Self Help Groups (SHGs) are major sources of finance for the poor. These SHGs are refinanced by banks or institutions like NABARD, SIDBI, etc. But these days SHGs are also financing micro activities of the economy as they are transforming themselves into Microfinance Organizations (MFOs). This article studies five issues: Size, diversity, sustainability, focus and taxation, which trigger the transformation of SHGs into MFOs.
Microfinance in India started in the early 1980s, from the small efforts of forming informal Self Help Groups (SHG) providing access to much needed savings and credit services. From this small beginning, the microfinance sector has grown significantly in the past decade and a half. National bodies like the Small Industries Development Bank of India (SIDBI) and the National Bank for Agriculture and Rural Development (NABARD) are devoting significant time and financial resources on microfinance.
This points to the growing importance of the sector. The strength of the microfinance sector (MFOs) in India is the diversity of approaches and forms that have evolved over time. In addition to the home grown models of SHGs and Mutually Aided Cooperative societies (MACS), the country has learnt from other microfinance experiments across the world, particularly Bangladesh, Indonesia, Thailand and Bolivia, in terms of delivery of microfinancial services. Indian organizations can learn from the transformation experiences of these microfinance initiatives. This article examines transformation in the Indian context. |
