Primary Agricultural Society Linkage: The Best Rural Remote Self-help Groups in India Can Do?

This case-study highlights key opportunities and challenges in linking community-based associations or groups with “Member-Owned Institutions (MOIs)” such as cooperatives for remote outreach. The study examines the linkage between two distinct kinds of MOIs –a largely informal association called a “self help group (SHG)” and a highly institutionalized government-promoted credit cooperative called “Primary Agriculture Credit Society (PACs)”. The paper studies:

• The potential of PACs as viable rural financial institutions;
• The role of the SHG-Bank linkage program in reaching rural households;
• Ways in which linkages between PACs and SHGs deepens and broadens access.

It then addresses the following questions:

• What are the challenges and opportunities in remote linkages?;
• What do SHGs gain from linkages to PACs and what is the security of their savings with these institutions?

The paper analyzes the case of SHGs-PACs linkages in West Bengal, India, examining the features of its enabling environment as well as the unique risks that SHGs face in this State. It finds that:

• PACs need to transform from credit dispersal agencies into savings based institutions.
• The greatest value derived by:
  • Members of the SHG was as owners of the SHG;
  • SHGs was as users of PACs services.
• Despite weak supervision and internal controls there was trust in PACs as safe keepers of SHG savings.

The paper concludes that SHG linkages with PACs do have potential for broad and deep outreach in rural areas.