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Case Studies | Economics | India | Volume 6 Issue 8, August 2017

Issues in Financial Intermediation through SHGs Federation

Suresh G ^[8]

Abstract: SHGs have became the vehicle of Change for the Poor and Marginalized Following the success of the Grameen Bank in Ban-gladesh, many developing countries decided to tap into their respective micro-credit potentials. India was no exception to this micro-credit frenzy and she too began investing in micro-finance and its allied activities. However, unlike Bangladesh, India did not have a financial institution dedicated for the provi-sion of micro-credit across various poverty-stridden households. As a result, traditional institutions, in the form of banks, NBFCs, NGOs and in some cases, even the State Governments, rose to the occasion. This, naturally, led to several repercussions, some good and some bad. Hence, the results are not at all consistent across India, with regard to microfinance and its allied programmes. India saw the need for micro-credit as the entire primary sector was domi-nated by informal creditors in the form of money-lenders and pawnbrokers, who charged exorbitantly high interest rates. This discouraged the poor from availing credit in the first place and those who did avail credit from these sources, were bound to lose their possessions (land/house) as collateral, since they would be in no position to repay, owing to the high interest rates. The Government of India understood that if poverty was to be alleviated from the country and the social status of the poor was to be uplifted, the availability of small and low-interest/interest-free credit was very important. As a result, NABARD along with a chain of SHGs, MFIs, banks and NBFCs were tasked with making credit available to each and every rural household. This report is going to deal with SHGs and SHG Federations, which been at the forefront of Micro-finance revolution in the country.

Keywords: SHG, Financial Inclusion, NGOs, Financial Institutions, IKP

Edition: Volume 6 Issue 8, August 2017,

Pages: 1003 - 1008

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