1

(Draft for discussion only)

Microfinance and the Cooperatives:

Can the Poor Gain from Their Coming Together ?

H.S. Shylendra

(hss@irma.ac.in)

Institute of Rural Management Anand (IRMA)

Paper presented at the

Third National Seminar On

Microfinance: Issues and Challenges

Organized by

Centre for Microfinance Research

Bankers’ Institute of Rural Development (BIRD)

Lucknow

On

2nd

and 3rd

December 2011

At

Bankers’ Institute of Rural Development (BIRD)

Sector “H”, L.D.A. Colony

Kanpur Road, Lucknow

2

Microfinance and the Cooperatives:

Can the Poor Gain from Their Coming Together ?

H.S. Shylendra1

Institute of Rural Management Anand (IRMA)

Introduction

Formal co-operatives for meeting the credit needs of the rural households including the poor

are now is existence for more than a century in India. The worsening debt conditions of the

farmers had forced the colonial rulers to explore creation of the credit cooperatives through

enactment of a legislation in 1904. While these cooperatives have traversed a long distance since

then, but their goal of reaching the poor has remained largely elusive till now. The challenge of

meeting the credit needs of the poor and other weaker sections by the cooperatives has been a

major debating issue since their emergence. Linking cooperatives with the phenomenon of

microfinance is the latest among a series of policy measures taken in making co-operatives

pro-poor and equitable in their working. The rapid growth of microfinance, notwithstanding the

several controversies, has evoked responses from varied quarters to tap its potential for

overcoming the challenges involved in reaching out to the poor. Just as women empowerment

groups have evinced interest in adopting the group based microfinance for espousing their

cause, a section of the cooperative advocates have argued for internalizing microfinance

methods by cooperatives to become more inclusive.

Given the limited success achieved in the past in reforming the cooperatives for poor, a lot of

hopes have been raised over the linkage being promoted between the cooperatives and the

microfinance. On the eve of the United Nation’s International Day of Cooperatives on July 2

2005, the UN Secretary-General observed (The Cooperator 2005): „…. both cooperatives and

microfinance, when used and managed appropriately, can help give those most in need the

power to improve their lives. Cooperatives have a long history of providing financial services to

poor and low-income people. Cooperative banks and credit unions were initially established to

reduce poverty and high indebtedness among small-scale farmers and craftsmen in urban and

rural areas. Cooperatives continue to serve this mission today- often by providing affordable

and equitable access to microfinance services‟.

It would be worthwhile examining this issue of linkage in a greater detail as the problem of

indebtedness with its attendant implications for inclusion and poverty alleviation continues to be

a major challenge (GOI 2007). The present paper makes an attempt to identify and discuss

relevant issues and emerging experiences and outcomes of adoption of microfinance by credit

cooperatives in India.

Before we elaborate on the structure of the paper, it would be useful to explicate by way of

clarification on the meaning of the terms microfinance, cooperatives and the poor used here.

Microfinance, we mean here essentially the system and practice of providing financial services to

1 I am thankful to Dr Gyanendra Mani of CFMR, BIRD for the invitation, and his comments on the preliminary draft.

The references in the paper are incomplete and to be finalised. Usual disclaimers apply.

3

poor / women through the use of group and other such innovative methods by formal agencies.

Microfinance in this sense is identified with various group based savings and credit programmes

as evolved prominently since 1970s in countries like Bangladesh, and replicated subsequently

elsewhere including India. In the India context, microfinance has emerged broadly in two forms

or models viz., the Self help Group (SHG)-Bank Linkage programme (SBLP) promoted by

National Bank for Agriculture and Rural Development (NABARD) since 1992, and the Non-

government organisations (NGO)/Microfinance Institutions (MFI)model. Under SBLP, the

formal financial institutions including cooperatives provide savings and credit services to the

poor through informal groups linked to them. In the later model, NGOs and other forms of MFIs

provide these services directly to the poor mobilized through informal groups. In a way, it is the

NGOs which pioneered and scaled-up the group method of lending to the poor. Cooperatives,

we mean primarily here the credit cooperatives established under the conventional cooperative

legislations passed initially by the British government in 1904/12 and repealed by various

provincial acts after independence. Broadly such cooperatives fall under two structures – the

three-tier short term credit structure and the single/two-tier long term structure. The co-operative

also include those established under new parallel liberal acts enacted by some of the states since

1990s. Our focus here will be largely on the credit cooperatives established under the

conventional acts, though the role of new generation cooperatives is not fully ignored. Between

the two models of microfinance, again though the primary focus is on capturing the experience

of cooperatives under SBLP model, the role of NGO/MFI model is explored to the extent

relevant in understanding linkage under discussion.

Poor we mean here the socially and economically backward and disadvantaged groups.

Economically, these groups may include the landless labourers, tenants, share croppers, small

and marginal farmers, artisans and other petty producers. Socially such groups may include

households from scheduled castes, scheduled tribes, most backward castes and minorities.

There may be lot of overlaps between these social and economic groups. In terms of gender, the

focus is on women from these groups given their social and economic disadvantages. The basic

and common characteristic of these groups is that they may lack clear rights to land and assets,

may be remote in their location, and socially discriminated. All these poses difficulty for them

in obtaining credit and other services from formal institutions like cooperatives. Their social

position also may come in the way of their participation in the affairs of the cooperatives leading

to discrimination. The microfinance movement has mainly targeted such category of households

in its coverage.

1. Cooperatives and the Poor

Even before we look at the role of cooperatives in experimenting with new microfinance

methods, let us look at some of past arguments and experiences relating to the cooperatives in

reaching out to the poor. Both in theory and practice, there have been divergent views about the

role of cooperatives in serving the poor. In a socialist system cooperatives are perceived as

instruments which can help in the transformation of the society into a socialistic form ending

inequality and exploitation (Khostov 1975). Cooperatives because of their emphasis on abolition

of private property and group approach to enterprise are considered compatible with the

socialistic goal. In a capitalist system, the role of cooperatives is more instrumental in serving

4

primarily the interest of the diverse members- poor or well-off, to help realize their economic

objectives related to production or consumption. The cooperatives may also play a balancing

role by trying to correct the excesses of private enterprises. In a mixed economy, cooperatives

are visualized to help serve the welfarist objectives of the state in terms of poverty alleviation

and empowerment of the poor (Parthasarthy 1991). Thus, in socialist and mixed economies the

cooperatives are seen as agencies for attaining larger goals of development with a focus on poor

and vulnerable groups. Given such a context, there are arguments especially in the mixed

economies like ours that cooperatives must have a clear focus on the poor as they are a welfarist

organization. Some even hold the view that it is not possible to conceive of cooperatives which

are not drawn from the poor (Parthasarthy 1975), and if needed cooperatives having sole focus

on poor may be created.

Given the expectation that cooperatives have to proactively reach out to the poor, there are

skeptics who argue that cooperatives may not be able to do justice to the cause due to certain

fundamental dilemmas they face (Lele 1981). These dilemmas pertain to addressing the trade-

off involved between the goals of growth and equity and decentralization and equity. While the

former dilemma largely relates to the constraint of attaining efficiency in serving the poor whose

needs are small and pose challenge in achieving cost-effective delivery of services. The later

dilemma emerges in the context of the elite capture of the cooperatives bypassing the poor in

taking any advantage of the benefits. Given the strong nature of these dilemmas and in the

absence of necessary pre-requisites to overcome them, conventional cooperatives may fail to

deliver for the poor. Under such circumstances, even if cooperatives have to be promoted it

would be better if these cooperatives either have a strong paternalistic approach or be small and

simple in their form and size to bring in cohesiveness. However, such skeptical views are

countered by others who argue that cooperatives may still succeed and reach out to the poor if

they get the support and guidance of progressive leadership in the context of overriding private

interests. Cooperatives hence may need a renewed attention to play the poverty alleviation role

(Hulme and Montgomery 1995). Similarly, others have argued for a strong role for cooperatives

in poverty reduction and social empowerment provided these cooperatives adopt lesson

emerging from the past failures and try to be more homogenous and participatory in their

working (Agarwal 2010). Thus, there is a renewed argument for promoting cooperatives to

address challenges of poverty and inequality and that cooperatives learn from the experiences

gained over a century of their existence. Hence, cooperatives continue to get the support from

varied quarters for their revival given their relevance. There are efforts to rejuvenate

cooperatives in India and elsewhere. The rejuvenation measures, among others, include creation

of a more liberal legal frameworks so as to enable cooperatives to assume new forms and

capabilities, recapitalization of weak ones, encouraging diversification by cooperatives,

professionalization, and adoption of new technology and other innovations to give the needed

edge to be more efficient. The 11th

five year plan has identified revitalization of cooperatives

and adoption of group approach as a vehicle for fostering agriculture development involving

small and marginal farmers and other vulnerable groups.

Credit Cooperatives and the Poor: Credit cooperatives were the earliest of the formal

cooperatives established in India by the colonial rulers. These cooperatives were modelled on

the German Raiffeisen system to help farmers free themselves from the clutches of

5

moneylenders. The primary objective of the act passed in 1904 was `encouragement of

individual thrift and mutual cooperation among the members, with a view to the utilization of

their combined credit, by the aid of intimate knowledge of one another’s needs and capacities

and of the pressure of the local public opinion’ (Ibbetson 1975: 103). These primary cooperatives

in rural areas were essentially meant for small men and were expected to work based on the

bonds of these people adhering to the principle of unlimited liability, mutual confidence and

mutual cooperation. Personal rather than material or tangible security was supposed to be the

basis of lending (ibid).

Subsequent to enactment of the Cooperative Societies Act in 1904, the credit cooperatives grew

fairly rapidly. The Britishers took proactive steps to spread the cooperatives in different parts of

the country. However, despite the rapid growth of the cooperatives their progress in terms of

coverage of poor was found to be unsatisfactory. An assessment of the working cooperatives in

the Madras Presidency concluded that the cooperatives suffered due to excessive control and

elite influence resulting in large scale exclusion of the poor (Robert Jr. 1983). Even the principle

of unlimited liability could not come to the rescue of the cooperatives as it proved to be elusory

in addressing cooperative insolvency. The bias of cooperatives against poor thus has been a

challenge since their inception. This situation did not change even after independence.

Cooperatives despite being the sole agencies were found to be both inadequate and ineffective in

addressing the problem indebtedness of rural households in general and the poor in particular.

