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SHGs:Issues and Challenges
Presentation by :
Micro Credit Innovations Department (MCID)
National Bank for Agricltre and !ral Development(NABA!D)"ead #$ce% Mmbai% India
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P&' Banks ()% Pvt* CBs (+)% !!Bs (,) -.%/// Branc0es (12%/// !ral3&emi 'rban)
&tate Coop* Banks 4 5+% DCCBs 4 5-/% &CA!DB 4/% PCA!DB 4 2 and PAC& 4 11-
'rban Coop Banks (+-1)% 6oreign Banks (5)
"o7ever:
Net7ork of informal credit 4 Money lenders%landlords% traders 4still acconted for sbstantial
portion of rral credit
Banking Network and Multi-agencyBanking Network and Multi-agency
approachapproach
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80e Dilemma of t0e Inverted 80e Dilemma of t0e Inverted
PyramidPyramid Banks
!ral
Poplation
9arge Banking Infrastrctre% en0anced otreac0 in rralareas% -/ million small loans% pro poor policies% priority sectorlending% sbsidy and sbventions% programmes andintensions like directing credit to rral areas% large resorcebase of banks% large banking manpo7er and sond controlsystems *
B'8% t0e Debt and investment srveys revealed ske7ness incredit ;o7% 0ose0old debt from non
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6indings from &tdies6indings from &tdies **in t0e eig0ties**in t0e eig0ties &avings and credit prodcts did not sit t0e poor
Procedres 7ere complicated and cmbersome
"ig0 transaction cost for t0e poor in availing >nancial services &ystem did not provide for anyt0ing to fall back on
?ven special poverty alleviation programmes did not recognise t0eimportance of savings
!esorce asked to 0andle often larger t0an t0e capacity of poor to
0andle @#t0ers decided everyt0ing
&o% poor 7antedMec0anism tokeep t0eirresorces safelyCredit to meett0eir emergenciesCredit for m?s
#r st
0asslefree>nancialservices
&o need 7asfor%
&stainableapproac0es%Prodcts t0atmatc0 needs capacities %redce
transactioncosts
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"o7 &" came into eEistence"o7 &" came into eEistence
• Presence of informal grops 7it0 variety of prposes*
•
C0its or c0it fnds% nid0is% bis0is etc* eEtending loans tomembers*
• By mid eig0ties% MF!ADA @Credit Management ropsstarted 7eekly savings and loan facility to grop members <renamed as @&elf "elp rops in +2,-*
• ICD& programmes in Ma0aras0tra% I6AD piloted 8amilnadGomen Development Proect in D0arampri districtlanc0ed arond same period*
• Absence of legal frame7ork for >nancing nregisteredgrops denied credits from banking sector*
• 'pscaling of lending activity not possible only ot ofmembersH o7n savings*
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NABA!D &tepped inNABA!D &tepped in In +22% NABA!D pilot proect to form and credit link
.// &"s from +22nance informal grops*
9oan linkage 7it0ot collaterals and 7it0otascertaining t0e prpose*
Banks 7ere to c0arge interest +J per annm from&"s*
&"s 7ere given freedom to >E interest rate frommembers*
!e>nance spport to banks by NABA!D etc* Dring pilot p0ase% 1-./ &"s credit linked 7it0 bank
loan of !s*/*., million covering , CBs% / !!Bs and- Coop banks*
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Mainstreaming of &"s
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80e &elf 0elp rop (&") 80e &elf 0elp rop (&") G0at is itG0at is it
A 0omogeneos grop of abot +/
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Design featresDesign featres
?nables eEclsion of ric0
&elf selection 6ocs on 7omen
&aving >rst and credit later
Intra grop appraisal system
Prioritisation of credit Credit rationing
&0orter repayment terms
Market rates of interest
8rg for 8ablet basedacconting
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80e grop s0old be in eEistence for at least mont0s
rop s0old 0ave promoted savings 0abits
&avings to loan ratio of +:1 or +: bt liberal
for matred grops&imple docmentation
Bank loans not to be sed for >nancingdefalters
"redit #inkage with Banks
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M?MB?!&"IP 6??&
8"!I68 C#99?C8I#N&
N#3#C#N8!IB'8I#N
9#AN !?PAFM?N8&
6IN?& P?NA98I?&BAN 9#AN&
Group Funds
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80e Prodct Converges 80e Prodct Converges
6ormal and Informal &ystems
6inancial capital and &ocial capital
&ystems Procedres and 6leEibility
Professionalism and 9ocal no7ledge
An Indian Product – researched,
Tested, Piloted, Grown, Expanded,
… and now A MOVEMENT
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Conceptalisation and pilot testing of &" 4 B9P
Contribting to condcive policy frame7ork
Convincing3cataly=ing all stake0olders
rant Assistance to &"PIs Capacity bilding spport for all players
!e>nance to banks
Critical tools3parameters3gidelines for
maintenance of acconts and records% rating% etc*
$%& - B#'- (ole of N)B)(*$%& - B#'- (ole of N)B)(*
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Book eeping by &" members t0rog0 a "and"eld Device
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Commnicating data3information3inpts to !BI%
oI etc !evie7 of progress
Innovations% stdies% disseminations of bestpractices etc*
Micro >nance Development and ?Kity 6nd(M6D?6) and G&" 6nd
Consltative mec0anism at varios levels 4National% &tate and District
$%& + B#' - (ole of$%& + B#' - (ole of
N)B)(* .....N)B)(* .....
