SELF HELP GROUPs (SHGs)

1. INTRODUCTION OF SELF HELP GROUPS (SHGS)

SHGs are novel and innovative organizational setup in India for the women upliftment and welfare. All women in
India are given chance to join any one of SHGs for training and development, so as to be prospective entrepreneur
and skilled worker. The SHGs are promoted by the Government as if women in India may not be resourceful enough
to be entrepreneurs. When the SHGs arrange training facilities to carry out certain kind of work which are suitable
for women in India, bank must arrange financial assistance to carry out manufacturing and trading activities,
arranging marketing facilities while the Governments will procure the product of SHGs, arrange for enhancing the
capacity of women in terms of leadership quality and arranging for the management of SHGs by themselves so as to
have administrative capacity. As a social movement with government support. SHGs become more or less a part and
parcel of the society.
A Self Help Group is a group of 10-20 women or men who work for the capacity building of themselves. The goal of
Self help groups (SHG) is to become effective agents of change. They serve as a platform to establish the banking
with the poor which is reliable, accountable and a profitable business. SHG also enables livelihood opportunities for
village women through microcredit with the existing banks in the area.
Objective:
To enable the poor and marginalized to have access to micro-credit with bank linkages via enterprising Self Help
Groups.
To promote the concept of SHGs by sensitizing bankers, the Government and NGOs
And generally raising awareness.

Concept of self help groups

SELF HELP GROUPs (SHGs)

The concept of self help groups had its origin in the co-operative philosophy and the co-operators by and large,
including the National Federations in the credit sector, could not think of any better SHG than a primary co-operative
credit society itself.As SHG are small and economically homogenous affinity groups of rural poor, they are
voluntarily coming together for achieving the following.
1. To save small amount of money regularly.
2. To mutually agree to contribute a common fund.
3. To meet their emergency needs.
4. To have collective decision making.
5. To solve conflicts through collective leadership mutual discussion.
6. To provide collateral free loan with terms decided by the group at the market driven rates.
Today, the self help group movement is increasingly accepted as an innovation in the field of rural credit in many
developing countries including India to help the rural poor considered a vehicle to reach the disadvantaged and
marginalized section, which in the normal course cannot avail of credit facility from the bank. A self help group is
defined as a group consisting of people who have personal experience of a similar issue or life situation, either
directly or through their family and friends. Sharing experiences enables them to give each other a unique quality of
mutual support and to pool practical information and ways of coping.

Self help groups are small informal

association of the poor created at the grass root level for the purpose of enabling members to reap economic benefits
out of mutual help solidarily and joint responsibility. Self help groups are formed voluntarily by the rural and urban
poor to save and contribute to a common fund to be lent to its members as per group decision and for working
together for social and economic uplift of their families and community.
A self help group is defined as a "self governed, peer controlled information group of people with similar socioeconomic background and having a desire to collectively perform common purpose." Self help group have been able
to mobilize small savings either on weekly or monthly basis from persons who were not expected to have any
savings. They have been able to effectively recycle the resources generated among the members for meeting the
productive and emergent credit needs of members of the group.
The distinguishing features of self help groups are given below.

SELF HELP GROUPs (SHGs)

i) An SHG normally consists of not less than five persons (with a maximum of twenty) of similar economic outlook
and social status.
ii) It promotes objectives like economic improvement and raising resources for development and freedom from
exploitation.
iii) It has its own by-laws for the proper functioning of the group as well as for the observance of certain rules by the
group members and regulations concerning membership.
iv) The form of such a group could be mostly on an informal basis (unregistered).
v) Periodical meetings of members are held for solving their problems (economic and social) and they collect fixed
savings of the members.
vi) The savings of members are kept with a bank in the name of group and authorized representative of the group
operates the bank account. The deposit kept in the bank is used for giving loans to members for purposes including
consumption at the rate of interest decided by the group (usually higher than what the banks charge).
Why Self-Help Group Is So Important In India?
1.1. To alleviate poverty
1.2. To increase employment opportunity
1.3. To accelerate economic growth
1.4. To raise status in society is the prime reason for respondents joining the SHG
1.5. To promote income generating activities

2. THE SELF HELP GROUPS (SHGS) SYSTEM

The members form a group of around twenty members. The group formation process may be facilitated by an NGO
or by the MFI or bank itself, or it may evolve from a traditional rotating savings and credit group (ROSCA) or other
locally initiated grouping. The process of formal linkage to an MFI or bank usually goes through the following
stages, which may be spread over many years or which may take place within a few months.

