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CONTENTS:
 Introduction
 Definition
 Strategic Policy Initiatives
 Activities In Micro Finance
 Micro Finance In India
 Is Micro finance creating financial capital?
 Self Help Groups
 How SHG work
 Sources of capital and links between SHG’S banks
 SHG’S Linkage Model
 Micro Finance Models
 Conclusion

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 Provision of financial services such as credit,saving, and
insurance
Poor individuals which fall below the poverty line
Impact of improving livelihood opportunities through the
provision of capital
Founded of the grameen bank in bangladesh by yusuf
Group lending, individual lending , the provision of savings
and insurance, capacity building, and agricultural
business development services
Creation of social value

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 SHGs, NGOs,NABARD,1995
The National Microfinace Taskforce,1999
Working Groups on Financial Flows to the
Informal Sector.2002
Microfinance Development and Equity
Fund,NABARD,2005
Working group on Financing NBFC’s by Banks-
RBI

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 Microcredit
Micro savings
Micro insurance
Remittances

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Micro Finance In India
Credit Agency Percentage of Rural Households
Government 6.1
Cooperative Societies 21.6
Commercial banks and RRBs 33.7
Insurance 0.3
Provident Fund 0.7
Other Institutional Sources 1.6
All Institutional Agencies 64.0
Landlord 4.0
Agricultural Moneylenders 7.0
Professional Moneylenders 10.5
Relatives and Friends 5.5
Others 9.0
All Non Institutional Agencies 36.0
All Agencies
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Is Microfinance creating
financial capital?
Invest in an Income generating activity
Poverty reduction
Depends on borrowers
Difficulty to isolate the effect of microcredit
Depends on the interest rates micro finance
institutions charge
Net capital accumulation
Raises difficulty ethical questions about making
profits on the back of the poor

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SELF HELP
GROUPS(SHGs)
Major role on poverty alleviation in rural india
Actively engage in saving and credit
Create some contorl over capital-very small amounts
Gradually away form explotation and isolation
Definition:
NABARD (1997) defines SHGs as "small, economically
homogenous affinity groups of rural poor, voluntarily
formed to save and mutually contribute to a common fund
to be lent to its members as per the group members'
decision".

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Contd:
10-25 members
Government of government and non-governmental
ageneies,they non-governmental agencies,they now make
up 90 % of all SHG’s
Rules and regultaions of SHG’s vary according to the
members and those facilitating their formation
Collect savings form members typically once a week
Start without any external financial capital
Small internal loans for micro finance enterprise

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Sources of capital and
links between SHG’s and
banks
Link up with financial institutions-loans for
investments in rural enterprise

NGO’s and banks are giving loans –Matching

loans

Repayment-Recommendations by group
faclitators, collaterals provided

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SHG’s-Bank linkage
model:
MODEL I:
Bank itself as a Self help Group Promoting
Institution(SHPI)
MODEL II:
Groups are formed by NGO’S or by government
agencies
MODEL III:
It is formed and nurtured by other agencies

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 Rate of Interest under SHG - Banks Linkage programme
Particulars Existing rate of Revised rate % p.a
Interest p.a
NABARD to Banks Refinance 6.5% 6.5 %

Banks to SHG 12%

Banks to NGOs 10.5%

No of participating Bank 202 No of NGO participating

550
Bank loan release (Rs in Millions) 570 NABARD Refinance
520

Loan per family 1,019 (release Rs in Millions)

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finance services offered to the
poor:

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MICRO FINANCE MODELS:
Micro Finance Institutions
Bank Partnership Model
Banking Correspondents
Service Company Model

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 India’s achievement of the MDG of halving the population of poor
by 2015 as well as achieving a broad based economic growth
also hinges on a successful poverty alleviation strategy. In this
backdrop, the impressive gains made by SHG-Bank linkage
programme in coverage of rural population with financial
services offers a ray of hope.

Underlying Belief of Self Help Groups..............

“Give a man a fish and you feed him a day but teach him how to
fish and you feed him a lifetime”
Many little things done in many little places, by many little
people, will change the face of the world. - An old Chinese saying
 

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