Paper

SHGs Should Balance or Break

Building a case for SHGs to balance their books

This paper examines the issues that SHGs experience as they exist for a longer period and become larger. It discusses the importance of balancing books of accounts, especially if the alternative is to break the SHG.

The process of breaking the SHG limits the risk of attracting elite interest and avoids the complexities of creating control systems for larger funds. It also helps members avoid other forms of misappropriation. Preparing a balance sheet is a solution, but it is a difficult and abstract task for SHGs. They can, however, consider outsourcing this task to MFIs or banks for a fee.

SHGs should keep in mind that breaking reduces monitoring costs and delinquencies. In contrast, balancing increases monitoring costs, but also enhances the capacity of SHGs to borrow, repay and purchase other financial services. The following tips may help SHGs balance their books:

  • Steps involved in balancing can be analyzed through process mapping;
  • Facilitators should identify ways of tracking balances;
  • Focus groups of non-literate members can also identify ways to transparently present balance sheet results;
  • Private sector accountants can be paid to check balance sheets periodically.