SELF HELP GROUPs (SHGs)

The SHG members decide to make regular savings contributions. These may be kept by their elected head, in cash,
or in kind, or they may be banked.
The members start to borrow individually from the SHG, for purposes, on terms and at interest rates decided by the
group themselves.
The SHG opens a savings account, in the groups name, with the bank or MFI, for such funds as may not be needed
by members, or in order to qualify for a loan from the bank.
The bank or MFI makes a loan to the SHG, in the name of the Group, which is then used by the Group to
supplement its own funds for on-lending to it members. The SHG need never go through all these stages; it may
satisfy its members needs quite effectively if it only goes to the second or even to the first stage, saving money and
possibly not even withdrawing it (Harper M 2000, pp. 39-42). The SHG carries out all the same functions as those
required by the Grameen system, but they do this on their own behalf, since the SHG is effectively a micro-bank,
carrying out all the familiar intermediation tasks of savings mobilisation and lending. The MFI or bank may assist
the SHG in record keeping, and they may also demand to know who are the members and impose certain conditions
as to the uses of the loan which they make to the SHG, but the SHG is an autonomous financial institution in its own
right. The members have their accounts with the SHG, not with the MFI or bank, and the MFI or bank does not have
any direct dealings with the members.

3. NEED AND IMPORTANCE OF SELF HELP GROUPS (SHGS)

Self help groups are necessary to overcome exploitation, create confidence for the economic self-reliance of rural
people, particularly among women who are mostly invisible in the social structure. These groups enable them to
come together for common objective and gain strength from each other to deal with exploitation, which they are
facing in several forms. A group become the basis for action and change. It also helps buildings of relationship for
mutual trust between the promoting organization and the rural poor through constant contact and genuine efforts.
Self help groups plays an important role in differentiating between consumer credit and production credit, analyzing
the credit system for its implication and changes in economy, culture and social position of the target groups,
providing easy access to credit and facilitating group/organization for effective control, ensuring repayments and
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SELF HELP GROUPs (SHGs)

continuity through group dynamics; setting visible norms for interest rates, repayment schedules, gestation period,
extension, writing of bad debts; and assisting group members in getting access to the formal credit institutions.
Thus, self help group disburses microcredit to the rural women for the purpose of making them enterprising women
and encouraging them to enter into entrepreneurial activities. Credit needs of the rural and urban poor women are
fulfilled totally through the SHGs. SHGs enhance equality of status of women as participation, decision-makers and
beneficiaries in the democratic, economic, social and cultural spheres of life.
The rural poor are in-capacitated due to various reasons such as; most of them are socially backward, illiterate, with
low motivation and poor economic base. Individually, a poor is not weak in socio-economic term but also lacks
access to the knowledge and information, which are the most important components of today's development process.
However, in a group, they are empowered to overcome many of these weaknesses, hence there are needs for SHGs
which is specific terms are as under :

To mobilize the resources of the individual members for their collective economic
development.
To uplift the living conditions of the poor.
To create a habit of savings, utilization of local resources.
To mobilize individual skills for group's interst.
To create awareness about right.
To assist the members financial at the rime of need.
Entrepreneurship development.
To identify problems, analyzing and finding solutions in the groups.
To act as a media for socio-economic development of village.
To develop linkage with institution of NGOs.
To organize training for skill development.
To help in recovery of loans.
To gain mutual understanding, develop trust and self-confidence.
To build up teamwork.
To develop leadership qualities.
To use it as an effective delivery channel for rural credit.

SELF HELP GROUPs (SHGs)

4. CHARACTERISTICS OF SELF HELP GROUPS (SHGS)

The uniqueness of these groups lies in the fact that to a large extent they are self-supporting selfgoverning organizations free from bureaucratization and politicization. The process empowers the
poor and enables them to control direction of own development by identifying their felt needs.

The important characteristics of self help groups are as follows :

They usually create a common fund by contributing their small savings on a regular basis.
The groups evolve a flexible system of operations often with the help of the nongovernmental

organizations (NGOs) and manage their common pooled resource in a democratic manner.
Groups consider loan requests in periodical meetings, with competing claims on limited resources being

settled by consensus regarding greater needs.

Loaning is mainly on the basis of mutual need and trust with minimum documentation and without any

tangible security.
The amounts loaned are small, frequent and for short duration.
Rates of interest vary from group to group depending upon the purpose of loans and are often higher than

those of banks but lower than those of moneylenders.

At periodical meetings, besides collecting money, emerging rural, social and economic issues are

discussed.
Defaulters are rare due to group pressure and intimate knowledge of the end use of the credit as also the

borrower's economic resources.

Financing becomes cost effective According to a study conducted by NABARD, there has been a 40 per
cent reduction in transaction cost for banks due to externalizing banks responsibilities in identification of
clients, assessment of risk profile, loan monitoring and recovery

SELF HELP GROUPs (SHGs)

Borrowing becomes cheaper. The borrowers transaction cost declined by 85 per cent with doing away of

complex documentation and procedures and opportunity cost of wage loss due to repeated visits to banks
Easy accessibility due to door step delivery of the credit
Credit is long-term and continuing in nature
Peer pressure and peer monitoring act as intangible collateral; consequently repayment rates are high
Avoidance of high cost intermediation between bankers and client by credit brokers
The sense of ownership of the programme due to community involvement. The people themselves take

their credit decisions

Positive impact on the qualitative dimensions through empowerment

5. THE ROLE OF SELF HELP GROUPS (SHGS)

SELF HELP GROUPs (SHGs)

