Microfinance in Distressed Areas of J&K, Rajasthan and Andhra Pradesh:Some Issues

This paper attempts to understand as to how effectively microfinance interventions help group members to sustain themselves during periods of disaster and in ecologically distressed areas. The multiplicity of Self-Help Group (SHG) promotion schemes/ institutions and the difference in financial benefits accruing therefrom has been found to have encouraged the migration of a significant number of SHGs/WSHGs ( Women Self- Help Group) promoted under the National Bank for Agriculture and Rural Development (NABARD) format to the National Rural Livelihoods Mission (NRLM) format. The major issues emerging from field visits and requiring attention were, lack of need based credit support to groups, apathy from banks and denial of credit by some branch managers to SHGs, insufficient credit for income generating activities on account of various reasons, good number of groups not practicing/ not allowed to practice internal lending, etc. The solution to addressing the inequities in the various microfinance approaches lies in Ministry of Rural Development (MoRD) agreeing to extend financial support available under NRLM to all the SHGs in a district, irrespective of the SHG promoting institution/ model. The possibility of working out a new set of work allocation between MoRD and NABARD may be explored taking the entire process of livelihood promotion in the country to a higher plane. Further, since the extant microfinance initiatives have not been able to provide an adequate coping mechanism to the SHG members during the periods of disaster/extreme stress and the rural poor barely manage to stay above subsistence levels only because of the extant social security schemes, such as Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), food subsidy under the National Food Security Mission (NFSM), and interest subvention, as a solution, therefore, a two pronged strategy is recommended, comprising (i) a microfinance product specially designed for disaster-prone areas aimed at ensuring a viable productive unit and (ii) enhanced social security measures in such areas in terms of number of schemes with higher ceiling for various programmes.