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CHAPTER-IV

MICROFINANCE IN KARNATAKA

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CHAPTER-IV

MICROFINANCE IN KARNATAKA

4.1. Introduction:

The origin of microfinance in Karnataka dates back to 1984 when Mysore

Resettlement and Development Agency (MYRADA), a Non-Governmental

Organisation (NGO) engaged in rural development and based in Karnataka,

promoted several co-operative societies that extended loans to their members

(Fernandez, 2004). Later in the mid-1980s, the National Bank for Agriculture and

Rural Development (NABARD) took the lead. After the launching of SHG-Bank

Linkage Program (SBLP) in 1991-92 and under this, programme the first micro,

credit by private Vysya Bank. NABARD up scaled the programme by way of

initiating a series of measures that include training of NGOs and bank staff. The

Cauvery Grameena Bank of Mysore district became the first RRB in state to

promote and credit-link several SHGs. With state intervention, Streeshakthi and

Swashakti programmes were launched as part of promoting micro finance.

The primary objective of the SHG-Bank Linkage Programme (SBLP) of

NABARD is to expand the outreach of the formal banking system to the un-reached

rural poor on a sustainable basis (see Suran, 2007). In addition, the following

objectives were formulated for advancement of the groups. Providence of hassle

free access to the financial services and products through formal sector with low

rate of interest itself has a number of benefits for the poor. In addition, the

programme fulfills several other objectives. First, it provides consumption as well

as production loan without any collateral. Secondly, it enables SHG members to

reap economic benefit out of mutual help, solidarity and joint responsibility. The

programme also ensures long-term help from a promoting institution for a number

of activities most notably the income generating activities

As SHGs are formed by economically poorer women with low level of

capabilities to deal with banks, Self-Help Group Promoting Institutions (SHPI) play

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a critical role in the formation of SHGs and their operations in the initial stages.

For the convenience, present chapter is divided into following sections. 4.1

Introduction, Section 4.2 presents analysis of SHG-Bank Linkage programme in

Karnataka, Section 4.3 discusses the role of stakeholders and Section, 4.4 presents

issues regarding SHG-Bank linkage. Analyses of promotion and linkage of joint

liability groups, Stree Shakti and progress of microfinance in Karnataka are

discussed in Section 4.5, 4.6 and 4.7 respectively. The last section describes the

Bidar DCCB model.

4.2. SHG-Bank Linkage programme in Karnataka

The self-help movement is deep-rooted in southern States and Karnataka has

been in forefront in terms of promotion and credit linkage. Specific strategies

formulated by NABARD to meet the requirement for widening the network and

deepening the penetration of the programme in the State enabled to show the

success. The fresh SHGs formed and credit linked (direct linkage by banks) during

the year 2010-11 were 62,346 and 49,759 respectively taking the cumulative SHGs

formed and credit linked in the State to 6, 56,463 and 5, 79,969 respectively as on

31st March 2011. The average loan per SHG has risen from 1.09 lakh during

2009-10 to 1.44 lakh during 2010-11. For the convenience, present chapter is

divided into following sections. 4.1 Introduction, Section 4.2 presents analysis of

SHG-Bank Linkage programme in Karnataka Section 4.3 discusses the role of

stakeholders and Section 4.4 presents issues regarding SHG-Bank linkage.

Analyses of promotion and linkage of joint liability groups, Stree Shakti and

progress of microfinance in Karnataka are discussed in Section 4.5, 4.6 and 4.7

respectively. The last section describes the Bidar DCCB model.

A conducive atmosphere for the spread of microfinance exists in the State.

Many NGOs/SHPIs have been promoting Self Help Groups. Most of the major

Commercial Banks and also the Regional Rural Banks (RRBs) and the District

Central Cooperative Banks (DCCBs) are playing the role of “Credit Purveyor” to

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SHGs. Women and Child Development Department (WCDD) of the State

Government is promoting “Stree Shakti” groups. The Micro Finance Profile of the

State is presented in Table 4.1.

Table-4.1

Salient Features of SHG-BLP in Karnataka

Sl.

No.

Particulars As on

31.03.10

During

2010-11

As on

31.03.11

1 No. of SHGs promoted 594117 62346 656463

2 No. of SHGs credit linked (new Groups) 530210 49759 579969

3 No. of SHGs financed (new and repeat groups) Indirect Linkage through MFIs

100424 44529

4 Amount of Bank loan availed ( crore) Amount of

MFI loans availed ( crore)

5257.51 1447.03 366.70

6704.54

5 No of families covered under the programme (lakh) 80.84 9.75 90.59

6 Percentage of women SHGs Over 90%

7 Average loan per SHG ( ) during 2010-11 144092

8 No of participating banks 73

9 No. of bank branches lending to SHGs (including PACS)

8372

10 No. of NGOs participating in the programme 350

11 Amount of NABARD Refinance ( crore) 1021.11 164.70 1185.89

Source: Microfinance in Karnataka, 2010-11.

The number of SHGs promoted increased from 5,94,117 in 2010 to 6,56,463

in 2011 and 49,759 new groups were created during 2010-11. Further, the number

of families converted under the programme increased to 90.59 lakhs in 2011

from 80.84 lakhs in 2010.

Table-4.2

Agency-wise No. of SHG Accounts Sl.

No.

Agency No. of SHG

Accounts as on

31.03.2010

New SHG

Accounts

opened during

2010-11

Total No. of

SHG Accounts

as on 31.03.2011

Percentage

of accounts

held

1 Commercial Banks

261012 33252 294264 45

2 Regional Rural Banks

161230 9599 170829 26

3 Cooperative Banks

171875 19495 191370 29

Total 594117 62346 656463 100 Source: Microfinance in Karnataka, 2010-11.

Non-Governmental Organisations (NGOs), Commercial Banks, the DCCBs,

PACS and RRBs continued to play a very significant role in promotion of SHGs in

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the State. Agency-wise number of SHG accounts added during the year and the

cumulative position as on 31 March 2011, with percentage share of SHG accounts by

each agency, are summarized in Table-4.2. Commercial banks topped the position in

promoting SHGs followed by Cooperative banks and RRBs (see Table 4.2). It is

important to note that as on 31 March 2011, 5, 79,969 groups have been credit linked.

The available data presents various dimensions of progress in credit linkage of SHGs

during and the cumulative position as at the end of the year 2010-11.

Table-4.3

Agency-wise cumulative credit linkage

Agency New

SHGs

Existing

SHGs

Total Loan Amount

( crore)

Commercial Banks 23440 14314 37754 659.91

Regional Rural Banks 13527 15090 28617 377.11

Cooperative Banks 12792 21261 34053 410.01

Total 49759 50665 100424

1447.03

Indirect Linkage through MFI/ NGO

44529 366.70


Table 4.3 presents agency wise cumulative credit linkage. It is welcoming

to note that commercial banks again topped in credit linkage as the loan amount

stood 659 crores followed by RRBs, which accounted 377 crores whereas

Cooperative banks provided loan of 410 crores. It is important to note that the

commercial banks not only increased their credit linkage through adding new SHGs

to the existing one. Furthermore, the agency-wise share of bank loan to SHGs

during 2010-11 and the cumulative position as on 31 March 2011 is presented in

Table-4.4, which shows that commercial banks are continued to dominate in

promotion of SHGs.

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Table-4.4

Agency-wise cumulative credit linkage

Agency No. of groups credit linked Bank Loan – crore (Ground

Level)*

As on

31.3.2010

During

2010-11

As on

31.3.2011

As on

31.3.201

0

During

2010-11

As on

31.3.2011

Commercial Banks

256796 23440 280236 2630.95 659.91 3290.86

Regional Rural Banks

149097 13527 162624 1471.44 377.11 1848.55

Cooperative Banks

124317 12792 137109 1155.12 410.01 1565.13

Total 530210 49759 579969 5257.51 1447.03 6704.54

* Bank loan figures include repeat finance by banks. Source: Microfinance in Karnataka, 2010-11.

Table-4.5

SHG Bank Linkage (1992-93 to 2010-11) in Karnataka

Year No. of SHGs credit

linked

Bank Loan

( lakh)

Refinance ( lakh)

1992-1993 114 5.73 5.73

1993-1994 51 5.51 5.51

1994-1995 481 77.71 70.71

1995-1996 1046 145.08 145.08

1996-1997 760 159.25 159.12

1997-1998 1138 232.19 228.10

1998-1999 2002 409.86 422.28

1999-2000 5018 1054.81 649.00

2000-2001 8009 1714.00 1404.00

2001-2002 18413 3475.39 2229.00

2002-2003 25146 7249.50 4073.55

2003-2004 41688 13960.37 6090.22

2004-2005 59332 26653.00 9951.00

2005-2006 61730 44266.02 6695.43

2006-2007 92708 81638.87 15599.24

2007-2008 94280 100646.47 12699.52

2008-2009 60319 120702.37 19219.00

2009-2010 57975 123355.55 22463.30

2010-2011 49759 144702.80 16477.80

Total 579969 670454.48 118587.59

Source: NABARD, 2011-12.

