RESEARCH SUMMARY The Maharashtra Rural Credit Programme: A Field Level...
The Maharashtra Rural Credit Programme: A
Field Level Reconnaissance
Prof. Sarthi Acharya is Research Director, Cambodia Development Resource
Institute, Phnom Penh, and Dr. Amita Bhide and Ms. Rekha Mammen are faculty

members at the Tata Institute of Social Sciences, Mumbai
The most recent estimates on poverty in India have identified nearly
320 million people, or 36 per cent of the population to be below the
poverty line (World Bank 1997; 1998). This is despite the fact that
poverty in India is defined rather modestly, in terms of a monetary
equivalent required to consume 2400 calories per capita per day.
There are several studies that have assessed poverty and unem-
ployment and have made judgements based on long-term trends.
Some recent results suggest that the number of unemployed persons
do not seem to have reduced over time (Parthasarathy and Reddy,
1996), there has been an increase in land alienation of small and mar-
ginal farmers (Parthasarthy, 1998), and the incidence of local food se-
curity emerging from labour redundancy appears to have risen (India,
1999). Dubey and Gangopadhyay (1998), while analysing the struc-
ture of the population below the poverty line using National Sample
Survey (NSS) 1993-94 data, note that poverty in India is predomi-
nantly rural, and has become more so in the post-reform (that is, the
1990s) period. Within rural areas, the worst-off economic group is
that of landless casual labourers, both in the agricultural and
non-agricultural sectors. There are distinct social dimensions to depri-
vation as well. Female-headed households record a much higher inci-
dence of poverty. Poorer households have a higher representation of
adult females or dependents. Dalit and tribal populations too record a

640 Sarthi Acharya, Amita Bhide and Rekha Mammen
higher extent and severity of poverty. Poverty alleviation is, thus,
re-emerging as a key concern on the governance agenda.
Anti-poverty programmes in India were initiated in the late
1970s, but both credit and sectoral programmes have been sup-
ply-driven, meaning that these are top-down dispensation schemes
with no overt assessment of the needs of the target groups. Only the
Employment Guarantee Scheme in Maharashtra (EGS) and the Em-
ployment Assurance Scheme (EAS) at the all-India level are, to an
extent, demand driven. But then, programmes aimed at providing
unskilled work at minimum wages can provide temporary relief, but
cannot pave the way for a new life to those below the poverty line. It
is in this context that the current thinking on poverty has undergone
a change.
The Report of the Independent South Asian Commission on Pov-
erty Alleviation (1992: 50-53) succinctly summarises the lessons
learnt till so far. Some key propositions are listed below:
• Building organisations of the poor is an essential prerequisite.
• The process has to be catalysed.
• The poor can save and invest efficiently.
• There is need for sensitive support mechanisms.
• Empowerment is the means to poverty alleviation.
The implications of these for an effective anti-poverty programme
could be listed as below:
1. The approach should be flexible to cater for all financial needs,
whether for savings or credit and for both small and large in-
vestments and supplementing cash flows.
2. The programme should have flexible, cost-effective mecha-
nisms to meet the demands and the needs of target group.
3. The effort should be to readily provide access to funds to genu-
ine borrowers; and
4. The plan of credit should encourage ongoing, efficient and ef-
fective use of credit to enable the borrowers to progressively
expand the scale of their enterprises.
The Maharashtra Rural Credit Programme (MRCP) is based on
this thinking. It attempts to design and implement a project that could
lead to a sustainable improvement in the delivery of credit services to
the rural poor. This research summary attempts to present the findings
of a state-wide field survey launched to make an assessment of the im-
pact of the MRCP on the target groups.

The Maharashtra Rural Credit... 641
The MRCP Project
The National Bank for Agriculture and Rural Development
(NABARD) and the Government of Maharashtra (GoM) have been
implementing the MRCP since 1994, with financial assistance from
the International Fund for Agricultural Development (IFAD) and the
Government of India (Gol), on a pilot basis in four districts of
Maharashtra: Pune, Yavatmal, Chandrapur and Nanded. Its reach was
extended to seven more districts in 1998-99.
The project's ultimate goal is to contribute to poverty alleviation
among the rural poor through improved financial services. The pur-
pose is to develop, through extended field implementation, an effi-
cient and cost-effective system for delivering rural financial
services for the poorer elements of the rural population. It is ex-
pected that the successful elements of the project would be repli-
cated through their incorporation into the nation-wide Integrated
Rural Development Programme (IRDP) and other similar credit ser-
The project has three major components, each having several
• Development of formal financial services to assist
participating commercial banks (CBs) to improve delivery of
credit to the rural poor and their managerial and financial
• Setting-up of informal (non-institutional) savings and credit that
promote savings mobilisation to create funds for lending among
self-help group (SHG) members.
• Implementation of support systems to assist all participating
agencies to carry out their responsibilities.
Some key features of the MRCP strategy are:
• People's participation in credit planning and implementation;
• Coordination among various implementing agencies at the
district level;
• Bankers' outreach at the village level;
• A combination of credit and non-credit support to the rural poor
(individuals and groups).
Various organisations like the NABARD, the National Institute of
Bank Management (NIBM); Mahila Arthik Vikas Mahamandal
(MAVIM); Maharashtra Industrial and Technical Consultancy Or-
ganisation (MITCON); Maharashtra Institute of Entrepreneurship

