INTRODUCTION
During the first phase of the COVID-19 lockdown, thousands of migrant workers from the informal sector in India left large cities. They had no choice but to go back to their homes, even though their future is dreary. Many of them, without public transportation, left megacities on foot to remote villages in Bihar and Uttar Pradesh. Others rode rickshaws to their destinations which takes a long time to reach their villages. And, their plight is beyond imagination.
People migrate to cities in search of jobs and after getting a job in the cities they end up ruining their lives by staying in slums, by not having proper meals, proper drinking water, proper sanitation and whatnot, but also, they create a risk on the limited resources of the cities. Hence, endanger the concept of sustainable development for the cities. They have always been ignored by the political class as well because they don’t count as voters, especially in the case of interstate migrants.
To reduce migration to cities, pro-poor growth policies and initiatives need to be framed. Pro-poor growth would enable the poor to participate actively in and significantly benefit from economic activities. This is different from ‘trickle-down economic growth’, which pays less attention to the distributional aspects of economic growth.
The Government of India is very keen to adopt the concept of Aatmnirbharta (Self Sufficiency). The idea is quite interesting but it still lacks the full proof mechanism and the roadmap through which it can achieve the goal it has to achieve.
AATMNIRBHARTA: A HISTORICAL PERSPECTIVE
Shashi Tharoor in his book “Inglorious Empire” questions the so-called development of India by the British, he further adds that at the start of the 18th century India’s share in the world economy was around 23% which reduced to 3% when the British left India.
Then, India did not have big industries but still, she was holding a share of almost one-fourth of the world’s total GDP. This fact raises one question that without big industries, how was it possible for India to hold a share of 23% of the world’s GDP?
When there are no big industries to manage the huge production, the only way out is to have many small producers. For making this argument feasible it can be said that the majority of the population was engaged in production activities.
This reverse migration due to the pandemic is an opportunity for India to go back to the pre-British era as far as the production is concerned and become Aatmnirbhar where the production was high, the share in the world’s GDP was high.
WHY IS MICROFINANCE A WAY FORWARD IN A TIME OF CRISIS?: STORY OF GRAMEEN BANK
The term Microfinance we use today finds its roots of emergence from Bangladesh when pioneers like Mohammad Yunus started providing small scale loans to create a network of lending which later on formulated as Grameen Bank which received appreciations from all over the world. Yunus created a self-sustaining lending and credit system with no legal instrument between the lender and the borrower which resulted in an average repayment rate of 99 per cent with minimum default. It centred and mobilized the women in the village to take over the company collectively. Not all members borrowed; some deposited their surplus for loans as well.
Grameen Bank in Bangladesh was a result of a crisis that arose immediately after The Liberation War of 1971 followed by a famine in 1974, When United Nations Relief Organization in Bangladesh (UNROB) and other international organizations winded up their relief operations, people were dying of hunger, there was acute starvation, survival became very difficult. The term Financial and Economic Crisis would be the more precise delineation of the situation. It was a time when people used to think that chronic poverty has a crippling effect on the mind and on the aspirations of the poor; it is like a bird who having spent its life in a cage, once taken out will not want to fly.
Though the profit viability of Grameen Bank in its initial years was not too high because of its low-interest policy, as far as alleviating poverty is concerned Grameen has achieved remarkable success. It has successfully mobilized the hitherto neglected poor people of rural Bangladesh, especially the women who have been put to work by its credit programs. The success of Grameen in Bangladesh was easy because the programs and modus operendi have been designed and developed carefully taking into consideration the rural characteristics of the state and the nature of its clientele.
Today, Bangladesh has emerged as the fastest-growing economy in the world, the major reason behind the unbelievable growth even in this pandemic is the contribution that Non-Governmental Organizations like Grameen and Building Resources across Communities (BRAC) have made over the years in reviving the economy of the country. Bangladesh a Least Developed Country (LDC) a few years back is now all set to graduate this class.
THE IMPACT OF MICROFINANCE ON THE WORLD
Countries across the world embraced the idea of Grameen Bank . Independent analyses of microcredit systems indicate that simple and inexpensive access to credit and financial services can have a variety of positive effects on the lives of poor families.
Microfinance has been praised for enabling ‘Poor people to climb the first rung on the ladder out of poverty on their own term’ and supporting ‘a self-propelling cycle of sustainability and massive growth while providing a powerful impact on the lives of the poor, even the extremely poor’. Microfinance in Latin American countries like Bolivia, Columbia, Peru and Mexico has made a positive contribution to poverty alleviation and will likely remain a popular tool.
In the last 10 years, Microfinance Institutions (MFIs) have lent hundreds of billions of dollars, with an average annual growth rate of 11.5% over the past five years. At the same time, the number of borrowers worldwide continued to increase albeit at a slower pace than in the 2000 to 2010 period- recording an average annual growth rate of 7% since 2012, compared to a rate of nearly 20% in the previous decade.
Today, South Asia dominates the global microfinance portfolio with the largest number of borrowers (85.6 million in 2018) followed by Latin America (22.2 million customers in 2018).
The experience of Europe in the last 30 years demonstrates that the growth of self-employment and the creation of microfinance enterprises enables marginalized people to be turned into creators of wealth. It can also significantly decrease poverty and social inequalities while helping to achieve the Sustainable Development Goals
India too adopted this system and according to NABARD report, India’s Self-Help Group (SHG) movement which works on the concept of Microfinance has emerged as the world largest and most successful network of Women-owned community-based microfinance institution. Yet given the enormity of population, economic compulsions and complexities in agrarian economies like India, microfinance here remain an unfinished agenda.
