MFIs – Malegam Report ………..(5)

Today’s  issue covers Support to SHGs / JLGs

Support to SHGs / JLGs

A study sponsored by SIDBI over 7 year period (2001-07) states that there was a unanimous demand from group members in all the villages, that skill development and training are imparted to the members of the group for undertaking any income generating activity and that only a loan was not sufficient for the purpose.

Microfinance India 2010 report points out that after the formation of groups, handholding is required to ensure that the group functions within the framework of group discipline and financial discipline. In fact the report states that the past success of SHG-Bank Linkage Programme (SBLP) was largely due to NGOs who worked with zeal and motivation, but this handholding is conspicuous by its absence in recent times. In a communication dt 22 Nov. 2006, RBI has also noted that many MFIs supported by banks were not engaging themselves in the capacity building and empowerment of the groups to the desired level.

Min. of Rural Development has suggested that in order to make branchless banking models work, banks need to re-engineer front end processes and establish a support architecture. National Rural Livelihood Mission has offered to co-invest in this concept.

Recommendations

§          Both under SBLP model as well as MFI model greater resources be devoted to professional inputs both in the formation of SHGs/JLGs as also in imparting of skill development and training and of handholding after the group is formed.

§          This would be in addition to and complementary to the efforts of the State Governments.

§          Architecture suggested by Ministry of Rural Development to be explored.

…………to be cont’d

Please do initiate your comments / queries to further broaden the understanding of the developments in the sector.

Particularly, we invite your comments on following

Are the recommendations adequate, considering that the report itself has acknowledged the contribution of the NGOs in making the success of past micro-credit and SHG-Bank Linkage Programmes?