Self help group - NGO - Bank linkages program in India: a case study

BY

DR HEMA BANSAL [Assistant Professor in Banking and Business Finance]

DEPT., OF BANKING AND BUSINESS FINANCE FACULTY OF COMMERCE M.S.UNIVERSITY OF BARODA INDIA

E-MAIL ADDRESS: hemachavan12@yahoo.com bansalmsu@satyam.net.in

CONTENTS

I II III IV V VI I

Introduction Banks, NGOs and SHGs: A Conceptual Framework Profiles District, Banks and NGOs. Examination Of Banks Participation in Implementation of SHGNGOBank Linkage Program. Case Studies of NGOs with SHGs Observations and Suggestions

Preface
Poverty alleviation has been the foremost concern of policy makers in India. The government functionaries and banks have been working in close partnerships in directing credit flows to the deprived and less privileged. However, despite the outreach, welfare strategies had failed to make a real dent in the lives of the rural poor. For the Banks too, it had been an arduous task with mounting Non-Performing-Assets. At a time like this, Micro Credit Approach based on savings emerged as a popular global approach to combat poverty. It was seen as a more comprehensive, integrated and viable approach to development. For the developing countries, the Micro credit approaches to development offered promising outcomes in terms of reaching the poor, benefiting them and also increasing the repayment rates for the bankers. The Government of India encouraged by the National Banks pilot study, advocated deployment of credit to the NGOs and SHGs by banks. The SHG-NGO-Bank Linkage Program has been set up as micro financing program at the National Level by the NABARD. The program is still in its infancy, banks have been given directives to identify SHGs or NGOs with SHGs for lending credence to them. Specific targets have also been laid for covering large number of SHGs every year. The present study makes an effort to identify the actual level of banks participation in promoting SHG-NGO-Bank Linkages. Case studies of NGOs with saving and credit groups are also presented with a view to create awareness about the NGO activities. The study also makes an effort to understand the barriers that impede partnerships between these two very distinct and individual organizations.

The present study has been completed under the University Grants Commission Scheme granted by the M.S.University of Baroda. After working on my doctoral study on Impact Analysis of IRDP Credit on Women, this study has been a completely different experience. The approaches of government programs and NGOs vary completely and so do the women beneficiaries. I have tried to keep the presentations and language as simple as possible for the benefit of operational level bankers and grass root level NGO workers. I am thankful to the university, bank officials and NGO functionaries for their co-operation in sharing valuable information with me. I am also grateful to

my husband, Dr Sharad research endeavors.

Bansal

for motivating and supporting me in my

Dr Hema Bansal Assistant Professor in Banking and Business Finance

Glossary
AIRCSC ALBO BOB BAIF BSST CAPART CCBs DIC DRI DCCB DWCRA FRFI GSFC IRDP ICED ICAR LBO MNP MAK NPA NGO NABARD NSK PMDA PACS PLDBs RRBs SCBs SLBC SBI SHGs SLDBs All India Rural Credit Review Committee Assistant Lead Bank Officer Bank of Baroda Bhartiya Agro Industries Foundation Bhagini Samaj Sewa Trust Council for Advancement of Peoples Action And Rural Technology Central Co-operative Banks District Industrial Center Differential Rate of Interest Scheme District Central Co-operative Bank Development of Women and Children in Rural Areas Formal Rural Financial Institutions Gujarat State Financial Corporation Integrated Rural Development Program International Center for Entrepreneurship Career Development Indian Council of Agricultural Research Lead Bank Officer Minimum Needs Program Mahila Antodaya Kendra Non Performing Assets Non Governmental Organization National Bank for Agriculture and Rural Development Nirmala Samaj Kendra Pandu Mewas Development Agency Primary Agricultural Credit Societies Primary Land Development Banks Regional Rural Banks State Co-operative Banks State Level Bankers Committee State Bank of India Self Help Groups State Level Development Banks

SEWA SARTHI SC ST SFT SEBC

Self Employed Womens Association Scheduled Caste Scheduled Tribes Shroff Foundation Trust Socially Economic Backward Class

CHAPTER I INTRODUCTION

Some Definitions

Micro finance plays a crucial role in reaching worlds poorest families. Micro credit has been seen as, credit provided for self employment and other financial and business services to very poor persons [Micro credit Summit, 1996] or small scale services, provided to people who operate small or micro enterprises, who work for wages or commission and other individuals or groups at local levels of developing countries, both rural and urban [Robinson, 1996]. Micro finance includes both micro credit and micro savings.

The Backdrop

The decade of 1990s saw the South Asian developing countries completely besotted by role models of liberalized economies. Liberalization and globalization led to adoption of liberal measures of growth and development. Foreign investments, improved technology and open market conditions led to fresh options of employment for the educated and the competent. These changes were wrought with dangers of further marginalization of poor and especially women. The society split between the better off and not so better off embraced new dimensions. Women with minimal education and skill experienced deprivation to the core. At a time like this the policy makers and the intuitionalists were searching for alternatives to counter poverty. One of the alternatives that were strongly emerging as a global movement against poverty was micro finance; the movement was driven

by shared commitment to provide credit to small enterprise formation and growth. It was also bonded together by a common rhetoric concern for the poor. Born of the NGO community, micro finance movement was driven by values strongly held by peoples participation, which is now seen as a driving force in the development process. I

In South Asia countries like India with greater magnitude of poverty were completely besotted by micro finance. Over the past four and a half decade, India has evolved a comprehensive network of financial institutions to meet the concurrent demand of credit. The process of widening and deepening of the formal institutional base began with the All India Rural Credit Survey Committees [AIRCSC, 1954] recommendation to expand the co-operative credit system. Expansion of the co-operative credit system was a mean effort in face of invincible credit requirements of the rural poor. The co-operatives found the task to enormous to tackle single handedly and consequently, commercial banks were nationalized in 1969 and the Rural Regional Banks [RRBs] were also set-up in 1976 to strengthen the rural institutional base. Today the formal rural credit system comprises of 64295 Commercial Banks Branches, 14541 RRBs, 89000 Primary Agricultural Credit Societies and 2787, Primary Land Development Banks. The formal rural credit system has been offering saving and credit options to rural customers under priority sector *. Credit is provided under special schemes of like: 1] Integrated Rural Development Program [IRDP] Indias largest anti-poverty
program, concentrating on households living below poverty line. 2] Differential Rate of Interest [DRI] Scheme Disburses loans to lowest income group of people at merely 4 per cent. 3] Development of Women and Children in Rural Areas [DWCRA] - Has been specially designed for women and children. Women are organized into groups of 10-15 for credit disbursals. 4] Council for Advancement of Peoples and Technology [CAPART] - Operates through voluntary agencies and supplements government efforts in reaching poor rural women. Grants are given to voluntary agencies to implement projects for providing income generating opportunities. 5] Jawahar Rojgar Yojana [JRY] A wage employment scheme, operating to create employment opportunities. 6] Training for Rural Youth and Self Employment [TRYSEM] - Provides training to youth in rural areas.

Credit programs despite their outreach had failed in terms of implementation, poor quality of assets, inadequate financial assistance, concentration in a few activities, lack of inter agency co-ordination and misutilization leading to mounting overdues and explosive non performing assets. [C.Rangarajan, 1997]. On the demand side, credit needs of rural masses were not sufficiently met by the formal institutions; there remained a set of rural poor whose needs were exclusively catered to by the informal system at relatively high cost [N Lalitha. 1997]. Almost 39 per cent of the total rural indebted households were still served by the informal sector [NABARD, 1997]. On the other hand formal rural financial institutions, also showed systemic deficiencies like, inability of management to control large number of far flung branches, inability of traditional banking system and procedures to handle increasing volume of business and varied activities leading to delays and lack of trained staff [M. Narsimham, 1988]. In a nutshell banks, who once began their journey as robust enthused, muscled institutions had turned vulnerable in face of systemic deficiencies and ineffectiveness of credit programs.

Paradigm Shift

The methods of providing micro credit though target oriented credit programs were now being questioned. Failures in this sphere prompted policy makers to shift their emphasis to new micro finance approaches.

The old paradigm of micro finance envisaged providing credit to poor people basically residing in rural and semi urban areas at subsidized rates of interest though public or government or financial institutions with donor support. The new micro finance continues to target the rural urban poor households with emphasis on women borrowers. Provision of finance for creation of their assets and maintenance, bringing in grater quality of services was seen as significant departure from earlier exercises in providing credit through financial institutions [K.Kaladhar, 1997]

Micro Finance a New World

To some the new micro finance is a new world, but this analogy is a keen to Columbus discovery of America. America was a new world to people who discovered it, but it had been well known to people who lived there. In case of new micro finance approaches, it was that now people were beginning to recognize and learn form the informal intermediaries that worked for poor and even made profits [Malcom Harper, 1998]. An attempt to formalize these traditional methods was sought by Friedrich Raffaisem in Germany by setting the first formal saving and credit organization in 1854. Over the past eight decades, co-operatives have increased considerably. In India, the cooperatives follow the three tier federal structure with State Central Co-operative Banks [SLDBs] at the helm, Central Co-operative Banks [CCBs] at the intermediate level and the Primary Agricultural Credit Societies [PACs] at the grass root level. The Co-operatives in India, were introduced under a state directive and not voluntary action a mark of true spirit of co-operation. It took twenty years to salvage the movement, but then the great depression of 1920s set in. The co-operatives as a consequence suffered a great setback and the first signs of weakening were witnessed then.

