Chapter II

Review of Literature
A good number of scholars and research institutes have studied

several issues relating to SGSY; and, mostly dealt with the

assessment of the programme effectiveness and socio-economic

impact. A review of some these studies were made to identify

issues which need to be examined further.

A research study by Hemalatha Prasad, et al (2000) on the

“Marketing Channels for Select Products of SGSY - A Study in

Four States”, observed that though the design of the programme

was good yet the impact of the program me suffered from

certain lacunae which were beyond the control of programme

management (i.e., DRDA). It was pointed out that there was a

need to undertake more research investigations on the wider

issues of the programme for improved programme

implementation and realize higher incomes. These include.

Infrastructure for indentified key activities should be taken up

at a faster pace and comprehensively. Infrastructures include

not only construction of marketing complexes and work sheds

but also good roads and better transport. Better forward and

backward linkages and institutional support wherever possible

are critical for the success of SGSY; ii. The credit requirement

and cash flows for each identified key activity should be

properly assessed in the District Level Development Committee

37
meetings; and iii. Technology interventions are particularly not

effective. Besides each DRDA should have a technology action

plan.

A research study entitled “Planning and Implementation of

SGSY: Need for Improvement” in the district of Ludhiana

(Punjab state) examined the impact of the programme in terms

of generation of self-employment. Gangi Reddy, Y (2002) noted

that while SGSY contributed significantly to employment, yet

the programme grossly suffered from lack of infrastructure

facilities expected of from the state government as an additive to

the efforts made through SGSY to make it more effective in

alleviating poverty.

The report of the Comptroller and Auditor General (CAG) of

India (2003) was critical about the implementation of SGSY in

the country and in particular about the quality of planning and

(inadequate) mobilization, selection and enablement of the

Swarojgaris for managing the self employment activities. The

non-involvement of line departments which were supposed to

provide technical guidance to the (poor) Swarojgaris, ineffective

monitoring, absence of a systematic approach in infrastructure

planning etc., were some of the major drawbacks reported of the

SGSY. In paint of fact, the CAG observed that the failures of

38
IRDP were not addressed in the SGSY implementation

adequately.

The huge subsidy (maximum of Rs. 1,25,000 per SHG), led to

exclusion of the poor in the backward district of Amaravati,

Maharashtra and several SHGs were formed to avail subsidy

only (Tekkekara in Kerala). It was also observed that Bank loans

were realized even when SHGs did not acquire the required

entrepreneurial abilities and confidence in some cases. It was

noticed that the productivity levels in many cases were sub-

optimal and market arrangements were ineffective.

The National Institute of Rural Development (2005) initiated

a Nation-wide research study on SGSY in 13 states. The study

observed that despite lacunae in several of peripheral

arrangements, the programme succeeded in yielding substantial

self-employment opportunities to those who participated in

SGSY. It was also concluded that SHGs per se cannot help the

rural poor to cross the poverty line under SGSY and income

generating activities with necessary linkages would enhance

their chances of crossing poverty line.

A study was undertaken by the Regional Rural Banks (2006)

titled: “An Impact Evaluation Study on SGSY,” while focused on

credit mobilization and utilization of infrastructure facilities and

39
other related aspects. The study found that lacunae in

infrastructure facilities had affected the gains of SGSY.

A book on Economic Impact of Self Help Groups - Case Study

by Tanmoyee Banerjee (2006), analysed the extent to which

decentralization and good governance contributed to poverty

alleviation, with particular focus on the performance of

Swarnjayanti Gram Swarojgar Yojana (SGSY). This was an

independent assessment concerning the progress of SGSY

programme at the macro level in Madhya Pradesh, juxtaposing

note the participation of members in the formation and

development of SGSY groups.It further examined the

participation of the members in ‘savings contribution’ and credit

utilization and aspects relating to linkages and synergy between

SGSY groups and other actors including Banks and Gram

Panchayats.

Poverty Alleviation and Social Disadvantage: Analysis of

Case Studies (3 Vols-Set) (2007)

The success rate of the SGSY in terms of monetary turnover in

the sample area stands at a little less than 60 percent for Self

Help Groups and an insignificant 3.1 percent for independent

Swarojgaris. Intended benefits of the SGSY only partially

reached the sample Swarojgaris in the selected blocks of the

identified districts due to a number of weaknesses in design and

40
implementation. Strengths of the scheme, however, were visible

in its social impact which included group dynamics, confidence

in working alone, status and dignity. Animal Husbandry and

Agriculture related occupations were dominant among SGSY

activities. Traditional activities were given priority in the sample

area.

Several studies were conducted by Ektara, (2007), a research

organisation based in New Delhi. And the Planning

Commission (GoI, 2007) on the impact of SGSY in selected

blocks of Madhya Pradesh. It was found that the economic

impact of SGSY was limited but it had generated wider social

benefits to the targeted beneficiaries. The study also pointed out

some lacunae at the implementation level.

