Lessons from Self Help Group-Bank Linkage Program as a Medium for Formal Financial access in India May 22nd, 2018 By: Suraj Jacob

What is a Self-Help Group? Lessons from India – SHG Bank Linkage Program What is a Self-Help Group? A self-help group (SHG) is a financial intermediary owned by the poor. Usually comprising of 10-20 women, it acts as a way of facilitating informal financials services to rural poor. It is an intricate social design in which people participate by making themselves socially and financially accountable to each other. Similar to ROSCA’s in several other countries , wherein homogeneous group members start similar financial initiatives.

Lessons from India – SHG Bank Linkage Program State of SHGs in India Total SHG coverage of 100 million households 8.5 million SHGs with savings 4.8 million SHGs with outstanding loans SHG acts as a tool for financial inclusion in India, especially rural India. In 1992, National Bank for Agriculture and Rural Development (NABARD) launched the Self Help Group Bank Linkage Programme (SBLP). This facilitates financial transactions between formal rural banking system in India and informal self help groups, formalizing the institution of SHGs.

Developments in the Indian SHG Space Lessons from India – SHG Bank Linkage Program 1992: NABARD launches SBLP 2006: RBI launches BC initiative 2008: Increased emphasis on SHG credit requirement 2011: NRLM starts as SHG platform 2011: SHG members authorized as BCs 2012: Introduction of SHG-2 2013: Simplification of SHG KYC norms 2014: SHGs to share credit information with CICs 2015: Digitization of SHGs via E-Shakti

SHGs are Used to Facilitate.. Lessons from India – SHG Bank Linkage Program Credit Linkage Delivery of Insurance and Pension Product Financial Literacy Hand Holding and Training Enterprise Development/Business Creation Community Participation

Study Context Lessons from India – SHG Bank Linkage Program IFMR LEAD in partnership with HIH India conducted a study on evaluating the impact of SHG based microfinance and entrepreneurship training program Impact was assessed on the socio-economic livelihoods of rural-low income households in Tamil Nadu (a state in India) Impact was assessed across outcomes such as financial behaviour, business creation and expansion and women empowerment indicators The SHG program was implemented by HIH India The program consisted of three main components: Group Formation, Business Training and Loan Disbursement HIH India managed the monitoring and tracking of program implementation that roughly covered 3000 beneficiaries.

Lessons from India – SHG Bank Linkage Program Research Objectives Is micro-credit combined with entrepreneurial training effective? Does it help poor households increase their well-being, consumption and business profits, and does it have positive impacts on education, health, and women empowerment? To what extent is the program effective and how do impacts differ for different segments of the population, in particular the poorest, the least educated, and those without a business? What are households’ characteristics that explain why some take-up micro- credit, while others don’t?

Lessons from India – SHG Bank Linkage Program Research Methodology Randomized Controlled Trial (RCT) approach to evaluate the impact of SHG program Helps isolate causal impact of the program Minimizes bias in the study Identifies nature and extent of impact Randomization was done at the village level Some villages received the treatment, while others did not

Sample Size and Geographical Context Lessons from India – SHG Bank Linkage Program Sample Size and Geographical Context Study Geography Study was conducted in 3 districts of Tamil Nadu- Sivagangai, Virudhunagar and Tuticorin Study Sample 303 villages were covered under the study and were randomly assigned into treatment and control groups 5061 households were selected from these villages as final study sample TREATMENT GROUP N= 3482 household Group Formation Training Loan Disbursement CONTROL GROUP N=1579 households Did not receive intervention

Study Timeline Lessons from India – SHG Bank Linkage Program Village Panchayat Level Survey: June 2010 Baseline Survey: July 2010 to October 2011 Implementation of HIH-SHG Program: Jan 2012 to Jan 2015 Midline Survey: February to May 2015 Endline Survey: March to November 2016

What do the Study Participants Look Like? Lessons from India – SHG Bank Linkage Program What do the Study Participants Look Like? Avg. Household size is 4.5 73% of Individuals had formal schooling 52% of employed adults work as casual laborers Avg. annual Household income is INR 96,135 73% of Households have at least one outstanding loan On avg., 34% of Household expenditure is spent on food

Key Results Variables which showed an effect of the program Lessons from India – SHG Bank Linkage Program Key Results Variables which showed an effect of the program Likelihood to Save and Savings Amount Likelihood to have loans and Number of outstanding loans Business profits in lean/off-season months Notable Variables which did not show an impact – Null Results Income Consumption and Expenditure Asset Accumulation Women Empowerment Indicators Key Text Study in line with Lit. Study exhibits some differences, but not to a large extent Study outcomes not in line with Lit.

