PADMASHREE DR.D.Y.

PATIL UNIVERSITY DEPARTMENT OF BUSINESS MANAGEMENT

SELF HELP GROUP BANK LINKAGE- PARADIGM OF SUCCESS)

(A Success Story of SHG* Bank Linkage Program in Andhra Pradesh in comparison with Maharashtra)

Prof. Prasadarao.M Dr.R.Gopal

Center Head, IDEAL College Dean &Director, Pd.Dr.D.Y.Patil University Department
prasadrao@itimes.com of Business Management
registrar9@gmail.com gopaldoctor@gmail.com
 SELF HELP GROUP BANK LINKAGE- PARADIGM OF SUCCESS
(A Success Story of SHG* Bank Linkage Program in Andhra Pradesh)

Prof. Prasadarao, Dr. R.Gopal

IDEAL Group of Institutions Pad.Dr.D.Y.Patil University
prasadrao@itimes.com Dept.of Bus.Mgmt
gopaldoctor@gmail.com
____________________________________________________________________________

Abstract: Maharashtra and Andhrapradesh states similar status in population, culture, water
resources, soil , agriculture, rural economy and geographically attached. More or less the SHG
Bank Linkage Model introduced in both the states ate the same time. The status up-to 2008-09
shown that is comparatively met with higher success rate in Andhrapradesh than Maharashtra.
Empowerment and sustainability’ are two impact factors of SHG Bank Linkage model and
Microfinance, where the rural poor trying to change their life in various parameters to improve
their social and even their political status (Prasadarao.M, & R.Gopal 20101. This effect is also
closely related to the group-based methods of intermediation which are used. Various factors
influencing the Microfinance activities through SHGs in Andhrapradesh. APMAS@ is one of the
key influencing agency in AP greatly striving towards influencing credit model, government
alliance, mentoring and monitoring the SHG Federations. This study would bring out the various
activities being administered by APMAS.

______________________________________________________________________________

Introduction:

On an average, one SHG consists of 15 to 20 members; a group leader is nominated on

the basis of rotation from amongst the group members to conduct meetings. About 75 per cent of
the members of the Self Help Groups are illiterate (including those who can sign only) and only
5 per cent have some post primary education. However, I was impressed by the methodical and
orderly process by which the self-help groups conducted their business. Meetings are usually
held once in a week. Normally, the agenda is disbursement of loans, collection of savings, fines
etc. A record of loans, savings and fines are maintained by an educated member of the SHG, by
the group leader or by a facilitator who is paid honorarium by the group.

Bank linkage is the largest microfinance program in the world. The uniqueness of the
model is the involvement of the promoter of the SHGs, Government and the Banks (Dr.Reddy
20093). It has worked very well and due credit must go to NABARD for playing a pivotal role.
While NABARD helped in the initial years of SHG – Bank linkage, full credit must go to the
SHG promoters and the Banks for taking it forward. One of the major challenges of the model is
the target-oriented approach. In many states of India, still the quantity of bank loan to an SHG is
not enough and it is in many cases not timely. Quality of SHGs is another issue which hinders
the growth. Almost 50% of the SHGs are not having adequate book keeping system making it
difficult for the bankers to lend to such SHGs. Inadequate promotional costs provided to the
SHPI*s is another issue. A large number of SHG promoted under SGSY* are only formed to
access the subsidy component affecting the entire movement. The collaboration between NGOs
and Government needs to be further strengthened and improved. Livelihood promotion is a
major challenge to ensure optimum utilization of the loans obtained by the SHG members.

APMAS established in 2001 into being with the vision of “Sustainable Women Self Help
Movement” in India when the SHG movement in India was at a take off stage. During the period
of 2001-2005 it has done considerable work in Andhra Pradesh during in collaboration with
State Government, NGOs, Banks and SHG federations. From 2005 onwards, APMAS has
increased it’s operations intensively in Andhrapradesh and spread supporting services in other
states like Assam, Bihar, Gujarat, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, West Bengal
and Uttar Pradesh.

The SHGs are treated by many MFIs, NGOs and other agencies as a good business
opportunity and mentored by state government, NGOs and APMAS like agencies form forming
the group, bank linkage to credit deliverance to uplift their livelihood and status. In majority of
cases an individual woman is not able to make much difference to her social status, even within
her own family, if she improves her financial position, being part of group and through group
activities with following indicators.

Economic indicators:
1. Access and rights to resources and economic opportunities. Impact on the division of labour,
workload and time use.

Political indicators:

2. Involvement in household decision-making, ability to influence household decisions.

3. Political awareness and interest – voting, decision about voting, etc
4. Relative participation and voice in public decision-making – community, state and nation.
5. Capability to put forward one’s own perspective/vision, to convince others and have a voice in
the public decision making particular at the grassroots level.

