CHAPTER VI ANALYSIS OF BORROWINGS

Transcription

1 6.1 Introduction CHAPTER VI ANALYSIS OF BORROWINGS When women move forward, the family moves, the village moves and the nation moves. Jawaharlal Nehru Access to finance, especially by the poor and vulnerable groups is a pre- requisite for employment, economic growth, poverty reduction and social cohesion. Further, access to finance will empower the vulnerable groups by giving them an opportunity to have a bank account, to save and invest, to insure their homes or to partake of credit, thereby facilitating them to break the chain of poverty. 1 Building an inclusive financial system, thus, has gained growing global recognition, bringing to the fore the need for the development strategies that touch all lives, instead of a select few. Women in India constitute about 50 per cent of the total population and comprise one third of the labour force. Involvement of women in economic activities generates supplemental income to support their families. It has been realized in many parts of the world that an effective way to tackle poverty and to enable communities to improve quality of life is through social mobilization of disadvantaged people, especially into Self Help Groups (SHGs). In this context, it is assumed that when women come together, they find strengthened and move towards further knowledge and awareness. This process leads to empowerment. The SHGs comprise poor people, who do not have access to formal financial institutions. They act as a forum for the members to provide support to each other. It also enables the members to learn to cooperate and work in a group environment. They provide savings mechanism, which suits the needs of the members. It 214

2 also provides a cost effective delivery mechanism for small credit to its members. In this way, SHGs contribute significantly to the improvement of poor women 2. The thrift and credit of women not only change the socio-economic, political, cultural, philosophical activities of the people but also determine and direct the production process of agriculture, industry and service sectors of the economy of a country. The thrift and credit of women also effect upon the production function, employment, income, consumption, savings and investment; and influence the use of four factors of production and technology. The rural credit delivery system, in fact, has been strengthened with the inclusion of SHGs as one of the providers of rural credit. The data collected from the selected sample households makes it clear that the sample SHG members have borrowed considerable amount of money from the banks through SHG membership. An attempt is made in this connection, to analyze the borrowing patterns of the sample SHG members in the study area. The purpose for which loan is utilized and its relationship with the borrowings is studied with the help of log linear multiple regression analysis in this chapter. The analysis of the opinion of the sample SHG members on certain aspects of SHGs like source of inspiration to join SHG, poverty reduction, usefulness of training, satisfaction with SHG programme etc., is also presented in this chapter Size of the Bank Loan (a) Bhimavaram Mandal Bank Credit is an important tool through which the resources can be channelized into desirable direction. Distribution of sample households of Bhimavaram Mandal by size of Bank loan is presented in table-6.1. It is clear from the table that, among the 215

3 TABLE-6.1 Distribution of Sample Households by Size of Bank Loan - Bhimavaram Mandal Size of Annual Household Income Below `25,000 Below `10,000 loan taken from the Bank Between `10,000 to `20,000 Between `20,000 to `30,000 Total Count 1(11.2) 4(44.4) 4(44.4) 9(100.0) Column % (3.3) (6.7) (6.7) (6.0) Between `25,001 to `50,000 Count 3(8.6) 18(51.4) 14(40.0) 35(100.0) Column % (10.0) (30.0) (23.3) (23.3) Between `50,001 to `75,000 Count 15(26.3) 17(29.8) 25(43.9) 57(100.0) Column % (50.0) (28.3) (41.7) (38.0) Between `75,001 to `1,00,000 Count 7(23.3) 12(40.0) 11(36.7) 30(100.0) Column % (23.4) (20.0) (18.3) (20.0) above `1,00,000 Total Count 4(21.1) 9(47.3) 6(31.6) 19(100.0) Column % (13.3) (15.0) (10.0) (12.7) Count 30(20.0) 60(40.0) 60(40.0) 150(100.0) Column % (100.0) (100.0) (100.0) (100.0) Source: Sample Household Data 216

4 lowest income with less than `25,000 annual income slab, 44.4 per cent of sample SHG members took Bank loan between `10,000 to `20,000, while another 44.4 per cent members have taken a loan amount ranging between `20,000 to `30,000 and the remaining 11.2 per cent members have taken loans of less than `10,000. Regarding the middle income slab, 43.9 per cent respondents have taken loans between `20,000 to `30,000, while 29.8 per cent received between `10,000 to `20,000 and 26.3 per cent received below `10,000 Bank loan. In case of the highest income slab with above ` annual incomes, a maximum of 47.3 per cent of the sample respondents received Bank credit between `10,000 to `20,000, while 31.6 per cent received between `20,000 to `30,000, followed by 21.1 per cent with less than `10,000 Bank loan. On the whole, around 40 per cent received Bank credit between `10,000 to `20,000, while another 40 per cent received between `20,000 to `30,000, followed by 20 per cent with a Bank loan of less than `10,000 per head in Bhimavaram Mandal. Among those with a Bank loan of less than `10,000, the maximum percentage, i.e. 50 per cent of the sample SHG members are found to be in the middle income group. Regarding those sample households with Bank credit between `10,000 to `20,000, the highest percentage (30 per cent) belong to lower middle income group. Likewise, among those whose borrowings from the Banks is between `20,000 to `30,000 the highest percentage, (i.e per cent) belong to middle income group. To conclude, the percentage of those who took bank loan between `10,000 to `20,000 is more among all the income slabs under consideration except the middle income slab. 217

