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CHAPTER-IV
MICROFINANCE IN KARNATAKA
129
CHAPTER-IV
MICROFINANCE IN KARNATAKA
4.1. Introduction:
The origin of microfinance in Karnataka dates back to 1984 when Mysore
Resettlement and Development Agency (MYRADA), a Non-Governmental
Organisation (NGO) engaged in rural development and based in Karnataka,
promoted several co-operative societies that extended loans to their members
(Fernandez, 2004). Later in the mid-1980s, the National Bank for Agriculture and
Rural Development (NABARD) took the lead. After the launching of SHG-Bank
Linkage Program (SBLP) in 1991-92 and under this, programme the first micro,
credit by private Vysya Bank. NABARD up scaled the programme by way of
initiating a series of measures that include training of NGOs and bank staff. The
Cauvery Grameena Bank of Mysore district became the first RRB in state to
promote and credit-link several SHGs. With state intervention, Streeshakthi and
Swashakti programmes were launched as part of promoting micro finance.
The primary objective of the SHG-Bank Linkage Programme (SBLP) of
NABARD is to expand the outreach of the formal banking system to the un-reached
rural poor on a sustainable basis (see Suran, 2007). In addition, the following
objectives were formulated for advancement of the groups. Providence of hassle
free access to the financial services and products through formal sector with low
rate of interest itself has a number of benefits for the poor. In addition, the
programme fulfills several other objectives. First, it provides consumption as well
as production loan without any collateral. Secondly, it enables SHG members to
reap economic benefit out of mutual help, solidarity and joint responsibility. The
programme also ensures long-term help from a promoting institution for a number
of activities most notably the income generating activities
As SHGs are formed by economically poorer women with low level of
capabilities to deal with banks, Self-Help Group Promoting Institutions (SHPI) play
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a critical role in the formation of SHGs and their operations in the initial stages.
For the convenience, present chapter is divided into following sections. 4.1
Introduction, Section 4.2 presents analysis of SHG-Bank Linkage programme in
Karnataka, Section 4.3 discusses the role of stakeholders and Section, 4.4 presents
issues regarding SHG-Bank linkage. Analyses of promotion and linkage of joint
liability groups, Stree Shakti and progress of microfinance in Karnataka are
discussed in Section 4.5, 4.6 and 4.7 respectively. The last section describes the
Bidar DCCB model.
4.2. SHG-Bank Linkage programme in Karnataka
The self-help movement is deep-rooted in southern States and Karnataka has
been in forefront in terms of promotion and credit linkage. Specific strategies
formulated by NABARD to meet the requirement for widening the network and
deepening the penetration of the programme in the State enabled to show the
success. The fresh SHGs formed and credit linked (direct linkage by banks) during
the year 2010-11 were 62,346 and 49,759 respectively taking the cumulative SHGs
formed and credit linked in the State to 6, 56,463 and 5, 79,969 respectively as on
31st March 2011. The average loan per SHG has risen from 1.09 lakh during
2009-10 to 1.44 lakh during 2010-11. For the convenience, present chapter is
divided into following sections. 4.1 Introduction, Section 4.2 presents analysis of
SHG-Bank Linkage programme in Karnataka Section 4.3 discusses the role of
stakeholders and Section 4.4 presents issues regarding SHG-Bank linkage.
Analyses of promotion and linkage of joint liability groups, Stree Shakti and
progress of microfinance in Karnataka are discussed in Section 4.5, 4.6 and 4.7
respectively. The last section describes the Bidar DCCB model.
A conducive atmosphere for the spread of microfinance exists in the State.
Many NGOs/SHPIs have been promoting Self Help Groups. Most of the major
Commercial Banks and also the Regional Rural Banks (RRBs) and the District
Central Cooperative Banks (DCCBs) are playing the role of “Credit Purveyor” to
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SHGs. Women and Child Development Department (WCDD) of the State
Government is promoting “Stree Shakti” groups. The Micro Finance Profile of the
State is presented in Table 4.1.
Table-4.1
Salient Features of SHG-BLP in Karnataka
Sl.
No.
Particulars As on
31.03.10
During
2010-11
As on
31.03.11
1 No. of SHGs promoted 594117 62346 656463
2 No. of SHGs credit linked (new Groups) 530210 49759 579969
3 No. of SHGs financed (new and repeat groups) Indirect Linkage through MFIs
100424 44529
4 Amount of Bank loan availed ( crore) Amount of
MFI loans availed ( crore)
5257.51 1447.03 366.70
6704.54
5 No of families covered under the programme (lakh) 80.84 9.75 90.59
6 Percentage of women SHGs Over 90%
7 Average loan per SHG ( ) during 2010-11 144092
8 No of participating banks 73
9 No. of bank branches lending to SHGs (including PACS)
8372
10 No. of NGOs participating in the programme 350
11 Amount of NABARD Refinance ( crore) 1021.11 164.70 1185.89
Source: Microfinance in Karnataka, 2010-11.
The number of SHGs promoted increased from 5,94,117 in 2010 to 6,56,463
in 2011 and 49,759 new groups were created during 2010-11. Further, the number
of families converted under the programme increased to 90.59 lakhs in 2011
from 80.84 lakhs in 2010.
Table-4.2
Agency-wise No. of SHG Accounts Sl.
No.
Agency No. of SHG
Accounts as on
31.03.2010
New SHG
Accounts
opened during
2010-11
Total No. of
SHG Accounts
as on 31.03.2011
Percentage
of accounts
held
1 Commercial Banks
261012 33252 294264 45
2 Regional Rural Banks
161230 9599 170829 26
3 Cooperative Banks
171875 19495 191370 29
Total 594117 62346 656463 100 Source: Microfinance in Karnataka, 2010-11.
Non-Governmental Organisations (NGOs), Commercial Banks, the DCCBs,
PACS and RRBs continued to play a very significant role in promotion of SHGs in
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the State. Agency-wise number of SHG accounts added during the year and the
cumulative position as on 31 March 2011, with percentage share of SHG accounts by
each agency, are summarized in Table-4.2. Commercial banks topped the position in
promoting SHGs followed by Cooperative banks and RRBs (see Table 4.2). It is
important to note that as on 31 March 2011, 5, 79,969 groups have been credit linked.
The available data presents various dimensions of progress in credit linkage of SHGs
during and the cumulative position as at the end of the year 2010-11.
Table-4.3
Agency-wise cumulative credit linkage
Agency New
SHGs
Existing
SHGs
Total Loan Amount
( crore)
Commercial Banks 23440 14314 37754 659.91
Regional Rural Banks 13527 15090 28617 377.11
Cooperative Banks 12792 21261 34053 410.01
Total 49759 50665 100424
1447.03
Indirect Linkage through MFI/ NGO
44529 366.70
Source: Microfinance in Karnataka, 2010-11.
Table 4.3 presents agency wise cumulative credit linkage. It is welcoming
to note that commercial banks again topped in credit linkage as the loan amount
stood 659 crores followed by RRBs, which accounted 377 crores whereas
Cooperative banks provided loan of 410 crores. It is important to note that the
commercial banks not only increased their credit linkage through adding new SHGs
to the existing one. Furthermore, the agency-wise share of bank loan to SHGs
during 2010-11 and the cumulative position as on 31 March 2011 is presented in
Table-4.4, which shows that commercial banks are continued to dominate in
promotion of SHGs.
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Table-4.4
Agency-wise cumulative credit linkage
Agency No. of groups credit linked Bank Loan – crore (Ground
Level)*
As on
31.3.2010
During
2010-11
As on
31.3.2011
As on
31.3.201
0
During
2010-11
As on
31.3.2011
Commercial Banks
256796 23440 280236 2630.95 659.91 3290.86
Regional Rural Banks
149097 13527 162624 1471.44 377.11 1848.55
Cooperative Banks
124317 12792 137109 1155.12 410.01 1565.13
Total 530210 49759 579969 5257.51 1447.03 6704.54
* Bank loan figures include repeat finance by banks. Source: Microfinance in Karnataka, 2010-11.
Table-4.5
SHG Bank Linkage (1992-93 to 2010-11) in Karnataka
Year No. of SHGs credit
linked
Bank Loan
( lakh)
Refinance ( lakh)
1992-1993 114 5.73 5.73
1993-1994 51 5.51 5.51
1994-1995 481 77.71 70.71
1995-1996 1046 145.08 145.08
1996-1997 760 159.25 159.12
1997-1998 1138 232.19 228.10
1998-1999 2002 409.86 422.28
1999-2000 5018 1054.81 649.00
2000-2001 8009 1714.00 1404.00
2001-2002 18413 3475.39 2229.00
2002-2003 25146 7249.50 4073.55
2003-2004 41688 13960.37 6090.22
2004-2005 59332 26653.00 9951.00
2005-2006 61730 44266.02 6695.43
2006-2007 92708 81638.87 15599.24
2007-2008 94280 100646.47 12699.52
2008-2009 60319 120702.37 19219.00
2009-2010 57975 123355.55 22463.30
2010-2011 49759 144702.80 16477.80
Total 579969 670454.48 118587.59
Source: NABARD, 2011-12.
