Asian Journal of Multidisciplinary Studies Available online at www.ajms.co.

in
Volume 2, Issue 1, January 2014
ISSN: 2321-8819

Status of Microfinance in India; a Study Based On Self Help Groups

Muhammed Shafi .MK

Research Scholar
M.Phil. Management
Maulana Azad National Urdu University, Hyderabad
Gachibowli (Po), India, Pin-500032

ABSRTACT: Microfinance is an economic activity which deals with small scale financial
services like lending loans and collecting funds for small scale industries. In India around 800
MFIs (Micro Financial Institutions) are prevailing in which south India is the most dominated
province for micro financial activities. Andhra Pradesh is overwhelmed state in micro finances
which posses more than 60% of Indian microfinance sector. It also play a pivotal role in keep up
socio economic balances in regional areas.NGO, NBFCs and RRB are the key players in this
sector with prominent methodologies like SHGs (Self Help Groups) and SBLP etc. moreover
there are some Types of Informal Credit Suppliers found in India (including financial
intermediaries) which are Chit funds, Nidhis, Brokers, financial co-operations etc. This research
is mainly based on quantitative analysis collected from statistical data revealed by micro financial
entities and supportive institutions like NABARD, SIDBI etc. This attempt explore overall micro
financial intermediaries in India on the regional basis like south, west etc in which it emphasize
on SHG entities operated by various financial institutions.

Keywords: Microfinance, SHGs, Delivery methods

INTRODUCTION third of the world poor population(surviving on an

equivalent of one dollar a day). Though central
Microfinance is perceived to be sustainable government and state government poverty
mechanism to fight poverty and empower low alleviation programs are currently active in India,
income households. It extent small loans to very microfinance plays a major contributor to financial
poor people for self-employment project that inclusion. In the past few decades it has helped out
generating income in allowing them to take care of remarkably in eradicating poverty. Therefore
themselves and their families. It is provided short Reports show that people who have taken
term financing and repayment can be made on microfinance have been able to increase their
weekly or one year basis. The procedures and income and hence the standard of living. (Kishanjit,
processes of loan disbursements are normally fast Basu, Krishan Jindal, 2000)
and easy. Micro finance institutions (MFIs) have
grown popular over the past few decades because About half of the Indian population still
that offer impoverished people access to funds that doesn’t have a savings bank account and they are
can be used to develop small business which can deprived of all banking services. Poor also need
provide regular income and financial resources to financial services to fulfill their needs like
undeserved market. As such micro finance is an consumption, building of assets and protection
important tool to promote business development in against risk. Microfinance institutions serve as a
rural areas too. It is mainly run by the non- supplement to banks and in some sense a better one
government organizations, popularly known as too. These institutions not only offer micro credit
NGOs. but they also provide other financial services like
savings, insurance, remittance and non-financial
(Robinson,2001) defines ‘microfinance services like individual counseling, training and
as small scale financial services providing to the support to start own business and the most
people who work in agriculture, fishing and importantly in a convenient way. The borrower
herding; who operate small or micro enterprises, receives all these services at his door step and in
who provide services; who work for wage and most cases with a repayment schedule of
commission; and other individuals and groups at borrower’s convenience. But all this comes at a
the local level of developing countries, both rural cost and the interest rates charged by these
and urban’. institutions are higher than commercial banks and
vary widely from 10 to 30 percent.
The latest research done by the World
Bank reveals that India is a home to almost one

101
Status of Microfinance in India; a Study Based On Self Help Groups

Review of Literature in the sample were involved in community actions.

