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Microfinance: a window of opportunities

Prof. (Dr.) Kishore C. Padhy

A survey of women SHG in Puri District Orissa, was conducted with questionnaire-cum interview method. It reveals that

1. SHG has eliminated money lenders in their area of operation. 2. SHG has provided productive employment to hitherto unemployed women. 3. Repeat finance has helped to lift people above poverty line. 4. Synergy effect is evidenced. 5. Development of communication skill is experienced. 6. Some group members show leadership qualities. 7. NGOS play helpful role vis--vis SHGs. 8. Supportive role of Government officials is not made available in relation to marketing of products. 9. Capacity building training needs to be imparted.

The author - Prof. (Dr.) Kishore C. Padhy is Director, Institute of Management & Information Science (IMIS), Bhubaneswar. He is author of 25 books and 70 research papers. He can be contracted at email:


A window of opportunities
Prof. (Dr.) Kishore C. Padhy


A self-help group is socially and economically homogenous group of 10-15 people, voluntarily coming together to achieve common goals. During the five decades after independence, State is the planner and implementer of anti-poverty programme. The working of the political system and administrative machinery has been inadequate, and number of people below the poverty line has not appreciably been reduced. The focus shifts to local participatory micro-development organization known as SHG. In India, 22 million SHGs are financed by banks up to March 2006. 32.9 million poor families have access to bank credit, the total number of poor people access linked to credit is 165 million. Over 90% are woman SHGs. In Orissa 1.8 lac SHGs have credit linkage with the Bank as on the 31 st March2006. They have been financed to the tune of Rs. 452 crores. SBI has credit linked about 1lac SHGs, most of those women SHGs, with assistance of Rs. 279 Crores. We, from Institute of

Management & Information Science (IMIS), Bhubaneswar, have undertaken a survey of SHGs, incidentally, all women SHGs, in Puri District (Orissa).


a) b) To study the change in economic status of SHG members after credit linkage with the bank. To examine the nature of economic activities undertaken by SHGs before and after credit linkage. To examine the efficiency of credit provided by the Bank.



3.1 The study is based on primary data collected by administering a questionnaire. The questionnaire consists of different aspects. i) ii) General information about SHG- Initial credit linkage and subsequent repeat finance. Management aspects Leadership, maintenance of books and accounts, grading of the financial group.


Economic Aspects - Income before and after linkage, assets size, economic activities Socio-political Aspect Social initiatives taken by SHGs, political consciousness/awareness of group members. SHG linkage with NGO, village panchayats etc.
Future Plan Land based activity and ancillary business like small business activity, Misc. works such as SBIs Recovery Agent.

*Prof. (Dr.) Padhy is Director of IMIS, Bhubaneswar. He can be reached in undertaken, end use of loan. The views are his own and not of IMIS.




Response of other villagers to the SHG.


The questionnaire is supplemented with door-to-door interview of the members of SHGs. Random survey method is used to conduct the survey in 52 SHGs spreading over 5 GPS and 1 NAC and having 662 members. Statistical tools such as percentage, averages etc. are used to analyze the data. Techniques like frequency distribution, cumulative frequency distribution, and pie charts are used for analyses.


1) SHG has eliminated moneylenders and reduced the cost of debt which ranges from 60% to 100% per annum in the countryside. SHG has provided productive employment to hitherto unemployed women. Repeat finance has improved the economic conditions of group members at least lift people above poverty line. Co-operation Synergy effect is evidenced. Development of communication skills is experienced. Group members develop futuristic vision. Some of them display leadership qualities. NGOs plays helpful role vis--vis SHGs. Block and Govt. officials play supportive role with SHGs, particularly in relation to marketing of products. NABARD and govt. provide adequate trainings support to the group members.

2) 3)

4) 5) 6) 7) 8)





-: 2 :Moneylenders have been successfully eliminated by all SHGs under report. The members lend among themselves, the current rate of interest being 36% per annum. Institutions should not look at askance at this rate as this is basically market-based. One of the SHG member at Nuasasan village commented: We are grateful to Bank that the loan enables us to lend and borrow. The rate is immaterial. We are at least giving the interest to ourselves, not outsiders. Another SHG met members medical expenses which would have required outside borrowings. No major social function like marriage or funeral rites was conducted in the homes of SHG members. moneylender. That is the reason for their complete independence from


In Orissa, most of the SHGs are women SHGs, above 96%. All SHGs surveyed by us were women SHGs. Women hitherto unemployed have been employed. They suffered from liquidity crunch. Now, the liquidity position has improved. 50% of women are able and willing to take economic decision. 10% of women have been able to influence their family with economic decisions.


