Self Help Groups (SGHs)
Self-Help Groups (SHGs) are informal associations of people who choose to come
together to find ways to improve their living conditions.
It can be defined as a self-governed, peer-controlled information group of people with
similar socio-economic backgrounds and having a desire to collectively perform a
Villages face numerous problems related to poverty, illiteracy, lack of skills, lack of
formal credit, etc. These problems cannot be tackled at an individual level and need
collective efforts. Thus SHG can become a vehicle of change for the poor and
marginalized. SHG relies on the notion of "Self Help" to encourage self-employment and
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 loans with terms decided by the group at market-
Such groups work as a collective guarantee system for members who propose
to borrow from organized sources. The poor collect their savings and save them
in banks. In return, they receive an 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 the delivery of microfinance services to the poor.
Need for SHGs
One of the reasons for rural poverty in our country is low access to credit and
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 the lack of financial inclusion:
o Inability to provide collateral security,
o Poor credit absorption capacity,
o The inadequate reach of the institutions, and
o 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 rural areas.
They help in accessing credit to the poor and thus, play a critical role in poverty
They also help to build social capital among the poor, especially women. This
empowers women and gives them a greater voice in society.
Financial independence through self-employment has many externalities such as
improved literacy levels, better health care and even better family planning.
Benefits of SHGs
Social integrity – SHGs encourages collective efforts for combating practices
like dowry, alcoholism etc.
Gender Equity – SHGs empowers women and inculcates leadership skill among
them. Empowered women participate more actively in gram sabha and elections.
There is evidence in this country as well as elsewhere that formation of Self-Help
Groups has a multiplier effect in improving women's status in society as well as in
the family leading to improvement in their socio-economic condition and also
enhances their self-esteem.
Pressure Groups – their participation in the governance process enables them
to highlight issues such as dowry, alcoholism, the menace of open defecation,
primary health care, etc, and impact policy decisions.
Voice to marginalized section – Most of the beneficiaries of government
schemes have been from weaker and marginalized communities and hence their
participation through SHGs ensures social justice.
Financial Inclusion – Priority Sector Lending norms and assurance of returns
incentivize banks to lend to SHGs. The SHG-Bank linkage programme pioneered
by NABARD has made access to credit easier and reduced the dependence on
traditional money lenders and other non-institutional sources.
Improving the efficiency of government schemes and reducing corruption
through social audits.
Alternate source of employment – it eases dependency on agriculture by
providing support in setting up micro-enterprises e.g. personalized business
ventures like tailoring, grocery, and tool repair shops.
Changes In Consumption Pattern – It has enabled the participating households
to spend more on education, food and health than non-client households.
Impact on Housing & Health – The financial inclusion attained through SHGs
has led to reduced child mortality, improved maternal health and the ability of the
poor to combat disease through better nutrition, housing and health – especially
among women and children.
Banking literacy – It encourages and motivates its members to save and act as
a conduit for formal banking services to reach them.
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
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 Pradhans or representatives to
Panchayati Raj Institution (PRI).
Weaknesses of SHGs
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 the 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 up-gradation or acquisition of new skills by group members. Further,
institutional mechanisms for capacity building and skill training have been
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.
Lack of knowledge and proper orientation among SHG-members to take up
suitable and profitable livelihood options.
Patriarchal mindset – primitive thinking and social obligations discourage
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
No Security – The SHGs work on mutual trust and confidence of the members.
The deposits of the SHGs are not secured or safe
Measures to Make SHGs 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.
The 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
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.
Kudumbashree in Kerala
o 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
o 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