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Table-4.5 and Table-4.6 present the SHGs-Bank Linkage in Karnataka since
inception. It is evident from the table that number of SHGs credit linked has
increased from 114 in the year 1992-93 to 2007-08. However, thereafter there is
decline in this number and it stood 49,759 in 2010-11. It is significant to note that
both the bank loan and refinance facility substantial increased during last two
decades. The bank loan which was mere 5.73 lakhs increased to 1,44,702 in
2010-11. Similar trends can be seen in case of refinance.
Further, the analysis of c reedit linkage by various agency show that the SHGs
linkage bank loan and provided by commercial banks stood highest with 2,80,236
linkages and 3,29,085 in 2011. However, this does not undermine the importance of
RRBs and Cooperative banks. The number of SHGs linkage and bank loan registered
tremendous growth through RRBs and cooperative banks as well (See Table 4.6).
Table-4.6
Credit linkage by Various Agencies (Cumulative) in Karnataka (1995-2011) Year
(as on 31
March)
Commercial Banks* RRBs* Cooperatives No of SHGs linked
Bank Loan
( lakh)
No of SHGs linked
Bank Loan
( lakh)
No of SHGs linked
Bank Loan
( lakh) 1995 316 42.85 340 46.10 – –
1996 1,034 143.00 658 91.03 – –
1997 1,425 206.00 1,022 186.65 5 0.50
1998 2,008 297.27 1,528 314.57 54 13.50
1999 2,974 473.61 2,417 513.34 201 68.25
2000 4,829 1,017.60 4,735 1,000.20 1,046 212.30
2001 6,395 1,452.00 8,334 1,647.70 3,890 576.80
2002 14,425 2,426.24 13,279 3,021.70 9,328 1,951.70
2003 20,987 4,539.58 23,473 6,048.29 17,718 3,973.05
2004 35,912 10,227.38 38,631 10,947.28 29,323 7,346.63
2005 54,814 20,210.36 62,732 21,973.31 45,652 12,991.16
2006 78,520 36,420.85 83,383 38,413.39 63,025 24,600.61
2007 139,341 85,925.91 99,931 55,718.50 78,364 39,429.31
2008 198,262 134,572.32 117,038 82,387.80 96,616 64,560.04
2009 223,853 201,563.77 136,690 113,339.14 1,11692 87,319.62
2010 256,796 263,095.00 149,097 147,144.00 1,24,317 1,15,512.00
2011 280,236 329,085.50 162,624 184,854.84 1,37,109 1,56,513.46
* Bank loan includes both direct and indirect linkage. Source: NABARD, 2011-12.
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The average loan per SHG has registering an increase of nearly 33% over
the previous year (See Table-4.7 and Figure-4.1). While this augurs well for the
growth of SHG, there is ample scope to increase the loan size further. All the three
agencies namely Commercial Banks, RRBs and Cooperative banks registered
growth in average loan per SHGs.
Table-4.7
Growth in Average Loan per SHG (Amount in )
Agency 2008-09 2009-10 2010-11
Commercial Banks 67,153.00 119,057.00 174,792.00
Regional Rural Banks 77,557.00 111,481.00 131,778.00
Cooperative Banks 74,581.00 94,769.00 120,403.00
Average loan (all agencies) 70,694.00 108,571.00 144,092.00
Source: Microfinance in Karnataka, 2010-11.
The role of MFIs finance to SHGs is one of the important segments in the
analysis. During the year 2010-11, banks in Karnataka have financed MFIs to the
tune of 366.70 crore for on lending to 44,529 SHGs.
0.00
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
140,000.00
160,000.00
180,000.00
Am
ou
nt
(Rs.
Cro
res)
2008-09 2009-10 2010-11
Figure 4.1: Growth in Average Loan per SHG
Commercial Banks Regional Rural Banks Cooperative Banks
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As per the data furnished by Association of Karnataka Micro Finance
Institutions (AKMI), 26 MFIs, affiliated to it, have a total loan outstanding of
2944.62 crore with an outreach of 44.69 lakh accounts as on 31 March 2011. In
Karnataka, SKDRDP has huge share in the microfinance market, followed by
several other MFIs like IDFFSPL, SRFS, SPANADANA, SKS, and Grameena
Koota etc. The extent of operations of all MFIs has not been captured due to lack of
any reporting system.
4.3 Role of Stakeholders
This section present the important role played by different stakeholders.
4.3.1 Government of India (GoI)
Taking cognizance of the role of SHG-Bank linkage in ensuring inclusive
growth, GoI has been attaching utmost importance to the programme, as has been
evident through Union Budget announcement every year. As indicated by Union
Government in its budget announcement for 2009-10, 50% of rural women are to
be covered under SHGs by the end of the XII Five Year Plan. Further, in the Union
Budget for 2011-12, a “Women SHG Development Fund” with a corpus of 500
crore, has been created and the same is proposed to be maintained with NABARD.
The fund will be used to refinance banks for lending to women SHGs.
4.3.2 Reserve Bank of India (RBI)
RBI through its policy announcements has made the environment conducive
for banks to participate in a larger way in the programme. Loans granted by banks
to such SHGs engaged in agriculture and allied activities are classified as direct
finance to agriculture, if banks maintain disaggregated data on SHG/micro credit
portfolio. Further, small amounts not exceeding 50,000/- per borrower, either
directly or indirectly through SHG/JLG mechanism or to NBFC/MFI for on lending
up to 50,000/- per borrower will constitute microcredit.
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4.3.3 Government of Karnataka (GoK)
In Karnataka, the State Government through its Women & Child
Development Department (WCDD) continued its mission of empowering rural poor
women in all the districts through its Stree Shakti Programme. WCDD has
facilitated promotion of 1, 35,000 Stree Shakthi Groups as on 31 March 2011 of
which 1, 22,000 Groups have been credit linked with financial assistance to the tune
of 1231.96 crore. As a part of withdrawal strategy and to wean away Stree
Shakthi Groups from Anganwadi Workers, WCDD has formed federations of the
Stree Shakthi Groups to strengthen and empower these women. WCDD has formed
federations of the Stree Shakthi Groups in all the 175 Talukas in the State and has
registered them under the Societies Act with common byelaw devised by the
department. Extensive training has been provided for capacity building of the
members of Stree Shakthi federation through MYRADA and with financial support
from NABARD.
The interest subvention scheme of providing loans to SHGs at 4% by the
Co-operative Bank has been extended for the year 2011-12. Government of
Karnataka has also extended the scheme (for the year 2011-12) for interest
subvention of 6% to nationalised banks in respect of loans extended to women
SHGs promoted with the assistance from various Government Departments.
4.3.4 Banks
Banks in Karnataka have given due importance to SHG-Bank Linkage
programme. The overall credit flow during the year 2010-11 is l, 477.03 crore
taking the cumulative bank loan to 6,581.72 crore. All the three agencies viz.,
Commercial Banks, RRBs and Cooperative Banks have made significant
contribution to the programme.
Commercial Banks have disbursed loans amounting to 659.91 crore,
constituting around 46 per cent of the loan disbursed during the year. Further,
Commercial banks have also been reaching SHGs through MFIs and nearly 70 to
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80 per cent of the loans of the MFIs to SHGs are through borrowings from
Commercial Banks. During 2010-11, an amount of 364.20 crore has been lent
through MFIs to SHGs. The average loan per SHG has increased from 1.19 lakh
to 1.75 lakh registering an increase of nearly 47 per cent by Commercial Banks.
During 2010-11, RRBs have also made significant disbursement and have
disbursed 377.11 crore. Some RRBs like Karnataka Vikas Grameena Bank and
Pragthi Gramin Bank are also lending to SHGs through MFIs. The average loan per
SHG has increased from 1.11 lakh to 1.32 lakh registering an increase of
nearly 18 per cent.
Cooperative banks with support from GoK in the form of interest
subvention, has increased their lending to SHG over the years. During the year
2010-11, they have disbursed loans amounting to 410.01 crore. The average loan
per SHG has increased from 0.95 lakh to 1.20 lakh registering an increase of
nearly 27%. The State Cooperative Bank has come out with a Vision Document
2010, wherein they have estimated formation and linkage of SHGs for the next five
years. As per the vision document, the Cooperative Banks intends promoting
around 1.25 lakh SHGs by 2015 and provide linkage to 1.40 lakh new Groups.
4.3.5 Micro Finance Institutions (MFIs)
The MFIs in Karnataka are registered either as NBFC-MFIs under
Companies Act or as MFO under Trust/ Societies Act. Out of 48 MFIs that are
active in the State, 23 have registered themselves with Association of Karnataka
Microfinance Institutions (AKMI). As on 31st March 2011, the MFIs registered
with AKMI have a total outstanding of 2944.62 crore.
4.3.6 NGOs
There are around 800 NGOs operating in the State, out of which 170 NGOs
are working with NABARD as SHPI partners. The NGOs have played a very crucial
role in SHG-BLP movement. They have remained a crucial link between SHGs on
one side and banks/developmental functionaries including the Government on the
139
other. The NGOs not only promote SHGs but also are actively involved in building
the capacities of SHGs also and inculcating financial discipline.
