A study on the performance of SHG-Bank Linkage Programme towards Savings and to beneficiaries in India Prof. Noorbasha Abdul, Ph.D. Professor of Commerce & Management, Acharya Nagarjuna University, Nagarjuna Nagar, Guntur, AP, India. Bolla Madhavi, Assistant Professor in the Department of Business Administration, Newton's institute of engineering Macherla, Guntur, AP, India. Abstract In India, the beginning of microfinance movement could be traced to self-help groups (SHG)- bank linkage programme (SBLP) started as a pilot project in 1992 by NABARD. Since their inception, SHGs have been playing a key role in poverty alleviation, women empowerment, and mobilization of savings and for achieving sustainable economic growth in India. So the present study made an attempt to review the growth and performance of SHG- Bank linkage programme in Andhra Pradesh and India with reference to the three major institutions- Commercial banks, Cooperative banks and RRBs. Key words: commercial banks, RRBs and cooperative banks. Introduction Microfinance institutions in India have emerged in the late 198s in response to the gap in availability of banking services for the unserved rural population. Their business proliferated in 199s under the open economy regime. Most of the institutions that entered the field were from the social sector and hence they took legal form of trusts or societies. In India, micro finance operates through two main channels: 1. Banking system through the SHGs under SHG- bank linkage programme and JLG bank lending programme; and 2. Micro finance institutions lending through individual and group approach. Need for the study Access to financial services is one of the keys to alleviating poverty and achieving sustainable economic growth. The larger part of the population in developing countries like India lives in rural areas in which agriculture is the main activity. However, majority of the farmers in India are small and marginal farmers. Due to low size of agriculture land, they are unable to get finance from institutional sources. In spite of this, formal financial institutions often avoid financing rural areas due to the perceived higher costs and risks. It is observed that there is a gap between agricultural farmers and financial institutions. To minimize this gap microfinance concept has been introduced. So the present study has focused on the development of microfinance in India. Objectives To study the agency wise growth and performance of SHGs in terms of savings, loans disbursed, outstanding and non performing assets in India vis a vis Andhra Pradesh; and To examine the contribution of NABARD and the RBI with respect to the development of micro finance in India. Significance of the study: Present study is significant to all the stakeholders like government, banks, SHGs and regulators to name a few. It is also significant for the research community and also useful for the policy makers to www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 85
frame new innovative policies for the benefit of poor and also for the economic development of country. Methodology The present study is descriptive in nature based on secondary data. Data had been collected through the books, web sites, research papers, reports of RBI and NABARD. The study was conducted to understand the growth trends in number of self help groups, disbursements, outstanding and the status of of commercial banks, cooperative banks and RRBs. Scope of the study The scope of present study is confined to Andhra Pradesh state and India only. As far as banks are concerned it is restricted to commercial banks, cooperative banks and RRBs. The period considered for the study is from 211 to 216. Review of literature Ø Karmakar (1999) has discussed the multi-agency approach to rural credit as an integral component of the credit system. Various factors have led to the poor performance of rural credit system such as poor resource base, low business and outreach levels, poor loan recovery performance, poor income margins due to increasing management costs and inadequate lending margins. Rural credit agencies are constrained by inadequate managerial and operational skills, and weak human resources due to poor training. Rural credit growth has been further hampered by the high loan default rate (exceeding 5 per cent) and the rising level of non-performing assets. Karmakar has made an in-depth study of the existing rural 41 credit delivery systems and has made many valuable suggestions for strengthening and restructuring the system, based on Asian financial role models. Ø Singh (21) conducted a study on the socio-economic impact of microfinance programme in Uttar Pradesh. In order to study the impact, rural areas of Kanpur district were selected on account of highest number of credit linked SHGs as compared to other districts in the state. For the purpose of the study, out of 11 SHGs linked with RRB, one group in Beridayria village was selected. It was found that in pre-shg situation most of the members were dependent on income