1

QUALITY ISSUES IN THE MICROFINANCE SECTOR

IN RAJASTHAN

Joint Study Of

APMAS, Hyderabad & CmF, Jaipur

2

OBJECTIVES OF THE STUDY

• the quality issues of SHGs, SHG federations, promoters and bank linkages

• Issues constraining improvement in quality, growth and spatial distribution

• Capacity building needs of different stakeholders

• Current sources of technical services• Possible strategies for addressing the

identified gaps and the role of CmF therein.

3

DISTRICT-WISE SAMPLE COVERAGE

Item\ District Bha Bil Dun Jal Bik Tot

• Blocks 3 3 3 3 3 15

• Habitations 15 18 19 19 18 89

• SHGs 38 41 42 42 39 202

• FGDs 3 3 3 2 3 14

• District-Officials 2 4 4 2 4 16

• Block-Official 5 5 6 5 6 27

• Bank Branches 6 6 6 6 6 30

• NGOs 2 1 2 1 2 8

4

SHPI-WISE SAMPLE SHGS

• DWCD promoted SHGs are in Bhilwara, Dungarpur and Jalor

• Most of NGO promoted SHGs are in Bharatpur and Bikaner

• Most of DRDA promoted groups in Jalor

SHPI wise distribution of Sample

DCWD, 61%

NGOs, 33%

DRDA, 6%

5

Development Profile of the Sample Districts

Indicator Bha Bil Dun Jal Bik

Rank of HDI 15 25 32 29 6

Rank of GRDI 7 23 27 21 3

Rural Poverty Ratio % 9.7 9.8 43.3 11.9 11.3

Rural BPL % 18.4 34.7 71.3 37.5 36.8

Per Capita Income 1991-92 3976 4391 2735 3825 4399

% of Farm Sector in DDP avg of 1987-88 to 1991-92

51.5 48.2 47 59.8 36.9

Female literacy rate-(R) 39.62 26.09 28.17 25.88 28.83

PROFILE OF SAMPLE DISTRICTS

6

LIMITATIONS OF THE STUDY

• Purposive selection of three districts• Coverage of only active/ functional groups• Selection of proportionately more no. of

SHGs promoted by NGOs• Federations are found only in Dungarpur

which formed very recently. Hence, not focused

7

PROFILE OF THE SHG MEMBERS• BC–37%, ST – 26%, SC–22%, Oth-15%

• 13% are widowed and divorced women

• Over 80% of the members are illiterate includes neo-literates also -36%

• Both APL and BPL are equally represented

• 51% are living in Kuchcha houses

• Non-farm labour–34%,agriculture–26%, Agri. Labour-16% are the primary occupation of many members

• Majority are marginal farmers- 60% followed by landless- 20%

8

PROFILE OF THE SHGS

• 12- avg. size of the SHG-2416/202; New members-78/29; replacements-22/13; dropouts-155/53

• Mixed caste groups are more (63%) than mono-caste groups (37%)

• More no. of SHGs are BC (42%) followed by SC (25%) and ST (22%)

• Majority of the SHGs are less than 4 years (64%)• Among the districts, > 4 year old groups are more

in Bilwara (50%)• 6 SHGs in Dungarpur have membership in

Federations

9

INFRASTRUCTURE: Distance

• 3 km -Avg. distance to bus point; lowest in Bilwara (1km) and longest in Bharatpur (4 km)

• 22 km –Avg distance to Block Hq; shortest in Bharatpur (15 km) and longest in Bikaner (27 km)

• 7 –km Avg. distance to bank; shortest in Bharatpur (5 km) longest in Dungarpur (10 km)

• 11% groups have banks within village – Jalore and Bhilwara more fortunate

• 38% have banks less than 5 km. Bikaner and Jalore are dominant

• 25% SHGs between 5-10 km. Bharatpur and Dungarpur; 25% over 10 km. Dungarpur

10

Bank linkages in Sample districts on 31st March 2005

District Total SHG linked

Amt. in Rs. million

Avg loan size in Rs.

Avg loan size of ICDS in Rs.