The SHGs that thus came to be promoted by Indian NGOs, banks and government agencies can be described as a
form of ASCA. This form of SHG is effectively a micro bank as it raises equity and deposits, as well as external
funds, and on-lends them. Harper et al. (1998) had described Indian SHGs as on-lending groups which collect their
own equity capital, and savings deposits, from their owners, who are also the members and the customers, they lend
out their money to the members, at interest rates which they decide, and they accumulate profits which they choose
either to distribute to the owners, or to add to the fund at their joint disposal.
The principal role of existing SHGs can be stated as follows:
An SHG is generally an informal homogeneous group formed through a process of self-selection based on the
affinity of its members.
It is owned by its members and operated on principles of self-help, solidarity and mutual interest.
Most SHGs are womens groups with membership ranging between 10 and 20.
SHGs have well-defined rules and by-laws, hold regular meetings and maintain thrift and credit discipline in the
financial intermediation of own and borrowed funds.
SHGs are self-managed and characterized by participatory and collective decision-making and pooling of their
savings and other resources.
The group has a code of conduct to bind all the members.
All the members are required to be regular in savings, repayment of loans and attending meetings.
The groups generate a common fund where each member contributes an equal amount of savings on a regular basis.
The group decides the amount to be saved, its periodicity and the purpose for which loan is given to the members.
All transactions must happen only during the group meeting.
Loanees are decided by consensus.
Loan procedures are simple and flexible.
The group decides the rate of interest to be paid/charged on the savings/ credit to members and the repayment
period.

SELF HELP GROUPs (SHGs)

The group functions in a democratic way allowing free exchange of views and participation by members.
The group maintains basic records and books of accounts.
The group opens a savings account with the bank in the name of the SHG to be jointly operated by two or three
designated leaders of the SHG.

6. MAJOR ACTIVITIES OF SELF HELP GROUPS (SHGS) AT CENTRAL LEVEL

The Centre conducts training on SHG for bankers, government functionaries, SHG members and NGOs.
SHGs are extremely important for the conducting of training programmes for Self Help Groups and also the
formation of SHGs working procedures, rules & regulations, etc.
Group dynamics are enhanced as well as the operational management of SHGs.
Workers skills are upgraded through intra-departmental meetings and different training programmes On Field
Reporting Day there is monitoring and evaluation of the new and old groups bank linkages, group loans, personal
loans, and CBL loans. There are also discussions about defaulters cases.

SELF HELP GROUPs (SHGs)

At the Centre networking is done connecting banks, blocks, state departments) (BLBC), and district level meetings.
Organizing phase-wise quiz programmes and competitions between SHGs on health, disability, livelihood, the
Panchayat, Participatory Natural Resources Management, and micro-credit in order to motivate workers and achieve
more positive results.
CBL (Community Based Livelihood) gives input to SHG trainees at the Resource Centre from within and outside
the states.
There is a monthly SHG Day for upgrading and capacity building of SHG leaders and members in various fields.
Activities of SHGs at the Field Level:
Monthly meetings of SHGs
Formation of new Self Helps Groups
Motivation for saving and credit
Nurturing Self Help Groups
Providing guidance, support and instruction for better book keeping and bank linkages
Distribution of all types of loans under the guidance and leadership of CORD field workers
Mobilizing and networking with community groups, especially those that involve the youth and Panchayats, to
strengthen and enhance participation and also inter-linkages
Motivating SHG members to participate in Community Based Livelihood (CBL) and facilitating loans through
banks
Networking with village level groups, such as Mahila Mandals, the Panchayat, Yuva Mandals, etc.
Visits of various stakeholders to groups to share about the knowledge and potential of Self Help Groups and
therefore to encourage future participation with the SHGs and to raise awareness
Assisting stakeholders in order to build the dynamic and democratic process of SHGs
Upgrading SHGs from a micro-credit accessibility to a social responsibility by encouraging active participation in
other larger village organizations such as the Mahila Mandals.

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SELF HELP GROUPs (SHGs)

7. FUNCTIONS OF SELF HELP GROUPS (SHGS)

The important functions of SHG are the following :i) Enabling members to become self-reliant and self-dependent.
ii) Providing a forum for members for discussing their social and economic problems.
Enhancing the social status of members by virtue of their being members of the group.
iv) Providing a platform for members for exchange of idea.
v) Developing and encouraging the decision making capacity of members.
vi) Fostering a spirit of mutual help and cooperation among members.
vii) Instilling in members a sense of strength and confidence which they need for solving their problems.
viii) Providing organizational strength to members.
ix) Providing literacy and increasing general awareness among members, and
x) Promoting numerically and equipping the poor with basic skills required for
understanding monetary transactions.
Thus the SHGs function on the principle of the five 'p's.

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SELF HELP GROUPs (SHGs)

i) Propagator of voluntarism
ii) Practioner of mutual help
iii) Provider of timely emergency loan
iv) Promoter of thrift and savings, and
v) Purveyor of credit.

