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To meet the credit requirements of self-help groups (SHGs) who are hit by the MFI (microfinance institution) crisis in Andhra Pradesh, a Rs 1,200-crore credit scheme is under consideration by banks.
The credit was sought to be extended through the bulk finance model to the Mandal Mahila Samakhyas (MMS), as per a letter sent to banks by the Society for Elimination of Rural Poverty, Andhra Pradesh Government, on March 30, 2011.
“The Union Bank of India has already financed 19 MMSs and is considering another 81 proposals. A few other banks are also keen to finance MMS. We have planned for linkage of 500 MMSs during 2011-12 with a sizeable credit flow,” Mr B. Rajasekhar, Chief Executive Officer, said in the letter.
There are 9.75 lakh SHGs in AP which are federated at the village level, which in turn are federate at the mandal level as MMS.
The MMSs have been providing both financial and non-financial services to the affiliated SHGs.
Assuring banks which are concerned with growing over-dues from SHGs, Mr Rajasekhar said only MMS which had a repayment rate of 90 per cent from SHG for the last two years would be identified for bank funding.
The MMSs have about Rs 1 crore owned funds and the debt-equity ratio envisaged would be 1:1 for the present depending on the comfort level of banks for lending with a minimum of Rs 50 lakh.
NEED FOR FINANCING
Making a case for lending to MMS, SERP (Society for Elimination of Rural Poverty) chief said that the bank credit had not kept pace with increased demand driving poor to access ‘high cost' credit from different sources, including MFIs.
Per group finance in the last year was at about Rs 1.60 lakh. Inadequacy of credit from the baking sector also resulted in multiple borrowings at the SHG/member level.
“The need for bulk finance to MMS is felt more than ever in the present context of MFI crisis,” he added.
Financing MMSs could be done for meeting the credit needs of the poor for taking up small duration loans and petty businesses with short cycles. The loan could be repayable in a maximum period of 12 monthly instalments.
RECOVERY
The SERP had also assured banks that it would ‘hand-hold' the entire recovery effort and monitor the loan repayment.
A software was also put in place to facilitate proper accounting, tracking loan portfolio and efficient internal controls.
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