He accesses the quality of SHGs on different
Some studies already have done related to this parameters like involvement in social harmony,
topic but most of them have examined importance social justices, community action etc. He further
and literature studies of microfinance. The observes that only 15% of SHGs have good quality
relationship between the financial system and of records that are maintained by the group
economic growth has been scrutinized by a large members.
number of studies in India and abroad. Financial
development is considered as a cause of economic (Sharma, 2007) shows that the SHG
growth (Schumpeter 1911; Hicks 1969). (Hicks movement has not get success in some north-
1969) argued that without financial innovation the eastern states for reasons that are peculiar to the
industrial revolution would not have taken place. region. The study also observes the banking
Microfinance is the result of financial service constraints as a factor that hinders the quality of
innovations which includes microcredit, micro SHG in Northeast India. Very few studies are
savings, money transfer vehicles and micro conducted on microfinance at the NER level in
insurance. It is a special kind of financial service India. Most of the studies focus on Self-Help
designed to cater the needs of poor people who are Groups (Agarwal, Shalini 2007; Gopisetti,
unemployed, entrepreneurs or farms who are not Rambabu 2007; Sarkar, Soumitra 2008; Nagarajan,
bankable. The microfinance revolution, particularly P.S 2009).
the success stories of institutions like Grameen
Bank in Bangladesh, Banco Sol in Bolivia, and Need for the study
Bank Rakyat in Indonesia, attracted several
India has been congregating to many financial
economists to study microfinance in the latter half
of the 1990s. Past studies of many researchers institutions and number of financial services which
found that microfinance has very beneficial are carried out by commercial banks and regional
enterprises. The corporate banks have ultimate aim
economic and social impacts (Holcombe, 1995;
Hossain, 1988; Otero & Rhyne, 1994; Schuler, to increase their profits for deriving more capital
Hashemi & Riley, 1997). appreciations and institutional diversification. So
developing institutions and banks are concentrate
In respect to the various qualities, on large investing people for easy fulfilling their
sustainability, performance and impact assessment profit motive needs. Despite many ventures and
related to SHGs in India, (Sa-Dhan, 2003) made a assistance extended by government to lower people
comparative study of assessment tools developed and small scale institutions, people cannot avail
by various organisation viz. NABARD, BASIX, their amount in healthy and profitable manner.
MYRADA, CARE, APAMAS etc. and have Some institutions realized the need of microfinance
identified eight broad thematic areas with various and started micro investments like micro mutual
indicators and their relative benchmarks. The study funds. But by the microfinance all banks can pools
also felt that unless a tool could provide an instant many small investments and small scale credit
and clear analysis of the state of affairs of SHG, it lending in wide range form will be facilitated. In
would not popular in practice. However, the study India more people are living rural areas where
identifies eight broad major indicators viz. Group people cannot meet big financial institutions to
Constitution, orgnisational discipline, fulfill their daily financial needs. This problem will
organizational systems, financial management, be eradicated only this kind of micro financial
credit policy external linkage etc. to access the activities. So this study tries to show issues,
quality of SHGs. APMAS (2006) examined a wide challenges and opportunities of micro finance in
range of issues including cases of dropouts from India and find out what are the different methods
SHGs and internal politics, and issues of social will capable to pave more transparency and
harmony and social justice, community actions, accountability of proper services rural people.
book-keepings, equity, defaults and recoveries and
sustainability of SHGs. (Singh, 2006) studied Objectives of the Study
SHGs programme of Peoples Education and  To analyze overall microfinance activities
Development Organisation and makes an attempt in India on the basis Self Help Group
to evaluate social and economic impact on operations.
households of SHGs members. They observed that  To study different microfinance delivery
members involved in SHGs programme have methods to carryout microfinance in India.
increased involvement in decision making,  To find out microfinance supporting
awareness about various programmes and measures and SHGs savings with financial
organisations. Moreover, the members get institutions.
information about the different sources of credit
and also reported that there are the evidences of Research Methodology
household income, food security and increased
standard of living. EDA Rural Systems and This study is based on quantitative and
APMAS (2006) observed that 30 per cent of SHGs qualitative analysis. The data are collected through

