SELF-HELP GROUPS IN MAYURAKSHI GRAMIN BANK DOCUMENTATION OF SUCCESSFUL EXPERIENCES,

IMPACT AND PERFORMANCE ANALYSIS

SHG: POWER TO EMPOWER

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT

REGIONAL TRAINING COLLEGE BOLPUR (SANTINIKETAN)

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SELF-HELP GROUPS IN MAYURAKSHI GRAMIN BANK DOCUMENTATION OF SUCCESS STORY, IMPACT AND

PERFORMANCE ANALYSIS

VEGETABLE CULTIVATION BY SHG MEMBER

NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT REGIONAL TRAINING COLLEGE

BOLPUR (SANTINIKETAN)

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CONTENTS

Foreword

Executive Summary 1

Chapter I Introduction 5 Chapter II Objective and Methodology 7 Chapter III Structure, Policies and Performance of the Bank 8 Chapter IV Structure, Policies and Performance of the Branches 16 Chapter V Testing of Hypothesis at Bank Level 29 Chapter VI Group Analysis 34 Chapter VII Analysis of Individual Members 46 Chapter VIII Role of the Branch Managers 50 Chapter IX Major Findings and Possibility of Replication 52 Chapter X A Few Warning Signals 57

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CREDIT LIST

Overall Supervision: Shri S G Rathod, Chief General Manager, Human Resource

Development Department, Head Office, Mumbai and Micro Credit Innovation Department, Head Office, Mumbai

Overall Guidance : Shri U N Biswal, Principal, Regional Training College,

NABARD, Bolpur Shri Kalyan Chatterjee, Chairman Mayurakshi Gramin Bank

Editing and Review: Shri S M Gangopadhyay, Faculty Member

Shri D K Sahoo, Faculty Member Shri B M Patnaik, Faculty Member Shri Bharat Tiwari,Faculty Member Shri P C Padhi, Faculty Member Shri Asoke Chakrabarty, Faculty Member

Computer support : Shri P K Mohapatra, Assistant General Manager Analysis and Drafting : Smt. Amita Tripathi, Assistant Manager Field Study : Smt. Amita Tripathi, Assistant Manager Field Level Support : Staff Members of Panchra, Illam Bazar, Mohammad Bazar,

Sriniketan Branches of Mayurakshi Gramin Bank

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EXECUTIVE SUMMARY

The overall objective of the present study by Regional Training College, National Bank for Agriculture and Rural development (NABARD), Bolpur is to document the success story of the Mayurakshi Gramin Bank in the field of microFinance innovation, to measure Self-help Group as a commercial proposition to the business and profitability of the bank, to measure the impact of SHG on interest rate, lending, recovery, staff of the bank, social benefits accrued and empowerment of the members. The three branches viz., Panchra, Illam Bazar and Mohammad Bazar, 32 SHGs from these branches and 70 individual members from the selected SHGs form samples for the study. The bank is operating in the district of Birbhum with 65 Branches with Rs. 342 crores deposits, Rs.197crores advances, profit of Rs.75 lakh, recovery percent of 80 and per staff business of Rs.1.17 core as on 31 March 2004. The bank started SHG business in the year 1997-98 and in right earnest in the year 2000-01. As on 31 march 2004, the bank has savings and credit linked 2729 and 1113 groups respectively. The total turnover of SHG business was Rs.594.80 lakh (7 percent) of the total turnover of the bank and net SHG interest income contributes 20 percent of the total profitability of the bank. The practice followed in the sample branches in fixing the credit limit for groups, provides ample scope for SHGs to avail bigger amount of credit and to repay regularly. They are following the practice of providing loans to selected SHGs based on their performance/ potential/ requirement than on any fixed formula. For uniformity and more credit off take, they provide credit based on following criterion - four times of corpus

fund + previous credit off take by the group. Out of the 2860 total groups linked to the bank as on 31 October 2004, female groups constitute 1676 (61 percent). The male groups constitute 39 percent as against the all India figure of 10 percent. The bank has credit linked some of the SHGs upto 6 times. Around 18 percent of the sample groups have been credit linked more than four times. The average off take of first credit linkage of groups is Rs.15040, Rs.30000 and Rs.15333 and of second credit linkage is Rs.28423, Rs.42833 and Rs.25666 in case of female, male and mixed groups respectively. The Management Information System (MIS) is the sine qua non of successful implementation of any programme. The bank may evolve a proper management information system in a computer environment so that SHG as a profitable business proposition can be internalized. Due to huge business potential of SHG business in future, a separate accounting head for assessing income and expenditure of SHGs may be created.

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Chapter I

Introduction

The ultimate objective of human society is to provide quality life to a large section of the populace in a shorter span of time through the movement that has universal appeal and acceptance. The first and the foremost condition of any movement is to kindle the flame of self-recognition and self-respect in the hearts of the masses. The movement has a specific objective to be fulfilled with the active involvement of the masses. The movement is pioneered to address a problem, which affects the society at a large scale. The banking sector has tried to provide the quality of life starting from the days of social banking through a series of Government directed or self-propelled schemes. The similarity between a scheme and a movement is that both are pre-contemplated. The concern of the scheme is to complete the task on the part of the formulators and executors within the stipulated period; whereas the existence and relevance of a movement continues till impacts are visible on the part of the society. The initiation of a scheme is never a difficult task; it is the sustainability of the scheme, which causes concern to the formulators. The beginning of a movement is much more difficult and at times seems to be impossible. Once it begins, the sustainability is assured. The key factor is the involvement and feeling of ‘We’ and ‘Ours’ among the masses. The difficulty comes in involving the society and making the people feel that it is their work. For this, every movement requires a pioneer and a group of activists, while every

scheme needs formulators and implementing agencies. SHG is a movement. It aims to address the problem of poverty in the society. Its nature is different from other poverty alleviation schemes or programmes. The basic difference is that it emphasizes the need of involvement of the society and community in the development process. Poverty alleviation has been a major concern in India for the policy makers. The nation has witnessed different schemes and programmes for the poverty alleviation. The results of all those schemes have not been that much fruitful. The main reason is the lack of people’s involvement at each stage. The implementing agencies took schemes and programmes as a part of their official duty making them rigid and target oriented. The concept of SHG came as an alternative to the poverty alleviation programmes. The

unique feature of SHG is that it inculcates the habit of thrift and banking among the

poorest of poor who somehow manage two square meals. This is no less than any charisma. The concept of thrift develops a sense of belongingness among the poor for bank credit, which leads to proper utilization and timely repayment of bank’s money. The appeal and impact of any movement depends more on the demonstration and replication effect. The movement always starts with the participation of persons to be counted on fingers. It is the demonstration and replication effect that converts an effort

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into a mass movement. The same is true in case of SHG also. The movement first started as a pilot project in a few selected areas. It was the success of the pilot project that encouraged the policy makers to spread the concept in each and every part of the country. The theory of replication helped a lot for the success in this field. It is not guided by strict rules and regulations. It expects continuous cultivation and exchange of views, ideas and experiences to flourish and propagate.

FRENCH BEANS CULTIVATION BY SHG MEMBER

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Chapter II

Objective and Methodology 2.1 Objectives A. Overall Objective: The overall objective of the study is to document the success story of the Mayurakshi Gramin Bank in the field of microFinance innovation, to measure Self-help Group as a commercial banking proposition to the business and profitability of the bank and to assess the degree and extent of social benefits accrued and empowerment of members.

B. At micro level the study aims at:

i) Documentation of the success story of microFinance in Mayurakshi Gramin Bank ii) Alternative Banking Business for Profitability and, iii) Testing of Hypothesis

1. Impact of SHG on Interest Rate 2. Impact of SHG on Lending and Recovery 3. Impact of SHG on Staff of the Bank 4. Impact of SHG on Other Loans 5. Economic Satisfaction vs. Social Responsibility 6. Inner Satisfaction of the Branch Manager 7. Replication of the success in other branches and banks.

2.2 Methodology The study was devoted to evaluate the macro level policies and strategies of the bank through discussion methodology and secondary data source. Further, three branches were selected for study based on their performance on microFinance and ranking methodology. The profitability and commercial proposition of SHG, and the profitability of SHGs vis-à-vis other loan products in the selected branches were also analyzed. The collection of data and information was through the process of discussion and questionnaire. In order to highlight the excellent performance of some of the Branch Managers in terms of formation and nurturing of SHGs, they were interviewed and asked to fill up the structured questionnaires, which was helpful in assessing their aptitude and inner satisfaction level. The three branches selected for study after discussion with the bank are the representative branches in the formation and linkage of SHGs. The samples studied from these three branches and their stratification is given below:

Stratification of the samples according to branch, SHGs and members Name of the branch No. of sample SHGs No. of sample members Mohammad Bazar 10 16 Panchra 09 36 Illam Bazar 13 18 Total 32 70

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Chapter III

Structure, Policies and Performance of the Bank 3.1 About the Bank Mayurakshi Gramin Bank sponsored by UCO Bank came into existence on 16 August 1976 with its Head Office at Suri in the Birbhum district of West Bengal to fill the gap between need and supply of credit to agriculture and rural sector. The name of the bank has been derived from the name of the river Mayurakshi. The area of operation of the bank covers one district viz. Birbhum, divided into 19 blocks. The 65 branches are spread in such a manner so as to touch all corners of the district. Out of 65 branches, 61 are rural branches and 4 are semi-urban branches. The total geographical area of the district is 4550 square kilometer with total population of 30.12 lakh. Around 90 percent of the population resides in rural areas, 38 percent is involved in cultivation and 38 percent depends on agriculture labour. The major crops grown are paddy, wheat, pulses, potato, sugarcane and oilseeds. Around 7 percent of the population is tribal. The bank started its business with an authorized capital of Rs.1 crore. It had earned a profit of Rs.0.26 lakh in the year of its inception i.e., 1976. After that, the bank incurred losses in the years to come despite continuous increase in deposits and advances. The bank incurred losses because of high transactions cost, low level of business and high non-performing assets. The deployment of surplus resources and the higher cost of fund were the major concern of the bank. Poor recovery performance of the bank had also affected the rotation of fund, which ultimately caused loss. Increased salary, wages and establishment cost on account of expansion of branches and volume of work contributed to the loss. The bank had been struggling hard to attain profitability/ viability. 3.2 Branch network implementing SHGs The SHG business in Mayurakshi Gramin Bank started in 1997-1998 in 4 of its branches. It gained momentum in the year 1999-2000. The year of starting of SHG, number of saving and credit linkage of SHGs as on 31 March 2004 in various branches is given below- Sl.No.

Branch Name Year of Implementing SHG

Savings linked

Credit Linked

Sl.No.

Branch Name Year of Implementing SHG

Savings linked

Credit Linked

Year No No Year No No 1 AYAS 1997-98 7 0 9 SRINIKETAN 1998-99 180 90 2 KOLESWAR 1997-98 106 69 10 BARHRA 1999-2000 17 1 3 MONGALPUR 1997-98 42 17 11 BHADRAPUR 1999-2000 70 35 4 SIAN 1997-98 76 18 12 BIRCHANDRAPUR 1999-2000 4 4 5 ILLAMBAZAR 1998-99 100 33 13 BAUTIA 1999-2000 25 8 6 JOYDEB KENDULI 1998-99 83 25 14 CHANDPARA 1999-2000 44 26 7 KHAYRASOLE 1998-99 98 37 15 CHATRA 1999-2000 22 7 8 RAIPUR SUPUR 1998-99 60 7 16 CHOWHATTA 1999-2000 73 31

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Sl.No

Branch Name Year of Implementing

SHG

Savings linked

Credit Linked

Sl.No

Branch Name Year of Implementing

SHG

Savings linked

Credit Linked

Year No No Year No No 17 DANTURA 1999-2000 10 4 42 PAIKPARA 2000-01 33 14 18 DEUCHA 1999-2000 23 2 43 RAJGRAM 2000-01 4 0 19 GADADHARPUR 1999-2000 12 1 44 RAJNAGAR 2000-01 22 8 20 HARIDASPUR 1999-2000 35 10 45 TANTIPARA 2000-01 23 17 21 KALITHA 1999-2000 46 27 46 RAMPURHAT 2001-02 111 34 22 KHUJUTIPARA 1999-2000 47 20 47 ABINASHPUR 2002-03 2 1 23 KOPAI 1999-2000 49 9 48 AHMADPUR 2002-03 19 9 24 LOHAPUR 1999-2000 37 17 49 BARACHATURI 2002-03 2 1 25 MAYURESHWAR 1999-2000 54 22 50 BASAPARA 2002-03 51 17 26 MOLLARPUR 1999-2000 26 6 51 BIPRATIKURI 2002-03 32 8 27 PALSA 1999-2000 6 0 52 CHANDRAPUR 2002-03 37 10 28 PANCHRA 1999-2000 126 85 53 CHHOTOSANGRA 2002-03 10 4 29 SAINTHIA 1999-2000 41 30 54 CHINPAI 2002-03 8 0 30 SATPALSA 1999-2000 103 101 55 DHALTIKURI 2002-03 29 23 31 SURI 1999-2000 66 30 56 GHURISHA 2002-03 26 4 32 ABADANGA 2000-01 17 4 57 HETAMPUR 2002-03 54 23 33 BARASIJA 2000-01 12 3 58 JUBUTIA 2002-03 18 3 34 BATIKAR 2000-01 10 5 59 KAPASDANGA 2002-03 5 4 35 BOLPUR 2000-01 35 2 60 KARIDHYA 2002-03 40 11 36 HATIA 2000-01 100 26 61 KURUNNAHAR 2002-03 51 11 37 JATRA 2000-01 26 12 62 LOKEPUR 2002-03 61 34 38 KALUHA 2000-01 8 6 63 NARAYANPUR 2002-03 24 2 39 KASTHAGORA 2000-01 5 4 64 PANRUI 2002-03 25 0 40 LABPUR 2000-01 41 7 65 RUDRANAGAR 2002-03 3 0 41 MOHAMMAD BAZAR 2000-01 97 34 TOTAL 2729 1113

3.3 The Area Wise distribution of SHG linkage The bank has 3 area offices in 3 subdivisions of the district. The table below shows the area wise distribution of number of SHGs savings linked and credit linked as on 31 March 2004:

Name of the subdivision

No. of branches

Savings linked

Credit linked

Ratio of credit linkage to savings linkage

No. No. No. Bolpur 19 1097 335 30.5 Rampurhat 27 794 352 44.3 Suri 19 838 426 50.8 Total 65 2729 1113 40.8

Area wise linkage of SHGs demonstrates that the performance of Suri region is comparatively better than the Rampurhat and Bolpur region. The SHGs are more or less evenly distributed in Suri and Rampurhat region. The credit linkage of SHGs in Bolpur region is 30.5 percent; Rampurhat region 44.3 percent, Suri region 50.8 percent and the bank average is 40.8 percent. Out of total 2729 SHGs, 2307 are mature for credit linkage. 1113 SHGs (48 percent of the mature groups and 40.8 percent of the total savings linked groups) are credit linked as on 31 March 2004.

