Credit Flow to the Handloom Sector: Appraisal of the Current Scenario
|Kanitkar, Dr. Ajit is Program Officer, Development Finance and Economic Security, Ford Foundation, New Delhi. He has a Ph. D from Pune University (Entrepreneurial response to Liberalization Policies: A case of Dairy Industry in India). He has worked with the Swiss Agency for Development and Cooperation (SDC), and as a Development Consultant in Pune and Delhi. Ajit has published three books on Women Entrepreneurs, Grassroots entrepreneurship and management of cooperatives in India. Ajit is interested in Ensuring access to financial services, promoting appropriate institutional and enterprise models that result in maximum returns to primary producers and change processes in large public systems.
For PUTTING IDEAS FIRST XII, a monthly discussion series on crafts, aesthetics, sustainable livelihoods and advocacy Dr. Ajit Kanitkar gave a talk on the Credit Flow to the Handloom Sector: Appraisal of the Current Scenario on Tuesday, 27th June, 2006 at India International Centre.
The talk was based on an exploratory study was funded by All India Artisans and Craftworkers Welfare Association (AIACA) and conducted by Dr. Kanitkar.
Objective of the Study
Map the current status/ reality with respect to credit flow. Planned vs. actual current flow
Current processes – practices
Estimate demand and supply
Map perceptions and experiences as experienced by weavers and their organizations
Primary Sources: Slice/ Cross Section of all stakeholders – National Bank for Agriculture and Rural Development (NABARD) Head and Regional Offices, Office of the Development Commissioner (Handlooms) and regional offices, Weaver Cooperatives, Individual Weavers, Traders, Bankers.
- Secondary Sources: Books, Government Census and Reports (especially the 1995 handloom survey published in 2004) and Other Research Studies
Potential Routes to Reach Credit
Over 25 lakh households were engaged in weaving pre-Independence. Post Independence 1.25 crores engaged in weaving. About 32 lakh looms and 20,000 Weaver Cooperatives
Most of them from Scheduled Castes, Scheduled Tribes and Other Backward Classes, most of them socially and economically deprived communities.
They work about 200 days a year
Next to agriculture, probably the single most important livelihood opportunity
Formal institutions: NABARD – State Cooperative Banks (SCBs) - District Cooperative Banks (DCBs) – Weaver Cooperative Societies (WCS) – Individual Weavers
Individual Weavers can contact Banks directly, through Master Weavers or go to Moneylenders.
Artisan Credit Card (ACC) – introduced in 2003 offers a credit delivery channel. But promotion slow
Group of Individual Weavers: NABARD in 2005 asked banks to experiment with Self Help Groups (SHGs) and Joint Liability Groups (JLGs) but this also takes upto a year
Bankers too lack enthusiasm
Supply side: in 1998-99 750 crores were sanctioned but in 2004-5 only 349 crore, declined by half
Possible Demand: NABARD estimate shows working capital requirement of 20,000 WCSs at 3200 crores. Taken per loom the scale of finance is 5000 crores
No estimate of weavers outside the cooperatives and only 25% of weavers are in cooperatives
Huge unmet demand
Pick of ACC is slow. Weavers had no history of interaction with banks.
Refinance mechanism is slow, takes 6-8 months.
Current policy discussion centered on cash credit/ working capital (purchase of yarn, market support etc.). Long term credit (e.g. for loom upgradation) being overlooked.
Cooperatives are puppets to the officials of the handloom department. But they are necessary to procure raw material and receive market development assistance and credit from the government to channel to weavers.
Map the status of the handloom industry with reference to the financial aspects of the sector
Need to clearly distinguish between credit flows as mentioned in the policy documents and the actual withdrawal made at grassroots
More transparency, easily accessible to independent researchers, industry associations and organizations
Review the existing credit delivery mechanisms and explore all possible alternate mechanisms without institutional bias
Policies need to encourage and promote more lending by the commercial banks
A flexible and differentiated credit policy for well performing, potentially viable and dysfunctional cooperatives
Procedures need to be simplified
Motivate well performing WCs to seek finances from banks and interested commercial banks to link up with cooperatives
WCS performing well to be encouraged to migrate and transform themselves to the Progressive Cooperatives Law
SHGs and JLGs to be encouraged even though they might take longer to provide multiple options to weavers
Microfinance Institutions (MFI) and NGO-MFIs could be a potential delivery mechanism
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