1. Self-help group (SHG) bank linkage program portrays it as an effective tool being used in various countries to approach a range of socioeconomic issues. Explore the possible performance and sustainability of this type of program in India?

Approach:

♤ Describe the Self-help group (SHG) bank linkage program in introduction.

♤ Performance should cover positive outcomes and challenges faced.

♤ Exploring the sustainability require suggestions for strengthening the program.

Answer:

A sizeable share of population in India continues to remain outside the formal banking system despite considerable expansion in branch network. Alternative models are being experimented with to meet the objective of financial inclusion. The SHG-Bank linkage model is the indigenous model of micro-credit evolved in India and has been widely acclaimed as a successful model.

SHGs are small, economically homogeneous affinity groups of rural poor (10-20) members each, voluntarily formed to save and mutually contribute to a common fund to be lent to its members as per the group members’ decision. SHGs can, therefore be called member - run mini – banks. The SHG - Bank Linkage Programme (SBLP) was an outcome of pilot projects during the 1980s for improving access of India’s rural poor to formal institutional financial services. For banks, it was a way of reducing their transaction costs by dealing with groups of people rather than individuals and reducing their risks through ‘peer pressure’ and making people save.