The report of the All-India Rural Credit Survey Committee (RBI 1954) brought out explicitly

the failure of cooperatives in catering to the needs of the small farmers (as hardly 1.9% of small

cultivators has been covered by the cooperatives) and the inequality in the distribution of

institutional credit.

The major conclusions of the Committee are worth quoting here: “Perhaps the most startling

revelation of the Survey has been the utter insignificance of the volume of the credit supplied to the

cultivator by the Co-operative movement… Co-operative agricultural credit… is in quantitative terms

little more than three per cent of the borrowings of the cultivator… what reaches the medium and small

cultivator from the co-operative institutions is a mere fraction of the little that co-operatives provide.….

The development of co-operative credit movement in India has been inadequate in three respects. There

are large parts of the country which it has not hitherto covered. … there are large parts of agricultural

population which still remain outside its membership, and even if attention is confined to those who are

members of co-operative credit societies, the large bulk of their credit requirements is met from sources

other than co-operatives.” The Committee argued that “there is no real alternative to some form of co-

operative association at the all important rural base of agricultural credit … even at levels higher than

the base, there is eventually no alternative more suitable than a co-operative form of credit

organization”.2

The Committee came out with the famous conclusion `Cooperation has failed, but cooperation

must succeed’. The Committee identified security based lending as against personal credit based

on character and repaying capacity as the primary reason for the bias of the cooperatives against

poor. The Committee while in general suggested an integrated scheme for strengthening

cooperatives with active state support, specifically it argued for shift in the emphasis of lending

from land to productive capacity and effective supervision. The Committee also highlighted the

2 as quoted in RBI (1985)

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relevance of the formation of group or association of borrowers based on joint responsibility for

the benefit of both borrowers and the lender.

Many subsequent assessments brought out the continued failure of cooperatives to overcome

their bias against the poor. The All-India Rural Credit Review Committee (AIRCRC) (1969)

concluded that small farmers continue to be handicapped with cooperatives due to exclusion

from membership, insistence on land security and restriction on loan size to tenants, which can

aggravate the situation of inequality especially in the context of new agricultural technology.

The National Commission on Agriculture (NCA) in one of its interim reports (GOI 1971)

argued that formal agencies like cooperative and commercial banks lacked a clear understanding

in dealing with the poor. It even said, „Although the cooperatives were till recently the only source of

institutional credit that could and should have helped people in the agriculture sector to reach the stage

of a viable production, a large number of small and marginal farmers and agricultural labourers have

had no chance even to enter them. „In a way, so far, the cooperative system has not succeeded in securing

the needs of the small and marginal farmers – not to speak of the agricultural labourers – to any

significant extent.‟(Ibid p.16)

Thus the various official assessments were almost unanimous about the failure of cooperatives

in working with the poor. The findings of the official agencies were collaborated by many

independent studies (Kumar 2007). These studies observed that cooperatives- both in short-term

and long term structure, have neither been able to reduce the dependence on informal sources

nor able to adequately cover the landless and other weaker sections. Land based credit policy,

focus on agriculture and production loans, control by elite and other vested interests not keen to

bring in poor are identified by these authors as the reasons as to why the co-operatives have not

been able to reach out to the poor. As a result of this glaring evidence of the continued

domination of cooperatives by the rich and better-off, there were calls to reforms the

cooperatives in favour of the poor. While some argued for creation of separate structure of

cooperative institutions for the poor, others suggested measures like credit rationing by the

existing cooperatives in favour of the small borrowers. Recommendation for creation of

Farmers’ Service Societies (FSS) with a focus on small farmers by NCA, Small Farmers’

Development Agency (SFDA) by AIRCRC, and Large Sized Adivasi Multipurpose Cooperative

Societies (LAMPS) with a exclusive focus on tribals by the Bawa Committee were some of the

pro-poor institutional arrangements suggested to reform the cooperatives. However, viability

considerations came in the way of creation of such exclusive institutions for small farmers and

poor.

Based on the recommendations of the AIRCRC the government created SFDA and MFAL as

developmental agencies which would identify viable small and marginal farmers and agricultural

labourers and help channelise flow of credit from cooperatives and other formal agencies for

pursuing productivity enhancing schemes. In order to ration credit in favour of the poor, RBI

fixed a share of 40 per cent of the funds of cooperatives to be devoted to small farmers.

Refinance to cooperatives was made conditional upon meeting the target fixed for the small

farmers (RBI 1975) The state governments also came with many incentive based measures to

encourage cooperatives to become more inclusive in their working. Universal membership drive

was launched by many state governments which provided subsidy or concession loan to enable

poor to subscribe to the share capital of the cooperatives. Contributions were made to bad debt

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reserves to encourage cooperatives to take risk in lending proactively to the poor. Reservations

were made for weaker sections to be on the governing committee of cooperatives to reduce elite

control of cooperatives as well as help poor participate in the management of cooperatives. An

attempt was made even to amalgamate primary credit cooperatives to make them become viable.

However, many of these measures did not result in any significant change in the working of

cooperatives towards of poor as corroborated by many assessments. An RBI Committee which

assessed the working of credit cooperatives in Maharashtra argued that despite earmarking of

funds for weaker sections, there was inadequate and poor efforts by the cooperatives in enlarging

the coverage of weaker sections. Bose (1980) in his assessment of cooperatives in West Bengal

argued that despite several efforts to bring in weaker sections, a very large section remained

outside the purview of cooperatives. Neither the quota of funds nor the universal membership

have yielded positive results. Bose attributed this to reasons like control of cooperatives by

landed peasantry, poor management and corruption, strong resistance of elite against inclusion of

poor and weak implementation by government of these measures. Bose even argued that poor

themselves neither have the keenness to join the cooperatives nor have the faith in cooperatives.

About SFDA and MFAL, the studies revealed that these agencies could not make much of a

difference in reorienting cooperatives. These agencies not only had a limited coverage but also

focused on farmers who were more productive and better-off and ignored the weaker sections

who had been neglected by the cooperatives. Thus, the attempts to reform the cooperatives in

favour of the poor did not yield the desired results.

But the effort of the State to make formal agencies including cooperatives respond to the needs

of the poor continued. Two or three initiatives worth mentioning here are the creation of

Regional Rural Banks (RRBs) and launch of the Integrated Rural Development Programme

(IRDP). Given the continued failure of the institutional agencies like cooperatives and

commercial banks, the Government of India decided to create RRBs in 1975 as a via media

between the local cooperatives and the professionally managed commercial banks. RRBs were

created as a small man’s bank to exclusively cater to the needs of the weaker sections. There

was large scale expansion of RRBs in the country during 1980s reaching out to many remote

rural areas.

IRDP as a credit based poverty alleviation programme targeting the poor was launched in 1977

and covered nearly 54 million poor till 1999. The focus of IRDP was helping the identified poor

by the state agencies to get access to easy and collateral free credit from the formal agencies at

reasonable terms for variety of income generating activities. Cooperatives were also roped in the

implementation of IRDP giving them an opportunity to overcome their past failure in reaching

out to the poor. While creation of RRBs to an extent eased the pressure on cooperatives but as

such did not make any dent on the nature of working of cooperatives. RRBs themselves also

suffered in their attempt to serve the weaker sections exclusive. Neither their policies nor their

methods were innovative enough to deepen the access of the poor (Shylendra 1996). About the

impact of IRDP on the cooperatives in changing their orientation towards the poor, studies

revealed several constraints faced by the cooperatives in this regard. Cooperatives despite

having a much wider network had only a limited share in the coverage of IRDP households.

Cooperatives had managed to cover only about 17 percent of the vast number of poor households

8

brought under IRDP by 1992-94 (Ahmed 1996). Moreover, cooperatives did not tune their

practices to accommodate these newly inducted poor. Complicated loan procedures, share capital

requirements increasing the burden on poor, and unfamiliarity of cooperatives with non-farm

sector lending resulted in poor response of cooperatives to serve the developmental credit needs

of the poor. Apart from these peculiarities of cooperatives in dealing with the IRDP households,

IRDP failed in general to become a programme which can ensure sustained access to institutional

credit for the poor.

In a way IRDP was one of the last programmes with welfarist approach to reform the formal

agencies including cooperatives. With the changed policy environment, the nature of policy

initiatives meant for reforming cooperatives also underwent changes. These newer policies were

more liberal and based on market principles. Two major strategies that could be identified are

the encouragement given to cooperatives to become more business-oriented through

professionalisation and diversification, and the promotion of microfinance among cooperatives.

The financial liberalization launched since early 1990s eventually was extended to include

cooperatives also. The financial institutions including cooperatives are expected to follow

prudential business practices aided by conducive regulatory framework and liberalized interest

rates. Through more market friendly and competitive practices, cooperatives are expected to

revive themselves as well as work towards deepening the outreach of poor. This is based on the

neo-classical theoretical argument of reducing control over functioning of financial institutions

and allowing them work based on response of market forces. The thrust is on financial prudence

and viability to survive and scale up. Adoption of business development plans and

diversification are some of the specific initiatives under the new approach to revive cooperatives

especially for the poor. The second important initiative is the promotion of microfinance among

formal agencies including cooperatives. Microfinance being innovative in its methods to include

poor and an apparently a viable proposition is considered to be a best bet in terms of really

making cooperatives to reach out to the poor.

In the next section we highlight along with the rationale and experience of adoption of

microfinance by cooperatives in India.

2. Co-operatives and Microfinance

Microfinance in the way defined earlier is the more recent of the various efforts made to reform

the cooperatives. The linkage visualized and being attempted between the cooperatives and

microfinance in fact has twin goals unlike other measures attempted in the past. While the

primary goal is to make the cooperatives more inclusive, the secondary goal is to improve the

economic and business prospects of the cooperatives in their revival attempt. The linkage is

being even referred to as a `win-win’ proposition for cooperatives and poor.

How is the linkage expected to work both for the cooperatives and the poor simultaneously?

Microfinance uses unconventional methods to mobilize poor and provide access to them to

credit, savings and insurance. The group method adopted by microfinance has been found

helpful to overcome the basic problem of collateral faced by the formal agencies and poor.

