POVERTY REDUCTION STRATEGY TN

a. Micro Credit
Micro credit schemes have succeeded in a significant way in many countries. In India
also, these are showing signs of success although the progress may be different in
different states. Micro credit is extended to the poor without the need for collateral. It is
based more on his participation in the self-help groups. Many banks are now entering this
market seeing this as a viable marketing option. Micro credit directed to poor is
considered as part of retail banking. The success of the Kisan Credit Card scheme,
launched in 1998-99, is an important dimension of micro credit. Extension of this scheme
to the informal sector is now being undertaken.
The concept of Self Help Groups promoted by NABARD for financing the poor by
formal institutions and non-formal institutions was started in 1991-92. The Swarnajayanti
Gram Swaryojana (SGSY) facilitates credit linkage with banks for self help groups in rural
areas. The Tamil Nadu government provides a subsidy in the form of Revolving Fund
(RF) of an amount of Rs. 10000 per SHG. Correspondingly, the banks provide cash credit
of up to Rs. 30000 per group. This scheme was earlier made applicable only to rural
SHGs. But in 2006-07, Government of Tamil Nadu has implemented the RF subsidy
scheme in urban areas also. In 2008-09, the scheme has been extended to all eligible self
help groups, totaling to about 1.50 lakh in number. Total number of SHGs is 3.67 lakh of
which 1.07 lakh are based in urban areas. The loan repayment rate is 99 percent. Every
year, nearly 25000 new SHGs are being formed. Appendix Table 6.1 gives details of
physical and financial achievements of self help groups in Tamil Nadu.
b. Micro Insurance
As discussed in Chapter 2, there is considerable volatility in agricultural prices. Farmers
are exposed to large fluctuations in output as well as prices, which leads to variations in
agricultural incomes. The element of uncertainty in agriculture is recognised to be far
higher than that in other sectors. Analysts say that there are four key aspects to making
the micro insurance of the poor a viable business proposition. These relate to
affordability, insurability, marketability and profitability. The insurance costs and the
related premium need to be kept low in order to ensure affordability. This is one aspect
where government subsidies have also been recommended, either directly to the poor for
insurance or indirectly to the company/organisation offering insurance. The second
aspect relates to risks in insurance. Predictability of the risk is an important aspect in
determining its insurability as well as the corresponding premium. For any poor, most
risks are high and relate to many aspects of his life. To reduce risks and make the
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