Self Help Groups
Self Help Groups -What are SHGs?
Self-help Groups (SHGs) are informal associations of people who come together to find ways
to improve their living conditions. They are generally self-governed and peer-controlled.
People of similar economic and social backgrounds associate generally with the help of any
NGO or government agency and try to resolve their issues, and improve their living
conditions.
The Emergence of Self Help Groups – Origin and Development in India
The origin of SHGs in India can be traced back to the establishment of the Self-
Employed Women’s Association (SEWA) in 1972.
Even before, there were small efforts at self-organising. For example, in 1954, the
Textile Labour Association (TLA) of Ahmedabad formed its women’s wing in order
to train the women belonging to families of mill workers in skills such as sewing,
knitting, etc.
Ela Bhatt, who formed SEWA, organised poor and self-employed women workers
such as weavers, potters, hawkers, and others in the unorganised sector, with the
objective of enhancing their incomes.
NABARD, in 1992, formed the SHG Bank Linkage Project, which is today the
world’s largest microfinance project.
From 1993 onwards, NABARD, along with the Reserve Bank of India, allowed SHGs
to open savings bank accounts in banks.
The Swarn Jayanti Gram Swarozgar Yojana was introduced in 1999 by GOI with the
intention of promoting self-employment in rural areas through formation and skilling
of such groups. This evolved into the National Rural Livelihoods Mission (NRLM) in
2011.
Evolution Stages of Self Help Groups in India
Every Self-help group usually goes through 3 stages of evolution stated below:
1. Formation of group
2. Funding or Formation of Capital
3. Development of required skills to boost income generation for the group
Many self-help groups are formed with the assistance of Self- help to promote agencies.
The various types of Self-help promoting agencies are stated below:
1. Non-governmental agencies
2. Government
3. Poverty management programmes
4. State & commercial banks
5. Microfinance institutions
6. SHG Federations
7. SHG leaders/Entrepreneurs
Functions of Self Help Groups
They try to build the functional capacity of poor and marginalised sections of society
in the domain of employment and income-generating activities.
They offer collateral-free loans to sections of people that generally find it hard to get
loans from banks.
They also resolve conflicts via mutual discussions and collective leadership.
They are an important source of microfinance services to the poor.
They act as a go-through for formal banking services to reach the poor, especially in
rural areas.
They also encourage the habit of saving among the poor.
Need for Self Help Groups
One of the chief reasons for rural poverty is the lack of access or limited access to
credit and financial services.
The Rangarajan Committee Report highlighted four major reasons for lack of
financial inclusion in India. They are:
Inability to give collateral security
Weak credit absorption capacity
The insufficient reach of institutions
Weak community network
It is being recognised that one of the most important elements of credit linkage in
rural areas is the prevalence of sound community networks in Indian villages.
SHGs play a vital role in giving credit access to the poor and this is extremely crucial
in poverty alleviation.
They also play a great role in empowering women because SHGs help women from
economically weaker sections build social capital.
Financial independence through self-employment opportunities also helps improve
other development factors such as literacy levels, improved healthcare and better
family planning.
Advantages of Self Help Groups
Financial Inclusion – SHGs incentivise banks to lend to poor and marginalised
sections of society because of the assurance of returns.
Voice to marginalised – SHGs have given a voice to the otherwise underrepresented
and voiceless sections of society.
Social Integrity – SHGs help eradicate many social ills such as dowry, alcoholism,
early marriage, etc.
Gender Equality – By empowering women SHGs help steer the nation towards true
gender equality.
Pressure Groups – SHGs act as pressure groups through which pressure can be
mounted on the government to act on important issues.
Enhancing the efficiency of government schemes – SHGs help implement and
improve the efficiency of government schemes. They also help reduce corruption
through social audits.
Alternate source of livelihood/employment – SHGa help people earn their livelihood
by providing vocational training, and also help improve their existing source of
livelihood by offering tools, etc. They also help ease the dependency on agriculture.
Impact on healthcare and housing – Financial inclusion due to SHGs has led to better
family planning, reduced rates of child mortality, enhanced maternal health and also
helped people fight diseases better by way of better nutrition, healthcare facilities and
housing.
Banking literacy – SHGs encourage people to save and promote banking literacy
among the rural segment.
