ENTREPRENEURIAL DEVELOPMENT

ENTREPRENEUR
The word Entrepreneur is given as a person ‘who starts a business ‘. Its also that an
Entrepreneur is a person ‘who starts an enterprise’, business or a firm’.
A person who sets up a business taking on financial risks in the hope of profit.

ENTREPRENEURSHIP
The activity of setting up a business or businesses taking on financial risks in the hope
of profit.
Entrepreneurship is the process of developing, organising, and running, a new business to
generate profits while taking on financial risks.
Definition of Entrepreneur:
Richard Cantillon says, “All persons engaged in economic activity as entrepreneurs”.
J.A. Schumpeter is of the view that, “A person who introduces innovate changes is an
entrepreneur and he is an integral part of economic growth”.
According to Webster, “Entrepreneur is one who assumes risk and management of
business”.
Definition of Entrepreneurship:

A.H. Cole has defined entrepreneurship as “The purposeful activity of an individual or

group of associated individuals, undertaken to initials, maintain, or earn profit by production
and distribution of economic goals and services”.

TYPES OF ENTREPRENEURS
I BASED OF THE TYPE OF BUSINESS

1. Trading Entrepreneur:
As the name itself suggests, the trading entrepreneur undertake the trading activities. They
procure the finished products from the manufacturers and sell these to the customers directly
or through a retailer. These serve as the middlemen as wholesalers, dealers, and retailers
between the manufacturers and customers.
2. Manufacturing Entrepreneur:

The manufacturing entrepreneurs manufacture products. They identify the needs of the
customers and then, explore the resources and technology to be used to manufacture the
products to satisfy the customers needs. In other words, manufacturing entrepreneurs convert
raw materials into finished products.
3. Agricultural Entrepreneur:
The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs.
They occur a wide spectrum of agricultural activities like cultivation, marketing of agricultural
produce, irrigation, mechanization, and technology.

II BASED ON THE USE OF TECHNOLOGY

1. Technical Entrepreneur:

The entrepreneurs who establish and run science and technology-based industries are called
‘Technical Entrepreneurs.’ Speaking alternatively, these are the entrepreneurs who make use
of science and technology in their enterprises.
2. Non-Technical Entrepreneur:

Based on the use of technology, the entrepreneurs who are not technical entrepreneur are non-
technical entrepreneurs. The forte of their enterprises is not science and technology. They are
concerned with the use of alternative and imitative methods of marketing and distribution
strategies to make their business survive and thrive in the competitive market.

III BASED ON OWNERSHIP

1. Private Entrepreneur:

A private entrepreneur is one who as an individual sets up a business enterprise. He/she it’s the
sole owner of the enterprise and bears the entire risk involved in it.

2. State Entrepreneur:
When the trading or industrial venture is undertaken by the Government, it is called ‘State
Entrepreneur’.

3. Joint Entrepreneur:
When a private entrepreneur and the Government jointly run a business enterprise, it is called
‘joint entrepreneur’.
IV BASED ON GENDER
1. Men Entrepreneurs:
When business enterprises are owned, managed, and controlled by men,these are called ‘men
entrepreneur’.
2. Women Entrepreneur’s:

Women entrepreneurs are defined as the enterprises owned and controlled by a woman or
women having a minimum financial interest of 51 percent of the capital and giving atleast 51
percent of employment generated in the enterprises to women.
V BASED ON THE SIZE OF THE ENTERPRISE
1. Small-Scale Entrepreneur:

An entrepreneur who has made an investment in plant and machinery up to Rs.1.00 crore is
called ‘small scale entrepreneur’.

2. Medium-Scale Entrepreneur:
The entrepreneur who has made investment in plant and machinery above Rs. 1.00 crore but
below Rs. 5.00 crore is called ‘medium-scale entrepreneur’.
3. Large-Scale Entrepreneur:

The entrepreneur who has made investment in plant and machinery more than Rs. 5.00 crore
is called ‘large-scale entrepreneur’.