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3.4 Financial position of the Bank The last six years’ financial position of the bank is given below- ( Rs. lakh)

Item 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 No. of branches 65 65 65 65 65 65 Deposit 16052.11 19393.68 22860.96 26926.33 31159.46 34149.04 Loans outstanding 5951.93 6398.03 8736.40 12137.29 16893.83 19671.04 Loans issued 2684.61 2826.67 4894.14 7011.13 9566.37 9001.80 No. of staff 465 465 464 461 462 461 Demand 2578.98 2806.06 4558.78 6121.61 8262.79 10018.34 Recovery 1267.36 1410.70 3146.27 4737.52 6499.39 7962.92 % of recovery 49.14 50.27 69.02 77.39 78.66 79.48 NPA 1804.91 1532.65 1277.45 1155.51 1198.29 1370.25 Profit/loss -350.77 -493.67 155.35 125.13 -495.01 75.91 Accumulated loss 3784.25 4277.92 4122.57 3997.44 4492.45 4416.54 Cost of fund 6.94 8.57 6.96 6.39 7.09 7.05 Return on fund 8.56 9.25 9.75 9.56 9.61 9.67 Financial margin 1.62 0.68 2.79 3.17 2.52 2.62 Transaction cost 3.55 3.19 3.08 2.47 3.52 2.99 Misc. income 0.48 0.79 1.15 0.57 0.54 0.90 Risk cost 1.82 1.07 0.26 0.28 1.16 0.33 Net margin -3.27 -2.79 0.60 0.99 -1.62 0.20 CDR 37.08 32.99 38.22 45.08 54.22 57.60 Per branch business 338.52 396.80 486.11 600.98 739.28 828.00 Per staff business 47.32 55.47 68.10 84.74 104.01 116.75 NPA % 30.32 23.96 14.62 9.52 7.09 6.97

The bank adopted mF innovation in the year 1997-98 as a strategy to expand its volume of business and sharing of risk with a view to achieving viability. The mF innovation has improved the performance of the bank as a whole. It has shown excellent results in the field of growth in advances, increase in CD ratio (highest CD ratio for the last 3 years among all the RRBs in West Bengal), substantial increase in recovery (highest in the year 2001-02 and 2002-03 and second highest 2003-04 in the state of West Bengal) of loans and reduction of NPA (NPA percent was lowest in the year 2001-02 and 2002-03 and second lowest in 2003-04 in the state of West Bengal). 3.5 SHG Position of the Bank The growth of savings and credit linkage of SHGs of the bank for the last four years is given below: (Rs. lakh)

Year Savings linked Growth (%) Credit linked Growth (%) No. Amount No. Amount No. Amount No. Amount

2000-01 286 8.65 22 3.32 2001-02 503 18.59 75.87 114.91 52 10.22 136.36 207.83 2002-03 1885 105.10 274.75 465.36 417 299.68 701.92 2832.29 2003-04 2729 214.50 51.72 104.09 1113 594.80 211.75 98.48

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286503

1885

2729

22 52417

1113

0

1000

2000

3000

Savings linked Credit linked

Savings and Credit Linkage

2000-01 2001-02 2002-03 2003-04

The bank has savings linked 2729 SHGs with deposit amount of Rs.214.50 lakh and credit linked 1113 SHGs with credit disbursement of Rs.594.75 lakh as on 31 March 2004. 3.6 Deposits Analysis The growth of savings linked groups and the amount mobilized by the bank as deposits is given below: (Rs. lakh)

The growth of deposits from SHGs in the bank is in the right direction and is following the pattern of the smooth and linear curve. The growth was 274 percent and 465.4 percent in number and amount respectively in the year 2002-03 because of the low base. It is expected to decrease further in subsequent years and may stabilize at 20-25 percent after the year 2005-06. The amount of per group savings (average) is also increasing at the rate of Rs.0.02 lakh, which may be considered a healthy sign. 3.7 Credit Analysis The growth of credit linkage of groups and the amount disbursed by the bank is given below: ( Rs. Lakh) In the year 2003-04 there was substantial increase in credit linkage from a higher base in comparison to the year 2002-03. The credit per group has come down from Rs 0.72 to 0.53 lakh due to credit linkage of 696 new groups. Considering the large number of

Year Savings linked Growth (%) Savings per Group

(Average) No. Amount No. Amount Amount

2000-01 286 8.65 - - 0.03 2001-02 503 18.59 75.87 114.91 0.04 2002-03 1885 105.1 274.75 465.36 0.06 2003-04 2729 214.5 51.72 104.09 0.08

Year Credit linked Growth (%) Credit per group (Average)

No Amount No. Amount Amount 2000-01 22 3.32 - - 0.15 2001-02 52 10.22 136.36 207.83 0.20 2002-03 417 299.68 701.92 2832.29 0.72 2003-04 1113 594.80 211.75 98.48 0.53

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savings linked groups, the average credit linkage percentage at 40.8 percent is considered at a lower level. 3.8 Profitability of SHG Business in the Bank The contribution of SHG to the profitability of the bank is given below: (Rs.lakh)

The above analysis shows that SHG alone has contributed an interest income of

Rs.14.76 lakh in overall bank profit of Rs.75 lakh in the year 2003-04. SHG turnover has also helped the bank in the form of utilizing surplus deposit for lending. The gap between loan disbursed and loan outstanding is higher in the year 2003-04. It shows the higher level of SHG turnover, which ultimately contributes to the profitability of the bank. 3.9. Other Activities

(i) Social Activities Mayurakshi Gramin Bank undertakes activities like Blood Donation Camps, felicitating the meritorious students to expand its social recognition. They organised Blood Donation Camp on 16 August 2003-04. In the Camp, staff members of the bank and SHG members donated blood. The participation of SHG members was the most notable aspect as it strengthens community and social bondage among SHG members. The bank felicitated students scoring 1st and 2nd rank in the district in the Madhymik Parishad Examination. The wards of the staff members securing above 75 percent marks in Madhyamik Parishad Examination were also felicitated.

(ii) Women Development Cell

Women Development Cell (WDC) was established on 18 August 2000. Since inception, WDC is involved in the economic development of the women through their skill upgradation in activities, such as kantha stitching, bari making, bidi binding, dairy activities etc., and making efforts to create markets for products prepared by women through its SHG network. The staff members purchase products prepared by SHG members. The WDC organises workshops on SHG and gender sensitisation, meet and match programmes for women SHG members.

PROFITABILITY OF SHG BUSINESS: BANK AS A WHOLE SL. No. Item 2000-01 2001-02 2002-03 2003-04

1 SHG deposit 8.65 18.59 105.10 214.50 2 SHG loan outstanding 3.32 10.23 217.88 309.05 3 Total Loan issued to SHGs 3.32 10.22 299.68 594.80 4 Interest paid on SHG deposit 0.17 0.37 2.10 4.29 5 Interest received on SHG loan 0.27 0.82 17.43 24.72 6 Interest paid on Deposit utilised for SHG lending -0.32 -0.50 6.77 5.67 7 Profitability 0.41 0.95 8.56 14.76 8 Recovery % 100.00 99.00 98.00 94.00

SHG interest

income contributes

19.7 percent of

Profitability.

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(iii) Farmers’ Club

The bank started Farmer’ Club in the year 1995-96 but it gained momentum in 2002-03. The bank has promoted 61 Farmers’ Clubs out of which one is Mahila Club. The bank is encouraging Farmers’ Club to develop as medium for promotion and nurturing of SHGs. With the expansion of SHG network, bank has felt the need of NGOs. The presence of reliable NGOs in the district is restricted. They are now using Farmers’ Clubs as an alternative to NGO. They are encouraging to select volunteers for Farmers’ Clubs from the mature SHGs. In Panchra Branch, Farmers’ Club named Mukti Nagar Krishak Sangh has adopted two villages and all the villagers have been brought under the umbrella of SHGs. The Farmers’ Clubs are properly nurturing the groups, facilitating them to take profitable economic activities and taking care of marketing. As a result SHGs are moving fast towards economic and social empowerment. In the above area SHG people have driven the moneylenders out of their business.

(iv) Farmers’ Clubs as Self-help Promoting Institutions (SHPI)

The following five Farmers’ Clubs have been selected as SHPI:

1. Chandan Nager Krishak Sangh ---- Panchra Branch 2. Mukti Nagar Krishak Sangh ----- Panchara Branch 3. Jaydev Krishak Sangh--- Jaydev Kenduli Branch 4. Salibadra Krishak Sangh --- Kasthgora Branch 5. Jagrata Krishak Sangh --- Koleshwar Branch (v) Policy Circulars Issued

From the year 1992-93, the bank has issued various circulars on microFinance to its branches. The circulars have created awareness among the Branch Managers and officers regarding formation and linkage of SHGs. The savings and credit linkage of groups started in right earnest after the issue of Head Office circular number 19/98 dated 25 March 1998. Subsequent to the 25 March 1998 circular, the bank has issued various circulars/ orders to take care of the operational difficulties faced by the Branch Managers. (v) Structure of the Micro Credit Department. The corporate body of the bank has started giving emphasis on micro credit as a profitable business. There was no micro credit department at Head Office. The department of Planning & Development was looking after micro credit. From November 2004 a separate micro credit department at HO has been created and an officer has been posted exclusively for micro credit. This reflects the corporate seriousness towards micro credit. The Women Development Cell at Head Office is also looking after micro credit especially monthly progress of SHG in different branches.

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(vi) Monitoring System-MIS

The management information system in the bank consists of collecting information from the branches, consolidating at Planning & Development Cell and putting up to the Chairman and Board for review. Fixing of targets and monitoring of progress is done in the monthly meetings of Branch Mangers. (vii) Training of Staff- Training is an essential imperative in micro credit innovation. In the year 1997-1998 Regional Training College (RTC), National Bank for Agriculture and Rural Development (NABARD), Bolpur conducted a bank specific programme on ‘Self-help Group and Vikas Volunteer Vahini (VVV)’ for the officers of the bank. The then Chairman Mr.J.M.Roy and Late Mrityunjoy Saha, Senior Manager, Credit used to visit RTC daily to review the impact of the programme. In the programme, the vital issue emerged was that the bank may start SHG business to get out of the vicious cycle of low lending and low recovery causing huge amount of NPA. The present Chairman Mr. Kalyan Chatterjee is much conscious about the training and orientation of the staff. A number of on-location workshops for the Branch Managers and Officers have been organized. The staff is deputed regularly for micro credit training programmes conducted by RTC, NABARD, Bolpur and UCO Bank Staff College, Kolkata. The details of the training status for last four years is given below –

Year Institute Designation No. 2000-01 NB RTC Officer 3 2001-02 NB RTC Officer 7 2002-03 NB RTC Officer 1 2003-04 NB RTC Officer 13 2003-04 UCO STC Officer 22 2003-04 UCO STC Clerks 3

(viii) Self-help Promoting Institution (SHPI) The purpose of SHPI is to form quality SHGs to make these SHGs viable for the bank through credit linkage and nurturing. Twelve branches of the bank have been selected to work as SHPI for two years. Each branch will form 30 SHGs and get 15 SHGs credit linked. The names of the branches selected as SHPI are-

1 Sriniketan 7 Mayureshwar 2 Baspara 8 Panchra 3 Illambajar 9 Khayrasole 4 Rampurhat 10 Lokepur 5 Satpalsa 11 Mohammad Bazar 6 Panikpara 12 Dhaltikuri

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(ix) Delegation of Power The bank is one of the few banks, which have clearly spelt out the sanctioning power of the Branch Manager in case of microFinance. The bank has given freedom to the Branch Manager to finance any amount subject to the proportionate linkage of savings.

PUMPSET OF SHG MEMBER

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Chapter IV

Structure, Policies and performance of Selected Branches on SHGs 4.1 Branches Selected for Study One of the objectives of the study was to identify the ingenuity of success of micro credit innovation and the possibility of replicating the same in other banks of West Bengal and other parts of the country, the identification of finer aberrations which if addressed will fine tune the SHG movement of the bank and a few danger/ warning signals to avoid the future pitfalls or any crumbling of the structure. Considering the above, the branches have been selected on geographical basis, SHG performance and the potential of the branches to be viable on SHG business. The branches studied are Panchra, Illam Bazar

and Mohammad Bazar.

