JOIN USThe political parties in Andhra Pradesh, like their counterparts elsewhere, are vying with one another in wooing the voters with as many freebies to them as possible.
Nothing special about that. But one promise, of the Congress, TDP and YSRCP, to write off the bank loans of the Self Help Groups (SHGs), is most likely to impact the other states in the country and thus make these major political parties of the state standout in the crowd; of course for the wrong reason.
The actual needs and demands of SHGs, to which we will come a little later, are different.
But definitely, they are not asking for the indiscriminate loan waiver which has the portents to kill the SHG spirit in the pioneering state, with its cascading effect all over India.
The SHG movement in Andhra Pradesh was not only hailed and emulated elsewhere in India, but it received worldwide attention for being a successful model.
Of the country’s 43.5 lakh SHGs which got bank loans by 2012, AP alone accounted for 32.17 per cent with a little over 14 lakh such groups as per the Microfinance India State of the Sector Report 2012.
Similarly, in the outstanding SHG loans of Rs 36,341 crore by that year, AP apportioned Rs15,341 crore accounting for 42.21 per cent in total.
SHGs has so far been one of the very few successful schemes of social mobilisation taken up by the government and its agencies in India.
As many as 10.4 crore persons, mostly women, have been organised into 79.6 lakh saving-linked SHGs as per the state of the sector report.
The groups lend the money so pooled to their members.
In the beginning, one or two persons are given loans. Who should get first and who later depending on their urgencies are decided by the group members by consensus.
This has been possible because everyone knows every other’s difficulties and empathise with others’ problems.
The poor women have proved to be accommodating, adjusting and disciplined in repayment.
This in fact has been the secret of its success, to whatever extent was it was possible, of the SHGs.
Since the group’s savings alone are not sufficient to meet the needs, the banks come into picture; not immediately but, say, six months after the formation of the groups.
During this gestation period, the groups are expected to learn how to manage their business - collecting savings, granting loans, recovering them, maintaining their books of accounts, conducting meetings and resolving the issues that come in the way of organising themselves.
The recovery of the loans was the responsibility of the groups.
It was not through the pressure exerted by the banks directly on the members, but was through the persuasion of other members of the group – the ‘peer pressure’, to use the SHG jargon.
The success, particularly in terms of loan repayment which was close to 100 per cent, of the SHGs — the community based programme — which can be classified as ‘formal microfinance’ or SHG- bank linkage programme has attracted the attention of the other type of the microfinance, called informal microfinance (which has several sub-segments in it), in particular, the private Microfinance Institutions (MFIs) operating for profit which dealt a severe blow to the people friendly microfinance – of SHG type.
Fast growth
Their goal of profiteering from lending to the poor women made the MFIs to lend indiscriminately and on highly exorbitant rates — the interest charged by them ranged between 24 to 60 per cent.
The pace of growth of the MFIs has been faster than the SHG type; the sector has grown 20 times in four years from Rs 897 crore outstanding advances in 2005 to Rs 18,344 crore by 2010.
The unquenchable thrust for profit made the MFIs to lend so indiscriminately that the microfinance loans in AP were 6.35 times more than the number of poor in the state which means each person on an average has got more than six loans.
This rate in Tamil Nadu, Kerala, Karnataka was 2.77, 2.49 and 1.74 respectively.
The policy of the government to allow the MFIs to indulge in profiteering resulted in the ruining of the genuine microfinance programme beneficial to the poor.
Instead of giving loans directly to the SHGs, the banks generously lent to the MFIs on a concessional interest who in turn lent to the poor on usurious rates to make hefty profits.
Women empowerment
All this is not to say that the SHGs in the original form had the capacity to cure all the ills of poverty.
The benefits from them have been arguably limited, but undoubtedly very crucial. The single most advantage has been the organising of women into groups.
This made the women learn to collectively face the challenges and to assert themselves.
They started raising their voice and demanding what they wanted. This has been a concrete step in the direction of women’s empowerment.
As for economic benefits, the freedom given to them helped the poor women to meet, though to an extent, some non-productive needs —their pressing consumption or social needs -- through pooled savings.
Non production needs like expenditure on health emergencies, expenditure on births, deaths, marriages etc are as important to the poor as the production needs.
For these purposes they borrow money at a very high interest rate and through pawning or selling whatever assets they have.
The SHGs saved them to a great extent from this eventuality.
There is no need for the profit-oriented MFIs to operate and distort microfinance in India.
And there is no need for the waiver of SHG loans. If the government feels there is any such need it should study the reasons for it and take steps to avoid the recurrence of such conditions once and for all before going ahead with the waiver.
Otherwise, it serves no purpose.
Waiver of SHG loans will not result in the increased employment and incomes to the poor women in the country, rather it may go against these goals.