5 (b) Chintalapudi Mandal Distribution of sample households of Chintalapudi Mandal by the size of the Bank loan is shown in table-6.2. It is clear from the table that those who received Bank credit between ` 20,000 to ` 30,000 are found to be in the maximum (i.e., 50 per cent) among the lowest income group and 49 per cent among the middle income group and also among the highest income group (62.3 per cent). The highest percentage of those who took Bank loan between `10,000 to `20,000, belong to the middle income class (40 per cent). Among the rest of the two cases of borrowers, the maximum are found to be in the highest income group (i.e., 40 per cent and 30 per cent respectively). To conclude, the percentage of those whose borrowings are between ` 20,000 to `30,000 are maximum (46.7 per cent) in Chintalapudi Mandal. While comparing the sample respondents of Bhimavaram and Chintalapudi Mandals on the basis of size of Bank loan, it is observed that 20 per cent of Bhimavaram sample respondents received bank loan of below `10,000. Contrast to this, there is no one who received such low amount in Chintalapudi Mandal. Maximum percentage of the sample respondents of the Bhimavaram Mandal received a Bank loan of `10,000 30,000, while a bank loan of `20,000 30,000 is availed by maximum per centage of the sample respondents of Chintalapudi mandal. Further, the average amount of loan taken per head is less among respondents of Bhimavaram Mandal, compared to Chintalapudi mandal. 218

6 TABLE-6.2 Distribution of Sample Households by Size of Bank Loan - Chintalapudi Mandal Size of Annual Household Income Between `10,000 to `20,000 loan taken from the Bank Between `20,000 to `30,000 Between `30,000 to `40,000 Total Below `25,000 Count 2(25.0) 4(50.0) 2(25.0) 8(100.0) Column % (6.7) (5.7) (4.0) (5.3) Between `25,001 to `50,000 Between `50,001 to `75,000 Between `75,001 to `1,00,000 above `1,00,000 Count 9(37.5) 6(25.0) 9(37.5) 24(100.0) Column % (30.0) (8.6) (18.0) (16.0) Count 12(23.5) 25(49.0) 14(27.5) 51(100.0) Column % (40.0) (35.7) (28.0) (34.0) Count 5(22.7) 7(31.8) 10(45.5) 22(100.0) Column % (16.6) (10.0) (20.0) (14.7) Count 2(4.4) 28(62.3) 15(33.3) 45(100.0) Column % (6.7) (40.0) (30.0) (30.0) Total Count 30(20.0) 70(46.7) 50(33.3) 150(100.0) Column % (100.0) (100.0) (100.0) (100.0) Source: Sample Household Data 219

7 6.1.2 Rate of Interest on Bank Loan (a) Bhimavaram Mandal Rate of interest on bank loan given to SHGs is of special interest as the Government of Andhra Pradesh has declared PAVALA VADDI scheme (i.e., 3 per cent rate of interest per annum) on such loans. Truly, if this scheme is totally implemented, it would give a great relief to many poor people. Table-6.3 represents the data relating to the distribution of sample SHG members of Bhimavaram mandal as per the rate of interest on the bank credit. It is evident from the table that the percentage of those who pay 12 per cent rate of interest on the bank credit is more among all the income groups taken into consideration. On the whole, around 73.3 per cent of the sample respondents in this mandal are paying 12 per cent rate of interest while only 26.7 per cent received the benefits of Pavala Vaddi scheme (3 per cent rate of interest). 220

8 TABLE-6.3 Distribution of Sample Households by Rate of Interest on Bank Loan - Bhimavaram Mandal Size of Annual Household Income Below `25,000 Between `25,001 to `50,000 Between `50,001 to `75,000 Between `75,001 to `1,00,000 above `1,00,000 Rate of Interest Total 3% 12% Count 4(44.4) 5(55.6) 9(100.0) Column % (10.0) (4.5) (6.0) Count 12(34.3) 23(65.7) 35(100.0) Column % (30.0) (20.9) (23.3) Count 16(28.1) 41(71.9) 57(100.0) Column % (40.0) (37.4) (38.0) Count 3(10.0) 27(90.0) 30(100.0) Column % (7.5) (24.5) (20.0) Count 5(26.3) 14(73.7) 19(100.0) Column % (12.5) (12.7) (12.7) Count 40(26.7) 110(73.3) 150(100.0) Total Column % (100.0) (100.0) (100.0) Source: Sample Household Data 221

9 (b) Chintalapudi Mandal Data on classification of sample respondents of Chintalapudi mandal according to the rate of interest on bank loan is shown in table-6.4. It is clear from the table that the beneficiaries of Pavala Vaddi scheme (i.e., 3 per cent annual rate of interest) are in maximum proportions among all income groups considered. As high as 66.7 per cent of the sample respondents in this mandal are covered by Pavala Vaddi scheme (3 per cent annual rate of interest), while the remaining 33.3 per cent pay 12 per cent rate of interest. The comparative analysis of the sample respondents of both the mandals as per the rate of interest on bank credit reveals that the percentage of those who pay 12 per cent rate of interest on bank loan is more in Bhimavaram Mandal (73.3 per cent) than that of Chintalapudi Mandal (33.3 per cent). The percentage of those who pay 3 per cent rate of interest on bank loan is 26.7 in Bhimavaram Mandal, while it is 66.7 per cent in Chintalapudi Mandal. It infers that there is a better coverage of Pavala Vaddi scheme (3 per cent annual rate of interest) in Chintalapudi Mandal which is basically a rural area. 222

10 TABLE-6.4 Distribution of Sample Households by Rate of Interest on Bank Loan - Chintalapudi Mandal Size of Annual Household Income Rate of Interest 3% 12% Total Below `25,000 Count 6(75.0) 2(25.0) 8(100.0) Column % (6.0) (4.0) (5.3) Between `25,001 to `50,000 Between `50,001 to `75,000 Between `75,001 to `1,00,000 above `1,00,000 Count 19(79.2) 5(20.8) 24(100.0) Column % (19.0) (10.0) (16.0) Count 34(66.7) 17(33.3) 51(100.0) Column % (34.0) (34.0) (34.0) Count 15(68.2) 7(31.8) 22(100.0) Column % (15.0) (14.0) (14.7) Count 26(57.8) 19(42.2) 45(100.0) Column % (26.0) (38.0) (30.0) Total Count 100(66.7) 50(33.3) 150(100.0) Column % (100.0) (100.0) (100.0) Source: Sample Household Data 223

