Model III: SHGs promoted by NGOs and financed by banks using NGOs/formal agencies as financial intermediaries.
Model II has emerged as the most popular model under the SBLP program Commercial banks, co-operative banks and the regional rural banks have been actively participating in the SBLP.
Parameters of banks for lending:-
SHGs get linked to banks via NGOs, for opening savings account and for their credit requirements. Banks lend to SHGs after assessing their credit worthiness on parameters such as group discipline, regularity of meetings, savings, rotation of funds, maintenance of books of accounts, group record keeping, repayment of loans etc.
The banks check for different aspects to find out the ‘level of Discipline’ in the group so there is a need to collectively perform good by follow the rules formed by the group as each and every one is responsible for the performance of whole group so they collaborate and cooperate to maximize their gain (group’s) by following the rules.
MFI – Bank Linkage Model
This model covers financing of Micro Finance Institutions (MFIs) by banking agencies for lending to SHGs and other small borrowers.
The SHG – Bank Linkage Program is a major plank of the strategy for delivering financial services to the poor in a sustainable manner since its inception,
CORPORATE-SHG LINKAGES MODEL:
A new trend has been emerging with the linkage between SHGs and Corporate because rural market offers tremendous potential of Growth for corporations by making their products and services available to these areas. Lot of interventions are designed by various companies to tap the market including designing tailor made supply chain, rural marketing campaigns, new marketing mix elements and integration of social elements to develop their brand awareness and market for their products. But still they are not that successful because this cost them high and low returns so these corporations are coming with an idea to join hands with SHGs and train these groups to work as an agent or retailer to reach the masses in remote locations.
SHGs can provide a suitable option for companies if they can be integrated into various functions such as ‘ Marketing, Distribution of products and services, Procurement of various raw materials and semi finished materials, Production and processing of indigenous products etc. companies are generally working hard to reach out to various areas and markets for their products and incur a huge cost to design and develop a marketing channel.
These microenterprises (developed with SHGs) can assist in delivery and distribution of the company products in the areas which are still untapped.
Procurement of raw materials or semi finished Materials can be done
Diffusion of innovation in these areas will be easier.
Brand awareness and Equity can be enhanced.
Members will have secured business and hence secured revenue.
Skill enhancement of members will bepossible.
up liftmen in Social status of the members.
Need for Corporate-SHG linkages
The purpose can be addressed by companies through two different approaches-
1. Adoption approach
2. Development approach
In this approach corporate entities can select a SHG who has their own products (indigenous) but lack technology, capital, skill and market to increase their scale of operation though the product these products can be a potential product for Future Markets.
Symbiotic association of corporations and SHGs are utilizing distinctive competence and are resulting in a win- win situation for both in long run broadly in the form of market and Socio-economic development.
The second approach for business entities is that they can work on developing business skills of SHGs, which are functional but due to certain limitations like lack of technology, business skill and seed capital they are not able to upgrade their business potential. With the corporate ‘SHG linkage these drawback can be reduced. The major advantage to SHGs is that they are easy to form and they can develop themselves and improve their skill and expertise in low cost.
Externalities from the process:-
The externalities evolved through this process are positive like going through this process the members get financial help ,which leads to make them interdependent initially (Development of social capital) and later on they become self sufficient by use of the credits to develop some livelihood means, this leads to the better nutrition possibilities to their families, better affordability to medical care which ensures good health of the family ,due to interacting with each other and some personnel’s from the intervening body their knowledge base increases that make them more aware of the issues related to health ,education different livelihood options and the capacity building programs also fill them with a sense of confidence which gives a synergistic effect in all the areas of the member and his family all this help motivate and assist them to attain a better position from their current situation and this whole process keeps going on and due to development of new livelihood options for the poor families the local economy also grows and pave way for some more economic activities to take place in the nearby areas .
Being a part of the SHG each member feel a sense of responsibility and dependence to each other which make them more connected as a group and by following the rules of the group there has been a development of trust and reputation which lead to reciprocity of their behavior in the group this creates a social capital which gives a synergistic effect in the social relationships among people outside the group also and add-ons to the local societies.
Success stories of one SHG helps in replication of the model in nearby areas.
Through socio-economic empowerment of women, SHGs are paving a way for gender equality in societies.
Sometimes strong integrity and cohesion among SHG members can lead to social movement against ill practices in the society.
Uneven distribution of credit to SHGs:-
The No. of SHGs have been increasing over time and benefitting the people in proportionally but if we see the comparative data according to the different regions we find that still there is a huge difference in the no of SHGs, and also the ration of SHGs who are linked to the banks . as it mainly depend on the role of local Government , presence of well performing NGO’s, Socio cultural factors etc. it is found that the—- percentage of the linked SHG, were from southern region consisting of Andhra Pradesh, Karnataka, Kerala and Tamil Naidu.. Many State such as Utter Pradesh and Bihar with high incidence of poverty have shown poor performance under the program .