Groups under Microfinance Institutions in India

Groups under Microfinance Institutions in India

In order to provide financing, insurance, and financial instruction to India's rural population, microfinance organisations establish many kinds of groups:

1. JLG, or Joint Liability Group - is a common informal group made up of 4–10 people that looks to borrow money with mutual guarantees. Normally, the loans are for activities related to farming or meticulously related activities. This cluster of borrowers comprises farmers, and rural employees. Within a JLG, equal responsibility beholds everybody for quick debt payback. Due to its simplicity, this institution does not require any financial administration.

2. SHG or, Self Help Group - A self-help group consists of people from comparable socioeconomic backgrounds. For a brief time, these small business owners band together and establish a shared fund for their operational requirements. These organisations fall under the category of non-profits. Debt recovery is taken care of by this group. Collateral is not necessary in this type of group loan. In general, interest rates are low. A number of banks have partnerships with SHGs with the goal of enhancing financial inclusion in the nation's rural areas. In this regard, the NABARD SHG linkage programme is important since it allows a number of Self Help Groups to borrow money from banks provided they can demonstrate a history of prompt repayments.

3. Grameen Model Bank - Nobel Prize winner Prof. Muhammad Yunus developed the Grameen Model in Bangladesh during the 1970s. In India, Regional Rural Banks (RRBs) were founded as a result of it. Acomprehensive growth of the rural economy happens to be the primary goal of this arrangement. SHGs have, nevertheless, fared better as MFIs in India than Grameen Banks did.

4. Rural Cooperatives - After India gained its freedom, rural cooperatives were founded. Poor people's resources were combined, and this fund was used to provide financial services. This method, however, had intricate monitoring protocols and primarily benefited creditworthy borrowers in rural India. As a result, this method did not achieve the initial level of success.