TABLE OF CONTENTS

ABSTRACT
CHAPTER-1: INTRODUCTION
CHAPTER-2:

RESEARCH

OBJECTIVES

METHODOLOGY
CHAPTER-3: LITERATURE REVIEW
CHAPTER-4: OBSERVATION & FINDINGS
CHAPTER-5: CONCLUSION & RECOMMENDATIONS
BIBLIOGRAPHY
ANNEXURE

&

Chapter-1
INTRODUCTION
Financial

liberalization

after

1991

decimated

the

formal

system

of

institutional credit in rural India. It represented a clear and explicit reversal

of the policy of social and development banking, such as it was, and
contributed in no small way to the extreme deprivation and distress of which
the rural poor in India have been victims over the last decade. This paper
examines the impact of changes in banking policy and structure on the rural
economy, and on the rural poor in particular.
Financial liberalization is a crucial component of the programmes of
economic reforms that are being imposed on the people of less-developed
countries. The demand that financial markets be liberalized quickly is high
on the agenda of imperialism; in India as well, advocates of economic
reform see financial liberalization as being at the core of structural
adjustment. There are many components of the package of reforms
associated with financial liberalization in India. The policies of financial
liberalization in India can be classified into three types: first, policies to
curtail government intervention in the allocation of credit, secondly, policies
to dismantle the public sector and foster private banking, and thirdly, polices
to lower capital controls on the Indian banking system.

It is well known that the burden of indebtedness in rural India is very great,
and that despite major structural changes in credit institutions and forms of
rural credit in the post-Independence period, the exploitation of the rural
masses in the credit market is one of the most pervasive and persistent
features of rural life in India. Rural households need credit for a variety of
reasons. They need credit to meet short-term requirements of working
capital and for long-term investment in agriculture and other incomebearing activities. Agricultural and non-agricultural activities in rural areas
typically are seasonal, and households need credit to smoothen out seasonal
fluctuations in earnings and expenditure. Rural households, particularly
those vulnerable to what appear to others to be minor shocks with respect to
income and expenditure, need credit as an insurance against risk. In a
society that has no law of free, compulsory and universal school education,
no arrangements for free and universal preventive and curative health care,
a weak system for the public distribution of food and very few general social
security programmes, rural households need credit for different types of
consumption. These include expenditure on food, housing, health and
education. In the Indian context, another important purpose of borrowing is
to meet expenses on a variety of social obligations and rituals.
If these credit needs of the poor are to be met, rural households need access
to credit institutions that provide them a range of financial services, provide
credit

at

reasonable

rates

of

interest

and

provide

loans

unencumbered by extra-economic provisions and obligations.

2

that

are

Historically, there have been four major problems with respect to the supply
of credit to the Indian countryside. First, the supply of formal sector credit to
the countryside as a whole has been inadequate. Secondly, rural credit
markets in India themselves have been very imperfect and fragmented.
Thirdly, as the foregoing suggests, the distribution of formal sector credit has
been unequal, particularly with respect to region and class, caste and gender
in the countryside. Formal sector credit needs specially to reach backward
areas, income-poor households, people of the oppressed castes and tribes,
and women. Fourthly, the major source of credit to rural households,
particularly income-poor working households, has been the informal sector.
Informal sector loans typically are advanced at very high rates of interest.
Further, the terms and conditions attached to these loans have given rise to
an elaborate structure of coercion economic and extra-economic in the
countryside.
That these constitute what may be called the problem of rural credit has
been well recognized; recognized, in fact, in official evaluations and
scholarship since the end of the nineteenth century. Given the issues
involved, the declared objectives of public policy with regard to rural credit in
the post-Independence period were, in the words of a former Governor of the
Reserve Bank of India, to ensure that sufficient and timely credit, at
reasonable rates of interest, is made available to as large a segment of the
rural population as possible. The policy instruments to achieve these
objectives were to be, first, the expansion of the institutional structure of
3

formal-sector lending institutions; secondly, directed lending, and thirdly,

concessional or subsidized credit. Public policy was thus aimed not only at
meeting rural credit needs but also at pushing out the informal sector and
the exploitation to which it subjected borrowers. Rural credit policy in India
envisaged the provision of a range of credit services, including long-term and
short-term credit and large-scale and small-scale loans to rural households.

1.1 Microfinance Definition

According to International Labor Organization (ILO), Microfinance is

an economic development approach that involves providing financial
services through institutions to low income clients.

In India, Microfinance has been defined by The National Microfinance

Taskforce, 1999 as provision of thrift, credit and other financial
services and products of very small amounts to the poor in rural, semiurban or urban areas for enabling them to raise their income levels and
improve living standards.

"The poor stay poor, not because they are lazy but because they have
no access to capital."

The dictionary meaning of finance is management of money. The

management of money denotes acquiring & using money. Micro

Finance

is

buzzing

word,

used

when

financing

for

micro

entrepreneurs. Concept of micro finance is emerged in need of meeting

special goal to empower under-privileged class of society, women, and
poor, downtrodden by natural reasons or men made; caste, creed,
religion or otherwise. The principles of Micro Finance are founded on
the philosophy of cooperation and its central values of equality, equity
and mutual self-help. At the heart of these principles are the concept
of human development and the brotherhood of man expressed
through people working together to achieve a better life for themselves
and their children.

Traditionally micro finance was focused on providing a very standardized

credit product. The poor, just like anyone else, (in fact need like thirst) need
a diverse range of financial instruments to be able to build assets, stabilize
consumption and protect themselves against risks. Thus, we see a
broadening of the concept of micro finance--- our current challenge is to find
efficient and reliable ways of providing a richer menu of micro finance
products. Micro Finance is not merely extending credit, but extending credit
to those who require most for their and familys survival. It cannot be
measured in term of quantity, but due weightage to quality measurement.
How credit availed is used to survive and grow with limited means.

Who are the clients of micro finance?

The typical micro finance clients are low-income persons that do not have
access to formal financial institutions. Micro finance clients are typically
self-employed, often household-based entrepreneurs. In rural areas, they are
usually small farmers and others who are engaged in small incomegenerating activities such as food processing and petty trade. In urban areas,
micro finance activities are more diverse and include shopkeepers, service
providers, artisans, street vendors, etc. Micro finance clients are poor and
vulnerable non-poor who have a relatively unstable source of income.
Access to conventional formal financial institutions, for many reasons, is
inversely related to income: the poorer you are, the less likely that you have
access. On the other hand, the chances are that, the poorer you are, the
more expensive or onerous informal financial arrangements. Moreover,
informal arrangements may not suitably meet certain financial service needs
or may exclude you anyway. Individuals in this excluded and under-served
market segment are the clients of micro finance.
As we broaden the notion of the types of services micro finance
encompasses, the potential market of micro finance clients also expands. It
depends on local conditions and political climate, activeness of cooperatives,
SHG & NGOs and support mechanism. For instance, micro credit might have
a far more limited market scope than say a more diversified range of financial
services, which includes various types of savings products, payment and
remittance services, and various insurance products. For example, many

very poor farmers may not really wish to borrow, but rather, would like a
safer place to save the proceeds from their harvest as these are consumed
over several months by the requirements of daily living. Central government
in India has established a strong & extensive link between NABARD
(National Bank for Agriculture & Rural Development), State Cooperative
Bank, District Cooperative Banks, Primary Agriculture & Marketing Societies
at national, state, district and village level.

The Need in India

India is said to be the home of one third of the worlds poor;

official estimates range from 26 to 50 percent of the more than
one billion population.

About 87 percent of the poorest households do not have access

to credit.

The demand for microcredit has been estimated at up to $30

billion; the supply is less than $2.2 billion combined by all
involved in the sector.

Due to the sheer size of the population living in poverty, India is

strategically significant in the global efforts to alleviate poverty and to
achieve the Millennium Development Goal of halving the worlds
poverty by 2015. Microfinance has been present in India in one form

or another since the 1970s and is now widely accepted as an effective

poverty alleviation strategy. Over the last five years, the microfinance
industry has achieved significant growth in part due to the
participation of commercial banks. Despite this growth, the poverty
situation in India continues to be challenging.

Some principles that summarize a century and a half of development

practice were encapsulated in 2004 by Consultative Group to Assist
the Poor (CGAP) and endorsed by the Group of Eight leaders at the G8
Summit on June 10, 2004:

Poor people need not just loans but also savings, insurance
and money transfer services.

Microfinance must be useful to poor households: helping

them

raise

income,

build

up

assets

and/or

cushion

themselves against external shocks.

Microfinance can pay for itself. Subsidies from donors and

government are scarce and uncertain, and so to reach large
numbers of poor people, microfinance must pay for itself.

Microfinance means building permanent local institutions.

Microfinance also means integrating the financial needs of

poor people into a countrys mainstream financial system.

The job of government is to enable financial services, not to

provide them.

Donor

funds

should

complement

private

capital,

not

compete with it.

The key bottleneck is the shortage of strong institutions and

managers. Donors should focus on capacity building.

Interest

rate

ceilings

hurt

poor

people

by

preventing

microfinance institutions from covering their costs, which

chokes off the supply of credit.

Microfinance institutions should measure and disclose their

performance both financially and socially.

Microfinance can also be distinguished from charity. It is better to

provide grants to families who are destitute, or so poor they are
unlikely to be able to generate the cash flow required to repay a loan.
This situation can occur for example, in a war zone or after a natural
disaster.

Financial needs and Financial services

In developing economies and particularly in the rural areas, many

activities that would be classified in the developed world as financial
are not monetized: that is, money is not used to carry them out.
Almost by definition, poor people have very little money. But
circumstances often arise in their lives in which they need money or
the things money can buy.

In Stuart Rutherfords recent book The Poor and Their Money, he cites
several types of needs:

Lifecycle

Needs:

such

as

weddings,

funerals,

childbirth,

education, homebuilding, widowhood, old age.

Personal Emergencies: such as sickness, injury, unemployment,

theft, harassment or death.

Disasters: such as fires, floods, cyclones and man-made events

like war or bulldozing of dwellings.

Investment Opportunities: expanding a business, buying land or

equipment, improving housing, securing a job (which often
requires paying a large bribe), etc.

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Poor people find creative and often collaborative ways to meet these
needs, primarily through creating and exchanging different forms of
non-cash value. Common substitutes for cash vary from country to
country but typically include livestock, grains, jewellery and precious
metals.

As Marguerite Robinson describes in The Microfinance Revolution, the

1980s demonstrated that microfinance could provide large-scale
outreach profitably, and in the 1990s, microfinance began to develop
as an industry. In the 2000s, the microfinance industrys objective is
to satisfy the unmet demand on a much larger scale, and to play a role
in reducing poverty. While much progress has been made in
developing a viable, commercial microfinance sector in the last few
decades, several issues remain that need to be addressed before the
industry will be able to satisfy massive worldwide demand.

The obstacles or challenges to building a sound commercial

microfinance industry include:

Inappropriate donor subsidies

Poor regulation and supervision of deposit-taking MFIs

Few MFIs that mobilize savings

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Limited management capacity in MFIs

Institutional inefficiencies

Need

for

more

dissemination

and

adoption

of

rural,

agricultural microfinance methodologies

Role of Microfinance:

The micro credit of microfinance progamme was first initiated in the

year 1976 in Bangladesh with promise of providing credit to the poor
without collateral , alleviating poverty and unleashing human
creativity and endeavor of the poor people. Microfinance impact
studies have demonstrated that

Microfinance helps poor households meet basic needs and protects

them against risks.

The use of financial services by low-income households leads to

improvements in household economic welfare and enterprise stability
and growth.

By supporting womens economic participation, microfinance

empowers women, thereby promoting gender-equity and improving
household well being.

12

 The level of impact relates to the length of time clients have had
access to financial services.

The Origin of Microfinance

Although neither of the terms microcredit or microfinance were used
in the academic literature nor by development aid practitioners before
the 1980s or 1990s, respectively, the concept of providing financial
services to low income people is much older.
While the emergence of informal financial institutions in Nigeria dates
back to the 15th century, they were first established in Europe during
the 18th century as a response to the enormous increase in poverty
since the end of the extended European wars (1618 1648). In 1720
the first loan fund targeting poor people was founded in Ireland by the
author Jonathan Swift. After a special law was passed in 1823, which
allowed charity institutions to become formal financial intermediaries
a loan fund board was established in 1836 and a big boom was
initiated.

Their

outreach

peaked

just

before

the

government

introduced a cap on interest rates in 1843. At this time, they provided

financial services to almost 20% of Irish households. The credit
cooperatives created in Germany in 1847 by Friedrich Wilhelm
Raiffeisen served 1.4 million people by 1910. He stated that the main

13

objectives of these cooperatives should be to control the use made of

money for economic improvements, and to improve the moral and
physical values of people and also, their will to act by themselves.
In the 1880s the British controlled government of Madras in South
India, tried to use the German experience to address poverty which
resulted in more than nine million poor Indians belonging to credit
cooperatives by 1946. During this same time the Dutch colonial
administrators constructed a cooperative rural banking system in
Indonesia based on the Raiffeisen model which eventually became
Bank Rakyat Indonesia (BRI), now known as the largest MFI in the
world.

14

Microfinance Today
In the 1970s a paradigm shift started to take place. The failure of
subsidized government or donor driven institutions to meet the
demand for financial services in developing countries let to several
new approaches. Some of the most prominent ones are presented
below.
Bank Dagan Bali (BDB) was established in September 1970 to serve
low income people in Indonesia without any subsidies and is now
well-known

as

the

earliest

bank

to

institute

commercial

microfinance. While this is not true with regard to the achievements

made in Europe during the 19th century, it still can be seen as a
turning point with an ever increasing impact on the view of politicians
and development aid practitioners throughout the world. In 1973
ACCION International, a United States of America (USA) based non
governmental organization (NGO) disbursed its first loan in Brazil and
in 1974 Professor Muhammad Yunus started what later became
known as the Grameen Bank by lending a total of $27 to 42 people in
Bangladesh. One year later the Self-Employed Womens Association
started to provide loans of about $1.5 to poor women in India.
Although the latter examples still were subsidized projects, they used
a more business oriented approach and showed the world that poor

15

people can be good credit risks with repayment rates exceeding 95%,
even if the interest rate charged is higher than that of traditional
banks. Another milestone was the transformation of BRI starting in
1984.

Once a loss

making institution channeling

government

subsidized credits to inhabitants of rural Indonesia it is now the

largest MFI in the world, being profitable even during the Asian
financial crisis of 1997 1998.
In February 1997 more than 2,900 policymakers, microfinance
practitioners and representatives of various educational institutions
and donor agencies from 137 different countries gathered in
Washington D.C. for the first Micro Credit Summit. This was the start
of a nine year long campaign to reach 100 million of the world poorest
households with credit for self employment by 2005. According to the
Microcredit Summit Campaign Report 67,606,080 clients have been
reached through 2527 MFIs by the end of 2002, with 41,594,778 of
them being amongst the poorest before they took their first loan. Since
the campaign started the average annual growth rate in reaching
clients has been almost 40 percent. If it has continued at that speed
more than 100 million people will have access to microcredit by now
and by the end of 2005 the goal of the microcredit summit campaign
would be reached. As the president of the World Bank James

16

Wolfensohn has pointed out, providing financial services to 100

million of the poorest households means helping as many as 500
600 million poor people.
1.2 Strategic Policy Initiatives

Some of the most recent strategic policy initiatives in the area of

Microfinance taken by the government and regulatory bodies in India
are:

Working group on credit to the poor through SHGs, NGOs,

NABARD, 1995

The National Microfinance Taskforce, 1999

Working Group on Financial Flows to the Informal Sector (set

up by PMO), 2002

Microfinance Development and Equity Fund, NABARD, 2005

Working group on Financing NBFCs by Banks- RBI

1.3 Activities in Microfinance

Microcredit: It is a small amount of money loaned to a client by a

bank or other institution. Microcredit can be offered, often without
collateral, to an individual or through group lending.

17

Micro savings: These are deposit services that allow one to save small
amounts of money for future use. Often without minimum balance
requirements, these savings accounts allow households to save in
order to meet unexpected expenses and plan for future expenses.

Micro insurance: It is a system by which people, businesses and

other organizations make a payment to share risk. Access to
insurance enables entrepreneurs to concentrate more on developing
their businesses while mitigating other risks affecting property, health
or the ability to work.

Remittances: These are transfer of funds from people in one place to

people in another, usually across borders to family and friends.
Compared with other sources of capital that can fluctuate depending
on the political or economic climate, remittances are a relatively
steady source of funds.

1.4 Legal Regulations

Banks in India are regulated and supervised by the Reserve Bank of

India (RBI) under the RBI Act of 1934, Banking Regulation Act,
Regional Rural Banks Act, and the Cooperative Societies Acts of the
respective state governments for cooperative banks.

