bu i ld i ng an i nc lu s i ve f i nanc i a l s e ctor i n i nd i a
101
well as in the new pronouncements, have not really elab-
orated a role for SHGs and SHG-based institutions. (An
exception is their proposed role in promoting financial
literacy.) In fact banks operating through BCs can now
function as competitors to MFIs and the SHGs in the
provision of credit and financial services to poor clients.
However, a supplementary channel that has re-emerged
is that of bank lending through SHGs promoted by
the NGO-and non-NBFC MFIs acting as the BC.
17
Nevertheless, given the proposed changes in the financial
service delivery structure, SHGs could become largely
redundant unless they find a role within the emerging
architecture of service delivery at the last mile.
B
OX
4.4
NRLM Financial Inclusion Objectives
Access to adequate amount of credit at reasonable rates
of interest along with convenient terms of repayment is
critical for poverty reduction. Therefore, the NRLM seeks
to promote universal financial inclusion by promoting
access to basic banking services. NRLM seeks to work on
both demand and supply sides for this purpose. Key focus
areas are:
• promotion of basic awareness on banking services,
insurance products and remittances to all SHG
members;
• preparation of all SHGs for opening of bank accounts;
• institution of appropriate systems of Bookkeeping and
provision of revolving fund and Community Investment
Fund (CIF)
• delivery of institutional credit
• promoting investment on productive livelihoods and
monitor prompt repayments
Source
: NRLM website.
The NRLM, nevertheless, has based its financial
inclusion model and the larger livelihoods develop-
ment approach on the strengthening of the SHG-bank
relationship as well as SHG federations (see Box 4.4).
NRLM sees SHGs as the building block both for finan-
cial federations as well as other cross-cutting livelihoods
organizations as part of a broad-based strategy for poverty
alleviation. In several states federated structures styled on
the Andhra Pradesh Indira Kranti Patham (IKP) model
are being implemented, with the help, among others, of
community resource persons drawn from the ranks of the
SHGs of Andhra Pradesh. It is critical how NRLM will
develop the proposed infrastructure of SHG federations
and other livelihood organizations of the poor; and ar-
range the financial resources for their needs. SHG fed-
erations could either act as MFI intermediaries or only
as BCs/BFs. Sources of finance for the federations could
be through dedicated funds and channels such as Stree
Nidhi in Andhra Pradesh or through women’s banks.
As things stand, the SHG continues to be a potential
rallying point for NABARD and NRLM and a host of
SHPIs supporting federations of SHGs as the base for an
alternative model in financial services delivery. The place
of SHGs and SBLP in the financial inclusion strategy
needs to be re-examined and re-negotiated.
PART 2
MICROFINANCE INSTITUTIONS:
PROGRESS AND PERFORMANCE
The microfinance institutions in India have evolved
through different phases of crises and growth over the
years. A significant aspect of this evolution has been
progressive movement towards formalization, regula-
tion and sustainability. Several factors have contributed
to this process of change including transformation of
microfinance providers, continued financial exclusion
of different sectors and population segments, expansion
of funding partners and options, technological innova-
tions, and increasing policy attention on issues relating to
microfinance. Even the crises that disrupted the growth
momentum of MFIs at least in some regions in the last
decade have left some great lessons for the sector and
ended the prolonged phase of regulatory indifference.
The key message that arises out of all the recent industry
analyses is that the MFIs have improved their perfor-
mance significantly in India during the past three years.
The optimism kindled by a series of proactive initiatives
by the central bank since 2012 to regulate microfinance
business and protect consumer interests have particularly
helped the ‘buoyant growth’ of MFIs through 2013–14
(CRISIL, 2014).
Part 2 reviews the growth and performance of MFIs
in India with special focus on the last triennium, i.e.,
