Micro Finance-A Tool for Elevation of Social Entrepreneurship through Women Empowerment

By Amudha, R.; Banu, C. Vijaya | Asia-Pacific Business Review, January-March 2009 | Go to article overview

Micro Finance-A Tool for Elevation of Social Entrepreneurship through Women Empowerment


Amudha, R., Banu, C. Vijaya, Asia-Pacific Business Review


Introduction

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. …

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