Accident cover for micro credit units mooted

Harjeet Ahluwalia

New Delhi, Dec 9: The banking industry has proposed that members of self-help groups (SHGs) active in micro credit development in rural and backward areas be provided accident risk cover.

A suitable policy towards this end has been suggested to be worked out in coordination with the Small Industries Development Bank of India and insurance companies, industry officials said.

The move is said to be part of a strategy evolved by public sector banks (PSBs) to mitigate hardships faced by SHGs seeking financial assistance. The remedial measures propounded by PSBs include redefining of bank policies and long-term plans with this perspective.
Procedural formalities, orientation of bank officers and staff regarding the credit needs of women entrepreneurs in particular etc., have also been favoured. An insurance cover would also lend a level of comfort to those striving for the betterment of their fellow members, the officials argued.

Banks asserted that financing through SHGs was more successful in terms of both field-level impact and repayment of loans. The concept had taken deep roots in the southern states and in parts of western and central India.

However, the banks have suggested greater coordination among the implementing agencies to popularise the concept in other parts of the country.

Under the SHG-bank linkage programmes of Nabard, as many as 2.63 lakh groups were covered with 45 lakh members drawn from very poor families. Notably, 90 per cent of SHGs comprise only women members.
Cumulative micro credit from the banking system to these institutions amounted to Rs 480 crore as on March 31 this year.

As many as 43 commercial banks were involved in these schemes, along with 177 regional rural banks and 94 cooperatives spread over 412 districts. As many as 10.3 million beneficiaries have availed of bank finance under the various programmes with micro credit standing at Rs 188.16 crore.

Micro credit covers consumption and production loans for various farm and non-farm activities of the poor, as well as their other credit needs including housing and shelter improvements.

The Reserve Bank had set up a micro credit cell in 1999 for enhancing the reach of micro credit providers. In April the same year, the Swarnajayanti Gram Swarozgar Yojana also adopted SHGs as the main delivery channel. SHGs are homogeneous groups comprising up to 20 members each to help develop the saving habits and utilise the fund to saved for the benefit of its members. Once the group is established and a certain amount has been mobilised as corpus, financial assistance is extended to the group which, in turn lends to its members.