SBI eyes micro-financing leadership by fiscal end

The State Bank of India (SBI) now intends becoming the leader in micro-financing by credit linking one lakh self help groups (SHGs) in the country by the end of the current financial year.

This was disclosed by Ashok Kini, a managing director of the bank, while talking to newsmen at the sidelines of a massive meeting of SHGs clusters in this remote village almost 200 kms from Nagpur.

"We see over 20 lakh people who have the will to better their lives, but have been suffering on account of finances to benefit from the move," Kini said. The SBI has covered 282 cluster groups in the Yavatmal-Chandrapur-Gadchiroli belt and taken an exposure of over Rs 18 lakh.

Kini said that the bank had already credit linked 60,000 SHGs so far offering finance totaling to Rs 900 crore. "We will be adding 40,000 more clusters and taking an additional exposure of Rs 400 crore," Kini said adding that the experience of the bank with SHGs had been overwhelming.

In Maharashtra and Goa the bank has credit linked 8,600 SHGs out of which 2400 are in Vidarbha alone. SHG members in Patanbori have also built houses by availing loans under Gram Niwas Yojana _ a housing credit scheme for SHGs.

The bank expects to get considerable number of SHGs from Andhra Pradesh, the North Eastern states, Orissa and Kerala. Vidarbha has the largest number of SHGs in Maharashtra. "The poorer the people the more they seem to be keen to form such organisations," Kini said of his experience with SHGs.

He said banking was not just about derivatives and interest rates, but also about touching peoples lives. "One has to put his heart into it. Micro-finance also pays handsomely," he said.

Kini said that micro-finance was not actually a very profitable venture for the bank, but one that was essential in nation building as it made thousands of women financially independent.

A typical self help group aimed at women financial empowerment consists of 12 to 15 members. The bank lends the group collateral free loans which is then extended to group members for setting up their own businesses.

The small savings pooled by the women is taken as a base for allowing loans. The limit ranges from 2 to 4 times deposited by the groups.

While the bank charges the SHG an annual interest of 8.25 per cent, the group in turn charges 24 per cent. The higher rate of interest keeps group involved in the process of recovery as the operating margin is attractive.

Reacting to the bank's initiative, women members of SHGs said that they didn't have to go to money lenders ever since their cluster was set-up. Their endorsement of the bank's scheme is especially significant as Yavatmal witnessed the highest number of suicides by debt-ridden farmers in 2004.

The SHGs in Pandharkawda village of Yavatmal district has also led to financial freedom of several poor families.