Innovative Pilot Projects
The phenomenal growth rate of microFinance sector, especially the SHG bank linkage programme has posed number of issues and challenges which need immediate attention. In response to this NABARD has initiated a number of innovations basically as an investment for posterity. At the core of these innovations is a desire to improve the outreach and sustainability of the programme. Some of the pilot projects designed and initiated recently are summarized here.
Introduction of Processor/Memory Cards- Application of IT in SHG Bank Linkage Programme
There are now many branches of Commercial Banks and Regional Rural Banks that service more than 200 SHG accounts which were hitherto considered impossible. Howsoever welcome the trend may be, the burgeoning numbers have also brought to the fore a host of issues relating to tracking, monitoring and adequately servicing SHG accounts. It was felt that the best way to deal with the huge numbers would be to take recourse to new technologies available.
Also in general, the branch manager in the rural areas is hard pressed for time and as a result does little for developing the business of the branch or for scouting for new business opportunities for the branch. It was felt that use of Information Technology in the form of processor/memory cards for SHGs and other clients coupled with automation in a branch would serve to solve these vexed issues and leave adequate time for business development work.
NABARD has therefore decided to launch an experiment through five branches each of two RRBs in Andhra Pradesh & Karnataka. Introduction processor/memory Cards for active clients and SHGs & automation of book keeping in SHGs is expected to reduce paper work, save time and thus improve the efficiency of the field worker. This is also expected to reduce the scope of manipulation, reduce unintended leakages and also maintain up to date books at SHG level.
The first pilot project on smart cards has been launched with Sri Visakha Grameena Bank in Andhra Pradesh (Reorganised as Andhra Pradesh Grameen Vikas Bank).The users of processor/memory cards would include SHGs and other good customers of the bank who are its regular customers. About 500 such customers, who would perform all banking transactions on a fast track, would be selected in each bank branch; time taken for banking by these regular good clients is likely to be reduced considerably. Use of processor/memory cards by SHG customers also adds another set of advantages like effective book keeping, tracking and monitoring of SHGs, reducing the hassles of illiterate SHG members seeking the assistance of the NGO / promoter/ local book writer to perform these functions. In addition to prompt upkeep of books by SHGs, auditing of books of accounts, computing interest, could also be ensured with this system. The transaction data of each SHG collected from the field could be consolidated at branch office to generate MIS reports, which the branch staff could effectively use to track the functioning of SHGs, ensure prompt credit linkages and recovery. This coupled with automation of back office operations of the branch would ease the branch manager of a lot of time spent on routine matters and they could use the spare time to build new customers and enhance business relations.
Scheme to finance Joint Liability Groups of tenant farmers
A Joint Liability Group (JLG) is an informal group comprising preferably of 4 to10 individuals but can be upto 20 members, coming together for the purposes of availing bank loan either singly or through the group mechanism against mutual guarantee. The JLG members would offer a joint undertaking to the bank that enables them to avail loans. The JLG members are expected to engage in similar type of economic activities like crop production. The management of the JLG is to be kept simple with little or no financial administration within the group. JLGs can be formed primarily consisting of tenant farmers and small farmers cultivating land without possessing proper title of their land / rural entrepreneurs engaged in non-farm activities.
A basic requirement for joint-liability security for Bank loans is that the farmers concerned, form themselves into groups of people who know and trust each other. These groups may vary in size from a minimum of 4 to a maximum of 10 farmers depending on the need and circumstances;
Each year the group members who want to borrow for seasonal production costs sign a contract in which they accept liability not only for their own individual loans, but also for the loans borrowed by other members of their group. Hence the term 'joint-liability'.
The loans are made by the bank to individual farmers or to the group collectively. The amounts borrowed by each person depend on his or her individual needs, subject to a maximum of certain prescribed amount in the policy (say Rs. 50,000) which can be borrowed with this form of security.
The JLGs should necessarily comprise the farmers or entrepreneurs (undertaking production of the same crops or group of crops or undertaking non-farm activities to ensure cohesive functioning and facilitate procurement of inputs, processing, marketing, etc.)
All the members of the JLG should be residing in the same village / compact area and not drawn from different / distant places.
Size of the JLG
The group should be formed preferably with 4 to 10 members (upto 20 members) to enable the group members to offer mutual guarantee.
Formation of JLGs
Banks may initially form JLGs by using their own staff wherever feasible. Banks may also engage business facilitators like NGOs and other individual rural volunteers to assist banks in promoting the concept and formation of groups. State Government Departments like Agriculture Department also could form JLGs of tenant farmers and small farmers not having clear land title. The JLGs of such eligible farmers can also serve as a conduit for technology transfer, facilitating common access to market information; for training and technology dissemination in activities like soil testing, training, health camps and assessing input requirements.
