Contributory factors towards sustainability of bank-linked self-help groups in India

Abstract

The present study focuses on the Indian flagship financial inclusion scheme – the Self Help Group-Bank Linkage Programme, which successfully leverages the social collateral concept and the vast network of bank branches in India to deliver financial services to small, cohesive and participatory women’s self-help groups. To develop a deeper understanding of the topic of sustainability of self-help groups, we propose a framework that conceptualizes sustainability by integrating the financial and organizational aspects of functioning of self-help groups. Sustainability is assessed in the light of the group’s performance (on set of indicators) with respect to the primary objective of the Self Help Group-Bank Linkage Programme, which is financial intermediation. Subsequently, we ascertain the effect of plausible contributory factors related to group management practices on the sustainability of self-help groups. The results of regression analysis on primary data captured from a survey of 170 self-help groups show that such factors as equitable access to credit, group savings, growth in savings, loan utilization in income generation activities, members depositing a savings contribution or loan installment on each other’s behalf, and distance from bank contribute significantly to group sustainability. Accordingly, designing suitable measures to monitor and improve group governance and management practices would be a critical policy intervention.