Home Based Businesses

Impact Of SHG Based Microfinance On Women Empowerment

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1. Introduction

 

Approximately 1,2 billion people have to survive with less than one dollar a day (World Bank report 2008).    Different studies conducted by Planning Commission of India and other agencies state that  more than 42%  of Indians earning less than Rs. 45/-per day. The amount of poverty in the world is unimaginably high. The millennium goals drafted by United Nations stress on is to reduction of poverty in the world by 2015.  World wide all the countries from developing to underdeveloped nations practicing different policies of their choice to cut-down the poverty rate of their respective nation.  Microfinance is only successful model  reaching the poor to uplift them by providing easy loan to build their business and other practices of self sufficiency, where regular financial services couldn’t reach.

Microcredits are small loans for entrepreneurs, who lack the means to be considered for loans through commercial banks. A lack of financial stability means a shortage of either surety or a stable monthly income. The idea is that individuals are able to get access to credits necessary for starting a small business and to generate income. Through increasing income the borrower can expand her enterprise and collect possessions. Access to financial services is thus argued to improve the economic situation of the poor (Consultative Group to Assist the Poor (CGAP), 2009).

In India SBLP (Self Help Group Bank Linkage Program)  sponsored by NBARD(National Bank of Agriculture and Rural Development) is a successful microfinance model striving towards upliftment of poor.

 

Genesis: The poverty alleviation effort, supported by providing credit through small cooperatives or Self Help Groups (SHGs)1 was introduced in India. Group lending, it was felt, could ensure a much higher level of loan repayment..

 

 

Self Help Groups are a small co-operatives mostly credit co-operatives. This style of group functions initially instituted by Prof.Mohammed Yunus in Bangladesh  and funded through  Grameen Bank. Successful  repayment of loans by poor people and meeting their varied and frequent credit needs are the pivotal of this scheme.

 

In India, the concept of group lending or small credit co-operatives was brought  on a pilot basis through programmes like the “Development of Women and Children in Rural Areas (DWCRA)” and the “Maharashtra Rural Credit Project (MRCP)”. Seeing the success of these pilots in terms of repayment of the loans taken and participation by women, the concept was brought in, in the mainstream poverty alleviation effort through the programme, “Swarna Jayanti Gram Swarojgar Yogana (SGSY)”, as a substitute for IRDP, the earlier poverty alleviation programme. SGSY is a poverty alleviation programme where in credit by commercial banks and subsidy by the government is provided to groups of rural poor women to undertake any economic activity. These groups can also thrift from their own funds and lend to their members. Credit for consumption purposes is allowed and so is multiple credit, allowing members to take repeated loans.

 

These small co-operatives, popularly known as SHGs, have now become a popular instrument world over, especially in developing countries for poverty alleviation. In India too, with a healthy repayment of loans, state governments and commercial banks are using this to meet their priority sector obligations. Microfinance in India in this form of small, women’s credit co-operatives has increased its outreach in several states. The number of SHGs is increasing rapidly. Some estimates put these at currently 2.5 million SHGs in India. (Economic Survey of India, p.67).

The amount of credit disbursed to these SHGs is increasing. Repayment of loans taken by them is reportedly very good, making rural micro lending a viable proposition for banks. In the past decade, these SHGs have worked well to ensure that repayment of loans is a  healthy ninety percent against  earlier poverty alleviation program, like IRDP, which has seen that the credit extended to the poor was hardly repaid, causing banks to find it unviable to lend to the poor under such schemes. Hence, SHGs have thus become a workable tool to channelize credit through banks to the rural poor. This is because in programs using SHGs the requirements of all stakeholders, namely the beneficiaries, the government and the banks, are being satisfied. However, it is seen that the number of SHGs that take up economic activities are relatively few and even fewer among them are successful. One problem is that of identifying economic activities that are viable at the rate of interest at which SHGs can avail loans. The women belonging to the SHGs can now influence decision making in their homes and communities. These are crucial decisions like what type of food the family will consume, regarding schooling of children, decisions pertaining to health, maintenance of the house and similar other things.

