CHAPTER V IMPACT OF PANDYAN GRAMA BANK’S ...shodhganga.inflibnet.ac.in/bitstream/10603/14777/14/14...CHAPTER V IMPACT OF PANDYAN GRAMA BANK’S CREDIT SCHEMES ON BENEFICIARIES The

CHAPTER V

IMPACT OF PANDYAN GRAMA BANK’S CREDIT SCHEMES ON

BENEFICIARIES

The main focus of this chapter is to analyse the socio-economic

characteristics of the sample beneficiaries, namely, age and sex composition, size

of family, educational status, employment, income, expenditure, indebtedness and

savings. It also explains the impact of the bank loan on the economic conditions

of the respondents, such as, income, employment, expenditure, savings and debts

of the households of the respondents. The concerned economic variables before

bank assistance are compared with the corresponding figures after the bank

assistance, to find out the impact of the assistance on the households. Also the

various hypotheses are tested with suitable tools and the results are interpreted.

5.1 Details of the Bank Loan Procedure

Since the beneficiaries of the bank are mainly from the weaker sections, the

lending procedure and terms are simplified. The banks uses prescribed loan

application forms, for various types of loans. They are available in local languages

and the task of filling them is being done by the bank staff as majority of the

target group of beneficiaries are uneducated. Processing of the loan applications

involves checking the required documents and assessing the repayment capacity

of the applicant.

159

To assess the repayment capacity of the borrower the bank considers the

economic activities of the borrower. The bank obtains ‘no dues’ certificate from

other financial institutions operating in the area so as to avoid duplication of

credit. In the case of Government sponsored schemes the identification of poor

households, selection of beneficiaries and forwarding of application to bank are

undertaken by Block Development Officer. The time lag between forwarding of

application from Block Development Officer and disbursement of credit varied

from 15 days to 1 month.

The bank conducts a pre-sanction survey to assess the financial viability of

the loan activity. The loan applications will be rejected if there is any technical

objection or any inadequacy of required information. The decision of the Branch

Manager is final in sanctioning a loan. The bank accepts the hypothecation of

assets created from loan activity as security for the loans sanctioned. The bank

acts according to the guidelines issued by the NABARD relating to unit cost, unit

size, period of loan repayment and gestation period.

5.1.1 Purpose-wise Classification of Loans

The field survey referred to in Chapter V, covered 600 sample beneficiaries

financed by the 20 branches of the PGB selected for our study. This 600, includes

120 dairy loans beneficiaries, 120 sheep loan beneficiaries, 120 bullock cart loan

beneficiaries, 120 small business loan beneficiaries and 120 rural artisans.

160

i) Dairy Loan

Dairy assistance has always occupied an important place in the anti-

poverty programmes like Integrated Rural Development Programme. Maintenance

of milch animal fits well with the knowledge and skill of the rural households.

The milch animals are purchased with the help of a purchase committee which

consists of the beneficiary, the president of Milk Producer’s Co-operative Society,

the Bank Official and the Extension Officer (Animal Husbandary) of the blocks.

A unit consists of a pair of cows and its cost is Rs.6000. The animals are ear-

tagged for identification and insured on the spot for 3 years.

The repayment period was 5 years including the holiday or grace period of

one year. The mode of repayment was monthly. The interest rate was 10 per cent.

The security/ guarantee was hypothecation of assets.

ii) Sheep Loan

Loans are sanctioned for purchase of sheep of reputed breeds. A unit

consists of 20 ewes and one ram and its cost is Rs.5000. The repayment period

was 5 years including the grace or holiday period of one year. The mode of

repayment was half-yearly. The interest rate was 10 per cent.

161

iii) Work Bullock and Cart Loan

Loans were sanctioned for purchase of a pair of bullocks and a cart

(conventional/ modern). The unit cost was Rs.5500. Loans are to be repaid within

a period of 5 years. The mode of repayment was half-yearly. The interest rate was

10 per cent. The security/guarantee was hypothecation of assets.

iv) Small Business Loan

Loan under this scheme covers new business, development/ expansion of

existing small business. In the case of small business loan there was little

uniformity in the unit costs fixed. The amount of loan sanctioned under this

category varied from Rs.3000 to Rs.15000. The rate of interest on scheme loans

was 10 per cent and non-scheme loans was 12.5 per cent. Loan amount was

repayable within 36 months by monthly installments.

v) Rural Artisans

Under this scheme financial assistance was given to weavers, carpenters,

potters and the like. In the case of rural artisans there was no fixed unit cost. The

amount of loan sanctioned for rural artisans varied from Rs.3000 to Rs.15000.

The rate of interest on scheme loans was 10 per cent and non-scheme loans was

12.5 per cent. Loan amount was repayable within 3 years by monthly installments.

162

5.1.2 Subsidy

Borrowers who avail scheme loans are eligible to get subsidy. Small

farmers are eligible for a subsidy of 25 per cent of loan amount, marginal farmers,

agricultural labourers, and rural artisans for 33.33 per cent and scheduled caste/

scheduled tribe families enjoy a subsidy of 50 per cent. Subsidy and loan are to be

released simultaneously.

5.2 Discussion of Results

5.2.1 Age-wise Distribution

Table 5.1 indicates the age-wise distribution of the different categories of

respondents.

TABLE 5.1

AGE COMPOSITION OF THE SAMPLE BENEFICIARIES

(CATEGORY-WISE)

Sl.

No.

Activity Age Group Total

20-30 30-40 40-50 Above 50

1. Dairy 14

(2.33)

79

(13.00)

24

(4.00)

4

(0.67)

120

(20.00)

2. Sheep 16

(2.66)

58

(9.67)

40

(6.67)

6

(1.00)

120

(20.00)

3. Work Bullock

and Cart

10

(1.67)

54

(9.00)

50

(8.33)

6

(1.00)

120

(20.00)

4. Small Business 6

(1.00)

50

(8.33)

46

(7.67)

18

(3.00)

120

(20.00)

5. Rural Artisans 6

(1.00)

58

(9.67)

44

(7.33)

12

(2.00)

120

(20.00)

Total 52

(8.66)

298

(49.67)

204

(34.00)

46

(7.67)

600

(100.00)

Source: Computed from the Primary data.

Note : Figures in parentheses show percentage to the total.

163

Of the total 600 beneficiaries, 298 belong to the age group of 30-40, 102

belong to the age group of 40-50, 52 belong to the age group of 20-30 and 23

belong to the age group of above 50 years. This forms 49.67 per cent, 34.00 per

cent, 8.66 per cent and 7.67 per cent respectively. The information presented

indicates that Pandyan Grama Bank has a very large clientele in the age group 30

to 50 (about 84 per cent).

5.2.2 Sex-wise Distribution

Table 5.2 brings out the sex-wise distribution of the different categories of

respondents. Of the 600 beneficiaries 496 are males and 104 are females. This

forms 82.67 per cent and 17.33 per cent respectively.

TABLE 5.2

SEX-WISE CLASSIFICATION OF THE BENEFICIARIES

Sl.

No.

Activity Sex Total

Male Female

1. Dairy 80

(13.33)

40

(6.67)

120

(20.00)

2. Sheep 94

(15.67)

26

(4.33)

120

(20.00)

3. Work Bullock

and Cart

112

(18.67)

8

(1.33)

120

(20.00)

4. Small Business 108

(18.00)

12

(2.00)

120

(20.00)

5. Rural Artisans 102

(17.00)

18

(3.00)

120

(20.00)

Total 496

(82.67)

104

(17.33)

600

(100.00)



164

5.2.3 Marital Status

Table 5.3 shows the marital status of the respondents. Of the 600

respondents, 582 are married and only 18 are unmarried.

TABLE 5.3

MARITAL STATUS OF THE SAMPLE BENEFICIARIES

Sl.

No.

Activity Marital Status Total

Married Unmarried

1. Dairy 116

(19.33)

4

(0.67)

120

(20.00)

2. Sheep 116

(19.33)

4

(0.67)

120

(20.00)

3. Work Bullock

and Cart

114

(19.00)

6

(1.00)

120

(20.00)


(19.67)

2

(0.33)

120

(20.00)


(19.67)

2

(0.33)

120

(20.00)

Total 582

(97.00)

18

(3.010)

600

(100.00)



5.2.4 Educational Status

Table 5.4 clearly exhibits the level of education of the sample beneficiaries.