Through principles of mutual cooperation, joint liability and peer monitoring coupled with their

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informal nature, small size and homogeneity of membership groups provide access to credit

services to the poor in the absence of a physical collateral. Microfinance interventions all over

have used group method to provide access to poor in a relatively successful manner. The same

principles of groups help ensure better recovery, reduce risk and cost of intermediation for the

lenders. The conventional cooperatives as evolved in India during 20th

century resorted to land

based lending as they could not break the collateral barrier. The linkage through informal groups

is expected to help the cooperatives to reach out to the poor by overcoming the fundamental

problem of collateral. Hence cooperatives like NGOs and other MFIs can include poor in their

working. Essentially, it is the institutional economics logic where in through adaptive behaviour

and newer forms of institutions the problems of market failures are overcome (Shylendra et all

2009).

As microfinance in a sense is a proven method, it is hoped that cooperatives can finally succeed

in the effort they have been making since their emergence to reach out to the poor. The other

advantage is the business prospects involved in promoting microfinance. Microfinance methods

have the potential to help cooperatives scale-up their coverage of poor relatively easily

bringing good dividends in terms of increased lending and assured recovery. Microfinance

groups can also bring savings to cooperatives as savings are an essential component of

microfinance methods. Moreover, microfinance interventions have the relative freedom to charge

viable interest rates on lending reducing the element of cross subsidization for the poor. Thus,

the linkage is argued to be both a social and bankable proposition for any formal agency. This is

the essential rationale advocated by NABARD in its promotion of SBLP with the formal

financial institutions including the cooperatives.

As highlighted earlier, in the Indian context microfinance has emerged under two broad models-

SBLP and NGO/MFI models. The issue of linkage of cooperatives with microfinance is relevant

in both the context. While in the case of SBLP the linkage is seen between SHGs and the

conventional cooperatives, in the NGO/MFI model it is seen in working of cooperatives

including the newer types established under the self-reliant cooperative legislations as MFIs.

While apparently the linkage between the cooperatives and microfinance is a promising

proposition but there are several challenges and contradictions for a successful outcome. Though

microfinance methods have certain strengths, they go with several limitations both at the

conceptual and operational level. It is argued that microfinance is more a neo-liberal

phenomenon and may not be suited for welfarist goals of inclusion, poverty alleviation and

empowerment. Being neo-liberal as such it may bring several pitfalls in the efforts to achieve the

above goals. There are several studies which have now captured in this regard the limitation of

microfinance from diverse experiences. Though the advocates of cooperatives have claimed that

cooperatives/ credit unions have been the original microfinancial institutions and harbingers of

microfinance, even then the cooperatives cannot escape from the major constraints and

limitations faced by the newer methods of microfinance including as a neo-liberal phenomenon.

At the same time, given that cooperatives have a potential to bring balance in addressing various

developmental contradictions, they may in fact be able to alleviate the negative consequences of

microfinance for their members.

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Let us briefly look at some of the challenges of microfinance methods for the conventional

cooperatives like primary agricultural credit societies (PACS) in India. Microfinance groups like

the SHGs need considerable resources for their emergence and sustenance. In the absence such

social intermediation process, group may not emerge uniformly both in quality and quantity. The

large variations one can see in the spread of SHGs across India is attributable to variations in the

availability of agencies necessary to promote SHGs. Social intermediation is essential as groups

have to be promoted in such a way as to internalize some of the essential principles of informal

mutual cooperation, peer monitoring and joint liability. Formal institutions like cooperatives

may not be able to promote such groups on a large scale unless supported by suitable and

competent agencies.

In principle, this should not have been a difficult proposition for cooperatives, as the

cooperatives promoted in India are supposed to have been modeled on Raiffeisen system having

many of the essential principles required for SHGs including the unlimited liability concept.

However, the cooperatives which really emerged during British period are of the modified type

violating many of the principles Raiffeisen system. In the post-independence period, the

cooperatives further deviated from the original Raiffeissen conception including the principle of

unlimited liability. Though in principle SHGs are compatible with the original conception of

credit cooperatives, in reality there is a mismatch. Therefore, both in the formation SHGs and in

their working cooperatives may face many contradictions posing difficulties for their actual

integration in a meaningful way. Like for example, while a formal cooperative works on the

basis of limited liability, an SHG is supposed to adopt the principle of unlimited liability.

Similarly, a cooperative is a member-owned organization with ability of democratic governance

and accountability. But an SHG is a informal body whose members may not be able to exercise

the same rights as that of a original member unless provide for legally.

Besides, cooperatives are no longer the sole agencies in the field of rural credit in the country.

The field is dominated by commercial banks and regional rural banks which have many other

strengths than cooperatives. Cooperatives which have lost their pre-eminent position now have

to compete with other formal agencies which are also keen to scale up their microfinance

interventions given the perceived benefits. Cooperatives may have to show or provide added

benefits to the microfinance groups capitalizing on their original strengths of local feel and

democratic governance.

The experiment of linking microfinance with the formal agencies is nearly two decades old in the

India context. What has emerged out of the experience and how far cooperatives have succeeded

in this almost last ditch effort to deliver on the equity is the moot question. This is what is

examined in the next two sections before arriving at some possible inferences and conclusions.

3. Cooperatives and Microfinance: A Review of Empirical Literature

This section makes an attempt to capture through a review available literature the experience of

the cooperatives in adopting the microfinance methods and the major outcomes observed

thereof. The review covers here both the conventional cooperatives as well as those based on

thrift and self-reliant approach.

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Several studies have tried to look at the overall performance of cooperatives under SBLP and

the some of the constraints faced by them. Sundar and Asokan (2004) in their study on the

performance of cooperatives in financing SHGs found that there are wide variations in the

performance of cooperatives under SBLP. The southern states have covered bulk of the SHGs

both in terms of number and disbursement, though certain states in other regions have shown

relatively better performance. Given the potential of SHGs, the authors argued that cooperative

banks and their officials have to take proactive steps in identifying and linking SHGs. Sen (2006)

assessing the governance of cooperatives as microfinance institutions argued that cooperatives

have generally played a significant role in providing financial services to the poor. The

cooperative however have lagged behind commercial banks under SBLP. The author found that

the poor performance as such is not due to the weakness of organizational network as

cooperatives have a good rural network. The author identified inadequacies in financial and

governance areas as the major causes of the poor performance. The author suggested that for

cooperative to succeed as microfinancial institutions they should strengthen their governance

through professional management, higher transparency, and autonomy. Pramod (2006) in his

assessment of SBLP experience argued that while cooperatives may be encouraged to participate

in SBLP, however the financial and human resource strengths of the cooperative need to be

carefully assessed. Any blanket expansion of SBLP by cooperatives may not be desirable.

Prasad (2006) exploring the changes required for internalization of microfinance by cooperatives

argued that there is a need for awareness creation among cooperatives. The SHGs need to be

given a separate entity status by cooperative through amendment to the extent of cooperative

laws. The bye-laws of cooperatively have to be amended to clearly specify the status, rights and

responsibilities of SHGs. Tripathy (2008) in his analysis of microfinance by cooperatives argued

that the SBLP model reached the cooperative very late resulting in its slow progress. The model

got boost only after the recommendation by a Taskforce in 1999 and with state governments

amending their cooperative acts to include SHGs. SHGs are compatible with cooperatives and

have also got business potential. As the model has shown positive outcomes, the author argued

for cooperatives to aggressively pursue the linkage.

In a prominent all-India level assessment based on empirical data from DCCBs, Harper, Berkhof

and Ramakrishna (2005) have tried to look at the role of SBLP in reforming the cooperatives.

The authors argued that as SBLP holds certain pros and cons for both the SHGs and the

cooperatives and it has to be approached cautiously by both the parties. The authors found that

the SBLP as such reached the cooperatives late as compared to other financial institutions. There

were wide variations observed in the spread of SBLP across different states even among

cooperatives. A few states like West Bengal had done exceedingly well in the linkage due to the

political support given to the cooperatives. The training and exposure of the top management

also had played a role in the initiatives taken by the cooperatives. The study did not find any

correlation between the strength of a DCCB and the extent of SHG linkage. However,

successful DCCBs under SBLP have tried to link more and more SHGs directly with PACS.

The choice of the SHPIs/SHGs, extent of decentralization adopted by the DCCBs, type of

services and membership offered to SHGs were some of the factors found influencing the direct

linkage of SHGs with PACS. NGOs were found to be the prominent SHPIs in the linkage of

SHGs with cooperatives themselves playing a limited role with a few exceptions. All the state

12

governments have put in place the needed legal framework to enable the linkage of SHGs. An

overwhelming proportion of cooperatives had offered only a nominal membership to the SHGs.

Overall, inadequate appreciation of the market potential of SHGs was found to be the key factor

in the low level of linkage by cooperatives under SBLP.

In terms of services, the cooperatives had largely offered term loan facilities to the SHGs and as

such had not placed any restriction on the use of savings by SHGs. However, the authors found

the savings with cooperatives as a risky proposition for SHGs. Given the very low share of SHG

business in the total portfolio, the impact of SBLP on the profitability of cooperatives was found

to be small and unclear. At the same time, SHGs had brought good deposits to PACS in few

cases. The loan recovery of SHGs was also found to be good. The study argued for a key

supportive role by NABARD to help both the cooperatives and the SHGs to gain from the

linkage, and for giving choice to SHGs to decide whether DCCB or PACS should be their bank.

The macro level studies thus indicate the cooperatives at large have not been able to fully tap the

potential of SBLP for reviving their business position. The general skewed spread of SBLP has

also affected the linkage by cooperatives. The late reach of SBLP to cooperatives coupled with

lack of legal clarity on the position of SHGs, and poor governance and business abilities of

cooperatives have come in the way of widespread adoption of SBLP by cooperatives. The

linkage model with the cooperatives varies across DCCBs, with many of the DCCBs on their

own directly dealing with SHGs for savings and credit leaving only an indirect/limited role for

PACS. Again in terms of membership, most cooperatives have offered only a nominal

membership to SHGs reducing the members of SHGs to a position of only a nominal

stakeholders. Moreover, despite SHGs showing promising performance in terms of savings and

repayment, the overall business position of cooperatives remains unaffected.

There are several case studies on DCCBs trying capture their specific experience. The

pioneering effort of the Bidar DCCB has been assessed by quite a few studies. Sibal and Dave

(2003) in their study had observed that the linkage has brought new vigor to PACS in Bidar. The

savings of SHGs accounted for 38 percent of the loan outstanding of the PACS. The SHG

linkage was found to be viable both for the bank and for the PACS. The PACS as a result have

become active as well profitable. Kulkarni (2003) found that PACS in Bidar have been able to

assimilate SHGs very well in their functioning. There was high level of awareness among the

staff about the SBLP. The study also observed that PACS under SBLP besides acting as SHPIs

have become very active in their day to day working. Interestingly, the cooperatives also

perceived SHGs as vehicles of social development. The rapid expansion of SHGs and coverage

of poor was attributable to motivation received from NGOs, training, and leadership

commitments of the DCCB.

