MODULE 5

Functioning of Self help groups

Various Models of Self Help Groups in India
1. Model-I Self help groups formed by NGOs and linked to banks
– Microfinance is dominated by Self Help Group(SHGs)- bank linkage
Programme as a cost effective mechanism for providing financial services to
the “ Unreached Poor” which has been successful not only n meeting
financial needs of the rural poor women but also strengthen collective self
help capacities of the poor, leading to their empowerment.
– In this model, NGOs would organize the poor into groups undertake
training for awareness, entrepreneurship and skill training help in
arranging inputs, extension and marketing, help in maintenance of
accounts.
– The SHG- Bank linkage programme started as an Action Research Project
in 1989. There are around 74.62 Lakh SHGs out of these 60.98 lakh are
women SHGs.
2. Model-II NGO forms and perform financial intermediation role as
a lender to SHG after sourcing loans from bank
– In this model besides acting as facilitator, the NGO also works as
financial intermediary. Here the loan is given to NGO by the bank for
on lending the SHGs.
– In this linkage model, NGO would be legally responsible for
repayment and would bear the risk of non-payment.
– The growth rate of SHGs and microcredit have been phenomenal
which certainly reveal that the rural people involved in their growth
are able to improve their micro entrepreneurial skills with the help of
their own savings and additional bank credit.
3. Model-III Bank-SHGs Association
– In this Model banks directly promote self help groups. The bank
assume to play the role of NGOs and ensure linkage with SHGs.
– The SHG route is one of the cost effective methods of credit flow to
the poor who need most.

Definition of NGO
The World Bank defines NGOs as “Private organizations that pursue
activities to relieve suffering, promote the interests of the poor, protect
the environment, provide basic social services or undertake community
development.
Important Features of NGOs
1. Purposes
2. Methods
3. Networking
4. Consulting
5. Management of Non governmental organizations
6. Relations
7. Staffing
8. Funding
9. Legal status
Sources of Funds for NGOs
– Funding sources including membership dues, the sale of goods and
services, private sector for profit companies, grants from local, state
agencies and private donations.
– NGOs rely on money from a variety of sources including donors,
foundations, corporations and Governments.

Types of NGOs
1. Operational NGOs-The primary purpose is the design and
implementation of development related projects
2. Advocacy NGOs-The primary purpose is to defend or promote a
specific cause .
Role of NGOs in Rural Development
1. To motivate the rural people to organise themselves and to form into
SHG.
2. To educate, train the group members in managing the group
activities like maintenance of books of accounts, conducting
meetings, management of funds etc.
3. To promote savings habit among the group members.
4. To help the SHG in identifying raw materials and local resources.
5. To help the group members to upgrade their skills and technology to
make best use of resources.
6. To make available credit facilities and to act as a link between the
rural poor and the bank.
7. To educate and train the group members to utilise credit properly
and to improve their economic conditions.
8. To help the group members in exploring markets for their products.
9. To work as facilitator in the meetings of the SHG.
10.NGOs are self help Promotion Institutions(SHPI) with a special task of
promoting, nurturing, strengthening and monitoring the SHGs
11. They are a catalyst in between SHGs and funding agencies like banks and
MFIs.
Criteria for SHGs Borrowing from NGOs
1. The borrowers must be a member of SHGs, which is promoted by the NGO.
2. Group or members of the SHG should act as the Guarantor for the loan.
3. Loan amount should be used for the purpose for which it has been availed.
4. Limits of loan depends upon the purpose for which the loan is used.
Benefits of NGOs
1. NGOs supported SHGs are more successful in functioning and
consistency
2. NGOs conduct more training for SHGs.
3. SHGs supported by NGOs are very prompt in repayment of
loans(99%).
4. Capacity planning is a key role played by NGOs.
5. Regular meetings and savings are compulsory.
6. Faster and shorter repayment schedule ensure faster recycling of
funds.
Training Programmes by the NGOs
NGOs conduct two types of trainings:
1. Training to SHG members
2. Training to SHG leaders
The training is conducted on:
– Orientation and social awareness
– Micro credit training
– Identifying and training in income generating activities.
– SHG Federation Concept and Panchayat Raj.
– Motivation Leadership training in SHGs
– Record Maintenance
– Marketing SHG products
The role of Governments in Microfinance
Governments Organizations are as follows:
1. District Rural Development Agency(DRDA)
2. Krishi Vidyan Kendra(KVK)
3. Mahila Arthik Vikas Mahamandal(MAVIM)

1. District Rural Development Agency(DRDA)

– The swarnajayanti Gram Swarozgr Yojana(SHSY) has been launched
with effect from 01.4.1999 as a new self employment programme for
the rural poor.
– The SGSY being implemented by the DRDA through the block
development office.
– Integrated Rural development programme(IRDP)
– Training of rural youth for self employment (TRYSEM)
– Development of women and children in rural area(DWCRA)
– Ganga kalyan yojana.
The salient features of the swarn jayantiGram swarozgar yojana
1. SGSY aims at establishing a large number of micro enterprises in
the rural areas.
2. The SGSY emphasis on the cluster approach for establishing the
micro enterprises.
3. The SGSY adopts a project approach for each key activity.
4. The existing infrastructure for the clusters of activities should be
reviewed and gaps identified.
5. The assisted families may be individuals or groups
6. The SGSY seeks to lay emphasis on skill developments through well
designed training courses.
7. The SGSY provides for promotion of marketing of the goods
produced by the SGSY swarozgaries.
8. The SGSY is a credit cum subsidy programme

2. Krishi Vidyan Kendra(KVK)

– Krishi Vidyan Kendra was started in 1996 as a first KVK of the
country with a view to update the technical skill of the farm public, to
train the farmers, farm women and rural youth in scientific farming,
to provide in service training to the staff of developmental
departments.
KVK Activities:
1. Conducting on farm testing for identifying technologies in terms of location
specific sustainable land use systems
2. Organize training to update the extension personnel with emerging
advances in agricultural research on regular basis
3. Organize short and long term vocational training courses in agriculture.
3) Mahila Arthik Vikas Mahamandal(MAVIM)
– MAVIM is the state womens development cooperation of Maharashtra,
established on the 24th Feb 1975 on the occasion of International womens
year.
– The mission is “ to bring about gender justice and equality for women,
investing in human capital and the capacity building of women, thus
making them economically and socially empowered and enabling them to
access sustainable livelihood.
– Objective is to bring about womens empowering by mobilizing women
and building organization of women, enhancing their capacities by
training, increasing their self confidence.
– Mavim’s head office is situated in Mumbai and the corporation has
34 district across the state of Maharashtra.

How can Governments support an inclusive Financial Sector

I. Governments maintain macroeconomic stability through
appropriate monetary and fiscal policies.
II. Governments can involve the private sector in formulating poverty
reduction strategies .
III. Governments should adjust regulatory frameworks to permit all
types of financial institutions to offer services to poor people.
IV. Governments should invest in supervisory capacity.

Government interventions which harm the development of

Microfinance
1. Interest rate ceilings
2. Provision of credit at the retail level
3. Subsidized lending programs
4. Political Interference
THANK YOU