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Progress under the SHG
Bank Linkage Programme
of non-borrowers is only 7 percent. As regards longevity, 16 it found that the proportion of
defunct and broken groups was only 7 percent, which is low considering that average group
age was 6 years. 17 While SHG longevity is not an end in itself, it is important that members are
able to save and borrow in the group mode for as long as it is useful for them to do so, and
that they can graduate to more attractive alternatives such as savings and borrowing through
the banks without causing groups to break up. New rather than restructured groups are
"inefficient" in a global sense, since they increase promotion costs, and they entail having to
start afresh in building credit-worthiness, impeding the flow of linkage credit. There is a need
for SHPAs to conduct the action research to evolve more flexible mechanisms to allow new
members to replace existing members, which would not only allow members to graduate without
breaking their groups, but also, more challengingly, include among the replacements those
hitherto excluded, by waiving the usual requirement that new members bring into the groups
the same amount as the accumulated savings of existing members. Flexibility in this and other
respects will place an even greater burden on book keeping skills, but would have a high pay off.
Finally, on the "light" side, less than 10 percent of members had dropped out, over a third of
them for reasons of migration, death or illness. The dropout rate was only marginally higher
among the very poor, and just 10 percent of dropouts were in default.
On the "shades" side however several of the findings are not so reassuring. While the number
of dropouts is low, only a fifth of them were paid their full share of interest and other income
on group operations when they exited, partly because the state of group accounts did not
allow for a clear apportionment of surpluses over and above over accumulated savings. Clear
guidelines and greater effort is needed on the part of SHPAs to ensure that dropouts receive
not only their accumulated savings but also share of profits or surpluses so as not to discourage
longer term memberships. 18
Of greater concern perhaps is the phenomenon of exclusion, which keeps the depth of outreach
to 51 percent. Self-exclusion as well as exclusion by existing group members and SHPAs is
practiced for much the same set of reasons - (i) anticipated difficulty in meeting savings
obligations, and in keeping up with loan repayments, as well as (ii) lack of understanding and
confidence in group processes, (iii) having to go outside the village for daily work which
makes it difficult to attend weekly meetings, and (iv) caste and personality related antipathies.
The study found no examples of SHPAs addressing the most important of these reasons -- the
inability to save regularly by households with variable and uncertain incomes -- by introducing
lower and more flexible savings requirements in keeping with varying cash flows.
Issues of
concern on the
financial side
include the
state of group
records, and
overdues within
groups
Issues of concern on the financial side include the state of group records, and overdues
within groups (unfortunately, overdues from the groups to the banks were excluded from the
terms of reference). The quality of group records would appear to be crucial to accountability
and transparency within groups and (therefore to their longevity) and to providing the banks
with the necessary comfort levels in loan appraisal and monitoring. 19 However record quality
was assessed as being "good" in only 15 percent of the groups, "moderate" in 39 percent, and
"weak" in 40 percent (they were unavailable in the remaining 6 percent of groups). Passbooks
however were up-to-date in 72 percent of the groups, although in the possession of the
members themselves as opposed to group leaders or account keepers, which is important for
transparency, in only 79 percent of the groups. The government promoted groups had the
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