Loan Utilization by Microfinance Beneficiaries (A Case Study of Select Districts in Telangana Region of Andhra Pradesh) Prof. Rao R. Nageswar*, Professor, Dr. Veenapani**, Associate Professor *Department of Business Management, Osmania University, Hyderabad, A.P. **Department of MBA, Sarojini Naidu Vanita Mahavidyalaya, Nampally, Hyderabad-500001, Andhra Pradesh, India Online published on 2 June, 2012. Abstract Microfinance is defined as “Any project or component that supports delivery of very small, uncollateralized or less than normally collateralized loans; other financial services such as savings or insurance for low income clients”- (Consultative Group to Assist the Poor (CGAP)). At the all Indian level, during 1998–99, 18,678 Self Help Groups (SHGs) were formed which increased to 69,53,250 groups during 2009–10. Similarly the credit disbursed during 1998–99 was Rs. 333 million and increased to Rs. 1,44,533 million during 2009–10. With huge amount of loans being disbursed under microfinance programmes, there is a need to study the utilization of loans by the beneficiaries and hence this study is taken up. The State of Andhra Pradesh has the highest penetration of microfinance in India; hence the state was selected for the study. A sample of eight hundred and ten members was selected from three districts of Telangana region in Andhra Pradesh, using multistage sampling method. Loan utility is classified into productive and non-productive usage. It was found that loan utilized for productive purpose increased from first loan to fourth loan, but decreased during the fifth loan dosage. This causes concern. Loan utilization was found to be dependent of member's education, occupation and their association with the microfinance programme. Loan utilization was found to be independent of cumulative bank loan availed by the members. In order to channelize the loans for productive purpose, a proper credit appraisal coupled with training for enterprise development should be taken up on a large scale. This will empower and enable the poor to become self-sufficient. Top Keywords Loan Utilization, Microfinance, Multistage Sampling, Self Help Groups. Top |