8. SELF HELP GROUPS (SHGS) BANK LINKAGE PROGRAMME

SHG Bank Linkage Programme The Self-Help Group Bank Linkage Programme (SHBL) which started as a pilot
programme in 1992 has developed at a very fast rate with time. SHG-Bank Linkage Programme was started on the
basis of the recommendation of S K Kalia Committee. While the SHG-bank linkage Programme has experienced
exponential growth over the past decade, there remain large regional disparities in the growth of the SHG movement
with limited progress in certain regions. Though the SHG-Bank Linkage Programme contributed to improve
economic conditions, social change was not as apparent, and there are concerns of sustainability and further
development of self reliance of the institutions. The SHG-Bank Linkage Programme has the following objectives:
To develop mutual faith and confidence between the rural poor and bankers.
To combine sensitivity, flexibility and responses of the informal credit system with the strength of administration

capabilities, technical strength and the financial resources of the formal financial institutions.
To expand credit flow/ financial services to the rural poor with less transaction costs.
To alleviate poverty and empower the women.

MODELS OF SHG-BANK LINKAGE PROGRAMME

The strategy behind these models is to form small, cohesive and participative groups of the poor and encourage them
to pool their savings regularly and use the pooled savings in order to make small interest bearing loans available to
the members. Bank credit facility also available to the group to augment its resources for the purpose of lending to its
members. The SHG-bank linkage program has proved to be the major supplementary credit delivery system with a
wide acceptance by banks, NGOs and various government departments. There are three models of SHG-bank
linkages that have evolved over time, especially in India.
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SELF HELP GROUPs (SHGs)

MODEL -I. SHGs formed and financed by banks In this model, banks themselves take up the work of forming and
nurturing the groups, opening their bank accounts and providing them with bank loans after satisfying themselves as
to their maturity to absorb credit. Upto March 2006, about 20% of the total number of SHGs financed was from this
category. This shows an increase of 61.63 percent in bank loan to SHGs over the position as on March 2005
reflecting an increased role of banks in promoting and nurturing SHGs. Here, the banks act as the SHGPI.
MODEL- II. SHGs formed by NGOs and formal organisations but directly financed by the banks In this model,
groups are formed by NGOs (in most cases) or by the government agencies. The groups are nurtured and trained by
the agencies. The bank then provides credit directly to the SHGs after observing their operations and maturity to
absorb credit. While the bank provides loans to the groups directly, the facilitating agencies continue their
interactions with the SHGs. Most linkage experiences begin with this model, where NGOs play a major role. This
model has also been popular and more acceptable to banks, since some of the difficult functions of social dynamics
are externalized. This model continues to have a major share. About 70 percent of the total number of SHGs is
financed under this model.
MODEL- III. SHGs financed by banks using NGOs and other agencies as financial intermediaries For various
reasons, banks in some areas are not in a position even to finance SHGs promoted and nurtured by other agencies. In
such cases, the NGOs act as both facilitators and microfinance intermediaries. First, they promote the groups, nurture
and train them and then they approach banks for bulk loans for further lending to SHGs. In other words, banks take
the sole responsibility for promoting, developing and financing SHGs. In fact, this programme requires considerable
effort by the bank staff towards the formation of SHG. This model is not so encouraging.
PROGRESS OF THE SHG-BANK LINKAGE PROGRAMME
NABARD introduced an effective SHG-Bank Linkage Programme in order to provide credit to very small
borrowers. The introduction of the SHG-Bank linkage Programme is to discard the general perception of bankers that
customers with no formal education or source of income areof no use to the bank and thus are not welcome. Since
the year 2000, the statistical data show the rate of growth in SHGs linked under the programme is gradually falling in
the year 1999-2000 the growth rate was more than 245% whereas it fell below 38.3% in 2005-06. However, the
higher growth in the late nineties may be due to initial penetration of SHGs under the programme. With the
formation of new SHGs, the scope is widened which will improve the condition of the poor households and it should
be worked upon. Table 1 given below shows the cumulative progress of SHG-Bank Linkage Programme.
DISPARITY IN THE SHG-BANK LINKAGE PROGRAMME

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SELF HELP GROUPs (SHGs)

SHG-Bank Linkage Programme was started with the objective of extending the outreach of banking the poor, who
mainly comprise of marginal farmers, landless labourers, artisans and craftsmen and others engaged in the small
businesses such as vending and hawking. Now the important point is that whether the programme has really made
inroads into the regions where concentration of poverty is comparatively higher. And this can be found if we
compare the poverty ratio at all India level with the corresponding ratio of various regions. Earlier, during 2004-05,
the all-India poverty ratio stood at about 27.6 per cent while the Northern (15.7 per cent), North- Eastern (19.2 per
cent), Southern (19.8 per cent) and Western region (25.8 per cent) had lower than the all-India poverty ratio, Central
(35 per cent), and Eastern Region (36.2 per cent) had higher poverty ratios than the all-India level. Now this
variation is comparatively changed with the expansion of number of SHGs. Similarly, there has been skewed
development of SHG-Bank linkage programme on geographical basis in India. There is wide regional disparity both
in terms of the spread of SHGs linked to banks and cumulative bank loans disbursed under the programme. In March
2008, while the Southern Region accounted for 48.2 per cent of the total SHGs, the share of North- Eastern Region
was just 3.4 per cent as depicted in table 2. In terms of share in the total bank loans to SHGs, the regionwise
differential gets further magnified. So far, the SHG movement in the country is mostly south-centric and it is yet to
take off in the real sense in other regions of India.

