Role of Self Help Groups in Financial Inclusion
Role of Self Help Groups in Financial Inclusion
Role of Self Help Groups in Financial Inclusion
INTRODUCTION: Financial inclusion: Financial inclusion broadly means the provision of affordable financial services viz. access to payment and remittances facilities, savings, loans and insurance service by the formal financial systems to those who are tend to be excluded. Financial inclusion is defined as as access to financial services for every person for enabling him enabling him to 1. Manage his money on day to day basis, effectively, securely and confidently. 2. Plan for future and cope with financial pressure in short term with the help of long term funds. 3. Deal effectively with financial distress like long term sickness, unemployment, or family breakdown by availing money management advice and insurance. Financial inclusion is not only limited to opening of banks accounts but also the banking education to make use of banking facilities and product to better manage their money and capabilities. Need for financial inclusion: In India 60% of the population do not have a bank account while about 37% of adults in india also do not use financial services. The primary reason being illiteracy, irregular income, availability of financial education and non availability of financial services in close proximity etc. Financial exclusion results into big loss for the country in terms of growth as big chunk of population cannot avail benefits of financial services. Major challenges in financial inclusion: Absence of reach and coverage due to inaccessible terrain. Lack of infrastructure, power, connectivity. Limited customer base and low income saving makes it unattractive for banks to invest. Non availability of low cost banking solution. Getting money from local money lender is easier. No identity of individuals makes KYC difficult. Non availability of collateral for loans.
Self help groups: an overview We know that the branch network and banking education are the most important variables especially for credits inclusions and further women are least included in terms of even saving accounts. Therefore bank linked approach like self help groups and microfinance institutions adds to the existing banking network and can play key role in financial inclusion. Self- Help Groups approach was introduced as an innovative credit channel in 1992 to link poor people with bank credit.
SHGs have varied origins, mostly as part of integrated development programmes run by NGOs with donor support. The major programme involving financial intermediation by SHGs is the SHG-bank Linkage Programme. This Programme was launched in 1992 by National Bank for Agriculture and Rural Development (NABARD), the apex bank for rural development in India. By March 2002, the programme covered 7.8 million families with 90 per cent women members. On-time repayment of loans was over 95% for banks participating in the programme. It also involved 2,155 nongovernment organizations Apart from NABARD, about half a dozen other apex bodies or wholesalers provide loans to financial intermediaries for on-lending to SHGs. These include the Small Industries Development Bank of India (SIDBI), Rashtriya Mahila Kosh (RMK), Housing and Urban Development Corporation (HUDCO), Housing Development Finance Corporation (HDFC) and Friends of Womens World Banking (FWWB). Donors and banks, including Rabobank, also provide grants and loans to microfinance institutions (MFIs) for on-lending to SHGs and federations of SHGs.
Impact of SHG based microfinance programmes: A major NABARD impact evaluation covering 560 members of 223 SHGs linked to banks in 11 states showed that SHG members realized major increases in assets, income and employment. Also, women members were found to have become more assertive in confronting social evils and problem situations. Nearly half the poor member households had crossed the poverty line.
Various other reviews and evaluations of SHG programmes suggest that SHGs have provided access to credit to their members; helped to promote savings and yielded moderate economic benefits reduced the dependence on moneylenders; and Resulted in empowerment benefits to women.
On the other hand reports suggest that: Contrary to the vision for development, SHG are generally not composed of mainly the poorest of families. There is greater evidence of social empowerment rather than significant and consistent economic impacts. Financial skills of group members have not developed as planned. CONCLUSION: Preliminary findings from an in-depth impact evaluation of a non-SHG MF model show that half the families covered were found to be no longer poor. A significant discovery was that the clients used as many as 17 different paths out of poverty as represented by different combinations of activities. It appears that proving impact using state of the art techniques has been found necessary for MFIs directly involved in lending operations in order to access funds for their MF operations. The same pressure is not felt by SHG facilitators. It is clear that substantial capacity building is necessary at NGO and SHG level to undertake the study of program effectiveness. As additional layers of primary and secondary federation are created, roles and responsibilities of various agents, MIS requirements and training inputs have to be planned and provided for these organizations as well.
References:
http://www.business-standard.com/india/news/financial-inclusion-india-scores-poorlyglobalstage/484232/ www.edarural.com/documents/SHG-Study/Executive-Summary.pdf www.nabard.org/dept_mcid/shgs.asp selfhelpgroups.in/