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loan default by SHGs,, study based on case study


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  • 1. Dissertation Submitted To Indian Institute of Technology, Guwahati In partial fulfillment for the award of the degree of Master of Arts in Development Studies, By Kaushal Kishor Kaushal Under Supervision of:- Dr. Mrinal Kanti Dutta Associate professor Department of Humanities and Social Sciences, IIT Guwahati
  • 2.  A SHG is a group of about 10 to 20 people, mostly 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 on saving first. The setting of terms and conditions and accounting of the loan are done in the group by designated members
  • 3.  To asses and analyze the status and reasons of default in between members of SHG and bank.  To study the best practices in repayment and document the mechanisms followed by organisations, micro-finance institutions and groups to ensure 100 percent on time repayment
  • 4.  Study is based on primary and secondary data  Primary data collected from the set of questionnaire  Secondary Data has collected from different Institutions, organizations, and from various government website.  Randomly selected 30 samples from five different SHGs.  Sample drawn from 2 blocks in Kamrup district  A descriptive study  Study is more of qualitative nature
  • 5.  Two blocks in Kamrup® District 1. Sualkuchi Dev. Block 2. Rangia Dev. Block  Randomly selected five SHGs. 1) Khushi SHG- 6 members 2) Lakhimi SHG-7 members 3)Pragatishil Shuba SHG-5 members 4) Milijuli mahila SHG-7 members 5. Jeuti SHG- 5 members
  • 6.  Understanding about SHG, microfinance issues, default issues. Functioning of SHGs, origin, issues and challenges and got an earlier understanding of the study
  • 7.  The origin of SHGs is from the brainchild of grameen Bank of Bangladesh, which was founded by Mohammed Yunus. SHGs were started and formed in 1975.  In india NABARD initiated in 1986-87.  But the real effort was taken after 1991-92 from the linkage of SHGs with the Banks.
  • 8.  Formative  Storming  Norming  Performing
  • 9.  Open and voluntary  Democratically controlled  Economic participation  Autonomy and independence  Education, Training and skill upgradation  Self-Help and Help to each other members  Ownership feeling
  • 10. Sl No.- SHPIs Schemes/Project Remarks 1. Department of women and child Development No specific Scheme Groups are organized by Aganwadi workers 2. Department of Rural Development SGSY BPL Group mostly promoted in collaboration with NGO. 3. NABARD and Banks SHG-Bank linkage, individual rural volunteers Through NGO, commercial Band and RRBs. 4. Cooperatives The cooperative have very recently started forming SHGs. 5. Voluntary Organization Support from Donar agencies and government program Groups promoted by NGOs, under Government sponsored programs are often reported by both (NGO AND GOVERNMENT)
  • 11.  Assam has a network of 1335 branches of 24 commercial Banks, 2 Regional Rural Banks (RRBs) and cooperative Banks in the Assam. There are 850 Rural,282 semi-rural and 203 urban Branches in the state. North East Development Finance corporation (NEDFI) also cater to the credit needs of the state
  • 12. Microfinance providers in assam Formal Bank Commerc ial Banks Co- operative Banks RRBs NABAR D SIDBI NEDFI MFI NGO NBFC Rural dev. dept. (SGSY) informal Private saving societies Village head, landlord village saving societies/ Namghar Goot/Mut ual groups Sanchoi Samities
  • 13.  Internal Lending  A better system of penalizing the members need to be in place. Current analysis shows that the penalty amount charged is not sufficient enough to incentivize members not to default indicating a scope of raising the penalty fee to control defaults further.  Lending by Banks  Considering the loan size and default rates, amount disbursed to SHGs need to be checked which might currently be too high for MP and Karnataka and a little low for Bihar.
