Models to Deliver Micro Finance :
In India due to adoption of "Multi Agency Approach" for the development
of micro Finance Programme. All the major financial institutions viz,
Commercial Banks, Co-Operative Banks, Regional Rural Banks, along with
NGOs and MFIs have been associated with the micro finance programme.
These institutions made experiments with various models to deliver micro
finance at the door steps of the rural poor. Of all the models, the
SHG-Bank Linkage model and Joint Liability Group (JLG) model (popularly know as Grameen model) are the most prominent micro finance models in India.
1. SHG, Bank Linkage Model
It is a small voluntary association of poor people having common
socio-economic back ground coming together to solve their common
problems through self help.
Programmes : The SHG promotes small savings among members and
such savings will be deposited in bank on the name of SHG. This SHG does
not have more than 20 members. The Banks issue loans to groups basing
on their savings and internal credit behavior. The SHG Bank linkage
model is emerged as a major micro finance business model in India. This
model can be further classified into three groups.
- SHG - Bank Linkage Model - I : Banks themselves take up the work of forming and nurturing the groups, their saving bank accounts and providing them bank loans.
- SHG - Bank Linkage Model - II : SHGs are formed by NGOs and formal agencies but are directly financed by banks.
- SHG - Bank Linkage Model - III : SHGs are financed by banks using NGOs and other agencies as financial intermediaries.
2. Joint Liability Group Model : It is a small group of
prospective borrowed with 4 or 5 Members - First instance only two
members are eligible for loan from Micro Finance Institution. If the
first two borrowers repay the principal plus interest over a period of
fifty weeks so other member of the group become eligible themselves for a
loan. Because of these restrictions there is substantial group pressure
to keep individual records clear. In this sense, collective
responsibility of the group serves as collateral on the loan. Grameena
model propounded by Prof. Mohammed younus, the father of micro
finance movement in Bangladesh and Nobel laureate, is the base for this
model . Unlike the SHG, the sole purpose of existence of a JLGM is to
receive a group loan from a MFI.
NABARD has taken a biased stand towards the SGH - Bank linkage model.
Grameena model has not received proper attention so far. It is only
after seeing the success in Bangladesh the RBI made up its mind in favor
of the Grameen model .The situation has turned favorable for Grameen
model of late and some banks have started interest.
Evaluation of Micro Finance Sector in India
Following are some of the features of Micro Finance in India, which is progressing rapidly.
- SHB - Bank Linkage Model is popular in its scale, geographical coverage and out reach. Thsi model is started as a pilot project of NABARD. It has become a movement now. It brought name and fame to india in the world of micro finance.
- Out of three SHG - Bank Linkage models, model II takes lion's shares.
- Among financial institutions commercial banks have the highest share in linkage with SHGs followed by RRBs and co-operatives.
- Southern region obtains better linkage and secured highest loans.
- Among the states, Andhra Pradesh occupies first place in terms of linkage and credit disbursal.
