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Awareness of Microfinance in Urban India

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DECLARATION
I, Disha Tiwari, student of Master of Management Studies (Finance), Jankidevi Bajaj Institute of Management Studies (JDBIMS), S.N.D.T Womens University, Mumbai, declare that the work done, and the project report titled Awareness of Microfinance in urban India, is original work carried out by me. All references, made to any published material in this report, have been duly acknowledged. This report has not been submitted to any University / Academic Institution for the award of any degree or diploma.

I solemnly declare that I am singularly responsible for any infringement on the Intellectual Property of anybody else in this report.

Place: Mumbai Date: 22 nd April, 2013

Disha Tiwari

Awareness of Microfinance in Urban India

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ACKNOWLEDGEMENT This research project is made possible through the help and support from everyone, including: teachers, family, friends, and in essence, all sentient beings. Especially, please allow me to dedicate my acknowledgment of gratitude toward the following significant advisors and contributors: First and foremost, I would like to thank my project guide Dr. Nitin Wani for his support and encouragement. He gives me timely guidelines and offered invaluable detailed advices on grammar, on subject of the project and logical way to proceed further in the project. Second, I would like to thank Mr.Narayan Bhaskar, administrative head of the Svasti Microfinance Pvt ltd who allowed me to visit their institution and on field to meet microfinance users and Mr.Vishnukant with whom I visited the microfinance users residing in Mankhurd & Chembur. And also to Mrs.Anjali Jadhav from Hindustan Microfinance Pvt Ltd who gave me relevant information regarding the working pattern of their institution.

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CHAPTER 1 1. Introduction A microfinance institution (MFI) is an organization that provides microfinance services. MFIs range from small non-profit organizations to large commercial banks. Microcredit is already a flourishing business working mostly through Self-Help Groups (SHGs). These, supported by banks, notably by the governments National Bank for Agriculture and Rural Development (NABARD), typically brought together about 15 women, who pooled their savings for a few months, allocated them to members who needed small amounts temporarily, and were then also eligible for a bank loan (short- to medium-term). Government agencies such as NABARD envisioned the role of Microfinance Institutions (MFIs) in this model as that of someone who will link SHGs primarily with banks. The number of borrowers through SHGs was expanding rapidly especially after 2005 central government budget support to this sector. Microfinance programs have generally targeted poor women. By providing access to financial services only through women-making women responsible for loans, ensuring repayment through women, maintaining savings accounts for women, providing insurance coverage through women-microfinance programs send a strong message to households as well as to communities. The economic empowerment of women has a positive impact as it helps in enhancing the wellbeing of women. The well-being of women includes many things including their health, autonomy to take decisions, earning income, and above all, her mental, physical and emotional stability. Because of the prevalence of patriarchy in India, women are usually dominated by the male members in the family, be it by their husbands, fathers, brothers, and later on, their sons. Women thus have to mould themselves according to the wishes of their male family members. According to CGAP-(Consultative group to assist the poor works)

Microfinance helps very poor households meet basic needs and protect against

risks.

The use of financial services by low-income households is associated with

improvements in household economic welfare and enterprise stability or growth.

By supporting women's economic participation, microfinance helps to empower 3

women, thus promoting gender-equity and improving household well-being.

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For almost all significant impacts, the magnitude of impact is positively related

to the length of time that clients have been in the program.

1.1 A brief history of Microfinance Microfinance is most common in the developing world; it started in Bangladesh in the year 1970. Microfinance credits are usually either interest free or carry interest that does not compound. Microfinance is a financial system that gives very small loans to working poor in developing countries to allow them to improve their business without having to pay unmanageable interest rates. People who receive the loan use the money to establish or expand businesses that create income for their families to feed, house, educate and provide health care for their children. They can also put aside money for a better future. Microfinance is the provision of financial services to low income clients; solidarity lending groups and self-employed who traditionally lack access to banking and related services.

