CHAPTER ONE

INTRODUCTION

1.1 General Background

Nepal, naturally gifted, agriculture based, landlocked country

occupies the area of 147,181sq.km. Nepal is the least developed country
in South Asia with 31% of the population in absolute poverty. Though
population below poverty line is in declining trend in recent few years,
the gap between the rich and poor has widened. Poverty rate has been
higher in the rural areas compared to the urban areas. Again, even in rural
areas, the spread of poverty is higher among women and low caste
communities. From HDI perspective the country is at 140th position out
of 174 countries in the world having 314 US$ per capita per annum. The
GDP growth rate is 1.99 percent per annum, which is lowest in South
Asia. Obviously the gender empowerment level is also excessive low.
This is simply because literacy rate of female is strongly low i.e. two-
third of male, they have poor health condition, no property right and no
decision making power. These factors are the leading issues which
constraints the women to have access to income and employment
opportunities.

Although women constitute half of total population, only 5 percent

of them have got the opportunities of formal sector job while rest of them
have been bound in informal sectors where working condition is very
difficult and even within it like reproductive role and family care
responsibilities have been not considered as productive jobs.

Women have been playing vital role in family institutions any

society throughout the world. Nepalese society is also not exception to
this. Women's socio-economic status has been changed with the new laws

1
moving participation in political and economic sectors. Although some
women are working as doctors, engineers, lawyers, administrators etc. in
these days, most of the women with limited access to economic resources
and control over it, limited opportunity to get education, training and
technology are still primarily involved in self-employed activities as a
means of supporting their families. Either most of their activities are not
access to economic value or under valued so that they are unable to
generate sufficient income and when they are considered as low income
earner, rural traditional society does not take appropriate step to their
health condition, and Education, and under the absence of these elements
poverty reduction becomes only a sadistic story. Deprivation from proper
technical knowledge and managerial skill they are also left out from the
credit market and resources. Thus, they are less able to make significant
improvement in their economic condition.

Leaving the male centric rote aside most of the countries in recent
time have given priority to women participation in the development
process considering as man and woman are two wheels of a cart.
Consequently, large number of national and international organizations
have been set up and carried out various specific programs to enable
women's roles and rights. These programs including formal and informal
education, health awareness activities income earning and self
employment generating activities have been launched with micro-credit
facilities. Observing the successful experience of Bangladesh and
Indonesia, Thailand, and many other developing countries, it is believed
that micro-credit has strong potentialities to reduce the poverty of women
in Nepalese context.

Although Nepalese women constitute half of the total population

and have always been involved in national development, their qualitative

2
condition is too much sympathetic, it is because they have been tied up by
the vicious circle of poverty. They have low literacy and life expectancy
rate as compared to their male counterparts, poor maternal health
condition etc. The main reasons are: they lack economic resources in the
form of property income and employment, human resources as the form
of skill and training and other resources.

In Nepal, women were hardly participated in development process

before 1980s AD. Only after the sixth five-year plan (1980/81-1984/85),
the necessity of women's participation was realized. At the very period
UNO had also celebrated 'UN Decade for women' (1975-1985). Since
then, various initiatives have been taken to mobilize and participate
women both as the agents and the beneficiaries in the development
process. Adoption of open and liberal economic policy by the
Government of Nepal to assimilate the globalisation since mid of 1980s,
and its complete implementation leaving the interest rate flexible to the
market forces with the rebirth of multiparty system enabled women about
their roles and rights through better access to health care, political
participation, free education facility, technical and managerial skill,
formal credit facility etc.

Micro-credit has been proved to be a most significant facilitator to

poverty reduction and women empowerment. It is an inevitable means of
breaking the vicious circle of poverty and to uplift the economic status of
the poor women. Nepal initiated rural micro-financing since 1970 through
the establishment of credit cooperatives, implementation of Priority
Sector Credit Program and Small Farmer Development Program (SFDP).
However, this present study only covers the use side of the fund and its
impact on women development. The goal of micro-credit services is to
create income and employment opportunities for the rural people

3
especially women and low caste communities. The ninth plan (1977-2002)
of country considered rural credit as a key of poverty reduction. Similarly,
the 10th plan (2002-07), claimed as poverty reduction in targeted areas
and communities. In recent decade it has been realized that the status of
women has been improved partly because of micro-credit programs.

Micro-credit programs in Nepal have been found in different

modalities; community based, sector based, gender based etc. The
Production Credit for Rural Women (PCRW), Micro-credit Project for
Women (MCPW) and Rural Development Banks are gender based
programs which have been focused to women. In recent years, micro-
credit programs for women have become one of the most effective
programs of the Government of Nepal to uplift rural women. The
production credit for rural women was the first step in this area initiated
by the government (Ministry of Local Development) and NRB with its
line offices. Government of Nepal and NRB have also their share
participation in Grameen Bikash Banks. The NRB's policy to grant
limited banking license to NGOs and Credit Co-operatives Societies
(SCCs) is also a new approach to promote micro-credit institutions. The
Government of Nepal has also established the Rural Self Reliance Fund
(RSRF) in 1990 with the objective of providing wholesale loan to SCCs
and NGOs. Similarly, with the Asian Development Bank, Government of
Nepal and NRB, Rural Micro-finance Development Center (RMDC) has
been registered on October30, 1998 with a mandate to operate as a
development bank and provide also wholesale credit to financial
intermediaries working in micro-credit field.

Development of micro credit program in Nepal has many

challenges; socio-cultural, financial, and political. Some common
problems related to women are: low level of education, inadequate health

4
and nutrition facility, rarely owning land, high participation rate in
traditional agricultural with low wages, limited scope to generate income
and low social status and all of which have been interlocked and circular
in manner and barriers to have access credit facilities. Similarly some
problems arise in supply side i.e. sustainability of the institution due to
heavy service delivery cost, shortage of loan able funds, lack of broad
based wholesale lending agencies, absence of self regulatory mechanism
and fully committed professionalism. Again some credit programs
implemented by the VDC under the line of DDC and PDDP may be
politicized. Recent internal insecurity is also another problem, which has
created the problem for the expansion of micro-credit institutions. Social
mobilization is also difficult when people are in conflict.

Generally loans are provided on the group guarantee without any

physical collateral, building a rule of thumb that when someone betrays to
repay rest members are fully responsible even for that repayment so that
group is formed from same geographical region with similar socio-
economic background. Thus the whole study focuses the effectiveness of
micro-credit for the women development.

1.2 Significance of the Study

Man is poor because he is poor but micro-credit programs have
become milestone to remove this traditional thought because poverty is
not associated with destiny or fate of men, rather it exists and extended
with the performance of poor himself and his government. After micro-
credit program it is said that man is poor because he is deprived from
human and economic resources; free and qualitative education, proper
health and nutrition facilities, employment opportunities etc. and all these
are the key responsibilities of the government to their citizens. And some
of these duties may be supported and initiated by SOs, NGOs, INGOs,

5
and other private institutions. Thus when micro-credit facilities
associating with other facilities are provided to deprived and
disadvantaged rural poor breaking vicious circle of poverty becomes
comfort.
Micro-credit program has been directed towards the poor women to
enable them to undertake their farming, and enterprise according to their
interest. The subsistence agriculture sector in which the large part of
national GDP depends can achieve a boost in production when women
are engaged in income generating activities through this approach. When
women are participated in the program, their participation will enhance
their socio-economic status. As they are economically active they will
have strong contribution in the national developmental process.
The study is important because in Nepal the government and its
central bank have initiated micro-credit program since three decades as a
means of poverty reduction. In Nepal, it is in an infant stages but
realizing the experience of many developing countries like Bangladesh,
Indonesia, Thailand and many others it is expected that the program
would be to much effective to break the vicious circle of poverty.
Although the study has its own general as well as specific objectives it is
intended to satisfy the main goal of micro-credit services i.e. generation
of income and employment opportunities for the rural people, especially
women providing credit and mobilizing their savings. Thus micro-credit
program is significant to accelerate the growth of agriculture, reduce the
poverty and to raise the status of women.
Micro-credit program needs participatory approach, which in turn
requires proper human resource development. When the quantitative and
qualitative aspect of this resource is better, then a nation can expect broad
based sustainable economic development. Therefore micro-credit

6
program raises the participation rate, which in turn facilitates economic
development.

The study observes the different kinds of people and their

communities and institutions working in this field and examines many
challenges faced by them. It evaluates the impact of program to the
beneficiaries. Thus through the study the impact of the program can be
assessed and attempts can be made to rectify possible defects and
strengthen this program. This study may expose the targeted groups''
perceptions, desire and problems and suggest to the concerned offices to
modify their launched activities if necessary.

1.3 Statements of the Problems

Nepal is a developing country with masses of population below the

poverty line. The intensity of poverty is high in rural areas, especially
among rural women because they lack access to health, education, and
economic resources and have to live in a conservative culture. In Nepal,
land is important asset. Even then women rarely own land because land is
inherited paternally. This hinders the women for obtaining credit hence
income generating activities.

'Labour force participation rate of women in Nepal is relatively

high (66%) but most (93%) of them are employed in low productive
agriculture sector. There are mostly unpaid family labours involved in
traditional household production activities. Participation of women in
relatively modern and more productive non agriculture sector is quite low
(7%)'1. Even the non agriculture sectors in which they work have low
wages and low job security e.g. garment, carpet, weaving, wool spinning
etc. In practice, there is also cruel discrimination in wage distribution

1. ADB (2001), Micro-finance Development in Nepal., p. 8.

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because female workers are paid less as compared to their male
counterparts for a same work.

Although women work much harder and for longer hours means
high burden of work, they have been living in difficult socio-economic
condition. Again their contribution to the national economy does not get
properly accounted for. This is because of traditional household chores
are usually not monetized and as such do not get included in the national
account.

To overcome the problems occurring in the front of Nepalese rural

women, sufficient developmental and promotional initiatives should have
been launched. Deprived women should be facilitated free education and
health services, agro training like goat and poultry farming, bee keeping,
buffalo husbandry, vegetable production, cereal grinds, handicraft making,
and training to develop entrepreneurial ability etc. Skill and training are
inevitable but not the sufficient condition to run their businesses and
farming. Thus rural poor must be provided appropriate credit facilities so
that they are able to implement their skill and knowledge in to operation.

In Nepal different types of programs have been launched since the

decade of 1970s under the direction and supervision of Government and
NRB. Some of the activities in this area are: small sector credit program
(1974), Priority Sector Credit Program (1976), Intensive Banking
Program (1981), Production Credit for Rural Women (1982), Cottage and
Small Industry (CSI) Credit Program (1985), Land Bank Scheme(1988),
Deprived Sector Credit Program(1989), Rural Self Reliance Fund(RSRF)
1991, Micro-credit Project for Women(MCPW) 1994, Grameen Banking
System(1992), Participatory District Development Program(PDDP). All
of which in fact intended to uplift the rural poor, especially women. The

8
government has also established Rural Micro-finance Development
Centre (RMDC) in 1998 which is executed by NRB and which is
undertaken to provide wholesale loan to the MFIs. However all the
micro-credit institutions are in infant stages and their credit programs
have not successfully reached to targeted groups because of inappropriate
policies, inefficient administration and lack of proper monitoring. Again
most of the MFIs working in this field have not yet attend "operational
self sufficiency" which is only necessary condition of attaining financial
sustainability and achieving "financial self sufficiency", which is
considered as a sufficient condition where MFIs are able to adjust
inflation in the interest rate and they can mobilize their resources
internally that is, through equity, deposits, and retained profits instead of
depending on government or donor resources for them, is still a long way
for them. And sometimes MFIs are bound by political and social reasons
so that they can not fully adjust inflation in the interest charges and when
it increases the cost of financing.

The women of Rajahar VDC, Nawalparasi district, like those living

elsewhere in the rural areas, have been involving in agriculture as manual
worker, reproductive and family care activities. They have high
responsibility either in indoor or outdoor works but, it is true, are living in
poor social and economic condition. It is because some of their works are
not access to economic value considering as non-productive jobs and
even for productive jobs, especially in agricultural field, there is vast
discrimination in wage rate as compare compared to their male
counterparts. For example in cutting rice plant male labours are paid
Rs.60 where as female workers are paid only Rs.40. Similarly, they are
also deprived from property ownership of land following the rule of
patriarchal conservative culture and this in turn restricts them from the

9
stream of loan market because underdeveloped loan market requires
sufficient mortgage.

The community where women have low income, low saving and
low capital formation, there certainly happen vicious circle of poverty.
Therefore, simultaneous actions should have been performed to break that
circle and raise women's status. Simultaneous actions require
collaborative performance of government, NRB, MFIs, NGOs, INGOs
and rural communities. But lack of proper coordination there may be
fragmentation between them, which may sometimes create obstacle to
achieve objectives.

Male dominated society with conservative culture eyes the women

as a low status family member and hardly considers their activities as a
productive job. And low level of literacy, not owning land, limited scope
to generate income and low social status are the burning issues occurring
in the front of Nepalese women which are interconnected and circular in
nature and which have pushed them into the misery of poverty. The low
social attitudes towards the women deprive them from human and other
economic resources, and then addressing the poverty becomes mere story.
However, PDDP, MCPW, Grameen Bikas Banks, and SFDP have been
oriented to reduce such deprivation. Loan is provided on group approach
or joint liability forming the group of 5 or more than 5 members
according to the lending procedure of the concern institutions/programs.
The group members are formed from the same geographical area with
similar socio-economic background. Utilization of loan is supervised by
the lending institutions because inefficient use of loan brings burden in
future which in turn affects mobilization of fund.

