4
N
ABARD provided the first social venture Capital for Self
Help Groups (SHGs). MYRADA worked with PACs in the
early 80s. The poor farmers who were not happy with
the PACS, broke away in 1984-5 and formed groups in
which all were poor. These developed into SHGs which had all the
structural features of a Cooperative. The members self-selected
themselves on the basis of affinity and started with regular
savings which were placed in a group common fund. MYRADA
provided training on how to conduct meetings, how to encourage
participation of all, how to identify and address problems related
to poverty, gender and social oppression and find solutions.
Funds for training were later provided by Nabard. The members
borrowed small loans from the common fund which MYRADA
embellished with a grant. SHGs built human and institutional
capital at the bottom of the pyramid which enabled the poor
to use credit for their growth; if credit alone is invested, it will
extract further capital.
When there were about 200 groups, MYRADA approached
NABARD on August 29, 1986, for a grant to match the groups
savings and to train them. Rs one million was sanctioned on
24 October, 1987. This was the first social venture capital which
today has blossomed all over India. Nabard/RBI took three policy
decisions: i) to allow Banks to advance one bulk loan to the SHGs
leaving the SHG to decide on individual loans to members; ii)
Shri Aloysius P Fernandez
Member Secretary, MYRADA
to lend to unregistered SHGs provided they functioned with
adequate documents and accounts and iii) to lend without
physical collateral. The affinity and the common funds were
the two pillars of joint liability. On the basis of these decisions
Nabard launched the SHG-Bank Linkage programme in 1992.
Nabard, NGOs and the Bank were the driving forces from 1992 till
2000; these comments refer only to this period.
SHGs were the Facebook of the 80s and 90s: One of the major
concerns today in advancing loans is to have adequate
information on the client through digital lending based on
algorithms and predictive models. The SHGs had all this data in
“living mode”. The members knew one another, their credibility,
income, behaviour, spending patterns, repayment culture etc;
they added an important dimension of lending, namely strong
relationships.
SHGs coped with diversity in size and purpose of loans and
schedule of payments. Families required different sizes of loans
even for similar assets. Livelihoods in rural economy are risky and
cannot be standardised and incomes are lumpy; they depend on
the monsoons which is the most disruptive instrument.
In brief, the pre 2000 SHG model and the SHG-Bank Linkage
program were the most appropriate to cope with the needs of an
informal, high risk, diversified rural economy.