4.3.7 NABARD
NABARD sees the promotion and bank linking of SHGs as part of an
overall arrangement for providing financial services to the poor in a sustainable
manner and an empowerment process for the members of these SHGs. Right from
the pilot phase, NABARD is actively involved in the SHG-BLP movement.
NABARD facilitates interaction among the stakeholders to address various issues
relating to up scaling the SHG-Bank Linkage, besides continuing its various
promotional and developmental interventions. The initiatives taken by NABARD in
SHG-BLP are discussed.
NABARD Financial Services Ltd (NABFINS) is a subsidiary of NABARD
with Government of Karnataka and a few public and private sector banks as co-
equity holders. NABFINS is collaborating with NABARD in developing innovative
business models for extending microfinance to the poor. NABFINS endeavours to
reduce clients’ risks while keeping the interest rates on loans to SHGs low. It has
adopted a Business Correspondent (BC) model as one of its principal verticals in its
business model. Under this model, NABFINS identifies NGOs, SHG Federations,
etc. who have a good record of accomplishment of working with the poor, as its
BCs to reach out to the SHGs of poor. NABFINS and the BCs then together assess
the suitability of the SHGs identified by the BCs for direct financing by NABFINS.
The BC not only identifies suitable SHGs for financing by NABFINS, but also
collects the recoveries and passes it on to NABFINS. BCs receive commission from
NABFINS for the services rendered. They also have access to NABARD
promotional assistance through NABFINS for organisation and nurturing of SHGs
and for extending skill trainings and exposure programmes for SHG members.
NABFINS also assist the BCs in accessing funds for other economic activities for
the poor taken by BCs like watershed development etc. from NABARD and other
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agencies. As on 31.3.2011, 31 BCs have been engaged by NABFINS and through
them has extended loans to the extent of 50.64 crore to 2044 SHGs. NABFINS
will also be piloting other innovative business models for extending microfinance to
the poor.
4.3.7.1 Role of NABARD under SHG-Bank Linkage Programme
NABARD has been playing a very important role namely financial,
developmental and promotional in the growth of SHG-Bank Linkage in the State,
which is depicted in Chart-4.1.
Chart-4.1 SHG-Bank Linkage in the State
During 2010-11, of 169.19 lakh benefiting 23,511 members / partners has
been disbursed towards various promotional initiatives by NABARD. NABARD
provides financial support by way of grant for the following activities:
NABARD
Promotional & Developmental
Financial Training and Capacity Building of Stakeholders
Grants to NGOs/banks for
• Promotion of SHGs
• Capacity building of SHGs
• Micro Enterprise Development
• Technology upgradation
• Supporting Federations
Grants to MFIS/Banks for Rating of MFIs
Documentation/ Dissemination of Best Practices
Refinance - General
Grants to MFIS/Banks for Rating of MFIs
Refinance to commercial banks for loan to MFOs/MFIs for onlending
Capital/Equity Support and Revolving Fund
Assistance to MFIs
141
� Capacity building of the partner agencies likes NGOs, Banks, and Government
Officials.
� Capacity building of SHG leaders / members.
� Exposure visits to banks/institutions pioneering in MF initiatives.
� Field visits to nearby SHGs for officials of Block Level Bankers’ Committee.
NABARD has conducted 337 training and exposure visits programmes
covering about 9436 SHG leaders/ members. Further, 145 book writers’ programme
covering 3,625 SHG members facilitating proper maintenance of books of accounts
was conducted by NABARD. Besides, 129 programmes for all officials of
Commercial Banks, RRBs, Cooperatives, Government Officials, NGOs etc at State,
District and Taluka level.
NABARD has been extending grant assistance for promotion of SHGs. Self
Help Promoting Institutions (SHPIs) being supported by NABARD includes NGOs,
DCCBs and RRBs. During the year 2010-11, NABARD sanctioned grant assistance
of 8.40 lakh for promotion and linkage of 2025 groups taking the cumulative
sanction to 522.58 lakh for promotion and credit linkage of 30324 groups.
Assistance to the tune of 15.81 lakh to NGOs sanctioned for capacity
building of SHGs.
4.3.7.1.A.Micro Enterprise Development Programme (MEDP)
Under the scheme, matured SHGs of more than 3 years are provided training
for undertaking Income Generation Activities/livelihood activities. During the year
2010-11, NABARD sanctioned 159 MEDPs with a grant assistance of 51.25
lakh covering 4452 individual SHG members. The MEDPs covered wide range of
activities like vermin composting, food products, Kasuti works, Beauty parlour,
tailoring, integrated agri system, soft toys making, rubber tapping, agarbathi
making, etc.
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4.2.7.1.B. Support for SHG Federations
As a measure to ensure sustenance of SHGs, NABARD initiated a scheme
for supporting SHG Federations during 2007-08. The scheme is presently on a
model-neutral basis. The SHG Federations should not involve in financial
intermediation. However, they can support SHGs with various non-financial
services like skill development training, procurement of inputs, marketing of
products, legal counselling, etc. As on 31 March 2011, NABARD has sanctioned
grant assistance of 25.67 lakh to 21 Community Managed Resource Centres
(CMRCs) of MYRADA supporting 84 Federations covering 2262 SHGs.
NABARD reimbursed 25 per cent of the training cost to WCDD for conduct
of Trainers’ Training Programme covering supervisors of WCDD and select NGOs.
In total, 1750 Trainers were trained. These trainers are now actively involved in
training of cluster members of the Stree Shakthi Groups on an ongoing basis.
4.3.7.1.C. Scheme for providing technology support to NGOs for strengthening MIS
NGOs associated with NABARD for promotion of SHGs are provided grant
assistance of a maximum of 50,000/- for purchase of computer for strengthening
MIS. NABARD provides software and hardware support to NGOs who have
promoted a minimum of 250 SHGs. During the year 2010.11, grant assistance of
0.50 lakh was sanctioned to one NGO for purchase of computer and for
strengthening of MIS.
4.3.7.1.D. Scheme for rating of MFIs
To enable MFIs/ MFOs to leverage funds from banks/ financial institutions,
a onetime grant assistance of 3.00 lakh is provided to MFIs/ MFOs to get
themselves rated through accredited rating agencies. MFIs with minimum loan
outstanding of 50 lakh and maximum of 10 crore would be eligible. Banks
can also avail 100% reimbursement of expenses towards rating of MFIs up to
3.00 lakh by way of grant. During the year 2010-11, an amount of 1.544 lakh
was sanctioned to one MFI as assistance for rating.
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4.3.7.1 E. Documentation and Dissemination
NABARD has supported development of exclusive software known as
NABYUKTI by MYRADA to facilitate the Self Help Promoting Institutions to
have appropriate database for effective monitoring. NABAKD has been distributing
the software free of cost to SHPIs wanting to develop database on the functioning
of their SHGs. NABARD has also sanctioned assistance to MYRADA for
upgrading the software to a web based solution in various languages that can be
directly downloaded from the MYRADA/ NABARD website. NABARD publishes
booklets/brochures capturing the developments under SHG-Bank Linkage
Programme in the State. Every year NABARD brings out a booklet on the status of
SHG-Bank Linkage Programme in the State.
4.3.7.1.F. SHG- Bank Linkage Award
Public recognition of excellent performance motivates the bankers/ NGOs
and enables to sustain the interest in the SHG-Bank Linkage Programme. In pursuit
of this, NABARD over the years has instituted State Level Awards for the best
performance under the SHG-BLP to felicitate and motivate the stakeholders. The
awards are based on specific parameters such as ratio of SHG portfolio to overall
loan portfolio, average per group finance, average per branch SHG credit linked etc.
4.3.7.1 G. General Refinance Scheme
NABARD provides refinance support to Commercial Banks, RRBs and
Cooperative banks against their lending to SHGs. Table 4.8 presents the refinance
support provided by NABARD to banks during the year 2010-11 which show that
cooperative banks received highest refinance facility ( 64.76 crore) followed by
RRBs (45.36) crore. The commercial banks received meagre amount of 3.92
crore.
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Table-4.8
Refinance Support during 2010-11
Agency No. SHGs Amt. of Refinance ( crore)
Commercial Banks 245 3.92
Regional Rural Banks 5845 45.36
Cooperative Banks 7692 64.76
NABFINS 2036 50.74
Total 15818 164.78
Source: NABARD, 2011-12.
Following the Hon’ble Union Finance Minister’s announcement in 2007-08
Budget speechNABARD has opened a separate line of refinance for banks for
financing Farm Production and Investment activities through matured SHGs, in
addition to the existing refinance facility for SHGs,. Term loan and cash credit
limits given by the banks for a period of five years to matured SHGs exclusively for
farm production and investment activities covering agriculture sector and allied
activities will be eligible under the scheme.
As per the revised guidelines on Priority Sector Advances issued by RBI, if
banks keep disaggregated data pertaining to agricultural loans to SHGs, they can
treat such loans as direct advances to agriculture. This will also facilitate banks to
claim refinance form NABARD under this special line of refinance.
