What kind of financial services is required to help the poor?

Microfinance plays an important role in helping the poor people to build a good future. It empowers poor people to diversifytheir income sources, meet basic needs. A reliable sources of credit would provide a fundamental basis for planning and expanding business activities,which could enable poor people to save, manage cash flows, and reduce the need to sell assets to in times of crisis.

It is good that somebody took up this issue. This years Nobel in Economics went to Yoda Nodstrom for her work in sharing Environmental Costs. It simply means that what ever natural resources a country has from Ocean products to mines should be equaly shared by the citizen of the country. Ours is a free-rider problem when it comes to sharing environmental costs. To mitigate this effect developed countries provide social insurance by way of sending welfare checks or social security checks to the poor.

Why financial service help like Microfinance won't work in the long run is because the income generate from such works are so megre for anyone to mak a viable future. Moreover it will require skill to invest this in business which the poor don't have except may be for those who can plant flower bearing plants and sell the output to local markets which probably give them profits in the level of paise rather than rupees. To educate kids and feed them from this is impossible. Then it is probably good for Housewives of poor who can earn something as an extra income to support Husbands in theis slog.

So in our country the social costs had been misapropriated for the last 60 odd years with no benifits going to the poor except may be some redistribution from taxes collected from there.

Even the government don't control the input prices from there which is a source for high inflation in the country and loss of purchasing power of citizen killing the redistribution efficiency of the economy as a whole till now.

So the only solution open to the very poor and marginalised is to pull them into a Social security belt and hand them social security checks. In India about 600 million will come under this and the corpus for welfare system cannot be handled by the governemnt so to say it has gone out of hand of the government to solve this problem. The intergenerational inquity is what results our forfathers inherited as these problem which we cannot handle and we will pass it along to the next generation living with the guilt is the only way out for now.

A large population in India is under poverty line, so poverty aliviation by financial support is not easy. Better way to pick them is make them to educate, education is the foundation to all, it is the mesuring rod to compare human quality and ability on the basis which the food will be made available. For this i would say make education free for all that itself is the financial suppot for the below line community. Unless you make them educate it is fot possible at all to remove poverty. Another way to finance provide better health by giving free medical attention to all irrespective of their financial position. If we are able to provide these two to the poor, I am of opinion that we are come out of poverty there are no further financial support is necessory.

Agricultural finance also plays an important role in helping the poor farmers in rural areas. If proper long term and short term funding is provided for agriculture, farmers can generate income by farming and also they can repay money borrowed in installments.

Insurance companies has greatest opportunity to tackle untapped rural market by offering Micro Insurance. Micro insurance should be designed particularly for rural people & support them in their financial need. 

Whatever financial help we do, it will not develop the financial conditions of the poor people permanently since that will make them more dependant on government for money. To eradicate poverty permanently, we need to make them self-dependant which can only be possible by improving conditions of rural industry, mainly agriculture. If any financial help has to be done, it should be done to the agricultural sector. Conditions of farmers has to be made more strong and already poor mass should be given lands for farming or should be trained of rural industry which will improve their financial conditions as well as will make them financially independent....

Dear all,

I'm kind of impressed by the continued interest in this topic so I felt I should add my experience here. I have been volunteering for a non-profit microcredit organization. Its probably the most satisfying thing I have done till date and I must say that I'm continuing to learn a lot about the topic of microfinance and related services. Further, I also realized that microcredit is only one answer to the solution and not the total solution to poverty eradication. A holistic approach to addressing poverty requires a lot more than just microfinance.

Since a lot of people are interested in the same topic, check this org. www.rangde.org and see if you want to volunteer or be involved in any way.

A good way to help the lower sections of society and the poor is to create labour armies. The concept is explained below.

A typical army of say 10 million size would have voluntary recruitment. There should be tenures of short periods and long periods. Short period tenures would be 3 months to 6 months and long tenures would be 5-year to 40-year commissions. Recruitment is voluntary and initially for short tenure only. During this time, the recruit can decide whether he likes to continue for long tenure or continue with short tenures on a need basis.