VI BASED ON CLARENCE DANHOF CLASSIFICATION

Clarence Danhof (1949), on the basis of his study of the American Agriculture, classified
entrepreneurs into four types. These are discussed in seriatim.
1. Innovating Entrepreneurs:

Innovating entrepreneurs are one who introduce new goods, inaugurate new method of
production, discover new market and recognise the ‘enterprise’.

2. Imitative Entrepreneurs:
These are characterised by readiness to adopt successful innovations inaugurated by innovating
entrepreneurs. Imitative entrepreneurs do not innovate the changes themselves, they only
imitate techniques and technology innovated by others.
3. Fabian Entreppreneurs:

Fabian entrepreneurs are characterised by very great caution and skeopticism in experimenting
any change in their enterprises. They imitate only when it becomes perfectly clear that failure
to do so would result in a loss of the relative position in the enterprise.
4. Drone Enterpreneurs:
These are characterised by a refusal to adopt opportunities to make changes in production
formulae even at the cost of severely reduced returns relative to other like producers. Such
entrepreneurs may even Suffer from losses but they are not ready to make changes in their
existing production methods.

Following are some more types of entrepreneurs listed by some other behavioural
scientists:

[Link] Operators:
These are the entrepreneurs who essentially work alone and, if needed at all, employ a few
employees. In the beginning, most of the entrepreneurs start their enterprises like them.
2. Active Partners:
Active partners are those entrepreneurs who start/ carry on an enterprise as a joint venture. It
is important that all of them actively participate in the operations of the business. Entrepreneurs
who only contribute funds to the enterprise but do not actively participate in business activity
are called simply 'partners'.
3. Inventors:

Such entrepreneurs with their competence and inventiveness invent new products. Their basic
interest lies in research and innovative activities.

4. Challengers:
These are the entrepreneurs who plunge into industry because of the challenges it presents.
When one challenge seems to be met, they begin to look for new challenges.
5. Buyers:

These are those entrepreneurs who do not like to bear much risk. Hence, in order to reduce risk
involved in setting up a new enterprise, they like to buy the ongoing one..

6. Life-Timers:
These entrepreneurs take business as an integral part to their life. Usually, the family enterprise
and businesses which mainly depend on exercise of personal skill fall in this type/category of
entrepreneurs.

FACTORS AFFECTING ENTREPRENEURSHIP

For analytical purposes, the various factors affecting entrepreneurial growth are grouped and
discussed under two broad categories, viz., economic factors and non-economic factors.
ECONOMIC FACTORS

From a strictly economic viewpoint, it can be said that the same factors which promote
economic development account for the emergence and development of entrepreneurship also.
Some of these factors are discussed here under:
[Link]:

Capital is one of the most important prerequisites to establish an enterprise. Availability of

capital facilitates the entrepreneur to bring together the land of one, machine of another and
raw material of yet another to combine them to produce goods. Capital is, therefore, regarded
as lubricant to the process of production.
[Link]:

The quality rather quantity of labour is another factor which influences the emergence of
entrepreneurship. It is noticed that cheap labour is often less mobile or even immobile. Adam
Smith (1776) also considered division of labour as an important element in economic
development.

[Link] Materials:
The necessity of raw materials hardly needs any elaboration and emphasis for establishing any
industrial activity and, therefore, its influence in the emergence of entrepreneurship. In the
absence of raw materials, neither any enterprise can be established nor can an entrepreneur be
emerged. Of course, in some cases, technological innovations can compensate for raw material
inadequacies.

