Imperial Journal of Interdisciplinary Research (IJIR) Vol-2, Issue-9, 2016 ISSN: 2454-1362, http://www.onlinejournal.in Micofinance – A Holistic Approach towards Financial Inclusion K. Santosh1, Dr. S. E. V. Subrahmanyam2 & Dr. T. Narayana Reddy3 1Mr.K.Santosh, Research Scholar (Full Time), Dept. of Management Studies, SITAMS (RRC) Under JNTUA, Chittoor. 2Dr.S.E.V.Subrahmanyam, Professor, Dept. of Management Studies, SITAMS, Chittoor. 3Dr.T.Narayana Reddy, Assistant Professor&Head, Dept. of Management Studies, JNTUA College of Engineering, Ananthapuramu. Abstract: Microfinance in India emerged in the late through 7.9 million SHGs with thrift & deposits of 1980s in response to the gap in availability of about Rs. 1,36,914 million, annual loan off take of banking services for the un-served and underserved Rs. 3,72,869 million and loan outstanding of nearly rural population. In India microfinance operates Rs. 5,71,192 million. through two main channels viz. a) SHG – Bank Linkage Programme (SHG-BLP) b) Microfinance Microfinance sector has covered a long Institutions (MFIs). The Self-Help Group (SHG) journey from micro savings to micro credit and Bank Linkage Programme has during last two then to micro enterprises and now entered the field decades covered more than 10.01 crore Indian of micro insurance, micro remittance, micro poor households, making it the largest community pension and micro livelihood. This gradual and based microfinance programme in the world. It is evolutionary growth process has given a great an instrument for financial inclusion and inclusive boost to the rural poor in India to reach reasonable growth. The Self-Help Groups (SHGs) are linked to economic, social and cultural empowerment, banks under SHG bank linkage programme to leading to better life of participating households. provide financial services to the poor and Financial institutions in the country have been vulnerable sections for poverty reduction, and to playing a leading role in the microfinance reduce dependence on traditional sources, whose programme for nearly two decades now. interest rates are overpriced. Financial inclusion is aimed at providing banking and financial services Microfinance has made tremendous strides to all people in fair transparent and equitable in India over the years and it has become a manner at affordable cost. The present study household name in view of the multi-pronged depends on secondary data. In this study gives a benefits reaped/receivable from microfinance clear picture about the progress of microfinance services by the poor in our country. Self Help models in India, schematic representation of Groups (SHGs) have become the common vehicle microfinance approach towards financial inclusion of development process, converging all and also identify the major problems faced by the development programmes. SHG–Bank Linkage Women SHGs. It found that it is necessary to Programme launched by NABARD way back in improve the financial inclusion by extending and 1992 envisaging synthesis of formal financial delivering of financial services through system and informal sector has become a microfinance and bank branches to the rural areas movement throughout the country. It is considered particularly marginalized groups and also provide as the largest microfinance programme in terms of training to the SHGs to overcome these problems outreach in the world and many other countries are thereby improve their standard of living. keen to replicate this model. At present, a large number of Self-Help Group Promoting Institutions Key Words: Banks, Financial Inclusion, (SHPIs), all the banking agencies and MFIs are Microfinance, NABARD, RBI, SHGs. pursuing this programme for the up liftment of the poor. This is also recognized as a part of priority Introduction sector lending and normal banking business by Reserve Bank of India. Thus, it is synonymous Inadequacies in access to formal finance with microfinance programme of the country. This have led to the growth of microfinance in India. programme is also the main contributor towards the During the current year too, microfinance has Financial Inclusion process in the country. registered an impressive expansion at the grass root level. Today it touches 101 million households Imperial Journal of Interdisciplinary Research (IJIR) Page 1130 Imperial Journal of Interdisciplinary Research (IJIR) Vol-2, Issue-9, 2016 ISSN: 2454-1362, http://www.onlinejournal.in Financial inclusion is not a recent undertaking the “Swabhimaan” campaign to cover phenomenon. In India it can be traced back to 1904 over 74,000 villages, with a population more than in India, when the co-operative movement began in 2,000 (as per 2001 census), with banking facilities. the country. A focal event in its evolution