ECONOMIC UPLIFTMENT OF DOWNTRODDEN PEOPLE THROUGH SELF HELP GROUPS IN LALGUDI TALUK, TIRUCHIRAPPALLI DISTRICT

THESIS SUBMITTED TO BHARATHIDASAN UNIVERSITY FOR THE AWARD OF THE DEGREE OF DOCTOR OF PHILOSOPHY IN ECONOMICS

BY P. RIAZ AHAMED M.A., M.Phil. (Ref No: 25114/Ph.D. 2/Econ/F.T./January 2010)

Under the guidance of

Dr. P.N.P. MOHAMED SAHAPUTHEEN Associate Professor and Head

POST GRATUATE AND RESEARCH DEPARTMENT OF ECONOMICS JAMAL MOHAMED COLLEGE (AUTONOMOUS) (Accredited at A Grade by NAAC – CGPA 3.6 out of 4.0) TIRUCHIRAPPALLI - 620 020 TAMIL NADU, INDIA JANUARY – 2013

P.G. AND RESEARCH DEPARTMENT OF ECONOMICS JAMAL MOHAMED COLLEGE (AUTONOMOUS) TIRUCHIRAPPALLI- 620 020

Dr. P.N.P. MOHAMED SAHAPUTHEEN Office : 0091-431-2331235 Associate Professor, Head & Research Advisor Resi : 0091-431-2421555 Mobile :+919443272683 Email : [email protected]

CERTIFICATE

This is to certify that the thesis entitled “ECONOMIC UPLIFTMENT OF DOWNTRODDEN PEOPLE THROUGH SELF HELP GROUPS IN LALGUDI TALUK, TIRUCHIRAPPALLI DISTRICT" submitted by P. RIAZ AHAMED, (Ref No: 25114/Ph.D. 2/Econ/F.T./January 2010) is a bonafide record of research work done by him under my guidance in the Department of Economics, Jamal Mohamed College, Tiruchirappalli and that the thesis has not previously formed the basis for the award to the candidate of any degree or any other similar title. The thesis is the outcome of personal research work done by the candidate under my overall supervision.

(Dr. P.N.P. MOHAMED SAHAPUTHEEN)

Station: Tiruchirappalli

Date:

DECLARATION

I hereby declare that the work embodied in this thesis has been carried out by me under the guidance and supervision of Dr. P.N.P. MOHAMED

SAHAPUTHEEN, Associate Professor, Head and Research Advisor,

Department of Economics, Jamal Mohamed College Tiruchirappalli - 620 020.

This work has not been submitted either in whole or in part for any other Degree or Diploma at any university.

(P. RIAZ AHAMED)

ACKNOWLEDGEMENT

I owe a debt of gratitude to many people who directly or indirectly helped me to complete this research work. Before thanking them, I pay plentiful thanks to God almighty for having bestowed me physical and mental health during the entire tenure of this research work. I extend my deep sense of gratitude to my Research Advisor Dr. P.N.P Mohamed Sahaputheen, Associate Professor and Head, Post Graduate and Research Department of Economics, Jamal Mohamed College, Tiruchirappalli for initiating and constantly monitoring this research work.

I place on the record my indebtedness to the Management of the Jamal Mohamed College, which has given me the opportunity to do the research work in this esteemed institution. My sincere thanks are due to Dr. R. Kadhar Mohideen, principal, Jamal Mohamed College for his encouragement to complete the research work.

1 found no words to reveal the sense of gratefulness to Dr. G. Gnanasekaran, Associate Professor and Head, Department of Economics, St. Joseph’s College (Autonomous), Tiruchirappalli and Dr T. Sridhar, Associate Professor, Department of Economics, National College, Tiruchirappalli, who as members of the Doctoral Committee, have questioned and even cross examined that propelled me to bring this thesis in the present shape. Words are not sufficient to I thank my professors of the economics department. Without their help, I could not have completed my research I work.

Finally, I convey my hearty thanks to my family members and friends without whose sacrifice the research work is impossible.

P. RIAZ AHAMED

CONTENTS

CHAPTERS TITLE PAGE NO.

Acknowledgement

List of Tables

I Introduction 1

II Concepts and Review of Literature 24

Genesis and Development of Self Help III 73 Groups an Overview

IV Profile of the Study Area 124

Analysis of the Economic Upliftment of Downtrodden People Through Self Help V 130 Groups in Lalgudi Taluk, Tiruchirappalli District

Summary of Findings Suggestions and VI 194 Conclusion

ANNEXURE:

Bibliography

Questionnaire

LIST OF TABLES

TABLE PAGE NAME OF THE TABLE NO. NO.

Overall progress under micro-finance during the last 3.1 88 four years

3.2 Growth of SHGs in Tamil Nadu as on 31 march 2010 93

3.3 The self-help group formation stages are outlined 103

4.1 Lalgudi Taluk – figures at a glance (2001 census) 127

5.1 Age – wise distribution of the respondents 131

5.2 Distribution of the respondents by sex composition 132

5.3 Marital status of respondents 133

5.4 Religious composition of the respondents 134

5.5 Community wise distribution of the respondents 135

5.6 Educational status of the respondents 136

5.7 Distribution of the respondents by their family type 137

5.8 Distribution of the respondents by their family size 138

Distribution of the respondents by their status in the 5.9 139 family

5.10 Distribution of the respondents by their occupation 140 5.11 Distribution of respondents by their reasons for joining SHG 141

5.12 Sources of joining SHG 142

5.13 Distribution of respondents by their years of experience in SHGs 143

5.14 Distribution of respondents by their groups associated with the NGO 144

5.15 Distribution of respondents by their monthly subscription to groups 145

Distribution of the respondents by their contributory savings per 5.16 146 month

5.17 Distribution of respondents by their status in the group 147

5.18 Remuneration for heads and assistant heads 148

5.19 Distribution of respondents by their membership in SHGs 149

Distribution of the respondents by their total loan borrowed from the 5.20 150 group

Distribution of the respondents by their loan borrowed from the group 5.21 151 during the study period

5.22 Distribution of respondents by rate of interest paid on SHGs loan 152

5.23 Repayment period of loan 153

5.24 Distribution of the respondents by their loan repayment 154

Distribution of respondents by their preference for source of getting 5.25 155 loan

5.26 Distribution of the respondents by the loan from NGO 156

5.27 Distribution of respondents by their loan from NGO 157 5.28 Distribution of respondents by the benefits from NGO other than loan 158

Distribution of the respondents by their total loan availed from the 5.29 159 banks

5.30 Distribution of the respondents by the source of getting bank loan 160

5.31 Distribution of the respondents by their repayment period of bank loan 161

Distribution of the respondents by the revolving fund sanctioned to the 5.32 162 groups

5.33 Distribution of the respondents by their share of revolving fund 163

5.34 Distribution of the respondents by subsidy availed from revolving fund 164

5.35 Distribution of the respondents by their subsidy availed on loans 165

5.36 Distribution of respondents by their utilization of loan 166

5.37 Distribution of the respondents by their borrowing from the non-SHGs 168

5.38 Interest rate of non-SHG loan 169

Distribution of respondents families by monthly income before joining 5.39 170 SHG

Distribution of respondents families by monthly income after joining 5.40 171 SHG

Distribution of respondents families by monthly expenditure before 5.41 172 joining SHG Distribution of respondents families by monthly expenditure after joining 5.42 173 SHG

5.43 Distribution of respondents families by monthly savings before joining SHG 174

5.44 Distribution of respondents families by monthly savings after joining SHG 176

5.45 Distribution of respondents by their utilization of savings 182

5.46 Distribution of respondents by their self-employment business 183

5.47 Distribution of respondents by their type of business 184

5.48 Own investment 185

5.49 Employment of workers in the business 186

5.50 Distribution of respondents by their labour cost 187

5.51 Distribution of respondents by monthly income from self-employment 188

5.52 Registration of self employment business 189

5.53 Distribution of self employed respondents by their problems 190

5.54 Distribution of respondents by loan repayment from self employment 191

5.55 Distribution of the respondents by the educational loan from SHG 192

Distribution of respondents by their view on improvement of economic 5.56 193 condition

LIST OF MAPS

MAP NAME OF THE MAP PAGE

4.1 Lalgudi Taluk 129 a ABBREVIATION

ADS - Area Development Schemes

AEC&RI - Agricultural Engineering College and Research Institute

AIMS - assessed the impact of Micro-enterprises Services

APMAS - Mahila Abhivruddhi Society in Andhra Pradesh

APRACA - Asia and Pacific Regional Agriculturist Credit Association

APRACH - Asia-Pacific Rural and Agricultural Credit Association

ASA - Association for Social Advancement

BPL - Below Poverty Line

BRAC - Bangladesh Rural Advancement Committee

CDF - Cooperative Development Foundation

CDP - Community Development Programme

CRPT - Community Resource Process Training

DWCRA - Development of women and children in rural areas

GTZ - German Agency for Technical co-operation

IDLAD - Integrated Dry Land Agricultural Development.

IFAD - International Fund for Agricultural Development

IRDP - integrated rural development programme

MACS - Mutually Aided Co-operative Society

MFDF - Microfinance Development Fund

MFIs - Microfinance Institutions MIX - microfinance information exchange market

MYRADA - Mysore Rehabilitation and Development Agency

NABARD - National Bank for Agricultural and Rural Development

NGOs - Non Governmental Organizations

PACB - Primary Agricultural Co-operative Bank

PLF - Panchayat Level Federations

RGVN - Rashtriya Gramin Vikas Nidhi

RMK - Rastriya Mahila Kosh

RWP - Rural Works Programme.

SC - Schedule Caste

SGSY - Swarnjayanti Gram Swarojgor Yojana

SHG - Self Help Group

SIDBI - Small Industries Development Bank of India

ST - Schedule Tribes

TNAU - Tamil Nadu Agricultural University

TNCDW - Tamil Nadu Corporation for Development of Women Ltd.

TRYSEM - Training of Rural Youth for Self Employment

WWF - Working Women’s Forum

CHAPTER - I

INTRODUCTION INTRODUCTION

According to Amartya Sen, lack of capability and opportunity are the major factors causing poverty and hunger in the developing nations like India. His studies on famine in India (Bengal 1943), Bangladesh, Ethiopia and Saharan countries found shortage of food was not always the cause of such catastrophe. He argues that it is a set of social and economic situations that deprives people of purchasing power and lead them to poverty and hunger1. The access to credit will help these people to raise purchasing power and fight poverty.

Eradication of poverty has been an important issue before the developing countries of the world. This is a big challenge for South Asian nations as about half of the world's poor live in this region. Again the intensity of poverty is high in India. One of every three persons in India is officially poor, and two of every three are either undernourished or malnourished. The rural poor men and women, landless labourers, artisans, agricultural labourers and small fishermen have almost been excluded from these financial services either because they were not available or simply because they were not considered credit worthy. A vicious cycle of low capital, low savings and consequently a weak capital base was perceived to be operating and perpetuating a permanent poverty syndrome.

The catalystic role played by credit for accelerating the economic develop- ment has been well recognized all over the world. The role played by finance in stimulating substantial economic development has been emphasized by the eminent economists like Kalecki, J.M. Keynes and Amartya Sen. Thereafter, the relationship between financial development and economic growth has been at- tributed in the endogenous growth theories.

India's overall development is not possible without developing the rural areas. The problems of poverty in rural and urban areas, more particularly amongst the backward classes, are due to lack of access for the poor to the basic services like education, health, sanitation, etc. The main reason for the same is

1 Sen, Amartya, “Poverty and Famines : An Essay on Entitlements and Deprivation”, Oxford, Clarendon Press, 1982. economic dependence, rapid increase in population after independence, disempowerment and lack of access to credit (Pandey 2008)2. However, conventional financial institutions seldom lend down market to serve the needs of such poor sections of the society. They are very often denied access to credit for any purpose.

Since the inception of the planning commission, planned efforts have been made to alleviate the problem of poverty. Soon after the commencement of the First Five year plan, central Government has instituted a Ministry of Rural Development to design, device, implement, manage, control and assess the rural development programmes of the country. On 2nd October 1952, the Government had launched Community Development Programme (CDP), based on trickle down hypothesis. National Extension service programme was also implemented during the First plan. The CDP covered almost all states and Union territories which consisted of 5026 blocks and each block covered 100 villages. But the programme failed due to lack of co-operation and co-ordination among the team and lack of Panchayat role.

A series of rural development programmes have been launched by the governments to achieve overall and all-sided development of rural India. These programmes have the main objectives such as (i) maximization of production in agriculture and allied activities in rural area including development of rural industries with an emphasis on village and cottage industries (ii) generation of maximum possible gainful employment opportunities in rural areas specially for weaker section of the community so as to enable them to cross the poverty line and (iii) providing certain basic amenities like safe drinking water, electricity, roads, credit facilities, marketing facilities, education, health care and nutrition.

It is in this context several programmes have been formulated to make a dent on poverty. The Government had implemented a series of self-employment and wage-employment generating programmes like Rural Works Programme (RWP), Integrated Dry Land Agricultural Development (IDLAD) and Area

2 Pandey manas, “Micro Financing: A Blessing for the Poor”, The Indian Journal of Commerce, vol-61, No-3, 2008. 2

Development Schemes. The rural housing programmes like Samagra Awas Yojana, Indira Awas Yojana have been implemented to provide houses to the roofless rural poor. An- tyodaya, Annapurna etc schemes have been implemented to help the destitute rural poor. The credit institutions like nationalized commercial banks, regional rural banks and co-operatives have been instituted in rural areas to extend credit facilities to the rural poor. The government identified the credit needs of the rural sector and framed policies conducive for the flow of institutional credit. Finance is one of the most fundamental inputs for economic activity, extension and development of any economy. Provision of financial ser- vices to the poor and underprivileged section of the society has always been in the focus of various programmes. However, the problem of the poverty has not been wiped out completely. A sizable selection of the population particularly the vulnerable groups, such as weaker sections and low income groups continue to remain excluded from even the most basic opportunities and services provided by the financial sector.

There has been a tremendous growth in banking sector in India, especially after new economic policies and banking reforms that has provided a paradigm shift to the entire banking sector in the country. With more than 53,000 commercial bank branches, around 15,000 branches of Regional Rural Banks and more than 100,000 cooperative bank branches, the country has emerged as one of the largest networks of bank branches in the world.

Despite the commendable efforts put in by the credit institutions, a large section of the poor population has still not got access to the credit from the formal banking system and depends upon conventional private sources like money lenders for their credit needs. Even though the government have also undertaken various poverty alleviation programmes, as revealed by various studies, a substantial portion of the very poor and the most vulnerable sections of the society has continued to remain out of the realms of such programmes. They have remained poor and backward, economically as well as socially. They consist of marginal farmers, petty rural artisans and agricultural labourers mostly belonging to socially and economically backward strata of the village population

3 are vulnerable to personal as well as natural calamities. The illiteracy of these poor people further compounds their problems. Despite the establishment of Regional Rural Banks, special schemes pertaining to employment generation and rural development could not control the widespread poverty in rural areas.

The recycling of funds has suffered on account of the generally poor recoveries of rural loans. Actually, the recoveries from the poor are generally regarded as much better than from the better off borrowers. The non-repayment by the poor has been primarily on account of wrong government policies, populist political decisions vitiating the general atmosphere of recovery, etc. Besides, there could be several other factors which appear to have restricted the access of rural poor to formal institutional credit. Some of these are:

(A) From the angle of the poor

Due to their social, economic educational backwardness and being unorganized, they are unaware of various programmes of facilities available from Government and the banks, are generally deprived of access to such benefits. They have an apprehension that the banks are not meant for poor people like them and they would not be able to get loans from the banks.

Lack of security to avail bank loan:

Documentation procedures, rigid lending policies and norms of the banks generally make the poor ineligible for bank credit. The uncertainty and long delays in obtaining such loans from the banks discourage them to approach the banks. In some cases, past unpleasant experience of the poor with the banks and government agencies is also a discouraging factor.

(B) From the angle of banks:

General mental reservation about financing such poor borrowers mainly due to the fear of bad debts.

Lack of security to back such loans.

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Non-compliance of documentation and other formalities by the borrowers.

Non-conformity with the usual banking norms.

Low returns to the bank on account of lower rate of interest to be charged on such small loans in accordance with the regulations of the central bank/ government.

Servicing large number of small loans with frequent transactions spread over a vast area is unwieldy besides involving high cost, making it inconvenient and apparently uneconomic for the banks. One would not be surprised if in the name of the market orientation and total freedom to lend, such small poor borrowers are the likely casualty and left high and dry. The result of all this is that the vast section of poor population continues to be outside the fold of banking system despite the best efforts by all.

There is a need for continuous flow of capital to the rural sector. Credit plays a key role in sustaining the development of the rural area and primary sector will continue to play an important role in the national economy. Rural development thus depends on the amount of credit available in the rural areas. Right from independence rural development vis-a-vis poverty alleviation had been considered as a major challenge to our country. Initially it was assumed that various poverty alleviation programs such as IRDP, TRYSEM, DWACRA, DPAP and MFAL could be able to enhance income level of the rural masses through trickle down effect.

But these programmes failed to achieve the target because 'trickle down effect' of economic growth cannot be achieved if growth is not accompanied with infrastructure development, which is essential for speedy percolation of the benefit of such programmes. Most poverty alleviation programmes also faced the problems of credit mobilization to the rural masses.

The existing banking policies were not found suited to the immediate needs of the poor scattered in rural areas. What they really needed was better access to the market rather than cheap, subsidized credit. The hundreds of

5 millions of poor the countries are largely out of the network of the banks. Banks were nationalized around forty years ago with the hope and promise that their services would reach to the poorest of the poor. But that goal is not even close to being met today.

The concept of rural development is so often equated with anti- poverty programmes. But the rural development is a comprehensive programme of activities which include agricultural growth, development of social and economic infrastructure, fair wages, housing, public health, education, village planning, nutrition and communication. So it is an effective instrument for rural rejuvenation for the poor rural households. There is much truth in Mahatma Gandhi's perception that the soul of India lives in her villages. He made the real efforts in understanding the rural problems by remaining us again and again that the soul of India lives in her villages. The prosperity of India, therefore, depends upon the prosperity of our villages.

Undeniably, the poorer sections in any community are denied satisfactory services by the formal and informal financial sectors. Concentration of monopolistic power, higher interest rates on loans, insistence of collaterals and exploitation through under valuation of collaterals have restricted the formal financial sector from providing credit to the poor and needy for their income generation activities.

The fact that the formal institutional banking sector has not lived up to its social responsibility of meeting the financial needs of the poor due to various reasons such as a) Lack of adequate branch network in rural area, b) Inability of the poor to offer satisfactory collaterals for the loans, c) Lack of education and d) Awareness among the poor.

The inherent limitations of the formal and informal sectors in providing financial services this e needy and the poor have led to the emergence of microcredit programmes in the developing world. The government sponsored poverty alleviation programmes are evolved centrally and planned without participation of the local people and therefore often fail to address the needs and

6 requirements of the poor. Lack of participatory approach in planning and execution of these programmes result in complete failure in improving socio- economic condition of the poor masses for which these were evolved. At this point of view microfinance or group lending is being looked upon as the golden stick for poverty alleviation vis-a-vis rural development. It is prime time to take appropriate measures in order to improve rural credit system.

Meaning and Nature of Microfinance

The term microfinance refers to providing very poor families with very small loans (microcredit) to help them engage in productive activities and grow their tiny business. Later, microfinance has come to include a broader range of services (credit, savings and insurance etc.) Traditionally microfinance was focused on providing very standardized credit product but emphasis shifted from rapid disbursement of subsidized loans to prop up targeted sector towards the building up of local sustainable institutions to serve the poor. The poor just like anyone else need a diverse range of financial instruments to be able to create assets, stabilize income and consumption and protect themselves against risks.

The concept of microfinance can be described as small, short, unsecured lending of money and provision of money and provision of very small loans that are rapid within short period of time. It is essentially used by the low- income individuals and households to empower them economically and enable them, financially. The microfinance is used as a sustainable tool to combat poverty. Microfinance can lead to micro solutions to poverty. It can be defined as a set of services comprising the following activities.

Features of Microfinance

1. It is a tool for empowerment of the poorest

2. Microcredit is delivered normally through SHGs.

3. It is essentially for promoting self empowerment and productivity in formal sector of economy.

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4. It is generally used for direct income generation and consumption.

5. It is not just a financing system but, a tool for social and economic change, especially for women.

6. It provides for seasonality, allow repayment flexibility, and avoid bureaucratic and legal formalities.

7. It assists the women to perform traditional roles better and to take up micro entrepreneurship.

Role of microcredit in eradication of poverty was stressed by the United Nations in its Economic and Social Council meet on July 25, 1997, in which the council called for strengthening the microcredit institutions. United Nation; while declaring the year 2005 as the International Year of Microfinance has focused on many issues concerning microfinance.

The microfinance industry in India emerged in the 1970's to provide poor with access to credit. It has become responsible to fulfil the small financial needs of the core poor of the society. This industry has broken the centuries old social customs of seclusion of people and highly successful in bringing them to the near main stream. The Noble committee also viewed that microfinance can help the people to break of poverty. Poverty alleviation is considered to be socially desirable goal in any developing country. The inclusive microfinance policy wherein the core poor have can easy access where the poor could access savings, credit, insurance and other services is making the core poor to come out of strong clutches of poverty hold.

The proponents argue that microfinance can help in substantially reducing poverty (little field et al Yunus 1996)3. The disbursal of credit from the microfinance organisations matched perfectly with the times when farmers needed credit for agricultural operations and repayment found better when compares to traditional institutional finance. (K P C. Rao, D. Kumara Charyulu

3 E.A. Parameswara Gupta, Syed Rahmathullah and Shankar, “Impact of Microfinance: A critical Analysis”, Southern Economist, Jan – 15, 2010. 8 and Xavier Gine 2003)4. Credit may be made a human right so that the poor get access to it without any constraints.

Easy access to credit would help in generation of more self employment opportunities for the poor credit (Manes Pandey)5. Microfinance has been found as the appropriate approach and effective tool for poverty alleviation and development (Laxman Saru 2008)6. There is now mounting hope that microfinance can be a large scale poverty alleviation tool which can uplift the standard of living of the poorest of the poor. Banks are coming forward now to lend to the poor and are looking to trap the expertise of the microcredit groups to create a new and potential market.

According to Prof Mohammad Yunus, father of Grameen Bank, the best theories of economics are meaningless if they cannot be practically applied, and that which can remove poverty and give people dignity of existence is the best economics. He has shown to the world that the poor are credit worthy by having a near 99 per cent repayment record in his Grameen Bank which alone today disburses more than Rs.300crore of loan even,' year and has more than two third of its funds as self generated.

With a humble beginning of lending mere US$ 27 to 42 poor victims al- most two decades back, the Grameen Bank, has grown to almost 1000 plus branches in Bangladesh with 2 million loans, amounting to a combined worth of staggering US 2 billion. Through his banking operations, he has shown to the world that markets are not only made of the top 20 per cent of population but also of the bottom 80 per cent. Almost 90 percent of Grameen Bank borrowers are poor women and the bank holds a relived loan repayment of 98 per cent. The bank has not only provided income generating loans in millions without any collaterals and student loans to the poorest of poor families, but also has been instrumental in building 6 lakhs homes.

4 Ibid 5 Pandey manas, “Micro Financing: A Blessing for the Poor”, The Indian Journal of Commerce, vol-61, No-3, 2008. 6 Laxma Saru, “SHG and Rural Development”, The Indian Journal of Commerce, vol-4, p-217, Oct- Dec, 2008. 9

According to reports, an overwhelming 5 per cent of his borrowers come out of poverty every year. It is through his efforts that poor children are now healthier, education and nutrition level are higher, housing conditions are better, child mortality has declined by 37 per cent, the status of women has been enhanced and the ownership assets by poor women including housing has im- proved dramatically7.

The lack of access to credit for the poor is attributable to practical difficulties arising from the discrepancy between the mode of operation followed by financial institutions and the economic characteristics and institutions and the economic characteristics and financing needs of low-income households. As a result, microfinance interventions are well recognized world over, as an effective tool for poverty alleviation and improving socio-economic conditions of the poor. In India, microfinance is making head way in its efforts for reducing poverty and empowering women in particular. Combating poverty in the world is necessary for world peace as stressed by Nobel Prize laureate Dr. Muhammad Yunus. For alleviating poverty, microcredit/finance is being mentioned as an important instrument. Therefore, this concept has attracted attention of both policy makers and academicians. Microcredit/finance programs have been introduced especially during the period of last 10 years in many developing countries. The well-known examples are the Grameen Bank in Bangladesh, Banco Sol in Bolivia and Bank Rakyat in Indonesia. The model of Grameen Bank promoted by Dr. Muhammad Yunus in Bangladesh has been copied by many developing countries in the world.

Without access to credit, one avenue of opportunity i.e. self-employment is shut off. Major part of India's population depends on agriculture; the majority of which are marginal farmers' or small farmers or landless farmers. They need a wide range of financial services for meeting their varied consumption needs. Micro financing Institutions also known as Semi-formal Source is gaining popularity nowadays specially SHGs. Micro financing Institutions provides varied types of microcredit as per the need of the poor. Even people find it more

7 K.N. Ghorude, “Microfinance for Financial Inclusion and Sustainable Rural Development”, Southern Economist, May-2009. 10 attractive because of the low transaction costs involved in it and no physical assets are required as collateral.

Microfinance Approaches

Indian microfinance is dominated by two operational approaches viz. SHGs and Microfinance Institutions (MFIs) in addition to a few cooperative forms. The first approach is popularly known as SHG-Bank linkage model. This model is the dominant model, initiated by the NABARD through the SHG-Bank linkage programme in the early 1990s. Today the SHG model also links the informal groups of women to the mainstream system and it has the largest outreach to micro financial clients in the world.

The second approach also called financing through MFIs is the emerging model. This model emerged in the late 1990s to harness social and commercial funds available for open-lending to clients. Today there are over 1,000 Indian MFIs. These institutions assume the responsibility of making available much needed microcredit to the poor section of the society. Generally MFIs /NGOs take on the additional role of financial intermediaries. In areas where the formal banking system faces constraints, the NGO are encouraged to approach a suitable bank for bulk loan assistance.

Saving capability among the poorest sections of the society will reduce dependency on financial institutions and develop self-reliance. It was also observed, that, every poverty alleviation programme initiated by the state had failed in capacity building of the rural masses. Therefore, they become more and more dependent on financial support. At this moment, Government must realize that it would provide basic minimum facilities to the people particularly marginalized section with primary education to all women, men, and children, primary health, rural roads, safe drinking water, sanitation and strong public distribution system. The SHGs are informal groups of persons joining together in order to share a common concern or programme. These groups are formed voluntarily and managed democratically. In most of the cases their membership

11 consists of homogeneous individuals. Members usually feel the need of SHG for various causes.

Meaning of SHGs

A SHG is a registered or unregistered group of micro entrepreneurs having homogenous social and economic background voluntarily, coming together to save small amounts regularly, to mutually agree to contribute to a common fund and to meet their emergency needs on mutual help basis.

The objectives of SHGs are to save their income, avail the loan from the common fund of this group, create confidence and capabilities of the members, help members in decision making, motivate the members by taking up of the social responsibilities to discuss their problems.

Role of SHGs

A money lender: Providing quickly small emergent loans, but without charging exploitative rate of interest;

A development bank: Providing small production and investment credit to the poor for their economic upliftment, but without going through the long procedures, documentation, security requirements, etc., and at lesser transaction cost;

A cooperative: Following participative approach of mutual cooperation and joint pressure, without the ills of selfish interest, interference of the big brothers/Government department officials, etc., and with a lot of flexibility; and

A voluntary agency: Helping each other through their common efforts for bringing economic and social upliftment of the poor people.

The SHGs also provide scope for collective management of funds and develop, inter alia, the entrepreneurial ability, which is difficult if undertaken by individual member, more particularly in case of a common activity undertaken jointly by many.

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SHG is a voluntary association of persons with common interests, formed democratically without any political affiliations. They are small and homogeneous groups of 15-30 members. The uniqueness of these groups in the fact that to a large extent they are self-supporting, self-governing organizations, free from bureaucratization and politicization. The process empowers the poor and enables them to control direction of own development by identifying their felt needs. SHGs are working in a democratic manner. It is a group effort. A group meets, interacts, collects savings from their members and provides loans to them. It also obtains loans from Banks. The membership composition shall have homogeneity in terms of socio-economic status or common economic activity and people having almost similar problems and needs, to have cohesiveness and collective approach.

The group members use collective wisdom and peer pressure to ensure proper end use of credit and timely repayment thereof. In fact, peer pressure has been recognized as an effective substitute for collaterals. The SHGs comprise very poor people who do not have the access to formal financial institutions. They act as the forum for the members to provide space and support to each other. It also enables the members to learn to cooperate and work in a group environment. The SHGs provide savings mechanism which suits the needs of the members. It also provides a cost effective delivery mechanism for small credit to its members. The SHGs significantly contribute to the upliftment of the poor.

Recently NABARD has initiated bank linkage microcredit agency called 'SHG' in rural areas. SHG programme paved the way to rural poor women to approach the banks for credit. It is revolution in 'Rural credit Delivery System in India. The Governments have introduced a single self- employment programme in lieu of all the previous self-employment programmes i.e. SHG Programme is a new experiment. Rural segment is the biggest segment which is the backbone of the development of India. The rural woman is the centre of rural development in terms of alleviation of rural poverty. Therefore, the Government has initiated women SHG programme as a best participatory approach to the rural develop- ment as well as the eradication of rural poverty.

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The role of Microfinance can't be ignored in India while 74 per cent people live in rural area and 80 per cent people earned their livelihood from agriculture. So that microfinance may be such a tool, which directly hits the poverty by helping poor or enabling them not only to survive but also to improve their standard of living. Financial markets serve poor people badly as they don't have collaterals and therefore are often neglected. High transaction costs and physical access to banking senses in low population density makes the situation even worst. Microfinance is a very effective tool in providing economic opportunity and fighting poverty.

Though the cohesiveness among the members would be increased due to homogeneity of the groups in terms education, occupation, income distribution, sex composition, but in the long term, stability of SHGs depends on their members' loyalty to it and the growing needs of the members. It is obvious that collective work, leadership with fixed tenure, mutual trust and cooperative philosophy would be the driving force for SHGs.

SHG is an informal association of rural poor, who have come forward voluntarily to work for their own economic, social and political development. It provides the rural poor with the means of economic and social entitlements. In more precise way, the SHG is the appropriate approach to empower the rural poor women and brining about of rural development through their efforts to eradicate rural poverty in particular and the all sided sustainable development of the country in general.

In this context it is aptly explained that the SHG is a microfinance institution of the rural credit delivery system. But SHG is not only the microfinance agency but also the agency of socioeconomic development of the poor.

The SHGs have been found as an effective and economic means of ensuring access of credit to the poor and vulnerable sections of the society, as the transaction cost is much less and because of the constant and effective supervision the loan is properly utilized and the repayments are prompt. SHGs are however,

14 not regarded as a substitute for the existing banking arrangement where the banks are giving loans directly to the people. They are to be regarded as a support system to the existing banking operations.

An economically poor individual gains strength as part of a group. Besides financing through SHGs reduces transactions cost for both lenders and borrowers. While lenders have to handle only a single account instead of a large number of small sized individual accounts, borrowers as part of a SHG cut down expenses on travel for completing paper work and on the loss of workdays in canvassing loans.

The SHG members begin to appreciate the fact that resources are limited and have a cost. Once the groups show this mature financial behaviour, banks are encouraged to make loans to the SHG in certain multiples of the accumulated savings of the SHG. The bank loans are given against group dynamics without any collateral and at market interest rates. The groups continue to decide the terms of loans to their own members. Since the groups own accumulated savings are part and parcel of the aggregate loans made by the groups to their members, peer pressure ensures timely repayments.

SHGs have done well with regard to financial inclusion defined as providing savings services, in which the poor get priority. SHGs seem to have become the last resort to developmental pursuit in housing, farming, and emergency fund creation, etc, (NABARD 1989). The role of SHGs now-a-days in catering needed services to the poor has drawn maximum attention and in this direction, Asia-Pacific Rural and Agricultural Credit Association (APRACH), German Agency for Technical co-operation (GTZ), Mysore Rehabilitation and Development Agency (MYRADA) and (NABARD) are doing their best in the cause of poverty alleviation.

A most notable milestone in the SHG movement was when NABARD launched the pilot phase of the SHG Bank Linkage programme in February 1992. This was the first instance of mature SHGs that were directly financed by a commercial bank. The informal thrift and credit groups of poor were recognized

15 as bankable clients. Soon after, the RBI advised commercial banks to consider lending to SHGs as part of their rural credit operations thus creating SHG Bank Linkage.

Government of India having realized the power and potential of SHG approach in alleviating the poverty has started mobilizing the poor women into SHGs. Further it is also realized the fact that the self- help group is the right approach to achieve rural development through empowering the rural poor women. The recent studies on development issues, endorsed aptly that the sustainable development can be made possible by making women an equally important paradigm of the development process. Hence the more stress has been given on the empowerment of women, particularly rural women by our planners. The SHGs movement in the country made the mission of women empowerment successful everywhere.

It is estimated that more than 25 million rural women of India have been benefited by the SHG. The socio-economic benefits include economic self independence, participation in village affairs and awareness about education.

SHGs play an important role in financial inclusion in terms of providing access to saving services (K. Dinkar Rao)8. SHG approach in recent years has been rightly recognised as the best way of socio-economic empowerment of people. (Paramjit Kaur Dhindsa, Seozy Bhatia 2008)9. Though there is variety of programmes to alleviate from poverty and empower the rural poor, microfinance and SHGs programmes have done well in all over the country. (R. Venknks h)10

The microfinance approach or tool has emerged as an important develop- ment in banking for canalizing credit to rural people for poverty alleviation directly and effectively. The RBI has issued comprehensive guidelines to banks in the year 2000 for promoting the system of microcredit and enhancing the outreach of the suppliers of microcredit. The microcredit extended by banks to individual

8 K. Dinkar Rao, “SHG Phenomenon in India” H. Note. Artha Vijnana Vol L. Nos, Sept-2008, P-24. 9 Paramjit Kaur Dhindsa, Seozy Bhatia, “Micro Credit and Rural Development, A Case Study of Amrisar”, Sedme Vol.35, No.2, P.No. – 11, June- 2008. 10 Venkatesh R, “Microfinance and SHGs”, Catalyst for Rural Transformation. The Indian Journal of Political Science”, Vol. – LXX, No.1, Jan march 2009, P. 137. 16 borrowers directly or through any agency is regarded as a part of bank's priority sector loans. The SHG Banks Linkage Programme is the major programme, which is implemented by commercial banks now for increasing the volume and outreach of microcredit.

Microfinance could serve as a strategy to bring in the elusive financial inclusion. Though microfinance does not directly tackle the poverty alleviation, it indirectly catalyses the process of poverty alleviation. Access to the financial services could solve many problems, and overcome the risks and vulnerabilities as is evident with regard to SHG-Bank linkage. The need of the hour is to get integration of efforts between microfinance and agencies working for poor.

The impact of microfinance programme especially through SHGs has been effective in making positive social change to all members, irrespective of the direct borrowers of the microcredit. Importantly, in the rural context, the SHGs have facilitated the poor to overcome the existing constraints grappling the formal credit institutions. Therefore, microfinance is a new method to meet the credit requirement in rural areas. It is being viewed as one of the most powerful tools for uplifting the economic conditions of the asset-less poor through group approach that ensures active participation and involvement of the beneficiaries in effective implementation of the programme.

The success story of Bangladesh has prompted Indian national government to introduce two major schemes in the area of rural development such as Swarna Jayanti Gram Sworozgar Yojana and Sampoorna Gram Sworozgar Yojana.

The rationale is that economic empowerment of the poor through strengthening the income generating capacity, equips the poor to access all the development requirements to get out of the multifaceted dimensions of poverty. SHG is the most dominant form of microfinance in India, over the past 10 years; nearly one million SHGs have been formed in India. The SHGs have been increased with almost 80 percent in South India especially in Tamil Nadu and Kerala. There has been an exponential growth in the number of SHGs from the year 2005.

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STATEMENT OF THE PROBLEM

Despite having a wide network of rural bank branches in India, which im- plemented specific poverty alleviation programmes that sought creation of self- employment opportunities through bank credit, a large number of unprivileged poor masses still continued to remain outside from the field of formal banking system. Therefore, a need was felt for alternative policies, systems and procedures, saving and loan products, other complementary services and new delivery mechanisms, which would fulfil the financial requirements of the poor.