Since then co-operatives have been virtually crippled by overdues. Overtime, the inability of PACs to gear up to emergencies, bureaucratic interferences and inexperienced inefficient members had affected the financial viability of these organizations. Besides, poor management, dominance of rich or strong village groups heavy dependence on CCBs and SCBs had brought PACs to a dubious state. On the other hand informal saving and credit mechanisms continued to exist the world over . They not only existed but also continued to provide qualitative services to the under serviced markets without jeopardizing their financial capabilities and viability. Most promising examples of micro credit institutions in South Asia were: Grameen Bank of Bangladesh, Bank Rakhyat Indonesia [BRI], Production Credit for Rural Women

[PCRW] and Bank pertaining [Malaysia]. In India we have SEWA [Self Exployed Womens Association], Working Womens Forum [WWF], Mysore Resettlement and Development Agency [MYRADA] and a large number of Non Governmental Organizations [NGOs]. These new micro finance institutions used the concept of self help groups, credit management groups, manila mandalies or sanghms to undertake saving and credit activities. These groups were voluntary association of homogenous people at grass root level formed to save and mutually contribute a common fund to be lent to group members as per group decision [Nabard, 1997]. Co-operatives and SHGs were guided by the principle of self-help and mutual help. But unlike the co-operatives, SHGs were informal homogenous groups comprising of mostly lower income class of people. Such group members were trained by NGOs to build financial resources through regular savings for lending to needy members. These groups were highly flexible and adapted themselves to the members and yet managed to recover almost 95 100 per cent of their advances. The National Bank of Agriculture and Rural Development [NABARD] in India was highly motivated by the extraordinary recovery rates of the SHGs. After the Micro Credit Summit, Micro Credit was seen as an effective weapon of dealing with poverty. A completely new strategy, which combined flexibility, sensitivity and responsiveness of the informal credit system and technical, administrative capabilities and financial resources of the formal credit system, was initiated by the National Bank for the first time in 1990 on an experimental basis. NABARD had promoted 2122 SHG linkages in 16 states in India. At present 16 commercial banks and 12 RRBs are involved in the linkage project [Nabard, 1997]. NABARDs pilot project had been a successful endeavour, which led to the formulation of a policy of SHG approach to lending at the National level for the banking sector. Efforts have just begun; the process of rooting in the new micro finance approach requires careful administering and follow-ups. Given the formal structure of the banking sector and the informal and flexible operational system of the NGOs the basic question is how to ensure and enhance the linkages between two very distinct and contrasting institutions. For establishing effective linkages it is necessary to understand and identify NGOs with saving and credit groups. It is also important to confirm the participation of banks in the program, remove barriers and build bridges of awareness and knowledge. The present research endeavor is an attempt at enhancing linkages, by creating an awareness of the individual operational mechanisms of SHGs, NGOs and Banks and the Self Help Group-NGO-Linkage program.

Objectives In this context the present study aims to: 1. Provide a Conceptual Framework of NGOs, Banks and Self Help Groups [SHG]. 2. Examine the Participation of Banks in Promoting SHG-Bank-Linkage Program. 3. Prepare Case Studies of NGOs with SHGs. Chapter Outline 4. Suggest Measures for Improving SHG NGO-Bank Linkage Program

Chapter Outline I II III IV V VI Introduction Banks, NGOs and SHGs: A Conceptual Framework Profiles: District, Banks and NGOs. Examination of Banks Participation in Implementation of the SHG-NGO-Bank Linkage Program. Case Studies of NGOs with SHGs. Observation and Suggestions.

References: Malcolm Harper, [1998]. Profit for the Poor, Cases in Micro Finance, Sage Publications. Lalitha N., [1997]. Rural Women Empowerment and Development Bank . Kanishka Publishers, Distributors , New Delhi, India. Kaladhar, K., [1997], Micro Finance in India, Economic and Political Weekly, October. Nabard, [1997] Micro Finance Innovations and Nabard. Nabard Publication, India. Jean Dreze and Amartya Sen, [1995] India, Economic Development and Social Opportunity. Oxford University Press, Delhi. Rangarajan C., [1997]. RBI Bulletin, RBI Publication, December. Reserve Bank of India Bulletin, RBI Publication. Robinson Marguirite, [1995]. The Paradigm Shift in Microfinance: A Pespective from HIID, Development Discussion Paper No 10,Harvard Institute for International Development. Shail Singh and Jai Prakash. 1994.Growth of Co-operative

Movement in India, Metaphysics of Co-operative Movement, [Eds] B.S. Bhatia, H. L. Verma, Deep and Deep Publications, New Delhi. Narsimham M., 1988, Competition and Regulation in Banking, 41st IBSS, September, Banking and Development, RBI Publications.

CHAPTER II BANKS, NGOs AND SHGs: A CONCEPTUAL FRAMEWORK The present chapter provides a conceptual framework of Banks, NGOs and SHGs and studies their role in the SHG-Bank-Linkage program. Banks, NGOs and SHGs The Linkage : The Approach

The new micro credit approach involves the participation of Banks, NGOs and SHGs. In India, the SHG-Bank-Linkage-Program was first implemented by NABARD though branches of Commercial, Co-operatives and Regional Rural banks in 16 states. The pilot project showed encouraging results in terms of increasing accessibility, recoveries, reducing costs and benefiting SHG members. It also gave banks some experience in working with NGOs/SHGs. RBI encouraged by this experience recommended, adoption of the SHG Bank Linkage Program at the national level and asked all the banks to make it a part of their corporate strategy. Self Help Groups[SHGs]

SHGs are small economical homogenous affinity groups of rural poor, voluntarily formed to save and mutually contribute a common fund to be lent to its members as per group decision [NABARD, 1997]. Singh and Jain [1995] have defined SHGs as voluntary association of people formed to attain goals both social and economical. Local saving groups and SHGs have as many names as languages. They are called Rotating Savings and Credit Associations [ROSAs], Revolving Funds, Chit Funds and even Merry Go Rounds. [Malcolm Harper, 1998]. Self Help groups find their financial resources inadequate due to their lower saving capacities while on the other hand; profitable investments are limited by social restrictions and lack of marketable skills amongst group members. In order to help groups to grow in terms of volume and socio-economic development external help becomes necessary.

A formal recognition and aid to these groups however came only in 1990s, when SHG bank linage program was introduced by NABARD. NABARD had outlined specific requirements amongst SHGs for becoming eligible for bank credit under SHG - Bank Linkage program.

The requirements were: - SHGs with not more than 20 members. - Registration of SHGs according to the by laws formed by the group members. -Members monthly savings were to be used for loaning. The repayment schedule and the loan installments were to be fixed after mutual agreement amongst members. -SHGs were required to adopt a democratic way of functioning with each member having the freedom to express her/his views on functioning of SHGs. -SHGs had to maintain regular books of accounts, including members, saving and loan register and meeting register. -SHGs were also required to open a saving bank account in the nearby Bank branch. -Further, SHGs could be established by any organization in village, taluka and city with the intiative of bank officials or NGO workers.

The Non Governmental Organizations [NGOs]/Voluntary Organizations [VOs]

The NGOs/VOs have been the pioneer innovators of the new micro finance approach. NGOs terminology itself is not yet well established since NGOs typology is unmodified. They operate under different ideology and nomenclature [Molly Joseph, 1997]. NGOs are defined by only what they are, which suggest that they can be whatever they need to be for a particular purpose [Malcom Harper, 1998]. Peter Bowden [1990], has attributed three major functions to NGOs: Provisoners of services and assistance; creation of self-help capabilities; advocacy / education. As a developmental organization it mobilizes, utilizes and monitors economic and non-economic inputs,

development culture by making necessary changes in values, attributes institutions of society. NGOs encompass a wide spectrum of organizations with different ideologies, activities and typologies. VOs are a part of a more comprehensive NGO network. Lord Beveridge defined VOs as, an organization initiated and governed by its own members without external control. Shivraman Committee in 1978 had suggested presence of objective conditions for VOs. Viz duly registered, statutory managing committee, competent staff, proper accounting and monitoring and a master plan for work. At present, we have VOs varying widely in size, functions, methodology and motivation. The process of voluntarism and emergence of NGOs in India, composites of seven stages this is indicated by a study on NGOs and sustainable development conducted by the Center of America in 1993. The roots of voluntarism are traced to the functioning of social institutions in the ancient and the medieval period [1800-1850]. Reform movements during the time let to the recognition of evils of caste, sex and social status. In the second phase [19th century] after the World War I, a political awakening was witnessed amongst the intelligent. Consciousness and self-help emerged as a primary focus of socio political movement. This voluntary movement acquired force in the struggle of independence in the third phase. In the next phase, twenty years were spent in consolidating the nation. Voluntary action joined together in government responsibilities of education, health care, socio economic welfare etc. Government program failures in mid-sixties and seventies were manifested in the trickle down approach of overall development. Severe income disparities between rich and poor led to emergence of the alternative rural development models. The real fallout of voluntarism came with the national emergency, J.P. Movement and the heavy politics. This left many looking for constructive alternatives to canalize their energies and concerns for more human and just societies. This fall out also led to an increased voluntary movements both in quantity and quality. It was the period when ideas of concretization and peoples participation began to emerge. More focused work with target groups, landless laborers, tribal, small farmers, women, SC/ST etc., became a base for NGOs/VOs programs. The seventh phase in the eighties was the reorganization and the visibility of NGOs work. NGOs in different parts of India were rooted in a specific socio political context and were inspired by the emergence and continuity of social change and political movements. Another stream of NGOs established by business industrial houses in India and religious institutions also surfaced. Since then, NGOs/VOs have grown and evolved in different forms. Korten[1992], has classified NGOs into three categories peoples organizations, public service contractors and NGOs. While John Clark [1991], has identified six types of NGOs viz: relief and welfare agencies, technical innovation organizations to pioneer improved methods of progress, public service contractors to implement part of government programs, popular development agencies concentrating on self help and grass root level democracy along with education. World Bank on the other hand has tried to codify the typology of NGOs as philanthropic and self help organizations are classified into: welfare NGOs, Development NGOs, Donor NGOs and Local NGOs.

Amongst the NGOs in India majority are individual development enterprises, trusts, cooperatives, voluntary organizations and mahila samagams. NGOs were not only classified on the basis of typology but were distinguished by size too. In the Indian context, small organizations are pre dominant. They work in a few villages within a block of a district or a few slums in one part of the city. There are small medium sized, third big and large sized organizations too. Medium sized NGOs cover a block and work with a staff of 2-10 members and project grants unto 1 lakh. Third big and large sized organizations are relatively larger and work with 25-50 and even 100 members staff. NGOs have been working in partnerships with donors and government for some time now. These partnerships have different facets of linkages. NGOs and government organizations have worked in friendly co existence with freedom and little or no interference and maximum support from the government. NGOs work for behavioral and attitudinal change amongst people to support implementation of government programmers of health, education, technology development and womens programs. NGOs also sometimes act as partners in implementation of government programs. Partnerships however, between banks and NGOs are still at a premature. It all began when NABARD motivated by experiences of other countries and India, decided to adopt the SHG approach of lending though NGOs. In order to avail financial assistance, NGOs had to fulfill certain criterias like good track record of consistent work, maintenance and audition of the books of accounts for at least three years, capability of handling weak and poor and saving groups with a saving bank account in banks. The Banks

