Microfinance in Haryana: Evaluation of Self Help Group-Bank Linkage Programme of NABARD in Haryana

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1 Microfinance in Haryana: Evaluation of Self Help Group-Bank Linkage Programme of NABARD in Haryana Sachin 1 and Sameesh Khunger 2 1,2 (Assistant Professor, Department of Business Administration, Chaudhary Devi Lal University, Sirsa, Haryana, India) Abstract: The present study attempts to examine the growth in savings of SHGs with Commercial banks, Cooperative and Regional Rural loans disbursed by these banks to SHGs and the growth in loans outstanding to SHGs of these banks in micro finance practices in Haryana using the data collected through the reports of National Bank for Agriculture and Rural Development (NABARD). The study shows that, in case of savings, number of SHGs having savings with Cooperative increased by percent followed by percent and percent in Regional Rural Bank and Commercial respectively, whereas the amount of savings of SHGs Increased by percent in Cooperative followed by percent and percent in Commercial and Regional Rural during the period under study. In case of loan disbursement, number of SHGs availed loan from Commercial increased by percent in Commercial and decreased by percent and percent in Cooperative and Regional Rural, whereas the amount of loans disbursed to SHGs increased by percent followed by 9.80 percent in Regional Rural and decreased by percent in Cooperative during the period under study. In case of Loans outstanding, the number of SHGs having loan outstanding with Cooperative increased by percent in Commercial banks followed by percent in Commercial and decreased by percent in Regional Rural whereas amount of Loans outstanding to SHGs increased by percent in Cooperative followed by 9.63 percent in Commercial and decreased by percent in Regional Rural during the period under study. Keywords: Micro Finance, SHG-Bank Linkage, NABARD, Commercial, Cooperative, Regional Rural Bank, Self Help Groups I. INTRODUCTION Micro finance in India is still in its nascent. Micro finance yet remains a powerful tool for development. It may be a panacea, but it has brought a sea of change in the lives of many in the poor and overpopulated country India. By reaching the un-reached rural poor in the rural areas, micro finance innovations are yielding results and giving hope to the millions of poor through providing credit. Today micro finance programs and institutions have become increasingly important components of strategies to reduce poverty or promote micro and small enterprise development. SHGs Linkage with banks helps in reducing the incidence of poverty through increase in income enabled the poor to build assets and enables households that have access to it to spend more on education than non-client households. The Task Force on Supportive Policy and Regulatory Framework for micro finance has defined it as Provision of thrift, credit and other financial services and products for very small amounts to the poor in rural, semi-urban or urban areas for enables them to raise their income levels and improve living standards. Micro finance is a participative model that can address the needs of the poor especially women members. It envisages the empowerment of the members by promoting their saving habits and extending bank loans to them. Micro finance is recognized and accepted as one of the new development paradigms for alleviating poverty through social and economic empowerment of the poor with special emphasis on empowering women. The core problem of rural finance is high transaction costs to the banks in financing a large number of small borrowers who require credit frequently and in small quantities. The same holds true of costs involved in providing saving facilities to small, scattered savers in rural areas. The rural savers and borrowers also face high transaction costs while dealing with banks due to distances, small value of financial transactions, etc. Besides the high transaction costs, the perception of risks in financing small borrowers who are unable to offer physical collateral, articulate their case or submit proper loan proposals, the urban orientation and the lack of flexibility in their operations are the other constraints which restrict the outreach of the formal banking system for the poor. Involvement of SHGs with banks could help in overcoming the problem of high transaction costs in providing credit to the poor, by passing on some banking responsibilities regarding loan appraisal, follow-up and recovery, etc. to the poor themselves. Self-Help Groups (SHGs) or Thrift and Credit Groups are mostly informal groups whose members pool savings and relend within the group on rotational or needs basis. These groups have a common perception of need and impulse towards Page 130

