PERFORMANCE OF MICRO-FINANCE PROVIDERS IN KARNATAKA

Thesis submitted to the University of Agricultural Sciences, Dharwad In partial fulfillment of the requirements for the Degree of

MASTER OF BUSINESS ADMINISTRATION

In

AGRIBUSINESS

By BHUVAN I.B

DEPARTMENT OF AGRICULTURAL MARKETING CO-OPERATIONS AND AGRIBUSINESS MANAGEMENT COLLEGE OF AGRICULTURE, DHARWAD UNIVERSITY OF AGRICULTURAL SCIENCES, DHARWAD 580 005

OCTOBER, 2007

ADVISORY COMMITTEE DHARWAD OCTOBER, 2007 (N.N. KARNOOL) CHAIRMAN

Approved by: Chairman: _____________________ (N. KARNOOL) Members: 1. ____________________ (BASAVARAJ BANAKAR) 2. ____________________ (H. BASAVARAJ) 3. ____________________ (S.B. MAHAJANSHETTY) 4. ____________________ (ASHALATHA K.V)

CONTENTS
Sl. No.
CERTIFICATE ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES 1. 2. INTRODUCTION REVIEW OF LITERATURE 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3. The overall picture of SHGs in India Institutional linkages of SHGs SHGs bank linkages in micro finance Port-folio of lending by the micro finance providers Performance of Self Help Groups Economic impact on the SHGs Problems faced by micro finance providers

Chapter Particulars

METHODOLOGY 3.1 3.2 3.3 3.4 Description of the study area Nature and Source of data Analytical tools employed Terms and concept used in the study

4.

RESULTS 4.1 4.2 4.3 4.4 The Growth Pattern of Micro Finance in Karnataka The Business Performance of the Micro-Finance Providers. Impact of Micro-Financial Institutions on Member Enterprise. Constraints Faced by Micro-Finance Providers

5.

DISCUSSION 5.1 5.2 5.3 5.4 The Growth Pattern of Micro Finance in Karnataka The Business Performance of the Micro- Finance Providers Impact of Micro-Financial Institutions on Member Enterprise To Identify the Constraints Faced by Micro-Finance Providers.

6.

SUMMARY AND POLICY IMPLICATIONS REFERENCES

LIST OF TABLES
Table No.
1.1

Title
Performance of micro finance in India SHG-Bank Linkage (1992-93 to 2005-06) Growth in Bank Linkage of SHGs (1992-93 to 2005-06) in Karnataka District Wise SHGs formed (1999-2000 to 2005-2006) in Karnataka District Wise Bank Loan disbursed to SGHs (1999-2000 to 20052006) in Karnataka Number of SHGs formed by selected NGOs Number of SHG members served by the selected NGOs NABARD funds expended to selected NGOs Loans provided by NGOs to SHGs through banks assistance NGOs own funds lent to SHGs Total Amount lent* NGOs to SHGs through different sources Amount Recovered from the SHGs in the selected districts Amount Overdue from the SHGs in the selected districts Portfolio of Lending by NGOs to SHGs Skill Development Activities Conducted by NGOs to the members of SHGs Impact of Micro Finance on the income of the SHG members in the Selected Districts Impact of Micro Finance on the asset position of the SHGs in the Selected Districts Impact of Micro Finance on the generation of employment of the SHGs in the Selected Districts Impact of Micro Finance on the Savings of the SHGs in the Selected Districts Impact of Micro Finance on the investment pattern of the main occupation of the SHGs in the Selected Districts

4.1 4.2 4.3

4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13

4.14

4.15

4.16

4.17

4.18

Table No.
4.19

Title
Impact of Micro Finance on the investment pattern of the secondary occupation of the SHGs in the Selected Districts Impact of Micro Finance on the expenditure pattern of the SHG members in the Selected Districts Proportion of Expenditure for Different Purposes Constraints Faced by the Micro Finance Providers in the Selected Districts

4.20

4.21 4.22

LIST OF FIGURES
Figure No.
1. 2.

Title
Karnataka state map showing the selected districts Karnataka state SHGs credit linked, Bank loan and refinance provided

1. INTRODUCTION
An estimated of about 300 millions in India and around 1.2 billion population world wide live in absolute poverty. They are unable to meet their most basic human needs for food, clothing, shelter and minimum health care. Since 1947, the absolute number of poor has doubled despite the significant growth in agriculture production and employment over the past five decades of development planning. Rural poverty continues to pose the greatest challenge in India. India today retains the dubious distinction of having the largest number of poor people on the planet. Poverty in India is closely associated with poor population, or an imbalance between population and land resources. In India landless or near landless people live close to the margin of existence experiencing seasonal unemployment and nutritional stress. The burden of such poverty falls heavily upon women and children. The low level of human development is both a cause and consequence of poverty. The Vision of Micro finance: "Five years hence, we are looking for a process change leading to empowerment of 75 lakhs poor households, and more particularly of the women from these households, through strong and viable people's structures like SHGs and mFIs which draw strength and support from the banking system with the message that banking with the poor is a profitable business opportunity for both the poor and the banks." In the development paradigm, micro-finance has evolved as a need-based policy programme to cater to the so far neglected target groups (women, poor, rural, deprived, etc.). Its evolution is based on the concern of all developing countries for empowerment of the poor and the alleviation of poverty. Development organisations and policy makers have included access to credit for poor people as a major aspect of many poverty alleviation programmes. Micro-finance programmes in the recent past have become one of the more promising ways to use scarce development funds to achieve the objectives of poverty alleviation. Furthermore, certain micro-finance programmes have gained prominence in the development field and beyond. The basic idea of micro-finance is simple: if poor people are provided access to financial services, including credit, they may very well be able to start or expand a micro-enterprise that will allow them to break out of poverty. There are many features to this seemingly simple proposition, which are quite attractive to the potential target group members, government policy makers, and development practitioners. For the target group members, the most obvious benefit is that micro-finance programmes may actually succeed in enabling them to increase their income levels. Furthermore, the poor are able to access financial services, which previously were exclusively available to the upper and middle-income population. Finally, the access to credit and the opportunity to begin or to expand a micro-enterprise may be empowering to the poor, especially in comparison to other development initiatives, which often treat these specific target group members as recipients. For development practitioners, the success of microfinance programmes is encouraging. Too often in the past, costly large-scale development initiatives have failed to achieve any sustainable benefits, especially after funds have dried up. Thus, micro-finance has become one of the most effective interventions for economic empowerment of the poor. The term Micro Finance is of recent origin though we do not find this word in text books dealing with finance and financial management. But, now a days, it is freely used in the media, national/international forums, literature relating to development and prosperity of relatively disadvantaged sections of the society etc. Microfinance (mF) has become, in recent years, a fulcrum for development initiatives for the poor, particularly in the Third World countries. It has been practiced in varying forms in different countries and it has been regarded as an important tool for poverty alleviation. Although micro finance could possibly include a range of financial services targeted to the poor, in common parlance, however, micro-credit and MF are often used interchangeably with emphasis on provision of credit to the poor.

It has been approximately 25 years since the birth of Microfinance with the Founding of the Grameen Bank in Bangladesh by Professor Mohammad Yunus. The field has spread with the adaptation and evolution of Professor Yunus ideas to various countries and contexts. The UN Year of Micro credit in 2005 indicated a turning point of Microfinance as the private sector began to take a more serious interest in what has been considered the domain of NGOs. However, with all the excitement about the prospects of the field to contribute to poverty alleviation and the integration of the worlds poor into the rapidly evolving global market system, the Consultative Group to Assist the Poorest (CGAP) estimated that microfinance probably reaches fewer than 5 per cent of its potential clients. Although this is a very rough estimate of those not reached by formal financial institutions, it might serve to provide a general idea of what share of the potential clients of microfinance have yet to be reached. India is home to growing and innovative sector of microfinance. With a large portion of the worlds poor, India is likely to have a large potential demand for microfinance. Micro finance has already made a positive impact on the quality of life of millions of poor people by providing greater access to credit, savings, insurance, transfer, remittances and other financial services which would other wise are unreachable. Micro finance is a financial service of small quantity provided by financial institutions to the poor. These financial services may include savings, credit, insurance, leasing, money transfer, equity transaction, etc. that is, any type of financial service provided to customers for meeting their normal financial needs, life cycle, economic opportunity and emerging with only qualification that transaction value is small and customers are poor (SHG-bank linkage programme Karnataka 2005-2006, NABARD, page number 17.). Micro finance is generally associated with poverty alleviation interventions, income distribution amongst a wider section of population, Purchasing power redistribution where a large number of people do not have enough purchasing power to participate in a market economy. It is associated with savings in small amount and small loans, the affordability, availability, accessibility of small loans in a flexible, sensitive and responsive manner. The availability of timely, adequate uninterrupted finance that cannot provide collateral in a nonbureaucratic style. It is a spring board for creating micro entrepreneurs and gender development. On an average, there is at least one retail credit for about 5000 rural people or every 1000 households. Rural credit from non-institutional sources (informal credit) was more than 36 per cent, indicating the role of money lenders in the rural credit system. United Nations launched the year 2005 as the International year of Microfinance. And it is stated that microfinance is a integral part of collective effort to meet the Millennium Development Goals in the reduction of poverty in rural areas. The need for rural credit in India had been recognized even before independence by the erstwhile British Government as early as 1793 when it issued regulations for Taccavi loans to farmers and subordinate tenants for various purposes. The measures initiated to reduce indebtedness and regulating money lending activities for agricultural purposes failed to provide a long term solution. The Cooperative Societies Act which was passed in 1904 to provide necessary legislative support to the financing of agriculture and regulating credit in the interest of cultivators then signaled the entry of credit for agriculture from the institutional sector. Since then, and till the late Fifties, cooperatives have been the major institutional source for all agricultural loans. The syndicate bank which was started functioning in 1921 concentrated on raising micro-deposits in the form of daily, weekly, savings and micro loans for its constituents. And after bank nationalization in 1969 micro finance concept in the banking institutions once again come to the discussion. A number of special programmes aimed at meeting the credit needs of the disadvantaged sections of the society have been implemented in the past. Over the years, special poverty alleviation wage and self employment programmes like Jawahar Rozgar Yojana, Indira Awaz Yojana, Employment Assurance Scheme, Development of Women and Children in Rural Areas (DWCRA), Swarnjayanti Gram Swarojgar Yojana, Training of Rural Youth for Self Employment (TRYSEM), Integrated Rural Development Programme (IRDP), etc. have been implemented by the government of India and State governments for creation of wage and self employment opportunities. Today, there are about 60,000 retail credit outlets of the formal banking sector in the rural areas comprising 12,000 branches of district level

cooperative banks, over 14,000 branches of the Regional Rural Banks (RRBs) and over 30,000 rural and semi-urban branches of commercial banks besides almost 90,000 cooperatives credit societies at the village level. On an average, there is at least one retail credit outlet for about 5,000 rural people. This physical reaching out to the far-flung areas of the country to provide savings, credit and other banking services to the rural society is an unparalleled achievement of the Indian banking system. Despite having a wide network of rural bank branches in the country, a large number of the poor continue to remain outside the fold of formal banking system. In 1992 NABARD lunched IRDP programme which was perhaps the biggest microcredit programme of our country and in the world as well. Due to not meeting with desired success, In spite of all these noble efforts, the disadvantaged section of the society could not access financial services from the formal financial systems and they had to either depend on the informal system or on themselves for their credit needs and this created the birth of micro finance. The programme of linking SHGs to banks, which was started on pilot basis in 199192, made rapid progress over the years. The SHG-bank linkage programme perhaps is the largest micro-finance programme of the world now in terms of its outreach. From a modest beginning in 1992-93 with 255 SHGs in 10 states, the number of SHGs increased substantially to 7.17 lakh in 2002 2003 covering all states and Union Territories. Cumulatively, till 31 March 2003, 7.17 lakh SHGs were provided bank loan aggregating Rs. 2048.70 crore and benefiting an estimated 78 lakh poor households. Total bank loans disbursed to SHGs during the year aggregated to Rs. 1022.30 crore involving a refinance of Rs. 622.30 crore by the National Bank. More than 90 per cent of the SHGs linked to banks were exclusive women SHGs. Micro finance is a Provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas for enabling them to raise their income levels and improve living standards. The term micro literally means small, but the task force has not defined any amount. But RBIs micro credit special cell says borrowers accounts up to the limit of Rs. 25,000 could be leveled as micro credit products and this amount could be gradually increased up to Rs. 40,000 over a period of time which roughly equal to Rs. 81,500 a standard for South India as per international perceptions. Micro-finance is providing financial services, savings and credit to poor house holds that do not have access to formal financial institutions. It is considered as an important tool in poverty alleviation. Recovery experience has been quite satisfactory. The microfinance clients are low-income persons typically self-employed and often household-based entrepreneurs. In rural areas, they are usually small farmers and others who are engaged in small incomegenerating activities such as food processing and petty trade. In urban areas, microfinance activities are more diverse and include shopkeepers, service providers, artisans, street vendors, etc. Micro financial institutions are organizations that offer financial services to low income population. Almost all of these offer micro credit and only take back small amounts of savings from their own borrowers, not from the general public. Within the microfinance industry, the term micro financial institutions have come to refer to a wide range of organizations dedicated to providing these services. There is a wide variety of institutions in India catering, with various degrees of success, to the micro finance needs of poor families. As indicated above, they comprise of micro finance providers in the formal financial sector comprising of commercial banks, Regional Rural Banks and cooperative banks and micro financial institutions comprising NonGovernment Organizations, Self-Help Groups federations and certain non-bank cooperative societies in the non-financial sector.

1.1

NATIONAL POLICY ON MICRO FINANCE

The structure of rural financial market in India is dualistic both formal and informal financial intermediaries. Consensus is growing among researchers that the formal financial

sector is not effectively serving the rural population in the third world countries. This is mainly attributed to the failure of financial intermediaries in fulfilling their basic functions viz.. Production credit to finance income generating activities Consumption credit to maintain and expand human productive capacity Quality saving schemes for increasing risk-bearing capacity of the rural house holds.

The performance of formal financial institutions particularly in their lending to the poor in India has been unsatisfactory. They face a number of constraints in broadening their services to the poor. A large number of rural house holds are with limited land resource and small economic activity accompanied with poor technology. But their demand for credit has been rising due to growing family size increased consumption requirement, social obligations and so on. But the institutional agencies not only lacked the required mechanism to assess their credit needs but also often overlooked their demand for credit on the ground that their needs are for non-productive purpose. Besides, pursued high risks transaction cost in small scale rural lending and absence of collateral securities kept the poor away from the fold of formal financial intermediaries. There is a strong case for a formal recognition of mF, just like institutional credit, as a strategic tool for poverty alleviation and rural development, both at the policy and implementation level. The Task Force therefore recommends that Government of India (GOI) may consider making a suitable Policy Statement recognizing the role of micro finance. On this direction, the Government of India (GOI) made announcements in the budget speeches of 1998-99 and 1999-2000 regarding SHG-Bank Linkage Programme. This endeavor may have to be carried further by recognizing the other initiatives of the voluntary sector in providing mF services to the poor. Self Help Group (SHG) banking is the primary mode of microfinance in India today, reaching over six million families. In spite of its considerable outreach, successful savings mobilization and high repayment rates, as with most other microfinance models, the financial viability of SHG banking has not been clear. SHG federations attempt to provide financial viability and sustainability to SHG banking. The acceptance and recognition of mF as an essential tool for poverty alleviation envisages adoption of a National Policy on mF. The major components of the National Policy are, encouraging initiatives and participation of different types of institutions in mF, Bringing the microfinance activities, irrespective of the type of institutions within the regulation and supervision by competent authorities, creating policy environment for closer linkages of the mF sector with the formal banking channels and making available equity, start-up capital and capacity building funds for the existing and prospective institutions engaged in mF including banks and various mF structures from institutional sources in the country. The poor already save in ways that may not consider as "normal" savings--- investing in assets, for example, that can be easily exchanged to cash in the future (gold jewelry, domestic animals, building materials, etc.). After all, they face the same series of sudden demands for cash may be for health, school fees, need to expand the dwelling, burial, weddings. As according to the Progress of SHG- Bank Linkage in India a yearly issue released by the NABARD, the performance of banks in linking SHGs to the banking system scaled further new heights during the year in the country. The banks financed 6,20,109 new SHGs during 2005-2006. The cumulative number of SHGs credit linked with banks increased to 22,38,565 as on 31 March 2006 as against 16,18,456 SHGs as on 31 march 2005. The cumulative progress in financing SHGs from 1992 onwards, in physical and financial terms is given in table 1.1 and as can be seen the bank loans aggregating to Rs. 1,13,97500 lakhs were disbursed to 22,38,565 SHGs from NABARD upto 31 March 2006.

1.2

KARNATAKA INITIATIVE

Of course, lack of capital is only one factor keeping poor rural households inactive from improving their welfare. In rural areas of Karnataka, illiteracy is high, basic social and

Table 1.1: Performance of micro finance in India SHG-Bank Linkage (1992-93 to 200506)

Year 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 As on 31March 2005 As on 31March 2006

No of SHGs credit linked (Physical Terms) 255 365 1,502 2,635 3,841 5,719 18,678 81,780 1,49,050 1,97,653 2,55,882 7,17,360 10,79,091 16,18,476 22,38,585

Bank loan (Rs lakhs) (Financial Terms) 30 36 179 361 578 1,192 3,330 13,590 28,789 54,554 1,02,231 1,85,550 21,96,180 68,98,000 1,13,97,500

Source : NABARD Report, 2006

market infrastructure is lacking, and many people are in poor health. When seed or irrigation water for the farmer, market access for the rural producer, or elementary bookkeeping skills for the would-be entrepreneur are absent, the returns to financial services will be low or sometimes even wasted. Karnataka does not figure on the top of the tables published by financial institutions, it shows that the number of self-help groups are formed in each state. This is mainly because the tables capture data after 1991-92 when the National Bank for Agriculture and Rural Development (NABARD) launched a SHG-Bank Linkage Programme. However, between 1984 and 1985, MYRADA, a non-governmental organization engaged in rural development and based in Karnataka, promoted several co-operative societies that were enabled to give loans to their members. Subsequently, the large co-operatives broke up into small groups, which were the genesis of the first SHGs, referred to at that time as Credit Management Groups, with a focus on the management of credit. The concept of each member making a saving in the group soon followed, as also the establishment of a system of regular meetings, book keeping and records, and collective decision-making. A pilot study (Puhazhendi and Sai, 2000) gave NABARD the confidence to mainstream the SHG Bank Linkage Programme in 1996 as a normal lending activity. The programme then spread rapidly, if unevenly, across the country, making it by 2002, the largest microfinance programme in the world. Thus, the history of SHG promotion started with NGOs taking the lead in the mid-1980s and the lead

passing on to NABARD by the late 1980s. After the SHG-Bank Linkage Programme was launched in 1991-92, the very first loans to SHGs in the country were given in Kolar district of Karnataka: by the Vysya Bank. Self Help Groups (SHGs) form the basic constituent unit of the microfinance movement in India. A SHG is a group of few individuals usually poor and often women who pool their savings into a fund from which they can borrow as and when necessary. Such a group is linked with a bank a rural, co-operative or commercial bank where they maintain a group account. Over time the bank begins to lend to the group funded out of the savings generated by the group members themselves, are called inter-loans. The Role of NGOs in Microfinance: Self Help Groups are almost always formed with outside assistance. Developmental NGOs, often with considerable history of working in a particular area for projects like literacy, sanitation etc., take to organizing SHGs, bringing together people, explaining the concept to them, attending and helping coordinate a few of the initial group meetings, helping them maintain accounts and linking them with the banks. Of late, some of the rural banks themselves are being designated as Self Help Promoting Institutions (SHPIs) and they help in the formation and nursing of SHGs.

