A friend of mine is being considered for the position of a business develoment manager in a micro finance bank and wants to know his duties and responsibilities.
INDIA-PRESENT TRENDS
India’s present economic status reveals the following profile:
Gross Domestic Product of $ 445 Billion
4th largest economy in terms of Purchasing Power Parity (PPP), with a GNP of US$ 1.8 Billion
Sixth fastest growing economy, projected to be 7-15% larger than Japan’s by 2010
Strong agriculture sector accounting for nearly 25% of national output and 15% of exports, with self sufficiency in all important crops except oilseeds
Diverse industrial base with self reliance in all core industries and a wide range of engineering products, but domestically weak in electronic hardware technology
Robust services sector accounting for 49% of national product, and growing by 7% annually
Mature financial sector and capital market with over 9000 listed companies and market capitalization equivalent to US $ 2 trillion, with the Banking and finance sector growing by 7.5%
CONCEPTOF MICRO FINANCE:
Microfinance is the supply of loans, savings, and other basic financial services to the poor. People living in poverty, like everyone else, need a diverse range of financial instruments to run their businesses, build assets, stabilize consumption, and shield themselves against risks. Financial services needed by the poor include working capital loans, consumer credit, and savings, pensions, insurance, and money transfer services.
Role of bank finance to socially and economically marginalized people through SHGs has the following advantages.
1. India is today suffering from mass poverty which is a consequence of unemployment and the result of income and wealth disparity. NAGAYYA (2000) reported that the Association for social advancements in Bangladesh, society for helping and Awakening Rural poor through Education (SHARE) in India, centre for youth and social Development (CYSD) in South Asia and Bangladesh, Rural Development committee consultative group to assist the poorest, professional assistance development action for self employed women association and credit development forum are focusing their financial attention to the income and employment generation of the poor with livelihood support.
2 . Micro enterprises required light capital as they do not need correctly machinery technical knowledge and the services of the technicians. The time gap between the flow of income and employment generation is relatively very short. Micro enterprises required small investment ranging between Rs.2000 to Rs.10000. HILARY STANDING (1985), stated that women are quite proportionately found in the least skilled, lowest paid job and they considered secondary labour market and their wage is defined as secondary wage.
3. Savings of people remain idle because of lack of proper financial services and awareness about saving mobilization among the people. Proper mobilization of saving and utilization of bank finance can be possible if micro enterprises are regionally established. Mark. M. Pitt noticed that 90% of women clients mobilized their own saving for investment initially.
4. Micro enterprises augment production of consumer goods and hence check the inflations. Inflation in India primarily arises due to shortage of consumer goods and under utilization of labour with scarce capital and poor financial resources. If these enterprises are used to produce consumer goods by giving opportunities for the fuller utilization of available labour and mobilization of microfinance inflation can be checked to a considerate extent.
5. Microfinance would be the best suited for better utilization of local resources and help to reduce poverty with result of achieving self sufficiency. N.NARAYANASAMY (2005) explained that the average saving per group is Rs.28000 which is higher than state average of Rs. 25000. The average savings per member increased from Ts.28to Rs.45 over a period.
6. Socialistic pattern of society requires a better utilization of income and wealth. Increase in employment opportunity among the rural and urban masses through micro finance lead to an increase in their purchasing power and maximization of utility. The decentralized economic structure can pave the way for a socialistic pattern of society. Marquerite Robinson (2001) illustrate the point “Credit subsidies to economically active poor could make good use of commercial credit present them from rationed loan successful micro finance is also being related to achievement of millennium development goals but the challenge as per Martin Greedily (2005) is the challenge for the industry is to manage scaling up without losing sight of its social purposes”.
7. Low capital cost and location advantages would play a continuing and healthy role in economic development. Provision of financial assistance would provide further stimulation to productive efficiency by lowering the transaction costs through institutional specialization and innovation in delivery system; they will be able to operate profitability in markets characterized by very small transaction sizes and less affluent clients.
8. Micro finance helps to raise the standard of living of the marginalized income groups of all communities. NALLAKABEER (2005) mentioned that microfinance has positive and significant effect on educational status of female children rather than male children when compared loans to men 1% increase in loans to women increased the probability of school enrolment by 1.9% for boys and 2.4% for girls while the same 1% increase in credit to male increased the boys enrolment only by 3.1%, but had no effect on girls. The overall enrolment rate is 6% and girls schooling by 8%. Himachal Pradesh, Kerala, Assam, Rajasthan, West Bengal and Maharastra formed an intermediate group with ratios within one standard deviation of the mean with 94, 85, 82, 65, 61, and 56 household participating in SHGs in every 1000 household respectively.India’s achievement is halving the population of poor by 2015 as well as achieving a broad based economic growth on a successful poverty alleviation strategy.
Conclusion:
From the above it is felt that, Poor people need a variety of financial services, not just loans. It is a powerful tool to fight poverty.further, Interest rate ceilings making it harder for poor people to get credit. The role of government is to enable financial services, not to provide them. Donor funds should complement private capital, not compete with it. The key bottleneck is the shortage of strong institutions and managers. Microfinance works best when it measures and discloses its performance.
Dr.R.SRINIVASAN is a Post graduate in commerce and Management. He received his doctoral degree from Alagappa University in 1997. He currently teaches financial management and Research Methodology Subjects in Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ?Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades.
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