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Group lending through an SHG bank-linkage programme in India: transaction costs and social benefits

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  • Meenakshi Rajeev
  • B. P. Vani
  • Veerashekharappa

Abstract

Group lending is useful in channelling credit to the self-employed poor in developing countries, to whom banks usually prefer not to lend, and formation of self-help groups (SHGs) helps facilitate this. In India, SHGs can access credit through private microfinance organisations or can approach banks through a state-led bank-linkage programme. Scholars argue that transaction costs are high while borrowing from banks despite relatively lower interest rates, making this uneconomical. This article uses a field survey to estimate transaction costs, presents other social benefits of the programme, and finds empirical justifications for strengthening the bank-linkage programme.

Suggested Citation

  • Meenakshi Rajeev & B. P. Vani & Veerashekharappa, 2020. "Group lending through an SHG bank-linkage programme in India: transaction costs and social benefits," Development in Practice, Taylor & Francis Journals, vol. 30(2), pages 168-181, February.
    • Handle: RePEc:taf:cdipxx:v:30:y:2020:i:2:p:168-181
    DOI: 10.1080/09614524.2018.1508418
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