Addressing poverty is the most significant challenge in this millennium, clearly reflected in the Millennium Development Goals that seeks to halve global poverty by 2015. SHG is the most dominant form of microfinance in India. The role of SHGs now-a-days in generating income to the poor has drawn maximum attention.

India has long taken efforts to expand credit availability to rural areas. Early programs, which often yielded disappointing results, were gradually replaced by efforts to establish SHGs and link them to banks. In 1992, NABARD piloted the concept with 500 groups. Since then, the SHG movement has witnessed tremendous growth that brought about one of the world’s largest and fastest-growing networks for microfinance.

The experience of Linkage Banking in India has proved that rural poor was not served by the banking sector in the past. Now, Linkage Banking makes it possible for many of them to get access to financial services from the banking system in India. Linkage Banking in India has evolved significantly as a people’s movement over the last five years, increasing outreach as also addressing the problems of poverty, unemployment, local resource mobilization and access to financial services for small scale enterprises.

The SHG Banks Linkage Programme facilitated by NABARD has significantly contributed to strengthening a sustainable financial infrastructure for the informal sector and for people who did not have access to formal financial

18 services before the experience in India shows that banks, including commercial banks, can serve the poor on a commercially viable basis through cost-covering savings and credit services. SHGs have an advantage in reaching out to the poor because of proximity, trust, commitment, flexibility and knowledge about each other. NABARD was able to build the SHG Bank Linkage Programme through an existing network of banks and NGOs.

The impacts of the microfinance programme in India indicate considerable socio- economic benefits for households and individuals. They benefit from the improved access to financial services, helping maintain, intensify and diversify their economic activities, with positive effects on income and employment generation and also raising the capacities of the beneficiaries to increase their household expenditure for basic needs. About 90 per cent SHGs are exclusively for women and their participation contributes substantially to human capacity building and empowers women to become more self-confident, self-sustaining and competent.

NABARD has evaluated functioning of the SHGs and prepared an evaluation report which mentions various positive points about SHGs (1) There has been an increase in the proportion of loan supplied by SHGs. (2) The productive loans are demanded rather than consumption loans by the members of the SHGs. (3) There has been cent percent recovery of loans given to the members of SHGs. (4) The transaction cost has been reduced considerably. (5) The income of the members of SHGs has gradually been increasing. (6) The number of persons setting up SHGs has been increasing.

The present study has focused its attention on the economic upliftment of rural poor through SHGs and assesses the impact in terms of income, expenditure, savings, investments, assets and entrepreneurial skills. The results of the study will be useful to make appropriate changes in the rural development policy.

There has been a rapid growth of SHGs since the launching of bank linkage programme by NABARD. This has risen up the credit flow to the SHG members. Thus the NABARD has made the above claims. Whether these

19 benefits of SHGs are available to the members in all parts of the country or not? Hence a need has arisen to empirically verify the role of SHGs in uplifting the downtrodden people by conducting a micro level study, “Economic Upliftment of Downtrodden People through Self Help Groups in Lalgudi Taluk, Tiruchirappalli District”. Thus the research question for which the present investigation seeks to address is “would SHGs uplift the downtrodden people from poverty?”

SIGNIFICANCE OF THE STUDY

Every fifth poor person of the world live in India. Any research work on economic upliftment should bring out a fruitful input to the policy formulation in this regard. In this context the present research work acquires importance. The study throws light on the motivating factors for joining SHG. This would help the policy to find the avenues and tools to deploy credit to the downtrodden people. By studying the income and expenditure of the SHGs members before and after joining the study would help to quantify the credit required to increase the income of the people. A deep insight in to the effect of small credit on employment, savings, investment and assets would help to understand the underlying relationship between the above variable through SHG mode.

SCOPE OF THE STUDY

This study analyses the role of SHGs in uplifting the economic condition of the downtrodden people. It assesses the impact on income, expenditure, savings, and skill formation. The study also finds the effects of SHG on entrepreneurial skills, self employment, education and spending pattern. Socio economic characteristics of the SHGs members and the profile of the study area are also analyzed. The process of group formation, reasons for joining the group, sources of joining the group and the functioning of the groups are also analyzed. The study also bring out the role of SHGs, NGOs and commercial banks in providing loans, repayment of loans and differences in the cost of borrowing.

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OBJECTIVES OF THE STUDY

™ To study the general characteristics of SHG members in terms of their family composition, age, education, social status and occupation.

™ To examine the motivating factors and the sources of joining SHG.

™ To evaluate the impact on living conditions of the members before and after joining the SHG’s in terms of income and expenditure.

™ To assess the impact of SHG’s on employment, savings, investment and assets.

™ To analyse the perceptions (opinions) of members on the benefits of SHG’s.

™ To suggest policy measures for the effective functioning of SHG’s.

HYPOTHESES

¾ Joining SGHs results in a significant rise in income of the members.

¾ There is a significant increase in expenditure as a result of participating in SHGs.

¾ Savings of the SHG members has increased after joining the SHGs.

RESEARCH METHODOLOGY

Sampling Design

A multi stage random sampling procedure was adopted. Tiruchirappalli district in Tamil Nadu was selected based on the number of SHGs in the state.

In the second stage, out of the 14 blocks in the Tiruchirappalli district, Lalgudi was selected which is having highest number of SHGs. Lalgudi Taluk consist of only one block, namely Lalgudi Block.

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In the third stage, 112 groups were selected, using simple random sampling method, which represents 10 per cent of the 1112 SHGs operating in the Lalgudi block. In the fourth stage, 216 members were selected, using simple random sapling method, which represents 10 per cent oegree 2163 members of the selected groups.

Data collection

To test the above hypotheses, respondents were interviewed and data were collected during 2010-11 with the pre tested and well structured schedule. The study attempted to find out the changes brought by SHG’s in their monthly income, expenditure and savings in order to find out the changes from the base level.

Analysis of data

Descriptive statistical analysis using mean, standard deviation etc was carried out and t- test, F-test, r2 and Regression co-efficient also carried out wherever necessary.

Period of study

The study is pertaining to one year period i.e., from December 2010 to November 2011.

Limitations of the study

9 The respondents have provided the information from their memory. Hence the data may suffer from recall bias.

9 Since the study is pertaining to one year period, the opinions of the respondents are also limited to the situation which existed during that period only.

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PLAN OF STUDY

The thesis is divided into six chapters. The details of each chapter are given below.

Chapter I discusses the introduction, meaning, nature and the features of microfinance approach, functions and role of Self Help Groups, statement of the problem, significance and scope of the study, objectives of the study, hypotheses, Methodology of present study, period of the study, limitations and plan of the study.

Chapter II briefs the concepts and review of literature. Earlier studies on SHGs have been brought into analysis. This chapter records the findings of researches conducted previously on the economic upliftment of SHGs in different regions.

Chapter III brings out an overview of genesis and development of self help groups.

Chapter IV provides the profile of study area.

Chapter V portrays the analysis and interpretation of the collected data on the economic upliftment of downtrodden people through self help groups in Lalgudi Taluk, Tiruchirappalli District.

Chapter VI records the major findings of the study, suggestions, scope for further research and conclusion.

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CHAPTER – II

CONCEPTS AND REVIEW OF LITERATURE

CHAPTER – II

CONCEPTS AND REVIEW OF LITERATURE

This chapter presents the concepts used and the reviews of the earlier research works pertaining to the role of Self Help Groups (SHGs) in the economic upliftment of the downtrodden people. Vast literature got generated on the formation, functioning, performance and the economic impact of SHGs. In this chapter studies related to the SHGs were reviewed with a view to highlight the ramifications of the subject of the study. Moreover the reviews reveal the method of tools selection and the constraints faced by the researchers. The findings of the earlier works may help the researcher to understand the study in a better perspective. Further it would also explore to the lacuna found and the areas to be covered in future.

2.1 CONCEPTS

Self-Help Group

The concept of SHGs was adopted by the Government of India as its primary aim to fight poverty. The term 'SHG' is generally used in India to refer to unregistered voluntary association of poor people of 10 to 20, from the same socio-economic group, involving primarily in saving and credit activities. It can be all-women group, all men-group or even a mixed group. However, over 90 per cent of these groups have only women members

A SHG is a small homogeneous group of not less than twenty, coming together to save small amounts of money regularly and to mutually contribute to a common fund.

The SHG is considered as a voluntary association of poor people. They are mostly having some socio-economic background. They are involved in solving their common problems through self-help and mutual help. It is also defined as a group of rural poor generally comprising of small and marginal farmers, landless agricultural labourers, rural artisans, women folk and other micro entrepreneurs

24 who organize themselves, achieve socio-economic development by raising resource at their level initially and linking with the bank subsequently with the help of NGOs11.

SHG in this study is defined as a group of members voluntarily come together to form a group with an objective of empowering economically and socially, contribute savings and thrift, invest the savings in productive enterprises or lend the saving among the group members to attain better standard of living and savings in future.

SHG Leader

Each group selects a leader among them and the leader will hold office for a period of three years. This leader manages the group members.

Microcredit

According to Microcredit Summit (1997), Microcredit refers to the small loan programmes extended to the very poor for self employment projects generating income allowing them to care for themselves and their families.

Among all these financial services, microcredit is more popularly used in different parts of the world as an intervention strategy of poverty eradication, employment generation and small enterprise creation.

Microfinance

The Task Force Committee on microfinance set up by NABARD (1999), defined microfinance as the provision of thrift, and credit and other financial services including insurance and products of small amounts to the poor in rural, semi-urban or urban areas for enabling them to raise their income improve living standards. Thus microfinance refers to small scale financial services-primarily savings,credit and insurance provided to the poor people.

11 www.aidindia.org 25

Microfinance is a term having a broad meaning and it covers all type of micro products and micro services targeted at the poor population of any country, region, state, province and society It refers to loans, savings, insurance, transfer services and other financial products targeted at low income clients.

Microcredit gives more emphasis on loans, while microfinance includes support services where channels for thrift, market assistance, technical assistance, capacity building, insurance, social and cultural programmes are opened. Thus, where microfinance is "credit plus", and Microcredit is "only credit".

Economically Downtrodden

Collins thesaurus of the English language defines downtrodden people as oppressed, abused, exploited, subservient, subjugated people12.

The people who are very poor due to the imbalanced growth rate of economic development and distribution of wealth among the people. The downtrodden are not made inclusive to enjoy the fruit of economic prosperity of the nation.

In this study the economically downtrodden people refers to those who are in the need of microcredit as they are unable to get the necessary finance from the formal banking system due to high transaction cost, lack of physical collateral securities, the urban orientation of the banking officials and inflexibility of banking operations in terms of procedures and policies.

Revolving Fund (RF)

Revolving Fund is a financial assistance provided to SHGs to augment their group corpus and create credit discipline by enhancing their financial management skills. Proper utilization of revolving fund will help in making SHGs creditworthy and access bank loans. This fund has been provided to those groups passed Grade-I.

12 Complete and unabridged 2nd edition. 2002 Harper Collins Publishers 1995. 26

Economic Assistance (EA)

This type of financial assistance is given to those SHGs after a period of one year from the date of inception of the group which has passed Grade-II. This purpose of the economic assistance is to make them start an economic activity. The total amount of loan that can be availed by each group is Rs.500000 and the amount of subsidy on the loan is Rs.1,25000. The Mahalir Thittam pays this amount of subsidy to the bank for the amount of loan advanced to the groups.

Mahalir Thittam

Mahalir Thittam is a scheme launched by the Government of Tamil Nadu with its own fund to cover the entire State including Tiruchirappalli District in a phased manner.

Empowerment

Empowerment is a process which generated changes in individual ideas and perceptions and creates awareness about one,s rights and opportunities for self development in all important spheres of life.

The World Bank defines empowerment as "the process of increasing the capacity of individuals or groups to make choices and to transform those choices into desired actions and outcomes.

Financial Inclusion

Dr. C. Rangarajan Committee has defined Financial Inclusion as “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost” .

Financial inclusion refers to the access to the credit and all the services extended by the financial institutions.Thus financial inclusion may well be all about money and finance, but with the ultimate objective of directly abolishing the state of social exclusion in the economy.

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2.2 REVIEW OF LITERATURE

2.2.1 Theoretical exposition

Social capital theory

Social capital theory is particularly valuable in low-income countries where institutions for contract enforcement remain weak. Just as physical capital or human capital can increase productivity (both individual and collective), social contacts can affect the productivity of individuals and groups (Putnam, 2000)13.

According to Putnam, social capital theory makes collective problems easier to resolve, as there is less opposition between parties. This results in improved social environments, such as safer and more productive neighbourhoods. It makes business transactions easier, since when people trust each other, there is less of a need to spend time writing up contracts. As a result, economic prosperity increases generally. It helps to increase and speed up the flow of information, which, in turn, improves education and economic production. Finally, social capital improves health and happiness through both psychological and biological processes which require human contact. The importance of trust and social capital has been highlighted in research outside that of mainstream banking and finance (Putnam, 1993)14.

This theory holds that a high level of social capital in a community contributes to democracy, levels of entrepreneurship, and improved health. The more reliable the information which the lender obtains from multiple sources, the better the term conditions are for borrowers. Social capital in relation to microfinance often employs group meetings and group lending techniques, potentially building human capital and strengthening the social capital of the community. Organizing borrowers into groups who pledge joint liability for each other´s loans (social collateral) has been the chief mechanism to ensure repayment on unsecured loans to the poor. The least explored outcome of microcredit is the

13 Putnam, R. “Making Democracy Work: Civic Traditions in Modern Italy”, New Jersey: Princeton University Press 1993. 14 Putnam, R. “ Bowling Alone: The Collapse and Revival of American Community”, New York: Simon & Schuster2000. 28 production of social capital arising from group-based microfinance programs. Social capital is created when MFI´s like Grameen Bank and its replicators require all members to repeat the same behavior every week, such as reciting the list of decisions that accompany group membership. The Grameen Bank is perhaps the first microfinance organization where the discussion has linked social capital with microfinance. In addition to facilitating debt collection, these meetings encourage regular interaction among members of highly localized communities. Group based microfinance can lower the costs of monitoring and enforcing existing rules and norms. Social capital generates higher repayment and higher savings. In addition, social capital helps members distinguish between willful defaults and defaults due to true negative personal shocks. It should be noted that enhancement of social capital is generally a valuable by-product of microcredit, not its primary objective. Thus, there may be more efficient ways to enhance social capital in any given setting15.

Principal-Agent Theory

The concept of self-interest on behalf of the agent is the central concept in Principal-agent theory and implies the acceptance that; “a non- negligible proportion of actors involved in economic transactions/inter- organizational relationships have inclinations toward opportunistic behavior and that these opportunistic actors are difficult to distinguish from the non- opportunistic”.

The relationship between the borrower and lender has often been analyzed by using the principal-agent approach. In Principal-agent theory the concepts of adverse selection and moral hazard are vital to understanding the problems facing the lender. The term adverse selection indicates that the lender experiences difficulties in knowing good borrowers from the bad, and that the former will ultimately subsidize the latter (Akerlof, 1970). To reduce the costs of adverse selection, the lender must perform an extensive assessment of the credit risk posed by the customer or the project and must consult several different information

15 Christian Hoegh – Guldberg HFF, “Bridging the Financial Gap to Africa? - a case study concerning online lending services in the battle against poverty” Copenhagen Business School, June 2010. 29 sources before credit is granted. Moral hazard arises because defaulting borrowers often do not bear the full consequences of their inability to meet their financial obligation to reimburse their loan. The lender bears the full cost of this default, a cost usually transferred to other borrowers in the form of higher interest rates.

This theory is important because it improves the understanding of the mechanisms involved with lending practices. By combining the control mechanisms of the Principal-agent theory with the insights on the trust building derived from social capital theory, a hybrid risk management model has been created16.

2.2.2 Empirical Reviews

DAMJI B. H. (2011)17 made a study on role of micro-finance in alleviation of poverty. He indicated that as proven by the success of the Grameen Bank, micro loans can help reduce poverty and thereby promote realization of fundamental human rights. However, as with any new industry, there are twin dangers of both ignoring growing problems and over-reacting to the recent abuses. In order to avoid losing the benefits of micro lending, national legislators should use international standards and comparative state practice to create more well informed and effective regulations. An attempt could be initiated to promote a cadre of new generation micro-finance leaders to strengthen the micro-finance institutions (MFIs) to optimize their contribution towards the sector's growth. Thus, with some renewed effort, substantial progress may be made in taking MFIs to the next orbit of significance and sustainability. This needs close monitoring of the on-going microfinance initiatives, suitable modification or formulation of innovative and forward-looking policies, based on the ground realities of successful MFIs in India. This, combined with a commercial approach from the MFIs in making micro-finance financially sustainable, will make this sector vibrant and help in achieving its single-minded mission of alleviating poverty through providing financial services to the poor.

16 Ibid 17 Damji B. H. (2011), “Role Of Micro-Finance In Alleviation Of Poverty”, International Online Multidisciplinary Journal Review Of Research, Vol I, Issue II, November, 2011 30

E.A.Parameswara Gupta, et al. (2010)18, in their critical analysis concluded that though microfinance does not directly tackle the poverty alleviation, it indirectly catalyzes the process of poverty alleviation. Access to the financial services could solve many problems and overcome the risks and vulnerabilities as is evident with regard to SHG- Bank linkage. The need of the hour is to get integration of effects between microfinance and agencies working for poor.

According to Satpal Sunil Phougat and Silender Hooda (2010)19 there is lack of diversities in the SHGs activities in the State of Haryana. Primary sector particularly milk cattle has been given importance in terms of resource allocation. Handlooms, handicrafts and other activities have been given less attention in the State. The problem of marketing of the goods by SHGs is a big constraint in achieving the targets. So, there is need for proper attention to solve such type of problems under Swarnjayanti Gram Swarojgor Yojana (SGSY).

Arjun Y. Pangannavar (2009)20, in his article on rural development listed the achievements of SHGs as follows: a) women got better education and training to earn more income, b) More spending on nutrition, health and education of their children, c) improvement of social and economic status and women have voice in decision making d) Better access to credit and higher income. He found that is the appropriate approach to empower the rural poor.

NCSW Report (2009)21 observed that SHGs have taken the form of a movement for women especially rural women's social and economical development. SHGs have arisen out of the perceived problems of women's lack of access to resources at both the household and the village level.The report added that in the past 20 years, SHGs have become significant institutions for rural development in India. This has been particularly true in the case of poor women.

18 E.A.Parameswara Gupta, Syed Rahmathuula and S.L. Shankar, “Impact of Microfinance: A Critical Analysis” Southern Economist, PP-29-32 January 15, 2010. 19 Satpal Sunil Phougat and Silender Hooda, “Swarnajayanthi Gram Swarozgar Yojana Programme implemented in Haryana.” Southern Economist, February 2010, Vol. 48, No. 20, pp. 41-44. 20 Arjun Y. Pangannavar, “Rural Development: Women Self Help Group” Southern Economist PP. 19,20. March.1.2009. 21 NCSW Report, National Perspective Plan for Women, Government of India, Ministry of Human Resource Development, New Delhi, 2009, p. 119. 31

Chandrashakar and Lokesh (2009)22 have pointed out that the NGOs are useful in organizing SHGs, in capacity building and in developing access to the institutions and resources of the State. However, officials are suspicious of the role of NGOs who are perceived as undermining their power. When NGOs are allowed to implement government projects, there is too much bureaucratic meddling. The long list of do's and don't of government procedure accords ill with NGO thinking and approach. In the recently restructured self-employment programme in the form of the SGSY, group schemes through the formation of SHGs have been overwhelmingly preferred. However, in none of the North-Eastern States below poverty line (BPL) lists are ready to organize households into SHGs to implement the programme.

In his empirical study, Debadutta Kumar Panda (2009)23 found that the group based microfinance impacted the client household positively in the increase of income, assets position, savings and literacy and in the reduction of migration.

The study compared the target households (members in Microfinance Programmes) and control group households (non-members) to study the impact of participation in the Microfinance programmes. Stratified random sampling technique was used to select a total of 100 households for target group and another 100 for control group from 10 villages. The study was carried out in Bolangiri District of Orissa State.

It was observed from the study that the target households had registered 11.41 per cent higher annual average income as compared to that of the control households. The target households had recorded 9.75 per cent higher assets value over that of the control group. Saving was one of the variable impacted most by the participation in microfinance groups. The target households had a significant growth in savings by 42.53 per cent over that of non-members. The study also revealed that the annual average employment days were found 20.43 per cent

22 Chandrashakar and M. U. Lokesh, “Role of SHGs in Socio-economic change of vulnerable poor.” International NGO Journal April 2009, Vol. 4, pp. 127-131. 23 Debadutta Kumar Panda, “Participation in the Group Based Microfinance and its impact on Rural Households: A Quasi experimental Evidence from an Indian State.” Global Journal of Finance and Management, Volume 1, No: 2, PP. 171-183, 2009. 32 higher in the target household as compared that of the non-participant households. the migration days per annum per household was 33.70 per cent lesser than that of the control households due to the participation in Microfinance Programmes. It was also noticed that the target groups had recorded 12.16 per cent higher literates per household over that of the control households.

Kumararaja (2009)24 in analyzing the impact of Mahalir Thittam of Tamil Nadu State has observed that SHG women are currently involved in economic activities such as production and marketing of agarbathis, candle and soap, ready- made garments, pickles, pappad, vathal, fur toys, bags, palm leaf products, ornaments, eatables, coir mat and other coir products, mattresses, leather goods etc. The SHG women monitor the normal and proper functioning of the ration shops, maintain vigil on brewing of illicit liquor and help the aged, deserted and widows to obtain loan. In addition to savings, the SHGs are engaged in village cleanliness, adult literacy campaign, family planning and child health, pulse polio campaign, backyard garden, health check-up camps, prohibition in the village, banning tobacco consumption and sales, AIDS awareness etc. The project has achieved 100 per cent loan repayment. It is reported that the repayment rates of direct borrowers have increased from 30 to 70 per cent. Banks disburse the credit to SHGs within seven days at their doorsteps. SHGs help in forming Village Development Council (VDC). These VDC members are involved in social and infrastructural development works.

Kumararaja (2009)25 evaluated the performance and the progress of SHGs in Tamil Nadu. He found that there has been a steady progress in the number of SHGs and amount of loan sanctioned. The study suggested that a timely and regular check on the microcredit through SHGs will contribute to a healthy progress and to the overall development of rural women.

t ofKumararaja, “Performance of SHG in Tamil Nadu.” Southern Economist, 2009, Vol. 47, No. 19, pp. 14-16. 25 Ibid. 33

Sarswathy et al. (2009)26 have analyzed the role of micro-finance in Krishnagiri district. Their study analysed the role of Government of India, NABARD, NGO and banks in promoting SHGs.They collected data from 75 members of 16 SHGs and 9 NGOs. The study revealed that majority of members agreed that their income has increased after joining SHG. It concludes that SHGs have become the development ambassador of villages.

Saurabh (2009)27 studied the experience of microfinance programmes in the context of liberalization. The author identified the defects of the rural Indian society and Indian rural financing system and suggested to eliminate the shortcomings of the existing rural financing system by establishing more Micro Finance projects and RRBs.

P. Sanjeev Kumar (2009)28 quoted the APMAS study on SHG- Bank linkage in Andra Pradesh covering a sample of 400 bank linked SHGs. The study clearly found that the repayment rates were high and that bank linkage made difference in the lives of the SGH members. He also noted that 1.6 million SHGs have benefited from approximately Rs. 69 billion in financing (NABARD 2005). There has been greater outreach of financial services to the poor through SHGs. The SHG’s in Andra Pradesh also called as DWCRA Groups. (Development of women and children in rural areas) are not only resorting to thrift but also taking small loans out of the corpus available with the group. These groups mobilized Rs. 1556.90 crores as corpus since its inception.

Tanmoyee Banerjee (2009)29 has estimated the impact of SHGs created under SGSY in West Bengal during September 2005 to March 2006. He observed that income generation through group activities has improved the average income of group members but the inequality of distribution of income is high among the group members than that of the non –group members. The case study further

26 A. Saraswathy, S. Porkodi and M. Bhuvaneswari, “Micro-finance in Krishnagiri District.” Indian Journal of Marketing, 2009, Vol. 39, No. 5, pp. 47-57. 27 Saurabh Kumar, “New Dimension of Empowerment.” Professional Banker, 2009, Vol. 9, No. 9, pp. 25-29. 28 P. Sanjeev Kumar, “SHG Movement and Women Empowerment in AP” Southern Economist, P.27- 28 March1,2009. 29 Tanmoyee Banerjee, “Economic impact of Self Help Groups – A Case Study,” Journal of Rural Development, Vol. 28 No.(4), PP. 451-467, Hyderabad, 2009. 34 revealed that there has been a significant decline in the medical expenditure and school dropout rate in the families of group member than that of non-group members. He inferred that SHG promotes a habit of saving among the group members and the monthly family saving has increased after joining of SHG.

Jyotirmayee Kar, (2008)30 in his paper on improving economic position of women through microfinance, pointed out that after joining the SHGs, saving habit of the members has improved. Most of them are inspired by the group spirit to save. The study was carried out in the less developed, tribal dominated district Mayurbhanj of Orissa with a sample of 320 members of 25 SHGs. The study presents a well grounded general picture that SHGs have made them aware of their ability to save and also to make use the same for productive purposes. All of them have also availed the benefit of improved access to credit and they are able to obtain a loan of Rs.6000 if they need. However, the study observed that the borrowers are not able to utilize the funds properly so as to help themselves out of the poverty level.

I. Naredra Kumar and A.C. Komala (2008)31 evaluated the performance of SHG’s in India by examining the group lending mechanism used by the SHGs linked programmes. They reported that along with giving the poor access to credit, the SGH mechanism also allows the poor to obtain a premium also on their savings. They also noted the problem of marketing and suggested the role of NGO’s in identifying marketing resources.

Akpomuvie, Orhioghene Benedict (200732studied the role of SHGs in the development of Nigeria. The study observed that the contribution of self-help group activities to rural development depends largely on the existence of committed local leaders in the rural areas concerned as well as the extent to which government encourages local planning and participation. The wide variations in

30 Jyotirmayee Kar, “Improving Economic Position of women through microfinance: Case of a Backward area Mayurbhonj – Orissa, India.” Indus Journal of Management and Social Sciences, Vol.2, No 1: 15-28 (Spring 2008) 31 I. Naredra Kumar and A.C. Komala, “Performance Evalution of SHG’s in India” Southern Economist, PP-14-16, November 1,2008 32 Akpomuvie, Orhioghene Benedict, “Self-Help as a Strategy for Rural Development in Nigeria: A Bottom-Up Approach”, Journal of Alternative Perspectives in the Social Sciences ( 2010) Vol 2, No 1, 88-11188 35 the scope and impact of self-help activities on the welfare of rural dwellers in different parts of the study areas reflect the nature of community leadership and their inclination towards self-help programmes. This implies that in those areas where there are no effective SHGs, community development activities have not made much impact on the social welfare of the rural population. The study further noted that Self-help projects have been successful in Urhoboland simply because, participants see them as their own, meeting and satisfying their needs. As such 100 per cent involvement is the case from conception to execution and sustenance of the facilities. The study found that roads, bridges, schools, maternity centers, post offices/postal agencies and town halls have been completed through self-help by the local people through their various socio-cultural associations. The study concluded that self-help is a relevant strategy for rural development in Nigeria.

BL Centre for Development research and Action (2006-07)33 has carried out a study in Uttar Pradesh and Uttaranchal to assess the impact of microfinance on socio-economic conditions of SHG members belonging to Scheduled Castes.The study was sponsored by Planning Commission. The study covered four districts in Uttar Pradesh and three districts in Uttaranchal. Four blocks were selected from each of the district and four villages (with high SC population) were selected from each block. In each selected village, two SHGs were selected. 224 SHGs and 1,120 members of SHGs were randomly selected for field survey. The Final report of the study presents the following findings.

¾ The average savings per group was reported to be Rs. 12442/- while per member saving was Rs 1199/-. Similarly, per group average credit was reported to be Rs. 54274/- while per member credit was found to be Rs. 5231/- The saving rate per member was reported to be low i.e. less than Rs. 50/- per month.

33 FINAL REPORT, “Microfinance and Empowerment of Scheduled Caste Women: An Impact Study of SHGs in Uttar Pradesh and Uttaranchal”, Sponsored by Planning Commission Government of India 2006-2007.

36

¾ Awareness regarding basic services amongst the members was reported satisfactory. Roads, drainage and socio-economic development were prioritized issues of local development.

¾ Most of the beneficiaries had availed of internal loans while 61 per cent had received bank credit. The main purpose of loan was reported to be consumption needs, emergencies, agriculture and other income generating activities.

¾ Only 39 per cent respondents received benefits while access to credit has made significant impact on overall socio-economic status.

¾ More than three-fourth respondents reported that they had initiated community development in their areas.

The study suggested that a mechanism should be evolved to develop a database on SHGs with an efficient management information system and Impact evaluation studies should be carried out for microcredit programs to incorporate requisite change.

Isabelle Guerin and Jane Palier (2007)34, in their article “Microfinance and the empowerment of women:Will silent revolution take place” observed that the collective approach is predominant in India, in the form of the SHG "model": Mutual aid groups of between 15 and 20 women in charge of managing the collection of savings, the allocation and repayment of loans, often with the support of an NGO. The collective approach appears to favour the empowerment process. The organisation of individuals into groups facilitates the creation of forums for discussion and collective action limiting isolation and withdrawal and favouring mutual reinforcement, mutual aid and a process for building self-esteem. This, however, is on condition that the operation of the groups be monitored and supported over time

34 ISABELLE GUERIN, “Microfinance and the Empowerment of Women: Will the Silent Revolution Take Place?”LPED /IFP and JANE PALIER, LPED/IFP page 128 ADA DIALOGUE, N°37 May 2007. 37

According to Joshi (2007)35 micro-finance provides credit access to poor with no collateral obligations. It encourages savings and promotes income generating activities. Loans are provided at the market driven rates of interest and peer pressure is used in repayment. Micro-finance is carried out through SHGs, where poor come together in the range of 10-20 by weekly, fortnightly and monthly meetings through their savings and loaning. It is hoped that through such interventions hitherto uncovered groups are covered with credit and in the process get empowered.

Linda Mayoux (2007)36 concluded that the microfinance groups may form the basis for collective action to address gender inequalities within the community, including issues like gender violence and access to resources and local decision-making. These local-level changes may be further reinforced by higher level organisation, leading to wider movements for social and political change and promotion of women's human rights at the macro-level. Microfinance has been strategically used by some NGOs as an entry point for wider social and political mobilisation of women around gender issues. Microfinance groups have been used by some programmes as the basis for mobilising women's political participation.

A. Munian (2007)37 analysed the role of microfinance in poverty reduction by using multi-stage simple random sampling method. A total of 6 SHGs and a sample of 78 members responding the sample SHGs were selected for the study. The study found that 66.7 per cent of members are borrowing loans with the help of NGO’s. It also inferred that 93.6 per cent expressed positively to change in their household’s income after they received loans from various banks. According to him, the SHG- Bank linkage approach contributes to social empowerment of women, however, the linkage and its impact can be made sustainable with the

35 S. C. Joshi, “Micro-credit not Charity.” Social Welfare, February 2007, Vol. 48, No. 32, p. 12. 36 Linda Mayoux, “Not Only Reaching, but also Empowering Women: Ways Forward for the Next Microfinance Decade” page 140-41 ADA DIALOGUE, N°37 May 2007 37 A. Munian, “Microfinance and Poverty Reduction: Analytical Issues” Southern Economist, PP-43-46 May-01-2009. 38 sincere interventions by the promotional agencies particularly the banks and block authority in the areas of awareness building, skill development and training.

Mishra and Others (2007)38 have attempted to study the size, composition, characteristics of rural SHGs, to examine their functions and the impact on generation of income and employment, to identify the major constrains and problems of the group and suggest measures for overcoming these problems. They suggested that the banks and other financial institutions and state government should come forward to help the rural poor through the SHG's and provide liberalized credit facilities at cheaper rates of interest.

Ranjula Bali Swain (2007)39 discusses the different definitions and uses of the concept of empowerment and, based on her research on SHGs in India, illustrates that training plays a key role in empowering women. She also presented that the level of self-confidence and mobility are also important constituents of empowerment. The comparison between the SHG respondents and the control group shows drastic differences. An overwhelming majority (88per cent) of SHG respondents reported an increase in self- confidence after joining the group.In terms of the economic confidence, about 87per cent of the SHG respondents (as compared to only 33.5 per cent of control households) reported confidence in meeting a financial crisis in the family. The SHG households also showed a significant positive change in the level of confidence while expressing their opinions in meetings. The interaction with government and bank officials had greatly increased and indicated greater mobility, confidence, exposure and better communication skills.

Ranjula Bali Swani and Maria Flora (2007)40 used a vulnerability measure which quantifies the welfare loss associated with poverty as well as

38 FINAL REPORT, “Microfinance and Empowerment of Scheduled Caste Women: An Impact Study of SHGs in Uttar Pradesh and Uttaranchal”, Sponsored by Planning Commission Government of India 2006-2007. 39 Ranjula Bali Swain, “Can Microfinance Empower Women? Self-Help Groups in India” department of economics, uppsala university page 182 ADA dialogue, n°37 may 2007 40 Ranjula Bali Swani and Maria Flora, “Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households” Department of Economics Uppsala University, Sweden, Working Paper 2007: 31, December 2007.

39 different types of risks like aggregate and idiosyncratic risks. Applying this measure to an Indian panel survey date for 2000 and 2003, their study found that SHG members have lower vulnerability as compared to a group of non-SHG members. Moreover, they found that SHG participation reduces the vulnerability of households, largely through its impact on poverty reduction.

Susy Cheston (2007)41, adds that gender inequality has to be looked at structurally within the microfinance institution and demands that women are no longer perceived as mere clients but as actors. She illustrates that gender equality is a win-win situation for the sector.

Singh and Pandey (2007)42 in their study on Empowerment of Scheduled Caste Women have highlighted the impact of microfinance on socioeconomic empowerment of Scheduled Caste women in Uttar Pradesh and Uttaranchal. They are of the view that SHG based microfinance is an instrument for overall economic empowerment of rural poor women.

Toshio Kondo (2007)43 has found from a Case Study Conducted in Philippines, that the microfinance programmes has enabled the participants to reduce dependence on presumably higher priced non-Grameen Bank approach loans. It has also improved consumption smoothing capabilities with lesser dependence on high priced loans and increased savings in both programme and non-programme MFI’s. He further noticed that the programme has kept the clients economically active with more enterprises and more employees. The study revealed that the impact on per capita income, total expenditures and food expenditures is only mildly significant but with regressive features.

41 SUSY CHESTON, "Just the Facts, Ma'am": Gender Stories from Unexpected Sources with Morals for Microfinance “ ADA DIALLOGUE, N0 37 May 2007 page 3 42 Singh, S.K., & Pandey, S.P., Empowerment Of Scheduled Caste Women Through Self Help Groups, Serials Publications, New Delhi, 2007. 43 Toshi Kondo, “ Impact of Microfinance on Rural households in the Phillipines” A case study from the special Evalution Study on the Effects of Microfinance Operations on Poor Rural households and the status of women, Asian Development Bank, September – 2007. 40

R. Lakshmi (2006)44 studied the influence of SHG schemes on rural women empowerment in Tamil Nadu. All the 26 districts were selected for the study because of their popularity and growth of SHG’s. She concluded that the SHG – Bank linkage programme has made enormous contribution to empowerments in rural areas of Tamil Nadu through SHG’s and the credit from banks from a position of dominance of supply side consideration to a more healthy demand oriented service system. The strong social ties among the members, increased business loan per member and lower SHG’s expenditure will contribute to the higher average income of the group members. The study found that 40 per cent of the SHG member chooses their business option based on practical training received from banks, govt. and NGO’s. 49 per cent of the members commenced their business by getting the loan from the banks.

Nagayya (2006) in his article, ‘Micro-finance for SHG’ has stated that the bank and SHG linkages through financing agencies helps to empower the poor and mobilizing collective strength to make them self-reliant. He has also stated that government intervention will not be able to bring a change in intrinsic attitude of the communities so as to make efficient use of credit sanctioned.45

Asokan and Sudha (2005)46 in their article, 'Economic Status of Rural Women SHGs in Nagapattinam District with a Special Reference to Elumagalur Village', empirically analysed eonomic status of rural women SHGs in Nagapattinam District of Tamil Nadu. The results have shown that sample respondents assets structure has increased after joining as members in SHGs, particularly financial assets increased considerably from 6.6 to 15.5 per cent. About 40 per cent of income has been generated through groups' activities and 42 per cent of women have become empowered in decision making. They have also revealed that the SHGs are successful to some extent in the study area in respect of economic process and social development.