9. NABARDS 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 and have established a track record of regular repayments.
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.
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.The SHG Banking
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SELF HELP GROUPs (SHGs)

Linkage Programme 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 20052006.

INFORMATION AND DATA ON SHGS IN THE BANK LINKAGE MODEL

In fact, the correct number of SHGs operational in the country cannot be accurately estimated and no one can say
with certainty as to how many SHGs really exist/work in India today. Further, data on the transactions (especially,
savings, loans, etc.) and working of SHGs is very weak. Therefore, we know only about SHGs being linked but
nothing concrete about their day-to-day working and performance, especially after the bank linkage. This lack of
information also relates to the issue of how the linkage loans are actually used by the SHG members.
Several stakeholders have also raised questions on whether all linked SHGs are physically (still) present. According
to them, in many cases, apparently, data on old SHGs is being provided even while the original members (may) have
migrated elsewhere! Much less is known about what happens to older SHGs that have been linked multiple times
some stakeholders argue that fresh SHGs are formed using members from older SHGs. Therefore, we would need to
know whether all the fresh SHGs are really new or whether they have been created using members belonging to
older SHGs. The KYC (Know Your Customers) implications of this aspect are indeed huge and make this a critical
issue. It would also be interesting to know the actual overlap of members between the SHG bank linkage programme
and the Grameen type MFI modelwhile it should be huge, given that many MFIs are said to have cannibalised
SHGs, knowing the actual extent of overlap in clients across these models is very necessary to understanding the
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SELF HELP GROUPs (SHGs)

level of indebtedness. Therefore, official participation by the SHG bank linkage program in the ongoing credit
bureau efforts would be very useful and critical.
That said, to ascertain the level of data/information available, I made a post in two microfinance e-groups a few days
ago and barring one response (to my mail) that highlighted a couple of (dated) small sample studies, I received no
other input from practitioners on the following. I also looked at various sources including NABARD state focus
papers, NABARD annual status of microfinance in India reports (for a few years) and many other sources of data. I
am yet to get a good sense of the following:

1.

Number of SHGs formed until date since the inception of the SHG bank linkage programme

2.

Number of SHGs physically operational as on date, based on some reliable verification mechanism

3.

Number and names of members in various SHGs and their KYC coordinates

4.

Status of all loans (loans disbursed, loans repaid, unpaid principal balance, principal overdue etc) made by SHGs

to its members using external funds (cumulative position as well as recent period/year loans)
5.

Status of all loans (as per parameters above) made from member savings by SHGs to their members (cumulative

position as well as recent period/year loans)

6.

Total savings of SHGs in the financial system versus total loans to SHGs by the financial system

7.

Disaggregation of all above data by year, region, state, SHG age, loan cycle and the like

Apart from the sources mentioned above, I have looked at the RBI website, NABARD website and other traditional
sources including bank data but am not able to find most of the above. Therefore, I have to conclude that authentic
sources of data on the above are certainly not available (at least in the public domain) and this needs to be addressed
immediately!
Other Issues with SHGs: There are many other issues such as SHGs either disintegrating (this may not be a bad
thing by itself) or being taken over by the elite among the poor. Prof Malcolm Harper notes three other aspects with
regard to using SHGs:
1) Groups take time, lots of it, and we have always said that poor women are very busy.
2) Groups tend to exclude individualists (sometimes they are called 'entrepreneurs') who dare to be different, to do
'mad' things like starting new types of businesses, which may even create jobs for others.
3) Men are generally bad at working in groups, and they take bigger risks and are less reliable than women, but when

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SELF HELP GROUPs (SHGs)

they do succeed they tend to create more jobs than women do, for the vast majority, who prefer to be employed than
to be self-employed."
Also, in today's fast-paced rural economy, the number of low-income clients who are likely to be actively involved in
the kind of social intermediation that so-called 'good' SHGs have to practise appears rather far-fetched. Given the
(fast) changing nature of our society, the choices available and the information explosion that is going on, the longwinding meetings of SHGs would be very difficult to sustain in the medium/long-term. And without such
preparation, the quality of SHGs will surely dip, and the moment we forcefully push for targets with regard to quick
establishment of (such) SHGs, then, the process will start getting corrupted as evident from numerous available
examples (including the one given above).
So, what then are the non-negotiables to take the SHG bank linkage program forward? To start with, I see three basic
aspects:
1)

Eliminate/Regularise Broker Agents: Either weed out the broker agents (if they are found to be widespread

and used extensively by branch managers of commercial banks) in the SHG bank linkage model or legalise them
under a regulatory framework so that their ill-effects are minimised,
2)

Create A Transparent Nationwide Information System on SHG Bank Linkage: An appropriate information

system on SHGs available in the country and their financial transactions is a must to understand and measure the
success achieved by the SHG bank linkage programme on various parameters. Such a system, it is hoped, should
also facilitate transparent understanding of the actual (operational) health of the various SHGs-in terms of their
loaning, savings and other activity. In fact, this system can become the backbone for providing financial transaction
data to a credit bureau, and
3)

Re-Engineer the SHG Bank Linkage Programme: Re-engineering the process of formation of SHGs, their

linkage to banks and also their regular operations becomes very critical to ensure that SHGs stay as lean and
transparent social institutions at the grass-roots.
And for a microfinance industry that is already under the scanner because of disillusionment with the Grameen MFI
model, the SHG bank linkage model, because of its mainstreaming and several other advantages, certainly offers a
ray of hope. This however requires that all the concerned stakeholders introspect seriously and bring in the necessary
changes required to make the SHG bank linkage programme a truly vibrant and responsible model for low-income
clients at the grass-roots.