18

NBFCs are registered under the Companies Act, 1956 and are
governed under the RBI Act. There is no specific law catering to NGOs
although they can be registered under the Societies Registration Act,
1860, the Indian Trust Act, 1882, or the relevant state acts. There has
been a strong reliance on self-regulation for NGO MFIs and as this
applies to NGO MFIs mobilizing deposits from clients who also borrow.
This tendency is a concern due to enforcement problems that tend to
arise with self-regulatory organizations. In January 2000, the RBI
essentially created a new legal form for providing microfinance
services for NBFCs registered under the Companies Act so that they
are not subject to any capital or liquidity requirements if they do not
go into the deposit taking business. Absence of liquidity requirements
is concern to the safety of the sector.

19

Chapter-2
RESEARCH OBJECTIVE AND METHODOLOGY
RESEARCH OBJECTIVES
The main research question/statement for this investigation:

To study the state of microfinance in Rajasthan

To document the development, clarify issues, generate the

understanding of challenges, and identify policy choices

To explore how far MFIs in Rajasthan have been successful in

strengthening the formal financial system in the process of
nurturing rural poor.

These are the sub questions supplementing the main research

question:

How microfinance is emerging as a financial tool for poor people

who do not get access to financial services?

Is providing credit to poor people enough to get them out of

poverty? Are poor people entirely satisfied with the products and
services MFIs are providing?

Does Microfinance reach the poorest of the poor?

20

Does Microfinance help in empowering poor people especially

women? If yes, how?

21

METHODOLOGY
A. Primary Data: The Primary tool was an interview schedule
comprising of a set of structured and unstructured questions to
elicit pertinent responses from the respondents.
SAMPLE:- The study conducted in Rajasthan region. A few
employees of Micro Finance Institutions and members of Self
Help Groups (SHGs) interviewed.
The size of the sample was 30 beneficiaries & 5 institutions
dealing in microfinance in Rajasthan.
Though it was not easy to obtain responses in primary data,
utmost care has been taken to maintain accuracy of results.
B. Secondary Data: Collected from published data like books &
journals, newspapers and internet to assist in the study.

22

Chapter-3
LITERATURE REVIEW
STATUS OF WOMEN INDIA
Violence against women is perhaps the most shameful human rights
violation. And it is perhaps the most pervasive. It knows no
boundaries of geography, culture or wealth. As long as it continues,
we cannot claim to be making real progress towards equality,
development and peace.
Kofi Annan, Secretary-General of the United Nations
Women in India are beginning to follow the direction that the women
of the Western world took more than eighty years ago; demanding
treatment as human equals. However, it has become more and more
evident as the revolution ages that Indian women may have to adapt
the Western feminist method to their very traditional and religious
culture. India has different complications that put the development of
women

in

completely

altered

context

than

their

Western

counterparts. Although the key targets remain similar: improvement of

health care, education and job opportunities in order to gain equality

between men and women in the various settings of public society, the
23

workplace, the school yard and possibly the most fundamental

setting of all the home. Women are striving to be independent on the
equal level of men. The additional complexities that the women of
India must also challenge are the caste system, the heavy religious
customs, older and more traditional roles of the sexes, as well as the
even stronger power that men hold in India. The status was at one
time accepted, but with the Western womens revolution and
perception, the role is slowly succeeding in its development through
both independent groups of women and national and worldwide
organizations based on the goal of gaining equality. They have all
accomplished much, but have yet to overthrow the male dominated
society.
The Original Status
A patriarichal and oppressed society with an inhumane caste system
supposedly based on religious faith, however, their religious beliefs are
obviously not understood since their masculine domination acts
against the religious base of men and women living as equals. Despite
modernization, womens status remained low and devalued well into
the 20th century. Gargi Chakravarty of the National Federation of

24

Indian Women stated in 1990 that Girls are looked upon by their
parents as burdens.
The status of women in India has been subject to many great
changes over the past few millennia. From a largely unknown status in
ancient times through the low points of the medieval period, to the
promotion of equal rights by many reformers, the history of women in
India has been eventful.
Women in India continue to play traditional roles even while changes
are occurring. Many of the ancient attitudes about women can be
traced back to the Vedas and other texts. Although women realize that
the circumstances of their lives are changing, many continue to abide
by these values, feeling it gives substance and structure to their lives.
This tends to be truer among women in rural areas than among urban
women. However, even urban women usually welcome arranged
marriages and wait to move up the hierarchy in their husband's
household. Educated women are making more and more unilateral
choices but among the educated it is accepted that it is appropriate
for the family to select a mate rather then encourage 1ove matches.
Probably the most publicized aspect of women's lives in India today is
the two issues of 'bride burning and the recurrence of sati (sutee). 7he

25

government has reacted quickly to these problems and has been

decisive in prosecuting and punishing the wrong-doers. However,
many women's groups feel the government can be even speedier in its
actions and these women continue to bring us issues of bride burning
in the press and on Indian YV. 7he last issue is sex selection among
those who can afford tests to determine the sex of the unborn foetus.
Many feminists, both in India and throughout the world, register
strong indignation at this practice and cite the lower female birth rate
in India.
Independent India
Women in India now participate in all activities such as education,
politics, media, art and culture, service sectors, science and
technology, etc. The Constitution of India guarantees to all Indian
women equality (Article 14), no discrimination by the State (Article
15(1)), equality of opportunity (Article 16), and equal pay for equal
work (Article 39(d)). In addition, it allows special provisions to be made
by the State in favour of women and children (Article 15(3)), renounces
practices derogatory to the dignity of women (Article 51(A) (e)), and
also allows for provisions to be made by the State for securing just and
humane conditions of work and for maternity relief. (Article 42).

26

The feminist activism in India picked up momentum during later

1970s. One of the first national level issues that brought the women's
groups together was the Mathura rape case. The acquittal of
policemen accused of raping a young girl Mathura in a police station,
led to a wide-scale protests in 19791980. The protests were widely
covered in the national media, and forced the Government to amend
the Evidence Act, the Criminal Procedure Code and the Indian Penal
Code and introduce the category of custodial rape. [16] Female activists
united over issues such as female infanticide, gender bias, women
health, and female literacy.
Since alcoholism is often associated with violence against women in
India, many women groups launched anti-liquor campaigns in Andhra
Pradesh, Himachal Pradesh, Haryana, Orissa, Madhya Pradesh and
other states. Many Indian Muslim women have questioned the
fundamental leaders' interpretation of women's rights under the
Shariat law and have criticized the triple talaq system.
In 1990s, grants from foreign donor agencies enabled the formation of
new women-oriented NGOs. Self-help groups and NGOs such as Self
Employed Women's Association (SEWA) have played a major role in
women's rights in India. Many women have emerged as leaders of local

27

movements. For example, Medha Patkar of the Narmada Bachao

Andolan.
The Government of India declared 2001 as the Year of Women's
Empowerment (Swashakti). The National Policy for the Empowerment
of Women came was passed in 2001.
In 2006, the case of a Muslim rape victim called Imrana was
highlighted in the media. Imrana was raped by her father-in-law. The
pronouncement of some Muslim clerics that Imrana should marry her
father-in-law led to wide-spread protests and finally Imrana's fatherin-law was given a prison term of 10 years, The verdict was welcomed
by many women's groups and the All India Muslim Personal Law
Board.

28

Workforce participation
Contrary to the common perception, a large percent of women in India
work. The National data collection agencies accept the fact that there
is a serious under-estimation of women's contribution as workers.
However, there are far fewer women in the paid workforce than there is
men.In urban India Women have impressive number in the workforce.
As an example at software industry 30% of the workforce is woman.
They are at par with their male counter parts in terms of wages,
position at the work place.
In rural India, agriculture and allied industrial sectors employ as
much as 89.5% of the total female labour. In overall farm production,
women's average contribution is estimated at 55% to 66% of the total
labour. According to a 1991 World Bank report, women accounted for
93% of total employment in dairy production in India. Women
constitute 51% of the total employed in forest-based small-scale
enterprises.
Women and men in India enjoy de jure equality. Article 14 of the
Constitution of India guarantees equal rights and opportunities to
men and women in political, economic and social spheres, Article 42
directs the State to make provision for ensuring just and humane

29

conditions for work and maternity itself and Article 51 (A) imposes
upon every citizen, a fundamental duty to renounce the practices
derogatory to the dignity of women.
However this de jure equality has not yet materialised into a de facto
equality, despite the efforts made in the Five Year Plans. The First Five
Year Plan sought to promote the welfare of women by helping them
to play their legitimate role in the family and the community but
emphasised that the major burden of organising activities for the
benefit of the female population had to be borne by the private
agencies. Five Year Plans continued to reflect the same welfare
approach to womens interests though they accorded priority to
education for both, men and women and launched measures to
improve maternal and child health services and supplementary
nutrition for children as well as expectant and nursing mothers.
It was the Sixth Five Year Plan in which the focus on womens
interests shifted from welfare and development. Planners and policy
makers began to recognize women not only as partners but also as
stake-holders in the development of the country. The Seventh Five
Year Plan saw developmental programmes which aimed at raising the
economic and social status of women and at ensuring that they get

30

the benefits of national development. This is when beneficiary

oriented programmes extending direct benefits to women in different
developmental sectors began. There was a stress upon the generation
of both skilled and unskilled employment through formal and nonformal education and vocational training. The Eight Five Year Plan
had a Human Development focus. It tried to ensure that the benefits
of development do not bypass women and it implemented special
programmes for women to complement the general development
programmes and to monitor the flow of benefits to women in
education, health and employment.
The Indian Government has passed various legislations to safeguard
Constitutional rights to women. These legislative measures include,
the Hindu Marriage Act (1955), The Hindu Succession Act(1956),
Dowry Prohibition Act (1961), Medical Termination of Pregnancy act
(1971), equal Remuneration Act (1976), Child Marriage Restraint
Act(1976), Immoral Trafficking (Prevention ) Act(1986) and finally Prenatal Diagnostic Technique (Regulation and Prevention of Measure)
Act (1994) etc.
Apart from these, various welfare measures have been taken up by the
Government from time to time empowers the women. They are, the

31

support to Training for Employment Programme (1987), Mahila

Samridhi Yojana (1993), The Rastriya Mahila Kosh (1992-93), Indira
Mahila Yojana (1995), DWACRA Plan (1997) and Balika Samridhi
Yojana (1997). On the 12th July, 2001 the Mahila Samridhi Yojana and
Indira Mahila Yojana have been merged into the integrated self-help
group programme i.e. swayam Sidhha.
The emancipation of women is not a simple matter. It requires the
attitudinal change of the husband, other family members and society
as a whole to the women. The community consciousness and
bureaucratic efforts are integral parts of the implementation of the
programmes. The 1st and the foremost priority should be given to the
education of women, which is the grassroots problem. The struggle for
gender justice will be slow, strenuous and protracted, as the change
can not be brought out easily. It has to be fought at emotional,
cognitive and action levels. The struggle has to be carried on within
caste,

class,

race,

religion,

everywhere

in

which

man-woman

relationship figure and matter.

National Policy For The Empowerment Of Women

The principle of gender equality is in the Indian constitution of its

preamble, Fundamental rights, Fundamental Duties and Directive

32

Principles. The Constitution not only grants equality to women, but

also empowers the state to adopt positive discrimination in favor of
women.
From the Fifth Five year Plan (1974-78) onwards has been marked
shift in the approach to womens issue from welfare to development of
new issue in determining the status of women. The national
Conference foe women were set up by an act of Parliament in 1990 to
safeguard the rights and legal entitlements of women. The 73 rd &74th
Amendments (1993) to the Constitution of India have provided for
reservation

of

seats

in

the

local

bodies

of

Panchayats

and

Municipalities for women, laying a strong foundation for their

participation in decision making at the local levels.
The Policy takes note of commitments of the Ninth Five Year Plan and
the other Sectoral Policies to empowerment of Women.
The womens movement and wide spread network of non Govt.
Organization which have strong grass roots presence and deep insight
into womens concerns have contributed in inspiring initiatives for the
empowerment of women.
However, there still exists a wide gap between the goals enunciated in
the constitution, legislation, plans, policies, programmes and related

33

mechanisms on the one hand and the situational reality of the status
of women in India, on the other. This has been analyzed extensively in
the Report of the Committee on the status of Women in India,
Towards Equality, 1974 and highlighted in the National Perspective
Plan for Women, 1988-2000, the Sharmashakti Report, 1988 and the
Platform for Action, Five Years After An Assessment.
Gender disparity manifests itself in various forms, the most obvious
being the trend of continuously declining female ratio in the
population in the last few decades. Social stereotyping and violence at
the domestic and societal levels are some of the other manifestation.
Discrimination against girl children, adolescent girls and women
persists in the parts of the country.

Goal & Objectives:

The goal of this policy is to bring about the advancement, development
and empowerment of women. The policy will widely disseminate so as
to encourage active participation of all stakeholders for achieving its
goal. Specially, the objectives of this Policy include

34

1. Creating an environment through positive economic and social

policies for full development of women to enable them to realize
their full potential.
2. The de-jure and de facto enjoyment of all human rights and
fundamental freedom by women on equal basis with men in all
spheres political, economic, social, cultural and civil.
3. Equal access to participation and decision making of women in
social, political, and economic life of the nation.
4. Equal access to women to health care, quality education at all
levels,

career

&

vocational

guidance,

employment,

equal

remuneration, occupational health and safety, social, security,

and public office etc.
5. Strengthening legal systems aimed at elimination of all forms of
discrimination against women.
6. Changing societal attitudes and community practices by active
participation and involvement of both men and women.
7. Mainstreaming a gender perspective in the development process.
8. Elimination of discrimination and all forms of violence against
women and the girl child; and

35

9. Building and strengthening partnerships with civil society,

particularly womens organizations.
Policy Prescriptions
Judicial Legal Systems
Legal-judicial system will be made more responsive & gender sensitive
to womens needs, especially, in cases of domestic violence and
personal assault. New laws will be enacted and existing laws reviewed
to ensure that justice is quick and the punishment meted out to the
culprits is commensurate with severity of the offence.
At the initiative of and with the full participation of all stakeholders
including community and religious leaders, the Policy would aim to
encourage changes in personal laws such as those related to marriage,
divorce,

maintenance,

and

guardianship

so

as

to

eliminate

discrimination against women.

The evolution of property rights in patriarchal system has contributed
to the subordinate status of women. The Policy aim to encourage
changes in laws relating to ownership of property and inheritance by
evolving consensus in order to make them gender just.
Decision Making:

36

Womens in power sharing and active participation in decision making,

including decision making in political process at all levels will be
ensured for the achievement of the goals of empowerment. All
measures will be taken to guarantee women equal access to and full
participation in decision making bodies at every level, including the
legislative, executive, judicial, corporate, statutory bodies, as also the
advisory Commission, Committees, Boards, Trusts etc. Affirmative
action such as reservations/quotas, including in higher legislative
bodies, will be considered whenever necessary on a time bound basis.
Women friendly personal policies will also be drawn up to encourage
women to participate effectively in the developmental process.
Mainstreaming a Gender Perspective in the Development Process:
Polices, programmes and systems will be established to ensure
mainstreaming of womens perspective in all developmental processes,
as catalysts, participants and recipients. Wherever there are gaps in
policies and programmes, women specific interventions would be
devised

to

access

from

time

to

time

the

progress

of

such

mainstreaming mechanisms. Womens issue and concerns as a result

will specially be addressed and reflected in all concerned laws, sect
oral policies, plans and programmers of action.

