Thesis submitted for the degree of Doctor of Philosophy in Management SBist 262

profitable. Thus ICICI bank sees a strong market among the segment that till now was termed as unbankable. Thus one can conclude that nationalized banks are focusing on the self help group as a part of the government initiative and it is a priority sector for them and they are gearing with for the challenge to bank upon the unbankable. Since they lack grass roots knowledge, they are tying up with NGOs as partners who form and hand hold the self help groups. Private banks like ICICI bank have joined the fray but their initiative is profit driven rather than development. 6. Conclusions: 6.1 Discussion on findings from Individual Banking based model The findings were generated through various data collection techniques ranging from the structured to the unstructured. The key findings from the research as discussed as under. SEWA Bank was started as a initiative to provide financial services to the members of SEWA union which is the flagship organization and had started with the monetary collections of the initial SEWA union members. SEWA Bank offers various financial services like savings, loan, pension and insurance in formats that are acceptable to its poor women clients. Women clients can open their accounts with paltry sums of Rs. 100 and all they need is a voter card or a valid identification The bank procedure slips are printed in gujarati so that the clients can understand it easily and at the same time there are bank officials who fill the withdrawal or saving slips for bank clients who are illiterate. It has also been observed that most of the bank clients are illiterate so the process of bank officials filling the slips increases the convenience for the bank s clients. Thesis submitted for the degree of Doctor of Philosophy in Management SBist 262

SEWA bank is basically meant for women and it has an all women staff so it becomes easier for poor women to deal with the bank since women would understand women problems better. SEWA bank also runs financial literacy program which has been marginally successful since most women clients are illiterate workers or poor housewives and their work hours, financial situation and family does not permit them to get financially educated. But still SEWA bank continues with its mission to spread financial literacy among its poor and illiterate women clients. In order to increase its outreach, SEWA bank employees known as handholders go into different areas of Ahmedabad and spread awareness about SEWA bank and its financial products. To facilitate this task, the bank has hired bank sathis who are old bank clients who work on a commission for the bank. Many women clients find it impossible to come to the bank to deposit savings or pay a loan installment due to loss of a day s wage or domestic work back home. They can deposit the same with their nearest bank sathi who in turn deposits the same with the bank in return of commission from the bank. The bank sathins have to deposit Rs. 25000 as safety deposit which is kept as and FD with the bank. They are paid 2.5% commission on collections from loans and 1.5% on collections from savings. There are currently 90 to 100 sathis working for SEWA bank. SEWA bank charges 18% rate of interest on its loans. Its loans which are secured and unsecured both, start from Rs.5000 onwards and till Rs. 15,000, the guarantee of the bank sathin/family member/relative/neighbour is fine. For loans above Rs. 15,000 the guarantee of a government servant is required. This poses a big problem to some bank clients who cannot find government servants who would support them. Many guarantors also charge money from the poor women clients to become a guarantor. In certain cases, local business men, autorickshaw owners and the bank sathin can also give guarantee in loans above Rs. 15,000. To access loan facility, the bank clients needs to have a minimum past history of 6 months of regualar savings. There has to be no current loan and no outstanding. In case of default on EMI, the client has to pay two EMIs simultaneously on the next due date. If the client still defaults that a penalty is levied on the defaulter. Thesis submitted for the degree of Doctor of Philosophy in Management SBist 263

The survey findings indicate that SEWA bank clients range in age from 20 years to 60 years. Around 36% of them are illiterate and 32% have got primary education. Only 1% of them have gone to college. A majority of them (67%) are home based workers ( who earn money by working out of their own homes) and the rest are hawkers, shopkeepers or domestic servants. In the income category, 26% respondents had an income category of Rs. 3200 and less, 51.8% had an income category of Rs. 5000 and less while 85% respondents had an income of up to Rs. 9000. 82% of the respondents are married and 74% have their own houses and 82% have pucca houses (houses with concrete roofs) and all of them have electricity connection. In terms of family size, 37.4% of respondents have four member family, while 26.9 % respondents have 5 member families while 15.3% respondents have 6 member families. In terms of savings, 25.7% respondents have a savings of Rs 2100 and less, around another 25% respondents have a savings that range upto Rs. 3600 while 75.4% people have a savings that range upto Rs. 6125. About 80.5% of respondents are highly satisfied with the saving service of SEWA bank. The only complaints were that at times there was a delay in adding of interest to their savings but these complaints were very few. In terms of loan, 50.6% of respondents have taken loan, and a majority of them being business and personal reasons. 95.8% of respondents indicated taking loan from SEWA bank only while the rest indicated that they use multiple sources for loans. Around 84.2% of respondents were highly satisfied with SEWA bank s loan facility. Respondents talked about inconvenience generated due to getting a guarantor. The issue has been discussed above. In terms of bank membership, 64% respondents had a bank membership of upto 4 years and 36% have more than 4 years. In terms of financial literacy, none of the bank clients has availed this benefit which indicates their lack of interest and the need for SEWA bank s proactive initiative to push the financial literacy program. In terms of availing the products of SEWA bank, 37.1% of the respondents have availed only savings, 25.7% have availed the facility of savings and loan, 12.6% Thesis submitted for the degree of Doctor of Philosophy in Management SBist 264

