ROLE OF SELF HELP GROUPS IN ALLEVIATION OF POVERTY Micro finance was developed by Muhammad Yunus, a professor in economics from

Chittagong University in 1976. On a field trip to a poor village in southeastern Bangladesh, Yunus and his students met a lady named Sufiya Begum who borrowed raw materials for making bamboo stools from a trader. The trader dictated the price that he would pay for the bamboo stools, leaving the poor lady with very little profit for her labor. These examples of a poverty stricken lady being exploited by an unscrupulous trader, made Yunus think of the various ways of empowering the poor. He started by making small loans available to the poorest of the various ways of empowering the poor. He started by making small loans available to the poorest of the poor by giving them $27 from his own pocket to forty-two individual basket weavers. He found out that not only did the poor survive with such help but this also ignited the spark of personal initiative, enterprise, and hope that enabled them to lift themselves out of poverty. Yunus thus began providing micro loans to the very poor in neighboring villages. (Robert Eichfeld, Henry Wendt, 2006) In 1983, Yunus founded the Grameen Bank meaning a village bank. Its business focused entirely on providing very small loans to impoverished people, mainly women, who organized themselves into small groups of five. To help, reinforce and supervise one another. Prior to these money lenders charging exorbitant interest rates were the only source of finance for the poor. Individuals who were not in absolute poverty could join credit cooperatives, but the amount they could borrow was often too small to meet their needs. Conventional banks were rarely an option since they required collateral security to grant loans, which most poor people did not have. The banks also required a great deal of paperwork, which the poor often found intimidating. Grameen Bank primarily targeted women, as Yunus found they were more likely to use the loans for productive purposes and repay them. Perhaps this was because women in Bangladesh found it much more difficult to access financing from any source and therefore considered this access to credit extraordinarily valuable. In addition, women tended to reinvest their profits as capital for their economic activities and use them to improve the lives of their families, thus multiplying the impact of each loan they availed. Grameen Bank aims to help poor families help themselves to overcome poverty. Only the poor, and especially poor women, qualify as clients. It gives loans for productive income-generating activities and for housing, but not for consumption. The borrower need not produce any collateral as security, mutual trust act as collateral. The borrower joins a group of others poor women from the village or neighborhood and loans are available in sequence. Once a loan is cleared, the borrower is eligible to receive another loan. The interest rate on such loans is kept as low as possible, usually close to the inter bank rate. The salient feature of the whole set up is that bank comes to the borrower rather than the borrower visiting bank. The fundamental principle of Grameen Bank is that nobody should be denied access to credit based on income levels. The Grameen Bank model is being followed in numerous micro finance organizations throughout the world, spanning Latin America, Africa, the Middle East, and Asia and among people of every major religion, cultural identity, and race. The original model of micro finance has been emulated, replicated, and modified to suit local conditions and enhance its acceptability. Bankers and economists in India have tried and tested, evolved, and successfully demonstrated a

