MICRO-FINANCE AND RURAL ENTERPRISES: AN ANALYSIS OF OPERATIONAL PERFORMANCE AND CONSTRAINTS IN THE SHG-BANK LINKAGE PROGRAM IN INDIA

This paper investigates the interrelationship within community's business environment and the operational characteristics of community-owned economic units. Drawing upon a field level survey conducted in 2006-07 in two districts each of Haryana and Orissa states of India, this paper examines the suitability of government-directed micro-finance strategy and the role of the community level Self-Help Groups (SHGs) in the flow of micro-finance to rural micro-enterprises. While determining the underlying factors impacting the governance of SHGs and their performance of economic ventures in a rural business environment, the paper outlines low financial base, non-provision of socio-economic incentives to members and the lack of group commitment to task accomplishment as the main problem areas of resource flow to the microenterprises. The results underline the need for an integrated approach to program governance and conclude with policy lessons for improving the implementation of micro-finance driven self-employment programs in rural areas.