4.2 Analysis of the Branches 4.2.1. Panchra Branch The structure, financial position and performance of Panchra branch is given below:

(Rs.lakh) Total no. of staff Officers Clerks Others 3 2 1 Item Year 2000-01 2001-02 2002-03 2003-04 Deposit 402.20 481.35 541.41 577.17 Loans issued (Total) 47.45 69.25 93.82 109.22 Out of which to SHG 0.51 1.88 18.30 55.75 Loans outstanding (Total) 106.22 139.99 173.24 188.02 Out of which to SHG 0.51 1.95 11.10 35.94 CDR 26.4 29.1 32.0 32.6 Productivity of the Branch (Deposits+ Loans O/S) 508.42 621.34 714.65 765.19 Per staff business 84.74 103.56 119.11 127.53 NPA (Total) 34.01 23.42 22.79 19.83 Profitability of the bank Interest on Deposit 42.13 35.31 44.59 49.13 Transaction cost, risk cost & other cost 12.38 21.45 17.53 14.67 Total 54.51 56.76 62.12 63.80 Interest on loans 10.41 14.97 21.01 21.29 Miscellaneous income 1.28 1.88 1.48 1.13 Total 11.69 16.85 22.49 22.42 Profit/ loss -42.82 -39.91 -39.63 -41.38

The interest margin of the branch is negative to the extent of Rs.27.84 lakh. The branch adopted SHG business in the year 1999-2000 to improve the overall performance of the branch, especially creating scope for increase in advance in priority sector, increase in recovery and reduction in NPA level. The thinking was that after making improvement in these fields, they would concentrate on profitability/ viability of the branch. The above

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financial indicators show that branch has achieved the expected success in the above fields.

(Rs.lakh)

PROFITABILITY OF SHG BUSINESS SL. No. Item 2000-01 2001-02 2002-03 2003-04

1 SHG deposit 0.14 1.87 3.83 10.29 2 SHG loan outstanding 0.51 1.95 11.10 35.94 3 Interest paid on SHG deposit 0.01 0.01 0.03 0.12 4 Interest received on SHG loan 0.04 0.14 0.92 2.77 5 Interest paid on Deposit utilised for SHG lending 0.02 0.00 0.44 1.54 6 Profitability 0.01 0.13 0.45 1.11 7 Recovery % 100 100 99 99

It is inferred from the above table that SHG business has contributed for the utilization of surplus deposit to the extent of Rs.25.00 lakh in the branch itself. Even it will be able to recover the proportionate staff cost of Rs.6500 per month. The table below shows the details of staff cost involved exclusively in SHG business-

(Amount Rs.) No. and grade of Staff engaged in SHG

Per month Gross salary Grade wise

No. of hours devoted for SHG

Total Cost

02 Officers (1Scale III &1 Scale I)

Scale III- Rs. 21000 Scale I -Rs. 18000

Scale III- 40 hours Scale I- 40 hours Total - 80 hours

3500 3000 6500

SHG has induced recovery of other loans resulting increase in recovery percentage from 29.4 percent in the year 2000-01 to 79.5 percent in 2003-04 and the reduction of NPA from 32 percent in the year 2000-01 to 10.5 percent in 2003-04. It has added to the profitability of the branch. 4.2.2 Projection of Branch Profitability The branch is continuously incurring losses for the last four years. The loss is moving around Rs. 40 lakh. The main cause of loss is low CD Ratio and absence of avenues for deployment of resources. No interest income has been taken from the resources transferred to Head Office. The problem before the branch is to deploy its resources in the branch itself. Since the area does not have much potential for high value advances, SHG is the only way left for the branch. Based on the present trend of SHG business in Panchra branch as well as discussion with the Branch Manager and the Field Officer regarding their vision of making the branch viable, it has been projected that the branch can attain viability in the year 2005-06.

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The contribution of SHG in overall turnover will be around 85 percent, as SHG has already become mainstream business in the branch.

(Rs.lakh) Total no. of staff Officers Clerks Others 3 2 1

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Item Deposit 402.20 481.35 541.41 577.17 588.71 600.49 612.50 Loans issued (Total) 47.45 69.25 93.82 109.22 269.51 490.36 817.47 Out of which to SHG 0.51 1.88 18.30 55.75 200.00 400.00 700.00 Loans outstanding (Total) 106.22 139.99 173.24 188.02 238.82 643.92 781.35 Out of which to SHG 0.51 1.95 11.10 35.94 76.66 165.40 404.09 CDR 26.4 29.1 32.0 32.6 40.6 107.2 127.6 Productivity of the Branch (Deposits+ Loans O/S) 508.42 621.34 714.65 765.19 827.54 1244.41 1393.85 Per staff business 84.74 103.56 119.11 127.53 137.92 207.40 232.31 NPA (Total) 34.01 23.42 22.79 19.83 18.00 12.00 8.00 Profitability of the bank Interest on Deposit 42.13 35.31 44.59 49.01 33.85 33.33 32.16 Transaction cost, risk cost & other cost 12.38 21.45 17.53 14.67 16.14 17.75 19.53 Total 54.51 56.76 62.12 63.68 49.99 51.08 51.68 Interest on loans 10.41 14.97 21.01 21.29 27.04 72.91 88.47 Miscellaneous income 1.28 1.88 1.48 1.13 1.24 1.37 1.50 Total 11.69 16.85 22.49 22.42 28.29 74.28 89.98 Profit/ loss -42.82 -39.91 -39.63 -41.26 -21.70 23.20 38.30

The above projection is directly related to the estimated SHG turnover in coming four years. The estimate has been made taking into account the increased credit limit of existing groups and credit linkage of new groups. The projection of increased credit limit of existing groups is based on the recent trend SHGs are showing in terms of credit availment.

(Rs.lakh) PROJECTED SHG BUSINESS OF PANCHRA BRANCH

Credit Range As on OCT. 04 2004-05 2005-06 2006-07 No. Amt No. Amt No. Amt No. Amt

UPTO 25000 10 2.50 30 7.50 20 5.00 10 2.50 26000 TO 50000 20 10.00 10 5.00 10 5.00 10 5.00 51000 TO 100000 25 25.00 25 25.00 25 25.00 15 15.00 100001 TO 150000 50 77.50 25 38.75 20 31.00 20 31.00 150001 TO 250000 05 9.50 30 72.00 25 56.25 50 125.00 250001 TO 400000 01 2.50 20 60.00 80 280.00 130 520.00 Total 111 127.00 140 208.25 180 402.25 235 698.50

As on October 2004, the branch has credit linked 111 groups with credit amount of Rs.127 lakh as against Rs.55 lakh during 2003-04, an increase of Rs.72 lakh in six months period of time. The main cause of such huge growth in turnover is crossing the credit limit of Rs.1 lakh by the 56 existing groups. The credit disbursed to the groups by the branch is in the form of short-term credit with repayment schedule of six months. After every six month the credit limit of groups increases almost to 90-100 percent and in a year almost to 200-250 percent. It is applicable to all the groups within any credit range. For example-

No. Of Time

Date of Availment of credit

Amount in Rs.

Increase in %

Date of Repayment

Ist loan 01/04/2003 30000 - 30/09/2003 IInd loan 01/10/2003 60000 100 31/03/2004 IIIrd loan 01/04/2004 100000 233 30/09/2004

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The branch accordingly identifies number of groups within different credit range and focuses its efforts on facilitating the existing groups in taking larger credit and credit linkage of new groups. In the above process, the CD Ratio of the branch also increases. This pattern of projection provides a scientific and easy methodology to the branch for increasing advances so that they move towards the profitability/ viability. 4.2.3 Replicable Success of Panchra Branch 4.2.4 The Beginning SHG movement in Panchra Branch started in the year 1999-2000. The corporate has taken some decisions deviating from traditional practices. At that time Branch Manager/ Field Officer started the process of SHG formation as a mission. The branch was having huge NPA of Rs.45 lakh out of total advance of Rs.60 lakh in priority sector. They formed 6 SHGs in the month of July 2000 and the members were in need of Rs.10000 for a seasonal Khajur Business (date-palm) in the month of October. The poor people of the area used to visit neighboring states for extraction of juice from khajur plantation and making of Gur. They had to take khajur plants on lease, needed some utensil and some helping hands. Their requirement was Rs.15000 in the season. Being asset-less they had no other way than to borrow from the moneylenders at an interest rate of 10 percent per month. By then SHGs were only three months old and as per rules bank could not give that much amount of credit that could meet their requirement. The problem before the Branch Manager and the Field Officer was to win the trust of villagers, and if they allowed the members to borrow from the money lenders they might loose their trust. Both the officers discussed the problem with the Chairman who consulted RTC, NABARD in this respect and visited the villages with one of the, Faculty Members of RTC and interacted with the SHG members. After that the management took a decision to finance an amount of Rs.6 lakh as short-term individual loan to the villagers for taking up their business. The most notable thing was that the loan was given without any collateral security. The only security was the confidence of the Branch Manager and the Field Officer and trust of the SHG members in the bank. After six months entire loan amount was repaid. The villagers were surprised by the volume of profit earned because earlier large portion of their profit was utilized in paying huge interest to the moneylenders. The experiment worked as a charisma and villagers themselves came forward to form SHGs. The credit flow to SHGs now constitutes around 74 percent of the total loans issued, recovery percentage increased from 29 percent in the year 2000-01 to 80 percent in 2003-04 and NPA reduced from 32 percent in the year 2000-01 to 10 percent in 2003-04. The SHGs have contributed in improving the recovery of other loans. The branch is an ideal branch in terms of SHG business.

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4.2.5 Innovation in approach (i) Negotiation with Panchayat The branch officers in consultation with one of the Faculty Members in RTC, NABARD, Bolpur innovated a new way to avoid political interference in their service area. They talked to the panchayat people regarding their plan and asked them to spare only two villages namely, Chandanagar and Muktinagar. The logic behind was that when two villages are developed as ideal villages rest will automatically come forward to shake hands with branch people and political people can not ignore community strength. Their experiment was successful and demonstration effect has been very effective in expanding SHG business in the area. (ii) Constitution of Farmers’ Club for Greater Social Mobilization Two Farmers’ Clubs are functioning in the branch. They are executing important roles such as formation of SHGs, recovery of loans and also promotion of advances in the area. The Clubs arrange training programmes on agriculture for the villagers. The immediate impact is change in cropping pattern from traditional to commercial crops that has created demand for more credit. The Club members also take care of marketing of the products. (iii) SHG Village Two villages namely, Mukti Nagar and Chandan Nagar are converted into SHG villages. All the families of these villages are under the umbrella of SHG. (iv) NPA Free Village The villages namely Mukti Nagar and Chandan Nagar have been made NPA free. (v) Money without Moneylender In the year 2000-01, when branch people started visiting these villages all the families were in the clutches of the moneylenders who charged 120 percent interest. Today no villager has to go to the moneylenders. They have driven the money lender out of their business. (vi) Enjoying Recovery The Farmers’ Clubs organise recovery camps in which recovery of the loan is celebrated as a festival. Before SHG mode, recovery was a curse for them. It used to be the moment of horror to them. The SHG member’s eyes get full with tears while narrating how they passed sleepless nights for repayment of debt to the moneylenders. This change is distinctively visible in the village.

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(vii) Transformation within Village Mukti Nagar Farmers’ Club, in co-ordination with village people constructed 4 km. Kuchcha road in 72 hours. The eternal look of the village itself tells the tale of the success of SHG programme and sincere and honest efforts on the part of the Branch Manager and the Field Officer. The kuchha houses in the village are neat and clean. Every house has a small garden with blooming flowers.

VEGITABLE GARDEN OF THE SHG MEMBER

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4.3 Illam Bazar Branch The structure, financial position and performance of Illam Bazar branch is given below:

(Rs.lakh) Total no. of staff Officers Clerks Others 6 3 1 Item Year 2000-01 2001-02 2002-03 2003-04 Deposit 1009.15 1137.94 1237.05 1440.57 Loans issued (Total) 75.55 157.25 201.02 195.69 Out of which to SHG 0.06 0.47 2.64 7.88 Loans outstanding (Total) 189.99 257.15 266.55 377.18 Out of which to SHG 0.02 0.35 0.33 8.19 CDR 18.8 22.6 21.5 26.2 Productivity of the Branch (Deposits+ Loans O/S) 1199.14 1395.09 1503.60 1817.75 Per staff business 119.91 139.51 150.36 181.78 NPA (Total) 53.53 35.61 32.06 29.31 Profitability of the bank Interest on Deposit 69.78 48.98 69.01 66.50 Transaction cost, risk cost & other cost 7.67 9.16 11.74 5.75 Total 77.45 58.14 80.75 72.25 Interest on loans 10.70 15.30 20.37 11.63 Miscellaneous income 1.78 1.90 1.53 3.40 Total 12.48 17.20 21.90 15.03 Profit/ loss -64.97 -40.94 -58.85 -57.22

The branch adopted SHG business in the year 2000-01. The Head Office selected SHG as potential business for them. Gradually they fell in love with SHG and started loving it in real earnest. The SHG turnover has increased from Rs. 6000 in the year 2000-01 to Rs. 7.88 lakh in the year 2003-04. They are moving fast towards mainstreaming the SHG business in their branch.

(Rs. lakh) PROFITABILITY OF SHG BUSINESS

Item 2000-01 2001-02 2002-03 2003-04 SHG deposit 0.82 1.25 1.84 6.52 SHG loan outstanding 0.06 0.08 2.64 7.88 Interest paid on SHG deposit 0.01 0.02 0.03 0.11 Interest received on SHG loan 0.01 0.01 0.32 0.95 Interest paid on Deposit utilised for SHG lending -0.05 -0.07 0.05 0.08 Profitability 0.04 0.06 0.24 0.75 Recovery % 100 100 100 100

The branch, though a late starter, has taken formation and linkage of SHGs to improve its business. The bank was having a notional profit of Rs.0.75 lakh from SHG during the year 2003-04. The SHG business has contributed for the utilization of surplus deposit in the branch itself and contributed to the profitability of the branch.

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It will be able to recover the proportionate staff cost of Rs.3000 per month. The table below shows the details of staff cost involved exclusively in SHG business- (Amount Rs.)