11 6.1.3 Purpose of Loan Utilization (a) Bhimavaram Mandal Purpose for which the loan amount used reveals the important economic activity, the health conditions and style of living of the family and of the area to some extent. Beneficiaries of any credit programme may utilize the loan they have taken for various purposes. The sorting out of the sample respondents of Bhimavaram Mandal according to their annual household incomes and the purpose for which loan utilized is shown in table-6.5. Among those who utilized the loan proceeds for agriculture, majority (66.7 per cent) are found to be in upper middle income group. Regarding those who spent for allied activity, major proportion of 31.2 per cent belong to upper middle income slab, while there is equal representation of 25 per cent each from the middle income and the highest income slabs concerned. Regarding those who spent for business, the highest proportion of 39.1 per cent is found to be in the middle income slab, followed by 25.7 per cent belonging to lower middle income slab with household incomes between `25,001 to `50,000 per annum. In case of the sample households spending the loan amount for buying household articles, the lower middle income group constitutes the large proportion of 60 per cent, followed by 40 per cent belonging to middle income group. About 43 per cent of those who use the loan amount for children s education are in the middle income group, followed by 28.6 per cent who spend for the same cause belong to upper middle income group. In case of those who utilize the bank credit for family functions, around 50 per cent are in middle income group followed by 28.7 per cent belonging to the lowest income slab. On the whole, it is found that about 70 per cent of the respondents in this mandal utilize the loan amount for business, while 10.7 per cent 224

12 TABLE-6.5 Distribution of Sample Households by Purpose of Loan Utilization Bhimavaram Mandal Size of Annual Household Income Below `25,000 Between `25,001 to `50,000 Between `50,001 to `75,000 Between `75,001 to `1,00,000 For agriculture For allied Activity Purpose for which the loan utilized For For household business articles For Children's Education For family functions Total Count 0(0.0) 1(11.2) 4(44.4) 0(0.0) 0(0.0) 4(44.4) 9(100.0) Column % (0.0) (6.3) (3.8) (0.0) (0.0) (28.7) (6.0) Count 1(2.9) 2(5.7) 27(77.0) 3(8.6) 1(2.9) 1(2.9) 35(100.0) Column % (33.3) (12.5) (25.7) (60.0) (14.3) (7.1) (23.3) Count 0(0.0) 4(7.0) 41(71.9) 2(3.5) 3(5.3) 7(12.3) 57(100.0) Column % (0.0) (25.0) (39.1) (40.0) (43.0) (50.0) (38.0) Count 2(6.7) 5(16.7) 20(66.6) 0(0.0) 2(6.7) 1(3.3) 30(100.0) Column % (66.7) (31.2) (19.0) (0.0) (28.6) (7.1) (20.0) above `1,00,000 Total Source: Sample Household Data Count 0(0.0) 4(21.1) 13(68.3) 0(0.0) 1(5.3) 1(5.3) 19(100.0) Column % (0.0) (25.0) (12.4) (0.0) (14.3) (7.1) (12.7) Count 3(2.0) 16(10.7) 105(70.0) 5(3.3) 7(4.7) 14(9.3) 150(100.0) Column % (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) 225

13 spend for allied activity and 9.3 per cent for functions. It is noticed that the least percentage (i.e., 2 per cent) of the members are found to be spending for the sake of agriculture. To conclude, those who spend the loan for business purpose constitute maximum percentage among all of the income slabs. This fact supports that Bhimavaram Mandal sample respondents are basically engaged in business activity as it is an urban area. b) Chintalapudi Mandal Classification of sample respondents of Chintalapudi Mandal according to the purpose for which loan utilized is shown in table-6.6. It is evident from the table that among those who utilize the loan amount for cultivation, the majority of the members (44.4 per cent) are in the middle income slab. Among those who use the loan for allied activity, the maximum proportion of 36.2 per cent belong to middle income slab, followed by 33.7 per cent belonging to the income slab with more than ` annual income. About 39.2 per cent of those who spend the loan for business are in the highest income slab. Majority of those who spent for household articles (66.7 per cent) also belong to highest income group. All the 100 per cent of the sample households utilizing the loan for children s education fall in the upper middle income slab with `75,000 to ` annual income. Those who are spending for family functions are spread in equal proportions among the lowest income, middle income and the highest income groups. On the whole, the majority of sample respondents, (i.e per cent) are utilizing the loan for allied activity, followed by 24 per cent utilizing for cultivation. To conclude, those who spend for allied activity account for major proportions among all of the income slabs under consideration. Agriculture and allied activity together show that 226

