FICCI CONFERENCE ON GLOBAL BANKING PARADIGM SHIFT 14-16TH by kylemangan

VIEWS: 11 PAGES: 19

									          WELCOME
               TO
     PRESENTATION ON
      Micro Financing :
Financing through Self Help Groups
             (SHGs)
                        A Presentation by
                    Mr. R.V.Shastri
         Chairman & Managing Director
                        Canara Bank

                                        1
India’s Development Agenda



A developed nation by
        2020


                         2
       Where do we stand ?

   GDP growth rate @ 6 %.
   250 million still below the poverty
    line.
   Deepening divide between the rich
    and poor.
   Increasing social tensions.
   Country rated poorly in the Human
    Development index of UNDP.
                                      3
        Where do we stand ?
                                         (contd.)

   70 % of the population live in rural areas and
    depend on agriculture for livelihood.
   Economic liberalisation did not touch the poor –
    The “trickle down”- A question mark.
   Under-employment in rural sector fuels urban
    migration,.
   Unchecked urban migration causes pressure on
    urban infrastructure.

                                                    4
   THE ANSWER


Providing sustainable
livelihood programmes
           to
   Rural poor in their
    neighbourhood.
                         5
        How do we provide
          employment


•   Organised sector provides only
    7% of the jobs.
•   Unorganised     sector is  the
    alternative.


                                 6
     Role of Formal Financial
           Institutions

   Close to 40 % of the credit needs of the
    unorganised sector is still met by the Informal
    Financial Sector, i.e., money lenders, landlords,
    etc.
   The formal financial system with their reach and
    strength can play a decisive role.
   Financing poor - a great business opportunity.
   The high cost of transaction, however, needs to
    be overcome.

                                                    7
   Micro Finance – The new
Business Opportunity for Banks

   Micro Finance is providing financial
    services, primarily savings and credit to
    poor house holds who do not have access
    to formal financial institutions.
   Considered world over as an important
    tool in poverty alleviation.
   Recovery experience has been quite
    satisfactory.
                                            8
SELF HELP GROUPS (SHGs)


Financing through SHGs are
the best medium for Formal
Financial Sector to reach the
rural poor.

                            9
     Salient features of SHGs

   Formed either by NGOs or Govt., agencies
    or by Banks.
   Members are from neighbourhood with
    homogeneous financial background.
   Members meet frequently.
   Identify problems and seek solutions.
   Save small amounts and lend among
    members.
   Operate one single bank account.
                                          10
           Credit Linkage

   Eligible for credit linkage from banks
    after six months by leveraging their
    savings.

   Over one million SHGs have been
    credit linked as on date with credit
    mobilisation of over Rs. 3800 crores.
                                         11
Growth in financing SHGs

                                  Cumulative Position as at
          Particulars
                                  March 02 March 03 March 04

1. SHGs credit linked (Numbers)    4,61,418 7,17,300   10,64,839

2. Bank Loan (Rs. in crores)       1002.50   2048.50    3848.00

3. Of the (1) above, women SHGs     415330   645651      958350
   (Numbers)


                                                             12
    Trends in SHG Credit
          Linkage
 Intermediation by NGOs are
  significant.
 Women empowerment – Unique
  feature of Indian SHG movement
 Over 90 % are women SHGs.




                               13
    Credit Utilisation and
         repayment
   Initial disbursements for
    consumption     needs   and
    paying off money lenders.
   Later rounds for income
    generating activities.
   Recovery rates are 90% to
    95%.

                                  14
   Issues in Micro Finance
   • Regional Imbalance
      REGION           SHGs Credit     BANK LOAN        % OF TOTAL
                         Linked       (Rs. in crores)   BANK LOAN
Northern Region               52048           130.20            3.38
North-Eastern Region          11300             17.98           0.47
Eastern Region               148682           260.30            6.76
Central Region               123676           273.78            7.11
Western Region                54749           140.20            3.64
Southern Region              674384          3025.54           78.64
       TOTAL               1064839          3848.00          100.00

                                                                 15
     Issues in Micro Finance
                              (contd.)
   Skewed heavily in favour of Southern
    States – 79 %.
   Costs Rs. 6000 plus to form and hand
    hold an SHG for 3 years.
   Govt., subsidy to be channelised for
    capacity building.


                                         16
      Issues in Micro Finance
                                   (contd.)
   Non-credit input like education, primary
    health, Nutrition, sanitation are essential.
   Corporate Sector to address this as a part
    of their Corporate Social Responsibility.
   Entry of NGOs in large number - need for
    appropriate legal enactment to protect the
    savings of the rural poor.

                                              17
       Opportunities for the
      Formal Financial Sector
   SHG movement has gathered momentum.
   Peer pressure proved to be effective substitute
    for tangible collateral.
   Very satisfactory recovery rate.
   Offers the Formal Financial Sector a very large
    profitable business opportunity.
   Besides credit, there is opportunity for insurance
    sector for providing micro insurance products
    both life and non-life.

                                                    18
THANK YOU
            19

								
To top