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Status of Micro Credit through SHGs in Meghalaya
                                                                                                                                                                                     Dr. Shreeranjan

(The contents below is extracted from author’s book on "Credit related Issues in Meghalaya", Published by NEICSSR Shillong, August, 2006. © Shreeranjan)

Introduction

Planning Commission in 2002 has acknowledged that “the credit needs of the rural poor are at present only partially met by formal credit agencies and a majority of rural poor continues to depend on the informal sources of credit”. Following pattern of credit usage by the rural poor has emerged from the study of PriceWaterHouse Coopers as quoted by the Planning Commission (2002):

  • 63% of total credit availed by the rural poor is for consumption purposes.

  • Only 37% is for productive use.

  • Overall share of organised sector in credit flow to rural poor is around 16%.

The study gave the following reasons for this distortion:

  • Non availability of credit for consumption needs from the organised sector.

  • Very high transaction cost to the borrowers from the organised sector.

  • Rigidity of terms and conditions for a loan from the organised sector.

  • Delay in sanction of loans by the organised sector.

  • Very high rate of defaults under the Govt. Sponsored has led to the reluctance on the part of the banks to extend credit to rural poor.

3.10. Role of Micro Finance,  Micro Finance Institutions (MFIs) &  Self Help Groups (SHGs) in Rural Credit

Microfinance refers to small scale financial services for both credit and deposit purposes. ADB (2000, cited by Satish, P, 2005) ‘defines microfinance as the provision of broad range of services such as deposits, loans, payment services, money transfers, and insurance to poor and low income households and their micro enterprises.’ The task force for NABARD (2003) sums up microfinance as "Provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas for enabling them to raise their income levels and improve living standards".

Micro Credit as we know refers to small amounts of credit both for production and consumption purposes to those poor households who remain or chose to remain outside the reach of the formal credit system but have demonstrated their credit worthiness. It is perceived as the springboard on which the economic emancipation of the weaker section could be initiated. Micro Credit helps the poor to acquire new assets, produce goods and services, and encourage collective self-management of resources for sustainable development. RBI (1999) mentioned “micro-credit organisations are institutions which provide thrift and credit and other financial services and products of very small amounts mainly to the poor in rural or urban areas for enabling them to raise their income level and thereby improve living standards. The micro-credit organisation would include institutions such as Non-Governmental Organisations, federations of Self Help Groups, Mutually Aided Cooperative Societies, etc.”

There has been a rise in micro credit programmes through MFIs. The key aspects and lessons from Grameen Bank experiences (Hulme and Mosley, 1996) are:

  • Confidence in the future availability of the scheme is the key to its success as a risk management tool that loans will be available in time of need, making it possible for households to dispense with less effective and less desirable strategies (child labour, money under the mattress).

  • use of social rather than economic collateral through joint liable borrowing group formation;

  • Access to finance is analogous to the employment guarantee schemes where the Clients often go to great lengths to repay their loans so as not to lose future access to loans.

  • high number of field staff, good outreach for disbursal and repayment collection;

  • a reliance on group / core fund from deduction out of loans and providing insurance  mechanisms of default; additional deduction to meet risks and contingency; local and operational variations.

  • Evidence from various studies suggests that micro credit has improved the conditions of poor women through enhanced  bargaining position with their husbands and family, boosting self-confidence, and participation in public life.

It has been established that microfinance programs both sponsored by NGOs and the state have been better in reaching out to moderately poor and vulnerable (not necessarily poor) households than to the extremely poor households. The usage of loans is often to protect against risk ahead of time than as ex-post coping mechanism, loans are rarely used for consumption directly which is generally met by smoothing income flows. When used as a coping device, loans usually go into rebuilding assets rather than direct consumption.

Presently micro finance institutions (MFIs) are broad spectrum entities which obtain finance from banks according to guidelines issued by RBI. MFIs seek to provide small scale credit and other financial services to low income households and small informal businesses.  As per one definition in MFDEF scheme of NABARD  “Micro Finance Institutions means an entity whose principal object or principal business is the provision of micro finance services to eligible clients and comprises microfinance organisations and MFI-NBFCs.”   MFIs appears to be ‘legally amorphous entities’ (RBI, 2005). In terms of nature and extent of regulation and supervision there are significant differences across the legal forms. .Most of these institutions are not under any prudential regulation and hence often do not enjoy confidence of lenders, donors and other stakeholders (RBI, 2005).  ‘For profit’ MFIs are incorporated under the Companies Act, 1956 and are registered as NBFCs under the RBI Act, 1934 which fall within the purview of RBI regulations. ‘not for profit’ companies under section 25 of the Companies Act, 1956 are exempt from the regulatory requirements under the RBI Act subject to certain conditions.

Legal forms of MFIs in India

Type of MFIs  

Estimated number

Law/ provisions under which registered

1. Not for profit MFIs 

a) NGO-MFIs


b) Non–profit Companies

 

400-500


10

 

Societies Registration Act 1860 or similar state Act, Indian Trust Act, 1882.

Section 25 of the Companies Act, 1956.

2. Mutual benefit MFIs
Mutually Aided Cooperative Societies and similarly set up institutions

200-250

Mutually Aided Cooperative Societies Acts by the State Govts.

3. For Profit MFIs, NBFCs

6

Companies Act 1956.
Reserve Bank of
India Act, 1934.