The  review of literature shows that the SHG activities with Bank Linkage has a positive impact on rural women self sustainability, with respect to increases in income, consumption, stabilization of income and general economic empowerment of beneficiaries. These studies highlight the increase in the confidence levels of the women, as also their involvement in community activities. According to these studies, as the SHG programme matures, the women get more involved in community activities and in addressing community problems by working in tandem with the government machinery to implement the different welfare schemes available, like constructions of roads, sanitation programmes, schemes for education and health etc. (Puhazendhi and K.J.S. Satyasai, 2001 Microfinance for Rural Finance, NABARD) and the SHGs from other village Kolsewadi have actively participated in assembly elections in supporting to Mr. Ganapthrao Gaikwad (Elected as a M.L.A 2009) who has been a  impact factor on these SHGs from formulation to now.  Given this, the following study is aimed at looking at this non-economic contribution of the SHG to the community in general.

2. Objective of the Study:

“To study the impact of SHG movement on self sustainability of rural women form Dwarli village.  The other social group dynamics which are causing the SHG performance and growth”.

2.1. Research Methodology:  Involves literature review of report of Planning Commission of India, NABARD and local panchayat reports Primary data is collected through direct interviews with the SHGs, SGSY authorities and welfare officer’s from KDMC (Kalyan Dombivli Municipal Corporation).  To understand further, the data has been collected from the Census of India (2001), a review of literature and other reference material from government agencies.

2.3. Sample Size: 10 SHGs  104 SHG Members

 

3.The paper is divided into four sections as follows:

 

1. Brief introduction of Dwarli village   &   The Self-Help Groups in Dwarli

2. How  the SGSY & SBLP Model Works

3. Impact of SHGs on the Women and the Society in Dwarli

4. Analysis and Concluding Observations.

 

 

 

 

3.1. The Self-Help Groups (SHGs) in Dwarli

 

The Dwarli  village, spread over 5060 hectares is located in a mixed atmosphere of rural area with urban exposure of Kalyan. It has a mixed population of artisans micro entrepreneurs, casual labours, brick workers (Khatkari & Thakur communities) and majority population is depends on agriculture and it’s allied products.   The regular financial products and facilities are exclude part for these villagers.

Table 1. Profile of Dwarli Village.

Census 2001

Sl.No.

Nomenclature

No.

01.

Area of the Village

5060 Hectares

02.

Number of Households

1950

03.

Total Population

9350

04.

Average Household Size

4.5

05

Male Population

4700

06.

Female Population

4650

07.

Literacy Rate

40

 

The SHGs movement began in Dwarli  some 4 years ago. A single village like Dwarli. Local political wings, social workers and SGSY officers are the main founders of these groups. These NGOs have their own social workers, mostly locals, who undertake the activity of forming the self help groups, helping them to register, to start saving and to link up with the bank. The 10 SHGs that we surveyed in Dwarli  are listed in Table 2.  The number of members in each SHG is different, but it ranges between 12 to 20 members per SHG. Most of these women have hardly had any formal education. Several of them are illiterate or have studied only upto 4th or 5th grade.

 

Regarding their economic background, most of these women come from farming families so that the main economic activity they know is agriculture or animal husbandry. Some of them are from poor families who have no land of their own and are engaged in working on others’ farms. Some of them belong to families engaged in trading activities like running small shops.

 

Table 2. Sample of Self Help Groups in Dwarli

(Bank of India)

Name of the SHG

No. of Members

Age of SHG (in Yrs)

Savitribhai Phule Bachatgat

14

05

Jai Laxmi mahila Bachatgat

19

03

Ahilyabhai mahila bachatgat

15

03

Shravanti mahila bachatgat

16

04

Karuna swayam mahila bachatgat

15

02

Swayamdeep mahila bachatgat

17

02

Sangh amarpatil mahila bachatgat

18

03

Shri swami Samarth mahila bachatgat

16

03

Samkalp mahila bachatgat

12

06

Navpraja mahila bachatgat

17

03

 

As the Table 2 shows, from the 10 SHGs that we surveyed, 08 are more than 3 years old. The members of the older groups had  long experience in saving, borrowing and enhancing their incomes. Over the years they have influenced other women of the village to participate in various group activities and establish SHGs.  The male population of this village usually small time traders and casual laborers.  The 2000 escalation of real estate has inspired them stop all entrepreneurial activities to become real estate agents by selling their lands and encouraging others to do the same.  Sudden shower of money not only spoiled their financial discipline and infected them with habits like alcohol and lavishness.   When real estate market was down during global recession, they virtually depend on their wives income.

