Case of Primary Agricultural Credit Society Linkage, India: The Best Remote Rural Self-Help Groups Can Do?

This case examines a linkage between two member-owned institutions in West Bengal, India, namely, Self-Help Groups (SHGs) and government-promoted Primary Agriculture Credit Societies (PACS). Models linking community-based associations with financial institutions have tremendous potential to expand outreach in remote areas. Linkages can provide these associations with additional value such as access to larger loans, a safe place for savings and the potential for providing a broader range of services. The West Bengal experience shows that:

• PACS-SHG linkage has broader potential rural reach than any other linkage model;
• SHGs offer a viable membership base, and a cheap and growing source of funds from the cooperative society perspective;
• SHG members trust PACS given their proximity, accessibility, knowledge of local staff and apparent security of savings.

The SHG-PACS linkage is a strong starting point for remote outreach. PACS need to be stronger financial intermediaries in their own right to provide a linkage model that can scale up and serve remote groups over the long run. SHGs too are yet to be fully integrated into the PACS structure. Regulation can play a key promotional role in defining ownership and supervision structure for this linkage.