Self Help Groups

 Self Help Groups

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/Entrepreneur

How are SHGs formed?

Most of the SHGs have come through the help of mentor bodies (either government or NGO), which provided initial information and guidance to them.

1. Identification of Potential Members: The first step is identifying individuals willing to join and participate in an SHG. 
2. Formation Meeting: Once potential members are identified, a formation meeting is organized. This meeting serves as a platform to explain the concept, purpose, and benefits of an SHG.
3. Group Formation and Membership: During the formation meeting, interested individuals formally express their commitment to forming an SHG. They agree to abide by the group’s rules and regulations and actively participate in its activities. 
4. Group Registration (Optional): SHGs have the option to register themselves formally under various government schemes, programs, or society acts.
5. Regular Meetings and Activities: Once the SHG is formed, regular meetings are held at a mutually agreed frequency, such as weekly or monthly. These meetings serve as a platform for members to discuss and plan their activities, share experiences, address issues, and make collective decisions. 
6. Savings and Internal Lending: A crucial aspect of SHGs is promoting savings and internal lending. Members contribute a predetermined amount of money as savings during each meeting. These savings are pooled together and kept as a common fund, which can be used for internal lending within the group. 
7. Capacity Building and Linkages: SHGs often collaborate with NGOs, government agencies, or other stakeholders to access training programs, skill development initiatives, market linkages, and government schemes.

Functions of Self Help Groups

1. Freedom from exploitative debt: In rural India, people are still dependent on informal moneylenders. These moneylenders exploit these poor people by entering into false agreements, writing wrong amounts on papers, charging excessive interest rates and confiscating property on failing to repay the loan. SHGs free these people from clutches of moneylenders.
2. 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.
3. Leadership development: SHGs provide an organisational platform to rural people to act as leaders for their respective activities. Self Help Groups provide dynamic leadership as every person gets a chance to lead according to the skill sets. Example: In Andhra Pradesh alone, 1,40,000 women leaders were created.
4. Social integrity: SHGs encourage collective efforts for combating practices like dowry, alcoholism etc.
5. Gender Equity: SHGs empowers women and inculcates leadership skills among them. Empowered women participate more actively in gram sabha and elections.
6. Pressure Groups: their participation in governance processes enables them to highlight issues such as dowry, alcoholism, the menace of open defecation, primary health care etc and impact policy decisions.
7. Voice to marginalized section: Most of the beneficiaries of government schemes have been from weaker and marginalized communities and hence their participation through Self Help Groups ensures social justice.
8. Savings: All SHG members regularly save a small amount. The amount may be small, but savings have to be a regular and continuous habit with all the members.
9. “Savings first – Credit later” should be the motto of every SHG member.
10. Internal lending: The SHG should use the savings amount for giving loans to members. The purpose, amount, rate of interest, schedule of repayment etc., are to be decided by the group itself.
11. Financial inclusion: SHGs have mobilised millions of people across the country especially women. 40.95 million families and 204.75 million people having been covered under NABARD-Bank Linkage programme and the cumulative loan figure standing at 18040 crores as on 31-03-2007
12. Impact on Housing & Health: The financial inclusion attained through SHGs has led to reduced child mortality, improved maternal health and the ability of the poor to combat disease through better nutrition, housing and health especially among women and children.
13. Banking literacy: It encourages and motivates its members to save and act as a conduit for formal banking services to reach them.

Need for Self Help Groups

1. One of the chief reasons for rural poverty is the lack of access or limited access to credit and financial services.
2. 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

1. 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.
2. SHGs play a vital role in giving credit access to the poor and this is extremely crucial in poverty alleviation.
3. They also play a great role in empowering women because SHGs help women from economically weaker sections build social capital.
4. Financial independence through self-employment opportunities also helps improve other development factors such as literacy levels, improved healthcare and better family planning.

Importance of Self Help Groups (SHG)

Some of the common advantages of self help groups are listed below:

1. Social integrity: It encourages people to put collective efforts to overcome various wrong practices like dowry, alcoholism etc.
2. Gender Equity: It gives empowerment to needy women and develops the skill of leadership among them and this committee also empowers women to do active participation in gram sabha and elections. As per different prepared data in the country or across the country shows that after the formation of a Self Help Group there are multiplier effects in improving women’s position in society as well as in the family leading to improvement in their socio-economic condition and also enhances their self confidence.
3. Pressure Groups: They are highly active in the government process which enables them to highlight major issues of society like dowry, alcoholism, the menace of open defecation, primary health care etc and impact policy decisions.
4. Voice to marginalized section: As most of government policies which are for poor and weaker sections but they are not getting their benefits. In that case Self Help Groups makes sure that each beneficiary should get this in a regular way.
5. Financial Inclusion: A typical self help group usually has a direct linkage with NABARD. This has made access to credit very easy and reduced the dependence of the poor section on traditional money lenders and other non-institutional sources.
6. Alternate source of employment: This committee has decreased dependency of poor people on agriculture by supporting them in setting up micro-enterprises e.g. personalised business ventures like tailoring, grocery, and tool repair shops.
7. Changes In Consumption Pattern: This score has made people educated about the importance of educating their children more along with importance of food and health than non-client households.
8. Impact on Housing & Health: The financial support which is provided by Self Help Groups helps in reducing child mortality rate, improved maternal health and also boosting immunity to combat disease through better nutrition, housing and health mainly among women and children.
9. Banking literacy: They also encourage and motivate people to save a certain amount of money and to do savings at the bank so that in case of need they can get loans.

Advantages of Self Help Groups

1. Financial Inclusion: SHGs incentivise banks to lend to poor and marginalised sections of society because of the assurance of returns.
2. Voice to marginalised: SHGs have given a voice to the otherwise underrepresented and voiceless sections of society.
3. Social Integrity: SHGs help eradicate many social ills such as dowry, alcoholism, early marriage, etc.
4. Gender Equality: By empowering women SHGs help steer the nation towards true gender equality.
5. Pressure Groups: SHGs act as pressure groups through which pressure can be mounted on the government to act on important issues.
6. Enhancing the efficiency of government schemes: SHGs help implement and improve the efficiency of government schemes. They also help reduce corruption through social audits.
7. 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.
8. 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.
9. Banking literacy: SHGs encourage people to save and promote banking literacy among the rural segment.

Problems of Self Help Groups (SHGs)

1. Need for extending this idea into the poorest families, which is not necessarily the case at present.
2. Patriarchal mindset prevailing which prevents many women from coming forward.
3. 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.
4. Sustainability and the quality of operations of such groups have been questionable.
5. There is a need for monitoring cells to be established for SHGs across the country.
6. The SHGs work on mutual trust. The deposits are not safe or secure.