No. and Grade of Staff engaged in SHG

Gross salary Grade wise

No. of hours devoted for SHG

Total Cost

1 Scale I officer 1 Messenger Staff

Scale I- Rs.18000 Messenger Staff -6000

Scale I- 30 hours Messenger-Staff 30 hours Total - 60 hours

2250 750 3000

SHG induced the recovery of other loans resulting increase in recovery percentage from 27 percent in the year 2000-01 to 64 percent in the year 2003-04 and the reduction of NPA from 28.18 percent in the year 2000-01 to 7.77 percent in the year 2003-04. 4.3.1 Projection of Branch Profitability The branch is deposit-oriented branch and the quality of advances is also good. The low CD Ratio of the branch has resulted in continuous loss. There is huge potential for deployment of resources in profitable ventures. SHG is one of the avenues for deployment of surplus resources directly as well as indirectly. Based on the present trend of increase in SHG as well as other advances, and discussion with the Branch Manager and the Field Officer, a projection regarding the financial picture of the branch in the next three years has been made. (Rs.lakh)

Total no. of staff Officers Clerks Others Total 6 3 1 10 Item Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Deposit 1009.15 1137.94 1237.05 1440.57 1469.38 1498.77 1528.74 Loans issued (Total) 75.55 157.25 201.02 195.69 290.43 448.36 655.85 Out of which to SHG 0.06 0.47 2.64 7.88 27.50 80.25 140.50 Loans outstanding (Total) 189.99 257.15 266.55 377.18 453.25 651.12 866.22 Out of which to SHG 0.02 0.35 0.33 8.19 24.43 69.12 107.78 CDR 18.8 22.6 21.5 26.2 30.8 43.4 56.7 Productivity of the Branch (Deposits+ Loans O/S) 1199.14 1395.09 1503.60 1817.75 1922.63 2149.89 2394.96 Per staff business 119.91 139.51 150.36 181.78 192.26 214.99 239.50 NPA (Total) 53.53 35.61 32.06 29.31 12.00 12.00 12.00 Profitability of the bank Interest on Deposit 69.78 48.98 69.01 66.50 84.49 83.18 80.26 Transaction cost, risk cost & other cost 7.67 9.16 11.74 5.75 6.33 6.96 7.65 Total 77.45 58.14 80.75 72.25 90.81 90.14 87.91 Interest on loans 10.70 15.30 20.37 11.63 13.98 20.08 26.71 Miscellaneous income 1.78 1.90 1.53 3.40 3.74 4.11 4.53 Total 12.48 17.20 21.90 15.03 17.72 24.19 31.23 Profit/ loss -64.97 -40.94 -58.85 -57.22 -73.10 -65.95 -56.68

The projection shows the reduction in the amount of loss with the mainstreaming of SHG business in the branch. The continuous increase in CD ratio is a positive feature for the branch. The trend will lead the branch to profitability.

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The projection of branch profitability is related to the estimated SHG business in the branch. The estimate is based on the future targets taken by the branch at their own level.

(Rs.lakh) PROJECTED SHG BUSINESS OF ILLAM BAZAR BRANCH

As on OCT. 04 2004-05 2005-06 2006-07 Credit Range No. Amt No. Amt No. Amt No. Amt UPTO 25000 24 3.20 45 8.50 45 11.25 50 12.50 26000 TO 50000 5 2.25 10 5.00 15 7.50 20 10.00 51000 TO 100000 4 2.00 20 10.00 20 20.00 20 20.00 100001 TO 150000 0 0.00 4 4.00 20 30.00 20 30.00 150001 TO 250000 0 0.00 0 0.00 5 11.50 25 53.00 250001 TO 400000 0 0.00 0 0.00 0 0.00 5 15.00 Total 33 7.45 79 27.50 105 80.25 140 140.50

The increase in the credit range of the existing groups and credit linkage of new groups has contributed in increasing the turnover of the branch. The identification of mature groups and facilitating them in taking up profitable economic activities will lead the branch to profitability as the area has vast potential for small trade and business. The staff strength of the branch permits it to depute one of the officers exclusively for SHGs. 4.3.2. Replicable Success of Illam Bazar Branch

4.3.3 SHG: A Way to Find Ways Illam Bazar branch of Mayurakshi Gramin Bank is situated in a market area. It is deposit-oriented branch and ranks second in deposit mobilization among all 65 branches of the bank. The concern of the branch is inducing credit in priority sector with a view to utilizing surplus deposit for the lending purpose. SHG in the branch was introduced with a view to expand the rural clientele and increase lending. The Branch Manager and Field Officer visited the villages and formed groups. They realized that the poor people of the area are in need of credit to take up economic activities. The problem before them was that they were asset-less having no collateral security to offer for availing bank loan. The Field Officer and Branch Manager selected such people and convinced them to form SHGs. They stimulated the sense of self-respect and self- reliance among the poor women by narrating success stories of the SHGs in the neighboring areas. They involved their messenger staff for wining trust of the rural poor. The efforts of the branch resulted in formation of 110 SHGs till date and out of those 45 credit linked. The SHGs are helping in the social and economic empowerment of the members. The branch formed a female group in the year 2001-02. All the members of the group belong to scheduled caste. All are of same economic strata i.e. asset-less poor with yearly income between Rs.10,000-12,000. The leader of the group is very dynamic and enterprising. She had a dream to start a grocery shop of her own to help her husband who is a vegetable vendor. She needed an amount of Rs. 20,000-25,000. SHG provided

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her an opportunity to approach bank for availing credit. After two years, group was in a position to avail that much amount of loan, which could meet her credit need. The group availed an amount of Rs. 32,000 in August 2004. Three members of the group borrowed money from the bank loan. The leader availed an amount of Rs.20,000 and started the grocery shop. Her dream realized because of SHG. The Branch Manager and the Field Officer also got inner satisfaction in converting small dream of a woman into reality. The notable aspect is that had SHG mode not been adopted, the bank could never finance an amount of Rs.20,000 to that asset-less woman. It is confirmed by another instance. A young man residing in the neighboring house of the above SHG member wants to take up a small business for which he needs an amount of just Rs. 10,000. He is Post Graduate degree holder from Viswa Bharti University, Santiniketan, Bolpur, a name that requires no guarantee for authenticity. He approached the bank for loan. The branch officers well recognized his qualification; offered respect for his zeal to take up business but for issuing loan, expressed their helplessness. They told that there is no provision by which they can issue a loan of even Rs. 10.00 (not to talk of Rs. 10,000) to him taking his PG Degree from Viswa Bharti University as security. He will have to give security for availing loan and bank cannot do anything to relax the rules. Here lies the message that SHG is way to find ways both for the bank and the client. It is nothing but SHG that a 7th class pass poor woman could easily get a loan of Rs. 20,000 to realize her dream and a PG Degree holder well educated young man is struggling for an amount of Rs.10,000. ------------------------------------------------------------------------------------------------------------

GROCERY SHOP BY SHG MEMBER

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4.4 Md.Bazar Branch The structure, financial position and performance of Md.Bazar branch is given below:

(Rs.lakh) Total no. of staff Officers Clerks Others 2 3 1 Item Year 2000-01 2001-02 2002-03 2003-04 Deposit 381.42 453.95 525.54 590.84 Loans issued (Total) 64.93 136.97 162.03 120.63 Out of which to SHG 0 0.08 0.24 1.70 Loans outstanding (Total) 120.79 209.75 317.77 347.62 Out of which to SHG 0 0.28 1.45 3.40 CDR 31.7 46.2 60.5 58.8 Productivity of the Branch (Deposits+ Loans O/S) 502.21 663.70 843.31 938.46 Per staff business 83.70 110.62 140.55 156.41 NPA (Total) 24.75 13.54 13.19 15.13 Profitability of the bank Interest on Deposit 38.18 32.85 46.06 61.75 Transaction cost, risk cost & other cost 10.93 13.10 19.46 13.56 Total 49.11 45.95 65.52 75.31 Interest on loans 11.79 18.70 36.47 41.40 Miscellaneous income 2.06 3.03 3.38 2.50 Total 13.85 21.73 39.85 43.90 Profit/ loss -35.26 -24.22 -25.67 -31.41

The CD ratio of the branch is 60.5 and 58.8 in the year 2002-03 and 2003-04 respectively. The main cause of the loss is high cost deposit taken by the branch. The SHGs can help the branch in mobilizing low cost deposit. The branch adopted SHG in the year 2001-2002. The exact position of SHG business in the branch can be seen in the following analysis:

(Rs.lakh) The branch is mobilising substantial amount of deposit from SHGs as good number of SHGs have been formed by NGOs and efforts of the villagers themselves. There is mismatch between the amount of deposit mobilized by the SHGs and lending to the SHGs.

PROFITABILITY OF SHG BUSINESS Item 2000-01 2001-02 2002-03 2003-04 SHG deposit 0.00 0.53 1.02 2.26 SHG loan outstanding 0.00 0.08 0.24 1.70 Interest paid on SHG deposit 0.01 0.08 0.11 Interest received on SHG loan 0.00 0.01 0.03 0.06 Interest paid on Deposit utilised for SHG lending 0.00 -0.03 -0.05 -0.03 Profitability 0.00 0.03 0.00 -0.02 Recovery % 100 100 100 100

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4.4.1 Projection of Branch Profitability Majority of the SHGs in the branch have been promoted by the NGOs. The activities of the NGOs have created much awareness about SHGs in the area. Formation is not a problem for the branch now. They can exploit this opportunity in their favour and focus their efforts on sensitization of the old groups for taking up remunerative economic activities. This will create scope for larger credit to the SHGs. Based on the discussion with the Branch Manager and the Field Officer regarding their future strategy to make the branch profitable, it has been projected that the branch can attain viability in the year 2006-07. The contribution of SHGs in the form of low cost deposit will be a strong weapon in the hands of the branch.

(Rs.lakh) Total no. of staff Officers Clerks Others Total 2 3 1 6 Item Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Deposit 381.42 453.95 525.54 590.84 602.66 614.71 627.00 Loans issued (Total) 64.93 136.97 162.03 120.63 175.59 297.63 428.14 Out of which to SHG 0.00 0.08 0.24 1.70 9.09 64.53 101.80 Loans outstanding (Total) 120.79 209.75 317.77 347.62 339.33 447.11 562.83 Out of which to SHG 0.00 0.08 0.32 2.02 8.45 60.89 76.05 CDR 32 46 60 59 56 73 90 Productivity of the Branch (Deposits+ Loans O/S) 502.21 663.70 843.31 938.46 941.99 1061.82 1189.83 Per staff business 83.70 110.62 140.55 156.41 157.00 176.97 198.31 NPA (Total) 24.74 13.54 13.19 15.13 13.00 12.00 10.00 Profitability of the bank Interest on Deposit 38.18 32.85 46.06 61.75 48.21 49.18 50.16 Transaction cost, risk cost & other cost 10.48 13.10 19.46 13.56 14.92 16.41 18.05 Total 49.11 45.95 65.52 75.71 63.57 66.07 68.74 Interest on loans 11.79 18.70 36.47 41.40 40.41 53.25 67.03 Miscellaneous income 2.06 3.03 3.38 2.50 2.75 3.03 3.33 Total 13.85 21.73 39.85 43.90 43.16 56.27 70.36 Profit/ loss -35.26 -24.22 -25.67 -31.81 -20.41 -9.79 1.62

The contribution of SHGs in the profitability of the branch will be in two ways; mobilization of low cost deposit and the increase in advance with assurance of good repayment. (Rs.lakh)

PROJECTED SHG BUSINESS OF MOHAMMAD BAZAR BRANCH As on DEC. 04 2004-05 2005-06 2006-07 Credit Range No. Amt No. Amt No. Amt No. Amt UPTO 25000 75 5.33 90 6.39 75 5.33 100 10.00 26000 TO 50000 2 1.00 3 1.50 50 25.00 70 35.00 51000 TO 100000 2 1.20 2 1.20 52 31.20 50 40.00 100001 TO 150000 0 0.00 0 0.00 3 3.00 10 12.00 150001 TO 250000 0 0.00 0 0.00 0 0.00 3 4.80 250001 TO 400000 0 0.00 0 0.00 0 0.00 0 0.00 Total 79 7.53 95 9.09 180 64.53 233 101.80

The branch is moving fast towards the linkage of new groups. During the period from 01 April 2004 to 31 December 2004 the branch has credit linked 46 groups with a growth

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rate of 139 percent. The same trend has been taken into consideration while making the projection. The branch is going for the scientific identification of the SHGs with different age groups to be credit linked within different credit range for systematic increase in credit flow to the SHGs.

SHG MEMBERS INTERACTING WITH OUTSIDERS

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Chapter V

Testing of Various Hypothesis at Bank Level 5.1 Impact of SHG on Interest rate - SHG vs. Other Loan Products The fixing of interest rate in any bank is required to be on scientific line where the factors, such as cost of fund, return on assets, risk cost, transactions cost and potential of the business are taken care of. An attempt has been made by the bank to rationalize the interest rate on SHG product vis-à-vis other products in the year 2004-05. The interest rate of SHG vis-à-vis other products is given below:

Sl.No. Loan Product Quantum Interest Rate in %

Prior to 01.08.2004

With effective from 01.08.2004

1 Crop Loan 50000 9.0 9.0 > 50000 - 12.0

2 Term loan for agriculture and allied activities.

Upto 5 lakh 14.5 13.5 > 5 lakh 15.0 13.0

3 Term loan for non-agriculture

Upto 25000 13.0 12.0 >25000<2lakh 15.0 14.0

>2lakh<10 lakh 14.5 13.5 >10 lakh 14.0 13.0

4 Self-help Group (Direct)

Upto 2 lakh 13.0 12.0 > 2lakh 14.0 13.0

Self-help Group through NGO

Upto 2 lakh 11.5 11.5 > 2lakh 12.5 12.5

From the beginning the bank has pegged the interest rate of SHG loans at the lowest slab except crop loan. This has further been rationalised with effect from 01 August 2004 where the interest rate has come down by 100 basis points. 5.2 Fixing of Interest Rate- Rationalization The fixing of interest rate in the bank needs some rationalization as analyzed below:

Sl.No.

Loan Product Interest rate in%

Recovery % Effective interest rate

Cost of fund

Margin

1 Crop loan 12.0 62.0 7.4 7.0 0.4 2 Term loan for agriculture

and allied activities. 13.5 55.0 7.4 7.0 0.4

3 Term loan for non-agriculture

14.0 71.0 9.9 7.0 2.9

4 Self-help Group (Direct) 12.0 100.0 12.0 7.0 5.0

It can be observed from the table that the margin available is the highest (5 percent) in SHG loan – more than 2.1 percent in comparison to term loan for non-agriculture and 4.6 percent in comparison to crop loan and term loan for agriculture and allied activities. The effective interest margin is highest in case of SHG loan as the recovery of SHG loan is around 100 percent.

