QUALITY ISSUES IN THE MICROFINANCE SECTOR IN RAJASTHAN

1
QUALITY ISSUES IN THE MICROFINANCE SECTOR IN
RAJASTHAN

• Joint Study Of
• APMAS, Hyderabad CmF, Jaipur

2
OBJECTIVES OF THE STUDY

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

3
DISTRICT-WISE SAMPLE COVERAGE
Item\ District Bha Bil Dun Jal Bik Tot
Blocks 3 3 3 3 3 15
Habitations 15 18 19 19 18 89
SHGs 38 41 42 42 39 202
FGDs 3 3 3 2 3 14
District-Officials 2 4 4 2 4 16
Block-Official 5 5 6 5 6 27
Bank Branches 6 6 6 6 6 30
NGOs 2 1 2 1 2 8
4
SHPI-WISE SAMPLE SHGS

• DWCD promoted SHGs are in Bhilwara, Dungarpur and
  Jalor
• Most of NGO promoted SHGs are in Bharatpur and
  Bikaner
• Most of DRDA promoted groups in Jalor

5
PROFILE OF SAMPLE DISTRICTS
Development Profile of the Sample Districts Development Profile of the Sample Districts Development Profile of the Sample Districts Development Profile of the Sample Districts Development Profile of the Sample Districts Development Profile of the Sample Districts
Indicator Bha Bil Dun Jal Bik
Rank of HDI 15 25 32 29 6
Rank of GRDI 7 23 27 21 3
Rural Poverty Ratio 9.7 9.8 43.3 11.9 11.3
Rural BPL 18.4 34.7 71.3 37.5 36.8
Per Capita Income 1991-92 3976 4391 2735 3825 4399
of Farm Sector in DDP avg of 1987-88 to 1991-92 51.5 48.2 47 59.8 36.9
Female literacy rate-(R) 39.62 26.09 28.17 25.88 28.83
6
LIMITATIONS OF THE STUDY

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

7
PROFILE OF THE SHG MEMBERS

• BC37, ST 26, SC22, Oth-15
• 13 are widowed and divorced women
• Over 80 of the members are illiterate includes
  neo-literates also -36
• Both APL and BPL are equally represented
• 51 are living in Kuchcha houses
• Non-farm labour34,agriculture26, Agri.
  Labour-16 are the primary occupation of many
  members
• Majority are marginal farmers- 60 followed by
  landless- 20

8
PROFILE OF THE SHGS

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

9
INFRASTRUCTURE Distance

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

10
SHG BANK LINKAGE SCENARIO
Bank linkages in Sample districts on 31st March 2005 Bank linkages in Sample districts on 31st March 2005 Bank linkages in Sample districts on 31st March 2005 Bank linkages in Sample districts on 31st March 2005 Bank linkages in Sample districts on 31st March 2005
District Total SHG linked Amt. in Rs. million Avg loan size in Rs. Avg loan size of ICDS in Rs.
Bharatpur 3114 65.69 21,095 12,524
Bhilwara 4635 66.42 14,330 13,887
Bikaner 1635 28.36 17,346 5,464
Dungarpur 1319 66.95 50,758 31,595
Jalor 229 4.97 21,703 22,768
Rajasthan 60,006 1,414.04 23,565 19,680
India 1,618,456 68,984.60 42,624 --
11
BANK LINKAGE SCENARIO

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

12
SHPI-INPUTS TO SHGs
1 Concept of SHG
2 Group processes
3 Self Management
4 Bookkeeping
5 Govt. programs
6 Federation concept
7 Skill based training
8 Micro-enterprises
9 Health
10 Nutrition
11 Gender

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

13
SAVINGS

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

14
SAVINGS

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

15
MEETINGS

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

16
LENDING PROCEDURES

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

17
LOAN EQUITY REPAYMENTS

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

18
LOAN PORTFOLIO AT RISK

• Of the 202 SHGs, 13-SHGs no schedule for
  repayment in 3 SHGs no loans disbursed during
  that year
• 64-SHGs made prepayments High in Bikaner-67
  less in Jalore-59
• 33- avg. recovery rate highest in Bilwara-70
  lowest in Bharatpur 47
• Avg. recovery rate is more in Govt.-64 than
  NGO-60
• 59 of SHG have PAR gt 90 days, 39 SHGs have PAR
  gt 180 days, and 15 of the SHGs have PAR gt365
  days.

19
BOOK-KEEPING
Type of Books District (Fig. in ) District (Fig. in ) District (Fig. in ) District (Fig. in ) District (Fig. in )   Tot
Type of Books Bha Bil Dun Jal Bik   Tot
Transaction sheet 3 7 5 3 3
Savings ledger 58 35 21 40 18 34
Loan ledger 39 35 17 40 20 30
Minutes Book 66 48 17 60 45 47
Receipts - 3 12 5 - 4
All in one book 37 50 82 45 60 56
No vouchers in any SHGs in any district No vouchers in any SHGs in any district No vouchers in any SHGs in any district No vouchers in any SHGs in any district No vouchers in any SHGs in any district No vouchers in any SHGs in any district No vouchers in any SHGs in any district
20
BOOKS OF ACCOUNTS

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

21
SHG NORMS PRACTICE

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

22
GRADING OF SHGS

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

23
SHG BANK LINKAGE STATUS

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

24
BANK LINKAGE

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

25
REASONS FOR DELAYED PAYMENT

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

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ISSUES IN SHGs

• Group formation - Lack faith on others- 20 and
  mobilization of poor-17
• Bank Transactionslong distance 2, illiteracy 5
  and no cooperation from banks 7
• Meetings less attendance 11, no agenda 2 and
  unsuitable timings 4
• Savings irregular savings 9 and unable to save
  12
• Lendingno internal lending 3, difficulties in
  the collection of savings loan instalments 4

27
ISSUES IN SHGS

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

28
ISSUES BANKERS PERSPECTIVE

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

29
ISSUES SHPI PERSPECTIVE

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

30
DECISION MAKING
Person Decision on the issue
Leaders Bank transactions-80 cash in hand-76 meetings-37 SHG expen.-38 external loans-30 membership-24
Members Norms- setting-47 reinforcement-62 meetings-42 default mechanism-52
SHPI Norms setting-48 membership-47 norms reinforcement / relaxation-20 external loans-42 ext. loan sanctioning
Family members Personal affairs-90 decision on political issues-93
31
SHGS IN DEVELOPMENT

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

32
IMPACT OF SHGS
1 Household income increased
2 Employment Generation
3 Credit is easily available
4 Access to formal institutions
5 Access to pro-poor programmes
6 Free from money-lenders
7 Indebted due to credits
8 Habit of savings
9 More expenditure on food
10 Health status improved
11 Independent life
12 Education levels improved
13 Self-confidence
14 Decision Making power
15 Representation in other groups
16 Leadership qualities
17 Group solidarity
33
IMPACT OF SHGS

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

34
Impact - Social

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