11138471151 Swarnajayanti Gram Swarozgar Yojana

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The Swarnajayanti Gram

Swarojgar Yojana
A Policy in Working

Nirmala Banerjee
and
Joyanti Sen

Sachetana
31, Mahanirvan Road,
Kolkata 700 029

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Foreword

Under this second sub-theme, Sachetana team has explored an area where researchers
seldom venture. Starting from the point where the policy of poverty alleviation was
translated into a budgetary measure called Swarnajayanti Gram Swarojgar Yojana, we
have traced the consecutive steps through which funds are to reach the ultimate
beneficiaries. By examining the hiatus between the guidelines provided by policy makers
and their actual interpretation on ground by executing agencies, we bring out why and
how this major measure has been slow to take off and poor in impact.
The fieldwork for this project was done by Joyanti Sen while the conception and
the final reporting was a joint effort. However, the work would not have been possible
without the ready cooperation generously offered to us by officers executing the scheme
in the State. Beneficiaries under the scheme also provided us with all the information that
we needed. Our grateful thanks go to all of them.
We are grateful to UNIFEM for providing the funds for the work and to our
colleagues in Sachetana for their continuous support.

Nirmala Banerjee

12 August, 2003

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Contents

Items Pages

Executive Summary 3-7
Chart I 8
Section I 9-10
Section II 10-16
Section III 16-23
Section IV 23-40
Section V 40-43
Section VI 44-45

Appendix I 46-51
Appendix II 52
Appendix III 53-54
Appendix IV 55
Appendix V 56-57
Appendix VI (A) 58
Appendix VI (B) Map 59
Appendix VII Table(A) 60
Appendix VII Table (B) 61
Appendix VII Table (C) 62

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Executive Summary

Introduction
The Swarnajayanti Gram Swarozgar Yojana (SGSY), a credit-based scheme sponsored
by the Government of India for poverty alleviation, is perhaps the largest of its kind in
the world. It was first announced in 1997 to commemorate fifty years of India's
independence and first allocations for it under the Ministry of Rural development
(MORD) were included in the GOI budget of 1999/2000. The MORD was to fix the
shares of each district in the country roughly on the basis of relative numbers of poor
residing there. 75% of the funds would come from the Union Government and each state
government would match it for the remaining 25%. Both parts of the funds are to go
directly to the District Rural Development Cells (DRDCs); in each district, the DRDC is
in charge of executing the scheme. For this, it is to draw on the help of local
governments, line agencies of superior governments and local branches of commercial
banks. Chart I shows the scheme of organization. Initially, benefits of the scheme were
meant exclusively for those living below the poverty line (BPL families), but recently
some non-BPL family members have also been allowed to avail of some of the benefits.
At least 50 % of the participants were to be women.

The Scheme
SGSY is to promote self-employment among the poor; it aims first to bring
several of those with similar backgrounds into groups (SHGs) where they are to start
building a revolving fund from their own savings as well as some grant and loans from
state funds. Initially, members are to borrow from it for any of their various credit needs.
Once they learn to manage that fund, they are to take up some productive enterprise,
preferably with the group as a whole. In this, they are to be helped by government and
semi-government agencies with detailed study of feasibility of the proposed activities as
well as modern training in appropriate skills. The banks are to play a major role in
ensuring that the groups and their activities are viable; above all, they are to instill

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banking habits among the participants and provide adequate credit to ensure that the
activities undertaken by the beneficiaries are run at an optimal scale.
Objectives of the exercise
In our understanding, gender budgeting exercises are not just a critique of past
performances of the state; they are also meant to help the policy makers to design
schemes for future allocations of budgetary funds that can be more effective in
empowering women. So, in undertaking this exercise regarding the SGSY, our aim was
two-fold: one, to examine how the long chain of steps involved in taking benefits
from the highest level of government to the lowliest, viz, poor women in rural India,
was working out in practice. The other was to assess how far participating in this
programme would actually be empowering for women. In other words, the review is
to highlight the specific aspects of the SGSY design that need to be revised in order to
make the project effective. We examined the scheme as it is operating in the State of W.
Bengal.

Methodology
In order to familiarize ourselves with the procedure for the project as planned by
the MORD, we studied the guidelines laid down by the Ministry. We then discussed with
senior officials of the Department of Panchayets and Rural Development in W. Bengal
how they perceived the scheme's design. From them we obtained introductions to the
DRDCs in three districts of the State where we were to carry out further fieldwork. The
selection of the districts was purposive; the districts had to be near enough to Kolkata to
permit repeated visits. And, we had to have local contacts with persons/organizations
working on the scheme in order both to examine their performance and to get access to
groups of ultimate beneficiaries. This was the way we could expect to form a clear idea
about how work on the SGSY was proceeding. At each stage, our discussions on the
theme were structured round some preset questions but there was sufficient room for
wide-ranging interaction with the people concerned.

Findings

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1. Room for misinterpretations
The guidelines provided by the MORD are highly opaque and use obscure terms
like "back-ended subsidy" without clearly defining them. In this case, we found that
banks in the districts we visited had chosen to interpret that term in ways that
protected themselves from any risks of non-repayment but deprived the
beneficiaries of the full extent of resources allotted for them. Executing officers at the
State level deeply resented this arbitrary stance of the banks but were apparently
unable to question their authority.
Similarly, inclusion of a subsidy in the revolving fund was meant only for
reducing interest charges on loans from the fund; but some DRDCs in the State had
assumed that it was to be distributed as one time gift among members of the SHGs.
There was ample scope for such misinterpretations and there was no regular
mechanism installed through which agencies at different levels could clarify the
position or raise their objections about any aspect.

2. Uneven application
The scheme assumes that everywhere, it is possible to bring the poor together to
form coherent groups. However, at least in this State, the poor belong to many
disparate communities and they do not always live in physical proximity. Also, there
is often a deep mistrust between them and they are unable or unwilling to work in a
cluster. Interference by political parties at the village level makes the matters worse. It is
reported that although designers of the scheme had emphasized the need for the poor to
work in groups, so far, over 85 % of the distributed funds have gone to persons working
on their own.
The scheme is essentially for creating work for the poor; therefore, it leaves out
of its scope those poor who are unable to work because of old age, sickness or
disability.
Also, to form and nurture groups of the poor is a time consuming task for the
organizers, whether they are NGOs or government workers. But on ground, the right
kind of persons or organizers are not available everywhere. The upshot is that, even

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the money released for districts in W. Bengal for earlier schemes like IRDP and
DWACRA did not get utilized in the first two years of SGSY and therefore, no
funds under the new scheme had been released in those years to any district of the
State.

Overcoming poverty
The SGSY was supposed to be a major improvement on earlier credit-based
poverty alleviation scheme in so far as along with credit, it provided for many support
services for the participants. These included, agencies to nurture the groups,
professionally competent assessment of feasibility of their economic activities,
professionally given technical training in the necessary skills, as well as arrangements to
build necessary infrastructure. Banks were directed to ensure an adequate credit flow at
all stages.
All these provisions had been included in the design because the SGSY aimed
to permanently raise the income of all its poor participants above the poverty line.
But at least with the beneficiaries that we were able to interview, we found little
evidence of the beginnings of a process of permanently eradicating poverty.
Reasons for this probably lay with the fact that, none of the supporting
provisos had been realized. There was no evidence from any area of a proper feasibility
study of possible economic activities. Rather, almost everywhere, the poor were carrying
on with their traditional work on a slightly enlarged scale. In some cases, participants had
actually lost because group organizers had encouraged more workers to take up their
activity with the result that wage rates had fallen significantly.
Similarly, the occasional training given was brief and informal. Organizers
thought the idea of formal training at professional institutions was impractical because
participants could not find the time.
Most of all, banks in the state appeared to have been very reluctant to join the
effort. Not only had they avoided giving the beneficiaries due amounts of funds; they had
also been very reluctant to take up any of the multiple tasks that the MORD had
envisaged for them.

