Villages in India are replete with problems of poverty, illiteracy, lack of skilled health care, among others. Over the years a realisation has downed that all these problems cannot be solved alone or by a single agency but be better solved through group efforts.
In wake of this realisation, groups of poor and marginalised have emerged to solve their individual problems through collective effort. Such groups are known as Self Help Groups (SFIGs).
SHGs are small economical homogenous affinity groups of rural poor, voluntarily formed to save and mutually contribute a common fund to be lent to its members as per group decision.
It is recognized by the government and does not require any formal registration. The purpose of the SHGs is to build the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
SHGs have been very successfully used by the government and the Non-Government Organizations in achieving several goals.
The 9th five-year plan of the government of India had given due recognition on the importance and the relevance of the Self-help group method to implement developmental schemes at the grassroots level as a form or enterprise. SHG performs the role of collective banks and enterprises, and ensure better access to loans with a lower rate of interest to start their micro unit enterprises.
Evolution of SHGs
In the late 1990s the central government introduced a holistic program. Swarnjayanti Gram Swarozgar Yojana (SGSY) based on the group approach for rural development. The SGSY approach was to encourage the rural poor to organize themselves into SHGs and to independently take up viable economic activities as microenterprises with support from government subsidies and bank credit.
Significance of Self Help Groups
Gender Equality: SHGs often create hope for gender equality within societies through socio-economic empowerment of women as well as inculcating leadership among them.
There is evidence in this country as well as elsewhere that formation of Self-Help Groups has a multiplier effect in improving women’s status in society as well as in the family leading to improvement in their socio-economic condition and also enhances their self-esteem.
Economic Benefits: Low financial investment through SHGs can ensure large economic benefits in return.
Social integrity: SHGs build integrity among its members or people from more or less same socioeconomic background, which often lead towards social integrity across rural villages.
Livelihood opportunities: SHGs expand the horizons of livelihood opportunities for rural poor.
Utilisation of community resources: SHGs are more likely to effectively and optimally utilise existing community-resources for creation of new livelihood opportunities.
Tackling Social ills: Strong integrity and cohesion among SHG members sometimes lead to social movement against ill practices of the society like dowry, alcoholism, etc.
Social Justice: The ideology of SHGs encourages involvement and participation of people from lowest economic strata or from most vulnerable section of the society – for their socio-economic empowerment which ultimately becomes instrumental in establishing social justice in society by strengthening the voices of economically vulnerable sections of the society.
Pressure groups: Sometimes SHGs act as pressure group to ensure proper functioning of Gram Panchayats.
Social auditing: SHGs have been found effective in social auditing of different rural development initiatives.
Banking literacy – It encourages and motivates its members to save and act as a conduit for formal banking services to reach them.
Voice to marginalized section – Most of the beneficiaries of government schemes have been from weaker and marginalized communities and hence their participation through SHGs ensures social justice.
Functions
It looks to build the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
It resolves conflicts through collective leadership and mutual discussion.
It provides collateral free loan with terms decided by the group at the market driven rates.
Such groups work as a collective guarantee system for members who propose to borrow from organised sources. The poor collect their savings and save it in banks. In return they receive easy access to loans with a small rate of interest to start their micro unit enterprise.
Consequently, Self-Help Groups have emerged as the most effective mechanism for delivery of microfinance services to the poor.
Need for SHGs
One of the reasons for rural poverty in our country is low access to credit and financial services.
A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a comprehensive report on ‘Financial Inclusion in the Country’ identified four major reasons for lack of financial inclusion:
Inability to provide collateral security,
Poor credit absorption capacity,
Inadequate reach of the institutions, and
Weak community network.
The existence of sound community networks in villages is increasingly being recognised as one of the most important elements of credit linkage in the rural areas.
They help in accessing credit to the poor and thus, play a critical role in poverty alleviation.
They also help to build social capital among the poor, especially women. This empowers women and gives them greater voice in the society.
Financial independence through self-employment has many externalities such as improved literacy levels, better health care and even better family planning.
Weakness
Reluctance among SHG-members to return loan taken from banks.
Apathy of rural banks to provide fund to SHGs, keeping in view their failures to return bank-loan in time.
Lack of knowledge and proper orientation among SHG-members to take up suitable and profitable livelihood options.