Asian Journal of Multidisciplinary Studies, 2(1) January, 2014 102

Status of Microfinance in India; a Study Based On Self Help Groups

primary basis like observation and personal Rashtriya Mahila Kosh, SIDBI - Small Industries
interaction and through secondary data. Secondary Development Bank of India, Tamil Nadu Women’s'
data collected from journals and other financial Development Corporation etc are prevailing in
periodicals published by financial institutions Indian microfinance sector. SBLP, initially
especially NABARD. The information gathered on promoted by MYRADA (in Karnataka) and
the regional basis like south, west, east, and north PRADAN (in Tamil Nadu and in Bihar) and
province of India. The main focus of this study is formally launched in 1992 by NABARD began to
SHG (Self Help Group) which have been operated scale-up in the mid-1990s. Under this programme,
by different banks and small scale enterprises. Due NABARD refinances bank loans to SHGs through
to lack believable data from states this study commercial banks but the credit risk is carried by
confined to major states from each province. the banks.
However I believe that the selected areas and found
facts represent all areas of India and research will MFI management approach, services and
be helpful to impart descriptive knowledge performance are influenced by their legal form –
regarding designed topic. ranging from not-for-profit Societies/Trusts and
not-for-profit Companies registered under Section
Microfinance in India - delivery methodologies 25 of the Companies Act to NBFCs licensed by
RBI. The institutions with legal forms lend through
Today microfinace has evolved into a the concept of Joint Liability Group (JLG). A JLG
vibrant industry exhibiting a variety of business is an informal group comprising of 5 to 10
models. Microfinance Institutions (MFIs) in India individual members who come together for the
exist as NGOs (registered as societies or trusts), purpose of availing bank loans either individually
Section 25 companies and Non-Banking Financial or through the group mechanism against a mutual
Companies (NBFCs). Commercial Banks, Regional guarantee. The below given table proves a brief
Rural Banks (RRBs), cooperative societies and snapshot of Indian microfinance. Now days it is
other large lenders have played an important role in running in many countries in a wide variety of
providing refinance facility to MFIs. Banks have settings like Grameen Bank, Village Bank, Credit
also leveraged the Self-Help Group (SHGs) Union, and Self-Help Groups model etc. In India it
channel to provide direct credit to group borrowers. is similar with respect to finances from specialized
institutions like the NBFC or SIDBI and
There are some kinds of supporting NABARD.
institutions in formal sector like NABARD,

Types of Micro Financial Institutions in India (MFIs)

SL. No Types of MFIs Number Legal Registration

Profit motive MFIs

1 Non-Banking Financial Companies 45 Indian companies Act, 1956

(NBFCs) Reserve Bank of India Act,
1934
Non-profit MFIs

2 NGOs 400-500 Society Registration Act, 1860

Indian Trust Act, 1882
3 Non-Profit companies 20 Section-25 of Indian
Companies Act, 1956
Mutual Benefit MFIs

4 Mutual benefit MFIs – Mutually 200-250 Mutually Aided Co-operative

Aided Cooperative Societies societies, Act enacted by State
(MACS) Governments
[Source: Adapted from the Report of the Task Force on Supportive Policy and Regulatory
Framework for Microfinance (NABARD 2012)
The Indian microfinance sector has two 1991 NABARD launched a pilot project called
major models for microfinance delivery – the SHG SHG Bank-Linkage Program (hereafter SHG-BLP)
Bank Linkage Programme and the MFI model. to extend bank credit to five hundred SHGs, which
While the MFI model is growing rapidly the SBLP later was extended to the whole country through
is by far the more dominant model in terms of the commercial banks while the MFI model is
outreach. Both these models are very different from privately managed with some institutions being
each other in methodologies adopted and legal regulated by the Reserve Bank of India.
forms of institution involved in service delivery. In