constructive programme based on a linkage programme linking self-help groups (SHGs) with banks and other financial institutions under the aegis of NABARD. Micro Finance Breakthroughs The World Bank commissioned a study of micro finance in the early 90s, focusing on three of the largest programs in Bangladesh, the Grameen Bank, and two other major micro credit programs namely, the Bangladesh Rural Advancement Committee (BRAC), and the Rural Development Project-12 (RD 12). The Bangladesh Rural Advancement Committee (BRAC) has been working with the rural poor since 1972, and in 1979 it began to provide credit via its 81 branches through the Rural Development Programme (RDP). It is the largest NGO in Bangladesh providing financial services to the poor. Rural Development Project 12 (RD-12) is a government run program headed by the Bangladesh Rural Development Board. According to the study, women who were clients of these three institutions increased their household consumption by 18 percent. Five percent of cents escaped poverty each year by borrowing and participating in micro finance programs. The other findings, such as those of the Assessing the Impact of Micro enterprise Services (AIMS) project of the United Stated Agency for International Development (USAID), had documented similar successes of micro finance programs in India, Zimbabwe, Peru, and the Philippines. In the case of India, clients of the MFI SEWA (Self-Employed Womens Association) Bank had reported higher house hold incomes and higher annual growth rates than non-clients. In India organization like SEWA among others with origins and affiliations in the Indian labour and womens movements identified credit as a major constraint in their work with informal sector women workers. Clients of the MFI Zambuko Trust in Zimbabwe had a higher average monthly household incomes and lower poverty rates than non-clients. Results from Peru showed that clients of MFIs earned $266 more per household member per year than non-clients. In Philippines, 22 percent of the MFI ASHIs clients escaped poverty altogether. (Robert Eichfeld, Henry Wendt, 2006) Initially, a few philanthropic individuals and nonprofit organization funded micro finance projects. As the years passed, government organizations developmental agencies, and some private foundations also began to support the concept. The technology boom of the 1900s provided the information systems necessary for managi9ng bigger portfolios and new products, while leading financial institutions and organization gathered funds for micro finance and began to set standards to improve governance within the industry. In 1997, the first Micro credit Summit was held at Washington DC during 2-4 February 1997, where 2,900 delegates from 137 countries met and set the goal of providing; micro credit to 100 million of the poorest families in the world by the end of 2005. (Robert Eichfeld, Henry Wendt, 2006) The Declaration and plan of Action of Micro Credit Summit, Washington included the following (Banking with the poor-A hand book on Self Help Groups, NABARD) Targeting the poorest of the poor. Organizing the poor into group mode. Stimulating habit of thrift among the poor. Participation of the poor in neighborhood lending processes. Loans without insistence on collateral.

Quick disbursement of small and short-term loans. Market related interest rates. Default management through peer and moral pressures. Transparent methods of operation. Clearly defined responsibilities and accountability of fund managers. Provision of the package of financial and non-financial services for poor.

The summit was an important turning point in the history of micro finance organizations. Governments, banks, financial institutions, and the voluntary sectors of the participating nations initiated a number of steps to enhance the flow of credit and other financial services to the poor. India actively participated in the convention and emerged as a leader and role model for the others. In the summit, the following and emerged as a leader and role model for the others. In the summit, the following three approaches were emphasized for providing micro finance services to the poor. 1. Conventional weaker section lending of the banks to individuals, groups and cooperatives. 2. SHG-bank linkage programme, where banks lend to groups with or without the support from NGOs and other SHPIs, and 3. .Lending of the banks and specialized financial institutions to various financial intermediaries in the non-formal sector for further on-lending to ground level groups or individuals. Several studies reveal that during the past three decades, micro finance has proved that small loans to the poor especially to poor women, when administered in a systematic and positive manner, can create sustainable economic businesses. Within a three to five year period, these small, privately owned businesses generate discretionary income that secures education, health care, transportation, better nutrition, clothing, and other consumables for the entrepreneurs families. This reinvestment of earnings in turn creates a generally rising level of prosperity and social cohesion at the village level. Micro Finance and SHGs- A New Paradigm Micro finance programmes in emerging economies has off late taken center stage of all developmental efforts. It has become a process to activate and involve civil societies in nation building on the theme of self-help and mutual trust. The main objective behind micro finance is to endow poor with resources and confidence in order to enable them manages their lifestyles and livelihoods on a sustainable basis. Studies have clearly demonstrated that micro finance is the only socioeconomic programme aiming at a broad range of goals promoting the well-being of the poor. The experience of micro finance clearly shows that savings or thrift is the vital financial service the poor always require and it has come to be regarded as an integral part of all anti poverty programmes today. The Micro Credit Summit defined the concept basing on its functional characteristics, while the a Task Force on Supportive Policy and regulatory framework for micro finance constituted by NABARD (1999), gave a normative definition of micro finance accepted by the RBI, defining micro finance as provision of thrift, credit and other financial services and products of very