[Source:  NABARD, 2003 ( cited by Sen and Shylendra) & Satish, P. 2005 Economic and Political Weekly, 23 April, 2005]

The position of micro credit providers and present legal framework governing them is as under(RBI, 2004 ):

Categories of Providers

Legal Framework governing their activities

(a) Domestic Commercial Banks:
      Public Sector Banks;
     
Private Sector Banks &
     
Local Area Banks

(i)   RBI Act 1934/
(ii)  BR Act 1949
(iii) SBI Act
(iv) SBI Subsidiaries Act
(v)  Acquisition & Transfer of Undertakings Act 1970 & 1980

(b) Regional Rural Banks

(i)   RRB Act 1976
(ii)   RBI Act 1934
(iii)  BR Act 1949

(c) Co-operative Banks

(i)   Co-operative Societies Act 
(ii)   BR Act 1949 (AACS)
(iii)  RBI Act 1934 (for such. banks)

(d) Co-operative Societies

(i)   State legislations and  MACS Act

(e) Registered NBFCs

(i)   RBI Act 1934
(ii)  Companies Act 1956

(f) Unregistered NBFCs

(i)   NBFCs carrying on the business of a FI prior to the coming into force of RBI Amendment Act 1997 whose application for CoR has not yet been rejected by the Bank
(ii)  Sec. 25 of Companies Act

(g) Other providers like Societies, Trusts, etc.

(i)   Societies Registration Act, 1860.
(ii)   Indian Trusts Act
(iii)  Chapter IIIC of RBI Act ’34
(iv)  State Moneylenders Act

In recent years, banks have also resorted to involving NGOs and other CSOs (Civil Society Organisations) for the SHG-Bank linkage programme, Joint Liability Groups,  MFOs, and Microfinance institutions (MFIs), as "pass through" agencies. New generation banks with a heavy reliance on technology but with a very limited branch network also have started to tap the rural credit market. There are  more than 800 MFIs operating in India and more than 3000 organisations involved in promoting and facilitating the SHG-Bank Linkage Programme as per RBI (2005).  MFIs provide a multidimensional  services, besides enabling  the poor to avail of some of the financial services. The activities covers wide spectrum such as promotion of SHGs, partnering with banks for financial services, to be facilitators without carrying the micro finance assets and liabilities on their balance sheets.  Barring some large NGOs, NBFCs, MACSs which function as "pass-through" entities in "partnership" with banks [ for Example  MFIs like SPANDANA (SPANDANA is a NGO  operating in  Guntur, Andhra Pradesh ), Share-Micro Finance Limited (Society for Helping and Awakening Rural poor through Education, Hyderabad,  Andhra Pradesh.,)] others do not handle cash. Most MFIs have lopsided geographical distribution concentrated in South India and the share of total microfinance business in the country is about 8% ( Satish, P. 2005).  

There are various  approaches, classification, models , categorisation of MFIs a snapshot of which is presented below: Francis Sinha, 2005,  indicates i) SHGs model ( MACS is included in this) and Grameen Model. Satish , P. (2005) mentions broadly five (5) categories of methodologies in  microfinance,  

Microfinance Methodologies

Examples

Characteristics

1. Grameen and Solidarity model

Grameen bank in Bangladesh; BancoSol in Bolivia, Solidarity groups in Latin America   

3-8 persons, each active and  assuming responsibility , lending and repayment to and from members through guarantee of the group members

2. The Group approach

SHGs- Bank linkages in India, PHBK programme in Indonesia, Chikola groups of K-REP in Kenya .

Delegates entire financial process (savings, loans, and repayments) to the Group which besides using their own fund also mobilises and secures additional finances from Fiancial institutions, MFIs.

3.Individual credit

BRI-Unit Desa in Indonesia , Priority sector lending by banks in India especially by RRbs and Cooperative banks

Small Credit given to individuals based on appraisal, disbursement savings and repayments

4. Community banking

Village Bank of FINCA in Latin America , replicated in Africa and Central Asia

Expanded group approach of 35-50 members ; borrow finance from the programme implanting agencies and on lend to members.

5. credit unions and Cooperatives

SANASA in SriLanka

Meber owned  organisations providing credit and other fiancial services. Apex bodies provide technical and financial service.

(Source: Extracts from an article written and presented at the APRACA Seminar at Manila on Regulation of mFIs in July 2004 by K. Muralidhara Rao, General Manager, NABARD, Mumbai. The views expressed are personal and attempts to capture the present thinking of regulating institutions.)

There is ongoing debate in respect of a regulatory system for the MFIs which focuses on three stages approach as indicated by RBI and NABARD:

  1. Stage one - to make the MFIs appreciate the need for certain common performance standards,

  2. stage two - making it mandatory for the MFIs to get registered with identified or designated institutions and

  3. stage three - to encourage development of network of MFIs which could function as quasi Self-Regulatory Organisations (SROs) at a later date or identifying a suitable organisation to handle the regulatory arrangements.

The Committee of RBI recommended that while the MFIs may continue to work as wholesalers of micro Credit by entering into tie-ups with banks and apex development institutions, more experimentation are needed about the suitability and sustainability of the MFI model. Such experimentation needs to be encouraged in areas where banks are still not meeting adequate credit demand of the rural poor such as North-eastern states and tribal dominated states such as Jharkhand, Chhattisgarh and Orissa which is pertinent to the Meghalaya context.  There is also a view that while the NGO-MFIs can continue to extend micro credit services to their clients, they could play an important role in facilitating access of their clients to savings services from the regulated banks. As regards allowing NGO-MFIs to access deposits from public / clients, the Committee of RBI consideresd that in view of the need to protect the interests of depositors, they may not be permitted to accept public deposits unless they comply with the extant regulatory framework of the Reserve Bank of India; further, as no depositors' interest is involved where they do not accept public deposits, the Reserve Bank of India need not regulate MFIs. The committee is also of the view that lenders of MFIs should ensure that these institutions adopt a ‘cost-plus- reasonable-margin’ approach in determining the rates of interest on loans.

