According to World Bank, 371 million people in India live in abject poverty. About 70 percent of the population lives in India's six lakhs villages. Majority of them live on agriculture produce by tilling lands and are engaged in petty business as micro entrepreneurs. Nearly 60 percent of the rural households do not have electricity and live without any basic amenities.
A major cause of poverty among India's rural people, both iniduals and communities, is lack of access to productive assets and financial services and social services. Micro-enterprise development, the only mechanism to enable the rural poor to generate income and improve their living conditions, attracted government attention only recently. As a result, micro-finance gained growing recognition as an effective tool in improving the quality of life of the rural poor.
This model of SHGs (Self Help Groups) bank linkage attracted attention as a possible way of delivery microfinance services to the poor. NABARD estimates that there are 2.2 million SHGs in India, representating 33 million members, that have taken loans from banks under its linkage program. This does not include SHGs that have not borrowed.
In India, the micro finance movement has almost assumed the shape of an industry, embracing thousands of NGOs/MFIs, community-based self-help groups and their federations, co-operatives in their varied forms, credit unions, public and private banks. According to SIDBI, during the last decade, the sector has witnessed a sharp growth with the emergence of a number of Micro Finance Institutions (MFIs) that are providing financial and non-financial support to the poor in an effort to lift them out of poverty. The MFI channel of credit delivery, coupled with the national level programme of SHG-Bank Linkage, today, reaches out to millions of poor across the country.
However, SHGs face problems in dealing with banks. In the midst of rapid upscaling of the SHG linkage, several groups and NGOs report denial of loans or delay in dealing with their proposals. The initial loan volumes are low. Often the banks require the groups to place all their savings with the bank, leaving little scope for internal lending of member's savings. The repeated visits, documentation requirements, lack of time on the part of branch staff to visit the groups in their villages and the lack of continuity of branch staff add to the woes of the groups.
The microcredit era that began in the 1970s quickly lost its momentum, to be replaced by a 'financial systems' approach. While microcredit achieved a great deal, especially in urban and semi-urban areas and with entrepreneurial families, its efforts in delivering financial services in the rural areas have been dismal.
Unfriendly attitude and middlemen
A classic example of how our rural banks works is given below. Periodical review meetings with the farmers are a regular feature in Indian Villages. One such meet was organized early November this year, in Chitrakoot in Bundelkhand region in Uttar Pradesh. The meet was called Rabi Ghoshti (Rabi Meet). It was attended by a large number of farmers. The meeting was held in the presence of Agriculture Production Commissioner.
Several issues highlighting the problems faced by the farmers in the region were discussed. Bundelkhand is a traditionally drought-hit area and has scant rainfall. Certain NGOs are active in the area but nothing much could be done. More often than not, farmers have to turn towards banks for funds.
The meet noted with concern the farmers' woes and the difficulties they face with the banks. There was a general consensus that either the banks are not friendly and ask for different documents or collaterals/securities throwing all norms to the dustbin or middlemen are active claiming a share from the loans granted. Numerous farmers even complained that many bank officials harassed them by wanting a commission on the loans. Serious monitoring of the working of our rural banks is almost not existent. Banks must find the time to analyse the reasons for these problems and design solutions that could work seamlessly in the field.
In India where microfinance movement is all set to attain the status of an industry, the role of MFIs must be streamlined. It is satisfying to note that numerous NGOs engaged in improving the lot of the rural poor have produced results which can easily work as model for our MFIs and rural development agencies.
It must not be forgotten that if India has to achieve the desired economic growth, the role of 'micro-finance' for the whopping rural population can not be undermined and no a non-sense approach is the need of the hour.
Read more about Amazon best seller in kerala here: https://www.groxp.com/success-story-amazon-best-seller-in-kerala/
A major cause of poverty among India's rural people, both iniduals and communities, is lack of access to productive assets and financial services and social services. Micro-enterprise development, the only mechanism to enable the rural poor to generate income and improve their living conditions, attracted government attention only recently. As a result, micro-finance gained growing recognition as an effective tool in improving the quality of life of the rural poor.
This model of SHGs (Self Help Groups) bank linkage attracted attention as a possible way of delivery microfinance services to the poor. NABARD estimates that there are 2.2 million SHGs in India, representating 33 million members, that have taken loans from banks under its linkage program. This does not include SHGs that have not borrowed.
In India, the micro finance movement has almost assumed the shape of an industry, embracing thousands of NGOs/MFIs, community-based self-help groups and their federations, co-operatives in their varied forms, credit unions, public and private banks. According to SIDBI, during the last decade, the sector has witnessed a sharp growth with the emergence of a number of Micro Finance Institutions (MFIs) that are providing financial and non-financial support to the poor in an effort to lift them out of poverty. The MFI channel of credit delivery, coupled with the national level programme of SHG-Bank Linkage, today, reaches out to millions of poor across the country.
However, SHGs face problems in dealing with banks. In the midst of rapid upscaling of the SHG linkage, several groups and NGOs report denial of loans or delay in dealing with their proposals. The initial loan volumes are low. Often the banks require the groups to place all their savings with the bank, leaving little scope for internal lending of member's savings. The repeated visits, documentation requirements, lack of time on the part of branch staff to visit the groups in their villages and the lack of continuity of branch staff add to the woes of the groups.
The microcredit era that began in the 1970s quickly lost its momentum, to be replaced by a 'financial systems' approach. While microcredit achieved a great deal, especially in urban and semi-urban areas and with entrepreneurial families, its efforts in delivering financial services in the rural areas have been dismal.
Unfriendly attitude and middlemen
A classic example of how our rural banks works is given below. Periodical review meetings with the farmers are a regular feature in Indian Villages. One such meet was organized early November this year, in Chitrakoot in Bundelkhand region in Uttar Pradesh. The meet was called Rabi Ghoshti (Rabi Meet). It was attended by a large number of farmers. The meeting was held in the presence of Agriculture Production Commissioner.
Several issues highlighting the problems faced by the farmers in the region were discussed. Bundelkhand is a traditionally drought-hit area and has scant rainfall. Certain NGOs are active in the area but nothing much could be done. More often than not, farmers have to turn towards banks for funds.
The meet noted with concern the farmers' woes and the difficulties they face with the banks. There was a general consensus that either the banks are not friendly and ask for different documents or collaterals/securities throwing all norms to the dustbin or middlemen are active claiming a share from the loans granted. Numerous farmers even complained that many bank officials harassed them by wanting a commission on the loans. Serious monitoring of the working of our rural banks is almost not existent. Banks must find the time to analyse the reasons for these problems and design solutions that could work seamlessly in the field.
In India where microfinance movement is all set to attain the status of an industry, the role of MFIs must be streamlined. It is satisfying to note that numerous NGOs engaged in improving the lot of the rural poor have produced results which can easily work as model for our MFIs and rural development agencies.
It must not be forgotten that if India has to achieve the desired economic growth, the role of 'micro-finance' for the whopping rural population can not be undermined and no a non-sense approach is the need of the hour.
Read more about Amazon best seller in kerala here: https://www.groxp.com/success-story-amazon-best-seller-in-kerala/
No comments:
Post a Comment