When the first self-help groups (SHGs) were linked to banks in Udaipur in 1992, several high-profile visitors from the Reserve Bank of India, Indian Institute of Management, Ahmedabad, Swiss Agency for Development and Cooperation and National Bank for Agriculture and Rural Development (NABARD) flocked to the small village of Sakroda to ask the bewildered group of women about their experience with the Rs. 5,000 loan they had received from a local bank. Economist Ajay Tankha’s book on the SHG movement in India begins with this interesting nugget in a foreword written by Vipin Sharma, CEO of ACCESS Development Services, a company that offers microfinance and livelihood assistance.
It takes us right into the book’s theme: How did the linking of banks with informal groups of less-privileged men and women grow into a movement? What were the challenges and what are the future directions to take? Tankha puts the importance of the SHG movement in India in context when he says, “With the massive social capital embodied in them, SHGs can be considered to have emerged as a significant part of the development infrastructure.” He tracks the SHG bank linkage programme and, with support from NABARD data, shows that Andhra Pradesh and Tamil Nadu lead in the effort.
Tankha observes that SHGs are gaining importance “as both a political force and as a channel for government benefits” and, with this, comes a risk to the democratic functioning of an SHG. It might have been interesting to hear what more Tankha has to say on the subject of political influence in SHG functioning but the book’s focus is the financial sustainability of SHG models. The case studies, adapted from secondary sources, are mostly success stories. However, two stories stand out because they show the difficult group dynamics that SHGs go through and the strategies used to overcome obstacles:
In Madri village in Rajasthan, an SHG borrowed Rs. 50,000 from a bank and divided it equally between 10 members. Each member had to repay Rs. 300 for 20 months. Several members were late with their payments, even when the SHG members decided on a penalty of Rs. 5 per month for late payment. So, those who were on time decided to conduct meetings in the homes of those who had not paid and the latter were responsible for the spending on the refreshments! This strategy worked to some extent and those who defaulted even after that were asked to pay Rs. 2500 each to cover the extra interest the group had to bear due to late payment.
In another case in a village in Chittoor district of Andhra Pradesh, the SHG leaders defaulted on repayment after apportioning a large part of the bank loan to themselves. Also, some of the group members — who were related to the leaders — did not insist on the repayment. The laxity led to other members stopping deposit of their savings with the SHG and, eventually, dropping out. But with several government schemes getting linked to the SHG movement, the group decided to revive their savings on the understanding that they would all get equal portions of the loan rather than the leaders getting a larger sum.
While credit support is at the core of the SHG movement, Tankha’s work shows how the social impact is much more than the economic impact. Increase in self-worth, communication skills and a collaborative effort to combat social evils are benefits that come with the formal recognition of SHGs. The author also points out that, given the varied context and experiences of SHGs and supporting financial institutions, it is difficult to pin down elements of good practice among SHGs. He sends out a strong call to NABARD to finalise a strategy to infuse new energy into the SHG movement.
The book also makes a case for collaboration between NABARD, the Ministry of Rural Development and other government agencies concerned to meet the objective of strengthening livelihoods of the poor. Such a joint effort, the author argues, is crucial to push the SHG-bank linkage into a movement that can alleviate poverty.
BANKING ON SELF-HELP GROUPS — Twenty Years On: Ajay Tankha;
ACCESS Development Services/Sage Publications India Pvt. Ltd., B 1/I-1, Mohan Cooperative Industrial Area, Mathura Road, New Delhi-110044.