1. Methods Of Micro FinanceMethods Of Micro Finance
SHGS /JLGS / FarmerSHGS /JLGS / Farmer
ClubsClubs
www.shgportal.comwww.shgportal.com

2. Credit - Financial Inclusion orCredit - Financial Inclusion or
Poverty Alleviation??Poverty Alleviation??
High transaction costs
Lengthy documentation
Monitoring costs
High defaults
Collateralised Lending
Leakages of subsidised
resources

3. The Solution … Group ApproachThe Solution … Group Approach
SHG Bank Linkage ProgrammeSHG Bank Linkage Programme
Encourage thrift- Micro DepositsEncourage thrift- Micro Deposits
Use social dynamics / peer pressureUse social dynamics / peer pressure
as Social Collateralas Social Collateral
Pool individual needs for CreditPool individual needs for Credit
Simplify processes for LendingSimplify processes for Lending
Link with the banking system forLink with the banking system for

4. SHG Bank Linkage ProgrammeSHG Bank Linkage Programme
Aim:
1.Micro-deposits
2.Micro-credit
3.Micro Enterprise
4.Members of SHGs to graduate to

5. The Core Strategy of SHG-BankThe Core Strategy of SHG-Bank
Linkage ProgrammeLinkage Programme
Basic human feeling of Self Worth
at its Core
Building financial capabilities and
self confidence in the rural poor,
through internal savings and
lending from the owned funds of
the SHGs.

6. The Core Strategy of SHG-The Core Strategy of SHG-
Bank LinkageBank Linkage (Contd..)(Contd..)
Leveraging the strength of the
formal banking system and the
flexibility of informal Self Help
Groups (SHGs) in providing
adequate financial services to the
rural poor.

7. MicroMicro financefinance
SHG Approach Individual Approach
SHG Bank Linkage Model MFI Bank Linkage Model
SHGs promoted &
Financed by bank
SHGs promoted by NGO
and Financed by banks
SHGs promoted by MFI
Bulk loan from Bank for
on-lending to SHGs
By Banks On-lending
by MFIs
Micro-enterprisesMicro-enterprises

8. Who Forms SHGs ?Who Forms SHGs ?
VVVVVV
ClubsClubs
IndividualsIndividuals
NGOs/NGOs/
mFIsmFIs
SHGs/SHGSHGs/SHG
FederationsFederations
BanksBanks
GovtGovt
AgenciesAgencies
SHPIsSHPIs

9. Design features of SHGsDesign features of SHGs
 Self-selectionSelf-selection
 Focus on women (85% of SHGs)Focus on women (85% of SHGs)
 Savings first and credit laterSavings first and credit later
 Group financed only after 6 monthsGroup financed only after 6 months
 Intra group appraisal systems andIntra group appraisal systems and
prioritizationprioritization
 Shorter repayment termsShorter repayment terms
 Market rates of interestMarket rates of interest
 Progressive lendingProgressive lending
 Maintenance of accounts by SHGsMaintenance of accounts by SHGs
 Developing a relationship with BanksDeveloping a relationship with Banks
 FLEXIBILITY IN APPROACHFLEXIBILITY IN APPROACH

10.  A homogeneous group of about 15 to 20A homogeneous group of about 15 to 20
 Every member to save a small amountEvery member to save a small amount
regularly. Pooled savings kept in aregularly. Pooled savings kept in a
savings bank account in SHG’s namesavings bank account in SHG’s name
transaction costs of both the poor andtransaction costs of both the poor and
bank reduced !bank reduced !
 SHG to use pooled thrift to give interestSHG to use pooled thrift to give interest
bearing loans to members – decisionsbearing loans to members – decisions
taken in group meetingstaken in group meetings
Every member learns prioritisationEvery member learns prioritisation
and financial discipline. Theirand financial discipline. Their
capacities to thinkcapacities to think and handle largerand handle larger
resources improves!resources improves!
The Self Help Group (SHG). . What is it ?The Self Help Group (SHG). . What is it ?

