Progress of Microfinance and Financial Inclusion “"A Critical Analysis of SHG-Bank Linkage Program in India”"

This paper critically analyzes the self help group (SHG)-bank linkage program in India.

The Indian government has promoted microfinance through the SHG-bank linkage program to bridge the gap in the financial network and spread banking facilities to the poor in rural and urban areas. Program benefits have not been equally distributed, although the program has performed well. To improve financial inclusion in India’s rural areas, the paper suggests that:

• Banks should expand their branches in the North Eastern, Eastern and Central regions;
• Banks should expand their services to suggest income generating activities to NGOs and SHG members and provide them training assistance;
• National Bank for Agriculture and Rural Development should incentivize banks to intensify efforts in areas where SHG-bank linkage program is not performing well;
• Banks should increase the amount of loan per person;
• Banks should put more effort into promoting the SHG-bank linkage program;
• Government should promote large sized NGOs and the operations of Swarn Jayanti Gram Swarojgar Yojna, in regions where the program has not performed well.