The Self-Help Groups (SHGs) movement has been a force for positive change in India over the past 50 years. It is based on the principles of group solidarity and microfinance, which empower individuals to come together to support each other financially and help their local communities develop.
The SHG model was first developed in 1972 with the formation of the Self-Employed Women’s Association, and since then it has gained momentum as an effective way to promote economic development at a grassroots level.
Today, there are thousands of SHGs across India working towards this goal—providing access to credit, promoting entrepreneurship among women and young people, and advocating for social justice.
What Is SHG?
Self-Help Groups (SHGs) are grassroots organisations that bring together a small group of women to make regular financial contributions. They have become an important form of microfinance and serve as opportunities for women to come together and discuss issues such as health, nutrition, gender equity, and justice.
A Self-Help Group (SHG) is typically composed of 10 to 20 women who come together and mutually agree to save a small amount of money – ranging from Rs. 10 to 200 each month.
During monthly meetings, apart from the repayment and disbursement of loans, both formal and informal discussions are held about various social issues. Women in the group share their experiences with one another and the conversations are documented as minutes of meetings.
In rural settings, SHGs have proven to be instrumental in fostering the entrepreneurial spirit of women by providing them with training, micro-loans, and the ability to make their own decisions.
This has resulted in rural women becoming more empowered as they are able to take ownership of their businesses and become better equipped to handle financial and social challenges.
SHGs have also been successful in creating a support system for women, enabling them to share experiences and develop a sense of solidarity. All this has been instrumental in helping rural women become economically self-sufficient and become agents of change in their communities.
Overall, Self-Help Groups have had a significant impact on the lives of rural women by providing them with financial resources, education, and support.
Through these groups, rural women have been able to access much-needed capital, build their confidence and skills, and engage in various entrepreneurial activities. In this way, SHGs are an important tool for the economic empowerment of rural women.
Historical Background
Micro-finance Institutes Of Bangladesh
Bangladesh is widely recognized as a leading innovator in the domain of microfinance. This comes from the groundbreaking work of Dr. Mehmud Yunus, a Professor of Economics at Chittagong University in Bangladesh.
His research project, the Grameen Bank, was initiated in 1976 and was formally recognized as a bank through government ordinance in 1983.
Despite not having a scheduled status from the Bangladesh Bank, Grameen Bank provides small loans to landless people, especially women, in order to promote self-employment.
Bangladesh Rural Advancement Committee (BRAC), Association for Social Advancement (ASA) and PROSHIKA are the other principal Micro-credit Finance Institutions (MFIs) operating for over two decades and their activities are spread in all the districts of that country.
These institutions have five basic features that form the basis of their microfinance practices:
- Firstly, these microfinance institutions primarily target women.
- Secondally, they use a group approach to accomplish their objectives. The group approach involves organising individuals into small groups and introducing them to micro-financing opportunities. In Bangladesh, microfinance institutions (MFIs) prioritise group solidarity and cohesiveness.
- Thirdly, in all of these MFIs, having savings is a fundamental requirement to qualify for credit.
- Fourthly, the officials from Bangladesh MFIs attend the weekly group meetings to collect savings, update passbooks, and provide loan disbursements.
- Finally, the MFIs have simple systems and procedures that are in line with the capabilities and needs of their clients.
Indian Scenario
The SHG movement in India began with the adoption of a modified version of Bangladesh’s model of micro-finance. The main purpose of this was to reduce poverty and give women greater economic power.
With the availability of micro-finance, self-help groups (SHGs) and credit management groups emerged in India, leading to the widespread adoption of SHGs.
Banks are the main source for providing micro-credit in India. Ilaben Bhat, the founder of ‘SEWA’ (Self Employed Women’s Association) in Ahmedabad, pioneered the concept of ‘women and micro-finance’ in 1970.
This has since been implemented by groups such as the Annapurna Mahila Mandal in Maharashtra and the Working Women’s Forum in Tamil Nadu, as well as many groups sponsored by NABARD (National Bank for Agriculture and Rural Development).
- In 1991-92, the National Bank of Agriculture and Rural Development (NABARD) launched an extensive initiative aimed at promoting self-help groups, resulting in a significant growth of the ‘SHG movement’.
- In 1993, the Reserve Bank of India permitted SHGs to open savings accounts in banks, which greatly enhanced the movement by providing access to banking services.
