The benchmark of disbursing Rs 15 lakh crore in 2020-21 will need reengineering of SHGs’ business processes and products
By GR Chintala
The Covid-19 crisis, like a hydra-headed monster, opened multiple warfronts for a developing nation like ours. But, above all, it moved the focus to the deep bonds between urban growth and rural prosperity. It showed that, in any economic algorithm, a resilient $5-trillion economy is simply impossible without the participation of the poor. And that they must have a significant share in the 15% annual growth required in bank credit for achieving the $5-trillion mark by 2025.
In a world in which tons of numbers and percentages flash by you each second, developing a certain kind of immunity towards them seems understandable. And, for that reason, most of us in urban India, outside the development sector, have remained virtually unaware of the silent upsurge in the shape of Self-Help Groups (SHGs) and Joint Liability Groups (JLGs), which have emerged as the very bedrock of all developmental policy framework.
The NABARD SHG Bank Linkage Programme today covers an astonishing 124 million rural households. If we take a rural family to be a unit of, say, five members, then this programme has already covered nearly half a billion Indians. Surprised? Wait, there is more. These 124 million households hold some Rs 260 billion worth of deposits with the Indian banking system, and have availed loans worth nearly Rs 1,000 billion! Alongside, over 4 million JLGs received financial assistance to the tune of over Rs 831 billion from various banks during the previous year. This network of informal credit delivery system within itself holds the promise of managing the Covid-19 disruption, creating a $5-trillion economy and bringing India closer to being an atmanirbhar nation. How?
The math is fairly simple. The average loan disbursed to an SHG during 2019-20 was just about Rs 2.47 lakh. In a group of, say, 15 rural women or artisans, it comes to a princely sum of Rs 16,500 per person. For JLGs, the average credit per JLG comes to about Rs 167,000, or just about Rs 33,000 per JLG member who can be tenant farmer or an artisan. These are abysmally low figures by any estimate. Surely, a group of 15 women need more than that, more so in the post Covid-19 era.
Even if a simple cash credit limit of Rs 1 lakh is given to one SHG member, we are looking at an exponential growth in the economy. A rough estimate will show you that providing Rs 1 lakh per SHG member/artisan will need credit of Rs 15,300 billion. For the non-believers who ask what will a poor woman do with a cash credit limit of Rs 1 lakh, here is what this dynamic micropreneur may use it for: Purchase of seeds and a host of other raw materials, basic tools and implements, farm labour, a two-wheeler, a cart, a bicycle, travelling, packaging material, rentals, storage and marketing, besides meeting basic consumption needs. Surely, a lakh is just about enough for this long list of that SHG member or artisan. Our questions about the needs of the poor reveal our ignorance about their needs.
Face it, even today, in spite of the long journey covered a vast majority of our poor still battle the loop of roti, kapda aur makaan. And numbers vindicate the same. Domestic credit provided by the banking sector as percentage of GDP in India was 72.06% in 2018 (according to the World Bank); although all comparisons with China are frowned upon, this figure was massive at 310%.
How do we increase bank credit in a sustainable and scalable manner? Technology and a large bouquet of service providers have simplified the ‘how’ to a large extent. Close to 2 crore new accounts were opened under the Pradhan Mantri Jan-Dhan Yojana in the last quarter itself, taking the total to nearly 40 crore, with over 50% of these belonging to women. The total wireless subscriber base has zoomed to nearly 1.15 billion, while Aadhaar enrolments stand at a phenomenal 1.26 billion.
These amazing figures, which have translated into case studies in public policy colleges all over the world, provide a brilliant matrix of opportunities. It is time, indeed, to develop an organisation-neutral platform that encourages seamless integration of SHGs and JLGs through this JAM trinity. The Report of the Internal Working Group to Review Agricultural Credit released in 2019 by RBI also desired for a technology-driven portal for banks to facilitate ease of credit to farmers for agriculture and allied activities on the lines of ‘PSB Loans In 59 Minutes’ to MSMEs. In the short term, the benchmark of disbursing Rs 15 lakh crore in 2020-21 will need reengineering of SHGs’ business processes and products to suit aspirational Bharat’s dreams and expectations. That is the current imperative.
The NABARD’s EShakti Project, which captures credit history of an SHG and enables a bank to take lightning fast decisions (besides a lot more), is working towards building the core premises espoused by RBI in the Public Credit Registry (PCR) information infrastructure. The ultimate objective we have in front of us is audacious and will have a deep cascading effect—digitising the nearly 1 crore SHGs in the country. It is difficult but hugely possible with coordination amongst banks, NRLM/SRLMs and state governments. At stake is an equitable society with equal opportunities for the rural poor.
Many times we use the word ‘resilient’ for the poor and try and build imagery of valour around them, when, in reality, they are resilient simply because it is the difference between life and death. The poor will win the war against Covid-19 if we empathise with this resilience with understanding, commitment and honesty.
The author is chairman, NABARD. Views are personal