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Sunday, October 20, 2013

Financial inclusion can be better achieved through self-help groups: Nabard

The two-decade-old self-help group-bank linkage programme for the economic betterment of rural poor is not receiving bankers’ attention, says Nabard.

This observation comes in the backdrop of the Government pushing banks to step up their financial inclusion (FI) drive through intermediaries such as business correspondents (BCs) and business facilitators (BFs) in the last three years

The FI drive, whereby financial services are sought to be extended to the hitherto large un-served population of the country, envisaged by the Government and the Reserve Bank of India entails banks engaging the services of BCs and BFs.

According to a Nabard (National Bank for Agriculture and Rural Development) report, though the SHG-BLP (self-help group-bank linkage programme) is a step towards bringing the ‘unbanked’ poor into the mainstream banking channel, its formal acceptance as a financial inclusion channel by the central bank is still awaited.

An SHG is a homogeneous group, comprising 15-20 members (mostly women), where members first pool in their savings and give out small loans to needy members. Once the SHG successfully undertakes savings and credit operations from its own resources, it can borrow from a bank (SHG-BLP) to enhance its pool of resources.

Scope of activities

The scope of activities undertaken by the BCs include disbursal of small-value credit; recovery of principal / collection of interest; collection of small-value deposits; sale of micro insurance, mutual fund plans, pension and other third-party products; and receipt/ delivery of small-value remittances and other payment instruments.

BFs provide services such as identification of borrowers; collection and preliminary processing of loan applications; creating awareness about savings and other products; post-sanction monitoring and follow-up for recovery.

Nabard said “though several initiatives were taken by the Government, the central bank, Nabard and banks to bring the poor into the fold of formal financial service providers, no serious attempt was made to leverage the SHG-BLP to achieve the financial inclusion goals.”

The ‘Status of Microfinance in India’ report observed that a successful programme such as the SHG-BLP, which could link millions of rural poor to the formal banking system, could have been the main instrument for financial literacy and financial inclusion in the country.

“There are a number of plausible ways by which matured SHGs could have been participants in the financial inclusion initiative, including being agents of providing direct banking services to the poor at their doorsteps, as a low-cost and efficient alternative.

“This model is certainly a more cost effective and reliable alternative to the existing inclusion agenda and millions of households, now members of SHG-BLP, would have been the immediate beneficiaries,” said Nabard.

Strong linkage

As on March-end 2013, the total number of SHGs linked with banks stood at 73.18 lakh, with savings aggregating Rs 8,217 crore. Further, 44.51 lakh SHGs had loans outstanding aggregating Rs 39,375 crore.

The Government and the RBI hold 99.50 per cent and 0.50 per cent stake, respectively, in Nabard. The institution was promoted in 1982 for ensuring sustainable and equitable agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives.

Source: thehindubusinessline


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