44 R. Lakshmi, “Influence of SHG Schemes on Rural Women Empowerment.” Southern Economist, PP-53-55, March-01-2010. 45 D. Nagayya, “Micro-finance for Self-Help Group.” Kurukshetra, 2006, Vol. 48, No. 11, pp.10 46 R. Asokan and T. Sudha, “Economic Status of Rural Women SHGs in Nagapattinam District (with special reference to Elumagalur Viilage.” Cooperative Perspective, January 2005, Vol. 39, No. 4, pp. 52-57. 41

Based on survey conducted by APMAS (2005)47 (Mahila Abhivruddhi Society) in Andhra Pradesh, CS Reddy and Sandeep Manak, in their paper stated that SHG’s have had improved livelihoods to the extent of providing the leverage needed to start an enterprise. However the interventions to introduce new livelihoods or refine existing ones that could yield better economic results were done by external agencies. He pointed out that in the phase of evolution SHGs require external help to continue to grow and have greater out reach and impact to civil society. The paper clearly demonstrated that Government, NGOs, Banks and others, including the private sector, can work together to help answer the needs to SHGs in a measured and effective manner in hopes of not overloading them leading to failure.

Basu (2005)48 in her paper on Scaling of Microfinance for India's Rural Poor has reviewed the current level and pattern of access to finance for India's rural poor and has examined some of the key microfinance approaches in India, taking close look at the most dominant among these, the SHG, bank linkage initiative. Her paper is based on a household survey supported by World Bank. The survey findings show that India's rural poor currently have a very little access to finance from formal sources. Microfinance approaches have tried to fill the gap. Among these, the growth of SHG Bank linkage has been particularly remarkable, but outreach remains modest in terms of the proportion of poor household served.

Chittaranjan Mishra (2005)49 in his article, 'SHGs in the unorganized garment sector: A case study of Madurai has explained that two types of Self Help Promoting Institutions (SHPI), namely, Government and NGOs are active in the household level garment sector. The DRDA promoted SHGs are more organized and have better infrastructure to carry out the activities relating to the garment sector. The NGO promoted SHGs, on the other hand, have taken part in other developmental activities in the village in a bigger way than in the DRDA

47 CS Reddy and Sandeep Manak, “Self Help Groups: A Keystone of Microfinance in India – Women Empowerment and Security” Mahila Abhivruddhi Society, Andra Pradesh, October 2005. 48 Basu, Priya & Srivastava Pradeep, Scaling Of Microfinance For India's Rural Poor, World Bank (WPS 3646), Delhi. 49 Chiitarajan Mishra, “SHGs in the Unorganized Garment Sector: A Case Study of Madurai.” Kurukshetra, July 2005, Vol. 53, No. 8, pp. 43-46 42 promoted ones. He has also indicated that capacity building and credit availability are complementary inputs to the growth of SHG-based garment sector.

Holvoet (2005)50, finds that in direct bank-borrower minimal credit, women do not gain much in terms of decision-making patterns. However, when loans are channelled through women's groups and are combined with more investment in social intermediation, substantial shifts in decision-making patterns are observed. This involves a remarkable shift in norm-following and male decisionmaking to more bargaining and sole female decision making. She finds that the effects are even more striking when women have been members of a group for a longer period and especially when greater emphasis has been laid on genuine social intermediation. Social group intermediation had further gradually transformed groups into actors of local institutional change.

Kamaraju (2005)51 has mentioned in his article, “SHGs -Emerging Rural Enterprises" that in rural areas SHGs utilized the loan for purchasing milch animals, goats and for meeting personal urgent needs. Some SHGs have purchased power tillers for agriculture purpose on hire basis. Investment in power tiller will increase their income both individually and collectively. Hiring out power tiller to peasants is an important entrepreneurial activity of SHGs. He has also indicated that the SHG should function as a non-political and non-controversial one. Political and religious neutrality paves the way for its healthy growth. He has also expressed that SHG gains momentum nowadays because of its many-fold effect in the economic empowerment of poor women.

Naila Kabir (2005)52 in her study on Microfinance has assessed the impact of microfinance on women's empowerment. The findings suggest that there is need for caution in talking about the impact of microfinance in general. Microfinance offers an important and effective means to achieving change on a number of different fronts, economic, social and political. The success of microfinance

50 Holvoet N, 2005: 'The Impact of Microfinance on Decision-Making Agency: Evidence from South India', Development and Change, vol. 36 (1). 51 S. Kamaraju, “Self Help Groups: Emerging Rural Enterprises.” Kisan World, Aug 2005, Vol. 32, No. 8, pp. 25-26. 52 Kabir Naila, Is Microfinance A Magic Bullet For Women's Empowerment? Analysis Of Findings From South Asia, Economic & Political Weekly, October 29, 2005. 43 organizations in build up the organizational capacity of poor women provides the basis for their social mobilization that may other development interventions have not been able to achieve.

Neera Burra, et al. (2005)53 in her edited volume on Microcredit, Poverty and Empowerment have highlighted the SHG based microfinance and their impact on women empowerment in India. They presented analysis of case studies and modules of microfinance in India. They are of the view that collective strategies beyond microcredit to increase the endowments of poor women enhance their exchange outcomes viz-a-viz the family, state, markets and community, and expand socio-cultural and political spaces are required for poverty reduction and women's empowerment.

K. Sita Devi, et al. (2005)54 examined empirically the impact of microfinance on the socio-economic status of the rural poor in Cuddalore district of Tamil Nadu. A multistage stratified random sampling method was adopted to measure the impact. With the main objective of finding the impact of microfinance in pushing back rural poverty, the study analysed the socio- economic status of the respondents both in pre and post SHG situation and also compared the impact with and without situations. The results of the study revealed that the SHG’s have had greater impact on both economic and social aspects of the beneficiaries. The study has shown that the employment per household increased from 420 man days in pre SHG situation to 527 man days in post SHG situation. Per capita income had increased to Rs. 6436 per annum from Rs. 4976 after the respondents become SHG members. The study also found that an average SHG member household possessed assets worth of Rs. 17244.38 in the post SHG situation while it was Rs. 9582.25 in pre SHG situation. Their study observed that the assets position of the non-member households was lesser than the SHG members of even in pre SHG situations. The study indicated that on the average a member could able to save Rs. 2773 in the post SHG situation while it

53 Burra Neera, J-Ranadive Joy Deshmukh, & Rajani K. Murthy (Eds.), Micro-Credit, Poverty And Empowerment, New Delhi: Sage Publication Pvt. Ltd., 2005. 54 “Impact of microfinance programme in rural development” 2005. - K. Sita Devi, T. Ponnarasi and G. Tamilselvi

44 was only Rs. 893.40 in the pre SGH situation. The level of repayment of loan by the respondents was very high in the post SHG situation. Regarding the social impact, the study found that the self worth, communication skill and access to amenities had improved after becoming the members of SHG. Thus it was inferred that microfinance intervention through SHG contributed to the empowerment of women.

Subashini Muthukrishnan (2005)55 has explained in her paper "Effective marketing Strategies for women SHGs" that the SHGs should be careful in terms of positioning their product relative to other competitive products and markets. They have to decide on the product and in price vis-a vis its cost of production, returns and the price at which its competitors are selling the product, credit time, marketing infrastructure available etc.She has also specified that SHGs must focus on improving the quality of the product.

Sinha (2005)56, in his article based on the survey carried out in Andhra Pradesh, Tamil Nadu, Karnataka, Kerala, Uttar Pradesh, Rajasthan, Assam and Manipur has observed that loan use is more prominent in the SHG’s in the Grameen model. Despite the insistence by the microfinance institutes there are evidences of loan diversion.

Satya Sundaram, (2005)57 reviewed that Miro-finance is being provided through SHGs and nongovernment organizations. The scheme is successful because it has almost solved the problem of overdue. Besides credit is being put to the most productive use, the SHG-Bank linkage has greatly helped the weaker sections. The voluntary agencies should aim at real empowerment of women. As a result of reservation, there are a large number of women sarpanches, but they do not function, but their husband's function on their behalf, and the voluntary agencies must be in touch with educational institutions for mutual benefit. Rural

55 Subhasini Muthukrishnan, “Effective Marketing Strategies for Women Self Help Groups.” Proceedings of the State Level Symposium on Socio-Economic Impact of SHG on Women, P.S.G.R. Krishnammal College for Women, Coimbatore, February 2005. 56 F. Sinha, “Access, Use and Contribution of Microfinance in India, Findings from a National Study,” Economic and Political Weekly, XL(17) : 1714-1719 – 2005. 57 Satya Sundaram, “Voluntary Action for Rural Development.” Southern Economist, December 2005, Vol. 41, No.15, p. 36.

45 development is a vast field and the problems are complex. Hence, voluntary action is needed to understand the nature and dimensions of rural problems and also to evolve appropriate strategies to solve these problems.

In his paper, Varman (2005)58 reported that microfinance SHGs have succeeded in promoting banking habit among the rural communities, women in particular and have increased the number of accounts in the formal banking sector. He also stressed that leadership experience improves banking habit much more than simple membership and advocated for rotational leadership over appropriate time.

Anita Panda (2004)59defended in her article, 'SHG - A Boon for Many' that initially the women were assisting the males in the business, but subsequently the women also came forward to start business independently. She also noted that the members utilized the loan in their family business and repaid the due amount in time.

Dutta and Neelakantan (2004)60 are of the view that the governance is a pervasive entity with strong intuitive appeal that, is somehow impossible to crystallize. Microfinance indeed any credit based activity faces certain unusual pre and post contractual problems such as adverse selection and morale hazard, which arise due to informational asymmetries and incompleteness, as well as imperfect commitment on the part of contracting parties. These problems are a sub-set of the general problem of any organization namely coordination and motivation, and necessitate the incurring of cost, called transaction cost, to solve these problems.

Leelavathy (2004)61 in her paper, 'SHG is a creamy layer for Women's social status' observed that the SHGs remove the curse of money lenders. SHGs are the ladder for upliftment of the downtrodden economically and socially. She

58 M.P. Varman, “Impact of Self Help Groups on Formal Banking Habits” Economic and Political Weekly, XL(17) : 1705-1713.2005. 59 Anita Panda, “SHG: A Boon for Many.” The Cooperator, December Vol. 42, No. 6, pp. 264-266. 60 Datta, S.K. & Neela Kantan, R., Governance In Microfinance: The Case Of BASIX, Indian Institute Of Management, Ahmedabad, November, 2004. 61 Leelavathy, “SHG is a Cream Layer for Women's Social Status.” Proceedings of National Level Symposium on Self Help Group: A Silent Revolution, Arulmigu Palaniandavar Arts College for Women, Palani, March 2004. 46 has also pointed out that the SHGs are taking up construction work for their hamlets, laying of roads, closing down of liquor shops, contributing to the rehabilitation works and management of their village affairs.

MYRADA62 conducted a study to assess the Impact of SHGs (Group processes) on the social empowerment status of women in southern India. The findings of the study are summarized as follows: 1.The level of confidence of respondents on several tasks specified, the members of older groups expressed a higher level of sense of ease. 2. The older group had substantially larger percentage of respondents reporting increase awareness about health and hygiene. 3. Over 95 percent of the old group members say that they themselves operate their accounts frequently. 4. Older group members have had an important role in popularizing the SHG among the other women. 5. A very high percentage of key family members are willing to support the SHG member as well as any other woman in the family who may like to get involved with a group. Particularly, the husbands have shown a generally positive attitude towards their wives.

Pratima Joshi (2004)63 in her article, wrote that the women are coming together and this is helping them to fight the evils in the society. She cited the Savitri SHG from Tandulwadi (District Akola, Maharashtra),and women from this group came together and stopped the practice of gambling, also asked questions to Health officers about the unhygienic conditions in their village, started goat- rearing business, also looked into the matters of Gram Panchayat. As the women are coming together, they are able to understand the problems of other women those who are not members of their SHG. They help the non-members to their level best to solve their problems.

Rimjhim Mousumi Das (2004)64 in his article "Microfinance through SHGs" has explained that microfinance through SHGs has become a ladder for the poor to bring them up not only economically but also socially, mentally and

62 MYRADA, “Impact of self help groups (Group processes) on the social/ empowerment status of women members in southern India”. 63 Pratima Joshi , “Maharashtra Times 29/10/04 ”. 64 Rinjhim Mousuni Das, “Microfinance through SHGs.” Kurukshetra, February 2004, Vol. 52, No. 4, pp. 43-45. 47 attitudinally. He has also revealed that microfinance not only deals with the credit part but also deals with savings and insurance part. The most successful region for microfinance is the southern part of India.

Senthil Vadivoo and Sekar (2004)65 pointed out in their article "SHG - A Movement for Women Empowerment" that empowering women is not just for meeting their economic needs but also for more holistic social development. In SHGs, collective action and solidarity is an important empowering mechanism. They are of the opinion that by empowerment, women would be able to develop self-esteem, confidence, realize their potential and enhance their collective bargaining power.

Tripatty (2004)66 has presented in his article 'SHGs' that necessary training could be provided to the SHG members to create awareness on community health, traditional and modern agriculture practices, microcredit, veterinary practices and water resource management, Panchayat Raj and other relevant issues applicable to the areas concerned. He has also provided that with appropriate mechanisms, various Ministries/Departments/Organizations can look towards the SHGs for targeting their programmes, which ultimately would help in improving the quality of life in rural areas.

'Drushti: Stree-Adhyayan Prabodhan Kendra67 is a centre for study of women which found the following good results of the SHGs movement, such as:

a) The women have started coming together to think about their problems on a scale larger than before.

b) At some places women have begun to consider solving their problems unitedly.

c) The women have acquiring courage to stand before the society.

65 K. Senthi Vadivoo and V. Sekar, “Self Help Groups: A Movement for Women Empowerment.” Kisan World, July 2004, pp. 13-14. 66 K.K. Tripathy , “Self Help Groups.” Kurukshetra, January 2004, Vol. 52, No. 8, pp. 40-43. 67 Drushti "An Evaluation of Impact of SHG on the Social Empowerment of Women in Maharashtra", 2005. 48

d) Their confidence level is obviously increasing.

e) They are acquiring knowledge of day-to-day worldly affairs.

f) Their decision-making ability is on increase.

g) The woman has acquired somewhat elevated status in her family.

h) Women have started to come out of their homes to take part in social activities.

There occurs greater participation of the women in political activities where there is a woman Cardpunch.

Basix- (2003)68 conducted a study in rural and urban areas of Kurnool, Khammam, Adilabad, Mehboobnagar in Andhra Pradesh, and Raichur in Karnataka and observed that clients were aware about insurance and were more willing to pay the premium for the insurance.

Ravichandran and Revathibala,(2003)69 have found that the dominance of money lenders could still be found in satisfying the credit needs of the members of PACBs. The SHGs, as an alternative institutional credit sub-system have overcome this problem. The utilization of credit for the purpose for which it is given could not be ensured in the case of the members of PACB, whereas it is one of the core objectives of the SHGs. Majority of the PACBs, are unviable due to mounting overdue whereas recovery of loan was not at all a problem of SHGs. They concluded that the SHGs have given more access to members in satisfying their credit and maintaining their credit discipline.

Rajamohan (2003)70 observed from his study in virudunagar district of Tamilnadu that the SHGs is a medium for the development of savings habit among

68 Basix Indian Market Research Bureau Hyderabad, “Impact Assessment Study”, 2002. 69 Ravichandran, K., and M. Revathibala. "SHGs Access, Use and Repayment of Institutional Credit by Borrowers". In UGC Sponsored National Seminar Women Empowerment through Microfinance. By the Department of Agricultural Economics. Annamalai University: 2003:64.

70 S. Rajamohan, “Activities of Self-Help Groups in Virudhunagar District: A Study.” Tamil Nadu Journal of Cooperation, April 2003, Vol. 3, No. 6, P. 15. 49 the women fold. It mobilizes a large quantum of resources. It is a window for better technology and skill upgradation. It helps to increase the income of the family. He noted that SHGs collective action and solidarity are important empowering mechanisms.

Sabyasachi Das (2003)71 has explained in his article "SHGs and Microcredit Synergic Integration" that the inability of the credit institutions to deal with the credit requirements of the poor effectively has led to the emergence of micro-finance or microcredit system as an alternative credit system for the poor. He has also mentioned that in rural India, it can be seen that the poorer sections of the society and destitute cannot avail the credit from banks and other formal institutions due to their inability to deposit collateral security and mortgage property. At this point of view, micro-financing or group lending is being looked upon as the instrument that can be considered as the golden stick for poverty alleviation vis-a-vis rural development.

Sundaresan et al. (2003)72 identified the difficulties in establishing the linkages between SHGs and banks mainly on account of the absence of legal status. The other problem faced by the banks is that of high demand for consumption loans. The real problem could be overcome if the NGO that has promoted the group is registered, and is willing to act as a generator, the banks, in such cases, could finance NGOs for lending to the members of the group. But if the NGO is not registered, then the banks find it difficult to establish credit linkages. In such a situation, there is a need either to simplify the existing documentation procedures to evolve a guarantee mechanism by way of establishing a suitable risk fund, at least in the initial stages of this experiment. If the banks provide proper training for skill and entrepreneurship development, the SHG members would be able to move into income generating activities.

71 Sabyasachi Das, “Self Help Groups and Micro Credit-Synergic Integration.” Kurukshetra, August 2003, Vol. 51, No. 10, pp. 25-30. 72 Sundaresan.R. et al. "Credit Needs of Rural Poor: Self Help Groups Role in India in UGC Sponsored National Seminar on Women Empowerment through Microfinance. By the Department of Agricultural Economics Annamalai University: 2003:17-27. 50

Senthil vadivoo (2003)73in his paper argued that the SHGs helped the women to protect themselves against exploitation. Credit needs of women could also be fulfilled through the SHGs. The prime need is to ensure that the poor live with dignity, sufficiency and responsibility. It is also recognized that the poor are bankable and they are likely to have a better appreciation of their socio-economic situation. The activities of SHGs have emerged as a sustainable approach to make credit facilities available to the poor at their door step in a simple and flexible manner.

Vengtesan and Santhagovind (2003)74 have opined that, the SHG concept is a silent revolution in promoting women development and in creating self-employment opportunities. The overall socio-economic impact index has measured in terms of area production, information, credit, marketing, knowledge, attitude, adoption and asset creation showed that majority of the members have benefited through micro enterprises.

Bandhyopadhyay et al. (2002)75opined that SHGs and panchayatiraj institutions in India should work in tandem and reinforce each other's work in order to have a decentralized development.

According to Divakar Rao, (2002)76 the existing formal financial institutions have failed to provide finance to the landless and it is necessary that proper financial assistance should be given to the formal financial institutions to overcome the vicious circle of poverty with the help of SHGs.

73 Senthilvadivoo., et al. "Credit Needs of Rural Poor and the Relative Role of SHGs And other Financial Institution.” In UGC sponsored National Seminar on Women Empowerment through Microfinance, By the Department of Agricultural Economics. Annamalai University: 2003.

74 Vengatesan, D., and Santhagovind, "Socio-economic Impact of Self Help Groups an Women Members." In UGC Sponsored National Seminar on Women Empowerment through Microfinance. By the Department of Agricultural Economics, Annamalai University: 2003: 70. 75 Bandhyopadhyah, P. "Convergence of Programmes by Empowering SHGs and PRIs." Economic and Political Weekly 37:26: 2002: 2556-61. 76 Rao Divakar P. "Credit Needs of Rural Poor and the Relative Role of SHGs and other Financial Institutions." NABARD Bank: Cuddalore:2002. 51

Harper (2002)77 in his study on Promotion of SHGs Under SHG Bank Linkage Programme in India has examined and compared the different ways in which self help promotion institutions (SHPI) promote SHGs. The study suggested that incentive schemes for NGOs and individual should be redesigned and tested in order to cover the full cost of SHPI. The management of the schemes to encourage SHG promotion should be experimentally delegated to banks in order to avoid the problems caused by NABARD's thin representation and to take full advantage of the banks greater field coverage.

Joshi (2002) 78 observed that microcredit programmer extends small loans to poor people for self-employment projects that generate income, allowing them to care for themselves and their families. In most cases, microcredit programmer offers a combination of services and resources to their clients in addition to credit for self-employment. These often include savings, training networking and peer support. It is an irony that micro-enterprises and the contribution to the economy often remain unorganized. Poor women usually run their own individual economic activities very efficiently because of sheer survival pressure on them. But public support for the economy is usually absent so it is very difficult for poor women to improve their economic situation individually and alone. When interventions are made to strengthen women's economic activities, it is very important to credit the positive policy linkages for access to raw materials, markets, skills, space, credit, equipment etc. Without this policy support, the most efficiently managed economic activities find it difficult to generate more income for poor women.

R.K. Mishra (2002)79 examined the success of microcredit intervention in Orissa. It is found that the repayment by the members to SHGs was around 98 per cent and SHGs to banks was over 95 per cent. SHGs in several categories including women, joint farmers groups, social forestry groups etc were formed.

77 Harper, Malcolm, Promotion Of Self Help Groups Under The SHG Bank Linkage Programme In India, Paper Presented At The Seminar On SHG Bank Linkage Programme At New Delhi On 25th & 26th November, 2002. 78 S. C. Joshi, “Micro-credit not charity.” Social Welfare, February 2002, Vol. 48, No. 32, p. 12, 2002.

79 Dr. Mishra R.K, “Self-Help Groups and Micro-Credit Movements in Orissa: Issues and Options, Indian Cooperative Review, Vol.34, No.3, January, Pp.189-193, 2002. 52

A study by NABARD (2002)80 covering 560 SHG member households from 223 SHGs across 11 states had shown many positive results on the impact of participation of rural poor in SHGs. There have been remarkable improvements in the standard of living of SHG members in terms of ownership of assets, borrowing capacities, income generating activities, income levels and increase in savings. It shows that the average annual saving per household registered an increase over three – fold. The following are the major findings of the study.

1. Employment increased by 18 per cent from 318 man-days to 375 man-days per household between pre and post SHG situations

2. Almost all members developed saving habit in the post SHG situation as against only 23 per cent of households who had this habit. Average annual savings per household registered over threefold increase from Rs.460 to Rs.1, 444/-

3. Average value of assets/household, which include livestock and consumer durables etc, increased by 72 per cent from Rs.6, 843/- in pre-stage to Rupees 11,793 in post-SHG stage.

4. The members were relatively more assertive in confronting social evils and problem situations. As a result there was a fall in incidence of family violence.

M. Anjugam and T.Alagumani (2001)81 in their study in Madurai district of Tamil Nadu assessed the economic, social and institutional impact of SHGs. It was underlined that the major purpose of loan extended was to pay off the loan from moneylenders.

Ex-post evaluation of study of SHGs was conducted in Karnal, Gurgaon and Bhiwani districts of Haryana by NABARD (2002)82. It was found in this study that in the pre-SHG situation 55.6 percent of the members talked freely

80 NABARD, “Ten years of SHG-Bank Linkage: 1992 – 2002” NABARD and Microfinance, 2002. 81 Anjugam M, and T. Alagumani, (2001), “Impact of Microfinance through Self-Help Group – a Case Study”, Indian Journal of Agriculture Economic, Vol.56, No.3, July- September, Pp.458. 82 NABARD September 2002 53 without any inhibition, and in the post SHG period 77.8 percent of the members talked freely. The percentage of members who hesitated to talk reduced from 22.2 percent to 5.6 percent in the post-SHG period. The improvement in the communication was due to increase in awareness and frequent interaction with NGO and bankers. The financial independence of most of the members also helped in achieving their freedom of expression. The study also found that after joining SHG, the members improved their status in the family, became helpful in family finance and sometimes helped others too. The overall improvement in all these confidence-building factors was about 43 percent. It is also pointed out that Involvement with SHG reduced the family violence in 16 percent cases especially due to reduced economic difficulties.

V. Puhazhendhi and K.L.S. Satyasai (2002)83 conducted a study with the help of a structured questionnaire .The sample for the study was 223 SHGs functioning in 11 states representing 4 different regions across the country. Pre- SHG and post-SHG situations were compared to assess the impact. The Period of the study was 1999-2000. Data in various economic and social aspects such as asset structures, income, social empowerment, behavioural changes etc. were collected and analyzed to assess the impact. It was concluded in the study that SHG as institutional arrangement could positively contribute to the economic and social empowerment of the rural poor.

According to Rao (2002)84 the genesis and development of SHGs in India reveals that the existing formal financial institutions have failed to provide finances to landless, marginalized and disadvantaged groups. The origin of SHGs could be traced to mutual aid in Indian village community. Cooperatives are formal bodies whereas SHGs are informal. SHGs encourage savings and promote income- generating activities through small loans. He opined that the SHGs are sustainable, have reliability, stimulate savings and in the process help borrowers to come out of vicious circle of poverty. He also claimed that more than 2 million

83 V. Puhazhendhi & K.L.S. Satyasai “Empowerment of rural women through self helps groups - An Indian experience” National Bank News Review. April -June 2002 84 V.M. Rao, “Women Self Help Groups Profiles from Andhra Pradesh and Karnataka.” Kurushetra, April 2002, Vol. 50, No.6, P. 26. 54 poor families have been brought with in the fold of formal banking sources, with the help of SHGs in Southern region.

P.K. Awasthi, et al. [2001]85 in their study in Madhya Pradesh on the impact of SHGs on economic status of women observed that the SHG women were engaged in Mahua, mushroom cultivation, amachur papad making, pisciculture, nursery etc. With the group loan at 2 per cent to 4 per cent interest per month, they realized an increase in income and employment. SHGs have made a positive impact on creating leadership, improving literacy, consciousness about health and hygiene and skill formation among the group member. However they suffered from lack of motivation, infrastructure, forward and backward linkages, insufficient loan, inadequate provision of marketing and inputs, lack of systematic monitoring and follow up etc.

Athavale, et al. (2001)86 have illustrated that the working of SHGs benefited the state of Madhya Pradesh in general and Dandi Tunkar village of Hashangabad district in particular. The SHG named "Yashoda Mahila Samiti" is selected for the case study, which was formed in February (1999) under the leadership of an Anganwadi worker. The study found that by December 2000 the amount collected gradually increased to Rs. 10,568 and by March 2001 the capital of the SHG increased to Rs. 15,000. The repayment of loan from members was 100 per cent. The amount borrowed was used to purchase fish nets and boats or for agriculture. The rate of repayment was very high. Looking at the success of the samiti, more samities came into existence in the village, one being formed by the males. All the members of the nine SHGs in the village have joined together to lift irrigation schemes for which 2 kilometer long pipe line was laid.Thus the SHGs played a major role in helping the villagers to adopt improved methods of agriculture and to grow vegetables and fruits.

85 Awasthi P.K, Deepak Rathi and Vimla Sahu, (2001), “Working and Impact of Self- Help Groups on Economic Status of Women in Watershed Area of Madhya Pradesh”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.475. 86 Athavale, M.C. et al. "Working of Self Help Groups and their Success Story in Hoshangabd District of Madhya Pradesh." Indian Journal of Agricultural Economics 56:3:2001:480. 55

Barbara and Mahanta (2001)87 in their paper maintained that the SHG's have helped to set up a number of micro-enterprises for income generation. Rastriya Gramin Vikas Nidhi's credit and saving programme in Assam has been found successful as its focus is exclusively on the rural poor. It adopted a credit delivery system designed specially for them with the support of a specially trained staff and a supportive policy with no political intervention at any stage in the implementation of the programme.

Barik and Vannan (2001)88 in their work "Promoting SHGs as a Subsystem of Credit Cooperatives" have stated that SHGs can be developed as a sub- system to primary agricultural co-operatives societies at village level. They have seen that by and large SHGs have been linked with commercial banks in the rural areas. However, the linkage with the co-operative credit system is proverbially poor. As such the need of.the hour is to make an earnest effort to bring about effective linkage with the co-operatives.

A study by Binodini Sethi and H.N. Atibundhi (2001)89 in their study in Orissa found that the average group size was 14 and 82 per cent of the SHGs were formed by women. There has been an uneven growth of SHGs in all the regions. The per capita loan was very low at Rs.177 per years. Only 28 per cent of the women were able to receive credit support from banks and the quantum of credit support was in the ratio of Rs. 650 for Rs.177 saving. It is suggested that more number of groups should be linked with the banks so that their credit support would be strengthened. Besides, intensive training and skill development may be offered to make the members independent and self-reliant.

87 Barbara and Mahanta, “Microfinance Through Self Help Groups And It's impact : A Case Of Rashtriya Gramina Vikas Nidhi - Credit And Saving Programme In Assam”, Indian Journal Of Agricultural Economics, Vol. 56 (3) July-Sept., 2001. 88B. B. Barik and P. P. Vannan, “Promoting Self Help Groups as Sub-System of Credit Co-operatives.” The Cooperaior, January 2001, Vol. 38, No.7. pp. 305-311.

89 Binodini Sethi and H.N. Atibudhi, (2001), “Microfinance: An Innovative Tool for Banking with the Unbankables: a Study in Kalahandi District, Orissa. 56

C.L. Dadhich [2001]90 in his study on microfinance A panacea for poverty alleviation analysed the performance of SHGs formed by Oriental Bank of Micro Lending and underlined that the project has established beyond an iota of doubt that properly designed and effectively implemented microfinance can be a means not only to alleviate poverty and empower women but also be a viable economic and financial proportion.

Ghosh (2001) 91 pointed out that combating poverty cannot be managed by the government alone. There are many areas where government needs collaboration and cooperation from NGOs particularly in creating opportunity facilitating empowerment and providing security to the poor. The pressure of the donor agencies on the recipient government to work through NGOs in development programme is also a dominant factor in increasing the role of NGOs to fight against poverty.

The HINDU (2001)92 reports that as regards to access and control over resources, it is impossible to disassociate SHGs from gender relations and the SHGs boost self-confidence and self-esteem. In Tamil Nadu, for instance, they have been a means to considerably increase the presence of women elected at the most recent "panchayat" elections (councils of elders), as a good number of the women elected come from SHGs.93

Indira Kumari and Sambasiva Rao (2001)94 explained how the 194 DWCRA groups consisting of 2512 women have supported themselves for their upliftment as a part of the remedy for alleviation of poverty. Surf making, Candle making, purse making, leaf plates and basket making, internal lending, etc., are

90 Dadhich, C.L, Microfinance - A Panacea For Poverty Alleviation: A Case Study Of Oriental Grameen Project In India, Indian Journal Of Agricultural Economics, Vol. 56 (3), July- S Stu, 2001.

91 D. K. Ghosh, “NGO intervention in poverty alleviation.” Kurukshetra, March 2001, Vol. 49, No. 6, p. 2. 92 "Hopes of SHGs' role in shaping mandate belied", The Hindu, 14 October 2001. 93 "Hopes of SHGs' role in shaping mandate belied", The Hindu, 14 October 2001. As regards to access to and control over resources, it is impossible to disassociate SHGs from gender relations. 94 Kumari Indira, Y., and B.Samtasiva Rao. "Emergence of Women Self Help Group and Its Impact Rural Development: A Case Study in Krishna District of Andhra Pradesh." Indian Journal of Agricultural Economics 56.3:2001: 485.

57 some of the activities taken up by the DWCRA groups which help them to derive sustainable incomes. Some of the groups are provided with DWCRA assistance and the rest of the group have functioned with their own savings. The average corpus of the funded groups is Rs. 57, 232 and of the unfunded groups have Rs. 10.336, which included capital accumulated with the help of bank loan, self finance, and accumulative savings. Hence, the government should provide more assistance to the SHGs of Nuzvidu to generate additional incomes. Along with increase in income, savingshe a their expenditure and standard of living of women would also improve. Despite the bottlenecks that arose in the functioning of the DWCRA scheme, it has helped the majority of women of Nuzvidu division to cross the poverty line.

M.S. Jairath (2001)95 analysed the growth and development of SHGs in Rajasthan taking two categories, viz, resource poor tribal and resource better of non-tribal. It was arrived that the average membership, rate of interest, size of borrowings were higher in the former, but the average amount of saving was higher with the latter.

M.S Kallur (2001)96 analysed the impact of SHG supported by NGO namely MYRADA on women empowerment in Karnataka. It was found that the loans were taken for productive purposes, interest charged were high to cover the expenses of the group, the recovery rate was higher compared to formal credit and income generation is small.

Kumaran (2001)97 has observed that the revival of SHGs during the last two decades has added another dimension to the on going poverty alleviation programmes. Since the poor in India lack organizational skills, the anti poverty programs should be implemented by linking the Panchayat Raj Institutions with

95 Jairath M.S, (2001), “Growth and Development of Self-Help Groups in Rajasthan”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.462.

96 Kallur M.S, (2001), “Empowerment of Women through NGOs: A Case Study of MYRADA Self- Help Groups of Chincholi Project, Gulbarga District, Karnataka State”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.465. 97 Kumaran, K.P. "Self-Help Croups of the Rural Poor in India: An analysis." National Bank Review '.7:2:2001: 31-37. 58

SHGs and by converging the sectoral development programme to the poor through SHGs.

Another study in Haryana by K.K. Kundu, et al. (2001)98 found that the SHGs both in formal and informal SHG -bank linkage have uneven block-wise performance. However the SHGs were able to provide the access to credit to the rural poor to financial services in a cost effective and sustainable manner, though the commercial banks made moderate efforts.

Kunduk et al. (2001)99 studied the composition, organizational structure, performance and the major constrains inhibiting the sustainability of SHGS. Secondary data on the various aspects of SHGs are compiled from the office of the Gurgaon Gramin Bank and Primary data from the selected SHGs have collected by personal revealed that both formal and informal SHG-Bank linkage programme operated in the district with uneven block-wise performance. The Regional Rural Bank, viz. Gurgaon Gramin Bank has played an active role in bank linkage programme so as to improve the access of the rural poor. Both formal and informal SHGs are formed with homogenous groups of similar socio-economic strata and involved in lively discussion with the members for determining their credit worthiness, need and exact requirement, income and repayment possibilities etc., so as to arrive at worthy solutions. The study observed that through these SHGs, the rural poor have not only developed confidence in them, but also cultivated the habit of thrift / savings and utilization of collective wisdom to tackle their own problems. If the rural poor are properly organized and given the proper set-up of micro-financing as a supplementary to the existing rural credit operations, it would help to ensure increased access to credit for them.

98 Kundu K.K, K.S. Suhag, U.K. Pandey and Kusum Jain, (2001), “Sustainable Micro Financing through Self-Help Groups in Gurgaon District (Haryana)”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.483. 99 Kundu, K. et al. "Sustainable Micro Financing Self Help Groups in Grugaon District (Haryana)". Indian Journal of Agricultural Economics 56:3:2001: 483. 59

Lakshmanan (2001)100 in his study in rural Tamil Nadu observed that the saving of SHGs increased from Rs. 20 in the beginning to Rs. 50 in the latest period. The groups obtained revolving fund; there is transparency in administration. Members are engaged in production of mats with the sufficient encouragement and support of the husbands.

Malaisamy and Srinivasan (2001)101 have studied the overdue position of SHGs and PACB beneficiaries in Madurai District of Tamil Nadu. Their study analysed the cost of credit and recovery performance of loans received by the beneficiaries of SHGs and primary agricultural co-operative banks (PACBs) and the causes of defaults in repayment of loans. A comparison of the overdue of SHG beneficiaries with those of co-operatives shows that the latter have a high level of overdue (Rs. 4,884) as compared to the former (Rs. 1,012) per household. The regression analysis reveals that 53 per cent of the variation in overdue position is explained by debt asset ratio, educational level of the beneficiaries and membership of SHGs.

Manimekalai and Rajeshwari (2001)102 in their paper highlighted that the provision of micro-finance by the NGO's to women SHG's has helped the groups to achieve a measure of economic and social empowerment. It has developed a sense of leadership, organizational skill, management of various activities of a business, right from acquiring finance, identifying raw material, market and suitable diversification and modernization.

