INTRODUCTION

The present study is a study examining the performance of Self-Help Groups as

a microfinance tools for economic development in Lawngtlai district in
Mizoram, which is one of the mostbackward districts in Mizoram. The study
examined Self-Help Groups under Chhimtuipui Area the NGOs working in
thedistricts. Formation of Self-Help groups is one prerequisite to be one of the
beneficiary of Area

omposed of 04–15 local women or men. A mixed group is generally not

preferred. Most self-help groups are located in India, though SHGs can also be
found in other countries, especially in South asia and Southeast Asia. Members
make small regular savings contributions over a few months until there is
enough capital in the group to begin lending. Funds may then be lent back to
the members or to others in the village for any purpose. In India, many SHG's
are 'linked' to banks for the delivery of micro-credit. A Self-Help Group may be
registered or unregistered. It typically comprises a group of micro entrepreneurs
having homogeneous social and economic backgrounds,all voluntarily coming
together to save regular small sums of money, mutually agreeing to contribute
to a common fund and to meet their emergency needs on the basis of mutual
help. They pool their resources to become financially stable, taking loans from
the money collected by that group and by making everybody in that group self-
employed. The group members use collective wisdom and peer pressure to
ensure proper end-use of credit and timely repayment. This system eliminates
the need for collateral and is closely related to that of solidarity lending, widely
used by micro finance institutions. To make the book-keeping simple enough to
be handled by the members, flat interest rates are used for most loan
calculations. Self-help groups are started by Governmental or Organizations
that generally have broad anti-poverty agendas. Self-help groups are seen as
instruments for a variety of goals including empowering women, developing
leadership abilities among poor people, increasing school enrollments, and
improving nutrition and the use of birth control. Financial intermediation is
generally seen more as an entry point to these other goals, rather than as a
primary objective. This can hinder their development as sources of village
capital, as well as their efforts to aggregate locally controlled pools of capital
through federation, as was historically accomplished by credit unions. Many
self-help groups, especially in India are under

NABARD's SHG Bank Linkage program, borrow from banks once they have
accumulated a base of their own capital and have established a track record of
regular repayments. This model has attracted attention as a possible way of
delivering micro-finance services to poor populations that have been difficult to
reach directly through banks or other institutions. "By aggregating their
individual savings into a single deposit, self-help groups minimize the bank's
transaction costs and generate an attractive volume of deposits. Through self-
help groups the bank can serve small rural depositors while paying them a
market rate of interest." NABARD estimates that there are 2.2 million SHGs in
India, representing 33 million members that have taken loans from banks under
its linkage program to date.

PARADIGMS SHIFTS IN DEVELOPMENT

The experience of the more than five decades has demonstrated that there is
always a possibility to develop but it is not invincible to occur. It is indent a few
countries succeeding in rapid economic 12growth and poverty alleviation, while
others not being so successful. Many development strategies experimented so
far have not yielded the desired results. For more than four decades,
development was seen mainly as a measure of economics – increasing the
capital stock and improving the allocation of resources. However, the
Economists differed in their view of how best to improveresources and to their
allocation, and the role government in this exercise. In 1980’s, the development
strategy shifted from micro management policies to macro economic policies
along with adjustment of fiscal imbalances and monetary policies. The collapse
of the socialist economiesin the world and end the cold war demonstrated the
inefficacy of a larger government role in the national economies. The new phase
of development thereafter was followed by the policies of (L.P.G.)
liberalization, privatization and globalization. However, this concept did not
find four in many developing countries and is still at a very nonscent stage. The
rapid growth of most of the East Asian economies showed that successful
development could be a companied by reduction of poverty, widespread
improvements in living standards and even in process of democratization. But
for those advocating the technical solutions, the East- Asian countries were
deeply disturbing. In most cases, national government played a larger role. They
followed some of the accepted technical prescriptions, such as stable macro
economic policies. Governments intervened in trade, though more to promote
exports than to inhibit particular imports. They regulated financial markets, \
engaged in mild financial restraint by lowering interest rates and increasing
profitability of banks and other financial institutions. There is wide spread
recognition that even countries pursuing good economic policies can suffer
from the volatility of short term capital flows while the risks and market failures
associated with short term capital flows have now become apparent, the
benefits especially for countries like those in East Asia with high savings rates
remain unproven. The new development strategy takes up the transformation of
the society as its core objective to development. It recognizes that an integral
part of successful development is the increase in GDP per capital. It first needs
to set forth the vision of the transformation, which may embrace certain
quantitative goods, such as a reduction in poverty by half or universal primary
education, or an increase in life expectancy by ten years, or a fall in crime by 30
percent but these are elements in or targets for the transformation process, not
the vision of the transformation itself. This vision needs to include a view of
transformation of the institutions, the creation of new social capital and new
regulatory or incentive-mechanisms. The mandatory and Key ingredients in a
successful development strategy are ownership and participation. By involving
public support groups of the civil society, the process of strategy formulation
may be able to elicit the commitment and democratic involvement that is
necessary to be socially acceptable and sustainable. Ownership and
participation are also mandatory if the development strategy is to be adopted to
the specific circumstances of a country. Recent researches prove that the
projects with higher degree of active participation have been more successful
and profitable. Although, the development priorities differ from country to
country, yet there are some common elements. The most important is education,
because without education a country cannot develop i.e. cannot attract and build
modern industries and cannot adopt new modified technologies rapidly in the
rural sector. Education also enables people to learn, to acquire values and
standards of behavior, and also to accept and help engender transformation.
Importantly, Infrastructure particularly protection or property, communication,
and transportation is vital for the conduct of business in modern times.
Necessarily in developing countries sense of isolation reduced. Health is again
very important because unhealthy population 13cannot be a productive labour
force. The basic quality of health should be viewed as a fundamental human
right and upgrading health standard must bean integral part of any holistic
development strategy. Knowledge, like education, enriches the human spirit and
with education and health, it leads to a more productive society. The power of
Knowledge is enormous as with increased knowledge, the output that can be
produced with the limited resources can be multiplied in magnitude. The
Capacity building of the individuals is must to empower them for social
transformation, economic development, participation in development process
and representation in governance. Hence a country aspiring to develop must
have institutions, entrepreneurship and leadership to catalyze, absorb and
manage the process of change and the changed society.

Paradigm shifts in Rural Development:

In the 1940’s, the newly independent nations, liberal and emerging as they
were, from the yoke ofimperialism, realised that potentials and constraints to
rural development were largely rooted in the society itself. The majority of the
nations were reeling under the weight of poverty, darkness of illiteracy and
filthiness of squator (Mythodal, 1968). They pinned their hopes on achieving a
higher economic growth rate for improving people’s standard of living.
Therural development pursued in the 1950’s and 1960’s was large lycentred
around ‘growth first’ models. Despite robust growth in the1960’s, economic
benefits did not ‘trickle down’ and majority of thepeople was languishing in
abject poverty, rising unemployment and increased inequalities (ILO, 1977).
The general disenchantment with the performance of the 1960’s of economic
growth without distributive justice, prompted the economists of the day to
engineer such the oriesand models as redistribution with growth, (Agarwal,
1998), basic needs approach (BRAC, 1997), integrated rural development, and
ademand for the establishment of new international economic order(Chambers,
1983). Therefore, the 1970’s could be described as adecade of equity and justice
(Chambers, 1989). The 1980’s were a mixed bag. It was a decade of structured
adjustments ‘without a human face’ (Chenery, 1974), to qualify itself to be
labelled as a ‘lostdecade’ (CIRDAP, 1987). It was also a decade, which laid
found ationsfor the people’s participation, integrated approach to development,
and for socio-economic development of many Asian countries. The1990’s, was
a decade that belonged to democratic forces, participatory decentralized rural
development, civil societies and human development (Subrahmanyam, 2003).
Rural development is conceptualized as a process of improving living standards
of the masses of the low income population residing in rural areas and making
the process of their development self sustaining (Lele, 1975). Rural
development has become a distinct approach and strategy implemented mainly
by the Government, NGO’ sand private agencies in developing countries. It
encompasses multi-sectoral components and is broader in its approach than
‘agriculture’ .It requires interdisciplinary approach. Its focus on poverty,
inequality and distributive justice makes it stand in a special category of
interventions for bringing about socio-economic change (World Bank,1997) In
the 1950’s, most of the national governments in Asia formulated ‘community
development’ programme with a view toachieving self reliance and
development through local institutions and participation of the rural
communities for their development (CIRDAP,1991). In the 1950’s the United
Nations identified community development as ‘synonymous with community
participation’ (Moser,1989). The community development was seen as a process
designed to create conditions of economic and social progress for the
wholecommunity with its active participation. The core elements of community
development were :-14participation of the people in local community
development projects, democratic decentralization, transfer of technology,
self help efforts. In India, Government initiated community development
movement in 1952, which expanded rapidly during the decade of the 1950’s. By
1960 over 60 nations in Asia, Africa and Latin America had launched national
or regional community development programmes (Ruttan, 1984).The followers
of redistribution with growth ‘model’ advocated theneed for a wholly new
organizations endowed with ample resources and the best cadres’ for executing
these target-oriented programmes.However, the basic need approach is a radical
departure from the conventional development approach. It was a shift from the
growth approach to consumption approach.Consumption targets replace growth
objectives (Streeten and Burki, 1978). In the wake of widespread poverty and
rising unemployment, the integrated rural development strategy and approach
was introduced with the explicit objectives of economic growth and poverty
alienation. Under economic growth it aims to have more agricultural and off
farm production, enhanced ruralincomes, improved infrastructure and
technology transfer to the rural areas. Under the poverty alleviation, transfer
orcreation of assets, creation of jobs for the rural poor and provision of basic
social services. In India, Small Farmers Development Agency(1971), National
Rural Employment Programme (1980), Rural Landless Employment Guarantee
Programme (1983), Minimum Needs Programme, Development of Women’s
Children in Rural Areas, Training for Rural youth for Self Employment, and
Integrated Rural Development Programme (1978-79) were launched. The
1980’s erasaw the emergence of a new philosophy in the name of efficiency.
The structural adjustment policies comprised of IMF stabilization policies to
reduce fiscal deficits and restore the balance of payments fragments position to
viable levels and the World’s Basic’s long term‘structuralreforms' to raise
productivity and enhance efficiency (Subrahmanyam,2003). The IMF and the
World Bank maintain that the structural adjustment policies contribute to
poverty reduction. It is assumed that structural adjustment policies will
adversely affect the poor in the developing countries. There is a set of elements/
factors that is common to most of the paradigms of development. It comprises
of natural resources, new technology, capital accumulation and investment,
educated, technically trained, enterprising and motivated human resources with
values and ethos congenial to rural development, in an appropriate institutional
and organizational framework. A people centered strategy, all in the Gandhian
model, would be the most appropriate paradigm of sustainable rural
development for India (Singh, 1999). India is rich in human resources, what is
needed now is a long term policy for development of human resources through
education, training, healthcare and empowerment and creation of congenial
socio-economic, institutional and political environment for 15the fullest
possible utilization of the vast, untrapped reservoirs of human powerand
ingenuity (Singh, 1999).

