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Direct SHG Bank Linkage: Eligibility

• The size of the SHG should be preferably between 10 and 20 members to enable effective individual participation in the group’s deliberations.
• The group should have been in active existence for at least a period of six months. The group may be informal or formal (registered).
• The group should have successfully undertaken savings and credit operations from its own resources.

Direct SHG Bank Linkage: Eligibility

• Democratic working of the group wherein all members feel that they have a say should be evident.
• The group is maintaining proper accounts/records.
• The branch should be convinced that the group has not come into existence only for the sake of participation in the project and availing benefits thereunder. There should be a genuine need to help each other and work together among the members.
• The SHG members should preferably have homogeneous background and interest.

Direct SHG Bank Linkage: Eligibility

The group should have satisfactory internal savings and credit activity for at 

least six month

ASSESSMENT OF SHG

To be assessed in terms of Group dynamics like -vibrancy,

cohesion, goal-oriented action, participation of members,

democratic decision and collective leadership group 

functioning  (actually as a group, or not) regular meetings

maintaining a record of financial/other transactions norms 

regarding membership, meetings, etc Group leaders to be 

elected by members and rotated periodically

Transparency in operations of the group and participatory 

decision making

Rates of interest on loans to  be decided by the group

Group liability and peer pressure to act as substitutes for 

traditional collateral.

Savings - amount, periodicity

Credit - procedure for sanction, ceiling amount, purposes, 

rate of interest to be charged, repayment period, etc.

Fines - in case of default in attending meetings, savings, and 

credit repayment. Group may also levy fines for any deviant behavior etc.

Personal/social improvement - minimum literacy level to be 

achieved, social work to be done etc.

Leadership

SHG - Bank linkage: a practical approach

Identification of active SHGs in the villages & establishing 

close contacts.

Opening of a SB A/c. in the name of SHG with a resolution 

copy from the SHG.

Receiving loan application from the SHG duly sponsored  by 

the promoting NGO if any.

Attending a group meeting at the village to

 observe the SHG and verify the records  and                 find out the objectives of  SHG/NGO. 

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What  SHGs do?

•  Meet regularly 

•  Compulsory  attendance

•  Maintain records

•  Create & develop common fund

•  Internal  lending

•  Discuss the problems  of  members

•  Avail  bank loan

•  Encourage income-generating activities

•  Arrange skill development training

•  Inculcate banking habit

•  Take up joint ventures

•  Take part  in  community / social activities

SPECIAL  FEATURES OF  SHGs

•  Flexibility,   transparency  &  autonomy

•  Democratic functioning

•  Self-discipline & conflict resolution through consensus

•  Collective  leadership & decision making

•  Creation &  development of  common fund

•  Loans  without collateral

•  Small, Timely  &  need-based  credit at doorstep

•  Market-related interest rates

•  Default management  through  peer pressure

•  Transparency  in  operations

•  Repeat  loaning  with  impressive recovery

•  Take up  social and cultural activities

Credit  flow  from  SHG  to  members

   Loans  for  -

  a)  Consumption purpose

  b)  Production purpose

  c)  Consumption  &  production purpose  

Advantages  of  SHG  to  members

•  Credit  delivery  at doorstep

•  Flexible norms  in  credit dispensation

•  Mutual trust and co-operation

•  Development  of  thrift  habit among poor

•  Financial  &  social empowerment

•  Employment  generation

•  Confidence building among members

•  Improvement in  standards  of  living

•  Entrepreneurship development

•  Asset  creation

•  Low-interest rate

•  Availability  of  small and need-based  credit

•  No  security

•  Convenient  repayment schedule

Advantages  to  Banks

•  Wider coverage

•  Less  desk work  to  field staff

•  Low  transaction  cost

•  High  recovery

•  Externalization  of  credit  function

•  Goodwill creation &  image  building

•  Meeting social  objective

•  Profitable

Books maintained by SHGs

•MINUTES BOOK

•ATTENDANCE REGISTER  

•SAVINGS &  LOAN REGISTER

•WEEKLY / FORTNIGHTLY / MONTHLY MEETINGS REGISTER

•MEMBERS PASS BOOK 

vThe quality of books of accounts maintained by SHGs is an area of concern.

v We may encourage Local Book Writers in association with concerned agencies promoting these SHGs.

v Such arrangement may be on a cost-sharing basis with some support from the Bank. 