37

Economic Empowerment of Women:

Poverty Eradication
Since women comprise the majority of the population below the
poverty line and are very often in situation of extreme poverty, given
the harsh realities of intra household and social discrimination,
macro economic policies and poverty eradication programmes will
specially address the needs and problems of such women. Steps will
be taken for mobilization of poor women and convergence of services,
by offering them a range of economic and social options, along with
necessary support measures to enhance their capabilities.
Micro Credit:
In order to enhance womens access to credit for consumption and
production, the establishment of new and strengthening of existing
micro-credit

mechanism

and

microfinance

institution

will

be

undertaken so that the outreach of credit is enhanced. Other

supportive measures would be taken to ensure adequate flow credit
through extant financial institutions and banks, so that all women
below poverty line have easy access to credit.
Women & Economy:

38

Womens perspective will be included in designing and implementing

macroeconomic and policies by institutionalizing their participation in
such processes. Their contribution to socio-economic development as
producers and workers will be recognized in the formal and informal
sectors (including home based workers) and appropriate policies
relating to employment and to her working conditions will be drawn
up.
Globalization
Globalization has presented new challenges for the realization of goal
of womens equality, the gender impact of which has not been
symmetrically evaluated fully. However, from the micro level studies
that were commissioned by the Department of Women & Child
Development, it is evident that there is a need for re-framing policies
for access to employment and equality of employment. Benefits of the
growing global economy have been unevenly distributed leading to
wider economic disparities, the feminization of poverty, increased
gender inequality through often deteriorating working condition and
unsafe working environment especially in the informal economy and
rural areas. Strategies will be designed to enhance the capacity of

39

women and empower them to meet the negative social and economic
impacts, which may from the globalization process.
Women and Agriculture
The important role played by women in the agriculture and ailed
sectors, as producers, concentrated efforts will be made to ensure that
benefits of training, extension and various programmes will reach
them in proportion to their numbers. The programmers for training
women in soil conservation, social forestry, dairy development and
other occupation ailed to agriculture lie horticulture, livestock
including small animal husbandry, poultry, fisheries etc. will be
expanded to benefit women workers in the agriculture sector.
Social Empowerment of Women
Education
Equal access to education for women and girls will be ensured. Special
measures will be taken to eliminate discrimination, universalize
education, eradicate illiteracy, create a gender-sensitive educational
system, increase enrolment and retention rates of girls and improve
the quality of education to facilitate life-long learning as well as
development of occupation/ vocation/technical skills by women.
Reducing the gender gap in secondary and higher education would be
40

a focus area. Sectoral time targets in existing policies will be achieved,

with a special focus on girls and women, particularly those belonging
to

weaker

sections

Tribes/Other

including

Backward

the

Classes/

Scheduled
Minorities.

Castes/Scheduled
Gender

sensitive

curricula would be developed at all levels of educational system in

order to address sex stereotyping as one of the causes of gender
discrimination.
Health
A holistic approach to womens health which includes both nutrition
and health services will be adopted and special attention will be given
to the needs of women and the girl at all stages of the life cycle. The
reduction of infant mortality and maternal mortality, which are
sensitive indicators of human development, is a priority concern. This
policy reiterates the national demographic goals for Infant Mortality
Rates (IMR), Maternal access to comprehensive, affordable and quality
health care. Measures will be adopted that take into account the
reproductive rights of women to enable them to exercise informed
choices, their vulnerability to sexual and health problems together
with endemic, infectious and communicable diseases such as malaria,
TB, and water borne diseases as well as hypertension and cardio-

41

pulmonary

diseases.

The

social,

developmental

and

health

consequences of HIV/AIDS and other sexually transmitted diseases

will be tackled from a gender perspecitive.
To effectively meet problems of infant and maternal mortality, and
early marriage the availability of good and accurate data at micro level
on deaths, birth and marriages is required. Strict implementation of
registration of births and deaths would be ensured and registration of
marriages would be made compulsory.
Womens traditional knowledge about health care and nutrition will be
recognized through proper documentation and its use will be
encouraged. The use of Indian and alternative systems of medicine will
be enhanced within the framework of overall health infrastructure
available for women.
Gender Sensitization
Training of personnel of executive, legislative and judicial wings of the
State, with a special focus on policy and programme framers,
implementation
machinery

and

and
the

development
judiciary,

as

agencies,
well

as

law

enforcement

non-governmental

organizations will be undertaken. Other measures will include:

42

(a)

Promoting societal awareness to gender issues and womens

human rights.
(b)

Review of curriculum and educational materials to include gender

education and human rights issues.

(c)

Removal of all references derogatory to the dignity of women from

all public documents and legal instruments.

(d)

Use of different forms of mass media to communicate social

messages relating to womens equality and empowerment.

Panchayati Raj Instructions
The 73rd and 74th Amendments (1993) to the Indians Constitution have
served as a breakthrough towards ensuring equal access and
increases participation in political power structure for women. The
PRIs will play a central role in the process of enhancing womens
participation in public life. The PRIs and the local self Governments
will be actively involved in the implementation and execution of the
National Policy for Women at the grassroots level.
International Cooperation
The

Policy

will

aim

at

implementation

of

international

obligations/commitments in all sectors on empowerment of women

43

such as the Convention on all forms of discrimination Against Women

(CEDAW), Convention on the Rights of the Child (CRC), International
Conference on Population and Development (ICPD+5) and other such
instruments. International, regional and sub-regional cooperation
towards the empowerment of women will continue to be encouraged
through sharing of experiences, exchange of ideas and technology,
networking with institutions and organizations and through bilateral
and multi-lateral partnerships.

44

ROLE OF MICROFINANCE
In recent years, most of the countries across the globe are in a
sweeping mood to promote micro finance institutions not only as a
positive

rural

development

intervention

but

also

as

rural

development panacea. Allured by the success of micro credit

institutions in developed countries, the developmental economists in
under developed and developing economies have increasingly become
enthusiastic in the promotion of micro credit as a rural development
intervention by tying it neatly with post-liberal development ideology.
In the Indian context, the frenzied promotional activity of the micro
credit institutions derive in part from the political slogan of Garibi
Hatao of the Union Government in mid 70s by the establishment of
Grameen Banks which were the offshoot of the putative success of
Developmental Financial Institutions in the West. Although the basic
philosophy behind the micro credit movement is to eradicate poverty
as it stimulates the growth of micro enterprises by developing new
markets and by promoting a culture of entrepreneurship, it involves
minimal state intervention, thereby shifting the focus of attention
away from the society towards individuals. The experience of micro
credit schemes in Asia, Africa and South America describes altogether

45

a different story by negating this particular aspect of development

intervention. This serves the starting point of the present paper in
considering micro credit as the limiting factor of rural development
intervention. No doubt, the limits arise from the individualistic focus
of the intervention. Keeping consistency with the title of the paper, it
not only explores the limitations of micro credit as a rural
development intervention through a survey of literatures but also
makes an attempt to bring to the focus the concept of rural micro
finance in which the issues of credit markets and the poor are
explored. The objective of bringing the above discussion to the
forefront is to assess the potential impact of micro finance institutions
as development interventions. Finally, attempt is made to look at the
conditions which limit the effectiveness of micro finance institutions
as development interventions in different parts of the globe including
India.
Despite the vast expansion of the formal credit system in the country,
the dependence of the rural poor on moneylenders continues in many
areas,

especially

for

meeting

emergent

requirements.

Such

dependence is pronounced in the case of marginal farmers, landless

labourers, petty traders and rural artisans belonging to socially and
economically backward classes and tribes whose propensity to save is
46

limited or too small to be mopped up by the banks. For various

reasons, credit to these sections of the population has not been
institutionalized. The studies conducted by NABARD, APRACA and
ILO

on

the

informal

groups

promoted

by

non

government

organizations (NGOs) brought out that Self-Help Savings and Credit

Groups have the potential to bring together the formal banking
structure and the rural poor for mutual benefit and that their working
has been encouraging, hence the concept of Micro Credit has evolved
and has gained momentum with the passing of time.
According to Oxfam, micro credit consists of "very small scale financial
services, including savings, loans for emergencies, day-to-day living,
and investment in productive activities" Credit is usually provided to
groups of individuals or village organizations that use joint-liability
(a.k.a. peer pressure!) to enforce loan repayment. Through group
savings and loans, poor people very often increase their economic
security and well being. Micro Credit has been defined as the
provision of thrift, credit and other financial services and products of
very small amount to the poor in rural, semi-urban and urban areas
for enabling them to raise their income levels and improve their living
standards. Micro Credit Institutions are those, which provide these
facilities. The Asia-Pacific region is home to many micro credit
47

institutions, and the majority of programs are directed at women in

rural areas. Targeting women as clients of micro credit programs has
been an effective method to ensure that the benefits of increased
family income are directed towards the general welfare of the family,
and particularly the children.

Microfinance is defined as any activity that includes the provision of

financial services such as credit, savings, and insurance to low
income individuals which fall just above the nationally defined poverty
line, and poor individuals which fall below that poverty line, with the
goal of creating social value. The creation of social value includes
poverty alleviation and the broader impact of improving livelihood
opportunities through the provision of capital for micro enterprise,
and insurance and savings for risk mitigation and consumption
smoothing. A large variety of actors provide microfinance in India,
using a range of microfinance delivery methods. Since the ICICI Bank
in India, various actors have endeavored to provide access to financial
services to the poor in creative ways. Governments also have piloted
national programs, NGOs have undertaken the activity of raising
donor funds for on-lending, and some banks have partnered with
public organizations or made small inroads themselves in providing

48

such services. This has resulted in a rather broad definition of

microfinance as any activity that targets poor and low-income
individuals for the provision of financial services. The range of
activities

undertaken

in

microfinance

include

group

lending,

individual lending, the provision of savings and insurance, capacity

building, and agricultural business development services. Whatever
the form of activity however, the overarching goal that unifies all
actors in the provision of microfinance is the creation of social value.

MICRO FINANCE INTERVENTIONS

In the development paradigm, micro-finance has evolved as a needbased policy and programme to cater to the so far neglected target
groups (women, poor, rural, deprived, etc.). Its evolution is based on
the concern of all developing countries for empowerment of the poor
and the alleviation of poverty. Development organisations and policy
makers have included access to credit for poor people as a major
aspect of many poverty alleviation programmes.
Micro-finance programmes have, in the recent past, become one of the
more promising ways to use scarce development funds to achieve the
objectives of poverty alleviation. Furthermore, certain micro-finance
programmes have gained prominence in the development field and

49

beyond. The basic idea of micro-finance is simple : if poor people are

provided access to financial services, including credit, they may very
well be able to start or expand a micro-enterprise that will allow them
to break out of poverty.
There are many features to this seemingly simple proposition which
are quite attractive to the potential target group members, government
policy makers, and development practitioners. For the target group
members, the most obvious benefit is that micro-finance programmes
may actually succeed in enabling them to increase their income levels.
Furthermore, the poor are able to access financial services which
previously were exclusively available to the upper and middle income
population. Finally, the access to credit and the opportunity to begin
or to expand a micro-enterprise may be empowering to the poor,
especially in comparison to other development initiatives which often
treat these specific target group members as recipients.
For

development

practitioners,

the

success

of

micro-finance

programmes is encouraging. Too often in the past, costly large-scale

development initiatives have failed to achieve any sustainable benefits,
especially after funds have dried up.

50

Thus,

micro-finance

has

became

one

of

the

most

effective

interventions for economic empowerment of the poor.

UNDERSTANDING

THE

DEVELOPMENT

PROCESS

THROUGH MICRO-FINANCE
Micro finance is expected to play a significant role in poverty
alleviation and development. The need, therefore, is to share
experiences and materials which will help not only in understanding
successes and failures but also provide knowledge and guidelines to
strengthen and expand micro finance programmes.
In India, a variety of micro-finance schemes exist and various
approaches have been practised by both GOs and NGOs. In the
development sector, credit has been viewed as one of the missing
inputs and therefore, a growing emphasis on re-formulating and restrengthening micro credit programmes is observed. There are
examples of spectacular successes and there are also examples of notso-successful programmes which experienced high default rates and
were unable to provide financial services in the long run. Ultimately
the aim is to empower the poor and mainstream them into
development. Amongst different approaches of micro-finance schemes,
the process and stages remain more or less the same.

51

The development process through a typical micro-finance intervention

can be understood with the help of Chart given below. The ultimate
aim is to attain social and economic empowerment. Successful
intervention is therefore, dependent on how each of these stages have
been carefully dealt with and also the capabilities of the implementing
organisations in achieving the final goal, e.g., if credit delivery takes
place without consolidation of SHGs, it may have problems of selfsustainability and recovery. A number of schemes under banks,
central and state governments offer direct credit to potential
individuals without forcing them to join SHGs. Compilation and
classification of the communication materials in the directory is done
based on this development process.

52

CLASSIFYING MICRO-FINANCE INTERVENTIONS

There are several Micro-Finance implementing organisations which
provide small loans in India. Some of them have successfully
expanded their services to thousands of borrowers. Given the fact that
most of these borrowers would not have had access to formal financial

53

institutions, that many of the borrowers utilise the loans to enter

and/or expand their informal sector micro enterprises, and that the
informal sector continues to be an important source of livelihood for
many poor people, these Micro Finance Organisations (MFOs) may
very well have had a major impact on improving the living standards of
millions of poor persons as well as on promoting economic growth.
The term MFO has been used for all types of implementing
organisations

facilitating

savings

and

credit

and

financial

activities at individual and/or group level, not going into details

of legal and technical aspects of MFOs.
Some of these organisations have evolved from small NGOs to become
important providers of financial services. Realising the potentially
important role that MFOs play in deepening the benefits of economic
growth, it is necessary that these MFOs should be strengthened by
providing them experience-sharing opportunities, materials and
training. Furthermore, the relative success of many MFOs soundly
refute the claims of some that "the poor are non-bankable" or that
MFOs are a waste of scarce development funds. In fact, it would be
difficult to find another type of developmental initiative which has
been relatively effective on such a large scale in recent years.

54

In India, there exist a variety of micro finance organisations in

government as well as non government sectors. Leading national
financial institutions like the Small Industries Development Bank of
India

(SIDBI),

the

National

Bank

for

Agriculture

and

Rural

Development (NABARD) and the Rashtriya Mahila Kosh (RMK) have

played a significant role in making micro credit a real movement. In
India, the size and types of implementing organisations range from
very small to moderately big organisations involved in savings and or
credit activities for individuals and groups. These groups also adopt a
variety of approaches. However, most of these organisations tend to
operate within a limited geographical range. There are a few exceptions
like PRADAN, ICECD, MYRADA, SEWA who have been successful in
replicating their experiences in other parts of the country and act as
Resource Organisations. Also, many organisations are involved with
SHGs, not only for credit, but for other purposes like watershed,
agriculture, etc.
Micro-finance interventions can be identified based on their span of
activity, source of funds, route through which it reaches the poor or
the coverage. However, it seems that one of the most common
practices and approaches prevalent is providing credit through SelfHelp Groups. The approach is to make SHGs the main focal point to
55

route all credit to members. Almost all national funding organisations

(NABARD, RMK) as well as other Government schemes advocate
forming of Self-Help Groups and thus providing or linking with credit.
However, many organisations providing individual finance directly also
exist. It has been explained in Chart given below.

56

THE PARTICIPATING ORGANISATIONS

The preparation of this resource directory covered about 450
organisations involved in micro-finance activities in 11 states of India.
These organisations are classified in the following categories to
indicate the functional aspects covered by them within the micro
finance framework. The aim, however, is not to "typecast" an
organisation, as these have many other activities within their scope :
1. Organisations implementing micro-finance activities
2. Resource organisations or support agencies
3. Formal

financial

institutions

Banks

and

development

organisations, like NABARD, SIDBI, Association of MFOs etc.

1. Organisations Implementing Micro Finance Activities
Organisations

implementing

micro-finance

activities

can

be

categorised into three basic groups.

I)

Organisations which directly lend to specific target groups

and are carrying out all related activities like recovery,
monitoring, follow-up etc. Some of these organisations are
graduating to become exclusive MFOs, but such cases are
few.

57

II)

Organisations who only promote and provide linkages to

SHGs and are not directly involved in micro lending
operations.

III)

Organisations which are dealing with SHGs and plan to start

micro-finance related activities.

