Dhrubajyoti Chattopadhyay

Microfinance Through Self Help Groups: A Case Study With Special Reference To Bongaon Block, North 24 Pgs.
Dhrubajyoti Chattopadhyay Abstract
At present 300 million people in India still live in deep poverty at less than a dollar a day (PPP). Microfinance through Self Help Groups (SHGs) is empowering poor particularly women in our country. A range of institutions in both public sector and private sector offer microfinance services in India. The objective of the paper is to analyse the role of microfinance through SHG in Bongaon Block , District North 24 Pgns. Key words: Growth, Empowerment, Inclusive, Microfinance.

Introduction The Indian economy has over the last six decades passed through four phases of growth. The first thirty years after independence, GDP (Gross Domestic Product) grew at 3.5% per annum. During the 1980s, with the initial whiff of reforms, it accelerated to 5.6% per annum. In the reform era of 1990s, the average growth rate of the GDP went up slightly to 5.8%. But the last five years of the Tenth Plan period, the Indian economy has witnessed the fastest pace of growth to an average of 8.5% per annum. Planning Commission estimates that if the reform process continues, Indias growth rate will touch the 10% rate by the end of the 11th Five Year plan (2012). High rate of growth is an impressive achievement in Indian economy. There have been improvements in some indicators such as balance of payments, IT-service sector growth, foreign exchange, telecommunications etc. But, growth is not the only measure of development. The ultimate objective is to achieve broad based improvement in the living standards of all our people. The Indian economy has grown at a frantic pace, but 28% (The percentage of the population below the official poverty line has come down from 36% in 1993-94 to 28% in 2004-05) Indians still live in abject poverty and a lot for those people living below poverty line did not have access to water, sanitation, healthcare and education. National Family Health Survey-3 shows that almost 46% of the children in the 0 to 3 years age group suffered from malnutrition in 2005-06. The literacy rate has gone up from 18.3% in 1951 to 64.8% in 2001, but the number of illiterate persons still exceeds 304 million, making India the country with the highest number of illiterate persons in the world. Life expectancy at birth has increased from approximately 32 years for both male and females in 1951 to 63.9 years for males and 66.9 years for females in 2001-06. Yet this is below the life expectancy of around 80 years in industrialized countries and 72 years in China. India also has an adverse sex ratio with only 933 women per 1000 men. Moreover, the child sex ratio (aged 0-6) has declined sharply from 962 in 1981 to 927 in 2001.1 The central vision of the Eleventh Plan is to build broad based improvement in the quality of life of the people, especially the poor, SCs/ STs, other backward castes (OBCs), minorities and women. This broad vision of the Eleventh Plan includes several inter related components : rapid growth that reduces poverty and creates employment opportunities, access to essential services in health and education especially for the poor, equality of opportunity, empowerment through education and skill development, employment opportunities underpinned by the National Rural Employment Guarantee, environmental sustainability, recognition of womens agency and good governance. We need to ensure that benefit of growth in terms of income and employment are adequately shared by the poor and weaker sections of the society, especially the scheduled caste, scheduled

