Report on Action Research Project on Gendering Microfinance under SGSY National Institute of National Institute of Bank Management Public Finance and Policy Report on Action Research Project on Gendering Microfinance under SGSY Contents Acknowledgement i Abbreviations iii Team Members v Chapter 1 Introduction 1 Chapter 2 Implementation of SGSY 10 Chapter 3 Lending Environment of SGSY 44 Chapter 4 Self Help Groups 62 Chapter 5 Feedback Mechanism 85 Chapter 6 Economic and Social Empowerment 93 Chapter 7 Business Portfolio of Bank Branches 112 Chapter 8 Summary, Conclusion and Recommendations 131 Appendices 141 Exhibits 191 Maps 192 Annexures 199 Acknowledgement We are grateful to Ministry of Rural Development (MORD), Government of India, for initiating and sponsoring the Action Research Project (ARP) on Gendering Microfinance under Swarnjayanti Gram Swarozgar Yojana (SGSY). Not only that, MORD financed fifty per cent of the project cost, and it took all the pains to coordinate with the state governments for carrying out the action research. Nine public sector banks, viz. Andhra Bank, Bank of Baroda, Bank of Maharashtra, Central Bank of India, Oriental Bank of Commerce, Punjab National Bank, State Bank of India, Syndicate Bank and UCO Bank, financed remaining fifty per cent of the project cost and agreed to select nine of their lead districts for conducting the action research. They took keen interest in the implementation, and ensured the ground support at district and block levels. We are thankful to them. At the nine districts of Sriganganagar, Kanpur Dehat, Arrah, Cuttack, Raisen, Bongaigaon, Pune, Uttar Kannada and East Godavari all the Project Directors (PDs) of District Rural Development Agencies (DRDA) and Lead District Managers of the sponsoring Public Sector Banks (PSBs) provided all the necessary supports required during the three years of formulation, implementation and monitoring of SGSY plans and conducting field works. District Development Managers of National Bank for Agriculture and Rural Development (NABARD) also cooperated with us in our endeavour. Credit Officers of DRDA supplied all necessary information. Officers of Line Departments provided their inputs. In the disturbed district of Bongaigaon, the PD took extra care for the safety of the researchers. We are grateful to all of them. The actual action was at the nine blocks, viz. Sriganganagar, Maitha, Sanchi, Arrah, Salepur, Sidli, Daund, Kumta and Rayavaram only. All the Block Development Officers (BDO), other officers of the Block Development Offices, Village Level Workers and Branch Managers of 19 PSBs, 2 Private Sector Banks, 6 Regional Rural Banks and 4 District Central Cooperative Banks fully participated in this ARP. We are thankful to all of them. I would like to make special mention of Shri R Mashahary, BDO of Sidli Block who took extra effort to make the scheme successful in the most difficult interiors of Bodoland. Because of him, we could interact with the SHG members freely without any fear even in the late night in their villages, which are otherwise considered as a sensitive area. We are thankful to all the investigators who were temporarily engaged for collection of field level data. At home all the team members wholly involved themselves in the conduct of orientation workshops, formulation and monitoring of block level SGSY plans, development of questionnaires and varieties of formats and coordination and supervision of the field work. Research staff especially Veena Panse took great pains in computerizing different kinds of field level data and preparing a large number of tables after filtering the data. Shainaz Baig prepared several drafts of the report; Deepali Kulkarni and Manjiri Kulkarni supplemented the effort. John T D provided editorial help and Nitin Mehendele rendered DTP support. We are grateful to all them. i Lastly, we would like to express our gratitude to all the SGSY borrowers and Self Help Group members with whom we had several rounds of discussions during three years : 2003-04 to 2005-06. We interviewed about 1400 borrowers for this research study and 500 women separately for our earlier study on Gender Perspective. All engaged themselves in discussions to enrich our understanding of the dynamics of SGSY. Each of them deserves special thanks. Finally, we are thankful to both National Institute of Bank Management, Pune and National Institute of Public Finance and Policy, Delhi for providing all the required support for the completion of this long duration project. R Dasgupta Coordinator ARP on Gendering Microfinance under SGSY NIBM, Pune January 31, 2007 ii Abbreviations ANB Andhra Bank ARP Action Research Project AW Anganwadi Worker BDO Block Development Officer BPL Below Poverty Line BLSC Block Level SGSY Committee BM Branch Manager BOB Bank of Baroda BOI Bank of India BOM Bank of Maharashtra BRGB Bhojpur Rohtas Grameen Bank CAN Canara Bank CB Commercial Bank CBI Central Bank of India CCO Coordinating and Controlling Officer CGB Cuttack Gramya Bank CLCC Central Level Coordination Committee COR Corporation Bank DCCB