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Micro finance--a tool for elevation of social entrepreneurship through women empowerment.


Entrepreneurship as a distinct factor of production contributes to the economic development of an economy. The wide range of significant contributions that entrepreneurship makes to the economic development include promotion of capital formation, creation of immediate large-scale employment, promotion of balanced regional development, effective mobilization of capital and skill, induction of backward and forward linkages and the like. The overall role of entrepreneurship in economic development of an economy is put as "an economy is the effect for which entrepreneurship is the cause." India being one of the largest countries though bestowed with adequate natural resources and human potentials, its development is lopsided. The twin causes, that is, wide inequality between urban and rural on one hand and under utilization of human resources on another hand, attributes to such imbalanced economic development. These have made the lives of Indian citizens, humanly impossible, as they have to cater to day-to-day needs of the family that are essential for their survival. The central theme of the Millennium Development Goals is the reduction of poverty in all its forms. These goals emphasize human development indicators, especially those relating to women and children, to enable people to live a life of dignity. India is described as an over-banked but underserviced economy. India has commercial banks in the Public Sector and the Private Sector, Regional Rural Banks and a large number of Co-operative Banks all catering to the different needs of the people. Despite this, many of the people remain outside the purview of the banking system.

Financial exclusion becomes more concern in the community when it applies to lower income consumers and/or that in financial hardship. There is a large overlap between poverty and permanent financial exclusion. Both poverty and financial exclusion result in a reduction of choices which affects social interaction and leads to reduced participation in society. Financial inclusion can also be defined as the ability of individuals to access appropriate financial services. The barriers to access the formal banking system have been identified as related to culture, education (especially financial literacy), gender, income and assets, proof of identity, remoteness of residence and so on. Efforts are being made by the authorities- especially banking regulators to improve access to affordable financial services through financial education, leveraging technology and generating awareness. Micro finance as a strategy involves the provision of a broad range of financial services, such as loans, deposits, payment services, remittances, pension and insurance to poor and low-income households. It aims at providing affordable financial services namely, access to payments/ remittance facilities, savings, loans and insurance services to the un-banked, social and economic inclusion of un-banked/counseling and creating opportunities for the poor by offering them choices and encouraging Self Esteem.

Micro finance through the self help groups has a lot of role to play in the social entrepreneurship as well as women empowerment. Economically poor individual gains strength as part of a group. Besides, financing through SHGs reduces transaction costs for both lenders and borrowers. While lenders have to handle only a single SHG account instead of a large number of small-sized individual accounts, borrowers as a part of a SHG cut down expenses on travel (to and from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans. A Non-Governmental Organization (NGO) is a voluntary organization established to undertake social intermediation like organising SHGs of micro entrepreneurs and entrusting them to banks for credit linkage of financial intermediation like borrowing bulk funds from banks for on-lending to SHGs. A study on Indonesia (Drioadisuryo and Cloud, 1999) suggests that when agencies, Government and nonGovernment, in a developing country make credit available to low income women, they can reduce the costs of delivery, greatly increase repayment rates and substantially improve the well-being of poor families. Hiatt and Woodworth (2006), in their study on Central America found that microfinance clients' socio- economic levels had increased due to their continued participation. Micro credit appears to improve the lives of those who are poor by increasing their buying and investing capability, this lifting them onto a higher economic plane. Accordingly, these small loans seem to positively affect poverty by creating entrepreneurship and greater self-reliance among the poor. SHGs now constitute the gross roots level institutions developed for social/economic and financial intermediation with a focus on the poor. The SBLP is "overwhelmingly based on the principle of financial services being related to the cash flows of the low-income client groups and thus aim to facilitate relatively frequent and very small or micro-loan and saving transactions"(Sinha, 2003). In the financial year 2007-08, Microfinance in India through its two major channels- Self-Help Group Bank Linkage Programme (SBLP) and MFIs served over 33 million Indians, up by 9 million over the previous year. 4 out of 5 microfinance clients in India are women. As per data available on 31st March 2008, the outstanding micro-credit portfolio on India Microfinance was about Rs.22, 000 Crore. 75% are accounted for by SBLP, 20% by large MFIs and 5% by medium and small MFIs. SBLP reports that over Rs.3, 500 Crore savings of SHG members in the year 2006-07. MFIs are prohibited from accepting savings; however one third of the clients are served under the SHG model and thus encouraged to save among them and/or open savings accounts with banks. The Table 1 shows the total number of SHGs financed by the banks in India. The successful Models of financing for SHG's which are being used world wide include:

Model I: An Intermediate Model that works on banking principles with focus on both savings and credit activities and where banking services are provided to the clients either directly or through SHGs.

Model II: A Wholesale banking Model, where the clients comprises of NGOs, Micro Finance Institutions (MFIs) and SHG Federations. This Model involves a unique package of providing both loans and capacity building support to its partners.

