SELF HELP GROUP – BLP IN MICROFINANCE SERVICE: …globalvisionpub.com/globaljournalmanager/specialpdf/1396513223.pdf · NABARD to provide refinance and promotional ... Primary data

SELF HELP GROUP – BLP IN MICROFINANCE SERVICE:AN EMPIRICAL STUDY

V. Narasimha Rao* and N. Subramanyam**

ABSTRACTThe Indian economy continues to suffer from the problems of poverty, sectoral divergencesin growth, and employment opportunities, and a poor progress of various socio-economicindicators despite higher economic growth in recent past. Attaining 100 percent financialinclusion is today one of the biggest challenges for Indian formal banking system. Self HelpGroups are important tools of micro-financing system. The formal financial institutionshave failed to perform their role of supplying institutional credit to the women folk in ourcountry for undertaking the income generating activities. As a result, a large segment ofpoverty-stricken people and particularly the women who constitute a significant numberremain outside need for the emergence of a new institution to tackle the situation. The SelfHelp Group-Bank Linkage programme (SHG-BLP) is a major plank of the strategy fordelivering financial services to the poor in a sustainable manner, which was initiated byNABARD. During the last decade, there has been a tremendous growth of SHGs. However,despite the spread and success of SHGs, they suffer from various drawbacks mainly poormanagement and poor internal control. While NABARD set the direction for the SHG-BLP,there has been very little direction setting for the ongoing support services to SHGs. Similarly,in those states where the SHG-BLP has been well established, the number of groups linkedper branch has increased to such an extent that it is making the monitoring and supervisionof groups difficult, resulting in falling recovery rates. This empirical research paper is anattempt to assess the progress of SHG-BLP in Andhra Pradesh as well as India.

Key Words: Financial Inclusion, SHG-BLP, Microfinance, Women Empowerment.

INTRODUCTIONThe Indian economy continues to suffer from the problems of poverty, sectoral divergences

in growth and employment opportunities and poor progress of various socio-economic indicators,

* Professor & Director, P.G. Department of Business Administration, Akkineni Nageswara Rao College, (Affiliatedto Krishna University), Gudivada – 521301, Krishna District, Andhra Pradesh

** Head: P.G. Department of Business Administration, SRK Institute of Technology, (Affiliated to JNTU-Kakinanda), Vijayawada, Krishna District, Andhra Pradesh

ISSN: 0973-8533Vol. 6 No. 2, December 2012

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Vol. 6, No. 2, December 2012

V. Narasimha Rao and N. Subramanyam

despite higher economic growth in recent past. Attaining the objective of hundred percentfinancial inclusion is today one of the biggest challenges for Indian formal banking system.Greater Financial Inclusion shall be a catalyst for accelerating the pace of economic growth withequity. Financial inclusion can be relied upon to achieve inclusive growth which is one of themajor objectives of eleventh five year plan. Therefore, financial inclusiveness and providing easyaccess to credit has always been the primary objective of the Government of India. Microfinanceservices in India are provided mainly by two different models—SHG-bank linkage model andMFI-bank model. Out of these two models, SHG-Bank Linkage Model has emerged as the moredominant model due to its adoption by formal financial institutions namely, Commercial Banks,Regional Rural Banks, and Cooperative Banks.

Self Help supplemented with mutual help can be a powerful vehicle for the poor’s effort tosocio-economic upward transition. Participative financial services’ management is more efficientand responsive. Poor can save and are bankable. Poor not only need credit support but alsosavings and other services. Small affinity groups of the poor, with initial outside support, caneffectively manage and supervise micro credit among their members. Collective wisdom of thegroup and peer pressure are valuable collateral substitutes. SHGs could be a pre- microenterprisestage for a majority of rural poor. SHG’s as client, facilitate wider outreach, lower transactioncost and much lower risk costs.

SHG-BANK LINKAGE PROGRAMMEOver the decades of planned development, the shift of emphasis of women’s programmes

from purely welfare oriented approach to a more pragmatic and development oriented one hasrecognized woman as a productive worker and contributor to the economy. The formal financialinstitutions have failed to perform their role of supplying institutional credit to the women folk inour country for undertaking the income generating activities. As a result, a large segment ofpoverty-stricken people and particularly the women who constitute a significant number stillremain outside need for the emergence of a new institution to tackle the situation.

The SHG-BLP is a major plank of the strategy for delivering financial services to the poor ina sustainable manner. The search for such alternatives started with internal introspection regardingthe innovations, which the poor had been traditionally making, to meet their financial serviceneeds. It was observed that the poor tended to come together in a variety of informal ways forpooling their savings and dispensing small and unsecured loans at varying costs to groupmembers based on need. The SHG- was started as an Action Research Project in 1989, whichwas the offshoot of a NABARD initiative during 1987 through sanctioning Rs. 10 lakh toMYRADA as seed money assistance for experimenting Credit Management Groups. In the sameyear, the Ministry of Rural Development provided PRADAN with support to establish SHGs inRajasthan. The experiences of these early efforts led to the approval of a pilot project byNABARD in 1992. The pilot project was designed as a partnership model between three agencies,viz., the SHGs, banks, and NGOs. This was reviewed by a working group in 1995 that led to theevolution of a streamlined set of RBI approved guidelines to banks to enable SHGs to open bankaccounts, based on a simple “interse” agreement. This was coupled with a commitment by

3

Global Journal of Business Management

Self Help Group – BLP in Microfinance Service: An Empirical Study

NABARD to provide refinance and promotional support to banks for the SHG-BLP. Initially, therewas a slow progress in the programme up to 1999 as only 32,995 groups were credit linkedduring the period 1992 to 1999. Since then the programme is growing rapidly.