2 collective action. Many of these groups got formed around specific production activity, promoted savings among members and use the pooled resources to meet emergent needs of members, including consumption needs. Micro finance helps in reducing the incidence of poverty through increase in income, enabled the poor to build assets and enables households that have access to it to spend more on education than non-client households. The Indian micro finance sector has two models for micro finance delivery viz. the SHGs-Bank Linkage Model and the Micro Finance Institution Bank-Linkage Model. In SHGs Bank-Linkage Model, SHGs are directly financed by the banks and MFI Bank-Linkage Model covers financing the Micro Finance Institutions (MFI) by banking agencies for on lending SHGs and other small borrowers covered under micro finance sector. II. REVIEW OF LITERATURE Various articles appeared in journals/magazines on different aspects of micro finance but they are restrictive in nature and do not give a comprehensive picture. A brief review of some of the relevant literature is as under: Krishna (2004) found that very large numbers of households have escaped from poverty as a result of microfinance services; but a very large number of households have also fallen in to poverty during the same time. According to his findings, diversification of income sources is the most important reason for households escape from poverty whereas poor health, high health expenses, high interest private debt and large social and customary expenses constitute major reasons for households declining in to poverty; This study will also see how the poor are escaping out of poverty as a result of microfinance. Reddy (2005) observed that the state of SHG identifies key areas of weakness which undermine the sustainability of SHG movement. He identifies the major areas such as financial management, governance and human resource ranges from weak to average quality for a majority of SHGs. Rangarajan (2006) outlined the evolution of SHGs through micro finance evolve through in three stages. First, to meet survival requirement need, the second stage is to meet the subsistence level through investing in tradition activities and in the final stage by setting up of enterprises for sustainable income generation. Ghate (2007) highlighted the need for creating awareness to charge cost-recovering interest rates, the importance for the NGO sector of building long-term and healthy relationships with the government and other stakeholders, importance of maintaining diversity in delivery channels of micro-credit. Srinivasan (2008) stated that microfinance has to develop a greater sensitivity to the needs of the poor clients. The small loans should give way to livelihood support loans of a larger size and longer duration. Only when livelihoods and incomes are targeted, micro finance sector can claim that its mission is achieved. Singh (2009) has given a comprehensive overview of all aspects of micro finance in India i.e. its essence, different institutions involved in its promotion, different modes of delivery, its weakness and the challenges that lay ahead, the programme of micro finance that has made rapid strides in India. Sahu (2010) said that micro finance has evolved as an accepted institutional framework to provide financial services to the poor in the developing countries and Self Help Groups (SHGs) are considered as the vehicle for advancement of micro-credit to them. The "credit-plus approach of micro finance through SHG not only provides small, timely and easy loan to the poor without any collateral but also inculcates saving behaviour amongst them. The micro finance movement through SHGs has also been considered as an effective development tool to enabling SHGs members to graduate to microenterprises and in turn, to tackle poverty. Moses (2011) stated that micro finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro finance scene is dominated by Self Hel Groups (SHGs) - linkage Programme aimed at providing a cost effective mechanism for providing financial services to the unreached poor. The study aimed at identifying the origin and concept of micro finance, features and role of micro finance in India, reviewing the progress and weakness followed by suggestion for making micro finance as an effective instrument of poverty elevation, women empowerment and rural development in India. Das (2012) reported that Self Help Groups (SHGs) under Indian micro finance programme have become a vehicle to pursue diverse developmental agendas and even for the profit motive. Removal of regional disparity in the implementation of the programme leads to target oriented approach which again considered as hindrance in the qualitative growth of the movement. Ayuub (2013) stated that Microfinance scheme help people to improve their living standard and provide them financial opportunity to expand their business. Microfinance is the key strategy that leads to quick revival of economy, increase in living standard and empowerment. Choudhary (2013) observed that micro financing services would surely lead to achieve the motive of poverty reduction. However, Government efforts alone cannot solve the problem of financial inclusion without the cooperation of the banking sector particularly, in the developing nations like India, where most of poor people do not have access to any kind of banking services. Commercial banks will definitely lead to good financial governance by changing their conventional attitude towards the poor that they are bankable as their good repayment behavior is evident through various studies. Gundappa (2014) stated that Microfinance program is one of the most important programs in India as developing countries are facing initial capital problem to investment that is why Micro Finance system is providing financial facility through SHGs. Page 131

