National Seminar

On
EMERGING DIMENSIONS OF HRD IN INDIA

Authors
1. Mrs. M. Madhavi 2. Mrs. M.Sujatha
Head & Associate Professor Assistant Professor
Department of Management Department of Management
Aurora’s PG College Aurora’s PG College
Ramanthapur, Hyd-13 Ramanthapur, Hyd-13

Address for Communication: Address for Communication:

404-Sai Ram Towers 1-9-285/3/1
Srinivasapuram II Line Flat No:101, Markendeya Apts
Ramanthapur Vidya Nagar,
Hyderabad-500013 Hyderabad – 500 044
Cell: 9491101155 Cell:9985824988
Email: madhaviprani12@gmail.com sujimphil@yahoo.co.in

1
 SELF HELP GROUPS AS A TOOL OF HUMAN RESOURCE DEVELOPMENT

* M. Madhavi ** M. Sujatha
.
One of the problems faced by the developing countries is the quality of the human
resources. The countries like India and China are having intensive population, but are
lagging behind in the growth phenomenon because of the poor quality of the people.
Human Resource Development aims at increasing the quality of the human resources
through various programmes and policies. At the organizational level it may include
training and development sessions and motivation of the employees. When it comes to the
point of developing the economy it depends on many factors like provision of employment
facilities, increasing the awareness of the population through poverty alleviation
programmes etc. Micro- Finance programs have become one of the more promising ways
to use scarce development funds to achieve the objectives of poverty alleviation. One of
the most important models of Micro- Finance is the development of Self-Help-Groups to
achieve the long cherished objective of poverty alleviation and rural development. 90
percent of the Self-Help-Groups linked with banks are women groups, which show that
SHGs have become the vehicles of social development. In this paper the authors have
proposed to evaluate the contribution of the SHGs in the human resource development
activities of the country. They have taken two groups belonging to the district of
Hyderabad, to study whether there has been any development in their standards of life by
the membership of these groups.

*Head, Dept. of Management, Aurora’s PG College, Hyderabad. She can be reached @

madhaviprani12@gmail.com

**Assistant Professor, Dept. of Management, Aurora’s PG College, Hyderabad. She can be

reached @ sujimphil@yahoo.co.in

2
INTRODUCTION:

The development of any economy ultimately depends upon the quality of its human resources.

Even though poverty alleviation is the top most priority of India’s development agenda since the

inception of Five Year Plans, roughly one-quarter of Indians still live below the poverty line

and almost 70 percent live in rural areas. One of the critical challenges to India is Financial

Inclusion of its population especially that of under privileged sections. Despite continuous

efforts by RBI, Financial Inclusion appears to be far away from reality. India has been ranked

poorly at 50th place, even below the African countries like Morocco and Kenya in the first

ever Index of Financial Inclusion prepared by Indian Council For Research on International

Economic Affairs. As per the index, the number of branches of a bank per 1 lakh adults is just

9.4. This indicates a vast scope for expansion of banking services in the country.

MICRO-FINANCE

In the above context, Indian Government and planners regarded Micro Finance Institutions

(MFIs) is of utmost importance for Financial Inclusion as these institutions connect with

people at the bottom of the economy. They have realized that subsidies are not the solution

to eliminate poverty. More than subsidies poor people need access to credit and opportunity to

exploit their talent. Absence of any recognizable employment and hence absence of collateral

make them non-bankable. In developing countries like India, lack of loans from any bank

leaves them with no other option but to borrow money from local moneylenders who charge

them huge interest rates. A lot of Micro Finance Institutions focus on providing relatively small

loans to poor people who have no access to formal banking services. Apart from giving loans,

3
Savings are also a very important part of micro-finance services. According to the United

Nations ‘Micro-Finance Institutions can be broadly defined as provider of small-scale financial

services such as savings, credit and other basic financial services to poor and low income

people’.

In India, micro-finance has emerged as a pilot project of NABARD in 1992. It involves the

provision of thrift, credit facilities and other financial services of very small amounts to the

poor among rural, semi-urban and urban areas for enabling them to raise their income levels

and improve the standard of living. Dr. C. Rangarajan, Chairman, Economic Advisory Council to

the Prime Minister said ‘Financial Inclusion is no longer an option but compulsion and SHGs

and NGOs can play an important role in making it a reality.’ at the India Financial Inclusion

Summit, 2008.

