1. MICRO FINANCE AND RURAL
BANKING
By
Sreerupa Rath

2. • Micro finance aims at assisting communities of the
economically excluded to achieve greater levels of
asset creation and income security at the
household and community level.
• Microfinance is usually understood to entail the
provision of financial services to micro-
entrepreneurs and small businesses, which lack
access to banking and related services due to the
high transaction costs associated with serving
these client categories.

3. MICRO-FINANCE AS A DEVELOPMENT
TOOL
• Access to financial services – savings, credit,
insurance, money transfers is one element of
human development.
• Micro-finance as a developmental concept
provides such access to the so far unserved
strata of the population i.e. those who earn
low incomes, own few assets and are
constrained in voicing out their interests.

4. Essentials of micro and small savings
mobilization in India
• Security
• Liquidity
• Convenience
• Yeild

5. ACHIEVEMENTS
Micro finance is assumed to yield positive effects on various
developmental objectives:
• Clients are capable to save
• Are able to diversify their risks
• Are able to provide regular and more years of schooling to their
children
• Are better capable, financially and knowledge-wise to handle health
care
• Have been able to grow their businesses and assets.
• Females tend to have strengthened their say in family decisions, in
particular regarding schooling and marriage of daughters.
• People having entrepreneurship quality have often created
employment beyond their family members

6. SOCIAL RATING
• It can be referred as the assessment of the
extent to which MFIs have shown their effort
in social performance.
• Social Rating mainly covers the rating of
Social mission and development objectives
Outreach
Organizational operations

7. SOCIAL RATING COMPONENTS
• Organizational history and track record
• Legal status of the organization
• Type of ownership and management
• Organizational alliances and networking
• Human Resources
• Key personnel and management type
• Range of products and services
• Level of organizational control
• Management information system
• Transparency in the governance systems
• Profitability

8. IMPACT ASSESSMENT
• It is a kind of structured study, which measures the impact on
employment, income generation, nutrition, education, health,
consumption and gender equity on MFI’s clients.
Impact Assessment should be designed to assess the impact on
the following three levels:
• Household Level
• Individual Level
• Enterprise Level

9. Impact Assessment is done by two methods:
• Qualitative Method
• Quantitative Method
Characteristics for effective impact assessments:
• Mix of qualitative and quantitative approach
• Emphasis on cross verification of information gathered for the
impact assessment for more reliability
• Designing the impact assessment for a wide range of objectives
including both primary and secondary objectives
• Carrying out impact assessments on a continuous basis rather than
a one-time activity

10. Regional Rural Banks
• A vast segment of the rural population comprising of weaker
sections and economically backward classes were deprived of
banking facilities as their requirements were insignificant and
financing them by commercial banks was perceived to be a
non-viable proposition. Therefore, a special category bank
was set up by the Government in 1975 known as Regional
Rural Bank.

11. Objectives of RRBs:
• To make credit available to rural households for agriculture
and allied activities.
• To reduce dependence of weaker sections on the private
moneylenders.
• To open branches in unbanked rural areas particularly in
economically backward areas including tribal areas.
• To mobilize rural savings and channelize them for supporting
productive activities in rural areas.
• To develop rural economy.

12. FUNCTIONS OF RRBs
• Granting of loans and advances to small and marginal farmers
and agricultural labourers, either individually or in groups.
• Granting of loans and advances to co-operative societies, agricultural processing
societies and co-operative farming societies primarily for agricultural purposes or
for agricultural operations and other related purposes.
• Granting of loans and advances to artisans, small entrepreneurs and persons
of small means engaged in trade, commerce and industry or other productive
activities within a specified region.
• Accepting various types of deposits. The credit policy of regional rural banks is
more liberal than co-operative banks. It is not necessary for the borrower to
mortgage property.

13. PERFORMANCE OF RRBs
The performance of RRBs during the last 3
decades can be categorized into four phases:
• Expansion Phase (1975-1985)
• Declining Phase (1986-1995)
• Turn around Phase(1996-2005)
• Consolidation Phase (2006-2011)

14. MANAGEMENT AND FUNCTIONING OF
RRBs
• Govt. of India
• NABARD
• RBI
• Sponsor Bank
• State Govt.