The Hindu Business Line : SHGs growing on `weak foundation'

Healthy balance
Mr Reddy said there was a need for a healthy environment, in which a balance is struck between the interest rates of MFIs, subsidy from the Government to SHGs and a mechanism of `best practises' is evolved.

Hyderabad , April 7

Though, the self-help groups (SHGs), number over six lakhs, and approximately Rs 3,500 crore of funds are handled by them in Andhra Pradesh, the basic foundation of the movement is still a bit weak for it to be totally sustainable.

Mr C.S. Reddy, Chief Executive Officer of the Mahila Abhivruddhi Society, Andhra Pradesh (APMAS), felt that efforts to strengthen the movement, which have been under way, needs to be accelerated.

For example, a State-level database on memberships, savings, credits, demand collections, balances, portfolio etc. on the SHGs is still not available. Most numbers that get into public domain are guesstimates only, he told Business Line.

Another problem that our studies have shown is a steady drop in loan repayment rates over the past five years. From the highly impressive 98 per cent repayment, the figure is now hovering around 90-92 per cent among SHGs, Mr Reddy said.

During fiscal 2005-06, nationalised banks, regional rural banks (RRBs), Community Investment Fund of World Bank etc. provided up to Rs 1,700 crore support.

Transformation

The big change in the over two decade long movement is the transformation of the SHGs from simple savings approach to livelihood to emerging as an economic force.

The SHGs are estimated to be handling around Rs 2,000 crore of external funds while their own mobilisation would be of the order of Rs 1,500 crore. About 7 million women are involved at present.

While the movement has got universalised in Andhra Pradesh (every village there are SHGs), it is yet to get broadbased in several other States. Interestingly, in Andhra Pradesh 70-90 per cent of the poor and poorest among them have been mobilised through the SHGs, he said. Ninety per cent of these are also bank linked.

SHG-Bank linkage

As the SHGs have evolved from single entities to networked groups, clusters and federations, the facilitation for lending has become easier. For example Federation of SHGs are linked to banks like Small Industries Development Bank of India. Giving loans to clusters of SHGs or village-level Federation of SHGs is becoming the norm.

While SHG-Bank linkage is the dominant form of micro-finance, Micro Finance Institutes (MFIs), NGO MFIs and NGO promoted mutually aided co-operative societies (MACS) are engaged in micro-finance in the State. These offer loans up to Rs 1,100 crore to about 26 lakh members.

Mr Reddy said there was a need for a healthy environment, in which a balance is struck between the interest rates of MFIs, subsidy from the Government to SHGs and a mechanism of `best practises' is evolved to the benefit of the poor.

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