The Hindu Business Line : The SHG lifeline

It was good to see their confident smiles as they opened a tin box and brought out the photograph of their Pir. They lit a few incense sticks near the picture before they started the interaction with some trainee bankers. It was clear that there had been a quiet metamorphosis among them — from shy housewives to smart entrepreneurs. A group of 20 muslim women, in the 20-70 age-group, from Bhatambara village in Karnataka’s Bidar district, many of whom do not know how to read and write, took the initiative of opening an SHG account in their nearest bank branch.

The changes happened consequently, as each member began to save regularly a small amount of Rs 20. The women members take bank loans against their SHG deposit to help the men in their families to start businesses or revive existing ones. The new-found status of those women has become an inspiration for others, and Bidar district has become somewhat of a pilgrim centre for SHG enthusiasts.

This is largely due to the long and enduring effort of Nabard, which metamorphosed the crawling SHG movement of the 1990s into a mass movement across the country. Today, SHGs have become a lifeline for banks, as much as vice-versa.

Transformation over the decade

In the early 1990s, when SHGs were first launched, bankers were in the wilderness. They did not know how to meet this social responsibility when they were neck-deep in NPAs. Today, repayment from SHGs comes flowing to the banks with less administrative cost. The recovery from SHGs is more than 90 per cent across the country, which has given enough hope that financial inclusion is truly possible.

Interestingly, the women SHGs are the front-runners in making a success of small enterprises. The poor people, many of whom bankers rejected as liabilities, have flooded banks with huge deposits. Delighted with the recovery position, 520 banks with more than 35,000 bank branches, have reached out to 3.5 crore poor households across the country.

But channelling the growing SHG deposits into entrepreneurship becomes a big challenge as small economic activities and cottage industries in the villages are seriously affected by mass production from giant companies, including big retailers of fresh foods, which market everything from vegetables to consumer items from Rs 2 a pack to Rs 2,000. Besides, polarisations based on politics and caste becomes catastrophic for a village economy.

Right environment

The Arjun Sengupta Committee on the unorganised sector also found banks’ inability to reach the small village entrepreneurs. In fact, the real problem lies somewhere else. The core objective of banks is business. Creating the right environment for small enterprises should also be the core objective of the Government and development agencies.

A healthy SHG can address the multifaceted problems of a village as the awareness of a common goal narrows the caste divide, develops a spirit of co-operation among villagers and takes care of all kinds of development works in the village. Additionally, it channels the village’s idle energy into various business propositions.

Nevertheless, banks need to be judicious. Too stiff a target for financial inclusion could pose a problem as it would force banks to sacrifice quality in pursuit of numbers. SHGs should not be made into a mass revolution; rather they should be seen as a natural evolution that happens with the co-ordinated effort of banks, villagers and the extension agencies for the common good.

(The author is a Pune-based freelance writer.)

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