Mohanty (2008) based on his case study of the Bidar DCCB argued that cooperatives can

effectively include the poor in their working through SBLP. The DCCB along with PACS had

credit linked nearly 78 per cent of the SHGs formed in the district. The linkage has been

attempted both with the branches of DCCB and with the village level PACS. The DCCB had

adopted a multiple models of SHG promotion with about 40 per cent of SHGs being promoted

directly by DCCB/PACS themselves. The DCCB also had taken the help of NGOs and

13

government department for this purpose. The active participation of DCCB has been facilitated

by the leadership which evinced keen interest in SBLP and internalized in its day to day

working. The internalization of SBLP was enabled through collaboration with NGOs, creation

of a separate micro-credit cell and appointment of staff for implementation of the programme.

The DCCB’s initiatives were also facilitated by the state government’s legal amendment

enabling SHGs to be linked to the formal cooperatives as nominal members and the financial

support provided by NABARD for promotional activities. The study found that there was an

active involvement of PACS which besides acting as SHPIs monitored locally the working of

the SHGs. The SHGs have brought significant level of savings to the PACS with 90 per cent of

total the savings of PACS being accounted by the savings of SHGs. However for lending PACS

has merely acted as agents of the DCCB by getting a commission for lending and recovering on

behalf of DCCB. The author concluded that the Bidar model has shown a potential for

strengthening the PACS especially when the implementation of SBLP is eventually handed over

to PACS as envisaged by DCCB.

A few studies have also tried to look at the experience of other DCCBs and PACS.

Puyalvannan (2003) in his study of SBLP of cooperative banks in Pudukottai and Trichy districts

of Tamil Nadu observed that primary cooperatives in these two districts have been able to link

significant proportion of SHGs formed in the district. The cooperative banks have taken the help

of NGOs and women development corporation in the formation of SHGs. However, the

provision of services to the SHGs by the cooperatives have suffered due to lengthy linkage

process adopted by the cooperatives. While the SHGs are linked to primary cooperatives, the

loans are sanctioned by the DCCB causing undue delay. The author argued for streamlining of

the linkage process by the cooperatives through higher commitment and less bureaucratic loan

process. Sundhararaman and Malaikolunthu (2004) in their study on the working of SHGs of

DCCB in Tiruchirapalli district observed that the DCCB’s involvement is facilitated by the

creation of a separate women development cell which has responsibility for mobilizing women

and arranging training for SHG formation. The DCCB has even formed SHGs under SGSY.

The DCCB has been able to issue large number of loans to SHGs with highly encouraging

recovery performance.

Santhanam (2008) in his study of the working of Chandrapur DCCB in Maharashtra observed

that DCCB has succeed in forming and providing linkage to a large number of SHGs mainly due

to its proactive collaboration with the government agencies. The DCCB in collaboration with

department of Women and Child Development took the help of widely spread Anganwadi

Workers (AWWs) in forming SHGs. The DCCB involving PACS also carried out a campaign to

form SHGs proactively. Over 12,200 SHGs could be formed by the DCCB of which about 60

per cent were formal by the AWWS. The study concluded that through convergence of efforts

SBLP could be initiated by DCCB. However, certain concerns have been raised by the study

with regard the quality aspects SHGs given the constraints faced by AWWs in terms of their

incentives and accountability. Mishra (2008) in her study of the experience of PACS in West

Bengal with special reference to Purulia district observed that SBLP is a potential mechanism for

cooperatives to expand their outreach and business. The model has worked relatively successful

in West Bengal especially in creating linkage for remotely located SHGs in a convenient and a

cost effective way. However, the author found several limitations coming in the way of effective

14

linkage. There is lack of clarity on the ownership issue given the nature of membership of

SHGs, PACS are also found to be suffering due to poor regulation and management resulting in

liquidity crunch in meeting the needs of SHGs. Overall, the integration was found to be weak

between SHGs and PACS. Another assessment of SHGs linked to cooperatives in West Bengal

(BS 2010) observed that SHGs in West Bengal are being encouraged to keep their savings as

term deposits leading to increase in small savings with PACS. The cooperatives do not permit

SHGs to withdraw and recycle their savings.

The case studies of DCCBs bring out several interesting issues in terms of both the strengths and

weaknesses of SHG linkage by cooperatives. Many of these cooperatives have been able to link

fairly a large number of SHGs through their proactive efforts. Besides acting on their own as

SHPIs, they have taken help from NGOs and government agencies for large scale SHG linkage.

Every effort has been made for internization of microfinance concept through training of leaders

and staff in collaboration with NGOs, and creation of separate cells for promoting and

implementing SBLP. At least in their area of working these cooperatives have been able to

widen the coverage of poor even in remote villages through the SHG linkage. In terms of

providing savings and credit facilities, the cooperatives have largely followed the norm adopted

in general under SBLP. The linkage wherever has reached certain threshold level has proved to

be viable for the cooperatives. Moreover, the inclusion of SHGs has made PACS become more

active in their working.

Several weaknesses have been identified by these case studies. The PACS are largely playing

agency role with DCCBs having a major control over the programme especially in terms of

lending activities. Bureaucratic delays and liquidity constraints also have come in the way of

smooth delivery of loan services to SHGs. Given the extensive coverage of SHGs achieved, the

quality of SHGs also has been an issue in these cases. Moreover, with assignment of nominal

membership, the issue of ownership to SHG members has not been adequately addressed by the

cooperatives.

The role of conventional co-operatives apart, there are few studies which have tried to look at

the experience of other type of cooperatives like thrift societies, urban cooperative banks

(UCBs) and the newly created self reliant cooperatives. These cooperatives have also tried to

reach out to the poor using microfinance methods in their own way outside the SBLP.

Even before the group concept had emerged some of the urban cooperatives had made their own

attempt to provide access to the urban poor. The Sewa Bank (Sri Mahila 1981) in Ahmedabad

had tried to reach out to the poor through field staff who would identify the needy and mobilize

them for purpose of savings and credit purpose. The members were encouraged to save and the

bank would provide loan for economic purposes. Similar type of approach was observed by

Harper (1998) in his case study of an urban cooperative bank in Orissa. The Sewa Bank had

subsequently adopted SHG model to reach out to the poor in rural areas with the help of the

Sewa NGO (Shylendra 2003). The SHGs dealt with the bank for savings and credit purpose

through their federations formed at district level. The formation of SHGs had helped SEWA

bank to extend its reach outreach in rural areas and in turn help the poor to access services from

a cooperative bank. Anandgopal and Selvaraju (2010) in their study of the micro-credit

15

operations of urban cooperative banks in the Coimbatore district of Tamil Nadu observed that the

UCBs have tried to reach out to the poor directly without any groups. The UCBs provided small

loans based on personal security. However, the members found the loan to be highly inadequate

and microcredit formed only a very small (0.17 per cent) of the total lending by these banks.

The authors advocated adoption of SHGs by UCBs for expansion of the microcredit programme.

Formation of thrift cooperatives was another major approach adopted in helping the poor meet

their savings and credit needs. Thrift based cooperatives have been formed both under the

conventional and the new self-reliant cooperative legislations. These cooperative have tried use

both group and other methods to reach out to the poor. Dwarki, Narayanasamy and Ramesh

(1996) in their assessment about the possibility of creating self-help credit cooperatives, argued

that the conventional cooperatives have failed in reaching the poor. There is no alternative but to

use SHGs for this cause. SHG cooperatives or federations can be formed for the purpose of large

coverage of poor. Krishnamurthy (1996) in study on the working of a thrift and credit

cooperative (TCS) in Adilabad district of Andhra Pradesh found that the cooperative has largely

covered low income group people. The TCS had adopted group mechanism for enrolment of

members. While the savings were made individually, loans were sanctioned through group

consent. Loans were lent in 1:3 ratio of savings. The groups were supposed to help in loan

recovery through joint responsibility. The TCS was able to achieve good loan recovery. The

author attributed the emergence of TCSs due to the failure of cooperatives. However, the

progress of TCS has been slow despite a new liberal legislation due to negative attitude of the

cooperative department towards such cooperatives. Elsewhere, Hulme and Montgomery (1995)

in their assessment of the working of thrift and credit societies (TCS) in Sri Lanka had found that

the cooperatives promoted by the Sanasa movement to be more inclusive as poorer people were

either able to join the existing cooperatives or could established new ones. The inclusion of the

poor has been facilitated by the progressive approach of the Sanasa movement. The TCS being

democratic were not captured by the local elites. The local and as well as national level

leadership had played a positive role in the observed outcomes leading to the conclusion that

self-interest behaviour need not be an axiomatic pattern. The authors argued that using market

mechanism over state patronage may help cooperatives to remain aloof from elite capture.

Assessing their own experience in promoting thrift cooperatives in Andhra Pradesh (AP), the

Cooperative Development Foundation (CDF 1999, 2000) concluded that women have a different

needs and hence need their own cooperatives. The women cooperative formed by CDF include

members from various sections without any focus on any particular targeting group. The thrust

of these cooperatives was on making the entire local economy vibrant for poverty alleviation.

These cooperatives are federated at local level and relied largely on local savings for their

working. The loans were lent to various purposes without any tangible collateral based on the

savings held by the individual members. Further, the assessment concluded that these

cooperatives were able to emerge as viable and autonomous member-based organizations aided

by the new liberal law enacted for such cooperatives in the state.

