Project 3

A STUDY OF SELF HELP GROUPS IN MYSORE
CHAPTER 1
CITY FINANCED BY CAUVERY KALPATHARU
GRAMEENA BANK, MYSORE
1. INTRODUCTION
1.1 PREAMBLE
1.2 SHG-BANK LINKAGE
1.3 THE PROBLEM
1.4 OBJECTIVES OF THE STUDY
1.5 RESEARCH METHODOLOGY
1.6 LIMITATION OF THE STUDY
1.7 CHAPTER PLAN
University Of Mysore Page 1

INTRODUCTION
1.1PREAMBLE:
Historically, efforts to deliver formal credit and financial services to the rural poor in
developing countries have failed. Commercial banks generally do not serve the needs of the
rural poor because of the perceived high risk and the high transaction costs associated with
small loans and savings deposits. To fill the void many governments have tried to deliver
formal credit to rural areas by setting up special agricultural banks or directing commercial
banks to loan to rural borrowers. However these programs have all most all failed because of
the political difficulty for governments to enforce loan repayment, and because the relatively
wealthy and powerful, rather than the poor, received most of the loans (Adams et al.1984,
Adams and Vogel 1986, world bank 1989).
The recent proliferation of innovative micro finance programs , often based on a
group lending methodology, has been largely inspired by the belief that such programs reach
the poor and have a positive impact on various measures of their welfare, including economic
measures (e.g., wealth and income) , social measures (e.g., educational attainment and health
status) , and less tangible measures such as empowerment. The popular press has waved
the banner of microfinance as perhaps the most important recent tool to reduce poverty. The
1997 microcredit summit called for the mobilization of $20billion over a ten year period to
support microfinance (Microcredit summit report 1997). Much of this faith in microfinance is
based on the highly selective anecdotal evidence of individuals who are reported to have
pulled themselves and their families out of poverty with the benefit of microcredit.
At, despite the proliferation of these programs and the outpouring of support by
donors, there has been precious little sound empirical research that tests the hypothesis that
they are reaching and benefiting the poor.

To form the basis of such a significant investments to reduce poverty compared to

alternative investments in other poverty alleviation programs. The proposition that
microfinance reaches the poor and positively affects their welfare should be proven and not
just assumed. This paper attempts to address this shortcoming in the literature by examining
the result of the survey of two Northeast Thailand village bank programs that target the
poor. The survey was designed and conducted in 1995-96 to measure outreach and impact on
the poor.While controlling for the endogeneity biases that have plagued other studies.
1.2 SHG-BANK LINKAGE:

The credit-linking of bank with SHG is one of the great success stories of
microfinance worldwide, although many Qualitative challenges remain and there is a long
way to go quantitatively. However, it is not the only model. Indeed it is Unique to India,
taking advantage as it does of our huge network of bank branches in the rural areas.
The much more important model worldwide is the MFI model in which a formal
semi-formal entity lends to borrowers at much lower transactions cost than the bank and
therefore has superior ability to handle risk. Repayment rates to both SHGs (and SHGs to
bank) as well as MFIs are typically in the upper 90s.
In keeping with out size and diversity, and the need to encourage innovations in
whatever from they occur, India has advisedly followed a multi-agency approach to MFIs.
They can be registered societies, trusts, cooperatives (of either the old , or new
mutually-aided variety , or MACS as they are know, which function with much less
government Interference), section 25 (not-for-profit) companies, or even NBFCs or local area
banks (LSBs) .The broad division of responsibility between Nabard and sidbi, through the
sidbi foundation for Microcredit (SFMC), lends to MFIs.
Understandably SIDBI has shown a preference for the larger, more formally
organized MFIs with equity capital. However very few MFIs with equity capital. However

very few MFIs can raise the Rs 2 crore of capital required to become microfinance
NBFCs.The vast majority of MFIs in India are societies and trusts, as is the case in many
other countries, such as Bangladesh and the Philippines. Many of them begin life in the
social sectors, including health and education, and then float separate entities dedicated to
microfinance as a specialized activity requiring financial skills. Others, such as NGO-MFIs
that follow the grameen model pioneered by Bangladesh start as credit only institutions.
.
1.3 THE PROBLEM:
The failure of banks to provide timely credit is forcing self help groups (SHGs) to
borrow from microfinance institutions (MFIs) at excruciating rates of interest. To meet RBI
targets on priority sector leading, banks are taking the softer option of leading to MFIs instead
of SHGs direcly,said Nabard Karnataka Chief General Manager Venkatesh Tagat. As MFIs
take responsibility for loan disbursal and recovery, this is an easy way out for banks, he added.
According to Nabard estimates 5, 70,000 SHGs have been linked with banks in
Karnataka. But only one-third of these have been able to actively borrow from banks. While
banks favour MFIs all over India, in Karnataka, the bias is particularly acute. According to
Nabard data, banks lent Rs 2600 crore to MFIs and just Rs 1,000 crore to SHGs in Karnataka
in 2009-10. In contrast, all-over India bank lending to SHGs at Rs 14,450 crore, outweighed
the funds given to MFIs at Rs 10,700 crore, in the same period. Even Karnataka based
commercial banks which lends generously to SHGs in other states are holding back here.
Canara Bank and Syndicate banks lent just Rs 42 crore and Rs 34 crore respectively to SHGs
in 2009-10 despite having excellent local network, these banks respectively gave Rs 142
crore and Rs 189 crore to SHGs in Andhra Pradesh.
Activists say SHGs have better access to bank credit in AP as the state government is
actively promoting them and putting pressure on banks to provide funds.AP has various

programmers to help SHGs use bank credit for income generation activities, said kolars
grameena mahila okkuta administrator M S Jayalakshmi.
Ironically, despite better access to bank credit, MFIs are also more active in AP as the
number of SHGs and their demand for credit seem to be higher. The government
programmes have not reached all sections of the population and MFIs stepped in to fill the
gap, said Jayalakshmi.
In AP, MFIs targeted SHGs, which were already borrowing from banks, and gave
them loans aggressively,saya Tagat. This saw SHG members borrowing from multiple
sources and wading into a debt trap.
Banks typically charge 12 percent interest rate to SHGs, which in turn may lend to
their members at 18 percent per year. But as bank credit is difficult to come by SHGs borrow
from MFIs at rates ranging between 24 and 36 percent per year. As the authorities are moving
into regulate MFIs, activists say they should not turn off the tap for timely credit. Tagat says
making bank step up credit to SHGs is the best long term solutions to the problems posed by
few MFIs.
1.4 OBJECTIVES OF THE STUDY:

To complete my job I have preferred the following objectives:-
1. To understand the purpose of micro financing.
2. To understand about micro financing system through SELF HELP GROUP
3. To study the management strategies followed by CKG Bank with regard to SHG.
4. To know what are the social activities undertaken by SHGs through CKG Bank.

5. To ascertain the rate of interest members get on their deposits.
6. To examine the role of CKG Bank in success of SHGs.
7. To make necessary suggestion for improving the performance of SHGs and making
them powerful institution at the micro level.
1.5 RESEARCH METHODOLOGY

The research method adopted in this project study is descriptive in nature. This study
enables to determine the extent of utilities that the SHG have been receiving.
The required data has been collected through primary source and secondary source.
1.PRIMARY SOURCE:
This data has been collected through extensive interview with the manager of the
organization and the interview conducted.A sample survey using a structured
questionnaire as a data collection instrument.
2.SECONDARY DATA:
The secondary data is collected through:
Cauvery Kalpatharu Grameena bank-annual report
Website
Manuals
1.6 LIMITATIONS OF THE STUDY:
1. The study is limited to CAUVERY KALPATHARU GRAMEENA BANK.

2. The study is focused on reliability of SHGs on microfinance of India.
3. The study was completed within a short span of time that was available.
4. The suggestions offered are limited only to the branch under study.
5. Being confidential in nature of certain aspects study was conducted to the

information provided.
6. Study is restricted to only for academic purpose; the inexperience makes this
research less precise when compared with a professional research work. Conclusion
has been arrived based on the information given by the bank.
1.7 CHAPTER PLAN:
1 .INTRODUCTION
This chapter gives an overview of the project work consisting the significance of the
study, objective, hypotheses, methodology etc.
2. MICROFINANCE: ORIGIN AND GROWTH

This chapter gives an outline of the Microfinance activity, its linkage with banking
systems and its role in economic development of the country.
3. SELF HELP GROUPS AND BANK LINKAGE

This chapter reveals a brief introduction to the SHGs, their features importance, function and their
linkage with bank.
4. MF PROGRAMME AT CAUVERY KALPATHARU GRAMEENA BANK, MYSORE

This Chapter covers the micro finance programme at CKG bank.

5. PERFORMENCE OF SHG IN - CAUVERY KALPATHARU GRAMEENA BANK,

MYSORE -DATA ANALYSIS
This is the core chapter. It manifests the performance and various activities of self help
group on the basis of responses collected from the respondents.
6. FINDINGS AND SUGGESTIONS

Under this chapter, findings are summarized and suggestions are for improving the
performance of SHGs in achieving their noble task of reaching out to the poorest of the poor
for their economic empowerment.
CHAPTER 2
MICROFINANCE ORIGIN AND GROWTH
2.1 INTRODUCTION
2.2 MICROFINANCE -DEFINITION
2.3 THE NEED MICROFINANCE IN INDIA
2.4 ECONOMICALLY ACTIVE POOR
2.5 ROLE OF MICROFINANCE

2.6 THE ORIGIN OF MICROFINANCE
2.7 STRATEGIC POLICY INITIATIVES

2.8 ACTIVITIES IN MICROFINANCE
2.9 MICRO FINANCE MODELS

2.1 INTRODUCTION
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 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 is emerging as a powerful instrument of poverty alleviation in new
economy. In India, Micro-finance scene is dominated by Self Help Groups (SHGs)- Banks
linkage programme, aimed at providing a cost effective mechanism for providing financial
services to the unreached poor. In the Indian context terms like small and marginal
farmers, rural artisans and economically weaker sections have been used to broadly
define Micro-finance customers. Research across globe has shown that, over time, Micro-
finance clients increase their income and assets, increase the number of years of schooling
their children receive, and improve the health and nutrition of their families.
The subject of Micro-finance is considered as significant & emerging trend in the
present scenario for the empowerment of women. Micro-finance programmes are promoted

as an important strategy for womens empowerment. Micro-finance builds mutual trust and
confidence between bankers and rural poor to encourage banking in a segment of population
where formal financial institutions usually find difficult to reach.
A poor person has not known what riches are, he is not frustrated. How can he go
beyond the riches if he is not frustrated with them?. A poor man also sometimes to me, but
then he comes to me for something that I cannot supply. HE ASKS FOR SUCCESS.
-Bhagwan Rajnesh: The true guru of self-help movement.
2.2 MICROFINANCE DEFINITION
The Microcredit Summit 2007 defines microcredit as the extension of small loans to
entrepreneurs too poor to qualify for traditional bank loans. It has proven as an effective and
popular measure in the ongoing struggle against poverty, enabling those without access to
lending institutions to borrow at affordable interest rates and start small business. The key
implication of microcredit is in its name itself 'micro'. A number of issues come to mind when
'micro' is considered: The small size of the loans, small size of savings, the smaller frequency
of loans, shorter repayment periods and amounts, the micro/local level of activities, the
community-based proximity of microcredit, etc. Hence microcredit is not the solution, but is a
menu of options and enablements that has to be put together, a la carte, based on local
conditions and needs. With the current explosion of interest on microcredit issues, several
developmental objectives have come to be associated with it, besides that of only 'credit". Of
particular importance is savings as an end in itself, and as a guarantee for loans. Microcredit
has been used as an 'inducer' in many community development activities, as an entry point in a
community organizing programme and as an ingredient in larger education/training exercises.
The Reserve Bank of India has defined microfinance as 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 living standards.
Microfinance Institutions are those that provide these facilities. The Virtual library on
Microcredit4 takes microcredit beyond the confines of 'money' and declares in its conceptual

framework that microcredit is as much about money as it is about information. Microcredit is

one way of reaching the poor and has demonstrated its effectiveness. A major concern of
microfinance is to increase penetrative outreach so that credit can be institutionalized and a
large number of people can benefit through improved access to credit for enabling them to
raise their income level and thereby improve their living standards
According to International Labour 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, semi-urban 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. Microfinance 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.
A good definition of microfinance as provided by Robinson is, 'Microfinance refers
to small-scale financial services for both credits and deposits that are provided to people who
farm or fish or herd; operate small or microenterprises where goods are I produced, recycled,
repaired, or traded; provide services; work for wages or commissions from renting out small
amounts of land, vehicles, draft animals, or machinery and tools and to other individuals and
local groups in developing countries, in both rural and urban areas.
2.3 THE NEED MICROFINANCE IN INDIA
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 income-generating 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.
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.
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.
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
Limited management capacity in MFIs
Institutional inefficiencies

Need for more dissemination and adoption of rural, agricultural microfinance

methodologies
2.4 ECONOMICALLY ACTIVE POOR
Hundreds of millions of Indians are poor by national and international standards.

