ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

SHG Federations as Anchors

The article by S Ananth and T Sabri Öncü entitled “A Critical Look at the Expansion of Banking Services through the Business Correspondent Model: Observations from Andhra Pradesh” (EPW, 22 February 2014) was truly a special one. Though very comprehensive, however, it misses a point that the contexts in Andhra Pradesh are quite different from most other states, if not all. The state has been the Mecca of microfinance; with about 17 million households, it has 14 lakh self-help groups (SHGs). With an average size of 12 members in an SHG, this virtually translates to carpet coverage of all households. With the state government running zero-interest credit programmes for over a decade for SHGs and others, like Rythu Mithra programmes, the setting is quite different with over-indebtedness already running high. This context is quite different; with interest arbitrages and a new breed of elite lenders, the poor households interface with the far too many financial service providers, besides the banking correspondents (BCs).

The authors have very rightly mapped all the issues connected with BCs and spell out how banks have left this largely to the technology provider or corporate BC to do the job with a minimalist approach. The report also highlights how the poor are victims of mis-selling and pyramid schemes when the local elite become BCs. The fundamental requirement for universal financial inclusion to succeed is for banks to look at these initiatives as an opportunity to explore the emerging market rather than to comply with the government’s needs and the regulatory norms of the Reserve Bank of India (RBI). 

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Back to Top