Asian Journal of Multidisciplinary Studies, 2(1) January, 2014 103

Status of Microfinance in India; a Study Based On Self Help Groups

Grameen Bank model: This model works on Size of the SHG: SHGs are small informal group
intensive fieldwork by staff to motivate and of 10-20 individuals promoting savings habit
supervise the borrower groups. Groups normally among members. It can be defined as a self
consist of five members, who guarantee each governed, peer controlled informal group of people
other’s loans. This model requires careful targeting with the similar socio-economic background and
of the poor through means of tests comprising having a desire to collectively perform a common
mostly of women group. A number of variants of purpose. NABARD launched the SHG-bank
the model exist; but the key feature of the model is linkage program on polite basis in February 1992.
group-based and graduated financing that substitute NABARD pilot project envisaged via The SHG,
collateral as a tool to mitigate default and the bank and non-governmental organisation
delinquency risk. (NGO). DHAN foundation has come up with a
unique approach of federating women self group
Village Bank model: This model involves an which is called KALANCHIAMS into cluster
implementing agency that establishes individual concept NIDHIS ‘ which is turn , from a block
village banks with about thirty to fifty members level federation.
and provides external capital for onward financing
to individual members. Individual loans are repaid Characteristics of the SHG: Some of the basic
at weekly intervals over four months, at which time characteristics for provision of credit by the bank to
the village bank returns the principal with interest/ the group are 1) should have been in active
profits to the implementing agency. This has been existence for at least a period of six months, 2) it
widely replicated mainly in Latin America and should have successfully undertaken savings and
Africa, but with substantially less total outreach credit operations from its own resources 3) should
than the many Grameen Bank replications is the be democratic working, wherein all members feel
Village Bank model. A bank repaying in full is that they have an equal say and it should be evident
eligible for subsequent loans, with loan sizes linked 4)the group is maintaining proper accounts/records
to the performance of village bank members in 5) banker should be convinced that the group has
accumulating savings. Peer pressure operates to not come into existence only for the availing
maintain full repayment, thus assuring further benefits and there should be genuine need to help
injections of capital, and also encourages savings. each other and work together among the members
Savings accumulated in a village bank is also be 6) SHG members should preferably have
used for financing. homogeneous background and interest.

Credit Union (CU): The third type of MF model is Margin and Security Norms: As per the existing
a Credit Union (CU). A CU is based on the concept operational guidelines, SHGs may be sanctioned
of mutuality. It is in the nature of non-profit savings linked loans by banks (varying from a
financial cooperative owned and controlled by its saving2 to loan ratio of 1:1 to 1:4). However, in
members. CUs, mobilize savings, provide loans for case of matured SHGs, loans may be given beyond
productive and provident purposes and have the limit of four times the savings as per the
memberships which are generally based on some discretion of the bank. However, the Banks may
common bond. CUs generally relate to an apex make the credit decision on the basis of certain
body that promotes primary credit unions and objective parameters such as proven track record,
provides training while monitoring their financial savings pattern, recovery rates, credit history,
performance. CUs are quite popular in Asia, mostly housekeeping, etc.
in Sri Lanka.
SHG – Bank Linkage Programme (SBLP)
Self-Help Groups (SHGs): A fourth model
originated in India is based on Self-Help Groups In its initial stage, SHGs financed are directed
(SHGs). Each SHG is formed with about ten- by the banks viz., Public and Private Sector,
fifteen members who are relatively homogeneous Commercial Banks, Regional Rural Banks (RRBs)
in terms of income. An SHG essentially pools and Co-operative Banks. One of the distinctive
together its members’ savings and uses it for features of the SHG - Bank Linkage Programme
lending. SHGs also seek external funding to has been very high on-time recovery. As on June
supplement internal resources. The terms and 2005, the on-time recovery under SHG- Bank
conditions of loans differ among SHGs, depending Linkage Programme was 90% in commercial
on the democratic decisions of members. Typical banks, 87% in RRBs and 86% in cooperative
SHGs are promoted and supported by NGOs, but banks. Later onwards the other institutions like
the objective for them is for to become self- MFIs, SPHIs, federation of SHGs or Government
sustaining institutions. organisations like NABARD, SIDBI etc. also took
initiative to form the SHG. These SHGs are
trained by the NGOs, SPHIs, MFIs or federation of
SHGs and bank linkage is also done. The banks
Basic features of SHGs keep the savings of the group as collateral and the
credit of the group corpus is linked to the amount
of savings. After six months of regular savings,