11.  Depending on the SHG’s maturity, bankDepending on the SHG’s maturity, bank
gives loan to the SHG as a multiple ofgives loan to the SHG as a multiple of
the pooled savings. Bank loan added tothe pooled savings. Bank loan added to
the SHG kitty.the SHG kitty.
Adequate & sustained access toAdequate & sustained access to
financial services!financial services!
The Self Help Group (SHG). . What is it ?The Self Help Group (SHG). . What is it ?
(contd..)(contd..)

12. MEMBERSHIP FEESMEMBERSHIP FEES
THRIFT COLLECTIONSTHRIFT COLLECTIONS
NGO/GO CONTRIBUTIONNGO/GO CONTRIBUTION
LOAN REPAYMENTSLOAN REPAYMENTS
FINES & PENALTIESFINES & PENALTIES
BANK LOANSBANK LOANS
Group FundsGroup Funds
Surplus so generated remains with the groupSurplus so generated remains with the group

13. MODE OF FUNCTIONING OF SHGsMODE OF FUNCTIONING OF SHGs
 Function democratically
 2-3 office bearers2-3 office bearers
 Rotation of office bearersRotation of office bearers
 Periodical meetingsPeriodical meetings
 Decisions regarding thrifts loansDecisions regarding thrifts loans
interestinterest rate etc in the meetingrate etc in the meeting

14. TYPES OF CREDITTYPES OF CREDIT
Term loans in multiple of thriftsTerm loans in multiple of thrifts
mobilized-4 times or more -mobilized-4 times or more -
increasing graduallyincreasing gradually
Repayable in 3 or more yearsRepayable in 3 or more years
Cash Credit limit/revolving creditCash Credit limit/revolving credit
limit of 4 times or more of group’slimit of 4 times or more of group’s
expected savings in 3 yearsexpected savings in 3 years

15. Progress – 2008-09Progress – 2008-09
 SHG Savings with Banks : No. of SHGsSHG Savings with Banks : No. of SHGs
– 6,121,147, Amount : INR 55.46 billion– 6,121,147, Amount : INR 55.46 billion
 Bank Loans disbursed to SHGs : No. ofBank Loans disbursed to SHGs : No. of
SHGs – 1,609,586 Amount : INR 122.53SHGs – 1,609,586 Amount : INR 122.53
billionbillion
 Bank Loans outstanding with SHGs:Bank Loans outstanding with SHGs:
No. of SHGs – 42,24,338 Amount : INRNo. of SHGs – 42,24,338 Amount : INR
226.80 billion226.80 billion
 Refinance to banks for SHG FinancingRefinance to banks for SHG Financing
– INR 26.20 billion– INR 26.20 billion

16. JOINT LIABILITY GROUPJOINT LIABILITY GROUP
 Informal group comprising 4-10Informal group comprising 4-10
individuals.individuals.
 For the purpose of availing bank loanFor the purpose of availing bank loan
against mutual guarantee.against mutual guarantee.
 JLG members to engage in similarJLG members to engage in similar
type of economic activities either intype of economic activities either in
Farm & Non farm sector.Farm & Non farm sector.
 Simple management with little or noSimple management with little or no
financial administration within thefinancial administration within the
group.group.