from labour but in the post-shg situation their main source of income was dairy. The survey showed that simple and quick credit delivery with lower interest rates in SHGs replaced the money-lenders. The study showed that the average value of assets increased by 46 per cent and the annual income per household increased by 28 per cent in post-shg periods. The study also revealed that the commercial banks were not prompt in linking SHGs for loans. Ø Mishra et al. (21) studied the impact of rural SHGs on generation of income and employment among the beneficiaries identified the major constraints and problems faced by the groups, and suggested measures for overcoming these problems in Faizabad district of eastern Uttar Pradesh. For the purpose of the study, five SHGs in Amaniganj block of the district were selected randomly. It was observed that SHG members were mainly from OBC community whose main occupations were agriculture, small businesses, labour etc. The results of the survey showed that SHGs have helped to increase the income of the participants by 1 to 15 per cent.. It was suggested to involve Commercial Banks, RRBs and Primary agricultural cooperative societies to provide liberal credit at cheaper interest rate to the poor through SHGs. Ø Basu and Srivastava (25) in their Rural Finance Access Survey-23 conducted jointly by World Bank and National Council of Applied Economic Research, India, highlighted the inadequacies in rural access to formal finance and the exploitative terms of informal finance, which provided a strong need for innovative microfinance approaches. The survey took a sample of 6 rural households from two Indian states- Andhra Pradesh and Uttar Pradesh. The study indicated that rural banks serve primarily the needs of the richer rural borrowers and the rural poor faced severe difficulties in accessing savings and credit from the formal sector. The survey showed that 66 per cent of the large farmers had a deposit account and 44 per cent www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 86
had access to credit. While only 3 per cent of the marginal farmers had a bank account and 87 per cent had finance Ø Ramachandran and Balakrishnan (28) have conducted a study of SHGs in Kanyakumari District to examine the pre and post SHG status of SHG members and impact of SHGs in empowering women. The study is based on a sample of 12 SHG members selected on random sampling basis. The study has revealed that after joining SHG the respondents have improved status both social and economically. The study has concluded that the SHGs have the power to create a socio-economic revolution in the rural areas of our country. SHGs have not only produced tangible assets and improved 6 living conditions of the members but also helped in changing much of their social outlook and attitudes. In the study area SHGs have served the cause of women empowerment, social solidarity and socio-economic betterment of the poor. Ø Krishna Reddy, Ch. V., (213) has made an empirical study on the contribution of SHG- Bank linkage programmes on the empowerment of women in Guntur district of Andhra Pradesh. The study has found out that the Institutional credit agencies like Commercial Banks could effectively replace the deceptive roles of the private NGOs and the SHGs. When the Government intervenes into the operation of the SHG- Bank linkage programme, many hitherto oppressed and marginalized people get benefitted and the ultimate result would be employment generation and poverty eradication in real terms. Ø Devi S. Kavitha (214) has reviewed on the topic Micro Finance and Women Empowerment this topic in this article is the presentation in a succinct and applicative manner of several decision making processes. Microfinance gained impetus primarily because it promised the social and economic uplift of women in developing countries across Asia, Latin America, and Africa. Countries in these regions have patriarchal societies that harbor genderbiased traditions preventing the liberation of women. The ability to generate and control their own income can further empower poor women. Research shows that credit extended to women has a significant impact on their families' quality of life. Performance of commercial banks related to SHG-BLP in India (Rs.in lakhs) Year Loan Loans 216 414111 93388.77 2518497.29 3714562.48 232139.69 215 4135821 66367.47 1733412.66 3447.57 246686.47 214 42281 663145.63 163749.35 2938841.31 22492.2 213 476986 553257.5 13385.7 2663944.38 217598.68 212 461886 415298.4 99424.49 258128.86 165541.56 211 4323473 4236.42 972455.27 2188325.67 16698.99 25 15 5 From the above chart, it is clear that the number of SHGs had decreased from 4323473 to 414111 during 211-16 which is 4.24%. The amounts of savings, disbursements, outstanding were increased www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 87
