PROPOSAL FOR GRANT ASSISTANCE FOR PROMOTION & LINKAGES OF JLGs

PROJECT PROPOSAL
 Profile of the Organization

Name Address

Vidharbha Kshetriya Gramin Bank, sponsored by Govt. of India, Govt. of Maharashtra and Central Bank of India 'Madhumalti' building, Gupte Marg, Jatharpeth, Akola,Maharashtra-444005 INDIA Chairman (Office/Fax) : +91-724-2490533 Office (General) : 2491767 E-Mail : info@vkgbakola.org vkgb.akola@rediffmail.com Mr. Mohd. Abdul Salam CHAIRMAN (Head Office) 09850358292 Financing Rural, Semi Urban & Urban areas Microfianace, SHG bank linkages Akola, Washim, Buldhana, Yavatmal and Amravati districts through 100 branches

Fax/E-mail

Name & Designation of C.E.O. Major Activities Area of operation

 Work Done in Social Sector

The Bank has played vital role by implementing Central and State Government's Debt Relief and Debt Waiver scheme and extended releif to farmers who were distress.

Banking assistance to women under its area of operation through / linkages of Self Help Groups and literate them by arranging various trainings, workshops with the assistance of NABARD. Bank is totally commited to rural prosperity.

 Past Experience in JLG Promotion & Linkages JLG Promotion and Linkage support given to 25 JLGs for Dairy Unit
No Financial/ other support received from NABARD earlier

 Proposed Area for Project Implementation

List Enclosed------- Annexure A

 Manpower available and Required for Project Implementation

BRANCH STAFF Head Office Staff ----- Credit Department Women Development Cell Branch Managers Further Training Support is required for Staff & JLGs.

 Methodology/Strategy Proposed to be adopted for formation & Linkage of JLGs Bank has received SHPI (Self Help Promoting Institution) status through our Bank Staff, Women Development Cell & Business Facilitators (BFs). Further Details about Schemes for financing Joint Liability Groups (JLGs) -------------- Annexure B

 Year-wise Physical & Financial programme

List Enclosed------- Annexure C

 Arrangements, type and cost of training of JLG group leaders, JLG members and own staff
However, the arrangement, type and cost of training of JLG group leaders, JLG members and own staff depends on the district in which training is going to be organized. But, an estimate can be given as following for No. of Participants = 30 y y y y y y y y y y y Sitting Arrangements ------------ Rs. 3000/Electricity---------------------------Rs. 500/Hall Rent----------------------------Rs. 2000/Food (Lunch)---------------------- Rs. 3000/Snacks------------------------------ Rs. 1000/Tea---------------------------------- Rs. 500/Water------------------------------- Rs. 1000/Fare--------------------------------- Rs. 3000/Outsourcing------------------------ Rs. 1000/Projector---------------------------- Rs. 1000/Field Visit-------------------------- Rs. 4,000/SUM TOTAL----------------------Rs. 20,000/day

 Monitoring arrangements proposed for Implementation and MIS proposed to be developed

project

Quarterly meetings will be conducted by the committee consisting of

y y y y

CHAIRMAN OF THE BANK DDM NABARD GENERAL MANAGER CREDIT DEPARTMENT OF THE BANK

y WOMEN DEVELOPMENT CELL (W.D.C.) y BRANCH MANAGERS The estimated cost of meeting is Rs. 5,000/meeting. MIS ( Management Information System) Operational Structure:
Head Office

Area Office

Area Office

Branch 1

Branch 2

Branch 3

Branch 1

Branch 2

Branch 3

JLG 1 C1

JLG 2 C2

JLG 3 C3

JLG 4

JLG 1 C1

JLG 2 C2

JLG 3 C3

JLG 4

Designation

No

Responsibilities y y y y y y y y y y y y y All administrative responsibilities Loan approvals Target setting and their achievements Monitoring of Credit Officers Reporting to the Head Office/Area Office Preparation of books of accounts Preparation of MIS reports Budgets and variance analysis Reconciliation of collected amount Formation of JLGGs and their training Sourcing of loan applications and preliminary appraisal Disbursement of loans Collection of installments

Branch Manager

Branch Accountant (one of Officer) the Credit 1

Credit Officers

6-8

The estimated cost for Data Collection is Rs. 5,000/month.