58

2. Resource Organisations or Support Agencies

These are the organisations who provide support to implementing
organisations. The support may be in terms of resources or training
for capacity building, counselling, networking, etc. They operate at
state/regional or national level. They may or may not be directly
involved in micro-finance activities.
A few associations to bring such MFOs on one platform have also been
initiated in India. Experience sharing through newsletters and/or
meetings/ seminars/training are the methods adopted by the
associations/collectives to support implementing organisations.
3. Formal Financial Institutions - Banks
Commercial Banks, Gramin Banks and Rural Banks provide funds to
SHGs and also operate their accounts. Funding agencies and
development institutions channelise credit through these FIs. Building
gender sensitivity and developmental dimensions amongst these
agencies is a major need. Banks prefer to route credit through SHGs,
though they directly lend to individuals also.
Development Agencies/Nodal Agencies in India, development agencies
like NABARD, SIDBI and RMK provide funds for credit. They support
MFOs and have separate allocations for SHGs and micro-credit. These
59

organisations have developed guidelines and training materials to help

MFOs implement micro-credit activities covered under their preview.
The understanding that providing financial services to the poor is
essential is not new in India. Since independence, the Indian
government has made various efforts from encouraging expansion of
the commercial bank branch network into rural and semi-urban
areas, creation of local subsidiary banks known as regional rural
banks, and promoting lending to key disadvantaged economic sectors.
Despite much progress, the socio-economic impact has not been as
powerful as expected because commercial banks were not able to cater
to this market in a cost-efficient and sustainable fashion. Instead,
bankers continued to view such lending as a social and more
pertinently, a regulatory obligation. Thus, financial organizations that
were meant to serve the poor did not do the job to the extent originally
planned.
Providing financial services to the poor, especially in rural areas, is
difficult and costly: Bankers lack the requisite information on their
clients. While this is true in any transaction, this is exacerbated in the
case of poor people because of the absence of collateral and personal
credit historyinformation that usually allows bankers to estimate

60

the creditworthiness of clients to a reliable degree. Poor clients also

require usually a high frequency of small transactions in inaccessible
geographic locations, making this clientele base unappealing to
traditional bankers. Furthermore, most poor clients being illiterate,
they are unable to cope with the usual paperwork and formalities of
the banking system. All these unique features of the clientele weigh
negatively in a typical cost benefit analysis. In addition, traditional
financial institutions do not promulgate the sort of outlook or policies
that would encourage their staff to lend to the poorest clients.
The microfinance promise brought innovations in all these aspects
contracts, management structures and attitudesthat made banking
for the poor not only possible, but also a viable business proposition.
Microfinance, which as a term has traditionally and until recently
been synonymous with micro-credit, has been growing fast in many
countries, most notably in Bangladesh since the 1970s when it was
initiated by organizations such as the Grameen Bank and BRAC. In
India the movement appeared only in the 1990s due to the advent of
financial sector reforms that encouraged policy makers to devise and
encourage

new

solutions

with

focus

on

repayment

and

sustainability. The movement started with the idea to connect a group

61

of villagers, usually a group of 15-20 women, to commercial banks,

which became widely known as the SHG-Bank linkage model. In
recent years, a new model of microfinance has emerged, closer to
world famous Grameen modelfinancial intermediation by so-called
Micro Finance Institutions (MFI), specialized institutions created
specifically to distribute credit to the un-banked population.
So where are we now?
The microfinance sector in India, largely unfettered by tedious
regulation and interference is young and dynamic. While there are
very few reliable aggregate data available for the Indian microfinance
market, a lower bound on supply of credit from the formal sector can
be estimated at Rs.37 billion (US$822 million) in 2004-05.
Currently, roughly 75% of the credit supply is via the Self Help GroupBank linkage route largely financed by the National Bank for
Agriculture and Rural Development (NABARD) and the rest comes
from MFIs, increasingly backed by commercial banks. However, the
difference in market share is decreasing, as the increase in credit flow
to SHGs over the previous year is 61% while growth of loans
originated by MFIS is well beyond 100%.

62

KAS foundation (KAS), a MFI operating in Orissa and Chattisgarh, is a

good example of this phenomenal growth. Registered as a Section-25
company, KAS started operations in the year 2003 and provides
savings, credit and other financial services to the poor in rural, semiurban and urban areas. Set up with the help of Rs.4.0 million grant
from the corporate responsibility wing of ICICI Bank, KAS has grown
phenomenally in the last 2.5 years, disbursing more than Rs.1.0
billion to 250,000 borrowers from 20,000 SHGs and 20,000 JLGs by
the end of the 2005-06 fiscal year featuring a portfolio at risk (PAR) of
not more than 1.25%. The root factors of the KAS growth story lies in
its willingness to enter into the hitherto unappealing territories of
Orissa and its innovative delivery channels, the continuous financial
support of ICICI Bank and agile leadership and management abilities
of the charismatic founder CEO, Mr. Kathiresan.
Despite such valiant efforts from KAS and other key players in the
microfinance

sector,

the

World

microfinance

activity

currently

Bank

reaches

estimates
only

4%

that
of

the

Indian
poor.

Furthermore, microfinance tends to be concentrated in rural areas as

opposed to urban areas and in South India as opposed to North India.

63

If microfinance is such a lucrative proposition, why are so many parts

of India under-served?
The biggest obstacle until fairly recently was little access to
commercial markets and the forbidding cost of capital funds. As
private

banks,

spearheaded

by

ICICI

in

2003,

entered

the

microfinance sector, this barrier partly disappeared and microfinance

activity is now accelerating at a break-neck pace, whether we speak of
loan outstanding, client outreach, product and service diversification
or geographic spread.
Today, concerns have shifted to growth management issues such as
skilled human resources, flexible product design, reducing transaction
costs, ensuring adequate management information systems, standard
credit information, better use of advances in technology, accessing
alternative financing, and dealing with regulatory hurdles and political
risks. There is a clear need for structured long term financing to the
sector to fully address these important issues and smoothly transition
into a well functioning mature industry.
As microfinance activity evolves into a full fledged industry, a
multitude of issues must be urgently addressed. The pool of skilled
microfinance professionals in India is still quite small, turnover is high

64

and microfinance is still not perceived as a viable business

opportunity and professional workplace by qualified graduates. It is
estimated that a minimum of 20,000 executives are required across
the sector over the next four years, particularly at middle management
positions. Another critical issue faced by MFIs is the very high
operational costs, especially at loan origination and during monitoring
because of doorstep service and little or no deployment of technology
solutions. This is a critical concern in the face of rising competition,
public scrutiny and political interference. Technological innovations
such as smart cards, biometric IDs, and rural kiosks that can help
control costs are crucial for a safe and rapid scale up. In terms of
financing, capital infusion is no longer a problem in India primarily
because of short term bank loans and off balance sheet financing via
the partnership model initiated by ICICI Bank. However, MFIs are
lacking in some forms of capital, especially access to long-term debt
from banks, equity and possibility of loan portfolio securitization. The
lack of information sharing represents another challenge that will be
become increasingly so with the growth of the sector. One of the main
impediments to the creation of a standard credit bureau is the lack of
a unique identifier e.g. a national social security number. Finally, the
sector is faced with a challenge of political nature. Two of Indias

65

largest MFIs recently faced government action in Andhra Pradesh

prompted

by

public

complaints

against

them

of

misbehavior,

malpractices and usurious interest rates, following which most Indian

MFIs have formally adopted a uniform code of conduct that addresses
these issues including forbidding unethical practices by loan officers.
Such incidents highlight the sharp need to regulate unknown start
ups and ensure that larger MFIs adhere to consistent good
governance, transparency and accountability standards.
In terms of regulations, the Reserve Bank of India and the Ministry of
Finance are strongly supportive of the microfinance movement. For
example, a big step forward for the sector was in January 2006 when
RBI permitted deposit mobilization by MFIs appointed as Business
Correspondents. Such policy milestones are shaping the fast paced
thriving sector today. Yet there is much to be done. A stable and
conducive policy environment is necessary for initiatives such as a
single credit bureau, biometric IDs or smart cards and weather
stations. We believe that while the sector at this stage needs a laissezfaire environment, policymakers should be on a continuous vigil and
deliver concurrent improvements in policy and regulation.

66

While the question of access is of immediate concern, it is also

essential to improve the quality of financial services that poor people
have access to. The full promise of microfinance can only be realized
by returning to the early commitments to experimentation, innovation
and evaluation. For this, we need to understand the true impact on
poverty alleviation and develop new products that are more suitable
for the needs of the poor. We also need to find ways to combine
microfinance with other types of development interventions so as to
achieve the end goal of microfinance: to serve the poor in a cost
efficient and sustainable fashion and to help improve the lives of the
poor. The Centre for Micro finance (CMF) in Chennai is undertaking a
large number of research and pilot projects with the objective to shed
light on precisely both of these aspectsincrease access and quality of
financial services to the poor.
As we go forward from here, the most salient point to remember is not
past successes or present impediments but the future economic
potential of this market. According to an April 2006 McKinsey India
survey, rural India has the potential to become a US$500 billion
market by the year 2020. It remains to be seen whether todays MFIs,
banks, lenders and investors have the tenacity, dexterity and wit to
retain and build on their first mover advantage.
67

MICRO CREDIT LENDING:

1. Defining criteria is the size of loans
2. Targeting population contains micro-entrepreneurs especially
women, from low-income households.
3. Laying down other conditions like attendance at weekly member
meetings, which discourages the really non-poor from taking the
loans.
4. The concept of group borrowing is driven by the idea that
solidarity among the like-minded people living in similar social
and economic conditions is crucial to the success of the
programs.
5. The bank insists on putting the loan to use within a specified
period of time usually seven days.
Micro credit as a tool of rural development through the development of
micro enterprises was introduced to the economy because formal
credit institutions (capital markets) and informal lending system either
failed to deliver the goods or not very much conducive to the growth of
micro enterprises. As we know the economic giants of the world
developed their economies by relying on formal credit institutions

68

through the development of their capital markets. But these formal

credit institutions have on the whole failed to provide credit to the
poor in the underdeveloped countries for many obvious reasons:
Firstly, formal financial institutions are removed, in a number of
respects, from the lives of the people. One need simply enter the foyer
of any commercial bank to get an immediate sense of this. For
instance, formal financial institutions tend to require literacy and
often have little knowledge of how business operates in rural areas,
i.e. the complex interaction of business and social obligations. For the
rural poor, transacting with formal financial institutions often involves
time consuming journeys away from the village and transactions
conducted during office hours with unfamiliar faces in unfamiliar
surroundings.
Micro-credit has become a major tool of development, and is fast
developing

as

associations,

an

international

dedicated

finance,

industry,

with

its

own

training

and

other

trade

support

organisations, research and journals. In a phase in the international

development endeavour in which ideology is out of fashion, the search
is on for practical, workable solutions to the deep-seated challenges of
poverty. Micro-credit seems to provide just such a solution. By

69

delivering financial services

at a scale,

and by mechanisms,

appropriate to poor people, micro-credit can reach them. By providing

poor people with credit for micro enterprise it can help them work
their own way out of poverty. And by providing loans rather than
grants the micro-credit provider can become sustainable by recycling
resources over and over again. In other words micro-credit appears to
deliver the holy trinity of outreach, impact and sustainability. No
wonder the development sector has become so excited.
When the formal financial institutions are a state run organization, it
may be driven by a range of socio-political organizations, in addition to
considerations of the clients ability to repay. Credit provision for
development of rural micro enterprises may not be an appropriate way
of facilitating rural development, and if the provision of credit is
determined mostly by factors other than ability to repay the loan, it is
unlikely that the micro-enterprise will be self-sustaining. In such a
circumstance micro credit institution is likely to cease providing
credit.
The transaction cost of the provision of credit to rural micro
enterprises may prove prohibitive to large formal financial institutions.
Rural micro enterprises are dispersed over large areas. Transactions

70

involve relatively small amounts and they require relatively large

amounts of on-interest earning cash to serve their clients. Von Pischke
claims that, Obligations to formal institutions may not be accorded
very high priority . especially when institutions are not responsive to
clients. In some instance, the opposite may be true. For example,
when a non-government organization (NGO) that was known in the
past for providing grants moves into providing loans, the recipients
often see the NGO as a soft target. Loan recipients recognize that the
NGO would be unwilling to put pressure on lenders who defaulted and
would certainly be unwilling to force the sale of collateral.
Formal credit institutions deal frequently with a large number of
clients who are often unknown to them. They rely on well developed
financial and legal markets to obtain information about their clients,
for example, institutions that collect information on bad debts and
organizations that give credit ratings. Such institutions do not exist in
rural areas where information about credit worthiness needs to be
extracted on a more personal basis. In assessing an enterprise, formal
financial institutions tend to rely on financial profitability and cash
flow analyses. These are expensive and are often inappropriate ways of
assessing rural micro enterprise projects. They do not take account of

71

social factors influencing production and distribution in rural

enterprise projects in developing countries.
Unlike their larger formal counterparts, entrepreneurs who start micro
enterprises typically lack assets, especially marketable ones to use as
collateral for loans. Many rural micro enterprise projects tend to be
agricultural enterprises that are dependent on vagaries of nature and
are therefore risky. The loans are often used for purchasing seeds,
fertilizers, pesticides and herbicides which can not be recovered in
case of crop failure. Because of all these reasons formal credit
institutions have tended to stay away from lending to rural micro
enterprises The vast majority of societies with money lending
economies including India has, or has had, some form of informal
money lending. Very often the money lenders have been despised
members of the community. In all societies with malicious money
lenders are usually believed to extract exorbitantly high interest rates
because of the weak bargaining position of the borrower. Highly
publicized cases of high interest rates have very often prompted
governments to outlaw informal money lending through the passing of
usury laws which set the ceiling on interest rates. These actions of the
governments have gone, of course, against the thought of Ohio School
which argued high interest rate to be a real reflection of the
72

opportunity cost of the loan. Even they tried to justify their arguments
by stating that high interest rate often included payment for a range of
services such as storage facilities for the produce, payment of market
taxes, etc provided by the money lenders.
Despite having a wide network of rural bank branches in India which
implemented specific poverty alleviation programmes that sought
creation of self-employment opportunities through bank credit for
almost two decades, a very large number of the poorest of the poor
continued to remain outside the fold of the formal banking system
(National Bank for Agriculture and Rural Development, 1999).
Therefore a need was felt for alternative policies, systems and
procedures, savings and loan products, other complementary services,
and new delivery mechanisms, which would fulfil the requirements of
the poorest, especially of the women members of such households. As
a result National Bank for Agriculture and Rural Development
(NABARD) in India launched its pilot phase of the Self Help Group
Bank Linkage programme in February 1992. In India as also in other
countries, Self Help Groups have been recognised by the policy
makers as the effective conduits for accomplishing the distributional
objectives

of

monetary

policy.

Group

model

as

developed

by

Bangladesh Grameen Bank is by and large followed in most of the

73

South East Asian Countries. India has adopted somewhat a similar

model to Bangladesh Grameen model. The SHG-informal thrift and
credit groups of poor came to be recognised as bank clients under the
pilot phase. The strategy involved forming small, cohesive and
participative groups of the poor, encouraging them to pool their thrift
regularly and using the pooled thrift to make small interest bearing
loans to members, and in the process learning the nuances of
financial discipline. Subsequently, bank credit also becomes available
to the Group, to augment its resources for lending to its members. It
needs to be emphasised that NABARD sees the promotion and bank
linking of SHGs not as a credit programme but as part of an overall
arrangement for providing financial services to the poor in a
sustainable manner and also an empowerment process for the
members of these SHGs. The NABARD led Pilot Project commenced
with the support of the Central Bank of the country, i.e., Reserve
Bank of India, from 1992 onwards aimed at promoting and financing
500 SHGs across the entire country, the SHG- bank linkage strategy
has come a long way. The strategy includes financing of SHGs
promoted by external facilitators like NGOs, bankers, socially spirited
individuals and government agencies, as also promotion of SHGs by
banks themselves and financing SHGs directly by banks or indirectly

74

where NGOs and similar organisations act as financial intermediaries

as well. Through the Self-help bank linkage programme the Reserve
bank of India and National Bank for Agricultural and Rural
Development Bank aimed to improve relations existing between the
poor and bankers with the social intermediation of NGOs.

MICROFINANCE IN AN INDIAN CONTEXT:Microfinance institutions (MFIs), specialized financial institutions that

serve the poor, derive from the success of some micro enterprise credit
programmes

performed

mainly

by

practitioners

in

developing

countries. Micro Finance (MF) is being practiced as a tool to attack

poverty the world over. During the last two decades, substantial work
has been done in developing and experimenting with different
concepts and approaches to reach financial services to the poor,
thanks mainly to the initiatives of the Non-Government Organizations
(NGOs) and banks in various parts of the country.
Despite having a wide network of rural bank branches in the country
and

implementation

of

many

credit

linked

poverty

alleviation

programmes, a large number of the very poor continue to remain

outside the fold of the formal banking system. Various studies
suggested that the existing policies, systems and procedures and the

75

savings and loan products often did not meet the needs of the
hardcore and asset less poor. Experiences of many anti-poverty and
other welfare programmes of the state as well as of international
organizations have also shown that the key to success lies in the
evolution and participation of community based organizations at the
grassroots level.

WEAKNESSES OF EXISTING MICROFINANCE MODELS:

One of the most successful models discussed around the world is the
Grameen type. The bank has successfully served the rural poor in
Bangladesh with no physical collateral relying on group responsibility
to replace the collateral requirements. The brief idea about Grameen
is given in the next part of this report. This model, however, has some
weaknesses. It involves too much of external subsidy which is not
replicable Grameen bank has not oriented itself towards mobilizing
peoples' resources. The repayment system of 50 weekly equal
installments is not practical because poor do not have a stable job and
have to migrate to other places for jobs. If the communities are
agrarian during lean seasons it becomes impossible for them to repay
the loan. Pressure for high repayment drives members to money
lenders. Credit alone cannot alleviate poverty and the Grameen model

76

is based only on credit. Micro-finance is time taking process. Haste

can lead to wrong selection of activities and beneficiaries.
Another model is Kerala model (Shreyas). The rules make it difficult to
give adequate credit {only 40-50 percent of amount available for
lending). In Nari Nidhi/Pradan system perhaps not reaching the very
poor. Most of the existing microfinance institutions are facing
problems regarding skilled labour which is not available for local level
accounting. Drop out of trained staff is very high. One alternative is
automation which is not looked at as yet. Most of the models do not
lend for agriculture. Agriculture lending has not been experimented.