14 TABLE-6.6 Distribution of Sample Households by Purpose of Loan Utilization - Chintalapudi Mandal Size of Annual Household Income For agriculture For allied Activity Purpose for which the loan utilized For house For hold business articles For Children's Education For family functions Total Below `25,000 Count 2(25.0) 4(50.0) 1(12.5) 0(0.0) 0(0.0) 1(12.5) 8(100.0) Column % (5.6) (4.8) (4.3) (0.0) (0.0) (33.3) (5.3) Between `25,001 to `50,000 Between `50,001 to `75,000 Between `75,001 to `1,00,000 above `1,00,000 Total Count 6(25.0) 10(41.8) 7(29.2) 1(4.2) 0(0.0) 0(0.0) 24(100.0) Column % (16.7) (12.0) (30.4) (33.3) (0.0) (0.0) (16.0) Count 16(31.4) 30(58.8) 4(7.8) 0(0.0) 0(0.0) 1(2.0) 51(100.0) Column % (44.4) (36.2) (17.4) (0.0) (0.0) (33.3) (34.0) Count 7(31.8) 11(50.0) 2(9.1) 0(0.0) 2(9.1) 0(0.0) 22(100.0) Column % (19.4) (13.3) (8.7) (0.0) (100.0) (0.0) (14.7) Count 5(11.1) 28(62.3) 9(20.0) 2(4.4) 0(0.0) 1(2.2) 45(100.0) Column % (13.9) (33.7) (39.2) (66.7) (0.0) (33.4) (30.0) Count 36(24.0) 83(55.4) 23(15.3) 3(2.0) 2(1.3) 3(2.0) 150(100.0) Column % (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) Source: Sample Household Data 227

15 79.4 per cent of the respondents are spending the loan proceeds for these activities. This establishes that the majority of the sample households of Chintalapudi Mandal are engaged in primary sector. The comparison between the sample households of the two mandals under study on the basis of purpose of loan utilization reveals that a major proportion in Bhimavaram Mandal have utilized the loan amounts for business (70 per cent), while only 15.3 per cent in Chintalapudi Mandal have utilized the loan for the same purpose. In case of those who have utilized the loan for cultivation and for allied activity constitute 2 per cent and 10.7 per cent respectively in Bhimavaram mandal, while the same account for 24 per cent and 55.4 per cent respectively in Chintalapudi mandal. It infers that most of the sample respondents of Bhimavaram Mandal are business oriented, while those of Chintalapudi Mandal are primary sector oriented Determinants of Borrowings The SHGs have become an important link in the Rural Credit Delivery System, thereby adding one more provider of rural credit to the existing formal and informal sources. Since the sample SHG members under study have borrowed bank credit as SHG members and used it for different purposes, an attempt is made to identify the relative impact of the purpose of loan utilization on borrowings with the help of Log Linear Multiple Regression Analysis. The various purposes for which bank credit is utilized by the SHG members are classified into three categories and are shown in table

16 Table-6.7 Purpose-wise Classification of Borrowings To Meet Production Expenditure 1.For agriculture (crop expenditure). 2.For allied activity (purchase of animals including poultry). 3.Purchase of irrigation equipment. To Meet Investment Expenditure 1. Purchase of house, assets, and household durables. 2. House repairs 3 Redemption of old debts 4 Expenditure on business and activities include in services and self-employment To Meet Consumption Expenditure 1. Regular day-to-day household expenditure 2. Expenditure on health & medical treatment of self and family members 3. Expenditure on festivals and family functions 5 Children s education. 229

17 In order to examine relative importance of the above determinants Log Linear Multiple Regression is employed. This requires (i) determining the dependent variable and the explanatory variables and (ii) interpretation of the nature of relationship between the dependent and independent variables. For the analysis of the bank credit received by the SHG members the dependant variable and the explanatory variables as indicated in Table 6.7 are: (i) Production expenditure, (ii) Investment Expenditure and (iii) Consumption Expenditure. The equation is Log Y= α +β 1 (log x 1 ) +β 2 (log x 2 ) + β 3 (log x 3 ) + µ i Where Y = Total amount of Bank Loan X 1 = Production Expenditure X 2 = Investment Expenditure X 3 = Consumption Expenditure and µ i is error term The nature of the relationship expected between the dependent variable and each of the independent variables is to be presented before conducting the regression analysis. Further, a review of the findings of earlier studies is considered. Recent studies show that the access for poor households to loans under SHG Bank Linkage has improved the asset position, shifted the borrowing patterns and increased consumption expenditure and had a positive impact on the income, decreased poverty and had a beneficial social impact

18 In a study conducted in Kerala by Mohindra and others, it is observed that the micro-credit is considered as an effective risk-mitigation strategy that prevents women from being excluded to health care or falling into debt trap or impoverishment due to the financial burden of health care. This striking result is congruent with the findings of a study conducted in Indonesia which concluded that households with better access to finance were better able to smooth their consumption against health shocks 4. According to a study, it is empirically revealed that borrowings for Income Generating Activities (IGAs) increased from 50 per cent to 70 per cent when compared to other purposes. However, from the data collected from six Mysore Resettlement and Development Agency (MYRADA) groups (Fernandez, 2000), it is observed that members utilized the loans mainly for consumption purposes.. Another major study of 72 SHGs undertaken in 1998 by Harper and others covering over 1000 SHG members in Orissa, Uttar Pradesh and Karnataka revealed that there is positive relationship between the borrowings and the members expenditure on diet, assets and education 5. In a study covering six States (Andhra Pradesh, Karnataka, Maharashtra, Orissa, Uttar Pradesh and Assam) it is revealed that the use of loans for productive purposes has increased by 20 per cent from 42.6 per cent in the pre-shg situation to 51.3 per cent in the post-shg situation. This positive trend is observed in all the States in the use of loans for production-oriented purposes. It appears that households use loans to satisfy consumption needs when they initially join a SHG. However, the member households reduced the usage of such loans after their SHGs are linked. They can access higher loan amounts after the Bank-Linkage and they use it for productive purposes. The study has also revealed that following Bank-Linkage, the loans used for Income Generating 231

