PROJECT REPORT. STUDY ON SCOPE OF MATURE SELF HELP GROUP s TO GRADUATE INTO MICROENTERPRISE. Syed Iliyas Basha

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1 PROJECT REPORT STUDY ON SCOPE OF MATURE SELF HELP GROUP s TO GRADUATE INTO MICROENTERPRISE By: Syed Iliyas Basha SUMMER INTERNSHIP PGDM BIF ( ) Under the guidance of Emmanuel V Murray General Manager NABARD APRO Hyderabad Submitted To: NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT A.P.R.O, HYDERABAD. i

2 INSTITUTE OF PUBLIC ENTERPRISE HYDERABAD ACKNOWLEDGEMENT I would like to extend my sincere thanks to the management of NABARD, especially to Mr. P. Mohanaiah, the Chief General Manager (CGM), APRO and Mr. E.V. Murray, General Manager, APRO for providing me the opportunity to take up the study, which has been a fabulous exposure and great learning experience. I would like to express my gratitude to Mr. E.V. Murray for his constant follow-up and valuable suggestions provided throughout. He has always been an ever lasting source of inspiration and guidance. I would also like to express my earnest gratitude and thanks to my project guide Mr. M. Praveen Kumar, AGM, APRO for his constant guidance and valuable suggestions during the study period. He has put a conscious effort in undertaking and completing this project. I am also indebted to Mr. Pawan Kumar, NABARD, APRO for his constant help during the study period. I am also thankful to Mrs. Nanditha Sethi, Faculty guide, IPE, Hyderabad for his valuable suggestions and constant guidance. I am also thankful to all those officers of NABARD, officials and grassroot workers of DRDA Department and also Chairman, Chaitanya Godavari Grameena Bank with whom I interacted during the course of the project, for offering their valuable support and kind co-operation during the course of the project. I also thank Mr. S.M.Sulaiman Basha, District Offiicer and Asst.Director of Sericulture, Guntur and also all the respondents who have given their valuable time, views and authentic information for this project. ii

3 The report is the contributions of numerous people- too many to mention individually, I thank all those numerous who have contributed in their own way in driving this project to success. Syed Iliyas Basha EXECUTIVE SUMMARY Title: Study on scope of Mature SHGs to graduate into microenterprises. Organization: NABARD Reporting Officer: Mr. E.V.Murray. Project Guide: Mr. Praveen kumar. Faculty Guide: Ms. Nandita sethi. Student Name: Mr. Syed Iliyas Basha. Objective: 1. To find the scope of activities which are feasible for SHG s to graduate into microenterprises. 2. To know what kind of support is required for SHG to form an enterprise. 3. To study the problems faced by SHG s to graduate into microenterprises. 4. To know the impact of MEDP programs on SHG s. Scope: The study was carried out in 14 villages Guntur districts. Besides many offices of government, DRDA, NGO s and banks were also covered for concrete and flawless study. iii

4 Methodology: An exploratory study was done on the socio economic condition of Self Help Groups that is involved in tailoring to streamline the research design and draw up the questionnaire. Mature SHGs who have availed loan from the banks for more than twice, Banks with whom SHG s are linked with, NGO s, officials and grass root workers of DRDA department were interviewed with the help of a structured questionnaire. Sources of Data: Primary Source 1. Mature SHGs who availed bank loan more than twice and banks managers with whom these SHG s are been linked. 2. Officials and grass root workers like community coordinator of DRDA department and also officials of Andhra Bank Institute of Rural Development (ABIRD). Secondary Source 1. Through various websites 2. Through different books, newspapers, articles, journals and magazines. Major findings The major findings of the study are: 75% respondents were in the age group of years. 44% beneficiaries were illiterate. All the beneficiaries were females. 57% beneficiaries were from downtrodden groups constituting scheduled castes, scheduled tribes, backward castes and minorities. Most of the sampled beneficiaries are dependent on external sources to record the books of accounts i.e. out of total 38 groups, 24 groups (64%) are dependent on external sources and only 14 groups (36%) are maintaining by the members within the group. The Groups are maintaining books like minute s book, ledger, cashbooks, passbooks and attendance registers. The member s in-charge of accounts is being given training in bookkeeping by the community coordinator or village book keeper. And the member who iv

5 is in-charge of recording the books will be paid an honorarium by the other group members. So far as the frequency of group meetings are concerned, it is observed that first week of every month meetings were the most common. In villages like lemalle and Mamallapalli the group members have kept penalties of Rs 100 for the members who are absent for the meetings. It is found that the operational efficiency and group dynamics of the SHG is not same in all villages. This could be attributed to several factors like background of SHG formation, internal problem, support provided by the promoters, effective leadership, etc. In Mamallapalli village most of the SHG s are doing the activities of dairy and crop production by taking the land for lease from landlords but due to the impact of inflation and rise in prices for all the commodities, lease rate were also increased thus making it difficult for the groups to adjust with the present TFI limit of rupees 5 lakhs. 30% of the SHG s i.e. 11 groups out off total 38 sampled groups interviewed during the study have availed financial assistance from the SHG federation and all the sampled groups (100%) are the members of the SHG federation in their respective villages. Beneficiaries were facing problems in order to graduate themselves into microenterprise, majorly due to reasons of Lack of group cohesiveness (15.6%), Dual responsibility (13.8%), in the field of Marketing (12.5%), Lack of entrepreneurship (12%), Risk (11.3%), Technology (10.6%), Value chain & Awareness both (8.1%), Skill and knowledge (4.4%) and Finance (3.8%). The activities taken up with the loan by the members are as follows : a. To meet their self needs b. Purchase of inputs for agriculture crops c. Construction of house/indiramma housing/individual toilets d. Purchase of buffalows/miltch animal. e. Business like grocery shops, cloth shop, auto rickshaw, fruit shop, dairy, v

6 tailoring, pickle making, used plastic bags conversion to cloth for drying /covering agriculture produce etc. Bapatla, Nizampatnam, Repalle the sea coast villages where SHG s are doing wet and dry fish procurement and marketing. At the time of the study, training is been given by ABIRD, on the activities like Fabric painting, soft toy making, pottery works, bouque making etc in komaripudi and pratipadu villages of Narasaraopeta division. Out of the total 38 SHG s interviewed, 31 SHG s are been trained in orientation programme given by banks and out of the total 175 members, only 49 members have attended the Income Generating Activity like soft toy making, fabric painting, pottery making and bouque making etc in komaripudi and pratipadu villages by ABIRD. Recommendations & Suggestions The SHPIs (Self Help Promoting Institutions) like DRDAs and NGOs have thus a dual role to play. Not only should they facilitate the availability of credit from the formal sector to the self help groups, they should also help the self help groups to identify suitable products which they can manufacture and sell. Marketing facilities for the sale of products of SHG should be facilitated by either DRDA or NGO s. Periodical exhibitions at village-level may be organized where the products of SHG can be displayed. SHGs should be organized into federation for collecting the products from beneficiaries and to tag them to corporate house, wholesaler, retailer, rural Mart etc. Interlinking of Rural Mart need to be attempted for supply chain management. One suggestion for better marketing is to promote the products of one SHG among other SHG members. Product of one SHG should be distributed to other SHG members through federation in the beginning, which later can be widened to all SHG members of district/state. Thus, it should be ensured that the product of SHGs would have wider demand and marketability vi

7 For about 22% of the sampled beneficiaries are involved in the Animal husbandry activity in Guntur district and most of them are engaged in dairy activities, thus scope for dairy is high and Government, DRDA officials and NGO s should facilitate these SHG to be motivated and support to be given to them to establish a dairy plants, collection centers and chilling units. Milk units can be established by solar hybrid milk chiller which enables food suppliers to store and preserve perishable food items such as milk, fruits and vegetables without the need for expensive diesel-powered generators. Still furthers studies need to be done to know the exact benefits to the SHG s. In order to make full use of the microfinance and ensure the success of micro-enterprises, the project management should understand that all SHG members need not/cannot start a microenterprise at the outset. Some, who are able to take risks, should start first and offer wage employment to other SHG members. Entrepreneurs need to have some behavioural competencies like taking initiative, having vision, planning, seizing opportunities, taking risks, making decisions, solving problems, collecting information, perseverance, time and quality consciousness, etc. SHG members often shy away at the beginning but are able to develop these competencies over a period. Additionally, the SHG members must be given guidance on the opportunities available in their surroundings. Let us assume that an SHG member shortlists five business opportunities. The SHG member may thereafter be asked to conduct a market survey, wherein the customers needs or expectations and the competitors weaknesses are mapped and looked into. This process helps us to further zero in on the options. Active intervention by district administration, professional bodies and voluntary organisations is precondition for the successful conception of micro enterprises in terms of skill training, designing products, providing new technology and access to market. vii

