Research & Advocacy,APMAS TITLE OF THE STUDY COMPETITION AMONG THE MICROFINANCE INSTITUTIONS AND ITS...

Research & Advocacy,APMASResearch & Advocacy,APMAS

TITLE OF THE STUDYTITLE OF THE STUDY

COMPETITION AMONG THE COMPETITION AMONG THE MICROFINANCE INSTITUTIONS MICROFINANCE INSTITUTIONS

AND ITS IMPLICATIONSAND ITS IMPLICATIONS


RESEARCH QUESTIONSRESEARCH QUESTIONS

What is the percentage of PoPs in SHGs?What is the percentage of PoPs in SHGs?

What is the loan appraisal methodology?What is the loan appraisal methodology?

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

What is the rate of defaulting? And reasons for What is the rate of defaulting? And reasons for it?it?

What extent banks are catering the financial What extent banks are catering the financial needs of SHGs?needs of SHGs?


RESEARCH QUESTIONS…RESEARCH QUESTIONS…

What is the role of mediators in SHG bank What is the role of mediators in SHG bank linkagelinkage

What is the scope, nature, and size of payments What is the scope, nature, and size of payments and services?and services?

What extent other micro finance institutions What extent other micro finance institutions influence SHG Bank linkage?influence SHG Bank linkage?

What is the perceptional gap between banks and What is the perceptional gap between banks and SHGs on SHG bank linkage?SHGs on SHG bank linkage?

What is the impact of SHG-Bank linkage on the What is the impact of SHG-Bank linkage on the lives of the people?lives of the people?


OBJECTIVES OF THE STUDYOBJECTIVES OF THE STUDY To understand the quality of SHGs after bank-To understand the quality of SHGs after bank-

linkage;linkage; To understand the coverage of SHG Bank linkage in To understand the coverage of SHG Bank linkage in

a branch;a branch; To under the rate of default and the percentage of To under the rate of default and the percentage of

over dues;over dues; To understand the financial resources/ agencies To understand the financial resources/ agencies

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

To identify various needs of the groups and the To identify various needs of the groups and the strategies for meeting the needs; andstrategies for meeting the needs; and

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


DATADATA NATURE OF DATANATURE OF DATA

Qualitative /Quantitative Qualitative /Quantitative Primary /Secondary Primary /Secondary

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

DATA COLLECTION TOOLSDATA COLLECTION TOOLS Interview SchedulesInterview Schedules

SHGsSHGs Banks/Branch ManagersBanks/Branch Managers NGOsNGOs


SAMPLING SAMPLING UNIVERSEUNIVERSE

SHGs linked to Andhra Bank in APSHGs linked to Andhra Bank in AP

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

DISTRICTS (3 -one from each region)DISTRICTS (3 -one from each region) Stratified Sampling TechniqueStratified Sampling Technique 3 Districts- Guntur, Ananthapur and Karimnagar3 Districts- Guntur, Ananthapur and Karimnagar No. of Linkages and Defaults in the branchNo. of Linkages and Defaults in the branch District in which AB is Lead BankDistrict in which AB is Lead Bank District in which Andhra Bank is not a Lead BankDistrict in which Andhra Bank is not a Lead Bank Excluded the districts from the sample where APMAS has conducted Excluded the districts from the sample where APMAS has conducted

a study on SHG Bank Linkage in A.P. in the pasta study on SHG Bank Linkage in A.P. in the past


SAMPLING….. SAMPLING….. BRANCHES IN THE DISTRICT(5) (3 X 5=15)BRANCHES IN THE DISTRICT(5) (3 X 5=15)

Stratified Random Sampling methodStratified Random Sampling method Regions within the district and developmentRegions within the district and development No. of linkagesNo. of linkages No. of default SHGsNo. of default SHGs MFIs located in that area-NGOs, MACSMFIs located in that area-NGOs, MACS

SHGs IN THE BRANCH (15)(15 x 7 =105)SHGs IN THE BRANCH (15)(15 x 7 =105) Purposive samplingPurposive sampling Period and amount of overduePeriod and amount of overdue No. of groups having over dueNo. of groups having over due No. of groups linked to other MFIsNo. of groups linked to other MFIs


