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TITLE OF THE STUDY

TITLE OF THE STUDY. COMPETITION AMONG THE MICROFINANCE INSTITUTIONS AND ITS IMPLICATIONS. RESEARCH QUESTIONS. What is the percentage of PoPs in SHGs? What is the loan appraisal methodology?

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TITLE OF THE STUDY

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

  2. RESEARCH QUESTIONS • What is the percentage of PoPs in SHGs? • What is the loan appraisal methodology? • What is the relationship between loan size, utilization, multiple loans/multiple doses, livelihoods and loan repayment? • What is the rate of defaulting? And reasons for it? • What extent banks are catering the financial needs of SHGs? Research & Advocacy,APMAS

  3. RESEARCH QUESTIONS… • What is the role of mediators in SHG bank linkage • What is the scope, nature, and size of payments and services? • What extent other micro finance institutions influence SHG Bank linkage? • What is the perceptional gap between banks and SHGs on SHG bank linkage? • What is the impact of SHG-Bank linkage on the lives of the people? Research & Advocacy,APMAS

  4. OBJECTIVES OF THE STUDY • To understand the quality of SHGs after bank-linkage; • To understand the coverage of SHG Bank linkage in a branch; • To under the rate of default and the percentage of over dues; • To understand the financial resources/ agencies other than banks to groups and their influence on SHGs and SHG-Bank Linkage; • To identify various needs of the groups and the strategies for meeting the needs; and • To understand the impact of SHG-Bank Linkage on the socio-economic life of the group members Research & Advocacy,APMAS

  5. DATA • NATURE OF DATA • Qualitative /Quantitative • Primary /Secondary • SOURCES FOR DATA • Banks/SHGs/DRDA/Velugu and NGOs • DATA COLLECTION TOOLS • Interview Schedules • SHGs • Banks/Branch Managers • NGOs Research & Advocacy,APMAS

  6. SAMPLING • UNIVERSE • SHGs linked to Andhra Bank in AP • REGIONS • All the 3 Regions in AP-Coastal , Rayalaseema and Telangana • DISTRICTS (3 -one from each region) • Stratified Sampling Technique • 3 Districts- Guntur, Ananthapur and Karimnagar • No. of Linkages and Defaults in the branch • District in which AB is Lead Bank • District in which Andhra Bank is not a Lead Bank • Excluded the districts from the sample where APMAS has conducted a study on SHG Bank Linkage in A.P. in the past Research & Advocacy,APMAS

  7. SAMPLING….. • BRANCHES IN THE DISTRICT(5) (3 X 5=15) • Stratified Random Sampling method • Regions within the district and development • No. of linkages • No. of default SHGs • MFIs located in that area-NGOs, MACS • SHGs IN THE BRANCH (15)(15 x 7 =105) • Purposive sampling • Period and amount of overdue • No. of groups having over due • No. of groups linked to other MFIs Research & Advocacy,APMAS

  8. SCENARIO OF COMPETITION WORLDWIDE BANGLADESH • Intense competition • Interest rates have reduced • MFIs are slowly beginning to offer larger, individual-based “enterprise loans” • 32.1 % of loans have fallen overdue for more than 2 years Research & Advocacy,APMAS

  9. EASTAFRICA • Earlier stage of competition • Uganda and Kenya : Saturated and intense competition • Presence of Multiple membership • Diversified product offerings : • Savings services • group-based loans • salary-based loans Research & Advocacy,APMAS

  10. CENTRAL AMERICA • In Nicaragua , MFIs enjoyed a virtual monopoly • Reduced interest rates on its larger loans from 3%to 2.5% per month • Larger loans at a wealthier, more lucrative segment of the market • Increased loan size • Asymmetric information ,multiple membership has created much problems - database maintained on internet about multiple borrowers • Coordination among MFIs to maintain credit bureau Research & Advocacy,APMAS

  11. INDIA • More supply driven • Unregulated with low outreach • Inadequate flow of funds • Limited and standard range of products • Lack business orientation • No formal product promotion system Research & Advocacy,APMAS

  12. ANDHRA PRADESH • Finest practices in micro finance • Competition in pockets • Monopolistic market to large extent • Ad-hoc competition management strategy • Players in Andhra Pradesh • Care (CASHE project), BASIX, Spandana, share and SKS • SERP • Commercial banks, SIDBI, and RRBs • RMK, FWWB : bulk lending & capacity building • Thrift cooperatives : CDF Research & Advocacy,APMAS