Various research studies on the theme in question point out

that though SGSY had been designed to deliver right impact, yet

the access of the poor to resources and institutions and the

social / physical circumstances prevailing in a given area also

matter.

Pathak DC and Panth SK (2008) undertook a study on the

impact of SGSY in Jaunpur district in Uttar Pradesh. The study

observed that though SGSY could not generate requisite impact

41
on the livelihoods of the poor, yet it contributed to

improvements in social sphere.

Apart from emphasizing on outreach, it is also important for

micro finance intervention to remain sustainable in the long

run. Amit Kundu (2008) noted that the Financial sustainability

is the core concern of any financial institution and considering

Self-help groups (SHGs) as grassroots organisations engaged in

the business of micro credit provision, their sustainability holds

crucial for rural upliftment. These issues were examined with

the help of secondary and primary data from Meghalaya in the

North-east region of India. As observed from the secondary

sources, the grading of groups and recovery status of SHG

financing in Meghalaya were precarious. Many SHG formed

groups because of subsidy provision in the SGSY scheme, while

made the scheme very popular and attractive in the state. The

primary survey on 200 SHGs though revealed an impressive

financial operation by sample groups over a three year study

period, sustainability had become less attractive when the

subsidy was negotiated into the financial details. The self

sufficiency ratios i.e. OSSR and FSSR are the primary indicators

of sustainability and both got reduced substantially when the

subsidy was introduced into the computations. This suggests a

negative impact of subsidy on the financial sustainability of

42
SHG operations, which should be curbed by encouraging group

formations with non-subsidized finance.

Factors determining the group performance of women-led self-

help groups (SHGs) engaged in agro-processing organized under

Swarnjayanti Gram Swarojgar Yojana (SGSY) in Kerala have

been examined following a multi-stage sampling technique in

the Thrissur district of Kerala by Pati A.P (2008). It was

observed that socio-economic variables like a) age; b)education ;

c) market perception; d) economic motivation ; e) attitude

towards self-employment; f) management-orientation) risk-

orientation; h) innovativeness; and i) information-seeking

behaviour influence the group performance of SHGs. The BPL

women in the performing SGSY-SHGs were around 30 years of

age, with middle school (level) education. Education and age of

respondents had negative correlation on group leadership. The

group stability had been determined by factors like group

cohesion, group leadership, team spirit, group decision-making

and regularity in maintenance of records. Correlation analysis

between group performance and socio-economic characteristics

revealed that management-orientation had a positive and

significant influence on all the determinants of group

performance, followed by information-seeking behavior,

knowledge about processing, market perception and economic

motivation. The parameters like age of the respondent,

43
education of spouse, attitude towards self-employment and

innovativeness had been found to be least influential on group

performance. The study indicated the need for providing

training on management and technical aspects as well as

provision of market infrastructure to the SHGs so that they

could become competitive in the market.

It was also mentioned that despite existence of certain lacunae,

the programme made an impact in generating employment

among the rural poor. The structural lacunae like road

connectivity, marketing facilities, credit mobilization though

hanging the impact, yet the rural poor with self-employment

zeal have been realizing good returns from their efforts and are

able to access better self-employment opportunities. However,

the existing studies are largely directed towards impact of SGSY

in terms of the programme objectives rather than the process

and promotion of employment opportunities.

A Study of SGSY in nine high poverty status such as Bihar,

Chhattisgarh, Uttar Pradesh and Odisha by Purushotham P.

(2009) observed that Swarojgaries were deprived of linkages,

technology and market support, training and required

infrastructure (Purushotham:2009). It also noticed that bankers

were reluctant to finance the activities in full. As a result most

the swarojgaries had not profitable livelihood activities which

would help them cross poverty line.

44
Radhakrishna Committee Report (2009), The Government of

India appointed the Committee on credit related issues under

SGSY in 2009. The Committee reviewed the earlier works, held

discussions with the various stakeholders and visited several

states. It found the SHG-Bank linkages were weak as hardly 22

percent of the SHGs were receiving credit from banks to

undertake income generating activities. Furthermore, these

activities were of low productivity and most of them were

traditional. It suggested a two-prong strategy for productive

absorption of credit by the Swarojgaries and universal coverage

of SHGs. Besides suggesting creation of an autonomous Rural

Livelihoods Mission (RLM), the committee has rightly

emphasized on social mobilization, formation and strengthening

of SHGs, training for managing SHG affairs and financial

discipline, skills development (to absorb credit gainfully) and

streamlining credit flow to Swarojgaries for promotion of rural

livelihoods. (MoRD, GoI 2009)