small amounts to the poor in rural, semi urban areas for enabling them to raise their income level and improve living standards. (Banking with the poor- A Hand Book on Self Help Groups, NABARD) SHG is a group of about 15-20 people from a homogeneous class who come together for addressing their common problems, to secure greater economic and financial strength through mutual help. They are encouraged to make thrift on a regular basis and use this pooled resource to make small interest bearing loans to their members. This process enables them to imbibe the essentials of financial intermediation including prioritization of needs, setting terms and conditions, and account keeping, thus building financial discipline in all of them. They also learn to handle resources of a size that is much beyond their individual capacities. The members of SHGs begin to appreciate that resources are limited and have a cost. They take collective decision on all matters including those relating to terms of credit like purpose, size interest rate, repayment period, exercise close supervision on the utilization of loans and exert peer and moral pressure on members to continue savings and repays loans promptly on time. The SHGs, in other words, are a group of poor persons who own, manage, and control a micro bank of their own. The greatest contribution of SHG in fighting against deprivation and poverty is that it empowers them by their increased critical self-awareness. It gives the poor a feeling of selfconfidence, solidarity, and social security to control and guide their own destinies. The amount they mobilize within themselves is insufficient even for the consumption needs of the members and there is hardly any scope for production or investment credit. This necessitates providing credit support to SHGs by banks for meeting credit requirement of the group members. Thus, SHGs become a link between banks and rural poor. Micro Finance in India Even after six decades of independence, Indias achievements in the development sector are moderate. Unemployment and poverty pose major challenges, especially in rural areas due to the dependence of the poor on non-institutional sources of credit. The growth of micro finance in India is a result of the failure of all institutional initiatives and heavy exploitation of the poor by indigenous moneylenders in the informal credit delivery system. The evolution and expansion of the micro finance sector in India has proved to be very useful for women coming forward to mobilize their own savings, eventually leading to gender equality. The dynamics of the rural economy in India has been changing rapidly. Rural banking was traditionally a monopoly of the local money lenders, until the colonial government enacted the Co-operative Societies Act in 1904. The co-Operatives were the main institutions for disbursement of rural credit. The government provided agricultural loans called Takkavi loans. After independence, the RBI A ct imposed the r4esponsibility of rural credit to RBI. All India Rural Credit Survey (1951) of the RBI showed that the co-operatives were a failure in providing rural credit, though they had a vital role in agricultural credit. Nationalization of banks in 1969 leads to the expansion of the banking network. The agriculture Refinance and Development Corporation (ARDC) was set up by the RBI in 1975 and the Regional Rural Banks were created. Subsequently, the ARDC was converted into NABARD,

while priority sector lending continued. In order to balance the shortage in the priority sector lending, the Rural Infrastructure Development Fund (RIDF) was initiated and a system of Special Agricultural Credit Plan was introduced. The innovations in the area of rural credit included Kisan Credit Cards and bank SHG linkages introduced in the early nineties. Since then, the SHG- Bank Linkage has been gaining strength and the programme has become the worlds largest in terms of both numbers and outreach. The private sector in India is now regarding the Micro Finance Institutions (MFIs) and SHGs as a business opportunity. The SHG concept has promoted participative decision-making, savings, and a varied range of loan products for consumption, production, insurance and social security. The most important aspect of the SHG movement is that it is based on peer pressure, which can be used effectively for recovery. In India, the performance of SHGs and MFIs in the south has been much better than the east, northeast, the central part of India, or even some parts of western India, with an Andhra Pradesh scoring the highest. The strength of the micro finance in India lies in the diversity of approaches and forms evolved over a period. The positive aspects of this informal credit delivery system are that disbursement of credit is easy and relatively quick, with no collateral required and that credit is given for any activity, especially for consumption and emergency purposes including non-productive purposes. Table: 1 SHG-Bank Linkage Programme-Regional Spread of Physical and Financial Progress as on 31st March, 2006 S.No. Region/State Cumulative No. of New Bank loan Cumulative No. of SHGs SHGs during 2005- bank loan up Provided Provided 06 to 31st with bank with bank March,2006 loan up to loan during 31st March, 2005-06 2005 A Northern- Region 1 Himachal Pradesh 17,798 5,122 298.95 863.98 2 Rajasthan 60,006 38,165 1,003.90 2,447.94 3 Haryana 3.351 1,516 115.38 316.01 4 Punjab 3,091 1,470 93.10 238.86 5 Jammu&Kashmir 1,647 43.90 100.48 707 6 New Delhi 125 99 5.44 18.58 Total(A) 86,018 47,079 1,590.67 3,985.85 B Northern-Eastern Region 7 Assam 31,214 25,215 482.17 1,423.98 8 Meghalaya 249 486 8.41 16.19 9 Tripura 1515 481 12.05 31.12 10 Sikkim 42 85 0.51 1.86 11 Manipur 796 672 41.75 71.85 12 Arunachal Pradesh 280 66 1.52 13.49 13 Nagaland 94 328 29.69 34.38

