Documente Academic
Documente Profesional
Documente Cultură
DOCTOR OF PHILOSOPHY
in
BUSINESS MANAGEMENT
Submitted by
M. PRASADA RAO
(Enrollment No: DYP- PHD- 066100018)
Research Guide
Dr. R. GOPAL
DIRECTOR, DEAN & HEAD OF THE DEPARTMENT
June 2010
1
“IMPACT OF SELF HELP GROUP – BANK LINKAGE
PROGRAMME AND ITS ROLE ON THE UPLIFTMENT OF THE
POOR “
(Special Reference to Raigad District, Maharashtra State)
2
DECLARATION
not formed the basis for the award of any degree, associate ship, fellowship or
Place: Belapur
3
CERTIFICATE
thesis has not formed the basis for the award previously of any degree,
diploma, associate ship, fellowship or any other similar title of any University or
Institution. Also certified that the thesis represents an independent work on the
Place:
Date:
Signature of the
Head of the department Signature of the Guide
4
ACKNOWLEDGEMENT
quality of this study and whose careful mentoring and wisdom has been my
Sakharam and special thanks to my wife without whose support, the thesis
Place:
6
6.2 Progress of SBLP 109
6.3 Factors for the SBLP success 112
6.4 Performance of SBLP 121
6.5 Evolution of SHG Federations 123
Chapter- 7 SBLP in Maharashtra
7.1 Microcredit in Maharashtra 129
7.2 SBLP in Maharashtra 132
7.3 Economy of Karjat Taluka 136
7.4 Importance of SBLP in Karjat 140
7.5 Functions of SHGs in Karjat 146
7.6 Impact of SHG on empowerment of the poor in 153
Karjat
Chapter - 8 Paradigm shift of Microfinance 156
Chapter - 9 Data Analysis, Interpretation and Findings 170
Chapter-10 Conclusion 215
Chapter-11 Recommendations 231
Chapter-12 Annexure
I) Cases 245
II) Bibliography 252
III) Map (Talukas & Villages of Raigad & 260
Karjat)
IV) Questionnaire 264
VI) Government Orders related to SHG credit 265
VII) SPSS findings 269
7
LIST OF TABLES
8
9.3. Participant Literacy frequency value and cumulative 175
percentage
9.3.1. Gender distribution according to their literacy status 175
purpose
9
LIST OF GRAPHS
study
information
purpose
10
SHGs
/entrepreneurial activity
11
LIST OF ABBREVIATIONS
AP: Andhrapradesh
Women
Development Agency
Business Management
Education
14
EXECUTIVE SUMMARY
(volume I) the need for reaching out to the informal sector through innovative
means has been rightly emphasized. The lack luster performance of the
banking sector in this regard has been criticized as, “The banking system must
priority sectors”
According to the Census 2001, only 4.16 crore households out of 13.83
crore households in rural India are reported to have availed banking services.
With all efforts made by banks and Self Help Groups (SHGs), only 30 percent
of rural households are linked to the banking sector. Over 9.67 crore of rural
are yet to be reached by banks. Among them 5.59 crore households are the
deprived lot, who do not own any of the assets listed in the Census
purveying microfinance.
15
National Bank for Agricultural and Rural Development (NABARD)
initiated the "SHG - Bank Linkage Programme" in 1992 as a pilot project and
banking services to provide financial services to the rural poor through the
process of savings and credit linkage of Self Help Groups. This scheme has
have cumulatively linked 22.38 lakh groups and disbursed loans of Rs.
Today commercial banks with more than 32,000 rural branches have
the largest share (50%) credit linked SHGs followed by RRBs (38%) through
their 11,900 branches. More than 3,000 NGOs and other development
building agencies. The Central Govt.'s initiative to employ the concept of Self
Help Groups in their poverty alleviation programmes has gone a long way in
peoples’ own resources and gradually supplements its resources from the
and utilizes such a capacity for all round development of the people and the
area. The evaluation studies conducted show that SHGs have made positive
social and economic impact on the lives of poor men and women. Banks have
16
found in SHGs a reliable credit delivery mechanism which is cost– effective.
Concerned, as they are, with the imperative need for avoiding Non Performing
Regional Imbalances
Poor survival rate of the groups, after the project loan is sanctioned
During the last few years, there has been an increase in the number of
Some of them have played a very positive role in extending micro credit in
certain regions. In some states, a few of them have come under cloud for
micro-credit deaths.
consultation with major banks and the banks were advised to introduce the
scheme in their area of operation by RBI in August 1998. The KCC scheme
17
aims at provision of adequate and timely credit to the farmers for their
support groups, are groups of people who provide mutual support for each
common disease or addiction. Their mutual goal is to help each other to deal
Institution (SHPI).
Model – 2: In this model, groups are formed by NGOs (in most of the cases)
agencies.
Model – 3: Banks only funding agencies and others like NGO and volunteers
economical empowering. Till the late 70s India was a ‘developmental state’,
which defined a minimalist role of the state. The microcredit has not only
18
become an important poverty alleviation program worldwide but it is also
47
considered as a magic bullet for women’s empowerment . The genesis of
society. Development alone cannot bring prosperity unless social justice and
gender equality are ensured. The one of the most essential features of
from traditional relations, social norms, and traditional ways of health care,
societies present a blend of the old (traditional) and the new (modern).
However, change from old to new is not an end in itself, but only a means to
achieve the end. The changes associated with development provide societies
as well as the individuals more control and influence over their own destiny.
choices and freedoms and at the same time by reducing their sense of
change.
groups in the country, which mobilize savings and recycle the resources
19
generated among the members. SHG’s are necessary to overcome
exploitation, create confidence for the economic self-reliance of the rural poor,
particularly among women who are mostly invisible in the social structure.
The SHG’s became a regular component of the Indian financial system since
PMO), 2002
20
• The SHG’s maintain their account in banks and operate jointly. The
iii. the quality and extent of financial services to members and issues
1. Sample: The sample for this study was 400 SHGs, spread over one district
Visakhapatnam from Andhra Pradesh and two districts Thane & Raigad
The major problem crippling the SHG based rural credit system in other
various financial institutions. This has become a major matter of concern and
Repayment of loan is an essential condition for the better health of rural credit
delivery system.
with the increase in size of landholding. The rate of default stood at 80 per
cent for landless households borrowing loans from informal sources and
12.5% for marginal farmers borrowing loans from SHGs. The other categories
21
of farmers did not show default on account of loans received by them.
Although the present investigation did not provide much insight into default
rates, this aspect needs to be further investigated with much larger sample
size.
marginal farmers had shortest association not only with informal lenders but
also with SHGs. Even landless, medium and large categories showed shorter
association with informal lenders. One of the plausible reasons for landless
of response from major public sector banks and low awareness of cooperative
banks in Karjat taluka effecting the spread and growth of SHG culture. The
of SHG culture, but mainly indirect role through training and advocacy,
22
This study assumes that NABARD plans modestly to reduce the rate of
growth, in order to achieve but not to go far beyond the 2012 three million
SHG target. This will require the continued use of all the types of SHPI which
are presently being used, including the newly introduced, which yet to enter
It was found there some prospective steps which helped Andhra Bank
educate the rural people to attain self sufficiency (as the microcredit
vi. Otherwise it is unlikely that NGO SHPIs will maintain the rate of
on the poverty alleviation mission through SHG Bank Linkage Program. First,
literature.
study is about the history of an idea, that the massive demand for
have important effects on social and economic and development. This has
now been well demonstrated on a large scale. We discuss here SBLP's role
and implementation strategies that put concept into practice, analyzing the
Gadchiroli and Thane, the study understand the paradigm shift in SBLP
financial intermediation. This shift has occurred because of the work of many
24
CHAPTER-1
INTRODUCTION
MICROFINANCE AND SELF HELP GROUP – BANK LINKAGE PROGRAM
financial services and products of very small amounts to the poor in rural,
semi-urban or urban areas for enabling them to raise their income levels and
Strategic Policy Initiatives: Some of the most recent strategic policy in the
are:
25
Activities in Microfinance
Micro savings: These are deposit services that allow one to save small
NABARD, SIDBI, SEWA, MYRADA, ADITHI, PRADAN, WWF, CDF, India etc.
There are a number of NGO’s and voluntary organizations, which are actively
26
engaged in promoting SHG’s and micro-finance through it. Swa-Shakti and
Self Help Group at Universal context: Self-help groups (SHG), also known
as mutual help, mutual aid, or support groups, are groups of people who
provide mutual support for each other. In a self-help group, the members
goal is to help each other to deal with, if possible to heal or to recover from,
this problem. While Michael K. Bartalos has pointed out the contradictory
nature of the terms “self-help” and “support,” C. Everett Koop has said that
self-help brings together two central but disparate themes of American culture,
modern industrial society, however, family and community ties are often
disrupted due to mobility and other social changes. Thus, people often choose
to join with others who share mutual interests and concerns. In 1992, almost
half of these were Bible study groups. Of those not involved in a self-help
group at the time, more than 10 percent reported past involvement, while
27
participants in the United States and that more than thirty self-help centers and
However, the flow of financial assistance to them was too marginal, if at all, to
enable them to cross the poverty line. The need to create a grassroots
and problems themselves, and to fulfill their needs was strongly advocated. In
with micro-credit and women SHGs. The strategy made a quiet revolution in
are small informal associations created for the purpose of enabling members
to reap economic benefit out of mutual help, solidarity, and joint responsibility.
The benefits include mobilization of savings and credit facilities and pursuit of
group enterprise activities. The group-based approach not only enables the
poor to accumulate capital by way of small savings but also helps them to get
access to formal credit facilities. These groups by way of joint liability enable
the poor to overcome the problem of collateral security and thus free them
28
from the clutches of moneylenders. The joint liability not only improves group
Self-help groups are comprised of people who share the same problem,
learn new ways to cope, discover strategies for improving their condition, and
help others while helping themselves. People find in self help group’s
individuals much like themselves who are able to share pragmatic, experience
tested insights gained from first-hand experience with the same situation.
Objectives of SHG:
To sensitize women of target area for the need of SHG and its
to women development.
Self Help Group Bank Linkage Program (Indian Context): SBLP is a new
age banking that aims at providing financial services to the poor by linking
29
them to formal financial institutions through the mechanism of Self Help Group
members working on the basis of principles like ‘self help’ and ‘joint liability’ to
activities.
helps him/her to collectively work out and follow operational & behavioral
pressure and smoothens out behavior patterns and makes her/him as a more
reliable borrower. Subtle, and at times not so subtle, peer pressure keeps the
group members in line with the broader objectives of the credit program.2 a
achiever. It is difficult for the banker to keep track of individual borrower; but if
he/she is a member of a group, it is much less difficult. Also, shifting the task
monitoring of activities, reduces the work of the banker and increases self-
The group dynamics works in SHGs as the group itself approves the
loan request of each member and in the process it feels morally responsible
for the loans. So, if any member of the group ever gets into trouble, the group
people, should be like-minded persons and have similar economic and social
status. Loans are of course given to the individuals. Although put a system
responsible for his or her loan. If the borrowing group forms itself through
the solidarity and the strength of the group. As the loan amount and
repayment installment are so small, the borrower does not feel the pressure of
the group fails to repay the loan the other members help him/her to repay it by
installment varies from Rs. 20 to Rs. 100 per member per month. Every group
passes a resolution and elects two leaders to carry out group activities. The
group resolution signed by all members is submitted to the bank along with a
group photograph for opening a savings account. The branch issues a pass-
book in the name of the group. A check book is given to the two leaders who
A SHG needs to save as per the decided level for about 6 months. A
demonstrate its strength and operational stability. The SHGs are expected to
maintain the following books and records with them: attendance register,
31
membership register, minute’s book, savings register, bank borrowing register
Bank Loan Linkage: Once the SHGs are stabilized in their operations, the
bank tries to provide loan facilities to SHG collectively or to each member. All
manager approves loan as and when eligible SHGs approach the bank. The
them capable to run their respective business and repay the loan amount
operations59.
Loan terms and conditions: The loan is disbursed in bulk to the SHG. The
purpose of loan utilization is left to the discretion of the SHG. The branch
group. The SHG loan is a term loan and can be sanctioned for a period of 3 to
However, the normal practice observed among SHGs is that they repay their
loans with in the one period (Andhra Bank). The bank will not take any
security for a loan up to Rs. 5,00,000/-. For a loan above Rs. 5,00,000/-
affinity groups of rural poor, voluntarily formed to save and mutually contribute
32
to a common fund to be lent to its members as per the group members'
decision". Most SHGs in India have 10 to 25 members, who can be either only
the groups is that they meet regularly (typically once a week or once in a
business, etc.), and to mitigate any conflicts that might arise. Most SHGs have
holders. Most SHGs start without any external financial capital by saving
one year) the SHGs start to give loans from savings in the form of small
internal loans for micro enterprise activities and consumption. Only those
SHGs that have utilized their own funds well are assisted with external funds
access to financial capital and markets for their products and services. While
the groups initially generate their own savings through thrift (whereby thrift
33
implies savings created by postponing almost necessary consumption, while
savings imply the existence of surplus wealth), their aim is often to link up with
enterprises. NGOs and banks are giving loans to SHGs either as "matching
Interest rates: There was a severe criticism on the interest rates being
charged form SHG. The interest rates are not fixed and vary with group to
group and bank to which off course higher than prime lending rate. The
NABARD has developed the Self Help Group [SHG]1 - bank linkage
approach as the core strategy that could be used by the banking system in
India for increasing their outreach to the poor. The strategy involved forming
SHGs1 of the poor, encouraging them to pool their thrift regularly and using
the pooled thrift to make small interest bearing loans to members, and in the
34
process learning the nuances of financial discipline. Bank credit to such SHGs
followed. NABARD saw the promotion and bank linking of SHGs not merely as
reaching banking services to one-third of the very poor of the country, i.e., a
population of about 100 plus million rural poor through one million SHGs by
35
the year 2007-08 and targeting 3million SHG and linkage with banks by
201255. This is the right time to fine-tune the strategies for the future, based
Microfinance from India and abroad. What is useful to all these studies is the
rapid growth of SHG-bank linkage into the largest Microfinance initiative in the
world in terms of its outreach and the need to closely look at the different
taking loans) are made available at low cost, are easily accessible and flexible
target new banking concepts in the early eighties, the basic concern was that
traditional banking cannot any longer ignore the creative human potential of
the poor in Asia. They should not remain wasted, as they are potential motor
for grass root level development. The following thesis became the entry point
Microcredit in Maharashtra:
economical empowering. Till the late 70s India was a ‘developmental state’,
for the free interplay of markets with the belief that it will solve the vexing
problem of poverty. Many scholars have argued that the official microcredit
The target group of this plan consists of households below the poverty
line (i.e. with annual household income up to Rs. 11000 at 1991-92 prices Rs.
action plan (PAP), focusing broadly on social development of the village, credit
and other implementing agencies. SHGs, on the other hand are formed either
interest per annum. Individual borrowers are given loans for specific activities.
SHGs, on the other hand , are required to mobilize savings first. After
achieving their savings deposits from a CB. The loans are distributed among
amount, interest rate, repayment and penalty). The rate of interest is typically
2-3% per month. Consumption loans are permitted. Eventually, when the
38
program worldwide but it is also considered as a magic bullet for women’s
empowerment.
1992. It has promoted two models the Self Help Group Bank Linkage
Program (SBLP) and the Microfinance Institution model (MFI). The SBLP
program runs under the aegis of National Bank for Agriculture and Rural
Development.
NGO: Chaitanya is the pioneer NGO to promote the SHG Bank Linkage
Maharashtra, it works in four talukas of Shirur, Sinnar, Khed and Junnar led
the supporting NGO initiatives to promote SHGs by proving funds for credit,
society. Development alone cannot bring prosperity unless social justice and
gender equality are ensured. The one of the most essential features of
from traditional relations, social norms, and traditional ways of health care,
societies present a blend of the old (traditional) and the new (modern).
However, change from old to new is not an end in itself, but only a means to
39
achieve the end. The changes associated with development provide societies
as well as the individuals more control and influence over their own destiny.
choices and freedoms and at the same time by reducing their sense of
change.
bypassed women who constitute about half of the population of the country.
provisions etc. highlighted the imperative need for gender equality and women
organizations join together for self help to secure better economic growth.
groups in the country, which mobilize savings and recycle the resources
exploitation, create confidence for the economic self-reliance of the rural poor,
particularly among women who are mostly invisible in the social structure.
These groups enable them to come together for a common objective and gain
strength from each other to deal with exploitation, which they are facing, in
several forms. A group becomes the basis for action and change. Significantly,
expansion of credit institutions (SHG’s) can definitely help in the revival of rural
in its efforts to reduce poverty and empower the rural poor. Micro-finance
NABARD and NGO’s has been largely supply-driven and a recent approach.
Micro-finance institutions are, other than banks, are engaged in the provision
of financial services to the poor. There are three types of lending technologies:
ii) The group lending, which is of various shapes and forms with advantages
drawbacks106.
iii) Individual based lending is one where the Micro-finance institutions have
very limited and there is sex bias in extending the credit to them. However,
women from the non-farm sector have better access to banks than the
repayment.
since 1996. The SHG’s are small, informal and homogenous groups. These
groups have proved as cyclic agents of development in both the rural and
urban areas8. The SHG’s after being formed start collecting a fixed amount of
resource, the group starts lending to its members for petty consumption
needs. If the bank is satisfied with the group in terms of (i) genuineness of
demand for credit; (ii) credit handling capacity of the members; (iii) repayment
behaviour within the groups; and (iv) the accounting system and maintenance
of the records, it extends a term loan of smaller amount to the group. Thus,
financing through SHG’s effects quite a few benefits like; (i) savings mobilized
by the poor; (ii) access to the required amount of appropriate credit by the
poor; (iii) meeting the demand and supply of credit structure and opening of
new market for financing institutions; (iv) reduction in transaction cost for both
way; considers loan requests; and loans are disbursed by purposes. The rates
of interest vary from group to group and the purpose of loan, interest rates are
• The average deposit and loan size of SHG account is larger than individual
accounts under the priority sector, bank transaction cost of dealing with SHG’s
is obviously lower than that of individual borrowers; the rate of growth of credit
priority sector.
• Banks can reduce the operating costs of forming and financing of SHG’s,
strategies for meeting the needs of the poor by combining the flexibility,
sensitivity and responsiveness of the informal credit system with the technical
institutions and also to build material trust and confidence between bankers
and the rural poor and to encourage banking in a segment of population that
• The entire process of internal savings and credit is backed by financial and
• Small savings of rural women can generate the required resources, which
can wean the people away from the exploitation of moneylenders. Thus, the
• Credit through SHG’s is being regarded more suitable by banks and NGO’s
• Credit accessibility through SHG’s is cost effective and group approach can
ensure wider coverage of poor families through bank credit, even the
members of the group learn interdisciplinary approach the banks for advances
• There is need to accept that women’s needs are not confined to self-
multipronged strategy.
44
• The various categories for financial institutions in rural market have exhibited
communities they serve, and should be affiliate for any distribution channel
through which they can profitably reach new customers. They should ensure
the existing level and types of group activity and informal intermediation, and
be ready to offer services and selling products, which are appropriate for local
communities62.
• There is urgent need to streamline the procedure for applying, seeking and
releasing of credit from the banks. The procedural difficulties are one of the
major implements, which have deterred women from financial benefits from
the banks. Therefore, the procedure for credit access to should be made more
inhibitions of women.
• There is also the need to evolve new products by the banks commensurate
45
• Marketing of new distribution may involve training or community development
technical knowledge.
