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[vaibhavmahajan]

Introduction: SHG

Self-Help Groups (SHGs) are informal associations of people that meet to discuss how to improve their living conditions.  They are self-organized groups of 5 to 20 people that come together to achieve a common purpose. Members of SHGs who are similar in terms of socio-economic background.

Villages are affected by poverty, illiteracy, a lack of skills, a lack of formal credit, and other concerns. Individual efforts will not suffice to overcome these problems, which will demand coordinated action. The beginnings of SHGs can be traced back to rural India's mutual aid and trust.

As a result, SHG has the potential to be a vehicle for change for the poor and marginalized. To foster self-employment and poverty alleviation, SHGs use the concept of "Self Help."

 Historical Background:

Bangladesh has a reputation for being a pioneer in the field of microfinance. Dr. Muhammud Yunus, an economist at Bangladesh's Chitgaon University, was one of the founders of the Grameen Bank action research project. The enterprise began in 1976 and was formally recognized as a bank in 1983 when the government passed an act.

Genesis of SHGs in India:

In India, SHG began with the foundation of the Self-Employed Women's Association (SEWA) in 1970.

NABARD's SHG Bank Linkage Project, which began in 1992, has grown to become the world's largest microfinance initiative.

Since 1993, SHGs have been able to open a savings account with NABARD and the RBI. This action gave the SHG movement a significant boost and opened the ground for the SHG-Bank linkage initiative.

Swarn Jayanti Gram Swarozgar Yojana (SGSY) was launched by the Indian government in 1999 to promote self-employment in rural regions by forming and skilling SHGs.

In 2011, the programme grew into a national movement known as the National Rural Livelihoods Mission (NRLM)

State Rural Livelihood Missions (SRLMs) are now active in 29 states and five territories (except Delhi and Chandigarh).

NRLM provided the poor with universal access to inexpensive, dependable financial services such as financial literacy, bank accounts, savings, credit, insurance, remittance, pensions, and financial services counselling.

But, interestingly SHG was not a new concept in Maharashtra. The women of Maharashtra's Amaravati District founded one SHG in 1947, starting with a little amount of only 25 paise.

In 1988, the ‘Chaitanya' Gramin Mahila Bal Yuvak Sanstha began promoting SHGs in the Pune District on an ad hoc basis.

SHGs were promoted in the southern portion of India by the ‘SADHAN', ‘DHAN' foundation, and ‘ASA'. However, their focus was solely on economic issues. NGOs in Maharashtra, on the other hand, have not only catered to the participants' economic needs, but have also been involved in the process of social development. The goal of ‘Chaitanya' is the same: to empower women in both economic and social ways.

Need of SHGs:

Low access to credit and financial services is one of the causes of rural poverty in our country. Financial empowerment refers to giving disadvantaged and low-income people access to or delivery of banking services at a reasonable cost. Despite supportive policies and a strong rural banking network in India, which executed particular poverty alleviation programmes through Bank loans, a huge percentage of the poorest of the poor remained outside the formal banking system. The goal of the self-help groups programme is to reach out to the poorest members of society who do not have access to financial services.

According to Fisher-Sriram (2002), the formal financial industry has failed to recognise the disparity between the hierarchies of credit requirements and creditworthiness.

Dr. C. Rangarajan chaired a committee to prepare a thorough study on "Financial Inclusion in the Country," which highlighted four primary factors for lack of financial inclusion: Weak community network, unable to offer collateral security, poor credit absorption capacity, insufficient reach of institutions.

The existence of strong community networks in villages is increasingly being recognized as one of the most significant aspects of rural credit linkage. They assist the impoverished in obtaining loans and hence play an important role in poverty alleviation.

They also aid in the development of social capital among the disadvantaged, particularly among women. Women are empowered and have a bigger voice in society because of this.

Financial independence gained through self-employment has numerous benefits, including increased literacy, greater health care, and even better family planning.

 SHG models in India:

In India, three main kinds of SHG-financial institution linkage have arisen. They are as follows:

·The SHGs are formed and financed by banks.

· SHGs are founded by NGOs and other organisations, but they are funded by banks.

· SHGs are financed by banks through NGOs and other financial intermediaries.