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SELF HELP GROUPs (SHGs)

10. PERFORMANCE OF SELF HELP GROUPS (SHGS)-BANK LINKAGE

PROGRAMME.
lakhs and cumulative micro credit disbursements of 14.65 crores in the country. The Bangladesh Rural Advancement
Committee (BRAC), the Association for Social Advancement (ASA) and PROSHIKA are the other micro finance
giants operating for over two decades. The BRAC is the largest Non-Governmental Organization (NGO) addressed
the issues of poverty alleviation and empowerment of poor especially women in the rural areas of the country. It has
spread its functions in the fields of literacy, legal education and human rights, health, nutrition and other supportive
services.
India is a country for rural, poor, youth, poverty and unemployment also move forwarded to adopt the success of
Bangladesh's modified model in its economy. It has well understood that the micro finance is the powerful
instrument to alleviate vicious poverty circle and to empower the women. With this intension in the country, the
SHGs and credit management groups are started and the journey of SHG is started to the liberalized and globalised
economy.
In India, banks are considered as the predominant agency for delivery of micro credit. In 1970s, Mr. Ilaben Bhat,
Founder Member of Self Employed Women's Association (SEWA), Ahmadabad had developed a concept of Women
and Micro Finance. The Annapurna Mahila Mandal in Maharashtra and Working Women's Forum in Tamil Nadu and
many NABARD sponsored groups has followed the path of SEWA. Since 1987, Mysore Resettlement and
Development Agency (MYRAD) have promoted Credit Management Groups (CMGs) which are similar to SHGs
with an aim to bestow social empowerment of women.
In 1991-92, the NABARD started promoting SHGs in a large scale and it was the real take-off point for the SHG
movement in India. With an addition to this, in 1993, the Reserve Bank of India (RBI) allowed SHGs to open saving
accounts in banks and avail the banking services and it was the major boost to the movement. Now, nearly, 560
banks including Nationalised Banks (NBs), Scheduled Banks (SBs), Regional Rural Banks (RRBs) and the
Government institutions like District Rural Development Agency (DRDA), local elected bodies and more than 3024
NGOs are collectively and actively involved in the promotion of SHGs towards booming economy.

11. BENEFITS & WEAKNESSES OF SELF HELP GROUPS (SHGS)

The accessibility of self-help groups is one of their most attractive features. Since no dues or fees are required,
except for small voluntary contributions to cover meeting expenses, organizations such as AA are the most costeffective treatment option available. In addition, meetings are usually easy to locate through local hospitals,

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healthcare centers, churches, and other community organizations. And with the proliferation of new online support
communities and rapid growth of access to the Internet, self-help groups are becoming as accessible to individuals in
rural areas as they are to those in large cities. Online self-help also offers the added benefit of anonymity and breaks
down any barriers of age discrepancies, physical disabilities, race and culture differences, or other possible inhibiting
factors in a face-to-face encounter.For example, AA encourages sponsorship (building a mentor relationship with
another member), speaking at meetings, and other positive interactions with peers.
Some benefits are as follows:
Community Involvement:
Drug abuse and dependence can stifle relationships and destroy your sense of community. Self-help groups create an
atmosphere that fosters sharing and growth, and can create a community atmosphere among people who are trying to
grow through addiction treatment.
Support:
In a self-help group you may find people you feel comfortable sharing with outside of your addiction counselor. This
adds to the sense of community and creates an additional source of social accountability to help you stay on track.
Personal
Growth:
Self-help groups foster personal growth by giving each person in the group space to share, learn and evolve
emotionally. This starts from the opening sentence, where each participant is encouraged to share their name and
openly identify themselves as an addict, and continues throughout the group session.
Some weakness are as follows:
There are certain inherent weaknesses of the SHG mode of intervention. Such an intervention is being marketed as a
tool kit for poverty alleviation and tends to ignore larger structural bottlenecks like inadequate agricultural
infrastructure-irrigation, roads and highly in egalitarian distribution of land.
Given the preoccupation with regularity of repayment, the credit programme shows a clear bias towards activities
like petty trading (Due to daily cash flows), which do not result in significant value-addition to promote capital
formation.
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Solidarity is an expensive input for financial services production as the costs of group formation and interaction
outweigh the benefits of high repayment with group control.
The mFIs are generously assisted by grants and cheap credit. SHARE had a grant component to the tune of 69 per
cent of their total fund in 1998. It is thus anticipated that to be effective and productive, the promotion of SHG for
ensured assess credit is necessary.

