Women members of Self-Help Groups should start micro enterprises to earn more, says K.G. Karmakar
The loan repayment rate of Self-Help Groups is falling, said K.G. Karmakar, Managing Director, NABARD, on Friday.
“The repayment by SHGs is not 100 per cent. It stood at 88 per cent the year before last and is falling further. Two reasons were attributed to it. Firstly, bank managers are not in touch with the SHGs and the loan members are not attending the monthly meetings. Bank managers should visit the borrowers at least once in three or six months to find out their problems,” he said.
Women members of Self-Help Groups should start micro enterprises to earn more, he said, delivering the special address at the national seminar on ‘Status and sustainability of microfinance in India,' organised by the Department of Economics, Meenakshi College for Women, and State Bank of India.
He said that about 85 per cent of SHGs were run by women and were successful as compared to mixed SHGs.
The women SHGs were disciplined, attended monthly meetings, repaid their loans promptly, maintained the savings rate and saved money for their family. Some of the SHGs run by men were also successful.
According to him, women members used the money to repay costly debts of money lenders, pay tuition fee, repair houses and purchase plots. They also purchased gold and hedged it. The male members used the excess money for temporary pleasure.
Urging the members to start micro enterprises, he said: “What these women members lack is marketing skill. Much has to be done on micro enterprises models and we have to train NGOs first.”
Talking about the sustainability of SHGs, he said that the dropout rate was quite high as the new member had to wait for at least six months to get credit and banks were not giving repeat credit.
Regional imbalances had to be removed as SHGs were concentrated mainly in southern states.
Justin Oliver, Executive Director, Centre for Micro Finance, IFMR, Chennai, in his keynote address said that to have positive impact, the poor should have access to complete range of financial services instead of credit.
Quoting a study, he said that Micro finance institutions had grown impressively over the last 10 years. This clearly indicated that people wanted to get credit. Mere access to credit increased new ventures by 30 per cent. Further surveys were needed to find out the results of micro finance.
J. Chandrasekaran, Chief General Manager, SBI Chennai Circle, said that it might be a possible solution to repeat cycles of credit to SHGs.
Keywords: Self-Help Groups, loan repayment, NABARD
Comments:
Sooner or later, loan default rate is bound to get higher, as the banks and many State Governments have given too much importance to the loan portfolio of the SHGs. In reality one borrower borrows from the SHG or from another Micro Finance company to repay his/her old loans. It is a vicious circle. Earlier moneylenders benefited and now it is the Micro Fiance companies.
Whatever commitments have been made by the state govts to release of subsidy, interest concession should be kept up on schdule before some political parties take advantage in misleading the groups which will have adverse impact on recovery.
Loan default under SHG Finance is directly attributed to indisciplined financing resorted by MFIs violating all the all the rules of good credit culture. MFIs are found to be financing SHGs before they complete their gestation period of 6 months and or get rated. Moreover, despite knowing that members of SHGs hve availed loans from SHGs, they are directly financed. Such situation will naturally result into loan defaul for banks in the immediate future and for MFIs too in long duration.