Consentia on Multidisciplinary Research

Linkage of Banks through SHG as A Tool for Women Empowerment in India

INTRODUCTION

In the changed context of rural development, there is more emphasis on sustainable development and empowerment of women in India which demand micro credit. Empower the women in social, political, economical and legal aspects became necessary to convert the idle society into self-sustainable society.  Women empowerment can be achieved through political power, education, employment and SHG.  Among these, SHG dominate and fruitful success of the women empowerment. SHG mainly concerned with the enlistment of the women in the society through, social, economical aspects. SHG not only mobilize micro finance and provide micro credit to the needed members but also it provides self employment training, awareness programme, promote the leadership qualities and confidential life to its members.

In India, women Empowerment is a buzz word to-day. As a nation, India is committed to the empowerment of women. Though women is regarded as “the unsung heroine who works from dawn to dusk”, yet it is unfortunate that even the ignorant and worthless men had been enjoying superiority over women which they do not deserve and ought not to have. So, since Independence, Government has made concerted efforts towards removing various biases.[1]

                                                     OBJECTIVES

  • To know the relationship between micro-financing and women empowerment.
  • To study about the self-help group bank linkage programme.
  • To know about the impact of SHG bank linkage programme.

                                                     RESEARCH METHODOLOGY

This research is applied, descriptive and analytical in nature. Secondary and electronic resources have been largely used to gather information and data about the topic.

 

Books and other reference as guided by Faculty have been primarily helpful in giving this project a firm structure. Websites, dictionaries and articles have also been referred.

Footnotes have been provided wherever needed, to acknowledge the source.

                                     SOURCES OF DATA

The source from which data is collected is secondary consisting of books, journals and different websites.

                                          REVIEW OF LITERAURE

The role of banks in women empowerment has been defined by many scholars by different ways.

S.Sarumathi and Dr.K.Mohan have discussed the role of micro-financing in their article “Role of Micro Finance in Women’s Empowerment”, Journal of Management and Science. In which they have stated that “The role played by Microfinance in women’s empowerment are considered into three dimensions namely psychological, social and economical.”

Sabharwal Gita (2003) in her article“From Margin to the Mainstream: Micro- finance Programmes and Women Empowerment: The Bangladesh Experience” has stated that “The Scheme of Micro-financing through SHGs create empowerment promoting conditions for women to move from positions of marginalisation within household decision making process and exclusion within community, to one of greater centrality, inclusion of voice”.

 CHAPTER-1

WOMEN EMPOWERMENT AND MICRO FINANCING

In India, women Empowerment is a buzz word to-day. As a nation, India is committed to the empowerment of women. Though women is regarded as “the unsung heroine who works from dawn to dusk”, yet it is unfortunate that even the ignorant and worthless men had been enjoying superiority over women which they do not deserve and ought not to have. So, since Independence, Government has made concerted efforts towards removing various biases.[2]

WOMEN EMPOWERMENT

Empowerment is not essentially political alone; it is a process having personal, economic, social and political dimensions with personal empowerment being the core of the empowerment process. In fact political empowerment will not succeed in the absence of economic empowerment. The Scheme of Micro-financing through SHGs create empowerment promoting conditions for women to move from positions of marginalisation within household decision making process and exclusion within community, to one of greater centrality, inclusion of voice. [3]

MICRO FINANCING

The Social processes of Micro financing programmes strengthens women’s self esteem and self worth, instil a greater sense of awareness of social and political issues leading to increased mobility and reduced traditional seclusion of women. Most importantly micro-finance programmes enable women to contribute to the household economy, increasing their intra-household bargaining power. Thus, micro financing through Self-help groups has transferred the real economic power in the hands of women and has considerably reduced their dependence on men. But the lack of education often comes in the way and many a times they had to seek help from their husbands or any other educated man/ woman for day-to-day work. The political as well as economic empowerment will not succeed in the absence of women education in skills and vocations they require the most. The Governments in developing countries therefore must take effective steps to enroll the members of SHGs in the Schemes of open schooling or any other distance mode to impart education. Although it is also true that economic empowerment alone does not always lead to reversal in gender relationship.[4]

Microfinance is the provision of financial services to low-income clients, including consumers and the self-employed, who traditionally lack access to banking and related services. Microcredit, or microfinance, is banking the unbankables, bringing credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral. “In general, banks are for people with money, not for people without.” (Gert van Maanen, Microcredit: Sound Business or Development Instrument, Oikocredit, 2004) is based on the premise that the poor have skills which remain unutilized or underutilized. Microcredit fits best to those with entrepreneurial capability and possibility. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.

