PERFORMANCE OF SHG-BANK LINKAGE PROGRAMME IN NORTH EASTERN STATES OF INDIA: A COMPARATIVE ANALYSIS

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1 PERFORMANCE OF SHG-BANK LINKAGE PROGRAMME IN NORTH EASTERN STATES OF INDIA: A COMPARATIVE ANALYSIS Dr. NITASHREE BARMAN 1 Dr. KINGSHUK ADHIKARI 2 1 Guest Faculty, Department of Commerce, Cachar College, Silchar, Cachar, Assam Assistant Professor, Department of Commerce, Assam University (A Central University) Silchar, ABSTRACT Cachar, Assam The rationale behind introducing microfinance in India is poverty alleviation by means of delivering proper financial services to the marginalised segments of the society. The underprivileged section of the society could not access to the Indian formal financial system for their credit needs because the banks and other financial institutions used to provide financial services to the upper and middle strata of the society. The indifferent attitude of the financial institutions of India towards the economically challenged section of the society has practically forced to take birth of microfinance. Microfinance can empower the poor so that they can move on from relying on hand-outs to being self sufficient and seeing their incomes grow. Over the years, SHG-Bank Linkage Programme (SBLP) has emerged as a most positive form of microfinance in India. The existing literatures on SBLP claims that the programme of NABARD is remarkable as it is the largest micro-financing programme in the world and it is moving towards the right direction. It has become the common vehicle in the development process as it has outstanding trickle down effects on the socio-economic empowerment of the poor. The present paper makes an attempt to analyse the performance of the SHG-Bank Linkage Programme in the states of North Eastern Region (NER) of India. Keywords: Microfinance, SHG-Bank Linkage Programme, North Eastern Region INTRODUCTION The development of financial services has started with the nationalization of fourteen major private banks in Later on with the establishment of Regional Rural Banks (RRBs) in 1975 and nationalization of six more private banks in 1980 has shown new direction towards credit delivery mechanism system in the country. However, the banking network, established to meet the needs of the rural sector in general and the poor in particular, has not proved to be successful (Sinha, 2009). Thus, deficiencies of the banking services to the poor through Government-sponsored programme lead to the search for an alternative mechanism, which would ensure a better credit delivery system for the poor. Microfinance has evolved over the past quarter century across India. Microfinance has proven to be an effective and powerful tool for poverty reduction (Reddy & Manak, 2005). Self Help Group (SHG) is become the common vehicle of development process, meeting all development programmes. Self Help Groups are usually informal groups of poor people having similar socio-economic background and who have come together to realise some common goals based on the principles of self help and collective responsibility (Shylendra, 2008). At present, the most important mode of microfinance is the SHG-Bank Linkage Programme. The rise of SHGs with Bank Linkage Programme has made a dominant form of microfinance in India. In 1992, NABARD launched SHG Bank Linkage Programme, envisaging synthesis of formal financial system and informal sector has become a movement throughout the country. Thus, the SHG-Bank Linkage Programme has an importance in empowering as well as inculcating the habit of depositing savings by the members of 31 icmrrjournal@gmail.com

