A PROJECT REPORT ON Role of NABFINS in women ...eprints.naarm.org.in/237/1/kamlendra final report_Rev.pdfA PROJECT REPORT ON Role of NABFINS in women empowerment through microfinance

A

PROJECT REPORT

ON

Role of NABFINS in women empowerment through microfinance in

Dhule (Maharashtra)

UNDER THE SUPERVISION OF

Dr. S. K. Soam

HEAD

INFORMATION AND COMMUNICATION MANAGEMENT

ICAR-NAARM, Hyderabad

SUBMITTED BY

Kamlendra Kumar

PGDM-1510

Post Graduate Diploma in Management (Agriculture)

ICAR-NAARM, Hyderabad

Indian Council of Agricultural Research

National Academy of Agricultural Research Management

Rajendranagar, Hyderabad (500030)

Telangana State, India

I | P a g e

CERTIFICATE

This is to certify that Mr. Kamlendra Kumar is a bonafide student of Post

Graduate Diploma in Management (Agriculture), ICAR-NAARM, Hyderabad, has

successfully completed the project work as prescribed by the Academy in the

partial fulfillment of the requirement of Post Graduate Diploma in Management

(Agriculture) for the academic year 2015 – 2017.

He has successfully completed his final project which is titled as “Role of

NABFINS in women empowerment through micro finance in Dhule

(Maharashtra)”.

PROJECT GUIDE

Dr. S. K. Soam

(HEAD) INFORMATION AND

COMMUNICATION MANAGEMENT

II | P a g e

DECLARATION

I, Kamlendra Kumar, student of Post Graduate Diploma in Management

(Agriculture), Indian Council of Agricultural Research – National Academy of

Agricultural Research Management, Hyderabad, do hereby solemnly and

sincerely declare, to the best of my knowledge and belief that the project titled

as “Role of NABFINS in women empowerment through microfinance in Dhule

(Maharastra)” in partial fulfillment of the award of Post Graduate Diploma in

Management (Agriculture) under the guidance of Dr. S.K Soam, Head

Information and Communication Management, ICAR – NAARM, Hyderabad is

my original work and the conclusions drawn therein are based on the data

collected by myself and all the contents and facts prepared and presented are

authentic without any bias.

The report submitted is my own work and has not been duplicated from any

other source. I shall be responsible for any irrelevant moment/situation.

Place : _ _ _ _ _ _ _ _

Date : _ _ _ _ _ _ _ _

KAMLENDRA KUMAR

PGDMA-1510

ICAR-NAARM, Hyderabad

III | P a g e

AKNOWLEDGEMENT

The success of the project is dedicated to the encouragement and guidance of

many people. I take this immense privilege to express my gratitude to the people

who have been an important part of the successful completion of this project.

I am thankful for all the knowledge, guidance and support imparted by our

director Dr. (Mrs.) R. Kalpana Sastry to me who gave me invaluable knowledge

during the final project.

In addition, I wish to convey deep sense of gratitude towards Dr. Ranjeet Kumar

(Head of the Agribusiness Management Division) for his valuable suggestions

and guidance for getting the data from different sources.

I would like to extend my heartfelt gratitude to Dr. K. Kareemulla, Dr. B. Ganesh

Kumar, and Dr. (Mrs.) Manju Gerard for the intellectual stimulation, monitoring

and providing continuous feedback to continue the project in desired direction.

I would also like to take this opportunity to thank the faculty members of

NAARM who have toiled hard in paving a solid foundation in me which is indeed

of great importance in carrying out the research work. My sincere thanks to Dr.

S.K. Soam (project guide) and who supported me throughout my project.

I would like to thank my family, fellow friends and juniors who are always there

to support and encourage me. I also thank all the persons who have given their

valuable time, views and authentic information for this project.

Date:

Kamlendra Kumar

PGDMA-1516

4

Table of contents

S.no Chapter Name Page no

1 Introduction 5-8

2 Objectives of study 9

3 Microfinance & Empowerment of Women 10-11

4 NABARD Financial Services Limited 12-23

5 Materials and Methods 24

6 Result and Discussion 25-28

7 Conclusion and Recommendations 29-30

8 References 31

5

1. Introduction

Microfinance is defined as any activity that includes the provision of financial

services such as credit, savings, and insurance to low income individuals which fall

just above the nationally defined poverty line, and poor individuals which fall below

that poverty line, with the goal of creating social value. The creation of social value

includes poverty alleviation and the broader impact of improving livelihood

opportunities through the provision of capital for micro enterprise, and insurance and

savings for risk mitigation and consumption smoothing. A large variety of sectors

provide microfinance in India, using a range of microfinance delivery methods.