Indian policy making and politics-are dominated by discussions of poverty, and the measures
of poverty rightly attract a great deal of attention and debate. In the second half of the 1990s,
India's GDP grew rapidly and many commentators had associated this acceleration in the
Indian economy with the process of economic reform that began in the 1990s. Yet the
reforms themselves, and the limited opening of the Indian economy that they involved,
remain controversial, as does their effect on poverty. This debate is far from unique to India.
The worldwide controversy about globalization and its effects on poverty and inequality has
followed much the same lines as the internal debate in India. And indeed, India accounts for
about 20 percent of the global count of those living on less than $1 a person per day, so that
what happens in India is not only a reflection of the worldwide trend, but is one of its major
determinants.
It is natural that the rate of growth of GDP and of consumption will normally be
overstated in a growing economy. The Government of India's official poverty estimates are
based on the results of regular consumer expenditure surveys by the National Sample Survey
Organization (NSSO). Surveys are in the field continuously and, in recent years; all surveys
have collected some data on consumers' expenditure. But only the larger surveys that focus
on consumers' expenditures are used by the Planning Commission to calculate the official
poverty statistics. The poverty estimates published by the Planning Commission count the
number of people who are living in households whose monthly per capita total expenditure is
less than a poverty line for the sector and the state in which they live. These poverty lines are
updated over time using the Indian system of State by State price indexes, which are
estimated separately for rural (the consumer price index for agricultural laborers, CPIAL)
and urban (the consumer price index for industrial workers, CPITW) households. There is no
predetermined All India poverty line, either for urban or rural. Instead, poverty counts are
made for each state, within each sector, and added up to get urban and rural totals. All India
urban and rural poverty lines are then set to guarantee that, if applied to all urban or rural
households without differentiation by State, the total number of those in urban and rural
poverty matches the sum of the State counts.
The poverty data from 1983 onwards are available according to current procedures,
and it is these numbers which are the subject of the debate. Despite an extensive body of
empirical work by eminent researchers, the debate on what happened to India's poverty in the
1990s continues. No doubt there will be more re-interpretations of the 19992000 survey,
and new data are continuously being collected. Indeed, there are two (thin) rounds since the
large survey, the 56th and 57th Rounds. But these provide little clarification. The 56 Round,
conducted in 2000-2001, shows a further reduction in poverty. The 57th Round data, from
2001-02, show that there was a sharp increase in poverty compared with the previous year. It
is unclear why this should be so, and there is no obvious economic event that would have
been expected to generate more measured poverty.
Poverty comes in many forms. The poor may suffer from lack of food, water and
shelter, unemployment or underemployment, disease and degradation, abuse and
disenfranchisement. The results of poverty are not only physical, mental and emotional
disability; lack of education and low skills, low self-esteem and lack of self-confidence. This
leads to fear and resentment, aggression and truncated vision. While all such people are poor
by the standards of the wider society, there are substantial differences among them. There are
poor people who have little land, small employment or even a petty business. Here, we
distinguish between the extremely poor and the economically active poor. The World Bank
defines extreme poor are those who are living on $1 a day. Nobel Laureate Amartya Sen has
observed that poverty must be seen as the deprivation of basic capabilities rather than merely
as low incomes.
The term economically active poor is used in general sense to those among the poor
who have some form of employment, supportable income and who are not severely food

deficit. Hulme and Mosley define the rninimum economic threshold that separates the core
poor from the poor as the existence among the poor of a reliable income, freedom from
pressing debt, sufficiently good health and sufficient resources to cope with the problems as
and when they arise. However, it would be difficult to accept Hulme and Mosley's view as
forget the poor, even the economically active poor may not fit into this set of criteria. The
distinction between poor and the economically active poor is not very precise. Households
move from one category to another over time. Therefore, economically active poor include
people who have achieved some benchmark as stated above; have skills or control over
earning assets and 'who are creditworthy borrowers and savers as per Institutional norms. It
has to be noted that sometimes people with adequate skills may not find employment or may
be underemployed. This issue is further complicated by gender inequality and in some
households, women may be malnourished than men and may not have proper access to basic
needs. The delineation of an official poverty line as defined by the consumption of goods can
be a useful tool for governments and donors in making policy decisions and in planning
long-term strategies.
Marguerite Robinson says that the poverty line concept is not directly relevant to
microfinance. Savers are commonly found on both the sides of the official line and many
borrowers below the line are creditworthy 'while many above the line are not. In
microfinance, the critical distinctions are those that differentiate the economically active poor
from the poor and between creditworthy and non-creditworthy borrowers. While the poor
may not directly benefit from microfinance, they can benefit indirectly from its development.
Thus, microfinance creates employment and some of the poor find employment among the
economically active poor enterprises. And given the true dimension of microfinance and with
appropriate enhancement in their skillet, the very poor who become employed will eventually
be able to make use of microfinance over a passage of time.
2.5ROLE OF MICROFINANCE
The main objectives of microfinance are:

To Increase their saving capability and thus their assets.

To Show them the way to save.
To make believe in themselves and in their capability to succeed.
To make them Approach to financing institutions.
To Opportune financing services at their reach.
To Show them & train them how to handle a credit.
A recent study of microfinance assesses the benefits of microfinance through self-help

groups where the benefits in terms of higher income, consumption, and savings matter for the
poor, the focus here is broader as an attempt is made to also assess some key dimensions of
empowerment of women
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.
The level of impact relates to the length of time clients have had access to financial
services.
IS THERE A DEMAND FOR MICROFINANCE?

"India has one of the largest networks of bank branches in the world, but the
hundreds of millions of poor in the country are largely out of it. Banks were nationalized
three and a half decades ago with the hope and promise that their products and services
would reach the poor. But that goal is not even close to being met today. With 52,000
commercial bank branches, 14,522 branches of regional rural banks and 100,000
cooperative bank branches, the country is teeming with institutions that should be able to
meet the credit needs of the people. But if you are poor, you're also probably out of luck
with the banks; it is tough persuading them to even let you open a bank account.6 The
consequences have been devastating. Consider these numbers: 75 million households in
India depend on moneylenders to meet financial needs; almost 90 percent of people in rural
India have no access to insurance; 5p million households are landless and need small credit
to start some economic activity. And even families earning Rs. 4000-5000 a month in urban
areas spend huge portions of their earnings to service their ever continuous debt.
But out of necessity and enterprise, those locked out of the banking world have found
a way out. It is called microfinance the extension of small loans to individuals who are
too poor to qualify for traditional bank loans, as they have no assets to be offered as
guarantee. In India, microfinance has worked largely through self-help groups (SHGs).
Predominated by women, these are formed with simple rules save, accumulate and give
loans to each other. Globally, it is slowly proving one of the most effective strategies to
neutralize poverty. According to Christina Barrineau, Chief Technical. Adviser for the
International Year of Microcredit 2005, a United 'Nations initiative to expand microcredit
opportunities, the figures for 'worldwide microcredit vary widely, from 70 million to 750
million outstanding. After almost three decades, the micro finance movement has created a
global network of tens of millions of women entrepreneurs and growing sub-classes of
sophisticated businesswomen who are helping to reduce poverty!
According to Alex Counts, President of Grameen Foundation USA a microfinance
organization in Washington, microfinance is now reaching 80 million families, 90 percent
of the borrowers being women and that's just the tip of the iceberg in terms of demand.
Nancy Iindborg, President of the Washington office of Mercy Corps states that while

microfinance has long been a strategy to alleviate destitution among women, they also had
the broader purpose of pumping up local economies "by helping to support a vibrant, small-
business sector". But not all that much money is available for the new wave of larger loans.
Grameen Bank, which has provided credit to 3.7 million borrowers across the globe, 96
percent of them females, has increased the size of some loans, Counts said. The problem is
that social service agencies that aim to eradicate poverty feel that their job is. done if they
help poor women create thriving, if tiny, businesses, he said.
Alex Counts says further that to ensure growth, larger, more sophisticated
businesses must emerge. However, many aid organizations are not even properly structured
to finance them. For many poor women, like the 11 percent of female entrepreneurs in
Kabul who are war widows, starting a business is the only hope for survival. Of the few
banks established in Kabul, "none of them are lending", said Katrin Fakiti-Wardak,
Director of Parwaz, a Kabul-based microfinance organization. In some rural areas, cultural
constraints, lack of financing, absence of transportation and the dearth of basic resources
like raw materials and skilled labour make starting a business an almost impossible dream
for women. And in cities like Kabul, while starting a micro business can be easy for
women, taking it to the next level can be a daunting task}
Can a mere 500 rupees change a life? This sounds unbelievable, as prices sparerib
the day. But in numerous villages in India, this miracle is quite real; millions of poor
women are today using small loans to rewrite their present and future. Many of them have
not even seen the corridors of a primary school, but are using common sense to propel their
entrepreneurship and group business activities. Dr. C. Rangarajan, Chairman, Economic
Advisory Council of the Government of Indiaj points out, "Microfinance can aid
employment and sustain households giving them opportunities they never had before". It is
called micro credit with good reason. The size of the loan is typically small. The borrower
is usually battling against poverty. The repayment schedule is simple and short. And, the
activity for which the loan is taken is often of a small nature. But poor women, who are in
the forefront of the microfinance movement, use the small loans to jumpstart a long chain
of economic activity from this small beginning. As they have enormous pride in their
integrity, they repay the loans quickly and reliably, not "wanting to be noticed as defaulters.

Then, they begin again, this time with a bigger loan - and keep expanding their profit base
until they do not need the loans any longer. Microfinance has given women in India an
opportunity to become agents of change. The movement has made them more confident
than ever helping them to explore new horizons and new dreams. The most active states in
India in the context of paradigm shift in microfinance are the three southern sates viz.,
Kerala, Andhra Pradesh and Tamilnadu. Other states where such self-help groups are
making a dramatic difference are Karnataka, Himachal Pradesh and Uttaranchal. Sheila
Dikshit, Chief Minister of Delhi, says: "Microfinance will be the future mantra for
alleviation of poverty. I have met "women who say that 500 to 800 rupees makes all the
difference as it dramatically changes their standard of life.
With a view to facilitating smoother and more meaningful banking with the poor, a
pilot project for purveying micro credit by linking the Self-Help Groups (SHGs) with banks
was launched by NABARD in 1991-92 with a view to facilitating smoother and more
meaningful banking with the poor. RBI had then advised commercial banks to actively
participate in this linkage programme. The scheme was next extended to RRBs and co-
operative banks. The number of SHGs linked to banks aggregated 461,478 as on March 31,
2002. This translates into an estimated 7.87 million very poor families brought within the
fold of formal banking services as on March 31, 2002. More than 90 percent of the groups
linked with banks are exclusive women groups. Cumulative disbursement of bank loans to
these SHGs stood at Rs. 1026.34 crores as on March 31, 2002 with an average loan of Rs.
22,240 per SHG and Rs. 1,316 per family. As regards model-wise linkage, while Model I,
viz. directly to SHGs without intervention/facilitation of any NGO now accounts for 16
percent, Model II, viz. directly to SHGs with facilitation by NGOs and other formal
agencies amounts to 75 percent and Model III, viz. through NGO as facilitator and
financing agency represents 9 percent of the total linkage. While 488 districts in all the
states and union territories have been covered under this programme, 444 banks including
44 commercial banks (including 17 in the private sector), 191 RRBs and 209 co-operative
banks along with 2,155 NGOs are now associated with the SHG-bank linkage programme.
While the SHG-bank linkage programme has surely emerged as the dominant microfinance

dispensation model in India, other models too have evolved as significant microfinance
purveying channels.
2.6 THE ORIGIN OF MICROFINANCE

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 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.
For several decades, many economies, including the Indian, experimented with
subsidised credit for ttip " poor. But the only tangible outcome perhaps was the increase in
Non-Performing Assets (NPA). Then came the realisation that the core issue for the poor was

access to credit rather than the cost of credit. In fact one of the contributions of microfinance
can possibly be the 'end of interest rate debate'. Microfinance has proved time and again that
it is access and not interest rates that are a constraint for the poor. Another discovery
followed, that the poor can and will save, and can indeed use a wide range of financial
services such as remittances facilities and insurance products. The most well-known and
cited international example of a microcredit institution is the Grameen Bank in Bangladesh.
But there are numerous others. Even during the Asian financial crisis, Bank Rayat Indonesia
not only survived but thrived; as did BancoSol in Bolivia.
Even the few banks in India who now belatedly recognize the potential in rural banking
lack the capability to serve this market, which has been neglected for so long, and need
intermediaries to help build their capacity to do business with small borrowers. V.K. Chopra,
Chairman and Managing Director, Corporation Bank, admits, "Lending without any collateral
by the commercial banks to the poorest of the poor in rural areas is very difficult as banks do
not have the expertise or facilities in these areas. That is why microfinance institutions should
step in. Today's banks are flush with money. If microfinance institutions are strong, banks will
readily lend to them". That there are significant opportunities for banks in microfinance is
now unquestioned.
Banks like ICICI are exploring how it could reap the benefits from the microfinance
revolution. Nachiket Mor, Executive Director, ICICI says: "A lot has been done in Andhra
Pradesh, but we want to build 250 micro finance institutions to build a network in 600 districts
each one serving a million households. It will involve around Rs. 200,000 crore and it is not
an unreasonable dream." Mor feels that the microcredit movement must now move beyond
their members and look at financing for roads and water. The larger banks also need the
microfinance institutions for other reasons, besides expanding their opportunities. The
microfinance institutions have considerable experience in dealing with the cultural realities of
life for the rural poor. Every self-help group and micro financing institution in India has been
through a great learning experience in the last couple of years. Everyday has been an
experience for these microfinance institutions.

Women need to guard their savings even in a bank fighting off pressures from the
family. Says SEWA Bank's Vyas: "We found women begging us not to send them any letters
or bank statements. They even asked us to keep their passbooks, as they did not want their
husbands to know they had money. Then they would be pressurized to withdraw it. More
often than not, it would be spent frivolously on gambling or alcohol". Large banks are wary
of this cultural minefield, and will look to their microfinance partners for help and assistance
in steering the course. Says Vijayalakshmi Ramanna, Chairperson of CHETANA, an NGO
serving about 16500 economically active poor women in Channapatna, women will never
beg, they live with dignity and pride. Women in India will never lower their goals. They will
always strive to raise their abilities to the height of their goals. When the NGO-SHG bank
linkage touches the heart of every poor woman in this country, India will be transformed and
we will see a prosperous and happy India. Microfinance movement will make words come
true.
Organizing the poor certainly is one challenge, but additionally women have to be put
into the loop of a sustainable livelihood through microfinance or the benefits won't arrive.
Also, microfinance is not a panacea by itself; it could help eradicate poverty only if it is
complemented with other measures like health care, literacy, women's rights and micro-
enterprise management. Points out Vyas: "We have to reach out to 370 million workers but
we have reached just 5 million. We have to link microfinance activity with sustainable
livelihood levels and we need to build an integrated approach weaving in vocational training,
health care and capacity building". The need for breadth is urgent. In areas where
microfinance has picked up like Mehboob Nagar in Andhra Pradesh, women have collected
over four crore rupees. Despite this, men migrate to cities like Mumbai for livelihood options.
So, the need is to invest in land, water, livestock, infrastructure and human development that
is why microfinance in India will ultimately have to graduate to livelihood financing.
As the anecdotal evidence supporting microfinance grows, there is now mounting

hope that it can be a large scale poverty alleviation tool. Says Vipin Sharma, Programme
Officer, Microfinance, CARE India: "The big challenge for the microfinance sector in India,
is to scale microfinance up, as it is an integral part of the strategy for poverty alleviation".
There is also fresh political will to see this happen. Vinod Rai, Additional Secretary, Finance,
points out: "The Finance Minister in his last budget statement said that Rs. 200crores would
be given to the National Bank for Agriculture and Rural Development for capacity building
of micro finance institutions as the government was keen to encourage them and help them
grow As many as 40 million households could be assisted with amounts of around Rs.
30,000crores". Mathew Titus, Executive Director, SA-DHAN, an NGO based in New Delhi,
feels that a fund of Rs. 200 crores could provide equity support for development of
microfinance institutions all over India.
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 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 Wolfensohn has pointed out, providing financial services to 100 million of the
poorest households means helping as many as 500 600 million poor people.
2.7 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
2.8 ACTIVITIES IN MICROFINANCE
The following are the activities undertaken by microfinance are:

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.
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.
2.9 Micro Finance Models
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.
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.
2.9(A) MICRO FINANCE INSTITUTIONS (MFIS)

MFIs are an extremely heterogeneous group comprising NBFCs, societies, trusts and
cooperatives. They are provided financial support from external donors and apex institutions
including the Rashtriya Mahila Kosh (RMK), SIDBI Foundation for micro-credit and
NABARD and employ a variety of ways for credit delivery.
Since 2000, commercial banks including Regional Rural Banks have been providing
funds to MFIs for on lending to poor clients. Though initially, only a handful of NGOs were
into financial intermediation using a variety of delivery methods, their numbers have
increased considerably today. While there is no published data on private MFIs operating in
the country, the number of MFIs is estimated to be around 800.
Structures of a Microfinance Institution

Microfinance institutions broadly operate under a wide range of legal structures. They
could be registered as-
1. NGO,
2. Trusts,
3. Sec 25 Companies,
4. Cooperative Societies,
5. Cooperative Banks,
6. Regional Rural Banks,
7. Local Area Banks,
8. Public and Private Sector banks,
9. Business Correspondents and
10. Non-Banking Finance Companies.

