Overcoming the Obstacle of Lazy Microfinance:The Challenge for SHG-2

Two decades after its launch the SHG-Bank Linkage Programme continues to be the mainstay of the Indian microfinance scene. What has occurred in the last two decades is of course spectacular, but at the present juncture when SHG- 2 is being launched, it is necessary to lookout for false turns and fair-weather friends. The SHG-Bank Linkage model was neither an easy nor a soft option. It requires tremendous amount of social mobilisation and organisation at all levels especially at the grassischolar_mains. Formation and nurturing of groups is an intensive activity. In contrast to this difficult and time taking task the sector has experienced the phenomenon of lazy microfinance. Lazy microfinance comes in two variants. One is the MFI (NBFC) variant and the other is a host of government sponsored, subsidy linked programmes, which aim to ride on the SHG concept. Though the seeds of lazy microfinance were sown with the launch of SGSY in 1999, it came into full bloom with the partnership model of funding MFIs by banks starting in 2003-04. The challenge of both these variants is real which SHG-2 needs to overcome. If the SHG-Bank Linkage Programme in the modified variant of SHG-2 has to grow into a widespread movement taking into its fold all the left over population groups, it has to clearly delineate a path which is separate from the lazy microfinance as manifested by the NBFC-MFIs on the one hand and the governmental sponsored SHG based programmes on the other. This would require attention at the level of formation and nurturing of groups and at the level of linkage with the banking sector for savings and credit. Unless a strong focus is given at these two levels- SHPIs and Banks- the obstacles posed to SHG-2 by lazy microfinance cannot be overcome.