Delinquency in Self Help Groups

Author: LB Prakash, Anjaneyulu Ballem
Published: April 03, 2009

Abstract:

This note focuses on identifying delinquency in SHGs, delinquency management and current delinquency management prevention strategies currently being undertaken by banks, SHPIs and MFIs. The note provides practical recommendations on the need to track individual repayment behaviour along with group repayments. There is also need for periodic SHG performance assessment and portfolio quality monitoring. In addition the note also describes group member’s psychology of paying less attention to internal loan repayment as compared to loans taken from external borrowers (financial institutions – banks, SHPIs, MFIs). Peer pressure and other informal means of ensuring repayments by group members also provide an overview to delinquency mitigation strategies at group level. As far as the banks are concerned, the provision of subsequent bank loans acts as a pressure for group members to make timely repayments. There is a need to better repayment discipline towards internal loans, unless addressed could later affect the repayment of SHG’s external borrowings

Tags: IFN15 , Group lending , India , South Asia , Self help groups , SHGs , Internal audit and control systems , Delinquency management , Internal audit , Risk management , Chaitanya , SHG bank linkage , IFN 15

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