Grameen Bank Groups and Self-help Groups; what are the differences?
Most rural micro-finance clients are organised into groups of some sort. There are many forms of group intermediation, but the dominant models worldwide are the Grameen Bank system, which originated in Bangladesh, and the Self-help group system, which is most widely practised in India. Each system has its advocates, and much debate on this topic appears to focus on which of the two is ‘the best’. This paper attempts to describe both systems, to analyse their respective strengths and weaknesses and to suggest which may be most suitable for particular types of clients, institutions and local environments.
After reviewing where, by whom and why the two systems used, the author assesses each method in terms of sustainability, outreach to and impact on the poorest, empowerment and institutional feasibility. The pros and cons are usefully summarised in a table at the end. The tentative conclusion drawn is that the Grameen system is more expensive but may nevertheless be more suitable for poorer communities, particularly in places where there are few NGOs to develop the groups, and few bank branches whose staff are willing to serve them. SHGs, on the other hand, can evolve quite easily from existing ROSCAs or other traditional financial or non-financial groups, and any bank can do business with them, so long as its management are prepared to deal with this unfamiliar but potentially highly profitable market segment. If there are many pre-existing groups, and if there is a wide network of bank branches, which need new business opportunities, the environment would seem to be ideal for the SHG system.