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The bank is adopting the policy to increase the rate of interest with the increase of quantum of loan amount in case of SHG loan whereas in case of term loan for agriculture it has been reduced with the increase of quantum of loan amount. The lessons could be learnt from the practices adopted by the SHGs themselves. Some of the SHGs of more than four years old are charging different rate of interest depending upon the amount of loan. For example, they charge interest at the rate of 2 percent per month against the amount below Rs.25000 and above that they charge interest at the rate of 1.5 percent per month. The quantum of credit thrown through SHG product is 3 percent and 7 percent of the total loan turnover during the years 2002-03 and 2003-04 respectively. The quantum of loan disbursed through SHG is not substantial upto 2003-04. To give more impetus to volume of business, the bank may consider rationalising the interest rate. Further, as indicated earlier, the fixing of interest rate of loan product is directly related to the risk cost and the volume of business. Keeping in view low volume of business and no risk cost, it is suggested that the interest on SHG may be reduced to 10 percent. 5.3 Impact on Recovery The low level of recovery of loans and high level of NPA led the bank to innovate something new. They adopted SHG concept that could cure their chronic NPA problems. The recovery percentage of SHG loan is as high as 95 percent, the highest among all other loan products. 5.3.1 Power of Peer Pressure The high recovery of SHG loan is the result of effective peer pressure. There are instances where one member of the group is not in a position to repay the loan in time because of some loss of assets created from SHG loan. In such cases, the group takes care of the timely repayment of the portion of loan given to that particular member. The question of wilful default does not arise in SHG loan, as the group members are well aware of the repayment capacity of each and every member of the group. The group itself debars the wilful defaulter member from taking finance. The group security and peer pressure are the basic factors responsible for 95 percent recovery of SHG loan. 5.3.2 Innovations The practice followed in the sample branches in fixing the credit limit for groups, provides ample scope for SHGs to avail bigger amount of credit and to repay regularly. They are following the practice of providing loans to selected SHGs based on their performance/ potential/ requirement than on any fixed formula. For uniformity and more credit offtake, they provide credit based on following criterion - four times of corpus

fund + previous credit off take by the group.

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(Amount Rs.)

Type of fund Amount Eligibility for borrowing (7000x4+13600)

After 6 month After 1 year Savings (10 member Rs.50 per month)

3000 6000

Interest 300 900 Others 100 100 Total Corpus fund 3400 7000 Borrowing from Bank after 6 months (1:4)

13600 41600

This innovation has sustained the interest of the group for taking up economic activities and repayment of present/ old dues at a shorter span of time. This also induced the defaulter borrowers to repay their dues and come to banking fold through SHG to have a sustainable banking relationship. 5.4 Repayment of Other Loans after SHG SHG is an innovation. It is not confined to a loan product or a scheme of financing. It has been rightly accepted by some of the Branch Managers that SHG is YOGA. YOGA aims at overall transformation in the human personality starting from the cure of physical diseases to the enlightenment of soul. Similarly, SHGs contribute for overall improvement in a bank’s/ branch’s performance. The SHGs in the bank have helped to improve the recovery of all types of loans inducing the recovery of old. There are also instances when women SHG members have pressurized their husbands to repay old bank loan so that they can take fresh loans from the SHGs and move together with other group members in the process of social and economic development. 5.4.1 Demand Collection Balance of The Bank for the Last Four Years (Rs.lakh)

Year Crop loan

Term loan (AGL. &Allied

Activities)

Term loan (Non-AGL)

Total Priority Sector

NPS G.Total SHG

DEMAND 2000-01 482.74 356.36 3719.68 4558.78 0.00 4558.78 0.10 2001-02 557.36 346.87 5217.39 6121.62 0.00 6121.62 3.78 2002-03 631.85 353.79 2854.32 3839.96 4422.83 8262.79 45.92 2003-04 687.03 377.29 3888.45 4952.77 5065.57 10018.34 159.39 COLLECTION 2000-01 224.26 93.68 2828.33 3146.27 0.00 3146.27 0.10 2001-02 308.13 114.02 4315.37 4737.52 0.00 4737.52 3.77 2002-03 352.87 127.69 1861.82 2342.38 4157.01 6499.39 45.40 2003-04 426.76 154.57 2789.08 3370.41 4592.51 7962.92 151.18 % OF RECOVERY 2000-01 46.46 26.29 76.04 69.02 0 69.02 100.00 2001-02 55.28 32.87 82.71 77.39 0 77.39 99.74 2002-03 55.85 36.09 65.23 61.00 93.99 78.66 98.87 2003-04 62.12 40.97 71.73 68.05 90.66 79.48 94.85

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The recovery performance of the bank suddenly increased from 50 percent to 69 percent in the year 2000-2001. The recovery is increasing year by year. Bank’s efforts to expand its social relationship through SHGs and Farmers’ Clubs have major contribution in this field. The efforts of the bank to enhance recovery have been supported and supplemented by the members of SHGs and Farmers’ Clubs. 5.5 Impact of SHG on Staff The SHG in the bank has paved the way for active involvement of the staff members in the process of social and community mobilization irrespective of cadre and designation. At personal level they are enjoying greater social exposure and recognition. The bank is directly involved in the formation and linkage of SHGs. It has created scope for the staff to play ground level role in the formation and linkage of SHGs. They are getting inner satisfaction in the social and community mobilization. It has raised the motivation level of the staff leading to team spirit among them. The impact of SHG has resulted in a more active personal, community and social life of the staff. Changing of attitudes in the form of respect for women family members, compassion for poor and elder people are some of the impacts of SHG on the staff members. The staff members are also showing their concern to social evils, such as child marriage, dowry, untouchability and discrimination on the basis of caste. 5.6 Impact of SHG on Lending Before introduction of SHG, the bank was having huge number of defaulter clients whom further credit could not be given, and for asset-less poor, there was no provision of credit. The bank was struggling hard to find ways and means to get out of the vicious circle of low lending and low recovery. There were only two ways before the bank. First, to get loans recovered and issue fresh loans to the same clients; second, to create new clientele in rural market. Both were Herculean tasks for the bank. At that crucial point of time bank went for SHG business. The SHGs and Farmers’ Clubs helped the bank in two ways- recovery of old loans and issue of fresh loans to the same client. The concept of flexible interpretation of rules and regulations and usage of discretionary power by the Branch Managers provided scope to the bank to lend some defaulter clients who were honestly eager to come to the bank through SHG mode. The bank being aware of the seriousness of the issue very prudently experimented this practice in a few selected branches where dynamic Branch Managers could win the trust of the villagers. The experiment emerged successful. When some defaulter members after repaying their old

SHG business has transformed the staff from sleepy, indifferent, mechanical, detached banker into an active, vibrant and humane banker.

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dues availed fresh loans resulting in visible changes in their social and economic conditions, the other members who did have repaying capacity themselves repaid old dues. This practice helped a lot in creating scope for credit flow in priority sector. The bank’s innovations, such as inviting the successful SHGs to various seminars, created a feeling among non-SHG members to come to SHG for social recognition, which ultimately helped in increasing SHG turnover. The bank is expanding its rural clientele through establishing sustainable relationship with SHG members by initiating steps such as issue of circulars for all the staff members to purchase SHG products. The Farmers’ Clubs worked as advertisers in promoting advance in the area. The bank with the help of the Farmers’ Clubs propagated remunerative economic activities in the respective areas, such as crop diversification, small trades, goattery, piggery etc., creating scope for credit. The bank with the help of Farmers’ Clubs also undertook initiative for land reclamation in some areas. The bank, in the form of SHGs, got new clientele in the rural market, which otherwise remains untouched. SHG is the only mode to bring the asset-less clients under the umbrella of banking. The SHG turnover of the bank has increased to Rs.594.80 lakh in the year 2003-04. The bank is concentrating its efforts on increasing lending. It has devised a pattern of survey of rural families to assess their credit needs. In this, they are getting help of SHG members and Farmers’ Clubs.

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Chapter VI

Group Analysis 6. Structure of Group

6.1 Distribution of Groups by Branchwise Out of the total 32 sample groups studied, 23 are directly linked by the bank and 9 through NGOs. The details are given below:

Name of the Branch

Formed by the bank

Formed by NGOs

Total % of Groups formed by Bank

Illambazar 13 13 100 Md.Bazar 1 9 10 10 Panchra 9 9 100 Total 23 9 32 72

All the groups in Panchra and Illam Bazar branches have been formed directly by the branch whereas in Md.Bazar branch about 75 percent groups have been formed by the NGOs. More than 95 percent of the groups are formed and linked directly by the bank. In the study samples, groups promoted by the NGOs have been taken for the purpose of modelwise analysis and to present a comparative study of bank groups and NGO groups. 6.2 Groups Category Out of 32 samples groups, 22 are female groups, 07 male groups and 03 mixed groups. Female groups constitute 69 percent of the total samples. The share of male groups in total sample is 22 percent. The samples of number of groups in female and male category have been taken keeping in view the overall ratio of female and male groups in the bank as a whole. Out of 2729 total groups linked to the bank, female groups constitute 1664 (61percent). The share of male groups is 39 percent as against the all India figure of 10 percent. The success of male groups in recovery and higher credit challenges the conventional wisdom and gender bias that microFinance innovation is successful in female groups only. 6.3 Age of the Group

Group No. Of Groups Years 5 Years 4 Years 3 Years 2 Years 1 Year Total

Female 22 3 10 8 1 22 Male 7 1 2 1 3 7 Mixed 3 1 2 3 Total 32 1 4 14 9 4 32 % To Total 3 13 44 28 12 100

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44 percent of the sample groups are more than two years old and 13 percent more than three years old groups, 28 percent more than one year and 12 percent more than 6 months old groups. Only one sample is of more than five years old group. The study reveals that

the benefits obtained from the group are stabilized in about two years. The inclination

of the groups towards social and other activities starts after three years when they

attain maturity .

6.4 Number of Members in Groups

No. of Members Group No. of

Groups 7 8 9 10 11 12 16

Female 22 1 3 3 9 4 2 0 Male 7 0 0 0 4 2 0 1 Mixed 3 0 0 0 1 2 0 0 Total 32 1 3 3 14 8 2 1 % To Total 3 9 9 44 25 6 3

The number of members varied from 7 to 16. The majority of groups stand between 10-11 members. All male groups have members above 10. Only one male group has 16 members. 6.5 Age Profile of the Group Members

Out of 32 sample groups, 78 percent are within the range of 18-35, 6 percent within 36-50 and 5 percent above 50 years of age group. The ideal age group for SHG is 18-35. 6.6 Homogeneity

Group No.of Groups

Caste& Locality

Locality& Economic

status

Caste, Locality& Economic

Status

Caste, Locality, Economic Status& others

Female 22 1 6 15 0 Male 7 1 3 3 0 Mixed 3 0 0 2 1 (PERCENTAGE) Group No. Of

Groups Caste& Locality

Locality& Economic

status

Caste, Locality& Economic

Status

Caste, Locality, Economic Status& others

Female 69 3 19 47 0 Male 22 3 9 9 0 Mixed 9 0 0 6 3 Total 100 6 28 63 3

Group No. of Groups 18-35 36-50 Above 50 % To Total Female 22 18 1 3 69 Male 7 5 2 22 Mixed 3 2 1 9 Total 32 25 2 5 100 % To Total 100 78 6 16

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Homogeneity is an important aspect of SHG concept, which leads the groups to greater affinity. All sample groups are homogeneous groups. Out of 32 sample groups, 63 percent are homogeneous in caste, economic status and locality, 28 percent in locality and economic status, 6 percent in caste and locality and 3 percent in caste, locality, economic status and others. No sample group has shown homogeneity in caste only. There are groups in which all members belong to the same caste but caste factor does not matter much for the homogeneity of group. The groups with members from upper caste and scheduled caste are affinity groups with no sign of friction. The groups with members from two religions i.e., Hindu and Muslim are also affinity groups. The problem of dominance has been seen in one group where economic status of one particular member is higher than that of other members of the group. The bank loans have been availed repeatedly by the leader only whose monthly income is above Rs.10000 per month while other members’ income is just Rs.1500-2000. In another group, the leader’s income level is 10 times more than that of other members. The leader is quite indifferent in availing loan from the group. Her membership has not any way affected the normal functioning of the group. 6.7 Conduct of Meetings The foundation of SHG is trust within the group. The trust building among the group members is possible only when they get opportunity to sit together frequently to remove their doubts and come closer to one another.

Group No. Of Groups

Weekly Fortnightly Monthly

Female 22 0 2 20 Male 7 1 0 6 Mixed 3 0 0 3 Total 32 1 2 29

% To Total 100 3 6 91 (PERCENTAGE)

Group No. Of Groups Weekly Fortnightly Monthly Female 69 0 6 63 Male 22 3 0 19 Mixed 9 0 0 9 Total 100 3 6 91

The meetings of the sample SHGs are conducted regularly. 91 percent groups conduct monthly meetings, 6 percent fortnightly and 3 percent weekly meetings. The monthly meeting periodicity is ideal and balanced. The attendance level in meeting is above 90 percent in all groups. About 50 percent groups have meetings on fixed dates while other groups have flexibility in date as per the convenience of the members. All groups meet in the evening time. The collection of saving is done in the meetings in case of 90 percent groups. 10 percent groups are not aware of the benefit of collecting savings in meetings itself. The disbursement of bank loan or inter loan is done in meetings only.