Asian Journal of Multidisciplinary Studies, 2(1) January, 2014 104

Status of Microfinance in India; a Study Based On Self Help Groups

these SHGs become eligible to apply loan from the Analysis

bank.
SHGs Microfinance operations overall India
Based on their savings corpus, number of
meetings and internal lending, bank gives credit to Amongst the regions, the Western region
the good SHGs. Once loan is sanctioned to the recorded the highest decline of 15% in the number
SHG, the concerned NGOs, SPHIs, MFIs or of SHGs saving linked - mostly due to a near 17%
federation of SHGs take the entire responsibility to fall in Maharashtra, followed by the Central region
monitor the loan amount and their periodic (representing some of the priority states) of 14%
installment payments. In the initial phase of the with Chhattisgarh recording as high as 24% decline
SHG movement, as the groups were formed by the and U.P. with 14% and the North Eastern States
NGOs or MFIs, the start-up costs were low for where the decline was almost 12%. Even Southern
banks. However, over the years, banks have also region - the pioneers in SHG-BLP recorded a near
evolved as SHPIs. In the process, the start-up costs 4% decline in the numbers.
of group formation, etc. have devolved on the
banks, impacting their pricing policies.

Source: NABARD report on status of microfinance 2012-13

On the other hand the savings balance of Progress under Microfinance – Savings of SHGs
SHGs with banks shot up by over 25% during the with Banks
year (`8,217 crore as against 6,551 crore a year Region wise/ State wise position
back). All except the North Eastern and Western A.NORTHEN REGION (Amount in Lakh)
region recorded higher savings bank balance with Sr. Region/State Total Saving
banks with Eastern States recording 47% increase No Number Amount
while the Southern States accounting for 37% of SHGs. in Banks*
increase. Among the major States, West Bengal 1 Chandigarh 609 95.11
recorded the highest increase of 93% followed by 2 Haryana 42580 4030.73
A.P. at 70%. If the spurt in Savings balance with 3 Himachal 53242 4277.92
banks is read with decline in the number of savings Pradesh
linked SHGs, could be suggestive of enhanced 4 Jammu & 5796 970.40
savings by SHGs, including voluntary savings by Kashmir
SHG members. The average savings bank balance 5 New Delhi 3787 348.05
of SHGs with banks as on 31.03.2013 was 11,230 6 Punjab 35060 3635.48
as against 8,230 for the previous year and southern 7 Rajasthan 231763 15760.74
region recording over 10,000 averages (14,350). TOTAL 372837 29118.52
Among the major States, Karnataka SHGs maintain *(Banks includes savings with SHGs in
the highest saving account balance of nearly 18,000
Commercial, Regional and Cooperative Banks)
per SHG closely followed by Andhra Pradesh. Source: NABARD report on status of microfinance
2012-13, as on 31st March 2013

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Status of Microfinance in India; a Study Based On Self Help Groups

