Micro Finance And
Transcript of Micro Finance And
-
8/6/2019 Micro Finance And
1/19
MICRO FINANCE ANDSELF HELP GROUP
Muhammad Aslam A
Rahul RSRenju RV
1
-
8/6/2019 Micro Finance And
2/19
Microfinance
Robinson (2001) defines microfinance as small-scalefinancial servicesprimarily credit and savingsprovided to people who farm, fish or herd and addsthat it refers to all types of financial servicesprovided to low-income households and enterprises.
2
-
8/6/2019 Micro Finance And
3/19
Type of MFIs
Community based savings and loans cooperativesalso known as self-help groups or SHGs
Charitable non-governmental organization providingrevolving loans to the poor.
MFIs established by commercial banks or governmentowned development banks.
3
-
8/6/2019 Micro Finance And
4/19
SHG
The Self Help Group is a village basedintermediary usually composed of
between 10-20 local women.
They pooled financial resources toprovide loans with small interest to the
members.
4
-
8/6/2019 Micro Finance And
5/19
Goals
To establish a forum wherein women can critically analyze theirsocio-economic situation and act as catalyst to bring aboutsocial change.
To build up self-confidence and spirit of cooperation amongwomen.
Economic empowerment of women in society aimed at self-reliance and self sufficiency.
To eliminate the role of moneylender.
To establish a linkage with the Banks, Governmentinfrastructures and other institutions for socio-economicdevelopment through SHGs.
5
-
8/6/2019 Micro Finance And
6/19
Formation of a SHG
Formation of a SHG takes about 2 months.
Deciding on an appropriate name for the SHG
Electing a President and Secretary and formulating,understanding and accepting by-laws.
Formulating by-laws requires at least two meetings of allmembers in a period of one month.
Opening the SHG Bank Account, and initiating the groupsinto maintaining records and registers (savings and
contribution register, attendance register, minutes book, etc)and books of accounts (cash book, bank book and ledgers)takes another one month.
6
-
8/6/2019 Micro Finance And
7/19
Basic Principles of SHG
The members of the groups should be residents ofthe same area and must have an affinity.
Savings first, credit thereafterSHGs should hold regular meetings
SHGs should maintain record of financial and othertransactions
7
-
8/6/2019 Micro Finance And
8/19
Basic Principles of SHG (Contd)
They should have norms regarding membership,meetings etc.
Group leaders should be elected by members androtated periodically
Transparency in operations of the group andparticipatory decision making
Rates of interest on loans should be decided by thegroup
8
-
8/6/2019 Micro Finance And
9/19
SHG Bank Linkage
In Feb 1992, NABARD launched the SHG BankLinkage Program.
Win-Win strategy The banks were able to tap a large market(low income
households)
Transactions cost were low and repayment rates were high
SHG were able to scale up their operations.
9
-
8/6/2019 Micro Finance And
10/19
Important aspects used by banks forassessing a Self Help Group
1.Norms for functioning
The SHG should have developed some kind of norms for itsfunctioning
The norms should be covering major areas of its functioningas well as the decision making processes, leadership etc.Norms generally relate to Membership, Meetings, Savings, Credit, Fines, Leadership,
Personal/social improvement.
How norms evolved, whether by the consensus of
the whole group.Whether the members are aware of the norms (evenif they are oral) and understand them
Whether the norms are implemented.
10
-
8/6/2019 Micro Finance And
11/19
-
8/6/2019 Micro Finance And
12/19
3.Maintenance of books
Whether group is maintaining the basic books that will givedetails of its functioning and accounts of the group is an
important criterion to be judged.
A financer should verify Whether details of meetings, proceedings, and attendance
are maintained
Whether member-wise record of saving and credit aremaintained
Whether the records are up to date
Whether all members are kept informed of their savings andcredit balances from time to time
12
-
8/6/2019 Micro Finance And
13/19
4.Leadership
Two or three group members are elected as
leaders/ book-writers. The group leaders are expected to
a) regularly convene and conduct the meetings
b) help the group members in taking decisions
c) resolve conflicts
d) maintain books of account
e) approach bank branch for operation of accounts.
13
-
8/6/2019 Micro Finance And
14/19
The aspects that are to be seen are :
Whether the leaders have been elected and rotated
Whether they help in democratic functioning of the group
Whether there is a conscious attempt to groom othermembers to take up leadership
Are they marginalizing the benefits (especially loans)
14
-
8/6/2019 Micro Finance And
15/19
5.Participation and awareness of group members
Are the members aware of the purpose of group
formation, the operations and activities of thegroup
Things to be observed Do they participate in group discussions and decision
making
Do they help solve the problem that are raised in themeetings
Do they work cohesively and have transparent dealings
15
-
8/6/2019 Micro Finance And
16/19
6.Savings
The group decides on the amount of savings and also itsperiodicity.
7.CreditThe following aspects to be looked into while assessing the creditfunction of the group
The decision making process of selecting loanees.
The system followed in assessing credit requirement of individual
members and the amount to be sanctioned. The system of monitoring the credit.
The repayment performance of members and incidence of defaultsbesides the effectiveness to deal with such defaults.
16
-
8/6/2019 Micro Finance And
17/19
8.Self Reliance of the Group
The functioning of the group without the support
of the NGO is an important criterion forassessment.
17
-
8/6/2019 Micro Finance And
18/19
Ratings of SHGs
Composition, age of the group, weekly groupmeetings, attendance, minutes books, savings,savings loan recovery etc.
A total of 150 marks SHG scoring more than 120 marks out of maximum of 150
marks could be chosen for credit linkage
SHG scoring less than 120 marks will have to be further
developed before linkage.
18
-
8/6/2019 Micro Finance And
19/19
Thank You
19