State of the Sector Report 2010 - Microfinance Gateway

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16 MICROFINANCE INDIAamply clear that non-traditional states are increasinglyparticipating in SBLP. The direction of theprogramme over the long term is positive in moststates, though the progress is slow compared tosouthern states.Penetration of microfinanceAs in the previous year, microfinance penetrationindex (MPI) has been computed for the differentstates for the year 2010 as well. The index measureswhether the client acquisition in different states isproportional to the population and population ofpoor households.The southern region has more than proportionatecoverage of microfinance. West Bengal is thenew entrant in the list of top five states under MPIand MPPI. Four out of top five states under MPPIare from the southern region (Table 2.5).Table 2.5 Ranking of select states based on MPI and MPPITop 5Name of state MPI Name of state MPPIAndhra Pradesh 3.64 Andhra Pradesh 6.35Tamil Nadu 2.27 Tamil Nadu 2.77Orissa 2.00 Kerala 2.49Karnataka 1.57 Karnataka 1.74W. Bengal 1.48 W. Bengal 1.65Last 5Name of state MPI Name of state MPPIJammu and Kashmir 0.03 Jammu and Kashmir 0.13Punjab 0.07 Bihar 0.14Bihar 0.20 Punjab 0.22Haryana 0.23 Madhya Pradesh 0.27Gujarat 0.26 Uttar Pradesh 0.32Among low penetrations states, Bihar, and Jammuand Kashmir figure under MPI and MPPI. UnderMPPI, Madhya Pradesh and Punjab have madean entry into the list. The index is also a measure ofcomparative performance and, hence, when a statemakes absolute progress in microfinance, it couldstill lose out on rankings on account of comparativebetter performance by others. Across regions, apartfrom South, East seems to have done marginallywell. The MPI is better than MPPI in eastern states.The central region comprising most of the pooreststates has a long way to go in improving microfinancepenetration levels (Figure 2.3).Index Value3.503.002.502.001.501.000.500.00NorthernRegionMPIMPPINortheasternRegionEasternRegionRegionsCentralRegionFigure 2.3 Regional comparisons of MPI and MPPIMPI and MPPIThese two indices are presented every year forthe last three years. The calculation of the indexwas carried out as follows:The number of credit clients of MFIs andmembers of SHGs with outstanding loans tobanks were computed and each state’s share to thecountry’s total microfinance clients was workedout. The intensity of penetration of microfinance(also known as MPI) was computed by dividingthe share of the state in microfinance clients withthe share of population. Intensity of Penetrationof Microfinance among Poor (MPPI) was derivedby dividing the share of the state in microfinanceclients by share of the state in population of poor.Since the microfinance clients are in the numerator,a value of more than 1 indicates that clientsacquired were more than proportional to thepopulation. Higher the score is above 1, betterthe performance. Lower the score from 1—whichis the par value—the poorer is the performancein the state.Performance of BanksWesternRegionSouthernRegionCommercial banks’ share of borrowing SHGs remainedthe same at 67 per cent (revised data ofNABARD for 2009) as in last year. In terms of volumeof loans, commercial banks had a proportionatelyhigh share of 68 per cent. The RRBs share ofgroups and loans declined during the year (Figure2.5). RRBs lost 1 per cent share in groups linked and2 per cent share in loans outstanding compared to
Self-help group bank linkage programme—in search of leadership and direction 1722%2009. Cooperative banks improved their share ofSHG lending, with their share of groups increasingby 1 per cent to 11 per cent in 2010 (Figure 2.4). Incase of loans, their share in 2010 was 11 per cent(Figure 2.5), an increase of 5 per cent over last year(6 per cent). In the midst of revamp, the increasedexposure to low risk loans to SHGs makes goodbusiness sense for cooperatives.Commercial banks had the highest average loansper group of ` 60700. The average loan of RRBs increasedfrom last year’s level of ` 53500 to 55000 in2010. Cooperative banks saw an impressive increasein average loan per group to ` 59700 in 2010 from` 29700 in 2009. This doubling of average loans isbound to improve customer satisfaction and profitabilityof SHG lending operations of cooperativebanks.There is a significant difference between thenumber of saving groups and the number financed.One third of the groups savings linked, that is 2.23million groups, did not get a credit linkage as at endof March 2010. Commercial banks provided creditto 75 per cent of savings linked groups and RRBslinked 67 per cent of such groups. CooperativesTable 2.6 Bank loans outstanding against SHGsAgency11%67%Outstanding loans of SHGsNo. of SHGsCommercial BanksRegional Rural BanksCooperative BanksFigure 2.4 Shares of different types of banks in SHG loanoutstanding by number of groups11%21%68%Commercial BanksCooperative BanksRegional Rural BanksFigure 2.5 Shares of different types of banks in SHG loanoutstanding by amount of loansAmount of o/sloans (` mn)Commercial Banks 3055254 185689.5Regional rural Banks 1015851 55863.3Cooperative Banks 521247 31114.1Total 4587178 272666.9provided loans to less than half the savings linkedgroups. While cooperative banks may require a longertime of gestation to finance the groups, it is morelikely that shortage of lendable resource affects theirability to provide loans. Most groups undergo theinitial discipline as much for savings facility as forcredit availability. The longer the period betweenformation and first loan, the more the likelihoodthat groups would fall apart or start borrowing fromothers sources. Apart from savings linked groups notbeing covered by credit, there are also groups thatwere formed but never linked to a bank. Last year’sreport mentioned a figure of almost half a milliongroups formed by different entities. These are in thestates of Madhya Pradesh, Rajasthan, West Bengal,Chhattisgarh, Uttar Pradesh and Bihar. The formationof these groups had cost money which wouldgo unrecovered if the groups are not made