A decade of Financing SGSY, a Self-employment Program for BPL Families
microfinance focus

By Dr. Amrit Patel,

Microfinance Focus, September 27, 2011:Since 1 April 1999 the Rural Financial Institutions in India have been financing Below Poverty Line [BPL] Families for Self-employment under the program “Swarnjayanti Gram SwarozgarYojana [SGSY]”. The program has a focused objective to bring the assisted BPL families [Swarozgaris] above the Poverty Line by providing themincome-generating assets through provision of bank credit and Government subsidy. The program aims at establishing micro enterprises in rural areas based on the ability of the poor and potential of each area.

Key components of the SGSY include [i] mobilization of rural poor to enable them to organize into Self-Help-Groups[SHGs] [ii] participatory approach in selection of key economic activities [iii] project approach for each key economic activity [iv] development of activity clusters to ensure backward and forward linkages [v] strengthening SHGs through Revolving Fund Assistance [RFA] [vi] provision of credit linked subsidy to help beneficiaries acquire income generating assets [vii] training of beneficiaries in group dynamics and skill development for managing micro-enterprises [viii] marketing support with focus on market research, upgradation and diversification of products, packaging, creation of marketing facilities [ix] provision of infrastructure development fund to provide missing critical links [x] active role of NGOs in the formation of SHGs and their capacity building [xi] prioritizing vulnerable groups of women, SC/ST, minorities and disabled. The SGSY also earmarks 15% fund for Special Projects for piloting innovative schemes for livelihood generation and taking up placement-linked skill development projects for providing wage employment to rural BPL in Private Sector

Performance: Starting with forming 2,92,426 SHGs in 1999-00, number of SHGs formed during 1-4-1999 to 31-1-2010 reached to 36,78,746, which included 68.3% women SHGs as against mandated 50%. Number of SHGs passed Grade-I and II accounted for 65.5% and 30.5% respectively of total SHGs formed reflecting slow progress. Total number of Swarozgaris assisted with credit and subsidy, was 1,32,85,688 taking up economic activities that comprised average 10 members of each SHG, individual Swarozgaris and those covered under special projects. Proportion of women Swarozgaris [57.6%] was higher than mandated 40% whereas SCs, STs, minorities and disabled was significantly less than mandated 50%, 50%, 15% and 3% respectively. Share of SHGs passed Grade-II [74.4%] in total SHGs taking up economic activities was quite low.

Fund utilization [74.9%] of available funds and 88.1% of allocated funds was quite low. Fund utilization for revolving fund assistance, infrastructure development, and marketing so critical to facilitate members of SHGs and individuals to take up viable economic activities and enhance credit absorption capacity was poor as compared to targets and utilization of subsidy. Fund utilization for training was significantly less than 5% in five years as against mandated 10%. Only in 2007-08 and 2008-09 it was more than 9%, which phenomenally shot up in 2009-10 resulting in overall utilization of 149.09%.This was attributed to organizing large number of training programs for trainers and training 21,11,960 SHGs and individuals, acknowledging the need for training field functionaries in the concept of promotion, nurturing and quality of working of SHGs, entrepreneurship development and marketing intelligence. Additional Rs.15 crore was earmarked in 2009-10..Extension Training Centers at the district level were specifically involved in the training of trainers and are being continued. .          .   

Training Institutes: Based on the experience of the Rural Development and Self-Employment Training Institute [RUDSETI] in Ujire, Karnataka jointly established by Shree D.M. Educational Trust, Syndicate Bank and Canara Bank in mitigating the problem of rural unemployment, Government since 2008-09 started establishing Rural Self-Employment Training Institute [RSETI] one in each district in the country to provide skill development training of BPL youths. The RSETIs are being established in partnership with public sector banks. As on 30 June 2010, 27 banks along with RUDSETI have taken up the responsibility of the management and functioning of 115 RSETIs in 115 districts of 19 States for which Government of India has released total grant of Rs.4246.18 lakh. During 2009-10, additional 200 RSETIs were expected to be established. 

Credit: Total credit disbursed to SHGs and individuals between 1April 1999 and 31January 2010 amounted to Rs.2427.37 crore. Targets for credit disbursement in the initial three years were ambitious, which were significantly reduced in following five years and then revised upwards. Accordingly, achievements as percentage to targets improved from 2003-04. However, overall achievement [60.4%] of target was significantly poor. SHGs had a share of 60.2% in credit and 61.5% in subsidy disbursement. Total investment [credit & subsidy] assisting 1,32,85,688Swarozgaris amounted to Rs.30,914.20 crore, of which credit component accounted for 67.35%. Per Swarozgharis investment progressively improved from Rs.17,113 in 1999-00 to Rs.30,181 in 2009-10, assisting 9,33,868 and 11,64,898 Swarozgaris respectively, with average investment of Rs.23,269 per Swarozgharis.