SCENARIO OF COMPETITION WORLDWIDESCENARIO OF COMPETITION WORLDWIDE

BANGLADESHBANGLADESH

Intense competitionIntense competition Interest rates have reduced Interest rates have reduced MFIs are slowly beginning to offer larger, MFIs are slowly beginning to offer larger,

individual-based “enterprise loans”individual-based “enterprise loans” 32.1 % of loans have fallen overdue for 32.1 % of loans have fallen overdue for

more than 2 yearsmore than 2 years


EASTEAST AFRICAAFRICA Earlier stage of competitionEarlier stage of competition Uganda and Kenya : Saturated and Uganda and Kenya : Saturated and

intense competitionintense competition Presence of Multiple membership Presence of Multiple membership Diversified product offerings :Diversified product offerings :

Savings servicesSavings services group-based loansgroup-based loans salary-based loanssalary-based loans


CENTRAL AMERICACENTRAL AMERICA In NicaraguaIn Nicaragua , , MFIs enjoyed a virtual monopoly MFIs enjoyed a virtual monopoly Reduced interest rates on its larger loans from Reduced interest rates on its larger loans from

3%to 2.5% per month 3%to 2.5% per month Larger loans at a wealthier, more lucrative Larger loans at a wealthier, more lucrative

segment of the marketsegment of the market Increased loan sizeIncreased loan size Asymmetric information ,multiple membership has Asymmetric information ,multiple membership has

created much problems - database maintained on created much problems - database maintained on internet about multiple borrowersinternet about multiple borrowers

Coordination among MFIs to maintain credit Coordination among MFIs to maintain credit bureaubureau


INDIAINDIA

More supply drivenMore supply driven Unregulated with low outreach Unregulated with low outreach Inadequate flow of funds Inadequate flow of funds Limited and standard range of products Limited and standard range of products Lack business orientation Lack business orientation No formal product promotion systemNo formal product promotion system


ANDHRA PRADESHANDHRA PRADESH Finest practices in micro finance Finest practices in micro finance Competition in pocketsCompetition in pockets Monopolistic market to large extent Monopolistic market to large extent Ad-hoc competition management strategy Ad-hoc competition management strategy Players in Andhra PradeshPlayers in Andhra Pradesh

Care (CASHE project), BASIX, Spandana, share and Care (CASHE project), BASIX, Spandana, share and SKS SKS

SERPSERP Commercial banks, SIDBI, and RRBs Commercial banks, SIDBI, and RRBs RMK, FWWB : bulk lending & capacity building RMK, FWWB : bulk lending & capacity building Thrift cooperatives : CDFThrift cooperatives : CDF


SOCIAL CATEGORIES OF THE SHG MEMBERSSOCIAL CATEGORIES OF THE SHG MEMBERS

FIGURE SHOWING SOCIAL CATEGORIES OF SHG

SOCIAL CATEGORY

MIOCBCSCST

PE

RC

EN

TA

GE

50

40

30

20

10

0 3

38

24

32

3


LITERACY LEVELSLITERACY LEVELSLITERACY LEVELS AMONG THE SHG MEMBERS

40.8

25.3

15.8

7.8 9.3

1.00.0

10.0

20.0

30.0

40.0

50.0

ILLITRATES

NEOLITERATES

PRIMARY

UPPER PRIMARY

HIGH SCHOOL

COLLEGE

PDSPDSWhite cards -72%,Pink cards - 8 %White cards -72%,Pink cards - 8 %


PRIMARY OCCUPATION OF THEPRIMARY OCCUPATION OF THE SHG MEMBERS SHG MEMBERS

DIFFFERENT OCCUPATIONS AMONG THE SHG MEMBERS

22.2

4.90.8 2.3

12.7

0.87.0

49.4

0.0

10.0

20.0

30.0

40.0

50.0

60.0

AGRICULTURE AG. LABOUR DAIRY CASTE OCCUPATION

SEASONAL BUSINESS PETTY BUSINESS PVT./GOVT.JOB OTHERS


GRADING OF SHGsGRADING OF SHGs

A, 12

B, 35C, 52


More than 1/3More than 1/3rdrd SHGs have distributed their SHGs have distributed their savingssavings

Received Rs.1,740 from distributed savingsReceived Rs.1,740 from distributed savings Reasons Reasons

The bankers adjust the old loans (such as crop The bankers adjust the old loans (such as crop loans, individual loans, etc) taken by the family loans, individual loans, etc) taken by the family membersmembers