Micro-finance is a dynamic field and hence many delivery models have been developed over

a period of time. Each delivery model has its share of problems and success. In India various

delivery models have been adopted by Micro-Finance Institutions and they can be broadly

categorized as follows :

Self-Help Group Model (SHG)

Federal Self-Help Group Model

Grameena Bank Model

Cooperative Model

4
Among different delivery models of micro-finance, SHGs represent the emergence of a new

paradigm in the era of poverty alleviation. Indian SHGs are unique in that they are mainly NGO

formed microfinance groups but later funded by commercial banks. A recent impact and

sustainability study of Self Help Groups (SHGs) Bank Linkage Programme, NCAER (2008) finds that

SHGs have significantly improved the access to financial services of the rural poor and have a

considerable positive impact on the socioeconomic conditions and the reduction of poverty of SHG

members and their households. In fact, RBI (2008) report on financial inclusion further emphasizes

that SHGs are “the most potent initiative since Independence for delivering financial services to the

poor in a sustainable manner.” SHGs also provide both skill development and human capital training

services to their members in addition to financial services.

Self-Help Group: A Self-Help Group is a registered or unregistered group of micro-

entrepreneurs having homogeneous social, economic background , voluntarily coming together to

save small amounts regularly. These savings contribute to a common fund and meet their

emergency needs on mutual help basis. The group members use collective wisdom and peer

pressure to ensure proper use of funds and timely repayment there of. SHGs can be formed

with 10 to 20 members. These groups can avail themselves of financial facilities offered by

financial institutions and the government. However there are credit norms to avail these

facilities. Frequently the group should convene meetings and discuss all the issues relating to

the group on a common platform. Government organizations, VDOs and other NGOs organize

regular training programmes for educating and developing the skills among members. SHGs

are required to maintain records as directed by the monitoring authorities. SHGs are directly

5
financed by banks and repayments are regular and defaults are very less when compared to

other types of loans.

SHGs have varied origins mostly as a part of integrated development programmes run by

NGO’s with donar support. The major programme involving financial intermediation by SHGs

is the SHG-bank linkage programme by which the formal banking system reaches the micro

entrepreneurs including farmers , launched in 1992 as a pilot project of NABARD. It has

since proved its efficiency as a mainstream programme for banking by the poor, who mainly

comprise the marginal farmers , landless laborers, artisans, and craftsmen and others engaged

in small business like hawking and vending in the rural areas.

The main advantages of the programme are:

Timely repayment of loans to bank

Reduction in transaction costs both to the poor and the banks

Door step ‘saving and credit ‘ facility for poor

Exploitation of untapped business potential of the rural areas.

All 498 banks [50 commercial , 96 amalgamated RRBs, and 352 co-operative banks] are

actively participating in the programme . As on December31 , 2007 bank loan of Rs.20,114cr.

was availed of by 30-51 lakh SHGs. The average bank loan availed of per SHG and per

family amounted to Rs.65,924/- and Rs.4,708/- respectively. The outreach of the programme

has enabled an estimated 427 lakh poor households to gain access to micro-finance from the

formal banking system. The benefits of the SHG bank linkage programme can be emphasized by the

increased number of groups and increased credit flows to this sector. The following table depicts the

fact that even the commercial banks have been taking keen interest in the provision of loan facilities

to these groups thus contributing to the overall development of the economy.

6
 Table-1 PROGRESS UNDER SHG- BANK LINKAGE

YEAR No. of SHGs financed by the banks Bank loans given during the year

during the year

Number Growth(%) Cumulative No. Amount Growth (%) Cumulative

(Rs. Cr) Amount

2003-04 3,61,731 41 10,79,091 1855.34 81 3,904.21
2004-05 5,39,365 49 16,18,456 2994.25 62 6,898.46
2005-06 6,20,109 15 22,38,565 4499.09 50 11,397.55
2006-07 6,86,408 11 29,87,441 6643.19 47 18,040.74
2007-08 1,26,068 - 30,51,041 2072.78 - 20,113.52
SOURCE: Economic Survey 2007-08

a) Includes repeat loans to existing SHGs

b) As on Dec.31, 2007

c) 2007-08 figures up to October, 2008

The table shows the number of SHGs financed by Banks from the year 2002-03 to 2007-08. The number

of SHGs are increasing and till now Rs. 20,113.52 Crores were disbursed through Banks toward loans to

SHGs. Not only Public Sector Banks but Regional Rural Banks, District Cooperative Banks are also

participating in the delivery of loans to various groups spread among rural areas of different states.

