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Elina Mohanty

Good recoveries draw more into the act, also into urban areas

Mumbai , July 5

Good recoveries from self-help groups (SHG) have spurred banks to accept them as a mainstream activity. Banks have set ambitious targets and planned innovations in this sector, even as the Centre plans to credit link 3.85 lakh SHGs during 2006-07.

"The National Bank for Agriculture and Rural Development (Nabard) expects Rs 4,800 to Rs 5,000 crore worth credit to flow to SHGs from the banking system during 2006-07," said Mr K. Muralidhara Rao, General Manager with Nabard's Micro Credit Innovations Department.

The growth of SHGs and the loan business, coupled with excellent recovery performance, which has been more than 90 per cent in some cases, has demolished the popular myth that the poor cannot pay back a loan, a Nabard official told Business Line. Lending to SHGs is no longer seen as a pilot programme or a poverty alleviation programme, he added.

During 2005-06, bank credit worth Rs 4,499 crore was disbursed to over six lakh new SHGs and over three lakh existing SHGs. A likely credit flow of Rs 700 crore is expected during the April-June quarter of this year, Mr Rao said.

State Bank of India (SBI), which enjoys about 47 per cent market share among commercial banks in this sector, plans to credit link 2.10 lakh SHGs during 2006-07. Bank of Baroda (BoB) expects to credit link 15,000 SHGs during the current year, against 11,055 SHGs in 2005-06. It also plans to disburse Rs 75 crore during 2006-07 against Rs 59.19 crore in 2005-06, said Mr B.G. Baria, BoB's General Manager.

Encouraged by their rural success, banks are looking to lend to SHGs in urban areas. "SBI expects to launch pilot projects, for creation and linkage of SHGs in urban areas. The bank has identified the four metropolitan cities, Hyderabad and towns in Kerala and Karnataka," an SBI official said.

Union Bank of India (UBI) also plans to focus on urban areas, especially Mumbai, during the current fiscal. It expects to form and nurture SHGs through Knowledge Centres in the urban areas, said Mr M.V. Nair, UBI's Chairman and Managing Director. The bank expects to credit link 25,000 additional SHGs during 2006-07 to reach its one lakh target.

Innovative Strategies

There is a dearth of committed NGOs across the country to form and nurture SHGs and this acts as an impediment in scaling up of finance to SHGs, an official said.

"Due to the presence of well-established NGOs in the South, more number of SHGs are formed and nurtured and our finance to SHGs is also substantial in South India,' he added.

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