SURVEY OF LITERATUREOn the background of the exponential growth of the SHGs and the growing interest and

concern in the area of micro finance, researchers have been active in delving into a variety ofissues regarding systems, outreach, capacity building, etc. has produced quite a large body ofliterature. Bank linkage system and problems, role of bankers and non-governmental organizationhas no less been a subject of intensive research and researchers have occasionally come up withalternative models of SHG Bank Linkages.

Hemalatha Prasad (1995) stated that homogeneity of the group in terms of caste occupationand locality made the group more cohesive, assured and regular income from the scheme arefound to be the factors behind the success of SHGs.

Kumar (1997) in his study found that the SHGs are mostly homogenous in terms of theirsocio-economic background. The savings level was reasonably satisfactory because of lowinterest rates changed by the banks and the revolving fund. Due to irregularity in repayment ofloan, non-adherence to the norms set by the group and lack of mutual trust and confidenceamong group members, some of the groups are defunct.

Nagayya (2000) in his study found that an informal arrangement for credit supply to thepoor through SHGs is fast emerging as a promising tool for promoting income-generatingenterprises.

Pattanaik (2003) in his study found that SHGs are continuously striving for a better futurefor tribal women as participants, decision-makers and beneficiaries in the domestic, economic,social and cultural spheres of life. But due to certain constraints like gender inequality andexploitation, various SHGs are not organized properly and effectively.

Shylendra (2006) in his study reported that the SHG movement has been growing fast inAndhra Pradesh as the successive governments there have played a major role in promotingSHGs in a big way as instruments of poverty alleviation and empowerment. This is the majorreason as to why it is a leading state in the country under the SHG-BLP.

Sudansu Kumar Das (2006) has studied the role of SHGs in rural credit delivery system.Due to low income and poor saving the poor can contribute a very small amount towards thecommon fund of the group. Therefore, SHGs always face the problem of scarcity of funds.Because of weak financial condition, SHGs always need external finance through linkage withbanks.

Basanta K Sahu and Tripathy (2009) in their study argued that in India, the most popularform of Micro finance is the SHG-BLP. It is treated as an effective employment generator inrural areas having capability to sustain the income of the households by ensuring their opportunitiesto work.

4



Sudin Kumar Bera (2011) found that SHG–BLP is a successful step in providing access tofinance to the rural needy people. The share of cumulative SHGs linked in Southern States hasbeen at about 60 per cent of the total SHG credit linked in the country.

Sanjay Kanti Das (2012) in his study observed that the quality of SHG has come understress due to fat growing of the SHG-BLP. Quality parameters would include not just financialand physical performance of the group, but also parameters to assess economic and livelihoodgoal achievement, social status improvement and entitlement access facilitation.

OBJECTIVES OF THE STUDYKeeping in view the importance of the study, the objectives of the present research paper are

framed as follows:1. to analyze the progress of SHG-BLP in India2. to analyze the progress of SHG-BLP in Andhra Pradesh3. to offer suggestions to improve the working of SHGs through SHG-BLP for more

effective microfinance service.

DATA SOURCES AND METHODOLOGYThe study uses both primary and secondary data. Multi-stage random sampling method is

used for the present study to collect primary data. Krishna District being the native district of theauthors was purposefully chosen for the present study. Six mandals and five villages from eachmandal are selected randomly. Ten SHG members from each village are selected. Thus, the totalsample size is 300. Primary data was collected from 300 sample respondents using pre-testedquestionnaire. Secondary data was collected from books, journals, internet and from variousreports such as reports of NABARD, NIRD, Andhra Pradesh Mahila Abhivruddhi Society, CESS,DRDA, etc. The relevant data collected from the field were coded and analyzed using SPSSsoftware. Suitable and appropriate statistical tools such as percentages were used. Test ofsignificance of the data was carried out using Chi-Square Test.

RESULTS AND DISCUSSIONDuring the last decade, India had recorded a tremendous growth of SHGs. There are about

97 million families covered under SHGs upto March 31, 2011. Total number of SHGs savingslinked with banks are 69.53 lakh, out of which 53.10 lakh are exclusive women SHGs and 16.94lakh are SGSY SHGs. During 2010-11, 15.87 lakhs are credit-linked SHGs of which, 12.94 lakhare exclusive women SHGs and 2.67 lakh are SGSY SHGs. The total number of credit-linkedSHGs having loans outstanding as on March 31, 2011 are 48.51 lakh, of which 38.98 lakh areexclusive women SHGs and 12.45 lakh are SGSY SHGs.

Regarding savings amount of SHGs, it is reported that total savings amount of SHGs withbanks as on March 31, 2011 are Rs. 6198.71 crore, out of which Rs. 4498.66 crore are savingsof exclusive women SHGs and Rs. 1292.62 crore are savings of SGSY SHGs. As regards loansdisbursed to and outstanding against SHGs, it is mentioned that total amount of loans disbursedto SHGs during 2010-11are Rs. 14453.30 crore, out of total loans disbursed to Women SHGs are

5



Rs. 12429.37 crore and to SGSY SHGs are Rs. 2198.00 crore. Total amount of loans outstandingagainst SHGs as on March 31, 2011are Rs. 28038.28 crore, out of which loans of women SHGsare Rs. 23030.36 crore and out of total loans outstanding against SGSY SHGs are Rs.6251.08crore. Average loan amount outstanding per SHG as on March 31, 2011is Rs.57795 and averageloan amount outstanding per member as on March 31, 2011 is Rs. 4128.