Governments also have piloted national programs, NGOs have undertaken the

activity of raising donor funds for on-lending, and some banks have partnered with

public organizations or made small inroads themselves in providing such services.

This has resulted in a rather broad definition of microfinance as any activity that

targets poor and low-income individuals for the provision of financial services. The

range of activities undertaken in microfinance include group lending, individual

lending, the provision of savings and insurance, capacity building, and agricultural

business development services. Whatever the form of activity however, the

overarching goal that unifies all actors in the provision of microfinance is the creation

of social value.

1.1 Microfinance Definition

According to International Labor Organization (ILO), “Microfinance is an economic

development approach that involves providing financial services through institutions

to low income clients”.

6

In India, Microfinance has been defined by “The National Microfinance Taskforce,

1999” as “provision of thrift, credit and other financial services and products of very

small amounts to the poor in rural, semi-urban or urban areas for enabling them to

raise their income levels and improve living standards”.

The dictionary meaning of ‘finance’ is management of money. The management of

money denotes acquiring & using money. Micro Finance is buzzing word, used when

financing for micro entrepreneurs. Concept of micro finance is emerged in need of

meeting special goal to empower under-privileged class of society, women, and poor,

downtrodden by natural reasons or men made; caste, creed, religion or otherwise.

The principles of Micro Finance are founded on the philosophy of cooperation and

its central values of equality, equity and mutual self-help. At the heart of these

principles are the concept of human development and the brotherhood of man

expressed through people working together to achieve a better life for themselves

and their children.

Traditionally micro finance was focused on providing a very standardized credit

product. The poor, just like anyone else, (in fact need like thirst) need a diverse range

of financial instruments to be able to build assets, stabilize consumption and protect

themselves against risks. Thus, we see a broadening of the concept of micro finance

our current challenge is to find efficient and reliable ways of providing a richer menu

of micro finance products. Micro Finance is not merely extending credit, but

extending credit to those who require most for their and family’s survival. It cannot

be measured in term of quantity, but due weightage to quality measurement. How

credit availed is used to survive and grow with limited means.

7

1.2 Concept and Features of Micro-finance:

1. It is a tool for empowerment of the poorest.

2. Delivery is normally through Self Help Groups (SHGs).

3. It is essentially for promoting self-employment, generally used for:

(a) Direct income generation

(b) Rearrangement of assets and liabilities for the household to participate

in future opportunities and

(c) Consumption smoothing.

4. It is not just a financing system, but a tool for social change, specially for

women.

5. Because micro credit is aimed at the poorest, micro-finance lending

technology needs to mimic the informal lenders rather than the formal sector

lending. It has to:

(a) Provide for seasonality

(b) Allow repayment flexibility

(c) Fix a ceiling on loan sizes.

Microfinance approach is based on certain proven truths which are not always

recognized. These are:

1. That the poor are bankable; successful initiatives in micro finance

demonstrate that there need not be a tradeoff between reaching the poor and

profitability - micro finance constitutes a statement that the borrowers are not

‘weaker sections’ in need of charity, but can be treated as responsible people

on business terms for mutual profit .

2. That almost all poor households need to save, have the inherent capacity to

save small amounts regularly and are willing to save provided they are

motivated and facilitated to do so.

8

3. That easy access to credit is more important than cheap subsidized credit

which involves lengthy bureaucratic procedures - (some institutions in India

are already lending to groups or SHGs at higher rates - this may prevent the

groups from enjoying a sufficient margin and rapidly accumulating their own

funds, but members continue to borrow at these high rates, even those who

can borrow individually from banks).

4. 'Peer pressure' in groups helps in improving recoveries.

9

2. Objectives of study

The Dhule district previously comprised tracts of land predominantly inhabited by tribal population. The Dhule district was then bifurcated on 1 July 1998 into two separate districts now known as Dhule and Nandurbar, the latter comprising the tribal region. Agriculture remains the basic profession of the population in this district. Most parts of the district are not under irrigation and thus cultivation heavily depends on regular Monsoon or rain water. Apart from wheat, bajra, jowar or jwari, onion the most favored commercial crop is cotton.

Dhule district is famous for the production of milk. Milk cattle used to be fed with cotton pend (cattle feed made by using cotton extract)

Due to mostly tribal areas women are not activity oriented and devoid of financial support.

