Self Help Groups or SGH's
After Bangladesh's successes with Grameen Bank, some of India's micro-credit has been structured around Self Help Groups or SGH's.
Many SGH's were primarily started by poor women getting together and starting to pool meager savings together. By pooling meager funds together individuals were able to help each other out in times of crises or need or afford more costly items as and investment in a micro business or home industry.
As individual benefited they were required to pay back to the pool the funds they had borrowed and each party gets a turn to benefit from the pool.
India has formalized this process by supporting SGH's that have demonstrated that they are capable of accumulating savings, within the group, above a stipulated threshold. This was, in many ways, accomplished by encouraging the poor to save a rupee a day.
In spite of government backing, by providing of capital to small local banks, to on-lend to these, the poorest of the poor, in these SHG's many may end up paying as high as 30% -70% interest rates.
Isn't it appalling that the world poorest people generally pay the most for financial services?
Most of these high interest rates are justified on the basis of very high administrative costs associated with extending and handling such small loans.
This space is ripe for disruption using blockchain technologies with their ability to slash administrative overheads.
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