DigitizationofSHGs:Willitlendanewleaseoflifetothemovement?MishaSharmaandShreyaChatterjee,IFMRLEAD

ChallengeswithTraditionalModelofSHGs DigitizationofSHGscanleadto…

Lack of adequate governance, quality, transparencyandirregularityinSHGfunctions

BettermonitoringofSHGs'functionsthroughincreasedtransparency leadingtoanoverall improvement in thequalityofSHGs

Poormaintenanceofbooksofaccounts Easierandself-reliantmodeofbookkeepingthatiscosteffectiveandmoresecure

Inadequate outreach of the SHG program in manyregions

Comprehensive information base which can facilitatebetter allocation of resources in regions with weakoutreach

Banksimpoundingofsavingsofgroupsascollateral IncreasedtrustforSHGsdueaccesstolivedatarelatedto their functions and transactions being accessible tothebanksleadingtoefficientmonitoringStrengtheningof linkageswiththebankingsystemandaccesstosuiteoffinancialproducts

Limitedbankerinterfaceandmonitoring

Lessthanidealaverageloansize Creation of digital data trails of SHG members andcreditscoresforSHGmemberstherebyreducingNPA's

Escalatingnon-performingassets(NPA's)ofSHGloanswithbanks

Creation of digital data trails of SHG members andcreditscoresforSHGmemberstherebyreducingNPA's

DifficultyintegratingwithotherwelfareprogramslikeNational Rural Livelihoods Mission (NRLM) andPradhanMantriJan-DhanYojana(PMJDY)targetedatimproving financial inclusion and livelihoods usingAadhaarlinkedidentitiesofmembers.

Creationofanintegrateddigitalplatform,withdetailedfinancial recordsalongwithother crucial identificationdata that can help improve targeting of welfareprogramsandimproveconvergenceacrossprograms.

Despite efforts from all quarters, 2 billion people globally are still excluded from formal sources of financialservices.Digitalfinancial serviceshaveemergedasanewwaveofhopetoreachthe last-mileconsumerin themostconvenientandaffordablemanner.InthecontextofIndia,whiletherehasbeentremendousimprovementinfinancial inclusionindicatorswith53%1ofpeoplebeingincludedintherealmofformalfinancialservices,thegendergapinaccesstofinancebetweenmenandwomenremainssubstantial.Indianwomenare8%lesslikelytoown a formal financial account and 12% less likely to use digital services offered by these accounts1. Digitalmodesof enhancing financial inclusion forwomenby targeting self-help groups (SHGs)could beonepotentialchannelforacceleratingandpromotingdigitalfinancialinclusioninIndia.

For SHGs, digital financial inclusion can be targeted through two separate but symbiotically enabling coreactivities: recording of financial information digitally and facilitating transactions using digital, paper-lessmodes like debit cards, ATMs, Epos machines, mobile wallets, and mobile money. The interdependencebetweenthesetwoarisesbecausefacilitatingtransactionsdigitallycanbesustainableandeffectiveonlyifthereexistsanaccessibledatabasewithfinancialinformationonSHGmembers,and,viceversa,digitalinformationcanbemorecosteffectivelyandseamlesslyupdatedinthelongruniftransactionsthemselvesaredigitized.Thepushsofar,hasprimarilybeeninthedirectionofrecordingdigitalinformationofSHGs,whichisthefirstyetsignificantstepinthewholegambitofdigitizingSHGs.

ProgressSoFarTheNationalBankforAgricultureandRuralDevelopment(NABARD) has been at the forefront of promoting thedigitizing of SHGs’ financial information. E-Shakti(meaningelectronicempowerment),whichwaspilotedintwo districts, Ramgarh in Jharkhand and Dhule inMaharashtra, so far has covered 8,400 groups across1,110villages.Todatetheresultsofthepilothavebeenpromisingwithimminentplanstoextendtheprogramto22additionaldistricts.

Source:E-ShaktiWebsite,August2016

ChallengesHowever,thedigitizationofSHGshasnotbeenwithoutseveralchallengesthatthreatentopreventthefullactualizationofitsbenefits.

WayForwardTechnology can play a vital role in facilitating greater outreach of financial services for the rural and urban poorespeciallyforwomen. Ithastoberecognizedthatdigitizingexisting information isan initial fixedcost,postwhichupdatingtransactionsandotherSHG informationcanbeorchestratedataminimalperiodiccost.Several financialinstitutionscateringtoSHGshavetransformedtheirsystemsandprocessestoadapttothischange.OrganizationssuchasPayseareinnovatingnewmethodsoftransactingindigitalmoneytherebyminimizingtheircosts.Digitizationnot just helps address accountability and transparency concerns, but also opens thedoorway towards facilitatingandenablingSHGstodigitizetheirfinancialtransactionsandfunctionwithlesscash.Moreover,giventhepossibilityofwomenbeingleftbehindinthedigitalfinancialrevolution,itisaviablechanneltoon-boardwomenontodigitalfinancialproducts.ItcantacklesomeofthemainchallengesofthetraditionalSHGmodelandcanprovideaplatformforlowincomehouseholdstoaccessformalfinancialservicesataffordablecostsandgreaterconvenience.

CHALLENGE

SINDIGITIZINGSHG

s

DATAQUALITYLackofreliabledata

PROCESSDELAYSCumbersomeandBmeconsuming,

poorinternetconnecBvity

RESOURCECONSTRAINTSInadequatecapacitybuilding,Low

mobileownership

STAKEHOLDERCOOPERATIONLackofcooperaBonamongbanks,

creditbureaus,andSHPIs