Tuesday, May 22, 2012

What should be done for SHG-Bank Linkage ?





When we have seen that the Central Government is controlling NABARD ( National Bank for Agriculture and Rural Development ) in India we find that the governments at the States have done little to encourage the sustainability of the Self- Help Group ( S.H.G.) in the rural areas of India. We have some random examples of the governments of the South India where they encouraged Self- Help Group ( S.H.G.) but came down heavily on the micro-finance movement due to defaults, suicides and politicization of the micro-finance institutions.

When the Self- Help Group ( S.H.G.) are dependent on the funds from the subsidized programmes like SGSY, MGNREGA , tribal Sub Plan (TSP) and Backward Region Grants (BRG) where the State governments have not taken initiatives to help provide loans to the Self- Help Group ( S.H.G.) s. The financial condition is made very tough due to the apathy and loss of foresightedness in the State level machinery. The Self- Help Group ( S.H.G.) are now seen as a source of revenue by the State Governments looking at the continuation in charging the stamp duty fees for accessing Bank Loans, Court fees for the recovery of the Bank Loans through the department of revenues ( through Tehsildars, SDMs, Revenue Inspector and Bank Officials ) and taxes , octroi  and levies on all kinds of purchases of the inputs required by the members of Self- Help Group ( S.H.G.). There is no tax rebate available easily for the members of Self- Help Group ( S.H.G.) through a single-window clearance in the State level. The exemptions in taxes, duties, octroi and levies are charged as if these Self- Help Group ( S.H.G.) members are the members of industries of the organized sector. Even when there may be some rebates available to these IGA for Self- Help Group ( S.H.G.) the claim for rebates, exemptions, etc are so cumbersome, time consuming and full of corrupt practices that a majority of the Self- Help Group ( S.H.G.)/ Clusters /Federations / Implementer Organization opts  out of it. These expenses are not re-imbursed by any seed capital or grant-in-aid from the programmes of NABARD and thus these relief are not availed of.

Political Parties exploit the loanees – When the Bank loans are sanctioned the loanees are huddled into some public meeting named as the Bank Loan Mela, Rozgar Mela, Swa rozgari Sammelan, etc. where the idea is to get the maximum mileage out of the process of providing loans to the members of Self- Help Group ( S.H.G.). The local MLA, M.P., Leaders and workers of the ruling political party converge to these meetings boasting of the good work they are doing for the poor people. They deliver speeches abusive of the C4entral Government while the Funds that may have reached the Self- Help Group ( S.H.G.) through SGSY came from the Central Government’s Share in SGSY, PMSRY, etc. while confusing the loanee as to who is the final do-gooder for them !.
 Thus we find that the loanees  are forced to be a part of the political rally and do as per the wishes of the ruling party. The reports at the NABARD- Level will show that these Self- Help Group ( S.H.G.) have decided the IGA as per there meetings and self-determined what is good for them but the fact remains that the ruling party workers force the members to select the activities which they ( the Party ) wants. The implementer may also be a party to these forced IGA in the individual cases. Thus these new loanee get demotivated on the onset of the loan receiving time itself.
The IGAs then start with the intentions to satisfy the demands of the outside agencies and the profits thus the repayments drop sharply after the first cycle of the income generation. The loanee decides not to repay the loan feeling that the political party will one day declare a loan-waiver. so why repay ? After three ofr four years of default i.e. non-repayment of loans these laonees become a soft-targets of the ruling Political Parties and become “politically encouraged Bank-defaulters”. The Banks start stern warnings where they shout at the Branch Managers pointing to the rising NPAs ( non performing-assets ). Banks then target the women, SC, STs, minorities, economically poorer families for issuing the loan recovery notices. Those members who might have revolted from the pressure of the ruling political alliances they are targeted more. The notices are then followed by the court notices for the final settlement or “one-time-compromising” of loans. This shows a clear cut political vendetta in some of the most poorer and remote areas where the local workers of the ruling political parties have made a mockery of the rule of law.
The local moneylenders are associated with this system to an extent that they find many opportunities to exploit the needs of the loanee from the Self- Help Group ( S.H.G.). These events go unreported for the fear of the Banks , Implementer Agencies and the Political Workers. We have several cases where all the above three kinds of roles are found within on family of the village.
The defaulters of loans are organized to vote for the ruling political parties so that they could get “loan-waivers” as a bargain in the next government. The defaulters put all our effort to get the ruling party re-elected in the State Assembly elections, local self-governments and all kinds of municipalities. The farmers are organized in a way to win the Mandi ( Agricultural Market ) Elections. The elections are won by these false promises for the loan defaulters but as the day pass by we see the same process of court notices, defaulters disgrace and many kinds of disadvantages reach the house of these compulsive defaulters. The recent sandals for the adjustments of loans taken from the Cooperative Bank upto rupees fifty thousand is running into crores of rupees in just two districts of Madhya Pradesh which is , incidentally , being investigated by NABARD, Bhopal.
When the political parties are themselves complicating the game of loan, the Central Government Agencies like NABARD, SIDBI , IDBI and even RBI can hardly provide any kind of relief to the common families who have organized themselves into small Self- Help Group ( S.H.G.). These agencies have not served the purposes for which they were created.