at constant rate during the period of 211-16. Since 211 onwards have also increased except in the year 214. Performance of Regional Rural Banks relating to SHG-BLP in India (Rs.in lakhs) Year Loan Loans 216 2256811 248428.13 916492.88 161934.5 16429.49 215 2161315 234653.37 772522.19 1382453.69 16553.96 214 211176 191585.73 628813.35 114894.99 69189.23 213 2388 15271.2 562652.22 152122.91 4388.27 212 2127368 1313.93 5265.15 861357.81 42634.18 211 115576 13584.19 162556.33 19785.65 1343.15 25 15 5 The above diagram states that the number of self help groups registered with the RRBs in India increased two times from 211-216 which are 2256811 lakhs as on March 216. In case of, RRBs showed stable performance during 215 to 216. Performance of Cooperative Banks relating to SHG-BLP in India (Rs.in lakhs) Year Loan Loans 216 1568 217322.11 293699.98 386426.49 353.72 215 14333 28259.23 252296.21 331391.89 2823.22 214 129493 1361.18 169173.14 24916.1 21585.26 213 122557 115758.22 157383.52 221462.43 186. 212 1214895 19829.49 156667.23 191613.51 1397.44 211 1985397 143539.67 319761.59 7435.23 27281.73 25 15 5 The above figure explains that the number of self help groups, disbursements and loan outstanding decreased from 211 to 215 at the rate of 92%, 8% and 48% respectively, but are increased. www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 88
Progress of Commercial banks relating to SHG-BLP in Andhra Pradesh (Rs.in lakhs) Year Loan Loans 216 61363 357295.5 83537.96 1218561.78 42714.92 215 6175 216735.66 3628.68 1123892.19 76483.88 214 987881 299537.69 9931.5 14892.64 54986.54 213 1156 22238.39 74537.35 125875.6 51536.54 212 162591 114991.38 538466.73 1117474.82 4352.74 211 141184 11288.99 469557.22 97912.3 21355.83 25 15 5 From the given data we can understand that the performance of commercial banks in relation to SHGs in Andhra Pradesh. As on march 216, the numbers of self help groups, amount of savings, loan disbursements, outstanding and non performing assets are 61363, Rs.357295.5, Rs.83537.96, Rs.1218561.78 and Rs. 42714.92 lakhs respectively. It is observed that there has been declining trend in number of SHGs since 212 onwards. The amount of savings increased 3 times and loan disbursements increased 2 times. Even though the amount of keeps on increasing during 211 to 215, it was reversed in 216 which is appreciable. Progress of regional rural banks relating to SHG-BLP In Andhra Pradesh (Rs.in lakhs) Year Loan Loans 216 2756 49869.79 34992.55 48437.18 12447.16 215 256758 4487.61 19438.64 447285.75 178. 214 4542 46368.19 411622.39 6485.45 12792.85 213 446 382.34 367713.47 49136.21 2643.55 212 4594 31827.84 265267.56 49352.54 1236.33 211 4173 27543. 13645.33 352232.71 5264.43 25 15 5 The above figure explains the performance of regional rural banks in terms of number, savings, disbursements, outstanding and in Andhra Pradesh. Savings, disbursements and outstanding were increased year on year during 211 to 216. In case of, RRBs were failed to recover the loans within the time as a result increased in 215. www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 89
Progress of Cooperative banks relating to SHG-BLP in Andhra Pradesh (Rs.in lakhs) Year Loan Loans 216 17354 7397.12 1517.15 1915.61 383.2 215 17 5726.68 7877.49 18914.92 2513.1 214 25375 456.3 11549.48 2233.4 1834.92 213 16637 258.59 3419.24 5893.27 211.9 212 2749 2196.34 1347.76 7344.9 44.78 211 23311 1948.23 15316.32 13767.28 428.78 3 It is clear from the above figure that the number of self help groups in Andhra Pradesh by cooperative banks is 17354 lakhs which were decreased from 23311 lakhs during 211 to 216 except in the year 213. The amount of savings was Rs. 258.59 lakhs which was Rs. 2196.34 lakhs in previous year. The performance of cooperative banks in terms of management is very good because 8 times it has been reduced from 215 to 216. Performance of SHGs-bank linkage programme in India (Rs.in lakhs) Loan Loans 216 7932 1369139.1 372869.9 5711923.47 368622.9 215 7697469 115984.7 2758523.6 5154546.14 381471.65 214 74295 989741.54 241735.85 4292752.4 293266.51 213 7317551 821725.47 258536.44 3937529.72 278692.95 212 796349 655141.46 1653476.87 3634.18 221273.18 211 7461246 72163.28 1454773.19 3122116.55 14741.8 25 15 5 As on march 216 the total number of self help groups in India is 7932 lakhs, the amount of savings, disbursements, outstanding and is Rs. 1369139.1, Rs 372869.9, Rs. 5711923.43 and Rs. 368622.9 lakhs respectively. It is observed that there was an increasing trend in all the above parameters but it is not be preferable in case of. www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 9