Risk Management : yield risk and price risk

Insurance & Commodity Future Exchange could be

explored

All the models lack in appropriate legal and financial structure. There
is a need to have a sub-group to brainstorm on statutory structure/
ownership control/ management/ taxation aspects/ financial sector
prudential norms. A forum/ network of micro-financier (self regulating
organization) are desired.

77

STATUS OF MICROFINANCE IN RAJASTHAN

Rajasthan is the largest state in India and the peculiar natural, social
and economic features of Rajasthan define the need and scope for a
strong microfinance movement. The primary sector dominates the
essentially agrarian economy, with 2/3rd of the population dependent
on agriculture and allied activities for their livelihoods. As per the
Human Development Index, Rajasthan comes at 12th rank among 15
major states in India.
In terms of availability of credit from RFI the state is among the least
privileged states. This is reflected in the number of bank outlets per
lakh population, per capita bank deposits, per capita bank credit and,
over all credit deposit ratio. In all these respects Rajasthan is lagging.
For example, per capita bank deposit in Rajasthan is Rs 6151, as
against Rs. 12922 for the country as a whole; per capita bank credit
in Rajasthan is Rs. 3355, as against Rs. 7486 for the country. Overall
bank penetration is also low.
In Rajasthan, microfinance is almost synonymous with Self Help
Groups. There is no other model of mF in the state. There are
approximately 1.5 lakh self help groups of women. Department of
women and child development has promoted about 50% of these
78

groups. Other government departments under developmental schemes

like SGSY, Watershed Development etc, have organized other 20-25%
groups. NGOs have promoted remaining 25-30% groups.
The Self Help Movement started more as 'social mobilisation' of women
for their better place in family and society rather than 'microfinance
movement' in Rajasthan. Many voluntary organisations had been
working

with

poor

organising

them

in

'village

development

committees'. But participation of women in these VDCs was sub

optimal. So they started a separate group of women 'Mahila Smooh/
or Mahila Mandals' as sub set of larger village institution purely with a
purpose of having increased participation of women in development.
Most development practioners and policy makers realized that mere
women participation through MM/MS is not adequate and some direct
action in terms of improving economic status of women is needed. The
assumption was that if women have access to income/ money, their
status in family and society would be better. Many voluntary
organisations and government (together and/or separately) started
organising women in to groups to take up small business (IG
Activities) collectively. Most of these activities were Off Farm like

79

sewing, dari, galicha, candle, chalk, agarbatti, achar, badi, papad,

handicrafts, etc.
But due to lack of proper marketing networks and many other
reasons, there was mixed experience. Except some success stories at
highly micro level, no significant impact is seen. It is probably a case
of 'Double Fault'. First pushing poor to become entrepreneur and that
too in a collective way.
Need of financial services:
It has been well researched and documented that poor have temporary
surpluses and they are in need of services to keep their savings safe. A
poor family may get the payment for their labour or they sell their
small assets or crops etc. The money received from such transactions
would have small temporary surplus, which they would use over next
few days/ months. If they do not have access to a place where they
can save that safely, it might result in to expenses on less critical
items or even on things like drinking etc. It has been noticed that due
to lack of access to banks or SHGs, they keep the money in cash and
it does not earn any interest.
Preliminary Observations on Credit Needs of Rural People
Category

Description

Credit For

80

Loan Size

Source

of

Credit
Very
Poor

Landless,
Food,
Consumption Money
SC/ST,
Clothes, HH loans up to lenders,
Single
consumption Rs. 2000/women HH,
Migrants

Poor

Small
and
Marginal
Farmers,
Traditional
services
trades

Food, health,
marriage and
other social
obligations,
equipments

Average

Medium
farmers,
shopkeepers

Working
Productive
SHG, PACS,
capital, agri loans up to Banks,
inputs, small Rs. 25,000/- moneylenders
assets

Better
off

Large
farmers,
permanent/
semi
permanent
job holders,
traders

Big
assetstractors,
vehicles,
to
pay
old
loans,
to
advance
loans,

Consumption
and
productive
loans up to
Rs. 10.000/-

Money
lenders,
SHGs,
friends,
relatives

More
than Commercial
Rs.
25,000 Banks, Coop
loans,
may banks
be up to Rs.
2,00,000

SHG Status: Major SHPIs:

Sr. No. SHPIs

Scheme/ Project

Remarks

1.

Department
of ICDS
Women and Child
Development

2.

Department
of SGSY
Watershed BPL groupsRural Development Development
through NGOs

81

Groups
are
organised by
Anganwadi
workers
and
sathins

Programmes
3.

NABARD
Banks

4.

Voluntary
Organisations

and SHG-Bank Linkage

With
support
Donor agencies
government
programmes

A few RRBs
Through
NGOs
from
and

Under SGSY: (from Department of Rural Development- Till November

2005)

Till November 2005, total 26263 SHGs have been organised.

(Max in Dungarpur-3636 and Min in Dholpur- 309)

Of these 11212 SHGs are women SHGs.

SHGs passed grade-I are 13951 and SHGs passed Grade-II are
4372

Groups taken up economic activities (entrepreneurship) are

2873 of which 192 are women SHGs

82

SHG Bank Linkage: (From NABARD)

Year

Nos.

of

SHG Loan

amount Refinance (Rs.

Credit Linked

(Rs. Lakhs)

Lakhs)

2002-03

22742

2184.12

1472.28

2003-04

33846

2587.61

992.13

2004-05

59906

6723.28

2864.77

2005-06 (till Nov. 79584

4344.18

924.52

05)
Department of Women and Child Development (DWCD): (till
October 2005)
Total SHGs formed:

100424 (Max 10269 in Jaipur and

Min 623 in Jaiselmer)

Total savings in the groups:

Rs. 4633.78 Lakhs

Nos. of Groups taken loan from 38138 (Max 3994 in Bhilwara and
banks:
Amount

Min 28 in Rajsamand)
of

loan

taken

from Rs. 7182 Lakhs

banks:
Nos. of groups engaged in IG 5926 (in 23 districts)
activities:

Voluntary Organisations: In every district, there are about 5-10

voluntary organisations that are organising SHGs either on their own
or in collaboration with government. Most of the voluntary agencies

83

have promoted 50 to 100 SHGs. However there are a few agencies that
have substantial number (300 to 800 SHGs) of groups. For example:
PEDO in Dungarpur, Lupin Foundation in Bharatpur, PRADAN in
Dausa, Dholpur, IBTADA in Alwar, ASSEFA in Baran and Banswara,
URMUL in Bikaner, Sewa Mandir in Udaipur, Navyuvak Mandal and
Bhoruka Charitable Trust in Churu, and a few others.
District Poverty Initiative Project (DPIP): in 7 districts (Churu,
Baran, Dholpur, Dausa, Jhalawar, Rajsmand and Tonk): Under DPIP
more than 20,000 common interest groups (CIG) have been formed.
Though as per the project norms these groups are supposed to
function as SHGs but these groups are working as 'activity groups'.
Very few groups are doing regular savings and inter loaning. Lately
efforts are being made to transform CIGs in to SHGs.
Credit

Cooperative

Structure:

There

is a formal cooperative

structure to extend credit to farmers. As of 30th June 2003, the

recovery rate at the apex level is 95.46%, at the DCCB level it is
77.24%, and at the PACS level it is 62.75%. The financials often do not
reflect the true picture. Short-term agricultural loans, for example, are
converted into medium term loans, once they fall overdue. They are
then not part of the current or overdue demand of the PACS, and this

84

helps the PACS report better recoveries than have actually been
achieved.
The total membership of all PACS in Rajasthan is 4.59 million
persons, as of 2001-02. The PACS were envisaged to cover in their fold
all agricultural families in the villages. The average share of members
that currently borrow from PACS across Rajasthan was at 37% in
2002-03.
Microfinance and Livelihood: The share of agriculture and allied
activities in to GSDP is reducing and people engaged in primary sector
are also looking for employment in wages and in non-farm sector. On
an average a person need around Rs. 10-15,000/- for initiating a
micro enterprise. It is difficult for these people to get the credit from
formal institutions. As they do not have assets to offer as collateral,
informal sources (moneylenders) also do not give them the credit.
Many of these people end us as wage earners.
The major issues that need to be addressed are:
1. Access of poor to formal financial institutions
2. Quality of the existing Self Help Groups- only 30% SHGs have
been able to take loan from Banks

85

3. Spread of the movement: About 80% of SHGs are located in 30%

of the districts
4. Outreach: Large number of poor are still beyond the reach of
SHGs and formal financial institutions
5. Microfinance is limited to micro savings and credit
6. Human resource challenge: Perspective and capacities of mF
promoters is very limited. Numbers of skilled persons in
microfinance is very less
7. Most mF products and services offered are pre determined and
they are not based on the needs of the clients
8. There is double reporting (same group being reported by
different SHG promoters). There are also cases where one
person is member of many groups.
9. Largely the SHGs are promoted to meet project requirements/
targets
10.

Still there are many operational problems in

SHG-Bank linkage

86

11.

Inadequate financial support so far on SHG

formation, it needs at least 3 years and about Rs.8-10, OOO/per SHG for promoting a good quality SHG.

QUALITY

ISSUES

IN

THE

MICROFINANCE

(RAJASTHAN)
DISTRICT-WISE SAMPLE COVERAGE
Item\ District

Bha

Bil

Dun

Jal

Bik

Tot

Blocks

15

Habitations

15

18

19

19

18

89

SHGs

38

41

42

42

39

202

FGDs

14

DistrictOfficials

16

BlockOfficial

27

Bank
Branches

30

NGOs

SHPI-WISE SAMPLE SHGS

87

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

PROFILE OF DISTRICTS
Development Profile of the Sample Districts
Indicator

Bha

Bil

Dun

Jal

Bik

Rank of HDI

15

25

32

29

Rank of GRDI

23

27

21

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

48.2

47

59.8

36.9

% of Farm Sector in DDP avg of 51.5

1987-88 to 1991-92

88

Female literacy rate-(R)

39.62 26.09 28.17 25.88 28.83

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%

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, > 4 year old groups are more in Bhilwara
(50%)

6 SHGs in Dungarpur have membership in Federations

89

INFRASTRUCTURE: Distance

3 km -Avg. distance to bus point; lowest in Bhilwara (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

SHG BANK LINKAGE SCENARIO

Bank linkages in Sample districts on 31st March 2005
District

Total SHG Amt.

linked

in Avg loan Avg loan size of

Rs.

size

million

Rs.

in 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

4.97

21,703

22,768

229

90

Rajasthan

60,006

1,414.04

23,565

India

1,618,456

68,984.60 42,624

19,680
--

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

SHPI-INPUTS TO SHGs

1. Concept of SHG
2. Group processes

91

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,

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

92

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

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

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

93

40% of SHG meetings in Bhilwara take place at night.

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 < 1 year

Two-third are monthly instalments; remaining are convenience20%, 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)

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 > 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

LOAN PORTFOLIO AT RISK

94

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 > 90 days, 39% SHGs have PAR > 180
days, and 15% of the SHGs have PAR >365 days.

BOOK-KEEPING

95

Type of Books

District (Fig. in %)
Bha

Bil

Tot
Dun

Jal

Bik

Transaction
sheet

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

12

All in one book

37

50

82

45

60

56

No vouchers in any SHGs in any district

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

96

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.

GRADING OF SHGS

97

30% - A grade, 50%- B grade and 20%- C grade

A-Grade-Highest Bhilwara 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

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

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.

98

19- avg. no. of instalments and loan ; highest-Bilwara-37;

lowest-Bikaner-17

Rs. 16,060- avg. loan amount repaid; largest-Bhilwara 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; > double in Bhilwara

compared to Bikaner (Rs. 32,019)

REASONS FOR DELAYED PAYMENT

Reasons for delayed or irregular payment

Non-availability of work and drought 69%;Ill-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

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%
99

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%

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

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

100

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)

DECISION MAKING
Person

Decision on the issue

Leaders

Bank transactions-80%; cash in hand-76%; meetings37%;

SHG

expen.-38%;

external

loans-30%;

membership-24%
Members

Norms- setting-47%; reinforcement-62%; meetings42%; default mechanism-52%

SHPI

Norms

setting-48%;

membership-47%;

norms

reinforcement / relaxation-20%; external loans-42%;

ext. loan sanctioning

101

Family

Personal affairs-90%; decision on political issues-93%

members

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 Bhilwara were more involved in socioeconomic issues compared to other districts

102

IMPACT OF SHGS

Household income increased

Employment Generation

Credit is easily available

Access to formal institutions

Access to pro-poor programmes

Free from money-lenders

Indebted due to credits

Habit of savings

More expenditure on food

103

Health status improved

Independent life

Education levels improved

Self-confidence

Decision Making power

Representation in other groups

Leadership qualities

Group solidarity

Results are mixed

Positive
Access to institutional credit and development of saving
habit.
Some members taken up income generation activities

Negative
o Loans are too small to take up income generation
activities
o Negative - Drought

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

104

Bondage among members is developing

105

KEY FINDINGS
There are currently 22 MFIs operating in the state. 8 of these MFIs are
local with headquarters in the state while the rest are multi-state
players SKS Microfinance is the largest player with 87 branches and a
portfolio of Rs. 159 cr.
Products:
Products and services offered by MFIs are primarily credit led and
insurance led. Since most of the NBFCs' are non-deposit taking
NBFCs, therefore, by regulation, they are not allowed to mobilize
saving deposits. Credit led products typically have loan sizes of Rs.
6000 to Rs. 10000 and increase with every loan cycle. MFIs also tie up
with insurance companies to provide life insurance. For repeat loans,
credit records and attendance at the weekly meetings of the members
is studied and based on this criterion the repeat loan is given out. The
repayment rate for most of the MFIs is reported to be more than 98%.
However, information received from field officers and other informal
sources reveals that repayment rates are actually not so high. Loan
defaults do happen but are not reported by MFIs to outside world.
Case 1: India Shelter Finance Corporation Ltd

106

India Shelter Finance Corporation Ltd (ISFC) is the new name of the
erstwhile Satyaprakash Housing Finance India Limited (SHFIL)
which was granted the certificate of registration by National Housing
Bank on 26th October, 1998. The business was taken over by a group
of professionals and relaunched on 12th March 2010. ISFC's capital
was first scaled up by a group of professionals with experience across
diverse businesses. Recently, Sequoia Capital has invested in the
company to meet the requirements of its first phase of growth. The
main objective of ISFC is to provide credit to middle income
households to acquire new housing or to extend and improve their
current housing. They believe that progressively larger numbers of
first generation urban families will need access to housing credit. This
credit will first be needed to extend and improve their current dwelling
units as families grow. As incomes rise, the ability to service the
credit to acquire higher quality new housing will also improve. ISFC
aspires to build a profitable and socially useful business by fulfilling
the housing credit needs of these families. Our support will increase
housing stock and improve health and education outcomes for these
families.
Customers

107

ISFC lends to urban households with a minimum income of Rs

120,000 per annum
Lending Methodology
ISFC offers loans based on the repayment capacity and stability of
occupation of the applicants. These are usually based on the following
factors but additional parameters may be considered during the
consideration process for credit applications.

Liabilities

Vocational/Educational qualifications

Income and continuity of income

Dependents

Assets

Saving habits

Spending patterns

Verifications with Credit Bureaus and occupational verifications are

carried out as required to assess loan applications. Loans are
disbursed in stages after verification of usage. ISFC does not lend for
any non housing related purpose.
Construction

and

Acquisition,

ISFCL offers loans for Home

Home

Extensions.
They offer the following products:

108

Improvement

and

Home

Nirmaan Sudhar
Home improvement and Extension loans of Rs 50,000 to Rs
100,000

Nirman Sudhar Plus

Home extension loans upto Rs 150,000

Nirmaan Adhar
Home acquisition and construction loans upto Rs 500,000

Repayment
Loan repayments are in equated monthly installments
Security
Loans are secured by equitable mortgage of the property financed
Case: Bharati Joshi for ARAVALI, Jaipur
This

discussion

was

based

on

ARAVALIs

learning

from

implementation of the Social mobilisation around natural resource

Management Project (SMP) with UNDPs fund support in 139 villages
of Ajmer District in Rajasthan. Six NGOs were part of project design
and implementation.
1Six elements formed core of ARAVALIs SHG strengthening
strategy under SMP:
0 (i) Financial asset building

109

1 (ii) Institution building

2 (iii) Human development
3 (iv) Physical and natural asset building
4 (v) Facilitating entitlements and schematic support
5 (vi) Establishing the collaborative polygon
Greater focus on social mobilisation of the community and SHG
strengthening has contributed to sustainable gains from the project.
Strengthening

NGOs

community

mobilisation

and

project

implementation capacities (together with the 350 quality SHGs

organised in the project area) helped create a social base on which
future development interventions can be launched in the area. This is
already being done as ARAVALI continues working with the SMP
partners under other projects and programmes in Ajmer, since these
NGOs and SHGs are now ready for higher order goals.
Working on entitlements and ensuring schematic support to the SHG
members households has prevented duplication of efforts and
ensured multi-pronged inputs to the poor.
Investment in SHGs seems to be essential; around Rs. 3000 was
invested in organising and strengthening each group, over a period of
4 years, apart from creating a revolving fund worth over a crore for the
SHGs.

