Self-help Co-operatives, Deposit Mobilisation and Supply of Credit

Abstract

Formal financial institutions (FFIs) in a developing economy often fail to meet the loan requirements of the poor. It is frequently stated that the poor are non bankable. Given this, several models and structures have emerged for making them bankable. Self-help groups (SHGs) have, in this context, proved to be an effective instrument responding to the financial needs of the rural poor in India and elsewhere. Many Micro-finance institutions (MFIs) have federated SHGs to mobilize larger number and volume of deposits for enabling the poor to have easy access to credit. Without a legal status however, these structures could not progress much. With the enactment of Orissa Self-Help Co-operative Act, 2001,federations of SHGs were registered as Self-Help Co-operatives (SHCs) with a legal status. These co-operatives then went ahead with forming new SHGs and aggregating them into SHCs. Such co-operatives have initiated a change in the method of delivering rural finance.