Self Help Groups: Catalyst of Microfinance Movement

Self Help Groups {SHGs} programme is the flagship microfinance intervention of NABARD which was launched as a pilot project on February 26th 1992 and deserve to be considered as a landmark development in the banking with the poor. In its part, RBI accepted most of the major recommendations and extended the SHG-Bank Linkage Programme beyond the pilot stage to as a normal business activity of the banking sector.
Now it’s a proven reality that the Bank Linkage Programme is one of the most cost effective components of microfinance movement-major change that it bestowed upon the Indian financial sector that banking with the poor is no longer remain an impractical and unachievable idea,it's a real accomplishment in the rural segment of banking.

This pragmatic initiative has immense growth potential for disadvantaged section that hitherto remained secluded from earlier poverty alleviation programmes. Despite many impediments, the programme has made remarkable socio-economic impact on empowerment of women in rural areas which considerably changing the institutional landscapes with better entitlement of enterprising poors. In last two decades, it impacted the lives of eight crore rural people across the country besides this, the creation of SHG has enabled the banking system to expand their footprint and to build a quality credit portfolio with those segments of the unbanked rural population.
Infact broadening of SHG is highly process specific and possess lot of room for innovative practices-beyond micro-savings and micro-credit, other financial services like micro-savings and micro-credit, other financial services like micro insurance, micro-remittances and micro-pension etc are presently placed in nascent stage but surely they would appeared more resonant in future ahead to cater the diversified needs of rural poors.

Unprecedented response of the SHG-Bank Linkage Programme facilitated by NABARD is truly acting as movement with a huge back-up of excellent micro finance clients. Complete attainment of universal financial access is most urgent thing as next course of action,as its proved now enterprises can only effectively thrive on institutional finance-here it’s also equally imperative to rationalize the private MFIs exorbitant interest regime.
Studies shows that microfinance services helps in poverty alleviation through its broad canvass of insuring equitable growth and spreading the programme in rest India to match its strength in southern states. In last two decades, SHGs have emerged as pivotal route of micro financial activities-as on March 31st 2009, banks credit outstanding against 42.4 lakh SHG stood at Rs 22,679.85 crore-on an average, this accounts to about Rs76, 000 per SHG and average loan per member stood at Rs5, 400 which is still very low in perspective of huge challenges.

The institutional achievements of the SHG-Bank Linkage Programme are most remarkable in terms of participatory and sustainable poverty alleviation and reaching to the developmental goals. On the social indices front; non-financial activities of SHGs are very crucial in attainment of actual socio-economic inclusion and empowerment. As government is contemplating some new regulatory changes to boost the microfinancial scenario, it would be naturally in priority to see more attention on SHGs increasing role in developmental framework. Presently few financial institutions except Regional Rural Banks {RRBs} and to some extant Co-operative banks, is taking optimum interest in empowerment of SHGs-this is a haunting concern as the marginalization of SHGs would dampen the entire euphoria of microfinance.

For banking sector, role of SHGs can be modeled as potential vehicle of financial inclusion in different capacity-from a potential client to a Banking Correspondent {BC}albeit sincerity must be ensured, so merely treating them as buzzword wouldn’t be suffice. Only genuine action and stout determination for socio-economic turnaround can lead this initiative to the crest of activities in rural financing. At any policy maneuverings, it must be clear in the mind of its architect that many unique challenges have to reckon with at next level of its execution-which can be addressed only through the innovation and constructive enterprise.
Atul Kumar Thakur
April 24th 2010, Saturday, New Delhi
atul_mdb@rediffmail.com