Competition Among the Micro Finance Institutions and Its Implications in Guntur District of Andhra Pradesh

7/31/2019 Competition Among the Micro Finance Institutions and Its Implications in Guntur District of Andhra Pradesh

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Research & Advocacy,APMAS

TITLE OF THE STUDY

COMPETITION AMONG THE

MICROFINANCE INSTITUTIONSAND ITS IMPLICATIONS


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RESEARCH QUESTIONS

What is the percentage of PoPs in SHGs?

What is the loan appraisal methodology?

What is the relationship between loan size,utilization, multiple loans/multiple doses,livelihoods and loan repayment?

What is the rate of defaulting? And reasons for

it? What extent banks are catering the financial

needs of SHGs?


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RESEARCH QUESTIONS

What is the role of mediators in SHG banklinkage

What is the scope, nature, and size of payments

and services? What extent other micro finance institutions

influence SHG Bank linkage?

What is the perceptional gap between banks

and SHGs on SHG bank linkage? What is the impact of SHG-Bank linkage on the

lives of the people?


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OBJECTIVES OF THE STUDY

To understand the quality of SHGs after bank-

linkage; To understand the coverage of SHG Bank linkage in

a branch;

To under the rate of default and the percentage of

over dues; To understand the financial resources/ agencies

other than banks to groups and their influence onSHGs and SHG-Bank Linkage;

To identify various needs of the groups and thestrategies for meeting the needs; and

To understand the impact of SHG-Bank Linkage onthe socio-economic life of the group members


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DATA NATURE OF DATA

Qualitative /Quantitative Primary /Secondary

SOURCES FOR DATA Banks/SHGs/DRDA/Velugu and NGOs

DATA COLLECTION TOOLS Interview Schedules

SHGs

Banks/Branch Managers NGOs


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SAMPLING UNIVERSE

SHGs linked to Andhra Bank in AP

REGIONS

All the 3 Regions in AP-Coastal , Rayalaseema and Telangana

DISTRICTS (3 -one from each region)

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


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SAMPLING..

BRANCHES IN THE DISTRICT(5) (3 X 5=15) 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) Purposive sampling

Period and amount of overdue No. of groups having over due

No. of groups linked to other MFIs


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SCENARIO OF COMPETITION WORLDWIDE

BANGLADESH

Intense competition

Interest rates have reduced

MFIs are slowly beginning to offer larger,individual-based enterpriseloans

32.1 % of loans have fallen overdue for

more than 2 years


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EASTAFRICA

Earlier stage of competition Uganda and Kenya : Saturated and

intense competition

Presence of Multiple membership Diversified product offerings :

Savings services

group-based loans

salary-based loans


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CENTRAL AMERICA

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 lucrativesegment of the market

Increased loan size

Asymmetric information ,multiple membership hascreated much problems - database maintained oninternet about multiple borrowers

Coordination among MFIs to maintain creditbureau


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INDIA

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


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ANDHRA PRADESH

Finest practices in micro finance Competition in pockets

Monopolistic market to large extent

Ad-hoc competition management strategy

Players in Andhra Pradesh Care (CASHE project), BASIX, Spandana, share

and SKS

SERP

Commercial banks, SIDBI, and RRBs

RMK, FWWB : bulk lending & capacity building

Thrift cooperatives : CDF


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SOCIAL CATEGORIES OF THE SHG MEMBERS

FIGURE SHOWING SOCIAL CATEGORIES OF SHG

SOCIAL CATEGORY

MIOCBCSCST

50

40

30

20

10

0 3

38

24

32

3


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LITERACY LEVELS

LITERACY LEVELS AMONG THE SHG MEMBERS

40.8

25.3

15.8

7.8 9.3

1.0

0.0

10.0

20.0

30.0

40.0

50.0

ILLITRATES

NEOLITERATES

PRIMARY

UPPER PRIMARY

HIGH SCHOOL

COLLEGE

PDSWhite cards -72%,Pink cards - 8 %


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PRIMARY OCCUPATION OF THESHG MEMBERS

DIFFFERENT OCCUPATIONS AMONG THE SHG MEMBERS

22.2

4.90.8 2.3

12.7

0.8

7.0

49.4

0.0

10.0

20.030.0

40.0

50.0

60.0

AGRICULTURE AG. LABOUR DAIRY CASTE OCCUPATION

SEASONAL BUSINESS PETTY BUSINESS PVT./GOVT.JOB OTHERS


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GRADING OF SHGs

A, 12

B, 35C, 52


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More than 1/3rd SHGs have distributed their

savings Received Rs.1,740 from distributed savings

Reasons The bankers adjust the old loans (such as crop

loans, individual loans, etc) taken by the familymembers

Increased internal defaulters

Few others withdrew for internal lending

Nearly 88% of the SHG do need basedlending from the savings

Average bank balance of the SHG : Rs.2,370.