642 Sarthi Acharya, Amita Bhide and Rekha Mammen
Development (MIED); and the GoM have been involved in the
MRCP in various capacities.
Outline of the Study
The present study is an assessment of the impact of this programme
on credit delivery institutions, on people and other social impacts. The
objectives of the study are to assess:
• the impact of MRCP on credit delivery institutions;
• the impact of MRCP on project borrowers; and
• the social impact of MRCP.
The methodology used was a combination of quantitative and
qualitative methods. The primary method of data collection was the
survey conducted during March-June 1999. A sample of 600 direct
borrowers from banks as well as SHGs was selected for interviews.
The sample was selected on criteria laid down in Table 1.
TABLE 1: Selection Criteria of the MRCP Study Sample
Sample Size
Basis of selection
10 villages per district in 4 districts
• Ecological Criterion
• Socioeconomic features
• Size and location
Total = 4 villages
• Number of nature of operational
credit institutions (banks, MAVIM,
15 interviewees per village
• Type of borrower (BPL/non-BPL,
• Point of loan access (SHG, bank, and
Total = 600 interviewees
so on.)
Note: BPL: below poverty line
The sequencing of research activities itself was a learning process.
The initial few weeks consisted of familiarisation with the
programme through reports and documents as well as interaction with
participants and beneficiaries. The team also pre-tested the survey
tool through these interactions. Familiarisation with institutional
set-ups in all project districts and obtaining data to identify the sample
were the next steps. The survey was carried out first, after which the
team undertook qualitative studies. This meant that the choice of vil-
lages and individuals for case studies was guided by the prior experi-
ence during the survey

The Maharashtra Rural Credit... 643
Chandrapur, Nanded and Yavatmal are located on the eastern side of
the state. All three districts share a part of their border with Andhra
Pradesh on the southern, eastern and southern sides respectively.
Pune district, on the other hand, is located closer to the western part of
the state. All four districts are located on the Deccan Plateau. The dis-
tricts fall into differing agro-climatic zones. Pune district has an aver-
age annual rainfall of around 1,170 mm, ranging from up to 2,500 mm
in the west to around 600 mm in the east. Yavatmal lies principally in
the moderate rainfall zone with average annual rainfall of 1,000 mm
and Chandrapur, in the high rainfall zone, has an annual rainfall of
around 1,690 mm. Nanded has average annual rainfall of 898 mm.
Agriculture is the main source of employment (cultivators and ag-
ricultural labourers) in all four districts with the proportion of workers
in this sector ranging from 68.10- 80.55 per cent in the eastern dis-
tricts. The only district with a proportion lower than the state average
of 59.62 per cent was Pune with 45.39 per cent.
The BPL families in the project districts totalled around 540 thou-
sand (almost 50 per cent of rural families) with Yavatmal (64 per cent)
and Chandrapur (52 per cent) having the highest proportions, accord-
ing to state government surveys pertaining to the early 1990s. Nanded
(35 per cent) and Pune (39 per cent) had much lower proportions of
BPL families.
The population of the four districts totals around 11.7 million (close to
15 per cent of the state). The proportion of rural population ranges
from 49 per cent in Pune district to 83 per cent in Yavatmal. The pro-
portion of Scheduled Caste (SC) population ranges from 10.92 per
cent in Yavatmal to 18.15 in Nanded, as compared to the state average
of 11.09. The highest concentration of Scheduled Tribes (STs) are in
Yavatmal (21.46 per cent) with the lowest in Pune (3.91 per cent), as
per the 1991 Census.
Land holdings are dominated by small (1-2 ha) and marginal (less
than 1 ha) categories, which account for 21 per cent and 28 per cent
respectively, of all holdings. Pune has the highest incidence of small
and marginal sized holdings, accounting for 57 per cent of the total.
Yavatmal has the lowest, accounting for 32 per cent of total hold-
ings, with marginal holdings representing only three per cent.

644 Sarthi Acharya, Amita Bhide and Rekha Manxmen
Chandrapur and Nanded have 51 and 46 per cent of marginal land
holdings respectively. Irrigation coverage in the project districts is
highest in Pune (20 per cent) and lowest in Yavatmal (two per cent),
with Chandrapur having 18.83 and Nanded having 4.21 per cent of
irrigation coverage
The numbers of agricultural labourers, defined as persons earning
more than 50 per cent of their income from wage labour and used as
an approximation of landlessness, indicate that landlessness is the
highest in Yavatmal, where labourers account for more than 50 per
cent of the total agricultural workers (including cultivators), and the
lowest in Pune (around 14 per cent). The high incidence in Yavatmal
is partly due to the presence of significant numbers of tribal people
who are traditionally itinerant and rely on wage labour.
A major constraint on livestock development, particularly dairy, is
the shortage of improved stock, with nondescript animals accounting
for a very large proportion of the breedable cows. Sheep and goat
rearing is concentrated in the rain shadow and scarcity zones, and is
undertaken mostly by nomadic shepherds.
Pune has a higher level of off-farm activity, reflecting the higher
degree of urbanisation in this district. These figures are likely to
understate the real situation, as many informal businesses may not
have been recorded. The principal, traditional village industries in
the project districts include leather, carpentry, blacksmithing, pot-
tery, cane and bamboo, fibre processing and oil seeds. Sericulture
is being developed in Akola and Yavatmal to the cocoon rearing
stage but as yet there has been little development of reeling or spin-
MRCP Project Organisation
The MRCP organisational structure is complex with several imple-
menting agencies at different levels (see Figure 1). While NABARD
and GoM are the two main agencies responsible for project imple-
mentation, a major role is played by the participating commercial
banks (PCBs)
At the district level, this consists of a District Programme Coordi-
nation Committee (DPCC), which is expected to ensure that the im-
plementation of the project is on track and also to assist with any
problems that may arise with regard to the same. The Chief Executive
Officer (CEO) of the Zilla Parishad, in all four districts, chairs the