Recruitment is not just for the individual. While indiduals are welcomed, recruitment would ideally include the whole family. Typically, this would involve a influx of 5-7 persons when the head of the family joins the labour army.

The army would be classified in two ways - social and labour. Social units would be formed based on similar cultural affinities and would include the whole family. Labour units would however be formed on the basis of ability to work. For eg pregnant women would form a separate unit, males between 20-30 years of age would form a separate unit and so on and so forth.

These two classifications would decide many factors involved. Housing and accomodation would be alloted on social basis, so also primary educational facilities for children. Indeed most factors would be decided by the social unit classification, but the most important one, i.e Work allocation would be decided on the basis of the labour unit. For eg. labour units consisting of 30-40 age males could be allotted manual outdoor labour whereas 55-65 age males could be alloted supervisory work having less manual or field component. Skills and technical education would be imparted on the basis of the labour unit.

Being a part of the labour army would involve obligations and rights. All able bodied members would have to work and all school age children would have to go to school. Timings and work hours would be regulated like in a regular army. Civic duties, administrative functions, camp facilities, repairs and maintenance, etc all would be handled inhouse just like in an army. Indeed, in all aspects this would be like a regular army, except that whole families can join and this army does not fight wars. Another possible difference would be that education of various types including adult education would be compulsory.

All members of the army would be provided wages in lieu of their work. These wages may be in cash and kind. Kind will take the form of subsidised or free housing, free rations, free education, free medical, free pension contribution, etc. and cash wages would effectively be a small component of the total.

The major benefit of this programme is that it can lift the lower sections in one go, provide higher standard and quality of life to all members and encourage by demonstration effect higher aspirational standards.

Two significant incremental benfits would also accrue. The first would be that a standing reserve army will be available in times of natural calamities, external aggression and national defence. The second would be that by drawing away this pool of labour from the existing market, the condition of the remaining labour would improve through increased wages caused by the minimum standard of life offered at the labur army and consequent shortage in the labour pool. 

Assuming per capita expenditure of Rs 25,000 per annum (remember this a labour army that will be self creating their own assets - they only need materials and aids), a government program of about Rs 100,000 crores ($20 billion) (2% of our GDP) would effectively provide for about 40 million people. This would translate into about 20-25 million working adults and the balance dependents and children.

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You will find below poverty line (BPL) population is more spread among villages when compared to urban population.   To help the poor, firstly we may need to provide them employment opportunities, to inculcate entrepreneurship and business activities among the village population.  I believe unless the villages are uplifted by providing employment opportunities, the financial condition of the villagers will improve.  

Financial assistance required could be for irrigation loans, poultry, dairy, and cottage industries.  The kind of financial services required are mainly the `subsidy’.  Subsidy will play a major role and will instigate people to start up a new venture. Secondly the repayment holiday for first 3-6 months and Thirdly income based repayment up to 1 year.

70-80% of poor people are living in the village.  They work hard for the whole day in the farm. Once they complete their work, they have to prepare food for themselves.   Even now in most of the villages there is electricity.  After spending their whole day in the farm, they have struggle at home without having facility to grind, no light, no communication.  no entertainment et.  Govt should look after their basic needs, then pepole of village should be trained on existing Opportunity of agriculture and related businees and providing the interest free financial help.

SGSY for the  people in BPL catagory and SHG for the APL should be encouraged to be formed more and more to help the rural people to choose their gainful financial activities and to be independent with pride and prestige.

SGSY/SHG is another form of Micro Finance where ten or more people come together, decide together and first saves some money as their corpus fund and approaches Banks for further loan. They are graded (examined ) and Banks agree to finance. Such groups are very successful and in some cases have, by their credit, availed big finances from banks and became independent.

Rural India is finding a new hope in SGSY/SHG and may be a new brand of success in days to come.

 I believe there should be extensive lending to SME in nonurban/rural areas as the small and medium enterprises (SME) sector in India plays a vital role in the growth of the country.

The SME sector in India accounts for around 95% of the industrial units, almost 40% of the gross industrial value-added in the Indian economy, 34% of exports and provides direct employment to 20 million persons in around 3.6 million registered SME units. The SME sector in India contributes to about 7% of India's gross domestic product (GDP).