LEGAL FORMS OF MFIS IN INDIA
Types of MFIs Estimated Legal Acts under which Registered

Number*
1. Not for Profit MFIs 400 to 500 Societies Registration Act, 1860 or
a.) NGO - MFIs similar Provincial Acts
Indian Trust Act, 1882
b.) Non-profit Companies 10 Section 25 of the Companies Act, 1956
2. Mutual Benefit MFIs 200 to 250 Mutually Aided Cooperative Societies
a.) Mutually Aided Cooperative Act enacted by State Government
Societies (MACS) and similarly
set up institutions
3. For Profit MFIs 6 Indian Companies Act, 1956
a.) Non-Banking Financial Reserve Bank of India Act, 1934
Companies (NBFCs)
Total 700 - 800
Source: NABARD website
2.9(B) BANK PARTNERSHIP MODEL

This model is an innovative way of financing MFIs. The bank is the lender and the
MFI acts as an agent for handling items of work relating to credit monitoring, supervision
and recovery. In other words, the MFI acts as an agent and takes care of all relationships with
the client, from first contact to final repayment. The model has the potential to significantly
increase the amount of funding that MFIs can leverage on a relatively small equity base.
A sub - variation of this model is where the MFI, as an NBFC, holds the individual
loans on its books for a while before securitizing them and selling them to the bank. Such
refinancing through securitization enables the MFI enlarged funding access. If the MFI fulfils
the true sale criteria, the exposure of the bank is treated as being to the individual borrower
and the prudential exposure norms do not then inhibit such funding of MFIs by commercial
banks through the securitization structure.
2.9(C) BANKING CORRESPONDENTS

The proposal of banking correspondents could take this model a step further
extending it to savings. It would allow MFIs to collect savings deposits from the poor on
behalf of the bank. It would use the ability of the MFI to get close to poor clients while
relying on the financial strength of the bank to safeguard the deposits. It remains to be seen
whether the mechanics of such relationships can be worked out in a way that minimizes the
risk of misuse.
2.9(D) SERVICE COMPANY MODEL

Under this model, the bank forms its own MFI, perhaps as an NBFC, and then works
hand in hand with that MFI to extend loans and other services. This model has two very
different and interesting operational features:
(a) The MFI uses the branch network of the bank as its outlets to reach clients. This allows
the client to be reached at lower cost than in the case of a standalone MFI. In case of banks
which have large branch networks, it also allows rapid scale up. In the partnership model,
MFIs may contract with many banks in an arms length relationship. In the service company
model, the MFI works specifically for the bank and develops an intensive operational
cooperation between them to their mutual advantage.
(b) The Partnership model uses both the financial and infrastructure strength of the bank to
create lower cost and faster growth. The Service Company Model has the potential to take
the burden of overseeing microfinance operations off the management of the bank and put it
in the hands of MFI managers who are focused on microfinance to introduce additional
products, such as individual loans for SHG graduates, remittances and so on without
disrupting bank operations and provide a more advantageous cost structure for microfinance.

CHAPTER 3
SELF HELP GROUPS AND BANK LINKAGE
3.1 INTRODUCTION
3.2 DEFINITION OF SELP HELP GROUP (SHG)
3.3 FORMATION AND PROMOTION OF SHGs
3.4 ACTIVITIES OF SELF HELP GROUPS
3.5 CHARACTERISTICS OF SELF HELP GROUPS
3.6 SELECTION OF GOOD SHGs FOR FINANCE
3.7 DOCUMENTATION
3.8 ADVANTAGES OF SHG CREDIT LINKAGE PROGRAMME
3.9 CHALLENGES FOCUSING SHG FEDERATION
3.10CONCLUSION

3.1 INTRODUCTION
There has been a great deal of emphasis on poverty alleviation schemes by Government
by expansion of rural credit through rural and semi urban branches of commercial banks after
nationalization. The financial Institutions have laid more emphasis on schematic lending
overlooking the credit for consumption requirements of the poor. As a result, there was large
scale diversion of funds creating recovery problem to banks.
In our country, credit is being provided to the rural poor by a multitude of financial
institutions like Commercial banks, Regional Rural banks, Cooperatives, etc.. .Still, about 28%
of rural poor depend on Money lenders, Traders, and other informal credit institutions for their
credit needs. The major complaint against formal credit institutions is the denial of required credit
demanded by rural poor. In fact the rural poor are mostly illiterate and ignorant of Bank's systems
and procedures of lending. They are scared of the cumbersome lending norms.
SELF HELP GROUP is a concept emerged in the direction of helping rural poor forming
groups so that; they will improve their living conditions through voluntary participation in thrift
and credit. The core objective is FLEXIBILITY, TRANSPARENCY AND AUTONOMY with
SENSITIVENESS AND RESPONSIVENESS of the participants.
3.2 DEFINITION OF SELP HELP GROUP (SHG)

Self help group is a small, homogenous affinity group of rural poor (10-20)
comprising agricultural labour, small and marginal farmers, and micro entrepreneurs who
have voluntarily come forward to form into a group. It can be a formal or informal group.
Members of SHG save and contribute to a common fund, from which small loans are lent to
the needy members as per the decision of the group.

The concept underlines the principle of THRIFT (by way of compulsory savings)
CREDIT and SELF HELP. Rural poor have the potential to save small amounts and have the
inherent trait to help them through mutual trust and active participation.In1976, Prof.
Mohamed Yunus of Bangladesh experimented the concept with success. In India, some NGOs
(Non Government Organizations) introduced the scheme during 1987-89. NABARD took up the
scheme on pilot project basis during 1991-92 and later extended it to all states in the country.
State Bank of India started providing financial assistance to SHGs since 1996-97, At present the
scheme is in operation throughout the country.
3.3 FORMATION AND PROMOTION OF SHGs

As the target group under SHG are rural poor, illiterate and not able to understand the
concept, the role of Non Government Organizations (NGOs) and Self Help Group Promotion
Institutions(SHPIs) is crucial in formation and development of SHGs in the villages. Concerted
efforts are needed by promoting agency to bring people together by building confidence among
them and making them understand and accept the objectives of the scheme. The role of
promoting agency is important in bringing cohesiveness in the group and orienting group members
towards group action; In our country, groups are formed by NGOs/SHPIs/VVV
Clubs/Government agencies and evolution process for the group to emerge as a strong and vibrant
entity would take at least 6-12 months.
STAGES OF GROUP DEVELOPMENT.
1) Forming and storming stage. (0-3 months)

During this period, people come, sit with suspicion, fear and anxiety. They have high
expectations and attendance to meetings is also not regular. They depend a lot on the facilitator
and raise several doubts. There will be conflicts between individual and group interests. Conflicts
among members is also seen. During this period, membership gets stabilized, natural leadership
start emerging, norms and procedures are established, members start availing small loans and
develop ownership feeling of the group.

2) Manning stage. (3-4 months)

Members develop mutual trust, group becomes cohesive and peer pressure applied
and sustained. Members show concern about the task, performance and start assuming more
group responsibilities.
3) Functioning and developing stage (6-12 months and above.)

Group starts performing various group functions that benefit the members. Members'
participation is visible with high attendance. They start contributing to Group responsibilities and
joint ventures. Capacity building is more visible through interactions with outsiders and group
impact is felt by all members. At this stage, the group members will not only think about their
welfare but also involve in social and cultural activities in the area. A perceptible change in the
living style of the members and their families is noticed after this stage.
3.3 (1).ROLE OF NGOs AND SHPIs IN GROW FORMATION & DEVELOPMENT

The following are the role of NGOs in formation of SHGs:
Conduct of regular meetings and ensuring full attendance.
Repeatedly reiterate the group objectives and clarify doubts of the members.
Promotion of mutual trust and co operation among members.
Identifying natural leadership among members and nurturing the same.
Training office bearers and allocation of duties.
Training members in book keeping and record maintenance.
Facilitating strict adherence of group norms.
Promotion of collective decision making process.
Organizing cross visits.
Ensuring transparency in management of group funds.
Helping SHGs in establishing links with Banks and other agencies.
The NGOs/SHPIs should actively associate with the groups till they attain the stage
of normal functioning. During this period, they play the role of explorer & initiator, promoter

& facilitator, coach and guide. After the group is stabilized, the NGO/SHPI will be a support
functionary. At this stage, the financing agency will start taking active part and assume the
role of financier, collaborator and adviser.
3.3(2) NABARD:
Capacity building among partner Institutions,
Loan fund support
Support to Government and formal Institutions.
Support to RRBs and commercial banks.
Support to NGOs.
Support to VW clubs/farmers' clubs.
Support to independent volunteers or Social workers.
3.3(3) GOVERNMENT:
Formation of groups among rural poor.
Provide revolving support to good groups
Capacity building and training support to SHGs
Support to group enterprises undertaken by SHGs.
Empowering the poor (Financial and Social)
Create awareness among poor about SHGs.
Providing forward and backward linkages.
Marketing support for the products of SHGs.
3.3(4) ROLE OF BANKS:

Provide credit to the groups for internal lending
Provide credit to the joint ventures undertaken by the groups.
Provide credit to individual members of SHGs for income generating activities.
Capacity building of staff members .
Capacity building of SHGs through training and SHG meets.
3.4 ACTIVITIES OF SELF HELP GROUPS

Following are the activities undertaken by self help groups:
3.4(1) FINANCIAL ACTIVITIES:
Encouraging thrift habit (compulsory savings) among rural poor.
On lending to members and earning interest.
Increasing base funds.
Selection and financing income generating activities.
Opening of deposit account with NGO/BANK/MFI.
Borrowing from Bank/NGO/MFI.
Recovery of loans from members.
Repayment of Bank loans.
3.4(2) MANAGERIAL ACTIVITIES

Conducting regular meetings.
Ensuring discipline among members by imposing fines/penalties for late
attendance/non attendance/late payment of thrift and loan installments.
Undertaking joint ventures and bringing cohesion among group members.
Arranging training to the members.
Arranging backward and forward linkages for gainful activities undertaken by the
members.
Organizing Social, Educational and cultural activities in the villages to bring
enlightenment among rural poor.
Participation in SHG clusters.
3.4(3) SECRETARIAL ACTIVITIES:

Maintenance of records like Attendance register, Minutes book, Deposit and Loan

ledgers, Passbook to members etc.

Ensuring transparency in group operations.
Developing leadership qualities among members.
Ensuring participatory functioning.
3.5 CHARACTERISTICS OF SELF HELP GROUPS

The main characteristics of self help groups are as follows:
Transparency in operations.
Resolving conflicts through collective leadership and mutual discussions.
Autonomous, Non political and no outside influence.
Improving base funds by THRIFT, INTERNAL LENDING and mobilizing external
funds like loans/grants/donations etc.
Credit decision as per consensus in group meetings and credit delivery on the spot.
Mutual trust and confidence & loans to members without collateral
Recovery through PEER PRESSURE.
Democratic financial management system.
Capacity building among members to interact with outsiders without fear or favour.
Small, timely and need based credit delivery at the door step.
Repeat loaning with impressive recovery.
Involvement in social and cultural activities in the villages.
3.6 SELECTION OF GOOD SHGs FOR FINANCE

The following criteria are taken into account for selection of good SHGs for
finance are:
The SHG should have been in active existence and functional at least for a period of
six months having satisfactorily generated internal savings and met credit heeds of

their members. The-group may or may not be registered.

The group should be conducting group meetings regularly and undertaking savings and
credit operations from its own sources.
The group should be working in a democratic manner and all the members should feel
that they have a say in the matters of the group. The group should be maintaining
proper accounts/records and the members must be aware of the financial condition of
the group funds.
The branch should be convinced that the group has not come into existence for the
sake of participation in the project and availing benefits there under. Genuine need to
help each other and working together should be felt by the members.
The members of SHG should preferably have homogenous background and interest.
Involvement of NGO/SHPI if any, should be evident and the agency should be
helping the SHG by way of training the members for proper functioning of the group.
A few members of the SHG or their family members might have taken loans directly
from the Bank/other Institutions before forming into group and defaulted. This should
not ordinarily come in the way of financing SHGs per se by Banks, provided the SHG
itself is not in default to the Bank. However, the SHG may not finance the defaulting
member from Bank loan.
There should not be any interference from local authorities. The office bearers must
be elected / nominated from the members of the group only.
The members in a group should preferably be between 10 and 20 to avoid registration
as per section 11(2) of Company's Act.
Service area restrictions are not applicable for financing SHGs
Savings Bank/' loan account should be opened in the name of SHG
Direct lending to SHGs.

Banks after satisfying about the functioning of the groups, may provide credit support by
sanction of loan directly to the SHG which in turn will lend to their members for their individual
needs following a collective decision making process in the group meetings.

Indirect lending to SHGs through NGOs/SHPIs:

NGO/SHPFs performance should be assessed based on :
1. Character, Location, families covered, commitment and Transparency of operations of the
NGO/SHPI.
2. Capacity of the NGO/SHPI, their staff and their commitment, rapport with the local
agencies and their expertise in SHG movement should be verified.
If a SHG for various reasons is not willing to be directly linked with the bank branch, or if
for any reason, the Bank branch is not fully confident of lending to SHG , the Bank may
finance the SHG through the NGO/SHPI that has promoted the SHG provided the NGO/SHPI
is willing to borrow from the Bank. The Bank may consider bulk finance to NGO/SHPI for on
lending to SHGs promoted by them
Where bulk finance*to NGO/SHPI is resorted to, the branch concerned should also
observe the working of SHGs by attending their meetings so that the branch may develop
necessary confidence in these SHGs and link directly at the end of the bulk financing
arrangement with NGO/SHPI.
In the beginning, credit facility may be made available in the form of Term loan
(Clean) with agreed repayment programme. Based on the confidence gained over a period of
time, branches may extend Cash Credit (Clean) facility keeping in view the rotation of
funds. Depending on the financial position and credibility of the NGO, the bank can fix
other terms and conditions similar to company finance with normal security, as the bank
may lend huge funds to NGO at low rate of interest.
Purpose for which the loans are used.
Sanction of loans to SHGs by Banks is based on the quantum of savings mobilized by
SHGs, but not for any specific purpose. The loans may be for consumption or production
purposes or for both. The purpose for which the group will lend to its members should be left
to the common wisdom of the group. Loans to SHGs for group enterprises should be
discouraged in initial stages.
SHGs should be encouraged in due course to use loans for productive purposes.
Internal savings of the SHGs may be used for meeting emergency needs of its members.