Objectives of study include:

To study the Scenario of Microfinance Industry

To study the Standard Operational Procedure (SOP) followed by NABFINS

To study the District level Financial Inclusion in Dhule (Maharastra) in study period

10

3. Micro Finance and Empowerment of Women

Self Help Groups (SHGs) have become the vehicle of change in the rural areas,

transforming the lives of the marginalized. Realizing that problems cannot be solved

alone, or by a single agency, small voluntary groups get together to pool their

resources, skills and talent to better their lives. SHGs organize the poor and the

marginalized to join hands to solve their problems and the method has been very

successfully used by the government and the Non-Government Organizations in

achieving several goals. As a form or enterprise, SHG performs the role of collective

banks and enterprises and ensure better access to loans with a lower rate of interest

to start or micro unit enterprises.

Empowerment is a social action process that promotes participation of people,

organization and communities in gaining control over their lives in their community.

There is urgent need of empowering women especially in rural areas. The formation

of Self Help Group and Micro Financing will enhance their socio- economic position

in the society.

Small loans can make good business sense among the women. It has been noticed

that women in particular stand to gain a lot from micro-finance because it gives them

an independent means of generating wealth and becoming self-reliant in a society

that does not offer them much scope for entrepreneurship. And since it is women

who run the household, a higher standard of living for women ensures better

governance and a healthier and more prosperous future for the children and a better

future for the nation. The success of micro credit initiatives has often been attributed

to their particular focus on empowering women and encouraging their self-reliance

through developing their own means of income. Various case studies show that there

is a positive correlation between credit availability and women's empowerment. It is

observed that majority of rural women who are associated with self-help group

activity positively succeeded to gain themselves empowered.

Women in rural India lived in virtual isolation, unable to access even the most basic

of services. But, with the formation of Women's Self-Help Groups, these women are

now achieving social and physical mobility. It is recognized that while the

empowerment of women is a process that will not happen automatically, SHG is a

suitable means for the empowerment of women. The impacts of SHGs on socio-

economic status of women were found significant.

11

Microfinance programs are currently being promoted as a key strategy for

simultaneously addressing both poverty alleviation and women's empowerment.

Where financial service provision leads to the setting up or expansion of micro-

enterprises there are a range of potential impacts including:

Increasing women's income levels and control over income leading to greater levels

of economic independence.

Access to networks and markets giving wider experience of the world outside the

home, access to information and possibilities for development of other social and

political roles.

Enhancing perceptions of women's contribution to household income and family

welfare, increasing women's participation in household decisions about expenditure

and other issues and leading to greater expenditure on women's welfare.

More general improvements in attitudes to women's role in the household and

community.

Why women SHGs

More than 60,000 women spread in 4 Blocks of Dhule District belong to the ‘Below

poverty line’ category ( their annual income is less than Rs. 24000. These women

are from different caste groups such as Scheduled Caste (SC), Scheduled Tribes (ST),

most backward Caste (MBC) backward caste (BC) and minority groups (Muslims).

Most of them are illiterates/semi-literates. Only 15 percent of this population own

economic assets, such as weaving looms, cows and goats, or a petty shop business.

If they need money, they cannot go to a bank to get a loan, so often their only choice

is to get a loan from a local money-lender, who usually charges outrages interest

rates (sometimes more than 100%!). Often such debts cannot be paid off in time, and

the individual or the family gets in deeper poverty, and sometimes leads to suicide.

The situation is especially poor for women, because they have often little or no

economic status, and especially when their husband is working elsewhere, they have

to face severe financial hardship.

12

4 NABARD Financial Services Limited

NABARD Financial Services Limited (NABFINS) is a subsidiary of National Bank

for Agriculture and Rural Development (NABARD) with equity participation from

NABARD(67%), Government of Karnataka(13%), Canara Bank(11%), and Union

Bank of India(5.7%), Bank of Baroda(3%), Dhanalakshmi Bank(3%) and Federal

Bank0.3). It is a non-deposit taking NBFC-MFI registered with Reserve Bank of

India and operate throughout India.

Fig: 3.1 Shareholders in NABFINS

The main objective of NABFINS is to provide financial services to unserved and

underserved activities. NABFINS envisages to evolve itself into a Model Micro

finance institution to set standards of governance among MFIS, operate with

exemplary levels of transparency, Operate at reasonable/moderate rate of interest and

provide financial Services at doorstep/near doorsteps of the clients.

The main focus of NABFINS is to Support livelihood activities of members of Self

Help Groups (SHGs), support institutions which serve disadvantaged sections of

populations like weavers, rural, artisans, urban poor, Small retail traders, small

producers, Small and marginal farmers, allied activities to agriculture etc.

