Self-help groups are self managed groups of poor men and women not exceeding 20 members. They should be Homogenous, having trust on one another. They should live in a hamlet for easier assessment, and to be organized voluntarily to become a group to mobilize own savings and revolve the same to meet the credit needs of members. The SHG may have a unique name. There need no registration as the members not exceeded 20.The group should operate on the principles of self help, mutual trust and cooperation. They should meet in a common place in regular intervals to collect the savings and to disburse the loans to the members. All particulars should be recorded in registers like savings register, loan register, resolution register etc. Decisions are to be taken collectively.

Functioning of the Group:
Normally, each group has 2 or 3 office bearers.
Animator – to preside the group meetings.
First representative may ensure about the norms
Second representative – Maintenance of accounts.
NGO- Help in conducting meetings and maintenance of accounts
Attendance register is to be maintained
Regular contribution of monthly savings is compulsory
The group decides the quantum of amount for monthly savings
All the money pooled is revolved among the members during the regular group meeting
All lending norms, purpose, amount, repayment, unit cost are arrived on consensus
Each group opens a Bank account jointly operated by animator, first representative or second representative as decided by the group members. Records are maintained for formation, activities, and resolutions of the group.

Accounting system of the group:
There is a simple accounting system
Self-help group is a localized financial institution
Books maintained are: Cash register, passbook for deposits/loans, cash receipts for vouchers.
For advances – Self designed DPNs, undertaking etc. Books are open for verification by the members.
Vouchers – The DPN (Demand Promissory Note) for loan availed are maintained.
All the transaction should be entered in the register

Self help groups are nowadays plays a vital role in our countries economy. Though the recovery of loans availed from banks are tends to decrease from 100% to around 85%, the social cause is being fulfilled. The poor woman now has banking knowledge. She has accounting, controlling systems. In our country all the banks are now willing to extent financial assistance through economic activities to the group members. More viable groups run restaurants, super markets, mini dairy units, DTP/Xerox machines etc. They also participate in social development works also.

A prudent banker can involve himself for the linkage of SHGs. He can act as a promoter and financier. Bank can open a savings bank account to a newly formed SHG, by obtaining the resolution copy for the formation of the group. Authorisationletter from the group members to operate the bank account by the secretary and treasurer. Usually a unique name is given to the group and the bank branch opens the account in the name of the group. There will be no byelaws since the group is an unregistered body. Reserve bank also permits to open savings bank for SHGs, eventhough it is an unorganisation.
 The banker can attend group meeting without interfering the meeting. He can ensure the books of accounts, regular internal repayment of loans, savings, and dynamism of the group function. Group savings for a group is meant to be the total of all the savings pooled by the group at a particular period along with earned interest. Group savings need not be kept in the savings account and hence the bank should note only the group savings but not the amount deposited with the branch.
Bank may consider for loans to the group by satisfying with the above points besides the age of the group, which normally above 6 months. The quantum of the loan may as 1:1 basis on group savings as their 1st linkage.

BENEFITS FOR BANKER:

1) As required by RBI, Fulfils the concept of priority sector lending.
2) Higher rate of repayments.
3) Reduction in lending and monitoring cost and workload.
4) SHG members become permanent financial partners to the bankers helps in recovering other overdue accounts.
5) SHG linkage is a profitable business and improves the advance portfolio, with good recovery.
6) Refinance is available from NABARD.

In simple words SELF HELP GROUP is not a programme but a CONCEPT. A brilliant banker will definitely reap the rich fruit through SHGs-, which fulfills social oblications and the banker can get a sizeable income and a strong customer base.In other words a prudent banker can use the SHG's  as a "RIGHT CLICK" to challange the change ...

With Regards,

• Written by AYYAPPAN.
• In category Small Business.
• 14 years ago.

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