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Progress under the SHG
Bank Linkage Programme
records, overdues were the highest for groups that received low inputs of any kind, or mainly
development inputs.
22 Or an average of Rs 24,260 per SHG, representing one fifth of the portfolio in the southern sample and
5 percent in the northern. The proportion of groups with overdues ranged from 66 percent in AP (PAR
35 percent) to 12 percent in Rajasthan (PAR 2 percent). Both the proportion of groups with overdues,
and average PAR per group, were substantially lower for bank promoted groups than for government
or NGO promoted groups.
23 The picture that emerges on profitability is mixed. Around half the sample groups are operating on a
profit with a good return on assets of 65 percent, and a return on internal capital (savings plus
accumulated interest) of 11 percent. Around 20 percent of the sample groups are running at a loss,
and for the rest the data is lacking.
24 The two institutions (one of them an RRB) which had the highest 360 day PARs within the groups (19
and 13 percent) also had the highest in loans outstanding to the bank (13 and 9 percent respectively)
Like the other studies it did not examine loan default rates, except to note that they are low, but could
eventually pose a problem.
25 See Tankha (2002), and for a tabulation of other studies, Christen and Ivatury (2005).
26 Sakhi Samiti, a two-tier federation in Rajasthan promoted by PRADAN, which came second in the first
two "rounds", came out on top after both adjustments, while PRADAN itself (for its operations in
Lohardaga district in Jharkhand) which was on top in the first two rounds dropped to fourth position
(with an RoA of -1 percent) perhaps as a result of the high costs incurred on its Computer Munshi
scheme discussed below. It would be an instructive but much more difficult to undertake the exercise
after standardizing for SHG quality (or rather some definition it). The RRB came third with an RoA of
1, despite having the lowest promotion costs of the five institutions at $ 50 per group, which raises the
question of the adequacy of bank of interest rates under the programme. While banks are in practice
free to set their own rates, in practice they feel it would be impolitic to exceed the current average of
9 to 10 percent (with some banks such as SBI charging less, and the cooperative banks and PACS
charging more, about 12 to 13 percent), The evidence of bank profitability at these rates is discussed
in footnote 33 below. It will become one of more than academic importance once the pressure of
targets is removed, as is suggested below, and profitability is the major criterion.
27 The proportion of A grade groups was 66 percent, B groups 26 percent, and C groups 8 percent. The
study reports that the banks do not use the CRI because they feel it takes too long, and use their own
assessment procedures instead. It makes the point that grading should not just be an externally led
and externally assimilated exercise, but that SHPAs need to invest in engaging the groups in the
grading process so that they learn to appreciate the elements of good financial performance and
governance.
28 The same dynamics have been observed by APMAS (2006) in connection with AP federations.
29 In this case the study suggests the explanation is likely to be benign, and due to one or more of the
following: dropouts, a reorganization of membership, the possibility of some of the older groups
distributing part at least of their savings back to their members, or adjusting it against loans outstanding.
30 Of the 48 percent of loans received by the groups that were repeat loans, 32 percent were "2nd
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