Lack of regular supervision and monitoring on SHG activities by the loan-providing banks.
Lack of awareness among SHG-members regarding their own community resources, often leaves them with limited options for income-generating activities which only produces marginal profits.
There is growing need to organise suitable capacity building or orientation programs for the SHG members who have been provided loan so that they can go for a cost-benefit analysis before making financial investment.
Challenges
Patriarchy: Dominance of patriarchal mentality across rural societies, often creates obstacles for women to join SHG or to take up income- generating assignments/projects outside home.
Lack of innovations: Inability of the SHG-members to explore innovative options for livelihood opportunities or economically beneficial projects.
Misappropriation of funds: Incidences of misappropriation of funds by SHG-members very often reported which maligns the spirit and ideology of SHG-formation.
Elite capture: There is problem of elite capture in SHGs i.e. Powerful members of SHGs try to corner benefit among themselves.
Poor awareness: Many members are not fully aware about recent government initiatives .which deprive them of their rights.
Problem of capacity building: There is lack of sufficient technical, operational, financial and marketing skills among many members of SHGs which hinders them in harnessing their full potential.
Lack of Monitoring: Lack of regular supervision and monitoring of SHG-activities has led to proliferation of such groups without questioning their internal processes and health.
Postive Impact of SHGs
SHGs often appear to be instrumental in rural poverty alleviation.
Economic empowerment through SHGs, provides women the confidence for participation in decision making affairs at the household-level as well as at the community-level.
Un-utilised and under-utilised resources of the community can be mobilised effectively under different SHG-initiatives.
Leaders and members of successful SHGs bear the potentiality to act as resource persons for different community-developmental initiatives.
Active involvement in different SHG-initiatives helps members to grow leadership-skills. Evidences also show that often women SHG-leaders are chosen as potential candidates for Panchayat Pradhan or representatives to Panchayati Raj Institution (PRI).
Initiatives taken
Genesis of SHG in India can be traced to formation of Self-Employed Women’s Association (SEWA) in 1970.
The SHG Bank Linkage Project launched by NABARD in 1992.
In 1999, Government of India, introduced Swarn Jayanti Gram Swarozgar Yojana (SGSY) to promote self-employment in rural areas through formation and skilling of SHGs.
The programme evolved as a national movement in 2011 and became National Rural Livelihoods Mission (NRLM) – world’s largest poverty alleviation programme.
DAY – NRLM now covers 100 million families through 8.5 million SHGs with savings deposit of approx. INR 161 billion. The 4.84 million SHGs received collateralfree credit, loan outstanding of over INR 615 billion of which, 88% are rural women.
Measures to Make SHGs Effective
The Government should play the role of a facilitator and promoter, create a supportive environment for the growth and development of the SHG movement.
Expanding SHG Movement to Credit Deficient Areas of the Country – such as Madhya Pradesh, Rajasthan, States of the North-East.
Rapid expansion of financial infrastructure (including that of NABARD) and by adopting extensive IT enabled communication and capacity building measures in these States.
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 urbanisation and many people remain financially excluded.
Positive Attitude – Government functionaries should treat the poor and marginalized as viable and responsible customers and as possible entrepreneurs.
Monitoring – Need to establish a separate SHG monitoring cell 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.
Need Based Approach – Commercial Banks and NABARD in collaboration with the State Government need to continuously innovate and design new financial products for these groups.
Case studies
Kudumbashree in Kerala
It was launched in Kerala in 1998 to wipe out absolute poverty through community action. It is the largest women empowering project in the country. It has three components i.e., microcredit, entrepreneurship and empowerment. It has three tier structure – neighborhood groups (SHG), area development society (15-20 SHGs) and Community development society (federation of all groups). Kudumbashree is a government agency that has a budget and staff paid by the government. The three tiers are also managed by unpaid volunteers.
Mahila Arthik Vikas Mahamandal (MAVIM) in Maharashtra
SHGs in Maharashtra were unable to cope with growing volume and financial transactions and needed professional help. Community managed resource centre (CMRC) under MAVIM was launched to provide financial and livelihood services to SHGs. CMRC is self-sustaining and provides need-based services.
Rupjyoti SHG is a female group at Daloigaon under Central Jorhat Development bloc.