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Empowerment of women
Though the scheme was meant only partially for women, in reality, almost all
participants in W. Bengal appeared to be women. However, it did not appear to have
empowered them to the extent envisaged by the designers.
The work and incomes generated through the scheme were mostly of a
supplementary kind and not commensurate with the time and effort required in joining
group activities. Men could not afford to give up their existing activities for that kind of
work. Women were willing to take it up as supplementary work. But this meant that,
the workload of the women had gone up substantially with only marginal
improvement in incomes.
Secondly, we found no instance where gender specific roles of women had been
questioned or altered. Rather, the organizers looked for work and training that
interfered least with women's roles as reproducers.
Except in one district, there had been few efforts to give women the capabilities
of handling their own business or management of funds.
Above all, the participants had very little awareness of what the scheme had
provided and what they were entitled to.
In general, that the scheme was not working well in W. Bengal was no doubt
partly due to failures on the part of the state level organizers. But it must be emphasized
that most of the problems seemed to arise from the elaborate but poorly grounded
structure of the scheme. It promoted a single, uniform procedure for all parts of the
country without taking note of the diversities in the nature of the poor and of poverty or
of the traditions of organizations. Tying up of the programme with the BPL lists added
one more reason why those lists have become politically important in all areas. The
scheme assumed that there would be ready cooperation from all other government and
non-government agencies in the area without providing adequate incentive for them. The
small sums set aside for organizational purposes appeared inadequate to
compensate for the organizational work involved. Banks were assigned a major role;
but no note had been taken of the fact that even with earlier anti-poverty schemes in the

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State, they had, in general provided very little sympathy and support for the needs of the
poor.
We feel that the scheme should be decentralized in a major way; each region
should be allowed to plan and execute the kind of support systems that it considers
appropriate for its poverty related problems. Equally important, there should be a
lot more publicity through the visual media about funds being available with
specific agencies and their responsibilities in the process so that potential
beneficiaries can seek explanations for any failures.

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CHART I Ministry of Rural
Development (MORD),
Govt. of India
In charge, SGSY
MORD to inform
DEPTs re release MORD to release
of funds to 75 % SGSY funds
DRDCs. directly to DRDCs

On MORD
advice, Dept. to
District Rural
release 25 %
Development
funds to DRDCs
Cells- DRDC under
the Zilla Parishads
Panchayet and Rural
Development
Departments of State
govt. (Dept.); overall
administrative charge Project Director,
SGSY to manage
SGSY in district

Block
Development
officers NGOs

Expected outcome:
Stage I
incomes of SGSY
Forming self-help groups, SHGs, of
beneficiaries to rise
persons from BPL families:
above poverty line
50 % beneficiaries to be women.
within three years.

Stage II
Revolving fund = own Stage III
savings + grant (Rs. Bank credit for economic activity
10,000)+ bank loan (Rs. 50% grant on amount upto Rs. 10,000
15,000). Members can per SHG or Rs. 1.25 lakhs per group,
borrow for any need. whichever is less.

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Section I
Introduction

For the current phase of the Women's Movement in India, the state has been both
an adversary as well as an ally. Many of the Movement's most aggressive campaigns
have been against the state, condemning it for its failures to protect women's rights to life
with dignity and justice. At the same time, it is to the same state that the Movement has
made its appeals from time to time for help in its fight against gender-based deprivations.
Since the self-image of the Indian state is that of a populist democracy, the appeals
usually get a positive response in the form of some additional gesture- perhaps a law for
reinforcing women's rights or a new budgetary scheme for some special service for
women. In this process, the Union Government by now has accumulated a large and
assorted baggage of legal and fiscal measures that are supposed to be pro-women. A
recent study done at the NIPFP1 has shown that in the 2003/04 budget of the Union
Government, funds had been allotted to not less than 32 supposedly women-specific
schemes. In spite of these gestures, women's groups continue to complain that the state is
not doing enough. The main reason of course is the tokenism of those gestures; combined
allocation to all those women-specific schemes in the Union budget in 2003/04 is no
more than 0.84 % of the total public expenditure (ibid p.14, table 3).
Of course, under the Indian constitution, state governments bear the major
responsibility of providing welfare services to their residents; in addition, many of the
welfare schemes funded out of the central budget are routed through the state machinery.
Therefore, it is more likely that women's share in the budgetary resources of state
governments matches their share in the state's population more closely. However, a study
by Sachetana for W. Bengal has shown that, even with very generous assumptions,
women's share in all governmental welfare service projects was no more than 10 % of the
total state revenue expenditure in 2000/012. Among these, many schemes were meant to

1
Lekha Chakravarty (2003): Macroscan of Union Budget 2003 in India: A Glimpse through Gender Lense
(draft). National Institute of Public Finance and Policy, New Delhi.
2
Nirmala Banerjee and Poulami Roy (2003): Gender in Public Policies: the case of W. Bengal. Sachetana,
Kolkata.

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assist women solely in their accepted traditional roles of mothers, reproducers and
housewives. A few others were to provide relief to distressed women (such as pensions to
distressed widows); but the state had not inquired into the reasons why it is women,
rather than men, that face such situations; nor had there been any attempt to correct those
basic anomalies. Lately however, the state has come to recognize that women have some
special difficulties that prevent them from sharing in welfare services on par with men.
There are therefore some additional schemes, as for example provision of crèches, which
help to remove those gender-based handicaps of women3.

Section II
Background and objective of the study

This study is a part of our work on gender budgeting; in our understanding,
exercises under this rubric are not to be limited only to an ex post analysis of budgets;
they should also aim to find out and advise policy makers on how best to design and
operate public policies that are to empower women. Even if the state allots substantial
budgetary resources to a scheme, its success in fulfilling its aims ultimately depends on
the various steps involved in its execution and on the understanding and efficiency of the
agents who carry out those steps. Therefore in seeking state's help on behalf of women, it
is necessary that we ourselves understand how existing policy measures work on ground
and what aspects of the design and executing procedures can lead to confusion, delays
and leaks in the process of generating the desired effects.
The present study therefore aims to analyze the nature and working of a public
policy measure that was meant to empower women but appears to have been only
partially or poorly successful in doing so. By unraveling its constituent steps and
examining the working of each of those steps, we aim to demonstrate that, for making a

3
Elsewhere we have discussed in some details this system of classifying the women-prone policies of the
state according to the state's objectives in promoting them. See Nirmala Banerjee, What is Gender
Budgeting? Sachetana, Kolkata, on behalf of the UNIFEM South Asia Regional Office.

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policy effective, it is important that each step is designed appropriately and executed
through transparent, unambiguous steps.

Poverty Alleviation
For doing so we have focused on policies for poverty alleviation to which the
Union government assigns considerable funds; increasingly, many of the schemes are
being designed and executed with the expectation that a large section of participants in it
would be women. Raising women's purchasing power is considered a more effective way
of dealing with poverty related deprivations, because women tend to spend most of their
incomes for household requirements; men on the other hand, tend to retain a much larger
part of their incomes for personal expenses (Agarwal 19944). Also, there is a lot of
evidence from other developing countries, particularly Bangladesh to show that, in credit
based poverty alleviation programmes, women's records of loan repayment are infinitely
better than men's5.
Policy makers tend to promote women's participation in poverty alleviation
projects from two angles. On the one hand, now that the nature of poverty as better
understood, it is
clear that the poor are poor not because they are unemployed but because they work for
long hours in activities of low productivity and poor returns. For raising their incomes,
they have to send additional members into the workforce. Women form the majority of
these additional workers and they usually have to take up activities that yield even lower
returns than those earned by men. Raising the returns from economic activities of all
workers and especially of these additional workers thus appears to be an efficient way of
combating poverty.
From another angle, promoting women's empowerment is now an avowed goal of
state policies in India and for that purpose too, it becomes important to increase the
returns to their work. In both the Ninth and the Tenth five year plans, there is an explicit
commitment to work towards women's empowerment; but the only concrete plan

4
Bina Agarwal (1994): A field of her own; Cambridge University Press, New Delhi
5
J. Murdoch (1998) The Gramin Bank: A financial Reckoning; Draft, Hoover Institution, Stanford
University

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schemes for that objective are those that are meant to provide micro-credit to poor
women for use in their gainful activities6.
Poverty alleviation schemes are considered to be specially empowering because,
a) unlike most other schemes, they treat women as earners and not just as reproducers. b)
they provide the same facilities to women as men, and, c) to guard against gender-based
biases , there is a provision reserving a fixed share for women.
To review the progress of these schemes, the Ministry of Rural Development,
which has been responsible for sponsoring them earlier, used to appoint from time to time
independent expert groups. Those reviews had three objectives: one, to check whether or
not the allotted funds had reached those below the poverty line; secondly, whether
women had received their due share, and thirdly how far it had been possible for the
beneficiaries to cross the poverty line.
This study is a review from a somewhat different angle. It recognizes that these
schemes are of a special character where funds that originate at the Central government
level have to reach the most distant and voiceless groups at the grassroots, namely the
poor and specially the women among them. This means that each scheme must be
sufficiently well designed to pass smoothly through multiple stages of decision-making
and execution. This study thus aims to follow those detailed steps and locate the
various points where there is scope for misconstruction as well as delays and lapses
from the professed objectives of the project. Furthermore, because the study is from a
feminist perspective, its particular concern is to check how far the designers as well as
various operators of the scheme are aware of the various possible bottlenecks that can
hinder women's true empowerment.

Box 1
The term empowerment is often used rather loosely and can itself be a cause for
reinforcing gender roles. For this paper, the term has the following connotations
• To enable women to operate in all spheres on par with men.