The Maharashtra Rural Credit... 645
DPCC. The Member-Secretary is the Lead District Manager (LDM)
of the district.
It was visualised that a Block Level Task Force (BLTF), compris-
ing Field Officers (Fos) of PCBs and block level DRDA officials,
would be formed to facilitate coordination. The DPCCs and BLTFs
have been constituted in all the districts, with the latter comprising
Branch Managers/FOs of PCBs, and block level government offi-
cials. The BLTF meetings are held on a quarterly basis. In the re-
constituted BLTFs, the Block Development Officer (BDO) is the
chairperson of the BLTF and the LDM is the convenor. In Phase I,
Village Development Council (VDC) members are also invited for
the meetings on a rotational basis. Discussions with bankers and
MAVIM representatives, however, indicated that coordination
with the development machinery was initially difficult.
The VDC has been a more active and effective body in assisting the
PCBs in beneficiary selection, project/trade identification and loan
recovery. The FOs of PCBs play a crucial role in the formation and
functioning of the VDCs.
The SHGs form the core of the programme. Some of these had
come into existence before the MRCP, through the Integrated Child
Development Scheme. However, most have been initiated and
sustained through efforts of MAVIM and NGOs.
The Sahayogini (female village level worker) is the key village
level functionary of MAVIM. Covering around four to five villages,
she is responsible for the initiation of SHGs, their regular meetings,
and making SHGs vibrant and dynamic entities.
The SHGs are provided training in bookkeeping at the village clus-
ter level by MAVIM. Some training in leadership is also provided.
Also cluster, block and district level meetings are organised from time
to time. Discussions with MAVIM representatives indicated that they
have been encouraging active SHG members to get involved in
VDCs. In Chandrapur, for example, 30 per cent of the VDC members
are members of SHGs as well.
NGOs are involved in this programme only moderately. There are
two categories of NGOs involved: bank-contracted and
MAVIM-contracted. There are a maximum of four NGOs in a district,
each covering four to five villages as project implementers. There is
NGO representation in the DPCC as well as in the Project Steering
Committee (PSC) at the state level.

FIGURE 1: Organisational Structure

The Maharashtra Rural Credit... 647
At the level of individual participants, the MRCP is a package consist-
ing of several dimensions: inculcation of thrift through SHGs,
inter-lending in SHGs, direct credit from banks, entrepreneurial and
vocational training, participation in village level forums and infra-
structure development in the village. While some of these are ex-
pected to have tangible economic impacts, others are expected to
contribute to an overall sense of involvement and empowerment.
Profile of MRCP Participants
Social Status
According to the programme guidelines, 90 per cent of the credit is-
sued through the MRCP is expected to reach poor groups (though not
necessarily those identified as 'poor' in BPL lists), with an emphasis
on women. Poor families are generally also characterised by low so-
cial status. Table 2 describes the representation of various social
groups among the respondents.
TABLE 2: District-wise Representation of Social Groups in the Study Sample
Note: Figures represent number of households; figures in parentheses are column-
wise percentages.
Table 2 shows that OBCs formed the single largest category of par-
ticipants in Chandrapur, Pune and Yavatmal. In Nanded though, 'oth-
ers' formed a significant proportion of the sample.

648 Sarthi Acharya, Amita Bhide and Rekha Mammen
Almost 50 per cent of the MRCP study sample consisted of de-
pressed caste groups (that is, SC/ST/DNT).
Education Levels
Almost 70 per cent of the study sample consists of literate persons, of
whom, more than 85 per cent have had some exposure to the formal
education system. Given established inverse correlations between lit-
eracy/education and poverty, the first two categories, that is illiterate
and literate (non-formal), have been clubbed as the poorest for pur-
poses of comparison of representation across districts. This correla-
tion is also a likely explanation to the fact that the proportion of
graduates in the sample is insignificant. There are no major variations
in educational levels in the sample across districts.
The implications of these low educational levels for participation
in various forums and design of various training programmes are tre-
mendous. It calls for non-literacy-based activities and methods of im-
parting skills.
Economic Characteristics
In Chandrapur and Yavatmal districts, over 50 per cent of the respon-
dents are landless; their major source of income is labour or
non-agricultural self-employment. In Nanded and Pune, while the
proportion of landless in the sample is relatively low (around 35 per
cent), the proportion of marginal farmers is quite significant (more
than 25 per cent). There are hardly any large farmers in the sample.
Given the conditions of agriculture and the representative character of
the sample it would be safe to conclude that the sample stands for the
priority target group of the MRCP.
Almost all the interviewed households are engaged in more than
one occupation. Several studies have demonstrated that multiple oc-
cupations represent a key survival strategy of poor households.
Non-agricultural self-employment is a source of income for all
households in Chandrapur, Nanded and Yavatmal. In Pune however,
only 59 per cent households are engaged in non-agricultural
self-employment. Pune also shows a relatively lower number of
households engaged in wage labour and a little lower proportion in
agriculture. This perhaps indicates that households in Pune are able to
derive livelihood from a single source in contrast to the other districts.
This may be related to the overall opportunities for socioeconomic de-
velopment in Pune as compared to other districts.