WOMEN AND MICRO FINANCING

The main aim of microfinance is to empower women. Women make up a large proportion of microfinance beneficiaries. Traditionally, women (especially those in underdeveloped countries) have been unable to readily participate in economic activity. Microfinance provides women with the financial backing they need to start business ventures and actively participate in the economy. It gives them confidence, improves their status and makes them more active in decision-making, thus encouraging gender equality. According to CGAP, long-standing MFIs even report a decline in violence towards women since the inception of microfinance. The most of the microcredit institutions and agencies all over the world focuses on women in developing countries. Observations and experience shows that women are a small credit risk, repaying their loans and tend more often to benefit the whole family. In another aspect it´s also viewed as a method giving the women more status in a socioeconomic way and changing the current conservative relationship between gender and class when women are able to provide income to the household.

 There are many reasons why women have become the primary target of microfinance services.

A recent World Bank report confirms that societies that discriminate on the basis of gender pay the cost of greater poverty, slower economic growth, weaker governance, and a lower living standard for all people. At a macro level, it is because 70 percent of the world’s poor are women. Women have a higher unemployment rate than men in virtually every country and make up the majority of the informal sector of most economies. They constitute the bulk of those who need microfinance services. Giving women access to microcredit loans therefore generates a multiplier effect that increases the impact of a microfinance institution’s activities, benefiting multiple generations. NABARD (2005) explains that the Self Help Group is a group with “an average size of about 15 people from a homogenous class. They come together for addressing their common problems. They are encouraged to make voluntary thrift on a regular basis. They use this pooled resource to make small interest bearing loans to their members. The process helps them imbibe the essentials of financial intermediation including prioritization of needs, setting terms and conditions and accounts keeping. This gradually builds financial discipline in all of them. They also learn to handle resources of a size that is much beyond the individual capacities of any of them. The SHG members begin to appreciate that resources are limited and have a cost. Once the groups show this mature financial behavior, banks are encouraged to make loans to the SHG in certain multiples of the accumulated savings of the SHG. The bank loans are given without any collateral and at market interest rates. The groups continue to decide the terms of loans to their own members. Since the groups’ own accumulated savings are part and parcel of the aggregate loans made by the groups to their members, peer pressure ensures timely repayments.” In this paper the role played by Microfinance in women’s empowerment are considered into three dimensions namely psychological, social and economical.[5]

Micro Finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro finance scene is dominated by Self Help Groups (SHGs) – Bank Linkage Programme, aimed at providing a cost effective mechanism for providing financial services to the “unreached poor”. Based on the philosophy of peer pressure and group savings as collateral substitute , the SHG programme has been successful in not only  in meeting peculiar needs of the rural poor, but also in strengthening collective self-help capacities of the poor at the local level, leading to their empowerment. [6]

