Repayment Performance in Joint Liability Lending: Experience of SHGs in India

Drawing upon data from 200 SHGs of Madhya Pradesh and Odisha during 2011-2012, this paper explores validity of the argument attached with high repayments and discouragement of strategic default in lending to joint-liable groups in Indian context. The average rate of recovery of SHG loans was found to be only 59.4 per cent including subsidy and debt relief, and NPA was 77 per cent. Many of these groups did not perform the basic function of a SHG (savings mobilization and inter-loaning) and were found to be dormant or disbanded at the time of interview. Agencies and clients pretend to interact actively but in reality do not complement one another and thus tend to work independently in the guise of a distorted and false logic of participation. It appears that the concept of SHG is no more working as vehicles of sustaining long term stability of effective financial intermediation and has, in turn become a platform of subverting the desired role for quick and short term gains in the form of loans.