Self-help groups (SHG) as a concept have been in existence for ages. However, SHGs in the arena of financial intermediation have been there for about 25 years, starting with the early credit management groups set up by Myrada, a non-governmental organization (NGO) based in Bangalore.

However, Ajay Tankha and other official chroniclers would record the birth of SHGs on the historic day of 26 February, 1992, when the National Bank for Agriculture and Rural Development (Nabard) issued a landmark circular (page 22). The construction of history has placed much emphasis on official recognition of an experiment that was in the making for five years. Therefore, 2012, instead of being celebrated as the silver jubilee of the SHG movement, was celebrated as the 20th anniversary of the issuance of a circular.

Tankha’s book is constructed on the review of the SHG movement, and its performance in the past two decades. Therefore, the book is organized into factual silos: origins of the groups; performance and growth; institutions involved; costs; and sustainability and impact. He has succumbed to the danger of this approach: of looking at silos in detail, loaded with facts and numbers and losing the big picture in the process—that of the landscape of financial inclusion. By this process, his time marker is an official recognition, a day when SHGs entered into the statistical reportage of the nation. The tragedy of SHGs has been the evangelical obsession with the movement rather than the concept. The concept of people getting together as a group for doing financial transactions was not new, a fact that Tankha recognizes early on. There are informal chit funds in India operating on similar lines. SHGs just tweaked the model to suit their acceptance with the formal banking sector. SHGs conceptually addressed issues that bother the bankers. They created a collective identity for the women in the group, and gave transaction aggregation. As it was a savings-led model, it also created a transaction trail for the bankers. This was important in the absence of a bankable collateral.

Before this book, Tankha has worked and written on diverse issues pertaining to SHGs—his particular contribution was in estimating the cost of promoting SHGs and SHG Federations. We can see that the overall approach of this book is towards evaluating the movement on financial terms. But at the end of twenty (five) years, we should look at whether the concept is relevant, the reasons for limited regional success and what it means to be taken over by the state. When we look at the future directions as Tankha attempts to do, it is important to go back to see if the base principles are intact.

Tankha fails to recognize the conceptual triggers behind the growth of the movement in a particular direction. For instance, were SHG federations necessary? While it looks natural that as the movement grows, we need consolidation and federations are a natural outcome, that is the line of argument he takes. However, if we examine it from an intermediation perspective it does not make sense to add another layer of costs between the bank and the ultimate customer. Aggregation of SHG transactions at the federation level would make sense if the spread of banking were not deep. It would, for instance, make sense for a Kotak Mahindra Bank or a Yes Bank. But for public sector banks having a physical presence in more than 45,000 rural and semi-urban locations it does not. It only cannibalizes the local business through an aggregation at the regional office level and bypassing the branch network through an alternative federation route. This takes us to the design principles to see if they work.

The unfortunate part of Tankha’s approach in this rather well-researched and detailed book is that he does not question the status quo. He takes facts as they appear and chronicles them. It would have been delightful if he had looked at each of the landmark events to build a story on how these events changed the course of history. If he had done that, he would have re-narrated our story of innovation that is so Indian in nature.

The story is that this innovation did happen. The natural excitement for this innovation should have come from the commercial world—particularly the banks who should have engaged with this segment commercially. However, the excitement came from the state in the paradigm of empowerment, inclusion and development. While it made sense for the SHG movement to seek the patronage of the state during the initial phases to sell the concepts to the banking world, going forward the basic commerce and the commercial exchanges were compromised because of the state. Initially it started with subsidies that provided funding for building the social architecture. But when the subsidies and intervention entered the commercial transactions, the decline of the spirit of SHGs started. Tankha fails to grasp this nuance.

Without undermining his remarkable work, we need to recognize one significant gap in the book. While Tankha locates SHGs in the world of financial inclusion, he fails to look at some emerging trends that question the fabric of groups. Technology-led interventions and state policy are moving towards disintermediation. The Aadhaar-enabled payments, the direct benefit transfers or payment of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) wages are sought to be loaded on to the individual bank account of the poor customer. What does this do the SHGs? Is the state suffering from the schizophrenia of the rural development strategy being at cross purposes with the financial inclusion strategy? Unfortunately Tankha does not engage with this scenario at all.

But for my reservations about the approach of the book, this is an important resource book for anybody interested in the field of SHG-based financial inclusion programmes in India.

M.S. Sriram is with the Centre for Public Policy at Indian Institute of Management, Bangalore.

Mint is the media partner of the Microfinance India Summit.

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