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Table-4.5 and Table-4.6 present the SHGs-Bank Linkage in Karnataka since

inception. It is evident from the table that number of SHGs credit linked has

increased from 114 in the year 1992-93 to 2007-08. However, thereafter there is

decline in this number and it stood 49,759 in 2010-11. It is significant to note that

both the bank loan and refinance facility substantial increased during last two

decades. The bank loan which was mere 5.73 lakhs increased to 1,44,702 in

2010-11. Similar trends can be seen in case of refinance.

Further, the analysis of c reedit linkage by various agency show that the SHGs

linkage bank loan and provided by commercial banks stood highest with 2,80,236

linkages and 3,29,085 in 2011. However, this does not undermine the importance of

RRBs and Cooperative banks. The number of SHGs linkage and bank loan registered

tremendous growth through RRBs and cooperative banks as well (See Table 4.6).

Table-4.6

Credit linkage by Various Agencies (Cumulative) in Karnataka (1995-2011) Year

(as on 31

March)

Commercial Banks* RRBs* Cooperatives No of SHGs linked

Bank Loan

( lakh)

No of SHGs linked

Bank Loan

( lakh)

No of SHGs linked

Bank Loan

( lakh) 1995 316 42.85 340 46.10 – –

1996 1,034 143.00 658 91.03 – –

1997 1,425 206.00 1,022 186.65 5 0.50

1998 2,008 297.27 1,528 314.57 54 13.50

1999 2,974 473.61 2,417 513.34 201 68.25

2000 4,829 1,017.60 4,735 1,000.20 1,046 212.30

2001 6,395 1,452.00 8,334 1,647.70 3,890 576.80

2002 14,425 2,426.24 13,279 3,021.70 9,328 1,951.70

2003 20,987 4,539.58 23,473 6,048.29 17,718 3,973.05

2004 35,912 10,227.38 38,631 10,947.28 29,323 7,346.63

2005 54,814 20,210.36 62,732 21,973.31 45,652 12,991.16

2006 78,520 36,420.85 83,383 38,413.39 63,025 24,600.61

2007 139,341 85,925.91 99,931 55,718.50 78,364 39,429.31

2008 198,262 134,572.32 117,038 82,387.80 96,616 64,560.04

2009 223,853 201,563.77 136,690 113,339.14 1,11692 87,319.62

2010 256,796 263,095.00 149,097 147,144.00 1,24,317 1,15,512.00

2011 280,236 329,085.50 162,624 184,854.84 1,37,109 1,56,513.46

* Bank loan includes both direct and indirect linkage. Source: NABARD, 2011-12.

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The average loan per SHG has registering an increase of nearly 33% over

the previous year (See Table-4.7 and Figure-4.1). While this augurs well for the

growth of SHG, there is ample scope to increase the loan size further. All the three

agencies namely Commercial Banks, RRBs and Cooperative banks registered

growth in average loan per SHGs.

Table-4.7

Growth in Average Loan per SHG (Amount in )

Agency 2008-09 2009-10 2010-11

Commercial Banks 67,153.00 119,057.00 174,792.00

Regional Rural Banks 77,557.00 111,481.00 131,778.00

Cooperative Banks 74,581.00 94,769.00 120,403.00

Average loan (all agencies) 70,694.00 108,571.00 144,092.00


The role of MFIs finance to SHGs is one of the important segments in the

analysis. During the year 2010-11, banks in Karnataka have financed MFIs to the

tune of 366.70 crore for on lending to 44,529 SHGs.

0.00

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

160,000.00

180,000.00

Am

ou

nt

(Rs.

Cro

res)

2008-09 2009-10 2010-11

Figure 4.1: Growth in Average Loan per SHG

Commercial Banks Regional Rural Banks Cooperative Banks

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As per the data furnished by Association of Karnataka Micro Finance

Institutions (AKMI), 26 MFIs, affiliated to it, have a total loan outstanding of

2944.62 crore with an outreach of 44.69 lakh accounts as on 31 March 2011. In

Karnataka, SKDRDP has huge share in the microfinance market, followed by

several other MFIs like IDFFSPL, SRFS, SPANADANA, SKS, and Grameena

Koota etc. The extent of operations of all MFIs has not been captured due to lack of

any reporting system.

4.3 Role of Stakeholders

This section present the important role played by different stakeholders.

4.3.1 Government of India (GoI)

Taking cognizance of the role of SHG-Bank linkage in ensuring inclusive

growth, GoI has been attaching utmost importance to the programme, as has been

evident through Union Budget announcement every year. As indicated by Union

Government in its budget announcement for 2009-10, 50% of rural women are to

be covered under SHGs by the end of the XII Five Year Plan. Further, in the Union

Budget for 2011-12, a “Women SHG Development Fund” with a corpus of 500

crore, has been created and the same is proposed to be maintained with NABARD.

The fund will be used to refinance banks for lending to women SHGs.

4.3.2 Reserve Bank of India (RBI)

RBI through its policy announcements has made the environment conducive

for banks to participate in a larger way in the programme. Loans granted by banks

to such SHGs engaged in agriculture and allied activities are classified as direct

finance to agriculture, if banks maintain disaggregated data on SHG/micro credit

portfolio. Further, small amounts not exceeding 50,000/- per borrower, either

directly or indirectly through SHG/JLG mechanism or to NBFC/MFI for on lending

up to 50,000/- per borrower will constitute microcredit.

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4.3.3 Government of Karnataka (GoK)

In Karnataka, the State Government through its Women & Child

Development Department (WCDD) continued its mission of empowering rural poor

women in all the districts through its Stree Shakti Programme. WCDD has

facilitated promotion of 1, 35,000 Stree Shakthi Groups as on 31 March 2011 of

which 1, 22,000 Groups have been credit linked with financial assistance to the tune

of 1231.96 crore. As a part of withdrawal strategy and to wean away Stree

Shakthi Groups from Anganwadi Workers, WCDD has formed federations of the

Stree Shakthi Groups to strengthen and empower these women. WCDD has formed

federations of the Stree Shakthi Groups in all the 175 Talukas in the State and has

registered them under the Societies Act with common byelaw devised by the

department. Extensive training has been provided for capacity building of the

members of Stree Shakthi federation through MYRADA and with financial support

from NABARD.

The interest subvention scheme of providing loans to SHGs at 4% by the

Co-operative Bank has been extended for the year 2011-12. Government of

Karnataka has also extended the scheme (for the year 2011-12) for interest

subvention of 6% to nationalised banks in respect of loans extended to women

SHGs promoted with the assistance from various Government Departments.

4.3.4 Banks

Banks in Karnataka have given due importance to SHG-Bank Linkage

programme. The overall credit flow during the year 2010-11 is l, 477.03 crore

taking the cumulative bank loan to 6,581.72 crore. All the three agencies viz.,

Commercial Banks, RRBs and Cooperative Banks have made significant

contribution to the programme.

Commercial Banks have disbursed loans amounting to 659.91 crore,

constituting around 46 per cent of the loan disbursed during the year. Further,

Commercial banks have also been reaching SHGs through MFIs and nearly 70 to

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80 per cent of the loans of the MFIs to SHGs are through borrowings from

Commercial Banks. During 2010-11, an amount of 364.20 crore has been lent

through MFIs to SHGs. The average loan per SHG has increased from 1.19 lakh

to 1.75 lakh registering an increase of nearly 47 per cent by Commercial Banks.

During 2010-11, RRBs have also made significant disbursement and have

disbursed 377.11 crore. Some RRBs like Karnataka Vikas Grameena Bank and

Pragthi Gramin Bank are also lending to SHGs through MFIs. The average loan per

SHG has increased from 1.11 lakh to 1.32 lakh registering an increase of

nearly 18 per cent.

Cooperative banks with support from GoK in the form of interest

subvention, has increased their lending to SHG over the years. During the year

2010-11, they have disbursed loans amounting to 410.01 crore. The average loan

per SHG has increased from 0.95 lakh to 1.20 lakh registering an increase of

nearly 27%. The State Cooperative Bank has come out with a Vision Document

2010, wherein they have estimated formation and linkage of SHGs for the next five

years. As per the vision document, the Cooperative Banks intends promoting

around 1.25 lakh SHGs by 2015 and provide linkage to 1.40 lakh new Groups.

4.3.5 Micro Finance Institutions (MFIs)

The MFIs in Karnataka are registered either as NBFC-MFIs under

Companies Act or as MFO under Trust/ Societies Act. Out of 48 MFIs that are

active in the State, 23 have registered themselves with Association of Karnataka

Microfinance Institutions (AKMI). As on 31st March 2011, the MFIs registered

with AKMI have a total outstanding of 2944.62 crore.

