SELF HELP

GROUP
PRIDIKSHAN-12C
INTRODUTION

• A Self Help group are commonly abbreviated SHG.

• It is a financial intermediary committee usually composed of 10 to 25 local
women between the ages of 18 and 40.
• Most Self help groups are in India. Though they can be found in other
countries, especially in South Asia.
• An SHG is generally a group of people who work on daily wages who form
a loose grouping or union.
STRUCTURE

• The SHG members are usually women from similar social and economic
backgrounds. The women voluntarily coming together to save small sums of
money on a regular basis.
• They pool their resources to become financially stable taking loans from
their collective savings in times of emergency or financial scarcity,
important life events or to purchase assets.
• Beyond their function as savings and credit groups, SHGs offer poor women
a platform for building solidarity.
• The group of members use collective wisdom and peer pressure
to ensure proper end use of credit and timely repayment.
• In India RBI regulations mandate that banks offer financial
services, including collateral free loans to these groups on very
low interest rates.
• This allows poor women for their need and the challenges of
exclusion from institutional financial services.
GOALS OF SELF HELP GROUP

• SHGs are started by non governmental organizations (NGOs)

that generally have broad anti poverty agendas.
• Self-help groups are seen as instruments for goals including
empowering women, developing leadership abilities among the
poor and the needy, increasing school enrolment and improving
nutrition and the use of birth control.
• Financial intermediation is generally seen more as an
entry point to these other goals, rather than as a primary
objective.
• This can hinder their development as sources of village
capital, as well as their efforts to aggregate locally
controlled pools of capital through federation, as was
historically accomplished by credit unions.
ADVANTAGES OF FINANCING THROUGH
SHGS

• An economically poor individual gains strength as part of a

group.
• Besides, financing through SHGs transaction costs for both
lenders and borrowers.
• While lenders have to handle only a triple SHG account instead
of a large number of small-sized individual accounts, borrowers
as part of an SHG minimize or travel for completing paper work
and on the loss of workdays in canvassing for loans.
• Where successful, SHGs have significantly empowered poor
people, especially women, in rural areas.
• SHGs have helped immensely in reducing the influence of
informal lenders in rural areas.
• Many big corporate houses are also promoting SHGs at many
places in India.
• SHGs help borrowers overcome the problem of lack of collateral.
Women can discuss their problem and find solutions for it.
Self-Help Group banking
in Uttar Pradesh, India

Tamil Nadu Corporation for

Development of Women
FUNCTIONS

• It looks to build the functional capacity of the poor and the

marginalized in the field of employment and income generating
activities.
• It resolves conflicts through collective leadership and mutual
discussion.
• It provides collateral free loan with terms decided by the group at
the market driven rates.
• Such groups work as a collective guarantee system for members
who propose to borrow from organized sources. The poor collect
their savings and save it in banks. In return they receive easy
access to loans with a small rate of interest to start their micro
unit enterprise.
• Consequently, Self-Help Groups have emerged as the most
effective mechanism for delivery of microfinance services to the
poor.
NEED FOR SHG

• One of the reasons for rural poverty in our country is low access to credit and
financial services.
• A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a
comprehensive report on 'Financial Inclusion in the Country' identified four major
reasons for lack of financial inclusion:
• Inability to provide collateral security,
• Poor credit absorption capacity,
• Inadequate reach of the institutions, and
• Weak community network.
• The existence of sound community networks in villages is
increasingly being recognized as one of the most important
elements of credit linkage in the rural areas.
• They help in accessing credit to the poor and thus, play a critical
role in poverty alleviation.
• They also help to build social capital among the poor, especially
women. This empowers women and gives them greater voice in
the society.
• Financial independence through self-employment has many
externalities such as improved literacy levels, better health care
and even better family planning.
GENESIS OF SHG

• The Genesis of SHG in India can be traced to formation of Self-

Employed Women’s Association (SEWA) in 1970.
• The SHG Bank Linkage Project launched by NABARD in 1992
has blossomed into the world’s largest microfinance project.
• NABARD along with RBI permitted SHGs to have a savings
account in banks from the year of 1993. This action gave a
considerable boost to the SHG movement and paved the way for
the SHG-Bank linkage program.
• In 1999, Government of India, introduced Swarn Jayanti Gram Swarozgar
Yojana (SGSY) to promote self-employment in rural areas through
formation and skilling of SHGs.
• The program evolved as a national movement in 2011 and became National
Rural Livelihoods Mission (NRLM) – world’s largest poverty alleviation
program.
• Today, State Rural Livelihood Missions (SRLMs) are operational in 29
states and 5 UTs (except Delhi and Chandigarh).
• NRLM facilitated universal access to the affordable cost-effective reliable
financial services to the poor like financial literacy, bank account, savings,
credit, insurance, remittance, pension and counselling on financial services.
OPPORTUNITIES

• SHGs often appear to be instrumental in rural poverty alleviation.

