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QUALITY ISSUES IN THE MICROFINANCE SECTOR IN RAJASTHAN

QUALITY ISSUES IN THE MICROFINANCE SECTOR IN RAJASTHAN. Joint Study Of APMAS, Hyderabad & CmF, Jaipur. OBJECTIVES OF THE STUDY. the quality issues of SHGs, SHG federations, promoters and bank linkages Issues constraining improvement in quality, growth and spatial distribution

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QUALITY ISSUES IN THE MICROFINANCE SECTOR IN RAJASTHAN

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  1. QUALITY ISSUES IN THE MICROFINANCE SECTOR IN RAJASTHAN Joint Study Of APMAS, Hyderabad & CmF, Jaipur

  2. OBJECTIVES OF THE STUDY • the quality issues of SHGs, SHG federations, promoters and bank linkages • Issues constraining improvement in quality, growth and spatial distribution • Capacity building needs of different stakeholders • Current sources of technical services • Possible strategies for addressing the identified gaps and the role of CmF therein.

  3. DISTRICT-WISE SAMPLE COVERAGE

  4. SHPI-WISE SAMPLE SHGS • DWCD promoted SHGs are in Bhilwara, Dungarpur and Jalor • Most of NGO promoted SHGs are in Bharatpur and Bikaner • Most of DRDA promoted groups in Jalor

  5. PROFILE OF SAMPLE DISTRICTS

  6. LIMITATIONS OF THE STUDY • Purposive selection of three districts • Coverage of only active/ functional groups • Selection of proportionately more no. of SHGs promoted by NGOs • Federations are found only in Dungarpur which formed very recently. Hence, not focused

  7. PROFILE OF THE SHG MEMBERS • BC–37%, ST – 26%, SC–22%, Oth-15% • 13% are widowed and divorced women • Over 80% of the members are illiterate includes neo-literates also -36% • Both APL and BPL are equally represented • 51% are living in Kuchcha houses • Non-farm labour–34%,agriculture–26%, Agri. Labour-16% are the primary occupation of many members • Majority are marginal farmers- 60% followed by landless- 20%

  8. PROFILE OF THE SHGS • 12- avg. size of the SHG-2416/202; New members-78/29; replacements-22/13; dropouts-155/53 • Mixed caste groups are more (63%) than mono-caste groups (37%) • More no. of SHGs are BC (42%) followed by SC (25%) and ST (22%) • Majority of the SHGs are less than 4 years (64%) • Among the districts, > 4 year old groups are more in Bilwara (50%) • 6 SHGs in Dungarpur have membership in Federations

  9. INFRASTRUCTURE: Distance • 3 km -Avg. distance to bus point; lowest in Bilwara (1km) and longest in Bharatpur (4 km) • 22 km –Avg distance to Block Hq; shortest in Bharatpur (15 km) and longest in Bikaner (27 km) • 7 –km Avg. distance to bank; shortest in Bharatpur (5 km) longest in Dungarpur (10 km) • 11% groups have banks within village – Jalore and Bhilwara more fortunate • 38% have banks less than 5 km. Bikaner and Jalore are dominant • 25% SHGs between 5-10 km. Bharatpur and Dungarpur; 25% over 10 km. Dungarpur

  10. SHG BANK LINKAGE SCENARIO

  11. BANK LINKAGE SCENARIO… • Increase in Bank Linkages in Rajasthan is mush faster compared to national level • Average Loan size in the state is significantly lower than that of national figures • Average loan size of DWCD promoted groups is significantly less than state average and that of all SHGs in the district • Wide Inter-district variations in loan size

  12. SHPI-INPUTS TO SHGs • About 70% of the SHGs received orientation of 1-2 days on SHG concept from their promoters • Less percentage of (15%) SHGs trained on book-keeping and self management • Few SHGs trained on micro-enterprise and skill development trainings • NGOs provided more inputs to SHGs compared to DWCD and DRDA,

  13. SAVINGS • Rs. 41 avg. savings per month per member; double in Bharatpur compared to Dungarpur • Avg. amt. of Savings per month per member is less in DWCD promoted SHGs-Rs. 38 compared to NGO -Rs. 43 and DRDA-Rs. 64 • Rs. 13,508 avg. cum. Savings; highest in Bharatpur- Rs. 16,082; lowest in Bikaner- Rs. 10,660 • Avg. cum. Savings and age of the SHGs are positively correlated except 6+ year old SHGs