J.P. Mishra, et al.[2001]103 on the socia -economic analysis of rural SHGs in Uttar Pradesh found that the members were mainly from OBC, whose main occupation were agriculture, small business, labour service etc. 93 per cent of the SHGs were male and only 7 per cent were female SHGs. The average savings

100 Lakshmanan S, “Working of Self-Help Groups with Particular Reference to Mallipalayam Self- Help Group, Gobichettipalaym Block, Erode District, Tamil Nadu”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.457.2001. 101 Malaisamv, A., and R. Srinivasan. "An Economic Appraised of Repayment and Overdue Position of Self Help Group and PACB Beneficiaries in Madurai District Tamil Nadu". Indian Journal of Agricultural Economics 56:3:2001:489. 102 Manimekalai and Rajeshwari “Nature and Performance of Informal Self Help Groups – A Case study from Tamil Nadu”, Indian Journal Of Agricultural Economics, Vol. 56 (3), July-Sept, 2001. 103 Mishra, J.P. Etal., Socio-Economic Analysis Of Rural SHG's Scheme In Block Amaniganj, District Faizabad, (U.P.), Indian Journal Of Agricultural Economics, Vol. 56 (3), July-Sept., 2001. 60 ranged from Rs.15 to Rs. 50. The SHGs have helped to increase the income by 10 per cent to 15 per cent. Repayment performance was good. The major problems include lack of training, credit and marketing facilities, entrepreneurship, social evils, and high interest rate. It was suggested to involve Commercial Banks, RRBs and PACS to provide liberal credit at cheaper interest rate to the poor.

Nweze and Ohabughiro (2001)104 analyzed the economic prospects of links in rural finance between the indigenous financial SHGs and community banks. Their inability to provide sufficient production credits to the members has necessitated the research for appropriate linking system between the indigenous groups and community banks in both urban and rural settings.

S. Nedumaran, et al. [2001]105 in a study conducted in Tamil Nadu on the impact of SHGs found that more than 60 per cent of the SHG members were SC/STs. Nearly half of them registered high performance. The average loan availed is positively associated with age. Net income received increased by 33 per cent over pre SHG situations. Social conditions also have improved and SHGs have contributed for the overall improvement.

Ojha (2001)106 in his article "SHGs and Rural Employment" has expressed that the SHG model of self-employment generation seems to be a workable model. However, there will be need for utmost care in promotion of SHGs. He has also mentioned that there are number of possible routes to the promotion of self- employment and strengthening SHGs is one of them.

Puhazhendhi and Satyasai (2001)107 in their paper attempted to evaluate the performance of SHG's with special reference to social and economic empowerment. Primary data collected with the help of structured questionnaire from 560 sample households in 223 SHG's functioning in 11 states representing

104 Nweze,. N.J., and G.O. Ohabughiro. "Links in Rural Finance between the Indigenous Financial Self Help Groups and Community Banks." Journal of Rural Development and Administration 33:3- 4:2001: 39-51. 105 Nedumaran S, K.Palanisami and L.P.Swaminathan, (2001), “Performance and Impact of Self-Help Groups in Tamil Nadu”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.471. 106 R. Ojha, “Self Help Groups and Rural Employment”, Yojana. May 2001, Vol. 45, pp. 20-23. 107 Puhazhendhi, and Satyasai, “Economic And Social Empowerment Of Rural Poor Through SHG's”, Indian Journal Of Agricultural Economics, Vol. 56 (3), July-Sept., 2001 61 four different regions across the country formed the basis of the study. The findings of the study revealed that the SHG's as institutional arrangement could positively contribute to the economic and social empowerment of rural poor and the impact on the later was more pronounced than on the former. Though there was no specific pattern in the performance of SHG's among different regions, the southern region could edge out other regions. The SHG's programme has been found more popular in the southern region and its progress in other regions is quite low, thus signifying an uneven achievement among the regions. Older groups had relatively more positive features like better performance than younger groups.

T. Ponnarasi and M.P.Saravanan [2001]108 brought out case studies of five SHGs in Cuddalore district of Tamil Nadu. Of the five groups, one has got the “Best SHG Award" for it has lent more than twice that of other groups, extended 90 per cent of the loan for productive purposes and also availed a large loan of Rs. one lakh which was absent with other groups. It was concluded that the SHGs have influenced greatly to the well being of the villagers.

Rekha (2001)109 has studied the functioning of Five womenSHGs in Bardez and Bicholim taluks of Goa. She observed that the SHG have made a lasting impact on the lives of the peer particularly women and their quality of life has improved a lot. The members gave positive responses relating to social and economic aspects leading to improvement in their quality of life in terms of increase in the family income, savings, consumption expenditure, gaining self- confidence, productive use of free time, getting opportunity to improve the hidden talent and getting more importance in the family. The study concluded that the movement of SHGs can significantly contribute towards the reduction of poverty and unemployment in the rural sector of the economy. The SHGs can lead to social transformation in terms of economic development and social changes.

108 Ponnarasi T, and M.P. Saravanan, (2001), “Comparative Study on Performance of Self-Help Groups – a case with Agaranallur Village in Cuddalore District, Tamil Nadu”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.469.

109 Rekha, R. Boankar. "Working and Impact of Self Help Groups in Goa." Indian Journal of Agricultural Economics 56:3:2001:471.

62

D.K. Singh (2001)110 conducted a study in Uttar Pradesh comparing the pre and post SHG situations of women SHGs. He found that the average value of assets increased by 46 per cent and the annual income per household by 28 per cent between pre and post SHG periods.

A.K. Singh (2001)111 in his study in Uttar Pradesh highlighted that the SHG's is now functioning in the place of moneylenders because loan could be taken at any time as and when needed for any purpose. There are no formalities involved and the transaction cost is low.

Satish (2001)112 in his paper raised certain issues related to the functioning of SHG's. Adequate care should be taken to ensure homogeneity of socio- economic status of the members, while forming SHG's. The process of SHG formation has to be systematic whether a Bank or an N.G.O forms it. He emphasized that SHG's experiment has to be spread throughout rural India rather than being concentrated in a few pockets of the country. NGO's are more suited for forming and nurturing of the SHG's, and therefore, it is essential to strengthen them and their resources so that they should increasingly undertake this work.

Swati-Bakshi et al. (2001)113 concluded that SHG (SHG) has emerged as a very successful concept to empower rural women by providing not only easy credit and thrift facilities but also many other opportunities for their self development. It has been found that besides reducing the pressure on the forests, the group members are able to start and run a nursery on their own. It has provided them opportunities not only experimental learning of many management skills but also of leadership and of group functioning. However, there are some weakness, which need careful attention of implementing agencies as well as SHG members.

110 Singh D.K, (2001), “ Impact of Self-Help Groups on the Economy of Marginalized Farmers of Kanpur Dehat District of Uttar Pradesh (A Case Study)”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.463. 111 Singh, A.K., “Empowering Women: Emerging Leadership in Rural India”, Paper Presented At National Seminar On Role Of Educated Women In Rural Development, Organized By G.P. Pant Institute Of Studies In Rural Development, Lucknow, Dated 17 March, 2002. 112 Satish, “Some Issues In The Formational Of SHG's”, Indian Journal Of Agricultural Economics, Vol. 56 (3), July-Sept., 2001 113 Swati-Bakshi S., Bakshi et al. "Empowering Women through Self Help Groups (SHG): A Case Study.” In tropical Forestry Research: Challenges in the New Millennium on 2-4 August 2001:238- 240. 63

Sharma (2001)114 has observed that significant changes have taken place in the living standards of SHG members in terms of increase in income levels, assets, savings, borrowing capacity and income generating activity. He underlined that caution needs to be exercised to safeguard the healthy growth of SHG movement in India.

Singh et al. (2001)115 found that the beneficiaries are involved in every aspect of financing from the very beginning owing to the belongingness to the funds. The recovery percentage is found to be 100 per cent in all the seven SHGs. Members receive the finance whenever it is needed. The SHGs provide loan to their members for purchase of animals, to start small business, to solemnize the marriage of their dependents, to meet out the expenses on the treatment of family members, expenses on education and other social obligations. The members as well as the bank officials are of the opinion that the members of SHGs could get loans in such magnitude and purpose for which banks cannot finance due to high operational cost. These groups have also helped the members to free themselves from the clutches of money lenders and save them from exploitation even for meager amounts. Further, it could be observed that the members do not mind to pay the higher interest rate of 24 per cent per annum to the group which has borrowed from the banks at 12 per cent rate of interest, and the interest earnings from the members are deposited in the bank at higher interest and distributed among the members of the group on repayment of bank loan. The study observed that micro-financing through SHGs is a better system for inculcating the habit of self-help among the rural poor.

K.C. Sharma (2001)116 maintained that through SHG's women empowerment is taking place. Their participation in the economic activities and decision-making at the household and society level is increasing and making the process of rural development participatory, democratic, sustainable and

114 Sharma K.C. "Micro Financing Through Self Help Groups." Indian Journal of Agricultural Economics 50:3:2002: 460. 115 Singh V.K. et al. "A Study on the Working and Impact Self Help Groups in Hisar, Districts of Haryana" Indian Journal of Agricultural Economics 56:3:2001: 478. 116 Sharma, K.C., “Micro Financing Through SHG's”, Indian Journal of Agricultural Economics, Vol. 56 (3), July-Sept. 2001. 64 independent of subsidy, thus, macro-financing through SHG's is contributing to the development of rural people in a meaningful manner.

Y.C. Sale, et al. [2001]117 in a case study of SHG in Maharastra found that the SHG group loan was lent to income earning activities such as sheep and goat rearing, poultry, meeting medical and educational expenses. The revolving fund assistance improved their scale of operations and the repayment of loan. SHGs have inculcated a habit of thrift and fulfilled the needs on priority basis. Expansion of such operations would improve a lot of rural poor households.

U.B. Singh, et al. (2001)118 analysed the role of SHGs in Haryana, which were started under the Water Shed Development Project to increase the income and to create self- employment for the people of Haryana comparing different SHGs. The first category of SHGs had mixed caste structure, majority belong to BPL families. The loan amount of Rs. 3 lakhs sanctioned by DRDA h stuot been disbursed as some members ask for buffaloes and other to invest in other activities. The second category consisted of 19 male members from APL group, where the records are well maintained and the internal lending was for the purpose of repair of house, for purchase of raw material for shop and for meeting other domestic requirements.

Srinivasan et al. (2001)119 have made a comparative analysis by studying the financial performance of rural and urban SHGs in Coimbatore district Tamil Nadu. The study covered 50 SHGs from the rural and urban areas. They have been randomly selected from the district and the data pertaining to total savings, total recovery, total default of the members have been collected from the offices of the selected SHGs and they are measured by using methods such as recovery index, thrift credit ration and outstanding credit ratio. The results of the study show that the total savings, the total lending and the total defaults are found to be higher in rural SHGs than in urban SHGs. Because of higher defaults, the

117 Sale Y.C, B.V. Pagire and H.R.Shinde, (2001), “Mahila Bachat Gat: An Exemplary Story of Ahmednagar District”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.476. 118 Singh U.B, Himmat Singh and Gurnam Singh, (2001), “Role of Self-Help Groups in the Shiwalik Foothills of Haryana”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.481. 119 Srinivasan, et al. "Financial performance of Rural and Urban Self-Help Groups – A Comparative Analysis.” India Journal of Agricultural Economics 36:2001: 478. 65 rural SHGs shows lower average recovery index and higher average outstanding credit ratio then the urban SHGs. The average thrift credit ratio of Urban SHGs is lower than that of rural SHGs, implying that the overall financial performance of the urban SHGs is better than the rural SHGs.

Valuraj (2001)120 has pointed out that the Voluntary agencies have played a pivotal role in ensuring the women entrepreneurs through income generating programmes. To achieve the objectives of SHGs in rural areas, the voluntary agencies should educate the SHG members regarding accounting procedures in order to regulate the fund management. Besides, the government should also make provisions, to strengthen the SHGs in rural areas rapidly.

Dasgupta (2000)121 in his paper on informal journey through SHGs observed that micro-financing through informal group approach has effected quite a few benefits viz.: (i) savings mobilized by the poor; (ii) access to the required amount of appropriate credit by theighlr; (iii) matching the demand and supply of credit structure and opening new market for Financial Institutions; (iv) reduction in transaction cost for both lenders and borrowers; (v) tremendous improvement in recovery; (vi) heralding a new realization of subsidyless and corruptionless credit, and (vii) remarkable empowerment of poor women. He stressed that SHG's should be considered as one of the best means to counter social and financial citizenship not as an end in itself.

Datta and Raman (2000)122 highlighted that SHG's are characterized by heterogeneity in terms of social and economic indicators. The success of SHG's in terms of high repayment is mostly related to the exploitation of prevailing social ties and cohesion found among women members. Social cohesiveness among members spring not only from their diverse background of knowledge base, skills occupations and income levels, but also due to the dynamic incentive system of

120 Valuraj R. "Self Help Groups an Alternative Approach to Empowerment of Rural Women. Tamil Nadu Journal of Co-operative, (2001): 25-29. 121 Dasgupta, R., “An Informal Journey Through SHG's”, Indian Journal & Agricultural Economics, Vol. 56 (3), July-Sept., 2001. 122 Datta and Raman, “Can Heterogeneity And Social Cohesion Coexist in Self Help Groups, An Evidence From Group Lending In AP in India”, Indian Journal Of Agricultural Economics, Vol. 33 (4), 1998 66 progressive lending to the groups on the successful completion of loan repaymes wiHowever, SHG's are heavily dependent on external financial agencies for their lending operations.

Hishigsuren, (2000)123 in his evaluation study assessed the impact of Micro-enterprises Services (AIMS) is the outcome of a USAID multi-year program that seeks to understand better the processes by which micro- enterprise programs strengthen businesses and improve the welfare of the clients and their households.

Kavitha, (2000)124 observed that there is a great potential among the women who form into groups with self-help. Their endeavour could be made fruitful if they are given proper training and orientation in the entrepreneurial trades and skills. The SHG promoting institutions and banks have a greater role to play in this regard. If skill training and motivation are given, SHGs would bring a revolution and revitalize the rural industries in the decades to come.

Khandker (2000)125, in his paper, on the role of SHGs in promoting savings, pointed out that extension of microcredit to take up larger productive act womies. Such a financial support, while reducing dependence on exploitative money lenders has inculcated saving habits and empowered women.

Nagayya (2000)126 maintains that an informal arrangement for credit supply to the poor through SHG's is fast emerging as a promising tool for promoting income-generating enterprises. He has reviewed the initiatives taken at the national level with a view of institutional arrangements to support this programme for alleviation of poverty among the poor, with focus on women. He maintained that NABARD and SIDBI are playing a prominent role at various stages of implementation of this programme. There are other national level bodies also supporting NGO's/VA/s, viz. Rastriya Mahila Kosh (RMK), Rashtriya

123 Hishigsuren Gaamaa, Holistic Approach To Development, Practitioner- Led Impact Assessment Of ASA, The Activists For Social Alternatives (ASA), Tiruchirapalli, 2000. 124 Kavitha, A. "Self-Help Groups as Microenterprises - A Feasibility Study". Ph.D. Dissertation." Gandhigram Rural Institute, Gandhigram: 2000. 125 Khandker R. Shahidur, “Savings, Informal Borrowings and Microfinance.” Bangaladesh Development Studies, 26(2and3) (June-September – 200). 126 Nagayya (2000) “Micro-Finance For Self Help Groups”, Kurukshetra, August,2000. 67

Gramin Vikas Nidhi (RGVN) etc. He called for an imperative need to enlarge the coverage of SHG's in advance portfolio of banks as part of their corporate strategy, to recognize perceived benefits of SHG's financing in terms of reduced default risk and transaction costs.

Pandey127 in his unpublished evaluation study, assessed the impact of Rashtriya Mahila Kosh, in the state of Maharashtra and was conducted to examine whether the RMK has been able to achieve its main objectives of reaching credit to poor women, enabling women to achieve economic independence and becoming aware about credit facilities and management. The study, which was exploratory in nature, had a sample of 250 beneficiaries from the NGO Annapurna Mahila Mandal in Mumbai, Pune and Belgaum and 50 from the NGO Rani Laxmibai Mahila Mandal in Chandrapur. These two NGOs were selected since they were implementing the RMK scheme.

Rakesh Malhotra (2000)128 in his study of 174 women beneficiaries, in Rae Bareilly of the state of Uttar Pradesh, drawn and covered randomly from four formal agencies of credit i.e. CB's, RRB's, PACS, and ARDB's revealed that less than half a per cent of female population against 3.5 per cent of male population in the study area were clients of the banks. It was observed that 83 per cent of loan cases availed by women; male members were primarily responsible for the end use of credit.

T.S. Ragavendra (2000)129 studied three SHGs run by forward, SC/ST and backward communities in Karnataka to assess the performance. He found that members no longer borrow from moneylenders. It was suggested that with vision, participation and motivation, forward community SHGs could sustain in changing farm based activities into market based.

127 Pandey Divya, Unpublished, The Rashtriya Mahila Kosh-An Evaluation Study, Sponsored By The Rashtriya Mahila Kosh, Ministry Of Human Resources Development, Government Of India, Research Centre For Women's Studies, SNDT University, Mumbai. 128 Rakesh Malhotra, “Access to Rural Women to Institutional Credit” Issues And Alternatives, BIRD, Lucknow, 2000. 129 Raghavendra T.S, (2001), “Performance Evaluation of Self-Help Groups: A Case Study of three Groups in Shimoga District”, Indian Journal of Agriculture Economic, Vol.56, No.3, July-September, Pp.466. 68

Ahmad (1999)130 through a case study on Thrift Groups in Assam, highlighted that women are coming to the administration directly for their just rights and to address their grievances boldly. It proved that SHGs are successful in North East India even in the midst of insurgency.

A study on the impact of group lending programmes in North East Thailand, made by Coleman (1999)131 had shown that the impact of village banks that provide group loans in villages is significant and has positive impact on women’s high interest debt because a number of members had fallen into vicious circle of debt from money lenders in order to repay their loans on village banks. It has also positive significant impact on women’s lending out with interest because some members engaged in arbitrage, borrowing from village bank at low interest and then lending out money at make up.

Dwarkanath (1999)132 in his study about DWCRA group in Andhra Pradesh found that nearly 58 per cent of women employed in production were in the middle aged category. Further, the study pointed out that the young generation women are more enthusiastic and capable of taking up a large variety of economic activities.

The ILO (1999)133 adopted the same position by acknowledging that the purpose of microfinance is absolutely not the elimination of problems relating to poverty - including women's poverty - and that it is only legitimate if it is integrated into a more global discussion on the promotion of fundamental rights, for women in particular.

Karmakar (1997)134 has noted that the credit from informal and institutional sources plays a vital role in rural development in Asia. Further, the study called for a few essential pre requisites for the informal credit sources and

130 Ahmad, M.A., “Women Empowerment: Self Help Groups”, Kurukshetra, April, 1999. 131 B.E. Coleman, “the Impact of Group Lending in North East Thailand,” Journal of Development Economics, 60,PP.105 -141, 1999. 132 Dwarakanath, H.D. "DWCRA in Andhra Pradesh." Kurukshetra 49:5:1999. 133 ILO, Gender and the Access to Financial Services 1999. 134 Karmakar, K.G. "Supplementary Rural Credit Delivery System; Some Asian Models". Journal of Rural Development 16:3:1997:515-516. 69 that of SHGs to meet with success and these include quick credit availability, borrowers’ minimum documentation charges and long repayment period.

Kabeer (1997)135 opined that the principle of SHGs represenl ton unexpected opportunity to give rise to truly democratic practices and to fight against these forms of inequality. Financial independence must be understood, not as an automatically transformed resource, but simply as an element that is likely to modify the parameters of choice.

Puhazhendhi (1999)136 analyzed the functioning of SHG's, their performance, sustainability, empowerment of women, economic impact on the members, future potentials etc. He observed that SHG's in Tamil Nadu are performing well towards social change and transformation. The emerging trends are leading to positive direction of empowerment of members and promotion of microfinance.

Puhazhendi and Jayaraman (1999)137 have observed that group formation has enabled women workers to enlarge their sphere of activity to never before explored areas such as animal husbandry, poultry etc.

According to Qaim (1999)138 women's SHGs have a long standing tradition in the Kenyan society. Since 1970s, women groups have been officially .acknowledged and promoted by the Kenyan government. More successful than the government induced groups, however, proved to be the women's own grass root initiatives. Women's groups are usually engaged in a variety of projects, with their main activity often in the agricultural sector. The Kenyan women carry the main agricultural workload and thus they play a pivotal role for rural development. He also opined that women groups constitute the appropriate mechanism for the transfer of technology between search and the farm, particularly with respect to

135 Kabeer, N., 1997: “Woman, Wages and Intrahousehold Power relations in urban Bangladesh, Development and Change”, Vol. 28, pp. 261-302. 136 Puhazhehdhi. V., “Evaluation Study of SHG’s: Important Findings of Evaluation Study in Tamil Nadu”, Paper Presented in a Workshop, Dated 26-27 August, 1999, BIRD, Lucknow. 137 Puhazhendi V. and Jayaraman. “Increasing Women's Participation and Employment Generation Among Rural Groups.” Indian Journal of Agricultural Economics 54:3:1999: 281-89. 138 Qaim, "Self Help Groups and Women Empowerment in Kenya.” Journal of International Development. 131:9/1999): 946-957. 70 semi, subsistence crops. He suggested that the closer integration of women's groups into technologies and in formation, dissemination could effectively contribute to a participatory and sustainable modernization of the Kenyan farming system.

Raju (1997)139 have examined the patterns of group formation, group dynamics, the impact of the scheme on the economic development and social cohesion among the women members, and on employment generation. They insisted the need for disassociating the scheme from the integrated rural development plan and for allowing it to grow as a SHG programme.

Hashemi et al. (1996)140 investigated whether women's access to credit has any impact on their lives, irrespective of who had the managerial control. Their results suggest that women's access to credit contributes significantly to the magnitude of the economic contributions reported by women, to the likelihood of an increase in asset holdings in their own names, to an increase in their exercise of purchasing power, and in their political and legal awareness as well as in composite empowerment index. They also found that access to credit was also associated with higher levels of mobility, political participation and involvement in 'major decision-making' for particular credit organizations.

Nanda Y.S (1995)141 explains the significance of establishing linkages with SHGs and banks. He observed that the main advantage to banks would be externalization of a part of the work items of the credit cycle, assessment of credit needs, appraisal, disbursal, supervision and repayment, reduction in transaction costs etc.

Kurayta (1994)142 suggested empowerment through a commonly planned intervention scheme in the mid-michigan area of Untied States. He found that the

139 Raju, and A.A. Firdausi. “Women’s Development Issues, Concerns and Approaches”, Journal of Rural Development 16:1:1997:113-122. 140 Hashemi SM, Schuler SR and Riley AP, 1996: 'Rural Credit Programmes and Women's Empowerment in Bangladesh', World Development, Vol. 24, No. 4, pp. 635-653 141 Nanda, Y.C., Significance Of Establishing Linkages of SHG's With Banks - Birds Eye View, Vol. 1 (3), BIRD, Lucknow, 1995. 142 Kurayta, Satoko "Empowerment of Women in Self-Empowerment Programme - A Study to Conceptualize Empowerment." M.A. Dissertation. Michigam State University: 1994. 71 empowerment is multi-dimensional, and it mainly centers on economic, social, psychological, and social aspects. According to him empowerment is a process which starts with awareness arising from individual consciousness, then grows into action and finally broadens to the collective level. Empowerment is thus transformative, and the beneficiary becomes an agent of.change.

Ponna Wignaraja (1989)143 has stressed on the need for awareness relation, buiCivig of women groups and equipping them with resources, knowledge and credit to achieve desirable changes in the area of women empowerment. To sustain the process of empowerment and to ensure participation by poor women, he suggested institution building at all levels. and innovative training and the awareness programmes would need to be properly established through SHGs.

143 Ponna, Wignaraja. “Women Poverty and Resource.” New Delhi: Sage Publication: 1989.

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CHAPTER - III

GENESIS AND DEVELOPMENT OF SELF HELP GROUPS AN OVERVIEW

CHAPTER – III

GENESIS AND DEVELOPMENT OF SELF HELP GROUPS AN OVERVIEW

Bangladesh has been acknowledged as a pioneer in the field of microfinance. Dr. Mohammed Yunus, Professor of Economics in Chitgaon University of Bangladesh, was an initiator of an action research project ‘Grameen Bank’. The project started in 1976 and through a series of trials and errors, Yunus settled on a working model and by 1983, under a special charter from the Bangladesh government, founded the ‘Grameen Bank’ as a formal and independent financial institution. Grameen is derived from the Bengali word gram, which means village; Grameen literally means “of the village,” an appropriate name for a lending institution that requires the cooperation of the villagers. The Grameen Bank targets the poor, with the goal of lending primarily to women. Since its inception, the Grameen Bank has experienced high growth rates and now has more than 5.5 million members of which 95 percent are women. Even then it does not have a scheduled status from the Central bank of the country, the Bangladesh Bank. The Grameen Bank provide loans to the landless poor, particularly women, to promote self-employment. At the end of December 2001, it had a membership of 23.78 lakh and cumulative microcredit disbursements of Tk 4.653 crore.

The Nobel Prize committee awarded the 2006 Nobel Peace Prize to Muhammad Yunus and the Grameen Bank “for their efforts to create economic and social development from below.” The microfinance revolution has come a long way since Yunus first provided financing to the poor in Bangladesh. The committee has recognized microfinance as “an important liberating force” and an “ever more important instrument in the struggle against poverty.”

By providing small loans to the extremely poor, the Grameen Bank offers these recipients the chance to become entrepreneurs and earn sufficiently high income to break themselves free from the cycle of poverty. Yunus’s pioneering

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efforts have brought renewed attention to the field of microfinance as a tool to eliminate poverty; and, since 1976 when he first lent $27 to 42 stool makers; the Grameen Bank has grown to include more than 5.5 million members with greater than $5.2 billion in dispersed loans. As microfinance institutions continue to Grow and expand, in both the developing and developed world, social activists and financial investors alike have begun to take notice.

Yunus (2007) argues that it is important to distinguish microfinance in all its previous forms from the specific form of credit adopted at the Grameen Bank, which he calls “Grameen credit”. Yunus argues that the “most distinctive feature of Grameen credit is that it is not based on any collateral, or legally enforceable contracts. It is based on ‘trust,’ not on legal procedures and system144

Lending to poor villagers involve a significant credit risk because the poor are believed to be uncredit worthy That is, they lack the skills or the expertise needed to put the borrowed funds to their best possible use. Consequently, mainstream banks have for the most part denied the poor access to credit. The Grameen Bank has challenged decades of thinking and received wisdom on lending to the poor. It has successfully demonstrated this in two ways First, it has shown that poor households can benefit from greater access to credit and that the provision of credit can be an effective tool for poverty alleviation. Second, it has proven that institutions do not necessarily suffer heavy losses from lending to the poor145.

The Group Lending Innovation

The Grameen Bank lending model can be described as follows Borrowers organize themselves into a group of five and present themselves to the Bank. After agreeing to the Bank rules, the first two members of the group receive a loan. If the first two successfully repay their loans, the four to six weeks later the next two are offered loans; after another four to six weeks, the last person is finally offered a loan. As long as all members in the group repay their loans, the

144 Yunus, Muhammad. “What Is Microcredit?” Grameen Bank, September 2007 145 ibid

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promise of future credit is extended. If any member of the group defaults on a loan, then all members are denied access to future credit. Furthermore, eight groups of Grameen borrowers are organized into centers and repayment is collected during public meetings. While this ensures transparency, any borrower who defaults is visible to the entire village, which imposes a sense of shame. In rural Bangladesh, this societal pressure is a strong disincentive to default on the loan. Group lending—or the joint liability contract— is rvicmost celebrated lending innovation by the Grameen Bank146.

In addition to the originator, the Grameen Bank, with 2.2 million members, two other major users of the system, Bangladesh Rural Advancement Committee (BRAC) and Proshika, each have over a million clients and there were in 1998 some thirty other Micro Finance Institutions with over 10,000 members, and many hundreds of other smaller organizations (CDF 1998)147. It has been estimated that some ten million people in Bangladesh receive financial services through this system. It has also been widely replicated by MFIs elsewhere, including a small number in India and in more than twenty other countries in Asia, in Africa, Latin America and also in disadvantaged rural and urban areas in North America and Europe.

BRAC, Association for Social Advancement (ASA) and PROSHIKA are the other principal MFIs operating for over two decades and their activities are spread in all the districts of that country. BRAC is the largest NGO of Bangladesh with a total membersank of 41.38 lakh. Initially set up in 1972 as a relief organization, it now addresses the issue of poverty alleviation and empowerment of poor, especially women, in the rural areas of the country. This institute also works in the field of literacy, legal education and human rights. BRAC has worked significantly in the fields of education, health, nutrition and other support services. PROSHIKA is also active in the areas of literacy,

146 ibid 147 Credit and Development Forum, CDF Statistics, Microfinance statistics of NGOs and other MFIs, CDF, Dhaka, 1998

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environment, health and organization building, while ASA and Grameen Bank are pure MFIs.

The micro-finance practices of these institutions revolve around five basic features. Firstly, these institutions primarily have women as their target group. Secondly, they adopt group approach for achieving their targets. The group approach focuses on organizing the people into small groups and then introducing them to the facility of micro-financing. The MFIs of Bangladesh place a great deal of importance to group solidarity and cohesiveness. Thirdly, savings are an essential precondition in all these MFIs for availing credit from them. Fourthly, the officials of the Bangladesh MFIs remain present in the weekly meetings of the groups and collect the savings, update the pass books and even disburse the loans, and lastly, the systems and procedures of the MFIs are quite simple and in tune with the requirements and capabilities of their clients.

CURRENT STATE OF MICROFINANCE

Since the inception of the Grameen Bank, microfinance has spread to cover five continents and numerous countries. The Grameen Bank has been duplicated in Bolivia, Chile, China, Ethiopia, Honduras, India, Malaysia, Mali, the Philippines Lanka, Tanzania, Thailand, the United States and Vietnam; the microfinance information exchange market (MIX) lists financial information for 973 MFIs in 105 different countries. Some MFIs have also begun to seek out public and international financing, further increasing their amount of working capital and expanding the scope of their operations. As MFIs have become more efficient and increased their client base, they have begun to expand their services through different product offerings such as micro-savings, flexible loan repayment and insurance.

In 1984, the participants of the Third International Symposium on Mobilization of Personal Savings in Developing Countries organized by the United Nations, agreed in the final resolution that -internal savings must provide the basis of credit programmes, state control over interest rate must be relaxed

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and there should be more decentralized financial services and strong linkage between the formal and informal credit institutions for development.

In 1986, the Asia and Pacific Regional Agriculturist Credit Association (APRACA) devised on a coordinated programme for the promotion of the linkage between the banks and the SHGs for rural savings mobilization and credit delivery to the rural poor.

In 1989, the Central Bank of Indonesia with the involvement of Self Help Promotional Institution (SHPI) started a pilot project entitled "Linking the Banks and the SHGs.

In 1993, a first step was taken in Thailand by opening a Bank for Agriculture and Agricultural Co operative (BAAC) and allowed to provide loans for farm related activities and as a second step in early 1999, Thailand government approved amendment to BAAC Act. Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ), as part of its technical cooperation with BAAC, was helping the bank to develop a system for non-farm activities. By 2002, there were 13 Thai commercial banks, 5 credit fancier companies (type of finance company), 18 finance companies and 18 foreign commercial banks to help microfinance poverty alleviation programme.

In 2003, Tanzania began pilot testing and provided access to microfinance to economically disadvantaged people using the village banking methodology.

BOLIVIA

Promocion y el Desarrollo de la Microempresa (PRODEM), a non- governmental organization (NGO) in the mid-to-late 1980s and provided small capital loans to groups of three or more people dedicated to entrepreneurial activities. By 1992, PRODEM serviced 17,000 clients and disbursed funds totaling $4 million dollars. Constrained by the legal and financial regulations governing an NGO, the board of directors decided to expand their services and PRODEM became the commercial bank, Banco Solidario, later that year.

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MEXICO

Compartamos is the largest MFI in Mexico, servicing 630,000 clients with an active loan portfolio of $285 million. Located in Mexico City, Compartamos is active in 26 Mexican states and serves primarily rural borrowers. Compartamos was founded in 1990 and began by offering joint- liability loans to female borrowers for income-generating activities. Compartamos has only expanded recently their services to allow men to borrow through their solidarity group and their individual credit program; still, around 98 percent of their borrowers are female. Compartamos became a commercial bank in 2006.

UNITED STATES

The Good Faith Fund was modeled after the Grameen Bank and was one of the first MFIs to be established in he wica. In 1986, while governor of Arkansas, Bill Clinton invited Mohammed Yunus to visit and discuss microfinance. The initial program was started as the Grameen Fund, but the name was later changed to better reflect the fund’s commitment to providing loans to micro-entrepreneurs. Loans weren’t securitized with collateral; rather, they were guaranteed on “good faith” (Yunus, 2003).

INDIAN SCENARIO

India has adopted the Bangladesh’s model in a modified form. To alleviate the poverty and to empower the women, the micro-finance has emerged as a powerful instrument in the new economy. With availability of micro- finance, SHGs microfinance and credit management groups have also started in India. And thus the movement of SHG has spread out in India.

In India, banks are the predominant agency for delivery of micro-credit. In 1970, Ilaben Bhat, founder member of ‘SEWA’ (Self Employed women’s Association) in Ahmadabad, had developed a concept of ‘women and micro- finance’. The Annapurna Mahila Mandal’ in Maharashtra and ‘Working

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Women’s Forum’ in Tamil Nadu and many National Banks for Agriculture and Rural Development (NABARD)-sponsored groups have followed the path laid down by ‘Self-Employed Women’s Association (SEWA)’, which is a trade union of poor and self-employed women workers.

MFIs have also become popular throughout India as one form of financial intermediary to the poor. MFIs exist in many forms including co-operatives, Grameen-like initiatives and private sector MFIs. Thrift co-operatives have formed organically and have also been promoted by regional state organizations like the Cooperative Development Foundation (CDF) in Andhra Pradesh. The Grameen-like initiatives following a business model like the Grameen Bank.

Private sector MFIs include NGOs that act as financial services providers for the poor and include other support services but are not technically a bank as they do not take deposits. Recently, microfinance has garnered significant worldwide attention as being a successful tool in poverty redu havn. In 2005, the Government of India introduced significant measures in the annual budget affecting MFIs. Specifically, it mentioned that MFIs would be eligible for external commercial borrowings which would allow MFIs and private banks to do business thereby increasing the capacity of MFIs. Also, the budget talked about plans to introduce a Microfinance Act that would provide some regulations on the sector. It is clear from the previous that the objectives of the bank sector nationalization strategy have resulted into several offshoots, some of which have succeeded and some have failed. Today, SHGs and MFIs are the two dominant form of microfinance in India.

In 1991-92 NABARD started promoting SHGs on a large scale. And it was the real take-off point for the ‘SHG movement’. In 1993, the Reserve Bank of India also allowed SHGs to open saving accounts in banks. Facility of availing bank services was a major boost to the movement.

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EMERGENCE OF THE SHG MOVEMENT

While no definitive date has been determinfforor the actual conception and propagation of SHGs, the practice of small groups of rural and urban people banding together to form a savings and credit organization is well established in India. In the early stages, NGOs played a pivotal role in innovating the SHG model and in implementing the model to develop the process fully. In the 1980s, policy makers took notice and worked with development organizations and bankers to discuss the possibility of promoting these savings and credit groups. Their efforts and the simplicity of SHGs helped to spread the movement across the country. State governments established revolving loan funds which were used to fund SHGs.

By the 1990s, SHGs were viewed by state governments and NGOs to be more than just a financial intermediation but as a common interest group, working on other concerns as well. The agenda of SHGs included social and political issues as well. The spread of SHGs led also to the formation of SHG Federations which are a more sophisticated form of organization that involve several SHGs forming into Village Organizations (VOs) / Cluster Federations and then ultimately into higher level federations. SHG Federations are formal institutions while the SHGs are informal. Many of these SHG federations are registered as societies, mutual benefit trusts and mutually aided cooperative societies. SHG Federations resulted in several key benefits including

• Stronger political and advocacy capabilities

• Sharing of knowledge and experiences

• Economies of scale

• Access to greater capital

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THE SHG MODEL

STRUCTURE OF SHG

A SHG is a group of about 10 to 20 people, usually women, from a similar class and region, who come together to form savings and credit organization. They pooled financial resources to make small interest bearing loans to their members. This process creates an ethic that focuses first on savings. The setting of terms and conditions and accounting of the loan are done in the group by designated members.

