IMPACT OF MICROFINANCE ON THE RURAL DEVELOPMENT IN ASSAM

1Priyabrata Bhattacharjee

Microfinance a new development in Assam, its origin can be traced back 1997-98, since then

several microfinance institutions came up and have succeeded in reaching the poorest of the

poor, and have devised new strategies with time for the fulfillment of their vision. Government,

being the front runner in developing the new schemes and implementing through its different

modes like NABARD, SIDBI etc. The credibility of the RRBs cannot be denied, and also AFC.

It’s been a short, but sweet journey for MFIs in the region, in comparison to the whole of India,

which is presently going through rough phase. Microfinance is now being considered as one of

the most important and an effective mechanism for poverty alleviation. In microfinance,

borrowers are organized into groups and peer pressure among them, which reduced the risk of

default. Many Micro-credit programs in the region are targeting one of the most vulnerable

groups in society – women, who live in households with little or almost no assets. By providing

opportunities for self-employment and status within the household.

The project is about microfinance and to investigate the impact of microfinance on the rural

development, with the main focus on Assam. Therefore it is more focused on both Microfinance

Institutions and the Beneficiaries (the poor people, who borrowed loan from microfinance

institutions) perspective and build up my research based on it. Therefore, the objective of this

study is to show how microfinance works, what is the role of MFIs in reducing poverty and how

it affects the living standard (income, saving etc.) of the poor people in Assam.

Several microfinance institutions/NGOs are working in Assam for the last few years. Asomi,

Assam Grameen Vikash Bank, NERFS, NEDFI, Bandhan, RGVN-CSP, Bosco Reach Out are

some of the prominent MFIs in Assam. These institutions are working effectively for the

empowerment, poverty reduction and improvement of living standards for the poor people in

Assam.

1 Alumni, Indian Academy School of Management Studies, Bangalore. Currently Analyst. “TAS Analytic Services

Pvt Ltd, A Time Warner Company”

I have chosen my sample based on the simple random sampling technique, from two districts

(Kamrup and Cachar) in Assam and I interviewed the MFIs through a structured questionnaire.

Therefore, the accuracy of the analysis heavily relies on the data provided by the people, I

interviewed.

From the analysis of data, I found that microfinance has the positive impact on the standard of

living of the poor people and on their life style. It has revolutionized the life of women to a large

extent. Though there is still Govt support needed for developing the better delivery system and to

provide support to the small MFIs, the scope of new innovation in the microfinance field is also

there

INTRODUCTION

“This is not charity. This is business, business with a social objective, which is to help people get

out of poverty.” Mohammad Yunus.

Microfinance is a form of financial development that has primarily focused on alleviating

poverty through providing financial services to the poor. Most people think of microfinance, if at

all, as being about micro-credit i.e. lending small amounts of money to the poor. Microfinance is

not only this, but it also has a broader perspective which also includes insurance, transactional

services, and importantly, savings.

Fig: 1.1 Structures of MFIs in India

“Microcredit, or microfinance, is banking the unbankables, bringing credit, savings and other

essential financial services within the reach of millions of people who are too poor to be served

by regular banks, in most cases because they are unable to offer sufficient collateral. In general,

banks are for people with money, not for people without.” (Gert van Maanen, Microcredit:

Sound Business or Development Instrument, Oikocredit, 2004)

According to James Roth, “Microfinance is a bit of a catch all-term. Very broadly, it refers to the

provision of financial products targeted at low-income groups. These financial services include

credit, savings and insurance products. A series of neologisms has emerged from the provision of

these services, namely micro-credit, micro-savings and micro-insurance”.