8 TABLE OF CONTENTS Acknowledgment.. ii Executive Summary. iii- vii List of Table x - xi List of Graphs xii List of Exhibits. xiii Chapter 1: Introduction 1-5 Micro finance across the globe - with India playing a vital role...1 Micro credit A novel approach of banking with poor... 2 Approach to Micro finance 2 Three official second tier institutions, which on-lend to specialist MFIs.. 4 Major Milestones in India... 5 Chapter 2: Origin of SHG in India 6 27 Concept of Self Help Group SHG Mechanism What could be considered as indicators of a good SHG?. 13 What is Unique about the SHGs and Linkage Program? Self Help Group movement in Andhra Pradesh 20 Profile of Self Help Groups in Guntur district.24 Specific Objectives of the study 27 viii

9 Chapter 3: Research Methodology Selection of Study Area and Sample Units Tools and Techniques Used for Data Collection. 29 Data Collection and Analysis Chapter 4: District profile Guntur Chapter 5: Data Interpretation and Analysis Profile of the Self Help Groups (SHG s). 35 Problems faced by Self Help Group (SHG) to graduate into microenterprises Details of the activities taken up by the SHG members Linkage wise details loan availed, repayment status and their internal accruals of the sampled beneficiaries.. 51 Scope of activities feasible for Self Help Group (SHG) Chapter 6: Major Findings, Recommendations & Suggestions Major finding of the study 63 Recommendations & Suggestions for the study 66 Limitations of the study. 69 References. 70 List of Officials Interacted during the Field study.. 72 Annexure ix

10 LIST OF TABLES Table Title of the Table Page No. No. 2.1 Progress of SHGs credit linked during the financial years Promotional Grant assistance by NABARD to SHPIs Project components of IKP Regional spread of SHG movement in Andhra Pradesh SHPI wise number of groups formed in Guntur district Socio economic profile of SHG s of DRDA Resources of SHG s Sampling frame of the study Age profile of the SHG Educational status of the beneficiaries Social group of the beneficiaries Problems faced by SHG to graduate into microenterprise Details of the activities taken up by the SHG members through loan Details of the SHG members who have availed loan for personal purpose 45 x

11 4.7 Gross income details of SHG members based on their activities Book maintenance of SHG s Details of training on Orientation to SHGs Group members who have attended training on IGA s Details of Groups who availed loan for third time Showing the details of groups who availed loan for fourth time Showing the details of groups who availed loan for Fifth time Showing the details of groups who availed loan for Sixth time Showing the details of Groups Loan,repayment and savings Showing the details of Groups TOTAL Loan, repayment and savings Activities presently taken up the SHG members in the different mandals of the Guntur district where the study has been conducted Scope of activities that the beneficiaries can take up to form an enterprise xi

12 LIST OF GRAPHS Graph No Title of the Graph Page No 2.1 Progress of SHGs credit linked during the financial years Distribution of the educational status in pie chart Distribution of social group of the beneficiaries in column chart Problems faced by the SHG to graduate into microenterprises Bar chart showing the details of the activities taken up by the SHG members through loan 4.5 Details of the SHG members who have availed loan for personal purpose through pie chart xii

13 LIST OF EXHIBITS Exhibit No. Title of the Exhibit Page No. 1.1 Major Milestones in India SHG Mechanism Structure of IKP at the district level 23 xiii

14 CHAPTER - 1 INTRODUCTION "If you can run a bank, lend money, and get it back, cover all your costs, and make a profit, and people get out of poverty, what else do you want?" Mohammad Yunus, micro-credit pioneer and founder of the Grameen Bank. Micro finance across the globe - with India playing a vital role The irrepressible desire and inherent capacity of poor to improve their living for themselves is considered as the foundation for concept of Micro Credit. Propelled by the demonstrative success of Bangladesh Grameen Experiment, Micro Credit is acknowledged as an effective channel to take the poor into a new domain of economic empowerment. Micro credit movement assumed global advocacy through Micro Credit Summit held in February 1997 at Washington. The summit representing 1500 institutions and 137 countries is a landmark in the collective crusade against poverty undertaken by the developed and developing countries together. The Micro Credit Summit launched a nine-year campaign to reach 100 million of the world s poorest families by the year Micro credit is referred as providing Credit for self employment, financial and other business services including savings and technical assistance. Most of the countries have long-established cooperative movements, including credit cooperatives. In most countries in South Asia and also in Indonesia, credit cooperatives have been largely unsuccessful in extending financial services to poor households. Generally, the cooperative movement includes people of all income levels within a particular village or community, and does not target the poor. Moreover, management of the cooperative movement has been inadequate in most countries. In some countries such as India and Pakistan, a large proportion of cooperatives are reported to be non-functional, due to financial mismanagement and inability to recover dues. Even where they are functional, management is often dominated by rural elites, with funds allocated on the 1

15 basis of patronage rather than needs. Frequently they rely heavily on government funds and are largely owned and controlled by governments. In India and Pakistan, for instance, state and provincial cooperative departments have the right to be represented on the board of directors, and can exert considerable influence on the management of cooperatives. For instance, permission may be needed to hold elections, invest funds, change their area of operations, use funds from their reserves, and similar matters. Particularly in India there are very few highly successful cooperative banks and societies, which are devoted specifically to providing financial services to the poor, such as SEWA Bank and Working Women s Forum etc, Micro credit A novel approach of banking with poor Micro credit is distinctly different from other poverty alleviation schemes. Loans under micro credit programs are very small, on an average less than $100 by world standards and in hundreds of rupees by Indian standards. Micro credit continues to target the rural and urban households, with emphasis on women borrowers, provision of finance for creation of assets and their maintenance and bringing in greater quality of services. The beneficiaries are identified by micro credit providers themselves independently or through NGOs/Self Help Groups/ the repayment period is generally very short. The amount is increased based on the borrower s repayment history. Micro credit is a novel approach of banking with poor with the distinct advantages of high repayments of loans and low transaction cost. Various micro finance initiatives have gathered pace in the recent years. In Micro Credit NABARD s role has been twofold, viz., promotional and financial. Promotional efforts assume the form of the SHG Bank Linkage programme and facilitating training. Financial involvement is in terms of providing refinance, revolving fund assistance and grants. Approach to Micro finance: Over the last decade micro finance has become an accepted institutional framework for taking financial services to the poor. Micro finance has now evolved into a type of independent financial system of its own and there are a number of variants in micro finance institutions and systems. But broadly they can be classified into two the individual 2

16 approach and the group approach. An example of the group approach, where the group itself, not the individual member, is the client, is the self-help group program in India. In all countries there are wide variety of small, informal savings and loans groups, such as rotating savings and credit associations (ROSCAs), which operate informally and are not registered. In at least three countries, these or similar groups have been institutionalized to some extent by involving them in formal micro finance programs. In India self-help groups (SHGs) are an integral part of the National Bank for Agriculture and Rural Development (NABARD) program for linking banks and SHGs. Nevertheless, they are generally not registered. Under Indian law, SHGs are only required to be registered (as a society, trust or cooperative) if they have more than 20 members. For this reason, many SHGs restrict their membership to 20 persons or less. It is also observed in Gujarat and some other parts of the country that some larger SHGs operate informally and are not registered. The purpose around which an SHG is initially formed varies depending on the kind of program being implemented and the need for collective working. It varies from managing a collective resource to promoting a social cause. In the context of microfinance, SHGs are formed (and sometimes old SHGs established with another purpose are converted) to foster savings and credit. A small group of individuals become members and pool their savings on a regular basis to form a collective fund. This fund is then rotated as credit amongst the members through a system of self-generated norms. Hence, the basis of the SHG is the mutuality and trust in depositing individual savings in group funds. Once the initial trust is established, the incentive or motivation for a member is the access provided to financial services through the common pool fund, which is higher than the individual s own savings. Indonesia has hundreds and thousands of groups engaged in savings and credit. Some of these are indigenous, based on traditional custom, while others are the result of action by government agencies, community groups and NGOs to form groups in connection with various government-initiated microfinance schemes. These include Bank Indonesia s microcredit project and program linking banks with self-help groups (PHBK), the income-generating project for marginal farmers and landless of the Ministry of Agriculture, and the newer mass programs 3

