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What is Self Help Group(SHG)
Self Help Group is a homogeneous group of micro entrepreneurs with affinity among themselves, voluntarily formed to save whatever amount they can conveniently save out of their earnings and mutually agree to contribute to a common fund of the group from which small loans are given to the members for meeting their productive and emergent credit needs at such rate of interest, period of loan and other terms as the group may decide.
  • To meet the credit needs of the poor by combining flexibility, sensitivity and responsiveness of the informal credit system with the strength of technical and administrative capabilities and financial resources of the formal credit institutions.
  • To build mutual trust and confidence between the bankers and the rural poor.
  • To encourage banking activity both on thrift as well as credit side in a segment of the population that the formal financial institutions usually find difficult to cover.
The group should
  • Be in active existence for at least a period of six months.
  • Have successfully undertaken savings and credit operations from its own resources.
  • Maintain proper accounts/records.
  • Work democratically wherein all members feel that they have a say should be evident.
  • Be formed to reflect genuine need to help each other and work together and Branch Manager should be convinced that the group has not come into existence only for the sake of participation in the project and availing benefits there under.
  • Have members preferably with homogenous background and interests.
Linkage Programme:
There are two ways of extending bank finance.
  • Direct to SHG or
  • Through bulk lending to VAs/NGOs for on-lending to Group.
Extent of Credit
The acceptable proportion of savings to the loan could vary from 1:1 to 1:4 depending on the assessment of the SHG by the Bank.
Rate of Interest & Processing Charges:
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Hypothecation of assets created out of Bank's finance.
No insistence on collateral security
Security Documents:
  • Inter se Agreement by all members.
  • Articles of Agreement by authorized members.
Bank prescribes appropriate repayment period in negotiation with the Group which may range from 3 to 7 years.
Repayment may normally be in regular monthly installments or as determined at the time of loaning based on local conditions, activities undertaken by members etc.
Loans from SHGs to members could be repaid in appropriate installments which may be daily, weekly or market days fortnightly, monthly etc.