Small Help Group

8/2/2019 Small Help Group

1/15

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)


2/15

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.


3/15

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.


4/15

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


5/15

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


6/15

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


7/15

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


8/15

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


9/15

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.


10/15

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,


11/15

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


12/15

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


13/15

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,


14/15

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


15/15

T H A N K

Y O U

Documents

Small Help Group