The most common model is the second. Almost three-quarters of all SHGs are women. This model applies to you. Only 20% of SHGs are covered by the first, and only 8% by the second, respectively, the third model.

 We will further discuss about SHG – bank linkage programs and current challenges in SHGs management.

[vaibhavmahajan]

Microfinance Growth in India During Pandemi

Microfinance: Power to Bottom of Pyramid with Low Risk

MFIs are a set of financial institutions that specialise in lending to low-income people. Microfinance loans have the following characteristics: they are small in size, have short terms, are not secured, and have a higher frequency of payback than regular commercial loans. The majority of these loans are used for income-generating activities, although they can also be used for consumption, housing, and other uses (RBI, 2011). The total Gross Loan Portfolio (GLP) of MFIs increased from ₹1.79 lakh crore on March 31, 2019 (default rate for microfinance was as low as 2.9%) to ₹2.32 lakh crore on March 31, 2020.

With a combined stake of 72 percent as of March 31, 2020, NBFC-MFIs and Scheduled Commercial Banks (SCBs) control a large portion of the microfinance portfolio. Small finance banks (SFBs), non-bank financial companies (NBFCs), and others own the rest (including not-for-profit MFIs). While NBFC-MFIs were the industry leaders in terms of GLP as of March 31, 2019, they lost market share to SCBs in 2019-20, owing to the merging of a significant NBFC-MFI with a SCB2. The National Bank for Agriculture and Rural Development (NABARD) pioneered the Self Help Group-Bank Linkage Programme (SHG-BLP), which contributes to the entire microfinance universe, apart from MFI-led strategy. As of March 31, 2020, there were 56.77 lakh SHGs, with SHG-BLP loans totaling Rs.1.08 lakh crore.

Reasons for low default rate:

·Only after you've attended a set number of batch meetings can you apply for a loan. This demonstrates that you are a serious candidate for the programme and that you have been given a basic understanding of the financial product.

·Your new loans will be approved based on your payback history for previous loans. You can apply for another loan after a thorough review of previous loan repayments and timely payments.

· Your loan quantity is gradually increased based on your previous loan repayments.

· You're aware that the interest on a single loan will steadily decrease over the course of each collection cycle.

·The loans are obtained in the MFIs branch office rather than via the field officer.

[vaibhavmahajan]

Self Help Group Benefits and Challenges

In last blog, we discussed about historical background and genesis of SHGs in India and its need, Now, we will analyze how these SHGs help the beneficiaries and what are the challenges.

Benefits:

· Gender Equity - SHGs empower women and help them develop leadership skills. Women who are empowered are more involved in gram sabha and elections.

· Voice for marginalized section - The majority of government plan beneficiaries are from weaker and underprivileged communities, therefore their participation in SHGs ensures social justice. It improves efficiency of government schemes and reduces corruption with the help of social audits.

· Financial inclusion - Banks are enticed to lend to SHGs by Priority Sector Lending regulations and the certainty of returns. NABARD's SHG-Bank linkage programme has made credit more accessible and reduced reliance on traditional money lenders and other non-institutional sources.

· Banking literacy - It educates and stimulates its members to save and serves as a conduit for conventional banking services.

· Alternative source of income - It reduces reliance on agriculture by assisting in the establishment of micro-enterprises such as tailoring, grocery stores, and tool repair businesses.

· Economic empowerment through SHGs gives women the confidence to participate in home and communal decision-making.

 Challenges:

· Patriarchal attitude — women are discouraged from joining SHGs due to primitive thinking and social duties, limiting their economic opportunities.

·There are around 1.2 lakh bank branches and over 6 lakh villages, however there are no rural banking facilities. Furthermore, because the cost of servicing remains high, many public sector banks and microfinance organisations are unwilling to provide financial services to the poor.

· Many of the activities carried out by SHGs are still reliant on basic skills, mainly in the primary sector. Due to low value addition per worker and the prevalence of subsistence pay, such activities rarely result in a significant increase in group members' income.

· No security - The SHGs rely on the members' mutual trust and confidence. The SHGs' deposits are not secure or safe.

·SHG members lack the necessary information and direction to pursue viable and profitable livelihood opportunities.

· In rural locations, there is a scarcity of competent resource persons who can assist group members in upgrading their skills or learning new ones. Institutional frameworks for capacity development and skill training are also missing.

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