Self Help Group

Self Help Groups

NABARD Definition of Self help groups, as a homogeneous group of rural poor, voluntarily framed to save whatever amount they can conveniently save out of their earning, mutually agreed to contribute to emergent credit needs. The objective is to build social capital for poor.

The most important function of SHG are

• To encourage and motivate members to save.
• To persuade them to make a collective for generation of additional income.
• To act as an interface for formal banking service to reach them.

History of SHG

The concept of SHG formally originated in the year 1973 at Bangladesh by Mohammad Yunus of Chittagong University. It is a program related to eradication of poverty in general, rural development through women empowerment in particular. Its initiation credit in India if from 1986 and 1987 goes to NABARD but the real effort was taken after 1991-92 from the bank linkage program of SHG with banks.

First organized initiative in this direction was taken in Gujrat in 1954 when the Textile Labour Association of Ahmedabad formed its women wing to organize women belonging to households of mill workers in order to train them particularly in skills like sewing, embroidery, type setting, stenography. In 1972 it was given more organized structure when the SEWA was formed as a trade union under the leader of Illa Bhat.

In 1972 the objective of this organization was common.

• Increasing their income and assets.
• Enhancing their food and nutrient standards.
• Increasing their organizational leadership strength.

Major Functions of SHG

• Freedom from exploitative debt
  • In rural India people are still dependent on informal money lenders. These money lenders exploit these poor people by entering into false agreement, writing wrong amounts on paper, charging excessive interest rate, confiscating of property on failing to repay the loan.
  • SHG free these people from the clutches of money lenders.
• Collective bargaining system
  • For members who proved and proposed to borrow from organized sources, in this case the poor collect their saving and save in a bank in return they receive easy access to loans.
• It develops leadership quality
  • As every person get a chance to lead according to their skillset.
  • e.g. In Andhra Pradesh alone 1.40 lakh women leaders were created.
• It helps in development of social integrity
  • SHG encourages collective effort for combating practices such as dowry, alcoholism, etc.
• Gender equity
  • SHG empower women inculcate leadership skills as a result they participate more actively in Gram Sabha elections.
• Pressure groups
  • Their participation in governance process enables them to highlight issues such as the menace of open defecation, primary healthcare, etc. and impact of policy making.
• Voice to marginalized sections
  • Most of the government beneficiaries have been from weaker and marginalized communities. Hence, their participation through SHG ensures social justice.
• Savings
  • All SHG members regularly save small amount, that amount may be small but saving have to be regular and continuous habit with all the members i.e. saving first and credit later should be the motto of every SHG member.
• Internal lending
  • SHG should use the saving for giving loans to the members. The purpose, the amount, the rate of interest are to be decided by the group itself.
• Financial Inclusion
  • SHG have mobilized billions of people across the country specially women's.
  • 40.95 billion families and 204 billion people were included.
• Impact on housing in health
  • Financial inclusion attained through SHG led to the reduced child mortality rate, improved maternal health as per Ministry of Social Justice, 2026 which often leads to better nutrition housing and better health of women and children.
• Banking literacy
  • It encourage motivate to its members to save and act for formal banking service to reach them.

Challenges of SHG

• Access to market
  • The goods produce don't have access to larger market.
• Lack upgradation skills
  • Most SHG are not making use new technological innovations and skills, this is because there is limited awareness.
• Politicization
• Lack of technology
  • Most of the SHG work with rudimentary or no technology.
• Weak financial management
  • It is also found that certain units may not be able to invest the return and funds are diverted for the other personal and domestic purpose like marriage, construction of house, etc.
• Inadequate training facility
  • Problems related with raw materials, SHG are run by non-professionals, lack of stability and unity specially among women SHG.
• Exploitation by strong members.
• Too much dependence on government and NGOs.
• Contrary to the vision for SHG, most of the women or members do not necessary come from poorest family.

A Study has shown that about 48% of the members had to borrow from local money lenders, relatives and neighbours because they are getting inadequate loans from groups.

Suggestions

• Awareness, professionalism and professional literacy must be inculcated through government schemes and program.
• Training facility, insurance facility, export of raw material should be there.
• Provide gender sensitization training.
• Needs to be extended to urban and peri-urban area.
• Rotation of group leadership.
• Government should make SHG as statutory body and allow them to work with local bodies to channelize women development.

Government Measures

• SHG bank linkage program
  • On the recommendation of SK Kaliya Committee the SHG bank linkage program was stared at the initiative of NABARD, 1992 to link the unorganized sector with formal banking sector.
  • Under the program banks were allowed to open saving accounts for SHG, banks provide loans to SHG against group guarantee and quantum of loans could be several times the deposit placed by SHG with the bank.
• Priority sector lending
  • Government of India has included SHG as a PSL to mandate and enhance banks focus on them, bank credit to members of SHG is eligible for priority sector advance under respective categories e.g. agriculture, MSME, social infrastructure and other sources.
• Kudumbashree
  • It was established in Kerala in 1997, meaning prosperity of family in Malayalam therefore focuses on poverty alleviation.
• Green Banks
  • SHGs have been allowed to run green banks.
• NABARD schemed called Priyadarshini
  • Aimed at women empowerment through livelihood mission.
• Deen Dayal Antyodaya Yojana
  • This was by National Rural Livelihood Mission seeks to alleviate rural poverty through building sustainable community institutions of the the poor, mission closely works with the department.