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

RECOMMENDATIONSIt is not clear what is the scale of investment Cordaid and ICCO wish to make in themicrofinance sector in future. It is also not known what is the present level of involvement ofCordaid and ICCO in development activity in various states in India. This has implicationsfor the type of support the two co-financing agencies can provide and the identification ofpotential partners in development. Given below is a set of more general recommendations fordonor support towards SHG development. These are based upon the findings of the study andthe views of leading MF practitioners in India.1. Development of standards for SHG developmentThe study drew attention to the rising concern in microfinance circles in India about thequality of SHGs being promoted, especially as the SHG bank linkage programme has becomeincreasingly target-driven. The experience of Andhra Pradesh where a massive statepromotion drive has resulted in thousands of defunct SHGs, which are now beingrehabilitated, provides a warning signal for SHG promotion in future. At the heart of SHGpromotion is a need for skilled and dedicated staff capable of institutionalising internalsystems and processes in the SHG along with providing support for maintenance of groupaccounts, periodic auditing and systems for flow of information to the facilitating institution.Banks and NGOs now use some kind of rating tool to assess SHGs, but there is need first fora consensus on the parameters and criteria for standard setting and to relate the standards tonature and type of professional and technical support to be provided. The objective ofstandards has to be towards an improvement of MF programmes rather than provide cut-offvalues to be used as a basis for denial of funds and support. There is also a need is to developthe capacity both of SHGs and the chain of SHG-promoting institutions to assess their ownperformance. The Sa-Dhan sub-group on standards has set up a dialogue and is working aconsensus among member NGO-MFIs for appropriate standards. ICCO and Cordaid couldsupport the ongoing process of standard setting for SHG development.2. Support for NGOs promoting SHGs in the poverty beltThe data on outreach and impact of the SHG movement clearly shows that the majorachievements in SHG promotion thus far have been in the southern states. There is alsoconcern that many of the members of SHGs are not from the poorest families. The povertybelt of northern, central and eastern India comprising the states of Bihar, Jharkhand, UttarPradesh, Uttaranchal, Rajasthan, Orissa, Madhya Pradesh and Chhattisgarh continue to bedeprived of opportunities for fighting their way out of poverty. Given the size of their povertypopulation, U.P. and Bihar are particularly under-served by development programmes. Partof the problem lies in the fact that there is a shortage of competent NGO partners working inthese States. However, this is a challenge that must be met. ICCO and Cordaid should reexaminetheir policies and move towards working in a more focused manner in poorerregions. Capacities of existing partners should be built up and new partners sought as part ofthis thrust. The experienced NGOs of the south are of the opinion that strategies for SHGdevelopment employed by them in the southern states are replicable in these states as well.The wider replication of the successful models of SHG promotion needs to be undertakenurgently. This could be the niche area for ICCO-Cordaid in the coming years.60