The bank-self help group (SHG) model of microfinance in India

The Bank-SHG Linkage Model of credit linkage in India is acknowledged as the largest such initiative in the developing world and is seen as a viable model for financial inclusion of the unreached. The total number of SHGs linked to banks stood at 74.62 lakhs as on 31 March 2011, with a savings amount of Rs.7016 crore and loan outstanding of Rs. 31221 crore. The numbers however account for only a small percentage of the total bank deposit and credit portfolio. There is also considerable regional imbalance with a clear concentration in the southern states and the other states lagging behind considerably. The outreach under the model is however much higher than the reach of microfinance institutions (MFIs). MFIs have come under the scanner in recent times with insinuations of their being a moneylender in a new garb and call for regulation of the sector. The paper examines the Bank-SHG linkage model in the backdrop of the above and explores the possible ways forward for more effective outreach.