Since then, the Self-Help Group (SHG) movement was established and grew in the states of Gujarat, Maharashtra, Andhra Pradesh, Rajasthan, Tamil Nadu, and Kerala.
SHG Model In India
There are three different models of linking Self Help Groups (SHGs) to financial institutions that have emerged in India.
- Banks, themselves, form and finance the SHGs.
- SHGs are formed by NGOs and other agencies but financed by banks.
- Banks finance SHGs with NGOs and other agencies as financial intermediaries.
Majority of the SHGs, around 75%, are under the second model. The first model covers only 20% and the third model covers only 8% of the SHGs.
Why Indian Women Need Self-help Groups (SHG)
The low female labour participation rates in India are a reflection of the discrimination and exclusion of women from economic activities and decision-making roles, as well as their lack of access to resources such as health, nutrition, and education.
Of approximately 432 million working women, around 343 million do not have paid formal job roles.
Self help groups in India provide a much-needed lifeline for female entrepreneurs looking to make their mark in the business world. Despite the government introducing numerous schemes to support women, the biggest challenge remains access to finance.
The fear of social stigma coupled with discriminatory practices has left many women with no option but to seek financial assistance from other sources.
Self help groups have emerged as an effective alternative for female entrepreneurs in these circumstances. By pooling together resources and taking loans at reasonable interest rates, women can start businesses without having to rely on traditional forms of financing such as banks or microfinance institutions.
The vast majority of SHG members are from rural and semi-urban areas where poverty levels remain high. Women who are part of these groups often come from disadvantaged backgrounds and lack the education, training and resources needed to succeed in a competitive business environment.
This makes it difficult for them to access mainstream financial services like bank loans or venture capital investments. In such cases, SHGs become very useful in helping them get their businesses off the ground or grow them further with additional funds.
SHGs also contribute towards increasing economic empowerment among Indian women by providing them with a platform to share knowledge, experiences and ideas on entrepreneurship.
This helps develop valuable business skills that can be used to launch successful ventures or gain better employment opportunities outside the group. It also encourages collaboration between members which leads to more innovative solutions being identified and implemented.
Self-Help Groups (SHGs): Key Facts
Self-Help Groups (SHGs) have been integral to the progress of rural development and women empowerment in India. Their remarkable contribution to the on-ground response to the Covid-19 pandemic has further highlighted their transformative potential.
Currently, there are around 1.2 crore SHGs in India, with 88 percent of them comprising all-women members.
Examples of successful SHG initiatives include Kerala’s Kudumbashree, Bihar’s Jeevika, Maharashtra’s Mahila Arthik Vikas Mahila Mandal and the recently launched Looms of Ladakh.
These initiatives have proved to be effective in providing socio-economic benefits to women and their families.
Since it was launched in 1992, the SHG Bank Linkage Project (SHG-BLP) has become the largest microfinance project globally. In its 30 years of existence, the SHG movement has proven to be a successful means of reaching small and marginalised communities.
Currently, promotion of bank-linked self-help groups (SHGs) is done through various entities such as the Central Government, State Governments, and NGOs.
To be eligible for loans from banks, these SHGs must follow the ‘Panchasutra’, which includes regular meetings, savings, inter-loaning, timely repayments, and maintaining up-to-date records of their accounts.
Impact Of SHGs
- As on March 31, 2022, the SHG-BLP has achieved the involvement of various stakeholders in serving 14.2 crore families through 119 lakh SHGs, which have saved a total of Rs 47,240.5 crore. Additionally, there are 67 lakh groups with outstanding collateral-free loans of Rs 1,51,051.3 crore.
- During the past ten years (FY13 to FY22), the annual growth rate for credit linkages of SHGs is 10.8%, while the annual growth rate for credit disbursement per SHG is 5.7%.
- Repayment rate of SHGs’ bank loans is over 96%, indicating that they have strong credit discipline and are dependable borrowers.
Self-Help Groups (SHGs) for women have been proven to have a notable and favourable impact on female empowerment in economic, social, and political aspects.
These effects are achieved through multiple pathways, such as increased knowledge about money management, improved financial decision-making abilities, development of supportive social networks among members, asset ownership, and diversification of livelihoods.
A recent study of the DAY-National Rural Livelihoods Mission, which is conducted through SHG structure, has revealed that both participants and functionaries have observed high levels of impacts in terms of women empowerment, improved self-esteem and personality development, reduced social evils; as well as medium-level impacts such as better education opportunities, increased inclusion in village institutions, and improved access to governmental schemes.