Policy Shifts in Rural Development:

India, like most developing countries has been adopting rural development
through various public policies since independence and the Policy makers have
been emphasizing upon the need of rural development ever since the advent of
planning process in the country. The ultimate objective of rural development
was the eradication of poverty and improving the quality of masses. In
formulating rural development policy the whole approach has been fundamental
and has been argeted towards alienating rural poor from the culture of poverty,
which has been perpetuated over According to Myrdal (1971) in a democratic
society, the basic objectives of rural development are (i) raising community
solidarity, (ii) raising agricultural needs and (iii) institutionalization of equality
and part and parcel of rural development efforts. The concept of rural develop
menthas undergone many changes depending upon the requirements and social
transformation of Indian democratic system. The Government of India was
committed to formulate plan policies on rural develop mentduring the
successive Five Year Plans, which are shown in Table 1.1. ages After the
independence, the Community Development Programme was launched in year
1952 with 55 pilot projects on experimental basis. Bye arly 1960’s, the
programme was extended to almost all the 5011 CD blocks of the country. It
was emerged that the developmental process would allow benefits to percolate
to the lowest level of the society on its own. It failed to achieve the desired
results mainly because of the lack of functional responsibility and coordination
of the part of administration. This was followed by the adoption of a new
strategy of agricultural development based on high yielding varieties of crops in
the late 1960’s. During 1970 Area Based Programmes were introduced like
SFDA, DPAP, MFAL etc. 1980’s emphasized on strength eningsocio-economic
infrastructure in rural areas, alienating disparitiesunder Integrated Rural
Development Programmes, creating new employment opportunities etc. 1990’s
era witnessed the policy shift and decentralized, people’s centered and human
face development approach and strategy was adopted.
POLICY SHIFT IN RURAL DEVELOPMENT
Five Years PlanPeriod Rural Development Policy1 st 1951-56 Community
development as method and national extension service as the agency2 nd 1956-
61 Cooperative farming with local participation3 rd 1961-66 Panchayati Raj –
three tier model of democratic decentralization.4 th 1969-74 Area based
programme5 th 1974-78 Introducing concept of minimum needs programme.6
th 1980-85 Emphasis on strengthening socio-economic infrastructure in rural
areas, alleviating disparities under Integrated Rural Development Programmes7
th 1985-90 Emphasis on creating new employment opportunities, special
programmes for income generation through asset endowments, Land reforms,
participation of people of the grass roots level.168 th 1992-97 Emphasis on
building up rural infrastructure, priority on rural roads, especially in tribal, hill
and desert areas, minor irrigation, soil conservation, social foresting and
participation of people in rural development programmes.9 th 1997-02 Jawahar
Gram Samridhi Yojana, Swarn Jayant Gram Swarojgar Yojana, Pradhan Mantri
Sarak Yojana, Sarva Shiksha Abhiyan etc. implementation10th 2002 -2007
Construction of roads, capacity building, human resource development,
communication technology transfer, education, women empowerment, self help
groups and micro credit etc.Source: Indian Journal of Social Development, Vol.
1(1), June, 2001

CONCEPTS OF SELF HELP GROUPS (SHGs)

SHGs are novel and innovative organizational setup in India for the women up
liftment and welfare. All women in India are given chance to join any one of
SHGs for training and development, so as to be prospective entrepreneur and
skilled worker. The SHGs are promoted by the Government as if women in
India may not be resourceful enough to be entrepreneurs. When the SHGs
arrange training facilities to carry out certain kind of work which are suitable
for women in India, bank must arrange financial assistance to carry out
manufacturing and trading activities, arranging marketing facilities while the
Governments will procure the product of SHGs, arrange for enhancing the
capacity of women in terms of leadership quality and arranging for the
management of SHGs by themselves so as to have administrative capacity. As a
social movement with government support. SHGs become more or less a part
and parcel of the society. The concept of self help groups had its origin in the
co-operative philosophy and the co-operators by and large, including the
National Federations in the credit sector, could not think of any better SHG than
a primary co-operative credit society itself. As SHG are small and economically
homogenous affinity groups of rural poor, they are voluntarily coming together
for achieving the following.

1. To save small amount of money regularly.

2. To mutually agree to contribute a common fund.

3. To meet their emergency needs.

4. To have collective decision making.

5.To solve conflicts through collective leadership mutual discussion.

6. To provide collateral free loan with terms decided by the group at the market
driven rates.Today, the self help group movement is increasingly accepted as an
innovation in the field of rural credit in many developing countries including
India to help the rural poor considered a vehicle to 17reach the disadvantaged
and marginalized section, which in the normal course cannot avail of credit
facility from the bank. A self help group is defined as a group consisting of
people who have personal experience of a similar issue or life situation, either
directly or through their family and friends. Sharing experiences enables them
to give each other a unique quality of mutual support and to pool practical
information and ways of coping. Self help groups are small informal association
of the poor created at the grass root level for the purpose of enabling members
to reap economic benefits out of mutual help solidarily and joint responsibility.
Self help groups are formed voluntarily by the rural and urban poor to save and
contribute to a common fund to be lent to its members as per group decision
and for working together for social and economic uplift of their families and
community. A self help group is defined as a "self governed, peer controlled
information group of people with similar socio-economic background and
having a desire to collectively perform common purpose." Self help group have
been able to mobilize small savings either on weekly or monthly basis from
persons who were not expected to have any savings. They have been able to
effectively recycle the resources generated among the members for meeting the
productive and emergent credit needs of members of the group. The Tamil Nadu
Corporation for Development of Women Ltd. (TNCDW) in its credit guidelines
for the SHGs defines “as a small economically homogenous affinity group of
rural poor, voluntarily formed to save and contribute to a common fund to be
lent to its members as per group decision and for working together for social
and economic uplift of their family and community” .The distinguishing
features of self help groups are given below.

 A SHG normally consists of not less than five persons (with a maximum of
twenty) of similar economic outlook and social status.

 It promotes objectives like economic improvement and raising resources for

development and freedom from exploitation.

 It has its own by-laws for the proper functioning of the group as well as for
the observance of certain rules by the group members and regulations
concerning membership.

 The form of such a group could be mostly on an informal basis

(unregistered).

 Periodical meetings of members are held for solving their problems

(economic and social) and they collect fixed savings of the members.

 The savings of members are kept with a bank in the name of group and
authorized representative of the group operates the bank account. The deposit
kept in the bank is used for giving loans to members for purposes including
consumption at the rate of interest decided by the group (usually higher than
what the banks charge).

 Sources of funds are the contribution of members savings, entrance fee,

interest from loans, proceeds of joint business operation and income from
investment. Funds may be used for loans, social services and common
investment.The SHG, being a group of like-minded persons, gets empowered to
solve most of its problems of a non-financial nature such as raw material and
input supply marketing, better adoption of technology, education and training
for realization of its objectives for development.18

NEED AND IMPORTANCE OF SHGs

Self help groups are necessary to overcome exploitation, create confidence for
the economic selfreliance of rural people, particularly among women who are
mostly invisible in the social structure. These groups enable them to come
together for common objective and gain strength from each other to deal with
exploitation, which they are facing in several forms. A group become the basis
for action and change. It also helps buildings of relationship for mutual trust
between the promoting organization and the rural poor through constant contact
and genuine efforts. Self help groups plays an important role in differentiating
between consumer credit and production credit, analyzing the credit system for
its implication and changes in economy, culture and social position of the target
groups, providing easy access to credit and facilitating group/organization for
effective control, ensuring repayments and continuity through group dynamics;
setting visible norms for interest rates, repayment schedules, gestation period,
extension, writing of bad debts; and assisting group members in getting access
to the formal credit institutions. Thus, self help group disburses microcredit to
the rural women for the purpose of making them enterprising women and
encouraging them to enter into entrepreneurial activities. Credit needs of the
rural and urban poor women are fulfilled totally through the SHGs. SHGs
enhance equality of status of women as participation, decision-makers and
beneficiaries in the democratic, economic, social and cultural spheres of life
The rural poor are in-capacitated due to various reasons such as; most of them
are socially backward, illiterate, with low motivation and poor economic base.
Individually, a poor is not weak in socio-economic term but also lacks access to
the knowledge and information, which are the most important components of
today's development process. However, in a group, they are empowered to
overcome many of these weaknesses, hence there are needs for SHGs which is
specific terms are as under :- To mobilize the resources of the individual
members for their
 collective economic development.

 To uplift the living conditions of the poor.

 To create a habit of savings, utilization of local resources.

 To mobilize individual skills for group's interst.

 To create awareness about right.

 To assist the members financial at the time of need.

 Entrepreneurship development.

 To identify problems, analyzing and finding solutions in the groups.

 To act as a media for socio-economic development of village.

 To develop linkage with institution of NGOs.

 To organize training for skill development.

 To gain mutual understanding, develop trust and self-confidence.

 To help in recovery of loans.

 To build up teamwork.

Introduction
National Bank for Agriculture and Rural DevelopmentNABARD is an apex
development bank in India based in Mumbai, Maharashtra. It has been
accredited with “matters concerning policy, planning and operations in the field
of credit for agriculture and other economic activities in rural areas in
India”.NABARD or National Bank for agriculture and Rural Development is
the apex institution accredited with all matters concerning policy, planning, and
operations in the fields of credit for agriculture and other economic activities in
the rural areas in India.NABARD is committed to rural prosperity by promoting
sustainable and equitable agriculture and rural development through effective
credit support, related services, institutional building and other innovative
initiatives.NABARD is set up by the Government of India as a development
bank with the mandate of facilitating credit flow for promotion and
development of agriculture and integrated rural development. The mandate also
covers supporting all other allied economic activities in rural areas, promoting
sustainable rural development and ushering in prosperity in the rural areas.With
a capital base of Rs 2,000crore provided by the Government of India and
Reserve Bank of India, it operates through its head office at Mumbai, 28
regional offices situated in state capitals and 391 district offices at
districts.NABARD is set up as an apex Development Bank with a mandate for
facilitating credit flow for promotion and development of agriculture, small-
scale industries, cottage and village industries, handicrafts and other rural crafts.
It also has the mandate to support all other allied economic activities in rural
areas, promote integrated and sustainable rural development and secure
prosperity of rural areas. In discharging its role as a facilitator for rural
prosperity

NABARD is entrusted
1. Providing refinance to lending institutions in rural areas2.Bringing about or
promoting institutional development and3.Evaluating, monitoring and
inspecting the client banks Besides this pivotal role, NABARD also: • Acts as a
coordinator in the operations of rural credit institutions • Extends assistance to
the government, the Reserve Bank of India and other organizations in matters
relating to rural development • Offers training and research facilities for banks,
cooperatives and organizations working in the field of rural development •
Helps the state governments in reaching their targets of providing assistance to
eligible institutions in agriculture and rural development• Acts as regulator for
cooperative banks and RRBs• Extends assistance to the government, the
Reserve Bank of

India and other organizations in matters relating to rural

development
• Offers training and research facilities for banks, cooperatives and
organizations working in the field of rural development • Helps the state
governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development • Acts as regulator for
cooperative banks and RRBs Some of the milestones in NABARD's activities
are: • Refinance disbursement under ST-Agri & Others and MTConversion/
Liquidity support aggregated Rs.19452 crore during 2009-10. • Refinance
disbursement under Investment Credit to commercial banks, state cooperative
banks, state cooperative agriculture and rural development banks, RRBs and
other eligible financial institutions during 2009-10 aggregated Rs.12009.08
crore. • Through the Rural Infrastructure Development Fund (RIDF)
Rs.12387.54 crores were disbursed during 2009-10. With this, a cumulative
amount of Rs.86939.74 crore has been disbursed as on 31 March 2010 covering
irrigation, rural roads and bridges, health and education, soil conservation,
drinking water schemes, flood protection, forest management and the Bharat
Nirman Project (BNP).• Under Watershed Development Fund with a corpus of
Rs.1102 crore as on 31 March 2008, 513 projects in 14 states have benefited. •
Farmers now enjoy hassle free access to credit and security through 906.40 lakh
Kisan Credit Cards that have been issued through a vast rural banking network.•
Under the Farmers' Club Programme, a total of 54805 clubs covering 104648
villages in 587 districts have been formed, helping farmers get access to credit,
technology and extension services.

Functions
•NABARD is an apex institution accredited with all matters concerning policy,
planning and operations in the field of credit for agriculture and other economic
activities in rural areas. •It is an apex refinancing agency for the institutions
providing investment and production credit forpromoting the various
developmental activities in rural areas •It takes measures towards institution
building for improving absorptive capacity of the credit delivery system,
including monitoring, formulation of rehabilitation schemes, restructuring of
credit institutions, training of personnel, etc.•Itco-ordinates the rural financing
activities of all the institutions engaged in developmental work at the field level
and maintains liaison with Government of India, State Governments, Reserve
Bank of India and other national level institutions concerned with policy
formulation. •It prepares, on annual basis, rural credit plans for all districts in
the country; these plans form the base for annual credit plans of all rural
financial institutions •It undertakes monitoring and evaluation of projects
refinanced by it. •It promotes research in the fields of rural banking, agriculture
and rural development

Mission
Promoting sustainable and equitable agriculture and rural development through
effective credit support, related services, institution building and other
innovative initiatives.In pursuing this mission, NABARD focuses its activities
on:Credit functions, involving preparation of potential-linked credit plans
annually for all districts of the country for identification of credit potential,
monitoring the flow of ground level rural credit, issuing policy and operational
guidelines to rural financing institutions and providing credit facilities to
eligible institutions under various programmesDevelopment functions,
concerning reinforcement of the credit functions and making credit more
productiveSupervisory functions, ensuring the proper functioning of
cooperative banks and regional rural banks

History
NABARD was established on the recommendations of Shivaraman Committee,
by an act of Parliament on 12 July 1982 to implement the National Bank for
Agriculture and Rural Development Act 1981. It replaced the Agricultural
Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of
Reserve Bank of India, and Agricultural Refinance and Development
Corporation (ARDC). It is one of the premiere agencies to provide credit in
rural areas.

