Transcript STUDY OF DEFAULTING IN SHGs AND COMPETITION IN

TITLE OF THE STUDY
COMPETITION AMONG THE
MICROFINANCE INSTITUTIONS
AND ITS IMPLICATIONS
Research & Advocacy,APMAS
RESEARCH QUESTIONS

What is the percentage of PoPs in SHGs?
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What is the loan appraisal methodology?
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What is the relationship between loan size,
utilization, multiple loans/multiple doses,
livelihoods and loan repayment?
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What is the rate of defaulting? And reasons for
it?
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What extent banks are catering the financial
needs of SHGs?
Research & Advocacy,APMAS
RESEARCH QUESTIONS…

What is the role of mediators in SHG bank
linkage

What is the scope, nature, and size of payments
and services?
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What extent other micro finance institutions
influence SHG Bank linkage?
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What is the perceptional gap between banks
and SHGs on SHG bank linkage?
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What is the impact of SHG-Bank linkage on the
lives of the people?
Research & Advocacy,APMAS
OBJECTIVES OF THE STUDY

To understand the quality of SHGs after bank-linkage;
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To understand the coverage of SHG Bank linkage in
a branch;
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To under the rate of default and the percentage of
over dues;
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To understand the financial resources/ agencies other
than banks to groups and their influence on SHGs
and SHG-Bank Linkage;
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To identify various needs of the groups and the
strategies for meeting the needs; and
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To understand the impact of SHG-Bank Linkage on
the socio-economic life of the group members
Research & Advocacy,APMAS
DATA
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NATURE OF DATA
 Qualitative /Quantitative
 Primary /Secondary
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SOURCES FOR DATA
 Banks/SHGs/DRDA/Velugu and NGOs
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DATA COLLECTION TOOLS
 Interview Schedules
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SHGs
Banks/Branch Managers
NGOs
Research & Advocacy,APMAS
SAMPLING
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UNIVERSE
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REGIONS
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SHGs linked to Andhra Bank in AP
All the 3 Regions in AP-Coastal , Rayalaseema and Telangana
DISTRICTS (3 -one from each region)
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Stratified Sampling Technique
3 Districts- Guntur, Ananthapur and Karimnagar
No. of Linkages and Defaults in the branch
District in which AB is Lead Bank
District in which Andhra Bank is not a Lead Bank
Excluded the districts from the sample where APMAS has
conducted a study on SHG Bank Linkage in A.P. in the past
Research & Advocacy,APMAS
SAMPLING…..
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BRANCHES IN THE DISTRICT(5) (3 X 5=15)
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Stratified Random Sampling method
Regions within the district and development
No. of linkages
No. of default SHGs
MFIs located in that area-NGOs, MACS
SHGs IN THE BRANCH (15)(15 x 7 =105)
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Purposive sampling
Period and amount of overdue
No. of groups having over due
No. of groups linked to other MFIs
Research & Advocacy,APMAS
SCENARIO OF COMPETITION WORLDWIDE
BANGLADESH
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Intense competition
Interest rates have reduced
MFIs are slowly beginning to offer larger,
individual-based “enterprise loans”
32.1 % of loans have fallen overdue for
more than 2 years
Research & Advocacy,APMAS
EAST AFRICA
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Earlier stage of competition
Uganda and Kenya : Saturated and
intense competition
