MODULE 4

SELF HELP GROUPS

• Self Help group is a method of organising the poor people and the
marginalized to come together to solve their individual problem.
• Self help groups play today a major role in poverty alleviation in rural India.

The micro finance practices of these institutions revolve around five basic
features:
a. These institutions primarily have women as their target group.
b. They adopt group approach for achieving their targets.
c. Savings are an essential precondition in all these MFI’s for availing credit
from them.
d. The officials of the Bangladesh MFI’s remain present in the weekly
meetings of the groups and collect the savings and even disburse the
loans.
e. The systems and procedures of the MFI’s are quite simple.
What is Self Help Group?
a. Self help groups also known as mutual help, are groups of people who
provide mutual support for each other.
b. 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.
c. 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 solidarity and joint responsibility.
d. A self help group is defined as a “self governed, peer controlled
information group of people with similar socio economic background and
having a desire to collectively perform common purpose.
Features of Self Help Group
• An SHG normally consists of not less than five persons(with max of
twenty)of similar economic outlook and social status.
• It promotes objectives like economic improvement and raising resources for
development and freedom from exploitation.
• It has its own byelaws for the proper functioning of the group as well as for
the observance of certain rules by the group members and regulations
concerning membership.
• The form of such a group could be mostly on an informal basis
• Periodical meetings of members are held for solving their problems and they
collect fixed savings of the members.
• The savings of members are kept with a bank in the name of group and
authorized representative of the group operates the bank account.
• Sources of funds are the contribution of members savings, entrance fee,
interest from loans.
• 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
money lenders.
• At periodical meetings, besides collecting money, emerging rural, social and
economic issues are discussed.
• Defaulters are rare dur to group pressure and intimate knowledge of the
end use of the credit as also the borrowers economic resources.
Objectives of Self Help Group
1. To build mutual trust and confidence between the bankers and the rural
poor.
2. To create a habit of savings small amount of money regularly.
3. To mobilize the resources of the individual members for their collective
economic development.
4. To meet the emergency financial needs of its members
5. To uplift the living conditions of the poor.
6. To mobilize the individual skills for group’s interest.
7. To encourage entrepreneurial spirit among its members.
8. To identify the problems, analyzing and finding solution in the groups
9. To act as a media for socio economic development of villages.
10.To develop linkage with institution of NGO’s
11.To organize training for promoting skill development
12.To help in the recovery of loans
13. To encourage collective decision making
14. To build team work
15. To solve conflicts among its members through collective leadership
16. To provide collateral free loan with terms decided by the group at the
market driven rates.
Principles of SHG
1. Interaction/meetings/Reflection/Analysis and action
2. Regular savings
3. Trust in one’s self and among members in the group.
4. Consensus
5. Records
6. Access to funds
7. Team Management of Resources.
Advantages of Self Help Groups
1. Channel of Financial Inclusion
2. Resource Mobilization
3. Promote savings and Banking habit
4. Improve the living conditions of the poor
5. Women empowerment
6. Promote Socio Economic justice
7. Community Actions
8. Develop Individual Skill of Group Members
9. Employment Generation
10.Reduce Influence of Unorganised Sector
11.Beneficial to the Financial Sector
Functions of Self Help Groups
1. The major function of self help groups is to make the members more self
reliant or self independent.
2. It is platform which enables its members to discuss their social and
economic problems
3. By providing the financial help it aids in elevating the economic and social
status of the members of the group.
4. It provides the forum for the members for the exchange of ideas
5. Through the exchange of ideas, it enhances the decision making capacity
of its members.
6. It fosters the spirit of mutual help and cooperation among members.
7. It boosts the confidence level of its members
8. Provides Organisational strength to its members
9. It promotes Financial literacy among its members.
Problems Faced By SHGS
1. Regional Imbalance
2. Poor Management
3. Problem of Micro enterprises
4. Dropouts
5. Lack of Business Attitude
6. Regulations
7. Lack of Political Support
8. Sustainability
Structure of SHG’s
a. Size of the group
b. SHG Leaders
c. SHG members
d. Functions of SHG
e. Meetings
f. Saving
g. Interloaning

Functioning of the SHG

a. The group functions with 2-3 office bearers
b. Office bearers should rotate atleast once in 2 years
c. Group meets periodically at fixed intervals to discuss any issues
d. All members attendance and active participation at meetings is essential.
e. Decisions are taken at meetings by a consensus of the group and not by
the President and Secretary alone.
f. All business is transacted at meetings and not privately with the President
or Secretary at their residence.
g. All savings, interest any group profit from a common activity and fines and
refunds of loans are deposited in the group’s bank account.
h. A regular monthly contribution is collected from each member for the
groups nominal administrative expenses like stationary, travel,
refreshments for meetings any training fees.
i. Until the cash is deposited in the bank, or for that matter all floating cash
is kept in a cash box.
Formation of Self Help Groups
1. Group Formation
2. Capital Formation through revolving fund and skill development
3. Income generating activities.