The Maharashtra Rural Credit... 649
The overall picture indicated by the variables is one of vulnerable
social groups with low educational levels, landless or having mar-
ginal landholdings, weak assets and resource base and a significant
number of dependents. In terms of targeting, therefore, the MRCP can
be termed effective.
Implementation of MRCP as Experienced by Participants
Mobilisation Processes through SHGs
The study covered a sample of 599 MRCP participants who had
availed of credit, either through SHGs or banks directly. Of the total
participants, 60 per cent (358) were SHG members and 40 per cent
(241) were non-SHG members. The SHG members, by virtue of their
meetings, could be expected to undergo an intensified mobilisation
process that is venturing out of the household, savings, handling cash,
accessing credit in their own name, and participating in community
activities, which are expected to be empowering. On the other hand,
the non-SHG members' interaction may be only with the VDC or
VDA. Table 3 shows that among SHG participants, a very large ma-
jority (91 per cent), had taken up SHG membership after the initiation
of MRCP. In some villages, SHGs were started earlier by agencies
like Chaitanya, Pune, but their proportion is very low in the sample.
The SHGs are, thus, a new experience for most participants.
TABLE 3: SHG Membership Before and After Project Initiation
Number of Households
Percent of total SHG
No Response
The participants interviewed during the study represent a total of
147 SHGs over the four project districts: 44 in Chandrapur, 32 in
Nanded, 37 in Pune and 34 in Yavatmal. Among the interviewed par-
ticipants, 54 per cent were part of SHGs initiated by MA VIM, another
22 per cent belonged to groups initiated by NGOs, and quarter of the
participants belonged to groups initiated by banks (6 per cent), ICDS
(4 per cent) and others (14 per cent).
There are variations in the project districts. In Pune, MA VIM and
NGOs have played an equally significant role; (NGO 33 per cent,

650 Sarthi Acharya, Amita Bhide and Rekha Mammen
MAVIM 30 per cent). In Chandrapur too, the proportion is somewhat
equal (NGO 34 per cent, MAVIM 36 per cent). In Nanded and
Yavatmal, NGOs have hardly played a significant role. In the study
sample, 80 per cent of the respondents belong to SHGs initiated by
The formation of a group is an extremely critical factor in SHGs.
While several studies have highlighted the importance of homogene-
ity, the basis for homogeneity differs. Secondly, group processes can
tend to either reinforce or subdue certain aspects of homogeneity. An
expectation in MRCP is that gender awareness of SHG members be
heightened through interaction in the group.
The mean monthly contribution in SHGs is Rs 23.50 per partici-
pant. The district mean contributions per month per participant are Rs
25 in Chandrapur, Rs 23 in Nanded, Rs 24 in Pune and Rs.21 in
Yavatmal. The monthly contributions range from Rs 10 for newer
groups to Rs.50 in case of a few groups.
Self-help Groups are not just financial mechanisms, but are in-
tended to be means of development of consciousness for its members.
The members' perceptions of functions of SHGs could thus be indica-
tive of the nature of group processes initiated (Table 4 ) .
TABLE 4: Functions of SHGs as Perceived by Participants
Note: These are multiple responses; hence figures are not cumulative.
Table 4 reveals that the most common function of SHGs is per-
ceived to be provision of credit (71.5 per cent), followed by 'getting
together' (41.8 per cent) and then, collection/recovery (28.2 per cent).
The emphasis thus, seems to be on financial functions. In Yavatmal,

The Maharashtra Rural Credit... 651
the provision of loans is perceived to be the singular function. The fig-
ures indicate that while a beginning has been made in terms of 'get-
ting together', the mobilisation has so far not been effective to
generate a consciousness for 'getting together'. It is apparent that
greater efforts need to be made to utilise SHGs as vehicles of change.
The potential for SHG members to play a role in rural transformation
till so far seems to remain largely untapped.
Village Level Mobilisation Processes: VDA, VDC and PAP
The MRCP attempts to engage, primarily the women in a process of
empowerment through SHGs. It also attempts to engage the village as
a whole in the process of its development and seeks their involvement
in credit planning through VDA, VDC and PAP. Bank officials are
expected to play a key role in this process of mobilisation by under-
standing the village, building rapport with people, constituting a
VDC, attending VDA/VDC meetings and assisting with the formula-
tion of the PAP. The study tried to assess these instruments and their
role as perceived by participants.
Awareness of VDA/VDC
Table 5 indicates that only 22 per cent participants were aware of the
VDC and VDA in Nanded, 47 per cent in Pune, 58 per cent in
Yavatmal and 65 per cent in Yavatmal. Overall, the awareness about
these agencies is surprisingly low. It indicates that VDCs and VDAs
yet need to be established as effective forums in the village.
TABLE 5: District-Wise Positive Awareness of VDA and VDC
Note : Figures in parentheses indicate percentages within districts
Interaction with VDC
There is a need to understand the nature of interaction of participants
with the VDC as it plays a critical role in credit planning in the village.
Table 6 reveals that there are very few cases where the VDC is

652 Sarthi Acharya, Amita Bhide and Rekha Mammen
inactive or it does not interact. However, this finding needs to be seen
in the context of overall low awareness about the VDC.
TABLE 6: District-Wise Nature of Interaction of Participants with the VDC
Note : Figures are not cumulative row wise. Percentages have been drawn for
each response against the total number of respondents in each district
Involvement with Poverty Alleviation Programmes
Poverty Alleviation Programmes (PAPs) is an important element of
village level processes. It is expected to stimulate wide debate on vil-
lage needs, plan credit and relate credit to the overall process of devel-
Table 7 shows that majority of participants are not aware of PAPs.
Also, amongst people who know of it, the percentage actually in-
volved in its formulation, ranges from four to six in all districts. There
is, therefore, a need to make concerted efforts for wider involvement
of villagers in PAPs.
TABLE 7: Reported Involvement in Formulation of PAPs