1.2 The Current State of the Indian Microfinance Industry It is interesting to note that there is extreme concentration in the Indian microfinance industry approximately one-third of all outstanding microloans and borrowers are from the state of Andhra Pradesh. It is also interesting to note that despite the recent growth of the industry, around 90% of the Indian population remains without access to financial services. Microfinance in India is funded by private and public capital. Private capital comes in the form of private equity investments and funds from the capital markets. Loans from private equity firms and the recent initial public offering of SKS microfinance are examples of private capital. Public capital is known in India as priority sector lending. The Indian government mandates all banks in India to lend to the priority sector. The priority sector includes agriculture, small enterprise, retail trade, education, and housing finance. The intent behind this policy was to make sure that under-served markets are not ignored by commercial banks. Microfinance falls into this definition of the priority sector, and this capital has been the primary driver of the recent growth in microfinance. From 2003 to 2009, the number of microloans extended to the poor in India grew from 1.0 million to 26.7 million.

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MFIs differ from one another in terms of: Lending model Loan repayment structure Mode of interest rate calculation Product offerings Legal structure

1.3 Key players of Microfinance system National Bank for Agricultural and Rural Development (NABARD) Reserve Bank of India(RBI) Self-help Groups(SHGs) Micro Finance Institutions(MFIs) Non-Government organisations(NGOs) Credit Rating Information Services of India Ltd(CRISIL)

1.4 Objectives The broad objectives of the study can be stated as follows: To find the awareness on microfinance among low income group people. To analyse the accessibility of microfinance to the poor people in urban India. To study the credit rating of microfinance by CRISIL. 1.5 Significance of study Microfinance is most common in the developing world; it started in Bangladesh in the year 1970. Microfinance credits are usually either interest free or carry interest that does not compound. Microfinance is a financial system that gives very small loans to working poor in developing countries to allow them to improve their business without having to pay unmanageable interest rates. People who receive the loan use the money to establish or expand businesses that create income for their 5

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families to feed, house, educate and provide health care for their children. They can also put aside money for a better future. Microfinance is the provision of financial services to low income clients, especially women who traditionally lack access to banking and related services. This study helps MFI the outreach of their financial services in the urban India (Mumbai). 1.6 Limitations of the study As mentioned above, this study is carried out in one particular area (Mumbai) of urban India to know the awareness level of Microfinance Institutions among people having very less income. Usually Microfinance users are located in the area where Microfinance institutions have their place of operation. And they are still aloof from the suburban part (Navi Mumbai) due to which it is difficult to reach the users of microfinance. 1.7 Chapter scheme The first chapter is about the introduction of microfinance, its brief history, and current status of microfinance. The objective of the study and its significance and limitations are also mentioned in the first chapter. However second chapter talks about theoretical background and the literature review of the past papers. It also deals with role of CRISIL in microfinance industry. Third chapter of this study deals with the research methodology used to carry out this project in which the source of data and collection method is described. Fourth chapter is divided into two parts. First part shows the analyses of primary data and its interpretation which is based on awareness of microfinance while second part deals with the study of credit rating of microfinance based on secondary data. Fifth chapter is all about the findings made from the analyses of data. Conclusion and recommendations are made in the sixth chapter of this study.

CHAPTER-2 6

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2. Theoretical Background There is growing interest in microfinance as one of the avenues to enable low income population to access financial services. India with a population of around 300 million poor people has emerged as a large potential opportunity for the microfinance sector. With only 48% of the population accessing financial services, expanding the microfinance sector is also important from the perspective of financial inclusion (World Bank, 2008). Since 2004, the Reserve Bank of India (RBI) has emphasized financial inclusion as an important goal. The recent global financial crisis also underlines the desirability of financial sector growth by broadening access to financial products rather than by facilitating excessive leverage to a subset of the population or by increasing the complexity of financial products. While there have been various initiatives to promote microfinance in India since the 1970s, the sector witnessed rapid growth only in the 1990s. The RBI has since the mid-1990s helped in attracting funding for the sector by including microfinance in the priority sector, to which banks are mandated to allocate a percentage of their lending. However, no specific regulation was imposed on the sector as a whole primarily because it was felt that regulation may hamper the sectors key strengths of informality and flexibility. With the growth of the sector both in terms of size, scope and number of participants, there is however now a need for developing a more formal regulatory structure. First, regulation is needed to enable a number of large microfinance institutions (MFIs) to offer savings services, so as to address a major shortcoming of the sector. The largest MFIs in the country, which cumulatively account for 80% of the sector in terms of portfolio outstanding are non-banking finance companies (NBFCs), who are unable to accept savings deposits Second, microfinance sector institutions are no longer solely socially motivated. Due to the growing perception that it is possible to earn high returns through