110

The revolving fund approach is different from the subsidy-driven

programme implementation that often weakens communitys stakes in
the programme.

111

For Rajasthan, where over two lakh SHGs have already been
constituted (as on record) the challenge is to vision together,
holistically, and for the long term, and scoping and sourcing funds to
translate this vision into a reality.
Case: Jaya Sharma for Nirantar, Delhi
This discussion was based on a qualitative research study of 2,750
SHGs in 16 Indian States, conducted by Nirantar A Centre for
Gender and Education in New Delhi. The key points made by the Case
were as follows:

Financial efficiency receives overwhelming focus in the Statesponsored SHGs; social issues go ignored.

At the household level, SHGs do not ensure entitlements for their

members; rather there is an increased and add-on burden of
savings and loan repayment on women.

The State-sponsored SHGs seldom received education or capacity

building inputs or feeds on gender or livelihoods.

More often than not, there is a concentration of power in these

SHGs with the literates benefiting from position and larger loans.

The instrumentalist use of labour and time of poor women is

evident in these SHGs, and it may be denounced.

112

There is a pressing need to clearly define the terms empowerment,

collective, and social issues.

Quality aspects of SHGs, literacy goals, and social focus of

community mobilisation efforts need to be stressed.

Social indicators need to be mandatorily included in SHG

(programme) quality assessment parameters.

Quality SHGs and realisation of women empowerment goals will

need investment in SHG capacity building and trained staff to
support them.

Case: Dr. Veena Pradhan for DWCD, Rajasthan

Dr. Veena Pradhan made this discussion in her capacity as the
Additional

Director

of

the

Department

of

Women

and

Child

Development (DWCD), Government of Rajasthan (GoR). She shared

updated data on the status of SHG programme in the State, efforts
being made by the DWCD to manage the SHG programme on meagre
resources, and what is needed to achieve the originally conceived
women empowerment and livelihoods enhancement goals through this
programme. The key points made were as follows:

113

Around 2.3 lakh groups have been constituted in the State so far,
of which 1,43,382 groups have been credit linked, and a total loan
amount of Rs. 380 crores has been disbursed to them.

The strategy of SHG promotion followed by the DWCD includes

elements of SHG capacity building, enterprise development, and
market linkage facilitation as well.

Recently, the Department of Women Empowerment has been

established by the GoR to bring into focus women empowerment
goals of the SHG programme. Resource Centres and a Women SHG
Institute have also been established. Efforts at convergence have
also been made.

However, field level problems remain, whether they be in convincing

bankers to open bank accounts for SHGs, verifying and preparing a
database of actual SHGs on the ground, sourcing funds for
investing in SHG capacity building, scouting for trained facilitators
for the SHGs, or garnering resources to address the many facets of
women empowerment.

Apart from rationalisation of loan interest rates and working on

bankers, the Case made a call for the following:

114

0 o Creation (and equipping) of a dedicated fund for group

promotion, and strengthening of SHGs as well as the
facilitating staff;
1 o Meeting insurance needs of the community;
2 o Stressing on livelihoods promotion in the interventions.
Case: Zakir Hussain for the Department of Rural Development,
GoR
Mr. Zakir Hussain made this discussion in his capacity as the Project
Director cum Deputy Secretary-SGSY in the GoR. Besides sharing the
key features of the centrally sponsored SGSY which aims to establish
a large number if microenterprises in rural areas by assisting
individuals as well as SHGs of BPL households, he raised the following
issues for perusal by the House:

There has been a tremendous increase in the percentage of credit

channelised through SHGs as against individuals, since the
scheme was first launched in 1999-2000.

The State is able to spend only 10% of its total allocation for
training (mainly business orientation and skill development) SGSY
beneficiaries. This amount can be accessed by other SHPIs,
including the DWCD, in case their groups are made predominantly
of BPL members.
115

Substantial investments have been made in developing marketing

infrastructure for supporting SGSY beneficiaries in the State.

Though there are 41 lakh BPL households in the State, annual

SGSY targets are always pegged at around 20,000 30,000
beneficiaries; this means that it will take several years before all
the BPL households of Rajasthan benefit from the scheme.

Case: Prema Gera for UNDP, Delhi

Through her discussion, Ms. Prema shared their learning from SMP
implementation with 17 partner organisations across the country. The
main points emerging there-from are as follows:

Targets for credit are often determined and passed on in a topdown manner in SHG programmes. Addressing vulnerabilities and
multiple livelihood promotion interventions have to be focussed
upon instead.

The poor are often marginalized not just economically, but also
socially and politically. Thus, all three kinds of marginalization of
the poor have to be addressed through programmes aimed at
womens empowerment.

The SMP tried to strengthen social and livelihood base of the

community and diversify / expand livelihood opportunities for the
poor. However, insufficient linkages were forged between project

116

and Government institutions. Also, many NGOs could not look or

plan beyond their areas and communities.

Food security issues cannot be ignored in women empowerment

programmes as access to savings and credit do not automatically
ensure nutrition and food security for this vulnerable section of the
society. The same holds true for social security needs of the
households.

While SHGs, clusters, federations, and co-operatives / producer

groups / microenterprise represent an institutional continuum (in
terms of size and scale), each has its own characteristics,
strengths,

and

limitations.

Apex

institutions

cannot

be

strengthened without ensuring a strong base; at the same time,

there should be no push to turn federations also into economic
entities. The State of Andhra Pradesh is an exception where the
latter could be achieved, there was a strong infrastructural support
ensured by the Government.

Money may not be the key requirement of women empowerment

initiatives; small inputs and simple technology may also work
wonders.

Advocacy / rights based approaches and institutions may need to

be supported where the extent of community marginalisation and

117

exploitation

demands

innovative

approaches

and

alternative

institutions.

NGOs need to be increasingly readied to perform facilitation roles,

and existing institutions and service providers strengthened rather
than creating parallel capacities that demand constant fund
inputs. Existing funds available with the public and other bodies
need to be leveraged to access more funds.

The SHGs, at the same time, should not be pushed to become

vehicles of Government schemes and programmes.

Case: Jaipal Singh for Centre for microFinance, Jaipur

Through his discussion, Mr. Jaipal Singh shared underlying issues
and emerging opportunities for the SHG programme in Rajasthan, as
follows:
1Issues
0 o The actual number of SHGs on the ground is not
available.
1 o Not all SHGs have been able to access bank loans.
Banks also seem to prefer on-lending to NGOs and MFIs.
2 o SHG-based credit and savings are not being able to meet
the financial needs of their members; consequently MFIs
are spreading their wings in the State.

118

3 o Limited efforts have been made so far to ensure

sustainability of SHG movement in the State.
4 o It is time to assess the requirement of and accordingly
develop the human resource required to support the SHG
movement.
District-wise mapping of SHG density in the State reveals that there
are several Districts (like Jaisalmer, Barmer, Jalore, Karauli, Kota,
Baran, and Jhalawar) where less than 4000 SHGs have been
organised so far. Coincidentally, these Districts are also the ones that
fare poorly on the Human Development Index (HDI) rankings. Any
renewed efforts to organise new SHGs should be made in these unreached areas.
Similarly, specific thrust areas should be identified for intensive action
and follow-up over the next 3-4 years, otherwise nothing will change
for the better.
Access to bank credit should be increased by taking various simple
operational decisions and steps like standardising the set of
documents to be furnished by an SHG for opening its bank account or
for accessing credit.
Multiple agencies in the State are implementing SHG programmes
with different objectives and approaches; this garbles the message

119

that reaches the ground This goes against the holistic support and
collaboration requirements of SHGs and SHG programmes. For coordination among different SHPIs, a separate unit / Department with
a holistic perspective can be thought of taking this role, so that it is
not implementing any sectoral scheme and can adopt a macro view. In
the present circumstances, the DWCD and DoRD cannot be expected
to collaborate or work together, without any other, external agency
playing a nodal role.
Investment

is

necessary

to

promote

quality

SHGs

and

their

federations. According to CmFs estimates, a sum of Rs. 40 crores is

required to strengthen the existing 2.4 lakh SHGs in the State.
Further, Rs. 40 crores will be required to organise 50,000 good quality
SHGs annually in the State. Only vibrant SHGs can fulfil the goals of
the SHG programme; just adding numbers will not help. Any money
spent in the SHG programme should be looked at as an investment in
building social capital for the poor in the State, and not as a subsidy.
An SHG Promotion Fund can be set up with clear institutional
framework for its management in Rajasthan.
Emerging Ideas and Inputs for SHG Vision & Strategy for
Rajasthan

120

SHGs offer the best platform for the poorest and marginalized
sections of the society (including women) to organise and work for
their socioeconomic upliftment and empowerment. They represent
social

capital

on

which

further,

holistic

development

and

empowerment initiatives can be launched.

Poverty focus and, thus, targeting in SHG programmes has to be

strengthened. Hence, the goal, objectives, and strategies of SHG
programmes should not be restricted to meeting financial ends or
only

savings-credit

activities,

but

go

beyond

(to

include

entitlements and status of women, for example), if the SHG

programme has to graduate into an SHG movement.

At present a number of different institutions are working in SHG

promotion, but there is no synergy amongst them; in fact
sometimes, they seem to be working at cross-purposes. The need of
the hour is to combine the strengths of initiatives having a strong
social focus with those having a strong economic and financial
focus, to arrive at a balanced programme that takes into account
the diverse facets of human existence.

Substantial financial investments are required for SHG promotion

and strengthening in the State. There may not be a lack of
resources with different agencies, particularly GOs and Banks;

121

only these need to be pooled and utilised as per a concrete, longterm Action Plan.

While there are some estimates on the kind of investment that has
to go into organising vibrant SHGs, locational issues must be
considered while making actual estimates of the investment
required.

122

Chapter-4
OBSERVATION &FINDINGS
GENERAL INFORMATION
TABLE: Table showing the type of SHGs
TYPE

NO.

OF PERCENTAGE

RESPONDENTS
Male

0%

Female

25

83%

Mixed

17%

Total

30

INTERPRETATION: Majority of the respondents are female self help

groups.

123

TABLE: Table showing the organisation that promote SHGs

ORGANISATION

NO.

OF PERCENTAGE

RESPONDENTS
Bank/any

other

financial 0

0%

Institution
NGO

20

67%

GOVT.DEPT

23%

cooperative society

7%

self

0%

Other

3%

Total

30

124

INTERPRETATION: Majority of the respondents are female self help

groups.

125

TABLE: Table showing if the SHGs are registered

NO.

OF PERCENTAGE

RESPONDENTS
Yes

25

83%

NO

17%

Total

30

INFERENCE: Majority of the SHGs are registered.

126

TABLE: Table showing the act under which the SHGs are registered
REGISTRATION ACT

NO.

OF PERCENTAGE

RESPONDENTS
Registration of Societies Act 12

48

1860
Act 4

16

Indian Trust Act 1882

32

Companies Act 1956

Other

Total

25

Cooperative

Societies

1955

127

INTERPRETATION: Most of the SHGs are registered under the

Registration of Societies Act 1860 followed by the Indian Trust Act
1882.

128

TABLE: Table showing the affiliation of SHGs

AFFILIATION

NO.

OF PERCENTAGE

RESPONDENTS
Cooperative Society
NGO/NBFC

(Non

10%

Banking 23

77%

financial Institution)
SHG Federation

TOTAL

30

13%

INTERPRETATION: Majority of the SHGs are affiliated to NGO/NBFC

(Non Banking financial Institution).

129

DETAILS ON SHG MEETINGS

TABLE: Table showing the frequency of meetings of the SHGs
FREQUENCY

NO.

OF PERCENTAGE

RESPONDENTS
Monthly

27%

Weekly

15

50%

Forthnightly

23%

Total

30

INTERPRETATION: Most of the SHGs conduct weekly meetings.

130

FINANCIAL INFORMATION OF SHG

TABLE: Table showing the frequency of savings
FREQUENCY

OF NO.

OF PERCENTAGE

SAVINGS

RESPONDENTS

Monthly

16

53%

Weekly

12

40%

Forthnightly

7%

Total

30

INTERPRETATION: Most of the SHGs have monthly savings plan.

131

TABLE: Table showing if members have extra savings

EXTRA SAVINGS

NO.

OF PERCENTAGE

RESPONDENTS
Yes

12

41%

No

17

59%

Total

30

INTERPRETATION: Most of the respondents do not have extra

savings.

132

MEMBER DETAILS
TABLE: Table showing the educational qualification of the members
EDUCATION

No.

OF PERCENTAGE

RESPONDENTS
Below 5th std

84

28%

5th to 10th

107

30%

10th to 12th

90

36%

Other

19

6%

Total

300

INTERPRETATION: Most of the respondents have studied only

between fifth to tenth standard.

133

TABLE: Table showing the economic status of the members of the

SHGs
INCOME

No.

OF PERCENTAGE

RESPONDENTS
< 2000

28

9%

2000 - 3000

114

38%

3000 - 4000

127

43%

4000 - 5000

21

7%

> 5000

10

3%

Total

300

INTERPRETATION: Most of the SHG members have income from

Rs.3000 to Rs.4000.

134

TRAINING DETAILS
TABLE: Table showing the training details of the SHGs
TRAINING

NO. OF RESPONDENTS

PERCENTAGE

YES

21

70%

NO

30%

Total

30

INTERPRETATION: Majority of the SHGs have undergone training.

135

TABLE: Table showing the organiser details of the training programme

ORGANISER

NO. OF RESPONDENTS

PERCENTAGE

Bank

17

57%

NGO

30%

Others

13%

Total

30

INTERPRETATION: Most of the training programmes are conducted

by banks.

136

SCHEME PARTICULARS
TABLE: Table showing the source of information to the SHGs
SOURCE

NO.OF
RESPONDENT
S
Through local dailies/TV/AIR
4
Through Extension Officers
0
Gramsabha
17
Intermediate Panchayat/Block
17
Gram Panchayat/Lowest elected 11
body
DRDA/Zilla Parishad
1
Other SHG members
27
Friends/Neighbours/Public
29
figures/ Members of local bodies
Other
0
TOTAL
106

137

PERCENTAGE

13%
0%
57%
57%
37%
3%
90%
97%
0%

INTERPRETATION: Majority of the SHGs got information through

Friends/Neighbours/Public figures/ Members of local bodies

138

TABLE: Table showing the usage of revolving fund

USAGE

NO.OF

PERCENTAGE

RESPONDENT
S
Purchase

of

raw 18

43%

materials/equipments
To

aid

marketing/infrastructure 6

14%

support for
Urgent

loans

to

individual 18

43%

members,
0

Other
TOTAL

139

0%

INTERPRETATION: Most of the SHGs use the revolving funt to

purchase raw materials or equipments.

140

GROUP MANAGEMENT
TABLE: Table showing the problems faced by SHGs in group
management
PROBLEM

NO.OF
RESPONDENT
S

PERCENTAGE

Differences among members

30%

Difficulties in earning the amount 8

for repayment of loan

27%

Operational difficulties of the 0

enterprise (including difficulties in
marketing),

6%

Delay in getting the loan amount 8

from the bank

27%

Non cooperation of officials/bank,

3%

Other

7%

TOTAL

30

141

INTERPRETATION: Most of the groups face problems in Difficulties in

earning the amount for repayment of loan and Delay in getting the
loan amount from the bank.

142

TABLE: Table showing the impact of the SHG activities

IMPACT

NO.OF
RESPONDENT
S

PERCENTAGE

A greater desire for self employment 19

15%

Bring women together to work in 22

groups

18%

Increase in income

25

20%

Increase in savings

24

20%

educational 18

15%

Improved social prestige,

15

12%

Other

0%

Total

123

Better
health
facilities

&

143

INTERPRETATION: The SHG activities has impacted mostly in

increased income and savings.

144

SOCIAL EMPOWERMENT
TABLE: Table showing the responses for freely and frankly speaking
in SHG meetings
DEGREE

NO.OF
RESPONDENTS

PERCENTAGE

VERY HIGH

12

40%

HIGH

13

43%

LOW

17%

VERY LOW

0%

TOTAL

30

INTERPRETATION: Most of the SHGs are able speak freely and fairly
to a high degree.
145

TABLE: Table showing the responses for teaching or training others

DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

27%

HIGH

14

46%

LOW

20%

VERY LOW

7%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to teach or train others

to a high degree.