[Link]:
The fact remains that the potential of the market constitutes the major determinant of probable
rewards from entrepreneurial function. Both the size and composition of market influence
entrepreneurship in their own ways. Practically, monopoly in a particular product in a market
becomes more influential for entrepreneurship than a competitive market.
NON- ECONOMIC FACTORS

Social Conditions
a. Legitimacy of Entrepreneurship:
The proponents of non-economic factors give emphasis to the relevance of a system of norms
and values within a socio-cultural setting for the emergence of entrepreneurship. In
professional vocabulary, such system is referred to as the legitimacy of entrepreneurship.
b. Social Mobility:

Social mobility involves the degree of mobility, both social and geographical, and the nature
of mobility channels within a system. The opinion that the social mobility is crucial for
entrepreneurial emergence is not unanimous.
[Link]:

A group of scholars hold a strong view that social marginality also promotes entrepreneurship.
They believe that individuals or groups on the perimeter of a given social system or between
two social systems provide the personnel to assume the entrepreneurial roles. They may be
drawn from religious, cultural, ethnic, or migrant' minority groups, and their marginal social
position
[Link]:
Several scholars (Brozen 1954: 339-364, Katzin 1964) have advocated entrepreneurial security
as an important facilitator of entrepreneurial behaviour Yet, scholars are not in agreement with
the amount of security that is needed

We also regard security to be a significant factor for entrepreneurship development. This is

reasonable too because if individuals are fearful of losing their economic assets or of being
subjected to various negative sanctions, they will not be inclined to increase their insecurity by
behaving entrepreneurially

PSYCHOLOGICAL FACTORS
Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate
specifically upon psychological factors. We consider these theories separately for that reason.
a. Need Achievement:

To the best of our knowledge, the best known of primarily psychological theories is David
McClelland's (1961) theory of need achie According to McClelland, a constellation of
personality characteristics which are indicative of high need achievement is the major
determinant of entrepreneurship development.

b. Withdrawal of Status Respect:

Hagen (1968) attributed the withdrawal of status respect of a group to the genesis of
entrepreneurship. Giving a brief sketch of history of Japan, he concludes that she developed
sooner than any non-western society except Russia due to two historical differences. First,
Japan had been free from 'colonial disruption' and secondly, the repeated long continued
withdrawal of expected status from important groups (Samurai) in her society drove them to
retreatism which caused them to emerge alienated from traditional values with increased
creativity.

Traits of Entrepreneurship

1. Robust Work Ethic

Successful entrepreneurs know a thing or two about work ethic. Most of the time, they’ll be
the first to arrive at the office and the last to leave. If there’s unfinished business, they’ll show
up at the office on weekends and holidays and work until the job is complete. These are the
people who always have work on their mind, even if they’re enjoying personal time.
2. Deep Passion

Work ethic and passion go hand in hand. It takes work ethic to keep the business strong, and it
takes passion to feel motivated enough to maintain a good worth ethic.
I believe passion is easily the most significant personality trait any successful entrepreneur has,
and for obvious reasons. They’re successful because they choose to do what they love.

Did you ever feel so passionate about a school project that you ended up getting an A? That
feeling of success is priceless, and it’s how entrepreneurs feel when they see great outcomes
from the effort they put into their work.

3. Creativity

Companies that thrive are often built from the wild creativity of their creators. With aggressive
competition these days, entrepreneurs are forced to come up with original ideas that
differentiate their companies from others.

Creativity can mean thinking of unique business ideas. It can also come into play when finding
a relationship between two unrelated things to solve a problem. Creative entrepreneurs consider
the possibility that the traditional solution isn’t good enough.

4. Motivated Self-Starters

A self-starter doesn’t settle for a draining 9-to-5 job. A self-starter doesn’t give up at the first
sign of struggle. A self-starter doesn’t hold things off until it’s too late.

A self-starter is someone who does what needs to be done without being asked or encouraged
to do so. They take the initiative on their own projects and lead themselves. They recognize
that when things get hard, it’s a challenge that helps them grow as an entrepreneur and make
the business stronger.

Entrepreneurs have to be self-starters to help their businesses scale rapidly in today’s cutthroat
business world.

5. Easy going Attitude

Change of plans? Do you need to redo an entire project? A successful entrepreneur will shake
off any inconveniencies and start from scratch without getting into a huge rut. In fact, many
entrepreneurs will tell you that their businesses turned out much differently from what they had
originally envisioned. They’ll also likely tell you that they wouldn’t want their business to have
turned out any other way.

