Rural Poverty Alleviation, SHGs and Panchayats

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2 Rural Poverty Alleviation, SHGs and Panchayats D Narayana* (*with assistance from Jenatte Andrews)

3 Rural Poverty Alleviation, SHGs and Panchayats 1. Introduction In the 1970s an ambitious credit scheme called, 'Integrated Rural Development Programme' (IRDP) with a considerable element of subsidy was launched in India to alleviate poverty. It was supply-led, not a demand led credit program, and the clients did not have the choice over 'purpose' and 'amount'. The underlying assumption was that poor lacked productive assets and by providing credit they would acquire assets and cross the poverty line. Loan and subsidy became the central point and the prgoramme did not have the desired effect (Dasgupta 2001). In , Development of Women and Children in Rural Areas (DWCRA) was launched as a sub-scheme of IRDP. The focus of DWCRA was on economic activities for rural women to be taken up in groups. The concept of the group was to enable women to take a larger amount of loan, so that by pooling their individual loans they could start viable non- farm activity. DWCRA too met with limited success (Madheswaran and Dharmadhikary 2001). Despite the above mentioned schemes and several others [Training Rural Youth for Self-Employment (TRYSEM), Supply of Improved Toolkits to Rural Artisans (SITRA)] the credit and poverty problem in the rural areas continues. Since the 1970s, numerous Non Government Organizations (NGO) had begun experiments in micro financing to address poverty issues and create self-employment for women. Official interest in informal group lending took shape during when National Bank for Agriculture and Rural Development (NABARD) supported and funded an action research project on, 'Savings and Credit Management of Self Help Groups' of an NGO in Karnataka (Dasgupta 2001). Following a survey of 43 NGOs in 11 states in India to study the functioning of SHGs in , NABARD impressed upon the Reserve Bank of India to come out with a circular on July 24, 1991 advising the commercial banks to extend credit to the SHGs under the pilot project of NABARD. The results 1

4 of the pilot project run by four NGOs 1 extending credit to 1706 SHGs were found to be quite encouraging. The RBI constituted a working group in 1994 to review the functioning of NGOs and SHGs and accepting the recommendations advised the banks that lending to the SHGs should be considered as an additional segment under priority sector advances. The SHGs, thus, became a component of Indian financial system. The SHGs have been the focal point of rural credit, self-employment program and poverty alleviation since then. In 1999, the Ministry of Rural Development restructured the numerous programs and introduced the new self-employment program called Swarnajayanti Gram Swarozgar Yojana which are implemented through SHGs. Following the decentralisation initiative in Kerala, SHGs called Kudumbasree are being formed to implement poverty alleviation programs. This note presents the trends in SHG formation in the macro and in two Panchayats of Kerala. The note is organised in six sections. Section 2 presents the broad macro picture of SHG growth in India. Section 3 is a description of the two Panchayats. Section4 discusses the SHGs in the two Panchayats. Sction5 analyses the SHG membership in one ward of one of the Panchayats. Section 6 concludes. 2. Growth of SHGs in India The SHGs have some interesting features. One of the important features is the homogeneity in the group in terms of social and economic status. The group has a membership between 10 and 20, and majority of the groups is of women. The basic functions envisaged are saving mobilisation, creation of common fund out of saving, availing of credit from banks, and loaning to members (Table 1). The number of SHGs have continued to grow in the 1990s and by March 2000 there were about SHGs in India with linkage with banks (the total may be larger as there are 1 Interestingly, three of the four NGOs were in South India and one in Orissa: Association of Sarva Seva Farms, Madras- 214 SHGs; People's Rural Education Movement, Behrampur- 829 SHGs; Assistance for Development Action, Madurai- 313 SHGs;and Community Development Society, Alappuzha