19 Activities have gone up from 57 per cent to 62 per cent. The findings of the present study are in line with the results of the empirical studies conducted earlier, which reported an increase in the share of borrowed funds being used for productive purposes between pre- SHG and post-shg situation (NABARD and GTZ, 2005) 6. A study made in Uttarakhand, in the districts of Bhageshwar and Chamoli revealed that the percentage of sample SHG members using credit for social consumption needs increased from 6 per cent to 26 per cent between pre-shg and post-shg situation 7. Lucie Gardenne and Veena Vasudevan have conducted an in-depth study of 69 mature SHGs managed by the NGOs and MYRADA in the districts of Chitradurga (Karnataka) and Kancheepuram (Tamil Nadu) to find out more about loan usage among the members of SHGs. The study has revealed that there was no clear shift from consumption to production loans 8. In another study conducted by Project Director, Lucknow, it is observed that the consumption loans dominate over the micro-financing. Emergency expenses have accounted for second major purpose of loaning. The proportion of consumption loans has been recorded highest in Sitapur, Dehradun, Banda and Udham Singh Nagar while that of emergency needs are higher in almost all the districts. The constructive purpose of micro-financing has been reported higher in Allahabad, Alighar, Sitapur and Dehradun 9. In another study conducted in the States of Himachal Pradesh, Rajasthan, Madhya Pradesh and Gujarat dealing with 200 SHGs, it is observed that lack of appropriate training facilities adversely affect women s entrepreneurial capacity. There is paucity of funds for undertaking credit plus activities such as training in skills and marketing etc., 232

20 as either the formal banks or funding agencies do not often provide funds for these activities. The funding agencies do not support capacity building. As a result, the loan obtained through SHG can meet mostly either the household consumption needs or shortterm production activities like financing crop production. The main purposes of borrowing as per empirical evidence are, consumption (26 per cent) followed by farm activities (14.59 per cent), medical exigencies (11.32 per cent), house repairs (10.74 per cent) and IGAs (9.92 pcer cent). Finally, consumption, acquiring assets other than land, marriage, house repairs & construction and education are the main purposes of taking loans 10. An analysis of the purposes of loans given to SHG members in MYRADA s projects shows that 42 per cent of the total number of loans are utilized for agri-related activities (including purchases of inputs, land development, repayment of high-cost loans taken from money-lenders, redemption of mortgaged assets) and 20 per cent for nonfarm activities such as trading, cottage industries and small business. The remaining loans are utilized for essential needs like food, education, housing, health and sanitation 11. The above empirical studies establish the fact that there is a positive relationship between the borrowings of SHG members and their expenditures on production, investment and consumption purposes. The present study tries to examine whether these findings hold good for the sample households considered in the study. On the basis of the above studies and on the basis of apriori reasoning, the nature of relationship expected between the dependent variable and the independent variables is indicated in Table

21 TABLE-6.8 Expected Relationship between Dependent and Independent Variables S.No. Name of the variable Symbol Total amount of Bank loan in ` Y Expected relationship 1 As on ( Dependent variable) Production Expenditure in ` X 1 Positive 2 As on ( Explanatory Variable) Investment Expenditure in ` X 2 Positive 3 As on (Explanatory Variable) Consumption Expenditure in ` X 3 Positive 4 As on (Explanatory Variable) 234

22 In the present study, three equations are estimated, i.e., one for the total sample households in the study area and one each for the sample households in Bhimavaram Mandal and Chintalapudi Mandal. Table-6.9 represents the results of Log Linear Multiple Regression Analysis related to total Bank credit of the total sample SHG members in the entire study area. It can be seen that the explanatory variables considered together explain 73.9 per cent of variation in the borrowings. The three independent variables considered for the analysis, i.e., Production Expenditure(X 1 ), investment expenditure(x 2 ) and consumption expenditure(x 3 ) positively influence the borrowings. The coefficients of the three variables considered are positive and statistically significant. The coefficient of the variable, production expenditure(x 1 ) is significant at 1 per cent level with an expected positive sign. The size of the co-efficient of this variable indicates that a one per cent increase in production expenditure leads to 0.39 per cent increase in borrowings. 235

23 TABLE-6.9 Influence of the Purposes of Loan Utilization on Borrowings of Total Sample Households Independent Variable Co-efficient Standard Error t-value Constant X * X * X * Source: Sample Household data * Significant at 1 per cent level Ṝ 2 =

24 The coefficient of the variable, investment expenditure(x 2 ) is significant at 1 per cent level with expected positive sign. The size of the co-efficient of this variable indicates that a one per cent increase in investment expenditure leads to per cent increase in borrowings. The coefficient of the variable, consumption expenditure(x 3 ) is also significant at one per cent level with the expected positive sign. The size of the coefficient of this variable indicates that a one per cent increase in consumption expenditure leads to per cent increase in borrowings. Thus, production expenditure appears to be the major determining factors of borrowings followed by investment expenditure in the entire study area Bhimavaram Mandal results The results of log linear multiple regression analysis related to borrowings of the sample SHG members of Bhimavaram Mandal are given in table It is evident from table-6.10, that the explanatory variables together explain 41.8 per cent variation in the borrowings. The coefficient of the variable, production expenditure (X 1 ) is significant at one per cent level with the expected positive sign. The size of the coefficient of this variable indicates that a one per cent increase in the production expenditure leads to per cent increase in borrowings. The coefficient of the second variable, investment expenditure (X 2 ) is also significant at one per cent level with the expected positive sign. The size of the coefficient of this variable indicates that a one per cent increase in investment expenditure leads to per cent increase in borrowings. The coefficient of the third variable, consumption expenditure(x 3 ) is significant at one per cent level with the expected positive sign. The size of the coefficient of this variable indicates that a one 237

25 TABLE Influence of the Purposes of Loan Utilization on Borrowings of the Sample Households - Bhimavaram Mandal. Independent Variable Co-efficient Standard Error t-value Constant X * X * X * Source: Sample Household data * Significant at 1 per cent level Ṝ 2 =