Tax Act, 1956 [Section 2(5), Section 11(5)], Societies Registration Act, 1860,
promotion institutions.
46
• A proper mechanism should be evolved to prepare database on SHG’s,
SHP’s, MFI’s etc. Moreover, MIS with good management backing needs to be
youth clubs etc. to promote small savings and women’s active and positive
role in development process, ensuring their rights, entitlements and due share
in developmental benefits.
financial services will need not only appropriate and efficient micro products on
a very large scale, but also customers who care willingly to pay the full costs of
those services. Bankers must change their attitude towards small loans to
47
poor, including women and start seeing them as a social obligation in treating
system must be put in place. Regulation and supervision ensures that micro-
financing organizations are run prudently and cases of poor people losing their
• The key elements in the survival and sustainability of the SHG’s should
naturally be built on those elements that have brought the group together.
They have to evolve as sustainable village level institutions for taking active
handle issues of its internal practices both financial and non-financial. The
group should be able to handle its leadership, problem solving and conflict
financially viable. It is achieved when the group is able to cover its operational
alone group has limited visibility and importance for both the general
mobilization for effective action or social issue etc. Thus, networking of SHG’s
activities independently.
are organized on the ‘unit’ banking principle are mainly rural based. Besides,
moneylenders, chit funds. At the financial services side, institutions like Unit
49
Insurance Corporation (GIC) were also created under public ownership
Scheduled commercial banks constitute about 97 per cent of the total deposits
metropolitan and urban areas and catered to the needs of industrial sector.
national income received only 2 per cent of bank credit in 1951. Such
saw the emergence of ‘social banking’ and was essentially ‘supply oriented’ (
Shetty, 1978). Through the branch licensing regulation, the Reserve Bank of
India (RBI) put pressure on banks through branch licensing policy to open
bank branches in semi-urban and rural areas. Thus the population per bank
office which was around 64 thousand in 1969 showed a dramatic decline and
rural and semi-urban areas was made possible by this substantially boosted
savings in the form of financial assets (especially currency and bank deposits
During the social phase of bank interest rates on deposits and loans were
50
administered with priority sector including informal sector getting a lower
interest rate prescription. Banks were required to lend 40 per cent of their
The lending to private corporate sector were greatly restricted using the
Scheme administered by the Reserve Bank of India (the central bank as well
as its financial regulator). Banks were compensated for the below the market
with the central bank. During the social phase of banking, monetary policy was
increasingly conducted
the forefront of the Self Help Movement in India. Alongside women’s own
savings, a major initiative in providing SHG members with bank credit was
introduced some years ago. APMAS believes that this initiative must not go
the way other rural credit has gone. Even though SHG-bank linkages are, as
field and share those learnings with all concerned, in order to ensure that bank
linkages added value to the lives of SHG members, their families, and to
51
ii. the quality of SHGs;
iii. the quality and extent of financial services to members and issues in
A summary of the findings of the study and the contents of this report
follow.
1. Sample: The sample for this study was 400 SHGs, spread over 1 district
53% of the members were from Backward Castes, 19% from Scheduled
Castes, 4.5% from each of Scheduled Tribes and Minority groups, and as
many as 19% from other castes. Only 25% of the members were able to read
and write, whereas 57% of the leaders fell in this category. Members
than warranted by their numbers in the larger community. Where 89% of the
members were from landless or small farm families, 11% of the members were
from large farm holding families. More than 70% of members were from the
reproductively and economically active age group. SHGs were promoted for
little over a fourth had 10 members or less. More than 50% of the SHGs were
average, an SHG was situated 8.5 kms away from Mandal headquarters. More
than three-fourths of the SHGs had access to bus services from within their
habitation. Along with other reasons for not changing leaders, one reason
was that some bank branches did not permit changes in signatories to bank
lakhs of on savings. Interest earned was not determined during the study. The
total revolving fund received by them was Rs. 34.8 lakhs. Cumulative savings
appeared to grow for some years, and then to reduce in several cases. In 20%
of SHGs that were over 9 years of age, cumulative savings were less than
Rs. 10,000. This might be the result of members dropping out of the SHG and
taking back their savings. Average idle funds kept in banks in the savings
accounts or fixed deposits amounted to nearly Rs. 5,800 per SHG, or around
Rs. 23 lakhs in all, indicating that members were drawing on their thrift for
many of the costs incurred in visiting banks to access loans for their groups.
Default had not yet manifested itself as a serious problem, although the
perception of bankers and of groups was that it needed to be dealt with firmly.
53
The concern might have arisen because loan sizes are continuing to increase.
It was not common to have a group defaulting for more than 4 continuous
against loans outstanding by the group to the bank, were common practice.
with their SHGs and to value the SHG’s association with its bank. In particular,
they felt that they now had access to formal financial institutions, to credit, that
their income levels had improved, that their savings habit had improved. They
only encompass traditional formal sector credit but also new generation credit
successful compare with other states. Especially the people live in Karjat
Taluka Although the study is focused upon rural poor including farmers,
various financial institutions. This has become a major matter of concern and
Repayment of loan is an essential condition for the better health of rural credit
delivery system.
with the increase in size of landholding. The rate of default stood at 80 per
cent for landless households borrowing loans from informal sources and
12.5% for marginal farmers borrowing loans from SHGs. The other categories
Although the present investigation did not provide much insight into default
rates, this aspect needs to be further investigated with much larger sample
size.
marginal farmers had shortest association not only with informal lenders but
also with SHGs. Even landless, medium and large categories showed shorter
association with informal lenders. One of the plausible reasons for landless
55
The study there by concentrated to find out the reasons of de-linkage of
poor from the formal banking/financial system and found that due to various
support from government agencies affecting the strength of the poor in Karjat
56
CHAPTER- 2
REVIEW OF LITERATURE
Reserve Bank of India (RBI) have made concerted efforts to provide the poor
perceptions of the banks left a gap in serving the credit needs of the rural
poor.19 It is in this context that micro credit has emerged as the most suitable
unreached poor population. Related to this at worldwide stage also, since the
deny the consumer credit companies (most of which are out the market today)
levels and repayment obligations which they frequently could not fulfill.98
linking banks, NGOs and informal local groups (self-help groups or SHGs)76
become a dominant form of financial access for the rural poor. A major
57
needs (savings, credit, insurance services) through flexible products at
competitive prices.
2. Historical background
modified form. To alleviate the poverty and to empower the women, the micro-
groups have also started in India. And thus the movement of SHG has spread
out in India.20
Women’s Forum’ in Tamilnadu and National Bank for Agriculture and Rural
has promoted Credit Management Groups (CMGs). CMGs are similar to self-
help groups. The basic features of this concept promoted by MYRADA are:
58
1] Affinity, 2] Voluntarism, 3] Homogeneity and 4] Membership should be
women.
scale. And it was the real take-off point for the ‘SHG movement’. In 1993, the
Reserve Bank of India also allowed SHGs to open saving accounts in banks.
The banks have externalized what would otherwise have been high
transaction costs for mobilizing savings of the poor, appraisal and sanction of
loans and improved loan recovery through the financial intermediary’s role
played by SHGs.53
3.1 While the term ‘self-help group’ or SHG can be used to describe a wide
government agencies, NGOs or banks. These groups manage and lend their
b. SHGs are formed by NGOs and other agencies but financed by banks.
intermediaries.
59
5. The SHG Movement in Maharashtra77: The concept of SHG was not
women of Maharashtra from Amravati District had established one SHG long
back in 1947.1 Further in 1988, ‘Chaitanya’ Gramin Mahila Bal Yuvak Sanstha
started promoting SHGs in Pune District. The NGOs not only have catered to
the economic needs of the participants, but also involved in the process of
6. SHGs and NGO support: The expert agencies shown that the success
of SHG linkage program has linkage with other auxiliary services of NGOs or
turn, were to fix their own program for lending to the SHGs with a view to
of its savings in the form of loan funds or a cash credit limit from the local rural
bank. The SHG on lends the funds it accesses from banks to its members.
7.2 The SHG –Bank Linkage model provides the cheapest and most direct
source of funds.
7.3 SHGs are formed with the assistance of self-help promotion institutions
helping with group formation, SHPIs provide training, monitoring, and other
SHGs formed by formal agencies and NGOs, but directly finance by banks
The year 2001 was declared as a ‘year of women empowerment’. Efforts were
being made in the direction that women should have a role in all walks of life;
and special provisions should be made in the budget for activities related to
spheres etc. At this juncture, SHG movement also started and in a way
20 women. The women save some amount that they can afford. It is small
where apart from disbursal & repayment of loan, formal and informal
61
10. Objectives of SHGs. 59
raised for day today needs. The saving groups when transformed to earning
groups not only increase the productivity of women but the credibility also. b)
‘entire development’ is the aim and mutual trust among the members is the
credo of SHG. 88
11.2. Another Ex-post evaluation of study of self help groups that was
68
conducted in Karnal, Gurgaon & Bhiwani districts of Haryana . It was found
62
in this study that the improvement in the communication was due to increase
the family d) Position in the society, e) Thinking about Views regarding female
Organization are:
i) Increased work loads, ii) Higher social pressure to ensure loan repayment,
indebtedness that is, simply because there are sufficiently profitable income-
more dependent that they were before. Some argue that micro-finance
programmes divert the attention of women from other more effective strategies
63
12. SHG Based Microfinance impact on Rural Economy:
15.1 While the term ‘self-help group’ or SHG can be used to describe a wide
government agencies, NGOs or banks. These groups manage and lend their
Agriculture and Rural Development (NABARD), the apex bank for rural
development in India.
64
In India three different models of linkage of SHGs to the financial
2.SHGs are formed by NGOs and other agencies but financed by banks.
intermediaries.
17. The SHG Movement in Maharashtra: The concept of SHG was not
women of Maharashtra from Amaravati District had established one SHG long
back in 1947. Further in 1988, ‘Chaitanya’ Gramin Mahila Bal Yuvak Sanstha
NGOs not only have catered to the economic needs of the participants, but
the same to empower the women in both ways, economically and socially.
Table : 2.1
65
Table : 2.2 Pattern of Partnership
3. Commercial banks 48
5. Co-operatives 316
Table : 2.3
year 1975 was declared as a ‘year for women’. Also, the decade from 1975 to
1985 was declared as a ‘decade for women’. During this period, the movement
which consist 50% of the society, was highlighted in this span of period. It was
emphasised that woman should get the same opportunities as that to men.
66
The year 2001 was declared as a ‘year of women empowerment’.
Efforts were being made in the direction that women should have a role in all
walks of life; and special provisions should be made in the budget for activities
economic and political spheres etc. At this juncture, SHG movement also
a. What is empowerment?
b. Economic empowerment
access to and control over productive resources and to ensure some degree
of financial autonomy..
c. Social empowerment45
Constitutionally and legally, man and woman are equal. In real practice,
however, woman still finds a secondary place. As the woman has now
d. Political empowerment
The political element entails that women have the capability to analyse,
women were able to see the outside world. They understood the processes
amount that they can afford. It is small amount ranging from Rs. 10 to 200 per
repayment of loan, formal and informal discussions are held. On many social
issues also, Women share their experiences in these groups. The minutes of
these meetings are documented and the accounts are written. The President,
Secretary and Treasurer are three official posts in any SHG. If the SHGs are
connected with some NGOs, they take part in other social activities of those
groups, Income generating groups, Self-help groups and Mutual help groups.
a.. Basically the SHGs are economic organisation. Small funds are raised for
day today needs. The saving groups when transformed to earning groups not
b. Doors are wide open to women to understand and gain knowledge about
‘entire development’ is the aim and mutual trust among the members is the
credit of SHG.
in the promotional strategies for the SHGs. Financial needs like banking,
power also, are the purposes behind some of the SHGs. The State
2005 to 2007.
programme to improve the access of the rural poor to formal credit and saving
into unbanked rural locations. Between 1969 and 1990, 30000 bank branches
69
Review. April –June 2002) For the study the data were collected with the help
of a structured questionnaire.
25.. Another Ex-post evaluation of study of self help groups in that was
conducted in Karnal, Gurgaon & Bhiwani districts of Haryana. (The study was
2002), was found in this study that in the pre-SHG situation 55.6 percent of the
members talked freely without any inhibition, and in the post SHG period 77.8
26.. Another study conducted by Impact of self help groups (Group processes)
This study shows that the level of confidence of respondents on several tasks
27. The women are coming together and this is helping them to fight the evils
in the society. e.g. In the Savitri self help group from Tandulwadi (District
conditions in their village, started goat-rearing business, also looked into the
28.. In another case a man raped a 23-yr. old girl. Her mother was frightened
and was reluctant to register the crime in the Police Station. But the members
of the SHG from that particular ‘basti’ supported her mother and advised to
70
register the crime. The police refused to register the crime. The SHG acted as
a pressure group and compelled the police to register the crime. (Ref: Daily
29. It seems that SHG activity is helping to change the status of women in the
family positively, e.g. one person was always reluctant to take his wife along
with him on his two-wheeler. Even in times of pressing need, he would avoid
her as a pillion rider. He did not pay much attention to what she was doing in
her SHG. His wife always managed to attend the group meetings and other
related activities on her own. One day the husband was passing through a
He stopped for a while. To his surprise, he saw his wife sitting on the
dais where the district collector was also present. He couldn’t believe that his
wife was such an important person. Her husband waited outside till the
meeting got over and took her on his two-wheeler proudly. Since then, he
takes his wife on his two-wheeler wherever she wants to go and also ready to
help her for group activities. (Ref: Daily Newspaper Pioneer 27/10/04-An
article by T. S. Kumar)
(The above study shows that SHGs are proving helpful in the process
one of the issues under study. In some of the articles, social empowerment
the woman.)
1) Self-confidence
71
2) Development of decision-making capacity
woman’s self confidence, her changing position in the society, the points, like
whether she has started to thinking about society and social problems,
whether she merely thinks of the problems or search for solutions also,
whether she also thinks on the evils such as discrimination between men and
women, social customs like dowry, casteism which have badly affected our
The multiple initiatives led by capacity building have made tremendous inroads
into the conventional bankers mindset. They now view SHG-Banking as a new
dimension of quality portfolio with very low risks and with marginal increase in
The objective of this study was to examine and compare the different ways in
which Self Help Promotion Institutions (SHPIs) promote Self Help Groups
(SHGs), in order to enhance the efficiency and quality of the SHG promotion
Management)
should be examined.
73
o The management of the schemes to encourage SHG promotion
microcredit programme in the developing world; and its bank lending rates
branches, and perhaps for another 20,000 who might join the program to
The Study applied average cost analysis, attributing all costs duly to
group lending to the very poor. In contrast, consolidated NPL ratios ranged
from 2.6% to 18%; and of Cash Credit (CC) and Agricultural Term Loans
contrast, ROA of Cash Credit varied from –10.2% to –0.5% and of ATL
from –6.3% to 0.2%; OSS ratios from 54% to 102%. SHG Banking was
debts.
exceptionally low interest rates, linkage banking was found to be viable and
profit-making for all financial institutions and SHGs; however, many rural
by high statutory liquidity requirements. (d) Given the low inflation rate,
finance in India93.
The study was based on primary details collected from 115 members in
76
60 SHGs. The socio-economic conditions of the members were compared
between pre and post SHG situations to quantify the impact. The study
findings concluded that SHG Bank Linkage Programme has made significant
of SHGs.
annual net income, Employment per sample households. Availing loans from
moneylenders and other informal sources with higher interest rate was
states) of the country. The study is based on primary details collected from
were compared between pre and post SHG situations to quantify the impact.
The reference period of the study was 2001-02. The study findings concluded
that SHG Bank Linkage Programme has made significant contribution to social
Major Findings
77
Structure and conduct of SHGs especially with reference to size,
The SC/ST and backward class constituted 83 per cent of the total
sample and coverage of this social group has shown increasing trend
assets between pre and post SHG situations. The increase in value of
assets that included livestock and consumer durable was from Rs. 4,498
group.
Varied saving products that are suitable for the rural poor were made
available for the SHG members that facilitated increased rate of saving
among them. Mean annual savings were increased from Rs. 952 to Rs.
Institutional credit deepening and widening among the rural poor were
achieved to a greater extent. The average loan per member during post
SHG situation was Rs. 5,122, which was about 123 per cent more than
the pre SHG situation. Availing loans from moneylenders and other
informal sources with higher interest rate was significantly reduced due
from different sources was reduced from 81 per cent to 31 per cent.
78
There was perceptible change in the loaning pattern between pre and
production oriented loans during post SHG situations which was mainly
per cent where as it was 86.6 per cent from SHGs to banks. The overall
The average annual net income per sample households was increased
to Rs. 15184, which was about 23 per cent more than the pre SHG
of its members.
strategy must focus more and more on training and capacity building of
While expanding the programme for wider coverage, efforts also need to
It was found from the Study that members in three year old groups
perceive themselves as stronger on almost all the studied parameters, with the
exception of a few parameters where the difference between the one year old
80
and three year old groups is not very significant (except in the case of
moderating group level conflicts, where the newer members express higher
below :
activities.
groups, etc.).
the poor.
81
o Presenting the idea of savings as a means of building capital over which
o Identifying and supporting certain entry point programmes that not only
meet some local need but also serve to bring people together, besides
camps, etc.
people’s interest.
and how they have served to meet the credit needs as well as a variety of
Each of the four NGOs had its own processes to strengthen groups and
the approach has been attempted below, that was noticed to underlie the work
of all the NGOs, though the specific forms of expression and manifestations
varied :
82
o Linking the concept of SHGs with savings, and using the pooled savings as
the primary means of building group capital over which members had full
control and which they could use to take loans amongst themselves.
legal awareness, and other such topics that could increase their knowledge
and enable them to take appropriate actions as required in their own lives.
community.
threaten the survival of rural households. Natural disasters quickly turn into
emergencies for poor families because of their extreme physical and socio-
Has the SHG bank linkage programme lightened the burden of life for the
average member of an SHG in any way? Is the rural household any better, by
560 SHG member households from 223 SHGs spread over 11 states showed
positive results. There have been perceptible and wholesome changes in the
in income levels. Some of the major findings of the study are presented here83.
stage to Rs. 71,000 in post-SHG stage. Land was the major asset with a
84
About 62 per cent of the households reported increase by about 24.5%
kuchha (mud walls, thatched roofs) to pucca (brick walls, tiled roofs)
housing.
8,341.
The share of consumption loans declined from 50% to 25%. About 70%
purposes.
12% to 24 % range.
Overall loan repayments improved from 84% to 94% between the two
or by about 33%.
85
About 43 per cent of the incremental income generated was from Non
Farm Sector (NFS) activities followed by farm (28%) and off-farm (21%)
activities.
About 74 per cent of the sample members had income below Rs. 22,500
family violence
which the SHG strategy has been adopted indicates that these loans for
agriculture do not find a place in the project reports that IFAD management
and evaluators produce. The reports provide data only on the amount
budgeted for agriculture in the annual plans and budgets and on the amount
86
spent. Loans by SHGs for agriculture are not a budget line expenditure. In
projects indicates that both the number and the amount of loans for agriculture
are several times higher than those budgeted for agriculture under the line
It may be useful to compare the SHG contribution in this sector with the
through the formal sector (banks and cooperatives), other than through SHGs.
