NATIONAL MICROFINANCE CONFERENCE 2011 1 REINVENTING SELF HELP GROUP MODEL

NATIONAL MICROFINANCE CONFERENCE

2011

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REINVENTING SELF HELP GROUP MODEL

Performance of SKDRDPPerformance of SKDRDP(www.skdrdpindia.org)(www.skdrdpindia.org)

1. It has promoted : 118, 500 SHGs

2. No. of clients : 13,45,000

3. Security dep. mobilised : Rs. 28200.00 million.

4. The total credit provided : Rs. 2880,00.00million.

5. Total credit turn over : Rs. 3300,00.00 million.

6. Total outstanding credit : Rs.97200.00 million.

7. outstanding bk. borrowings : Rs. 71300.00million.

8. BC business : RS 1050.00 million.

9. No. of Project offices : 65

10.No. of staff employed : 3800

11.Recovery rate : 100%


FACTS1. SHG has become a very strong tool for financial

inclusion. 2. SHGs also have reached the government schemes more

transparently to the deserving.3. SHGs have provided robust credit folios to banks.4. Overdues among government schemes have reduced.5. Women participation in community activities has immensely increased.6. SHG is more capable of achieving the double bottom line

more effectively.7. SHG meeting centres are strong poaching ground for

MFIs.3

FACTS

8. Low per capita outstanding Rs. 4,000/- per member. (Rs. 27,266.00 crores/4587178 = Rs. 0.59/group @ 15/member/group = Rs. 4,000/- per member).

9. New groups hardly get any loan for a long time.

10. Even though bank gives credit at 10.5% many groups lend at 24% which is usurious and the money so earned is used for other purposes than lending too.

11. NREGA has a telling effect on enterprise credit.

12. Unscrupulous elements have crept in.


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POSITIVES OF SHG MODEL

1. Savings driven – collateral security

2. Capacity building

3. Peer pressure

4. Has the government patronage.

5. Convenient meeting ground for

smaller number.

7. Promotes self sufficiency

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POSITIVES OF SHG MODEL

7. Develops leadership8. Actively participate in local issues.9. Cost effective - Bank funded low interest Self supervised Self monitored Self managed - Collection

Record keepingSubmission to

bank/centre

10.Labour sharing and public works.11.Social audit.

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NEGATIVES OF SHG MODEL

1. Leaves out the ultra poor/poor.

2. Waiting time for loan - dropout

despondency

corruption

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3. Too much dependency on formal bank and government.

• Delay in sanctions

• Too much waste of time

• Too much paper work

• Freedom is less

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4. Government interference

• Self reliance is lost

• Subsidy dependant

• Politicisation

5. Misutilisation.

6. Usuriousness within the members.

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7. Wastage of precious funds

> For public activities

> Unwanted expenses.

8. Time consuming.

9. Records are often not written/ verified leading to pilfera

10. SGSY and other subsidy have killed the ingeniousness

of SHG.11.Categorisation of BPL and APL has affected the peer

pressure.

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SHGs V/S MFIsMFIs SHGs

Typically MFIs loans are individual centric although there is group guarantee.

SHG loans are group centric with individual guarantee.

There is no financial collateral. Effective financial collateral in the form of savings.

Inflexible tenures often only 50 weeks repayment period.

Flexible tenures ranging from 50 weeks to 500 weeks

Inflexible interest rates. Purpose based, support based rates.

No government participation hence customers are deprived of state support.

Government participation ensures state support.

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SHGs V/S MFIsMFIs SHGs

High interest rates. Nearer to market rates.

Very little capacity building. Focus on capacity building.

Cap on lending amount. Group decision.

Promoting institutions mostly for profit.

Promoting institutions mostly not for profit.

Single loan per member. Multiple loans also considered.


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THE CHALLENGES

Micro level:1. Bring in the ultra poor.

2. Simplify the record keeping and if possibly mechanize.

3. Make use of the mobile technology.

4. Increase transparency.

5. Reduce misuse of funds and bargaining

powers of SHG leaders.

6. Pass on the subsidy to the beneficiary.


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THE CHALLENGES

Macro level:1. Interest subsidy to SHGs (the same that are given to farmers).

2. Reserve the government funds to SHGs.

3. Develop a centralized data centre.

4. Develop UID No.

5. Encouraging MFIs and NGOs for promoting SHGs instead of government forming the SHGs.

6. Relook at the BC model to dovetail into SHG model.

7. Promotion of SHG federations.

8. Inter institutional collaboration in training and capacity building of SHGs.


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ROAD AHEAD

1. Solid foundation by NABARD, RBI, Governments – It has created a lot of awareness.

2. Opportunities for planned growth –

‘Farm plan’ concept.

3. Opportunities for poor to take

public works on contract.

4. Labour sharing.

5. Utilising government subsidies and facilities.

6. Opportunities for banking within the bank.

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GOVERNMENTAL SUPPORT FOR SHG/MFI BONDING

1. Permission for savings collection from SHGs.

2. Financial support for promotion and capacity building of SHGs.

3. Subvention of interest on loans to SHGs through MFIs.

4. Liberalise bank lending norms to SHG sector.

5. Equity support to SHPIS and NBFCS for finances to SHGs.

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GOVERNMENTAL SUPPORT FOR SHG/MFI BONDING

6. Scrapping of state money lender act for financing to SHGs.

7. Permission to charge realistic interest for recovery of expenditure.

8. Rationalisation of fee structure in the BC Model.

9. Support to technology development.

10. Reduce writing work to SHG members.

11. Better awareness creation on transactions.

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HOW MFIS CAN MAKE USE OF SHG MODEL

1. SHGs can bring in capital promotion of community based NBFCS.

2. Cross subsidise Microfinance activities by participating in government programmes like NPs – Lite Scheme, NREGA, RSBY Scheme.

3. Cross subsidise with life insurance.

4. Cross subsidise with BC Model.

5. Cross subsidise with financial inclusion.

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Documents

NATIONAL MICROFINANCE CONFERENCE 2011 1 REINVENTING SELF HELP GROUP MODEL