4.3.7.1 H. Support to MFIs
Realising the need and potential of MFIs and the importance attached to
their role by the GoI, NABARD has been supporting MFIs to accelerate the
availability of financial services in rural areas. The support from NABARD to MFIs
is available in the following forms:
4.3.7.1.I. Scheme for Capital/Equity Support to MFIs
The scheme for capital/equity support to MFIs has been introduced during
the year 2006-07. The specific objectives of the scheme are to provide
capital/equity support to MFIs to enable them to leverage capital/equity for
accessing commercial and other funds from banks, for providing financial services
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at an affordable cost to the poor, and to enable MFIs to achieve sustainability in
their credit operations over a period of 3-5 years. Normally, MFIs having the
effective interest rate of more than 25 per cent per annum to the ultimate clients are
not considered for support under the scheme. As on 31st March 2011, an amount of
two crore has been lent to MFIs under the scheme.
4.3.7.1 J. Revolving Fund Assistance (RFA) to MFIs for on lending to SHGs
NABARD was selectively supporting NGOs/MFIs experimenting various
models of micro finance like Grameen Model, NGO networking, SHG Federations
etc., especially in areas where sustainability of the systems is yet to be established.
The focus of RFA support will be directed for encouraging alternative micro-credit
innovations. The assistance is aimed at facilitating the supported agencies to
provide funds to the disadvantaged and excluded persons at an affordable cost.
Though the RBI has deregulated interest rate, MFIs have the effective
interest rate of more than 25 per cent per annum for the ultimate clients who were
not considered for support under the scheme. During 2010-11, an amount of 3
crore was sanctioned to IDF Financial Services (P) Ltd for on-lending to SHGs
taking the cumulative sanctions to 15.01 crore as on 31 March 2011. The details
of RFA sanctioned are given in Table-4.9.
Table-4.9
RFA sanctioned to MFIs ( crore)
Sl. No. Name of the MFI Amount sanctioned
1 Sanghamitra Rural Financial Services Ltd 7.51
2 SKDRDP 2.00
3 IDF Financial Services (P) Ltd 5.50
Total 15.01
Source: Microfinance in Karnataka, 2010-11.
4.3.7.1.K. Capital Support / Revolving Fund Assistance to Start-up MFIs
With a view to have a balanced growth of the MFI sector and enable them to
leverage funds from banks, NABARD provides capital support/ RFA to the Start-up
MFIs who are between 6 months to 2 years old. For the purpose of NABARD support,
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MFIs having an effective rate of interest equal to or less than 25 per cent are
considered.
4.4. Issues concerning SHG-Bank Linkage
Despite the growth of SHG-Bank Linkage in Karnataka, certain issues are
impeding the movement. It requires concerted efforts to tackle them effectively.
Some of the issues for the attention of stakeholders have been discussed below:
• Mobilising all poor into some institutional platform preferably SHGs, JLGs and
federation of SHGs.
• Setting-up dedicated institutions on the lines of SERP in AP, Magalir Thittam in
Tamil Nadu or Kutumbashree in Kerala, which would work in mission mode in
creating and nurturing the SHGs. The institution will liaise with all stakeholders
including bankers, various technical assistance providers, NGOs, etc in
achieving the above-mentioned objective.
• Increase the average per SHG credit to 2.50 lakh to 3.00 lakh in 1-2 years.
• Ensuring active bank accounts for all SHGs.
• Ensuring all SHG members to save regularly and have per member saving
25,000/- in 5 years.
• Good working SHGs to function as Business Correspondents.
• All SHG members to have basic insurance coverage including life
• Accidental disability, health and asset insurance particularly
• Livestock insurance.
• All SHG members to have at least 2-3 sources of income.
4.4.1 Regional imbalances in the spread of SHGs
Though SHG movement has taken deep roots in Karnataka, there has been
imbalance in the spread of SHGs among various districts of the State. The spread of
SHGs has been observed to be low in Koppal, Bagalkot, Belgaum, Bijapur and
Haveri districts. The spread of SHGs is moderate in Raichur, Bellary, Kolar,
Tumkur, Gadag, Hassan, Davanagere and Chamarajanagar, whereas the spread is
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good in Dakshina Kannada, Shimoga, Chikmagalur, Gulbarga, Uttara Kannada,
Dharwad, Kodagu, Mysore, Chitradurga, Udupi and Mandya districts. The
promoters of SHGs have to focus on districts where the spread so far has been low
or moderate, to minimize the imbalances.
4.4.2 Entrepreneurship development
Further, it is generally observed that the spread of SHGs shall be slow where
the livelihood opportunities are limited. It is crucial for the SHGs to invest their
money and efforts in income generating activities for their sustenance and
improvement in their standard of living. However, rural households are not able to
get opportunities for investment in promising enterprises due to lack of backward
and forward linkages.
Micro enterprises like agarbathi, pickle, papad making, etc., have not
succeeded as they are not able to find adequate market for their products. There is a
need not only to improve the quality of their produce so as to find market beyond
the domestic ones, as also to diversify the activities, by way of coordination with
the District Industries Centre in order to identify new and adaptable activities and
gain skills in them. NGOs have a crucial role to play to assist the SHGs to take up
new activities.
4.4.3 Federations of SHGs
For sustaining the SHGs, many NGOs have experimented institutional
arrangements such as Federations of SHGs. Such emerging structures have been
tried not only as a part of withdrawal strategy by promoters, but also to ensure
participation of the SHGs in tackling their common problems such as infrastructure
development, input procurement, marketing, coordination with development
agencies including Government Departments, legal counselling, adult education,
etc. For instance, Community Managed Resource Centres (CMRCs) promoted by
MYRADA among their SHGs function as Business Facilitators for banks, provide
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legal counselling to their members suffering from domestic violence and external
exploitations, coordinating training arrangements, marketing interventions, etc.
It is a good sign that WCDD has planned an extensive training plan for the
functionaries of Taluka Level Federations of SHGs promoted by it in consultation
with MYRADA and financial participation of NABARD. This intervention is
expected to bring about common standards among the emerging SHG Federations.
Some of the NGOs have promoted Federations only for monitoring of their loan
services to SHGs, rather than empowering SHGs to access a variety of services
from different providers. All the stakeholders should strive for the empowerment of
community based organizations for sustaining the self help movement to support
the rural poor.
Often SHGs still complain that they are not able to get due attention from
banks while getting the banking services. Therefore, they are compelled to look for
alternative sources including MFIs and private moneylenders for meeting their
needs. Looking to the increasing loans to MFIs being issued by banks, it appears
that they find it convenient to outsource their SHG loan portfolio for keeping the
transaction costs low. However, this results in increased borrowing costs for MFI
clients. Though some of the MFIs are extending value added services to their
clients, justifying the high cost of lending, not all MFIs are packaging their products
with additional services. Increased per group finance would not only reduce
transaction costs for the banks, but also help the SHGs access adequate loans for
graduating to take up income generating activities. Banks are, therefore, required to
increase the loan size to groups, especially the well functioning existing groups.
4.4.4 NGOs as Business Facilitators
Banks have been availing the services of NGOs while financing SHGs. So
long, NGOs are being supported by sponsoring agencies. After the sponsorship
period, SHGs are expected to independently deal with various service providers,
including banks. However, it is observed that SHGs do need continued hand
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holding. Hence, banks should consider continuing the facilitation services of NGOs
for some time by suitably compensating the facilitation costs. NGOs facilities help
not only providing qualitative services to SHGs, but also in loan monitoring.
4.4.5 Multiple memberships
Even as SHG-Bank Linkage has become mainstream business of banks,
there are instances when the bank branches have not been able meet the need
effectively and adequately, prompting members to seek alternate sources for their
needs as explained in the previous issue. The individual members gain membership
to other groups, especially those being promoted by new functionaries such as
MFIs. This has led to added burden to the members, requiring to saving and debt
servicing beyond their capacity. Promoters need to take care to ensure that members
do not resort to multiple memberships, as it may lead to their defaulting to save or
repay the loans. To meet the credit needs of SHGs, banks to embrace the concept of
Total Financial Inclusion and meet the entire credit requirements of SHG members
namely income generation activities, social needs like housing, education etc and
debt swapping.
4.4.6 In-operative accounts
Many bank branches are observing SHG accounts remaining inoperative,
either due to groups getting defunct or shifting their transactions to some other
agency. Banks need to ensure that while old SHGs opening the new accounts have
closed their earlier accounts with the previous bank. Also, during the strategy meets
held with stakeholders, consensual decision was taken to identify inoperative SHG
accounts to explore the possibility of reviving them with the appropriate capacity
building interventions or to close them.
4.4.7 Issues with MFIs
Many Micro Finance Institutions have emerged to tap the micro finance
market in Karnataka. While MFIs claim to cater to the unmet needs of SHGs, banks
feel the functioning of MFIs vitiates the self help movement. While banks need to
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improve their services, by being more responsive to the needs of SHGs, if necessary
by application of technology, having exclusive SHG branches, use of business
facilitators/correspondents and such other proactive measures. At the same time,
MFIs need to adopt a code of conduct for ensuring compliance with best practices,
in the interest of the SHGs.