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microfinance lending, commercially driven entities are also being attracted to the sector. This further underlines the need for supervision and consumer protection. Third, some MFIs have started offering products such as insurance, remittances and pensions by tying up with mainstream providers. While this helps in broadening the scope of microfinance services, it also calls for coordinated regulation of the sector particularly in view of the limited financial literacy of its participants. Such increasing overlap between various financial institutions is expected to continue. Finally, while the diversity of legal forms in the sector has arisen due to its unplanned, entrepreneurial growth, a uniform regulatory framework would enable a level playing field and prevent regulatory arbitrage. While regulation is essential, avoiding over regulation that hampers innovation and unduly increases transaction costs is also equally important. Microfinance InstitutionsA range of public sector as well as private sector offers the micro finance services in India. Based on asset sizes, MFI can be divided into three categories: 5-6 institution which have attracted commercial capital and scaled up dramatically within last five years. The MFIs which include SKS, SHSRE and grameen style program but after 2000, converted into for profit regulated entities mostly Non-Banking Finance Companies (NBFCs). Around 10-15 institutions with high growth rate, including both news and recently form for profit MFIs. Some of MFIs are Grameen koota, Bandhan and ESAF. The bulk of Indias 1000 MFIs are NGOs struggling to achieve significant growth. Most continues to offer multiple development activities in addition to microfinance and have difficultly accessing growth trends. (microfinancedata.pdf)

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LITERATURE REVIEW

Savita Shankar (2011) defines financial inclusion as ongoing access to a range of financial services in an affordable and convenient manner. As low income groups are often among those lacking such access, microfinance programmes providing financial services to them have emerged as a public policy instrument to promote financial inclusion. This thesis evaluates the contribution of microfinance programs in promotion of financial inclusion in India. To sustain financial inclusion, group microfinance members should graduate to individual financial services. The thesis therefore also explores the environment in which such graduation could take place. The thesis analysed appropriate regulatory framework for the microfinance sector. The study has implications for policymakers at the national and state level, microfinance providers, members and funding agencies. The thesis findings also suggest that there is considerable scope for policy relevant empirical research on microfinance in India. Anand (2011) has criticised industry for their oppressive style of functioning which allegedly has caused hardships to credit seekers in some districts of Andhra Pradesh, where in some cases some of the clients even committed suicide. These resulted in speculations from various quarters, suggesting curbing of Microfinance Institutions (MFIs) operational freedom which, MFIs contested, would force them out of the business. The main reason for such incidences was said to be the high rates of interest and the marketing (especially collection) tactics adopted by MFIs. In turn, MFIs argued that they themselves get funds at a very high rate of interest, and when one adds the operating expenses of MFIs the final credit rate would come up to what MFIs are generally charging. And if they do not ensure repayment of their loans by their clients, the cost of funds will go even higher. With this backdrop, this study has been carried out to find the actual reasons behind the hardships of MFIs clients, reasons for the high cost of capital, causes of inefficiency in operations which have increased the cost of credit further, and problems with the current marketing strategy and other related areas. This study encompasses all aspects of microfinance as present in Andhra Pradesh (India) and suggests possible solutions.

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Basu and Srivastava (2005) suggests that despite substantial efforts and a vast network of rural banks, the rural poor still have very little access to formal finance. In this scenario, new microfinance approaches designed to deliver finance to the poor have emerged. The paper assesses the potential and possibilities of microfinance in enriching rural access. The authors evaluate the growth of SHG-Bank linkage model of microfinance. The number of SHGs linked to banks has increased from 500 in 1990s to 8lac in 2004. But with an outreach of only 12 million, the SHG- Bank linkage has a long way to go. It is further mentioned that less than 5% of poor rural households have access to microfinance. In this too, the regional imbalance is also a concern. SHG-Bank linkage capitalises on countrys vast resources of rural bank branches. To encourage banks to lend to SHGs, NABARD provides refinance options. Moreover, SHG lending is calculated as priority sector lending which acts as an added incentive for banks.