The study focuses into issues like the development or transformation going on in Assam, i.e. the

rural part, which is till today vast, untapped and unnoticed, though lots of NGOs along with

Govt. are trying to provide employment to the underprivileged people, by training them

regarding handicrafts, handlooms etc. At present, microfinance is proving to be an effective tool

to make the people come out from the poverty level. Twenty years ago, it was nearly impossible

for a farmer to get the loan in Assam from the traditional financial sectors like banks. Now, it is

possible due to the microfinance activities. There is a positive effect of microfinance on socio

economic environment in rural areas. On December 18, 2007, General Assembly of United

Nations passed a resolution (resolution No. 52/194) which emphasized on reducing the poverty

through national and international co-operations. Its focus was on the impact of microfinance

throughout the developing countries of the world.

In case of Assam, it is only in 1997-98 that microfinance movement had really begun and has

been rapidly picking up since then. The growth rate of both the member of SHG linked to bank

and also the credit disbursed has quite impressive.

The SHGs in the State need cheaper micro finance for improving their productivity. As a pilot

scheme to give a thrust to SHGs, Sri Tarun Gogoi (Chief Minister, Assam).have provided for

Rs.10 Crore in the budget proposals for 2008-09 as an interest- free loan to the Assam Financial

Corporation [AFC] for micro financing SHGs at a subsidized rate of interest. More funds will be

made available for this purpose during the year if required.

It has been recognized that the poor people who are capable of coming out from poverty with

dignity and can improve their living standard when the right environment and opportunities exist.

Many MFIs has put emphasis on the improvement, empowerment of the women, who live in

absolute poverty and experience the constant hindrances to grow. Generally, in the region, the

small-scale firms based on agriculture, poultry and fisheries need to have their own land, which

few of them have. Most of the times, people who do not own land are deprived of getting loan

from a bank due to the lack of collaterals. In these cases, microfinance organizations help them

to spread out their business by offering them different kinds of small loans, which is a common

feature of microfinance institutions.

Major problem which the study highlights is the lack of Infrastructure in the region and lack of

trained personnel, most of the NGO’s are going through a transformation phase. As certain part

of Assam is situated in distant areas and a lot of communication problem are there it is creating a

major setback for MFI. Though many MFI’s have sound villages reach out due to local ground

level staff. Many are trying to join hands with government and simultaneously reach the

customer and trained the SHGs.

The MFI business model is not yet the full answer (and recent issues have highlighted the areas

to improve), but it definitely bears the seeds of low-cost banking required for inclusion.

REVIEW OF LITERATURE

There are about three billion people, half of the world’s population, living on the income of less

than two dollars a day. Among these poor communities, one child in five does not live to see his

or her fifth birthday. One study in 2006 showed that the ratio of the income between the 5%

richest and 5% poorest of the population is 74 to 1 as compared to the ratio in 1960, which was

30 to 1. To enhance international development, the United Nations Organization (UNO)

announced the millennium development goals, aimed to eradicate poverty by 2015. In this

regard, microfinance is the form of financial development that has its primary aim to alleviate the

poverty. Governments, donors and NGOs around the world responded enthusiastically with plans

and promised to work together towards the realization of these goals. In the recognition of

microfinance, the UNO celebrated the year 2005 as a year of micro-credit, as a result this

financing instrument is perceived worldwide as a very effective mean against hunger and

poverty, mainly in developing countries.

World is like a two side of a coin, where one side are the rich wealthy people with all the

financial facilities, on the other side are the underprivileged poor who are unaware of those

financial benefits. The level of a country’s poverty has long been linked with measures of its

economic development. Many underdeveloped countries of the world are still unaware of the

recent development in micro-finance. A country cannot be said developed until and unless the

poorer sections of the society play a vital role in the development process.

In Stuart Rutherford recent book The Poor and Their Money, he cites several types of needs:

Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding,

widowhood, old age.

Personal Emergencies: such as sickness, injury, unemployment, theft, harassment or

death.

Disasters: such as fires, floods, cyclones and man-made events like war or bulldozing of

dwellings.

Investment Opportunities: expanding a business, buying land or equipment, improving

housing, securing a job (which often requires paying a large bribe), etc.