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tribe, other backward caste and minorities. For this growth must be inclusive. It must be spread across all states and not just limited to some. It must occur not just in our major cities but also in our villages and small towns. According to Indian Prime Minister, the key components of the inclusive growth strategy included a sharp increase in investment in rural areas, rural infrastructure and agriculture, spurt in credit for farmers, increase in rural employment through a unique social safety net and a sharp increase in public spending in education and health care. The urban- rural divide has to be bridged and rural areas integrated with the economic processes to ensure equitable and inclusive growth. Microfinance is considered to be a powerful and an effective tool for poverty alleviation. Microfinance can include the poorest of the poor into formal financial systems to give them the access to sustainable livelihoods by building up micro enterprises. Microfinance Institutions are working with this social objective. Microcredit became prominent all over the world in 1980s. It was started in Bangladesh, Brazil and many Asian countries for the upliftment of the poor. In 1998 United Nations General Assembly announced 2005 as the International year of Microcredit to recognize the contribution of microcredit to poverty alleviation. Microcredit was strongly implied in the endorsement by the World Summit 2002 which states Microfinance and credit for micro, small and medium sized enterprises, including in rural areas, particularly for women, as well as national savings schemes, are important for enhancing the social and economic impact of the financial sector (Paragraph II, A, 18). But the most significant recognition of its importance was made in the 2005 World Summit Outcome Document. Microcredit has now become a global agenda of Millennium Development Goals. The primary aim of Millennium Development is to eradicate extreme poverty by the year 2015. Microcredit is of ancient origin in India. The informal sector in rural India consists of moneylenders, traders, merchants etc. They have traditionally provided microcredit to the rural poor but charged exorbitant rates of interest. It resulted into debt trap. Cooperative Credit Banking structure was set up in 1904. The important development in the Indian Financial sector came out by nationalization of 14 commercial banks in the year 1969. In 1975 Regional Rural Banks was incorporated. The present formal sector is based on multi agency approach consisting of Public sector banks, cooperatives and regional rural banks. The SHG-Bank linkage model introduced by NABARD was attempted to link the formal banking system to the informal groups in a cost effective manner. Micro finance through Self help groups is recognized as a key strategy for poverty alleviation and womens empowerment. The main purpose of SHG formation is to develop capacity building, to become economically self reliant, to play active role in decision making, to contribute directly to their families and to confront systematic gender inequalities. They are important productive human resources in our society. They have detailed knowledge about their immediate environment. But they get no opportunity to develop themselves. Self help group has to bridge this gap. A self-help group (SHG) is a village-based financial intermediary usually composed of between 10-20 local women. 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 SHGs are 'linked' to banks for the delivery of microcredit. SHGs are member-based microfinance intermediaries inspired by external technical support that lie between informal financial market actors like moneylenders, collectors, and ROSCAs on the one hand, and formal actors like microfinance institutions and banks on the other. A Self-Help Group (SHG) is a

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registered or unregistered group of micro entrepreneurs having homogenous social and economic backgrounds; 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. 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 microfinance institutions. To make the book-keeping simple enough to be handled by the members, flat interest rates are used for most loan calculations. 2 Self Help Group Bank Linkage Programme in Bongaon Block Bangaon is one of the five sub-divisions of the District Of North 24 Parganas, located at 23.07N 88.82E. It is the last station on the Sealdah-Bangaon section of Eastern Railway, 77 km from Sealdah Station. It is part of the Kolkata Suburban Railway system. Bongaon has border with Bangladesh. Most Business of Bangladesh come from this Bordeer. As of 2001 India census, Bangaon had a population of 102,115. Males constitute 51% of the population and females 49%. Bangaon has an average literacy rate of 76%, higher than the national average of 59.5%; with 55% of the males and 45% of females literate. 10% of the population is under 6 years of age. SC population is around 80-90%. Bongaon is one of the areas where ground water is affected by arsenic contamination. There have many high and primary schools and also a Government aided Hospital namely Dr. J. R. Dhar Sub Divisional Hospital in this sub-division. It has 200 beds and 30 doctors. Most of the people of this region are Below Poverty Line. There are some private Nursing Homes in Bongaon Block. 3 Table 1: Gram Panchayat wise Formation Report of SHGs in Bongaon Block on 03/09/2010 Sl No Name of Gram Panchayat Sundarpur Ganrapota Ganganandapur Palla Ghatbaor Dharmapukuria Gopalnagar II Bairampur Akaipur Tangra Kalupur Gopalnagar I Dighari Chhaygharia Chowberia I Chowberia II SHG Formed by NGO 23 2 40 4 33 5 43 12 10 10 11 18 0 6 3 6 226 226 0 SHG Formed by Gram Panchayat 99 101 107 125 71 105 12 43 117 87 114 49 90 66 77 67 1330 1278 52 Total Women SHG 118 100 137 128 102 110 51 53 112 93 99 66 79 68 80 58 1454 1409 45

1 2 3. 4. 5. 6. 7. 8 9. 10. 11. 12. 13. 14 15 16. Total (Up to this month) Total (Previous month) This months Performance

122 103 147 129 104 110 55 55 127 97 125 67 90 72 80 73 1556 1504 52

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Source : Gram Panchayat wise Report of SHGs as on 03/09/2010, Bongaon Block The above table represents the number of SHG groups formed in sixteen Gram Panchayats of Bongaon Block. There is a steady growth of SHG formation in this Block as observed in the above table. During the month of October 2010, there was a positive growth rate of SHG formation by Gran Panchayat is 3.45%, whereas SHG formation by NGO is nil. It is also observed that almost 93% SHG groups are women SHG. It is noted that NABARD declares that more than 400 women join the SHG movement every hour and an NGO joins the micro-finance programme every day. Table 2 :Gram Panchayat wise Training Report of SHGs in Bongaon Block Sl. No. Name of Gram Panchayat Holding of Basic Orientation Trainning (BOT) 122 100 138 94 104 103 59 55 114 108 125 62 80 66 54 60 1444 Holding of Hand Holding Training (HHT) 96 99 99 55 111 97 52 16 86 88 77 43 84 61 35 46 1145 Holding of Holding of Managerial Skill Training Development Training (SDT) 10 96 17 34 8 18 6 6 5 16 0 19 1 9 0 15 0 14 12 74 8 15 7 8 0 86 0 27 0 6 0 1 74 444 444 0

