Micro Credit - SHGs
Micro Credit - SHGs
Micro Credit involves the provision of thrift, credit and other financial services and products of lower value to the poor in rural, semi urban and urban areas for enabling them to raise their income levels and improve their living standards. It has become a successful instrument for economic empowerment of the underprivileged sections of the society by improving their access to formal credit system through Self Help Groups (SHG).
Loans provided through Micro Credit can be used for consumption or production. After a period of time, groups may be encouraged to undertake income-generating activities.
Models of credit linkage of Self Help Groups (SHG):
- Dhanlaxmi Bank takes up the task of organizing SHGs and financing them
- Financing SHGs, which are organized by NGOs etc. directly (Direct Linkage)
- Financing NGOs/MFIs for on lending to SHGs organized by them ( Indirect Linkage)
Micro finance loans are to be repaid after a mutually agreeable term as defined by the bank and SHG. This will depend on income to a maximum period of five years. In case of projects, the maximum period will depend on the income generated from project.
- The eligible loan amount to SHGs is computed as a multiple of group corpus mobilized by them (Maximum of seven times)
- Selection of the SHGs is based on the rating model developed by NABARD.
- Minimum score required for selection of SHG for linkage/lending is 80%
- Financial viability, technical feasibility and bankability of the project would need to be looked into in respect of Project finance under direct linkage
- The leadership of the group and facilitator support also examined
- For financing SHGs, the loan is cleared after all the members provide guarantees.
- Loan application from authorised representatives of self help groups
- Resolution in group meeting to avail Bank Finance
- Recommendation letter from NGO/SHPI if sponsored by them
- Inter se agreement executed by all members authorizing the representatives to transact on behalf of the group (To be stamped as general power of attorney)
- DPN of authorised representatives of group
- DP Delivery letter signed by authorised signatories
- Articles of agreement executed by group representatives (to be stamped as an Agreement)
- If assets are created out of loan proceeds, asset may be hypothecated to the bank