17 (IDT and Prosperous Family program). There is no provision for registration of SHGs, nor are they regulated except in the context of the particular government program from which they arise. Similarly in Thailand, some of the community organizations involved in the microfinance programs of the Government Savings Bank (GSB) and Urban Community Development Office(UCDO) are registered as cooperatives. However, most are unregistered and operate informally. For instance, figures from UCDO show that of the 385 members with savings activities, only 66 are legally registered as cooperatives while the other 319 are not registered and operate informally. Moreover, in most countries the cost of subjecting MFIs to full prudential regulation and supervision would be prohibitive. In Bangladesh, for instance, there are around 1,000 NGOs involved in microfinance. And while MFIs in other countries do not have nearly the same outreach as in Bangladesh, the number of MFIs is not necessarily less. In India there are perhaps as many NGOs engaged in microfinance as in Bangladesh, plus some 90,000 primary agricultural credit societies and thousands of self-help groups. In the Philippines, there are some 500 MFIs reaching a combined total of only 30,000 borrowers. In Thailand there are more than 1,500 community organizations engaged in microfinance. Three official second tier institutions, which on-lend to specialist MFIs. In India, there are at least three official second tier institutions, which on-lend to specialist MFIs. However, none of them imposes rigorous performance and reporting standards. The second tier institution with the largest lending program is Rashtriya Manila Koch (RMK). For a partner organization to borrow from RMK, it should have at least three years experience in thrift and credit administration, a 90 per cent recovery performance during the last three years (in practice, RMK generally accepts a recovery rate in the range of 80 to 90 per cent), satisfactory funds management and financial performance, and a good track record of work in the socioeconomic field. These requirements are all quite general in nature. There are also a number of requirements relating to loans by the partner organizations to individual borrowers. Further, partner organizations are supposed to maintain 10 per cent of the loan provided by RMK as reserves, but this is not strictly enforced. 4

18 NABARD as a part of its mandate initiated certain research projects on SHGs as a channel for delivery of micro-finance in the late eighties. Amongst these, the project sponsored by the Mysore Resettlement and Development Agency (MYRADA) on Savings and Credit Management of SHGs was partially founded by NABARD in In , in collaboration with some of the member institutions of the Asia Pacific Rural and Agricultural Credit Association (APRACA), NABARD undertook a survey of 43 nongovernmental organizations (NGOs) in 11 states in India, to study the functioning of microfinance SHGs and their collaboration possibilities with the formal banking system (NABARD, 1991). Both these research projects produced encouraging possibilities, and NABARD initiated the pilot project called the SHG linkage project in NABARD also held extensive consultations with the Reserve Bank of India. This resulted in issuing a policy circular to all commercial banks to participate and extend finance to SHGs (RBI, 1991). NABARD also issued a broad set of flexible guidelines in February 1992 (NABARD, 1992) to the formal rural banking system, explaining the project s modalities. The project was extended to the regional rural banks and co-operative banks, in addition to the commercial banks in SOURCE: History and spread of the self-help affinity group movement in India The role played by IFAD by Aloysius P. Fernandez, Executive Director, MYRADA Exhibit 1.1: Major Milestones in India: Major commercial banks nationalized NABARD established as an apex agency for rural finance Establishment of SIDBI foundation for Micro credit Regional rural 1982 banks established 1999 in NABARD launches SHG bank linkage program Proposed bill on microfinance regulation. 5

19 CHAPTER - 2 ORIGIN OF SHG s IN INDIA In 1976, Prof. Mohammed Yunus of Bangladesh started women s groups in Bangladesh and developed thrift and savings among the poorest. Now it has developed into a bank named Bangladesh Grameen Bank (BGB). Its report in February 1998 states that the bank has 1138 branches and covers villages. It has members of which only are men. The bank has disbursed a cumulative amount of US $ Million whereas the savings of the members has reached US $ Million. With the success of BGB and similar organisations elsewhere, the concept of Micro credit has gained momentum in India. Based on this success many Non-Governmental Organisations (NGOs) in our country are involved in organising SHGs and they serve as an agent between the bank and the poor. Self- help groups (SHGs) play today a major role by creating women empowerment in rural India. A growing number of poor people (mostly women) in various parts of India are members of SHGs and actively engage in savings and credit, as well as in other activities (income generation, natural resources management, literacy, child care and nutrition, etc.). The Savings and credit 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 away from exploitation and isolation. It was observed that the poor tended to come together in a variety of informal ways for pooling their savings and dispensing small and unsecured loans at varying costs to group members on the basis of need. The SHG Bank Linkage Programme was started as an Action Research Project in 1989 which was the offshoot of a NABARD initiative during 1987 through sanctioning Rs. 10 lakh to MYRADA as seed money assistance for experimenting Credit Management Groups. In the same year the Ministry of Rural Development provided PRADAN with support to establish self-help groups in Rajasthan. The experiences of these early efforts led to the approval of a pilot project by NABARD in The pilot project was designed as a partnership model between three 6

20 agencies, viz., the SHGs, banks and NGOs. This was reviewed by a working group in 1995 that led to the evolution of a streamlined set of RBI approved guidelines to banks to enable SHGs to open bank accounts, based on a simple interse agreement. This was coupled with a commitment by NABARD to provide refinance and promotional support to banks for the SHG - Bank Linkage Programme. The guiding spirit behind NABARD s microfinance initiatives has the following contours: Offers cost effective approaches to formal institutions for expanding outreach to poor. Develop collateral substitutes. Focus on rural poor, especially women. Facilitate empowerment of the poor and Effectively pursue the macro-economic objectives of growth. Initially there was a slow progress in the programme up to 1999 as only 32,995 groups were credit linked during the period 1992 to Since then the programme has been growing rapidly and the number of SHGs financed increased from 81,780 in to more than lakh in and lakh in (table below). Year Table 2.1, progress of SHGs credit linked during the financial years No. of SHGs financed during the year (in lakh) Cumulative no. of SHGs financed (in lakh) Source: NABARD 7

21 Graph 2.1, Progress of SHGs credit linked during the financial years In India the pioneer in this field is Self-Employed Women's Association (SEWA). It was started in Though started as a trade union for women in the unorganised sector, today SEWA boasts of running the first Women's Bank in the country. By the year 2000 SEWA has a membership of The SEWA Bank has depositors and borrowers whose loan outstanding Rs.887 lakhs as on March SEWA has also networked many co-operatives and emerged as the largest federation of co-operatives in the country. Organizations in Southern India like PRADAN (Professional Assistance for Development Action), MYRADA (Mysore Resettlement and Development Agency), ASSEEFA ( Association for Sarva Seva Farms), MALAR (Mahalir Association for Literacy, Awareness & Rights) etc. have entered into this rural credit system. PRADAN has a membership of 7000 women who have availed 40,000 loans worth Rs.2.7 crores as on March MYRADA has members who have saved RS.48 lakhs and availed loan to the tune of Rs.2.90 crores. MALAR has a membership of women who have saved RS.86 lakhs and availed loan to the tune of Rs.2.23 crores. 8

22 NABARD refinances the banks, which lend to SHGs. As per NABARD's Annual Report , banks have financed SHGs with a finance of Rs.53 crores as on 31st March The repayment is excellent. The Finance Minister in his budget speech in the year has asked NABARD and SIDBI to increase the number of SHGs to 1, 00,000. Even this number will be minuscule as it will cover only 20, 00,000 people in our country which has nearly 38 crores of people below poverty line. Mahalir Association for Literacy, Awareness & Rights (MALAR) has emerged as a new self-reliant model for our nation. An offshoot of the Total Literacy Campaign in Kanyakumari District, MALAR has emerged as an organisation of poor women who share the interest income to sustain a full time structure, office and training\ schedule. This has kindled a new hope. Already 10 districts in Tamilnadu have undergone training at MALAR and started similar organisations for micro-credit. Revamping of the rural credit system has already started. The banks Regional Rural Banks, Co-operatives and SHGs linked with Non-Governmental Organisations (NGOs) have a role to play. There is need for closer study to support the system. So that, the country can eradicates poverty at least in the beginning of the next millennium. NABARD introduced a Pilot Programme for starting and lending to SHGs in 1992 based on the experience of BGB and MYRADA. NABARD also provides training support, Grant cum Aid support for micro credit under it's different schemes. SIDBI has entered this field late but now SIDBI has formed a Micro-credit foundation, which gives loans to NGOs after rating them by an external agency. The minimum loan is Rs.50 lakhs and it is to be used only for micro enterprises. Rashtriya Mahila Kosh - an organisation promoted by Govt. Of India also gives direct loans to NGO's for on lending with incentives for proper repayment. All Banks including co-operative Banks and Private Banks lend to SHGs based on their savings at the ratio of 1:1 initially and this can go upto 1:4. World Bank and IMF have found a way to reach the poor through NGOs and they see this as an opportunity to reduce poverty and also to prevent the poor from agitation because of the ill effects of their Economic policies. The Government of India, which is under IMF and WB guidance, has launched schemes Scrapping Integrated Rural Development Programme, Scheme for Urban 9

