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The Self-Help Groups (SHGs) are mostly informal groups whose members have a common perception of need and impulse towards collective action. These groups promote savings among members and use the pooled resources to meet the emergent needs of their members, including the consumption needs. Sometimes, the generated internal savings are supplemented by external resources loaned/donated by the nongovernmental organisations (NGOs) who promote them. The SHGs are thus able to provide banking services to their members, which may not be sophisticated but are cost-effective, simple, flexible, accessible to their members and above all without any defaults in repayments of loans. Linking SHGs to banks helps in overcoming the problem of high transaction costs to banks in providing credit to the poor, by transferring some banking responsibilities, such as loan appraisal, follow-up, recovery,-etc., to the poor themselves.
SHG Lending - International and Indian Experience
Over the past few decades several informal and innovative approaches in financing the poor in a sustainable manner have been experimented in many developing countries. Efforts of Bank Rakyat Indonesia (BRI) in Indonesia, Bank for Agriculture and Agriculture Cooperatives (BAAC) in Thailand, Grameen Bank and Bangladesh Rural Advancement Committee (BRAC) of Bangladesh, Amanah Ikhtiar Malaysia (AIM) of Malaysia and Agriculture Development Bank of Nepal (ADBN) are some of the examples which have yielded encouraging results in empowering the poor through credit in Southeast and South Asia.
In India, the innovative approach as exemplified in the SHG movement has made big strides since the National Bank for Agriculture and Rural Development (NABARD) introduced the Pilot Project in 1991. After the report of Reserve Bank of India Working Group in 1996 (RBI, 1996) the SHG has graduated into a regular financing activity for banks. During the year 2000-2001, banks had financed Rs. 287 crores to 1.49 lakh SHGs. Karnataka, Andhra Pradesh and Tamil Nadu states had a major share in the linkage programme. Till date the programme has brought bank credit to 44 lakh households through 2.65 lakh SHGs.
Several studies reveal that most of the groups formed and financed were of poor women. This feature was more conspicuous in the resource-poor regions, predominated by poor people. The demand for credit from these groups was frequent and for small amounts, at unpredictable times and more...