Tips for Field Worker s Vol 2 - Vanbandhu Kalyan Yojana

However, the bank or FW will not interfere in the terms and
conditions of further loans by the SHG to group members.
The SHG has the power to decide:
a. The terms and conditions of the loans to its members;
b. Who will get loans;
c. What will be the purpose for which the loan is
sanctioned;
d. What the amount of the loan will be; and
e. What will be the repayment amount and interest rate?
Most SHGs charge interest at 2-3 per cent per month.
The Project has estimated that with the increase in the SHG’s
own resources, a group can disburse credit of about Rs.100,000
in the fifth year. It is assumed that at least 90 per cent of the
SHGs would be linked to the banks in this manner.
It is estimated that in the first year, about 70-80 per cent
loans taken are used for consumption, social and health
needs, and the remaining 20-30 per cent for production
and investment. This position changes in the third year when
loans for consumption purposes form only 20-30 per cent of
total loans taken and those for productive purposes go up to
70-80 per cent. It has also been noted that the initial
production-based loans are used for traditional on-farm
activities like buying seed, fertilizer, pesticides, cattle, etc.
Linkages help banks in the following ways:
a. The transaction costs to the bank are low;
b. Recovery rates on SHG loans are extremely high;
c. SHGs do not just take loans but also deposit savings
in the bank. The banks do, in fact, receive more
deposits than the amounts sanctioned as loans; and
d. In many cases, SHG members have helped banks
recover very old defaulted loans.
SWA-SHAKTI
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