Empirical Analysis of Growth and Distribution of Microfinance in India using Panel-Corrected Standard Error Fixed Effect Method

Abstract

An attempt was made to analyze the Growth and Distribution of Microfinance in India towards SHG-BLP programme during the period 2008-09 to 2019-20. Study was intended to assess the sustainability of microfinance program in India through its financial lending towards SHG-BLP. Endogeneity model of financial lending towards microfinance was chosen for the study under which bank-loans were taken as dependent variable affected by Independent variables i.e. savings, number of SHGs, loan outstanding and lagged or endogenous variable of bank loans. State-specific effects were measured for the analysis of Growth and distribution of microfinance in India. Model used the PCSE fixed effect methods to highlight the State-specific growth potential of microfinance in India. Study also used post-hoc analysis to assess the performance of commercial, cooperative and regional rural banks in bank linkage program through SHGs and concluded that commercial banks were found highest contributing in SHG-BLP however the growth trends supports the easy accessibility and availability of RRBs in terms of savings, loan disbursement and even in loan outstanding. Period for this assessment was taken from 2009-10 to 2018-19. Empirical finding raised a serious concern about the growth and distribution of Microfinance in India by highlighting the rising trend of loan outstanding in the financial lending towards SHG-BLP. It was found that the financial lending in India towards microfinance is majorly driven by number of SHGs, loan outstanding followed by savings. This also was observed that endogenous factor past period of loans also affected the bank-loans towards SHG-BLP in India. The selected states and agencies performing towards microfinance were contributing greater in loan outstanding than loan disbursed towards the program raised the need for sustainable policy implications for the microfinance program in India.

Keywords: SHGs, Microfinance, Panel Data, PCSE, Post-Hoc, Commercial Banks, RRBs, Cooperative Banks, Endogenous

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