Finance Matters column in The Hindu Business Line – Farzana Najeeb of Advocacy writes the fifth article in the series.
In the past few weeks with microfinance under public scrutiny, the self-help groups (SHG) channel is being positioned as a cheaper alternative of delivering microfinance compared to MFIs. A close look at the characteristics of the SHG model, its cost structure and interest rates to the ultimate customer shows that its cost is comparable to the MFI model despite a lot of implicit subsidies.
The SHG Bank Linkage Programme (SBLP) has contributed significantly to making credit available to the rural poor, but the true costs and risks inherent in this model need to be better understood. Understanding the SBLP
Under the SBLP, a SHG with 10-20 members (usually women) is formed with the support and guidance of a self-help promoting institution (SHPI). The SHG members are encouraged to make voluntary savings, which is internally lent.
To read the full article click here.