Sriram (2010) traces the different stages of progress of microfinance institutions over the last two decades. Three distinct waves of growth of microfinance institutions have been stated. The first wave was when the development sector discovered the methodology of reaching loans to the poor through a callable model, which was mastered by the Grameen bank. The second wave was when these microfinance institutions reached scale and sought methods to morph into commercial organisations. The third wave was when mainstream institutions like L&T finance and Equities took to microfinance as a business. Other than SHG model, the other model followed by microfinance institutions is the Grameen model wherein customers are identified using a poverty index and are organised into small groups. With MFIs operating more than acceptable levels of commercial activities in a non-profit format, it was difficult for them to explain their form to the commercial world. The option was to either set up a local area bank or form a non- banking financial company (NBFC). Bank license being difficult to obtain, the latter was the available alternative. The author highlights the loopholes in legislation and regulation in this context.

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According to Karmakar (2009), microfinance covers the delivery of banking and other financial services at affordable costs to the vast sections of disadvantaged and low- income groups. Easy access to public goods and services is essential for an open, inclusive and efficient society. Microfinance provides savings and credit facilities under three models a) the banks providing no frills deposit and loan facilities, b) SHG-bank linkage model, c) microfinance institutions model and d) the post offices. The role of NABARD in policy formulation, financial innovations, technological interventions and institutional strengthening has been highlighted. The author also criticizes the lack of any regulatory framework foe microfinance institutions other than NBFCs. Nair (2001) opines that the SHG model of microfinance depends on social intermediation through self-help or solidarity groups so that financing is cost effective and peer pressure and monitoring act as collateral. Group lending avoids high cost intermediation between banks and clients and reduces individual borrowing transaction cost. The author classifies the microfinance sector into two broad categories Financial and non-financial. Financial sector includes commercial banks, rural banks etc. Non-f inancial sector comprises of not for profit microfinance institutions (NGOs, trusts), mutual benefit microfinance institutions (state credit cooperatives) and for profit microfinance institutions (non-banking financial companies). The logical foundation of promoting non-financial microfinance institutions rests on the apparent failure of the financial sector institutions and the disappointing p er fo rm a nc e o f g ov er nm e nt programmes. There has been a 40% reduction in transaction cost due to SHG intermediation and consequent reduction in time spent by the bank staff. Similarly, borrowers transaction cost has been found to have declined by 85% with the elimination of complex documentation and procedures and reduction in time and costs incurred in repeated visits to bank

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.Krishnamurthy and Varalaxmi (2011) suggested that the awareness programs should be conducted in each educational institution to explain the benefits of microfinance. It is crucial that more microfinance institutions should be set up to provide loans all over the country. Microfinance should be made easy for the microfinance seekers to go for it and flourish the business environment. The study concluded that microfinance institutions are not only contributing significantly to the development of finance sector in their respective countries, but also they play an important role to eradicate poverty by providing much needed capital to low income people which are able to generate tremendous return on the investment. K.S.Ranjani (2012) points out at absence of regulation as one of the important factor contributed to the recent turmoil in the microfinance industry. This paper looks into the need for regulation of Microfinance Institutions (MFI) aspects of regulation and international experiences in regulation that could guide the industry in India. This paper also attempts to build a conceptual framework for regulation of MFI in India. Like every other financial intermediary, microfinance institutions will benefit the customer as well as the industry at large when they subject themselves to both self and statutory regulation. Khavul (2002) states that Microfinance is an emerging phenomenon that opens access to capital for individuals previously shut out from financial services. In its direct engagement with the poor, microfinance represents a new way for financial capital to potentially stimulate economic growth in developing countries. However, microfinance is poorly understood, and it remains unclear whether it delivers on its promises. The goal of this paper is to introduce the topic of microfinance to a wider audience of management researchers and to identify opportunities for future research in this new and growing area.

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CHAPTER-3 RESEARCH METHODOLOGY The methodology adopted to accomplish the objectives of the study has been elaborated in this chapter. 3.1Data sourceThis study is basically based on primary data collected from microfinance users of Svasti Microfinance Pvt ltd and other non-users of microfinance. However, secondary data also supports this study. The secondary data has been collected from newspaper articles and other websites providing information on microfinance.

3.2Year of the study- The 10 months are divided according to the following manner in order to be an effective project. July to September(2012): Focusing on the study as a whole and

identifying the problems and framing the title, collecting information as well as details raring industry and also framing objectives. October to December (2012): Literature review. Framing of

questionnaire for data collection, information collected through questionnaire for data collection and interpretation. January to April(2013): From the interpretation the researcher list out

certain findings, suggestion, conclusion & rough copy submission for correction, after the correction fair copy was prepared and submitted.