1.3

OBJECTIVES:

This is the right as well as crucial period to have a close look on the performance of micro finance providers and also to assess their impact on the SHGs and through it the assessment of the impact of the SHGs on the rural poor. Thus it was thought proper and most conducive to under take a research study entitled Performance of micro Finance Providersin KARNATAKA. The objectives of this study were 1. To study the growth and pattern of micro finance in Karnataka. 2. To evaluate the business performance of the micro- finance providers. 3. To study the impact of micro-financial institutions on member enterprise. 4. To identify the constraints faced by micro-finance providers.

1.4

PRESENTATION OF THE STUDY

The study is presented in six chapters.

The first chapter is developed to the introduction of the Micro finance and Micro financial institutions and the need for this study and the specification of the objectives. The second chapter presents a review of literature of the important existing studies on the micro financial situation world wide. The third chapter details the description of the study area, nature and source of data, the tools and techniques of analysis adopted for evaluating the objectives. Chapter IV gives us a brief insight into the results under appropriate heads in consistence with the objectives of the study. Chapter V seeks to interpret the results of the study and explains the causal relationships between certain variables and outcome, in micro financial activities. It also discusses a frame of inference for drawing policy measures. The chapter VI summarizes the results and suggests polices to improve the micro financial activities.

1.5

SCOPE OF THE STUDY:

The interest rates are deregulated not only for private micro finance institutions but also for formal banking sector. In the context of softening of interest rates in the formal banking sector, the comparatively higher interest rate (12%-24% per annum) charged by the

micro-financial institutions has become a contentious issue. The high interest rate collected by the micro financial institutions from their poor clients is perceived as exploitative. It is argued that raising interest rates could undermine the social and economic impact on poor clients. Since, most of the micro financial institutions have lower business volumes, and their transaction costs are far higher than that of the formal banking channels. The cost structure of micro financial institutions would affect their sustainability in long run. Self Help Groups, as micro financial invitation emerged as an impetus for community action. An informal supplementary credit delivery mechanism by lending at group level, the SHGs are in existence the scope of study influenced by the chief objective to study the income generating activities and how it contribute to the empowerment of poor.

1.6

LIMITATIONS OF THE STUDY

A student researcher, who was constrained with limited time, conducted the study and other resources at the disposal, poverty and poor education level of the respondents posed difficulties in getting accurate information. Study relied heavily on respondents memory to gather information pertaining to certain variables under study. Though the student investigator had taken at most care while collecting data, possibility of some errors creeping in cannot be ruled out.

2. REVIEW OF LITERATURE
In this chapter an attempt has been made to critically review the literature of the past research work in relevance to the present study. The studies available on the role of Non Governmental Organisations in provision of micro finance to the self help groups and their impact on the self help groups have been reviewed. The related literature has been gathered and presented under the following heads. 2.1 2.2 2.3 2.4 2.5 2.6 2.7 The overall picture of SHGs in India Institutional linkages of SHGs SHGs bank linkages in micro finance Port-folio of lending by the micro finance providers Performance of Self Help Groups Economic impact on the SHGs Problems faced by micro finance providers

2.1

THE OVERALL PICTURE OF SHG IN INDIA

Pathak (1992) SHG being comprised of group of persons, gets empowered to solve most of their problems of non-financial nature like raw materials, inputs supply, marketing, better adoption of technology education and training for realizing the human potential for development. The SHGs of Kerala have become centers for initiating social action against dowry system, alcoholism, illiteracy and divorce (NABARD 1997). Dinakar Rao (1994) reported that networking of SHGs and Self-help promoting institution are elements of propagating self-help. And that SHGs linked with formal credit agencies had advantages of pooled enterprises, economic of scale and organisation to relish exploitation. Harper (1996) in his study Self-help groups some issues from India indicated that in India, as in other parts of the developing world, the banking community is extending its services to the poor by lending to self-help groups. By providing single larger loans, relying on the group, on NGOs, to monitor the on lending of micro-loans, the banks transaction charges are reduced, making the operation potential profitable. Kumaran (1997) examine self-help groups promoted by a voluntary agency in A.P and their role in promoting thrift and credit activities among the poor. Further he also examine in detail the process of development of self-help groups, structure and function, resource mobilization and socio-economic, activities. Various factors responsible for active functioning, passivity and disbandment of self-help groups are examined in detail. Ramalakshmi (1998) pointed out that, inadequate working capital, is the most serious problem restricting the performance of many DWCRA groups and also the group members need training for skill enhancement especially for items such as soft made garments, foot wear, woolen blankets etc. Puhazhendhi and Jayaraman (1999) reported that the SHG members taking up more than one activity increased from about 30% during pre group formation situation. They undertook supplementary activities such as animal husbandry, poultry etc, and non-farm activities like Petty shop, Kirana shop, Flower selling business etc. Hartwig (1999) noted that SHG of Africa have increased the family income there by ensuring food security and children education. Suriakanthi (2000) reported that bank transactions are essential activities of SHGs. Credit and subsidy under the (SGSY) Swarna Jayanthi Gram Swarozgar Yojana Scheme can be availed only through banks.

Dadhich (2001) stated that effective implementation of micro-finance can be a means not only to alleviate poverty and empower woman but also be a viable economic and financial proportion. Raghavendra (2003) reported that the average participation level of SHG members has been quite good. Officials of Commercial Banks and RRBs together account for 50 per cent of total participation followed by Co-operative banks at45 per cent and the balance 5 per rd cent by NGOs. Southern region accounts for over 2/3 of total participation. Satya Sundaram (2005) stated that micro-finance in India is making steady and satisfactory progress. NABARD has set a goal of covering 10 million poor, i.e. one third of the countrys poor population through one million SHGs by 2003. Thorat (2005) stated that micro-financial services provided to the poor in sustainable manner is consistent with high repayment rates. Which meant that if the services to the poor were provided in a sustainable manner than the beneficiaries would go in for repayments that are quite high in consideration to a staggered manner of provision of services.

2.2

INSTITUTIONAL LINKAGES OF SHGs

Nanda (1999) conducted impact studies of self help and found that the most outstanding impact of the linkage programme could be the socio-economic empowerment of the poor more particularly the women. Gurumoorthy (2000) reported that the SHGs are linked with banks for the internal credit under the projects of rural development. The appraisal consists of bank managers, rural development officers, NGOs, project implementation units visit the groups for providing financial assistance to the respective entrepreneurial activities. Barik and Vannan (2001) reported that the project of linking SHGs with banks has gained momentum in India from 1992. And he reported that three broad models have emerged, model-I: Bank-SHG, member formed 14 per cent, model-II: bank (facilitating agency) SHG-members formed70 percent and model-III: Bank-NGO-MFI-SHG-members formed 16 per cent of SHGS linked during the 1999-2000. Namboodiri and Shiyani (2001) reported that the SHGs that are promoted by the NGOs had a better saving performance compared to that of SHPI. However, the repayment performance of the SHGs promoted by the SHPI was superior to that of NGOs. Pankaj (2001) reported that the SHG-bank linkage programme launched by NABARD in 1992 is a landmark in the field of micro financing in India. This programme aims to organize SHGs 10 to 20 persons from the economically homogeneous strata regularly save the amounts from their earnings. Satish (2001) reported that the NGOs due to the nearness to the people and flexibility of operations seem to be better equipped to undertake SHG formation. And linking SHGs to bank helps in overcoming the problem of high transaction costs to banks in providing credit to the poor. Kothal et al (2003) stated that there could be four different models of linkage between SHGs and banks. Acceptance of a particular model depends on the perception of the bank and the strength of the SHGs and the NGO. The programme of SHGs organized by various NGOs and banks in different part of the country is reported to be highly satisfactory. Kala (2004) reported that the linking of the self help groups (SHGs) with formal rural banking started after the launching of the pilot scheme by NABARD in February 1992 and that linkage of SHGs is possible only if the SHGs have successfully collected savings, made loans and recovered them for six months. Selvachandra (2004) stated that SHG and its linkage with banks is an important vehicle to promote micro finance in India. This programme helps to promote financial transactions between formal banking systems with the informal SHGs as clients.

Asokan (2005) reported that among the three models of linkages introduced, the second model i.e., SHG formed by NGOs and formal agencies but directly financed by bank is the best model. And he stated that the role of NGOs is very important to form SHGs Joseph. Bhagwati (2006) stated that the micro- credit advanced through the mechanism of self-help groups linked to bank credit is associated with higher level of loan recoveries and that tree linkage project has facilitated socio-economic empowerment of weaker sections including women folk. Joseph and Easwaran (2006) sated that in all parts of the country, self-help groups are organized by governmental and non-governmental organizations (NGOs). The government, banks and non-governmental organizations facilitate them by providing revolving fund, organizational and training, credit etc. Subbiah and Navaneetha (2006) reported that there are three models under the SHG-bank linkage programme, about 72% of the SHGs are formed by NGOs/government agencies and the like financed by banks. They stated that the programme has been advantageous not only to members of SHG but also to the banks.

2.3

SHGs BANK LINKAGES IN MICRO FINANCE

Puhazhendhi and Jayaram (1999) found that the in formal groups of rural poor with active intervention of NGOs adequately supported by training significantly improved womens participation both from economic and social aspects. Nanda (1999) conducted impact studies of self-help groups and found that the most outstanding impact of the linkage programme could be the socio-economic empowerment of the poor more particularly the women. Gurumoorthy (2000) reported that the SHGs are being linked with banks for the internal credit under the projects of rural development. The appraisal consists of bank managers, rural development officers, NGOs; project implementation units visit the groups for providing financial assistance to the respective entrepreneurial activities. Barik andVannan (2001) reported that project of linking SHGs with banks has gained momentum in India from 1992. And he reported that three broad, models have emerged, model I: Bank-SHG- member, formed 14 per cent, model-II: Bank (facilitating agency) SHGmembers, formed 70 per cent and model-III: Bank-NGO-MFI-SHG-member formed 16 per cent of SHGs linked during the 1999-2000. Namboodiri and Shiyani (2001) reported that the SHGs that are promoted by the NGOs had a better saving performance compared to that of SHIP. However, the repayment performance of the SHGs promoted by the SHIP was superior to that of NGOs. Pankaj (2001) reported that the SHG-bank linkage programme launched by NABARD in 1992 is activities land mark in the field of micro financing in India. This programme aims to organize SHGs 10 to 20 persons from the economically homogenous strata regularly same the amounts from their earnings. Satish (2001) reported that the NGOs due to the nearness to the people and flexibility of operations seem to be better equipped to undertake SHG formation. And linking SHGs to bank helps in over coming the problem of high transaction costs to banks in providing credit to the poor. Raghavendra (2003) revealed that the total number of SHGs, which were credit linked in the country, reached a phenomenal figure of 4.61 lakh by March 2002. Almost 90 per cent of them were linked to banks were exclusive women groups and periodic studied have revealed that repayment of loans by SHGs to banks has been consistently over 95 per cent. Kothal et al. (2003) stated that there could be four different models of linkage between SHGs and banks. Acceptance of a particular model depends on the perception of the bank and the strength of the SHGs and the NGO. The programme of SHGs organized by various NGOs and banks in different part of the country is reported to be highly satisfactory.

Kala (2004) reported that the linkage of the Self Help Groups (SHG's) with formal rural banking started after the launching of the pilot scheme by NABARD in February 1992 and linkage of SHGs is possible only if the SHGs have successfully collected savings, made loans and recovered them for six months. Subbiah and Navaneetha (2006) reported that there are three models under the SHG's-bank linkage programme. About 72% of the SHGs are formed by NGOs/ government agencies and the like financed by banks. They stated the programme has been advantageous not only to members of SHG's but also to the banks. SavitaShankar (2006) conducted Studies on efficient credit models in micro finance, in Tamil Nadu; the most popular model for the dispensation of micro credit in India is the group-lending model. As per Sa-dhan (Industry Association of Community Development Finance Institutions in India) data, group loans account for 93% of the microfinance in India. Shylendra etal.,(2007) report the overall performance of the self-help group (SHG) intervention of the Sadguru Water and Development Foundation (SWDF) in India and identifies possible ways to take it forward for promoting savings and credit activities. The study was stated that Self-help groups have become an important instrument in the delivery of microfinance services like savings and credit for the poor.

2.4

PORT-FOLIO OF LENDING BY THE MICRO FINANCE PROVIDERS

A World Bank study (1995) revealed that 67 per cent of the credit needs of poor people in India is for consumption needs and of the consumption credit required, 75 per cent was for short periods for emergent needs such as illness and household expenses during the lean monsoon seasons. They also estimate that 75 per cent of production credit (only 33% of total credit) was met by banks while 100 per cent of consumption credit requirement was met by informal resources at interest rate ranging from 30 per cent to 90 per cent per annum. Roshan Singh et al. (1978) studied the pattern of flow of credit in Bichpuri development block of Agra district in Uttar Pradesh. They found that the pattern of financing agriculture was similar both at the national and district level. The proportion of bank finance to agricultural showed a steady but slow increase over a period of four years. The overall share of large farmers in total finance to agriculture was much higher as compared to the small and medium farmers in all the years (1972 to 1977). The share of small farmers showed an increasing trend mainly during the years 1976 and 1977 when deliberate efforts were made to direct the flow of bank credit in favour of small farmers. Desai (1988) assessed the institutional credit requirement for agriculture production in 2000 A.D. and observed the growth rate of total credit between 1972-73 and 1982-83 was 17 per cent in nominal terms. The commercial bank share has more than doubled from 16.31 per cent in 1972-73 to 35.85 per cent in 1982-83. He estimated short term credit requirement by taking the total value of crop output from the cost of cultivation scheme of government of India for the period from 1974-75 to 1984-85 and found that the growth rate in agriculture advance to be 16.28 per cent. Ramdass (1989) measured the institutional credit flow in Pondicherry and observed that the short term credit advance by the institutions had grown enormously, while the long term credit lagged behind. He suggested the need for institution to come forward to provide long term credit and utilize the saving mobilized in rural areas exclusively for rural investment. Pradeep kumar (1993) used growth rate analysis to analyse the growth in physical and financial performance indicators of horticultural producers cooperative marketing society limited, Bangalore. The indicators considered were membership share capital, owned funds, sales, inventories, fixed assets, current assets, total assets, current liabilities and total liabilities. Pahazhendhi and Jayaraman (1999) concerned about the growth of agriculture advance during 1990-96, pointed out that despite the phenomenal growth in absolute terms, the proportion of amount outstanding advance to priority sector showed a declining trend from

16.9 per cent in June 1990 to 14.3 per cent in March 1996. The reversal trend was observed in 1996-97 March when the loans for agriculture constituted 16.3 per cent of net bank advances. The share of priority sector lending at all India level whose share had declined from the peak of 42.9 per cent in 1985 marginally improved to 41.7 per cent in March 1997. Nair (2000) reviewing recent trends in rural financial intermediaries and commercial banks in India indicated that the commercial banks credit to rural areas during the late 1980s and early 1990s has shown a deceleration in growth. The relative proportion of bank credit flowing to priority sector, especially agriculture was fallen below the target of 18 per cent at a national level since the mid 1980s. Abate (2000) studied the loan and advances to agriculture from all of the financial institutions shown significant compound growth rate over the study period. Compared to the growth in term loan (13.0 per cent), the growth in crop loan (17.2 per cent), which is a major index of agriculture production finance has shown a higher growth rate in Karnataka state during the study period. Similarly, the growth in agricultural advances (12.5 per cent) has shown higher growth rate in direct agricultural advances (10.9 per cent). However the share of agriculture advance and weaker section had shown a declining trend during the study period. The recovery performance of agricultural advances in commercial banks, regional rural banks and co-operative banks has shown a positive trend. Only the recovery performance of primary cooperative agricultural and rural development bank had shown a declining trend. With respect to the problems encountered in Agriculture credit system misutilization of loan amount by borrower, willful and deliberate default by borrowers and diversion of income generated out of the investment have found prime importance in the order. Vishvanath (2002) conducted a study in the management appraisal of district central co-operative bank in Uttar Kannada District of Karnataka and found that growth in number of branches, employees and membership was positive and significant. Except borrowing (8.17 per cent) all other financial variables showed a positive and significant growth. The recovery percentage for the selected Karnataka District Central Co-operative bank branches was found to be more than 90 per cent. Gosh (2005) studied that the share of allied activities in agricultural output, namely dairying, fisheries and poultry has been increasing significantly, the share of livestock in the gross value of agriculture (crop and livestock production) increased from under 16 per cent in 1970-71 to 26 per cent in 1995-96, that of fisheries went up over the same period from 1.7 per cent to 3.1 per cent. The share of non-food crop in the cropped area has increased from 25.7 per cent in the triennium ending 1971-72 to 35.1 per cent by 1999-2000. Gosh (2005) studied that the short term credit remained nearly unchanged, significantly at about 14 per cent, the growth of long term credit slowed down from about 20 per cent in the 1970s to about 14 per cent in the 1990s which is too disturbing. Clearly, this trend is bound to have a crippling impact on the capacity of the agricultural sector to grow and prosper. Reddy and Gupta (2006) studied the credit management in Self Help Groups(SHGs) under South Asia Poverty Alleviation Programme (SAPAP) revealed that the data on purpose wise allocation of credit showed that sample groups allocated 34 per cent, 22 per cent and 22 per cent of the total credit to small businesses, animal husbandry and agriculture respectively. Under animal husbandry, members take loan to purchase milch animals, sheep and goats, under agriculture members take crop loan to purchase, plough and bullock carts. The other major purposes include domestic consumption (13 per cent) and clearing of old debts (7 per cent) and share of health and education is only three per cent. Thus the members in the sample groups have taken credit mainly (78 per cent) for productive/ income generating activities during the study period. Thanarathnam (2006) while studying the working of primary agriculture co-operative banks, analyzed the loan dispersed by the bank. He had used the annual average growth rate of different types of loans given by banks. It was found that the average annual growth rate for the period 1996-97 to 2001-02 with regard to short term loan was 2.07 per cent, for jewel loan it was 1.35 per cent deposit loan has 3.44 per cent of growth rate. It was really

appreciable and it really showed the performance of the bank. According to the amount of loan dispersed by the bank, a large percentage share was taken by the jewel loan in all the six years and the amount was small with regard to deposit loan. Ramappa and Sivasankaraiah (2007) studied that the share of agriculture loan in the total priority sector advances was considerably large and fluctuated from 73.02 per cent in 1993-94 to 76.79 per cent in 2004-05. It was also evident that of the total agriculture loan in 2004-05, crop loan alone accounted for 93.31 per cent. Among non-agriculture activities retail trade/business enterprise received large quantum of loan followed by Self Help Groups. The percentage share of non-priority sector in total outstanding advances showed increasing trend from 15.16 in 1993-94 to 34.2 in 2004-05. It signifies the change in the lending pattern of the Rayalseema Grameena bank in Andhra Pradesh. Rangi et al. (2002) reported that about 59 per cent of the borrowings were for consumption purposes in the household. However, about 32 per cent of the respondents reported those consumption loans were exclusively for routine family expenditure because employment was not regularly available to the respondents households. About 18 per cent of them took credit for repair of their houses and about five per cent each used it for the study of their children and installation of hand pumps.It was found that about 71 per cent of these bank loans were for productive purposes. Among the productive purpose, dairy farming was the most dominant (about 32%) followed by tailor shop (about 19%), cloth shop (about 10%), grocery shop (about 6%) and electrical shop (about 3%). The loans for consumption purposes accounted for about 29 per cent of the cases. The routine family expenditure was dominant reason for taking loans, for this purpose. The other purposes were social functions, medical treatment and house repairs (Rangi et al., 2002). Vasudeva Rao (2003) in his study conducted at Andhra Pradesh pointed out that a majority of the people have taken loans for their own occupational development, where as, only a few have taken for health, education and marriage purposes. The amounts taken are also varying with the purpose. About 75.60 per cent availed loan for dairy activities, while 4.00 and 3.60 per cent of the respondents availed loan from the group for daughters marriage and poultry, respectively (Ritu Jain et al, 2003).