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 Thus the present study focuses on the effectiveness of micro-credit
for women development in the concerned area observing some indicators
which are either fully or partly responsible in improvement of women
status. The study also focuses the methods of implementation of the
program.

1.4 Objectives of the Study

The general objective of the study is to find out the effectiveness of

micro-credit programs in women development of Rajahar VDC,
Nawalparasi district. However the specific objectives are as follows:

I. To examine the improvement of women status by the micro-credit

programs.
II. To find out the impact of the program to the poverty reduction.
III. To access the impact of program on the beneficiaries earnings and
living standards.
IV. To recommend viable measure for the policy makers as well as
community level beneficiaries.

1.5 Limitation of the Study

The study will have following limitations:

I. This study will be very specific like socio-economic studies. The
conclusion might not be generalized for the whole.
II. The study will be based on primary data. However secondary data
are also presented when needed.
III. Required statistical tools will be used to collect and analyse the
data.
IV. This study completely based on and limited to the beneficiaries
groups and credit institutions formed and operating within the
territory of Rajahar VDC.

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 CHAPTER TWO
PROFILE OF THE STUDY AREA

2.1 The Village Development Committee

Rajahar is one of the VDC among 74 VDCs of nawalparasi district,

Lumbini zone. This VDC lies in the inner terai region and forms the part
of Mahabharat Mountain in the north. Narayani river is flowing in the
south side of the VDC and other small rivers Gharai Khola and Mukunde
khola have been flowing on the east and west side forming its
geographical boundary. It is 20-22 km ahead to west from big trading city
Narayanagarh. The east-west Mahendra highway have passed from its
east west side which is about 2 km and north-south distance of this VDC
is about 8 km. It is situated 500 to 5000 fit from seaside so that two types
of climate are seen in the VDC.

2.2 Historical Background

Before 2032 B.S. this VDC was known by the name of Siswar
Panchyat. Except Rahahar VDC there were other 4 VDC of present were
involved in Siswar panchyat. At that time Rajaher area was covered by
vast jungle and uncultivated land. At the same year the branch office of
Nepal Punarbas company had distributed land to the people naming it as
‘Rajahar Bayabasta Sthel” then people started cultivation cutting bushes
and trees. Thus it is a new place of new society which have been formed
with different casts and ethic groups.

2.3 VDC Profile

According to VDC office the total population of the village is

11752 and there are altogether 1707 households. Out of total population

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5950 are males and 5876 are females. Almost all the people who reside in
this VDC are farmers but their faming is not above than subsistence
farming. There are few people who go to work out side mainly to India. A
very small number of people are engaged in governmental and non
governmental services. Beside farming, some people are also engaged in
cottage industry, trade, tea shop, carpentry etc.

Although there is a health center in its neighboring VDC, health

service facilities are very poor in this village because there is lack of
efficient doctors and required medical equipments. Similarly there is
electricity but it has not been used for productive purposes. Again there is
primary schools in each ward and a secondary and higher secondary
schools in the VDC but number of people to send their children into
school is very low because they do not know about the benefit of
education and they have not proper income so that they engaged their
children in their farm activities. Only four wards of this VDC has
drinking water facilities and the remaining wards have been deprived of
such facilities. Therefore they rely either on well or hand pumps for
drinking water. There is no such market where the villagers could at lest
manage at all their primary needs. People usually go to their primary
needs. People usually go to either Narayangarh or Kawasoti for
marketing and other services. In such context their produced vegetables,
food grains and livestock cannot be marketized. The general subsistence
is based on agriculture which is traditional. The main crops of this area
are paddy, whet, wheat (corn) and mustard. Herding and livestock rearing
are also prevalent in this VDC. Herding system are existed traditionally
but high breed livestock domestication is spreading slowly.

People of the various casts and creed inhabitant in this VDC. They
are of different ethnic groups such as Bramin, Chhetri, Magar, Gurung,

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Tharu, Newar, Kumal, Bishwokarma, Majhi-bote etc. Nepali language is
the medium of general communication but Magar and Tharu language are
also spoken by the people of these ethnic groups.

In Rajahar VDC, the micro-credit program was initiated since 1997.

Out of 5876 female only 430 individuals were formed in groups under the
program in the VDC. There are all together 30 women groups within the
430 women members. Only the women of eight ward out of nine wards
have been able to form groups. The program has not yet been launched in
ward number nine named Barakol of this VDC because of various
reasons. First of all it is remote and hilly area, second people of this ward
are poor and illiterate and third most of the sophisticated staffs of banks
and FI-NGOs do not want to go and invest in this remote ward.

Table No. 1
Major Occupation of Person in Rajahar VDC
S.N. Occupation Population Percent
1. Agriculture 7801 66.38
2. Dally wages 2089 17.76
3. Business 480 4.08
4. Job 440 3.74
5. Miscellaneous 942 8.02
Total 11752 100

Source: VDC office

Table 1 shows that 66.38 percent of total population has been

engaged in agriculture and 17.76 percent of population have been
involved in wage earner. Both these sectors have been proved as a
subsistence sector so that life of people in these sectors is very difficult

14
and miserable. Only 3.74 and 4.08 percent population are engaged in job
and business sectors respectively. However living standard of the people
in these sectors is relatively better.

Rajahr VDC is located in the rural setting and it is out of access

from the proper infrastructure facilities. Yet modern values are slowly
penetrating in to their lives: women have no inheritance rights as it is a
national problem so that they are deprived from the stream of loan market
because underdeveloped loan market requires sufficient mortgage. The
people of this area are poor. Among poor some are in such a miserable
condition that they have insufficient food to feed their children
throughout the year. Women are still engaged in non-remunerative
activities. Although they have contributed hard labour, they do not posses
any economic power.

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 CHAPTER THREE
LITERATURE REVIEW

3.1 Literature Review Related to Micro Credit Programs

3.1.1 Small farmer development program

Small Farmer Development Program, a well-structured and pioneer

group based and physical collateral free micro-credit program to cater
financial needs of the small farmers, was initiated as a pilot project in
November, 1975 by Agricultural Development Bank (ADB\N). The
program which covers the entire country, aims at organizing "Small
Farmer "into small credit groups and provide credit on a group guarantee
basis.

The main objective of this program is to improve the overall

wellbeing of the small farmers through provision of basic inputs e.g.
micro-credit, technology, training, and other related social and
community development services.

As mentioned above SFDP follows group approach in delivery and

recovery of micro-credit. The group organizer who is an employee of
ADB/N plays a supportive role in this process. First of all a particular
village is selected and small farmers are identified to be eligible for SFDP
member on the basis of required per capita income level defined by
ADB/N i.e. small farmer are those who basically possess less than 0.5
hector of cultivated land per family and/or per capita income less than
Rs.2500 (at 1987/88 price). Villagers must be small farmer, tenant or
agriculture labour dependent on agriculture, small craft or cottage
industries for their livelihood and have sharp willingness to work together

16
with the group members. The program is based on group liability so that
small farmers are motivated to organize themselves into groups and these
groups or individuals are financed to generate income by undertaking
productive activities. A study conducted by the Agricultural Project
Centre (APROSC) in 1980 found that SFDP was effective in reaching
small farmers and in response Government of Nepal proclaimed SFDP as
a national program for development of rural people. 'SFDP currently
operates 291 SPOs in 67 districts of the kingdom covering more than
140717 small farmer families. Under this program, a sum of Rs.5.95
billion has been disbursed and Rs.4.17 billion has been repaid by the end
of FY2000/01. The types of credit include agriculture, livestock, poultry,
agriculture implements, irrigation, and cottage industries. The women
participation in the program comes to 29 percent.'2

The program also provides training and other inputs and technician
services to assist the small farmer productive activity. A process of
institutionalizing the small farmer groups into the "Small Farmer Co-
Operative Limited (SFCL)" has been initiated since 1993/94.The purpose
of this initiative is to create locally-owned and managed MFIs that can
take over the activities of SFDP on a self sustaining basis. 'By mid
January 2003, 125 such SFCLs are in operation in 32 districts. Up to that
period SFCLs has been providing Rs 1829 million, here Rs.849 million
rupees have been recovered where as saving amount was reached to
Rs.165 million'3. It is considered a land mark in this front that for the first
time the marginal population was included into the net of minor-credit.

2
SFDP, ADB/N (2001) Part B, p. 10
3
Economic Review (2003), p. 40

17
 It was thought that service delivered through SFDP to men would
automatically 'trickle down' to the family but a conference on the
occasion of international decade for women held in kathmandu in the late
70s concluded that the development program broadly aimed to improving
the condition of rural people often failed to benefit women and their
conditions were still deteriorating. Therefore women groups were formed
in the name of women development program (WDP) first in two and
second in five in the preceding years in SFDP areas. The observation
found positive impact of the program implementation so that women
development program was initiated in SFDP in 1981/82. Later the
program was expanded to cover wider geographical areas and women
population. It represented an important attempt to integrate women in
economic development plan. The program became very successful to
create awareness and consequently a desire among poor to participate in
micro-credit program for development activities.

The main objective of the WDP is to improve the socio economic

status of rural women establishing self reliant women's group with
regular credit delivery system to enable them to initiate and promote
various income generating activities and strengthen the organizational
capacity of women. Except providing credit for income generation,
training and community development activities are also integrated to
develop skill and productive endeavour of women.

By the end of 1984/85 the program has launched in 19 SFDP sites

located in various districts covering 51,141 members in which 17,763 are
women. In recent years, this trend is in increasing order. The WDP as a
micro credit program mobilizes local savings and links it institutional
credit of ADB/N. The women group meets regularly and discusses their
problems and reach to a solution for their own and community

18
development. Member of the group collects monthly amount (Rs.5 to 10
or above) as set by themselves into the group saving fund and which is
deposited in a local bank. The group members also provide credit to
member in need from their saving fund. The fund is also used to pay for
developing community assets and infrastructures. Lending procedure and
use of the credit in terms of WDP are same as explained above. Members
are also provided recognized training like poultry farming, bee keeping,
kitchen gardening, sewing, etc. Health and social awareness program are
also launched to them which have partly been supporting their productive
activities and children. Benefit derived through this program has become
effective to fulfil some of their Socio-economic needs. The WDP under
the SFDP however, has served only around 29% of the women as against
the total number of small clients.

3.1.2 Production Credit for Rural Women (PCRW)

The ministry of local development (MLD) in collaboration with

UNICEF, NRB, CBs and ADB/N initiated the first women focused socio-
economic program "Production credit for Rural Women (PCRW)" in
1982. It is a gender based program. This program involved organization
of poor women into small credit groups and appropriate skill training by
the MLD staff and extension of group based loans by the participating
banks.

The main objective of this program is to uplift the socio-economic

status of rural women. For this, the program increases the income of rural
women by participating them into productive activities associating with
regular credit facilities and other technical services. It needs to form the
self reliance women's group because in it women are able to tackle their

19
problem and fulfil their needs. The program also strengthens the ability of
the banks to serve women in rural areas.

'The program had covered 67 districts by July 2000. As of mid-July

2000, CBs and ADB/N disbursed a total loan of more than Rs.831.2
million to 74571 rural women through 163 bank branches in 67 districts.
Total outstanding loan has been estimated as 546 million. The average
loan size of the program is about 7000'4.The program follows a simple
implementation mechanism. The women development division (WDD)
motivates women to form group of appropriate size from layer of low
income and helps to obtain credit from different banks. Loans are
delivered for productive activities such as agriculture, livestock, cottage
industries, small enterprises, and trade and service sectors. PCRW has
presented a unique feature that it utilizes commercial bank's financial
resources allocated and disbursed under the priority sector program of
intensive banking program and the credit funds made available through
ADB/N and donors. Here it is noted that by mid-July 1997, over 260,000
borrowers of all categories were benefited by the IBP of commercial bank
with outstanding loan of Rs.2.2 billion. Unlike SFDP, women member of
PCRW receive bank credit with out any physical collateral up to Rs.30
thousand at a confessional rate of interest under the priority sector
lending program. The women development section (WDS) also
encourages women members of the group to save regularly. Different
mechanisms are used to mobilize saving i.e. either compulsory or
voluntary saving schemes. Savings have been used for financial
formation as well as consumption needs of the group members into
productive activities. The activities like training, group organization,
community development inputs and services etc. required for capacity

4
ADB/N(2001):Micro-finance Development in Nepal., Part. B, p. 14

20
development of the groups are delivered in assistance of multilateral and
bilateral donors arranged by the government. The capacity measures are
found to be instrumental in making credit more productive.

PCRW program has helped women to work together engage in

individual or group level productive work to generate income. It has
stipulated them to show their hidden talents and ability. The sign of
'trickle down' effect to the family and child welfare has been clearly seen
through participation of women in PCRW.

