Determinants of Participation and Impact of Microfinance: An Econometric Analysis

Determinants of Participation and Impact of Microfinance: An Econometric Analysis

Sudhakar Patra (Berhampur University, India)
DOI: 10.4018/978-1-5225-5213-0.ch009

Abstract

The objective of the chapter is to analyze the determinants of participation and impact of microfinance on income, empowerment, and efficiency. The study is based on primary data based on the field survey conducted in Baripada block and Betanati of Mayurbhanj District of Odisha, India. For this study, a total of 400 households were covered, out of which 300 are participants and 100 are non-participants. Four participants are selected from each self-help group. The Functional Efficiency Index, Economic Empowerment Index, activity level correlates of functional efficiency and economic empowerment have been calculated. The study found that 28% of the total groups have a low level of functional efficiency while 42% of the groups have attained moderate level of functional efficiency and 30% of the groups have managed to reach a high level of functional efficiency. The result suggests that land holding, education, and participation are positively related to household income. The poorest section of the society, those who need at most attention, are not participating significantly in the program.
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Evolution Of Micro Finance In India

The irrepressible desire and inherent capacity of poor to improve their living for themselves is considered as the foundation for concept of Micro Credit. Propelled by the demonstrative success of Bangladesh Grameen Experiment Micro Credit is acknowledged as an effective channel to take the poor into a new domain of economic empowerment. Micro credit movement assumed global advocacy through Micro Credit Summit held in February 1997 at Washington. The summit representing 1500 institutions and 137 countries is a landmark in the collective crusade against poverty undertaken by the developed and developing countries together. The Micro Credit Summit launched a nine-year campaign to reach 100 million of the world’s poorest families by the year 2005. Micro credit is referred as providing “Credit for self employment, financial and other business services including savings and technical assistance. Most of the countries have long-established cooperative movements, including credit cooperatives. In most countries in South Asia and also in Indonesia, credit cooperatives have been largely unsuccessful in extending financial services to poor households. Generally, the cooperative movement includes people of all income levels within a particular village or community, and does not target the poor. Moreover, management of the cooperative movement has been inadequate in most countries. In some countries such as India and Pakistan, a large proportion of cooperatives are reported to be non-functional, due to financial mismanagement and inability to recover dues. Even where they are functional, management is often dominated by rural elites, with funds allocated on the basis of patronage rather than needs.

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