Poor people find creative and often collaborative ways to meet these needs, primarily through

creating and exchanging different forms of non-cash value. Common substitutes for cash vary

from country to country but typically include livestock, grains, jewellery and precious metals.

Microfinance is a credit methodology, which employs effective collateral substitute for short-

term and working capital loans to micro-entrepreneurs. The level of a country’s poverty has long

been linked with measures of its economic development. Little consideration was given to the

social reorganization of the natural resources (e.g. empowerment vs. alienation of people,

sustainable use vs. depletion of the environment).

The economies with positive growth rate of Gross National Product (GNP) were measured by

their poverty mitigation. This emphasized on the achievement of wealth and technology as a path

for development and assumed that improved lives for all would be the natural consequence.

In his autobiography released in 2006 Muhammad Yunus, has taken the world and tried to turn it

on its head. Banker to the Poor takes us about the story Yunus entrance into the world of micro-

credit, wherein the poorest of the poor are given small loans without any collateral and with the

expectation that the loan will be repaid in full. From his first gut-reaction loan to a person clearly

in need, to a multi-national, billion dollar enterprise, Yunus has created an organization whose

goals are nearly completely opposite of any other financial institution. The most exciting part

about the book is the personal stories, the experiences of those whose lives have been changed

by the micro-credit model. It is amazing to realize what a difference $40 can make to a person

who earns pennies every day. The set-up of the bank itself was interesting, although sometimes

the economic discussions got thick and might turn some readers off. I like to feel more informed

about Bangladesh itself, since Yunus does take time to give us some of his personal background

and experiences in his home country.

While doing my research, it was found from some of the research paper, which sight more into

the informal evolution of Microfinance or lending procedure which was to be prevailing in the

region for a certain period, till date there is little bit trace of this kind of informal lending,

without any regulatory.

A survey on informal practices of microfinance was conducted in three districts of lower Assam-

Kamrup (rural), Nalbari and Baksha to gather information regarding informal practices that are

prevailing in these districts. In these parts of the state, Kabuliwala (1969) was the main source of

credit. After 1999, NGO- based and block based SHGs created a change in the scenario.

STATEMENT OF THE PROBLEM

This paper presents the interim findings of a state level impact assessment of microfinance in

Assam. The study aims to assess on a scale the outreach and development impact of MFI

programmes in relation to different product designs and delivery systems in various parts of

Assam.

The present scenario of MFI in Assam is not as satisfactory. Due to lack of a ground level

structure, better financial amenities, difficult geographical terrain and literacy among the users,

about the MFI’s. Being the gateway of northeast, the growth of the region is not satisfactory.

Assam comprises of twenty seven administrative districts, of which a part comprises of

International Border with Bangladesh. There is lots of SSI’s prevailing, but due to lack of

financial support the industries are facing a tough situation.

The paper tries to analyze the microfinance providers prevailing in Assam, the working models

and their reach in Assam, the unregulated MFI’s providers and their practice in Assam, the future

prospective of MFI’s in Assam.

SCOPE FOR THE STUDY

This research has been done in order to indicate the impact of Microfinance in economic and

social enhancement of the rural areas of Assam. It also highlights the development going on in

Assam through Microfinance. The scope of this section is broad and attempts to address soft as

well as hard issues involved in the development of composites. Therefore it addresses issues

such as design, methodologies, Govt and funding agencies support to MFIs, different product

and services of MFIs, the services offer for the rural development both in context to training and

financial services providence, lending methodologies for better reach – out. Empowerments and

self- employment of women were the other key factors of this study.

The concept that will be highly important in near future will be the technological innovation in

the Microfinance delivery , better the innovation in Microfinance delivery, better can be the

competitiveness of any organization.

OBJECTIVES OF THE STUDY

1. To identify the role of institutions, organizations and other bodies engaged with

microfinance activities in Assam.

2. To see whether microfinance help quantitatively in order to improve level of rural

population.

3. To check the Characteristics and criteria for formal and informal finance education in

order to accelerate the growth and delivery of micro-finance.