Sahu and Das (2007) have tried to examine the experience of the new self-reliant cooperatives in

promoting microfinance in Orissa. The study observed that the mutually aided cooperatives have

been trying to mediate their functioning through the mechanism of SHGs despite having

16

individuals as primary members. These cooperatives have emerged through the integration or

federation of SHGs promoted by NGOs. The cooperatives have tried to tap the potential of

groups for joint liability and peer monitoring. The cooperatives were found working based on

the savings of the members mobilizing significant level of own funds. The loans were generally

linked to the level of savings made by a member. The cooperatives have fairly a high proportion

of members who are borrower members. Because of the involvement of NGOs these

cooperatives have been able to target largely socially disadvantaged groups like SC/ST and

OBCs. However, due to reliance on own funds, the cooperatives have not been able to meet the

credit demand of the members adequately. At the same time, the group leader were found taking

advantage of their position in accessing loans. Mishra (2008) in her case study of a mutually

aided cooperative society (MACS) in AP observed that the MACS with its structure in the form

of a multi-tier federation of SHGs had shown the ability to reach the poor in remote areas with a

focus on Dalits. The MACS had worked in a decentralized and autonomous way and was able

to stand-up to the competition from even the SBLP in meeting the needs of the members. The

MACS was still found to be weak and needed multi-dimensional capacity building for its

sustainability as a member owned institution.

The experience of UCB’s thrift and self-reliant cooperatives suggest that even these cooperatives

have made effort to bring in poor with varied outcomes. Some of the UCBs though did try

directly to reach out to the poor but were found wanting on both the depth and width of the

access. Hence, some of them have tried to adopt group method more recently to replicate the

microfinance experience. As far as thrift and self-reliant cooperatives, the findings reveal that

there is a concerted effort to focus on poor and women, especially where the promoting NGOs

have taken such interest. Many of them have tried to work with group method to take advantage

of its strengths of peer monitoring and better loan recovery. Unlike the PACS/DCCBs, these

cooperatives have tried to ensure full membership and ownership to the target group. As regards

to provision of services, there is a clear focus on savings, both to mobilize resources as well as to

leverage it for lending and recovery. While such an approach has enabled them to attain self-

reliance in terms of resources and governance, but it has also posed constraints in adequately

meeting the credit needs of the members.

4. Cooperatives and SBLP : The Emerging Scenario

In this section we look at the all-India and state-wise details of the progress of SBLP model of

microfinance focusing on the cooperatives. As highlighted earlier, SBLP is promoted by

NABARD since 1992 with the aim of widening the access to credit by poor through linking

informal SHGs with the formal financial institutions. We analyse here both general progress of

SBLP as well as the extent of involvement of cooperative to gauge the role being played by the

cooperatives in the spread of SBLP.

17

Table 1: Progress of SHG-Bank Linkage Programme (All-India) (March End)

(No. in Lakhs)

Particulars 2010 2007 2002

1 No. of SHGs savings linked 69.53 41.61 NA

2 No. of SHGs credit linked 48.51 28.95 4.62

3 Estimated HHs covered (lakh)* 973.45 582.50 (64.61)

4 % of women SHGs (% of 1) 76.40 78.62 90.00

5 % of SHGs Credit Linked 69.76 69.57 -

6 % of SGSY SHGs 24.36 22.98 NA

7 Total savings (Rs.crores) 6199 3513 NA

8 Total loan outstanding (Rs.crores) 28,038 12,366 1026

9 Average savings per SHG (Rs) 8,915 8469 NA

10 Average loan outstanding per SHG

(Rs.)

57,795 42724 22,240

11 Savings: credit Ratio (9:10) 1:6.5 1:5.1 -

12 Average loan outstanding per member

(Rs.)

4,128 3052 1,216

13 Average savings per member (Rs.) 632 605 -

14 % of NPA 2.94 - - Source: NABARD, Status of Micro Finance in India 2009-10.

* Estimated by the author taking 14 as the average size of a SHG

Table 1 presents the progress of SBLP at all-India level from 2002 onwards. By 2010 about

69.53 lakh SHGs had been linked to various financial institutions with an estimated coverage of

97.35 million households in the country. In terms of the social composition, the women SHGs

account for about 76.40 per cent of the total SHGs. The proportion of women SHGs has been

declining since 2002 as more and more SHGs for men are being formed. Of the total SHGs

linked, about 24.4 per cent of them have been formed under Swarnjayanti Gram Swarozgar

Yojana (SGSY), a flagship credit based self-employment scheme of the Government of India

being implemented since 1999. In terms of savings and credit linkage, the SHGs in all have

mobilized a savings of nearly Rs. 6200 crores at the all-India level. On average, an SHG has

mobilized a savings of Rs. 8915 with each member saving a per capita amount of Rs. 632.

In terms of credit linkage, nearly 70 per cent of the total SHGs have been able to obtain credit

from financial institutions. The total outstanding loan of the SHGs as of March, 2010 came to

Rs. 28,038 crores. On an average, the outstanding loan per SHG and per member comes to Rs.

57,795 and Rs. 4,128 respectively indicating relatively smaller size of the loan borrowed by the

SHGs and their members. While at the all-India level, the savings to credit ratio comes to 1:4.5,

at the average SHG level the ratio is 1:6.5 indicating that the credit linked SHGs are accessing

credit in excess of the 1:4 ratio recommended as the minimum norm for lending by NABARD.

While at all-India level, the overall progress of SBLP looks fairly impressive, a major concern

that has been identified since long is the wide variations seen across states and regions in the

18

spread of SBLP. Though more recently the disparities have reduced, but still the southern states

which are also relatively better-off in terms of socio-economic development, account for bulk of

the SHGs linked, savings mobilized and loan accessed under SBLP (see appendix Tables A1, A2

and A3). NABARD has been taking few steps to reduce the skewed growth by trying to

promoting SBLP in backward and needy states in a pro-active way. The nature of spread of

SBLP reflect a paradox wherein an intervention for inclusive development shows a skewed

spread in favour of developed regions with a potential to aggravate the existing inequalities in

parameters like financial inclusion.

Let us now analyse the extent of involvement of cooperatives under SBLP and their relative

performance. In terms of involvement of cooperatives, the NABRD data is reported at the

DCCB level. This does not really help us in understanding the role being actually played by

lower level cooperatives like PACS. In the case of cooperatives, the SBLP is being implemented

in a mixed way. While in some cases it is the DCCBs which are the primary agencies involved in

linkage of SHGs for savings and credit, in few cases both DCCBs and PACS are involved in the

implementation. The NABARD data is an aggregation of both type of practices seen in the case

of cooperatives.

Table 2: Details of SHG Linakge by Cooperatives(All-India)

Particulars March 2010

1 No. of SHGs savings linked (lakh) 10.79

2 No. of SHGs linked under SGSY(lakh) 1.43 (13.28%)

3 No. of SHGs credit linked 5.10 (47.27%)

4 Estimated number of HHs covered (million) 15.11

5 Total savings (Rs. crores) 1225

6 Total loan outstanding (Rs. crore) 1729

7 Average loan outstand per SHG (Rs.) 33,894

8 Average savings per SHG (Rs.) 11,352

9 Savings:Credit Ratio (7:8) 1:3

10 % of NPA 3.88

9 No. of DCCB participating / reporting >318 Source: Same as in Table 1

* Figures in brackets are % to 1.

Table 2 presents some all-India level details of SBLP for the cooperatives. Overall, about 10.79

lakh SHGs have been linked to the cooperatives which account for about 15.5 per cent of the

total SHGs linked in the country by March, 2010. An estimated 15.11 million households have

been covered by the cooperatives under the linkage. Further, about 1.43 lakh SHGs linked to the

cooperatives have been formed under the SGSY. The SHGs of SGSY account for about 13.25

percent of the total SHGs linked to the cooperatives as against 24.4 per cent linked to all

financial institutions. The possible reasons could be same as those identified earlier for the poor

performance of the cooperatives under IRDP.

In terms of savings and credit linkage, the SHGs linked to cooperatives have mobilized a total

savings of Rs 1225 crores by March 2010. The average savings of SHGs under cooperatives

19

comes to Rs. 11,352, which is relatively higher than the average savings of all SHGs in the

country3. The per capital savings comes to about Rs. 811 as compared to all-India per capita

savings of Rs. 632. In terms of credit linkage, the proportion of SHGs linked for borrowing

comes to 47.27 per cent in the case of cooperatives which is much lower than the proportion of

69.8 per cent seen in the case of all financial institutions. While the total outstanding loan of

SHGs of cooperatives amounted to Rs. 1,729 crore by March 2010, the SHGs linked to

cooperatives are having a much lower average loan amount outstanding (Rs. 33,894) as

compared to SHGs of all financial institutions put together. Thus, the SHGs of cooperatives are

found to be showing relatively weaker performance in terms of credit linkage under SBLP.

The relative progress and position of cooperatives under SBLP vis-à-vis other financial

institutions is presented in Table 3. Commercial banks(CBs) are now the leading agencies under

SBLP. The commercial banks account for majority of the SHGs linked both for savings and

credit. The cooperatives though have managed to increase their involvement and share under

SBLP, overall they have the lowest proportion of SHGs linked. The cooperatives accounted for

15.5 per cent of SHGs linked for savings and only 10.5 per cent of SHGs linked for credit as of

March, 2010. While in terms of total savings the cooperatives have a share of about 19.8 per

cent, their share in total outstanding loan accounted for about only 6.2 per cent. The share in the

outstanding loan has been consistently declining for cooperatives over the years.

Table 3: Progress in Institution-wise Share in SHG Linkage(All-India)

(No. in Lakhs) (Amt. in Rs. Crores)

SHGs Savings Linked

FIs

No. of SHGs (%) Amount of Savings (%)

2010 2007 2002 2010 2007 2002

1 Coops 15.5 16.4 na 19.8 13.2 na

2 RRBs 26.2 28.4 na 21.0 32.9 na

3 CBs 58.3 51.1 na 59.3 53.9 na

Total 100.0

(69.53)

100.0

(41.68)

na 100.0

(6199)

100.0

(3513)

na

SHGs Credit Linked

No. of SHGs (%) Loan Amount Outstanding (%)

1 Coops. 10.5 9.4 7.9 6.2 6.50 7.7

2 RRBs 22.8 25.2 37.5 21.9 22.7 33.7

3 CBs 66.7 65.4 54.5 71.9 70.8 58.6

Total 100.0

(48.51)

100.0

(28.95)

100.0

(4.62)

100.0

(28,038)

100.0

(12,367)

100.0

(1,026) * Figures in brackets are actual figures for no. of SHGs and amount.

Thus, at all-India level the cooperatives are playing more of a supplementary role under SBLP

with commercial banks and RRBs having the major share in the linkage both in terms of number

3 One may have to read this carefully as data on savings for cooperatives shows a sudden increase in 2010 over

2009.