Region-wise Performance:
During 2009-10, region-wise performance under SGSY is assessed for 10 months ended 31 January 2010 for which data are available. By and large performance analysis up to 31 January 2010 during the financial year 2009-10 provides better understanding [i] since it excludes fag end rush to achieve targets and utilize allocated funds [ii] Implementing agencies having experience of not less than a decade are expected to show reasonably good progress through better learning, planning and coordination. Number of SHGs [1,17,144] formed in Southern region during 10 months in 2009-10 was little higher than annual average [1,13,680] of two months less in 11 years, whereas in all other regions the number was low and significantly less [26%] in Northern region. Share of women SHGs was significantly higher [77.2%] in 2009-10 than average [68.32%] during 1999-2010. During 2009-10 it was significantly higher in Southern, Western & Easter regions as compared with other regions, though more than 50% as mandated except in Central region. Training was accorded top priority during 2009-10 in all regions by utilizing 1577.99% of allocated funds to train 21,11,960 SHGs & individuals. Further, training focused on SHGs [93.5%]. Share of SHGs passed Grade-II in the total SHGs formed during 2009-10 in all regions was quite low with overall average of 29.5%.Total number of SHGs including those passed Grade-II provided with economic activities during the year was significantly higher in Easter region & moderately higher in other regions but significantly less in Northern region. However, proportion of SHGs passed Grade-II in total SHGs provided with economic activities in Eastern region was 63.7% reflecting poor performance. 

Credit:Credit disbursement as percentage [54.63%] to targets was significantly low. Southern, Northern & Central regions recorded appreciable achievements whereas other regions showed extremely poor performance. Share of subsidy disbursed to SHGs accounted for 73.48% of the total & was significantly higher than that of individuals in four regions as compared to Central & North-east regions. Investment [Credit plus subsidy] was significantly high in Central region, whereas it was modest in Southern & Eastern regions as compared to other three regions. Credit as percentage to total investment was significantly high in Southern & Northern regions whereas it was modest in three regions and poor in North-East region. Investment as well as credit per SHG was significantly higher in Northern, Central & Southern region than other regions..

Fund Utilization
: Total expenditure incurred during 2009-10 was 66.1% of the total allocated funds showing poor utilization of funds in all regions except North-East [117.9%]. Eastern and Southern regions utilized higher proportion of Revolving Funds than other regions. Only Eastern region utilized infrastructure development funds [19.4%] little less than mandated 20%, followed by Northern region [18.8%]. Only North-East, Southern and Eastern regions could utilize training funds more than mandated 10%. All regions utilized insignificant amount for marketing and other purposes.

Major deficiencies observed, among others, were [i] weaknesses in the planning and implementation process, formation, nurturing and working of SHGs [ii] subsidy acted as a tempting factor rather than enabling one to acquire income generating assets through bank credit resulting in unsatisfactory loan repayment as compared to SHG-Bank-Linkage Program [iii] estimated income was not generated because of lack of effective coordination and systematic monitoring of SGSY implementation [iv] heavy concentration on agriculture and that too milch animals [v] inadequate use of funds earmarked for capacity building and skill development training, infrastructure development and marketing support. Deficiencies were observed in varying degrees in all States but were more pronounced in States of North-East region, Uttar Pradesh, Uttrakhand, Himachal Pradesh, Rajasthan, Madhya Pradesh, Chhatisgarh, Bihar, Jharkhand, Orissa and West Bengal in particular.,             

Need For: On 2 October 1978 Government had launched Integrated Rural Development Program aimed at alleviating rural poverty by providing self-employment opportunities to the rural poor through capital subsidy and bank credit to help them acquire productive assets to cross the poverty line on a sustainable basis. The District Rural Development Agencies were specifically established for implementing IRDP. Between 1980-81 and November1999, about 535.22 lakh beneficiaries [including 44.7% SC/ST & 25.4% women] were provided Rs.11796.01 crore capital subsidy & Rs.21336.63 crore bank credit. However, implementation of IRDP till November 1999 and SGSY since April 1999 could not alleviate rural poverty as expected, as according to NSS round [2004-05], 41.8% rural population had monthly per capita expenditure of Rs.447, which some economists consider Below Starvation Line instead BPL. Besides, according to Multidimensional Poverty Index [MPI] worked out by UNDP & Oxford University, July 2010, about 645 million people [55%] in India are poor. As against 410 million MPI poor in 26 of the poorest African countries, eight Indian States [Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal] have 421 million MPI poor. The MPI reveals a vivid spectrum of challenges facing the poorest households. MPI considers 10 sharp indicators, namely Education [child enrolment and years of schooling]; Health [child mortality and nutrition] and Standard of living [electricity, drinking water, sanitation, cooking fuel, flooring and assets]. A global report on poverty eradication of the U.N. Secretary-General [2010] shows that economic growth is evident for the progress in China in reducing extreme poverty and raising living standards, whereas India is expected to be home to more than 300 million in poverty out of 900 million predicted to be in extreme poverty in 2015. Acknowledging the fact that out of the estimated 70 million rural BPL households as per 2010 projections, as many as 45 million households still need to be organized into SHGs and the existing SHGs need further strengthening and intensive financial support, the Government of India has approved the restructuring the SGSY as the National Rural Livelihoods Mission [NRLM] to be implemented in a mission mode across the country. However, the planning and implementation of NRLM should be integrated with ongoing programs of health, education, drinking water, sanitation, housing, fuel, transport and communication [instead NRLM being implemented in isolation] so as to create direct impact on the quality of life of rural households in terms of human development index. Besides, following enabling measures need sharp focus.