2 SHGs and thus reducing poverty, the main motto behind introducing the programme, through providing credit facility to the SHGs at a subsidised cost to assist financially their group business. Having this backdrop, the present paper attempts to analyse the performance of the SHG-Bank Linkage Programme in the context of North-Eastern states of India. North Eastern Region of India is comprised of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. The region is economically backward, characterized by low rate of growth and predominance of agriculture as the main source of livelihood, which creates disguised unemployment problem. Thus, the evaluation of the performance of SHG Bank Linkage Programme in the region has its own significance. LITERATURE REVIEW Puhazhendhi (2000) observed that progress of the SHG-bank linkage program in Tamil Nadu was by and large satisfactory. Bansal (2001) found that performance of SHGs-Bank linkage program in India is rapidly expanding its outreach under the pioneering initiative of NABARD. Commercial banks were in predominant position in those states where poverty incidences were low, while RRBs were dominant in poorer states. Das (2003) concluded that micro- credit-shg model got tremendous attention in recent years. The phenomenal growth of SHGs indicates that the weaker sections of the society are also capable to sharpen their micro-entrepreneurial skills with the help of their own savings and additional bank credit, as needed which claims that micro-credit-shg integrations could be away out for overall rural development. Selvachandra (2004) found that SHG bank linkage programme is boon to the poor and for bank a via media to reach the outreach in large numbers in the processes of economic development. Vanishree (2012) assessed the progress of the SHG-Bank Linkage Programme in India, where banking institutions faced different challenges in financing to SHGs. However, the programme has positive impact on social and economic livelihood of the people in rural areas. Sundaram (2012) concluded that SHG-Bank linkage programme has been able to improve socio-economic condition of the members of the SHG. Ghosh (2012) found that loans used for productive purposes and the regularity in repayment of bank loans increased along with the decrement of the dependency on moneylenders as well as the incidence of poverty among SHG households after the linkage programme. Thus, the study claimed that SHG-Bank linkage programme has significantly improved the rural poor s access to formal financial services and has positive impact on the socio-economic conditions of SHG households. Chary & Swvvasi (2013) reviewed the progress of SHG Bank Linkage programme in India with reference to loan outstanding against SHGs where Commercial Banks have the majority share of loan outstanding against SHGs followed by Regional Rural Banks and Co-operative Banks during the study period. Kumar & Golait (2009) found that SHG-Bank linkage programme was successful in Southern region of India but failed to achieve its goal in economically backward states of the country. Further, studies made by Borbora (2011) and Roy (2011) observed that growth of SHG-Bank Linkage programme in North Eastern Region of India was uneven and share of this region in disbursing bank loan to SHGs was lowest among all other regions of India. OBJECTIVES OF THE STUDY 1. To study the performance of SHG- Bank Linkage programme in North Eastern Region vis-a-vis India. 2. To analyse the performance of SHG- Bank Linkage Programme on selected counts in North Eastern states of India icmrrjournal@gmail.com

3 HYPOTHESES OF THE STUDY H 01 : The performance of SHG Bank linkage programme of individual states of North Eastern Region does not differ with the average performance of the region in terms of per SHG savings, loan disbursement, loan outstanding and non-performing assets. H 02 : There is no significant difference across the North Eastern states in terms of per SHG savings, loan disbursement, loan outstanding and non-performing assets. DATA AND METHODOLOGY The present study is quantitative in nature and based on secondary data. The study is being confined to the SHG-Bank Linkage Programme under micro finance and eight states of North-East India. The relevant secondary data for the period of four years i.e. from to , have been collected from the Status of Microfinance in India prepared by NABARD for relevant years. The performance evaluation of SHGs-Bank Linkage programme in North- Eastern states is based on four parameters, such as, per SHG savings, per SHG loan disbursed, per SHG loan outstanding and per SHG non-performing assets. Further, basic descriptive statistics, such as, mean and coefficients of variation as well as Compound Annual Growth Rate () have been used. ANOVA has been employed to test the significance of difference across the North Eastern states on selected parameters. RESULTS AND DISCUSSION Table 1 shows per SHG performance of SHG-Bank Linkage Programme in North Eastern Region vis-a-vis India during The average per SHG savings of NER was 4094 with coefficient of variation of 1.92 percent whereas in India the same was 9444 with coefficient of variation of percent. The highest amount of per SHG savings of 4164 deposited in 2009 and it started declining afterwards registering a negative compound annual growth rate of 1.19 percent. During the study period, the banks operating in the NER disbursed average per SHG amount of with the coefficient of variation of percent. The highest amount of per SHG loan of disbursed in 2011 while lowest of 58243in 2009 having compound annual growth rate of 7.13 percent. Table1: Per SHG performance of SHG - Bank Linkage Programme in North Eastern Region vis-a-vis India (Figures in ) North Eastern Region (NER) India Year Loan Loan Savings Disbursed Outstanding NPA Savings Loan Loan Disbursed Outstanding NPA 2009/ / / / Mean icmrrjournal@gmail.com