Objectives
NABARD was established in terms of the Preamble to the Act, "for providing
credit for the promotion of agriculture, small scale industries, cottage and
village industries, handicrafts and other rural crafts and other allied economic
activities in rural areas with a view to promoting IRDP and securing prosperity
of rural areas and for matters connected therewith in incidental thereto".The
main objectives of the NABARD as stated in the statement of objectives while
placing the bill before the Lok Sabha were categorized as under :1.The National
Bank will be an apex organization in respect of all matters relating to policy,
planning operational aspects in the field of credit for promotion of Agriculture,
Small Scale Industries, Cottage and Village Industries, Handicrafts and other
rural crafts andother allied economic activities in rural areas.2.The Bank will
serve as a refinancing institution for institutional credit such as long-term,
short-term for the promotion of activities in the rural areas.3. The Bank will
also provide direct lending to any institution as may be approved by the Central
Government.4.The Bank will have organic links with the Reserve Bank and
maintain a close link with in.

Role
NABARD's refinance is available to State Co-operative Agriculture and Rural
Development Banks (SCARDBs), State Co-operative Banks (SCBs), Regional
Rural Banks (RRBs), Commercial Banks (CBs) and other financial institutions
approved by RBI. While the ultimate beneficiaries of investment credit can be
individuals, partnership concerns, companies, State-owned corporations or co-
operative societies, production credit is generally given to
individuals.NABARD has its head office at Mumbai, IndiaNABARD operates
throughout the country through its 28 Regional Offices and one Sub-office,
located in the capitals of all the states/union territories. Each Regional
Office[RO] has a Chief General Manager [CGMs] as its head, and the Head
office has several Top executives like the Executive Directors[ED], Managing
Directors[MD], and the Chairperson. It has 336 District Offices across the
country, one Sub-office at Port Blair and one special cell at Srinagar. It also has
6 training establishments.NABARD is also known for its 'SHG Bank Linkage
Programmedwhich encourages India's banks to lend to self-help groups (SHGs).
Because SHGs are composed mainly of poor women, this has evolved into an
important Indian tool for microfinance. As of March 2006 2.2 million SHGs
representing 33 million members had to been linked to credit through this
programmed. NABARD also has a portfolio of Natural Resource Management
Programmes involving diverse fields like Watershed Development, Tribal
Development and Farm Innovation through dedicated funds set up for the
purpose.
Major Activities
• Preparing of Potential Linked Credit Plans for identification of exploitable
potentials under agriculture and other activities available for development
through bank credit.

• Refinancing banks for extending loans for investment and production purpose
in rural areas.

• Providing loans to State Government/Non Government Organizations

(NGOs)/Panchayati Raj Institutions (PRIs) for developing rural infrastructure.

• Supporting credit innovations of Non Government Organizations (NGOs) and

other non-formal agencies.

• Extending formal banking services to the unreached rural poor byevolving a

supplementary credit delivery strategy in a cost effective manner by promoting
Self Help Groups (SHGs)

• Promoting participatory watershed development for enhancingproductivity

and profitability of rainfed agriculture in a sustainable manner.

• On-site inspection of cooperative banks and Regional Rural Banks (RRBs)

and iff-site surveillance over health of cooperatives andRRBs.

Rural Innovation
NABARD's role in rural development in India is phenomenal. National Bank
for Agriculture & Rural Development (NABARD) is set up as an apex
Development Bank by the Government of India with a mandate for facilitating
credit flow for promotion and development of agriculture, cottage and village
industries. The credit flow to agriculture activitiessanctioned by NABARD
reached Rs 1,574,800 million in 2005-2006. The overall GDP is estimated to
grow at 8.4 per cent. The Indian economy as a whole is poised for higher
growth in the coming years. Role of NABARD in overall development of India
in general andrural & agricultural in specific is highly pivotal.Through
assistance of Swiss Agency for Development and cooperation, NABARD set up
the Rural Infrastructure Development Fund. Under the RIDF scheme Rs.
512830 million have been sanctioned for 2,44,651 projects covering irrigation,
rural roads and bridges, health and education, soil conservation, water schemes
etc. Rural Innovation Fund is a fund designed to support innovative, risk
friendly, unconventional experiments in these sectors that would have the
potential to promote livelihood opportunities and employment in rural areas.
The assistance is extended to Individuals, NGOs, Cooperatives, Self Help
Group, and Panchayati Raj Institutions who have the expertise and willingness
to implement innovative ideas for improving the quality of life in rural areas.
Through member base of 250 million, 600000 cooperatives are working in
India at grass root level inalmost every sector of economy. There are linkages
between SHG and other type institutes with that of cooperatives.The purpose of
RIDF is to promote innovation in rural & agricultural sector through viable
means. Effectiveness of the program depends upon many factors, but the type of
organization to which the assistance is extended is crucial one in generating,
executing ideas in optimum commercial way. Cooperative is member driven
formal organization for socio-economic purpose, while SHG is informal one.
NGO have more of social color while that of PRI is political one. Recently in
2007-08, NABARD has started a new direct lending facility under 'Umbrella
Programme for Natural Resource Management' (UPNRM). Under this facility
financial support for natural resource management activities can be provided as
a loan at reasonable rate of interest. Already 35 projects have been sanctioned
involving loan amount of about Rs 1000 million. The sanctioned projects
include honey collection by tribals in Maharashtra, tussar value chain by a
women producer company ('MASUTA'), eco-tourism in Karnataka etc.

NABARD and its Role in Training

The provisions of the Act as stated below very clearly indicate the nature and
scope of the developmental mandate of the Bank and its role in training and
capacity building with the underlying belief that the process of development
cannot be accomplished by credit/refinance alone.section 38 of the NABARD
Act provides that the Bank shall:•maintain expert staff to study all problems
relating to agriculture and rural development and be available for consultation
to the Central Government, the Reserve Bank, the State Governments and the
other institutions engaged in the field of rural development.•Provide facilities
for training, for dissemination of information and the promotion of research
including the undertaking of studies, researches, techno-economic and other
surveys in the field of rural banking, agriculture and rural development.•provide
technical, legal, financial, marketing and administrative assistance to any
person engagedin agriculture and rural development activities;•may provide
consultancy services in the field of agriculture and rural development and other
related matters in or outside India, on such terms and against such
remuneration, as may be agreed upon;In this context, the role of training in
NABARD and the role played by it for capacity building in client institutions,
partner agencies and other developmental agencies are important.For
maintaining 'Expert Staff', the bank needs to provide continuous exposure to its
officers and staff for up scalingtheir knowledge and skills in core areas.
However, in the initial years the Bank had recruited expert staff from various
technical disciplines and created a separate cadre of officers. These officers
were involved in formulating, appraising, monitoring and evaluating different
agricultural projects implemented by different credit agencies. These officers,
irrespective of their academic background, were imparted similar type of
training as all other officers. Their placements and the regular job rotations
helped in grooming them to take up assorted assignments get involved in a
variety of roles and functions including credit, developmental, promotional,
supervisory and necessary support and information for decision making. The
Bank also had access to their specialized skills which were utilized whenever
needed.In pursuance of the Bank's mandate as stated in the Act, the Bank
provides training facilities for the RFIs and agencies involved in rural
development through BIRD and the two RTCs. With a view to broad base the
training and capacity building efforts, the Bank encourages the RFIs to set up
their own training systems and provides these training institutes the necessary
support to conduct meaningful and quality training. Options and avenues for
strengthening the training interventions at the client level are continuously
examined so that the human resources in these institutions are developed to take
on the challenges, reckon with the competition, improve customer service,
expand outreach, develop suitable products and thereby contribute to rural
development.As NABARD primarily functions through other agencies, the
needs of the client institutions largely determine the knowledge and skill
requirements of NABARD officers.NABARD endeavors to blend the
experiences of client bank training with the training for NABARD officers so as
to make training meaningful and relevant to their roles. Efforts are also made to
blend the study findings with the outcome from training to periodically measure
the overall impact of the investments made in the training efforts.

NABARD today
25 YEARS OF DEDICATION TO RURAL PROSPERITY Initiates measures
toward institution-building for improving absorptive capacity of the credit
delivery system, including monitoring, formulation of rehabilitation schemes,
restructuring of credit institutions, training of personnel, etc.nABARD
completed 25 years of its eventful and trailblazing existence on 12 July 2007.
Established in 1982, by an Act of Parliament, NABARD's mandate was to
provide focused and undivided attention to the development of rural India by
facilitating credit flow for promotion of agriculture and rural non farm sector.
Emphasizing this in no uncertain terms, its mission statement underscores
NABARD's goal to "promote sustainable and equitable agriculture and rural
prosperity through effective credit support, related services, institution
development and other innovative initiatives". NABARD's functions can be
classified into 4 major categories viz. Credit Planning, Financial Services,
Promotion and Development, and Supervision. Under Credit Planning
NABARD prepares Potential Linked Credit Plan (PLP) annually for each
district of the country by assessing potential available in agriculture and rural
sector. This serves as a guide for banks and Government agencies to prepare
their own investment and credit plans in the district and state. Under its
Financial services, it refinances commercial, cooperative and regional rural
banks for lending to on farm and non-farm activities. This includes farm
activities like minor irrigation, animal husbandry, farm mechanization, forestry,
fisheries, land development, horticulture, plantation and medicinal crops and
non-farm like rural industries, artisans, handicrafts, handlooms, rural housing,
rural tourism and agro processing. Refinance is provided by NABARD for both
long term investment credit as well as short term production credit for crop
loans and working capital for non-farm activities. A nationwide network of 28
regional offices at the state capitals, a sub-office at Port Blair and 391 district
development offices are at hand to cater to this awesome task. Clearly
NABARD's benevolent hand has been silently at work in supporting rural
resurgence in various ways and its stakes are quite enormous. A glance at the
figures will give a fair idea. It has channelized a whopping Rs. 1, 21,000 crore
under its investment credit programme and RIDF since inception, which
includes Rs. 8795 crore disbursed during 2006-07. Under production credit the
Bank sanctioned limits of Rs. 12570 crore during 2006-07. NABARD has
effectively brought in a number of innovations in the rural credit domains. To
quote a few: Formation and Linkage of Self Help Groups, Farmers Clubs, Rural
Infrastructure Development Fund, Watershed Development, Kisan Credit Card,
District Rural Industries Project, Cluster Development Programme and Rural
Innovation Fund. Coordinates the rural financing activities of all the institutions
engaged in developmental work at the field level and maintains liaison with the
government of India , state governments, the Reserve Bank of India and
othProfile of the area under study ( Lawngtlai District): Lawngtlai district is one
of the eight districts of Mizoram state in India. The district is bounded on the
north by Lunglei district, on the west by 19Bangladesh, on the south by
Myanmar and on the east by Saiha district. The district occupies an area of
2557.10 km²(2011 census). Lawngtlai town is the administrative headquarters
of the district. The district shares its boundaries with Lunglei and Saiha districts
on the north and south respectively. The inhabitants of the district are mainly
the ethnic groups of tribals like Lai and Chakma, who are among the minor
tribal communities of Mizoram. The main occupation is cultivation and the
rural population largely depends on agriculture for their subsistence. The
physicalfeature is mainly hilly except with long narrow strip of low lying area
along the western side of Chamdur Valley. Geography of Lawngtlai District:
Lawngtlai district is located in the southwestern most part of Mizoram having
international boundaries with Bangladesh to the west and Myanmar to the
south. The district is bounded by Lunglei District to the north and Saiha District
to the east. The Thega (Kawrpui) River forms most of the boundary with
Bangladesh on the west and the Kaladan River forms the eastern boundary with
Saiha District. Lawngtlai district occupied an area of 2557.10 km² (2011
Census). The area is mountainous and hilly with a small strip of low lying
riverine plain along the western side of the Chamdur Valley. Landslides are
common especially during rainy season. The western side of the district is
covered by dense virgin forest. The main rivers include the Kaladan River,
Tuichong River, the Chhimtuipui River, the Ngengpui River, the Chawngte
River and the Tuiphal River. Economy of Lawngtlai District: Onethird of the
total inhabitants of Lawngtlai district rely entirely on agriculture, which is
mostly based on traditional method of shifting cultivation. Only a small fraction
of urban population is involved in permanent type of employment, such as state
government service, bank and feature is mainly hilly except with long narrow
strip of low lying area along the western side of Chamdur Valley.Geography of
Lawngtlai District: Lawngtlai district is located in the southwestern most part of
Mizoram having international boundaries with Bangladesh to the west and
Myanmar to the south. The district is bounded by Lunglei District to the north
and Saiha District to the east. The Thega (Kawrpui) River forms most of the
boundary with Bangladesh on the west and the Kaladan River forms the eastern
boundary with Saiha District. Lawngtlai district occupied an area of 2557.10
km² 2011 Census). The area is mountainous and hilly with a small strip of low
lying riverine plain along the western side of the Chamdur Valley. Landslides
are common especially during rainy season. Thewestern side of the district is
covered by dense virgin forest. The main rivers include the Kaladan River,
Tuichong River, the Chhimtuipui River, the Ngengpui River, the Chawngte
River and the Tuiphal River.Economy of Lawngtlai District: One-third of the
total inhabitants of Lawngtlai district rely entirely on agriculture, which is
mostly based on traditional method of shifting cultivation. Only a small fraction
of urban population is involved in permanent type of employment, such as state
government service, bank andschools, and few engaged in small-scale business.
The economic status of the district is in fact the lowest among the districts in
Mizoram.Divisions of Lawngtlai District: Unlike the most parts of India, where
districts are divided into tehsils (talukas), in Lanwgtlai district there are two
Autonomous District Councils, the Lai autonomous District Council (LADC)
and the Chakma Autonomous District Council (CADC) with their headquarters
at Lawngtlai and Chawngte (Kamalanagar) respectively. Having separate
20autonomous legislative, executive and judicial functions, the Lais and the
Chakmas administer their respective autonomous regions in accordance with
the provisions of the Sixth Schedule to the