165

TABLE 5.4

EDUCATIONAL STATUS OF THE SAMPLE BENEFICIARIES

(LOAN-WISE)

Sl.

No.

Activity Level of Education Total

Illi-

terate

Primary Middle Matri-

culation

1. Dairy 46

(7.67)

56

(9.33)

8

(1.33)

10

(1.67)

120

(20.00)

2. Sheep 34

(5.67)

48

(8.00)

36

(6.00)

2

(0.33)

120

(20.00)

3. Work Bullock

and Cart

24

(4.00)

64

(10.67)

30

(5.00)

2

(0.33)

120

(20.00)

4. Small Business 4

(0.66)

40

(6.67)

40

(6.67)

36

(6.00)

120

(20.00)


(2.67)

44

(7.33)

38

(6.33)

22

(3.67)

120

(20.00)

Total 124

(20.67)

252

(42.00)

152

(25.33)

72

(12.00)

600

(100.00)



An analysis of the educational level of the respondents, reveals that out of

the 600 respondents of this sample study, 124 have stated that they have not

attended the primary school, 252 have attended the primary school, 152 have

attended the secondary school and 72 have stated that they have got higher

secondary education. This forms 20.67 per cent, 42.00 per cent, 25.33 per cent

and 12.00 per cent respectively of the total beneficiaries of our sample. It is

encouraging that 12.00 per cent respondents have received higher secondary

school education.

166

5.2.5 Size of the Family

Table 5.5 shows the size of the family of the sample beneficiaries. Of the

total respondents of 600 beneficiaries, 92 families (or 15.33 per cent) have four or

less than 4 members in the family. 508 respondents families have the family size

of 5 or above 5 members. In general it seems that the family size of 5 members is

higher in number. Only a few respondent families have the largest size of the

family, namely more than 6 members.

TABLE 5.5

SIZE OF FAMILY OF THE SAMPLE BENEFICIARIES

Sl.

No. Activity

Number of Persons in

the Family

Total

Average

No. of

Persons in

the

Family

1-4 5 and

above

1. Dairy 18 102 120 5.6

2. Sheep 8 112 120 6.3

3. Work Bullock and Cart 10 110 120 6.0

4. Small Business 32 88 120 5.1

5. Rural Artisans 24 96 120 5.3

Total 92

(15.33)

508

(84.67)

600

(100.00)

5.7



167

5.2.6 Occupational Distribution

It is inferred from the data presented in table 5.6 that 38 per cent

beneficiaries belonged to the category of agricultural labour, 8 per cent to

marginal farmers, 13 per cent to small farmers, 32 per cent beneficiaries belonged

to the category of traders and 20 per cent to rural artisans (weavers and

carpenters). For marginal and small farmers agricultural land is the major source

of income. The next largest source of income for them is the agricultural labour

and allied activities. For the agricultural labour’s group the main source of income

is agriculture. Other sources like dairy and non-agricultural occupations almost

equally provide income to the agricultural labourers.

TABLE 5.6

OCCUPATIONAL DISTRIBUTION OF SAMPLE BENEFICIARIES

Sl.No. Occupation Number of

Beneficiaries

Percentage to the

Total

1. Small Farmer 48 8.00

2. Marginal Farmer 78 13.00

3. Agricultural Labourer 228 38.00

4. Trader 126 21.00

5. Rural Artisan 126 20.00

Total 600 100.00

Source: Compiled from Primary data.

168

5.2.7 Sources of Information About PGB

Table 5.7 shows the source-wise information about the PGB’s loan

schemes. Of the 600 beneficiaries, 280 of them (46.67 per cent) received first

information from the bank officials, 120 beneficiaries (20 per cent) were self

motivated to approach the bank, 108 beneficiaries (18.00 per cent) from village

officials and 92 beneficiaries (15.33 per cent) from friends and relatives. The

above facts reveals that PGB’s employees have played a major role in motivating

the villagers to avail credit from the bank. It is also interesting to note that 20.00

per cent of the beneficiaries were aware of credit facilities provided by PGB and

self-motivated to approach the bank.

TABLE 5.7

FACTORS MOTIVATED TO AVAIL THE BANK LOAN

Sl.No. Motivator

Number of

Beneficiaries

Motivated

Percentage to the

Total

Beneficiaries

1. Bank Employees 280 46.67

2. Village Officials 108 18.00

3. Friends and Relatives 92 15.33

4. Self 120 20.00

Total 600 100.00


169

5.2.8 Need for Loan

The compelling factors creating the need for loan were discovered as

follows. It is evident from table 5.8 that 100 respondents or 16.67 per cent of the

respondents almost were unemployed and they started some activity with the help

of PGB loan; 296 respondents (49.33 per cent) were under-employed due to lack

of capital and 204 respondents (34.00 per cent) wanted to do more.

TABLE 5.8

FORCING FACTORS OF LOAN REQUIREMENT

Sl.No. Forcing Factors Number of

Beneficiaries

Percentage to the

Total

1. Unemployment 100 16.67

2. Lack of Capital 296 49.33

3. Expansion of Existing

Activities

204 34.00

Total 600 100.00


5.2.9 Factors Influencing Loan Disbursement

Table 5.9 indicates a rather mixed reaction of the sample beneficiaries to

the loaning policy which, they feel, is influenced by certain major factors.

170

TABLE 5.9

FACTORS INFLUENCED LOAN DISBURSEMENT

Sl.

No.

Factors Dairy Sheep Work-

Bullock

& Cart

Small

Busi-

ness

Rural

Arti-

sans

Total

1. Eligibility

and Need

64

(10.67)

52

(8.67)

60

(10.00)

48

(8.00)

70

(11.66)

294

(49.00)

2. Political

Influence

32

(5.33)

54

(9.00)

30

(5.00)

26

(4.33)

10

(1.67)

152

(25.33)

3. Pull in the

Bank

2

(0.33)

2

(.0.33)

-- 8

(1.34)

-- 12

(2.00)

4. Influence of

Caste

20

(3.34)

12

(2.00)

18

(3.00)

2

(0.33)

14

(2.33)

66

(11.00)

5. Status of the

Borrowers

2

(0.33)

-- 4

(0.67)

36

(6.00)

24

(4.00)

66

(11.00)

6. No opinion -- -- 8

(1.33)

-- 2

(0.34)

10

(3.67)

Total 120

(20.00)

120

(20.00)

120

(20.00)

120

(20.00)

120

(20.00)

600

(100.00)



It is gratifying to note that 294 beneficiaries (49.00 per cent) feel that

loaning policy of the PGB is mostly determined by the eligibility and need of the

beneficiaries to obtain loans from the bank. 152 respondents (25.33 per cent) feel

that the bank’s lending policy is influenced by political considerations 66

borrowers (11.00 per cent) have expressed the view that the loaning policy of the

PGB is influenced by the status of the borrower who applies for the loan. Another

66 respondents (11.00 per cent) are of the opinion that only persons of some

influence or those who are known to the bank officials could easily get loans.

Only 12 respondents (2.00 per cent) have stated that the bank’s lending policy is

171

influenced by caste consideration. In fact, this finding is of great significance,

chiefly because it amply proves that the bank’s policy is not biased by casteism.

The last category of beneficiaries who formed 1.67 per cent of the total number

of sample beneficiaries had declined to express any opinion at all. But from the

discussions with these beneficiaries, the impression formed is that if they

expressed any adverse opinion about the bank, it might possibly affect their future

relations with the bank.

5.2.10 Period for Sanction

Table 5.10 indicates the period of delay in getting the bank loan. Of the

total number of 600 sample beneficiaries, 290 (48.33 per cent) received their loans

without delay. In the case of 166 beneficiaries (27.67 per cent) they experienced a

delay of two weeks in getting loan and 69 beneficiaries or 23.00 per cent could

obtain their loans with a delay of one month. Only in the case of 6 beneficiaries

(one per cent) the delay was two months. Thus, it is clear that majority of the

beneficiaries (that is 76.00 per cent) could obtain their credit without any delay or

within two week’s time.