23 Microenterprises, Prime Minister s Urban Poverty alleviation programme and TRYSEM. The Schemes are known as (1). Swarnajayanthi Gram Swarozhar Yojana SGSY. (2).Swarnajayanthi Sahahari SwaRozhar Yojana SJSRY The former is for Gram Panchayats and the latter for Town Panchayats, Municipalities and corporations. According to this scheme, the Panchayats will select the good group with assistance from BDO, Bank and NGOs and provide Rs.10000/- as revolving fund - Free of Interest and then banks will provide loan to the group - seeing the performance. There is an individual subsidy of 30% for those who do individual enterprises and 50% subsidy for Group enterprises. After the Micro Credit summit held at Washington WB, IMF and many foreign funding agencies have directed their projects towards micro-credit. Now Govt. of India has also directed CAPART and other funding agencies to focus on micro credit because of which all NGOs are running after people to form as a SHGs so that they can get funds. Thus a slow and steady SHG movement started during 1990s in India truly representing the concerns of the poorest of the poor. 10

24 Concept of Self Help Group Self-Help Group (SHG) is a small voluntary association of poor people, preferably from the same socio-economic background. They come together for the purpose of solving their common problems through self-help and mutual help. The SHG promotes small savings among its members. The savings are kept with a bank. This common fund is in the name of the SHG. Usually, the number of members in the SHG does not exceed twenty. The SHGs comprise of poor people who do not have access to formal financial institutions. They act as the forum for the members to provide space and support to each other. It also enables the members to learn to cooperate and work in a group environment. The SHGs provide savings mechanism, which suits the needs of the members. It also provides a cost effective delivery mechanism for small credit to its members. The SHGs significantly contribute to the empowerment of poor women. Creation of SHGs can be done by Non Governmental Organizations (NGOs) Social Workers, health workers, village level workers, etc Informal Associations of local people Development oriented government departments Banks Bank personnel and other individuals. The mechanism of how the SHGs are formed from electing the president within the group, initial regular thrift savings, regular meeting and all the way to open a bank account. Thus the following is been presented in the below figure: 11

25 Exhibit 2.1: SHG Mechanism. The SHG-bank linkage program is targeted to reach the poorest sections, which are bypassed by the formal banking system. Therefore, it is essential that only the poor be considered as the target group for the SHG -bank linkage program. An SHG can be all-women group, all-men group, or even a mixed Group. However, it has been the experience that women's groups perform better in all the important activities of SHGs. Mixed group is not preferred in many of the places, due to the presence of conflicting interests. As soon as the SHG is formed and a couple of group meetings are held, an SHG can open a Savings Bank account with the nearest Commercial or Regional Rural Bank or a Cooperative Bank. This is essential to keep the thrift and other monies of the SHG safely and also to improve the transparency levels of SHG's transactions. Opening of SB account, in fact, is the beginning of relationship between the bank and the SHG. The Reserve Bank of India has issued instructions to all banks permitting them to open SB accounts in the name of registered or unregistered SHGs. 12

26 By initially managing their own common fund for some time, SHG members not only take care of the financing needs of each other, but develop their skills of financial management and intermediation as well. Lending to members also enhances the knowledge of SHG members in setting the interest rate and periodic loan installments, recovering the loan, etc. What could be considered as indicators of a good SHG? Homogeneous membership: As far as possible, the membership of an SHG may comprise people from comparable socio-economic background. Though difficult to define in clear terms, a major indicator of homogeneity in membership is absence of conflicting interests among members. No discrimination: There should not be any discrimination among members based on caste, religion or political affiliations. Small membership: Ideally, the group size may be between 15 and 20, so that the members are participative in all activities of the SHG. In a smaller group, members get opportunity to speak openly and freely. However, the membership may not be too small that its financial transactions turn out to be insignificant. Regular Attendance: Total participation in regular group meetings lends strength to the effectiveness of SHGs. To achieve this, the SHGs should place strong emphasis on regular attendance in the group meetings. Transparency in functioning: It is important that all financial and non-financial transactions are transparent in an SHG. This promotes trust, mutual faith and confidence among its members. Maintenance of books of accounts as also other records like the minutes book, attendance register, etc., are important. Set of Byelaws: The SHG may discuss and finalize a set of byelaws, indicating rules and regulations for the SHG's functioning and also roles and responsibilities of members. It is better to have a written set of byelaws. The Self Help Promoting Institution (SHPI) and bank may guide the SHGs in this. Thrift: The habit of thrift (small savings) is fundamental to the SHG and helps in building up a strong common fund. 13

27 Utilizing savings for loaning: Once an SHG has accumulated sizeable amount in the form of savings say for a period of about 3-6 months, the members may be allowed to avail loans against their savings for emergent consumption and supplementary income generating credit needs. What is Unique about the SHGs and Linkage Program? Decision making: Members make decisions collectively. SHG concept offers opportunity for participative decision making on conduct of meetings, thrift and credit decisions. The participative process makes the group a responsible borrower. Financial services: SHGs provide the needed financial services to the members at their doorstep. The rural poor needs different types of financial services, viz. Savings, consumption credit, production credit, insurance, remittance facilities etc. The platform of SHG provides the possibility to converge these services. Supplementary to formal banking: SHG linkage does not supplant the existing banking system, but it supplements it thus taking full advantage of the resources and other advantages of the banking system. Cutting costs: SHG linkage cuts costs for both banks and borrowers. In a study sponsored by FDC, Australia, it was observed that the reduction in costs for the bankers is around 40 % as compared to IRDP loans. The poor have a net advantage of 85 % as compared to individual borrowing. Similar finding was also observed in a NABARD study NPA Savvy: The SHG Bank Linkage mechanism has proved that the repayments are as high as 95% % Peer pressure as collateral: The SHG linkage emphasizes peer pressure within the group as collateral substitute. 14

28 Quality clients: The SHGs are turning out to be quality clients in view of better credit management, mobilization of thrift, low transaction costs and near full repayments. Client preparation: The members of the SHGs could over a period of time, very selectively graduate to the stage of micro entrepreneurship and have been prepared with requisite credit discipline. Social agenda : Available statistics indicate dependency of 35%-40% of rural households on non-institutional sources for credit needs. SHG Linkage offers a better way of dealing with the magnitude of social agenda. Many NGOs/ Governments have recognized the SHG as a vehicle for carrying and deepening of their developmental agenda/ delivery of services. NABARD Support: NABARD'S Support for Capacity Building and Loanable Funds NABARD provides capacity building assistance and financial support to its partners for the promotion and broad basing of microfinance operations. As part of its efforts to link larger number of SHGs to the banking system, NABARD also focuses on training and sensitization of partner agencies, through various interventions. Liquidity Support to Banks for SHG-bank Linkage The National Bank continued to provide 100 per cent refinance assistance to banks for financing SHGs. During , Rs million was disbursed as loan to SHGs by various banking institutions. Banks had availed of refinance to the tune Rs million from NABARD. As on 31 March 2009, the bank loans outstanding to the SHGs aggregated Rs million, while cumulative refinance availed of by the banks aggregated Rs million. 15

