CORE ISSUES
_______________________________________________________________________________________________
 3.1 SAVINGS AND CREDIT GROUPS 
       AS A UNIQUE DEVELOPMENT 
INNOVATION
3.2 INTEGRITY OF THE SCG 3.3 CREDIT NEEDS OF THE POOR 3.4 THE ROLE OF THE NGO 3.5 WHERE THERE IS NO NGO 3.6 OUTREACH CAPACITY OF BANKS 3.7 SYSTEMS OF ACCOUNTABILITY 3.8 RE-PACKAGING THE SHG-BANK
LINKAGE INITIATIVE 3.9 TRAINING
 

3.1 SAVINGS AND CREDIT GROUPS AS A UNIQUE DEVELOPMENT INNOVATION
Provision of credit alone cannot enable people to break out of the vicious cycle of poverty and indebtedness that circumscribe their indebtedness. That can only occur when groups recognize their collective strength and are able to use it to re-negotiate institutional practices and rrangements and redress the historical imbalance in access to, use of and allocation of resources. Savings and credit groups are an extremely strategic toolof both economic and social empowerment of marginalised populations. The importance of the two facets of the SCG - social and economic - becomes apparent when one realizes that providing access to credit is not sufficient, if the beneficiary cannot exercise control over its use and management. Given that, marginalised populations, especially women, have more chance of exercising rights as a group rather than as individuals, SCGs by virtue of their collective strength not only enable its members to access credit on favourable terms but also provide a way by which they can manage it and exercise control over its use. Furthermore, if strategically located SCGs soon move beyond meeting the credit needs of its members to linking with schemes and programs that concern the overall development of their village, not just their members.

2 INTEGRITY OF THE SCG
Mainstream institutions, recognizing savings and credit groups as extremely effective community based financial institutions, have initiated ways by which SCGs could play an important role in mainstream efforts to deliver credit to the poor. In this context, it is important to recognize that SCGs are distinct organizational entities which have evolved their own rules and systems. Thus linkage efforts should not seek to subsume SCGs within the mainstream structure, rather, they should seek to create an environment where the integrity and autonomy of each organization is not compromised. It is only by allowing SCGs to retain control over decisions regarding the use and management of funds accessed by them can efforts to reach the poor succeed.

3.3 CREDIT NEEDS OF THE POOR
It is important to recognize that in the context of the poor, credit for both consumption and production needs go towards maintaining a quality of life that is subsistence level, and as such cannot be easily differentiated. Asset building which is the key to improving the quality of life (and is the focus of many micro-credit initiatives), occurs at a much later stage when the group is able to access large amounts of credit and non-financial inputs.

3.4 THE ROLE OF THE NGO
NGOs can play a very catalytic role in building the relationship between SCGs and banks that forms the basis of linkage. Within this context, it is important however to understand that while NGOs are good at forming groups and in building the capacities of the group to mobilize and manage resources, they themselves are usually ill-equipped to play the role of financial intermediaries between groups and banks. Most bankers, hesitant to lend to informal SCGs whose only security is the group, are more comfortable if the NGO were to take a more formal role in the linkage process and bear some if not all responsibility for securing the loan (even though security is not a requirement of the scheme). However while comfortable with introducing SHGs to banks and strengthening the linkage with banks, most NGOs do not see a role for themselves in formally recommending SHGs to banks. The long term role envisaged for NGOs in the linkage process is to train SHGs and build their capacities to absorb credit and manage funds efficiently. Additionally, the NABARD SHG-Bank linkage scheme by creating a linkage between the banking institution and marginalised women's (and men's) groups provides an opportunity for SHGs to enter mainstream processes. By routing credit through NGOs, SHGs though accessing credit, remain on the periphery with little knowledge of how to access credit independently.

3.5 WHERE THERE IS NO NGO
A national initiative that hinges on the presence and participation of NGOs is a limited one. It has to be able to cater to those groups who have developed without the benefit of NGO intervention. There are a huge number of SHGs in rural and urban India that operate with limited resources and are unable to tap into the network of NGOs, funding agencies, donor organizations or State programs.In addition to groups that are formed independently, there are government agencies like the ICDS that are forming self help groups. The real challenge of financial institutions will be to reach out to these groups, who often may not be supported by an NGO. It is only when financial institutions expand their reach to those areas where there are no NGOs can the linkage initiative achieve a significant scale of operations.

3.6 OUTREACH CAPACITY OF BANKS
The Indian banking system has a large network - (ratio of banks to villages?). A very important part of their mandate is to fulfill social development objectives through credit for the poor. While banks have in the past been severely criticized about the poor quality of credit available to low-income clientele the argument should not be that banks should cease its efforts to reach this segment of the population, rather it should call for an investment in ascertaining how banks could become better providers of financial services to the poor. It would be a folly to throw the baby out with the bath water. The kind of outreach that such a network offers cannot be paralleled by any other financial institutions. So while funds such as RMK and other funds play an important role in demonstrating the creditworthiness of SCGs, they cannot hope to achieve the size of operation of the rural banking network.

3.7 SYSTEMS OF ACCOUNTABILITY
While there have been significant policy level interventions and some ground level initiatives, there has been little support for these from the Regional/ Zonal and Head Offices. For a policy to be translated into practice, systems of support and accountability at every level of the banking institution are essential. Currently no one is asking the branch manager whether or not the scheme is being implemented - there are no regular reporting mechanisms for this scheme. For a scheme in which pressure to implement is not based on a target, it is important that there be alternative mechanisms for accountability within the system. For instance if regional managers were to take an interest in the monitoring, the implementation of the schemes, the branch manager would not only become aware of the scheme but would also take steps to implement it. The lack of systems within the banking hierarchy that hold the branch manager and all levels above him accountable is a major lacuna. In the present scenario too much is left to the individual banker's beliefs, biases and initiatives.

3.8 RE-PACKAGING THE SHG-BANK LINKAGE INITIATIVE
There is a need to create a separate identity for the SHG-linkage initiative that distinguishes it from other schemes for low-income clientele in order to make it attractive to a branch manager. The legacy of IRDP has been that social banking or banking with the poorer sections of society has become synonymous with default and deception. Branch managers are hard pressed to imagine that banking with the poor can actually be of benefit to them on strictly financial terms, social considerations aside. Consequently, there is a need to distance this credit product and clientele from the unpleasant experience of IRDP in order for bankers to make the shift in perspective from seeing the poor as beneficiaries of subsidized government hand-outs to seeing them as partners in a viable, mutually beneficial financial relationship.

3.9 TRAINING
The linkage process requires each of the actors in the process to gain a more realistic understanding of the others. While training that is in the lecture format is useful in addressing some of the theoretical issues and information needs, there is a need to create more non formal training opportunities that allow bankers and members of SHGs to interact. Direct interactions with SHG members is the most effective means for bankers to understand what an SHG is. Additionally, interactions with bankers and SHGs who have implemented the scheme is the best way of building confidence in the linkage program and in learning how to operationalize the linkage.

     



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