Constitution of India.
This district is divided into four Rural Development Blocks:

1. Lawngtlai Rural Development Block

2. Bungtlang ‘South’ Rural Development Block

3. Chawngte Rural Development Block

4. Sangau Rural Development Block.

The town of Lawngtlai is the headquarters for the district. The names ofthe
headquarters of the Rural Development Blocks are same as the them. There are
158 villages in Lawngtlai district. There are 3 Legislative Assembly
constituencies in this district, 36- Tuichawng (ST), 37-Lawngtlai West (ST) and
38-Lawngtlai East (ST).Introduction National Bank for Agriculture and Rural
Development(NABARD) is an apex development bank in India based in
Mumbai, Maharashtra. It has been accredited with “matters concerning policy,
planning and operations in the field of credit for agriculture and other economic
activities in rural areas in India”.NABARD or National Bank for agriculture
and Rural Development is the apex institution accredited with all matters
concerning policy, planning, and operations in the fields of credit for agriculture
and other economic activities in the rural areas in India.NABARD is committed
to rural prosperity by promoting sustainable and equitable agriculture and rural
development through effective credit support, related services, institutional
building and other innovative initiatives.NABARD is set up by the Government
of India as a development bank with the mandate of facilitating credit flow for
promotion and development of agriculture and integrated rural development.
The mandate also covers supporting all other allied economic activities in rural
areas, promoting sustainable rural development and ushering in prosperity in
the rural areas.With a capital base of Rs 2,000crore provided by the
Government of India and Reserve Bank of India, it operates through its head
office at Mumbai, 28 regional offices situated in state capitals and 391 district
offices at districts.NABARD is set up as an apex Development Bank with a
mandate for facilitating credit flow for promotion and development of
agriculture, small-scale industries, cottage and village industries, handicrafts
and other rural crafts. It also has the mandate to support all other allied
economic activities in rural areas, promote integrated and sustainable rural
development and secure prosperity of rural areas. In discharging its role as a
facilitator for rural prosperity NABARD is entrusted with1. Providing refinance
to lending institutions in rural areas2.Bringing about or promoting institutional
development and3.Evaluating, monitoring and inspecting the client banks
Besides this pivotal role, NABARD also: • Acts as a coordinator in the
operations of rural credit institutions • Extends assistance to the government,
the Reserve Bank of India and other organizations in matters relating to rural
development • Offers training and research facilities for banks, cooperatives and
organizations working in the field of rural development • Helps the state
governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development• Acts as regulator for
cooperative banks and RRBs• Extends assistance to the government, the
Reserve Bank of India and other organizations in matters relating to rural
development • Offers training and research facilities for banks, cooperatives and
organizations working in the field of rural development • Helps the state
governments in reaching their targets of providing assistance to eligible
institutions in agriculture and rural development • Acts as regulator for
cooperative banks and RRBs

Some of the milestones in NABARD's activities are:

• Refinance disbursement under ST-Agri & Others and MTConversion/
Liquidity support aggregated Rs.19452 crore during 2009-10.

• Refinance disbursement under Investment Credit to commercial banks, state

cooperative banks, state cooperative agriculture and rural development banks,
RRBs and other eligible financial institutions during 2009-10 aggregated
Rs.12009.08 crore.

• Through the Rural Infrastructure Development Fund (RIDF) Rs.12387.54

crores were disbursed during 2009-10. With this, a cumulative amount of
Rs.86939.74 crore has been disbursed as on 31 March 2010 covering irrigation,
rural roads and bridges, health and education, soil conservation, drinking water
schemes, flood protection, forest management and the Bharat Nirman Project
(BNP).

• Under Watershed Development Fund with a corpus of Rs.1102 crore as on 31

March 2008, 513 projects in 14 states have benefited.

• Farmers now enjoy hassle free access to credit and security through 906.40
lakh Kisan Credit Cards that have been issued through a vast rural banking
network.

• Under the Farmers' Club Programme, a total of 54805 clubs covering 104648
villages in 587 districts have been formed, helping farmers get access to credit,
technology and extension services.

REVIEW OF LITERATURE :-
Various studies have been conducted since the nationalization of commercial
banks in 1969, highlighting the importance and use of credit particularly in rural
areas. These studies look into the problems of over dues and the causes for poor
recovery. Interestingly, several studies have been conducted by social scientists,
financial institutions and agencies, which highlight the positive trends and
impact of Self Help Groups on empowerment, credit accessibility and the social
change. It is very difficult to review all the relevant studies since proper
documentation of such studies is 21still to be ensured. Therefore, available
relevant studies, particularly case studies, workshops, seminars and symposia,
have been critically reviewed. Nagayya (2000) maintains that an informal
arrangement for credit supply to the poor through SHG's is fast emerging as a
promising tool for promoting income-generating enterprises. He has reviewed
the initiatives taken at the national level with a view of institutional
arrangements to support this programme for alleviation of poverty among the
poor, with focus on women. He maintained that NABARD and SIDBI are
playing a prominent role at various stages of implementation of this
programme. There are other national level bodies also supporting NGO's/VA/s,
viz. Rastriya Mahila Kosh (RMK), Rashtriya Gramin Vikas Nidhi (RGVN) etc.
He called for an imperative need to enlarge the coverage of SHG's in advance
portfolio of banks as part of their corporate strategy, to recognize perceived
benefits of SHG's financing in terms of reduced default risk and transaction
costs.Ahmad (1999) through a case study on Thrift Groups in Assam,
highlighted that women are coming to the administration directly for their just
rights and to address their grievances boldly. It proved that Self Help Groups
are successful in North East India even in the midst of insurgency. Similarly
Gurumoorthy (2000) maintained that SHG is a viable alternative to achieve the
objectives of rural development and to get community participation in all rural
development programmes. SHG is a viable organizational setup to disburse
micro credit to the rural people for the purpose of making them entrepreneur
and encouraging them to enter into entrepreneurial activities. Credit needs of
the rural people can be fulfilled wholesomely through the SHG's. The SHG
have successfully demonstrated how to mobilize and manage thrift, appraise
credit needs, maintain linkages with the banks and enforce financial self
discipline. SHG's enhance the equality of status of the poor as participants,
decision-makers and beneficiaries in the democratic, economic and social and
cultural spheres of life. They encourage SHG members to take active part in the
socio-economic progress of the society. Bhatia and Bhatia (2000) through few
case studies highlighted that recovery of SHG's is higher than other credit
extended to borrowers. Moreover, involvement of SHG's had helped the bank
branches in recovery of old dues. They observed that there has been perceptible
changes in the living standards of the SHG's members, in terms of ownership of
assets, increase in savings and borrowing capacity, income generating activities
and income levels as well. V.M. Rao (2002) maintain that a review of the
genesis and development of SHG's in India reveals that the existing formal
financial institutions have failed to provide finances to landless, marginalized
and disadvantaged groups. The origin of SHG's could be treated to mutual aid
in Indian village community. SHG's encourage savings and promote income
generating activities through small loans. The experience available in the
country and elsewhere suggests that SHG's are sustainable to have replicability,
stimulate savings, and in the process help borrower to come out of vicious
circle of poverty.Rakesh Malhotra (2000) in his study of 174 women
beneficiaries, in Rae Bareilly of the state of Uttar Pradesh, drawn and covered
randomly from four formal agencies of credit i.e. CB's, RRB's, PACS, and
ARDB's revealed that less than half a per cent of female population against 3.5
per cent of male population in the study area were clients of the banks.
Furthermore, only 7.64 per cent of the total number of cases financed and only
6.96 percent of the total quantum of credit extended by RFI's have gone to
women. It was observed that 83 per cent of loan cases availed by women; male
members were primarily responsible for the end use of credit.22Puhazhendhi
(1999) analyzed the functioning of SHG's, in performance, sustainability,
empowerment of women, economic impact on the members, future potentials
etc. He observed that SHG's in Tamil Nadu are performing well towards social
change and transformation. The emerging trends are leading to positive
direction of empowerment of members and promotion ofmicro finance.Shanthi
and Dhana lakshmi (2004) in their article, ‘Case Study of Women’s
Empowerment through SHGs in Gobichettipalayam Block, Erode District’ state
that empowerment is an active, multidimensional process which enables women
to realize their full potential and powers in allspheres of life. Women’s
empowerment process starts with economic empowerment .They have also
disclosed that leadership qualities and active participation in group culture lead
to improvement in political acumen which would in turn strengthen and sustain
the overall process of empowerment.The above studies simply demonstrate that
SHG's are playing a vital role in extending macrofinance to the rural poor. The
functioning of SHG's has been based on participatory mechanism and therefore
the impacts of SHG's on its members in terms of empowerment, accessibility to
credit, socio-economic change etc. has been found positive. Though there are a
number of studies which are related to functioning and micro-finance but only a
few studies have been taken so far to assess the impact of Self Help Groups on
the socio- economic empowerment. In this context, the present study is
important to assess the impact of Women Self Help Groups on its members in
terms of socio-economic empowerment in Lawngtlai District. The study
findings may be useful for policy imperatives and smooth functioning of SHG's.
More benefits of SHG's may be obtained through proper functioning of these
groups and extending of micro-finance to develop and
promotemicroenterprises.

Daniel C. Clay et.al (1988)1indicated that 47 percent of farm households in

Rwanda engaged in some form off-farm employment. Time spent by the

1 Daniel. C. Clay et.al (1988), “Inequality and the Emergence of Non-Farm

Employment in Rwanda”, Dept. of Sociology, Michigan State University, East
lansing, Michigan, U.S.A.32farmers in artisan activities was the heaviest in the
construction industry. Nearly 80 percent of the off-farm employment was held
by men.
Ravi and Modi (1992)2observed that the introduction of new technology will
create more non-farm employment and generate additional income to the
surplus labour. Labourers, who were not directly observed into more productive
agricultural jobs, may be absorbed indirectly into non-farm jobs industry
directly or indirectly related agriculture.

