Credit asymmetry

Bihar lags behind in credit funds and bank credit linkages

Looking for loans: Self-help groups at work.

At a time when the Union Cabinet has cleared a proposal to sanction loans to women self-help groups (SHGs) at the same interest as charged on farm loans, Bihar, which has been experiencing a silent SHG revolution for some time now, is suffering from disproportionate credit disbursement and weak bank credit linkages. The Cabinet has approved seven per cent interest on SHG loans.

This lopsided focus reportedly is mostly due to credit disbursement remaining confined to the ‘usual gang of four States’ — Andhra Pradesh, Tamil Nadu, Karnataka and Kerala as they received a whopping 80 per cent of this SHG credit. On the other hand, Bihar trails behind with a mere 2.5 per cent share.

“I would rank the States in the following order: Andhra Pradesh, Kerala, Tamil Nadu, and Bihar. Bihar is catching up. The problem is bank linkages are weak. They (give out) loans worth nearly Rs. 17,000 crore annually, however 80 per cent (of it) goes to these four States,” Jairam Ramesh, Union Rural Development Minister told

The Hindu .

“While SHGs have taken off, bank linkages are weak and need to be worked on,” acknowledged Mr. Ramesh, reiterating that “the real success is in Bihar”.

Mr. Ramesh had recently written to the Union Finance Minister recommending that all banks should prepare State-wise SHG-bank linkage credit action plan keeping in mind the credit requirements for SHGs in the respective States. Documents accessed by The Hindu reveal that Bihar requires Rs. 1,100 crore credit disbursement — almost four times its current share.

Currently, there are nearly 25 lakh women SHGs in the country, with nearly three crore members and over the next five years, the number is expected to rise to seven crore.

State-wise credit disbursement figures reveal that there has been a continuous uneven focus with Andhra Pradesh leading the race receiving 51 per cent, Tamil Nadu 12 per cent, Karnataka 10 per cent and Kerala five per cent of the total credit available.

Till December 2012, Jeevika or Bihar Rural Livelihood Project, aided by the World Bank, facilitated nearly 486,655 poor households to be mobilised into 42,680 SHGs constituted of and run by women. These SHGs manage their own funds worth around Rs. 20 crore, and have leveraged around Rs. 75 crore from commercial banks. Jeevika is now implementing the task of forming 10 lakh SHGs in Bihar under the Centre’s new Aajeevika scheme that replaced the Swarnajayanti Gram Swarozgar Yojana.