4.4.8 Database and its integrity
The detailed data / information on the SHG activities help in reviewing the
progress and planning. The system of data collection and report generation needs
revamping both at District and State level, specifically commercial banks.
4.5 Promotion and Linkage of Joint Liability Groups
In order to give focused attention to the needs of mid-segment groups,
especially those of landless farmers/share croppers/oral lessees taking up farming
and allied activities, there is a need to promote JLGs. This would enable the
members of such groups to access timely and adequate loans required for taking up
their activities. Promotion of JLGs also helps the farmers to strengthen their
collective bargaining power. JLGs can collectively involve in procurement of inputs
and thereby save the cost of inputs besides liaise with Government agencies and
Krishi Vigyan Kendras for adoption of technology and prudent farming practices.
Similar to JLGs for the members in the farm sector, Activity Based Groups
(ABGs) for the members in the non-farm sector need to be promoted to enable them
access institutional credit for meeting their financial requirements for undertaking
their activities. Many such ABGs have been promoted under various activity
clusters. Such efforts have to be replicated to promote ABGs for people engaged in
various non-farm vocations in the rural areas.
The essential feature of JLG is that it is an informal group comprising of 4-
10 individuals coming together for purpose of availing loan on individual basis or
through group mechanism against mutual guarantee. Generally, members of a JLG
would engage in a similar type of activity in agriculture/ Non farm sector. The JLG
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concept would ensure that the Joint Liability Agreement and peer pressure in the
group serves as security for loan repayment. To facilitate promotion of JLGs,
banks/ group promoting institutions are eligible for incentive from NABARD.
Incentives will be extended for formation, nurturing and credit linking/ financing of
JLGs over a period of 3 years at the rate of 2000/- per JLG.
Though the loan given to the groups should be related to the credit needs, it
is desirable to include savings element in JLG concept. Regular savings of
affordable amounts not only help in inculcating savings habit among the farmers
(for meeting their investment / consumer needs, contingencies) but also facilitate
their coming together on regular basis helping to promote mutual trust.
Additionally, these savings will be credited in their bank account, which will
improve their rapport with the bank.
NABARD has successfully taken-up the issue of Waiver of Stamp duty for
JLGs with Government of Karnataka. While presenting the Budget for 2011-12, the
GoK had announced to that effect and detailed notification has been issued vide
Notification No. RD.73/ Registration and Stamp duty 2011 dated 29 March 2011
wherein stamp duty is waived for JLGs availing loan up to 5.00 lakh for non-
agriculture purposes. As regards Agriculture purposes, the waiver of stamp duty is
already in vogue.
Some NGOs like SKDRDP and IDF have already facilitated formation of
JLGs and providing loans through their MFI arm. Even in the formal sector, RRBs
and Commercial banks have been actively involved in providing loans to JLGs.
During the year 2010-11, under NABARD’s JLGPIs scheme, sanction and credit
linkages are given in Table 4.10
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Table-4.10
Sanction and Credit Linkage of JLGs - 2010-11
Agency Target
(No.)
Achievement
(sanctioned)
Promoted and credit linked
CBs
15000
1,270 60
RRBs 6,722 2,954
CCBs 1,300
NGOs 11,725 400
Total 21,017 3,414
Source: Microfinance in Karnataka, 2010-11.
4.6 Stree Shakthi
The programme was launched during 2000-01 and is implemented
throughout the State. The focus of this scheme is to empower rural women and
make them self reliant. Stree Shakthi Groups are formed at the village level to
inculcate the habit of savings and thrift among its members, so that women are
economically empowered. Each group comprises of about 15 to 20 women
members who come from below the poverty line families. Women belonging to
families that are landless are agricultural labourers, and largely SC/ST women who
have come together to form 1.30 lakhs Stree Shakthi Groups. In 2011-12 budget
speech, Government had announced the formation of 60,000 new groups. Hence, by
end of September-2012, 10,000 new groups were formed through taluka
federations. At present there are 1, 40,000 groups, comprising a membership of
21.00 lakhs women that are functioning in the State.
Groups conduct regular weekly meetings and save a minimum of 10/-.
These savings are used to do internal lending among the members helping them to
utilize the money for their day-to-day needs and to start small income generating
activities. Till end of September-2012, the groups had saved 1151.13 crores
since inception. Bank loans have been availed by 1, 21,325 groups to the extent of
1334.98 crores and there has been internal loan circulation to the tune of 3302.51
crores and used for taking up various income generating activities.
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Each Stree Shakthi Group is given a Revolving Fund of 5, 000/- and kit
material of 600/- which includes 9 books and zinc metallic trunk. To encourage
women’s groups to involve in saving activities and take up income generating
activities, the State has offered financial incentives of 5000/-to each group.
Further, the State also offers financial incentives of 15,000 to those groups who
have saved between 75, 000/- to 1.00 lakh and an incentive of 20,000/- to
those groups who have saved above 1.00 lakh. So far, 6367 Groups have taken
advantage of these incentives.
A subsidized loan at an interest of 6.0% is given to those groups who take
up loans ranging from 25,000/- to 1.00 lakh. A budget provision of 9.00
lakhs provided for 300 such groups during 2012-13. Each district is given 75,000
to conduct Exhibitions & Mela’s at District & Taluk Level. The purpose of this is to
facilitate the marketing of products produced by these groups. Under the Karnataka
Societies Registration Act 1960, so far 175 Block Level Societies have been
registered. Since 2005-06, financial assistance of 30, 000/- each year has been
provided to strengthen these Societies.
Skill Development Training was imparted to the Stree Shakthi Groups based
on their interest. So far, 95,735 members have been given Skill Development
Training and total expenditure of 541.19 lakhs was incurred. The budgetary
allocations for various activities under Stree Shakthi are
� 1050 lakh ( 950.00 lakh for rural groups and 100 lakh for urban Stree
Shakthi groups to be created by KSWDC) for creation of SHGs, of which an
expenditure of 240.87 lakh was incurred as offset 2012.
� With a focus on the backward areas, under the Special Development
Programme an amount of 100 lakhs each is allocated towards (i) incentives to
groups, which are involved in income generating activities, of which a sum of
23.50 lakh was spent up to Sep 2012 and (ii) continuation of civil works.
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� In view of the large number of groups taking up income generating activities, it was
proposed to provide marketing facilities at the taluka level in a phased manner from
the year 2007-08. During 2012-13, 100.00 lakhs is allocated for construction of
four taluka bhavans. The scheme has made the following impact.
•••• Inculcated habit of savings
•••• Self reliant, confident and economically independent women
•••• Development of delivery mechanisms for poverty alleviation
The progress of Stree Shakthi Scheme is summarized in Table 4.11 and Figure-
4.2, which shows that there has been decline in expenditure incurred under this scheme.
Table-4.11
Progress under Stree Shakthi Scheme
Years Expenditure
( In lakh)
Achievement
(No.s)
2008-09 952.92 80947
2009-10 832.93 49989
2010-11 970.83 86359
2011-12 795.36 54145 2012-13 (up to the end of September-12) 240.87 13611
Source: Economic Survey of Karnataka, 2012-13.
Figure-4.2: Progress under Stree Shakthi Scheme
0
200
400
600
800
1000
1200
2008-09 2009-10 2010-11 2011-12 2012-13 (up to
the end of
September-12)
Expen
dit
ure
(R
s. I
n l
akh)
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
Ach
ievem
ent
(Nos.
)
Expenditure (Rs. In lakh) Achievement (No.s)
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4.7. Progress of Microfinance in the Southern Region
4.7.1 Progress and Regional Disparities
There has been considerable regional disparity in terms of the spread of
micro finance in India. The Southern region of India is way ahead of the other
regions not just in terms of the absolute number of SHGs formed and the bank
credit supplied to these SHGs but also in terms its coverage of poor persons
residing in this region. A comparison with the number of poor persons is useful as
micro finance is essentially a means of providing bank credit to the poor sections of
the population. The Southern region is one of the well-developed regions in terms
of banking infrastructure. This has led to concentration of micro finance.
NABARD’s well-known SHG Bank Linkage Programme (SBLP) was initiated
through a pilot programme in Karnataka from the mid-1990s, which has now
expanded throughout the country. The SHGs are mainly concentrated in southern
region. The main reason of this is the prevalence of voluntary organisations in the
spread of linkage banking programme.
Table-4.12
Savings Mobilisation through Microfinance 31st March 2011
(Amount in lakhs)
Sl. No. States SHG Savings
Number % Amount %
1 Andhra Pradesh 1466225 42.02 130780 35.19
2 Karnataka 564545 16.18 96503 25.97
3 Kerala 493347 14.14 42144 11.34
4 Lakshadweep 164 0.00 10 0.00
5 Tamil Nadu 943098 27.03 99724 26.84
6 Puducherry 22081 0.63 2431 0.65
A Southern Region 3489460 (100) 46.76 371592 (100) 52.96
B Northern Region 372772 5.00 32857 4.68
C North Eastern Region 324739 4.35 13105 1.87
D Easter Region 1527618 20.47 140838 20.07
E Central Region 786436 10.54 60338 8.60
F Western Region 960921 12.88 82901 11.81
All India 7461946 100 701630 100
Source: NABARD, 2010-11.