3.3 SampleThe sample of 140 data has been collected from the group of women who themselves or their spouse earning less than INR 10000 per month. The group of women include vegetable vendor, garland maker, peon, house worker, hospital receptionist and housewife located in the different parts of Mumbai. And the remaining data is collected from nearby resident place from the same group of people.

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3.4Type of dataThe type of data is primary for the research purpose based on non-probability convenience. Along with primary data, secondary data is also supporting this study. Primarily the part-2 of the analysis is based on secondary data.

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CHAPTER 4 DATA COLLECTION AND ANALYSIS Fig.1.1

Interpretation- Out of the 140 respondents 61% (85) access to the banks for finance while 39% (55) access to the microfinance institution for the finance.

Fig.1.2

Interpretation- out of 140 respondents, 61% are not aware of microfinance while 39% are aware of it and therefore using the microfinance services according to their benefits from various MFIs such as Hindustan Microfinance Pvt ltd, Svasti Microfinance Pvt ltd and other similar institution located in various parts of Mumbai. 15

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Fig.1.3

Interpretation- From the above graph, it can be interpreted that microfinance users are only having one type of account with MFIs i.e. loan account. Other types of accounts are not maintained by the MFI. Fig.1.4

Interpretation- The rate of interest on loan provided to the microfinance is low. The interest rate for the microfinance users is 1% along with 12% processing fee. However, it differs in different microfinance institutions but there is only slight difference.

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Fig.1.5

Interpretation- The purpose of taking loan from MFIs is different. From the research it is found that majority of people (44%) take loan for job creation i.e. using funds for establishing small business like small groceries, 25% people use the funds for health purpose like medical expenses of the family members, 18% people use the funds for housing as it is again a critical factor to bear expenses of housing in the urban area especially in Mumbai and 13% people need funds for the education of their children.

Fig.1.6

Interpretation- The research shows that 73% of the microfinance users are highly satisfied while 27% are only satisfied and there are 0% users who are unsatisfied with the services provided by various MFIs in urban India. 17

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Fig.1.7

Interpretation- There are several reasons for change in economic condition of microfinance users. 44% of users believes that their economic condition has been improved as the loan taken from MFIs facilitate income earning while 18% believes that funds from microfinance facilitate stress and disaster management and 9% have both the reason for change in their economic condition. Whereas 29% have different reason such as financial reliability for women has reduced.

Fig.1.8

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Interpretation- The most critical factor for availing microfinance from the MFI is the availability as still there is lack of marketing of microfinance products among the urban poor people and there is no other critical factor except instalment for the very few who have very less income and more expenses. Fig.1.9

Interpretation- The most influencing factor for opting microfinance is the collateral free loan. Therefore, 40 out of 55 respondents believe that they are motivated to take loan from MFIs because of no collaterals while 9 people believes that they are influenced to take microfinance as it helps to establish small business and the remaining 7 are using microfinance because it gives them long term financial independence. Fig.1.10

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Interpretation- For all microfinance users i.e. 100% people have convenience in repayment of instalment of the loan taken as the instalment amount is taken on weekly basis within the range of Rs100-250 Fig.1.11

Interpretation- Out of the total microfinance users, 9% suggest to reduce the interest rate further and 9% suggest to broad the range of financial services while 82% give different suggestions such as reducing the instalment period from weekly to monthly and providing education to establish small business. Fig.1.12

Interpretation- This figure illustrates that the services provided by the MFIs apart from the loan are general insurance and financial education where 30 people are 20

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accessing to general insurance and 10 out of 55 are taking only financial education while the remaining 15 are not accessing any other service from MFI except loan. Small entrepreneur training and life insurance services are not provided by these MFIs.

Fig.1.13

Interpretation- All microfinance users (women) fall under different age groups. 36% falls under the age group of 26-35 years while 33% falls under the age group of 36-45 years. Only 9% women are under the age group of 46-55years while 22% falls below 25 years.

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Fig.1.14

Interpretation- From the above graph, it is observed that no microfinance user is qualified above matriculation. Majority of people i.e. 25 people are qualified up to school while 15 are qualified as 10th pass and remaining 15 are matriculate pass.

Fig.1.15

Interpretation- 54% of microfinance users are having some small kinds of business of selling of vegetable, fruits, snacks, artificial accessories etc., 9% are having small 22

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retail shops, 13% are doing service as school peon, household worker, hospital receptionist etc. while 24% are either housewife or helping in the work of their spouse.