  14. SAVINGS… • 17 SHGs have distributed their savings; 13 are mixed SHGs; 12 are 4 + years old SHGs • 22% of SHGs have changed their monthly thrift-increased (21%) decreased (1%) ; 50% of the groups are between 4-6 year old • Many ST-36% and BC-28% SHGs have increased their monthly thrift amount • Collection of savings- mainly in meetings-58% followed by door to door, leader’s house • Over 75% of the SHGs leaders collecting monthly savings

  15. MEETINGS • 90% of the SHGs have the norm of monthly meetings • Three-fourth of SHGs conducting meetings at leaders house; other in community place • 67% of SHGs conducted 6 meetings during the last 12 months; remaining between 1 to 5 meetings • 16%-no meetings during the last 12 month; Double in Jalore (24%) and Bikaner (23%) compared to other • 41% of SHGs- meeting at after noon, 20% at convenience, 16% in the morning • 40% of SHG meetings in Bilwara take place at night.

  16. LENDING PROCEDURES • NB lending is predomint-68%, ED is only-13%, both-16%; no lending in 3% of the SHGs • 90% of the SHGs loan repayment period is < 1 year • Two-third are monthly instalments; remaining are convenience-20%, half yearly-7%, bimonthly, quarterly-3%, and yearly-2% • 87% of the SHGs lent to their own members; more SHGs lent to non-members in Bilwara-20% and Dungarpur-10% • Interest rate: Rs. 0.70-3 to SHG; Rs.1-2 to Non-SHG • No collateral surety; in few case promissory notes • 8% of the SHGs collected penalties (Rs. 4-10)

  17. LOAN EQUITY & REPAYMENTS • Rs. 28,624- disbursed as loan by each SHG • 57%- SHG members have loans currently • 7- average no. of loans in a SHG • 55% of the SHGs have over dues > 3 months • 94% of the loan amount is outstanding • 18% of the loan outstanding is arrears • On an average 4 members defaulted in SHG Note: loan data for the last one year Jan 05-Dec 05

  18. LOAN PORTFOLIO AT RISK • Of the 202 SHGs, 13%-SHGs no schedule for repayment; in 3% SHGs no loans disbursed during that year • 64%-SHGs made prepayments; High in Bikaner-67% less in Jalore-59% • 33%- avg. recovery rate; highest in Bilwara-70%; lowest in Bharatpur 47%; • Avg. recovery rate is more in Govt.-64% than NGO-60% • 59% of SHG have PAR > 90 days, 39% SHGs have PAR > 180 days, and 15% of the SHGs have PAR >365 days.

  19. BOOK-KEEPING

  20. BOOKS OF ACCOUNTS • 56% of the SHGs have all accounts in one book; about one-third have MB, savings & loan ledgers • Over 60% of the SHGs, records maintained by SHPI followed by SHG office bearers-25% • However, in Bharatpur more percentage of SHG office bearers are maintaining the books • Nearly 50% of the SHGs keeping their records at President’s house followed by SHPI staff-28% • Nearly 50% of the SHGs issued Individual Pass-Books to its members • Pass-Books are with members in majority cases; in few cases with president, secretary and SHPI

  21. SHG NORMS & PRACTICE • 42% groups have norms for savings collection but only 15% are practicing • 37% groups have norms for loan repayment but only 12% are practicing • 31% groups have norms for attendance but only 9% are practicing • Few groups have norms in Jalore but no practice; Very few groups in Bikaner have norms and all of them practice.

  22. GRADING OF SHGS • 30% - A grade, 50%- B grade and 20%- C grade • A-Grade-Highest Bilwara 40%; lowest-Bharatpur-16% • B-Grade-Highest-Bharatpur-68%; lowest-Dungarpur-42% • C-Grade-highest-Dungarpur-26%; lowest-Bilwara-10% • Age and quality of SHGs are negatively correlated • % of ‘C’ grade groups is almost 3 times in mono-caste groups compared to mixed caste groups; where as 15% of ‘B’ grade groups are more in mixed groups compared to mono-caste