However, Banks should not deny loans to eligible SHGs simply because the stated purposes
are for consumption/non productive.
Credit delivery:
The loan amounts should not be handed over to a single representative of the group.
Credit delivery to a group should always be in the presence of office bearers of SHG and
selected members. At least one of them should be a borrower so as to safeguard / prevent
possibility of misappropriation of funds.
Other lending norms:

1) Group size : 10-20 members
2) Loan amount: No ceiling in limit, but on pro rata basis ranging from 1:1 to 1:4 of group
funds (Corpus)
3) Group assistance after a minimum functioning of 6 months(from the date of 1 st meeting
of the group).
4) Opening Savings bank account / loan account in the name of SHG.
5) NABARD provides 100% refinance to Banks.
6) Loan as Term Loan or cash credit (clean)
7) Achievements are shown under Agl. Segment.
8) Finance can be extended beyond service area.
9) Rate of interest is as applicable from time to time.
10) Financial powers : as delegated by the respective circle authorities.
11) Security: Group pressure is considered as security and the loan is secured by guarantee
of all members, (loans to SHGs are treated as clean , loans)
12) Repayment: 24/36 monthly/quarterly/half yearly installments or as agreed mutually by Bank
and SHG.
3.7 DOCUMENTATION
Direct Finance to SHGs:

The SHG intending to avail loan facility from the Bank should pass a resolution in group
meeting expressing their intention to avail loan from the bank and authorize two/three
representatives of the group to execute all necessary formalities for availing loan
1) Loan application executed by authorized representatives
1) Inter-se agreement executed by all members authorizing the representatives to transact on
behalf of the group.
(To be stamped as general power of attorney)
3) Articles of Agreement executed by group representatives (to be stamped as an Agreement)
4) Recommendation letter from NGO/SHPI if sponsored.
Indirect Finance through NGOs / MFI

1) Loan application
2) Articles of Agreement
Other conditions:
a) NGO should have been registered under Society/ Company/partnership/Co operative
Act.
b) Audited balance sheet for 3 years analyzed.
c) Provision in by law of NGO to borrow for SHG activities.
d) Resolution to borrow from Bank.
e) A statement of credit required by SHGs.
f) Loan should be collaterally secured.
g) NGOs should specify the rate of interest they will charge for the loans sanctioned to SHGs.
It should not be unduly high.
Financial Powers:
The financial for sanction of un secured advances as stated in delegation of financial
powers would be applicable in his case. Keeping in view the clean nature of the Term loan, the
minimum sanctioning authority would be AGM of the Region or AGM of the branch. (For
formats / documents for financing SHG federations please refer corporate centre letter No. MC/
55/227 dated 2142-2005)

1. Encourage income generating activities.

2. Sanction new limits (Repeat loans) to the good groups based on
savings/demand/activities
undertaken by them.
3. Organize training programmes to SHGs and awareness campaigns to new groups.
4. Promote community services activities in the villages involving SHGs.
5. Send progress report at monthly intervals to controlling authorities.
3.8 ADVANTAGES OF SHG CREDIT LINKAGE PROGRAMME:

The following are the main advantage of SHG credit linkage programme:
3.8(1) TO BANKS:
Wider coverage
Less desk work to field staff
Low transaction cost to bank
Externalization of credit function
High recovery and no NPAs
Goodwill and image building in villages for the Bank
3.8(2 ) TO SHG MEMBERS

Credit delivery ( small, timely and need based) at the door step
Flexible norms in credit dispensation
Promotion of mutual trust and co operation among members
Development of thrift habit among poor
Financial and social empowerment of members
Employment generation in villages
Confidence building among rural poor
Improvement in standard of living

Entrepreneurship development among SHG members

Asset creation
Loans without security and formalities
Convenient loan repayment schedule
3.9 CHALLENGES FOCUSING SHG FEDERATION
A federation is a network of SHGs evolved by the SHGs themselves and comprises

representatives drawn from the network with the main objective of supporting one another
to attain the economic and social empowerment of the members and to build the capacity
such that it gives an operational freedom and also an improved compensation for its produce
resulting in higher income and better revenues for the networked SHGs. It is a forum of
collective effort of women members enabling holistic and sanctified growth and
sustainability of the participating SHG.
THE NEED FOR FEDERATION:

The need for federations was felt as the SHGs were unable to deal with certain
issues beyond their reach and operational capability. If the SHGbank linkage moment has
to be sustained, it calls for a collective action and common support and hence the need for the
federation. Apart from sustaining the SGH movement, the federation adds value to the
existing operations. The normal SHG -with a membership of about twenty women members
is too small when it comes to deal with realizing the greater aspirations of the members. The
ability to negotiate and gain greater bargaining power has forced the SHGs to unite and form
the federations. The exemplary feature of the SHGF is that it is not a legal entity and does not
have a corporate status. However, the Reserve Bank of India has permitted the federations to
engage in the financial transactions -with the banks. Several federations have been promoted
by the NGOs to address the issues of capacity building, improving the quality, bettering the
marketing strategy, greater bargaining power, sharing the cost of various operational
strategies and to ensure the overall sustainability of the networked SHGs.
The credit in leading the way and pioneering the concept of SHG federation goes to
MYRADA. This NGO has focused on the promotion of federations comprising 15 to 20

SHGs. These federations are not registered entities and their focus is primarily on capacity
building, delinquency management and addressing the various issues as to how to fortify and
strengthen the causes of social upliftment. PRADAN promoted by the Sri Padmavathi Mahila
Abyudaya Sangam in Tirupathi has sponsored the Dhan Foundation. The Dhan Foundation
has fostered federations of cluster of SHGs at the apex level. While the SHGFs promoted by
the Dhan Foundation are registered under the Societies Act, the federations promoted by the
MYRADA are unregistered. The Cooperative for American Relief Everywhere most
popularly called as CARE has sponsored SHGFs across the states of Andhra Pradesh, Orissa
and West Bengal. The SHGFs promoted by the Dhan foundation is spread across the southern
parts of India. It is common to note a two tier phenomenon of SGHF formation, one at the
Village level and the other at the Block level. The two tier system enables better coordination
and communication to facilitate sustainable institutions for the economically active poor.
There are also complex SHG federations originating from the Village level, Cluster
level, Block level, District level, Divisional level and at the State level. But such a complex
system needs to be discouraged as too many layers defeat the very purpose of forming the
federations. The federation concept serves the dual purpose of sharing and learning. The
federation helps the SHGs to scale up its level of operations. They share their expertise and
pool their proficiency and skill that enables them to enhance their capability. As the number
of groups grow with the addition of newer groups, the principal promoters' involvement and
direct contact with the various groups takes a beating. It is at this point of time that the
promoter thinks of sponsoring a federation to leverage the various tasks in the most
productive manner.
Through the federation mechanism, the SHGs come together under one umbrella to
exchange their knowledge, information and more importantly their experience. When the
issue of marketing and obtaining the desired price for their produce surfaces, the federation
as a representative of the SHGs takes up their cause that enables the networked SHGs to
improve their visibility. This collective bargaining power is the essence of federation. The
federation also takes up several sodal welfare measures like female infanticide, education to
the girl child, free school for the girl child, even providing toilet facilities for the girl

children, curbing the girl and women trafficking, manufacture of illicit and spurious liquor,
domestic violence against women and the girl child and empowering the women.
THE PURPOSE OF A FEDERATION

The basic function of a federation is to strengthen the SHG-bank linkage for a
sustainable relationship. The federation strengthens the capacity of the member SHGs in a
variety of ways. The style of governance ensures a more realistic and practical approach to
problem-solving, goal-setting and promotion of SHG mechanism at all levels. The federation
ensures that the status of the SHG is protected and may not be altered by any unilateral
decisions. The federation resolves any conflict that may arise within the member SHGs. The
critical component of the federation is assistance in the maintenance of records and books
which the SHGs consider very cumbersome and least productive and also provides staff
support to the member SHGs. Apart from regulating and supervising the functioning of the
member SHGs, the federations help the member SHGs in the preparation of books of
accounts. Of late, the federations have taken up the task of providing multiple credit lines to
the member SHGs and are involved in marketing low premium insurance products to the
members of the SHGs.
The SHG federations are very popular and spread across southern India and a
majority of these federations are small comprising less than 50 SHGs. Bulk of the federations
are located in Andhra Pradesh, Kerala and Tamil Nadu. It is noticed that majority of these
federations have a two-pronged objective one of poverty alleviation and the other of women
empowerment. The federations apart from monitoring the member SHGs ensure that the
SHGs meet regularly with a good attendance. It is significant to note that the savings pattern
shows an upward trend in all those SHGs linked through a federation and that there are no
locked up funds implying that the funds are being properly deployed to ensure a better return
for the members.
The Department for International Development of the United Kingdom has supported
the SHG federation mechanism in Andhra Pradesh, West Bengal and Orissa. It is true that a
number of Federations promoted by MYRADA,DHAN, Outreach, CARE, PRADAN, PANI
and NEED have done a commendable job but the federation launched by the Kerala

Government with the active support of the Union and the NABARD called the
Kudumbashree deserves a special mention and has been detailed in a separate chapter.
Kudumbashree, through a three-tier community based programme, envisages formation of
informal bank of poor women and empowering women through community based
organization. It aims at the establishment of rural marketing networking and formation of
microenterprises across the state of Kerala. The World Bank, DFID and a large number of
international NGOs promote SHG federation as an institutional mechanism for poverty
alleviation. Samgha means a congregation of those who have the same view.
CHALLENGES BEFORE A FEDERATION

The federations in India are faced with innumerable challenges. Who should take the
lead in promoting a federation? Is it the job of the SHGs themselves or is it the prerogative of
an NGO or the promoting organization. What are the legal safeguards for the federations in
India? The federations managed by the members drawn from the SHGs are on more
occasions blissfully unaware of the role and responsibilities of the federations. They are all
committed but lack vision and look up to the promoters in managing larger issues. Fund
mobilization is one of the biggest challenges before the federations. They find themselves in
an awkward position as the promoters themselves are corning from an ideological
background with limited resource capability. As a result, accountability and transparency, the
two critical components for redefining the microfinance moment has taken a beating. Who is
the true owner of these federations? The federations get driven by the "Aaya Ram, Gaya
Ram' culture. It is seen that those who are vocal in the SHGs get into the management of the
federations. They have their own priorities and have inadequate understanding of the
federation mechanism.
The vision of the federation has to be driven by its members and not by the promoters.
Certainly, this would lead to a clash of conflict if the promoters have their own agenda of
priorities. The federations are governed by the members who have a very short tenure and are
forced out of job every year. The tenure of the federation members has to be such that is
linked to the tenure of the credit availed from the bank. The federation management has to be
financially compensated by the promoters such that they spend quality time in the federation

and ensure a win-win situation for everyone. The clash of conflict between the promoters and
the federation management often sends wrong signal to the entire process of microfinance.
The Indian bureaucratic culture of the promoters drawing comfort through the
informal chain of working with the staff members of the federation more often causes havoc
in the function of the federations. The federation staff feel that they are accountable to the
promoters and not to the federation management needs a course correction. The majority of
the federations in India do not have a legal sanctity. They have no bye-laws and are loosely
bound more often by trust and confidence. Most of the federations do not have a well laid out
plans on governance and the administrative mechanism. The federations do not develop the
second level leadership on the premise that their own place and position in the federation
may not be safe and protected in the long run.
The federations are plagued by trained staff, as a result most of them are not in the
habit of preparing the statement of accounts. Even when trained staffs are employed, the
question of accountability is found to be poor. Well funded federations behave in a more
autocratic manner and position themselves as financial institution and lending directly to the
members of the SHG, thus, bypassing the SHGs. If we look at the SHG linked federations,
the members of the SHGs have taken credit from more than one party. They may have taken
a loan from a bank or a federation or even from the promoters. In today's context, taking a
number of loans simultaneously from several establishments has become the order of the day.
What then are the challenges before a federation?

1. Sustain the awareness amongst the member SHGs about the activities and the
functioning of the federation without creating too many layers and with a minimum
barrier.
2. Improve the connectivity and the communication between the members of the SHG
and the federation.
3. The federations are cash strapped. Hence it is advisable that the federations offer both
the financial and the non-financial products to all constituents of the self-help group.
The financial products can include a package comprising savings, credit and insurance

both life and non-life. The non-financial package can include various services,
maintenance of books and records, marketing and promotional efforts, loan monitoring
etc. based on an actual fee.
4. Sustainability of operations is by far the paramount challenge facing a federation in the
country. Most of the time, it is noticed that the federations are kept afloat using grant
money and tall claims are made that these federations are financially sustainable. The
purpose of promoting a federation is to ensure sustainability on a long-term basis that
the SHGs or the individual member of the SHG may not able to sustain. The current
status of the federations across the country shows a rather disturbing trend. Most of the
federations are already exhibiting poor financial viability and concomitant low
sustainability.
5. Technology will play a key role in linking the efforts of the federation in its various
facets of operations. No doubt the records and the books ol accounts maintained by the
SHGs are adequate; the desired information is not submitted to the federation on a
regular basis prompting the federations to spend considerable time and effort in the
follow up. The federations need to have a strong MIS and a user friendly Core Business
Solutions (CBS). The CBS will serve as a building block to cement the efforts of the
federation and to ensure its sustainability on a long-term basis.
6. The other great challenge before a federation is to obtain a legal status and register
either as a Trust or a Society under the relevant act or can even aspire to graduate to be
registered under the Companies Act. Such a legal recognition enables the federation to
commercialize its products and reduce its credit risk considerably.
7. The federations in India are expected to lay more emphasis on the social consideration
and as a result the profit motto of the federations suffers to a large extent. Moreover, the
concept of specific goal or target oriented performance of the federation undermines the
sustainability of the federation.
8. Promoters of federations need to in-build the institutional development skills in the
management of these federations. Moreover, the maintenance of the federations
involves considerable cost. According to the Ministry of Rural Development, the
average cost of establishing an SHG is about Rs. 10000. Assuming that there are about

100 SHGs in one federation, the promotional cost alone would be in the region of Rs.
10 lakhs. In addition, it costs another about Rs. 5 to 10 lakhs to promote the federation.
Over and above the operating costs of the federations varies from one federation to
another.
9. As the federations grow in size, the greatest challenge is to how to maintain and sustain
its member participation. As the corpus of the federation swells up, vested interests tend
to take over the administration of the federations and the power play begins.
10. It is true that the SHG federation model has attained the exalted status in capacity
building and has a great potential in improving the socioeconomic conditions of the
economically active poor. The federations need active support from the formal financial
market, the government and the promoters. The federations have been evolved as a
model that promotes the sustainability of the SHGs and has provided the much needed
institutional base for the poor women in particular to realize their dreams and
aspirations.
11.The federations should inspire the SHGs to dream by awakening the entrepreneur in
them. The federations have come to stay in our country. With improvement in the legal
and regulatory frameworks to facilitate the growth of the federations, the federations
will serve as a building block to address the poverty alleviation measures in our
country.
3.11CONCLUSION:
SELF HELP GROUP is a concept emerged in the direction of helping rural poor forming
groups so that; they will improve their living conditions through voluntary participation in thrift
and credit. SHG is to evolve supplementary credit strategy for reaching the poor, to build mutual
trust and confidence between the bank and poor.