NGO promoted Micro Finance Institutions either in the shape of SHGs and NBFCs traverse the thin line of formal and informal structure and could emerge as a sturdy hybrid which takes on the best elements if governed and delivered properly. According to a study by Kropp and Suran (2002), three different models of credit linkages have been found feasible while applying to their formation in the country:

  1. SHGs formed and financed by banks (16%);

  2. SHGs formed by NGOs and Formal agencies/ Govt. but funded directly by banks(75% of financed SHGs);

  3. SHGs financed by banks using NGOs and other agencies as financial intermediaries (9%).

I would like to add 4th dimension of stand alone or abandoned SHGs promoted by NGOs, Govt., banks as per some programmes and abandoned or left alone in the tumult of development and finance. An additional fifth column of SHGs is such that mutates from one form or format to another in the spirit of survival of the fittest through adaptation.

Based on above stipulations, there could be different models of the linkage between SHG and banks ( modified after study by Thorat, YSP.  2004; Nanda, Y.C. 1994 ):

Model 1: The simplest and most direct is a model in which the banks deal directly with the individual SHGs, providing financial assistance for on-lending to the individual members.

Model 2: Another model, a slight variant of the first, is where the bank gives direct assistance to the SHG and the SHG promoting instituion (SHPI), usually an NGO, provides training and guidance to the SHG and generally keeps a watch to ensure its satisfactory functioning.

Model 3: The third model places the NGO or SHPI as a financial intermediary between the bank and a number of SHGs. The linkage between the bank and the SHGs in this case is indirect. The NGO accepts contractural responsibility for repayment to the bank.

Model 4: The most common linkage  model in India is Bank-SHG with active support of Govt./ SHPI /NGOs. Banks deal directly with individual SHGs in this case but SHPI/NGOs/Govt. provides the initial training, guidance for organization, thrift, credit and economic activities. While linkage of the banks is direct with the SHGs, the SHPI has an important role in pre- as well as post-linkage stages. The fourth model envisages bank loans directly to individual members of SHGs upon recommendations of the Govt, SHG and NGO. In this case, the Govt. NGO assists the bank in monitoring, supervising and recovery of loans.

Model 5: In many cases, the NGO/ SHPI also provides or organizes/ channelise some amount of  initial support to these SHGs to augment their resources (for e.g. an NGO, MYRADA, provided such financial assistance to SHGs from an initial support of Rs. 1 million by NABARD before the Pilot Project was started). The SHPI/NGO also monitors and ensures satisfactory functioning of the SHGs even after the linkage.

Model 6 : Mixed or Variants: Very often in the older SHGs the linkages traverses an evolutionary process where there is movement from model five or three to model two and to model one and finally to model four as the objective is access to the quantum of finance and end use.

Growth, evolution or adoption or adaptation of various course very often depend on the perception and formalities of the bank and also on the strength of MFIs/ Govt and other agencies. There have been cases where banker is proactive, outgoing, having a first hand knowledge on the working of a SHG has straightway taken model two or even model one. On the other hand,   conservative banking may follow model three and rely on the NGO or SHPI or Model 4 which fits the Govt. Sponsored Programmes for defined objectives (e.g. SGSY, IWEP, SGSRY etc).

Group-based credit and insurance programs experimented over the last two decades, also offer good promise as it:

  • reduces problems of wrong selection and dissolve moral aspects involved;

  • reduces likelihood of members taking up projects with high risks;

  • reduces or remove requirements for traditional norms of collateral, extending the spread to most poor;

  • accommodates even very small loans and is more responsive to the needs of the borrower;

  • has high repayment rates; and

  • is more sustainable.

The shortcomings of Group-based credit and insurance programs are that:

  • Success is not universal;  

  • more successful in reaching the moderately poor than most poor Hulme and Mosley 1996; Khandker 1998; the poorest and most vulnerable groups may still be excluded;

  • selection biases may overstate the benefits from program participation;

  • financial sustainability remains a concern;

  • In some cases subsidy dependence is high and in some cases, interest rates more than double.

Group credit schemes may need to think of innovative ways to lower costs while maintaining their outreach to the poor. On costs and benefits of credit subsidies issue limited evidence shows differences across programs and within programs across different groups of borrowers. Vijay Mahajan (2005) has mentioned limitations of micro credit in having five fatal assumptions:

  1. Assumptions that the credit is the main financial service needed by the poor;

  2. Assumptions that credit can automatically translate into successful micro enterprises;

  3. Assumptions that all the poorest wish to be self employed and can be helped by the micro credit;

  4. Assumptions that giving micro credit to people slightly above poverty line is mistargeting;

  5. Assumptions that micro credit institutions can all become financially self sustaining.

Drawing upon the concept of livelihoods as mentioned in the opening portion of chapter I a more sustainable broad based expanded paradigm of micro credit is engulfed in the concept of ‘livelihood finance’( Mahajan, V.2005) as intrisincally linked. According to Mahajan (2005) ‘livelihood finance’ as a comprehensive approach includes the following which must be brought in more proactively in integrated policy and operational domain:

  1. Financial services: savings, credit, insurance, infrastructure finance, investment in human development;

  2. Agriculture and business development services: Productivity enhancement, risk mitigation, local value addition and alternate market linkages;

  3. Institutional development services: producer organisation, systems of accounting, accountability, MIS, incentives etc.  

