Shg-Bank Linkage Programme in India- An Appraisal of Trends and Issues

Abstract

With growing emergence of micro finance in India. Increasingly jostling for institutional sp11ce, we need lo ask ourselves if ii will usually manage lo ... gel 'credil · 10 1he rural poor in a su.\'lained manne,: Or will microjinance furn 0111 lo he m1 inler/oper 1ha1 \t'i/1 end up 1hree decades later in !he usual way: anolher wave of dud inslilulions Iha! neilher die nor heat:J" (Srivastava 2005) In India, the delivery of microtinance services has taken a unique approach with active government participation. The SIIG- bank linkage programme (henceforth SBLP) is carried out under the guidance of National Bank for Agriculture and Rural Development (NABARD) with an active par1icipation ofNGOs, state development institutions. commercial banks. regional rural banks. district rural development authorities (DRDAs) and local bodies like panchayati raj institutions (PRls). This unique approach of financial service delive1y to the rural poor runs parallel to independent microfinance initiatives by many NGO/MFls. Self I lelp Groups (SHGs) form the basic constituent unit of the SBLP. An SHG is a group of individuals with an average siLe of about fifteen members from a homogenous class- usually poor and mostly women- who pool their savings into a fund from which they can borrow. This is done through opening an account in commercial or regional rural banks. After some time, the bank begins to lend to these groups as a unit without any collateral, except for the accumulated savings deposited by the group in the bank account. The SBLP is now being implemented in 3 1 States and Union Territories covering 583 districts of the count1y. As of March 2006, cumulatively, banks have lent Rs. 11 3.98 billion to 2,238,565 SHGs through 547 pa11icipating banks. About 32.98 million households have gained access to formal banking system through SI IG- bank linkage programme. Nearly 90 percent of SI-IGs are women only groups with repayment rates of over 90 percent (Table I).