Obtaining Credit through a Joint Account
This paper examines the impact of a self-help group (SHG) initiated by DHAN Foundation in Kottupatti, a village in Tamil Nadu in India.
The paper initially discusses the impact of the SHG by focusing on the impact on noteworthy women in the group. It highlights the positive impacts on the lives of the borrowers due to the initiation of this group:
- Obtaining access to financial services of the formal banking sector and freeing themselves from the moneylenders;
- Moving out of crumbling mud huts into stone or brick houses;
- Leasing a piece of land and setting up small independent businesses;
- Paying for doctor's visits.
The paper then explains that success of the groups in India led to the genesis of the SHG-bank linkage and was introduced as national program entitled Linkage Banking. It explains the concept of Linkage Banking involving the following steps:
- Villagers organize themselves into a SHG;
- The SHG opens a joint account and saves continuously;
- Banks evaluate the SHGs;
- Banks decide on the SHG's creditworthiness after six months of evaluation.
The paper enlightens that more than a million SHGs, with 16 million members, are now regular bank customers and directly benefit by the program.
The paper concludes with discussion among the group members on decisions regarding the provision of loan and other investment decisions.