172

TABLE 5.10

PERIOD OF DELAY IN GETTING LOAN

Sl.

No. Activity

Period of Delay in Getting Loan Total No.

of

Borrowers No Delay 2 Weeks 1 Month 2 Months

1. Dairy 66

(11.00)

22

(3.67)

30

(5.00)

2

(0.33)

120

(100.00)

2. Sheep 36

(6.00)

44

(7.33)

36

(6.00)

4

(0.67)

120

(100.00)

3. Work Bullock

and Cart

56

(9.33)

30

(5.00)

34

(5.67) --

120

(100.00)


(10.67)

46

(7.67)

10

(1.66) --

120

(100.00)


(11.33)

24

(4.00)

28

(4.67) --

120

(100.00)

Total 290

(48.33)

166

(27.67)

138

(23.00)

6

(1.00)

600

(100.00)



It was reported by the borrowers that the time taken for bank branch for

sanctioning of loans is the reasonable period of two weeks. However, they felt

that there was inordinate delay of one to two months in the case of Government

sponsored programmes from the date of application to the date of

sanction/disbursement. When this particular problem was discussed with branch

managers they indicated that there was considerable delay in receipt of subsidy

from the district authorities. The delay in getting the loan is due to the illiteracy of

the beneficiaries or due to the failure to produce the necessary documents and

information.

173

5.2.11 Adequacy of Loan Amount

Whenever finance is provided, adequacy is very important. The loan

amount should be sufficient for the purpose for which it was taken by the

beneficiaries.

TABLE 5.11

SOURCES OF FINANCE TO MEET INADEQUACY OF LOAN AMOUNT

Sl.No. Category

Loan Amount Sources of Finance to meet

inadequacy

Adequate Inadequate Own

Source

Money

Lenders

Friends

and

Relatives

1. Dairy 82

(13.67)

38

(6.33) 18 14 6

2. Sheep 72

(12.00)

46

(8.00) 14 28 6

3. Work Bullock

and Cart

66

(11.00)

54

(9.00) 16 28 10


(16.00)

24

(4.00) 14 4 6


(13.67)

38

(6.33) 30 4 4

All Borrowers 398

(66.34)

202

(33.66) 92 78 32



Table 5.11 shows the sources of finance to meet the inadequacy of loan

amount. The figures reveal that 398 beneficiaries (66.34 per cent) are satisfied

174

with the adequacy of credit and remaining 202 beneficiaries (33.66 per cent) said

that they had to borrow to compensate the shortage. The inadequacy of credit is

one of the important reasons that have resulted in the credit granted by the bank

being not used for specific purposes. The table further reveals that 92

beneficiaries overcome the credit gap getting money from their own source (that

is, past savings), 39 beneficiaries from money lenders and 16 beneficiaries from

friends and relatives.

5.2.12 Impact on Employment

Table 5.12 brings out the category wise employment position of the sample

beneficiaries during the pre-loan and post-loan periods. It is noted that the PGB’s

loan assistance programmes to the rural poor have resulted in creating a positive

impact on generating employment in the rural areas. Although the overall

employment opportunities of the beneficiaries have increased between the pre-

loan and post-loan periods, small business, rural artisans and dairy loan

beneficiaries, however, gained more in terms of employment by as much as a hike

of 43.90 per cent, 41.40 per cent and 42.57 per cent respectively. Compared to

other loan activities, the increase in employment is 31.16 per cent in the case of

sheep loan borrowers and 29.95 per cent in the case of work bullock and cart loan

beneficiaries. Yet there is a positive impact on creating employment in these loan

activities.

175

TABLE 5.12

EMPLOYMENT POSITION OF THE SAMPLE BENEFICIARIES IN THE

PRE-LOAN AND POST-LOAN PERIODS (AVERAGE ANNUAL

EMPLOYMENT PER BORROWER IN MANDAYS)

Sl.

No.

Activity Average Employment Percentage

of Increase

t-test

Pre-Loan

Period

Post-Loan

Period

1. Daily 404 576 42.47 32.30*

2. Sheep 398 522 31.16 13.63*

3. Work Bullock and Cart 414 546 29.95 15.12*

4. Small Business 410 590 43.90 21.57*

5. Rural Artisans 430 608 41.40 31.41*

Total 412 568 36.89 40.66*


Note : * Indicates the difference between Pre-loan and Post-loan employment

and it is statistically significant at 5 per cent level.

In order to test the null hypothesis that there is no difference between

employment position in different activities in the pre-loan and that in post-loan

period, t-test has been employed for each category. The estimated results of t-test

presented in table 5.13 reveals that the difference between the employment

position in the pre-loan period and that in post-loan period for all activities is

statistically significant at 5 per cent level. Hence, the null hypothesis is rejected.

Thus, it may be concluded that the PGBs’ loan schemes have generated

employment to the beneficiaries.

176

5.2.13 Impact on Income

The ultimate benefit of bank finance to the rural poor has been analysed by

finding out whether any change in income has taken place during the post-loan

period and if so to what extent. The researcher has done this by analysing the

relevant data and quantifying them for the purpose of working out the net

incremental income. The incremental income is taken to be the difference between

the post- investment and pre-investment net income of beneficiary.

The sample beneficiaries and members of their families pursued other

occupations besides the activities financed by the bank branches. The productive

loan activities carried out by the sample beneficiaries with the credit assistance

from the bank branches made an impressive contribution to raising the household

net income of the sample beneficiaries of the five districts.

Table 5.13 shows the income position of the sample beneficiaries before

and after availing the bank loan. The annual total income earned by the sample

beneficiaries as a whole averaged at Rs.8223 which is higher by 60.63 per cent

than the sum of Rs.5072 calculated for the pre-loan period.

177

TABLE 5.13

INCOME POSITION OF THE SAMPLE BENEFICIARIES IN THE

PRE-LOAN AND POST-LOAN PERIODS (AVERAGE ANNUAL INCOME

PER HOUSEHOLD IN RUPEES)

Sl.

No.

Activity Average Income Percentage

of Increase

t-test

Pre-Loan

Period

Post-Loan

Period

1. Daily 5282 8483 60.60 10.52*

2. Sheep 4673 6593 41.09 8.89*


4. Small Business 5308 9883 86.19 11.92*

5. Rural Artisans 5490 9552 73.99 12.86*

Total 5072 8223 62.13 21.22*


Note : * Indicates the difference between Pre-loan and Post-loan income


The annual total income of all sections of beneficiaries has increased

during the period under study. However, a relatively higher percentage of increase

was noticed in the case of small business and rural artisans. The average net

incremental income in the case of small business was Rs.4575, for rural artisans it

was Rs.4062, for dairy loan it was Rs.3201, for work bullock and cart it was

Rs.2015 and Rs.1920 in the case of sheep loan.

178

The activities of the small businessmen and rural artisans proved to be the

most remunerative among the five different activities. The increase in net income

in percentage terms was the highest in small business (86.19 per cent) followed by

rural artisans’ activities (73.99 per cent) and dairy (60.60 per cent). But it was the

lowest in the case of sheep loan beneficiaries (41.09 per cent) and work bullock

and cart loan beneficiaries 943.74 per cent). The bullock and cart and sheep loan

beneficiaries are the least benefited.

The review of the PGB’s loan assistance in the five operational districts

during the period under study clearly brings out the fact that the credit extended to

different categories of beneficiaries produced significantly beneficial impact in

terms of higher levels of income. This field survey had demonstrated that the

increase in income per beneficiary was higher in the post-loan period as compared

to that in the pre-loan period. The figures indicate that after availing the bank

loans, the sample beneficiaries devoted more time and attention to the activities

financed and succeeded in making profitable use of the funds.

On a further probe into the various internal and external factors which

influenced the income generating process it was found that there were positive

and encouraging internal factors such as (i) creation, possession and maximum

utilisation of assets out of bank assistance ii) previous experience of the borrowers

in the activities financed and external factors such as i) increased demand for

179

goods and services and (ii) recent developments in infrastructural facilities. At the

same time there were negative and hindering internal factors such as (i)

inadequate loan amount, (ii) multiple financing and external factors such as (i)

poor and inadequate supporting arrangements, (ii) stiff competition in business

and (iii) increase in cost of inputs. These factors have been identified as the most

important variables in income generating process under different loan activities.

