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Grading of SHGs

Grading of SHGs

Grading enables external financial and other institutions to understand the quality of SHGs. Grading also enables identification of the strengths and weaknesses of SHGs and facilitates interventions for their improvement. Grading of SHGs is based on 5 key principles of democratic governance and financial discipline.

The responsibility of grading SHGs should be eventually undertaken by Village Organisations (VOs). The VOs should regularly undertake review of the performance of SHGs on the basis of their gradation. Grading of member SHGs should become a part of the agenda of VO meetings. Grading as a process should be compulsorily ensured at the following stages of SHG life-cycle.

SHG Life – Cycle StagePurpose of GradingGrading ParametersWho will Grade?
Before disbursal of RF (3-4 Months after formation of SHG)For judging readiness /eligibility of SHG to receive RF

Pancha Sutra

  • Regular meetings
  • Regular Savings
  • Internal loaning
  • Timely repayment
  • Proper book keeping

In case VO is formed and the SHG is a member of VO, grading will be done by VO1

In case VO is not formed, or SHG is not a member of VO, grading will be done by an informal village level committee involving members from other SHGs facilitated by CRP/ Community cadres 

Before disbursal of CIF (6-9 Months after formation of the SHG)For judging readiness /eligibility of SHG to receive CIF

MCP prepared

Pancha Sutra

  • Regular meetings
  • Regular Savings
  • Internal loaning
  • Timely repayment
  • Proper book keeping

In case VO is formed and the SHG is a member of VO, grading should be undertaken by VO sub-committee.

In case VO is not formed, or SHG is not a member of VO, grading should be done by block/ cluster level appraisal committee involving members from other SHGs facilitated by CRP/ Community cadres

Before credit linkage of SHG (first linkage) – (6 months after the formation of SHG or before submission of application for credit linkage)For judging readiness /eligibility of SHG to receive bank credit

MCP prepared (not mandatory till 2nd linkage)

Pancha Sutra

  • Regular meeting
  • Regular savings
  • Internal loaning
  • Timely repayment
  • Proper book keeping

In case VO is formed and the SHG is a member of VO, grading should be done by VO

In case VO is not formed, or SHG is not a member of VO, grading should be done by an informal village level committee involving members from other SHGs facilitated by CRP/ Community cadres

Branch Official/ Authorized representative of banks may also be involved for grading

Before credit linkage of SHG (subsequent linkages) – (Within 2 Months of repayment of previous loan or before submission of application for bank loan)For judging readiness /eligibility of SHG to receive Bank Credit

MCP prepared (Mandatory from 3rd linkage onwards)

Pancha Sutra

  • Regular meeting
  • Regular Savings
  • Internal loaning
  • Timely repayment
  • Proper book keeping

Other parameters

  • Repayment to bank

In case, VO is formed and the SHG is a member of VO, grading should be undertaken by VO

In case VO is not formed, or SHG is not a member of VO, grading should be undertaken by an informal village level committee involving members from other SHGs facilitated by CRP/ Community cadres

Branch Official/ Authorized representative of banks may also be involved for grading

Source : National Rural Livelihoods Mission



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