2.5

PERFORMANCE OF SELF HELP GROUPS

Ramlingam et al 1987 in their study entitled socio economic impact of IRDP on weaker section:a comparative analysis showed that the social status of the respondents had increased considerably from low status to higher status. Mahabub Hussain (1988) while assessing the performance of the Garmeena Bank in Bangladesh laid the hypothesis that If the poor are supplied with the working capital, they can generate productive self employment with out additional external assistance, and the results showed that the Garmeena bank has reached 6 percent of villages and 4 percent target house holds (1987). Molly (1990) found that there is lions share of NGOs programmes in the selected organizations related to the factory type employment such as readymade garments, Khadi and Village industry, candle making etc. The major productions schemes especially on house hold basis, which occupied 24 percent of total schemes, were animal husbandry, poultry, sericulture, fodder cultivation, kitchen garden and others. Pathak (1992) reported that SHG being comprised of group of persons, gets empowered to solve most of their problems of non- financial nature like raw materials, inputs supply, marketing, better adoption of technology, education and training for realizing the human potential for development. Nataraj (2004) in his study on Role and performance of SHGs in rural credit-an economic analysis reported that the average savings per group and average savings per member incase of RRBs sponsored SHGs was better compared to NGO promoted SHGs Girija (1995) stated that the group provides the women a base for self-employment and empowerment through group dynamics. The peer pressure on group members has

ensured proper utilization of credit and repayment of loans, savings provided, self-insurance and self-assurance to the group members. Harper (1996) in his study, self help groups-some issues from India indicated that in India, as in other parts of developing world, the banking community is extending its services to the poor by lending to self help groups. By providing single, larger loans, and relaying on the groups, on NGOs, to monitor the on-lending of micro loans, the bank transaction charges are reduced, making the whole operation potentially profitable. McGuire and Conroy (1997) described two studies on Bank NGO linkages and the transactions costs of lending to the poor through groups, one, in India and one in the Philippines. The India study compared the transaction costs incurred by banks while lending to the poor through various channels, and found that the transaction costs were much lower where banks used NGOs and self Help Groups as intermediaries. Transaction costs facing borrowers were also significantly lower. This suggests an important role for NGOs in the intermediation process. The Philippines study looked at the question from the prospective of NGOs. It found that NGOs could channel credit to the poor with lower transaction cost, as a proportion of loans granted, than most other institution. But the small loans and short maturities inherent in lending to the poor inevitably led to transaction costs being relatively high compared to the value of loans outstanding at any one point of time. The article also highlights the need for NGOs to minimize the costs as for as possible. Kumaran (1997) in his study on 21 SHGs found that 19 were active groups and one each was passive and dissolved group. According to him, the individual monthly contribution for savings varied from group to group (Rs.10-Rs.30) and the total savings for 18 groups in a year was Rs.33, 013/- while the total credit generated during the same period was Rs.2, 18,223/-, of which business took a large share of 29 per cent followed by others at 28 per cent, cumulative loan at 23 per cent, clearance of old debit at 12 per cent and health expense at 6 per cent. The interest rate on the loan varied from 5 percent to 3 percent between the groups on monthly basis. Sherin (1999) found that seventy six per cent of the respondents were highly self reliant in the functional SHGs where as only 48.27 per cent of the respondents expressed high self-reliance in the non-functional SHGs. The male respondents were significantly greater in self-reliance in comparison with their female counterparts. Prasad (2000) reported that in many villages, community issues like drinking water, roads, electricity and health services were addressed by the womens groups. The women involved themselves in various activities like desilting of tanks and working towards child development in addition to income generating activities. Arun Kumar (2004) reported that (53.33%) of the groups studied belong to medium level of performance category followed by high level of performance category (33.30%) of groups and remaining 13.33 per cent of groups belonged to low performance category. Selvi and Rathna Krishnan (2004) observed that the majority of the SHG leaders (88.30%) performed the specified leadership roles to the medium level followed by 11.7 percent of them in lowland. Asian productivity organization (2005) reiterated that on the way to improve the measurement of performance in productivity measurement, the total factor productivity should measure the synergy and efficiency of utilizing both labour and capital inputs. Further it stated that an appropriate productivity performance measurement system should cover financial, internal business process customers and learning and growing. Asian productivity organization (2005) reiterated that on the way to improve the measurement of performance in productivity measurement, the total factor productivity should measure the synergy and efficiency of utilizing both labour and capital inputs. Further it stated that an appropriate productivity performance measurement system should cover financial, internal business process customers and learning and growing.

2.6

ECONOMIC IMPACT ON SHGs

Dwarakanath (2001) reported that the DWCRA programme helped the rural women to earn an additional monthly income ranging from Rs.250-Rs.2000 depending on entrepreneurial activities taken up by them. Savitha (2004) reported that economic empowerment was high for agricultural laborers (53.33%) followed by small farmers (26.67%) and landless farmers (6.67%). Sentil and Sekar (2004) reported that income generation through SHG members gained additional income and employment through SHGs. Asokan (2005) reported that National Institute of rural development (NIRD) conducted a study on micro enterprises, which are developed by SHGs in Kerala. The characteristics of micro entrepreneurs under SHGs revealed that a high proportion (90%) of them were unemployed prior to joining SHG and tailoring was found to be the most preferred activity (47%). The study also found that the average monthly turnover of micro project taken by members of SHGs members was around Rs. 1917 and net profit worked out to be Rs. 700 per month. This indicates a high level of profit i.e. 60 per cent of individual units have investments less than Rs. 5,000. A study conducted in Trchirapalli rural area found that before starting micro- enterprises their annual income was increased to the tune of Rs. 50,879. Ganesh (2005) reported that in Akola district of Maharashtra an SHG formed under SGSY in record time of one and half years, all the families belonging to BPL status have uplifted to Owner of Brick Kiln status. Their net profit per 1000 bricks amount to Rs.550/- to Rs.650/- approximately. And their turnover has increased to more than Rs.3.5 lakhs. NABARD (2005) studied the impact of SHGs on economic empowerment of its members in Ballir district, Uttar Pradesh. And reported there was an increase of the monthly income of each of the families by at least Rs.700/month and this increase was solely due to the business that they were able to do by virtue of taking loan after the activities of SHG started. Rao (2005) reported that the highest average annual household income (Rs.45, 600) is from among respondents of papads and pickles and lowest (Rs.38, 600) from respondents of chalk making activity. And the micro enterprises roughly provided 117mandays/respondent, which was a great contribution. Dasarathararamaiah et al. (2006) reported that 10.0 per cent of beneficiaries had income between Rs.7, 201 and above, 20.67 per cent have income between Rs.4, 801 to 7,200 and 31.33 per cent have income Rs.3, 601 to 4,800 and 38.00 per cent have income below Rs.3, 600 per annum after implementation of DWCRA. And it was found that there are no persons without any income. And it was also found that 50 per cent of beneficiaries have less than 100 man-day of employment, 21.67 per cent of the beneficiaries have employment between 101 to 180 man-day, 20.00 per cent of the beneficiaries have employment between 181 to 240 man-day as against 8.33 per cent of the beneficiaries who have employment between 241 and above man-day of employment per annum. Gangaiah et al (2006) conducted study on impact of SHGs on income and employment generation. They reported that on an average the loans received generated 184 person days of employment per household. Non-farm activities generated higher number of person days of employment. Idly shop, cloth business and tailoring generated 300 each and 240 person days of employment. They also found that SHGs had favourable impact in generation of income in the village selected. The averag3e income generated was Rs.19, 578/-. Income generated in the selected activities shows that it b varies from Rs.5000 per annum in case of idly shop to Rs.26, 541 in the case of agriculture. Joseph and Easwaran (2006) conducted a study to identify the constraints in functioning of SHGs and its impact on the members. And it was found that 51.28 per cent of respondents had income between Rs.25, 000 to Rs.50, 000. Majority of respondents had assets worth below Rs, 1 lakh and more than one-half of the respondents as whole (51.28%) had assets below Rs.1 lakh. They also studied the perceived impact of SHGs on tribal

development. When studied the relationship between the composition and impact of SHGs. The perceived impact of SHGs was found to be significantly associated with three variables duration of membership, members participation and perceived group cohesion.

2.7

PROBLEMS FACED BY MICRO FINANCE PROVIDERS

Kumaran (1997) concluded that passivity in self-help group is mainly on account of irregularity in payment of savings and employment of loans, non-adherence to norms set by the group and lack of mutual trust and confidence among members. Regular defaulting by some members resulted in dissolution of some SHGs. Prita (2001) studied the performance of Self Help Groups in Dharwad district found that the major constraints faced by the members were difficulties in diversification/ starting of activities (41.67%), misunderstanding among SHG's members (38.17%), lack of space for storage of materials (28.24%) and inadequate availability of raw material at the right time (16.03%). Sentil and Sekar (2004) stated that political interference in selection of beneficiaries under peoples plan, lack of timely credit facilities, lack of adequate credit, lack of adequate farm women oriented schemes and delay in operation of development programmes were the major constraints perceived by the SHG members. Darlingselvi (2005) reported that from the study conducted in kanyakumari district that the members came across certain difficulties in marketing their products in time. Rao (2005) reported that though problems varied across activities, social taboos as also lack of communication skills came out to be major factors. Lack of transportation, competition from established brands and lack of capital were voiced by women. Joseph and Easwaran (2006) identified the perceived constraints in the functioning of SHGs and found that lack of government attention was first and foremost problem i.e. 39 percent. High rate of interest was felt by 33.43 percent of members, followed by insufficiency of loan for income generation, inability to repay the loan etc.

3. METHODOLOGY
The description of the methods and procedures followed in conducting this research is furnished under the following heads. 3.1 3.2 3.3 3.4 Description of the study area Nature and Source of data Analytical tools employed Terms and concepts used in the study

3.1

DESCRIPTION OF STUDY AREA

The Indian State of Karnataka is located within 11.5 degree North and 18.5 degree North latitudes and 74 degree East and 78.5 degree east longitude. It is situated on a tableland where the Western and Eastern Ghats ranges converge into the Nilgiri hill complex, in the western part of the Deccan Peninsular region of India. Karnataka extends to about 750 km from north to south and about 400 km from east to west. Karnataka is situated in the Deccan Plateau and is bordered by the Arabian Sea to the west, Goa to the northwest, Maharashtra to the north, Andhra Pradesh to the east, Tamil Nadu to the east and southeast, and Kerala to the southwest. It is situated at the angle where the Western Ghats and Eastern Ghats of South India converge into the Nilgiri hills. The highest point in Karnataka is the Mullayanagiri hill in Chickmagalur district which has an altitude of 1,929 meters (6,329 ft) above sea level. Divided into 28 districts, the state is well connected by roads, railways, air and waterways. Motor able roads are 1,37,520 lakhs km in length while rail network is 3,192 km which includes broad gauge, meter gauge and narrow gauge. Bangalore, Belgaum, Mangalore and Hubli are the main airports. New Mangalore Port is the main all-weather seaport in Karnataka which mainly handles cargo vessels. It has a sea coast of nearly 400 km (300 with inundations). Karnataka is predominantly rural and agrarian and has a population of 4,49,77,201. About 76% of its population lives in rural areas while about 71% of its working force is engaged in agricultural and allied activities which generate 49% of the state income among the agriculture crops. Karnataka accounts for 59% of the countrys coffee production and 47% of the countrys ragi production. The state is fifth in oilseed production as per 2001 census. There were nine districts of Karnataka selected for the study in view of large number of micro finance providers in these districts. 3.1.1 Belgaum 3.1.2. Bijapur 3.1.3. Chickmagalur 3.1.4. Chitradurga 3.1.5. Davangere 3.1.6. Dharwad 3.1.7. Haveri 3.1.8. Koppal 3.1.9. Shimoga The demographic features of these districts are as follows,

Fig 1. Karnataka state map showing the selected districts

3.1.1 Belgaum
The main food crops are Jawar, Paddy and wheat. Commercial crops like cotton, tobacco, groundnut and sugar cane are also raised. Belgaum & Khanapur taluks of the district receive good rains, Bailhongal, Hukkeri & part of Chikkodi receive medium rains while the other five talukas-Athani, Raibagh, Gokak, Ramdurg & Saundatti are considered as drought prone. The district is surrounded by Maharashtra state in the North, Bagalkot district in the East, Dharwad & Uttar Kannada districts in the South, Goa and Maharashtra state in the west. Belgaum is located at 15.87 N 74.5 E. It has an average elevation of 751 meters (2463 feet). The most elevated portion of the district lies to the west & south between 450 to 900 meters above MSL & extends over an area of 13,415 sq.kms which is 7 percent of the total geographical area of the state. It measures about 160 km from north to south and 80 to 130 km from east to west and forms a large plain, studded with solitary peaks broken here and there by low ranges of hills on the north-east. The district is open and well cultivated but to the south, it is intersected by spurs of the Western Ghats. The city is situated in the northwestern parts of Karnataka and lies at the border of two states, Maharashtra and Goa. It is one of the oldest towns in the state, lying at a distance of 502 km from Bangalore and 500 km from Mumbai. The district comprises 1278 villages with an area of 13,415 km with a population of around 5 lakhs (500,000). Situated near the foothills of the Sahyadri mountain range (Western Ghats) at an altitude of about 779m, 100km from the Arabian Sea with the river Markandeya flowing nearby, Belgaum exhibits swift and kaleidoscopic changes in topography, vegetation and climate. As of 2001 India census Belgaum had a population of 399,600. Males constitute 51% of the population and females 49%. Belgaum has an average literacy rate of 78%, higher than the national average of 65%; with 54% of the males and 46% of females literate. 11% of the population is under 6 years of age. Belgaum is an ideal location for vegetable trading, fish, wood & mining resource trading in north.

3.1.2 Bijapur
Bijapur is one of the largest districts in Karnataka and has an area of 10541 sq. km 0 0 consisting of 5.49 percent of the area of the state. It lies between 15 50 and 17 28 north 0 0 latitude and 74 54 and 76 28 east longitude. The district is surrounded by Sholapur district on the north and Sangli on the North West (both of Maharashtra state), by the district of Belgaum on the west, Bagalkot on the south, Gulbarga on the east and by Raichur on the south east. Thus, it is a land locked district on the northern boundary of Karnataka. The Bijapur district consists of five talukas v.i.z. Bijapur, Basavana Bagewadi, Indi, Sindigi and Muddebihal. The climate of the district is generally dry, the large variation the rainfall, from year to year, both in quantum and its distribution through the seasons. This makes the district more prone to drought and famine. The average annual rainfall of the district is 668.2 mm. The 0 0 temperature ranges from 14.8 C to 43 C. There are two main types of soil s namely black soil and red soil. The main food crops are Jowar, Bajra, wheat and gram. Among the commercial crops groundnut, Sesamum, linseed, cotton, safflower and sunflower are more popular. The medium rainfall, dry and healthy weather are considered to be the ideal conditions for grape cultivation. Bijapur district in Karnataka has all these ideal conditions for successful grape cultivation which is the major grape cultivating district in the northern Karnataka. It ranks first in the area under grape cultivation in Karnataka with 4390 hectare and with a production of 65805 tonnes during the year 2002-03. Grape cultivation is practiced throughout the district. Almost all the produce in the study area, grape is known for quality. Hence, Bijapur was specially selected for the study. According to 2001 census the total population of the district was 18.10 lakhs, Total: 18.10 lakhs (18.06918 inhabitants)out of which Males: 9.07 lakhs and Females: 9.02lakh.Density: the population density of Bijapur district is approximately 172 persons per sqkm and the sex ratio of the district 977/1000males. According to 2001 census the literacy

rate of the district is at 56 percent stood marginally above the state figure. The literacy rate among male is 57.95 whereas among female it is only 39.14 percent. The climate is warm and dry throughout the year and rainfall is scarce. The average annual rainfall for the district is 552.8 mm with 37.2 rainy days. The monsoon generally breaks in the district during June and lasts till October. The highest mean monthly rain fall 149.2 mm in the month of September and lowest is 3.5 mm in February. The annual rainfall variation in the district is marginal from place to place. The major soil types of the district are black soil and red soil Bijapur is very rich in red soil which is conducive to the cultivation of horticultural crops. The major crops grown in this area are, Jowar, Bajra, groundnut, linseed, cotton, safflower, Sesamum and sunflower are more popular. Grape, Pomegranate, Ber, Sapota and Papaya are the main fruit crops grown. Whereas Onion, Lemon, Cabbage, Cauliflower, Tomato and Brinjal are the important vegetables grown in the district. The main sources of irrigation are Canals, Bore wells and Tanks.

3.1.3 Chickmagalur
Chickmagalur, the district head quarters of Chickmagalur district, is 251km from the state capital of Bangalore and surrounded by the Baba Budan Giri hills and dense forests. The district is situated between 12 54 42 and 13 53 53 north latitude and between 75 04 46 and 76 21 50 east longitude. Its greatest length from east to west is about 138.4 kilometers and from north to south 88.5 kilometers. The district receives normal average rainfall of 1925 mm. The highest point in this district is Mullayanagiri, 1926 mts. above sea level which is also the highest point in the state of Karnataka. 30% of the district (2108.62 km) is covered with forests. The district borders Shimoga district to the north, Davangere district to the north-east, Chitradurga and Tumkur districts to the east, Hassan district to the south, Dakshina Kannada district to the south-west and Udupi district to the west. The rivers Bhadra, Tunga, Hemavathi, Netravati, and Vedavathi flow all year round. The district is rich in iron, magnetite and granite deposits. Black soil is found around Baba Budan Giri Hills where as Red and Gravel soils are found in the southern parts of the district. Chickmagalur district gets its name from its headquarters of Chickmagalur city. Chickmagalur literally means "The town of the younger daughter" in the native Kannada language. The town is said to have been given as a dowry to the younger daughter of Rukmangada, the legendary chief of Sakrepatna and hence the name. As one can guess, there is indeed a town called Hiremagaluru which means "The town of the elder daughter" which is about 5 km from Chickmagalur city. According to 2001 census, Chickmagalur district has a total population of 11,39,104 of which 6,54,275 are males and 5,64,829 are females. 81% of the population resides in rural area with the remaining 19% being the urban population. Among Taluks, Sringeri taluk has the least population whereas Chickmagalur Taluk has the highest population. Males constitute 51% of the population and females 49%. Chickmagalur has an average literacy rate of 77%, higher than the national average of 59.5%; with male literacy of 80% and female literacy of 73%. 11% of the population is under 6 years of age.

3.1.4. Chitradurga
The population was 1,517,896, of which 18.07% were urban as of 2001 comprising Nayakas, Gollas (Yadavs), Kurubas, Madiga, Lingayats, and several other communities. Majority of the people in Chitradurga are Hindus with Muslims comprising about 9% of the population. Kannada is the most widely spoken language but Urdu and Telugu is also spoken near areas bordering Andhra Pradesh. The district is hilly, with lots of forts and villages. The district is bounded by Tumkur District to the southeast and south, Chickmagalur District to the southwest, Davangere District to the west, Bellary District to the north, and Anantapur District of Andhra Pradesh state to the east. Davangere District was formerly part of Chitradurga. The district is divided into taluks, namely Chitradurga, Hiriyur, Hosadurga, Holalkere, Challakere and Molakalmuru. It is rich in mineral deposits, including gold prospecting at Halekal, Kotemardi or Bedimaradi, etc., and open cast copper mines at Ingaldhal.

