TCN special: Misra Commission report excerpts- Part 14

By TwoCircles.net news desk,Misra Commission report excerpts – home page

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SpecialisedFinancial Institutions 

The National Minorities Development and Finance Corporation, set up in 1992,provides special focus to economic development of the backward sections amongminorities.  Establishment of NMDFC is a major landmark in the attempt toenhance credit flow to minorities at the national level.  It is a nationallevel apex financial body, functioning under the Ministry of MinorityAffairs.  Its aims and objectives include:

* To promote economic and developmental activitiesfor the backward sections among minorities, preference being given to theoccupational groups and women;

*  To assist individuals or groups belongingto minorities by way of loans and advances for economically viable schemes andprojects;

* To promote self-employment and other ventures forthe benefit of minorities;

*  To extend loans and advance s to eligiblemembers for pursuing general, professional or technical training or educationat graduate or higher level;

* To Assist Upgradation of technical andentrepreneurial skills of minorities for efficient management of productionunites;

*  To work as an apex institution ofcoordinating and monitoring the work of all corporations, boards or otherbodies set up by States/UTs for assisting the minorities in their economicdevelopment; and

*  To help in furthering the governmentalpolicies and programmes for development of minorities. 

NMDFC provides financial support to minority families having income belowthe double poverty line.  At present this amounts to an annual familyincome of less than RS 40,000/- in rural areas and Rs 55,000/- in urbanareas.  Funds are channelised through State Channelising Agencies (SCAs)and NGOs.  At present there are 35 operational SCAs in 24 States and 2UTs, who channelise the NMDFC funds for development work.  Of these 35agencies, 12 are exclusive corporations for minorities, while 16 arecorporations for Scheduled Castes/Scheduled Tribes/Other Backward Castes/Women, and 7 are State bodies, Industrial Corporations, Cooperatives or bankwith a a mandate to serve special occupational groups or purvey credit topriority sectors.  In the network of NMDFC, there are about 150 NGOsacross the country for implementing the scheme of micro-finance launched in1998-99. 

 NMDFC Lending Schemes and Programmes: The mainactivity of the Corporation is to extend term loans up to Rs 5.00 lakhs tobeneficiaries from minority families whose income is below double the povertyline, for financing viable projects.  NMDFC finances up to 85 percent ofthe project cost to a maximum of 4.25 lakh; the SCA provides 10 percent ofproject cost.  The rate of interest charged from SCA is 3.5 percent p.a.,which in turn charges 6 percent from the borrowers.  Micro-finance scheme,run on the SHGs (Self Help Groups) concept with the help of selected NGOs isfor the poorest members of minorities who generally have no access to formalbank credit.  Under Mahila Samriddhi Yojana, the Corporation bears thetraining cost and stipend for training that is provided to groups of about 20women, in suitable craft activities.  The group is formed into a SHG andafter the training, micro-credit is provided. 

 Education Loan: This scheme provides loan forprofessional and technical courses with good employment potential up to amaximum duration of 5 years. 

Margin Money scheme: Financial assistance is provided to the eligiblebeneficiaries to meet the requirements of margins asked for by banks forsanctioning of loans.  NMDFC has launched a special programme for economicdevelopment of minorities in the 41 minority concentrated districts(MCDs). 

NMDFC’s Promotional Schemes include the following:

*  Vocational Training:  Short termneed-based vocational trainings are supported by NMDFC contributing 85 percentas grant to the organizers, who are local recognized training institutes.

*  Marketing Assistance to Craftspersons:  To support crafts persons in market promotion and sale atremunerative prices, NMDFC finances SCAs and NGOs in organizing exhibitions areselected locations, for sale of the handloom and handicraft products ofminority community crafts persons.

* Assistance for Design development/SkillUpgradation:  NMDFC provides grants to SCAs and NGOs to give exposure to craftspersons to new designs and for training to upgrade their skills to meet thechallenge of the changing market. 

Performance and Impact of NMDFC

The Corporation has an authorized share capital of Rs.650 crore out of whichthe Government of India’s share in 65 percent.  The Government of Indiahas so far contributed RS. 375.36 Crore in equity of the Corporation whileRS.96.50 crore has been contributed by the various State Governments. Since its inception, during the last twelve years, the Corporation has providedfinancial assistance of Rs. 917.75 crores to 3,41,077 beneficiaries throughState Channelising Agencies and NGOs.  Table 7.5 depicts the trends in thedisbursements and coverage of beneficiaries by NMDFC: 

Table 7.5: performance of the NMDFC inTerms of Disbursement and Coverage of Beneficiaries

  (Rs. in lakhs)

* Utilisation includes administrative andpromotional expenditures   ( Source : NMDFC). 

Quantum disbursed by NMDFC for term loans had gone up from Rs. 3003.94 lakhin 19094-95, to Rs 12667.37 lakh in 2004-05 but came down to Rs. 9818.00 lakhin 2006-07.  The number of beneficiaries of tem loans has gone up in thesame period from 9570 to 34449 persons in 2004-05.  The total number ofbeneficiaries upto 2006-07 was 2,17,071 persons, with a total disbursement ofRS 9818.00 lakh.  Term loans are the major component of NMDFClending.  The growth rate of the scheme was uneven in the initial yearsafter 1997-98 un till 2004-05 after which it declined during the last twoyears.  The year 2004-05 showed substantial increase in disbursement ofterm loans, from Rs.81.43 crore in 2003-04 to Rs 126.67 crore, registering agrowth rate of 66.38 percent. 