67%

13%

11%

5.7%3%

0.3%

NABARD

Govt. of Karnataka

Canara Bank

Union Bank of India

Bank of Baroda

Federal Bank

13

Thus, NABFINS endeavors to establish and run a NBFC-MFI model which would

promote and sustain:

i) Good governance leading to transparency in accounting, remuneration and

disclosure,

ii) Reasonable rates of interest and low transaction Costs which earn a profit but do

not profiteer at the expense of the clients,

iii) Investment in activities that generate income in the short, medium and long

term and increase Capital assets with the poor families;

iv) Customized loans and repayment Schedules in order to respond to the diversity

of livelihood situations and

v) Fair practices which ensure that there is no over/ multiple lending or coercion in

Collection.

Keeping in mind these guiding norms, NABFINS intends to promote a culture,

organizational and business models which would -- "Balance business with inclusion

in growth". Inclusion focuses on the poor and marginalized.

NABFINS has currently its operations in- Madhya Pradesh, Maharashtra, Karnataka,

Andhra Pradesh, Tilangana, Tamilnadu, Chhattisgarh, Jharkhand, Bihar, Kerala,

Manipur and Mizoram which covers 92 districts

Fig:3.2 Financial Highlights of NABFINS

The total income of company for the year under review is ₹144.51crore which is

16.71% higher than the total income of ₹ 123.82 crore for previous year. The profit

before tax is ₹ 24.63 crore for the year ended March 31, 2016 as against ₹ 31.18

crore for the corresponding previous year.

144.51

123.82

24.6331.18

0

20

40

60

80

100

120

140

160

FY 2015-16 FY 2014-15

Rs

Cro

re

Total Income PBT

14

Fig: 3.3 Total SHG Network of NABFINS from 2012-2016

NABFINS client outreach is growing at a CAGR of 36.71% and has reached up to

5.54 lakh in 2016 from 1.16 lakh in 2012.

Fig: 3.4 NABFINS Loan Purpose Distribution

Most of the loan disbursed by the NABFINS is utilized in agriculture, agriculture

allied and Non-farm business which include poultry, dairy, handicraft, and other

small business like provision store etc..

1.16

2.36

3.8

5.095.54

0

1

2

3

4

5

6

2012 2013 2014 2015 2016

Clie

nt

(Lak

h)

Year

20%

27%

27%

6%

7%

7%

5% 1%

Agri

Agri Allied

Non Farm

Debt Swap

Houshold

Business

Housing

Health

15

Fig: 3.5 NGO linkages of NABFINS from 2012-2016

The number of B&DC are continuously increasing and reached up to 275 in the year

2016

Fig: 3.6 Amount disbursed by NABFINS from 2011-2016

Amount disbursed is the amount which has already been provided to SHGs as a loan,

It is Rs 808 crore in year 2016

NABFINS contributes only 1.5 % of the total MFI loan disbursement in 2015-16.

211

411

631

764808

0

100

200

300

400

500

600

700

800

900

2011-12 2012-13 2013-14 2014-15 2015-16

Rs

cro

re

67

103

161

268 275

0

50

100

150

200

250

300

2012 2013 2014 2015 2016

Nu

mb

er o

f B

&D

C

16

Fig: 3.7 Average loan size

Average loan size of year 2016 is 3.9 lakh which has come down as compare to 2015

which is 4.87 lakh due to less requirement of loan due to better monsoon and

company internal changes for risk mitigation

3.8 BUSINESS MODELS OF NABFINS:

NABFINs provides loans to individuals, groups such as Self Help Groups (SHGs),

Joint Liability Groups (JLGs), Institutions of the poor, etc.

At present NABFINS has distinct business models for financing the following

Customer segments

1. Self Help Groups (SHGs)/Joint Liability Groups (JIGs) under Business &

Development Correspondents/Facilitators model

2. Joint Liability Groups (JLGs) including special projects like Post Tsunami

Sustainable Livelihood Project (PTSLP) in Tamilnadu

3. Second Level Institutions (SLIs)

3.13.48

3.79

4.87

3.9

0

1

2

3

4

5

6

2012 2013 2014 2015 2016

Loan

Siz

e (R

s. L

akh

)

Year

17

In addition to the above three business models, NABFINS has also a direct linkage

model, wherein, SHGs are financed directly, wherever, the existing B & DC cease

to exist or failed and in areas where there is scarcity of good NGOs.

