SHG-Bank Linkage Program in India

Under the SHG-bank linkage programme, NGOs and banks

interact with the poor, especially women, to form small homogenous groups. These small groups are encouraged to meet frequently and collect small thrift amounts from their  members and are taught simple accounting methods to enable  them to maintain their accounts. Although individually these poor could never have enough savings to open a bank account, the pooled savings enable them to open a formal bank account in the name of the group. This is the first step in establishing links with the formal banking system. Groups then, meet often and use the pooled thrift to impart small loans to members for meeting their small emergent needs. This saves them from usurious debt traps and thus begins their empowerment through group dynamics, decision-making, and funds management.

Gradually the pooled thrift grows and soon they are ready to receive external funds in multiples of their group savings.

Bank loans enable the group members to undertake incomegenerating activities. Through the SHG-bank linkage program the RBI and NABARD have tried to promote relationship banking, i.e.,

improving the existing relationship between the poor and bankers with the social intermediation of NGOs.


more : http://ifmr.ac.in/cmf/mrap/wp-content/uploads/2009/04/shg-bank-linkage-program.pdf