NIRDPR evaluates self-help group-bank linkage program

Hyderabad: The National Institute of Rural Development and Panchayati Raj (NIRDPR), conducted a research study on ‘An Evaluation of the Self-Help Group-Bank Linkage Programme (SHG-BLP) with special reference to its Loan Portfolio and Asset Quality’ in Three States.

The primary objective of the study was to find the main reasons behind the growing level of Non-Performing Assets (NPAs) in the SHG-BLP.

Based on the responses received from members of the SHGs, the study found that poor economic conditions, non-cooperation/non-repayment by other members of the SHG, expenses towards marriages/ social ceremonies and medical emergency, among others, and expectations of loan waiver from the government, in that order, were the main factors behind the unhealthy growth of NPAs in the three sample States.

Speaking about the importance of such a study, Dr. WR Reddy IAS, Director General, NIRDPR, said, “Last mile connectivity in financial inclusion gained momentum in India when National Bank for Agriculture and Rural Development (NABARD) pioneered SHG – BLP in 1992. Started as a bank outreach programme, SHG-BLP transcended itself into a holistic programme for building human, social, economic, and of late, technological capital in rural India. As more than a quarter-century has been passed after its launch, performance of the programme needs a review, hence the study.”

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Commissioned by NABARD, the NIRDPR team covered a sample of 663 individual members of SHGs from Andhra Pradesh, Madhya Pradesh and Odisha. In addition, the team elicited responses from 58 stakeholders (such as credit officers in banks, line department officials and office-bearers of Self-Help Promoting Institutions in the sample states) in order to obtain a comprehensive view of the asset quality of the SHG-BLP.

Speaking about the key findings of the study, Dr. M. Srikanth, Associate Professor and Head, Centre for Financial Inclusion and Entrepreneurship, NIRDPR, said, “Though the SHG-BLP was witnessing lower loan defaults by its members in its earlier years, bad loans have been mounting up in the recent past due to various reasons. NPAs, a cause for great concern for the banks in India, in the SHG-BLP peaked to a record high of 7.4 per cent in the FY 2014-15 and later reduced to 5.19 per cent as on March 31, 2019. As very few studies have been undertaken on NPAs of SHG-BLP in India, the study gained significance.”

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The study assessed various aspects of credit linkage, income-generating capacity of the SHG members, asset quality of loan portfolio of the SHG-BLP, both in quantitative and qualitative terms.

Apart from covering economic indicators like income, expenses, savings, loans and investments, the study examined end uses of loans, various factors behind the growth of NPAs in the SHG-BLP, age profile of bad loans, credit counselling and observance of Pancha Sutras (regular meetings, regular savings, regular internal lending, regular repayments and regular book-keeping) by Self-Help Groups for their long-term sustainability.

SHG-BLP, a brainchild of NABARD, is regarded as the largest microfinance programme in the world today. The programme has made an indelible mark on the Indian financial landscape by extending collateral-free loans to Rs. 50.77 lakh SHGs to the extent of Rs. 87,098 crore as on March 31, 2019.

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