5 SHGs without linkage and waiting for linkage). Over 80 percent of the groups are those of women and over 10 lakhs of households have come under SHGs. Interestingly, about two- thirds of the linked SHGs were located in the southern region of the country (Table 2). As already mentioned, in 1999, the Ministry of Rural Development launched a new self employment program named Swarnajayanti Gram Swarozgar Yojana (SGSY). SGSY has been devised keeping in view the positive aspects and deficiencies of the earlier programs such as IRDP, DWCRA, TRYSEM, SITRA, GKY, and MWS. SGSY has been launched with a view to achieve the desired linkages among the programs and the much needed focus on the substantive issue of sustainable income generation. The number of SHGs formed under SGSY till November 2000 in the Indian states is presented in Table 3. It is evident that like the overall numbers of SHGs those under SGSY are also concentrated in the southern region of the country. Kerala has seen a fairly widespread growth of SHGs under the NGOs in the 1990s. One of the major donor agencies has been funding NGOs since to sponsor SHGs and as of 2001 there are about 10,000 SHGs under 17 NGOs supported by it. One of the active members of this agency would put the total number of NGOsponsored SHGs in Kerala to be around 30,000. In Kerala, a new dimension to the SHG movement has been added by the decentralisation of administration since The Panchayats, or LSGIs, have begun sponsoring SHGs (called Kudumbasree), largely of poor women, to channel poverty alleviation scheme funds. The pace of formation of Kudumbasree units has picked up speed in recent years and it is difficult to come up with an estimate of the total number. But their numbers are large (see a later section for the numbers in two Panchayats). These Panchayat programs and the central government self-employment program for poverty alleviation called Swarna Jayanti Gram Swarozgar Yojna have SHG at the core. Unfortunately both these initiatives have all the ingredients like (i) target, (ii) subsidy, (iii) both bureaucratic and political involvement in the credit process, (iv) insistence on entrepreneurial income generating activity, and (v) lack of understanding of the nuances of rural financial requirements (Dasgupta 2001). 3

6 3. The Two Panchayats The two Pachayats selected for the project are North Mararikulam in Alappuzha district and Kottathara in Wayanad district of Kerala. N. Mararikulam has a population of about 29,000 persons in an area of square kilometers with a population density of 1700 persons per sq. km. Kottathara has a population of about persons in sq. kms. with a density of 530 persons per sq. km. The two Panchayats are strikingly different in terms of the economic activities carried out. In Mararikulam, almost 73 percent of the land area is house plots with the rest being available for the cultivation of field crops. As the house plots are used for coconut cultivation it could also be said that almost 71 percent of the land area is under coconuts. Another 17 percent of the area is under paddy with the rest being devoted for miscellaneous crops. About 1600 households (out of a total 6737 households) are dependent on fishing with three wards (old wards 5, 8, and 10) almost entirely consisting of fisher folk. Coir sector is one of the major sources of livelihood for the households in Mararikulam Panchayat. Around 1460 men and 635 women work in large and small coir factories numbering 16. About 6000 women in the Panchayat also carry out coir spinning. In addition to the traditional fishing and coir making, there exists a large public sector steel complex and various small-scale industrial units in the Panchayat. Kottathara is largely agricultural with about 4400 landowners out of whom over 3000 are agriculturists. Among the 1275 who own below 10 cents of land, the majority is agricultural labourers. Paddy and coffee are the main crops grown in the Panchayat, and pepper follows closely behind. The other crops grown are areca, coconut, rubber, ginger, banana, and tapioca. Non-farm employment is low in the Panchayat. There are a few brick-making units, which work during the dry months of the year. A women's industrial society with about 56 members used to make notebooks, pads, file covers etc. It is defunct now. About 50 families are involved in traditional crafts. And some 4

7 persons from the Panchayat get employment in few of the diamond polishing units situated in the neighbouring Panchayats. Turning to the amenities available in the houses in the two Panchayats, N. Mararikulam is more developed than Kottathara with higher percentage of houses being electrified, with sanitation and with water supply in the former (Table 4). As regards electrification N. Mararikulam reports over 40 percent point higher level. Further, with regard to all the three amenities the inter-ward variation is very high in both Panchayats. The wards reporting lower percentage with regard to one amenity also report lower levels with regard to the other two amenities. 4. The Kudumbasree and SHGs in the Two Panchayats It is evident from Tables 5 and 6 that the proportion of households who are members of Kudumbasree or SHGs sponsored by NGOs (both will be called SHGs henceforth) is high in both the Panchayats. In N Mararikulam about 57 percent and in Kottathara about 67 percent of households are members of SHGs. Like the inter-ward variation in the amenities discussed above membership in SHGs also shows variation across the wards. A further difference is the proportion of households covered by the type of SHG, whether Panchayat sponsored or NGO sponsored. While in N Mararikulam about a third of all SHGs are those sponsored by the NGO, in Kottathara, close to 40 percent of all SHGs are sponsored by the NGO. Whether NGO sponsored or Panchayat sponsored the SHGs have both above poverty line households and below poverty line households. The Kudumbasree units have mostly come into existence in the last one year in N Mararikulam and during the last six months in Kottathara. The NGO sponsored SHGs have been in existence for over four years now. This difference shows up in their borrowings as well. Most of the Kudumbasree units borrow from their own accumulated savings and NGO sponsored SHGs seem to have been linked to the commercial banks, which facilitates their borrowing from banks as well. In Kottathara, it was observed that for every one rupee saving by the SHG three to four rupees have been borrowed from the banks. 5

