The basic objective of the paper is to identify the effectiveness of group lending-based microfinance program operating through Primary Agricultural Credit Societies (PACS) in improving the economic condition among the rural participants in two blocks of Hooghly district in West Bengal. For the impact study, both Difference-in-Difference and First Difference methods have been considered. With the help of longitudinal data, the methods have been applied to minimize the possibility of selection bias during the time of drawing samples. It was found from the field survey that very few marginal farmers had taken credit from their respective groups for agricultural purposes. Results reveal that there has been no significant impact of microfinance program in terms of improvement of the outcome variables among the member households, in spite of the low interest rate charged on loans, high repayment rate within the groups and small size of Self-Help Groups (SHGs). The reasons for the same are lack of skill-based training programs for the members of groups and lack of marketing facilities to promote and sell the products produced by the members of SHGs. The only positive aspect is that the members can now protect themselves from the clutches of professional moneylenders who charge exorbitant interest rates.

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.

Managerial Economics Journal, Primary Agricultural Credit Societies, PACS, Self-Help Groups, SHGs, Socioeconomic Movement, Cooperative Credit Societies, National Bank Of Agriculture and Rural Development, NABARD, Decision Making, Socioeconomic Environment, Microfinance Institutions, MFI.