In order for a group to get a bank loan, it must be a registered entity. It should have a good record of working and have a democratic functioning where all members feel they have a say in the decision-making process.
The group should also be involved in income-generating activities. Moreover, it should have a membership list and minutes book.
Purpose of the SHG
The SHG (self-help group) is a collection of local people who work together to make savings and loans. They often take on community projects, such as providing water to villages or repairing roads. They also help with social services, such as giving food to the poor. In addition, they may also offer training for the unemployed. Women typically run the SHGs.
The use of SHGs as platforms for development programs is attractive to donors and governments for several reasons. First, it reduces costs by reducing the number of interventions needed to reach the same population. Second, it promises a better delivery of programs by promoting the development of social capital through regular group interactions. However, scholarship cautions that more evidence is needed to support the claims about the benefits of SHG-routed development.
SHGs are usually started by non-governmental organizations (NGOs) with broad anti-poverty agendas. Their main goal is to enable the poor and marginalized to overcome poverty through economic and social empowerment. Their financial intermediation is seen as an entry point to achieve other goals, such as enhancing women’s leadership capabilities, increasing school enrolment, improving nutrition and birth control, and providing housing.
In addition to financial inclusion, SHGs can offer other services that can improve the quality of life for persons with disabilities. For example, the SHGs can provide alternate sources of livelihood and improve living standards by offering vocational training. The SHGs can also promote savings and banking literacy. This can help individuals save money for emergencies and improve their ability to earn income from the market. Moreover, they can allow them access to loans from banks and other institutions. In addition, the SHGs can help reduce the reliance on informal lenders.
Size of the SHG
The size of an SHG should be at least ten members to ensure that all members can participate in group deliberations. This is particularly important in hilly tracks/ regions and tribal-dominated areas where communities are dispersed. It is also essential that the members of an SHG are from the same neighborhood so that they can understand each other’s problems and needs.
To apply for a loan, you must first obtain an application form from the financial institution or bank. Fill out the forms accurately, including personal information and other relevant details. In some cases, you may need to submit additional documentation or proof of income.
Membership of the SHG
A group’s membership is a critical factor in determining the success of its lending activities. Members must be willing to contribute regularly and have a strong desire to help one another. Moreover, they must have the capacity to save and repay loans. A good SHG should also be able to develop its sources of income.
The goal of SHGs is to promote economic independence among rural poor women, primarily through self-employment. They also provide a voice for marginalized sections of the community. Moreover, SHGs can play a role in disaster management. This is important in regions that are prone to natural calamities. In addition, SHGs can provide much-needed financial support for individuals and families in need of assistance.
SHGs must be a registered entity and have been in existence for at least six months to be eligible for credit linkage. The group should have a democratic working environment and be committed to the principles of SHGs. The members of the SHG must be literate and have a basic understanding of bookkeeping. The members should be able to participate in meetings without the use of a translator. In addition, the members should have a clear understanding of the purpose and benefits of the SHG.
Banks usually sanction savings-linked loans to SHGs, varying from a saving to loan ratio of 1:1 to 1:4. These loans are then used by the group to undertake business activities. Usually, the bank does not require any security for these loans, as the recovery rate is excellent. However, the risk involved in lending to SHGs is high. As a result, banks must be careful in their selection of SHGs for credit linkage.
Financial Status of the SHG
The financial status of the SHG is an essential determinant of its capacity to access credit from banks. This status is determined by the ability of the group to generate savings and to pay interest on those savings. It is also determined by the capacity of the group to repay debt. Moreover, the status of the SHG is a critical factor in deciding whether it can access more funds and provide more significant benefits to its members.
A self-help group (abbreviated as SHG) is a local community organization consisting of 12 to 25 people who earn daily wages and live in the same area. The majority of these groups are in India, though they can be found in many other countries as well. They act as self-reliant, autonomous local financial intermediaries and are generally made up of women. They have proven to be more effective savers, borrowers, and investors than men, as well as more likely to invest their savings in agriculture, horticulture, and fisheries.
SHGs play an essential role in empowering the poor and reducing their multidimensional poverty. They can increase income and employment generation, facilitate social inclusion, and encourage thrift creation and savings. They can also help overcome information asymmetry and increase participation in the household, including decision-making. They can even avail of government schemes such as ujjwala and toilet construction.
The present study aims to explore the efficacy of SHG-BLP in improving financial inclusion and abbreviating the social exclusion of vulnerable rural poor households. It uses the propensity score matching method to evaluate the impact of SHG-BLP on simultaneous achievements in financial and social inclusion. The research is conducted in central Assam, specifically in the Nagaon, Marigaon, and Hojai districts.
Loan Requirements of the SHG
The SHG should be able to demonstrate the ability to generate regular savings through internal lending. This is important to ensure that the group has adequate resources for revolving funds. Moreover, the SHG should have a stable membership with members who have similar interests. This will make it easier for the group to come up with innovative solutions.
SHGs are often linked with banks to provide micro-credit. The bank will sanction the SHG with a loan amount, which is generally multiple of the pooled savings. In addition to the savings-linked loans, the SHG may also receive term or project-based loans. It is also essential for the SHG to have a soundtrack record of repayments.
This approach is attractive to development agencies for several reasons, including potential cost-savings and “economies of scope”—the benefits of delivering multiple programs through one intervention platform (Gugerty et al., 2019). In addition to the cost-savings, scholarship argues that SHG-routed development programs can leverage social capital, such as community trust and reciprocity, which give them a competitive advantage over approaches that target individuals directly.
Currently, many SHGs are working to reduce malnutrition among women by raising awareness about the underlying causes of poor diets. However, many of these initiatives have not been scaled up to the national level. To address this gap, USAID Okard is partnering with local NGO PRADAN to use its SHGs as delivery platforms for nutrition interventions in eight block sites.
PRADAN is leveraging its SHG network by layering a BCC program on top of its core livelihood and microcredit work. The project, called Facilitating Action Against Malnutrition (FAAM), has been designed to support women in reducing malnutrition and anemia by providing them with the tools they need to make better choices.