8 5. The Households Left Out of the Kudumbasree and SHGs This section analyses the data obtained in a complete listing of the households of one of the wards of N. Mararikulam selected at random. The section seeks to present the characteristics of the households who have members in SHGs and who are not members of the SHGs. At the time of writing, the survey of 335 households (out of 574 in the ward) has been completed. Of the 335 households, 266 had one of the members of the household in a SHG (NGO sponsored, SGSY, or Kudumbasree) and 69 households had none. Thus, almost 80 percent of the households of the ward are covered under SHGs. (Note that this percentage squares well with that given in Table 5 based on the numbers given by the SHGs). It is observed that distribution of households by the number of rooms in the house shows no significant difference between SHG member and non-member groups, except that the proportion of one room tenements was higher among SHGs (Table 7). Similar is the pattern with regard to the distribution of households with floor material of the house. Considering the monthly income of the households, it may be seen that almost all the SHG households report a monthly income below Rs whereas among non-shg households about 13 percent report income above Rs 2000 per month. As reported income is supposed to be subject to biases of various types and is not considered a very good indicator of the economic status of a household, ownership of asset has also been considered. It is observed that about 40 percent of the non-shg households have no assets, or own a radio or bicycle only. Going by the income criteria, the non-poor do not seem to be falling into the SHG member category but a small proportion of the poor are excluded (83 percent of the non-shg members with low incomes). Taking thge asset criteria, a small proportion of the poor do not seem to fall in the SHG member category (about 40 percent of the non-shg members are asset less). Whichever criteria we take the proportion of total poor that fall outside the SHGs would be between 10 and 18 percent. Any scheme 6

9 designed to reach the poor through the SHGs will fail to reach this group of poor households. 6. Conclusion SHG coverage in Kerala is good. A very high proportion households fall under the mebership of one type or another of SHGs. Those households not coming under the SHGs fall into two types. The extremely poor who do not have the ability to save on a regular basis, or not having an eligible female member; or the rich who do not need such an institution for social support. Any programme operatinalised through SHGs could reach the poor or those who are just above the poverty line, excluding only a small proportion of the poor. 7

10 Table 1 Some Basic Features of SHGs Promoted by NGOs/ Banks 1. Organization Homogeneity in terms of economic/ socio-economic status, common identity of activities etc. 2. Nature of target groups Generally poor and weaker sections of the people in rural areas and particularly women. 3. Management Selected/ elected leader and duty generally rotated. Holds meeting regularly. 4. Financial instruments 4a. Common fund Created out of saving, interest earned on loan, donation etc. 4b. Savings mobilisation While in certain cases no fixed rate of savings, in some cases regular and fixed rate of savings, and in some cases as per capacity of the members. 4c. Loaning Decided by the purpose, quantum and the resources available with the SHGs. Purpose of loans for individuals include consumption, clearing outside debt, social, medical, education, business, agriculture, etc., and loans for common production activities. 4d. Repayment period Generally lower than prescribed by banks. 4e. Rate of Interest Varies from 12 to 20 percent. In a few cases the interest rates are determined by the NGOs. 5. Linkage with banks Banks treat SHGs as borrowers. Source: Namboodiri and Shiyani, Table 2 Highlights of the Progress of SHGs' Linkage Programme 1. Cumulative number of SHGs linked up to March Percent of women groups Number of participating bank branches Number of States and Union Territories covered Number of districts where SHGs were linked Number of NGOs participating Number of households covered (1000) Disbursement of bank loans as of March 2000 (Rs lakhs) 9807 (a) Commercial banks 5797 (b) Regional rural banks 3662 Co-operative banks Loan per family (approx. In Rs) Region-wise share of cumulative number of SHGs linked as on March 2000 i. Southern 65 ii. Eastern 10 iii. Central 11 iv. Northern 3 v. Western 10 Source: Namboodiri and Shiyani,

11 Table 3. SHGs under SGSY, Indian States (Nov. 2000) State SHGs formed Number taking up economi c activities Percentage of Disadvantaged SC* ST** Women Handicapped Credit Disbursed (lakhs) Subsidy Disbursed (lakhs) Andhra Pradesh Assam Bihar C Garh Gujarat Haryana Him. Pradesh Jharkhand Karnataka Kerala Madhya Pradesh Maharastra Orissa Punjab Rajasthan Tamilnadu Uttar Pradesh Uttaranchal West Bengal All India Note: Credit and subsidy disbursed in FY up to Nov *SC=Scheduled Caste, ST=Scheduled Tribe Source: Mohiuddin et al