The Maharashtra Rural Credit... 653
Participating Agencies
At the level of individual participants, the MRCP is a programme that
integrates credit services with project inputs and entrepreneurial skills
through coordination between different participating agencies such as
PCBs, MAVIM, NGOs, MCED, MITCON and the Animal Hus-
bandry Department (AH). Some of these, such as banks, are primary
agencies, while others such as MCED, MITCON, and the AH have a
specific, but limited role. What is more, all these agencies are not in-
volved in all villages. The experience of people with respect to these
agencies is influenced by these factors Banks are identified as service
providers by almost all participants in Chandrapur district, which
could be an indicator of their activeness. In other districts too, major-
ity of the participants have identified banks as service providers
though two-fifths of the sample consists of SHG participants who
may not have direct contact with bankers.
MAVIM is identified by roughly half the participants in Nanded
and Yavatmal as an MRCP service agency. It is surprising to note that
only 30 per cent participants in Chandrapur identify MAVIM al-
though it is one of the key agencies in that district. In Pune, MAVIM
works in 70 per cent of the villages and yet less than 15 per cent of the
respondents identified it as a service provider.
The identification of NGOs, MCED, MITCON and AH as service
providers may be indicative of the low spread of their activities in the
sample villages. The number of people utilising credit for animal hus-
bandry purposes is quite high, yet the number of people able to iden-
tify AH as part of MRCP is low.
Nearly 90 per cent of the participants do not perceive or are quiet
about the role of NGOs in MRCP. Similar percentages for MITCON,
MECD and AH are 93, 90 and 86. Even discounting for SHG partici-
pants in the sample, the spread of services by MITCON, MCED and
AH seems to be low and indicates the limited number of borrowers
who avail of services of these agencies. People who have experienced
these services, however, seem to be largely satisfied with their qual-
ity. Participants' experiences with respect to all agencies reveal that
the training sessions organised by MITCON, MCED and AH are
quite useful and relevant.
Two key agencies in the implementation of MRCP are banks and
government development machinery. The PCBs are involved in pro-
cessing applications, VDC guidance, and loan disbursal. The

654 Sarthi Acharya, Amita Bhide and Rekha Mammen
development machinery at the district and block levels prepares a
BPL list, organises training and processes subsidies.
Credit and its Utilisation
The MRCP is most importantly, a financial scheme that provides a
flexible line of credit relevant to the needs of the poor. Understanding
the patterns of credit and its utilisation by people is therefore, vitally
Table 8 indicates that a significant proportion of people, that is
around 27 per cent, have accessed credit more than once under
MRCP. This proportion is highest in Nanded (around 40 per cent) and
lowest in Yavatmal (around 16 per cent). Nevertheless, MRCP has yet
not assumed the position of a demand-led credit agency, which the
customers visit whenever there is need.
TABLE 8: District-Wise Distribution of Number of Loans Taken by
There are varied patterns of credit utilisation across districts. In
Pune and Nanded, the highest number of loans was for productive
purposes. The process seen common in both districts is the move from
one productive purpose to another. Within productive loans, there has
been upgradation of enterprises, initiation of new ones, diversifica-
tion, and so on. Next, credit has been accessed for a variety of needs
and it demonstrates the ability of MRCP to meet the
multi-dimensional character of rural credit needs.
A common experience in conventional PAPs is that credit is not
utilised for the purpose for which it has been given, and assets are

The Maharashtra Rural Credit... 655
disposed off. The experience of MRCP with respect to this is illus-
trated in Table 9.
TABLE 9:District-Wise Utilisation of Credit for Purpose Given
The experience can be said to be mostly positive. The proportion of
full-utilisation of credit for the purpose is comparatively low in
Nanded. However, even there, the participants have used only part of
the credit for purposes other than those originally intended. Given the
fact that in a poor household the use of credit is usually determined by
priorities immediate at that time, the general lack of deviation from
purpose in the utilisation of credit is a commendable achievement.
Loan Recovery
The experience of several ongoing PAPs with respect to recovery is
extremely poor. The MRCP is distinct from other programmes in this
aspect as is apparent from Table 10.
TABLE 10: District-Wise Default in Payments
Note : Asking participants whether they have missed paying any instalment has
identified defaulters

656 Sarthi Acharya, Amita Bhide and Rekha Mammen
The table shows that the proportion of defaulters in SHG is ex-
tremely-low, that is less than 15 per cent. The proportion of default in
bank repayments is relatively higher - 3-5 times higher. However,
compared to the IRDP recovery rate in these districts, the default rates
are low. For example, in Chandrapur, the IRDP recovery rate in
March 1999 was 25 per cent whereas it was double that figure in the
MRCP. The MRCP defaults also do not necessarily mean a conver-
sion of investment into non-productive assets (NPAs) as seen in other
programmes. Our investigations show that the extent of disposal of
assets is negligible. The SHGs have played a vital role in retaining the
assets and sometimes in their enhancement. Therefore, these propor-
tions need to be looked at in the wider context.