The 59th round of the National Sample Survey (Government of India, 2005)
revealed that only 27 per cent of the total number of farming households
received credit from the formal sector (banks and cooperatives) – this does not
include the SHG route. The NABARD report (Figure 2) indicates that bank
loans to SHGs increased from Rs 2 879 million to 29 942 million from 2000 to
2005. The figure indicates an increase of some 90 per cent year-on-year for
the first three years, 82 per cent in 2003/04 over the previous year and 61 per
cent in 2004/05. This compares very favourably with the annual increase in
credit from the formal sector to the agriculture sector, which is about 15 per
cent due to government pressure). The macro picture is also cause for
concern. For example, surveys (NABARD, 2003) have shown that the capital
fallen from 9.4 per cent in 2003/04 to 8 per cent in 2004/05. Both the public
sector (which contributes about 30 per cent) and the private sector (which
87
contributes about 70 per cent) seem reluctant to invest in agriculture. An
MYRADA’s projects (MYRADA, 2003) shows that 42 per cent of the total
lenders and redemption of mortgaged assets, mainly land and trees) and 20
per cent in non-farm activities such as trading, cottage industries and small
businesses. The remaining loans are for essential needs, for which members
interest rates; these essential needs include food, education, housing, health
goals. For the past five decades offer independence, the State is the planner
and administrative machinery has been inadequate and the number of people
below the poverty line has not been appreciably reduced. The focus has
88
37. Major findings / recommendations of the studies on SHG Bank
Linkage Programme:
The multiple initiatives led by capacity building have made tremendous inroads
into the conventional bankers mindset. They now view SHG-Banking as a new
dimension of quality portfolio with very low risks and with marginal increase in
The objective of this study was to examine and compare the different ways in
which Self Help Promotion Institutions (SHPIs) promote Self Help Groups
(SHGs), in order to enhance the efficiency and quality of the SHG promotion
process.
89
o The banks, particularly co-operatives, are likely in the medium term to
should be examined.
in the developing world; and its bank lending rates – fluctuating at market rates
for the 17,000 participating bank branches, and perhaps for another 20,000
who might join the program to reach a population of 100m by 2008( Prof. Dr.
90
The Study applied average cost analysis, attributing all costs duly to
each product; and marginal cost analysis, in response to the advice of bank
applied to seven units of three banks in October 2002. The results are
indicative only.
82
* The future sustainability of SHG Banking hinges on five factors: (a) A
exceptionally low interest rates, linkage banking was found to be viable and
profit-making for all financial institutions and SHGs; however, many rural
banks require restructuring. (c) SHGs have substantially increased their level
statutory liquidity requirements. (d) Given the low inflation rate, preservation of
the value of resources is no major issue, except in distressed banks. (e) With
Empowerment
91
The study is based on primary details collected from 115 members in
between pre and post SHG situations to quantify the impact. The study
findings concluded that SHG Bank Linkage Programme has made significant
of SHGs.84
annual net income, Employment per sample households. Availing loans from
moneylenders and other informal sources with higher interest rate was
states) of the country. The study is based on primary details collected from
were compared between pre and post SHG situations to quantify the impact.
The reference period of the study was 2001-02. The study findings concluded
92
that SHG Bank Linkage Programme has made significant contribution to social
It was found from the Study that members in three year old groups
the exception of a few parameters where the difference between the one year
old and three year old groups is not very significant (except in the case of
moderating group level conflicts, where the newer members express higher
confidence levels.38
93
CHAPTER- 3
undertaken with aim to alleviate poverty and uplift the poor. Post nationalization of
being earmarked towards meeting the credit needs of the poor. Bank
the state and central governments, which included credit packages and programs
The ‘defining event’ in the build-up of financial architecture in India was the
aspiration for rapid and equitable economic and social development. The
to the hitherto neglected sectors and regions. Significant progress was made in
achieved, credit flow to the poor, and especially to poor women, remained
inadequate. This led to initiatives, that were institution driven that attempted to
converge the existing strengths of rural banking infrastructure and leverage this to
better serve the poor. The pioneering efforts at this were made by National Bank
94
Even with the presence of public sector & cooperative banks and local
money lenders. The men & women of most of villages are practicing seasonal
business, daily wage workers in industries and construction works. Very few are
active in small time businesses like selling vegetable, fish, flowers and road side
make shift groceries. However they require a stable income and pride place in the
society. To meet that requirement, they definitely require a financial support from
banks and other sources in the form of loans without collateral and procedural
hassle.
loan repayment along with regular banking accessibility. SBLP was conceived to
fill the existing gap in the formal financial network and extending the outreach of
banking to the poor. However, the present distribution of the SBLP is skewed
against the poorer regions of the district. Banks may need to be encouraged as
created to address the regional imbalances in the SBLP. SHGs need to be formed
One way the NABARD and RBI statistics shows regions spread and fiscal
strength of the program, Raigad district shows the irony picture of the under-
95
performance either by Bankers, the policies or the people who could’ exploit the
number of people who required very small doses of credit at frequent intervals.
The same held true of the costs involved in providing savings facilities to the small,
scattered savers in the rural areas. Feelings were mutual among the very small
savers and borrowers in the rural areas as well, as they tended to view banking as
an institutional set up for the elite; even if they tried to reach the bank branch the
long distances and loss of earnings on being away from work while visiting bank
branch were hurdles and they were never sure whether they would get any service
1996. But the SBLP could tough the success path from 2002 only. Moreover the
report from District Lead bank (Bank of India for Raigad) shows a severe drop of
92% in SHG linkage from 2004 to 2007. The linkage of new SHGs even
decreasing or not been initiated. Except Gadab, Karjat Talukas other part of
Raigad has witnessed much more (95%) drop-outs and some talukas like Panvel
. This will generate significant external economies for agricultural yields and
96
overall rural development. Enhanced efforts should be made towards embedding
The core objective of this study to understand the challenges faced by the people
The research study focuses on the reason on spread of Self help Bank
Linkage Program in the areas of Villages of Karjat Taluka. The study would
investigate the conditions which are discouraging the otherwise successful model
of microfinance elsewhere that has the capability to uplift their poor economic
conditions and can give a sustainable development. The study would focus
the rural poor, especially women, this study becomes both essential and
relevant. More specifically, this research study has been held to explore if
the SHG approach has been successful in the empowerment of rural women
97
Objectives of the Study:
* To study the impact of Self Help Group- Bank Linkage Program and its
* To study the impact of SBLP activities and any other linkage models are
* To study the role of NGOs in the success of SHG linkage model of group
* To study and analyse the reasons for the low success rate of the SBLP
HYPOTHESIS:
98
CHAPTER- 4
1. Methodology: 4.1A
genesis Self Help Group-Bank Linkage model of Microfinance and the factors
impacting the empowerment of the rural poor. The factors effecting the
Planning Commission, DRDA, Public Sector Banks, Local Panchayats and the
research reports and case studies from various Microfinance Institutions and
NGOs.
from Bankers, SHGs, NGOs who has been involved with SHG-Bank Linkage
Program, related activities and with personnel related/non related with SHG-
respondents covering all the classes from SHG-non SHG. A good rapport was
first established with the respondents with the help of senior bankers and
from those have deep understanding of the tribal habitability and their
no.of accounts and NPAs Bankers. The analysis on data collected for pilot
study was analysed to find out the suitability of the questionnaire and the
consultancy with the experts from NABARD, Guide and other subject related
experts.
activities or not aware, 2) Those involved in SHG and Bank Linked and 3)
ii) Questionnaire Design; where questions are pointers and open ended so
SBLP operations and its impact on their development. These tools are
from the contact points such as NGOs, Local Panchayats, District Collector,
Welfare Officers, Lead Bank Officer of the respective Banks (Bank of India).
e) The Data Analysis: This would involve analyzing the data collected and
3. The criteria used for sample selection: Though the SHG activity
help economic empowerment of women, the change in their familial and social
achieve it, a member should have sufficient experience of well established and
Hence the following criteria were used for sample selection(as per
101
1) The SHG should be 2 to 3 years old.
2) The sample should be representative of the entire district. Hence the study
from Ambernath taluka and Karjat taluka. Because they are most perfect
examples for success and failure of the SHG Bank Linkage Program. The
the women from SHGs were illiterate and those were literate, could not write
answers; so all the members were interviewed, with the help of the
questionnaires.
ii. The sample for this study was 400 SHGs, spread over 3 districts
of any group from nearly 14 clusters (villages). The data from Bank of India
as it is the lead bank of Raigad, Union Bank of India, Pen Urban Cooperative
Information :
related to their inception, bank link, age of SHG, saving , bank loan
102
refunds and re-loans. This Information provided context for the
iv. Detailed discussions were held with officials of National Bank for
Secondary Research: The secondary data were collected from the Annual
Government of India as well as from the classified data available with the
1) The study is based on the information provided by the SHGs, in Raigad and
2) The diversity of commerce activities of Raigad district and other areas may
opportunities in Raigad and Thane districts may vary with the result from
other districts. The report has been prepared based on the data collected from
103
CHAPTER- 5
MICROFINANCE THROUGH SELF HELP GROUP BANK LINKAGE
absorbing. Micro finance combines the strengths of both formal and informal
informal system was in vogue in India in the form of chit funds, etc., since time
immemorial. It came into existence under formal system with the advent of co-
movement was initially envisaged with unlimited liability and small size of
societies consisting of homogenous groups, over the years in the quest for
entered the domain of rural credit for organizing the poor into informal groups
104
for mutual economic and social empowerment. However, the origin of micro
finance movement in its present shape dates back to 1986, when the Sixth
a sequel to it, in India, the National Bank for Agriculture and Rural
1992 for linking 500 Self Help Groups with commercial banks i. e., the formal
sector. The pilot project was further extended to Regional Rural Banks and
to the poor (micro-credit) there are five distinct approaches: In India the
National Bank for Rural Development (NABARD) and the Reserve Bank of
Bank linkage model (which is different from the Grameen Bank model3), SHGs
bring together about 10- 20 women who pool their savings for a few months,
allocate them to members who need small amounts temporarily, thus making
them eligible for a bank loan. In India, micro-credit is provided through (a)
105
finance institutions (MFIs) which comprise of non-governmental organizations
operatives (like SEWA in Gujarat). In the commercial model, there are two
variants: (1) Bank-MFI model and (2) Partnership Model pioneered by ICICI
bank. The SHG-Bank linkage model was introduced in 1991-92 with a pilot
project of linking 500 SHGs with banks which increased to more than 16 lakh
by the end of March 2005. Cumulatively, these SHGs have accessed credit of
Rs. 6,898 crore from banks during the period. About 2.4 crore poor
households have gained access to the formal banking system through the
programme. During the last six years the number of SHGs linked to banks has
credit programme to the priority sector since the early 1970s was part of the
push for financial deepening and inclusion. But the economic reforms since
the financial landscape especially the access of credit to the poor. Studies
has declined since 1992 and the share of debt of rural households especially
106
Reserve Bank of India and National Bank for Agriculture and Rural
inclusion. After a series of farmers' suicides in the country which are linked
to rising indebtedness, all banks are being urged to adopt ‘financial inclusion’
as an operational policy.
modest 33 thousand SHGs 1992 to 2.9 million SHGs by 2007, the biggest
some setbacks in March 2006 with borrowers in the state of Andhra Pradesh
to these entities on the ground that they behave like loan sharks 30. It is in this
and Ramola57 “the formal financial sector may achieve financial sustainability
organizations (NGOs) may reach poor clients, but are often unsustainable.
Micro finance on the other hand, combines both outreach and sustainability.
Such practice is perhaps most clearly embodied in the micro finance, which
marries the best of the formal financial sector in terms of sustainability with
107
Since independence, the Government of India in general and Reserve
Bank of India in particular have made concerted efforts to provide the poor
Regional Rural Banks, which have mandated credit programmes for the low
credit institutions achieved in the past several decades, the rural poor continue
procedures associated with formal credit. The credit needs are small,
frequent, usually emergent and they arise at unpredictable times. For the poor,
the consumptive credit needs often precede and also determine their
productivity.
For various reasons, the credit flow to the poor for meeting all their
requirements did not get institutionalized. Some of the major causes lie in the
require credit as said earlier, frequently and in small sums, and also the banks’
these problems effectively the micro finance has been tried as a viable
alternative in reaching the hitherto unreached and fill up the gap in the
financial services needed by the poor such as thrift, credit and insurance.
108
Credit under micro finance programme is extended on the basis of social
collaterals in the form of joint liability with or without Self-Help Group. Credit
SHGs with commercial banks is gaining momentum. Both National Bank for
financed under the scheme of which 90 per cent were women SHGs.
(Amount in US $ million)
Year No. of SHGs Bank Loan Refinance
Linked
1992-93 255 0.10 0.09
1993-94 620 0.20 0.15
1994-95 2,122 0.78 0.68
1995-96 4,757 1.81 1.69
1996-97 8,598 3.33 3.00
1997-98 14,317 6.40 5.75
1998-99 32,995 13.57 12.37
1999-00 1,14,775 44.53 34.64
2000-01 2,63,825 105.26 87.72
109
Source: National Bank for Agriculture and Rural Development.2003
percent refinance at the concessional interest rate of 6.5 per cent per annum.
This was further facilitated by the RBI circular issued to banks in February
2000 for mainstreaming the micro credit and reckoning it as priority sector
lending.
Union Territories. A notable feature is that 90 per cent of the groups formed
110
were exclusively of women members. The repayment of bank loans issued to
the co-operative spirit, people are interwoven with common affiliations and
social obligations. The factors like personal rapport and proximity and like-
Many SHGs have come into existence in India spontaneously and have
business like functioning and efficiency in recycling the funds often with
repayment rates nearing cent percent are additional positive features. Some of
the best practices followed under micro finance sector in India include inter
certain other important best practices. These aspects have been discussed in
banks have been involved in micro finance programme. In all, three distinct
linkage models are being followed. Under Model-I, banks themselves take up
the work of forming and nurturing the groups, opening their saving accounts
and providing them bank loans. Up to March 2002, 16 per cent of the total
number of SHGs financed were from this category. Under Model-II, SHGs are
formed by NGOs and formal agencies but are directly financed by banks.
i) RBI has allowed banks to formulate their own models or choose any
conduit/ intermediary for extending micro credit. Banks are allowed to choose
implemented.
ii) Banks are permitted to prescribe their own lending norms keeping in
iii) Banks are also allowed to devise appropriate loan and saving
products and related terms and conditions including the size of loan, unit cost,
unit size, maturity period, grace period, margins and purpose of borrowing
112
iv) Interest rates on bank's loans given to micro finance institutions are
completely deregulated.
vi) The micro finance institutions registered as not for profit NBFCs
have been exempted from registration and prudential requirements. RBI has
permitted such NBFCs to provide credit not exceeding US $ 0.001 million for
business activity and US $ 0.003 million for meeting the cost of a dwelling unit
to the poor.
apart, the Government of India has also allowed foreign direct investment in
projects.
facilitator tracks member accounts at the village level with hand written sheets
records and little time is spent on interface and discussions on economic and
113
institution known as Swayam Krishi Sangam (SKS) has introduced Smart Card
SHGs pose a serious concern over the viability of these institutions in the long
114
Source: SKS, SEWA, SRFS Balance sheets (US$ valued @ Rs.48.77 as on
Septermber 2003)
Micro finance market in India has made rapid strides both in terms of
SHGs linked with the banks and the number of beneficiaries covered. The
freedom given by the Reserve Bank of India has paved the way for its fast
Development Fund has also helped the various entities for orderly
NABARD and select micro finance institutions reveal that micro finance has a
very positive impact on the lives of the poor. It has emerged as a cost-
effective, operationally simple and low-risk strategy for expanding client base
and business. It has afforded a positive institutional alternative and has cut
into the informal sector hold on rural market. Infact micro finance is making the
has ushered in the economic independence of women and change in inter &
intra-household dynamics.
will also help to reduce the transaction costs. Last but not the least, in an
115
anxiety to have faster up scaling and mainstreaming of micro finance sector,
we should not dilute the basic principles of micro finance and load it with
segments of formal sector. Micro finance in India is still to reach the potential
it has. There is therefore an urgent need to explore and deploy new delivery
help us to reach poorer clients, particularly those living in remote areas and
to serve clients whose growing enterprises require larger funding than that
is not for any specific methodology. MFIs may on lend directly to SHGs/
individuals or root their assistance through their partner NGOs & MFIs. They
may also adopt any other lending channel so as to effectively reach financial
assistance to the poor clients. This approach has been decided in view of the
fact that MFIs not only offer a varied combination of products and adopt
different pricing techniques, they also differ in their credit delivery technology /
clientele, product mix, pricing technique, legal and institutional form used and
above all, the long term micro-finance objectives (social vs. commercial micro
finance).
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5.2.3 Microfinance models/approaches in India: The following
their potential and performance. In 1987 NABARD first put funds into the
enable it to invest resources to identify affinity groups, build their capacity and
match their savings after a period of 3-6 months. The grant was based on
MYRADA’s experience in promoting SHGs since 1985 and the initiative of the
other NGOs. After an analysis of this action research, and owing to the efforts
117
of successive NABARD chairpersons and senior management, in 1990 RBI
issued guidelines to provide the framework for a strategy that would allow
banks to lend directly to SHGs. Based on these initial experiences, the SHG-
described in Section III). Since then – and on the basis of its extensive
programme, provided funds for capacity building and innovation, and helped
SHGs were linked during the year 2006, bringing the cumulative number of
SHGs that had ever been linked (provided with bank loans) to 2.92 million by
March 2007 (Table ---). Assuming an average group size of 14 members1 this
translates into coverage during the year of another 9.6 million persons, over
90 percent of them women, and the total number of SHG members who have
households have more than one member in the programme, the number of
families benefited is slightly smaller than these numbers imply. About half of
them are below the poverty line. In addition to first loans to new SHGs,
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about 11 percent over those linked last year. This represents only a slight
deceleration of the rate of growth of loans to new SHGs from 15 percent last
year. The increase in the number of repeat loans however, was exactly the
or an increase of 48 percent over last year's new lending, which had grown by
50 percent over the previous year. The average size of first loans made to new
5.3.2 SHG Linkage: Under this programme Microfinance has until now
cumulative, rather than loans outstanding at the end of year. The latter is a
stock measure of size, as compared to a flow, and provides a better basis for
comparison with the size of lending under the MFI model, or with bank lending
2005. These ratios had been the subject of conjecture until now.
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5.3 Progress in credit linked SHGs .
education. And third, social capital built through creating local organization
poor people to participate in the society. With a loan and a source of income
family and to make plans beyond only the survival of the day. The existence of
through smoothing income. For this reason, poor households are argued to
In many cases men take care of income and money and women take care of
basic needs such as health care of their children, education and nutrition and
Microfinance creates the opportunity for women to get access to capital. Pitt
the one hand and to the reduction of gender inequality and dependency on the
other hand 66
121
5.5 Disadvantages of microfinance: Microfinance is a much
microfinance reaches the poorest and don’t think that microfinance will sort
the very poorest can’t be reached with this method, researchers argue that
who can realize a degree of savings. Vulnerable people are not able to level
their consumption and are quite sensitive to income shocks, and thus have
little advantage with the aid of microfinance. The effect of microfinance on the
while at the same time women maintain responsible for the repayment of the
loan. Because women do not invest the money, positive external effects
inequality and the dependency position of women. Goetz and Gupta conclude
that the chance of daughters going to school diminishes when women become
independent entrepreneurs.
122
microfinance programs positively contribute to female empowerment. A
for investment in agriculture that is so very vital for improving their agricultural
production. This paucity of capital flow perforce makes them seek loans from
money lending sharks at exorbitant rates of interest and often this debt-trap
reduces them to penury. It becomes difficult for the farmers to come out of this
debt-trap even when faced with a favourable season and a good harvest96.