District Central Cooperative Bank DDM District Development Manager DLSC District Level SGSY Committee DRDA District Rural Development Agency GOI Government of India GSSB Gram Seva Sahakari Bank IBA Indian Banks' Association IGA Income Generating Activity Indian Indian Bank IRDP Integrated Rural Development Programme KAR Karnataka Bank KDCC Karnataka District Central Cooperative Bank KHMS Kagal Hini Meenugarala Sahakari Sangha KKGB Kanpur Khetriya Grameen Bank LD Line Department LDM Lead District Manager LBO Lead Bank Officer MAVIM Mahila Arthik Vikas Mahamandal MF MicroFinance MFI MicroFinance Institutions iii MORD Ministry of Rural Development NABARD National Bank for Agriculture and Rural Development NGO Non-Government Organization NIBM National Institute of Bank Management NIPFP National Institute of Public Finance and Policy NIRD National Institute of Rural Development NPA Non-Performing Asset NS Non-Subsidized OBC Oriental Bank of Commerce PD Project Director PGB Prag Jyotish Grameen Bank PLDB Primary Land Development Bank PLR Prime Lending Rate PNB Punjab National Bank PSB Public Sector Bank P&SB Punjab & Sind Bank PVSB Private Sector Bank RBI Reserve Bank of India RF Revolving Fund RRB Regional Rural Bank RSSN Rayat Seva Sahakari Bank SBBJ State Bank of Bikaner & Jaipur SBI State Bank of India SBIN State Bank of Indore SC Scheduled Caste SGSY Swarnajayanti Gram Swarozgar Yojana SHG Self Help Group SHPI Self Help Promotion Institution SLBC State Level Bankers' Committee SLSC State Level SGSY Committee ST Scheduled Tribe SYN Syndicate Bank TM Top Management UBI United Bank of India UCO UCO Bank VGB Varda Grameen Bank VIJ Vijaya Bank VLW Village Level Worker VSSN Vyabsyay Seva Sahakari Bank iv Team Members Coordinator(s) K Dinker Rao, NIBM, Till July, 2004 R Dasgupta, NIBM, Since August, 2004 Report Writing L S Chakraborty, NIPFP R Dasgupta, NIBM Resource Team K Dinker Rao, NIBM D P Khankhoje, NIBM A U Gadewar, NIBM L S Chakraborty, NIPFP V A Deshpande, BOM R Yadav, OBC R Dasgupta, NIBM Research Staff Veena Panse Darshay Sinha Samik Chowdhury Coordinating Officials Lead District Managers O P Jindger/M K Sharma OBC, Sriganganagar M S Trivedi CBI, Raisen G K Dixit/A K Srivastava BOB, Kanpur S R Singh PNB, Arrah R Mahapatra/S Behra UCO, Cuttack B N Karmakar/N Sharma SBI, Bongaigaon P T Gavde/ G H Y Tirandaz BOM, Pune B R Hiremath SYN, Karwar A S Chary ANB, Kakinada Block Development Officers J Juneja Sriganganagar F C Das Salepur Laxmi Choudhury Sanchi R Mashahary Sidli R K Trivedi Maitha M S Ghule Daund K Biswas Arrah R N Naik Kumta A R Reddy Rayavaram v Chapter 1 Introduction 1.1 Swarnjayanti Gram Swarozgar Yojana (SGSY) The Swarnjayanti Gram Swarozgar Yojana (SGSY) replacing the Integrated Rural Development Programme (IRDP), the most important credit related development intervention in 1999 has following salient features : (i) A few key activities in a block to be financed; project approach to be adopted; (ii) A cluster approach for each activity to be adopted for selection of villages for financing; and technology up gradation is ensured in identified activity clusters; (iii) Encouraging the Self Help Group (SHG) model for disbursement of credit; adopting a gradual multiple credit approach of Revolving Fund (RF) followed by Income Generating Activity (IGA) credit; (iv) Emphasizing on women’s access to SGSY; (v) Ensuring capacity building and skill training and promotion of marketing of the goods; and (vi) Adopting planning approach, which is implicit. The SGSY programme has similarity with IRDP with regard to : (a) sponsoring of clients by government institutions, and (b) providing subsidy to the borrower with the exception that (i) the SHGs as clients are to be rated by a team of government, credit institutions and NGOs where available, and (ii) the subsidy component to be adjusted at the end of repayment schedule only. While the first two of the salient features are to ensure economies of scale, focused approach and market attention, the third and fourth features are recognition of efficiency of SHG model in terms of credit utilization, credit discipline and necessity of women empowerment to address development holistically. Fifth feature is to emphasize the importance of ‘credit plus’ in the credit-led development process to improve the productivity of credit and repayment level. Lastly, planning approach ensures systematic and scientific lending; identifies the varieties of gaps; and attempts to reduce the gap optimally. 1.2 Background A study on SGSY by National Institute of Bank Management (NIBM) indicated that the main tenets of SGSY as enunciated earlier were not adhered to. The Central Level Coordination Committee (CLCC) too had revealed the inadequacies. With this background, a proposal to launch an Action Research Project (ARP) in association with National Institute of Public Finance & Policy (NIPFP), New Delhi was discussed with the Top Management (TM) of the banks and the Ministry of Rural Development, Government of India at the Punjab National Bank (PNB) Training College at New Delhi on January 17, 2003.