A report on the Microfinance initiatives in Bihar

Bihar: Socio-economic and Banking profile

Bihar is a poor state with a huge deficit in institutions providing credit. The poverty ratio in Bihar is 42.5% which is very high in comparison to Pan India’s poverty ratio of 26%.

Socio-economic Profile	Bihar	India
Population	83 million	1029 million
Poverty ratio	42.56%	26%
Overall literacy rate	47.50%	65.20%
SC population	15.70%	16.20%
ST population	0.90%	8.20%
Avg. land holding	0.75 ha	1.57 ha
Human development index	0.367	0.472
Infrastructure development index	91.31	100

* Source:Census of India 2001, HDR 2001

Banking Network in Bihar*	Bihar	India
Total number of bank branches (Including RRBsand Co-operative Banks)	3735	73,836***
Bank branch per ‘000 population	25	16
Credit Deposit ratio	33.48 %	74.2 %#
Total number of new SHG Bank A/cs opened in 2007-08	6,873	NA
Total number of new SHG Bank credit linkages in 2007-08**	19,370	5,52,992
SHG savings with banks @	505.96 million (as on 31.3.2008)	35,127 million (as on 31.3.2007)
Total amount disbursed during 2007-08 under SHG- Bank linkage **	Rs. 1127.5mn	Rs. 42,275mn

*Source: 24th SLBC Review Meeting Report, 31st March 2008 ** Source: NABARD@ SLBC meeting July 2008 and Microfinance State of the Sector Report 2008

*** Bihar Economic Survey 2006-07, Govt. of Bihar.# RBI press release on 18 July 2008.

The Regional Skew: Microfinance penetration in selected states of India

The microfinance penetration in Bihar is a meager 0.3, which is even lesser then Punjab and Haryana, which are the comparatively prosperous states of India. The table below clearly shows that Microfinance institutions are largely skewed in Southern India.

State	MPI*	MPPI**
Andhra Pradesh	3.03	5.27
Karnataka	2.15	2.27
Tamil Nadu	2.18	2.66
Kerala	1.29	2.36
Bihar	0.3	0.2
Haryana	0.13	0.26
Punjab	0.08	0.27

*The intensity of penetration of microfinance (MPI) was computed by the dividing the share of the state in microfinance clients by the share of the state in population.

**MPPI was derived by dividing the share of the state in microfinance clients by the share of the state in population of poor.

Current Status of Microfinance: MFI Outreach in Bihar

Microfinance need to be taken professionally. The performance of NBFC based MFIs have shown the outstanding results in India. In Bihar too, majority of the NBFCs like SKS Microfinance, Casphor, ASSEFA have doubled their client base in a year.

Name of the organization	Year of start of operations	Legal Status	Total no. of Districts	Number of clients
SKS (Bihar)	2005	NBFC	33	84,444
Cashpor (Bihar)	1997	NBFC	4	70,621
ASSEFA (Bihar)	2005	NBFC	3	40,000
NIDAN	1996	SOCIETY	6	18,508
Gramin Jan Kalyan Parishad	2005	SOCIETY	1	12,602
Jan Jagaran Evam Punarwas Sansthan	2003	SOCIETY	2	3,070
Trust Microfin Services	1999	TRUST	2	2,812
Nav Jagriti	2002	SOCIETY	2	2,250
Mass care International	2003	SOCIETY	5	1,200
CDOT	2007	SOCIETY	1	580
Batika	2007	SOCIETY	2	300
Boarddev	1999	SOCIETY	2	296
Bihar Development Trust	2007	TRUST	2	200
Estimated TOTAL				236,343

* (Figures as on 31stMarch 2080)

Source: SA-DHAN, The Bharat Microfinance Report-Quick Data 2008 and MFI reports.

Potential Microfinance Clients

The population of Bihar is approximately 92.9 Million. The total number of household under below poverty line is 7.67 Million.

Estimate of No. of Poor Household in Bihar (2008)
Population of Bihar*	92.90 Million
Total No. of Households**	18.59 Million
No. of Rural Households (89.54% of total population)	16.65 Million
No. of Urban Households (10.46 % of total population)	1.94 Million
No. of Rural BPL (42.1% of rural population)	7 Million
No. of Urban BPL (34.6 % of urban population)	6,73,000
Total No of BPL Households	7.67 Million

*Assumed annual growth rate of 1.63% p.a. during 2001-08 as per national average for India 1991-2001, All India census data 2001.

** Assuming five person per Households.

*** Rural poverty ratio in rural Bihar is 42.1% for 2004-05 (Source: CSO, NSSO Survey Reports)

**** Rural poverty ratio in urban Bihar is 34.6% for 2004-05 (Source: CSO, NSSO Survey Reports)

Poverty Outreach of Microfinance in Bihar

The outreach of micro credit in Bihar is as low as 18.7%. Approximately 81.3 % of the rural population has no access to Credit.

Microfinance Outreach
A. SHG Coverage
Total No. of SHGs credit linked in the state [1]	92,008
Total Number of Household Covered ( 13 members/ household per SHG)	1,196,104
Percentage of BPL Households as SHG Members #	15.61%
B. MFI Coverage
Total No. of clients/households covered by MFIs (Assuming one client per household)*	2,36,343
Percentage of BPL Households as MFI Clients #	3.1 %
Percentage of Poor Households covered by Microfinance	18.7%

[1]Source: NABARD data for March 2008. Note: Total BPL households estimated to be 7.67million in 2008.

# assuming all SHG members and MFI clients are BPL

* Source: SADHAN, The Microfinance Quick Report, 2008 & MFI Reports.

Credit Demand of Poor Households in Bihar and the Supply Gap

As per the calculation, the total demand of micro credit in Bihar is Rs. 48,675 Million while the current supply is Rs. 2,128 Million. Thus the demand supply gap is around 96%.

Demand
Credit requirement per poor HH per Annum (Asumed)
a. Rural	Rs. 6,000
b. Urban	Rs. 10,000
Total Credit Demand for Rural BPL households per annum	Rs. 41,945 Million
Total Credit Demand for Urban BPL households per annum	Rs. 6,730 Million
Total Credit Demand for All BPL households per annum	Rs. 48,675 Million
Supply
Estimated Annual Credit Supply from Banks	Rs. 2,128 Million
Demand-Supply Gap	96%

* Includes Rs. 1,128 mn in SHG bank linkages and Rs. 1,000 mn by MFIs