Problems of Self Help Groups (SHGs)
Need for extending this idea into the poorest families, which is not necessarily the
case at present.
Patriarchal mindset prevailing which prevents many women from coming forward.
There are about 1.2 lakh branches of banks in rural areas as opposed to 6 lakh villages
in the country. There is a need to expand banking amenities further.
Sustainability and the quality of operations of such groups have been questionable.
There is a need for monitoring cells to be established for SHGs across the country.
The SHGs work on mutual trust. The deposits are not safe or secure.
Way Forward for Effective Self-Help Groups
1. The Government should create a supportive environment for the growth and
development of the SHG movement. It should play the role of a facilitator and
promoter.
2. SHG Movement should be expanded to Credit Deficient Areas of the Country – such
as Madhya Pradesh, Rajasthan, States of the North-East.
3. Financial infrastructure should be expanded (including that of NABARD) by adopting
extensive IT-enabled communication and capacity building measures in these States.
4. Extension of Self-Help Groups to Urban/Peri-Urban Areas – efforts should be made
to increase income generation abilities of the urban poor as there has been a rapid rise
in urbanization and many people remain financially excluded.
5. Government functionaries should treat the poor and marginalized as viable and
responsible customers and as possible entrepreneurs.
6. SHG monitoring cell should be established in every state. The cell should have direct
links with district and block level monitoring system. The cell should collect both
quantitative and qualitative information.
7. Commercial Banks and NABARD in collaboration with the State Government need to
continuously innovate and design new financial products for these groups to meet
their needs.
SHG Models:
Linkage Model. (General Model):
Modified Linkage Model. (e.g.- OBC Dehradun) Savings. ...
NGO Model. (e.g.-UPLDC, etc.) Savings & ...
Modified NGO Model. (e.g.- BASIX & SHARE (AP), SEWA (Gujrat),
Kudumbashree etc.) ...
Indirect NGO Model. (e.g.- BOB- SEWA, Lucknow) ...
International Fund for Agricultural Development (IFAD) model (e.g.-TN, UP,
Maharashtra under IFAD Project) ...
Swarnjayanti Gram Swarozgar Yojana (SGSY) model. Savings & Credit.
Self-Help Promoting Institutions (SHPI) model (eg RRBs under NABARD scheme)
Linkage Model (General Model):
o This model involves linking Self-Help Groups (SHGs) directly with formal
financial institutions such as banks, microfinance institutions (MFIs), or
cooperative societies. SHGs mobilize savings and manage credit internally,
and they are linked to banks for accessing loans to further support their
members' financial needs.
Modified Linkage Model (e.g., OBC Dehradun) Savings:
o This variation of the linkage model may involve specific modifications
tailored to the needs of a particular region or community. For instance, the
OBC Dehradun model may involve adaptations in savings mobilization
strategies or credit linkages to better suit the local context.
NGO Model (e.g., UPLDC, etc.) Savings &:
o In the NGO model, non-governmental organizations (NGOs) play a central
role in promoting and supporting SHGs. NGOs provide training, capacity-
building, and facilitation services to SHGs, helping them with savings
mobilization, credit linkages, and various livelihood interventions.
Modified NGO Model (e.g., BASIX & SHARE (AP), SEWA (Gujarat), etc.):
o Similar to the NGO model, the modified NGO model may include additional
features or enhancements in terms of the services provided by NGOs. For
example, organizations like BASIX, SHARE (AP), and SEWA (Gujarat) may
offer more comprehensive support, including livelihood promotion, social
empowerment, and advocacy activities.
Indirect NGO Model (e.g., BOB- SEWA, Lucknow):
o In this model, SHGs receive support from NGOs indirectly through
partnerships or collaborations with other entities such as banks or government
agencies. For instance, Bank of Baroda (BOB) may collaborate with SEWA
(Self-Employed Women's Association) in Lucknow to provide financial
services and capacity-building support to SHGs.
IFAD Model (e.g., TN, UP, Maharashtra under IFAD Project):
o The International Fund for Agricultural Development (IFAD) model involves
SHG promotion and capacity-building activities supported by IFAD-funded
projects in states like Tamil Nadu (TN), Uttar Pradesh (UP), and Maharashtra.
These projects aim to enhance the socio-economic status of rural communities
through SHG-based interventions.
