Rural finance, as defined by the World Bank, is the provision of a range of financial
services such as savings, credit payments and
insurance, to individuals both in farm and
non-farm sectors on a sustainable basis. It includes financing for agriculture and
agro-processing sector. Agricultural finance is defined as a subset of
rural finance dedicated to financing agriculture-related activities. Microfinance is the provision of financial services for
poor and low-income people and covers the lower ends of both rural and agricultural
finance. Cooperative credit societies always have a very important role to play in the Indian
financial system, especially in the sphere of rural finance. The cooperative movement, which is
the largest socioeconomic movement in the world, has contributed significantly to the
alleviation of poverty, creation of productive employment as well as the enhancement of
social integration in the country. The cooperative sector is mainly concerned with
agricultural credit, marketing of agricultural products and distribution of fertilizers and
pesticides and other essential commodities. The cooperative banking system has a three-tier
structure providing short-term, medium-term and long-term agricultural credit with
Primary Agricultural Credit Societies (PACS) at the village level, the Central Cooperative Banks
at the district level and the State Cooperative Banks at the state level. The formation,
registration, operation and winding up of cooperatives are governed by state laws and
regulations. Agriculture credit for the small and marginal farmers can be treated as one form
of microcredit because the size of credit disbursed through PACS is a function of the size
of land owned by the borrower. Though the Agriculture Credit Review Committee, under
the chairmanship of A K Khusro, in its historic report of 1989, propagated the concept
of microcredit delivery through the Self-Help Groups (SHGs) as a part of
business development program of the PACS, the SHG concept did not gain much ground in
the cooperative sector in India. The National Bank for Agriculture and Rural
Development model initiated in 1992 did not envisage the implementation of SHG in the
cooperative sector through PACS. In 1995, the State Government permitted the PACS of West Bengal
to enroll the SHGs as members of PACS. The Hooghly District Central Cooperative Bank
Ltd., one of the leading District Central Cooperative Banks in West Bengal, started
motivating the rural poor and established six groups in the month of January 1996. Since then,
the bank has enormously increased the number of SHGs and credit linkage thereof. The
basic objective of the paper is to investigate how effective this joint liability microfinance
programs through PACS is in improving the economic condition of the rural participants.
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