29 Financial Support to Partner Agencies Promotional Grant Assistance to NGOs to function as SHPIs NGOs already working in the social sector are encouraged to take up SHG promotion as an "addon" activity. This not only helped in complementing the core areas of activities of the participating NGOs but also reduced overheads costs in formation and nurturing of groups. NABARD provides a grant assistance of Rs 4500/- to NGOs for promotion and linking of each SHG. This amount broadly covers training of members of SHG, stationery for the group, incentive/part salary of NGO staff etc. Supporting RRBs as SHPIs In order to widen the spectrum of SHPIs, NABARD assisted five branches of Cauvery Grameena Bank (CGB), an RRB in Mysore, in the year 1994, to test the feasibility of RRBs themselves taking on the role of SHPIs. Under this programme, the bank staff at the identified branches were provided with specific training in promotion, nurturing and financing of SHGs. This experiment succeeded in grooming RRB staff to form SHGs. Having successfully oriented a few RRBs to take up the role of SHPIs, it was felt necessary to find ways of reducing the per SHG cost involved in promotion and nurturing of SHGs by bank staff, if the programme were to be broad based across the country. Therefore, an alternative module was developed by NABARD, involving lower cost, to support more RRBs. This module envisages support from NABARD for training of staff of ten identified branches for each RRB, with provision to partly meet the costs of awareness building, training and stationery for the SHGs, which are promoted by them. NABARD provides grant Rs2500/- per SHG to RRBs for formation and linkage. DCCBs as SHPIs In India cooperative institutions like District Cooperative Central Banks (DCCBs) and Primary Agricultural Cooperative Credit Societies (PACS) have a long history being in existence for the past several decades. They have the potential to emerge as major partners considering their strong presence in rural areas for integrating SHG bank linkage programme in their existing business activity. NABARD has therefore formulated a scheme for assisting DCCBs to form, nurture and link self-help groups. NABARD provides grant Rs2500/- per SHG to DCCBs for formation and linkage. 16

30 Farmers' Clubs as SHPI. NABARD has been encouraging informal forums called Farmers' Clubs (FCs) to spread the message of 'Development through Credit' and inculcate the repayment ethics among borrowers. These clubs also have significant potential to work as SHPIs. Accordingly, a module was developed to support them to function as SHPIs. The module envisages financial support to nodal bank branches and FCs for meeting expenditure on (i) awareness building on SHGs among volunteers and nodal branch staff, (ii) training of identified FC volunteers to work as facilitators (iii) required stationery for SHGs promoted, (iv) reimbursement of expenditure incurred by the facilitators in promotion of SHGs, and (v) incentives to the Farmers' clubs for acting as SHPI. Individual Rural volunteers as SHPIs In regions of the country, where NGOs are not adequately represented, a special initiative has been launched by NABARD in the year 2003 to rope in socially committed individual volunteers like retired and active school teachers, post masters, village elders, anganwadi workers, members of existing credit linked SHGs etc for formation of self help groups and linking them with banks. This scheme is being implemented in 20 states of the country through regional rural banks/ district central cooperative banks. Volunteers are provided with grant assistance of Rs 1200/- per SHG for formation and linking them. Source: NABARD website. 17

31 Additional Promotional Grant assistance for hand holding at a maximum rate of Rs 500/- per SHG to NGOs, RRBs, DCCBs and UCBs and Rs 300/- per SHG to Farmers Club can be sanctioned separately. Table 2.2: Promotional Grant assistance by NABARD to SHPIs Sanctions during the Agency Cumulative Sanctions Cumulative Progress Year Amount No of Amount No of AmountNo of No No No SHGs SHGs SHGs NGOs RRBs Co-operative Banks IRVs Farmers Clubs Total Source: NABARD website. Credit availability and development into microenterprise: The rural poor may not be able to form groups by themselves to command a sufficient strength to approach and negotiate with external agencies like banks for funds. With a view to make thrift and credit activities meaningful for economic empowerment, the groups are gradually encouraged to deploy their funds in investment or income generating activities. With all these benefits, as of now the total disbursement of credit is very limited and the perhousehold credit made available is very small. If a serious impact on the economic conditions of the rural poor has to be made, a much larger flow of credit to support a much broader production base is required. It is towards this objective the SHG-Bank Linkage Programme need to be taken forward. These groups have to graduate into promoting micro enterprises. Though micro enterprises are not a panacea for the complex problems of chronic unemployment and poverty, yet promotion of micro enterprises is a 18

32 viable and effective strategy for achieving significant gains in income and assets for poor and marginalized people. We can thus see the evolution of Self Help Groups at three levels At one level households use microfinance to meet survival requirements where small savings and loans serve as a buffer in the event of an emergency or to smoothen consumption or even service previous debt to give itself more liquidity during lean times. At the second level, subsistence needs are met through microfinance, where a household begins to utilize microfinance to diversify its basket of income-generating activities, or to meet working capital requirements in traditional activities. At the third level as households reach a stage where they can assume a higher degree of risk, microfinance would be used to invest in setting up an enterprise or facilitating entry into employment in one way or the other in order that the household becomes sustainable. 19

33 Self Help Group movement in Andhra Pradesh: Though Andhra Pradesh (AP) has had a history of people coming together to extend various financial services, the women s savings and credit movement gathered momentum in 1993, in the Nellore district. Here, women had been organized into Mahila Mandalis during the Total Literacy Campaign. Subsequently these groups spearheaded the antiarrack (country liquor) movement. This was very successful, eventually leading to imposition of prohibition in the state. Having achieved that goal, the women s groups became restless, till someone suggested that they form themselves into savings and credit or "Podupulaxmi" groups. Thus Nellore led the way by having over 6,000 such groups in By March 1999, there were over 1, 80,000 savings and credit groups in AP. The members of a savings and credit group (SCG) are usually neighbours, friends and fellow workers. Women in these groups may not be from the same caste/ community but they have the same socio-economic back ground. These groups also provide an opportunity for social interaction. The regular obligation to save may be no more than glue which brings the group together and holds it together providing a base for other important activities. In some groups, their opportunities for profitable investment are limited due to lack of skills, markets and opportunities. The most important government program involving women in savings and credit is Development of Women and Children in Rural Areas (DWCRA). About 40 percent of the DWCRA groups in the country are in AP. About 15 lakh women are covered under DWCRA and Rs 150 crores was provided as revolving fund as against a saving of Rs 200 crores by the groups till March Source: Savings and Credit Movement of Andhra Pradesh - Lessons for the Rest of India Sankar Datta and Vijay Mahajan, Basix, dated: Aug

34 With government support, particularly from the Rural Development department with its network of District Rural Development Agencies (DRDAs), and further support from many active District Collectors, the women s savings and credit movement is now widespread. These are known by different names in various local savings groups districts: Podupulaxmi groups (Nellore, Kurnool), Ananta Mahila Sakti (Ananthpur), Maalaxmi (Mahaboobnagar), Podupu Jyothi (Ranga Reddy), Samabhavana (Nalgonda), Pragati Laxmi (Nizamabad), Grama Laxmi (Chittoor), Mahila Sakti (East Godavari) and so on. Major Initiatives Some of the major efforts in promotion of savings and credit groups in Andhra Pradesh included: Government Programs - DWCRA The DRDA in most of the districts are actively involved in transforming DWACRA groups into savings and credit groups of women. But the effort does not stop there. Many DRDAs have taken steps towards continuing support and strengthening DWCRA groups. For example, in Srikakulam and Nellore districts, the DRDA and NABARD are jointly conducting training programs for group leaders and bank managers. In Nalgonda district, the DRDA had promoted 2,800 groups in just two months. In Cuddapah district, the DRDA has plans to promote village level MACTS, 3,000 new groups and provide tool kits to women in future. Out of the 180,000 Savings and Credit Groups in Andhra Pradesh in March 1999, close to 140,000 were DWCRA groups. Government Programs Special - SAPAP The state has a special project sponsored by the UNDP. The UNDP has established a South Asia Poverty Alleviation Program (SAPAP), operating in three districts of AP namely Ananthpur, Kurnool and Mahaboobnagar. It has promoted over 2,700 groups covering over 42,000 members. A Village Organisation (VO) has been formed at each village where all the groups in that village have been federated. All the VOs have been federated as Mandal Samakhyas at the mandal level. Source: Savings and Credit Movement of Andhra Pradesh - Lessons for the Rest of India Sankar Datta and Vijay Mahajan, Basix, dated: Aug

