Sa-Dhan Newsletter Volume 4 Issue 2
Community Based Organisations
where PRADAN's staff also attended. As of now, there are
capacity building of SHGs and the bank linkage is to make
about 350 Clusters in PRADAN projects
federation sustain without NGO support. One way to strengthen
them is to create mutual support mechanisms by creating
Most of the federations promoted by PRADAN are nested at
network of SHGs.
the block level. There is usually one/two representative(s)
from each cluster, generally changed once a year. It has
PRADAN experience shows that the need for networking
governing Body and Executive Committee, which meets
firstly evolves as the facilitator reduces SHG visits. Secondly,
monthly. PRADAN so far has promoted only two Federations
the need for its formation arises due to the need for problem
organised in the 55 Blocks. The two federations are Damodar,
that arises. The problem could be the need for support,
Hazaribagh (Jharkhan) and Sakhi Samiti in Kishangarh Bas,
solving the problems and conflict resolution. Finally, the
Alwar (Rajasthan) both registered under the Societies Act
inputs of the facilitator also lead to the formation of networking.
1992 and 1994 respectively.
With the formation of network, the role of the facilitator
becomes important for building mutual support function and
PRADAN assessment of Networks is that they are a very
to strategically guide the network to serve meaningful purposes.
effective and necessary medium for "social intermediation".
These are the reasons for the emergence of networking
The size of the network- from 10 to 20 SHGs at the Panchayat
according to PRADAN.
level is found to be more useful. This is because; at this level
the network is more closer and accessible to the SHGs.
Networking from the SHGs perspective is means many things.
Representatives are truly representatives of all SHGs. It
It means resolving intra-group issues, which one SHG alone
becomes more functional and able to influence SHGs.
could not do. It means easing interact and learn from each
Therefore, PRADAN gives more efforts for strengthening the
other, successes stories and failures. It means mechanisms to
Cluster level organisations in all its Projects
tackle problems and to plan ahead. It means to calibrate
oneself with peers and take up issues at levels above the
For PRADAN, Networking is not looked at as a forum for
village like the Panchayat or the block. It also means drawing
financial intermediation as this is not the most effective way
inputs from the facilitator (staff of the promoting institutions)
of using the women's skills and time. Narendranath said,
for good health.
"Handling finances need staff, especially of higher order
skills, who may be difficult to control in the long run".
From the perspective of the facilitator (PRADAN's Staff),
Therefore, PRADAN looks at financial institutions as a short-
networking is a mechanism to be in touch with the SHGs. It
term arrangement till direct SHG-bank linkages become strong.
means a forum. A forum for developing and institutionalizing
Therefore, PRADAN does not think the scale of economy as
values through a process of peer learning. It means to ease
major issue in direct SHG financing by banks; rather there are
the monitoring and evaluation of performance (PO and
diseconomies of scale and risk.
Federation/ Cluster/ SHGs) in a participatory manner. It is also
a means for providing cost-effective interaction with external
FINANCIAL INTERMEDIATION THROUGH NGO-
agencies such as banks, government agencies and
PROMOTED COMMUNITY ORGANIZATIONS IN
development support agencies like PRADAN. It also means
INDIA
the provision of special inputs for building leadership cadre.
PRADAN's Experience on Networking of SHGs was followed
The following diagram shows overview of networking model
by Ajay Tankha's presentation on "Financial Intermediation
practiced by PRADAN:
through NGO-Promoted Community Organizations in India"
which is based on a study he has undertaken. According to
him, there are two broad paths for SHG's long-term involvement
in financial intermediation. They are a) SHG link directly with
banks on a permanent basis and b) SHG/Federations linked
SHG
SHG
SHG
link to various types of MFIs.
There are two reasons for SHG link directly to banks. The first
is reason is that Bankers favour SHGs due to the possibility
CLUSTERS
of externalization of the transaction costs of small loans and
ensured recoveries through peer pressure. Secondly, given
the extensive outreach of the Indian banking system, it has
FEDERATION
not penetrated to the poor and hence, Ngos are trying to
bring the poor into the fold of existing mainstream banking.
He also said that there is two ways in which SHGs/ Federation
In this model, networking takes place at two levels. One at the
linked to other MFIs. The first is Ngo-MFIs lending to SHGs
contiguous village or panchayat (10-15 SHGs at the Panchayat
and individuals and the second id that of Ngo-MFIs lending
/contiguous villages /Cluster level. The second levels in which
to clusters and federations. His study suggests that Ngo-MFIs
networking function is at the block level (100-150 SHGs) call
lending to SHGs and individuals are transforming into MFIs
Federation. With regard to the functioning of network at the
or starting satellite microfinance activities. This Ngo-MFIs
cluster level, there are three representatives from each SHG -
may retained SHGs for on lending or takes the role of pure
generally changed once a year. It conducts monthly meeting
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