SHG Bank Linkage Programme
What is a Self-Help Group ?
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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
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.
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
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 premicroenterprise stage for a majority
of rural poor
SHG Bank Linkage Programme
 SHG’s
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
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
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
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
SHG Bank Linkage Programme
 Cost effective, operationally simple and
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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
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
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
SHG Bank Linkage Programme
Future Strategy
 Expansion in the Poverty struck and Tribal
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areas
Massive capacity building efforts by other
stakeholders eg.Banks,NGOs, Govt. Dev. Dept.
Banks’ to own the SHG’s 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 SHG’s for future handholding
and sustainability
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