 Item wise details of expenditure/ budget Assistance Amount to be given by NABARD( 4 27,50,000 Rs. yrs.) Cost of Training of JLG members and own staff Rs. 20,000/day Commitee meetings Data Collection for MIS Rs. 5,000/meeting Rs. 5,000/month

ANNEXURE B The Scheme for financing Joint Liability Groups (JLGs) of Micro Entrepreneurs/artisans/others in Rural Non-Farm Sector 1) Objectives: i) To augment flow of credit to Micro entrepreneurs /artisans/individuals in Non Farm sector activities; ii) To serve as collateral substitute for loans to be provided to the target group. iii) To build mutual trust and confidence between bank and the target group. iv) To minimize the risks in the loan portfolio for the banks through group approach, cluster approach, peer education and credit discipline; and v) To provide sustainable livelihood opportunities to vulnerable section for enhanced productivity and livelihood promotion through JLG mechanism. 2) General features of JLG: A Joint Liability Group (JLG) is an informal group comprising of 4-10 individuals coming together for the purpose of availing bank loan on individual basis or through group mechanism against mutual guarantee. Generally, the members of a JLG would engage in a similar type of economic activity in the Non farm Sector. The members would offer a joint undertaking to the bank that enables them to avail loans. JLG members are expected to provide support to each other in carrying out occupational and social activities. 3) Criteria for membership: i) Members should belong to similar socioeconomic status, background and environment carrying out non- farm activities and agree to function as a Joint Liability Group. This way, the groups would be homogeneous, organized by Individuals and develop mutual trust and respect. ii) The members should be residing in the same village/ area/ neighbourhood and should know and trust each other well enough to take up joint liability for group/ individual Loans. iii) Members who have defaulted to any other formal financial Institution, in the past, are debarred from the Group Membership. iv) More than one person from the same family should not be included in the same JLG. 4) Group Approach:

i)

ii) iii)

iv)

v)

vi)

vii)

All members of the JLG should be active enough to assume leadership of the group to ensure the activities of the JLG. The selection of an effective /able/active leader for the JLG is essential as this will ultimately benefit all the JLG members. The leader fosters a sense of unity, oversees and maintains discipline, shares information and facilitates repayments. For the bank, the leader is the focal point for group activities. The JLG should hold regular meetings which must be attended by all the members regularly to discuss issues of mutual interests. The principles of self - help and group strength need to be emphasised. Group cohesion has to be ensured. Adequate emphasis should be placed on the roles, expectations and functions of the group/ members & the benefits of group dynamics. The JLG can easily serve as a conduit for technology transfer, facilitating common access to market information, for training and technology dissemination in activities relating to non farm sector training and assessing input/ raw material requirements. The JLGs for specific non farm activity, e.g. production of handicrafts / other non farm products may be federated at village/ block level for development of the product. The JLG in the clusters on their stabilization could come together in the form of cluster federation or producers companies with a view to contributing the entire value chain and thereby achieving economies of scale in production and marketing of the product. The JLGs and evolving JLG structures are expected to build up empathy and understanding and create responsive lending mechanisms leading to greater interaction and interdependence between the members of JLGs.

5) Who can form JLGs: Business Facilitators, NGOs, Farmers Clubs, Farmers Associations, Panchayat Raj Institutions (PRIs), Krishi Vikas Kendras (KVKs), State Agriculture Universities (SAUs), Agriculture Technology Management Agency (ATMA), Bank branches, PACS, other cooperatives, Govt. Depts., Producer Associations , Artisan Guilds, Department of SMEs, Small Scale industries/ Agro industries, Individuals, Input dealers, and Document writers (in cooperative banks),MFIs/MFOs, etc. 6) Savings : JLG members need to be encouraged to save regularly. Banks may open savings account by the JLG / individual members of the JLG to ensure regular savings and thrift habit amongst them.

