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(ix) Micro-Finance is to be an Integral Part of the Mainstream Banking
A word of caution is required to be entered in regard to the almost
universal, - and uncritical - expectations of a pivotal role to be played by the
micro-finance movement in the rural credit system of the country. First, over
54% of NGO- supported SHGs are concentrated in four southern states or
over 48% within them in Andhra Pradesh alone. SHG formations in other
regions are hampered by the absence of a dedicated NGO movement. Second,
women up-liftment is an important goal, but the goal of poverty-alleviation has
to have a wider coverage. Recent reports on progress of SHG-Bank linkage
reaffirm that 90% of the SHGs continue to comprise only of women members.
When the micro-finance system is brought into the mainstream, concentration
only on women SHGs will not work and formation of SHGs amongst men
entrepreneurs is a much arduous task. Third, interest rates are said to be
high in micro-credit lendings mediated through NGOs and SHGs. Studies on
Grameen Bank and other micro-financing schemes have emphasized how high
rates of interest, while they are accepted by the poor initially because of their
state of helplessness, nevertheless become a burden on their incomes and their
future stream of savings. Fourth, studies express similar misgivings regarding
the apparent prompt and regular loan repayments by the micro borrowers
because in reality they are known to repay not out of the income stream flowing
from assets gained, but through further borrowings; repetitive borrowings
unrelated to economic activities have become a common feature.
Finally, the micro-credit system cannot be a substitute for the large credit
needs of the poor in general; the objective of socio-economic empowerment of
the poor households in a villages would be better served only if all sections of
the village - myriad small and marginal farmers, farm households in general,
village artisans, and other household enterprises - partake the benefits of
increased institutional credit but such a requirement is unlikely to be served
without co-opting the borrowing needs of all small borrowing households as
a responsibility of the banking system and not just the NGO-supported and
SHG-based micro enterprises.
The RBI has just given credence to the estimates of
`
450,000 crore as
the credit requirements of small borrowers which the existing framework of
SHG movement cannot satisfy. Though the basis of it is not known, there is
no doubt that the gap and financial exclusion at the informal sectors level,
is indeed huge. Banks, which have in recent years, shied away from small
borrowal accounts, should treat providing micro-finance as part of their
mainstream banking responsibility. We have shown how the commercial banks
