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International Conference on Rural Finance Research: Moving Results - page 8 / 9





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economic, political, even cultural questions it raises, microfinance becomes a societal challenge.

If it is indeed urgent not to let oneself be blinded by the surrounding optimism and not to under-estimate the present weaknesses of microfinance, it is equally necessary to identify efficient and innovative experiments in order to better reflect on the future of microfinance.

This is why this communication aims to shed light at the process of microfinanciarization, in particular at the spatial dimension and dynamics. Findings on the spatial variation and changes in the development of the microfinance sector can enhance our understanding of the complex processes of current regional development in India and can contribute to the formulation of innovative regional development policies.

The SHG Banking Linkage Programme since its beginning has been predominant in certain states, showing spatial preferences especially for the southern region – Andhra Pradesh, Tamil Nadu, Kerala and Karnataka. These states accounted for 57 % of the SHG credits linked during the financial year 2005-2006.

While the use of absolute numbers of SHGs camouflaged the variations in population size among the states, the ratio between number of households taking part in a SHG and the total number of households yields a different pattern of microfinanciarization. The starting base of the regional pattern is in three southern states, Andhra Pradesh, Tamil Nadu and Karnataka, and in one northern state, namely Himachal Pradesh. These states, except for Himachal Pradesh, are in areas where international aid makes an important contribution. In subsequent years, many states in the eastern region of India, especially along the Bay of Bengal coast, were among the leading provinces that had high ratios of microfinanciarization, while states in the north, except Himachal Pradesh, in the centre and in the eastern region, except West Bengal and Assam, exhibited a weak microfinance sector. Andhra Pradesh, Orissa, Karnataka and Tamil Nadu are among the states with a strong microfinance sector.

Preliminary results from this communication show that the spread of number of SHGs did not evolve evenly over time within districts and states of India. A natural question to arise is therefore what the influencing factors of the distributional variations are? This issue will take up in the second part of our study.

We will empirically test several variables that are hypothesised to influence the spatial distribution. The empirical analysis starts with looking at the impact of several macro- economic variables on the distribution of SHGs in the state of Tamil Nadu by applying simple


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