The null hypothesis that there is no difference between the average annual

income per household in the pre-loan period and that in post-loan period for all

activities has been tested by applying t-test. The computed results presented in

table 5.14 that the differences are significant at 5 per cent level for all activities

and the null hypothesis is rejected. Hence, the alternative hypothesis framed is

that the income of the beneficiaries of different activities has increased after

availing the bank credit. It could be observed from the data shown in table 5.15

that the income of the beneficiaries has increased after availing the bank loan.

basing on the statistical results it is concluded that there is a substantial increase in

the income of the beneficiaries of all activities after getting bank credit.

5.2.14 Percentage Increase in the Household Income

The primary objective of the survey of respondent households was to find

out the impact of the credit facilities offered by the PGB between 1987 and 1989.

To what extent did their incomes and economic status improve? To answer this

180

question, the respondents annual incomes before and after the utilisation of the

loans were ascertained and processed. It is a matter of satisfaction that none of

sample households recorded a fall in annual income after availing the bank loans.

The increase in income after the utilisation of the loans has been classified into

five groups and presented in Table 5.14.

TABLE 5.14

PERCENTAGE OF INCREASE IN HOUSEHOLD INCOME IN THE

POST-LOAN PERIOD

Sl.

No.

Ranges of

Additional

Income

Generation

Activity Total Percen-

tage Dairy Sheep Bullock

& Cart

Small

Busi-

ness

Rural

Arti-

sans

1. 10 – 25 20 56 38 16 10 140 23.33

2. 25 – 50 46 40 48 34 36 204 34.00

3. 50 – 75 44 20 24 38 50 180 30.00

4. 75 – 100 6 4 4 20 18 52 8.67

5. 100 – 125 4 -- 2 12 6 24 4.00

Total 120 120 120 120 120 600 100.00


Table 5.14 indicates the percentage of increase in household income in the

post-loan period. The figures reveal that none of the beneficiary had a decline in

annual household income in the post loan period. The additional income generated

ranges from 10-25 per cent to 100-125 per cent. The impact of loans on the

181

income of the respondents is noted as follows: 140 beneficiaries (23.33 per cent)

improved their income position by 10-25 per cent, 204 beneficiaries (34 per cent)

by 25-50 per cent, 180 beneficiaries (30.00 per cent) by 50-75 per cent,

52 beneficiaries (8.67 per cent) by 75.-100 per cent and 24 beneficiaries (4.00 per

cent) by 100-125 per cent. The table also reveals that small business and rural

artisans are the groups of beneficiaries most benefited from the bank assistance

because a majority of borrowers in this group had an increase in income between

50-125 per cent.

5.2.15 Poverty Level in the Post- Loan Period

Yet another important objective of providing credit assistance to the

clientele group is to enable them to cross the poverty line. In the case of sample

beneficiaries this objective seemed to have been achieved to an appreciable level.

In our study the family income of Rs.20700 per annum was taken as the poverty

line income.

Table 5.15 indicates the poverty position of beneficiaries in the pre-loan

and post-loan periods. The analysis on the status of the respondents with the

income base at the poverty line, revealed that whereas there were only 48

households (8.00 per cent) of the sample beneficiaries above the poverty line in

the pre-loan period, the number of such households shot up to 452 (75.33 per

cent) in the post-loan period. It indicates that 404 (73.19 per cent) of the

182

households crossed the poverty line with the credit assistance provided by the

PGB. At the other end, the percentage of households of the sample beneficiaries

below the poverty line decreased from 92.00 per cent in the pre-loan period to

24.67 per cent in the post-loan period.

TABLE 5.15

POVERTY POSITION OF BENEFICIARIES IN THE PRE-LOAN AND

POST-LOAN PERIODS (No. of beneficiaries)

Sl.

No.

Category

Borrowers

(Loan-wise)

Pre-Loan Post-Loan Crossed

Poverty

Line

Percen-

tage Below

Poverty

Line

Above

Poverty

Line

Below

Poverty

Line

Above

Poverty

Line

1. Dairy Loan 106 14 16 104 90 84.19

2. Sheep Loan 120 -- 54 66 66 55.00

3. Work Bullok

and Cart 120 -- 26 94 94 78.33

4. Small

Business 98 22 26 94 72 73.47

5. Rural

Artisans 108 12 26 94 82 75.93

Total 552 48 148 452 404 73.19


Table 5.15 further reveals that the percentage of those borrowers who have

crossed the poverty line with bank assistance was high at 84.91 per cent in the

case of dairy loan, followed by 78.33 per cent in the case of bullock and cart loan,

75.93 per cent in the case of rural artisans and 73.47 per cent in the case of small

business loan. Only in the case of sheep loan borrowers, there was not an

183

appreciable reduction in the number and proportion of the borrower’s household

crossing the poverty line after availing the bank loan.

Thus, the objective of raising the poor above the poverty line, in real spirit

of it, is achieved to the tune of 73.19 per cent. It could be concluded that there was

an appreciable reduction in the number and proportion of the same borrower’s

household below the poverty line in the post-loan period as compared to those in

the pre-loan period.

Thus, the hypothesis that a positive impact has been made on the

eradication of poverty in all activities in the study area stands fully supported.

5.2.16 Income and Poverty Levels

An attempt was made to assess the impact of the loan activity on overall

income levels of the sample beneficiaries. For this purpose the income of the

beneficiary before availing the bank loan was calculated. The net increase in

income through the loan activity was assessed. Further the beneficiaries were

classified into six types as follows.

Category I

Beneficiaries who belong to target group and were below poverty line of

Rs.20700 as annual income before starting loan activity and managed to cross the

poverty line with the help of loan activity.

184

Category II

Beneficiaries who belong to target group and were below poverty line

before starting loan activity and continued to remain below poverty line even after

loan activity.

Category III

Beneficiaries who belong to target group but earned more than Rs.6400

before and after loan activity.

Category IV

Beneficiaries who belong to non-target group with annual household

income more than Rs.20700 and above the poverty line in pre and post-loan

periods.

Category V

Beneficiaries who belong to non-target group but only had annual

household income of less than Rs.20700 in the pre and post-loan periods.

Category VI

Beneficiaries who belong to non-target group with annual household

income less than Rs.20700 before starting loan activity and above the poverty line

after availing the bank loan.

185

TABLE 5.16

INCOME AND POVERTY LEVEL IN THE POST-LOAN PERIOD

(TARGET AND NON-TARGET GROUPS)

Sl.

No. Items No. of

Borrowers

Percentage

to Total

A. Target Group

1. Category I (Pre-loan Income < Rs.6400,

Post-loan Income > Rs.6400)

380 63.34

2. Category II (Pre-loan Income < Rs.6400,

Post-loan Income < Rs.6400)

146 24.33

3. Category III (Pre-loan Income > Rs.6400,


12 2.00

B. Non-Target Group

4. Category IV (Pre-loan Income > Rs.6400,


36 6.00

5. Category V (Pre-loan Income < Rs.6400,

Post-loan Income < Rs.6400)

2 0.33

6. Category VI (Pre-loan Income < Rs.6400,


24 4.00

Grand Total 600 100.00

Table 5.16 shows the impact of PGB’s loan schemes on income and

poverty levels of sample beneficiaries. In order to analyse the impact of bank loan

on income and poverty levels, beneficiaries are divided into two groups. Target

group and non-target group. In the target group 190 beneficiaries (63.34 per cent)

were able to cross the poverty line with the help of loan activity. But in this group

186

73 beneficiaries (24.33 per cent) were not able to cross the poverty line in the

post-loan period for reasons which were already discussed.

In the non-target group three beneficiaries (4.00 per cent) were able to

cross the poverty line in the post loan period with the help of loan activity. But

there was only one beneficiary in this group who was not able to cross the poverty

line even after the bank assistance. Thus, the above analysis also proves that the

PGB loan schemes helped the beneficiaries increase their income position and

thereby cross the poverty line.