14 Mizoram 28 946 Total(B) 34,238 28,279 C Eastern Region 15 Orissa 1,23,256 57,640 16 Bihar 28,015 18,206 17 Jharkand 21,531 9,288 18 West Bengal 92,698 43,553 19 UT of A&N 128 36 Islands Total(C) 2,65,628 1,28,723 D Central Region 20 Madhya Pradesh 45,105 12,020 21 Chattisgarh 18,569 12,722 22 Uttar Pradesh 1,19,648 42,263 23 Uttaranchal 14043 3,545 Total (D) 1,97,365 70,550 24 Gujarat 24,712 9,448 25 Maharastra 71,146 60,324 26 Goa 408 216 Total (E) 96,266 69,988 F Southern Region 27 Andhra 4,92,927 94,311 Pradesh 28 Karnataka 1,63,198 61,730 29 Kerala 60,809 26,179 30 Tamil Nadu 2,20,698 92,080 31 UT of Pondichery 1,309 1,190 Total(F) 9,38,941 2,75,490 Grand Total 1,618456 6,20,109 @ Includes Rs.21, 686.31 million provided to 3, 44,502 SHGs. Source: NABARD

61.30 637.40 2,236.71 370.33 399.87 1,161.75 2.47 4,171.13 556.09 165.86 1997.75 315.81 3,035.51 558.07 1,717.56 24.99 2,300.62 15,994.25 4,426.00 2,325.95 10,342.87 166.43 33,255..50 44,990.83

64.14 1,657.01 4754.65 1,052.19 1,114.60 2,424.52 8.23 9,354.19 1,666.86 337.81 5,1563.54 891.86 8,050.07 1,244.51 3,951.67 55.21 5,251.39 43,455.18 9,927.53 4,821.48 27121.87 350.86 85,676.92 1,13,975.43

Table-2 SHG-Bank Linkage Programme: Performance as on 31st March, 2006 S.No. 1 2 3 Particulars No. of SHGs linked % of women groups No. of participating banks: (i) commercial Banks (ii) Regional Rural Banks (iii) cooperative Banks Bank Branches participating Cumulative as on 31st March, 2006 2,238,565 90 545 47 158 44362 31

5 6 7 8 9 10 11 12

No. of States/Uts No. of districts covered No. of partners Bank loans Rs. in billion Refinance Rs. in billion No. of poor households assisted (in million) Average Loan/SHGs Rs Mode Wise Linkage (Cumulative %) (i)SHGs formed and financed by Banks (ii) SHGs formed by other agencies but directly financed By banks (iii) SHGs financed by banks using financial intermediaries

