SELF HELP GROUPS PERFORMANCE IN INDIA

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1 INTRODUCTION SELF HELP GROUPS PERFORMANCE IN INDIA DR. N. SREEDHAR* *Department of Economics, Rayalaseema University, Kurnool, Andhra Pradesh, India. In most South-Asian countries, the status of women is low and their socio-economic conditions are much below than that of men. The flow of financial assistance to them is too marginal to enable them to cross the poverty line. Therefore a need to create a grassroot organizational base to enable women to come together to analyse their issues and problems themselves, and to fulfill their needs was strongly advocated. In fact, experience shows that some of the successful group-based participatory programmes have made significant improvement in the conditions of poor women. The group based approach not only enables the poor to accumulate capital by way of small savings but also helps them to get access to formal credit facilities and mobilization of savings and pursuit of group enterprise activities. Pinnacle Research Journals 8 Today the biggest challenges both the developed and developing countries facing are poverty, unemployment, and population explosion. There are a number of possible routes to promote of employment. Self-help groups are one of them. India has a population of million with 742 million living in rural areas. About 40 percent of the rural population and percent of the urban population are estimated to be living below the poverty line. Most of them are engaged in agriculture earnings which are not enough to meet the basic necessities. The rural and urban have been dependent on money lenders for their financial needs, such as marriage in the family, illness or other emergency needs, as the formal credit system of banks, by and large is beyond the rich or the poor. This provides an opportunity for money lenders to exploit the situation. The activities of SHG have emerged as sustainable to the poor at their door step in a simple and flexible manner. Of late, however, the planners and policy makers have been eagerly searching for certain alternatives to strengthen women to make women economically, socially and politically growth. Empowerment of women has been recognized as a central issue in elevating the status of women. The participatory approach is a vital issue in development policies and programmes for women. Micro finance programmes are currently being promoted as a generic alternative / key strategy for simultaneously addressing both poverty alleviation and women empowerment. Increasing access to credit for the poor has always remained at the core of Indian planning in its fight against poverty. The assumption behind expanding outreach of financial services, mainly credit was that the welfare costs of exclusion from the banking sector, especially for rural poor are very high. Starting in late 1960s it saw nationalization of existing private commercial banks, massive expansion of branch network in rural areas, mandatory directed credit to priority sectors of the economy, subsidized rates of interest and creation of a new set of rural banks at district level and an Apex bank for Agriculture and Rural Development

2 (NABARD) at National level. These measures resulted in impressive gains in rural outreach and volume of credit. These impressive gains were not without a cost. Government interventions through directed credit state owned Rural Financial Institutions (RFI) and subsidized interest rates increased the tolerance for loan defaults. The problem at the start of 1990 looked two fold, the institutional structure was neither profitable in rural lending nor was it serving the needs of the poorest. In short, it had created a structure, quantitatively impressive but qualitatively weak. Micro credit emergence in India has to be seen in this backdrop for a better appreciation of current paradigm. Successful microfinance interventions across the world especially in Asia and in parts of India by NGO provided further impetus. In this backdrop, NABARD s search for alternative models of reaching the rural poor brought the existence of informal groups of poor to the fore. It was realized that the poor tended to come together in a variety of informal ways for pooling their savings and dispensing small and unsecured loans at varying costs to group members on the basis of need. NABARD designed the concept of linking these groups with banks to overcome the financial constraint. The programme has come a long way since 1992 passing through stages of pilot ( ), mainstreaming ( ) and expansion phase (1998 onwards) and emerged as the world s biggest microfinance programme in terms of outreach, covering 1.6 million groups as on March,2005. Pinnacle Research Journals 9 In the Development paradigm, micro-finance has evolved as a need-based policy and programme to cater to the so far neglected target groups (women, poor, rural deprived etc.,). Its evolution is based on the concern of all developing countries for empowerment of the poor and the alleviation of poverty. Micro-finance programmes have, in the recent past become one of the more promising ways to use scarce development funds to achieve the objective of poverty alleviation. The basic idea of micro-finance is simple; the poor people are provided access to financial services, including credit, they may very well be able to start or expand a micro enterprise that will allow them to break out of poverty. Finally, the access to credit and the opportunity to begin or to expand a micro enterprise may be empowering to the poor. Thus microfinance has become one of the most effective interventions for economic empowerment of the poor. The aim of the present paper is (i) (ii) To analyse the SHGs performance in India To show Regional Disparities of SHGs in India This paper is mainly based on the secondary data. The secon dary data has been drown from various sources. NABARD Statistical reports,government of India Reports, Reserve Bank of India(RBI) Reports,Journas,Books,ect. THE CONCEPT OF SELF-HELP GROUPS The Self-Help Group (SHG) is a small voluntary association of poor people preferably from the same socio economic background. It is for the people, by the people and of the people. It focuses on the weaker sections particularly women for their social defense. SHGs have

