Chapter Eleven

311

THE ROLE OF INSTITUTIONS AND THEIR EFFCTIVENESS AND DEVELOPMENT OF THE

MICROENTERPRISES

11.1 Introduction:

This chapter tries to discuss the effectiveness of the institutions that are presently

involved in development of Microenterprises. Globalization has made it imperative to

have competent, vibrant and responsive institutions. This chapter is composed in

three parts- a discussion on the institutions, their roles, and their effectiveness and

challenges faced with specific reference to the microenterprises.

SHG are now proving to be an effective strategy for participatory development to

fulfill the socio-economic objectives of poverty alleviation, watershed development

and management, community resource development and management, forest

development and also effective delivery and recovery of microfinance. The SHGs

help their members to develop various kinds of small businesses and trades which are

Enterprise development requires innovation of various types, and the management of

risks. Enterprises fulfill a market need as well a social need to something new or

different. Usually, enterprises are taken up by educated, trained people who are not

economically disadvantaged. They are driven by the urge to be independent and

innovative. These traits of entrepreneurship are, however, not seen in the businesses

run by SHGs.

Government schemes and support motivate poor and underprivileged to start their

enterprises. Often, this is the only livelihood option. Most members of the SHGs

studied were just above, at or below poverty line. These people start with several

disadvantages- they lack education, wide exposure, capabilities and experiences,

assets and resources, support etc. Setting up an enterprise in such adverse

circumstances is a matter of curiosity and interest; and more so on how they are run.

Chapter Eleven

312

, that such enterprises can neither be successful

nor sustainable, without strong and supportive institutions. In this study, the author

studied the roles played by the various stakeholders/ institutions to support SHGs in

their efforts at setting up and running their enterprises. Also examined were the

achievements, and the challenges and constraints faced by them with the object of

enhancing their usefulness and effectiveness. The major institutions involved in the

process in Sindudurg district are DRDA a government promoted NGO, banks,

NGOs and other voluntary organizations, resources providers like NABARD,

KVICs, KVIBs, etc. The author has interacted with all of them. The chapter is

discussed in two part A& B. Part A- is about present institutions and part B-is about

the need of developing a new institution.

Institutions are an essential part of social order and all members of society have

some relationship with one institution or the other-knowingly or otherwise.

Institutions influence our lives and existence. They could be of several kinds-

formal or informal, social, political and economic; or a combination of these. There

influences could be positive or negative. Hence, it is necessary to understand the

roles they play and their influence. It is important to understand what institutions

are.

Definitions of the institution

Social institutions are the means for getting certain things done. Institutions carry

out certain functions and activities which are important to life, have the influence to

bring about or prevent changes. They have structure, norms, and roles, function to a

set of rules and procedures. Institutions are made up of people, and have a

hierarchy.

There are Social, Economic, Political, Technical, Governmental, non governmental

complementing the role of other institutions and together serve the needs of

Chapter Eleven

313

individuals and society. Their potential to affect our lives is vast and they play a

very important role in bringing about changes.

Institutions can also be referred to as mechanisms to perform specific functions for

individuals, groups, communities or society. These functions may be financial,

religious, economic, educational, health, security, judicial, government etc. Some of

these institutions are family, banks, police, court, schools, hospitals, government

etc.

Well functioning and effective institutions bring about qualitative changes to our

lives. They help in enhancing prosperity, increase the feeling of satisfaction and a

sense of well-being. They are necessary and indispensable part of us because our

way of living is complex.

Here, the institutions that are discussed are those which influence the

microenterprises development process of the Self Help Groups.

11.2. SHGs:

Enterprise development is mostly an economic function that includes production,

marketing and distribution, and consumers. The enterprise needs legal sanctions and

approval for its establishment and operations. Thus, government and institutions

play an important role in controlling, supporting and developing the enterprises.

Since 1960s and70s governments in many countries have started to play active roles

in promoting and developing enterprises. This was included in their policies for self

employment and enterprises. To support the efforts of the citizens to be self-

To exist and thrive, enterprises required certain resources, support and services that

would enable to perform effectively. All enterprises, whether big or micro have

structure, policies, goals and functions. They offer products or services that are the

purpose of their existence and operations.

Big businesses or macro-enterprises have the intrinsic strength to influence policy,

create a support system for their benefit. This could include associations, chambers

of commerce and business, or such collectives as may be necessary to project their

Chapter Eleven

314

strength and protect their interests. The scale of their business and the reach brings

them he money afford services and other inputs to grow.

However, microenterprises are upcoming phenomenon and have none of these

advantages. They are encouraged chiefly to give the poor, marginalized and the

unemployed population of the society a chance to develop themselves. These

groups of underprivileged do not have the support system and the resources big

businesses have. Hence, it is necessary to create an infrastructural and institutional

support system to address their development needs. The support must ensure that

the function well enough to sustain themselves and earn a decent income and profit.

The SGSY program was started in April 1999 with the objective of providing

opportunities for self employment through SHGs with the aim of poverty

alleviation

to with the SHGs achieve the objective of creation of self employment

opportunities. The process involves many functions and stages like organizing the

members into a group, trained and awareness, savings and applying for and getting

financial support to start an enterprise. These functions involve several

organizations and institutions.

roles influence their success in meeting the desired objectives. Different

organizations are involved in different stages: organizing individuals into SHGs,

educating them on the rules and regulations, record maintains, accessing finance

and subsidy support, technical guidance and supports, legal support, marketing

support, production improvements and guidance, networking support etc. Without

cooperative, coordinated and integrated efforts the SHGs will face many difficulties

in getting their enterprises established and making them sustainable. Institutions

with good governance, trained and committed professionals, , and their timely

intervention make the difference.

But, in the SHGs studied, institutional support was largely lacking and was seen as

the major constraint to the development of the SHGs. The author made efforts to

interact with the concerned institutions to understand their roles related to helping

the SHGs. The general feeling among the stakeholders was that the institutions

Chapter Eleven

315

lacked the skills to deal with microenterprise issues and the commitment to work

with SHGs.