Model III: An Individual Banking-based Model that has its clients as individuals or joint liability groups. While programme management and client appraisal in this Model may be a challenge, it is best suited to lending to enterprises.

Keeping these validated models for delivery of credit to the poor and the unorganized sector in view, Reserve Bank of India ( is moving towards a systems perspective for providing effective policy support not only because a number of different institutions, Viz, banks, MFIs, NGOs and SHGs are involved, but also because these institutions have very different institutional goals. With this in view, a series of initiatives is being planned for putting in place a more vibrant microfinance dispensation environment in the country where complementary and competitive models of microfinance delivery would be encouraged to co-exist. Of these models under the Self-Help Group Bank Linkage Programme (SBLP), the Model II Viz, SHGs promoted by NGOs/ Government agencies and financed by banks has emerged as the most dominant model in case of India. The Table 2 shows the model-wise cumulative linkage position of SHGs in India in recent years.

The rural women have heavy work load with dual responsibility for both farm and household activities. Taking the economy as a whole, women perform two-thirds of the work but earn only one tenth of the income. If the goal of the economic development includes improved standards of living, removal of poverty, access to dignified employment and reduction in inequality, through proper utilisation of available resources, then it is quite natural to start with women. Women are the leaders, bankers, savers and also tiny depositors. Women have built up social networks and facilitate the creation of social capital. On this basis empowering women folk become inevitable. Empowering women begins only a stage when they become economically independent. To make them economically independent, it is essential that they should be employed either by seeking employment or generating their own income. And hence, initiating self-employment has become a necessity rather than an option to focus on balanced economic development, which has given birth to the formulation of self-help groups for emancipating rural women.

Self-help groups are usually informal groups whose members have a common perception of need and importance towards collective action. These groups promote savings among members and use the pooled resources for multi dimensional development. The number of members in SHGs is normally ranges from 10 to 20, it is expected that within the group, there should be true democratic culture in which all the members must participate actively in the decision making process. Becoming a member in SHG ensures women to become socially and politically empowered. The concept of SHG generally rejuvenate the rural women as it helps in breaking the vicious circle of poverty among women, thereby to become economically viable. The study has been conducted keeping in mind the role of micro finance in women SHG's. The specific objectives of the study include:

* To get an insight about conceptual / functional framework of micro finance and operational model of Self Help Groups.

* To study the impact of micro finance in empowering the socio-economic status of members of SHGs resulting in development of social entrepreneurship.

Research Methodology

This study ventures to understand and assess the role of SHGs in Peravurani taluk situated in Thanjavur District which is covered by agricultural occupation with both urban and rural areas. This study covers 10 villages with a sample size of 174 SHG members. The villages are Avanam, Paingal, Sanakarai, Kuruvikkarampai, Peravurani, Pinnavasal, Ammaiyandi, Veeraragapuram, Panchanathipuram and Vathalaikkadu. Survey method is followed to collect the primary data by administering an interview schedule. The primary data has been collected by way of administering an interview schedule in the villages which has already been mentioned in person. Twenty interview schedules have been administered to each village by meeting the SHG members who are accessing the SHG for receiving the service. Out of 200 interview schedules, 26 are found incomplete and 174 are fully complete with 87% of response rate. The analysis is based on the opinion collected from 174 SHG members.

Statistical Tools

Arithmetic mean is calculated to study the average age and average number of members in groups and the deviation from the mean is studied with the help of Standard deviation. Percentage analysis is also used for studying the profile of the members, source of information and duration of SHGs and venture and income of the members. ANOVA Single factor has been used to study the impact of demographic variables on the ventures started and the increase in income.

Results and Analysis

All the SHGs under the study have been formed and nurtured in Peravurani taulk by NGOs. The maximum number of members are limited to 20, while 12 is fixed as the minimum. These groups promote savings among its members by fixing certain amount as a minimum savings which varies from group to group, the frequency of which ranges between weekly to monthly, according to the convenience of the member of the respective group. Of the 10 groups, 6 groups meet once in a week and 4 groups meet once in a month to discuss about the working of the group. The membership detail of the respondent groups has been detailed in Table 3. The table shows that 70% of the respondent groups have more than 17 persons and less than 20. The mean equals 16.6. Standard deviation is 2.65. Number of members in a group on an average is 17 members and there are 2.65 deviations from the mean from all the groups. Hence there exists a large variation in the number of members in the group. The age of the members is depicted in Table 4. The average age of the respondents (calculated by mean) is 31.12 years. And standard deviation is 9.32. This shows that the average age of the members is 31 years and there is a deviation of 9.32 from the mean. Hence there exists a large variation in the age of members in the group. The Table 5 reveals the details of the members regarding the marital status, size of the family and the number of members in their family and percentage analysis has been made to assess their family background as follows:

Marital status have a greater influence on the decision making power of a women in a country like India. The participation of married women is more than the unmarried, as the married are determined in improving their socio-economic status. At the same time, SHGs also empower widows by providing regular thrift and credit. 50% of the members are from a family size of three to six members. This leads to the necessity of earning income for medium and large size families. The members earning in the family other than the respondent shows that 86.21% have only one and almost no earning members in the family. This shows that the status of the respondents is only normal. The Table 6 shows the source from which the members have collected information about SHGs and the time for which they were members in the group. Percentage analysis has been made to study the various sources and the duration of membership. This shows the initiative taken by the members and the degree of interest in participating as a member in a group for the efficient conduct of the group. The major proportion of the married women participating in SHGs has made the study to find out as to the source of motivation to join SHGs. A woman may become a member of SHG either on her own initiative or motivated by friends or by influenced by other agencies. As far as the duration of membership is concerned, it could be seen that 8.62% of the respondents have been the members for a period of less than one year, 21.27% and 25.86% have been the members for one year and one to two years respectively. It could also be inferred that only 44.25% are holding membership for more than two years. The consistency in the period of membership is lower because of less popularity. Friends and NGOs play a vital role in inspiring the individuals to join SHGs. Other sources like bank officials and employment exchanges also influence them to become the members in SHGs. Table 7 depicts the ventures started by the members and the increase in the income of the members.

Figure 1 shows the different ventures started by the members and the increase in the income of the members has been shown in Figure 2. Manufacturing of Agarpathi, Washing powder, Bricks and Mates, Petty shops, Animal husbandry, Milk animal rearing and Fishery are some of the ventures the women members have started with the help of SHGs. Among various types of business, mate making ranks the first place, agarpathi preparation the second place and brick manufacturing as the third place. As far the increase in income after joining SHGs is concerned only 13.80% of the respondents get an increase of Rs.300-500 and 86.20% earn an increased amount of Rs.100-200 per day. This increase in income level has resulted in better standard of living and the inculcating social awareness in the minds of the members. The social awareness includes sanitary, family and public dimensions. Sanitary awareness means using of toilets, drinking of safe water, using of eco-friendly paper bags and paper cups and understanding of environment problems. Family awareness includes imparting of education to children, awareness of taking family decision regarding expansion and abolition of child marriages. Public awareness includes implementation of useful programmes to the general public like abolition of liquor, adult education, creation of awareness of property rights and the like.


The impact of demographic variables namely, age, marital status, family size and number of earning members on the type of ventures started is studied by framing a hypothesis:" Demographic factors do not have an influence on the ventures started by the SHG members" and the hypothesis is tested with the help of ANOVA (Single factor). From the Table 8, it is evident that the calculated values (F value) are lesser than the table values (F critical) and it implies that there is no relationship between the demographic factors and the type of ventures. Irrespective of the age, marital status, family size and number of earning members, the SHG members engage in the various types of ventures as discussed in Table 7. The impact of demographic variables namely, age, marital status, family size and number of earning members on the increase in income is studied by framing a hypothesis: "Demographic factors do not have an influence on the increase in income of the SHG members" and the hypothesis is tested with the help of ANOVA (Single factor).

From the Table 9, it is evident that the calculated values (F value) are lesser than the table values (F critical) and it implies that there is no relationship between the demographic factors and the increase in income. Irrespective of the age, marital status, family size and number of earning members, the SHG members earn income as discussed in Table 7. This shows that irrespective of the demographic factors, they are able to start any business and earn an income up to Rs.500 per day. The economic status of members is elevated through the participating in SHGs. Micro credit leads to an increase in household income. The use of loans and deposits services can result in diversification of income sources or enterprise growth. Access to financial services enables members to build and change their mix of assets. Micro credit can be used for land acquisition, house construction or improvements or purchase of animals and consumer durables. Members can also use loans to make important investments in human assets such as health and education. For woman money management, greater control over resources and access to knowledge leads to greater choices and a voice in family and community matters. Economic empowerment is accompanied by growth in self-esteem, self-confidence and new opportunities. Micro finance members tend to have greater levels of savings than non-members, which is very important for building assets.


SHGs have started reaping fruitful results by creating self confidence through economic independence among the women. Women especially in rural areas have started playing a vital role through mobilising savings and build the capital resources of the country through SHG. The economic status of the members is increased through venturing a business, thereby increasing the income. An emancipation of women in society will ensure to develop social network among the people and build socially, economically and technologically a strong nation. Government can contribute most effectively by setting sound macroeconomic policy that provides stability and low inflation.


Hiatt, Shon R. and Woodworth, Warner P. (2006), "Alleviating poverty through microfinance: Village banking outcomes in Central America", The Social Science Journal, Vol. 43, pp. 471-477.

