Self-help Groups as Financial Intermediaries in India ... - Sa-Dhan

3.2.3 SHG Federations Linked to MF WholesalersThe federations of SHGs discussed thus far have either been linked to the promoting NGOthat has taken up the role of the MFI or have accessed funds from other intermediaries,sometimes promoted by the NGO. As such they have retained a dependency status vis-à-visthe NGO. Mature secondary federations can, however, directly access funds from MFwholesalers. When registered as societies or trusts, they effectively are converted into MFIsusing the same legal forms adopted by the NGO, but with lower overhead costs. The cost ofoperations of these block- level federations, of about 200-250 SHGs and 10-15 clusters, coverboth financial and non-financial activities and are met through interest margins andmanagement fees and contributions. They represent a culmination in the development ofmulti-tier SHG-based community institutions, designed to function independently of theNGO after its phase out.DHAN Foundation 23 is an NGO that has developed independently functioning financialfederations in Tamil Nadu. DHAN, like its parent PRADAN and MYRADA, has not itselfacted as a financial intermediary for its federations. The multi-level structure of “nested”community institutions designed by DHAN as part of the kalanjiam community banking(KCBP) model allows them to respond to the credit needs of members at the appropriate level- SHG, cluster nidhi or secondary federation. KCBP groups, clusters and federations arepromoted as independent organizations and are managed by members themselves at hamlet,village and block level. These are promoted as nested institutions with interdependency ratherthan a ‘three-tier’ type of organization. Apart from local bank linkage at SHG and clusterlevel, the federations promoted by DHAN Foundation have accessed loans from apex lendingorganisations such as SIDBI, RMK, HDFC and HUDCO having fulfilled theircreditworthiness criteria. The specialised housing finance agencies fill an important gap inthe loan portfolio not available to other SHG federations.3.2.4 Mutually-Aided Cooperative Societies (MACS)MACS as an organisational form have been described in Appendix 4. Andhra Pradeshenacted the Andhra Pradesh Mutually-Aided Cooperative Societies Act in 1995 to cover thenew style cooperatives. This Act had two main features: (i) for the first time members couldfully own and control their cooperatives; and (ii) new cooperatives could be formed in areaswhere existing primary agricultural societies had become defunct. Similar legislation hasbeen since enacted in Bihar (also extended to Jharkhand) 24 , Madhya Pradesh, Orissa andJammu and Kashmir. However, it is only in Andhra Pradesh, where the CooperativeDevelopment Forum (CDF) took the lead in registering its “thrift cooperatives” under thisAct, that this form of cooperative has been used for microfinance. Thus at present this is aform of MFI that is unique to one state.Andhra Pradesh has over 403,000 SHGs, developed by a range of stakeholders, but mainly asDWCRA groups formed under the government scheme. Associations of these SHGs havebeen formed into financial cooperatives and registered as MACS 25 . Over 325 Mutually-Aided23 Not covered by the study visits. Information sourced from Vasimalai, 2000 and AIAMED, 2000.24 The Bihar Self-supporting Cooperative Societies Act.25 Other SHGs have been formed into clusters or unregistered financial federations, known as mahila (women’s)banks.18