5.5.Status of Micro Credit through SHGs in Meghalaya

The main aspects, merits and demerits of micro credit have been touched upon in brief above. With paradigm shifts in credit dispensation and programmatic shifts in various sectors and schemes of Govt.of India , SHGs and NGOs have been brought to the forefront. There are burgeoning programmes requiring social mobilisation through SHGs for microcredit and delivery of services through participation, capacity building. and empowerment The SHG programmes which  had a slow start, has gradually picked up in the state. There are around 6500-7000 SHGs in the state under various programmes, as on  January,06, such as SGSY (C&RD deptt.), IWCP ( Social Welfare deptt.), IWDP ( Soil Conservation deptt.),  NABARD and Banks, Horticulture Mission ( Agriculture deptt.), IFAD projects (NEC, and Planning Deptt.) , NGO  promoted and run under various assistance programmes.  

There are also migration of groups for one objective to the other and thus, possible overlaps. There is a need to survey, rate and involve these socially mobilised groups towards consolidation, capacity building and effective partnership in developmental delivery in the state.

5.5. a. The SHGs bank linkage programme has not progressed in the State of Meghalaya at the same pace as in other parts of the country.  The main reason for the poor progress appears to be the lack of awareness of the concept of promotion, capacity building of SHGs etc.  Besides, most of the groups promoted by NGOs are now being covered under SGSY.  Micro-finance and mere provision of credit does not foster self-employment; at the same time, there is a need to facilitate and provide comprehensive micro enterprise development support.

As per NABARD, as on 30 November 2004 , the progress under SHG bank linkage programme is as below:

(Rs.in lakhs)

Agency

Cumulative No. of SHGs credit linked as on 30.11.2004

Cumulative loan disbursed as on 30.11.2004

Cumulative Refinance disbursed as on 30.11.2004

 

No SHGs provided with bank loan since inception
as on 31.12.2005

Cumulative amount of finance to SHGs since inception as on 31.12.2205

CBs

138

66.57

24.22

264

79.42

RRB

67

31.00

-

67

10.00

MCAB

10

1.05

1.05

27

11.42

Total

215

98.62

25.27

358

100.84

Source NABARD, 2005 & 2006

Besides the above NEDFi has also promoted around 65 numbers of SHGs for microfinance of which 51 are women SHGs. A total of Rs 41.37 lakh involving 759 beneficiaries have been assisted as on February, 2006. As on 30-11-2004 , 215 SHGs have been credit-linked to various banks. Further, as per RBI upto 30th September 2005 , 1958 SHGs have been credit linked with the bank in Meghalaya with 785 lakh as disbursed amount.

5.5. b. Status of NGO facilitated SHGs formation

Most of the  micro credit initiatives in the State have taken place with the involvement of NGOs such as Bosco Reach Out, BAKDIL Diocesan Social Service Society, Bethany Society, FMA-Outreach for Underprivileged Women and Children, Women for Integrated Sustainable Empowerment (WISE), Nangroi Hynniewtrep Organisation, Namrhen Association, Western Cultural and Socio Welfare Association etc., to name a few. Of these, the Bosco Reach Out has been more successful in the formation and linking of SHGs with the banks.  NABARD has sanctioned grant assistance of Rs.8.00 lakh to Bosco Reach Out for conducting various training programmes for strengthening 400 existing SHGs and promoting 400 SHGs both in Meghalaya and Assam within a period of three years.  NABARD has also sanctioned Revolving Fund Arrangement of Rs.15 lakh for lending to 150 SHGs with an average loan of Rs.10000.00 per group for undertaking income generating activities.  As on June 2004, Bosco Reach Out has formed 5563 SHGs, of which 340 groups have been savings linked.

Table : District-wise NGO facilitated SHGs in Meghalaya

Name of the Agency

             Name of the District

E.K. Hills

W.K. Hills

Ri Bhoi

Jaintia Hills

W.G. Hills

E.G. Hills

S.G. Hills

Total

Women for Integrated Sustainable Empowerment

77

-

-

-

-

-

-

77

Seng Samla Diskiangpunsior New Mawbuit

-

39

-

-

-

-

-

39

St. Michael’s Mission Home

-

-

-

-

29

-

-

29

Charisma Holistic Restoration in Society Transformation (CHRIST)

5

-

-

-

-

-

-

5

BAKDIL - Diocesan Social Service Soceity

-

-

-

-

78

6

42

126

Society for Micro Economy Development Activities (SoFMEDA)

15

-

6

-

-

-

-

21

Ringrer Market Welfare Committee

-

-

-

-

5

-

-

5

Western Cultural & Socio Welfare Asociation

-

31

-

-

-

-

-

31

FMA-Outreach for Underprivileged Women and Children (FMA-OUWC)

20

53

-

7

8

-

-

88

New Rompa Mebit Club

-

-

-

-

76

-

-

76

Nangroi Hynneiwtreb Organisation

11

-

-

-

-

-

-

11

Namrhen Association

30

-

-

16

-

-

-

14

IFAD Project

-

312

-

-

435

-

-

747

Bosco Reach Out

132

81

405

424

147

70

-

551

Kner Shaki Mission Organisation

4

-

-

-

-

-

-

-

Total

294

516

411

447

778

76

42

2564

(Source: NABARD,2006)

Table : Details of district-wise SHGs formed in the State as per available records December 2004

Sl. No.

Name of the District

Total No. of SHGs formed

Of which Women SHGs

Total No of member

Total amount of savings (Rs.)