The MRCP expects the following impacts:
• The overall impact of the project will be seen in terms of
improvement in income of participants and repayments made to
banks, in the change in attitude of banks towards borrowers from
the target group and the change in the perception of these
borrowers towards the bank. These changes will finally lead
towards the development of a rural credit system in which the
poor rural households have continued access to institutional
• Women are expected to account for over half of the project
participants. Apart from the income benefits increasing the
welfare of their families, women themselves will derive
considerable benefits in terms of improvement in their social
status, awareness and in their confidence to cope with the
constraints which society imposes on them
Occupational Shifts
Poor households often engage in a variety of tasks to eke out a liveli-
hood. Occupations are multiple and stable. A shift towards single oc-
cupations, self-employment, and larger number of days in
employment are therefore, some effective indicators of poverty alle-
A quarter of the participants in Pune, 31 per cent in Chandrapur, 14
per cent in Nanded and 20 per cent in Yavatmal have upgraded from
their earlier work through MRCP credit. Among all the participants,

The Maharashtra Rural Credit... 657
16,8 percent people in Chandrapur, 6 per cent in Nanded, 13 percent
in Pune and 10 per cent in Yavatmal have been able to give up their
earlier work after accessing MRCP credit. These people have shifted
from wage labour to self-employment There are many more people
who have not experienced remarkable shifts in occupations but have
shifted away from wage employment towards self-employment. Ta-
ble 11 shows this aspect.
TABLE 11: People's Opinions on whether they have experienced a shift towards
The table indicates that between 50-75 per cent households in all
project districts have experienced at least some shift towards
self-employment. Correspondingly, between 50-75 per cent house-
holds in all districts, have reported a decrease in the unemployment in
the family. The extent of migration among respondents in Pune and
Chandrapur was already low (at nine and five per cent respectively).
However, in Nanded and Yavatmal, it was quite significant, at 23 and
20 per cent respectively. In these latter districts respondents have re-
ported that the extent of migration had reduced after MRCP (to 11 per
cent in Nanded and 20 per cent in Yavatmal)
Access to Credit
One of the key issues linked to rural poverty is poor people's limited
access to sources, which makes their dependency on moneylenders
inevitable and accentuates their vulnerability. A major objective of

658 Sarthi Acharya, Amita Bhide and Rekha Mammen
the MRCP is to improve access to credit. It is, therefore, interesting to
examine the existing sources of credit, seen as 'available' by the
MRCP participants (Table 12).
TABLE 12: Credit Source Status of MRCP Study Sample, March 1999
Note : Credit source categories are not mutually exclusive.
The respondents identified 'MRCP' and the 'Bank' as the key
sources of credit. SHGs emerge as a significant source of credit only
in Chandrapur and Pune districts, where about 16 per cent and 48 per
cent respectively, mentioned this as a source of credit. This is perhaps
due to a perception that SHG loans are synonymous with MRCP
credit. One cannot also ignore the possibility of a bias that may have
occurred due to the respondents' misunderstanding regarding the pur-
pose of the study and its implications for respondents' access to
MRCP credit in the future. These findings would need to be
crosschecked with secondary data available with the banks, coopera-
tives and the DRDA.
Shifts in Incomes
Table 13 shows that there is an increase in incomes from all sources
(agricultural, non-agricultural, wage labour and self-employment) in
all the four project districts. In Chandrapur, the increase in income is

The Maharashtra Rural Credit... 659
marked. In Yavatmal and Nanded too, increase in income is substan-
tial. In all these three districts, the levels of incomes from this source
prior to MRCP were low. In Pune, where incomes were high even be-
fore MRCP, the percentage increase in income source is not as high as
other in districts.
TABLE 13: District-Wise Pre- and Post Project Mean Household Incomes by
Source (Increase in per cent)
Consumption Patterns
For households who are poor or near poverty, the incomes are
rather difficult to assess accurately. It is easier to gather data on
consumption patterns, which usually reflect a lot of income (pro-
portionately) spent on food and sheer survival. Expenditure on so-
cial goods and services such as education and health usually has a
much lower priority. An enhanced income is, therefore, more accu-
rately expressed in the changes in consumption patterns. Table 14
reports the frequency of changes reported in the participant house-
The above table indicates that there have been definite upward
shifts in consumption patterns of participant households. The areas
where more than 60 per cent respondents have recorded a definite in-
crease are cereals, pulses, edible oil, milk, clothes, health and educa-
tion. Areas of moderate impact (between 40 -60 per cent) are
expenditure on non-vegetarian food items, fuel, house repairs and
utensils. Impact on investment in jewellery and durables is very lit-
It is significant to note that while MRCP credit has helped partici-
pants (especially the very poor) to increase expenses on priority con-
sumption items like food and fuel as well as education and health,
they find themselves unable to invest in durables. It is an indication of
the fact that poverty alleviation of households is a long-drawn pro-
cess, and that there is a long way ahead.

660 Sarthi Acharya, Amita Bhide and Reklia Mammen
Empowerment of Participants
The MRCP utilises a variety of mobilisation processes and village
level institutions, recognising that these need to go hand-in-hand
with income generating or saving activities. These processes are
expected to impart a variety of skills to the participants, enhance
their self-esteem and increase awareness, so that they are able to
improve their mobility in the community and influence the inequi-
table access to resources and services within the household and
community. One important area where MRCP is expected to con-
tribute is that of skills. Table 15 illustrates the skills gained by
MRCP participants.

The Maharashtra Rural Credit... 661
TABLE 15: Acquisition of Skills Through MRCP as Reported by Participants
This table reveals that most significant gains have been made in the
area of cash-handling and public dealing, followed by marketing and
purchase of material. These skills are important, when it is borne in
mind that around 56 per cent of the participants are women, who have
extremely limited opportunities, exposure and involvement in house-
hold decision-making (economic and otherwise). There is a regional
and activity-specific skew though: gains in terms of technical skills
were reported by only one-fourth participants in Chandrapur, and
even less in other districts. Yavatmal is the only district where more
than 40 per cent participants reported an increase in legal skills. These
differences need to be understood in the context of varied inputs of the
programme in different districts.
The various examples given above as well as the earlier discussion on
institutions illustrate the impact that MRCP has had on villages.
These are summarised below.
• MRCP is definitely seen as a scheme distinct from other
government programmes or poverty alleviation schemes.