Presence of Multiple membership
Diversified product offerings :
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Savings services
group-based loans
salary-based loans
Research & Advocacy,APMAS
CENTRAL AMERICA
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In Nicaragua , MFIs enjoyed a virtual monopoly
Reduced interest rates on its larger loans from
3%to 2.5% per month
Larger loans at a wealthier, more lucrative
segment of the market
Increased loan size
Asymmetric information ,multiple membership has
created much problems - database maintained on
internet about multiple borrowers
Coordination among MFIs to maintain credit
bureau
Research & Advocacy,APMAS
INDIA
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More supply driven
Unregulated with low outreach
Inadequate flow of funds
Limited and standard range of products
Lack business orientation
No formal product promotion system
Research & Advocacy,APMAS
ANDHRA PRADESH
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Finest practices in micro finance
Competition in pockets
Monopolistic market to large extent
Ad-hoc competition management strategy
Players in Andhra Pradesh
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Care (CASHE project), BASIX, Spandana, share
and SKS
SERP
Commercial banks, SIDBI, and RRBs
RMK, FWWB : bulk lending & capacity building
Thrift cooperatives : CDF
Research & Advocacy,APMAS
SOCIAL CATEGORIES OF THE SHG MEMBERS
FIGURE SHOWING SOCIAL CATE GORIES OF SHG
50
40
PERCENTAGE
38
32
30
24
20
10
0
3
ST
3
SC
BC
OC
SOCIAL CATE GORY
Research & Advocacy,APMAS
MI
LITERACY LEVELS
LITERACY LEVELS AMONG THE SHG MEMBERS
50.0
40.8
40.0
30.0
ILLIT RAT ES
NEOLIT ERAT ES
25.3
PRIMARY
20.0
10.0
15.8
UPPER PRIMARY
7.8 9.3
HIGH SCHOOL
1.0
COLLEGE
0.0
PDS
White cards -72%,Pink cards - 8 %
Research & Advocacy,APMAS
PRIMARY OCCUPATION OF THE
SHG MEMBERS
DIFFFERENT OCCUPATIONS AMONG THE SHG MEMBERS
60.0
49.4
50.0
40.0
30.0
22.2
20.0
10.0
12.7
4.9
0.8
2.3
7.0
0.8
0.0
AGRICULTURE
AG. LABOUR
DAIRY
CASTE OCCUPATION
SEASONAL BUSINESS
PETTY BUSINESS
PVT./GOVT.JOB
OTHERS
Research & Advocacy,APMAS
GRADING OF SHGs
A, 12
C, 52
B, 35
Research & Advocacy,APMAS
SAVINGS
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More than 1/3rd SHGs have distributed their
savings
Received Rs.1,740 from distributed savings
Reasons
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The bankers adjust the old loans (such as crop
loans, individual loans, etc) taken by the family
members
Increased internal defaulters
Few others withdrew for internal lending
Nearly 88% of the SHG do need based
lending from the savings
Average bank balance of the SHG : Rs.2,370.
Research & Advocacy,APMAS
INTERNAL LENDING,SAVINGS- DEFAULTING
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67% of the borrowed loan from the savings are
outstanding
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Avg. 5.7 members borrowed loan from savings
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Avg. 4.5 members are defaulted to SHGs
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Avg. savings borrowed per group: Rs.16,250
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Avg. savings outstanding
Research & Advocacy,APMAS
: Rs.10,940
PERCENTAGE OF SHGs
LINKED TO BANK
Percentage of SHGs Linked to Bank
No. of SHGs Bank
Linked
39%
61%
Research & Advocacy,APMAS
No. of SHGs not
Bank Linked
PERCENTAGE OF 1ST AND
REPEAT LINKAGES
Percentage of 1st and Repeat Linkages
Repeat
Linkage, 48
52
Research & Advocacy,APMAS
RATE OF DEFAULT
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Kuchinipudi has maximum proportion (49.33
percent) of groups overdue and amount of
loan overdue (8.82 percent)
In spite of having less number of SHGs,
(compared to other mandals) have more
default rate
Kolluru, Phirangipuram and Vinukonda have
sizeable MFI activity
The SHG shows more tendencies to default
when the socio economic conditions are
deficient
Sustainability of relationship of the group and
bank is decreasing.
Research & Advocacy,APMAS
LOAN STATUS
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Avg. amount of loan borrowed Rs.28,550
Avg. amount of loan repaid
Rs. 9,590
Avg. amount of loan over due Rs.18,680
