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Gujarat steps in to back microfinance for SHGs….Jyotsna Bhatnagar
Ahmedabad: Even as the central bank attempts to streamline the operations of private micro financiers and states like Andhra Pradesh try to shield low-income clients from MFI exploitation, Gujarat is busy putting in place a Rs 1,500-crore network of microfinance linkages to empower over 2 lakh self help groups (SHGs) in the state. Once in place, this will be the country’s largest government-driven micro-finance linkage involving nationalised banks.
The project is one among the several conceived under chief minister Narendra Modi’s Rs 20,000-crore Mission Mangalam, which aims to provide a million livelihoods through self-employment by integrating self-help groups in the corporate value chain. Memoranda of understanding for the projects were signed at the Vibrant Gujarat Global Investment Summit in January. Government sources associated with the project revealed that the formal banking system is playing a pivotal role by providing micro finance linkages. While Rs 300 crore has already been linked, proposals received from large public sector banks for pumping in the remaining Rs 1,200 crore are awaiting clearance.
The project aims at linking the state’s 2 lakh SHGs with a minimum of Rs 50,000 cash-credit facility, protecting its estimated 25 lakh members from penury.
It would also shield those with seasonal incomes from liquidity crisis during lean months. The facility can also be used for swapping costlier loans from money lenders.
Said a government official: “The biggest advantage of this micro-finance facility would be that, being flexible credit, it can be used for any purpose including consumption, exigencies like marriage, education and health. More importantly, unlike conventional sources like money lenders who charge 7-10% interest per month, this credit would be available at an affordable 9-11% per annum. The credit would be dispensed as cash-credit and interest would be charged only on the quantum of money withdrawn and not on the entire amount.”
Most districts have seen hectic activity on the new initiative, holding meetings of government officials with senior bankers, district officials and representatives of SHGs. While 16 of the 25 districts have been covered, it is expected that all the linkages would be in place by mid-July.
SHGs are also being helped with capacity building to enable them to handle these funds. Over 2,000 workers has been recruited at the field level to hand-hold the SHGs to manage funds for sustainable livelihoods.
“The Gujarat government has proved that the formal banking system can be effectively milked to fulfill the micro-finance needs of the rural poor without any requirement of private MFIs and NGOs,” a government spokesperson claimed. “The biggest plus point is that this credit will not be in the form of term loans but rotational, which, over a period, would generate a much bigger corpus of over R5,000 crore which can be effectively used for empowering the poor,” he added.
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