Fig.16

Interpretation- From the above graph it can be observed no microfinance user has income above Rs10000 per month. In fact majority people i.e. 30 out of 55 are having income less than Rs 3000 while only 15 people are having income between Rs3000 to Rs5000 and remaining 10 are having income more than Rs5000 per month. Fig.1.17

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Interpretation- From the above graph it can be interpreted that people having one child and people having no child are equal i.e. 5 respondents in each category. The majority of people are having three children i.e. 28 out of all users and 15 people are having two children while only 2 are having more than 3 children.

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PART-II Role of CRISIL in credit rating of Microfinance CRISIL (Credit Rating Information Services of India) is Indias leading ratings agency. CRISIL provides grading and risk assessments of microfinance institutions, and rates MFIs bank facilities and securitisation transactions. CRISIL offers customized diagnostic services that cater to the requirements of donors and social investors proposing to invest in, or provide grants to, MFIs, or microfinance programs of non-government organizations (NGOs). These studies, apart from carrying out a strengths, weaknesses, opportunities, and threats (SWOT) analysis, may be customized to indicate actions that the MFIs can explore to scale up and sustain their microfinance operations, while minimizing risks. CRISIL also offers customized services, such as a review of the business plan and periodic monitoring of microfinance programs, with an option of an MFI Grading under this service. CRISILs microfinance institution (MFI) grading is a current opinion on the ability of an MFI to conduct its operations in a scalable and sustainable manner. The grading is assigned on an eight point scale, with mfR1 being the highest and mfR8 the lowest. The MFI grading is a measure of the overall performance of an MFI on a broad range of parameters under CRISILs MACRO framework. It includes a traditional creditworthiness analysis using the CRAMEL approach, modified to be applicable to the microfinance sector. The acronym MICROS stands for Management, Institutional arrangement, Capital adequacy and asset quality, Resources and asset-liability management, operational effectiveness, and scalability and sustainability. MFI grading scale: mfR1-highest, mfR8-lowest (www.crisil.com)

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According to the study done by Micro-credit ratings International Limited in 2006:The purpose of this study is to estimate the investment required to enable the microfinance sector. SHGs and MFIs had to meet the overall demand for micro-credit by 2010 in a financially sound and sustainable manner. MFIs are expected to meet about 25% of the micro-credit demand by 2010, while the other 75% of the demand is expected to be met by the bank-SHG linkage programme. This paper estimates the equity investment required by MFIs to grow while maintaining a sound capital adequacy position. It also estimates the promotional and operational expenses likely to be incurred in enabling the bank-SHG linkage programme to meet the overall demand from poor families. (www.m-cril.com)

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CHAPTER-5 INTERPRETATION AND FINDINGS From the above analysis the findings are:1. The awareness about microfinance services among urban poor people is still very low. More than half population is still unaware of microfinance. 2. There is only loan account maintained by MFIs for their customers. 3. The greatest advantage to the microfinance users are the low interest rate on loan, no collaterals and the small amount of instalments. 4. The users of microfinance have income less than Rs.10000 per month, generally ranging between Rs.2000 to Rs.6000 having their own small business. 5. The age group of respondents (women) falls between 26-45 years having qualification up to school. 6. The other service provided by the MFIs is general insurance. Financial education is provided but it is still not up to the mark. And there is no small entrepreneur training for them to establish their own business. 7. CRISIL plays a significant role in rating the microcredit given by MFI.

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CHAPTER-6 CONCLUSION AND RECOMMENDATION ConclusionThis study shows the awareness of microfinance among urban poor people. The earlier studies were carried out on the regulatory framework of microfinance, contribution of microfinance to the economy of a country, style of functioning of MFI, the role of NBFCs and other key players in the microfinance. This study is carried out in the Mumbai region. Collection of sample data and its analysis shows that there is still lack of marketing of microfinance service among urban poor population but the services of existing MFIs are more or less satisfactory to the users of microfinance. Recommendation From this study, it is suggested that there should be proper marketing of The range of services provided by the microfinance should be microfinance among poor people in the urban areas. increased up to significant level including financial education, small entrepreneur training programs. The maximum loan amount of Rs25000 should be extend as the growing prices of basic commodities, housing and education will not suffice the needs of microfinance users. The weekly payment of instalment should be extend to at least 15 days as sometimes it is not possible for the poor people to pay the instalment within a week time if some calamity occurs or source of income stops.

