SHGs AS A SUB SYSTEM OF PACS (a case of BIDAR DCCB)

By Group - 7 Heera Singh Bisht 19 Kumar Abhinandan 23 Lopa Mudra Dhal 25 Premanand.S 33 Shashi Bhushan 38

BIDAR DCCB
Exposure visit to Bidar District Cooperative Central Bank to study the PACs - SHG Model The case illustrates how the Primary Agricultural Societies through SHGs have helped in uplifting the socio-economic standards of the disadvantaged people.

POOREST OF THE POOR

The bank found that despite a wide network, a large section of society comprising of landless laborers, poor artisans and others living below the poverty line were still not covered by any financial institutions. Decided to assist the poor who do not have any collateral to give as security for the loans and therefore depend on money lenders.

 In order to reach the rural poor, the bank decided to extend the assistance through the self-help groups.

To start with in 1997 the bank provided loans to the SHGs promoted by the two main NGOs of the district; PRAWARDA and Mahila Samkhya.
When all these groups repaid the loan fully without any follow up, the bank decided to promote SHGs and link them through the Primary Agriculture Cooperative Societies (PACs).

SHG INITIATIVE
After observing the success of the loans provided by the bank to the SHGs promoted by the two NGOs, the bank decided to undertake SHG promotion activity as a part of its business portfolios. Initiated SHG linkages as a normal activity of the bank

Institutions involved in promotion of SHGs

1. Non Governmental Organizations (NGOs) 2. District Central Cooperative Bank (DCCB) 3. State Government (Shree Shakti)
1. Non Governmental Organizations (NGOs)
NGOs - initiators of SHG movement. PRAWARDA - pioneer among them, started SHGs since 1994 as experimental basis to involve village people in implementation of Watershed Projects. It was wonderful experience with exceptional participation by SHGs in Watershed projects at villages. Then started micro finance activities

2. District Central Cooperative Bank (DCCB)

Trend setter for the entire Cooperative sector in the country. Promoted large no. of SHGs

3. State Government
Shree Shakti Programme to promote SHGs, using Anganwadi Workers. Started during, 2001-2002, 2793 SHGs by 2005.

No. of SHGs promoted by different institutions

Name of SHPI As on 31/03/2003 2607 2224 1689 6520 As on 31/03/200 4 2771 3052 2516 8339 As on 31/03/2005 2863 3679 2793 9335 % Contribution By each Promoter 30 % 40 % 30 % 100 %

NGOs DCC Bank Govt. (Shree Shakti) Total

Quality of SHGs Promoted by Various Institutions

1. NGO SHGs: NGOs interventions - fund based & dont give handholding support for long time. SHGs - continuous & life long Community Based Institutions (CBOs), Need very strong foundation of concept clarity and hand-holding support at least for 3-5 years. 2. DCC Bank SHGs Social obligation Means of reaching Deposits and Credit targets. Not giving any useful training and hand-holding support to SHGs. 3. Govt. (Sthree Shakti) SHGs Generally weak. Promoted by Anganwadi workers Target oriented

PRIMARY OBJECTIVES
To provide assistance to the rural poor who had been deprived of the facility of the formal banking system through the network of PACs. To take up SHG promotion as a strategy for the revitalization of the PACs. To fulfill the social objective of serving the poor. To develop non-farm sector through the medium of SHGs

Initial Experiments in Micro Finance

By 1997, Bidar DCC Bank, had covered more than 80% of the farmers under the credit facility. However, another major segment of rural families (about 1.40 lakh families) were un reached by the formal credit system.

Key Issues related to Fast Tracking Financial Inclusion through Cooperatives SHG Federations: In majority of the MACS/Self Reliant cooperative Societies Acts, provision of nominal and associate membership is not included. SHG federations depend largely on ordinary members share capital and deposits. PACS as SHPIs and Mini Banks: PACS having mini banks are appropriate FIs for undertaking multiple financial services. However these PACS, are not allowed to use the savings/deposits for lending to the poor. PACS can function as Business Correspondents for Banks SHG Membership in Cooperatives: Some States still have laws that do not permit SHGs becoming members and holding equity in PACS/Thrift and Credit Cooperatives.

PILOT PROJECT
DCCB Bidar considered this experiment as a Pilot Project and the lessons learnt during the initial period gave some more insight regarding the strategy to be adopted. The bank decided to strengthen 171 PACs as Self Help Promoting Institutions (SHPIs) which would eventually form, train, develop and link the SHGs to their PACs.

Humnabad Taluk was the first Taluk wherein every village and hamlet had at least one SHG was declared as a SHG Taluka by the Governor of Karnataka.

IMPACT ON SHG SAVINGS, RETAINED EARNINGS AND BORROWINGS: There is a strong impact of SHG membership on saving behavior. In many SHGs, the amount of individual weekly savings has quadrupled from Rs.5 to Rs.20, Substantially increased the volume of loan able funds and retained earnings. The repayment rate is 98%; non-performing loans are zero. As of August, 2002, SHGs in the district had total savings of Rs.120 m and retained earnings of Rs.90m (common fund), totaling internal resources of Rs.210 m, which is nearly five times the amount of bank loans of Rs.45 m. The total working capital is thus Rs.255 m (US $5.26 m). The annual total turnover of SHGs is reportedly Rs.500m.

BENEFITS OF SHG BANKING:

Indirect benefits of SHG Banking in the district are pronounced. 38% of the families in the district, and 72% of poor families are SHG members with access to financial resources. Empowerment of Women, who are increasingly involved in community development programs and local politics.

IMPACT AT PACS LEVEL:

Training is an integral part of the whole process and the Board of Directors, Secretaries, Accountants and other staffs of PACs have been trained on SHG concept and its functioning. This motivated the PACs to promote, develop and finance SHGs. At present there are 1993 SHGs promoted by the PACs themselves of them 929 SHGs are financed by DCCB as on November, 2001. The DCC Bank intends to make PACs to play the role of NGOs in the promotion and financing of SHGs They are benefited as the DCCB is paying interest margin to PACs on SHG loans @ 1.5% p.a. that will also improve the financial position of PACs by increase in saving bank deposits, increase in lending, and higher recovery percentage.

REVITALISATION OF PACS BY SHG PROMOTION

The following impact on the functioning of the PACs. As more and more SHG SB A/c are opened in the PACs, the day-to-day operations in the PACs increases. The SHG members will come to the PACs for depositing their savings. This created an environment of day-to-day banking in the PACs by which the operational efficiency of the PACs improves. The SHG movement has helped to strengthen the Business Development Plan (BDP) of PACs.

 The SB Deposit in PACs increased. For example in Bhemalkhed PACs, 70 SHGs are saved an amount of 3.4 lakhs and out of which 1.03 lakhs is balance in the SB Account. This amount is used by many PACs for business due to which they have saved the interest payable on cash credit limit earlier being availed from DCCB. This also ensured regular presence of the secretary of the PACs that leads to social auditing by the people in the villages. The lending in the PACs has increased substantially where as operational cost has reduced to a greater extent.

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