No. of SHGs opened SB A/c

Remarks/Name of the NGO promoting the SHGs

 

1.

West Garo Hills

  171

 153

 1835

617016

  106

IFAD-New Rompa Mebit Club; Krima IV; Byacid; Aca; Bethany Society; BRO & SAVE

2 .

East Garo Hills

   52

  31

  509

 252000

   25

BRO

3.

West Khasi Hills

  189

  92

 2081

 414229

  125

IFAD-BRO; WAWO;  WCSWA; SSD; KJPS

4.

East Khasi Hills

  101

  54

  972

 777388

   40

BRO & SOFMEDA

5.

Jaintia Hills

   33

   0

  343

 229425

   34

Promoted by RRB/NGOs

6.

Ri Bhoi

   75

  38

  764

 605882

   36

BRO

Total

  621

 368

 6504

2895940

  366

 

(Source: NABARD,2005)

NABARD, Government departments like Community and Rural Development (C&RD), Social Welfare, Agriculture , Cooperation, etc have organised awareness and exposure programmes for government officials, NGOs, communities, SHGs and for banks as a promotional step.  

5.5. c. SHGs in IFAD Projects

1. North Eastern Region Community Resource Management Project for upland areas (NERCRMP): A pilot project with IFAD support on participatory development process is also under implementation in the state under the North Eastern Region Community Resource Management Project for upland areas (NERCRMP). The project is working for   participatory, sustainable, and viable community based institutions that are expected to carry out a people driven mode of rural development. The programme gives thrust upon increasing local capabilities, improving livelihood opportunities, enhancing saving habit and capacity and improving delivery systems through local participation, especially that of women. It has been concentrating on building up Community Based Institutions (CBIs) at the grassroot level, called Natural Resources Management Groups (NaRM-Gs) and Self Help Groups (SHG). In Meghalaya, West Garo Hills and West Khasi Hills are being covered. SHGs are supposed to play a crucial role in the success of the programme. 257 and 520 SHGs have been formed in West Khasi Hills (162 villages) and West Garo Hills (192 villages) respectively with the help of selected NGOs.   Of these about 302 SHGs (April 2005) have been graded in West Garo Hills District, and have received 12. 12 lakhs as loans and in addition Rs. 24.80 lakh as loans for transport etc. The project cost In Meghalaya is about Rs 159.36 crore which has contributions from IFAD (Rs 109.92 cr- 68.9%), GOI (Rs. 26.88 Cr- 16.86%), beneficiary (Rs.16.80 Crore-10.54%) and financial institutions (Rs. 5.76 crore- 3.63%)

2. Livelihoods Improvement Project for the Himalayas : Another IFAD project is being implemented by the Meghalaya Rural Development Society (MRDS) with planning department of the Govt. of Meghalaya as the nodal authority. This livelihood improvement programme assisted by IFAD is to focus on poor households in the State in the remaining five districts ( excluding West Garo and West Khasi Hills districts) where a large number of SHGs, approximately 3000, will also be mobilised spread over 5 years commencing 2005-06. These groups will also have inclusion principles of existing mobilised groups under SGSY and others based on certain criteria. The financial service provided under the project would encompass savings, credit and insurance as proven in many successful experiments against poverty.  The project goal is to improve livelihood of vulnerable group in a sustainable manner through livelihood opportunities and strengthening local institutions that relate to livelihood development. The project component include Promotion and capacity building of SHGs; Capacity building of SHGs promoters, grassroot trainers and formal financial institutions; enabling networking of SHGs and capacity building of federations; revolving fund assistance to SHGs and federations; funding mobile banking facility; technical assistance to federations; need based studies and research. Approximately 29300 households in over 570 villages of 14 blocks covering about 30% of each block are likely to benefit and is expected to cause ripple effect. The total project cost is around Rs 172.14 crore . The cost sharing is likely to be 48.34% by the IFAD, 27% by the banks in the form of credit, 10.63 % by the stakeholder ie poor people, 14 % by the state govt. Thus, the programme holds a good promise to enhance credit deployment and absorptive capacities in the state.  

5.5.d. SHGs under SGSY( Swarna Jayanti Gram Swarojgar Yojana)

The Scheme SGSY was launched by the Union Government in the year 1999-2000. The scheme adopts a process approach (bottom up approach) involving microfinance and micro credit flows through social mobilisation and group formation towards self employment and income generation. In the state there was considerable confusion and delay in initial understanding, acceptance, switch over and initiation efforts with the result that for the first 3-4 years there was very slow progress and negligible absorption of funds excepting for the promotional and training components. Most of the SHGs were in their initial stages of formation and grading. Non – Governmental organizations (NGOs) are also involved in organizational work, Group formation and grading exercises. Project reports based on the identified key activities have been prepared. Considerable number of SHGs have passed on Grade I and Grade II and application have been sponsoring to the Banks for taking up economic activities. Though the credit mobilization was very less initially, it is observed that there has been some improvement in terms of the number of applications sponsored and sanctioned to the beneficiaries lately. The district wise status of SGSY is presented below based on reported figures.

District wise SHGs under SGSY (as reported, July 2005)

District

SHGs formed

SHGs Eligible for Revolving fund

SHGs  Sanctioned Revolving fund

SHGs Received Revolving fund

SHGs Eligible for project financing

SHGs sanctioned project finance

SHGs Received project financing

East Khasi hills

646

247

197

165

74

49

45

West Khasi hills

685

473

473

204

77

na

na

West Garo hills

1300

313

293

293

6

6

6

East Garo hills

859

493

366

366

365

1

1

Jaintia hills

373

291

122

122

20

9

9

Ri- Bhoi

215

199

199

199

16

16

16

South Garo hills

315

101

52

52

7

Nil

nil

Grand Total

4395

2117

1702

1401

558

81

77

(Source: Directorate of C&RD and SIRD)

There is some variation in reporting. As per SLBC ending September 2005, under SGSY, total number of SHGs  which are savings linked are 1557, the number of SHGs which are credit linked are 1304 and the amount disbursed as loan under SGSY amounts to Rs 6.38 lakh.

