Ramakka S, a 66-year-old coolie, tells her SHG-story thus: After a discussion with persuasive representatives of an SHG, Ramakka decided to take a loan of Rs: 2,000 to start a garment business.She had her reasons. The job she was employed for was physically too exhausting for her age. Besides, the SHG convinced her that a business in garments would do well.

A resident of Kaligapura, a village along Kanakapura Road in Bangalore, she took the bait and set up shop. Alas, the business failed to take off and she had to go back to her previous “exhausting” job. Only, now she had an additional burden of a loan to clear!.”I can’t blame them [the SHG] because they just wanted to help me. But since I was new to this field, I wasn’t able to manage the garment business,” Ramakka said.

What makes her situation worse is that one of the women of the SHG had taken a loan of Rs: 15,000 in the name of the group and absconded. Now, Ramakka and the other SHG members have to pay back that loan too.

Ramakka has another five months to settle the business loan. She is worried though. What if some other woman from the SHG absconds after taking a loan? She said she had to sell her family’s silverware to be able to clear the loan of Rs: 25,000. “I don’t want to borrow money again,” she said. Once bitten twice shy. Ramakka is just one of the many rural folk in Karnataka who regret their decision to buy the dreams sold by SHG only to see them turning into a nightmare.

The National Rural Livelihood Mission (NRLM) enables poor households to form a self-help group. They can then take a loan to start a business. Another role of the NRLM is to help poor borrowers to bring their ventures on track. The programme’s agenda lays focus on capacity building but this is not being followed in letter and spirit in Karnataka.

Another unsuspecting villager, Bhagyamma L, said she will never take a loan from an SHG again. “The SHG’s may seem like they are helping us, but it’s a trap,” she said.

Bhagyamma was looking for a moneylender for a loan to fund her daughter’s wedding when someone suggested she talk to Billekalli Sangha, an SHG in the village, which she did. The group told her they could lend her Rs: 30,000 to be paid back in equal monthly instalments (EMI’s) of Rs: 1,630 over two years. When she finally cleared the loan, the group talked her into taking another loan, this one of Rs: 15,000 to celebrate a festival.

“When an SHG approach us, we blindly take loans but paying every month for years is hard,” Bhagyamma said. “It’s very hard for people like us, who are daily wage labourers, to pay back the loans on time. So we end up taking loans from others.”

Surprise deductions

Elsewhere, another daily wage labourer, Jyothi L, holds a similar grudge. She had borrowed Rs: 20,000 for her daughter’s wedding from the Choodohalli Sangha. The loan was to be paid back in EMIs of Rs: 211 for five years.

Her complaint is that she received only Rs: 18,000 after deductions. Alleging that money was deducted unnecessarily, she said women like her are asked to open a bank account, in which they have to maintain a minimum balance of Rs: 1,000, rendering that sum unusable for them.

“I earn Rs: 100-200 a day. Some days I don’t earn anything. We keep paying EMIs at the SHG and it never ends. I borrowed from my neighbours and cleared the SHG loan. I don’t want to borrow money from any SHG, it’s too complicated,” she said.

Bharati Bijapur, 40, programme coordinator of Vimochana Sangha (an NGO working for the welfare of Devadasi women in Athani taluk), said SHGs and banks are eager to disburse loans; that under NRLM, these institutions have a target of lending Rs: 50,000 to poor households, as part of the government’s commitment to infuse capital into the lower segments of society and alleviate poverty, and that to meet the target, bank agents or middlemen convince villagers to borrow money.

Drawing from her experience of having worked with women’s groups for 15 years, Bijapur said most of these women have only worked in agriculture. When middlemen of banks and SHG paint a rosy picture of what their life could be if only they took the loan and started a business, they fall prey and borrow money. She said these women have no knowledge or experience of running a new business which often ends in disaster. These women then go back to agriculture with an additional burden of a loan.Collective debt

Lured by a vision of a better future sold by an SHG, lakhs of women in Karnataka and other parts of India, find themselves loaded with loans to settle. Many of them find that they are in no position to clear the loan.

Bad debt or non-performing assets, in banking parlance in Karnataka stands at Rs: 2,235 crore, the highest in the country. The state also happens to have the highest number of bank accounts with the account holder failing to pay at least one instalment of the loan. The number of such accounts, called irregular accounts, in Karnataka is more than 1.7 lakh.

Some SHG help women procure a bank loan, others have their own budget to lend money. Every SHG has a representative, called “sevapratinidhi”, to help women enrol with the group. These representatives do not get a salary. They get a commission for every SHG they help start. Karnataka has about 4.2 lakh SHGs with about 6.2 lakh affiliate accounts.

Reflecting on these numbers, Bijapur said the government has only been disbursing money and collecting data, never ensuring that the borrowers are equipped with the knowhow to make use of the capital to profit from it.

“This is a serious problem in many villages. The government should ensure that poor women benefit from this scheme and are given proper training to do so,” she said.

The need for capacity building reflects in the plight of women who find themselves worse off after taking a loan from an SHG. Nevertheless, many women claim all is hunky dory.

For instance Renukamma S. The 26-year-old is a representative of Dharmasthala Sangha in Kumbalgudu village in Bangalore Rural. She claimed many women have benefited from the SHG. “The group stays in touch with members, monitors their progress and see to it that they are in a position to pay back loans in time,” she said.

Jayamma S, the leader of an SHG, Janalakshmi Sangha, for two years, begs to differ. “It’s wiser to borrow money from financiers than from an SHG. It may seem like they are helping us, but they don’t actually help,” she said.