Savings Lessons from India – SHG Bank Linkage Program Treatment Households were 9% more likely to save and also reported higher savings amounts Treatment Households were 9% more likely to save and were more likely to invest their savings towards asset building and business expansion

Loans Lessons from India – SHG Bank Linkage Program Households with SHG membership have more instances of loans from formal sources Treatment Households were 14% more likely to acquire loans, had higher outstanding loan amounts and were more likely to have insurance policies.

Household Business Lessons from India – SHG Bank Linkage Program In lean months treatment households earn ~ 33 % more profits as compared to their control counterparts Businesses run by households in the treatment sample have significantly higher average profits for months in their lean period when compared with their counterparts in the control sample.

SHG Dissolution Lessons from India – SHG Bank Linkage Program Downward trend in the proportion of SHGs dissolving as module trainings and loan cycles progress Use the other IFMR Financing SHGs study to substantiate this.

Households Types which Benefitted Most from the Program Lessons from India – SHG Bank Linkage Program Households Types which Benefitted Most from the Program Households with Businesses Households in higher income quartiles Households with Heads having higher education levels Households with Female Heads Are more likely to save with SHGs Program helps secure women's decision making power

Households Characteristics Influencing SHG Participation Lessons from India – SHG Bank Linkage Program Households Characteristics Influencing SHG Participation Households with Businesses Households in higher income quartiles Households with Female Heads

Conclusion Need for greater hand holding Lessons from India – SHG Bank Linkage Program Conclusion Positive impact of the program on the savings and loans behaviour of households. No transformational effects Need for greater hand holding Better quality of SHG interaction could lead to greater impact of SHG membership on women’s livelihoods. Digitization holds promise for more transparency and accountability Leverage SHGs for livelihood promotion as well Results show a positive impact of the program on the savings and loans behaviour of households. However the findings also suggest that being part of SHGs might not have transformational effects on income and overall economic conditions of households. Results highlight the need for greater hand-holding of SHGs to ensure their sustainability in the longer term. Better quality of SHG interaction could lead to greater impact of SHG membership on women’s livelihoods. Need for developments in the SHG space towards making the SHG movement more inclusive and transparent- Towards this end, Digitization of SHGs holds promise. SHGs in general have demonstrated the ability to transform lives of rural women across India and greater efforts should be made to make it a holistic platform for livelihood promotion rather than a mere financial inclusion tool.

Lessons from India – SHG Bank Linkage Program Findings on Saving Group models (SGs & SHGs) from other research studies High Savings Credit Resilience Food Security Self-confidence Medium Asset Accumulation Consumption Medium to Low Education expenditures Income Female decision-making power Leadership Collective Activities Low Health expenditures Business profits Business ownership Poverty Level Key Text Study in line with Lit. Study exhibits some differences, but not to a large extent Study outcomes not in line with Lit. Not captured in study analysis Green – Study in Line with Literature Orange – Study exhibits some differences from literature but not to a huge extent Red – Study not in line with lit. rature Source: Understanding the Impact of Savings Groups: SEEP Network, 2017

Thank you Lessons from India – SHG Bank Linkage Program Panelists Agnes Svensson, Head of Programs, Hand in Hand International Dr. Tara Nair, Professor, Gujarat Institute of Development Research A. Umarani, CEO, Kalanjiam Foundation Moderated by: Sayan Kundu, Research Manager, IFMR-LEAD

Lessons from India – SHG Bank Linkage Program Bibliography Status of Microfinance in India 2016–17. Mumbai: NABARD, 2017 Inclusive Finance India Report, 2016: Access-Assist, 2016 Understanding the Impact of Savings Groups: SEEP Network, 2017 The Evidence-Based Story of Savings Groups- A Synthesis of Seven Randomized Control Trials: Gash & Odell, 2013 Self-Help Groups in Development-A Review of Evidence from South Asia and Sub-Saharan Africa, EPAR Brief No. 283, Anderson et al, 2014 Self Help Group Bank Linkage- Through the Responsible Finance Lens: IFMR- LEAD, Agarwal, Sharma & Champ, 2013