1. Higher Market Penetration in line with National Policy
“Accelerating Financial Outreach by Commercial Banks through Collaborative Actions”
SPECIFICS OF RURAL INDIA
OBJECTIVES
Suggest how banks can leverage on the Self Help Linkage Model .
Propose an alternate service delivery strategy based on SHG Linkage program for financially excluded sections of the economy.
Identify probable benefits derived to SHGs/ MFIs and Banks.
Agriculture has been the construct of tradition and economic life of Rural India leading to socio economic development.
Uneven distribution of wealth across the rural segments
Multiple occupations resulting mobilization of resources and incomes.
Reduction in the literacy gap between the rural and urban.
Emergence of contract farming
Skewed distribution of operational bank branches.
Lesser access to financial service despite of increased savings rate
EXPECTED PAYBACKS FROM THE COLLABORATIONS
PSB
Higher Market Penetration in line with National Policy
Average saving in delivery cost by 25% to 30% .
Increased in other income component through higher cross selling of products.
SHGs
Increase in saving rate amongst rural households & banking transactions
Operational Standardization & Benefit Refinancing facility from Institutions.
Act as Business Correspondent & Financial Literacy Centers generating alternate income.
MFIs
Creation of Employment opportunities
Benefit Securitization Facility
Rise in revenue margins through increased customer life cycle.
NEED FOR THE STUDY
Penetration of Micro Finance is low in India.
Differential cost of delivery across varied channels by banks.
SHG’s lack operational efficiency, transparency, infrastructure and financial training.
Identifying cost effective model for rural outreach.
Differential interest rates by MFIs and Banks
METHODOLOGY
The study is conceptual in nature based on the Self Help Linkage Model.
The research aims to propagate an alternative business strategy through
revamping the existing SHG Model by customized services, also expanding the role of MFI for entrepreneurial initiatives whereby strengthening financial inclusion.
EXTENDED MODEL OF SHG LINKAGE PROGRAM
INTENTION OF THE PROPOSED MODEL
Cost of service delivery depends on the delivery channels, banks incur differential cost for different medium. For rural sections banks should outsource the selected retail banking services to SHGs.
SHG linkage model & MFI collaborations with banks can be effective delivery medium considering :
a) Training by banks to SHGs/ MFIs on:
- Financial products/services, technology and maintenance of records
- Cross selling of micro insurance products and other services
- Credit counselling/ Financial literacy
- Identifying product need
- Role of business correspondent
b) Banks will leverage on: - Operating Cost and Other Income
How different
Model proposes SHGs as the service delivery partner for retail bank products/ services and also as financial literacy centers.
Project and Entrepreneurship finance to be routed through MFIs, which will act as specialized agency.
Thrust is on increasing the accountability at the rural levels through increased participation of SHG/ MFIs.
ANTICIPATED OUTCOMES
Reduced cost of service delivery at increased customer base for banks.
Alternate income source for SHGs and for banks increase in other income.
New product development based on financial need analysis.
Reduction in interest disparity.
Financial independence to rural households
RELEVANT LITERATURE
Das Lipishree (2012) research indicates a rise in the rural credit through microfinance however there is a need for improved governance for managing the future challenges. Study by Basu et.al (2008) advocates that micro credit for entrepreneurship is essential however along with the credit for enterprise development provision of support services ensure overall growth of the enterprise which has been consistently overlooked by banks. NABARD (2015) report indicates following concerns of SHGs limited bankers interface, multiple memberships and borrowing, inadequate monitoring and delay in account opening and loan disbursements.
References
Das Lipishree (2012) “Microfinance in India: self-help groups - bank linkage model”
MPRA Paper No posted 12. May :44 UTC, Online at
 Parthasarathy Anbuoli (2015) “A Study on Origin and Growth of SHG in India”, International Conference on Inter Disciplinary Research in Engineering and Technology; PP:
 Planning Commission Report (2008) “A Report on the Success and Failure of SHG’s in India – Impediments and Paradigm of Success”.
 NABARD ( ) “SHGs, Savings for the Present, Securing the Future”
By: Prof. Shirly Abraham & Dr. Deepa Pillai