As stated earlier SHG itself is a new strategy and is the SHG movement is still

maturing. Thus, the experiences of institutions constitute an important knowledge

base and are a useful feedback system for making course corrections and systemic

changes. The following table shows the institutions concerned with the SHGs and

their microenterprises. There are government and non government institutions who

support the SHGs.

Table No. 11.1

Institutions Involved and Their Functions in the District

Sr.No. Institutions Status of the Institution

Functions

1 DRDA District level government department

SGSY Programme implementation, coordination, subsidy support, infrastructure development, funding

2 NABARD A National pioneering resource organization on SHGs - representative

SHG Bank linkage programme, partnership with NGOs and support to form SHGs, trainings to banks, refinances support to bank.

3 NGOs Voluntary developmental organization, made up of civil societies.

Close to people and informal ways to connect with people and built the SHGs.

4 Banks Formal financial institutions - credit provisions

Microfinance provision to SHGs, financial inclusion programmes

5 Resource organization-

Program, infrastructural, funding support organization mostly government based.

Trainings and capacity building support- skill development

These organizations play complementary roles according to their objectives,

strengths, resources, expertise and capacities to support the SHGs microenterprises

promotion and development.

Chapter Eleven

316

11.2.1. Non Government Organizations (NGOs):

Since the Eighth five year plan, NGOs have been formally accepted as partners for

development approach, NGOs help to take the process further because they are

closer to grassroots than government machinery. NGOs are voluntary organizations

and come forward to make ethical contributions towards the development of poor,

marginalized as well as downtrodden sections of the society. Earlier, NGOs would

function solely with their resources raised from donations and fill the gaps where

accommodated or incorporated by governments over a larger area. SHGs are

outcomes of a similar process -

MYRADA in India were the initiatives of NGOs.

the promotion and formation of SHGs. Their informal working approach with the

nt in projects. In

roles and responsibility differs .

NABARD allots projects to NGOs. Each NGO is responsible for forming a fixed

hree years. But NGOs with SGSY

have different norms and expectations from the DRDA. The DRDA in Sindhudurg

is not consistent with its policy of involving NGOs. The work and responsibilities

differ from NGO to NGO. Collaboration and coordination levels are not

satisfactory.This affects the implementation of SGSY programs. All NGOs admit to

this problem.Furher many NGOs have goals and objectives different from that of

SGSY.The table No. 11.2 shows the NGOs and SHGs formations work in the study

areas.

Chap

ter E

leve

n

317

Tab

le N

o.11

.2

SH

Gs

For

mat

ion

by N

GO

s in

the

Stu

dy A

rea

N

ame

of N

GO

s Si

nce

year

SH

Gs

unde

r th

e D

iffe

rent

Pro

gram

mes

T

otal

SGSY

-B

PL

SH

Gs

bank

lin

kage

A

PL

Jal-

swar

aj

Tej

asw

ini

Spec

ial

com

pone

nt

plan

(S

CP

)

Inde

pend

ent

prog

ram

mes

fu

ndin

g ag

ency

Lup

in

20

00

654

349

- -

- -

1003

Gom

ukha

2002

20

9 -

100

30

9

KO

NIM

2007

35

39

-

- -

- 7

4

DM

RC

20

04-

2008

5

66

7

3

HSS

P

(Tec

hnic

al in

puts

an

d tr

aini

ngs

on

frui

t pro

cess

ing

activ

ity)

2003

-20

06

- -

- -

- -

80 (

Pres

entl

y no

t w

orki

ng w

ith S

HG

s)

Nir

mal

giri

2006

-

- -

- -

105

105

Mau

li M

ahila

M

anda

l Shi

roda

(

MM

MS

)

1998

-20

00

- -

- -

- 12

0 Pr

esen

tly

not w

orki

ng

with

thes

e SH

Gs

2007

49

35

84

M

AV

IM

20

03

648

- -

156

159

- 96

3

JSS

(Ski

ll bu

ildin

g

As

per

- -

- -

- N

o co

mpi

led

data

bas

e

Chap

ter E

leve

n

318

/trai

ning

s )

trac

t av

aila

ble

with

NG

O

Bha

gira

th

Poul

try

and

biog

as

inst

alla

tion

trai

ning

in

puts

to S

HG

s.

2003

-

- -

- -

- --

----

---

----

----

---

Che

tana

20

03

- -

- -

-

Dat

a w

as n

ot s

hare

d w

ith th

e au

thor

and

N

GO

was

rel

ucta

nt to

di

sclo

se th

e in

form

atio

n. N

GO

pr

ovid

es o

wn

mic

rofi

nanc

e to

the

SH

Gs

but a

ccou

nts

are

open

ed in

the

bank

s

CO

NB

AC

K(

Skill

tr

aini

ngs

in B

ambo

o )

2006

-

- -

- -

- Fo

r th

e in

tere

sted

SH

Gs

and

the

SHG

s no

min

ated

by

the

DR

DA

und

er th

e SG

SY.

Mah

ila in

dust

rial

co

-ope

rativ

e (c

oir

proc

essi

ng a

nd

prod

uct

deve

lopm

ent ,

tr

aini

ng a

nd jo

b w

ork

to S

HG

s)

2006

-

- -

- -

120

(Yas

hasv

ini b

y R

asht

raw

adi

Con

gres

s pa

rty)

No

com

pile

d da

ta b

ase

avai

labl

e w

ith th

e N

GO

Chapter Eleven

319

11.2.1.1. NGOs in the District and their Role with SHGs:

Some NGOs in the district have not continued to work on SHG formation with

SGSY and NABARD. There are various reasons, chiefly non-payment by the

government, delays in payments, too much paper work, frequent changes in areas of

work, lack of respectful relationship etc. Directly or indirectly, these affect the

NGOs involvement with SHGs on a sustainable basis.

There are several organizations involved in SGSY programme besides NGOs.

There are AWWs, VDOs and even the elected representatives. They have a contract

e

formation of SHGs are required to carry out handholding for as long as the SHGs

need them. However, the DRDA changes the allocation of the place of work every

year for the NGOs. As a result, NGOs are unable to make a long term commitment

to their association with the SHGs.