The micro-finance scheme, started in 1998-99 benefited 789 persons in thatyear, with total disbursement of Rs 34.12 lakh.  The quantum ofdisbursement under the scheme has been showing an upward trend upto 2006-07except sharp decline during the year 2002-03.  The total disbursementunder the scheme has gone up to Rs. 1317.13 lakhs during 2006007 covering25,482 beneficiaries. 

The education loan scheme, began in 2003-04, benefited 368 persons in thatyear, with a financial disbursement of RS81.25 lakh.  The beneficiariesincreased during the years 2004-05 and 2005-06 to 1103 and 1195 respectivelybut came down to 530 during 2006-07.  The amount of disbursement alsoregistered a decline during 2006-07 

The Mahila Samriddhi Yojana began in a small way in 2002-03 and an amount ofRs.1.53 lakh was disbursed to 40 beneficiaries.  The disbursement andcoverage of beneficiaries has been increasing continuously with an amount ofRs.6.96 lakh during 2006-07 covering 320 beneficiaries. 

Under NMDFC’s promotional schemes, the beneficiaries of interest free loancomponent were 2340 in 1988-99 with disbursement of Rs 4.90 lakh.  Thenumber of beneficiaries went up to 10430 in 2001-02 with disbursement ofRs.21.71 lakh.  The coverage under the scheme is, however, coming downthereafter with a disbursement of Rs.1.21 lakh only during 2005-06 with 590beneficiaries.  No disbursement has been reported during the year2006-07. 

The amount disbursed for Vocational Training during the years 1999-2000 and2000-01 was Rs.4.45 lakh and Rs 17.95 lakh respectively covering 139 and 290beneficiaries.  While the disbursement under this scheme has beenincreasing gradually amounting to Rs 43.78 lakh during 2006-07, the number ofbeneficiaries of the programme has gone down to 858 as against 1389 during2005-06. 

Further, it may be evident from Table 7.5 that the amount of disbursementand number of beneficiaries under various schemes has been increasing yearafter year except occasional decline as discussed in the aboveparagraphs.  The total amount of disbursement under various schemes hasbeen Rs. 917.75 crores benefiting a total of 3,41,077 beneficiaries. However, the assistance provided has been very limited, both in terms ofphysical and financial coverage.  It is apparent from Planning Commission’ssurvey that the number of BPL families among minorities in rural and urbanareas in substantial.  Economic empowerment of women from these householdscan only be achieved by organizing them as SHGs and providing them microcredit.  

The percentage of loan recovery was above 90 during 2002-2003 and 2003-04but has come down to 83.87 percent from State Channelising Agencies and was88.64 percent from NGOs by the end of the financial year 2006-07.  Thisindicates that more and more recyclable fund is becoming available to NMDFC forimplementing its objectives.  However, it may be mentioned that recoveryfrom beneficiaries is poor and hence recovery from States is not a indicator ofthe performance.  Authorized share capital of NMDFC needs to be substantiallyenhanced.  The limit on Channelising agencies in State needs to be liftedand there should be no need for State guarantees.  

The community-wise disbursement of funds under Term Loan and Micro Financeas well as coverage of beneficiaries is shown in the Table 7.6

Table7.6:  Community-wise Disbursement of Funds by NMDFC 

Source:  Rapid Assessment of the Role of Financial Institutions in theUpliftment of Minorities in the Country, by Agricultural Finance CorporationLtd, Mumbai, 2006 

As may be seen from the Table 7.6, maximum amount of loan was disbursed toMuslims, followed by Christians and Sikh.  Buddhists account for a verysmall percentage of beneficiaries, and Parsis have not taken up the loans atall.  State-wise disbursement of funds under term loan and beneficiariescoverage as on 31.3.2005 is given in the Table7.7. 

Source:  Rapid Assessment of the Roleof Financial Institutions in the Upliftment of Minorities in the Country, byAgricultural Finance Corporation Ltd, Mumbai. 2006 

As may be evident from the Table 7.7,  maximum amount of term loan wasavailed by Uttar Pradesh (19.31 percent), West Bengal(15.90 percent), and Kerala (14.29 percent).  Between them, these threeStates corner about 50 percent of the total loan disbursement.  OtherStates where there has been substantial disbursement are Gujarat (8.17percent),  Karnataka (7.33 percent), Andhra Pradesh (4,41 percent), Maharashtra (4.26 percent) and Mizoram (4.13percent).  These 8 states between them have availed of about 75 percent ofthe Term Loan disbursement.  The State of Uttarakhand availed the lowest amount of Rs25 lakh (0.04 percent). 

From the point of view of social equity the beneficiaries of Term Loancoverage and loan amount should be in proportion ot the minority population ofthe State.  However, there are disparities on this count.  Forexample the States of Maharashtra and Biharhave 9.20 percent and 7.29 percent of the country’s minority population, butshare only 2.31 percent and 3.60 percent of the loans disbursed.  

The data contained in Table 7.7 is based on the Report of Agriculture FinanceCorporation which was asked by the Commission to Conduct a  Study on therole of financial institutions in the upliftment of minorities.  However,as per latest data received from the NMDFC, disbursement to States upto the endof 2006-07 aggregates to Rs.870.52 crore with 2,24,447 beneficiaries. 

Outreach of NMDFC 

The NMDFC has been able to cover only 1.60 percent of those eligible toreceive economic development support under its programmes upto 31^stMarch, 2005 as indicated in the Table 7.8.

Table7.8:  Outreach of NMDFC 

Source:  Rapid Assessment of the Roleof Financial Institutions in the Upliftment of Minorities in the Country, byAgricultural Finance Corporation Ltd, Mumbai, 2006.