26 per cent increase in the consumption expenditure leads to per cent increase in borrowings. Further it appears that investment expenditure is relatively more important than the other two independent variables in Bhimavaram Mandal. The least influential factor in this mandal appears to be the consumption expenditure Chintalapudi Mandal results The results of log linear multiple regression analysis related to borrowings of the sample households of Chintalapudi Mandal are given in table From the table, it can be seen that the explanatory variables considered, together explain 33.2 per cent variation in the borrowings. The coefficient of the variable, production expenditure(x 1 ) is significant at one per cent level with the expected positive sign. The size of the co-efficient of this variable indicates that a one per cent increase in production expenditure leads to per cent increase in borrowings. The coefficient of the variable, investment expenditure(x 2 ) is significant at one per cent level with the expected positive sign. The size of the coefficient of this variable indicates that a one per cent increase in investment expenditure leads to per cent increase in borrowings. The coefficient of the variable, consumption expenditure(x 3 ) is significant at one per cent level with expected positive sign. The size of co-efficient of this variable indicates that a one per cent increase in the consumption expenditure leads to per cent increase in borrowings. It is clear that production expenditure appears to be relatively more important factor and investment expenditure appears to be the least influencing factor, in the case of Chintalapudi mandal. 239

27 TABLE Influence of the Purposes of Loan Utilization on Borrowings of Sample Households - Chintalapudi Mandal Independent Variable Co-efficient Standard Error t-value Constant X * X * X * Source: Sample Household data * Significant at 1 per cent level. Ṝ 2 =

28 The above regression analysis reveals that major proportion of the sample households utilized the bank loan for business purpose in Bhimavaram Mandal, while in Chintalapudi Mandal the maximum percentage of respondents utilized the loan for cultivation and allied activities. Production expenditure is found to be the most influencing factor on borrowings in the entire study area. However, the investment expenditure is relatively more influential factor in Bhimavaram Mandal compared to Chintalapudi Mandal where the production expenditure is found to be dominating. Economic activity of the sample households in both the mandals is in accordance with the results of the regression analysis. The results of the regression analysis show a difference in the values of Ṝ 2 between the urban and rural mandals. As the composition of borrowers in the rural mandal is different, the rural mandal has shown less value pertaining to Ṝ 2. Lack of awareness, illiteracy, conservatism, social stigma etc. may be the reasons to this tendency. To sum up, the determining factors of borrowings in the two mandals differ in their relative importance.they are, if arranged rank-wise, Investment Expenditure, Production Expenditure and Consumption Expenditure in Bhimavaram mandal, while in case of Chintalapudi mandal they are Production Expenditure, Consumption Expenditure and Investment Expenditure. Hence, it can be concluded that the results of the regression analysis are in accordance with the proposed hypothesis i.e. the determinants of borrowings of the SHG women differ between the rural and urban mandals of the district. 241

29 6.2 Analysis of Opinion of Sample Respondents Anant et.al (2006) 12 have reported that the self help groups are small voluntary association of people from the same socio-economic background with a purpose of solving their common problems through self help and mutual help. The strength and success of SHGs depend on the attitude of the SHG members. Hence, here is an effort to study the opinions of the sample SHG households regarding the functioning of the SHGs from the view points of SHG members so as to get insights into their problems and give policy prescriptions to improve the SHG movement on practical base Opinion on whether there is any inspiration to join SHGs and source of inspiration From the opinion collected from the sample SHG members it is clear that more than 90 per cent of them have been inspired by some source to join SHGs (table and figure 6.1). It is only 9.3 per cent in Bhimavaram Mandal and 5.3 per cent in Chintalapudi Mandal said to have been self-motivated to join SHGs. 242

30 % of Respondents TABLE Opinion on Whether There is Any Inspiration to Join SHGs Issue Is there any % of respondents in Bhimavaram Mandal % of respondents in Chintalapudi Mandal Total inspiration to join SHGs a) Selfmotivated (NO) b) Motivated by other sources (YES) Total Source: Sample Household data Figure Bhimavaram Mandal Chintalapudi Mandal 0 YES NO Any Inspiration YES: Motivated by other sources NO: Self Motivated 243

31 Data related to percentage of sample respondents regarding various sources of inspiration to join SHG is presented in table 6.13 and figure It is evident from the table that majority of sample households have been inspired by DRDA (47.4 per cent), followed by other SHG members (22 per cent) and then friends and relatives (19.3 per cent) in case of Bhimavaram mandal. In the case of Chintalapudi mandal respondents, it is interesting to note that the major source of inspiration is friends and relatives (43.4 per cent), followed by DRDA (36 per cent) and other SHG members (15.3 per cent), to join the SHGs. To conclude, while the DRDA is the strongest source of inspiration to join the SHGs in Bhimavaram mandal, it is the category of friends and relatives, who inspired most of the members in the case Chintalapudi mandal to join the SHGs. Finally it infers that the functioning of SHGs is relatively more influencing in Bhimavaram mandal than in Chintalapudi mandal as a source of inspiration. 244

32 % of Respondents TABLE-6.13 Source of Inspiration to Join SHGs Source of Inspiration % of respondents in Bhimavaram Mandal % of respondents in Chintalapudi Mandal Total Other SHG members DRDA Friends and relatives Facilities offered by Govt None( Self motivated) Total Source: Sample Household data Figure Bhimavaram Mandal Chintalapudi Mandal 0 Other SHG members DRDA Friends& Relatives Facilities offered by Govt. None Source of Inspiration 245