Table-2 ADVANCES TO SHGs BY PUBLIC SECTOR BANKS

7
 Year No. of Amount % to total

Accounts Outstanding advances

(in 100s) (in Rs.Crs)

March 2004 450 1233 0.2
March 2005 460 1843 0.3
March 2006 1067 4047 0.4
March 2007 967 3898 0.3
SOURCE: RBI website

This table shows the delivery of loans to SHGs by Public Sector Banks from 2004 to 2007 March. The

disbursements were maximum in the year 2006. The public sector banks were taking an active

participation in this programme because of the maximum recovery rate on these loans which is 98% of the

loan sanctioned to the groups and prompt payments offered by the groups.

SHGs in the state of ANDHRA PRADESH:

Andhra Pradesh is one of the pioneer states in encouraging self-help groups. The world bank has

said that the model of SHGs in Andhra Pradesh is remarkable and could be replicated in other

states in India. Much of micro-finance initiatives involved SHGs predominantly are giving

assistance to poor women in the villages of AP. Studies commissioned by NABARD in 2002 indicate

that the programme has emerged as the largest micro-finance network in the world. The state wide

distribution of SHGs linked with banks shows a predominantly large share of over 42% of all

linked SHGs in Andhra Pradesh, Tamilnadu and Uttar Pradesh follow with a share about 12% and

11% respectively. A.P government has made a pioneering effort in the organization and

development of SHGs in which rural women are largely involved. The role of women in the

organization and monitoring of SHG action plan has paved the way for the speedy development

of economic and productive activities of the group. Another important factor which contributed to

8
the development in A.P is the collective participation of various organizations and credit

institutions.

PROGRESS IN THE STATE ODF ANDHRA PRADESH:

SHGs in A.P emerged as a sub-scheme of Integrated Rural Development Programme in 1982-83

with UNICEF cooperation with primary objective of focusing attention on women members of

rural families living below the poverty line. The savings and credit movement started working in

Nellore district in 1993. Later SHGs are formed into savings and credit groups known as Podupu

Lakshmi. There has been a phased expansion of SHGs which are popularly known as DWCRA

group. According to a study out of 10 million people in the world carrying on thrift activity 2

million are in A.P. itself. With the government support , particularly with the network of District

Rural Development Agency(DRDA) and support from many NGOs, the women’s savings and

credit network is now widespread in Andhra, Rayalaseema and Telangana regions.

Table -3 Progress of SHGs in Andhra Pradesh

Years No. of SHGs in state Loans delivered (Rs.Crs)

2003-04 2,31,336 752.90

2005-05 2,61,254 1017.70

2005-06 2,88,711 2001.40
2006-07 3,66,489 3063.87
2007-08 4,31,515 5882.79
Source: SAAKSHI Telugu daily

The table shows the progress of SHGs in the state of AP. We can observe a clear raise in the number of

groups as well as the amount of loans disbursed from the year 2003-04 to 2007-08. In the state 25

commercial banks, 12 Regional Rural Banks and 12 District Central Banks with the help of 4,600

branches are delivering loans to women self help groups.

9
The revolving funds of SHGs in AP amounts to an outstanding RS.3,951 Crores along with their own

thrift money of 1,755 crores. The recovery is also ideal when compared with the recovery from other

sector loans. Now in AP around 7,29,533 groups are working with 90,97,139 women members. The city of

Hyderabad is also contributing its share in the delivery of loans to the women groups in the city and sub

-urbs of the city. In Greater Hyderabad Municipal Corporation limits as many as 37,637 groups are

working with 5, 64, 555 members. The government disbursed an amount of Rs.101.35 crores to these

groups till now. Among the 41,180 urban groups working in the state the city occupies a majority share of

21,307 groups.

The success of a group largely depends on the homogeneity and unity of purpose among the

group members. These groups help the members to concentrate on production activation. Regular

and rigid saving is invoked to achieve balance of power within the group and generate a sense of

ownership, most often result in credit discipline among members.

This, in turn, stabilize the group and help group in striving toward the objectives of micro-

enterprise.