3.1.3 Micro-Credit Project for Woman (MCPW)

Learning lesson from the PCRW program, micro-credit project for

women (MCPW) was initiated in 1994 by the government of Nepal under
financial assistance of Asian Development Bank (ADB) with an objective
of developing NGOs as appropriate financial intermediaries that would
provide quality micro-credit services to the rural poor women over time.
‘The project is under implementation through 95 NGOs in 12 districts
and 5 municipalities. As of 31December, 2001, these FIs had 1619
borrowers with an outstanding loan of Rs18.13 million’5. Nepal Rastra
Bank (NRB), however, occupies sole responsibility to administer these
program by channeling funds through commercial banks, agricultural
development banks, Nepal Bank limited (NBL), and FI-NGOs. And it is
noted that bank loan is made available to women beneficiaries initially
through WDS in the recommendation of NGOs.

To provide an access of credit to the women in both the rural and

urban areas is the primary objective of this program while issues like
poverty reduction and human development are regarded as secondary

5
NRB, Mirmire (2005) P,289

21
objective. The over all objective of this program is however to improve
the socio-economic status of women and promote their participation in
national development. In order to have this goal, the aim of this project is
to generate income and employment in selected rural and urban areas.

Like other targeted credit programs, the program has been designed
to cater financial services such as credit and savings. Non- financial
services such as organizing women in group, providing skill and training
etc. are also provided to stimulate their ability of handling productive
activities. First of all poor women are identified on the basis of per capita
level less than or equal to Rs.4400 and mobilized and organized into self
help group of 25members. These members are provided bank credit for
multiple purposes such as agro- farming, small business and enterprises.
The amount of loan ranges from 30 thousand to 250 thousand per
borrower. Members are encouraged to save regularly and cultivate saving
habits. Group savings thus deposited are lent to its members for
productive as well as consumption purposes.

The program has become successful in bringing large number of

poor, deprived and disadvantaged women into the safety net of formal
credit and helps them to generate self employment opportunities initiating
income generating activities which would uplift their socio- economic
status through reducing poverty of their family, village, and the country
as a whole.

3.1.4 Grameen Banking

During the period of 1992-1996, five regional development banks

(Grameen Bikash Banks), following the grameen bank model of
Bangaladesh were set up to cater the financial needs of the deprived

22
sections of the society in rural areas especially women for undertaking
income generating activities. In the beginning, the rural development
banks, one each in the eastern and for western development regions, were
established towards the end of 1992. By June 1996, other three banks,
one each in the other three development regions, were also set up. In
aggregate, NRB and HMG hold about 33% and 10% respectively.

The basic objective of these banks is to provide financial resources

required for different types of income generating activities by forming
group of deprived women of rural areas and help reduce the level of
poverty among the rural households. Identification and motivation of
targeted groups, compulsory training about rules and regulation of bank
and its lending procedure, easy loan at door step without any physical
collateral, 2+2+1 lending scheme to observe the performance of
preceding loan receiver and compulsory saving scheme are some of the
sound features of Grameen Banking. These features have partly
stimulated the clients to achieve high and more stable income with proper
employment generation and which in turn raise the repayment rate. The
present fragmentary studies have shown that repayment rate of grameen
banks is as high as 95% so that these banks occupies in better position
than earlier launched programs.

The operation modalities of Grameen Bank is first to identify the

poor women in the village. Then motivate and organize women in group
of five. Each woman are given compulsory training among the group
members for at least seven days to provide information on banks credit
and their lending procedures and made women aware of their farming and
business. The training also makes women to read and write even their
own name. The Grameen Banks provide and collect loans at the door step
and loans are distributed to individual group members against group

23
guarantee in the field of agriculture, micro-enterprises, trade, and service
sectors, Any rural women from rural households with less than 0.6 hector
in Tarai and 0.5 hector in hills are eligible to join the group recognition
test then the group member becomes eligible for the loan. The loans are
extended following 2+2+1 model means in the group, rest will be
facilitated at last observing the performance of earlier member. There
may be four weeks gap between first and second phase and within sixteen
weeks all borrowers get loan. The bank goes to the borrowers themselves
during the group meeting at the villages. The purpose of loan is to
provide an opportunity to the rural women for undertaking and promoting
their farming, small enterprises, and trade and service activities. The bank
lends credit up to 5 thousands rupees per borrower in the first phase and
this amount gradually increases up to Rs.25 thousands in the successive
period. The banks regulate 20% interest rate per annum for all purposes.
In this respect it is severely higher than the loan provided by Banijaya
Banks due to their high service delivery cost and it is not considerable.
Again rural people need banking services at the doorstep rather than high
interest rate. Although the interest rate of development bank is high, the
program is highly satisfactory because clients have been able to achieve
high and more stable income with massive employment opportunities and
which are the region of high repayment rate. Saving in group is
compulsory and each week every member has to save Rs.1 or 2 in the
group fund where Rs.1 daily during training period and 5 percent of
received credits is also deposited. The group fund is mobilized for
emergency purpose or to over come the problem of households' credit.

By mid- January 2005, these banks have already formed 35,435

groups through the4,961 centres of 1,003 VDCs of 43 districts and
forwarded micro-credit without collaterals to 147,949 members for

24
income generating activities by mobilizing local skills. As of now, these
banks have provided micro-credits totalling Rs11.55 billion. Of this,
Rs10.16 billion has been recovered with Rs1.39 billion as outstanding in
credit. Total amount of saving deposited by these groups reached
Rs471.60 million including collective savings Rs.416.80 million and
individual savings Rs.54.80 million by mid January 2005.6

Recently, four NGOs have been transformed into the private

development banks under the development bank act 1995 with a view to
expanding their scope and scale of micro- finance operations. These are
Nirdhan Utthan Bank Ltd. NUBL (1998), Swavalamban Bikas Bank Ltd.,
SSBL (2001) DEPROSC Development Bank Ltd., DDBL (2000) and
Chimek Bikas Bank Ltd., CBBL (2001). However, last two banks don't
follow the grameen bank pattern and the former one was the first
introduced in grameen banking system since early 1992 in the name of
Nirdhan Program. Up to mid- January 2005, these banks provided credit
totalling of Rs.4.62 billion to 113,122 members of 24,547 groups through
the 4,658 centres of 881 VDCs. During the same period Rs.3.89 billion
has been recovered while total outstanding loan has been reached to
737.10 million.

3.1.5 Rural self Reliance Fund (RSRF)

Rural self reliance fund was established in 1990 by the government

of Nepal, as a pilot-scheme, with the objective of providing wholesales
loan to financial intermediaries (SCCs and NGOs) that had difficulty in
obtaining access to credit for on lending to the rural poor. Nepal Rastra
Bank Development Finance Department is the executing agency of this
program. This program is the first step in Nepal in the direction of

6
Economic Survey (2004/05) P,16

25
exploring alternative means of credit delivery to the poor. RSRF provides
credit on the instalment basis based on the performance of the borrowing
institutions. The internal rate charged by the fund is just 8% and it returns
75% of interest if the concerned institutions repay principal and interest
on the schedule time- so that the effective interest rate is just 2 percent.

The targeted group of the fund is the individual households holding

less than 15 ropanis of land in the hills or less then 1 bigah of land in the
Terai. The SCSs or NGOs who act as financial intermediaries between
the fund and the beneficiaries (target group) are responsible for social
mobilization, group formation, skill training, saving mobilization,
demand assessment, loan approval, disbursement and supervision and
flow ups. Loan is provided up to Rs. 30,000 without any physical
collateral depending on group approach or liabilities. The SCCs or NGOs
may on lend the loan from the fund only in those VDCs and
municipalities where no more than 3 commercial bank or their branches
(including banking offices of Agriculture development Bank) have been
operating at present.

But SRSF stopped lending to the NGOs since 1998/99 for the
reason that financial intermediary society Act, 1998 had not allowed
NGOs to accept saving, and RSRF’s one of the policies being that of
lending a SCC or NGO to the extent of ten times the saving it had
collected. Now the amended version of FISA allows FI-NGOs to collect
saving from their group members, therefore, NRB needs to take
initiatives to make RSRS funds available to the FINGOS as earlier. For
RSRF to continue lending to FI-NGOs does not have to wait for
amendment in the financial intermediary society by laws. It can be done
internally with little bit of push from NRB. Such an initiative would

26
improve access of RSRF fund to the FI-NGO that are not served by
RMDC its strict eligibility criteria.

“It has disbursed loans equivalent to Rs. 72.8 million through 50

NGOs in 26 districts and 159 co-operatives in 40 districts as of mid July
2004, hence 8996 households of 47 districts were benefited as mid July
2004. NRB has been contributing to this fund from its profit each year. In
FY 2003/04 NRB provided the fund with Rs. 74.8 million. From FY
2003/04, the fund has been successful to operate on its own income.”7

3.1.6 Rural Micro-Finance Development Center (RMDC)

Rural micro-finance development center was established by Nepal

Rastra Bank in 1998 realizing the fact that the MFIs operating in the
micro finance market had sever shortage of funds for on lending and also
needed assistance in enhancing their institution capabilities. However,
RMDC because operational since 2000 only. Twenty-one banks and
financial institutions, including NRB own the share of this second tier-
institution.

It started functioning with the objective of contributing “to

improving socio-economic condition of the poor, the landless, and the
assets less through increasing their access to resources for productive
undertakings and employment”8 Its disaggregate specific objectives are
many that include, among other, to provide wholesale funds to potential
and viable micro finance institutions for on lending to the ultimate
borrowers for undertaking their productive activities; to help build and
strengthen institutional capacity of the partner organization (POs); to

7
Nepal Rastra Bank, Economic Report, 2003/04, p. 26.
8
RMDC annual report 2003-03, p. 8.

27
provide financial and technical supports to MFIs; to under take research
and development activities to promote new micro-finance prducts and
develop sound practices; to strengthen their capacity through training and
exposure visits and to act as a financial intermediary to channelize the
resources.9

Till July 2004, RMDC has approved a total loan amounting to Nrs.
444.48 million for 32 MFIs and disbursed NR’s 363.71 million (81.8%)
to 28 MFISs. Among 28 MFIs, 2 regional Grammen Bikas Bank, 4
private micro credit development banks 18 micro finance NGOs and 4
co-operatives societies.10

Observing the functioning of RMDC sound satisfaction has been

found in case of development of micro-finance market but, it is true, it
alone can not meet the financial need of MFIs in Nepal. some more
institutions are urgently needed. In this context, NRB needs to come up
with appropriate policy measures that would create conducive
environment for entry to other second tire institutions. Without a few
more second tier institutions with provision of providing wholesale loans
to MFIs, it will be impossible to achieve the target of reducing population
below poverty line by the end of tenth plan period.

3.1.7 Developmental and Promotional Initiative taken by NRB

in Support of Micro-finance

Before 1974 only ADB/N was supplier of rural credit and which
was not sufficient to meet the growing needs of rural credit because
according to the data presented by NRB in 1972, ADB/N disbursed

9
Ibid.
10
Informations are from RMDC

28
Rs.13.64 million in rural financing in FY 1969/70 which was only 1.36
percent of the total credit needs of the country. Two big government
owned banks, NBL and RRB's interest was mainly on financing
commerce and trade in the urban areas and not in rural lending. Again
there were also a few credit cooperatives and ward village committees at
the grass roots level, but there financial resources and capabilities were
limited. Realizing all these facts NRB took appropriate steps i.e.
developmental and promotional initiatives, in support of micro-finance.

Accordingly, NRB in 1974 directed the two CB's to invest at least

5% of their deposit liabilities in the "small sector". This step was the
beginning of directed credit system and also involving CBs in rural
lending in Nepal. Later on in 1976, the scope of small sector was
enlarged so as to cover the whole of agriculture, cottage industries and
services and renamed it as "priority sector". Similarly NRB took
initiatives to establish Credit Guarantee Co-operation (now Deposit
Insurance and Credit Guarantee Corporation) with its major share holding
to minimize the risk of default or non-repayment of priority sector loan.

In 1981, NRB introduced Intensive banking program(IBP) under

which the CBs were required to provide project based loans in priority
sector that were to be supervised regularly and they were to extend at
least 60% of their priority sector loan to rural poor below the poverty line
as group based lending without any physical collateral. Later on NRB
realized that the coverage of priority sector loan was still lower than
expected so that it introduced "deprived sector credit scheme" in 1990.
Under this scheme CBs are required to invest a minimum of 0.25% to 3%
of their total loans and advances to the "hard core poor". In the initial
phase up to Rs.15000 was provided with interest subsidy by Government

29
through budgetary allocation. But interest subsidy was withdrawn when
loan amount extended to Rs.30000.

NRB established 5 development banks, one in each development

region with its major share holdings during the 1992-1996 periods. These
banks provide loans under group guarantee system to rural women
belonging to ultra poor category without any physical collateral. Again
NRB took a lead role in establishing "Rural Micro-finance Development
Centre (RMDC)" in 1998 which was brought under to overcome the
severe shortage of fund and enhance institutional capabilities of MFIs
operating in the microfinance market. RMDC has the provision to
provide wholesale loans to MFIs licensed by NRB, for on lending to the
sub-borrowers. It can also provide technical assistance, staff training etc.
to the financial intermediaries.

Up to mid July 2002 there exists 827 MFIs in micro-finance market

but most of them have not yet attained operational self-sufficiency and
achieving financial self-sufficiency is still a longer way for them.
Therefore various present studies shows that NRB's efforts should be
extended in promotional activities though these have been taking since
1992 in support of micro-finance.