146

TABLE: Table showing the responses for speaking in public meetings

DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

27%

HIGH

14

47%

LOW

20%

VERY LOW

7%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to speak to a high

degree in public meetings.

147

TABLE:

Table

showing

the

responses

for

presenting

cultural

programmes in public
DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

17%

HIGH

10

33%

LOW

10

33%

VERY LOW

17%

TOTAL

30

INTERPRETATION: There is an equal level of high and low degree

response for presenting cultural programmes in public.

148

TABLE: Table showing the responses for taking leadership positions in

SHG
DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

18

60%

HIGH

27%

LOW

3%

VERY LOW

10%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to take leadership

positions in SHG to a very high degree.

149

TABLE: Table showing the responses for writing minute of SHG

meetings
DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

3%

HIGH

14

47%

LOW

11

37%

VERY LOW

13%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to write SHG minutes

to a high degree.

150

TABLE: Table showing the responses for keeping of SHG accounts

DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

20

69%

HIGH

28%

LOW

3%

VERY LOW

0%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to keep accounts to a

very high degree.

151

TABLE:

Table

showing

the

responses

for

performing

bank

transactions
DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

18

62%

HIGH

24%

LOW

14%

VERY LOW

0%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to perform bank

transactions to a very high degree.

152

TABLE: Table showing the responses for going to government office or

police station
DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

20%

HIGH

11

37%

LOW

30%

VERY LOW

13%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to go to government

office or police station to a high degree.

153

TABLE: Table showing the responses for talking to government

officials or police
DEGREE

NO.OF

PERCENTAGE

RESPONDENTS
VERY HIGH

3%

HIGH

14

48%

LOW

31%

VERY LOW

17%

TOTAL

30

INTERPRETATION: Most of the SHGs are able to talk to government

officials or policeto a high degree.

154

ECONOMIC EMPOWERMENT
TABLE: Table showing the responses for Own savings account with
monthly savings
SAVINS ACCOUNT

NO.OF

PERCENTAGE

RESPONDENTS
YES

13

43

NO

17

57

TOTAL

30

INTERPRETATION: Most of the SHG members did not have own

savings account with monthly savings before joining the SHG

155

TABLE: Table showing the responses for Continuing the savings

account even if SHG ceases to exist
SAVINS ACCOUNT

NO.OF

PERCENTAGE

RESPONDENTS
YES

24

80

NO

20

TOTAL

30

INTERPRETATION: Majority of the respondents would continue the

savings account even if SHG ceases to exist

156

TABLE: Table showing responses on taken loans from money lenders

before joining the SHG?
OPTIONS

NO.

OF PERCENTAGE

RESPONDENTS
YES

23

76%

NO

24%

TOTAL

30

100

INTERPRETATION: 76 % of the respondents says that they have

taken loan from the lender before joining SHG

157

TABLE: Table showing responses on availing loans from money

lenders even after joining SHG
OPTIONS

NO.

OF PERCENTAGE

RESPONDENTS
Yes

12

40%

No

18

60%

TOTAL

30

100

INTERPRETATION:

60% of the respondents say that they didnt

taking loan from the money lender after joining the SHG

158

POLITICAL EMPOWERMENT
TABLE: Table showing response for Competed in Panchayat or
Municipal elections
CONTESTED

NO.OF

PERCENTAGE

RESPONDENTS
YES

13

NO

26

87

TOTAL

30

INTERPRETATION: Majority of the respondents have not Competed in

Panchayat or Municipal elections

159

TABLE: Table showing result of the election

RESULT

NO.OF

PERCENTAGE

RESPONDENTS
WON

25

LOST

75

TOTAL

INTERPRETATION: Majority of the respondents have lost in the

Panchayat or Municipal elections.

160

TABLE: Table showing responses on Active participant of any political

party
PARTICIPANT

NO.OF

PERCENTAGE

RESPONDENTS
YES

NO

29

97

TOTAL

30

INTERPRETATION: Majority of the respondents are not Active

participants of any political party

161

FINDINGS
Majority of the respondents are female self help groups.
Majority are NGO promoted shgs and they are registered.
Most of the SHGs are registered under the Registration of Societies
Act 1860 followed by the Indian Trust Act 1882.
Majority of the SHGs are affiliated to NGO/NBFC(Non Banking
financial Institution).
Most of the SHGs have monthly savings plan.
It is found that most of the SHG members have income from
Rs.3000 to Rs.4000.
Most of the training programmes are conducted by banks.
Majority

of

the

SHGs

got

information

through

Friends/Neighbours/Public figures/ Members of local bodies

Most of the groups face problems in Difficulties in earning the
amount for repayment of loan and Delay in getting the loan amount
from the bank.
Most of the SHGs are able speak freely and fairly to a high degree.

162

 It is found that most of the SHGs are able to take leadership

positions in SHG to a very high degree.
Most of the SHGs are able to write SHG minutes and perform bank
transactions to a very high degree.
Most of the SHGs are able to talk to government officials or police
to a high degree.
Most of the SHG members did not have own savings account before
joining the SHG
Majority of the respondents have not Competed in Panchayat or
Municipal elections
It is found that majority of the respondents have lost in the
Panchayat or Municipal elections.
Majority of the respondents are not Active participants of any
political party
Most of the respondents say that they didnt taking loan from the
money lender after joining the SHG

163

Chapter-5
CONCLUSIONS AND RECOMMENDATIONS
Micro Finance Institutions are providing credit to people who
otherwise are not able to get it from commercial banks. The excellent
growth registered by MFIs in Rajasthan in terms of number of clients
and amount of credit is a good indicator of the 'demand of credit' and
acceptability of MFIs. However it is worth mentioning here that the
clients of MFIs are those who have some economic activities which
enable them to make weekly repayments. Therefore the MFI clients are
largely in semi urban areas and somewhat in better off rural areas.
Rate of interest charged by MFIs has been a much debated issue.
While it is largely accepted that the cost of credit to poor (small size of
transactions and large distances) will always be more than what it is
for economically better off middle class; there is no agreement on what
should be 'just and appropriate' interest rate. It is also argued that
market forces (competition) will force the MFIs to rationalise their
interest rates but considering the number of people who do not have
access to formal financial institutions, possibility of this happening is
remote. Initially clients come to MFIs for loans because their effective

164

rate of interest (30-35%) is lower than that of moneylenders who

normally charge 36-60%. But as the loan size grows, the interest rate
of 30% becomes a burden and defaults start happening. However the
local staffs of MFI give a top up loan to get repayment instalment on
time. Or the client starts approaching another MFI to repay the loan of
another MFI. Most MFIs are found to focus their operations in same
area. One can find lot of MFIs in few areas while none in other areas.
However, this does not result in lowering of interest rates. The major
reason attributable is that it takes around 15-20 days for a MFI to
train and orient a new set of microfinance clients. The late MFI
entrant finds it easier to deal with tried and tested set of microfinance
clients rather than to start operations in a virgin territory. The
negative implication of this practice is occurrence of multiple lending.
One set of clients are provided credit by more than one MFI. This leads
to payment to one MFI by availing credit from the other and vice-versa,
until the client falls into debt trap and defaults. Apart from a few big
MFIs, majority do not reveal their cost structure and therefore, the
justification of high interest rates. The salary structure of top
executives working in some of the MFIs is same or even more than the
commercial bank staff. This adds to the total cost/ expenses of MFIs,
thereby impacting the interest rates charged to microfinance clients.

165

MFI promoters need to understand that all these costs are ultimately
borne by the poor. If MFIs, like other for-profit NBFCs (read vehicle
finance, gold loan finance, home finance, car finance NBFCs etc) can
easily access capital markets to raise cheap finance, and if they have
mastered the art of recovering loans from villagers and can reach
where the banks can't, it may be argued whether or not they still
require 'priority sector lending' support. Same reasoning is applicable
to 'micro-credit' portfolios of 'gold loan' companies, which, too, fall
under priority sector lending. MFIs currently operate in urban, semiurban and relatively well off rural areas. MFIs can target relatively
poorer segments by collaborating with SHGs. SHGs provide a ready
platform for MFIs to scale up and impact weaker sections of poor.
SHGs need more credit while MFIs look for disciplined clients with
good credit record. MFIs can save on cost given that SHGs are capable
to take care of back-end operations (e.g. collection, distribution, bookkeeping etc) by themselves. However, for this to happen, MFIs may
have to give a re-look at their cost structure and see where costs can
be reduced so that they charge economical interest rates to clients.

Rajasthan is today the largest state in India, with 3.42 lac square
kilometers of area. It also suffers from several unique challenges
owing to its topography and scattered population. Lack of
166

industrial development has also contributed to excessive poverty

levels in the state.

There are broadly four microfinance services for the poor these are
savings, credit, insurance and remittance

From the discussions with various MFIs one of the major causes of
the above emerged as lack of resources with the poor due to
unemployment

and

poverty

which

makes

them

unable

to

contribute to regular savings.

Conditions of membership often being rigid pose as major barrier

for the poor to join the movement.

On many occasions the reason for women not joining the

movement has been the male dominant society.

Apart from outreach, quality of the SHGs is an important issue

which governs the processes of group stability, bank linkage and
ultimately the sustainability of the movement at large. Out of the
3.6 lakhs SHGs in the State 2.6 lakhs actually exist. Ownership of
the SHGs and dependence of the federations on the promoting
NGOs also remain a challenge.

The Self Help Group Movement in Rajasthan has been able to

reach out to many households but still large sections of poorest of
poor remain outside the ambit of the movement.

167

There is considerable scope of work on quality issues of Self Help

Groups in the State.

There have been limited innovations in financial products but by

and large the present financial products are not geared towards
womens specific needs.

Non Government Organizations are fast transforming into MFIs

and Donors are moving away from Community based microfinance.

Cooperatives, the most empowering form of Community based

microfinance have not been institutionally supported.

Institutional microfinance industry is growing at an alarming rate

but

empowering

microfinance

can

only

be

done

through

community based microfinance with investment in capacity of

women to help them manage their own funds and their own
institutions.

For Micro Finance Institutions (MFIs), it is particularly essential to

separate the interest cost form the operational Cost. Overall the
burden of the interest on the customer should not be so much to
cause him to default.

Multi Level

Finance Companies in the business of saving

mobilization were found to have reached the remotest part of

Rajasthan. The credibility of such companies is under serious

168

cloud of doubt as per their past experiences in Rajasthan and

elsewhere

in

the

country.

There

is

inherent

risk

of

misappropriation of funds of the poor households by these

companies.

Instant regulatory measures and check and balances have to be

put in place to save the hard earned money of poor households
from misappropriation.

The largest percentage of loans was found to be used for debt

swapping. This reflects the level of indebtedness in the rural areas
of Rajasthan.

Some of the achievements of the Self Help Groups movement in

Rajasthan were found to be the response received from women and
the positive impact on their confidence.

Variations in the number of SHGs reported in paper and practice is

an aspect of the movement that cannot be ignored.

The Self Help movement is still at a large distance from covering all
the poor households in its ambit.

There is cause for these two markets - microfinance and

micromortgages - to be compared. Both serve low-income, mainly
informal, households and promote greater financial inclusion. Both
use business models that are innovative and very unlike their

169

'mainstream' financial services equivalents. The business model

pioneered by the Grameen Bank - of joint lending to groups of
women - is fundamentally different from the service model of
classic banks. In the same way, micromortgage companies' risk
assessment models are fundamentally different from traditional
housing finance companies.

They have invested in the creation of an in-depth, interview-based

credit scoring system to replace the formal documentation-driven
application process for home loans. In social impact terms, the
impact of allowing people to buy their own homes is as high, if not
higher, than that of providing unsecured loans for income
generation and consumption purposes. Additionally, micromortgage
companies are attracting significant interest like MFIs, from both
social and commercial investors. Recently, International Finance
Corporation

invested

$22

million

in

government-linked

micromortgage company in Rajasthan. Nevertheless, there are

important differences between the two models.

ISSUES OF CONCERN

Large number of poor are still beyond the reach of SHGs and
formal financial institutions

170

About 80% of SHGs are located in 30% of the districts

The quality of SHGs is the prime concern. Only 30% are of A

grade. (Quality standards -Financial, institutional and social
development.)

Credit linkage from banks is a major problem being faced by

SHGs. Loan sanction is a problem. Only 30% SHGs have been
able to take loan from Banks

Largely the SHGs are promoted to meet project requirements/

targets

Some SHGs are operating just like BCs thus not interested to
continue

No proper and up dated skill training to members.

Human resource challenge: Perspective and capacities of mF

promoters is very limited. Numbers of skilled persons in micro
Finance is very less

Inadequate financial support so far on SHG formation.

The focus of the institutional design of bank is mainly on profit

making. Bank considers SHGs as a business opportunity.

171

Sometime banks dont provide loan in time because of their rigid

guidelines that hampers client interests.

Loan is not given immediately after the vocational training for

Income Generation Activities-Transfer of learning would not be
so effective

No financial support for existing set up (not interested to

purchase new machines)

Wish to have loan or raw material and marketing of product

SHGs are assessed on the basis of their past loan repayment

records. Cases are shared when loans are sanctioned even
without holding regular meetings in SHGs.

Marketing

hurdle

is

another

issue

for

managing

SHGs

independently in Rajasthan

Malpractices in NGO were shared that affects the performance

of SHGs. They treat bank linkage as the account opening only.
Afterwards members face problems in obtaining loans due to
improper functioning.

Reliability of NGOs is a issue .Corruption in NGO is also one of

the factor of non performance of SHGs

172

Record writing in SHGs is of prime importance and has been

found as a weak link in several cases.

Majority members joined SHG with the prime motive of receiving

loan. They dont have group feeling.

In many areas women are still engrossed in Thinking of Famine

not capable to visualize IGAs

Banks are required to change their approach of profit making to

service

Operational self sustainability is a major issue of SHGs in

Rajasthan. They are unable to work without support of NGOs

Frequent change of bank officials is another problem that

negatively affects performance of SHGs

A critical gap often experienced by SHPIs and SHGs is the

unavailability of trained people to write books of accounts for
SHGs. Preliminary estimates indicate the need of 7000 such
personnel in the state.

In the state of Rajasthan social disparity between genders and

the low level of education among women has resulted in the
slow growth of the SHG movement.

173

There has also been lower MFI activity in these regions due to
an overall lack of financial literacy.

The growth rate of national players in the state is hampered by

the lack of knowledge of local culture and political dynamics.

Microfinance sector in Rajasthan is growing and is projected to

grow at a decent pace in the coming years. However, the biggest
hurdle in the way of inclusive growth of the sector is the lack of
capacity of the promoters

Need to build awareness on Quality of SHGs among SHG

members and SHPI

Financial literacy need to be increased

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(xxv) Wilson, K. (2002) The new microfinance-an essay on the selfhelp group movement in India, Journal of Microfinance, Vol. 4,
No. 2, pp.21245.
(xxvi) Sa-Dhan. Kurumi Fukaya and Narayanan Shadagopan, SaDhan Research Team. Microfi- nance regulation in India. (2001).

177

ANNEXURE
QUESTIONNAIRE
I.
GENERAL SHG PROFILE
1. Name of SHG: ____________________________________
2. Address________________________ village__________Block ________
Phone No.______________
3. Type of group
Male/Female /Mixed
4. Date of SHG formation.
Date____ Month_______ Year_______
5. Name the organization, which promoted the SHG (tick relevant box)
Bank/any other financial Institution
NGO
Govt. Department
Cooperative Society
Self
Any other (specify)
6. Whether SHG is also registered under any other legal provisions:
Yes
No
If Yes tick the relevant Act under which the SHG is registered
Registration of Societies Act 1860
Registration No_________
Cooperative Societies Act 1955
Registration No_________
Indian Trust Act 1882
Registration No_______
Companies Act 1956
Registration No___________
7. Whether the SHG is affiliated to the following (Tick any of the following)
Cooperative Society
NGO/NBFC*

SHG Federation

(*NFBC: Non Banking financial Institution)

II.