 CHAPTER- 2

THE SELF-HELP GROUP BANK LINKAGE PROGRAMME

 NABARD (2005) explains that the Self Help Group is a group with “an average size of about 15 people from a homogenous class. They come together for addressing their common problems. They are encouraged to make voluntary thrift on a regular basis. They use this pooled resource to make small interest bearing loans to their members. The process helps them imbibe the essentials of financial intermediation including prioritization of needs, setting terms and conditions and accounts keeping. This gradually builds financial discipline in all of them. They also learn to handle resources of a size that is much beyond the individual capacities of any of them. The SHG members begin to appreciate that resources are limited and have a cost. Once the groups show this mature financial behavior, banks are encouraged to make loans to the SHG in certain multiples of the accumulated savings of the SHG. The bank loans are given without any collateral and at market interest rates. The groups continue to decide the terms of loans to their own members. Since the groups’ own accumulated savings are part and parcel of the aggregate loans made by the groups to their members, peer pressure ensures timely repayments.” The SHG bank linkage programme links a SHG group to banks, where the banks provide a loan to a mature group. The group places its savings in the group deposit account in the bank (at about 12% per annum), using its group savings and group guarantee as a collateral. NABARD provides subsidized refinancing support to banks to encourage such lending. However, the demand for such refinancing support to banks has fallen, as SHG lending is more profitable and has lower default rates (less than 1% as compared to 11-12% of their regular portfolios) (Base and Srivastava, 2005). The NABARD SHG bank linkage programme has achieved only 1.4% of the potential demand, reaching out to seven million households with an average credit of Rs. 2,000 a household, as against the need to reach 100 million with Rs. 10,000 per household. The microfinance institutions (MFIs) on the other hand, have been able to meet only 0.25% of the demand (Mahajan, 2002). India has 37% of the world’s population earning less than $1 a day, of which 60% are women (Human Development Report, 2003). The Government of India, National Policy for the Empowerment of Women (2001), declared various measures aimed towards achieving greater equality between men and women. In 1993, the Indian government ratified the International Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW). The government’s poverty alleviation programmes such as Swaranajayanti Grama Swarojgar Yojna (SGSY) and the Rashtriya Mahila Kosh implement their programmers through microfinance interventions of NABARD’s Self Help Group bank linkage programme. Apart from the large numbers of households that this programme services, the following features make the NABARD SHG model unique:

  1. The distinctive process of formation of the SHGs and the freedom that they have in deciding the terms of their lending and borrowings within the group, once they receive the loan.
  2. The use of the existing and extensive infrastructure of rural bank branches for disbursing microfinance services.
  3. Three distinctive ways of linking the SHGs to the banks, through NGOs, commercial and rural banks, with the NGOs playing a major role in promotion of the SHGs and their training.
  4. The government’s poverty alleviation programmes such as Swaranajayanti Grama Swarojgar Yojna (SGSY) and the Rashtriya Mahila Kosh implement their programmes through microfinance interventions.

Using higher rates of savings, borrowings, timely repayment of credit, promptness in attending SHG meetings and decisions by individual members as indicators of enhanced credit access, income generation and socio-economic empowerment Over the past decades, subsidized rural banking in India, despite its large network of rural bank branches has failed to reach the poorer sections of the society. By the early 1980s, the All India Debt and Investment Survey (Government of India, 1981) showed that the share of non-institutional agencies (informal lenders) in outstanding cash dues of the rural households was 38%. The main limiting factor in reaching formal finance to this group was the high transaction costs and lack of appropriate credit and saving products. A study conducted by NABARD in the mid-eighties revealed that financial services required by poor households are: safe-keeping of small surpluses in the form of thrift; access to consumption loans to meet emergency needs and financial services and products that did not require collateral (MYRADA, 2002). The Self Help Group Bank Linkage model evolved from the pioneering efforts of NABARD and two NGOs, MYRADA and PRADHAN.88 starting with 500 groups in the early 1990s, the cumulative numbers of SHGs that have been financed have increased to 1,618,456, by March 2005. The expansion of the SHG bank linkage programme has seen acceleration in the past few years. It has reached an estimated 121.5 million people and disbursed more than Rs. 68 billion in cumulative bank loans up to March 2005, using a network of 41,082 bank branches and 4,323 NGOs.[7]