The problem stands compounded and further exacerbated when farmers look
not only increased capital requirements of farmers but they are also seen as
responsible for necessitating and increasing the demand for superior inputs.
reap the benefits of the green revolution due to low surplus income accruing to
123
them. The adequacy and timely availability of credit have always played a
accounted for by commercial banks with the role of RRBs and LDBs being
only marginal. Although the role of RFIs in credit delivery has become crucial
in more recent times, particularly in the changed market conditions, the point
that merits attention is how far these credit institutions will be effective in
sustaining the reforms sweeping the financial sector and in coming up trumps
against competition from other players as they may not have level playing
reserved areas for their operations any more. In fact, the entire decade of
1990s was full of discussion on the positive and negative impacts of financial
sector reforms and their implications for the agricultural sector. In the era of
RFIs are the major issues that need to be taken cognizance of in ensuring
effective rural credit delivery system. However, the major problems plaguing
the efficiency of rural credit delivery system are the mounting overdue and
phenomenon that cuts across these different agencies79. As per the estimates
reported by Gulati and Bathla (2002), not only the outstanding loans of various
RFIs operating in India grew significantly but the overdue of these financial
124
institutions had increased considerably during the period between 1980 and
1998 (Table 1). The RRBs, in particular, showed maximum increase in their
also grew significantly over the course of time. Further, while the nineties’
period (1990-1998) was marked with higher growth in outstanding loans for
to the former. Among various states of India, the RFIs of Maharashtra are
reported to show the highest amount of overdues and outstanding loans over
the past one decade. Even the proportion of overdues to outstanding loan of
outstanding loans of RFIs was more than 30 per cent in Maharashtra during
1997. The other states that fall in the category of above 30 per cent overdue42
as proportion of loans outstanding of their RFIs are Assam, Bihar, Jammu and
Kashmir, Madhya Pradesh, Orissa and Tripura. One can observe several
clearly shown better financial health for the institutions at the district level as
compared to the primary or grass root level. It is not the cooperatives alone
but there are several rural financial institutions that are beset with similar
and framing appropriate policies to rejuvenate the existing rural credit delivery
in this state
The major issue of attention of this study are on not only to review the
phases. While the first phase (1904-1969) encompassed the monopoly of the
credit cooperatives, the second phase (1969-1991) was marked with the
induction of the commercial banks into the rural credit delivery system through
their nationalisation in 1969 and the setting up of the RRBs all over the country
in 1975 with a view to provide low cost banking facilities to the weaker
sections of the society13. The third phase, concomitant with the introduction of
Puhazhendi and Jayaraman (1999) that the innovations in rural credit delivery
mainly due to increased flow of credit to farming community. They also assert
126
that with the acceleration in the pace of capital formation, rural infrastructure
development will see a new pace and much of this effort will be directed and
marketing channels which in turn will allow more productive and increasing
From 1991 the reforms in the banking sector have been initiated in
longer time in initiation on account of certain limitations, viz., the need for
and control cooperative credit institutions and the need to balance the
interests of very many diversified groups which control, operate and guide the
the cooperative credit sector, he not only delves into the positive and negative
effects of the policy reforms but also suggests some new steps that need to be
initiated to truly restructure and bolster the cooperative credit sector in the
127
spheres of economic and business activities has enabled the use of
freedom with greater accountability and changes in cooperative laws, that will
expanding and diversifying its business operations relating to farm and non-
from the Government for their growth and development. Nonetheless, experts
organizations, especially those which are as large in their size and market
poverty. Their objective is to reduce poverty with the aid of loans. Rather than
Divided opinions mark the discussion around the reaching of the very
52
poorest. Khandker argues that the impact of microfinance is stronger on the
poorest than on the poor. However, the very poorest have little to gain from
the very poorest from participating. For this reasons it therefore seems
microfinance.
the microfinance through SHG-Bank Linkage model could provide the requisite
credit facility to the poor, it may seek the support of other government bodies,
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CHAPTER- 6
banks, cooperatives, and the regional rural banks. The study also presents
vital information about the leading NGOs with major credit linkages in Indian
states.
Out of around one billion people in India, 26% are poor (National
Statistical Sample Organization, 2000). At the bottom the poor need credit for
had turned weak, were confronted with the challenge of making themselves
private and foreign banks. At this time, the rural credit system needed a fresh
130
6.1.3. Role of NABARD: In India, the adaptation of the new microfinance
Group Bank Linkage Program.” After an initial pilot study the RBI set up a
as a potential intervention tool in the area of banking with the poor. The RBI
was quick to accept the recommendations and advised the banks to consider
community and bankers. The NABARD envisions covering one third of the
Through the SHG-bank linkage program the RBI and NABARD have tried
between the poor and bankers with the social intermediation of NGOs. The
strengths of various partners: NGOs, who are best in mobilizing the poor and
compared to other countries where parallel model of lending to the poor is pre
dominant, the Indian linkage model tries to use the existing formal financial
network to increase the outreach to the poor, while ensuring the necessary
flexibility of operations for both bankers and the poor. Various credit delivery
131
innovations such as Grameen Bank Replications80, NGO networking, credit
regional rural banks had succeeded in linking 114,775 SHGs by March 2000.
With an average size of 20 members per group, the program had reached
over 2.2 million households. A large majority (85%) of the SHGs linked to
banks were essentially women’s groups. The new microfinance approach has
in rural India.
Urban Development Corporation, and Rastriya Mahila Kosh are some of the
financiers,” they leverage funds from the government, market, donors, and
lenders for lending to its partners and NGOs. Reserve Bank of India and the
refinancing agency. The program at the grass root level is executed through a
The program has been gradually gathering momentum. A review of the SHG
established the maximum linkages. The RRBs had a sizable coverage but the
Commercial Banks: From the 1950s through 1970s, the financial system in
banks and branches of foreign owned commercial banks that provided short
term commercial and trade credit. The Commercial banks have been found
to be more suitable for microfinance because they are regulated and fulfill the
systems.
Regional Rural Banks: The regional rural banks (RRBs) were established
quest to increase their out reach through subsidized lending the RRBs were
bestowed with the title of “White Elephants” because of their severe non-
performing assets and viability problem. The RRBs were supported with a
fresh infusion of capital from NABARD and RBI. As a result, RRBs gradually
new products suited to the rural markets, like Farmers Credit Card and
occupational loans. The RRBs also responded well to NABARD’s initiative for
consisting of state cooperative banks (SCBs) at the apex level, district central
primary credit society. PACS are grassroot level organizations that raise
and cottage industry. DCCBs, on the other hand, organize credit to PACS,
carry out banking business, and sanction, monitor, and control the
implementation of policies26.
entities became substitutes for viable enterprises. NGOs began lending for
134
women’s creditworthiness in terms of their better repayment capacities, NGOs
also started lending to these women. With time they underwent transformation
thirds of SHG credit linkages, the linkage program was predominant in the
40% of credit linkages were established. The acceptability of the program was
relatively higher in southern India, because the savings and the credit
movement was launched here. Some of the other contributory factors were
form groups.
and train them, and then they approach banks for bulk loans for lending
to the SHGs.
The third model, where SHGs were formed and nurtured by the NGOs,
135
was more popular among the bankers. Banks opened saving accounts and
then provided credit directly to the SHGs, while NGOs acted as facilitators.
This approach has been widely accepted by the practitioners partly because of
agencies like the District Rural Development Agency (DRDA), District Women
Sixteen percent of the SHGs were credit linked under the third model
Under this model, NGOs formed SHG federations and then facilitated them to
assume the role of MFIs. This model is expected to gain wider recognition with
commercial banks accounting for the major share in the total deposits
(SBLP). The SBLP being implemented since 1992 has emerged as the
and Rural Development (NABARD), the apex bank for rural finance in the
country is the key promoter of the SBLP in India. The SBLP aims at providing
help and joint liability to obtain access to financial services from formal
agencies. By March 2005, more than 1.62 million SHGs have been linked,
India61.
Rs. 20,487 millions. Of these nearly 40% of the linkages with 48% of amount
and cooperatives.
The total no. of SHG linkages in AP during the year 2002-2003 were
79,037 and the amount disbursed is Rs. 4,541.3 millions. The targets fixed
for the year 2003-2004 are 2,03,977 linkages, with a credit of Rs. 1,00,000
lakhs. But the question is to what extent are the various key players such as
banks, NGOs, SHGs, will maintain quality and follow prescribed norms in
achieving their targets? And the strategies adopted by the key players in the
137
SHGS linkage process may have much influence on repayment and
sustainability of SHGs.
organizations, who are the major SHG promoting institutions, have started
facilitators between banks and SHGs. Now-a-days these NGO-MFIs with their
system on one hand and influencing the SHG-Bank Linkage on the other,
levels seriously for the past 4 / 5 years. They are providing financial assistance
in the form of revolving fund or matching grant to these groups so that they
could cater the financial needs of their group members. The groups which
formed for getting revolving fund/ matching grant/ govt. inputs, and the
facilitator and promoter DRDA/Velugu linked the SHGs to banks for financial
assistance in the form of Community Investment Fund (CIF) along with the
Andhra Bank has received an award from Govt. of Andhra Pradesh for
its best performance in SHG-Bank linkage programme during the year 2001-
02.
period of defaulting, nature of defaulting (willful), reasons for it, etc., loan size,
the three models of SHGS Bank Linkage, influence of MFIs, multiple loans,
Commercial banks were accused of not doing much to adopt and scale-
result, the SBLP had achieved only limited outreach in the first six years of its
of India (RBI) called upon all commercial banks to give due priority to SBLP
by making it a part of their corporate strategy. All the public sector commercial
banks including AB duly followed the RBI’s suggestion. SBLP has been
139
included as a part of bank’s corporate planning strategy. The top management
proactive steps in promoting SHGs in the state. By 2005, more than 4.92
lakh SHGs had been formed and linked to financial institutions, the highest for
any state in the country. These SHGs have been formed and supported mainly
DWACRA, women below poverty line were mobilized to form small groups to
take up various income generating activities (IGAs). The groups were provided
with training and matching grant of up to Rs. 25,000 to take up IGAs. Banks
were required to provide loan support to these DWACRA groups. The Andhra
supported District Poverty Initiative Project (DPIP) called Velugu from 2000-
called Society for Eliminating Rural Poverty (SERP) constituted by the state
based organisations like SHGs. SERP makes use of the existing District Rural
140
Development Agencies (DRDAs) to form and support SHGs. Specialised
village based workers have been appointed by SERP for the purpose. These
staff have also been given training by SERP on SHG formation and
the districts of AP. The state government also has played a proactive role in
linking these SHGs with financial institutions. Targets were given to banks at
state and district levels to link SHGs to banks. A massive drive for SHG
formation and linkage, thus, was launched by the state government all over
Andhra Pradesh.
agencies at all levels about the need for promoting SBLP. NABARD
purpose. At the same time, the state government has shown keen interest in
monitoring the progress of SBLP. The SBLP has been placed under the
purview of the State Level Bankers’ Committee (SLBC), the highest body for
besides giving annual targets to different banks has been regularly monitoring
the progress of SBLP at state and regional levels. Incidentally, the Andhra
bank’s large network of branches and the government promoted SHGs all
141
over the state. The Bank, without taking support of NGOs directly linking the
gives annual targets to every branch under SBLP and molding SBLP as both a
model I, banks directly form and finance SHGs. Under model II, NGOs and
GOs form SHGs and link them to banks for finance. Under model III, banks
and link them to banks. In few cases, the branches of AB are following model
(MF) Cell in 2004 under Priority Sector Policy Department. A senior manager
looks after the cell. The main objective of the Cell is to help the bank in
The head office gives targets to zonal offices about the number of
SHGs to be linked. The zonal offices in turn give minimum targets to branches
linked during 2004-05 against which 47,848 SHGs were linked (Table 6.1).
The idea of target setting is also well received by the branches. The zonal
offices may provide support to branches like additional staff and vehicle for
linkage purpose. The branch staff are also trained by AB and NABARD. For
142
SBLP, the service area is relaxed for the branches. Branches can even go to
villages outside the original service area or jurisdiction for linkage purpose.
either model I or II. If it is model I, branch managers identify villages for group
formation during their visits. They try to target those villages where there is
branch staff help those who come forward in forming the group, passing
group resolution, electing leaders and opening savings account with the
branch. Based on the experience of successful SHGs, many new SHGs get
In the case of model II, SHGs are formed by the DRDA community
activists. The DRDAs also give training to the SHGs on group formation and
143
management. The DRDA activists introduce these SHGs to bank branches for
linkage. In many places DRDAs have preferred to link their SHGs with AB
adopted under SBLP. In few cases, SHGs are also formed and linked by
NGOs.
about monthly savings installment rate based on their capacity. The savings
installment varies from Rs. 20 to Rs. 100 per member per month. Every group
passes a group resolution and elects two leaders to carry out group activities.
The group resolution with the signature of all members is submitted along with
a group photograph for opening a savings account. The branch issues a pass-
book in the name of the group. A check book is given to the two leaders who
C) Loan Linkage: Once the SHGs are stabilised in their operations, AB tries
to provide loan facilities to SHGs. All eligible SHGs are identified for fresh loan
SHGs approach the bank. The branch manager has to go to the village for
village branch: “We have been organizing SHG melas for the last three years
on November 22 which is AB’s foundation day. This year our branch has been
given a target of linking 500 SHGs. Every month we link about 5-6 SHGs. But
melas help us in linking large number of SHGs in one go. We inform zonal
144
office in advance about the mela. The branch staff start identifying SHGs and
institutions. The aim is to make the procedures both simple and prudent
given the informal nature of SHGs. The following papers are to be prepared for
Rating Index(CRI), SHG appraisal form and loan agreement. The application
form is submitted in the name of the SHG taking loan. Inter-se agreement and
CRI are instruments developed by NABARD for facilitating SHG linkage with
attorney by all the members of SHGs. The agreement besides specifying the
internal terms and conditions including liability for debt contracted, authorizes
grade the SHGs based on their managerial and financial performance. The
SHGs are given scores for their performance on 14 different parameters. The
SHGs are categorised as A, B, and C based on their scores out of a total 100
marks. All SHGs scoring over 70 marks are categorised under Rs.A’ and are
marks are categorised under ‘B’ and are recommended for capacity building.
SHGs scoring less than 50 are categorised under ‘C’ and are suggested
145
intensive capacity building. The CRI has now been made mandatory by AB
The appraisal format is used to estimate the loan demand of the SHG
based on members’ loan needs and the debt capacity of the SHG. The debt
capacity is appraised based on CRI of the SHG and its corpus fund
depends basically on the corpus of the SHG. A branch manager can sanction
loan to the tune of 1: 4 of the SHG’s corpus. The managers can consider
even a higher loan ratio depending upon the health of the SHG. AB is
to sanction loans up to Rs. 1,50,000 on their own. For amount above Rs.
1,50,000 the branch needs to take the approval of the zonal office. Mature
SHGs interested in taking up economic activities can seek even higher loan.
the activity.
E) Loan Terms and Conditions: The loan is disbursed in bulk to the SHG.
The purpose of loan utilisation is left to the discretion of the SHG. The branch
group. The SHG loan is a term loan and can be sanctioned for 3 to 5 years
However, the normal practice observed among SHGs is that they repay their
loans within one year period. The bank will not take any security for loan up to
146
Rs. 5,00,000. For a loan above Rs. 5,00,000, security as per usual banking
loans to SHGs. The rate is decided by the norm of prime lending rate (PLR)
Andhra Bank has introduced credit card facility for mature SHGs
which requiring higher level of finance. With a credit card, a SHG will get cash
credit limit up to Rs. 2,00,000 The period of the card is for 3 years during
which the SHG can draw and repay loan as per its convenience. The limit
could be enhanced based on the performance of the SHG. The main aim of
support. More or less all other conditions of SHG loan applies to credit card
also. The members of SHG with credit card facility will get an additional benefit
managers, the credit card facility was picking up only slowly with the SHGs.
branches are supposed to file monthly and half yearly reports about the
progress of SHG linkage. The bank staff make monthly visits to villages to
monitor the performance of SHGs. “Our branch has fully computerised the
unlike the initial period, the monitoring of SHGs has been facilitated by
147
mandal level co-ordinators appointed by DRDAs. The co-ordinators have
been making efforts to sufficiently strengthen the SHGs,” said Mr. R.P.
Behra, the deputy manager of Narasampet branch of AB which has 782 SHG
accounts.
Overall, at all levels of AB, the SBLP scheme under Andhra Bank is
Yelamanchili) expressed the view that their SHGs are functioning well since
inception. They also felt that their participation has helped them in
the bank linkage, the members are getting encouraged to take up various
The mangers of AB feel that the quality of SHGs overall has been
satisfactory. Though initially there were problems but with the effective
monitoring and support mechanism put in place by DRDAs and AB, SHGs are
functioning well. The AB officials expressed the view that under SBLP the
loan recovery has been very high. Only about 2 or 3 per cent of SHGs are in
default. Most SHGs have their own mechanisms for recovering loans.
management. The literate members tend to misutilise the SHG for their gains.
It is also difficult for branch staff to deal with large number of illiterate
members. At the same time, the branch staff feel that the presence of large
148
number of SHG members causes disturbance to the transactions of non-SHG
the SHGs. AB would like to increase the scale of finance to SHGs. However,
SHGs have been found to be slow in utilising the enhanced credit limit. SHG
Even when they take up such activities, marketing of their products and
trying to help the SHGs by organising fairs and exhibitions to market their
products. Moreover, it is found that many SHGs tend to default after first or
second loan assistance. With the fast and large scale growth of SHGs, the
keep SBLP aloof from any kind of political interference. The SBLP has been
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6.5.1 Requirement of SHG Federations: While the NGO promoted SHGs
promote new SHGs of the poor and to access various services to the member
impractical for any promoter to engage in Capacity Building of all the SHGs
promoted, without incurring high costs, which probably are not justifiable.
transaction costs and default rates are reduced, value-added services like
micro-insurance, input supply are provided, while increasing the outreach and
The Federation helps in ensuring that the SHGs survive and function as
In AP, various SHG Federation promoters like DHAN, UNDP, Velugu project
Organization – Federation. The SHG is the primary unit and the building block
of the SHG Federation model. The SHGs, 15-25 in number, are federated at
potential to provide space and support so that each of its members can
identify and use opportunities for her empowerment both in private and public
life.
cases where there are a large number of SHGs in a single village, more than
one VO may be formed. With the lessons learnt in UNDP and Velugu, the
financial intermediation is to be vested with the VO. The VO will have the
members.
Access bulk loans from Banks and development projects for on-lending to
member SHGs
EC will elect its President and Secretary. The VO may be registered under the
APMACS Act.
and VOs with Banks and other financial institutions without getting involved in
and not a manager, the quality and range of services seem to improve at a
due to coverage of a large geographical area, the Federation Board can have
awareness about the status and performance of the SHGs with the help of
is the primary service, which may limit the focus on SHGs. Federations
low capital adequacy at the VO level, emphasises the fact that donated equity
153
is at the Mandal Samakya level, and this probably explains the sense of
f) Recovery rates being high at the Mandal Samakya level compared to the
VO reinforces to the fact that the Mandal Samakyas are more focused on loan
the SHG level are adequate, accuracy and timeliness in recording information
major role in the social and economic empowerment of women, having strong
j) Better book keeping, coupled with a regular review of plan vs. progress
and budget vs. expenditure would help achieve the goals and objectives of the
the number of tiers in the structure. The SHG members are more aware of the
154
Headquarters, which is normally not frequented by the members, member
comprehensively.
the role definition of the Village Organisation and the Mandal Samakhya
155
CHAPTER -7
economical empowering. Till the late 70s India was a ‘developmental state’,
for the free interplay of markets with the belief that it will solve the vexing
problem of poverty.