35 Indira Kranti Patham Project (IKP) The SHG movement took a firm root in the state with the implementation of World Bank assisted poverty reduction project, Indira Kranti Patham (IKP), a scaled up versions of the SAPAP model with more focus on livelihood component. The project aims to build strong institutions of the rural poor and enhance their livelihood opportunities so that the vulnerability of poor is reduced. IKP consists of two projects, viz, Andhra Pradesh District Poverty Initiatives Project (APDPIP) and Andhra Pradesh Rural Poverty Reduction Project (APRPRP) and is implemented in 864 mandals out of a total 1127 mandals in the State. The project has a total outlay of Rs.21,400 million with 56 per cent of the project outlay meant to support the sub projects of the poor through Community Investment Fund (CIF). Government of Andhra Pradesh has decided to cover the entire state under the IKP Programme from the financial year by dovetailing the funds from State Government and Government of India. Society for Elimination of Rural Poverty (SERP), an autonomous body registered under the Societies Registration (Telangana) Act, has been established for management of IKP, which is implemented by SERP through DRDAs at the district level. A large complement of staff consisting of Community Coordinators, Assistant Project Managers, District Project Managers have been appointed for managing the project. Project components of IKP: Table 2.3 (Rs crores) S.No Name of the component APDPIP APRPRP TOTAL 1 Strengthening-institutional,social and human capital Support tosub-projects of poor Support to pilot programmes Support to eliminate child labour Support for the persons with

36 disabilities 6 Project management, monitoring, evaluation and other special studies TOTAL Source: NABARD Poorest of the poor Exhibit 2.2: Structure of IKP at the district level: Note: MBK - Mandal Book Keepers, VBK- Village Book Keepers 23

37 Table 2.4: Regional spread of SHG movement in Andhra Pradesh S.No Region SOURCE: NABARD Total No. of SHG's No. of members Cumulative No. of SHGs credit linked upto march 2009 (Rs crores) Cumulative Bank loan upto march 2009 (Rs crores) 1 Coastal Andhra 3, 70,104 42, 73,707 11, 63, % OF TOTAL Rayalaseema 1, 59,153 19, 34,640 4, 15, % OF TOTAL Telangana 3, 21,414 39, 73,834 9,36, % OF TOTAL TOTAL 8, 50,671 1,01,82,181 25,14, Profile of Self Help Groups in Guntur district: There are 7, 49,233 rural white ration card households existing in Guntur district. As on 31 March 2011, 55,879 groups have been promoted by DRDA, with a SHG membership of 6, 14,669 spreading over all the mandals in the district. Presuming that there is at least one women member in each of the families having a white ration card, considerable scope exists for formation of new groups. Few NGO s i.e. ASSIST (Chilakaluripet), SASSS (Chowdavaram), Grama siri (Bapatla), Spandana and CARDS (Guntur) have also implemented the SHG-Bank Linkage Programme. Few more NGO s have shown interest in taking up micro financing of SHG s in the district. These NGO s do not have exclusive groups and majority are also members of SHG s promoted by DRDA/Indira Kranthi Patham (IKP). The present position in regards to SHG s in the district is as under: 24

38 Table 2.5: SHPI wise number of groups formed: S.No SHPI No. of SHG s promoted No. of households covered 1 Indira Kranthi Pathakam Project 55,879 6,14,669 2 NGO s Nil Nil 3 Banks Nil Nil 4 Others NA NA Source: NABARD PLP Guntur Table 2.6: Socio economic profile of SHG s of DRDA Total number of SHG s in the district 55,879 Total members covered under SHG s 6,14,669 Average number of members per SHG s 11 Percentage of SC members 30.12% Percentage of ST members 6.36% Percentage of BC members 26.47% Table 2.7: Resources of SHG s: Particulars Total savings of the SHG s Average savings per SHG Total corpus of the SHG Average amount of corpus per SHG Number Rs crores Rs.49,514/- Rs crores Rs.69,157/- 25

39 Present status: DRDA has a district level training center at kotappakonda and 30 mandal level training centers are also set up in project mandals for capacity building of SHG s and VO s. Andhra Bank Institute for Rural Development (ABIRD) and few NGO s are conducting MEDP courses on activities such as Tailoring, Embroidery, Fashion designing, Beautician course, Saree painting to SHG s members. Most of the courses run by ABIRD for SHG members are funded by NABARD. The rating exercise done by the DRDA indicates that 55% of the groups are rated as A, 30% are rated B, 10% are rated as C, and 5% are rated as D, Critical Rating Index (CRI) should be made compulsory for credit linking of SHG s by DRDA before bank linkage. The state government is also supporting the SHG s by way of providing housing under Indiramma Housing Scheme. During the year , 6,507 SHG members are assisted under the scheme with a bank loan of Rs lakhs. The state government is also subsidizing the interest on bank loan under Pavala Vaddi Scheme by reimbursing the SHGs the difference between the bank interest rate and 3% p.a., if the repayments are regular in SHG members. A novel scheme Debt Swapping Scheme for SHGs was implemented during the year under which the high cost debt of 1415 SHGs was swapped by grant of bank loan of Rs lakh to SHG members. In Guntur district IKP-Urban is also being implemented for the benefit of women in urban areas. During the year , under MEPMA (IKP urban), the achievement was Rs lakh. The target for the year is Rs lakh. Federation of SHG s: The DRDA has so far promoted 1766 village organizations (VOs) of the above 1349 VOs have been registered and 417 are yet to be registered under the APMACS act as on 31 March These VOs are again federated at the mandal level and at present 64 Mandal 26

40 Mahila Samakhyas (MMS) are constituted, including specialized MMS for coastal Fisherman, Chenchus and Handicapped people. These MMS are again federated at district level to form Zilla Mahila Samakhya. So far, only one VO was financed by the banks for on lending to SHGs. Source: NABARD PLP Guntur With this background, the study was conducted to find out the scope of activities which are feasible for SHGs to take up a microenterprise, the reasons why matured SHGs are not graduating to micro enterprises and what kind of support is required for the SHGs in the process of graduating into microenterprise in selected villages of Guntur district. Specific Objectives of the study were To find the scope of activities which are feasible for SHG s to graduate into microenterprises. To know what kind of support is required for SHG to form an enterprise. To study the problems faced by SHG s to graduate into microenterprises. To know the impact of MEDP programs on SHG s. The study provides useful finding in identifying major bottlenecks responsible for matured SHGs not graduating into micro enterprises in selected villages of Guntur districts of Andhra Pradesh. The findings of the study are expected to long way in development of microenterprises in Andhra Pradesh will give insight to policy makers to take appropriate policy decisions and also raise relevant issues for further studies. 27

41 CHAPTER - 3 RESEARCH METHODOLOGY A brief description about the selection of topic, sources and method of data collection and analytical techniques used during the study are given below: Selection of Study Area and Sample Units: The Guntur district of Andhra Pradesh state (India) was randomly selected for the study and there are total 55,879 SHG s are functioning in the district which would help and relate to the objectives of the study. Selection of villages formed the next stage of sampling. The villages were selected in a pre planned way such that the villages listed for the survey should be covering all the three revenue divisions (Guntur rural, Narasaraopet and Tenali) of the Guntur district. The total villages covered for the study counts to 14 villages coming under 11 mandals and they are Lemalle, Pedakakani, Gollapodi, Jonnalgadda, Venkatreddy palem, Kaza, Mamallapalli, Pitala vari palem, Gokaraju nalliboena palem, Nizampatnam, Pedaravuru, Komaripudi, Pratipadu and Yellamanda. One hundred and seventy five SHG members from 38 different SHGs were interviewed in their respective villages. SHGs were randomly selected from among all SHGs located in different mandals of Guntur district. Which were promoted by the DRDA and their group age at the time of the study, ranges from 3 years to 15 years. The survey was conducted in the month of May 2011, using a random sampling methodology. These villages have both APL and BPL SHGs and all the SHG s are having members ranging from 10 to 15 members. With the help of stratified sampling the SHG s selected for the study are mature SHG s which means the group should avail loan for more than two linkages from the bank. In this way total of 38 groups were taken in for the sample study. Selection of respondents formed the next stage of sampling. At this stage, the respondents includes the first leader, second leader and 3 to 4 other members in the group are selected for the interview with the help of stratified random sampling. 28