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Agencies connected with SHG movement 

•  Poor people

•  N.G.O.s /  SHPI

•  Banks

•  NABARD

  Governmen

Role of  poor

•Forming into homogenous &  affinity  groups  with the help of  NGO/SHPI/BANK/GOVT

•  Mobilize  savings from members

•  Internal  lending

•  Involving  in social  &  cultural  activities 

Role of  NGO / SHPI

•Formation of groups

•  Nurturing and development of groups

•  Capacity building through training

•  Arranging credit linkage with Banks

•  Skill development  of  SHG members 

•   Training group members in records keeping

•  Development of leadership qualities among members

•  Liaison with  Banks and Government agencies

•  Train group members in new technologies

Role of Banks

•  Provide credit to SHGs for internal lending

•  Provide credit  for joint ventures  of SHGs

•  Conduct awareness programs to SHGs  /  bank staff

•  Promoting community development activities 

Role of  NABARD

•Capacity building support to Partner Institutions

•  Loan fund support

•  Support to Government & formal agencies

•  Support to RRBs and  Commercial Banks

•  Support to NGOs

•  Support to farmers’ clubs

•  Support to independent Volunteers

Role of Government

•Formation of groups among rural poor

• Provide revolving fund support

• Provide support for group activities   (NRLM)

• Empowering the poor (Financial and   Social)

•Create awareness among poor

• Provide linkages 

 

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SHGs

Why  Self  Help Groups?

•Bank  credit  is  not  reaching   poorest of poor

•  Banks lend  for production purpose

•  Poor  need  money  for  consumption

•  Cumbersome lending norms  by  Banks

•  Timely  and  adequate credit not available for  poor

•  Security oriented lending   by  Banks

FOUR IN ONE ROLE OF SHGs

• A MONEY LENDER
• A VOLUNTARY AGENCY
• A DEVELOPMENT BANK
• A CO-OPERATIVE

MICRO CREDIT-MICRO FINANCE

MICRO CREDIT (MC): MC is  defined  as  a process  of  meeting  the capital  investment needs of individuals and groups for the startup and sustenance of small business enterprises”.

.

MICRO FINANCE (MF): “MF  refers  to the entire range of  financial  services  to the poor,  skill up-gradation and entrepreneurial development to overcome poverty.”

RESERVE BANK OF INDIA 
RBI/2015-16/29
FIDD.FID.BC.No.02/12.01.033/ 2015-16 
(July 01, 2015 )

  An important step in the Linkage Programme would be the training of the field level officials and sensitization of the controlling and other senior officials of the bank.

  Considering the need and magnitude of training requirements of the bank officers/staff both at field level and controlling office level, the banks may initiate suitable steps to internalize the SHGs linkage project and organize exclusive short duration programmes for the field level functionaries.

  In addition, suitable awareness/sensitization programmes may be conducted for their middle level controlling officers as well as senior officers. 

WHAT IS A SELF HELP GROUP?

A Self-Help Group [SHG] is a small economically homogeneous and affinity group of rural poor generally not exceeding 20 members  voluntarily coming together :

vTo save small amounts regularly

vTo mutually agree to contribute to a common fund

vTo meet their emergency needs

vTo have collective decision making

vTo solve conflicts through collective leadership and mutual discussion

vTo provide collateral-free loans with terms   decided by the group.

How the groups are formed?

Groups are  formed with the help of:

v   N.G.O. (Non-government   organization)

v  S.H.P.I.(Self-help group promoting   institution)

v  VVV clubs

v  Government  agencies

v  Banks