20

of SHGs linked and their volume of business. How far cooperatives hence would be able to

achieve the twin objectives (social and banking) is a moot question. Even though cooperatives

have a much wider network of branches/outlets, they have overall lagged behind other financial

institutions in tapping the potential under SBLP.

NABARD had visualized three forms or models of linkage under SBLP. In the first model of

SBLP the financial institutions themselves are expected to promote and link SHGs directly for

savings and credit. In the second model of SBLP, the financial institutions can take the help of

variety of self-help promoting institutions called as SHPIs for formation and linkage of SHGs.

Under the third model, financial institutions would lend to NGOs/MFIs which in turn would

promote and finance SHGs involving a kind of indirect linkage with the financial institutions.

As formation and nurturing of SHGs is a crucial step, NABARD came up with the idea of

supporting SHPIs which would help in undertaking this crucial role. Though recent data is not

available with regard to model-wise spread of SBLP, the data for 2007 indicated that bulk of the

SHG linkage (75 per cent) has taken place under the second model of SBLP wherein SHPIs like

NGOs and government agencies play the key role in the linkage. Financial institutions including

cooperatives had accounted for 17 per cent of SHGs linked in the country. Thus, financial

institutions have preferred largely the financial intermediation over social intermediation role.

NABARD has been providing grant support to RRBs and DCCBs to emerge as SHPIs. A large

number of DCCBs received grant support to promote SHGs under SBLP. By March, 2010,

about 102 DCCBs were involved as SHPIs in implementing ongoing projects for SHG

promotion. However, overall the cooperative banks by March, 2010 have promoted 44,618

SHGs (as against the target of 59,105) which accounted for about 4.13 per cent of the SHGs

linked to cooperatives. Thus, like other financial institutions cooperative banks have largely

tried to rely on other SHPIs for formation of SHGs.

Given that cooperatives have a varied spread across states, it would be worthwhile to examine

the extent of participation or involvement of cooperatives across different states/regions under

SBLP.

The state-wise performance of cooperatives under SBLP may be seen from appendix tables A1

to A3. In terms of the relative share, it may be seen that states which have a relatively higher

share in the total SBLP linkage are also the states which have a higher share in the total SHGs

linked to cooperatives; the exception however is being Andhra Pradesh. Maharashtra, West

Bengal, Karnataka, Tamil Nadu and Orissa are the prominent states which have linked large

number of SHGs under cooperatives. Kerala and Rajasthan are other prominent states. This is

true both in the case of SHGs linked for savings (Table A2) and credit (Table A3). Overall,

region-wise share of SHGs linked to cooperatives is broadly similar to region-wise share seen in

the case of all financial institutions, except for western region. In other words, regions which

have a prominent share in the total SBLP show similar trend in the case of linkage of SHGs with

cooperatives. Western region however shows a much higher share in the case of SHGs linked to

cooperatives as compared to its share in the SHGs linked to all financial institutions. This is

primarily due to Maharashtra which shows a considerably higher share under SHGs linked to

cooperatives (24.83 per cent and 16.32 per cent) both with respect to savings and credit. It may

be therefore inferred here that performance of different states with regard to linkage of SHGs to

21

cooperatives seems to have been influenced largely by their performance under overall SBLP.

The overall trend and factors at work in a state seem to have enabled/disabled cooperatives with

regard to their participation under SBLP. Thus, the paradoxical trend noted earlier in terms of

the relationship between the socio-economic development of a state and its performance under

SBLP continues largely even in the case cooperatives. Incidentally, in those states which do not

have a prominent share in the total SHGs linked under cooperatives, a large portion of SHGs

linked to cooperatives are under SGSY (Table A2) highlighting the lack of initiatives by

cooperatives in these states for linkage outside the SGSY.

Another key dimension that may be taken note of in respect of state-wise performance under

SBLP is the share of cooperatives in the total SHGs linked to different financial institutions.

This may be in appendix Tables A2 and A3 which provide data with regard to SHGs linked to

savings and credit. As mentioned earlier, at all-India level it is the commercial banks which are

the leading institutions in terms of SHG linkage and cooperative have overall a small share in the

total linkage. The scenario is largely same even when seen across different states both for

savings and credit linkage (Table A2 and A3). Some of the states where cooperatives have a

relatively significant share in the SHGs linked to all financial institution are HP, Rajasthan, West

Bengal, Uttarakhand, Maharashtra and Karnataka. Even in these states the bulk of the linkage is

accounted by other financial institutions except in the case of HP for SHGs credit linked. Thus,

across most states, commercial banks and RRBs are the prominent institutions for linkage under

SBLP with cooperatives playing largely a supplementary role.

Having examined the relative share and contribution of cooperatives under SBLP, it would be

useful to look at the contribution of SBLP to the working cooperatives in meeting the savings

and credit needs of the SHGs and their members, and in tapping the potential of business

involved in the linkage.

At all-India level, the SHGs of cooperatives have a higher average savings than the SHGs of all

financial institutions. The same pattern can be seen across many states (Table A2), which

indicates that SHGs of cooperatives seems to have mobilized relatively higher level of savings

than SHGs linked to other financial institutions. In terms of credit linkage, at the all-India level

it could be seen that a higher proportion (69.8 per cent) of SHGs linked to all financial

institutions have been able to obtain credit as compared to SHGs linked to cooperatives (47.3

per cent). The same pattern can be seen across all prominent states under SBLP (Table A3)

indicating a higher level of credit accessibility of SHGs linked to other financial institutions than

cooperatives. Another indicator of credit linkage is the savings to credit ratio. At the all-India

level, the ratio for 2010 worked out to 1:3 for cooperatives as compared to 1:6.5 for all financial

institutions. Similar trend could be observed from the NABARD data across most of the states

(NABARD 2010) indicating a much higher ability of SHGs to leverage credit based on saving in

case of other financial institutions as compared to cooperatives. Thus, cooperatives while are

able to mobilize relatively higher level of savings from SHGs but have not been able to meet the

credit needs of SHGs in a similar vein. This is reflective of the constraints of cooperatives either

in terms of fund availability or procedural and other constraints to extend credit facilities to the

SHGs on lines similar to other financial institutions.

22

How far SHGs can help cooperatives in terms of their business has been an important question in

the linkage programme. In order to examine this at the macro level, we have looked at the

relative position of SBLP in the overall business levels of PACS. The attempt is more to identify

the indicative scenario as the data available for both the cooperatives and SBLP are not fully

consistent and accurate. Moreover, for data on cooperatives we have focused on the PACS level

performance whereas SBLP data on cooperatives is available at the DCCB level aggregating

both the DCCB and PACS position.

Table 4: Progress of PACS in recent years (All-India)

Particulars 2000-01 2004-05 2009-10

1 No. of PACS 98,843 1,08,779 94,647

No. of Villages Covered (%) - - 96.24 %

2 Total members (in 000) 99,918 1,27,406 1,26,419

3 % of SC members 13.62 24.27 20.63

4 % of ST members 8.49 9.26 8.32

5 Total Borrowers

(% to 2)

46,533

(46.57 %)

45,070

(35.37%)

59,800

(47.30%)

5 Total Deposits (Rs. in Lakhs) 13,48,107 18,97,604 35,28,607

6 Total Loan outstanding

(Rs. in Lakhs)

34,52,233 48,78,546 76,47,983

7 % of Loan Overdues 34.90 33.59 41.39%

8 % of PACS in Profit - 73.28% 43.25% NAFSCOB: Performance of PACS (2009-10).

Many of the recent assessments on cooperatives have brought out the continued weakness of

primary cooperatives both in terms of their governance and financial position. Table 4 reveals

several of the major problems ailing the primary cooperatives. The primary cooperatives

consisting of PACS, FSS and LAMPS though have a network covering over 96 per cent of the

villages, their depth of operations leaves much to be desired. The borrowing membership

constitutes only less than half of the total membership. This is despite an increase seen in the

membership of PACS more recently. While the total volume of deposit and loan have increased

in absolute terms, the financial soundness continues to be of a concern (when seen in terms of

loan overdues, profit and viability) for a significant proportion of PACS. The concern is

compounded by the fact that the above position is seen even after two major financial revival

initiatives implemented recently by way of waiver of bad debts and recapitalization of short-term

cooperatives in the country. The role for microfinance in boosting the financial conditions of

primary cooperatives hence would be of a tall order.

The macro level potential of SBLP in affecting the business prospects of PACS may be seen in

Table A5. At all-India level, the average number of SHGs linked to a PACS comes to 11.4.

Across states this varies from about 1.15 SHGs in Punjab to 59 SHGs in Puducherry. Even in

prominent states like West Bengal (21), Karnataka (34), Maharashtra (13) and Tamil Nadu (29)

the average number of SHGs linked to PACS is also not very high. Even at the DCCB level

except in the case of few prominent states, the average level of SHGs linked is very low. Among

23

the states for which the data is available (Table A6), while the all-India level average is 3405 per

DCCB, it varied from mere 74 in UP to 9007 in West Bengal. Across states, about 46 per cent of

the reporting DCCBs have less than 1000 SHGs linked to them. Put together, less than 23 per

cent of DCCBs have more than 5000 SHGs linked, with only about 9 per cent of DCCBs having

more than 10,000 SHGs linked to them. Again bulk of these DCCBs with higher level of SHG

linkage is found in only a few states prominent in terms of their involvement. With the SHG

formation reaching some sort of a saturation in many states, the potential for further increasing

the coverage of SHGs by cooperatives hence remains a challenging task.

In terms of some of the business parameters, as can be seen from Table A5, the SHGs have

increased the membership of PACS by an estimated 1.51 crore which constitutes about 10.76 per

cent of the total PACS members including the SHG membership. This is assuming that SHG

members have been admitted as primary members of the cooperatives. The level of increase is

significant in the sense that bulk of this membership is women and belong to poorer sections of

rural households. The linkage to that extent has made the membership of PACS more inclusive

of women and poor.

However, the impact of this additional coverage of poor households on PACS’ business through

SHGs is not very significant at least at macro level (Table A5). The savings of SHGs accounted

for about 2.72 per cent of the total savings mobilized by PACS. The loan outstanding of SHGs

accounted for 2.26 per cent of total loan outstanding for PACS. Given that the proportion of

credit linked SHGs is less than half of the total SHGs linked, the impact on credit business is

relatively weaker. However, in some of the states where the linkage of SHGs with cooperatives

is more prominent, like West Bengal, Uttarakhand, Rajasthan and Tamil Nadu, SBLP accounts

for relatively a considerable share in PACS’ membership, savings and lending. Also in smaller

states like Tripura, Manipur, and Puducherry, where possibly the non-SHG business was weak,

the SBLP apparently has added significant level of business with potential to make a difference

on the financial condition of PACS.

