Self-help groups (SHGs) in the Indian state of Andhra Pradesh will soon have an alternative source of microloans in the form of Stree Nidhi, a cooperative microfinance bank that has been formed by the state government and the Mandal Mahila Samkhyas (MMS), a representative federation of SHGs. SHGs are units of 10 to 20 individuals that pool their savings, apply for group loans and lend internally to their members.
Stree Nidhi will mobilize deposits from SHGs and lend funds at an annual interest rate of 13 percent. The average loan size is expected to be INR 15,000 (USD 335) for a one-year term with monthly repayments [1]. The bank’s first customers will be approximately 10 million female members of MMS, who were previously offered credit under the government’s bank linkage program for SHGs. Stree Nidhi intends to disburse all loans via mobile phones and predicts that loan disbursements will be completed within 48 hours of applications that are approved [3].
Stree Nidhi has been established with INR 5 billion (USD 65 million) in share capital [1]. MicroCapital reported on the microfinance bank in May 2011, at which time it was suggested that the federal and state governments would invest alongside five private and public-sector banks [2]. Additional details of the capital structure have not been made available in the most recent report. Stree Nidhi will reportedly disburse INR 10 billion (USD 200 million) through 2012, with the goal of increasing this to a total of INR 40 billion (USD 900 million) in 2014 [1].
By Rohan Trivedi, Research Associate
About the Reserve Bank of India (RBI):
Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.
Sources and Additional Resources:
[1] The Hindu Business Line: “First-ever microfinance ‘bank’ to begin operations”, http://www.thehindubusinessline.com/industry-and-economy/banking/article2453454.ece
[2] MicroCapital.org story, May 20, 2011: “MICROCAPITAL BRIEF: Details Emerge on ‘Microfinance Bank’ Proposed by Government of Andhra Pradesh, Government of India, Several Banks”, https://www.microcapital.org/microcapital-brief-details-emerge-on-“microfinance-bank”-proposed-by-government-of-andhra-pradesh-government-of-india-several-banks/
[3] Business Standard: “Women’s bank to extend Rs 1,100 cr micro loans”, http://www.business-standard.com/india/news/womens-bank-to-extend-rs-1100-cr-micro-loans-/449131/
MicroCapital.org story, August 15, 2011: “MICROCAPITAL BRIEF: Indian Government Publishes Draft of Microfinance Institutions Bill, Would Make Reserve Bank of India (RBI) Sole Regulator, Establish Microfinance Development Council, Microfinance Development Fund”, https://www.microcapital.org/microcapital-brief-indian-government-publishes-draft-of-microfinance-institutions-bill-would-make-reserve-bank-of-india-rbi-sole-regulator-establish-microfinance-development-council-microfinance/
MicroCapital Universe Profile: Reserve Bank of India (RBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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