Arguably the microcredit does not always have a positive impact on14
poverty alleviation because the official program does not have the capacity to
of nutrition and health, increasing domestic & social violence and insecurity
not possible for women to get empowered. Women, hardly have any control
1994. Since its inception, it has made substantial progress in targeting for the
poor women’s control over the assets acquired, and trade-offs between
estimate, barely 20% of the rural poor and 10% of the poor women had access
largely on the informal sector (e.g., money lenders, traders, friends and
relatives) mainly for consumption needs. Apart from high interest rates-
ranging from 5-10% per month charged on such loans- usually informal credit
empowerment. There is thus a large unmet even - demand for credit among
the rural poor. Also, there is need for credit among the rural poor especially
the women. Also, there is demand for savings and insurance services.
The target group of this plan consists of households below the poverty
line(i.e with annual household income up to Rs. 11000 at 1991-92 prices Rs.
157
24,000/-p.a current). Priority is given to those with income upto Rs. 8,500.
action plan (PAP), focusing broadly on social development of the village, credit
and other implementing agencies. SHGs, on the other hand are formed either
interest per annum. Individual borrowers are given loans for specific activities.
SHGs, on the other hand , are required to mobilize savings first. After
achieving their savings deposits from a CB. The loans are distributed among
2-3% per month. Consumption loans are permitted. Eventually, when the
empowerment.22
collective risks of the poor and provide credit at affordable cost to help them &
schemes in Maharashtra.
1992. It has promoted two models the Self Help Group Bank Linkage
Program and the Microfinance Institution model (MFI). The SBLP program
159
runs under the aegis of National Bank for Agriculture and Rural Development.
having a total credit disbursement of Rs. 1,13,980 million were started. Even
after it’s good success rate and motive it has always elicit criticism of feminists
stating that it has not changed the ‘woman’s’ role as a financial controller of
her home and the patriarchal social structure does not allow women to control
their incomes. Unless one finds new and economically productive roles for
women so that they can use their loans for themselves, the emphasis on
of gender roles.
allows for new ways to develop and linking it with development where this
NGO: Chaitanya is the pioneer NGO to promote the SHG Bank Linkage
Maharashtra, it works in four talukas of Shirur, Sinnar, Khed and Junnar led
the supporting NGO initiatives to promote SHGs by proving funds for credit,
capacity building and innovation. By March 2005, the SBLP has provided
the world.
SGSY and SBLP: Swarnajayanti Gram Swarojgar Yojana (SGSY) has been
launched with the objective of bringing every assisted family above the poverty
line within three years, through the provision of micro enterprise. SGSY aims
upon the potential of the rural poor. It is rooted in the belief that the rural poor
in India have competencies and, given the right support can be successful
organisation of the rural poor into self-help groups (SHGs) and their capacity
important approaches:
challenge before the Government. While there has been a steady decline in
rural poverty over the last two decades, there were 244 million rural poor (37
per cent of the rural population) in the country, as per the latest available
provision of basic services for improving the quality of life of the people and
supplement the growth effort and protect the poor from destitution, sharp
rural areas have been redesigned and restructured in order to propel the
skewed downtrend in Raigad district. Though the Table: 7.1 showing good
numbers but when compared with previous years and other districts and
ideology.
Although the basic philosophy behind the micro credit through SHG
focus of attention away from the society towards individuals. Especially the
states in India in terms of per capita income, yet incidence of poverty in the
state remains close to the national average. The state’s economy grew at a
faster rate than the all-India average during 1980-1 to 1992-3, but it slowed
cent in 2002-3, but more than 50 per cent of total workers are still engaged in
this. Cropping pattern has been shifting to greater value addition non-cereal
The benefits of this growth process have, however, not spread equally
dominant areas like Karjat it’s surrounding villages. The much talked about
share of poor. Given current investment flows, the overall growth potential of
Maharashtra does look bright for the medium run. But, distributional
implications of the emerging growth pattern across sectors suggest that the
163
poor might not benefit proportionately from the growth process. The lessons
inclusive, and that intervention through social welfare programmes like MEGS
should be designed to suit the local resource base of poorer regions for faster
poverty reduction48.
The State is first to implement woman’s policy and engendering the budget by
but an entity built on collective efforts of its people. Self Help Group (SHG)
the underserved and unserved rural poor, who had been so far bypassed by
the banking system. The amount deposited by 3.80 lakh SHGs was Rs. 267
0.75 lakh SHGs was Rs. 325 crore. The outstanding credit with 4.10 lakh
SHGs was Rs. 1,021 crore as on 31st March, 2008. 80% of the funds were
districts. Only 2% of the funds only utilized by the Banks for the purpose of
Policy Initiatives: Several policy initiatives have been taken during the year
of India and National Bank for Agriculture and Rural Development, for
the policies of the Central Government, Reserve Bank of India and NABARD
have also taken series of measures for ensuring smooth flow of credit to the
banks expanding their outreach to the poor and adding quality to the loan
rural poor, on a sustained basis, who had been so far by-passed by the
regular basis. The process of SHG helps the poor to understand their strength
that they can also keep their small savings in a safe manner. The Government
of India has accorded national priority for SHG Bank Linkage Programme
since 1999 for covering rural poor through SHGs. The Hon’ble Union Finance
Minister, in his Budget speech for 2004-05 indicated that 5.85 lakh additional
SHGs may be linked during the next three years in order to provide financial
services to the rural poor. For promotion, credit linking or for recovery of loans
from SHGs in the rural areas, banks can avail the services of NGOs, religious
has been set up in NABARD with contributions from NABARD, RBI and a
select commercial banks. The fund is being utilized for providing promotional
and technical support for encouraging orderly growth of micro Finance sector
in SHG promotion and credit linkage in the State. SHG promotion and linkage
Government agencies, Farmers’ Clubs, and Banks themselves have not been
credit linked. The banks are required to consider financing all eligible SHGs,
so that a replicable model can be designed for its application in other districts,
at a later stage.
Rs.8535 crore has been fixed for rural credit and development programs.
Despite these measures, large number of unbanked rural poor have not been
these poor people NABARD has been pursuing the concept of SHG. During
2004-05, over 35000 SHGs have been credit linked and for the current year,
NABARD has a goal to credit link 45000 SHGs. Further, large number of
tenant farmers, lessee farmers and share croppers who do not have a title to
financial excluded rural people from Karjat become prey to the money lenders.
Joint Liability Groups to meet their credit needs. The initial results of the
alternate credit delivery mechanism in the near future. The cooperative credit
structure in the state has been suffering from several weaknesses. In order to
strengthen the cooperative credit structure, the State Government has shown
strengthen short term cooperative structure and result in enhanced credit flow
to agriculture. The Long term cooperative credit structure in the state has
consolidation of Regional Rural Banks has also been taken up. Accordingly
167
three RRBs viz., Akola Gramina Bank, Buldhana Gramina Bank and Yavatmal
Gramina Bank sponsored by Central Bank of India have been merged to form
Karjat Taluka.
formal credit institutions and informal lending system either failed to deliver the
Till 2006 even after having strong NGOs in specially in Karjat the SHG
movement was good at numbers at least, but presently in Karjat after the
NGO working with 50 SHGs and Rastraseva, NGO dealing with 4 SHGs out of
that two SHGs stopped functioning as a group, which is proving very in-
sufficient. The absence of strong NGOs Raigad and Thane districts absence
of any strong MFIs associated with active support from government bodies
and strong NGO network has hampering the spread and sustainability of
SBLP.
168
Table: 7.1 SHGs Linked status from 2005-2008
Area Year Bank
2005-06 2006-07 2007-08
Alibag 50 20 0
Apta 65 32 15 BOI
Bense 30 20 12 UBI
Bhal 29 12 6 BOI
Chondhi 40 25 10 BOI
Gadab 750 291 173 BOI
J.Murud 24 20 7 BOI
Kalamboli 47 23 1 BOI
BOI,CB,UBI
Karjat 800 200 87 ,PUCB
Kharghar 80 54 14 BOI
Khopoli 150 75 10 BOI
New-Panvel 15 0 0
Nhava-Sheva 4 0 0
Pangloli 15 11 8 BOI,CB
Panvel 4 3 1 BOI,
Rewasgaon 5 2 1 BOI
Taloja 70 42 20 BOI
Uran 50 25 10 BOI
Wasambe(M) 75 20 18 BOI
Total 2303 875 426
at certain level19. The Microfinance industry has not affected by any such
events. The failure of Microfinance and SHG Bank Linkage in Raigad district
showing growth in establishing new SHG and increased rate of linkage, the
same has shown a downtrend of SHG linkage with banks during 2005 to 2008
(Table:7.1).
Micro credit through SHG Linkage model scheme in this regard for the
micro credit through SHG Linkage model is a necessity but not a sufficient
target communities varies. The wealthier segments of the target group seem
to benefit most. The non-poor also take the advantage of the scheme when
they are politically and socially in advantageous position. The impact of the
Over and above of all these factors, the additional limiting factors in the case
of the villages in Karjat Taluka are the lack of political will, static mindset of
the people, societal value system, and lack of entrepreneurship, limited market
micro credit through SHG Linkage model scheme as such is not a failure by
itself. What matters most is how best micro credit through SHG Linkage
micro credit through SHG Linkage model should address itself to its
implantation and limiting conditions for its revival and make it economically
viable if they have to play a greater role for developing rural areas in a region
or in a country.
170
Credit is one of the many infrastructural needs of a micro
such as cycle repairing, tailoring, etc but they are very important for agriculture
which being one of the most significant rural micro enterprises in developing
land for cash crops, if for instance, there is no place to store crops or there is
crops to the market place. Small farmers may not want to change from
subsistence crop to cash crop and become entrepreneurs, even if cash crops
income in their enterprises. Those entrepreneurs who are numerate but not
literate can often go some way in developing their enterprises, but their
enterprises are severely limited. For example, they do not have access to
information from the print media and cannot enter into written contracts.
171
7.4.3 Political influence: Power Relations and the Limits of Micro credit
The poor people of Raigad and Thane districts are often remain poor not
context and the particular set of power relations that prevail. But excessive
political interest with out development view is also curse for the empowerment
of the poor60.
Karjat shown some light on micro credit through SHG Linkage models for
districts. Micro credit through SHG Linkage model scheme in this regard for
of micro credit through SHG Linkage model is a necessity but not a sufficient
to benefit most83.
shown that the few SHG those are in operation realized the importance of
maintaining records and documents they are willing to hire and pay for these
services of a literate person form the village to help them with record
Book Keeping: As SHG Transactions may be small today but will not
the needs of the future, so ensure that there is adequate space in all record
Books and that proper systems are maintained from the beginning.
a) Admission Register:
time of joining the SHG. It is an important book since it gives base socio-
economic status of the members at the time of joining the group and forms the
data base on which periodic assessment can be made of the impact of SHG
Membership on the lives of its members. It goes without saying then, that this
173
the actual socio-economic status of members. The data is compiles using
indicating the page number allotted to each person. Each Person must be
given Membership numbers at the time of joining. The serial number in which
Membership numbers are important because in rural area many men and
chaired this weeks meeting member No 6 will automatically chair the next
admission register. · When a member leaves the SHGs her/His number must
(for example, a new person joining the group), as it will cause confusion.
Her/his page in the admission register must record that she/he is no longer a
member. Her/his reasons for leaving must also be recorded The Admission
filled and regularly updates as new facts come to light or changes occur in the
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7.5.3 Attendance Register: There is no ambiguity about this Book: it is a
functioning well. Attendance however is not enough members must also come
the SHGs have a fixed day of the week a fixed time and a fixed place for
meetings, many SHGs levy fine on members who are late or who fail to show
Book is signed at the end of the meeting. · From the Minutes Book it may be
possible to find out who was absent but it is not possible to find out who was
late, such latecomers are usually fined. · If the average attendance for the year
has to be calculated, it will involve going back to the minutes of all the
meetings held in the year, to count the signatures and tally them with the
not suitable for all members Discuss with members. They can change the
meeting days and timings to suit their convenience SHG meeting place is not
convenient for all the members Discuss with members. They can fix an
alternate place that is convenient to all Some members keep away because
they cannot get along well with some other members Discuss with members
175
and find out if such interpersonal problems can be solved. If not it is better to
divide and form separate groups of members with shared common interest or
affinities. Some members are not interested Discuss with them and other
members and find out why. Maybe they have different expectations from the
group. Maybe they want quick benefits but are unwilling to share in their
responsibilities. Maybe their interest conflict with the interest of the other
such members to leave the group. Often such members drop out on their own.
Any other reasons Discuss with members and help them find appropriate
to establish that it is functioning SHG.A well kept Minutes Book can provide
one. Those minutes are recorded in a proper bound register and not on loose
sheets of paper clipped together in the file. Loose sheets of paper are easily
lost. Further they lower the credibility of an SHG · That the Register used for
writing minutes has pre marked pages number in serial order. This will serve
register is serially numbered. The number should be written on the very day
that a new register is brought into use. This will make tracking easy and
occurrence. A two year old groups that is on meeting no.50 inspires more
between written matters there are no blank spaces in the Minutes. Blank
spaces in each page has to be scored out before the Minutes are signed by
the members otherwise they present a potential danger that matter maybe
*Participatory decision-making
That at the end of each meeting the minutes are read to the group before
obtaining the signatures of members and thereafter signed by all the members
present. This is to make sure that members who cannot read are in agreement
Thumb impressions.
· That if a new register for Minutes must not be introduces while the
old one still has a page or two left. If for some reasons then that the blank
the SHG concept is being understood and promoted all the other major books
record financial transaction after they have occurred. The Minutes Books
aspirations of the group. The more the number of issues discussed, the
greater the thoroughness with which they are discussed, the more the
attention that is given to cover these details on record, the more vibrant the
rights from the beginning we have found that individual Pas Books play
* It gave the SHG itself an identity because the Pass Book carried its name
and seal
* It gave the individual members a ‘badge ‘ of membership
decision taken by the SHG as a whole. The authorized person must sign in the
must also be encouraged to sign so that he/she is aware of the entries being
made.
Staff of the Block must not sign in the Passbook in place of the authorized
representative It must be borne in mind that a pass book is not a full and final
documents e.g. Minutes Book entries, cash book and Bank book entries
of the concerned members themselves. Many SHGs tend to collect them and
keep the all in one place maybe in the house of the Secretary. They state that
(b) The chances of the passbooks being forgotten during a meeting are
eliminated
(c) The Secretary or book writer can update the pas boo even after the
meeting is over
· A payment Voucher acknowledges that money has gone out of the SHG
· It is on the basis of these receipts and Payment vouchers that the entire
economic life. Two decades prior to SHG movement was initiated, Similar to
179
Andhra Bank in Andhra Pradesh, in Maharashtra Bank of India started
identifying and financing under such schemes. Bank of India started in a big
way financing tribals from deep forests in the districts of Chandrapur and
have been responded with development of the poor and appreciated by the
empowered the rural people from the social, economical and political aspects.
Economic: The Scheme for cultivation of Tussar silk worms was so unique
that the small assistance ranging between Rs.250/- to Rs.500/- for buying
tussar silk cocoons as seed and for livelihood of the family of the rearer who
were required to camp in jungles throughout the growth period of the worms
on trees of ‘Arjun' and ‘Ain' that it was lapped up by the tribals. The financing
was undertaken directly going into deep forests camping at forest guest
up in the form of micro finance or SHGs. Providing finance to the poor after
180
organising them into homogenous groups, commonly known as Self Help
Rural Credit Project, Pilot Project through International Fund for Agricultural
Development (IFAD).
active Self Help Groups involving finance of Rs.1.7 crore and plans to link
Apart from individual SHGs, Bank also extends credit to the Self Help
policy, the Bank has decided to actively associate itself in this movement in
financing the SHGs in tribal and backward areas covered through the network
The SHGs from Gadchiroli and Chandrapur are been benefited with
the credit support through their respective SHG and set up their own business
goat, buffalos, even availing loans for agriculture also. Raigad district would
181
CHAPTER -8
Since the second half of the twentieth century, third world countries
registering economic growth. With the passage of time, however, the expected
results became hard to come by. Instead, the programs and projects that were
Program, which was practiced in the 1970s27. Before a decade was out, this
approach was also proved to be a failure. Then the World Bank blamed
developing world is marked by the change from government and donor funded
gap' between demand and institutional supply. Thus, despite the widespread
demand for financial services - for both credit and savings facilities - it is
182
households in developing countries. This includes most of the poor people in
(a) The pervasive misunderstandings about local financial markets that are
agencies.
(b) The low level of influence in their respective societies of those who
constitute the demand. Credit services enable the use of anticipated income
management and productivity, and to improve the quality of their lives and
2. Because their incomes are low, they cannot save enough for the inputs they
need.
3. They also cannot afford to pay the costs of the credit they need.
183
6. If such people are to save in banks, they need to be taught financial
discipline.
institutional loan.
heavy losses.
b. Subsidized loans are provided to the borrower at below market rates, and
are therefore desirable. These loans encourage corruption, and in the process
often reach the local elites rather than the target population of lower-income
borrowers.
often require that the interest rates charged for subsidized loans are lower
than the interest rates paid on deposits, thus providing a negative spread and
where local savings have been mobilized, loans tend to be widely available
184
and repayment rates high. Repayment is high primarily because borrowers
want to keep open the option to borrow again – at what are highly attractive
rates in comparison with the interest rates charged on the informal commercial
market.
the subsidies not provided and from the losses not incurred. Where needed,
already save. In case of emergencies, they have fewer options than wealthier
people and therefore many save regularly in cash kept in the house and in a
durable goods.
condition for credit; these reflect two different underlying philosophies. The
latter assumes that the clients must be taught financial discipline and 'the
for effective savings mobilization is for the institution to learn how to provide
without subsidy.
that combine social and financial services, and that do not mobilize voluntary
funds. Unless they raise interest rates on loans, mobilize voluntary savings,
and separate social and financial activities, these institutions cannot become
sustainable.
financial institutions. There are not enough donor and government funds to
microfinance can be profitable, the formal banking sector will begin to enter
the market. This has already occurred in Indonesia where large private banks
186
have become aware of BRI's profits and have entered the microfinance market
provide the initial examples may need assistance; later the country's own
banking sector will learn that microfinance represents a large, unsupplied, and
profitable market.
8.4 Credit Mechanisms Adopted by HDFC (India) for Funding the Low
Income Group Beneficiaries
HDFC has been making continuous and sustained efforts to reach the
thus enabling them to realise their dreams of possessing a house of their own.
terms of cash and labour for construction of their houses. HDFC also ensures
that the newly constructed houses are within the affordability of the
beneficiaries, and thus promotes the usage of innovative low cost technologies
and locally available materials for construction of the houses. The loans from
HDFC has experienced 100% recovery for the loans disbursed to various
projects.