3 potential in crediting awareness on day-to-day affairs, promoting in savings habit, developing self and community assets, increasing the income level, increasing the social power etc. The concept of SHGs generates confidence and self security among the people involved. Self help group (SHGs) formed in rural India consisting usually fifteen to twenty members hailing from a certain locality with similar socio - economic backgrounds. The unregistered groups operate on the principles of mutual trust, co-operation and interdependence. Preference in membership is offered to the poorest of the poor, handicapped, windowed, deserted and dalits. The leaders are selected from members of the group. The SHGs work through a process of social mobilization to set up a successful enterprise to earn a sustainable living that helps the beneficiaries to lift themselves above the poverty line. ORIGION OF SHGS The origin of SHGs can be traced to 1976, when Prof. Mohammed Yunus of Bangladesh started women s group in Bangladesh. He began experimenting with micro-credit and women SHGs. The strategy made a quiet revolution in Bangladesh ;in poverty eradication by empowering the poor women. This group later developed into the Bangladesh Grameena Bank. In India, the pioneer in this field was Self Employed Women s Association (SEWA). Although it started as a trade union for women in the unorganized sector almost 40 years ago, today it boasts of running the first women s bank in the country. In southern India, organizations like Pradan, Myrada, Aseefa, Malar etc., have entered this rural credit system. All these are high profile NGOs getting vast funds from the imperialist counties. NABARD which came into existence in 1981 refinances the banks, which in turn lends to the SHGs. For this vast sums are being spent by the imperialists and their institutions like the World Bank, Asian Development Bank etc. SHG IS A TOOL TO EMPOWER WOMEN Pinnacle Research Journals 10 In recent years, women empowerment has become a subject of great concern for the nations all over the world especially in poor and developing countries. The progress of any nation is inevitably linked with social and economic plight of women of the particular country. Empowerment means emancipation of women in harmonious co-existence with men in the society. Power provides social recognition, dignity, prosperity, property, value and security; hence empowerment has acquired a considerable importance. Empowerment as a concept was introduced at the International Women s Conference at Nairobi in In the conference empowerment is defined as A redistribution of social power and control of resources in favour of women. Empowerment is not only essential in political field; but also it is a process having personal, economical, social, and political dimensions with personal empowerment. Empowerment by the way of participation in SHG can bring enviable changes and enhancement in the standard of living of women in poor and developing nations. Self Help Group (SHG) is a process by which a group of women with common objectives are facilitated to come together voluntarily to participate in the developmental activities like savings, credit and income generation and thereby ensuring economic independence. A landmark

4 in the history of women s development is the emergence of the concept of Empowerment of. The government of India declared the year 2001 as the Year of Women s Empowerment. When a women becomes a member of SHG, her sense of public participation, enlarges the horizon of social activities, high self-esteem, self-respect and fulfillment in life expands. It enhances the status of women as participants, decision makers and beneficiaries in the democratic, economic, social and cultural spheres of life. Thus undoubtedly SHG can be an effective tool to empower women socially and economically. SHGs are formed for the purpose of empowerment of women. SHG-BANK LINKAGE PROGRAMME Pinnacle Research Journals 11 SHG-Bank linkage programme was started with the objective of extending the outreach of banking to the poor, who mainly comprise the marginal farmers, landless laborers, artisans and craftsmen and others engaged in small businesses such as hawking and vending. Looking into the efficacies of SHG-bank linkages as the potential tool for poverty alleviation. The SHG or Self-help groups are formed extensively with the help of NGOs. SHG bank linkage model is the indigenous model of micro credit that has evolved in India. At present there are 3000 plus NGOs with the SHG-bank linkage programme and other models of bank-micro financial intermediary linkages by NABARD. Under the SHG-Bank Linkage Programme there are broadly three models of credit linkage of SHGs with banks. However the underlying design feature in all remains the same. Its design built on combining the collective wisdom of the poor, the organizational capabilities of the social intermediary and the financial strength of the Banks. The SHG-bank linkage programme covers over 14 lakh groups, involving a cumulative credit flow of Rs.6,300 corers at the end of March,2005 from the banking system. DETAILS OF SHG BANK LINKAGE IN INDIA The total cumulative amount released by NABARD agencies to SHG linkage programme vary among the NABARD agencies. Providing informal finance through formal system is the significant step taken by NABARD for getting easy access to finance by the poor in India. SHG BANK LINKAGE IN INDIA Year No. of SHG Linkage Cumulative Linkage Growth Rate ,61,478 4,61, ,55,882 7,17,360 55% ,61,731 10,79,091 50% ,39,385 16,18,476 50% ,20,109 22,38,565 38% ,86,408 29,24,973 31% ,52,992 34,77,965 19% Source: Compiled from NABARD Database

