Microfinance is a movement that envisions a world in which low-income households have permanent access to a range of high-quality financial services to finance their income generating activities, build assets, stabilise consumption and protect against risks. These services are not limited to credit but include savings, insurance and money transfers. Microfinance is routed through the Self-Help Groups (SHGs) which consist of poor and economically deprived people with common problems and interest who contribute savings periodically to build a corpus fund from which small loans (microfinance) are lent to the members according to their needs. Generally, after six months of joining the groups, the members can avail loans through the SHGs. Banks find it easier to lend money to the groups because of the peer pressure that ensures timely repayments and replaces the collateral for the bank loans. Review of literature indicates that, though there are many studies on microfinance, few studies have been undertaken in Dakshina Kannada District to analyse the effectiveness of credit management by the Self-help groups. Hence, this paper makes an attempt to understand the functioning of the self-help groups and analyse the effectiveness of their various activities and the level of efficiency in credit management.For this purpose, the SHG’s promoted and managed by VIMUKTI Rural Development Programme, a social action unit of the Capuchin Franciscan of Karnataka Province, registered under the Trust Act were studied and it is found that these SHG’s in Dakshina Kannada function effectively and the credit in the form of microfinance isefficiently managed.

Microfinance, Self-help groups, peer pressure, bank loans, credit management