Friday, October 20, 2017

Although Microfinance in principle are helpful credit plus to poor women, at the same time the interest rates charged by microfinance institutes including Grameen Bank are high compared to that of traditional banks.

Aracknut plates production by SHG-SEVAI
Micro finance refers to supply of loans, savings and other financial services primarily to the financially weaker section of the society. These services are small “micro” – because a person who does not have a lot of money most likely will not need a loan of several thousand rupees. However, a loan of a few hundred rupees may make a huge difference in their lives. It gives them the ability to purchase livestock for a small farm, a sewing machine to help make accessories and clothes, or supplies for a small store. A micro
Mat weaving by SHG Member
finance
 institution (MFI) is an organization that provides micro-finance services to poor. An MFI can operate as a nonprofit such as a non-government organization (NGO), credit cooperative, non-bank financial institution (NBFI. Many MFIs offer services beyond loans and savings, including education on business and financial issues and social services focused on health and children. Micro-finance
-MFI targets the poorest of the poor, with a particular emphasis on women. Women traditionally had less access to financial alternatives of ordinary credit lines and incomes. Although Microfinance in principle are helpful to poor women, the same time the interest rates charged by micro-finance institutes including Grameen Bank are high compared to that of traditional banks..Microfinance has diversified the types of loans it makes. It supports loans to support the enterprises of SHG members’ immediate relatives. It has found that seasonal agricultural loans and lease-to-own agreements for equipment and livestock help the poor establish better agriculture. The MFI has set a goal: to make each of its
Betel-vine leave cultivation
members free of poverty, as defined by
Microfinance benchmarks such as having adequate food and access to clean water and latrines.
 Micro-finance is all about providing small value loans and other financial services to the weaker section of the society in order to improve their standard of living. The strengths such as experience, expertise, multiple and low cost funding, sound financial position help. It is also argued that in the rush to scale up micro-finance offerings, many newcomers to the field might actually be doing more harm than good. They points out a number of flaws with the current approach to micro-finance, cautioning that there is little historical evidence for the developmental role of credit to the poor; that there has been little rigorous evaluation of the overall benefits of micro-finance to a person’s quality of life; and that the poorest of the poor are by definition the ones who “need” credit the most, but can do the least with it. Now the question still arises, why still such high interest rates? That is because of high cost of operations which the MFI’s have to take on.
There is confusion about the difference between Money Lenders and Micro-Finance institutions. While MFI’s are money lenders, money lenders are not
Organic farming Panchakavya production
MFI’s. MFI’s are focused on lending and managing funds for productive activities, also they help form support groups for the borrower to be able not only to participate in a group towards something productive, but also this way the group ensures that the energies created by such finance are not dissipated in non-productive activities.
A comparison between microcredit loans and traditional loans reveals several differences which affect interest rate levels. These differences are significant: the smaller size of the loans; the operational follow up required on the borrower and the fact that micro-credit institutions have to pay to procure their own capital. They therefore represent two distinct economic models. To be sustainable, micro-finance institutions must not only cover their costs, but also generate a reasonable profit. Micro-finance includes basic financial services - including small loans, savings accounts, fund transfers and insurance. This enables them to earn an income so they can afford food, clean water, proper shelter and an education for their children. The women SHGs follow Discipline, Unity, Courage and Hard work – in all walks of their lives, Prosperity they bring to their families, they will not live in dilapidated houses, they shall repair their houses and work towards constructing new houses at the earliest, they grow vegetables all the year round and eat plenty of them and sell the surplus. During the planting
Successful women Federation etreprenurs 
seasons, the SHGs shall plant as many seedlings as possible; they will plan to keep their families small and they will reduce their expenditures but they will look after their health. The members of SHG also take pledge to educate their
Gem polishing unit by SHG woman
children and ensure that they can earn to pay for their education and they will always keep their children and the environment clean and they will build and use house hold toilets and use boiled water for drinking and cooking. The SHG members shall not take any dowry at their sons' weddings; will not give any dowry at their daughters' weddings. The SHG members shall not inflict any injustice on anyone; neither will they allow anyone to do so. The members collectively undertake bigger investments for higher incomes and they always be ready to help each other. If SHG members come to know of any breach of discipline in any village, they will all go there and help restore discipline and they take part in all social activities collectively.-Kris


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