Drioadisuryo Panjaitan, Rosintan, D. M. and Cloud, Kathleen (1999), "Gender, Self-Employment and Micro Cerdit Programs An Indonesian Case Study", The Quarterly Review of Economics and Finance, Vol. 39, pp. 769-779.

Sinha, S. (2003), "Financial Services for Low Income Families: An Appraisal", IIMB Management Review, Vol. 15 (2), pp. 54-65.

R. Amudha (1) and C. Vijaya Banu (2)

(1) Department of Commerce, SASTRA University, Srinivasa Ramanujan Centre, Kumbakonam-612001, Tamil Nadu, India

(2) School of Management Studies, SASTRA University, Thirumalaisamudram, Thanjavur--613402, Tamilnadu, India

(1) E-mail:, 2E-mail:
Table1: Total SHGs Financed by Banks in India

Year During the Year Cumulative

1992-99 33 33
1999-00 82 115
2000-01 149 264
2001-02 198 461
2002-03 256 717
2003-04 362 1,079
2004-05 539 1,618
2005-06 620 2,239
2006-07 1,106 3,345

Source: NABARD

Table 2: Model-wise Cumulative Linkage Position (as at end-March)

Model Type No. of SHGs ('000)
 2004 2005 2006
Model I- SHGs promoted, guided and financed 218 343 449
by banks

Model II- SHGs promoted by NGOs/ Government 777 1,158 1,646
agencies and financed by banks

Model III- SHGs promoted by NGOs and financed 84 117 143
by banks using NGOs/ formal agencies as
financial intermediaries

Total 1,079 1,618 2,239

Source: NABARD

Table 3: Membership Profile of SHGs

No. of Members in a Group No. of Respondents

12 02
13 00
14 01
15 01
16 00
17 02
18 00
19 01
20 03
Total 10

Source: Primary data

Table 4: Age of the Members

Age (Yrs) No. of Respondents

15-20 17
20-25 31
25-30 33
30-35 35
35-40 27
40-45 22
45-50 9
Total 174

Source: Primary data

Table 5: Profile of the Members

 Marital Status of Members

Status No. of Members Percentage to Total

Married 168 96.55
Unmarried 2 01.15
Widow 4 02.30
Total 174 100.00

 Family Size of Members

No. of Members in Family No. of Members Percentage to Total

Up to 3 51 29.31
3 to 6 87 50.00
above 6 36 20.69
Total 174 100.00

 Number of Earning Member in a Family

Number No. of Members Percentage to Total

Nil 87 50.00
One 63 36.21
Two 24 13.79
Total 174 100.00

Source: Primary data

Table 6: Source of Information and Duration of SHGs

 Source of Information about SHGs

Source No. of Members Percentage to Total

Friends 64 36.78
NGOs 39 20.41
Relatives 29 16.67
Print media 17 09.77
Miscellaneous 25 14.37
Total 174 100.00

 Duration of Membership

Duration No. of Members Percentage to Total

Less than 1 year 15 08.62
1 year 37 21.27
1-2 years 45 25.86
More than 2 years 77 44.25
Total 174 100.00

Source: Primary data

Table 7: Venture and Income of the Members

 Venture Started

Venture No. of Members Rank

Agarpathi 30 2
Washing powder 20 4
Mate making 45 1
Petty shops 9 7
Animal husbandry 6 8
Milk animal 16 6
Bricks 29 3
Fishery 19 5
Total 174 --

 Increase in Income

Amount Per Day No. of Members Percentage to Total

100-200 95 54.60
201-300 55 31.60
301-400 16 09.20
401-500 8 04.60
Total 174 100.00

Source: Primary data

Table 8: Impact of Demographic Factors on the Type of Ventures Started

Demographic Factors F Value F Critical Result

Age 0.170636 2.15324 Accepted
Marital Status 0.27082 3.048833 Accepted
Family Size 2.333553 3.048833 Accepted
No.of earning members 2.122424 3.048833 Accepted

Source: Primary data

Table 9: Impact of Demographic Factors on the Increase in Income

Demographic Factors F Value F Critical Result

Age 0.771031 2.15324 Accepted
Marital Status 2.185887 3.048833 Accepted
Family Size 0.210272 3.048833 Accepted
No.of earning members 1.504729 3.048833 Accepted

Source: Primary data

Figure 1: Ventures Started by the Members

Fishery 11%
Bricks 17%
Milk animal 9%
Animal husbandry 3%
Petty shops 5%
Mat making 27%
Washing powder 11%
Agarpathi 17%

Note: Table made from pie chart.
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Author:Amudha, R.; Banu, C. Vijaya
Publication:Asia-Pacific Business Review
Date:Jan 1, 2009
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