Microfinance schemes in India and their implications

      Micro-finance is the provision of banking services like accepting deposits, loans, payment services, money transfers and insurance products to the poor, low income earning sectors for their micro and small enterprises. To enable this banks and other such institutions have introduced various schemes from time to time. Micro finance through self help groups (SHG’s) is publicized as an important link to enable delivery of these services to the depth of the people. SHG’s are considered as such a vital link now that even Reserve Bank of India (RBI) and NABARD provide help to them by promoting their services or through means of re-finance or by initiating various policies and systems.

      The key components of micro finance are:

1. Micro finance has managed to penetrate into approximately 75 million households.

2. The demand for credit in the poor countries is estimated to be around Rs. 60,000 crores.

3. Against the demand a cumulative disbursement is about only Rs. 5,000 crores under all microfinance schemes.

4. Out the above disbursements the targeted audience i.e. the rural poor have only around 5% access to availing micro finance schemes.

      The various schemes provided by various bodies to provide the facilities of micro finance in India are:

Swarnajayanti Gram Swarozgar Yojna (SGSY):

SGSY program as the name Swa-rozgar i.e. self employment suggests is for the poor which has been an important component of the anti-poverty program. This program was an initiative from the government for the rural population started with effect from 1.04.1999.  Its objective is to bring the assisted families above the poverty line by providing them income generating assets. A total of 6260 SHG’S have been formed in the period ranging from 1999-2009.

Kisan Credit Card Scheme (KCC):

The instrument of KCC is one of the key products developed to improve the farmer’s accessibility to bank credit. Model scheme of KCC was formulated by NABARD in 1998-99 is being implemented in all states and union territories. About 1.94 crore kisan credit cards have been issued up to 31^st October 2001.

Subsidy Scheme:

 Subsidy scheme is basically to provide loans for attractive business plans on a subsidized rate. Depending upon the amount of loan subsidy for the same is provided. The basic subsidy provided as per this scheme would be 50% of the unit cost and maximum amount of Rs. 5,000 would be released to the beneficiaries. For loans to start up a business, to provide a service or start-up an industry the unit cost up to Rs. 25,000 a subsidy of maximum Rs. 5000 will be released.  While for unit cost above Rs. 25,000 to Rs. 1.00 lakh subsidy and margin money will be released.  For allocation of these subsidies, the district manager of the district will invite for application through advertisements in the newspaper. After which the applications will be analysed and then the banks providing these subsides will receive the applications for sanctioning of the loans for the margin money. The concerned bank will verify the feasibility and viability of the project and send the proposal for release of Margin money loan to the District office. The Committee will approve the list of beneficiaries and forward the proceedings to the head office for release of Margin Money loan and Subsidy to the Bank.

 

Land Purchase Scheme (New Scheme):

Land purchase scheme which is a new scheme is one in which the corporation purchases the agricultural land to give it to the poor landless farmers in the rural areas. The beneficiary of this scheme will receive either 2 acres of Dry Land or 1 acre of wet land. The cost of each acre of land would be around Rs. 30,000 crore out of which the beneficiary farmer would have to pay on 50% of the amount which is treated as loan at the rate of interest of 7% p.a. with a period of 4 years. The other 50% cost is treated as a subsidy and the amount is paid by the corporation. The Committee will select the beneficiary based on the proposals they receive.

These were some of the most significant schemes provided by the SHG’s, NABARD, banks or other institutions which have helped the poor to have access to credit for their development.

Akanksha Chaturvedi