Gupta G.B (1993)3

revealed that a number of weavers were employed and a number of women

artisans were also getting employment along with the weavers. However, they
were being exploited by the middlemen/master weavers. The recovery of loan
installments was better in power loom than other sector loaning by the
PCARDBs. Training of the technical personnel was identified as pre-requisite to
undertake NFS activities by the banks.

2 Ravi and Modi, M.K. (1992) “Agricultural Development and Non-Farm

Employmentchanges in Hissar District of Haryana,” Indian Journal of
Agricultural Economics, Vol. XLVII, No. 2.

3 Gupta G.B. (1993), “A Study on Financing Non-Farm Sector Activities

(power looms)” by Tamil Nadu Co-operative State Land Development Bank
Limited, Planning,

Research and Development Cell, National Co-operative Agriculture Rural

Development Banks’ Federation Limited, Bombay. PP.1-20.33Peter Lanjouw,
P.Shariff, A. (1993)4conducted a study among 32,000 rural households across
India. In this study, it was found that non-farm incomes accounted for roughly
one third (34 percent) of household income in rural India on average, with
considerable variation across population sectors and between States. Education
appeared to improve the prospects of non-farm employment. Women were able
to get lower income from non-farm activities. Those with larger per capita land
holdings were most likely to find non-farm work, yet on average had lower
non-farm income.

Mridul Eapen (1994)5revealed that the employment structure in rural areas of

kerala did not show any significant overall improvement due to NFS, but rural
prosperity had increased among casual workers.

Chadha G.K. (1994)6

conducted an employment and poverty household surveys across three States of

differing levels of development: Bihar considered a4

Peter Lanjouw, P.Shariff, A, (1993), working paper series, no.81, National

Council for Applied Economic Research, New Delhi.

5 Mridul Eapen (1994), Rural Non-Agricultural Employment in Kerala some

Emerging Tendencies, Economic and Political Weekly, Vol. XXIX, No.21
p.1295.

6 Chadha. G.K. (1994), Quoted in “The Rural Non-Farm Economy in India- A

Review of Literature” by Daniel Coppard. (2001), p.21.34backward region;
Andhra Pradesh, and agriculturally developed region and Uttar Pradesh, a State
with both developed agricultural and non-agricultural sectors. He expressed that
a quickly growing and productive agricultural economy is able to promote well
developed non-agricultural activity within the village itself. As the economy is
developing, the proportion of non-farm income increases among the poor
households.

Vissaria and Basant (1994)7

identified that during the past decade, the share of the rural non-farm sector in
the total rural workforce had considerably increased. The trend was more
evident among male workers than the female workers. The increase in the non-
farm employment was a consequence of an increase in the proportion of casual
non-agricultural workers. Participation in RNF employment is inversely
proportional to the size of household landholding.

Jemol Unni (1996)8

expressed that older men specialize in agricultural activities and better educated
men specialize in non-agricultural employment in the selected 30 villages of
Gujarat. High population densities and proximity to

7 Visaria.P. and Basant. R. (1994), “Non-Agricultural Employment in India,

Trends and Prospects”, Sage Publications, New Delhi.

Jemol Unni, (1996), Quoted in “The Rural Non-Farm economy in India: A

Review of Literature”: NRI Report No 2662. Chatham U.K: Natural Resources
Institute35rural towns (markets) also foster such specialization. Many more
women engage in casual and part-time work, particularly concentrated in the
agricultural labour sector. RNF sector may be particularly important for woman
by drawing them away from poorly remunerated agricultural work.

Saleth (1996)

investigated the benefits of non-farm growth. He remarked that households who

benefited from non-agricultural employment may not necessarily reap the
benefits of the non – farm sector. For example, large landless households with
cattle, benefit from non-agricultural employment whilst wealthier households,
which are able to invest in better education, benefit from access to non-
agricultural activity having higher economic returns. This further demonstrates
the potential response to growth opportunities available to better –endowed
groups, whilst distress factors like unemployment commonly mediate the non –
agricultural activities of the poor.

Atul Mishra (1996)10 revealed that the employment in the RNFE was high in
States where green revolution (Punjab and Haryana-26 percent) or land reform
(Kerala and Bengal-26 per cent) had taken place. But it was low in the States
9Saleth M R (1996), Rural non- Farm Employment in Tamil Nadu: A
Quantitative Analysis at the household level, The Indian Journal of Labour
Economics, Vol.39, No.210 Atul Mishra, (2001), The Emergence of
Entrepreneurship in the Rural Non-Farm36where neither green revolution nor
land reform had taken place (Bihar 11 per cent). However, regions of green
revolution or land reform together contributed less than 25 percent of the
cultivable areas. Most of the rural population was living in areas where neither
green revolution nor land reform had taken place.

A study on social institutions and structural transformation of the nonfarm

economy conducted by Jayaraj D. (1997)11 confirmed that there was growth of
rural non-agricultural employment. RNFS also boosts rural industrialization and
entrepreneurial culture. Islam (1997)12 revealed that the factors that lead to
distress-push participation in the RNFE include successive droughts that
depress income and hence increase the need for alternative sources of income,
usually through low skill jobs. Factors that lead to demand pull diversification
include the increased income of lower and middle-income households and
increased demand from urban areas for rural products.

11 Jayaraj, D. (1997), Social Institutions and the Structural Transformation of

the NonFarm Economy, in Barbara Harrish White and S. Janakarajan, (Eds)
Rural India Facing the 21st Century, Anthem Pre Publication, New Delhi.p.191.

12 Islam. N. (1997), “The Non-Farm Sector and Rural Development –Review

of Issues and Evidence, Food, Agriculture and the Environment Discussion
Paper 22, Washington DC: IFPRI.37

Kishor.C.Samal (1997)13 opined that equal distribution of land and rural assets
including common property resources and water for irrigation and RNFS
activities are positively related through consumption expenditure linkages.

Gopalappa (1997)14 found that the spread of RNFS in rural areas was due to
distress factors such as land-man ratio and cropped area. The literacy rate,
people’s awareness, willingness to work and the availability of infrastructure
facilities also contributed for the spread of RNFS.

Nagaiya, D. (1999)15 reported that States which have shown relatively fast
growth in employment in the RNFS were generally the ones which also
recorded a relatively better growth of agriculture. Symmetry in the growth rates
of different sub-sectors within RNFS was also observed in Andhrapradesh.

13 Samal, C. Kishore (1997), Rural Non-Farm Activities in specific Region of

Orissa, Journal of Rural Development, Vol.16 (3) pp.457 -464.14 Gopalappa,
D.V. (1997), Rural Non-Farm Employment in Karnatak

15 Nagaiya, D. (1999), Rural Non-Farm Sector in Andhra Pradesh-Trends and

Directions for the Future, Journal of Rural Development, Vol.18, No.1,
p.85.38Iyampillai S. and Jayakumar N. (2000)16 revealed that the relationship
between caste hierarchy and the land holding status among the rural households
in Trichirappalli District. There was Domination of SC households in casual
(Non Farm Employment) NFE including construction activities and the
domination of Non-SC households in the regular NFE including govt. jobs, self
employment and business. Only 18 percent of the sample households were
living below the poverty line earning less than Rs. 11,000 at 1997 prices.
Households taking part in NFE earned roughly about 40 percent of their income
from NFE. Large land owners got better income earnings from NFE also.
Transport facilities appeared to be very strong determinant for raising their level
of income.Nagarajan G. (2000)17 reported that Tamil Nadu had highest average
amount of NFS loans showing with Rs. 231.957 lakhs followed by Maharashtra
with Rs. 215.169 lakhs, Gujarat with 148.57 lakhs and Kerala with Rs. 210.97
lakhs. Analysis of place for NFS loans in the total loans issued reveals the
emergence of NFS loans as an important avenue for deployment of funds for
DCCBs. There is definite shift towards NFS loans in the selected banks in all

16 Iyampillai, S and Jayakumar, (2000), Non-Farm Employment in Tamil

Nadu. “Rural Employment – The Non-Farm Sector, Koteswara Rao, M (Ed)
Deep&$Deep Publications, New Delhi.

17 Nagarajan. G. (2000), “A Study of Non-Farm Sector Loans by District

Central Cooperative Banks in Tamil Nadu. Thesis submitted to Bharathidasan
University, Thiruchirappalli, Tamil Nadu.39categories of loans. Arrangements
for recovery of loans all the selected District Central Cooperative Banks are
satisfactory.Koteswara Rao (2000)18 expressed that rural non-farm sector in
India has witnessed a steady expansion during the last two decades. The
workforces in rural areas are gradually shifting from low productive agricultural
jobs of various types partly in rural areas themselves and partly in urban area.
Nearly one fourth of rural male and about one-sixth of rural female workers
were engaged in different types of non-agricultural activities. The mode of
employment is also undergoing significant changes.

Sidhu R. S (2000)

19 reported that the main reasons accounting for the occupational shifts at
micro-level from agricultural to non agricultural jobs was due to sharply
declining employment potential in regions with high out growth. One percent
growth of farm output was found to be as low as 0.00, 00.7 and 0.19 in Punjab,
Haryana and Uttar Pradesh. It was due the labour substitution to the high
agricultural growth regions. Technological and organizational changes in
agriculture are largely responsible for this; second the diversification of the
rural

18 Koteswara Rao, M (2000) “ Rural Non-Farm Employment in India: A Note”,

Koteswara Rao (ed.) Rural Employment the Non-Farm Sector, Deep and Deep
Publication, New Delhi,

19 Sidhu R. S. (2000), Extent and Pattern of Loan Overdues in Punjab, Indian

Cooperative Review, Vol. 40, No. 1.40economy into non-agricultural activities
under the process of development. Third improvement in literacy and
vocational training converting the rural under employed into openly
unemployed seeking jobs outside agriculture.

Sudhakar Reddy, E. (2000)20 viewed that rural non-farm employment was

distinguished from the programme for industrialization required a separate
strategy in terms of its procedures and provisions, method of implementation
and administration. RNFS was more broad based compared to rural
industrialization. This needed to be built into the programme for rural non-farm
sectorNABARD (2001)21 conducted a study on Rural Non-Farm sector in
Ludhiana and Sangrur districts of Punjab during 1999-00 covered PCARDBs,
Commercial Banks, RRBs, and State Cooperative Bank. The study revealed that
total recurring employment created by the sample NFS activities was 507,830
man days with average potential of 25,883 man days per unit. Around 30
percent of the sample borrowers repaid their loans regularly.

20 Sudhakar Reddy, E. (2000), Rural Non-farm Employment in Developing

EconomiesTheoretical Formulation and Empirical Evidence, Journal of Rural
Development, Vol.19, No.1, pp.131-145

21 NABARD, (2001), “Study Report on Rural Non-Farm Sector in Ludhiana

and Sangrur Districts of Punjab:, NABARAD’s Regional Office, Chandigarh.41

Ramachandraiah. G (2001)22 identified the institutional and infrastructural

impediment in rural industrialization in Dindigul District. Since the enterprises
had good resource base, their success rate was found to be very high. 90 percent
of the enterprises were working very well. Junior Davis and Douglas Pearce
(2001)23 indicated that lack of money for further investment was a major
constraint, especially among small firms complaining of poor access to credit in
Central Eastern Europe.

NABARD (2001)24 conducted an ex-post evaluation study on rural nonfarm

sector in Ludhiyana and Sangrur districts of Punjab. This study reported that the
recovery percentage of RNFS loans in sample banks were 89 percent in
Ludhiyana and 85 percent in Sangrur district during the year 1998. Effective
monitoring and follow-up was reported to be the main reason for higher
percentage of recoveries

22 Ramachandraiah, G. (2001), Institutional and Infrastructural Impediments in

Rural Industrialisation in Dindigul District, Tamilnadu, National Institute of
Rural Development, Research Report Series No43, p.2323 Davis Junior and
Douglas Pearce (2001), Non-Agricultural Rural Sector in Central

24 NABARD (2001), An Ex-post Evaluation Study on Rural Non-Farm Sector

in Ludyana and Sangrur District of Punjab, Evaluation Study Series No.7,
NABARD, Regional Office Chandigarh, p.75.42

Metha G.S (2002)25 examined to the structure, growth, development potentials

and the kinds of problems existing in the properly functioning of various non-
farm activities in the State of Uttaranjal (India). The study highlighted that
nearly one-third of the non-farm activities were traditional by nature and were
established over three generations ago. The family members of the non-farm
households motivated 42 percent of the entrepreneurs for establishing non-farm
activities. And around 23 percent of the entrepreneurs were motivated by their
friends and relatives and remaining only 3.04 percent of the entrepreneurs have
decided to establish concerned non-farm activities after motivating them by the
Government. Non- farm activity was found to be a very profitable occupation in
the rural areas. The margin of all non-farm activities together was estimated to
be around 42 percent.