3.8.1 B & DF/B & DC MODEL:

Under this Model, NABFINS provides need based finance to Self Help

Groups"/Joint Liability Groups" through the intermediaries or "partners' named as

Business and Development Facilitators (B&DFs) or Business & Development

Correspondents (B&DCs). These B& DFS or B&DCs are typically, NGOs, local

grass root level organizations, Community Managed Resource Centers, Producer

Collectives, etc., who act as intermediaries between rural poor and financing

institutions. While the intermediary function of B&DF and B& DC are identical in

nature, i.e., providing financial linkage for SHGs, the only differentiating function

between these two intermediaries is that While B&DC handles Cash

disbursement/recoveries, B&DF Sources loans but does not cannot handle Cash.

Self Help Group (SHG): Self-Help Group (SHG) is a small voluntary association

of 10-20 poor people, preferably from the Same Socio-economic background. They

come together for the purpose of solving their common problems through self-help

and mutual help. The SHG promotes Small savings among its members. The Savings

is used for providing inter-loan among its members for various emergent needs,

surpluses are kept with a bank. This Common fund is in the name of the SHG.

Usually, the number of members in one SHG does not exceed twenty.

Joint Liability Group (JLG): It is an informal group Comprising of 4-10

individuals having affinity and Common interest, preferably engaged in a similar

economic activity - farm Or non-farm, i.e., small/marginal farmers, share Croppers,

shepherds, goat rears, artisans, weavers, petty traders, fruit/vegetable/grain Vendors

etc. They meet regularly and the groups formed based on the principles of self-help

and Cohesion for mutual benefit. A members of the JLG are jointly and severally

liable for the loan availed by each member.

The broad functions of a B & DC are as follows:

-Promotion and nurturing SHGS/Joint Liability Groups/Activity

Groups/Common interest Groups etc.

-Identification of groups for financing and selection of activities

18

- Collection of application and verification of primary information/data

- Processing and submission of application to NABFINS

- Facilitating disbursement of credit sanctioned by NABFNS at doorstep of SHG

- Post-sanction monitoring and follow-up of recovery

-Collection of installments/interest/charges at doorsteps of SHGs and remitting

the same to NABF NS account

- Monitoring and handholding of SHG/JLG/other groups and carrying

developmental activities for upliftment of members of the group.

NABFINS also provides/arranges for grant/support to B&DCs to promote, nurture

and build institutional capacity of SHGS/JLGs/Other groups.

Benefits of B & DF/B & DC Model:

NABFINS as well as the ultimate clients get following benefits from B & DC

model:

- The Service (Disbursement of loan & recovery) can be arranged at the place

and time, which is convenient to the clients

- Credit and enterprise Counseling can be provided taking into consideration

the local opportunities and potentials through B & DCS

- The transaction cost at both at client level can be moderated and the benefit

of this can result in lower transaction cost, which can be passed to the clients

through lower interest rates and charges

-Close and field level monitoring of financial services/support and utilization

can be ensured

- Increased outreach to even areas with poor access by engaging local grass

root level NGOs as B & DF/B & DCS

-Potential to bring Convergence of various developmental activities facilitated

by NGOs and meeting of credit needs required for inclusion in growth.

-Potential to nurture collectives of small/marginal farmers, service providers

etc. enabling them to participate in markets/growth.

-Rural borrowers with low social capital will not have any inhibition in

dealing with agencies/NGO working in the local areas.

-Access to the services including non-financial development services can be

ensured through B&DCs.

19

3.8.2 POST TSUNAMISUSTAINABLE LIVELIHOOD PROGRAMME

(PTSLP) MODEL:

Loans under the programme are provided to Producer JLGs/individuals covered

under the programme in six coastal districts of Tamilnadu, i.e., Nagapattinam,

Kanyakumari, Cuddalore, Vilupuram, Kancheepuram and Thiruvallur, where

extensive damage was caused by Tsunami in the year 2004, for setting up micro

enterprises. This is a sponsored programme of Government of Tamilnadu and

International Fund for Agricultural Development (IFAD). FAD assisted PTSLP

provide credit and enterprise support to build sustainable livelihood systems for

communities affected by tsunami.

At present, NABFINS provide loans to SHG/JLGs identified under the programme

as a part of the project cost, balance being financed by way of soft loan out of PTSLP

funds and margin money to be brought in by the borrower/s. Loans are provided

directly to JLGs through the Support of Project Monitoring Unit (PMU) of PTSLP.