Banks can finance JLG by adopting any of the two models.
Model A – Financing Individuals in the Group: Model B – Financing the Group:
The JLG would prepare a credit plan for its individual members and an aggregate of that is submitted to the banks. Banks may evolve simple loan application for this purpose. The individual members of JLG would be eligible for bank loan after the bank verifies the individual members’ credentials.
Purposes of credit
The finance to JLG is expected to be a flexible credit product addressing the credit requirements of its members including crop production, consumption, marketing and other productive purposes. Banks may consider cash credit, short-term loan or term loan depending upon the purpose of loan.
NABARD has been popularizing the scheme and detailed guidelines for financing of JLGs has been issued to all banks during 2009. During the year ended 31 March 2011, 85766 JLGs were formed and an amount of Rs.65969.99 lakhs was disbursed as loan. Cumulatively, 141045 JLGs have been formed and Rs.114529.45 lakhs has been disbursed as on 31 March 2011.
Project on "Computer Munshi" - a self-sustaining mechanismto manage SHG account and MIS
Quality and regularity of book keeping is the aspect of linkage banking, which is most affected because of the widespread illiteracy amongst the poor SHG women. If ignored for a long time, this has the potential to endanger the sustainability of the Groups. Another related issue of almost equal importance is the MIS, which means passing on the relevant information about the functioning of the SHGs to the concerned stakeholders like SHPIs and banks. PRADAN, an NGO, which has promoted more than 4000 SHGs, very strongly felt that sustaining the groups would be a major problem if a proper accounting system and an stronger MIS and were not put in place urgently. They therefore came up with the idea of Computer Munshies. The idea involves identification of skilled rural youth for the task of higher order accounting by providing training as Computer Munshies (CM). The trained individuals would be equipped with a computer and software to serve 100 to 300 SHGs. The SHG level meeting transaction statement will be send to the CM after every meeting, which will be keyed in by the trained individual using the software which would generate outputs like trial balance, member savings and loan balances. The SHG promoter and the banker could also access data about SHGs from the CM on payment of a fee.
The software for the project has been developed by PRADAN. It captures all the essential data- financial and non-financial. The software also generates number of useful reports. The data could be aggregated at the cluster or block level to make assessment of the functioning of the groups in a specific geo-span. It also facilitates financial analysis, drawing a trial balance, balance sheet, portfolio analysis, member level impact - by capturing the base line data etc. The outputs generated could be useful to all related stakeholders including bankers, social intermediaries and the SHG themselves.
To test the idea, NABARD has sanctioned a grant assistance of Rs.6.10 lakh to PRADAN for establishment of 10 Computer Munshi Units in the states of Jharkhand and Orissa. The Agency set up 10 units in the 2 states and their services were availed by 1246 SHGs in Jharkhand and 254 SHGs in Orissa. An evaluation study conducted by the Orissa Regional Office revealed that this initiative served to provide timely and accurate information on SHGs to Banks, government agencies and other stakeholders; facilitated financial analysis; helped drawing of trial balances; educated SHG members on book-keeping and strengthened group dynamics due to the interactive nature of the process and the high level of transparency. It also helped monitor loan repayment, planning for the next linkage and resulted in faster credit linkages. PRADAN would measure the effectiveness of the idea and the commercial viability of the project, based on which the future strategy will be decided.
Post Office Linkage Programme
With the objective of examining the feasibility of utilising the vast network of post offices in rural areas for disbursing credit to the rural poor on agency basis, and to test the efficacy of the Department of Posts in providing micro finance services to rural clients, NABARD launched a pilot project on SHG Post Office Linkage Programme in 5 districts of Tamil Nadu in 2006 with an initial Revolving Fund Assistance (RFA) of Rs.100 lakh which was later increased to Rs.300 lakh. As on 30 June 2011, 2819 SHG accounts were opened in post offices and 1219 SHGs were given loans amounting to Rs.336.10 lakh.
In Meghalaya, the scheme was launched in 2007 and involved 10 post offices and 7 NGOs with 40 SHGs promoted.