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6.8 Literacy The majority section of society covered under SHG programme comprises of illiterate people. Poverty and lack of awareness are the major causes of illiteracy. SHG programme addresses the issue of literacy by raising the sense of self-respect among the members. Literacy level of sample group members is presented below:

Group No. of

Groups Total

literate Illiterate after Membership

Illiterate after Membership

excluding neo-literate

% of literacy after Membership

% of literacy after Membership excluding neo-literate

Female 22 198 18 23 92 70 Male 7 75 3 4 96 95 Mixed 3 31 1 3 97 97 Total 32 304 22 30 93 79

Before membership 69 percent of members were literate. The literacy among women and men members was 59 and 90 percent respectively. After membership, literacy level of the members increased from 59 to 70 percent, 90 to 95 percent and 88 to 97 percent in case of female, male and mixed groups respectively. The study shows that improvement in literacy level is limited to neo-literacy; 48 illiterate members have become neo-literate in Post-SHG period that constitutes 61 percent of the total improvement in literacy level. 6.9 Occupational Pattern The occupation of sample members is given in the table below:

Pre-SHG Occupation Group No. of

Groups Wage

Labourer Agriculture Allied

Activities Traditional

Craft Others Total

Female 22 87 16 12 0 101 216 Male 7 25 33 0 0 20 78 Mixed 3 9 13 2 6 2 32 Total 32 121 62 14 6 123 326

Group No. of Groups

No. of Members

Literate before Membership

Illiterate before Membership

% of literacy before Membership

Literate after Membership

Neo-literate after Membership

Female 22 216 128 88 59 151 47 Male 7 78 70 8 90 74 1 Mixed 3 32 28 4 88 31 0 Total 32 326 226 100 69 256 48

Post-SHG Occupation Group No. of

Groups Wage

Labourer Agriculture Allied

Activities Traditional

Craft Others Total

Female 22 65 42 10 0 99 216 Male 7 24 33 0 0 21 78 Mixed 3 4 18 2 6 2 32 Total 32 93 93 12 6 122 326

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Percentage wise occupation Pre-SHG Group No. of

Groups Wage

Labourer Agriculture Allied

Activities Traditional

Craft Others Total

Female 22 40 7 5 0 47 100 Male 7 32 42 0 0 26 100 Mixed 3 28 41 6 19 6 100 Total 32 37 19 4 2 38 100

Post-SHG Absolute Change in Occupational Pattern Post-SHG Percentage Change in Occupational Pattern The major share accounting for 37 percent of the sample households depended on wage labour in Pre-SHG period. In post-SHG period that percentage has decreased to 28 percent, a change of 9 percent. This 9 percent change has increased the dependency on agriculture, which has gone up to 28 percent in Post-SHG period from 19 percent in Pre-SHG period. There is more or less no percentage change in the occupational pattern in case of allied activity and traditional craft. The shift of occupation from wage labour to agriculture is mainly because of the provision of collateral free loan through SHG. The money enabled wage labour to take land on contract for cultivation of high value crops, such as vegetable etc. The SHG has helped the poor farmers by providing capital for cultivation in their own land, which they could not use in the absence of capital. The farmers had to migrate to towns for daily labour. After SHG, such farmers started cultivation in their own lands. The economy of the area coming under the branches selected for study is predominantly agriculture oriented. There is not much potential for non-farm activities in the absence of forward and backward linkages. The efforts of the people are, therefore, towards adding more value to the agriculture than switching occupational pattern from farm sector to non-farm sector. The change in occupational pattern is more prominent in women members – change in wage labour by 25 percent and 162 percent in agriculture. The major reason of women switching over from wage labour to agriculture is increase in family income after SHG. The increased family income first makes the women members

Percentage wise occupation Post-SHG Group No. of

Groups Wage

Labourer Agriculture Allied

Activities Traditional

Craft Others Total

Female 22 30 19 5 0 46 100 Male 7 31 42 0 0 27 100 Mixed 3 13 56 6 19 6 100 Total 32 29 29 4 2 37 100

Group No. of Groups

Wage Labourer

Agriculture Allied Activities

Traditional Craft

Others

Female 22 -22 26 -2 0 -2 Male 7 -1 0 0 0 1 Mixed 3 -5 5 0 0 0 Total 32 -28 31 -2 0 -1

Group No. of Groups

Wage Labourer

Agriculture Allied Activities

Traditional Craft

Others

Female 22 -25 163 -17 0 -2 Male 7 -4 0 0 0 5 Mixed 3 -56 39 0 0 0 Total 32 -23 50 -14 0 -0.8

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to switch over. They prefer to work in their own field because of the sense of honor and dignity. The male members are engaged in wage labour to supplement the family income. 6.10 Savings Pattern The first formal activity of the group is starting of savings. It develops habit of thrift among the poorest of poor ensuring the repayment of loan. The groups save on monthly basis. The amount of saving per member varies across the group. The groups save Rs.20 to Rs.300 per month. There is only one group whose per member per month saving is Rs.300. Majority of the groups save Rs.30 to Rs.50 per member per month. The groups are not showing the trend of increase in amount of saving per month per member with attaining maturity. The average monthly saving of individual female, male and mixed group member is Rs.37, Rs.82 and Rs.43 respectively. The average monthly saving per group is Rs.373, Rs.878 and Rs.460 in case of female, male and mixed groups respectively. The average monthly saving of all individual samples and of all group samples are Rs.48 and Rs. 492 respectively. 6.11 Corpus Mobilization Category wise/ Purpose wise The source of group savings comprises of saving by the members, the interest earned from internal lending and interest margin from bank loan. The system of imposing fines or receiving grants/ aids from outside sources is not followed by the sample groups. The interest portion constitutes 23, 21 and 38 percent in case of female, male and mixed groups respectively, which is very high. The higher interest portion has enabled the groups to avail bigger amount of credit. The quick rotation of fund has contributed in increasing the interest portion. The groups, therefore, are not interested in increasing saving amount. The corpus is increasing because of the availment of bigger amount of credit resulting income from interest margin. The practice to provide credit based on following criterion - four times of corpus fund + previous credit off take by the group- has also contributed to increase the interest portion of corpus fund.

Group No.of Groups Monthly individual saving amount in group Total Female 20 25 30 40 50 300 Male 22 2 3 6 2 9 0 22 Mixed 7 1 5 1 7 Total 3 1 2 3 Group 32 2 4 7 2 16 1 32

% To Total 6 13 22 6 50 3 100

Group AVG. monthly saving per member

AVG. monthly saving per group

Female 37 373 Male 82 878 Mixed 43 460 Total 48 492

Total Corpus Fund Average Total Group Corpus

Saving Corpus Interest

Corpus Total

Corpus Saving

Corpus Interest

Corpus Total

Female 10056 2939 12994 221225 64649 285874 Male 13564 3665 17229 94950 25652 120602 Mixed 15267 9233 24500 45800 27700 73500 Total 38887 15836 54723 361975 118001 479976

% of Individual Item to Total corpus Fund Average Total Group Corpus

Saving Corpus Interest

Corpus Total

Corpus Saving

Corpus Interest

Corpus Total

Female 77 23 100 77 23 100 Male 79 21 100 79 21 100 Mixed 62 38 100 62 38 100 Total 71 29 100 75 25 100

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6.12 Internal Lending The practice of internal lending in the group helps in developing the understanding of savings and credit management among the members. Out of 32 sample groups, 81 percent groups have done internal lending which is considered higher percentage. 63 percent groups started internal lending within 6 months whereas 19 percent started internal lending after 6 months.

Started Internal Lending

Group No.of Groups

No Inter Lending

Within 6

Month

6-12 Months

% of Inter Lending

Female 22 5 13 4 77

Male 7 1 4 2 86

Mixed 3 0 3 0 100

Total 32 6 20 6 81

%To Total 100 19 63 19 81

The interest rate charged for internal lending was same with that of bank borrowing except two cases. The higher rate of interest charged for internal lending and bank borrowing was observed in 4 groups who have availed higher amount of credit. The majority of groups charge interest at the rate of 24 percent. Comparing the SHGs of other districts in West Bengal, 24 percent interest is also a higher amount. The main reason being Birbhum is a backward district where competition among banks is comparatively less. The fixing of interest rate by the SHGs is directly proportionate to the interest charged by the banks. The members are more interested for building of corpus fund so that they can avail bigger amount of credit. 6.13 Credit Linkage The hassle-free and need based availability of institutional credit to the asset-less poor is one of the basic objectives of SHG programme. The clients covered under SHG are those who could not approach the institutional credit because they did not have any collateral security to offer against the loan. Out of 32 sample groups, majority of the groups are credit linked within 1 year whereas 40 percent are credit linked after 1 year.

Interest rate in %

No. Of Groups doing inter lending

No. Of Groups

availing bank credit

No lending 6 0

18 1 1

24 19 27

30 2 2

36 3 1

60 1 1

Total 32 32

Credit Linkage Time

Group No. of Groups

Within 6 months

Within 6-12 months

After 1 year

Female 22 3 10 9

Male 7 2 2 3

Mixed 3 2 1

Total 32 7 12 13

% To Total

100 22 38 40

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The table below shows that 66 percent of the sample groups have taken first credit below Rs.20000, 28 percent between Rs.20000 to Rs.40000 and 6 percent more than Rs.60000.

First Credit Linkage

Group No. of Groups

<10000 >10000<20000 >20000<40000 >40000<60000 >60000

Female 22 6 9 7 0 0

Male 7 1 3 1 0 2

Mixed 3 2 1 0 0

Total 32 7 14 9 0 2

% Of Total 22 44 28 0 6

The average off take of first credit linkage of female groups is Rs.15040, male groups Rs.30000 and mixed groups Rs.15333. The overall average is Rs.18340. The average of credit, when compared with that of savings, comes almost 1:4, which is higher amount for first credit linkage. The bank has taken risk also which shows the flexibility of bank’s approach. 6.14 Second Credit Linkage

Group No. of Groups

No 2nd Credit linkage

Within 6 months

Within 6-12 months

After 1 year

Female 22 9 1 11 1

Male 7 4 3

Mixed 3 2 1

Total 32 13 1 16 2

% To Total 100 41 3 50 6

The economic development of the members depends on the frequency of credit and repayment of bank loan. The study reveals that around 59 percent of the sample groups have availed second time credit. 53 percent have availed credit within 1 year. 41 percent (13groups) of the groups have not availed second time credit. Out of 13 groups 3 are more than 2 years old and 6 are more than 1 year old. Some of the groups have repaid the loan but not availed second time credit.

Age of group

No. of Groups availing 2

nd time

credit

No. of Groups not availing 2

nd time

credit

2003-04 0 4

2002-03 3 6

2001-02 11 3

2000-01 4 0

1999-2000 0 0

1998-99 1 0

Borrowing Group Minimum Maximum Average Female 5000 30000 15040

Male 8000 70000 30000

Mixed 13000 20000 15333

Total 5000 20000 18340

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The table below shows that 38 percent of the groups have availed second time credit below Rs. 40000.

Second credit linkage

Group No. of Groups

No Credit <10000 >10000<20000 >20000<40000 >40000<60000 >60000

Female 22 9 0 3 7 3 0

Male 7 4 0 0 2 0 1

Mixed 3 0 0 0 3 0 0

Total 32 13 0 3 12 3 1

% To Total 41 0 9 38 9 3

The average amount of second time credit off take is Rs.28423, Rs.42833 and Rs.25666 in case of female, male and mixed groups respectively. The overall average is Rs. 30263.

Borrowing

Group Minimum Maximum Average

Female 13000 54000 28423

Male 23500 75000 42833

Mixed 21000 30000 25666

Total 13000 75000 30263

The increase in loan amount from first to second linkage can be seen in the table below- The average increase in borrowings in case of female groups is as high as 89 percent followed by 67 and 43 percent in case of mixed and male groups respectively. The overall average increase is 65 percent which is a higher level compared to other banks. 6.15 Credit Linkage Time More frequency of credit linkage of groups proves the sustainability of the groups. The good feature seen in the study is that bank has credit linked some of the groups upto 6 times. 18 percent of the sample groups have been credit linked more than 4 times. The groups credit linked 5 to 6 times have availed loan amount of more than Rs.1 Lakh. 6.16 Purpose-wise Distribution The majority of sample groups have taken loan for the purpose of production and investment viz., 56 and 31 percent respectively. 6 percent of the groups have equally distributed the loan amount among themselves. Only 3 percent of the groups (only 1 in number) have availed loan both for consumption and production purpose. The high percentage of production and investment purpose ensures the economic development of

Change in % in borrowings-Ist & 2nd

Group Minimum Maximum Average

Female 160 80 89

Male 194 7 43

Mixed 62 50 67

Total 160 275 65

Credit linkage time

Group No .of Groups

1 2 3 4 5 6

Female 22 9 9 1 1 2

Male 7 4 1 1 0 0 1

Mixed 3 0 1 0 1 1 0

Total 32 13 11 2 1 2 3

% To Total 100 41 34 6 3 6 9

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the members as well as timely repayment of the loan as the loan is utilized for income generating activities.

Purpose of Disbursement of loan among members Group No. of

Groups Production Investment Distributed

equally Consumption/ Production

Production/ Investment

Female 22 12 9 1 0 0 Male 7 4 1 0 1 1 Mixed 3 2 0 1 0 0 Total 32 18 10 2 1 1

% To Total 56 31 6 3 3

Percentage Share

Group No. of Groups

Production Investment Distributed equally

Consumption/ Production

Production/ Investment

Female 22 55 40 5 0 0 Male 7 58 14 0 14 14 Mixed 3 67 0 33 0 0

6.17 Repayment of Loan Developing the sense and understanding among the borrowers that repayment of loan leads to availment of more loans has been one of the core objectives of SHG movement. The overall repayment of SHG loan is 94 percent. The repayment schedule fixed by the SHGs varies form monthly to yearly depending upon the purpose of the loan. It has been found that loans are repayed before the schedule. The culture has contributed in greater SHG turnover by the bank. 6.18 Awareness about Group Formation 98 percent members of the sample SHGs are aware of the purpose of group formation. The higher awareness level has helped in ensuring the sustainability of the group.

