India in last 15 years has witnessed unprecedented growth in financial services, unfolded by liberalization and globalization of financial services due to adoption of Information Technology and unlocking of the regulatory framework. But alongside this positive development there are evidences that the formal financial sector still excludes a large section of population.
Financial inclusion broadly means the provision of affordable financial services, viz., access to payments and remittance facilities, savings, loans and insurance services by the formal financial system to those who tend to be excluded.
The persons having low income and less geographical access to banks are likely to exclude from the financial inclusion. Such persons may be mostly the families of land-less agricultural laborers, marginal farmers, oral lessees, migrant laborers and the educationally and economically deprived groups like tribal and women. Indirectly financial inclusion of low income people in terms of credit accounts has taken place through various government sponsored credit schemes like Small /marginal Farmers Development Agencies in early 70's, Integrated Rural Development programme (IRDP) since 1978 to 1999 and Survodya Gramin Savarojgar Yozna (SGSY) since 1999. The Kisan Credit Card (KCC) is another big success in linking farmers with banks. Artisan Card and General Purpose Credit Card (GCC) are the latest schemes to link low-income people with banks. One common weakness of these credit schemes has been the absence of saving/current account in general and taking a loan from banks has been one time life event for majority of such borrowers.
As an innovative credit channel, the Self Help Group (SHG) approach was introduced in 1992, to link poor people with bank credit. Under this programme, about 40million rural families have been linked with banks up to March 2007 (NABARD). The distinguishing feature of this approach as compared to other sponsored credit schemes is the learning the management of own money by the poor before availing bank loan. Moreover, the SHG approach does not involve any subsidy; hence, it is sustainable with its own strength. A number of studies have found that SHG approach reduces the transaction cost for banks and loan availing cost of borrowers. In financing SHGs, the requirement of collateral by banks has been replaced by peer group pressure and hence this approach has enabled social and economic inclusion of women by waiving the requirement of collateral.
NIYATEE FOUNDATION, as a social development organization one step ahead in the process of Financial Inclusion of the Self-Help-Group. With its present Institutional Development programme for Women, Financial Inclusion capacity building training programme has been encase to around 500 SHGs in five districts (Bargarh, Khordha, Keonjhar, Kendrapada and Jagatsingpur) in the state of Odisha. Financial Inclusion of SHG has a positive impact though not significant with saving accounts which points towards need for further enrichment of the SHGs with financial education.