SHG Bank Linkage Programme

1
SHG Bank Linkage Programme

• What is a Self-Help Group ?
• A Self-Help Group SHG is a small, economically
  homogeneous and affinity group of 15-20 rural
  poor which comes together to
• save small amounts regularly
• Mutually agree to contribute to a common fund
• Meet their emergency needs
• Have collective decision making
• Resolve conflicts through collective leadership
  and mutual discussion
• Provide collateral free loans on terms decided
• by the group at market driven rates

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SHG Bank Linkage Programme

• The SHPI trains the members to maintain simple
  accounts of the collected thrift and loans given
  to members.
• The regular meetings also provide a platform to
  discuss and resolve many social and common
  issues, thus fortifying them together.
• A savings bank account is opened with a bank
  branch and regular thrift collection and loaning
  to members build up the financial discipline
  among the members to encourage the bank to
  provide larger loans to the group.

3
SHG Bank Linkage Programme

• The conceptual thinking behind the SHG philosophy
  and the Bank Linkage could be summarised as
  under
• Self Help supplemented with mutual help can be a
  powerful vehicle for the poors effort to
  socio-economic upward transition
• Participative financial services management is
  more efficient and responsive.
• Poor can save and are bankable

4
SHG Bank Linkage Programme

• 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 their members
• 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
•          

5
SHG Bank Linkage Programme

• SHGs as client, facilitate wider outreach, lower
  transaction cost and 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

6
SHG Bank Linkage Programme

• 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

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SHG Bank Linkage Programme

• Collective wisdom in credit decisions
• The peer pressure enable the group to minimise
  the aggregate risks of failures
• 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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SHG Bank Linkage Programme

• 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
  credit support based on parameters of group
  dynamics, regularity in savings, internal
  lending, participation level, etc.
• NGOs grade the SHGs before recommending them for
  bank loan
• The weak ones have to wait and overcome weakness

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SHG Bank Linkage Programme

• Cost effective, operationally simple and low risk
  strategy for expanding client base and business
• Externalising some of the credit functions to SHG
  
•  Bank loans only when initial savings and
  internal lending has stabilised
• Banking with disciplined clients and not
  beneficiaries
• More than 95 on-time repayment from the poor
  some of whom were possibly defaulters

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SHG Bank Linkage Programme

• Heavy investments by NABARD in formation,
  nurturing of SHGs, building capacities of NGOs,
• Training of banks and other stakeholders - as
  Investment in human capital development
• NGOs promote SHGs for deepening the impact of
  their programmes and furthering their own social
  agenda
• Banks promote / finance them for expanding
  quality business coverage and
• Governments promote them for multiple
  developmental objectives

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SHG Bank Linkage Programme

• 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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SHG Bank Linkage Programme

• Future Strategy
• Expansion in the Poverty struck and Tribal areas
• Massive capacity building efforts by other
  stakeholders eg.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
  accoutant/Smart card etc
• Federating the SHGs for future handholding and
  sustainability

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SHG Bank Linkage Programme

• Graduation of SHG members to Entrepreneurship
• Skill development training to improve work
  efficiency and develop quality product,
• Arrangement for raw material and other inputs
• Design development and consistancy
• Marketing of the product
• Ultimate aim is to make her an independent and
  self dependent entrepreneur