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8rg for acconting t0rog0mobile based soft7are
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Progress in &"s &aving and Credit 9inkedProgress in &"s &aving and Credit 9inked (No* in lak0s)(No* in lak0s)
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&"
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87o decades of &"
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Where Have we reached ?
Jammu &
Kashmir
Himachal Pradesh
Uttar
Pradesh
Punja
Har!ana
"ajasthan
G#a
Karnata$a
%ndhra
Pradesh
rissa
'adh!a
Pradesh
(elhi
Gujarat
'aharashtra
Kerala
)amil
*adu
+ihar
West
+engal
Jhar$hand
Si$$im
%ssam
%runachal
Pradesh
*agaland
'ani,ur
'i-#ram)ri,ura
'eghala!a
Heartland #. SHG
.#cus
Chhattisgarh
Green /0tent #. c#verage12345
67 states
"ed 8 93 4 c#verage states
;ell#w 1 93 < 73 4 = states
Bro7n
173 > 234 states
$%& sa,ingsco,erageMapping- March!1
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Where Have we reached ?
Jammu &
Kashmir
Himachal Pradesh
Uttar
Pradesh
Har!ana
"ajasthan
G#a
Karnata$a
%ndhra
Pradesh
rissa
'adh!a
Pradesh
(elhi
Gujarat
'aharashtra
Kerala
)amil
*adu
+ihar
Jhar$hand
Si$$im
%ssam
%runachal
Pradesh
*agaland
'ani,ur
'i-#ram)ri,ura
'eghala!a
Chhattisgarh
Green /0tent #. c#verage1234
3= states
"ed 8 93 4 c#verage 6@ states
;ell#w 1 93 < 73 4 states
+r#wn 173 > 23 4 A states
$%& creditco,erageMapping- March!1
PunjaUttara$hand
West +engal
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&trategy for 'pscaling &"
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&trategy for 'pscaling &"
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&" Meeting in Progress
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Impact of the programmeImpact of the programme
?Etensive coverage of >nancially eEcldedpoor
?mpo7ered t0e disempo7ered 4 &pecially7omen
?conomic impact 4 Increase in net 0ose0old income
C0anges in 4 eEpenditre pattern% saving 0abits
Improvement in 4 asset 0oldings% >nancialstats% 0ealt0% 0ygiene and edcation
&ocial empo7erment 4 Increased socialrole% social 0armony% collective action
against social instice
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&ome of t0e Innovative Initiatives of&ome of t0e Innovative Initiatives of
NABA!DNABA!Drain bank and &"s
Compter mns0i
Nabykti &oft7are t0rog0 Myrada
IC8 &oltion for &" Acconting < Mobile Based% 8ablet Based "and "eld Device Based
Geb based MI&
!ral volnteer as book 7riter
Post #$ce as &"PI and 6inancial Intermediary
oint 9iability ropsAction !esearc0 for Oolntary &avings
"ealt0 Package for &" members
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Isses and c0allengesIsses and c0allengesConcentration in sot0ern states < 1J of total saving linked &"s and .1J of total credit linked grops
Qality of rops 4 lack of reglar meetings% poorbook 7riting% lack of adit of acconts% rating andgrading of grops
G0ereas overall credit ;o7 increasing (from !s* +1.1, Crin /+/
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Isses and C0allengesIsses and C0allenges
• Individal &B A3C by only small percentage of
individal members
• NPA in &"s (*21J% 1*-J and */2J as at t0e end of Marc0/+/% /++ and /+ resp) 4 9ed by Central !egion 7it0 +5*J andGestern !egion 7it0 ,*J
• &bsidised and C0eap credit eopardi=ing gropdynamics 4 Kality of grops declining
• Importance of savings3t0rift in grop not recognised
• ?Ecessive infsion of credit% mltiple members0ip%mltiple borro7ings
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Isses and C0allenges***Isses and C0allenges***
InadeKate gradation from consmptioncredit to credit for liveli0ood
National !ral 9iveli0ood Mission
Bilding of strctres 7it0 otside spport
6ederations (CB#s) 7orking as >nancial intermediary
Interest &bsidy and &bventions
Income stabilisation to be >rst priority beforeen0ancing income
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$%& $cheme$%& $cheme
• +./ back7ard districts in , states
•
Implementation in satration mode• Nodal N# 4 Identi>cation by 9DM DDM in
consltation 7it0 D9CC
• Participation by bank branc0es 7it0 CB&
•
Mo' bet7een bank and N#• N# to promote and facilitate credit linkage% provide
0and0olding spport% enable liveli0oods and beardefalt risk
•
Creation of G&" 6nd in NABA!D• rant spport !s*+/%///3< per &" and training etc
• &ervice c0arge from banks .J p*a* on o3s loanagainst &"s* Defalts% if any% to be netted ot*
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Two *ecades of $%&-B#' +Two *ecades of $%&-B#' +
Need for (e,istitng / $%& -Need for (e,istitng / $%& -• InadeKate otreac0 in many regions
• Delays in opening of &" acconts anddisbrsement of loans
• Imponding of savings by banks as collateral%
• Nonrst loans 7ere repaid promptly
• Mltiple members0ip and borro7ings by &"members 7it0in and otside &"s and
• 9imited banker interface and monitoring
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'roduct le,el changes in $%&-'roduct le,el changes in $%&-
Allo7ing volntary savings:
Cas0 Credit 3 overdraft for &"s
?nabling oint 9iability rops (9s) 7it0in&"s
Improving !isk Mitigation &ystems
Bilding second tier instittions
&trengt0ening monitoring mec0anism 4 rating
aditing Addressing 8raining reKirements
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