Jayaraman et.al (2002)26 observed that employment generation according to

the size of investment under the broad activity group showed that the
manufacturing units generated higher additional employment in man days,
which was followed by service units, trade/ business units and agro-based units

25 Metha G.S. (2002), “Non-Farm Economy and Rural Development”, GIRI

Institute of Development Studies, Lucknow.

26 Jayaraman, B, K.C. Badatya, Sami Samantara and Vinod. K.Vidyarthi

(2002), Rural Non-farm Investments-An Impact Assessment, NABARD,
Mumbai, p.84.43

A study conducted by Jayasheela et al, (2003)27 found that non-farm activity

has been immensely helpful for the villagers as it not only provided
employment but also good income all the year and checked migration to a large
extent. Maitreyi Bordia Das (2003)28 found that non-farm self employment was
not the preferred option of better educated and high status workers. Instead, it
comprised individual with low level of ducation working in low status
occupations.Tiago Wandschneider and Junior Davis (2003)29 specified the best
practices and strategies for promoting rural non-farm employment through
project intervention. Access to credit was found to play a crucial role in
successful enterprise development and household diversification into non-farm
activities in India and Bangladesh.

27 Jayasheela, K.H Ananth, V.K.Pallanna (2003), Non-Farm Production for

Reduction of Rural Poverty, Social Welfare, Vol.49 No.10, January. p.35.

28Maitreyi Bordia Das (2003), The Non-farm Self-employment in India,

29 Wandschneider Tiago and Junior Davis (2003), Best Practices and Strategies
for Promoting Rural Non-Farm Employment through Project Intervention, NRI
Report

NABARD (2003)30 has undertaken an evaluation study on District Rural

Industries Project in Tirunelveli District of Tamilnadu. This study found that
recovery of loans under RNFS was good in the case of PCARDBs and RRBs
but not satisfactory in the case of Commercial banks when compared the
recovery registered under agricultural loan.Peter Lanjouw and Abusaleh Shariff
(2004)31 viewed that non-farm incomes account for roughly one third of
household income. However, non-farm employment probabilities and earnings
find strong evidence on education in determining access to non-farm
occupations. There was clear evidence that education improves prospects of
finding non-farm employment. Premaratne, S.P. and S.M.P. Senenayake
(2004)32 observed that education and infrastructure facilities were widely
recognized as very important determinants of access to non farm income
generation activities in the rural areas. The positive link between literacy and
number of non-farm enterprises in

30 NABARD (2003), An Evaluation Study on District Rural Industries Project

inTirunelveli District of Tamilnadu, NABARD, Regional Office, Chennai,

31 Lanjouw Peter and Abusaleh Shariff (2004), Rural Non-Farm Employment

in India. Access Incomes and Poverty Impact, Economic and Political Weekly,
Vol.39, No.40,

32 Premaratne, S.P and S.M.P.Senennayake (2004), Access to Rural Non-Farm

Economic Activities in Sri Lanka, Indian Journal of Agricultural Economics,
Vol.59, the villages seems to be the result of increased awareness and aspiration
among literates about new and better models of livelihoods.

NABARD (2004)33 conducted a study on Rural Non-farm sector activities in

Kollam and Allapuzha Districts of Kerala. The activities covered were Fish
Processing, Concrete Works, Mat Making, Furniture Making, Brick
Manufacturing and Common Catering. This study reported that the highest
number of man days of employment generated (960 male + 160 female) was
found in Brick Manufacturing Industry. It was observed that the repayment
performance in smaller investments, ie., Concrete Work, Fish Processing and
Mat Making was better than those of bigger investments, ie., Furniture Making,
Brick Manufacturing and Multi Catering Units.

NABARD (2004)34 conducted a study on Employment Generation, Health and

Sustainability of RNFS units in Shimoga District, Karnataka. The study covered
146 units financed by Sahayadri Grahmin Bank, KSCARDB, Shimoga DCCB
and Commercial Banks. The study revealed that the handicrafts units

33 NABARD (2004), An-Ex-post Evaluation Study on Rural Non-Farm Sector

Activities in Kollam and Alappuzha Districts of Kerala, NABARD, Regional
Office, Tiruvandram

34 NABARD, (2004), “Study Report on Employment Generation, Health and

Sustainability of RNFS Units in Shimoga District, Karnataka”, Regional Office,
Bangalore.46generated 10,848 man days of employment during the study
period followed by 56,482 man days by Manufacturing Industry 45,698 man
days by Agro based Industry, 60,425 man days by Service Industry, and 40,050
man days by Retail Trade/ Small Business.Mahabub Hossain, (2004)35 pointed
out that the RNFS had been expanding and become a major component of the
rural economy. The share of non-agriculture in rural household income had
grown from 36 per cent in 1982 to 42 per cent in 1987 and further to 54 per cent
in 2000. The share of nonagriculture in rural employment had increased from
34 to 52 per cent and 1987: 2000 in Bangladesh. Engs Asim I. Osmani and Syed
Haider Abbas Zaidi (2004)36 indicated that the share of agriculture income to
total household income came down from 58 per cent in 1999 to 46 per cent in
2003 in Pakistan. But the non-agricultural income shot up from 42 to 54 per
cent during the same period of time. The growth in rural incomes over 1999-
2003 was on account of the non-agriculture sector.

35 Hossain Mahabub (2004), Rural Non-Farm Economy, Evidence from

Household Survey, Economic and Political Weekly, Vol, XXXIX, No.36, Sep.
pp.4053 -4058.36 Engs Asim I. Osmani and Syed Haider Abbas Zaidi (2004),
Non-Farm Rural Sector 47Ajantha. B. Rajkonwar (2004)37 made an attempt to
examine the cluster approach for rural industries development. According to
him, the local community gains directly and indirectly from the institutions due
to increased local employment and more business opportunities and the success
resides with the innovative entrepreneurial skills in all NFS activities.

NABARD (2004) has undertaken an-ex-post evaluation study on RNFS

activities in Kollam and Alappuzha districts of Kerala. This study found that the
repayment of RNFS loans was appreciable for smaller investment activities
covering below Rs.50000 to Rs.100000. These activities include fish processing
and mat making. Wilful defaulters and improper follow up action taken by the
banks for recovering the overdue were some of the reasons for the poor
recovery.

NABARD (2005)38 conducted an ex-post evaluation study on RNFS in Andhra

Pradesh. The study found that credit flow to RNFS has increased over the time
due to insufficient and irregular orders (fashion technology), weaning 37
Ajantha, B. Rajkonwar (2004), Cluster Approach for Developing Rural
Entrepreneurship, Yojana, Vol.48, No.48, March, pp.37-40. 38 NABARD,
(2005), “Study Report on Rural Non-Farm Sector Investments in Andhar
Pradesh”, NABARAD’s Regional Office, Hyderabad.48away of the members
from the group by private traders (coir mat) and nonutilization of the machines
(coir rope). Ranjit Singh Ghuman (2005)39 viewed that a holistic approach
towards the development of rural economy was sine qua non. It would include
efforts to raise both farm and non-farm rural income through industrialization,
provision of quality education, health, housing and other related social services.
Growth and development of RNFS was possible only with the emergence of
rural-based, rural-linked, rural-based urban-linked and urban-based rural linked
enterprises/activities.

Nagendra Babu, K. (2005)40 found that recovery in non-farm sector to total

loans and advances was 227.06 percent, in 2003. It was good when compared to
farm sector recovery in Regional Rural Bank which stood at 50.97 percent. 39
Ranjit Singh Ghuman (2005), Rural Non-Farm Employment Scenario –
Reflection from Recent Data in Punjab, Economic and Political Weekly, Vol-XL
No.41, October, 40 Nagendra Babu, K (2005), Evaluation of Recovery
Performance in Regional Rural Bank: A Case Study, Southern Economist, Vol.
44 No.2, .49Biradhar, R. A. and Rajasekar, D. (2006)41 who studied agrarian
structure and occupational diversification in rural Karnataka found that there
was occupation shift from agriculture to non-agricultural activities from 1981 to
1991 census. The non-agriculture employment had increased in sub sectors.

NABARD (2006)42 undertook an ex-post evaluation study on RNFS

investment in Bhilwara District of Rajasthan. This study revealed that the
repayment performance was excellent at 92.2 percent. The excellent repayment
performance was due to the manufacturing and service activities financed by
the banks. The defaulters accounted for 46 percent to sample size. The wilful
default was reported by 35 percent of total defaulters.According to Sankar
Kumar Bhaumik (2007)43 analysed the growth rates of farm and non-farm
employment. He found that, at the all India level, the growth rate of non-farm
employment was high in the post reforms period when

41 Biradhar, R. A. and Rajasekar, D. (2006), Agrarian Structure and

Occupational Diversification in Rural Karnataka, Labour and Development,
Vol, 11,12, No. 2,1 June,

42 NABARD (2006), An Ex-Post Evaluation Study on RNFS Investment in

Bhilwara District of Rajasthan, NABARD, Regional Office, Jaipur, 43 Sankar
Kumar Bhaumik (2007) “The Growth and Comparison of Rural Non-farm
Employment in India in the era of Economic Reforms.” The Indian Economic
Journal, 50the growth rate of farm employment was low. Further he found both
in the pre and post reforms period, most of the states that enjoyed high growth
rates of nonfarm employment also suffered from low growth rates of farm
employment. Consequently the rank correlation coefficient between ranks of
growth rates of farm and non-farm employment turned out to be negative in
both the periods. This means that the rural workers flocked in the non-farm
sector for employment whenever the prospects of farm employment dwindled,
in the present phase of agrarian crisis in India.

(Shah & Soni, 2022) have stated in their study that, “NABARD providescredit
for various sector including rural development, agricultural development, allied
services, micro and medium business enterprises, SHGs. NABARD always
look that rural finance as priority sector for sustainable development. Also
stated that SHG should focus on specific income generating activities”.
(Bishnoi, 2018) stated in his study that “NABARDs role in rural development is
very wide and it helps in improve the quality of life of rural poor people.
Awareness programme should be conduct for know more about NABARDs
schemes and programme to the public and beneficiaries”. (MISHRA, 2015)
stated in her study that, “India is the country of village and most of the
population live in rural India. NABARD has significantly provided credit in
rural area for priority sector for rural development and suggested that
NABARD should make more provision for rural credit for the ”.
(Dr.K.V.S.Prasad, 2017) stated in his studies that, “SHG-BLP covered rural
poor especially women through financial inclusion. This programme is mostly
participated widely programme for providing micro credit”. (Radhaakrishnan,
& Dr. Shenbagaraman, 2017) stated in their studies that “NABARD played
important role in capacity building and refinance through various banks for
priority sector and SHG-BLP. It widely spreading the micro finance activities in
India”. (Vijeta, 2019) stated in her studies that, “Micro finance is mostly
distributed by two models i.e. SHG-BLP and MFI-BLP. SHG-BLP associated
with saving credit function by members of SHGs. SHG-BLP is biggest
programme because it touches the boundaries of most ofpoor and women”.
(Patgiri, Deka, & Sonowal, 2022) stated in theirstudies that “NABARDs SHG-
BLP model