6
One such scheme promoted exclusively for women is that of "Rashtriya Mahila Kosh" of the Dept. of
Women & Child, MORD

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• To provide special assistance to women in their functions of biological
reproduction.
• To challenge the traditional division of labour and gendered allocation of tasks
and to ensure that household tasks are shared equally by men and women.
• To take full account of women's unpaid work in assessing their contribution to the
household and to the economy.

In other words, empowerment has to mean not only more jobs and better
earnings for women but also establishing a trend towards a better position for them
in the society, economy and family.

Selection of the scheme
Schemes for poverty alleviation and employment generation with reservations for
women have been in operation for over two decades by now. Activists in the women's
movement have welcomed them for their potential for women's empowerment. However,
available data from official sample surveys has shown that during the 1990s, poverty
levels in most of rural India including especially rural W. Bengal where we were to
conduct our inquiries, had gone down only marginally. Further, the incidence of poverty
was consistently higher among women than among men in India as a whole and also in
W. Bengal. This was true both among children and among adults of 15 years or more
(Banerjee 2000 table 4, Sundaram 2001, tables 10 and 12)7. What is more, the excess in
the percentage of women under poverty line as compared to men had remained more or
less at the same level. Obviously, on-going poverty alleviation schemes had not been
able to correct that situation despite reservations for women.
In view of these findings the Union Government has radically revised its anti-
poverty programme. The Swarnajayanti Gram Swarozgar Yojana (henceforth referred

7
N.Banerjee (2000): Poverty and social development; Paper presented at the workshop on poverty
organized by the Centre for Studies in Social Sciences, Kolkata, July. Also K. Sundaram (2001):
“Employment poverty in India in the 1990s: Further Results from NSS 55th Round Employment
Unemployment Survey 1999/2000” in Economic & Political Weekly, August 11. These two estimates are
not strictly comparable over time since there is some difference in the database for 1993/94 and 1999/2000.
However, in both those years there was a positive difference between the percentages of female and male
populations living in poverty households.

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to as SGSY) came into effect from 1st April 1999. It replaced the following schemes that
had been in operation till then:
1. Integrated Rural Development Programme or IRDP
2. Development of Women and Children in Rural Areas or DWACRA
3. Million Wells scheme or MWS
4. Supply of Improved Toolkits to Rural Artisans or SITRA
5. Ganga Kalyan Yojana or GKY.
6. Training of Rural Youth for Self-Employment or TRYSEM

For this study we have selected the SGSY for the following reasons:
Empowerment of women and working with women's groups for promoting
savings and group enterprises is a very important part of the scheme. It is
stipulated that at least 50% of the self-help groups participating in the
programme has to be of women.
The SGSY with a targeted credit programme of Rs. 3,200 crores8 is supposed
to be the world's largest credit linked poverty alleviation programme.
Because the scheme is still in its formative stage, - at least in W. Bengal- we
felt that if necessary, there is scope for reformulating it in the light of the
findings of an in-depth field study such as ours.
As described in later paragraphs, SGSY is a very elaborate scheme that
requires close cooperation between several agencies; these include the Union
government, state governments and their administrative network from state
head-quarters to block levels, the NGOs or other organizing agents, local
branches of the lead banks etc. This provides an ideal case for a study of the
problem that we have set for ourselves, namely to study the possibility of
bottlenecks or breakdown in communication between diverse agencies and its
impact on the working of a scheme.
The study is thus to answer the following questions:

8
The figure is for the year 2001-2002 as of 26/4/2002. It is from table 22 of the research report on SGSY
prepared by the National Institute of Bank Management, Nov 2002.

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1. What are the scheme's professed objectives and procedure? Who were the
agents envisaged to participate in it?
2. How far have these proposals been understood and practiced at different
stages?
3. What if any are the differences between the original proposal and its
practice in the state and why have these arisen?
4. What benefits have accrued to the target population?
5. How do the beneficiaries view the programme?

Methodology of the study
This study relates to the operation of the SGSY in the state of W. Bengal in the
period between 1999 when the scheme was initiated until end of 2002 when the fieldwork
took place. As per the original proposal, the Ministry of Rural Development under the
Union government has sponsored the scheme and the Ministry determines the allocations
for each district in each state according to its estimates of the relative incidence of
poverty in that district. Table I shows the central allocations for each of the W. Bengal
districts.
To start with, we had no information about the operation of the scheme except
that the Panchayet and Rural Development Department of the government of W. Bengal
was in overall charge of its operation in the State. Therefore, the first stage of the study
consisted of interviews with senior officers of the department regarding their
understanding and views about the scheme. At this stage, the inquiry was focused on
details regarding financial allocations and release of funds during the previous two years
as well as their utilization. These interviews were structured around a list of questions
that are reproduced in Appendix II. It also provides a list of the names and designations
of those interviewed at that stage. (Appendix III)
The second stage of the study comprised of visits to district offices that were
responsible for implementation of the scheme. The offices visited were of the Zilla
Parishads, and The District Rural Development Cells. Since it was not possible to visit
all the districts within the time at our disposal, we selected three districts. These were:

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1. Haorah is a district, which is partly in the Kolkata Metropolitan District and
accommodates a mixture of agriculture and small as well as medium industries.
2. Paschim Medinipur, which is a less advanced but highly politicized region.
3. Hoogli is a progressive district with a healthy mixture of agriculture along with
rural and urban industry.
At the beginning of this stage, we had little information about the way the work
was being conducted and the persons responsible for it. Our method was to contact the
officers in charge at the district levels and with authorization from the officer concerned,
contact the various persons involved in the operations. Since we did not know the nature
of those involvements, we decided to conduct open-ended interviews that could bring out
the details of the operations at each level. (Though we did carry a set of questions in
Bengali, mainly on the financial aspect of the SGSY in their District. A copy of these
questions translated in English is annexed as Appendix IV). We realized that to collect
the required information would need repeated visits of the investigators. Therefore the
selected the districts had to be easily approachable from Kolkata. A list of persons
interviewed at this stage is annexed as Appendix V
The third stage consisted of meetings with the beneficiaries in groups as well as
singly. We wanted to observe and discuss the programme with as diverse a set of
beneficiaries as possible; we knew that this would not be possible unless we had a proper
introduction from NGOs or government officials working in the field. Part of the reason
why we selected the above-mentioned districts was that we had the necessary contacts
with field workers of diverse backgrounds. At this stage, information was collected
through group meetings with women in the self-help groups organized for the SGSY.
These were supplemented by informal interviews with randomly selected beneficiaries.
Basic information about the field sites and their location on a map is given in Appendix
VIA & VIB. A detail of the meeting with the beneficiaries at this stage is annexed as
Appendix I.

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Section III
The Scheme

Box 2
Short description of the scheme

Swarnajayanti Gram Swarojgar Yojana (SGSY) is a self-employment scheme. This scheme
was introduced from 1 April, 1999. Six different self-employment and training schemes and sub-
schemes were merged to form this scheme.
The principal aim of this scheme is to bring BPL families to APL status within three
years. The main difference with the previous IRDP DWCRA scheme is to encourage group loans
and group enterprise and ultimately to stop giving individual loans to members of the groups.
Funding for the project is shared by the Centre and The States on a 75:25 ratio
Initially groups are formed with 10 or 15 persons belonging to the BPL families. This
group is called a Self Help Group (SHG) and the individual members of the group Swarojgaris.
There is provision under the scheme to involve local NGOs to help the DRDC in forming such
groups.
The funds received by the DRDC are kept in a savings bank accounts The DRDC can
open their account with branches of the principal participating banks in the field. The funds
deposited in the saving account earn interest at the usual rates till the amount is given as loans to
the Swarojgaris.
In the first six months the group members are taught to save money i.e. they have to build
up a corpus fund by saving a certain amount every week/month. These savings are kept in a local
or field bank.
After six months, the groups is evaluated by a team where the Project Director, a member
of the Block Development Office and a representative of the bank are present. If they pass the
evaluation test they are given Grade I status. At this stage they are paid Rs. 10,000. - as a
revolving fund. Individual members can borrow from this money either for business purposes or
for personal consumption. They do not have to pay any interest. They are also given Rs. 15,000.
- as loan by the bank, which is called the cash credit or matching corpus fund.
After completion of one year, according to performance and again going through an
evaluation process, the group gets Grade II status.
After a group gets Grade II status they get credit cum subsidy facilities. This stage is
called bank credit linkage. Subsidy under SGSY is uniform at 30% of the project cost, subject
to a maximum of
. Rs. 10,000. - For groups of Swarojgaris (SHGs) the subsidy is 50% of the project cost
subject to per capita subsidy of Rs. 10,000.- or Rs. 1.25 lakhs whichever is less.