3.8.3 SECOND LEVEL INSTITUTION (SLI) MODEL:

Second Level Institutions (SLI):

Though the Company has been predominantly involved into lending to SHGS, JLGs

using the B&DC model however, considering the importance and overall

requirement of the sector to promote and develop institutions of the poor, the

Company also has a separate vertical focusing only on financing SLIS.

Background:

As the rural production and service Systems are largely constituted of small and

marginal players, they are largely being disadvantaged and unorganized do not enjoy

the advantages of scale. This necessitates the need for Organizing these individuals

and small group of individuals into Common interest assembly.

There are three major areas of intervention that is required:

1. Organisation of the Small players through community organisation requiring

the intervention of agencies with social mobilization abilities.

2.Organisation of the common interest groups into efficient production/

processing Service providers into an institutional framework, providing end

to end Services requiring the intervention of agencies with higher

management abilities.

20

3. Arranging financial services requiring the intervention of agencies with high

risk appetite and an orientation to serve the under-privileged.

The first two components requires grant assistance and multi-institutional

collaboration. The financial services, more particularly credit could be supported by

the company.

Definition of second level Institutions

For the Purpose of providing financial assistance by NABFNS, an organization will

be called second level institution if

1. It is formed by a group of first level organizations like individuals, SHGs,

JLGs, Farmers' Or Artisans Groups/Societies and may include federations.

2 It is a registered body, and a legal entity.

3. Members of first level Organizations are the shareholders in the Organization

4. It deals with any business activity which could interiliac cover production,

processing, aggregation of primary produce or its value addition of primary

produce or marketing

5. It works for the benefit of the members of first level organization/members

6. Profit earned may be shared amongst the member or pooled to the share

capital or reserves of the SLI

Enabling Factors for a successful Second Level Institution

There are three enabling factors for a Successful Second Level Institution.

1. Apex Level: Co-ordination/Partnership/Tie-ups for aggregation, access to

market, finance, technology infusion, quality Control, etc.

2. Organization Level: Strong management, ability of Management to de-risk

the consumer and members.

3. Member Level: Enough motivation, incentives to members to remain

together, pool resources & capabilities to engage in market Centered

production.

21

Credit requirement in a Second Level Institution

Credit is one of the key requirements of a Second Level Institutions. Access to timely

and adequate Credit is difficult for the Second Level Institutions, partly deterred by

low profits made by SLI, weak balance Sheets, and in some cases, lack of ability

collateral being fledgling organisations of the poor with limited understanding of

finance. Even if credit support is extended to a Second Level Institution, it is usually

at high interest rates, which are unsustainable for SLls in the long run. Thus, the

difficulty experienced by SLS is not only for mere access to timely, adequate Credit

but also at reasonable and affordable terms.

Therefore, providing access to credit to such naive, pro-poor organisation is one of

the key interventions being pursued by the Company. The support to these

organisations could be in the form of working capital loans, term loans. While the

term loans could be used by these institutions for purchase of Capital assets,

equipment needed for processing, transport, infrastructure etc, however, the working

capital needs could be primarily used for purchase of inputs, consumables which

support primary production activities by the members. Many SLI like Souharda,

MACs also serve as credit facilitating or on-lending institutions, aggregating the

credit needs and also serving as credit providers at the grass roots for its own

members with other supportive and promotional role.

NABFNS engagement with Second Level Institutions.

The SLls with whom NABFINS work, falls into two categories;

a) Those which do not handle commodities/handicrafts etc. but federate

SHGS and CB05. These federations promote SHGs/CBOs, train them,

help to solve problems and build linkages, provide credit etc.

b) Those that manage commodities/handicrafts - do value addition,

processing, and Scale. This is an urgent requirement in the country where

these institutions have been neglected. However, the risk here is relatively

higher and this risk needs to be covered.

Appreciating the spirit of Collectivism and Cooperation NABFINS has initiated

extending financial support to second level institutions.

The line of activities of different SLs supported by NABFI NS include:

1) Dairy & Milk processing.

2) Procurement, Processing, value addition and marketing of different

commodities viz. Soya bean, Wheat, Bengal Gram, Red Gram, Paddy etc.

22

3) Silk (End to end from weaving to value addition and marketing).

4) Cotton (Procurement, Ginning, Processing and marketing).

5) SHG federations (for on lending to SHGS).

6) Seed Production and Marketing 7) Handloom weaving and readymade

garments.

8) Handicrafts (Bamboo crafts and other items).

9) Jaggery Production.

10) Terracotta Crafts.