1 Sundarpur 2 Ganrapota 3. Ganganandapur 4. Palla 5. Ghatbaor 6. Dharmapukuria 7. Gopalnagar II 8 Bairampur 9. Akaipur 10. Tangra 11. Kalupur 12. Gopalnagar I 13. Dighari 14 Chhaygharia 15 Chowberia I 16. Chowberia II Total (Up to this month) Total (Previous 1394 965 74 month) This months 50 180 0 Performance Source : Gram Panchayat wise Report of SHGs as on 03/09/2010, Bongaon Block

Table 2 shows that members of 1444 SHG are holding Basic Orientation Trainning (BOT), 1145 SHG are holding Hand Holding Training (HHT), 74 SHG are holding Managerial Training and 444 are holding Skill Development Training (SDT). Thus the members were trained in this block. With this training and capacity building, the members are involved in different productive activities. The standard of living has also increased due to increase in employment and income of the group.

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Table 3 : Gram Panchayat wise Credit Linkage Report of SHGs in Bongaon Block Sl No Name of Gram Panchayat Credit Linkage by Bank Credit Linkage by DRDC Total Project Cost (Rs in lakh) 45.54 59.81 22.75 15.24 82.20 53.89 5.52 0.00 0.00 35.17 20.47 18.38 13.42 15.28 7.86 9.58 405.11 Subsidy (Rs in lakh) 18.80 26.10 9.10 6.40 32.70 21.30 2.30 0.00 0.00 15.45 8.50 7.13 5.00 6.53 3.90 3.90 167.11 167.11 0.00

1 Sundarpur 19 19 2 Ganrapota 23 23 3. Ganganandapur 8 8 4. Palla 6 6 5. Ghatbaor 32 32 6. Dharmapukuria 22 22 7. Gopalnagar II 2 2 8 Bairampur 0 0 9. Akaipur 0 0 10. Tangra 14 14 11. Kalupur 8 8 12. Gopalnagar I 7 7 13. Dighari 5 5 14 Chhaygharia 6 6 15 Chowberia I 4 4 16. Chowberia II 4 4 Total (Up to this 160 160 month) Total (Previous 160 160 405.11 month) This months 0 0 0.00 Performance Source : Gram Panchayat wise Report of SHGs as on 03/09/2010, Bongaon Block

Table 3 represents that 160 SHGs have been linked with credit by Bank and DRDC and taken up economic activities. Table also indicates that on an average an amount of Rs 405.11 lakh is available under the SGSY programme. The cumulative subsidy disbursed is Rs 167.11 lakh. The credit subsidy ratio is 3:1. Conclusion The core objective of forming a SHG is to extend financial services (credit, saving and insurance) to the deprived section of the society. Microfinance through SHG plays an important role in creating income generation activities for the poor in India. The target population is able to largely satisfy their credit needs by joining SHG. It is important to study the life cycle of an SHG based on parameters already identified by NABARD. Only those SHGs that secure to satisfactory ratings may be considered for subsequent doses of funds. Finally we hope that banks,

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intermediaries and NGOs are to get involved closely in empowering target groups particularly women and thus enabling social progress of this block. Works cited
1. 2. 3. Planning Commission (2006) Towards Faster and More Inclusive Growth: An Approach Paper to the 11th Five Tear Plan, Government of India / www.planningcommission.nic.in http://en.wikipedia.org ,Self help group (finance) From Wikipedia http://en.wikipedia.org, Bangaon Subdivision From Wikipedia

References
Bisoyi Tanuj (2010), Rural Credit, Regional Rural Banks and Micro- Finance, Avhijeet Publications, 1st,New Delhi. Das S.K, Nanda B.P and Rath J (2008), Micro Finance and Rural Development in India, New Century Publications 1st,New Delhi. Tapan Neeta (2010), Micro Credit, Self-Help Groups (SHGs) and Women Empowerment, New Century Publications 1st,New Delhi. http://www.scribd.com, Problems and challenges before inclusive growth strategies in India.

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