However, the quantum of loan to be given to the groups should be related to the credit needs of the enterprise and not to the quantum of savings. 7) JLG Models : Banks can finance JLGs by adopting any of the two models. Model A Financing Individuals in the JLG. Each member of the JLG could be provided with an individual Swarojgar Credit Card (SCC) or any other specifically designed card or general purpose card. The financing bank should assess the credit requirement, based on the product /enterprise /activity to be undertaken and the credit absorption capacity of the individual. All members would jointly execute a loan document, making each one jointly and severally liable for repayment of all loans taken by all individuals belonging to the group. The mutual agreement needs to ensure consensus among all members about the amount of individual debt liability that will be created including liability created out of the individual Swarojgar Credit Card or any other card . Any member opting out of group or joining the group, will necessitate a new loan agreement, to be kept on record in the bank branch. Model B Financing the JLG as a Group. The JLG functions, operationally, as one borrowing unit. The group would be eligible for accessing one loan, which could be combined credit requirements of all its members. The credit assessment of the group could be based on the micro enterprise / activity to be undertaken. All members would jointly execute the document and own the debt liability jointly and severally. The mutual agreement needs to ensure consensus among all members about the amount of individual debt liability that will be created. Any change in the composition of the group, will lead to a new document being registered by the bank branch. 8) Credit Appraisal: Banks may conduct a thorough credit appraisal to avoid under or overfinancing. Suitable rating tools are already available for the purpose. The finance to JLG is expected to be a flexible credit product addressing the credit requirements of its members including production/working capital, marketing and investment credit, besides other productive purposes in the non farm sector.

All other norms of financing including rate of interest, margin on security, documentation, coverage under insurance scheme and personal accident insurance, etc., may be followed by the bank as per its regular norms. 9) Priority Sector: Credit to JLGs of Micro enterprises /artisans/individuals in Non-Farm Sector will be treated as normal business activity under Priority Sector. Banks may include lending to JLGs in their corporate plan and also in the training schedule of officers/ staff. 10) Monitoring and Review: i) The JLGs through peer pressure ensure loan utilisation and timely repayment.The bank may hold all members liable in case of default. ii) The banks Loan Officers are expected to maintain harmonious relations and continuous close contact and relationship with the JLG leader and other members so as to convert them into good reliable customers of the bank. Maintenance of good credit history by the JLGs will gradually lead to lowering of the bank's own transaction costs in terms of intensity of appraisal and monitoring. iii) Banks may evolve suitable MIS & monitor the programme at various levels and at regular intervals. A progress report may be sent to the RBI and NABARD in the prescribed format for JLGs in Non farm sector (format given in Appendix I) on a half yearly basis as on 30 September and 31 March each year so as to reach within 20 days of the half year to which the report relates. 11) Incentive for promotion of JLGs: 11.1. To facilitate promotion of JLGs, Banks/ Other institutions as Joint Liability Group Promotion Institution ( JLPIs) are eligible for grant assistance from NABARD, Banks branches / Other institutions are expected to formulate a plan for promotion of JLGs and sanction of credit to the JLGs. Each JLPI is expected to formulate a plan for a minimum size of 20 JLGs. Assistance will be extended to banks for formation, nurturing and financing of JLGs over a period of 3 years @ Rs.2000 per JLG. Other institutions promoting JLGs will be eligible for grant assistance of Rs 2000/- per JLG over a period of three years through banks. 11.2. The first instalment of Rs. 1000/- would be released to the Bank/ other institutions after sanction of loan by the bank. The 2nd instalment may be released after commencement of repayment. The 3rd instalment may be released

in 3rd year subject to certification of bank with regard to satisfactory repayment. 11.3 With regard to payment of grant in respect of JLG Promoting Institutions, the grant would be routed through banks involved in JLG financing and the rate and pattern of release of grant would be the same as applicable to the banks. However, the funds would be released, based on the certification by the banks as indicated in above. 11.4 The banks/Business Facilitators engaged by banks for promotion and linkage of JLGs may take steps to evolve/introduce simple books of accounts and registers as in case of SHGs. 12) Capacity Building: Banks may undertake capacity building measures like conduct of training programmes for stakeholders, awareness and sensitization of JLG concept both for banks own staff as well as the target group. The banks operating staff should be familiar with the concept, benefits for the banks and clients under the programme. NABARD would consider supporting capacity building programmes for Banks staff and other publicity measures, such as publication of pamphlets/ leaflets, use of media (print as well as others), etc. for greater awareness and orientation. 13) NABARD Refinance: NABARD will provide 100% refinance assistance under investment credit, to all banks in respect of their lending to JLGs under Investment credit as per the following: 13.1 Quantum of refinance The revised scheme of financing JLG envisages a flexible and composite credit product comprising of block capital and or working capital. NABARD will provide 100% refinance assistance to all banks in respect of their lending to JLGs under investment credit and the procedure for claiming refinance from NABARD would be similar to that under SHG Bank Linkage Programme. 13.2. Format of refinance claims The Format for drawl application under JLG will be similar to that under SHG financing. Terms and Conditions of refinance like Repayment, etc as applicable to SHG lending will be applicable to SHG lending will be applicable to JLG lending.