Banks have been major purveyors of micro finance in rural areas. Institutional Fit is extremely important for the successful implementation of any program. The ideal institutions to deliver financial services to smaller users is one which initiates, develops the activity and carries it on for as long as it is needed. In India, institutions like commercial banks, RRBs, Co-operatives viz. CCBs. PACS, PLDBs and SLDBs, have deployed rural credit. Commercial banks have the necessary outlets, security, equipment, hierarchy of administrative systems, record keeping, and efficient staff to manage savings and lending operations. The co-operatives operate through PACs and SLDBs at ground level, they lend largely for farm activities in small amounts. PACs lend essentially for crop loans while undertaking non-crop loan lending on marginal scale. PLDBs/SLDBs are essentially term lending institutions, which lend for purposes including: minor irrigation, land development, plantation, horticulture, fisheries, farm mechanization etc. Co-operative sector financing is in small amounts with exception of financing non-farming activities. The co-operatives have had a longer experience in delivering micro finance, but lack

resources and dynamism and are subject to frequent interventions from government functionaries. Public sector and co-operative banks in India, till liberalization worked with severe constraints in terms regulations and government interventions. Till date, government partnerships and priority sector impositions had hampered the banks profitability levels. The programs of rural development too have had limited success in terms of achieving income, employment and social benefits to the poor. The SHG approach of lending was introduced to banks as a new micro finance approach with innovativeness and flexibility. The SHG approach has been initiated against the backdrop of certain benefits to the banks. It is anticipated to decrease the bankers burden of scruitinization of application, loan disbursals, monitoring and recovery of loan accounts. Decrease in individual loan procedures is anticipated to reduce the cost to the banks, increase profits and small savings in rural areas. It is envisaged that this approach shall bring proximity and affinity between bankers and rural people. For implementation of SHGs approach the formal RFIs viz. commercial banks, cooperatives and RRBs have been asked to deploy credit through SHGs. No specific targets have been set at, NABARD hopes to cover 50000 SHG linkages with banks by 2000. Banks through circulars have been asking their training centers to cover SHG bank linkage program as a part of their officers and staff training programs. In order to enable banks to report their SHG lending without difficulty on account of divergent purposes in ground level disbursements from SHGs to members, an additional component under priority sector lending target has been incorporated. Banks now report their lending to SHGs or NGOs under a new segment viz., advances to SHGs irrespective of purposed for which members have been disbursed loans. The scope for lending to SHGs would depend upon the extent of poverty, presence, availability, support from NGOs and the need and desire amongst poor to form groups. Bank branches have been allowed to fix their own programs under the service area approach. In order to help bank branches get catalytic services of NGOs the lead bank would indicate the names of NGOs block wise. Service area branch managers would have a continuous dialogue for effecting linkages with SHGs and NGOs/VOs. In case an NGO feels comfortable with working with another branch outside its service area it would be allowed to operate with another bank branch. The lending to SHG would be included in the LBR system and reviewed at State Level Bankers Committee [SLBC] level. Banks have been prescribed to use a simple documentation procedure for lending to SHGs. The Linkage

The self-help group, bank linkage program has tow vistas of linkages: Directly by identifying or forming SHGs Indirectly financing SHGs through NGOs/VOs

In case of direct credit deployment, loans of the group had to be in proportion with the savings, this ratio was to be increased to 1:2 to 1:4 in a phased manner. Accumulated savings of SHGs for at least six months were strongly emphasized by banks. The RBI has also made it imperative for SHGs to deposit their savings in a saving bank account with the bank branches. The rate of interest was fixed at 12 percent for lending to SHGs. Repayment installment was to be decided with mutual consultation of SHG members.

Design and Method of the Study

The present study covers Vadodara district in the State of Gujarat in India. The study is based on primary data collected from banks, governmental and Non Governmental Organizations. Initially, NGOs/ VOs list from the directory was procured, after studying the list, NGOs working with rural development; income generating activities, agriculture and other allied activities were identified. Out of 24 NGOs and a few others suggested by the NGO workers, 11 were selected for the study. The VOs selected for the study formed almost 50 per cent of the total NGOs list. This study has been a time bound project of one year and has been handled single handedly and hence it was not possible to trace all the NGOs. The following NGOs have been selected for this study during the year 1997-98: 1. Anagram Charitable Trust: 2. Panda Mewas Vikas Agency; 3. Baif Development Resarch Foundation; 4. Shroff Foundation 5. Mahila Samakhya 6. Mahila Antodaya Kendra 7. Shri Gangaba Stree Sahayak Audyogik Sahakarai Mandali Ltd 8. Nirmala Samaj Kendra 9. Bhagini Samaj Kendra 10. Rural Development Circle 11. Bharatiya Samaj Sewa Trust

In order to understand the efforts made by banks in establishing the SHG approach, officials of four major public sector banks and a central co-operative bank were selected for a primary survey. Public sector banks included: The Lead Bank, ie. The Bank of Baroda [BOB], State Bank of India [SBI], Dena Bank and the District Central Cooperative Bank [DCCB]. Secondary information was collected from bank circulars, Nabard Publications, training manuals and published studies on new micro finance approach. Primary data was collected from questionnaires, interviews and informal conversations. Case studies of SHGs with Bank linkage program and SHGs with NGOs financing are also presented though a simple descriptive method. References: 1. Beveridge Lord William, 1949. Evidence for Voluntary Action, Allen and Unwin, London. 2. Clark Jhon, 1991. Democratizing Development The Role of Voluntary Voluntary Organization, Kumerian Press, West Hartford. 3. David Korten, C., 1992. Getting to the 21st Centaury Voluntary Action And Global Agenda, Oxford and IBH, New Delhi, p67. 4. Joseph Molly, 1997. Women Participation and Development Strategies, Kanishka Publisher, Distributors. 5. Malcom Harper, 1998. Profit for the Poor, Cases in Micro Finance, Oxford Publication. 6. NABARD, 1997. Micro Finance Innovations and NABARDs, NABARDs Publication India. 7. Peter Bowden, 1990. NGOs in Asia: Issues in Development, Public Administration and Development, Vol. 10, p.141-52. 8. Shivaraman, B., 1978. Committee on Voluntary Participation in Rural Development, Planning Commission, New Delhi.

CHAPTER III
PROFILES: DISTRICT, BANKS AND NGO

The present section creates profiles of the area of study and sketches the banks and credit programs operating in the region. It also looks into the growth and types of NGOs in this region.

The Districts Rural Profile

Vadodara district is located in the Central part of Gujarat State. Eastern part of the district comprises of Chotaudaipur, Pavi Jetpur and Naswadi talukas which are relatively backward in terms of resources and development. The rest of the area is sufficiently blessed with two major rivers Narmada and Mahi and about 80 rivulets. The soils in the district is sandy loam and black mostly suitable for cultivation of bajra, tobacco, cotton and orchid crops. The district has a moderate climate and an average rainfall of 1000 mm. There are 1655 villages and 19 towns in the district. As per 1991 census the total population of the district was 20,86, 610 with around 60 per cent of the population living in rural areas. The district has a well-established network of transport and communication facilities. The total area of the district comprises of 77200 hectares out of which nearly 69.25 per cent is under cultivation. Due to the non-availability of canal water and irrigation projects, wells, tubewells and other minor irrigation schemes assume greater significance. The average land holding size is 2.63 hectares with 2,05,025 land holders. The livestock presence is 876 thousand with majority being cows, buffaloes and milch cattle. The co-operative marketing system with its eight regional marketing societies covers 12 Talukas of the district. Demographic characteristics of rural households indicate an average family size of 5.5 members. The average literacy rate between male and females was 49.2 and 24.8 per cent respectively.

For the scheduled tribes and scheduled castes the literacy level is low at 24.8 per cent scheduled castes and 32 per cent. A large section of the working class population falls in the category of agricultural laborers of which women too form a predominant part. The female work participation rate is 23.5 per cent. A study of the habitant conditions indicated that majority of the population was residing in on roomed houses while a large section of the population has roof tops made of corrugated iron, zinc and other material sheets.

Banks and Credit Programs

1. Banks in the District Vadodara district is well served by public sector commercial banks. The branch network comprises of 149 commercial bank branches and 49 DCCBs and LDB branches. The Co-operative structure also has a strong set up in the district; there are 3847 primary co-operative societies. The commercial banks are centered around the city area but are less visible in the backward regions of the district.

2. Development Programs of the Banks

The formal financial institutions implement development programs for the rural poor and the deprived. The programs effective in the region are: [I] IRDP [Integrated Rural Development Programs]: Is a program that has been working as a frontal anti poverty program throughout the nation since 1981. IRDP has a specific characteristic feature of decentralized process of planning, emanating from a block as a unit of planning. The main objective of IRDP is to improve production and increase employment opportunities for the rural poor. Animal husbandry and minor irrigation have been the most popular programs of IRDP. [ii] Special Program for Assistance of Small and Marginal Farmers. The program is implemented through DRDA and aims at exclusively assisting small and marginal farmers for enhancing productivity levels of their farms. Finance is made available for digging and construction of new wells, repairing and deepening of existing wells; purchase and installation of electric motors pump sets, oil engines and community irrigation projects. Besides irrigation facilities, encouragement is also given for plantation of fuel and fruit trees and accelerating cultivation of oil seeds and pulses.

[iii] Bio Gas Development Program This program is implemented by various industries viz. Gujarat Agro Industries Corporation Ltd., KVIB, GSFC with credit assistance from banks. The central and the state government make subsidy assistance ranging from 17 to 48 per cent available. [iv] Small Scale Industries Development The district industrial center [DIC] takes the initative in identifying and supporting the small-scale industries in different segments. It also identifies and supports smallscale sick industries within the district with the support of the banks. [v] Program of Bankable Schemes Under the program, the DIC provides financial assistance to rural artisans, craftsmen, entrepreneurs, small businessmen and traders for enabling them to undertake various employment oriented and income generating activities under industries, service and business sector. [ vi] Jeevan Dhara Program Under the program, benefit of free dugwell has been given to small and marginal farmers of SC/ST communities. Financial institutions assist farmers for purchase of oil engine/electric motors with 50 per cent subsidy is also provided as crop loan to beneficiaries. [vii] Tribal Sub Plan Program The plan of tribal sub-plan of the district adopts an integrated area development strategy in respect of infrastructure to cover all the developmental needs of the area. The districts agriculture, animal husbandry departments and the social welfare department of the district panchayat sponsor application to various financial institutions for provisioning subsidy to the SC and STs.

[viii] Gujarat Backward Classes Development Corporation

The development corporation at Gandhi agar operates schemes for granting subsidy to educationally and socially backward classes. The corporation also sponsors applications to banks under different bankable schemes. [ix] Subsidy for Cottage Industries. Under this scheme, subsidy is granted to SEBCs ranging from Rs. 3000 to 5000 forming 33.33 to 50 per cent disbursals. [ix] Development Programs/Schemes of NABARD

NABARD grants refinance for farm and non-farm sect oral activities to schematic lending, NABARD provides automatic refinance to banks for implementation of IRDP, Rural and Cottage Industries, Farm Mechanization, Bio-Gas, MNP and Land Development /Waste Land Development.

