A Critical Review of Self-Help Group - Bank Linkage Programme of Micro-finance in India

Abstract

The Self-Help Group - Bank Linkage Programme (SHGBLP) of micro-finance for poverty alleviation in India is the largest micro-finance programme in the world. It has emerged as a predominantly significant approach for the growth and development of micro-finance sector in India. Started by the National Bank for Agriculture and Rural Development (NABARD) in 1992 as an experiment with a non-government organization (NGO) named MYRADA in Karnataka, it has undergone from pilot to consultation to implementation phases. It is based on NGOs and banks motivating poor people to form groups, mobilize their savings, and finally link them with banks for credit support to start income-generating activities/ micro-enterprises. As on 31 March 2006, a total of 2,238,565 SHGs were linked with banks, 90 per cent of them women groups, having Indian Rs 113.98 bilIon of loans to 32.98 million poor households. The average loan per group in this programme is Rs 50,917 and per household Rs 3,456. The programme covered 583 districts of thirty-one states. In this paper a critical review of SHGBLP has been done by taking examples of impact evaluation studies and an empirical case study of an NGO. It has emerged from review that SHGBLP has problems related to functioning and sustainability of groups, credit management, and transaction cost and utilization of credit for starting income-generating activities/ micro-enterprise by the members of the groups.