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APPENDIX QUESTIONNAIRE I am a student of MMS-II from Jankidevi Bajaj Institute of Management Studies, SNDT University. I am doing a research project on Awareness of microfinance in urban India which is done for the academic purpose. Please tick on the appropriate option for the below questions. 1. What is the other source of finance do you access? Banks Microfinance Institution Other(specify) 2. Are you aware of microfinance? Yes No If yes then answer the following1. Nature of account do you have with MFI? Savings a/c Current a/c Deposit a/c Loan a/c 2. How is the interest rate on the given loan? Low High Very high 3. For what purpose you generally use the availed funds from MFI? Housing Job creation Health Education of children Other(specify) 29

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4. To what extent you are satisfied with the services by microfinance institution? Highly satisfied Satisfied Unsatisfied 5. What do you think about the changes in your economic condition after becoming member of MFI? Credit received from MFI facilitated income earning Advice/training from MFI facilitated income earning Savings in MFI facilitated stress and disaster management All of the above Other (specify) 6. What is the critical factor for availing service from the MFI? Interest rate Processing Instalment factor Availability Other(specify) 7. What are the factors influencing for opting microfinance? No collaterals Help to establish small businesses. Long term financial independence Other(specify) 8. Are you able to repay instalments of the loans comfortably? Yes No 9. What are your suggestions for the MFI? Broadening the range of financial services. Reduce the interest rates Flexible repayment option 30

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Other(specify)

10. What are the other services you are getting from MFI? Micro insurance Life insurance Financial education Small entrepreneur training All of the above None of the above PERSONAL DETAILS 1. Name: Native Place: Gender: Male Female 2. Age: Below 25 years 26-35 years 36-45 years 46-55 years 3. Qualification: Up to school 10th pass Matriculate Graduate Other(specify) 4. Occupation: Service Business(specify) 31

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Retailer Other(specify) 5. Monthly income: (per month) Below 3000 3000-5000 5000-10000 10000 above 6. Number of children : One Two Three More than three. None 7. Number of children going to school: All Specify

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BIBLIOGRAPHY 1. Anand. High cost of finance in microcredit business in Andhra Pradesh(India): Problems and possible solutions The Icfaian Journal of Management Research, Vol. VII, No. 4, 2008. 2. Savita Shankar, An analysis of the role of microfinance programs in promoting financial inclusion in India submitted to LEW KYUAN YEW SCHOOL OF PUBLIC POLICY, National university of Singapore,2011. 3. Susanna Khavul, Creating opportunities for the poor Academy of Management Perspectives, pg-58, August 2010. 4. DR.M.Krishnamurthy; S.Varalakshmi, Microfinance perception- A study with special reference to Salalah, Sultanate of Oman ZENITH International Journal of Multidisciplinary Research Vol.1 Issue 3, July 2011. 5. K.S.Ranjani, Regulating Microfinance in India- A conceptual framework Synergy (January, 2012), Vol. X No. I. 6. Sriram, M.S., 2010, Commercialisation of Microfinance in India:A Discussion of the Emperors Apparel, Economic and Political Weekly, June 12, 2010 vol xlv no 24. 7. Nair, Tara, 2001, Institutionalising Microfinance in India: An Overview of Strategic Issues, Economic and Political Weekly, Vol. 36, No. 4, Money, Banking & Finance (Jan 2001), pg. 399-404. 33

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8. Karmakar, K.G., 2009, Emerging Trends in Microfinance, Economic and Political Weekly, March 28, 2009 vol xliv no 13. 9. Basu Priya and Srivastava Pradeep, 2005, Exploring Possibilities: Microfinance and Rural Credit Access for the Poor in India, Economic and Political Weekly, Vol. 40, No. 17 (Apr.2005), pg. 1747+1749-1756. Web References1. CGAP, 2006. Comparative Database on Microfinance Regulation www.microfinancegateway.org 2. http://crisil.com 3. http://fusionmicrofinance.com 4. http://www.inm.org.bd 5. http://www.nabard.org 6. http://www.iitk.ac.in 7. http://www.microfinancegateway.org 8. http://www.centre-for-microfinance.org 9. http://www.mcril.com 10. http://www.smeworld.org

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