"Development is not a Cup of Tea." Report from the SHG Sustainability Conference

This weekend, CMF and NABARD hosted a conference entitled "Sustainability of SHGs: Scope, Issues and Challenges." For those of you that are new to microfinance or this blog, an SHG is a Self Help Group, the predominant model of micro-lending in India. The traditional definition of an SHG is a group of 10-20 women of homogenous socio-political background that come together to save, lend, and address common problems.

The SHG bank-linkage programme was first pioneered by Myrada, a Karnataka-based NGO. The bank-linkage programme allows SHGs to access large sums of capital from banks for distribution among group members—at the same time, banks can more efficiently meet their priority sector requirement for rural lending. After successfully piloting the program with NABARD, the SHG-bank linkage programme has fast become the largest microfinance initiative in India. But this also raises important questions – with so many crores (10 million rupees for you foreigners) being poured into the program, are SHGs really fostering good savings and lending practices, empowering women, or alleviating poverty? Recent studies indicate serious quality issues in the programme, which if not addressed, will lead to ever lower repayment rates. A comprehensive study by APMAS and EDA Rural Systems on SHGs points out that though social lights are increasing, financial shades pose a risk to the movement.

We were lucky to hear Mr. Aloysius P. Fernandez, Myrada's Executive Director, speak (he certainly won the award for most animated speaker of the day) about his own experiences with Self-Help Groups.

Among other things, he asked the conference participants (which included prominent members of RBI, NABARD and fellow practitioners) to stop thinking of SHGs as static, proprietary institutions that can be claimed by NABARD, Myrada, or any other facilitator for that matter – in his experience with mature, well-functioning SHGs, a strong SHG is a fluid, organic group of women (sometimes men) that can and do respond to their community, village or member-level problems as they arise. At its core, he stressed that SHG formation was meant to be a bottom-up solution to increasing access to finance, but it has since been compromised by a top-down push for quantity over quality.

As for the development catchphrase of the day (or decade), Mr. Fernandez pointed out that the Germans don't have a word for sustainable – nor does Tamil, Kannada, and so on. I can't do his delivery justice, but you'll have a chance to hear the whole conference on our website shortly. In his opinion, we should stop talking about sustainability and focus instead on participation. He suggests that if SHGs are to persist as relevant tools to poverty alleviation (or simply financial inclusion), we must not forget that development takes time, effort, and power . In his own experience with Myrada, he has seen that members of SHGs only begin to move from consumption, health or education loans to productive loans over a period of 8 to 10 years. If the Indian development community wishes SHGs to promote livelihoods, practitioners must let go of set formulas and focus on developing flexible livelihood strategies – access to finance (especially of the amount available through SHGs) is not nearly enough.

In his own words, "Development is not something static; development is not a cup of tea."

For more on the SHG movement, check out a recently published report entitled "Impact and Sustainability of the SHG Bank Linkage Programme" by NCAER here.