Being easygoing is all about going with the flow, taking new opportunities as they come, not
getting stuck in a certain mindset and being receptive to changes and even criticism. Successful
entrepreneurs can take a bad situation and spin it around to their advantage
6. Eager to Learn

No one knows everything. A new business doesn’t often have staff in every department due to
lack of funding. It takes time and resources to build a team. That means entrepreneurs need to
learn everything from accounting to marketing from the get-go.

This kind of experience is what makes accomplished entrepreneurs so well rounded. They’ve
seen it, been through it and learned it all before.

Whether you hope to become an entrepreneur, are fairly new in the game or are now a seasoned
entrepreneur, you can become successful. Although adopting these personality traits will help
you in the long run, it’s likely you already possess them if you’re following the entrepreneurial
path.

Barriers to Entrepreneurship
[Link]
We are all bustling with ideas that are unique and can make for an amazing business start-up.
But no matter how good your idea is, you will always need stable finances and funding from
the investors to begin the process and take the first step towards your journey of
entrepreneurship.

And getting a sound financial investment or funding can be one of the biggest Barriers to
Entrepreneurship as many of banks, private investors, angel investors, and organizations find
it quite difficult to believe in the start-up ideas owing to the risk of failure and losing their
money.

2. Fear of not to be a success

We all go through the fear of failure. And if the fear is associated with the risks and stakes
taken in the stream of business and entrepreneurship, the level of fear elevates.
There is a fear if we are on the right track, is the idea worthwhile, will there be profit, will I
find investors, and various such fears and tensions act as the Barriers to Entrepreneurship.

3 No strategic plan in place

Lack of Proper planning and strategy in place is one of the most common Barriers to
Entrepreneurship.
Many of us think to build a business out of a hobby without having any sort of long term and
short term vision and plan in mind.
Running a fully-fledged business or being an entrepreneur requires a huge amount of skill set,
passion for excelling, strategic vision, the mission to accomplish the goals, market research,
and a lot more.
 Right from the target market, finances, human resources, to a proper strategic plan is required
to build a successful business or a brand in the market.

4 Human resource issues

Entrepreneurs cannot handle and run a business alone by themselves. We require the support
of human resource to carve a niche in the market.
Employees with the required knowledge, expertise, and experience are needed for the
efficiency of the business processes and high levels of productivity.

5 Stringent rules and regulations of the market

It is not very easy for entrepreneurs to enter the new market as there are quite many rules and
regulations imposed by the government authorities.
Plus there are various laws and compliances to be adhered to such as taxation, environmental
regulations, licenses, property rights, and much more than act as the Barriers to
Entrepreneurship.

6 Fewer opportunities
Even though there is a lot of talent pool in the market with the aspiring entrepreneurs buzzing
with the ideas, but the opportunities presented to them are quite less and fewer.
Reasons such as nepotism and corruption act as the Barriers to Entrepreneurship with not many
vital and lucrative opportunities.

7 Lack of capacity
Even if there are opportunities presented to the aspiring entrepreneurs, there is a lack of
capacity in some them to embrace the opportunities with open arms. The reasons can vary from
lack of knowledge, lack of education, lack of willingness, lack of strategic knowledge, and
cultural hindrances amongst others; but the factor of motivation and zeal gets missing.
To start a new business venture amidst all the risks and market-related issues, it requires a lot
of hard work, passion, and high capacity to handle all of it.

8 Less market experience

The experts always mention that one should never rush in setting up a business. It is quite
necessary to gain a relative amount of work experience by working in the industry domain or
sector of choice and as per the education levels. It also helps to sharpen the required expertise
and find the ground in the career graph.