State-wise Outreach of SHGs

The State-wise number of SHGs having savings with banks as on March 31, 2011 isprovided in Table-1. As on March 31, 2011, a total of 69,53,250 SHGs have saving bankaccounts with the banking sector with outstanding savings of Rs. 6198.71 crore. Andhra Pradeshaccounted for the largest number of SHGs as on March 31, 2011 (20.83 per cent of total numberof SHGs in the country), followed by Tamil Nadu (11.89 per cent), Maharashtra (11.08 percent), West Bengal (9.31 per cent), Karnataka (7.69 per cent), Odisha (7.24 per cent) and Kerala(5.67 per cent). It is less than 1 per cent in Arunachal Pradesh, Goa, Haryana, Himachal Pradesh,Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, New Delhi, Punjab, Sikkim,Uttarakhand, Andaman &Nicobar Islands (UT), and Pondicherry (UT). This shows the regionalinequalities in the spread of SHGs in the country.

Regarding amount of savings of SHGs as on March 31, 2011, it is found from the table thatAndhra Pradesh registered largest percentage of savings (20.25 per cent of total amount ofsavings in the country), followed by Tamil Nadu (14.58 per cent), Karnataka (10.12 per cent),West Bengal (9.60 per cent), Maharashtra (9.17 per cent), Kerala (6.06 per cent), Odisha (5.88per cent), Gujarat (5.19 per cent), and Uttar Pradesh (4.27 per cent). More than ten States in thecountry registered less than one percent of the total savings of the country.

Distribution of rural household coverage under SHG-BLP as on March 31, 2012 is furnishedin Table-2.The same is given in Graph-1. It is evident from the study that there are only 7States—Andaman & Nicobar Islands, Andhra Pradesh, Chandigarh, Karnataka, Kerala, Pondicherry,and Tamil Nadu—where cent percentage rural households are covered under SHG-BLP. Asagainst this, there are 9 States, where less than 20 per cent of rural households are covered underthe programme. In the case of 10 States, rural households coverage ranges from 21 to 50 percent, whereas it ranges from 51 to 75 per cent in the case of 5 states. Rural household’scoverage in the case of two States—Goa and Odisha—is 76 to 100 per cent.

6



Table 1

Table Showing State-wise Spread of the SHG-BLP -savings of SHGs with Banks as on March 31, 2011(Amount Rs. Lakh)

State As on March 31, 2011 % to totalNo. of SHGs Savings Amount Rs. No. of SHGs Savings Amount

Andhra Pradesh 14,48,216 1,25,528.98 20.83 20.25Arunachal Pradesh 6,418 164.89 0.09 0.03Assam 2,18,352 7,359.94 3.14 1.19Bihar 1,40,824 8,539.57 2.03 1.38Chattisgarh 1,13,982 7,578.06 1.64 1.22Goa 6,745 3,649.31 0.10 0.59Gujarat 1,68,180 32,190.15 2.42 5.19Haryana 36,762 10,762.55 0.53 1.74Himachal Pradesh 50,182 3,490.9 0.72 0.56Jammu & Kashmir 4,366 1,818.83 0.06 0.29Jharkhand 79,424 7,421.81 1.14 1.20Karnataka 5,34,588 62,705.32 7.69 10.12Kerala 3,94,197 37,556.32 5.67 6.06Madhya Pradesh 1,78,226 10,151.07 2.56 1.64Maharashtra 7,70,695 56,828.02 11.08 9.17Manipur 10,831 218.56 0.16 0.04Meghalaya 11,787 360.25 0.17 0.06Mizoram 5,097 251.40 0.07 0.04Nagaland 5,926 334.37 0.09 0.05New Delhi 2,191 234.85 0.03 0.04Odisha 5,03,172 36,473.5 7.24 5.88Punjab 45,005 3,645.1 0.65 0.59Rajasthan 2,13,295 14,255.08 3.07 2.30Sikkim 2,428 141.98 0.03 0.02Tamil Nadu 8,26,710 90,373.26 11.89 14.58Tripura 31,349 3,335.70 0.45 0.54Uttar Pradesh 4,29,760 26,464.03 6.18 4.27Uttarakhand 43,997 7,170.41 0.63 1.16West Bengal 6,47,059 59,486.85 9.31 9.60A & NIslands 3,763 92.87 0.05 0.01Pondicherry 19,723 1,286.96 0.28 0.21

Total 69,53,250 6,19,870.89 100.00 100.00

Source: Status of Microfinance in India 2010-11: A NABARD publication

7



Table-2

Frequency Distribution of Rural Household Coverage Under SHG-banks Linkage Programme

Rural household Number of States Statescoverage range within the range(per cent)

0-20 9 Bihar, Haryana, Jammu & Kashmir, Jharkhand, Madhya Pradesh,Nagaland, Punjab, Sikkim and Uttar Pradesh

21-50 10 Arunachal Pradesh, Assam, Chhattisgarh, Delhi, Gujarat, HimachalPradesh, Manipur, Meghalaya, Rajasthan and Uttaranchal

