IN A country where savings of poor families are meagre and banks not ready to risk giving loans, how do you fund local business plans? You let the poor be the bankers themselves. That’s what 2.5 million aptly named self-help groups (SHGs) do across India.
The core belief behind SHGs is that poor can help each other by pooling in their savings and lending the money to the members in need. Linkage with banks also gets them easy credit for group entrepreneurial activities. Perfect at concept level, the scheme has done well in states like Andhra Pradesh, Kerala, Tamil Nadu and Bihar. But there’s still a lot of ground to be covered. The scheme has reached only around 40 per cent of the poor households in rural India. Lack of training for members, indifferent attitude of banks and poor market access for the products they make also add to the trouble.
The scheme has reached only around 40 per cent of the poor households in rural India. Lack of training for members, indifferent attitude of banks and poor market access for the products they make also add to the trouble.
Let the people trade
The government has been banking on various welfare programmes since independence to tackle poverty which saw a drop from 54.9 per cent of the population in 1973-74 to 36.0 per cent in 1993-94 and 26.1 per cent in 1999-2000. However, the number of rural poor did not drop that drastically which is why a new self-employment programme, known as “Swarnjayanti Gram Swarozgar Yojana” (SGSY), was launched in April 1999. SGSY was later formalised into National Rural Livelihood Mission (NRLM) and SHGs remained its base. Though all the self-help groups have common goals, they can be supported by government, NGOs or banks. Having reached around 3 crore women, SHGs have an edge over formal financial institutes and can be a great leverage for socio-economic transformation of the villages.
We look at three reports, one by the Union Ministry of Rural Development, another submitted to the Planning Commission of India and third by a group of civil society organisations, to analyse the hits and misses of the scheme and how it has done with the poor.
Women and SHGs: Made for each other
A survey of five states, conducted by the Voluntary Operation in Community and Environment (VOICE), came up with some interesting finds, which were later submitted to the Planning Commission of India. Though conducted in 2008, the survey still offers a good insight into the functioning of SHGs.
The SGSY focussed on women and SC/STs with a target of 40 per cent women members and 50 per cent SC/ST representation. The survey found that participation of these two groups was higher than the target. Around 59 per cent SHG members were women while over 69 per cent belonged to SC, ST caste groups and 21 per cent OBCs.
SHGs also contribute to political growth of women as well as community service. In a survey of 214 SHGs (most of them NGO promoted), in five states done by EDA Rural Systems, it was found that one out of every four SHGs had a woman member who ran for local political office in the panchayat or village council, and in one out of every five SHGs, there was a woman member who had been elected.
one out of every four SHGs had a woman member who ran for local political office in the panchayat or village council, and in one out of every five SHGs, there was a woman member who had been elected. Around 30 per cent of SHGs were involved in community actions.
It was also found that 30 per cent of SHGs were involved in community actions. These involved improving community services like water supply, education, health care, veterinary care, village road), trying to stop alcohol sale and consumption, contributing finance and labour for new infrastructure, protecting natural resources and acts of charity to non-members.
The most common single type of action taken up by SHGs is the attempt to close down local liquor outlets. Seven out of 18 of such actions were found to be effective in at least closing the local supply. However, the success was only partial as the supply continues from a nearby village.
How do you get the poor?
The VOICE survey found that around 82 per cent members were landless and 17 per cent were small landholders. Business communities or traders and those engaged in dairy production were also represented but very few of the members were skilled labourers like artisans, mechanics and those with caste occupations like barbers and carpenters.
However, targeting of only BPL families was found to have turned counterproductive just like other welfare schemes, including subsidised food on ration cards, or providing training and credit for self-employment due to local politics. The criteria being sufficiently vague left considerable room for manipulations. In many villages nearly 80 per cent of households get to figure on the list. Therefore when it comes to actually selecting the beneficiaries for any scheme, it is easy to focus on one's supporters and give the genuine needy a go-by. The study group analysed that about 15 per cent of the families covered in UP, 12 per cent in Bihar and 8 per cent in Chhattisgarh were ineligible beneficiaries. In other states like Andhra Pradesh and Gujarat, the percentage was less than 4.
