STATUS OF BANKING AND MICROFINANCE IN THE NORTH-EAST

SECTION 3

GROUP MEMBERSSOMYA SINGH 1PALLAVI SHALLAM 3VAIBHAV CHOUDHRY 5NEERU RAMINA 11MOHIMA GHOSH 12PARIDHI MAHENDRA 21NISHANT BANGAR 28

SHALINI CHANDRA 33

CHECHIN NOKREK

MARAK 38

ABHISHEK DATTA 46

CHERAG GANDHI 49

AKSHIT GARG 58

HIMANSHU SAJLAN 63

INTRODUCTION• FINANCIAL EXCLUSION REMAINS A MAJOR CHALLENGE FOR INDIA. • 40% OF THE POPULATION IS STILL OUTSIDE THE FOLD OF FORMAL BANKING

IN THE COUNTRY. • THERE ARE WIDE DISPARITIES IN RURAL AND URBAN POPULATION AS WELL

AS WITHIN DIFFERENT GEOGRAPHIC REGIONS.

BANK BRANCHES IN NORTHEAST

CREDIT QUALITY

• NORTHEAST HAS A SMALL ECONOMY AND HENCE BANK CREDIT IS LIKELY TO BE LOW. • THE CREDIT/SGDP RATIO IS VERY LOW, WHICH MEANS THAT CREDIT SUPPLY

IS NOT EVEN COMMENSURATE TO THE EXISTING ECONOMY SIZE OF THE NORTHEASTERN STATES.• NORTHEASTERN STATES HAVE THE LOWEST CREDIT/SGDP RATIO OF LESS

THAN 20%.

CREDIT-DEPOSIT RATIO• THE CREDIT DEPOSIT (C-D) RATIO IN NORTHEAST IS LAGGING FAR BEHIND THE REST OF

THE COUNTRY.• NORTHEAST’S OVERALL C-D RATIO OF 35.8% IS LESS THAN HALF OF THE COUNTRY

AVERAGE OF 72.6%.• IT IS CLEAR FROM THE CRITICAL BANKING INDICATORS THAT THE NORTHEAST IS THE

MOST FINANCIALLY• EXCLUDED REGION IN THE COUNTRY. WHETHER BECAUSE OF UNEVEN BANKING

INFRASTRUCTURE,• GEOPOLITICAL RISKS, POPULATION DENSITY, OR SOME OTHER FACTORS, ECONOMIC

GROWTH HAS SIMPLY NOT TAKEN OFF IN THE NORTHEAST.

DEMAND FOR MICROCREDIT IN THE NORTH-EAST REGION

• Arises from financial requirements of low income households.• The north-eastern region has been underserved till date.• The demand for microcredit has been estimated on the basis of dwelling units.• Dwelling units are classified on the basis of material used for construction of

roofs- grass, thatch, bamboo, wood, mud, plastic, polythene, tiles, slate.• The dwelling units were selected on the basis of economic status.

ASSAM

MANIPUR

MEGHALAYA

TRIPURA

NAGALAND

ARUNACHAL PRADESH

MIZORAM

SIKKIM

MICRO CREDIT DEMAND FOR THE REGION

MICRO CREDIT SUPPLY CHANNELS

•DIRECT LENDING BY COMMERCIAL BANKS•SHG BANK LINKAGE MODEL•DIRECT MICROFINANCE BY MFIS•INDIGENOUS INSTITUTIONS

INDIGENOUS INSTITUTIONS•NAMGHARS AND PUJAGHARS- ASSAM•MARUPS – MANIPUR•SONCHAY, SOMOBAY, SAMITI & GOT – ASSAM•SHINGLUPS- MANIPUR•MAHARI ASSOCIATIONS – MEGHALAYA

CREDIT SUPPLY ESTIMATION

Vision

•Over one third of northeast’s low-income households will have access to financial services in a dignified and transparent manner by 2015. The financial services will be

• Provided by a multitude of professional, people-oriented and viable institutions to give the people of northeast an opportunity to improve their standard of living and enabling them to contribute to and benefit from the india growth story.

CREDIT SUPPLY ESTIMATION• The supply of credit has been estimated based on the two major channels of credit i.E. The

shg-bank linkage and direct microfinance. While there are also indigenous institutions providing credit facilities locally, due to lack of data it is difficult to ascertain its size.

• Shg-bank linkage: shgs have been linked to commercial banks, rrbs as well as cooperative banks. The total supply of microcredit for the north east through shgs bank linkages was at rs 4.69 billion as of march 2009.

• Direct microfinance by mfis: while there are a few mfis operating in the northeastern states, their contribution to the overall supply is still small. The available data indicates that the total supply from the MFI channel is close to rs1.15 billion. Of this sum, the majority is concentrated in assam and manipur.

CURRENT STATUS OF FINANCIAL INCLUSION

FINANCIAL INCLUSION VISION BY 2015

TARGET OF GROSS LOAN PORTFOLIO BY 2015 TO ACHIEVE THE DESIRED OUTREACH

MICROSAVINGS

MICROSAVINGS POTENTIAL ACROSS STATES (RS MN)

MICROINSURANCE• Microfinance institutions typically provide life insurance to their clients and their

spouses by acting as agents for mainstream insurance companies.