Dasgupta (2009) , in his article referred to the observations

made by the Radhakrishna Committee (RRC) which studied the

credit flow to members of self help groups (SHGs) and individual

beneficiaries under the SGSY since its inception. The RRC was

highly impressed with the functioning of the SHG federation in

Andhra Pradesh, the Kudambasree model in Kerala and the

Village Development Board in Nagaland. In these states, one

45
fourth of SHGs are engaged in self employment activities. The

RRC suggested that for eliminating poverty, the flow of credit

must be increased besides proposing opening of more rural

branches, paying a uniform interest rate of 7 % per annum

along with government subsidy. In addition, the RRC

recommended setting up National Rural Livelihood Mission,

Rural Livelihood Fund which is a hybrid model of the SGSY for

generating both wage and self employment. In the SHGs, the

repayment performance, the functioning of line departments,

marketing problems and finally employment and income

generation aspects were to be addressed adequately. Thus there

is a need for paradigm shift from a financial target approved to

an entrepreneurship development mode by addressing to

quantity to quality facets of SGSY.

Umdor S. and Panda B. (2009) attempted to assess the impact

of SHGs formed under the SGSY programme in Meghalaya. The

study brought out in sharper focus the importance of SHG as

an effective credit delivery mechanism and showed that

membership in the SHGs facilitated empowerment of the

members (especially women) and their households - - both

economically and socially. Economic empowerment gets

manifested in the form of increased access to credit for both

productive and consumption purposes, increase in household

income and diversification of sources of income. Social

46
empowerment was seen in terms of SHG members’ enhanced

status and recognition in the family as well as boosting their

self-confidence in the society. About 30 SHGs were randomly

selected in each of the three analytical groups. The members

belonging to older SHGs had more number of sources of income

compared to younger SHGs and this association was found to

be significant. It also found evidence of a non-economic benefit

to the members of SHGs in terms of their increased status and

recognition in the family. A significantly higher percentage of

members of the older SHGs was involved and consulted in

important household decisions and their membership of SHGs

had boosted their self confidence. Although the SHG movement

in Meghalaya was at its infancy, the evidence from this field

study showed that it made a positive impact on the lives of the

SHG members and their households. The ‘revolving fund’

imparted credit discipline and financial management skills to

the members so that they become credit worthy over time.

Another study sponsored by the Planning Commission taken

up by University of Kashmir (2009), found that – “although

the performance of the SGSY improved since its inception, albeit

gradually, yet a great deal remains to be done.”

Das B.C. (2010) examined the performance of 50 SGSY-SHGs

linked to the RRBs in Karnataka, which financed income

generating activities prior to 2007. It was found that the SHGs

47
of the study sample performed very satisfactorily on twenty

performance indicators; and, they scored around 75 out of 100

marks. However, a large proportion of the SHG members were

ignorant about the amount of loan, rate of interest, quantum of

subsidy, mode of subsidy delivery and terms of loan repayment.

The study also revealed that the maturity level of the group and

size of the bank credit availed of by the group was positively and

significantly correlated. In the study area, most of the immature

SHGs were not reckoned with by the banks as serious micro-

credit clients and the SHG-bank linkage process was not

pursued seriously.

Tripathy K.K. and Sudhir Jain K. (2010), assessed the

governance issues in the operations of Self-Help groups (SHGs)

in the rural areas, based on a primary research conducted in

2006-07 in two districts each of Haryana and Orissa states.

Varimax analysis of the performance parameters indentified the

underlying factors which have an impact on the governance of

SHGs, and the performance of micro-finance ventures. The

study findings indicate that SGSY intervention in the rural

micro-finance sector had limited income impact on SHG

economic ventures due to consumption orientation of credit,

and weak SHG operational environment in a rural set up. The

analysis also indicated that in backward districts, the

commitment to group task under the micro-finance programme

48
tends to be higher whereas the same is lower in the developed

districts. The author highlighted some of the policy implications

like creation of necessary infrastructure in the backward

regions, enhancement of education and skill up gradation of

members, effective monitoring of SHG activities by both the

government and bank officials (as the need of the hour).

Kalpana’s K (2011), conducted the study in 2005-06 for 27

SHGs in three villages in one block in a district of Tamil Nadu.

The villages are among the poorer and more economically

backward panchayats of the administrative block. Each SHG

ranged from three to seven years in age. They were engaged in

activities such as Leather based industries. Home based beedi

rolling and brick kilns. The items they prepared were not getting

adequate income. They were not participating the exhibitions

and melas to attract customers and the expenditure incurred by

SHGs did not always end with loan sanction. The SHGs were

required to participate in government sponsored exhibitions of

SHG products that celebrated the emergence of female “micro-

entrepreneurs” and SGSY promoted livelihoods. Exhibitions

conducts to showcase the products the fiction of managing

substance of enterprises over a long period and at a higher cost

demystified. SHGs need more support from Development

Officials at the block and the bank manager. Due to weak

literacy levels the rural women struggled to make sense of bank

49
procedure on account. Although the SHGs have paid

successfully the token loan they however needed the

government’s support for developing income generating

activities on a sustained basis.

