bu i ld i ng an i nc lu s i ve f i nanc i a l s e ctor i n i nd i a
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SHG members in 40 towns and 10 districts of 3 regions
in unbifurcated Andhra Pradesh, and was carried out
between September and November 2013. The objective
of the study was to grade the SHGs based on their perfor-
mance, and to assess the members’ access to credit from
SHGs, banks and SLFs and their repayment rates and
extent of default; and to know the issues and problems in
the functioning of SHGs for action for the future.
MEPMA adopted a holistic approach with multiple
strategies to improve the quality of life of the urban poor
by organizing them into self-reliant and self-managed
institutions. However, there were regional disparities and
though the majority of members were poor, considerable
number of non-poor members joined SHGs to avail low-
cost loans from banks, SLFs and Stree Nidhi.
Government was the lead agency of all the SHPIs in
urban Andhra Pradesh, promoting 69 per cent of the
groups, though nearly one-fourth of SHGs (24 per cent),
were formed by the community or individuals with the
demonstration effect of older SHGs. The SHGs lend the
funds mobilized internally and from external agencies
such as banks, SLF and Stree Nidhi. The loan term,
rate of interest, mode of payment and collateral security
required varies depending on the fund source. Of the
total SHGs, 79 per cent of SHGs availed bank linkage
at least once since inception and 21 per cent of SHGs
availed the Vaddi Leni Runalu (VLR) interest subvention
scheme of the Andhra Pradesh government to the extent
of Rs. 997.4 million.
As far as the quality of SHGs was concerned, the
sample groups were graded according to the critical rating
index (CRI) tool developed by NABARD. Most SHGs
were rated C grade (46 per cent), followed by B grade (37
per cent) and A grade (18 per cent). The SHG members
were good at promoting compulsory savings for different
purposes, but the other aspects were weak, including
frequency of meetings, member attendance and meeting
agenda. Book-keeping was poor and needed to be
addressed on a priority basis. However, loan repayment
to banks and other external agencies was good.
The households joined SHGs primarily to avail
low-cost credit and government pro-poor programmes,
irrespective of their social and economic categories. At
the same time a large amount of funds were lying idle
in SHG SB accounts, and SHGs largely depended on
external credit agencies, rather than mobilizing funds
internally. A large number of SHGs had been waiting
for a long time for repeat linkage from banks and other
agencies. Of the 1,554 SHGs that have loan outstanding
with banks, majority of the SHGs (84 per cent) have no
defaulters and overdues.
The SHGs have been slowly taking up the role of
SHPIs. About 17 per cent of SHGs had formed 983 new
SHGs in their locality. The group size had declined in
most SHGs (66 per cent of total) as compared to the time
of formation. The incidence of dropouts/withdrawal of
membership was high across the districts, and higher in
older SHGs. The majority of the households had formed
into groups to avail interest-free and low-cost loans and
interest subsidy without which non-repayment and
default would inevitably rise.
There were many issues at SHG, SLF, TLF and
promoter levels. Some of them were (a) poor database
management at SHG and federation levels; (b) irregular
meetings with poor attendance and financial transactions
outside the meetings; (c) poor quality of book-keeping;
(d) leaders’ dominance and low leadership rotation; (e)
problems in SHG credit linkage—insistence on fixed
deposits and insurance by banks, large amount of idle
funds in SHG SB accounts, banks control on SHG
withdrawal of savings, large payments by the SHGs in
order to get credit linkage, etc.
Practices like distribution of group funds periodically,
equal distribution of external loans to all the members,
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flexibility in paying monthly savings and loan instalments
and attending meetings and sharing group responsibili-
ties were contributing factors for the smooth functioning
of SHGs, even though not considered best practices.
SHG members reported significant changes as a result
of access to credit. These included (a) repayment of high
cost loans; (b) improvements in health of household
members and children’s education; and (c) increase in
monthly household income and expenditure on food and
employment generation for household members.
(iv) Graduation of SHGs
A study on ‘Whither Graduation of SHG Members?’ by
the Economic Research Department of NABARD some-
what belatedly attempted to address an issue that has
been vexing SHG practitioners for many years. A sample
of 240 SHG members selected from four districts to each