3.1.5. Davangere
Davangere (also known as Davangere) is a city in the Indian state of Karnataka. It is the administrative headquarters of Davangere District. The city of Davangere is located on NH4 (National Highway 4) at a distance of about 260 km from the state capital of Bangalore. The coordinates for this district are 14 27N latitude to 75 55E longitude. As of 2001 India census, Davangere had a population of 363,780. Males constitute 52% of the population and females 48%. Davangere has an average literacy rate of 69%, higher than the national average of 59.5%: male literacy is 74% and, female literacy is 64%. In Davangere, 12% of the population is under 6 years of age. Davangere is located on the Bangalore-Pune railroad. Davangere is a market for grain and cotton and is home to a major textile industry. There is a machine-tool factory in the suburbs. In the late 18th cent., Haidar Ali, ruler of Karnataka (Mysore), gave Davangere to the Maratha leader Apoji Ram, who encouraged merchants to settle there. A major road and rail junction, it supports a large-scale textile industry and is a trading centre for cotton and grain. The surrounding villages produce hand loomed cotton and wool. Several colleges affiliated with the University of Mysore are situated at Davangere.

3.1.6 Dharwad
Dharwad district situated in the Northern part of Karnataka state at 1431N latitude and 74 28 E longitudes. The district comes under the transaction zone. It is bounded by Belgaum in the north, Haveri in the south, from north east to south east by Gadag district. The District is divided into 3 belts geographically, viz; Malnad, transition and dry regions. Malaprabha is the only one major rivers of the district. It has 5 taluks and 403 villages in it. Dharwad and Hubli taluks fall in the western part of the Dharwad district. Dharwad and Hubli talukas surrounded by Kalaghatagi, Kundgol, and Navalgund taluks of Dharwad district and Gadag taluks of Gadag district. The salient geographic and demographic features of the study area and the sample talukas are presented in Table 3.1 Dharwad district has an area of 4263 sq. km of which Dharwad taluka has an area of 1032 sq. km and Hubli taluka has an area of 631 sq. km. the total population of Dharwad district as per 2001 census was 16.05 lakhs and of which Dharwad talukas was 2.19 lakhs and Hubli taluka acconted for 1.28 lakhs. The density of population of Dharwad district was 377 per sq. km as against 219 and 207 per sq. km for Dharwad and Hubli talukas respectively. Dharwad is renowned as a center for education. It has two universities namely the University of Agricultural Sciences and Karnataka University. In Dharwad district there are 746 primary school, 207 high schools, 77 degree Colleges, 5 B.Ed. Colleges, 2 Engineering Colleges in addition to 8 Polytechnics, 2 Medical, 3 Pharmacy, one Dental, 7 Ayurvedic and 4 Homeopathy Colleges as well as one Physical Education centre. There are 173 primary schools and 20 high schools present in Dharwad taluka and 114 primary schools and 23 high schools present in Hubli taluka respectively Dharwad district is rich in 4 clothing and textile units, 8 chemical industries, 78 engineering units and 214 other miscellaneous industries. In all more than 25 thousand people derive their livelihood from these industries. In case of Dharwad and Hubli talukas there was 96 and 175 industries are work in process. Dharwad district is well connected with rail, roads and highways. National Highway No. 4 connecting Pune and Bangalore runs through Dharwad. All the villages of Dharwad district enjoy bus service facility. The Karnataka State Road Transport Corporation (KSRTC) as well as private transport services provides public transport facilities. Dharwad district have 221672 motor Vehicles as against in Dharwad and Hubli taluka have 55748 and 76919 motor Vehicles. Soils in Dharwad district comprise of red, medium and deep black soils. Similar types of soils were found in Dharwad and Hubli talukas. The major soil in both the talukas is deep black and red soil which is moderately rich in plant nutrients.

The south west monsoon is the most crucial for Dharwad district. The district has a normal rainfall of 969 mm, as against 905 mm and 1496 mm for Dharwad and Hubli talukas respectively. The land utilization pattern of Dharwad district is as follows, the net sown area of Dharwad district came to 5,23,470 hectares as against 77,388 and 56,567 hectares for Dharwad and Hubli talukas respectively. The area under forest was 35,235 hectares for Dharwad district and 13,676 and 2033 hectares of land covered by forest in Dharwad and Hubli talukas respectively. The district covers 26,876 hectares of the fallow land and of which 8,046 hectares comes under Dharwad taluka and 8,049 hectares is covered by Hubli taluka. The area devoted to different crops in the dharwad district is as follows, the major crops in Dharwad district and Dharwad and Hubli talukas were paddy, jowar, wheat, ragi, groundnut, red gram, Bengal gram, sugarcane and cotton and most of the area is rain fed. The area irrigated by different sources in Dharwad district are Canals and wells are the major sources of irrigation in Dharwad district. The total irrigated area came to 40,356 hectares in Dharwad district and of which 5915 and 5721 hectares is in Dharwad and Hubli talukas respectively.

3.1.7. Haveri
Haveri is 7 hours away from Bangalore by train. It is the stop 72 kms before Hubli and 72 after Davangere. By road, it is about 340 kms from Bangalore on NH-4 towards Mumbai. Haveri is located at 14.8 N 75.4 E. It has an average elevation of 572 meters (1876 feet). There are two major colleges in Haveri. One is Gudleppa Hallikeri College, another is C. B. Kolli Polytechnic. A new government engineering college is proposed which is expected to start in the 2008 academic year. Among other colleges are S. S. Womens Degree College, SJM Pre-University College, and SMS Pre-University College. As of 2001 India census, Haveri had a population of 55,900. Males constitute 51% of the population and females 49%. Haveri has an average literacy rate of 70%, higher than the national average of 59.5%: male literacy is 76%, and female literacy is 64%. In Haveri, 13% of the population is under 6 years of age.

3.1.8. Koppal
Koppal, a newborn district of Karnataka state, carved out of Raichur District, came into existence on 01-04-1998. It is situated between 15* 09' 00" to 16* 03' 30" North Latitude and 75* 47' 30" to 76* 48' 10" East Longitude. It consists of four talukas viz: Koppal, Gangavathi, Kushtagi & Yelburga. Koppal district is surrounded by Raichur district in the east, Gadag district in the West, Bagalkot district in the north, Bellary district in the south. Koppal district headquarters is closest to the world heritage Hampi. The total geographical area of Koppal district is 552495 hectares out of which forest area is 29451 hectares. Land not available for cultivation is 55497 hectares. Area sown is 396627 hectares. Haveri is located at 14.8 N 75.4 E. It has an average elevation of 572 meters (1876 feet). The total population of Koppal district is 11.93 lakhs (as per 2001 census) among which 9.95 lakhs from rural area and 1.98 lakhs from urban area. The district is having sex ratio of 982 per 1000 males. The literacy level of the district is 62.39%. Population Density is 216 per Sq.Km. Koppal district is having partly red sandy and black cotton soil suitable for agriculture and horticulture crops. The taluk is having few Rocky Mountains with xerophytes vegetation. The Tungabhadra river is formed by union of two rivers, viz., the Tunga and the Bhadra, both of which rise at Gangamula in the Varaha Parvata of the Western Ghats. This is also a perennial river, very deep in certain places and almost unaffordable even in the dry season. This river enters the district near Kesalapur village at the south-western tip of Koppal Taluk. The general slope of the land in the district being north-west to south-east, the Tungabhadra has a large number of rivulets and streams serving as tributaries. But none of these streams is of any great importance by itself and they generally go dry during the summer. There is

Thungabhadra reservoir at Munirabad which is in the border of koppal taluk. The Tungabhadra River also is reputed as one of the important rivers of South India. The climate of the district is very hot and dry.

3.1.9. Shimoga
The district with sprawling area of 8465 Sq. Kms, is situated between 13* 27' and 14* 39' North - latitude and between 74* 38' and 74* 4' East longitude. It is hounded on the east by Davangere district, south by the Chickmagalur district, west by the Udupi and NorthCanara districts and on the north by Haveri and Davanagere districts. Shimoga district being a part of the Malnad region receives good monsoon rainfall; the months from June to October being the rainy season. In the years 1901-1970, it received an average annual rainfall of 1813.9 mm with an average of 86 days in the year being rainy days. The average annual temperature of Shimoga District is around 26 C. The average temperature has increased substantially over the years. In some regions of Shimoga district, the day temperature can really soar to about 40oC during summers, leading to water crisis and other problems. The major soil forms found in the Shimoga district are Red gravelly clay soil, Red clay soil, Lateritic gravelly clay soil, Lateritic clay soil, Medium deep black soil, Non-saline and saline Alluvo-Colluvial soil and Brown forest soil. Major minerals found in this district are Limestone, White Quartz, Kaolin, Kyanite and Manganese.
0

3.2

NATURE AND SOURCE OF DATA

The present study was designed to understand and analyze NGOs and their part who are involved in micro finance activity to improve the lives of the rural poor. The study was conducted with reference to 2006-2007. The State of Karnataka was chosen as the locale of study. Karnataka is one of the pioneering states in the micro finance movement of the country. Out of 27 districts in Karnataka, nine districts namely Belgaum, Bijapur, Chickmagalur, Chitradurga, Davangere, Dharwad, Haveri, Koppal and Shimoga were chosen for the study in view of large number of micro finance providers in these districts in the state. Keeping in view of the objectives of the study, a multi stage sampling procedure was adopted for the selection of the district, micro finance providers and SHGs. At the first stage based on the total strength of the non government micro finance service providers, the districts were selected. In the second stage from each selected district 20 percent of the Non Government micro Finance Service providers (NGOs) were taken at random which amounted for 22 NGOs. In the next stage two SHGs were selected at random from each selected NGOs who are serving as micro finance providers.

3.2.1 Sampling procedure

The data pertaining to various aspects under study were collected from the primary source, with respect to amount lent, port -folio lending by micro Finance providers, cost and returns involved in each activities, recovery performance under micro financial activities in the selected districts was collected with the help of pre-tested questionnaire from the NGOs for the year 1999-2000 to 2006-2007 and SHGs for the year 2006-2007. Similarly, terms and conditions involved in micro financial activities were obtained from the Financial Institutions. The growth and pattern of micro finance in the state for the period 1992 to 2006 and districts wise growth and pattern of micro finance in Karnataka for the period 1999 to 2006 was collected from secondary sources.

3.3

ANALYTICAL TECHNIQUES EMPLOYED

3.3.1 Triennium averages 3.3.2 Compound Growth Rate Analysis 3.3.3 Paired t test

3.3.4 Impact Index

3.3.1 Triennium averages

Triennium averages for first three and last three years are calculated, change during the period over the first triennium averages to last triennium averages was calculated because of plausibility of large number of continuous time series data. Further annul average growth in percentages calculated by dividing the change during the period by number of years in the study period in order to study the performance of micro finance activities undertaken by the non governmental micro finance providers.

3.3.2 Compound Growth Rate Analysis

In order to assess the growth in number of SHGs credit linked , Bank loan and Refinance of micro finance providers in Karnataka are worked out for a period of 14 years from 1992-93 to 2005-06 and all the districts as a whole were worked out for a period of 7 years from 1999-2000 to 2005-06. The Compound growths are computed by using the exponential function of the form. Yt=AB Ut------------------------------ (1) Where, Yt = SHGs credit linked/ Bank loan/Refinance/number of family assisted/ Recovery/over dues A = Y in the base year T = Time period Ut = Error term B = 1+g, where g = growth rate. By taking the logarithm, equation (1) was reduced to the following form LogYt = LogA+ (LogB) t+ Log Ut--------------- (2) Where log A and logB are the parameters of the function obtained by ordinary least square method (OLS) Defining, Qt = log Ut Xt = t a=logA b=logB Ut = logUt Equation (2) could be written as follows Qt = a + bxt + Ut--------------(3) Once the above equation is estimated, g can be computed as: g = Antilog (b)-1 x 100 -------------- (4) For comparison purposes the growth rates arrived at with the help of Equation (4) is multiplied by 100 to obtain the percentage change in the variable concerned, that is the percentage of growth [(Antilog b)-1]x100.
t

3.3.3 Paired t test

To find out the impact of NGOs on the SHGs the paired t-test was done, which is a statistical test for finding the differences in performance of SHGs before and after joining the NGOs who are involved in microfinance. (di-0) Paired t test = 2 Sd /n Di = ( X1i X2i) Sd =
2

1 n-1

{di2 - (di)2} n

3.3.4 Impact Index

The impact of the NGOs on the SHGs was also assessed using the scoring pattern. The impact index was obtained by using the formula. Average scores obtained Impact index = Average maximum scores to be obtained

3.4

TERMS AND CONCEPT USED IN THE STUDY

Credit: A contractual agreement, in which a borrower receives something of value now, with the agreement to repay the lender at some date in the future. Credit delivery models: These are the path through which micro finance/credit flow from apex level institutions to ultimate SHG members. Expended: It is the total amount that is been forwarded from the micro finance providing institutions to the SHGs. Interest: The charge for the privilege of borrowing money, typically expressed as an annual percentage rate. Loan: When a lender gives money or property to borrower and the borrower agrees to return the property or repay the borrowed money, along with interest, at a predetermined date in the future Lending: To provide (money) temporarily on condition that the amount borrowed be returned, usually with an interest rate. Micro finance: Provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas for enabling them to raise their income levels and improve living standards. Micro financial providers: Micro financial providers are those, which provide thrift, credit and other financial services and products of very small amounts mainly to the poor in rural, semi urban or urban areas for enabling them to raise their income level and improve living standard which may also includes non-governments. Micro credit: Refers to a small loan to a client made by a bank or other financial institution. NGO: Non-governmental organization, which is an informal supplementary credit delivery mechanism for lending at group level Over dues: It is conceptualized as the non- repayment of any part or full amount of loan by the borrower to any financial institutions with in the time specified for the repayment. Repayment: The act of returning money received previously.

Saving: Refer to the various kinds of deposit amount of the farmers/ beneficiaries and others kept in any financial institutions. Self employment: The status of an individual who rather than accepting a position as an employee of another person or organization choose to go into business for him or herself. Self help groups: These are voluntary groups come together for obtaining loans from financial institutions in order to employ income generating activities to improve their standard of living.

4. RESULTS
In consistence with the objectives of the study, the data collected from different sources were analyzed. The results are presented under the following heads. 4.1 The Growth Pattern of Micro Finance in Karnataka 4.1.1 Growth in Bank Linkage of SHGs in Karnataka. 4.1.2 District Wise SHGs formed in Karnataka. 4.1.3 District Wise Bank Loan Disbursed to SHGs in Karnataka. 4.2 The Business Performance of the Micro-Finance Providers. 4.2.1 Formation of SHGs by selected NGOs. 4.2.2 Number of SHG members served by the NGOs 4.2.3 Amount of NABARD funds expended to selected NGOs 4.2.4 Lending to SHGs through Bank assistance 4.2.5 Lending to SHGs through NGOs own funds 4.2.6 Total Amount lent* through different sources to SHGs by the selected NGOs 4.2.7 Amount Recovered from the SHGs in the selected districts 4.2.8 Amount Overdue from the SHGs in the selected districts 4.2.9 Portfolio of Lending by NGOs to SHGs. 4.2.10. Skill Developmental Activities Conducted by NGOs to the SHGs. 4.3 Impact of Micro-Financial Institutions on Member Enterprise. 4.3.1 Impact of NGOs on the Income of the SHGs. 4.3.2 Impact of NGOs on the Asset Position of the SHGs. 4.3.3 Impact of NGOs on the Generation of Employment of the SHGs. 4.3.4 Impact of NGOs on the Savings of the SHGs. 4.3.5 Impact of NGOs on the investment pattern of the SHGs. 4.3.6 Impact of NGOs on the Consumption Pattern of the SHGs. 4.4 Constraints Faced by Micro-Finance Providers.

4.1

THE GROWTH PATTERN OF MICRO FINANCE IN KARNATAKA

The growth patterns of SHGs in Karnataka are presented in this section. This gives a clear picture of growth in micro finance provided and the pattern in which it has grown in the past decades.

4.1.1 Growth in Bank Linkage of SHGs in Karnataka

Table 4.1 presents the pattern of growth of SHGs in the state from 1992-1993 to 2005-06. In the year 1992-93 the total number of SHGs credit linked were only 114 which decreased to 51 in 1993-94 then there was a constant rise in their numbers. In the year 2005 06 the total number of SHGs credit linked grew up to 61,730. The compound growth rate of number of SHGs credit linked increased at the rate of 71.19 per cent. Similarly bank loan disbursed to SHGs was found to be growing at the compound growth rate of 95.97 per cent and refinance to banks from Apex level institutions increased at a compound growth rate of 75.83 per cent. The rate of growth in bank loan was higher than the growth in both the SHGs credit linked and refinanced.

4.1.2 District Wise SHGs Credit Linked in Karnataka

The table 4.2 presents district wise SHGs credit linked from the year 1999-2000 to 2005-2006 for the 27 districts of Karnataka. The first triennium end average values are lower in all the districts except in the districts of Bidar and Chitradurga. The compound growth rates

Table 4.1: Growth in Bank Linkage of SHGs (1992-93 to 2005-06) in Karnataka

Year 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Cumulative CGR r2

No. of SHGs Credit linked 114 51 481 1,046 760 1,138 2,002 5,018 8,009 18,413 25,146 41,688 59,332 61,730 224,928 71.19 0.75**

Bank Loan (Rs lakh) 5.73 5.51 77.71 145.08 159.12 232.19 429.86 1,054.81 1,714.00 3,475.39 7,249.50 13,960.37 26,653.00 44,260.02 99,422.29 95.97 0.56**

Refinance (Rs lakh) 5.73 5.51 70.71 145.08 159.12 228.1 422.28 649 1,404.00 2,229.00 4,073.55 6,090.22 9,951.00 6,659.43 32,092.73 75.83 0.71**

Source: SHG-bank linkage Programme Karnataka 2005-2006, NABARD, ** = Significant at 1 Percent

of Bidar and Chitradurga districts for these years were 0.69 and 11.12 respectively. The state total for all the years was found to be 2,24,928 number of SHGs. The first triennium average values for the state as a whole (15,263.67) was found to be lower than the state average but whereas in the case of the second triennium end average values for the state as a whole (51,330.33) was higher than the state average

4.1.3 District Wise Bank Loan Disbursed to SHGs in Karnataka

The district wise bank loan disbursed from the year 1999-2000 to 2005-2006 for the 27 districts of Karnataka are presented in table 4.3 indicating that the first triennium average values were lower in all the districts. The state overall total for all the years was found to be 99,422.77 lakhs rupees and the average for the state was found to be 14,204.97 lakh rupees. The first triennium average values for the state as a whole (2,384 lakh rupees) was found to be lower than the state average but whereas in the case of the second triennium average values for the state as a whole (28,344.42 lakh rupees) was higher than the state average.

4.2

THE BUSINESS PERFORMANCE FINANCE PROVIDERS

OF

THE

MICRO-

The important factors that decide on the business performance of the Micro Finance providers are discussed in this section.