51-75 5 Lakshadweep, Maharashtra, Mizoram, Tripura and West Bengal76-100 2 Goa and Odisha100 7 Andaman & Nicobar Islands, Andhra Pradesh, Chandigarh, Karnataka,

Kerala, Pondicherry and Tamil Nadu

Graph- 1

Frequency Distribution of SHG Coverage of Total Rural Households

9 States

0-20%

21-50%

51-75%

76-100%100%

7 States

2 States

5 States

10 States

8



Regional Spread of SHGs

Region-wise spread and savings of SHGs with Banks as on 31st March 2011 is given inTable – 3. It is evident from the table that the southern region occupied lion’s share of spread ofSHGs (46.36 per cent). Out of 69,53,250 SHGs in the country, 32,23,434 are in the southernregion. As against this, eastern region accounts for 19.76 per cent of the total SHGs in thecountry, followed by 13.60 per cent in Western region and 11.02 per cent in Central region. Thenorthern and northern-eastern region accounts for less than 10 per cent of the total SHGs in thecountry.

An analysis of savings amount of SHGs with banks region-wise reveals that out of Rs.619870.89 lakhs of savings in the Country as on March 31, 2011, Rs. 317450.84 lakhs ofsavings are from the southern region (51.21 per cent). At the next level, eastern region accountsfor 18.07 per cent of the total savings of the country, followed by 14.95 per cent in Westernregion, 8.29 per cent in Central region and 5.52 per cent in Northern region. As against this,northern eastern region accounts for only 1.96 per cent of the total savings of the SHGs withbanks in the country.

It is concluded that there are regional inequalities in the country regarding number of SHGsand amount of savings with banks by the SHGs. Southern region records highest percentage,while northern region records lowest percentage in this regard. This shows the backwardness ofthe women in the northern region of the country.

Table-3Region-wise Spread of the SHG-BLP -Savings of SHGs with Banks as on 31st March 2011

(Amount Rs. Lakh)

Sl. No. Region Total

No. of SHGs Saving Amount Rs.

1. Northern 3,51,801(5.06) 34,207.31(5.52)2. Northern-eastern 2,92,188(4.20) 12,167.09(1.96)3. Eastern 13,74,242(19.76) 1,12,014.60(18.07)4. Central 7,65,965(11.02) 51,363.57(8.29)5. Western 9,45,620(13.60) 92,667.48(14.95)6. Southern 32,23,434(46.36) 3,17,450.84(51.21)

Total 69,53,250(100.00) 6,19,870.89(100.00)


9


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11



Growth Rate of SHGs

The data on growth rate of SHGs linked with banks during the last two years, that is, during2009-10 and 2010-11 is presented in Table-4. It is evident from the table that the annual growthrate is 14 per cent in terms of number of SHGs linked with banks from 2009-10 to 2010-11. Interms of total amount of savings, annual growth rate is 12 per cent.

It is interesting to note that Jammu & Kashmir has recorded highest growth rate in terms ofnumber of SHGs (85.87 per cent). At the next level, Gujarat has registered highest growth rate interms of number of SHGs during 2009-10 and 2010-11 (60.10 per cent), followed by Jharkhand(59.64 per cent), Andaman and Nicobar Islands (51.86 per cent), Sikkim (38.58 per cent),Tripura (37.43 per cent), Uttarakhand (28.26 per cent), Meghalaya (22.46 per cent), Mizoram(20.50 per cent), Karnataka (16.88 per cent), Tamil Nadu, & Pondicherry (15.94 per cent),Punjab (14.94 per cent), Manipur (14.32 per cent), Odisha (13.85 per cent), Maharashtra (12.46per cent), Rajasthan (10.81 per cent). As against this, Nagaland state has recorded negativegrowth rate. Annual growth rate is less than 10 per cent in case of Kerala, Uttar Pradesh, NewDelhi, West Bengal and Madhya Pradesh statesin terms of number of SHGs linked with SHGs.

With regard to savings amount, Jammu & Kashmir bags highest growth rate (590.76 percent), followed by Gujarat, Goa, Haryana, Jharkhand, Uttarakhand and Nagaland bagging morethan 100 per cent. Maharashtra and West Bengal has registered negative growth rate in terms ofsavings. Assam, Himachal Pradesh, Tripura, Manipur, Karnataka, Uttar Pradesh, Meghalaya,Andhra Pradesh, and Rajasthan have registered growth rate of less than 25 per cent.

Distribution of SHGs Agency-wise

The SHG-BLP bank-wise position is provided in Table-5. As on March 31, 2011, a total of69.53 lakh SHGs were having saving bank accounts with the banking sector as against 61.21lakh SHGs as on March 31, 2010, thereby showing a growth rate of 13.6 per cent. Further, it isevident from the table that the share of commercial banks in the aggregate number of SHGs ason March 31, 2011 stands at the highest level with 58.3 per cent, followed by Regional RuralBanks (RRBs) (26.2 per cent) and Co-operative banks (15.5 per cent).

As regards annual growth rate in the number of SHGs, it is found that annual growth rate ishighest in co-operative banks, while it is lowest in Regional Rural Banks. It is obvious from thefact that total number of SHGs financed by co-operative banks increased sharply from 9,43,050at end- March 2010 to 10,79,465 by end-March 2011, reflecting significant interest being evincedby many co-operative banks. The number of SHGs linked with Commercial banks as on March31, 2010 has increased from 35,49,509 to 40,52,915 by March 31, 2011 showing a growth rateof 14.2 per cent. As against this, number of SHGs linked with RRBs as on March 31, 2010 hasincreased from 16,28,588 to 10,79,465 showing a growth rate of 11.8 per cent.

