Financial inclusion has witnessed significant investments and efforts from a variety of stakeholders in India over the past few years. The Reserve Bank India (RBI) is promoting inclusive growth using the business correspondent model. Banks have been trying to create a sufficiently large business correspondent footprint to offer banking services to low income customers in a seamless and cost efficient manner. Banks are exploring different partners like MFIs, SHPIs, corporates with large retail networks, individuals and Agent Network Managers (ANMs) to reach out to the unbanked and under-banked. Self Help Group Promoting Institutions (SHPIs) have good outreach, experience of working with unbanked and a social motivation which motivates banks to collaborate with them.
Shri Kshethra Dharmasthala Rural Development Project (SKDRDP) is an SHG promoting institution (SHPI), which is a pioneer in the SHG-BC model working in the backward districts of Karnataka. It has collaborated with various banks to provide access to formal financial products and services for the poor and unbanked in its area of operation.
This case study highlights the SHG-BC model, how the model can be further improved, and factors that contributed to the success of the model. It will also serve as a guide for other institutions and SHPIs who want enter into business correspondence. It will also help SHPIs understand the advantages and challenges of adopting a BC model for financial inclusion, and to apply some of the lessons learned from SKDRDP's successful SHG BC model.