17. OBJECTIVEOBJECTIVE
 To augument flow of credit to farmers &To augument flow of credit to farmers &
Micro-entrepreneurs artisans in Farm &Micro-entrepreneurs artisans in Farm &
Non farm Sector Activities.Non farm Sector Activities.
 To serve as collateral substitute for loans.To serve as collateral substitute for loans.
 To build mutual trust & confidenceTo build mutual trust & confidence
between bank & the target group.between bank & the target group.
 To minimise the risks in loan portfolio forTo minimise the risks in loan portfolio for
the bank through group & cluster.the bank through group & cluster.
 To provide food security to vulnerableTo provide food security to vulnerable
section by enhanced production,section by enhanced production,
productivity & livelihood promotionproductivity & livelihood promotion
through JLG mechanismthrough JLG mechanism

18. Criteria for selection of JLG membersCriteria for selection of JLG members
 Members to be of similar Socio- economicMembers to be of similar Socio- economic
status, background & carrying out samestatus, background & carrying out same
economic activity.economic activity.
 Members carrying out either farming orMembers carrying out either farming or
Non Farm activities & agreeing toNon Farm activities & agreeing to
function as JLG.function as JLG.
 Members to be from the same village/Members to be from the same village/
area/ neighbourhood & trust each other.area/ neighbourhood & trust each other.
 Members defaulting to any other formalMembers defaulting to any other formal
financial institution, in the past, debarredfinancial institution, in the past, debarred
to be member of Group.to be member of Group.
 Only one member from same family in theOnly one member from same family in the
same JLG.same JLG.

19. Size of the JLG – 4 to 10 farmersSize of the JLG – 4 to 10 farmers
Formations of JLGs byFormations of JLGs by
 Banks, PACS, other Coop., Govt.Banks, PACS, other Coop., Govt.
Depts.Depts.
 NGOs, Panchayati Raj Institutions,NGOs, Panchayati Raj Institutions,
 KVKs, State Agriculture Univ., Agri.KVKs, State Agriculture Univ., Agri.
Tech. Management Agency (ATMA)Tech. Management Agency (ATMA)
 Farmers Clubs, Farmers Associations,Farmers Clubs, Farmers Associations,
 Producers Associations, ArtisansProducers Associations, Artisans
Guilds, Dept. of SSI/ Agro IndustriesGuilds, Dept. of SSI/ Agro Industries
etcetc
 MFIsMFIs

20. Savings by JLGSavings by JLG
 Primarily to be a credit group.Primarily to be a credit group.
 Voluntary savings.Voluntary savings.
 JLG members to be encouragedJLG members to be encouraged
to open “no frills” accounts.to open “no frills” accounts.

21. JLG ModelsJLG Models
Model “A”Model “A”
 Financing individuals inFinancing individuals in
the groupthe group
 All members to executeAll members to execute
one inter-se documentone inter-se document
making each one jointlymaking each one jointly
& severally liable for& severally liable for
repayment.repayment.
 Financing bank toFinancing bank to
assess creditassess credit
requirement.requirement.
 Mutual agreement &Mutual agreement &
consensus amongconsensus among
member on the quantummember on the quantum
of loanof loan
Model “B”Model “B”
o Financing the groupsFinancing the groups
o JLG to function asJLG to function as
one borrowing unit.one borrowing unit.
o JLG eligible forJLG eligible for
acquiring one loan.acquiring one loan.
o If the member want toIf the member want to
save, SB A/c can besave, SB A/c can be
opened in the name ofopened in the name of
the JLG.the JLG.
o All members toAll members to
execute one inter-seexecute one inter-se
document making eachdocument making each
one jointly & severallyone jointly & severally
liable for repayment.liable for repayment.

22. Important factors in JLG approachImportant factors in JLG approach
 Concept depends heavily on
mutual trust & peer pressure.
 Quality of group leadership is
important for sustainability of
JLG.

23. Purpose of creditPurpose of credit
 Flexible credit product.
 For crop production,
consumption, working
capital, marketing & other
productive purpose both
in Farm & Non Farm
Sector.

24. Loan limitLoan limit
 Maximum loan upto Rs.
50000/- per individual under
both model “ A” and model
“B”.

25. Rate of InterestRate of Interest
 As decided by Banks
 Incentive for prompt
repayment to be considered
by banks.

26. Margin & Security normsMargin & Security norms
 No collaterals to be insistedNo collaterals to be insisted
upon.upon.
 Margins as per usual normsMargins as per usual norms
may be applied.may be applied.