Of the total members of SHGs covered under the survey, 60.87% of the families are below poverty line. Majority of the families are marginal farmers, having less than 1 acre of land and a reasonable size of the members are land-less daily labourers without having any regular source of income. The landless families are unable to express their income status in monetary terms as they are not getting employment throughout the year. Those families who depend on handicraft selling, areas have only seasonal income. Most of the area is irrigated. 10% of the families are financially sound. The average loan liability of the groups with a loan of Rs. 80,000 is about Rs. 32480 and the loan liability of the groups with a more than Rs.1 lac is Rs. 35,000. The smaller size loans have been repaid with the hope of getting a bigger size loan with subsidy. 12 % of the SHGs have improved economic condition. Food security has improved in all SHGs. None of the SHGs have experienced reduced economic position.


Cooperation is visibly evidenced most the SHG president and secretary interviewed talked in terms of We rather than I. In 2 out -: 3 52 :- SHGs surveyed, there is dissension in the group. They propose to exclude one member in each group to bring about cohesion.


Low-income customers have small account and transaction sizes. Computerized service at a central village for a small fee is a financially viable proposition. This will reduce transaction cost and help regular maintenance of books and accounts. At present, books of SHGs are maintained at quarterly/half yearly interval.


Block and Govt. officials, in spite of prouncements, do not play supportive role with SHGs fully. All SHGs are not invited to fairs and craft melas organized by them. Block level committee does not organize such melas regularly. Marketing is the bottleneck in SHG products. SHG members are lift to their own devices. Govt. may set up Credit Reference Bureau by collecting a part of the cost from the SHGs.To reduce the initial cost of establishment, Government may partly subsidize NGOs operating such agency. A part of the cost may be recovered by offering their services to companies that sell goods and services for consumers in general who will have a readymade database. In Europe, Credit Bureaus are owned by a group of lenders. In U.S, ownership of agencies is independent of users of services. In India, in view of the size, Govt. and NGO can

have public- private participation to float such a bureau. This will enable information sharing and reduce risk of default among SHG.


Youth SHG: In view of unsatisfactory experience of banks, particularly in respect of SEEUY and PMRY loans which were literally taken as political grants by the beneficiaries, banks, encourage women SHGs. Unemployed youth is a reality in Indian landscape. There is risk in formation of SHG exclusively among the male youth because of

a) b) c)

their individualistic predilection. search for a secure job, preferably urban -oriented low skilled job or desk-bound job. easy susceptibility to political designs and needs.

Since the society is sitting on the volcano of unemployed youth, there is need to co-opt youth in the mainstream of micro finance. This will ensure utilization of youth in productive work -: 4 :- socio-political conflicts. Youth practices short term rather than entertainment or unnecessary saving and group productive activities. They will experience harmony and cohesion among diversity. This is harbinger of a better socio-economic future for them. 5.8 Participation in fair/ festivals: Most of the SHGs surveyed have expressed interest in joining block/district level fairs/festivals for sale of their products. Very few have got such chances. Favouritism including illegal gratification are allegations made against some government agencies, particularly ORMAS. Wider participation will reduce favouritism, if any, on this score. 5.9 Group dynamics: In the group, we found the leader who plays the following roles: Interpersonal role: Liaison with customers, bank and other s outside the organization Information role: Monitor: Gathering information Disseminator of information Decision making role: Analyst of issues Entrepreneur- taking risks Disturbance handler Resource allocator for efficient utilization Negotiator dealing with others which will not disadvantage the group Arbitrator identifying and settling conflict.


The following characteristics are delineated in SHG leaders in varying degrees: Intelligent Integrity Confident Sociable

Positive outlook Good Judgment Willing to learn Solves problems

Communicate Attentive Includes not excludes Courageous. Realistic

Decisive. Determined -: 5 :-


Training: Capacity building training is organized by NABARD, occasionally by banks like SBI. This has to be done on an ongoing basis. Training facility provided by the Government is inadequate. Even, central village level or block level fair is not organized regularly. Of late, SBI has organized training camps for a few SHGs. Basically, this being a government extension programme, BLCC should organize several training programmes for SHGs, by adopting cluster approach. Such economic activities as Dairy, Fishery, Duck Rearing, can be explained from the stage of planning to implementation for SHGs to adopt as per their needs and convenience. In that event, the group as a whole can make worthwhile contribution by doing such activities and saying what support they require. In this context, we recommend participatory rural appraisal method. It may be guide led whereby the facilitator asks a series of questions to stimulate conversation among participants. The technique is flexible, exploratory, and interactive and responsive to issues raised during the process. Both the facilitator and group members learn from, with and through local people.

