Case Study: Sahulat Journal, Vol.7, No. 1, December 2018 and June 2019
Dr. Adv. Neeta Deshpande2
India ranks among the top 15 economies of the world as per GDP. Nevertheless, about 300 million people or 60 million households are living below poverty line. Microfinance is an extremely effective development tool in a country like India. It infers providing financial services to the poor and low-income groups whose low economic standing eliminates them from formal financial systems. Microfinance is emerging as an instrument to address poverty in the new economy. But the success of microfinance has been disputed by extreme criticism regarding loan repayment, high interest rates, exploitation of women borrowers, ineffectual microfinance provision to target groups etc. It was in this context that many scholars proposed ‘interest free microfinance system’ as an alternative for microfinancing. At present, there are a lot of methods of interest free microfinance. Mostly, its operations are characterised by small, usually short-term loans, efficient simplified borrower and investment appraisal; quick payment of repeat loans after timely repayment; and convenient location and timing of services. One of the most popular models of interest free microfinance is the Self Help Group (SHG). Lately, India has witnessed widespread emergence of federated structures of informal SHGs as a corollary of the growth of the SHG movement. The objectives of the paper are to understand interest free microfinance practices in India, explore the potential of SHG federations, features and functions of the federation as well as a case study of ‘Chaitanya’ which has helped in the establishment of 15 federations in seven districts of Maharashtra.
This paper highlights major issues and challenges of SHG federations and recommendations for their successful implementation.