Bharatpur 3114 65.69 21,095 12,524

Bhilwara 4635 66.42 14,330 13,887

Bikaner 1635 28.36 17,346 5,464

Dungarpur 1319 66.95 50,758 31,595

Jalor 229 4.97 21,703 22,768

Rajasthan 60,006 1,414.04 23,565 19,680

India 1,618,456 68,984.60 42,624 --

SHG BANK LINKAGE SCENARIO

11

BANK LINKAGE SCENARIO…

• Increase in Bank Linkages in Rajasthan is mush faster compared to national level

• Average Loan size in the state is significantly lower than that of national figures

• Average loan size of DWCD promoted groups is significantly less than state average and that of all SHGs in the district

• Wide Inter-district variations in loan size

12

SHPI-INPUTS TO SHGsSHPI INPUTS TO SHGs

72.3

24.8

5.4 13

.4

1.5

0.5 4.0

3.0

37.1

37.1

1.5

1 2 3 4 5 6 7 8 9 10 11

Aspects

per

cen

tag

es

• About 70% of the SHGs received orientation of 1-2 days on SHG concept from their promoters

• Less percentage of (15%) SHGs trained on book-keeping and self management

• Few SHGs trained on micro-enterprise and skill development trainings

• NGOs provided more inputs to SHGs compared to DWCD and DRDA,

1 Concept of SHG

2 Group processes

3 Self Management

4 Bookkeeping

5 Govt. programs

6 Federation concept

7 Skill based training

8 Micro-enterprises

9 Health

10 Nutrition

11 Gender

13

SAVINGS

• Rs. 41 avg. savings per month per member; double in Bharatpur compared to Dungarpur

• Avg. amt. of Savings per month per member is less in DWCD promoted SHGs-Rs. 38 compared to NGO -Rs. 43 and DRDA-Rs. 64

• Rs. 13,508 avg. cum. Savings; highest in Bharatpur- Rs. 16,082; lowest in Bikaner- Rs. 10,660

• Avg. cum. Savings and age of the SHGs are positively correlated except 6+ year old SHGs

14

SAVINGS…• 17 SHGs have distributed their savings; 13

are mixed SHGs; 12 are 4 + years old SHGs

• 22% of SHGs have changed their monthly thrift-increased (21%) decreased (1%) ; 50% of the groups are between 4-6 year old

• Many ST-36% and BC-28% SHGs have increased their monthly thrift amount

• Collection of savings- mainly in meetings-58% followed by door to door, leader’s house

• Over 75% of the SHGs leaders collecting monthly savings

15

MEETINGS

• 90% of the SHGs have the norm of monthly meetings

• Three-fourth of SHGs conducting meetings at leaders house; other in community place

• 67% of SHGs conducted 6 meetings during the last 12 months; remaining between 1 to 5 meetings

• 16%-no meetings during the last 12 month; Double in Jalore (24%) and Bikaner (23%) compared to other

• 41% of SHGs- meeting at after noon, 20% at convenience, 16% in the morning

• 40% of SHG meetings in Bilwara take place at night.

16

LENDING PROCEDURES• NB lending is predomint-68%, ED is only-13%, both-

16%; no lending in 3% of the SHGs

• 90% of the SHGs loan repayment period is < 1 year

• Two-third are monthly instalments; remaining are convenience-20%, half yearly-7%, bimonthly, quarterly-3%, and yearly-2%

• 87% of the SHGs lent to their own members; more SHGs lent to non-members in Bilwara-20% and Dungarpur-10%

• Interest rate: Rs. 0.70-3 to SHG; Rs.1-2 to Non-SHG

• No collateral surety; in few case promissory notes

• 8% of the SHGs collected penalties (Rs. 4-10)

17

LOAN EQUITY & REPAYMENTS

• Rs. 28,624- disbursed as loan by each SHG• 57%- SHG members have loans currently• 7- average no. of loans in a SHG• 55% of the SHGs have over dues > 3 months• 94% of the loan amount is outstanding• 18% of the loan outstanding is arrears• On an average 4 members defaulted in SHGNote: loan data for the last one year Jan 05-Dec 05

18

LOAN PORTFOLIO AT RISKPortfolio at Risk

37

25

6

26

11

2

35

23

10

26

10

2

36

25

5

3933

17

PAR > 90 days PAR > 180 days PAR > 365 days

Avg

. Per

cent

age

of P

AR

Bha Bil Dun Jal Bik Tot

• Of the 202 SHGs, 13%-SHGs no schedule for repayment; in 3% SHGs no loans disbursed during that year

• 64%-SHGs made prepayments; High in Bikaner-67% less in Jalore-59%

• 33%- avg. recovery rate; highest in Bilwara-70%; lowest in Bharatpur 47%;

• Avg. recovery rate is more in Govt.-64% than NGO-60%• 59% of SHG have PAR > 90 days, 39% SHGs have PAR > 180

days, and 15% of the SHGs have PAR >365 days.