What is the way out of this recycling of poverty ?

The centralized, top heavy , full of useless power and professional agencies have been targeting the ameliorating poverty in the rural India. NABARD, hence the RBI have failed to reach the poorer sections of the society either through Banks or through Self- Help Group ( S.H.G.) s to provide loans for them so that they can start some kind of productive and sustainable livelihood


Statistics provided by the website of NABARD ( www.nabard.org) exhibits that by the year 2009-2010 Self- Help Group ( S.H.G.) linked with Banks ( i.e. given loans through the local Branches of a Bank ) were 69.53 lakhs.
Now my calculation is
Even if we take an average of maximum 18 members in each Self- Help Group ( S.H.G.) this should become 12.52 Crores of Indians.
When we take a minimum of 5 members per Self- Help Group ( S.H.G.) then this figure should be around 3.5 Crores of Indians.
Thus, we can safely say that the Banks provided service loans in a range of 3.5 Crores to 12.5 crore Indian through Self- Help Group ( S.H.G.).

Again, more than 47%  of Indian are known to be BPL ( Below Poverty Line Level ) So out of a total of 112 crores we have 52.64 crores as BPL persons. Thus by 2010, Banks reached a mix of population equal to a maximum of 12.52 crores which is  about 10% of the total of 2012 Census . 

Thus a minimum of 5% and a maximum of 15% of Indians could get loans from the Banks under the able guidance of NABARD through the formation of Self- Help Group ( S.H.G.).

( These  figures  have been taken from the website and the question of validity and verifiability of the data lies with NABARD )

My question is this :

When NABARD has taken thirty years of time to reach a maximum of 15% of the total population in India what time period will it take to reach another 30% of the Indians through Self- Help Group ( S.H.G.) ?

In my assumption it could be well nearly another 70 years or so.

What will you do ? Wait for Banks and honorable NABARD to reach your door in a remote village in another turn of this century or die poor ?
I have the following suggestions to make :-

  1. Cut, edit and reduce the power of NABARD to regulate the already heavily-regulated markets for the Bank-loans to the rural areas.                                                         
The power that is vested in these Centralised Banks have degenerated into corrupt practices in Hugh numbers. The actions of the DDMs are supported by the Regional Offices of NABARD while they have lost control on the loan activities of several nationalized and private Banks. The Land Developemnt , Cooperatives and Some Private Banks follow the instruction of NABARD but many of the big nationalized Banks have been denying Bank Loans to the Self- Help Group ( S.H.G.) even after the recommendations of the NABARD. This situation is detrimental to the financial inclusion policy of the RBI and NABARD.              What is the benefit of giving more powers to these Structures when they are proving inefficient and ineffective to reach out to the majority of the Indians ? The executive powers of NABARD should be reduced if they are not able to generate compliance with the Banking system of India.

2. Penal Action through Punishment and reward Sytem be Started for Banks :

NABARD, and thus the RBI, has been reducing the flow of loans and grant in aid assistances to the implementors, even when the higher budgetary allocations are made available to them. Instead of reducing the non-budgetary expenses and the budget deficits they have been increasing their expenses on salaries and other benefits, travel bills and non-effective efforts to increase the percolation of the fund flow. They have given excuse of the high (imaginary and non-realistic ) salaries provided to the young energetic Managerial Staff of the private Banks. They fail to realize that they have an aged staff with increasing family liabilities, placed in Big places with inflationary pressures, have to maintain a Status equal ( sometime greater that the ) District Magistrate, are inefficient in plain terms and have shoddy decision making processes with no importance to transparency in their decision making processes.