27. DocumentsDocuments
 Introduction form
 Application cum appraisal
form .
 Mutual guarantee & DP note.

28. Personal accident InsurancePersonal accident Insurance
 Banks may considerBanks may consider
covering JLG membercovering JLG member
under personal accidentunder personal accident
insurance.insurance.

29. Incentive for Promotion of JLGsIncentive for Promotion of JLGs
from NABARDfrom NABARD
 Grant assistance to eligibleGrant assistance to eligible
institutions @ Rs. 2000/- per JLGinstitutions @ Rs. 2000/- per JLG
over a period of three years.over a period of three years.
 Grant is for formation, nurturingGrant is for formation, nurturing
& financing of JLG.& financing of JLG.
 Capacity Building programmes &Capacity Building programmes &
publicity material expenses alsopublicity material expenses also
supported by NABARD.supported by NABARD.

30. Monitoring & ReviewMonitoring & Review
 Banks to monitor at regular
intervals.
 Periodic report to be sent to
RBI/ NABARD on half yearly
basis (31 March/30 September)

31. JLG – SHG DifferenceJLG – SHG Difference
FACTORSFACTORS JLGJLG SHGSHG
Group size 4-10 members 05-20 members
per SHG
Type of
members
Exclusively of Farmers,
Oral Lessees, Share
croppers, artisans,
entrepreneurs
Only very poor
members
Savings A Credit Group -
Savings optional
Savings-cum-
Credit Groups

32. SHG – JLG DifferenceSHG – JLG Difference (Contd..)(Contd..)
FactorFactor JLGJLG SHGSHG
Loaning Either Singly or Jointly by JLG
by financing bank
Only to SHG by
financing bank
Maximum
loan
amount
Restricted to Rs.50,000/- per
Individual (both under Model A
or B)
No such upper
limit since linked
to total savings
etc. Of group
SB A/c JLG members to be encouraged
to open INDIVIDUAL ‘No Frill
Accounts’
Group Bank A/c
of SHG
Others To serve as a conduit for
technology transfer, facilitate
access to market information,
carry out activities like soil
testing, training, health camps
to its members
May attempt, no
such bar.

33. Farmer's Club ProgrammeFarmer's Club Programme
 MissionMission
Development in rural areasDevelopment in rural areas
through credit, technologythrough credit, technology
transfer, awareness andtransfer, awareness and
capacity building.capacity building.

34.  Farmers’ Clubs are grassroot level
informal forums of farmers.
 Such Clubs are organised by rural
branches of banks with the support
and financial assistance of NABARD.
 With the enhancement of the
programme, other agencies like
NGO, VAs, KVKs, etc. are also now
included as agencies included in the
formation and promotions of FCs.

35. The Programme was launched by
NABARD in November 1982 to
propagate the five principles of
“Development through Credit”.

36. The five principles are:The five principles are:
1. Credit must be used in accordance with the
most suitable methods of science and
technology.
2. The terms and conditions of credit must be
fully respected.
3. Work must be done with skill so as to
increase production and productivity.
4. A part of the additional income created by
credit must be saved.
5. Loan installments must be repaid in time
and regularly so as to recycle credit.
“VVV Programme” was rechristened as
“Farmers’ Club Programme” in 2005 by
revisiting its earlier mission.