NABFINS directly deals with SLIS and not through any intermediaries like B &

DCS.

3.8.4 Standard operation procedures followed by NABFINS for loan

distribution

Standard operation procedure has two main phase:

1. Selection and empanelment of B&DC

2. Loan Process

Business and Development Correspondents (B&DC): Institution/Association

who currently interface between the rural poor and financial institution can be

leveraged to provide support services to NABFINS as Business and Development

Correspondents (B&DC), under well-defined terms and conditions by way of

contractual agreement.

3.8.4.(a) Process of selection and empanelment of B&DC:

• Identification of NGO by District office and Due Diligence by District Team

• Obtain the application with documents and forward the appraisal to HO

• Field visit by HO team and Report submission at B&DC office

• Pre Empanelment meeting with HO team

• In-principle empanelment letter to B&DC at HO

• Committee Meeting at HO with B&DC

• Agreement/Contract with B&DC

23

3.8.4.(b) Loan Process

• Sponsorship letter of groups offered by B&DC

• Loan Application

• Group Grading ; KYC, Records, Bank Account Details

• Application Data Entry and Loan Application Sanction Process(CBS)

• Pre Disbursement Visit

• LAR (Within 15 days of Pre disbursement visit)

• Loan Repayment Start (After 30-45days)

• Post Disbursement Visit (Every three month)

3.8.(c) Grading Indicators:

The whole grading process consist of two types of scores that is financial scores

and Non-financial scores total of 100 marks. A group eligible for loan must score 80

out of 100.

Non-Financial parameters (40 marks)

o Group Governance/Homogeneity

o Conduct of Meetings(during last 6 months)

o Attendance and Meeting

o Financial Transactions in the Group

o Awareness about Financial Transactions

o Maintenance of records

Financial parameters (60 marks)

o Regularity in savings

o Regularity in Internal loan repayment

o Velocity of Internal Lending

o Pattern of Lending

o Borrowers quality

o Maintenance of Records

Documents presented at the time of group grading

Resolution for borrowing from NABFINS

Household Survey

Loan Pass Book/Ledger

All book of accounts

Photos of all members

KYC

Statement of Bank/MFI loan closure/Outstanding

24

Groups are not eligible for loan from NABFINS

No Internal lending

More than 3 members default in saving continuously

More than 3 member default in internal loan repayment continuously

Not completed 6 month vintage with BC who has sponsored the group

Low average saving/ Low Growth in saving of the group since formation as

per frequency of saving

25

4 Materials & Methods

Methodology Used

Survey method:

Data collection was done from each and every SHG as a KYC, grading

form and application form from place of meeting during grading

procedure for loan purpose

Nature and Source of Data:

Secondary data was extracted as required from the KYC, grading form

and application for every SHG.

Loan purpose was collected twice first at the time of grading and again

at the time of pre disbarment visit.

Sampling Procedure:

Purposive sampling of the SHGs from list of sponsorship letter

provided by B&DC

Area of study: Dhule Maharashtra

Period of Study: 60 days (45 days)

Sample size: 67 SHG

Tools used for analysis

Microsoft Excel

26

5 Results and discussion

Financial inclusion: is the delivery of financial services at affordable costs to

sections of disadvantaged and low-income segments of society. Financial refers to

all types of financial services, including credit, savings, payments and credit, from

all types of formal financial institutions.

This study was conducted in Dhule Maharashtra to examine the role extent of

financial inclusion and how far is it able to empower rural women population.

Financial inclusion has become one of the most critical aspects in the context of

inclusive growth and development.

NABFINS started operations in Dhule in Year 2015 and till 2017, it has credit

linkage with more than 300 women SHG through their B&DC model.

Study period was 1 February 2017 to 25th march 2017. NABFINS credit link the

SHGs following their standard operation procedure mention in chapter 3.

Total SHG linked during study period were-67

Table: Number of villages covered

Taluka Number of

villages

Number of SHG Type women/men

Dhule 8 24 women

Sakri 10 13 women

Sindkheda 6 12 women

Shirpur 7 18 women

Total 31 67

Total amount disbursed to 67 SHGs was Rs 13.94 Lakhs

First linkage SHG: The SHGs which were credit linked with NABFINS first time

is known as first linkage

27

Second linkage SHG: The SHGs which were credit linked with NABFINS second

time or they may have credit link first time with some other bank of MFI are known

as second linkage

Fig: 5.1 Fist linkage financial Institutions

Above distribution shows the MFIs available in Dhule which has already provided

loan to several SHGs. Major Share hold by NABFINS.