 CHAPTER 3

IMPACT OF THE SHG-BANK LINKAGE PROGRAMME

  • Microfinance has reduced the incidence of poverty through increase in income, enabled the poor to build assets and thereby reduce their vulnerability.
  • It has enabled household that have access to it to spend more on education than non-client households. Families participating in the programme have reported better school attendance and lower dropout rates.
  • It has empowered women by enhancing their contribution to household income, increasing the value of their assets and generally by giving them better control over decisions that affect lives.
  • It has contributed to a reduced dependency on informal money lenders and other non-institutional sources.
  • It has facilitated significant research into the provision of financial services for the poor and helped in building ‘capacity’ at the SHG level.
  • Finally it has offered space for different stakeholders to innovate, learn and replicate. As a result, some NGOs have added micro-insurance products to their portfolios, a couple of federations have experimented with undertaking livelihood activities and grain banks have been successfully built into the SHG model in the eastern region. SHGs in some areas have employed local accountants for keeping their books and IT applications are now being explored by almost all for better MIS, accounting and internal controls.[8]

 CONCLUSION

The study suggests that a lot needs to change to make women truly empowered. It is difficult to believe that a minimalist SHGs programme would have sustainable impact on the empowerment of women. SHGs, where a majority of groups are linked with the help of NGOs that provide support in financial services and specialized training, have a greater ability to make a positive impact on women empowerment. If women empowerment is to be pursued as a serious objective by SHG programmes in particular and the larger microfinance community in general, greater emphasis needs to be placed on training, education and creating awareness in order to achieve a larger and more lasting empowerment. Rural women play a significant role in the domestic and socio-economic life of the society and therefore, holistic national development is not possible without developing this segment of the society. The review of studies related to credit accessibility to women simply demonstrates that the direct access to institutional credit to rural women is very limited and suffers from the sex bias in extending it to them. However, women from the non-farm sector have better access to banks than the women working in the farm sector. Even, male members of women borrowers have greater influence on accessibility to credit utilization and its repayment.

The SHG’s became a regular component of the Indian financial system since 1996. The SHG’s are small, informal and homogenous groups. These groups have proved as cyclic agents of development in both the rural and urban areas. The SHG’s after being formed started collecting a fixed amount of thrift from each member regularly. After accumulating a reasonable amount of resources, the group starts lending to its members for pretty consumption needs. If the bank is satisfied with the group in terms of (i) genuineness of demand for credit; (ii) credit handling capacity of the members; (iii) repayment behaviour within the groups; and (iv) the accounting system and maintenance of the records, it extends a term loan of smaller amount to the group.

Micro-finance interventions through SHGs programmes are well-recognized world over as an effective tool for poverty alleviation and improving socioeconomic status of rural poor in India too, micro-finance is making headway in its effort for reducing poverty and empowering rural women. Micro-finance through the network of cooperatives, commercial banks, regional rural banks, NABARD and NGO’s has been largely a supply driven recent approach.

                                                REFERENCES

 

WEBLIOGRAPHY

[1] “SELF-HELP GROUPS IN INDIA – A CATALYST FOR WOMEN ECONOMIC EMPOWERMENT AND POVERTY ERADICATION” Prof. ANUPPALLE, R. REDDY , 33EME CONFERENCE MONDIALE DU CIAS, TOURS (FRANCE) 30 JUIN – 4 JUILLET 2008

[2] “SELF-HELP GROUPS IN INDIA – A CATALYST FOR WOMEN ECONOMIC EMPOWERMENT AND POVERTY ERADICATION” Prof. ANUPPALLE, R. REDDY , 33EME CONFERENCE MONDIALE DU CIAS, TOURS (FRANCE) 30 JUIN – 4 JUILLET 2008

[3] Sabharwal, Gita (2003) “From Margin to the Mainstream: Micro- finance Programmes nd Women

Empowerment: The Bangladesh Experience” http://www.gdre.org

[4] Ibid at 2

[5] S.Sarumathi and Dr.K.Mohan, “Role of Micro Finance in Women’s Empowerment”, Journal of Management

and Science, Vol. 1, No.1, Sep 2011

[6] Women Empowerment Through Micro Finance: A Boon forDevelopment, Tiyas Biswas

[7] SHG bank linkage programme as a vaccine for Women Empowerment in India, Sarita Chaudhary IIMT College of management Greater Noida, (U.P.)

[8] Ibid at 6

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