37. FunctionsFunctions
The broad functions of the Farmers’ Clubs as
envisaged are as follows :
 Coordinate with banks to ensure credit flow among
its members and enhance better bank borrower
relationship,
 Organise minimum one meeting per month and
depending upon the need, there would be 2-3
meetings per month. Non-members can also be
invited to attend the meetings,
 Interface with subject matter specialists in the
various fields of agriculture and allied activities etc.,
extension personnel of Agriculture Universities,
Development Departments and other related
agencies for technical know how upgradation.
 For guest lectures, even experienced farmers who
are non members from the village/ neighbouring
villages could be invited,

38. FunctionsFunctions (contd..)(contd..)
 Liaison with Corporate input suppliers to
purchase bulk inputs on behalf of
members,
 Organise/facilitate joint activities like
value addition, processing, collective
purchase of inputs and farm produce
marketing, etc.; for the benefit of
members. They can also sponsor /
organise SHGs,
 Undertake socio-economic developmental
activities like community works,
education, health, environment and
natural resource management etc.
 Market rural produce and products

39. NABARD’s support to Farmer ClubsNABARD’s support to Farmer Clubs
 NABARD’s policy support for Farmers’ Club
Programme lays stress on linking
technologies with farmers’ club members
and also facilitating market access through
the following mechanism:
 Capacity building of members of Farmers’
Clubs including leadership training.
 Linkage with technology/markets
 Self Help Groups (SHGs)/Joint Liability
Groups (JLGs) formation
 Forming Federations of Farmers’
Clubs/Producers’ Groups/Companies

40. Benefits of Farmers' Club to Bank BranchBenefits of Farmers' Club to Bank Branch
The formation of Farmers’ Club lead to better
Banker-Borrower relationship in the area. An
Evaluation study of Farmers’ Club
Programme (FCP) carried out by IIM,
Lucknow has brought out the following
advantages of FCs to bank branches:
 Increase in deposits.
 Increase in the credit flow and diversification
of lending.
 Generation of new business avenues.
 Increase in the recoveries and decline in the
non-performing assets.
 Reduction in the transaction costs of
financial institutions/ Banks.

41.  Socio economic development of the village
 A win-win situation both for the banker and
borrower
 Besides benefit to banks, the Farmers’
Club has also been instrumental in certain
social welfare measures like free eye
check-up camp, Animal Health Care Camp,
Mass vaccination camp, community works
like road, check-dams, afforestation, etc.
 Enhancement in bargaining power for bulk
purchase of inputs and marketing of their
produce
Other BenefitsOther Benefits

42. Who can form Farmers' ClubsWho can form Farmers' Clubs
All Institutional Agencies
(Commercial Banks, Cooperative
Banks and Regional Rural Banks)
and all grassroot level organisations
(NGOs, PRIs, State Agricultural
Universities, KVKs, Post Offices
etc.) are eligible to form Farmers’
Clubs

43. The Set UpThe Set Up
 Farmers’ Club is an informal forum in villages.
 Can be promoted in a village / cluster of villages,
generally in the Operational Area of a Bank.
 It should have minimum of 10 members, no upper
limit in the membership is envisaged.
 Every Club would have three office bearers - One
Chief Coordinator/Volunteer/ President, the other
Associate Coordinator/Volunteer/ Vice President and
a cashier.
 The office bearers would be elected by Club Members
on a democratic basis for a term to be decided by the
Club.
 Office bearers should be residents of the area of the
operation of the club. No NGO/FC promoting agency
representative can be office bearer of the club.

44. Functions of the Office bearersFunctions of the Office bearers
The main functions would be
 to convene meetings,
 to arrange meetings with experts,
 maintenance of Books of
Accounts,
 coordination with Bank, Line
Deptts. of the State Governments,
 maintaining proper liaison with all
concerned.

45. MembershipMembership
 All villagers except willful defaulters
can become members of the club.
 The club must make endeavour to
raise their own resources by way of
contribution from members,
 undertaking certain business
services such as bulk procurement
of inputs and collective marketing of
agricultural produce,
 agents for insurance and other
services etc.