On occasions, government staff and politically influential persons in the village

create hurdles in the formation process. This attitude hurts the NGOs and reduces

their motivation and commitment. NGOs working with NABARD are also hardly

interested in continuing their work. One of the reasons is that SHGs are increasing

APL-SHGs. The loan amounts are not sufficient for the groups to do any

meaningful work. Thus the NGOs feel constrained by circumstances beyond their

control.

As stated earlier, NABARD does not provide for training and any capacity building.

This is left to the NGOs to manage with the funds they are given. It is difficult for

NGOs to provide quality training with limited resources. Thus, the programme

conditions are not conducive to meaningful work by committed organizations.

11.2.1.2. Capacities of the NGOs:

NGOs in the district lack local talent and trained professional staff. Attracting the

right skills requires liberal funding, which is something that is just not available. As

from foreign agencies. NGOs in Sindhudurg are also located at a considerable far

Chapter Eleven

320

from the source of funds ( Mumbai and Pune are nearly 450 km away). The NGOs

are unable to build a proper infrastructure for their operations which are constraints

to provide quality training and support to the SHGs. There are very few

development programmes at present that provide for infrastructural development

support to NGOs. Clearly, the Government has failed in facilitating this aspect.

Both the programmes lack the necessary training needed to build capabilities of

nners have assumed that the skills and

competencies already exist. The consequence is lack of knowledge and the skills

required to guide SHGs competently , particularly microenterprise functions .

11.2.1.3. Functions of the NGOs:

The functions of NGOs are related to soft inputs like awareness creation, training

and education, organization and mobilization, referrals and developing linkages,

providing guidance and support. The role is comprehensive but their performance is

not quantifiable. This is not so with the DRDA and banks. Their performances are

quantified in terms of the amount sanctioned, disbursed, and the subsidy sanctioned

and disbursed. Hence among the stakeholders, the status of NGOs is seen at a lower

level and their work often goes unrecognized. There is a need to change this attitude

as soft inputs are just as important as the hard ones.

The following table shows in brief the nature of the functions of the NGOs involved

in the both programmes.

Chap

ter E

leve

n

321

Tab

le N

o.11

.3

F

unct

ions

in S

HG

s M

icro

ente

rpri

ses

Dev

elop

men

t in

the

Dis

tric

t

Nam

e of

N

GO

s

SHG

s fo

rma

tion

Pro

ject

B

PL

/A

PL

SH

Gs

Wor

kin

g in

N

o.

of

Blo

cks

Fun

ctio

ns P

erfo

rmed

by

the

NG

Os

Rel

ated

to

the

SHG

s

Savi

ngs L

ink

age

Gra

dati

on

Cre

dit

Lin

kag

e

Bus

ines

s G

uida

nce

Cel

l

Tra

inin

g

Mar

keti

ng

Net

wor

ks/

fe

der

atio

n

Infr

astr

uctu

re

Supp

ort

Mon

itor

ing

Lup

in

HW

RF

Y

es

SGSY

,

NA

BA

RD

- SH

G-

Ban

k cr

edit

linka

ge

prog

ram

Bot

h

Seve

n bl

ock

s

Ban

ks

Don

e

Ban

k/ O

wn

mic

rofi

nanc

e su

ppor

t up

to

Rs

2500

0/-

per

grou

p fo

r ec

onom

ic

acti

vity

No

Y

es

Som

e ti

mes

su

ppor

t fo

r pa

rtic

ipat

ion

in

exhi

bitio

n

No

N

o

By

the

fiel

d w

orke

rs;

initi

ally

m

onth

ly

then

af

ter

two

year

s w

hen

aske

d by

SH

Gs

.

Gom

ukh

Yes

SG

SY,

Jals

war

aj

,

Bot

h

Kud

al, Sa

wa

nt-

wad

i, M

al-

wan

, D

ev-

gad,

K

ank

a-va

li

Ban

ks

No

B

anks

O

ccas

ion

ally

Y

es

No

N

o

No

--

---

----

----

-

Chap

ter E

leve

n

322

KO

NIM

Yes

N

AB

AR

SHG

s-

Ban

k cr

edit

linka

ge

APL

Kan

ka-

vali

B

anks

N

o

Ban

ks

Yes

Y

es, t

wo

mod

el

CFC

st

alls

.

Yes

N

o

Mar

ketin

g st

all

By

4 fi

eld

wor

ker

DM

RC

Y

es

----

----

- A

PL

Kud

al

and

Ven

-gu

rla

Ban

ks

Yes

B

anks

Pr

ovid

ed

Yes

ex

hibi

tions

su

ppor

t

No

St

ar-

ted

but

now

st

op-

ped

No

O

ne

fiel

d w

orke

r

HSS

P

Ear

lier

wor

king

wit

h SH

Gs

for

som

e ye

ars

but

now

cur

rent

ly h

as s

topp

ed w

orki

ng

Nir

mal

-gi

ri

Yes

O

rgan

ic

farm

ing

prom

otio

n inte

rnat

iona

l fun

ds

Bot

h

Kud

al

Ban

ks

Ban

k an

d ow

n m

icro

fin

ance

at

4%

in

tere

st r

ate

up to

R

s 50

000/

- pe

r SH

G.

No

Y

es

No

N

o

No

N

o

Mon

thly

m

eetin

gs

and

repo

rts

,

12 f

ield

w

orke

rs

Mau

li

Mah

ila

Man

dal

Shir

oda

( MM

MS)

Yes

SG

SY,

NA

-B

AR

D

Bot

h

Ven

-gu

rla

and

Saw

ant

-w

adi

Ban

ks

No

B

anks

N

o

Yes

N

o

No

N

o

By

fiel

d

visi

t

Chap

ter E

leve

n

323

MA

VIM

Y

es

SGSY

,

Tej

asw

een-

i ,

SCP

Bot

h

All

bl

ock

s

Ban

ks

No

Ban

ks

Occ

asio

nal

ly

Yes

Y

es

som

etim

es

Clu

s-te

r le

vel

fede

ra- ti

ons

are

gett

ing fo

rmed

For

exhi

bitio

ns

and

bloc

k le

vel h

all

for

SHG

s m

eetin

g an

d fo

r fu

ncti

ons

By

proj

ect

appo

inte

d st

aff.