Repayment Schedule

Group No. of Groups Monthly Half Yearly Yearly

Female 22 5 17 0

Male 7 0 5 2

Mixed 3 0 2 1

Total 32 5 24 3

% 16 75 9

Repayment Schedule

Group No. of Groups

No delay Partial delay

Delay & default

Female 22 21 1 0

Male 7 7 0 0

Mixed 3 2 0 1

Total 32 30 1 1

% 94 3 3

Awareness about Group formation

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 211 5

Male 7 78 78 0

Mixed 3 32 32 0

Total 32 326 321 5

% Total 100 98 2

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6.19 Awareness About Laws and Byelaws 73 percent members of the sample SHGs are aware of the laws and byelaws. The high percentage of awareness of laws and byelaws indicates the active participation of the members in SHG functioning. 6.20 Awareness About Record Maintenance 51 percent of total sample SHG members are aware of record maintenance. This is related to the high percentage of neo-literacy of the SHG members. The neo-literate members could sign only. One or two literate members maintain the record. In some cases records are maintained by outsider’s help viz., Farmers’ Clubs. There are instances where literate members are not making efforts to maintain record and remaining dependent on Farmers’ Clubs. 6.21 Awareness About Rate of Interest and Repayment of Loans 85 percent members of the sample SHGs are aware of the rate of interest and repayment of loans. It shows majority of members join SHG for availing credit as per their need. This positive sign has contributed in almost 95 percent recovery of SHG loan. 6.22 Trust in Leader 99 percent members have expressed trust in their leaders. This factor helps in ensuring longevity and sustainability of the groups. The absence of sign of friction in the groups attributes to the trust in leadership.

Awareness about laws & byelaws of SHGs

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 139 77

Male 7 78 69 9

Mixed 3 32 30 2

Total 32 326 238 88

% Total 100 73 27

Awareness about record of SHGs

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 90 126

Male 7 78 58 20

Mixed 3 32 19 13

Total 32 326 167 159

% Total 100 51 49

Awareness about rate of interest and repayment

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 173 43

Male 7 78 78 0

Mixed 3 32 26 6

Total 32 326 277 49

% Total 100 85 15

Trust in leader

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 214 2

Male 7 78 78 0

Mixed 3 32 32 0

Total 32 326 324 2

% Total 100 99 1

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6.23 Degree of Dependency on Leader The level of dependency of the members on leader is very high (93 percent). The dependency is mainly because of the high neo-literacy level among the members. They are dependent only for writing of books and accounts. 6.24 Social Empowerment of Members The credit disbursement is not the sole objective of SHG movement. The objective is economic development with the social empowerment of the poor, downtrodden and disadvantaged class of society. The study finding proves this fact with the social empowerment of 88 percent members of the sample SHGs. 6.25 Economic Development of the Members The SHGs have helped in economic development of 90 percent of the sample members. The higher amount of credit disbursed by the bank to SHGs and increase in amount of credit from first to second linkage also prove this fact. 6.26 Leadership Rotation The leadership rotation is desirable for stability of the group. The stability of the group depends on trust and transparency of the financial transaction and proper maintenance of books and accounts. Another vital aspect of the group stability is the ability of the leader to interact with outside agencies for capacity building and financial transactions. During interaction it has been observed that the second factor dominates the selection and rotation of the leadership. The maintenance of records is regular in 81 percent of the sample groups, which indicates transparency in financial transactions, and less scope for misappropriation of fund or inefficient utilization of loans. In 91 percent groups no leadership rotation has been seen. The cases of rotation (only 9 percent) are because of the personal problems of the leaders in continuing and not as a regular practice.

Degree of dependency on leader

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 206 10

Male 7 78 71 7

Mixed 3 32 25 7

Total 32 326 302 24

% Total 100 93 7

Social empowerment of members

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 176 40

Male 7 78 78 0

Mixed 3 32 32 0

Total 32 326 286 40

% Total 100 88 12

Economic development of members

Group No. of Groups

No. of members

Aware Not aware

Female 22 216 198 18

Male 7 78 74 4

Mixed 3 32 23 9

Total 32 326 295 31

% Total 90 10

Leadership rotation

Group No. of Groups

No rotation in leadership

Rotation within 1 year

Female 22 21 1

Male 7 5 2

Mixed 3 3 0

Total 32 29 3

% Total 100 91 9

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CHAPTER VII

Individual Member Analysis

7.1 Impact of SHG on Individual Members

In the previous chapter efforts have been made to evaluate the success of SHG movement in terms of SHGs as a whole. This chapter covers the aspects reflecting economic and social improvement of the individual members. 70 individual samples have been collected for the purpose of study. The samples are from those very SHGs, which have been studied, in the previous chapter. This has been done for the purpose of relating and comparing the changing pattern in the group life with that of the individual life. 7.2 Age Profile of The Members Out of total 70 members, 79 percent are within age range of 18-35. This age range dominates the group sample also. The study proves that this age range is ideal for SHGs. 7.3 Literacy Level of the Members The literacy level of the members in Pre-SHG period is 64 percent and 14 percent members are neo-literate. The literacy level of the members in Post-SHG period is 66 percent and 29 percent members are neo-literate. The increase in literacy level is 2 percent and in neo-literacy is 15 percent. The change from pre-SHG literacy level to Post-SHG literacy is visible in the form of shift from illiteracy to neo-literacy. The similar trend is present in group analysis also. The observation emerged from study is that average adult SHG members, those were previously illiterate, could only sign and not read and write which is evident in the form of greater dependency on leaders. Joining SHG made them realize the importance of education, which resulted in increased number of members being able to sign.

Age Profile of members Category No. of member 18-35 35-50 Female 39 29 10 Male 31 26 5 Total 70 55 15 % To Total 100 79 21

Literate before membership

Sex No. of members

Illiterate Neo- literate

Upto class V

Upto class X

Above class X

Female 39 11 8 14 6 0

Male 31 4 2 10 8 7

Total 70 15 10 24 14 7

% To Total

100 22 14 34 20 10

Percentage of change in illiteracy after membership

Sex No. of members

Illiterate Neo- literate

Upto class

V

Upto class X

Above class X

Female 39 -72.7 100.0 0.0 0.0 0.0

Male 31 -75.0 100.0 10.0 0.0 0.0

Total 70 -73.3 100.0 4.2 0.0 0.0

Literate after membership

Sex No. of members

Illiterate Neo- literate

Upto class V

Upto class X

Above class X

Female 39 3 16 14 6 0

Male 31 1 4 11 8 7

Total 70 4 20 25 14 7

% To Total 100 6 29 36 20 10

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7.4 Occupational Pattern About 36 percent of sample members are wage labourers, 30 percent are engaged in agriculture and 30 percent in other activities mostly small business in Pre-SHG period. There are perceptible shift in Post-SHG period in case of wage labour from 36 to 14 percent. The 22 percent change has been distributed in increase of agriculture (13 percent), allied activities (2 percent), traditional craft (1 percent) and other activities (6 percent). The shift over a period of time is positively on account of assistance from SHG in the form of capital for taking up cultivation. The loan availed from SHGs has contributed in expansion of same activities leading to reduction in percentage of wage labour. 7.5 Income Level of the Members The frequency distribution of average annual income reveals that about 24 percent members are having income of more than Rs.25000 per annum. This proportion has increased to 57 percent in the Post-SHG period. 46 percent members are having income between Rs. 10000 to Rs.25000 per annum. This proportion has declined to 27 percent in Post-SHG period. About 30 percent members are having income of less than Rs.10000 in Pre-SHG period. This proportion has declined to 16 percent in Post-SHG period. This is mainly because of the shift in the income distribution to higher slab. The incremental income generated is directly linked to the shifting of wage labour to agriculture and expansion of same activities. The cultivation of vegetable as commercial crops, expansion of khajur business and trading of ready-made garments and consumer durables are the major incremental activities. This is the result of increased use of loans for production and investment purpose. The average income per annum in case of women, men members and sample members as a whole in pre-SHG period is Rs.18923, Rs.14435 and Rs 16936 respectively. The same has increased to Rs. 23333, Rs.22032 and Rs.22757 per annum in Post-SHG period respectively.

Pre-SHG occupation of members

Female Male Total % To Total

Wage labour 14 11 25 36

Agriculture 6 15 21 30

Allied activities 0 1 1 1

Traditional Craft 2 0 2 3

Others 17 4 21 30

Total 39 31 70 100

Post-SHG occupation of members

Female Male Total % To Total

Wage labour 6 4 10 14

Agriculture 13 17 30 43

Allied activities 1 1 2 3

Traditional Craft 2 1 3 4

Others 17 8 25 36

Total 39 31 70 100

Pre-SHG Income Member No. of members Upto 10000 >10000-25000 >25000 Average

income Female 39 11 13 15 18923 Male 31 10 19 2 14435 Total 70 21 32 17 16936 % To Total 100 30 46 24 Post-SHG Income Member No. of members Upto 10000 >10000-25000 >25000 Average

income Female 39 5 11 23 23333 Male 31 6 8 17 22032 Total 70 11 19 40 22757 % To Total 100 16 27 57

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7.6 Expenditure Pattern The increase in income in the Post-SHG period has improved the consumption level only. There is no change in the consumption pattern. Generally the level of consumption of essential requirement improves with increase in income. There was increase ranging from Rs. 200 to Rs. 400 in absolute terms in case of items, such as cloth, house and health contributing for quality of life. Consumption expenditure per year is Rs. 21983 in the Pre-SHG period. There is 26 percent increase (Rs. 27760) in the Post-SHG period. Food constitutes more than 60 percent of the total expenditure in both Pre and Post-SHG period. The higher consumption percentage in food item indicates that families were not able to meet the basic requirement of two square meals for the whole year. This shows there was acute poverty in Pre-SHG period. The share of debt has increased from 10 percent to 20 percent because of access to low interest loan from SHG. Few of the groups, who have availed credit more than three times have graduated to taking up economic activities, purchase of land, building of pucca house and opening of individual savings account in the bank. 7.7 Agency-wise Share of Borrowings The study proves that in Pre-SHG time money lenders accounted for a major source of borrowing (36 percent). The share of institutional credit in Pre-SHG period is nil. Post-SHG period shows complete shift in borrowing agency, making SHG as the major source of borrowing with 80 percent followed by the bank with 34 percent. Only 3 percent members have been found to borrow from the moneylender after joining SHG. The change is visible in the form of money lenders of the area reducing the rate of interest from 8-10 percent per month to 4-5 percent per month.

Share of Expenditure per year

Item Pre-SHG Post-SHG % Change

Amount (Average)

% Amount (Average)

%

Food 15902 72 17011 61 7

Cloth 1496 7 1877 7 25

House 793 4 1381 5 74

Education 660 3 925 3 40

Health 518 2 645 2 25

Festival 272 1 342 1 26

Debt 2224 10 5465 20 146

Other 118 1 114 0 -3

Total 21983 100 27760 100 26

Per capita Consumption annual 4228 - 5338 - -

Per capita Consumption monthly 352 - 445 - -

Agency wise borrowing

Item Pre-SHG Post-SHG

No. % To Total No. % To Total

Relative 5 7 0 0

Friend 1 1 1 1

Mahajan 25 36 2 3

Bank 0 0 24 34

SHG 0 0 56 80

Other 5 7 2 3

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7.8 Social Impact and Empowerment 7.8.1 Self-confidence The group formation brings out self-confidence and self-worth in Post-SHG period in the areas of leadership and hidden talents. This ensures respectful treatment from society as well as the family members. The most important thing is that the access to finance from the groups has given them advantage to meet not only financial crisis but also command over social and political issues. This has united them to come out to help their neighbours and others at the time of social and economic crisis. The help comes in the form of financial assistance for daughter’s marriage, medical treatment and education of children. The table below shows that the level of self-confidence in Post-SHG period has improved to 96 percent from 31 percent in Pre-SHG period.

Response for Self Confidence

Particulars Reported Response

Pre-SHG Post-SHG

No. % To Total No. % To Total

1. None 48 69 3 4

2. Self Confidence and Self Worth 17 24 2 3

3.Confidently Meet Financial Crisis - 0 0 0

4. Respectful Treatment from Family Members - 0 0 0

5. Comes out to Help members - 0 0 0

6.2+3 1 1 3 4

7.2+4 1 1 0 0

8. 2+5 1 1 1 1

9.2+3+4 - 0 11 16

10.2+3+4+5 2 3 50 71

Total 70 100 70 100

7.8.2 Decision Making Power The decision-making capacity of the SHG members has improved from 34 percent in Pre-SHG period to 99 percent in Post-SHG period. This has its impact in decision-making in household matters and social matters. It has also enabled the members to protest against social evils, such as drinking and domestic violence. The tremendous impact of SHG is in the form of increased mobility of the members. They get opportunity to visit banks, panchayats, to attend meetings and to interact with bank officers, public representatives and outsiders.