662 Sarthi Acharya, Amita Bhide and Rekha Mammen
• It is primarily seen as a scheme intended for women. The focus
on poverty-stricken groups does not emerge as sharply.
• MRCP has provided several opportunities to women. Those
who have initiative and some level of education have benefited
the most. There are, however, others who are not as involved and
several who are left out of this process.
• The nature of opportunities is multifaceted - economic, social,
personal. The impact has therefore been seen most in creation of
confidence and positive self-esteem among women.
• MRCP has also succeeded in creating a more people-friendly
credit system, distinct from co-operatives and moneylenders.
• The SHGs are the most promising institutions set up under
MRCP. There are many which have become vibrant collectives,
but there are many more that need further sustenance and inputs
in order to be viable.
• The VDCs too are quite active but their role has so far been
narrowly defined. Their linkage to other village institutions too
needs a re-look.
• The VDAs are the weakest institutions. This is also because no
agency defines 'VDA' within their area of work; for example
MAVIM works with SHGs and banks with VDCs. Eliciting
wider people's participation requires more efforts and therefore,
the activity needs to be 'owned' by an agency.
Nationalised banks in India carry out around 95 per cent of lending to
the priority sector. Under the new economic environment, priority
sector lending, which has always been more of an obligation than a
voluntary commitment, has taken on the dimensions of a burden.
Bankers are not interested in giving loans under PAPs due to poor re-
covery, which in turn contributes to an increase in unproductive as-
sets. The tendency then is to extend a substantially lower quantum of
loan and to institute other kinds of checks on beneficiaries. The rela-
tionship of rural people with bank suffers the most in this approach;
banks are seen as institutions of the well-off people.
The expects banks to participate and initiate a process of outreach
to villages by understanding the village and its people, organising
non-credit social programmes and evolving credit plans in consulta-
tion with people. The people directly responsible for these activities

The Maharashtra Rural Credit... 663
are the FOs. The support available to them is through the Lead Bank
in the districts, their coordination with government machinery and in-
puts of agencies like MAVIM and NGOs.
One of the major contributions of the project is expected to be the
'institutionalisation of processes, to improve the image of the poor as
credit-worthy borrowers in the eyes of bankers so as to ensure that the
poor are not cut off from access to credit in a liberalised credit frame-
work' (MRCP Project Appraisal, 1995).
Understanding the impact of the MRCP on these institutions and
their motivation is, therefore, extremely crucial. This section is based
on observations in this aspect as well as an analysis of schedules filled
up by 11 bank officials and the research team's informal discussions
with a selected number. It attempts to understand perceptions of bank-
ers and their experiences of MRCP.
The common observation of all these branches in rural lending has
been that
• recovery is difficult,
• there is a general lack of credit discipline, and
• renewal of time-based documents is difficult.
Their experience of PAPs, in particular, is that in several cases
there is no asset formation, and recovery is very poor (on an average
around 30-40 per cent). There is also a lot of political interference.
Only a handful felt that the IRDP and other programmes lead to in-
come enhancement of the poor.
Linking SHGs is one of the most critical innovations of MRCP in
terms of improving access to credit for the poor, particularly women.
Table 16 focuses on some dimensions of the SHG experience of
banks. The table reveals that Chandrapur has almost double the num-
ber of SHG as compared to the other three districts. It also matches
our observations related to the pace of the programme in Chandrapur
being the highest. The proportion of linkage to banks in Pune and
Chandrapur is 60 per cent each, which seems to be in keeping with
SHGs being at various stages in their evolution. In Yavatmal and
Nanded, however, this proportion is significantly lower, indicating
some difficulties in the functioning of SHGs. The same observation
also applies to the relationship between cumulative SHG savings and
the amount of refinance made available to them. In Nanded espe-
cially, the total amount of re-finance is lower than savings, though in
Yavatmal too the ratio is relatively low. In Pune and Chandrapur, the
quantum of cumulative savings is almost similar, but the amount of

664 Sarthi Acharya, Amita Bhide and Rekha Mammen
re-finance in Chandrapur is more than four times that in Pune, indicat-
ing that bankers in Chandrapur have perhaps more confidence in
SHGs, or that SHGs in this district are more vibrant and have moved
on to larger credit requirements for collective enterprises.
TABLE 16: Experience of Banks with Reference to SHGs District-Wise
Note : Complete data could not be obtained from one branch in Yavatmal.
The SHG experience of bank officials in MRCP is quite positive; the
experience of credit given to individuals under MRCP is mixed but still
much better when compared to the IRDP experience of the same banks.
This is an encouraging finding, indicating that
• bank officials have begun to develop confidence in participants'
willingness and ability to repay, and
• the nature of enterprises has been changing.
The number of accounts being extended services however is de-
creasing. In order to prevent concentration of credit resources in fa-
vour of a few at the cost of restricted or reduced access to other, more
vulnerable and disadvantaged, the scheme needs a re-look.
The experience of banks with respect to recovery in direct credit
given to individuals is mixed. In the case of some branches, there has
been substantial improvement. For example, at a branch in Yavatmal
the recovery increased from 11 per cent in 1995 to 77 per cent in 1999.
Among branches where data were available, the lowest recovery for
MRCP was 35 per cent and the highest was 96 per cent. The average
recovery every year has been around 66 per cent. While this is a sub-
stantial improvement over the IRDP experience; there is considerable
scope for improvement keeping in mind the target of 96 per cent as set
up in the Mid-Term Review/Evaluation mission.