Amit Patel’s (2011), study focused mostly on credit flow and

use by the SHGs region-wise in India. Region-wise data on the

credit flow to SGSY through SHGs revealed that central region

assisted 28.1 percent of total SHGs while it was, 23.3 percent in

the southern region. The share of the eastern and northern

regions was 22.8 percent and 5.1 percent respectively. But the

shares of credit supply to women, SCs, STs, Minorities and the

Disabled in the total varied considerably across regions. The

southern region assisted the highest proportion of women, SCs

and disabled Swarojgaris whereas in the North-east region the

STs and Minorities were assisted mostly. In all the regions,

women Swarojgaris were provided support more than mandated

requirement of 40 percent. Of the total SHGs and individual

Swarojgaris assisted, the primary sector covered 63.35 percent

ranging from 76.86 percent in the western region to 51.98 in the

southern region followed by the secondary sector (20.24

percent). The southern region had relatively balanced coverage

of all the three sectors. Within the primary sector, milch animal

had significant concentration in the four regions as compared to

the southern and the eastern regions. Similar pattern was

50
observed in regard to disbursement of credit and subsidy.

Institutional infrastructure available at the district and state

levels since long has not been attempted to exploit the potential

of rural artisans, industries, village craftsmen, business and

services existing in most of the villages. Intensive pressure on

agriculture could not help realise expected objectives under

SGSY. All regions utilized insignificant amounts for marketing

and other purposes.

Jabir Ali (2011) analysed the process of micro-enterprise

development based on social capital created under government

initiatives. The study was based on a primary survey of 107 self

–help groups (SHGs) in the state of Uttar Pradesh. Findings of

the study provide practical insights for developing SHG based

micro-enterprises in profitable and sustainable manner.

Uma Shankar, Shishir Pandey and Harendra Mohan Singh

(2011), examined the effectiveness of micro finance and noted

that MFIs have developed many unique and innovative practices

to deal with the problems in providing credit to the poor. The

researchers argued that microfinance must also be coupled with

other social programs that are flexible to meet the diverse needs

of the poor families. MFIs on their part, should also be willing to

incorporate the customs and practices of the people into the

programmes but ensure adoption of holistic approach to fight

poverty.

51
In this study, Vikas Batra (2012) observed that SGSY helped in

augmentation of assets base among the sample SHG

households. The study concluded that the impact of

microfinance on household welfare was limited. A good number

of respondents of the study reported that microfinance helped

them to reduce their vulnerability but the risk management

strategies adopted were only temporary in nature because the

main focus was on loans (accessing) rather than increasing

income and building assets.

Tessy Thomas (2013) analysed the social mobilization and

enabling process of the poor through SHGs. She observed that

SHGs have been more gender sensitive since 65 percent of

members were women. The convergence of disabled was two per

cent, while participation of minorities was about 15 percent in

the SGSY in India. It was found that recovery rate of the loans

was poor and indicators of self-sufficiency brought to light the

negative impact of subsidy. The amount of loan provided was

sometimes very small to invest on a profitable venture to cross

the poverty line. She suggested that a better approach to

eliminate poverty would be to make the environment conducive

to increased flow of credit to the poor rather than directing it,

leaving micro level credit management to financial institutions.

She also opined that the involvement of the government must be

confined to only macro-affairs such as policy formulation and

52
framing incentive mechanisms for both banks and the

bureaucracy. Social composition of the assisted swarozgaris was

in favour of the most vulnerable groups like Schedule Castes

and Schedule Tribes. In Murshidabad district of West Bengal, a

low percentage of Swarojgaris (21 percent) were good at book

keeping. Majority of SHGs especially in the backward rural

areas lacked proper knowledge of book keeping / accounts. The

component of fund utilization under SGSY was said to be

maximum in the West Bengal. Lack of capacity building and

training was due to inadequate institutional infrastructure and

lack of trainers or inaccessibility for rural poor to the existing

institutions. SGSY seemed ill-equipped to meet the challenge of

gauging the suitability of Swarozgaris for various Self-

employment programmes depending on their initial asset

position or possession of prior entrepreneurial experience,

training and skills. Under performance of SGSY was due to the

failure in implementation of the guidelines.

Based on the foregoing critique, on the implementation of SGSY

during 2000-2012, the present research investigation is taken

up for assessment.

53
References:

1. Amit Kundu (2008), “Impact of SGSY Scheme on Self Help

Group Members in West Bengal, India”, Afro-Asian

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2. Amit Patel (2011), “A Decade of Financing SGSY”, Journal

of The Indian Banker, Vol. VI No.9, September.

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57