4.2.1 Formation of SHGs by selected NGOs

The performances of microfinance provided by NGOs to SHGs formed by them in the selected districts are discussed here. It is evident from the table 4.4 that the total numbers of

70000

No.of SHGs Credit linked

Bank Loan(Rs lakh)

Refinace(Rs lakh)

60000

50000

Values

40000

30000

20000

10000

0 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 2000-01 2001-02 2002-03 2003-04 1999-2000 2004-05 2005-2006

Years

Fig. 2: Karnataka state SHGs credit linked, Bank loan and refinance provided

Fig. 2: Karnataka state SHGs credit linked, Bank loan and refinance provided

Table 4.2: District Wise SHGs formed (1999-2000 to 2005-2006) in Karnataka

(Nos.)
Name of the Districts 1999-00 2000-01 2001-02 2003-04 2004-05 2005-06 Total Average TE 02 TE 06 BAGALKOT 14 39 310 576 756 727 2803.00 400.43 121.00 686.33 BANGALORE (R) 14 24 204 1152 3528 2813 8047.00 1149.57 80.67 2497.67 BANGALORE (U) 20 30 337 304 425 2084 3401.00 485.86 129.00 937.67 BELGAUM 128 308 434 1480 2766 3622 9675.00 1382.14 290.00 2622.67 BELLARY 108 437 2969 1774 2503 2107 10971.00 1567.29 1171.33 2128.00 BIDAR 918 1796 1775 1577 640 2025 10757.00 1536.71 1496.33 1414.00 BIJAPUR 160 260 326 518 1082 1063 3959.00 565.57 248.67 887.67 CHAMARAJ NAGAR 93 365 757 877 1358 1813 5889.00 841.29 405.00 1349.33 CHICKMAGALUR 4 114 254 664 1071 1447 3736.00 533.71 124.00 1060.67 CHITRADURGA 503 735 2973 1842 730 1586 9917.00 1416.71 1403.67 1386.00 DAKSHINA KANNADA 2853 3388 1534 6925 3559 4217 25563.00 3651.86 2591.67 4900.33 DAVANAGERE 34 98 461 577 1991 1823 5233.00 747.57 197.67 1463.67 DHARWAD 287 494 380 795 773 1485 4580.00 654.29 387.00 1017.67 GADAG 20 68 182 527 732 1268 2969.00 424.14 90.00 842.33 GULBARGA 293 484 567 1993 2622 3776 11267.00 1609.57 448.00 2797.00 HASSAN 70 490 1426 2941 4446 5929 17374.00 2482.00 662.00 4438.67 HAVERI 29 121 287 618 1259 2162 4797.00 685.29 145.67 1346.33 KODAGU 16 27 382 682 609 1251 3250.00 464.29 141.67 847.33 KOLAR 581 738 1334 1553 1727 2546 9669.00 1381.29 884.33 1942.00 KOPPAL 39 91 290 605 1264 757 3296.00 470.86 140.00 875.33 MANDYA 38 126 867 1891 2808 3485 10275.00 1467.86 343.67 2728.00 MYSORE 1100 1445 1277 2601 4996 3830 16340.00 2334.29 1274.00 3809.00 RAICHUR 39 370 412 831 1368 1103 4550.00 650.00 273.67 1100.67 SHIMOGA 868 1371 738 1033 929 2010 7595.00 1085.00 992.33 1324.00 TUMKUR 227 345 1508 2943 3725 4069 14682.00 2097.43 693.33 3579.00 UDUPI 269 539 494 3427 1639 1302 9626.00 1375.14 434.00 2122.67 UTTARA KANNADA 34 83 168 982 1267 1430 4707.00 672.43 95.00 1226.33 State total 8759 14386 22646 41688 50573 61730 224928.00 32132.57 15263.67 51330.33
Source: SHG-bank linkage Programme Karnataka 2005-2006, NABARD TE= triennium ending,

CGR R2 92.91 0.95** 168.17 0.76** 98.08 0.55** 74.85 0.90** 52.90 0.42** 0.69 0.01NS 37.89 0.89** 51.79 0.92** 128.30 0.88** 11.12 0.04 NS 10.43 0.21* 91.51 0.77** 26.42 0.71** 91.99 0.85** 55.19 0.94** 93.29 0.96** 92.83 0.81** 103.46 0.85** 25.17 0.90** 70.23 0.73** 108.28 0.96** 28.11 0.69** 61.05 0.86** 7.70 0.22* 65.38 0.98** 37.38 0.33** 93.16 0.95** 37.82 0.97**

** = Significant at 1 Per cent, * = Significant at 5 per cent, NS = Not Significant

Table 4.3: District Wise Bank Loan disbursed to SGHs (1999-2000 to 2005-2006) in Karnataka (lakh rupees)

Name of the Districts 1999-00 2000-01 2001-02 2003-2004 2004-2005 2005-2006 Total Average TE 02 TE 06 Bagalkot 1.69 4.65 41.77 197.90 264.98 485.70 1032.48 147.50 16.03 316.19 Bangalore (R) 1.69 2.86 36.05 411.20 2467.03 2678.00 5629.93 804.28 13.53 1852.08 Bangalore (U) 2.41 3.57 140.62 168.70 654.71 1208.40 2245.21 320.74 48.87 677.27 Belgaum 15.41 36.70 117.09 619.90 1097.39 2529.00 4730.39 675.77 56.40 1415.43 Bellary 13.01 52.07 431.23 619.90 836.43 1440.10 3827.43 546.78 165.43 965.48 Bidar 110.55 213.98 426.57 816.10 706.56 2326.80 5075.76 725.11 250.37 1283.15 Bijapur 19.27 30.98 74.05 173.30 469.10 645.20 1619.50 231.36 41.43 429.20 Chamarajnagar 11.20 43.49 312.81 377.00 631.29 1120.90 2682.49 383.21 122.50 709.73 Chickmagalur 0.48 13.58 74.94 207.40 429.56 925.50 1735.36 247.91 29.67 520.82 Chitradurga 60.57 87.57 391.96 594.00 784.80 1163.70 3665.90 523.70 180.03 847.50 Dakshinakannada 343.57 403.66 206.87 2177.10 2044.50 1799.80 7903.90 1129.13 318.03 2007.13 Davanagere 4.09 11.68 143.73 115.00 1055.50 1468.10 2834.40 404.91 53.17 879.53 Dharwad 34.56 58.86 95.98 208.90 442.52 1008.80 1959.82 279.97 63.13 553.41 Gadag 2.41 8.10 53.99 116.90 250.68 777.00 1250.98 178.71 21.50 381.53 Gulbarga 35.28 57.67 146.95 467.60 813.67 2040.70 4098.97 585.57 79.97 1107.32 Hassan 8.43 58.38 300.19 875.90 1814.86 4618.60 8094.46 1156.35 122.33 2436.45 Haveri 3.49 14.42 74.69 194.40 578.29 1328.90 2226.29 318.04 30.87 700.53 Kodagu 1.93 3.22 45.76 189.80 365.54 1200.70 1898.34 271.19 16.97 585.35 Kolar 69.97 87.93 172.00 402.40 1131.96 1789.90 3978.36 568.34 109.97 1108.09 Koppal 4.70 10.84 75.86 63.80 401.96 499.80 1094.46 156.35 30.47 321.85 Mandya 4.58 15.01 103.31 524.50 1024.07 2255.70 4143.87 591.98 40.97 1268.09 Mysore 132.47 172.16 166.17 856.10 3040.82 2794.10 7556.92 1079.56 156.93 2230.34 Raichur 4.70 44.08 102.92 184.20 461.38 641.70 1521.18 217.31 50.57 429.09 Shimoga 104.53 163.35 299.02 821.80 1386.66 1337.40 4384.96 626.42 188.97 1181.95 Tumkur 27.34 41.10 101.66 797.40 2426.83 4410.60 8218.03 1174.00 56.70 2544.94 Udupi 32.39 64.22 169.89 1345.70 665.68 757.60 3847.78 549.68 88.83 922.99 Uttarakannada 4.09 9.89 77.12 433.60 566.01 1007.30 2177.61 311.09 30.37 668.97 State total 1054.81 1714.00 4383.19 13960.50 26812.77 44260.00 99422.77 14204.97 2384.00 28344.42
Source: SHG-bank linkage Programme Karnataka 2005-2006, NABARD

CGR 158.87 289.42 184.31 133.66 104.55 54.49 82.33 99.62 198.37 62.93 45.84 157.02 70.46 143.91 94.48 161.01 154.58 193.97 75.10 112.11 178.42 80.46 104.49 58.72 148.32 78.37 156.16 89.30

R2** 0.83** 0.71** 0.72** 0.75** 0.90** 0.68** 0.85** 0.83** 0.75** 0.95** 0.75** 0.69** 0.70** 0.64** 0.74** 0.70** 0.68** 0.64** 0.79** 0.72** 0.75** 0.75** 0.82** 0.86** 0.75** 0.53** 0.83** 0.83**

TE= triennium ending

** = Significant at 1 Percent

SHGs formed from the selected districts were 9,243. The average number of SHGs formed was 1,155.37 for all the selected districts. The highest numbers of SHGs were formed in Chitradurga and it was 2,071, the highest average was also found in the same district which was 259 SHGs.

4.2.2 Number of SHG members served by the NGOs

Table 4.5 revealed the total number of SHG members served in the selected districts and was found to be 1,39,342 and the average for all the selected districts was 19,171. The highest number of members served was found in the district of Chitradurga (31850) and the highest average was found in Dharwad district which was 4676.

4.2.3 Amount of NABARD funds expended to selected NGOs

Table 4.6 presented the formation of the SHGs by the NGOs using the NABARD funds in the selected districts and the total funds that were spent in all the selected districts was Rs. 57,06,817. The average amount utilized from NABARD for all the selected districts was Rs. 7,13,352.16. The highest fund that was used was in Belgaum (Rs. 33,01,985) with an average of Rs. 4,12,748. The lowest utilization of NABARD funds was found in Bijapur district (Rs. 18,000) with an average of Rs. 2,000 per year.

4.2.4 Lending to SHGs through Bank assistance

It could be noticed from table 4.7 that, total lending to the SHGs by the NGOs using the assistance of the banks in the selected districts was Rs. 42,26,85,501 and the average for the selected districts was Rs. 5,28,35,688. The highest amount spent was found in Shimoga district which was about Rs. 11,33,16,000 and the average was Rs. 1,41,64,500 rupees. The lowest amount lent was in the district of Bijapur where in they had lent only an amount of about Rs. 15,00,000 with an average of almost Rs. 1,87,000.

4.2.5 Lending to SHGs through NGOs own funds

The amount spent from NGOs own funds for a year including the amount lent to the SHGs are presented in the table 4.8. The total amount spent by the NGOs in the selected districts was Rs. 3,34,94,500 and the average was Rs. 41,86,813. The highest amount was spent in Chitradurga district which amounted to Rs. 1,54,06,000 and the average was found to be Rs. 19,25,750. The lowest amount that was spent was in the district of Bijapur which accounted for only Rs. 1,71,000.

4.2.6 Total Amount lent* through different sources to SHGs by the selected NGOs
The total amount lent to SHGs included, the funds from NABARD, the loans forwarded from banks and the own funds of the NGOs spent. These are presented in the table 4.9. The total amount spent from in the selected districts was Rs. 46,18,86,818 with an average of Rs. 5,77,35,852. The highest total amount spent was found in Shimoga district which accounted for Rs. 11,46,07,566 with an average of Rs. 1,43,25,946.

4.2.7 Amount Recovered from the SHGs in the selected districts.

Table 4.10 indicates the recovery by the NGOs from the SHGs towards the amount lent. The total amount recovered from all the SHGs in the selected districts was Rs. 44,34,68,564, and the percentage to the total amount lent was only 96.64 per cent. The highest recovery was found in Shimoga district which was Rs. 11,23,47,410. The lowest recovery that was found was in the district of Bijapur which was Rs. 16,89,000 with consideration to the amount of money that was recovered but they had 100 per cent recovery.

4.2.8 Amount Overdue from the SHGs in the selected districts.

The overdue amount that was left with the SHGs is discussed in table 4.11. The total amount that was overdue from all the SHGs in the selected districts was Rs. 1,82,08,254. The

Table 4.4: Number of SHGs formed by selected NGOs

(Nos.) Years District 1999-00 Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total 123 12 75 251 100 38 50 64 713 2000-01 238 6 49 251 35 58 64 701 2001-02 227 40 61 251 212 90 111 992 2002-03 217 21 75 251 72 7 162 64 869 2003-04 198 10 75 251 82 7 61 280 57 1021 2004-05 248 9 55 272 0 119 61 200 57 1021 2005-06 302 21 65 272 100 402 16 254 74 1506 2006-07 331 10 85 272 25 1393 28 203 73 2420 1884 129 540 2071 626 1928 204 1297 564 9243 236 16 68 259 78 241 26 162 71 1155.37 Total Average

Table 4.5: Number of SHG members served by the selected NGOs

(Nos.) Years District 199900 1845 180 1125 2797 1500 760 750 768 9725 200001 5453 276 1909 5970 2200 760 1620 1664 19852 200102 8932 956 2946 9519 6316 760 2970 3628 36027 200203 12211 1334 3936 13444 7612 84 760 5400 4780 49561 200304 15246 1484 5061 17745 9088 182 1948 9600 5724 66078 200405 19069 1628 6001 22842 9088 1650 3136 12600 6832 82846 Average/year 2005-06 23651 1985 7126 27129 11038 6540 3424 16410 8280 105583 2006-07 28716 2165 8746 31850 11488 23376 3952 19455 9594 139342 3590 271 1093 3981 1436 4676 494 2432 1199 19171

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total

Table 4.6: NABARD funds expended to selected NGOs

(Rs. In lakhs) Years District 199900 0.07 0.91 0.98 200001 0.91 0.91 200102 0.98 0.98 200203 0.75 0.91 1.66 200304 0.42 0.75 0.50 0.96 1.00 1.24 4.87 200405 10.20 0.11 1.75 0.90 0.11 0.98 1.00 1.37 16.43 200506 12.88 1.50 0.12 0.58 1.25 1.45 17.79 200607 9.51 1.25 0.06 0.23 1.25 1.11 13.42 Total Average

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total

33.01 0.18 6.00 0.90 0.50 0.29 2.76 4.50 8.90 57.06

4.12 0.02 0.75 0.11 0.06 0.06 0.34 0.56 1.11 7.13

Table 4.7: Loans provided by NGOs to SHGs through banks assistance

(Rs. In lakhs) Years District 1999-00 Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total 17.11 2.00 10.00 10.00 1.00 57.00 53.00 150.11 2000-01 24.81 1.50 12.00 12.00 26.50 75.00 90.00 241.81 2001-02 22.84 2.00 8.00 100.00 33.00 101.00 100.00 366.84 2002-03 23.29 1.00 45.90 120.00 52.00 125.00 118.00 485.19 2003-04 14.24 2.00 32.00 121.00 63.00 70.54 125.00 163.04 590.82 2004-05 18.00 2.00 37.00 140.91 76.00 15.00 70.54 150.00 173.04 682.50 2005-06 16.50 1.50 34.00 187.91 86.00 15.00 6.54 162.50 183.04 692.99 2006- 07 22.14 3.00 44.92 195.91 116.00 151.00 33.04 197.50 253.04 1016.56 158.96 15.00 223.82 887.75 453.50 181.00 237.66 936.00 1133.16 4226.85 19.87 1.87 27.97 110.96 56.68 22.62 29.70 117.00 141.64 528.35 Total Average

Table 4.8: NGOs own funds lent to SHGs

(Rs. In lakhs) Years DISTRICT 199900 5.70 0.20 0.20 1.35 13.44 0.30 1.00 0.22 22.41 200001 6.70 0.21 0.32 1.55 13.82 1.10 0.22 23.92 200102 5.65 0.20 0.71 1.56 11.58 1.30 0.32 21.32 200203 6.63 0.22 1.06 27.40 11.58 1.50 0.22 48.61 200304 5.73 0.20 1.07 28.50 11.58 1.50 1.60 0.72 50.90 200405 6.50 0.18 1.08 30.05 11.58 0.50 1.70 1.80 0.82 54.21 200506 6.48 0.21 1.08 31.25 11.58 0.66 1.65 1.90 0.72 55.53 200607 7.56 0.29 1.03 32.40 11.58 0.66 1.75 2.00 0.77 58.04 Total Average

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total

50.95 1.71 6.55 154.06 96.74 1.82 6.90 12.20 4.01 334.94

6.36 0.21 0.81 19.25 12.09 0.22 0.86 1.52 0.50 41.86

Table 4.9: Total Amount lent* NGOs to SHGs through different sources

(Rs. In lakhs) Years District 199900 22.81 2.27 10.20 11.35 14.44 57.30 1.00 54.13 173.51 200001 31.51 1.71 12.32 13.55 40.32 76.10 91.13 266.64 200102 28.49 2.20 8.71 101.56 44.58 102.30 101.30 389.14 200203 29.92 1.22 47.71 147.40 63.58 126.50 119.13 535.46 200304 20.39 2.20 33.82 149.50 75.08 73.00 127.60 165.00 646.60 200405 34.70 2.29 39.83 171.86 87.58 15.61 73.22 152.80 175.23 753.14 200506 35.86 1.71 36.58 219.16 97.58 15.78 8.77 165.65 185.21 766.32 Total 2006- 07 39.21 3.29 47.20 228.31 127.58 151.72 35.02 200.75 254.92 1088.02 242.93 16.89 236.37 1042.71 550.74 183.11 247.32 952.70 1146.07 4618.86 30.36 2.11 29.54 130.33 68.84 22.88 30.91 119.08 143.25 577.35 Average

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total

* Total amount lent = NABARD+ BANK fund+ own funds lent to the SHGs

Table 4.10: Amount Recovered from the SHGs in the selected districts (Rs. In lakhs)

District Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

Years 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 21.62 2.27 9.09 11.10 14.44 51.57 0.98 53.04 30.16 1.71 10.90 13.25 39.79 74.57 89.30 27.31 2.20 7.33 92.70 43.97 100.25 99.27 28.64 1.22 45.73 134.77 62.91 123.97 116.74 18.93 2.20 31.08 137.15 73.33 66.09 125.04 161.77 33.22 2.29 37.07 157.36 86.83 15.45 66.31 149.74 171.81 34.54 1.71 33.64 202.10 96.79 15.50 8.30 162.33 181.59 736.53 2006- 07 37.60 3.29 44.90 210.18 126.75 150.21 31.90 196.73 249.90 1051.49

Total 232.06 (95.52) 16.89 (100.00) 219.78 (92.98) 958.64 (91.93) 544.81 (98.92) 181.17 (98.94) 224.19 (90.64) 933.64 (98.00) 1123.47 (98.02) 4434.68 (96.64)

164.13 259.70 373.05 514.00 615.62 720.13 Total Note : Figures in the parenthesis are percentages to the total amount lent

highest amount overdue was found in Chitradurga district which was Rs. 84,06,301. The district of Bijapur had no overdue situation as the entire amount lent was already recovered.

4.2.9 Portfolio of Lending by NGOs to SHGs

The portfolio of lending by the NGOs in the selected districts to the SHGs was found in six major categories which were agriculture, Agribusiness, manufacturing, personal needs, petty business and others. The information on these are presented in the table 4.12. In Belgaum district, 49.90 per cent was lent towards agriculture. In Bijapur district, 68.10 per cent was lent towards other category. In Chickmagalur district 49.87 per cent was lent towards agriculture and 31.85 per cent towards other category. In Chitradurga district 52.76 per cent was found to have been lent to agriculture, 28.84 per cent was lent to Agribusiness and 31.39 per cent towards personal needs in Davangere district. In Dharwad district the lending procedure was very erratic with only 9.15 per cent, 18.29 per cent, 27.44 per cent and 45.12 per cent was lent to agriculture, agribusiness, manufacturing and other categories respectively. In Haveri 80.65 per cent was lent to agriculture, where as in Koppal 50 per cent was lent to agribusiness, while, Shimoga district recorded 80.13 per cent of the total amount lent towards agriculture. The lowest lending that was given to agriculture was in the district of Dharwad.