187
8.5. Strengths of Informal Sector: A synthesis that can be evolved out
Experience indicates that savings and credit are both critical for success and
The operating indicators show that programs which are designed taking
into account the localized and geographical differences have been successful.
operational success has been more when interest rates are at or near market
188
rates: The experience of NGOs indicates that low income households are
willing to pay market rates. The crucial problem is not the interest rates but
paying much higher rates when borrowing from informal markets. A flexible
rate of interest scheme would indicate a wider spread for NGOs. Selected
generalized for all needs and geographical spread. The programs which are
regulatory regime contributes to the success. The NGOs which have been
essential factor for success is that all development programs should converge
across sectors.
successful model Grameen31 type also some weakness. It involves too much
of external subsidy which is not replicable Grameen bank has not oriented
weekly equal installments is not practical because poor do not have a stable
job and have to migrate to other places for jobs. If the communities are
189
agrarian during lean seasons it becomes impossible for them to repay the
loan. Pressure for high repayment drives members to money lenders. Credit
alone cannot alleviate poverty and the Grameen model is based only on credit.
rules make it difficult to give adequate credit {only 40-50 percent of amount
available for lending). In Nari Nidhi/Pradan system perhaps not reaching the
very poor.
All the models lack in appropriate legal and financial structure. There is
critical to link poor to formal financial system, whatever the mechanism may
be, if the goal of poverty alleviation has to be achieved. NGOs and Banks
have been involved in community development for long and the experience
shows that they have been able to improve the quality of life of poor, if this is
and microfinance institutions in India indicate that despite their best of efforts
they have not been able to link themselves with formal systems.
190
8.1 Comparison of SHG Vs MFIs
SHG/SBLP Model MFI/Micro Credit/Grameen Bank
Model
Community based Investor Owned
Community Managed (SHG) Professionally Managed (SKS)
Community (Self) Accepting outside funds for on
lending
Integrated (Social & finance) Minimalist (finance only)
Non Profit/Mutual benefit For profit
Only for poor For all under served clients
Self Regulated Externally regulated
demand for finance, intermediation and regulation. Whatever may the model of
The following tables indicate the existing and desired situation for each
component.
8.2A
8.2 DEMAND
Existing Situation Desired Situation
Fragmented Organized
191
Undifferentiated Differentiated (for Consumption,
housing)
Addicted, corrupted by capital & De-addicted from capital & subsidies
subsidies
Communities not aware of rights and Aware of rights and responsibilities
responsibilities
8.3 SUPPLY
Existing Situation Desired Situation
Grand Based (NABARD, SGSY, Regular fund sources
DRDA, Banks) (borrowing/savings/deposits)self,
Maximum Revolving Funds
Directed credit- unwilling and Demand responsive
corrupt
Not linked with mainstream of Part of mainstream (Core banking and
financial institutions Financial Institutions
Mainly focused for credit Add Savings and Insurance
Dominated by political interferences Reduce dominance of informal,
unregulated suppliers
8.4 INTERMEDIATION
Existing Situation Desired Situation
Non Specialised Specialised in Financial Services
Non oriented to financial analysis Thorough in financial analysis
Non profit capital For profit
Non linked to mainstream financial Link up to FIs
institutions
Not organized Self regulating
8.5 REGULATION
Existing Situation Desired Situation
Focused on formal service providers Include/Informal recognisation e.g
(informal not regulated) DWACRA, SHGs in AP
Regulating the wrong things e.g Regulate rules of game
192
volatility in interest rates
Multiple and conflicting Coherence and coordination across
regulators
Negatively Oriented Enabling Environment
The three options that emerge out of above discussion regarding structure of
own funds. The formal sector will take advantage of the lower transaction
costs and risk premium of the informal sector so as to reach the low income
group borrowers beyond the profitable reach of the formal sector. As for the
beneficiaries, inspite of the transaction cost of the formal and the informal
sector being transferred on to them, the cost of borrowing will remain low as
formal sector funds could promote competition within the informal sector and
Option-II: Since it is now being felt that the existing structures are inadequate
community, an Institution that would combine the strengths of an NGO and the
appropriate.
193
Option-III: As mentioned before, a review of the cooperatives and NGOs
strength of the community based systems is their close rapport and linkages
with the community and its members. The broad arrangement involves a bulk
loan from the Formal Financial Institution to the Community Based Financial
households. The CBFI will have the responsibility for loan origination and
8.8. Conclusion
Microfinance operation. First of all, the poor repay their loans and are willing to
pay for higher interest rates than commercial banks11 provided that access to
provide strong repayment motivation and produce extremely low default rates.
Secondly, the poor save and hence microfinance should provide both savings
and loan facilities. The findings imply that banking on the poor can be a
194
A main conclusion of that microfinance can contribute to solving the
flexibility in the credit instrument that could make it match the multiple credit
demand for financing and savings behaviour of the potential borrowers and
and to make them more "bankable" to financial institutions and enable them to
qualify for long-term credit from the formal sector. Microfinance institutions
195
CHAPTER- 9
Introduction: This chapter is divided into three parts the first part of the
program and second part of the chapter deals with the statistical analysis of
SHG participating in the study. Each part is then sub divided into two parts the
first part deals with the basic and descriptive statistics while as in the second
part deals with statistical test which provides sufficient evidences to prove or
disprove the hypothesis and objectives discussed in the earlier chapter three.
Part 1: The table below lists the variable used in data with their measurement
196
Gender, Literacy status of the individual, Whether Taking Nominal
education, Profession of the Individual, In immediate neeed
where from the need is satisfied, Who inform about SHG,
Reason FOR taking loan from SHG, Saving Account Yes or
No,Name of bank, Amount saved in account, Do you know
SBLP, Any loan from SBLP, Loan Sufficient, Do you have
information for SBLP work, Are you on any position of your
Group, Major reason of taking loan from SBLP, How many times
the loan is taken, Supported by any organization, Any Repay of
Loan, Entrepreneur Activity
Age of the individual, Age of SHG, No of members, Income Scale
Before,Amount saved in account,Year since in SHG, CURRENT
FAMILY Income,Total no of members in family,No of Children,No
of son in family, No of Daughter in family.
Table. 9.1. Interpretation: The total 3072 individuals who are any way
associated with the some or other self help groups. Table 9.1 and chart 1
shows the surprising and promising results. Out of 3072 participants 99.3%
are Female and 0.7% are male. This result seems to be very interesting and
focus on the program if they are wishing to improve the economic and social
women SHGs could sustained sofar. Even One educated women can
Table -9.1:
197
Showing the male Female distribution of Individuals participated in the
study.
Chart -9.1:
Showing the male Female distribution of Individuals participated in the
study.
Table 9.2. Interpretation: While taking the survey the care is taken to
include maximum variations. The Table 9.2 and chart9.2 shows the age
that maximum of the percentage is 23 and is for the age 35. There some
cases which are of the age 50 which in terms of percentage is very small and
is only 1 percent. Thus we can say that the individuals who are participating in
the SHGs are much mature and responsible. This is a positive sign and may
contribute towards success of the programme, as they are very much in need
can be flexible to handle the responsibilities and deal with all age group
people.
Cumulative
Age Frequency Percent
Percent
25 29 .9 .9
26 29 .9 1.9
28 68 2.2 4.1
29 198 6.4 10.5
30 197 6.4 17.0
31 30 1.0 17.9
32 503 16.4 34.3
33 467 15.2 49.5
34 197 6.4 55.9
35 708 23.0 79.0
199
36 29 .9 79.9
38 239 7.8 87.7
39 30 1.0 88.7
40 289 9.4 98.1
45 29 .9 99.0
50 30 1.0 100.0
Total 3072 100.0
study
200
Cumulative
Literacy Frequency Percent
Percent
considered for success of SHGs and SBLP program is the literacy of the
41.3% of the individuals are found to be literate i.e., they are capable to read
and write which helps them look after the accounts, negotiate with
cheated as it used to happen in 60s, & 70s. This literacy would enrich the
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Table- Illiterate 1804 58.7 58.7 9.3.A :
Showing the gender
Literate 1268 41.3 100.0
Total 3072 100.0
Gender
Total
Female Male
literate, male Illiterate Female Literate and Female literate. The table shows
that 1791 females out of 3052 female are Illiterate and 1261 to be literate in
the sense that they can sign at least. Out of 20 surveyed male it is found that
13 male are literate and 7 male to be illiterate. The references from the
202
successful SHGs from Gadchiroli, Chandrapur, Thane and Visakhapatnam
shows that initial stage of while joining the group majority of the members are
illiterate, but after two three years they have become versed the official
proceedings with minimum acquired literacy. This would be the major reason
NABARD certifying as good SHG, which has completed at least 2-3 yrs of
the forcing character for increasing the earning of the family. The Table 9.4
followed by chart shows the frequency distribution for the family members. In
this study we can observe that the family size varies from 2 to 9. The family
size with 2 members includes husband and wife and the family size 9
members include all dependent in the family. There are very few those have 2
observed that 38 percent of the families are with family size of 6 and 33.5
percent the families are of size of 5 members. The maximum family members
maximum members to be in the SHG and avail the flexible credit to support
a group.
203
Table-9.4. Showing the Frequency distribution of the number of
members in family.
Number of
member in Frequency Percent Cumulative Percent
family
2 4 .1 .1
3 196 6.4 6.5
4 456 14.8 21.4
5 1030 33.5 54.9
6 1166 38.0 92.8
7 188 6.1 99.0
8 30 1.0 99.9
9 2 .1 100.0
Total 3072 100.0
204
.
Table .9.5 Interpretation Another important factor important factor is number
of children in the family. It is observed that there are 0.2 percent families with 0
children and the maximum 7 children percentage is 0.8 percent. The maximum
38.5 percent (Table-9.5). Table 9.5 and the chart followed show the
distribution of Son. There are 53.5 percent families who have 2 sons and 5.4
percent families which have 0 sons while as Table - 5.3 that there are at least
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9.5.: Showing the Frequency distribution of the number of members in
family.
Number of
Cumulative
children in Frequency Percent
family Percent
0 7 0.2 0.2
1 106 3.5 3.7
2 467 15.2 18.9
3 959 31.2 50.1
4 1184 38.5 88.6
5 270 8.8 97.4
6 53 1.7 99.2
7 26 0.8 100.0
Total 3072 100.0
206
Chart-9.5.1: showing the distribution of son in family.
Number of Cumulative
daughter Frequency Percent
Percent
0 336 10.9 10.9
1 869 28.3 39.2
2 1471 47.9 87.1
3 367 11.9 99.1
4 2 .1 99.1
6 27 .9 100.0
Total 3072 100.0
207
Chart-9.5.2 : Showing the distribution of daughters in family.
Table 9.5 to 9.5.3 shows a high level dependency for the members on the
members sending their children to school which shows the maturity level and
members to continue with the group and continue with economic activities.
Whether taking
education Frequency Percent
9.6. The profession is also the influencing characteristic to the individual for
3072 individual it is observed that maximum individuals are seasonal labor, the
individuals who are involved in some or other micro business. The percentage
of individuals who are daily wage labor is 20.8. There are 11.8 and 10.8
percent of individuals who are Milk product seller and Vegetable Vendors.
The 51.5% members are highly below poverty line i.e., earning Rs. 50/- per
day as on 2008-09 which makes them as highly suitable for the SBLP scheme
209
activity which is the core strength of the group through entrepreneurial
activities.
Cumulative
Profession Frequency Percent
Percent
Seasonal Labor 941 30.6 30.6
Vegetable vendor 331 10.8 41.4
Micro Business 799 26.0 67.4
Daily Wage Labor 639 20.8 88.2
9.7 The awareness of SHG and SBLP is also one of the most important
factor. To check the awareness source we categorized it into three parts that
210
is Government, NGOs and Animator. We raised the question that where from
is nearly 5.5 percent of the individual did not responded for the question. But
out of responded individuals 91.5% said that the information is obtained from
Government agencies, 4.9% said that they got information from NGOs and
3.6% said that they got information from Animators. This may lead to the
awareness and they are one of the best sources for providing the information
The table 9.7 and chart 9.7 shows that there are only 24% people who has
taken loan for Business purpose and remaining almost 76% people says that
they have taken loan for other purposes like repaying old loan, house repair,
Family Function etc. It may be allowed to take loan for repaying old loans
211
Table-9.8: Showing the Frequency distribution of the individuals’
purpose for Loan.
Cumulative
Purpose Frequency Percent Percent
Health Purpose 289 9.4 9.4
Children Education Expenses 649 21.1 30.5
Business purpose 736 24.0 54.5
House Repair 376 12.2 66.7
Family Function 344 11.2 77.9
Repay Old Loan 678 22.1 100.0
Total 3072 100.0
212
It is observed from Table-9.9 that 75% of the individuals are only
members of SHGs while as 8.2% president, 9.2% secretary and 0.6% are
involved in Bank operations.
Position of the
Frequency Percent
Individual
Candidate only 2288 74.5
Khajindar/Treasurer 232 7.6
Secretary 284 9.2
President 251 8.2
Bank Operations 17 .6
Total 3072 100.0
Chart –9.9 Showing frequency distribution of individuals according to
positions they are holding in SHGs
213
9.9. Though the literacy rate is 51%, 74.5% member have not taken any
responsible position which has to be corrected and each member should bear
No of members in
SHG Frequency Percent
10 383 12.5
12 603 19.6
13 302 9.8
14 638 20.8
15 408 13.3
16 454 14.8
18 284 9.2
214
No of members in
SHG Frequency Percent
10 383 12.5
12 603 19.6
13 302 9.8
14 638 20.8
15 408 13.3
16 454 14.8
18 284 9.2
Total 3072 100.0
2 541 17.6
3 850 27.7
4 937 30.5
5 744 24.2
Total 3072 100.0
215
Chart – 9.11 showing distribution of Age of SHG.
Table.9.12: Interpretation: The groups, from where data collected are 30.5%
promoted by SGSY which are formed on the basis to avail the subsidy by the
complete the government targets given to them, The group progress was not
been followed up by the respective promoter after the subsidy was disbursed
216
or the group itself discontinued further to avoid the repayment of the remaining
loan amount. During the study and data collection this has outlined by the
with failure allover India. The remaining 6.2% and 39.9% promoted by NGOs
SHG’s success or failure. The study and analysis shown that only 168 SHGs
217
out of 3072 were obtained loan and repaid also amounting 5.5% which is
worrisome. The core banking functionary is to provide the loans and collect
the deposits. If core purpose is not deal with, then the objective of formation
of SHG and bank linkage would not sustain. Active steps have to be taken to
encourage the members to avail the loans after becoming eligible and utilize it
for meet their requirements and invest on business, where they can repay the
loan. The valid reasons have to enquired with the remaining 94.5% members
for not availing the loans and motivate and educate them to understand the
Loan
repay Frequency Percent
Chart – 9.13 showing distribution of individual who has repaid the loan.
218
Table.9.14; Interpretation: showing distribution of individual who are
The outcomes of Table 9.14 and 9.13 are proportional to each other.
As the 94.4% of the members are not involved in any entrepreneurial activity
where they feel need of money rotation. What ever money they are earning
from labour and daily wages been expended on domestic chores or depending
any difficulty is existing, which has to be resolved for the purpose of the
Entrepreneur Frequenc
Activity Percent
y
219
Chart –9.14: Showing distribution of individual who are doing some or
other entrepreneur activities.
The objective of the study is to study the role of NGOs in the success of
tried to find out whether there exist any relationship between Repay and
must have a loan re-cycle with Bank linkage, it is determined by the question
of any loan from bank and the individual has repaid the loan, and any
The hypothesis that NGO plays very important role in the survivals of
220
Alternative Hypothesis: The NGO plays important role in making SHG
The chi square test is used to test the attribute independency and
the Table 9.15 shows that the null hypothesis is rejected and alternative
hypothesis is accepted since significant value is less than that of 0.05. So the
study and analysis conclude that if the participation of NGOs increases in the
SHG programme the program will be more successful. The other factors like
Entrepreneur
Activity
Row Attribute Yes No Chi Sig Continge Sig
Attribute Values Square ncy
value coefficie
nt
Refund No 21 0
380.8 0.00* 0.698 0.000
Yes 1 378
NGO No 21 11
241.9 0.00* .614 0.000
ACTIVE Yes 1 367
SHGs with the presence of NGOs. This conclusion arise from the matter of
approaching towards . This also can be observed from the chart following the
interpretations.
221
Chart-9.16
between the other parameters and entrepreneur activity since we say that if
there exist entrepreneur activity SHG is active that means ultimately we tried
education and position in the group with the entrepreneur activity. The results
are presented below in the table. The Chi square sig values for Literacy status
profession of the individual is less than 0.05 that means the value is significant
and thus we can conclude that there is association between these parameter
222
profession, literacy, and no of members in family is showing significant
association.
Factor Analysis: the factor analysis is used to identify the important factors
which influence the entrepreneur activities of the SHG. The factors are
extracted to represent the set of variables in the data set in such a way that
entrepreneur activity. The factor analysis shows that there are 8 factors
whose Eigen values are greater than one (Annexure-vii). The Eigen values
greater than one implies that these factors contributing maximum in terms of
variance. The table below shows that the extracted factor in all explains 70%
variance. this means that if we consider these eight variables for analysis
component matrix: Rotated Component Matrixab: The table shows that the
individual. These are the most important factors which really contribute for
Income analysis: This part of the analysis the study is divided into two parts
the firs we checked the significant difference in the income levels of the
income before and income after the SHG participation. in the second part of
the income analysis the test is carried out to check the significance of the
223
difference between the groups one belonging to the active SHGs and other
Case 1 :
done by using paired t test. the results are presented below in the table.
Table.9.16
T Df Sig.
Income Before - -2.231 3071 .026
Income after
Table.9.16; Interpretation: The sig value is less than 0.05 implies that there
is significant difference between the before and after income of the individual.
individual.
Chart showing the means of Income before and after the participation in
SHG
224
Case 2:
The sig value is less than 0.05 implies that there is significant difference
SHGs. Thus we conclude that participation in active SHG improves the income
225
MAJOR FINDINGS OF THE RESEARCH:
The research findings of the study are structured to two individual sub-
chapters:
The numbers of SHGs linked each year in the rest of India has grown
of well over 100% per year. If this rate of growth is maintained, or even if the
started in a big way financing tribals from deep forests in the districts of
directly going into deep forests camping at forest guest houses, getting
tribals. Starting with financing for 10 such areas in the year 1973, the Bank
had covered all the 3000 silk worm rearing families in Vidarbha by 1977.
Group concept has taken roots in the Bank since then, in various other
form of micro finance or SHGs. Providing finance to the poor after organising
need of 760 active Self Help Groups involving finance of Rs.1.7 crore and
plans to link another 25000 groups to Bank finance which are in nurturing
9.2 Trends & Challenges: Millions of rural population have been provided
of India to assist the members of SHGs for freeing them from the clutches of
during last year. Based on the feedback received from branches, the scheme
has been revised and made applicable to all its branches. Under the scheme,
term loan sanctioned be utilized for any purpose especially for the repayment
institutional sources.
227
Self- help groups (SHGs) play today a major role in poverty alleviation
parts of India are members of SHGs and actively engage in savings and credit
management, literacy, child care and nutrition, etc.). The S/C focus in the SHG
is the most prominent element and offers a chance to create some control
over capital, albeit in very small amounts. The SHG system has proven to be
very relevant and effective in offering women the possibility to break gradually
9.3 The findings from primary data analysis output: During the
process, the various answers have come from the respondents. There are
quite interesting answers have come which would expose the gap between the
secondary data available, promises and assurances from the statutory bodies
stationed at Raigad and Thane districts, perhaps it could be the reason for the
9.3.1 Gender Disparity: The women in interior villages of Karjat Taluka are
primarily belongs to Adivasi sect. Both and male and female are bread
winners of the family as per the situation. Due to bad habits of male head of
the family leading to domestic violence, illiteracy to children which are keeping
228
9.3.2 NGO influence: The NGOs like Academy of Development Sciences,
entrepreneurial activities. Uptol 2005 ADS was active and formed no.of SHG
only that it had played a pivotal role in tribal education, fight against land
poor. It has conducted lot of entrepreneurial workshops to teach the tribal poor
people to know about the business technique. From 2002 to 2004 it has
formed nearly 600 SHGs in villages of Karjat Taluka. In 2005 ADS has
become non-functional due to their internal crisis and all the SHGs formed by
participate in entrepreneurial activities. The male group on the next day it self
expended the total money on alcohol in contrary the female group purchased
some news papers and leaves to prepare paper envelopes and meal plates for
road side hotels. These two assets has put them ahead of male SHGs. It
was found that women SHGs are in better position of managing the group
229
9.4. Positive factors for the success of SBLP:
seasonal farmers.
disciplined groups
9.5 Negative Factors: During the study for last three years it was found
that even after having so many opportunities SGH Bank Linkage movement is
not getting ignited. The out come of the primary data collected duly verified
of the previously existed SHGs. All the 600 SHGs formed by ADS become
disoriented and only 10SHGs could found during the pilot study, those still
ready to participate in SBLP activities. When final data collected and studied
from Raigad and Thane districts the same picture has come in a different way.