The SGSY is a credit-cum-subsidy programme. The main purpose behind the
SGSY is to help families below the poverty line to earn a higher income that can sustain
them at a level above the poverty line. The scheme envisages that an assisted family will
come out of poverty within three years of joining the scheme. During this period they will
be closely monitored and helped at each stage, not just with credit, but with sound

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productive ideas, training and know-how for them, and help to market their products at
economic price. Typically in a block, the scheme expects to assist about 300-600 persons
in a year.
The work is to be done by organizing the rural poor into self-help groups (SHGs)
for undertaking economic activities. The new approach ushered in with the scheme
incorporates the lessons learnt from the workings of several earlier poverty alleviation
schemes and is much more comprehensive. Apart from providing financial support, the
promoters are to ensure that members of the SHGs also receive the necessary training for
conducting the activities and to manage the project and it’s accounting. In addition, the
facilitators of the activities would also ensure that there is adequate infrastructure and
marketing opportunities within reach of the groups. Details of its salient features are as
follows:

The cluster approach
Instead of supporting myriad different activities, the scheme in each block would
concentrate on promoting a cluster of a few activities. This cluster will comprise not
more than ten but preferably four or five key activities for each district. The District level
SGSY committee will arrange to get a detailed project report for each activity and get it
vetted by the concerned bank. This cluster for each region is selected after carefully
considering the viability of each of those activities taking into account locally available
resources, skills, markets and infrastructure.
The Swarozgaris, i.e. the beneficiaries under the scheme, can either be individuals
or groups, but policy makers prefer the group approach because groups can undertake
larger activities that can be run at economic scale. In any case, all Swarozgaris are to be
members of SHGs and begin the group through pooling their savings, making internal
loans to group members out of that pool and monitoring their timely repayment. The
groups are the guarantors of all loans to members, whether as individuals or when
working in a cluster. This is true also of the bank loans that they get for their economic
activities.

21

The agencies involved
The scheme requires active participation of many agencies. The District Rural
Development Cell in each place (DRDC) is to do the coordination. Panchayet Raj
institutions are to help in selecting the potential beneficiaries; they are also to participate
in selection of the activities. Banks are to provide the necessary credit as well as act as
monitors at several stages of the formation and development of the SHGs. Both
government and non-government organizations (NGOs) are to come forward for socially
mobilizing the under-privileged and to help them to organize into SHGs that can work
harmoniously and productively. Local officials as well as local elected representatives are
to participate in SGSY committees at several levels. In addition, other line agencies, like
irrigation department, roads department, electricity boards etc are to be invited to
cooperate with the DRDC and modify their own development plans to ensure that the
infrastructure necessary for the selected activities is available in that area.

Financing
The scheme is sponsored by the Ministry of Rural development of the Union
government; it determines the amount of funds that each district in each state is to receive
every year on the basis of its assessment of the dimensions of poverty there as well as its
capacity to utilize the funds. It undertakes to provide 75 % of those funds into a pool of
resources earmarked for the scheme. State governments are to contribute the remaining
25% on a matching basis to make up the total allocated amount for each district. Central
funds for the scheme are to be released directly to the DRDCs in two installments during
each year, one at the beginning of the financial year and the other after 60 % of the initial
funds are utilized. As soon as central funds are released, the state government has to send
to the DRDCs its 25 %.
The funds from this pool are for all expenses for organizing and facilitating the
formation and running of the SHGs, to supplement its core revolving fund through a
subsidy of Rs. 10,000 per group as well as to provide them with other stipulated
subsidies.
30% of the pooled resources are meant for expenses of the organizing department

22

and of the organizations (GOs as well as NGOs) who act as facilitators of each group. A
part of the pool is to be set aside in a fund for training the beneficiaries in all the skills
required for organizing, operating and managing the activities of the SHGs. SGSY funds
are not meant for infrastructure building for which the DRDCs are to seek help from
other line departments; but they can be used for some small but crucial investments of
that kind.

Box 3
Financing arrangements:

• The group starts collecting and banking the savings of its members with the selected bank
branch.
• Once the group is stable, the bank releases for its use as a revolving fund a cash credit flow of
Rs. 25,000, of which Rs.10, 000 is a subsidy from the central fund.
• This revolving fund is to be used for any requirements of the group members; the group is to
monitor its repayment.
• When the group takes up a productive activity, it gets a further loan-cum-subsidy from the
bank for use in its requirements of buying assets as well as for meeting its running costs.
• This amount is to be Rs. 10,000 per member or Rs. 1.25 lakhs for the group as a whole,
whichever amount is less.
• 50% of this amount comes as a subsidy. Though the bank also releases that amount, it cannot
charge interest on it.
• Interest rates for the loans will be notified by the Reserve Bank of India or by NABARD.
• Those authorities will also determine the security norms for the loans.

Banks' involvement
Apart from public funds for the scheme, local branches of public sector banks are
to act as main financiers of the economic activities of the groups. They are to provide
credit both for acquiring fixed assets as well as for their running expenses. The
government subsidy to which groups become entitled on undertaking economic activities
is to be a part of the amount released by the banks. But banks are not allowed to charge
interest on the subsidy amount and can use that amount to set off against its liabilities

23

only if repayments by the SHGs are not according to the agreed schedule.
Apart from providing credit at the required time, banks are in overall charge of
ensuring that the basic objective of the scheme, viz. to remove poverty of households on
sustained basis, is fulfilled. They are therefore concerned with the nature of the activities
chosen and the capabilities of the Swarozgaris to carry them out successfully. Therefore
they are to be closely associated at each stage, from selection of the beneficiaries to
smooth functioning of the groups, their choice of projects, the kind of assets they acquire
etc. Thus the banks are important members of the committees that do the grading of the
SHGs from time to time.
Policy makers have repeatedly emphasized the view that no project or
activity under the scheme should languish because of under-financing. Rather, if
banks feel that a project is viable, they should ensure that whenever required,
additional funds are quickly available.

Grading of SHGs
Although policy makers intend to hasten the programme of poverty alleviation,
the scheme SGSY is designed for very careful nurturing of the SHGs and their economic
activities. For this, each SHG goes through several stages from its formation, to the point
when it undertakes and runs a profitable economic activity that can raise incomes of all
the involved families to levels above the poverty line. The stages are as follows:
1. Group formation: when facilitators identify potentially harmonious groups and
mobilize them to form groups. This is expected to need considerable interaction
between the community of the poor and the facilitators.
2. Group stabilization: when the group starts and develops a saving-cum-internal
loan routine. The loans can be utilized for personal requirements, whether
productive or otherwise.
3. Micro-credit: when the group corpus is supplemented by the revolving fund
through the banks' intervention. At this stage they may start training for their
proposed activity.
4. Development of micro-enterprises: when the groups select an economic activity

24

and starts working on it.
The group is reviewed at the end of each stage and the timeframe set for each stage is
fairly elastic. The group can proceed to the next stage only when experts are satisfied
with its progress. The DRDC is to seek the cooperation of the concerned bank in the
grading and review processes of which the local SGSY committee would work out
details. Release of funds to the groups is also contingent on their successfully completing
each stage.
Training
As mentioned before, the SGSY envisages training members of the SHGs for
upgrading skills required to run and profitably manage their economic activities. The
DRDC is to investigate what facilities are locally available with government and non-
government institutions. Apart from a basic mandatory orientation programme that
informs the Swarozgaris about SGSY, training is to be for the specific skills needed for
the productive enterprises. A part of the central pool of funds is to be set aside for the
costs of all kinds of training.

Marketing
The SGSY has rightly emphasized the need to use optimally local resources as
well as local marketing opportunities because it notes that selling in distant markets
usually leads to the involvement of outside agencies on terms that are exploitative to the
producers. The Swarozgaris are of course free to market their products nationally or
internationally but should preferably try and do so through government or semi-
government agencies.

Overall Assessment of the Design
In the following sections, we will be describing the problems encountered in
operating the scheme in W. Bengal. Part of the difficulties appear to arise because the
design of the scheme is complicated and the guidelines circulated by the Ministry of
Rural Development are not as clear as they should have been. But there are several
aspects of the design itself that need to be noted at the outset.

