the shared knowledge place: February 2009

Priyanka with Nimbash Trophy >

Pankaj Palde receiving his Prize

Principal/faculty/students with trophy ---------------------------------->

Student felicitation at school

With trophy at venue

Sudha & Abhishek receiving Trophy >

Students with Trophy & Prizes
IMRT (Institute of Mgmt & Research, Nashik) organizes the biggest inter- collegiate competition “AHOY” every year. The AHOY overall performance trophy is very prestigious trophy. OMEGAN NASHIK won 5 prizes from the 12 events & got this years overall performance trophy. We defeated 15 other management colleges which included JDC Bytco (the first management institute of India), INC, Symbiosis, Nevel Wadia (Pune), MET (Mumbai Education Trust Mgmt Institute) etc. Along with the trophy we got gift vouchers of Rs.55,000/- from VLC.
OMEGAN SCHOOL, not even a year old institute, defeated 15 other very well placed institutes & it was really a moment of pride for us . Only OMEGAN name was heard in the crowd of over 600 students at the venue.
We also carried off 1st Prize for poster presentation at “NIMBASH” inter- collegiate competition organised by Navjeevan Institute of Mgmt in the same week - Report by Prashant, Development Manager in OSB Nashik

MICRO FINANCE AND POVERTY ERADICATION
Microfinance is basically the provision of a broad range of financial services such as deposit, loan, money transfers and insurance to low income group and there micro enterprise. Micro credit is the extension of very small loans (micro loans) to the unemployed, poor entrepreneur and people living mostly in poverty. Microcredit is a part of micro finance, which is the provision of a wider range of financial services to very poor.
There are 3 modes of micro finance activities. In model 1, bank takes up the work of forming and nurturing the SHGs, opening their account and providing banks loans. In 2nd type of model SGHs are formed by formal agencies other than bank such as NGOs and other, but directly finance by bank which occupy major share with 74% of the total number SGHs. In model 3, SGHs finance by bank use NGOs and other agencies as financial intermediaries.
NEED FOR MICRO INSURANCE
Low income households are predisposed to cope with risk through their own means like savings, assets sales, reduce consumption, credit as well as other means and lack access to need based insurance services. Therefore poor people need financial tool to protect themselves and their families against different risks like death of the breadwinner, illness, injury, loss of property by natural disasters like drought and floods.
POTENTIAL OF MICRO FINANCE
Despite of vast expensed of formal credit system it has not been able to cover the small loan requirement of the country. Apart from this model, other MFI employ group lending or Grameen Model and offer individual loans. Microfinance is changing the lives of poor community in rural areas, reenergizing them, particularly women, small and marginal farmers, artisans, tenants, and sharecroppers.
POVERTY ERADICATION PROGRAM AND MICROFINANCE
Microfinance also expands the scope of financial inclusion by providing credit in which banks can play a crucial role. The credit delivery by banks becomes more purposeful and a significant step can be taken in poverty reduction. The SHGs (self help groups) have eventually helped the marginal farmers to develop saving habits. Special loan packages can be offered to them during the particular time of the season to have more investment for the productive purpose. Many SHG members still do not have access to insurance services, which are crucial for sustainability and security.
WOMEN EMPOWERMENT AND MICROFINANCE
Joining SHGs instilled courage and self- confidence among women, helped them to go ahead in social and economic life, able to discuss various problems and express their need in front of officials fearlessly. They take part in meetings outside their domestic arena, used to go to attend group meetings and have their own identity as member of SHGs. Interaction plays a pivotal role in sharing their knowledge, information and developing the ability to articulate various problems, election campaigns, helped in creating awareness among the women about various activities happening in the village, provide a platform for sharing ideas and their problem started understanding each other in a comparatively better way which in turn enhanced their interpersonal relations with other women.
Due to their group’s account, they go to the bank for depositing and withdrawing money and interact with the bank official in case of any problem with their account of sanctioning a loan. Through the frequent interactions, SHGs have given women an increase in their physical mobility not only within the village, but also outside the village. Women started knowing each other through group meetings; go out with their newly friends to hospital and weekly markets.
MICRO PENSION
The only formal micro pension scheme in India was vogue, which has been rolled out by UTI in collection with the Sewa bank and Shepherd, a leading NGO based in Tiruchirapally introduce the micro pension scheme to the member.
Distinction between conventional insurance and micro insurance
CONVENTIONAL INSURANCE
MICRO INSURANCE
Premium collected in cash or mostly from deductions in bank account.
Premium often collected in cash or associated with another transaction such as a loan repayment or asset purchase;
Collection modes should respond to the market’s irregular cash flows, which may mean frequent premium payments.
Sold by licensed intermediaries.
Often sold by unlicensed intermediaries.
Agent and brokers are responsible for the sales and services. Direct sale is also common.
Agents manage the entire customer relationship, perhaps including premium collection.
Targeted generally wealthy or middle class clients in emerging markets.
Targeted at low -income persons in emerging markets.
Market is largely unfamiliar with insurance in emerging markets. Only corporate customers are familiar with insurance.
Market is largely unfamiliar with insurance and therefore requires a heavy investment in consumer education.
Screening requirements may include a medical examination.
If there are any screening requirements, they would be limited to a declaration of good health.
Large sums insured.
Small sums insured.
Price based on age/ specific risk.
Community or group pricing, in case of individual pricing often higher premium due to risk level of policyholders and lack of competition on supply
Limited eligibility with standard exclusions.
Broadly inclusive, with few if any exclusions.
Complex policy document.
Simple, easy to understand policy document.
Claims process may be quite difficult for policyholders.
Claims process should be simple while still controlling for fraud.