The main causes for delay in implementation of SGSY in the state are as follows:

  1. Some procedural difficulties;

  2. Formation of groups (Self Help Groups) in the rural areas was a time consuming process and required considerable social mobilization efforts , hitherto missing in developmental actions in the state;

  3. Group activities or combined operations, were not easily acceptable;

  4. A lot of education, consultation, and motivation on the objective of the Scheme and the benefits it may bring through the Community Credit System required assimilation particularly among the people below poverty line which poses a great challenge;

  5. The sparse location of households in rural areas and remoteness from Bank branches makes the effective linkage difficult;

  6. The poor disposition of banks and banking personnel with mindsets;

  7. Poor/ cautious participation of the banks and financial institutions in the process;  

  8. Most of the branches in rural areas being “one man” branches rendering it difficult for the Branch Manager to attend the Grading Process of SHGs;

  9. Processing of sanctioning loan application by banks is considered slow and time consuming; and

  10. The fear/ impression that failure to repay may attract punishment such as imprisonment which made people hesitant to venture in new activities with bank loan in view of their inherently weak risk taking capacity being below poverty line.  

5.5.e. Swayamsidha (IWEP)

One of the women empowerment strategies came into the force by recasting the erstwhile ‘Indira Mahila Yojana’, in 2001 as ‘Swayamsidha’. The programme aims at generation of awareness and achievement of economic emancipation through micro level income generation activities and convergence of various services such as literacy, health, non formal education, rural development, water supply, entrepreneurship etc. This was attempted through organising women into SHGs, during the 9th plan and carrying forward the organisation to link with micro-credit or micro-finance structures. There is also an  attempt to expand the Rashtriya Mahila Kosh (RMK). The Tenth Plan (GOI,2002) mentions the need for setting up an exclusive ‘Development Bank for women Entrepreneurs’ towards development of small scale and tiny sector, besides equipping all states to establish Women’s development Corporation  in order to provide backward and forward linkages of credit and marketing. The progress of SHGs linkage with banks in the state of Meghalaya under Swayamsidha scheme is given below in the Table.  

Table : Progress of Swayamsidha (IWEP); end June 2005.

Items Description

Mylliem

Mawshynrut

Resubelpara

Umling

Betasing

Total

1.

No. of Surving IMY SHGs

60

-

-

-

 

60

2.

New SHG formed

46

99

102

105

104

456

3.

Total SHG

106

99

102

105

104

516

4.

No. of village covered

72

61

65

55

57

310

5.

No. of SHG Members

2136

1258

1021

1073

1263

6751

6.

No. of SHG doing serving

100

99

102

105

104

510

7.

Amount saved (in Rs)

4,23,264

5,03,526

3,72,684

2,06,437

2,77,214

17,83,125

8.

No. of SHG doing inter Loaning

57

55

52

61

76

301

9.

Amount Loan

1,51,000

1,95,062

1,57,727

85,700

57,930

6,87,419

10.

No. of Members received Loan

668

99

302

133

347

1549

11.

No. of SHG having Bank Account

76

75

20

87

96

354

12.

Amount deposited in bank.

2,13,678

1,84,993

71,310

19,900

2,46,738

7,36,619

13.

No. of SHG availing Loan from bank

-

-

Under process  with bank 8%

6

6

20

14.

Amount of loan

-

-

-

3,75,000

1,30,000

5,05,000

15.

No. of loan beneficiaries

-

-

-

66

81

147

16.

No. of SHG doing IGA

34

90

46

41

38

249

17.

No. of SHG Members doing IGA

651

900

366

N/A

130

2047

(Source: Directorate of Social Welfare, Govt of Meghalaya. July 2005.)  

List of Woman Self Help Group Under Swayamsidha (IWEP)

5.5.f. SHGs  under Watershed Development and Wasteland development projects of Soil conservation Department :

Soil conservation department in the state is implementing various centrally sponsored schemes such as Watershed development programme under shifting cultivation areas, Integrated waste land development programme in which SHGs are mobilised in the watershed areas. Self Help Group (SHG) in the watershed also include landless or marginal farmers who are organized into small homogenous groups (preferably with 15-20 members in each case) based upon their livelihood, social affinity, compatibility etc. The primary purpose is to strengthen them as a functional unit in order to embark upon need based activities. Village level community organizers duly trained in respect of the concept of SHG, management of credit and thrift activity, group dynamics and maintenance of records through focused exposure visits to successful examples as well as through skill oriented training programmes are utilized for mobilisation. The group can be considered mature when it meets regularly, the attendance is above 75 percent; proceedings of the meeting are maintained properly, records about credit and thrift activity are maintained properly, recovery of loan is above 90 percent etc. On community organizers could be withdrawn. In IWDP separate Self- help Groups are organised for women, scheduled castes, scheduled tribes etc.

District

Number of SHGs formed ( & year)

Revolving fund/ linkages

Loans From banks

Remarks

East Khasi hills

45
( 2001)

 45
( Rs.11.25 lakh under SGSY)

 7
(Rs.30.08 lakhs)

Initiated various income generating activities such as Transport, agri-horti, veterinary, tailoring, small business etc. Intra loaning; only a few passed 2nd grading but mostly due for 2nd grading.

