small help group
TRANSCRIPT
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SCHOOL OF ECONOMICS
DAVV, INDORE
ASSIGNMENT
ON
SHG- BANK LINKAGE PROGRAMME
BY:
MUKESH RAJAK
SARVESH PANDEY
KAMLESH KUMAR SINGHADITYA NANDAN
MBA (F.S)
(BATCH OF 2010-12)
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INTRODUCTION
Under the SHG-bank linkage program, NGOs and banks
interact with the poor, especially women, to form smallhomogenous groups.
These small groups are encouraged to meet frequentlyand collect small thrift amounts from their members.
They are taught simple accounting methods to enablethem to maintain their accounts.
Although individually these poor could never haveenough savings to open a bank account, the pooledsavings enable them to open a formal bank account in thename of the group.
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This is the first step in establishing links with the formal
banking system.
Groups then, meet often and use the pooled thrift to
impart small loans to members for meeting their small
emergent needs.
This saves them from usurious debt traps and thus begins
their empowerment through group dynamics, decision-
making, and funds management.
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FUNCTIONING OF SHG BANK
The SHPI trains the members to maintain simple
accounts of the collected thrift and loans given tomembers.
The regular meetings also provide a platform to discussand resolve many social and common issues, thusfortifying them together.
A savings bank account is opened with a bank branchand regular thrift collection and loaning to membersbuild up the financial discipline among the members toencourage the bank to provide larger loans to the group
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The conceptual thinking behind the SHGphilosophy and the Bank Linkage could
be summarised as under:Self Help supplemented with mutual help can be a powerfulvehicle for the poor'seffort to socio-economic upward transitionParticipative financial services management is more efficient
and responsive.
Poor can save and are bankable
Poor not only need credit support but also savings and other
services
Small affinity groups of the poor, with initial outside support,can effectively manage and supervise micro credit among theirmembers
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Collective wisdom of the group and peer pressure are valuable
collateral substitutes
SHGs could be a pre- microenterprise stage for a majority of rural
poor
SHGs as client, facilitate wider outreach, lower transaction costand much lower risk costs and
Empowerment and confidence building of poor, especially of poor
women, is a major outcome
The mismatch between the expectations of the poor and
capabilities of the formal banking system needs to be minimised
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What makes the SHG approach succeed ?
At group level :
Group formation and nurturing - the key to successful SHG
Group composition - thrust on affinity and homogeneity
Members learn to maintain financial discipline
Members own stake in the group - in the form of savings
Collective wisdom in credit decisions
The peer pressure enable the group to minimize the aggregate
risks of failures
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Savings and credit is a continuing process and not a one-
time injection of loans
Freedom of selecting loan purpose to the members, with
benefit of peer counseling
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AT BANK LEVEL :
The group formation and nurturing process is intensive and
should not be rushed through.
Emphasis on Grading -Banks grade the SHGs for creditsupport based on parameters of group dynamics,regularity in savings, internal lending, participation level,
etc.
NGOs grade the SHGs before recommending them forbank loan.
The weak ones have to wait and overcome weakness
Cost effective, operationally simple and low risk strategyfor expanding client base and business.
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Externalizing some of the credit functions to SHG.
Bank loans only when initial savings and internallending has stabilized.
Banking with disciplined clients and not beneficiaries
More than 95 % on-time repayment from the poorsome of whom were possibly defaulters.
Heavy investments by NABARD in formation, nurturingof SHGs, building capacities of NGOs,
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Training of banks and other stakeholders - asInvestment in human capital development.
NGOs promote SHGs for deepening the impact oftheir programmes and furthering their own socialagenda.
Banks promote / finance them for expanding qualitybusiness coverage
Governments promote them for multipledevelopmental objectives
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ISSUES IN SHG :
Regional Imbalances
Quality of SHGs
Impact of SGSY on SHG-bank linkage programme
Provision of micro-insurance to the SHG members
Micro Enterprise Promotion among members of Mature
SHGs
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FUTURE STRATEGY
Expansion in the Poverty struck and Tribal areas
Massive capacity building efforts by other stakeholders e.g.Banks, NGOs, Govt. Dev. Dept
Banks to own the SHGs linked with them as their client and
nurture them to keep them in good health
Training the SHG members to maintain their books of account
themselves or arrange IRVs/Barefoot accountant/Smart card etc
Federating the SHGs for future handholding and sustainability
Graduation of SHG members to Entrepreneurship
Skill development training to improve work efficiency and
develop quality product,
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Arrangement for raw material and other inputs
Design development and consistency
Marketing of the product
Ultimate aim is to make her an independent and self
dependent entrepreneur
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T H A N K
Y O U