The methodology of lending loans is, groups comprising of 15-20 women from a homogenous

socio –economic background collect some amount from all the members. The decisions will be

collectively taken based on the need and replacement capacity. In case, the group needs more

amount of money they try to get the funds from various external sources such as MFI, DRDA,

banks or non-banking organizations. Due to the effectiveness of this methodology SHG’s are

encouraged to undertake thrift and credit activities.

Banks are charging 25ps interest per 100 per month on the loans. Mandala Samakhya charges

0.50ps per hundred/month. Grama Samakhya charges 1/- and internal sources cost them 2/-. The

authors have taken two groups in Hyderabad and interviewed the Leaders of the groups. It was found

10
that the groups in the villages are more effective and the level of awareness is more when compared with

the groups working in the city. The Grama Samakhya President Mrs. Manemma was interviewed to

understand the working of SHG’s in the village. There are around 30 groups in the area of study,

out of which 27 groups are around 10years old. Of these the authors have selected two groups one

which has been very successful, and the other a failure.

CASE-1:

Lakshmi Devi group was started in 1998 under the leadership of Manemma . There are 10 members

in the group. Each member saves 50/- per month. This group has been given loans of Rs.20,000

in the beginning and then Rs.40,000 and now under TFY program they got a loan of Rs.

4,00,000. This amount has been used by the members for the upliftment of their economic status.

• Kantamma of this group had taken a loan of Rs.40,000 from the loan sanctioned to them and

purchased an auto rickshaw and thereby became self – employed.

• Lakshmi , one of the member has taken Rs.40,000 to send her husband to Muscat and there

by the earnings of the family have been improved.

• Another member Padma used 40,000 to purchase a buffalo and by this she is able to earn

an additional amount of 200/-per day.

• Manemma has taken 30,000 from the fund and spent it to dig a borewell in the field.

With the installation of the motor she is now able to harvest two crops a year and is able

to improve her income.

11
The group is able to utilize the benefits provided to them because Manemma is aware of all the benefits

which they can get by forming into a Self Help Group. She is able to motivate all the members of the

group, to be united and to pay the debts in the prescribed manner. Further the group is maintaining good

records of their activities and noting of the accounting transactions is found to be perfect.

The loans are not only helping the individual members but also the group which is collectively

using the funds to cater to the needy in the group. Many times social obligations are also met

with the help of internal credit facilities. A commendable feature of this group is the unity and co-

operation prevailing amongst the members. When a member of the group lost her husband, the

remaining group helped her by giving 5000/- from the internal sources. When another member’s

son met with an accident and fractured his leg the group helped her in getting a loan of 20,000

from Mandala Samakhya.

The formation of a group is not only helping them in improving the economic status but also

relieving them from indebtedness as the interest rates charged on the loans granted are very low.

The group members are paying 900/- per month towards the repayment of an amount of 40,000.

Had it been taken from outside sources they should pay an interest of 1,200 at the rate of 3/-

per month. This explains the burden borne by the members from outside credit before they were

formed into a group.

12
 After going through the performance of the group we can clearly state that SHG model of Micro

financing is very successful in the achievement of inclusive growth. This was made possible

because of

 Effective leadership

 Awareness about the benefits of SHGs

 Thriftiness among the members

 Perpetual membership

 Credit discipline

 Integrity of the group

 Cooperation among the members

CASE-2:

Another group Durga Bhavani Podupu Sangham was also undertaken for the study. This group belongs

to Ramanthapur area of Hyderabad city. The group was started in the year 2000 under the leadership of

Mrs. Umadevi. The group was originally started with 20 members but later on the number was decreased

to 10. This is due to non-payment of savings regularly and irresponsibility of the members towards the

activities of the group. This group initially saved Rs.30 per month and the amount was deposited in

Andhra Bank. After two years this group got a bank loan of Rs. 2,00,000. But the group leader was unable

to disburse the amount because of the fear of non-payment by the members. Till today the group is having

the revolving fund with them without any utility. Further this group also got some contract work to

undertake CC road work of worth Rs.50,000. But due lack of co-ordination in the members of the group,

the work has been taken up by the local ward counselor with out any benefit to the members of the group.

Another fact observed was the low levels of motivation rendered by the group leader to the members of

13
the group. The group leader is not aware of the benefits associated with the SHGs and their contribution

to the development of the members of the group. With her ignorance she herself is away from availing the

benefits of the group formation.

