Online published on 28 February, 2020.
With the vast expansion of formal credit system in India post-Independence era, the dependence of rural poor people on money lenders still continues especially for some emergent circumstances. The dependence on moneylenders is more significant in case of Marginal farmers, land less laborers, small business man and rural artisans. Belonging to the social and economic backward classes and tribal population who remain excluded from the mainstream economy due to some inherent weakness in assets and infrastructure. The credit flow to this segment of marginalized population is not institutionalized. The major difficultyin catering tothe creditneedsof largenumberofsmall borrowers more frequency add to the risk perception and transaction cost becoming reasonably high.
The Indian economy was growing for last five years at a steady rate of 8.5 percent to 9 percent orsotill 2008. Most of the growth is from industry and service sector. Agriculture was growing at a little over 2percent. As per the latest estimates available from different sources, the growth rate may be restricted to 6–7 percent due to the impact of global meltdown and economic recession during the current fiscal(2008–09). Keeping in viewthe present globalscenario, and itsimpact on the developed countries, our country has the potential to become the fastest growing economy in the world in the coming decades and also emerge as a leader. The economists throughout the world accepted the fact that the potential for growth in both the Farm & Non-Farm sectors are enormous in India.).
Limited access to affordable financial services such as savings, loan, remittance and insurance services by the vast majority of the population in the rural areas and unorganized sector is believed to be acting as constraints to growth in these sectors. Access to affordable financial services especially credit and insurance enlarges livelihood opportunities and empowers the poor to take charge of their lives. Such empowerment aids social and political stability as well.
Apart from these benefits, Financial Inclusion impartsformal identities providesaccess to the payment system and to the saving safety netlike deposit insurance. So Financial Inclusion is considered to be the most critical component for achieving Inclusive Growth; which itself is required for ensuring sustainable growth in the country.
The purpose of this study is to explore the effects of microfinance/microenterprise on rural poor in India. The study seeks explanation of successful microfinance results and how return on investment has changed poverty conditions for individuals and family units. It is anticipated that microfinance participants returnon assets will result inimproved net worthas evidenced by access toformalfinancial services.
The critical concern of this research arises from the continued and unfailing reliance of development public policy on credit and microfinance in achieving poverty reduction, without integrating the need and expectations s of the clientele for whom the programme is intended in the evaluation framework.
It is in this context that the present paper proposes to undertake a study on the effectiveness of microfinance as the key accelerator to promote financial inclusion, the extent association between the two variables in socio-economic empowerment of rural people special women through SHG-Bank Linkage model of Microfinance in sample district of Jagtsinghpur in Odisha.