46. Steps in the formation of Farmers’ ClubsSteps in the formation of Farmers’ Clubs
 Bank branch can promote the clubs directly or
engage Farmers’ Club promoting agencies like
Krishi Vigyan Kendras (KVKs), Agriculture
Universities, NGOs, Corporates, etc.
 All grassroot level organisations (NGOs, PRIs, State
Agricultural Universities, KVKs, ATMA, Post Offices
etc.) are eligible to form Farmers’ Clubs
 Select a village/ cluster of villages suitable for
launching Clubs in the operational area of the bank
branch.
 Identify a few progressive farmers and borrowers
with good track record of proper loan utilisation,
aptitude and capacity for team work. (Success of the
Club hinges on the right choice of members).

47. Steps in the formation of Farmers’ ClubsSteps in the formation of Farmers’ Clubs
(contd..)(contd..)
 Encourage the members to select a Chief
Coordinator/Volunteer/President and an Associate
Coordinator/Volunteer/Vice President and a Cashier.
This will ensure collective leadership and
continuance of the Club.
 Provide orientation training to them with the help of
NABARD (Regional Office / DDM or trained officers
from the bank) before launching.
 Encourage members to convene monthly meeting
regularly, guide them to have meaningful discussion
and take necessary follow up action.
 Motivate members them to identify credit and non-
credit needs (training, socio-economic, village
infrastructure, etc.), prepare a plan of action and
accordingly arrange for expert talks, counselling,
need-based activities, etc. with the help of
Government Departments and other agencies
concerned.

48.  Ensure that the members maintain
Membership Register, Meeting Register,
Minutes Book and Books of accounts .
 Evolve a performance parameter and
measure the Clubs’ contribution annually.
 Use Club as a tool in aid of branch not only
in the matter of credit and recovery but also
in facilitating promotion of SHGs, micro
credit, Financial Inclusion and convergence
of services.
Steps in the formation of Farmers’ ClubsSteps in the formation of Farmers’ Clubs
(contd..)(contd..)

49. Rating of Farmers ClubsRating of Farmers Clubs
 To facilitate the graduation of
farmers’ Clubs into Federations of
Farmers’ Clubs or Producers’
Groups/ Companies, it would be
desirable for the sponsoring
agencies to rate the Farmers’
Clubs as per prescribed
parameters.

50. INCENTIVESINCENTIVES
Awards to Best Working Clubs:
 Awards would be given to be provided to
best working clubs at the district, state and
national levels, based on the rating norms.
Capacity Building for Adoption of
Technology (CAT):
 NABARD’s Capacity Building for Adoption
of Technology (CAT) programme may be
used for the benefit of farmers’ club
members for training and exposure visits
within and outside the State.

51. Financial Support from NABARDFinancial Support from NABARD
NABARD assistance to all agencies will
uniformly be @Rs.10,000/- per club per year
for a period of 3 years whether they are
institutional or other agencies and the region
concerned. Assistance will be towards the
following minimum & mandatory expenses:
 Formation & Maintenance Expenses 2,000/-Formation & Maintenance Expenses 2,000/-
 Base Level Orientation TrainingBase Level Orientation Training 5,000/-5,000/-
Programme (BLOTP)Programme (BLOTP)
 Meet with Experts (2 ProgrammesMeet with Experts (2 Programmes 3,000/-3,000/-
in a year)in a year)
 TotalTotal 10,000/-10,000/-

52.  NGOs/KVKs will be provided with an
incentive of Rs.2,000/- per club out of
the total assistance of Rs.10,000/- per
club per annum.
 NGOs/KVKs who are operating in
hilly/remote/naxal affected areas, will
be provided with additional incentive
of Rs.3,000/- per club for a period of 3
years over and above Rs.10,000/-
referred to above.

53. Revival Package of Assistance forRevival Package of Assistance for
Dormant ClubsDormant Clubs
 In order to revive the dormant/defunct
FCs, NABARD has introduced a revival
package.
 The assistance may be used towards
meeting the revival cost including
arranging exposure visits for members
of such dormant clubs as well as
concerned branch managers.
 Package of assistance may be
extended to NGOs/VAs for revival of
clubs promoted by banks.

54. THANKTHANK
YOUYOU