First promotional activity undertaken by NRB was its collaboration

with the ministry of local development (MLD) in "production credit for
rural women (PCRW)" project and acting as an executing agency for its
credit part in 1982. The other far reaching activity was the adoption and
implementation of policy to grant limited banking licenses to NGOs and
SCCs engaged in micro-finance in 1990. A study report (sinha 2000) has
expressed this act as a bold step in the promotion of micro-finance and
unique in south Asian region. In the same year 1990, Government of

30
Nepal established the "Rural Self Reliance Fund (RSRF)" as a pilot
scheme, with the objective of providing wholesale loan to financial
intermediaries (SCCs and NGOs).In the way, Financial Intermediary Act,
1998 had created obstacle between RSRF and NGOs but after its
amended version has created little bit comfort because it allows FINGOs
to collect saving from their group members. This fund administered by
NRB, was the first step in Nepal in the direction of exploring alternative
means of credit delivery to the poor.

The other innovative/promotional role played by NRB was its

active participation from conceptualization to finalization of development
bank act in 1992, under which a total of 21 development banks have been
incorporated by mid January 2003, of which 11 are micro-finance
development banks. In 1993, NRB adopted a policy of CB's wholesale
loans to Grameen Bikas Banks and licensed NGOs and amount of their
(CB's) share participation in Grameen Bikas Banks as a part of deprived
sector credit. The policy became effective although it was indirect way of
lending. In 1994, NRB again collaborated with MLD in "Micro-credit
Project for Women (MCPW)" for channeling ADB funds through NBL,
RBB and FINGOs to the rural women of 12 districts and five
municipalities. The most recent and potentially the most far-reaching
promotional step undertaken by NRB was its important role in
formulating "Financial Intermediary Societies Act 1998".

3.2 Literature Review Related to Women Status and

Poverty Reduction

Acharya, Meena (1994) women in Nepal are among the poorest

and disadvantaged group because of social, legal and intra household
discrimination. As a result of which education, health and nutrition status

31
of women including girl child are much lower than that of men. They do
long and harder work but live in difficult conditions because must of their
works are not considered as productive job hence not accessed in national
account. Again there is cruel wage discrimination so that even for same
work they are paid low wage rate as compared to their male counterparts.
Similarly they are also deprived from property ownership of land
following the rule of patriarchal conservative culture and this in turn
restricts them from the stream of loan market because under developed
loan market requires sufficient mortgage. Lack of credit facilities also
restricts women to have access to improved technology, training,
agricultural inputs and information. Therefore, there is need of such
programs for women which can make equal access to the economic
activities and resources and other social programs because contemporary
rural development programs have largely by passed them.

Acharya Meena (2003) defines financial development and its

impact on poverty alleviation on the basis of availability of data.
Although government and non-government micro finance institutions
including the co-operatives have grown fast in the 1990s, they have made
very little impact in the rural credit market because most of them have
been concentrated in urban areas. So that more than 80 percent of the
borrowing in rural areas have still to depend on non formal sources for
their credit needs. The study also presents that majority of targeted credit
programs have been unable to directly cater to the needs of the bottom 20
percent households because the poor lack human and economic resources,
basically they lack knowledge to benefit from the saving credit program.
The study concludes that in spite of rapid growth of the financial sectors
in the post liberalization period, its presence and influence in the rural
areas have been declined. There seems to be no forward and backward

32
linkage of this financial development with the real sector of the economy
and consequently to poverty alleviation.

Khadker (1998) summarize a number of different studies

conducted in Bangladesh using the 1991/92 surveys and focusing on three
major micro finance programs, including the Grameen Banks and the
Bangladesh Rural Advancement committee (BRAC). Methodological
import is accessed using a double difference approach between eligible
and ineligible households (with land holdings of more than half an acre
making households ineligible) and between program and non- program
villages. After controlling for other factors, such as various household
characteristics, any remaining difference was attributed to the micro
finance programs. The study draws a number of conclusions, but the main
one is that the program has a positive effect on household consumption,
which was significantly greater for female borrowers. On average, a loan
of 100 takas to a female borrower, after it is repaid, allows a net
consumption increases of 18 takas. In terms of poverty impact it is
estimated that 5% participant households are pulled above the poverty
line annually.

Regmi Krishna Kumar (2002) has made an extensive study in this

field to analyze micro credit to women for poverty reduction. Study was
conducted in Benimanipur VDC, Nawalparasi district taking borrowers as
a sample population. Some of the major findings of the study may be
summarized as: first of all the program is found as target group oriented
because most of the women involved in micro-credit program are
relatively poor and having income less than 2000. The study found
positive impact of micro-credit program for women on beneficiaries'
earning and living standards. Similarly the program has also some
positive social impact in terms of child education, family planning,

33
sanitation and other social reforms. Repayment rate is found as 80% in
over all programs. However, repayment rate is lower in agriculture
activities and higher in business activities. In sufficient super vision due
to staff turn over, under staffing and long distance between sites and
death of animals due to various reasons are the causes of low repayment
rate. Among the sample borrowers 25% has totally paid the loan, 55%
partially paid and 20% has not paid at all.

Some of the recommendation suggested by the study are as follows:

 It will be better if the program would designed in such a way that

identification and implementation of the program and its
monitoring and supervision could be done by the community itself.
 The program should develop a practical and varied training course
related to skill development, agriculture extension, and income
generation and business promotion activities as per the need of
particular community.
 Effective market mechanism should be developed for produced
vegetables, food grains and livestock.

Fighting poverty with micro finance (2000) Economic

development of the poor is the most difficult task as they have certain
unique deficiencies, most important being (i) illiteracy and/ or lack of
access to knowledge and information, (ii) landlessness or small farmers,
(iii) lack of access to credit and modern inputs, (iv) lack of skill, (v) lack
of marketing support.

Credit is recognized as most important inputs for the development

of the poor whether it is in individual or in-group form. Many studies
have pointed out that for all kinds of income generating activities based

34
on land, water, industry, trade, service etc, credit is one of the basic inputs
and access to it by the poor is the most difficult due to the following
reasons:

a) Low credit - worthyness.

b) Because of the multiple credit needs the credit obtained for the
productive propose is diverted to non productive purpose such as
consumption and social ceremonies.
c) Though the poor have multiple credit needs, the size of credit for
each item is small which are difficult to be obtained from the
banking institutions.
d) The poor needs credit very frequently for shorter duration but it is
difficult to get small loans frequently from the financial initiations.

Soti, Bimal (2002) has made a study in this field to analyze the
impact of micro-credit program on poverty reduction. The study was
conducted in Chainpur VDC depending on sample survey data. Some of
the findings of the study are as follows:

Women of Chainour VDC under the MCPW program were found

as subsistence farmers. Joining in this program has empowered women in
varying degree. It has provided various opportunities for poor women to
come out of their non- productive household activities, to organize
themselves in groups and to work in productive and social activities. The
program has made women self-confidence in case of expenditure, saving
and other social decision-making process. Although their income has
been sufficiently increased, the nature and duration of their work have
remained unchanged. It is because their projects are still not fully escape
from traditional method. The positive change of majority of Women
member in clothing pattern and food practices indicates the positive

35
impact of the project in study area. In respect to financial intermediation
the program is in the right way to fulfill the financial needs of rural poor.
Reaching the poor through financial intermediations is found to be cost
effective and targeting can be done correctly. Although most of the
project were small and unable to generate remarkable profit, 84% of the
respondents have made some profit.

Some of the recommendations made by the study re as follows:

 As there is no better alternative, rather than to continue and

increase the involvement of NGOs in the delivery of financial
service to rural poor, NGO should be made more efficient.
 Training for women to run their project should be conducted
frequently even if some charge is included.
 There most be well insurance scheme for live stock husbandry and
the process of insurance claim should be made easy and fast.
 Every act which are imposed by NRB and HMG should be in the
favor of development of micro finance hence poverty reduction.
 There should be proper identification and selection of the target
groups to ensure that really poor, backward communities are not
left behind.

Prakash Regmi (2001) has described that women have limited or

almost no control over their property, and poor access to institutional
credit services and facilities is restricting them in their ability to generate
income and improve their socio-economic status.

Limited access to credit is recognized as a major obstacle to the

sustained development to the poor. Poor women are generally unable to
have access to the formal financial sectors due to the lack of tangible

36
collateral with them. They must rely on the non-formal sources, which
are expensive and exploitative in nature. Credit directly addresses to the
economic dimensions or poverty. It mobilizes the resources and make
these accessible to marginalized communicates such that they can tackle
the practical problem they have to face.

Haq, Mehbub Ul (2000) describes that unequal economic

opportunities for women are manifested most clearly in their limited
access to credit. The availability of micro credit especially for poor
women, provides an opportunity for them to have some measure of
economic independence. In south Asia Numerous initiatives by both
government and NGOs have been able to provide credit to women.
Although some of these have been very successful, there is still a huge
urgent need for micro credit in the region, particularly in rural areas. His
study shows that women are almost invisible to formal financial
institutions. They receive less then 10 percent of commercial credit. In
any case, credit alone is not a vehicle for generating income. Without
substantial market incentives and infrastructure, borrowers are likely to
remain in debt as they have limited option to make profitable investment.
Rural credit programs with support services that include training, saving
mobilization techniques and group formation are motivating women to
become self-employed.

Khendker and Cowdbury (1996) made a study in this field, to

analyze the effectiveness of targeted credit program on poverty
alleviation and resource base of the poor. The study was based on
household survey data of the year 1991/92 covering 1800 households
from both program and non-program villages. The study focused the
three major micro-finance programs; Bangladesh Rural Advancement
Committee (BRAC), The Grameen Banks (GB) and Bangladesh Rural

37
Development Board's Rural Development Program (BRDB-RD12).
Methodological impact was accessed using a double difference approach
between eligible and ineligible households and between program and
non-program villages.

The main objective of the study was to examine the impact of

targeted credit program on rural poverty reduction and sustaining
household welfare. However, there were two specific objectives: first one
was to develop a methodology to estimate the costs and benefits of group
based credit program and rest was to analyze the financial and economic
efficiency of the credit programs, which depend on resource intensive
group formation and monitoring.

The key finding was that targeted credit program not only reduced
poverty but also increase resource base of the poor in a sustainable
manner on a long term basis. The data shows that Grameen Bank is
considerably more effective than BRAC in terms of cost-effectiveness
and that as expected loans to female borrowers were considerably more
effective than loans to males. Again the data analysis shows that it takes 5
years for poor program participants to rise above the poverty line and
eight years to achieve economic graduation (to stop taking loan from
targeted credit program). The data analysis also shows a structural shift of
traditional farm activities towards non-farm activities after launching
targeted credit program because it stimulated beneficiaries to invest
increasingly in non-farm rather than farm resources. The study
recommends the implementation of policy interventions to use the
superior skills of the graduates of these targeted programs to create more
dynamism in the rural economy.

38
 Ms Pradhan and Shrestha (2061) found micro-finance program in
Nepal is at evolutionary stage because only after complete financial
sector liberalization since 1989, leaving the interest rate flexible to the
market forces, a number of FIs owned both by Government and private
sector came into existence with a view to initiate micro-finance
activities .Some of them were existed in the form of innovation and rest
were in the form of replication. The goal of micro finance services is to
create income and employment opportunities for the rural poor people
providing micro- credit and mobilizing savings.

Although rural development banks were thought to be effective

institutional mechanism for promoting micro-finance services, due to
high administrative costs and increased ratio of losses, they are facing
serious problem of sustainability. They are also operating in limited areas
with limited outreach. There is also shortage of loan able fund and lack of
broad based whole sale lending agency. Again absences of self regulatory
mechanism and fully-committed professionalism have become a major
issue. Finally most of the MFIs have the problem of sustainability due to
heavy service delivery cost. Recovery of loan is equally challenging. And
recent internal insecurity is creating problem for the expansion of micro-
credit. Social mobilization is also difficult when people are in conflict.

Shalik Ram Sharma (2003) has tried to analyze problem faced by

MFIs/ Programs in attaining financial sustainability. The presentation
begins describing theoretical concept and ends connecting it with
Nepalese context. Financial sustainability refers to the extent to which a
MFI, in addition to being financially viable, mobilizes its own financial
resources internally, that is, through equity, deposits, and retained profits
instead of depending on govt. or donor resources.

39
 The study explains two types of hurdle in reaching financial
sustainability i.e. operational and financial self sufficiency. Expenses
such as salaries and other administrative cost, depreciation of fixed assets,
interest on borrowings and deposits (i.e. cost of loan able funds), and
provisioning for loan loss (i.e. the cost of loan principal lost to default)
out of fees and interest income are included in operational self sufficiency.
Where as financial self sufficiency requires MFIs to cover all
administrative costs, loan losses, and financing costs from operating
income, after adjusting for inflation and subsidies and treating all funding
as if it had a commercial cost. Without crossing first hurdle, second can
not be expected and once this second is crossed, subsidies in the form of
concessional funds are no longer required and also inflation does not
erode the value of MFI's capital. Theoretically, increasing staff
productivity, efficiency and loan quality, and curtailing unnecessary staff
and thereby administrative cost may reduce the service delivery cost then
MFIs can attain operational self sufficiency which is necessary condition
of sustainability.

In Nepalese context, MFIs that have involved for many years in

micro finance services have not yet achieved operational self-sufficiency
level due to theoretical, social, and political reasons and achieving
financial self-sufficiency is still a longer way for them. These
institutions/programs have to bear five types of cost: social cost, service
delivery cost, fund cost, provisioning for loan loss and inflation. If these
institutions have to achieve at least operational self sufficiency level,
Government of Nepal, donors or other institutions who take interest in
poverty reduction should share their social cost and some portion of their
costs associated to institutional capacity building, employment generation,
technology transfer and research and development for the initial periods.