4. To identify the need of technological advancement to trigger the growth of MFIs in

Assam

5. To explore the growth and development and status of microfinance in Assam.

METHODOLOGY

Primary sources:-

A planned effort is made using structured questionnaire to interview the respondents. The

respondents are the Microfinance provider, who are interviewed, are chosen using Simple

random sampling method.

The survey is done through personal interviews with both MFIs, self help group/Ngo .In this

study respondent are interviewed personally so that the errors involved in gathering primary data

are minimized.

Secondary sources:-

The secondary sources used for collecting data are:-

1. Internal Sources:-

MFI Reports/Financial statements.

MFI Publications.

Government reports

Annual Annexure

2. External Sources:-

Information is gathered from Magazines & Journals like –ICFAI Journals, & Business Today.

Business dailies like –The Economic Times, The Business Line, etc

News Paper like – The Hindu, Assam Tribune & the Telegraph. Apart from this information was

also taken from internet.

The population chosen for the study, taking in to consideration the objective of the study is

defined as, Major Microfinance institutions/Ngo’s in Assam.The sample consist of 10

Microfinance Institutions had taken as sample from the Assam using Simple random sampling

method. Out of the MFI’s selected for the study, 3 MFI’s selected from Kamrup District and 7

MFI are from Cachar District.

Tools for Analysis:-

The data collected from various sources is carefully computed, classified, tabulated, analyzed

and interpreted. The technique used for analyzing would be with the help of graph, chart,

tabulation and sampling analysis to express and draw the inference from the findings.

Data collected from two districts of Assam

NAME OF THE

DISTRICT

LIST OF MFI’S/NGO’S

KAMRUP( METRO)

• ASSAM FINANCIAL CORPORATION

• ASOMI FINANCE PVT. LTD

• RGVN-CSP

CACHAR

• DESHBANDHU CLUB

• NORTH EASTERN DEVELOPMENT FINANCE

CORPORATION LTD.

• BANDHAN FINANCIAL SERVICES PVT. LTD

• ASSAM GRAMIN VIKASH BANK

• RURAL EDUCATION DEVELOPMENT INSTITUTE

• FOUNDATION FOR DEVELOPMENT OF NORTH EAST

TERRITORY

• UNNACO FINANCIAL SERVICES PVT LTD

LIMITATIONS OF THE STUDY

There are number of limitations in this study. Firstly, the respondents were limited (10

respondents or samples) in terms of size and composition. Secondly, the data collection was

restricted only within the Cachar and Kamrup district of Assam, which may fail to represent the

actual scenario of the whole State. While interviewing the people, some problems faced were in

explaining the questions as most of the people, who are involved in microfinance program, are

Field Officers, who are not aware of all the things about microfinance. Therefore, it was too

difficult to make them understand some of the technical terms: like Funding agencies, lending

methodologies etc. Another problem faced while collecting the data was that, the MFIs are

reluctant to share information. Moreover, theories were other problem when I wrote the

theoretical framework. Because, no established theories were particularly defined in

microfinance field yet. Grameen model has been used as an ideal theory for microfinance.

Besides this, some other related things to microfinance like, eligibility criteria, problem facing

institutions, mobilizations, solidarity, etc. were also used in theoretical framework. Finally, the

accuracy of the analysis heavily relied on the data provided by the MFI’s involved in

microfinance program in Assam. The study is taken only for the Microfinance institutions like

Nedfi and AFC’s; whereas Microfinance Beneficiaries are not taken into account.

MAJOR MFIs AND THEIR ROLE IN ASSAM

Source: “Microfinance in Assam”- an overview’, presentation by Dr. Debabrata das, Tezpur

University in the MRAP researchers meet in CMF, Chennai.

Since its Inception in the region in 1997-98 MFI’s has become an integral part in helping the

people in meeting their daily needs and at the same time building their assets. There are many

MFIs working in Assam and in the other parts of world, which have differences in their

organizational structure and working methodology, but they all work on the common theory,

philosophy and goal.

