Short Notes.

Ravi shanker.

MICRO CREDIT INTERVENTIONS IN PROMOTING MICRO ENTERPRISES1

R.C. Choudhury, Asghari Mohiuddin, N. Mohanan, D.V.V. Ramana Rao, P. Purushotham, D. Pattabhi Rami Reddy and B. Ravindra Nadh . NABARD 2001. RS.
1 Compiled by Ravi Shanker for National Workshop on Watershed Management, Ahmedabad.2004. CRD Gandhinagar. Ministry of Rural Development. Government of Gujarat.

MICRO CREDIT INTERVENTIONS IN PROMOTING MICRO ENTERPRISES2

A study was carried out in selected clusters spread over four regions where there is heavy concentration of SHGs in the States of West Bengal, Kerala, Chattisgarh and Jharkhand. NG0s, promoted by banks/cooperatives broadly classified the SHGs in the selected clusters into sets depending upon sponsorship viz., promoted and those promoted by district rural development agencies (DRDAs). Only those SHGs that existed for more than three years were considered. The criteria for selection of SHGs depend upon location specific conditions. Thus, in all 65 SHGs covering 325 SHG members and 130 Micro Enterprises from four States constituted the overall sample frame. Objectives To examine the structural characteristics of SHGs that are emerging in the rural credit market. To analyse the operating systems in SHGs for mobilization of savings, delivery of credit to the needy, management of group funds, recovery of loan over dues and linking process with banks etc. To explore the effectiveness of SHGs in identifying, nurturing entrepreneurial talent among the poor and providing escort services in micro enterprise development. To analyse the role played by the Self-Help Promoting Institutions (SHP1s) in building up leadership, establishing linkage with banks, access to product market, technical upgradation, management of group funds, skill development etc., for sustainable development of micro enterprises. To suggest appropriate policy intervention for effective performance of SHGS. Data Collection and Analysis: The data were collected and analysed by 'Case Study cum Survey Method'. Secondary data gathered from the records of the SHGs as well as micro entrepreneurs of the SHGs. A wide range of information, such as composition of membership, savings mobilized, loan disbursed, interest rates, recovery procedures, assets created, external assistance received, etc., also ascertained. Micro entrepreneurs in the SHGs were personally interviewed with the help of structured questionnaire to get insights into their strengths and weaknesses in project planning and implementation. Through this exercise, internal dynamics and external factors influencing the operation success or failure of micro
R.C. Choudhury, Asghari Mohiuddin, N. Mohanan, D.V.V. Ramana Rao, P. Purushotham, D. Pattabhi Rami Reddy and B. Ravindra Nadh . NABARD 2001. RS.
2 Compiled by Ravi Shanker for National Workshop on Watershed Management, Ahmedabad.2004. CRD Gandhinagar. Ministry of Rural Development. Government of Gujarat.

enterprises were ascertained. The economic gains and social benefits derived by the members of the SHGs in general and micro entrepreneurs in particular were analyzed in perspective. The role played by SHP1s in sustaining micro enterprises was assessed. Major Findings The study shows that the flow of micro credit is a pushing factor for the promotion of micro enterprises. This is evident by the fact that the SHGs are the purveyors of major credit requirements of new micro entrepreneurs. Majority of the micro entrepreneurs lacked necessary skills in the chosen trade/activity. This is evident by the fact that some of the micro entrepreneurs have shifted their operational activity due to lack of necessary skills. Most of them started from the cadre of daily wage labour to become small business entrepreneurs. Majority of the entrepreneurs operated with narrow margins and their enterprises have low entry and exit barriers. There lies the role of SHPIs for filling the short gaps relating to the market, sources of raw materials and technology upgradation and forward and backward market linkages for supply of raw materials and marketing of finished products. The study also brings out that of the three SHG promoting institutions. viz., the groups promoted and nurtured by the Commercial Bank patronage are better equipped for capacity building of SHGs and micro enterprise promotion. However, it is a matter of concern that the micro enterprise development depends on the success of the activity, role of SHPIs in providing support services to the entrepreneurs and their capacity to seek business opportunity. However, the role of other SHPIs cannot be ignored in the capacity building among members of SHG groups. The study also reveals that SHGs are still in the process of consolidation and their sustainable development depends on a number of factors, which are both internal and external to the organization. No doubt, SHGs have set a new agenda for financial intermediation by Banks in the form of micro credit. Further. SHG as a system has infused certain synergy among its members to climb up in the socioeconomic ladder in the development process. SHGs have served the cause of women empowerment, social solidarity and socioeconomic betterment of the poor for their consolidation. SHGs can be nurtured as thrift and credit groups. Leadership must be emerged from the grassroots level. Majority of SHGs though, are illiterate, asset less poor with no specific occupational skills, can be transformed and still can play a critical role for sustainable development of SHGS. SHGs have been acting as regulating force against the exploitation of moneylenders and unscrupulous elements and provide stiff competition in the

money market. There is a gradual increase in production credit when compared to consumption credit in the study area. The purpose for credit demand and its utilization is more in consumption loans, which is showing decreasing trend over a period of time. SHGs promote micro-enterprise development in a significant way in small portions, which indicate the tiny nature of the enterprise. Though many NG0s have come forward to form SHGS. The SHGs promoted by Banks have proved to be strong and exhibited strong SHG-Bank linkage. NGO promoted SHGs are poorly organised in terms of micro- enterprises and establishing linkages with banks and sustainability of micro-enterprises as a group activity is a difficult proposition. Majority of the individual women micro-entrepreneurs in the study areas belong to younger age group and were self- starters in their business/trade. Most of the entrepreneurs in the study area in respect of occupational category prefer miscellaneous (other) activities and this trend indicates that they are unskilled and have no intention to take risk into standard business or product lines. Role of Banks and DRDAs as development agents has been marginal with limited perspective. Their ability in perceiving business opportunity for the BPL households is rather static. They merely serve as conduits for channeling of credit and subsidies to the SHGS. Some SHGs have been lending their savings to non-members in the villages at interest rates ranging from 36 to 60 percent per annum. This is typically in contrast with the objectives of self-help groups. Though women groups have been built into well-knit social groups, they have received very little help from any professional agencies in the matters relating to the identification of viable self-employment opportunities/micro-enterprises. Active intervention by district administration, professional bodies and voluntary organizations is a precondition for the successful conception of micro-enterprises In terms of skill training, designing products, providing new technology and access to market. There are evidences to suggest that SHGs as and when are stabilized could serve as a platform to help identify the potential entrepreneurs who could chart a

growth path to come out of poverty syndrome with credit, input and market support extended by Banks/SHPIs.