40
 Ghuran Thakur (2003) defines SFDP as the pioneer of micro-
finance in Nepal. The study is based on the performances of 5 SPOs (Sub
Project Offices of SFDP), which on an average are only of about 4 years
old and whose main target group is especially the women member of hard
core poor family of the small farmer(sf). Analysis of performances show
that these SPOs are evolving as a suitable model of micro-finance for the
poverty alleviation programs because within short period, all have
obtained operational viability and have maintained almost 100 percent
qualitative loan portfolio. Loan has been provided on the basis of group
approach/ joint liability and is mainly for short duration from which small
farmers get quick return. The average loan size is NRs10.76 thousand.

The study found positive correlation between capital formation and

the success of the program. There is significant improvement in the
growth of the internal resources. On an average each SPO has
accumulated one-third of internal resources of their loan outstanding. If
the growth remains same for 3-4 years, these SPO will be able to manage
their fund from internal resources. The analysis again found remarkable
achievement in loan investment, principal and interest collection. Loan
repayment rate is more than 98 percent which is similar to Grameen
replicated model. The analysis also informs us that women member are
comparatively more disciplined toward taking loan, loan proper
utilization, regular saving collection and loan repayment and are able to
provide effective peer pressure.

ADB (2003) has made a study to define the relation between

poverty and micro-finance. The study defines poverty as an income level
below a socially acceptable minimum and micro-finance as one of a
range of innovative financial arrangements designed attract the poor as
either borrowers or savers.

41
 In principal, micro-finance can relate to the "non-destitute chronic
poor" who occurs due to lack of assets and opportunities and "transitory
poor" which is temporary in nature and occurs due to the results of
adverse shocks. Lack of assets indicate absence of physical collateral
which restricts the poor to have access of formal credit and to depend on
informal credit where interest rate is high and sources are limited. So that
the study advocates that if access to credit can be improved, the poor can
finance productive activities that will raise income level of poor, provided
that there are no other binding constraints. This is a route out of poverty
for the non-destitute chronic poor. Similar effect is found in case of
transitory poor. But the study found present market clearing interest rate
of MFIs is unaffordable to the core poor (lower level of non-destitute
chronic poor) so that they will either not take up the services or take it up
and get into financial difficulties. Again they are excluded from group
and ignored by office staffs due to various reasons.

Hans Dieter Seible (1996) defines that the vast majority of people
in developing countries are small farmers, micro entrepreneurs and casual
income earners. They constitute that part of the economy which is called
informal sector, which includes small farms, fishery, animal husbandry,
etc. Although people of this sector are poor, poorly educated and without
access to social and financial services, this sector provides employment
and income to the rural and urban people and produced basic goods and
services for the increasing population. So, in every developing country
there is need of strong financial system to develop their economies and
alleviate poverty by regulating financial sectors and mobilizing targeted
program i.e. micro credit. If financial system development is to be geared
at both poverty alleviation and economic growth, it must include micro

42
finance policy not only for the formal sector alone but for the whole
economy.

Two approaches have been identified regarding the delivery of credit to

the women.

i. Discriminating approach, that target women directly and

exclusively as in Grammen bank in Bangladesh which gives
membership to women only.
ii. Non discriminatory approach, which aim at both men and women in
balance way without any strong preference of either gender.

The author giving example of targeted programs like SFDP,

Intensive Banking Program, PCRW, cooperative etc. and has concluded
that all these programs have ignored the existence and structure of self
help groups. Unlike self helps groups, which mobilizes their own, funds
and enforce repayment rigidly, none of the priority lending program are
even close in achieving viability and sustainability. The micro-credit
program should aim at both mobilization of saving and reaching poor in
one hand and achieving viability of the micro finance institution to
sustain the micro credit program.

43
 CHAPTER FOUR
RESEARCH METHODOLOGY

When we think about rural women, their living conditions and

recent increasing trend of Micro credit to up-lift them there emerge
various question such as: What is women development? What are the
indicators of women development? How are these indicators measured?
Do the micro-credit programs have strong potentiality to break the
vicious circle of poverty? Have the credit programs and other initiatives
associated with it-empowered women through raising their socio-
economic status? These questions are the road map of this study. When
all the answers of these questions including the method of testing
hypothesis and the control of variance are deliberatively linked up in a
network, the conceptual framework of the present study is set up and
which make ease to see the whole circumstances through the telescopic
eye.

Women development is related to the growth and expansion of

both materials and noon material welfare of women. So, it is a relative
concept which indicates positive changes in social, economical, political,
legal, educational, physical etc. structure of women of a society. All these
components are highly responsible to uplift the women and reduce their
poverty. It is because socio-economic positive changes are inevitable for
greater economic stability which directly impacts the life of women, their
children and their communities in which they live and creates brighter
future to the deprived and disadvantaged women. Again skill and
education, technical and entrepreneurial ability make the women able to
work in an autonomous and sustained manner. Thus, main purpose of
women development is to raise the women's participation in income

44
generating activities. However, it is true that income generating activities
of women have been considered as the effectiveness of micro-credit
programs so that the present study moves round in this concept.

4.1 Research Design

This study is based on the micro-study of micro-credit program. It

has been intended to analyze the effectiveness and sustainability of
micro-credit program in the specific study area. Both explorative and
descriptive research designs have been adopted to analyze and interpret
the quantitative and qualitative data collected from the concerned field.
Loan, investment and repayment of credit have been observed.

4.2 Nature of the Data

The study has mainly been based on the first hand or primary data
observed and collected from the consequence area using appropriate data
collection tools.

Required secondary data have also been obtained through

secondary sources e.g. books, journals, newspapers, published and non
published reports by MFIs, NGOs, INGOs, SOs and other institutions
working in this field. The questionnaire has been presented in Annex -1.

4.3 Population and Sampling

The population under this study are the 240 individuals in the form
of group formed under micro credit program in the Rajahar VDC. Out of
total population 42 individuals have been chosen as the sample
population for the detailed study.

45
4.4 Sample Technique

The list of the rural women of Rajahar VDC involving in micro-

credit program was found from women development centre and other
concern organization. From that list a sample has been taken by using
stratified random sampling considering each ward of VDC as a separate
strata.

4.5 Process of Data Collection

The primary data were collected by making structured

questionnaire. Borrowers, women group leader and staffs of the concern
institutions were interviewed separately and required data were collected.
To collect necessary information the researcher had also discussed with
many professionals, which was very much useful to present report in this
form.

4.6 Data Processing and Data Analysis

Data collection during the field study period is analysed using

descriptive method for better evaluation and interpretation. Similarly
quantitative statistical methods mainly correlation and regression analysis
are used to find out the effectiveness of total loan amount borrowed on
income increase per month. Again z test is fitted to analyse whether the
living standard have changed from before and after program intervention.

4.7 Correlation Analysis

Karl Pearson’s coefficient or coefficient of correlation measures

the degree of association between two variables i.e. xi (loan amount
borrowed in the study) and yi (income increase per month in the study).

46
Therefore correlation analysis deals with the statistical technique, which
measures the degree of relationship (or association) between the two
variables. In other words, it helps us in analysing the covariance of two or
more variables. For instance after deriving correlation analysis one can
able to find the relationship between loan amounts borrowed and income
increase per month. It is calculated by using following formula.

rxy 
 xy  n x y
 x 2
 n x   y
2 2

n y
2

The value of correlation lies between -1 to A i.e. -1 r  1.

If r = 1 there is perfect positive relationship.

If r = -1 there is perfect negative relationship.

If r = 0 there is no correlation at all.

The closer the value of r is to 1 or -1, the closer the relationship

between the variables and the closes r is to o, the less close relationship.
While estimating the value one variable from the value of other variable,
the higher the value of r, the better the estimate.

4.8 Regression Analysis

Regression analysis calculates equation that provides value of

dependent variables (income increase per month in this study) for given
value of independent variables (loan amount borrowed in this study). The
primary objective of the regression analysis is to show the relationship
between total loan amount borrowed and income increased per month.
For instance, after deriving regression equation one can able to find out
the effect of the loan amount borrowed on income increase per month.

47
 Income increase per month (yi) is regressed with loan amount
borrowed (xi) to examine the value of dependent variable (yi) for any
given value of independent variable (xi) and vice versa.

Regression equestion of yi on xi can be expressed as:

Yi = a + bxi

Where, yi = income increased per month

Xi = loan amount borrowed
a = constant
b = coefficient of loan amount borrowed
4.9 Test of Significance

There may occur the standard errors of estimate (SEE) like

standard deviation, to measure the reliability of estimated equation as
well as coefficient. The larger the standard error of estimate, the greater
the scattered ness of given observation from the regression line which
means no goodness of fit. On the other hand smaller the value of (SEE),
the better will be the goodness of fit.

4.10 Test of Goodness of Fit (R2)

R2 is used to find the explanatory capacity of independent variable.

It measures the scattered ness of observation from the regression line. It
describes how the dependent variable is explained by independent
variable. In other words, R2 shows how well the change in dependent
variable is explained by the independent variables. Closer the observation
to the regression line, better the goodness of fit i.e. y is better explained
by explanatory variables. R2 is the square of the correlation coefficient,
which shows the percentage of the total variation of the dependent

48
variable that can be explained by the independent variables. The value of
R2 ranges from 0 to 1. If the value of R2 approaches to ‘1’ the regression
plane thus estimated is a good fit and if it approaches to ‘0’,it implies the
bad fit. It is because increasing R2 means explaining more of the total
variation by regression plane. Hence the coefficient of determination can
be generalized as:

b xy
R2 
y 2

Where, x= xx
y= yy
4.11 Test of the significance of the parameters.
4.11.1 F Test

F test is used to examine the overall significance of the model,

which can be performed as:

R 2 / k 1
F
1  R 2  / N  k
Where,
R2 = coefficient of determination
K = number of explanatory variables
N = number of observations

The calculated f variance ratio is compared with the tabulated

value at special level of significance with (k-1) and (n-k) degree of
freedom. If F call <F tab null hypothesis is accepted. If F call >F tab null
hypothesis is rejected.

49
4.12 Research Hypothesis

Hypothesis 1

In terms of food practices there is no significant difference between

the proportion or relatively better off respondents before and after
borrowing.

Hypothesis 2

In terms of clothing pattern, there is no significant difference

between the proportion of relatively better off respondents before and
after borrowing.

50
 CHAPTER FIVE
DATA ANALYSIS

In this chapter, we analyse the collected data regarding the

objectives. Since the main component of the micro credit programs for
women is to provide small scale credit (up to NRs 30,000) for women to
increase their income level by fully utilizing their internal resources and
skill. The part of data analysis is related with loan amount and its impact
upon beneficiaries earnings and living standards. Again the impact of the
program on the women status and the component of the program such as
saving and loan repayment data will be analysed.

5.1 Loan Amount

Loan amount of the program at first phase of investment.

Table No. 2
Loan Amount and Number of Borrower
Loan amount borrowed at the No of borrowers Percentage of the
first phase of investment total borrowers
500 3 7.14
1000 3 7.14
5000 4 9.52
10000 17 40.48
15000 8 19.05
20000 4 9.53
25000 2 4.76
30000 1 2.38
Total 42 100
Source: Field survey by researcher.

51
 Table two shows the scenario of the loan amount and percentage of
the total borrows. The borrowers have been found very aware in
demanding loan according to their skill and entrepreneurship talent. Out
of 42 borrowers 40.48 percent have taken the loan amount of Rs. 10000,
and 19.05 have taken 15000. Percentage of women taking loan amount
Rs. 10000 and 15000 is very high which is near to three fifth because
amount less than these are considered small in size to run their project.
Only 4.76 and 2.38 percent of total borrowers have taken the loan amount
Rs. 25000 and Rs. 30000, respectively. These percentage are small
because women are still hesitating to take big amount of loan to run their
project at first phase of investment.

5.2 Loan Disbursement by Purpose

In general occupation signifies employment of the people in

different sectors for income earning purpose. In the study area women are
involved in different occupations such as agricultures, bee and poultry
farming, labouring, trade and so on.

Table No. 3
Occupation of Borrowers before Launching Micro Credit Programs
Occupation No of borrowers Percentage of the total borrowers
Agriculture 16 38.10
Retail Business 2 4.76
Wage Earners 11 26.19
Bee Farming 1 2.38
Poultry Farming 1 2.38
Hoteling 3 7.14
Raising Milk Buffalo 6 14.29
Other 2 4.76
Total 42 100
Source: Field survey by researcher.

52
 Table no. 3 presents that before launching Micro-credit program
women members were involved in various economic activities such as
agriculture, retail business, wage earners, poultry farming etc. Out of 42,
38.10 percent were involved in Agriculture and 26.19 percent were
involved as a wage earners. Involvement percent of women in these two
sectors is high because these sectors had adopted fully primitive methods
of production and women with lack of skill, knowledge and training
would like to choose these. 4.76 percent of total were involved in retail
business and 2.38 percent were involved in each bee and poultry farming
sectors. Therefore engaged percent in these three sectors was minimal
because these occupations were considered little bit difficult and
economically less profitable.

