Financial Inclusion Conference - Sa-Dhan

BREAKAWAYSESSION - 3F i n a n c i a l I n c l u s i o n C o n f e r e n c e - 2 0 1 2“The First Mile Walk into the Financial System”currently the livelihood finance to community is inadequate. However, Sujeevanahelped people in getting adequate finance after which people themselves did notborrow from multiple sources. He mentioned that IDF received excellent supportfrom the bankers and expressed hope that in the coming times, with increasedtechnology, the paperwork will get reduced and efficiency will increase in SHGlending.Mr Parshuram Nayak put forth some of the practical issues and processes thatmake flow of finance difficult to SHGs. Mr Nayak started by listing down the keystakeholders of SHGs which included the government, NGOs, governmentdepartments, private players, banks, evaluation agencies and regulators.He further explained that these stakeholders are overburdening SHGs by usingthem as delivery and marketing channels for provision of range of governmentschemes or selling products. On funding side, Mr Nayak said that for lending to theSHGs or to the MFIs, bank apply equal rigour as they do for any commercialinvestment, although this is considered to be priority sector lending.He explained that SHGs are expected to fulfill elaborate documents, bookkeepingnorms, asset quality parameters and are rated internally as well as externally. MrNayak presented a list of assessments and rigorous exercise that SHG has to gothrough to avail funds. He mentioned that similar process is also adopted by banksin lending to MFIs, which eventually lend to SHGs. Such complex processaccording to Mr Nayak is a constraint in flow of funds.Mr Thakkar of SBI explained the bankers’ perspective and the reasons behindslowdown of SHG lending in the last two years. According to Mr Thakkar the keyreasons for the slowdown in SHG lending rate and deterioration in SHG portfolioquality in last two years was on account of:• Increased focus of banks on expanding outreach in non-banked areas throughexpansion of branch network and Business Correspondents (BC). Hementioned that in the last two years over 73,000 new villages have been coveredunder banking, of which SBI alone has covered around 12,000 villages. Heexplained that this expansion will continue, SBI for next year has a target ofincluding 7,5000 more un-banked villages• Focus on opening new banks accounts. Over 14.5 million new no-frill accountshave been opened in the last two years• Decreased contact of bank with SHGs due to shift of focus on area expansionand opening new accounts• High number of staffs retiring and commensurate numbers not recruited yet• Influence of NREGA on SHGsMr Thakkar said that slowdown in SHG lending is only a temporary phenomenon34