25

Although it is the largest single scheme for poverty alleviation in the country, the
scheme is to help only a limited section of the rural poor. Since it is meant to assist the
poor essentially by generating more gainful work for them, it leaves out of its scope those
who are too young, too old, sick or disabled to work. There are admittedly other schemes
for those poor who cannot take up work, but it is possible that public resources allotted to
those schemes are in no way comparable with those set aside for SGSY and far from
commensurate with their numbers among the poor.
On the other hand, even in the case of those who are capable of taking up
additional gainful work, the work generated under the SGSY is essentially for
supplementing rather than replacing their earlier activities. Therefore, it is possible that in
many cases, joining the scheme would increase the workload of the poor beyond tolerable
limits.
The scheme's operation depends on many agencies at many levels committing
time and attention to the work. Not only the district administration and line agencies,
Panchayet members and office bearers but also local bankers as well as NGOs have to be
continuously involved in the work. However, there seems to be no provision for checking
whether or not such agencies are available and cooperative in all areas. The sponsors can
do little if any of these agencies do not carry out their responsibility and it is not clear
what incentives are being offered to them for carrying out the work.
The SGSY is essentially a top-down scheme; it embodies a patriarchal outlook
where outsiders vet and approve of the poor who are to join the SHGs, grade them from
time to time and keep them continuously on a kind of a probation for getting access to the
next rung of benefits in the proposed chain. On the other hand, the beneficiaries have no
scope for appealing against the performance of the agencies and, as we shall see in the
case of W. Bengal, have to accept the decisions of the multiple authorities watching over
them.
The scheme provides a single design, which is to be applied uniformly in all areas
of rural India. It makes little provision for accommodating regional differences in the
nature of poverty, or the backgrounds of the poor. In many cases poverty is endemic in a
region because of poor terrain and lack of infrastructure and human capital; in such a

26

case, the SGSY approach of slow and patient building of capacities and infrastructure is
appropriate. In other cases, poverty could be a temporary phenomenon caused by a
sudden calamity like floods where a quick relief programme is needed. Also, while it
seems logical that there would be a basic identity of caste and religious backgrounds
among people residing in any one area; but the strength of such bonds is not equally
strong in all areas. And it is just as likely that within an area, there are long-standing and
deeply entrenched clashes of economic interests between people living in close
proximity. Building the programme on a cluster approach is therefore risky.
Similarly, even within one state or district, institutions like committed NGOs,
training centers or ready market connections are unlikely to be evenly spread. Therefore,
per capita investment required to overcome poverty is bound to be different from area to
area. This is true to greater or smaller degree of all the necessary institutional inputs. In
the fieldwork we started with this understanding of the scheme as conceived in the
guidelines. We aim to verify how this was being applied in the operations in W. Bengal.

Section IV
Findings From the fieldwork

We started on the study with very little understanding of the operation of the
SGSY scheme. It therefore seemed logical to first approach the Department of
Panchayets and Rural Development of the government of W. Bengal that was in overall
charge of it. It took several visits to the headquarters of the Department in Kolkata to get
to interview concerned officials there; all of them proved to be extremely cooperative and
frankly discussed with us their own understanding of and reservations about the scheme.
At this stage our method was to elicit responses of the officials to a set of questions
prepared beforehand.
They first confirmed that in W. Bengal the procedures about agencies and
disbursement of the funds are the same as outlined in earlier paragraphs. There is now a

27

project director in charge of the SGSY in each district. This officer has the full authority
to select NGOs and other executing agencies, allot funds to SHGs, and generally take
charge of authorizing expenditure.
A fact that was not clear from the Guidelines but came out of these
discussions was that allocations to each district were to be determined freshly each
year in the light of the performance of the scheme there in the previous year. The
official list of those below the poverty line was given for five years and rarely
changed within that interval. But that did not mean that the amount allocated for
the district was fixed for that period. Appendix VII A, B & C brings this out. The
scheme was first launched in W. Bengal in April 2000 for the year April 2000 to march
2001. In that year, the Union government did not release any funds to any district in W.
Bengal, though the State government had released to each district the amount that was to
be its contribution relative to the Centrally announced allocations. This was because all
W. Bengal districts had together an opening balance of over Rs. 100 crores from the
funds that the districts had received in previous years under the schemes that had been
merged into SGSY; these were IRDP, TRYSEM, DWACRA etc. In other words, the
actual funds released to each district depended on the performance so far (as assessed by
the rate of success of the local machinery in utilizing allocated funds) of this and similar
earlier schemes
In the next year, i.e. April 2001 to March 2002, both the Central and the State
governments announced the amounts that were earmarked to each district in the State, but
either till the end of that period released none of these funds. Only the district of Haorah
received funds to the tune of Rs. 78.26 lakhs.
It appears that if the district machinery cannot give a utilization certificate
for the previous balance at the time when the next installment is due, the amount
due to it can and is diverted to other districts in that state or in other states.
Decisions in this matter rest solely with the Union government.
The question automatically came up as to why various districts in W. Bengal had
so much of funds left unutilized. We could get no satisfactory answer to the query from
officials in Kolkata. Nor could they explain what had happened to the funds of the order

28

of Rs. 100 crores which had been allotted to districts in W. Bengal but ultimately not
released. We could not find out whether it would be possible in the future for those
districts to claim it. In their opinion, the following bottlenecks were holding up work in
the State:
• The basis of allocations made to the districts by the Central government was far
from clear. Officials had been informed that the share of each district in the total
amount budgeted for that year would be based on Central assessment of the
relative numbers of persons below poverty line in that district. However, how
much of this budgeted amount was actually released to the district would depend
on its performance in using the funds in the previous year. The State government
had recently proposed to the Ministry of Rural Development that the allocations
should be solely on the number of blocks in the district and no weight should be
given to previous performance.
• Officers at this level felt that the poor record of performance in W. Bengal was
mainly due to the non-cooperative attitude of the banks who refused to fully
release the subsidy part of funds to the beneficiaries even when these were
due and recommended.

• They also mentioned that the State government, which was to release its share
within a fortnight of Central release, often delayed the process by some more
weeks.

The Department nevertheless had been urging the district authorities to improve
their performance. Accordingly, in the two-year period from March 2000 to April
2002, approximately 35,635 SHGs had been formed in the State. Of these 90% were
women's groups.
It was however, rather surprising that in general, at this level of the bureaucracy,
nobody seemed to be overly concerned about the fact that this major programme
for poverty alleviation was progressing very slowly in the State. As shown by Table I
in at least in eight of the 18 districts participating in the scheme, there was an increase in

29

the opening balance between 1st April 2000 and 1st April 2001. In other words, those
eight districts had not improved their performance on this front even with the launching
of the SGSY that replaced the earlier schemes. However, even after two years of the
launching of the new scheme, officials at State headquarters had only the vaguest of
notions about hitches in the working of the old or the new schemes.
This was so in spite of the fact that, for a long time it was obvious that something
was seriously wrong with the working of all the Centrally sponsored anti-poverty
programmes in the State. The large balance left over in all the districts from previous
schemes had clearly signaled that fact. Therefore, one would have expected that State
officials had thoroughly investigated the problems holding up work on the earlier
schemes and checked in detail whether or not those or any other difficulties were there in
the new programme. However, apparently there had not been any detailed state level
inquiry into the performance of the earlier schemes. Nor had the details of the new
scheme been verified or discussed with its Central sponsors to make sure that the same
problems were not reintroduced in the new design.
Finding out what had ailed the centrally sponsored poverty alleviation
programmes in the State should not have been difficult for State headquarters because the
laggards included several of the more developed districts of W. Bengal and these were
adjacent to the Kolkata metropolis. Monitoring their performance should have been easier
for state level authorities; or officers at district levels should have had no difficulty in
bringing them to the notice of the former.
Instead, State officials resented the fact that a Central ministry had given them a
ready blueprint for a scheme that involves a good deal of regular administrative work and
would further have the authority to stop their grants if their performance failed to meet its
requirements. They had therefore asked the Ministry of Rural Development to allot
funds solely according to the number of blocks in a district and not on the basis of
performance or utilization. In other words, rather than try to improve ways of reaching
help to the poor, the problem had been converted into a question of State-Centre
relations.

30

Findings from the second stage
At the second stage, we approached officials at the district level who were
actually in charge of operating the scheme. The Joint Secretary in charge of the project in
the Department of Panchayet and Rural Development had very kindly written to officers
in charge of DRDCs in all districts asking them to cooperate with us and to provide us
with all necessary information. This was of great help as it managed to persuade officers
everywhere to meet with us and openly discuss their views and experiences. In this
section, we first discuss the information gathered from each district and then analyze it
together.
It was not possible for us to visit all 18 districts where the SGSY was in
operations: so we purposely selected three of those. The district of Paschim Medinipur
was selected for two reasons: it is one of the least advanced regions of the State with a
large concentration of tribal and very poor population. Its economy rests mainly on
agriculture and forestry. However it still one of the most politicized districts in the State
The second district selected was Hoogli, which on the other hand is one of the
more advanced districts in the State; it has a good mixture of prosperous agriculture along
with traditional industry in rural areas and modern large and medium industries located in
it. It is also near Kolkata and therefore it was easy for us to make multiple visits there
The third district selected was Haorah that is also close to Kolkata. It houses
many small and large industrial units. It also has some well-diversified agriculture. The
social and economic characteristics of the selected districts are given in Appendix VIA
Apart from considering these characteristics of the districts for our selection, we
were also guided by our need to have some contacts with NGOs in the area. This was
essential for us to get access to people who could shed light on their experience of
running the programme and dealing with officials. They would also provide us with
opportunities to meet the beneficiaries for discussions that were to be part of the third
stage of our work. For these interviews, we had a list of questions about the objectives of
the SGSY and its financing practices.