Condition required for membership for SHGs

a. Members should be between the age group of 21-60 years
b. From one family, only one person become a member of an SHG.
c. The group normally consists of either only men or only women.
d. Members should be Homogeneous
e. Members should be rural poor.
Initiatives by NABARD with respect to SHG
1. Conceptualization and introduction of pilot programme in February 1992
for linking 500 SHGs with banks after consultations with RBI.
2. Introduction of bulk lending scheme in 1993 for encouraging the NGOs
which were keen to try group approach.
3. Developing a conducive bank accounts policy framework through
provision of opening saving bank accounts in the names of SHGs.
4. Training and awareness building among the stakeholders.
5. Provision of capacity building support of NGOs/SHGs/Banks.
6. Encouraging banks(RRBs) for promotion of SHGs.
7. Financial support to NGOs for promotion of SHGs.
8. Encouraging rural individual volunteers in promotion and nurturing of
SHG’s.
9. Close monitoring.
10. Dissemination through seminars, workshops , occasional papers and
print media.
11. Setting up a microfinance development fund in NABARD for meeting the
promotional costs of up scaling the microfinance interventions.
12. Initiating the credit rating of the microfinance institutions through
accredited credit rating agencies of India by meeting 75 percent of the
cost of the rating as grant.

Refinance Assistance Provided By NABARD

Self Help Group is a visible organized set up to disburse microcredit to the
rural women and encourage them in entrepreneurial activities. SHGs and
micro credit are the solutions to speed up the socio economic development of
poor women.
Institutions funding/ Promoting SHGs
1. NABARD
2. SIDBI
3. RMK(Rashtriya Mahila Kosh)
A fund set up in 1993 by the department of women and child
development, G-Vehicle to carry SHG product from production place to
market place.
1. Work shed to carry out SHG activities.
2. Business outlets/shops for selling of SHG Products.
3. For establishment of chilling plant, small size cold store, godown etc.
4. Purchase/lease of land to carry cultivation by employing SHG members.
5. Provide loan to individual women micro entrepreneur or group of women
entrepreneurs to undertake income generating activities.
6. To rehabilitate sick societies
7. To repay the loan availed by the societies/women SHG in higher interest
rate either from money lender.
8. Provide technical services to women SHG/women entrepreneur.
9. To carry out various training program to SHG members.
10. Aid export business of the products of SHG.
11. To organise “Exhibition and sale” for marketing of products of SHG.

HDFC(Housing Development Finance)

• HDFC has been making continuous and sustained efforts to reach the
lower income groups of society, especially the economically weaker
sections.
• Helping the poor to realise their dreams of possessing a house of their own.
• HDFCs helps the need for better housing and living environment for the
poor, both in the urban and rural sectors in its collaboration with KFW, a
German Development bank.
• HDFC collaborations with organisations both Governmental and Non-
Governmental implements the low cost housing projects for the individuals
belonging to the economically weaker sections.

HUDCO(Housing & Urban Development )Corporation

• Scheme called “Night Shelter for Pavement Dwellers” for the construction of
composite night shelters with toilets and baths for urban shelter less in
rural areas.
RGVN(Rashtriya Grameen Vikas Nidhi)
• It is a non profit society formed in April 1990.
• Operating in the neglected north eastern region of the country.
• It is the only national donor agency working in this remote area
Role of Self Help Groups in Social and Financial Inclusion
1. Inculcate saving habit
2. Increase income and standard of living
3. Alleviate poverty and promote economic independence
4. Increase self confidence and self respect
5. Generate self employment opportunities
6. Decision making and political leadership
7. More access to amenities.
NORMS of SHGs
1. Objectives of the group
2. Meetings- time, Periodicity
3. Savings –amount , periodicity, rate of interest
4. Credit-procedure for sanction
5. Fines- defaulters in attending meetings
6. Leadership – election or nomination of leaders
7. Personal/social improvement