Non-Governmental Organizations in the District

The Vadodara city is the 21st largest city in India, with a population of around 13 lakhs. The city alone has 1742 registered organizations offering human welfare services in the community. Out of 1742 organizations, one third of them are active around the year while one forth have sporadic activities. The average population served by the VOs is around 2125. VOs in Vadodara are broadly divided in nine categories viz. education and recreation, economic and socio cultural, health care, womens enlistment, other welfare activities, residential, rehabilitation of disabled and rural development. It was observed that maximum number of NGOs were working with education and recreation activities while, almost 32 per cent were economic and socio cultural organizations. There were about 7 per cent NGOs working with womens enlistment and only 3 per cent with rural development programs. The services and programs of NGOs varied in nature they included economic services such as income generating activities, assistance in cash and kind, loan s and subsidies, education, research, child development, mothers health and women related services. The nature and number of projects implemented by NGOs differ widely across different categories. Economic organizations included: 19 NGOs with income generating activities and 39 organizations providing financial help to needy and loans for self employed. The womens uplifting organizations included 25 training organizations, 9 income supplementary activities and 8 manila mandalies. There were some welfare organizations, which were involved in creating employment opportunities and camps on agriculture. Funds were mainly mobilized in the form of donations, interest on deposits, organizations activities and grants. The staffing pattern revealed that most organizations had no paid staff, 15 per cent of the NGOs had 2-3 staff members and very few VOs were working with 8-20 persons.

References: 1. United Way Directory, 1988. Directory of Voluntary Organizations in Baroda. A United Way Publication. 2. United Way Publication, 1995-96, Directory of NGOs/VOs in Gujarat State, United Way Publication. 3. Service Area Approach, 1997-98. An Lead Banks Annual Action Plan, Bank of Baroda Publications.

CHAPTER IV EXAMINATION OF BANKS PARTICIPATION IN IMPLEMTING SHG- NGO BANK LINKAGE PROGRAM

The SHG bank linkage program has been introduced by the National Bank for Agriculture and Rural Development [NABARD] in all the districts of the country. All banks have been asked to identify SHGs or NGOs with saving and credit groups to form linkages. In order to extend effective linkages the banks need to adopt an integrated process of identifying, sensitizing, training and motivating bankers. In this context the present chapter makes an attempt to :

- Study NABARDs role in promoting SHG program. - Assess initiatives made by the lead banks and other three major public sector banks in establishing SHG linkages in Vadodara district. - To review the SHG bank linkage in the district

Role of the NABARD

Since the eighties, the NABARD has been operating as an apex level financial institution to promote integrated rural development. For a long time it has been supporting credit delivery innovations. After the successful implementation of NABARDs pilot study in SHG bank linkage program, NABARD has been vehemently promoting this approach. Initial effort of NABARD have been successful in improving the outreach of poor clients, around 9598 SHGs covering 29 commercial banks, 80 RRBs and 11 Cooperative banks have established by banks till 1996-97, majority of which were linked though NGOs. NABARD has been playing a role of a facilitator, resource provider and clearing house for exchange of information and experiences for NGOs. It has under taken to promote action research special studies on various

aspects of SHGs and other innovative credit concepts for policy refinement. The bank also is involved in sensitizing field level and senior officers from the banking sector through comprehensive training programs conducted at reputed training centers. Monitoring and follow-ups of banks progress is also undertaken at the national bank.

The Lead Bank

The lead bank in any district is vested with the responsibility of disseminating information, guidelines, rules and regulations of RBI and NABARD. Introduction and implementation of a new concept through proper guiding and monitoring is the responsibility of the lead bank. In this study, the lead bank of the Vadodara district is the Bank of Baroda. The bank in its background paper Service Area Approach outlines the rules, regulations, guidelines and operational strategies for providing credit to SHGs. It submits a list of NGOs to bankers for exploring the possibility of establishing linkages. This document is circulated amongst 149 commercial bank branches, 49 branches of the district central co-operatives and Land Development Banks [LDBs]. The lead banks have also been passing on the circulars of NABARD to various banks on a regular basis. The key individuals responsible for propelling and establishing the SHG approach to lending are the lead bank manager and the assistant lead bank managers. Interviews and informal conversations with these functionaries brought interesting revelations. The bankers saw the rural development as a long drawn process that had become a frustrating experience with government partnerships. The Lead Bank Officer [LBO] thought that the SHG approach was for the underprivileged rural masses that were not eligible for any assistance under the regular credit programs. He said that efforts were being made to make banks initiate SHG lending through directives at each bank and branch level. He was highly skeptical about the approach as he felt that like all other rural development programs this too would lead to misappropriation of funds, this time through NGOs. Rural development unfortunately is no more a favorite with the bankers. Besides, liberalization and financial sector reforms have pushed bankers into fulfilling prudential norms, risk aversion, meeting growing competition and lucrative commercial endeavors. The Assistant Lead Bank Officer [ALBO] was refreshingly an optimistic and relatively enlightened individual. He felt that it was important for bankers to have a strong motivation and positive attitude. He stated that besides NABARDs regular guidelines, training programs were arranged by the training centers to sensitize the bankers with the SHG approach to lending. The training programs

had enabled bank officials to acquire a clear perception of the utility, effectiveness and benefits of the SHG approach. Through a visit to the banks training center it was found that the center was conducting training programs for branch managers on a regular basis. The training programs were generally held for a single day or sometimes three days. The three days training program was more comprehensive. The initial session was spent on changing the mindset of the bank officials through brainstorming sessions and introducing innovative flexible ideas for forming SHGs. Emphasis was given on identifying saving groups and motivating them to open a saving account with the nearest bank branch. NABARDs framework for introducing a SHG or financing one was discussed in detail. All documents to be executed by the banks for financing NGO/SHGs were also discussed. [Details of the documents to be executed are provided in Annexure II] .The training programs generally ended with a field visit to an NGO, sponsoring bank and a SHG. This practical experience was very effective in building a positive impression amongst the branch mangers. On the other hand, the one-day training programs were mere flashes of reality. It was unfortunate that the bankers were unable to spare their staff for the three days program and the training centers were forced to contain the training programs to a single day Short training programs were inadequate in persuading bankers to take up SHGNGO linkages. In an effort to identify the problems faced by bank officials in implementation of the SHG program, it was found that it was difficult for the bankers to identify SHGs and NGOs. They were certain that if they succeeded in identifying SHGs, extending of partnerships would be an easier task. It was also felt that rewarding the bankers for their efforts would go a long way in motivating bank officials. Other Public Sector Banks.

In this study three public sector banks namely the State Bank of India [SBI], Dena Bank and Bank of India [BOI] with greater number of branches were selected. Bank officials from the top management and branch level were interviewed. Out of the three banks only SBI had succeeded in establishing SHG- linkage in the tribal area of Chotaudipur taluka. The poor performance as been accorded by bank officials to: -Lack of adequate information about NGOs/SHGs; -NGOs had not come forward and contacted banks; -There was a lacuna in the information and the approach; -Branch managers lacked motivation and confidence to form saving groups on their own and ultimately most bank officials

were busy fulfilling targets and did not have time to experiment with innovative methods. A study of the awareness level of the SHG approach amongst bank officials revealed that bankers who had undergone the training program were only aware of the SHG approach. A large number of bank officials had a vivid picture and were unable to relay much about micro credit. Bank officials from these banks also manifested their dissatisfaction with government partnerships. Besides, as the banking sector was fast becoming competitive, banks were busy concentrating on new thrust areas, this affected the bankers interest in rural development projects adversely. One important revelation was that the bankers were refraining from financing the SHGs as they believed that in case of defaults it was not possible to file a suit against a SHG. In brief the bank officials were optimistic but a little skeptical about the SHG bank linkage program. Officials who had undergone training programs were looking forward to initializing partnerships though none of them were found to be making any special efforts. The SHG program has not yet picked up in the district there were only few cases of SHG linkages reported by the State Bank of India and Bank of Baroda in the tribal areas of Chotaudaipur and Savali Talukas.

The District Central Co-operative Bank

The district central co-operative banks at the intermediary level, serves as a vital link between State Cc-operative Bank [SCB] and the grass root level organizations the Primary Agriculture Credit Societies [PACS]. The Baroda Central Co-operative Bank has been suffering losses and at present is concentrating on consolidating its weak position. It has been busy making efforts in meeting prudential norms of Non Performing Assets [NPA] increasing funds, improving infrastructure facilities, diversifying lending policy and procedures, availing maximum refinance and above all improving recovery performance. The major problem confronting the Baroda Central Co-operative Bank [BCCB] is its under resourced human potential. Most of the staff at the bank were educated till the twelfth grade and there were only two to three bankers who had completed with graduation. The manager informed, that he had received NABARDs circular notifying him about the SHG program only in January 1998. He did not have any knowledge about the SHG linkage approach but was looking forward to learning and implementing it. He felt that the bank needed a training center, as imparting training was a basic necessity in wake of the lower educational status of bankers. Despite this one of the note worthy findings was that the Co-operatives were financing Mahila Mandalies through NGOs and they had a 90 to 100 per cent repayments. The irony was that the bankers were appreciative of the Mahila

Mandals but did not realize that they were just another name for the Self Help Groups. The Linkage [Cases of SHG Bank - Linkage] After the establishment of the SHG Bank-Linkage program in Vadodara district since 1995 only two cases of linkages were reported. The first case refers to the direct linkage established by the State Bank of India branch in the tribal area of Chotaudaipur Talukas. The second linkage has emerged from a partnership with an NGO. Out of these two cases, the BOB sponsored linkage is reviewed in detail and a brief account of the SHG financed in Chotaudaipur is also made.

1. SHG-Linkage of SBI in Chotaudaipur Talukas

Chotaudaipur Talukas has a significant population of scheduled tribes and scheduled castes. The land area is undulating with pockets of population. Landholding is highly fragmented, as cultivators are many. The average landholding size is around two acres. Application of any modern technology requires a larger area. For a small to a marginal farmer using a tractor becomes difficult, as even the banks pre requirement for financing a loan for a tractor ownership of 9 acres of land. There were some farmers in Chotaudaipur who wanted to use a tractor for cultivation. The SBI Branch manager first organized these farmers into a group and after some preliminary savings, sanctioned loan for a tractor. This long-term loan had been given for nine years and the group was formed only for the purpose of acquiring loan. Bank officials themselves are skeptical about the repayment, they acknowledge the fact that is would not be possible for group members to stay together for a period of nine years. Bankers justify the loan purely on social consideration.