The SHG federation while functioning as a facilitating agency will consciously develop
entrepreneurial competency of individuals and professionalize the management of SHGs,
simultaneously ensuring equitable distribution of resources.
MICRO FINANCE SHOULD BE SO SOFT TO TOUCH THE LIVES OF THE PEOPLE THEY
SERVE BUT HARD ENOUGH TO LEAVE A DISTINCT IMPACT ON THEIR LIVES.
CHAPTER 4
SHGs PROGRAMME AT CAUVERY KALPATHARU

4.1 BANK PROFILE

4.2 BANK LINKAGE WITH SHGs
4.3 SWARNJAYANTI GRAM SWAROZGAR YOJANA
4. 4 DOCUMENTATION
4.5 SHG PROGRAMME AT CAUVERY KALPATHARU
4.1 BANK PROFILE

MISSION STATEMANT
Partnering in the improvement of standard of living of all our customers and
growing as a prime and strong Rural Bank in the State and Country is our Goal.
Sincerely responding to the wishes and aspiration of our customers and serving
them with a smile beyond their expectations is our Motto

The Cauvery Kalpatharu Grameena Bank (CKGB) came in light in 2006. It is a

Regional Rural Bank sponsored by State Bank of Mysore. CKGB operates its banking and financial
business in the State of Karnataka.
Cauvery Kalpatharu Grameena Bank was established under Regional Rural Banks Act 1976
on 24th May, 2006. The Bank was constituted by the amalgamation of 2 erstwhile banks sponsored
by State Bank of Mysore - Cauvery Grameena Bank and Kalpatharu Grameena Bank.
Ownership shares of Cauvery Kalpatharu Grameena Bank are divided into Government of
India (50%), Government of Karnataka (15%) and State Bank of Mysore (35%). The Bank has
achieved the status of Scheduled Commercial Banks also to run all kinds of business.
CKGB operates its banking and financial business in 7 districts of Karnataka State -
Mysore, Tumkur, Hassan, Bangalore Rural, Ramanagar, Chamarajanagar and Bangalore
Urban districts. It has a large network of more than 215 branches. All branches are fully
computerized.
CKGB has a customer base of more than 11 lakhs. The Bank fulfills the need of farming
community, business class, professional and self employed persons. CKGB has decided to open a
branch in the villages where population is more than 2000.
Head office of Cauvery Kalpatharu Grameena Bank is located at CA 20, Vijayanagar II Stage
in Mysore (Karnataka). www.ckgbank.com is the official website for the updated information
regarding recruitment, loans, interest rates, saving accounts, results, new schemes and other services.
CKGB provides a wide array of banking and financial services - agricultural banking,
deposits, Kisan Credit Card, Kisan Gold Card, Kisan Chakra, Farm Mechanization, Agri Clinics,
micro finance, personal banking, insurance services, personal loans, housing loans, vehicle loans,
consumer loans, education loans and mortgage loans.

4.1A)Objectives
Our Motto is not to make Profit out of

banking
But to Profit YOU out of OUR Banking
bridge the gap between commercial and co-operative bank

Low cost structure
To cover both mass and class banking
To encourage efficient deposit mobilization.
To promote SHGs on its own and also as a Self Help Promoting Institution(SHPI)
To extend Banking facility to unreached and extend micro finance services for
uplifting the poor
4.1B) Organizational structure

The Chairperson of the Bank is Smt.L.T.Ambujakshi TEGS VI (DEPUTY
GENERAL MANAGER) deputed by the Sponsor Bank i.e., State Bank of Mysore. She is
also heading the Board of the Bank. Chairperson is assisted by General Manager
Administration and General Manager Operations at Head office.
At Head Office The General Manager- Administration is assisted by Chief Managers

heading Accounts, Planning & Secretariat, Advances, Inspection, Vigilance, Personnel
Administration and Information Technology Department. The General Manager- Operations
is overseeing the functions of all the 4 Regions. Viz., Mysore, Hassan, Tumkur and
Bangalore.
At Regional Offices The Regional Manager is supported by Chief Manager / Senior

Managers in General banking and Credit Section.
4.1C) BANKS ACHIEVEMENT

Performance Highlights 2010-2011

Bank awarded first prize for the Fifth Consecutive Year under RRB category in
Karnataka for the Highest Shares of SHG Business to Overall Business by
NABARD
Sira Branch in Tumkur District has been selected as the Best Performer under the
category Highest Quantum of Loan Disbursed to SHGs among RRB Branches
in Karnataka for second consecutive year.
All that 215 branches of the bank are brought under Core Banking Solutions
Platform.
The bank has reached a total business level of Rs.3895.97 crore registering a growth
of 21.30%
The Deposit level is at Rs.2187.08 crore registering a growth of 21.54%
The Advances level is at Rs.1708.89 crore registering a growth of 20.91%
The Priority Sector Advances level is at Rs.1521.13 crore accounting for 89.01%of
total advances.
The Agriculture Advances level is at Rs.1021.36 crore accounting for 59.76% of total
advances.
The Net Profit of the Bank is at Rs.19.18 crore registering a growth of 20.93%.
Bank has disbursed loan of Rs 994.70 crore achieving 104.71% of MOU Goal.
Disbursement to Priority Sector is Rs.846.80 crore accounting for 85.13% of total
disbursement
Disbursement to Agriculture Sector is Rs.593.92 crore accounting for 59.71% of total
disbursement
Per Branch productivity has increased from Rs.15.30 crore to 18.12 crore registering
102.67% of MOU Goal.
Per Employee productivity has increased from Rs.3.37 crore to 4.16 crore
registering 112.44% of MOU Goal.

During the current year the bank has credit linked 10271 SHGs with financial
assistance of Rs.167.12 crore. The Cumulative linkage of SHGs is 52758 with
financial assistance of Rs.659.58 crore
During the current year the bank has formed and credit linked 1697 JLGs with
financial assistance of Rs.13.56 crore. The Cumulative formation and linkage is 2772
JLGs with financial assistance of Rs.24.39 crore.
4.1D) GOALS FOR 2011-12:

To open 15 New Branches.
To increase Business Turnover to Rs.4800 Crore.
To reduce Gross NPA to 1.19 % of Gross advance.
4.2 BANK LINKAGE WITH SHGs

4.2 STEPS IN PROMOTION OF SHGs
Identifying suitable Branches
Selection of SHG volunteers for promotion of SHGs
Training SHG volunteers in SHG promotion
Promotion of SHGs by SHG volunteers
Opening of Savings Bank account by SHGs
Credit linkage of SHGs
ADVANTAGES TO BANK:
SHG financing is cost effective for Banks.
Adds quality to loan portfolio of Banks.
By using VW clubs Banks can externalize number of their functions , Participation in
SHGs linkage programme where there are no NGOs.
Excellent recovery besides good will to Bank/Branch.

4.4 SHG PROGRAMME AT CAUVERY KALPATHARU GRAMEENA

BANK, MYSORE.
CKGB has taken up formation and credit linking of Self Help Groups as a
mission to reach those families who were hitherto having no access to the credit by any
formal financial institutions and are therefore depending on money lenders.
STEADY GROWTH IN SELF HELP GROUPS- BANK CREDIT LINKAGE

PROGRAMME
The erstwhile Cauvery and Kalpatharu Grameena Banks in association with

NGOs and voluntary agencies has been extending financial help through SHG Bank Credit
Linkage Programme ever since 1992. The effort of the erstwhile Cauvery Grameena Bank
has been recognized with following laurels:
BEST RRB in Karnataka for SHG promotion and linkage since 1999-2000
continuously;
Won Certificate of Appreciation from Micro Credit Summit Campaign held at
Washington for the year 2001.
The amalgamated Cauvery Kalpatharu Grameena Bank has been honoured by NABARD
by recognizing the Best Performance under SHG-Bank Linkage Programme 2006-07
with
First Prize under RRB Category.
First Prize under RRB-Branch Category awarded to B.S.Gate Branch in Tumkur
district.
The Bank has again adjudged as BEST RRB in credit linkage of SHG-2008-09 by
NABARD

The performance of the Bank as at the end of March 2011 are as under:
SHGs having SB Account 26,638
SHGs linkage during 2010-2011
Credit linkage during 2010-2011
Total (No. of groups) 10271
Of which fresh groups 3,461
Self Help Groups outstanding accounts:
Accounts 21021
Amount Rs. 211.65 Crore
Source: annual report of CKG Bank
As a skill development measure, women Self Help Group Members were trained in various
micro enterprises, vermiculture, dairy farming, etc. The Bank has formulated various
schemes for members of Self Helps Groups to improve the standard of living.
JOINT LIABILITY GROUPS (JLGs)

Bank has formed JLGs in respect of tenant farmers, agricultural labourers
who are without proper land records for security to avail finance for agriculture and other
activities. Bank has financed 2772 groups with an amount of Rs. 2439 Lakh.
Objective:
To extend Banking facility to unreached and extend micro finance services for uplifting the
poor.
Coverage:
Bank is actively involved in financial inclusion in all 7 districts of operation.
Progress as on 31.03.2011

No Frill Accounts
No Frill Accounts opened 6, 08,278
No of GCC Issued 21,126
Amount of Loans TO GCC Rs 24.38 Crores
SOURCE: Annual Report of CKG Bank
GUIDELINES FOR LENDING/RECOVERY AS FOR AS SHGS ARE CONCERNED

LENDING:
1. All SHG groups established 6 month before are eligible for finance.
2. Group members ranges: 10-20.
3.Quatum of limit decided by the bank based on period of linkage with bank and
corpus/deposit that group has maintaining which varies with 1:2 to 1:8 (1:2=corpus:
finance)
4. Minimum the 2 members are educated.
RECOVERY:
1. Regular savings and maintaining deposit in saving bank account of the group.
2. Representative should mobilize the savings from all the members of the group in
each meeting.
3. Meetings should be conducted at weekly intervals.
4. Group has to make internal lending at reasonable rate of interest
5. Continues follow up by the Bank official to ensure above said details so that
recovery will comes smoothly.
4.4(a) Achievement of Bank in comparison with Target :-
MOU 2010-2011 In lakhs

TARGETS ACHIEVEMENT %OF

ACHIEVEMENT
SHG Formation 1100 698 63.45
SHG Linkage 3800 3461 91.08

Fresh
Source: Annual Report
FUTURE PLANS/PROGRAMS OF THE BANK AS REGARDS SHGS AND MFIS.

The bank to continue to promote SHGs on its own and also as a Self Help Promoting
Institution.
The Bank continues extending credit to SHGs promoted by NGOs/Government agencies.
Meetings in SHG

4.4(b)THE PROGRESS UNDER PROMOTION AND LINKAGE OF

SHGS FOR THE PERIOD ENDING 31 MARCH2011 IS AS UNDER :
In lakhs
Sl.no Particulars Total

1 No. of SHGs having SB Account 5644
2 Of the above SHGs more than 6 months 3019
old
3 Total Outstanding of these SHGs in SB 622.00
accounts
4 CREDIT LINKAGE 2039
Credit linkage during the current year
since 1st April
5 Of the above no. Of fresh groups(A/C)
6 No. Of repeat groups (availing loan for 1205
second and subsequent times)
7 Amount of bank loan 2926.32
8 Accounts outstanding 2718
9 Outstanding amount 4899.00
Source: Annual report
During the current year 2010-11, 10271 SHGs were given loan to the extent
of Rs.16712.48 lakhs compared to 10077 groups and Rs. 14236.97 lakhs
loan given during the previous year 2009-2010.

CHAPTER 5
PERFORMENCE OF SHGs IN CKG,
MYSORE- DATA ANALYSIS
5.1 INTRODUCTION
5.2 ANALYSIS OF DEMOGRAPHIC PROFILE
5.2.1 AGE
5.2.2 INCOME RANGE
5.2.3 FAMILY STRENGTH
5.2.4 EARNING MEMBERS
5.2.5 LOAN TAKEN
5.2.6 FREQUENCY OF LOAN AVAILED
5.2.7 AVERAGE SIZE OF LOAN AVAILED
5.3 ANALYSIS OF MEMBERS RESPONSES
5.3.1 SHG LENDING VS. LOCAL MONEY LENDING
5.3.2 MOST GOOD FEATURE OF SHG BORROWING
5.3.3 OPINION ABOUT SHG
5.3.4 USAGE OF SHG LOAN FOR INTENDED PURPOSE
5.3.5 PERFORMANCE RATING OF SHG
5.3.6 RELATIONSHIP OF PEOPLE WORKING IN SHG
5.3.7IMPACT OF SHG MEMBERSHIP
5.3.8 FAMILY SUPPORT FOR SHG MEMBERSHIP
5.3.9 OPINION ABOUT THE TIMELY CREDIT FROM SHG
5.3.10 SHG AT CKG VS. OTHERS
5.3 .11RATING THE PERFORMANCE OF TEAM LEADER

5.4 SUMMARY
1. INTRODUCTION
The analysis of this chapter is based upon the primary data
collected through the questionnaire .This chapter consists of two parts: PART-A
and PART-B.
Part-A deals with the analysis of general information about the respondents of
SHGs. The major categories of information included in part-A relates to age,
income, family strength, earning members, loan taken, average loan taken,
frequency of loan availed,etcPart-B consists of information relating to the
activities and the performance of SHGs in Mysore city. The major parameters
used of this purpose including purpose of loan, performance of SHG vs. Local
Money lender, etc.
2. ANALYSIS OF DEMOGRAPHIC PROFILE

The Cauvery Kalpatharu Grameena Bank in Mysore town is a
leading bank as for as promotion of microfinance services. In all the Bank is
supporting as many as 161 SHGs since the year 1992, of which a sample of five
SHGs have been selected for evaluating the working and performance of these
groups.
In this section a brief analysis of demographic profile of SHG
members is presented covering the factors like age , annual income, size of the
family , etc,.

