Micro-finance disbursement in one of the country?s most populous state, Uttar Pradesh (UP) is yet to take roots, while in Tamil Nadu it has made some dent taking advantage of high literacy rate even among the rural poor. In Orissa non-availability of adequate funds is a major constraint for expansion of income generating activities.
A study undertaken by the apex organisation of micro-finance institution, Sa-Dhan in these three select states found that in UP there was not much of an enterprise activity as compared to that in Tamil Nadu. Most of the people setting up their own enterprises make the initial investments themselves and the average investment ranges between Rs 1,275 to Rs 25,000.
Setting up of small grocery or cosmetic shop is one of the most favored livelihood option in the rural areas of UP. Analysis shows that small shops are not quite viable as they have very small margin while the interest burden is high. Other preferred livelihood options are driving, tailoring and rendering professional services like cycle mechanics, barbers, carpenters, carpet weavers, able operators, masons, courier service, insurance agents, mobile repair, sarge weaving.
Though UP ranked fifth in the absolute size of self help groups (SAGs) in 2001, in terms of SHU bank linkage the state ranked even lower at a modest seventh. The micro-finance institutions in the state suffer from poor growth. In 2000-02 while the micro-finance institutions in Rajasthan registered a five-fold growth that in UP registered a growth of mere 1.5 times.
In Tamil Nadu, about 37% of the rural entrepreneurs source money from money lenders and 20% of them source credit from micro-finance institutions for setting up of shops, while the remaining make their own investment. Only 13% of the households set up small shops, while 25% of them prefer providing professional services. Here too the most favored option is driving and tailoring but the rates are far higher than in UP.
In Orissa, apart from non-availability of adequate fund for income generating activities, other constraints are lack of market linkage, non-availability of raw materials and access to technology.