4.2.10 Skill Developmental Activities Conducted by NGOs to the SHGs

The skill development activities conducted by the NGOs to the SHGs were recorded under seven major heads. They were, exposure visits, training programmes, demonstrations, MELAs conducted for marketing of the products, linkages provided between technology institutions and SHGs, linkages provided between marketing institutions and SHGs and equipments provided (Table 4.13). The highest numbers of exposure visits were conducted in Chitradurga (68.38), the highest numbers of training programmes (470.13) were conducted in Dharwad district and demonstrations (51.25) were found to be highest in the district of Chitradurga, the highest numbers of MELAs (12.88) were conducted in Dharwad district and the highest numbers of equipments (75.00) were provided in Chitradurga district. In Bijapur, Chickmagalur, Chitradurga, Davangere, Haveri and Shimoga there were no linkages between marketing institutions provided. In Bijapur, Chitradurga, Davangere, and Haveri there were no linkage facilities provided between technology institutions and the SHGs. In Bijapur, Chickmagalur, Davangere and Haveri no melas for the SHGs were conducted.

4.3

IMPACT OF MICRO-FINANCIAL MEMBER ENTERPRISE

INSTITUTIONS

ON

The impact of micro financial institutions (NGOs) on the member enterprises (SHGs) are discussed here under; the impact is studied on the different aspects like income position of the SHG members, asset position of the SHG members, generation of employment, the savings, the investment pattern and the consumption pattern.

4.3.1 Impact of NGOs on the Income of the SHG

Table 4.14 presented the impact of micro finance provided by NGOs on the income of the SHGs in the selected districts. It is clear from the table that all the t values are found to be statically significant, indicating positive impact of the NGOs on the SHGs. The highest impact was found in Chitradurga district where the income before the involvement of the NGOs was Rs.19,862.50 and after the involvement of the NGOs the income rose to Rs. 42,775 and the t value was 6.78. The lowest impact was found in Belgaum district where in the income before was Rs. 55,379 and it rose to Rs. 1,34,108 having a t value of 2.08.

4.3.2 Impact of NGOs on the Asset Position of the SHGs

The impact of microfinance provided by the NGOs in the selected districts on the asset position of the SHG members are presented in the table 4.15. In Bijapur district the impact on the SHG members was found to be negligible. In Belgaum district, thet values were found to be higher signifying higher impact on the SHG members asset position.

Table 4.11: Amount Overdue from the SHGs in the selected districts

(Rs. In lakhs) District Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total Years 1999-00 1.18 1.01 0.24 5.73 0.02 1.08 9.27 2000-01 1.35 1.21 0.29 0.53 1.52 1.82 6.73 2001-02 1.18 0.81 8.85 0.61 2.04 2.02 15.52 2002-03 1.27 1.97 12.62 0.67 2.53 2.38 21.46 2003-04 1.46 2.17 12.35 1.75 6.91 2.55 3.22 30.42 2004-05 1.47 2.75 14.49 0.75 0.15 6.90 3.05 3.42 33.01 2005-06 1.32 2.37 17.06 0.79 0.15 0.46 3.31 3.62 29.11 2006-07 1.61 2.29 18.12 0.83 1.50 3.12 4.01 5.02 36.53 Total 10.87 (4.47) 14.60 (6.18) 84.06 (8.06) 5.93 (1.07) 1.81 (0.99) 23.13 (9.35) 19.05 (2.00) 22.60 (1.97) 182.08 (3.35)

Note : Figures in the parenthesis are percentages to the total amount lent

Table 4.12: Portfolio of Lending by NGOs to SHGs

(In percentage to the total lending) District Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga Total Agriculture Agribusiness 49.90 31.90 49.87 52.76 26.97 9.15 80.65 40.00 80.13 53.04 3.72 0.00 13.12 28.91 28.84 18.29 0.17 50.00 9.90 24.47 Manufacturing 8.15 0.00 3.83 2.38 7.56 27.44 9.83 10.00 3.35 6.48 Personal Needs 10.86 0.00 1.33 0.00 31.39 0.00 9.35 0.00 6.62 6.57 Petty Businesses 4.59 0.00 0.00 0.09 0.00 0.00 0.00 0.00 0.00 0.26 Other Category* 22.79 68.10 31.85 15.87 5.23 45.12 0.00 0.00 0.00 9.18

* Other category includes human hair processing, craftsmanship, for the purchase of equipments and for the purchase of machinery

Table 4.13: Skill Development Activities Conducted by NGOs to the members of SHGs

(No./NGO) MELAs Linkages Linkages Conducted Provided Provided Exposure Training for Between Equipments Demonstrations Between Visits Programmes Marketing Technology Provided Marketing the Institutions Institutions Products and SHGs 18.75 22.63 68.38 30.88 0.63 18.00 46.88 59.88 26.13 36.00 143.63 71.25 229.13 470.13 21.38 46.88 171.88 43.13 24.38 51.25 8.25 0.63 17.50 46.88 16.00 1.00 0.25 12.88 1.25 0.25 17.38 2.00 0.25 5.75 2.00 10.00 1.88 5.75 16.38 0.13 56.88 75.00 8.75 6.25 4.13 10.00

District

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

4.3.3 Impact of NGOs on the Generation of Employment of the SHGs

Table 4.16 presented the information on generation of employment in the SHG members after the NGOs involvement in the selected districts. In Belgaum district there was a change up to 70 per cent on the farming as the generation of employment had increased but there was a negative impact on the agricultural labour up to about 83.33 per cent as the man days had decreased from 60 to 10. In Bijapur district also the same trend can be seen. In Chickmagalur district there was a decrease in the farming (- 52.17) and the agricultural labour (- 54.15). In Chitradurga district it was found that there were no agricultural labours. In Davangere district the agriculture labour had decreased (- 50.00) after the SHGs were started. In Dharwad district the man days on agriculture had increased from 60 man days to 195 man days. In Haveri district both the farming (- 16.67) and agricultural labour (- 25.00) had experienced a decrease in the generation of employment. In Koppal district the number of man days on agricultural labour had decreased from 160 to 100 man days. In Shimoga district also the same trend was found as there was a decrease of 50 percent in the agricultural labours.

4.3.4 Impact of NGOs on the Savings of the SHGs

The impact of the micro finance on savings of the SHG members was also a factor that was considered in the study. It is evident from the table 4.17 that there was a positive impact on the savings of the SHG members. The percentage change reveals that Dharwad district had the highest per cent change which amounts to about 212.50 per cent thus it implies the highest impact was seen in Dharwad district. The least impact was seen in Belgaum district as thet value was 2.14 and the per cent change was 109.58. The districts like Bijapur, Chitradurga, Davangere and Shimoga all had the same rate of per cent change which was 150 percent.

4.3.5 Impact of NGOs on the investment pattern of the SHGs

The investment pattern in the SHGs also had some impact after the NGOs involvement and these are presented in the tables 4.18 and 4.19. There were two major purposes/occupations that were considered for the analysis; the occupations that were taken up in the first purpose/category were agriculture, poultry, sheep rearing, human hair processing and craftsmanship. The occupations that were considered for the second purpose/category were agriculture, poultry, dairy, sheep rearing, make up choulees and handicrafts. 4.3.5.1 Impact of NGOs on the investment pattern of the SHGs in the main occupation The impact on the investment pattern of the SHG members after the working of the NGOs started on the first purpose or the major occupation are shown in the table 4.18. As it can be clearly seen from the table that, 90.90 per cent of the respondents were practicing agriculture as their major occupation before the functioning of the NGOs started and once this started they sort of shifted from agriculture and started to do the subsidiary occupations such as poultry (34.10 per cent), sheep rearing (56.80 per cent), human hair processing (4.50 per cent) and craftsmanship (4.50 per cent) as their main or major occupation. The presence of the human hair processing and craftsmanship were found in both the periods with the same values. 4.3.5.2 Impact of NGOs on the investment pattern of the SHGs in the secondary purpose Table 4.19 presented the impact on the investment pattern of the SHG members after the working of the NGOs started on the secondary purpose /occupation. The table clearly shows that, the occupation that was done by most of the respondents in the secondary purpose/occupation category was poultry farming (61.40 per cent) followed by dairy (20.50 per cent) and then sheep rearing along with agricultural works. In the phase after the operations of the NGOs started 90.90 of the people were found to be indulged in the agricultural works as their secondary occupation, but 4.50 per cent of the people were found to be having the occupation on make up coulees and the same per cent were found to be doing handicrafts along side with the major occupation.

Table 4.14: Impact of Micro Finance on the income of the SHG members in the Selected Districts

(Family income in Rs.) District Before becoming member 55379.00 16900.00 31633.33 19862.50 29250.00 15650.00 19000.00 104133.00 19625.00 After becoming member 134108.00 36400.00 68133.33 42775.00 63000.00 33700.00 40900.00 254096.00 42250.00 Percentage change 142.16 115.38 115.38 115.36 115.38 115.34 115.26 144.01 115.29 Paired t value 2.08* 4.33** 4.61** 6.78** 3.46** 5.25** 4.13** 2.54* 4.61**

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

** = Significant at 1 Per cent, * = Significant at 5 per cent

4.3.6 Impact of NGOs on the Consumption Pattern of the SHGs

The impact of the functioning of the NGOs on the consumption pattern of the SHG members is presented in the table 4.20. There was a lot of impact on the consumption of food and on the consumptive expenses of clothing was found in Chitradurga district and were statistically found significant. Further Chitradurga district was found to be statistically significant in the expenses towards health and education. There was a high impact in Chickmagalur district on the expenses of miscellaneous items, but in the case of the total impact on the consumption pattern Chitradurga stands first. 4.3.6.1 Proportion of Expenditure for different purposes The proportions in which the changes in consumption have been seen are presented in the table 4.21. Here we can see that there has been a decrease in the proportion of expenditure that has been made on the food and clothing in all the districts that were considered for the study. The expenditures on the health and education have increased but not of that high a proportion the increase that has been found have been very meager. But the expenditure on the miscellaneous items and the religious expenditure have increased very much with greater proportions.

4.4

THE CONSTRAINTS PROVIDERS

FACED

BY

MICRO-FINANCE

Here an effort has been made to identify the constraints that are faced by the micro finance providers and the intensity of these problems and thus by the help of which we can

Table 4.15: Impact of Micro Finance on the asset position of the SHGs in the Selected Districts

District

Before After becoming becoming member member No. of machines

Paired t value

Before After becoming becoming member member No. of vehicles

Paired t value

Before After becoming becoming member member No. of TVs

Paired t value

Before After becoming becoming member member No. of houses

Paired t value 1.53NS 1.00NS 1.73NS -

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

0.75 0.50 0.83 0.88 0.75 1.00 0.75 1.00 0.50

1.25 0.50 1.33 1.13 1.25 1.00 1.00 2.00 0.75

2.65** 2.24* 1.53NS 1.73NS 1.00NS 1.00NS

0.38 0.50 0.17 0.13 0.25 0.00 0.25 0.00 0.50

0.63 1.00 0.50 0.50 0.50 0.50 0.50 0.50 0.75

1.53NS 1.00NS 1.58NS 2.05* 1.00NS 1.73NS 1.00NS 1.73NS 1.00NS

0.38 1.00 0.50 0.50 0.50 0.50 0.50 0.00 0.75

0.88 1.00 1.00 0.75 1.00 0.50 0.75 1.00 1.00

2.65** 2.24* 1.53NS 1.73NS 1.00NS 1.00NS

1.00 1.00 1.00 0.88 1.00 1.00 1.00 1.00 1.00

1.25 1.00 1.00 1.00 1.00 1.00 1.00 1.50 1.00

Note: Paired t test was not computed in some cases as the standard errors for these variables were zero.
** = Significant at 1 Per cent, * = Significant at 5 per cent, NS = Not Significant

Table 4.16: Impact of Micro Finance on the generation of employment of the SHGs in the Selected Districts

(man days/year)
Before After becoming becoming member member Farming % Change Before After becoming becoming member member Animal husbandry 255 156 121 150 255 195 250 160 125 70.00 95.00 -52.17 -25.00 70.00 225.00 -16.67 33.33 4.17 75 25 60 70 75 100 45 60 120 75 50 80 130 95 140 90 90 140 0.00 100.00 33.33 85.71 26.67 40.00 100.00 50.00 16.67 % Change Before After becoming becoming member member Agricultural labour 60 156 229 0 60 0 120 160 60 10 65 105 0 30 0 90 100 30 -83.33 -58.33 -54.15 -50.00 -25.00 -37.50 -50.00 0 5 6 60 65 200 15 30 10 % Change Before After becoming becoming member member Others 200 52 45 70 200 300 300 0 50 940.00 650.00 16.67 207.69 50.00 1900 -100.00 400.00 % Change

District

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

150 80 253 200 150 60 300 120 120

Table 4.17: Impact of Micro Finance on the Savings of the SHGs in the Selected Districts

(Rs.) District
Before becoming member After becoming member

% Change

Paired t value

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

1461.25 260.00 475.00 305.00 450.00 240.00 275.00 2695.00 300.00

3062.50 650.00 1216.67 762.50 1125.00 750.00 725.00 5800.00 750.00

109.58 150.00 156.14 150.00 150.00 212.50 163.64 115.21 150.00

2.14* 4.33** 4.88** 6.73** 3.46** 4.01** 4.52** 2.49* 4.52**

** = Significant at 1 Per cent, * = Significant at 5 per cent

suggest measures to overcome these problems. The constraints that were considered for the study are High Rate of interest, Inadequate information on the present scenario of SHGs, Lack of time to participate in all the activities of all the SHGs, Lack of adequate training and skill development facilities, Less number of genuine borrowers, No support for Starting a new activity, Non- cooperation from the SHGs, Problem in marketing the products produced by the SHGs, Political interference and Timely availability of financial help.

4.4.1 Problems faced by the micro finance providers.

The constraints faced by the micro finance providers in the selected districts were studied and are presented in the table 4.22. The most acute problem is the lack of time to participate in all the activities of all the SHGs (81.82), followed by timely availability of financial help (74.24), no support for starting a new activity (72.73), problem in marketing the products produced by the SHGs (71.21), political interference (71.21), high rate of interest (65.15), lack of adequate training and skill development facilities (65.15), inadequate information on the present scenario of SHGs (62.12), less number of genuine borrowers (51.52) and non- cooperation from the SHGs (48.48)

Table 4.18: Impact of Micro Finance on the investment pattern of the main occupation of the SHGs in the Selected Districts

Main occupation Sl. No. Codes Agriculture 40 1 Before (90.90) 15 2 After (34.15) (56.80) (4.50) (4.50) (100.00) 25 (4.50) 2 (4.50) 2 (100.00) 80.00** 44 Poultry Sheep rearing Human hair processing 2 Total Craftsmen 2 44 Chi square

Note: Figures in the Parenthesis are Percentages to the Total

** = Significant at 1 Per cent

Table 4.19: Impact of Micro Finance on the investment pattern of the secondary occupation of the SHGs in the Selected Districts

Secondary occupation Sl. No. Codes Agriculture 4 1 Before (9.10) 40 2 After (90.90) Note: Figures in the Parenthesis are Percentages to the Total
** = Significant at 1 Per cent

Dairy 9 (20.50)

Poultry 27 (61.40)

Sheep rearing 4

Make up coulees

Total Handicrafts 44

Chi square

(9.10) 2 (4.50)

(100.00) 73.455** 2 (4.50) 44 (100.00)

Table 4.20: Impact of Micro Finance on the expenditure pattern of the SHG members in the Selected Districts

(rupees/family) Food Districts Mean Pre 8150 3900 7300 4575 6750 3600 4350 14800 4500 Mean Post 9925 4550 8516 5337.5 7875 4200 5075 18100 5250
Paired t value

Clothing Mean Pre 4800 1300 2433 1525 2250 1200 1450 9100 1500 Mean Post 6575 1950 3650 2287. 5 3375 1800 2175 12400 2250
Paired t value

Religion Mean Pre 50 65 80 70 75 50 65 90 50 Mean Post 1775 650 1216 762 1125 600 725 3300 750
Paired t value

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

2.48** 4.33** 4.61** 6.73** 3.46** 5.19** 4.03** 3.31** 4.52**

2.48** 4.33** 4.61** 6.73** 3.46** 5.19** 4.03** 3.31** 4.52**

2.48** 4.33** 4.61** 6.73** 3.46** 5.19** 4.03** 3.31** 4.52**

** = Significant at 1 Per cent

Contd..

Contd.. Health Districts Mean Pre 6050 1300 2433 1525 2250 1200 1450 11600 1500 Mean Post 9600 2600 4866 3050 4500 2400 2900 18200 3000
Paired t value

Education Mean Pre 3750 100 500 122 145 95 129 7500 144 Mean Post 7300 1300 2433 1525 2250 1200 1450 14100 1500
Paired t value

Miscellaneous Mean Pre 437.5 150 200 125 175 125 112.5 850 125 Mean Post 900 350 416 312.5 375 300 275 1700 300
Paired t value

Total Mean Pre 23238 6815 12946 7942 11645 6270 7557 43940 7819 Mean Post 36075 11400 21097 13275 19500 10500 12600 67800 13050
Paired t value

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

2.48** 4.33** 4.61** 6.73** 3.46** 5.19** 4.03** 3.31** 4.52**

2.48** 4.33** 4.61** 6.73** 3.46** 5.19** 4.03** 3.31** 4.52**

2.03* 2.01* 7.05** 4.84** 4.89** 2.42** 2.93** 2.26** 3.65**

2.43** 4.08** 4.86** 6.71** 3.62** 4.67** 4.02** 3.19** 4.65**

** = Significant at 1 Per cent, * = Significant at 5 per cent

Table 4.21: Proportion of Expenditure for Different Purposes

Districts

Before After Before After Before After Before After Before After Before After becoming becoming becoming becoming becoming becoming becoming becoming becoming becoming becoming becoming member member member member member member member member member member member member Food Clothing 27.51 39.91 40.37 40.21 40.38 40.00 40.28 26.70 40.23 20.66 19.08 18.79 19.20 19.32 19.14 19.19 20.71 19.18 18.23 17.11 17.30 17.23 17.31 17.14 17.26 18.29 17.24 26.04 19.08 18.79 19.20 19.32 19.14 19.19 26.40 19.18 Health 26.61 22.81 23.06 22.98 23.08 22.86 23.02 26.84 22.99 Education 16.14 1.47 3.86 1.54 1.25 1.52 1.71 17.07 1.84 20.24 11.40 11.53 11.49 11.54 11.43 11.51 20.80 11.49 Religion 0.22 0.95 0.62 0.88 0.64 0.80 0.86 0.20 0.64 4.92 5.70 5.76 5.74 5.77 5.71 5.75 4.87 5.75 Miscellaneous 1.88 2.20 1.54 1.57 1.50 1.99 1.49 1.93 1.60 2.49 3.07 1.97 2.35 1.92 2.86 2.18 2.51 2.30

Belgaum Bijapur Chickmagalur Chitradurga Davangere Dharwad Haveri Koppal Shimoga

35.07 57.23 56.39 57.61 57.96 57.42 57.57 33.68 57.55

Table 4.22: Constraints Faced by the Micro Finance Providers in the Selected Districts

Sl. Constraints faced No. by the respondents 1 Lack of time to participate in all the activities of all the SHGs Timely availability of financial help No support for Starting a new activity Problem in marketing the products produced by the SHGs Political interference Rate of interest Lack of adequate training and skill development facilities Inadequate information on the present scenario of SHGs Less number of genuine borrowers Non- cooperation from the SHGs

The actual number of respondents (Nos.) Low 5 (22.73) 6 (27.27) 6 (27.27) 7 (31.82) 8 (36.36) 9 (40.91) 9 (40.91) 6 (27.27) 13 (59.09) 15 (68.18) Medium 2 (9.09) 5 (22.73) 6 (27.27) 5 (22.73) 3 (13.64) 5 (22.73) 5 (22.73) 13 (59.09) 6 (27.27) 4 (18.18) High Total

Index

15 22 81.82 (68.18) (100.00) 11 22 74.24 (50.00) (100.00) 10 22 72.73 (45.45) (100.00) 10 22 71.21 (45.45) (100.00) 11 22 71.21 (50.00) (100.00) 8 22 65.15 (36.36) (100.00) 8 22 65.15 (36.36) (100.00) 3 22 62.12 (13.64) (100.00) 3 22 51.52 (13.64) (100.00) 3 22 48.48 (13.64) (100.00)

2 3 4

5 6 7

9 10

Note: Figures in the parentheses indicate percentage to the total

5. DISCUSSION
In consistence with the objectives of the study, the data collected from different sources were analyzed. The discussions on the data that were presented in the chapter before are done in this chapter and a sincerer attempt has been made to give the most appropriate reasons for the datas. 5.1 The Growth Pattern of Micro Finance in Karnataka. 5.1.1 Growth in Bank Linkage of SHGs in Karnataka. 5.1.2 District Wise SHGs Credit Linked in Karnataka. 5.1.3 District Wise Bank Loan Disbursed to SHGs in Karnataka. 5.2 The Business Performance of the Micro- Finance Providers. 5.2.1 Formation of SHGs by selected NGOs. 5.2.2 Number of SHG members served by the NGOs 5.2.3 Amount of NABARD funds expended to selected NGOs 5.2.4 Lending to SHGs through Bank assistance 5.2.5 Lending to SHGs through NGOs own funds 5.2.6 Total Amount lent* through different sources to SHGs by the selected NGOs 5.2.7 Amount Recovered from the SHGs in the selected districts 5.2.8 Amount Overdue from the SHGs in the selected districts 5.2.9 Portfolio of Lending by NGOs to SHGs. 5.2.10. Skill Developmental Activities Conducted by NGOs to the SHGs. 5.3 Impact of Micro-Financial Institutions on Member Enterprise. 5.3.1 Impact of NGOs on the Income of the SHGs. 5.3.2 Impact of NGOs on the Asset Position of the SHGs. 5.3.3 Impact of NGOs on the Generation of Employment of the SHGs. 5.3.4 Impact of NGOs on the Savings of the SHGs. 5.3.5 Impact of NGOs on the investment pattern of the SHGs. 5.3.6 Impact of NGOs on the Consumption Pattern of the SHGs. 5.4 To Identify the Constraints Faced by Micro-Finance Providers. 5.4.1 Problems faced by the micro finance providers.