APMAS started the journey in following steps :

At State level:

* Trained more than 50,000 professionals and Para-professionals on various aspects of SHGs &
SHG federations.
* Developed several training modules, manuals and video films for wider use.
* Development of a quality assessment (rating) system called GRADES for assessing the
performance and credit worthiness of SHG federations. Rated 423 SHG federations.
* Conducted a large number of research studies on SHG Bank linkage, SHG quality, SHG
federations and MFIs.
* Conduct national study on SHG federations.
* Anchoring District Livelihood Resource Centers (DLRCs) to promote sustainable
livelihoods.
* Policy advocacy at State and National level on various issues related to quality and
sustainability of SHGs in the country.

Expansion of APMAS:

Starting from 1995, Andhra Pradesh has played a pivotal role in the promotion of SHGs and has
emerged as a leader both in the number of SHGs in the state as well as the total amount of bank
linkage under the linkage banking model. The following are the reasons for the exponential
growth and also for some of the key lessons learnt:

* High quality & sustainable SHG promoted by some of the NGOs in the state.
* State Government through the projects funded by the UNDP, World Bank and others has up-
scaled the model to cover every village of Andhra Pradesh.
* NABARD played a significant role in motivating and training bankers to provide loans to
SHGs under the SHG – bank linkage program.
* A large number of SHG federations have been promoted which have been working on
improving the quality of SHGs.
* SHGs and SHG federations have taken up the role to delivering government services and
managing various anti-poverty schemes.
* Where there is political will and bureaucratic commitment, scale is possible and can become
sustainable. A total SHG – Bank linkage of Rs.7,000 crores in 2007-08 is just an example of
continued growth in the linkage banking volume.
* While SHG federations are very attractive to be treated as delivery channels for government
schemes, they might affect their autonomy and sustainability.
* Large-scale SHG movement supported by the state Government run the risk of political
interference, undermining the realization of the full potential of such institutions.

Strong SHGs would make a strong SHG federation:

In AP the formation of Federations has helped the SHGs to strengthen their capabilities to
manage them selves efficiently. SHG movement may get overburdened by the multiple agendas
the federations have unless there is a deliberate focus on issues like gender, rights & entitlements
of women, health and education, the SHGs be reduced to savings and credit groups. To have
strong SHGs and SHG federations, there is a need for a developing a large base of social capital
in the form of book keepers, trainers, auditors and marketing specialist emerging from the SHGs.
For the SHG federations to meet the member’s needs, interface with the government is very
important and critical.

The Development of strong SHGs in AP:

As like APMAS there are various agencies lime SERP*, DWACRA* promoted by government
are playing major role in capacity building of SHGs. The strengthening exercise has developed
under following stages:
 1. Strong group dynamics and book keeping system at the SHG level
2. Adequate loan size for the SHGs to meet the credit needs of the SHG members.\
3. Formation of the SHG federations at the village, mandal and district level. These
federations have sub-committees for different functions – microfinance, marketing, food
security, insurance, social aspects, disability, etc
4. All the staff & the Executive Committee members and Office Bearers of the federations
are trained and have also given an opportunity to go on exposure visits.
5. Initial pilots were done before up scaling any initiative. For example, Village
Organizations (Village level federation of SHGs) distribute pensions in Andhra Pradesh.
This was initially tried out in a few places before the model was fine-tuned and up-scaled.
6. There is several staff that supports the federations who receive specialized training in
managing bulk milk cooling centers, procurement centers, marketing, pension
distribution, etc.
7. SHG federations taken on such responsibility in the hope to earn profits and to earn a fee
by providing those services. It is important for SHG federations to get involved in those
activities that benefit a large number of their members.

Financial Inclusion through SHG:

SHG model is scalable and most suited for women empowerment and poverty reduction.

For sustaining the SHG movement there is need for the social capital to emerge from the
SHGs. While promoters can play a facilitating role, the must have the ability to self manage
their affairs.
Simple and user-friendly book keeping system is needed: Book keeping is an area that definitely
requires further work. However, it is the firm belief and conviction of APMAS that the women
are able to manage and can manage it very well if adequate support and guidance is provided.
For the SHPIs it is important to have full faith in the women and their capacities. Also, it is very
important for the promoters not to complicate the bookkeeping system to serve their own needs.
We must have a large number of trained book keepers in the SHGs. We must also train some of
the SHG members to be SHG auditors. If there is effective mechanism of monitoring SHG book
keeping and also period rating, the book keeping would improve. Also, the SHG federations
have a system of seeking monthly reports from the member SHGs it would make them more
responsible. It is highly desirable for the SHGs to have their accounts audited annually.



SHGs model has considerable potential to facilitate financial inclusion & inclusive growth.

Using smart card technology, we could reach all the un-reached with the full range of
financial services.

