India's Self-Help Groups

As the year that I spent immersed in WEP Nepal wound down in 2002, I began to share the strength of WEP’s sav­ings groups with my microfinance colleagues—a strength that existed not despite but because the groups were never con­nected to external lenders.

Kim, it turned out, was already managing a savings group program of her own with Catholic Relief Services (CRS), as part of a mammoth, diverse, microfinance movement in India, the self-help groups (SHGs). Kim invited me to return with her to northern India to see a different manifestation of savings groups in action.

Kim and a shifting group of CRS staffers took me through­out West Bengal, Jharkhand, Bihar, Orissa, and Uttar Pradesh provinces on an informal journey to learn about CRS’s work with SHGs. We often traveled all night by train, followed by bone-jarring jeep rides to the villages far away from the rail centers. We slept in parish houses where the Indian priests and nuns who served the region lived. After rice and dal din­ners and long talks with the priests late into the night, we would find ourselves startled awake by church bells at five in the morning.

Unlike the orderly WEP meetings, at which we would hold detailed interviews one group at a time, hundreds of people showed up at each stop in India. We did not have the time or resources to arrange the carefully selected interview sampling of a full-scale project evaluation—how were we going to sort out the jaw-dropping prospect of interviewing an entire village? I shouted out my questions to the few peo­ple in the front who could hear me (or rather, my translator).

From what we could decipher, many in the crowd were enthusiastic about their SHGs. It was a chaotic process and not scientific, but between these gatherings and a few poi­gnant conversations with CRS’s staff, local priests, and leaders of local NGOs, we learned what we needed to know.

The basic methodology of the SHG in India was remark­ably similar to that of WEP groups, except that most groups did eventually link with banks to receive loans, which became a larger source of capital for their individual lending than was their own savings pool.

SHGs, I found, were trained and supported by a wide array of local organizations, and this led to substantial dif­ferences in how the groups operated. CRS supported small local NGOs to train groups. The Self Help Group-Bank Linkages program promoted by India’s National Bank for Agriculture and Rural Development (NABARD) would even­tually became by far the world’s largest microfinance ini­tiative. According to Banking on SHGs: Twenty Years On, a recently published book by SHG expert Ajay Tankha, there were ninety-six million SHG members saving and lending in India as of 2012, a figure more than triple the outreach of all the other microfinance initiatives in India.⁶ To put this in perspective, the Microcredit Summit, which tracks MFI outreach, reports that there are some two hundred million microfinance borrowers worldwide.⁷

At 1.2 billion inhabitants, the population of India exceeds that of all the countries of Africa combined, but it was not the size of India that I came to believe was the driver of the suc­cess of SHGs. The genius was decentralization. Thousands of different Indian NGOs (and now, increasingly, govern­ment agencies) trained the groups, and thousands of different banks—with a bank office for most clusters of villages—made loans to the groups. In this Self Help Group-Bank Linkages model, NGOs did what they do well: they trained people and provided supportive services.

Like WEP groups, the SHGs I came across in India were hubs of resilience for their members and their villages. One group in particular is etched in my memory. The members used their group meeting to prepare a complete, community­wide disaster response. The same day of their meeting, Vinod Parmeshwar, who later became the deputy director for Sav­ing for Change, and I slipped down a muddy clay trail on foot to meet with a group readying for the monsoon. When we arrived, members were sewing together empty plastic bottles with tightened caps to create makeshift lifejackets, an inge­nious if disquieting precaution for the coming flash floods. As rain pelted down on the thatch roof, they showed us the plan they had developed to protect their financial records inside ziplock bags stored with their grain on high ground. They had drawn up a map for an evacuation plan that included assisting elderly villagers to get to safety, too.

What I saw in India reaffirmed my belief that much more can be done at much lower cost by building on what is already in place than through the traditional, centralized microfinance model. The SHG movement in India used this strategy when it built on the services that NGOs were already providing in these communities to organize groups, and then used a well-established and dispersed rural banking system to deliver additional loan capital. In the state of Orissa, for example, a catechist described to me how he trained commu­nity members in SHGs at the same time that he performed his usual missionary work teaching people the fundamentals of Catholicism. Given the simplicity of the SHG model, a catechist could become a group trainer. It struck me here as in Nepal that these groups can be trained by volunteers and operate on their own, so long as the model is simple and the goal is to make the groups independent.