SHG Extension

8/8/2019 SHG Extension

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Self Help Groups

Simranjeet Singh

MBA-926


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Need For SHGs

Introduction

History

Functioning

Goals

Present Status & Spread

Government Policy

Linkages

Structure Of SHG MovementFuture prospects

Conclusion

A Remarkable SHG story: Kudumbashree

Contents


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Need for SHGs

The overwhelming majority of people who earnless than $1 a day, especially in the rural areas,

continue to have no practical access to formalsector finance.

Financial services have been identified as acrucial tool to prevent financial distress and

implosion of the lives of the people with nosafety cushions.

Money management services allow us to lessenthe curse the poverty for the millions in its grasp.


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Continued

Members make small regular savings

contributions over a few months until there is

enough capital in the group to begin lending. Funds may then be lent back to the members

or to others in the village for any purpose.

In India, many SHGs are 'linked' to banks forthe delivery of microcredit.


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In Other Words

SHGs are member-based microfinance

intermediaries inspired by external technical

support that lie between informal financialmarket actors like moneylenders, collectors,

and ROSCAs on the one hand, and formal

actors like microfinance institutions and

banks on the other.Other organizations inthis transitional zone in financial market

development include CVECAs and ASCAs.


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History

The post-nationalization period in the bankingsector, circa 1969, witnessed a substantial amount ofresources being earmarked towards meeting the

credit needs of the poor. There were several objectives for the bank

nationalization strategy including expanding theoutreach of financial services to neglected sectors.

In the early 1980s, the

GoI

launched theIntegratedRural Development Program (IRDP), a large poverty

alleviation credit program, which providedgovernment subsidized credit through banks to thepoor.


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Continued

But studies showed that what the poor needed was wasbetter access to financial services and products, rather thancheap subsidized credit.

To answer the need for microfinance from the poor, thepast 25 years has seen a variety of microfinance programspromoted by the government and NGOs.

In 1999, theGoI merged various credit programs together,refined them and launched a new program calledSwaranjayantiGramSwarazagarYojana (SGSY).

The mandate ofSGSY is to continue to provide subsidizedcredit to the poor through the banking sector to generateself-employment through a self-help group approach


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Functioning

The group members use collective wisdom andpeer pressure to ensure proper end-use of creditand timely repayment.

This system eliminates the need for collateral.

It is closely related to that of solidarity lending,widely used by microfinance institutions.

To make the book-keeping simple enough to behandled by the members, flat interest rates areused for most loan calculations.


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Goals

Self-help groups have a varying emphasis on

microfinance or may be seen as

microfinance +. Self-help groups are seen as instruments for a

variety of goals:

1. Empowering women by improving economicstatus.

2. Developing leadership abilities among poor

people.


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Present Status & Spread

Not all states arecreated equal when itcomes to SHGs

MaximumSHGs arefound in southernstates of TN, AP,Kerela,

Karnataka(44%) Northern states have

shown higher failurerates.


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Government Policy

In 1999, theGoI merged various credit programs together,refined them and launched a new programme calledSwaranjayantiGramSwarazagarYojana (SGSY).

The policy environment in India has been extremely supportive

for the growth of the microfinance sector in India. Particularly during the International Year of Microcredit 2005,

significant policy announcements from theGoI and RBI haveserved as a shot in the arm for rapid growth.

In many Indian states, SHGs are networking themselves intofederations to achieve institutional and financial sustainability.

In 2005, theGoI allowed MFIs to be eligible for externalcommercial borrowings which would allow MFIs and privatebanks to do business thereby increasing the capacity of MFIs.


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Linkages

Many self-help groups, especially in India, underNABARD'sSHG-bank-linkage program, borrowfrom banks once they have accumulated a baseof their own capital and have established a trackrecord of regular repayments.

This model has attracted attention as a possible

way of delivery microfinance services to poorpopulations that have been difficult to reachdirectly through banks or other institutions.


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Present Status: SHG-Bank Linkage Model

In Rs Crore Source:NABARD


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Structure Of SHG Movement


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Future Prospects

NABARD has identified MFIs as a core

strategy for expanding credit access.

GoI & RBI have formulated policies keepingthis view in accordance.

It has been estimated that double the current

no.SHGs, the most successful MFI model,are needed to bridge the credit supply gap in

the next 10 years.(NABARD study).


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Conclusion

There is no doubt that SHGs have created aquiet revolution in the lives of millions of thepoorest people across the world.

However significant challenges remain interms of legal status and governancestructures left undefined.

There is still considerable scope for thismodel to grow and provide access to itsmembers to a whole slew of financial servicesunavailable to them before.


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A Remarkable SHG story:

Keralas Kudumbashree This self-help chain, started on a modest scale in 1998, has grown over

the period as one of the mighty womens movements in Asia with a full-time membership of3.7 million, engaged in an array of gainful activities.

t was initially conceived as a community based women orientedinitiative with NeighbourhoodGroups (NHG) as its base.

It was conceived as a collaborative venture of the state government,NABARD andState Poverty Eradication Mission.

The units started small and micro enterprises& cottage industries bypooling individual savings and with support of rural or co-operativebanks and civic bodies.

It has diversified and expanded into initiatives like catering services,

budget hotels and group farming & even IT services. Besides the social impact, the product and services of Kudumbasree

have been able to achieve a brand-like status.

The NHGs' number has increased within a short time exceeding 2.03lakh with their presence in all 999 village panchayats, 53 municipalitiesand 5 city corporations.


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Thank You

SHG Extension

Documents

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