  • 14. Literacy/Education Level Percentage/Number of Members 1. Illiterate 53.33 (16) 2. Can only sign 26.66 (8) 3. Up to 5th class 6.33 (2) 4. 6-8th class 3.33 (1) 5. 9-10th class 3.33 (1) 6. HSC 3.33 (1) 7. Graduation 3.33 (1) All 100 (30)
  • 15. Occupation Number/Percentage of members engaged 1. Agriculture 20 2. Animal Husbandry 6.3 3. Daily wage worker-Non agriculture 13.3 4. House hold enterprises 0.00 5. Other/common SHG enterprises 0.00 7. Housework 53.3 8. All 100
  • 16. Name of SHGs Income from own economic activity Income from spouses Borrowed from others Total percent Khushi SHG 16.66 33.33 50.00 100 Lakhimi shg 14.4 42.8 42.8 100 Pragatishil SHG 40.00 20.00 40.0 100 Milijuli SHG 28.57 14.28 57.14 100 Jeuti SHG 20.00 0.00 80.00 100 Total 36.66 23.3 40.00 100
  • 17. Activities Percentage of members 1. Meeting household expenses, education & Health issues 53.33 2. Agriculture 13.3 3. Individual Entrepreneurship 6.6 4. Common entrepreneurship 0.00 5. Others 26.80
  • 18.  Spending loan in Non-economic Activities  Lack of awareness/information to SHG members.  Dependence of members to repay the loan is foremost reason to default
  • 19.  Widespread laxity in writing and absence of basic books of record  Ad hoc formation of groups  Low incidence of inter-loaning  Appropriation of benefits by the leaders/ office bearers  Credit to group without estimating credit needs of members  Lack of effective grading by banks and organisations.  Lack of emphasis on group development  Lack of attention to member savings
  • 20.  Motivate individual to invest in economic generation activities  Focus on common entrepreneurship  Focus on skill up-gradation training  Priority should be based on saving than credit  SHG should go in evolutionary process  Reduce the dependence  SHG should undergo in an evolutionary process  Separate grading and focus on training  Sustainability questioned?
  • 21.  Promoting ‘area centric’ federations of SHGs  Reach out to all poor families, not restrict to only BPL  Adopting common approaches  Saving first, credit later  Strengthening SHGs Movement in weaker areas
  • 22.  Up to 2010, researchers argued, loan repayment in SHGs is more than 95%, but now many researcher found that, loan repayment rate has been decreased and it is now 88%.
  • 23.  Sahu, G.B,(2010), SHG Bank Linkages in North West India: Experiences and Challenges in Financial Access and Poverty Alleviation, Centre for Micro- Finance (sub- centre) Institute of Development Studies, Jaipur.  Sharma, A. (2007), “Expanding outreach to underserved regions: Kick-starting microfinance in North-eastern Region,” Indian Institute of Bank Management, Guwahati. Retrieved April 1, 2009 from .   Subrahmanyam N.,(2009), “Microfinance and SHG-Bank Linkage: Regional analysis and perspectives”, Prajnan, Journal of Social and Management Sciences, vol. XXXVIII, no. 3, December, pp. 183-202.   Subrahmanyam N, (2009-10), “MicroFinance and SHG-Bank Linkage: Regional Analysis and Perspectives”, Prajnan, Vol.XXXVIII, No.3, pp 183-202 .   Tiwari P and Fahad S M, “Concept Paper: Microfinance Institutions in India”, Retrieved from: (accessed 03/12/2013)   Choudhury,J.andDevi,R.(2009).Women’sParticipation in Economic Development: Role of SHG In Konwar, K. and S. Das (Eds).Role of women in the socio economic up-liftment of Assam, Purbanchal Prakash, Guwahati, Assam.   Gurumoorthy,T.R.(2000).Self help groups empower rural women,Kurukhetra.   Jain,Ritu.(2003).Socio-Economic Impact Through Self Help Groups,Yojana.   Kumaran,K.P.(2001).Self help groups of the rural poor in India :Ananalysis,National Bank News Review.   Misra,C.(2005).SHGs in Unorganised Garment: ACase Study of Madurai. Kurukshetra.   Sharma, P. And Verma, S.K.(2008).Women Empowerment through Entrepreneurial Activities of Self Help Groups.   Srinivasan, N. (1995). Group approach to empowerment of rural women-IFAD experience in Tamilnadu state.   Singh, Y. K. ,Kaushal, S .K. and Gautam, S. S. (2007). ‘Performance of Women’s Self Help Groups (SHGs )in District Moradabad, U.P’,International Journal of Rural Studies (IJRS,).
  • 24. Special Thanks to My Guide Dr. M K Dutta & Prof. Barua.