583 4896 114 42 33 51 20 20 74 6

MICROFINANCE SYSTEM IN ANDHRAPRADESH Andhra Pradesh (A.P.) IS Indias fifth largest state, with a population of 76 million, of which three fourths live in 26,500 rural villages. According to survey of the IX five year plan (1997-02) carried out by the Government OF Andhra Pradesh (GOAP), the state is predominantly a rural and one of the poor states in India. According to the World Bank, A.P. per capita income was about US $ 382- compared to the national average of US $446 in 1999. Due to the strong performance of the service sector, poverty in the state declined in the 1990s, dropping over 30 percent in 1990 to 21.6 percent in 2000. The states growth rate of 5.9 percent also exceeded the national average of 5.4 percent in the second half of the 1990s. On the other hand, AP has also been pursuing economic reforms to setup growth and alleviates poverty. The SHG movement has been primary route towards poverty alleviation and growth in AP. The evolution of the SHG movement in AP can be traced to the year 1979, with the implementation of the Integrated Rural Development Programme [IRDP].As a sub component of the IRDP, The Government of India [GOI] started the Development of Women and Children in Rural Areas programme [DWCRA] in 1982 83.Under this programme, women living in neighborhood, with similar socioeconomic backgrounds formed into SHGs of 25 members each. They collectively took up economic activities according to their skill and resources. The DWCRA groups were provided with a matching grant of Rs15, 000 to be used as a revolving fund in order to undertake economic activities. Besides this, the groups also received training and their products were exhibited in specially created DWCRA bazaars, thus providing them an opportunity to access diverse markets. Over a period, during late 80s and early 90s, this programme picked up momentum and DWCRA groups all over the state were strengthened. In 1996, the South Asia Poverty Alleviation programme (SAPAP) Pilot Project was conducted in three districts of AP, which was rendered highly successful. Subsequently, the state saw a steady scaling in the number and structure of SHGs .The GOAT included the social mobilization approach in velugu (meaning Light in Telugu), in the Andhra Pradesh District

Poverty Initiatives Project (APDPIP), which is the major Poverty alleviation programme through which SHGs are being promoted in AP. The programme us State sponsored and is operational in over 860 mandals in 22 districts of the state. The GOAP also established an independent support organization called Society for Elimination of Rural Poverty (SERP), to implement poverty elimination project aiming at social mobilization, employment generation, and enhancement of livelihoods. SCRP bridges the gap between the government and the people and can be termed as a government NGO (GONGO). The Government of Andhra Pradesh (GOAP) has adopted a multi fold and multi dimensional strategy to eradicate to poverty. The poverty alleviation programmes of the (GOAP) can be segregated into five categories namely income enhancement programmes, which include self e4mployement programmes like IRDP, DWACRA and TRYSUM, wage employment programmes like JRY and EAS, programmes focusing on providing food and nutritional security like PDS and ICDS, programmes providing basic minimum services like hosing, sanitation, health, education, income maintenance programmes like pension schemes, maternity benefit scheme and survival benefit scheme, and lastly schemes for natural resource management and lively hoods. Most of the poverty alleviation programmes are designed by the central government and are implemented by the state on fund sharing basis. Andhra Pradesh also promotes some of its own like Adarna, Girl Child Protection, and Deepam, Velugu. GOAP has actively taken up empowerment of women as the main strategy to tackle poverty at different levels. The SHG movement has been at the fore front of all developmental schemes in AP. The developmental agenda of the state has placed people, most importantly women in focus. The SHG programme of the state is the largest in the whole country both in terms of outreach and in terms of numbers, the state is alone has half of the SHGs existing in the country. The district- wise progress of the SHG-Bank Linkage Programme of Andhra Pradesh is as under Table-3: SHG-Bank Linkage- District-Wise cumulative Physical & Financial Progress up to 31st March, 2006 in Andhra Pradesh Si. No Name of the No. of SHGs Cumulative Bank loan Cumulative District Provided No. of SHGs disbursed bank loan with bank provided during disburse d STaPRIL, loan during with bank 01 up to 31st ST st 01 April, loan up to 2005 TO 31 March, 2006 ST 2005 to 31 March , March, 2006 31ST ,March, 2006 2006 1 2 3 4 5 6 7 Adilabad Anantapur Chittoor East Godavari Guntur Kadapa Karimnagar 2,002 4,424 4,626 8,163 4,876 6,018 3,995 19,001 23,349 30,814 67,037 26,311 16,239 24,894 322.58 579.57 1181.99 1645.37 790.82 696.65 300.78 1112.39 1528.18 317.76 5291.14 2286.39 1476.94 1269.39

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Khammam Krishna Kurnool Mahabubnagar Medak Nalgonda Nellore Nizamabad Prakasam Rangareddy Srikakulam Visakhapatnam Vizianagaram Warangal West Godavari Total