West Khasi hills

8
(2001-2005)

Only one group received Rs. 10,000/

nil

Inactive  and poor performance

West Garo hills

29+40= 69 (2003-2005)

Nil

nil

Initial stage;  no grading; savings mobilized,

East Garo hills

33
(2001-2006)

 Nil

Nil

Poor follow up and  linkages, not graded.

Jaintia hills  

26 (14+12) (2001-2005)

8 ( Rs 47000/

2 received bank loans

6 graded , others initial stage

Ri- Bhoi

39
(2003-2005)

NA

Nil

Initial  stage.  

South Garo hills

40 (1999-2005)

Not available

3 nos received loans

3 nos. graded; economic activities by some; linkage with SGSY

(Source: Directorate of Soil and Water Conservation, 2006)

List of Self Help Group Under Soil and Water Conservation Department

The SHGs require more proactive and involved encouragement and advocacy to make them more successful. There also appears to be migration and collaboration among different programmes of govt. creating some kind of complacency.  

5.5.g. SHGs in SGSRY (Swarna Jayanti Sahari Rojgar Yojana)

SGSRY, which was launched in 1997, as an instrument of urban Poverty alleviation Programme also utilised CBOs and SHGs aiming at creation of community assets, nutrition, immunisation, health care, adult literacy and preschool facility etc. the scheme is implemented in Six towns namely Shillong, Tura, Jowai, Williamnagar, Baghmara and Resubelpara of Meghalaya. There are 24 community development societies / neighbourhood communities constituted in these towns for implementation of programmes .The programme also provide support to SHGs, Thrift and crdit societies.  

5.5.h. Self Help Groups Promoted by Cooperative Institutions

SHG promotion role has already been experimented by the SCB (MCAB) for credit linkages and also by one of the prominent Mendipathar Multipurpose Cooperative Societies (MMCS). The detailed achievements are as below:  

Attributes

MMCS

MCAB

Other Cooperatives

1. Number of SHGs formed

104

 

 

2. Total number of villages covered

52

 

 

3. Total Members

1235

 

 

4. Number of women groups

50

 

 

5. number of men groups

34

 

 

6. number of mixed groups

20

 

 

7. number of groups received revolving fund from block

2

 

 

8. Number of groups under SGSY

NIL ?

 

 

9. Groups received loans from Banks

20 (SBI)

 

 

10. groups receiving assistance under horticulture/ irrigation etc department

10 (Rs. 5000 each from horticulture);
2 (Rs 3500 from Irrigation)

 

 

11. total amount of group collection

Rs, 235388/

 

 

12. Total amount of savings

Rs.362385

 

 

13. total amount of loans from banks

Rs. 835000/

 

 

14. Activities of the groups promoted

 Inter-loaning among the members, consumer shop, poultry, piggery, arecanut, bamboo, banana marketing, weaving, cloth selling, horticulture, rubber nursery, tea cultivation

 

 

15. formed during

2001-2005

 

 

16. range of monthly collection

Rs 10 (9 groups)
Rs 15 (4 groups)
Rs 20 (35groups)
Rs 25 (5 groups)
Rs 30 (30 groups)
Rs 40 (20 groups)
Rs50 (1 groups)

 

 

List of Self Help Group promoted by Mendipathar Multipurpose Cooperative Societies

5.5.i. Self Help Groups Promoting Institutions

With a view to accelerate the promotion and up-scaling of SHGs in the State, NABARD has brought a concept Self Help Promoting Institutions (SHPI). NABARD has assisted two NGOs which function as SHPIs. One in East Khasi Hills District and the other in West Garo Hills district.  RRB, SCB and Commercial banks may take up the role of SHPIs.  The services of Individual Rural Volunteers (IRV) may also be engaged by Banks for which NABARD also provides grant support. More Farmers clubs can also be formed and encouraged to form Self Help Groups. Promising cooperatives institutions can also play a vital role as SHPI. Mendipathar Multipurpose Cooperative Society for example has formed 104 SHGs. Involving Traditional local institutions in the process of SHG promotion   may help to increase the linkage of SHGs with formal credit agencies.  It may become a good strategy to saturate the state with good quality SHGs and then perhaps there may be cooption by formal institutions to credit link these groups.    Support and subsidy available under various Government sponsored schemes with capacity building aspects would generate quality groups which properly nurtured would be in a better position to utilise the assistance  to create the right environment and message.

Table  :  Performance of NABARD SHPI

Name of the NGO : New Rompa Mebit Club,  W.G. Hills, Araimile.

District

 

Year wise Targets

Total

 

To be credit linked - Approved

Achievement/remarks

 

2004-05

2005-06

 

 

 

W.G. Hills

200

100

300

100

Promoted 76 groups till date. Of which, 27 have been saving linked.

S.G. Hills

100

200

300

 

 

Name of the NGO : New Rompa Mebit Club,  W.G. Hills, Araimile.

Garo Hills

122

122

244

50

Promoted 84 groups till date. Of which, 73 have been saving linked.

Khasi Hills

 

 

 

 

 

(Source: NABARD,2006)

5.5.j. SHG under Horticulture Technology Mission

Under Technology mission of horticulture Self help groups of women in development of horticulture@ Rs 5000/- has been assisted in the state. So far in the last five years, 1351 SHGs have been assisted with Rs 67.55 lakh . However, their dispersal and effectiveness need assessments.