Grain Banks and SHGs
The tribal population in some parts of the country is known to use the concept of Grain Banks (Grain Golas) for saving the grains during the harvesting seasons and using them to meet their consumption requirements during the lean / dry periods. They also use the arrangement for borrowing the grains for seed purposes at the time of sowing. in the past also, some of the state and central government interventions in these backward regions had attempted to create the infrastructure of Grain Banks. Currently, the need for evolving a participatory food security system for backward tribal regions is being actively debated
The strong emphasis on group savings in kind and borrowing in kind under the Grain Bank approach has significant similarities with the SHG Bank Linkage Programme; the difference being that the savings and loans are in kind. The issue, therefore, is how to facilitate monetization of the savings and loans in kind and integrate the traditional approaches into the monetized microFinance system. Such integration would enable the poor tribal population to access need based financial services and also address the issues of food and seed securities.
These considerations have led to the launch of the pilot project on Grain Banks. The project is to enable the poor to save in kind, raise resources against such savings, provide access to self managed, participate in food security systems and also provide access to seeds for sowing purpose in the times of distress. In the first phase the pilot project was implemented in 17 villages in Thaumul Rampur Block of Kalahandi district in Orissa state through Antoday -an experienced NGO. It involves promotion of 25 SHGs and formation of 3 Grain Banks. Apart from the savings in cash, monetization of the savings-in-kind, as also loans to SHGs against their stock of grains, would be considered by the Bank. Members would save and draw loans both in cash and / or kind, depending upon their convenience. 3-grain banks have been set up in Silet, Sikerguda and Maltipadar villages.29 SHGs have been promoted & grains totaling 963 Kgs (rice, paddy, ragi& small millet) have been saved by the groups. Kalahandi Anchalika Gramin Bank provided loan-aggregating Rs one lakh to the groups.
Encouraged by the successful establishment and maintenance of the Grain Banks by SHGs formed by tribal communities, NABARD extended the pilot project in the predominantly tribal areas of Chhattisgarh state for construction and establishment of 5 grain banks each in Mylibeda and Merkatola villages of Bastar and Kanker districts involving SHGs, which mainly belong to Adivasi communities.
Rural Volunteers as Book Writers
Low literacy levels of SHG members resulting in heavy dependence of SHGs on SHPIs for record keeping is one of the constraints in extending the linkage programme in resource poor areas. Keeping this in view, NABARD, based on interactions with banks and NGOs, has launched a pilot project for associating local rural volunteers as book writers for SHGs to improve the regularity/ accuracy in the maintenance of books of accounts, and to explore a possible evolution of MIS between SHGs and banks. A grant assistance of Rs.7.5 lakh has been sanctioned to cover honorarium to the book writers, cost of their training and the stationary required for book keeping of SHGs. The project is being implemented through 5 RRBs in three ( Gorakhpur , Jaunpur & Pratapgarh) and two districts (Samastipur & Munger) of Uttar Pradesh and Bihar , respectively.
Project on 'e-Grama'
With the aim of equipping and enabling villagers/ SHGs members access information, NABARD during 2005-06 has part funded establishment of 13 Village Information Centres (e-grama) through an NGO in Davanagare district of Karnataka. The technology integrated information networks cover various areas like weather conditions, crop inputs, product prices, land records and other useful information for the rural folk. Besides this, many add-on services like bookkeeping of SHGs, DTP, scanning, etc., are also envisaged to be provided. The NGO has facilitated setting up 50 centres including 13 with NABARD's assistance. Commercial banks and RRB are extending necessary credit support to entrepreneurs.
Financing Rythu Mithra Groups
Since 2003-04, Rythu Mithra Groups (RMGs) are being promoted by the Government of Andhra Pradesh to bring about a marked improvement in the lives of small, marginal and landless farmers through collective action. RMGs are expected to serve as a conduit for its members for technology transfer, facilitate access to market information and market, assist in carrying out activities like soil testing, training, health camps, assess input requirements, etc. A pilot project for financing RMGs by banks was launched in 13 districts during 2004-05. Encouraged by the success, the project was extended to all the districts of the states. During the year 12468 RMGs have been extended loan amount of Rs.131.77 crore by 20 commercial banks, 16 RRBs and 9 DCCBs participating in the project.
Social Security System for SHG Members
Another innovative project which has been approved by NABARD entails creation of community based social security system for members of SHGs in rural areas for improving their livelihood and securing them from uncertainties of life. The project components include provision of a package of health insurance, life insurance etc for SHG households by paying premium generated through discounts offered by service providers like grocery shop, cloth merchant etc in the project area for SHG members in rural areas. It is being implemented through an NGO-Organization for Awareness of Integrated Social Security (OASIS) in two villages covering 500 poor households from Betul district of Madhya Pradesh state, involving a grant assistance of Rs.8 lakh. Self Employed Groups (SEGs) from SHGs would be formed by the NGO to provide various services involving selling of products at a discount.