ABOUT SELF HELP GROUPS - BANK LINKAGE

SHGs have increasingly been seen as good business for banks – they are a source of deposits and reliable at repaying loans. The most widespread financial service providers in rural areas of India are cooperatives.

self-help group (SHG) bank linkage movement which has helped to bring financial services to large numbers of poor people. SHGs are member-owned and controlled financial service enterprises, providing savings and credit services to their members. They usually distribute their profits to members and they facilitate members' access to education and training. They are, in effect, micro cooperatives. They are linked to bigger financial institutions to keep their savings and provide additional capital for on-lending to members.

Although the authors of this paper could not quantify the potential financial impact of cooperatives increasing their SHG business, they did consider the results would be beneficial, e.g. in terms of improved loan recovery ratios, improved credit:deposit ratios and improved representation of communities by having more women members. They recommend, therefore, that the staff of primary societies should be exposed to successful SHG linkage experiences and that district banks should actively promote their services to SHGs and SHG promotion institutions. They do note, however, that no SHG should be encouraged to do business with an institution that lacks deposit insurance.

Self Help Groups :

Despite vast expansion of the formal credit system encompassing spheres of social and mass banking, the dependence of the rural poor on moneylenders still continues in many areas, especially for meeting their emergent needs. Under the circumstances, a non-formal agency for credit supply to the poor, in the form of Self Help Groups, emerged as a promising partner to the formal credit system. SHGs are part of micro credit.

The objectives of Self Help Groups are to :

Inculcate saving and banking habits among the poor;

Secure them with financial, technical and moral strengths;

Enable availing of loan for productive purposes and repaying the same over a period of time, and in the process

Gain economic prosperity;

SHG - Bank Linkage programme-emergence:

Experience of Bangladesh Grameena Bank paved way.

Rigidities of formal credit system and the plight of the poor

Necessitated them to form into groups by adopting the concept "Self Help & Mutual Help".

NABARD has formulated pilot project for Linking SHGs with Banks in 1992.

Criteria for selecting SHGs :

The group should have been in active existence for at least a period of six months.

The group should have successfully undertaken savings and credit operations from its own resources.

Democratic working of the group wherein all members feel that 'they have a say' should be evident.

The group is maintaining proper accounts / records.

The SHG members should preferably have homogeneous background and interest.