Micro finance institutions in Karnataka
The origin of microfinance in Karnataka dates back to 1984 when Mysore Resettlement and Development Agency (MYRADA), a Non-Governmental Organisation (NGO) engaged in rural development and based in Karnataka, promoted several co-operative societies that extended loans to their members (Fernandez, 2004). Later in the mid-1980s, the National Bank for Agriculture and Rural Development (NABARD) took the lead. After the launching of SHG-Bank Linkage Program (SBLP) in 1991-92 and under this, programme the first micro, credit by private Vysya Bank. NABARD up scaled the programme by way of initiating a series of measures that include training of NGOs and bank staff. The Cauvery Grameena Bank of Mysore district became the first RRB in state to promote and credit-link several SHGs. With state intervention, Streeshakthi and Swashakti programmes were launched as part of promoting micro finance.
The self-help movement is deep-rooted in southern States and Karnataka has been in forefront in terms of promotion and credit linkage. Specific strategies formulated by NABARD to meet the requirement for widening the network and deepening the penetration of the programme in the State enabled to show the success. The fresh SHGs formed and credit linked (direct linkage by banks) during the year 2010-11 were 62,346 and 49,759 respectively taking the cumulative SHGs formed and credit linked in the State to 6, 56,463 and 5, 79,969 respectively as on 31st March 2011. The average loan per SHG has risen from 1.09 lakh during 2009-10 to 1.44 lakh during 2010-11. For the convenience, present chapter is divided into following sections. 4.1 Introduction, Section 4.2 presents analysis of SHG-Bank Linkage programme in Karnataka Section 4.3 discusses the role of stakeholders and Section 4.4 presents issues regarding SHG-Bank linkage. Analyses of promotion and linkage of joint liability groups, Stree Shakti and progress of microfinance in Karnataka are discussed in Section 4.5, 4.6 and 4.7 respectively. The last section describes the Bidar DCCB model.
Role of Stakeholders
Government of India (GoI)
Taking cognizance of the role of SHG-Bank linkage in ensuring inclusive growth, GoI has been attaching utmost importance to the programme, as has been evident through Union Budget announcement every year. As indicated by Union Government in its budget announcement for 2009-10, 50% of rural women are to be covered under SHGs by the end of the XII Five Year Plan. Further, in the Union Budget for 2011-12, a “Women SHG Development Fund” with a corpus of 500 crore, has been created and the same is proposed to be maintained with NABARD. The fund will be used to refinance banks for lending to women SHGs.
Reserve Bank of India (RBI)
RBI through its policy announcements has made the environment conducive for banks to participate in a larger way in the programme. Loans granted by banks to such SHGs engaged in agriculture and allied activities are classified as direct finance to agriculture, if banks maintain disaggregated data on SHG/micro credit portfolio. Further, small amounts not exceeding 50,000/- per borrower, either directly or indirectly through SHG/JLG mechanism or to NBFC/MFI for on lending up to 50,000/- per borrower will constitute microcredit.
Government of Karnataka (GoK)
In Karnataka, the State Government through its Women & Child Development Department (WCDD) continued its mission of empowering rural poor women in all the districts through its Stree Shakti Programme. WCDD has facilitated promotion of 1, 35,000 Stree Shakthi Groups as on 31 March 2011 of which 1, 22,000 Groups have been credit linked with financial assistance to the tune of 1231.96 crore. As a part of withdrawal strategy and to wean away Stree Shakthi Groups from Anganwadi Workers, WCDD has formed federations of the Stree Shakthi Groups to strengthen and empower these women. WCDD has formed federations of the Stree Shakthi Groups in all the 175 Talukas in the State and has registered them under the Societies Act with common byelaw devised by the department. Extensive training has been provided for capacity building of the members of Stree Shakthi federation through MYRADA and with financial support from NABARD.
Micro Enterprise Development Programme (MEDP)
Under the scheme, matured SHGs of more than 3 years are provided training for undertaking Income Generation Activities/livelihood activities. During the year 2010-11, NABARD sanctioned 159 MEDPs with a grant assistance of 51.25 lakh covering 4452 individual SHG members. The MEDPs covered wide range of activities like vermin composting, food products, Kasuti works, Beauty parlour, tailoring, integrated agri system, soft toys making, rubber tapping, agarbathi making, etc.
Support for SHG Federations
As a measure to ensure sustenance of SHGs, NABARD initiated a scheme for supporting SHG Federations during 2007-08. The scheme is presently on a model-neutral basis. The SHG Federations should not involve in financial intermediation. However, they can support SHGs with various non-financial services like skill development training, procurement of inputs, marketing of products, legal counselling, etc. As on 31 March 2011, NABARD has sanctioned grant assistance of 25.67 lakh to 21 Community Managed Resource Centres (CMRCs) of MYRADA supporting 84 Federations covering 2262 SHGs.
Issues with MFIs
Many Micro Finance Institutions have emerged to tap the micro finance market in Karnataka. While MFIs claim to cater to the unmet needs of SHGs, banks feel the functioning of MFIs vitiates the self help movement. While banks need to improve their services, by being more responsive to the needs of SHGs, if necessary by application of technology, having exclusive SHG branches, use of business facilitators/correspondents and such other proactive measures. At the same time, MFIs need to adopt a code of conduct for ensuring compliance with best practices, in the interest of the SHGs.
Database and its integrity
The detailed data / information on the SHG activities help in reviewing the progress and planning. The system of data collection and report generation needs revamping both at District and State level, specifically commercial banks.
The Business Performance of the Micro-Finance Providers
The total number of SHG members served in the selected districts was found to be 1, 39,342 and the average for all the selected districts were 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.
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 57,06,817. The average amount utilized from NABARD for all the selected districts was 7,13,352.16. The highest fund that was used was in Belgaum ( 33,01,985) with an average of 4,12,748. The lowest utilization of NABARD funds was found in Bijapur district ( 18,000) with an average of 2,000 per year.
Total lending to the SHGs by the NGOs using the assistance of the banks in the selected districts was 42,26,85,501 and the average for the selected districts was 5,28,35,688. The highest amount spent was found in Shimoga district which was about 11, 33, 16,000 and the average was 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 15,00,000 with an average of almost 1,87,000.
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