Medinipur

31

Our first visit to Paschim Medinipur was in September 2002, when we had an
appointment to meet the Project Director in charge of the SGSY in the district. The
officer proved to be highly forthcoming and gave us copious information; but preferred
not to answer specific questions; he would rather tell us the "story" of SGSY.

Initiating the work
The district had previously been conducting poverty alleviation work under the
IRDP and DWACRA schemes; in fact it had funds of the order of Rs.12 to 13 crores left
over from those received under the previous programmes. It had taken the agency all of
the previous two years to use up those funds. In the current financial year, the district
office had asked for release of new funds.
The Department of Panchayet and Rural Development appoints the Project
Director for SGSY in each district. In Paschim Medinipur, the Project director had
appointed an assistant project director as well as one or more officials from the state
administrative cadres in charge of the SGSY at each block level.
Method of operation
This district was operating on a somewhat different basis because the Project
Director did not approve of the way he thought NGOs operated. He had therefore
decided to work, not through NGOs, but through employees of government and
semi-government bodies like schools, anganwadis, swasthya kendras etc. Employees
of such agencies as well as in a few cases, Panchayet members, were asked to undertake
the work of organizing and nurturing the SHGs in addition to their normal duties.
Moreover, although the scheme provided for separate payment for administering the
work for the work of organizing the groups, workers in this district got no additional pay
for it. However, the Department knew about this practice and approved strongly of these
efforts.
Process of organization
The Project Director in this district dwelt at some length on the difficulties of
organizing SHGs. Forming the groups needed considerable social mobilization. The
district BPL list included a high proportion of Scheduled Tribe (ST) and Scheduled Caste

32

(SC) families. The organizers had to visit each family individually to explain to them the
new scheme, highlight its superiority over the previous ones and persuade them to come
to join the groups. To do so it was necessary to establish a personal relation with each
family, deal sympathetically with their personal problems-whether of domestic violence
or of money to feed the children- and persuade them about why the group approach was
better for them. The whole process of getting the scheme to start working took over one
year and several visits to each family. The Project Director emphasized the fact that
between communities and places, the problems and attitudes encountered were
different. It was only after establishing a close communication with these various groups,
that the scheme could be started. That partly explained the delay in using funds from the
new scheme. The SGSY design, according to the Director had not allowed enough time
for this part of the work.
Nevertheless, in his opinion, the SGSY scored over earlier schemes because it
started with bringing people together for building a collective saving habit. The SGSY
design allowed the members to use these savings for their consumption needs, or to pay
back expensive loans or even for social obligations like marriage ceremony or dowry.
This gave the groups some stability and helped the members to develop loyalty to the
group.
By the time of our visit, there were more than 20,000 groups all of which had
reached what the project director called "community convergence action'. By this he
meant that in the district already various line agencies of the government were coming
forward to help the various groups in their plans. For example, the Keshpur group had
taken up silk weaving and they had got a reeling machine from another government body,
the Paschimanchal Unnayan Fund. The Sericulture department had given training to the
women for running the machine. All in all, there was growing awareness about the
beneficiaries under the scheme among other departments and other public agencies
operating in the region. The groups by then had stabilized sufficiently for the Project
Director to release to each the initial cash credit facility of Rs. 25,000 for building up its
revolving fund.
Although the original design of SGSY did not perceive it as an exclusively

33

women's scheme, at least in this district, all the groups formed were of women. The
Project Director gave no explanation for this except that he felt that women needed the
help more.

Funding
According to officials in this district, the major problem with the scheme lay with
its pattern of funding. It appeared that the original scheme of distribution of the allocated
funds was as follows:

(1) Revolving fund 10%
(2) Matching corpus fund 10%
(3) Infrastructure 20%
(4) Training 10%
(5) Subsidy 50%

However, the groups could not claim the subsidy till they reached what was called the
second stage, i.e. till the groups had started functioning on a stable basis. On the other
hand, most of the members were so poor that they needed some financial help
immediately if they were to get out of the clutches of the usual usurers in the locality.
Apparently there was some room for renegotiating the programme to
incorporate lessons from below; Project Director here had been able to convince
higher authorities in this matter and they were then in the process of passing an
order that would allow project directors to reallocate 40% of subsidy according to
local requirements.
The Department of Panchayet and Rural Development saw Paschim Medinipur
SGSY as one of the most successful in the State. One reason perhaps was that the officer
had been able to form many groups in some of the poorest areas of the State. As we
noticed on our later field visits in that district, the Project Director had been closely
monitoring the groups and was personally familiar with many of them. However, he ran
the programme in a very patriarchal way without leaving any initiative with the persons

34

organizing the groups. On the other hand, the organizers too were content merely to carry
out his orders since for them there was no incentive to put any extra effort in doing
something that is an addition to their workload without any extra payment. It was not
clear how far this procedure could be replicated in other areas with other
communities of the poor, or with other, less energetic officers at the helm of things.
Further, the original scheme envisaged that, groups participating in the SGSY
would, develop links with banks to get funds for developing their enterprises. Providing
some immediate relief, developing a saving habit or even giving some training were no
doubt parts of the objectives of SGSY. But for its success, it aimed to ensure that the
participants reach a situation where they are permanently out of poverty and have found a
sustainable means of livelihood. To finance such activities, it is essential to develop and
establish regular credit links with local banks. In spite of the project's apparent success in
this district, however, none of SHGs had been able to forge such links with the banks.
This could be because of the recalcitrance of local banks; but it could also be because
none of the groups or their organizers had developed the capacity to negotiate with the
banks. The SGSY scheme had allowed three years for completing this process of raising
and sustaining the incomes of the participants to levels above the poverty line. After the
lapse of two years, none of SHGs here were as yet anywhere near that stage.

Hoogli
We had first contacted the Project Director of the Hoogli district with an
introduction from the Department; he then invited us to attend a meeting that he had
organized on 8th November with various NGOs and other agencies engaged in the
project. We also met him on another occasion in January 2003 in order to interview him
personally about the work.

Organization
The Hoogli SGSY has been organized in a way that is dramatically different from
what we had seen in Paschim Medinipur. The Project Director for the District had sought
to involve several NGOs who had been organizing women for DWACRA programmes.

35

The Project Director had initially encouraged some Panchayet Samities, local elected
governments at the village level, to take up the work; but he was not very happy with
their working and had therefore increasingly tended to work through local NGOs. He was
very critical of the way the programme was being run in Paschim Medinipur. He felt that
District Office there was interested only in forming more and more groups but had not
paid sufficient attention to nurturing them to the next stage where they could get bank
credit. The NGOs that were participating in the Hoogli SGSY project also felt that the
Medinipur model was ultimately unworkable because forming more and more groups
without properly nurturing the existing ones was likely to be self-defeating. They also
questioned how much time would employees of government and semi-government
agencies give to this work of organizing. It was after all, a very laborious task.
Compared to the other district, the scale of the Hoogli SGSY programme was still
small. There were so far 1925 SHGs formed in the district; of these 781 groups had
reached a stage where they could get the allocations for the revolving fund. 17 groups had
gone ahead and made links with banks for the next stage of credit cum subsidy for their
productive activities.
Of the total, 1250 were women's groups, some others were mixed and a few were
exclusively of men. In other words, over two thirds of the groups were exclusively of
women.

Funding
The District had started with left over funds of the order of Rs. 7.41 lakhs from
the earlier DWACRA scheme. It had received a further grant of Rs. 69.75 lakhs as the
State Government's contribution for SGSY in 1999-2000. Of this entire amount, they had
till then spent less than 60%; therefore they had not submitted to higher authorities an
audited report for the utilization of the grant.
The project Director claimed that while they had not received any more money
under the scheme, they did receive both from the Ministry and from the department the
annual allotments towards their administrative cost
The DRDC in the District had no idea about how the Ministry arrived at the

36

amounts allocated to each district. The Project Director emphasized that they were not
consulted in the matter and had no information about what happened to the funds if they
were not utilized in time.
There seemed to be some misunderstanding about the funds for infrastructure; the
original scheme had stipulated that these were for meeting some minor gaps in the
required infrastructure facilities; but it was not clear who was to undertake the work, the
DRDC, the NGOs or the SHGs. Under the Hoogli project the funds had been given to the
groups and wasted by the groups on small items like buying buckets brooms etc. No
lasting assets had been generated.
Training
The Hoogli SGSY project had put considerable emphasis on training the
beneficiaries. This had been done through several NGOs, However, though the district
had as many as 104 government approved NGOs, only 24 of them had undertaken this
kind of training even though the Project Director had set aside funds for that and had
asked for sound training schemes. The Project Director was proud to say that theirs was
the only district that had arranged to train women in their own homes, since most found it
difficult to go out to training institutes for several days. In fact he was critical of the
SGSY guideline's suggestions that training should be organized through institutes in the
area. He felt that was not practical since it was difficult to organize to get women to go in
groups for that. It was also perhaps not necessary because adequate training could be
given through local groups, getting the women to go to local clubs etc when necessary.
He seemed to be unaware of the fact that by doing so, the project was
reinforcing the stereotypes of women as homebound housewives. Also, this ruled
out their getting skills at any kind of modern and professional levels.

