Banks told to focus on micro finance

Mainstream commercial banks, apart from providing micro credit, should focus on micro finance, which includes credit, savings and insurance, said Self Employed Womens Association (SEWA) chairperson Ela Bhatt in Ahmedabad on Wednesday.

Speaking at a seminar on self help groups organised by the National Bank for Agriculture and Rural Development (NABARD), Bhatt said micro credit alone is not the quick-fix solution of poverty removal in the country and both banks and the government must work together for providing micro finance.

Stating that self help groups (SHG) formed the heart of social banking, Bhatt, whose organisation has done considerable work in this field, said that Gujarat still lags behind as far as implementation of this concept is concerned.

"The southern states of Tamil Nadu, Kerala, Andhra Pradesh and Karnataka account for 75 per cent of the loans given under the SHG scheme, which means that there is still a lot to achieve in Gujarat.

The SHG-bank linkage programme, where banks provide loans even to poor persons who cannot provide any security, was launched in 1992.

Bhatt added that even countries such as Sri Lanka and Bangladesh have a better record as far as financing SHGs are concerned.

According to Bhatt, there are more than six crore families in the country, around 4.50 crore rural families and around two crore urban families.

"All these are economically active with the capacity to pay back loans, but they need micro finance," Bhatt said.

The SEWA chairperson stated that at a time when the economy is robust, interest rates are low, liquidity is high with banks having money to loan out, yet, there is not as much finance for SHGs.

"In 1994, 18.3 per cent of all lending by banks was for the poorer sections and this has come down to 5.3 per cent in 2002. Something is obviously wrong and it is for the government and banks to look into the issue," she said.

Commenting on the informal economy in the country, Bhatt said this sector needs to be given micro finance, acknowledging its contribution to the economy.

The SEWA chairperson stated that according to 2002 figures, the unorganised sector or informal economy accounts for 92.7 per cent of the employment in the country, 63 per cent of the gross domestic product, 55 per cent of all savings and 47 per cent of India's exports was from the unorganised sector.

"Voluntary organisations have, and will, continue to do their work of organising these sections and helping them get credit facilities. But mainstream banks need to now take up microfinance as a serious business, as over 99 per cent of loans taken by SHGs have been paid back," Bhatt said.