  23. SHG BANK LINKAGE STATUS • 27% of SHGs bank linked for credit; 35%- CBs, 17%- RRBs and 29%-Coop • Rs. 37,870 - avg. loan size; Rs.45,200 - CBs, Rs.30,100 - RRBs and Rs.13,500 -Coop • % of NPA is 0.16%; 0.23% - CBs and no NPA in RRBs and Coops; Only one branch out of 30 has one NPA • 3.73% - is the over due; 0.74%- C, 11.15%- RRBs and 0.19%- Coop

  24. BANK LINKAGE • 73% sample SHGs are credit linked to bank • More % of ‘A’ grade and less % of ‘B’ and ‘C” grade in bank linked groups compared to non-bank linked • Rs. 46,162 avg. loan size; largest-Bharatpur Rs. 46,162; smallest-Bikaner Rs. 21,147. • 19- avg. no. of instalments and loan ; highest-Bilwara-37; lowest-Bikaner-17 • Rs. 16,060- avg. loan amount repaid; largest-Bilwara Rs. 22,725; lowest-Bikaner-7,247. • Rs. 26,831- (58%)avg loan outstanding; highest-Bharatpur Rs. 39,413; lowest-Bikaner Rs. 13,327 • Rs. 56,218- avg. Cum. Amount of loans; > double in Bilwara compared to Bikaner (Rs. 32,019)

  25. REASONS FOR DELAYED PAYMENT Reasons for delayed or irregular payment • Non-availability of work and drought 69%;Ill-health 17%; migration 13% Action against defaulters • Repeated visits to groups-57%; and no action-12% Reasons for small size of loan/ no repeat loan • Bankers not interested 19%; small size of loan 15%; limited purpose 19%; surplus with group 13% only in Bharatpur • Earlier loan not cleared 16% only in Bharatpur and 13% only in Bhilwara

  26. ISSUES IN SHGs • Group formation - Lack faith on others- 20% and mobilization of poor-17% • Bank Transactions–long distance 2%, illiteracy 5% and no cooperation from banks 7% • Meetings – less attendance 11%, no agenda 2% and unsuitable timings 4% • Savings – irregular savings 9% and unable to save 12% • Lending–no internal lending 3%, difficulties in the collection of savings & loan instalments 4%

  27. ISSUES IN SHGS… • External loans – less volume of loan 4%, more time taking & repeated visits 6% • Grants – for few groups 3%, repeated visits 1% • Book-keeping – no proper set of books 9% and no training on book-keeping 11%. • Trainings – no trainings 8%, centralized trainings 11%, not interested in training 4% and no training on livelihoods and micro-enterprise • Monitoring – No/ less monitoring and supervision • Others – men involvement in making decisions

  28. ISSUES: BANKERS PERSPECTIVE • Low quality of groups • Illiteracy of members • Difficulties in meeting the targets due to absence of quality groups • Low volume of loan • Feels that promotion of SHGs is not the business of banks • Not enough staff to promote SHGs

  29. ISSUES: SHPI PERSPECTIVE • Difficult to mobilize BPL members • BPL groups interested in SGSY linkage but not in general linkage • Need for capacity building at all levels • Multiple tasks (especially in DRDA not able to focus on SHGs) • Lack of financial support for NGOs • Incentives for a limited period to NGOs • Sustainability of SHGs in absence of NGO (SHPI) support is a question • Training for Primary stakeholders in livelihoods • Low education levels of Anganwadi workers (de-facto leader of SHGs in majority of cases)

  30. DECISION MAKING

  31. SHGS IN DEVELOPMENT • Less participation of SHGs in social issues-anti-child labor-1%, TLC-8%,anti-arrack movement-3% • 11% of SHGs focused on Girl-child education • Many SHGs participated in health related activities across districts-ICDS activities-39%- PP, FP, AIDS • Very few SHGs participated in income and employ- generation related activities-FFW, MM, PDS, WS • SHGs of Bharatpur and Bilwara were more involved in socio-economic issues compared to other districts

  32. IMPACT OF SHGS

  33. IMPACT OF SHGS • Results are mixed • Positive – • - Access to institutional credit and development of saving habit. • - Some members taken up income generation activities • Negative – • - Loans are too small to take up income generation activities • - Negative - Drought

  34. Impact - Social • Majority of Primary stakeholders and secondary stakeholders confirm positive impact of women empowerment. • Women coming out of their houses • Interacting with officers and others • Bondage among members is developing

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