5 The above table reveals the over all cumulative bank linkage made in India for provision of micro finance to the poor and needy. Cursory look at the figures shows that an average 44 percent growth is seen in the attempt made to reduce poverty through bank linkage as proposed by NABARD. Over the year, there is a substantial reduction in the growth of linkage provided. Since its inception it has shown a consistency in its growth, but later on it started to trickle down and in the recent past it has come down to 19 percent. This decline in growth may be due to the saturation point or slack in the implementation. The first theory or saturation may not be true as still poverty is pervasive and unemployment is widely spread in India. This decrease may be due to the slackening attitude of executives or policy thrust could have shifted to some other area of importance. The SHG-Bank linkage programme helped 167 lakh (45.21%) household members up to then during the it was only 130 lalkh (22.41%) household members are benefited through the SHG-Bank linkage programme. The linkage programme helps the poor people to get micro-credit from formal financial institution to improve their standard of living and economic conditions. DISPARITIES IN THE SHG-BANK LINKAGE PROGRAMME Notwithstanding the remarkable progress, geographically there has been a skewed development of SHG-Bank linkage programme in India. There is wide regional disparity both in terms of the spread of SHGs linked to banks and cumulative bank loans disbursed under the programme. REGION WISE PROGRESS OF SHG BANK LINKAGE PROGRAMME AS ON 31 ST MARCH, 2008 Pinnacle Research Journals 12 Regions No. of SHGs Loan to SHGs Average Loan for SHG No. of SHGs Loan to SHGs Share (%) in Total SHGs per Lakh of Population Northern 2,30, , North Eastern 1,19, , Eastern 6,72, , Central 4,05, , Western 3,74, , Southern 16,74,811 15,896 94, All India 34,77,965 22,268 64, Source: Compiled from NABARD Data Base

6 In March 2008, while the Southern Region accounted for 48.2 percent of the total SHGs, the share of North-Eastern Region was just 3.4 percent. In terms of share in the total bank loans to SHGs the region-wise differential gets further magnified. While the Southern Region accounted for 71.4 percent of the total loans to SHGs, the share of North-Eastern Region was just about 1.5 percent. For all regions excluding Southern Region, even though the share of total SHGs linked to banks was close to 51.8 percent, their share in total loans to SHGs was only 28.6 percent implying that adequate credit is not being routed through SHGs in these regions. As the regions vary in geographical area and population, the number of SHGs is normalized by the population of the region and SHG per lakh population has been taken as a better indicator of SHG spread in the respective regions. The number of SHGs per lakh population for the Southern Region is 703, which is more than double the average at all India(310) and almost five times of the Central Region (142). In addition to the inter-regional disparity, there is wider interregional disparity among the constituent States in SHG spread. The progress of SHG-Bank linkage programme has not been homogeneous in any region. In the Southern Region, where the programme has been very successful, SHGs per lakh population varied between 891 in Andhra Predesh and 435 in Kerala during March In the North-Eastern region, the major share was accounted for by Assam with 34.1 percent of the total SHGs while the rest of the six states in the region had a negligible share in the total SHGs. Similarly, Rajasthan and Himachal Pradesh were distinctly ahead in the Northern Region in terms of spread of SHGs. In the Eastern Region, SHG spread in Orissa was comparable with the Southern States. There is a clear evidence of the fact that the SHG movement in India has spread to other regions/states, though not to the same extent as in the Southern States. However, a major concern remains the scale of finance in the non-southern regions. The average loan per SHG in this regions continues to be much lower than that in the Southern Region. Further progress in the SHG-Bank linkage programme needs to reckon these regional variations in the spread of the programme. ROLE OF SHG IN POVERTY ALLEVIATION Pinnacle Research Journals 13 Women s SHG and micro credit organizations are being seen as roads to poverty alleviation and emancipation of women. The role of Self-help group in poverty alleviation and empowerment of the weaker sections is gaining increasing recognition in many developing countries. The credit linkage programme covered 523 districts in all states and union Territories by March 31, The most heartening feature of the programme has been the active participation of women accounting for 90 percent of the total SHGs and a strong repayment performance of over 95 percent. The SHGs are social development strategy in India. An ILO study finds that men than to spend 60 percent of their income in their home and 40 percent on themselves. Whereas a women spends 90 percent of her income on her family and only 10 percent on herself. Several surveys reveal the percentage of repayment of loans in the case of women is higher than the men. Now the two concepts namely SHG and Micro Finance are aimed to focus on women empowerment where the Podupulakshmi strategy is an effective instrument to achieve the goal and is helpful in the eradication of poverty. Distribution of poverty during , the all India poverty ratio stood at about 27.6 percent poverty ratio to 100 percent of total poor in India. While the Northern region 15.7 percent to 7.4 proportion of total poor, North-Eastern 19.2 percent to 2.6 percent of poor,