SHG Federation

Typically, about 15 to 50 SHGs makeith a Cluster with either one or two representatives from each SHG. Depending on geography, several clusters or VOs come together to form an apex body or an SHG Federation. In Andhra Pradesh, the VOs, SHG Clusters and SHG Federations are registered under the Mutually Aided Co-operative Society (MACS) Act 1995. At the cluster and federation level, there are inter-group borrowings, exchange of ideas, sharing of costs and discussion of common interests. There are typically various subcommittees that deal with a variety of issues including loan collections, accounting and social issues. SHG Federations have presented some key benefits to SHGs as a result of their greater scale, but, in addition to the benefits of SHG Federations, there are some drawbacks or constraints, that should be noted. An SHG Federation is a formal group of informal common-interest groups. As a result of its rather informal members, there are internal constraints that it faces. Namely, it has a poor capacity for self-governance, average to low quality managers and systems and process are poorly defined. Further, there is significant financial cost to organizing and registering a SHG Federation which has been estimated to be about Rs 7,000 per SHG member. To bridge these internal constraints requires savvy external assistance and there are few good

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quality NGOs to provide this assistance to a burgeoning number of SHG Federations148.

SHG model in India

In India three different models of linkage of SHGs to the financial institutions have emerged. They are

¾ Banks, themselves, form and finance the SHGs.

¾ SHGs are formed by NGOs and other agencies but financed banks.

¾ Banks finance SHGs with NGOs and other agencies as financial intermediaries.

The second model is the most popular model. Almost three-fourths of all the SHGs come under this model. Only 20per cent of the SHGs are covered under the first and 8 per cent under the third model respectively149.

The operation mode of different SHG models is presented as follows.

Model I SHGs formed and financed by banks

SHGs formed directly by banks under this model, the banks themselves act as SHPIs in forming and nurturing groups, opening their savings accounts and providing them with bank credit.

Model II SHGs formed by NGOs, and formal agencies but directly financed by banks

This is called as NGO Facilitated SHGs. This appears to be the most popular model amongst bankers. Under this model, NGOs and formal agencies in

148 CS Reddy APMAS, “Self HelpGroups: A Keystone of Microfinance in India - Women empowerment & social security, October 2005.

149 Drushti "An Evaluation of Impact of SHG on the Social Empowerment of Women in Maharashtra", 2005.

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the field of microfinance act as facilitators. They propagate the message, organize groups, train them in thrift and credit management and nurture them over a period. Banks in due course, link these groups by directly providing loans to them.

Model III SHGs financed by banks using NGOs as financial intermediaries

In this model, NGOs take on the dual role of facilitators and financial intermediaries. They help in formation of SHGs, nurturing them, training them in thrift and credit management. Eventually, the NGOs approach banks for bulk loan assistance for lending to these SHGs.

Model IV NGO Guided but self supported SHGs

This category of SHGs are entirely formed and supported by the group members, neither getting any assistance or support from bank nor from NGOs. By observing the group formed in the neighborhood areas, these groups have initiated themselves and function as other models mentioned above.

Model V Completely Self-Supported SHGs

Yet another category of SHGs which are very rarely found are the SHGs formed and initiated by the NGOs, guided by them on the rules and regulations, accounts to be maintained etc. But no financial support either directly or through the linkage with banks is arranged but only the savings of the members are used for internal lending as well as for starting an enterprise. Of all the four groups mentioned above, this group seems to be different, self-dependent and accordingly may be encouraged. However, by not getting any external support, the size of the enterprises initiated may be too small and also expansion is not possible150.

150 Manimekalai, “Impact Of Various Forms Of Micro Financing On Women”, Department Of Women and Child Development Ministry Of Human Resource Development Government Of India’ 2004

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SHG Bank Linkage

The potential of nded to develop as local financial intermediaries to reach the poor gained wide recognition in many developing countries especially in the Asia-Pacific Region, Many NGOs have played an active role in fostering the growth of the SHGs in furtherance of their socio-economic agenda. Considering the immense potential of the SHGs in meeting the development aspirations of the unreached rural poor, the NABARD, the apex development institution with exclusive focus on integrated rural development supported and funded in 1986- 87, a MYRADA sponsored action research project on savings and credit management of the SHGs. Therefore in collaboration with some of the other member institutions of the APRACA, the NABARD undertook a survey of 43 NGOs spread over 11 states in India to study the functioning of the SHGs and possibilities of collaboration between the banks and the SHGs in mobilization of rural savings and the delivery of credit to the poor.

Encouraged by the results of the studies of the SHGs experience, the NABARD in consultation with the RBI, the Commercial Banks and the NGOs launched the pilot project of linking the SHGs with the Commercial Banks in 1991 - 92 and issued detailed guidelines in February 1992. The RBI advised the CBs in July 1991 to extend finance to the SHGs as per the NABARD guidelines. This was the first instance of mature SHGs that were directly financed by a CB. The informal thrift and credit groups of poor were recognized as bankable clients. Soon after, the RBI advised CBs to consider lending to SHGs as part of their rural credit operations thus creating SHG Bank Linkage.

The linkage philosophy was based on the informal credit system, that is, the moneylenders were holding their way over the rural poor because of the responsiveness, flexibility and sensitivity to the credit needs of the poor. The poor require credit very frequently in small quantities without much hassle and for the activity of own choice. The moneylender is always there at his doorstep for supplying the credit promptly, but wth tan exorbitant rate of interest, forcing the poor to cough up all his surpluses/ income and making him/her, thereby,

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move downhill along the poverty line. The moneylender has a vested interest in the perpetuation of poverty.

The formal credit system has the resources, manpower and technical capability to handle any volume of credit dispensation. The pilot project on linking the SHGs with the Banks was launched aiming at combining the positive factors of both the systems and ensuring advantages to both the formal credit system and the SHGs. The traditional attitude of a banker that the poorest of the poor is not reliable and the banks are not meant for them is a myth to be dispelled. The distinct advantages envisaged under the project for the Banks and the SHGs are that the Banks are advised to win the confidence and trust of the rural poor.

The linking of SHGs with the financial sector was good for both sides. The banks were able to tap into a large market, namely the low-income households, low transactions costs and high repayment rates. The SHGs were able to scale up their operations with more financing and they had access to more credit products.

The NABARD continues to provide 100 per cent refinance to banks at an interest rate of 6.5 per cent per annum. Other support measures provided include facilitating training of the bank officials and the field staff of the NGOs, the SHGs, the Federations of NGOs / SHGs and other related institutions through financial assistance, faculty support and the like.

After successful experimentation in Cauvery Grameen Bank, Mysore (Karnataka), in association with an experienced NGO, namely MYRADA, more and more RRBs are involving themselves as SHGs. Some Government agencies like Zillah Panchayat have also taken initiatives to promote SHGs and such efforts are supported by the NABARD through assistance in organizing training programmes for the staff.

The RBI has been prevailing upon the commercial banks to formulate their respective policies on microfinance and promotionngs SHG. The NABARD

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has been organising the SHGs workshops involving bankers and development personnel to accelerate the process of SHG Bank Linkage. The RBI has issued circular to the CBs to reckon microfinance extended directly to individual borrowers or the rough intermediaries as parts of their priority sector lending. The circular also stated that micro credit should form an integral part of the corporate credit plan of the bank and should be received at the biggest level on a quarterly basis.

Savings of SHGs with Banks

As on 31 March 2010, a total of 69.53 lakh SHGs were having saving bank accounts with the banking sector with outstanding savings of Rs. 6198.71 crore as against Rs. 61.21 lakh SHGs with savings of Rs. 5545.62 crore as on 31 March 2009, thereby showing a growth rate of 13.6 per cent and 11.8 per cent, respectively. Thus, more than 97 million poor households were associated with banking agencies under SHG-Bank Linkage Programme. As on 31 March 2010, the CBs lead with saving account of 40.53 lakh SHGs (58.3per cent) with savings amount of Rs. 3673.89 crore (59.3 per cent) followed by RRBs having savings bank accounts of 18.21 lakh SHGs (26.2per cent ) with savings amount of Rs. 1299.37 crore (21.0per cent) and Cooperative Banks having savings bank accounts of 10.79 lakh SHGs (15.5 per cent) with savings amount of Rs. 1225.44 crore (19.8per cent)151.

Bank loans Disbursed to SHGs

During 2009-10, banks have financed 15.87 lakh SHGs, including repeat loan to the existing SHGs, with bank loans of Rs. 14,453.30 crore as against 16.10 SHGs with bank loans of Rs. 12,253.51 crore during 2008-09, registering a decline of 1.4 per cent of SHGs but a growth of 17.9 per cent in bank loans disbursed. Out of the total loans disbursed during 2009-10, SHGs financed under SGSY accounted for 2.67 lakh (16.9per cent) with bank loan of Rs. 2198.00

151 NABARD Annual Report 2011

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crore (15.2per cent) as against 2.65 lakh SHGs (16.4per cent) with bank loan of Rs. 2015.22 crore (16.4per cent) during 2008-09152.

Promotional support - SHG-Bank linkage

Microfinance Development and Equity Fund (MFDEF)

To strengthen the efforts of NABARD towards promotional support for microfinance, the Government of India in the Union Budget for 2010-11 had further increased the corpus of MFDEF to Rs.400 crore. Recognizing the need for up scaling the micro-Finance interventions in the country, the Honourable Union Finance Minister, while presenting the budget for the year 2000-01, had created Microfinance Development Fund (MFDF) with an initial contribution of Rs. 100 crore, to be funded by Reserve Bank of India, NABARD and commercial Banks in the ratio of 40:40:20153.

The Fund is utilized to support interventions to eligible institutions and stakeholders. The major components of the assistance include promotional grant assistance to Self-Help Promoting Agencies, training and capacity building for microfinance clients and stakeholders of SHG - Bank Linkage Programme, funding support to MFIs, Management Information System (MIS) for microfinance, research, studies and publications154.

The following table describes the overall progress of microfinance programmes in India. The table 3.1 presents the savings, loans distributed and the loans outstanding under SHG-Bank linkage model. The table 3.2 shows the growth of MFI and Bank linkage model155.

152 Ibid 153 Ibid 154 Ibid 155 Ibid

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TABLE – 3.1 STATUS OF MICRO-FINANCE The overall progress under these two models is depicted in Table -3.1 Table 3.1 - Overall Progress under Micro-finance during the last Four years (Rs. in crore) Particulars 2007-08 2008-09 2009-10 2010-11 No. of No. of No. of No. of Amount Amount Amount Amount SHGs SHGs SHGs SHGs A. SHG-Bank linkage Model Total 6121147 5545.62 6953250 6198.71 74.62 7016.30 5009794 3785.39 Savings of SHGs (22.2%) (46.5%) (13.6%) (11.8%) (7.3%) (13.2%) SHGs with Out Bank as on of 1505581 1563.38 1693910 1292.62 20.23 1817.12 1203070 809.51 31 March which (25.1%) (93.1%) (12.5%) (-17.3%) (19.4%) (40.6%) SGSY

Total 25.9586 12253.51 1586822 14453.3 11.96 14547.73 1227770 8849.26 Bank SHGs (31.1%) (38.5%) (-1.4%) (17.9%) (-24.6%) (0.01) Loans disbursed to SHGs Out during the of 264653 2015.22 267403 2198 2.41 2480.37 246649 1857.74 year which (7.3%) (8.5%) (1%) (9.1%) (-9.9%) (12.8%) SGSY

Total 4224338 22679.84 4851356 28038.28 47.87 31221.17 3625941 16999.91 Bank SHGs (16.5%) (33.4%) -14.80% (23.6%) (-1.3%) (11.4%) Loans outstanding with SHGs as on 31 Out of 976887 5861.72 1245394 6251.08 12.86 7829.39 March 916978 4816.87 which (6.5%) (21.7%) -27.50% (6.6%) (3.4%) (25.2%) SGSY

Cont..

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B.(1) MFI-Bank linkage Model (Amount in crore)

2008-09 2009-10 2010-11 2007-08 (% of Growth) (% of Growth) (% of Growth) Particulars No. of No. of No. of No. of Amount Amount Amount Amount MFIs MFIs MFIs MFIs Bank Loans 471 disbursed 581 3732.33 691 8062.74 8448.96 518 1970.15 to MFIs during (12.2%) (89.4%) (18.9%) (116.00%) (-31.8) (4.8) the year Bank Loans 1513 outstanding 1915 5009.09 10147.54 2315 13730.62 1109 2748.84 with MFIs (72.7%) (82.2%) (-21%) (102.60%) (53) (35.3) as on 31 March Note Actual number of MFIs provided with bank loans would be less as several MFIs could have availed loans from more than one bank.

Source NABARD Annual Report 2011

The cumulative progress in financing SHGS, in physical and financial terms is given for the year 2010-2011156.

Physical

¾ Total number of SHGs savings linked with banks 74.62 lakes

¾ Out of total [of which] exclusive Women SHGs 60.98 lakes

¾ Out of total [of which] -SGSY SHGs 20.23 lakes

¾ Total number of SHGs credit linked during 2009-11 11.96 lakes

¾ Out of total [of which] exclusive Women SHGs credit linked 10.17 lakes Out of total [of which]-SGSY SHGs credit linked 2.41 lakes

¾ Total number of SHGs having loans outstanding

as on 31 March 2011 47.87 lakes

156 NABARD Annual Report 2011

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¾ Of which exclusive Women SHGs 39.83 lakes

¾ Of which-SGSY SHGs 12.45 lakes

¾ Estimated number of families covered upto 31 March 2011 97 million

Financial

¾ Total savings amount of SHGs with banks as on 31 March 2011 Rs. 7016.30 crores

¾ Out of total savings of exclusive Women SHGs Rs. 5298.64 crores

¾ Out of total savings of SGSY SHGs Rs. 1817.12 crores

¾ Total amount of loans disbursed to SHGs

during 2009-11 Rs. 14547.73 crores

¾ Out of total loans disbursed to Women SHGs Rs. 12622.33 crores

¾ Out of total loans disbursed to SGSY SHGs Rs. 2480.37 crores

¾ Total amount of loans outstanding against SHGs

as on 31 March 2011 Rs. 31221.16 crores

¾ Out of total loans o/s against Women SHGs Rs. 26123.75 crores

¾ Out of total loans o/s against SGSY SHGs Rs. 7829.38 crores

¾ Average loan amount outstanding per SHG

as on March 2011 Rs. 65223 crores

¾ Average loan amount outstanding per member

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as on 31 March 2011 Rs. 4128 crores

SHGs in Tamil Nadu

Tamil Nadu Corporation for Development of Women

Tamil Nadu Corporation for Development of Women Ltd. (TNCDW) was established in 1983 with the prime objective of bringing about socio-economic development and empowerment of women. The Department implements its flagship programme through Mahalir Thittam, besides implementing the International Fund for Agricultural Development (IFAD) Assisted Post Tsunami Sustainable Livelihoods Programme. Mahalir Thittam is a socio-economic empowerment programme for women implemented by Tamil Nadu Corporation for Development of Women Ltd. Mahalir Thittam is based on the SHG approach and is implemented in partnership with the NGOs and the Community based organizations. Later the scheme was extended to the erstwhile Salem and South Arcot districts in 1991-1992 and further extended to Madurai and Ramanathapuram in 1992-1993. and was progressively introduced in all the districts of the State.

The SHG approach was started in a small way in Dharmapuri District in the year 1989 with the assistance of the IFAD and has seen steady growth particularly with the introduction of Mahalir Thittam from 1997-98. It has now become a very vibrant movement spread across all districts of the State encompassing in its fold the poor, underprivileged women living on the fringes of society.

Manimegalai Awards

To encourage well functioning SHGs and Panchayat Level Federations (PLFs), the Government had announced Manimegalai awards at State and district levels. Awards are presented to 5 best PLFs and 10 best SHGs at the State level. One PLF selected as best at the district, level and 3 SHGs found to be the best at

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the district level are given Manimegalai awards and the best SHG at "he Block level is given a certificate.

Affiliation of NGOs

Mahalir Thittam is implemented in partnership with NGOs who help in formation of SHGs, provide training and monitor them. The NGOs are provided funds for providing the above services. Interested NGOs are affiliated as partners to Mahalir Thittam if they satisfy the norms for affiliation.

PLF

Under Mahalir Thittam, it is envisaged that Federations of SHGs will be formed at the Village Panchayat level called the PLF. The PLFs, by pooling in talent and resources and exploiting economies of scale in production and marketing, can benefit member SHGs immensely. Strong federations are a sure way to ensure sustainability and self reliance of SHGs.

The Tamil Nadu Women Development Project and the SGSY Scheme of the Rural Development have been converged with rural SHGs and conur on guidelines and norms have been adopted. Similarly, in respect of SHGs in Urban areas, the SGSY and the TNWDP are being operated in a converged manner. Apart from CBs, the SHGs open bank accounts in Primary Agricultural Cooperative Banks (PACBs) and avail loans as per the Tamil Nadu Women Development Project norms.

Revolving Fund (RF) to SHGs in Tamil Nadu

Revolving Fund is provided to SHGs to augment their group corpus and create credit discipline by enhancing their financial management skills. Proper utilization of RF will have in making SHGs credit worthy and access bank loans. After passing the first credit rating, SHGs in rural areas are provided with RF subsidy of Rs. 10000 under schemes like SGSY. But RF subsidy was not available to SHGs in urban areas which restricted their access to credit from banks. Therefore the Government announced a scheme to provide RF subsidy to

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urban groups from the year 2006-07. In two years period (i.e. 2006-07 and 2007-08) Rs. 30 crores have been provided as RF subsidy to 30000 urban SHGs in the State. As the allotment of funds for RF subsidy under the schemes like SGSY is limited, all the eligible groups were not able to get RF subsidy. Hence in 2008-09 the Government decided to provide RF subsidy to all the eligible 1.5 lakh SHGs and Rs.150 crores were earmarked for this purpose. As on 31st March 2009, RF subsidy of Rs.10000 each along with bank credit has been disbursed to 131413 SHGs during 2008-09.

Tamil Nadu doing well on the SHG front has resulted in the boasting of more than 3.78 lakhs of SHGs with a membership of 60.63 lakhs women as on 30.11.2008. This includes 2.61 lakhs of SHGs directly covered by the Tamil Nadu Corporation for Development of Women Ltd., through the successful fostering of savings habit and promptness in loan repayment.

TABLE – 3.2 Growth of SHGs in Tamil Nadu as on 31 March 2010 (Amount Rs. lakh)

Year Commercial Bank Regional Rural Cooperative Total Bank bank

No. of Savings No. of Savings No. of Savings No. of Savings SHGs SHGs SHGs SHGs

2010 618627 69400.56 75202 4377.38 13288 16595.32 82671 90373.26 1 0

2011 134581 208005.37 7009 7889.24 49879 39727.57 19146 255622.18 9

Source: NABARD Annual Report 2011

From the above table it is noticed that the total No. of SHGs in Tamil Nadu has increased from 826710 in 2010 to 191469 in 2011. During the same

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period savings amount of SHGs has shown an increasing trend of Rs. 255622.18 lakhs from Rs.90373.26 lakhs. It is also estimated by NABARD that 7437846 rural households will be covered by the SHG programme in the year 2011-12. It is to be noted that 14456886 households were already covered by SHG programme.

ORGANISATION AND FUNCTIONING OF SHGs

SHGs, in many ways, have gone beyond the means of delivering the financial services as a channel and turned out to be focal point for purveying various services to the poor. The programme, over a period, has become the common vehicle in the development process, converging important development programmes.

NEED FOR AND OBJECTIVES OF SHGs

The SHGs hold the power and serves to overcome the helplessness of the poor. The group savings serve a wide range of objectives other than immediate investment. It improves discipline on group members in developing the savings habit. It also enhances self-confidence of the individual that reflects sign of group encouragement and the strength of unity of members and group cohesiveness. The following are the objectives of the SHGs

™ To organize poor women.

™ To raise the level of social consciousness of its members.

™ To work for social and economic empowerment.

™ To bring about gender equality in the society.

™ To inculcate and to improve the saving habits among women.

™ To increase the total family income.

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™ To improve the economic standards through self-employment of women.

™ To enable utilization of bank loans and government welfare schemes.

™ To help the members to escape from the clutches of moneylenders.

™ To mobilize financial resources for promotion of economic activities

FEATURES OF SHGs

i) An SHG normally consists of not less than five persons (with a maximum of twenty) of similar economic outlook and social status.

ii) It promotes objectives like economic improvement and raising resources for development and freedom from exploitation.

iii) It has its own by-laws for the proper functioning of the group as well as for the observance of certain rules by the group members and regulations concerning membership.

iv) The form of such a group could be mostly on an informal basis (Unregistered).

v) Periodical meetings of members are held for solving their problems (economic and social) and they collect fixed savings of the members.

vi) The savings of Members are kept with a bank in the name of the group and the authorized representative of the group operates the bank account. The deposit kept in the bank is used for giving loans to members for purposes including consumption at the rate of interest decided by the group (Usually higher than what the banks charge).

vii) Sources of funds are the contribution of members’ savings, entrance fee, interest from loans, proceeds of joint business operation and income from

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investments. Funds may be used for loans, social services and common investment.

The SHGs, being a group of like-minded persons, gets empowered to solve most of its problems of a non-financial nature such as raw material and input supply, marketing, better adoption of technology, education and training for realization of its objectives for development.

CHARACTERISTICS OF SHGs

The important characteristics of SHGs are as follows:

i) They usually create a common fund by contributing their small savings on a regular basis.

ii) The groups evolve a flexible system of operations often with the help of the NGOs and manage their common pooled resources in a democratic manner.

iii) Groups consider loan requests in periodical meetings, with competing claims on limited resources being settled by consensus regarding greater needs.

iv) Loaning is mainly on the basis of mutual need and trust with minimum documentation and without any tangible security.

v) The amounts loaned are small, frequent and for short duration.

vi) Rates of interest vary from group to group depending upon the purpose of loans and are often higher than those of banks but lower than those of moneylenders.

vii) At periodical meetings, besides collecting money, emerging rural, social and economic issues are discussed.

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viii) Defaulters are rare due to group pressure and intimate knowledge of the end use of the credit as also of the borrower's economic resources.

FUNCTIONS OF SHGs:

The important functions of SHGs are the following:

i) Enabling members to become self-reliant and self-dependent

ii) Providing a forum for members for discussing their social and economic problems

iii) Enhancing the social status of members by virtue of being members of the group

iv) Providing a platform for members for exchange of ideas

v) Developing and enhancing the decision-making capacity of members

vi) Fostering a spirit of mutual help and co-operation among members.

vii) Instilling in members a sense of strength and confidence which they need for solving their problems.

viii) Providing organizational strength to members.

ix) Promoting literacy and increasing general awareness among members and

x) Promoting numerically and equipping the poor with basic skills required for understanding monetary transactions

Thus the SHGs function on the principle of the five

i) Propagator voluntarism

ii) Practitioner of Mutual Help

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iii) Provider of Timely Emergency Loan

iv) Promoter of Thrift and Savings and

v) Purveyor of Credit.

FORMATION AND DEVELOPMENT OF SHGs

The first and foremost investment is to promote and develop SHGs as effective and sustainable institutions. The process of promotion and development of these groups is organic and needs to be evolved over a period. A lot of process inputs are essential for organizing the members and developing their leadership capabilities to promote the SHGs. Equal efforts need to be put in for nurturing and building them as institutions for the future. Each of these institutions has various stages of development and definite milestones of growth.

The process of group formation involves a series of tasks carried out in a sequence. They are the following:

SHORT LISTING OF POTENTIAL VILLAGES

In the process of formation, the potential villages have to be short-listed. For short listing the potential villages, the following criteria are followed.

i) Remoteness of the village

ii) Lack of infrastructure facilities like electricity, roads, drinking water and the like

iii) Low literacy rates and high mortality rate

iv) Hamlets with less than 100 families

v) Smaller land holdings and

vi) Existence of moneylenders and intensity of exploitation.

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IDENTIFYING THE POOREST OF THE POOR

The process of identifying the poorest of the poor involves three steps, viz., village mapping, wealth ranking and sharing information with the villagers.

In village mapping, the entire village structure consisting of houses, streets, trees, schools, government buildings, common buildings, street lights, temples and water facilities has to be covered. Village maps are drawn with the help of the village people mainly to understand the environment and dynamics of villages. It helps to understand the exact number of families living in the village and to initiate a dialogue for intervention.

In the wealth ranking process, the families selected in the potential villages are categorized as the poorest, the poor, the moderate and the rich families mainly to identify the poorest of the poor families for group formation.

In order to seed the concept of the SHGs, the information collected through these two processes is shared with the poorest people of the village to get their approval and authenticity.

SEEDING THE CONCEPT

Once the process of selecting the poor is complete, the need for collective action, promotion of savings and sanctioning of credit are emphasized among the poor. Conducting special meetings involving leaders from other SHGs carries out this process.

FORMATION OF GROUPS

After seeding the concept of SHG, steps to form the groups are taken up. In this stage, the steps are initiated to name the groups and frame norms and operational guidelines relating to functioning, saving and lending of the groups. In addition, groups can be assisted for selection of office-bearers such as president, secretary and the treasurer and defining their roles and responsibilities.

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QUALITY CHECK

Once the groups are formed, quality check should done to see

i) Whether the members are from the poorest category?

ii) What is the motive of the members in forming the SHG?

iii) Whether have they framed by-laws and selected the office bearers? and

iv) What is the number of the members?

After considering the various aspects, if it is found that the group consists of the poorest women and is formed with the motive of initiating and managing savings and credit activities independent of external support, the group can be recognized as an SHG. The group is provided with the necessary inputs for developing bye-laws and role clarity.

REGULARIZING THE GROUP LEVEL SYSTEM

A group level system is primary for the proper functioning of the groups. After three to five months of group formation, the following steps are followed to set up a system at the group level;

i) The minutes are written every month and read at the end of every meeting.

ii) Simple accounting system and necessary books are opened and maintained from the first day itself.

iii) Awareness of the norms of the groups among all members is created and

iv) Training is imparted to the office-bearers and group accountants for clarifying their role.

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STAGES OF GROUP DEVELOPMENT

Each group goes through several stages in development. These stages are by and large common to all groups, though their manifestations may be different.

First Stage

The initial stage in the life of a small group is concerned with forming the group. This stage is characterized by members seeking safety and protection, tentativeness of response, seeking superficial contact with others, demonstrating dependency on existing authority figures (trainer or facilitator), complaining about physical and simple matters (light, sleeping and food arrangements, seating and the like.) and a certain degree of smart get up to the authority to gain his approval. Members at this stage either engage in 'busy' type of activity or withdraw and show apathy.

Second Stage

The second stage is marked by the formation of dyads and triads. Members seek out similar others and begin a deeper sharith of self. Continued attention to the subgroup creates a differentiation in the group and tensions across dyads/triads may appear. The members feel comfort and support in their dyads/triads and feel strong enough to challenge the authority figure. Strong dyads attempt to show defiance of authority. Focus on task performance begins to emerge, but energy is mostly spent within a sub-group. 'Pairing' is a common phenomenon.

Third Stage

The third stage of development is marked by a more serious concern with task performance. The dyads/triads begin to open up and seek out other members in the group. Efforts are made to establish various norms for task performance. Members begin to take greater responsibility for their own groups and relationship with the authority figure becomes relaxed. Others who are dissimilar

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in the group are accepted and interaction among dissimilar people takes place around the task.

Fourth Stage

This is the stage of a fully functioning group where members see themselves as a group and NGO involved in the task fully. Each person makes a contribution and the authority figure is also seen as part of the group. Group norms are followed and collective pressure is exerted to ensure the effectiveness of the group. The group redefines its goals in the light of information from the outside environment and shows an autonomous will to pursue those goals. The long-term viability of the group is established and nurtured.

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TABLE – 3.3 The SHG formation stages are outlined in Table Stages of SHGs SL. Role of Stage Duration Role of SHGs NO NGOs

• Attend meetings of organized by NGOs Preparatory 1. 3 months Initiator • Identify poor though PRA method Stage • Get awareness about their role

• Organize groups Forming • Selection of leaders and office bearers and 3-24 2. Promoter • Evolve SHG norms and bye- laws Storming months • Pooling of savings and loan operations Stage • Repayment of loan

• Attend training programme • Develop skill • Link with banks Stabilizatio 24 to 60 3. Facilitator • Shift from consumption to production loans n Stage months • Streamline accounting system • Formation of new groups and stabilization of old groups • Handling of SHG transaction independently with less support Expansion/ • Formation of cluster association 60 to 96 4. Growth Advisor • Link with Panchayat Union Office months Stage • Take up community issues • Take up income generation programmes. • Become financially viable • Self-propeller federation to be formed Stage of After 8 Withdraw • Linkage with banks to get intensified 5. Autonomy years al • Participate in wider developmental and political process Source: R. C. Gupta, 'Management of Savings and Credit Programmes by Non- Governmental Organization.

Role of SHG Members

• To promptly attend SHG meeting.

• To fully participate in SHG meeting and voice opinion clearly and freely.

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• To share responsibility of SHG collectively like going to banks by rotation.

• To prompt repayment of SIIG loan.

• To participate in village and social action programmes.

• To ensure unity and mutual trust between all members and adopt the principle ofunctve and take'.

• To ask questions/doubts openly and ensure that the SHG functions transparently.

• To ensure prompt annual reelection of at least representatives and also animators.

• To promptly attend training programmes and ensure implementation of good practices.

• To share problems, experience, feelings and ideas with all members of the SHG.

Although SHGs can be for men, women or men and .women combines, SHGs of women are found to be more effective and SHGs of women constitute about 95% of the groups functioning in the state.

Functioning of SHGs

• The SHGs generate common fund where each member contributed her savings on a regular basis.

• SHGs meet periodically (weekly) collect the money saved by their members and lend to the needy members for production purposes and also for subsistence and consumption needs.

• Loaners are decided by consensus. Loan amounts are small with low interest rate and for short duration. Loan procedure is very simple and flexible.

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• SHGs also take loans from banks or voluntary agencies or whe other promotional institutions to meet the requirements of the members.

• The group itself with help of NGO makes assessment of individual credit needs of its members and submits to the bank for sanction of collective loans in its name. The group collectively ensures repayment of bank loans.

• NGO helps the SHGs in procuring raw materials and also marketing of the produce.

Best Practices in SHGs:

Getting a group formed takes time and skills. Development workers must pay frequent visits to the community where the group is to be formed and devote time to talk to the people and getting to k low them. Some sort of investigation into the problems of people and their response patterns, beforehand will surely help. There is no one best way to form groups, however, the following sequence of events have been found to be consistent in yielding good results:

• A meeting with local opinion leaders and elders to develop mutual confidence.

• Use of rural mass media like Burrakatha Street plays, puppet shows, folk songs, etc impr sensitizing and motivating community members.

• Providing clear picture about the theme of SHG programme soon after the cultural event.

• Enlisting the support of community volunteers for animation purposes and to do the talking with people.

• Holding of focuses meetings of interested members to clarify doubts and address fears.

Membership in SHGs

It is important that people from poor households are made aware and made to recognize the significance of collective efforts in solving problems that

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seem impossible with individual efforts, by voluntarily deciding to put their efforts together to help increase their access to financial services, economic services like technology, training in skill and enterprise management, material support and marketing facilities etc. besides a host of other social services.

Homogeneity Factor

The greater the extent to which individuals share activities, the more they will interact and the higher the probability that they will form a group. Interaction enables people to discover common interests, likes and dislikes attitudes or sentiments. There are other important factors which encourage homogeneous group formation viz.

1. Gender: Gender focus of groups has been quite successful in promoting gender concerns, particularly in the context of economic empowerment of women. 2. Neighborhood: People who live in the same neighborhood are likely to form stronger groups than people who live in different areas, 3. Community: People with similar social background exhibit similar coping behaviour in times of crises hence will be able to extend mutual support, 4. Occupation: People in similar occupation tend to be cohesive and group action is often found successful in confronting common problem.

Besides these, other factors like age, physical or social disability, management of community resource/asset are also being tried out for building up community organizations.

Membership Requirements

• Size of group is normally restricted to 15-20 members to facilitate participatory processes.

• Members of a group should be at least 18 years of age.

• Members should be aware of rights and obligations of membership.

• Members must share understanding on objectives and vision of group.

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• Finally, membership by mutual selection is a solitary means to build group solidarity.

Mutual selection process entails the participant to expressly indicate the list of all people who could be trusted with their money. Persons with negative characteristics tend to be left out of such formed trust groups and those with the positive attributes tend to be included.

Rights and Obligations of Members

• Every member has a right to determine goals, objectives and vision of the group.

• Every member has a right to participate in every activity of the group.

• Every member has a right to participate in group meetings and decision-making.

• Every member has-a right to participate in the leadership function.

• Every member has right to access loans from the pooled corpus funds of the group.

• Every member has a right to share in the group's wealth.

• Every member has a right to scrutinize group's records and inspect property.

• Every member has a right to withdraw from membership in genuine circumstances.

• Every member is under obligation to accept goals, objectives and vision of the group.

• Every member is under obligation to participate in all group activities.

• Every member is under obligation to make oneself aware and abide by group norms and rules.

• Every member is under obligation to participate in group meetings and decision-making.

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• Every member is under obligation to contribute minimum agreed thrift amount to the group.

• Every member is under obligation to act with diligence in discharge of group responsibilities.

• Every member is under obligation to discharge debt liability contracted by the group.

• Every member is under obligation to participate in supervision of group finance/businesses.

• Every member is under obligation to defend the group at all for all.

It is quite interesting to note that the rights and obligations of members are almost convergent mainly on account of SHG being a member owned, managed and controlled institution. Every ordinary member is also a part of management. Hence, transparency is the watch word.

Governance in SHGs

Strong savings and credit groups owned and managed by the community itself need competent and committed development facilitators, strong cadre of leaders, and enlightened and alert members. Hence the governance of SHGs that promotes democratic traditions is crucial for its success. Evolution of norms or rules and regulations for self-governance, participatory decision-making, diligence and self-discipline among group members coupled with strong enforcement mechanism are sufficient conditions for transparency in group operations. These rules are regulations arc not mere statements but reflect the understanding of group norms by members through their conduct in group activities. Rules and regulations of the group, therefore, need to apprehend conflict situation in day-to-day functioning of group and provide ready solutions. The Decould broadly cover:

• Groups to have unique name to give it a distinct identity.

• Goals and objectives of group formation.

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• Membership issues - optimal size, entry norms, exit policy.

• Extraordinary issues concerning membership - expulsion and cooption of members.

• Leadership structure - positions, roles and .responsibilities.

• Positioning of leaders - tenure, selection and change process.

• Financial services - savings and credit products.

• Fund management - cash management, interest rates, and expenditures.

• Decision-making - decision-making apparatus, styles and record- keeping.

• Enforcement of decisions made by the group.

• Enforcement of group norms - discipline procedure.

• Relationships management with service agencies - Banks, SRIPI/DRDA etc.

While stability of group membership is strongly encouraged, it is possible that a few members could be co-opted into the groups to attain optimality in group size, alternately delinquent members could be expelled, in which case the groups could undertake a situational analysis and take appropriate decision. However, core objectives of the group and rule for self-governance should not be lost sight of.

It is apt to realize that leadership in SHG is a verb and not a noun. The range of leadership responsibilities includes the following:

• Providing guidance for group activities.

• Assisting in information sharing among group members.

• Helping define problems and identify solutions.

• Facilitating appraisal of group performance.

• Encouraging members to offer ideas and opinions.

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• Resolving conflicts and disputes between group members.

• Conducting meetings and facilitating group decisions.

• Organizing, implementing and coordinating group plants.

• Facilitating financial transactions during group meetings.

• Maintaining and keeping records of accounts.

• Maintaining a bank account on behalf of the group.

• Representing the group's interests to outside bodies.

• Conducting negotiations and doing business with other organizations.

• Rendering truthful and correct accounts to members.

Considering the wide ranging responsibilities of leaders in SHGs, responsibility sharing mechanism by assigning different leadership roles to several members must be worked out. This entails:

• Grouping of leadership responsibilities and identifying leader positions.

• Affording clarity in roles and responsibilities of different leadership positions.

• Selecting leaders for discharging expected leadership roles on consensual basis.

• Developing systems and procedures where ordinary members are required to assist leaders in discharge of routine functions.

• Providing in built mechanism for rotation of leadership at least once in two years with clear succession plans for smooth change-over of leadership, similar to that found in rotary clubs.