About 15 per cent of the families covered in UP, 12 per cent in Bihar and 8 per cent in Chhattisgarh were ineligible beneficiaries. In other states like Andhra Pradesh and Gujarat, the percentage was less than 4.
Also, definition of poor differed from one area to another as it was dependent on the money value of a household’s monthly per capita consumption expenditure. Decentralisation of the scheme with each region given the authority to tailor the use of the funds to its problem of poverty and the poor can improve the results.
What SHGs fail to be
The programme’s emphasis on group approach is based on the rationale that a poor in a group can substantially benefit from collective strength, mutual help and scale of economies. But in many cases, the members shared the group loan, subsidy, and revolving fund but they were found to be pursuing the economic activities individually thus defeating the purpose.
One of the objectives behind the scheme was to reduce the enormous workload that poor women especially carry in their multiple roles as reproducers and producers. It was hoped that the new activities would be sufficiently productive for them to earn better incomes with less physical labour. Instead, workload on women has only increased after joining the SHGs mainly because it provided them with some supplementary work, but the new activities could not generate enough income for them to give up any of their earlier tasks.
Workload on women has only increased after joining the SHGs mainly because it provided them with some supplementary work, but the new activities could not generate enough income for them to give up any of their earlier tasks.
Which trades, what funding
The scheme relying heavily on people and banks ca
n’t afford not to work for improvement of these two segments to ensure success. Reluctance from banks to fund entrepreneurial activities of SHG members who belonged to the BPL category and lack of risk taking capacity of the members confined the scope of the scheme.
The designers of the programme had realised that persons are poor not because they do not work, but because they do low productivity work. So, to reduce poverty, people had to be given thorough knowledge of market opportunities which fetch better returns. However, most SHGs focussed on ‘safe’ traditional activities like dairy, agriculture and agro-processing. Next preferred activities were vegetable / fruit vending followed by service enterprises, petty trade, and other activities for which no separate forward and backward linkages were required. Often, it was found that without market access, many startup projects failed and manufactured product stockpiled. A significant push on the infrastructure front is necessary to maintain viability of the groups.
Most SHGs focussed on ‘safe’ traditional activities like dairy, agriculture and agro-processing. Next preferred activities were vegetable / fruit vending followed by service enterprises, petty trade, and other activities for which no separate forward and backward linkages were required.
In a few trades such as handlooms, which were by nature cluster-oriented, the assistance under SGSY was very meagre since it required higher level of investments whereas the banks were not willing to provide financial support.
The funding pattern was found to be not transparent and simultaneously involved several agencies without any chain of authority between them. Thus, delays in approval of funds hold up the project at any stage.
That the state of affairs continues to this date is evident from the recent report by the MoRD which states that only 22 per cent of the SHGs were able to access bank credit for income generating activities. To rectify this, not only the credit delivery system needs to be streamlined, training, marketing and even placement support is required for SHGs so that banks start trusting their capabilities.
In some states, systematic sensitisation of the bankers along with placement of 'Bank Mitras' coupled with a robust network of SHGs and their federations have enabled the poor to access loans and overcome technical and marketing constraints.
Only 22 per cent of the SHGs were able to access bank credit for income generating activities. To rectify this, not only the credit delivery system needs to be streamlined, training, marketing and even placement support is required for SHGs so that banks start trusting their capabilities
Some hope through federations
The experience was different in case of states where SHG federations were formed. Each SHG was able to work closely with members of other groups in their own village and also with members of other blocks and district. Thus it led to a bigger collective group, organising all the rural poor in a state under one programme. The MoRD reports observes that for a poor family to come out abject poverty, a nurturing and handholding support of its own organisations for a period of 6 - 8 years is extremely critical.
However, it was heartening to note that poor do intensely use the limited knowledge and experience at their command. If their lives are to be changed significantly, then outside agencies have to bring in substantial inputs of a kind that they want but cannot get. For this it is important to find out what they do know and have. It is only then that schemes can be devised that can give right inputs in right quantities.
With this consideration, NRLM will focus on creation of dedicated professionals to deliver services relating to training of the community and to ensure high quality and timely service. It has also identified resource organisations which have successfully implemented rural livelihoods strategies.