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

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Agency/Programme5. Rashtriya Mahila Kosh(RMK)6. UNICEF/UNDP CommunityConvergent Action (CCA)ProgrammeAmount of support (Rs. perSHG promoted)DetailsRemarksRs. 4,000 1. Available to NGO-MFIsacting as intermediaries inlending to SHGs promoted bythem.2. Interest free loan of Rs.1,00,000 for every 25 SHGspromoted, converted into agrant on successful completionof loaning.Rs. 8,000Over 3 to 4 yearsA strategy for women’s(implemented through 4 NGOs, empowerment through SHGsincluding PRADANwith savings and credit as an(see table 4.1) in Bihar and entry point. ImplementedJharkhand)through state governments toencourage bottom-up planningand greater responsivenessfrom its line departments.(Balance -Rs. 4,000 - ofPRADAN’s total promotioncosts of approx. Rs. 12,000 metthrough 50% grant fromICCO.)42
5. SUSTAINABILITY OF SHGS AND SHG-BASED INSTITUTIONS5.1 Concepts and IssuesIn the study of rural development we can locate three frameworks of analysis. These are theneo-classical, Marxian and systems approaches. While the latter two are holistic approaches,the neo-classical framework provides the underpinning of modern microfinance, with itsfocus on the decision making of individual economic agents towards (short-term) profit orutility maximisation. Neo-classical discussion and policy prescriptions in microfinance aredirected towards creating the conditions for the operation of free rural financial markets.Institutional economists have further used the imperfect information paradigm to focus ontransaction costs of credit delivery that serve to explain and justify high interest rates charged byvillage moneylenders. The problems of rural credit markets have been seen in terms of the coststo lenders related to screening borrowers, incentives for repayment and enforcement of loanrecovery (Hoff and Stiglitz, 1993). Much of the appeal of modern microfinance lies in itsability to address these problems through innovations such as the group approach, targetingwomen, small loan sizes and progressive loaning.The concept of sustainability on the other hand has its origins in natural resourcesmanagement as part of systems analysis linked to the technical concept of “carryingcapacity” of an ecosystem (McNamara and Morse, 1998). The disjunction between theconcepts of sustainability and microfinance is further confounded by the narrow applicationof the sustainability concept to financial intermediary institutions as assessed throughsustainability-linked performance criteria. This is clearly flawed since within a holisticframework, financial resources are but one of a set of livelihood resources which arecombined in the pursuit of livelihood strategies such as intensification, diversification andmigration (Scoones, 1998).Within microfinance, sustainability can be viewed at several levels - institutional, group andindividual - and can relate to organisational, managerial and financial aspects. However, it isthe financial sustainability of microfinance institutions that has become the critical point offocus of mainstream analysis at the expense of the sustainability of the client/borrower.Hulme and Mosley (1996) distinguish between the “intended beneficiary” school and the“intermediary” school wherein the former is more concerned with the impact of microfinanceon the intended beneficiary individuals or households and the latter with the institutionaloutreach and institutional sustainability 40 . The duality represented by these schools is alsoevident from the tension between financial sustainability and poverty alleviation, i.e., whetherfinancial sustainability of the MFIs can be reconciled with the objective of reaching thepoorest households.Gender empowerment represents another domain of influence of microfinance interventions.Mayoux (1998) provides three contrasting, but overlapping, paradigms of financial selfsustainability,poverty alleviation and feminist empowerment. Thus sustainability in thefinancial self-sustainability paradigm is seen in terms of financial self-sufficiency of the40 This also reveals the interlinked nature of issues related to impact and sustainability. Thus, tracing householdlevelimpact, which is discussed in the next chapter, is a major concern of the intended beneficiary school. Theintermediary school sets greater store by repayment rates and financial self-sufficiency with repayment ratesbeing considered a proxy for impact on the presumption that timely repayment of loans by “rational” borrowersis evidence of adequate returns to the investments undertaken by them.43
Page 4 and 5: List of AcronymsAIAMEDAIMSAPMASASAA
Page 6 and 7: EXECUTIVE SUMMARY1. Introduction1.1
Page 8 and 9: self-management by members and scal
Page 10 and 11: 6.4 On the other hand field reports
Page 12 and 13: sustainable self-help groups. An in
Page 14 and 15: 2. DEVELOPMENT OF SELF-HELP GROUPS
Page 16 and 17: average loan per SHG was Rs. 18,227
Page 18 and 19: • training and sensitising bank o
Page 20 and 21: organizational structure and the na
Page 22 and 23: Table 2.1 (contd.)S.No.ParticularsN
Page 24 and 25: the SHG from banks starts from pari
Page 26 and 27: • In either situation SHGs can co
Page 28 and 29: 3.2.3 SHG Federations Linked to MF
Page 32 and 33: 3.4 ConclusionThis section served t
Page 34 and 35: MYRADA,Karnatakaa.o.OUTREACH,Karnat
Page 36 and 37: Name ofNGO/StateDHANFoundation,Tami
Page 38 and 39: However, for a comparative analysis
Page 40 and 41: linkages with credit and savings 34
Page 42 and 43: out of 5,153 SHGs covered under the
Page 44 and 45: eceived revolving fund grants, cost
Page 46 and 47: the high level of educated unemploy
Page 48 and 49: CARE-CASHE Project(A.P.)(implemente
Page 50 and 51: Holy CrossSocial ServiceCentre(HCSS
Page 54 and 55: microfinance intermediary 41 . Unde
Page 56 and 57: On the other hand, there is evidenc
Page 58 and 59: infrastructural and other constrain
Page 60 and 61: would not be possible while working
Page 62 and 63: through the SHG as a basis to sourc
Page 64 and 65: the programme is particularly probl
Page 66 and 67: It is possible to query the methodo
Page 68 and 69: world. Other partners from India ar
Page 70 and 71: RECOMMENDATIONSIt is not clear what
Page 72 and 73: REFERENCESAIAMED (2000), Good Pract
Page 75: Mahajan, Vijay and G. Nagasri (1999
Page 79 and 80: Appendix 2: Types of SHGsTypes of S
Page 81 and 82: Appendix 3 (contd.)OrganisationSIDB
Page 83 and 84: 4. Trade based Group model: The est
Page 85 and 86: Appendix 5S.No.1. JOTHI 92,077.00
Page 87: Appendix 6: Stages of Evolution of

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

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