33 6.2.2 Opinion on Role of SHG in Poverty Reduction Poverty alleviation and livelihood generating microfinance schemes put more emphasis on women SHGs to make their contribution visible in the family and to empower them in economic as well as in social aspects of life. The following table-6.14 and figure-6.3 represent data on the opinion of sample households regarding the role of SHG in poverty reduction. According to the table, it is clear that around 51.3 per cent of respondents in Bhimavaram Mandal expressed the marginal role of SHG in poverty reduction, while 48.7 per cent highlighted that SHG has played a substantial role in poverty reduction in their lives. Contrast to this, among Chintalapudi respondents, as high as 67.3 per cent acknowledged the substantial role of SHG in poverty reduction, followed by 32 per cent agreeing for marginal role of SHG, while a meagre 0.7 per cent expressed that SHG has not at all helped in poverty reduction in their lives. To conclude, it is the marginal role of SHG in poverty reduction acknowledged by majority in Bhimavaram mandal, while the substantial role of SHG in poverty reduction is acknowledged by majority in Chintalapudi mandal. On the whole, it may be inferred that 100 per cent sample households in Bhimavaram mandal and 99.7 per cent of sample households in Chintalapudi mandal have acknowledged the SHG s role in poverty reduction. 246

34 % of Respondents TABLE-6.14 Role of SHGs in Poverty Reduction Nature of role of SHG in poverty reduction % of respondents in Bhimavaram Mandal % of respondents in Chintalapudi Mandal Total Substantial Marginal NIL Total Source: Sample Household Data Substantial Marginal Figure-6.3 Nil Role of SHG in Poverty Reduction Bhimavaram Mandal Chintalapudi Mandal 247

35 6.2.3 Satisfaction with SHG Programme and Microfinance provided under SHG Data related to opinion of sample respondents regarding satisfaction with SHG programme and microfinance provided under SHGs is shown in Table 6.15 and Figure It reveals that all the 100 per cent of sample SHG members in both the mandals are satisfied with SHG programme and the microfinance provided under SHGs. 248

36 % of Respondents TABLE-6.15 Satisfaction with SHG & Micro finance under SHG S.No. Issue 01 Satisfaction with SHG programme 02 Satisfaction with microfinance provided under SHGs % of Respondents in Bhimavaram Mandal (who said yes ) % of Respondents in Chintalapudi Mandal (who said yes ) Total Source: Sample Household Data Figure Satisfaction with SHG Programme Satisfaction with Micro-finance Bhimavaram Mandal Chintalapudi Mandal ISSUE 249

37 6.2.4 Training Programme Poverty is a result of many factors such as illiteracy, ill-health, lack of assets, lack of credit, lack of influence and lack of skills etc. Mere provision of credit cannot speedily assure the development of an individual. Hence, there is a need to combine other service programmes to the target groups. Empowerment in competence, in the management context, refers to developing skills, knowledge and attitudes required to carry out tasks successfully and efficiently. By developing capabilities of people, their job competence can be improved 13. Specific training programmes could fulfill this task. Data related to the provision of training programmes to the sample SHG members in the study area and the benefit of training in improving their skills are displayed in Tables 6.16 and 6.17 and in Figures 6.5 and 6.6. According to Table 6.16 and Figure-6.5, it is evident that while only 16.7 per cent of the sample respondents in Bhimavaram mandal have undergone training by the government or any other agency, it is 56 per cent of the respondents in Chintalapudi mandal who received such training. It is revealed, while interacting with the sample respondents, that the training programmes were organized by DRDA. To conclude, the coverage of such training facilities is in brisk operation in Chintalapudi mandal. 250

38 TABLE 6.16 Receipt of Training S.No. Issue 01 Have you undergone any % of Respondents in Bhimavaram Mandal % of Respondents in Chintalapudi Mandal Total training by the Govt. or any other agencies? a) Yes b) No Total Source: Sample Household Data Figure-6.5 Bhimavaram Mandal Chintalapudi Mandal Yes 16.7% No 83.3% Yes 56% No 44% Total Study Area Yes 36.3% No 63.7% 251

39 6.2.5 Improvement of Skills through Training Further, all the sample respondents in Bhimavaram Mandal who received some training programme (16.7 per cent) have expressed that it was beneficial to upgrade their skills, while 83.3 per cent stay outside of this issue as they did not have the benefit of receiving any such training (Table-6.17 and Figure-6.6). Regarding the sample SHG members of Chintalapudi mandal, around 44 per cent did not receive training, while 50 per cent, who received the training, said about positive benefits of training and only a meagre 6 per cent, who received training, spoke of ineffectiveness of the programme. Thus, the training programme is said to be more effective with positive benefit to a maximum number of members who received the training in both the mandals. From this it may be inferred that there is need for extension of such training programmes in order to improve the skills of the SHG members in the process of achieving Women Empowerment. 252

40 TABLE 6.17 Benefits of Training S.No. Issue % of Respondents in Bhimavaram Mandal % of Respondents in Chintalapudi Mandal Total 01 Whether the training is beneficial to improve your skills? a) Yes b) No c) Not Applicable as no training is received TOTAL Source: Sample Household Data Figure-6.6 Bhimavaram Mandal Chintalapudi Mandal Yes 16.7% Yes 50.0% NA 83.3% Total Study Area No 6.0% NA 44.0% Yes 33.3% No 3.0% NA 63.7% 253

41 6.2.6 Problems experienced by SHG Members The data presented in Tale-6.18 and Figure-6.7 displays that about 96.7 per cent of sample SHG members of Bhimavaram mandal and around 87.3 per cent of the same in Chintalapudi mandal have experienced no problems as SHG members. But around 2 per cent of respondents in Bhimavaram mandal have expressed marketing problems faced by them, while about 1.3 per cent has mentioned the financial insufficiency as a big problem. Regarding Chintalapudi mandal, there is no one found to be experiencing any marketing problems, while 12.7 per cent is found to be facing financial insufficiencies. Comparatively the respondents who have been facing financial problems are more in Chintalapudi mandal (12.7 per cent), while those of Bhimavaram mandal have been facing more or less marketing problems (2 per cent). From the above analysis it may be concluded that further penetration of banking facilities particularly into the rural areas like Chintalapudi to achieve financial inclusiveness and solving the marketing problems of urban-oriented commercial centres like Bhimavaram are needed for the upliftment of SHG members. 254