Thus, while the overall impact on SBLP appears insignificant on the business position of

cooperatives but in states where there is relatively intensive effort by the cooperatives for

linkage SBLP seems to be showing a better potential for a positive impact.

5. Conclusion

There has been a long drawn effort since their emergence to reform the cooperatives to give the

needed focus on the poor. The past results have not yield the expected results. The attempt to

marry microfinance with the cooperatives has to be seen both in the historical and the emerging

context. The linkage is supposed to be a `win-win’ situation both for the cooperatives and the

poor, with poor able to get access to a formal source and the cooperatives tapping the business

potential involved in the coverage. The analysis based on the emerging experience suggests that

the above twin goals of the linkage have not been attained in the way they have been visualized.

Despite a few noteworthy efforts by the cooperatives in some of the states, the overall results and

outcomes of the linkage leave much to be desired especially given the enormity of the continued

challenge of attaining financial inclusion.

24

Both the conventional and newer types of cooperatives are found involved in promoting

microfinance. The effort of the conventional cooperatives is to be seen largely under the

NABARD promoted SBLP. Even after nearly two decades of SBLP’s implementation, the

cooperatives are found playing only a supplementary role in it with other financial institutions

being able to overtake the cooperatives. There are also wide variations seen across the states in

the involvement of cooperatives. The paradox of inequality in the spread of SBLP is seen even

when seen from the angle of the involvement cooperatives. Several factors have come in the

way of the cooperatives’ effective participation under SBLP. While the other financial

institutions– CBs and RRBs, have been able to considerably increase their participation through

proactive involvement, the cooperatives in general have been found wanting in showing similar

type of involvement. Lack of appreciation of the potential involved under SBLP and inadequate

professional and other abilities to pursue a programme of SBLP type are some of the constraints

faced by the cooperatives. Simultaneously, the apparent delay both in promoting SBLP among

the cooperatives and in creating a suitable legal environment has also made cooperatives to be

lax in taking the needed initiatives. However, there have been some proactive efforts by states

governments and by some cooperatives to promote SBLP. Creation of needed legal framework,

efforts by cooperatives to collaborate with NGOs and GOs to draw upon their strengths, and

relevant policies to internalize the implementation of SBLP are some of the measures which

have contributed for these relative success stories.

In terms of the impact of adoption, cooperatives which have made intensive efforts have been

able to reap few benefits out of the SHG linkage. The operations of microfinance have as such

been found viable by these cooperatives. The linkage has brought in significant savings

especially at the primary cooperatives level. The SBLP has also energized many of these

cooperatives. However, at the macro level given the limited involvement of cooperatives under

SBLP the scope for boosting the overall business and financial conditions of cooperatives has

been of limited nature. Further, the general saturation reached in the formation of SHGs the

scope for cooperatives to further increase their involvement appears to be limited and

challenging. In terms of the gains for the poor, the results are not fully satisfactory. Apart from

the concern expressed in terms of the safety of savings of the SHGs with the cooperatives, there

are certain restrictions have been faced by the SHGs in fully utilizing their savings. About to

access to credit, the performance of cooperatives has been found to poor as compared to other

financial institutions. On all key parameters like proportion of SHGs credit linked, the ratio of

saving to credit, and the average loan outstanding, the SHGs of cooperatives show low levels of

achievement indicating the constraints being faced by the SHGs linked to cooperatives in

obtaining adequate credit services. That apart, the real integration of SHGs with cooperatives

also has been found to be of a challenge. In most cases, it is the DCCBs which have been found

mainly controlling/implementing the programme leaving only limited scope and role for PACS

to really taken advantage of SBLP. Moreover, the poor have remained at the periphery with the

cooperatives offering them only a nominal membership. So much for any empowerment of

SHGs visualized through such a linkage.

25

Despite all the limitations observed, it would be worthwhile to pursue the linkage between the

cooperatives further. The aim should be to both consolidate the efforts as well as to overcome the

constraints faced. Some of the proactive steps taken by cooperative as identified need to

supported for replication by other cooperatives. Every effort has to be made to internalize the

microfinance by the cooperatives. A clear clarity both in the legal and social sense to be brought

about for fullfledged integration of SHGs and their members with the cooperatives. PACS

should be really take over the SBLP from the DCCBs as the need for revival of cooperatives is

much more important at the primary level. At the same time, while cooperatives may see

microfinance both as a viable and a social proposition, but any effort to tap microfinance to

revive the business of the cooperatives will be of tall order imposing unnecessary burden both

on the SHGs and their members. Such goal may also bring in the contradiction faced by many

MFIs in this regard. While SHGs may help activate the cooperatives but cooperatives in

general may to have to look beyond microfinance for their overall rejuvenation. The self-reliant

cooperatives also have to be supported through relevant policies given their success in reaching

out to the poor.

---o---

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28

APPENDIX

Table A1: Major State-wise Details of SHGs Linked under SBLP by Co-operatives and

All Financial Institutions(FIs) (Amount in Rs. Lakhs)

State/

Region

SHGs Linked to

Cooperatives for

Savings

SHGs Linked to

All FIs for Savings

Bank Loan

Outstanding of

SHGs Linked to

Cooperatives

Bank Loan

Outstanding of SHGs

Linked to All FIs

No. of

SHGs

Savings

Amt.

No. of

SHGs

Savings

Amt.

No. of

SHGs

Loan

Amt.

No. of

SHGs

Loan

Amt

Haryana 3532 235 36762 10763 444 546 15802 15507

HP 16614 641 50182 3491 15083 3274 27209 10597

Punjab 4604 305 45005 3645 2019 695 10045 6708

Rajasthan 55498 3345 213295 14255 27426 9243 96206 46329

Northern 80666 6060 351801 34207 45317 13913 152491 81513

Assam 20018 1060 218352 7360 11841 4373 100422 49123

Meghalaya 2346 35 11787 360 112 147 3191 1340

Tripura 4273 101 31349 336 1709 923 14580 9687

Arunachal 207 16 6418 165 192 179 3203 1068

Manipur 1135 20 10831 219 NA NA 4452 1879

N-E 29774 1489 292188 12167 13917 5668 133785 67348

Bihar NA NA 140824 8540 NA NA 82215 55777

Jharkhand NA NA 79424 7422 NA NA 63741 29075

Orissa 68990 6998 503172 36474 28693 9580 372646 151608

W. Bengal 171140 14641 647059 9487 123424 14481 507782 132693

Eastern 243382 21724 1374242 112015 152873 24289 1027570 369491

Chattisgarh 20375 752 113982 7578 4452 326 52588 19906

MP 19595 970 178226 10151 13269 5008 76928 44513

Uttarkhand 11514 4272 43997 7170 4933 2881 30049 18233

UP 2444 230 429760 26464 4665 3022 338357 163588

Central 53928 6224 765965 51364 27319 11237 497922 246240

Gujarat 27337 9780 168180 32190 3298 1426 69286 14162

Maharashtra 268069 26696 770695 56828 83273 16440 384765 120331

Western 297383 36724 945620 92667 87719 18991 457476 136948

AP 26613 1919 1448216 125529 18436 15298 1471284 1173954

Karnataka 158173 27177 534588 62705 56696 17386 300738 205530

Kerala 53585 4424 394197 37556 21977 12264 257760 101531

Tamil Nadu 132881 16595 826710 90373 84522 51739 538867 405943

Puducherry 3080 208 19723 1287 1337 2115 13463 15331

Southern 374332 50322 3223434 317451 182968 98801 2582112 1902288

Grand Total 1079465 122544 6953250 619871 510113 172899 4851356 2803828

Source: NABARD, Status of Micro Finance in India 2009-10.

29

Table A2: Some Details of SHGs Linked to Co-operatives for Savings (March 2010)

State/

Region

% of SHGs Linked to

Cooperatives for

Savings to Total SHGs

linked to All FIs

Statewise Share (%)

of SHGs linked to

Cooperatives

Statewise Share

(%) SHGs linked

to All FIs for

Savings

% of SHGs linked

to Cooperatives

Under SGSY

No. of

SHGs

Savings

Amt.

No. of

SHGs

Savings

Amt.

No. of

SHGs

Savings

Amt.

No. of

SHGs

Savings

Amt.

Haryana 9.61 2.18 0.33 0.19 0.53 1.74 51.30 55.46

HP 33.11 18.37 1.54 0.52 0.72 0.56 12.45 26.14

Punjab 10.23 8.36 0.43 0.25 0.65 0.59 10.38 21.60

Rajasthan 26.02 23.47 5.14 2.73 3.07 2.30 4.51 7.12

Northern 22.93 17.72 7.47 4.95 5.06 5.52 9.02 35.25

Assam 9.17 14.40 1.85 0.86 3.14 1.19

Meghalaya 19.90 9.63 0.22 0.03 0.17 0.06 58.06 35.27

Tripura 13.63 30.01 0.40 0.08 0.45 0.05 31.85 16.21

Arunachal 3.23 9.42 0.02 0.01 0.09 0.03 45.89 47.84

Manipur 10.48 9.21 0.11 0.02 0.16 0.04

N-E 10.19 12.24 2.76 1.22 4.20 1.96 13.12 5.88

Bihar NA NA NA NA 2.03 1.38 NA NA

Jharkhand NA NA NA NA 1.14 1.20 NA NA

Orissa 13.71 19.19 6.39 5.71 7.24 5.88 4.56 16.76

W. Bengal 26.45 154.33 15.85 11.95 9.31 1.53

Eastern 17.71 19.39 22.55 17.73 19.76 18.07 1.35 5.41

Chattisgarh 17.88 9.92 1.89 0.61 1.64 1.22 0.15 0.64

MP 10.99 9.56 1.82 0.79 2.56 1.64 43.85 43.49

Uttarkhand 26.17 59.58 1.07 3.49 0.63 1.16 52.70 90.69

UP 0.57 0.87 0.23 0.19 6.18 4.27 63.30 45.13

Central 7.04 12.12 5.00 5.08 11.02 8.29 30.11 70.77

Gujarat 16.25 30.38 2.53 7.98 2.42 5.19 14.82 2.67

Maharashtra 34.78 46.98 24.83 21.78 11.08 9.17 14.04 8.74

Western 31.45 39.63 27.55 29.97 13.60 14.95 14.02 7.07

AP 1.84 1.53 2.47 1.57 20.83 20.25 7.87 0.29

Karnataka 29.59 43.34 14.65 22.18 7.69 10.12 4.05 8.19

Kerala 13.59 11.78 4.96 3.61 5.67 6.06 3.95 9.23

Tamil Nadu 16.07 18.36 12.31 13.54 11.89 14.58 45.02 37.19

Puducherry 15.62 16.13 0.29 0.17 0.28 0.21 17.27 25.81

Southern 11.61 15.85 34.68 41.06 46.36 51.21 18.96 17.62

Grand Total 15.52 19.77 100.00 100.00 100.00 100.00 13.28 15.72

Source: NABARD, Status of Micro Finance in India 2009-10.