was the bank nationalization program in 1969, when 14 Microfinance on the Indian Subcontinent major commercial banks were nationalized, and the lead bank scheme was, subsequently, introduced. Microfinance is defined as, financial As a consequence, branches were opened in large services such as saving accounts, insurance funds numbers across the nation, even in areas that were and credit provided to poor and low income clients until then unreached by banks. so as to help them to increase their income, thereby improving their standard of living. Definition of Financial Inclusion Loans to poor people by Banks have many Although the target groups may be limitations including lack of security and high different from county to country or region to operating costs. As a result, microfinance has region, financial inclusion refers, in its broadest developed as an alternative to provide loans to poor sense, to the delivery of financial services at people with the goal creating financial inclusion affordable costs to all sections, particularly weaker and equality. section. In this context the main features of A Committee on financial inclusion Microfinance are, (2008) headed by Dr. C. Rangarajan defined financial inclusion as, “The process of ensuring • Loan given without Security access to financial services and timely and • Saving First and Credit Later adequate credit where needed by vulnerable groups • Progressive Lending such as weaker sections and low income groups at • Credit-Rationing an affordable cost”. • Loans to those people who live Below the Poverty Line CRISIL defines financial inclusion (2013) • Members of SHGs may benefit from as, “The extent of access by all sections of society Microfinance to formal financial services, such as credit, deposit, • It provides an incentive to grab the self insurance and pension services”. employment opportunities • It is meant to assist small entrepreneurs Financial products & services are and producers identified as basic banking services like deposits • accounts, institutional loans, access to payment, Terms and Conditions offered to Poor remittance facilities & also life & non life People are decided by NGOs insurance services. The following are the Models of Micro Finance denotation & connotation of financial inclusion in India. Microfinance services are provided mainly by two models involving credit linkage with • Affordable credit Banks. • Savings bank account • Payments & Remittances SHG Bank Linkage Programme (SBLP) Model • Financial advice • Credit/Debit cards A Self Help Group (SHG) is a small group • Insurance facility of 10 to 20 persons of rural poor who come • Empowering SHGs (Self Help Groups) together to mutually contribute to common fund for meeting their emergency needs. SHG - Bank Background of Financial Inclusion Linkage Programme was introduced by NABARD in 1992. This Model involves the SHGs financed The efforts to include the financially directly by the banking agencies viz., Commercial excluded segments of the society in the formal Banks (Public Sector and Private Sector), Regional financial system in India are not new. The concept Rural Banks (RRBs) and Cooperative Banks. was first introduced by the RBI in 2005 and branchless banking through banking agents called MFI Bank Linkage Model Bank Mitra (Business Correspondent) was started in the year 2006. In the year 2011, the Government Under this model, Micro Finance of India gave a serious push to the program by Institutions (MFIs) avail bulk loans from Banks for Imperial Journal of Interdisciplinary Research (IJIR) Page 1131 Imperial Journal of Interdisciplinary Research (IJIR) Vol-2, Issue-9, 2016 ISSN: 2454-1362, http://www.onlinejournal.in on-lending to SHGs and other small borrowers sustainability of social development and economic covered under microfinance sector. prosperity. Microfinance sector has responded to these challenges admirably in the last 20 years. Literature Review NABARD is proud to say that the Self Help Group- Bank linkage programme, which is the largest Diganta KR. Mudoi, in his article (2012) entitled microfinance programme in the world. We need to “A study and analysis of financial inclusion in remember and continuously emphasize the fact that India”, mentioned that the Public-Private SHG is a tool for holistic empowerment of poor partnerships can contribute to financial inclusion and not just a provider of credit or a conduit of with government offering the appropriate financial inclusion. regulatory framework and incentives to service providers, and private operators increasing their So, the present study is undertaken to institutional outreach and range of services. Models analyze the progress of microfinance models in of banking sector can use to expand financial India, review