42 % of Respondents Problems Experienced by SHG Members TABLE-6.18 S.No. Issue % of Respondents in Bhimavaram Mandal % of Respondents in Chintalapudi Mandal Total 01 Marketing Problems Financial insufficiencies 03 NIL (No Problems) TOTAL Source: Sample Household Data Figure Marketing Financial Insufficiency ISSUE No Problems Bhimavaram Mandal Chintalapudi Mandal Total 255

43 6.2.7 Suggestion of Sample Respondents Opinion of the sample households for improvisation has been collected and the data is depicted in Table-6.19 and Figure-6.8. It establishes that majority of the sample SHG households of Bhimavaram mandal (39.3 per cent) and Chintalapudi mandal (52 per cent) have suggested for increasing of the amount of bank loan. It is to be noted that while as high as 34.6 per cent in Bhimavaram mandal suggested for the speedy implementation of 3 per cent rate of interest per annum (i.e. Pavala Vaddi Scheme ), only 5.3 per cent suggested for the same in Chintalapudi mandal. This is because of the reason that the Pavala Vaddi Scheme (3 per cent rate of interest per annum scheme) has not covered about 73.3 per cent of sample respondents in Bhimavaram mandal (Table- 6.3). Among other note worthy suggestions, the respondents in Chintalapudi mandal (9.3 per cent) suggested the need of training programmes for self-employment. Thus, the most emerging conclusion is that a majority in both the mandals have suggested the need for enhancement of bank loan. 256

44 S.No Suggestions for Improvement of SHG Programme TABLE-6.19 Suggestions of SHG Members % of Respondents in Bhimavaram Mandal % of Respondents in Chintalapudi Mandal Total 01 More amount of Bank Loan Speedy implementation of 3 per cent annual rate of interest (Pavala Vaddi Scheme) 03 More marketing assistance More convenient bank timings Prompt repayment of loan by SHG Members 06 Need training programs for selfemployment Nil Total Source: Sample Household Data Figure-6.8 More Bank Loan% of Respondents Speedy Pavala Vaddi Scheme More Marketing Convenient Bank Timings Prompt Repayment of Loan 257 Training Programs Nil Suggestions for Improvement of SHG Programme Bhimavaram Mandal Chintalapudi Mandal Total

45 6.2.8 Conclusion The credit needs of the rural poor are determined in a complex socio-economic milieu, where it is difficult to adopt project lending approach as followed by banks and where the dividing line between credit for consumption and productive purposes is blurred. Under the circumstances, a non-formal agency of credit supply to the poor, in the form of Self-Help Group (SHG) of the poor has emerged as a promising partner of the formal agencies. Later on, SHG-Bank Linkage has been implemented resulting in specific advantages to both the systems. For the groups, the advantages are accrued in the form of access to a larger quantum of resources, access to better technology and skill upgradation. Another very important aspect is the timely availability of credit for meeting emergent needs which include medical and social requirements. An attempt has been made in this chapter to study the quantum of bank loan, rate of interest on loan, purposes of loan utilization, relative influence of purposes of loan utilization on borrowings and also the opinions of sample SHG members on specific SHG-related issues. The main findings are presented below. The maximum amount of loan per head given to the respondents in Bhimavaram mandal is between ` 20,000 - ` 30,000 while in Chintalapudi Mandal it is between `30,000 to `40,000. The extent of coverage of Pavala Vaddi Scheme is higher in Chintalapudi Mandal compared to Bhimavaram Mandal. Major proportion of the sample households utilized the loan for business purpose in Bhimavaram Mandal, while in Chintalapudi Mandal the maximum percentage of respondents utilized the loan for cultivation and allied activities. Production expenditure is found to be the most influencing factor on borrowings in the entire study area. However, the investment 258

46 expenditure is relatively more influenciel factor in Bhimavaram Mandal when compared to Chintalapudi Mandal where the production expenditure is found to be dominating. It may be concluded that the economic activities of the sample households in both the mandals are in accordance with the results of regression analysis. It is observed that around 45 per cent of the sample SHG members in Bhimavaram mandal and around 58 per cent of the same in Chintalapudi mandal were found to be having less than ` 1000 incremental income per month during the post-shg period. According to the sample respondents of Bhimavaram mandal it is due to taking up of economic activities in the non-farm sector after joining the SHGs, the income is increased. Those of Chintalapudi mandal opined that it is the economic activity in the farm sector being the reason for increase in income in the post-shg period. It is found that around 62 per cent and 63 per cent of the respondents in Bhimavaram and Chintalapudi Mandals respectively are having incremental savings of below `100 per month during the post-shg period. It is also found that about 68 per cent of the sample SHG members in the urban mandal and around 92 per cent of the same in the rural mandal are paying less than ` 100 for the savings fund per month. The sample households of Bhimavaram Mandal have acknowledged that the reason for joining the SHGs was mainly to improve social and economic status in the society. However, the SHG members of Chintalapudi Mandal have opined that getting loan at low rate of interest was the prime reason for joining the SHGs. It is observed that most of the respondents in both the mandals have joined the SHGs by the inspiration of DRDA, friends and relatives. Almost all the respondents in both the mandals have acknowledged the positive role of SHGs in poverty reduction. The proportion of respondents received 259