Microfinance Methods: A Case Study Of Self-Help Group In Bangladesh

The Self-Help Group (SHG) movement which was originated in Bangladesh under the Leadership of Noble Laureate Prof. Mohamed Yunus is a noble mission- an innovative concept that has its roots in Bangladesh and has also touched every part of the globe. In order to achieve this mission in India, experiments were taken up in the late 1970s and 80-s, SHG-Bank linkage program has been adopted as a poverty alleviation tool in the country by NABARD in 1992. The Self Help Groups (SHGs) is the dominant microfinance methodology in India. In this case the members of Self Help Group, pool their small savings regularly at a prefixed amount on daily or weekly basis and SHGs provide loan to members for a period fixed. SHGs are essentially formal and voluntary

Bank credit facility also available to the group to augment its resources for the purpose of lending to its members. The SHG-bank linkage program has proved to be the major supplementary credit delivery system with a wide acceptance by banks, NGOs and various government departments. There are three models of SHG-bank linkages that have evolved over time, especially in India.

3.1 Model -I. SHGs formed and financed by banks:

In this model, banks themselves take up the work of forming and nurturing the groups, opening their bank accounts and providing them with bank loans after satisfying themselves as to their maturity to absorb credit. The banks at every step have provided funds and kept the funds available reflecting an increased role of banks in promoting and nurturing SHGs.

3.2 Model- II. SHGs formed by NGOs and formal organisations but directly financed by the

In such cases, the NGOs act as both facilitators and microfinance intermediaries. First, they promote the groups, nurture and train them and then they approach banks for bulk loans for further lending to SHGs. In other words, banks take the sole responsibility for promoting, developing and financing SHGs. In fact, this programme requires considerable effort by the bank staff towards the formation of SHG. This model is not so encouraging.

4. Process and progress of SHG- bank Linkage Model:

From the table below, it can be seen that, during 2014-15 about 2.68 lakh new SHGs were added in the domain of SHG to take the number of SHGs savings linked with formal financial institutions to 76.97 lakh as on 31.3.2015. After a dip in the number of SHGs in 2012-13, the SHG BLP has taken strength not only with net additions to the number of SHGs but also with enhanced savings and credit linkage of SHGs in the subsequent years. There was an increase of 3.59% in the number of savings linked SHGs over the previous year. As many as 16.26 lakh SHGs were disbursed with fresh loans during the year - a 19% increase over 13.66 lakh SHGs getting fresh loans during 2013-14. The quantum of fresh loans issued by banks also rose by nearly 16% during the year. Number of SHGs with credit outstanding with banks has shown a rise of 6%, from 41.97 lakh in 2013-14 to 44.68 lakh, against