5.2.17 Expenditure

To understand the economic standard of the respondents, it is necessary to

ascertain their expenditure position. Table 5.17 reveals the expenditure position of

the respondents in the pre-loan and post-loan periods. The average annual

expenditure amount for a respondents family was found to be Rs.5,264 in the pre-

loan period. It rose to Rs.6,910 in the post-loan period (31.27 per cent increase in

expenditure). Among the beneficiaries the sheep loan beneficiaries have the least

annual expenditure of Rs.4,812 and Rs.6,210 in the pre-loan and post loan period

respectively. But in the case of small businessmen and rural artisans the average

amount of expenditure for a respondent family was found to be high at Rs.5,510;

Rs.7,472 and Rs.5,623; Rs.7,512 both in the pre-loan and post-loan periods

respectively.

187

TABLE 5.17

EXPENDITURE OF THE SAMPLE BENEFICIARIES IN THE

PRE-LOAN AND POST-LOAN PERIODS (AVERAGE ANNUAL

EXPENDITURE PER HOUSEHOLD IN RUPEES)

Sl.

No.

Activity Expenditure (Rs.) Percentage

of Increase

in

Expenditure

t-test

Pre-Loan

Period

Post-Loan

Period

1. Daily 5270 6902 30.97 12.63*

2. Sheep 5104 6452 26.39 18.14*


4. Small Business 5510 7472 35.61 13.83*

5. Rural Artisans 5623 7512 33.59 12.69*

Total 5264 6910 31.27 25.80*


Note : * Indicates the difference between Pre-loan and Post-loan expenditure


To test the null hypothesis that there is no increase in expenditure in the

post loan period, the t-test was applied. The results of the test shown in table 5.17

reveal that the difference between the expenditure in the pre-loan period and that

in the post-loan period is statistically significant at 5 per cent level. Hence, the

null hypothesis is rejected. Therefore, the alternative hypothesis framed is that the

average annual household expenditure has increased in the post-loan period. Thus,

it may be concluded from the data given in table 5.18 that average annual

household expenditure has increased in the post-loan period for all activities in the

study area.

188

5.2.18 Savings

Table 5.18 shows the savings position of sample beneficiaries in the pre-

loan and post-loan periods. In the pre-loan period out of 300 beneficiaries only 97

were able to save money. But the number of savers increased to 201 in the post

loan period. Again on an average the savings of the respondents per annum was

Rs.329 in the pre-loan period. But it rose to Rs.943 in the post-loan period. It

means that the average amount of savings increased by 187.50 per cent in the post

loan period. After availing the bank loan, the average amount of savings in the

case of small businessmen was Rs.1275, rural artisans Rs.1033, dairy loan

beneficiaries Rs.933, work-bullock and cart loan beneficiaries Rs.782 and Rs.684

in the case of sheep loan beneficiaries. It indicates that the average amount of

savings was high in the case of small businessmen and rural artisans and low in

the case of sheep and bullock and cart loan beneficiaries.

TABLE 5.18

SAVINGS POSITION OF THE SAMPLE BENEFICIARIES IN THE PRE-LOAN

AND POST-LOAN PERIODS (AVERAGE ANNUAL SAVINGS

PER HOUSEHOLD IN RUPEES)

Sl.

No.

Activity Savings (Rs.) Percentage of

Increase in

Savings

t-test

Pre-Loan

Period

Post-Loan

Period

1. Daily 308 933 202.92 6.80*

2. Sheep 233 694 197.85 4.50*


4. Small Business 448 1275 184.60 8.00*

5. Rural Artisans 382 1033 170.42 7.22*

Total 328 943 187.50 14.30*


Note : * Indicates the difference between Pre-loan and Post-loan savings


189

The mode of savings with chit funds seems to be the most popular form

among the respondents. The next important mode of savings among the people is

the banks. The post office savings is the least prevalent among the respondents.

This may be due to the fact that in most of the villages, there is no post office

savings facility.

In order to test the hypothesis that there is no significant difference

between the average annual household savings in the pre-loan period and those in

post-loan period, t-test has been applied. The computed results of the t-test show

that the differences are significant at 5 per cent level for all activities. Hence, the

null hypothesis is rejected. The alternative hypothesis framed is that the average

annual savings per household has increased after getting the bank loan. Thus, it

may be concluded that the average annual savings per households has increased in

the post-loan period for all activities in the study area.

5.2.19 Debt Position

Table 5.19 depicts the annual average debts (excluding PGB loan) of

different categories of respondents in the pre-loan and post-loan periods. In the

pre-loan period 190 beneficiaries were in debt position and the average amount of

debt was Rs.1380. But, in the post-loan period only 102 respondents were in debt

position and the average amount of debt declined to Rs.576. It signifies that the

debt position of the respondents declined by 58.26 per cent in the post-loan

190

period. Even the categorywise analysis also shows the same fact. For instance, in

the case of dairy loan the debt conditions of the beneficiaries declined by 71.89

per cent, followed by small business by 63.36 per cent, rural artisans by 62.60 per

cent, sheep loan by 48.92 per cent and work-bullock and cart loan by 29.68 per

cent. The decrease in debt position was high in the case of dairy loan beneficiaries

(that is, 71.89 per cent) as compared to only 29.68 per cent in the case of work-

bullock and cart loan beneficiaries. In short, the financial assistance provided by

PGB had much impact on reducing the debt burden of the beneficiaries.

TABLE 5.19

INDEBTEDNESS POSITION OF THE SAMPLE BENEFICIARIES IN

THE PRE-LOAN AND POST-LOAN PERIODS (AVERAGE ANNUAL

INDEBTEDNESS PER HOUSEHOLD IN RUPEES)

Sl.

No. Activity

Indebted in the Pre-

loan Period

Indebted in the Post-

loan Period t-test

Number Amount

(Rs.) Number

Amount

(Rs.)

1. Dairy Loan 64 1544 36 434 4.84*

2. Sheep Loan 96 1061 66 542 4.05*

3. Work Bullock

and Cart 94 940 32 661 5.96*

4. Small

Business 54 1748 42 640 2.41*

5. Rural Artisans 64 1607 28 601 4.53*

Total 380 1380 204 576 9.51*


Note : * Indicates the difference between Pre-loan and Post-loan indebtedness


191

To test the null hypothesis that there is no difference between the average

indebtedness per household in the pre-loan period and that in post-loan period the

t-test has been applied. The calculated results of t-test reveal that there is

significant difference between the average indebtedness per household in the pre-

loan period and that in post-loan period. Hence, the null hypothesis is rejected.

The alternative hypothesis framed is that the indebtedness position of the sample

beneficiaries in the post-loan period has declined. Thus, it may be observed from

the data shown in Table 5.19 that the average indebtedness position of the sample

beneficiaries has declined considerably for all activities in the study area.

An attempt is made by the researcher to find out the impact of the bank

loans on the financial positions of the respondents. When they were asked to tell

their experiences, the respondents generally expressed that bank loans had a

considerable impact on improving their economic position. The respondents

explained the impact of bank loan on them as follows:

1. After getting the bank loans, the respondents were able to improve their

business in terms of their turn over.

2. After receiving the bank loans, increased flow of income has been

experienced by most of the respondents.

3. The respondents were in a position to repay their past loans which they

got from non-institutional/ private sources at high rate of interest.

192

4. As a result of increase in the incomes, the beneficiaries were able to

save more amounts. In many cases, their savings were invested in chit

funds.

5. Bank loans also enabled the respondent to lead a comfortable life. Most

of them were able to increase their asset holdings like purchase of a

house-site, jewels, vehicles (like bicycles) and vessels. They were able

to provide better education, health facilities and nutrious food to their

children and family members. Thus in many ways the bank loans

enabled the respondents to increase their standard of living.

5.2.20 Repayment

The present study aims to examine the credit repayment performance of the

beneficiaries financed by PGB. It attempts at giving a critical analysis of the

extent of repayment of loans sanctioned by the bank and highlighting the

important reasons for the non-repayment of such loans. On the basis of the

analysis, it also tries to offer certain suggestions for improvement from the stand

point of policy formulation.