4.3.6 NGOs

There are around 800 NGOs operating in the State, out of which 170 NGOs

are working with NABARD as SHPI partners. The NGOs have played a very crucial

role in SHG-BLP movement. They have remained a crucial link between SHGs on

one side and banks/developmental functionaries including the Government on the

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other. The NGOs not only promote SHGs but also are actively involved in building

the capacities of SHGs also and inculcating financial discipline.

4.3.7 NABARD

NABARD sees the promotion and bank linking of SHGs as part of an

overall arrangement for providing financial services to the poor in a sustainable

manner and an empowerment process for the members of these SHGs. Right from

the pilot phase, NABARD is actively involved in the SHG-BLP movement.

NABARD facilitates interaction among the stakeholders to address various issues

relating to up scaling the SHG-Bank Linkage, besides continuing its various

promotional and developmental interventions. The initiatives taken by NABARD in

SHG-BLP are discussed.

NABARD Financial Services Ltd (NABFINS) is a subsidiary of NABARD

with Government of Karnataka and a few public and private sector banks as co-

equity holders. NABFINS is collaborating with NABARD in developing innovative

business models for extending microfinance to the poor. NABFINS endeavours to

reduce clients’ risks while keeping the interest rates on loans to SHGs low. It has

adopted a Business Correspondent (BC) model as one of its principal verticals in its

business model. Under this model, NABFINS identifies NGOs, SHG Federations,

etc. who have a good record of accomplishment of working with the poor, as its

BCs to reach out to the SHGs of poor. NABFINS and the BCs then together assess

the suitability of the SHGs identified by the BCs for direct financing by NABFINS.

The BC not only identifies suitable SHGs for financing by NABFINS, but also

collects the recoveries and passes it on to NABFINS. BCs receive commission from

NABFINS for the services rendered. They also have access to NABARD

promotional assistance through NABFINS for organisation and nurturing of SHGs

and for extending skill trainings and exposure programmes for SHG members.

NABFINS also assist the BCs in accessing funds for other economic activities for

the poor taken by BCs like watershed development etc. from NABARD and other

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agencies. As on 31.3.2011, 31 BCs have been engaged by NABFINS and through

them has extended loans to the extent of 50.64 crore to 2044 SHGs. NABFINS

will also be piloting other innovative business models for extending microfinance to

the poor.

4.3.7.1 Role of NABARD under SHG-Bank Linkage Programme

NABARD has been playing a very important role namely financial,

developmental and promotional in the growth of SHG-Bank Linkage in the State,

which is depicted in Chart-4.1.

Chart-4.1 SHG-Bank Linkage in the State

During 2010-11, of 169.19 lakh benefiting 23,511 members / partners has

been disbursed towards various promotional initiatives by NABARD. NABARD

provides financial support by way of grant for the following activities:

NABARD

Promotional & Developmental

Financial Training and Capacity Building of Stakeholders

Grants to NGOs/banks for

• Promotion of SHGs

• Capacity building of SHGs

• Micro Enterprise Development

• Technology upgradation

• Supporting Federations

Grants to MFIS/Banks for Rating of MFIs

Documentation/ Dissemination of Best Practices

Refinance - General

Grants to MFIS/Banks for Rating of MFIs

Refinance to commercial banks for loan to MFOs/MFIs for onlending

Capital/Equity Support and Revolving Fund

Assistance to MFIs

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� Capacity building of the partner agencies likes NGOs, Banks, and Government

Officials.

� Capacity building of SHG leaders / members.

� Exposure visits to banks/institutions pioneering in MF initiatives.

� Field visits to nearby SHGs for officials of Block Level Bankers’ Committee.

NABARD has conducted 337 training and exposure visits programmes

covering about 9436 SHG leaders/ members. Further, 145 book writers’ programme

covering 3,625 SHG members facilitating proper maintenance of books of accounts

was conducted by NABARD. Besides, 129 programmes for all officials of

Commercial Banks, RRBs, Cooperatives, Government Officials, NGOs etc at State,

District and Taluka level.

NABARD has been extending grant assistance for promotion of SHGs. Self

Help Promoting Institutions (SHPIs) being supported by NABARD includes NGOs,

DCCBs and RRBs. During the year 2010-11, NABARD sanctioned grant assistance

of 8.40 lakh for promotion and linkage of 2025 groups taking the cumulative

sanction to 522.58 lakh for promotion and credit linkage of 30324 groups.

Assistance to the tune of 15.81 lakh to NGOs sanctioned for capacity

building of SHGs.

4.3.7.1.A.Micro Enterprise Development Programme (MEDP)

Under the scheme, matured SHGs of more than 3 years are provided training

for undertaking Income Generation Activities/livelihood activities. During the year

2010-11, NABARD sanctioned 159 MEDPs with a grant assistance of 51.25

lakh covering 4452 individual SHG members. The MEDPs covered wide range of

activities like vermin composting, food products, Kasuti works, Beauty parlour,

tailoring, integrated agri system, soft toys making, rubber tapping, agarbathi

making, etc.

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4.2.7.1.B. Support for SHG Federations

As a measure to ensure sustenance of SHGs, NABARD initiated a scheme

for supporting SHG Federations during 2007-08. The scheme is presently on a

model-neutral basis. The SHG Federations should not involve in financial

intermediation. However, they can support SHGs with various non-financial

services like skill development training, procurement of inputs, marketing of

products, legal counselling, etc. As on 31 March 2011, NABARD has sanctioned

grant assistance of 25.67 lakh to 21 Community Managed Resource Centres

(CMRCs) of MYRADA supporting 84 Federations covering 2262 SHGs.

NABARD reimbursed 25 per cent of the training cost to WCDD for conduct

of Trainers’ Training Programme covering supervisors of WCDD and select NGOs.

In total, 1750 Trainers were trained. These trainers are now actively involved in

training of cluster members of the Stree Shakthi Groups on an ongoing basis.

4.3.7.1.C. Scheme for providing technology support to NGOs for strengthening MIS

NGOs associated with NABARD for promotion of SHGs are provided grant

assistance of a maximum of 50,000/- for purchase of computer for strengthening

MIS. NABARD provides software and hardware support to NGOs who have

promoted a minimum of 250 SHGs. During the year 2010.11, grant assistance of

0.50 lakh was sanctioned to one NGO for purchase of computer and for

strengthening of MIS.

4.3.7.1.D. Scheme for rating of MFIs

To enable MFIs/ MFOs to leverage funds from banks/ financial institutions,

a onetime grant assistance of 3.00 lakh is provided to MFIs/ MFOs to get

themselves rated through accredited rating agencies. MFIs with minimum loan

outstanding of 50 lakh and maximum of 10 crore would be eligible. Banks

can also avail 100% reimbursement of expenses towards rating of MFIs up to

3.00 lakh by way of grant. During the year 2010-11, an amount of 1.544 lakh

was sanctioned to one MFI as assistance for rating.

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4.3.7.1 E. Documentation and Dissemination

NABARD has supported development of exclusive software known as

NABYUKTI by MYRADA to facilitate the Self Help Promoting Institutions to

have appropriate database for effective monitoring. NABAKD has been distributing

the software free of cost to SHPIs wanting to develop database on the functioning

of their SHGs. NABARD has also sanctioned assistance to MYRADA for

upgrading the software to a web based solution in various languages that can be

directly downloaded from the MYRADA/ NABARD website. NABARD publishes

booklets/brochures capturing the developments under SHG-Bank Linkage

Programme in the State. Every year NABARD brings out a booklet on the status of

SHG-Bank Linkage Programme in the State.

4.3.7.1.F. SHG- Bank Linkage Award

Public recognition of excellent performance motivates the bankers/ NGOs

and enables to sustain the interest in the SHG-Bank Linkage Programme. In pursuit

of this, NABARD over the years has instituted State Level Awards for the best

performance under the SHG-BLP to felicitate and motivate the stakeholders. The

awards are based on specific parameters such as ratio of SHG portfolio to overall

loan portfolio, average per group finance, average per branch SHG credit linked etc.

4.3.7.1 G. General Refinance Scheme

NABARD provides refinance support to Commercial Banks, RRBs and

Cooperative banks against their lending to SHGs. Table 4.8 presents the refinance

support provided by NABARD to banks during the year 2010-11 which show that

cooperative banks received highest refinance facility ( 64.76 crore) followed by

RRBs (45.36) crore. The commercial banks received meagre amount of 3.92

crore.

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Table-4.8

Refinance Support during 2010-11

Agency No. SHGs Amt. of Refinance ( crore)

Commercial Banks 245 3.92

Regional Rural Banks 5845 45.36

Cooperative Banks 7692 64.76

NABFINS 2036 50.74

Total 15818 164.78


Following the Hon’ble Union Finance Minister’s announcement in 2007-08

Budget speechNABARD has opened a separate line of refinance for banks for

financing Farm Production and Investment activities through matured SHGs, in

addition to the existing refinance facility for SHGs,. Term loan and cash credit

limits given by the banks for a period of five years to matured SHGs exclusively for

farm production and investment activities covering agriculture sector and allied

activities will be eligible under the scheme.