42 Table 3.1: Sampling frame of the study: Sampling frame of the study Village SHG's SHG Village SHG's SHG members members Pedakakani 3 15 Pitala vari palem 2 12 Gollapudi 2 9 Gokaraju 1 5 nanaboeni vari palem Jonnalagadda 6 26 Nizampatnam 2 8 Lemalle 5 19 Pedaravuru 1 4 Venkatreddy palem 1 7 Komaripudi 1 5 Khaza 2 9 Pratipadu 3 14 Mamallapalli 5 24 Yellamanda 4 18 TOTAL SHG s: 38 groups, TOTAL Members: 175 members, TOTAL villages covered: 14 Sources of Data: The data were collected from the primary as well as secondary sources. The members served as the primary source of data, whereas the secondary data was collected from different proceedings of DRDA offices, NABARD website, different books, newspapers, articles, journals, magazines and web sites were also referred for the purpose. Tools and Techniques Used for Data Collection: A well-structured, specifically designed interview questionnaire was used to collect the data. In order to get reliable information, questions covering different aspects of study were framed. The interview schedule was constructed carefully after having discussion with the guide and thorough consultation of available relevant literature so as to fulfill the objectives of the study. Pre - testing of questionnaire: The questionnaire was pre - tested in the field with two to three groups to check whether the information included in the questionnaire would be sufficient to achieve the objectives of the study or not. After the pre - testing, modification were incorporated in it for the purpose of final data collection. 29

43 Data Collection and Analysis: In order to collect and gather primary data, field observation and structured questionnaire survey methods were employed. In addition, information was also collected through discussions and interviews with local NGOs, Banks, DRDA department officials and also interacted with grass roots level workers like community coordinator (CC), Animator, Village book keeper etc. Secondary data was gathered from the records of SHGs, DRDA offices were supplemented by the primary data collected from the group and NABARD website. A wide range of information such as Basic information of the group formation, their age, educational status, caste, savings mobilised, loan disbursed, interest rates, recovery procedures, activities taken up by the group, etc. were ascertained from the SHGs and their members. Besides, different books, newspapers, articles, journals, magazines and web sites were also referred for the purpose. The data collected from each village regarding the structure and profile of SHG members, savings and loans of SHGs, economic and social benefits derived by SHG members etc. has been processed separately and averages of each village are being taken. The analyses obtained from different village are compiled and compared to draw the inferences about the performance of the SHGs in the study area. 30

44 Chapter - 4 District profile Guntur Guntur District is situated on the coastline of A.P.State. River Krishna bound it on the North. On the South by Prakasham, Mahaboobnagar and Kurnool Districts and on the East Bay of Bengal. River Krishna traverses about 250 KMs from North to South-East. The total geographical area of the district is Sq.Kms. (4.14% of the State) comprising 3 Revenue divisions, 57 Revenue Mandals and 713 Revenue villages of which 706 are inhabited. As per the 2001 census, the population of the district is 41, 06,999 of which males are 50.75% females are 49.25% Urban populations is 28.89% and Rural population is 71.11% of the total population, SCs constitute 13.96% and STs 4.42%. The literacy rate of the district is 44.09% and density of population is 361 per Sq.km. The District enjoys the benefit of both South-West Monsoon (63%) and North East Monsoons (28%). Total normal rainfall of the district in all seasons is mm. The total geographical area of the district is 11, 17,066. Hectors, of which 1, 54,288 Ha. (12.86%) is under forests. The barren and uncultivated waste is 40,005.6 Ha. Land put to nonagricultural use is 1, 51,993.6 Ha. And the net area sown is 6, 13,312.8 Ha. 31

45 The major source of irrigation in the district is the canal system of Nagarjuna Sagar and Krishna Western Delta Projects. In addition, the district has got good ground water potential and lift irrigation schemes. The major crops grown in the district are Paddy, Blackgram, Chillis, Cotton and Tobacco. The area under food crops is 7, 51,997 Ac., under pulses 5, 50,078 Ac. and under Non-food crops it is 7, 48,242 Ac. There is good livestock population in the district and dairy resources are being suitably exploited by Sangam Dairy and many other private dairy units. Besides other minerals available in the district, lime stone is being utilised by the cement factories at Macherla, Tadepalli and Piduguralla. The public in the district are politically highly conscious and take active interest in political matters. In the delta area social tensions are generally observed between Daliths and Non-daliths. In the town areas particularly in Guntur Town, Piduguralla, Dachepalli, activities of rowdies are 32

46 fairly common. In the upland areas of Narasaraopet, Sattenapalli and Gurazala Sub-divisions, the incidents of bodily offences is high and use of explosives is a common phenomenon in a number of villages in Macherla, Gurazala, Narasaraopet Rural, Piduguralla and Sattenapalli Police circles. At present faction in Palnadu belt is remarkably come down. Extremist activities are existing in the limits of Gurazala Sub-division, Piduguralla Circle, part of Sattenapalli Circle of Sattenapalli Sub-division, Narasaraopet Rural Circle and Vinukonda Circles of Narasaraopet Sub-division. STATISTICS PERTAINING TO GUNTUR DISTRICT Area Sq. KM. Boarder districts Prakasam, Nalgonda, Mahaboob Nagar & Krishna Population 43 Lakh No. of Assembly Constituencies 19 No. of Parliament Constituencies 4 No. of Mandals 57 No. of Revenue Villages 729 No. of Panchayaths 1051 No. of Municipal Towns 10 (Including Guntur Municipal Corporation) No. of Bank Branches 235 No. of Industries 20 Large & Medium Industries No. of Small Scale Industries 3000 Principal Crops Paddy, Cotton, Chitties, Turmeric, Groundnut, Blackgram, Tobacco, Ted Gram, Vegetables. 33

47 CHAPTER - 5 DATA INTERPRETATION AND ANALYSIS The field study has been conducted in Guntur district of Andhra Pradesh in the month of May, covering 11 mandals and 14 villages of Guntur district. The interaction with 38 sampled groups which are termed as mature self help groups i.e. who have availed loan for more than twice and total of 175 members have been interviewed with a structured questionnaire. Thus, the basic data related to self help groups have been presented below: Field Level Survey: Group Characteristics: Number of SHGs Studied 38 Range of Age of the SHGs Studied 3 years to 15 years Size of SHG members 10 to 15 Average group size Range of Savings by SHGs Rs.50 to Rs.100 Average savings by the Groups Rs.36, 350 Average funds with a SHGs (loans plus) Rs.4, 99,300 Average loan size (cumulative) of SHGs Rs.3, 63,300 SHGs received training 81.5% (orientation), 18.5% (IGAs) Member characteristics No. of SHG Members Interviewed 175 Range of repayment from group per month Average corpus fund with the groups 1, 35,950 Average first loan taken by the groups from the banks 26,500 Average Last loan taken by the groups from the banks 3, 63,300 Average outstanding amount of the groups to the banks 1, 93,840 34

48 PROFILE OF THE SELF HELP GROUPS (SHG s): The basic data of the beneficiaries have been collected from the respondents which accounts to an average of 10 members per group and their basic profile which includes AGE, EDUCATION AND CASTE of the sampled beneficiaries are collected and presented below. Age profile of the SHG s: The age profiles of the total 394 SHG members are been given below: Table 4.1: showing the Age profile of the SHG AGE MEMBERS PERCENTAGE & ABOVE TOTAL It is observed from the above table that 58.88% beneficiaries are in age group of years and 16.24% beneficiaries are in age group of years from this it is evident that 75.12% of the beneficiaries are in the age group of years which belonged to working population. Amongst the total sampled beneficiaries of 394 members, 16.24% people belongs to age group, where as only 8.63% of beneficiaries are more than 50 years old and are availing the ABHAYA HASTHAM scheme introduced by government of Andhra Pradesh. This may be concluded that most of the sampled beneficiaries i.e. 75% are in the working age group reflecting huge demographic advantages in the Guntur district. 35

49 Education status of the beneficiaries: Table 4.2: Showing the educational status of the beneficiaries MEMBERS PERCENTAGE ILLITERATE PRIMARY HIGH SCHOOL GRADUATION TOTAL Pie chart 4.1: showing the distribution of the educational status It is observed that 44.42% of the beneficiaries are illiterate, while 38.58% beneficiaries are educated up to primary level. Educated beneficiaries like high school and graduates were only 17% of the total beneficiaries. Thus from the above it is clear that 44.42% beneficiaries are illiterates who are dependent on either first leader of the group or animator, thus these people need to be educated with basic knowledge and awareness so as to make them self dependent.17% of educated beneficiaries includes, 16.75% of high school and 0.25% of graduates. 36

