SHGs vulnerable to fraud as accounts not audited

Nellore: Even as the union government is insisting for financial discipline and recording transactions for accountability, Self-Help Groups (SHGs) are lacking the self-control though all were linked to banks and other microfinance institutions. Moreover, there is no proper monitoring and accountability on huge turnover of mighty microfinance sector where hundreds of crores worth transactions were being made by SHGs. The turnover is normally accounted by very few groups and even the banks don’t know the actual status since they confine to a 10-15 member group.

Highlights:

• Around 38,500 groups with 3.75 lakh members and Rs 600 crore bank linkages has no self-control mechanism which is being ignored by government monitoring wings
• Very few groups obtain audit statements and submit to the banks at the time of obtaining loans

In fact, though there are different models for pursuing microfinance, the SHG Bank Linkage Programme (SBLP) has emerged as the major microfinance scheme in the country. When the pilot project was initiated by the National Bank for Agriculture and Rural Development (NABARD), the SHG model was adopted and called it as an Indian model. In the early 90s, the NABARD called it as the SHG-Bank Linkage model. The linkage is unimaginable as one cannot imagine that there are around 38,500 groups in Nellore district with around 3.75 lakh members with rough savings of around Rs 230 crore per annum.

They also get financial support running into crores of rupees from the banking institutions every year and the recent financial year also witnessed such a huge loan component of Rs 620 crore from banks. The component has phenomenally been increasing every year depending on repayment capacity of the members. But, such a huge amount being financed by the banks and other financial institutions is lacking accountability in terms of financial discipline.

SHGs mobilise savings but they are insufficient to meet group members’ credit demand. As a result, most of the SHGs source funds from banks and microfinance institutions. As part of financial discipline, the groups should ensure proper maintenance of account books on daily basis as they are also responsible for getting the accounts inspected once in a month and audited once in six months or year for submitting the statements/reports to the group meeting for appraisal.

“We don’t know about any such meeting on financial statements and audit by the group. We simply save money, take loan from the group and repay it. Banks provide the assistance. Leaders will take care of all such things,” said D Bharathi, a group member in Nellore city. She says passbooks of majority members are kept with the group leaders, who finally return them after cessation of activity from the group. The RBI and microfinance institutions are extending assistance to the mpowerment of women but the basic principle of maintaining proper accounts, auditing and returns are being missing and the government departments concerned are keeping mum on such irregular activity.

“We sometimes insist for an audit statement from the group while sanctioning a loan and we practically know that it has not been prepared exactly. However, we issue loans to groups based on their repayment capacity and history which is all in the game,” said a chief manager of a scheduled bank on condition of anonymity.Interestingly, it is known fact that this huge amount of money is either not being invested or utilised for livelihood enhancement but was being spent for family needs. The members simply share the loan amount and repay it according to schedules.

Some money lenders also started groups for easy loan sanction at an affordable interest rate and avoiding personal indemnity.“In fact, groups and organisations at various levels have to go for audit, submit the statements to the DRDA and also to the registering authorities such as the Cooperative department. But, this is not being followed properly. But, we don’t insist for strict rules since majority members are illiterates and from poor background,” said an official from the DRDA
accounts wing.

By P V Prasad