As per the revised guidelines on Priority Sector Advances issued by RBI, if

banks keep disaggregated data pertaining to agricultural loans to SHGs, they can

treat such loans as direct advances to agriculture. This will also facilitate banks to

claim refinance form NABARD under this special line of refinance.

4.3.7.1 H. Support to MFIs

Realising the need and potential of MFIs and the importance attached to

their role by the GoI, NABARD has been supporting MFIs to accelerate the

availability of financial services in rural areas. The support from NABARD to MFIs

is available in the following forms:

4.3.7.1.I. Scheme for Capital/Equity Support to MFIs

The scheme for capital/equity support to MFIs has been introduced during

the year 2006-07. The specific objectives of the scheme are to provide

capital/equity support to MFIs to enable them to leverage capital/equity for

accessing commercial and other funds from banks, for providing financial services

145

at an affordable cost to the poor, and to enable MFIs to achieve sustainability in

their credit operations over a period of 3-5 years. Normally, MFIs having the

effective interest rate of more than 25 per cent per annum to the ultimate clients are

not considered for support under the scheme. As on 31st March 2011, an amount of

two crore has been lent to MFIs under the scheme.

4.3.7.1 J. Revolving Fund Assistance (RFA) to MFIs for on lending to SHGs

NABARD was selectively supporting NGOs/MFIs experimenting various

models of micro finance like Grameen Model, NGO networking, SHG Federations

etc., especially in areas where sustainability of the systems is yet to be established.

The focus of RFA support will be directed for encouraging alternative micro-credit

innovations. The assistance is aimed at facilitating the supported agencies to

provide funds to the disadvantaged and excluded persons at an affordable cost.

Though the RBI has deregulated interest rate, MFIs have the effective

interest rate of more than 25 per cent per annum for the ultimate clients who were

not considered for support under the scheme. During 2010-11, an amount of 3

crore was sanctioned to IDF Financial Services (P) Ltd for on-lending to SHGs

taking the cumulative sanctions to 15.01 crore as on 31 March 2011. The details

of RFA sanctioned are given in Table-4.9.

Table-4.9

RFA sanctioned to MFIs ( crore)

Sl. No. Name of the MFI Amount sanctioned

1 Sanghamitra Rural Financial Services Ltd 7.51

2 SKDRDP 2.00

3 IDF Financial Services (P) Ltd 5.50

Total 15.01


4.3.7.1.K. Capital Support / Revolving Fund Assistance to Start-up MFIs

With a view to have a balanced growth of the MFI sector and enable them to

leverage funds from banks, NABARD provides capital support/ RFA to the Start-up

MFIs who are between 6 months to 2 years old. For the purpose of NABARD support,

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MFIs having an effective rate of interest equal to or less than 25 per cent are

considered.

4.4. Issues concerning SHG-Bank Linkage

Despite the growth of SHG-Bank Linkage in Karnataka, certain issues are

impeding the movement. It requires concerted efforts to tackle them effectively.

Some of the issues for the attention of stakeholders have been discussed below:

• Mobilising all poor into some institutional platform preferably SHGs, JLGs and

federation of SHGs.

• Setting-up dedicated institutions on the lines of SERP in AP, Magalir Thittam in

Tamil Nadu or Kutumbashree in Kerala, which would work in mission mode in

creating and nurturing the SHGs. The institution will liaise with all stakeholders

including bankers, various technical assistance providers, NGOs, etc in

achieving the above-mentioned objective.

• Increase the average per SHG credit to 2.50 lakh to 3.00 lakh in 1-2 years.

• Ensuring active bank accounts for all SHGs.

• Ensuring all SHG members to save regularly and have per member saving

25,000/- in 5 years.

• Good working SHGs to function as Business Correspondents.

• All SHG members to have basic insurance coverage including life

• Accidental disability, health and asset insurance particularly

• Livestock insurance.

• All SHG members to have at least 2-3 sources of income.

4.4.1 Regional imbalances in the spread of SHGs

Though SHG movement has taken deep roots in Karnataka, there has been

imbalance in the spread of SHGs among various districts of the State. The spread of

SHGs has been observed to be low in Koppal, Bagalkot, Belgaum, Bijapur and

Haveri districts. The spread of SHGs is moderate in Raichur, Bellary, Kolar,

Tumkur, Gadag, Hassan, Davanagere and Chamarajanagar, whereas the spread is

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good in Dakshina Kannada, Shimoga, Chikmagalur, Gulbarga, Uttara Kannada,

Dharwad, Kodagu, Mysore, Chitradurga, Udupi and Mandya districts. The

promoters of SHGs have to focus on districts where the spread so far has been low

or moderate, to minimize the imbalances.

4.4.2 Entrepreneurship development

Further, it is generally observed that the spread of SHGs shall be slow where

the livelihood opportunities are limited. It is crucial for the SHGs to invest their

money and efforts in income generating activities for their sustenance and

improvement in their standard of living. However, rural households are not able to

get opportunities for investment in promising enterprises due to lack of backward

and forward linkages.

Micro enterprises like agarbathi, pickle, papad making, etc., have not

succeeded as they are not able to find adequate market for their products. There is a

need not only to improve the quality of their produce so as to find market beyond

the domestic ones, as also to diversify the activities, by way of coordination with

the District Industries Centre in order to identify new and adaptable activities and

gain skills in them. NGOs have a crucial role to play to assist the SHGs to take up

new activities.

4.4.3 Federations of SHGs

For sustaining the SHGs, many NGOs have experimented institutional

arrangements such as Federations of SHGs. Such emerging structures have been

tried not only as a part of withdrawal strategy by promoters, but also to ensure

participation of the SHGs in tackling their common problems such as infrastructure

development, input procurement, marketing, coordination with development

agencies including Government Departments, legal counselling, adult education,

etc. For instance, Community Managed Resource Centres (CMRCs) promoted by

MYRADA among their SHGs function as Business Facilitators for banks, provide

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legal counselling to their members suffering from domestic violence and external

exploitations, coordinating training arrangements, marketing interventions, etc.

It is a good sign that WCDD has planned an extensive training plan for the

functionaries of Taluka Level Federations of SHGs promoted by it in consultation

with MYRADA and financial participation of NABARD. This intervention is

expected to bring about common standards among the emerging SHG Federations.

Some of the NGOs have promoted Federations only for monitoring of their loan

services to SHGs, rather than empowering SHGs to access a variety of services

from different providers. All the stakeholders should strive for the empowerment of

community based organizations for sustaining the self help movement to support

the rural poor.

Often SHGs still complain that they are not able to get due attention from

banks while getting the banking services. Therefore, they are compelled to look for

alternative sources including MFIs and private moneylenders for meeting their

needs. Looking to the increasing loans to MFIs being issued by banks, it appears

that they find it convenient to outsource their SHG loan portfolio for keeping the

transaction costs low. However, this results in increased borrowing costs for MFI

clients. Though some of the MFIs are extending value added services to their

clients, justifying the high cost of lending, not all MFIs are packaging their products

with additional services. Increased per group finance would not only reduce

transaction costs for the banks, but also help the SHGs access adequate loans for

graduating to take up income generating activities. Banks are, therefore, required to

increase the loan size to groups, especially the well functioning existing groups.

4.4.4 NGOs as Business Facilitators

Banks have been availing the services of NGOs while financing SHGs. So

long, NGOs are being supported by sponsoring agencies. After the sponsorship

period, SHGs are expected to independently deal with various service providers,

including banks. However, it is observed that SHGs do need continued hand

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holding. Hence, banks should consider continuing the facilitation services of NGOs

for some time by suitably compensating the facilitation costs. NGOs facilities help

not only providing qualitative services to SHGs, but also in loan monitoring.

4.4.5 Multiple memberships

Even as SHG-Bank Linkage has become mainstream business of banks,

there are instances when the bank branches have not been able meet the need

effectively and adequately, prompting members to seek alternate sources for their

needs as explained in the previous issue. The individual members gain membership

to other groups, especially those being promoted by new functionaries such as

MFIs. This has led to added burden to the members, requiring to saving and debt

servicing beyond their capacity. Promoters need to take care to ensure that members

do not resort to multiple memberships, as it may lead to their defaulting to save or

repay the loans. To meet the credit needs of SHGs, banks to embrace the concept of

Total Financial Inclusion and meet the entire credit requirements of SHG members

namely income generation activities, social needs like housing, education etc and

debt swapping.

4.4.6 In-operative accounts

Many bank branches are observing SHG accounts remaining inoperative,

either due to groups getting defunct or shifting their transactions to some other

agency. Banks need to ensure that while old SHGs opening the new accounts have

closed their earlier accounts with the previous bank. Also, during the strategy meets

held with stakeholders, consensual decision was taken to identify inoperative SHG

accounts to explore the possibility of reviving them with the appropriate capacity

building interventions or to close them.

