Self-help Groups (SHGs) - Indian Polity

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.

Functions of Self-help Groups

 They try to build 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 of 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:
o Inability to give collateral security
o Weak credit absorption capacity
o Insufficient reach of institutions
o 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 help improve other development
factors such as literacy levels, improved healthcare and better family planning.

Self-help Groups India - Origin and Development

 The origin of SHGs in India can be traced back to the establishment of 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, papd makers, 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.

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.

Kudumbashree in Kerala

The Kudumbashree project was started in Kerala in 1999, as a community action to eradicate poverty. It has
become the largest women-empowering project in India. There are 3 components namely, microcredit,
entrepreneurship and empowerment. Kudumbashree is a government agency.

UPSC Questions related to Self-Help Groups (SHGs)

What is Self-help Group definition?

Self-help Groups (SHGs) are informal associations of people who come together to find ways to improve
their living conditions.
What are the benefits of self-help groups?

They help improve the lives of the poor and marginalised segments of society. They also foster financial
inclusion.

Are self-help groups free?

Usually, SHGs are free and informal. Sometimes, a small donation is taken to cover expenses.

What is SHG bank linkage?

Under this programme, banks were allowed to open savings accounts for Self-Help Groups (SHGs). This
was started in the early nineties.