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

Even where SHGs are not constituted into higher-level financial organisations, promotingNGOs have felt the need to form cluster level associations, for cross learning and for NGOmonitoring during later stages of SHG development. HCSSC, PRADAN and MYRADA haveencouraged SHGs to form into cluster bodies of 10-20 groups belonging to contiguousvillages. In the case of other agencies which have helped to form member or communitybased organisations for financial services at the development block level, intermediate nonfinancialorganizations at village or cluster level have been promoted with similar objectives.A related learning is that scattered SHG development is likely to be counterproductive andshort-lived since each SHG needs to receive sustenance from wider associates even when notbrought together into a higher order financial intermediary. This is especially so when theclose contact and support of the promoting NGO is to be withdrawn.Quality of groups: The sustainability of SHGs is clearly related to the “quality” of groupspromoted. A common characteristic of leading SHG promoters is the intensive training andcapacity building undertaken at group level at various stages, which in turn contributes tohigher costs of promotion. By now NGOs and banks have generally devised assessmentcriteria for appraisal and periodic evaluations of group performance and sustainability 51 .Assessment indicators include frequency and attendance of meetings, volume of savings,rotation of own savings, development of financial and skills, quality of leadership, etc. It iscommon to find, though only at field office level, data on ratings of groups into good,average and poor or similar categories. Broadly speaking, even best practice NGOs generallyhave only about 50% of groups placed in the highest category, with 30-40% of SHGs needingadditional support and 10-20% failing to take off. This accounts for the varying duration ofexternal inputs necessary in SHG promotion and development and makes the case forcontinued long-term NGO presence in the area. The quality of SHGs promoted has become aserious issue in the case of SHGs promoted under the DWCRA, and other state initiatives,especially in Andhra Pradesh where limited and improper facilitation has led to a largeproportion of SHGs becoming defunct. The revival of these SHGs is part of the activities ofthe CASHE project, APMAS and the ASP.Long-term prospects: The longer-term prospect for SHGs linked to banks is unclear. Theleading NGOs covered in the study have phased out from some areas after having linked theSHGs formed to banks. 52 There is, however, unease about their ability to continue to accessto funds from the banking system and to move along a growth path out of poverty. WithNGO withdrawal the monitoring of the SHGs also ceases and there is little information ontheir activities. However, since the NGO generally continues to work in the area it is in aposition to undertake troubleshooting on their behalf.The logical path for members of SHGs linked to banks should be to graduate to (larger)individual loans under the bank’s normal lending programme. This does not appear to beemerging, both on account of the absence of a vision at NGO and bank level as well as51 NABARD has developed rating criteria for appraisal of groups for bank linkage, as have various banks. Aparticularly elaborate questionnaire on a 700 point score to assess the quality and creditworthiness of a grouphas been developed by BASIX. MYRADA uses very detailed criteria for evaluation of group performance,guidelines for financing self-help groups and guidelines for an evaluation to decide if NGO involvement can bephased out.52 This is not a widespread phenomenon. NGOs promoting SHGs and village sanghas under long-term donorpartnerships for running integrated programmes have often resisted phasing out of their area of operations evenafter 10 to 15 years.47