PERCENTAGE OF PAR BY SHPI

30

17

6

37

24

405

10152025303540

PAR > 90 days PAR > 180 days PAR > 365 days

PERIOD OF PAR

AV

G. %

OF

PA

R

Govt NGO

19

BOOK-KEEPING

Type of Books

District (Fig. in %)

 TotBha Bil Dun Jal Bik

Transaction sheet 3 7 5 3 3

Savings ledger 58 35 21 40 18 34

Loan ledger 39 35 17 40 20 30

Minutes Book 66 48 17 60 45 47

Receipts - 3 12 5 - 4

All in one book 37 50 82 45 60 56

No vouchers in any SHGs in any district

20

BOOKS OF ACCOUNTS• 56% of the SHGs have all accounts in one book;

about one-third have MB, savings & loan ledgers• Over 60% of the SHGs, records maintained by

SHPI followed by SHG office bearers-25%• However, in Bharatpur more percentage of SHG

office bearers are maintaining the books• Nearly 50% of the SHGs keeping their records at

President’s house followed by SHPI staff-28%• Nearly 50% of the SHGs issued Individual Pass-

Books to its members• Pass-Books are with members in majority cases;

in few cases with president, secretary and SHPI

21

SHG NORMS & PRACTICE

• 42% groups have norms for savings collection but only 15% are practicing

• 37% groups have norms for loan repayment but only 12% are practicing

• 31% groups have norms for attendance but only 9% are practicing

• Few groups have norms in Jalore but no practice; Very few groups in Bikaner have norms and all of them practice.

22

GRADING OF SHGSGrading of SHGs

1640 33 24 35 30

68

5040 50

43 50

16 1026 26 23 20

0%

20%

40%

60%

80%

100%

Districts

'C'

'B'

'A'

SHPI-Wise Grading of SHGs

28

42

31 30

49

33

5550

24 25

1320

DWCD DRDA NGO Total

SHPIs

Per

cen

tag

es 'A'

'B'

'C'

• 30% - A grade, 50%- B grade and 20%- C grade• A-Grade-Highest Bilwara 40%; lowest-Bharatpur-16%• B-Grade-Highest-Bharatpur-68%; lowest-Dungarpur-42%• C-Grade-highest-Dungarpur-26%; lowest-Bilwara-10%• Age and quality of SHGs are negatively correlated • % of ‘C’ grade groups is almost 3 times in mono-caste groups

compared to mixed caste groups; where as 15% of ‘B’ grade groups are more in mixed groups compared to mono-caste

23

SHG BANK LINKAGE STATUS

• 27% of SHGs bank linked for credit; 35%- CBs, 17%- RRBs and 29%-Coop

• Rs. 37,870 - avg. loan size; Rs.45,200 - CBs, Rs.30,100 - RRBs and Rs.13,500 -Coop

• % of NPA is 0.16%; 0.23% - CBs and no NPA in RRBs and Coops; Only one branch out of 30 has one NPA

• 3.73% - is the over due; 0.74%- C, 11.15%- RRBs and 0.19%- Coop

24

BANK LINKAGE • 73% sample SHGs are credit linked to bank

• More % of ‘A’ grade and less % of ‘B’ and ‘C” grade in bank linked groups compared to non-bank linked

• Rs. 46,162 avg. loan size; largest-Bharatpur Rs. 46,162; smallest-Bikaner Rs. 21,147.

• 19- avg. no. of instalments and loan ; highest-Bilwara-37; lowest-Bikaner-17

• Rs. 16,060- avg. loan amount repaid; largest-Bilwara Rs. 22,725; lowest-Bikaner-7,247.

