Growth of microfinance and SHGS linkage in India – A critical analysis

Indian Microfinance development was started with the formation of first Microfinance Institution ‘Shri Mahila SEWA Sahkari Bank’ as an urban co-operative bank, by the Self Employed Women's Association (SEWA) in 1972. The Government of India had realized the importance and need of rural finance and established the National Bank for Agriculture and Rural Development (NABARD) in 1982. National Bank for Agriculture and Rural Development (NABARD) launched SHG-Bank Linkage Programme in 1992 as a pilot project with the RBI's recognition of informal groups in July 1991. But before NABARD's initiatives, SHG based poverty alleviation programme for the rural women was implemented by nationalised banks, cooperatives, etc. Indian microfinance sector occupied an important place in global microfinance through SHG-Bank Linkage (SBL) model and the Microfinance Institution (MFI) model. In this paper an attempt has been made to analyse the growth of Indian microfinance with SHG-Bank Linkage Model and MFI Bank Linkage programme including the effect of Andhra Pradesh Crisis in the sector. Moreover, the policy support provided by NABARD and RBI also discussed. The study is based on the secondary data availed from various sources.