• Adopting a methodology for changing leaders in case of non- fulfillment of expected roles.

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SHG Meetings

Group meetings include times when members gather either periodically or at short notice to discuss the activities of the group and decide on its future actions. The group must meet weekly or fortnightly for collection of savings and repayment of loan amount and for discussing all other matters. The group meetings need to be conducted with a certain discipline in relation to regularity, time, and items to be discussed. All activities in SHG revolve around meetings at which members access savings and credit services, share experiences, learn from each other and also receive education and training.

9 Meeting is a forum for group action and facilitates information sharing among members.

9 Meetings are to be convened at regular intervals as per the convenience of the members.

9 While frequency- of meetings is guided by the convenience of members, the critical determinant is the ability of members to discharge financial obligation to the group. In other words, thrift, credit and record keeping functions must converge with the meeting at least one a month.

9 Meetings must be held at a mutually decided place, date and time. In other words, meetings are conducted at same place, on the same day and at same time each time they ociaheld.

9 In the absence of common meeting place, meetings could be held at the house of each member by rotation.

9 Active participation in the deliberations by all members must be encouraged with expression of free and frank views. However, involvement of non-members in the decision-making process should be strictly objected to.

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9 Structured agenda for group meeting with definite sequence of activities to be pursued (viz., attendance, review of decisions of previous meeting, thrift, repayments, loans and social issues) will make meetings effective.

9 Deliberations on other social and community issues together with routing financial matters are found to consolidate group dynamics.

9 Sharing of various responsibilities among the members during the meeting process.

9 Attendance of members taken before commencement of deliberations at the meeting enables effective member participation.

9 Meetings should have near-full attendance of members; any absence of members must be viewed seriously.

9 Penal provisions like fines, penalties, etc. must be enforced for late coming leave without prior intimation.

9 Chronic absenteeism in meetings is generally discouraged by withholding or delaying other pecuniary benefits to members.

Savings Function

Poor look for saving services from formal financial institutions. Without a safe place to put their savings, the poor tend to invest it in assets such as gold, silver, livestock etc. which can be pawned or sold in times of need. Thrift contributions by members to the group must be perceived as a savings product serving long term financial security needs. As such savings are generated by poor households either by refraining from consumption or postponement of their not so urgent needs. The thrift contributions reflect confidence of members on the group and it is seen as an index of their stake in the process. Thrift management is, perhaps, the most important function in a SHG. The group members must be encouraged to save as much as each can without it being a uniform amount for all. Usually the SHGs start off with a minimum savings of

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all members. As the years pass they may opt for optional savings according to the capacity of each member. Some of the best practices in this include:

• Thrift collection could commence from first meeting itself.

• Periodicity and quantum of thrift decided by group members themselves keeping in view the ability of poorest member among them to pay the agreed amount at predetermined intervals.

• Minimum compulsory thrift contributions to be made by all members.

• Withdrawals against compulsory thrift contributions are not permitted unless the member withdraws from primary membership.

• Groups must insist for on-time contribution by members.

• Groups must collect thrift contribution in the presence of all members during the meetings only.

• Thrift collections must be utilized for lending to group members and must not be kept idle.

• Penal provisions like fines, penalties, etc. must be enforced against late payment or default in thrift.

• Chronic default in on-time thrift contributions by' members is generally discouraged by withholding or delaying other pecuniary benefits to members. At times penalties for late/non-payment include fees, denial of higher loan amounts or longer waiting periods for loans.

• Delayed thrift contributions must not be received outside meetings.

• Additional or seasonal savings are encouraged by a few numbers of groups. But it is again desirable to have equal savings without interest implications keeping in view the weak fund management capability of many groups. However, whenever optional savings are offered it is suggested that

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suitable compensation (interest) is provided to address the equity question among various members.

• It is desirable to make payment of thrift amount to a member withdrawing from the group for genuine reasons.

• Continuity of thrift is the regular of SHG process and any attempt to obstruct or discontinue it after receipt of Revolving Fund, Subsidy, Grant or even a Bank Loan can only be a self-inflicting move.

Credit Function

Providing credit access to membersmmenpoor household on sustainable basis is the primary objective of SHG. A well conceived loan programme in a SHG will enhance its attractiveness to the members. These loans are often given for various purposes without insistence on collateral but are available at cost. There is no compulsion to avail of loan facility, as such those who avail loans

SHGs typically offer small, short-term loans for meeting emergent and consumption requirements only to their members. The internal lending must preferably commence from the data of first pooling of savings. Need based lending is strongly recommended by active groups.

Loans are extended keeping in view the nature of need of particular member. Preference in borrower evaluation is, however, given to those who are regular in attendance at meetings and timely payment of thrift amounts.

Group must have a system of giving differential priorities to several purposes for taking loaning decisions. Here urgency of purpose is given precedence while selecting a borrowing member.

Groups must establish a process to assess of credit requirement for arriving at loan quantum, efficacy of such system need to be seen in the context of particular SHG.

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In a few groups, the loan quantum is in proportion to the individual member's total thrift contribution. Decision of groups indicating differential loan quanta based on the purpose and person availing the loan reflects their maturity.

All credit decisions must be taken at the meetings only after giving due consideration to opinion of all members. Large loans to members are suitably collateralized considering the risk perception of the group. Often, groups go in for chattel financing wherein a borrower offers a critical productive asset as security for loan.

Terms of credit like interest rate and schedule of loan repayments are negotiated and conveyed clearly to the borrowing member.

Flexible repayment schedules are worked out by groups taking into consideration the various income-flows of the household and repayment capacity of the member concerned.

Monthly or even weekly repayments (wherever weekly meetings are held) of both principal and interest payments are found to be convenient to both borrowers and the group to liquidate the loan liability.

Separate schedules for principal and interest payments may be stipulated as they are easy to comprehend even by illiterate borrowers.

Loans could be issued to the borrowing members in the presence of other members of the group.

Groups ensure proper end-use on credit as also management of asset, wherever created. This practice must be continued at frequent intervals till the loan is fully repaid by the borrowing member.

Concurrent loans are generally discouraged by most groups in view of small fund base. But wherever they are given, rigorous appraisal must be undertaken on the purpose, genuine need of borrower and her performance in the earlier loan.

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Reward for on-time repayment may be given to members in the form of future access o higher loan amounts.

Penal provisions like fines, penalties, etc. must be enforced against late payment or default in loan repayment.

Chronic defaults in on-time loan repayment by members are generally discouraged by withholding or delaying other pecuniary benefits to members. At times penalties for late/non-payment include fees, denial of higher loan amounts or longer waiting periods for further loans.

Continuity of need based internal lending will strengthen SHG processes and any attempt to obstruct or discontinue it after receipt of Revolving Fund, Subsidy, Grand or even a Bank Loan can only be a self-destructive move.

Fund Management in SHGs

Mobilizing micro-thrifts is only part of comprehensive savings sendee SHGs. Small savings from resource-poor households need operative protection against loss of deposits. Misappropriation in savings and credit groups as well as imprudent lending from internally generated deposits threatens the security of savings programme. They have to be shielded against the financial and non- financiai risks. The amount such as fines imposed on membee nagrants from the NGOs, bonuses for various programmes and service charges on external loans should be put into the common fund of the groups. All common expenses related to the group may be met from this common fund.

It is, therefore, considered necessary that high standards are set in the area of fund management which covers the following:

Group fund generally comprises member thrift, interest earned on internal loans, fines and penalties levied on defaulting members, loans and grants received in the name of the group. The groups are not expected to discriminate between the sources of fund for meeting loaning requirements. In other words,

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the savings, loan repayments, interest payments, fines and penalties paid by members will be pooled in the meeting for on-lending to the group members.

Efficient cash management in a meeting reflects the fund management capability of the group. Idle funds are a drag on the group.

Responsibility sharing in cash management at each meeting on rotation basis for assisting the group leaders will not only promote transparency but also enhance fund management competence among group members.

Managing of savings account with local branch is another important area in fund management. All cash collections made at a meeting may be deposited into the bank and withdrawals made for disbursing the loans. While members could take turns for depositing the cash into bank, the persons authorized and the borrower concerned could draw the money from bank. However, groups maintaining up to date records could consider extending loans out of pooled fund during the meetings itself. Periodic reconciliation of accounts with bank transactions is considered useful.

Preparation of micro-credit plans in groups by groups improves considerably the credit absorption capacity as it entails acquisition of planning and financial skill among group leaders.

In the initial stage only short term loans are extended, usually for periods ranging from 3-12 months, to enable larger number of members’ access credit facility from the group. However, insistence on monthly repayments from borrowing members will accelerate the velocity of lending within the group, which also partially reflects equity in loan access to group members.

Groups must have a policy on interest rates. Most groups charge interest rates that are linked to contemporary market rates. It is also desirable to build in risk factor in the interest rate structure in long term.

Generally interest is not paid to the members on the compulsory savings. Even in cases where interest is computed on compulsory thrift contributions the

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same is merged with the member savings rendering the very process in fructuous. Coming to interest rate on loans, a few groups have been charging differential interest rates to their borrowers keeping in view the purpose of loan which can be considered good. However, the groups are not expected to soften their rates in the short term with the receipt of grant or loan funds from institutional sources. It must be appreciated that the interest Furrged on loan is a source for raising additional capital to fund the corpus base. However, the interest may be charged on outstanding loan amounts as against interest rates charged by a few on EMI or flat rate basis.

Members must be made aware of their cumulative thrift contributions and loan outstanding.

Investment of pooled savings in a common asset (even a productive one) and blocking internal lending will in fact run counter to the objective of giving sustainable credit access to poor households. Further, the risk of investing entire corpus in a singular activity is fraught with risks.

Groups incurring regular expenditure towards cost of bank transactions, honorarium to book keeper etc. could consider collecting additional amounts every month from their members to avoid erosion of loaning funds. A few groups have been holding small cash balance, say of Rs. 200 to t 300 to give hand loans to members for meeting emergent credit requirements.

Rotation of Group Fund

All savings and excess of common fund would be rotated as short-term loans amongst the members at the rate of interest decided by the group.

Record Keeping in SHGs

Record keeping is possibly the most crucial function in a SHG often confined to the periphery. An efficient record keeping assumes significance for promoting transparency in the system considering the need for providing safety of micro-deposits pooled in savings and credit programmes. An effective

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information system that supports their sell-management efforts is sine-quo-non for sustainability of SHGs. Such system can be considered effective when it is easily understood and appeals to cognitive abilities of ignorant and illiterate community. Besides, it must be credible, verifiable and facilitate quick recall of stored information in the perception of users. The books and registers to be maintained by each SHG to ensure proper accounts are given below.

Attendance Register, Minutes Book, Savings Ledger, Loan Ledger, General Ledger, Cash Book, Individual Pass Book, Receipt Book and Paymeon- aoucher Some of the best practices in record keeping area could reflect upon the following issues:

• Critical self-awareness must be created among groups on issues relating to record keeping.

• Groups must assume the responsibility for safe keeping of records.

• Group members must be trained to recognize books of accounts and their structure.

• Groups must be encouraged to discuss on nature and contents of records.

• Groups must be encouraged to hire services of local book keeper to upkeep records in case of non-availability of literate members in the group capable of writing the records.

• Groups must be strongly encouraged at compensate for services rendered by book keeper.

• Groups must ensure that books are updated while the meeting is in progress.

• Groups must ensure that book writer reads out the nothings made by him in various books.

• Groups must develop a practice of closing the books of accounts by year end.

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• Cross checking of books across groups (peer audit) could be encouraged for audit purposes.

• Groups must encscusge its members to learn to read and write their own books in the long run.

• Members must cultivate habit of confirming entries in member passbook.

Group Vigilance and Control Mechanism in SHGs

The corpus fund of a group is entirely contributed by its members and hence they alone must ensure that the fund is managed and controlled by them without any outside interference whatsoever. There is no alternative to alertness of members and their participation in group meetings. Some of the best practices discussed earlier also go in strengthening the group vigilance and control mechanism. These include:

• Responsibility sharing mechanism where members assist leader in conduct of meeting.

• Practice of leadership rotation coupled with clearly laid out succession plan.

• Preventing outsiders from handling cash, even for training purposes.

• Responsibility fixing for handling cash during meeting and holding impress cash thereafter.

• Practice of tallying cash inflows and outflows at the end of each meeting.

• Practice of clarifying member wise cumulative savings and loans position every month.

• Responsibility to deposit cash and withdrawal from savings bank account on rotation basis.

• Practice of bank reconciliation on periodic basis.

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• Ensuring end-use of credit by helping the borrowing member in purchase of assets, if any.

• Regular review of deviant behaviour of members in attendance, thrift or loan repayment.

• Enforcement of group discipline through fines and penalties system in a transparent manner.

• Practice of rotating members accompanying leader for training and review sessions.

Training

The staff of NGO and Bank staff imparts training to the office-bearers of the SHGs, members of the groups and representatives of the cluster level federations.

Annual Auditing

A qualified auditor should audit the accounts of the groups annually. The SHG should meet the audit cost.

Banking Relationship

SHGs are primarily savings and credit groups and availing savings and credit services from local banks is a logical extension of their growth strategy to meet increasing credit demand from members. Moreover accessing savings services from banks will provide safety to the pooled funds. It is expected that groups will demonstrate desired maturity in terms of group and financial dynamics leading to inculcation of banking habits in the groups. It would also make possible the bringing about of general improvement in the nature and scale of operations that would accelerate economic development.

• Open savings account in group's name with the service area branch concerned.

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• Regular operations in the group's savings account will help build healthy relationship with bank.

• Groups to assess their future fund requirements and articulate the credit gap in micro-credit plans.

• Groups to have clarity on issues relating to eligibility conditions, credit entitlement and legal obligations arising out of credit linkage with banks.

• Groups and banker must hold discussions at loan appraisal stage for enabling banker to arrive at a credit decision.

• Terms and conditions of credit extended by banks including implication of joint and several liabilities in the event of credit linkage must be clearly understood to all members of the group.

• Groups must assimilate bank loans with their corpus fund by extending need based loans to those members who could not access loans earlier from out of pooled savings. Here, the group must take care not to deviate from the financing norms (quantum of loan, rate of interest, repayment period) already laid down for giving loans out of their pooled thrift amounts merely because outside funds are rejected into the group corpus.

• Groups must ensure on-time payment of bank loans by setting aside a portion of total collections made in each meeting for honouring repayment obligation to the bank. In other words, groups will square up the default amount of any borrowing member and pass on the installment amount to the bank as per contracted repayment schedule.

• Continuity of thrift and need based internal lending even after receipt of bank loan will strengthen SHG processes and any attempt to obstruct or discontinue it can only be a self-inflicting move.

• Banks must reward for on-time repayment by means of repeat and higher finance.

SHGs also promoted democratic culture and provided women with opportunities to imbibe norms of behaviour that are based on mutual respect.

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Hence they were able to foster concern even in internal lending of loans based on the individual needs and priorities. It provided a firm based for dialogue and cooperation in programmes with other institutions like government departments, cooperatives, financial and Panchayat Raj Institutions.

The SHGs engaged not only in productive economic activities but also in social empowerment and capacity building of rural women. Health education, medical facilities, literacy, alternative agriculture practices, leadership qualities and team building are other activities of SHGs.

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CHAPTER – IV

PROFILE OF THE STUDY AREA

CHAPTER – IV

PROFILE OF THE STUDY AREA

The overall objective of this Study is to analyze the economic upliftment of downtrodden people through Self help groups in Lalgudi Taluk, Tiruchirappalii District. An evaluation of this would require an understanding of SHGs member’s characteristics. These characteristics in turn are influenced by the broad parameters of the study area. Therefore an evaluation of the impact of SHGs requires an understanding of the area and its various features. This profile of the study area assumes significance in arriving at the economic upliftment of the downtrodden people.

Tiruchirappalli District

Tiruchirappalli district is an important region in the State of Tamil Nadu. This district is located at the Central part of Tamil Nadu surrounded by Perambalur district in the north, Pudukkottai district in the south, Karur and Dindigul districts in the West and Thanjavur district in the east.

It lies between 10° 10' and 11° 20' of the Northern latitudes and 78° 10' and 79° 0' of Eastern longitudes in the centre part of the Tamil Nadu. The general slope of the district is towards east.

Tiruchirappalli district comprises of eight taluks. They are Lalgudi, Musri, Tiruchirappalli, Thottiyam M.nallur, Srirengam and Manapparai, which included 14 blocks, 408 Village Panchayats and 1590 Villages. Tiruchirappalli is the only Municipal Corporation which is also the Head Quarters of the District.

Tiruchirappalli city which is the headquarters of the district became a municipality in 1866. In April 1994, the Tamil Nadu Government formed the Tiruchirappalli City Corporation amalgamating Tiruchirappalli, Ponmalai and Srirangam Municipal Councils into one. Since then Srirangam, Ponmalai and K. Abisekapuram function as three zones of the City Corporation.

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According to 2001 census, the total population of the district is 24, 18,366 which consists of 12,08,534 males and 12,09,832 females. The sex ratio is 1001. The population registered a growth rate of 8.76 per cent in the decade 1991 – 2001. The district is having a density of 549. The rural population constitutes 12, 79,204 and urban population constitutes 11, 39,162. Out of the total work force of 10, 64,521, the agricultural labourers constitute 2, 45,875. The literacy rate of the district is 79.16 per cent.

Agriculture sector provides the major source of income to the population of the district and the major crops in this district are paddy, cholam, cotton, groundnut, maize etc., In addition, the other allied sectors like dairy, sheep/goat, sericulture and inland fishing are the major sectors contributing to the district economy as well as act as a major source of providing livelihood for improving the income and standard of living of the people.

Tiruchirappalli has been a traditional agricultural district and the river Cauvery flows through the district. The total cultivated area is 1,95,495 hectares. The numerous other small canals ensure irrigation to the lush green fields. The district normally experiences a high mean temperature and a low degree of humidity. The maximum and minimum temperatures recorded are 38.7° C and 32.8° C respectively. The average rainfall is 867.8 mm and the monthly average for the weather period is 44.66 mm. The normal rainfall during north-east monsoon is 385.2 mm and during the south-west monsoon is 268.9 mm.

Tiruchirappalli has been a centre of activities for many historical events from the days of the early Cholas. Rock Fort, Thayumana Swamy, Pillaiyar Temple, Teppakulam, the Nawab's palace, the Nadir Shah Mosque, Sri Rangam Temple, Thiruvanai Koil, Subramanyaswami Temple, Upper Anient and Grand Anient are some of the important monuments and temples reflecting the history, culture and traditions of the district.

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It has a number of detached hills, among which Pachamalai Hill is an important one, which has a peak up to 1015 m, located at Sengattupatti Rain Forest.

Profile of the Lalgudi Taluk

According to the 2011 census, the taluk of Lalgudi had a population of 254705 with 124855 males and 129850 females. There were 1040 women for every 1000 men. The Taluk had a literacy rate of 75.56157.

The census 2001 reveals that the study area had a population of 2,45,698 with 1,21,753 males and 123,945 females. There were 1018 women for every 1000 men. The Taluk had a literacy rate of 77.09. The total number of households was 58,938.

It is to be noted that schedule caste population is 50,337 and scheduled Tribes constitute only 397 in the total population. The census 2001 reports that there are 1,13,140 workers in the Taluk of which 68937 are male workers and 44,203 are female workers. There are 17338 Marginal Agricultural labourers in the Taluk. The details of the workforce in the Taluk are presented in the following table.

157 The detailed data of 2011 census is yet to be published.

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Table – 4.1

LALGUDI TALUK – Figures at a Glance (2001 census)

Parameter Total Male Female Percentage Sex Ratio Population 245698 121753 123945 100 1018 Population (0-6) 27965 14437 13528 12.84 937 Scheduled Castes 50337 24729 25608 23.12 1036 Scheduled Tribes 397 197 200 0.18 1015 Literates 167844 93056 74788 77.09 804 Illiterates 77854 28697 49157 22.91 1713 Workers 113140 68937 44203 46.05 641 Main Workers 88078 57348 30730 35.85 536 Main Cultivators 26063 17243 8820 29.59 512 Main Agricultural labourers 33893 18017 15876 38.48 532 Main Workers in household industries 2240 1131 1109 2.54 981

Main Other Workers 25882 20957 4925 29.39 387 Marginal Workers 25062 11589 13473 10.2 1046 Marginal Cultivators 3921 1925 1996 15.65 1037

Marginal Agricultural labourers 17338 7160 10178 69.18 1422 Marginal Workers in Household industries 711 217 494 2.84 2276 Marginal Other Workers 3092 2287 805 12.34 352 Source: Directorate of Census Operation 2001- Tamil Nadu.

Lalgudi lies close to Coleroon River. Ayyan Vaikal is the river passing through Lalgudi. The major source of irrigation is river Cauvery. Many canals irrigate as much as 73.78 per cent of the net irrigated area. Paddy, groundnut, banana and sugarcane are major crops.

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There are 39 Pre-primary schools, 126 primary schools, 53 middle schools, 13 high schools and 9 higher secondary schools catering the educational needs of the Taluk people. 1602 teachers are working in the educational institutions. Government Boys Higher Secondary School (Boys) is more than 100 years old and one of the best Govt. schools operating in the Trichirappalli district. A majority of students pursue higher education only at Tiruchirapalli due to lack of standard institutions in Lalgudi. Recently a Govt. run Arts and Science College is opened. Agricultural Engineering College and Research Institute (AEC&RI) affiliated with Tamil Nadu Agricultural University (TNAU) is functioning in Kumulur village in an area of 300 acres 4 km near to lalgudi offering B.Tech Agricultural Engineering. There is also a polytechnic college in Lalgudi - Manakkal, many of the students travel to Trichy city every day by train to pursue their college education. A Government Arts & Science college was opened in Paramasivapuram and a Teacher Training college opened at Manthurai in Lalgudi.

There are 92 revenue villages in the Taluk. Lalgudi assembly constituency is part of Perambalur (Lok Sabha constituency). The Taluk has 42 post offices 8 police stations and 14 branches of nationalized commercial banks. There are 13 primary health centers in the Taluk. The Taluk has 5309 wells for both domestic and agricultural purposes. The total livestock of the economy is 2, 39,786.

Lalgudi is famous for its temples. The Shiva Temple Saptharishieeswarar temple) is one of the early Chola period temples, and the Tamil Appar is said to have visited this temple. The statue of Lingam, the main god of the temple, is quite different from other Lingams: It has a vertical wedge-like cut on the top which is red in colour. The statue is of rock, as is this redness on the head of Lingam. There is a mythology behind the redness of this Lingam. There is also a temple for Mother Parvathi in the same temple. Punjai sangenthi is the nearest village to Lalgudi. The Famous Ayyanar temple there was built during the chola

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period. There are also small temples of Hidu deities, four mosques and churches in the Taluk.

SHG in Lalgudi Taluk

There are 1112 SHGs are functioning in the Lalgudi Taluk. There are 17186 women members enrolled in the groups. The group had a savings of Rs.618.696 lakhs in the year 2011. These groups are operating in 45 Village Panchayats of the Taluk. It is to be noted that Lalgudi Taluk has the highest number of SHGs in the Tiruchirappalli District.

There are 9 NGOs functioning in the study area. They are B.S.S.S, Banial, Savai, Coroat, Equuetas, GramaVidial, K.L.A, Repco and Scope.

List of Training Programmes

The following is the list of training programmes provided to SHG group members in Tiruchirappalli District through various non-governmental organizations:

¾ Animator and Representative

¾ SHG Members Training

¾ EDP Training (Entrepreneur Development Programme)

¾ Skill Training

¾ Vocational Training

¾ PLF Training

¾ AIDS Awareness Training

¾ Literacy Training

¾ Community Resource Process Training (CRPT)

¾ Health Awareness Training

¾ Panchayat Raj Training.

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129 a

CHAPTER V

ANALYSIS OF THE ECONOMIC UPLIFTMENT OF DOWNTRODDEN PEOPLE THROUGH SELF HELP GROUPS IN LALGUDI, TALUK, TIRUCHIRAPPALLI DISTRICT

CHAPTER – V

ANALYSIS OF THE ECONOMIC UPLIFTMENT OF DOWNTRODDEN PEOPLE THROUGH SELF HELP GROUPS IN LALGUDI TALUK, TIRUCHIRAPPALLI DISTRICT

The provision of credit and generation of savings have long been recognized as essentials in rural development strategy. Adequate and timely credit to the rural sector is one of the basic requirements of rural credit delivery system.

The real idea of microfinance is to help increase income of poor people particularly women. It is based on the notion that with small-socio loans and access to other financial and business services, the poor can help themselves to generate income by creating or expanding small businesses.

The concept of Self Help Groups (SHGs) is the most exciting discovery in the context of micro finance. They inculcate the habit of thrift, savings, availing loan and repaying the same over a given period of time and in the process the rural poor gain economic prosperity through credit.

The principal objective of this study is to assess the economic upliftment of downtrodden people through SHGs. The researcher has selected 216 respondents using simple random sampling method, from the Lalgudi block. The respondents were interviewed by using a pre tested and well structured schedule. The data provided by the respondents were classified and tabulated for the purpose of analysis and interpretation. The analysis explains the socio economic conditions, group formation, functioning of the groups and economic impact of SHGs.

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AGE COMPOSITION

The table exhibits the age wise distribution of the surveyed members of the achieve participation of the community in promoting their economic well being. The age composition of the members shows the involvement of a particular age group in the activities of SHGs. Age factor also reflects the relative position of members in SHG. The following table shows the age composition of SHG members.

TABLE – 5.1

AGE – WISE DISTRIBUTION OF THE RESPONDENTS

Age group No. of SHG Members Percentage

20-30 59 27.3 30-40 106 49.1 40-50 40 18.5 50-60 2 0.9 60-70 9 4.2 Total 216 100 Source: Primary Data

It is observed from the table that a majority (76.4per cent) of the members are under the age of 40 years. It signifies that the energetic younger generation is better suited to take up entrepreneurial responsibility. SHG can provide ample opportunities and utilize the youthful human resources so as to improve the economic upliftment of the rural poor. The participation of youth in larger numbers also shows their responsibility and determination to become an economically vibrant society.

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SEX COMPOSITION

Gender disparity is almost seen in every sphere in India. The incidence of poverty and associated deprivations fall more on women. Thus they started to participate in the economic development programmes. The following table shows the distribution of respondents according to sex.

TABLE-5.2

DISTRIBUTION OF THE RESPONDENTS BY SEX COMPOSITION

Sex Composition No. of SHG Members Percentage

Male 72 33.3

Female 144 66.7

Total 216 100

Source: Primary Data

The sex composition of the SHG members reveals that 66.7 per cent of the sample respondents are female. The predominance of female in SHG is perhaps due to the fact that rural women always remain the main component of the development process of Indian economy. The majority of the rural women are living below the poverty. Therefore the government has initiated women SHG programme as a best participatory approach to the rural development and economic upliftment of the rural poor. The study also found that the participation of men in SHGs is gaining momentum in rural areas particularly in the study area with the participation of 72 men. Thus the sex composition reveals the general trend in India that women have predominated role in the SHG Programme.

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MARITAL STATUS

Marriage is a strong social institution in India, which affects the economic life of the people. The following table clearly shows that majority of respondents are married. Of the total sample, they constitute 87.5 per cent and only 12.5 per cent are unmarried.

TABLE- 5.3

MARITAL STATUS OF RESPONDENTS

Marital Status No. of SHG Members Percentage

Married 189 87.5

Un-Married 27 12.5

Total 216 100

Source: Primary Data

It is observed from the study that marital status of the respondents influenced the respondents to join SHGs in order to support their families. The large participation of married respondents in SHGs showed that SHGs play a majority role in the upliftment of rural poor by encouraging them to enter into entrepreneurial activities. Since majority of the respondents are belonging to the age group of above 30 years, the number of married is very high in this study. It is also observed that married members are being given preference in group formation as they will work with commitment.

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RELIGION

Religions dictate the way of life. The religious ritual and practices have economic implications. The religious sentiment of Indian people accommodates all the religion. It is a common feature of India that people belonging to all religion peacefully assemble together in the places of occupation. The distribution of respondents by religion is presented in the following table

TABLE- 5.4

RELIGIOUS COMPOSITION OF THE RESPONDENTS

Religion No. of SHG Members Percentage

Christian 12 5.6

Hindu 168 77.8

Muslim 36 16.7

Total 216 100

Source: Primary Data

The religion wise distribution of respondents shows the community participation in SHGs, the respondents belong to Hindu, Muslim and Christian religion. The table shows that majority of the respondents (77.8 percentages) belong to Hindu. Since the Muslim and Christian population is meagre in the study area, the respondents belonging to the two religions are in small members.

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COMMUNITY

Indian society is historically formed with a hierarchy. The people are grouped in to communities based on social and economic status. The people belonging to backward and schedules caste community are generally excluded from the development process. Community wise distribution of the respondents is presented in the following table.

TABLE- 5.5

COMMUNITY WISE DISTRIBUTION OF THE RESPONDENTS

Community No. of SHG Members Percentage

B.C 172 79.6

S.C 33 15.3

S.T 11 5.1

Total 216 100

Source: Primary Data

The community of the respondents reflects their socio-economic conditions. It is significant to note that 79.6 per cent of the respondents are from the backward community. This is followed by scheduled caste which constitutes 15.3 per cent. Only 5.1 per cent are from scheduled tribe. The reason for low level of participation of SC and ST people in SHGs is that majority of them are agricultural labours and educationally backward and unaware of SHGs programmes. It shows that government has to involve the SC, ST population in SHGs so as to achieve inclusive growth.

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EDUCATIONAL STATUS

Educational level of an individual plays a significant role in attaining better employment status and higher income. The literacy level of India has started to reach a moderate level of around 70 percentages during recent year. People with low education could earn low income which is insufficient to might basic needs. The education status of the respondents is tabulated below.

TABLE- 5.6

EDUCATIONAL STATUS OF THE RESPONDENTS Education Qualification No. of SHG Members Percentage P.G. Degree 1 0.5 U.G. Degree 15 6.9 B.Ed. 6 2.8 Diploma 2 1 Higher Secondary School 34 15.7 High School 71 32.9 Middle School 55 25.5 Elementary School 17 7.9 Unablyated 15 6.9 Total 216 100 Source: Primary Data

The educational status of the respondents shows that majority are literate in the study area. Their education ranges from lower primary to graduation. So SHGs do no limit admitting only less educated rather highly educated members are also found in SHGs. The following table reveals that out of the 216 respondents, 71 studied up to middle school and 34 got higher secondary school education. The number of illiterate among them is only 15.

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Noticeably 16 among them were graduates and 6 had B.Ed. degree and 2 possessed diploma qualification. The educational status of the respondents shows the fact SHGs can promote entrepreneurial skills among the respondents. Since majority of them are literates.

FAMILY TYPE

Indian society preferred joint family. However urbanization and modern economic development changed the preference towards nuclear family. The distribution of the respondents by their family type is presented in the following table.

TABLE- 5.7

DISTRIBUTION OF THE RESPONDENTS BY THEIR FAMILY TYPE

Family Type No. of SHG Members Percentage

Nuclear 158 73.1

Joint 58 26.9

Total 216 100

Source: Primary Data

The changing cultural, economic and social situations have its influence on the family system. It can be found from the study area. Out of the 216 respondents, 158 (73.1 per cent) respondents are living in nuclear family. Only 58 respondents are in joint family system. Thus there is a transition from joint family system to the nuclear system in the study area. It is to be noted that SHGs afforded financial and entrepreneurial support to the respondents to uplift their individual family. It is observed that the tendency to move to nuclear families

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both in rural and in urban areas of India has also been found in this study area also. SHG members may need more time to devote on business responsibilities.

FAMILY SIZE

Indian preferred large families. The family size has connections with economic condition of the family. The size of the family denotes the total number of members in the respondent’s family which include parents, children and others. Family size is one of the factors influencing the economic welfare of the families. Larger the family size lesser will be the economic freedom to save by the members. Low economic status and low educational status are associated with high birth rate and higher family size. The size of the family also reveals the influence of family control plans on rural households.

TABLE – 5.8

DISTRIBUTION OF THE RESPONDENTS BY THEIR FAMILY SIZE

Family Size No. of SHG Members Percentage

Below 3 60 27.8

5-Apr 118 54.6

7-Jun 23 10.6

Above 7 15 6.9

Total 216 100

Source: Primary Data

The distribution of respondents by their family size is given in the following table. The data show that more than half of the respondents (54.6) had 4-5 members in their family. While 27.8 per cent had below 3 members in their family.

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STATUS IN THE FAMILY

The stats of the respondents in their family reflects their decision making power and their participation in the process of upliftment of their family. The following table reveals that 129 of the sample respondents are wives, 11 respondents are daughter in law and 4 respondents are daughters.

TABLE – 5.9

DISTRIBUTION OF THE RESPONDENTS BY THEIR STATUS IN THE FAMILY

Status in the Family No. of SHG Members Percentage

Son 30 13.9

Daughter 4 1.9

Daughter in Low 11 5.1

Wife 129 59.7

Head 42 19.5

Total 216 100

Source: Primary Data

It inferred that the females outnumbered the male in participating in the decision making process in their families. Traditionally females are not allowed to discuss and interact with males other than their family members. But the SHGs create opportunities for the women to interact and to take decision. Even though they are not the head of the family and irrespective of their status in the family women are able to participate in the empowerment process.

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OCCUPATION

An enquiry into the occupations of the selected dependents before joining SHG helps to study the socio-economic background which makes them to join. In the study area prime occupation of the people is agriculture. The occupation was broadly classified as agriculture, business, working in commercial shops, Non agricultural casual labourers like electricians, carpenters, plumbers, tailors etc. The occupation of respondents before becoming a SHG member is indicated in the following table.

TABLE – 5.10

DISTRIBUTION OF THE RESPONDENTS BY THEIR OCCUPATION Occupation No. of SHG Members Percentage Agriculture 4 1.8 Casual Labour 83 38.4 Worker In Commercial Firm 9 4.2 Technical Labour 11 5.1 Self-Employed 32 14.8 Unemployed 77 35.6 Total 216 100 Source: Primary Data

The table clearly shows that out of the 216 respondents, 139 were employed before joining SHG and only 77 were reported unemployed. The distribution of those employed by nature of employment before joining SHG reveals that 83 had been casual labourers like plumber, tailor, carpenter, vegetable seller, rice mill driver, real estate agent. 32 were self employed and 11 were technical labourers. Only 4 members were engaged in agriculture and 9 were working in private firms.

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REASONS FOR JOINING SHG

The reasons revealed by the respondents’ shows that their basic motivation for joining the groups is economic upliftment. The following table presents the distribution of respondents by their reasons for joining SHGs.

TABLE - 5.11

DISTRIBUTION OF RESPONDENTS BY THEIR REASONS FOR JOINING SHG Reasons No. of SHG Members Percentage Training 6 2.3 Cheap and Easily Loan 145 56.6 Unity 10 3.9 Becoming Entrepreneur 45 17.5 Awareness 15 5.8 Savings 35 13.6 Total 256 100 Source: Primary Data

It is found that 145 respondents reported cheap and easy loan as their reasons. They seemed to have a hope that they could utilize the loan for their economic upliftment. Becoming an entrepreneur was reason to 45 respondents. Gradual increase of savings was cited as the reasons to 35 respondents. Getting social awareness was the reason to join SHG in the case of 15 respondents. While 10 reported unity as the reason, training was cited by 6 respondents.

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SOURCES OF JOINING SHG

The following table identifies different sources which facilitate the respondents to become members in the SHGs. It is seen from the table that out of 216 respondents, 127 joined the groups through their friends and 60 of them through their relatives. 18 respondents become members with the help of heads of the SHGs, 11 got the opportunity through NGOs.

TABLE – 5.12

SOURCES OF JOINING SHG

Sources No. of SHG Members Percentage Relatives 60 27.8 Friends 127 58.8 Head of SHG 18 8.3 N.G.O 11 5.1 Total 216 100 Source: Primary Data

It observed from the study that 86 per cent of the respondents become members with the help of friends and relatives. This clearly shows that a person who had become SHGs members helped the potential people to join the groups. This shows the fraternity and friendship of the people in the study area. It is also interesting to note that even though NGOs play a major role in the formation of SHGs, only 11 respondents become the SHG members in the study area by the influence of NGOs. This shows the minimal role of NGOs in making awareness and motivation in the study area.

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EXPERIENCE IN SHG

The years of experience as SHG members helps to study the functioning of SHGs and its role in promoting skills, savings habits among the members. The experience enables the members to overcome the various problems associated with the process of economic upliftment of rural areas.