DISTRICT WISE ACHIEVEMENT OF SHG UNDER HORTICULTURE MISSION DURING LAST FIVE YEARS

Rs. in Lakhs

Component EKH WKH RBH JTH EGH WGH SGH TOTAL
Phy Fin Phy Fin Phy Fin Phy Fin Phy Fin Phy Fin Phy Fin Phy Fin
Woman Development                                
a. SHG in development of Horticulture @ Rs. 5000/- per group 275 13.75 227 11.35 128 6.40 182 9.1 215 10.75 192 9.60 132 6.60 1351 67.55

5.5.k. Factors Impeding the Promotion and Linkage Of SHGs to the Banks

There are contradictory reports of bank linkages in the state. The progress of the SHG- Bank linkage programme in the State has not been upto the expected level mainly on account of the following factors:

  • Concept of promotion, development, capacity bulding of SHGs is yet to be understood by all implementing agencies;

  • The NGO sector required in such social developmental efforts is itself in a nascent stage in the state. Besides, the capacity of NGO sector itself needs substantial mobilisation, strengthening and support;

  • Internal lending among the groups members has generally not taken place;

  • There is considerable time lag in the formation of the groups and the maturity for linkage;

  • Some of the NGOs which are involved in the formation of the groups are also extending credit facilities to such SHGs and since the system is working well and the members are comfortable with the arrangement, the probability of such groups getting linked with the banks remains low unless there is better relationship and service orientation including terms of credit evolved by the banks;

  • Many of the SHGs being promoted by NGOs have gradually been drawn towards SGSY and are being covered under the programme;

  • There is lack of co-ordination among various agencies involved in promotion of Self Help Groups;  

  • SHGs are not exempt from the payment of stamp duty in respect of the loans availed by them. State Government may consider this.  

  • In some cases as in case of Horticulture Mission in the state, numbers of  members in  SHGs are limited to only five which may not serve the objective of group formation; and

  • The monitoring and nurturing of SHGs for credit linkage is generally lacking. There is a need for more SHPIs; besides, more proactive role of Government  for handholding, guidance, Capacity building, support and monitoring in energising the NGO sector and SHG movement is required.

References

  • Hulme.D.and Mosley, P. (1996) Finance against Poverty. Volume- I & II Routledge.

  • Kropp E.W & Suran B. S(2002). Linking Banks Self Help Group in India An Assessment. NABARD.

  • Mahajan, V. (2005). From Microcredit to Livelihood Finance. Economic and Political Weekly ( India . October 8-14.p.4416-4419.

  • Sen Prabal K. and Shylendra H S, (2004 ). ‘ Governance Issues in Rural Finance- A Concept Note’  Paper Presented at the Workshop  on Governance  Issues in Rural Finance  held during  17-18, December, 2004, at IRMA, Anand

  • Government of India , (2002). Tenth Five Year Plan. Vol. I,  II & III Planning Commission of India . New Delhi . India

  • Nanda, Y.C. Country Report - India . APRACA-GTZ Regional Workshop on the Linkage Programme: Focus on Implementation Issues, 26-28 October 1994.

  • NABARD (2005). Agenda Note for Upscaling of SHGs and Credit Linkage in Meghalaya, Shillong , Meghalaya

  • NABARD (2005) State Focus Paper, Meghalaya 2005-2006.PLP Estimates, Shillong , RO NABARD.

  • NABARD (2006) State Focus Paper, Meghalaya 2006-2007.PLP Estimates. Shillong., RO NABARD.

  • North Eastern Region Community Resource Management Project (NERCRMP) – IFAD (2004) Winds of Change : Sustainable Livelihood Development Initiatives of the NERCRMP- IFAD. Shillong. Meghalaya , India

  • RBI [Reserve Bank of India ] (1999) . Report of the Working Group on reforms in Deposit  Insuarance in India.Cahirman: Jagdish Capoor[Online]2006.  

  • RBI (2004). Report of the Working Group on Development Financial Institutions. Mumbai.  May2004; Chairman : ( N. Sadasivan) [Online]  

  • RBI (2005). Report of The Expert Group ( headed by YSP Throat)  On Investment Credit . Mumbai  June 2005 Online]

  • RBI (2005). Report of the Internal Group (Headed by H. R. Khan) to Examine Issues Relating         to Rural Credit and Micro finance. July , Mumbai. [Online]

  • RBI (2005). Report On Trends And Progress of  Banking In India 2003-04 [Online]

  • Rao, K.M. (2004). Extracts from an article written and presented at the APRACA Seminar at Manila on Regulation of MFIs in July 2004. NABARD, Mumbai. (Online).

  • Satish, P. (2005) Mainstreaming of Indian Microfinance. Economic and Political Weekly ( India ). April. 23. 1731-1739.  

  • West Garo Hills Community Resource Management Project (WGHCRMS) (2005)  Status Report of WGHCRMS under NERCRMP as on April 2005 . WGHCRMS- NERCRMP -IFAD. Shillong, Meghalaya , India .

  • Notes from :

    • Directorate of Community & Rural Development, Govt. of Meghalaya

    • State Institute of Rural Development, Govt. of Meghalaya

    • Directorate of Social Welfare, Govt. of Meghalaya

    • Directorate of Soil Conservation, Govt. of Meghalaya

    • Mendipathar Multi Purpose Co-operative Society

    • Bosco Reach Out

    • Meghalaya Co-operative Apex Bank (MCAB)

    • National CO-operative Union of India , Shillong Project Office

    • NABARD Regional Office

    • Department of Co-operation, Govt. of Meghalaya

    • West Garo Hills Community Resource Management Project