4.4.7 Issues with MFIs

Many Micro Finance Institutions have emerged to tap the micro finance

market in Karnataka. While MFIs claim to cater to the unmet needs of SHGs, banks

feel the functioning of MFIs vitiates the self help movement. While banks need to

150

improve their services, by being more responsive to the needs of SHGs, if necessary

by application of technology, having exclusive SHG branches, use of business

facilitators/correspondents and such other proactive measures. At the same time,

MFIs need to adopt a code of conduct for ensuring compliance with best practices,

in the interest of the SHGs.

4.4.8 Database and its integrity

The detailed data / information on the SHG activities help in reviewing the

progress and planning. The system of data collection and report generation needs

revamping both at District and State level, specifically commercial banks.

4.5 Promotion and Linkage of Joint Liability Groups

In order to give focused attention to the needs of mid-segment groups,

especially those of landless farmers/share croppers/oral lessees taking up farming

and allied activities, there is a need to promote JLGs. This would enable the

members of such groups to access timely and adequate loans required for taking up

their activities. Promotion of JLGs also helps the farmers to strengthen their

collective bargaining power. JLGs can collectively involve in procurement of inputs

and thereby save the cost of inputs besides liaise with Government agencies and

Krishi Vigyan Kendras for adoption of technology and prudent farming practices.

Similar to JLGs for the members in the farm sector, Activity Based Groups

(ABGs) for the members in the non-farm sector need to be promoted to enable them

access institutional credit for meeting their financial requirements for undertaking

their activities. Many such ABGs have been promoted under various activity

clusters. Such efforts have to be replicated to promote ABGs for people engaged in

various non-farm vocations in the rural areas.

The essential feature of JLG is that it is an informal group comprising of 4-

10 individuals coming together for purpose of availing loan on individual basis or

through group mechanism against mutual guarantee. Generally, members of a JLG

would engage in a similar type of activity in agriculture/ Non farm sector. The JLG

151

concept would ensure that the Joint Liability Agreement and peer pressure in the

group serves as security for loan repayment. To facilitate promotion of JLGs,

banks/ group promoting institutions are eligible for incentive from NABARD.

Incentives will be extended for formation, nurturing and credit linking/ financing of

JLGs over a period of 3 years at the rate of 2000/- per JLG.

Though the loan given to the groups should be related to the credit needs, it

is desirable to include savings element in JLG concept. Regular savings of

affordable amounts not only help in inculcating savings habit among the farmers

(for meeting their investment / consumer needs, contingencies) but also facilitate

their coming together on regular basis helping to promote mutual trust.

Additionally, these savings will be credited in their bank account, which will

improve their rapport with the bank.

NABARD has successfully taken-up the issue of Waiver of Stamp duty for

JLGs with Government of Karnataka. While presenting the Budget for 2011-12, the

GoK had announced to that effect and detailed notification has been issued vide

Notification No. RD.73/ Registration and Stamp duty 2011 dated 29 March 2011

wherein stamp duty is waived for JLGs availing loan up to 5.00 lakh for non-

agriculture purposes. As regards Agriculture purposes, the waiver of stamp duty is

already in vogue.

Some NGOs like SKDRDP and IDF have already facilitated formation of

JLGs and providing loans through their MFI arm. Even in the formal sector, RRBs

and Commercial banks have been actively involved in providing loans to JLGs.

During the year 2010-11, under NABARD’s JLGPIs scheme, sanction and credit

linkages are given in Table 4.10

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Table-4.10

Sanction and Credit Linkage of JLGs - 2010-11

Agency Target

(No.)

Achievement

(sanctioned)

Promoted and credit linked

CBs

15000

1,270 60

RRBs 6,722 2,954

CCBs 1,300

NGOs 11,725 400

Total 21,017 3,414


4.6 Stree Shakthi

The programme was launched during 2000-01 and is implemented

throughout the State. The focus of this scheme is to empower rural women and

make them self reliant. Stree Shakthi Groups are formed at the village level to

inculcate the habit of savings and thrift among its members, so that women are

economically empowered. Each group comprises of about 15 to 20 women

members who come from below the poverty line families. Women belonging to

families that are landless are agricultural labourers, and largely SC/ST women who

have come together to form 1.30 lakhs Stree Shakthi Groups. In 2011-12 budget

speech, Government had announced the formation of 60,000 new groups. Hence, by

end of September-2012, 10,000 new groups were formed through taluka

federations. At present there are 1, 40,000 groups, comprising a membership of

21.00 lakhs women that are functioning in the State.

Groups conduct regular weekly meetings and save a minimum of 10/-.

These savings are used to do internal lending among the members helping them to

utilize the money for their day-to-day needs and to start small income generating

activities. Till end of September-2012, the groups had saved 1151.13 crores

since inception. Bank loans have been availed by 1, 21,325 groups to the extent of

1334.98 crores and there has been internal loan circulation to the tune of 3302.51

crores and used for taking up various income generating activities.

153

Each Stree Shakthi Group is given a Revolving Fund of 5, 000/- and kit

material of 600/- which includes 9 books and zinc metallic trunk. To encourage

women’s groups to involve in saving activities and take up income generating

activities, the State has offered financial incentives of 5000/-to each group.

Further, the State also offers financial incentives of 15,000 to those groups who

have saved between 75, 000/- to 1.00 lakh and an incentive of 20,000/- to

those groups who have saved above 1.00 lakh. So far, 6367 Groups have taken

advantage of these incentives.

A subsidized loan at an interest of 6.0% is given to those groups who take

up loans ranging from 25,000/- to 1.00 lakh. A budget provision of 9.00

lakhs provided for 300 such groups during 2012-13. Each district is given 75,000

to conduct Exhibitions & Mela’s at District & Taluk Level. The purpose of this is to

facilitate the marketing of products produced by these groups. Under the Karnataka

Societies Registration Act 1960, so far 175 Block Level Societies have been

registered. Since 2005-06, financial assistance of 30, 000/- each year has been

provided to strengthen these Societies.

Skill Development Training was imparted to the Stree Shakthi Groups based

on their interest. So far, 95,735 members have been given Skill Development

Training and total expenditure of 541.19 lakhs was incurred. The budgetary

allocations for various activities under Stree Shakthi are

� 1050 lakh ( 950.00 lakh for rural groups and 100 lakh for urban Stree

Shakthi groups to be created by KSWDC) for creation of SHGs, of which an

expenditure of 240.87 lakh was incurred as offset 2012.

� With a focus on the backward areas, under the Special Development

Programme an amount of 100 lakhs each is allocated towards (i) incentives to

groups, which are involved in income generating activities, of which a sum of

23.50 lakh was spent up to Sep 2012 and (ii) continuation of civil works.

154

� In view of the large number of groups taking up income generating activities, it was

proposed to provide marketing facilities at the taluka level in a phased manner from

the year 2007-08. During 2012-13, 100.00 lakhs is allocated for construction of

four taluka bhavans. The scheme has made the following impact.

•••• Inculcated habit of savings

•••• Self reliant, confident and economically independent women

•••• Development of delivery mechanisms for poverty alleviation

The progress of Stree Shakthi Scheme is summarized in Table 4.11 and Figure-

4.2, which shows that there has been decline in expenditure incurred under this scheme.

Table-4.11

Progress under Stree Shakthi Scheme

Years Expenditure

( In lakh)

Achievement

(No.s)

2008-09 952.92 80947

2009-10 832.93 49989

2010-11 970.83 86359

2011-12 795.36 54145 2012-13 (up to the end of September-12) 240.87 13611

Source: Economic Survey of Karnataka, 2012-13.

Figure-4.2: Progress under Stree Shakthi Scheme

0

200

400

600

800

1000

1200

2008-09 2009-10 2010-11 2011-12 2012-13 (up to

the end of

September-12)

Expen

dit

ure

(R

s. I

n l

akh)

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Ach

ievem

ent

(Nos.

)

Expenditure (Rs. In lakh) Achievement (No.s)

155

4.7. Progress of Microfinance in the Southern Region

4.7.1 Progress and Regional Disparities

There has been considerable regional disparity in terms of the spread of

micro finance in India. The Southern region of India is way ahead of the other

regions not just in terms of the absolute number of SHGs formed and the bank

credit supplied to these SHGs but also in terms its coverage of poor persons

residing in this region. A comparison with the number of poor persons is useful as

micro finance is essentially a means of providing bank credit to the poor sections of

the population. The Southern region is one of the well-developed regions in terms

of banking infrastructure. This has led to concentration of micro finance.

NABARD’s well-known SHG Bank Linkage Programme (SBLP) was initiated

through a pilot programme in Karnataka from the mid-1990s, which has now

expanded throughout the country. The SHGs are mainly concentrated in southern

region. The main reason of this is the prevalence of voluntary organisations in the

spread of linkage banking programme.