The final out come is that 98% of the SHGs are non-active now due absence
230
9.5.2. Increasing No. of NPA (Non Performing Assets): The study found
that the NPAs in Banks are steeply increasing; the reasons primarily 40 out
of 44 SBLP accounts with Union Bank of India 110 out of 114 SBLP accounts
with Bank of India either preferred not to repay the loan which was granted to
them through SGSY subsidy scheme. i.e., Out of Rs..2.5 lakhs loan,
after distributed equally amongst the members nearly Rs..10450/- which they
exepended on lavish of kinds and when it has come to repayment, they simply
means now does;t have money to repay. Related to this bankers are not
willing to issue new loans and form new SHGs. Significantly in 2009 Bank of
comparatively 2007-08
unable to recover the loan amounts given SHGs in Karjat and Thane districts
economic and entrepreneurial activity. During the field visit to various villages
in Karjat and Thane which are situated at industrial belt and there lot scope for
adventure sports facilities. In Karjat villages it was found that some villages
opting causal labour rather doing business. In some villages even though they
want do some business, they lack skills and knowledge to establish business.
Some one like active NGO , Animator appointed by NABARD or any MFIs can
be an answer for this problem, to being there to motivate, educate and mentor
the rural poor to make them able to identify their strengths and opportunities to
iii) Excessive Political Interference: Now a days the political activities have
increased in these areas. When ever and where ever mob is required, the un-
employed people were hired on daily wage basis includes food, alcohol and
Rs. 300/- and even women also getting into such events and converting them
completely against doing any risky and hard work to earn. A classic example
for the activities is this event in Kalyan, local politicians was very much
infavour with the women SHGs and all the women groups were campaigned
for him in the recently concluded 2009 elections, immediately after election
iv) Lack of Basic Amenities: The 10 villages of Karjat taluka from where the
data been
collected are
living in kuchha
232
houses and open for all natural calamities. Away from potable water facility at
near bay, not to ask about public transport system. Schools and other
amienites they have come all the way either to Neral or to Karjat, even for
general purchases also. Theoritically these are suitable for microfinance and
completely excluded.
these village, have to motivate the housewives. This ascertains that the
government should really focus on the program if they are wishing to improve
research found that only women SHGs could sustained so far. Even One
educated women can motivate the family and the whole villages will be
educated.
Impact Factors:
i) Age : When the study been conducted it was observed and found that the
women SHGs in AP, Tamilnadu, Karnataka and other states the average age
of the each group near to 35-40. At Karjat also the groups average ages is
nearly 38, and average children in a group is and family members are 4.5;
these factors are bonding women to the group to earn money for the family
even though the male head of the home is earning. The wish for growth,
social status and good education, life to children are luring the women to be
233
honest and discipline with the group. The average age group of 25 and 50
ii) Literacy:. The references from the successful SHGs from Gadchiroli,
joining the group majority of the members are illiterate, but after two three
years they have become versed the official proceedings with minimum
good SHG, which has completed at least 2-3 yrs of operations off course
iii) Awareness of SHG and Bank Linkage: The awareness of SHG and
SBLP is also one of the most important factor. To check the awareness source
raised the question that where from the information regarding SHG/SBLP is
obtained? Some of the individuals that is nearly 5.5 percent of the individual
did not responded for the question. But out of responded individuals 91.5%
said that the information is obtained from Government agencies, 4.9% said
that they got information from NGOs and 3.6% said that they got information
Organization should take lead for spread of awareness and they are one of
iv) Purpose of Loan: There are only 24% people who has taken loan for
Business purpose and remaining almost 76% people says that they have
234
taken loan for other purposes like repaying old loan, house repair, Family
Function etc. It may be allowed to take loan for repaying old loans lower % for
v) Participation: Table 9.3. Though the literacy rate is 51%, 74.5% member
have not taken any responsible position which has to be corrected and each
member should bear the responsibility on rotation basis. Accounts can be with
amongst all the members equally to make them most suitable and sustainable
group.
bachat ghat” kalyan has purchased mini buses with the bank loan to ply the
long distance residents to rly stn., and two more SHGs planning to do the
same with the help of Mrs. Umne, Welfare officer and animator for
political party has embossed their name on the buses to exhibit that they only
related as the majority of population of the study belong to Tribal group and
235
dominantly falling in the criteria of BPL. The coastal boundary, tourism,
availability of rural poor and trial villages makes it very much similar to Raigad.
The said districts are technically suitable for the SHG and Bank Linked
During the study it was found that Raigad and Thane districts having
conditions and no.of of SHG the success rate of the Bank Linkage program is
SHPIs and SHGs which have been promoted by them, were very less
indirect role through training and advocacy, the marketing of the SHG concept
b. The formation of SHGs in Raigad and Thane districts are not supported
loans and government subsidies maximum no.of SHGs in Raigad and Thane
districts are not binding to the bank linkage norms of repayment, subsequently
236
majority loans are converting in to NPAs, which discouraging the banks to help
NREGS to SHGs
corporate
undertaken by some of the SHGs in Raigad & Thane districts due to lack of
support from NGOs for the marketing the products, technical support, regular
monitoring the continuation had negatively affected. In compare with other two
motivator.
the establishing likely in the medium term to be the main SHPIs with the fear
of increased no.of NPAs and low support from local authorities. They should
research Raigad district; as when and where ever the individual SHGs are
237
unable to function and perform for the sustainability the other SHGs in the
federation are helping (mentoring and monitoring the performance of the under
performed SHG)
cooperative banks in Karjat Taluka effecting the spread and growth of SHG
of SHG culture, but mainly indirect role through training and advocacy,
This study assumes that NABARD plans modestly to reduce the rate of
growth, in order to achieve but not to go far beyond the 2012 three million
SHG target. This will require the continued use of all the types of SHPI which
are presently being used, including the newly introduced, which yet to enter
It was found there some prospective steps which helped Andhra Bank
the SHGs
Lack of Strong SHPI: The study found that decline growth has fled the
absence of the SHPI culture which has become a strong support to SBLP
activities in AP. Lack of strong SHG Federation culture would be one more
Incentives to NGOs:
According to existing NABARD incventive policty the NGOs will get the
months effecting from the date of SHG formation. In Kalyan, Panvel Talukas
the NGOs who have been pioneer while forming the SHGs and Bank Linkage
There is some evidence that some NGOs which are benefitting from
three months after disbursement of the first loan, because they will receive no
further incentives after this date. NABARD should consider extending this
Banks as SHPIs
Institution, has achieved the high end returns with SBLP scheme and
239
establishing many more SHGs in various talukas in Visakhapatnam . But in
Raigad and Thane none of the public sector Bank or cooperative banks are
not acting as SHPI. In the medium term banks should and will emerge as the
main promoters of SHGs. In the longer term, the banks’ role will gradually be
reduced, as SHG members themselves start their own groups. Bankers will
have to respond to these initiatives, as they should for any new customer, by
providing advice and assistance. The SHG promotion role as such, however,
in the following section. Within the banking sector, Co-operative Banks, such
as the Kalyan Janata Sahakari Bank, The Jan Kalyan Sahakari Bank in
But after observing the plight of Bank of India and Union Bank of India
increasing rate of NPAs and bad debts, they dropped from the scheme for the
Subsidies: It was found that many SHGs are formed into to avail the subsidy
Badlapur, Neral, Mamdapur, and Bhivpuri) and become non-existent with one
year, subsequently the Bank of India Katemaniali Branch and Union Bank of
India Neral branch have suffered with 90% of SBLP account converted into
240
bad-debts subsequently as NPAs) exacerbate this problem. In other areas,
Low Marketing :This study found little evidence that some of the existent
SHGs members are unable to sell the goods manufactured by them due to
selling skills. Which directly effecting their repaying capacity of the loan
which they obtained from bank, the fear of this is probably banks mangers’
main reason for reluctance to finance SHGs. The rapidly growing numbers of
SHGs, however, make it very likely that some markets will become saturated
in a few years and managers’ fears will be justified. It is much easier to sell
market access for rural products, at the District, State and national levels.
and assets for the SHG members after they formed the group. Out of the total
sample, 45 per cent reported an increase in assets after joining a SHG. The
mean annual savings of households increased two - fold after joining SHGs.
time. Higher savings were reported for bank linked groups (36 per cent) than
for NGO supported groups (16 per cent). The proportion of savings to total
resources was relatively higher for bank linked groups (35.7 per cent) than
241
NGO supported groups (30.5 per cent). The average loan per member
increased significantly by 123 per cent during the post-SHG situation. Out of
total loans received by SHG members, 72 per cent were used for income
generating purposes and 28 per cent for consumption. The size of loan was
Repayment of Loans: On loan repayment, the study reported that 5.4 per
cent of the groups had promptly repaid the loans and only 16.7 per cent repaid
late. The ‘in time’ loan repayment performance was reportedly lower for bank
linked groups (90.8 per cent) than for NGO-facilitated groups (82.1 per cent).
study found that the quality of records/note books was good only in 15 per
cent of groups, moderate in 39 per cent and weak in 40 per cent8. The
maintained records. Overall, the data reflect relatively low standard deviation
around the mean for the number of loans and amount borrowed by members.
242
CHAPTER- 10
CONCLUSION AND FUTURE CONSIDERATIONS
The subject of this research study is “Impact of Self help Group –Bank
Linkage Program and It’s Role on the Upliftment of the Poor”. An in-depth
look at Self Help Group their linkage with Bank as an effective tool to provide
the easy credit to poor who otherwise elude the benefits of the financial
inclusion.
provide the poor with access to financial services. When compared to the
wider SHG bank linkage movement in India, private MFIs have had limited
strength and status change of the poor before and after joining in SHG. There
purpose of empowerment..
243
the key findings. These analyses are based on qualitative data drawn from
individual and group interviews conducted during July 2007 – January 2010.
three years, it did not translate into higher incomes for members and
90% SHGs that are linked to banks are reported to be of women as mentioned
sustainable manner.
244
Studies have shown overall positive impact of SHG bank linkage
significant changes in the living standards of SHG members have taken place
A) Institutional Issues:
Reserve bank of India and Govt. of India for alleviation of poverty56. Hence,
institutional mission is required for banking with the poor i.e., by linking,
bank culture and structure to gear towards high volume, small loan size
business.
245
3. Human resources: The financial methodologies to reach poor and
view of interest rate ceilings for small loans, targeted credit schemes.
Agencies is waning away and there are inherent failures in the mechanism to
1. SHGs rating norms are not followed. Groups are to be rated as per the
laid down procedures and efforts are required to rectify their weak areas.
group members. The internal lending and bank finance should be for few
members only either for consumption (for small amount) or for capacity
building. The credit limits are to be assessed based on credit absorption by the
group and proposed activity should be linked to the skills of the group
members.
writing the accounts by the literate person of the village, this is resulting in
signaling the threats ahead. The constraints affecting the positive impact of
SHG Bank linkage model are need to be identified on an ongoing basis and
apparent that Indian economy can’t wait, without improving the economic
248
conditions of poor. Vis-a-vis banking with the poor is a profitable business
opportunity for both the poor and the financial institutions in India.
drinking water facility like enumerable changes happening in the life of poor
form the villages of Karjat Taluka. It indicates that SHG loans remain small
concern. Project has to invest a lot on members’ education. The project may
ponder over to utilize the vast network of electronic media for awareness
Broadly speaking, the important factors that are responsible for non-
programs, loan melas, loan write-offs, risk of defaults, high costs for
249
monitoring the loan accounts etc. In the present scenario of deregulated
client looks for timely provision of credit instead of subsidized credit. Also,
there is need for a sustainable credit dispensing system to suit the poverty
Summary of finding:
poverty alleviation mission through SHG Bank Linkage Program. First, the
250
social and economic & development23. This has now been well demonstrated
on a large scale. We discuss here SBLP's role in the formulation of the initial
that put concept into practice, analyzing the results, and disseminating the
findings. Drawing on work in Asia, Africa15, and Latin America, the paper
occurred because of the work of many people in many countries. This paper,
One just can’t ignore the role the banks are playing in building a strong
251
to economic management. However, being a developing and emerging
profitability and competitiveness, there are concerns that the banks have failed
The strategies to ensure financial inclusion through SBLP can truly lift
the living standards of the deprived class and provide them an opportunity to
the participation of women in practically every fora. They have also emerged
below the poverty line could succeed within a short span of time primarily
associated with the self-help groups”. The women’s groups are observed to be
more proactive and less politicised and as a result the district official
machinery finds it more effective to work with these groups. It is also easy for
As one official put it, “before the emergence of self-help groups there was
lacunas/gaps found which speak about the impact factors for the current
failure of the scheme in Karjat and suggestions to rectify them and steps to
SBLP as a successful. It stood 2nd in all over India too provide number of
loans to SBLP.
Lack of Strong SHPI: The absence of strong SHPI system was felt during
the study as the 140 SHGs on withly left out of actual 1250 SHGs in Karjat
and surrounding areas. The SHPI and SHG Federations system were met.
The absence of Federation culture would be one more reason of the low an
a) .Financial Education to interior rural and tribal areas (RBI & NABARD
Initiative)
Collection)
iii) Marketing
iv) Sales
v) Investment
support for the poor only by selecting the correct person and group.
of respective district
254
l) The findings of the study suggests that NABARD should invite bids from
operate for their consumer goods, which monitors the health of SHGs
n) Such a survey would also make it easier for NABARD to delegate the
would monitor the social aspects which the banks might otherwise
more particular about holding monthly meetings (68 per cent) than the
bank linked groups (59 per cent). Older SHGs (formed 3 years or
earlier) observed monthly meetings more regularly than the new SHGs.
255
However, 24 per cent of new SHGs had irregular meetings and 50 per
cent of SHGs had a fixed date and timing for meetings. About 88 per
This study assumes that NABARD plans modestly to reduce the rate of
growth, in order to achieve but not to go far beyond the 2012 three million
SHG target. This will require the continued use of all the types of SHPI which
Suggestions:
effectiveness of SBLP in Karjat, if any MNC and major Indian company could
ii. Adoption of the SHGs and their products by the FMCG: The SHGs
in rural villages of Karjat facing big discouraging when their products were not
sold in the market as against big brands . If any FMCG company like HUL, P
& G can adopt their products or out source their packaging works or any other
related, thereby companies are reducing the expenditure and helping the
Government or any other agency can purchase their products and sell them
Banking:
post/pre SHG formation (one of the model MF SHG): Give full freedom to the
(appointed animator) at branch level to look after the SBLP activities and
with out putting them in fear and insult. The group pressure from the federation
SHG and be responsible for their deeds. Either continue the commission to
NGO till SHG exists (as in present situation the NGO would be availing the
commission for the purpose of forming the SHG up to three months only, due
to this after formation and bank linkage the NGOs not overseeing the
257
Technology:
financial inclusion :Provision for Mobile Banking, ATM on wheels and financial
Business Correspondent model would help them to avail the best banking
facilities.
rural poor who according to the reports, excluding themselves from regular
financial systems would get the best strength of the life to empower
themselves.
way can be introduced to the rural poor of RAIGAD and THANE districts.
Finally that is the duty of a teacher to serve the society and show the way
Yunus.
258
CHAPTER- 11
played an important but mainly indirect role through training and advocacy,
assumptions and the findings from our study, are presented below, as they
three months after disbursement of the first loan, because they will receive no
further incentives after this date. NABARD should consider extending this
schemes are deliberately designed as ‘add-ons’, and not to cover the full costs
of the SHG promotion process. If it is considered that there is a need for more
locally test an experimental scheme which covers the full costs of efficiently
In the medium term banks should and will emerge as the main
promoters of SHGs. In the longer term, the banks’ role will gradually be
reduced, as SHG members themselves start their own groups. Bankers will
have to respond to these initiatives, as they should for any new customer, by
providing advice and assistance. The SHG promotion role as such, however,
which are not. About half the bankers to whom we spoke believed that SHG
business was not profitable, because of the cost of promotion but also
260
because of the higher transaction costs involved. It is should be unnecessary
to repeat the now familiar arguments in favour of charging higher interest rates
ensure that all its own staff understand that access to credit is more important
than its cost for poor people, and should then vigorously recommend interest
rate increases, or associated charges, to any banks which claim that SHG
business in unprofitable.
This study suggests that they are of good quality, but that the drought in
some parts of the State is likely seriously to reduce recoveries from SHGs,
to maintain their savings and repayments. This only confirms the fact that
SHGs, like other systems of micro-finance, are not in themselves a solution for
poverty. The rural poor need effective economic safety nets, such as crop
maintain its present stance that SHGs are not a panacea for poverty, and
SHG promotion work and government programmes. The present for NGOs
promoting SGSY linked SHGs, for instance, is clearly inconsistent with the
that collaboration at the field level is possible, and this should be facilitated
whenever possible.
261
NABARD have already limited the damage potential of the SGSY and
cases where the availability subsidy had affected the formation and quality of
SHGs, but our study suggests that the fear of this is an important reason for
continue its efforts to minimise this problem, both at central and state
since most competent people need to earn a living. NABARD should therefore
examine the experience of Basix and any other agencies which work with
scheme which enables unemployed young men and women to earn a modest
an important role and this is likely to increase rapidly in the future. There are
investigate this phenomenon in order both to ensure that SHPIs do not claim
credit for SHGs in whose promotion they have played no part, and to assess
the quality of such groups and devise ways of correcting any weaknesses they
may have.
262
11.3. Capacity Building and Training
NABARD should improve and modify its extensive SHG related training
finance matters much more than its price. If they believe SHG business is
unprofitable, they should increase the interest rates charged to SHGs in order
to cover the full costs, including that of SHG promotion. Frequent trainings
bankers NGOs and volunteers to demonstrate that this benefits both SHG
members and the banks, and NABARD should ensure that this issue is
included in all SHG related training for its own staff, for government officials
book-keeping at the SHG level. All training programmes for anyone who is
exercises in this. SHG promotion is not difficult, and it does not need a bank
and lower level branch staff should be trained and encouraged to perform this
task.
treat SHG members with respect, as valued customers and not as suppliants
attitude, such as role play exercises and video clips, should be produced and
requested. Some bankers are thus naturally reluctant to finance SHGs outside
their service areas, even if the bank in whose service area the SHG falls is
unwilling to finance them, since this would make it difficult for such SHGs to
take advantage of the SGSY subsidies. NABARD should try to persuade the
authorities to allow any eligible SHGs to access the SGSY, regardless of the
se agreement’ before taking a loan. The stamp duty costs around fifty rupees,
and the ‘transaction costs’ associated with obtaining this form can be
mirrored within states and within districts. The SHG movement is expanding
become members of more than one group and competition becomes counter-
exacerbates this problem. In other areas, however, the coverage is very low.
