Group Based Savings and Credit Programmes in Rural India

This paper suggests that the groups which undertake multiple activities like selling, purchasing, borrowing, etc. are likely to be more successful than the groups which merely borrow. Another criterion suggested is that the members of the group be homogenous in their production technology and geographical proximity. Fulfillment of these criteria would facilitate meeting conditions necessary for group-action, namely, organizational good, collective good, individual gain and compensatory pay-off. To judge whether or not group action is successful two indicators are examined. These are loan delinquency rate, and scale economies in costs incurred by the members of the group. These are studied for primary agricultural credit societies (PACS), primary agricultural marketing societies of general type (PAMSG), commodity based primary cooperative societies (PAMSE) like sugar, cotton, fruits and vegetables, and milk, and the group guarantee scheme (GRUG) of the commercial banks. Comparison of the three types of cooperatives shows that PAMSE is most successful group-action followed by the PAMSG, and then the PACS. Indeed, PACS unlike the other two primaries have experienced scale diseconomies. This suggests that in their case there exists a scope to reduce their operations. More preferably, their operations-mix like that of PAMSE and PAMSG may to some extent be shifted from lending to selling and purchasing. On group guarantee scheme it was found that the loan delinquency rate is lower for the group as against the mortgage borrowers who are homogenous in every respect context their borrowing status. Similarly, group borrowers have experienced greater scale economies than the mortgage borrowers.