problem definition
The National Bank for Agriculture and Rural Development (NABARD) is a
unique development financial institution, set up by an Act of Parliament in 1981
for bringing about integrated rural development. Owned jointly by the Reserve
Bank of India and the Central Government, it is entrusted with agricultural
credit responsibilities, and developmental activities besides supervisory role
over rural financial institutions (RFIs). It seeks to promote sustainable
agriculture and equitable rural prosperity through effective credit support,
related services, institution development and microfinance innovations. It raises
funds from the urban financial markets for deployment in rural India. Over the
years, NABARD has established 16 Funds for enabling agricultural and non-
agricultural development initiatives and innovations. In tune with national
priorities and its own endeavours, NABARD has innovated, piloted and up-
scaled credit products and services for rural development, aimed at building the
capacities of RFI’s/SHG clientele, building rural value chains, strengthening
extension services, etc. for widening and deepening of rural credit absorption
capacity in rural areas. The National Bank for Agriculture and Rural
Development (NABARD) is a unique development financial institution, set up
by an Act of Parliament in 1981 for bringing about integrated rural
development. Owned jointly by the Reserve Bank of India and the Central
Government, it is entrusted with agricultural credit responsibilities, and
developmental activities besides supervisory role over rural financial
institutions (RFIs). It seeks to promote sustainable agriculture and equitable
rural prosperity through effective credit support, related services, institution
development and microfinance innovations. It raises funds from the urban
financial markets for deployment in rural India. Over the years, NABARD has
established 16 Funds for enabling agricultural and non-agricultural
development initiatives and innovations. In tune with national priorities and its
own endeavours, NABARD has innovated, piloted and up-scaled credit
products and services for rural development, aimed at building the capacities of
RFI’s/SHG clientele, building rural value chains, strengthening extension
services, etc. for widening and deepening of rural credit absorption capacity in
rural areas. The major business loans are given for seasonal agricultural
operations, for rural capital investments and for building rural infrastructure. Its
major development initiatives are taken up through the Rural Innovation Fund
and the Rural Infrastructure Development Fund, the SHG-Bank Linkage
Programme, the Watershed Development Fund and the Tribal Development
Fund besides the Financial Inclusion and Financial Inclusion Technology Funds
and the Microfinance Development and Equity Funds.The major challenges for
rural India are as under:

i) Food Security especially in rural and tribal areas

ii) Financial Inclusion by 2015

iii) Poverty alleviation by ensuring Rural Livelihoods

iv) Credit Flow for the Rural Services Sector

v) Strengthening of Cooperatives and Regional Rural Banks

vi) Microfinance Institutions and addressing areas of concern

1. Food Security Issues

A major challenge facing NABARD is tackling the problem of hunger and

malnutrition affecting one-third of the population. There is also the need to
narrow the gap between producer costs and consumer prices so that farmers
margins are enhanced through effective marketing support. To tackle global
climate change, it is critical to have an institutional mechanism to help farming
communities adapt to changing climatic conditions. The food riots in some
countries in early 2008 are not forgotten and with oil prices edging to US$100
per barrel, repeats of such food riots are not ruled out. The rising prices of
inputs especially seeds, pesticides and fertilizers, diesel costs for pumpsets,
spurious inputs, water shortages, controls on food prices, lack of rural
infrastructure especially cold storages, godowns, etc. have culminated into
lower agriculture production and productivity. To arrest food prices, we need
better management of water resources, better quality of seeds, scientific farming
practices, rational use of fertilizers, integrated pest management and agricultural
diversification. Capital assets creation in agriculture is essential for boosting
productivity, such as cost-effective micro irrigation systems. The need to reduce
cost of farm credit to 4% (as per National Commission of Farmers, 2004) is
another imperative while about 60% of farmers have little or no access to
institutional credit, are problems which brook no delay in finding appropriate
solutions. The low seed germination rates and the seed replacement rates are
also problems eluding solution. In tribal areas, the need for community grain
banks is felt and needs to be addressed. The needs of dryland farming are acute
in view of 60% of farms depending on monsoon rains. Tribal farmers who are
mostly dependent on slash and burn farming techniques need to be weaned
away from ecologically destructive farming practices. Availability of
agricultural credit in the right amount and in time, is being tested with the
formation of Joint Liability Groups and the spread of appropriate or modern
technology through Farmers Clubs and KVKs, is also being popularized. The
challenge of ensuring good crops for every drop of water, low cost credit, better
margins for farmers rather than for traders and better rural infrastructure needs
to be met urgently as ours is essentially an agrarian economy. The creation of
Farmers Associations for aggregating, sorting, grading, packing and
transporting produce, negotiating with traders, taking positions in commodity
exchanges, are essential as also weather insurance/crop insurance products that
seek to mitigate some of the farmers’ risks. The awesome challenge is to ensure
that 85% of the farmers who are small/marginal farmers having un-irrigated
land holdings less than 2 hectares, are able to eke out a living for their families.
2. Financial InclusionThis is not brought about by opening a number of ‘no-
frills’ accounts but must include safe bank deposits, affordable credit, safe funds
transfers, micro insurance / micro-pensioners and financial literacy/counseling.
The formation of self-help Groups (SHGs) and SHG Federations as also
microloans by microfinance institutions is also part of financial inclusion. There
is a need to implement the Banking Correspondent/Facilitators Model by banks
in unbanked areas so as to lower transaction costs for banks and clients as also
set up a large number of micro ATMs so that cashless transactions within a
common technology platform, is possible in rural areas. The Unique
Identification numbers, proposed to be given to all citizens, will also enable
quicker financial inclusion. The creation of a Rural Credit Bureau would help in
quicker credit decisions than hitherto.

3. Poverty AlleviationThis is not possible without financial inclusion as a means

of empowerment and pre-supposes some exposure to financial literacy and
banking systems. Without a strong support system, poverty alleviation will
remain a dream unless financial margins of farmers and rural artisans are
improved. The quality of rural infrastructure especially for rural connectivity
(roads, bridges, telecom, etc.) needs major improvement and upgrading. Also
cluster development for farm and off farm activities would help in creating
employment opportunities for rural growth. The key to poverty alleviation is
ensuring livelihoods in and around villages in rural areas. The need for
infrastructure and amenities is a must if poverty alleviation is to happen. Today
48% of our people are living below the poverty line and there is a need to
address issues such as endemic starvation, hunger, child mortality and women’s
health issues. These social issues can be resolved only after urgent poverty
alleviation. The need for rural employment (on-farm and non-farm sectors) is
acute as is the need for environmental sustainability.

4. The Rural Services Sector

Credit for the rural transportation sector and for rural retail sector are available
but for the other segments of the rural services sector such as cheap rural
housing, drinking water, sanitation systems, rural eco-tourism and renewable
rural energy, the credit flow is virtually non-existent. Unless lending to these
sectors is stepped up, the quality of rural life will not improve and the unending
migration of rural youngsters to urban areas in search of livelihoods and jobs,
will continue. It is said that by 2050 half the population will be in cities! The
question that begs an answer is “Will the 50% people remaining in rural areas,
be able to produce enough food to feed 100% of the population”? Possibly
biotechnology will provide an answer with improved production and
productivity. NABARD has a critical role to play in reinvigorating the rural
economy.

5. Strengthening Rural Financial Institutions

Cooperatives are the most farmer-friendly institutions in rural areas and most of
them are non-viable or are non-functional. The Central and State Governments
have pumped in millions of rupees so as to re-capitalize the Regional Rural
Banks and the rural cooperative credit institutions, in view of the important
roles played by them in rural capital formation and rural credit disbursal. These
banks need to develop systems and processes to enable the smooth flow of rural
credit and its timely recovery. The RRBs and Cooperatives also need to invest
in BC / BF agents and Computer/mobile technologies to enable a wider
footprint area for their services without increasing operational costs sharply.

6. Microfinance Issues

The entry of foreign direct investment into microfinance institutions (MFIs)

signals a trend of profiteering on poverty. The entry of investors who see easy
pickings in MFIs and without any social commitment, are bound to create
problems. In the SHG bank linkage programme, high interest rates as per group
decisions reflect the risks and profits remain within the SHG. In MFIs the social
bonding is lacking as is social collateral! Groups are formed for reducing
transaction times and costs only and social motives in forming groups are
absent. Also, profits of MFIs are siphoned off for the investors. Prof. Mohd.
Yunus, the Grameen Bank founder, terms these MFIs as institutional money
lenders! There are other problems such as charging of high interest rates, non-
transparency in imposing additional charges for institutional lenders,
proliferation of MFIs in over-banked areas (whereas they would be welcome in
grossly unbanked areas). Relentless pumping of credit leading to over-lending
and multiple membership of SHGs by rural women who often fail to juggle
their loans from one SHG to another has led to religious ‘fatwas’ and non-
cooperation in villages for loan repayments. There is also no exit policy of
NGO’s or MFIs and this results in stagnation if there is no move towards
relevant upgraded products such as micro-insurance, health insurance, micro
pensions, micro enterprises, etc. Also, there is no regulatory body to oversee the
operations of these MFIs and self-regulation does not seem to have any telling
impact. All this adds to problems brewing in the microfinance sector. Further,
banks seem to have opted for lending funds to MFI’s in bulk as these qualify for
priority sector lending norms and are not perturbed by the problems being
created by MFI’s which are piling up, leading to an explosive situation later.

7. Perspectives

Institutional mechanisms for smooth flow of agricultural credit are needed

along with new processes and IT systems, to enhance outreach and credit
availability for farmers on favourable terms. Self-sustaining villages, rain-water
harvesting structures to trap water, organic farming practices, SRI practices are
all necessary. However, for microcredit, the SHGs seem to be better placed than
institutional lenders especially when social collateral norms are concerned. The
need for constant upgrading of financial products and technologies adds to the
costs of rural credit. The use of BC/BF models for expanding footprint area of
banks without creating ‘brick and mortar’ branches is also a step in the right
direction. The risk mitigation of agricultural operations for the farmer is a major
challenge as also the challenge to provide adequate infrastructure for rural
people. The challenges of food security, environmental sustainability financial
inclusion and poverty alleviation need to be addressed with urgency and
sensitivity, so that tribal people and neglected sections of society are brought
into the ambit of development. An inclusional model of rural development
based on our credit plus approach has emerged to provide a base for equitable
growth and prosperity in the rural areas. If this is not addressed, social strife and
unrest under the guise of various revolutionary movements are inevitable, in the
underdeveloped and tribal areas of the country.Problems of Self-Help Groups
(SHGs):

The SHGs face problems in different areas.The important problems are briefly
stated below:
1. Ignorance of Members/Participants:Even though the authorities take
measures for creating awareness among the group members about the schemes
beneficial to them, still majority of the group are unaware of the schemes of
assistance offered to them.Many are Ignorant about the scheme.

2. Inadequate Training Facilities:The training facilities given to the members of

SHGs in the specific areas of product selection, quality of products, production
techniques, managerial ability, packing, other technical knowledge ate are not
adequate to compete with that of strong units.

3. Problems Related with Raw Materials:Normally each SHG procures raw

materials individually from the suppliers. They purchase raw materials in
smaller quantities and hence they may not be able to enjoy the benefits of large
scale purchase like discount, credit facilities etcMoreover, there is no systematic
arrangement to collect raw materials in bulk quantities and preserve them
properly. There is no linkage with major suppliers of raw materials. Most of the
SHGs are Ignorant about the major raw material suppliers and their terms and
conditions. All these causes high cost of raw materials.

4. Problems of Marketing:Marketing is an important area of functioning of the

SHGs. However they face different problems in the marketing of products
produced by them.

Following are the major problems ofSHG

(a) Lack of sufficient orders

(b) Lack of linkage with the marketing agencies.

(c) Lack of adequate sales promotion measures.

(d) Lack of permanent market for the products of SHGs.

(e) Absence of proper brand name.

(f) Poor/unattractive packing system.

(g) Poor quality of products due to the application of traditional technology,

resulting In poor market,
(h) Stiff competition from other major suppliers.

(i) Lack of a well defined and well knit channel of distribution for marketing.

5. Lack of Stability and Unity Especially among women SHGs:In the case of
SHGs dominated by women, it is found that there is no stability of the units as,
many married women are not in a position to associate with the group due to the
shift of their place of residence. Moreover, there is no unity among women
members owing to personal reasons.

6. Exploitation by Strong Members:It is also observed that in the case of many

SHGs, strong members try to earn a lion’s share of the profit of the group, by
exploiting the ignorance and illiterate members.

7. Weak Financial Management:It is also found that in certain units the return
from the business is not properly invested further in the units, and the funds
diverted for other personal and domestic purposes like marriage, construction of
house etc.

8. Low Return:The return on investment is not attractive in certain groups due

to inefficient management, high cost of production, absence of quality
consciousness etc.

9. Inadequate Financial Assistance:It is found that in most of the SHGs, the

financial assistance provided to them by the agencies concerned is not adequate
to meet their actual requirements. The financial authorities are not giving
adequate subsidy to meet even the labour cost requirements.