12



Table-5

Table Showing Bank-wise Number of SHGs Having Savings with Banks

Agency No. of SHGs % of Share

Commercial banks (Public & Private Sector) 31.3.2010 35,49,509 58.031.3.2011 40,52,915 58.3% growth 14.2

Regional Rural Banks 31.3.2010 16,28,588 26.631.3.2011 18,20,870 26.2% growth 11.8

Cooperative Banks 31.3.2010 9,43,050 15.431.3.2011 10,79,465 15.5% growth 14.5

Total 31.3.2010 61,21,147 100.031.3.2011 69,53,250 100.0% growth 13.6


Savings of SHGs with Banks

The agency-wise savings of SHGs with banks as on March 31, 2010 and March 31, 2011are given in Table-6. As on March 31, 2011, total SHG’s savings with banks amounts to Rs.6,198.71 crore as against Rs. 5,545.62 crore savings as on March 31, 2010, thereby showing agrowth rate of 11.8 per cent.

Agency-wise, it is observed that commercial banks have maintained good progress infinancing SHGs as their share increased from 50.0 per cent in 2009-10 to 59.3 per cent in 2010-11. The share of co-operative banks in SHG-bank linkage increased from 14.1 per cent to 19.8per cent over the period, while that of RRBs declined to 21.0 per cent from 35.9 per cent.Regarding growth rate during 2009-10 and 2010-11, it is found that co-operative banks recordedhighest growth rate over the period in terms of savings amount, while Regional Rural Banksrecorded negative growth rate. In other words, the growth rate of savings is 56.5 per cent incase of co-operative banks, 32.5 per cent in case of commercial banks and -34.7 per cent(negative) in case of regional rural banks.

As regards savings per SHG, it is found that the amount of savings per SHG has declinedfrom Rs. 9060 by end March 2010 to Rs.8915 by end March 2011. In case of savings per SHGalso, RRBs recorded negative growth rate, while the growth rates are 36.7 per cent and 16.0 percent in case of co-operative banks and commercial banks respectively.

13



Table-6

Savings of SHGs with Banks – Agency-wise Position(Rs. in Crore)

Agency Position as on Total SHG’s savings Per SHG savingswith the banks as on (Rupees)31 March 2010/2011

Amount Per cent share

Commercial banks 31.3.2010 2,772.99 50.0 7,812(Public & Private Sector)

31.3.2011 3,673.89 59.3 9,065% growth 32.5 16.0

Regional Rural Banks 31.3.2010 1,989.75 35.9 12,21831.3.2011 1,299.37 21.0 7,136% growth (34.7) (41.6)

Cooperative Banks 31.3.2010 782.88 14.1 8,30231.3.2011 1,225.44 19.8 11,352% growth 56.5 36.7

Total 31.3.2010 5,545.62 100.0 9,06031.3.2011 6,198.71 100.0 8,915% growth 11.8 (1.6)


Bank Loans Disbursed to SHGs

The agency-wise details of loans disbursed by banks to SHGs during the years 2009-10 and2010-11 are provided in Table-7. It is evident from the table that Bank loans disbursed to 15.87lakh SHGs, including repeat loan to the existing SHGs during the year 2010-11 aggregated to Rs.14,453.30 crore, registering a decline of 1.4 per cent of SHGs, but an increase of 17.9 percent,as compared to Rs. 12,253.51 crore during 2009-10. Out of Rs.14,453.30 crore loan disbursedduring the year 2010-11, 67.7 per cent of the amount were disbursed by commercial banks, 23.1per cent by RRBs and 9.3 per cent by Co-operative Banks. It is interesting to note that bank loansdisbursed to SHGs by commercial banks and RRBs during the last two years registered anegative growth rate, while co-operative banks recorded positive growth rate.

Loan disbursed per SHG has risen from Rs. 76128/- during 2009-2010 to Rs. 91,083 during2010-11 registering a growth rate of 19.6 per cent. The growth rate is 24.7 per cent in case ofcommercial banks, 12.3 per cent in case of RRBs and 15.0 per cent in case of Co-operativebanks. It is also observed from the table that Commercial banks are disbursing highest amount ofloan per SHG, i.e., Rs.1,00,050 per SHG during 2010-11, while RRBs disburses Rs.88,461 andCo-operative banks disburses Rs.57,629/-.

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Table-7

Bank Loans Disbursed to SHGs – Agency Wise Position(Rs. in crore)

Total loans disbursed by banksto SHGs during the year

Agency During the year No. of SHGs Per cent Share Amount Per cent Share Per SHGloan disbursed

(Rupees)

Commercial 2009-10 10,04,587 62.4 8,060.53 65.8 80,237Banks (Public & 2010-11 9,77,521 61.6 9,780.18 67.7 1,00,050Private Limited) % of growth (2.7) - 21.3 - 24.7Regional Rural 2009-10 4,05,569 25.2 3,193.49 26.1 78,741Banks 2010-11 3,76,797 23.7 3,333.20 23.1 88,461

% of growth (7.1) - 4.4 - 12.3Cooperative 2009-10 1,99,430 12.4 999.49 8.2 50,117banks 2010-11 2,32,504 14.7 1,339.92 9.3 57,629

% of growth 16.6 - 34.1 - 15.0Total 2009-10 16,09,586 100.0 12,253.51 100.0 76,128

2010-11 15,86,822 100.0 14,453.30 100.0 91,083% of growth (1.4) - 17.9 - 19.6


Bank Loans Outstanding Against SHGs

The agency-wise position of outstanding bank loans to SHGs for the years 2009-10 and2010-11 are depicted in Table-8. It is obvious from the table that 48.51 lakh SHGs had outstandingbankloans amounting to Rs.28,038.28 crore as on March 31, 2011,as against 42.24 lakh SHGswith bank loans of Rs. 22,679.85 crore as on March 31, 2010, representing a growth of 14.8 percent in number of SHGs and 23.6 per cent in bank loans outstanding against SHGs.