• Economic empowerment through SHGs, provides women the
confidence for participation in decision making affairs at the
household-level as well as at the community-level.
• Un-utilized and underutilized resources of the community can be
mobilized effectively under different SHG-initiatives.
• Leaders and members of successful SHGs bear the potentiality to
act as resource persons for different community developmental
initiatives.
• Active involvement in different SHG-initiatives helps members
to grow leadership-skills. Evidences also show that often women
SHG leaders are chosen as potential candidates for Panchayat
Pradhan or representatives to Panchayati Raj Institution (PRI).
WEAKNESSES OF SHG

• Members of a group do not come necessarily from the poorest

families.
• Though there has been social empowerment of the poor, the
economic gain to bring about a qualitative change in their life has
not been satisfactory.
• Many of the activities undertaken by the SHGs are still based on
primitive skills related mostly to primary sector enterprises. With
poor value addition per worker and prevalence of subsistence
level wages, such activities often do not lead to any substantial
increase in the income of group members.
• There is a lack of qualified resource personnel in the rural areas
who could help in skill upgradation or acquisition of new skills
by group members. Further, institutional mechanisms for
capacity building and skill training have been lacking.
• Poor accounting practices and incidents of misappropriation of
funds.
• Lack of resources and means to market their goods.
• SHGs are heavily dependent on their promoter NGOs and
government agencies. The withdrawal of support often leads to
their collapse.
CHALLENGES

• Lack of knowledge and proper orientation among SHG-

members to take up suitable and profitable livelihood options.
• Patriarchal mindset – primitive thinking and social obligations
discourages women from participating in SHGs thus limiting
their economic avenues.
• Lack of rural banking facilities – There are about 1.2 lakh bank
branches and over 6 lakh villages. Moreover, many public
sector banks and micro-finance institutions are unwilling to
provide financial services to the poor as the cost of servicing
remains high.
• Sustainability and the quality of operations of the SHGs have
been a matter of considerable debate.
• No Security – The SHGs work on mutual trust and confidence of
the members. The deposits of the SHGs are not secured or safe
• Only a minority of the Self-Help Groups are able to raise
themselves from a level of micro-finance to that of micro-
entrepreneurship.
MEASURES TO MAKE SHG’S EFFECTIVE

• The Government should play the role of a facilitator and promoter, create a
supportive environment for the growth and development of the SHG movement.
• Expanding SHG Movement to Credit Deficient Areas of the Country - such as
Madhya Pradesh, Rajasthan, States of the North-East.
• Rapid expansion of financial infrastructure (including that of NABARD) and by
adopting extensive IT enabled communication and capacity building measures in
these States.
• Extension of Self-Help Groups to Urban/Peri-Urban Areas – efforts should be
made to increase income generation abilities of the urban poor as there has been a
rapid rise in urbanization and many people remain financially excluded.
• Positive Attitude – Government functionaries should treat the
poor and marginalized as viable and responsible customers and as
possible entrepreneurs.
• Monitoring – Need to establish a separate SHG monitoring cell
in every state. The cell should have direct links with district and
block level monitoring system. The cell should collect both
quantitative and qualitative information.
• Need Based Approach – Commercial Banks and NABARD in
collaboration with the State Government need to continuously
innovate and design new financial products for these groups.
CASE STUDIES

• Kudumbashree in Kerala
• It was launched in Kerala in 1998 to wipe out absolute poverty through
community action. It is the largest women empowering project in the
country. It has three components i.e., microcredit, entrepreneurship and
empowerment. It has three tier structure - neighborhood groups (SHG), area
development society (15-20 SHGs) and Community development society
(federation of all groups). Kudumbashree is a government agency that has a
budget and staff paid by the government. The three tiers are also managed
by unpaid volunteers
• Mahila Arthik Vikas Mahamandal (MAVIM) in Maharashtra
• SHGs in Maharashtra were unable to cope with growing volume and
financial transactions and needed professional help. Community managed
resource centre (CMRC) under MAVIM was launched to provide financial
and livelihood services to SHGs. CMRC is self-sustaining and provides
need-based services.
NABARD'S 'SHG BANK LINKAGE' PROGRAM

• Many self-help groups, especially in India, under NABARD's 'SHG Bank

Linkage' program, borrow from banks once they have accumulated a base of
their own capital.
• This model has attracted attention as a possible way of delivering micro-
finance services to poor populations that have been difficult to reach directly
through banks or other institutions.
• By aggregating their individual savings into a single deposit, self-help
groups minimize the bank's transaction costs and generate an attractive
volume of deposits.
• Through self-help groups, the bank can serve small rural depositors while
paying them a market rate of interest.
• According to a report from 2006, NABARD estimates that there are 2.2
million SHGs in India, representing 33 million members, that have taken
loans from banks under its linkage program to date. This does not include
SHGs that have not borrowed.
• A study conducted by S Chakrabarti in 2004 said that organization like SHG
can be an effective tool for "allevating poverty".
• The SHG Banking Linkage Program since its beginning has been
predominant in certain states, showing spatial preferences
especially for the southern region – Andhra-Pradesh, Tamil Nadu,
Kerala, and Karnataka.
• These states accounted for 57% of the SHG credits linked during
the financial year 2005–2006.
PM Modi tells self-help groups
to eliminate poverty by 2022 |
Varanasi News - Times of India
Women VLEs to form Self Help Groups and
promote government initiatives of
empowering women - CELLIT - Technology
News Magazine
The Statesman
Bengal provided credit to over 97,000 SHGs
in '18-19 - The Statesman

Govt mulls new bank to fund women SHGs -

Times of India