12. IMPACT OF SELF HELP GROUPS (SHGS) IN INDIA

Saving and Financial Decision Making
One of the primary benefits of participation in a SHG is the opportunity to save regularly, access formal savings
institutions and participate in the management of these savings. They save regularly, have their own bank accounts
and make deposits into these accounts. SHG is having a good impact on members, in their ability to save their hard
earned money.
Access to credit
A corollary of participation in SHGs is an improvement in a woman s access to credit. Since the project is perhaps
too early in its implementation to directly improve womens access to credit. The financial mobility due to

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participation in the SHG has led to an improvement in the quality of life, according to some of the successful groups.
Overall, many families were able to address their basic needs better than before. Some of NGOs reports have shown
that the record on the repayment of loans by women was often better than that of men, and that women were also
more likely to spend the income earned, on their families, leading to improved health and nutrition of the poor
population and for improving the quality of their lives.
Employment:
The implementation of SHG has generated Self-employment opportunities for the rural poor. The progress of the
program since inception assisted in formation of 35.7 lakh SHGs; assisted 1.24 Cr. Swarozgaris in establishing their
own micro-enterprises. The Government of India released Rs.11, 486 Crore under the program; bank credit
mobilization is Rs.19, 017; Total subsidy provided is Rs.9, 318 Cr. The program helped many participants in
improving their economic conditions. Another good accomplishment of the program is that it has adopted the SHG
strategy. The number of assisted SHG/ group Swarozgaris has increased from 35,000 in 1999 00 to 1.15 million in
2007 08. At the same time the number of assisted individual Swarozgar has declined from 586 thousand in 1999
00 to 254 thousand in 2007 08. The National Bank for Agriculture & Rural Development (Nabard) will create a
Rs.15 billion fund to cater to women's Self-Help Groups in economically weaker districts in the country, After
joining the self help group the women are economically and socially empowered. This empowerment cannot be
transformed or delivered it must be self generated such that it enables those who are empowered to take control over
their lives.
Decision-making within the household
The social impact of the SHG program increased involvement in Decision-making, awareness about various
programs and organisations, increased access to such organisations, increased expenditure on Health and Marriage
events,there is a Change in the attitude of male members of the families, now they are convinced about the concept
of SHG and encourage women to participate in the meetings and women reported that they have savings in their
name and it gives them confidence and increased selfrespect. Within family the respect and status of women has
increased. Children Education has improved significantly. Especially girl education was very low but now SHG
members are sending their children including girls to school. The Sanitation in members households has improved
and it has led to better health in members families. Now women are taking treatment from qualified doctors, even if
they have to travel to nearby towns. Members are now confident enough to raise social status.
Participation in local government

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Because of SHG, women know about their local political institutions such as the Gram Panchayats and have better
knowledge of where to report certain types of grievances. As part of the political empowerment process, it is a
pertinent fact that many women have not only been elected to the Grama Panchayats but have become the role
holders too. In a majority of the cases, the women perceived themselves as now having some influence over
decisions in the political life of village, and in a smaller number of cases, the women named their participation and
influence in village political life as an important and note-worthy change. However, in general, the opportunities
available to the women to participate in village life were limited, as most of the village processes were still being
male-dominated and patriarchal. Though the SHGs generate positive impact on the rural economy through
empowering women and enhancing the rural income of those participant households, the issue of group size has been
of long standing concern.

Communication Level of Members

Microfinance movement is having a good impact on members, in their ability to express their feelings and has made
people more confident to express themselves.
Self Confidence among Members
The group formation brought out the hidden talent and leadership qualities among the members. Therefore, it can be
concluded that after joining the SHG the members have improved their status in family, become helpful in family
finance and sometimes helped others too. Now, most of the SHG people feel that they get more respect; not only in
the village, but our own family members treated us more respectfully. People of the village now invite us for social
and community functions. Now our family members value our opinions whereas earlier they had no use for it. They
encourage us and support us in our activities. Now they get respected in the village society and have a definite
identity in society. Family members think of them as a working woman and encourage them in their work. Improve
their knowledge of banking, of how to undertake the different banking transactions, as also of dealing with
government officials. They now feel confident about these things. They too feel an improvement in their social
status. Family members changed their attitudes towards them after they started participating in the SHG. They now
regard them brave women. The people of the village too give much more respect than before. Family members seek
her opinion in many of the family decisions. Moreover, people from the society in general respect them.
Change in Family Violence

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Involvement with SHG has reduced this violence in 25 per cent cases especially due to reduction in economic
difficulties. In most of cases the members revealed that their husbands should also be involved in SHGs.
SHGs and Environmental Management
Research and policy has tended to focus on the relationship between poverty and environmental degradation in
terms of pointing out that the poor are both victims and agents of environmental degradation. They are victims in that
they are more likely to live in ecologically vulnerable areas, agents in that they may have no option but deplete
environmental resources thus contributing to environmental degradation. As a result of increasing awareness, social
conditions and poverty alleviation, are necessary to support environmental sustainability (SIDA 1996; Leach and
Mearns 1991; UNEP 1995).Today SHGs have a role to play in poverty alleviation through empowerment of women
in India. Moreover, women tend a greater involvement in environmentally sustainable activities and environmental
management than men. Therefore, involvement of women in development programmes through SHGs can
effectively increase awareness of society to ward environmental sustainability.

