Characteristics Of Shgs Salient Features Economics Essay

The credit will be granted after personal savings not before that. Savings are to come first: no credit will be granted by the SHG without cost savings by the average person participants of the SHG. These savings are to provide as partial security for their loans.

Self Help Groups should hold regular meetings. It could be regular, fortnightly, and monthly. In case of failure to do so, an excellent may be imposed.

Maintenance of financial and other details should be properly done. The catalogs should give the details of volume of meetings presented, decision used conferences, amount of personal savings of customers, credit availed, payments.

There should be election or nomination of leaders and they should be rotated routinely.

Rate of interest which loan will be given to the member will be chose by the group.

Group liability and peer pressure act as collateral.

All the initiatives for the management of fund are undertyaken vy the poor at the micro-level (group ) level itself.

funds are mobilised and credit is prolonged to people by other members themselves.

Selection of borrowers for availing microcredit is performed at micro (group ) level itself.

Repayment of loan is guaranteed through peer monitoring.

Members have collective accountability of financial deals in the group.

Promote thrift behavior among people for the monetary betterment of people.

Some of the key points underlying the project and the guidelines that were issued to the implementing groups are the following :

The SHGs are to use part with their funds (almost 60%) for loaning to their

members and the others for depositing in a loan provider to provide as the foundation for

refinancing from the lender.

The joint and many responsibility of the members is to serve as an alternative for physical collateral to the part of lending options to members more than their

savings deposits.

Credit decisions for onlending to members are to be used by the group


Central Loan company refinance is to be at mortgage loan add up to the interest rate at

which the personal savings are mobilised.

All of the intermediaries (the Central Loan company, finance institutions, NGOs and SHGs) will charge

an interest margin to pay their costs.

Interest rates on savings and credit for associates should be market rates to be

determined locally by the participating organizations.

Instead of penalties for arrears, the banks may impose a supplementary incentive

charge to be refunded in the case of timely payments.

The ratio of credit to personal savings will be contingent upon the creditworthiness of

the group and the viability of the projects to be executed, and is to

increase as time passes with repayment performance.

SHGs may levy a supplementary demand on the interest rate for internal account generation

(which would be self-imposed required savings).

Within the first ten a few months of the execution period, by March 1990, 7 private

banks and 11 branches of government banks acquired made 229 group lending options to SHGs,

which got retailed these to about 3500 members. Lending options totalling about $0. 4 million

had been disbursed, on typically about $2000 per group and $118 per member.

SHG savings deposits with the bank amounted to about $400 per group, offering a

credit to personal savings ratio around 5. NGOs have obtained loans from the banking companies at 22 to

24 per cent which is merely slightly greater than the refinancing rate of large to small

banks. Rates to end users have been between 30 to 44 per cent after the NGOs and

SHGs have added their margins to protect costs and build money to hide joint and

several liability. Only 1 of the participating banking institutions had sought a guarantee under the

scheme from the Central Standard bank.

SHG can be explained as 'the plan by individuals, of the folks and for individuals reflecting the real people's particialption in the process of development at lawn main level. The SHG activity hass thus added a fresh dimention to microfianncing in the country.

Factors behind success of the Grameen Loan provider are : participatory process in every

aspect of lending system, peer pressure of group people on each other, lending

for activities which generate regular income, each week collection of loans in small

amount, intense discussion with borrowers through weekly meetings, strong central

management, dedicated field personnel, extensive personnel training willingness to innovate,

committed pragmatic command and decentralised as well as participatory style of


The Grameen Loan provider experience shows the vital importance of credit as an entry

point for upliftment programme for rural poor. In case a programme is with an appeal

for people surviving in abject poverty, it must offer them clear and immediate prospects

for economic improvement. Thereafter, it is much easier to sell other interventions of social

development, however unconventional they may show up, once improvements in

standard of living are shown.

The Grameen Bank or investment company clearly shows that insufficient collateral secuirty shouldn't stand in

the way of providing credit to the poor. The indegent can utilise loans and pay them if

effective types of procedures for bank transactions with them can be established. In the event of

the Grameen Bank, formation of organizations with a little band of like minded rural poor

has performed well, and group solidarity and peer pressure have substituted for

collateral security.


there is not yet formal formal publication on different information of SHGs (Dasgupta, 2001).

role and need for microfinance in development and development of Indian economy

1. 2 Dependence on Study 2

1. 3 Analysis Objectives 3

1. 4 Section of the study 4

1. 5 Way and Strategy 5

1. 6 Survey format 8

1. 7 Constraints 9

However, the distance between demand and offer of financial services still prevails due to shortcomings of institutional credit system as it offers funds limited to productive purposes, requirement of collateral and considerable paper work leading to inordinate delays. Due to this, there continues to be exclusion of large numbers of poor from formal financial systems. Hence, as a response to failure of formal financial system in reaching the poor and destitute masses, the microfinance was innovated and institutionalized in the Indian circumstance. The basic aim of microfinance is to provide access to financial services so that poor can come out of vicious group of poverty.