It has been stated in The World Bank Economic Review that microfinance has not only helped

people to develop in their material capital but also in the human capital, by better access to health

care and education system, and general awareness among the people about their rights and duties

towards society. One of the most important features has been the reduction of gender biased in

the society. MFIs have helped women acquire assets of their own, educated them and thus gave

them the right and power in the household decision making.

The most of the microfinance institutions and agencies all over the world focuses on women in

developing countries. In Assam also the scenario is almost same, Observations and experience

shows that women are a small credit risk, repaying their loans and tend more often to benefit the

whole family. In another aspect it´s also seeing as a method, giving the women more status in a

socioeconomic way and changing the current conservative relationship between gender and class

when women are able to provide income to the household. Women are in most cases responsible

for children, and in poor conditions it results in physical and social underdevelopment of their

children. 1.2 billion People are living on less than a dollar a day. There are many reasons why

women have become the primary target of microfinance services. A recent World Bank report

confirms that societies that discriminate on the basis of gender pay the cost of greater poverty,

slower economic growth, weaker governance, and a lower living standard for all people. At a

macro level, it is because 70 percent of the world’s poor are women. Women have a higher

unemployment rate than men in virtually every country and make up the majority of the informal

sector of most economies. They constitute the bulk of those who need microfinance services.

Giving women access to microcredit loans therefore generates a multiplier effect that increases

the impact of a microfinance institution’s activities, benefiting multiple generations.

The existence of informal MFI’s in Assam is also high; they provide savings services to the

public. Surprisingly, the number of such institution is reportedly large and significant savings are

mobilized by them without any regulatory oversight. When there is a shortage of regulated

institutions to mobilize savings, other organizations find a niche for operations and occupy the

space. If the geographies are remote, impeding easy access for the regulatory, then enforcement

of laws that prohibit deposit taking activities becomes difficult. Preventing such informal finance

activities when a viable alternative has not been put in place is another aspect of the problem.

The most active savings generation and credit providers in these areas are private savings and

credit societies. These saving and credit societies are run by local people. These saving and

credit societies are run by local people. These societies perform basic functions of the banks.

Most of these societies are informal and do not have a formal registration under any law. Five or

Six local persons pool their funds and offer credit to the people at an interest rate ranging from 3

percent to 5 percent per month. They also collect deposits from members daily or weekly,

offering interest of 12 % to 24% per annum. However, there are few societies which are under

some NGOs registered as society. These societies function under a name and brand with their

logo and offices in different places. They carry the pretence of a formal MFI with their

signboards and other paraphernalia. They issue record books of transactions similar to pass

books to the members.

MFIS FUND PROVIDERS

DESHABANDHU CLUB SIDBI

ASOMI LOANS FROM NATIONALISED BANKS AND

LINCOFIN BELGIUM

NEDFI IDBI, ICICI,IFCI, SIDBI, INSURANCE COMPANIES-

LIC,GI, UTI BANK AND SBI

UNNACO NEDFI, BANK OF BARODA

ASSAM FINANCIAL

CORPORATION

GOVERNMENT OF ASSAM, SIDBI, IDBI

RGVN_CSP TATA SOCIAL WELFARE TRUST, FWWB,

OPPORTUNITY INTERNATIONAL, IDBI, NABARD,

SIDBI, NEDFI, HDFC AND ICICI

DONET NIL

RURAL EDUCATION

INSTITUTE

NIL

BANDHAN SIDBI, ALLAHABAD BANK, UBI , SBI

ASSAM GRAMIN

VIKASH BANK

UBI, GOVERNMENT OF ASSAM

FUND PROVIDERS OF THE MFI

The Government is flowing fund in the region for the MFIs, through its different mode like

NABARD, SIDBI, and AFC. Some of the funding agencies have also taken initiative in the

development process, but till date no International donor or Religious organization has taken step

forward for providing financial assistance, like the scenario prevailing in others parts of India.