Table No. 4
Occupation Change After Joining Micro-Credit Program
Occupation No of borrowers Percentage of the total
borrowers
Agriculture 8 19.05
Retail business 6 14.29
Wage earners 2 4.76
Bee farming 6 14.29
Poultry farming 7 16.67
Hoteling 2 4.76
Raising Milk Buffalo 11 26.19
Total 42 100
Source: Field survey by researcher.

Table 4 shows that out of 42 borrowers 26.19 percent has started

raising milk buffalo and 16.67 percent women have started poultry

53
farming. Similarly 14.29 percent has started retail business. But after
launching program engaged percent of women in agriculture and wage
earners field have been significantly declined to 19.05 and 4.76 percent
respectively. It is because members have left previous traditional
occupation and have started such business, which are economically
profitable. Even in agriculture and wage earners field introduction of
modern technology, methods and skill have been found. The table shows
that there is change in occupation after the program interventions because
borrowers having different view point have started different occupation
according to their own interest, skill and entrepreneurship talents.

5.3 Change in Income

In general income is an economic gain through economic activity.

Similarly in the study area income denotes the earning of the borrowers
of the program through any productive activity. The income may be
money or articles as food grains, milk, animal husbandry but here in the
study, for convenience, the self consumption by the borrowers is not
included in income. Only the income which is earned by the sale of
product and income which is earned in the firm of wages are considered.
To know the change in income before and after the program intervention
the personal questionnaire has been used.

54
 Table No. 5
Income of the Member before and After Borrowing Loan from the
Program
Before Borrowing After Borrowing
Percent of No of the Income No of the Percents of
the total borrowers Group Per Borrowers the total
Borrowers Month Borrowers
57.14 24 0-500 1 2.38
26.20 11 500-1000 1 2.38
9.52 4 1000-1500 3 7.14
2.38 1 1500-2000 5 11.90
2.38 1 2000-2500 10 23.81
2.38 1 2500-3000 15 35.71
3000-3500 3 7.14
3500-4000 2 4.76
4000-4500 1 2.38
4500-5000 1 2.38
100% 42 42 100%
Source: Field survey by the researcher.

Table no. 5 presents that income in the study area has been
significantly increased after program intervention. Before launching the
program there is about 83.34 percent of the borrowers who have income
less then 1000 but after program intervention it has been reduced to 4.76
percent. Similarly before program there were only 7.14 percent of the
borrowers with income more than 1500 but after program intervention it
reached to 88.08 percent.

55
 This fact has proved that the members associated with the program
have significantly increased their average income after intervention of
program.

I. Attempt has been made to find out the correlation regression

related between that loan amount borrowed (xi) and increased in
income per month (yi)

I. (a) Correletion between xi and yi (r)

The result was obtained by using SPSS computer software which is

given as below:

Table No. 6
Correlation
Loan amount Income
borrowed increased per
month
Loan amount borrowed Pearson 1.000 .803
Correlation
Sig. (2-tailed) .000
N 42 42
Income increased per Pearson .803 1.000
month Correlation
Sig. (2-tailed) .000
N 42 42

Table no. 6 shows that correlation (r) is 0.803. This yielded value
i.e. loan amount borrowed and increase in income per month are
positively related. As we have out set the third objective i.e. to access the
impact of program on the beneficiaries' earnings and living standards, this
objective is proved by the test. Economically we can interpreate that the
loan amount or investment is the only most important factor, which
causes to increase in income.

56
 I. (b) Regression of Increases in income per month (yi) on loan amount
borrowed (xi)

We have regression line

Yi = a + bxi
Where,
Yi = computed value of y
a = autonomous increase in y
b = slope of yi on xi [b measures how the change in dependent variable (yi)
exists with the change in independent variable i.e. xi]

Here the result was obtained with the help of SPSS computer
software, which is given as below:

Table No. 7
Summary of Regression
Equation Dependent Independent Constant Coefficient t f Adj.
variable variable of loan Value Value R2
amount
borrowed
Yi = a + Income Loan 1200.848 0.105 8.536 72.862 0.646
bxi increased amount
per month borrowed

Table no. 6 shows the value of a and b as:

a = 1200.848
b = 0.105

57
 Since the coefficient b is positive there is a positive relationship
between yi (increase in income per month) and xi (loan amount borrowed),
hence increase in income is positive function of loan amounts borrowed.

We now see how the dependent variable yi i.e. increase in income

per month is dependent on loan amount or independent variable (xi).

(1) Suppose, loan amount (investment) , xi = 0

Then yi = a = 1200.848

This illustrates that even if there is no investment autonomous

function (part) exists, which simply refers to a constant value. It further
implies that although loan amount has its vital role to generate income,
social and other micro economic factors also have some role to generate
the total income.

(2) Suppose loan amount (investment) xi = Rs. 100

Then yi = a + bxi
= a + 0.105 × 100
= a + 10.5

This illustrates that if we invest 100 it will generate Rs. 10.5

income per month.

I. (c) Coefficient of Determination

According to table 6 the coefficient of determination R2 is 0.646,

which indicates that 64.6 percent of the total variation is explained by
regression equation so that the equation itself is a good fit. Economically,
We can intemperate that 64 percent increased in income have been
generated due to loan amount or investment and rest 36 percent by other
factors.

58
Result of F test

Table 6 shows that value of F ratio is 72.862. Since the calculated

F value 72.862 is grater than the tabulated F value i.e. 4.08, the regression
line yi on xi is significant i.e. more of the variation in income increase per
month is explained by the loan amount borrowed.

5.4 Living Standard

1. Living standard of the borrower/respondent before and after

joining the program.

Living standard of the borrower/respondent is usually analysed in

terms of food practices, sheltering, clothing etc. Here both quantitative
and descriptive tools are used to see whether the living standard has
changed from before and after program intervention. Among quantitative
tools Z test is used for food practices and clothing pattern made by
borrowers which are important dimension of living standard. Here for
simplicity, traditional and relatively better off food practices and clothing
pattern made by family member of respondents are analysed.

5.4.1 Change in Food Practices of Family Members of

Respondents

Table No. 8
Change in Food Practices before and after Program Intervention
S.N. Category Before Borrowing After Borrowing
01 Traditional 31 17
02 Relatively Better off 11 25
Total 42 42

59
 The table no. 8 itself represents the picture that the living standard
has increased after the program intervention. It can be proved from
statistical tools also. Whether the number of respondents who have
perceived positive change in food practice is significant or not has been
tested with Z test as follows.

In the usual notation, we have

N1 = 42 = N2
P1 = sample proportion of relatively better off members before borrowing
11
=  0.262
42
P2 = Sample proportion of relatively better off members after borrowing
25
  0.595
42

Now setting the hypothesis;

Null Hypothesis Ho : P1 = P2, there is no significant difference

between the proportion of relatively better off members before and after
borrowing.

Alternative Hypothesis H1: P1< P2, there is significant difference

between the proportion of relatively better off members before and after
borrowing (left tailed test)

Since N = 42, we use Z test.

P1  P2
Z
 1 1 
PQ  
 N1 N 2 

Level of significance: 5 percent i.e.  = 0.05

60
 N 1 P1  N 2 P2
Where population proportion P 
N1  N 2

42  0.262  42  0.595

42  42
= 0.428
and Q = 1- P = 1- 0.428 = 0.572
0.262  0.595
Now Z 
 1 1 
0.428  0.572  
 42 42 
= - 5.27
 /Z/ = 5.27

Z tabulated value at 5% level of significance for left tailed test is

1.645

Decision

Since computed Z (5.27) is greater than that tabulated value i.e.

1.645, null hypothesis is rejected or alternative hypothesis is accepted and
we can conclude that the project intervention is significant in increasing
the number of members who take the relatively better off food.

5.4.2 Change in clothing pattern of family members of

respondents

Table No. 9
Change in clothing pattern before and after program intervention
S.N. Category Before Borrowing After Borrowing
01 Traditional 29 15
02 Relatively Better off 13 27
Total 42 42

61
 In the usual notation, we have

N1= 42 = N2

P1 = Sample proportion of relatively better off members before borrowing

13
  0.31
42

P2 = Sample proportion of relatively better off members after borrowing

27
  0.643
42

Now setting hypothesis

Null hypothesis, Ho: P1 = P2 there is no significant difference

between the proportion of relatively better off members before and after
borrowing.

Alternative hypothesis, H1: P1< P2, there is significant difference

between the proportion of relatively better of members before and after
borrowing (left tailed test).

Since N = 42 we use Z test

P1  P2
Z
 1 1 
PQ  
 N1 N 2 

Level of significance: 5 percent i.e.  = 0.05

N 1 P1  N 2 P2
Where population proportion, P 
N1  N 2

62
 42  0.31  42  0.643

42  42
= 0.477
and Q = 1- P = 1- 0.479 = 0.524
0.31  0.643
Now Z 
 1 1 
0.477  0.524  
 42 42 
= - 5.289
 /Z/ = 5.289
Z tabulated value at 5% level of significance for left tailed test is
1.645

Decision

Since the computed value of Z (5.289) is greater than tabulated

value of Z (1.645), null hypothesis is rejected or alternative hypothesis is
accepted and we conclude that the project intervention is significant in
increasing the numbers of members who put on the relatively better off
clothing.

5.5 Savings

Saving is an important component of micro credit program so that

there is provision of either compulsory or voluntary saving scheme.
Women borrowers should deposit fixed amount of money into their
saving fund after involving in the group. Saving is deposited either
weekly or monthly scheme depending on the nature of the particular
program. In general practices, women of Rajahar VDC has saved Rs. 14
per week but in case of small farmer development program they have
saved Rs. 60 per month. Saving have been used for financial formation as

63
well as consumption needs of the group members into productive and
non-productive activities.

Up to 2062 Chaitra total savings of borrower of Rajatior VDC is

NRs. 27500. According to program office saving will be mobilized only
after all the borrowers of the particular group pay the loan.

Table No. 10
Sources of Saving
S.N Source Number of Respondents Percent
1 Reducing household expenses 15 35.71
2 Get from husband 5 11.90
3 Project income 12 28.57
4 Combining of 1 and 2 5 11.90
5 Labour 5 11.90
Total 42 100
Source: Field survey by their researcher.

Table 10 shows that the main source of saving for about 35.71
percent of the total respondents is by reducing household expenses. Only
about 28.57 percent of the total respondents rely on project income for
amount needed in group saving. Out of total, 11.90 percent depends upon
their husband to save the required amount.

5.6 Loan Repayment

The loan repayment is a crucial aspect of the lending activities of

any financial institution. Loan disbursement of any financial institutions
depends upon the loan repayment cycle. If loans are repaid on time,
financial institutions expand loan size and the number of borrowers. But
if loans are not repaid on time it will not only affects the turn over

64
capacity of financial institutions but also create burden of loan to the
borrowers and which in turn affects borrowing and lending of the
borrowers themselves.

Depending on the availability of data it has been estimated that up

to mid July 2005, repayment percentage of the over all program was near
about 85 percent. Among the sample household it is found that 30 percent
has totally paid the loan, 55 percent has partially paid and 15 percent has
not paid at all. However, in the case of Grameen Bikas Bank, the
repayment rate is 98 percent.

5.7 Status of Women

The status of women refers to the extent to which women have

control over their own lives and have access to knowledge, economic
resources and political power. Nepalese women have lower economic as
well as social status due to lack of proper education, appropriate skill,
ability to decision making power and proper women's empowerment
provided by our society. There are various indices of the status of women,
they are:

i) Education of women
ii) Control over decision making
iii) Self-confidence to live their lives.
iv) Social prestige
v) Women autonomy

All of the above indices are clearly influenced by the micro credit
program and former are the dimension of women status. Above indices
are briefly explained with the help of following table.

65
 Table No. 11
Changes in Women Status after Borrowing the loan form MCPW.
S.N Indicators Before After Differences
borrowing borrowing Increase Decrease
loan loan Percentage Percentage
1 Education 3 (7.14%) 35 76.19%
of women (83.33%)
2 Decision 8 (19.05%) 31 54.76%
making (73.81%)
power
3 Self 7 (16.67%) 38 73.81%
confidence (90.48%)
to live
their lives
4 Social 6 (14.29%) 31 59.52%
prestige (73.81%)
5 Women 5 (11.90%) 29 57.14%
autonomy (69.04%)
Source: Field serves by researcher.

5.7.1 Education of Women

Education is the most important elements of human life. It makes

easy to live human life in the society. Education brings lots of changes in
life style of men as well as women. Most of the participants (women) in
this program either have no education or have low education. They did
not got formal education from the school and college. Educated and
trained women can face the various socio-economic problem but
uneducated women always remain far from such problems. However

66
micro credit program and its consequence trainings, seminars and group
meeting have raised women's knowledge, skill and ability hence informal
education. Even the women who could not write their own name can
write after joining the program. Table no. 11 shows that 76.19% of
women have increased their education after joining the micro credit
program. They got opportunity to learn about banking system, such as
lending and repayment procedure, saving scheme etc. However the
project has not conducted special program for increasing female
education.

