Achievements and challenges of SHGBank linkage program in India: The result of village surveys in Andhra Pradesh and Maharashtra

Abstract

Poverty alleviation is one of the biggest agenda in the world, especially in South Asia where more than 500 million people live below the poverty line (World Bank n.d.).1 Since International Year of Microcredit was declared by the United Nations in 2005, microfinance has been increasingly recognized as an effective instrument of poverty alleviation in developing countries. These are the fundamental reasons why financial inclusion of the the poor through microfinance (MF) is highlighted as one of the main instruments for poverty alleviation and equitable economic development in India, especially in rural areas where majority of BPL people live (GOI 2008; Mehrotra et al. 2009). Government policy to extend microfinance in rural India is presently implemented mainly through the SHG-Bank Linkage n.d. Program (the SHG Program) which is effectively put into operation by the national refinancing agency National Bank for Agriculture and Rural Development (NABARD). This program aims to provide financial services of formal financial system such as savings and loan facilities to the poor by linking banks and Self Help Groups (SHGs), each of them formed by 10-20 neighboring villagers, mostly by women.