EXECUTIVE SUMMARY

Student’s Name: Venkata Subba Reddy G

Organization: Mahila Abhivruddhi Society (Andhra Pradesh)
Reporting Officer: Mr. B. Anjaneyulu
Faculty Guide: Prof. H S Shylendra
Title: SHG Federations as Financial Intermediaries.

Objective: The objectives of the study were to understand the evolution of SHG federations and its
structures. The focus was mainly on the process of financial intermediation. The study also proposes a
suitable structure and task sharing for these federations.

Scope: The study was limited to Five Mandal Federations of both two and three-tier structures in the state
of Andhra Pradesh.
.
Methodology: This included meeting with Board and Staff at Village and Mandal federations. Informal
interviews with the promoters and Bank Managers were also held.

Sources of Data: Primary data was collected from the governing bodies, members of Mandal Samakya
(MS: It is a body of VO’s coming together), Village organizations (VO: It is a body of groups from one or
more villages, the groups are members and not individuals), banks. Documents from the respective
Federations and Banks were also taken. Secondary data from the APMAS resource center, Internet and
other Research papers.

Major Findings: Self Help Group federations are primarily promoted as an institution to strengthen the
SHG movement. This being the premise some of the findings reveal that they are rarely serving the
purpose. Four out of five federations reveal that the members had no say in the formation of these
federations. Similar is with the case of lending loans. The promoters decide the criteria and process of
lending’s and repayments. Moreover there is no focus on activities at each level. The activities are pushed
by the promoters. As most of the members are illiterates, they rely heavily on facilitators. They have
emerged as power centers in some parts and are easy pray to politics.

The By-Law compliance in the election of Board is rarely taken care of by these federations. In
terms of financial intermediation the data for twenty nine VO’s revealed that twenty one were unregistered
and yet handling huge funds. There is sluggishness in the repayment rates of Community Investment Funds
(CIF). The political rumors and other external factors impede the repayment process of these grant loans.
The loans from CIF were given mostly to purchase cattle or sheep. The members find it difficult in making
them a productive venture.

Recommendations: The study reveals that there is a need to help facilitators gain conceptual clarity about
these federations. Similar is the case with the members. The dependency of members on facilitators should
be reduced. Secondly the size of the CIF loans can be restricted rather than doling out huge amounts which
the members find it difficult to manage and thereby default in repaying these grants.

Village Organization: The VO which is closer to the group can be effective in financial intermediation. The
VO’s should be legally registered bodies, to obtain bank linkages, and thereby reduce the transaction costs
to both members and Banks. The VO’s can educate members to take up the tasks of financial
intermediation. Facilitators should be given clear job profiles.

Mandal Samakya: The MS which is a group of VO’s coming together can function, utilizing the economies
of scales in the region. The MS can facilitate to provide members inputs and find markets for their outputs.
The MS can provide Value added services like insurance schemes which can make life simple for the
members. It can also take up social intermediation activates like child labor, dowry issues, AIDS awareness
etal. Finally it can facilitate the Village Organizations with capacity building programmes to help these
institutions become truly member owned and member managed.

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 Acknowledgements

This study was conducted at the Mahila Abhivruddhi Society (Andhra Pradesh) as
partial fulfillment of Organisation Traineeship Segment. The CEO of the organsiation Mr
C S Reddy is duely acknowledged for having given me this opportunity. I also thank the
Reporting Officer Mr B Anjaneyulu and the staff of APMAS for their cooperation
through out the study. I am greatful to the organizations visited and professionals
interviewed for their cooperation, and participants of the various fora. Finally, I thank the
women who have paid heed to my request and spent time to provide information required
for this study.

Subba Reddy G V (24071)

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 List of Abbreviations

APDPIP Andhra Pradesh District Poverty Initiatives Project

CC Community Coordinators
CIF Community Investment Fund
DB MACS Dalith Bahujana Mutually aided cooperative society
DRDA District Rural development Agency
FSS Financial Self Sufficiency
MACS Mutually Aided Cooperative Society
MBK Master Book Keepers
MFO Microfinance Organization
MS Mandala Samaikya
NABARD National Bank for Agriculture and Rural Development
NGO Non-government Organization
OSS Operational Self Sufficiency
PAR Portfolio at Risk
SERP Society for Elimination of Rural Poverty
SHG Self Help Group
UNDP United Nations Development Program
VO Village Organization

List of Tables and Annexures

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1. Cost of Credit (Maheshwaram ) 1

2. CIF funds to VO’s 2

3. CIF funds to VO2 and VO3 3

4. Income and Expenditure of DB MACS 4.1

5. Balance sheet statement of DB MACS 4.2

6. Portfolio Analysis 4.3

5. Economic sustainability of VO(Maamadugu) 5

6. Economic sustainability of VO( Vennela) 6

7. Economic sustainability of VO(Gangavaram) 7

8. Income Statement Pragati MACS 8.1

9. Balance sheet statement Pragati MACS 8.2

8. Expenditure on Book Keepers 9

9. Economic viability of VO 10

REFERENCES

1. Nair Ajai, “Sustainability of Microfinance Self Help Groups in India: Would

Federating Help?” working paper

2. Sa-dhan literature review of SHG Federations

3. APMAS Research Paper on SHG Federations

4. Harper Malcom, “10 statements on SHG federations” for APMAS.

5. www.apmas.org

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