Transformation of Credit Delivery for the Poor through SHG–Bank Linkage Programme: Retrospect & Prospects

Abstract

Despite rapid branch expansion, priority sector lending norms and thrust on pro-poor and rural credit schemes, in the post-nationalization period, a vast segment of the population, particularly the poor and disadvantaged, did not have access to the existing financial institutions. There were serious aberrations in the credit delivery mechanism and schemes. An earnest search was made for an alternative credit delivery approach for the vulnerable section of the community. In this backdrop, NABARD based on the learnings from the action research and intensive consultations with all concerned, launched a pilot project on SHG–Bank Linkage Programme (SHG–BLP) in 1992, by combining the mutual strength of formal credit institutions (banks) and informal agencies (SHGs), linking savings with credit and focusing on relationship banking. With the success of the pilot scheme, it was mainstreamed in 1996. The programme has been nurtured with multi-pronged promotional efforts and creation of a conducive policy environment by NABARD with the support of the Government and RBI. Banks and NGOs have played significant roles in upscaling and deepening the programme. Now, the programme in a gradual process has become a national movement and the world’s largest microfinance programme in terms of size and outreach. It has transformed the whole approach of all players in dealing with the poor, rural credit and rural financial institutions and the voluntary sector. It has brought about socio-economic empowerment of the poor, particularly women, as evidenced from various impact studies. Most of the rural development schemes and livelihood programmes incorporated the SHG approach. For sustaining quality and effectiveness of the SHG–Bank Linkage Programme, emerging issues like regional imbalance, promotion of micro-enterprises/livelihood, capacity/institution building efforts for managing growth, adoption of technology and continued supportive policy environment need to be addressed. The SHG–BLP has the potential and propensity to transform the entire rural India.