1 SHGs AS A SUB SYSTEM OF PACS (a case of BIDAR DCCB) DR. MEDHA DUBHASHI, Head of Centre for Gender Studies, Vaikunth Mehta National Institute of Cooperative Management, Pune

2 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.

3 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.

4 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).

5 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

6 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

7 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.

8 SHG CELL An SHG Cell was opened with 3 officers who had worked in NGOs for formation of SHGs. These Officers did intensive field work in Bhosga area and formed 23 SHGs. These SHGs were handed over to the PACs, after training the PACs secretaries and the Branch Managers.

9 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.

10 Table-1: SHG Progress Report as on 31/12/02 -- Bidar DCCB 1.Total number of SHGs formed in the district a.SHG Formed by PACs b.SHGs formed by NGOs c.Shree Shakti ,352 2.Total SHG Members1,00,945 3.No. of Women Members96,998 4.Cumulative Internal Savings Mobilized (in lakhs)1, No. of SHGs Financed by DCCB Amount of Loan given by DCCB (in lakhs) % Recovery98% 8.Interest rate on SHG loans13% Source: Micro Credit Division, Bidar DCCB

11 The success is due to the coordinated efforts of DCCB Bidar and NGOs in the District.

12 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.

13 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.

14 BENEFITS OF SHG BANKING: 1.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. 2. Empowerment of Women, who are increasingly involved in community development programs and local politics.

15 3. Exposure of bad habits of family members harassment of women, resulting changing male attitudes and behavior. 4. Exposure of social evils such as child marriage, child labour and dowry.

16 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 it’s 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.

17 The DCC Bank intends to make PACs to play the role of NGOs in the promotion and financing of SHGs and PACs have also realized the advantages, in SHG promotion and linkage. They are benefited as the DCCB is paying interest margin to PACs on SHG 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.

18 REVITALISATION OF PACS BY SHG PROMOTION With the introduction of SHG concept at the PACs level through proper training to the non-officials and staff of PACs, they can be converted, as SHPIs The following impact on the functioning of the PACs. 1. As more and more SHG SB A/c are opened in the PACs, the day-to-day operations in the PACs increases. 2. The SHG members will come to the PACs for depositing their savings.

19 3. This created an environment of day-to-day banking in the PACs by which the operational efficiency of the PACs improves.

20 4. 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. 5. 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.

21 6. This also ensured regular presence of the secretary of the PACs that leads to social auditing by the people in the villages. 7. The lending and profit of PACs increased. For example in Bhemalkhed PACs, 24 SHGs were given loan of Rs.8.36 lakhs during the period The PACs has earned more than Rs.12,500/- of interest margin.

22 8. The risk involved is nil, as there is 100% repayment of loan. The operational cost is negligible. 9. Promotion of SHGs improved the repayment ethics of not only the SHG members (most of whom are women) but also the other borrowers.

There are instances of repayment of overdue by the non-SHG borrowers as they see the poor families repaying the loans. 11. The lending in the PACs has increased substantially where as operational cost has reduced to a greater extent. 12. The SHG movement has helped to strengthen the Business Development Plan (BDP) of PACs.

24 REFERENCE “Antodaya-Unto the Last; A Case of Revitalizing PACs Through SHGs in Bidar DCCB” The Administrator, Volumne XLVI, July 2003, pg25-34

25 THANK YOU