5.7.2 Control Over Decision Making

An index of women's control over decision-making was

constructed by asking them question about household matter on which
decision has to be taken e.g. control over funds borrowed, control over
business, income generating activities, control over spending or
utilization of earning. Decision making power of men and women
depends on their education, skill, entrepreneurial talent ship etc. If
women control credit they will invest in appropriate project, which is
related to their skill and ability, hence such project will generate more
income. Again if women control project income then they will repay loan
at time and raises saving which are the inevitable part of micro credit
program. Form the fixed questionnaire it is found that women control
over decision-making power has been significantly increased. Table No.
11 shows that before borrowing loan only 19.05 percent women had
decision making power but after borrowing loan the percentage reached
to 73.81 percent where 54.76 percent of women participants have
increased there decision making power after joining the program. These
women have been capable to decide by themselves about control of the

67
loan, to involve in the income generating activities, to spend their earning
and other household matters.

5.7.3 Self Confidence to Live their Lives

Self-confidence is one of the important elements to live their lives

and to run their project properly. Self-confidence depends upon the
education, skill and social attitude. If their is good social attitude to look
after women and if women are educated and skilful they can present
leading role for their household and social development. Table no. 11
shows that 73.81 percent participants have raised their self confidence
after joining the program.

5.7.4 Social Prestige

Social prestige is created within the society and depends upon the
individual himself or herself. If men and women are educated, skilful and
functions good for their own society, they are prestigious in the eye of
society. Most of the women participants before launching micro credit
program have low social prestige because they lack human and economic
resources but after joining the program their social prestige has been
increased. Table no. 11 shows that before launching the program only
14.29% women participants where prestigious in the society but after
launching the program it reached to 73.81 percent means 59.52% women
participants have raised their social prestige after joining the program.

5.7.5 Women's Autonomy

Autonomy was measured by women's ability to spent family

income freely. Program participation was found to have little impact on
this variable. However, the interaction term between program

68
participation and household income had a positive impact. This implies
that program participation alone is not enough to improve women
autonomy. Autonomy improves only if household income increases along
with program participation. Table no. 11 inculcates that 57.14 percent of
participants women have increased their autonomy after joining this
program.

Over all presentation of data shows that there is positive

relationship between increase in income per month (yi) and loan amount
borrowed or investment (xi), hence increase in income is positive
function of loan amount borrowed or investment which has been proved
by the highly positive value of correlation (r) as well as positive
coefficient (b) of regression analysis. Again the value of coefficient of
determination, R2, clarifies the above facts that more than 60% increases
in income have been generated due to loan amount or investment.
Similarly computed values of z test show that the living standard of
women in terms of better food practices and clothing pattern has been
significantly improved as their income rises. Again it has been estimated
that repayment rate of loan is strongly higher and concept of saving is
being developed.

69
 CHAPTER SIX
SUMMARY, CONCLUSION AND RECOMMENDATIONS

6.1 Summary and Conclusion

Although Nepalese women work for much longer hours, they live
in difficult socio-economic condition it is because most of their works are
not considered as productive jobs. There is also cruel wage discrimination
so that even for same work they are paid low wage rate as compared to
their male counterparts. Again they are also deprived from property
ownership of land and this in turn restricts them from the stream of loan
market hence income-generating activities. Similarly, their level of
literacy, life expectancy and income lies well below. Thus extent of
poverty is higher among women, which constitute half of total population.
Then the poverty has become a burning issue of the developing countries
like Nepal. So that many such countries including Nepal has applied
different alternatives to address the poverty. Micro credit program is one
of the such recently developed alternatives which has been believed,
learning the lesion from Bangladesh, Indonesia and Thailand, to have a
greater potentiality to reduce the extent of poverty.

Women are important sources of energy for development and their

groups can be an effective channel for resources aimed at meeting the
needs of the poor people in rural areas. These potentials can be best
realized if they are integrated into the whole spectrum of development
programs rather than relegated to the marginal sector currently reserved
for women.

Leaving the male centric rote aside most of the countries in recent
time given priority to women participation in the development process

70
considering as man and women are two wheels of a cart. Similarly, large
number of national and international organizations have been set up and
carried out various specific programs to enables women's roles and rights.
These programs including formal and informal education, health
awareness activities, income earning and self-employment generating
activities have been launched with micro credit facilities. Micro credit has
been proved to be most significant facilitators to poverty reduction and
women empowerment. It is an inevitable means of breaking the vicious
circle of poverty and to up lift the economic status of poor women.

Nepal initiated rural micro-finance since 1970 through the

establishment or credit co-operations, implementation of priority sector
credit program and Small Farmer Development Program (SFDP). After
the initiation of rural micro finance (micro-credit) various programs such
as PCRW, MCPW, PDDP, Grameen Banking and many other FI-NGOs
from government and private sector came into existence to provide
financial service towards the poor women to enable them to under take
their farming and enterprise according to their interest.

WDS of Nawalparasi started micro credit program in Rajahar VDC

since 1997 under which micro credit is provided for production activities
for the poor women. Specially micro credit program does not require
physical collateral for the disbursement of loan. Loan is provided on
group liabilities. Since 1997, there are all together 18 groups which out of
240 group members engaged in income generating activities and total
loan disbursement up to 2005 is 72,62,000.

Under micro credit program in Rajahar VDC, WDS- Rajahar,

Grameen Bikas Bank-branch office Beldiha, and Agriculture
Development Bank-branch office Rajahar provide loans. Micro credit

71
program for women has served women from a different ethnic groups
including Brahmin, Chhetri, Newar, Tharu, Kumal, Magar, and so on but
Bramhin and Chhetri are the major participants by cast.

Some of the findings of the study may be summarized as:

The rural women of Rajahar VDC under the coverage of micro

credit program were relatively poor having income less than Rs. 1500
yearly. So on an average the program is target group oriented.

The study has found positive impact of micro credit program on

beneficiary's earnings and living standards. Similarly, involvement in the
micro credit program has empowered women in varying degree. It has
offered opportunities for poor women to come out of their house hold
confines, to organize themselves in groups and to work in productive and
social activities. The program with its focus on group activities and
income generation has helped to enhance the self confidence and
increased right to spend thus increasing the access to resources.

For most of the women, despite of the efforts of FI-NGOs both of

government and privet sector, the nature of their work appears to have not
changed. So in spite of the increase in monthly income their average
working hours have remained unchanged as they are still stuck on the
traditional farming activities. Similarly most of the projects were small
and unable to generate remarkable amount of profit but 84% of the
respondents have made some profit.

Repayment percentage of the overall program was near about 85

percent in Rajahar VDC. Repayment is found lower in agriculture
activities and higher is business activities. Low repayment rate was
caused by insufficient supervision due to staff turn over and under

72
staffing and long distance between sites and death of animals due to
various reasons. Among the sample borrowers 30 percent has totally paid
the loan, 55 percent has partially paid the loan and 15 percent has not
paid at all. However, in case of Grammen Bikas Bank, the repayment rate
is 95 percent. Therefore, repayment rate of loan of the program in whole
as well as sample can be taken as satisfactory.

Empirical findings showed that correlation is 0.803 which signifies

that loan amount borrowed and increase in income per month are
positively related. Similarly in regression analysis, the value of
coefficient is found positive so the increase in income is positive function
of loan amount borrowed. Again the value of coefficient of determination
is 0.646 which reveal that 64 percent increase in income has been
generated due to loan amount or investment. And from test statistics it is
found that project intervention is significant in increasing the number of
members who take relatively better off food and clothing hence better
living standard.

Therefore looking the scenario of various facts and empirical

findings of the study such as shift of occupation from traditional
agriculture activities to small agriculture based industries and retail
business, significant rise in average income, improved in living standard
and women empowerment, developing concept of saving, and higher
repayment rate it can be said that the program is toward satisfactory trend
to reduce the poverty but there is still many things to be done considering
the solution of existing problems so that there is need to planning in
future.

73
6.2 Recommendation

Based on the study the following suggestions are recommended for

further improvement and successful implementation of the program.

 It will be better if the program would be designed in such a way

that need identification, implementation, supervision and
monitoring of the program and its flow up could be done by the
community itself.
 The program should develop practical and varied training courses
related to skill development activities, agriculture extension,
income generation and business promotion as per the need of
particular community.
 Most of the disbursed loan goes to agriculture activities it is
because our whole economy is dominated by agriculture sector.
Thus following points are proposed:
o Healthy livestock should be supplied to loaner instead of
providing credit in cash.
o Vaccination of animal should be arranged at appropriate
time.
o The program should have its at least one veterinary assistant
who can fully devote time to provide services.
o Though there is the provision of insurance in case of death of
livestock but it has not been smoothly implemented. So there
is need of smooth implementation of insurance provision as
well as the provision of insurance to the livestock suffering
from diseases too.
 Group savings are of great importance in the rural economy.
Though most of the programs have saving scheme, it is

74
 insufficient so that there is need to adopt incremental approach
i.e. saving should be increased as income starts to generate
from the program.
 In rural areas there is inefficient market mechanism. Market is
settled once with in a week. Where vegetable producers have
felt difficult because some of the vegetables can not be stored
long when it is reaped. Therefore daily effective market
mechanism should be developed. Again there should be at
least one cold storage on the particular area where producer
can store their surplus vegetables like potato, onion etc.
 The position of the program staff should be permanent so that
they could perform their responsibilities with confidence and
concentration. Given the field oriented nature of the work of
the program staff, allowances should be raised. Monitoring of
the overall operation of the program activities should be
carried out by some independent agency. The credit project
should be located at an easily accessible place where the
women could gather, raise queries and get information.
 To supervise the use of the loan and to provide effective skill
to advice on the management of the loan project field staff
should be trained regularly so that the clients of the credit
program can receive technical as well as managerial skill
properly.
 The program should be included with literacy classes as well
as orientation classes in which the WDS staff should provide
all information about loan, repayment schedule and rate of
interest, etc.

75
 There is need to shift the program from agriculture based on
small industry and business promoted activities because there
is high operation cost in agriculture based activities.
 There is lack of universal definition regarding micro-credit in
the context of Nepal. The credit small in size (micro) is
generally called the micro credit.
 Quite often many micro credit advocates tends to considered
poverty as cash flow problem and seek in narrow economic
terms. Poverty particularly that of women can not be explained
in terms of cash flow problems it has strong linkage with
inequitable distribution of wealth, unequal macroeconomic
policies. Any strategy for poverty reduction with main
emphasis on micro credit and income generation programs in
informal sector is not going to be effective in the long run.
Women economic empowerment is much more than credit and
income generation program.
 In some of the case, it is found that, women’s autonomy has
been narrowed by their family, especially by their husband,
which in turn has disturbed in investment, saving, and income.
Therefore beneficiaries’ family or husband should be
participated in a counselling conducted by concern offices so
that women autonomy can be raised.
 As there is no better alternative, rather than to continue and
increase the involvement of NGOs or FI in the delivery of
financial service to rural poor, NGOs should be made more
efficient. Although not highly significant but a Positive and
relatively significant association between profit and perception
level of support service provided by NGO had been found
among the rural women covered by MCPW in Rajahar VDC.

76
 Given this finding, all efforts should be made to deliver better
services to the MPCW women members in a coordinated
manner. NGOs should work in the direction so as to link
women member to government line agencies and motivate
them to take their service and resource, which is supposed to
be helpful in starting off farm income generation project.
 Micro-credit program can cot alone be considered as the
panacea of poverty alleviation so that other programs are also
headed as complementary.
 Only micro finance indeed will not bring desire change in the
living condition of poor people of Nepal. Thus it needs to
involve various actors/stakeholders in the poverty program.
More and more local bodies should be involved in planning
and mobilizing resources. Indeed they have comparatively
more base and strength in the mobilization of the community.
They have also resources, which can be utilized for various
specialized services and infrastructure development.
 Here the civil society should perform as a control unit of the
functions made by local bodies, FI-NGOs and Government. It
should manage various awareness programs so that micro
credit program and its consequence components planning and
mobilizing resources can only follow right and appropriate
track. Again decision-making role should lie with the
beneficiaries. As the beneficiaries are more aware of their local
socio economic contexts there are better placed to decide about
the credit priorities and processes.

77
 QUESTIONNAIRE

1.1 Name of the Respondents

Age
VDC Ward No. Locality

1.2 Cast Ethnic Group:

1.3 Education: Literate

Illiterate
Completed class

1.4 Marital Status: Married/ Unmarried/ Widow/ Divorced.

1.5 Family Head:

Respondents herself Husband
Other

2. Economic Background

2.1 What is your land tenure status?

(a) Owner cultivates (b) Tenant cultivates

(c) Share cropper (d) Land less
(e) other specify

2.2 What is your land size holding and production?

S.N. Khet (in Production in Pako in Production is

Bigha) quintal Bigha quintal
1
2

78
2.3 Do you have land in your own name?
Yes No
If Yes
Did you have it earlier or owned after the program begain?

2.4 Can you produce sufficient food for your family in your own land?
Yes No more than necessary

2.5 What was your main occupation or job before joining the program?
(a) Agriculture (b) Wage earner
(c) Household activities (d) other jobs, specify

2.6 What is your monthly income before and after joining the program
(in rupees)
(a) Before
(b) After

A. Question related to objectives No. 2 and 3

A.1 Why did you join the program?

(a) To earn more income and to improve family condition
(b) To be self dependent
(c) others specify

A.2. Do you think your poverty has been reduced by joining the
program?
Yes No Do not know

A.3. What types of benefit have you got from that program?
Economic benefits
Non Economic benefits
If you have got non economic benefits then please specify it:

79
A.5. Have you taken any loan from the program
Yes No

A.6. If yes, how many times you have taken the loan?

A.7. What was the purpose and amount of loan?

