IMPACT OF MICROFINANCE AND SELF HELP GROUPS (SHG) ON RURAL MARKET DEVELOPMENT

Abstract

The Indian banking system has failed to reach to poorer section of rural India despite its large network of rural bank branches. All India Debt and Investment Survey showed that the share of non-institutional agencies (informal lenders) in outstanding cash dues of the rural households was 38%.The main limiting factor in reaching formal finance to this group was the high transaction costs and lack of appropriate credit and saving products. A study conducted by NABARD revealed that financial services required by poor households are: safe-keeping of small surpluses in the form of thrift; access to consumption loans to meet emergency needs and financial services and products. The present study assesses the benefits of microfinance through self-help groups. While the benefits in terms of higher income, consumption, and savings matter for the poor, the focus here is broader, as an attempt is made to assess some key dimensions of women’s empowerment-defined broadly as expansion of freedom of choice and action to shape their own lives. The study is based on a review of literature on SHGs, the experiences of several leading NGOs involved in the formation of SHGs and interviews with chief executives and staff of other NGOs/ projects promoting SHGs.