Reviving Dormant SHG-Bank Linkages in a Migration District
District B has 1,240 self-help groups; 38% have not borrowed for 18 months. A baseline shows 62% of members are women engaged in poultry and tendu leaf; average loan size is ₹28,000; repayment overdue is 9.4%; and 21% of loans were used for consumption or repaying moneylenders. The district's MGNREGA person-days fell from 41 lakh to 27 lakh in two years, and male out-migration rose. A microfinance institution has entered 40 villages with weekly doorstep collections and a flat pricing structure. The district central cooperative bank's SHG portfolio is ₹9.6 crore, of which ₹2.1 crore is substandard. The bank has ₹1.5 crore of Financial Inclusion Fund support available for training and four field officers. The board wants a one-page strategy to reduce dormancy and NPA within 12 months without fresh unsecured lending.
1. Diagnose the causes of dormancy and delinquency, separating supply-side from demand-side factors.
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Supply-side factors
- Product design: a flat ₹28,000 loan does not match poultry feed cycles or the seasonal tendu lump sum.
- Service: branch timings and monthly collection suit the bank, not the borrower; the microfinance institution's weekly doorstep collection is more convenient.
- Staff: four field officers for 1,240 groups means supervision is thin; dormancy is easier to ignore than to revive.
- Portfolio: ₹2.1 crore substandard out of ₹9.6 crore (21.9%) shows weak follow-up and possibly evergreening.
Demand-side factors
- MGNREGA person-days fell from 41 lakh to 27 lakh and male out-migration rose; repayment capacity has genuinely fallen.
- 21% diversion to consumption or moneylenders signals that loan size and purpose were not matched to the activity.
- Low financial literacy and price risk in poultry and tendu make members prefer quick, flexible cash.
Dormancy is therefore not one problem: 471 dormant groups include viable groups lost through poor service and weak groups that should not be lent to again.
2. Prioritise three interventions for the four field officers with 12-month targets, and justify the sequence.
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Interventions, sequenced
- Triage the 1,240 groups (months 1–2). Classify into viable, watch and exit using repayment, activity and attendance. Focus field officers on the 200 viable dormant groups first; do not lend to the exit list.
- Fix collection and product fit (months 2–5). Introduce fortnightly doorstep collection for viable groups, loan sizes tied to the activity, and a written end-use declaration. This addresses the microfinance competition directly.
- Training and linkage (months 4–12). Use the ₹1.5 crore Financial Inclusion Fund for activity-based training with attendance and follow-up; link groups to poultry buyers and tendu contractors.
Targets: dormancy 38% → 25%; overdue 9.4% → 6%; diversion 21% → 12%.
Why this order: training without collection discipline does not change repayment; product fit without triage wastes officer time on groups that should be exited.
3. Design a four-indicator monitoring dashboard with thresholds and review frequency.
Read the worked answer
| Indicator | Definition | Threshold | Review |
|---|---|---|---|
| Active SHG ratio | Groups with a transaction in 90 days ÷ total | ≥75% | Monthly |
| On-time repayment | Instalments paid by due date ÷ due | ≥94% | Fortnightly |
| End-use compliance | Sample loans used for stated activity ÷ sample | ≥88% | Quarterly |
| Field visit compliance | Planned group visits completed ÷ planned | ≥90% | Monthly |
Reasoning: the four indicators cover demand (activity), behaviour (repayment), service (visits) and portfolio quality (dormancy). Thresholds are set just above current performance so they are achievable but demanding. A breach of two indicators in the same month triggers a district review; a single breach of the repayment threshold triggers a branch-level call. Report to the board quarterly, with the diversion sample redone every quarter because it is the earliest warning of NPA.