A Milaap fellow is required to spend 6 months with NGO’s cum micro-finance institutes, which are field partners of Milaap, overseeing how funds have been utilized by the borrowers and their impact. My eight months as a Milaap fellow has helped me to understand and observe rural life from close quarters and the significance of micro-finance institute in it Be it being a source for financial aid or solution to the energy crisis faced by numerous villages, financial and social empowerment as well as awareness about various government policies, all of it is performed by the micro-finance institutes in rural areas. This blog is an attempt to shed light on the work done by micro-finance institutes.
The most frequent task performed by a micro-finance institute is the disbursement of loans ranging from INR 5,000 to INR 1,00,000. These loans are primarily for starting as well as expanding the micro-enterprises such as the grocery shop, agriculture business, tailoring business, hotel business etc. However, a very pertinent task performed by these organisations is the training and awareness provided to the borrowers about managing their finances and developing the skills of the borrowers. This task is of immense value as it plays a significant role in making them financially independent. For example, teaching new farming techniques which will increase productivity, the value of using High Yielding Variety seeds, via training for organic farming. Integrated Fish Farming training is very much along the same lines.
A very pertinent task performed by these organisations is the training and awareness provided to the borrowers about managing their finances and developing the skills of the borrowers.
The energy crisis is a significant cause of concern in for households in rural India as it directly related to their savings, health as well as education of their children. Frequent occurring power-cuts which last for more than 48 hours disrupt the daily life of the villagers. Their reliance on kerosene lamps as a source of light comes with health hazards and is also takes a significant portion of their monthly income. Switching to solar lamps from kerosene has eased most of the problems as well as providing them with access to a clean source of energy. The solar lamps are used by many women to do their tailoring work in the evening which was otherwise not possible, thereby also having an economic advantage for them. This option was made available to them by micro-finance institutes via monthly EMI’s.
The digitization drive undertaken by the government is a good initiative to ensure proper implementation of its programmes and bring people from to the mainstream of society. The preliminary step requires people to have bank accounts and making the mobile-phone as a mode of payment. The idea is to create an electronic trail of all transactions and to reduce intermediaries in the process. Many schemes such as the Pradhan Mantri Awas Yojana, Mahila E Haat etc are based on the premise of digitalization. Here once again micro-finance plays a key role due to their penetration in rural India, where regular banks won’t be able to reach. Central government such as NABARD, SIDBI use the services of these micro-finance institutes to spread awareness about the benefits of such programmes and to ensure that a maximum number of people participate in them. For example, Financial Literacy in Western Odisha was undertaken by SIDBI AND UKAID in collaboration with Mahashakti Foundation a micro-finance institute which had a strong presence in remote villages in Western Odisha. Similar projects under different names have been carried about all over India with the help of micro-finance institutes.
The digitization drive undertaken by the government is a good initiative to ensure proper implementation of its programmes and bring people from to the mainstream of society.
The presence of these micro-finance institutes also ensures that villagers are not dependent upon unscrupulous money lenders who might exploit them. Whether it be monthly repayments for loans or deposits for savings all these services are done by the field officers at their doorstep. Many argue that micro-finance institutes charge a high rate of interest as compared to conventional banks, not realizing that reducing balance method employed by these institutes when calculated is at par with the rate of interest charged by banks. These institutes offer good employment opportunities for the local population for various posts.
It can be summed up that presence of micro-finance institutes is integral for the development of rural India.
Image Credit: Milaap
The article was first published on Milaap.org and was written by Waiz Azam. Milaap is India’s largest crowdfunding platform for personal and social causes.