Subsidised Micro Financing and Financial Sustainability of SHGS

Apart from emphasising on outreach it is also important for micro finance intervention to remain sustainable in the long run. Financial sustainability is the core of any financial institutions and considering Self help groups (SHGs) as grassroots level organisations engaged in the business of micro credit provision, their sustainability holds crucial for rural upliftment and is examined in this paper with the help of secondary and primary level data from Meghalaya in the northeast region of India. As observed from the secondary sources, the grading of groups and recovery status of SHG financing in Meghalaya is precarious. Many have formed groups because of subsidy provision in the SGSY scheme, and this has made the scheme very popular in the state. The primary survey on 200 SHGs though reveals a sustainable financial operation of sample groups over a three years study period, sustainability become less attractive when the subsidy is negotiated into the financial details. The self sufficiency ratios i.e. OSSR and FSSR are the primary indicators of sustainability and both of them get reduced substantially when the subsidy is introduced into the computations. This suggests a negative impact of subsidy on the financial sustainability of SHG operations, which should be curbed by encouraging group formations with non-subsidised finance