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The largest MFIs of India, such as SHARE, SPANDANA, CDF, MYRADA,
SKS and PREM are also concentrated in southern region. NABARD has been
instrumental in facilitating various activities under microfinance sector in the
Southern Region. Besides NABARD, there are some other agencies like SIDBI,
RRBs, Co-operative Banks and public and private commercial banks are playing an
important role for the development of microfinance sector in the southern Region.
Below tables, highlight the overall progress under microfinance in the Sothern
Region
Table-4.12 highlights the state-wise progress of microfinance in Southern
Region in terms of number of SHGs and the mobilization of savings. Then the
regional data is also given to understand the relative growth of Southern Region
with respect to other regions of India. Among states of Southern Region, Andhra
Pradesh is having 42 per cent SHGs with 35 per cent savings mobilized which is the
highest followed by Tamil Nadu with 27 per cent SHGs and 27 per cent savings
mobilisation. The other Southern Region states are lagging far behind. If we
compare the Southern Region with respect to the other regions of India, we find that
Southern Region comprises the highest of 47 per cent of SHGs and more than half
of the total savings mobilisation (53 per cent). On the other hand, the Eastern
Region is having 20 per cent of SHGs and savings mobilization of equal
percentage. Thus, we find that at the regional level, the performance of
microfinance is best in the southern states and worst in the NER. Thus, we find that
the microfinance environment in the Southern region is very active.
157
Table-4.13
Loan Disbursed by Banks during 2010-11 (Amount in Lakhs)
Sl. No. States SHG Loan Disbursed
Number % Amount %
1 Andhra Pradesh 367420 50.61 620917 56.47
2 Karnataka 90342 12.44 137435 12.50
3 Kerala 72761 10.02 77769 7.07
4 Lakshadweep 14 0.00 6.50 0.00
5 Tamil Nadu 191469 26.37 255622 23.25
6 Pondicherry 4016 0.55 7877 0.72
A Southern Region 726022 (100) 60.70 1099629 (100) 75.59
B Northern Region 42493 3.55 37752 2.59
C North Eastern Region 39307 3.29 32096 2.21
D Easter Region 247624 20.70 161950 11.13
E Central Region 91954 7.69 62591 4.30
F Western Region 48734 4.07 60755 4.18
All India 1196134 100 1454773 100
Source: NABARD, 2010-11.
Similarly, Table-4.13 highlights the state-wise progress of microfinance in
Southern Region in terms of number of SHGs and amount of loan disbursed by
Commercial Banks, RRBs, and Cooperative Banks. Then the regional data is also
given to understand the relative growth of Southern Region with respect to other
regions of India. Among the states of Southern Region, the state of Andhra Pradesh
is having 51 per cent SHGs with 56 per cent disbursed bank loans, which is the
highest, followed by Tamil Nadu with 26 per cent SHGs and 23 per cent disbursed
as bank loan. The other Southern Region states are lagging far behind. When we
compare the Southern Region with respect to the other regions of India, it is the
number one region even with respect to disbursement of bank loan to SHGs. Easter
region is the next best performer compared to other regions. Thus again we find that
at the regional level, the performance of microfinance is best in the southern states
and worst in the other regions.
158
Table-4.14
Bank Loans Outstanding against SHGs as on 31st March 2011 (Amount in lakhs)
Sl.
No.
States SHG Savings
Number % Amount %
1 Andhra Pradesh 1693792 62.58 1336912 61.30
2 Karnataka 252613 9.33 224612 10.30
3 Kerala 178211 6.58 157275 7.21
4 Lakshadweep 14 0.00 5 0.00
5 Tamil Nadu 574385 21.22 452624 20.75
6 Puducherry 7393 0.27 9430 0.43
A Southern Region 2706408 (100) 56.54 2180859 (100) 69.85
B Northern Region 149108 3.11 90314 2.89
C North Eastern Region 150021 3.13 69525 2.23
D Easter Region 1105533 23.10 420255 13.46
E Central Region 358872 7.50 236539 7.58
F Western Region 316821 6.62 124623 3.99
All India 4786763 100 3122116 100
Source: NABARD, 2010-11.
Table-4.14 shows the state-wise progress of microfinance in Southern
Region in terms of number of SHGs and amount of loan outstanding by
Commercial Banks, RRBs, and Cooperative Banks. The regional data is also given
to understand the relative growth of Southern Region with respect to other regions
of India in terms of bank loans outstanding. Among the states Southern Region, the
state of Andhra Pradesh is having63 per cent SHGs with 61 per cent outstanding
bank loans which the highest is followed by Tamil Nadu with 21 per cent SHGs and
21 per cent bank loans outstanding as on 31st March 2011. The other Southern
Region states are lagging far behind. At the all India level, the Southern Region is
having highest number of SHGs and outstanding banks loan with more than 50 per
cent as compared to other regions. Thus, it is clear that at the regional level, the
performance of microfinance is best in the southern states and worst in the other
regions in terms of bank loan outstanding. Thus, we find that the microfinance
environment in the Southern Region is very active in terms of bank loans
outstanding.
159
Table-4.15
Non-Performing Assets against bank loans to SHGs as on 31st March 2011
Sl.
No.
States Amount of Gross
NPAs against
SHGs
NPA as %age to
loan outstanding
1 Andhra Pradesh 27049 2.02
2 Karnataka 6686 2.98
3 Kerala 13547 8.61
4 Lakshadweep 0.00 0.00
5 Tamil Nadu 34957 7.72
6 Pondicherry 397 4.21
A Southern Region 82636 3.79
B Northern Region 6366 7.05
C North Eastern Region 5856 8.42
D Easter Region 18107 4.31
E Central Region 25404 10.74
F Western Region 9042 7.26
All India 147411 4.72
Source: NABARD, 2010-11.
Table-4.15 shows the state-wise progress of microfinance in Southern
Region in terms of Non-Performing Assets (NPA) of SHGs out of the total loans
outstanding in Commercial Banks, RRBs, and Cooperative Banks. The regional
data is also given to understand the relative growth of Southern Region with respect
to other regions of India in terms of NPAs. Among the states of Southern Region,
the state of Tamil Nadu is having the highest amount of gross NPAs (34957 lakhs).
However, in terms of percentage of NPAs to outstanding bank loans of SHGs, it is
highest in Kerala (8.61 per cent) as compared to Tamil Nadu (7.72 per cent) and
other states in Southern Region. Among the Southern Regions, Andhra Pradesh and
Karnataka are doing exceptionally well in its loan recovery with the minimum
percentage of 2.02 per cent and 2.98 per cent NPAs to the outstanding bank loan of
SHGs, which are even below the all India average of 4.72 per cent. The southern
region is having the lowest percentage of NPAs (3.79 per cent) with respect to the
outstanding bank loan of SHGs. Thus, again we find that at the regional level, the
160
performance of microfinance is best in the southern states and worst in the Central
Region in terms of NPAs to loan outstanding. Thus, it is clear that the microfinance
environment in the Southern Region is very active in terms of recovery
performance of the bank loans to SHGs.
4.7.2 District Wise Bank Loan Disbursed to SHGs in Karnataka
The district wise bank loan disbursed from the year 1999-2000 to 2005-2006
for the 27 districts of Karnataka indicating that the first triennium average values
were lower in all the districts. The state overall total for all the years was found to
be 99,422.77 lakhs rupees and the average for the state was found to be 14,204.97
lakh rupees. The first triennium average values for the state as a whole (2,384 lakh
rupees) was found to be lower than the state average but whereas in the case of the
second triennium average values for the state as a whole (28,344.42 lakh rupees)
was higher than the state average.
4.7.3 The Business Performance of the Micro-Finance Providers
The important factors that decide on the business performance of the Micro
Finance providers are discussed in this section.
The performances of microfinance provided by NGOs to SHGs formed by
them in the selected districts are discussed here. The numbers of SHGs formed
from the selected districts were 9,243. The average number of SHGs formed was
1,155.37 for all the selected districts. The highest numbers of SHGs were formed in
Chitradurga and it was 2,071, the highest average was also found in the same
district, which was 259 SHGs.
4.7.3.1 Number of SHG members served by the NGOs
The total number of SHG members served in the selected districts was found
to be 1, 39,342 and the average for all the selected districts were 19,171. The
highest number of members served was found in the district of Chitradurga (31850)
and the highest average was found in Dharwad district, which was 4676.
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4.7.3.2 Amount of NABARD funds expended to selected NGOs
The formation of the SHGs by the NGOs using the NABARD funds in the
selected districts and the total funds that were spent in all the selected districts was
57,06,817. The average amount utilized from NABARD for all the selected
districts was 7,13,352.16. The highest fund that was used was in Belgaum
( 33,01,985) with an average of 4,12,748. The lowest utilization of NABARD
funds was found in Bijapur district ( 18,000) with an average of 2,000 per year.