Govt. or NABARD sponsored NGO trainers should adopt action-learning method in training SHGS. SHG group members are not quite literate, but they are intelligent and experienced enough not to be taught in the classroom method. One group described how they coped up with a medical case of a group member by self-help and cooperation. This is quite a lesson on disaster management: a false step or non-cooperation would have resulted in breakdown of the group or economic/social ruin of that member. Marketing/ leadership training can be imparted through Reg. Revans fundamental equation: L= P+Q+A+R Where L = Learning P = Programme learning Q = Questioning A = Action R = Reflection The members would learn with and from are another, so also the NGO trainer. The inner experiential cycle would be as given below : Desire to changerisk-taking, (Courage and responsibility) insight Transformation. This is the essence of much talked about women empowerment. The method helps When we are in a new situation,-: we never been before 6 have :When human resources around are untapped.

When we are working with new group of people we have never met/dealt with before.


Process Model :
6.1 The process model of SHG is given below : 1. Members of SHG.

2. 3. 4. 5. 6. 7.

SHG as group Village community The Panchayat Higher bodies- Dist, State NGO SBI

The intersections on the concentric circles represent the environments that get influenced by the SHGs.


At village community level, the women SHGs in general have not interacted with such social issues as a) b) c) Alcoholism Dowry problem Financial indiscipline of man folk

They have by-passed the issues as a) b) c) 6.3 they are the beginners. they have to develop economic roots. they require community approval, if not support, to start with.

A few group members participated in Gram Sabha. They also could not recall any benefits, tangible or intangible, accruing in the process. Pipili is politically surcharged block, with two dominant politicians dividing the society vertically. Hence, lower political involvement of women groups is not a weakness in the formative

stage. The villagers support women SHGs,

they feel no animosity even if they do not get loan and SHGs get it. 6.4 NGO, namely, Sujog is active in the area. It has explained to a large numbers of surveyed -:representative 7 :groups the nuances of bank finance. Its is found in Bank to extend helping hand to SHG and Bank in respect of filling up forms, maintenance of accounts quarterly (for a small fee), counselling SHGs in bank finance and repayment. In fact, the leader of NGO, a woman is popular in the area and is a failed candidate for Panchayat election in the past. She does not belong to traditional major parties. But her political ambition and its effect on SHG in future needs to be analyzed with caution.


SBI is a major link in the process. All credit linked SHGs acknowledged helpful role of Bank. While discussing with them; one point emerged that MFIS charge higher interest but they receive and deliver funds at the doorstep. A suggestion for Bank is to collect repayment of dues in a central village once in a week, preferably Tuesday, which is declared as SHG day by the Bank. This would make Bank popular.


What is in Banks response to SHG? A top executive of SBI thinks micro financing not only as Government programme, but also as a desirable strategy for long-term growth. A senior executive, feels that it is Banks policy and that the scope is vast, Local Branch Manager, says that this is the only way to serve poor people around. Gain for the Bank: there is no defaulting Women SHG and repayment of loan is about cent percent, occasionally with a time-lag. The problem, if only, we visualize for the future is less of personal relationship between Credit Officer and SHG and lack of continuity in relationship because of staff transfer/placement/well paid banks staff being at psychological distance from the not-so-well off clients.

-: 8 :-

Churchilli C. (1999), Client-focused lending: the art of individual micro lending, Toronto, PACT Publication Mayoux L. (2003), Sustainable learning for womens empowerment, Sanskriti NABARD (1999) Summary and recommendations of Task force on supportive policy and regulatory frame work for micro finance, Mumbai. Robinson M.S (2001), The micro finance revolution: Sustainable banking for the poor, World Bank. Srivastav A, (2005) Self-help groups and civil society, ISI, New Delhi. World Bank Report (2001)-The micro finance revolution: sustainable finance for the poor. World Bank (CGAP), (2003), Micro Finance: Poverty Assessment Tool -(2006), Key principles of micro finance.