5.1

THE GROWTH PATTERN OF MICRO FINANCE IN KARNATAKA

The growth pattern of SHGs in Karnataka is discussed in this section. These give us a clear picture of the growth of the micro finance and the pattern in which it has grown in the past decades.

5.1.1 Growth in Bank Linkage of SHGs in Karnataka

The pattern of growth of SHGs in the state from 1992-93 to 2005-06 is discussed in detail. Here there is data on three aspects of the growth of Micro finance in the state they are the number of SHGs credit linked, bank loan disbursed and the refinance that is provided. In

the year 1992-93 the total number of SHGs credit linked were only 114 which decreased in 1993-94 to 51 then we can see a constant rise in their numbers. In the year 2005-06 the total number of SHGs credit linked grew up to 61,730. The compound growth rate of number of SHGs credit linked increased at the rate of 71.19 per cent. Similarly bank loan disbursed to SHGs was found to be growing at the compound growth rate of 95.97 per cent and refinance to banks from Apex level institutions increased at a compound growth rate of 75.83 per cent. The rate of growth in bank loan is higher than the growth in both the SHGs credit linked and refinanced. This was achieved because of the efforts of the NGOs and the government agencies, the policies that were taken up by the government during these periods, seeing the importance of the SHGs in the improvement of the lives of the poor was also evident for this kind of an achievement in the field of SHGs growth. This higher growth in micro finance may also be possible because of refinance support provided by the apex level institutions which are into Micro finance.

5.1.2 District Wise SHGs Credit Linked in Karnataka.

The district wise SHGs credit linked from the year 1999-2000 to 2005-2006 for the 27 districts of Karnataka shows clearly that the first triennium end average values are lower in all the districts except in the districts of Bidar and Chitradurga. The compound growth rates of Bidar and Chitradurga districts for these years were 0.69 and 11.12 respectively, as the compound growth rate itself states the growth in these district were low because of the lack of interest among the people for these kinds of policies in the regions. The state total for all the years was found to be 2,24,928 number of SHGs the average for the state was found to be 32,132.57 in number this growth can be attributed to the efficient working of the people those who are related to the micro finance and its development. The first triennium end average values for the state as a whole (15,263.67) was found to be lower than the total state average but whereas in the case of the second triennium end average values for the state as a whole (51,330.33) was higher than the state average, the total movement of Micro finance in the state was geared up during the second triennium as a lot of government policies were framed and also because of the realization of the apex level institutions on the importance of the SHGs and their role in the alleviation of poverty.

5.1.3 District Wise Bank Loan Disbursed to SHGs in Karnataka

The district wise bank loan disbursed from the year 1999-2000 to 2005-2006 for the 27 districts of Karnataka are presented in table 4.3 and as it can be clearly seen that the first triennium end average values are lower in all the districts. The state total for all the years was found to be Rs. 99,422.77 lakhs the average for the state was found to be Rs. 14,204.97 lakh. The first triennium end average values for the state as a whole (Rs. 2,384 lakh) was found to be lower than the state average but whereas in the case of the second triennium end average values for the state as a whole (Rs. 28,344.42 lakh) was higher than the state average this again can be attributed to the efficient working of the agencies that are involved in the up-liftment of the micro financial institutions.

5.2 THE BUSINESS PERFORMANCE OF THE MICRO- FINANCE PROVIDERS

The important factors that decide on the business performance of the Micro Finance providers based on the availability of the data are discussed in this section.

5.2.1 Formation of SHGs by selected NGOs

The performances of microfinance provided by NGOs to SHGs formed by them in numbers in the selected districts are discussed here. It is evident from the table 4.4 that the total numbers of SHGs formed from the selected districts were 9,243. The average number of SHGs formed for the selected districts were 1,155.37. The highest number of SHGs that were formed was in Chitradurga and it was 2,071, the highest average was also found in the same district which was 259 SHGs Chitradurga district has a lot of NGOs that are working in the area for a long period of time and all of these NGOs are working hard in the direction of making more and more SHGs and seeing to it that they are working well. The least growth was found in the district of Bijapur as the area had a lot of interior places and the NGOs found

it difficult to go and meet the people and convince them to form SHGs and this can also be attributed to the fact that there was no sufficient works that were directed in this matter till recently as was opinioned by the NGOs that were interviewed.

5.2.2 Number of SHG members served by the NGOs

The total number of SHG members that were served in the selected districts were found to be 1,39,342 numbers. The average for the selected districts as a whole was 17,417.75 numbers. The highest number of members served (31,850) and the highest average (3,981) was found in Chitradurga district this can be attributed to the fact that as there were more number of SHGs created thus there were more number of members served and the people were also more educated and thus could understand the working of the SHGs and could maintain a good group as a whole. The number of members served was least in Bijapur district because of the fact that there were less number of groups and all of them were placed in most interior areas.

5.2.3 Amount of NABARD funds expended to selected NGOs

The formation of the SHGs by the NGOs using the NABARD funds in the selected districts and the total funds that were expended in all the selected districts was found to be Rs. 57,06,817. The average amount from NABARD for all the selected districts was found to be Rs. 7,13,352.16. The highest fund that was used was in Belgaum (Rs. 33,01,985) with an average of Rs. 4,12,748 these highest values were found only in Belgaum because of the fact that there were more number of NGOs that were recognized by NABARD and majority of the selected NGOs in the study were in to the using of the NABARD funds. The lowest amount that was borrowed from was found in Bijapur district which was Rs.18,000 there was only one NGO that was identified by the NABARD and this was selected for the study in the district and they had opted for lower funds from the NABARD thus their borrowing were low.

5.2.4 Lending to SHGs through Bank assistance

Lending to the SHGs by the NGOs using the assistance of the banks in the selected districts are discussed here, Rs. 42,26,85,501 was the total amount lent from the banks to the SHGs through the NGOs for all the selected districts and the average for these districts as a whole was Rs. 5,28,35,688. The highest amount expended in all the selected districts was found in Shimoga district which was about Rs. 11,33,16,000 and the average was Rs. 1,41,64,500, the NGOs situated in Shimoga district are working in that district from a long period of time they have a lot of SHGs that are with the NGO probably from the inception of these NGOs and they have been very loyal to the NGO, thus the amount that is lent from the banks through the NGOs to the SHGs is very high. Even though these NGOs have a lesser number of SHGs in comparison to others seeing the loyalty of the SHGs the amount that is lent to these SHGs is quite high. This can be attributed to the selfless working of the NGOs towards the SHGs and also the government agencies creating favorable policies to boost the lending processes towards the SHGs. The district of Bijapur was found to be the lowest lender because the area in which the working of the NGO is concentrated it is in a very remote area and even today people are scared to take loans as was opinioned by the NGO and also the fact that lower numbers of SHGs were created.

5.2.5 Lending to SHGs through NGOs own funds

The amount spent from their own fund that is from the NGOs own funds for a year including the amount lent to the SHGs are discussed in this section. The total amount spent by the NGOs of all the selected districts was found to be Rs. 3,34,94,500 and the average was Rs. 41,86,813. The highest amount was spent in Chitradurga district which amounts to about Rs. 1,54,06,000 and the average was found to be Rs. 19,25,750 Chitradurga district has a lot of NGOs that are financially sound thus they have the potential to make higher expenses towards the SHGs. The lowest amount that was lent was found again in the district of Bijapur because of the lower number of SHGs that were created.

5.2.6 Total Amount lent* through different sources to SHGs by the selected NGOs
The total amount lent which includes the funds from NABARD, the loans forwarded from banks and the own funds expended of the NGOs in the selected districts are discussed in this section. The total amount spent from all the selected districts was Rs. 46,18,86,818 having an average of Rs. 5,77,35,852. The highest total amount spent was found in Shimoga district. The NGOs that are situated and were selected for the study in Shimoga district were working from quite some time and thus they had a very good financial support from the banks, NABARD and from societies of their own thus we can see that the total amount lent here is quite high.

5.2.7 Amount Recovered from the SHGs in the selected districts

The recovery from the SHGs by the NGOs towards the banks is discussed here. The total amount that was recovered from all the SHGs in the selected districts was Rs. 44,34,68,564 which accounted for an average of Rs. 5,54,33,571. The highest recovery was done in Shimoga district which was Rs. 11,23,47,410 this shows the loyalty of the SHGs in their repayment and also encourages the lending agencies to lend more. This loyalty in the SHGs are created by imparting rigorous training to the SHG members, maintaining good books of account and also because of proper recovery procedures. The lowest recovery in terms of the amount that was recovered was found in the district of Bijapur which was Rs.16,89,000 but all the total amount that was lent was recovered and the recovery percentage was 100 per cent.

5.2.8 Amount Overdue from the SHGs in the selected districts

The overdue amount that was left with the SHGs is discussed here. The total amount that was overdue from all the SHGs in the selected districts was Rs. 1,82,08,254. The highest amount overdue was found in Chitradurga district which was Rs. 84,06,301 with an average overdue amount of Rs.10,50,788 for each year because of low training programmes and no proper recovery procedures. There were no overdue amount found in the district of Bijapur as the recovery that were done in that area was to the tune of 100 per cent.

5.2.9 Portfolio of Lending by NGOs to SHGs

The portfolio of lending by the NGOs in the selected districts to the SHGs was found in six major categories which were Agriculture, Agri business, Manufacturing, Personal needs, Petty business and others. In Belgaum district, agriculture had 49.90 per cent lent towards it as it was the priority sector in the study area. In Bijapur district, 68.10 per cent was lent towards other category this can be attributed to the fact that the majority of the SHGs that were created were in the urban areas and thus the lending towards Agri business, Manufacturing, Personal needs and Petty business was nil, we can also see that 31.90 per cent average was lent towards agriculture. The case in Chickmagalur district was that 49.87 per cent was lent towards agriculture and 31.85 per cent was lent towards other category as the considerations here were higher towards agriculture and fisheries (in Narashimarajapura). In Chitradurga district 52.76 per cent was found to have been lent to agriculture signifying the importance of agriculture in the area, 28.84 per cent was lent to Agri business in Davangere district. In Dharwad district the lending procedure were very erratic with only 9.15 per cent, 18.29 per cent, 27.44 per cent and 45.12 per cent was lent to agriculture, Agri business, manufacturing and other categories respectively as the NGOs here were also concentrating on rehabilitation of the widows and the socially distressed people. In Haveri 80.65 per cent was lent to agriculture, where as in Koppal 50 per cent was lent to Agri business, Shimoga district recorded 80.13 per cent of the total amount lent going towards agriculture signifying the importance of the agriculture in the area.

5.2.10 Skill Developmental Activities Conducted by NGOs to the SHGs

The skill development activities that were conducted by the NGOs to the SHGs was recorded under seven major heads they were exposure visits, training programmes, demonstrations, MELAs conducted for marketing of the products, linkages provided between technology institutions and SHGs, linkages provided between marketing institutions and

SHGs and equipments provided. In Bijapur, Chickmagalur, Chitradurga, Davangere, Haveri and Shimoga there were no linkages to marketing institutions provided as the facilities needed for such activities were not significantly created. In Bijapur, Chitradurga, Davangere, Dharwad and Haveri there were no linkages between technological institutions provided as the NGOs had little contact with such issues. No melas were conducted for marketing the products as there were no products like crafts, incense stick, pickles and etc produced. The products that were produced were in very small quantities and the creation of MELAs was insignificant in the districts like Bijapur, Chickmagalur, Davangere and Haveri. In consideration to equipments provided in Dharwad the values were zero signifying that no equipments were provided.

5.3

IMPACT OF MICRO-FINANCIAL MEMBER ENTERPRISE

INSTITUTIONS

ON

The impact of micro financial institutions (NGOs) on the member enterprises (SHGs) is discussed in this section; the impact is studied on the different aspects like income position of the SHG members, asset position of the SHG members generation of employment, the savings, the investment pattern and the consumption pattern are studied here.

5.3.1 Impact of NGOs on the Income of the SHG

The impact of micro finance provided by NGOs on the income of the SHGs in the selected districts are discussed here. All the values of t are statically significant saying that there was positive impact of the NGOs on the SHGs. The highest impact was found in Chitradurga district where the income before the establishment or working of the NGOs was Rs. 19,862.50 and after the working of the NGOs started there income rose to Rs. 42,775 and their t value was 6.78, these were because of the higher lending towards the priority sector. The lowest impact was found in Belgaum district where in the income before was Rs. 55,379 and after the working of the NGOs started it rose to Rs. 1,34,108 having a t value of 2.08 which can be attributed to the fact that even though there was a increase in the income it was not as much as in other districts.

5.3.2 Impact of NGOs on the Asset Position of the SHGs

The impact of microfinance provided to the SHGs by the NGOs in the selected districts on the asset position of the SHG members. In Bijapur district the impact on the SHG members was found to be negligible as thet values were generated for only the vehicles position. In Belgaum district thet values were found to be higher signifying higher impact of the NGOs on the SHG members asset position signifying that the members had a better asset creation in this district in comparison to other districts.

5.3.3 Impact of NGOs on the Generation of Employment of the SHGs

Table 4.16 presented the information on generation of employment in the SHG members after the NGOs involvement in the selected districts. In Belgaum district there was a change up to 70 per cent on the farming as the generation of employment had increased but there was a negative impact on the agricultural labour up to about 83.33 per cent as the man days per year had decreased from 60 to 10 this is attributed to the fact that there were more people who went in to work in their own fields instead of going in for some others fields. In Bijapur district also the same trend can be seen. In Chickmagalur district there was a decrease in the farming (- 52.17) and the agricultural labour (- 54.15) as people there were more interested in some other activity like agri business, craftsmanship and fishing in Narashimarajapura. In Chitradurga district it was found that there were no agricultural labours. In Davangere district the agriculture labour had decreased (- 50.00) after the SHGs were started but a lot of them had increased their interests in agriculture, animal husbandry and other activities like selling milk, agri business and maintenance of a lot of petty business . In Dharwad district the man days on agriculture had increased from 60 man days to 195 man days signifying the importance of agriculture. In Haveri district both the farming (-16.67) and agricultural labour (-25.00) had experienced a decrease in the generation of employment as lot of the people had gone in for the human hair processing and other works along with animal husbandry. In Koppal district the number of man days on agricultural labour had decreased

from 160 to 100 man days as they started to indulge themselves in other activities like animal husbandry and farming in their own fields. In Shimoga district also the same trend was found as there was a decrease of 50 percent in the agricultural labours.

5.3.4 Impact of NGOs on the Savings of the SHGs

The impact of the micro finance on savings of the SHG members was also a factor that was considered in the study. It is evident from the table 4.17 that there was a positive impact on the savings of the SHG members. The percentage change reveals that Dharwad district had the highest per cent change which amounts to about 212.50 per cent thus it implies the highest impact was seen in Dharwad district this was because that the NGOs here were also into rehabilitation of the widows so they insisted that a lot of saving were necessary and this could help them to go a long way and thus the higher rate of savings. The least impact was seen in Belgaum district as the t value was 2.14 and the per cent change was 109.58. The districts like Bijapur, Chitradurga, Davangere and Shimoga all had the same rate of per cent change which was 150 per cent.

5.3.5 Impact of NGOs on the investment pattern of the SHGs

The investment pattern in the SHGs also had some impact after the NGOs had started their working. There were two major purposes/occupations that were considered for the analysis; the occupations that were taken up in the first purpose/category were agriculture, poultry, sheep rearing, human hair processing and craftsmanship. The occupations that were considered for the second purpose/category were no work (as there was a majority of the respondents who did not do any second work and thus there was no investment), poultry, dairy, sheep rearing, make up coulees and handicrafts. 5.3.5.1 Impact of NGOs on the investment pattern of the SHGs in the first purpose The impact on the investment pattern of the SHG members after the working of the NGOs started on the first purpose or the major occupation are shown in the table 4.18. As it can be clearly seen from the table that, 90.90 per cent of the respondents were practicing agriculture as their major occupation before the functioning of the NGOs started and once this started they sort of shifted from agriculture and started to do the subsidiary occupations such as poultry (34.10 per cent), sheep rearing (56.80 per cent), human hair processing (4.50 per cent) and craftsmanship (4.50 per cent) as their main or major occupation. The presence of the human hair processing and craftsmanship were found in both the periods with the same values. 5.3.5.2 Impact of NGOs on the investment pattern of the SHGs in the second purpose Table 4.19 presented the impact on the investment pattern of the SHG members after the working of the NGOs started on the secondary purpose /occupation. The table clearly shows that, the occupation that was done by most of the respondents in the secondary purpose/occupation category was poultry farming (61.40 per cent) followed by dairy (20.50 per cent) and then sheep rearing along with agricultural works. In the phase after the operations of the NGOs started 90.90 of the people were found to be indulged in the agricultural works as their secondary occupation, but 4.50 per cent of the people were found to be having the occupation on make up coulees and the same per cent were found to be doing handicrafts along side with the major occupation.