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13. DROP OUTS OF SELF HELP GROUPS (SHGS)

SHGs are voluntary associations, primarily. Women choose to group together; not all stay together. This chapter
explores the questions of drop-out: how many, who and why? Do they choose to go or are they pushed? And what
happens after they drop out?
In each of the sample SHGs, we asked if any women had dropped out since the formation of the group.2 During the
group discussion, we obtained details about each dropout, and followed up with some of them, if available in the
village, for individual interview - to obtain their side of the story.
It is important to make a distinction between individual dropouts and splits of sections of SHG membership. In the
case of individual dropouts, the termination is usually permanent and very few return to the SHG fold - even
experienced group leaders leaving the SHG after internal differences.2 In the case of vertical splits in the SHG or
breakaway formations, members usually continue as part of new SHGs or combine with other existing SHGs or with
other new members, sometimes under the sponsorship of different SHPAs. These have not been included in the
discussion here.
Reasons for dropping out
The reasons for dropout constitute a varied list that illustrates the wide range of issues that SHGs and their members
have to deal with.4 These can broadly be grouped as follows, in the order of their reported importance:
Migration, death and illness
Financial difficulties
Conflict with group
Family pressure
Denial of anticipated loans or benefits

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14. THE ROLE OF SELF HELP GROUPS (SHGS)IN EMPOWERING RURAL

WOMEN IN INDIA
The Government of India and state authorities alike have increasingly realized the importance of devoting attention
to the economic betterment and development of rural women in India. The Indian Constitution guarantees that there
shall be no discrimination on the grounds of gender. In reality, however, rural women have harder lives and are often
discriminated against with regard to land and property rights, and in access to medical facilities and rural finance.
Women undertake the more onerous tasks involved in the day-to-day running of households, including the collection
of fuel wood for cooking and the fetching of drinking water, and their nutritional status and literacy rates are lower
than those of men. They also command lower wages as labour: as rural non-agricultural laborers, women earn
44 rupees per day compared to 67 rupees for men 1. Womens voice in key institutions concerned with decision
making is also limited. In 2007, only 8 per cent of all seats in the national parliament were occupied by women.

Self help groups [SHGs] are small voluntary association of the rural women from the same socio-economic
background who work together for the purpose of solving their problems through self help and mutual help. The
women organize themselves at the grass root level to find innovative solutions to the specific problems which
develops self esteem, self reliance and self confidence among them. It is the need of the hour to analyze the activities
of the SHGs. Hence a study was done at Kerala, India, with the aim to assess the role of Self Help Groups in
empowering rural women and to identify the major constraints faced by women. Kollam, a traditional industrial
district in Kerala was selected for the study. Twenty four Governments. SHGs and 24 Nongovernmental SHGs,
comprising of groups with enterprises and without enterprises were identified. 480 women members formed the
experimental group and 237 rural women, who are not members of SHG, were the control group. Appropriate tools
were used to conduct the study. Self Help Groups without enterprises were found to be less empowered ,socially and
economically than those with enterprises Government and non-government SHGs showed significance difference in
economic, social and political role. The study revealed that micro-enterprises are a viable pathway for improving the
economic status. Independent variables like education, income and mass media contact were positively and
significantly related with the role of SHGs.

15. CONCLUSION
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SELF HELP GROUPs (SHGs)

Today Self-help groups (SHGs) clearly play a central role in the lives of the poor. SHGs have changed the life of
many individuals or groups for the better. This is considered not only a tool for poverty alleviation, but also has
proved to be relevant in offering women the possibility to gradually break away from the exploitation and isolation
in India. The SHG-Bank Linkage Programme has provided a more favorable environment for enhancing Indias
potential for greater equitable growth with empowerment while considering the positive signs in their performance.
The opinion that when the shgs create this responsibilities several spread-effects can be spawned. A few of the end of
male domination, reducing the importance of cash by enabling group efforts, when the group will automatically take
care of personal needs of the members and their families such as health care, education, employment, marriage, etc.,
it also empower of poor women in financial support and helps to withstand in the community.
SHG Programme play a major role in poverty alleviation in rural India. The programme in various blocks all seem to
be very successful in reaching poor clients Importantly; there is evidence of increased household income. This is a
very significant indicator of impact. Standard of living for the program participants have increased and also the food
security is much more for the program clients. Programme loans are one of the main ways clients overcome food
insecurity with sickness, disease, emergencies and crises, where programme participants seem to transfer the loan
source from friends and moneylenders to SHG loans to meet these expenses.

16. WEBLIOGRAPHY
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www.newsky.co.uk.
http//www.ilo.org/public
http//www.industrial and commerce.com
wikipedia.org/wiki/Self-help_group_(finance)

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