2. SHG Linkage of Bank of Baroda in Savali Taluka

Savali Taluka is located within a radius of 792 km and covers 13 villages. It accommodates rural and urban population of 205478 and one third scheduled castes and tribes. The literacy rate is low at 48.80 per cent. Majority of the population is dependent on agricultural activities. People residing in Savali are mainly rajputs they are known to be highly short tempered and staunch people. The bank officials face several difficulties while negotiating with them. About 9569 hectares of land is irrigated with well and issued to grow paddy. Jowar, sugarcane, bajra and other commercial crops. Savali Taluka lacks the facility of a full-fledged hospital and only has a primary health center. There are three dispensaries, 147 milk co-operative societies, 226 primary schools but only 26 high schools and 2 higher education centers in the Talukas. The institutional umbrella

covers 13 banks, 4 District Central Co-operative Banks, 1 State level District Bank, 62 Primary Agricultural Co-operatives and one marketing co-operative. The SHG linkage is established through an NGO called Social Action for Rural and Tribal Inhabitants in India [Sarthi]. The BOB branch manager at Rajupura branch about 60 kilometers away from Savali town had undergone the training program at the Bank of Barodas training center. Drawing initiative from the program, the manager took upon himself the task of identifying a NGO with saving groups within his area. This was when he came across SARTHI. The manager persuaded the NGO to open a bank account in the name of the SHGs in Rajupura branch. Savings of SHGs were deposited with the branch. The Bank has not begun its lending activities yet because it is waiting for the group to mature and complete its gestation period of six months .

SARATHI has its head office in the Panchmahal and has been functioning since 1984. A leading landlord established the organization. The NGO is involved in a number of programs like watershed development, womens emancipation, rural development, chula, bio gas plant etc. The NGOs office is situated in Chhaliar a village 15 km away from the main highway further away from Savili Taluka. The NGO works with a few hamlet of villages within a radius of 3 to 5 km from its office. Some villages are unapproachable by road, there are only small paths leading to them. The NGOs office has a program officer, sevika and an accountant residing within the NGO premises they work closely with the villagers and share a close bond with them. Sarathi has about eight mature groups operating since 3 to 4 yrs and 20-30 pre mature groups working with only saving activities. When SHGs were to be formed women were gathered and oriented about the NGO and its activities. At the meeting, the sevika explained the benefits of forming groups, which included, getting benefits from NGOs such as, procuring saplings at subsidized rates, getting finance from banks etc. The sevika also educated the group about the benefits of group formation, strength of working together, coming out of the house and building awareness and gaining strength to live life more meaningfully. The sevikas were supported by elderly men [who were working with the NGO in watershed programs] who explained to the women about the importance of thrift by giving them simple examples with which women could relate easily. Meetings were conducted once a month by two literate women from each groups known as mantri and pramukh. They were trained by the NGO to undertake simple procedures like book-keeping, maintaining registers, collecting savings, repayments and depositing the savings with post office saving banks. The NGO worker was simply involved in monitoring the process. All types of grievances of group members were settled at the meetings while all loan decisions were also taken here. Loans

were procured for consumption and production purposes such as fertilizer, shop, and trading and social activities. A regular saver was allowed to get a loan from the group at 2 per cent per month. Interest on savings was only used for lending activities. Each group kept an amount of Rs 15000 in the saving account with the Post Office Saving Bank. After the corpus grew to a sizeable amount it was deposited in the commercial bank on the groups name. The core fund of Rs 15000 was used only for paying off members who left the group or meeting critical expenditures. Besides, the Rajupura branch, the NGO also had some SHG saving account in desar village with the SBI bank branch. The SBI however has not taken any lead in recognizing and financing the SHGs. This NGO has a long experience in forming and handling SHGs. The bank linkage program has a greater chance of sustaining the poor and itself. CHAPTER V CASE STUDIES OF NGOs WITH SHGs

The banks initiatives, awareness and problems of SHG-Bank linkage program have been reviewed in the previous chapter. There are different ways of bringing sustainable financial services to poor; the present chapter makes an attempt to understand them. Eleven NGOs/VOs were selected from [Annexure I] for a detailed appraisal. The material for case studies was gathered over a period of one year [1997-98]. The case studies offer an insight of the different systems and institutions and attempt to describe the ways in which their clients or beneficiaries were able to use them. They also provide detailed information about the saving and credit groups and their method of operations. NGOs selected for case studies included: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. Shroff Foundation Trust [SFT], Mahila Antodaya Kendra [MAK], Pandu Mewas Development Agency [PMDA], Shree Gangaba Stree Sahayak Aughoygik Sahakari Mandali Ltd [GSSASM], Nirmala Samaj Kendra [NSK], Mahila Samakhya [MS], Bhagini Samaj Sewa [BSS], Bhartiya Agro Industries Foundation [BAIF], Rural Development Circle[RDC], Anugrah Charitable Trust [ACT] and; Bhartiya Samaj Sewa Trust [BSST].

On visiting these NGOs it was found that Anugrah Charitable Trust and Samaj Sewa Trust had closed their activities and were currently inactive. Voluntary organizations are not static and often change their activities and locations. Rural Development Circle is one such organization, which is working with quality circle concept. Bhagini Samaj Sewa is a womens organization, which runs its own credit society for the benefit of its employees. The rest of the NGOs have saving and credit groups and work with multiple objectives. 1. Shroff Foundation Trust

Located at Kalali, 10 kms away from the district, Shroff Fondation Trust [SFT] works for realizing the dreams of rural development. Established in 1980 as a charitable organization, SFT was registered under the Bombay Public Trust Act, 1950. SFT is the brainchild of a leading industrialists wife. Located in the spacious premises at Kalali village, SFT has an aesthetic looking office, a full-fledged medical hospital and a training center. SFTs activities extend around Kalali, Ekalbara, Piludra and a few villages around Chotaudaipur Taluka[Tribal Area]. The SFT works with the objective of improving productivity, efficiency and creativity of the village population through the support of industries, government agencies and village institutions. SFT undertakes a wide range of activities viz., childrens center, health agro, veterinary services, energy management, housing, water harvesting and management, youth services, womens welfare and training of rural population. Ramesh Gandhi Samarak Bal Kendra a part of the SFT has organized childrens workshops, picnic, sports, debates, teaching and even saving activities. The saving scheme for children needs special mention as it has succeeded in mobilizing Rs 93,386 with 206 childrens savings collected every month. These savings were further used for providing teaching materials and undertaking developmental activities. Besides SFT also undertakes activities viz.,

-- SFTs hospital provided medical aid to 65721 cases ; -- Agro services were also made available to farmers to increase their crop yields ; -- 7035 cattle were given veterinary services -- Energy management had aided installation of 3000 chullas and 7000 latrines. This had helped to decrease community diseases and conserve energy; -- Low cost houses with proper ventilation and sanitation were also built; Independent water facility for irrigation and cattle were provided to 600 families in 3 villages. The water shed program had covered 85000 hectares in 22 villages and supported several activities

SFT also had a special training center where their staff and village women were trained. Training was imparted for enhancing knowledge, improving behavioral skills, rapport building and inculcating leadership abilities. Women in Kalali, Ekalbara and Khalipura villages had begun mahila dairies through co-operative action. These co-operatives enabled women to get higher prices for their milk and acquire an additional income of Rs 854 per month. Women were also found to be saving 50 paise per liter in a span of only 12 months they had succeeded in accumulating Rs 50000 which were deposited with BOB branch. The Bank of Baroda had advanced several loans to women in Kalali for purchasing milk cattle under the Integrated Rural Development Program. Loans were imparted on the NGOs guarantee this had ensured a 100 per cent loan recovery for the financing bank. There were four groups with SFT, which had the potential of establishing credit linkages. Details of these groups are given below. Saving Groups of SFT
S.N. Taluka Members Savings Time of Operation

1 2 3 4

Vaodara Chotaudaipur Chotaudaipur Chotaudaipur

60 20 15 15

4000 3000 --------

3 months 6 months to be initiated to be initiated

In the first group of the district 45 women belonged to the milk co-operative The group was a mixed with women members from different income levels. The group was purely a saving group but was ready to begin credit activities. The second group was in the tribal village of Judavat, women here were involved in cane work activities. Funds for the groups activities came from SFT and its saving and credit programs. The cane artifacts produced by the group were sold in exhibitions organized by SFT. Democratically elected members called the sarpanch and mantri managed the groups. Decisions were jointly taken at the monthly meetings saving and loaning activities were also undertaken here. The third group in Chotaudaipur was a male group comprising of 15 cobblers. The Rangpur group [forth group] of 15 members was involved in embroidery work. Women were provided training by CAPART, while funds were made available by the NGO and marketing was undertaken by a sister concern of SFT. In order to provide an impetus to the SHG-Bank Linage Program, the lead back had arranged a meeting with leading NGOs. This meeting had increased the awareness of NGO functionaries. The project co-coordinator of SFT was also present at this meeting; he had acquired necessary information and circulars for establishing linkages with banks for SHGs. Unfortunately when the project co-coordinator approached the branch manager of Bank of Baroda in the area, the bank manger had no knowledge of the SHG Bank Linkage Program. Since then, the branch manger has been transferred and is replaced by a new face; the project co-coordinator awaits him with anticipation of a positive response. A promise yet to be fulfilled by the lead banks branch offices.

2. Mahila Antodaya Kendra [MAK] Mahila Antodaya Kendra [MAK] was formed in 1994. The Kendra has been motivated by the famous Bangladeshi model of Grameen Bank. Drawing inspiration from the Grameen bank the Kendra has sought to transform the lives of poor women in backward rural interiors and urban pockets of the state. MAK is the brainchild of a popular politician and social worker Sanat Mehta. Under his able leadership the Kendra has grown and flourished. The founder from industries, public trusts, cooperative organizations, progressive farmers, friends, government of India and state governments mobilized the building and premises cost. Financial support is extended to women trough the Grameen Mahila Bank and the SHGs. The Kendra has rushed in a quiet revolution with deposits of two million

rupees. Initially, only financial credit was offered but now loans in kind are also extended. Loans have been given for various purposes: sewing machines, lorries, handcarts, cycle rickshaws, diesel pumps and even house repairing. There were 2172 members out of which 537 were urban and 975 were in rural areas. A large majority of the members were tribal while scheduled castes; minorities and backward classes were also significant. Loans unto Rs. 28,59,800 were lent till April 1997 out of which the NGO had recovered 95.90 per cent of the outstanding loans. In case of kind loans, Rs 32,64,671 were disbursed and the recoveries of Rs 24,44,99 made till the last year. There is significant evidence to show that the Kendra had succeeded in its objectives. The battle against poverty is gathering momentum and already sizeable number of beneficiaries has been able to break the shackles of poverty. The formal banking institutions have however no links with the NGO. The MAK has 12 SHGs operating in urban areas of the district. A field worker organized women into groups of 20 and began savings with Rs 10, 50 or even 100. Loaning activities began after a month the loan size varied between Rs 300 to 1200. Every month a single loan of equal amount was sanctioned in-group meetings. Collection of savings, repayment installments and maintenance of passbooks and records were also undertaken at the meetings. Loans were interest free but then no interest was paid on the deposits too. Consumption loans however were provided at 12 [per cent] Out of the total savings only a part was lent while the rest was kept with group. The SHGs recorded a 100 per cent rate of repayment. A brief account of SHGs saving and loan activities are provided here. Saving and Credit Groups of MAK

SN. 1 2 3 4 5 6 7 8 9 10 11 12

Savings of SHGs in Rs 7680 4620 7020 8760 10010 8470 8470 3900 4080 2800 5720 2640

Loans of SHGs in Rs 9900 5500 8800 11000 12300 10000 4500 4900 3500 7000 3500 3500

The Mahila Antodaya Kendra runs its own Grameen Bank on the lines of renowned model bank in Bangladesh. Since its inception in 1994[till 1996], the Kendra has disbursed Rs. 1.6 million rupees to 1500 beneficiaries. Each member was required to deposit a minimum amount every month before asking for credit. The MAK has become the symbol of saga of empowerment of the most important section of Indian society. The challenging the way in which each of the following women tried to emancipate their life is a quest characterized by dignity and self-respect.