JSS

(Sk

ill

buil

ding

in

puts

)

No

-

B

oth

A

ll

bloc

ks

-

No

-

Tra

inin

gs

to S

HG

s

Som

etim

e th

roug

h ex

hibi

t-ti

ons

No

E

xhib

ition

s

NO

Bha

gi-

rath

(

trai

ning

on

bi

ogas

an

d an

imal

hu

sban

d-d

ry)

No

-

-

K

udal

B

anks

-

-

-

T

rain

ing

on

poul

try,

da

iry

and

biog

as

-

-

-

-

Che

tana

Y

es

Don

or

agen

cy

IGSS

S

Bot

h V

eng

urla

,K

ank

aval

i

Ban

ks

Som

e ti

mes

N

ot f

rom

ba

nks

but

own

mic

rofi

nanc

e pr

ovis

ion

So

me

tim

es n

ot

regu

lar

No

N

o

No

Fi

eld

wor

kers

an

d su

perv

isor

s

Chapter Eleven

324

11.2.2. Role of Banking Institution and SHGs in The District:

The role of the banks has been mandated by the Reserve Bank of India. Once a Self

Help Group is formed it must open a savings account with a bank. This is necessary

to qualify for finance from the bank. This service is offered by the nationalized

banks, District credit cooperative banks (DCCs) and Regional Rural banks (RRBs).

Thus, banks are an important stakeholder group in the promotion and development

of the SHGs. They providing saving and credit facilities to the SHGs, and by doing

so, financial literacy and inclusion the poor and marginalized takes place. The

the beneficiaries are poor. They also proved wrong the notion that the poor are not

creditworthy. The Success of Grameen Bank model in Bangladesh and its work

with the poor has influenced RBI to formulate policy to include the poor and

marginalized. RBI adopted SHG as a strategy for financial development of poor.

Now microfinance is seen worldwide as a panacea. It is believed that delivery of

microfinance to the poor will alleviate poverty. Banks are the instruments to

provide the needed microfinance.

11.2.2.1.

The opening of a savings account is treated as registration of the SHG. The pass

SBI, BOI, RRBs form SHGs as it is a part of their policy. The RRBs and SDCC

work as SHPIs (Self Help group Promotion Institutions) under the NABARD

scheme in the villages of their service area. (When there are not enough NGOs ,

RRBs and DCCs are encouraged to form SHGs in their respective districts).

NABARD provides refinance funds to banks, to lend to SHGs at a concessional rate

of interest. SHPIs receive better funding support than the NGOs working with

NABARD on the same programme).

Banks usually help to open bank accounts, carry out gradation of the SHGs and

lending to SHGs. Under the SGSY program, banks are asked to provide training

inputs on BPL-SHGs by the DRDA. In reality, most bank managers are not

interested to provide these inputs and rarely do it. Working with SHGs is not a

traditional role for banks; it is considered to be an unwanted work for the staff who

Chapter Eleven

325

are more used purely commercial transactions. However, the senior managements

of some banks have understood the potential of the SHGs. They have changed their

policy vis-à-vis SHGs and have instructed their branches to form SHGs in their

service areas. SDCC bank had formed a federation of SHGs who bank with it.

However, conflicts among the SHGs and the absence of knowledge of how to

manage a federation by the bank staff resulted in its abandonment. The bank had

provided a place to the federation for market

that, too, is not functioning.

11.2.2.2. Data base of SHGs:

Many banks do not maintain data on SHGs. Only the SDCC bank was able to

provide data about the number of SHGs that had accounts with the bank. But the

bank does not maintain a separate record of BPL and APL SHGs. The NABARD

district. The management of records was very poor and this deficiency came as a

surprise to the author; and more so as SHGs are considered a priority sector.

11.2.2.3. Credit to SHGs and Banks:

Before SHGs came into existence, the poor, marginalized and even those just above

the poverty-line had little or no access banking. SHGs made available the platform

to

and credit linkage facility to SHG members. As SHGs grew and in an increasing

position of strength, they have influenced the various changes, that took place in the

institutions. Without exception, banks have also felt the need to bring the changes

has moved bankers. They have responded positively .Ten years ago, banks were

hesitant to even allow SHGs to open a savings account. Today, SHGs do not face a

problem or resistance from the banks in opening an account. Timely repayment by

the groups has motivated banks to adopt a positive approach when dealing with the

poor. The following table provides types of banks in the district who work with

SHGs.

Chapter Eleven

326

Table No.A 11.4

Types of Banks and No. of Branches Working with SHGs

Sr.No Banks No of Branches

1 Nationalized 71

2 DDC-SDDC 70

3 RRBs- WKGB 15

- March 2010

Table No B.11.4

Bank Wise Distribution of the SHGs in The Study

Banks WOMEN

BPL APL

M EN APL

MIXED BPL APL

Total

Nationalized 7

3 4 2

1 17

Co-operative (SDCC)

-

2 1 1

- 4

Rural banks (RRBs)

1

- - - - 1

11.2.2.4. - Experiences of Bank Personnel with SHGs in the District:

The author could not interview the managers of all banks with which the groups had

their accounts. However, all the district coordinators of the banks and the Lead

District Manager of the district were interviewed by the author. They discussed

their concerns regarding SHGs at length. The discussions included microenterprise

experiences, and their own role and performance, as well as the challenges faced in

the district. The author categorized the discussions and explains in the later part of

the chapter.

11.2.2.5. Discussions with the Lead District Manager (LDM) of (BOI):

Every district has a lead bank, which is the host commercial bank to monitor and

regulate the work of banking institutions. It also prepares a yearly business plan for

the district and assigns targets to various banks in the district so that the collective

goals are achieved. The Lead District Bank (LDB) also conducts review of the work

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district. There are Block Level Bankers Committee (BLBCs) at block level and

District Level Bankers Committee (DLBCs) at district level. These are organized on

Lead Bank. SHGs are one of the important review areas for the LDM, particularly

the BPL-SHG and APL-SHGs. Thus the author has made efforts to interview these

As should be the case the LDM was a senior, experienced and committed bank

o

interaction, he discussed the various concerns about SHGs and banks in

individuals as in a SHG than to individuals. It is a more effective and safer way of

SHGs help the process of financial inclusion on a large scale. In view of the

positive experience with SHGs, banks are now moving to encouraging group

members to open individual accounts. There is awareness of financial matters.

