Sa-Dhan Newsletter Volume 5 Issue 2
Operational Costs of Delivering Microfinance : Banker's Perspectives
Luckily for the banking industry in the country and the
activities, government subsidies, etc., have sometimes
millions of poor, NABARD, having watched the above
disrupted even well running groups. Thirdly, the income
sporadic and isolated but highly successful efforts at
generating activities of most individuals or even groups
poverty alleviation, launched a programme known as
have not progressed beyond the very rudimentary activities,
"Bank-SHG Linkage programme". Initially, the NGOs were
such as taking care of milch cows, petty shops, etc. These
encouraged to form, organise and develop homogenous
activities have helped the individuals to earn only marginal
self-help groups (SHGs) of people, each group comprising
surplus. They are unable to progress along the value chain
not more than 20 people. NABARD and RBI persuaded
of more complex activities which would enable them to
public sector banks, regional rural banks and agricultural
pierce through the glass ceiling of poverty line permanently.
co-operative banks to open savings bank accounts for these
groups. Norms were laid down for measuring the progress
The NGOs no doubt have been the prime movers in the
of the groups. The banks were encouraged to lend on a
formation, nurturing and culturisation of SHGs. However,
graded scale to the groups after certain period of maturation.
most NGOs show no inclination to withdraw and allow
The amounts lent went to augment the resources of the
SHGs to stand on their own legs. Some are seen to have
groups for lending to the individual members of the groups
vested interest in controlling not only the SHGs but also
on terms determined by the groups themselves. The RBI,
the district-level federation of the SHGs as the savings,
NABARD and other banks have shown considerable
financing and economic activity levels increases.
inventiveness and openness to experimentation. As a result,
the Bank SHG Linkage Programme has progressed from
The government is trying to copy and transplant this model
very small beginnings to impressive size, perhaps, one of
for implementing its employment-oriented/poverty alleviation
the biggest mF programmes in the world.
programmes such as Prime Minister Rozgar Yojana (PMRY),
Swarna Gram Swarozgar Yojana (SGSY), etc. In a well-
BANK SHG LINKAGE PROGRAMME
intentioned effort it is directing the government officials at
Position as on 31-03-2003
the block levels to form groups. It also provides subsidies
of various kinds. While the idea appears to be adopted from
No. of participating banks
504
a successful model, in reality the results in most states
No. of participating branches
31,000
have been counterproductive. Because when the new
No. of SHG linked
850,000
groups get subsidy, the old groups formed under Bank-
SHG Linkage programme are breaking down in some
No. of members
12 million
places. The groups formed through the efforts of government
Total borrowings
Rs 28 billion
officials, who do not have any special training in social
work, are mere collection of individuals without an identity
Apart from the progress in quantitative terms, certain
of purpose. More often than not, people come together to
qualitative achievements need enumeration.
collect the subsidy.
They are,
Against the above backdrop, the banking industry has
a.
These groups known as NABARD GROUPS or Bank-
exhibited an admixture of pursuing the Bank-SHG Linkage
SHG GROUPS have revived and strengthened credit
Programme with some interest, curiosity and enthusiasm
discipline and culture; the bad debts are insignificant.
and complying mechanically with the directives in respect
b. A few studies have revealed that the programme has
of government programmes of mF.
had positive impact on the rate of interest charged
by money lenders.
Secondly, even though the total sum involved in mF from
c.
There has been improvement in the status of members
the public sector banks is substantial, in relation to its total
of the group, particularly women, within the family
lendable resources, the sum is really minuscule. Therefore,
and amongst the society.
the management looks at it with benign curiosity as an
d. Though poverty eradication still remains a distant goal,
image building exercise to organisations that are caring,
there has been significant alleviation of hardship.
socially concerned and committed to poverty eradication.
e.
The movement has begun to take roots across the
Consequently, stakeholders large banks treat mF as one
length and breadth of the country.
more line of activity and nothing more and nothing less.
Post-financial sector reform, where banks have to show
At the same time it is more important to remind all
greater concern for profits, profitability, financial soundness,
stakeholders interested in orderly growth of mF in the
quality of assets, return on total assets, etc. Personal
country on the limitations and certain negative developments,
banking, housing finance, credit cards, commercial advances,
which if not corrected at this stage are likely to cause
project finance, etc., have come to occupy their
considerable damage to the programme.
consciousness, rather than mF. The attitude is dictated by
the size of mF and the contribution it can make to the
The limitations can be identified from different stake
bottom line. This is not to say that the banks are not
holders' point of view; viz., the SHGs, the NGOs, the banking
interested in mF but only to emphasise by nature of things,
industry and the government and policy planners.
mF cannot receive the same strategic importance for the
managements of banks as consumer finance and commercial
The SHGs by and large stay healthy as long as they remain
loans.
tied to the NGOs. Outside influences such as political
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