2,641 5,072 2,914 3,587 4,844 8,829 3,288 4,872 3,356 1,513 1,530 6,413 1,515 3,724 6,149 94,311

33,625 27,033 24,266 27,083 27,008 25,334 14,613 21,244 20,888 14,149 29,362 29,319 19,056 31,455 35,158 5,87,238

618.00 830.47 687.32 448.98 728.04 622.34 575.41 499.65 696.33 597.13 1050.01 1048.20 356.93 525.97 1241.71 15,994.25

1683.65 2007.31 1733.93 1850.95 1775.46 1682.46 1273.08 1236.00 1910.61 1325.54 2965.40 2252.79 1064.86 1770.53 2840.42 43,455.18

Source: NABARD The state government makes conscious efforts to assist these SHGs by providing assistance through revolving fund under various programmes. Earlier, SHGs were popularly called DWACRA groups after the programme, Development of women and Children in Rural Areas. Several services of the state also coverage at the SHG level in the state. The Deepam scheme provides LPG connections to SHG members. The state government also provides power and Rs. 1000 as subsidy for each connection. Apart from this, the SHGs are also being benefited by permanent Rural Housing Scheme of the state government. The SHG women are also being entrusted with raising of nurseries, management of water sheds, construction of sanitary toilets, etc. the SHG members actively participate in the literacy programmes Akshara Sankranti. Several programmes for capacity building, training and creating awareness through exposure visits has also been taken up all the districts, by the state government. Training programmes are organized to help SHG members learn the techniques of marketing, packaging of products etc, in addition to gaining exposure to the latest technologies displayed at the Training and technology Development Centers located in all the districts. In addition to all this, the state government also provides marketing support to SHGs. They are encouraged to participate in fairs taking place at the national level and in other states. The state government is also encouraging net working of SHGs to create synergies among them. The SHG movement of Andhra Pradesh has been the cause for improvement in the socioeconomic status of rural women. In the year 1992, NABARD started collaborating with SHG promoters and banks in AP. This marked the beginning of the SHG-Bank Linkage programme in the state. Since then, AP has been in the forefront of the SHG movement in India. The success of the movement can be attributed collective efforts of the partners in the programme, namely state government, the apex institutions like NABARD bankers, governmental departments like the DRDA, community based organizations, NGOs and most importantly the people. Various developmental agencies in Andhra Pradesh promoted and inspired the formation of diverse kinds of thrift and credit groups to channelise the various poverty alleviation and social development programmes in the state. These groups vary widely in terms of their membership, size, decision making process, methods

of group action, etc. the characteristic features of various types of micro credit groups operating in Andhra Pradesh. SIGNIFICANCE OF SELF HELP GROUPS There are certain features, which represent the significance of the self-help groups and they are as follows Strength of SHGs is reflected in group cohesion and vibrant behavior. Fungibility of savings and credit cycles in SHGs help consolidate the group behavior. SHGs inculcate thrift habits and increase in level of savings among rural poor. Improvement in access credit. Financing of unique and non-traditional activities. Definite shift in loaning pattern of the members from consumption to productive activities. Improvement in loan volumes of SHGs through internal capitalization. Quality of loan appraisal and supervision improved with increase in loan portfolios. Near cent percent recovery of loans at SHG level. Interest rates at group level are adjusted to market conditions. Greater awareness of the need to graduate to higher economic operations. Creation of common and community assets. Reduction in transaction cost for banks and borrower alike. Simplified loaning procedures and documents. Excellent recovery performance loan extended to SHGs. SHGs help banks to expand good clientele base among rural poor. SHGs are used to expert peer and social pressure to rehabilitate defaulters. SHGs provide enabling environment for conscious leadership development, decentralized decision making, peer pressure, and sustainability of group action. Participation in socioeconomic development programmes like literacy, health, nutrition, housing, primary education, sanitation, etc. by matured SHGs have contributed to overall empowerment of rural poor.

