Impact of bank interest rates on SHG Members

The book examines the effects and ramifications of interest rates on SHG members under the NABARD programme on bank-SHG linkage with the help of data collected from a large number of SHGS formed by the Grama Vikas, Kamataka. Although the banks did not incur much cost towards training, selection and monitoring of the borrowers, they benefited a great deal from higher recovery rates under the linkage programme. The SHGS, on the other hand, spent considerable time in the selection, monitoring and repayment of loans. They also incurred costs on account of loan defaults and other expenditure. The interest rates under the linkage programme had debilitating impact on income from the activities undertaken by the SHG members. The book concludes that the banks were faced with win-win situation while SHGS and members were faced with loss-loss situation. There is, therefore, a case for NGOS, donors and development workers to advocate a reduction in the interest rates charged by the banks under the NABARD bank-SHG linkage programme.