Once the person is ready to take risks and have a relative amount of market exposure, he is
ready to take the entrepreneurial plunge.
9 Lack of risk-taking capacity

It is always said that entrepreneurs never sail in safe waters and are never confined to their
comfort zones. Lack of risk-taking capacity is the psychological mindset and perspective
towards the business and acts as one of the major Barriers to Entrepreneurship.

The budding entrepreneur has to have a structured and organized approach towards the various
business elements and should risks rather than averting them.

10 Corrupt business situations

As mentioned earlier, if the business situations and the environment are not very supportive
and corrupt for the young and aspiring entrepreneurs, it acts as one of the top Barriers to
Entrepreneurship.

Bribing, rampant corruption, unfriendly ties of government with other nations, inconsistent
laws, stringent compliances, and enforcing regulations that are unhealthy and negative in their
approach hamper the growth of businesses in the country.

11 Inadequate training

With no proper education, development, training, entrepreneurial skills, and technical know-
how acts as the Barriers to Entrepreneurship.

12 Lack of practical knowledge

Have a strong educational background is just not enough to pursue business as it requires
practical knowledge as well to stay relevant amidst the various market cycles. And many
entrepreneurs lack practical knowledge.

Stages of entrepreneurship development:

These are the seven stages of entrepreneurship development. By following these steps, you’ll
be well on your way to starting a successful business.

The steps of entrepreneurship development are:

[Link] a business idea

[Link] a team
[Link] a business plan

[Link] capital
[Link] your business
[Link] your business

[Link] your business.

1. Finding a business idea:

This is the first and most important step of entrepreneurship development. You need to have a
great business idea to start a successful enterprise.
There are many ways to come up with a business idea, but the best way is to think about what
you’re passionate about and what needs are not being met in the marketplace.
2. Building a team:

Once you have a business idea, you need to start building a team of like-minded individuals
who will help you turn your idea into a reality. This team will include people with different
skillsets and expertise, so it’s important to choose wisely.

3. Creating a business plan:

This step is crucial for any entrepreneur. A business plan will help you map out the goals and
objectives of your new business, as well as the strategies you’ll use to achieve them. Without
a solid business plan, it will be very difficult to make your business successful.

4. Raising capital:
To get your business off the ground, you’ll need to raise money. This can be done through
investment from friends, family, or venture capitalists.

5. Launching your business:

Once you have a team in place and a business plan created, it’s time to launch your business.
This is when all of your hard work will finally pay off.

6. Growing your business:

After you’ve launched your business, it’s important to continue growing it. This can be done
by expanding your product line, entering new markets, and acquiring other businesses.
7. Exiting your business:

Eventually, you may want to sell your business or take it public. This is the final step of
entrepreneurship development, and it can be a very lucrative one if done correctly.
Women Entrepreneurship

Women Entrepreneurs may be defined as “ A Women or group of women who initiate,

organise and run the business enterprise”.
Acc. to Schumpeter, “Women entrepreneurs are those women who innovate, initiate or adopt
a business activity"

Economic Development:
Economic and Social Development is the process by which the economic well being and
quality of life of the nation, region, local community or an individual are improved according
to targeted goals and objectives

Economic Development is the creation wealth from which community benefits are realise. It
is more than a jobs program, its an investment in growing your economy and enhancing the
prosperity and quality of life for all residents.

Entrepreneurs initiate and sustain the process of economic development in the following
ways:
1. Capital Formation:
2. Improvement in Per Capita Income:
3. Generation of Employment:
4. Balanced Regional Development:
5. Improvement in Living Standards:
6. Economic Independence:
7. Backward and Forward Linkages:
8. Innovation:
9. Other contributions:

1. Capital Formation:

Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities.
Investment of public savings in industry results in productive utilization of national resources.
Rate of capital formation increases which is essential for rapid economic growth. Thus, an
entrepreneur is the creator of wealth.

2. Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like
land, labour and capital into national income and wealth in the form of goods and services.
They help to increase net national product and per capita income in the country, which are
important yardsticks for measuring economic growth.
3. Generation of Employment:

Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as

an entrepreneur offers the best way for independent and honorable life. Indirectly, by setting
up large and small scale business units they offer jobs to millions. Thus, entrepreneurship helps
to reduce the unemployment problem in the country.

4. Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in economic
development. They set up industries in backward areas to avail various concessions and
subsidies offered by the central and state governments.
Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have
put the hitherto unknown places on the international map.

5. Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and introduce
new products. Production of goods on mass scale and manufacture of handicrafts, etc., in the
small scale sector help to improve the standards of life of a common man. These offer goods
at lower costs and increase variety in consumption.

6. Economic Independence:

Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture

indigenous substitutes of hitherto imported products thereby reducing dependence on foreign
countries. Businessmen also export goods and services on a large scale and thereby earn the
scarce foreign exchange for the country.
Such import substitution and export promotion help to ensure the economic independence of
the country without which political independence has little meaning.

7. Innovation:

Innovation is the key to entrepreneurship. It implies the commercial application of an invention.

As an innovator, the entrepreneur assumes the role of a pioneer and an industrial leader.
Entrepreneurs have contributed many innovations in the developing new products and in the
existing products and services. All these have resulted in economic development by way of
generating employment, more income etc.,

8. Other contributions:

Women entrepreneurs are the main actresses in charging the culture of the society. In our
country, women are workaholics and participate outside the house and develop the sense of
independence and the like.
Thus women entrepreneurs in our country are directly or indirectly playing an important role
in environmental protection, back ward and forward integration and are acting as charge agents,
thus contributing to the economic growth of the country.

PROBLEMS OF WOMEN ENTREPRENEURS

Women entrepreneurs encounter two sets of problems, viz., general problems of entrepreneurs
and problems specific to women entrepreneurs (Birley 1989). These are discussed as follows:

Problem of Finance:
Finance is regarded as “life-blood” for any enterprise, be it big or small. However, women
entrepreneurs suffer from shortage of finance on two counts. Firstly, women do not generally
have property on their names to use them as collateral for obtaining funds from external
sources. Thus, their access to the external sources of funds is limited. Secondly, the banks also
consider women less credit-worthy and discourage women borrowers on the belief that they
can at any time leave their business. Given such situation, women entrepreneurs are bound to
rely on their own savings, if any and loans from friends and relatives who are expectedly
meager and negligible. Thus, women enterprises fail due to the shortage of finance.

Scarcity of Raw Material:

Most of the women enterprises are plagued by the scarcity of raw material and necessary inputs.
Added to this are the high prices of raw material, on the one hand, and getting raw material at
the minimum of discount, on the other. The failure of many women co-operatives in 1971
engaged in basket-making is an example how the scarcity of raw material sounds the death-
knell of enterprises run by women (Gupta and Srinivasan 2009).

Stiff Competition:
Women entrepreneurs do not have organizational set-up to pump in a lot of money for
canvassing and advertisement. Thus, they have to face a stiff competition for marketing their
products with both organized sector and their male counterparts. Such a competition ultimately
results in the liquidation of women enterprises.

Limited Mobility:
Unlike men, women mobility in India is highly limited due to various reasons. A single woman
for room is still looked upon suspicion. Cumbersome exercise involved in starting an enterprise
coupled with the officials humiliating attitude towards women compels them to give up idea
of starting an enterprise.

Family Ties:
In India, it is mainly a women's duty to look after the children and other members of the family.
Man plays a secondary role only. In case of married women, she has to strike a fine balance
between her business and family Her total involvement in family leaves little or no energy and
time to devote for business. Support and approval of husbands seem necessary condition for
women's entry into business. Accordingly, the educational level and family background of
husbands positively influence women's entry into business activities.

Lack of Education:
In India, around three-fifths (60%) of women are still illiterate. Illiteracy is the root cause of
socio-economic problems. Due to the lack of education and that too qualitative education,
women are not aware of business, technology and market knowledge. Also, lack of education
causes low achievement motivation among women. Thus, lack of education creates one type
or other problems for women in the setting up and running of business enterprises.