SGSY Model Savings & Credit:
o The Swarnjayanti Gram Swarozgar Yojana (SGSY) model, implemented by
the Government of India, focuses on promoting self-employment and
entrepreneurship among rural poor through SHGs. It integrates savings and
credit components with capacity-building, skill development, and income-
generating activities.
SHPI Model (e.g., RRBs under NABARD scheme):
o The Self-Help Promoting Institutions (SHPI) model involves institutions such
as Regional Rural Banks (RRBs) working under the National Bank for
Agriculture and Rural Development (NABARD) scheme to promote and
support SHGs. SHPIs provide financial and technical assistance to SHGs for
their sustainable development.
Kudumbashree primarily operates under a modified form of the NGO Model. However, it
incorporates elements from various other models as well to suit the unique socio-economic
context of Kerala. Here's how Kudumbashree aligns with the characteristics of the NGO
Model and other relevant models:
1. NGO Model:
Kudumbashree receives significant support and guidance from governmental
and non-governmental organizations (NGOs) in its implementation. These
organizations provide training, capacity-building, technical assistance, and
other forms of support to Kudumbashree units and members.
2. Savings & Credit:
Kudumbashree emphasizes savings mobilization and credit facilities for its
members. It encourages regular savings contributions from members, which
are pooled to create a common fund within each Kudumbashree unit. These
savings are then utilized for providing loans to members for various income-
generating activities and community development projects.
3. Community Development:
Similar to the Community Development SHG Model, Kudumbashree aims at
holistic community development. It engages its members in various activities
beyond savings and credit, including livelihood promotion, entrepreneurship,
social empowerment, health, education, sanitation, and environmental
conservation.
4. Government Support:
Kudumbashree receives extensive support from the Government of Kerala,
which plays a crucial role in its funding, policy formulation, and
implementation. The government provides financial resources, administrative
support, and policy guidance to ensure the effective functioning of
Kudumbashree at the grassroots level.
5. Women Empowerment:
Kudumbashree focuses on women's empowerment, reflecting aspects of the
Women Empowerment SHG Model. It provides women with opportunities to
participate in decision-making processes, access education and skill
development programs, and engage in income-generating activities to improve
their socio-economic status and enhance their leadership capabilities.
6. Livelihood Promotion:
Kudumbashree actively promotes livelihood enhancement among its members,
akin to the Livelihood Promotion SHG Model. It supports various income-
generating activities such as agriculture, animal husbandry, micro-enterprises,
handicrafts, and service-oriented ventures to create sustainable livelihood
opportunities for women and their families.
Overall, Kudumbashree represents a comprehensive and integrated approach to community
development and women's empowerment, blending elements from the NGO Model with
other relevant SHG models to address the multi-dimensional needs of its members and
promote inclusive growth at the grassroots level in Kerala.
1. Linkage Model
(General Model)
Members Bank
Savings Savings
Credit at rates
Credit at rates decided by Bank
decided by Members
SHG
2. Modified Linkage Model
(e.g.- OBC Dehradun)
Credit at rates prescribed by Bank
Members Bank
Savings
Savings
SHG
3. NGO Model
(e.g.-UPLDC, etc.)
Savings & Credit
Members
SHG
Savings &
Credit Support and
linkage services
Support and linkage services
Bank NGO
4. Modified NGO Model
(e.g.- BASIX & SHARE (AP), SEWA (Gujrat), etc.)
Savings & Credit
Members
Credit
Savings SHG
Credit / Grant
Bank NGO
5. Indirect NGO Model
(e.g.- BOB- SEWA, Lucknow)
Savings
Members
Raw material and job work
Savings
SHG
Credit
Bank NGO
6. IFAD Model
(e.g.-TN, UP, Maharashtra under IFAD Project)
Savings
Members
SHG
Credit Savings
Support services
Line Departments Bank NGO
S linkage
u services
p
p
o
r
t
a
n
d
Line Departments Bank NGO
7. SGSY Model
Savings & Credit
Members
SHG
Support Savings &
DRDA
services Credit
Support
and
linkage
services
Line Departments Bank NGO
8. SHPI Model
(e.g.- RRBs under NABARD scheme)
Savings & Credit
Members
Savings &
SHG
Credit Support and
linkage services
Support and linkage services
Bank VVV Clubs /Facilitators