While commercial banks waive off loans to stay healthy, the women-led world’s largest microfinance operation thrives on near 100% repayment, for decades
The Economic Survey 2022-2023, presented by the Union finance minister to Parliament January 31, has a special mention of India’s little-known but high-impact banking operation: the women-led self-help groups (SHG) disbursing billions of rupees every year.
India boasts of some 12 million SHGs, of which 88 per cent are all-women-member ones. These groups usually consist of 20-25 members, mostly residents of villages. In 1992, these groups were linked to banks for disbursal of small loans — called SHG Bank Linkage Project, SHG-BLP — for taking up livelihood options, like livestock rearing or setting up a tailoring unit.
By 2022, these groups operate a financing operation that is regarded as the world’s largest microfinance project. According to data cited in the Economic Survey 2022-2023, SHG-BLP covers 142 million families with saving deposits of Rs 47,240 crore.
“The number of SHGs credit linked has grown at a CAGR of 10.8 per cent during the last ten years (FY13 to FY22), while credit disbursement per SHG has grown at a CAGR of 5.7 per cent during the same period,” notes the Economic Survey 2022-2023.
Through the Economic Survey 2022-2023 report, it has been mentioned several times how India’s commercial banks have healthy balance sheets. This is mostly due to massive waiving off of non-performing loans.
But for the loans under SHG-BLP, there are hardly any loans turning into bad ones that are to be waived off. “Notably, SHGs’ bank repayment is more than 96 per cent, underscoring their credit discipline and reliability,” says the Economic Survey 2022-2023.
Across the country, states have been declaring special economic packages for SHGs as part of overall livelihood development programmes. Under the National Rural Livelihood Mission (NRLM), the government has set a target of increasing each SHG’s income to Rs 1 lakh by 2024. To do so, microfinance linked to livelihood development is the key strategy.
In 2021, the government, under its COVID-19 pandemic stimulus package, increased SHGs’ limit for collateral-free loans to Rs 20 lakh from Rs 10 lakh. This reportedly benefited 6.3 million women SHGs and 68.5 million households.
The Economic Survey, a statement on the state of the economy and recommendations on key development policies, argues that the women SHGs must be made the centre of rural development as they have already been demonstrated as an effective local community institution.
“It may be noted that more than 75 per cent of rural female workers are employed in the agricultural sector. This implies a need to upskill and create employment for women in agriculture-related sectors such as food processing. Here, the self-help groups (SHGs) can play a crucial role in shaping rural women’s potential into concrete developmental outcomes of financial inclusion, livelihood diversification, and skill development,” it says while recommending that these groups be further strengthened with access to loans and markets for their produce.
Last September, Prime Minister Narendra Modi, while addressing a mega gathering of SHG members in Madhya Pradesh, said, “Over a period of time, ‘Self Help Groups’ turn into ‘Nation Help Groups’.” In the same meeting, he also promised that every rural household in the country would have one member in the local SHG.
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