2.1 AGE:
As per the table 2.1 majority of the members i.e., about 55% of them are
in the age group of 30 to 40 years.40% of them are in the age group of
below 30 and also 40 to 50 years. Then remaining 5% respondents come
under the age group of 50 to 60.This implies that youngsters are more
interested in SHG activity compared to the members whose age is above
40.
Table 2.1
AGE PROFILE OF RESPONDENTS
Age(yrs) Number of Percentage

Respondent
Below 30 16 20
30-40 44 55
40-50 16 20
50-60 4 5
Total 80 100
Source: primary data

2.2 INCOME RANGE:
Table 2.2 below depicts that the majority i.e 40% of the members
belong to the annual income range of 10000 to 15000. 25% respondents come
under the income range of 5000 to 10000 then 10%is shared by those having
income less than 5000 and also having more than 20000 .remaining 15% having
an annual income between 15000 to 20000.It indicates that majority of the
members belong to marginal income group.
Table 2.2:
INCOME RANGE OF RESPONDENT

Income (per Number of respondents Percentage
Annum)
Below 5000 8 10
5000-10000 20 25
10000-15000 32 40
15000-20000 12 15
Above 20000 8 10
Total 80 100
Source: Primary data.

2.3 FAMILY STRENGTH:
According to table 2.3, 10% of the respondents family size is below

3 and 30%of the respondent is below 4 .The average family size of majority
i.e50% of respondents comes under below 5. Then the remaining10%
respondents come under the family size of above 6.Therefore it can be
concluded that majority of the respondents belong to nuclear family.
Table 2.3
FAMILY STRENGTH
No. of family members Num of respondents Percentage
Below 3 8 10
Below 4 24 30
Below 5 40 50
Above 6 8 10
Total 80 100

2.4 EARNING MEMBERS
Below table 2.4 depicts 50% of the respondents with maximum 2

earning members in a family. Then 25%of them have 1 earning member.
Remaining other 25% respondents have 3 earning member in family. Therefore
it can be concluded that majority of the respondents belong to 2 or less earning
members in a family.
Table 2.4
EARNING MEMBERS
Earning members Number of respondents percentage
1 20 25
2 40 50
3 20 25
Above 4 0 0
Total 80 100

2.5 LOAN TAKEN
Table 2.5 below shows that majority i.e 30% of the respondents have
taken loan in the range of 10000-20000. Other 25%of them have taken loan in
the range between 20000 to 30000.20%of the respondent have taken loan
between 5000 to 10000.15% of them above 30000 then remaining 10% of them
have taken loan below5000.Accordingly we can say that the size of the loan is
medium and it works out to an average of Rs 1000 per month.
Table 2.5
LOANS TAKEN
Loan taken Number of respondents percentage
Below 5000 8 10
5000-10000 16 20
10000-20000 24 30
20000-30000 20 25
30000& above 12 15
Total 80 100
Source: Primary data

2.6 FREQUENCY OF LOAN AVAILED
As per the data presented in table 2.6 below, majority of the respondents
i.e., upto 50% of them have availed the loan only 1 times. 25%of the
respondent have availed a loan 2-3times and other 25% of them availed 4 to
6times.This implies that respondents have availed a loan not so frequently.
Table 2.6
FREQUENCY OF LOAN AVAILED
Loan availed Number of respondents percentage
1 40 50
2-3 20 25
4-6 20 25
More than 6 0 0
Total 80 100
2.7 AVERAGE SIZE OF LOAN AVAILED
On the basis of information showed in the table 2.7 below it can be

observed that majority of the respondents i.e., upto 37% of them have availed

the loan between Rs .5000 to10000. 25%of them have taken loan in the range of
10000 to 15000. 19% Of the respondents have taken loan in the range between
15000 to 20000 and above 20000 respectively. This means the size of the loan
taken by respondent each time is low and sufficient only for small
entrepreneurial activity.
Table 2.7
AVERAGE SIZE OF LOAN AVAILED
Average loan taken Number of respondents percentage
Below 5000 0 0
5000-10000 30 37
10000-15000 20 25
15000-20000 15 19
Above 20000 15 19
Total 80 100
3. ANALYSIS OF MEMBERS RESPONSES
This is the main and important section of the whole project wherein
detailed discussion about the performance of SHGs at CKG Bank Mysore

is undertaken. For this purpose the responses of the members are grouped
into ten sub sections, each section dealing with a particular theme.
3.1 SHG LENDING VS. LOCAL MONEY LENDING:
In this sub section a brief discussion about the members

response relating to how they feel about SHG lending in comparison with local
money lending is taken up. Mainly the following five questions were asked
1. Is borrowing from a bank as a member of SHG is better than

borrowing from a local money lender?
Table 3.1(1)
SHG LENDING VS. LOCAL MONEY LENDING
Borrowing from Bank Number %
Total respondents 80 100
Yes 80 100
No - -
Total 80 100

Diagram 3.1(1)
As per the data furnished in Table 3.1(1) all the 80 Respondents did
answer the above question affirmatively indicating that the SHG members are
highly positive about the financial assistance from the bank instead of the
money lenders.
(2)To what extent SHG borrowing is better than borrowing from local money
lending?
The responses to this question are presented in table 3.1(2) indicating that
81% 0f the respondent opined that above 60% SHG better than LML. Other
19% opined that its better to the extent of 40 to 60%.

Table 3.1(2) SHG borrowing is better than borrowing from local money
lending
SHG better than LML Number of %
Respondent Source:
Upto 30% 0 0
30-40% 0 0 primary
40-60% 15 19
data
Above 60% 65 81
Total 80 100
Diagram
3.1(2)
SHG BORROWING IS BETTER THAN BORROWING FROM LOCAL
MONEY LENDING

(3)Which factor do you think is the worst part of borrowing from a local money
lender?
When the respondents were asked to identify the worst part of borrowing
from a local money lender, majority of them i.e., 56% of respondent said
that it constitute high interest rate. While 20% of the respondents feel that
local money lending is worst from all the viewpoints i.e., high interest rate,
collateral security and coercive repayment pattern. The results are shown
in table 3.1c and the corresponding diagram.
Table 3.1(3)
THE WORST PART OF BORROWING FROM A LOCAL MONEY
LENDER
Worst part of Number of %
borrowing Respondents
High interest 45 56
Collateral security 10 13
C.Repayment pattern 5 6
All the above 20 25
Total 80 100
Diagram 3.1(3)
THE WORST PART OF BORROWING FROM A LOCAL MONEY
LENDER

(4) Would you say that there are some good features of borrowing from local
money lender?
For this question 50 respondents constituting 63% of them answered

in the affirmative and said yes to the question. The remaining 30 respondents i.e
37% of them opined that there are some good features of LML borrowing. The
results are shown in the following table 3.1d and the corresponding diagram
Table 3.1(4)

GOOD FEATURES OF BORROWING FROM LOCAL MONEY

LENDER
Good feature from LML Number of %
respondent
Yes 50 63
No 30 37
Total 80 100
Diagram 3.1(4)
GOOD FEATURES OF BORROWING FROM LOCAL MONEY
LENDER
(5) Which of the following is a good feature of borrowing from Money lender?

The respondents were asked to identify some good features of

borrowing from money lender including convenience of borrowing, privacy of
borrowing and emergency situation. 31% of the respondents opined that
privacy is the good feature.25% of them opined that emergency and all the
three respectively are good features of borrowing from money lender. And The
relevant data is presented in table 3.1(5) and the corresponding diagram.
Table 3.1(5)
GOOD FEATURE OF BORROWING FROM MONEY LENDER
Features Number of %
Respondent
Convenience 15 19
Privacy 25 31
Emergency 20 25
All the above 20 25
Total 80 100
Diagram 3.1(5)
GOOD FEATURE OF BORROWING FROM MONEY LENDER

3.2 MOST GOOD FEATURE OF SHG BORROWING:

In this sub section the discussion is based on the
identification of the good features of borrowing as a member of SHG. For this
purpose respondents were asked to answer 3 questions.
(1)Which of the following is the single best feature of
borrowing as a member of SHG?
The respondents were asked to identify the single
most good feature of borrowing from SHG like convenience of borrowing,
collateral security, low interest rate and repayment pattern. Majority of the
respondents i.e 69% said that low interest rate is the good features of
borrowing from SHG. The relevant data is presented in table 3.2a and the
corresponding diagram.
Table 3.2(1)

SINGLE BEST FEATURE OF BORROWING AS A MEMBER OF

SHG
Good feature of SHG Number Of % Sourc
e: Respondent
Convenience 14 18
Coll.security 5 6
Low interest 55 69
Repayment 6 7
Total 80 100
primary data
Diagram 3.2(1)
SINGLE BEST FEATURE OF BORROWING AS A MEMBER OF
SHG
(2)Are you
satisfied as a member of SHG?

For this question 80 respondents constituting 100% of them

said yes. This means that SHG is helping them in fulfilling their needs.
The results are shown in the following table 3.2(2) and corresponding
diagram.
Table 3.2(2)
SATISFIED AS A MEMBER OF SHG
Satisfied as a member of SHG Number of %
respondent
Yes 80 100
No 0 0
Total 80 100
Diagram 3.2(2)
SATISFIED AS A MEMBER OF SHG

(3)Which of the following factor do you consider important?
The respondents were asked to identify the important factor they

consider to satisfy as a member of SHG. Most of the respondents i.e 38%
ranked to the bank support while other31% option was enhanced social
status and 25% of them opined friendly relationship remaining 6% selected
good leadership. The relevant data is presented in table 3.2(3)and the
corresponding diagram.
Table 3.2(3)
FACTOR DO YOU CONSIDER IMPORTANT
Important Factor Number of %

respondent
Friendly relationship 20 25
Free entry 0 0
Good leadership 5 6
Bank support 30 38
Enhanced social status 25 31
Total 80 100
Diagram 3.2(3)
FACTOR DO YOU CONSIDER IMPORTANT

3.3 OPINION ABOUT SHG
When the respondents were asked to express their

willingness to inform their friends and relatives to join the SHG, all 80 of
them expressed their willingness to do so. The relevant data is presented in
table 3.3 and the corresponding Diagram 3.3
Table 3.3
OPINIONS ABOUT SHG
Inform others Number of %
Respondent
Yes 80 100
No 0 0
Total 80 100
Diagram 3.3
OPINIONS ABOUT SHG

3.4 USAGE OF SHG LOAN FOR INTENDED PURPOSE

The sample depicts that all 80 respondents constituting 100%
of them using loan for intended purpose. The results are shown in the
following table 3.4 and corresponding diagram.
Table 3.4
USAGE OF SHG LOAN FOR INTENDED PURPOSE
Using for Intended purpose Number of %
respondent
Yes 80 100
No 0 0
Total 80 100


Diagram 3.4
USAGE OF SHG LOAN FOR INTENDED PURPOSE
3.5 PERFORMANCE RATING OF SHG
The respondents were asked to rate the performance of their

SHG 50% of them rated their SHG performance as excellent & 38% as average
and other 12% as good . Table 3.5 and the corresponding diagram 3.5 depict the
results.
Table 3.5
PERFORMANCE RATING OF SHG
Performance of SHG Number of %
respondent

Excellent 40 50
Average 30 38
Good 10 12
Poor 0 0
Total 80 100
Diagram 3.5
PERFORMANCES RATING OF SHG

3.6 RELATIONSHIP OF PEOPLE WORKING IN SHG
Respondents were asked to express their opinion

about the relationship of the people working in SHG and all 80 of them said that
the relationships are cordial. The results are shown in the table 3.6 and the
corresponding diagram 3.6
Table 3.6
RELATIONSHIP OF PEOPLE WORKING IN SHG
People in SHG are cordial No of %
Respondent
Yes 80 100
No 0 0
Total 80 100
Source: Primary data
Diagram 3.6
RELATIONSHIP OF PEOPLE WORKING IN SHG

3.7 IMPACT OF SHG MEMBERSHIP
With the objective of accessing the impact of SHG membership,

the question was asked whether their financial knowledge was improved. All
the respondents answered in the affirmative indicating that their financial
knowledge was improved. The results are shown in the table 3.7 and the
Table3.7
IMPACT OF SHG MEMBERSHIP
Financial knowledge improved Number of %
respondent

Yes 80 100
No 0 0
Total 80 100
Diagram 3.7
IMPACT OF SHG MEMBERSHIP

3.8 FAMILY SUPPORT FOR SHG MEMBERSHIP
When the respondents were asked to express their opinion about

their family support, majority of respondents i.e., 50% of them said that they
received their family support to the extent of above 50 to 75%. And about 31%
of them receive more than 75% support from their family. Other 19% of them
receive support between 25% to 50%. The results are shown in the table 3.8 and
the corresponding diagram 3.8
Table 3.8
FAMILY SUPPORT FOR SHG MEMBERSHIP
Support received from family Number of %
respondent
Upto 25% 0 0
25-50% 15 19
50-75% 40 50
Above 75% 25 31
Total 80 100
Diagram 3.8
FAMILY SUPPORTS FOR SHG MEMBERSHIP
3.9
OPINION ABOUT THE TIMELY CREDIT FROM SHG
The respondents were asked to express their opinion

about timely credit facility from their SHG, about 88% respondents answered
in the affirmative indicating that they received timely credit facility from their
SHG. Other 12% of them indicated no to the question. The results are shown in
the table 3.9 and the corresponding diagram 3.9
Table 3.9
OPINION ABOUT THE TIMELY CREDIT FROM SHG
Timely credit Number of %
Respondent
Yes 70 88
No 10 12

Total 80 100
Diagram 3.9
opinions about the timely credit from SHG

3.10 SHG AT CKG VS. OTHERS
The respondent were asked to rate about their SHG against

other SHGs with other banks ,all of them rated their SHG as better than any
other in the Mysore town. The results are shown in the table 3.10 and the
Table 3.10
SHG AT CKG VS. OTHERS
Sour
ce: SHG is better than Number of %
other respondent
Yes 80 100
No 0 0
Total 80 100
primary data
Diagram 3.10
SHG AT CKG VS. OTHERS

3 .11 RATING THE PERFORMANCE OF TEAM LEADER
The respondents were asked to express their opinion about

the performance of their team leader. 56% respondents answered that their team
leader performance is excellent and the remaining 44% indicate as good. The
results are shown in the table 3.11 and the corresponding diagram 3.11
Table 3.11
RATING THE PERFORMANCE OF TEAM LEADER
Performance of team leader Number of %
respondent