4.7.3.3 Lending to SHGs through Bank assistance
Total lending to the SHGs by the NGOs using the assistance of the banks in
the selected districts was 42,26,85,501 and the average for the selected districts
was 5,28,35,688. The highest amount spent was found in Shimoga district which
was about 11, 33, 16,000 and the average was 1,41,64,500 rupees. The lowest
amount lent was in the district of Bijapur where in they had lent only an amount of
about 15,00,000 with an average of almost 1,87,000.
4.7.3.4 Lending to SHGs through NGOs’ own funds
The amount spent from NGOs own funds for a year including the amount
lent to the SHGs. The total amount spent by the NGOs in the selected districts was
3,34,94,500 and the average was 41,86,813. The highest amount was spent in
Chitradurga district which amounted to 1,54,06,000 and the average was found
to be 19,25,750. The lowest amount that was spent was in the district of Bijapur
which accounted for only 1,71,000 highest amounts overdue was found in
Chitradurga district which was 84,06,301. The district of Bijapur had no overdue
situation as the entire amount lent was already recovered (NABARD).
4.7.3.5 Portfolio of Lending by NGOs to SHGs
The portfolio of lending by the NGOs in the selected districts to the SHGs
was found in six major categories, which were agriculture, Agribusiness,
manufacturing, personal, needs, petty business and others. In Belgaum district,
49.90 per cent was lent towards agriculture. In Bijapur district, 68.10 per cent was
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lent towards other category. In Chickmagalur district, 49.87 per cent was lent
towards agriculture and 31.85 per cent towards other category. In Chitradurga
district, 52.76 per cent was found to have been lent to agriculture, 28.84 per cent
was lent to agribusiness and 31.39 per cent towards personal needs in Davangere
district. In Dharwad district, the lending procedure was very erratic with only 9.15
per cent, 18.29 per cent, 27.44 per cent and 45.12 per cent was lent to agriculture,
agribusiness, manufacturing and other categories respectively. In Haveri 80.65 per
cent was lent to agriculture, where as in Koppal 50 per cent was lent to
agribusiness, while, Shimoga district recorded 80.13 per cent of the total amount
lent towards agriculture. The lowest lending that was given to agriculture was in the
district of Dharwad.
4.7.2.6 Skill Developmental Activities Conducted by NGOs to the SHGs
The skill development activities conducted by the NGOs to the SHGs were
recorded under seven major heads. They were, exposure visits, training
programmes, demonstrations, MELAs conducted for marketing of the products,
linkages provided between technology institutions and SHGs, linkages provided
between marketing institutions and SHGs and equipments provided. The highest
numbers of exposure visits were conducted in Chitradurga (68.38), training
programmes (470.13) were conducted in Dharwad district and demonstrations
(51.25) were found to be highest in the district of Chitradurga. The highest numbers
of MELAs (12.88) were conducted in Dharwad district and the highest numbers of
equipments (75.00) were provided in Chitradurga district. In Bijapur,
Chickmagalur, Chitradurga, Davangere, Haveri and Shimoga, there were no
linkages between marketing institutions provided. In Bijapur, Chitradurga,
Davangere, and Haveri there were no linkage facilities provided between
technology institutions and the SHGs. In Bijapur, Chickmagalur, Davangere and
Haveri no melas for the SHGs were conducted.
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4.7.4 Impact of Micro-Financial Institutions on Member Enterprise
The impact of micro financial institutions on the member enterprises (SHGs)
are discussed here under; the impact is studied on the different aspects like income
position of the SHG members, asset position of the SHG members, generation of
employment, the savings, the investment pattern and the consumption pattern.
4.7.5 Impact of NGOs on the Income of the SHG
Impact of micro finance provided by NGOs on the income of the SHGs in the
selected districts is an important aspect. The highest impact was found in Chitradurga
district where the income before the involvement of the NGOs was 19, 862.50 and
after the involvement of the NGOs the income rose to 42,775 and the‘t’ value was
6.78. The lowest impact was found in Belgaum district where in the income before
was 55,379 and it rose to 1, 34,108 having at value of 2.08.
The pattern of growth of SHGs in the State from 1992-93 to 2005-06 is
discussed in detail. Here, there is data on three aspects of the growth of Micro
finance in the State. In the year 1992-93, the total number of SHGs credit linked
were only 114, which decreased in 1993-94 to 51 while we can see a constant rise
in their numbers. In the year 2005-06, the total number of SHGs credit linked grew
up to 61,730. The compound growth rate of number of SHGs credit linked
increased at the rate of 71.19 per cent. Similarly, bank loan disbursed to SHGs was
found to be growing at the compound growth rate of 95.97 per cent and refinance to
banks from Apex level institutions increased at a compound growth rate of 75.83
per cent. The rate of growth in bank loan is higher than the growth in both the
SHGs credit linked and refinanced. This was achieved because of the efforts of the
NGOs and the government agencies, the policies that were taken up by the
government during these periods, seeing the importance of the SHGs in the
improvement of the lives of the poor was also evident for this kind of an
achievement in the field of SHGs growth. This higher growth in micro finance may
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also be possible because of refinance support provided by the apex level
institutions, which are into Micro finance.
4.7.6 District Wise SHGs Credit Linked in Karnataka
The district wise SHGs credit linked from the year 1999-2000 to 2005-2006
for Karnataka shows clearly that the first triennium end, average values are lower in
all the districts except in the districts of Bidar and Chitradurga. The compound
growth rates of Bidar and Chitradurga districts for these years were 0.69 and 11.12
respectively, as the compound growth rate itself states the growth in these district
were low because of the lack of interest among the people for these kinds of
policies in the regions. The state total for all the years was found to be 2,24,928
number of SHGs the average for the state was found to be 32,132.57 in number this
growth can be attributed to the efficient working of the people those who are related
to the micro finance and its development. The first triennium end average values for
the state as a whole (15,263.67) was found to be lower than the total state average
whereas average values for the state as a whole (51,330.33) were higher than the
state average in the case of the second triennium end. the total movement of Micro
finance in the state was geared up during the second triennium as a lot of
government policies were framed and also because of the realization of the apex
level institutions on the importance of the SHGs and their role in the alleviation of
poverty.
4.7.7 District Wise Bank Loan Disbursed to SHGs in Karnataka
The district wise bank loan disbursed from the year 1999-2000 to 2005-2006
for the 27 districts of Karnataka is reported in Table 4.16. It is evident from the
table that at the first triennium end, average values are lower in all the districts. The
State total for all the years was found to be 99,422.77 lakhs the average for the
state was found to be 14,204.97 lakh. The first triennium end average values for
the state as a whole ( 2,384 lakh) was found to be lower than the state average but
whereas in the case of the second triennium end average values for the state as a
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whole ( 28,344.42 lakh) was higher than the state average this again can be
attributed to the efficient working of the agencies that are involved in the up-
liftment of the micro financial institutions.
Table-4.16
District-wise Bank Loan disbursed to SHGs (1999-2000 to 2005-2006) in
Karnataka ( Lakh)
Name of the
Districts
1999-00 2000-01 2001-02 2003-04 2004-05 2005-06 Total Average
Bagalkot 1.69 4.65 41.77 197.90 264.98 485.70 1032.48 147.50
Bangalore (R) 1.69 2.86 36.05 411.20 2467.03 2678.00 5629.93 804.28
Bangalore (U) 2.41 3.57 140.62 168.70 654.71 1208.40 2245.21 320.74
Belgaum 15.41 36.70 117.09 619.90 1097.39 2529.00 4730.39 675.77
Bellary 13.01 52.07 431.23 619.90 836.43 1440.10 3827.43 546.78
Bidar 110.55 213.98 426.57 816.10 706.56 2326.80 5075.76 725.11
Bijapur 19.27 30.98 74.05 173.30 469.10 645.20 1619.50 231.36
Chamarajnagar 11.20 43.49 312.81 377.00 631.29 1120.90 2682.49 383.21
Chickmagalur 0.48 13.58 74.94 207.40 429.56 925.50 1735.36 247.91
Chitradurga 60.57 87.57 391.96 594.00 784.80 15 23.70 3665.90 523.70
Dakshinakannada 343.57 403.66 206.87 2177.10 2044.50 1799.80 7903.90 1129.13
Davanagere 4.09 11.68 143.73 115.00 1055.50 1468.10 2834.40 404.91
Dharwad 34.56 58.86 95.98 208.90 442.52 1008.80 1959.82 279.97
Gadag 2.41 8.10 53.99 116.90 250.68 777.00 1250.98 178.71
Gulbarga 35.28 57.67 146.95 467.60 813.67 2040.70 4098.97 585.57
Hassan 8.43 58.38 300.19 875.90 1814.86 4618.60 814.8646 1156.35
Haveri 3.49 14.42 74.69 194.40 578.29 1328.90 2226.29 318.04
Kodagu 1.93 3.22 45.76 189.80 365.54 1200.70 1898.34 271.19
Kolar 69.97 87.93 172.00 402.40 1131.96 1789.90 3978.36 568.34
Koppal 4.70 10.84 75.86 63.80 401.96 499.80 1094.46 156.35
Mandya 4.58 15.01 103.31 524.50 1024.07 2255.70 4143.87 591.98
Mysore 132.47 172.16 166.17 856.10 3040.82 2794.10 7556.92 1079.56
Raichur 4.70 44.08 102.92 184.20 461.38 641.70 1521.18 217.31
Shimoga 104.53 163.35 299.02 821.80 1386.66 1337.40 4384.96 626.42
Tumkur 27.34 41.10 101.66 797.40 2426.83 4410.60 8218.03 1174.00
Udupi 32.39 64.22 169.89 1345.70 665.68 757.60 3847.78 549.68
Uttarakannada 4.09 9.89 77.12 433.60 566.01 1007.30 2177.61 311.09
State total 1054.81 1714.00 4383.19 13960.50 26812.77 44260.00 99422.77 14204.97
Source: SHG-bank linkage Programme Karnataka 2005-2006, NABARD
Association of Karnataka Micro-finance Institutions (AKMI) is registered
under the Societies Act of 1860 and it is overseeing the workings of various (23)
MFIs, has informed that the loan outstanding given by various MFIs as on March
2012 is 3232.26 crore covering 4214872 accounts, out of which overdue is only
2.56 per cent.
