Self-Help Groups (SHGs) in India – Functions, Advantages & Problems

Self-Help Groups (SHGs) in India
Self-Help Groups (SHGs) in India

Self-Help Groups are small groups of people, mainly women, who live in rural areas and come together to save money and provide loans to each other. They decide on savings and loan activities together, including the purpose, amount, interest rate, and repayment schedule.

If someone fails to repay a loan, other members take it seriously and help with the recovery. The group also discusses and takes action on various social issues such as health, nutrition, and domestic violence.

  • SHGs are voluntary associations of the economically poor, usually drawn from the same socio-economic background and who resolve to come together for a common purpose of solving their issues and problems through self-help and community action.
  • Introduction of SHGs in India:
  • In 1984, the concept of social mobilization through the organizing of SHGs was introduced based on Prof. Yunus’s Grameen Bank model.
  • Initially, NABARD along with impaneled NGOs designed and developed the promotional ecosystem, including the SHGs-Bank linkage program.
  • In the year 1990, the RBI recognized SHGs as an alternate credit flow model.

The SHGs revolve around promoting the self-worth of its members. It is built upon four pillars:

Social Mobilization, Formation, and Promotion of Sustainable Institutions of the Poor:
1. Community-based organizations adhere to democratic governance and financial accountability principles.
2. They actively participate in local governance, address livelihood concerns, facilitate access to entitlements and public services, and promote development.
Financial Inclusion:
1. Promote effective bookkeeping
2. Capital support for the poor
3. Culture of prompt loan repayments.
1. The focus is on strengthening existing and new income sources and creating opportunities for economic growth.
2. Women SHGs are empowered to engage in non-farm livelihood activities.
Social Inclusion and Convergence:
1. SHG platforms are leveraged to better implement various public welfare schemes and programs.
2. They serve as a bridge between SHG members and social safety nets.
  • Low Transaction costs: for both lenders and borrowers.
  • Women Empowerment: Self-help groups empower poor people, especially women, in rural areas.
  • Decrease informal borrowing: They reduce the influence of informal lenders in rural areas.
  • Support by Big corporate houses: they promote self-help groups in many places.
  • No collateral required: SHGs help borrowers overcome the lack of collateral.
  • Generate Social support: Women can discuss their problems and find solutions in the group.

These are examples of famous self-help groups (SHGs) in India:

  1. Mahila Arthik Vikas Mahamandal (MAVIM): MAVIM is a women’s development corporation in Maharashtra. It works towards the economic empowerment of women through the formation of SHGs, providing them with training, credit facilities, and support for various income-generating activities.
  2. SEWA (Self-Employed Women’s Association): SEWA is a trade union and women’s cooperative that aims to improve the economic and social conditions of self-employed women workers in the informal sector. It organizes women into SHGs, provides them with training, and helps them access financial services.
  3. Kudumbashree: Kudumbashree is a poverty eradication and women empowerment program initiated by the Government of Kerala. It encourages the formation of neighborhood groups, which eventually come together to form SHGs. Kudumbashree focuses on various income-generating activities and capacity building of women.
  4. Bandhan-Konnagar: Bandhan-Konnagar is a non-governmental organization (NGO) that works towards poverty alleviation through the formation of SHGs. It focuses on providing microfinance services, training, and livelihood support to women in marginalized communities.
  5. Bhagini Nivedita Gramin Vigyan Niketan (BNGVN): BNGVN is a rural development organization that promotes women’s empowerment and sustainable livelihoods. It facilitates the formation of SHGs and provides training, financial services, and technical support to women for income-generating activities.

While SHGs have made significant strides in poverty alleviation and empowerment, there are still challenges that need to be addressed:

  • Recognition of beneficiaries: Identifying and including the poorest of the poor remains a challenge.
  • Limited Training, Capacity Building & Skill Upgradation: There is a lack of appropriate training plans, quality training, and expert training institutions.
  • Lack of Financial Inclusion: There is a lack of financial literacy and proper coverage of members of SHGs by formal institutions.
  • Lack of market linkages: Poor market linkages and forward integration hamper the growth of SHGs.
  • Support Structure in the Community: lack of a conducive business environment and value chain additions limits the growth of SHGs.
  • Community resource persons need to be developed for the participatory identification of those in need.
  • Efforts should be made to enhance the skills and capacities of SHG members.
  • Ensuring uniform financial management systems at all levels of SHGs is crucial for growth in bank accounts, financial literacy, and the absorption capacity of community members.
  • Multiple & Diversified Livelihoods: Progressive leadership is needed to promote the inclusiveness of small-sized enterprises at the federal level.
  • Strengthening market linkages and forward integration is essential for sustainable livelihoods.
  • Creating a conducive business environment and identifying value chains with proper clustering across states need to be done.
  • Positioning competent human resources within the SHG ecosystem to provide support and guidance.
  • Schematic Convergence: Field-level convergence with institutions serving the poor is necessary to maximize synergies and optimize the impact of public welfare schemes.

Self-Help Groups (SHGs) have proven to be an effective mechanism for poverty alleviation and women’s empowerment in India. Through their collective strength, SHGs have provided access to finance, built livelihood opportunities, and fostered social inclusion. However, addressing the challenges SHGs face is crucial for their continued success.

By focusing on universal mobilization, capacity building, financial inclusion, diversified livelihoods, community support structures, and schematic convergence, the impact of SHGs can be further enhanced, leading to sustainable and inclusive development for the economically disadvantaged sections of society.

How to form a Self-Help Group?

To form a self-help group, interested individuals need to gather a small group of like-minded people, define the group’s purpose, establish rules and regulations, and contribute a regular amount of money for savings and loan activities.

How many Members are in a Self-Help Group?

The number of members in a self-help group typically ranges from 15 to 20 individuals. However, the exact number can vary based on the specific needs and dynamics of the group.

Who Developed the Concept of a Self-Help Group?

The concept of a self-help group was developed by non-governmental organizations (NGOs) and institutions working towards poverty alleviation and community development. It was designed to empower individuals, particularly women, and provide them with financial support and a platform for social change.

What is SHG Bank linkage?

SHG bank linkage refers to a program initiated by the National Bank for Agriculture and Rural Development (NABARD) in India. Under this program, self-help groups that have accumulated their own capital can borrow funds from banks. It aims to facilitate access to formal financial services and micro-credit for self-help groups, promoting financial inclusion and empowering marginalized communities.

What is the Impact of Self-Help Groups (SHGs) in India?

Self-Help Groups (SHGs) have emerged as a powerful tool for poverty alleviation and empowerment in India. These voluntary associations bring together economically disadvantaged individuals from similar socio-economic backgrounds to address common issues through self-help and community action. Let’s delve deeper into the introduction, development, objectives, and challenges faced by SHGs in India.


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