use of fortheir potential, especially in financial inclusion.Commercial banks had a larger share of borrowinggroups but smaller share of saving groups. Cooperativeshad a disproportionately higher share ofboth number of groups that saved as also the amountof money that was saved. This has to do with thepractice in cooperative banks to wait for a long timeafter the group is formed and savings linked beforegiving the first loan. In the case of commercialbanks and RRBs, the groups once savings linked areprovided a loan as soon as it’s feasible. On the whole,commercial banks supported the SHGs much betterthan the RRBs and cooperatives. RRBs beingrural and local should have been natural partnersof SHGs. Even after consolidation of their business,the SHG focus of RRBs does not seem to be intense.South based RRBs seem to be more supportive ofSBLP than those in the north and central regions.Where states runs special projects, banks are marginallymore willing to finance the groups. Withaverage loan size having increased (much more soin some states than others), the original concept ofpurpose-neutral loans needs re-examination. Practicessuch as equal division of loans and frequentdistribution of savings and corpus should be scrutinizedand appropriate actions taken. Banks dealwith depositors’ funds. While they lend under socialor state pressure, the credit environment should notbe made forbidding.With very thin staff and the complexities of dealingwith groups where leaders tend to rotate eachyear, branches of banks find the large numbers ofgroups disconcerting. The branch managers ofbanks who in turn are rotated once in two or three
Page 1: Microfinance India
Page 4 and 5: Copyright ©ACCESS Development Serv
Page 7 and 8: List of Tables, Figures, Boxes,Abbr
Page 9 and 10: List of Tables, Figures, Boxes, Abb
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Page 13 and 14: ForewordAfter coping with the uncer
Page 15: ForewordxvI’m happy that the 2010
Page 18 and 19: xviiiMICROFINANCE INDIASadhan’s c
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Page 22 and 23: 4 MICROFINANCE INDIAcent in 2009. 1
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Page 29: Overview—the juggernaut decelerat
Page 32 and 33: 14 MICROFINANCE INDIASavings Perfor
Page 36 and 37: 18 MICROFINANCE INDIAyears have a l
Page 38 and 39: 20 MICROFINANCE INDIAThe study whil
Page 40 and 41: 22 MICROFINANCE INDIAper cent peopl
Page 42 and 43: 24 MICROFINANCE INDIAState andname
Page 44 and 45: 26 MICROFINANCE INDIAinnovation tha
Page 46 and 47: 28 MICROFINANCE INDIAANNEX 2.2Micro
Page 48 and 49: 30 MICROFINANCE INDIARegion/StateF
Page 50 and 51: 32 MICROFINANCE INDIAMFIs in the mi
Page 52 and 53: 34 MICROFINANCE INDIAreturn-on-asse
Page 54 and 55: 36 MICROFINANCE INDIAneeds introspe
Page 56 and 57: 38 MICROFINANCE INDIACompetition an
Page 58 and 59: 40 MICROFINANCE INDIAIt looks unfai
Page 60 and 61: 42 MICROFINANCE INDIAwas a commenda
Page 62 and 63: 44 MICROFINANCE INDIAterms of ideas
Page 64 and 65: 46 MICROFINANCE INDIAfast growth of
Page 66 and 67: 48 MICROFINANCE INDIASecond wave of
Page 68 and 69: 50 MICROFINANCE INDIABut to make MF
Page 70 and 71: 52 MICROFINANCE INDIA11. In Chapter
Page 72 and 73: 54 MICROFINANCE INDIAflow of funds
Page 74 and 75: 56 MICROFINANCE INDIAThe MHP requir
Page 76 and 77: 58 MICROFINANCE INDIAto boomerang o
Page 78 and 79: 60 MICROFINANCE INDIAlocal populati
Page 80 and 81: 62 MICROFINANCE INDIAInvestor Inves
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66 MICROFINANCE INDIAto have the la
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68 MICROFINANCE INDIAand it also ha
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Savings, investmentsand pensionMicr
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Savings, investments and pension 73
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On the other hand, a third of respo
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Policy environmentand regulationThe
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Policy environment and regulation 8
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Policy environment and regulation 8
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Technology in microfinanceMicrofina
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Technology in microfinance 91Other
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Technology in microfinance 93100%90
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Social performance,transparency and
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Social performance, transparency an
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Table 9.2 Mission orientation and a
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110 MICROFINANCE INDIATable 10.1 Wh
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112 MICROFINANCE INDIAtransfer serv
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114 MICROFINANCE INDIAManaging BC n
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116 MICROFINANCE INDIAdoes not seem
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118 MICROFINANCE INDIASHG Sahayog N
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120 MICROFINANCE INDIATo conclude,
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122 MICROFINANCE INDIA6. Further, b
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124 MICROFINANCE INDIASl. No. Recom
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126 MICROFINANCE INDIA• To provid
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128 MICROFINANCE INDIAInstitutional
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AppendixTable A.1 Fact sheet on cov
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Appendix 133Name of the bankCommerc
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Appendix 135mobilization by SHGs an
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BibliographyThe Union Budget 2010-1
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Bibliography 139‘How India Earns,
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