banking - SHGs

Self-Help Groups: SHGs have been launched to combat the problem of growing poverty at
the grass roots level. Small, cohesive and participative groups of the poor are formed who
regularly pool their savings to make small interest bearing loans to its members. In the process,
they lean the nuances of financial discipline. Initially bank credit is not primary objective. It is
only after the group stabilizes and gains ability to undertake productive activity and bear risk that
micro-credit comes into play.
The SHG bank linkage programme has proved to be the major supplementary credit delivery
system with a wide acceptance by banks, NGOs and various government departments. It
encourages the rural poor to build their capacity to manage their own finances, and then
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negotiate bank credit on commercial terms. Certain norms have to be observed in the formation
of SHGs. To become a member, a person has to be below the poverty line. Only one member of
a family can become a member and that person cannot become a member of more than one SHG.
There is no limit of maximum number of members can be between 10 and 20. Members of SHGs
are supposed to meet regularly, that is, once a week or once a fortnight. However, registration is
optional and left to the discretion of the members.

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