Banks now accept the poor with little reservation. Bank staff are also more sensitive

to the needs of the poor. But more needs to be done. Following are the systemic

issues which were discussed by the LDM of Bank of India

a- Staff Slection Procedures:

The Human resource aspect of organizations helps in the realizations goals. Thus,

the quality and capabilities of human resources are found to be important factors.

Staff appointed to work in rural areas is not suitably trained for the work. It is

important that staff know the background of SHGs and the issues involved.

However, posting in rural areas is viewed by the staff merely as a service

obligation. Most of the personnel are just interested in seeing through their tenure

and return to an urban posting. It also happens that staff who acquire experience of

working with SHGs are posted to a different section in which their experience is not

of much use. These are some of the demotivating factors. Thus, banks must have

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better selection and transfer policies. The selection process must keep in mind, the

specifics of the job. Potential recruits must show an interest in rural development.

Presently, staff selection of locals is for clerical positions. State Bank of India has

recently started a special recruitment drive to appoint personnel with professional

degrees and interests in rural and agricultural development. The move was

influenced by the potential revealed from the work done with SHGs in rural areas.

The LDM also said that the such recruits must be ready and able to work in villages,

travel on motorcycles (many areas do not have roads fit for cars) to the interiors.

The challenging working conditions are made clear during the selection process.

Evidently, banks view rural areas a growth sector for their businesses.

b-Training and Capacity Building of Banking Staff:

The LDM also dwelt upon the present skills among the staff. He was of the opinion

that every bank must have the policy to appropriately train its personnel before they

are transferred to rural areas. SHG work should be made compulsory in their job

training module on SHGs, for bankers. But banks rarely depute staff to attend the

course inspite of being paid by NABARD. It is left to the branch manager to deal

with SHG issues without support from the staff. This is not a desirable state of

affairs; as managers cannot devote all their time to SHG work and the staff are not

properly trained for the work. Thus, this gap is a systemic deficiency which must be

addressed on an urgent basis because of the increasing number of SHGs.

c- ontribution:

The LDM also suggested that banks plan their manpower before the staff is posted

in rural areas. The staff should be compulsorily trained and oriented towards rural

development. There tenure in rural areas must be in phases of three, five and eight

years. Their commitment and performance must be rewarded with promotions,

monetary incentives, etc. In brief, bank staff must not feel that they are losing on

career advancement due to their rural posting. On the contrary, there must be an

incentive to work there.

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d- Lack of Uniform Approach by Banks:

Although declared a priority area, banks still do not deal with micro financing with

the seriousness it deserves. Different banks give different weightage to

microfinance in their policies. There is a lack of consistency within the same bank

in different states. For example, Syndicate Bank has a strong presence among SHGs

in Karnataka, but do not do much work in Maharashtra. Acceptance of the

Microfinance bill will bring about uniformity in approach to micro financing of

SHGs. However, at the same time, policy formation and implementation must be

taken seriously. Often, it happens that policies and programs are drafted with good

intentions, but implementation is half-hearted.

Today, different banks charge different rates of interest. Some banks insist on a

mortgage, which is against the guidelines. The type of financing also varies with

banks. Some banks offer a Cash- Credit arrangement, some give Term loans.

Repayments could be fixed monthly amounts or at the discretion of the local

management. The non-uniformity results in confusion. Thus, there is a need to

adopt a uniform approach to interest and repayments.

e- atter:

This was a concern voiced by the LDM. SHGs in Sindhudurg lack, long term vision

and goals. Rather, they are more interested in the (small) benefits. This is one of the

reasons why some bankers are reluctant to get involved with SHGs. He also

explained that banks must make profits; and they would show greater interest in

SHGs, only if these earn profits.

Presently, there are more BPL-SHGs than APL. in the district. The banks hold the

opinion that the BPL-SHGs will disband after the loan is repaid and the subsidy is

disbursed. The assumption assumed i.e. the subsidy holds greater attraction to the

BPL-SHGs than making the efforts to set up and run an enterprise. For this reason,

banks do not consider financing of BPL-SHGs as an attractive long term prospect.

Financing has not been considered of much important aspect of banking. To

customers relations with the BPL SHGs. But the researcher could see that the BPL-

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hardly those are encouraged by the banks for further continuation of credit for their

economic activities e.g SHGs -Dungeshwer, Rosario and Ganesh SHGs.

f- Profitability and Commercial Views are over Emphasized:

Another issue mentioned by the LDM was that most of the banks at present, those

are asked to work on SHGs and microfinance are the commercial banks and not the

development banks. And so there is a major difference comes in their working

strategies with SHGs. Profit earning is the motive in globalization era; banks are not

an exception for it. Hence, it is considered most important than the development of

the poor or of marginalized in the society. And if this is so, then country need to

develop another system of banking or new section in banks- where the

development, poverty alleviation and finance for it can be more focused attentions

aim are getting clashed with one another.

Due to the present strengths and opportunities in rural development it has to be

looked after differently not just by adding to the present banking system which may

hardly give justice to the cause. For SHGs and microfinance activity there is a

special need of having right persons with certain qualities and knowledge to deliver

the banking services. Such person can be appointed for three to four branches and

can look after the monitoring, guidance and direction to SHGs in their business. At

present, banks do have technical staff, that provide such specialized services to

branches for industries and on agriculture sectors financing and similar mechanisms

can be developed or can be created for microfinance and microenterprises financing

related work too. The government and RBI should be taking such initiatives. Banks

are hardly having any independence for doing anything on these matters at present.

g- Infrastructural Constraints:

Banks have to work with shortage of infrastructure. This is an obstacle in their

efforts to serve SHGs better. For example banks do not provision for a vehicle, even

a motorcycle, which their personnel can use when visiting villages. The training

given to bank staff for SHG work is not adequate to respond to challenges of

microenterprises development. Professional and technical support for

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microenterprises development is absent. This is also a major constraint in the

development of microenterprises.