The reasons for the non-performance of the group are

 In-effective leadership

 Lack of awareness among the members

 Lack of credit discipline

 Absence of thriftiness

 Lack of co-ordination among the members of the group

With this study, it can be observed that the SHG-Bank linkage programme has contributed significantly

towards the primary objective of poverty alleviation and empowerment of rural India. At the same time

there are some problems associated with the working of these groups.

 The Commercial banks have been following largely 1:4 savings credit ratio prescribed as a lending

norm. The loan terms are also uniformly prescribed and strict. The groups with relatively lower

savings ability are finding the lending ratio highly restrictive.

 The contribution of SHGs in the improvement of the socio-economic conditions of the poor

house-holds is commendable but not uniform. The awareness in some of the areas is relatively

high and in some other areas it is very poor.

 The utilization of funds by the SHGs is not always productive. The groups are using these funds

for education, housing, health and protective needs also, which is creating a problem of repayment.

14
  In some of the areas the groups are not having access to banking facilities because of the location

of the banks. They have to travel long distances to access the services. Due to this some of the

groups are becoming reluctant to avail the facilities of loans and other benefits.

 Commercial banks also have been facing some problems like an increase in the percentage of Non

Performing Assets in case of non-recovery of loans and loans with out any guarantee.

 The real need of the small and marginal farmers is not funds alone but the timely availability of a

package of inputs and custom services, along with technical advice and support services for

packaging and processing and transportation.

 The absence of effective organization and promotion is leading to the failure of the groups and the

groups are unable to get the benefits of micro finance

In spite of these problems the working of the groups is observed to be commendable. The defaults in

these loans are only 2 to 3 percent when compared to other types of loans given by the banks like personal

loans, vehicle loans, mortgage loans etc. However if these problems are reduced to the possible extent the

number of groups ready to avail the loans will increase. These problems can be overcome by some of the

remedial measures which can be taken at different levels.

 The banks should be wiling to provide loans with flexible credit norms to enhance the coverage

of the groups under bank linkage.

 Entrepreneurial developmental assistance can be provided to the people of the groups to

increase the productive utilization of funds on loans.

 The local governmental agencies can take initiative to promote awareness in their areas to

increase the number of groups.

15
  More number of branches of banks and other micro finance institutions can be established to

increase the accessibility of banking facilities to the groups.

 Rural development agencies can take the assistance of NGOs working in the rural areas to

provide advisory services to the micro and small farmers in the processing, storage and

marketing of their produce.

 It has been observed that where the community activists, community volunteers and

community coordinators are taking initiative to promote SHGs, the groups are able to reap the

benefits of micro finance.

CONCLUSION:

From the study it has been observed that the concept of SHGs is gaining momentum in the state of

Andhra Pradesh. In fact, it is the leading state in the south India, which has created lot of

opportunities to the rural population particularly women. Human resources of any country , if

developed will contribute to the development of the economy in all the spheres of activities. For a

labour intensive country like India, development of self employment and self-development

facilities are useful not only in the short run but in the long run also. The Indian economy could

sustain the economic crisis due to the importance attached to the tiny and small industries, which

are also a source of self -employment along with the development of SHGs in the rural areas. The

shift in the Indian economy now is from the provision of employment to the generation of

employment that is made possible through the concept of SHGs. SHGs have been instrumental in

the achievement of the long cherished objective of poverty alleviation of our policy makers,

particularly in rural India.

References:

16
 Misra SK & Puri VK, 2006, “Indian Economy” Himalaya Publishing House.

 Dutt & Sundaram 2006, Indian Economy, S. Chand & Co. New Delhi.

 The Chartered Accountant, September, 2008.

 The Economic Times, English Daily, Hyderabad, 28th august, 2008.

 Saakshi, Telugu Daily, Hyderabad, 22nd October, 2008.

 Kurukshetra, January, 2005, volume 53, No.3 “The growing mission of Self-Helping” by Nava

Thakuria pp.,38-40.

 Kurukshetra, August 2003, Volume 51, No. 10 “Rural credit delivery, Reaching the unreached” by

G. Srinivasan, pp., 10-12.

 Kurukshetra, November 2002, Volume 51, No. 1 “Rural credit and women Self Help Groups” By

Dr. H.D. Dwarakanath, pp., 9-15.

 Yojana, May 2008, “ Budget 08-09 , Rural Development” By KK Tripathy & Ishita Tripathy,

pp.,49-51.

 Economic survey of India, 2008.

 Website of NABARD

 Website of RBI

17