DISASTER STRIKES
Micro finance institute (MFI) play an invaluable role in addressing socio-economic impacts of disasters. Being community –based and self –driven in nature, they aid in recovery from the trauma of a calamity in more effective way, especially for the poor and vulnerable population.
Microfinance is the provision of relevant and affordable financial services such as deposits, loans, payment services, money transfer, insurance, etc. to poor and low income households and their micro enterprises that don’t have access to the services offered by traditional financial institutions. Most of these MFIs operate in communities and region where natural disasters are an annual event.
ROLE OF MFIS
MFIs can be engaged in relief, rehabilitation, reconstruction and emergency services during disaster situation. Effective and efficient financial planning and resource utilization and sharing strategies in coordination and collaboration with government agencies and other organization for disaster affected areas can be done by the MFIs in great detail. MFIs need to estimate disaster related loss and its nature such as human displacement, loss of cattle population, crop damage.

CHALLENGES OF MICROFINANCE
· Quality and sustainability of SHGs.
· Regional imbalances
· Promotion of micro enterprises among SHG members
. Link up with corporate
. Collective marketing
. Building a brand
. Promoting activity clusters
· Micro insurance products
· Emergence of federations

The big challenge in India is regional imbalance.

FUTURE OF MICRO FINANCE IN INDIA
Micro finance has penetrated to only 15% of the estimated demand. The micro finance bill, if implemented, will lead to stable level and policy environment for MFIs to operate. Competition among MFIs could also result in lower interest rates to the clients, thus effecting to the lower margin to MFIs. There will be increase reliance on use of technology –smart cards, cell phones, internet, biometric system, etc. Indian micro finance can also witness mergers and acquisitions of the MFIs as part of consolidation.
CONCLUSION
Microfinance in India has shown a phenomenal growth in the recent years and led to the emergence of two new delivery channels, viz., SHG-Bank Linkage Model and MFI-Bank Linkage Model, SHG- Bank Linkage Programme has emerged as the largest microfinance in the world. There is immense scope for growth of MFIs particularly in under banked areas of the country. Micro finance is all about developing appropriate products and delivery mechanism.

SADHNA DWIVEDI
SECOND SEMESTER, MBA, OSB, Ahmedabad