India. The responsibility was devolved upon the Lead district banks. However,

related infrastructural needs like class rooms, technology, equipment, machinery,

vehicles, program content and personnel needs were not addresses. The lead district

bank has to collaborate with the DRDA to develop a training center for SHGs in

the district. About 70% BPL-SHGs and 30%APL-SHGs members are expected to

benefit. However, the lead bank still does not have a clear idea about its role and

how to go about performing its task.

The District Coordinators expressed their concerns which chiefly revolve around

staff shortage. Most rural banks have just one or two officers. It is difficult to

manage both banking duties and outdoor work. The staff of the banks has little or

no experience of business development. As a consequence they are unable to offer

any guidance to SHGs.

Banks have some relationship with NGOs, but these are in the nature of a short

term arrangements. They also not have the funds to outsource some services to

NGOs. Thus, institutional collaboration is not possible in the circumstances. DRDA

staff also are not competent to make viable proposals for BPL-SHGs. This makes it

more difficult to bank to make sanction decisions.

visits to SHGs can have a positive influence on the SHGs in encouraging them to

pursue their work more seriously. This view was expressed by Omkar SHG.

need new adoptions of functioning at various levels as the LDM has discussed and

shared. Accordingly, the changing needs and roles, the institutions need to undergo

a change, which may be wanted or unwanted by the functionaries but which has

hardly left for choice.

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11.2.3. Sindhudurga DRDA:

The DRDA is a government agency. It is basically an NGO created by the state

government and administered by government staff. It implements rural

development and poverty alleviation programmes at district level. The funds and

grants of state and central government are given directly to the DRDAs. DRDAs

work as the nodal NGO in the district with the other concerned departments and

organizations. Although DRDA is an NGO, government appoints its staff and runs

the organization as a government department.

The DRDA can appoint or make contracts with other NGOs and organizations to

partner the implementation of government funded programme like SGSY. DRDAs

are not directly involved in the formation of SHGs, but with the help of village level

development officers (VDOs), elected panchayat members, Anganwadi workers

(AAWs) etc., they facilitate the formation of SHGs.

The names of possible BPL members are drawn for the list of BPL families and

they are encouraged to form SHGs to avail of SHG benefits. Group members

coming from similar backgrounds form a homogeneous SHG. In certain exceptional

circumstances, APL persons are allowed to join BPL groups provided their numbers

do not exceed thirty percent of the total strength. Although they can participate in

group activities and enterprises, they are not entitled to a share of the subsidy

amount.

11.2.3.1.Capacities of staff at DRDA:

The DRDA does not accomplish much due to the limited capabilities of its staff.

The staff comprises mostly of persons who have not studied beyond high school

and poorly trained. Thus they are unable to give quality inputs to enable SHGs to

develop. In comparison, NGOs perform better. Informal capacity building inputs

have hardly done of these kinds of SHGs in general by government staff e.g.

Ganageshwer SHG in the present study. Even loan utilization by these SHGs has

not done up to the satisfaction, sanctioned loan amount under the SGSY. The reason

given lack of direction and attention provided by the DRDA staff because this

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SHGs mainly depen

distance and location is too difficult to take regular guidance.

The staff has not attended any training program for ten years. They have not had

any exposure to current thoughts and practices in rural development work It is

believed that SHG formation and management can be easily managed by the

present staff. The DRDA Project director agreed that a capability gap exists in the

district. Often, planning and the implementation authorities are misled on the

capabilities of the staff.

They arrange support from outside or at least refer them persons/ agencies, who can

help. SHGs which have received such support are better motivated. They also

become eligible for subsidies and are able to sustain their work. The success of

SHGs depends largely on collaborative and coordinated efforts all the stakeholders

in the program. Collective efforts by all stakeholders bring dynamism to SHGs.

11.2.3.2- Administration:

The DRDA has a Project Director and three assistant project officers for

implementing and monitoring the SGSY program at the district. They have been

allotted certain functions and responsibilities. They are supported by clerical and

statistical staff for administration and reporting. The DRDA has two extension

officers in each block to monitor the implementation of the SGSY work. One

extension officer is usually from the DIC, with sound technical abilities. The DIC

do not have right personnel with them in the district to do the justice.

The DRDA performs tasks and functions like appointing NGOs, allocation of areas,

organizing training for SHGs, grading BPL-SHGs, sanction of subsidy and transfer

of money to banks, marketing support to SHGs through exhibitions, infrastructure

is given below.

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11.2.3.3. Trainings and Capability Enhancement:

DRDA is responsible for providing quality training and inputs to upgrade the skills

and capabilities of BPL- SHGs. Lack of skills restricts earning opportunities for group

members. Thus, skill building and upgrading are important components of self

employment programmes such as SGSY. As Sindhudurg is under developed, it does

not have the institutions to support skills improvement efforts.

their skills and capabilities is one aspect of SGSY programme. The DRDA, a district

level implementing and monitoring agency, does not have any facility or

infrastructure of its own to impart the desired training to the SHGs. Physical and

software resource are not available in the district. Thus, all training is conducted by

resource persons from other agencies and paid for by the DRDA. Due to low

remuneration and excessive paper work, most NGOs and even other government

agencies do not like to get involved in DRDA work

DRDA does not have a mechanism for monitoring the training processing and

verifying the quality of training provided by the resource organizations. Some NGOs

complained about the poor quality of training and the basic inputs provided to the

SHGs. The DRDA does not have the infrastructure in the district. There is very little

post-training follow up. This work must be performed by the DRDA within a

timeframe; otherwise the benefits of training will be lost.

11.2.3.4-Marketing Support:

The DRDA has some funds to create marketing support for the SHGs. It organizes the

visits of groups for participation in various exhibitions in different cities organized by

the rural development ministry. The DRDA has deputed SHGs to exhibitions in Delhi,

Mumbai and Panjim. However, these exhibitions do not help in getting the SHGs, a

regular market; rather they give the groups a good exposure to what is happening

outside to immediate community. The DRDA also organized block level and district

level exhibitions, in which there were more participating SHGs. It is a good

opportunity for the common public to know about the work done by SHGs and also

for the SHGs to understand customer preferences.