Increased internal defaultersIncreased internal defaulters Few others withdrew for internal lending Few others withdrew for internal lending

Nearly 88% of the SHG do need based Nearly 88% of the SHG do need based lending from the savingslending from the savings

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

SAVINGSSAVINGS


INTERNAL LENDING,SAVINGS- DEFAULTING INTERNAL LENDING,SAVINGS- DEFAULTING

67% of the borrowed loan from the savings are 67% of the borrowed loan from the savings are outstandingoutstanding

Avg. 5.7 members borrowed loan from savingsAvg. 5.7 members borrowed loan from savings

Avg. 4.5 members are defaulted to SHGsAvg. 4.5 members are defaulted to SHGs

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

Avg. savings outstanding : Rs.10,940Avg. savings outstanding : Rs.10,940


PERCENTAGE OF SHGs PERCENTAGE OF SHGs LINKED TO BANKLINKED TO BANKPercentage of SHGs Linked to Bank

61%

39% No. of SHGs BankLinked

No. of SHGs notBank Linked


PERCENTAGE OF 1PERCENTAGE OF 1STST AND AND REPEAT LINKAGESREPEAT LINKAGES

Percentage of 1st and Repeat Linkages

52

Repeat Linkage, 48


RATE OF DEFAULTRATE OF DEFAULT Kuchinipudi has maximum proportion (49.33 Kuchinipudi has maximum proportion (49.33

percent) of groups overdue and amount of loan percent) of groups overdue and amount of loan overdue (8.82 percent)overdue (8.82 percent)

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

Kolluru, Phirangipuram and Vinukonda have Kolluru, Phirangipuram and Vinukonda have sizeable MFI activity sizeable MFI activity

The SHG shows more tendencies to default when The SHG shows more tendencies to default when the socio economic conditions are deficientthe socio economic conditions are deficient

Sustainability of relationship of the group and bank Sustainability of relationship of the group and bank is decreasing.is decreasing.


LOAN STATUSLOAN STATUS Avg. amount of loan borrowed Rs.28,550Avg. amount of loan borrowed Rs.28,550 Avg. amount of loan repaid Rs. 9,590Avg. amount of loan repaid Rs. 9,590 Avg. amount of loan over due Rs.18,680Avg. amount of loan over due Rs.18,680 Avg. amt of loan outstanding Rs. 20,150Avg. amt of loan outstanding Rs. 20,150 Avg. period of default : 13.4 monthsAvg. period of default : 13.4 months Avg. loan per member :Rs. 2,510Avg. loan per member :Rs. 2,510 Nearly 8 out of the 9 borrowed have defaultedNearly 8 out of the 9 borrowed have defaulted 11 out of 34 SHG have multiple membership11 out of 34 SHG have multiple membership Older groups are defaulting-54monthsOlder groups are defaulting-54months


LOAN SIZELOAN SIZE Lower caste find the loan size to be Lower caste find the loan size to be

adequateadequate Quantum of loan was inadequate for 77% Quantum of loan was inadequate for 77%

of OC groupsof OC groups Loan size found inadequate by 72 % Loan size found inadequate by 72 %

SHGs borrowed loans from MFIsSHGs borrowed loans from MFIs 45% of SHGs with MFIs members 45% of SHGs with MFIs members

received loan size between Rs.8,000-received loan size between Rs.8,000-16,000 only16,000 only


SOCIAL CATEGORIES OF THE SHG-MFI MEMBERSSOCIAL CATEGORIES OF THE SHG-MFI MEMBERS

3

10

3

15

0

2

4

6

8

10

12

14

16

ST SC BC OC


PRIMARY OCCUPATION OF THE SHG-MFI PRIMARY OCCUPATION OF THE SHG-MFI MEMBERSMEMBERS

More number of petty business and agri.laborMore number of petty business and agri.labor

11

4

10

1 1

02468

1012


CONTD…CONTD…

They are not Landless laborThey are not Landless labor Owns a houseOwns a house Self employed with a minimum income of Self employed with a minimum income of

Rs.1500 or household income of Rs.2500 Rs.1500 or household income of Rs.2500 per monthper month


