Nagesh Prabhu and

Anil Kumar Sastry

BANGALORE: Continuous and sustained efforts by the Cooperation Department to promote and nurture self-help groups (SHG) and SHG-linked credit programme has thrown a large number of moneylenders, pawnbrokers and private finance corporations out of business in the State.

Substantial decrease in loans provided by these players and the phenomenal growth in loans extended by SHGs to members speak volumes about the healthy growth of SHGs and the benefits secured by farmers.

Loans and advances by private players declined by over 50 per cent — from Rs. 329 crore in 2002-03 to Rs. 161 crore in 2005-06.

The number of people, particularly farmers and labourers, availing themselves of such loans also decreased from 2,86,608 in 2002-03 to 1,71,125 in 2005-06.

Over 2,600 moneylenders, 7,000 pawnbrokers and 8,500 finance corporations (owned by two or three individuals) have licence to operate. The number of moneylenders was negligible in Gulbarga, Bidar, Belgaum and Bijapur districts where SHGs have gained ground, sources in the Cooperation Department told The Hindu.

Lending by SHGs, in association with banks, rose from Rs. 20.43 crore in 2001-02 to Rs. 276.13 crore in 2005-06. They had lent Rs. 140.66 crore in 2004-05, Rs. 80 crore in 2003-04, Rs. 42.17 crore in 2002-03.

The number of SHGs increased four-fold — from 24,875 in 2001-02 to 1,07,073 in 2005-06. Savings too increased from Rs. 19.19 crore in 2001-02 to Rs. 152.57 crore in 2005-06.

The SHG-linked credit programme in rural areas has, within a few years, proved beyond doubt that the poor are bankable.

The financial facilities offered by SHGs helped in improving the standard of living of the rural people and in their empowerment, especially women and farmers, sources said.

The decision to offer loans at four per cent interest to farmers through cooperative societies and the severe restrictions and penalties on moneylenders and pawnbrokers under the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004 imposed by the Cooperation Department, are the other factors that led to decline in private lending.

Licensed private players are allowed to charge 16 per cent interest on unsecured loans and 14 per cent interest on secured loans (such as loans given on the deposit of gold and other valuables).

The department has registered 45 cases under the Act against lenders for charging exorbitant interest. SHGs also charge interest on loans, but they are reasonable and free from irritants. The Cooperation Department has also planned to conduct workshops for popularising the micro-credit concept in rural areas.

The moneylenders and pawnbrokers lent not more than Rs. 10,000 to small farmers and labourers. Their lending to farmers declined significantly and it now formed less than five per cent. Out of the Rs. 161 crore lending in 2005-06, they lent about Rs. 15 crore to small farmers, the sources said.

In an attempt to act firmly against private players, the Government introduced the Karnataka Moneylenders (Amendment) Bill, 2006, to amend the Karnataka Moneylenders Act, 1961, in the just concluded legislature session.

The Bill seeks to enhance the licence fee from Rs. 5,000 to Rs. 6,000 for a five-year period and transfer of licence to legal heirs on the death of the licensee.

Owing to the disruption of the legislature proceedings, the Bill, however, was not passed.

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