have availed the facility of savings, loan and insurance while 11.1% have availed the facility of savings, loan and pension. The data indicates that 64.2% of respondents have taken at least one loan from SEWA Bank, 7.9% respondents have taken two loans and 8.5% respondents have taken about 5 loans from SEWA Bank. The above data indicates that 67.6% of loans have been taken as capital requirement for running existing business while 32.4 % of loans have been taken for starting new businesses. The above data indicates that in the category of personal loan, 71% of loans have been taken as a part of house purchase or house repair, 8% have been taken for purchase of household items while around 7% loans have been taken to repay old debt and another 10% was taken to meet the expenditure from a birth in the family. In terms of loan size, 50% have a loan size of 10,000 and the reasons is that this is the maximum amount that one can get without a guarantor. Another 10% have taken loan of Rs. 25000 and 13% have taken loan of Rs. 50,000. 63.5% respondents have only saving accounts while 29.9% respondents have saving and recurring accounts with SEWA Bank. 80.4% of respondents have no other saving option except for SEWA bank. A marginal 11.5% respondents have accounts in a nationalized bank while 3.9% respondents have savings in post offices. Thus it can be inferred that a majority of SEWA Bank clients do not have access to any other conventional banking system apart of SEWA bank. In the study by using linear regression it has been seen that as the bank membership increases there is an increase in savings among the bank clients. The research studied the relationship between bank membership and availability of loan. Using logistic regression it was observed that as bank membership increased the probability of availing loan also increased. As bank membership increased above 4 years the chances of availing loan increased by 13.5 times. The research studied the relationship of savings, bank membership and loan amount and through step wise regression it was found that savings has an impact on the size of loan that can be availed from SEWA bank. Larger is the saving, larger is the loan amount that can be availed. Thesis submitted for the degree of Doctor of Philosophy in Management SBist 265

Finally the research studied the relationship between savings, bank membership and number of loans. Through step wise regression it was observed that bank membership had a positive impact on number of loans availed from SEWA bank. More the bank membership, larger are the number of loans availed. 6.2 Discussion on findings from Self Help Group Bank Linkage model The findings for the Self Help Group Bank Linkage Model is discussed below. Gujarat has been selected by NABARD as one of the 13 priority states to develop the SBLP( SHG Bank linkage program). SHGs are formed on the basis of caste in rural areas which indicates the element of caste heterogeneity is very dominant. The age group of SHG members ranges from 22 years to 45 years. 16% members are of the age of 35 years. The study of the SHG in terms of caste indicates that out of the 244 respondents surveyed in the 17 SHGs, 36.9% are Koli Patels which is the highest, followed by Vankars at 17.6%, further followed by Darbars at 16.4%. On the education front, out of the 17 SHGs, 66.4% of the 244 respondents were illiterate, another 25.4% had gone thorough primary education. A majority of the respondents (48.8%) were housewives, 32.4% were farm workers while 18.9% were laborers who worked at construction sites. The average family size for a majority of the respondents (70.9%) ranged between 6-7 members which suggests that families size in rural areas are higher than urban areas (refer to findings from SEWA bank) The Income study indicates that 18.9% respondents have a monthly family income of Rs. 2000, 24.6% have a family monthly income of Rs. 3000, 22.9% have a family monthly income ranging from Rs. 3500 to Rs. 4000. Out of the total 244 respondents 93.4% were married. In the case of type of house, a majority had mixed houses (57.8%), 28.7% had kuccha houses and 13.5% respondents had pucca houses. Around 82.8% respondents had an electricity Thesis submitted for the degree of Doctor of Philosophy in Management SBist 266

connection at their homes while the rest did not. It was essentially the Valmikis and the vaghrees who did not have electricity connection at their homes Out of the 244 respondents, 54.1% were land owners while the rest were without arable land. In terms of area of land owned, around 55.2% of the respondents have land ranging from 5 to 10 bighas, 14.9% have more than 10 bighas and 29.9% have less than 5 bighas. In terms of live stock, 54.3% of respondents own cattle which are primarily buffaloes for milking purposes. The above mentioned data indicates that 32.8% have a SHG membership of more than 1.5 years and 67.2% have membership of upto 1.5 years.. The study indicates that savings and access to loans happens to the most important reasons to join a Self Help Group. In the study, 73% respondents have ranked savings as the first reason for joining the self help group. In the study, 72.1% respondents have ranked access to loan the second most important reason for joining a Self Help Group The study indicates that for the 244 respondents, the savings ranged from Rs. 900 to Rs. 1650. In terms of other saving options, one of the option that emerges from the study is sakhi mandals with 20.9% of respondents going for it. The sakhi mandals are self help groups that are promoted through anganwadis on the behest of the government. The government of Gujarat pays the women working in the anganwadis for formation of the self help groups. An interesting fact is that only 4.5% of the respondents had access to the conventional banking system. And a major of the respondents ( 74.6%) resorted to savings at their homes itself. Out of the total 244 respondents, only 66 respondents (27%) have saved through other options and for 80% of the respondents the savings range till Rs. 600. The study indicates that out of the respondents, 35.2% have got access to loans through membership in the self help group. The study further indicates that 89.5% of the loans are intralending loans. Intralending loans are loans that is given to Thesis submitted for the degree of Doctor of Philosophy in Management SBist 267