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In Kudal and Malvan, block panchayats have constructed a few stalls for SHGs to

market their products. The stalls are offered to SHGs on rent. However, the stalls are

inconveniently located and do not attract customers. SHGs mostly stock and sell only

what they produce and do not offer products made by other SHGs. Thus, customers

do not have a choice. They must visit the shop only if they are interested in a

particular product. With some networking and coordination by the DRDA, it should

be possible for SHGs to stock more than just their products. The DRDA has started to

form village level federations of SHGs. It is possible that this arrangement will be of

such help in the near future.

Sindhudurg district is recognized as having considerable tourist potential. The DRDA

is constructing block level malls, so that BPL-SHGs can offer their products to a

wider customer base. The project has been sanctioned but funds have not been

constructed at a cost of Rs 25,00,000/- each. A district level mall is planned at Kudal

near the Mumbai-Goa Highway at a cost of Rs. one crore . The site has been selected

and land acquisition is in the process. The mall is expected to be completed by 2012.

11.2.3.5-Subsidy Disbursement:

The DRDA is authorized by the central government to sanction subsidy to the

beneficiaries. The subsidy is the share that beneficiaries can claim after they have

repaid the loans. This is done after the second stage of the gradation and the amount is

deposited in the bank account of the SHG. The subsidy disbursement takes place on

basis of loan used for the years completed by the SHGs- i.e 20%, 30%, 40%, 60% and

80% for each progressing year and 100% get covered on completion of five years. On

getting the subsidy the family is listed as APL family. Subsidy cannot be disbursed

before three years of the sanction of the loan. However, one group, Dungeswar, repaid

the loan in one year and claimed the subsidy amount immediately. The money was

also distributed among the APL members even though they were not entitled to it.

This was brought to the attention of the bank manager who said he was not aware

about this. He also said that a single officer cannot manage such a large number of

SHGs.

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The second gradation is done by DRDA as per the availability of funds. There are

many BPL-SHGs who have not received the gradation because funds were not

available. Subsidy must be disbursed to SHGs in a five year time frame.

11.2.3.6. Innovations by the DRDA under the SGSY:

SGSY is regarded as one of the progressive programmes of the government and the

first of its kind. It is open and inclusive. As it was being implemented, it was changed

and modified to suit existing needs and conditions. There is room for improvement,

innovation and experimentation. The DRDA Sindhudurg is open to considering

innovative implementation strategies. The modifications are in training, development

of common facility centers for fruit processing, SHG clusters, exhibitions at block and

district level etc.

a-Trainings:

Since January 2010, the DRDA has increased the number of days for training for

skill development. The maximum duration of training for one skill is 45 days with

a stipend of Rs 50/ per member, per day. This is sufficient incentive for a

participant to complete training with full concentration. The second innovation is

training for skills upgrade. The training is given in phased manner and can go up to

forty five days. In exceptional cases, the training can be extended to sixty days.

The next innovation is basic training at the village itself. These are conducted at the

place of work. This helps all SHG members to participate and learn.

b- Infrastructure Development

There are infrastructure constraints due to which the stakeholders face various

roviding

infrastructure for SHGs.

As reported earlier also, BPL-SHGs face problems in getting suitable places for

their activities. This is needed so they are able manage their businesses better and

take a long term view. It also facilitates investment decisions for sustainability.

Considering this, the DRDA has accepted the CFC model developed by KONIM-

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development project for fruit and food processing in Sindhudurg. The DRDA will

replicate the cluster model in ten villages for SHGs engaged in fruit processing.

must develop the capability to manage and control the CFCs. The CFCs must be

and technology. The CFCs will charge processing costs from the SHGs who use the

facility. The charges will meet the operations and maintenance costs of the CFCs.

c- Federations

It is widely believed that federations and networks of SHGs may help in improving

the strength and sustainability of SHG movement. The DRDA took up this work for

SHGs in April 2010. Those included were BPL-SHGs. Federations are formed at

the village, block and district levels federation. A General Resolution (GR) has

20, Gram Vikas Mandals (GVMs) were formed. A

village with ten BPL SHGs can form GVMs. Registration has not been completed

programmes in the villages.

The DRDA has not done much in respect of insurance cover for SHG members.

SHGs to take insurance cover for the loan sanctioned to SHGs. Most stakeholders

have very little information on the insurance needs and safety measures for SHGs in

low emphasis placed on insurance remains a matter of concern

11.3. Emerging concerns:

These are connected to the sustainability of the role of institutions and their support to

SHGs. The concerns are related to the limitations of the present institutions to

perform their roles effectively and ability to respond to the challenges ahead.

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Governmental, non governmental and financial institutions are directly involved in

the development of SHGs and their microenterprises. They must constantly interact,

cooperate and coordinate with each other in the performance of their functions.

Teamwork will help in achieving the goals. It will not be possible for one

organization, institution or stakeholder to bring about the changes on its own. It is

also difficult from the costs and resources point of view.

In reality, at present, there is no coordination among the agencies. This is a matter of

great concern as the SGSY has been ten years in its implementation. Sindhudurg has

two NGO networks. One of them is non-functional. The other meets once in six

months with no fixed agenda for SHGs. The NGOs cite manpower and resource

constraints as the reason. Some reasons are provided by the NGOs for lack of

networking are like lack of man power with institutions, lack of resources with the

institutions, lack of earlier experience on networking and on developing group

microenterprise of SHGs or guiding an income generational activities by NGOs.

Difficulties in availing supportive infrastructural and funding etc. are shared

commonly by the networking NGOs .

11.3.1. Holistic and Comprehensive Programmes:

The NGOs also shared their concerns on the limitations of the SGSY and NABARD

programs. The programmes are less comprehensive than they should be and do not

provide for funding NGOs. The guidelines are loose and contracts open to

misinterpretation. In the circumstances, the NGOs are the losers. As mentioned

before, government officers lack adequate knowledge and professionalism. They lack

the confidence to work with the NGOs who are partners in implementing SGSY

scheme. The government controls the funding and the absence of qualified and

dedicated personnel results in improper deployment of the funds.