SHGs are novel approach in developing economies. They envisage a human development out look in their scheme of things. The clarity in goals and objectives of SHGs determines the peace and direction of their development. Consequently, the groups must be facilitated for long-term goals rather than for short financial gains. Some of the critical long term benefits are: Sustainable access to the financial services. Strong livelihood support systems. Enhancement of the collective bargaining power. Self reliance and sense of dignity. Improvement in overall standard of living and empowerment.

The main objectives of SHGs are to: Institute saving and banking habits among the poor; Securing them with financial, and moral strength; Enabling availing of loan for productive purposes and repaying it over a period of time; Gaining economic prosperity; Gaining from collective wisdom in organizing and managing their own finance and distributing it among themselves.

MAJOR DEFICIENCIES IN THE SYSTEM The studies conducted by NABARD in Visakhapatnam district have brought out many positive features in the functioning of SHGs. But there are certain deficiencies in the banklinkage programme. The major district level constraints with regard to SHGs as reported by NABARD are 1. Rating of SHGs as per Critical Rating Index (CRI) and standard Accounting Package (SAP) needs to be adopted for maintaining quality of groups. The action has to be taken by DRDA. 2. Banks need to insist on micro credit plans for the SHGs for proper appraisal of SHG loans. 3. Negligence in the monitoring of SHGs by the banks and DRDA, mainly in the post disbursement period needs to be avoided. 4. Proper group processes and internal concerns were not observed. 5. Irregularity in books of accounts and conduct of meetings was observed. As such, an imperative need was felt to improve the functioning of groups by coordinated efforts and actions of all concerned. 1. 2. 3. 4. 5. 6. 7. 8. The other deficiencies as observed by the researcher are as follows. Wrong identification of the beneficiaries and activities leading to mismanagement, misappropriation and misleading of funds. Inadequate Knowledge of the beneficiaries, about the skills required to run the activities chosen by them. Insufficient past transactions and poor follow up due to inadequate staff in the rural branches. Lack of proper appraisal knowledge of the officials implementing the programme. Unsatisfactory recovery assistance to the banks by governmental agencies. Widespread illiteracy among the beneficiaries. Lack of rotation of leadership in some SHGs leading to domination of one member on the others. Lack of training in the banking and government programmes is the rural areas like Sarabhanapalem.

According to the observations of the researcher during the survey, discussions with the banker, NGO staff and officials of the lead bank and NABARD, the following suggestions are prescribed. SUGGESTIONS TO THE BENEFICIARIES 1. Majority of the beneficiaries require training in literacy and numerical ability. 2. Awareness needs to be inculcated in legal literacy, rights and gender awareness, social issues like bigamy, child labour, domestic abuse of women at home, etc, which are essential to create self confidence in them. 3. The lazy attitude of the respondents regarding adopting activities in which they received training to generate income needs to be changed. 4. Though all the 122 SHGs except two rated A, and were considered loanable, many of them were bordering near 70 out of 100. Such SHGs need to improve further. 5. SHG members need to be more active, enthusiastic and dynamic in their activities. Their participation in governmental schemes should be improved. In this process, NGOs could act as facilitations and motivators. 6. The office bearers managing the group should be given nominal financial benefits as encouragement for their services, enabling them to be more involved in the activities of the SHG. 7. Meetings and seminars like in seethammapeta should be conducted other places as well, enabling the SHGs to get a chance to exchange their views and be able to develop their group strength by interactions. 8. Networking of SHGs into a federations is required 9. Strong marketing network is also required for effective and proper marketing of products and services of micro enterprises linked SHGs. They need marketing support and institutional capacity to handle marketing activities independently. 10. SHGs have to evolve as sustainable village level institutions for taking active role in development and governance. SUGGESTIONS TO NGOS AND OTHER DISTRICT LEVEL AGENCIES 1. In spite of the several advantages experienced by the members after joining SHGs, majority of them were not independent enough to make their own decisions at home. The NGOs and voluntary agencies need to work towards educating these disadvantaged women regarding gender equality and other gender related issues. 2. Marketing facilities should be improved for the sale of products of SHGs. Periodical exhibitions at block-level could be organized where the product of SHG can be displayed. 4. Active intervention by district administration, professional bodies and voluntary organization is required which will foster skill training, designing new products, providing new technology and access to market and will create successful micro enterprises. 5. Many groups are not being trained in terms of profitable business ventures like tailoring and in banking procedures. Training facilities and tie ups need to be strengthened. Many SHG members especially in Madugula, Ankapalli and Lankavanipalem reported that they were not aware of any kind training facilities.

