Group lending through an SHG bank-linkage programme in India: transaction costs and social benefits. Issue 2 (17th February 2020)

• Record Type: Journal Article
• Authors: Rajeev, Meenakshi; Vani, B. P.; Veerashekharappa,
• Is Part Of: Development in practice. Volume 30:Issue 2(2020)
• Page Start: 168
• Page End: 181
• Publication Date: 2020-02-17
• Subjects: Labour and livelihoods – microfinance -- economics -- aid – development policies -- South Asia; Technical assistance -- Developing countries -- Periodicals; Economic assistance -- Developing countries -- Periodicals; Developing countries -- Economic conditions -- Periodicals; 338.91091724
• DOI: 10.1080/09614524.2018.1508418
• Languages: English
• ISSNs: 0961-4524

Abstract

ABSTRACT: Group lending is useful in channelling credit to the self-employed poor in developing countries, to whom banks usually prefer not to lend, and formation of self-help groups (SHGs) helps facilitate this. In India, SHGs can access credit through private microfinance organisations or can approach banks through a state-led bank-linkage programme. Scholars argue that transaction costs are high while borrowing from banks despite relatively lower interest rates, making this uneconomical. This article uses a field survey to estimate transaction costs, presents other social benefits of the programme, and finds empirical justifications for strengthening the bank-linkage programme.