Amarjeet Sinha, DK Singh & NN Sinha
A ccess to capital for growing enterprises and for Self Help Groups in particular is one of the biggest challenges. The second challenge is to adopt innovation in their products, to bring design in their products, and to follow quality standards in their products. Once the members of the Self Help Groups start aspiring for these elements of business concepts they would start growing at a pace that would be visible in the time to come. It would also require to build partnership with institutions which are outside the traditional institutional mechanism of the Ministry of Rural Development.
A win-win situation
Self Help Groups are eligible for coverage under CGFMU. If the sanctioned amount is between Rs. 10 lakh and Rs. 20 lakh, the guarantee fee for such loans is 0.25 per cent per annum for the first year and 0.5 per cent per year in subsequent year. And these are charged on the outstanding balance at the time of sanction at pro-rata basis and thereafter on annual basis for renewal. Many people feel that the guarantee fee may be rationalised.
One probable solution could be to provide a mechanism to take care of the guarantee fee commission, either in full or in part and such scheme can be conceptualised in lieu of interest subversion which can be a win-win situation. Everybody is looking for a low cost lending window for state to take care needs of Self Help Groups but there are evolving challenges to maintain asset quality and to keep loan books growth intact from the perspective of NBFC. There is a need to strike balance between facilitating credit growth in this segment and quality of portfolio by different stakeholders.
Harness social capital
It is clear from the challenges listed above, none of them is insurmountable. Enterprises need careful scientific planning, assessment of resources and market potential. FPOs too have challenges in scaling up for similar reasons. State intervention in buying products is not e solution. Far from it. Public subsidies are not the way forward. Professional support for well-trained Technical, Finance and Marketing Managers is the critical missing piece especially with the compliance requirements for Producer Companies being very high in the Companies Act. Demystifying governance and audit processes and facilitating the credit linkages will unleash the power of women’s collectives.
- Doorstep delivery of financial services.
- Promoting a less cash ecosystem within SHGs.
- Promote culture of digital payments in rural areas
The challenge of improving Female Work Participation Rates hinges on our ability to quickly scale up opportunities for livelihood diversification for the 83.6 million Members in rural areas and over 6 million in the urban Livelihood Mission. The social capital is waiting to be harnessed for multiple livelihoods as the pathway to higher incomes. While it is true that collectives of women take 3-5 years to mature, it is also true that a large number of collectives are waiting to leverage the credit from formal institutions to diversify livelihoods on scale.
With a Non-Performing Assets of barely two and a half per cent, we have to move from distrust to trust. Bank Sakhis and Banking Correspondents form the SHGs are building a relationship with formal financial institutions.
Through processes like the Community Based Recovery Mechanism (CBRM), Branch Managers in West Bengal and Bihar have significantly scaled up lending directly to SHGs instead of lending through Micro Finance Institutions (MFIs). While MFIs meet an important consumption loan need of poor households, the rate at which that credit is accessed is not good for economic activity. It is difficult to compete in the market with MFI credit at anywhere between 20-30 per cent if other units are accessing credit ay 11-14%! Banks find it convenient and safe to lend through MFIs as monitoring return at the last mile becomes easier. However, for businesses to grow, we need direct funding.
On-lending institutions
It is interesting to look at Streenidhi in erstwhile Andhra Pradesh, playing the role of an on-lending institution, registered as a Cooperative institution of the SHG State Apex Body. Banks have trust in on lending as recoveries are timely with little over dues. With use of technology and digitisation, Streenidhi is able to sanction consumption loans in 24 hours, an important factor behind its success. Efforts to replicate the on -lending institution is being attempted in other states as well. The Girish Chaturvedi Committee that examined the issue, recommended an on-lending institution under the Cooperative Act. Odisha has an MoU with the State Bank of India with a State Guarantee to accept the State Rural Livelihood Mission as an on-lending institution. In Tamil Nadu, Banks are comfortable in lending directly to Cluster Level SHG Federations. In Kerala a large number of Joint Liability Groups (JLGs) have been formed of Kudumbshree women as SHG is not a legal entity for formal credit lending by Banks; JLGs are.
Women’s Work Participation
The women’s collective movement under the Livelihood Mission is an opportunity that will determine the trajectory, speed and quality of inclusive growth in India. Women’s Work Participation Rates is the greatest challenge before the country today in growing faster. The lesson from across the developed world and the journey of the East Asian Nations and China, indicate the positive consequences of higher Women’s Work Participation Rates on the growth of GDP. The five trillion dollar dream will be fulfilled through the facilitation of such an inclusive pathway to progress.
(Amarjeet Sinha is former Secretary, Ministry of Rural Development, DK Singh is Secretary General of the NHRC and NN Sinha is Secretary in the Ministry of Rural Development)