1. Role, responsibilities and functions of all stakeholders involved in the implementation of NRLM need to be well defined so as to ensure that BPL Swarozgaris manage their assets efficiently and earn sufficient to come out of poverty within three years.

2. Potential Linked Plans being formulated annually by NABARD for each district should serve as a resource document for preparing village, Block and District level NRLM plans incorporating formation of SHGs, their needs for training for skill development and capacity building, utilization of funds to support infrastructure development, technology and market and make economic activities bankable. .

3.The initiative of RSETIs should, among others, focus on capacity building and empowering SHGs on lines of SHG-Bank-Linkage Program being implemented in the country as well as the Society for Elimination of Rural Poverty [SERP] in Andhra Pradesh f SHGs. to  enable them to.[i] involve members to identify income generating activities totally based on their occupational skills, local resources, markets and economic viability; obtain bank credit and Government subsidy on time and use them to generate expected level of income, repay credit on time and improve their standard of living.[ii] share among SHGs within a Block/District their experience of success and failures to continuously improve the project planning and implementation.[iii] take full advantage of new technology to improve quality of products, enhance business opportunities, and explore markets for their products. [iv] fully utilize the allocated and available funds for Revolving Fund Assistance, infrastructure development, marketing initiatives, training for skill development and forming SHGs Federations to create enabling environment and enhance credit absorption capacity that can impact on program outcomes[v] prepare quality bankable loan proposals acceptable to banks.

4.Banks having considerable experience in formulating, implementing and monitoring the Service Area Credit Plans since April 1989 should be in a better position to incorporate bankable economic activities covering more secondary and tertiary sectors rather than primary sector. Financial literacy and Credit counseling must be an integral part of NRLM to educate BPL Swarozgaris.

5.The NRLM should benefit from [i] a number of District Rural Industries Projects promoted by NABARD covering progressively 106 districts since 1993-94 that provide valuable insight in exploring and exploiting the unfathomable potential of rural industries and [ii] several schemes of NABARD to promote and support rural non-farm sector including schemes for women.

6.Resourceful and experienced Institutions, such as District Industries Centers, Khadi& Village Industries, Handicrafts, Handlooms, Sericulture and Coir Boards working since long have a significant role to enhance product quality and link activities with marketing.

7.Performance of NRLM must be systematically and in detail monitored quarterly at Block, District and State level to improve quality of planning and implementation and ensure achieving end objectives. Performance at Block level should be monitored village-wise and bank-wise, at District level block-wise and bank-wise and State level district-wise and bank-wise. Academic institutions operating in a district or State must be involved to evaluate the impact of SGSY including repayment of bank credit on a yearly basis.

8.Progress including deficiencies in implementation along with recovery of credit as revealed in quarterly monitoring and yearly impact evaluation must be released in local print and electronic media quarterly to seek feedback and improve program quality. Website of Ministry of Rural Development should make available full details including recovery of bank credit.

9. NRLM would need comprehensive half yearly monitoring-cum-concurrent evaluation in each district right from beginning during the Twelfth Five Year Plan period. .

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Much depends on the States where NRLM impact is concerned

This is a succinct and timely piece.

There is potential for NRLM to build upon from where SGSY has left. Graduation of SGSY from a SHG-based microfinance programme to a self-employment promotion programme has been probably, the weakest performance area and hence, supporting and building businesses of and for the poor may be an area of focus, depending on the pre-NRLM and post-SGSY baseline of a State.

Since the States are in-charge of NRLM implementation, quality of governance and development programming capacities of States will play a defining role in effectiveness of NRLM. My experience from the status of various Government-funded development programmes in a North Indian State shows that investments in human resource development are considered largely un-necessary by GOs (to the extent that in a certain programme, funds meant for capacity building are proposed to be diverted for physical works much against the National Guidelines issued for the same). Investments in altering this outlook and developing a "grow-others" attitude among Government functionaries can also come from NRLM!

The State is too afraid to innovate or even plan as per its own priorities, looking at the AP MODEL (and the Central nod) all the time. The result is that by the time the Northern State has tightened its belt, the Southern States have taken and used Central funds and are already charting the next phase of a programme. While a programme like NRLM requires diverse experience and expertise to come together, GO-SGSY functionaries on the field are hardly aware as to how NRLM will roll out and "impact their offices". The NGOs which have promoted SGSY groups on field are not clear as to how NRLM roll out will impact the existing groups and often find themselves unprepared to field queries from SGSY members on this aspect. Such opacity is inimical to success of an ambitious programme like NRLM - it will be much better to do direct cash transfers to the poor households rather than pumping tax-payers' money through a system and structure fearful of change and insecure of other development stakeholders.
Hoping for good intent, common sense and capabilities to prevail,

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