Fig: 5.2 Total amount disbursed in first linkage and second linkage

Above graph shows the breakup of total loan disbursed in fist linkage and second

linkage in Dhule in study period which also shows the average loan amount in both

the linkages which is better than DCB and other MFI (Field observation)

67%6%

18%

3% 3% 2%

NABFINS

Annapurna

DCB

ICICI

dhan laxmi

HDFC

24.92

0.83

114.5

3.09

0

20

40

60

80

100

120

140

Total Loan Amount Average of LoanAmount

Total Loan Amount Average of LoanAmount

Rs.

Lak

h

First Linkage Second Linkage

28

Fig: 5.3 Loan disbursed in different sectors

5.4 Some of the strengths and weaknesses observed in Business Partner B&DC

are.

Strengths:

NGO LUPIN has strong hold on their SHGs.

NGO has Digitalized the records of their SHGs

Well qualified, Good number of Staff and work efficiently

Well aware of operational procedures of NABFINS and other RRBs

Has various schemes for skill development program

Has small enterprises which provide hand holding to heir SHG like small

dairy

Weaknesses:

They try to dominate SHG and NABFINS Staff

Less groups are activity oriented

Record are maintained by B&DC staff which may lead to record

adjustments

5.5 Some of the issues observed in SHGs are

Lack of activity oriented groups

Lack of awareness about record keeping, banking procedures

Purposes of the loan are undecided which may become a constraint for

upliftment of their social and economic status

Dominating group representatives over the members which leads to misuse of

funds, conflicts among the members

26%

16%

10%

22%

8%

10%

8%agriculture

Garments business

Poultry

pur.of milch animal

inv. In small business

provision store

House hold activity

handicraft

irrigation

Education

29

5.6 Other General observations:

Loan disbursement duration –within 10 days of grading

There are NO over dues and non-performing assets

Maximum tenure period demanded by the groups are 24 months

Lupin NGO hand holding is very strong with the SHGs due to regular training programs and small enterprises setup with the help of SHGs

30

6. Conclusion and Recommendations

NABFINS operation is going well in Dhule and playing a major role women

empowerment through financial inclusion. As observed during the study period most

of the SHGs want credit linkage from NABFINS and prefer over other DCB and MFI

due to easy availability of credit, less time taken by NABFINS in loan sanction

process and low interest rate than other MFIs. Most of the loan disbursed by

NABFINs is mostly used by SHGs in agriculture and agriculture allied sectors and

some part of it also goes to small business where women are involved majorly. The

major strength of finance provided by NABFINS is the second linkage loan which

varies from 150000 to 800000 depending upon saving, performance and type of

business the group is involved, this type of big amount loans can be used for income

generation/ activity purpose rather than consumption. Through financial inclusion

NABFINS has supported many women involved in agriculture and agriculture allied

activities which indicate the women empowerment through financial inclusion.

Women empowerment

-Making them self-dependent on taking the decisions of life

-Providing opportunity to involve in income generating activities

-Providing opportunity to start some new business and be an entrepreneur

-Provide opportunity to avail benefits from different government schemes and

projects

-Provide opportunity to participate in group activities as men and to hold equal

decision making rights

6.1 Recommendations:

• Client centric approach : Customized product portfolio according to the

need of clients

• Training Initiative : Training and development programs for the staff and

Regular meetings with B&DC management team

• Digitization : To avoid the risk and manipulation of record

31

• Marketing : Introduction/Awareness about the products and services

to the groups on a common platform by

organizing/celebrating/sponsoring the social cause day at a district

level/ Financial melas

• Reports and Quarterly result announcements : Aware about the

financials to the root level hierarchy to improve the efficient and

knowledge and learn them about the competencies

• CSR activity implementations : At a district level women

empowerment/ young entrepreneurship development programs

organization to uplift the entrepreneurship

32

7 References

Mayoux, L. 1998. Women's Empowerment and Micro-finance programs:

Approaches, Evidence and Ways Forward.

Ackerley, B. (1995). Testing the Tools of Development: Credit Programmes , Loan

Involvement and Women's Empowerment. World Development, 56-68.

Syed M. Hashemi (1996): Rural credit programs and women's empowerment in

Bangladesh

Nayak, Purusottam and Mahanta, Bidisha (2009): Women

Empowerment in India.

Neeta Rani (2009): Women Empowerment in India

Tiyas Biswas (2006): Women Empowerment through Micro Finance: A Boon for

Development

Annual report (2015-2016): Nabard financial services Ltd.