5.3.6 Impact of Ngos on the Consumption Pattern of the SHGs

The impact of the functioning of the NGOs on the consumption pattern of the SHG members and according to the results there was a lot of impact on the consumption of food in Chitradurga district, in the consumptive expenses on clothing also Chitradurga district was found to be in the first place as the statistical value is significant here. Further Chitradurga district was found to be statistically significant in the expenses towards health and education. There was a high impact in Chickmagalur district on the expenses of miscellaneous items, but in the case of the total impact on the consumption pattern Chitradurga stands first this can be attributed to the fact that there was higher lending to these SHGs.

5.3.6.1 Proportion of Expenditure for different purposes The proportions in which the changes in consumption have been seen are presented in the table 4.21. According to Angels Law as the income increases the expenditure on the basics (like food and clothing) decreases, the expenditure on the necessities (like health and education) increases and the expenditure on the luxuries will increase even more. Here we can see that there has been a decrease in the proportion of expenditure that has been made on the food and clothing in all the districts that were considered for the study. The expenditures on the health and education have increased but not of that high a proportion the increase that has been found have been very meager. But the expenditure on the miscellaneous items and the religious expenditure have increased very much with greater proportions. These values justify angels law as the proportion of the expenditure on the food and clothing have decreased and the proportion of the expenditure on the education and health have increased but to a very small extent and the expenditure on the religious ceremonies and the miscellaneous items of consumption have increased very much.

5.4

TO IDENTIFY THE CONSTRAINTS FACED BY MICROFINANCE PROVIDERS

Here an effort has been made to identify the constraints that are faced by the micro finance providers and the intensity of these problems and thus by the help of which we can suggest measures to overcome these problems. The constraints that were considered for the study are High Rate of interest, Inadequate information on the present scenario of SHGs, Lack of time to participate in all the activities of all the SHGs, Lack of adequate training and skill development facilities, Less number of genuine borrowers, No support for Starting a new activity, Non- cooperation from the SHGs, Problem in marketing the products produced by the SHGs, Political interference and Timely availability of financial help

5.4.1 Problems faced by the micro finance providers

The constraints that are faced by the micro finance providers in the selected districts were also studied. The most acute problem is the lack of time to participate in all the activities of all the SHGs this can be stated because the index value for it is significant here there were less number of peoples who were monitoring the SHGs thus all the activities of all the SHGs could not be monitored by less people. This is followed by timely availability of financial help. The order of these constraints in the descending order is as follows No support for Starting a new activity, Problem in marketing the products produced by the SHGs, Political interference, High Rate of interest, Lack of adequate training and skill development facilities, Inadequate information on the present scenario of SHGs, Less number of genuine borrowers and Noncooperation from the SHGs.

6. SUMMARY AND POLICY IMPLICATION

An estimated of about 300 million in India and around 1.2 billion population world wide live in absolute poverty. They are unable to meet their most basic human needs for food, clothing, shelter and minimum health care. Since 1947 the absolute number of poor has doubled despite the significant growth in agriculture production and employment over the past five decades of development planning. Rural poverty continues to pose the greatest challenge in India. The Vision of Micro finance: "Five years hence, we are looking for a process change leading to empowerment of 75 lakhs poor households, and more particularly of the women from these households, through strong and viable people's structures like SHGs and MFIs which draw strength and support from the banking system with the message that banking with the poor is a profitable business opportunity for both the poor and the banks." The structure of rural financial market in India is dualistic both formal and informal financial intermediaries. Consensus is growing among researchers that the formal financial sector is not effectively serving the rural population in the third world countries this is mainly attributed to the failure of financial intermediaries in fulfilling their basic functions viz.. Production credit to finance income generating activities Consumption credit to maintain and expand human productive capacity Quality saving schemes for increasing risk-bearing capacity of the rural house holds.

The performance of formal financial institutions particularly in their lending to the poor in India has been unsatisfactory. They face a number of constraints in broadening their services to the poor. A large number of rural house holds are with limited land resource and small economic activity accompanied with poor technology. But their demand for credit has been rising due to growing family size increased consumption requirement, social obligations and so on. But the institutional agencies not only lacked the required mechanism to assess their credit needs but also often overlooked their demand for credit on the ground that their needs are for non-productive purpose. Besides pursued high risks transaction cost in small scale rural lending and absence of collateral securities kept the poor away from the fold of formal financial intermediaries. There is a strong case for a formal recognition of mF, just like institutional credit, as a strategic tool for poverty alleviation and rural development, both at the policy and implementation level. The Task Force therefore recommends that government of India (GOI) may consider making a suitable Policy Statement recognizing the role of micro finance on this direction the government of India (GOI) through the announcements made in the budget speeches of 1998-99 and 1999-2000 regarding SHG-Bank Linkage Programme. This endeavor may have to be carried further by recognizing the other initiatives of the voluntary sector in providing mF services to the poor. Of course, lack of capital is only one factor keeping poor rural households from improving their welfare. In rural areas of Karnataka, illiteracy is high, basic social and market infrastructure is lacking, and many people are in poor health. When seed or irrigation water for the farmer, market access for the rural producer, or elementary bookkeeping skills for the would-be entrepreneur are absent, the returns to financial services will be low or sometimes even wasted. Karnataka does not figure on the top of the tables published by financial institutions, it shows that the number of self-help groups formed in each state. This is mainly because the tables capture data after 1991-92 when the National Bank for Agriculture and Rural Development (NABARD) launched the SHG-Bank Linkage Programme. However, between 1984 and 1985, MYRADA, a non-governmental organization engaged in rural development and based in Karnataka, promoted several co-operative societies that were enabled to give loans to their members. Subsequently, the large co-operatives broke up into small groups,

which were the genesis of the first SHGs, referred to at that time as Credit Management Groups, with a focus on the management of credit. The concept of each member making a saving in the group soon followed, as also the establishment of a system of regular meetings, book keeping and records, and collective decision-making. A pilot study (Puhazhendi and Sai, 2000) gave NABARD the confidence to mainstream the SHG Bank Linkage Programme in 1996 as a normal lending activity. The programme then spread rapidly, if unevenly, across the country, making it by 2002, the largest microfinance programme in the world. Thus, the history of SHG promotion started with NGOs taking the lead in the mid-1980s and the lead passing on to NABARD by the late 1980s. After the SHG-Bank Linkage Programme was launched in 1991-92, the very first loans to SHGs in the country were given in Kolar district of Karnataka: by the Vysya Bank. Self Help Groups (SHGs) form the basic constituent unit of the microfinance movement in India. An SHG is a group of a few individuals usually poor and often women who pool their savings into a fund from which they can borrow as and when necessary. Such a group is linked with a bank a rural, co-operative or commercial bank where they maintain a group account. Over time the bank begins to lend to the group funded out of the savings generated by the group members themselves, are called inter-loans. The Role of NGOs in Microfinance: Self Help Groups are almost always formed with outside assistance. Developmental NGOs, often with considerable history of working in a particular area for projects like literacy, sanitation etc., take to organizing SHGs, bringing together people, explaining the concept to them, attending and helping coordinate a few of the initial group meetings, helping them maintain accounts and linking them with the banks. Of late, some of the rural banks themselves are being designated as Self Help Promoting Institutions (SHPIs) and they help in the formation and nursing of SHGs. This is the right as well as crucial period to have a close look on the performance of micro finance providers and also to assess their impact on the SHGs and through it the assessment of the impact of the SHGs on the rural poor. Thus it was thought proper and most conducive to under take a research study entitled Performance of micro Finance Providersin KARNATAKA. The objectives of this study were 1. To study the growth and pattern of micro finance in Karnataka. 2. To evaluate the business performance of the micro- finance providers. 3. To study the impact of micro-financial institutions on member enterprise. 4. To identify the constraints faced by micro-finance providers. The present study was designed to understand and analyze NGOs and their part in the improvement of the lives of the rural poor. The study was conducted during January 2007 to September 2007. The State of Karnataka was chosen as the locale of study. Karnataka is one of the pioneering states in the micro finance movement of the country. The study is based on purposive sampling .Out of 27 districts in Karnataka, nine districts Belgaum, Bijapur, Chickmagalur, Chitradurga, Davangere, Dharwad, Haveri, Koppal and Shimoga were chosen for the study. Keeping in view of the objectives of the study, a multi stage purposive sampling procedure was adopted for the selection of the district, talukas, micro finance providers and SHGs. The first stage is based on the total strength of the non government micro finance service providers. In the second stage from each selected district all the Non Government micro Finance Service providers were taken. The data pertaining to various aspects under study were collected from the secondary source, with respect to amount lent, port -folio lending by micro Finance providers, cost and returns involved in each activities, recovery performance under micro financial activities in the selected districts will be collected with help of pre-tested questionnaire from the NGOs and SHGs. Similarly, terms and conditions involved in micro financial activities have been obtained from these Financial Institutions. The growth and pattern of micro finance in the state for the period 1992 to 2006 and districts of Karnataka for the period 1999 to 2006 were collected from NABARD.

The analytical techniques that were employed are triennium averages, tabular analysis, compound growth rate analysis, Paired t test and impact index

FINDINGS OF THE STUDY

1. The pattern of growth of SHGs in the state from 1992-1993 to 2005-2006 are discussed in detail. Here there is data on three aspects of the growth of Micro finance in the state they are the number of SHGs credit linked, bank loan disbursed and the refinance that is provided. In the year 1992-1993 the total number of SHGs credit linked were only 114 which decreased in 1993-94 to 51 then we can see a constant rise in their numbers. In the year 2005-2006 the total number of SHGs credit linked grew up to 61,730. The compound growth rate of number of SHGs credit linked increased at the rate of 71.19 per cent per annum. Similarly, bank loan disbursed to SHGs was found to be growing at the compound growth rate of 95.97 per cent and refinance to banks from apex level institutions increased at a compound growth rate of 75.83 per cent. The rate of growth in bank loan is higher than the growth in both the SHGs credit linked and refinanced. This was achieved because of the efforts of the NGOs and the government agencies, the policies that were taken up by the government during these periods, seeing the importance of the SHGs in the improvement of the lives of the poor was also evident for this kind of an achievement in the field of SHGs growth. This higher growth in micro finance may also be possible because of refinance support provided by the apex level institutions involved in Micro finance. 2. It is evident from the table 4.4 that the total numbers of SHGs formed from the selected districts were 9,243. The average number of SHGs formed for the selected districts was 1,155.37. The highest number of SHGs that were formed was in Chitradurga and it was 2,071, the highest average was also found in the same district which was 259 SHGs Chitradurga district has a lot of NGOs that are working in the area for a long period of time and all of these NGOs are working hard in the direction of making more and more SHGs and seeing to it that they are working well. The least growth was found in the district of Bijapur as the area had a lot of interior places and the NGOs found it difficult to go and meet the people and convince them to form SHGs and this can also be attributed to the fact that there was no sufficient works that were directed in this matter till recently as was opinioned by the NGOs that were interviewed. The total amount lent which includes the funds from NABARD, the loans forwarded from banks and the own funds expended of the NGOs in the selected districts are discussed in this section. The total amount spent from all the selected districts was Rs. 46,18,86,818 having an average of Rs. 5,77,35,852. The highest total amount spent was found in Shimoga district. The NGOs that are situated and were selected for the study in Shimoga district were working from quite some time and thus they had a very good financial support from the banks, NABARD and from societies of their own thus we can see that the total amount lent here is quite high. The recovery from the SHGs by the NGOs towards the banks is discussed here. The total amount that was recovered from all the SHGs in the selected districts was Rs. 44,34,68,564 which accounted for an average of Rs. 5,54,33,571. The highest recovery was done in Shimoga district which was Rs. 11,23,47,410 which shows the loyalty of the SHGs in their repayment and also encourages the lending agencies to lend more. This loyalty in the SHGs are created by imparting rigorous training to the SHG members, maintaining good books of account and also because of proper recovery procedures. The lowest recovery in terms of the amount that was recovered was found in the district of Bijapur which was Rs.16,89,000 but all the total amount that was lent was recovered and the recovery percentage was 100 per cent. The portfolio of lending by the NGOs in the selected districts to the SHGs was found in six major categories which were Agriculture, Agri business, Manufacturing, Personal needs, Petty business and others. In Belgaum district, agriculture had 49.90 per cent lent towards it as it was the priority sector in the study area. In Bijapur district, 68.10 per cent was lent towards other category. This can be attributed to the fact that the majority of the SHGs that were created were in the urban areas and thus the lending towards Agri business, Manufacturing, Personal needs and Petty business was nil, we can also see that 31.90 per

cent average was lent towards agriculture. The case in Chickmagalur district was that 49.87 per cent was lent towards agriculture and 31.85 per cent was lent towards other category as the considerations here were higher towards agriculture and fisheries (in Narashimarajapura). In Chitradurga district 52.76 per cent was found to have been lent to agriculture signifying the importance of agriculture in the area, 28.84 per cent was lent to Agri business in Davangere district. In Dharwad district the lending procedure was very erratic with only 9.15 per cent, 18.29 per cent, 27.44 per cent and 45.12 per cent was lent to agriculture, Agri business, manufacturing and other categories respectively as the NGOs here were also concentrating on rehabilitation of the widows and the socially distressed people. In Haveri 80.65 per cent was lent to agriculture, where as in Koppal 50 per cent was lent to Agri business, Shimoga district recorded 80.13 per cent of the total amount lent going towards agriculture signifying the importance of the agriculture in the area. 3. The impact of micro finance provided by NGOs on the income of the SHGs in the selected districts is discussed here. All the values of t are statically significant saying that there was positive impact of the NGOs on the SHGs. The highest impact was found in Chitradurga district where the income before the establishment or working of the NGOs was Rs. 19,862.50 and after the working of the NGOs started there income rose to Rs. 42,775 and their t value was 6.78, these were because of the higher lending towards the priority sector. The lowest impact was found in Belgaum district where in the income before was Rs. 55,379 and after the working of the NGOs started it rose to Rs. 1,34,108 having a t value of 2.08 which can be attributed to the fact that even though there was an increase in the income it was not as much as in other districts. The impact of microfinance provided to the SHGs by the NGOs in the selected districts on the asset position of the SHG members is examined here. In Bijapur district the impact on the SHG members was found to be negligible as thet values were generated for only the vehicles position. In Belgaum district thet values were found to be higher signifying higher impact of the NGOs on the SHG members asset position signifying that the members had a better asset creation in this district in comparison to other districts. Table 4.16 presented the information on generation of employment in the SHG members after the NGOs involvement in the selected districts. In Belgaum district there was a change up to 70 per cent on the farming as the generation of employment had increased but there was a negative impact on the agricultural labour up to about 83.33 per cent as the man days per year had decreased from 60 to 10. This is attributed to the fact that there were more people who went in to work in their own fields instead of going in for some others fields. In Bijapur district also the same trend can be seen. In Chickmagalur district there was a decrease in the farming (- 52.17) and the agricultural labour (- 54.15) as people there were more interested in some other activities like agri business, craftsmanship and fishing in Narashimarajapura. In Chitradurga district, it was found that there was no agricultural labour. In Davangere district the agriculture labour had decreased (- 50.00) after the SHGs were started but a lot of them had increased their interests in agriculture, animal husbandry and other activities like selling milk, agri business and maintenance of a lot of petty business . In Dharwad district the man days on agriculture had increased from 60 man days to 195 man days signifying the importance of agriculture. In Haveri district both the farming (- 16.67) and agricultural labour (- 25.00) had experienced a decrease in the generation of employment as lot of the people had gone in for the human hair processing and other works along with animal husbandry. In Koppal district the number of man days on agricultural labour had decreased from 160 to 100 man days as they started to indulge themselves in other activities like animal husbandry and farming in their own fields. In Shimoga district also the same trend was found as there was a decrease of 50 percent in the agricultural labour. The impact of the functioning of the NGOs on the consumption pattern of the SHG members and according to the results there was a lot of impact on the consumption of food in Chitradurga district, in the consumptive expenses on clothing also Chitradurga district was found to be in the first place as the statistical value is significant here. Further Chitradurga district was found to be statistically significant in the expenses towards health and education. There was a high impact in Chickmagalur district on the expenses of miscellaneous items, but in the case of the total impact on the consumption pattern Chitradurga stands first. This can be attributed to the fact that there was higher lending to these SHGs.

The proportions in which the changes in consumption have been seen are presented in the table 4.21. According to Angels Law of consumption, as the income increases the proportion of expenditure on the basics (like food and clothing) decreases, the expenditure on the necessities (like health and education) increases and the expenditure on the luxuries will increase even more. Here we can see that there has been a decrease in the proportion of expenditure that has been made on the food and clothing in all the districts that were considered for the study. The expenditures on the health and education have increased but not of that high a proportion the increase that has been found have been very meager. But the expenditure on the miscellaneous items and the religious expenditure have increased very much with greater proportions. These values justify Angels Law as the proportion of the expenditure on the food and clothing have decreased and the proportion of the expenditure on the education and health have increased but to a very small extent and the expenditure on the religious ceremonies and the miscellaneous items of consumption have increased very much. 4. The constraints that are faced by the micro finance providers in the selected districts were also studied. The most acute problem is the lack of time to participate in all the activities of all the SHGs. This can be stated because the index value for it is significant here there were less number of people who were monitoring the SHGs thus all the activities of all the SHGs could not be monitored by less people. This is followed by timely availability of financial help. The order of these constraints in the descending order is as follows No support for starting a new activity, Problem in marketing the products produced by the SHGs, Political interference, High Rate of interest, Lack of adequate training and skill development facilities, Inadequate information on the present scenario of SHGs, Less number of genuine borrowers and Non- cooperation from the SHGs.

POLICY IMPLICATIONS
1. There should be enough procedures that should be followed for the employment of more staff and the amount that needs to be paid to them should be properly notified in order to maintain sufficient staff to look after all the procedures and processes of all the SHGs that come under a NGO. 2. There is also a urgent need for the establishment of different skill development facilities at the block level in order to ensure a proper training, demonstration or any other skill developmental activities to take place in that block for the SHGs through the NGOs. 3. Some major steps need to be taken in the direction of imparting proper education to both the staffs of the NGOs and also the members of the SHGs. This would ensure that the whole process of microfinance runs smoothly and it should also ensure that the recovery performances should be enhanced in order to avail higher loans. Thus, the stress for the need for education to both staff of the NGOs and the members of the SHGs.

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PERFORMANCE OF MICRO-FINANCE PROVIDERS IN KARNATAKA

BHUVAN I. B. 2007
ABSTRACT
Self Help Groups (SHGs) form the basic constituent unit of the microfinance movement in India. An SHG is a group of a few individuals usually poor and often women who pool their savings into a fund from which they can borrow as and when necessary. Over the time banks begin to lend to the group funded out of the savings generated by the group members themselves, are called inter-loans. The Role of NGOs in Microfinance: Self Help Groups are almost always formed with outside assistance. Developmental NGOs, often with considerable history of working in a particular area for projects like literacy, sanitation etc., take to organizing SHGs, bringing together people, explaining the concept to them. In the year 2005-2006 the total number of SHGs credit linked grew up to 61,730. The compound growth rate of number of SHGs credit linked increased at the rate of 71.19 per cent per annum. Similarly, bank loan disbursed to SHGs was found to be growing at the compound growth rate of 95.97 per cent and refinance to banks from apex level institutions increased at a compound growth rate of 75.83 per cent. The highest impact was found in Chitradurga district where the income before the establishment or working of the NGOs was Rs. 19,862.50 and after the working of the NGOs started there income rose to Rs. 42,775 and their t value was 6.78, these were because of the higher lending towards the priority sector. The most acute problem is the lack of time to participate in all the activities of all the SHGs. This can be stated because the index value for it is significant here there were less number of people who were monitoring the SHGs thus all the activities of all the SHGs could not be monitored by less.

Dr. N. N. KARNOOL
CHAIRMAN