UPSC Mains General Studies Paper – 2 Mains 2020Development processes and the development industry —the role of NGOs, SHGs, various groups and associations, donors, charities, institutional and other stakeholders
Structure of the Question
- In Introduction,
- Try to discuss Microfinance in brief.
- In Body,
- Micro-Finance as an anti-poverty vaccine.
- Discuss SHGs Twin Objectives – poverty alleviation and women empowerment.
- In Conclusion,
- Try to suggest how the goal of financial inclusion can be realized by Microfinance
Micro-Finance is the practice of providing the poor with credit, savings and insurance facilities to set up or to expand Income Generating Activities relating to agriculture and its allied activities and non-farm sector, and thereby reducing poverty and improving the standard of living. The basic feature of microfinance is that the loans are given without any security.
- Microloans: These loans are significant as these are provided to borrowers with no collateral.
- Microsavings: These accounts allow entrepreneurs to operate savings accounts with no minimum balance. These help the users to instill financial discipline and develop an interest in saving for the future.
- Microinsurance: It is a type of coverage provided to borrowers of microloans. These insurance plans have lower premiums than traditional insurance policies. It addresses all kinds of risks that people of low income groups or poor people face globally.
Micro-Finance: An Anti-poverty Vaccine
- Economic growth: Microfinance services contribute to the improvement of resource allocation, promotion of markets, and adoption of better technology; thus, microfinance helps to promote economic growth and development.
- Income security: It assists the communities of the economically excluded to achieve a greater level of asset creation and income security at the household and community level.
- Small entrepreneurs: It aims to dispense access to the capital to small entrepreneurs.
- Alleviating Women’s Status in Society: They provide a significant contribution to gender equality and women’s empowerment through their contribution to women’s ability to earn an income and in turn initiate a wave of change in economic empowerment, and wider social and political empowerment.
- Reach for Society Building: Aimed at pro-poor development and civil society strengthening, Micro-finance programmes not only give women and men access to savings and credit, but reach millions of people worldwide bringing them together regularly in organized groups.
- Goal of Self- Reliance: Micro finance is a tool to overcome exploitation, create confidence for economic self-reliance of the rural poor, particularly among rural women. Rapid progress in SHG formation has now turned into an empowerment movement among women across the country.
Self-Help Groups (SHGs) and Micro-Finance
SHGs are informal associations of people who choose to come together to find ways to improve their living conditions. In the last few decades, SHGs have emerged as the most effective mechanism for delivery of microfinance services to the poor in general and women in particular. The Genesis of SHG in India can be traced to the formation of the Self-Employed Women’s Association (SEWA) in 1972.
These groups can act as microfinance institutions and help in alleviating the conditions of the rural poor for the following reasons:
- People will have faith in and among themselves.
- Rates of interest can be fixed by considering the State of the individual getting finance.
- Repayment of loans becomes comparatively easier.
- Skill development program taken up by SHGs improves employability of members involved.
- SHGs work on reducing rural poverty by lifting people from below the poverty line and generating assets for them. There is positive correlation between SHGs and poverty can be inferred from the fact that southern states with high numbers of SHGs (71%) have an average poverty rate at 9% as against the nation’s average of 21%.
SHGs provide for equality of opportunity for women in economic activities. It is evident that this has resulted in the social upliftment of women’s status. They are instrumental in building Social Capital among the poor, especially women. Some of the initiatives in this direction are as follows:
- Kudumbashree Mission in Kerala: Women under Kudumbashree, are organized into Neighborhood Groups (NHGs). Thrift and Credit Societies are set up at NHG level to encourage the poor to save and to avail easy credits.
- SHG-Bank Linkage Programme (SBLP) was launched in 1992 by NABARD. It envisaged an amalgamation of the formal financial sector and informal sector. Because of this, the formal financial institutions in India have entered microfinance in a massive way.
- SHG development through NABARD: Under the SHG-Bank linkage programme, NABARD provides refinance and promotional support to Banks for credit disbursement. A full-fledged project enabling SHGs to open bank accounts based on a simple inter-se agreement, was launched by NABARD in 1992 involving a partnership among SHGs, banks and NGOs.
- Rashtriya Mahila Kosh: It was set up with the intention to facilitate credit support to poor women for their socio-economic upliftment by providing loans in a quasi-formal credit delivery mechanism. The Kosh lends with a unique credit delivery model “RMK – NGO-SHG Beneficiaries”.
- SEWA: The Self Employed Women’s Association (SEWA) is a membership-based organization created in 1972 combining labour, women, and cooperative movements, aimed at organizing self-employed women in the informal economy and assisting their collective struggle for social justice, equality, and fair treatment.
- Myrada: MYRADA is a non-government organization started in 1968 working in backward and drought-prone areas. The organization was registered as “Mysore Resettlement and Development Agency” under the Mysore Societies Registration Act 1960 in the year 1968.
For equitable and sustainable development in rural India, financial inclusion supported by MFIs plays an important role. It strengthens India’s ability to post fast economic growth with a focus on reducing poverty and empowering women.
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