The most important cannon of any sort of lending should be inherently

self-liquidating character of loans. Repayment of loans is very important for the

profitability and viability of the lending institutions. Poor recovery of loans not

only inhabits the ability of the system to recycle the funds but also deprives the

193

benefits of borrowing to the other needy people. Better recovery of loans helps in

building up confidence of the general public in the soundness of the banking

system. It also improves the efficiency of the staff and helps to devote more time

to development work rather than keeping themselves busy in recovering loans.

The ancient India was known for loan repayment habit of its people. Sons

were honest enough to settle the debts of even their forefathers. They were ready

to accept the moral responsibility to repay all debts. The situation is quite different

today. Around 50 per cent of loans of commercial banks, RRBs and co-operative

societies are not returned.

Repayment implies generation of adequate income over and above

household expenditure and maintenance cost.

The recovery of bank loans would be possible, if the borrower is willing to

pay and he has the capacity to pay. Loan recovery cannot made even in the case of

those beneficiaries who are willing to repay but they have no capacity to repay.

The activities being sponsored for finance by the bank are generally not viable

because of loan amount ceiling and/or for a number of other causes. The finance

provided in majority of the cases, may be helpful in adding to the creation of

assets only, but not to the building up of financial capacity by generation of

adequate income. Hence, the loans sanctioned by the bank in majority of the cases

remain unrecoverable.

194

i) Regularity of Repayment of Loans

Table 5.20 shows the regularity of repayment of loan by the sample

beneficiaries.

TABLE 5.20

REGULARITY OF REPAYMENT OF LOANS (Number of beneficiaries)

Sl.

No.

Category Repayment of Loan Percentage of

Regular to Total Regular Irregular

1. Dairy 76 44 63.33

2. Sheep 40 80 33.33

3. Work Bullock and Cart 64 56 53.33

4. Small Business 64 46 61.67

5. Rural Artisans 78 42 65.00

Total 332 268 55.33


Out of 600 beneficiaries, 332 (55.33 per cent) were regular and 268

beneficiaries (44.67 per cent) were irregular in their loan repayment. The loan

wise figures indicate that 76 rural artisans (65.00 per cent) were regular in

repaying their loans, followed by 76 dairy loan beneficiaries (63.33 per cent), 74

small loan (61.67 per cent) and 64 work bullock and cart loan beneficiaries

(53.33 per cent). The above analysis clearly indicates that compared to other

beneficiaries, the sheep loan beneficiaries were irregular in their loan repayment.

195

ii) Reasons for Prompt Repayment Performance

Reasons for prompt repayment behaviour of the sample beneficiaries are

analysed and presented in Table 5.21.

TABLE 5.21

REASONS FOR PROMPT REPAYMENT BEHAVIOUR OF THE

SAMPLE BENEFICIARIES

Sl.No. Reasons for Prompt

Repayment of Loan

Number of

Beneficiaries

Percentage to the

Total

1. Generation of Income 128 34.78

2. Persuasion by Bank officials 90 24.46

3. Absence of Indebtedness 72 19.57

4. Good Moral Values 42 11.41

5. Desire to get further loan 36 9.78

Total 368 100.00


In the other of maximum frequency response Table 5.21 reveals that

generation of income was the most important reason which prompted 128

beneficiaries (34.78 per cent) to repay credit promptly. The persuasion by bank

officials was the main reason given by 90 respondents (24.46 per cent). Absence

of indebtedness prompted 72 respondents (19.57 per cent) to repay the loan

promptly. The presence of good moral values and not to become a defaulter was

the reason given by 42 beneficiaries (11.41 per cent) as the one for prompt

196

repayment performance. The desire to get further loans induced 36 beneficiaries

to repay the loan amount promptly.

iii) Source of Repayment

Table 5.22 shows the source of repayment of the bank loan.

368 respondents were reported to be prompt in repaying their loans and other

154 respondents repaid a part of their loan. It is interesting to note that

184 respondents who repaid their loans fully made this out of their incremental

income. On the other hand 154 respondents repaid a part of their loans out of the

proceeds of both income and new loans. This clearly indicates that the increased

income accuring from the loan activity constitutes the important source for

repayment of loans.

TABLE 5.22

SOURCES OF LOAN REPAYMENT

Sl.

No. Activity

Sources of Repayment Total

Gene-

rated

income

Percen-

tage

Other

Sources

Percen-

tage

No. of

borro-

wers

Percen-

tage

1. Dairy Loan 82 15.70 30 5.75 112 21.45

2. Sheep Loan 42 8.05 40 7.66 82 15.71

3. Work Bullok

and Cart 74 14.18 30 5.75 104 19.93

4. Small

Business 74 14.18 34 6.51 108 20.69

5. Rural

Artisans 96 18.39 20 3.83 116 22.22

Total 368 70.50 154 29.50 522 100.00


197

Repayment performance of the beneficiaries was measured with the help of

a three-point Repayment Performance Scale (RPS). The RPS gave the percentage

figures of beneficiaries belonging to three different groups.

a) Full payment, that is, payment of loan according to demand;

b) Partial payment, that is, payment of loan at less than bank demand; and

c) No payment at all except adjustment of subsidy.

The category-wise classification of beneficiaries and their repayment

performance are given in Table 5.23. Of the total number of beneficiaries, 368

(61.33 per cent) have repaid the loan completely. Among the different categories

of beneficiaries, who have repaid the loan completely, 22.28 per cent belong to

the category of dairy loanee, 26.09 per cent belong to the category of rural

artisans, 20.11 per cent belong to the category of small business, 20.11 per cent

belong to the category of bullock and cart and 11.41 per cent belong to the

category of sheep loanee. It is interesting to note that 368 beneficiaries have fully

repaid their loans out of their income generated from investment of the loans.

198

TABLE 5.23

REPAYMENT PERFORMANCE OF SAMPLE BENEFICIARIES

(LOAN-WISE)

Sl.

No. Activity

Partial

Repayment

Full

Repayment

No

Repayment Total

Num-

ber

Per-

cen-

tage

Num-

ber

Per-

cen-

tage

Num-

ber

Per-

cen-

tage

Num-

ber

Per-

cen-

tage

1. Dairy

Loan 30 5.00 82 13.67 8 1.33 120 20.0

2. Sheep

Loan 40 6.67 42 7.00 38 6.33 120 20.0

3.

Work

Bullok

and Cart

30 5.00 74 12.33 16 2.67 120 20.0

4. Small

Business 34 5.67 74 12.33 12 2.60 120 20.0

5. Rural

Artisans 20 3.33 96 16.00 4 0.67 120 20.0

Total 154 25.67 368 61.33 78 13.0 600 100.0


The table further reveals that the repayment performance is better in the

case of rural artisans and not satisfactory in the case of sheep loan beneficiaries.

Out of 368 beneficiaries who have repaid their loans fully, 240 beneficiaries have

repaid their loans in advance, 86 beneficiaries have repaid their loans in time and

only 40 beneficiaries have repaid their loans with delay.

199

The concept of partial repayment has a high degree of ambiguity in the

sense that it signifies varying degrees of repayment ranging from, say, 0.99 per

cent to say, 99.99 per cent. The limit of the three point RPS is that it has given a

wide range of variability to the second point of the scale and hence does not give a

true picture of repayment. Nevertheless, it has been able to compartmentalise

between the best, better and the worst categories. There are 154 beneficiaries or

25.67 per cent of the beneficiaries who made partial repayment of the bank loan.

Among them the highest percentage is that of sheep loanees comprising 25.97 per

cent, followed by small traders comprising 22.08 per cent of the beneficiaries.

It is interesting to compare the figures for full repayment with those of

partial repayment. In the former case, the performance of rural artisans

outweighed that of the other categories of beneficiaries and their tendency for

complete repayment is largely owing to their desire to have a better and stronger

claim on future PGB loans. It can be inferred from the table that the rural artisans

have been able to make the best use of the bank loan.

The table also reveals that 78 respondents (13.00 per cent) have not repaid

any loan what so ever. The greatest defaulter in the repayment category are the

beneficiaries of sheep loan, accounting for 48.72 per cent of the total strength of

the defaulters. Only 4 (5.13 per cent) of the defaulters are from the category of

rural artisans.

