THE ROLE OF MICROFINANCE INSTITUTIONS IN OVERCOMING THE FINANCIAL

CRISIS BEING FACED BY MIGRANT WORKERS DUE TO COVID-19 WITH SPECIAL

REFERENCES TO PURVANCHAL REGION OF UP

1. Introduction:

India is a country of villages where 68.8% of the population lives in rural areas and are primarily

dependent on agricultural activities. However, the land is not proportional to the vast rural population to

survive on. Thus, they become unemployed and poor. Ultimately, they move from their village to urban

areas searching for livelihood and become part of India's unorganized labour. According to the 2011

Census, India has over 480 million labours, out of which 90% are in unorganized sectors and somehow

managed to earn a living However, the advent of COVID-19 took off its way to shattering India's

economy back in March 2020. The state announced the nationwide lockdown from 22nd March 2020,

which lasted till 31st May. As a result, all the activities were put to pause for more than three months. The

labour class faced much misery and were left with no food and money to feed their family and struggled

to come back to their native places (A historical reverse migration). Millions of workers/labourers

migrated back and refused to return to cities post lockdown. However, the problem does not end here.

Labours migrated from villages because of no work, and millions of labour had again migrated back to

villages similar to moving from 0 to 10 and then back to 0 again. The question arises about how they are

going to survive this financial crisis.

Is The Solution Micro-finance?

Microfinance- Conceptual framework :

Microfinance in the initial stages was considered an activity to provide finance and credit to poor people

and was considered synonymous with microcredit. Taking microfinance as synonymous with microcredit

was the narrower approach. This was a limiting force that confined the scope of microfinance activity to
the provision of credit services only. However, over time, the concept of microfinance evolved and

became richer progressively.

Marguerite S. Robinson has defined microfinance more comprehensively. To her, microfinance refers to

small-scale financial services, primarily credit and savings provided to people who farm or fish or herd;

who operate small enterprises or micro-enterprises where goods are produced, recycled, repaired, or sold;

who provide services; who work for wages or commissions; who gain income from renting out small

amounts of land, vehicles, draft animals, or machinery and tools; and to other individuals and groups at

the local levels of developing countries, both rural and urban.

The Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development

(NABARD) have defined microfinance as an activity of providing thrift, credit and other financial

services and products to the poor in rural, semi-urban and urban areas for enabling them to raise their

income levels and thereby improve their standard of living. It is taken as a tool to bring the financially

excluded low-income people into the ambit of the financial system. Microfinance is defined as an

economic activity of providing financial services to economically viable low-income rural, semi-urban

and urban poor or people living in abject poverty for undertaking economically productive micro

activities of farming, fishing, fishery, livestock rearing and breeding, dairying, running micro/small shops

and enterprises, working for wages or commissions and providing various household facilitating services

to individuals and households, engaging in gainful activities of generating income by renting out land,

animals, vehicles and machinery and tools. Financial Services in microfinance generally include saving

schemes and financial assistance in the form of a credit to poor people living in abject poverty for their

self-help economic activities and insurance and their familial and personal purposes. Microfinance is not

confined to financial intermediation only. It is propelled with societal philosophy, and it renders social

intermediation services in the form of self-help group formation, extension of financial literacy services,

and promotion of cooperation and self-confidence among socially and financially excluded people.

Objective:
● 1 : There assess the impact of funds provided by MFIs on the financial crisis of migrant workers

in Purvanchal due to covid-19.

● 2 : To assess impact of funds provided by MFIs on new small entrepreneurs in Purvanchal during

covid-19.

● 3 : To asses the impact of funds provided by MFIs on women empowerment in Purvanchal during

covid-19.

● 4 : To assess the impact of microcredit on the financial crisis due to covid-19.

Hypothesis:

● H01 : There is no significant impact of funds provided by MFIs on the financial crisis of migrant

workers in Purvanchal due to covid-19.

● H02 : There is no significant impact of funds provided by MFIs on new small entrepreneurs in

Purvanchal during covid-19.

● H03 : There is no significant impact of funds provided by MFIs on women empowerment in

Purvanchal during covid-19.

● H04 : There is no significant impact of microcredit on the financial crisis due to covid-19.

Review of literature:

● Jaya Anand(2000)- maintains that the concept of microcredit is superior to the traditional rural

credit system and will be that participants have stable income than they did before

● Priya Basu(2005)- The paper review that the current level and pattern of access to finance for

India's rural poor and examines some of the critical microfinance approaches in India, taking a close look

at SHGs linkage initiative, the paper argues that in an economy as vast and varied as India's there is scope

for diverse microfinance approaches to co-exist. Private sector microfinance needs to acquire more

professionalism, and the government can help create a flexible architecture for microfinance innovation.
Finally, the paper argues that microfinance can, at minimum, serve as a quick way to deliver finance to

the poor; the medium-term strategy to scale up access to finance for the poor should be to 'graduate'

microfinance clients to the formal financial institution. The paper offers suggestions on what it would

take to reform these institutions to improve access for the poor.

● A.K. Dwivedi(2011)- A study on micro-credit in Eastern Uttar Pradesh Region (concerning

CASHPOR Micro-credit)- The study suggests that Cashpor Microcredit promoted by Cashpor Financial

Technical Services Pvt Ltd. CFTS is working with a mission to alleviate poverty in the Eastern UP region

and has made a positive impact on the clients. The financial management of CMC shows that it achieved

self-sufficiency level. The business policy followed by CMC is client-oriented, and the institution is

getting benefited because of pro-poor plans, which especially they have as CHI (Cashpor Housing Index).

The Efficiency, Productivity, and Profitability level shows optimum levels and are equivalent to

standards. The growing ROAR and decreasing CCAR shows the effectiveness and improvement in

business activities.

Methodology:

● Type of study- The research designed for the study confined is analytical and descriptive in

nature.

● Source of Data- The study is based on primary as well as secondary data. Primary data would be

collected through structured questionnaires from microfinance beneficiaries, Migrant workers. Personal

interviews would be conducted for MFIs officials and for SHGs and NGOs as well. Secondary data would

be collected from published reports of NABARD and MFIs.

● Sampling- for formulating the sample size of the underlying formula of William G. Cochran

(1977) would be used.

● Research scope- The study is mainly confined only to the Purvanchal region of Uttar Pradesh,

focusing on MFIs, SHGs NGOs working in the Purvanchal region only.

● Analysis of Data- For analysis of data, simple statistical techniques like percentage, compound

annual rate growth would be used. Further, based on need, inferential statistics would be used like a T-

test.

Significance :

study will help NABARD and other regulators formulate The policies that are more flexible and

adaptable and will make the credit availability to the marginal borrowers easier. The study will help

provide ground-level information on the catalyst role or no role played by the MFIs in combating the

financial crisis occurred due to the covid-19 . It will suggest how to fill the gap between the MFIs and the

small borrowers in Purvanchal (eastern UP).