50 Distribution of sample beneficiaries according to social group: Table 4.3: showing the social group of the beneficiaries. Caste MEMBERS PERCENTAGE SC ST OBC MINORITY GENERAL TOTAL Column chart 4.2: showing the distribution of social group of the beneficiaries It is interesting to note that 11.17% of the total beneficiaries were Schedule Castes (SC) and 40.61% of the beneficiaries were from Other Backward caste (OBC) and 5.08% were from minority community % of the total beneficiaries belonged to general category that is upper caste. This may be concluded that majority of the beneficiaries were from downtrodden section of society consisting of SC, ST, OBC and Minority. 37

51 Problems faced by Self Help Group (SHG) to graduate into microenterprises In order to get the views from the matured self help groups, the question has been raised as what is hindering them to form as a unit and start a microenterprise. Thus the following parameters have been kept and responses are been collected, which is presented in the table below: Table 4.4: showing the problems faced by SHG to graduate into microenterprise Parameter RESPONSES PERCENTAGE Lack of entrepreneurship Skill and knowledge Marketing Value chain Technology Lack of group cohesiveness Finance Awareness Risk Dual responsibility Total Responses From the total 175 sampled beneficiaries, only 143 members are involved in Income Generating Activity and questions were asked regarding the problems they face to graduate into microenterprise. There were 160 responses from the 143 members that means a single responder has different problems faced with the following parameters listed in the above table. Lack of entrepreneurship is one of the major problem with the SHG to graduate into microenterprises as shown in the above table and for the study, lack of entrepreneurship would mean the SHG are lacking in initiativeness to take up any activity. Duel responsibility means the women SHG members besides doing their household activity shouldering family responsibility, doing their IGA activity were able to provide additional 38

52 income to their family; thereby it is one of the obstacles for the beneficiaries to spare time for the IGA activity as well as family responsibility. 16% of the sampled groups are facing the problem of group cohesiveness, when interacted with the groups the response would be their inferiority complex, mindset and feel like they might arose clashes as soon as they start the unit, absence of group management etc. Pie chart 4.3: showing the problems faced by the SHG to graduate into microenterprises The sample research revealed that 16% of self help group are not receiving benefits because of lack of group cohesiveness, while about 14% of SHG s are encountering the problem of deul responsibility. In respect of marketing skills 12% of SHG s are lacking in it, while about 12% of SHG s lack in entrepreneurship skills. 39

53 Kind of Support to be provided to the SHGs to graduate into Microenterprise: 104 out of 160 responses are facing problems to graduate into microenterprise which are majorly like Lack of group cohesiveness, deual responsibility, marketing, lack of entrepreneurship, risk taking ability etc. support need to be provided in the field of marketing to link their products to the local markets, mandal mela s, exhibitions in the towns and cities and establishing a stall to market their product. From the study 11% of SHG women are avoiding risk, which is hampering their development. Thus, DRDA,NABARD and NGO s should play a active role in educating them the positive effects of risk and how it helps them to run their business successfully. Entrepreneur must pocess the qualities of risk taking ability but the quantum of risk they take differce from one person to the other but basic qualities and skills should be imbibed in them such that they can initiate their microenterprise. 16% of the SHG in the study are facing the problems of group cohesiveness which is the major hurdle for them to graduate in to microenterprise, SHG members should be thought about different ways by which they can be in group and give few successful examples of the their fellow groups, motivate them better to from in a group and start up the enetrprise. There is lot more to be needed as a support to the SHG s in terms of the financial assistance, technology upgradation, value chain management etc. which NABARD, DRDA, BANKS, NGO s should consider in order to elevate them from the present situation, to grew them as an initiator or entrepreneur and start microenterprise activity. 40

54 Case Study 1 : Success story of Madhurima Mahila Podupu Sangam, Pitla Vari Palem Village Madhurima mahila group has started in the year 2000 and consisting of 10 members. The group leader Rama Devi has initiated to do the business of Pickle making units in the year At present the groups is able to produce a turnover of 15,00,000, the quantum of pickle s of about 10 tons and are able to generate a profit of 25% on the turnover. Homemade pickles of 14 varieties, other cooking powders are produced with good quality are able to get demand in the market. DRDA department have linked them to market their products and opened a stall in the exhibition in Hyderabad, Pragathi maydhan- new delhi, other exhibitions in gurgoan, dehradum etc and also doing direct marketing in the local madals. The interesting fact about the group is that only three members are actively participating in the business and the other members are acting as sleeping partners and helping financial assistance to the active members. Thus, this could be one of the best examples to the other groups for forming as a unit and take up the enterprise. 41

55 Case Study 2 : Guntur Food Co-op, Pitla Vari Palem Village Asian Heritage Foundation with the help of an NGO- JIYO foundation has found a cluster of SHG women who are engaged in common activity i.e. pickle making in P.V.Palem. Total 43 groups have been found of which 3 to 4 members from each group were selected to form a new group i.e. Guntur Food Co-op. World bank has granted a loan of rupees 13,43,000 through AHF and this organization is aiming to have capital investment of rupees 5,00,000 which they are planning to avail as a loan from the bank and working capital will be adjusted through the monthly savings of the group members. Every three months work shop is provided for members at new Delhi on different activities like bookkeeping, computer training, hygiene class, catering classes and also aiming for herbal activities also. Arbindo ashramam provides them with food, lodging and incentives. All kinds of pickles both vegetarian and non vegetarian, sprinkles, all types of spices, sweets, snaks, papads, cattering services etc are the present varieties of products which are presently accepted for orders. Marketing is done through the links provided by the AHF and at present the is been linked with all the retail outlets like Reliance, Subhiksha, More, Spensors, other exhibition in Hyderabad. In Delhi links with Navadhanya, Taj group of companies etc were been provided but the group is waiting for the registration to be done as a cooperative society and licences from FPO. Orders on hand from Tenali, Chennai, Vijyawada and also monthly orders from Taj group of companies. They are also planning to get licence to export their products to China and Nepal.AHF has four clusters of this kind in different places of Andhra pradesh like Srikalahasti, Gatuppal, Vekatagiri and P.V.Palem. 42

56 Details of the activities taken up by the SHG members: The details of the sample beneficiaries who have utilized the financial support (loan) availed from the financial institution and taken up activities like Agricultural, Animal husbandry, Handicraft & handlooms, services, small business and personal purposes, the details of which are shown in the table below. Table 4.5: showing the details of the activities taken up by the SHG members through loan SHG members availed loan for the activity Activity Members PERCENTAGE Agriculture based Animal husbandry/dairy Handicraft & Handlooms Services Small business Personal Total NOTE: Activities taken up by the SHG members are clubbed and shown in the above table; details of the activities clubbed under different heads are shown in the table below: Agriculture based Animal husbandry/dairy Handicraft & Handlooms Services Small business Personal Crop Production Milch cattle Sheep rearing Poultry Fishery Paper plates Plastic mats Pit looms Tailoring Hotel Cycle shop Mineral water plant Chairs Sweet Pickle Kirana shop Stamps Vegetable shop Fruit shop Mango House building Marriage Education Investing in spouse business Self needs 43

57 Bar chart 4.4: showing the details of the activities taken up by the SHG members through loan About 25% of the SHG members are using financial assistance for agriculture purpose, where as 22% of SHG members are connected with Animal husbandry/dairy and about 11% accumulate to handicrafts & handlooms but it is also note that 18% of SHG members are using the financial assistance for personal purposes. It is observed that in Guntur district most of the activities are farm based as we have seen above, 58% of the activities taken up by the sampled beneficiaries include agricultural crop production, milch animal and handlooms & handicrafts. It is interesting to note that these activities are traditionally imbibed by the beneficiaries from their ancestors. Even in respect of personal purpose nearly 25% of SHG members are using money for the purpose of constructing their own house, children s education and also investment in spouse business, details of which are presented in the table below 44

58 Table 4.6: showing the details of the SHG members who have availed loan for personal purpose Personal Purpose Item Members Percentage House building 8 25 Marriage Education 8 25 Investing in spouse 8 25 business Self needs Total NOTE: In the above table self needs purpose includes food, cloth and health Pie chart 4.5: showing the details of the SHG members who have availed loan for personal purpose Income of the SHG members availing from their respective enterprise: The sampled beneficiaries have been asked about their monthly gross income, which they realize from their respective enterprises. The table gives the picture of the different activities which the 45