The flow of loans should be regulated by the Central Governments through the Ministry of Finance and the grant assistance provided to the Banks and thus to the NABARD should be put on hold for another five years, unless the efficiency and professionalism is proved  by these conglomerates.

3. The preliminary conditions for the encourager, motivator, Implementers for the formation and sustenance of the Self- Help Group ( S.H.G.) should be relaxed :

 The Self- Help Group ( S.H.G.) organize themselves into Clusters and than into Federation of Self- Help Group ( S.H.G.). The Banks do not support these Structures which suitably help these Self- Help Group ( S.H.G.) to attain a profit making and economically viable entity. These organizations are not supported by any kind of financial grant assistance by NABARD. The rules for help to these organizations be relaxed and made profit making exercise for the members of these Self- Help Group ( S.H.G.). Initial three-years’ support must come from the NABARD and then followed up by the local Lending Bank Branches.

Instead of increasing the salaries of these managers who are inefficient and anti-poor it is worth taking steps to strengthen the micro-structures for the poor through their Self- Help Group ( S.H.G.) s. at the village level itself with low salaries of the service- providing staff members, efficient-accountants, low cost housing and low cost recovery of loans.

4. Budgetary Allocation for these top-heavy Bnaks like NABARD be reduced to anamount equal or less than the total amount of loan disbursed ( actually reaching the hands of the loanee) in that period.

The release of budgetary expenses for NABARD may be done on a quarterly basis so as to maintain a recorded pace of work and verifiable mode of work. The loan sanctioned and the loan disbursed should be similar and the budget than can match this achievement for that quarter of the year.

5. All and every kinds of subsidies, benefits, increase and bonuses to the Staff Members of the Nationalised Bank should be stopped  and ket oh-hold for the next five year or so.

The performance in terms of the outreach of the loans to the Self- Help Group ( S.H.G.), women, farmers and the youth of India should be closely monitored and then rewarded or punished for non-performances, under-cutting of loan figures, mis-reporting, inefficiency of Staff and under performances of the Branches. ( which can be done case by case )

6. Adopt micro level technologies that will help the people.

All possible modes of latest technologies are untied to reach out to the people of India. We need more and new numbers of Branches at micro level. The Business Associate Model is restricted to the wealthy and the relatives and friends of the permanent employees of these Banks. New person hardly get any chance to get the sponsorship for the new branches, BA Model and nano-Branches for the Self- Help Group ( S.H.G.). This has to change in the coming years as the load on these old stereotype ideas will increase manifold and new fresh ideas are needed to provide an opportunity for others to flourish.

The Banks are very slow in investing on the technologies and they are concentrating their services to urban centers of India. We hardly find ATMs, Credit Cards, Mobile Banking, Net Banking and PDA Based Banking in villages far away. The excuses are superficial as they do not want to invest on new technologies for the benefit of the people. They also fear that the corruption will decease due to IT based Banking processes. Many of the staff members are found lacking in the simple use of a laptop and IT enabled services in NABARD itself.( can be checked anytime by an online exam by an independent agency ) Why are they not penalized when the private bank would have terminated the services very long time ago. ?

7. Self- Help Group ( S.H.G.) Model is sustainable

More and more numbers of people should be encouraged to form Self- Help Group ( S.H.G.) in their localities, open Bank Accounts and Save money.This will increase literacy level for Banking procedures, mutual trust among the community, money will reach the Banks in form of Savings and the plans for the profit making IGAs will [percolate to the poor people through these Self- Help Group ( S.H.G.), Clusters and Federation of these Self- Help Group ( S.H.G.). The Schemes from the State and Central Governments will reach these members faster. Governments should design programmes which can provide tax benefits, exemptions, waivers, rebates, discounts and provide social service through these Self- Help Group ( S.H.G.).
The poor people of India have to go a long way in order to avail of the benefits designed for them.

The concept of Self- Help Group ( S.H.G.) can show us a sustainable way to fight poverty in an indigenous way, purely Indian in nature.

 Will we give an opportunity to the ourselves ,WE , the people of India ?





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