Case 1: Rekhaben Rajput : As a vendor of homespun aerated water, she earned meagerly amount hardly enough to make her two ends meet after paying hire charges of 120 Rs a month for a mobile vehicle in which she carried her water. She walked into the Kendra to obtain a loan of Rs 1000 and put an end to a life of perpetual want. The loan and the Kendra have enabled her to expand her small business activity. She now quenches more thirsty throats than before by augmenting her capacity to make larger quantities of soda mixed with lime. And a lot cooler too, she made herself eligible for a second loan. The business is booming, Rekhaben is comfortable and is even managing a repayment of Rs 500 a month. Case 2:

Nandabahen Pravin
As a member of the Kendra and a vegetable seller scraping an income Rs 20 to 25 a day she acquired Rs 400 worth of vegetables from the credit given to her. She also had to chip in some money as an earnest deposit. With the kendras loan she has emerged as a vegetable seller in her own right. She has also begun earning money by making lip smacking snacks utilizing the unsold vegetables. Her jingling cash box helps her to save as much as Rs 250 to 300 a month after meeting business expenses and needs of family. She has also acquired a refrigerator by procuring a loan from the Kendra. Regular in her payment to the Kendra, Nanadahehen is keenly participating in the Kendras activities. The Kendra has now extended a loan of Rs 5000 to enable Nanadabehen repair her dwelling unit which now works as a residence cum sales outlet.

Case 3 Sankdi Villalge in Dediapada Sanctuary:--+ Bharuch district has etched its name permanently in agriculture by deciding to harness water streams flowing though the sanctuary with the help of diesel engines and raising crops during winter season. It was a momentous decision because utilizing waters for erasing crops was a long cherished but yet an unfulfilled desire. So crucial was the decision that people trudged a distance of 15 kms wading through even flash floods caused by heavy rains. The question to be decided was whether loans with built in subsidy under Tribal Welfare Program of the government should be sought or the Kendra loan with no subsidy element should be availed of. The vote was in favor of the Kendra loan. The reason: Kendra loan was certain and hassle free the government loans on the other hand meant endless trips and no certainty. The Kendra reciprocated the trust and confidence reposed in it by sanctioning Rs 100 000 for eight women for puchase of diesel engine. Today the tribal people of Dediapada are contended lot beaming with happiness. Before the diesel engine, the Kendra had extended a loan of Rs. 1 lakh to nearly 700 women, which enabled them to take a second crop. The loan has now been paid back successfully.

It is the firm belief of the Kendra that whatever little, but it has been able to transform the lives of people. Life constitutes a series of continuous experiences. A single experience is like a brick in the wall. The strength and weaknesses of the wall depends on the quality of texture used in the construction. The Kendra can justifiably be viewed as a brick of texture of quality in the wall of life of those who had sought to transform it.

3. Pandu Mewas Development Agency

Set up to promote integrated rural development the Pandu Mewas Development Agency [PMDA], supports 25 villages of Savli taluka in Vadodara District. The development agency is fortunate to have the representation of government functionaries and banks officials in the trusts board. This representation has ensured adequate flow of funds, expansion and smooth functioning its activities. The trusts activities are divided in five broad based fields of : infrastructure, agriculture, animal husbandry, rural occupation and other services. Under the infrastructure project, schemes such as widening of linkage roads to villages through government funds, setting up of check dams, village improvement programs have been undertaken. In the agricultural sector, the agency has been working actively in land reclamation projects, installation of irrigation equipment on check dams digging, repairing and even deepening of wells. All these tasks have been undertaken through the active participation of small and marginal farmers co-operative societies. The VO also provides extension services to farmers through village level and extension workers. This not only has increased the productivity for farmers but opened new vistas of knowledge, skills and techniques for upgrading age old ignorance and beliefs. There was a set of marginal and small farmers cultivating land on crop sharing basis for lack of agricultural equipment. The agency was involved in distributing bullocks to each family and initiating the use of tractors amongst the farmers. Under the crop loan scheme the agency had facilitated flow of funds from the BOB to the deprived

farmers. Tobacco, maize bajra were the main crops of the area, an introduction to hybrid crops was undertaken through the womens co-operative society. This benefited the farmers in increasing their earnings. CAPART has been extending support to the agency for increasing their outreach. However in spite of the extensive support provided by PMDA to small and marginal farmers they were unable to increase their income beyond a certain limit. In order to provide incremental income to these farmers and agricultural laborers the agency borrowed loan from the SBI and the BOB. Funds were procured for purchase of buffaloes cows and goats, PMDA also undertook activities such as cattle breeding, nutritive fodder, treatment camps and gobar gas plants. It was observed that a large number of real youth had completed primary and secondary education but were confronting severe unemployment problems. In order to support such groups, training classes of six months duration were arranged by MDA in co-operation with the government functionaries. The BOB was advancing loans to these youth under credit schemes such as the IRDP. Banks funds were procured for expanding old business and setting up new ventures. Families engaged in bidi and pottery making, leatherwork, grocery, ice-candy etc. were duly encouraged to pursue their businesses. With the banks support the villages now have shops where none existed before. Village meetings were crucial ingredients of the implementing process of the NGO for the co-operative groups. Problems and difficulties that arose at the village level meetings were taken up at trustees board meeting. Resolving problems was made relatively easy by the presence of government and bank officials at board meetings. The PMDA has set up seven co-operative societies for the purpose of irrigation, carpet weaving and small business activities. Out of these seven co-operative societies, one was a womens co-operative working with cottage and village industries. Co-operative societies were formed to ensure peoples participation and achieve the goal of excellence. Co-operative societies working for lift irrigation were male dominated. Each society had a committee made of 11 members with a Pramukh and Mantri. The committee was responsible for providing river water to farmers. Committee members took necessary decision regarding distribution of water, salaries and collection of funds. Profits form the activities and savings were used for promoting irrigation endeavors. PMDA also has some 100 saving groups operating in about seven villages of Savali Taluka. All these groups have prospects for bank linkages. It needs to be noted that in spite of direct linkages with banks in terms of directed funds to underprivileged rural poor in Savali Talukas under IRDP, DWCRA and other programs no effort has yet been made to reach these saving groups. As a matter of fact, it was the International Center for Entrepreneurship and Career Development [ICED] that approached the agency for forming saving groups. ICED contacted the trust for imparting training to its ninety beneficiaries for four days.

Training was to be imparted for forming and running groups. In addition training for identifying economic activities, procuring inputs and marketing was also arranged. The ICED has opened a saving account with a public sector bank and it plans to finance groups with Rs 10000 at seven per cent rate of interest. The trust officials had no knowledge about the SHG bank linkage program but they were keen to work with bank partnerships. Women SHGs with the agency have been operating for last four to five years with saving accounts in post office saving banks. Funds in form of interest on savings are only used amongst group members for consumption and economic activities such as making toys, sewing etc. 4. Shree Gangaba Stree Sahayak Audhyogik Sahkari Mandali Ltd.

The mandali was established in 1980s to help economically backward and widowed women. The mandali operates though its staff of 20 members. Emphasis is given o creating additional employment by supporting income-generating activities. Income generation activities include canteen activities, sweets, plates and bowl making from leaves and pickle making. The canteen activity began with the idea of providing clean simple and nourishing food. Snacks were also provided to anganwadies [day care center for children] by the mandalies. They had to fill in tenders and on acceptance; the mandali was given the contract of providing food. Once the contract was finalized, the mandali appointed women for cooking, cutting etc. The mandali was also engaged in manufacturing sweets and farsans on order during diwali festivals. The trust had only one activity of plates and bowls making for marriages and ceremonial occasions operating in rural areas. There were about four to five groups of 20-30 women involved in this activity. Like minded women came together for collective effort and sharing of benefits. These women like the SHGs formed their saving groups and used their funds for pursuing income generating projects. The Gangaba Mandali, also ran a masala and pickle divisions all of which were prepared in the organizations premises. Stitching and block printing on silk and handloom cloth were also done here. Initially, training was provided to women and subsequently employment. Products manufactured were sold in the market at reasonable prices. Garments and handloom work was displayed in government shops such as the handloom houses. The organization is medium in sized and thrives to create employment for the backward and low-income group women. The Managua Mandali has employed large number of women in its production unit but do not have any marketing staff. The lack of professionalism affects the units work as most of the divisions are running below capacity.

The trust enjoys the assistance of the District Central Co-operative Bank. All loans of the DCCBs had a repayment rate of 95 to 100 per cent. DCCBs need to study these mandalies to promote more of them. It needs to be noted that the manadalies are a form of saving and credit groups. Unfortunately the officials of the co-operative banks do not recognize this.

5. Nirmal Samaj Kendra [NSK]

NSK is an organization run by a Christian Missionary since last two decades. The NGOs programs mainly concentrate on educational, medical, agricultural and relief activities. The NGOs office is situated around the station area where a substantial number of low income group population lives. Its office is large with a medical center and a mobile van at its disposal. Under the Christian Child Funded Project, education was provided to children in backward areas. Village women were organized into mahila mandals for undertaking developmental activities. The NGO has around 35 mahila mandals operating today. NSK believed in participative development, after initial training to mahila mandals it has withdrawn support and allowed them to operate independently. NSK however, stands by to support and help these mandalies. Some of the women were also involved in providing tuitions to children of class 1 to10 and were actively participating in health programs too. Women who were trained to work as nursemaids were helping village women in delivering babies. The NGO had its own medical center that provided medical aid to backward women in the city area, it also worked to provide aid to rural women through its mobile van. |The NGO also ran saving and credit groups in three villages of Padra Taluka in Vadodara. Savings and Credit Groups of NSK Name of the Village Group Members Duration of Operation Savings in Rs In years

1. Dhabasa 150 6 60000 2. Bhoj 100 4 40000 3. Padra Town 22-27 8 30000 Self Help Groups of NSK had a long-standing experience of working with saving and credit activities. The first two groups had large members. Initially, there were four to six groups with 20-25 members operating in each village. As the groups lacked leadership qualities the NGO decided to merge these groups into a larger group.