Forming Groups
Men in general were not interested in joining groups because earnings from such
activities were very meager. Women on the other hand were always interested in
supplementing their incomes and always had use for whatever little additions they
earned. Therefore, more and more groups have only women members.

37

The Director agreed with his colleague in Medinipur about the difficulties in
getting people together to form groups. A lot of groundwork is involved in persuading
them to work as a group. The problem is aggravated by the fact that there are several
political parties claiming the loyalty of the poor and members belonging to different
political parties are unwilling to work in a single group. Women are also resistant to the
idea of pooling savings and revolving funds. They would prefer to deal individually with
the organizing agency
In spite of this, the Director had pushed for a group approach; he believed that an
individual swarozgari would be at a disadvantage because it is difficult to organize
training, infrastructure support or marketing opportunities for a single person. In fact,
though the Guidelines for SGSY do allow each group to take up more than one activity,
the Hoogli Project Director also disapproved of that practice and has tried persuading
each SHG to take up a single activity.
The main problem, according to the Project Director was the requirement to apply
the scheme to families below the poverty line (BPL). The poor, according to him, are too
busy trying to earn a minimal living; they are unwilling to take time off from their
uncertain activities to come to group meetings. In any case, they do not believe that the
government is likely to help them. It is only those who have a regular living who are
prepared to spare the time for group activities. Most of the members come from such
categories and these women have a clear notion about how to use the additional
resources. Another set who join the groups are those who use the opportunities to expand
the family business. For example there are many women whose families have
traditionally carried on family businesses of chikan work The additional credit was put in
the same business to expand its scale. These members who have some regular
employment or a running family business are unlikely to be categorized among the BPL.
One of the more successful groups of Swarozgaris mentioned to us another
problem that appeared to arise from reserving the entire programme for BPL families.
Over the last few years, the group had managed to build up a successful business
producing jams and other preserves. Through that activity, their incomes had now risen to
levels above the poverty line. They were wondering, would this mean that they can no

38

longer claim any assistance under the SGSY?
The Ministry has also realized this problem of reserving the project funds
exclusively for BPL households and the new guidelines have laid down that up to 20% of
the members of a SHG can be from those above the poverty line. In Hoogli, SHGs tend
to include both BPL and APL members; however only 20% can be from the APL
families and they cannot claim the subsidy.

Views of the Intermediaries
While visiting Hoogli DRDC, we met organizers of two of the NGOs involved in
the SGSY. They highlighted the difficulties they had encountered in the work. Their
biggest complaint was about the BPL lists. These lists formed the basis for selection of
the participants but they were riddled with political manipulations and it was very
difficult to locate the genuinely needy persons.

Box 4
The BPL List

Defects in the BPL lists are perhaps the main reason why most projects for poverty
alleviation so far have proved ineffective. The SGSY is also likely to suffer the same fate.
Over time, almost all projects for helping the poor at the grassroots have become tied with the
BPL lists. Whether it is giving ration cards for subsidized food, or providing training and
credit for self-employment- every facility is reserved for those on the BPL list. As a result,
inclusion in this list has become the most important criterion for being eligible for whatever
largesse that are made available for distribution at the grassroots. As such, its politicization
was only to be expected.
Problem is, whether a household is poor or not is supposedly based on the money
value of its monthly per capita consumption expenditure. And it is quite impossible for local
workers and busy administrators to ascertain that systematically for each village household.
So alternatively, the poor are identified on the basis of an amalgam of several rough criteria
such as amount of land owned by a household, whether it’s dwelling is pucca or not, whether
members possess a bicycle, a watch, etc. The criteria are sufficiently vague and elastic to
leave considerable room for manipulations to bring in all the sympathizers of those in power.
It is reported that in many villages nearly 80% of households get to figure on the list.
Therefore when it comes to actually selecting the beneficiaries for any scheme, it is easy to
focus on one's supporters and give the genuine needy a go-by.

39

Organizer of one of the NGOs felt that the subsidies given under the project creates
problems for women. When men of the households realize that those funds do not have to
be returned, they bring pressure on the women to hand these over. This apparently has led
to increased domestic violence in many cases. However, others argued that the subsidy
was essential for drawing the women into the groups.
Both the organizers were very aware of the difficulties of organizing poor women
who are mostly illiterate, into any kind of cohesive groups. Also, even when they join in
groups, they remain deeply suspicious of each other and strongly resist the idea of group
activities. If that hurdle is overcome, the groups have to face the hostility and indifference
of the banks who are unwilling to release the funds even when the group is ready and has
obtained the necessary clearance. The rate of interest charged also appeared to be too
high to the women. Although it was significantly below what they would have paid to the
village mahajan, they found it hard to find investment opportunities where the returns
would be sufficient to cover those additional charges.
For NGOs organizing groups for SGSY, there were problems on many fronts;
often the Panchayet leaders created difficulties because they did not fully understand the
scheme and felt that they should have direct authority over the money. The DRDC
officials did not release funds promptly and held up their work. Along with the banks,
they too view the NGOs' activities with some suspicion.

Haorah
We visited the Haorah DRDC office in November 2002, when we met by
appointment the project Director. The lady gave a lot of time and her answers contained
particularly useful insights into the working of the SGSY in the State because she had
taken the trouble to find out how the scheme was working in other districts.
Funding
The Haorah project was obviously the most successful among those we had
visited since it had used up all the funds left over from the IRDP project and had received
funds from the SGSY. In the year 2001/2002, it had received one installment of Rs. 78.26

40

lakhs from the Centre and Rs. 26.08 lakhs from the State. It was entitled to another
installment from the Centre in that year, but could not get it because it had not used up
60% of the funds from the earlier allotment. That was not surprising since the
allocations for the year 2001/2002 had been released as late as March 2002. In the
next year, that is, in 2002/2003, they had again received Rs. 80.06 lakhs from the Centre
and Rs. 26.08 lakhs from the State. These funds were also released as late as October
2002; even then the Project officials had managed to use up 60% of the allotment and had
sent the utilization report as required. They were hopeful of utilizing the entire amount by
March 2003. In that case they would be entitled to get the third installment of the
2002/2003 grants.
The Project Director explained that in each year, the DRDC separately receives
the grant towards administrative expenses on a 70:30 basis. The Haorah Project Director
too thought that the Ministry should let the DRDCs know the basis of inter-district
allocations.

Organization
In Haorah district, the Project was being executed by NGOs. They were being
paid in several installments Rs.10,000 per group . In addition, the DRDC had helped the
NGOs to organize a basic orientation programme for the SHGs as well as for individual
swarozgaris. For this training the DRDC would mobilize the help of other line
departments like health and agriculture. This way the line departments become aware of
the programme and at the same time, the SHGs come to appreciate the multi-dimensional
nature of the project.
In spite of her efforts she had not been able to attract men to join any SHGs. In
this district men from poor households very often migrated or commuted to work; (there
was very little wage work available for casual labourers). So they were not available to
join local activities for earning supplementary income. In any case, earnings from the
SHG activities were too small to attract men. The few groups of males that had come up
under the scheme were those of betel leaf growers, who lived in the locality and had their
land under betel leaves in the same area.

41

The Project Director was of the opinion that, in other districts like Paschim
Medinipur, the district officials and Bloch Development Officers wanted themselves to
conduct the progarmme because they wanted control over the funds for the power that the
funds give them. This had actually meant that implementation of the project is delayed
because the officers could not give it sufficient time from their busy schedules. In any of
the past years, W. Bengal has not been able to spend more than 26% of the funds due to
it. Kerala, on the other hand, had utilized 126% of the funds. This was possible because,
every year, if any state is unable to use its allotments, then the surplus goes to a special
fund from which funds are re-allotted to those states that have used up their own grants.
In the past, W. Bengal's funds have been diverted to Kerala, Andhra and Bihar.
This is a marked departure from the procedure for earlier schemes when states
could keep the unused balance and carry it forward to the next year.