• Rs. 26,831- (58%)avg loan outstanding; highest-Bharatpur Rs. 39,413; lowest-Bikaner Rs. 13,327

• Rs. 56,218- avg. Cum. Amount of loans; > double in Bilwara compared to Bikaner (Rs. 32,019)

25

REASONS FOR DELAYED PAYMENT

Reasons for delayed or irregular payment• Non-availability of work and drought 69%;Ill-health

17%; migration 13%

Action against defaulters• Repeated visits to groups-57%; and no action-12%

Reasons for small size of loan/ no repeat loan• Bankers not interested 19%; small size of loan

15%; limited purpose 19%; surplus with group 13% only in Bharatpur

• Earlier loan not cleared 16% only in Bharatpur and 13% only in Bhilwara

26

ISSUES IN SHGs• Group formation - Lack faith on others- 20%

and mobilization of poor-17%

• Bank Transactions–long distance 2%, illiteracy 5% and no cooperation from banks 7%

• Meetings – less attendance 11%, no agenda 2% and unsuitable timings 4%

• Savings – irregular savings 9% and unable to save 12%

• Lending–no internal lending 3%, difficulties in the collection of savings & loan instalments 4%

27

ISSUES IN SHGS…

• External loans – less volume of loan 4%, more time taking & repeated visits 6%

• Grants – for few groups 3%, repeated visits 1%• Book-keeping – no proper set of books 9% and no

training on book-keeping 11%.• Trainings – no trainings 8%, centralized trainings

11%, not interested in training 4% and no training on livelihoods and micro-enterprise

• Monitoring – No/ less monitoring and supervision • Others – men involvement in making decisions

28

ISSUES: BANKERS PERSPECTIVE

• Low quality of groups

• Illiteracy of members

• Difficulties in meeting the targets due to absence of quality groups

• Low volume of loan

• Feels that promotion of SHGs is not the business of banks

• Not enough staff to promote SHGs

29

ISSUES: SHPI PERSPECTIVE• Difficult to mobilize BPL members• BPL groups interested in SGSY linkage but not in

general linkage• Need for capacity building at all levels• Multiple tasks (especially in DRDA not able to

focus on SHGs)• Lack of financial support for NGOs• Incentives for a limited period to NGOs • Sustainability of SHGs in absence of NGO (SHPI)

support is a question• Training for Primary stakeholders in livelihoods • Low education levels of Anganwadi workers (de-

facto leader of SHGs in majority of cases)

30

DECISION MAKINGPerson Decision on the issue

Leaders Bank transactions-80%; cash in hand-76%; meetings-37%; SHG expen.-38%; external loans-30%; membership-24%

Members Norms- setting-47%; reinforcement-62%; meetings-42%; default mechanism-52%

SHPI Norms setting-48%; membership-47%; norms reinforcement / relaxation-20%; external loans-42%; ext. loan sanctioning

Family members

Personal affairs-90%; decision on political issues-93%

31

SHGS IN DEVELOPMENT

• Less participation of SHGs in social issues-anti-child labor-1%, TLC-8%,anti-arrack movement-3%

• 11% of SHGs focused on Girl-child education

• Many SHGs participated in health related activities across districts-ICDS activities-39%- PP, FP, AIDS

• Very few SHGs participated in income and employ- generation related activities-FFW, MM, PDS, WS

• SHGs of Bharatpur and Bilwara were more involved in socio-economic issues compared to other districts

32

IMPACT OF SHGS

1 Household income increased

2 Employment Generation

3 Credit is easily available

4 Access to formal institutions

5 Access to pro-poor programmes

6 Free from money-lenders

7 Indebted due to credits

8 Habit of savings

9 More expenditure on food

10 Health status improved

11 Independent life

12 Education levels improved

13 Self-confidence

14 Decision Making power

15 Representation in other groups

16 Leadership qualities

17 Group solidarity

IMPACT OF SHGs

36 3169

3816

424

9821

3444

3363 59

2447

58

54 5728

3756

4886

160

5442 57

29 3261

43 27

9 113

25 28

10 101

18 12 14 9 7 915 10 15

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

PERC

ENTA

GE

Yes No Can't Say

33

IMPACT OF SHGS

• Results are mixed• Positive – • - Access to institutional credit and development

of saving habit.• - Some members taken up income generation

activities• Negative – • - Loans are too small to take up income

generation activities• - Negative - Drought

34

Impact - Social

• Majority of Primary stakeholders and secondary stakeholders confirm positive impact of women empowerment.

• Women coming out of their houses

• Interacting with officers and others

• Bondage among members is developing