SHG members from the money collected from amongst themselves. Bank loans account for 10.5% of disbursed loans. 86 respondents who have taken loans, 74 of them (86%) have taken loan once while 12 of them have taken loan twice. The study indicates that crop loan and house repair to be the first reason for taking a loan. Medical emergency is also one of the reasons for taking a loan. The loans taken ( intraloans and bank loans) range from Rs. 1000 to Rs.6000. A loan of Rs. 2000 happens to be the most taken since 35% of respondents took it. According to the study, the respondents believe that the most important advantage of availing loan from self help groups is the low rate of interest (72%). The study indicates that 13 respondents (15%) have taken loan from other sources apart of the selfhelp group. The study further indicates that out of the various sources available for availing loan, money lenders dominated (61.5%) other loan sources. The study indicates an interesting fact that all the respondents had availed loan from other sources before they were members in the self help group. The study indicates that out of the 86 respondents who have availed loan from the self help groups, 9 respondents (10.5%) have defaulted. The study indicates that out of 244 respondents, 72% have gone to the bank atleast once as a part of the Self Help Group whereas 28% respondents indicated that they have never visited the bank through their Self Help Group. The research also indicates that members of SHG do not have access to conventional banking system. It has also been proved by using linear regression analysis that longer membership in the Self Help Group generates higher savings In the research, the relationship between SHG membership and availability of loan was studied. Through logistic regression, it was proved that as number of years of SHG membership increases, the probability of access to loans increases 14.256 times more Thesis submitted for the degree of Doctor of Philosophy in Management SBist 268

In the research, the relationship between SHG membership and loan size was being studied. Through regression it was observed that as SHG membership increases, the loan size also increases. The research also indicates that SHGs that are functioning for a long time also get access to bankloans. 6.3 Final Observations The study included the in-depth study of tow dominant models of microfinancing. The two models are performing two basic duties that all good microfinancing models should invariably be doing. Firstly to provide basic financial services in the best effective manner and secondly trying to generate financial literacy among its clients. Both the model are succeeding in the first initiative but have not achieved similar success in the latter. The latter is of much importance and though one might argue that dealing in financial services would if not in totality would to a better extent be generating financial literacy. But the gap would still remain but both the models seem to identify the gap are taking steps to fill it. And the road forward in not without hurdles since the clients are women who have to be more responsible to the environment that surrounds them rather than themselves. One would want to add certain comments which are not a part of the scope of study but still deserve mention is the impact that the models bear upon its clients. The self help group models tends to bring an element of empowerment and unity among women. The model operates on microfinance as one of the agendas and not the final end in itself. Women are more connected to each other and also bring positive changes around themselves. The Self help groups in Vataman stopped flesh trade from thriving in Vataman and the self help groups at Varna got a proper road built in their village. Thus apart of financial empowerment, the SHG model also genertes social and personal empowerment. On the flip side, the caste dynamics is very strong and same caste SHG tend to survive. Secondly group dynamics are also at work and at times the process go dysfunctional causing the SHG to break down. SHGs have also been notorious to form when a bank loan is needed and disintegrate after it much to the woe of Thesis submitted for the degree of Doctor of Philosophy in Management SBist 269

the loaning bank. The SHG model is more successful in a rural backdrop and is relatively tough to operate in an urban milieu. The dynamics of urban poverty does not permit the luxary of group formation and regular meetings to a large extent. It does not mean that SHG in urban do not exist, the only point to be made is that it may not be the most optimal of microfinance options to the urban poor. Discipline in terms of group formation, regular meetings and social collateral might be tough to implement. Thus individual banking model comes into the picture. Of course the cost of doing business with an individual becomes higher since it get nullified when a bank deals with the SHG as a group. Still SEWA bank operates well with over a (number) clients and Rs(number) in profits. Its clients base has shown a increase of (number) % and its outreach has increased to many part of Gujarat making it one of its kind. SEWA bank runs a free literacy program but still does not get as many students in comparison to the number of clients that it gets. Secondly the this model does give an element of group empowerment and unity that is a quintessential part of the SHG model but still since SEWA bank is run by an all women staff and its hand holders and bank sathis are always in touch with the poor women clients, SEWA bank manages to understand the requirements of their poor female clients well. Compared to the SHG model, more better and sophisticated financial services are delivered through SEWA bank like pension and insurance which are yet to find way in the SHG model discussed above.thus the individual based banking model scores higher on quality and variety of financial services while the SHG bank linkage model scores higher on group based unity and empowerment. Thesis submitted for the degree of Doctor of Philosophy in Management SBist 270