SHG federations could be partners (or business correspondents) for the banks to provide the
last mile connectivity. SHG federations have the potential to manage micro-insurance
program

Leadership traits: Many SHGs practice rotational leadership. It must be a part of their norms
for change of leadership. There are some practical difficulties as the bankers do not want the
leaders to change as they require changing the same in their books. Also, the initial leaders think
it is a privilege to be a SHG leader and are not interest in having new leaders take over the
responsibility. In some of the SHGs there members are not willing to take the responsibility of
being a leader which leads to existing leader continuing. A large number of SHG members need
to be trained on leadership, particularly on book keeping. The monitoring system must ensure
following their own numbers. Every effort should be made to ensure that the SHG leader is not
seen as mediator.

Subsidies-effect on SHG: In many parts of the country, there is no need to promote SHGs
now. As there is considerable awareness, new SHGs are formed on their own. It is very
important to make adequate investments in the promotion of SHGs. It costs approximately Rs.10,
000 over a three year period to promote a good SHG, only a portion of that amount is invested in
SHG promotion leaving those groups as weak and at time dormant. Governments must cut down
on the subsidies for the SHGs and spend more money on capacity building. Also, any subsidy or
grant that the government wants to give to the SHGs could be given to their federation as a seed
capital.

Capacity building measures: APMAS had trained and certified more than 300 professionals to
be trainers of trainers. Unfortunately or fortunately many of them have become fulltime
employees of various projects or organizations. There is an urgent need to train and certify
professionals to train others. Also there is a need to have collaboration with Academic
institutions to offer certificate courses, short-term courses and diploma course in SHG
promotion

Govt influence: The bill in its current form is not helpful to the SHG movement. In fact it can
hinder the growth and sustainability of the SHG movement. We would like to propose a self-
regulation mechanism recognized by the regulator as the way forward.

Conclusion: Many MFIs and other agencies working towards financial inclusion at individual
basis. But the agencies like APMAS, SERP and DWACRA along with strong NGOs which
either directly or indirectly promoted by government of Maharashtra along with SGSY and other
sponsored programs which definitely boost the rural credit program and the success of SHG
Bank Linkage Program at larger level to meet the targets of Development Goals and financial
Inclusion in very near future. The following aspects have to keep in view before implementing
the new regulations and schemes towards a successful financial inclusion strategies.

Future Goals/Challenges:

1. By 2013, most of the poor would join as SHG making the number of SHGs in the country
close to ten million.

2. The linkage banking (outstanding) through SHGs and SHG federations and other forms of
community based microfinance would have reached 50,000 crores with a number of women
engaged in the SHG movement nearing 100 million.
3. NBFC approval: The business stream form Microfinance has been latest growing feature of
microfinance industry MFIs, It could SKS’s IPO, many majority of MFI converting into NBFCs
to receive funds to provide the easy loans to excluded perhaps with higher interest rates is
possible so far. The fresh approvals by RBI to NBFCs for accepting deposits are not considered,
while capital, liquidity and leverage requirements have been heightened for those already
permitted to do so."(Usha Thorat. Dy.Governor, RBI 2010)

Steps to face the Challenges:

1.. Increased focus on livelihood promotion, particularly in food processing, dairy service sector,
agriculture and other emerging sectors.

2. Need to focus on use of technology and a large effort in the area of public-private-partnerships
(PPP). The banking sector will have to rise to the occasion and the Governments will have to
play a more proactive role.

3. Exploring new strategies such as “Rang De” which is an Indian nonprofit micro lending
online platform whose mission is to make microcredit accessible to low-income households
by engaging social investors and by lowering loan interest rates through innovative means.

4. Inducting various credit model which are flexible like Business Correspondent Model

5. The Banking operations should reach the interior villages sofar no banking serviced could’t
afford to reach.

6. Introducing latest technology lile Mobile Banking, Banking on wheels

7. Activating Post office, Gram Sevika and retired personnel from the selective areas would be
an opportunity to gain maxim exposure..

Bibliography

1. Gopal.R, Prasadarao.M,2010, Imacat of SHG Based Microfinace on rural poor empowerment.

www.marketpressrelease.com,
2. Reddy.CEO, APMAS 2009, interview
3. Thorat Usha, Dy.Governor RBI, 2010 address at the Tenth Annual International Seminar on
Policy Challenges for the Financial Sector in Washington,
4. www.microcredit.org 2010, provision for online platform for microlending.
Key words:

APMAS: Andhrapradesh Mahila Abhivrudhi Society

DWACRA: Development of Women and Children in Rural Areas (AP)
SERP: Society for Elimation of Rural Poverty (AP)
SGSY: Swarnajayanti Gram Swarojgari Yojana
SHG: Self Help Group
SHGF: Self Help Group Federations
SHPI: Self Help Group Promoting Institutions
MFI: Microfinance Institutions
NABARD: National Bank for Agriculture and Rural Development
NBFC: Non Banking Financial Company
RBI: Reserve Bank of India