SAVINGS


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INTERNAL LENDING,SAVINGS- DEFAULTING

67% of the borrowed loan from the savings areoutstanding

Avg. 5.7 members borrowed loan from savings

Avg. 4.5 members are defaulted to SHGs

Avg. savings borrowed per group: Rs.16,250

Avg. savings outstanding : Rs.10,940


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PERCENTAGE OF SHGsLINKED TO BANK

Percentage of SHGs Linked to Bank

61%

39% No. of SHGs Bank

Linked

No. of SHGs not

Bank Linked


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PERCENTAGE OF 1ST ANDREPEAT LINKAGES

Percentage of 1st and Repeat Linkages

52

RepeatLinkage, 48


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RATE OF DEFAULT

Kuchinipudi has maximum proportion (49.33percent) of groups overdue and amount ofloan overdue (8.82 percent)

In spite of having less number of SHGs,(compared to other mandals) have moredefault rate

Kolluru, Phirangipuram and Vinukonda havesizeable MFI activity

The SHG shows more tendencies to defaultwhen the socio economic conditions aredeficient

Sustainability of relationship of the group and

bank is decreasing.


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LOAN STATUS

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


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LOAN SIZE Lower caste find the loan size to be

adequate

Quantum of loan was inadequate for 77%of OC groups

Loan size found inadequate by 72 %SHGs borrowed loans from MFIs

45% of SHGs with MFIs membersreceived loan size between Rs.8,000-16,000 only


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SOCIAL CATEGORIES OF THE SHG-MFI MEMBERS

3

10

3

15

02

4

6

8

10

12

14

16

ST SC BC OC


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PRIMARY OCCUPATION OF THE SHG-MFIMEMBERS

More number of petty business and agri.labor

11

4

10

1 1

0

24

6

8

10

12

PETTYBUS

INES

S

MILCHC

ATTLE

AG.LA

BOUR

AGRICU

LTUR

EJOB


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CONTD

They are not Landless labor

Owns a house

Self employed with a minimum income ofRs.1500 or household income of Rs.2500per month


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RELATIONSHIP WITH MFIS 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 potentialcandidates 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 ofthe current loan taken from bank

Nearly half of the SHG maintain less than Rs.1000bank balance

Most of the 11 SHGs have borrowed fresh loans


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Relationship between MFI members and SHGdefaulters

AVG. NO. OF MEMBERS INSHG

11.38

AVG. NO. IN MFI 2.8

AVG. NO.OF DEFAULTERS TOBANK 8.13

NO. OF MFI MEMBERSDEFAULTERS TO SHG

20 out of 31 (64 %)

AMOUNT DEFAULTING TOSHG Rs.65700 (n= 11 SHGs)

NO. OF SHG LEADERS IN THEMFI

23 out of 31 (74.19%)


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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


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OPINION ON MFIs

High interest rates

Weekly installments

Strict monitoring Zero tolerance to default

Attitude of the staff


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IMPACT

SHG

Credit easily available

Free from moneylenders

Education levelsimproved

Self confidence

Leadership

SHG-MFI

More improvement inincome level

Access to pro poorprogramme

More employmentgeneration

Indebtedness Leadership

Group solidarity


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IMPLICATION OF COMPETITION

Increase in overall outreach

Increased efficiency and new products cateringto clients needs

Prices have decreased Loan size improved

Repayment schedule made convenient toborrowers

Compulsory savings decreased Planned promotion strategy and strategic

placement of services


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CHALLENGES

Retaining customers

Retaining motivated staff

Handling multiple membership and default

Improving operational efficiency

Organizational and financial sustainability

Credit discipline

Mobilize savings-given the existingregulations


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SUGGESTIONS

Proper grounding of SHG principles by trainingthe members

Retaining the SHG members in drought hit areaby providing livelihood activity

More repeat linkages for branches were lesseligible groups are present

Monitoring system of the banks to be

strengthened Fix a day per week for transactions of SHGs

only in the bank


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Research & Advocacy APMAS

Thank you

Competition Among the Micro Finance Institutions and Its Implications in Guntur District of Andhra Pradesh

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