10. Non-co-operative Attitude of the Financial Institutions:The Financial

Institutions do not consider SHGs seriously while providing finance and other
help.

11. Inadequate and ill-trained staff to meet the challenges:The attitude of the
staff of the rural development department is not encouraging. They are not well
trained to accept the challenges and equip the SHGs self-reliance.

12. Inadequate Support from Line Department:For obtaining assistance and

support, the group members have to approach the line officers. However the
line officers are not co-operative with the SHGs. This will hamper the very
objective of the schemes.

Suggestions to Minimize the Problems Faced by SHGs:

The following suggestions are offered to minimize the above mentioned issues
of SHGs:

1. Information about locally available materials and their varied uses should be
disseminated to SHGs. Proper encouragement and training should be given to
them to make innovative products by using these materials. In order to have a
knowledge base about the availability of materials, in panchayat levels, surveys
can be conducted under the auspices of local authorities.

2. In order to solve the various problems relating to marketing of SHGs, the

state level organisations should extend the activities throughout the state instead
of limiting its operations in a particular area.

3. Various SHGs functioning in a particular panchayat area can form a co-

operative society. This society may be entrusted with the task of marketing the
products of different SHGs under a common brand name. Further, the society
can undertake sales promotion activities and procure rare raw materials for the
benefits of member SHGs.

4. Non-Government Organisations (NGOs) can play a significant role in

empowering women entrepreneurs by providing basic education, motivation
training, and financial help and so on.

5. All the members in the SHGs may not have the same caliber and expertise.
NGOs can identify the inefficient members of the group and can impart proper
training to them in order to make them competent. For this purpose, short term
training programmes can be arranged at the panchayat level.

6. Frequent awareness camps can be organised by the Rural Development

department authorities to create awareness about the different schemes of
assistance available to the participants in the SHGs.

7. Lastly, arrangements may be made by the financial institutions for providing

adequate financial assistance to the SHGs strictly on the basis of their actual
performance without any discrimination of caste, politics etc.In the emerging
changes in the values and attitudes of the members of the SHGs are a clear
manifestation of socio-economic empowerment interventions yielding relatively
quicker results. The socio-economic programmes reinforce each other and
promote all-round development of the children, the women, the households and
the communities.It is a process which ultimately leads to self-fulfillment of
each member of the society. It is in this direction that SHGs are moving towards
fulfilling their objectives with a meaningful strategic direction.

HYPOTHESIS
The Self-Help Group (SHG) and National Bank for Agriculture and Rural
Development (NABARD) have played significant roles in improving the lives
of the economically disadvantaged in rural areas. While I don't have access to
real-time data or specific developments beyond my last knowledge update in
September 2021, I can provide a general hypothesis of how SHGs and
NABARD can help improve the lives of the poor:

Financial Inclusion: SHGs can provide a platform for rural individuals,

especially women, to come together, pool their savings, and access microcredit
facilities provided by NABARD. This financial inclusion can help them invest
in income-generating activities and cope with unexpected expenses.

Skill Development: NABARD often supports skill development programs in

rural areas. SHGs can participate in these initiatives, enhancing the members'
abilities to earn a livelihood and contributing to their long-term economic well-
being.

Agriculture and Livelihood Improvement: NABARD's focus on agriculture and

rural development can help SHGs access resources for better farming
techniques, crop diversification, and infrastructure development. This can lead
to increased agricultural productivity and income.

Women's Empowerment: SHGs often prioritize women's involvement.

NABARD's support in this context can empower women in rural areas, both
economically and socially, by providing access to resources and decision-
making opportunities.

Poverty Alleviation: The combined effort of SHGs and NABARD can

contribute to poverty alleviation by creating sustainable income sources,
reducing dependence on moneylenders, and improving overall economic
stability in rural communities.

It's important to note that the effectiveness of SHG-NABARD interventions can

vary depending on local contexts, government policies, and the commitment of
stakeholders. Monitoring and evaluation are crucial to ensure these initiatives
lead to the intended improvements in the lives of the poor. For the most recent
and specific information on the impact of SHGs and NABARD, it's advisable to
refer to updated reports and studies on rural development in India

.It seems like you're interested in the hypothesis of how organizations like Self
Help Groups (SHGs) and NABARD (National Bank for Agriculture and Rural
Development) can improve the lives of economically disadvantaged
individuals. While I don't have access to the latest research, I can provide a
general overview of their potential impact.

The hypothesis surrounding SHGs and NABARD often includes the following
points:Economic Empowerment: SHGs are expected to empower poor
individuals, especially women, by providing them with access to credit, savings
facilities, and income-generating activities. NABARD supports SHGs by
providing financial assistance and capacity-building programs.

Poverty Alleviation: The hypothesis is that SHGs, with NABARD's support,

can help alleviate poverty by enabling members to invest in small businesses,
agricultural activities, and skill development, ultimately improving their income
and standard of living.

Social Empowerment: SHGs encourage social cohesion and mutual support

among members. This is believed to enhance social capital and lead to better
community development.

Financial Inclusion: The hypothesis suggests that NABARD's initiatives, in

partnership with SHGs, can promote financial inclusion among marginalized
populations who were previously excluded from the formal banking sector.
Sustainable Agriculture: NABARD promotes sustainable agriculture practices
through SHGs, aiming to enhance agricultural productivity and reduce the
vulnerability of farmers to various risks.It's important to note that the
effectiveness of these initiatives may vary depending on local factors,
implementation, and government policies. Rigorous studies and data analysis
are required to validate these hypotheses and measure their impact on the lives
of the poor.india

OBJECTIVES
focusing on empowerment of women
Women empowerment has been one of the significant strategies in the
development process in India since the 9 th Five Years Plan. Self help Group
(SHG) approach has become the most sought after means for achieving that
goal, particularly among the poor people. Studies undertaken so far have
assessed the role of SHGs towards women empowerment in India, focusing on
"increase in income" or "gender impact". In this study we have tried to highlight
the perception of SHG participants about their empowerment, with particular
reference to a multiethnic village in the Junglemahal area of Paschim Medinipur
district in West Bengal. The study dealt with five SHGs operating in the village,
each having 10 members. Thus, the study group included 50 members (mostly
from adivasi communities). Our results revealed that SHG approach provided
for the self directed learning (SDL) to women in the context of their value
system, belief and custom was of particular value. The members of the SHGs
perceived to have been empowered after joining in this programme and
achieved a relatively higher status by inculcating certain skills within
themselves.

Entrepreneruship Skills Among Womens Through SHGs

The Empowerment of women is one of the key issues of international

development. The Women's organization in the SHGs has empowered them to
gain greater power in services such as their resources, psychological resources,
and decision-making power at all stages of life. The various discriminatory
SHG nations have focused on skills development, aiding in innovation, access
to credit at a financial institution for small-scale economic enrichment projects,
and directing the use of credit in the vulnerable category of women. Women can
empower if they can easily access credit, it will improve their cultural and
social conditions. all this kind of development is called women's empowerment.
The government is investing heavily in the Self Help Group to grow the
economy and reduce poverty. This research is an important requirement of the
current situation. Women who are environmentally friendly, financially
independent, and numerical speakers will ultimately focus on achieving an
equal voice of democracy in the country's political arena. in 2015, a global
development consultant company called Intellecap embarked on a journey to
identify and install specialized computers in rural areas. they aim to identify key
beneficiaries of this model, women who play a key role in non-farm work,
conserving the city's eco-system, and working as solar-powered entrepreneurs.
such a model could go a long way in trying to create jobs and empowerment
while involving rural women with new technologies. This paper touches on
areas of how the government by providing a reduction in women so that they
can create jobs and finances for them to provide ideas for their new business

RURAL INNOVATION
NABARD role in rural development in India is phenomenal. National Bank For
Agriculture & Rural Development (NABARD) is set up as an apex
Development Bank by the Government of India with a mandate for facilitating
credit flow for promotion and development of agriculture, cottage and village
industries. The credit flow to agriculture activities sanctioned by NABARD
reached Rs 1,57,480 crore in 2005–2006. The overall GDP is estimated to grow
at 8.4 per cent. The Indian economy as a whole is poised for higher growth in
the coming years. Role of NABARD in overall development of India in general
and rural & agricultural in specific is highly pivotal.

Through assistance of Swiss Agency for Development and Cooperation,

NABARD set up the Rural Innovation Fund. Rural Infrastructure Development
Fund (RIDF) is another noted scheme for the bank for rural development.[17]
Under the RIDF scheme Rs. 51,283 crore have been sanctioned for 2,44,651
projects covering irrigation, rural roads and bridges, health and education, soil
conservation, water schemes etc. Rural Innovation Fund is a fund designed to
support innovative, risk friendly, unconventional experiments in these sectors
that would have the potential to promote livelihood opportunities and
employment in rural areas.[18] The assistance is extended to Individuals,
NGOs, Cooperatives, Self Help Group, and Panchayati Raj Institutions who
have the expertise and willingness to implement innovative ideas for improving
the quality of life in rural areas. Through member base of 25 crore, 600000
cooperatives are working in India at grass root level in almost every sector of
economy. There are linkages between SHG and other type institutes with that of
cooperatives.

The purpose of RIDF is to promote innovation in rural & agricultural sector

through viable means. Effectiveness of the program depends upon many factors,
but the type of organisation to which the assistance is extended is crucial one in
generating, executing ideas in optimum commercial way. Cooperative is
member driven formal organisation for socio-economic purpose, while SHG is
informal one. NGO have more of social color while that of PRI is political one.
Does the legal status of an institute influences effectiveness of the program?
How & to what an extent? Cooperative type of organisation is better (Financial
efficiency & effectiveness) in functioning (agriculture & rural sector) compared
to NGO, SHG & PRIs

Recently in 2007–08, NABARD has started a new direct lending facility under
'Umbrella Programme for Natural Resource Management' (UPNRM). Under
this facility financial support for natural resource management activities can be
provided as a loan at reasonable rate of interest. Already 35 projects have been
sanctioned involving loan amount of about Rs 1000 crore. The sanctioned
projects include honey collection by tribals in Maharashtra, tussar value chain
by a women's producer company ('MASUTA'), eco-tourism in Karnataka

INSTITUTIONAL DEVELOPMENT
Institutional Development Department of NABARD has been taking several
initiatives in association with Government of India (GoI) and Reserve Bank of
India (RBI) to improve the health of RFIs viz:

Regional Rural Banks (RRBs)

State Cooperative Banks (StCBs)

District Central Cooperative Banks (DCCBs)

Primary Agricultural Credit Societies (PACS)

State Cooperative Agriculture and Rural Development Banks (SCARDBs)

Primary Cooperative Agriculture and Rural Development Banks (PCARDBs)

Institutional Development Initiatives of NABARD

Review of performance of Cooperative Banks
Cooperative Development Fund (CDF)

Centre for Professional Excellence in Cooperatives – CPEC

Organisational Development Initiative(ODI)

PACS Development Cells (PDCs)

Regional Rural Banks (RRBs)

State Cooperative Banks (StCBs)

District Central Cooperative Banks (DCCBs)

Regional Rural Banks (RRBs)

Self Help Groups Objective

The fact that SHGs contribute to reducing poverty by offering financial services
is one of the primary and fundamental justifications for their necessity. As the
networks of these communities are increasingly recognised as a crucial
component of credit linkage in rural areas, the trend of self-help groups is
dramatically growing in the village areas.Along with helping people financially,
they also support certain groups within society, such as women, by
emancipating them financially and bolstering them to advance as a group.
SHGs support the culture of self-employment, which offers numerous benefits
like increased access to education and healthcare, as well as effective family
planning, among others imdia

OBJECTIVE OF NABARD
The main objects of NABARD are as follows:

1. NABARD provides refinance assistance for agriculture, promoting rural

development activities. It also provides all necessary finance and assistance to
small scale industries.

3. NABARD in coordination with the State Governments, provides agriculture.

4. It improves small and minor irrigation by way of promoting agricultural

activities.
5. It undertakes R&D in agriculture, rural industries.

6. NABARD promotes various organizations involved in agricultural

production by contributing to their capital.

Thus, the objects of NABARD can be brought under three major heads:

Credit function

Development function.
Promotional function.