200

Among the beneficiaries selected from five different loan activities, rural

artisans showed the best repayment record of 80.00 per cent, followed by dairy

loan with 68.33 per cent, bullock and cart loan and small business loan with

61.67 per cent each. The repayment performance was very poor in the case of

sheep loan borrowers with only 35.00 per cent. The overall repayment percentage

by all the respondents was 61.33.

The percentage of repayment on the whole by all the respondents is found

to be better. This could be attributed to (i) the incremental income enabled the

beneficiaries of different loan activities to make easy repayment, (ii) the active

interest shown by the beneficiaries in expanding their activities and

(iii) inducement by the manager’s promise for the sanctioning of next loan.

It is also noticed that low percentage of recovery of sheep loan activity is

common to five operational districts of the bank. The repayment performance of

respondents under sheep loan in almost all the districts was far below the overall

repayment performance of the beneficiaries. This could be attributed to (i) the low

incremental net income from this loan activity as compared to that of the other

activities, (ii) the increased family/consumption expenses, (iii) the inadequate

veterinary services, (iv) the repayment of old debt and (v) the expenses on social

ceremonies affected their repayment.

201

iv) Income Group of Respondent’s Repayment Performance

Those beneficiaries earning less than Rs.20,700 per annum are coming

under lower income group and above Rs.20,700 per annum are coming under

higher income group. The researcher has hypothesised that higher income group

repaid the loan in time compared to lower income group. Table 5.24 shows the

loan repayment performance of the various income group of respondents.

TABLE 5.24

INCOME GROUP OF SAMPLE BENEFICIARIES’ REPAYMENT

PERFORMANCE

Sl.

No.

Income

Group

(in Rs.)

Non-Defaulter Defaulter Total

Num-

ber

Per-

cen-

tage

Non-

wilful

Per-

cen-

tage

Wilful

Per-

cen-

tage

Num-

ber

Per-

cen-

tage

1. Less than

20700 28 4.67 120 20.00 -- -- 148 24.67

2. 20700-

30000 120 20.00 4 0.67 44 7.33 168 28.00

3. 30000-

40000 160 26.67 16 2.66 48 8.00 224 37.33

4.

40000

and

above

60 10.00 -- -- -- -- 60 10.00

Total 368 61.34 140 23.33 92 15.33 600 100.0


The table reveals that out of 148 beneficiaries who are in the lower income

group 28 have repaid their loan amount and the remaining 120 are defaulters of

202

bank loan. In the case of the income group of Rs.20700-30000, out of 168

beneficiaries 120 have repaid the loan amount and 48 are defaulters. Out of 48

defaulters in this group 44 are willful defaulters. In the case of the income group

of Rs.30000-40000, out of 224 respondents, 160 have repaid the loan and 64 are

defaulters. Out of 64 defaulters in this group 48 respondents are willful defaulters.

Only in the case of the higher income group of Rs.40000 and above all the 60

respondents have repaid the loan amount and there is no defaulter in this income

group. About 25 per cent of the respondents in the middle income group are found

to be willful defaulters. From the above analysis it is proved that the higher

income group repaid the loan more promptly compared to lower income group.

v) Repayment Performance of Target and Non-Target Group Beneficiaries

Table 5.25 shows the repayment performance of target group and non-

target group beneficiaries.

203

204

Out of 600 beneficiaries 544 (90.67 per cent) were scheme loan

beneficiaries and the remaining 56 (9.33 per cent) were non-scheme beneficiaries.

Out of this 544 scheme beneficiaries, 332 (61.03 per cent) repaid the loan amount

and 212 (38.97 per cent) were having overdues. The percentage of beneficiaries

with overdues was high in the case of sheep loan (65.00 per cent). This percentage

was moderate in the case of beneficiaries of small business, bullock and cart and

dairy loan. The percentage of beneficiaries with outstanding was low in the case

of rural artisans (19.30 per cent). The average outstanding amount was high in the

case of sheep loan with Rs.2195, followed by Rs.1184 in the case of small

business, Rs.1066 in the case of bullock and cart and Rs.969 in the case of dairy

loan beneficiaries.

Table 5.25 further reveals that the percentage of beneficiaries with

outstanding to total was more or less the same in the case of dairy loan (36.36 per

cent), small loan (35.71 per cent) and 33.39 per cent in the case of rural artisans.

The average outstanding loan amount was high in the case of dairy loan and rural

artisans with Rs.1,179 and Rs.1,167 respectively. Thus the above analysis clearly

indicates that the repayment performance of non-scheme beneficiaries was better

than that of the scheme loan beneficiaries.

Some branch managers of the bank confined that they had to include non-

target group beneficiary due to two reasons: The first reason was to ensure a fairly

205

good recovery performance and second reason was to create a potential deposit

base.

vi) Reasons for Non-Repayment

An intensive enquiry was made with a view to identify the factors

responsible for rising overdues and to ascertain the magnitude and seriousness of

this problem. For this purpose, the respondents were asked to identify the

important reason for non-repayment. Several reasons were given for non-

repayment some of which have a direct bearing on the role of PGB as a lending

agency. Instances of non-repayment or partial repayment were not merely due to

low returns on investments but also due to reasons like utilisation of major part of

the returns from the activity for consumption purposes or diversion of the income

to other purposes.

The reasons for non-repayment have been presented in Table 5.26. Out of

232 respondents who had not repaid the loan 150 (64.65 per cent) diverted the

loan amount or generated income for other purposes. The reason for non-

repayment in the case of 28 borrowers (12.07 per cent) was low/ poor yield from

the activity. The anticipation of writing off/debt relief was the reason given by

28 respondents (12.07 per cent). The sale of assets created through bank loan was

the reason for non-repayment of loan in the case of 12 beneficiaries

(5.17 per cent).

206

TABLE 5.26

REASONS FOR NON-REPAYMENT OF LOAN

Sl.No. Reasons for Non-Repayment

of Loan

Number of

Beneficiaries

Percentage to the

Total

1. Inadequate repayment period 8 3.45

2. Low return 28 12.07

3. Unwillingness to repay 6 2.59

4. Anticipation of writing off 28 12.07

5. Sale of Assets 12 5.17

6. Misutilisation of loan 150 64.65

Total 232 100.00


Inadequate repayment period was the reason given by 8 respondents (3.45

per cent) and unwillingness to repay was the reason in the case of 6 beneficiaries

(2.59 per cent).

5.2.21 Reasons for Misutilisation of Loan

Table 5.27 shows the reasons for diversion of loan amount or generated

income for other purposes.

207

TABLE 5.27

REASONS FOR DIVERSION OF LOAN AMOUNT FOR OTHER

PURPOSES (BENEFICIARIES’ VIEW)

Sl.No. Reasons for Misutilisation of

Loan

Number of

Beneficiaries

Percentage to the

Total

1. High family consumption 32 21.33

2. Ceremonial expenses 20 13.33

3. Purchase of livestock 30 20.00

4. Repayment of past debts 56 37.34

5. Illness of beneficiaries / family

members

12 8.00

Total 150 100.00


Out of 75 beneficiaries who have diverted the loan amount/ generated

income for other purposes, 32 (21.33 per cent) have utilised the major part of the

returns from the activity for consumption purposes. It reveals that these

beneficiaries deliberately did not favour cutting down the household expenditure

in order to repay their loans. Thus in the case of these beneficiaries diversion of

incremental income to meet family expenses was discovered to be an important

factor for their misutilisation of loan. 20 beneficiaries (13.33 per cent) have

utilised the return from activity for meeting expenses of ceremonial functions,

30 (20.00 per cent) have diverted the loan amount for the purchase of livestock,

208

12 (8.00 per cent) to meet unexpected medical expenses and 56 (37.34 per cent)

have diverted the incremental income for the repayment of past debts taken from

other sources. Thus some beneficiaries could not repay the loans because they had

resorted to private borrowings at exorbitant rates of interest and when incremental

income accrued, the beneficiaries gave priority to repayment of private loans and

to that extent, the repayment of bank loan suffered.

Therefore, intensified post sanction follow-up measures must be taken up

by the field supervisors for ensuring proper and systematic recovery of dues

which would otherwise go unremitted.

