Banking with the Poor: NABARD's Experience

This paper outlines the achievements of National Bank for Rural and Agriculture Development (NABARD) in the areas of microfinance and rural development in India.

The author tracks the progress of microfinance in the country as follows:

• In the early eighties, studies conducted showed that the actions taken by the government in the microfinance sector were ineffective - the poor needed better access to banking services and products, rather than cheap subsidies;
• This led to the development of the Self help group (SHG) - Bank linkage - model, the purpose of which was to expand the outreach of the banks to the poorest of the poor;
• SHGs are small, cohesive, participatory groups of the poor, who regularly pool in their savings and use these to give members small, interest bearing loans;
• In the last 12 years, innovative programs by NABARD in this area have led to the following achievements:
  • Access to formal banking services at the doorsteps to 18 million poor Indian families;
  • Empowerment of women's groups;
  • Increase in households assets, savings and employment;
  • Improvement in housing conditions.

In conclusion, the author argues that NABARD's interventions have been so successful that it has helped the poor to access banking services at transaction costs that are the lowest in the world.