Two of the institutions which didn’t receive any assistance are of very small in size, and they are

presently funding themselves on their own.

Most of the Respondents provide two training simultaneously i.e. either Business Development

support and financial literacy or gender and social issues and health and nutrition.

Though Microfinance is not very old in Assam, the development in the process of expansion,

providing financial services, reaching out to distant villages and helping SHGs in Capacity

Building is immensely appreciated. Majority of the respondents focus on financial literacy, in the

region .Financial literacy among the Shgs is done in the region with the help of NABARD, UBI,

and M, S, M, E. Deshabandhu Club being an NGO mainly provide training in Health and

Nutrition. MFIs also provide awareness program by the respective block, through farmers club

with the help of NABARD.

Problems Respondent

Security/Peace and Order Situation 1

Travel time to clients 0

Lack of business opportunities 1

Lack of basic infrastructure 5

Inadequate information about clients 2

Lack of trained personnel 5

Inadequate financial resources 3

Till date Microfinance is not very popular in the region, due to lack of proper marketing in the

region, and illiteracy among the beneficiary. Lack of knowledge regarding microfinance among

the personnel is also one of the reasons. Lack of financial resources for large medium and small

MFI in the region is also affecting, mainly small Mfi/Ngo are facing lot of problem due to strict

govt measures. Terrorist’s problem is also one of the reasons; United National Liberation Front

(UNLF) has been using microfinance schemes like women's cooperatives and has already

covered 2500 beneficiaries in Manipur and Assam. Though unreported, this has been going on

for the last four years and has regained much of their eroded mass base by a unique grassroots

experiment, called Phunga Marup, a microfinance scheme aimed at small entrepreneurs which

threatens to render conventional counter insurgency operations futile.

This type of unsocial activities are arising due to the lack in the system, as they are using the tool

of “Poverty Alleviation Programme” in a more sophisticated way and simultaneously building

their own base in the region. One of the reason for these cause, is the village people are not so

educated and poor, they are not so bother regarding the organization, they are more interested

towards the lending money, moreover there is no such other NGOs or MFIs in that area who

offers at a lucrative price.

FINANCIAL PORTFOLIO OF THE MFIs

MFIS INTEREST RATE OF LOAN TENURE FOR LOAN

DESHABANDHU CLUB 12% 1 year

ASOMI 15% 1 year

NEDFI PLR + 1-3% 5 year

UNNACO 15% 46 weeks

ASSAM FINANCIAL

CORPORATION

6% Reducing p.a. 18 months

RGVN_CSP 7% TO 10% 50 weeks

DONET 3% 36 months

RURAL EDUCATION

INSTITUTE

12% 10months

BANDHAN 18.97% 44 weeks

ASSAM GRAMIN VIKASH

BANK

7% KCC LOAN-12% 1-10year

Financial Portfolio of the MFIs

Out of all the respondents, equal no of respondents provides loan less Than Rs.15000-Rs.24000

and more than Rs.25000. The Structure of Microfinance in the region has also got boost up due

to entry of National MFIs like Bandhan, Anjali Microfinance, which have a sound Lending

programme and more financially stable. 3 MFIs in the region provides more than Rs.50 crore

depending upon the project viability.

FINDINGS

1) Though Microfinance is prevalent in India for a long period, but in Assam it is in initial growth

phase. Microfinance in Assam is witnessing a faster growth due to the entry of many national

level MFIs like Bandhan, Anjali Microfinance.

2) Almost maximum no of clients of MFIs are women, who hold basic primary education. Almost

all of them have started their business by lending loans from MFI. Due to this self reliability

most of the women has bought a change in their social and financial situation of their family.

3) Most of the small MFIs provide training not only in financial literacy, but also by teaching them

weaving, preparing handloom crafts etc. It is benefiting, by creating the employment opportunity

for the poor, by teaching the tool for surviving. If one can help, a poor person to stand on his

own that cannot only bring about a revolution in their lives but also in the society.

