Programme description

Title: Rural Financial Institutions Programme
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: India
Lead executing agency: National Bank for Agriculture and Rural Development (NABARD)
Overall term: 2005 to 2013

Context

The cooperative credit infrastructure in India is one of the largest cooperative credit systems worldwide in terms of membership and active clients. It has more than 127 million members, of which over 45 million are borrowing members. About 40 per cent of the short and medium term cooperative credit structure institutions, including state cooperative banks, district central cooperative banks, and primary agricultural credit societies are in various stages of financial, managerial and structural impairment.
The cooperative sector has not witnessed a reform programme of this dimension before that has touched   the lives of millions of people. The reform and revitalisation of the cooperative banking sector are expected to make a substantial contribution towards the better financial inclusion of rural people by diversifying their economic activities, increasing  incomes, and by improving  livelihoods supporting broad-based rural growth and equity.

NABARD, the implementing agency of the reform and partner of GTZ's Rural Financial Institutions Programme, aims to improve the functioning of primary agricultural credit societies, district central cooperative banks, and state cooperative banks mainly through legal and institutional reforms.

Objective

Provide the rural poor with increasing access to sustainable and qualitatively improved financial services offered by the short-term cooperative credit structure and microfinance organisations.

Approach

The programme contributes to NABARD's endeavours in  cooperative revival and reform, as well as other aspects of the microfinance sector in three major areas:

• Establishment of a training and certification system for cooperative credit structures,  in  order  to  develop capacities of staff and management and ultimately improve institutional conditions
• Improvement of audit systems for cooperative credit structures for  better financial management of the institutions and their member cooperatives
• Promotion, supervision, and (self)-regulation of microfinance organisations, in order to develop viable and sustainable microfinance intermediaries that are in a position to provide adequate financial services to the rural poor.

While cooperating with NABARD at macro/policy level, the GTZ RFIP accords high importance to the results and impacts at micro level and monitors all activities accordingly.

Synergies and coherence are drawn from strategic coordination with the Asian Development Bank, the World Bank and German Financial Cooperation (KfW Entwicklungsbank). The programme also benefits from collaborations with the German Cooperative and Raiffeisen Confederation (DGRV) and the Academy of the German Cooperatives (ADG).

Results achieved so far

• The reform programme is the largest of its kind worldwide in terms of members and clients
• Primary agricultural credit societies count more than 127 million members, of which more than 35 per cent are borrowing members
• The Revival and Reform package includes 110,000 institutions and their branches
• 25 states have agreed to implement the reform measures necessary for cooperative credit structures, thereby covering 96 per cent of the CCS institutions
• The Government of India has allocated an overall amount of INR 140 billion, mainly towards the reform process