S.N. Purpose Amount

1
2

A.8. Did you spend loan in particular purpose or not?

Fully spent Partial spent
Not spent

A.9. If not where did you use if?

(a) Household consumption
(b) Keeping in cash
(c) Others, specify

A.10. Are you benefited from the loan?

Yes No Do not know

A. 11 Did you pay the loan?

(a) paid totally (b) paid partially
(c) not paid at all

A.12 After paying loan, what is the purpose for which the remain
income is used?
(a) Household daily needs
(b) Household other expenses
(c) Personal use

80
 (d) Reinvested in previous work
(e) Others, specify

A. 13 Do you have any saving or not?

Yes No

A.14 If yes, what is the monthly savings (in rupees)?

Monthly saving: …………………

A.15 For what purpose the saving is used?

(a) To pay back the loan
(b) Taking idle
(c) To lend the someone else
(d) Others specify

A.16 Have you made any change in your food and clothes after joining
the program?
Yes No
If yes, what where the ingredients of your daily food before the
program?
What is it now?
What did you we before the projects began?
what did you wear now?

Related to objective No. 1

B.1. Expect income generating activities which types of program have

you joined under this program?
(i) Community development activities
(ii) Training
(iii) Environment and appropriate technology

81
 (iv) Literacy classes (v) others specified
If training, how many times have you attended?

B.2. Do you think the knowledge you received from the training is
adequate to run your project.

B.3. What is your role in various intra household decision making

process?
Before program: After program:

B.4. Do you think that after joining the program you can support yourself
if left alone?
Yes No Don’t know

B.5. Do you think that the thinking of society towards you has changed
after joining the program?
Yes No Don’t know

C. Related to Objective 4

C.1. Is there any problems you have faced while you are performing
various activities under this program?
Yes No
If yes, what are they? Specify

C.2. Did you get any co-operation to solve that program from NGO,
Bank, Government etc?
Yes No
If yes what are they

C.3. Do you have any suggestions or comments to this program which

can help to make it more effective?

82
 BIBLIOGRAPHY

Acharya, Meena (1994), The Statistical Profile of Nepalese Women,

IIDS, Kathmandu, Nepal.

Acharya, Meena (2003), Development of the Financial System and its

Impact on Poverty Alleviation in Nepal, Economic Review
(2003), Research Department Nepal Rastra Bank.

ADB (2003), Micro-finance and Poverty Reduction in Asia, what is

the evidence.

ADB/N (2001), Micro-finance Development in Nepal, ADB/N monthly

news (Ghuran Thakur: SFDP the pioneer of micro-finance in
Nepal).

Aryal, Jeetendra Prakash and Gautam, Arun (2001), Quantitative

Techniques, New Hira Books Enterprises, Kirtipur, Kathmandu,
Nepal.
Black, John (2002), Dictionary of Economics, Oxford University Press,
New York.

CIRDAP (2000), Fighting Poverty With Micro Finance, Report of

seminar on sustainable local community Development and the role
of micro-credit in rural development, CIRDAP, Dhaka,
Bangladesh.

Dahal, Dev Raj and Guru Gharana K.K. (ed) (1996) Development
Strategy of Nepal, NEFAS, Kathmandu, Nepal.
District Development Committee (2004), Progress Report of Women
Development Program, WDS/DDC Nawalparasi, Nepal.

83
Gupta, C.B. (1985), An Introduction to Statistical Methods, Vani
Educational Books, a division of Vikas Publishing House Pvt. Ltd.,
New Delhi
Gupta, S.P. (1989), Statistical Methods, Sultan Chand and Sons
Publishers, Daryaganj, New Delhi.
Guru-Gharana, K.K. (1997), Poverty and Poverty Reduction Agenda in
Nepal, Kathmandu, Nepal.

Hans, Dieter Seible (1996), Financial System Development and Micro

Finance, GTZ, Eschborn.

Kansakar, D.R. and Shrestha, K.N. (2000), Quantitative Techniques for

Economics, Sewa Publishers, Kathmandu, Nepal.

Khandkar, S. (1998), Fighting Poverty with Micro Credit: Experience

from Bangladesh, New York: Oxford University press for the
World Bank.

Khandker and Cowdbury (1996), Targeted Credit Program and Rural

Poverty in Bangladesh. World Bank Discussion Paper No. 336,
Washington D.C.

Krishana Kumar Regmi (2000), Micro-credit to Women for Poverty

Reduction: A Case Study of the Benimanipur VDC,
Nawalparasi District, Nepal.

Ministry of Finance (2005), Economic Survey (2004/05), HMG,

Ministry of Finance, Kathmandu.

National Planning Commission (2002), Approach to the Tenth Plan

(2002 -2007), NPC/HMG, Kathmandu, Nepal.

Nepal Rastra Bank, Economic Report 2003/04

84
NRB (2001), Mirmire (2001), Published by Nepal Rastra Bank, Bankars
club.

NRB (2004), Nepal Rastra Bank Shamachar, Kathmandu

Regmi, Krishna Kumar (2000), Micro Credit to Women for poverty

Reduction: A case study of the Behimanpur VDC, Nawalparasi
District, Nepal.

Regmi, Prakash (2001), Micro Credit and Status of Women in the

context of poverty reduction in Nepal The economic Journal of
Nepal, Vo.l 24 CEDECON, T.U. Kirtipur, Nepal.

Shalik Ram Sharma (2003), Micro-finance Against Poverty: The

Nepalese Scenario, published in economic review.

Wolff, Howard K and Pant, Prem R (2000), Social Science Research

and Thesis Writing, Buddha Academic Enterprises Pvt. Ltd.
Kathmandu, Nepal.

85
MICRO-CREDIT AND WOMEN DEVELOPMENT
MICRO-CREDIT AND WOMEN DEVELOPMENT

(A Case Study of the Rajahar VDC, Nawalparasi District)

A Thesis Submitted to
Central Department of Economics, the Faculty of
Humanities and Social Sciences in Partial
(A Case Study of the Rajahar VDC, Nawalparasi District)

Fulfillment of the Requirement for the

Degree of Master of Arts
in
Economics

By
Shankar Babu Adhikari
-Shankar Babu Adhikari 2006

Central Department of Economics

Tribhuvan University
Kirtipur, Kathmandu

2006

86
 LITTER OF RECOMMENDATION

This dissertation entitled "Micro-Credit and Women Development: A

Case Study of the Rajahar VDC, Nawalparasi District" has been
prepared by Mr. Shankar Babu Adhikari under my supervision and
guidance. I hereby recommend it for acceptance.

______________________________
Dr. Madhavi Singh Shah
(Professor)
Central Department of Economics
Tribhuvan University
Kathmandu, Nepal

Date:

I
 APPROVAL LETTER

We certify that this thesis entitled "Micro-Credit and Women

Development: A Case Study of the Rajahar VDC, Nawalparasi
District", submitted by Mr. Shankar Babu Adhikari to the Central
Department of Economics, Faculty of Humanities and Social Sciences,
Tribhuvan University, in partial fulfillment of the requirements for the
Degree of Master of Arts in Economics has been found satisfactory in
scope and quality. Therefore, we accept this thesis as a part of the said
degree.

Thesis Committee

Prof. Dr. Madhavi Singh Shah -------------------

Department Head

Ms. Chapala Koirala -------------------

Gender Specialist
External Examiner

Prof. Dr. Mdhavi Singh Shah -------------------

Supervisor

Date:

II
 ACKNOWLEDGEMENT

I take this opportunity to express my sincere gratitude to my

supervisor Dr. Madhavi Singh Shah, Professor and Department Head of
Central Department of Economics for encouraging and providing me
ideas to complete this dissertation. I am obliged to her for her guidance as
well. It was almost impossible to present this dissertation in this form
without her guidance and supervision.

I also take this opportunity to express my sincere and deep regards

to my parents for providing me constant financial support to the bet of
their capacity to complete my Master Degree studies. Similarly I have no
words to thank my wife, Rita and sisters, Usha, Krishana, Uma and
Apshara, who more than anyone else sustained me in arduous task.

I feel really proud of having association with my colleagues,

Damber Rawut, Narayan Poudel, Tuk Bahadur K.C., Raju Shrestha,
Deepak Aryal, Chiranjibi Tiwari for their efforts of making homely
environment.

I should thank Bikesh Maharjan (University Computer Service) of

computer secretariat service, Kirtipur for his efficient and timely
secretarial service.

Last but not the least, I would like to thank all those who have
directly or indirectly supported me in making this endeavor a success.

Date Shankar Babu Adhikari

III
 TABLE OF CONTENTS

Page No.
Letter of Recommendation I
Approval Letter II
Acknowledgement III
List of Tables VII
Acronyms VIII

CHAPTER ONE: INTRODUCTION 1

1.1 General Background 1

1.2 Significance of the Study 5
1.3 Statements of the Problems 7
1.4 Objectives of the Study 11
1.5 Limitation of the Study 11

CHAPTER TWO: PROFILE OF THE STUDY AREA 12

2.1 The Village Development Committee 12

2.2 Historical Background 12
2.3 VDC Profile 12

CHAPTER THREE: LITERATURE REVIEW 16

3.1 Literature Review Related to Micro Credit Programs 16

3.1.1 Small farmer development program 16
3.1.2 Production Credit for Rural Women (PCRW) 19
3.1.3 Micro-Credit Project for Woman (MCPW) 21
3.1.4 Grameen Banking 22

IV
 3.1.5 Rural self Reliance Fund (RSRF) 25
3.1.6 Rural Micro-Finance Development Center (RMDC) 27
3.1.7 Developmental and Promotional Initiative taken by NRB in
Support of Micro-finance 28
3.2 Literature Review Related to Women Status and Poverty
Reduction 31

CHAPTER FOUR: RESEARCH METHODOLOGY 44

4.1 Research Design 45

4.2 Nature of the Data 45
4.3 Population and Sampling 45
4.4 Sample Technique 46
4.5 Process of Data Collection 46
4.6 Data Processing and Data Analysis 46
4.7 Correlation Analysis 46
4.8 Regression Analysis 47
4.9 Test of Significance 48
4.10 Test of Goodness of Fit (R2) 48
4.11 Test of the significance of the parameters. 49
4.11.1 F Test 49
4.12 Research Hypothesis 50

CHAPTER FIVE: DATA ANALYSIS 51

5.1 Loan Amount 51

5.2 Loan Disbursement by Purpose 52
5.3 Change in Income 54

V
 5.4 Living Standard 59
5.4.1 Change in Food Practices of Family Members of
Respondents 59
5.4.2 Change in clothing pattern of family members of
respondents 61
5.5 Savings 63
5.6 Loan Repayment 64
5.7 Status of Women 65
5.7.1 Education of Women 66
5.7.2 Control Over Decision Making 67
5.7.3 Self Confidence to Live their Lives 68
5.7.4 Social Prestige 68
5.7.5 Women's Autonomy 68

CHAPTER SIX: SUMMARY, CONCLUSION AND

RECOMMENDATIONS 70

6.1 Summary and Conclusion 70

6.2 Recommendation 74

QUESTIONNAIRE 78

BIBLIOGRAPHY 83

VI
 LIST OF TABLE

Table No. Title Page No

Table No. 1Major Occupation of Person in Rajahar

VDC 14

Table No. 2 Loan Amount and Number of Borrower

51

Table No. 3 Occupation of Borrowers before

Launching Micro Credit Programs 52

Table No. 4Occupation Change After Joining Micro-

Credit Program 53

Table No. 5 Income of the Member before and After

Borrowing Loan from the Program 55

Table No. 6 Correlation

56

Table No. 7Summary of Regression

57

Table No. 8 Change in Food Practices before and after

Program
Intervention 59

VII
Table No. 9 Change in clothing pattern before and
after program
intervention 61

Table No. 10Sources of Saving

64

Table No. 11Changes in Women Status after

Borrowing the loan form MCPW. 66

VIII
 ACRONYMS

ADB/N : Agricultural Development Bank of Nepal

ASDB : Asian Development Bank
CBS : Central Bureau of Statistics
CECJ : Canadian Center for International Studies and
Cooperation
CMF : Center for Micro Finance
CSD : Center for Self-help Development
FAO : Food and Agricultural Organization
FINNIDA : Finish International Development Association
GNP : Gross National Product
GBP : Grameen Bank Program
GTZ : German Development Service
HDR : Human Development Report
IFAD : International Fund for Agricultural Development
Bank
LRDP : Integrated Rural Development Program
MCPW : Micro Credit Project for Women
MLD : Ministry of Local Development
NBL : Nepal Bank Limited
NGO : Non-Governmental Organization
NRB : Nepal Rastra Bank
PDDP : Participatory District Development Program
PCRW : Production Credit for Rural Women
RBB : Rastriya Banijya Bank

IX
RSRF : Rural Self Reliance Fund
SPCL : Small Farmer Cooperative Limited
SFDP : Small Fanner Development Project
SHGs : Self Help Groups
UNDP : United National Development Program
UNICEF : United Nations Children’s Fund

UNFW : United Nation’s Fund for Women

USA : United States of America

USAID : United State Agency for International Development
VDC : Village Development Program
WB : World Bank
WDD : Women Development Division
WDO : Women Development Officer
WDP : Women Development Program
WDR : Women Development Report
WDS : Women Development Section
RMDC : Rural Micro Finance Development Center
FI : Financial Institution