In these regions there are eight states in which 522837 SHGs which is more than 50% of total
Rajasthan constitutes major parts where there are micro finance in eastern region. Though Jharkhand
231763 SHGs and 15760.74 savings in banks. shows unfavorable results toward microfinance
Himachal Pradesh takes 53242 Self Help Groups activities where there are only 85334 units and
and 4277.92 lakh savings in banks. New Delhi is 7689.92 savings in banks.
the least constituting region where there are only
3787 SHGs and 348.05 lakh savings with D. SOUTHERN REGION (Amount in Lakh)
commercial, regional and Cooperative banks. Sr. Region/State Total Saving
Anyhow compare to other regions of India northern No Number Amount
region is positioning middle place in micro finance of SHGs. in Banks*
activities. 1 Andhra Pradesh 1421393 254179.23
2 Karnataka 645695 115618.92
B. NORTH-EASTERN REGION (Amount in 3 Kerala 581325 51758.93
Lakh) 4 Lakshadweep 27 7.17
Sr. Region/State Total Saving 5 Puduchery 20053 1731.58
No Number Amount 6 Tamil Nadu 873012 84966.77
of SHGs. in Banks* TOTAL 3541505 508262.60
1 Assam 271072 10750.76 *(Banks includes savings with SHGs in
2 Arunachal 5033 412.09 Commercial, Regional and Cooperative Banks)
Pradesh Source: NABARD report on status of microfinance
3 Manipur 12656 235.24 2012-13, as on 31st March 2013
4 Meghalaya 9573 515.66 Here is the most dominant part of microfinance
5 Mizoram 3117 612.21 in India; around 70 percentage of Indian micro
6 Nagaland 8478 185.85 finance has been seen in southern region. Andhra
7 Sikkim 3529 79.43 Pradesh is the toped state in south as well as India
8 Tripura 10438 219.34 where it constitute 60% microfinance activities.
TOTAL 322896 13010.63 There are 1421393 SHG units in Andhra Pradesh
*(Banks includes savings with SHGs in and 254179.23 savings in banks. Kerala, Tamil
Commercial, Regional and Cooperative Banks) Nadu, Karnataka also show wide range of micro
Source: NABARD report on status of microfinance finance operations. This will lead to rural and
2012-13, as on 31st March 2013 regional balance in India
In this area microfinance is been seen without E. CENTRAL REGION (Amount in Lakh)
prominent figure. In north east region only Assam
shows a positive and better condition in Sr. Region/State Total Saving
microfinance activities. The total number of SHGs No Number Amount in
is less than 50000 units in comparison with of Banks*
northern region of India. This may be because of SHGs.
their geographical as well as cultural impacts 1 Chhattisgarh 98493 6135.96
because these eight states are small states compare 2 Madhya 159457 12321.19
south states. Pradesh
3 Uttar Pradesh 403932 39200.82
C.EASTERN REGION (Amount 4 Uttarakhand 40316 4763.57
in Lakh) TOTAL 702198 62421.54
Sr. Region/State Total Saving *(Banks includes savings with SHGs in
No Number Amount Commercial, Regional and Cooperative Banks)
of SHGs. in Banks* Source: NABARD report on status of microfinance
1 A & N 5217 144.74 2012-13, as on 31st March 2013
Islands In central region, even there are some
2 Bihar 270890 16967.64 movements for microfinance based on SHGs, that
3 Jharkhand 85334 7689.92 is not shows favorable condition on the basis of its
4 Odessa 522837 41827.81 geographical area. Here only Uttar Pradesh
5 West Bengal 58681 72694.87 constitutes more than half of total SHGs units
TOTAL 1471009 139325.98 (403932 units) and savings, rest of states not
*(Banks includes savings with SHGs in constitute less than average conditions towards
Commercial, Regional and Cooperative Banks) microfinance.
Source: NABARD report on status of microfinance
2012-13 as on 31st March 2013.
Eastern region is better place for microfinance
where almost all states show tremendous signal for
activities based on SHGs. Odessa is taking part of
F. WESTERN REGION (Amount in Lakh)