The mainstream financial institutions are not honestly interested in microfinance services because of higher business deal cost, greater risk, lower return and unsophisticated clients. Dasgupta R. (2006)

the formal sector FINANCIAL INSTITUTIONS in India have been offering only

the needs of the commercial sector and providing lending options for middle and upper income

groups. (Tiwari and fahad, _)


Lack of understanding and co-operation among the associates.

inability to attain the marketplace (Kumari and MALATHI, 2009 " Microcredit and Rural Development" IN publication anil kumar thakur and Praveen Sharma, profound and deep publications pvt Ltd

The first chapter is developed to the benefits of the Micro financing and Micro finance institutions and the need for this review and the specs of the targets.

The second chapter presents a review of books of quite existing studies on the micro finance.

The third chapter details the information of the analysis area, dynamics and way to obtain data, the various tools and techniques of analysis adopted for evaluating the goals.

The forth chapter gives us a short insight into the results under appropriate minds in consistence with the targets of the analysis.

The fifth section looks for to interpret the results of the study and also talks about a structure of inference for attracting policy procedures.

The sixth chapter summarizes, concludes the results and advises polices to enhance the micro financial activities.

Urban Microfinance

7. 56 You will find no clear estimates of the number of folks in cities with no

access to arranged financial services. This can be attributed, partly at least, to the

migratory mother nature of the metropolitan poor, comprising mostly of migrants from the rural

areas. Even money lenders often shy from lending to urban poor.

7. 57 There were a few cases of MFIs venturing into this area of loaning to

urban poor who are undertaking micro-enterprises and small company activities.

Urban branches of banks, even though having manpower and technology support, are

not attuned to SHG loaning or microfinance. They can be occupied with multiple and

diversified activities and generally find no time to cater to the microfinance market

segment. Lending opportunities in other industries dissuade them from trying the

laborious activity of microlending. The migratory characteristics of elements of the reduced income urban

population is also adding that urban bankers are not venturing into this field.

7. 58 Opening of specialised microfinance branches / skin cells in potential metropolitan centers

exclusively catering for microfinance and SHG - loan company linkages could be thought of, to

address certain requirements of the metropolitan poor. BFs / BCs could be the mechanism to

reach the mark clients in these areas. However, banking institutions need to put into action proper

risk management procedures, develop appropriate models and products tailor-made to this

segment. Banking companies can also consider associating with MFIs starting urban

microlending as a feasible option.

By then Microfinancing by 'non-formal companies' financial organisations experienced already started. ONE-MAN SHOP Women's Relationship (SEWA) held by women of petty trade organizations was set up in 1974 in Gujarat. It included providing bank services to the poor and self-employed.

At this stage, it was realised that the poor really needed better access to these services, alternatively than cheap subsidized credit. Keeping because the economic situation, a strong need was thought for alternative procedures, procedures, personal savings and loan products, other complementary services, and new delivery mechanisms, which would fulfil the requirements of the poorest, especially of the women people of such households. The emphasis, therefore, was on bettering the gain access to of the poor to microfinance.

In India,

Data analsis


Banks supply the group financing amounting to four times the groupings' savings but, as the group matures, based on the communities' background, banks are ready to give more.

SHG cash may be distributed either to 1 or more of the associates of the group who are then personally accountable to the group for repayment. The group is free to decide the interest charged to its customers, but typically an associate borrows from the group at the rate of 24 percent per annum (Barman et al. , 2009). After financing from standard bank is totally repaid, the group qualifies for even more receipt of the loan.

Process of Group Formation

Self Help Groups Model

Self help as an idea involves the campaign and enhancement of indigenous means of becoming socially, economically and politically empowered. ll must lead to su. , winahle development procedures at the community level. The self applied help group ts envisaged as a captivating, democratic and practical entity at grassroots level. People, women and men, who've never been included preceding would plan, implement and monitor their own development. They would mobilize internal and external resources, create effective grassroots institutional modalities at the neighborhood level and ensure redistributive justice, regarding access and control over essential natural and other common property resources.

The notion of do it yourself help is not new. The movement for self-reliance of India was a testimony to the have difficulties for self-reliance against colonial powers. "Gram Swara_j", meaning community self-rule was the process of creating a national eyesight of development by initiating rural development with emphasis on village level autonomy. The concept of self-reliance in India is within the history. Sadly. the road of planned industrial development resulted in a gradual lo" of control by the poor over local community resources - land. forests. water. seeds, local technology, decision making. and thus accentuating poverty, especially in the rural and tribal belts. Women were especially afkctcd, as development paradigms did not include their realities. TherL' in addition has been a sharpening of religious and ethnic identities, engineered by vested political interests, which has resulted in conflicts and schisms locally. There are some micro-initiatives in the country, where people have considered control over their lives either through struggles orreclaiming their privileges over resources (home. community. and intellectual). They may have exhibited alternatives in

environment, agriculture and management of forests, personal savings and credit programs, populace and development i"ues etc. , through advocating self applied help concepts.