4) Most of the beneficiary feels that the procedure of obtaining loans from MFIs is easier than

conventional banking as no collateral security is needed to take the loan from MFIs, which have

made it possible for everyone to join the formal monetary process unlike the conventional

banking which requires collateral security. Moreover it is not a complex system to take loan from

MFIs.

5) During the study it was seen regarding the savings of the client, which is increasing day by day

due to the motivation for becoming self reliable. As the saving or income is increasing, it will

have a positive impact upon the rural development of Assam, it is also benefiting the youth by

starting to build their own business.

6) While the MFIs lend money to the SHGs or JLGs, they also keep a strict vigil upon the activities

of the borrower, which pressurizes the borrowers for not indulging in antisocial activities.

7) Throughout the study it was noticed, regarding the support that the Government is providing by

flowing fund in the region for the MFIs, through its different agencies like NABARD, SIDBI,

and AFC.

8) Majority of the MFIs focus on financial literacy, which is fore most important thing in financial

inclusion of India .Financial literacy among the SHGs is done in the region with the help of

NABARD, UBI, and M, S, M, E.

9) The main problem MFIs are facing in the region is the lack of basic infrastructure and lack of

trained personnel.

10) Almost all the MFIs prevailing in the region follow Self Help Group Lending model.

11) In the survey, it was seen that most of the savings of SHGs with bank is with RRBs.

12) NABARD has chosen 13 priority states and among which Assam holds a place, where priority is

assigned to awareness in building and for identification of NGOs and other partners in the

region. NABARD is also providing training to the NGOs, SHGs and government agencies for

better effectiveness in the field of Microfinance.

13) The eligibility criterion that most of the MFIs use for screening their clients is to verify the

activities of the group, after the reports of the coordinator or Field officer. Some small MFIs at

first provide training regarding handlooms practices then they judge the active workers and

provide finance depending upon the needs. Another thing they judge is the community based

organization/traditional organization willing to take up development activities. Almost all the

organization prefer Women groups, due to better credibility, some other things are:

a. Registration of NGO should be more than 3 years

b. Age 18-55 years for married Women

c. Age 45-55 years for unmarried women

d. Domicile in same area

e. Not involved in anti-social activities

f. Some social status

g. Should be Indian

14) During the secondary data collection, it came to the notice regarding the influence of informal

Microfinance, in the region, though they don’t have any legal status, and also they possess high

interest rates.

15) The interest rates of formal MFIs range between 7%-20%per annum.

16) Though MFIs are providing financial literacy, but they lack in the social objective of

Microfinance.

17) Demand for Micro-credit in the region is high, but in accordance the gap between

demand and supply is seen in the area.

18) During the study, no technological innovation was found in microfinance delivery. But, due to

launch of different national Level MFIs in the region, it can bring certain changes in the whole

scenario.

CONCLUSION

“Maybe our great-grandchildren will go to museums to see what poverty was like”

Muhammad Yunus

The growth story of Microfinance in Assam has just started, till date it has made a lot of impact

improving the living standard of the family not only in economic term but also in social term.

Amazingly a idea which is generated and become popular in a neighboring country, is also

gripping up the small state of Assam through its objective of rural development, employment

generation, poverty eradication, better health facilities etc. A lot of Govt. support is there in

Assam, but the main part is the implementation of those supports. Though the government

regulation regarding MFIs in India has become more strict and vigil, it can be taken as a positive

impact for the overall rural development in Assam .From this study and research, To conclude, it

has been seen that there is a noticeable and positive impact of microfinance activities on the

living standards, empowerment and employment generation among the poor people in Assam.

SUGGESTIONS

1) The recruitment of the field officer for MFIs/NGOs must be from the local area itself, so that

better reach out can be achieved, also the selection must be based on merit, and proper training

must be given, based upon the ground level banking knowledge requirements.

