Covid-19 changed the entire world, more specifically the Self-Help Group Bank Linkage Programme (SHG-BLP). It is a landmark model initiated by National Bank for Agriculture and Rural Development (NABARD) in 1992 to deliver affordable doorstep banking services as part of financial inclusion drive in India.

Today, the SHG-BLP is regarded as the largest micro-finance programme in the world — with a total membership of 100.14 lakh groups (covering nearly 12 crore households) across India and having extended collateral-free loans of ₹87,098 crore to 50.77 lakh SHGs as on March 31, 2019. It is interesting to note that more than 90 per cent of the SHG members are women.

A reality check

By obtaining micro-finance, an SHG generally takes three to five years to mature and reach the stage of self-sustainability, graduating from consumption and low-productive activities to economic enterprises. However, some of the SHG members may not undertake entrepreneurship due to lack of motivation, viable business opportunities, managerial skills, technical knowhow, value addition to their products or services, financial literacy, adequate supply of credit, market linkages, etc.

Besides, the SHGs are saddled with non-rotation of leadership positions, inadequate hand-holding support of Self-Help Promoting Institutions (SHPIs) and change in the government’s policy.

Mounting NPAs

Though this programme witnessed lower loan defaults by its members in its earlier years, bad loans have been increasing in the recent past due various reasons. The NPAs of the SHG-BLP surged from ₹.423 crore in 2007-08 to ₹4,524 crore in 2018-19. NPAs reached a peak level of 7.40 per cent in the FY 2014-15 and later fell to 5.19 per cent as on March 31, 2019.

This situation of bad loans will be further accentuated and dent the sustainability of SHG-BLP on account of Covid-19 pandemic if the SHGs do not convert the problems into opportunities. Hence, there is every reason to arrest this trend and make the SHG-BLP, a sustainable model.

Corona-driven opportunities

Though the coronavirus has thrown many challenges to the members of SHGs with regard to conducting physical meeting, mobilising savings (physical currency notes) of the group, rotating the money for internal lending among the members, depositing the physical cash towards repayment of loans, and maintaining hard copy of records, digital channels, however, made their life simple.

Specifically, the SHG members can overcome the digital divide by operating their cash transactions through electronic banking; they can meet their peers through social/digital media without meeting in person; they can maintain their records in e-Shakti (a digital initiative of NABARD for maintaining SHGs’ books of accounts, thereby improving their credit score).

SHGs can market their products through Amazon, Flipkart, etc., thereby generating more revenue to repay their bank loans on time. Most importantly, SHG members can be imparted online training in respect of financial/digital literacy, group dynamics, market linkages, risk management, and ethics. Besides, these SHG borrowers should be groomed in terms of confidence to excel in income-generating activities by embracing technology.

Also, the SHG members should be given flexibility in repayment of bank loans — for instance, instead of daily, weekly repayment schedule, based on their cash flows. Thus, there exists an opportunity for SHG women to make masks, sanitisers, etc., to supply for online customers, and, thereby, maintaining their bank loan accounts healthy.

Srikanth is an Associate Professor, National Institute of Rural Development and Panchayati Raj, Hyderabad, and Saravanan is Professor in Finance & Accounting, IIM Tiruchirappalli