 

The influence of SHG activities is so influential; the senior women members started   interacting with the local bank officials, going for training workshops out of the village for a day or two and most importantly have interacted with the social worker several times. All these interactions and exposure to something different than their small world is like a continuous education for them.

 

 

3.2.How  the SGSY & SBLP Model Works:

 

The objective of the Swarnjayanti Gram Swarozgar Yojana (SGSY) is to bring the assisted poor families (Swarozgaries) above the Poverty Line by ensuring appreciable sustained level of income over a period of time (Min.of Rural Devp., GOI guidelines). This objective is to be achieved by inter alia organising the rural poor  into Self Help Groups(SHGs) through the process of social mobilization, their training and capacity building and provision of income generating assets. The SHG approach helps the poor to build their self-confidence through community action.  Interactions in group meetings and collective decision making enables them in identification and prioritization of their needs and resources. This process would ultimately lead to the strengthening and socio-economic empowerment of the rural poor as well as improve their collective bargaining power.

The volunteers authorized by SGSY, any other govt., body  or social  workers to help the rural poor women to come together to form a SHG. Once the formation is over they were been taught in primary accounts, book keeping, recording minutes, technical and logistic support to learn and setup a entrepreneurial atmosphere.  Initially there were encouraged save  Rs. 50 to further per month/individual with the group.  After certain period the accumulation fund will be ready for the loan distribution amongst the same group which  known as the “Revolving Fund (RF)” .

The amount borrowed can be anything but it is normally seen to be around Rs. 500 to Rs.2000. Interest is charged on these internal borrowing, normally at the rate of two percent per month.  The initially the loan amount used to expend on personal expenditures like children education, health and other miscellaneous requirements. Later they were encouraged to participate in selling vegetables, retail milk vending, selling of papads.

 

After six month to one year of disciplined operations they are eligible for a loan from scheduled commercial banks in multiples of its savings(nearly 4times to the saved amount) Union Bank of India. This loan amount is to be distributed amongst the members as per the discretion of the group members, but has to be for an income generating activity.  It is mandatory for the members  to  specify the purpose of the loan and it’s usage while applying for loan.  During this  part of the activity the members are helped by the Volunteers/NGO workers. Normally, under SGSY a loan of Rs. 2,50,000 is given to each SHG. Of this, Rs. 1,00,000 are the subsidy component and the remaining Rs.1,50,000 are meant to be the credit component. The rate of interest charged by the bank is between 9.5 % to 10.5% which is always below PLR.  The total loan given to the group is generally shared equally between the members. Repayment is to be made in monthly installments. The amount of installment is decided by the group itself at their monthly meetings. These range between Rs. 300 to Rs. 500 per person per month.

 

3.3. Impact of SHG Movement on the Women and the Society in Dwarli

 

The women groups in Dwarli were only house-wives and partime agriculture labour before they joined SHGs.  Now they are intend to empower themselves through entrepreneurial activities such as manufacturing of Kopar-Masala, Sauce, Candles and various small scale domestic use products.  The local welfare officer from KDMC and volunteers are interested to help them by conducting workshops on these subjects and to strengthen the group activities.   As part of the SHG programme, the women have to undertake some economic activity if they apply for a bank loan. Of the 10 SHGs here, 4 of them have not taken the bank loan. Of the remaining, in some cases, the loan has been taken by only a few members. This shows that the women who completely excluded from societal economic activities now become influential factor in domestic and social activities, by saving, doing business and multiplying the revenues to her family and the group.

3.3.1 Benefits with SHGs:

After the joining the SHG in this village women experienced the difference between pre and post SHG economic freedom. The benefits are more than the economic betterment, the women have experienced a greater betterment in the non-economic spheres of their lives. The way people perceive them has changed.

 

3.3.2  Economic Improvement

The average savings per member were increased from 2008 to 2009, i., Rs.50 to Rs.200/month.  The purchasing power of women has been considerably increased. From the chosen sample of SHGs in Dwarli have experienced a social respect.

3.3.3  Decision Making Capacity:

 

The behavioral changes experienced by the sample women due to their participation in the SHG program.  Now the women members are participating actively in domestic decision making i.e, purchasing of  consumable goods, sending children to schools and setting you small business during non-harvest period rather going as a laborer.