• In some cases, they also provide health insurance. Data indicates that mfis are able to provide insurance coverage at an annual premium of rs10 per rs1,000 sum insured.

• Assuming that an aggregate insurance cover of the total microfinance demand is required, the insurance premium potential for the northeast region is rs 230-380 million of which an insignificant portion has been tapped to date.

KEY STAKEHOLDERS FOR MICROFINANCE

DEVELOPMENT IN NORTH-EAST

CENTRE FOR MICROFINANCE & LIVELIHOOD (CML) Formation •Established in 2008

•Active support of Tata Social Welfare Trust (TSWT)

Location •Guwahati, Assam

Purpose(Social sector)

•Capacity building andCollaborative interventions •Research and Policy Advocacy

Conducted •Along with RGVN first microfinance & livelihood conference for northeast in February 2010

RASHTRIYA GRAMEEN VIKAS NIDHI (RGVN)

NGO support programme

• Reinforcing livelihood systems of poor people who have little or no access to mainstream assistance

• Promote, nurture, and develop ngos

• RGVN provides financial support to ngos by way of

• Returnable grants/revolving fund for livelihood activity

• Grants to meet programme support

• Institutional development costs of the NGO

• Managerial support

NGO-MF

• Ngo’s evolved to handle larger credit

• RGVN takes the credit risk to work with these ngos with borrowed fund and grooms them into sustainable mfis

StructureNon-profit

organizationFounded

1990Registered Societies

Registration Act

Head Quarter

Guwahati

Operational14 states prime focus on North

East

ProgramsNGO Support Programme

NGO Microfinance RGVN-Credit and Savings

Programme

Nabard

• Apex development bank

• Facilitates credit flow for promotion & development of agriculture, SME, cottage, handicrafts & rural crafts

• Support economic activities in rural areas

• Sustainable rural development & secure prosperity of rural areas

• Key stakeholder for provision of northeast microfinance vision 2015

Sidbi

• Apart from the zonal office SIDBI has branch offices in each of the eight northeastern states, these are located in agartala, aizawl, dimapur, gangtok, guwahati, imphal, itanagar and shillong

• Significant presence in the northeast

• Spurred the growth of microfinance at national LEVEL

• CATALYZING GROWTH OF MICROFINANCE IN NORTHEAST

NEDFi: North Eastern Development Finance Corporation Ltd. • Incorporated under the Companies Act, 1956, in 1995 with its

registered office at Guwahati• Development of industries, infrastructure, animal husbandry, agri-

horticulture plantation, medicinal plantation, sericulture plantation, aquaculture, Jointly promoted by IDBI, ICICI, SBI, IFCI, SIDBI, UTI, LIC and GIC

• After the creation of DONER it came under control of Ministry • Catalyzing the economic development & financing MFIs and also

organizing capacity building programmes for themFriends of Women’s World Banking - India (FWWB-I)• Institution Building, Capacity Building, Monitoring and Assessment

Services for Micro Finance Institutions, Community Based Organizations (Federations, Cooperatives, Producer Companies), Enterprises

• Poverty alleviation, enhancing and introducing livelihood activities for women

• Lending to poor women clients, to enable them to get better access to:• Solar Energy • Water and Sanitation Facilities • Education Loans & Financial Literacy• Health and Hygiene Awareness

(iv) Commercial Banks

• Several Commercial Banks but SBI is the biggest bank in outreach.• Private sector banks are also now expanding in northeast. • Regional rural banks and cooperative societies are also key stakeholders. • They are chief sources of fund for MFIs and SHGs and hence are indispensable

stakeholders. (v) Consultants

• Key role in providing technical support, mentoring support,developing products,systems and processes,research, studies and assessments for maintaining standards and transparency.

• M2i Consulting, Intellecap, Microsave etc which can play a role in Northeast.• IT and technology consultants will also have a role in making available

affordable technology solutions for the northeastern MFIs. (vi) Government

Both the state and central government will play a critical role in designing a conducive framework. The national and statutory authorities can really help create a favourable system that welcomes donor funding, minimizes interference, and creates a facilitating regulatory environment.

(vii) SHPIs and MFIs

• SHPIs groom SHGs which ultimately deliver financial services. • These SHPIs are several NGOs operating in all the states of northeast.• MFIs provide financial services directly to the clients.• Major MFIs: RGVN-CSP, ASOMI, IIRM, Bandhan, Prochesta, Youth Volunteers’ Union

(YVU), Volunteers for Village Development (VVD), NEREFS and UNNACO.

(viii) Donors

Donors facilitate and enable:• Capacity building and creating infrastructure for the MFIs• Overcoming the initial loss phase and other financial needs

(ix) Academic institutions

Universities such as Indian Institute of Banking and Management, Guwahati University, Assam University, Assam Agriculture University, Dibrugarh University, Tezpur University.

Management Colleges Such as Assam Institute of Management, School of Management Studies (Assam university), Darwin School of Business, Centre for Management Studies (Dibrugarh) etc.

THANK YOU