Response for Decision Making Power Particulars Reported Response Pre-SHG Post-SHG

No. % To Total

No. % To Total

1. No Decision Making Power 46 66 1 1 2. Joint Decision on purchase of household assets 13 19 2 3 3.Joint Decision on Social Matters 1 1 1 1 4. Protest against Social Evils 0 0 1 1 5. Increased Mobility 0 0 4 6 6.2+3 7 10 3 4 7.2+5 1 1 7 10 8. 2+3+4 2 3 0 9.2+3+5 0 0 17 24 10.2+4+5 0 0 1 1 11.3+4+5 0 0 1 1 12.2+3+4+5 0 0 32 46 Total 70 100 70 100

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Chapter VIII

Role of Branch Managers

8.1 Branch Managers as Change Agent The initiation of SHG is unlike any traditional scheme in banking sector. Much rests upon the discretion and attitude of the Branch Manager as no manual contains clear-cut instructions and guidelines that are universally effective in SHG business. It requires an innovative approach depending upon the nature of specific needs. The key role is of the Branch Manager. The branches having zero number of SHG turn into SHG branches with the initiative of the Branch Managers. The faith of the Branch Manager in SHG leads other staff taking SHG business as a mission. The Branch Manager is the pioneer of SHG movement in his branch. It is his bent of mind and faith that motivate other staff to work with the spirit of activist. In this sense Branch Manager is the real change agent in SHG movement. A study was made of the Branch Managers of three successful branches to measure the factors essential for a Branch Manager to mainstream SHG in the branch. In the scale of ten, 10 characteristics were measured to identify the factors responsible for SHG multiplication and business growth. The details of the study are given below-

Characteristics Name of the branch Panchra Sriniketan Illambazar Skill on concept, formation, linkage, motivation etc. 9 10 9 Remuneration 8 9 7 Functions- Formation, linkage, recovery, awareness, marketing etc. 5 7 5 Accepting Management decision 10 10 10 Status in the bank for forming SHG 9 9 9 Physical labour 6 7 8 Influential- able to influence management decisions 8 9 6 Sense of Identity with SHGs 10 10 10 Individual contribution 4 6 4 Satisfaction level 8 9 8 Total 77** 86** 76**

** (The marking has been done by the Branch Managers themselves.) The above characteristics are essential for a Branch Manager for introduction and mainstreaming of SHG business. The above three Branch Managers have played pivotal role in pioneering SHG movement in their branches. All have put 10 marks for the sense of identity with SHGs. It proves that the sense of social responsibility along with

concern for the branch profitability is the key factor for the success of SHG movement. All the three have put 9 marks for status in the bank for forming SHGs. It indicates that bank’s policy is to encourage SHG movement and motivate the officers to introduce and mainstream SHG business in their branches. The management is honouring and accepting the views and suggestions of successful Branch Managers, which can help in replicating the success of one branch in other branches. The Branch Managers/ officers having much

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experience in SHG formation and linkage are posted in the branches where SHG business is low. The successful Branch Manager of Panchra branch, an ideal one in SHG business, has been transferred to Mohammad Bazar branch where SHG business offers tremendous potential. The marking methodology adopted in this study can help the bank to select right person for right purpose ensuring success within expected span of time. The Branch Managers scoring more than 60 may be considered for posting in the branches offering potential for SHG business. 8.2 Economic Profit vs. Inner Satisfaction The versus philosophy gives a distinct idea about the process of satisfaction level of a Branch Manager over a period of time, taking into account various indicators usually considered to satisfy a public servant. The economic satisfaction in an employed staff may consist of remuneration, financial incentives, promotions, reimbursement of a particular acts performed etc. The inner satisfaction relates to emotional satisfaction of an individual reflected in the form of love and affection shown to him by the society, contributions made for the socially disadvantaged sections of the society etc. This may be with awards in the form of recognitions/ promotions or may be with any monetary/ economic benefits. The above versus philosophy was test checked in three branches having different remuneration pattern and it was observed that it is the drive/ recognition of the people that has propelled the Branch Managers to take SHG business to a higher level. The Branch Managers having zeal and aptitude may be posted in the potential SHG business branches identified so as to reap good investment for the future profitability of the Bank. 8.3 Time and Stress management SHG is physically demanding activity for the Branch Managers. The Branch Managers have to visit the villages beyond the office hours for the formation and the sensitization of SHGs. Sometimes they have to attend the meetings of the groups. The demand for physical presence leads to shortage of time for family whereas the increased work pressure because of SHG business causes much stress during office hours. The successful Branch Managers interviewed for the study purpose admitted the fact that SHG is much labour demanding work. Initially it is more difficult as SHG members are basically illiterate or just neo-literate people for whom banking is something strange. It makes the task of a Branch Manager more difficult. The greater number of SHGs also create problems for the Branch Managers in managing the groups. The maintenance of balance becomes a challenge for the Branch Managers. The Branch Managers already suffering from diseases, such as blood pressure, find it more difficult to maintain their health. The inner satisfaction involved in SHG work helps in keeping the morale of the Branch Managers high. The role of family members is much crucial. The understanding of the family members about the SHG concept and nature of work can make the task easy for the Branch Managers. ===============================================================

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Chapter IX

Major Findings and Possibility of Replication

The SHGs contribute in improving the overall performance of the bank in

the form of increasing recovery of all loans, reduction of NPA, increase in advance and increase in low cost deposit. (See Para. 3.4)

With the increase in the quantum of savings at individual members level,

it is imperative to provide passbook to each individual member so that trust and confidence is built up in the Group. (See Para.3.6)

Considering the large number of groups savings linked, the average credit

linkage percentage at 40.8 is low. The bank has to make efforts to credit link more groups. (See Para. 3.7)

SHG alone has contributed an interest income of Rs.14 lakh in overall

bank profit of Rs.75 lakh in the year 2003-04. SHG turnover has also helped the bank in utilizing surplus deposit for lending to SHGs. The gap between loan disbursed and loan outstanding is higher in the year 2003-04. It shows the higher level of SHG turnover. (See Para. 3.8)

Due to huge business potential of SHG business in future, a separate

accounting head for assessing income and expenditure of SHGs may be created. (See Para. 3.8)

The study proves that SHG is a commercial proposition. The banks may

propagate SHG as a loan product. The profitability analysis of the branches has revealed that SHGs start giving net interest income to the bank in 3 to 4 years. The proportionate staff cost involved in SHG business can also be recovered by the net income generated from SHG. (See Para. 3.8)

The Women Development Cell (WDC) is making efforts to create markets

for products prepared by women through its SHG network. The bank has issued a circular all its branches advising the staff members to purchase the products prepared by women SHG members. (See Para. 3.9 ii)

The bank is using Farmers’ Clubs as an alternative to NGO and it has

shown encouraging results. In Panchra Branch Farmer’ Clubsnamed Mukti Nagar Krishak Sangh has adopted two villages and all the villagers have been brought under the umbrella of SHGs. This Farmers’ Clubs is also taking care of marketing of farm produce. (See Para 3.9 iii)

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The management information system is the sine quo non of successful implementation of any programme. The bank may evolve a proper management information system in a computer environment so that SHG as a profitable business proposition can be internalized. (See Para. 3.9 vi)

Through proper monitoring and awareness creation, as observed during

the study, the present credit flow can be three times more in a year. Each branch may have details of SHG, basic data of each SHG – potential SHG for higher credit, SHGs which credit will continue at present level, new SHGs to be credit linked and new SHGs that will be formed. This data may be consolidated at head office level and different strategies for intervention at branch level and group level have to be explored for business growth. (See Para. 3.9 vi)

There are around 14 branches, which have SHGs of less than 10. The staff

of those branches needs immediate training. The Branch Managers and Field Officers having reservations about SHGs may be given motivational training so as to bring them to the mainstream of SHG business. The staff that is expected to enhance credit of higher amount to SHGs may be given training on micro enterprises, marketing of products and precaution to be taken. The Group members may also be given on various aspects of training such as book keeping, accounting etc., to handle larger inflow and out flow of money. (See Para. 3.9 vii)

The bank is one of the few banks, which have clearly spelt out the

sanctioning power of the Branch Manager in case of micro finance. The bank has given freedom to the Branch Manager to finance any amount to the SHGs subject to the proportionate linkage of savings. (See Para. 3.9 ix)

It is expected that micro credit innovation is for the poorest of the poor.

There should be clear distinction between SHG and “Group” financing. In the name of micro finance, trader or higher income members may not be allowed to avail finance under SHG programme. The power for group financing should be restricted and fixed as per the norms followed in case of other loans. (See Para. 3.9 ix)

The bank branches may prepare SHG projection on scientific line as per

the suggested methodology for increasing advances so that branches move towards the profitability/ viability. (See Para.4.2.2)

The Farmers’ Clubs organize recovery camps in which recovery of loans

is celebrated as a festival. (See Para. 4.2.4)

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The bank has gone beyond the fixed criterion to generate trust and confidence among the villagers that MGB is always behind them. They lent individual loans to the villagers without any collateral security to enable them to come out of the clutches of the moneylenders. They lent to some defaulter members also who were honestly eager to come to the bank through SHG mode. (See Para. 4.2.4)

The bank innovated a new idea of adoption of two or three villages in a

particular area by taking the panchayat people in confidence so that the success achieved through SHG may be replicated in other villages also. The experiment emerged successful and demonstration effect contributed in expanding SHG business and developing banking habit among the villagers. (See Para. 4.2.5)

The effective interest margin is highest in case of SHG loan as the

recovery of SHG loan is 100 percent. The recovery performance of loan directly affects the risk cost. The volume of business also constitutes around 7 percent of the total loan turnover. To give more impetus to volume the bank may rationalise the interest rate. It may be reduced to 10 percent. The bank may also fix the rate of interest at 9 percent for the amount above Rs.2 lakh in case of SHGs. (See Para. 5.2)

Some of the SHGs of more than four years old are charging different rate

of interest depending upon the amount of loan. They charge interest at the rate of 2 percent per month against the amount below Rs.25000 and above that 1.5 percent per month. (See Para.5.2)

The group itself debars the willful defaulter member from taking finance.

The group security and peer pressure are the basic factors responsible for almost 100 percent recovery of SHG loan. (See Para.5.3.1)

The bank is following the practice of providing loans to SHGs based on

their potential/ requirement than on any fixed formula. For uniformity and more credit offtake, it is encouraging to provide credit based on following criterion - four times of corpus fund + previous credit off take by the

group. This innovation has sustained the interest of the group for taking up economic activities and repayment of present/ old dues at a shorter span of time. This also induced the defaulter borrowers to repay their dues and come to banking fold through SHG to have a life long banking relationship. (See Para.5.3.2)

SHG business turns around the staff from sleepy, indifferent, mechanical

and detached banker into an active, vibrant and humane banker. (See Para.5.5)

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The SHGs help in expanding the relationship network of the bank; an

essentiality in today’s banking environment. The bank gets free out sourcing agents in form of Farmers’ Clubs and SHG members. (See Para.5.6)

SHGs provide golden opportunity to the bank to innovate and experiment

new ideas, which are not available in any other product. This opportunity if utilized certainly helps the bank to turn around. (See Para.5.6)

The study reveals that the benefits obtained from the group are stabilized

in about two years. The inclination of the groups towards social and other activities starts during third year when they attain maturity. (See Para.6.3)

18-35 age range is ideal for SHGs. (See Para.6.5)

Caste factor does not matter much for the homogeneity of group. The

groups with members from upper caste and schedule caste are affinity groups with no sign of friction. The groups with members form two religions i.e. Hindu and Muslim are also affinity groups. (See Para 6.6)

The major reason of women switching over from wage labour to

agriculture is increase in family income after SHG. The increased family income first makes the female members to switch over. They prefer to work in their own field because of the sense of honour and dignity. (See Para.6.9)

Monthly saving by the members of the SHGs varies from Rs.20 per

month to Rs.300 per month. Majority of the groups (78 percent) are saving between Rs.30 to Rs.50 per member per month. (See Para.6.10)

The average saving of individual female, male and mixed group member

is Rs. 37, Rs. 82 and Rs. 43 per month respectively. (See Para.6.10)

The average monthly saving is Rs. 373, Rs.878 and Rs. 460 in case of female, male and mixed groups respectively. (See Para.6.10)

The interest portion of the total corpus constitutes 23, 21and 38 percent in

case of female, male and mixed groups respectively which is very high. The quick rotation of fund has contributed in increasing the interest portion. The higher interest portion has enabled the groups to avail bigger amount of credit. (See Para.6.11)

The interest rate charged to the members for the lending out of their own

resources and borrowed from the bank is same in all cases except two

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cases. internal lending was same with that of bank borrowing except two cases. (See Para.6.12)

The majority of the groups charge interest at the rate of 24 percent. (See

Para.6.12)

The average off take of first credit linkage of female groups is Rs.15040, male groups Rs.30000 and mixed groups Rs.15333. The overall average is Rs.18340. (See Para.6.13)

The average amount of second credit off take is Rs.28423, Rs.42833 and

Rs.25666 in case of female, male and mixed groups respectively. The overall average is Rs. 30263. (See Para 6.14)

The bank has credit linked some of the groups upto 6 times. Around 18

percent of the samples groups have been credit linked more than four times. ( See Para.6.15)

98 percent members of the sample SHGs are aware of the purpose of

group formation. (See Para.6.18)

73 percent members of the sample SHGs are aware of the laws and byelaws of the SHGs. (See Para.6.19)

51 percent of total sample SHG members are aware of record

maintenance. (See Para.6.20)

85 percent members of the sample SHGs are aware of the rate of interest and repayment of loans. (See Para.6.21)

The loan availed from SHGs has contributed in expansion of same

activities leading to reduction in percentage of wage labour. (See Para.7.4)

The success of SHG movement depends much on the faith and bent of

mind of the Branch Managers. (See Para.8.1)

The Branch Managers scoring more than 60 marks may be considered for posting in branches offering potential for SHG business. (See Para.8.1)

SHG cannot be launched as any other ordinary banking scheme. It needs

to be taken, as a movement in which involvement of each and every member from messenger to highest authority is must for its success. (See Para.8.1)

The beginning of SHG is much difficult and sometimes seems impossible also but once initial block is removed stream starts flowing.

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Chapter X A few warning signals

It has been observed during the study that groups with monthly savings of Rs. 300 to Rs. 1000 per member per month are also dealt under SHGs. There may be clear-cut demarcation between SHG financing and group financing.

Only savings and deposits cannot keep the groups active and sustainable

for long period of time. The feeling of frustration and hopelessness has been seen among SHG members regarding expected economic benefit from SHGs. Such groups need proper guidance for taking up remunerative economic activities.

The need for providing orientation as well as skill based training to the

groups and members is seriously felt. The dominance of Farmers’ Clubs has been observed in some cases. They

should not dominate the normal functioning of the groups, such as maintenance of books and accounts, depositing of money in the branches etc.

The attitude of some of the officers and staffs is still not in conformity

with that of the management in respect of SHG business. The Branch Managers and Field Officers should be given frequent trainings on various aspects of SHG and microFinance.

The SHG movement requires ground level work for its longevity and

sustainability. The theory of replication does help in the wide spread of the movement. The replication should not be mistaken as a marketing stunt. It may weaken the root of the movement.

BY: AMITA TRIPATHI, ASSISTANT MANAGER