Microfinance Product for Uttarakhand

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Submitted by: vAnjali Sati vOm Prakash vShilpa Dhawan vSumit Sharma vVibhanshu Kumar

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MICROFINANCE SITUATION IN NORTH INDIA

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Microfinance is underdeveloped in North compared to South and Western States of India. Microfinance in the north is difficult for the reasons that any development work is difficult: the nature of the work of this kind is that those who most need it are the most difficult to get it to (Malcolm Harper). Microfinance serves about one fifth of poor households in India and has helped to widen the reach of financial services to the population of 1.1bn, 80 per cent of whom have no access to banks, says the 2006 report on Microfinance in India.

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Underdevelopment, poor infrastructure and governance, force of illegitimate interests, and lack of strong community-based development institutions has made it hard to reach the poor in North India. Cashpor, Varanasi, Sonnatta, Allahabad, Ajeevika, Delhi, Jeevika, Jabbalpore are some of the recent entrants into microfinance field in North India.

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MICROFINANCE IN UTTARAKHAND
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The State of Uttarakhand, which came into being as the 27th State of the Union of India on 9 November 2000 has a population of 8.489 million. The density of population is less than 51 persons per sq. km in Upper Himalayas and 51 to 200 persons in Middle Himalayas, and more than 200 persons per sq km. in Shivalik & Terai regions of the State. Overall population density is less than 159 per sq. km. 58% of the work force in the State depend on agriculture dominated by small and fragmented land holdings. Per capita income of the State is Rs. 15,186 (US$337

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Financial Sector In Uttarakhand

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The formal banking structure in Uttarakhand is made up of a mix of nationalized banks (1097 branches), regional rural banks (176 branches), 9 private banks (38 branches), 10 district cooperative banks (184 branches), and cooperative agriculture and rural development banks (20 branches). Of the total network of branches, 56 percent are located in rural areas, 25 percent are in semi urban areas and 19 percent are in urban areas. Uttarakhand has one of the lowest credit-deposit ratios in India only 20% of the total deposit of Rs. 155,210 million (US$ 345 million) was lent in the region. The loan disbursement to weaker sections was only Rs. 4799 million in 2002-03. The Agricultural Credit availability on per ha basis is similarly estimated at Rs. 9455 in the State as against the all India average of Rs 7438 during 2004-05.

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MICROFINANCE IN UTTARAKHAND
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After the formation of Uttarakhand, vigorous efforts have been made to promote self-help groups with a view to tackle a myriad of Uttarakhands problems. NABARD estimates that about 26,000 SHGs have been formed in the State (2005) and 5,550 about SHGs have been credit linked with banks as on 31 March 2006. 79% of these SHGs were formed under the Swarna Jayanti Gram Swarojgar Yojana (Village Self Employment Plan) by District Rural Development Agency. Though SHG movement has taken roots in all districts of the State, the spread, however, is uneven.

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Dehradun, Nainital, Tehri Garhwal, and U.S. Nagar has 70% of the SHGs formed and linked with the banks. The average loan disbursement size is highest with the lead banks (SBI, Punjab National Bank, and Bank of Baroda), and lowest among Cooperative Banks.

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Microfinance Product for Uttarakhand

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Product : Microcredit for Earthquake Affected Districts of Uttarakhand Aim: to provide micro credit in earthquake affected districts (Uttarkashi, Chamoli, Rudraprayag, Bageshwer, Tehri Garwhal etc.). Process: It is proposed to work the rehabilitation activities with a cluster model approach. During the participatory needs assessment survey, clusters will be identified spread over the above districts. Under this component groups of women affected by earthquake will be formed and provided with small collateral free loans for working capital. The loans are disbursed to women organised in groups of 20 members.

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Contd..
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The loan size will be of ranging from INR 12000 to INR 30000 depending upon the need of the affected people. The loans will be provided mainly for income generation and livelihood promotion activities. The groups will be trained in managing the financial affairs. Individual loans can be provided to the members of the groups under group guarantee method. The decisions on loans will be on the basis of peer pressure and the decision will be taken by women members of the respective groups. The process will be facilitated by the field staff during the weekly centre (SHG) meetings.

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Target Clients: The members will be from landless labourers, marginal farmers, poorest among the farmers community, SC/ST and other weaker sections of the society. The project will be entirely of women, who will be the primary participants of the project.

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Earthquake Relief Microcredit

1 year 2 year 3 year 4 year

5 year
30000 5th Cycle 2 Years Fortnightly 52 14.82 445 331 776 2 Years 8507

Loan Amount Loan Cycle Loan Tenure Repayment Frequency No of Installments Insurance Fees (per INR 1000) Insurance Fees (Amount) Processing Fees (1%) + Service tax (10.3%) TOTAL Fees Insurance Tenure Interest Earned Instalment Amount Declining Interest Rate

12000 1st Cycle 1 year 5 months Fortnightly 36 11.29 136 132 268 1.5 Years 2338 400 26.00%

16000 2nd Cycle 2 years Fortnightly 52 14.82 237 176 414 2 Years 4537 400 26.00%

20000 3rd Cycle 2 Years Fortnightly 52 14.82 296 221 517 2 Years 5671 500 26.00%

25000 4th Cycle 2 years Fortnightly 52 14.82 371 276 646 2 Years 7089 625 26.00%

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750

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