To give an example, two block extension officers have not completed their

graduation. One of them has passed the tenth and the other passed the twelfth

standard. They were not trained in any way or SHG work. The only training and

orientation that DRDA staff received was in 2001-2002, when LUPIN conducted a

two day workshop for the DWACRA groups for move them to SHGs. It is not

surprising, then, that today DRDA does not have comprehensive knowledge of SHGs

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have to improve are inducting qualified and knowledgeable manpower, prudent use

technical and financial resources, facilitate long term sustainable involvement with

SHGs, infrastructural development, establishment of networks and linkages between

institutions inside the district and outside. These aspects are further explained by the

author.

11.3.2. Qualified and Knowledgeable Staff:

As matters stand today neither government nor nor-government organizations have

qualified and experienced professionals. The present flexible strategy helps the

participants and beneficiaries to think and act without any bias or preconceived

notions. They can explore opportunities and find non-traditional ways to earn an

income or profit. This is a challenge for staff and institutions who have not updated

their knowledge and capabilities. They are not in a position to help the beneficiaries

who, in some ways, are more aware and knowledgeable. This is observed in NGOs as

well as DRDA at both staff and executive levels. Thus, their capacity to work and

contribute meaningfully to the SHG movement is limited. They must be encouraged

to constantly update their skills and knowledge.

11.3.3. Technical and Financial Resource Allocations:

Economic development cannot take place without proper allocation of technical and

financial resources. There must also be available adequate competencies to compete

in the global markets. The institutions that work with SHGs must be qualified to

guide them to compete in bigger markets. This will not be possible without proper

allocation and use of financial resources, and planning. As things stand today, the

required infrastructure does not exist. There are deficiencies in product testing

laboratories, information access centers, IT applications, etc.

11.3.4. Long Term Involvement and Commitment:

Development is a continuous process. Development happens in phases and there is a

seamless transition from one phase to another. Individuals and institutions must share

the same vision and have a long term commitment. This view applies to the

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development of the microenterprises by SHGs also.All stakeholder organizations

will be a challenge.

11.3.5. Infrastructural Development:

Development is not possible without appropriate infrastructural support. A person

having a car and knowing to drive cannot go anywhere if his car does not have fuel.

The analogy holds good for the development process also. Poor infrastructures limit

the capacity and motivation to deliver the desired results. Sound processes, marketing

outlets, institutional support for product testing, consultancy and guidance services

for enterprise development must be made available.

The investments required are high and it may not be possible for one institution to

accomplish the objectives. In contrast to big businesses SHG's do not have access to

resources. Thus, the government has to play a crucial role in the circumstances.

Financial institutions, who make profits from their SHG activities may be encouraged

to contribute as part of their Corporate Social Responsibilities (CSR) obligations.

Other institutions like development donors or other funding agencies can invest their

funds for this cause. NGOs and other development organizations can be encouraged

to jointly share their resources and facilities. SHGs should be made aware and

motivated by banks. NGOs, and the concerned government departments should be

encouraged to participate in providing regular qualitative and sustainable support to

SHGs in areas like training, consultancy, product development, technological support

etc. This will help in bringing about improvement in standardization and quality

microenterprise products and services.

11.3.6. Establishing Networks and Linkages:

Network and linkages with various organizations involved in SHGs programmes are

necessary. The DRDA must coordinate and network among all stakeholders. This will

bring in team spirit which is absent today. The Project director must play a visionary

role in motivating the networking partners to work together to achieve the goals of the

programmes.(Coordination meetings do not take place even once a year. Only the

block staff meet at the DRDA office once a month. Even this is not communicated to

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NGOs). The feeling that the DRDA does not encourage the participation of the NGOs

must be dispelled. Government officials must not behave like bosses; they must treat

NGOs as equal partners to achieve a positive outcome.

The DRDA must facilitate networks and linkages. One possibility is to encourage

SHGs to sell each he products of other SHGs. This will encourage SHGs to work with

each other, increase their market reach, give customers more choice and introduce

healthy competition.

Part II:Felt Need for Creating a New

A new approach is needed in which the collective strengths, resources and

capabilities of the institutions can be used to achieve maximum benefits for the

SHGs. This approach would be one of cooperation and collaboration. This will avoid

duplication of efforts and optimal use of resources. To achieve this end, institutions

must be motivated to come together. One possible way of achieving this is by the

creation of a common facility centre that can be used as resource sharing facility.

Physical infrastructural facilities could be created at block and district level in which

SHGs may able to get the required guidance, consultancy, information, help in

capacity building, technical support and whatever they need to develop their

microenterprises or livelihood activities.

The functions and modalities such an institution may be decided by the partnering or

collaborating institutions. SHGs can be registered as partner members of such

institutions. The center will work like a to direct and guide SHGs

microenterprises development to attain sustainability. The efficient and effective

management of such a center is of critical need. The institution must be apolitical and

facilitate collaborative efforts.

11.4. Proposed Functions of the Institution (as derived from the experiences of this study):

derived from the findings of this study. These are points for reflection.

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1. Identifications and selection of the viable opportunities for microenterprises

(Institutions like bankS, DRDA and NGOs are not competent to perform the task).

2. Creating an Information Bank- Identify and collect information, and knowledge of

marketable products and services, markets information, raw material prices,

technology available, equipment, innovations, access to resources access, and other

needs of SHGs.

3. Build an ongoing capacity and skill development center- Skills development and

upgradation in business management, accounts and record maintenance, marketing

and delivery, recovery of dues, receipts and payments, documentation and auditing,

use of information technologies etc.

4. Support networks and promote linkages: Organizing visits, exhibitions and

demonstrations, promote institutional networks and facilitate sharing of resources

among partners and members.

5. Resource and research center for microenterprises development and promotion.

6. Business Development Services Providers resources center. The centre will offer

inputs for business planning, maintenance, monitor changes, quality management

If properly systemized, planned and executed, the Center can provide the kind of

support that is missing today.

11.5. Conclusion:

Collective and planned efforts by all stakeholders are necessary to serve SHGs and

diversified, multiple and multidimensional services and products could be made

available for the beneficiaries. This will guide the development process better. Such a

centre may not necessarily run by the government. All stakeholders must be equally

involved. It is also possible to consider Public-Private partnership for promoting and

developing the microenterprises. Sindhudurg is rich in natural resources and there is

huge potential for their use.