Excellent 45 56
Good 35 44
Ok 0 0
Total 80 100
Diagram 3.11
RATING THE PERFORMANCE OF TEAM LEADER

5.4 SUMMARY:
The whole discussion above concerning the performance

evaluation of microfinance programme of CKG bank which focuses on Bank-
SHG linkage can be summarized as follows:
MF PROGRAMME PERFORMANCE
Sl.No. CRITERIA RANK
OK GOOD EXCELLENT
1 IMPACT OF SHG
2 TIMELY CREDIT FROM SHG
3 SHG AT CKG AGAINST OTHER
BANK
4 PERFORMANCE OF SHG
5 ENHANCED SOCIAL STATUS OF
SHG MEMBER
6 SATISFACTION AS A MEMBER
OF SHG
7 BORROWING FROM SHG
AGAINST LOCAL MONEY
LENDER

From the above analysis it can observed that in 6 out of 7 criteria

the MF programme of CKG ,Mysore has been ranked GOOD .Therefore it
can be concluded that MF programme of CKG, MYSORE, is par GOOD, and
hence the hypotheses is proved.
CHAPTER 6
SUMMARY OF FINDINGS AND SUGGESTIONS

6.1 INTRODUCTION
6.2 SUMMARY OF FINDINGS

(i)General
(ii) Members Responses
6.3 SUGGESTIONS
6.4 CONCLUSION
6.1 INTRODUCTION
The objective of this chapter is to present a brief account of findings of the study
followed by suggestions and conclusion. Accordingly, the chapter consists of three main
segments: 1.summary of findings, 2. suggestions and 3.Conclusion. Further, findings are sub-
divided into two parts: first part being general i.e. based on demographic profile of

respondents and second part based on responses of SHG members. The suggestions are
mainly based on the
Inputs provided by the bank officials regarding the functions of SHGs in their bank.
6.2 SUMMARY OF FINDINGS
(i)General
a) Age: Majority of the members i.e., about 55% of them are in the age group of 30 to 40
years. This implies that youngsters are more interested in SHG activity compared to
the members whose age is above 40.
b) Income range: Majority of the members belong to the annual income range of 10000
to 15000.It indicates that majority of the members belong to marginal income group.
c) Family strength: The average family size of majority of respondents found be below 5.
Therefore it can be concluded that majority of the respondents belong to nuclear
family.
d) Earning members: It was found that in 50% of the families there were maximum 2
earning members and in the rest only one earning member.
e) Loan taken: Majority of the respondents have taken loan in the range of 10000 to
20000. Accordingly we can say that the size of the loan is medium and it works out to
an average of Rs 1000 per month.

f) Frequency of loan availed: Majority of the respondents i.e., upto 50% of them have
availed the loan only one times. This implies that respondents have availed a loan not
so frequently.
g) Average size of loan availed: Majority of the respondents i.e., upto 25% of them have
availed the loan Rs.10000 to 15000. This means the size of the loan taken by
respondent each time is low and sufficient only for small entrepreneurial activity.
(ii) Members Responses
a) SHG members are highly positive about the financial assistance from the bank instead
of the money lenders.
b) All the respondents have opined that borrowing from SHG is better than borrowing
from money lending by more than 60%.
c) Majority of them i.e., 56% of respondents said that high interest rate is the worst part
of borrowing. While 25% of the respondents feel that local money lending is worst
from all the viewpoints i.e., high interest rate, collateral security and coercive
repayment pattern.
d) All the 50 respondents constituting 63% of them answered in the affirmative and said
there are some good features of borrowing from local money lender.

e) 31% respondents said that privacy is the good features of borrowing from money
lender and other 25% said convenience of borrowing, privacy of borrowing and
emergency situation.
f) Majority of the respondents i.e69% said that low interest rate is the most good
feature of borrowing from SHG.
g) All the 80 respondents constituting 100% of them said they are satisfied as a member
of SHG. This means that it is helping them in fulfilling their needs.
h) As regards the important factor they consider to be satisfied as a member of SHG,

most of the respondents ranked the enhanced social status and friendly relationship.
i) When the respondents were asked to express their willingness to inform their friends
and relatives to join the SHG, all of them expressed their willingness to do so.
j) The sample depicts that all 80 respondents constituting 100% of them using loan for
intended purpose.
k) Most of the respondents rated the performance of their SHG as excellent.
l) Respondents were asked to express their opinion about the relationship of the people
working in SHG and all of them said that the relationships are cordial.

m) For a question whether their financial knowledge was improved, all the respondents
answered in the affirmative indicating that their financial knowledge has improved.
n) Majority of respondents i.e., 50%of them said that they received their family support
to the extent of above 65% to 70% and 19%of them receive more than 70%.
o) 88% of the respondents said that they received timely credit facility from their SHG.
p) All the respondents rated their SHG as better than any other in the Mysore town.
q) All the respondents were asked to express their opinion about the performance of
their team leader, 55% of them answered in the affirmative indicating that their team
leader performance is excellent other 45% as good.
6.3 SUGGESTIONS

Based on the survey findings and opinions of the bank executives, the following
suggestions are offered:
a) While under taking the study of the sample respondents ,it was notice that all
most majority of members in SHG are less Educated .efforts should be made to
educate the members in SHGs regarding all programs of SHGs.
b) The self help groups should get weekly letters to convey information regularly
about the meetings, due payments, periodic savings, if any new scheme is introduced
and etc
c) Active participation of each member is essential to ensure transparence and

democratic way of functioning of SHGs.
d) Identify steps to be taken to promote MFIs and purpose a system for their
classification and rating.
e)To make necessary recommendations for improving the performance of SHGs and
making them powerful institutions at the micro level for achieving economic
empowerment of the people.
6.4 CONCLUSION:

Microfinance as a powerful tool for achieving the goal of financial

inclusion has gained momentum all over the country. The role played by regional
rural banks in this task, is not only stupendous, but also a model for other banks in the
country.
Microfinance initiatives of CKG bank are driven by its consideration of

promoting financial services to unorganized segments of rural and semi urban sector.
The CKG focus on bank SHG linkage is a grand step forward in achieving women
empowerment in economically backward section. The result of this study based on
sample survey clearly indicate high rate of success of bank- SHG linkage credit
delivery model implying further expansion of the MFI programs and bring under its
fold.
SHGs have emerged as a better option for providing rural credit. It is found that from
the project study that most of the respondents are successful in eradicating some part
of their poverty by availing loans from the SHGs for self dependence.

BIBLIOGRAPHY
PRIMARY DATA
A survey conducted on performance evaluation of SHGs delivering

Micro Finance System in Mysore City, Financed by CKG bank Mysore.
SECONDARY DATA
Books
Understanding micro finance Debadutta, K.Panda
Micro finance hand book an institutional and
financial perspective- Joanna ledgerwood
Website
www.microfinance.com
www.microfinancegateway.com
www.ckgbank.com
Annexure I

APPLICATION FROM THE SELF HELP GROUP

FOR AVAILING BANK LOAN
To : Date
The Branch Manager

Cauvery Kalpatharu Grameena Bank
_________________Branch
Dear Sir,
APPLICATION FOR LOAN
We, the duly authorized representatives of the above SHG, hereby apply for a loan
Aggregating Rs. ___________ /- (Rupees__________________________________only) for
on lending to our members as per the Group resolution dated _______________
The financial particulars of the group as on ______________are given in the enclosed sheet.
We agree to undertake as follows.
1. We agree to repay the loan amount as per the repayment schedule which may be fixed by
the bank.
2. A copy of the Inter-se Agreement executed by all the members of the group authorizing us
interalia to borrow on behalf of the SHG is enclosed.
3. We hereby declare that the particulars given above are true and correct to the best of our
knowledge and belief.
4. We hereby authorize the Bank to disclose all or any particulars or details or information
relating to our loan accounts with the Bank, to any other financial institution including
NABARD, Government or any agency as may be considered necessary or desirable by the
Bank. It will be in order for the Bank to disqualify the SHG from receiving any credit
facilities from the Bank and or recall the entire loan amount or any part thereof granted on

this application, if any of the information pertaining to the group, furnished herewith is found
incorrect and/or containing misrepresentation of facts.
Yours faithfully,
1.
2.
[Authorised representatives for SHG] Group Seal)

Annexure 2
Model Checklist for Grading/Assessing the Performance of Self Help Groups under the
SHG Bank Linkage programme
Sl.No Key factors Ratings

/Marks
1 Composition The rating is based on the
a) Membership is homogeneous 10 judgment of assessing
b) Non homogeneous 05 official
2 Age of the Group There is no need to evaluate
a) One year and above 10 group if an SHG is less than
b) Six months and above but less than a 05 six months
year
3 Group Meetings 10 Mi
a) Four meetings in a Month 05 nimum meeting to be
b) 2-3 meetings per month 03 conducted by the group in a
c) 1 meeting per month month are 2
4 Attendance Members Attendance in last

a) More than 90% 10 10 weeks taken and divided
b)Between 75% to 90% 08 by 10 gives the average
c) Less than 75% 05 number of members attended
the meeting
5 Minutes book Peruse minutes book
a) Written in detail 10 pertaining to meetings held
b) Maintained but not in detail 05 during the last 3 months
6 Participation by members in meetings Observe during the group

a) Participating by majority 10 meetings. Or otherwise
b) Participation by only few members 05 Interact with members.
Know the pulse.

7 Savings
a) 4 times a month (by majority) 10 Calculate average number of
b) 4 times a month (by a few members participating in the
members) 08 savings in the meeting
c) 2 times a month by majority 08 (Frequency of savings by
d) 2 times in a month not by majority 05 members)
members Majority means 75%
e) once in a month 03
Style of functioning Interact with members or

8 a) democratic and transparent 10 personally observe in the
b) decisions taken by few dominant 05 group meeting how decisions
members are taken dominant
members/ Judge
whether all decisions are in
group meetings and on
democratic lines.
9 whether periodical rotations are made in
group leadership Verify the resolutions or
a) so far no 00 copies of the letter sent to the
b) so far 1 time 05 Bank
c) more than one time 10
10 Selection, sanctioning and disbursement a) Ascertain the position and
of internal loan to the members, Terms peruse from the minutes of
and conditions discussed the meeting or from
a) in the group meeting members of the group
b) not in the Group meeting 10
Whether transactions recorded in the 00
proceedings of the group meetings
a) Yes
b) No 10

00
11 Interest on internal loan Individual loan register

Fixed to all the members at 24% pa 10
Fixed at 36% pa 07
Fixed above 36% pa 03
12 Utilisation of savings for internal loans Arrive at the proportion to
a) 100% 10 savings and total amount lent
b) Above 80% 08
c) Above 60% 06
d) Less than 50% 05
13 Recovery of loans in the internal lending Individual loan ledger each
a) 100% 10 account to know the
b) Above 80% 06 recovery.
c) Above 60% 04
d) Less than 60% 00
14 Repayment Individual loan ledger revels
Principal and interest 10 this
Only principal 05
Only interest 00
15 Books of accounts
i) groups are able to write 10 Enquire and Verify the books
ii) few are able to write 05
iii) engaging the outsider 03
Continued .
16 All Books are 10 Verify all the books
Regularly maintained & updated 05 And conclude your
Most important books are updated 00 judgment.
Irregular and not updated
17 Bye laws and Self help Group rules Enquire/interact with the
a) Known to all members 10 members and arrive at the

b) Known to most of the members 05 conclusion

c) Not known to many members 00
18 Auditing of accounts Enquire with the members
i) Yearly once 10
ii) As and when required 05
iii) So far not done 00
19 Attended in Training, other activities Enquire with the members
under taken
Number of activities are more than 5 10
A very few activities are undertaken 05
Not aware to take any activity 00
20 Whether the group is contemplating to To analyse the developments
take any Income Generating activity in the status of the group and
a) already undertaken in a small way 10 the groups interest
b) Activity is on cards 05
c) yet to decide 00
Total Marks maximum 200
Total Marks Very good Good Unsatisfactory

200 160 to 200 120 to 160 Less than 120
Notes:
1. SHG scoring more than 160 marks out of maximum of 200 marks can be chosen for
linkage.
2. SHG scoring less than 160 marks will have to be further strengthened before linkage. The
areas of improvement may be appraised to group leaders and members. Evaluation may again
be considered lending after rectification.
3. SHG scoring less than 120 be rejected and advised to take rectificatory measures

Annexure 3
[TO BE STAMPED AS A GENERAL POWER OF ATTORNEY]

INTER-SE AGREEMENT TO BE EXECUTED
BY THE MEMBERS OF THE SELF HELP GROUP
THIS AGREEMENT made __________________________________ this ___________

__________________________________________________
_______________day of______________________________ 200_______ _______

Between 1. Shri/Smt/Kum.________________________________________ Son / Wife /

Daughter of,_______________________aged ____________years residing at
__________________ __________________________________________________
2. Shri/Smt/Kum.________________________________________ Son / Wife / Daughter

of,______ __________________aged ____________years, residing at
_________________________________________________________________;
3. Shri/Smt/Kum.________________________________________ Son / Wife / Daughter of,

____________________________________________________ aged ____________years
residing at ________________________
__________________________________________________ ;

of,____________________________________________________ aged
____________years residing at ______________________________
__________________________________________________ ; and

of,.____________________________________________________ aged_______Years
residing at____________________________________; and
.
.
.
20 Shri/Smt/Kum________________________________________ Son / Wife / Daughter
of,.____________________________________________________ aged_______Years
residing at____________________________________; and

who are members of the ________________________ group, hereinafter referred to

collectively as The Self Help Group (SHG) Members which expression shall, unless
repugnant to the context or meaning, include
every member of the said SHG and their respective legal heirs, executors and administrators.
WHEREAS all SHG members are residents of ____________________________________

Village in_____________________________ taluk of the Karnataka State and are known to
each other.
WHEREAS the SHG members above named have joined voluntarily together and formed the
SHG with an intent to carry on savings and credit and other economic activities for mutual
benefit subject to the terms and conditions hereinafter appearin
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT:
1. Each member of the SHG shall save a sum of Rs. ____________ (Rupees ________
____________________________________________ only) or such sum as may be decided
by the Group, on weekly fortnightly/monthly basis which shall be deposited with the
authorised member of the group.
2. Each member shall strive for the success of the SHG and shall not act in any manner
detrimental to the business interests of the SHG.
3. The SHG members shall be jointly and severally liable for all the debts contracted by the
SHG.
4. All assets and goods acquired by the SHG shall be in the joint ownership of all the
members of the SHG and shall ordinarily be in the constructive custody of such member as

may be authorised by the Group and shall be kept at the place of business at which shall not
be changed without consent of the SHG members.
5. The SHG members hereby duly elect and appoint
Shri/Smt/Kum. ____________________________________as ________________ ,
Shri/Smt/Kum. ____________________________________as ________________ ,
Shri/Smt/Kum. ____________________________________as ________________ ,

[by whatever name designated] to look after and manage the day to day affairs of the SHG
activities and also act in their name and on their behalf in all matters relating thereto. The
authorised representatives, may however, be removed at any time by majority vote of the
members and new representatives elected.
6. Each of the SHG members hereby agrees to abide by and ratify all such act, deeds and
things as the authorised representatives may do in the interest of the said activities.
7. The authorised representatives shall take decisions in the day to day working of the SHG
and each representative shall actively involve herself or himself and co-operate in looking
after the day-to-day affairs of the SHG activities in particular to attend to the following
activities.
Every member of the SHG hereby authorises the representatives to apply for the loan on
behalf of the SHG and execute necessary agreements/documents on behalf of the SHG for
the purpose. The authorized representative may collect loan amounts from the bank on behalf
of SHG; deposit the same in the savings account of the SHG for on lending to members in
accordance with the decision of the SHG and also deposit recovery of loan installment from
members in the loan account/s of Self Help group with the bank.