SHGs in all the villages followed similar patterns of organization and management. Group leaders were democratically elected and were responsible for conducting monthly meetings, collecting savings and maintaining pass books and books of accounts. Savings of Rs 10 were collected every month from members and loans were given for social and economic activities. Loans were deployed at 12 per cent and the loan size varied from Rs 250 to 1000. Group savings were kept with the Central Bank branches of different villages in the names of group leaders and not SHGs. All the SHGs had full repayment rate of 100 per cent as women with defaults were compelled to repay through group pressures and additional penalty rates. The NGO is willing to procure funds from banks but lacks knowledge about banks credit programs. NSK is willing to procure funds form banks but lack the knowledge about banks credit programs. NSK is willing to procure funds from banks but lacks knowledge about banks programs. NSK had tried procuring funds form banks for its income generating activities about three years back but had not received any positive feedback. Since then, the NGO has survived with its own funds, but is open to receiving banks support even today.

6. Mahila Samakhya
The education department of Human Resource Ministry, Government of India in 1989, initiated Mahila Samakhya. This program is implemented in six States in India. Mahila Samakhya works to create an awareness amongst women about her rights and her education. It also works to increase the self-esteem and confidence of women by helping them to realize their potential and contribution towards households and society. It has tried to coerce village and district level functionaries to fulfill their duties and support activities of Mahila Samakhya. Mahila Samakhya organized women groups, provided primary education and created opportunities for womens education. When women are organized into groups they become stronger. Under Mahila Samakhya, women groups are known as mahila sanghs. In order to sustain these groups two women, selected by the sangh members and were provided training. These trained women were known as Sakhies they provided good support to the Sanghs activities. The sakhies kept on changing every year, giving equal opportunities to all women, to grow and develop. After the training process women became capable of joint thinking and deliberations. They acquired the strength to voice their needs for education, childcare, health, fuel, fodder and water related problems. The program is given the freedom of flexibility, which enabled it to make changes in accordance to their needs. The Mahila Samakhya s functionaries were working for every ten villages, they operated as intermediaries between the village and district and state level

committees comprising of government and non-government officials and were set to take financial and administrative decisions. Mahila Samakhya has also initiated some economic development programs. Foremost, a strong Sangh was selected for a model experiment. After initial saving activities for six months, savings were deposited with the bank. Rules, regulations and procedures for lending were framed by the NGO, while vigorous training was imparted to the Sangh for conducting monthly meetings and maintaining records. Mahila Samakhya played a crucial role in disseminating information, solving problems and working out the cost benefits. In some villages the NGO had taken up DWCRA activities. As present Mahila Samakhya has twelve groups with 261 members and Rs 30,400 savings with it. Sanghs of Mahila Samakhya

SN. 1 2 3 4 5 6 7 8 9 10 11 12

Area Chotaudaipur Naswadi Naswadi Padra

Duration of Operation In years.

Savings

Total Women 26 28 15 80 29 15 20 27 25 10 25 18

2 4000 1 3500 1/6mths 1500 4 3000 2 4000 3 2000 5 4000 6mths 1400 2 2000 2 2000 1/6mths 3000 to be initiated

Out of these 12 groups, the sixth and the ninth group undertook credit activities. These groups were engaged in making bowls and plates of leaves while the rest were exploring the possibilities of taking up economic activities such as making of files etc. The groups face common problems like marketing, credit availability, male interference, rigidity of government programs and bulk paper work involved in availing bank finance.

6. Bhartiya Agro Industries Foundation [BAIF]

BAIF began its activities under the erstwhile leadership of a famous social worker. BAIF was registered under the Bombay Public Trust Act 1950, as a non-profit voluntary organization. It was latter renamed as BAIF. BAIF aims at improving the quality of rural life though sustainable development of degraded resources-land, livestock, water and vegetation using idle human time through multi disciplinary programs. It also fought to overcome the problems of health, illiteracy, empowerment and development of local leadership to ensure better quality of life. Initially, a participative appraisal of problems was undertaken before selecting suitable interventions. It promoted grassroots level organizations to manage the programs and ensure sustainable development. The programs backed by identification of solutions to field problems through applied research, transfer of technologies and extensive network of dedicated professionals and enhancement of local participation have ensured livelihood for rural poor in thousands of villages. The multidisciplinary programs of BAIF have been decentralized and are managed by state level autonomous institutions through dedicated professionals having sound managerial financial and technical competence. BAIF helped small farmers to harness the natural resources for development. Livestock is the mobile natural resource owned by small farmers, BAIF has initiated cattle development through cross breeding. The uniqueness of the program lays in provision of services at the doorsteps of the farmers. A trained technician who covered about 2000 breed able cows and buffaloes in 10-15 villages operated each center. The program was spread over 650 centers in five states. Watershed development is an important component, which ensures safe drinking water and even supports incomegenerating activities. Establishment of contour trenches, live hedges, windbreaks development of percolation tanks and promotion of sound tillage practices to promote soil, moisture and conservation were important components of the program. Tree based farming systems, which ensured soil and water conservation, higher productivity and improved eco system were supported by research. Sericulture has also been developed in parts of Maharashtra, Gujarat, Karnataka, Rajasthan, Madhya Pradesh and Utter Pradesh. Watershed development is an important component, which ensures safe drinking water and even supports income-generating activities. Establishment of contour trenches, live hedges, windbreaks, development of percolation tanks and promotion of sound tillage practices to promote soil, moisture and conservation were important components of the program. Tree based farming systems, which ensured soil, and water conservation, higher productivity and improved eco system were supported by research. Sericulture has also been developed in parts of Maharashtra, Gujarat and Uttar Pradesh for providing gainful employment to women. In order to improve the quality of life of women, BAIF had sought to empower women and facilitate improved health status by seeking their participation in income generating activities such as nursery rising, vegetable, mushroom cultivation and food processing. SHGs were promoted to create confidence and leadership qualities amongst women with focus on personality development, functional literacy, enterprise development,

gender sensitization and credit linkages. As a matter of fact in a place called Vasda in Gujarat tribal had a unique tradition called Wali. This tradition honored and protected womens right over her earnings. BAIF had used this dynamic tradition to introduce several income generating activities as part of the program. Women were organized into SHGs to take up various activities such as nursery raising, mango and cashew grafting, kitchen gardens and mushroom cultivation The tribal women were active participants in the community health programs, this had helped women to shoulder responsibilities in more efficient and equitable manner. In order to promote the overall development a tribal rehabilitation program was implemented in Vanasda district of Gujarat. Self reliance was the key word to reduce dependence on outsiders. For input supply processing and marketing of their produce the tribal families had even set up their own co-operatives. Looking to the success of this model the program is being replicated in other states to cover other weaker sections of the society as well. BAIF also runs a central research station, which is recognized as a research institution by the government of India and the Ministry of Environment and Forests. BAIF has received number of awards for its distinguished achievements and work. 7. Bhagini Samaj Sewa Trust [BSST] BSST is a full fledged organization formed by women and working for women. The organizational body comprises of wives of leading businessmen in the city. BSS runs several programs that provide employment opportunities for women like running pickle and masala making units and undertaking activities like stitching, embroidery etc. All the activities of the organization were conducted in the spacious three storied building premises. There are many facets of the organization but this study focuses on the credit society of the NGO, which works as a financial intermediary. The credit society was mainly formed to provide credit support to its employees particularly women residing in the urban pockets of the district. The society mobilized funds and provided loans to women. Attractive rates were provided on savings while loans were lent at 18 per cent on reducing balance. Loans unto Rs 15000 were given for three years and were repaid in equal monthly installments. In case of full repayment, borrowers were given a concession of two to three per cent, this enabled the society to achieve a 95 per cent recovery rate. The credit society as such was averse to using marketing techniques for increasing their outreach but preferred to rely on personal connections of their customers. The functionaries believed that this method was best to attract serious genuine customers. The societys savings stood at more than 6, 50, 000 Rs while the total share capital of about 3 lakes was contributed by 972 members of the society. The credit society was a profit making enterprise with over Rs 50000 profits recorded the previous year. The profits were higher on account of the high recoveries and lower operational and fixed costs. The society had excess reservoirs of funds and is looking for new vistas for financing.

8. Rural Development Circle Rural Development Circle, after working for sixteen long years is lying inoperative. Lack of funds, non-availability of staff and lack of perseverance by the main organizer have been mainly responsible for this. Rural development is a demanding vocation, which requires dedication and hard work. Sudha Mujmudar the main organizer was forced by circumstances at home like pressures of bringing up growing children and to pursue a lesser demanding profession. She now works for Quality Circle Forum of India. Quality Circle is a small group of 5 to 15 people who voluntarily meet once in a week for an hour to identify analyse and resolve work related problems and implement solutions. Quality Circle concept could also be used for ural development for introducing a culture of participation and involvement amongst rural public. Forming of SHGs is based on participative approach, group members could be taught self reliance through mutual help. The quality cirlcle has the experience of working with bankers, government officials and villagers it could be used by bankers to form SHGs too.

CHAPTER VI OBSERVATIONS AND SUGGESTIONS

This chapter presents some observations on the important findings of this research report. Based on them some suggestions are put forward to strengthen the SHGBank -Linkage Program. Rural Financial Institutions are extremely formal, on the other hand NGOs operate with informal and flexible operational systems. The basic question confronting policy makers is how to ensure and enhance linkages between the two very distinct and contrasting institutions. To ensure effective linkages it becomes necessary to build mutual bridges of awareness and reorganization amongst bankers and NGO functionaries. The present study has evolved from this basic need. It has undertaken the task of: providing a conceptual framework of NGO, banks and SHGs besides examining bank participation in promoting SHG linkage program and presenting case studies of NGOs dealing with saving and credit activities. The study was conducted in Vadodara District of Gujarat State during 1998-99. Secondary information on new micro finance models was collected from published studies and reports, while the primary data was collected form questionnaires,

interview and informal conversations with banks and NGO officials. Bank Officials of the Bank of Baroda and other three public sector banks with wider coverage of branches [Bank of Baroda, Dena Bank and the Bank of India] were selected for appraisal. The Baroda Central Co-operative Bank manager was also interviewed. Further 11 NGOs were selected form a list of 24 NGOs operating with rural development, women and economic activities.