NABARD should assess the market potential for SHGs in each district, using a
264
rough rule of thumb such as one SHG per 20 or 30 rural households, and
with low SHG market penetration. DDMs should do the same within their
districts.
We found little evidence that SHG members are unable to sell the extra
goods which their loans have enabled them to make, but the fear of this is
probably banks mangers’ main reason for reluctance to finance SHGs. The
rapidly growing numbers of SHGs, however, make it very likely that some
markets will become saturated in a few years and managers’ fears will be
their members to sell their products, but NABARD should investigate and
improving quality and market access for rural products, at the District, State
dissemination of a new approach to financial services for the poor, and the
banks are the wholesale and retail channels through which the ‘product,
265
financial services, must reach its final customers, the rural poor. Refinance is
becoming less attractive as interest rates fall, but the marketing task still has to
be carried out, regardless of the banks’ sources of funds. SHGs have been
more effective to reach the final customer. In the commercial world of fast
training, financial incentives and other forms of assistance. NABARD has thus
far chosen to use a combination of these strategies. It has a limited field force
addition to the development of SHGs, and it works through both the banks
themselves and other types of SHPIs, through the provision of training and
incentives.
the various schemes to encourage it, however, lie with the DDMs and
NABARD itself. The banks reap the fruits, in terms of SHGs which are good
customers, but the schemes to promote the merchandising task are designed,
supervised and in part at least paid for by NABARD itself, even when the task
266
This may seem a radical suggestion, which pre-supposes a far greater
degree of trust between NABARD and the banks than actually exists. We
12.2.2 Monitoring
enable NABARD to monitor and audit the quality and equity of SHGs
promoted with its assistance. This should focus on the ‘social’ aspects of
SHGs, since bankers should only be responsible for monitoring the financial
performance of their SHGs like that of any other customer. Any additional
monitoring must not involve extra work for SHG members or bank staff. SHGs
are bank customers, like any others, and they are not a particularly important
SHGs than of other customers. he ‘social’ aspects of SHGs are not the banks’
direct concern, but they must be regularly monitored in order to avoid ‘client
drift’ away from the poor. NABARD should urgently design and field test an
objective system for appraising SHGs and their membership, which can
financial and social health of SHGs. Such a system could be the basis of a
routine national sample survey of SHGs, which would continually monitor the
267
health of SHGs throughout India. Indicators such as the poverty levels of
members, rates of drop out, equity of borrowing among members, and the
“The findings of the study suggests that NABARD should invite bids
from commercial market research firms to design and manage a national SHG
sample survey programme, such as Hindustan Lever already operate for their
basis.”
for the SHG members after they formed the group. Out of the total sample, 45
per cent reported an increase in assets after joining a SHG. The mean annual
savings of households increased two - fold after joining SHGs. About 23 per
Andhrapradesh higher savings were reported for bank linked groups (36 per
cent) than for NGO supported groups (16 per cent). The proportion of savings
to total resources was relatively higher for bank linked groups (35.7 per cent)
than NGO supported groups (30.5 per cent). The average loan per member
increased significantly by 123 per cent during the post-SHG situation. Out of
total loans received by SHG members, 72 per cent were used for income
generating purposes and 28 per cent for consumption. The size of loan was
268
Suggestions: The following suggestions were drawn in the interest of SBLP
1. Banks:
channels for marketing the products of SHGs financed by the Bank. The
levels.
For better monitoring of SHGs, Bank would like to support the idea of
federating SHGs at village and higher levels. The federations would not
only take up responsibilities for closely monitoring the quality of SHGs but
also help reduce the burden of its branches in dealing with large number
of SHGs.
Financial Literacy:
a. Financial Education to interior rural and tribal areas (RBI & NABARD
Initiative)
iii. Marketing
269
iv. Sales
v. Investment
Linkage
270
The existing SBLP scheme in Karjat Taluka are supported by volunteer
organizations or non regular NGOs. Even where NGOs are active, the
only for savings, and internal credit with 15peoples. After speaking to
Bank and with proven credibility the SHG linked with Banks.
product sales.
Stage 4: The revolving funds raised from internal thrift, and revenue
through the internal funds and remaining funds from Banks. Through
even banks would put much more money on the SHG basket to
circulate and for further growth of the both group and bank.
activists and teachers reveal speak of the stresses and strains of daily life in
272
towards Bachatghats and its benefits.
The ideas and intentions are various and impetus, will definitely enhance the
anticipated growth of the rural poor, which not only theoretically but practically
also possible, if the plans and methodologies are supported with honest
especially the group members themselves for which these endeavor done.
Once other countries and states can get benefit from indigenous financial
supporting plan of” SHG Bank Linkage Program”, The people from Raigad
273
CHAPTER -12
ANNEXURES
The following cases are the outcome of the discussions, during pilot
study and data collection from Karjat and surrounding villages, some of
the cases from Kalyan (Rural) are drawn which are exemplary and
sustained SHGs.
1. “Earlier no one used to care for us, If I said I want to borrow ten
thousand rupees, people would say she is a widow, how will she return this
money. They would ask a hundred questions. When our Bachatghat was
active, there is no such hassle. We conduct a group meeting and withdraw the
money. If the bankers delay it even for one hour, we ask them why you are
taking so long. They withdraw the money at once.” (Respondent-1, Laxmi Bai
Savitri Phule Bachat Ghat, Neral, lost husband due to disease, mother of two
micro credit to rural women for the purpose of encouraging them to enter into
entrepreneurial activities. Credit can counter both the lack of access women
to formal banks and the very high rates demanded by local moneylenders.
daily life: expenses on food, clothing, health, even children education also.
274
Microcredit through Bachatghat Empowers:
raised, all are like savior to use who offers money and we used to accept for
used to take money from the money lender. The interest rate used to be high:
four to five rupees per hundred/per month. Here the interest rate is cheaper,
two rupees per hundred. We can return this money in monthly installments.
The money we took from the moneylender had to be returned in one go.”
come tomorrow or the day after, I have to consult other members of my family.
Now there is no such problem. We give all repayments in time. Even if we are
late for fifteen days the group accommodates us.” (Sunil Ghare, Husband of
4. “Once I had taken a loan of five thousand rupees from a bank for
setting up a fruit shop. Every time the Secretary would come, I had to offer him
his chai- pani. Eventually the loan outstanding against me increased to ten
thousand, then twenty thousand. Till today this loan is outstanding against
275
me. But I paid five hundred rupees to the Secretary and he had shown it as a
new loan. Every time he shows the earlier loan as having been paid and
4. “Nobody could get bank loan without a middleman ealrlier. The prime
reason is that the poor people from interior villages of Karjat were not aware
about their eligibility and where and whom to meet. After completing all the
formalities for the loan purpose from the bank, half the loan would be eaten
up because of the corruption. Today the bankers treat the women with respect
and give them loans. Now no one can even dare to ask for a cup of tea or
energy, though these are official commitments, initially it was very had to
encourage the poor women to form group and save in single account. There
are lot of social, political and group dynamics are involved. People are very
much contempt to think for doing hardwork apart from what they are doing.
276
ready to dependant on some one else as they are un-employed (Prajna, NGO
the tourists coming to visit Matheran, This small money raised from this
school. I had been to Union Bank and Pen Urban Cooperative bank for loan of
Rs. 15,000/- to set up at a small road side pan shop. The items to sell will get
it for credit, but install and shop and other things will require that much money.
But the banker asking me the permanent residence proof and house or land
on my name. I don’t have house on my name, Land also I sold to meet the
expenses for the father’s illness. I don’t what is Bacahtghat, if joing such a
7. “The people required flexible loans to develop themselves. There are lot
casual and dailwage labours. Even people from interior villages are been
used as mob for political campaigns by all the political leaders. For show-off
their strength the poor men and women are hired for Rs. 50-100 plus food per
day. Party flags are changing in their hands, even these poor people are
happy to get money by doing nothing. None of the political party leaders are
8. Political interference:
model purchased a 30seater mini bus to ply the residents from various places,
public transport is available after every 1hr. None of the political leaders were
involved in the loan and other processes. But when this group purchased the
bus local political party embossed their name as the pioneer of the scheme.
Poor women have to accept the demands as they are powerless. None of the
welfare officers from KDMC or myself were given due credit. This type of
activity kills the initiative to put more hardwork towards the scheme. (Mrs.
Umne, Welfare Officer, SYSY(KDMC Office) Kalyan). Apart from the group is
now independent and free from financial crisis. The bachatghat has sown
Previously at schools and main marker our products were used sold at good
quantitiy and business was good. For last two years our products are getting
sold, and the wholesalers and retailers are not ready to take our goods by
telling people are purchasing the branded goods and not ready to purchase
the locally manufactured eatables. When we enquired and check the quality
278
of the product our eatables no less than the branded one except excessive
chemicals, colours and preservatives. For out side their products look very
attractive. Wanted go for the attractive packing and other measures but the
10. “As we have to other activities also we can’t travel from Vikroli to Karjat
on regular basis. Some one has to be with them to monitor and mentor them.
Being women we can’t travel so much distances. If the students and teachers
can take the responsibilities to liaise up with them regularly. We can train the
development skills. Problems is that none of the colleges are ready to share
the social cause (Sunita, Program officer, Swayam, NGO, Vikhroli supported
by Godrej group)
11. “We already burdened with the targets of new accounts and business
Assets). Some time these things becoming threat to our career also. Where
we have time and manpower to deal with such petty business? Even
personally we are interested also, but we don’t have that much man power.
(Bank Managers from UBI, BOI from Neral, Karjat and Katemanivali
branches). If you want us to help the new groups to form and provide loan,
279
please try and encourage them to repay the existing loans as majority of the
groups are not accessible. All the groups have formed under SGSY and once
they avail the loan from us they are turning away their faces from us. Off-
course we are getting 50% of the loan amount reimbursed by the government
as it is the subsidy, but remaining 50% loan amount is getting converted into
bad debts and finally NPA from majority of the accounts. For last two years
280
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Sr. Name of Sub- Name of No. of No. of No. of
No Division Tahasils Villages Circles Sazzas
1. 1. Alibag 214 5 43
Alibag
2. Pen 171 4 30
3. Murud 74 3 14
6. How many SHGs you have formed & attached to your bank
8. What is the minimum and maximum duration the SHG are attached with
your branch
11. What is amount your are obtaining from NABARD or any other
agencies for the SBLP credit/micro credit
12. Apart from SBLP credit, are you offering any other micro credit
schemes
13. All the members of SHG are regularly saving in the SBLP/SHG group
account
16. After how many days/from the date of SHG attachment, the bank is
contributing to the group savings(if yes) at what rate?
292
17. What is the interest rate you paying back to NABARD/any other for the
funds obtained for the MC/SBLP accounts
18. What is the active interest rate your charging from the SBLP/MC
account holders
21. You have any difficulty in maintaining the SBLP/SHGs accounts (if yes)
what are they
a) Manpower c) operational cost
b) Any Other
22. How many SHGs/SBLP accounts have completed one or more loan
cycles & eligible for next term loan
23. How frequently you are visiting the areas of SHGs for
monitoring/assessment
25. Any SHGs are converted in to bad debts(if yes how many?)
293
GOVERNMENT OF ANDHRA PRADESH
ABSTRACT
Self Help Group Lending by Commercial Cooperative and Regional Rural Banks
Pavala Vaddi Scheme – Payment of Interest incentive twice in a year -
Comprehensive Guidelines – Revised -Orders –Issued.
=====================================================
PANCHAYAT RAJ AND RURAL DEVELOPMENT (RD.II)DEPARTMENT
Read:- G.O. Ms. No. 152, PR & RD (RD.III) Department, Dated 02.05.2005.
ORDER:
Government in the G.O. read above, issued orders for payment of interest
incentive to the Self Help Groups on the interest charged by the banks over and
above 3% per annum once in a year based on the performance of the loan
account obtaining as on March, 31st of the previous financial year.
2. Government have reviewed the policy from time to time and felt it
expedient to mitigate hardship and to give more respite to the Self Help Groups.
Accordingly, Government hereby decide to allow payment of interest incentive to
the Self Help Groups once in six months i.e. twice in a year based on the
performance of the loan account obtaining as on September, 30th and March, 31st
instead of once in a year.
3.1 The scheme shall be applicable to all loans extended to Self Help Groups
by banks on or after 01.07.2004.
3.2 Interest incentive in respect of active loans shall be released to the groups
once in six months i.e. twice in a year based on the performance of the
loan account obtaining as on September, 30th and March, 31st. The
SHGs which have completed six months of regular repayment of bank
loan shall become eligible for interest incentive.
3.3. The SHGs which have got bank loan in the month of July or January
and which have repaid the loan for at least one month prior to the cut-off
294
date, i.e. September 30th and March 31st shall also be eligible for getting
the interest incentive benefit.
3.4 The loan accounts that are classified as overdue in the books of the bank
at the time of half-yearly closing and that which are classified as Non-
performing Assets at year-end closing are ineligible.
3.5 However, if they resume on-time repayments and regularize the arrears,
they are eligible for the incentive in the next half-yearly period.
3.6 The DRDA shall collect from the bank branches the certified statement
of list of eligible groups which have repaid regularly. This should be
signed by the Bank Manager.
3.7 The DRDAs shall obtain from the bank branches the following lists
immediately after close of September, 30th and March, 31st.
3.7 a. List of active loan accounts as at close of September, 30th and March,
31st for which claim is being made indicating the actual interest
applied.
3.7.b. List of Groups that have closed / foreclosed their accounts during the
year indicating the actual interest applied.
3.8 . DRDA shall determine the eligible interest incentive and issue proceedings,
suo-motu, for release of incentive based on the certified statement of bank
branch. This should be completed with in 30 days of every half year i.e. by
October,31st and April,30th. The Pavala Vaddi amount shall reach the
member of SHG by November, 15th and May 15th.
3.9 The DRDAs shall obtain the details of SHG repayment for the purpose of
interest subsidy twice a year.
3.10. The Mandal Samakhya and their staff will approach the banks twice a year
and obtain the details of SHG repayment along with a certified bank
statement for all the eligible SHGs.
3.11 The Mandal Samakhya will forward the proposal to DRDA and DRDA will
calculate the Pavala Vaddi to be given to each SHG basing on the bank
statement.
3.12 The DRDA shall issue proceedings for the SHGs eligible for Pavala Vaddi,
indicating the exact amount of Pavala Vaddi incentive to be given to the
SHG. Accordingly, the DRDA shall prepare the cheques Village
295
Organization wise and give them to the Mandal Samakhya along with the
statement of particulars accruing to each SHG.
3.13 The Mandal Samakhya in turn shall distribute the cheques to the SHGs
through the Village Organizations.
3.14 The SHGs shall give the Pavala Vaddi to the Members directly.
3.15 The amount of incentive given to the members should be recorded in the
SHGs minutes book and individual pass book.
3.16 The Pavala Vaddi incentive should reach the members of the eligible
SHGs. It should not be retained as the corpus fund of the Self Help
Groups.
3.17 DRDA shall put in place appropriate MIS for SHG-Bank Linkage
Programme and update the same at quarterly intervals to monitor the
repayment performance of the scheme.
4. All the District Collectors and Chairmen of the DRDAs shall take action
accordingly.
5. This G.O. is available on the Internet and can be accessed at the address
http://www.rd.ap.gov.in.
K.RAJU
PRINCIPAL SECRETARY TO GOVERNMENT(RD)
To
The Chief Executive Officer, SERP, AP., Hyderabad.
The Commissioner, Rural Development, AP., Hyderabad
All District Collectors and Chairmen of DRDAs in the State
All Project Directors of DRDAs in the State
The Convener, State Level Bankers, Committee, Andhra Bank, Hyderabad
The Principal Secretary to Govt. Finance & Planning (Expr.PR&RD)
Department
All Heads of the Banks through the Commissioner, Rural Development, Hyderabad
Copy to:
The Principal Secretary to Chief Minister.
The PS to Chief Secretary to Government.
The PS to Minister (RD)
The PS to Principal Secretary (RD)
SF/SC.
296
//FORWARDED::BY:ORDER\\
SECTION OFFICER
*****************************************************************************************
Read the Following: G.O.Rt.No. 1778, Dated: 27.04.2005 , Fin(Expr. P.R &
RD) Dept.
ORDER:
297
SH(13)-Intrest subsidy on loans taken by DWCRA Groups
(intrest on loans at 3% per annum)
310- Grants in aid
312-Other grants in aid
5. The Commissioner, Rural Development, Hyderabad shall adjust the
above sanctioned amount to the P.D Account of the District Rural
Development Agencies after obtaining the authorization from the
Director of Treasuries and Accounts after obtaining the authorization
from the Director of Treasuries and Accounts, Hyderabad to meet the
expenditure of Intrest Subsidy (Intrest on Loans at 3% per annum) on
Loans taken by the DWCRA Groups.
6. The Commissioner, Rural Development, Hyderabad should Intimate the
allotment of funds to the Government and ensure the proper utilization
of the funds and the implementation of the above scheme.
7. The Director of Treasuries and Accounts, Hyderabad is requested to
adjustment the amount on the adjustment Bill preferred by
The Commissioner, Rural Development, Hyderabad based on the
Budget Release Oreder issued by the Finanace (Expr. PR & RD)
department in the reference read above duly following the quartely
regulation orders issued in the reference 1st of the Budget Release
Order in the reference read above.
8. This order does not require the concurence of the finance department in
view of the Budget Releases Order issued in the reference read above.
K.RAJU
PRINCIPAL SECRETARY TO GOVERNMENT(RD)
To
Copy to :-
299
SPSS- Findings
The above table shows that the eight extracted factors are Repay of Loan,
NGO supported, No of children, Age of SHG, Gender, Income of the person, No of
members, Age of the individual. These are the most important factors which really
contribute for SHGs entrepreneur activity and finally SHG to be active.
1 2 3 4 5 6 7 8
Incom Before -.021 -.114 .139 -.148 .732* -.089 -.164 .064
Age of SHG -.032 .986* -.046 -.037 -.010 .038 .030 -.039
Major reason of -.007 -.084 .679 .317 -.027 -.145 .043 .161
Are you on any -.083 -.105 -.123 .452 -.384 .420 -.115 -.320
No of son in family .607 .031 .137 .612 .069 -.162 -.120 .186
No of Daughter in .710 -.062 -.087 -.536 -.003 .108 .113 -.133
Whether Taking .043 .098 -.043 .222 .395 .049 .498 .111
Profession of the .008 .038 -.072 -.072 -.112 .494 -.001 -.060
Year since in SHG -.023 .983 -.060 -.040 -.006 .054 .036 -.040
Reason FOR .029 .025 .692 -.030 .074 -.241 .196 -.206
NGO Supported .075 -.066 -.088 .014 -.054 .060 .008 .857*
300
* The highest value in the column representing the variables as extracted
factors.
Income analysis: This part of the analysis the study is divided into two parts the firs
we checked the significant difference in the income levels of the income before and
income after the SHG participation. in the second part of the income analysis the test
is carried out to check the significance of the difference between the groups one
belonging to the active SHGs and other belonging to the inactive SHGs.
The factor analysis shows that there are 8 factors whose Eigen values are
greater than one. The eigen values greater than one implies that these factors
contributing maximum in terms of variance. The table below shows that the extracted
factor in all explains 70% variance. this means that if we consider these eight
301
8 1.027 5.705 70.189 1.027 5.705 70.189 1.149 6.381 70.189
302