8. The SHG members hereby specifically authorise the representatives:-
(i) To open Savings, Fixed Deposits and other accounts in ___________________Cauvery

Kalpatharu Grameena Bank agreed by the SHG and operates the same under the joint
signature of any two of the following authorised representatives.
Shri/Smt/Kum. ______________________________________________
Shri/Smt/Kum. ______________________________________________
Shri/Smt/Kum. ______________________________________________
(ii) To keep or cause to be kept proper books of accounts of the savings, made by the SHG
Members, loans granted to them and the recoveries made from them and render every year
the
full accounts to the SHG members for their approval and adoption;
(iii) To receive all payments due to the SHG and issue requisite receipts or
acknowledgements for and on behalf of the SHG;
(iv) To institute and defend on behalf of the SHG members any legal proceedings and
safeguard the interests of each member of the said SHG and for this purpose engage or
disengage any lawyer or advocate or agent and incur the necessary legal expenses in
connection therewith.
9. In the event of death of any of the members of the SHG, his/her legal heirs shall be entitled
for the benefits and be liable for the obligations of the deceased member under this
agreement.

10. It is agreed that no new person shall be inducted as a member of the SHG without
consent of all the existing members.
IN WITNESS WHEREOF the aforesaid members of the SHG have set their respective hands
hereunto at the place_____________________ and on _______________ day of________
month ___________year first herein appearing.
Sl.No Name of the member Signature/thumb impression of the SHG
member
1

10
11
12
13
14
15
16
17
18
19

20
WITNESSES:
(1)___________________________________________________________________
Annexure 4
(*Details of members up to 20 to be filled in.*Signature of all the members to be taken in the

last page *note Informal Self Help Groups should not consist of more than 20 members)
ARTICLES OF AGREEMENT FOR

FINANCING SELF-HELP GROUPS
The Articles of Agreement made on this _____________________day of __________________

200______ at _________________ by and Between M/s._______________________________
_____________________________ [name of SHG] ___________________________________
______________________an unregistered association of persons/individuals having its office at
_________________________________ represented by its authorised representative
1. Shri/Smt. __________________________ _______________________

(Name) (Designation)
2. Shri/Smt/Kum. __________________________ _______________________


who are fully authorised by all the members of the SHG, (a copy of such Authorisation is annexed
hereto and forms part of this agreement), hereinafter referred to as the borrower which expression
shall unless repugnant to the subject or context thereof, mean and include members of the
unregistered association for the time being, their respective successors, legal heirs, administrators and
assigns of the one part and (Cauvery Kalpatharu Grameena bank) constituted under the special statue
having its Head Office at Inakal Road, Mysore and the Branches, interlaid, one at
_____________________________________ hereinafter called the Bank which expression shall
unless repugnant to the subject or context thereof mean and include its successors and assignees of
the second part.
Whereas the borrower is an unregistered association of persons, who have interse agreed to help each
other as self-help group, with a view to developing and ameliorating the socio-economic conditions
of their members.
Whereas having formed the association as a self help group, the Borrower as per application dated
____________ made by the said
Shri/Smt/Kum. __________________________ _______________________

Shri/Smt/Kum. __________________________ _______________________

and
Shri/Smt/Kum. __________________________ _______________________
______ duly authorised to borrow in terms of its resolution dated ___________ [copy enclosed],
Requested the Bank to *grant a loan/extend credit facility of Rs. ___________ /- up to the limit of
Rs.________________/- (Rupees_____________________________ ________________0nly)
________________________________________only) for on-lending to its members.

And whereas the Bank has agreed to grant the *loan/extend credit facility to the borrower on certain
terms and conditions. And whereas the Bank and the borrower are desirous of reducing the agreed
terms into writing, now, therefore, this agreement witnessed as follows:
1. The Bank has agreed to grant and the borrower has agreed to borrow by way of term loan/cash
credit
(clean) upto the limit of Rs. __________/- (Rupees ___________________________________
__________________________________________________________only) and the bank has
opened ________________________ (specify the kind of loan account) a/c no. ______________ of
date __________ in the name of the borrower in its book of accounts.
2. In case the facility availed is cash credit* the Borrowers will operate the cash credit account
satisfactorily and within the limit and the Borrower shall repay the outstanding liability in the account
inclusive of interest and other charges debited from time to time on demand without demur.
3. In case loan availed is Demand Loan*, without prejudice to the right of the Bank to recall the loan
on demand the Borrower undertakes to repay the loan with (*Delete whichever is not applicable)
interest and other within the period stipulated in terms of sanction.
4. In case the credit facility availed of by the borrower is a term loan the same shall be repayable in
installments in the manner specified here below in the repayment schedule. (to be specified) Besides
the borrower will pay interest at the rates that may be prescribed for such lending by RBI/NABARD
from time to time.
5. It is clearly understood by and between the parties hereto that in the event of the borrowers failure
to utilize the proceeds of the credit facility for the purpose for which the same has been made
available by the bank to the borrower, the borrower shall repay immediately on demand without
demur together with interest without prejudice to Banks right to initiate other legal action.

6. The borrower shall pay interest on the loans to be calculated on the daily balances in the loan
account and be debited thereto at quarterly rests or as the bank may decide.
7. The borrower should utilise the proceeds of the credit facility for the purpose of lending to its
members to improve the socio-economic conditions of their members and their families.
8. The borrower shall repay the credit facility availed of together with interest payable as per the
interest rates that may be fixed by RBI/NABARD from time to time for such lending.
9. The borrower shall be liable to repay the facility on demand together with the interest and other
charges payable by the borrower to the bank in accordance with the rules of the bank.
The Term loan amount of Rs _________ sanctioned to the borrower (SHG) shall be repayable in
______ monthly installments of Rs _________ each together with interest at ________ % calculated
on the daily products charged to the account at monthly/Quarterly rests and for Months first of such
installment should commence from ________ and the last installment on _______ with Rs ________
In witness whereof the parties hereto have affixed their signature on the date and the Month and year
first herein above written.
For Cauvery Kalpatharu Grameena Bank

For Self Help Group
Manager Representative 1 Representative 2 Representative 3
Terms and conditions letter
1. Members to utilise the loan for the purpose for which the loan is taken.
2. They should maintain the assets in working condition and insure them.

3. The group should continue to save regularly, conduct regular meetings, maintain books of
accounts and there should not be any change in the Group activities/attitudes.
4. Only one member of the family can become the member in the group. Similarly member of
some other group should not be allowed to become member of this group.
5. Members must show keen interest in knowing the financial position of the group.
6. Onwards lending to the members by the group should be transparent and by known and
acceptable method to all members.
7. While repaying the loan both Principal and interest together should be repaid without fail.
8. Group is eligible to take repeat loans after full repayment of both principal and interest of the
current loan. It should be noted that credit depends on the savings. more the savings more the
loan.
9. The practice of Auditing the books of accounts, periodically say for six months or one year
should be built in.
10. Group should not extend loans to non members or out side members.
11. All members are individually, jointly and severally liable for repayment of the loan. In case of
death of any member, the legal heirs have to take the responsibility of the out standing loan.
If deceased members life is insured, the claim settled should be utilised for closure of the
loan by remitting the cheque to the Bank.
12. At any point of time, it should be ensured that Membership of the group should never come
down lesser than 15.
13. The leadership of the group should be rotated at least once in a year and in such case the
Group should through a resolution inform the Bankers about such change, with the specimen
signatures of new leaders along with two photographs if not already submitted.
14. Member of the promoting institution should not be admitted as member in the group. This is
applicable to the Sthree shakthi groups promoted by Anganawadi also. Group members
should take active role in formation of cluster, federation of the self help groups. They should
expose themselves to trainings as and when provided by any agency.
15. Group should be eager to take up any Income Generating activity to increase their income
level.
. Representative 1, Representative 2 Branch Manager.

Annexure 5
CAUVERY KALPATHARU GRAMEENA BANK

PART-A
GENERAL INFORMATION:
1. Name:
2. Age(in years)
a. Below 30( ) b. 30-40( )
c. 40-50( ) d. 50-60( )
3. Income (per annum)
a. Less than 10000( ) b. 10000-20000( )
c. 20000-30000( ) d. 30000-40000( )
e. Above 40000( )
4. Number of Family members
a. Below 3( ) b. below 4( )
c. Below 5( ) d. above 6( )
5. Number of earning family members
a. 1( ) b. 2( )
c. 3( ) d.4 and above( )
6. Occupation
7. Amount of loan taken
a. Less than 4000( ) b. 4000-8000( )
c. 8000-12000( ) d. 12000 & above( )
8. Number of times loan availed
a. 1( ) b. 2-3( )
c. 4-6( ) d. more than 6( )

9. Average loan taken each time
a. less than 3000( ) b. 3000-6000( )
c. 6000-9000( ) d. more than 9000( )
1. Borrowing from bank as a member of SHG is better than borrowing from a

local money lender Do
you agree with this statement?
Yes : No
2. If your answer is yes for the question number 1 above, to what extent SHG
borrowing is better than borrowing from local money lender?
Upto 30% : 30 to 40%
40 to 60% : above 60%
3. Which of the following factors do you think is worst part of borrowing from
a local money lender?
High interest rate : collateral security
Coercive repayment pattern : all the above
4. Would you say that there are some good features of borrowing from local
money lending compared to SHG?
Yes : No
5. If your answer for Q. NO.4 is yes please tick such features
Convenience of barrowing : Privacy of barrowing

Emergency situation : All the above
6. Which of the following is the single most good feature of borrowing as a

member of SHG?
Convenience of barrowing Collateral security
Low interest rate Repayment pattern
7. Are you satisfied as a member of SHG?
Yes : No
8. If the answer for the Q.NO. 7 above are yes, which of the following factors
do you consider important? (Pl. rank)
Scope for friendly relationship

Free entry into the group
Good team leadership
Excellent bank support

Enhanced social status
9. Would you like to inform other friends and relatives to join the SHG?
Yes : No
10. Do you use the loan taken as a member of SHG exclusively for the intended
purpose?
Yes : No

11. How do you rate the performance of your SHG?
Excellent : Average
Good : Poor
12. Do you think the relationships of the people working In SHG are cordial?
Yes : No
13. After joining the SHG do you think your knowledge level about financial
matters improved?
Yes : No
14. What is the extent of support received from your family to work as a
member of SHG?
Upto 25% : 25 to 50%
50 to 75% : Above 75%
15. Do you get the timely credit facility from SHG?
Yes : No
16. Do you think your SHG is better than any other in the Hassan town?
Yes No

17. How do you rate the performance of your team leader ?
Excellent
Good
OK
18. Do you have any suggestion for improving the performance of SHG?

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A STUDY OF SELF HELP GROUPS IN MYSORE

University Of Mysore Page 1

University Of Mysore Page 2

To form the basis of such a significant investments to reduce poverty compared to

1.2 SHG-BANK LINKAGE:

University Of Mysore Page 3

1.3 THE PROBLEM:

University Of Mysore Page 4

1.4 OBJECTIVES OF THE STUDY:

2. To understand about micro financing system through SELF HELP GROUP

University Of Mysore Page 5

5. To ascertain the rate of interest members get on their deposits.

6. To examine the role of CKG Bank in success of SHGs.

1.5 RESEARCH METHODOLOGY

1.6 LIMITATIONS OF THE STUDY:

1. The study is limited to CAUVERY KALPATHARU GRAMEENA BANK.

University Of Mysore Page 6

2. The study is focused on reliability of SHGs on microfinance of India.

5. Being confidential in nature of certain aspects study was conducted to the

1.7 CHAPTER PLAN:

2. MICROFINANCE: ORIGIN AND GROWTH

3. SELF HELP GROUPS AND BANK LINKAGE

4. MF PROGRAMME AT CAUVERY KALPATHARU GRAMEENA BANK, MYSORE

University Of Mysore Page 7

5. PERFORMENCE OF SHG IN - CAUVERY KALPATHARU GRAMEENA BANK,

6. FINDINGS AND SUGGESTIONS

2.2 MICROFINANCE -DEFINITION

2.3 THE NEED MICROFINANCE IN INDIA

2.4 ECONOMICALLY ACTIVE POOR

2.5 ROLE OF MICROFINANCE

2.7 STRATEGIC POLICY INITIATIVES

University Of Mysore Page 8

2.8 ACTIVITIES IN MICROFINANCE

2.9 MICRO FINANCE MODELS

University Of Mysore Page 9

University Of Mysore Page 10

2.2 MICROFINANCE DEFINITION

University Of Mysore Page 11

framework that microcredit is as much about money as it is about information. Microcredit is

According to International Labour Organization (ILO), Microfinance is an economic

In India, Microfinance has been defined by The National Microfinance Taskforce,

The dictionary meaning of finance is management of money. The management of

Traditionally micro finance was focused on providing a very standardized credit

University Of Mysore Page 12

2.3 THE NEED MICROFINANCE IN INDIA

University Of Mysore Page 13

University Of Mysore Page 14

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

University Of Mysore Page 15

Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding,

As Marguerite Robinson describes in The Microfinance Revolution, the 1980s

The obstacles or challenges to building a sound commercial microfinance industry include:

Inappropriate donor subsidies

Few MFIs that mobilize savings

Limited management capacity in MFIs

University Of Mysore Page 16

Need for more dissemination and adoption of rural, agricultural microfinance

2.4 ECONOMICALLY ACTIVE POOR

Hundreds of millions of Indians are poor by national and international standards.

University Of Mysore Page 18

The main objectives of microfinance are:

University Of Mysore Page 19