4 About loan outstanding, average per SHG outstanding amount comprised of percent of average per SHG disbursement. The highest per SHG loan outstanding of NER was in 2011while in case of India highest of was in 2012/13. Further, average per SHG NPA in NER was 3662 whereas in case of India the same was with coefficient of variation of percent and percent respectively. Moreover, compound annual growth rate of per SHG Non Performing Assets (NPA) of NER is percent while it is percent in case of all India. Table 2: Per SHG Savings under SHG - Bank Linkage Programme (Figures in ) States 2009/ / / /13 Mean A. Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Note: Figures in parentheses indicate p value of t statistic t-values (0.899) * (0.012) * (.000) (0.545) (0.156) (0.649) (0.474) (0.092) * indicates significant at the 0.05 level (2-tailed) Table 2 reveals per SHG savings in North Eastern states for the period of four years i.e. from to During the study period, on an average Mizoram has comparatively highest per SHG savings of 9991 registering highest compound annual growth of percent while it is lowest in case of Manipur with the amount of 1984 having negative growth rate of 2.70 percent. About the consistency in per SHG savings deposit, it is highest in case of Assam with lowest coefficient of variation (8.06 percent) while the same is lowest in case of Arunachal Pradesh with highest coefficient of variation (73.29 percent). The results of hypotheses testing show that per SHG savings of all the states except Mizoram, Sikkim and Tripura is lesser than the North Eastern Region. However, the difference is significant only in case of Assam and Manipur. Table 3 analyses per SHG loan disbursement in North Eastern states for the period of four years i.e. from to During the study period, on an average, Tripura disbursed comparatively highest amount of per SHG loan of while the same is lowest in case of Manipur ( 57971). With respect to consistency in disbursement, it is the highest in case of Manipur with lowest coefficient of variation (12.57 percent) while lowest is observed in case of Arunachal Pradesh with highest coefficient of variation (57.09 percent) icmrrjournal@gmail.com

5 Table 3: Per SHG Loan disbursed under SHG -Bank Linkage Programme (Figures in ) States 2009/ / / /13 Mean A. Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Note: Figures in parentheses indicate p value of t statistic t-values (0.826) (0.286) (0.064) (0.985) (0.085) (0.190) (0.705) * (0.005) * indicates significant at the 0.05 level (2-tailed) The of per SHG loan disbursement is the highest in case of Arunachal Pradesh with the growth rate of percent while Sikkim has lowest growth rate of 0.48 percent. Moreover, per SHG disbursement of all the states except Assam, Manipur and Sikkim and Tripura is greater than the North Eastern Region. However, the difference is significant in case of Tripura only. Table 4 shows state wise analysis of per SHG loan outstanding in North Eastern states for the period of four years i.e. from to During the study period, on an average, per SHG loan outstanding is the highest in Mizoram and lowest in Sikkim. About the consistency, it is highest in case of Assam with lowest coefficient of variation (7.14 percent) while lowest is observed in case of Arunachal Pradesh with highest coefficient of variation (56.22 percent). The analysis shows that the growth rate (43.67 percent) of Arunachal Pradesh was highest and on the other hand, Mizoram showed lowest growth performance with negative growth rate of percent icmrrjournal@gmail.com

6 Table 4: Per SHG Loan Outstanding under SHG -Bank Linkage Programme (Figures in ) States 2009/ / / /13 Mean A. Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Note: Figures in parentheses indicate p value of t statistic t-values (0.692) (0.451) * (0.029) (0.988) * (0.026) (0.951) * (0.039) (0.116) * indicates significant at the 0.05 level (2-tailed) The results of hypotheses testing show that per SHG loan outstanding for four states, namely, Assam Manipur, Meghalaya and Sikkim is lesser and in case of remaining states, it is greater than the average of North Eastern Region. However, the difference is significant only in case of Manipur, Mizoram and Sikkim. Table 5 provides per SHG non-performing assets in North Eastern states for the period of four years i.e. from to During the study period, on an average, Mizoram is troubled with comparatively highest amount of per SHG NPA of while Tripura performed under the SHG -BLP along with lowest per SHG NPA amount of About the consistency, it is the highest in case of Assam with lowest coefficient of variation (28.05 percent) while the same is the lowest in case of Mizoram with highest coefficient of variation ( percent). The state wise growth performance of the programme reveals that the is the highest in Tripura with percent while there is a negative growth rate in Mizoram and Arunachal Pradesh icmrrjournal@gmail.com