  13. SOCIAL CATEGORIES OF THE SHG MEMBERS Research & Advocacy,APMAS

  14. LITERACY LEVELS PDS White cards -72%,Pink cards - 8 % Research & Advocacy,APMAS

  15. PRIMARY OCCUPATION OF THE SHG MEMBERS Research & Advocacy,APMAS

  16. GRADING OF SHGs Research & Advocacy,APMAS

  17. SAVINGS • More than 1/3rd SHGs have distributed their savings • Received Rs.1,740 from distributed savings • Reasons • The bankers adjust the old loans (such as crop loans, individual loans, etc) taken by the family members • Increased internal defaulters • Few others withdrew for internal lending • Nearly 88% of the SHG do need based lending from the savings • Average bank balance of the SHG : Rs.2,370. Research & Advocacy,APMAS

  18. INTERNAL LENDING,SAVINGS- DEFAULTING • 67% of the borrowed loan from the savings are outstanding • Avg. 5.7 members borrowed loan from savings • Avg. 4.5 members are defaulted to SHGs • Avg. savings borrowed per group: Rs.16,250 • Avg. savings outstanding : Rs.10,940 Research & Advocacy,APMAS

  19. PERCENTAGE OF SHGs LINKED TO BANK Research & Advocacy,APMAS

  20. PERCENTAGE OF 1ST AND REPEAT LINKAGES Research & Advocacy,APMAS

  21. RATE OF DEFAULT • Kuchinipudi has maximum proportion (49.33 percent) of groups overdue and amount of loan overdue (8.82 percent) • In spite of having less number of SHGs, (compared to other mandals) have more default rate • Kolluru, Phirangipuram and Vinukonda have sizeable MFI activity • The SHG shows more tendencies to default when the socio economic conditions are deficient • Sustainability of relationship of the group and bank is decreasing. Research & Advocacy,APMAS

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

  23. LOAN SIZE • Lower caste find the loan size to be adequate • Quantum of loan was inadequate for 77% of OC groups • Loan size found inadequate by 72 % SHGs borrowed loans from MFIs • 45% of SHGs with MFIs members received loan size between Rs.8,000-16,000 only Research & Advocacy,APMAS

  24. SOCIAL CATEGORIES OF THE SHG-MFI MEMBERS Research & Advocacy,APMAS

  25. PRIMARY OCCUPATION OF THE SHG-MFI MEMBERS More number of petty business and agri.labor Research & Advocacy,APMAS

  26. CONTD… • They are not Landless labor • Owns a house • Self employed with a minimum income of Rs.1500 or household income of Rs.2500 per month Research & Advocacy,APMAS

  27. RELATIONSHIP WITH MFIS • Avg. no. of MFI members in SHG –2.8 • Period of association with MFI :20.18 months • Less savings in SHGs where 5-6 MFI membership • Leader and active member are the potential candidates for MFIs • Leader centered groups • 63.64 % of C- grade SHG have multiple membership • 8 out of the 11 SHGs have more than 7 defaulters of the current loan taken from bank • Nearly half of the SHG maintain less than Rs.1000 bank balance • Most of the 11 SHGs have borrowed fresh loans Research & Advocacy,APMAS

  28. 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%) Relationship between MFI members and SHG defaulters Research & Advocacy,APMAS

  29. REASONS FOR PREFERING MFIS MORE THAN 80 % OF THE GROUPS • Individual loan • Adequate loan size and timely loan • Multiple loans • Less voluntary savings • Procedures- take less time and money • Loan at doorstep • Less hassle of books of accounts • Transparency in transactions Research & Advocacy,APMAS

  30. OPINION ON MFIs • High interest rates • Weekly installments • Strict monitoring • Zero tolerance to default • Attitude of the staff Research & Advocacy,APMAS

  31. SHG Credit easily available Free from moneylenders Education levels improved Self confidence Leadership SHG-MFI More improvement in income level Access to pro poor programme More employment generation Indebtedness Leadership Group solidarity IMPACT Research & Advocacy,APMAS

  32. IMPLICATION OF COMPETITION • Increase in overall outreach • Increased efficiency and new products catering to clients needs • Prices have decreased • Loan size improved • Repayment schedule made convenient to borrowers • Compulsory savings decreased • Planned promotion strategy and strategic placement of services Research & Advocacy,APMAS

  33. CHALLENGES • Retaining customers • Retaining motivated staff • Handling multiple membership and default • Improving operational efficiency • Organizational and financial sustainability • Credit discipline • Mobilize savings-given the existing regulations Research & Advocacy,APMAS

  34. SUGGESTIONS • Proper grounding of SHG principles by training the members • Retaining the SHG members in drought hit area by providing livelihood activity • More repeat linkages for branches were less eligible groups are present • Monitoring system of the banks to be strengthened • Fix a day per week for transactions of SHGs only in the bank Research & Advocacy,APMAS

  35. Thank you Research & Advocacy,APMAS

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