Table-4.12

Savings Mobilisation through Microfinance 31st March 2011

(Amount in lakhs)

Sl. No. States SHG Savings

Number % Amount %

1 Andhra Pradesh 1466225 42.02 130780 35.19

2 Karnataka 564545 16.18 96503 25.97

3 Kerala 493347 14.14 42144 11.34

4 Lakshadweep 164 0.00 10 0.00

5 Tamil Nadu 943098 27.03 99724 26.84

6 Puducherry 22081 0.63 2431 0.65

A Southern Region 3489460 (100) 46.76 371592 (100) 52.96

B Northern Region 372772 5.00 32857 4.68

C North Eastern Region 324739 4.35 13105 1.87

D Easter Region 1527618 20.47 140838 20.07

E Central Region 786436 10.54 60338 8.60

F Western Region 960921 12.88 82901 11.81

All India 7461946 100 701630 100


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The largest MFIs of India, such as SHARE, SPANDANA, CDF, MYRADA,

SKS and PREM are also concentrated in southern region. NABARD has been

instrumental in facilitating various activities under microfinance sector in the

Southern Region. Besides NABARD, there are some other agencies like SIDBI,

RRBs, Co-operative Banks and public and private commercial banks are playing an

important role for the development of microfinance sector in the southern Region.

Below tables, highlight the overall progress under microfinance in the Sothern

Region

Table-4.12 highlights the state-wise progress of microfinance in Southern

Region in terms of number of SHGs and the mobilization of savings. Then the

regional data is also given to understand the relative growth of Southern Region

with respect to other regions of India. Among states of Southern Region, Andhra

Pradesh is having 42 per cent SHGs with 35 per cent savings mobilized which is the

highest followed by Tamil Nadu with 27 per cent SHGs and 27 per cent savings

mobilisation. The other Southern Region states are lagging far behind. If we

compare the Southern Region with respect to the other regions of India, we find that

Southern Region comprises the highest of 47 per cent of SHGs and more than half

of the total savings mobilisation (53 per cent). On the other hand, the Eastern

Region is having 20 per cent of SHGs and savings mobilization of equal

percentage. Thus, we find that at the regional level, the performance of

microfinance is best in the southern states and worst in the NER. Thus, we find that

the microfinance environment in the Southern region is very active.

157

Table-4.13

Loan Disbursed by Banks during 2010-11 (Amount in Lakhs)

Sl. No. States SHG Loan Disbursed

Number % Amount %

1 Andhra Pradesh 367420 50.61 620917 56.47

2 Karnataka 90342 12.44 137435 12.50

3 Kerala 72761 10.02 77769 7.07

4 Lakshadweep 14 0.00 6.50 0.00

5 Tamil Nadu 191469 26.37 255622 23.25

6 Pondicherry 4016 0.55 7877 0.72




D Easter Region 247624 20.70 161950 11.13

E Central Region 91954 7.69 62591 4.30

F Western Region 48734 4.07 60755 4.18

All India 1196134 100 1454773 100


Similarly, Table-4.13 highlights the state-wise progress of microfinance in

Southern Region in terms of number of SHGs and amount of loan disbursed by

Commercial Banks, RRBs, and Cooperative Banks. Then the regional data is also

given to understand the relative growth of Southern Region with respect to other

regions of India. Among the states of Southern Region, the state of Andhra Pradesh

is having 51 per cent SHGs with 56 per cent disbursed bank loans, which is the

highest, followed by Tamil Nadu with 26 per cent SHGs and 23 per cent disbursed

as bank loan. The other Southern Region states are lagging far behind. When we

compare the Southern Region with respect to the other regions of India, it is the

number one region even with respect to disbursement of bank loan to SHGs. Easter

region is the next best performer compared to other regions. Thus again we find that

at the regional level, the performance of microfinance is best in the southern states

and worst in the other regions.

158

Table-4.14

Bank Loans Outstanding against SHGs as on 31st March 2011 (Amount in lakhs)

Sl.

No.

States SHG Savings

Number % Amount %

1 Andhra Pradesh 1693792 62.58 1336912 61.30

2 Karnataka 252613 9.33 224612 10.30

3 Kerala 178211 6.58 157275 7.21

4 Lakshadweep 14 0.00 5 0.00

5 Tamil Nadu 574385 21.22 452624 20.75

6 Puducherry 7393 0.27 9430 0.43




D Easter Region 1105533 23.10 420255 13.46

E Central Region 358872 7.50 236539 7.58

F Western Region 316821 6.62 124623 3.99

All India 4786763 100 3122116 100


Table-4.14 shows the state-wise progress of microfinance in Southern

Region in terms of number of SHGs and amount of loan outstanding by

Commercial Banks, RRBs, and Cooperative Banks. The regional data is also given

to understand the relative growth of Southern Region with respect to other regions

of India in terms of bank loans outstanding. Among the states Southern Region, the

state of Andhra Pradesh is having63 per cent SHGs with 61 per cent outstanding

bank loans which the highest is followed by Tamil Nadu with 21 per cent SHGs and

21 per cent bank loans outstanding as on 31st March 2011. The other Southern

Region states are lagging far behind. At the all India level, the Southern Region is

having highest number of SHGs and outstanding banks loan with more than 50 per

cent as compared to other regions. Thus, it is clear that at the regional level, the

performance of microfinance is best in the southern states and worst in the other

regions in terms of bank loan outstanding. Thus, we find that the microfinance

environment in the Southern Region is very active in terms of bank loans

outstanding.

159

Table-4.15

Non-Performing Assets against bank loans to SHGs as on 31st March 2011

Sl.

No.

States Amount of Gross

NPAs against

SHGs

NPA as %age to

loan outstanding

1 Andhra Pradesh 27049 2.02

2 Karnataka 6686 2.98

3 Kerala 13547 8.61

4 Lakshadweep 0.00 0.00

5 Tamil Nadu 34957 7.72

6 Pondicherry 397 4.21

A Southern Region 82636 3.79

B Northern Region 6366 7.05

C North Eastern Region 5856 8.42

D Easter Region 18107 4.31

E Central Region 25404 10.74

F Western Region 9042 7.26

All India 147411 4.72


Table-4.15 shows the state-wise progress of microfinance in Southern

Region in terms of Non-Performing Assets (NPA) of SHGs out of the total loans

outstanding in Commercial Banks, RRBs, and Cooperative Banks. The regional

data is also given to understand the relative growth of Southern Region with respect

to other regions of India in terms of NPAs. Among the states of Southern Region,

the state of Tamil Nadu is having the highest amount of gross NPAs (34957 lakhs).

However, in terms of percentage of NPAs to outstanding bank loans of SHGs, it is

highest in Kerala (8.61 per cent) as compared to Tamil Nadu (7.72 per cent) and

other states in Southern Region. Among the Southern Regions, Andhra Pradesh and

Karnataka are doing exceptionally well in its loan recovery with the minimum

percentage of 2.02 per cent and 2.98 per cent NPAs to the outstanding bank loan of

SHGs, which are even below the all India average of 4.72 per cent. The southern

region is having the lowest percentage of NPAs (3.79 per cent) with respect to the

outstanding bank loan of SHGs. Thus, again we find that at the regional level, the

160

performance of microfinance is best in the southern states and worst in the Central

Region in terms of NPAs to loan outstanding. Thus, it is clear that the microfinance

environment in the Southern Region is very active in terms of recovery

performance of the bank loans to SHGs.

4.7.2 District Wise Bank Loan Disbursed to SHGs in Karnataka

The district wise bank loan disbursed from the year 1999-2000 to 2005-2006

for the 27 districts of Karnataka indicating that the first triennium average values

were lower in all the districts. The state overall total for all the years was found to

be 99,422.77 lakhs rupees and the average for the state was found to be 14,204.97

lakh rupees. The first triennium average values for the state as a whole (2,384 lakh

rupees) was found to be lower than the state average but whereas in the case of the

second triennium average values for the state as a whole (28,344.42 lakh rupees)

was higher than the state average.

4.7.3 The Business Performance of the Micro-Finance Providers

The important factors that decide on the business performance of the Micro

Finance providers are discussed in this section.

The performances of microfinance provided by NGOs to SHGs formed by

them in the selected districts are discussed here. The numbers of SHGs formed

from the selected districts were 9,243. The average number of SHGs formed was

1,155.37 for all the selected districts. The highest numbers of SHGs were formed in

Chitradurga and it was 2,071, the highest average was also found in the same

district, which was 259 SHGs.

4.7.3.1 Number of SHG members served by the NGOs

The total number of SHG members served in the selected districts was found

to be 1, 39,342 and the average for all the selected districts were 19,171. The

highest number of members served was found in the district of Chitradurga (31850)

and the highest average was found in Dharwad district, which was 4676.

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4.7.3.2 Amount of NABARD funds expended to selected NGOs

The formation of the SHGs by the NGOs using the NABARD funds in the

selected districts and the total funds that were spent in all the selected districts was

57,06,817. The average amount utilized from NABARD for all the selected

districts was 7,13,352.16. The highest fund that was used was in Belgaum

( 33,01,985) with an average of 4,12,748. The lowest utilization of NABARD

funds was found in Bijapur district ( 18,000) with an average of 2,000 per year.