Funding
The Haorah Project Director was very critical of the funding pattern laid down in
the guidelines. It gave banks unwarranted powers, especially regarding the subsidies that
were built into the project. The guidelines are far from clear about the release of the
subsidies but they do say that, when the groups start interacting with the bank for getting
access to a flow of credit, nothing should stop them from getting the subsidy due to them.
This is not only a gross injustice on the part of the banks but also goes against the
intentions of the policy-makers to provide collateral-free loans to the poor. It defeats
the very purpose of the scheme of ensuring that economic activities of the groups are
not foiled for want of adequate credit.

Box 5
Back-ended subsidy

Banks in W. Bengal have chosen to interpret the provision of "back-ended subsidy
" in the following way:
When the SHGs become eligible to the credit facility from the banks, the
latter do not release the full amount but keep back the subsidy part as a collateral
for the credit. This means that whereas the scheme envisages that each group
would have access to a total credit of Rs.10,000 per member or Rs. 1.25 lakhs in
total (whichever amount is smaller), it actually gets only 50% of that, because the
50% of the total that is supposed to be a subsidy is not released to the group by
the banks.
It is worth noting that banks in W. Bengal were doing the same thing with
the IRDP funds. This has had been reported repeatedly to the MORD by experts

42

Building Infrastructure
The Project Director was very aware of the need to provide infrastructure that
may be necessary to make the economic activities of the SHGs viable. However, in
Haorah, very little land is available with the groups to build their own structures, so the
Director had initiated action on some commonly useful activities like roads. However, in
this, she met fierce opposition from various line agencies. In the end, instead of providing
roads for facilitating marketing, she had provide mobile vans to SHGs to market their
products from door to door.

Views of the Beneficiaries
Our ultimate aim was to find out how far beneficiaries had understood the
scheme, whether it met their needs and how far participation in it had helped them to deal
with their perennial deprivations. In order to examine these aspects we had requested the
DRDC offices in the three districts to provide us with contacts with some of the groups
that had started working in their areas. The Project Directors everywhere readily agreed
to that and arranged to introduce us to a few. In Paschim Medinipur, the Project Director
himself offered to take us to meet some groups in one of the remoter areas of the district.
In Hoogli, we were introduced to organizers of a few NGOs who took us to meet the
groups organized by them. In Haorah, the Project Director requested a woman member of

43

the local Panchayet to accompany us. In all we met over 200 participants from fifteen
groups. Of these, only one group was of males. Because of the presence of the organizers
themselves, women of the groups found it difficult to be fully frank with us. It was only
in Haorah that we could freely interact with them. Nevertheless, complaints of the
women did come out in response to some leading questions from us.

Funding
So far, only three groups, all from Haorah, had reached the stage when they were
able to establish links with the banks and get the cash credit facility. These groups had
been formed as far back as 1996 under the DWACRA project. All the other groups had
only recently reached the stage where they could claim the state help for starting a
revolving fund.
We found that very few of the participants knew exactly what the financial
provision was under the scheme and accepted whatever was given to them. If the details
had ever been explained to them, they had obviously not absorbed them. Even with the
little they did get, very few had any idea about what to do with it.

Activities
Almost all the members are involved in small activities, which are mostly home-
based. They are mostly continuation of what they had been doing in the past before
joining the group. The additional resources had helped them to expand their scale to some
extent. But in spite of the talk about SGSY's training component, we saw no
indication of new skills being introduced or old skills being upgraded. The only
exception was a single group in Haorah about which some details are given later. As with
the previous micro-credit projects9; none of the project organizers could provide the
participants with any new ideas for viable new economic activities.
Moreover, though the SGSY had aimed at getting the poor to join in groups for
building viable activities, almost all the small enterprises we heard of were being run by
members in their individual capacities. As Appendix VII (Table B) shows, most of the

9
Nirmala Banerjee and Mukul Mukherjee (1999): Some thoughts on Micro-credit for empowerment;
Sachetana, Kolkata

44

resources released in the first two years had gone to individual Swarozgaris instead of
groups in the ratio 10:1.
We found individuals cultivating mushrooms, running a small poultry, tailoring,
knitting, making muri (puffed rice) or bari ( lentil cakes) or some bamboo work. Joining
the project had not altered their techniques but in some cases they had got some facilities
for marketing as in the case of mushroom growers in Haorah. But it had not been possible
for the organizers to persuade the women to come together to cultivate mushrooms or
raise chickens on a larger scale through a group activity. This is in spite of the fact that,
there are well-known economies of scale in doing these activities on a larger scale.
In one instance, joining a SGSY group had actually harmed the economic
interests of some participants. In Medinipur, several women had been doing zari work on
piece rates for a middleman. When the group was formed, the organizer, for want of any
ideas about alternatives, had persuaded all the women to carry out their work in a
common shed. In that way a lot more women got to imitate the skills of the initiating few
and look for the same work. This meant that the local labour supply for that work
increased and it made it easy for the middleman to beat down the piece rate for all
workers.
One of the group activities that seemed to work well was of a group in Haorah
which had started a unit to make preserves-jams, jellies, pickles etc- and sell them
through a marketing unit set up under the project. Another group, that of men, had started
a provision store and had acquired a van to give home deliveries. Each of the men was
already engaged in another activity and they all took turns to work at the store.

Communications with the authorities
Most participants are rural women with little or no education or exposure to the
world outside. However, before they join the group, they and their households had
obviously used all their ingenuity, knowledge and skills for the living they so far had.
They had joined SGSY groups obviously in the hope that they would get some additional
equipment to improve their livelihoods. The Project was to give them not only some extra

45

credit, but a holistic package of new ideas, market information, new skills, physical
equipment, and infrastructure for running new enterprises. Obviously this had not
happened; but the members were neither aware of what they should have got, nor were
they in a position to confront the authorities. The latter, on the other hand, in most cases,
carried forward the top-down approach built into the project design and had made the
beneficiaries feel obliged for the benefits they had received, however partial they were.

Section V
Conclusion

Policy- makers in India would like to promote an image of the country as being
both fast developing and humane. The one major stumbling block in their project is the
vast and persistent problem of poverty, especially rural poverty. After having tried many
different projects for its alleviation, the Union government launched the Swarnajayanti
Gram Swarozgar Yojana; the SGSY was not just to give some dole or some one-time
grants or loans to the poor; it aimed to nurture their economic activities for as long as
three years so as to ensure that the poor do rise above the poverty line.
While the aim was admirable, the way devised for doing so has left a lot to be
desired. If one examines the design of the scheme in details, several aspects come up.
These are briefly summed up below:

Funding
As we saw before, few people even at the state headquarters or at the district level
have really understood the funding pattern. For example, at least in some places, the
subsidy part of the money given for the revolving fund is being treated as a non-
refundable one-time gift to the participants. However, the guidelines have mentioned that
the subsidy is to the group as a whole, the individuals who borrow from the revolving
fund, must return the entire borrowed amount to the group. They are merely
exempt from paying interest on the part represented by the subsidy. However, in the

46

districts we visited we came across instances when the beneficiaries were not required to
return even the full principle.
Similarly, as we have mentioned in box no. 4, the banks have been
interpreting the provision for "back-ended subsidy" in ways that make their
operations completely risk-free. The other agencies have not understood this fully.
Even if they had, they would have no authority to challenge the banks. The funding
pattern is not just not transparent; it simultaneously involves several agencies without any
chain of authority between them. Thus apart from possible delays in the funds passing
from the MORD and State governments to the DRDCs, the banks can, in addition, hold
up the project at any stage. The guidelines say that banks have to be involved at all stages
starting from choosing the beneficiaries. Who has the authority to question the banks
if their decisions obstruct the progress of work?
The guidelines had strongly suggested that no enterprise begun with SGSY was to
be constrained in reaching its optimal scale for lack of funds. We have seen before how
banks in W. Bengal have completely neglected this responsibility.
Recently, the Institute of Bank Management had undertaken a field survey of
banks participating in the SGSY10. The report brings out the very poor record of
achievement of the programme, and gives several reasons fro that. But surprisingly, it
makes no mention of the fact that the scheme of financing is hard to understand or
that banks are taking decisions, which are not warranted by the original design of
the project. Nor does the report anywhere question why banks have been so wary of
promoting the SGSY even though there are provisions for groups standing as
guarantors for any loans that might be made.
In other countries, particularly in Bangladesh, this provision has had a
marvelous impact on ensuring repayment of loans especially from women members.
Even the Indian micro-credit projects have followed the same approach with good
results. So the Report should have looked into the reasons why, for this programme,
the banks are allowed to be so cautious.

10
K. Dinkar Rao (2002): Swarnajayanti Gram Swarozgar Yojana: A Research Report: National Institute
of Bank Management, Mumbai. The survey was confined only to bank participating in the programme. No
attempt was made to contact other agencies.

11138471151 Swarnajayanti Gram Swarozgar Yojana

11138471151 Swarnajayanti Gram Swarozgar Yojana

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