SHG Financing (1).pptx

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1. Presented By- Bikrampur FINANCING SELF HELP GROUP

2. Definition Self-help Groups (SHGs) are informal associations of people below poverty line who come together for mutual help, mutual benefit and mutual cooperation for development of saving habit, Income generation, social needs and debt swapping. They are generally self-governed and peer-controlled. It’s a v illage based financial committee usually composed of 10-20 local women/men exception being hill, tribal , desert areas where a min of 5-20 members is acceptable. Generally all members are BPL but max of 30% can be from APL but they are not eligible for subsidy .

3. Emergence of SHG In India SHG traced in 1972 with the establishment of SEWA. Ela Bhatt, who formed SEWA, organized poor and self-employed women workers. NABARD, in 1992, formed the SHG Bank Linkage Project, which is today the world’s largest microfinance project. From 1993 onwards, NABARD, along with the Reserve Bank of India, allowed SHGs to open savings bank accounts in bank. The Swarn Jayanti Gram Swarozgar Yojana was introduced in 1999 by GoI with the intention of promoting self-employment in rural areas through formation and skilling of such group. Further evolved into the National Rural Livelihoods Mission (NRLM) in 2011.

4. SHG-BLP Self help Group- Bank Linkage Programme Self Help Groups have the potential to bring together the formal banking structure and the rural poor for mutual benefit. Studies conducted by NABARD in a few states to assess the impact of the linkage project have brought out encouraging and positive features like increase in loan volume of the SHGs, definite shift in the loaning pattern of the members from non-income generating activities to production activities, nearly 100 per cent recovery performance, significant reduction in the transaction costs for both the banks and the borrowers etc., besides leading to a gradual increase in the income level of the SHG members.

5. SHG BLP NABARD continues close coordination with all stakeholders in SHG-BLP sector. Collaboration with NRLM is being regularly maintained and enhanced for the support of SHG-BLP. Coordinated efforts like conduct of National level seminars and workshops, mutual dialogues and capacity building of stakeholders on SHG BLP have now become very regular. Coordinated efforts in following areas have particularly proved immensely fruitful. Training of Trainers (TOT) programme Conduct of Village Level Programmes (VLPs)  Smooth transition of WSHGs  promoted in NRLM intensive blocks to SRLMs

6. SHPI- Self Help Promoting Institutes This programme is an attempt through Self Help Promoting Institutes (SHPI) to work for promoting and enabling credit linkage of these groups and also ensure  loan repayment . The NGO sector has played a prominent role of working as a Self Help Group Promoting Institution (SHPI) by organizing, nurturing and enabling credit linkage of SHGs with banks.  NABARD later co-opted many others as SHPIs including the rural financial institutions (RRBs, DCCBs, PACS), Farmers’ Clubs (FCs), SHG Federations, Individual Rural Volunteers (IRVs) etc. These stakeholders were encouraged to take up promotion of SHGs by way of promotional grant assistance from NABARD.

7. MEDP – Micro Enterprise development Programme NABARD since 2006 has been supporting need-based skill development programmes (MEDPs) for matured SHGs which already have access to finance from Banks. MEDPs are on-location skill development training programmes which attempt to bridge the skill deficits or facilitate optimization of production activities already pursued by the SHG members. Grant is provided to eligible training institutions and SHPIs to provide skill development training in farm/off-farm/service sector activities leading to establishment of micro enterprises either on individual basis or on group basis Over the years around 4.68 Lakh SHG members have been covered through 16,406 MEDPs.  

8. LEDP-Livelihood and Enterprise Development Programmes Livelihood and Enterprise Development Programmes S kill upgradation trainings alone have limited impact on livelihood creation among the SHG members. T o create sustainable livelihoods among SHG members and to attain optimum benefit out of skill up gradation there is provision. That provision is of intensive training for skill building, refresher training, backward-forward linkages and handholding & escort supports. It also encompasses the complete value chain and offers end-to-end solution to the SHG members. I mplementation on a project basis covering 15 to 30 SHGs in a cluster of contiguous villages.

9. DAY-NRLM The Ministry of Rural Development, Government of India launched a programme known as National Rural Livelihoods Mission (NRLM) by restructuring and replacing the Swarn jayanti Gram Swarozgar Yojana (SGSY) scheme with effect from April 01, 2013. DAY-NRLM is the flagship program of Govt. of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihood services.

10. FINANCIAL ASSISTANCE:DAY-NRLM Revolving Fund (RF):  DAY-NRLM would provide Revolving Fund (RF) support to SHGs in existence for a minimum period of 3/6 months and follow the norms of good SHGs, i.e. they follow ‘Panchasutra’ – regular meetings, regular savings, regular internal lending, regular recoveries and maintenance of proper books of accounts Only such SHGs that have not received any RF earlier will be provided with RF, as corpus, with a minimum of Rs10, 000 and up to a maximum of Rs15,000 per SHG No Capital Subsidy will be sanctioned to any SHG from the date of implementation of DAY-NRLM.