Male-Dominated Society:
Male chauvinism is still the order of the day in India. The Constitution of India speaks of
equality between sexes. But, in practice, women are looked upon as abla, ie. weak in all
respects. Women suffer from male reservations about a women's role, ability and capacity and
are treated accordingly. In nutshell, in the male-dominated Indian society, women are not
treated equal to men. This, in turn, serves as a barrier to women entry into business.

Low Risk-Bearing Ability:

Women in India lead a protected life. They are less educated and economically not self-
dependent. All these reduce their ability to bear risk involved in running an enterprise. Risk-
bearing is an essential requisite of a successful entrepreneur.

SELF HELP GROUP (SHG)

A group 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 mutual support and to pool practical
information and ways of coping.
They are small, informal association of the poor created for purpose of economic benefits out
of mutual help.

Definition of Self Help Group

A self help group is define as “ Self governed, peer controlled information group of people
with similar Socio- Economic background and having a desire to collectively perform common
purpose”.

Characteristics of SHG
Some of the important characteristics of SHGs as per the Govt. Of India stipulation are as
follows:

[Link] SHG may consist of 10-20 members.

[Link] affinity of the members is a common characteristic. This means to say that each SHG
is a group of homogeneous masses.
[Link] members of the group should belong to families below poverty line.
[Link] group shall not consist of more than one member from the same family.
5.A person shall not be a member of more than one group.
[Link] members create a common fund by contributing their small savings on regular basis.
7. The groups evolve flexible systems of working and manage polled resources in democratic
manner.
8. Groups consider the loan requirements of members in periodic meetings and competing
claims on limited resources are settled by consensus.
9. Loans are given on trust with minimuim documentation and without any security.
10. The loans are of small amount, issued frequently for short duration.
11. The rate of interest varies from group to group and the purpose of the loan. It is higher than
that of banks but lower than that of moneylenders.
12. At periodic meetings, besides collecting money, social and economic issued are also
discussed.

Objectives of SHGs
The concept of Self Help Group is initiated towards fulfillment of the following social
objectives:
1. To support economic freedom of the rural people living Below Poverty
2. To encourage poor rural folk in developing their habit of working in groups.
3. To develop Entrepreneurial Culture among poor rural people
4. To Help the vulnerable section of the society, who does not have access to institutional
finance
5. To develop the habit of thrift and saving among the poor rural people
6. To empower the rural people both economically and socially
7. To develop the sense of social responsibility among the rural people

Needs of Self Help Groups

There are needs for SHGs which is specific terms are as under:
a) To mobilize the resources of the individual members for their collective economic
development.
b) To uplift the living conditions of the poor.
c) To create a habit of savings, utilization of local resources.
d) To mobilize individual skills for group’s interest.
e) To create awareness about right.
f) To assist the members financial at the rime of need.
g) To identify problems, analyzing and finding solutions in the groups.
h) To act as a media for socio-economic development of village.
i) To develop linkage with institution of NGO’s.
j) To organize training for skill development
k) To help in recovery of loans.
l) To gain mutual understanding, develop trust and self-confidence.
m) To build up teamwork.
 n) To develop leadership qualities.
o) To use it as an effective delivery channel for rural credit.

Functions of SHGs:
The important functions of SHG are the following:

a) Enabling members to become self-reliant and self-dependent.

b) Providing a forum for members for discussing their social and economic problems.
c) Enhancing the social status of members by virtue of their being members of the
group.
d) Providing a platform for members for exchange of idea.
e) Developing and encouraging the decision making capacity of members.
f) Fostering a spirit of mutual help and cooperation among members.
g) Instilling in members a sense of strength and confidence which they need for
solving their problems.
h) Providing organizational strength to members.
i) Providing literacy and increasing general awareness among members, and
j) Promoting numerically and equipping the poor with basic skills required for
understanding monetary transactions.