4.7.3.3 Lending to SHGs through Bank assistance

Total lending to the SHGs by the NGOs using the assistance of the banks in

the selected districts was 42,26,85,501 and the average for the selected districts

was 5,28,35,688. The highest amount spent was found in Shimoga district which

was about 11, 33, 16,000 and the average was 1,41,64,500 rupees. The lowest

amount lent was in the district of Bijapur where in they had lent only an amount of

about 15,00,000 with an average of almost 1,87,000.

4.7.3.4 Lending to SHGs through NGOs’ own funds

The amount spent from NGOs own funds for a year including the amount

lent to the SHGs. The total amount spent by the NGOs in the selected districts was

3,34,94,500 and the average was 41,86,813. The highest amount was spent in

Chitradurga district which amounted to 1,54,06,000 and the average was found

to be 19,25,750. The lowest amount that was spent was in the district of Bijapur

which accounted for only 1,71,000 highest amounts overdue was found in

Chitradurga district which was 84,06,301. The district of Bijapur had no overdue

situation as the entire amount lent was already recovered (NABARD).

4.7.3.5 Portfolio of Lending by NGOs to SHGs

The portfolio of lending by the NGOs in the selected districts to the SHGs

was found in six major categories, which were agriculture, Agribusiness,

manufacturing, personal, needs, petty business and others. In Belgaum district,

49.90 per cent was lent towards agriculture. In Bijapur district, 68.10 per cent was

162

lent towards other category. In Chickmagalur district, 49.87 per cent was lent

towards agriculture and 31.85 per cent towards other category. In Chitradurga

district, 52.76 per cent was found to have been lent to agriculture, 28.84 per cent

was lent to agribusiness and 31.39 per cent towards personal needs in Davangere

district. In Dharwad district, the lending procedure was very erratic with only 9.15

per cent, 18.29 per cent, 27.44 per cent and 45.12 per cent was lent to agriculture,

agribusiness, manufacturing and other categories respectively. In Haveri 80.65 per

cent was lent to agriculture, where as in Koppal 50 per cent was lent to

agribusiness, while, Shimoga district recorded 80.13 per cent of the total amount

lent towards agriculture. The lowest lending that was given to agriculture was in the

district of Dharwad.

4.7.2.6 Skill Developmental Activities Conducted by NGOs to the SHGs

The skill development activities conducted by the NGOs to the SHGs were

recorded under seven major heads. They were, exposure visits, training

programmes, demonstrations, MELAs conducted for marketing of the products,

linkages provided between technology institutions and SHGs, linkages provided

between marketing institutions and SHGs and equipments provided. The highest

numbers of exposure visits were conducted in Chitradurga (68.38), training

programmes (470.13) were conducted in Dharwad district and demonstrations

(51.25) were found to be highest in the district of Chitradurga. The highest numbers

of MELAs (12.88) were conducted in Dharwad district and the highest numbers of

equipments (75.00) were provided in Chitradurga district. In Bijapur,

Chickmagalur, Chitradurga, Davangere, Haveri and Shimoga, there were no

linkages between marketing institutions provided. In Bijapur, Chitradurga,

Davangere, and Haveri there were no linkage facilities provided between

technology institutions and the SHGs. In Bijapur, Chickmagalur, Davangere and

Haveri no melas for the SHGs were conducted.

163

4.7.4 Impact of Micro-Financial Institutions on Member Enterprise

The impact of micro financial institutions on the member enterprises (SHGs)

are discussed here under; the impact is studied on the different aspects like income

position of the SHG members, asset position of the SHG members, generation of

employment, the savings, the investment pattern and the consumption pattern.

4.7.5 Impact of NGOs on the Income of the SHG

Impact of micro finance provided by NGOs on the income of the SHGs in the

selected districts is an important aspect. The highest impact was found in Chitradurga

district where the income before the involvement of the NGOs was 19, 862.50 and

after the involvement of the NGOs the income rose to 42,775 and the‘t’ value was

6.78. The lowest impact was found in Belgaum district where in the income before

was 55,379 and it rose to 1, 34,108 having at value of 2.08.

The pattern of growth of SHGs in the State from 1992-93 to 2005-06 is

discussed in detail. Here, there is data on three aspects of the growth of Micro

finance in the State. In the year 1992-93, the total number of SHGs credit linked

were only 114, which decreased in 1993-94 to 51 while we can see a constant rise

in their numbers. In the year 2005-06, the total number of SHGs credit linked grew

up to 61,730. The compound growth rate of number of SHGs credit linked

increased at the rate of 71.19 per cent. Similarly, bank loan disbursed to SHGs was

found to be growing at the compound growth rate of 95.97 per cent and refinance to

banks from Apex level institutions increased at a compound growth rate of 75.83

per cent. The rate of growth in bank loan is higher than the growth in both the

SHGs credit linked and refinanced. This was achieved because of the efforts of the

NGOs and the government agencies, the policies that were taken up by the

government during these periods, seeing the importance of the SHGs in the

improvement of the lives of the poor was also evident for this kind of an

achievement in the field of SHGs growth. This higher growth in micro finance may

164

also be possible because of refinance support provided by the apex level

institutions, which are into Micro finance.

4.7.6 District Wise SHGs Credit Linked in Karnataka

The district wise SHGs credit linked from the year 1999-2000 to 2005-2006

for Karnataka shows clearly that the first triennium end, average values are lower in

all the districts except in the districts of Bidar and Chitradurga. The compound

growth rates of Bidar and Chitradurga districts for these years were 0.69 and 11.12

respectively, as the compound growth rate itself states the growth in these district

were low because of the lack of interest among the people for these kinds of

policies in the regions. The state total for all the years was found to be 2,24,928

number of SHGs the average for the state was found to be 32,132.57 in number this

growth can be attributed to the efficient working of the people those who are related

to the micro finance and its development. The first triennium end average values for

the state as a whole (15,263.67) was found to be lower than the total state average

whereas average values for the state as a whole (51,330.33) were higher than the

state average in the case of the second triennium end. the total movement of Micro

finance in the state was geared up during the second triennium as a lot of

government policies were framed and also because of the realization of the apex

level institutions on the importance of the SHGs and their role in the alleviation of

poverty.

4.7.7 District Wise Bank Loan Disbursed to SHGs in Karnataka

The district wise bank loan disbursed from the year 1999-2000 to 2005-2006

for the 27 districts of Karnataka is reported in Table 4.16. It is evident from the

table that at the first triennium end, average values are lower in all the districts. The

State total for all the years was found to be 99,422.77 lakhs the average for the

state was found to be 14,204.97 lakh. The first triennium end average values for

the state as a whole ( 2,384 lakh) was found to be lower than the state average but

whereas in the case of the second triennium end average values for the state as a

165

whole ( 28,344.42 lakh) was higher than the state average this again can be

attributed to the efficient working of the agencies that are involved in the up-

liftment of the micro financial institutions.

Table-4.16

District-wise Bank Loan disbursed to SHGs (1999-2000 to 2005-2006) in

Karnataka ( Lakh)

Name of the

Districts

1999-00 2000-01 2001-02 2003-04 2004-05 2005-06 Total Average

Bagalkot 1.69 4.65 41.77 197.90 264.98 485.70 1032.48 147.50

Bangalore (R) 1.69 2.86 36.05 411.20 2467.03 2678.00 5629.93 804.28

Bangalore (U) 2.41 3.57 140.62 168.70 654.71 1208.40 2245.21 320.74

Belgaum 15.41 36.70 117.09 619.90 1097.39 2529.00 4730.39 675.77

Bellary 13.01 52.07 431.23 619.90 836.43 1440.10 3827.43 546.78

Bidar 110.55 213.98 426.57 816.10 706.56 2326.80 5075.76 725.11

Bijapur 19.27 30.98 74.05 173.30 469.10 645.20 1619.50 231.36

Chamarajnagar 11.20 43.49 312.81 377.00 631.29 1120.90 2682.49 383.21

Chickmagalur 0.48 13.58 74.94 207.40 429.56 925.50 1735.36 247.91

Chitradurga 60.57 87.57 391.96 594.00 784.80 15 23.70 3665.90 523.70

Dakshinakannada 343.57 403.66 206.87 2177.10 2044.50 1799.80 7903.90 1129.13

Davanagere 4.09 11.68 143.73 115.00 1055.50 1468.10 2834.40 404.91

Dharwad 34.56 58.86 95.98 208.90 442.52 1008.80 1959.82 279.97

Gadag 2.41 8.10 53.99 116.90 250.68 777.00 1250.98 178.71

Gulbarga 35.28 57.67 146.95 467.60 813.67 2040.70 4098.97 585.57

Hassan 8.43 58.38 300.19 875.90 1814.86 4618.60 814.8646 1156.35

Haveri 3.49 14.42 74.69 194.40 578.29 1328.90 2226.29 318.04

Kodagu 1.93 3.22 45.76 189.80 365.54 1200.70 1898.34 271.19

Kolar 69.97 87.93 172.00 402.40 1131.96 1789.90 3978.36 568.34

Koppal 4.70 10.84 75.86 63.80 401.96 499.80 1094.46 156.35

Mandya 4.58 15.01 103.31 524.50 1024.07 2255.70 4143.87 591.98

Mysore 132.47 172.16 166.17 856.10 3040.82 2794.10 7556.92 1079.56

Raichur 4.70 44.08 102.92 184.20 461.38 641.70 1521.18 217.31

Shimoga 104.53 163.35 299.02 821.80 1386.66 1337.40 4384.96 626.42

Tumkur 27.34 41.10 101.66 797.40 2426.83 4410.60 8218.03 1174.00

Udupi 32.39 64.22 169.89 1345.70 665.68 757.60 3847.78 549.68

Uttarakannada 4.09 9.89 77.12 433.60 566.01 1007.30 2177.61 311.09

State total 1054.81 1714.00 4383.19 13960.50 26812.77 44260.00 99422.77 14204.97

Source: SHG-bank linkage Programme Karnataka 2005-2006, NABARD

Association of Karnataka Micro-finance Institutions (AKMI) is registered

under the Societies Act of 1860 and it is overseeing the workings of various (23)