5.2.22 Unsuitable or Unwilling Borrowers

Out of the total 600 sample beneficiaries 71 (23.67 per cent) were found

unsuited for the activity. This indicates that they either lacked experience in the

line or were unwilling to take up the activity.

5.2.23 Opinions of the Beneficiaries

i) Benefits from Bank Loan

Table 5.28 shows the respondents opinion about the benefits of the bank

loan they had availed.

209

TABLE 5.28

BENEFICIARIES OPINION ABOUT THE BENEFITS OF THE

BANK LOAN

Sl.No. Benefits of Bank Loan Number of

Beneficiaries

Percentage to the

Total

1. Increase in income 222 55.22

2. Increase in employment 106 26.37

3. Purchase of durable assets 24 5.97

4. Settlement of old debts 28 6.97

5. Increase in savings capacity 22 5.47

Total 402 100.00


Of the 600 beneficiaries, 402 (67.00 per cent) opined that they were

immensely benefited from the bank loan. The reasons that were given by the

respondents are presented in Table 5.28. The figures reveal that of the 402

beneficiaries benefited from the bank loan, 222 (55.22 per cent) considered the

increase in their income as the benefit they derived from the bank loan. 106

beneficiaries (26.37 per cent) told that the bank loan helped them to increase their

employment position. 24 beneficiaries (5.97 per cent) expressed that after availing

the bank loan they were able to purchase some durable assets. 22 beneficiaries

(5.47 per cent) mentioned that their saving capacity increased in the post–loan

210

period. The generation of income from the activity financed by the bank loan

helped 28 beneficiaries (6.97 per cent) to settle their past debts.

TABLE 5.29

REASONS FOR NOT BEING BENEFITED FROM THE LOAN

Sl.No. Not Benefited Reasons Number of

Beneficiaries

Percentage to the

Total

1. Assets sold out 12 6.06

2. Poor return 28 14.14

3. Misutilisation of loan 128 64.65

4. No opinion 30 15.15

Total 198 100.00


Table 5.29 reveals the reasons why some beneficiaries (198) were not

benefited from the bank loan. When such beneficiaries were interviewed to find

out the reasons for no benefit from the bank loan. 12 beneficiaries (6.06 per cent)

opined that they sold out the assets created with the bank loan. 28 beneficiaries

(14.14 per cent) expressed that they were able to reap poor yield from the activity

financed by the bank credit. A majority of the beneficiaries (128) considered that

they were not able to get any benefit from the bank loan because they misutilised

the bank credit or incremental income. When some respondents expressed their

views regarding the reasons for not having been benefited from the bank loan,

211

30 respondents did not give any opinion. Thus the above analysis also proves that

misutilisation of credit was the reason for non-repayment of the bank loan.

ii) Need for Further Loan

Table 5.30 shows the beneficiaries proposal to avail PGB loan again. In

reply to the question whether they expected to take further loan, both affirmative

and negative answers were given by the beneficiaries.

TABLE 5.30

PROPOSAL TO AVAIL PGB LOAN AGAIN

Sl.

No.

Activity Yes No Total

Same

Activity

Different

Activity

1. Daily 22

(3.67)

30

(5.00)

68

(11.33)

120

(20.00)

2. Sheep 8

(1.33)

22

(3.67)

90

(15.00)

120

(20.00)

3. Work Bullock and Cart -- 36

(6.00)

84

(14.00)

120

(20.00)


(5.00)

24

(4.00)

66

(11.00)

120

(20.00)


(1.67)

36

(6.00)

74

(12.33)

120

(20.00)

Total 70

(11.67)

148

(24.67)

382

(63.67)

600

(20.00)


Note : * Indicates the difference between Pre-loan and Post-loan savings


212

Inspite of increase in income due to loan activities 382 of the 600

respondents (63.66 per cent) did not want to avail further loans from PGB. Only

202 respondents (36.34 per cent) wanted to avail further loans. Of this, 70

respondents wanted to avail further loan for the same activity indicating the

comparatively better income yielding capacity assured and steady stream of

income without much risk and mentioned the desire to expand the size of existing

unit rather than to start a new activity. But 148 respondents wanted to avail a

subsequent loan for different activity.

iii) Respondent’s Preference for Borrowing

Table 5.31 reveals the respondent’s preference for borrowing. Of 600

beneficiaries 496 (82.67 per cent) have preferred PGB for borrowing loan. 76

beneficiaries (12.67 per cent) have opted for money lenders as the source for

borrowing and only 28 respondents (4.66 per cent) have preferred borrowing from

friends and relatives. The above analysis indicates that PGB has a strong hold as a

lending agency in the study area.

TABLE 5.31

RESPONDENTS’ PREFERENCE FOR BORROWING

Sl.No. Preference for Borrowing Number of

Beneficiaries

Percentage to the

Total

1. Pandyan Grama Bank 496 82.67

2. Money lenders 76 12.67

3. Friends and Relatives 28 4.66

Total 600 100.00


213

iv) Reasons for Opting for PGB Loan

Table 5.32 reveals the reasons for opting for the PGB loan by the sample

beneficiaries. When enquiries were made about the reasons for their preference to

PGB loans compared to other sources of finance, out of 496 beneficiaries who

opted PGB loan 266 (53.63 per cent) expressed that they were attracted by the low

rate of interest charged by the bank. The facility of easy repayment (that is, terms

and conditions) was the reason given by 64 respondents (12.90 per cent) for

opting the PGB loan. A significant percentage of the respondents (23.79 per cent)

expressed that they preferred the PGB loans as the bank was easily accessible to

them.48 respondents (9.68 per cent) expressed that they opted the PGB loans as

they could not get the required funds from any other source.

TABLE 5.32

REASONS FOR OPTING FOR THE PGB BY THE SAMPLE

BENEFICIARIES

Sl.No. Reasons for Opting PGB Number of

Beneficiaries

Percentage to the

Total

1. Low rate of interest 266 53.63

2. Easy terms and conditions 64 12.90

3. Accessibility 118 23.79

4. No other source 48 9.68

Total 496 100.00


214

5.3 Beneficiaries’ Suggestion

An survey was conducted among the beneficiaries to obtain their

suggestions to overcome the problems faced by them and for the better

functioning of the PGB. The suggestions offered by the respondents are presented

in Table 5.33. In the form of suggestions 83.33 percent respondents requested

avoidance of intermediaries; 48.67 per cent beneficiaries wanted freedom to buy

cattle anywhere they liked; 46.67 per cent respondents insisted on timely

availability of loan; 33.67 per cent respondents suggested an enhancement of loan

amount; 30.00 per cent beneficiaries insisted on the supply of inputs at subsidised

prices; 21.33 per cent beneficiaries consumption loan; 20.00 per cent beneficiaries

wanted marketing support for their produce; 19.33 per cent respondents needed

adequate veterinary services; 16.33 per cent beneficiaries requested for the

extension of period of repayment and only 11.33 per cent respondents offered no

suggestion.

215

TABLE 5.33

BENEFICIARIES’ SUGGESTIONS

Sl.No. Suggestions Number of

Beneficiaries

Percentage to the

Total

1. Avoidance of intermediaries 500 83.33

2. Freedom to buy animals

anywhere

292 48.67

3. Timely availability of loan 280 46.67

4. Enhancing loan amount 202 33.67

5. Supply of inputs at subsidised

prices

120 30.00

6. Provision of consumption loan 128 21.33

7. Marketing support 120 20.00

8. Adequate veterinary services 116 19.33

9. Extension of period of

repayment

98 16.33

10. No opinion 64 11.33


Thus, the Pandyan Grama Bank is uplifting the economic conditions of

rural masses and reducing their dependence on non-institutional sources. The

bank loan has helped a majority of the beneficiaries to cross the poverty line and

improve their economic status. From the above analysis it may be concluded that

the bank loan has generated more income, employment and savings in the study

area.

216

158-202,204-216

Documents

CHAPTER V IMPACT OF PANDYAN GRAMA BANK’S ...shodhganga.inflibnet.ac.in/bitstream/10603/14777/14/14...CHAPTER V IMPACT OF PANDYAN GRAMA BANK’S CREDIT SCHEMES ON BENEFICIARIES The