RELATIONSHIP WITH MFISRELATIONSHIP WITH MFIS Avg. no. of MFI members in SHG –2.8Avg. no. of MFI members in SHG –2.8 Period of association with MFI :20.18 monthsPeriod of association with MFI :20.18 months Less savings in SHGs where 5-6 MFI membership Less savings in SHGs where 5-6 MFI membership Leader and active member are the potential Leader and active member are the potential

candidates for MFIscandidates for MFIs Leader centered groupsLeader centered groups 63.64 % of C- grade SHG have multiple membership63.64 % of C- grade SHG have multiple membership 8 out of the 11 SHGs have more than 7 defaulters of 8 out of the 11 SHGs have more than 7 defaulters of

the current loan taken from bankthe current loan taken from bank Nearly half of the SHG maintain less than Rs.1000 Nearly half of the SHG maintain less than Rs.1000

bank balancebank balance Most of the 11 SHGs have borrowed fresh loans Most of the 11 SHGs have borrowed fresh loans


Relationship between MFI members and SHG Relationship between MFI members and SHG defaultersdefaulters

AVG. NO. OF MEMBERS IN SHG

11.38

AVG. NO. IN MFI 2.8

AVG. NO.OF DEFAULTERS TO BANK

8.13

NO. OF MFI MEMBERS DEFAULTERS TO SHG

20 out of 31 (64 %)

AMOUNT DEFAULTING TO SHG

Rs.65700 (n= 11 SHGs)

NO. OF SHG LEADERS IN THE MFI

23 out of 31 (74.19%)


REASONS FOR PREFERING MFISREASONS FOR PREFERING MFIS

MORE THAN 80 % OF THE GROUPS MORE THAN 80 % OF THE GROUPS Individual loanIndividual loan Adequate loan size and timely loanAdequate loan size and timely loan Multiple loansMultiple loans Less voluntary savingsLess voluntary savings Procedures- take less time and moneyProcedures- take less time and money Loan at doorstepLoan at doorstep Less hassle of books of accountsLess hassle of books of accounts Transparency in transactionsTransparency in transactions


OPINION ON MFIsOPINION ON MFIs

High interest ratesHigh interest rates Weekly installmentsWeekly installments Strict monitoringStrict monitoring Zero tolerance to defaultZero tolerance to default Attitude of the staff Attitude of the staff


IMPACT IMPACT

SHGSHG Credit easily availableCredit easily available Free from moneylendersFree from moneylenders Education levels Education levels

improvedimproved Self confidenceSelf confidence Leadership Leadership

SHG-MFISHG-MFI More improvement in More improvement in

income levelincome level Access to pro poor Access to pro poor

programmeprogramme More employment More employment

generationgeneration IndebtednessIndebtedness Leadership Leadership Group solidarityGroup solidarity


IMPLICATION OF COMPETITIONIMPLICATION OF COMPETITION

Increase in overall outreach Increase in overall outreach Increased efficiency and new products catering Increased efficiency and new products catering

to clients needsto clients needs Prices have decreasedPrices have decreased Loan size improvedLoan size improved Repayment schedule made convenient to Repayment schedule made convenient to

borrowersborrowers Compulsory savings decreasedCompulsory savings decreased Planned promotion strategy and strategic Planned promotion strategy and strategic

placement of servicesplacement of services


CHALLENGESCHALLENGES

Retaining customersRetaining customers Retaining motivated staffRetaining motivated staff Handling multiple membership and defaultHandling multiple membership and default Improving operational efficiencyImproving operational efficiency Organizational and financial sustainabilityOrganizational and financial sustainability Credit discipline Credit discipline Mobilize savings-given the existing Mobilize savings-given the existing

regulations regulations


SUGGESTIONSSUGGESTIONS

Proper grounding of SHG principles by training Proper grounding of SHG principles by training the membersthe members

Retaining the SHG members in drought hit area Retaining the SHG members in drought hit area by providing livelihood activityby providing livelihood activity

More repeat linkages for branches were less More repeat linkages for branches were less eligible groups are presenteligible groups are present

Monitoring system of the banks to be Monitoring system of the banks to be strengthened strengthened

Fix a day per week for transactions of SHGs Fix a day per week for transactions of SHGs only only in the bank in the bank


Thank youThank you

Research & Advocacy,APMAS TITLE OF THE STUDY COMPETITION AMONG THE MICROFINANCE INSTITUTIONS AND ITS...

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