 

3.3.4. Community Participation

 

The community participation was there previous to joining SHG.  Now with financial strength gave them a advanced authority while participating in social activities.

3.3.4  Political Activism: During 2009 assembly elections in Kalyan rural constituency the SHG members from Dwarli were actively participated in campaign to now elected M.L.A., and few members contesting in local panchayat elections.

 

3.4. Analysis and Conclusion:

 

3.4.1 Over the years, women who have barely completed their schooling, who could earlier barely step out of their houses to talk to government officials or other village men, are today stepping out and caring for themselves and their communities with confidence.

 

3.4.2 Most women felt that after their participation in SHGs they are more respected in their own families and society in general. Their contribution to the family is valued and the family in turn supports them to undertake activities like these.

 

3.4.2 In Dwarli village no women never participated in political activities. Now they have chances to win local panchayat elections.  The accession to credit with flexibility made them financial included by regular banking and financial system.

 

3.4.3  The availability of easy loans from regulated bodies encouraged them set up their own busiess to support their families and subsequently the society.   Comparatively we can witness the great change in women freedom  self dependency and supporting to their family from 2006 to now.

Problems of sustainability/continuity :

Political influence:  The accessive political interests and real estate escalation diverting the women to reduce their interest towards SHG movement.  Bank of India, Katemanivali Branch has witnessed zero new SHG accounts opened in 2010.
Ill sufficient staff at KDMC and Banks to follow up:  Less staff availability with KDMC and banks keeping them away from SHG promotional activities and followup with existing SHGs
Non-existence of strong NGO:  Where ever the SHG model is successful; there a strong NGO activities were witnessed.  NGOs are playing a pivotal role between SHGs and funding agencies and actively stimulating the SHGs to continue with their entrepreneurial activities and economic activities, which is basic requirement for the bankers and funding   agencies to provide further loan.  Majority of SHGs existing in nearby villages were discontinued immediately after initial loan disbursement.  The bankers have recovered the subsidy money, but couldn’t recovery the remaining loan amount,  which keeping them away from providing further loan.
Low market for the products produced by the SHGs:  Even the members from some active SHGs are still interested to continue with the entrepreneurial activities as they benefited previously.  Now they are finding deficiency in quality of the product and genuine purchasers of their manufactured products.  Lack of marketing & branding skills some of the SHGs from dwarli couldn’t sell their products, subsequently they didn’t paid the loans.

During interviews it was appeared that majority of SHGs established only for procuring theirs bank loan which comes with a substantial subsidy. SHGs which have taken loans from the bank are required to specify the for which they have taken it i.e. some economic activity, but in majority cases it was not happened

 

Suggestions:  During the study there are some encouraging point is that the SHG model is  elevated the self esteem of the women, due to various reasons exhibited earlier effecting the sustainability in Dwarli village.  To activate the old SHGs and stimulate existing SHGs

A strategic plan with the combined support from government and banks with the support of NGOs, where SHGs will be encouraged to participate in economic and entrepreneurial activities to generate regular income.  Encourage them repay the bank outstanding amount to make them eligible for future loans.
b. Teach them the principle of demand and supply to encourage them to produce the goods in demand.  The proper marketing skills either retail or wholesale.  If it is not possible by them to make arrangements sell their products from other channels like opening outlets at Big Bazar and many malls and retail chain at shopping complexes  Once they get the minimum margin money to their products, it would encourage them to continue with the SHG Bank Linkage Program and nourish their life as well society.

 

References

 

1. Planning commission report, Govt.of India. 2009
Government of India, Census of India,  2001. & Thane District collector Report 2009
Economic Survey of India, 2007-08.
Mohhamad Yunus.Banking for the Poor, Grameen Bank, Bangladesh
Puhazehendi, V. and K.J.S. Satyaasai (2001), Microfinance for Rural Poor, National Bank for Agriculture and Rural Development, 2000
Min.of Rural Development, Government of India Guidelines for DRDP

Prasadarao.M                    
Center Head                                              
IDEAL College PTULC,
Kalyan        

Dr.R. Gopal
Dean & Director
Dept. of Business Mgmt of Pd.Dr.D.Y.Patil University,
Navi Mumbai