Case - SBIs Microfinance Initiatives

Case Summary The case presents an overview of State Bank of India's (SBI) microfinance programs. SBI is the largest bank in India with over 9,000 branches and is also the largest player in the microfinance sector in India with a market share of around 20%. The bank has been an active participant in the microfinance programs initiated by NABARD since 1992. SBI has taken several initiatives to expand its microfinance portfolio covering one million SHGs. The case discusses some of the unique programs undertaken by SBI to spread its microfinance activities.

Role played by SBI in the microfinance sector in India SBI played a exceptional role visiting to farmer and providing them information about SHG(Self Help Group). SBI helped framer to become stable in terms of saving so that they can take loan for their farming help there is financial discipline created. This initiative by SBI in 15 villages, with a predominant farming community, have changed for the better. The SHGs had borrowed Rs 500,000 to buy tractors Linking banks and SHGs has become one of the largest and fastest growing microfinance programs in India initiated by SBI SBI catered to the needs of agriculturists and landless laborers through 6,600 semi-urban and rural branches. SBI had setup 974 branches exclusively for development of agriculture through credit deployment. Foray into Microfinance

SBI has been actively involved in the microfinance sector as it serves both the social and commercial objectives of the bank. It was the largest player in the microfinance sector in India in terms of loans disbursed to SHGs According to Ashok Kini, managing director of SBI, "We see over 2 million people who have the will to better their lives, but have been suffering on account of finances, to benefit from the move."

SBI has been an active participant in the microfinance sector since 1992, when the National

Bank for Agriculture and Rural Development (NABARD) launched the pilot phase of the SHGBank Linkages program. In that year, SBI started the SHG linkage program on an experimental basis in a few of its branches. After a couple of years, SBI decided to extend the program to its rural and semi-urban branches all across India.

Following Initiative by SBI Microfinance Formation of self help groups Wholesale lending Project Uptech Started in 1988 for technological upgradation in small and medium scale industries to make them more competitive. SBI LIFE SHAKTI Insurance for rural womens who are part SHGs. Sahayog niwas To facilitate housing for SHG members. This scheme was extended to members of SHGs in semi-urban and rural areas AGRI SBU Contract farming KISAN CREDIT CARDS

The Road Ahead According to a World Bank-NCAER Rural Finance Access Survey conducted in 2003, the reach of microfinance was limited to only 6.6% of the total demand in India. The average loan provided to each SHG member was about Rs. 1,766. In 2002-03, only 22% of the existing SHGs took loans from the banks. The southern region of India accounted for 65% of the SHGs linked with banks and 75% of the amount being disbursed. The states in the North Eastern regions of India accounted for just 0.6% of the SHGs and 0.3% of the amount disbursed in the fiscal 2002-03. The Eastern region which was densely populated and poverty ridden accounted for 12.6% of the total number of SHGs and 5.9% of the amount disbursed. The top management of SBI visualized significant potential in SHG financing since only about 25% of the bank's branches had formed or provided loans to SHGs.

Opinion

According to me the initiative taken by SBI in rural for micro finance is an exceptional one for benefit of rural framers as well bank too. It seems that through longer operations on microfinance made SBI a largest player of bottom of pyramid. SBI not only helped rural people but also educated which created a trust between them which helped them to sell their other products to the people like insurance, deposits etc.