6. The beneficiaries should be motivated to identify activities of their interest and employ a trainer by paying him or her, a fixed amount every month, like in seethammapeta 7. , where the SHG members are paying for their tailoring classes. 8. The various categories for financial institutions in rural market have exhibited different potentials in serving rural women. There is need to synchronize their efforts so that their work becomes supplementary and complementary in serving women. 9. There is need to evolve training packages for entrepreneurship development to enable rural women as successful business managers and sustaining organizations etc should be enhanced to impart training, skill development and technical knowledge. 10. The factors responsible for poor performance of micro finance and functioning of SHGs should be investigated, examined and analyzed scientifically and systematically to resolve the emerging problems, difficulties and challenges being faced. 11. Social capability building programmes should be organized form time to time to train the NGOs activists, volunteers, panchayat representatives, members of youth clubs etc. to promote small savings and womens active and positive role in development process, ensuring their rights, entitlements and due share in developmental benefits. Transformation of the repayment culture is required. SUGGESTIONS TO THE BANKER 1. The bankers should ensure that the loans that they provide are going in the right direction. As these loans are available easily and at a cheaper cost, the beneficiaries tend to use them for non-productive purposes. 2. The bankers should ensure prompt repayment of loans and interest by the SHG members by explaining the various benefits accrued for promptness in their financial dealings. 3. In some branches, it was found that the credit given to the groups are being divided equally among the group members but it is not being distributed according to the priority of the needs of members. 4. Care should be taken to see that the credit is used for the purposes mentioned in the actual plan submitted to the bank. 5. Seethammapeta Branch of Indian Bank must improve its SHG base. 6. In some cases, like in Madugula, the communication gap between the banker and the beneficiaries has to be reduced. As most of the SHG members are illiterate and ignorant, the banker needs to go a step further in order to make them feel comfortable and interact with them at a one to one level. 7. The communication has to be in the language and terminology acceptable and understandable by the SHG members. 8. All the rural branches of Indian Bank need to be computerized. 9. There is need to evolve new products by the banks commensurate with the requirement of rural women. Apart from credit, several other financial services like health insurance and life insurance could also be included in the package offered to SHGs. 10. Banks should encourage inter branch convergence of SHGs in order to promote sharing of ideas and experiences among SHGs. 11. Branch managers should be close to the communities they serve, and should be alert for any distribution channel through which they can profitably reach new customers. They should be ensured of the existing level and types of group activity and informal

intermediation, and be ready to offer savings and lending products which are appropriate for local communities. 12. In order to ensure proper utilization of the credit, there is an urgent need to introduce availability of consumption credit from the formal channel. 13. There is need to sensitize bank staff towards the needs, constraints, and inhibitions of women. 14. Customer-Contact-Programmes for women should be organized to disseminate the information of various schemes and financial needs of women. References:
1. 2. 3. 4. 5.
Sadegh Bakhtiari, Microfinance And Poverty Reduction: Some International Evidence ,International Business and Research Journal, Vol.5, Number 12, December 2006 Pitt, Mark M. and Shahidur R. Khandker, Household and Intrahousehold Impact of the Grameen Bank and Similar Targeted Credit Programs in Bangladesh. World Bank Discussion Papers 320. Washington, DC Bulletin on the Eradication of Poverty, Micro Finance and Poverty Eradication, Time to End Poverty, Annual Edition, No.11, 2004. James Roth and et all, Micro Insurance and Micro Finance Institutions- Evidence From India, CGAP Working Group on Micro Insurance and Bad Practices, Case Study No.15 Piyush Tiwari and S.M. Fahad, Micro Finance Institutions in India, Housing Development Corporation, Roman House, 169, Backbay Reclamation, Mumbai- 400 020.

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