Primary Agricultural Society Linkage: the best remote self-help groups in India can do?

Abstract

Models linking community-based associations with financial institutions have tremendous potential to expand outreach in remote areas. Associations in many forms (self-help groups, savings and credit associations) already have a strong presence in rural areas. They generally provide convenient access for members who have few or no alternatives. Linkages can provide these associations with access to liquidity exchange, safety for savings and the potential for a broader range of services, even graduation to individual services. The self-help group bank-linkage model in India is known to be one of the fastest-growing microfinance programmes in the world. Self-help groups are informal thrift and credit groups of the poor that came to be recognized as bank clients under the pilot project. Starting with 500 SHGs the cumulative number of linked SHGs stands at 2.2 million today, reaching about 31 million families and linking to financial institutions including commercial banks, regional rural banks and cooperatives. This case study highlights key opportunities and challenges in linking community-based associations with member-owned institutions such as cooperatives for remote outreach. The case answers the following key questions: is this an effective model for remote outreach? Is there added value because these associations are member-owned?