7 Southern 19.8 percent to 15.3 proportion of total poor, and western region 25.8 percent to 13.6 proportion of total poor had lower than the all India poverty ratio, Central 35 percent to 32.1 proportion of poor, and Eastern Region 36.2 percent of poverty ratio to 29 proportion of total poor had higher poverty rations than at the all India level. The present distribution of the SHG- Bank linkage programme does not appear to have taken cognizance of the extent of poverty. In the Eastern and central Region, the proportion of total poor in India is significantly higher than the proportion of SHGs linked to banks in these regions. PROBLEMS OF SHG Lack of financial support, lack of education, lack of good management, lack of training and motivation programmes and poor family, support to the women. Pass books are in English language. Most of this SHG members are not literate in English language and hence are unable to read and understand the pass books. Marketing support is not provided by the bank to market their products through bank s marketing outlets. SUGGESTIONS 1. The Government and NGOs have to take necessary steps to create awareness in the minds of women especially the women who are crossing 35 years of age. 2. The government has to formulate the strategies and policies for the improvement of literacy rate. Pinnacle Research Journals A large number of self help group members are using subsidy for non-productive products like, purchase of jewellary, household expenses, marriage festivals etc. The banks and financial institutions have implement strict rules and regulations regarding the use for the purpose of productive activities only. 4. The members of the SHG should be more active to mobilize their savings by group action. Meetings and seminars may be organized where the members will get a chance to exchange their views. 5. The self help groups are a new innovation in the field of rural development to finance the rural women and there by helping to transform rural economy by improving economic status of each and every house hold in the rural areas. CONCLUSION In this twenty-first century, the society must take an active people centered and growthoriented poverty alleviation strategy. The self-help groups will play a vital role in such strategy. The system of SHG facilitates its members to improve their financial position. The government should take effective steps in increasing the pace of development through SHG. The SHG-Bank Linkages are a benchmark in women s empowerment and socio-economic development of

8 women at the village level. SHGs contributed significantly to the development of women entrepreneurs and also for overall development of the economy. Poverty alleviation has always been the first concern of the policy makers in India. Because more than about 24% of population is below the poverty line. To promote balanced development and reduce the inequalities, the concept of Micro Finance has been recognized as comprehensive and viable approach in recent times. The Government and the policy makers have recently evolved the bank Self Help Groups linkage programme to eradicate poverty and increase income of the poor people. Women are very important segment in development at local to global levels. Economic independence and education of women will go a long way in attaining self- reliance for women. Real change will come when women are treated on par with men and give a equal opportunities. When that happens, India will be able to harness its women power and emerge as a respected nation. REFERENCES 1. Southern Economist, Volume 49, No. 18, January 15, Southern Economist, Volume 50, No. 3, June1, Raghav Gaiha and Mani Arul Nandhi, July 2006, Micro finance, self help gropus and empowerment in Maharastra. 4. Dinakar Rao K. Women s development: Linkages for credit, New Delhi. 5. Promotion of self help groups, bank linkage programme in India Malcom Harper, pub: NABARD, Mumbai, Pinnacle Research Journals Srinivasan, Girija & Satish (1999), Impact of SHG lending on the profitability of branches. Rural Bankar, Issue No. 21, P Holcombe, Susoon, Managing to empower the grameena banks experience of poverty alleviation : Oxford University press, Dhaka, NABARD, NABARD and Micro Finance Mumbai, NABARD (1989), Studies of self help groups of the rural poor, Bombay. 10. NABARD : Progress of SHG Bank Linkage in India. 11. Bansal, Hema 2003, SHG: Bank Linkage programme in India: an overview journal of micro finance, Volume No. 5, November gurumoorthy, T.R. 2000: Self help groups empower rural women, Kurukshetra, Pg. No