ABSTRACT
As mentioned in the introduction, the microfinance sector in India is dominated by two models, the SHG–Bank Linkage Model (SBLM) and the microfinance institution (MFI) Model. Both models have been developed through an iterative process of experimentation and feedback using field studies and experiments. The SBLM was based on the findings of an action research project sponsored by the National Bank for Agriculture and Rural Development (NABARD) in 1987. Prior to this, a series of research studies conducted by NABARD in the 1980s found that despite the existence of a network of rural bank branches specifically aimed at channeling bank credit to low income groups, the poorest individuals remained outside the ambit of the banking system. The studies further showed that the existing bank policies, systems and procedures, as well as the loan and deposit products, were not tailored to meet the needs of the poor (Singh 2008). NABARD officials then actively tried to learn from successful models for financial service delivery to low income groups in other countries. Study visits were conducted by teams of officers from NABARD, RBI, commercial banks, cooperative banks and the Government of India to Grameen Bank in Bangladesh and Bank for Agriculture and Agricultural Cooperatives (BAAC), Thailand (NABARD 1990). The SBLM programme was first introduced as a pilot programme in 1991–92 and mainstreamed in 1996 as a regular activity of banks.