TABLE – 5.13

DISTRIBUTION OF RESPONDENTS BY THEIR YEARS OF EXPERIENCE IN SHGs

No. of Years No. of SHG Members Percentage 1 – 3 79 36.5 3 – 6 56 25.9 6 and Above 81 37.5 Total 216 100 Source: Primary Data

From the above table it is inferred that 37.5 per cent of the respondents have had more than 6 years of the experience as members and 25.9 per cent of the respondents got 3 to 6 years of the experience. The remaining 36.5 per cent have 1 to 3 years of experience in the SHGs. More than half of the respondents have experience of above 3 years.

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GROUPS ASSOCIATED WITH NGOs

The following table details the name of the NGOs under which the SHGs were formulated in the study area.

TABLE – 5.14

DISTRIBUTION OF RESPONDENTS BY THEIR GROUPS

ASSOCIATED WITH THE NGOs

Name of the NGOs No. of SHG Members Percentage B.S.S.S 20 9.3 Banial 23 10.6 Coroat 72 33.3 Equetas 6 2.8 Grama Vedial 5 2.3 K.L.A 1 0.5 Repco 1 0.5 Savai 87 40.3 Scope 1 0.5 Total 216 100 Source: Primary Data

The highest number of members is attached with Savai NGO (40.3 per cent), followed by Coroat (33.3 per cent). K.L.A, Repco and scope are respectively having 0.5 per cent of the total sample SHG members.

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SUBCRIPTION PER MONTH

Subscription is collected from the members of the groups for covering the travel expenses, expenditure incurred towards getting loans from banks, for maintaining ledgers and for expenditure incurred to conduct monthly meeting like supplying tea and snacks to the members.

The following table presents the subscription amount paid by the members.

TABLE – 5.15

DISTRIBUTION OF RESPONDENTS BY THEIR MONTHLY SUBSCRIPTION TO GROUPS

Subscription (Rs.) No. of SHG Members Percentage 5 68 31.5 10 139 64.4 No 9 4.2 Total 216 100 Source: Primary Data

It is seen that 139respondents pay Rs.10 per month towards subscription, while 68 respondents pay Rs.5. no subscription is collected from 9 respondents. It is revealed by the respondents that the collected of subscription vary according to the rules of their respective SHGs.

CONTRIBUTORY SAVINGS

SHGs promotes saving habits among its members by asking them to contribute voluntarily towards group savings. Out of this contributed savings the groups lend the required loan amount to the members. In the SHG concept, the savings of members are supposed to be deployed towards internal lending amongst the group members. Regular saving by group members is among the

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core principles of SHGs. The study observed that group members were generally adhering to the saving principle in all the SHGs.

The very concept of SHG insists the member to contribute their savings to complement the capital based of the SHG. The following table shows the savings per month contributed by the respondents to the groups.

TABLE – 5.16

DISTRIBUTION OF THE RESPONDENTS BY THEIR CONTRIBUTORY SAVINGS PER MONTH Savings (Rs.) No. of SHG Members Percentage Nil 12 5.6 50 5 2.3 100 39 18.1 150 1 0.5 250 67 31 300 92 42.6 Total 216 100 Source: Primary Data

It is seen from the table that 42.6 per cent of the respondents contributed Rs.300 towards group’s savings and 31 per cent of the respondents contributed Rs.250. The contribution by 18.1 per cent was Rs.100 per month. In the case of 2.3 per cent of the respondents, the amount was Rs.50 and only one respondent contributed Rs.150. No savings was reported by 5.6 per cent of the respondents. It was observed that the group savings acted as a source of strength and confidence for the members. Several members, during their interactions with the investigator, expressed pride and happiness at the savings habit that they developed as a result of their becoming members of SHGs. The accumulated savings possessed by the SHG in their accounts were in many cases of an amount that they had never imagined would be possible in their lifetime.

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STATUS IN THE GROUP

The status of members in the SHGs shows their experience and leadership qualities. The following table presents the various statuses of the members in the groups.

TABLE – 5.17

DISTRIBUTION OF RESPONDENTS BY THEIR STATUS IN THE GROUP

Status No. of SHG Members Percentage Head 17 7.9 Asst. Head 9 4.2 Member 190 88 Total 216 100 Source: Primary Data

There are three types of status in the structure of SHGs. It is seen that 17 respondents act as the head of the groups, while 9 are functioning as assistant head. The study reveals that 190 respondents are being the members of the groups.

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REMUNERATION FOR HEADSHIP

By participating and functioning as heads and assistant heads in the SHGs, the members can also earn income through the remuneration given by the NGOs for their leadership services.

TABLE – 5.18

REMUNERATION FOR HEADS AND ASSISTANT HEADS

Remuneration (Rs.) No. of Heads and Assistant Heads Percentage 1000 3 11.53 2500 4 15.38 3000 3 11.53 Nil 16 61.53 Total 26 100

Source: Primary Data

It can be noticed from the table that 10 respondents are being given remuneration. Among the 10 respondents, 3 were paid Rs.3000, 4 respondents were paid Rs.2500 and Rs.1000 is the remuneration earned by 3 respondents. The practice of giving the remuneration to the leaders is not followed by all SHGs.

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MEMBERSHIP IN SHGs

The following table details the distribution of respondents by their membership in SHGs.

TABLE – 5.19

DISTRIBUTION OF RESPONDENTS BY THEIR MEMBERSHIP IN SHGs

Number of Groups No. of SHG Members Percentage One 179 82.9 More Than One 37 17.1 Total 216 100 Source: Primary Data

It is found that 37 respondents are being members in more than one group. When same members enjoy membership in more than one SHG they take large share of available credit excluding others. Secondly those members borrow beyond their repaying capacity which increases their debt burden.

AN ANALYSIS OF BORROWING BY SHGs MEMBERS

Borrowers in the micro credit market can avail loan through certain modes of loan disbursal group loan, bank loan; NGO loan, Revolving fund and Non-SHG loan are some modes in practice in the study area. Analysis of borrowing by the respondents through these modes is given in the following section.

TOTAL AMOUNT OF THE LOANS FROM THE GROUP

The lending capacity of SHGs depends on the contributed saving by the members. The members of the SHGs are eligible to get loan from the SHGs. The savings of the SHGs can be rotated among the group members at minimum

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interest. The rate of interest and the number of instalment for repayment of loan are decided in the meeting of the SHGs. The loan amount may be utilized by the members for their urgent needs like medical care, education of the children and income generating activities.

The total amount of the loans borrowed by the 161 sample respondents is presented in the following table. The SHGs in which the respondents are members, gave loan up to Rs.60000.

TABLE – 5.20

DISTRIBUTION OF THE RESPONDENTS BY THEIR TOTAL LOAN BORROWED FROM THE GROUP Amount of Loan (Rs.) No. of SHG Members Percentage Below 15000 119 55.1 15000-30000 38 17.6 30000-45000 3 1.4 45000-60000 1 0.5 Nil 55 25.5 Total 216 100 Source: Primary Data

The data revealed that 119 respondents borrowed less than Rs.15000 from the groups and 38 respondents were given loans between Rs.15000 to Rs.30000. Only 4 respondents borrowed loans between Rs.30000 to Rs.60000. it is observed from the study that the loan amount mentioned by the respondents reflects to the loan which they borrow from the date of joining the groups. As revealed by the respondents they used to borrow more than one time from the groups.

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LOANS FROM THE GROUP DURING THE STUDY PERIOD

The following table shows the loan borrowed by the 161 respondents during the study period.

TABLE – 5.21

DISTRIBUTION OF THE RESPONDENTS BY THEIR LOAN BORROWED FROM THE GROUP DURING THE STUDY PERIOD

Amount of Loan (Rs.) No. of SHG Members Percentage Below 5000 31 14.4 5000-10000 93 43.1 10000-15000 35 16.2 15000-20000 2 0.9 Nil 55 25.5 Total 216 100 Source: Primary Data

As can be seen from the table that 93 respondents borrow between Rs.5000 to Rs.10000 and 35 respondents got between Rs.10000 to Rs.15000 in the study period 2010-2011. Less than 5000 were borrowed by 31 respondents and the remaining 2 respondents got between Rs.15000 to Rs.20000.

RATE OF INTEREST ON GROUP LOAN

One of the important benefits from the SHGs is the availability of loans at cheap rate of interest. When compared with the other sources of loan like NGOs and money lenders, the loan from SHGs cost lesser burden to the rural poor. SHGs lend loans to the members out of the saving amount contributed by the members to the group every month. It is interesting to note that the rate of

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interest charged on the loans given by the SHGs is collected and distributed among the members at the end of every year. Therefore it is beneficial for the members.

The following table details the rate of interest paid by the respondents to the loans from their groups.

TABLE -5.22

DISTRIBUTION OF RESPONDENTS BY RATE OF INTEREST PAID ON GROUP LOAN Interest Rate (per cent) No. of SHG Members Percentage 24 160 99.4 25 1 0.6 Total 161* 100 Source: Primary Data

* Remaining 55 respondents did not avail group loan

The above table shows that nearly 75 per cent of the respondents borrowed loans from SHGs. They pay 24 to 25 percentage of rate of interest per annum for their loans. There is no need to give any security for getting loans.

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REPAYMENT PERIOD OF GROUP LOAN

The table details the loan repayment period by the respondents to the SHGs.

TABLE -5.23

REPAYMENT PERIOD OF GROUP LOAN Repayment Period No. of SHG Members Percentage 4 Months 2 1.24 5 Months 9 5.59 6 Months 3 1.86 7 Months 1 0.62 10Months 127 78.88 12Months 19 11.8 Total 161* 100 Source: Primary Data * Remaining 55 Respondents Did Not Avail Group Loan

Out of the 161 members who borrowed loans from the SHGs, 127 respondents had to repay their loans within 10 months and 19 respondents had to repay within one year. The remaining 15 members had repayment period between 4 months to 7 months as shown in the table.

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LOAN REPAYMENT

Regular repayment of loan in time reflects the members economic status and thereby their repaying capacity. Prompt and timely repayment of loans has for long been considered the hallmark of lending to SHGs. Several studies have highlighted that repayment in loans granted to SHGs has exceeded 90 to 95 per cent. This aspect was also examined during the course of the study.

TABLE – 5.24

DISTRIBUTION OF THE RESPONDENTS BY THEIR LOAN REPAYMENT

Respondent Status No. of SHG Members Percentage No Default 216 100 Default 0 0 Source: Primary Data

Compulsory collection of loan dues in every week or month by the SHGs ensures prompt repayment by the members. When asked about the repayment by the members to the banks and NGOs from which they borrow through SHGs, all the respondents replied positively. This makes the SHG – Bank linkage programme successful. The SHG savings and recovery performance has been very good. In fact though these SHGs belong to informal sector, still their recovery performance for the loan availed both from the formal sector banks and from the groups has been very encouraging. Hundred per cent loan repayment by the sample respondents in the study area clearly establishes the social capital theory that organizing borrowers into groups who pledge joint liability for each

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other´s loans (social collateral) has been the chief mechanism to ensure repayment on unsecured loans to the poor.

PREFERENCE FOR THE SOURCES OF LOAN

The following table presents the preference of the sample respondents for getting the loans from difference sources. There are many sources of getting loans to the rural people like money lenders, co-operative banks, commercial banks, NGOs and SHGs.

TABLE – 5.25

DISTRIBUTION OF RESPONDENTS BY THEIR PREFERENCE FOR SOURCE OF GETTING LOAN

Preference No. of SHG Members Percentage Bank 142 65.7 NGO 74 34.3 Total 216 100 Source: Primary Data

The rate of interest, easy availability of credit and the procedures adopted during the loan process influence the borrowers preference of a particular source. Among the various sources the sample respondents showed their preference for loans from banks and NGOs. It is seen from the table that 142 respondents preferred nationalized commercial banks and 74 preferred NGOs for getting loans.

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LOAN FROM NGO

The distribution of respondents who availed loans from NGOs is presented in the following table. Though the NGOs play a significant role in the formation of SHGs, the group members do not prefer to get loan from NGOs as the interest rate is high.

TABLE – 5.26

DISTRIBUTION OF THE RESPONDENTS BY THE LOAN FROM NGO

Loan from NGO No. of SHG Members Percentage

No 204 94.4

Yes 12 5.6

Total 216 100

Source: Primary Data

It is observed from the study that majority of the respondents (94.4 per cent) did not have any loan transaction with NGOs. Only 5.6 per cent respondents availed loans from NGOs. This is due to the fact that most of the NGOS functioning in the study area do not involve directly in the loan transactions and the groups are directed by the NGOs to approach the commercial banks. It is to be noted that even though 34.3 per cent of the respondents prefer to borrow from the NGOs, as noted in the table 5.25, they could not get from NGOs due to the above fact.

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TOTAL LOAN AVAILED FROM THE NGO

The following table shows the total loan availed by the members from the NGO from the date of joining the SHGs. The loan amount ranges between Rs. 10,000 to Rs. 32,000.

TABLE – 5.27

DISTRIBUTION OF RESPONDENTS BY THEIR LOAN FROM NGO Loan Amount No. of SHG Members Percentage 10000 1 0.5 10100 3 1.4 17000 2 0.9 20000 2 0.9 30000 3 1.4 32000 1 0.5 Nil 204 94.4 Total 216 100 Source: Primary Data

It is inferred from the study that majority of the respondents do not approach NGOs for loan as the processing fee charged by NGOs along with rate of interest increase the cost of borrowing and put extra Burden to them.

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BENEFITS FROM NGO OTHER THAN LOAN

Since NGOs play a significant role in the formation of SHGs, the benefits accrues to the SHG members from the NGOs are to be studied in order to asses the role of NGOs in the process of economic upliftment of the rural people. NGOs provide variety of service like skill related training to the respondents. The following table shows the multiple services rendered by NGOs to the respondents.

TABLE – 5.28

DISTRIBUTION OF RESPONDENTS BY THE BENEFITS FROM NGO OTHER THAN LOAN No. of SHG Benefits Percentage Members Free Eye Check Up 1 0.5 Free Tuition for Children and 72 33.3 Entrepreneurship Development Training Tailoring, Basket Making, Pickles Making and 98 45.4 Gem Cutting Not Availed Any Other Benefits 45 20.8 Total 216 100 Source: Primary Data

The above table indicates that 98 respondents have been given training for tailoring, basket making, pickles making and gem cutting. Free tuition to the member’s children and entrepreneurship development training were availed by 72 respondents. Besides these skilled related training, NGOs also conducts free eye check-up camp.

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TOTAL LOAN AVAILED FROM THE BANKS

SHG has encouraged rural poor to save through group savings. They are at ease in their minds as they can avail funds when they need, without having to pay any collateral. The most important effect has been the escape from the clutches of the money lenders. Pledging on jewelry has also reduced. Thus the SHG- Bank linkage programme has increased the access to credit in the study area.

The following table shows the total loan availed by the members from the commercial bank from the date of joining the SHGs.

TABLE – 5.29

DISTRIBUTION OF THE RESPONDENTS BY THEIR TOTAL LOAN AVAILED FROM THE BANKS Amount of loan (Rs.) No. of SHG Members Percentage 5000 35 16.2 10000 28 13 15000 3 1.4 20000 55 25.5 22000 21 9.7 25000 20 9.3 30000 21 9.7 Nil 33 15.3 Total 216 100 Source: Primary Data

It is found that 25.5 per cent of the respondents have availed Rs.20000 from the bank loans and 16.2 per cent of the respondents have availed Rs.5000. It is reported by 13 per cent of the respondents that they have availed Rs.10000. It is also found that Rs.22000, Rs.25000 and Rs.30000 were borrowed by 21, 20 and 21 respondents respectively. Only 3 respondents have availed Rs.15000 and the remaining 3usedspondents did not get any loan from banks.

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SOURCES OF BANKS LOAN

The following table shows the sources of getting bank loans by the group members.

TABLE – 5.30

DISTRIBUTION OF THE RESPONDENTS BY THE SOURCE OF GETTING BANK LOAN

Sources No. of SHG Members Percentage Group Leaders 129 59.7 NGO 87 40.3 Total 216 100 Source: Primary Data

It is revealed by the 40.3 per cent of the respondents that they used to get loans from commercial banks with the help of NGO. Generally, group members used to approach the banks with the help and guidance of their group leaders and got loans. In this study, 59.7 per cent of the respondents got bank loans with the help of their leaders. Thus, the respondents by joining the groups are able to get the loans from banks easily. Easy availability of credit at the time of their needs makes them to feel happy.

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REPAYMENT PERIOD OF BANK LOAN

The table- 5.31 presents the loan repayment period by the respondents to the nationalized bank. The repayment period vary with the amount of loan borrowed.

TABLE – 5.31

DISTRIBUTION OF THE RESPONDENTS BY THEIR REPAYMENT PERIOD OF BANK LOAN

Repayment Period No. of SHG Members Percentage 10 Months 51 27.86 12 Months 119 65.02 15 Months 2 1.09 20 Months 5 2.73 24 Months 6 3.27 Total 183* 100 Source: Primary Data * Remaining 33 respondents did not avail bank loan

Out of the 216 respondents, 183 members got loan from the banks. Among the borrowed 92.88 per cent repay their loans within 12 months. The remaining 7.12 per cent have repayment period between 15 months to 24 months.

It is inferred from the study that 12 respondents were given huge amount of loan as they repay the loans without any defaults.

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REVOLVING FUND

Revolving fund is provided to SHGs to augment their group corpus and create credit discipline by enhancing their financial management skills. The government of Tamil Nadu has been providing revolving fund to the groups. Once the savings habit has been regularized for a period of six months, the SHGs become eligible for rating. After the process of rating is completed, the SHGs are eligible to receive an amount of Rs.50, 000/- as Revolving Fund Assistance (RFA) from the banks which is expected to be rotated among the members according to their needs, preferably for individual income generating activities. A subsidy of Rs.10, 000/- is provided under the RFA to the SHGs if majority of members belong to Below Poverty Line (BPL) households.

The following table shows the respondents whose groups have availed the revolving fund.

TABLE – 5.32

DISTRIBUTION OF THE RESPONDENTS BY THE REVOLVING FUND SANCTIONED TO THE GROUPS

Revolving found Amount in Rs. No. of SHG Members Percentage Yes 60000 106 49.1 No 0 110 50.9 Total 216 100 Source: Primary Data

It is reported by 102 respondents that their groups were sanctioned with revolving fund. It is to be noted that the groups to which the 106 respondents belongs, have received Rs.60000 from the government of Tamil Nadu as revolving fund.

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DISTRIBUTION ERSTHE REVOLVING FUND

Generally the revolving fund is distributed equally among all the members of the groups. The following table clearly shows the share of 106 respondents in the revolving fund.

TABLE – 5.33

DISTRIBUTION OF THE RESPONDENTS BY THEIR SHARE OF REVOLVING FUND

Share in Revolving No. of SHG R.I. Percentage fund (Rs.) Members (%) 2000 1 0.5 12 2500 4 1.9 12 3000 97 44.9 12 3500 1 0.5 12 5000 1 0.5 12 Nil 112 51.9 12 Total 216 100 Source: Primary Data

From the table it is understood that 97 respondents had a share of Rs.3000 each and 4 respondents were given Rs.2500 as loan from the revolving fund. The highest share of Rs.5000 was given to 1 respondent. They borrowed the amount at 12 per cent rate of interest.

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AVAILING SUBSIDY OF REVOLVING FUND

SHGs in rural areas are provided with revolving fund subsidy. The following table details the no. of respondents’ availed subsidy of revolving fund.

Out of the 106 respondents who got the loan from the revolving fund, 98 respondents availed subsidy for their loans and 8 respondents were not given subsidy.

TABLE – 5.34

DISTRIBUTION OF THE RESPONDENTS BY SUBSIDY AVAILED FROM REVOLVING FUND

No. of SHG Subsidy Amount in Rs. Percentage Members Nil Nil 110 50.9 Yes 10000 98 45.4 No 0 8 3.7 Total 216 100 Source: Primary Data

It is reported by the respondents that each member has been given a subsidy of Rs.10000. By giving subsidy, the government has been reducing the burden of debt of the members.

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TOTAL SUBSIDY FOR THE LOANS

Subsidy reduces the burden of debt and helpful to the group members who borrow loans from the groups, banks and NGOs. The following table details the total amount of subsidy received by the members for their loans.

TABLE- 5.35

DISTRIBUTION OF THE RESPONDENTS BY THEIR SUBSIDY AVAILED ON LOANS

Subsidy on loan (Rs.) No. of SHG Members Percentage

400 24 11.1

450 5 2.3

500 8 3.7

520 4 1.9

800 5 2.3

No 170 78.7

Total 216 100

Source: Primary Data

It is indicates that majority of the respondents 78.7 per cent of the respondents did not receive any subsidy and only 21.3 per cent avail subsidy. As seen from the table that 24 member’s availed subsidy of Rs.400 each and 5 respondents got Rs.800 each. It is found that 17 respondent’s availed subsidy of between Rs.450 to Rs.520.

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UTILIZATION OF LOAN

The following table presents the multiple usages of the loan that has been availed by the members. The utilization of loan assumes importance and determents the economic success of the respondents.

TABLE- 5.36

DISTRIBUTION OF RESPONDENTS BY THEIR UTILIZATION OF LOAN No. of SHG Utilization Of Loan Percentage Members Durable Consumer Goods 23 10.6 Education 34 15.7 Family Function, Festival Expenses, 12 5.5 Medical Expenses Jewels Purchase 17 7.8 Self Employment 103 47.7 Agriculture 4 1.9 Loan Repayment 23 10.6 Total 216 100 Source: Primary Data

It is of considerable interest to study and analyze how the respondents utilized their loan which they got from the SHGs. The emerging pattern of utilization of loan is shown in the above table. As can be observed from the table, out of the 216 respondents (47.7 per cent) utilized the loan for self employment. They started gem cutting, tailoring, basket making, sales idly and dosa, pickles making, and selling sarees and fancy items are the noted self employment started by the respondents. The second most important purpose to

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which loans utilized was the expenditure incurred towards education of their children. 34 respondents (15.7 per cent) used the loan for the purpose of education.

Next important item is the expenditure incurred towards purchasing of jewellery and durable consumer goods like washing machine, mixes, iorn box, and home theater. T.V., refrigerator and grander. It was found from the above table that 17 respondents (7.8 per cent) utilized in jewellery purchase and 23 respondents used the loans which they got from the SHGs to repay the loans which they borrowed from money lenders and commercial banks before joining the SHGs. Poor economic background and low income compiled them to depend on private loans for their families.

As displayed by the table 12 respondents (5.5 percent) used their loans for family functions, festivals and medical expenses. It is interesting to note that only 4 respondents reported to have used the loan for agriculture.

Thus it can be inferred that loans were utilized for self employment by 47.7 per cent respondents and for education by 15.7 per cent respondents. It is true that SHGs has enhanced the living standard, social status and the entrepreneurial skills of the SHGs members.

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BORROWING FROM THE NON-SHGs

Loan borrowed from different sources by the respondents before joining the SHGs indicates their indebtness. They have to pay high rate of interest and to accept the unreasonable conditions affects their financial position much. The following table explains the amount of loan availed by the respondents from Non-SHGs sources.

TABLE – 5.37

DISTRIBUTION OF THE RESPONDENTS BY THEIRNT OROWING FROM THE NON-SHGS Amount loan (Rs.) No. of SHG Members Percentage

Up To 50000 60 27.8

50000-100000 5 2.3

100000-150000 1 0.5

150000-200000 1 0.5

200000-250000 1 0.5

Nil 148 68.5

Total 216 100

Source: Primary Data

From the above table, it is seen that 60 respondents availed loans up to Rs.50000 and 5 respondents had borrowed between Rs.50000 to Rs.100000. In the case 3 respondents the loan amount ranges between Rs.100000 to Rs.250000.

It is inferred the table that 68.5 per cent of the respondents did not borrow any loans from the Non-SHGs.

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INTEREST RATE OF NON-SHG LOANS

Rural people used to borrow from the money lenders and other private sources to meet the consumption expenditure, expenditure on marriages, religious functions, medical care and children educations. The rate of interest charged by the above sources is very high and swallows a sizable amount of the earnings of rural people. The high cost of repayment affects the standard of living of the rural poor. SHGs provide loans to the members at cheap rate of interest so as to enable them to repay the loans in time and to improve their economic status. The following table clearly shows the different rate of interests paid by the respondents to the Non-SHG.

TABLE – 5.38

INTEREST RATE ON NON-SHG LOAN Rate of Interest (Annual) No. of SHG Members Percentage 18 3 4.54 30 5 7.57 36 30 45.45 42 13 19.69 48 7 10.6 60 8 12.12 Total 66* 100 Source: Primary Data * Remaining 150 respondents did not avail Non-SHG loan

From the above table it is observed that out of the 216 respondents, only 66 respondent’s borrowed loans from non-SHGs sources. Of them, 28 respondents pay rate of interest which ranges between 42 per cent and 60 per cent. They got these loans from the money lenders without any security and 35 respondents pay rate of interest which ranges between 30 per cent and 36 per cent. They mortgage their jewels and used to get loan up to the maximum value of mortgaged jewels (nearer market price). On the other hand, 3

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respondents used to get loan amount lesser than the face value of the jewel at the interest rate of 18 percentage. Therefore it is inferred that discriminatory interest charging practice is prevailing in the case of conventional source of loans.

FAMILY MONTHLY INCOME BEFORE AND AFTER JOINING SHGS

Income is one of the most important indicators of the economic well being of a person. It is the yardstick to measure the standard of living. The respondents were asked about their monthly income before joining the SHGs. To evaluate the pre-SHGs status, the distribution of respondents by monthly income is presented in the following table.

TABLE – 5.39

DISTRIBUTION OF RESPONDENTS FAMILIES BY MONTHLY INCOME BEFORE JOINING SHG

Monthly income (Rs.) No. of SHG Members Percentage below 4000 16 7.4 4000-8000 152 70.4 8000-12000 41 19 12000 - 15000 7 3.2 Above 15000 0 0 Total 216 100 Source: Primary Data

It is observed from the table that there was wide variation in the monthly income in respect of 152 families (70.4 per cent) was between Rs.4000 to Rs.8000 per month. In the case of 19 per cent monthly income was between Rs.8000 to Rs.12000. Only the top 3.2 per cent of respondents’ families could earn income that ensures decent living standard. It is to mention here that 7.4 per cent of respondents’ families could earn only less than Rs.4000 per month. The average monthly income before joining the SHG was Rs.6722.22.

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TABLE – 5.40

DISTRIBUTION OF RESPONDENTS FAMILIES BY MONTHLY INCOME AFTER JOINING SHG Monthly income (Rs.) No. of SHG Members Percentage below 4000 3 1.4 4000-8000 143 66.2 8000-12000 57 26.4 12000-15000 6 2.8 15000 and above 7 3.2 Total 216 100 Source: Primary Data

SHGs contributed significantly in increasing the monthly income of the respondents’ families. SHGs enhance their level of income through the creation of self employment opportunities, low rate of interest and motivation to work. The above table clearly presents that the number of families with the income of less than Rs.4000 per month has fallen to 3 from 16. It is also found that the no. of families who were able to earn Rs.8000 to Rs.12000 had increased to 57 from 41. The no. of who was in the income range of Rs.4000 to Rs.8000 has decreased to 143 from 152. This indicates that the respondents belonging to this range of income have moved to the higher income range. It is interesting to note that 13 families are able to earn above Rs.12000 after joining SHGs. Thus SHGs has positive effects of increasing the income of the rural households. After joining the SHGs, the average monthly income was Rs. 7548.61.

To find there is any significant difference between the income of the SHG members before and after joining SHGs normal distribution test (Z – test) was used. The calculated Z value 213.54 which is more than the table value 1.96 at 5 per cent level of significance. Therefore, it is concluded that there is a significant difference between the income of the SHG members before and after

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joining SHGs. This implies after joining the SHGs the family income of the members has increased significantly. The First Hypothesis states that Joining SGHs results in a significant rise in income of the members. Since the calculated Z- value accepts the first hypothesis, the First Hypothesis is proved.

FAMILY MONTHLY EXPENDITURE BEFORE AND AFTER JOINING SHGS

Family expenditure is a fair indicator of the family economic status. Family expenditure includes expenditure on food, clothing, medical care, fuel, travel expenses, relative family function and entertainment etc. An attempt is made to analyse the monthly family expenditure of the respondent family before and after joining the SHGs, so as to make ac comparative analysis of the impact of SHGs. The distribution of respondent family by their monthly expenditure before and after joining the SHGs is presented in the following table.

TABLE – 5.41 DISTRIBUTION OF RESPONDENTS FAMILIES BY MONTHLY EXPENDITURE BEFORE JOINING SHG Monthly expenditure (Rs.) No. of SHG Members Percentage below 4000 61 28.2 4000-8000 126 58.3 8000-12000 22 10.2 above 12000 7 3.2 Total 216 100 Source: Primary Data

It was reveals that 58.3 per cent of the respondents’ family had their monthly expenses in the range of Rs.4000 to Rs.8000 before joining the SHGs. While 3.2 per cent of the families could have budget of above Rs.12000 and 10.2 per cent had monthly expenses of Rs. 8000 to Rs.12000. The monthly expenditure of 28.2 per cent families was below Rs. 4000. The average monthly family expenditure before joining SHGs stood at Rs. 5488.43.

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TABLE – 5.42

DISTRIBUTION OF RESPONDENTS FAMILIES BY MONTHLY EXPENDITURE AFTER JOINING SHG

Monthly Expenditure (Rs.) No. of SHG Members Percentage

below 4000 36 16.7

4000-8000 136 63

8000-12000 36 16.7

12000-15000 4 1.9

above 15000 4 1.9

Total 216 100

Source: Primary Data

As displayed by the table significant change was found in the monthly expenditure of the respondents’ families after joining SHGs. It is observed that respondents’ families were able to maintain higher living standards in terms of food consumption and the use of articles.

The data clearly shows that after joining the SHGs the number of respondents families how were able to spend Rs. 4000 to Rs. 8000 had increased to 36 from 22. The number of families who spent above Rs. 12000 had increase to 8 from 7. On the other hand the number who spent below Rs. 4000 had declined from 61 to 36. Average monthly family expenditure after joining SHGs was Rs. 6314.81.

The above analysis reveals the positive aspects of SHGs and it increased the economic status of the members. Thus respondents’ families could afford such a pattern of expenses mainly due to the SHGs.

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To find there is any significant difference between the monthly expenditure of the SHG members before and after joining SHGs normal distribution test (Z – test) was used. The calculated Z value 196.76 which is more than the table value 1.96 at 5 per cent level of significance. Therefore, it is concluded that there is a significant difference between the monthly expenditure of the SHG members before and after joining SHGs. This implies after joining the SHGs, the family monthly expenditure of the members has increased significantly. The Second Hypothesis states that there is a significant increase in expenditure as a result of participating in SHGs. Since the calculated Z- value accepts the second hypothesis, the Second Hypothesis is proved.

FAMILY SAVINGS BEFORE JOINING SHGs

Promotion of savings habits among the members is one of the important functions of SHGs. Savings is an indicator of the enhanced well being of the respondents and their family. The following table explains the saving position of the respondents’ family before joining the SHGs.

TABLE- 5.43

DISTRIBUTION OF RESPONDENTS FAMILIES BY MONTHLY SAVINGS BEFORE JOINING SHG Monthly Savings (Rs.) No. of SHG Members Percentage No Savings 157 72.68 Less Than 400 20 9.26 400 – 800 36 hat 7 Above 800 3 1.39 Total 216 100 Source: Primary Data

As displayed by the table that 157 respondents families (72.7 per cent) had no savings on their hands. As majority of the respondents are housewife, they don’t have any source of employment and their family income is insufficient

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so that they are not able to save. As revealed by the 36 respondents that they save Rs.400 to Rs.800 per month, while 3 respondents are able to save above Rs.800 per month. It is reported by 20 respondents that they save less than Rs.400 every months. The average monthly savings of the respondents before join SHGs was Rs.132.41.

The study reveals that majority of the respondents are economically downtrodden and they don’t have sufficient income to save.

FAMILY SAVINGS AFTER JOINING THE SHGs

It is observed from the saving that SHGs resulted in highly positive attitudes among the members towards saving. Despite the raising cost of living due to inflation the members were able to save a part of their earnings. It is found that the number of families who saved nothing has come down to 73 from 157 after becoming members in the SHGs. It is seen that 53 respondents’ families save between Rs.500 to Rs.1000 per month and 26 respondents’ families save between Rs.1000 to Rs.1500 per month. It is reported by 56 respondents that they have the capacity to save less than 500 every month. The monthly savings of 8 respondents ranges between Rs.1500 to Rs.2000. The following table explains the saving position of the families after joining SHGs. The average monthly savings of the respondents after joining as SHGs member was Rs. 464.12.

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TABLE- 5.44

DISTRIBUTION OF RESPONDENTS FAMILIES BY MONTHLY SAVINGS AFTER JOINING SHG Monthly savings (Rs.) No. of SHG Members Percentage

Nil 73 33.8

below 500 56 25.92

500 – 1000 53 24.54

1000 – 1500 26 12.04

1500 – 2000 8 3.7

Total 216 100

Source: Primary Data

To find there is any significant difference between the monthly savings of the SHG members before and aoini joining SHGs normal distribution test (Z – test) was used. The calculated Z value 194.21 which is more than the table value 1.96 at 5 per cent level of significance. Therefore, it is concluded that there is a significant difference between the monthly savings of the SHG members before and after joining SHGs. This implies after joining the SHGs, the family monthly savings of the members has increased significantly. The Third Hypothesis states that savings of the SHG members has increased after joining the SHGs. Since the calculated Z- value accepts the third hypothesis, the Third Hypothesis is proved.

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To assess the relationship between family income and expenditure pattern of the respondents before joining as SHGs members the regression model was used.

Adjusted R Std. Error of the Model R R Square Square Estimate

1 .978 .956 .955 506.309

ANOVA

Model Sum of Squares Mean Square F Sig.

Regression 5.975E8 5.975E8 2.331E3 .000

Residual 2.769E7 256349.161

Total 6.252E8

Coefficients

Unstandardized Standardized Coefficients Coefficients Model t Sig. Std. B Beta Error

(Constant) -1001.218 145.905 -6.862 .000

Family Income before joining 1.052 .022 .978 48.280 .000 SHGs

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The above statistical inference reveals that there is a positive correlation between family income and expenditure pattern of the respondents before joining SHGs. The t – test result also confirms that the correlation is significant.

The following statistical inference indicates the relationship between family income and savings pattern of the respondents before joining as SHGs members.

Adjusted R Std. Error of the Model R R Square Square Estimate

1 0.118 0.014 0.005 217.947

ANOVA

Sum of Model Mean Square F Sig. Squares

Regression 72088.512 72088.512 1.518 .221

Residual 5130093.307 47500.864

Total 5202181.818

Coefficients

Unstandardized Standardized Coefficients Coefficients Model t Sig. B Std. Error Beta

(Constant) 39.713 62.806 .632 .529

Family Income before joining .012 .009 .118 1.232 .221 SHGs

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The statistical inference reveals that there is a low positive correlation (1.4 per cent) between income and savings pattern of the respondents before joining as SHGs members. The t – test also confirms the relationship.

To assess the relationship between family income and expenditure pattern of the respondents after joining as SHGs members the regression model was used.

Adjusted Std. Error of the Model R R Square R Square Estimate

1 .982 .965 .964 422.676

ANOVA

Model Sum of Squares Mean Square F Sig.

Regression 5.278E8 5.278E8 2.955E3 .000

Residual 1.929E7 178654.780

Total 5.471E8

Coefficients

Unstandardized Standardized Coefficients Coefficients Model t Sig. B Std. Error Beta

(Constant) -5.349 133.853 -.040 .968

Family Income After joining .937 .017 .982 54.356 .000 SHGs

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The above statistical inference reveals that there is a high positive correlation (96.5 per cent) between family income and expenditure pattern of the respondents after joining SHGs. The percentage is comparatively St more than the R2 value of the respondents before joining the SHGs.

The following statistical inference indicates the relationship between family income and savings pattern of the respondents after joining as SHGs members.