30

Table A3: Details of SHGs Credit linked to Cooperatives (March2010)

State/

Region

Share (%) of

SHGs Linked to

Cooperatives in

Total Loan

Outstanding of

SHGs of All FIs

Statewise Share

(%) of SHGs

Linked to

Cooperatives in

Total Loan

Outstanding of

SHGs of All FIs

Statewise Share

(%) of all FIs in

Total Loan

Outstanding

under SBLP

% of SHGs Credit

Linked under

SBLP

No. of

SHGs

Loan

Amt.

No. of

SHGs

Loan

Amt.

No. of

SHGs

Loan

Amt.

Coops All FIs

Haryana 2.81 3.52 0.09 0.32 0.33 0.55 12.57 42.98

HP 55.43 30.90 2.96 1.89 0.56 0.38 90.78 54.22

Punjab 20.10 10.37 0.40 0.40 0.21 0.24 43.85 22.32

Rajasthan 28.51 19.95 5.38 5.35 1.98 1.65 49.42 45.10

Northern 29.72 17.07 8.88 8.05 3.14 2.91 56.18 43.35

Assam 11.79 8.90 2.32 2.53 2.07 1.75 59.15 45.99

Meghalaya 3.51 10.95 0.02 0.08 0.07 0.05 4.77 27.07

Tripura 11.72 9.53 0.34 0.53 0.30 0.35 40.00

46.51

Arunachal 5.99 16.75 0.04 0.10 0.07 0.04 92.75 49.91

Manipur NA NA - - 0.09 0.07 - -

N-E 10.40 8.42 2.73 3.28 2.76 2.40 46.74 45.79

Bihar NA NA NA NA 1.69 1.99 NA NA

Jharkhand NA NA NA NA 1.31 1.04 NA NA

Orissa 7.70 6.32 5.62 5.54 7.68 5.41 41.59 74.06

W. Bengal 24.31 10.91 24.20 8.38 10.47 4.73 72.12 78.48

Eastern 14.88 6.57 29.97 14.05 21.18 13.18 62.81 74.77

Chattisgarh 8.47 1.64 0.87 0.19 1.08 0.71 21.85 46.14

MP 17.25 11.25 2.60 2.90 1.59 1.59 67.72 43.16

Uttarakhand 16.42 15.80 0.97 1.67 0.62 0.65 42.84 68.30

UP 1.38 1.85 0.91 1.75 6.97 5.83 - 78.73

Central 5.49 4.56 5.36 6.50 10.26 8.78 50.66 65.01

Gujarat 4.76 10.07 0.65 0.82 1.43 0.51 12.06 41.20

Maharashtra 21.64 13.66 16.32 9.51 7.93 4.29 31.06 49.92

Western 19.17 13.87 17.20 10.98 9.43 4.88 29.50 48.38

AP 1.25 1.30 3.61 8.85 30.33 41.87 69.27 101.59

Karnataka 18.85 8.46 11.11 10.06 6.20 7.33 35.84 56.26

Kerala 8.53 12.08 4.31 7.09 5.31 3.62 41.01 65.39

Tamil Nadu 15.69 12.75 16.57 29.92 11.11 14.48 63.61 65.18

Puducherry 9.93 13.79 0.26 1.22 0.28 0.55 43.41 68.26

Southern 7.09 5.19 35.87 57.14 53.22 67.85 48.88 88.10

Grand Total 10.51 6.17 100.00 100.00 100.00 100.00 47.26 69.77

31

Table A4: Some Basic Details of PACS by states and region

States/

Region

No of

PACS

% of

Viable

PACS

Members(000) % of

Borrow-

ing

Members

Total

Deposits

(Rs. Lakh)

Loan

Outstand

-ing (Rs.

Lakh)

Total SC ST

Haryana 628 100 2970 567 - 56.80 37095 483280

HP 2097 21.13 1068 288 41 11.70 119097 3442

Punjab 3990 80.35 2664 406 - 65.46 90806 443193

Rajasthan 5127 87.60 4427 873.3 777.79 50.46 31008 303761

Northern 12607 71.73 11273 2169.63 840.69 51.36 278125 1237389

Assam 766 92.56 3034 415.58 487.34 2.70 0 594

Meghalaya 179 94.41 94 8.57 85.49 5.30 268 1026

Tripura 268 97.01 373 62.76 130.05 15.82 441 2045

Arunachal 33 33.33 19 19.34 - 0 0 -

Manipur 204 95.59 117 22 38 84.61 65 -

N-E 3583 57.27 3695 529.63 769.37 6.63 7193 4780.5

Bihar 8463 0.00 9637 0 0 2.19 6672 43248

Jharkhand 208 28.85 121 38.12 20.13 18.16 1268 1385

Orissa 3565 81.71 16166 10922.16 1962.57 36.52 238150 346719

W. Bengal 8026 50.74 17229 2242.88 2399.62 49.02 130123 179470

Eastern 20308 34.88 43163 13203.16 4382.32 33.79 376258 571111

Chattisgarh 1213 92.09 1745 248.89 591.98 50.41 25003 61257

MP 4633 72.80 4924 639.67 801 48.72 50378 251294

Uttarakhand 679 67.89 866 171 62 26.44 27571 34754

UP 8929 79.68 2748 2230 117 39.22 6820 163176

Central 15454 78.08 10283 3289.56 1571.98 44.59 109772 510481

Gujarat 7763 64.76 2861 316.02 406.72 48.29 24121 393860

Maharashtra 21240 62.73 13668 739 747 21.21 10041 965743

Western 29082 63.30 16611 1055.02 1153.72 25.77 34162 1359603

AP 2721 79.49 12405 2162.02 896.02 37.70 115337 457585

Karnataka 4694 62.76 7479 845.97 466.33 22.35 161761 407156

Kerala 1608 82.34 12735 1272.91 200.57 151.25 2090705 2240548

Tamil Nadu 4522 43.17 9016 1510.52 234.09 50.55 344997 852897

Puducherry 52 44.23 155 43 - 34.19 7002 3279

Southern 13597 61.84 41790 5834.42 1797.01 72.32 2719802 3961465

All-India 94647 69.25 126419 26081.88 10514.89 47.30 3528607 7647983

Source: NAFCOB 2010

32

Table A5: Relative Share of SHG business to Total PACS Business (March 2010)

State/

Region

Average No.

of SHGs per

PACS

Total

Estimated

SHG

Members*

% of SHG

members to

Total PACS

members*

% Share of

SHG Savings to

PACS’ Savings

% Share of

SHG Loans to

PACS’ Loan

Outstanding

Haryana 5.62 49448 1.64 0.63 0.11

HP 7.92 232596 18.12 0.54 95.13

Punjab 1.15 64456 2.37 0.34 0.16

Rajasthan 10.82 776972 15.09 10.79 3.04

Northern 6.40 1129324 9.17 2.18 1.12

Assam 26.13 280252 8.51 736.12

Meghalaya 13.11 32844 26.37 12.94 14.30

Tripura 15.94 59822 13.97 22.88 45.16

Arunachal 6.27 2898 13.15 - -

Manipur 5.56 15890 12.06 30.95 -

N-E 8.31 416836 10.21 20.71 118.56

Bihar - - - - -

Jharkhand - - - - -

Orissa 19.35 965860 5.66 2.94 2.76

W. Bengal 21.32 2395960 12.32 11.25 8.07

Eastern 11.98 3407348 9.32 5.77 4.25

Chattisgarh 16.80 285250 14.19 3.01 0.53

MP 4.23 274330 5.30 1.93 1.99

Uttarkhand 16.96 161196 15.87 15.49 8.29

UP 0.27 34216 1.23 3.38 1.85

Central 3.49 754992 6.87 5.67 2.20

Gujarat 3.52 382718 11.90 - 0.36

Maharashtra 12.62 3752966 21.88 - 1.70

Western 10.23 4163362 20.33 - 1.40

AP 9.78 372582 2.92 1.66 3.34

Karnataka 33.70 2214422 23.22 16.80 4.27

Kerala 33.32 750190 5.59 0.21 0.55

Tamil Nadu 29.39 1860334 17.32 4.81 6.07

Puducherry 59.23 43120 22.11 2.97 64.49

Southern 27.53 5240648 11.23 1.85 2.49

Grand Total 11.41 15112510 10.76 2.72 2.26

* Total membership of SHGs estimated by taking an average of 14 members per SHG. Total

members of PACS includes estimated total of SHG members.

33

Table A6: State-wise Distribution of DCCBs by Number of SHGs linked (2010)

States

No. of

DCCBs

Reporting

Average

SHGs per

DCCB

DCCBs by No. of SHGs Linked

1000 1000-3000 3000-5000 >5000 >10000

Haryana 17 208 16 1 0

HP 3 5538

1 2

Punjab 20 230 20

J& K 3 139 3

Rajasthan 29 1914 5 19 4 1

Orissa 17 4058 2 7 3 4 1

West Bengal 19 9007 1 6 1 4 7

Chattisgarh 6 3396 1 2 2 1

MP 28 700 23 3 2

Uttarkhand 12 960 10 1 1

UP 33 74 33

Gujarat 17 1608 11 2 3 1

Maharashtra 30 8936 1 5 6 9 9

AP 17 1565 9 4 3 1

Karnataka 21 7532 1 3 4 8 5

Kerala 14 3828 3 5 1 4 1

Tamil Nadu 21 6328 3 3 3 7 5

Total 307 3405 142 61 34 42 28

% (100.0) - 46.25 19.87 11.07 13.68 9.12