The Maharashtra Rural Credit... 665
In spite of the continual increase in the savings of SHGs,
re-finance to SHGs and credit to individual participants, the total
quantum of MRCP business in proportion to all transactions of the
bank branches is low (between one to six per cent, as reported by of-
The bankers are most impressed with the SHG concept. The rea-
sons given are that SHGs make a 'real' difference in the living stan-
dards of people, the costs are low, and recovery is good. Besides as
observed by one official, SHGs also help to reduce other problems.
There are a significant number of people who feel that a combination
of SHG and direct credit is essential to cover all segments of the rural
population. It is interesting to note that in Yavatmal, all three bank of-
ficials felt that 'only SHGs' was the desirable route to credit. This is
perhaps also related to bankers' experience of recovery from individ-
ual credit, which is the lowest in Yavatmal.
The bank officials interviewed attend almost all VDC meetings.
The activities conducted by these branches in villages included health
camps, road construction through Shramdan, and cultural and social
activities. Two bank officials made specific mention of such activi-
ties. One field observation is that activities very rarely include a com-
ponent of infrastructure development, which requires greater
coordination with the DRDA/BDO. All bank officials felt that they
initiated discussions on village needs in VDC meetings .
It has been observed by the research team that the interaction with
villagers was limited to FOs. The bank managers very rarely got in-
volved in village meetings or in other aspects of the MRCP. Some
FOs have experienced discomfort, when commitments to villagers
made by branch managers, not involved in MRCP, are not fulfilled.
The FOs expressed some difficulties, as stated in Table 17 in the
functioning of the MRCP. The research team, during data collection,
observed that the process of constituting the VDC, its representative
character and its functioning, all need a lot of improvement. It also felt
the need for coordination among participating agencies and greater
involvement of DRDA officials and bank managers.
The SHG concept thus, seems to be well received by bankers.
However, MRCP is much more than a SHG plus individual credit
programme. Also, currently it is being implemented on a low scale.
Bankers' views on its 'bankability' are critical from the point of view
of sustaining the programme. They feel that the initial costs of MRCP
are high. However, it could be made more bankable in the future. For

666 Sarthi Acharya, Amita Bhide and Rekha Mammen
this, the continuation of escort services and the enthusiasm of the
VDCs are considered important.
TABLE 17: Difficulties Experienced by Bank Officials in Implementing MRCP
Nature Of Difficulties
Lack of cooperation from BDO
All training programmes arranged centrally.
Other MRCP workers not involved in recovery
Have to spend a lot of effort in countering earlier
culture of non-repayment.
Non-credit inputs not provided effectively.
Poor response from VDA/VDCs
BPL list is considered a 'forever' list
Bankers' Views on MRCP
Presented below are some comments of bank officials on the per-
ceived impact of the MRCP. These are important as they have come
directly from the 'horse's mouth'.
• Through participation of people, good quality work at less cost
is made possible.
• A programme genuinely working for village development.
• MRCP is the only feasible long-term approach.
• Helps establish good relations with people.
• People's participation helps in asset verification and in sharing
• Recoveries are regular.
• VDCs do not cooperate with us.
• Other MRCP people also need to feel involved in the
The bankers expressed a lot of satisfaction about the MRCP. It has
generated enthusiasm among people and received a lot of acceptance.
They feel it is low-scale but gives good and tangible returns. The
VDC, in the opinion of the bank officials, is a genuine forum but the
SHGs were more impressive. The number of SHGs, their savings,
credit extended to them, and individual accounts are on the rise. Field
officials are taking an active interest in the MRCP and have demon-
strated a lot of motivation. The quantum of business is, however, mi-
nuscule compared to the total bank business. Most importantly, the
scale of the MRCP and its relation to the involvement of the bank is
the most crucial issue in sustaining the programme. It needs to be

The Maharashtra Rural Credit... 667
addressed headlong as the MRCP cannot continue on a pilot basis for-
This research summary reports the findings of a survey launched to
assess the functioning of the MRCP, a credit scheme launched in the
1990s to reach credit to the rural poor for poverty alleviation. It has
made several improvisations over the IRDP, essentially through try-
ing to replace a supply-led top-down approach with one that becomes
demand-led. It works through village committees, stakeholders and
SHGs, who work in close co-operation with government and bank
staff to not only provide credit but to ensure its optimal use and repay-
ment. Training and organisation form an integral part of the
This survey, the first of its kind to cover the broad range of issues
and the whole geographic span of the programme, found that the
programme is more effective in its reach than almost all its predeces-
sors, and that it has been able to raise the levels of incomes and well
being of the clientele. Following the principles of popular participa-
tion in designing and implementing rural development schemes, it has
aimed to set up committees and local organisation systems to achieve
the goals. Limitations of achieving targets, however, are increasingly
realised when programmes that are essentially designed for
small-scale operation, are multiplied on the large scale, and institu-
tionalised in the existing bureaucratic system.
Generous grant obtained from NABARD for conducting this survey is gratefully
acknowledged. We thank R. Jare, V. Kulkarni and S. Narwade for providing lead-
ership in collecting the data. We alone, though, are responsible for the findings.
THE INDIAN JOURNAL OF SOCIAL WORK, Volume 62, issue 4,october 2001