Adjusted R Std. Error of Model R R Square Square the Estimate

1 .138 .019 .010 394.795

ANOVA

Sum of Model Mean Square F Sig. Squares

Regression 328715.546 328715.546 2.109 .149

Residual 1.683E7 155863.114

Total 1.716E7

Coefficients

Unstandardized Standardized Coefficients Coefficients Model t Sig. B Std. Error Beta

(Constant) 229.134 125.023 1.833 .070

Family Income after .023 .016 .138 1.452 .149 joining SHGs

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The statistical inference reveals that there is a low positive correlation (1.9 per cent) between income and savings pattern of the respondents after joining as SHGs members. This R2 value is slightly more when compare to the R2 value of the respondents before joining SHGs. The t – test also confirms the relationship.

The average monthly income before joining SHGs was Rs.6722.22 which has increased to Rs.7548.61 after joining SHGs. The average monthly expenditure before joining SHGs was Rs. 5488.43 which has increased to Rs.6314.81after joining SHGs. Similarly, the average monthly savings before joining SHGs was Rs.132.41 and it has increased to Rs.464.12 after joining SHGs.

The mean values and statistical inferences prove that after joining SHGs the respondents economic conditions have improved.

UTILIZATION OF SAVINGS

Savings accumulated is an indicator of improved economic status of the respondents after joining the groups. When the respondents are asked how they utilized their savings, 41 respondents invested their savings for the purchase of jewellary. Usefulness at the time of need and a source of finance were identified as the reasons for using their savings on the purchase of jewellary.

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TABLE – 5.45

DISTRIBUTION OF RESPONDENTS BY THEIR UTILIZATION OF SAVINGS Utilization Of Savings No. of SHG Members Percentage Purchase of Bullocks 4 1.9 Education 12 5.6 Fixed Deposit 27 12.5 Family Expenditure 18 8.3 Investment in Business 41 19 Purchase of Jewellery 38 17.6 Insurance Policy 3 1.4 Loan Repayment 3 1.4 T.V., D.V.D & Two Wheeler 3 1.5 No 67 31 Total 216 100 Source: Primary Data

Notably 27 respondents kept their savings with commercial bank in the form of fixed deposits which ensures a fixed return and 3 respondents have taken life insurance policy. As displayed by the table 12 respondents used their savings for loan repayment. It is also found that 18 respondents have used the savings towards family expenditure and 3 purchased DVD and two wheeler. Only 4 utilized the savings for buying bullocks for agriculture purpose.

SELF EMPLOYMENT THROUGH SHGs

The SHG members apart from being a member have also facilitated by various agencies to undergo several training particularly on self-employment activities, the rules and principles to be followed etc. Thanks to the NGOs and also the SHG members who have not only become the members but also undertook several training to uplift their status and engage in some kind of

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activities or the other. The following table details the various businesses run by the self employed respondents. It is found that basket making business is run by 8 respondents, plumbing and electrical works by 10 respondents, tailoring by 22 respondents and sarees sales by 10 respondents.

TABLE – 5.46

DISTRIBUTION OF RESPONDENTS BY THEIR SELF-EMPLOYMENT BUSINESS

Business No. of SHG Members Percentage Nil 113 52.3 Basket Maker 8 3.7 Chicken Shop 4 1.9 Embroider 4 1.9 Fancy Store, Sarees Sales 4 1.9 Flour Mill 3 1.4 Jewel Maker 6 2.8 Grocery Shop 4 1.9 Money Lender 4 1.9 Pickles & Vathal Making 4 1.9 Plumber & Electrician 10 4.6 Rice Mill 8 3.7 Sale of Idly, Dosa & 4 1.9 Vadai Sarees Sales 10 4.6 Sheep 8 3.7 Tailoring 22 10.2 Total 216 100.0 Source: Primary Data

It is found that chicken shop (4), embroider (4), fancy store (4), flour mill (3), jewel making (6), grocery shop (8), pickles and vathal making (4), rice mill (8), sale of idly and dosa and sheep roaring (8), are the other self employment business run by the respondents.

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TYPE OF BUSINESS

SHGs are helpful not only in promoting entrepreneurial skills through self employment but also develop partnership business among its members.

TABLE – 5.47

DISTRIBUTION OF RESPONDENTS BY THEIR TYPE OF BUSINESS

Type No. of SHG Members Percentage Individual 98 45.4 Partner 5 2.3 Total 103* 100 Source: Primary Data * Remaining 113 respondents have not self employment

It is seen from the above table that out of the 103 respondents who are self employed, 5 self employers run their business on partnership business.

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OWN INVESTMENT OF SELF EMPLOYMENT

To a question, whether the respondents had invested their own money for their business after joining SHGs, 72 self employment respondents responded positively. It is found that 31 respondents did not invest their own money. They have been operating their business only by availing loans from the SHGs. The following table gives the distribution of respondents by their own investment.

TABLE- 5.48

OWN INVESTMENT Investment (Rs.) No. of SHG Members Percentage below 10000 46 44.66 10000-50000 19 18.44 50000-100000 4 3.88 100000-120000 3 2.91 No 31 30.09 Total 103* 100 Source: Primary Data * Remaining 113 respondents have not self employment

It is seen from the table that 46 respondents had invested less than Rs.10000 in their business. The investment put by 19 members was between Rs.10000 to Rs.50000 and 4 respondents used between Rs.50000 to Rs.100000. As their business requires huge amount of investment and the loan amount given by the groups is not sufficient, they have to make use of their own finance. It can be seen from the table 3 respondents invested between Rs.100000 to Rs.120000 in their business.

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WORKERS IN THE SELF EMPLOYMENT

It is found that out of the 103 respondents who are self employed, 75 respondents run their business on their own without employing any labour. The remaining 28 respondents employ some workers in their business.

TABLE- 5.49

EMPLOYMENT OF WORKERS IN THE BUSINESS

Employment of Workers No. of SHG Members Percentage

No 75 34.7

Yes 28 13

Total 103* 100

Source: Primary Data

* Remaining 113 respondents have not self employment

Thus SHGs not only promotes self employment but also create employment opportunities to the rural workers.

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COST OF LABOUR

The following table present the labour cost incurred by the 28 self employed respondents.

TABLE – 5.50

DISTRIBUTION OF RESPONDENTS BY THEIR LABOUR COST Labour cost (Rs.) No. of SHG Members Percentage Nil 75 72.81 1800 4 3.88 2000 9 8.73 4000 5 4.85 6500 5 4.85 7000 5 4.85 Total 103* 100 Source: Primary Data * Remaining 113 respondents have not self employment

As shows by the table –5.50 that the cost of labour incurred by the self employed respondents ranges between Rs.1800 to Rs.7000. The wage costs vary according to the nature of work and the number of work days.

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MONTHLY INCOME FROM SELF EMPLOYMENT

SHGs have yielded a favourable impact on its members in terms of promoting entrepreneurial skills. With the help of SHGs the members gain training and financial help through loans which enable them to hope for a protective self employment. The following table present the monthly income earned from their self employment.

TABLE – 5.51

DISTRIBUTION OF RESPONDENTS BY MONTHLY INCOME FROM SELF-EMPLOYMENT Monthly income (Rs.) No. of SHG Members Percentage

1000-3000 58 56.31

3000-6000 23 22.33

6000-9000 17 16.5

9000-12000 5 4.85

Total 103* 100

Source: Primary Data

* Remaining 113 respondents have not self employment

The study reveals that out of the 216 respondents selected for the study, 103 respondents started self employment. It was reported by 58 respondents that they earn income of Rs. 1000 to Rs.3000 from their business, while 23 respondents earn between Rs.3000 to Rs.6000. The income of 17 respondents is Rs.6000 to Rs.9000 and 5 respondents are able to earn between Rs.9000 to Rs.12000.

The self employment started by the respondents will not only help them but also brings benefits to their village in future.

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REGISTRATION OF BUSINESS

The following table presents the registration status of the business run by the self employed respondents.

TABLE – 5.52

REGISTRATION OF SELF EMPLOYMENT BUSINESS

Registration of Business No. of SHG Members Percentage

Yes 7 6.79

No 96 93.2

Total 103* 100

Source: Primary Data

* Remaining 113 Respondents Have Not Self Employment

When the respondents were asked about registration of their business, the overwhelming majority (96 out of 103) of the respondents reported negatively. But only 7 have registered their business.

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PROBLEMS FACED BY THE SELF EMPLOYED

Out of the 103 self employment respondents, 82 respondents had been facing many problems in running their business. The following table details the problems.

TABLE – 5.53

DISTRIBUTION OF SELF EMPLOYED RESPONDENTS BY THEIR PROBLEMS Problems No. of SHG Members Percentage Credit 16 15.53 Labours, Raw Materials 5 4.85 Power 4 3.88 Power and Labours 7 6.79 Price Difference 1 0.97 Price Fluctuation of Marketing 4 3.88 Price Fluctuation of Raw Material 9 8.73 Raw Materials 12 11.65 Raw Materials, Marketing 5 4.85 Seasonal Change 15 14.56 Theft and Seasonal Change 4 3.88 No 21 20.38 Total 103* 100 Source: Primary Data * Remaining 113 respondents have not self employment

It is reported by 16 respondents that lack of credit is the main problem and 15 respondents cited seasonal change as their problem. Raw material is the same problem to 12 respondents and marketing and raw materials are the problems to 5 respondents. Price fluctuation of raw materials was cited by 9 respondents, price deference by 1 respondent power and labours by 7 respondents.

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It is also found that 4 respondents had the problem of power, 5 had problem of raw material and labour and theft and the seasonal change was cited by 4 respondents.

LOAN REPAYMENT FROM SELF EMPLOYMENT

Though the SHGs help the members to carryout self employment the success can be measured only in terms of repayment of loan by the respondents their self employment. The following table reveals that out of the 103 members, 99 responded positively that they are able to repay the loan from their self employment income.

TABLE- 5.54

DISTRIBUTION OF RESPONDENTS BY LOAN REPAYMENT FROM SELF EMPLOYMENT

Loan repayment No. of SHG Members Percentage

Yes 99 45.84

No 4 1.85

Total 103* 100

Source: Primary Data

* Remaining 113 respondents have not self employment

The remaining 4 members revealed that the income from self employment is not sufficient to repay the loan and repayment of loans is made with the help of other sources of income.

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EDUCATIONAL LOAN FROM SHGS

It is observed from the survey that the group members have highly positive attitudes towards their children educations. Their children were sent to nursery and matriculation schools. They understood the importance of education as they felt that their poor financial status should not affect the aspiration of their children to acquire education. SHGs are helpful to them by giving educational loan from commercial bank. This attitude may increase the enrolment of children in school. The distribution of respondents to availed educational loan from SHGs is given in the following table.

TABLE – 5.55

DISTRIBUTION OF THE RESPONDENTS BY THE EDUCATIONAL LOAN FROM SHG

Educational Loan No. of SHG Members Percentage

Yes 184 85.2

No 32 14.8

Total 216 100

Source: Primary Data

It is found from the survey that majority of the respondents (85.2 per cent) got educational loans with the help of their groups.

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IMPROVEMENT OF ECONOMIC CONDITION AFTER JOINING SHGs

SHGs can bring improvement on the economic upliftment of individual and his family. The economic upliftment can be felt in terms of higher income, an increase in consumption expenditure, more savings, self employment opportunities, acquiring skill and training and improved living standard. The loan borrowed from the groups and its proper utilization determents the economic status of the respondents.

TABLE – 5.56

DISTRIBUTION OF RESPONDENTS BY THEIR VIEW ON IMPROVEMENT OF ECONOMIC CONDITION

Improvement of Economic Conditions No. of SHG Members Percentage

Yes 216 100

Source: Primary Data

Regarding the improvement of economic condition of respondents’ family after joining SHGs, it is observed from the following table that all the respondents were unanimous in their views. They revealed that the economic condition of their family had been improved.

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CHAPTER VI

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

CHAPTER – VI

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

In the previous chapter inferences drawn on the basis of an analysis of the tabulated data were presented. Along with an elucidation of data, quantitative tools were employed to test the hypotheses of the study. The study has analyzed and quantified the economic upliftment of the downtrodden people in the study area. This chapter presents a summary of important findings, suggestions based on the findings and conclusion.

6.1 FINDINGS OF THE STUDY

™ An analysis of the socio economic characteristics of SHG members revealed that they were from the socially and economically weaker sections. 79.6 per cent of the respondents were from the backward community and scheduled caste which constitutes 15.3 per cent. Only 5.1 per cent are from scheduled tribe. The study supports the general trend in India that women have predominated role in the SHG Programme. It is found from this study that 66.7 per cent of the sample respondents are female. The participation of men in SHGs is gaining momentum in rural areas particularly in the study area with the participation of 72 men.

™ Most of the SHG’s members were under the age of 40 years. The study reveals that 87.5 per cent of the respondents are married. More than half of the respondents had 4-5 members in their family. While 27.8 per cent had below 3 members in their family. Majority of the respondents belong to Hindu religion and 73.1 per cent respondents are living in nuclear family.

™ Majority of the SHG member were educated. The number of illiterate among the respondents is only 15. Noticeably 16 among them were graduates and 6 had B.Ed. degree and 2 possessed diploma qualification.

™ The females outnumbered the male in participating in the decision making process in their families. When infused with confidence and sense of

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belonging to the group, it has been found that women often would show better results than men.

™ Friends and relatives played a major role in group formation. 127 joined the groups through their friends and 60 of them through their relatives. This shows the fraternity and friendship of the people in the study area.

™ It is seen that 139 respondents pay Rs.10 per month towards subscription, while 68 respondents pay Rs.5 and no subscription is collected from 9 respondents. It is revealed by the respondents that the collection of subscription vary according to the rules of their respective SHGs.

™ Regarding the sources of getting bank loan, 59.7 per cent of the respondents got bank loans directly with the help of their leaders and 40.3 per cent of the respondents used to get loans from commercial banks with the help of NGO

™ More than half of the respondents have experience of above 3 years. 37.5 per cent of the respondents have had more than 6 years of the experience as members and 25.9 per cent of the respondents got 3 to 6 years of the experience. The remaining 36.5 per cent have 1 to 3 years of experience in the SHGs. 37 respondents are being members in more than one group. It is observed from the study that members with more experience create awareness among the poor about the advantage of SHGS.

™ The study revealed that only 7.9 per cent respondents act as the head of the groups, while 4.2 per cent respondents are functioning as assistant head and the remaining are members.

™ Out of the 216 respondents, 190 respondents borrowed less than Rs.15000 from the groups and 38 respondents were given loans between Rs.15000 to Rs.30000. Only 4 respondents borrowed loans between Rs.30000 to Rs.60000. It is observed from the study that the loan amount mentioned by the

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™ Nearly 75 per cent of the respondents borrowed loans from SHGs. They pay 24 to 25 percentage of rate of interest for their loans. There is no need to give any security for getting loans.

™ It is found that 204 respondents do not approach NGOs for loan as the processing fee charged by NGOs along with rate of interest increase the cost of borrowing and put extra Burden to them. The respondents prefer to get loan from banks and groups. As they are economically downtrodden, they don’t want to bear additional burden.

™ The rate of interest, easy availability of credit and the procedures adopted during the loan process influence the borrowers preference of a particular source. 65.7 per cent respondents preferred nationalized commercial banks and 34.3 per cent respondents preferred NGOs for getting loans. It is observed from the study that NGOs are interested only in group formation and respondents could not get loan directly through NGOs.

™ Compulsory collection of loan dues in every week or month by the SHGs ensures prompt repayment by the members. When asked about the repayment by the members to the banks and NGOs from which they borrow through SHGs, all the respondents replayed positively. This makes the SHG – Bank linkage programme successful.

™ Regarding the sources of getting bank loan, 59.7 per cent of the respondents got bank loans directly with the help of their leaders and 40.3 per cent of the respondents used to get loans from commercial banks with the help of NGO.

™ It is noticed from the study that 183 respondents have borrowed loans from banks which ranges between Rs.5000 – Rs.30000.

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™ 182 members got loan from the banks. Among the borrowed 55.1 per cent repay their loans within 12 months. The remaining 5.6 per cent have repayment period between 15 months to 24 months.

™ Out of the 216 respondents, only 66 respondents borrowed loans from non-SHGs sources. Of them, 28 respondents pay rate of interest which ranges from 42 per cent to 60 per cent. They got these loans from the local money lenders without any security and 35 respondents pay rate of interest which ranges from 30 per cent to 36 per cent. This clearly shows that the rural poor are still under the clutches of moneylenders.

™ Regarding the distribution of revolving fund, Rs.60000 was distributed among the members. It is reported that 97 respondents had a share of Rs.3000 each and 4 respondents were given Rs.2500 as loan from the revolving fund. The highest share of Rs.5000 was given to 1 respondent. They borrowed the amount at 12 per cent rate of interest. Also to be noted that 98 respondent’s availed subsidy for their loans and 8 respondents were not given subsidy.

™ The study revealed that the monthly average income had increased due to the participation in SHG programme. The average monthly income had increased from Rs.6722.22. to Rs.7548.61 after joining the group. Thus the income has increased by Rs.876.39.

™ Similarly their average monthly family expenditure had increased by Rs.826.38 after joining the group. Their family expenditure showed an upward shift from Rs.5488.43 to Rs.6314.81. They enjoy a better standard of living than before.

™ The average monthly savings of the respondents had increased to Rs.464.12 from Rs.132.41 after their participation in the SHG programme. Their saving capacity had increased by Rs.331.71. Thus the role played by SHGs in the economic upliftment of the downtrodden people is proved in terms of increase in income, expenditure and saving of the respondents.

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™ Regarding saving pattern of the respondents, 27 respondents kept their savings with commercial bank in the form of fixed deposits which ensures a fixed return and 3 respondents have taken life insurance policy.

™ Regarding the loan utilization, 47.7 per cent utilized the loan for self employment, 15.7 per cent used the loan for the purpose of education, 7.8 per cent utilized in jewellery purchase and 23 respondents used the loans which they got from the SHGs to repay the loans. Which they borrowed from money lenders before joining the SHGs. A 5.5 per cent used their loans for family functions, festivals and medical expenses. This shows the consciousness on the part of respondents in avoiding luxurious and unproductive expenditure. It is also noticed that majority of them don’t have the practice of borrowing loan to repay the loan.

™ Training promotes entrepreneurial skill and provides ample opportunities for self employment. 98 respondents have been given training for tailoring, basket making, pickles making and gem cutting. Free tuition to the member’s children and entrepreneurship development training were availed by 72 respondents. Besides these skilled related training, NGOs also conducts free eye checkup camp. Thus training and skill improvement is the tangible benefit of SHGS.

™ SHG acts as instrument in motivating the unemployed youths to stand on their own legs by starting self employment. It is found that 103 respondents became self employed after joining SHGS. It was reported by 58 respondents that they earn income of Rs.1000 to Rs.3000 from their business, while 23 respondents earn between Rs.3000 to Rs.6000. The income of 17 respondents is Rs.6000 to Rs.9000 and 5 respondents are able to earn between Rs.9000 to Rs.12000.

™ It is also observed from the study that out of the 103 self employed respondents, 99 respondents repay their loans from their self employment

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income. Only 4 self employed respondents felt that the income is insufficient to repay the loans and they used to depend on other sources of income to repay.

™ The study reveals that SHGs brought many benefits to the members who were seen in terms of income, consumption expenditure, savings, leadership qualities, entrepreneurial skills, decision making power and self employment opportunities. Regarding the improvement of economic condition of respondents’ family after joining SHGs, all the respondents were unanimous in their views. They revealed that the economic condition of their family had been improved.

6.2 SUGGESTIONS

The following suggestions and recommendations have been made based on the findings of the study.

The study found that the participation of bachelors in the SHG programme is very minimum. Efforts should be made to include the bachelors in large number as they are with lesser commitments and can take entrepreneurial responsibilities.

The study noticed that even though maximum members are Hindus the participation of scheduled caste and scheduled tribes population is very low. Therefore it is suggested that awareness programmes should be conducted among S.C. and S.T. people to educate and encourage them to become SHGs members.

Banks and NGOs should take initiatives to form SHGs among the rural youths who have higher educational qualifications like, graduates, diploma holders so that they can be motivated to start self employment.

Since the study area is predominantly agricultural, more landless agricultural labourers are to be motivated to join SHGs. So that they can be saved from the clutches of local money lenders.

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The study also noticed that half of the respondents became members only because of cheap and easy loan. Therefore the groups should monitor whether the loan is properly and productively used by the members. The SHGs should educate the members to avoid luxurious spending and other unproductive expenses.

It is found that the groups formed by NGOs compelled the members to save huge amount. It may affect the consumption capacity of the members. Therefore it is suggested that the government should regulate the NGOs not to compel the members in this regard.

It is suggested that in order to get larger amount of finance, the NGOs may reduce the rate of interest on loans as the interest rate charged by NGOs is higher than the banks.

NGOs may help SHG in identifying new marketing areas for the products produced by SHGs members.

Efforts should be made by the government to evolve an insurance scheme for the SHGs members.

Government both state and Central should work hand- in -hand to promote the concept of SHG without political biasness and selfish motives taking into account the welfare of the women folk in general by incorporating as an important strategy for women empowerment in the national policy and allocating more grant in the budget and developing effective implementing machinery.

NGOs, Educational Institutions and Social Service organizations etc engaged in the works of promotion and development of SHGs should be encouraged at all levels with sufficient financial grants and appreciation and awards

Banks and other financial institutions should work with open-mind and service motives to promote SHG among women particularly downtrodden

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communities like scheduled caste and scheduled tribes, marginalized groups in order bring them into main stream of development and growth of India

SHG can be encouraged to form cooperative societies to promote Village, Cottage and Other industries in the study area. SHGs should be strictly encouraged to undertake economic activities and income generating activities for sustainable income to the group.

Training may be given on how various government schemes should successfully be implemented to achieve the objective of rural development. Training camps on issues concerning health and legal matters should be organized. There is a need to organize literacy camps, also. Training camps for the SHG members on various topics such as, how to handle the financial matters should be organized

The rapport established crossing the boundaries of class, caste must be used for strengthening the collective interests to create a world without disparities and SHG has really revolutionized in this regard. This must be sustained.

The group must assess whether the members will be able to save a fixed amount out of their earning without foregoing their essential expenditure or borrowing from others.

Proper encouragement to use the SHG products by the state NGOs, group members through customer’s chain would enable to improve the market. Organizing trade airs at regular intervals are to be carried out in the study area to motivate the members in marketing their products.

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6.3 CONCLUSION

Taking the strengths and opportunities, SHGs may be encouraged as a movement and as an institution to facilitate the rural poor to have better access to credit, with larger outreach, create micro entrepreneurs and participate in various community and social affairs and empowered in taking. On the whole it is observed that the impact of SHGS on socio-economic empowerment of rural poor, improving access to credit, improving the saving, family expenditure pattern on food, cloth, consumer durables, etc and above all reducing the transaction cost as against informal lending and also other forms of lending with subsidy component in the study area.

The new millennium has thrown many challenges subjecting many nations to undergo transformation cutting across their established tradition and culture. New issues have to be addressed to effect social and economical progress of our nation. The most important one is economic upliftment of downtrodden people through self help groups. SHGs have undoubtedly begun to make a significant contribution in poverty alleviation and empowerment of poor, especially women in rural areas of our country. The present study found that the downtrodden people in the study area are benefited through SHGs in Lalgudi Taluk, Tiruchirappalli District and the performance of the SHGs was good. If the aforesaid suggestions are carried out by the authorities concerned, the SHGs will further improve the economic upliftment of downtrodden people in the study area.

6.4 SCOPE FOR FURTHER RESEARCH

The following areas are suggested for further research in Self Help Groups

¾ A comparative study on the performance of women SHGs with men SHGs can be undertaken.

¾ A Comparative study of the SHG members with non group members in the study area.

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¾ A study on accessibility to credit and bankability of rural poor by the commercial programs can be undertaken.

¾ SHG Shave to be viewed from a long-term perspective, which underlines the need for deliberate policy implications in favour of assurance in terms of technology back-up, product market and human resource development. Hence, there is a need for the development of an innovative and diversified microfinance sector based SHG which will make a real contribution to economic empowerment o the downtrodden people.

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ANNEXURE

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Singh U.B, Himmat Singh and Gurnam Singh, “Role of Self-Help Groups in the Shiwalik Foothills of Haryana”, Indian Journal of Agriculture Economic, Vol.56, No.3, Pp.481, July-September 2001.

Singh V.K. et al. "A Study on the Working and Impact Self Help Groups in Hisar, Districts of Haryana" Indian Journal of Agricultural Economics 56:3:2001: 478.

Srinivasan, et al. "Financial performance of Rural and Urban Self-Help Groups – A Comparative Analysis.” India Journal of Agricultural Economics 36:2001: 478.

SUSY CHESTON, "Just the Facts, Ma'am": Gender Stories from Unexpected Sources with Morals for Microfinance “ ADA DIALLOGUE, N0 37 May 2007 page 3

Tanmoyee Banerjee, “Economic impact of Self Help Groups – A Case Study,” Journal of Rural Development, Vol. 28 No.(4), PP. 451-467, Hyderabad, 2009.

V. Puhazhendhi & K.L.S. Satyasai “Empowerment of rural women through self helps groups - An Indian experience” National Bank News Review. April -June 2002

Valuraj R. "Self Help Groups an Alternative Approach to Empowerment of Rural Women. Tamil Nadu Journal of Co-operative, 25-29, 2001.

Venkatesh R, “Micro Finance and SHGs”, Catalyst for Rural Transformation. The Indian Journal of Political Science”, Vol. – LXX, No.1, Jan march 2009, P. 137.

News Paper Reports:

The Hindu, "Hopes of SHGs' role in shaping mandate belied", 14 October 2001.

Pratima Joshi , “Maharashtra Times 29/10/04 ”.

The Hindu, “Hopes of SHGs' role in shaping mandate belied", 14 October 2001. As regards to access to and control over resources, it is impossible to disassociate SHGs from gender relations.

Paper Presented In Seminars / Workshops:

Basix Indian Market Research Bureau Hyderabad Impact Assessment Study, 2002.

Credit and Development Forum, CDF Statistics, Microfinance statistics of NGOs and other MFIs, CDF, Dhaka, 1998

CS Reddy APMAS, “Self-Help Groups: A Keystone of Microfinance in India - Women empowerment & social security, October 2005.

Datta, S.K. & Neela Kantan, R., Governance In Micro Finance: The Case Of BASIX, Indian Institute Of Management, Ahmedabad, November, 2004.

Drushti "An Evaluation of Impact of SHG on the Social Empowerment of Women in Maharashtra", 2004.

Drushti "An Evaluation of Impact of SHG on the Social Empowerment of Women in Maharashtra", 2005.

Harper, Malcolm, Promotion Of Self Help Groups Under The SHG Bank Linkage Programme In India, Paper Presented At The Seminar On SHG Bank Linkage Programme At New Delhi On 25th & 26th November, 2002.

ILO, Gender and the Access to Financial Services 1999.

Khandker R. Shahidur, “Savings, Informal Borrowings and Microfinance.” Bangaladesh Development Studies, 26(2and3) (June-September – 2001).

Leelavathy, “SHG is a Cream Layer for Women's Social Status.” Proceedings of National Level Symposium on Self Help Group: A Silent Revolution, Arulmigu Palaniandavar Arts College for Women, Palani, March 2004.

Manimekalai, “Impact Of Various Forms Of Micro Financing On Women”, Department Of Women And Child Development Ministry Of Human Resource Development Government Of India’ 2004

NABARD Annual Report 2011

Pandey Divya, Unpublished, “The Rashtriya Mahila Kosh-An Evaluation Study”, Sponsored By The Rashtriya Mahila Kosh, Ministry Of Human Resources Development, Government Of India, Research Centre For Women's Studies, SNDT University, Mumbai.

Puhazhehdhi. V., “Evaluation Study Of SHG's: Important Findings of Evaluation Study In Tamil Nadu”, Paper Presented In A Workshop, Dated 26-27 August, 1999, BIRD, Lucknow.

Ravichandran, K., and M. Revathibala. "SHGs Access, Use and Repayment of Institutional Credit by Borrowers". In UGC Sponsored National

Seminar Women Empowerment through Microfinance. By the Department of Agricultural Economics. Annamalai University: 2003:64.

Ravichandran, K., and M. Revathibala. "SHGs Access, Use and Repayment of Institutional Credit by Borrowers". In UGC Sponsored National Seminar Women Empowerment through Microfinance. By the Department of Agricultural Economics. Annamalai University: 2003:64.

Senthilvadivoo., et al. "Credit Needs of Rural Poor and the Relative Role of SHGs And other Financial Institution.” In UGC sponsored National Seminar on Women Empowerment through Microfinance, By the Department of Agricultural Economics. Annamalai University: 2003.

Singh, A.K., “Empowering Women: Emerging Leadership in Rural India”, Paper Presented At National Seminar On Role Of Educated Women In Rural Development, Organized By G.P. Pant Institute Of Studies In Rural Development, Lucknow, Dated 17 March, 2002.

Subhasini Muthukrishnan, “Effective Marketing Strategies for Women Self Help Groups.” Proceedings of the State Level Symposium on Socio- Economic Impact of SHG on Women, P.S.G.R. Krishnammal College for Women, Coimbatore, February 2005.

Sundaresan.R. et al. "Credit Needs of Rural Poor: Self Help Groups Role in India in UGC Sponsored National Seminar on Women Empowerment through Microfinance. By the Department of Agricultural Economics Annamalai University: 2003:17-27.

Vengatesan, D., and Santhagovind, "Socio-economic Impact of Self Help Groups of Women Members." In UGC Sponsored National Seminar on Women Empowerment through Microfinance. By the Department of Agricultural Economics, Annamalai University: 2003: 70.

Working Papers:

Basu, Priya & Srivastava Pradeep, “Scaling of Micro Finance for India's Rural Poor”, World Bank (WPS 3646), Delhi.

Ranjula Bali Swani and Maria Flora, “Effect of Micro Finance on Vulnerability, Poverty and Risk in Low Income Households” Department of Economics Uppsala University, Sweden, Working Paper 2007: 31, December 2007.

Toshi Kondo, “ Impact of Micro Finance on Rural households in the Philippines” A case study from the special Evalution Study on the Effects of Micro Finance Operations on Poor Rural households and the status of women, Asian Development Bank, September – 2007.

Books:

Burra Neera, J-Ranadive Joy Deshmukh, & Rajani K. Murthy (Eds.), Micro-Credit, Poverty And Empowerment, New Delhi: Sage Publication Pvt. Ltd., 2005.

Ponna, Wignaraja. “Women Poverty and Resource.” New Delhi: Sage Publication: 1989.

Singh, S.K., & Pandey, S.P., Empowerment Of Scheduled Caste Women Through Self Help Groups, Serials Publications, New Delhi, 2007.

Research Report / Studies:

Binodini Sethi and H.N. Atibudhi, “Micro Finance: An Innovative Tool for Banking with the Unbankables: a Study in Kalahandi District, Orissa, 2001.

Christian Hoegh – Guldberg Huff, “Bridging the Financial Gap to Africa?- a case study concerning online lending services in the battle against poverty” Copenhagen Business School, June 2010.

CS Reddy and Sandeep Manak, “Self Help Groups: A Keystone of Micro Finance in India – Women Empowerment and Security” Mahila Abhivruddhi Society, Andra Pradesh, October 2005.

FINAL REPORT, “Micro Finance and Empowerment of Scheduled Caste Women: An Impact Study of SHGs in Uttar Pradesh and Uttaranchal”, Sponsored by Planning Commission Government of India 2006-2007.

Hishigsuren Gaamaa, “Holistic Approach To Development, Practitioner- Led Impact Assessment Of ASA, The Activists For Social Alternatives (ASA), Tiruchirapalli”, 2000.

MYRADA, “Impact of self help groups (Group processes) on the social/ empowerment status of women members in southern India”.

NABARD, “Ten years of SHG-Bank Linkage: 1992 – 2002” NABARD and Micro Finance, 2002.

National bank for Agriculture and Rural Development, 2002, Impact Assessment study, NABARD, Mumbai, India

NCSW Report, National Perspective Plan for Women, Government of India, Ministry of Human Resource Development, New Delhi, p. 119, 2009.

Putnam, R. “Bowling Alone: The Collapse and Revival of American Community”, New York: Simon & Schuster, 2000.

Putnam, R. “Making Democracy Work: Civic Traditions in Modern Italy”, New Jersey: Princeton University Press 1993.

Rao Divakar P. "Credit Needs of Rural Poor and the Relative Role of SHGs and other Financial Institutions." NABARD Bank: Cuddalore: 2002.

Swati-Bakshi S., Bakshi et al. "Empowering Women through Self Help Groups (SHG): A Case Study.” In tropical Forestry Research: Challenges in the New Millennium on 2-4:238-240, August 2001.

Dissertation:

Kavitha, A. "Self-Help Groups as Microenterprises - A Feasibility Study". Ph.D. Dissertation." Gandhigram Rural Institute, Gandhigram: 2000.

Kurayta, Satoko "Empowerment of Women in Self-Empowerment Programme - A Study to Conceptualize Empowerment." M.A. Dissertation. Michigan State University: 1994.

Web sources:

www.aidindia.org

ECONOMIC UPLIFTMENT OF DOWNTRODDEN PEOPLE THROUGH SELF-HELP GROUPS IN LALGUDI TALUK, TIRUCHIRAPPALLI DISTRICT

STRUCTURED SCHEDULE

1. Name :

2. Age :

3. Sex :

4. Marital Status :

1. Married 2. un-maried 3. Widowed 4. Divorced 5. Separated

5. Religion :

1. Hindu 2. Muslim 3. Christian

6. Community :

1. S.C 2. S.T. 3. B.C. 4. M.B.C 5. O.C.

7. Educational Status :

8. Type of Family :

1. Joint family 2. Nuclear Family

9. Family Size :

10. Occupation of Family Head :

11. Member’s Status in Family :

12. Occupation before joining SHGs :

13. Monthly income of the Family bofore joining SHGs:

14. Reasons for joining SHG :

1. Awareness 2. Training 3. Cheap and Easily Loan 4.Unity 5. Becoming Entrepreneur 6.Savings 7. Others

15. Sources for joining SHGs :

1. Relatives 2. Friends 3. N.G.O. 4. Head of SHGs

16. Name of the SHGs in which your atre a member :

17. Year of joining the Group :

18. Is your group associated with NGOs? :

1. Yes 2. No

19. If yes, Name of NGO?

20. Total members of your groups? :

21. Monthly Subscription to the group?

22. Documents to be submited for joining SHG?

23. Your Status in group :

1. Head 2. Assistant Head 3. Member

24. Salary for headship? :

25. Are you a member in more than one groups? : 1. Yes 2. No

26. Amount of loan borrowed from the group : Rs.

27. Rate of interest for the group loan :

28. Repayment period of group loan :

29. Are you able to repay the loan every month? : 1. Yes 2. No

30. If NO, what are the reasons?

31. Preference for the sources of loan :

1. Bank 2.NGOs

32. Do you avail loan from NGO : 1. Yes 2. No

33. If Yes, amount of loan availed from NGO.

34. Rate of interest for the NGO loan:

35. Do NGOs give loans continiously?:

1. Yes 2. No

36. Benefits from NGO other than Loan:

37. Has your group got Revolving fund?

1. Yes 2. No

38. If yes, Amount of revolving fund : Rs.

39. Your share in revolving fund : Rs.

40. Have you got subsidy on Revolving fund? :

1. Yes 2. No

41. If yes, amount of subsidy :Rs.

42. Do you pay any interest for revolving fund?

1. Yes 2. No

43. Name of the bank associated with the distribution of revolving fund:

1. Commercial Bank 2. Co-operative bank 3. Private Banks

44. Loan availed from the banks :Rs.

45. Have you got subsidy for your total loan?

46. Utilization of loan :

1. Self employment 2. education 3. childrens marriage 4. contruction 5. consumer durable goods 6. gold puchase 7.Others

47. If self employment, give details?

48. Monthly income from Self employment:

49. Own investment in Self employment ?

50. Do you have any partners in your business?

1. Yes 2. No

51. Have you faced any problems in your self employment? if yes, give details:

52. Have you registered the self employment business?

1. Yes 2. No

53. Did you avail loan from Non-SHG sources for Self empployment?

1. Yes 2. No

54. If yes, give detail ?

55. Loan amount from Non- SHG sources :

56. Rate of interest on Non-SHG loan :

57. Is income from Self-Employment suffecient to repay the loan?

58. Do you employ any persons to look after your business? Give details :

59. Cost of employing labourers

60. Savings after joining the SHG :

61. Utilization of savings :

62. Does your group give educational loan?

1. Yes 2. No

63. Have you availed educational loan?

64. Do you think that SHGs have improved your economic status

1. Yes 2. No