Have SHGs transformed lives?

It was in 1992 that the National Bank of Agricultural and Rural Development (NABARD) initiated Self-Help Groups (SHG). The absence of institutional credit in rural areas led to their establishment. Almost three decades later, the question that is being asked is, have they really transformed the lives of rural women?

The answer is ‘yes’ and ‘no’, the former only to a marginal extent. And mainly ‘no’ because, there are huge gaps in empowerment of women, poverty alleviation, and uplifting of socio-economic standards of living. The gaps are staring in our face.

The concept of SHG was conceived as a support structure to create income generating activities for the poor and the marginalised. Is that (income-generation activities) happening? It appears not, as most of the micro-finance provided has been going towards non-income generating activities.

The amount of micro-finance provided so far is huge. As per a government report, as on March 31, 2017, SHGs had savings of over Rs 16,000 crore in banks and double that amount in their internal lending. The SHG programme had also sourced collateral-free loans to the tune of Rs 61,000 crore. With such huge transactions and over 8.5 crore rural women as direct participants in this mass movement, it is baffling to see that the lives of women in rural areas have not changed as they should have. Where then is the micro-finance money going?

It is believed that most of the funds are used for non-income generation activities, such as clearing a personal loan, or meeting wedding or other family function expenses, or other personal expenses.

Agencies which have been micro-financing these SHGs have not really bothered about whether they have been able to create micro-entrepreneurs or create jobs and help in women’s empowerment. These financial institutions basically have been providing micro-finance to SHGs and have been interested in getting their money back. The agencies are happy to lend to SHGs as there is a joint liability of the group, thus ensuring good repayment track record.

It is time the financial institutions got the vision and mission right. These agencies need to follow up on how the funds are deployed, help create support structures (help in sourcing material, logistics and marketing) for SHGs to thrive, and help SHGs to consolidate and expand. India needs a massive support structure to expand rural income-generation activities. There is a need to create micro-infrastructure (milk-chilling plants, ketchup units, arecanut plate-making units and the like to be run by SHGs) in villages such that there is value-addition to the farm produce and rural folks get a better price and assured support in terms of sourcing and marketing.

Last-mile banking

While micro-infrastructure is created in a cluster of villages, there is a need to make funds accessible and affordable to the rural population, living in nearly 6.5 lakh villages of India. Financial institutions (public sector banks) are not present in many villages of India and the rural folk have to travel several kilometres to reach a bank. Access is a big issue.

Thankfully, some financial institutions such as co-operatives have been reaching out to the rural population, providing micro-finance and other support systems at their doorsteps. Micro-financing at the doorstep has to happen on a war-footing, even while government and other agencies think of deploying digital modes of transaction in rural areas.

Official statistics indicate that less than 30% of the villages in the country have a bank within a radius of 5 km. But there are a large number of people without bank accounts. There have been efforts to aggressively push for ‘financial inclusion’. The Pradhan Mantri Jan Dhan Yojana has resulted in a rapid increase in the number of bank accounts. However, reports indicate that ‘financial inclusion’ has stopped at only opening of bank accounts, whereas access to formal credit is still a herculean effort.

One report states that about 38% of these accounts are inactive (no withdrawals or deposits), reflecting that either the account-holders are in abject poverty or they do not have access to funds. The need to reach out to the unbanked is urgent. While the SHGs do not fall in the ‘unbanked’ category, they still do not have easy access to finance at their doorsteps. If cooperatives have to micro-finance SHGs, the co-operatives themselves should have access to funds (exclusively for SHGs) at nominal interest rates. NABARD has been doing it, but it requires a lot more effort.

For substantive transformation of rural women to take place through the platform of SHG, there is urgent need for the government, the public and private sector financial institutions and other agencies to put in gargantuan efforts by providing access to affordable funds, promoting entrepreneurship, marketing and other support structures. Till such time, the performance of SHGs will be limited. It is time to step on the gas.

(The writer is Founder-President, Gnanashale Souharda Co-operative Ltd)