7 (Figures in ) INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW Table 5: Per SHG Non-performing Assets under SHG - Bank Linkage Programme States 2009/ / / /13 Mean A. Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Note: Figures in parentheses indicate p value of t statistic t-values (0.066) (0.589) (0.051) (0.249) (0.315) (0.132) (0.229) (0.056) The result of hypothesis testing shows that per SHG non-performing asset of all the states except Assam and Tripura is greater than the region as a whole. However, with respect to this particular parameter, there exists no significant difference between the values of individual states and the average value of the North Eastern Region as a whole. Table 6: Results of Analysis of Variance (ANOVA) Parameters F value p- value Results Per SHG Savings Significant Per SHG Loan disbursement Significant Per SHG Loan outstanding Significant Per SHG Non-performing Assets Insignificant Source: Computed Note: Level of Significance (α) is.05(2-tailed) Table 6 shows that the variation in the performance of SHG- Bank Linkage Programme across the North Eastern states in terms of per SHG Savings, Loan disbursement, Loan outstanding is statistically significant as the p value of the respective parameters is less than the α value i.e In other words, there exists statistically significant difference across the states with respect to these three selected parameters. Such result indicates that per SHG performance of the programme in the respective states is unparallel. Moreover, in terms of degree of dissimilarity of the performance, it is greatest in case of per SHG loan outstanding which is evident from the lowest p value of followed by per SHG loan disbursement (p= ) and per SHG savings (p= ). About per 37 icmrrjournal@gmail.com

8 SHG Non-Performing Assets the variation in the performance across the states of NER is not significant as the p value is greater than the level of significance (α). The result implies that the burden of having per SHG Non-Performing Assets is by and large parallel across the states. CONCLUSION The main objective of the present paper is to assess the performance of SHG- Bank Linkage programme in North Eastern states of India. The growth performance of the programme in the region in terms of per SHG saving and loan disbursement is not satisfactory compared to all India level whereas opposite is the result in case of per SHG loan outstanding and Non-Performing Assets. The results of two-tailed t test conclude that per SHG savings of all the states except Mizoram, Sikkim and Tripura is lesser than the region but the difference is significant only in case of Assam and Manipur. About per SHG disbursement, all the states except Assam, Manipur and Sikkim and Tripura are having greater amount than the region but the difference is significant in case of Tripura only. In case of per SHG loan outstanding, four states namely, Assam Manipur, Meghalaya and Sikkim are having lesser amount than the region and the difference is significant only in case of Manipur, Mizoram and Sikkim. In regard to per SHG Non-Performing Assets, all the states except Assam and Tripura are having greater amount than the region. Unlike the results of previous testing, in this particular parameter, the performance of SHG Bank linkage programme of individual states of North Eastern Region does not differ with the average performance of the region. Finally, it is observed that there is no significant difference across the states of NER in terms of all the selected parameters except per SHG Non-Performing Assets. Thus, the result implies that the recovery performance of all the states of the region is similar to a considerable extent. REFERENCES Bansal, H. (2001), SHG-Bank Linkage Programme in India: An Overview. Journal of Microfinance, Vol.5, No.1. Borbora, S. (2011), Commercial Banking and SHG-Bank Linkage Programme: A Review with Special Reference to North Eastern Region, in A.K. Agarwal and B. Singh (eds.), Understanding India s North East, Guwahati, DVS Publishers. Chary, S.N., and Savvasi, S. (2013), SHGs Bank-Linkage Programme - A Study of Loans outstanding of Banks against SHGs, International Journal of Business and Management Invention, Vol. 2, No. 1. Das, S. (2003), Self Help Groups and Micro-Credit: Synergy Integration, Kurukshetra, August. Kumar, P. and Golait, R. (2009), Bank Penetration and SHG-Bank Linkage Programme: A Critique, Reserve Bank of India. NABARD, Status of Micro Finance in India ( to ), Mumbai Puhazhendhi, V. (2000), Evaluation study of Self Help Groups in Tamil Nadu, National Bank for Agriculture and Rural Development, Mumbai. Reddy, C.S. and Manak, S. (2005), Self-Help-Groups: A Keystone of Microfinance in India S & Social Security, Mahila Abhivruddhi Society, Andhra Pradesh (APMAS), Hyderabad icmrrjournal@gmail.com

9 Roy, A. (2011), SHG Movement and the Development of Northeastern Region of India, A.K. Agarwal and B. Singh (eds.), Understanding India s North East, Guwahati, DVS Publishers. Selvachandra, M. (2004), Microfinance through Self Help Groups, Kisan World, Vol. 31, No. 11. Shylendra, H.S. (2009), Role of Self Help Groups, Yojana, January. Sinha, F. (2009), States of Microfinance in India. Institute of Microfinance, Retrieve from Sundaram, A. (2012), Impact of Self-Help Group in Socio-Economic Development of India, IOSR Journal of Humanities and Social Science, Vol. 5, No.1. Vanishree. (2012), An Insight into the SHG-Bank Linkage Programme, VSRD International Journal of Business & Management Research, Vol. 2, No icmrrjournal@gmail.com