro finance program as on 31 March 2015 (In crore) Particulars SHGs covered under SJGSY Assistance of SIDBI to MFI Number Amount Number Amount Number Amount Number Amount Loan disbursed during the year

9 138 Loans outstanding Savings accounts with banks SGSY- Swarnajayanti Gram Swarozgar Yojana, SHG- Selp- Help Group. SIDBI - Small Industries Development Bank of India. Sources NABARD Annual Report The progress of micro finance in the context of loan disbursed, loan outstanding and number of saving accounts with bank during the year is express the progress of micro finance in the country. The number of Selp-Help group and loan disbursed by them is in increasing trend over the year. The number of micro finance institution and loan disbursed by them is also follow the same trend in the respective year. It indicates the scope for extension of micro credit market and also for expansion of micro finance institution in the country. The growth of loan outstanding over the year by financial institution in the country is also indicating increasing trend. The same trend is followed by the Selp-Help Group over the respective periods. That show how much potential of micro credit exist in the rural poor people in the country. In this case one thing is considerable that number of Selp Help group is decreasing during the year but amount of loan outstanding is increasing in a good amount. It indicates the bright future of loan outstanding. The saving account of Selp Help Group with bank is also in increasing trend. The rate of growth of saving account with bank is more than rate of growth of increasing number of Selp Help Group. The Swarnajayanti Gram Swarozgar Yojana (SGSY) is covered the number of SHGs and provide financial help to them year by year. The small industries development bank (SIDBI) is also provide financial assistance to microfinance institution for helping various selp-help group across the country. The amount provided by Small industries Development Bank to micro finance institution is follow increasing trend that depicts that financial assistance by microfinance institution to SHGs is growing. The growing order of financial assistance to SHGs by MFI and other means is strengthening the financial situation of member of SHGs and also helpful in creation of new SHGs across the country. The number of SHGs covered by SGSY is also follow increasing trend and the financial assistance under SGSY is also in growing trend. This all contribute to SHGs development by its own way and provide financial assistance to

10 139 SHGs by own planed limit. Now their contribution to upliftment of poor is better and surely it is providing the means of life living to the poor across the country. Figure-6 Grant assistance extended to Selp-Help Group promoting institutions, as on 3 March ( Rs. In Lakh) Agency Cumulative sanction up to 31 March 2015 Disbursements up to 31 March 2015 Amount No. of SHGs Amount No. of SHGs NGOs RRBs Co-operatives Banks IRVs Formers clubs Total NGO- Non-Government Organization, RRB- Rural Bank, IRV- Individual Rural Volunteer. Sources- NABARD annual report The grant assistance by the government to various Selp-Help Group promoting institutions is also revealing the progress of micro finance in the country. The extension of grant to Non- Government Organization (NGO), Regional Rural Bank (RRB), Cooperative Bank, Individual Rural Volunteer (IRV) and former club is also witnessing the progress of micro finance in the country. The amount of Lakh has sanctioned to this SHGs promoting institution. And the disbursement figure is amount of Lakh to SHGs across the country. The NGO is playing a vital role in the development of SHGs, granted to amount of Lakh and to promote SHGs in the country up to March They distributed Lakh to Lakh to various SHGs across the of the country. Now NGOs has became smart player to run for poverty alleviation across the world. The RRBs of the country is also playing significant role in development of micro finance in the country. It is associated with SHGs across the country and granted by amount of Lakh up to March It distributed amount of Lakh to SHGs in the country up to March It provides various loan products to rural poor to fulfill their micro credit needs. The cooperative banks are also contributing to SHGs development and assist rural poor people. Up to March SHGs had associated with cooperative banks and it sanctioned to amount of Lakh across the country. it disbursed an amount of Lakh to SHGs up to March Cooperative bank is now more helpful for rural poor, co-operative societies and former that needs timely financial assistance. Currently Individual Rural Volunteer (IRV) is playing bridge role between supporting institution and rural poor. Yet SHGs had associated to IRV and sanctioned by amount of Lakh up to March 2015 among them amount of Lakh disbursed to SHGs up to March The former clubs is also playing pivotal role for rural poverty eradication. Although former clubs less contributing as compared to other

11 140 promoting institution. Now 5118 SHGs associated with former clubs and amount of is sanctioned for that. The former clubs had disbursed amount of Lakh to 7322 SHGs across the country up to March Relationship between micro finance and entrepreneurship Promotion of entrepreneurship and business innovation by microfinance institutions credit to firms is an essential driver of economic growth. The microfinance revolution in India reveals that it is playing a vital role in the vision of poverty eradication with various effort of government of India. The reserve bank of India also provide license of bank to two MFI that will be a big step for development of MFI. It will highly spread the credit disbursement and increase the productivity by credit supply. The role of microfinance now has been more tactical than in the past. It promotes financial inclusion by adoption of individual lending to the poor and targeting micro enterprises. It is not limited to only productive poor but also extend the innovation oriented entrepreneur. It is also now remove the traditional hindrance to entrepreneurship and micro business by being with various NGOs. The microfinance is a bigger contributor of one factor of production namely capital to entrepreneur. The rural entrepreneur has good amount of labor and land but they always facing the problem of capital during the exploitation of production factors for economic activity to earn profit. Now days rural entrepreneurship is totally dependent on microfinance because of it is very feasible for infant entrepreneur across the world. Now in India micro finance enable poor to start new business and expand existing business activities. It boosts up the entrepreneurship in India and creates a lot of employment. It is the magic of micro finance that small businesses contribute around 40 percent in Gross Domestic Product in India. During the absence of micro finance in the world poor people was unable to seek entrepreneurial opportunity. Conclusion The micro finance playing a vital role in entrepreneurial development in rural area by providing micro loan to several SHGs across the. The number of SHG is increasing and amount of disbursement of loan is also increasing year by year but the growth rate of SHGs bank linkage, loan and refinance assistance to SHGs is decreasing. The amount of loan and refinance assistance is not growing in respect of increasing number of SHGs across the. The number of SHGs is not sufficient in any except southern. The country has good potential for formation of new SHGs across the except southern. Reference 1- International journal of college science, 3: 2 July 2009, Tiyas Biswas and P. P. Sengupta.

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