Significance of Establishing Linkages with Self-Help Groups and Banks


Y.S.Nanda, NBARD, India

Study Report - SHG: Andra Pradesh

Highlights of Findings

I. OPERATIONS

  1. Before sanction of loans to the VA for on-lending to groups, bank branch managers had visited the groups and participated in meetings to satisfy themselves about the functioning of the group.
  2. Satisfied by the excellent recovery under the programme, the banks have shown interest in extending loans through the VA.
  3. Bankers felt that direct lending to groups can be done once the groups attain maturity.
  4. The VA provided training in maintenance of books of accounts at SHGs level either at its training centre or through the village animator.
  5. he rate of interest charged was 3% per month on the loans given out of the thrift amount and 1.10% per month on loans given for income generating activities under the linkage with bank.
II. GROUP RESPONSIBILITY
  1. The VA had pledged the savings of all the members of the SHG as collateral for the loans availed even though at the SHG level only some of the memebrs were financed. This has been done with the concent of all members to ensure buildup of groups pressure. This feature can be emulated by other SHGs.
  2. The members have been regular in repayment of loan instalments without any default.
  3. Income from other sources such as farm labour was utilized for repayment of instalment during the period where there was no income from existing milch animals bought through credit from SHG.
III. LENDING OF OWN FUNDS
  1. The SHGs maintained small amounts as 'emergency funds' to meet consumption requirement of the members.
IV. IMPACT OF CREDIT AND ASSET CREATION
  1. The weavers expressed that their earnings owning to increased production consequent to availability of loan for purchase of raw materials and other input.
  2. Most of the SHGs were reported to have undertaken group activities such as plantation, running of Balwadis (kindergarten schools) and other community development work with financial assistance aquired from the VA. However, no bank finance was involved in undertaking these activities.
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