The studys results indicated that: It was observed that SHGs were working in different areas under names such as; rotating funds, chit funds, merry go rounds, mahila sanghams and mahila mandalies. SHGs had different interpretations but commonly SHGs were viewed as small economical homogenous affinity groups of rural poor, voluntarily formed to save and contribute a common fund to be lent to its members as per group decision. The National Bank had spelled certain requirements for providing finance to SHGs: group size of not more than 20 members, registration of SHGs, compulsory monthly savings and maintenance of regular books of accounts. NGOs varied in size, functions, methods of operation and motivation . NGOs have evolved since the 18th century and had grown and matured into distinct individual organizations. They included a wide spectrum of organizations with different ideologies, activities and typologies. They could be classified into welfare organizations, development organizations, donor and local organizations or small medium and third big sized organizations. The SHG bank linkage program of banks required NGOs to fulfill certain vital criterias for forming successful partnerships. Some of the requirements were: NGOs needed to possess a good track record, consistent work, maintenance and audition of books of accounts and capability of handling SHGs. For banks SHG and NGO financing is a relative new concept. Commercial, Cooperative and RRBs have been vested with the responsibilities of initiating SHG Bank Linkage Program under a separate component of priority sector lending. Banks have been asked to disburse credit in proportion to savings between 1:1 to 1:4 after at least six months of initial saving activities. Loans are to be provided at 10.5 per cent while the NGOs are allowed to lend to SHGs at 12 per cent rate of interest. Repayment schedules are to be fixed in consultation with

SHGs. The lead banks in every area have been making concentrated efforts to promote micro credit financing through self help groups.

Commercial banks and co-operative credit structure have a significant presence in the district. These banks however are relatively lesser visible in the backward and tribal regions of the area. Banks have been operating various credit schemes like the IRDP, Small Industries Development Programs, Jawahar Rojgar Yojana etc. Under the priority sector lending target. NGOs in the district have emerged making fragmented efforts in various fields. Vadodara city alone had 1742 NGOs. Mazimum NGOs were working with recreation activities. While 32 per cent of the organizations, were working with socio cultural activities. There were only seven per cent NGOs functioning with womens empowerment and rural development activities. Most of the NGOs were small while only onethird organizations were large.

The National Bank has been playing the role of a facilitator, resource provider and clearinghouse for exchange of information and experiences for NGOs. The lead bank i.e. the Bank of Baroda has also been making concentrated efforts to promote the SHG Bank Linkage Program. In its Service Area Approach plan, rules, regulations guidelines and operational strategy for establishing bank linkages with Self Help Groups and NGOs are clearly outlined. The training center has also been making concentrated efforts to create awareness. Primarily a there days training program had been arranged but this was shelved to a days session. The one-day training program was considered inadequate to change the mindset or motivate bankers to undertake financing of SHGs. Most bankers except those who had undergone the training program had a vivid knowledge about the NGO program. Some bankers saw rural development as a long drawn process that had become a frustrating experience with government partnerships. Some also felt that the SHG program was only a means to misappropriate funds by NGOs. Rural development was no more an important thrust area amongst top bank officials. Bankers were more concerned about their profitability, prudential norms and larger lucrative business activities. Operationally, bankers inability to file a suit against the SHGs also deterred them from lending to SHGs. The onus of establishing linkages depended completely on the motivation of an individual banker. A dedicated banker when trained was in a better position to lend to SHGs. This is reinstated by the fact that the SHG bank linkages established till date, have been by bankers who had undergone the training

program. The District Central Co-operative Bank had severe recovery problems and was mainly concentrating on improving the financial performance. The bank did not have a training center in Vadodara and hence the SHG Bank Linkage Program has yet to reach the cooperative functionaries. One of the important achievements that need specific mention is the ninety five to hundred per cent recovery rate of mahila mandalies. These mandalies have been financed by the DCCB on the NGO guarantees and works like saving and credit groups of new micro finance business traders etc. A large section of the backward classes were also members of the SHGs. The process of group formation, management and functioning was similar to the new micro finance approaches of SEWA, IFAD, Grameen Bank and like. SHGs preferred to put their savings with Post Office Saving Banks instead of Commercial Banks. Majority of the SHGs preferred the POSB due to the informal setup and familiarity with the local staff. The core fund for the SHGs was raised form savings, interest on groups savings and interest on loans. Loans were equally procured for production and consumption purposes. Most of the NGOs were charging the market rate of interest between 17 to 24 per cent to their group members. However, there were some NGOs, which were lending at subsidized rates too. Loan repayment in case of all NGOs was between 95 to 100 per cent. Repayment installments were fixed with the approval of group members. Loans were generally repaid in a span of two to three years. In case of defaults group pressure was exercised and in some cases penalty rates for delays were also levied. Sometimes savings of members were also used to repay loans. Training has been a crucial input for most of the NGOs. Majority of the NGOs had their own training centers. Vigorous training was imparted to NGO functionaries before undertaking any activities. Group members and their representatives were also imparted training for strengthening and managing groups. There were few NGOs with co-operative societies. In SFT area, women had formed milk co-operatives to combat low prices. Through co-operatives women succeeded in acquiring additional income. Besides in a span of only a year, women had accumulated savings of Rs 50000 through regular saving activities. The PMDA had also set up seven co-operatives societies for the purpose of irrigation, carpet weaving and undertaking small business activities. Out of these

seven co-operative societies, one was a womens co-operative working for cottage and village industries. Co-operative societies were formed to ensure peoples participation. In BAIF tribal women had set up co-operative societies to take up activities such as nursery raising, mango and cashew grafting, kitchen gardens and mushroom cultivation. The Bhagini Sewa Samaj was running its own credit society has accumulated enormous funds has 95 per cent recovery rate and is a profit making enterprise. Almost fifty per cent of the NGOs were facilitating flow of funds to rural poor by acting as intermediaries. Loans were procured for raising crops, agriculture and IRDP activities. Even while loans were granted to individuals through NGOs, recoveries were 90 per cent. The Mahila Antodaya Kendra had a Grameen Bank functioning on the Bangladeshi model. Most of the NGOs were unaware of the SHG Bank Linkage Program. NGO functionaries had tried procuring funds from banks, but the lukewarm negative response of the bankers had left them looking out for other alternative sources. After being informed about the SHG Bank Linkage Program the NGO functionaries showed their keenness in working and procuring additional information from banks. Only one NGO had a project co-coordinator who knew about the SHG program but ironically, the branch manger in his area was totally ignorant.

Some Suggestions
1. There is a necessity to increase the visibility of NGOs working with micro credit. Bankers need to note that NGOs working with literacy, health, environment, womens issues etc., also work with Self Help Groups. For identifying NGOs with SHGs banks can: A] Invite NGOs and SHGs through newspapers, magazines and other communication channels to register themselves with the Lead Bank in the area. B] The list of NGOs could be procured from the directory of NGOs. These directories are available with leading NGOs in the area. C] Most of the NGOs prefer to deposit their savings with the local Post Office Saving Banks, the Lead Bank can check the records of these banks. 2. There is a serious need for sensitizing the bankers with the micro credit approach to development. Given the magnitude and demand for micro credit the efforts made by the training center, NABARD and the Lead Bank are not

adequate. officials.

They have been able to reach only ten per cent of the bank

3. Bankers need to enhance their knowledge of the Self Help Groups. Bankers at the operational level need understand that saving and credit groups, mahila manalies, mandals etc., are also Self Help Groups. 4. While adopting the SHG-Bank-Linkage-Program, bankers need to be flexible in their approach. For eg. SHGs may be larger in size than the bankers requirements in which case the bankers need to work with NGOs to lend shape to their requirements. 5. Bankers need to be creative and have affinity with the needs of the SHGs. Bankers supportive involvement without interference should go a long way in eliminating psychological barriers between NGO officials and bankers.

6. In needs to be noted that ispite of their size and being constitutionally suited to meet the needs of the rural masses, Co-operative banks in India, have been relatively oblivious of the SHG Bank Linkage Program. The bank officials seem to be in urgent need of a training center not only to upgrade their skills but to increase their awareness level too. Given the size and experience of dealing with rural masses the Co-opertative banks have a major role to play in popularizing this approach. 7. Bankers need to be careful while forming SHGs. They need to understand that SHGs formed for merely imparting loans have little chances of sustaining in the long run. Groups formed need a comprehensive approach to development with active participation of members.

8. The training program needs to be made more comprehensive to motivate bankers to take up SHG-NGO lending activities. 9. As most bank officials do not have specialized skills to form and manage SHGs, extension workers or sevikas may be appointed on ad-hoc basis to promote the SHG- NGO linkages. 10. Liberalization and subsequent imposition of prudential norms in terms of capital adequacy requirements, increasing profitability of banks have compelled bank officials to focus on more lucrative options for sustaining their organizations. Rural development has been seen as a peripherial issue by most of them. Given this environment reinforcements to bankers for their

SHG- NGO linkages should go a long way in motivating the bank officials to take up micro credit financing. 11. NGOs have been providing small loans on the basis of individual savings. The repayments have been around 90 to 100 per cent. The banks can intoduce lending to individuals based on savings under credit programs implemented by the government and bank officials. 12. The NGO need to organize saving groups in smaller sizes. They could further group them into clusters for undertaking other activities. These clusters could be federated in block level clusters and even district level federation. The federations could undertake common service functions of collective problem solving collective community services; inter group assistance and maintaining accounting books. These federations could be made self-reliant and would undertake managing of SHG even after the withdrawal of NGOs. Efforts undertaken by the Government and the National Bank at the Macro level have not percolated to the micro level. Bank officials at the village level are still not forthcoming in establishing linkages with the NGOs. NGOs on the other hand are as weary as ever before. Successful partnerships between these two very distinct organizations will need overwhelming efforts from the bank officials and NGO workers.

ANNEXURE I LIST OF DOCUMENTS TO BE EXECUTED FOR PROCURING BANK FINANCE BY SHGs AND NGOs.

I] The Sponsorship Letter from NGO/SHPI to the Branch Manager. The application for loan submitted by SHG to Bank Branch required the following information: Name of the SHG, address, date and year of establishment and registration along with a registration certificate, number of members is a group, name of the SHPI/NGO/ assisting the group, authority of the group to representatives to apply for a particular loan, an agreement to repay the loan as per the repayment schedule and a copy of the agreement authorizing the representatives to borrow loans, authority to the bank to disclose any particulars, information relating to the loan to any other financial instution including NABARD, Government or an agency. II] Articles of Agreement used by Banks while financing SHGs: The document is an agreement made by the SHG members to authorize representatives to undertake all activities of the group. It covers details of the association and a request to grant loan to its members. It also includes the kind of credit facility granted and terms and conditions for implementing the facility. Besides repayment details it also authorizes representatives to make payments. III] In case the SHGs are sponsored by a Voluntary Agency or an NGO the Application Form included details of: Address and registration certificate, types of activities undertaken, loan amount, number of members in SHG, repayment particulars, schedule of loans extended to SHGs and existing liabilities from other financial institutions. A balance sheet for the last three years of the NGO and a declaration of authenticity of information with an authority to share the information with related agencies. IV] An Articles of Agreement for use while financing SHGs through NGOs or Self Help Promotion Institution. The document specified the agreement for forming a Society, Charitable Trust with the names of representatives. The agreement also covers all the information about the SHG sponsored and the terms and conditions for which loans were availed.