ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Lending to the Poor

Over the years there have been many attempts in India and in other third world countries to introduce effective lending programmes for the poor. These may have important lessons for the design of the new credit programme that the government is currently introducing.

The ministry of rural development has recently introduced major       changes in the Integrated Rural Development Programme (IRDP). Based on the recommendations of the Hashim Committee, from April 1, 1999, the self-employment programmes of IRDP, Training of Rural Youth for Self Employment (TRYSEM), Development of Women and Children in Rural Areas (DWCRA), the Ganga Kalyan Yojana (GKY) and the Million Wells Scheme (MWS) have all been merged into a single self-employment programme called the Swarnjayanti Gram Swarozgar Yojana (SGSY). The new scheme seeks to focus on the formation of Self-Help Groups (SHGs). At least half the groups at the block level are to be exclusively women’s groups. SHGs will have to fulfil certain (as yet unspecified) ‘minimum norms’ before accessing credit. Expenditure will be allowed to be incurred on the groups for capacity building. SGSY would seek to promote multiple doses of credit rather than a one-shot credit ‘injection’. It is stated that the subsidy will be a ‘minor and enabling component’ of the programme. Subject to availability of funds, SGSY seeks to cover 30 per cent of all rural poor families in the next five years [Ministry of Rural Development 1999a].

Earlier, in September 1993, the Reserve Bank of India had constituted a high powered expert committee headed by the then deputy governor of RBI, D R Mehta to look into the problems of IRDP and to suggest suitable structural remedies. The committee had made several suggestions, which were subsequently accepted by the government of India. These included switchover from front-end to back-end subsidy (in which the amount of subsidy is adjusted after the loan component is repaid), linking a certain percentage of subsidy allocation to recovery performance, setting up of a district-level technical group for identification of investment opportunities, etc.

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