11. NRLM Cntd…… Community Investment Support Fund (CIF) will be provided to the SHGs in the intensive blocks, routed through the Village level/ Cluster level Federations, to be maintained in perpetuity by the Federations. The CIF will be used, by the Federations, to advance loans to the SHGs and/or to undertake the common/collective socio-economic activities. DAY-NRLM has a provision for interest subvention, to cover the difference between the Lending Rate of the banks and 7%, on all credit from the banks/ financial institutions availed by women SHGs, for a maximum of ₹ 300,000/- per SHG. This will be available across the country in two ways : (i) In 250 identified districts, banks will lend to the women SHGs @7% up to an aggregated loan amount of Rs300,000/-.The SHGs will also get additional interest subvention of 3% on prompt repayment, reducing the effective rate of interest to 4 %. (ii) In districts other than the above 250 districts, all women SHGs under DAY- NRLM will be eligible for interest subvention to avail the loan facility at an interest rate of 7%. The funding for this subvention will be provided to the State Rural Livelihoods Missions (SRLMs) from the allocation for DAY- NRLM.

12. Role of Banks Opening of Savings account of SHGs: KYC verification of only the office bearers shall suffice for opening of savings bank account Opening of Savings account of Federation of SHGs: Banks are advised to open savings account of Federations of SHGs at village, Gram Panchayat, Cluster or higher level. These accounts may be categorized as savings account for ‘Association of persons’. Transaction in Savings account of SHGs and Federation of SHGs: To facilitate this, banks are advised to enable transactions in jointly operated savings account of SHGs and their federations with inter-operable facility

13. Lending Norms of SHG   Lending Norms : (a) Eligibility Criteria :(i) Active existence at least since the last 6 months as per the books of account of SHGs and not from the date of opening of S/B account (ii) Practicing ‘ Panchasutras’  ( iii) Existing defunct SHGs are also eligible for credit if they are revived and continue to be active for a minimum period of 3 months. (b) Loan amount: (i) multiple doses of assistance under DAY- NRLM. (ii) can avail either Term Loan or a Cash Credit Limit loan or both based on the need. In case of need, additional loan can be sanctioned even though the previous loan is outstanding.

14. CASH CREDIT LIMIT DP(YEARWISE) LIMIT 1ST 6 times of the existing corpus or minimum of Rs 1 lakh whichever is higher. 2ND 8 times of the corpus at the time review/ enhancement or minimum of Rs 2 lakh, whichever is higher. 3RD  3 lakhs based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit history. 4TH Minimum of ₹ 5 lakhs based on the Micro credit plan prepared by SHG and appraised by the Federations /Support agency and the previous credit History Banks are advised to sanction minimum loan of Rs 5 lakhs to each eligible SHGs for a period of 5 years with a yearly drawing power (DP).

15. TERM LOAN In case of Term Loan, banks are advised to sanction loan amount in doses as mentioned below: First Dose: 6 times of the existing corpus or minimum of Rs 1 lakh whichever is higher. Second Dose: 8 times of the existing corpus or minimum of Rs 2 lakh, whichever is higher. Third Dose: Minimum of Rs 3 lakhs based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit history. Fourth Dose: Minimum of Rs 5 lakhs based on the Micro credit plan prepared by the SHGs and appraised by the Federations /Support agency and the previous credit History. * (Corpus is inclusive of revolving funds, if any, received by that SHG, its own savings, interest earning by SHG from on-lending to its members, income from other sources, and funds from other sources)

16. NRLM Dashboard

17. Purpose of loan and repayment Purpose: The loan amount will be distributed among members based on the Micro Credit Plan (MCP) prepared by the SHGs. In order to facilitate use of loans for augmenting livelihoods of SHG members, it is advised that at least 50% of loans above Rs 2 lakhs and 75% of loans above Rs 4 lakhs be used primarily for income generating productive purposes. Micro Credit Plan (MCP) prepared by SHGs would form the basis for determining the purpose and usage of loans. Repayment: The First year/ first dose of loan will be repaid in 12-18 months in monthly/ quarterly installments . The Second year/ Second dose of loan will be repaid in 18-24 months in monthly/ quarterly installments . The Third year/ Third dose of loan will be repaid in 24-36 months in monthly/ quarterly installments . The loan from Fourth year/ Fourth dose onwards has to be repaid between 3-6 years based on the cash flow in monthly/ quarterly installments.

18. Security and Margin No collateral and no margin will be charged up to Rs10.00 lakhs limit to the SHGs . No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.

19. Dealing with Defaulters It is desirable that willful defaulters should not be financed under DAY-NRLM. At the stage of accessing bank loan by SHG for financing economic activities by its members, the willful defaulters should not have the benefit of such bank loan until the outstanding loans are repaid . Willful defaulters of the group should not get benefits under the DAY-NRLM Scheme and the group may be financed excluding such defaulters while documenting the loan.

20. Post credit follow-up Loan pass books or statement of accounts in regional languages may be issued to the SHGs At the time of documentation and disbursement of loan, it is advisable to clearly explain the terms and conditions as part of financial literacy . Bank branches may observe one fixed day in a fortnight to enable the staff to go to the field and attend the meetings of the SHGs and Federations to observe the operations of the SHGs and keep a track of the regularity in the SHGs meetings and performance.