3 Mudaliar & Mathur (2015) Microfinance has the potential to have a powerful impact on women s empowerment. Although microfinance is not always empowering for all women, most women do experience some degree of empowerment as a result. Varghese (2016) stated that harmonious progress of a nation is possible only when women are considered as equal partners in the development process. Since early 1970s the emergence of Self Help Groups (SHGs) as a vehicle of transformation in poverty alleviation and women empowerment became worldwide phenomenon. Self Help Groups are considered as one of the means to empower women as it enables them to pool resources through thrift and opens them to easy access to credits. Annapurna (2017) Mutual benefit for banks as well as SHGs is the core theme for the successful implementation of the program. Pro active approach of banks, creation of exclusive fund at bank level for lending to SHGs will help increasing the volume of credit available for SHGs. A special cell to cater the needs of SHGs at bank level will help in thorough monitoring of the groups and their activities and also extended financial consultancy to improve their economic conditions. In view of above review of the literature, the present study entitled Microfinance in Haryana: Evaluation of Self Help Group-Bank Linkage Programme of NABARD In Haryana is an addition to the existing literature. Objective of the Study The present study is conducted to examine the growth in savings of SHGs with Commercial banks, Cooperative, and Regional Rural, loans disbursed to SHGs by these banks and the growth in loans outstanding to SHGs of selected public sector banks. III. RESEARCH METHODOLOGY The present study is of analytical nature and used the secondary data of savings of SHGs of selected public sector banks, loans disbursed by these banks and loans outstanding to SHGs of selected public sector banks under SHG-Bank Linkage Programme in Haryana is collected from the annual reports of NABARD, websites and journals from the period to and various statistical tools like percentage, trend analysis and one way Anova statistics has been applied to arrive at the conclusions. IV. RESULTS AND DISCUSSIONS Table -1 shows the number of SHGs having savings with Commercial banks, Cooperative banks and Regional Rural in Haryana during the period under study. The number of SHGs having savings with banks increased by percent, percent and percent in Commercial, Cooperative and Regional Rural respectively. Table-1 Number of SHGs having Savings with in Haryana Year Commercial Co-operative Regional Rural Source: NABARD Annual Reports Source of Variation SS Df MS F P-value F crit Between Groups E Within Groups Total The value of statistics shows that there is no significant difference between the number of SHGs having savings with Commercial, Cooperative and Regional Rural. Therefore null hypothesis i.e. there is a significant difference between the numbers of SHGs using savings with Commercial, Cooperative and Regional Rural in Haryana is accepted. Table - 2 shows the number of SHGs having amount of savings with Commercial, Cooperative and Regional Rural in Haryana during the period under study. The number of SHGs having Page 132

4 savings with banks increased by percent, percent and percent Commercial, Cooperative and Regional Rural in respectively. Table-2 Amount of Savings of SHGs with in Haryana (Amount Rs. Lakhs) Year Commercial Cooperative Regional Rural Source of Variation SS df MS F P-value F crit Between Groups Within Groups Total The value of statistics shows that there is a significant difference between the number of SHGs having savings with Commercial, Cooperative and Regional Rural. Therefore null hypothesis i.e. there is no significant difference between the numbers of SHGs using savings with Commercial, Cooperative and Regional Rural in Haryana is rejected. Table -3 shows the number of SHGs availed loan from Commercial, Cooperative and Regional Rural in Haryana during the period under study. The number of SHGs availed loan from banks increased by percent, decreased by percent and decreased by percent in Commercial, Cooperative and Regional Rural respectively. Table-3 Number of SHGs Availed Loan from in Haryana (Amount Rs. Lacs) Cooperative Regional Rural Years Commercial Source of Variation SS Df MS F P-value F crit Between Groups Within Groups Total The value of statistics shows that there is no significant difference between the number of SHGs availed loan from Commercial, Cooperative and Regional Rural. Therefore null hypothesis i.e. there is no significant difference between the number of SHGs availed loan from Commercial, Cooperative and Regional Rural in Haryana is accepted. Page 133

5 Table - 4 shows amount of loan disbursed to SHGs by Commercial, Cooperative and Regional Rural in Haryana during the period under study. The amount of loans disbursed to SHGs by banks increased by percent, decreased and increased by 9.80 percent in Commercial, Cooperative and Regional Rural respectively. Table-4 Amount of Loan Disbursed in Haryana (Amount Rs. Lakhs) Regional Rural Year Commercial Cooperative Source of Variation SS Df MS F P-value F crit Between Groups Within Groups Total The value of statistics shows that there is a significant difference between the amount of loan disbursed to SHGs by Commercial, Cooperative and Regional Rural. Therefore null hypothesis i.e. there is no significant difference between the amount of loan disbursed to SHGs by Commercial, Cooperative and Regional Rural in Haryana is rejected Table - 5 shows the number of SHGs having loans Outstanding with Commercial, Cooperative and Regional Rural in Haryana during the period under study. The number of SHGs having loans outstanding with banks increased by percent, percent and decreased by percent in Commercial, Cooperative and Regional Rural respectively Table-5 Number of SHGs Having Loans Outstanding With Bank in Haryana Regional Rural Year Commercial Cooperative Source of Variation SS Df MS F P-value F crit Between Groups E Within Groups Total Page 134