MFIs, has informed that the loan outstanding given by various MFIs as on March

2012 is 3232.26 crore covering 4214872 accounts, out of which overdue is only

2.56 per cent.

166

Table-4.17

Bank-wise Savings Mobilisation as on 31st March 2011 in Karnataka

(Amount in lakhs)

Sl. No. Name of the Bank No. of SHGs Savings

1 Allahabad Bank 282 27

2 Andhra Bank 178 16

3 Bank of Baroda 1320 133

4 Bank of India 525 10

5 Bank of Maharastra 587 3

6 Canara Bank 28423 7248

7 Central Bank of India 493 393

8 Corporation Bank 10443 2813

9 Dena Bank 789 748

10 IDBI Bank 44 213

11 Indian Bank 2997 293

12 Indian Overseas Bank 2040 117

13 Oriental Bank of Commerce 67 4

14 Punjab National Bank 938 124

16 State Bank of Hyderabad 1246 18135

17 State Bank of India 37411 278

18 State Bank of Mysore 49586 9917

19 State Bank of Travancore 376 93

20 Syndicate Bank 31756 4426

21 UCO Bank 522 119

22 Union Bank of India 4426 246

23 Vijaya Bank 30720 4079


In Karnataka State, the State Bank of Hyderabad mobilized highest savings

of 18135 lakhs from 1246 SHGs followed by State Bank of Mysore with savings

mobilization of 9917 lakhs from 49586 SHGs (See Table 4.17). However, the

State Bank of Mysore is performing well as compared to other banks. The bank has

disbursed loan amounts of 25779 lakhs to 9115 SHGs during year 2010-11(see

Table 4.18).

167

Table-4.18

Bank-wise loan disbursed during 2010-2011 in Karnataka

(Amount in lakhs)

Sl. No. Name of the Bank No. of SHGs Loan disbursed

1 Allahabad Bank 175 136

2 Andhra Bank 30 33

3 Bank of Baroda 135 213

4 Bank of India 379 448

6 Canara Bank 6283 13893

7 Central Bank of India 190 86

8 Corporation Bank 601 721

9 Dena Bank 23 12

11 Indian Bank 696 1566

12 Indian Overseas Bank 694 1388

13 Oriental Bank of Commerce 39 34

14 Punjab National Bank 47 106

16 State Bank of Hyderabad 498 1313

17 State Bank of India 9000 8889

18 State Bank of Mysore 9115 25779

19 State Bank of Travancore 2 2

20 Syndicate Bank 1230 3032

21 UCO Bank - -

22 Union Bank of India 191 460

23 Vijaya Bank 2737 5018


Table-4.19 depicts that in Karnataka, the State Bank of Mysore is having

highest loan outstanding of 44,380 lakhs, followed by State Bank of India with

21,803 lakhs. In Tamil Nadu, the loan outstanding is highest in Indian Bank to

the extent of 1,19,508 lakhs in 1,05,967 SHGs. As evident from Table-4.20,

Gross NPAs against SHGs is highest in State Bank of India ( 1141 lakhs),

followed by Union Bank of India ( 933.70 lakhs) in Karnataka. However,

percentage of NPAs to outstanding bank loan of SHGs is highest in Corporation

Bank (22.9 per cent).

168

Table-4.19

Bank-wise loan out-standing as on 31st March 2011 in Karnataka

(Amount in lakhs) Sl. No. Name of the Bank No. of SHGs Loan O/S

1 Allahabad Bank 295 196 2 Andhra Bank 146 141 3 Bank of Baroda 656 624 4 Bank of India 1222 1659 5 Bank of Maharashtra 83 105 6 Canara Bank 14312 21549 7 Central Bank of India 549 585 8 Corporation Bank 3894 3388 9 Den a Bank 519 334

11 Indian Bank 1202 1618 12 Indian Overseas Bank 1751 2066 13 Oriental Bank of Commerce 12 29 14 Punjab & Sind Bank 2 1.37 15 Punjab National Bank 266 261 16 State Bank of Hyderabad 1246 968 17 State Bank of India 24897 21803 18 State Bank of Mysore 18652 44380 19 State Bank of Travancore 2 2 20 Syndicate Bank 10963 13448 21 UCO Bank 264 206 22 Union Bank of India 2847 3123 23 Vijaya Bank 7523 10099


Table-4.20

Bank-wise Non-Performing against bank loans to SHGs as on 31st March 2011

in Karnataka

(Amount in lakhs) Sl. No. Name of the Bank Amt. of Gross NPAs

against SHGs NPAas %age to loan o/s

1 Allahabad Bank 0 0 2 Andhra Bank 6.44 4.6 3 Bank of Baroda 0.0 0.0 4 Bank of India 0.0 0.0 5 Bank of Maharashtra 5.64 5.3 6 Canara Bank - - 7 Central Bank of India - - 8 Corporation Bank 329 22.9 9 Dena Bank 10.89 10.7

11 Indian Bank 258 2.8 12 Indian Overseas Bank 452 6.9 13 Oriental Bank of Commerce 15 Punjab National Bank 31.6 0.9 16 State Bank of Hyderabad 17 State Bank of India 1141 13.6 18 State Bank of Mysore 0 0 19 State Bank of Travancore 164.98 1.1 20 Syndicate Bank 87.70 2.8 21 UCO Bank 0 0 22 Union Bank of India 933.70 5.1 23 Vijaya Bank 0.50 0.1


169

4.8. Bidar DCCB Model

Bidar DCCB played a laudable role in developing PACS in capturing SHG

business in the district. In order to have sustainable and quality SHGs, DCCB

assisted all the PACS in the district to appoint on contract one Assistant Supervisor,

who attends to the work of forming SHGs, participates in their meetings, nurture

them and credit link them to DCCB. In order to induce PACS to hire staff

exclusively for SHG work, DCCB bear the honorarium paid to Assistant

Supervisors on a tapering basis. It had also opened exclusive training centre

“SAHARDA” for providing training to SHGs, staff and other stakeholders in the

sector. SHGs promoted by PACS were allowed to open savings bank account either

with PACS or nearest DCCB branch as per the convenience of the group. Savings

and internal lending are routed through savings bank account by the group. Credit is

provided by DCCB branch either directly or through PACS. While the loan

accounts are opened in the books of the DCCB branch, SHG is free to make

repayments through the PACS or at the DCCB branch. PACS are given an

incentive of l per cent of the interest collected on the loans issued to the groups, by

the DCCB, Savings and other deposits maintained by SHGs with PACS ranged

between 5.00 lakh to 3.00 crore averaging was 15 lakh, which the PACS is

free to utilise in their business. In addition to interest incentive, the low cost

deposits benefit the PACS to improve their business. As on 31st March 2011,

DCCB had credit linked 14,569 SHGs with a loan outstanding of 35.25 crore.

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References:

Bhuvan, I.B. (2007), Performance of Micro-finance providers in Karnataka, Unpublished M.Phil. Dissertation, University of Agriculture Science, Dharwad.

Meenakshi Rajeev, B.P. Vani and Veerashekharappa (2012), How importance are Self-Help Group Promoting Institutions? A Case of Karnataka, International Journal of Economics and Management Science, Vol. 1, No. 2, pp. 129-136.

K. Naveenkumar and Veerashekharappa (2012), Outreach and Sustainability Micro Finance Institutions: Case Study from Karnataka, International Journal of Economics and Management Science, Vol. 1, No. 2, pp. 79-90.

http://www.nabard.org

Karnataka Economic Survey, 2011-12.

Karnataka Economic Survey, 2012-13.

NABARD, Microfinance in Karnataka, 2005-06.




NABARD, SHG-Bank linkage in Karnataka, 2008-09.

NABARD, SHG-Bank linkage in Karnataka, 2009-10.

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