Performance of SHGs-bank linkage programme in Andhra Pradesh (Rs.in lakhs) Year Loan Loans 216 91517 414561.96 115547.66 172282.57 55545.12 215 88458 262949.95 562314.81 15992.86 9676.89 214 1418676 349962.18 1332481.92 211414.13 69614.31 213 1421393 254179.23 111644.6 174814.54 54391.38 212 149594 14915.56 817142.5 1534172.26 5399.85 211 1466225 1378.22 62918.88 1336912.29 2749.4 25 15 5 The above diagram explains that as on March 216 the number of self-help groups in Andhra Pradesh is 91517 lakhs. The amount of savings and disbursement is increased around 3 times 2 times respectively during 211 to 216. In 216 the amount of is Rs.55545.12 lakhs which was Rs. 9676.89 lakhs in the previous year. In terms of the performance of banks is very good. Role of NABARD Ø NABARD had been providing financial assistance to MFIs by way of long term refinance support to eligible NBFC-MFIs since 214-15. During 215-16 Rs 23/- crore have been disbursed to 17 MFIs. Ø NABARD has been extending 1% refinance to banks towards their lending to SHGs and MFIs to supplement their resources. Cumulative disbursement of refinance by NABARD for SHG lending now stands at Rs 37634/- crore. Ø NABARD extended grant support to NGOs, federations of SHGs, RRBs, NGO-MFIs, CCBs, PACS, farmers clubs and individual rural volunteers for promotion, nurturing and credit linkage of SHGs with the banks. Cumulative grant support to all the partner agencies up to march 216 is to Rs 3378.8 lakh. Ø NABARD gave due recognition to training and capacity building of various stakeholders such as bankers, NGOs, government officials, SHGs, SHGs federations and trainers. During 215-16 more than 51 training programmes were conducted and about 1.81 lakh participants were trained. Cumulatively around 35.94 lakh participants have been imparted training as on 31 st march 216 leading to a strong team for implementation of the microfinance programmes. Ø In order to give the SHG-BLP a leg up, village level programmes on SHGs were planned and sponsored by NABARD with the support of banks and NRLM in 13 priority states. NABARD supported more than 42 village level programmes during this period. SRLM and state government departments also participated in the programmes. Banks reported credit linkage of more than 7 SHGs and account opening of about 25 new SHGs during these programmes. Ø Skill development is an important tool for improving the employability and enhancing productivity of the working poor and thereby reducing poverty and exclusion. Rural poor women typically face difficulties or discrimination in accessing good quality training. Keeping the above in view NABARD continued with micro enterprise development programme to nurture the entrepreneurial talents of members of mature SHGs to set up and run micro enterprises as a livelihood option in farm or non farm sector. Around 14352 skill up gradation www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 91
training programmes have been conducted under this initiative covering about 4.2 lakh members of matured SHGs up to 31 march 216. Role of RBI Ø Deemed-for-profit MFIs are classified as NBFC-MFIS, a distinct category among NBFC Ø Mandated minimum net- owned funds of INR5m Ø Directed MFIS to structure portfolios with 85% of net assets in qualifying microfinance assets Ø Standard form of loan agreement and a loan card,stating rate of interest and other loan conditions,should be issued to all borrowers Ø Not more than two MFIs can lend to the same borrower Ø Set pricing cap based on two broad formulae and lending rate based on lower of the following : Ø Cost of funds plus margin Ø Average base rate of the five largest commercial banks by assets multiplied by 2.75 Ø Set INR1, AS MAXIMUM level indebtedness of a borrower and loan amount restricted to INR6, for the first disbursement cycle (from april 215 onward) Ø Loans to be extended without collaterals:tenure should not be less than 2 years and borrower could repay loans in weekly,fornightly or monthly instalments according to their choice Ø Processing charges should be less than 1%of gross loan amount Ø NBFC-MFIs are encouraged to voluntarily become members of at least one SRO,such as MFIN References Ø ILO (1998), Enterprise Creation by the Unemployed: The Role of Microfinance Paper Presented in International Conference on Self-employment, Burlington, 24-26 September. Ø Karmakar, K.G. (1999): Rural Credit and Self Help Groups, Micro Finance Needs and Concepts in India SAGE Publications, New Delhi. 13. Ø Mishra, S.N.; and Hossain, M.M. (21), A Study on the Working and Impact of Dharmadevi Mahila Mandal A Rural Self-help Group in Kalahandi District of Orissa, Indian Journal of Agricultural Economics, Vol. 56, No. 3, pp. 48-81. Ø Singh, D. K. (21), Impact of Self Help Groups on the Economy of Marginalized Farmers of Kanpur Dehat District of Uttar Pradesh A Case Study, Indian Journal of Agricultural Economics, Vol. 56, No. 3, pp. 463-64. Ø Basu, P.; and Srivastava, P. (25), Scaling-up Microfinance for India s Rural Poor, World Bank Policy Research Working Paper, No. 3646, World Bank, Washington, DC. Ø Ramachandran, T. and Balakrishnan, S (28): Impact of Self Help Groups on Women s Empowerment: A Study in Kanyakumari District Kurukshetra, Vol.57 (2), December, 28, PP. 31-34. Ø Ch. V. Krishna Reddy, (213), A Study on the impact of Micro Financing Institutions on the Income & Employment Generation, Unpublished thesis, Acharya Nagarjuna University Ø Devi S. K. (214). Micro Finance and Women Empowerment Global Journal of Multidisciplinary Studies, Volume 3(5). www.theinternationaljournal.org > RJSSM: Volume: 6, Number: 8, December 216 Page 92