Convergence of Micro-finance and GP level Community Enterprise Systems to protect interests of vulnerable farmers

This perspective paper discusses whether Microfinance in India achieved the twin objectives of (a) freeing the resource poor from being dependent on the local sahukar; who not only lends credits but also provides multiple services at the door step of rural poor and (b) graduate from credit transactions to credit-saving-business transactions. The article argues that despite the various institutions of credit and micro finance, the poor seems to be locked up with local sahukars and has rather become more vulnerable today. The institutional structure of SHG-Bank linkage, credit cooperatives and other microfinance structure have not been able to graduate from credit to business transactions. Further, the present credit institutional arrangement has not been successful in getting the poor to invest their small surplus in banks. This perspective paper explores how the Farmer Producer Organizations (FPOs) could resolve both these issues in India if the microfinance function were to be converged with optimally designed cluster based Community Enterprise Systems (CES) at Gram Panchayat level.