2) Though the Microfinance in Assam is still in its growth phase, but lack of infrastructure is

creating obstacle, the best way to get rid of these is creating more ground for microfinance by

educating the SHGs and motivating them, by doing proper marketing activities, market research

and marketing audit in the village. Another important suggestion will be merging of small

informal MFIs with the formal MFIs, which will provide benefit to all the stakeholder and the

reach of MFIs will be larger.

3) MFIs should give full information about interest rate, other hidden costs charged, and any

condition applied, to their clients.

4) Better environment must be created for MFIs to work as agents of commercial banks, by making

commission rate negotiable and permitting the MFIs to loan back the savings mobilized by them on

agreed terms.

5) The credit delivery at the door step of the client must be there, at a reasonable cost to the clients,

visits to branches impose extra costs on the borrowers in terms of transportation cost and time

spent.

6) More guidance and counseling regarding, the idea of income generation activities training for

skill and entrepreneurial development, etc. for which suitable grant assistance from Government or

donors is necessary.

7) The clients of MFIs are mostly those people who survive upon seasonal or periodic income,

therefore MFI must insist on two different schemes i.e. one interest rate during usual time period

and other during the seasonal time, this is for those who prefer this scheme, this may increase

better credit management and can also reduce burden upon the beneficiaries.

8) As the competition is growing day by day in the region the MFIs must look for ways to lower the

operational costs via efficiencies, technological innovations, etc. Effective monitoring and

management will be a successful tool for lowering the interest rate to sustain in the industry. In

mere future, interest rate will be a real challenge for the MFIs for their sustainability.

9) MFIs mostly in the region face difficulty in differentiating their products from their competitors,

for that purpose the MFIs must bring innovative features or differentiated features like scheme

related to housing insurance, EDP trainings, for nonfarm loan customer. MFIs must also make

packed with rural health mission and open a centre of it along with their branches, they can also

give suggestion regarding like soil testing, pesticides, yield seeds, fertilizers, and also regarding

their expertise etc. MFIs can also bring different product for different region dependent upon its

necessity in that area.

10) MFIs must also take customer feedback at regular basis and develop products upon the client’s

requirement.

11) The growth of mobile technology in the region is enormous, almost every member of SHGs have

it, therefore after every meeting of SHGs, the member of SHGs can sent a text message

regarding the attendance, collection and proceedings of meeting, which will save the client and

the field officer time. They can also bring payments, remittances and other related services

through mobile phone technology which can help in microfinance delivery in the region.

12) MFIs need to concentrate more on opening new branches and creating proper channel for

delivery of Microfinance.

SCOPE FOR FURTHER STUDY

The current study is based on small sample size taken from only few villages of Kamrup and

Cachar district of Assam. Therefore, the results cannot be generalized to other district of Assam

especially in the analytical terms. Further research done on a bigger scale with large sample size

could shed light on how microfinance activities affect the average living standard of poor people,

and also on the rural development of Assam, analytically.

The current study did not consider the reasons of motivation to join the Microfinance program.

Another area that has not been investigated is the difficulties that the borrowers face to repay the

loan. These areas deserve to be studied by future researchers in the field.

Further research could be conducted in this area and for finding the reasons for the gap between

demand and supply in terms of Microfinance services.

BOOKS:

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Poverty”, New York: Public Affairs

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Publisher, India

Harper, M. (2003), “Microfinance – Evolution, Achievements and Challenges”, ITDG

Publishing, UK, p.11

Stuart Rutherford (2009), The Poor and Their Money, Practical Action Publishing, UK,

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REPORTS AND GAZETTES

Annual Report (2010), AFC

Annual Report (2010), NABARD

Annual Report (2009), Assam Gramin Vikash Bank

Annual Report (2010), Bandhan

Annual Report (2009), RGVN-CSP

Directorate of Economics & Statistics, Government of Assam

The World Bank Economic Review, Vol. 19, No. 2

Journal of Microfinance, Vol. 7, No. 1, p. 22

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