It is also revealed from the table that out of 4851356 lakhs SHGs, 66.7 per cent of SHGswere outstanding bank loans to Commercial banks, followed by 22.8 per cent to RRBs and 10.5per cent to Co-operative banks. Further, it is delineated from the table that out of total outstandingbank loan amount, 71.9 per cent is of commercial banks, 21.9 per cent is of RRBs and 6.2 percent is of Cooperative banks. Growth rate in terms of outstanding loan amount during the lasttwo years is more in case of cooperative banks as compared to commercial banks and RRBs.

The average loan outstanding per SHG amounted to Rs.57,795 as on March 31, 2011, whileit is Rs. 53,689 as on 31.3.2010. It is also observed that the average loan outstanding per SHG tocommercial banks is Rs. 62,289 as on March 31, 2011, followed by Rs. 55,658 to RRBs and Rs.33,894 to Co-operative banks.

15



Table-8

Bank Loan Outstanding Against SHGs – Agency-wise Position(Rs.in crore)

Total Bank loan outstanding against SHGs

Agency Position as on No. of SHGs % Share Amount % Share Per SHG-Bank(Rupees) loan outstanding

Commercial Banks 31.3.2010 28,31,374 67.1 16,149.43 71.2 57,037(Public & 31.3.2011 32,37,263 66.7 20,164.71 71.9 62,289Private Limited) % growth 14.3 - 24.9 - 9.2Regional Rural Banks 31.3.2010 9,77,834 23.1 5,224.42 23.0 53,428

31.3.2011 11,03,980 22.8 6,144.58 21.9 55,658% growth 14.3 - 17.6 - 4.2

Cooperative banks 31.3.2010 4,15,130 9.8 1,306.00 5.8 31,46031.3.2011 5,10,113 10.5 1,728.99 6.2 33,894% growth 22.9 - 32.4 - 7.7

Total 31.3.2010 42,24,338 100.0 22,679.85 100.0 53,68931.3.2011 48,51,356 100.0 28,038.28 100.0 57,795% growth 14.8 - 23.6 - 7.6


SELF-HELP GROUPS IN ANDHRA PRADESHHistorically, there is a concentration of SHGs in Southern States particularly in Andhra

Pradesh mainly on account of proactive role played by the State Governments.The SHG movementtook a firm root in the State with the implementation of World Bank assisted poverty reductionproject, Indira Kranti Patham (IKP), a scaled up versions of the SAPAP model with more focuson livelihood component.The project aims to build strong institutions of the rural poor andenhance their livelihood opportunities so that the vulnerability of poor is reduced. IKP consists oftwo projects, viz., Andhra Pradesh District Poverty Initiatives Project (APDPIP) and AndhraPradesh Rural Poverty Reduction Project (APRPRP). Society for Elimination of Rural Poverty(SERP), an autonomous body registered under the Societies Registration Act, has been establishedfor management of IKP through DRDAs at the district level.A large complement of staff consistingof Community Coordinators, Assistant Project Managers and District Project Managers has beenappointed for managing the project. Majority of the SHGs in the State have been formed throughthe IKP project andthe DRDA.

The state of Andhra Pradesh has been the focus of attention on the world map primarily dueto its pro-active government and significant strides made by its SHGs. SHGs are playing animportant role in optimization of natural and human resources through people’s participation. Thegovernment of Andhra Pradesh has taken up Women’s Empowerment as one of the main

16



strategies to tackle socio-economic poverty. SHG movement through savings has been taken upas mass movement by women, a path chosen by them to shape their destiny for the better.Development agenda of the state in the last few years of placing the people especially women inthe forefront has enabled the formation of large number of SHGs throughout State where womenare saving one rupee per day. The state government is making efforts to assist SHGs byproviding revolving fund under various programmes.

Right from the beginning, NGO’s in Andhra Pradesh are working for the cause of womenand are involving in facilitating the formation of self-help groups and efforts for their sustenance.NGOs are working in close coordination with DRDA’s in training and capacity building, skilldevelopment training programmes, building self-help group centered organizations, etc.

The Government of Andhra Pradesh has taken up the theme of women’s empowerment asone of the main agenda items to tackle rural poverty and socio-economic issues. Self-helpmovement through thrift and savings has been taken up as a mass movement by women – a pathchosen by the women to shape their destiny. Development agenda of the state in the last fewyears has been to place the poor, especially the women (below poverty line) in the forefront. Thishas facilitated formation of a large number of SHGs throughout the length and breadth of theState.