Asian Journal of Multidisciplinary Studies, 2(1) January, 2014 106

Status of Microfinance in India; a Study Based On Self Help Groups

Sr. Region/State Total Saving predominant in West Bengal, Andhra Pradesh,

No Number of Amount in Kerala and Tamil Nadu states. In Andhra Pradesh
SHGs. Banks* the federations are registered under the Mutually
1 Goa 9889 66o.74 Aided Cooperative Societies Act, thus providing
2 Gujarat 208410 17555.05 substantial autonomy for the federations with
3 Maharashtra 687717 51370.41 reduced government domination. In Kerala, the
TOTAL 906016 69586.20 federations are promoted through the
*(Banks includes savings with SHGs in Kudumbashree program, while the Tamil Nadu
Commercial, Regional and Cooperative Banks) Government promotes the federations under its
Source: NABARD report on status of microfinance Vazhndhu Kaatuvom and Mahalir Thittam projects.
2012-13, as on 31st March 2013
. The financial needs of the SHGs are catered to
Here Maharashtra is only shows positive results by various financial institutions: the Commercial
where there are 687717 SHG units and 69586.20 Banks, Co-operative Banks, Co-operative Credit
lakh savings which is more than 75 % of total Societies and Regional Rural Banks (RRB). There
microfinance activities of western region. Gujarat are around 94000 Co-operative outlets, 14000
has better option to make more microfinance branches of the RRBs and 33,000 suburban
activities because of geographical peculiarities and branches of the commercial banks. Commercial
many commercial banks are running in Gujarat bank plays a vital role in creating of Self help
which will provide financial supports to micro group and providing micro finance. In other words
financial activities. we can say that commercial banks emerge as a
leader in creating Self help groups. The study also
Findings ravels that maximum no. of Self help groups has
been present in southern region and while poor
The growth performance of SHG during the presence in north eastern region
last years has reached a stage of upland, and it is
time for giving it new direction for future Concluding Observations
expansion. The provisional data available from
NABARD for the year 2012-13 shows that the Microfinance is a growing sector in India
number of SHGs provided with bank loans was which plays a significant role in socio economic
20.58 million, which is about Andhra Pradesh development. In microfinance industry of India
topped the list of states with the maximum number there are many financial institutions in which
of groups with a share of 32 per cent, Tamil Nadu SHGs are wider growing intermediary in form of
with 11.8 percent stood in the second place. While microfinance which are processed by Banks, NGOs
West Bengal ranked third with 8.8 per cent share, and Other NBFCs. The annual report of NABARD
Odessa, with a share of 7.22 per cent, ranked fourth based on ‘Status of microfinance in India reveals
and Karnataka, with a share of 6.1 per cent, ranked that south India is the most dominant area for this
fifth. sector and Andhra Pradesh topped in state wise
analysis of micro finance operations. Self-help
Analysis of the SHG-bank linkage groups are started by non-profit organizations
programme data shows a similar pattern of regional (NGOs) that generally have broad anti-poverty
imbalances. More than half (52%) of the active agendas. Self-help groups are seen as instruments
clients of the industry belong to the Southern states, for a variety of goals including empowering
while almost one quarter (23%) belong to the women, developing leadership abilities among poor
Eastern states. Western states contribute 10% to the people, increasing school enrolments, and
total client base, and central and Northern states improving nutrition and the use of birth control. In
contribute 6% each. The Northeastern states seem SHGs, NABARD started SBLP program which has
to be the most underserved region of the country, been progressing different nook and corner of
responsible for a meager 3% of the total number of India. NABARD estimates that there are 2.2
clients. A similar trend is also seen in loan portfolio million SHGs in India, representating 33 million
– the Southern states contributing 54%, Eastern members that have taken loans from banks under
states 22%, Western states 10%, Central states 7%, its linkage program to date. This does not include
Northern states 5%, and Northeastern states only SHGs that have not borrowed. The SHG Banking
2%. MFIs rarely travel a long distance to overcome Linkage Programme since its beginning has been
regional imbalances in their client outreach and predominant in certain states, showing spatial
coverage. preferences especially for the southern region –
Andhra Pradesh, Tamil Nadu, Kerala and
A study on outreach of SHGs conducted in Karnataka
the North Eastern region highlighted that within the
North East Region, the growth in SBLP is In India only 20% of people access loans from
concentrated in the plains of Assam and Tripura. formal source and 80% are from informal source.
The SGSY Programme has been dominating the Out of this 20% only 10% are access to
SHG movement in NER unlike other parts of India microfinance. Commercial banks provide more
where the SBLP leads The SHG programmes are loans for SHGs and RRBs and Co-operative banks

Asian Journal of Multidisciplinary Studies, 2(1) January, 2014 107

Status of Microfinance in India; a Study Based On Self Help Groups

also make loan disbursement after commercial to gain a clearer understanding of the overall role
banks. The overall snapshot of microfinance played by micro finance institutions in India and
outreach and penetration in districts and states of can use inputs from map to make informed
India documented the expansion of micro finance decisions about the need for expansion of financial
via the SHG and JLG (MFI) models in India over services to the poor, and can allocate resources to
the last several years. It is expected that it will address the areas remain underserved.
assist practitioners, policymakers and researchers

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