All communities have home help groups in a few form or the other. They could be in the forrn of sanghas, mahila mandals, cooperatives, casual savings communities, literary groups etc. There are casual systems of knowledge transmitting, borrowing, financing. governance, legal redress, monitoring public norms, handling issues of turmoil locally and so on.

Self help organizations (SHGs) arc informal in the initial stages. They are either developed out of existing grours locally (I he feature of every group shaped are distinctive, predicated on objectives, membership, strategy of development and group operations), or are nuclei of much larger functions to be initiated in the community. However, there comes a time when they have to institutionalize themselves for wider outreach. This research targets the SHG model and its impact on women's empowerment. Hence, the model will be dealt elaborately in the following pages.

Given the years of alienation and sub-ordination thai community groupings have observed, SIJGs as a system, are delicate and susceptible in the initial stage. There is a tendency to be beneficiaries and leave decision making to others. NCiOs and other intermediaries arc needed to support and facilitate their early working and growth. Over a period. the nature of support and facilitation change with regards to the account and the culture of the group up to point thai the SHG is able to function individually and build organizations which have the

capacity to continue operations well beyond the job period and negotiate vitality relations.

Such an activity will need time and cannot he completed in a priority time slots. Neighborhoods go through various levels before they hecome capahle of controlling their own affairs, given that they have to acquire literacy, monetary security, advocacy, group maintenance, collective leadership and other skills. The informal SHGs also have to turn into a strong business and federate/coalesce on regional or countrywide basis.

Members of the SHG have impulse toward collective action for a typical cause. The normal need is reaching their emergent financial needs without having to be dependent on the exterior help. The people form several 12-20. The group development process may be facilitated by an NGO or hy the MFI or standard bank itself, or it may evolve from a traditional rotating personal savings and credit group (ROSCA) or other locally initiated group. A number of the features that describe SHG best arc given he low:

I. SHGs are a democratic group for a development purpose and they arc ever more used for micro credit. How big is the SHGs is neither too big nor too small as this can be a development group working with credit and other socio financial issues. SHG has it own market leaders and holds regular meetings.

2. The SHG people decide to make regular personal savings efforts. These may he retained by their elected brain, in cash. or in kind, or they may be banked.

3. The facilitation NGOs and finance institutions provide capacity building inputs so that they hecome effective and accountahk experiencing the needs of its members.


4. After a period of consi, tcnt savings (6 month' to one calendar year) the SHGs begin to give loam; from personal savings in the form of small internal loans for micro venture activities including ingestion. Only those SHGs that contain utilized their own cash well are assisted with external funds through linkages with hanks and other financial intermediaries.

5. The SHG opens a checking account, in the group's name, with the bank or MFI, for such funds as are no\ needed by customers, or in order to be eligible for a bulk loan.

6. The bank or MFI makes a loan to the SHG, in the name of the Group, which is then employed by the Group to complement its own cash for on-lending to it users.

The SHG do not need to always proceed through all these levels; it may satisfy its members' needs quite effectively if it only would go to the second or to the first stage, saving money and perhaps not withdrawing it (Harper M 2000, pp. 39-42). The SHG bears out all the same functions as required by the Grameen system, but they do this independently behalf, because the SHG is a micro-hank, carrying out all the intermediation projects ot' saving' mobilization and lending. The MFI or lender may assist the SHG in record keeping. and they may al'o demand to know who arc the customers and impose conditions regarding the uses of the loan that they make to the SHG, however the SHG is an autonomous financial institution in its right. The mcmhcrs have their accounts with the SHG. not with the MFJ or loan company, and the MF! or hank does not have any direct dealings with the members.


Table I: BASICS and Functions of SHGs

11le basic principles on whiCh the I Functions of the SHGs

SHGs function

I. SHG Is really a network of associates who match location standards. They arc citizen m the area and arc homogeneous (Homogeneity can be in terms of caste/occupation/farm size/sex or income level).

2. They may have guidelines/norms regarding their performing.

·'· Cost savings first, credit thcrcal'tcr.

Personalized services suiting the requiretnents of the people are made certain.

4. SHGs carry regular meetings to

I. Recognition of poor individuals and awareness building.

2. Forming of groupings.

3. Guiding groupings in developing steps and systems in savings and credit businesses.

4. Supporting the communities m

maintenance of books and accounts.

5. Training the customers m group working and management.

6. Liaison with the banking institutions for linkage of teams and selectively behaving as

financial intermediary.

ensure participation of memhers in

7. Addressing social


the activities of the group.

5. SHGs maintain accounts.

6. Group leaders are elected by associates and rotated regularly.

7. Transparency in functions of the group and participatory decision making ensure that the benefits to customers are evenly allocated.

X. Market interest rates on personal savings and credit are billed.

9. Group liahility and peer pressure

act as substitutes for traditional guarantee for loans.


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