Determinants of NPLs of Self-Help Group-Bank Linkage Program in India: Empirical Evidences and Policy Implications

This article examines the major factors influencing the non-performing loans (NPLs) of the Self-Help Group-Bank Linkage Program (SHG-BLP) in India at both macro- and micro-levels. A panel regression analysis of the state-level data shows that the total outstanding loan amount, average loan size per SHG and poverty rate exert positive impacts, whereas gross state domestic product has a negative effect on gross non-performing loans (GNPLs). Analysis of primary data indicated a higher incidence of loan default by SHG members. Logit regression analysis employed on primary data suggests that the loan default by SHG members is positively associated with age and experience because of higher family responsibility and lesser incentive to repay the loan. On the other hand, self-employment, levels of income and savings show negative relations with loan default. Self-employed SHG members and those who make some savings are less likely to default on loans. Similarly, higher-income groups show less chance to default on loans. An analysis of the perceptions of the SHG members reveals that poor economic conditions, non-cooperation among members, social and medical expenses, and expectations of loan waiver from the government are the main reasons for loan defaults.