6 The value of statistics shows that there is no significant difference between the numbers of SHGs having loans outstanding with Commercial, Cooperative and Regional Rural. Therefore null hypothesis i.e. there is no significant difference between the numbers of SHGs having loans outstanding with Commercial, Cooperative and Regional Rural in Haryana is accepted. Table 6 shows the amount of loan outstanding to SHGs by Commercial, Cooperative and Regional Rural in Haryana during the period under study. The amount of loan outstanding to SHGs by banks increased by 9.63 percent, percent and decreased by percent in Commercial, Cooperative and Regional Rural respectively. Table-6 Amount of Loans Outstanding to SHGs by Bank in Haryana (Amount Rs. Lakhs) Year Commercial Cooperative Regional Rural Source of Variation SS Df MS F P-value F crit Between Groups E Within Groups Total The value of statistics shows that there is no significant difference between the amount of loan outstanding to SHGs by Commercial, Cooperative and Regional Rural. Therefore null hypothesis i.e. there is no significant difference between the amount of loan outstanding to SHGs by Commercial, Cooperative and Regional Rural in Haryana is accepted. V. CONCLUSIONS To sum up, in case of savings, number of SHGs having savings with Cooperative increased by percent followed by percent and percent in Regional Rural Bank and Commercial respectively, whereas the amount of savings of SHGs Increased by percent in Cooperative followed by percent and percent in Commercial and Regional Rural during the period under study. In case of loan disbursement, number of SHGs availed loan from Commercial increased by percent in Commercial and decreased by percent and percent in Cooperative and Regional Rural, whereas the amount of loans disbursed to SHGs increased by percent followed by 9.80 percent in Regional Rural and decreased by percent in Cooperative during the period under study. In case of Loans outstanding, the number of SHGs having loan outstanding with Cooperative increased by percent in Commercial banks followed by percent in Commercial and decreased by percent in Regional Rural whereas amount of Loans outstanding to SHGs increased by percent in Cooperative followed by 9.63 percent in Commercial and decreased by percent in Regional Rural during the period under study. Page 135

7 VI. REFERENCES [1] Annapurna A. Alimelu. (2017) SHG-Bank Linkage Programme: An Indian Perspective, International Journal of Engineering, Science and Computing, Vol. 7, Issue 4, April, pp , Available at: [2] Ayuub, Sunia (2013) Impact of Microfinance on Poverty Alleviation: A Case Study of NRSP in Bahawalpur of Pakistan, International Journal of Academic Research in Accounting, Finance and Management Sciences, Vol. 3, Issue-1, January, pp [3] Basu, Priya and Srivastva, Pardeep. (2005), Scaling-up Microfinance for India s Rural Poor, World Bank Policy Research Working Paper No. 3646, Available at: [Accessed on: April 05, 2018]. [4] Choudhary, Meenakshi (2013) A detailed study of Micro Finance as a tool for Tribal Transformation in areas of Madhya Pradesh, International Journal of Business and Management Invention, Vol. 2, Issue 3, March, pp [5] Das, Sanjay Kanti (2012), Ground Realities of Self Help Group-Bank Linkage Programme: An Empirical Analysis, International Journal of Research in Social Sciences, Vol. 2, Issue 2, May, pp [6] Ghate, P. (2007), Indian Microfinance: The Challenges of Rapid Growth, New Delhi: Sage Publications. [7] Gundappa, Mudakappa (2014) Micro Finance and Empowerment of Women: An Impact Study of SHGs, Indian Streams Research Journal, Vol. 4, Issue-8. September, pp 1-6. [8] rogramme%20an%20indian%20perspective.pdf [Accessed on April 05, 2018] [9] Krishna, A. (2004), Escaping poverty and becoming poor; who gains, who loses and why? World Development, Vol. 32, Issue- 1, pp [10] Moses, Emerlson. (2011), An Overview of Micro Finance in India, Shodh Samiksha or Mulyankan, Vol. 3, Issue 27, April, pp [11] Mudaliar, Arti and Mathur, Ayushi. (2015), Women Empowerment through Microfinance, International Journal of Arts, Humanities and Management Studies Vol. 1, Issue-2, February, pp [12] Rangarajan, C. (2006), Micro Finance and its Future Directions, Towards a Sustainable Micro Finance Outreach in India, New Delhi; NABARD, GTZ and SDC, pp [13] Sahu, Gagan Bihari (2010), SHG Bank Linkages in North West India: Experiences and Challenges in Financial Access and Poverty Alleviation, Centre for Micro-Finance (sub- centre) Institute of Development Studies, Jaipur. [14] Singh, Tejmani, N. (2009), Micro Finance Practices in India: An Overview, International Review of Business Research Papers, Vol. 5, Issue-5, September, pp [15] Srinivasan, N. (2008), Microfinance India: State of the Sector Report, 2008, Sage Publications Private Limited, India. Page 136