Microfinance through Self-Help Groups and Financial Inclusion

Abstract

Microfinance through Self-Help Groups (SHGs) has established itself as a reliable strategy for ensuring the outreach of a variety of benefits for the poor in the country, with a focus on poor women. Different models of savings mobilisation and credit delivery tried out in various regions are presented in this paper. The present classification is in terms of SHG-Bank Linkage Programme (SBLP) model and Micro Finance Institutions (MFIs)-Bank Linkage (MFIBL) model. The paper presents a review of SBLP for the period 2008-16, MFIBL during 2013-16, and brings out the view that microfinance through SHGs is an important strategy for financial inclusion, for which special initiatives have been taken by Government of India and the Reserve Bank of India. The objective of financial inclusion is to provide a holistic set of financial services through multiple delivery channels to the unbanked population to enable them to lead a better quality of life. The study, based on an analysis of published State-wise data on the microfinance programme, and examination of recent literature accessible from various sources, focuses on the linkage between microfinance through self- help groups and financial inclusion.

One important aspect emphasised in the second part of the paper is the role of microfinance beyond savings and credit through a number of products and services. Emphasis is being laid on the convergence of SBLP and NRLM with other related programmes to accelerate the penetration of financial inclusion. The SBLP and MFIBL models should be pursued with greater vigour to play a proactive role for the greater outreach of microfinance with penetration in underserved areas without compromising on the quality of lending.