Self-help Groups (SHG) Movement in Andhra Pradesh

Self-help groups (SHGs) gained prominence as informal institutions of women for povertyeradication and as an efficient delivery mechanism of the state aid, in Andhra Pradesh. In additionto DWCRA groups, NGOs, large scale poverty eradication programmes like Velugu, APUSP andAPRLP have been promoting SHGs and their federations in large numbers. The number of SHGslinked to banks for credit is increasing each year exponentially and the ‘SHG-Bank linkage’demonstrated the potential to become a profitable business for banks.

SHGs have been initiated by NGOs in late 1980s in Andhra Pradesh.The women’s savingsand credit movement in Andhra Pradesh can be said to have really began in 1995, in Nelloredistrict as “Podupulakshmi” movement post anti-liquor campaign by women. This led to large-scale promotion of SHGs in every district of AP. The Podupulakshmi movement started with theslogan of “save a rupee a day”. Almost all the groups across the State began monthly individualsavings of Rs. 30 with each DWCRA group consisting of 15 women. By 2000, DWCRA becamea flagship program of Government of AP to implement all its poverty reduction programs. StateGovernment introduced schemes like Deepam (subsidized gas connections for DWCRA women)and State funded Revolving Fund, in addition to the Central Government Schemes. Severalthousands of groups were formed instantly to access various Government Schemes. To givefurther impetus to the DWCRA movement, the State Government established a separate departmentcalled “Women Empowerment & Self Employment” under the Rural Development Department tofocus on promoting DWCRA groups, increase bank linkage and to promote micro enterprises.

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Government Support for the SHG Movement

Revolving Fund AssistanceFor ensuring financial viability of the SHGs, the state government has been providing

Rs.25,000 as Revolving Fund Assistance (RFA) to the SHGs consisting of Rs.10,000 as subsidyand Rs.15,000 as loan. All the groups which have completed six months of thrift and are havingproper group dynamism are eligible to get revolving fund assistance.

Waiving of Stamp DutyAndhra Pradesh has waived stamp duty in full on all loan documents to be executed by

SHGs under the SBL programme in favour of banks and other financial institutions for obtainingloans.

PavalaVaddi SchemeThe PavalaVaddi Scheme is one interest subsidy scheme started during 2004-05 with an

objective of providing subsidy on the interest on loans taken by the SHGs. The scheme providesloans to the SHGs at 3 per cent interest rate.

SHG- BLP in APThe beginning for linking of banks with SHGs in the State was made with the launching of

SHG-BLP (SBL programme) in the country by NABARD in 1992. During the initial periods,NABARD supported NGOs for formation, nurturing and credit linkage of SHGs. The SBLprogramme gathered momentum after RBI made the programme a part of normal lending activityof the banks under priority sector from April 1996. AndhraPradesh has always become the frontrunner in the SBL Programme.

Savings of SHGs with BanksIn Andhra Pradesh, self-help movement through savings has been taken up as a mass

movement by women. Bank-wise details of SHG-Bank linkage scheme regarding savings inAndhra Pradesh is given in Table-9. Out of 14,48,216 groups having savings accounts with thebanks in the State, around 71 per cent of the groups are promoted by commercial banks, about27 per cent of the groups are promoted by Regional Rural Banks and nearly 2 per cent of thegroups are promoted by co-operatives.

It is found from the table that total amount of savings are Rs.1,25,528.98 lakhs as on March31, 2011, out of which 77.6 per cent are from Commercial Banks, 20.8 per cent are fromRegional Rural Banks and the rest 1.5 per cent are from Co-operative Banks.

18



Table-9

Table Showing Savings of SHGs with Banks in Andhra Pradesh as on 31st March 2011(Amount Rs. in lakh)

Agency No. of SHGs Saving amount

Commercial Banks 10,25,638(70.8) 97,455.56(77.6)Regional Rural Bank 3,95,965(27.3) 26,154.09(20.8)Cooperative bank 26,613(1.8) 1,919.33(1.5)Total 14,48,216(100.0) 1,25,528.98(100.0)

Note: Figures in the parentheses indicate percentages to the total.Source: Status of Microfinance in India 2010-11: A NABARD publication

Bank loans disbursedThe data on bank loans disbursed to the SHGs during 2010-11 in Andhra Pradesh is depicted

in Table-10. It is obvious from the table that bank loans are disbursed to 5,64,089 SHGs in theState during 2010-11. Out of 5,64,089 SHGs, loans are disbursed to 71.2 per cent of the SHGsby Commercial banks, followed by 26.9 per cent by Regional Rural Banks and 2 per cent by Co-operative banks. Total bank loan amount disbursed to the SHGs in the State during 2010-11 isRs.6,70,664.32 lakhs, of which 72.9 per cent are by Commercial Banks, 25.3 are by RegionalRural Banks and 1.8 per cent are by Cooperative banks.

Bank loans outstanding against SHGsThe data on bank loans outstanding against SHGs in the State as on March 31, 2011 is

provided in Table-11. It is striking to note that 14,71,284 SHGs in the State have outstandingloans to the banks as on March 31, 2011, of which 72.2 per cent of SHGs to the commercialbanks, 26.5 per cent are to RRBs and 1.3 per cent to Co-operative banks. Total amountoutstanding to the banks by SHGs in the State as on amounts to Rs.11,73,953.62 lakh. Out of thetotal amount outstanding, 74 per cent is of Commercial banks, 24.7 per cent is of RRBs and 1.3per cent is of Co-operative banks.