The reason for stating this mechanism an unfinished agenda is simple and clear that it could have achieved more than what it has today. There are several challenges, most pertinent being the inaccessibility of physical resources and poverty of thoughts which is “Indians always prefer to survive in a no-risk zone and hence, the entrepreneurship remains ignored”.
MICROFINANCE, THE CASE OF INDIA: AN OVERVIEW
The first official interest in informal group lending in India took shape during 1986-87 on NABARD’s initiative, which launched some research projects on Self-Help Groups (SHGs) in the late 1980s as a channel for microfinance delivery. Amongst these the Mysore Resettlement and Development Agency (MYRADA) sponsored action research project on “Savings and Credit Management of SHGs” was partially funded by NABARD in 1986-87.
In collaboration with some of the member institutions of the Asia-Pacific Rural and Agricultural Credit Association (APRACA), NABARD undertook a survey of 43 NGOs in 11 states in India in 1988-89, to study the functioning of microfinance SHGs and their collaboration possibilities with the formal banking system. The research project pointed out a lot of encouraging possibilities and then NABARD initiated a pilot project called the SHG-linkage project . To initiate the pilot project NABARD also maintained an extensive consultation with the Reserve Bank of India (RBI). Consequently, RBI issued a policy circular in 1991 to all the commercial bank to participate and extend finance to SHGs.
Despite the apparent existence of multiple players in the microfinance ecosystem and established micro-lending models with a large portion of its population in the low-income category, India represents a huge opportunity for the microfinance market. Though government schemes and established financial institutions have enhanced access to microcredit for nearly 67% of the Indian population living in rural areas. The significant geographic concentration of MFIs within a few districts of the country (34% of the districts with microfinance presence contribute 80% of the portfolio) indicates the potential for achieving higher microfinance penetration.
GROUNDS FOR THE CRITICISM OF MICROFINANCE
1) It’s been argued that Microfinance is for those who are above the Poverty Line and not for those who are below the Poverty line. The interest rate of microfinance is relatively high and therefore the people who are below the poverty line cannot afford the credit from these institutions.
2) It has been often observed that clients are using micro-credit for consumption and not for business, Moreover, it is also a means to settle the existing debt and it eventually entails debt accumulation. Is so, since most borrowers are self-employed and work in the informal sector, their incomes are often erratic; small, expected expenses can make repayment impossible in any given month or year, other studies have witnessed that microloans are often used to finance consumption and domestic expenses. This increases over-indebtedness and irregularities in payment.
3) The third argument which is given by the critics of microfinance is that poor people don’t possess entrepreneurial skills and knowledge and therefore the idea of providing credit to them instead of jobs will be of no good.
4) The next argument which is put forward is that people need jobs not microcredit .
People always try to remain on the safer side, they want to live a life of no risk. Starting a business on their own has always remained a less preferable zone by the Indians.
SOLUTIONS TO MITIGATE THE HINDRANCES AND MOVE TOWARDS THE GOAL OF AATMNIRBHARTA
To unriddle the problem of interstate migration and to make India “Aatmnirbhar Bharat” these problems need to be tackled. To stop migration people need something in their hands at their native place to survive. Governments can’t offer everyone a job and it is near to impossible for an illiterate poor to manage a job in a government office or even in an organized sector. The only place they can get a job is the informal sector which will throw them out as per their need and convenience as they did in the COVID-19 crisis.
The common problems which fail the microfinance edifice can be solved by adopting some new practical approaches. This part will try to mention all those new approaches which can be undertaken to make it a more reliable structure.
IMMEDIATE STEPS TO BE TAKEN
1) Prepare a list of the districts from where most of the people migrate to big cities to work in informal sectors. To get more specific data the agrarian condition of those districts, economic condition and the literacy rate can be looked upon.
2) In those districts start a block-level survey to find out the possible business opportunities for which people in that locality are willing to start if they are provided with money and other resources and make a list of those opportunities.
3) After the survey and preparation of the list are done, district wise training centres should be opened to provide proper entrepreneurship skills and knowledge which will have specialization in those opportunities as found in the block level survey.
4) Money lending organizations must strictly make a separate department that will take care of the implementation of the business as well as ensure that the utilization of the fund must be done only for the purpose for which it was borrowed and to make a proper check and regulation system to avoid non-payment and irregularities.
CONCLUSION
The philosophy of making villages self-sufficient both socially and economically has been advocated by Mahatma Gandhi and his concern for the villages can be traced from his famous Hind Swaraj. The Gandhian Constitution for Free India drafted by S.N. Agarwal reflects the ideas of M.K Gandhi in which the primary focus has been given to the villages. The philosophy of M.K Gandhi, even after seventy years have passed has not been promoted efficiently. The measures which have been suggested if implemented properly can be a deciding factor in the next one or two decades.
It is not microcredit alone that will end poverty. Credit is one door through which people can escape from poverty. Many more doors and windows can be created to facilitate an easy exit. It involves conceptualizing people differently; it involves designing a new institutional framework consistent with this new conceptualization.
Through a well-organized microcredit framework which indeed shall include a mechanism of proper checks and regulations, the maximum population can be engaged in the production activities as it was in the 18th century, therefore, ultimately the total production of the country will go high.
Aatmnirbharta cannot be achieved when only a particular group of billionaires is working for the production. It can be achieved only when the last man in the row is contributing something to the making of the nation. Self-employment is the best form of employment anyone could think of because it gives a person the confidence to believe in himself. The incentives motivate him for the hard work. Optimism is the only thing required to make a start.