12 Table 4. Distribution of Houses with Amenities in the Panchayats Ward Number of Households Population N. Mararikulam Scheduled Caste/ Tribe Population Electrified Houses Number (%) With Sanitation Number (%) With Water Supply Number (%) (82.61) 515 (93.30) 507 (91.85) (86.58) 516 (89.90) 531 (92.51) (75.40) 391 (78.83) 376 (75.81) (90.01) 557 (97.55) 550 (96.32) (92.29) 572 (95.81) 505 (84.59) (93.14) 412 (97.40) 408 (96.45) (84.95) 552 (97.18) 316 (55.63) (85.37) 422 (93.57) 408 (90.47) (86.32) 402 (94.81) 395 (93.16) (87.68) 390 (94.20) 319 (77.05) (78.64) 453 (83.43) 438 (80.66) (83.90) 391 (95.37) 386 (94.15) (82.07) 304 (89.41) 296 (87.06) (59.36) 245 (65.51) 251 (67.11) Total (6.82) 5680 (84.31) 6122 (90.87) 5686 (84.40) Kottathara 1 & (27.88) 393 (60.37) 578 (88.79) 479 (73.58) 3& (38.35) 408 (61.45) 570 (85.84) 480 (72.29) 4& (59.13) 124 (20.60) 331 (54.98) 421 (69.93) (21.34) 124 (33.33) 316 (84.95) 310 (83.33) (25.45) 109 (31.32) 306 (87.93) 331 (95.11) 9& (26.32) 206 (31.79) 452 (69.75) 448 (69.14) Total (33.59) 1364 (41.52) 2553 (77.7.2) 2469 (75.16) 10

13 Table 5. The Distribution of SHGs across Wards and by Sponsor in North Mararikulam Panchayat Ward No. No. of SHGs No. of Members No. of BPL Members HH Kudu SGSY NGO Kudu SGSY NGO Kudu SGSY NGO (12) 330 (12) (7) (3) (6) 90 (4) 366 (15) 126 (6) (9) Total (124) (49) Note: Kudu- Kudumbasree; SGSY- Swarnajayanti Gram Swarozgar Yojna. The figures in the last column first panel are %SHG members in total households and in the second panel % of BPL households in the total. %HHs covered (38.59) (52.09) (34.07) (37.48) (29.82) (50.59) (35.74) (39.69) (26.42) (19.08) (34.07) (37.32) (33.53) (33.70) (36.19) 11

14 Table 6. The Distribution of SHGs across Wards and by Sponsor in Kottathara Panchayat Ward No. No. of SHGs No. of Members No. of BPL Members HH Kudu SGSY NGO Kudu SGSY NGO Kudu SGSY NGO %HHs covere d (34.87) (28.16) (49.67) (6) 46 (4) (8) (38.71) Total (11) (36.19) Note: Kudu- Kudumbasree; SGSY- Swarnajayanti Gram Swarozgar Yojna. The figures in the last column first panel are %SHG members in total households and in the second panel % of BPL households in the total. The numbers shown in column 2 and the last column are for wards 1&2, 3&6, 4&5, 7, 8, 9&10 respectively. Table 7. Distribution (%) of Households by Economic Status and Membership of SHGs in N Mararikulam, Ward 2. Number of Total Rooms in the House SHG Non SHG Material used Soil Cement Tiles for Floor SHG Non SHG Monthly Below Income of Household (Rs) SHG Non SHG Ownership of Assets None Radio only Bicycle only One or more of TV/VCR/ Fridge/Mcycle /car/g Stove SHG Non SHG

15 References Mohiuddin, A., Hemalatha Prasad, C., Rizwana, A., Sridhar Seetharaman., Ramana Rao, D. V.V., and Yadappanavar, A.V Activities for women under cluster approach and their capacity building: SGSY- an evaluation study. Orientation Programme on SGSY for District Level Officials. National Institute of Rural Development, Hyderabad. Dasgupta, R An Informal Journey through Self-Help Groups. Indian Journal of Agricultural Economics. 56(3): Madheswaran, S., & Dharmadhikary, A Empowering Rural Women through Self-Help Groups: Lessons from Maharastra Rural Credit Project. Indian Journal of Agricultural Economics. 56(3): Namboodiri, N. V., & Shiyani, R.L Potential Role of Self-Help Groups in Rural Financial Deepening. Indian Journal of Agricultural Economics. 56(3):