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Table-4.17
Bank-wise Savings Mobilisation as on 31st March 2011 in Karnataka
(Amount in lakhs)
Sl. No. Name of the Bank No. of SHGs Savings
1 Allahabad Bank 282 27
2 Andhra Bank 178 16
3 Bank of Baroda 1320 133
4 Bank of India 525 10
5 Bank of Maharastra 587 3
6 Canara Bank 28423 7248
7 Central Bank of India 493 393
8 Corporation Bank 10443 2813
9 Dena Bank 789 748
10 IDBI Bank 44 213
11 Indian Bank 2997 293
12 Indian Overseas Bank 2040 117
13 Oriental Bank of Commerce 67 4
14 Punjab National Bank 938 124
16 State Bank of Hyderabad 1246 18135
17 State Bank of India 37411 278
18 State Bank of Mysore 49586 9917
19 State Bank of Travancore 376 93
20 Syndicate Bank 31756 4426
21 UCO Bank 522 119
22 Union Bank of India 4426 246
23 Vijaya Bank 30720 4079
Source: NABARD, 2010-11.
In Karnataka State, the State Bank of Hyderabad mobilized highest savings
of 18135 lakhs from 1246 SHGs followed by State Bank of Mysore with savings
mobilization of 9917 lakhs from 49586 SHGs (See Table 4.17). However, the
State Bank of Mysore is performing well as compared to other banks. The bank has
disbursed loan amounts of 25779 lakhs to 9115 SHGs during year 2010-11(see
Table 4.18).
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Table-4.18
Bank-wise loan disbursed during 2010-2011 in Karnataka
(Amount in lakhs)
Sl. No. Name of the Bank No. of SHGs Loan disbursed
1 Allahabad Bank 175 136
2 Andhra Bank 30 33
3 Bank of Baroda 135 213
4 Bank of India 379 448
6 Canara Bank 6283 13893
7 Central Bank of India 190 86
8 Corporation Bank 601 721
9 Dena Bank 23 12
11 Indian Bank 696 1566
12 Indian Overseas Bank 694 1388
13 Oriental Bank of Commerce 39 34
14 Punjab National Bank 47 106
16 State Bank of Hyderabad 498 1313
17 State Bank of India 9000 8889
18 State Bank of Mysore 9115 25779
19 State Bank of Travancore 2 2
20 Syndicate Bank 1230 3032
21 UCO Bank - -
22 Union Bank of India 191 460
23 Vijaya Bank 2737 5018
Source: NABARD, 2010-11.
Table-4.19 depicts that in Karnataka, the State Bank of Mysore is having
highest loan outstanding of 44,380 lakhs, followed by State Bank of India with
21,803 lakhs. In Tamil Nadu, the loan outstanding is highest in Indian Bank to
the extent of 1,19,508 lakhs in 1,05,967 SHGs. As evident from Table-4.20,
Gross NPAs against SHGs is highest in State Bank of India ( 1141 lakhs),
followed by Union Bank of India ( 933.70 lakhs) in Karnataka. However,
percentage of NPAs to outstanding bank loan of SHGs is highest in Corporation
Bank (22.9 per cent).
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Table-4.19
Bank-wise loan out-standing as on 31st March 2011 in Karnataka
(Amount in lakhs) Sl. No. Name of the Bank No. of SHGs Loan O/S
1 Allahabad Bank 295 196 2 Andhra Bank 146 141 3 Bank of Baroda 656 624 4 Bank of India 1222 1659 5 Bank of Maharashtra 83 105 6 Canara Bank 14312 21549 7 Central Bank of India 549 585 8 Corporation Bank 3894 3388 9 Den a Bank 519 334
11 Indian Bank 1202 1618 12 Indian Overseas Bank 1751 2066 13 Oriental Bank of Commerce 12 29 14 Punjab & Sind Bank 2 1.37 15 Punjab National Bank 266 261 16 State Bank of Hyderabad 1246 968 17 State Bank of India 24897 21803 18 State Bank of Mysore 18652 44380 19 State Bank of Travancore 2 2 20 Syndicate Bank 10963 13448 21 UCO Bank 264 206 22 Union Bank of India 2847 3123 23 Vijaya Bank 7523 10099
Source: NABARD, 2010-11.
Table-4.20
Bank-wise Non-Performing against bank loans to SHGs as on 31st March 2011
in Karnataka
(Amount in lakhs) Sl. No. Name of the Bank Amt. of Gross NPAs
against SHGs NPAas %age to loan o/s
1 Allahabad Bank 0 0 2 Andhra Bank 6.44 4.6 3 Bank of Baroda 0.0 0.0 4 Bank of India 0.0 0.0 5 Bank of Maharashtra 5.64 5.3 6 Canara Bank - - 7 Central Bank of India - - 8 Corporation Bank 329 22.9 9 Dena Bank 10.89 10.7
11 Indian Bank 258 2.8 12 Indian Overseas Bank 452 6.9 13 Oriental Bank of Commerce 15 Punjab National Bank 31.6 0.9 16 State Bank of Hyderabad 17 State Bank of India 1141 13.6 18 State Bank of Mysore 0 0 19 State Bank of Travancore 164.98 1.1 20 Syndicate Bank 87.70 2.8 21 UCO Bank 0 0 22 Union Bank of India 933.70 5.1 23 Vijaya Bank 0.50 0.1
Source: NABARD, 2010-11.
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4.8. Bidar DCCB Model
Bidar DCCB played a laudable role in developing PACS in capturing SHG
business in the district. In order to have sustainable and quality SHGs, DCCB
assisted all the PACS in the district to appoint on contract one Assistant Supervisor,
who attends to the work of forming SHGs, participates in their meetings, nurture
them and credit link them to DCCB. In order to induce PACS to hire staff
exclusively for SHG work, DCCB bear the honorarium paid to Assistant
Supervisors on a tapering basis. It had also opened exclusive training centre
“SAHARDA” for providing training to SHGs, staff and other stakeholders in the
sector. SHGs promoted by PACS were allowed to open savings bank account either
with PACS or nearest DCCB branch as per the convenience of the group. Savings
and internal lending are routed through savings bank account by the group. Credit is
provided by DCCB branch either directly or through PACS. While the loan
accounts are opened in the books of the DCCB branch, SHG is free to make
repayments through the PACS or at the DCCB branch. PACS are given an
incentive of l per cent of the interest collected on the loans issued to the groups, by
the DCCB, Savings and other deposits maintained by SHGs with PACS ranged
between 5.00 lakh to 3.00 crore averaging was 15 lakh, which the PACS is
free to utilise in their business. In addition to interest incentive, the low cost
deposits benefit the PACS to improve their business. As on 31st March 2011,
DCCB had credit linked 14,569 SHGs with a loan outstanding of 35.25 crore.
170
References:
Bhuvan, I.B. (2007), Performance of Micro-finance providers in Karnataka, Unpublished M.Phil. Dissertation, University of Agriculture Science, Dharwad.
Meenakshi Rajeev, B.P. Vani and Veerashekharappa (2012), How importance are Self-Help Group Promoting Institutions? A Case of Karnataka, International Journal of Economics and Management Science, Vol. 1, No. 2, pp. 129-136.
K. Naveenkumar and Veerashekharappa (2012), Outreach and Sustainability Micro Finance Institutions: Case Study from Karnataka, International Journal of Economics and Management Science, Vol. 1, No. 2, pp. 79-90.
http://www.nabard.org
Karnataka Economic Survey, 2011-12.
Karnataka Economic Survey, 2012-13.
NABARD, Microfinance in Karnataka, 2005-06.
NABARD, Microfinance in Karnataka, 2008-09.
NABARD, Microfinance in Karnataka, 2010-11.
NABARD, Microfinance in Karnataka, 2011-12.
NABARD, SHG-Bank linkage in Karnataka, 2008-09.
NABARD, SHG-Bank linkage in Karnataka, 2009-10.