Avg. amt of loan outstanding Rs. 20,150
Avg. period of default : 13.4 months
Avg. loan per member :Rs. 2,510
Nearly 8 out of the 9 borrowed have defaulted
11 out of 34 SHG have multiple membership
Older groups are defaulting-54months
Research & Advocacy,APMAS
LOAN SIZE
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Lower caste find the loan size to be
adequate
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Quantum of loan was inadequate for 77%
of OC groups
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Loan size found inadequate by 72 %
SHGs borrowed loans from MFIs
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45% of SHGs with MFIs members
received loan size between Rs.8,00016,000 only
Research & Advocacy,APMAS
SOCIAL CATEGORIES OF THE SHG-MFI MEMBERS
15
16
14
12
10
10
8
6
4
2
3
3
0
ST
SC
BC
Research & Advocacy,APMAS
OC
PRIMARY OCCUPATION OF THE SHG-MFI
MEMBERS
11
10
4
1
PE
TT
Y
JO
B
1
BU
SI
NE
SS
M
IL
CH
CA
TT
LE
A
G
.L
A
BO
UR
A
G
RI
CU
LT
UR
E
12
10
8
6
4
2
0
More number of petty business and agri.labor
Research & Advocacy,APMAS
CONTD…
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They are not Landless labor
Owns a house
Self employed with a minimum income of
Rs.1500 or household income of Rs.2500
per month
Research & Advocacy,APMAS
RELATIONSHIP WITH MFIS
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Avg. no. of MFI members in SHG –2.8
Period of association with MFI :20.18 months
Less savings in SHGs where 5-6 MFI membership
Leader and active member are the potential
candidates for MFIs
Leader centered groups
63.64 % of C- grade SHG have multiple membership
8 out of the 11 SHGs have more than 7 defaulters of
the current loan taken from bank
Nearly half of the SHG maintain less than Rs.1000
bank balance
Most of the 11 SHGs have borrowed fresh loans
Research & Advocacy,APMAS
Relationship between MFI members and SHG
defaulters
AVG. NO. OF MEMBERS IN
SHG
AVG. NO. IN MFI
11.38
AVG. NO.OF DEFAULTERS TO
BANK
8.13
NO. OF MFI MEMBERS
DEFAULTERS TO SHG
20 out of 31 (64 %)
AMOUNT DEFAULTING TO
SHG
Rs.65700 (n= 11 SHGs)
NO. OF SHG LEADERS IN THE
MFI
23 out of 31 (74.19%)
2.8
Research & Advocacy,APMAS
REASONS FOR PREFERING MFIS
MORE THAN 80 % OF THE GROUPS
 Individual loan
 Adequate loan size and timely loan
 Multiple loans
 Less voluntary savings
 Procedures- take less time and money
 Loan at doorstep
 Less hassle of books of accounts
 Transparency in transactions
Research & Advocacy,APMAS
OPINION ON MFIs
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High interest rates
Weekly installments
Strict monitoring
Zero tolerance to default
Attitude of the staff
Research & Advocacy,APMAS
IMPACT
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SHG
Credit easily available
Free from moneylenders
Education levels
improved
Self confidence
Leadership
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SHG-MFI
More improvement in
income level
Access to pro poor
programme
More employment
generation
Indebtedness
Leadership
Group solidarity
Research & Advocacy,APMAS
IMPLICATION OF COMPETITION
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Increase in overall outreach
Increased efficiency and new products catering
to clients needs
Prices have decreased
Loan size improved
Repayment schedule made convenient to
borrowers
Compulsory savings decreased
Planned promotion strategy and strategic
placement of services
Research & Advocacy,APMAS
CHALLENGES
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Retaining customers
Retaining motivated staff
Handling multiple membership and default
Improving operational efficiency
Organizational and financial sustainability
Credit discipline
Mobilize savings-given the existing
regulations
Research & Advocacy,APMAS
SUGGESTIONS
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Proper grounding of SHG principles by training
the members
Retaining the SHG members in drought hit area
by providing livelihood activity
More repeat linkages for branches were less
eligible groups are present
Monitoring system of the banks to be
strengthened
Fix a day per week for transactions of SHGs
only in the bank
Research & Advocacy,APMAS
Thank you
Research & Advocacy,APMAS