OBJECTIVE /GENEALOGY/ VISION/ MISSION / OF THE SHG

1. OBJECTIVES OF SHG
State the reasons as to why the group was formed
______________________________________________
_______________________________________________

178

2. VISION /MISSION GOALS of SHG

i)________________________________________________________
ii)_______________________________________________________
III. MEMBERSHIP DETAILS:
Members details
1. Name of Members
2. Gender Age
Male
Female

179

3. Marital Status
Married
Unmarried
4. Educational Status

Below 5th std

5th to 10th

10th to 12th
5. Skills available

6. Occupational Status*
Agriculture
Non Agriculture
Other occupation
No occupation
7. No of children

3
8. Economic Status of members
<2000
2000 3000
3000 4000
4000 5000
>5000
IV. DETAILS OF SHG MEETINGS
1. Indicate frequency of meetings of SHG
Monthly

Weekly

Forthnightly

2. Indicate the total no of meetings held since inception

__________________ nos
V. FINANCIAL INFORMATION of SHG
1. Savings: Indicate the regularity of savings
No.

Frequency of Regular Savings

Monthly

Weekly

fortnightly

Tick relevant

2. Are the group members also making Extra saving

Yes
No
3. Indicate the amount of saving by members

180

Amount of Saving per month/per member Rs

4. Do members save in non cash form
Yes
No

181

If Yes indicate the types/items of non cash forms of savings

Indicate the sources of funds of the SHG and the amount received
Sl No Sources of funds
Total Amount
1
Thrift/Savings - 2
Revolving Fund.
3
Bank Loan
4
External Funding
5
NGO support
6
Govt. Agency
7
Any others
8
Interest charged on
On loans from
SHG to members

Name of Orgn/Bank

Purpose of grant/loan

VI. LOAN AND CREDIT DISBURSEMENT AND REPAYMENT IN SHG

Loans details in SHG
Sl
No
Numbers
1
No of members who have taken loan
2
No of members who have taken loans more than once
3
Number of non SHG persons who received loans
4
Total no of loans
5
No of loans taken by members
6
No of loans taken by representatives

Particulars

Credit Utilization and repayment

Sl No
Loan Category Amt(Rs) No of members
Rate of Interest
1
Consumption (Domestic)
2
Emergencies
Farm Sector
3
Agriculture
4
Animal Husbandry
Non-Farm Sector
5
Income Generation
activity
6
Asset
Building/Investment
7
Any other

Repayment status

VII. BOOK-KEEPING AND DOCUMENTATION

1. Indicate whether the SHG are maintaining the following books and
ledgers

182

Sl No
No
1
2
3
4
5
6
7
8
9
10
11
12

Names of the books /Ledgers

Yes

Admission Book
Minutes Book
Attendance register
Cash book
General ledger
Savings ledger
Loan Ledger
Bank pass Book
Individual Pass book
Receipt Vouchers
Stock book
Any other (specify)

2. Has the audit of the SHG been done

Yes
No
VIII.TRAINING
1. Indicate the details of trainings of the members of the SHG
Sl No
Name of Trainings
of SHG Members

Duration Dates

IX.CREDIT PLUS ACTIVITIES

1.
What
types
of
programmes/activities/awareness
taken up by SHG are:
Sl No
No
1
2
3
4
5
6
7
8

intervention/social

Types of programme
Health
Immunization
Education
ICDS/Nutrition/Anganwadi
Adolescent programme
Non formal Education
T.L.C
Water and Sanitation programme

183

No

action

Yes

Any others (Specify)

X. GROUP DYNAMICS, CAPACITY, COMMUNICATION AND

INTERACTIONS (ASSETS-LINKAGE-COVERGENCE-etc)
1. Self-Help and Social Capital:
Sl No
Details
Type of activity
1
Does SHG have any contingency arrangement for
meeting any difficult/unforeseen circumstances
within the group and for its activities
2
Has any member or section of your community other
than members of your SHG ever approach SHG for
help
3
Has SHG organized any activity in village(s)
4
Has any new employment activity been made
available to the SHG members

Yes

No

2. Has SHG group met any of the following to address group or community
Problem
YES
NO
Official of the State/ District/block level

Political leader

NGO

SHPI/Federation

Banks

Any other relevant organization (pl specify with details)

LINKAGE-CONVERGENCE
3. Please provide details
established
linkage.

of

institutions

to

Sl No
Name of the organization
Specify details
A Monetary Institutions
1
Banks
2
Non-banking/financial
institutions
3
Chit funds
4
International Funding Agencies
B Line Department/Sectoral Department
Health Department
2
Agriculture Department
3
Animal Husbandry Department
4
Education Department

184

which

your

Yes

SHGs

has

No

5
6
7
8
9
10
11

Social Welfare Department

Soil & Water Conservation
Cooperation Department
Forestry Department
Community and Rural
Development department
NGO
Any other (Specify

4. Has the SHG taken initiative to have a federation of SHG;

Yes

No

If yes give details.

_____________________________________________________________________
_____________________________________________________________________
XI. PERCEPTION OF SHGs
A) Regarding selected activities
1. Are the physical & human resources required for the selected activity is
available in the village?
Yes

No

2. Is there any member in your SHG having following quality;

A. leadership

B. micro planning

C. documentation

D. critical decision making processes

3. Is there any ready made market available for your product/selected activity
at;
YES
NO
A. Local level

B. Regional level

C.
National level

4.
Is there any linkages identified with marketing agencies/cooperative bodies?
Yes

No

5.

Is there any training agency identified for the activity?

Yes

No

If yes, Name of the Training Agency _______________________

6.

Is there any training programme identified for the selected activity?

YES
NO
Existing marketing potential and linkages

Product development & marketing linkages

XII. ROLE OF SHGs IN IDENTIFICATION OF ACTIVITIES

185

1. Does your SHG helped SGSY committee in the identification of activity?

Yes

No

If yes, Are they (SHG) provided information regarding

A. Existing knowledge and skill base of the persons residing in the cluster/village?

B. Existing
level
of
resources/raw
material
in
the
villages

C. local,
regional
and
national
marketing
potential

D. In
all
three
mentioned
above

XIII. CAPACITY/SKILLS EXISTING WITH THE BENEFICIARIES

1. Does the existing group members are able to strengthen the organization's ability
to perform specific functions
Yes

No

2. Is the SHG enables and stimulates their members for;

Better interaction, communication

A.
Conflict resolution in society, and

B.
Enhancing social capital

C.
Agriculture and Related Activities Livestock, Forestry, etc.

D.
Mining and Quarrying

E.
Household Industry

F.
Other Industry

G.
Construction

H.
Trade and Commerce

I.
Transport, Communication, etc.

J.
Service

K.
Others (Specify)

186

XIV. TRAINING IMPARTED

1. Did the members in your SHG undergo any skill development training?
Yes

No

Not applicable
If yes, what type of skill development training programme organised?
Technical skill

Management skill

Not Applicable

2. In case of Technical skill development programme who was the organiser?

Line departments

NGO

Others

3. In case of managerial skill development programme who was the organiser?

Bankers

NGO

Others

XV. MARKETING SUPPORT PROVIDED

1. Does the DRDA/Administration provide any marketing support to the group?
Yes

No

Not applicable
If yes, what kind of support is provided by the DRDA?
1.
Act as a facilitator and tie-up groups with local & outside market

2.
Organised Sale out let Through participating in various Exhibitions

3.
Institutional
selling

4.
Others

XVI. SCHEME PARTICULARS

1. How did the members in your SHG come to know about the scheme?
Through
local
dailies/TV/AIR

Through
Extension
Officers

Gramsabha,

Intermediate
Panchayat/Block

Gram
Panchayat/Lowest
elected
body

DRDA/Zilla
Parishad,

187

Other

Friends/Neighbours/Public

Others

SHG
figures/

members
Members

of

local

bodies

2.
When did you open the account in the bank? Month: _________, Year :
_________
3.
Where is the application form for loan submitted?
Gram sabha

BDOs office
Bank

DRDA

Any other Have the SHG invested in on-farm activities?

Yes

No

If Yes, (a) The facilities created/improved Particulars Approx. cost (Rs.)

Open wells

Bore/tube wells

Lift irrigation

Check dams

Pump sets

Other lifting devices

Others (specify)

If No, type of activity your SHG is involved in

Buffalo rearing

Poultry

Piggery

Tools for Handloom or handicrafts,

Tools for Carpentry/ black smithy and other vocations

Open a shop

Others

No
No
1
2
3
4

Documents Code

Yes

Minutes Book 5 Bank Passbook

Attendance Register 6 Individual Passbook
Loan Ledger 7 Repayment Particulars
Cash Book

4. Did the BDO/bank officials visit the members in your SHG and explain about the
opportunities for self-employment?
S.NO
OFFICIALS
YES
NO
1
BDO
2
Bank
5. What is the frequency of meetings of members in your SHG?
1 .Weekly,

188

 2. Fortnightly,
3. Monthly,
At irregular intervals,
No meetings.
6. Do the members participate in the decision-making process?
Yes,
No
7. Are there thrift and credit activities in your SHG?
Yes,
No
8. How much do they deposit in SHG on monthly basis? Rs. ______
9. Has the group developed financial management norms covering loans,
sanction procedure, repayment schedule, interest rates, etc.?
Yes,
No
10. Has revolving fund been provided to your SHG?
Yes,
No
If Yes,
when : Month: ____________Year: __________
Amount received Rs._____________
11. How was the revolving fund used?
Purchase of raw materials/equipments,

To aid marketing/infrastructure support for

income generating activities,

Urgent loans to individual members,

Any other (Specify)________

189

12. Did the members in your SHG undergo any skill development training?
Yes,
No,
Not Applicable
13. When did your SHG (after its formation) apply for the loan/subsidy of the
scheme?
Did not apply till date,

In the first three months,

Between 4-6 months,

Between 7-8 months,

Between 8-12 months,

After one year

14. Did your SHG receive loan under SGSY from bank/financial institutions?
Yes,
No
If Yes,
When : Month: __________, Year: ___________
How much amount has your SHG repaid? Rs._________
What is the loan repayment due till now? Rs_________
What is your SHGs lock in period?
Three years,

Four years,

Five years,

Others (specify) _____

Voluntary Operation in Community Planning Commission
and Environment (VOICE) Government of India
15. Did your SHG find any difficulty in getting the loan? (Use Code)
Yes,
No
If Yes explain the type of difficulty
Indifferent attitude of Officials,

Demand for bribe,

Difficulty in providing collateral security,

Difficulty in providing required documents,

Others specify _____________________
16. Was any commission or bribe paid in availing the benefit?
Yes,
No
If Yes, specify the amount Rs._________
17. How long have your SHG taken to acquire the asset after release of loan
amount from the bank?
In the first month,

In the second month,

In the third month,

In the fourth month,

After four months,

190

Not Applicable

18. Did the line depts./DRDA/bank check/verify & mark the assets created/
purchased?
Yes,
No,
Not Applicable
19. Whether the assets created/procured under the scheme are maintained
properly?
Yes,
No,
Not Applicable

191

20. Have your SHG done any kind of market assessment prior to starting the
unit?
Yes,
No,
Not Applicable
21. How does your SHG market the products/ services?
On our own,

Through melas/exhibitions,

With the help of government departments,

With the help of DRDA,

Associated with other SHGs,

With the help of NGOs/other agencies,

Others (specify)________
22. Does your SHG participate in trade fairs/exhibitions organised by
governmental/ nongovernmental agencies regularly?
Yes,
No,
Not Applicable
If Yes, indicate the number of such functions in which your SHG has
participated
23. Does your group participate in Gramshree melas/ Saras?
Yes,
No,
Not applicable
24. Does your SHG face problems in marketing your product/service?
Yes,
No
If Yes, give details_________________________________________________
25. Distance to the nearest market where products are sold/service provided?
_____km
Is your SHG carrying out marketing related activities?
Yes,
No,
Not applicable
26. Is your SHG marketing products of Individual swarozgaris also?
Line Departments
DRDA/BDO
Bank
Voluntary Operation in Community Planning Commission
and Environment (VOICE) Government of India
Yes,
No,
Not Applicable

27. Has your SHG

development?
Yes,
No,

received

any

assistance

192

in

product

design/product

Not Applicable
If Yes, who provided the assistance?
Rural Development Commissionerate (State level),
DRDA,

Bank,

Others (specify) _________________________________

28. What is the current annual turnover of your SHG from SGSY activities?
Rs.____
Are the assets created/procured under SGSY insured?
Yes,
No
If Yes, has any insurance claims on assets made so far?
Yes,
No
29. Are the members in your SHG aware of the group life insurance scheme for
swarozgaris under the scheme?
Yes,
No
30. Are periodic meetings organised by DRDA to give necessary guidelines in
quality
control?
Yes,
No,
Not Applicable
31. Does your SHG possess the Vikas Patrika?
Yes,
No,
Not Applicable
If Yes, is it maintained properly?
Yes,
No
32. How much did your group earn from SGSY activities? (Amount in Rs.)
GROUP MANAGEMENT:
33. How much is the increment in net annual income of the group generated
from the project? Rs.___________
34. Does your SHG find any problem in managing the activities of the Group?
Yes,
No
If Yes, what is the nature of the problem?
Differences among members,

Difficulties in earning the amount for repayment of loan,

Operational difficulties of the enterprise (including difficulties in marketing),

Delay in getting the loan amount from the bank,

Non cooperation of officials/bank,

Others (specify________________________________________

193

35. Does SGSY activity help in the following?

A greater desire for self employment,
yes
no
Bring women together to work in groups, yes
no
Increase in income,
yes
no
Increase in savings,
yes
Better health & educational facilities,
yes
no
Improved social prestige,
yes
no
Others (Specify)_____________

no

XVII. SOCIAL EMPOWERMENT

Skill / Ability
1. After becoming a member of the SHG, how much change has occurred in
you
regarding the following skills/ abilities? (Please tick the appropriate
column)
SI.NO
V.Low
1
2
3
4
5
6
7
8
9
10

Change Statement

V.High High Low

Freely and frankly speaking in SHG meetings

Teaching / Training someone else
Speaking during public meetings
Presenting cultural programme in public
meetings
Taking up leadership positions in the SHG
Writing minutes of SHG meetings
Keeping of the accounts of SHG
Performing bank transactions
Going to government office / police station
Talking to government officials / police

2. Do you have own house? ,

yes
no
If yes, type of housing?
Kutcha

Semi-Pucca
Pucca

NA

3. Is it due to your membership in SHG?

yes
4. Is your house electrified?
yes
5. If yes, is it due to your membership in SHG?
6. Do you have a sanitary latrine?
yes
If yes, is it due to your membership in SHG?

no
no
no

If no, what is the type of sanitation do you have?

Public Latrine

Pit Latrine

194

Open Place

NA

7. If you do not have sanitary latrine, what is the reasons?

No sufficient land

No money

Not a felt need

NA

8. Do you have safe drinking water within 150 meters? yes

no
9. How do you dispose household waste-solid / liquid? (Specify)
XVIII. ECONOMIC EMPOWERMENT
Did you have a Savings Bank account before joining the SHG? yes
no
Did you have a Post office account before joining the SHG?
yes

no
. If yes, in whose name was the account?
Own name,

Joint account
NA

3. Did you had your own savings accounts did you have monthly savings?
yes
no
4. What was the source of finance in your contingency before joining the SHG
-_______
5. Do you take loan from this source after joining the SHG yes
no
6. Had you/ your family taken loans from money lenders before joining the
SHG?
yes
no
1.
2.

7.

Are you still availing loans from money lenders even after joining SHG- yes
no

If yes, what are the reasons that you still depend on money lenders?
Dont get sufficient loans from SHGs
Havent repaid the loans from SHG
Delay in getting the loans from SHG
Any other (Specify)__________
NA

If yes, what are the reasons that you still depend on gold loans?
8. What is your thrift saving as on today? Rs_______
Suppose the SHG ceases to exist and there are no more SHG meetings, or
you leave
the SHG, still will you continue your savings in a Bank / Post office?
yes
no
10. Have you taken any loans from / through the SHG?
yes
no
9.

195

11. Self employment/income generation (individual)

Activity of the enterprise_____________
When was it started ___________
Have you got any training- yes
no
The total project cost in Rs________
Loans amount Rs_______ subsidy/ grant amount Rs____
Beneficiary share amount Rs ______
What type of loans
Direct Bank loans

NGO / CDS transferring Loans

Only from thrift

Any other(Specify)__________
Average monthly profit________________
If no why?
Rough monthly expenses in Rs __________
Status of repayment
Fully Repaid
Being repaid
Not yet started
12. Are you a defaulter of loans repayment? yes
no
13. What are the main reasons for default in repayment of loans?
14. If some one default in loans repayment what action is taken?
Extend the period without fine

Extend the period with fine

Any other (Specify)_________

N.A

XIX. POLITICAL EMPOWERMENT

1. Are you a member of any other social/ religious organization/
group?
yes
no
2. If yes, what is the name of the organization / group?
yes
no
3. Have you ever held leadership position in any of this organization/
group?
yes
no
4. Have you attended any Grama Sabha/ Ward convention before you
became
a member of the SHG?
yes
no
5. How did you participate in discussions?
Very actively

Actively

196

Indifferently

Have you contested in Panchayat / Municipal Elections? yes

If yes, when?
After joining the SHG

Before joining the SHG

NA

6. If yes, what was the result?

Won,

Lost

NA

197

no

If won, are you a Chairperson of any Standing Committee / Working

group?
yes no
7.Did you vote during the last election?
yes
no
8.Are you an active participant of any political party?
yes
no

198

ANNEXURE

199

200