Table-10

Table Showing Bank Loans Disbursed to the SHGs during the Year 2010-2011 in Andhra Pradesh(Amount Rs. inlakh)

Bank No. of SHGs Loan amount

Commercial Banks 4,01,438(71.2) 4,88,671.31(72.9)Regional Rural Bank 1,51,521(26.9) 1,70,001.97(25.3)Cooperative bank 11,130(2.0) 11,991.04(1.8)Total 5,64,089(100.0) 6,70,664.32(100.0)

Note: Figures in the parentheses indicate percentages to the total.Source: NABARD, Mumbai, Status of Micro Finance in India 2010-11

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Table-11

Bank Loans Outstanding Against SHGs as on 31stmarch 2011 in Andhra Pradesh(Amount Rs. inlakh)

Bank No. of SHGs Amount of loan outstanding

Commercial Banks 10,62,726(72.2) 8,68,646.25(74.0)Regional Rural Bank 3,90,122(26.5) 2,90,009.69(24.7)Cooperative bank 18,436(1.3) 15,297.68(1.3)Total 14,71,284(100.0) 11,73,953.62(100.0)

Note: Figures in the parentheses indicate percentages to the total.


The income generating activities taken up by the SHGs and access to the banks and financialinstitutions attracted the attention of not only other States but at international level also. Manydignitaries from other states and other countries visited Andhra Pradesh and praised the SHGmovement and implementation of SHG-BLP in Andhra Pradesh. The other State governments arealso taking the practice as a model and are sending teams to study the implementation of theprogram with an aim to implement in the same way in their states.

CONCLUSIONSHGs are important tools of micro financing. Over the years SHGs have achieved tremendous

progress in bringing about social and economic upliftment in the life of its members. However,despite the spread and success of SHGs, they suffer from various drawbacks. The mainobjective of SHGs is reduction of poverty. In spite of provision of credit to a large number ofpoor people, not many have successfully come above the poverty line. Infact, SHGs and micro-credit cannot bring about solution to the complex problem of poverty.

Many SHGs suffer from poor management and poor internal control systems. Roles andresponsibilities of members and office bearers are not clearly defined. In some cases, cash flowsalso have been managed inappropriately. Most SHGs are dominated by few well-off, educatedmembers who get re-elected several times. Over dependence on leaders is a problem associatedwith all successful SHGs. Lack of education and skills among members is the root cause of theproblem. SHGs are informal organizations and hence there is governance system. This may bedue to lack of experience or lack of capacity to review functions or comply with legal regulations.SHGs are governed by various regulations of different entities. This makes formation andfunctioning of SHGs difficult.

The SHG programme has been predominant in the States of Andhra Pradesh, Tamil Nadu,West Bengal, Karnataka, and Uttar Pradesh. 40 per cent of credit linkages were established onlyin the state of Andhra Pradesh. The North Eastern states need to be focused upon. While thepolicy support for lending to SHGs has been unequivocal, such support for organizationalsustainability of the groups has not been clear. The minimal promotional funding for groupformation and linkage with banks has resulted in lack of institutional support mechanism for the

20



large number of groups. Several studies have indicated that many SHGs have inadequate andpoor record keeping practices and repayment rates are falling.

The SHGs required several on-going services which they cannot procure individually fromthe market. Several incidents of dropouts from groups are observed. The drop-out rates of verypoor is about 11 per cent and that of others is about 7 per cent. Inability to make regular savingdeposits is the major cause of dropouts.

While NABARD set the direction for the SHG-BLP and has taken industry level initiatives toground the programme, there has been very little direction setting for the ongoing supportservices to SHGs. Similarly, in those states where the SHG-BLP has been well established, thenumber of groups linked per branch has increased to such an extent that it is making themonitoring and supervision of groups difficult, resulting in falling recovery rates.

Overall, the apathy of bankers towards adopting a business development approach to SHGlending is leading to the disintegration of groups, with SHG members turning to other sourcesincluding MFIs for financial services, etc. in several states. Apart from the investment in formingand nurturing a SHG going waste, the members lose an opportunity to access savings services.Delays in loan processing by banks means that even repeat loans to well performing groupsmaterialize with a gap of 3 to 6 months. With the change in branch staff the gap is usually larger.

The staff is inadequate in bank branches. Target oriented approach has been adopted forbank linkage in the state. Stakeholders are having high expectations on bankers in addition to areaspecific problems of banks. NGOs are playing vital role in SHG promotion. NGOs are constrainedwith conditional grants and there is limited funding available for NGO to promote and sustainSHGs. Uncertainty exists at ground level due to lack of role clarity among various stakeholders.Role confusion is hindering the coordinated effort among various stakeholders. New businessmodels for enhancing rural livelihoods are being created with information and communicationtechnology.

Government recognition and mainstreaming of the initiative has often been perceived as anindicator of success, but such recognition has been a double-edged sword. On the one hand, itprovided the thrust required to expand rapidly; on the other, it has become vulnerable to governmentmanagement patterns—target-oriented quick group formation, predetermined criteria for identifyingbeneficiaries and forming groups without assessing affinity among the members, and the tendencyto further separate each caste or community for group formation, especially for subsidy distribution.

Since the major drive to promote SHGs, through the means of thrift and credit, was withthe goal of improving financial services to poor, their function was largely viewed as financialprovision and management. This tended to minimize the major role they have played (or have thepotential to play) in empowerment of poor and improving the livelihoods of poor and marginalized.

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