Introduction
- The banking services are reaching to almost every corner of the country. Govt too wants to bring every person to the banking process. But due to various problems, the vision cannot be fulfilled. Govt is reaching to those areas through the Self Help Groups (SHG).
- People from the same socio-economic background forms group (mostly) linked with banks to deliver micro credit to any individual or group is known as self-help group. SHGs are formed with the contributions of the members over a few months to make base capital to lend to the members or others for any purpose.
- SHGs consist of people from the homogeneous socio-economic field, making regular & spontaneous financial contributions to form a fund to provide support on emergency on mutual agreement. No collateral is usually kept for the lent amount. Flat interest rates are used to make bookkeeping easy & simple.
- Though anti-poverty is the main motto of SHGs, they provide support in various possible ways. Along with NGOs, SHGs take part in social reform & economical upliftment of local rural areas. They support women empowerment, encourage poor marginal people to lead, encourage locals to enrol their children in school, increase awareness about nutrition & hygiene. Overall SHGs bring Govt policies to common people’s doorsteps.
Like all other things on the earth SHGs too have some advantages & disadvantages. Let us discuss some advantages & disadvantages of SHGs.
Advantages
Introduce marginal people to the strength of the group.
- Reduce processing cost of lending & borrowing.
- Make lending-borrowing process time & cost efficient.
- Develop socio-economic structure in the local areas.
- Bring Govt policies & bank to the doorstep where banking service is not very cost efficient.
Disadvantages
- Banking service made up of small capital
- Zero collateral or bondage.
- The risk of not being repaid.
- Can hinder development as the capital is gathered from the locals and lent to the locals too.
As the process is very effective with minimum initial investment Govt is also putting effort to cut short the disadvantages. Various banks have come forward to register the SHGs. NABARD has started ‘SHG Bank Linkage’ program to support the SHGs with base capital to borrow from banks & also keeps a record of proper repayments. This model is able to attract poor marginal population’s attention. According to NABARD, they have brought as many as 2.2 million SHGs with 33 million members under banking service. RBI also has issued instructions to all banks to put up facilities & permitting them to register all unregistered SHGs & to open a savings account.
Facts about SHGs
- In its 1st phase (1987-1992) SHGs were promoted by the initiative of NGOs under NABARD’s supervision.
- In the 2nd phase (1992 onwards) SHGs are bringing under SHG-bank linkage programs.
- NABARD has launched a scheme to provide credit through banks with CBS facilities in 150 LWE/backwards districts across the country for promotion & financing women self-help groups (WSHGs) with the maximum credit of rupees 10,000.
- PRADAN is one of the front runners to promote SHGs in India. Started on 1987 in Alwar, Rajasthan with its 1st ever Self Help Group for poor women. Till march 2015 they had 28,592 SHGs across 7 states with a membership of 367,821 poor women & 1015 million rupees savings.
- Union Bank of India provides credit varying from 1:1 to 1:4 ratio of accepted savings by the SHGs. The repayment options prescribed by the bank are also very flexible. Weekly, fortnightly, monthly repayment options are available.
- ICICI bank provides a maximum credit of rupees 7.5 lakh with interest rates of 12%-19% & maximum tenure period of 36 months.
- National Skill Development Corporation (NSDC) is promoting entrepreneurship program through numerous SHGs to encourage rural youth to start their own enterprises with their skills.
