GS Advanced Program 2024

Self Help Group movement in India Batch 1 - #Gov003

What is SHG?
informal groups + people who face similar problems  form a group to overcome their common
problems; small saving collateral for loan  needs + starting own venture

Need for SHG:

low access to credit and financial services rural poverty + Formal system is not adequate.
+ Rural population lack literacy + Exploitation by moneylenders + Each member alone may not have
collateral to access credit and also loan repayment rate is less.
Solution: combine people of similar problem and similar background in symbiotic relation They may
together cooperate solve each other’s problem.

How SHG function?

• Thus, SHG is a type of financial intermediary which economically empower its members.
• A group of 10-20 members combine and pool fund.
• Loan is granted against this pool fund by bank.
• 1) use for own need 2) group can start its own micro unit enterprise.
• SHG microfinance services to the poor.

History of SHG:
 Mohammad Yunus.
 Women bamboo stool maker  exploitation from moneylenders
 He simply gave a simple $27 loan success and loan repayment  concept of microcredit Grameen
Bank was planted (1983)
Microcredit: small loan + impoverished borrower + lack collateral + no verifiable credit history support
micro entrepreneurship

History of SHG in India.

1. Self-Employed Women’s Association (SEWA) in 1970.
2. Mysore Resettlement and Development Agency (MYRADA) in 1985.
3. 1987: The National Bank for Agriculture And Rural Development (NABARD) provided MYRADA with a
grant of ₹1 million
4. 1990: RBI accepted the SHG strategy as an alternative credit model.
5. 1992: NABARD issued guidelines to provide the framework for a strategy that would allow banks to
lend directly to SHGs.
6. 1992: SHG-Bank Linkage Programme was launched.
7. The SHG Bank Linkage Project launched by NABARD in 1992 has blossomed into the world’s largest
microfinance project.

Principles of SHG:
 Homogenous background: know other member personally  better coordination and cooperation.
 Collectivisation : loan to single person= higher chances of loan default; bank Group 
members = higher loan repayment ratio due to peer and social pressure.
 Participation: cohesive force  talent and energy pool
 Promote saving: promote thrift savings  Investing in income generation schemes.

Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]
 GS Advanced Program 2024
Self Help Group movement in India Batch 1 - #Gov003

What are the advantages of the SHGs?

Economic:
 Reimagining role of women in economy: Welfare model to empowerment model + realizing this
untapped potential + passive recipient  active contributor in economy.
 Promotion of Rural entrepreneurship.
 Financial Inclusion – Priority Sector Lending norms and assurance of returns incentivize banks to
lend to SHGs.
 The SHG-Bank linkage programme pioneered by  reduced the dependence on traditional money
lenders and other non-institutional sources.
 Non farm employment: 90 % or rural women on farm employment pedestal for micro
entrepreneurship  reduced dependence of women on farm jobs.
 Banking literacy: It encourages and motivates its members to save and act as a conduit for formal
banking services to reach them.

Social:
 Combating social evils: multiplier effect in improving women’s status  alcoholism, drug
addiction, gambling, etc.
 Changes In Consumption Pattern : It has enabled the participating households to spend more on
education, food and health reduced MMR + CMR + literacy rates +

Political:
 Political mobilization: inculcates leadership skill Gram sarpanch.
 Active participation in democracy: the inclusion of weaker and marginalised sections of the society
in the local governance.
 Improving efficiency of government schemes and reducing corruption through social audits.

Challenges of the SHGs?

 Gender biasness.
 Target based formation of groups which lack homogeneityartificial SHGs lacking homogeneity
and bonding Problem of formalization of informal sector
 Lack of skill and knowledge.
 Loan repayment ratio is less.
 Failed ventures often leads to suicide.
 Misuse for political gain.
 Bank linkage is still poor.
 Loan amount used for personal needs instead of ventures.
 Patriarchal mindset outward mobility of women gets restricted + patrilocal system

Observations:
 According to a report of NABARD, 50 % of SHG do not survive after 1.5 years of formation.
 Only a minority of the Self-Help Groups are able to raise themselves from a level of micro-finance
institution to that of micro-entrepreneurship venture.
 In 2006 there were reports of SHG member’s suicide due to coercive force used by Micro Finance
Institutions for force repayment of loans.

Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]
 GS Advanced Program 2024
Self Help Group movement in India Batch 1 - #Gov003

 largest SHG movement in the world, problem of poverty still persists in India.

SHG success models:

 Kutumbshree in Kerala.
 TANWA in TN.
 Myrda in Karnataka.
 Lizzat Papad.
 SEWA in Gujarat.

SHG miscellaneous DATA:

 10 crore household are connected with SHG.
 Loan repayment ration has improved by 80 %.
 50% of SHG do not survive after 1.5 years. (NABARD report).
 India has 1 crore SHG with bank linkage.
 Bihar has highest number of SHG.

Keywords related to SHGs.

 Micro-entrepreneurship.
 Gender empowerment through economic emancipation.
 Engendering development.
 Active participant in development.
 Gender mainstreaming.
 Breaking shackles of Patriarchal confinement.
 Women component of societal transformation.
 Welfare model to empowerment model of development.
 Passive recipient to active participant in development.
 Citizen centric and citizen led model of development.
 Harnessing social synergy for societal wellbeing.
 Missing women labor force to resurgent women.
 Thrift saving.
 Financial intermediary.

Various schemes of Government for SHG

1. SHG-Bank linkage programme
2. PM Gram Parivahan Yojna to provide interest free loans to SHG to purchase commercial vehicles.
3. 20 lakh collateral free loan to eligible SHGs under Atma-nirbhar Bharat.
4. Mahila Samriddhi yojna to provide 50000 Rupees to accredited SHGs.
5. E-Shakti project: Pilot project of NABARD for digitization of SHG.
I. It involves digital connectivity and literacy.
II. Digital record keeping.
III. Real time monitoring of fund utilization by SHG by the sponsored bank.
6. Jeevika in Bihar funded by World bank is largest SHG programme in the world.
7. Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME).
8. 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
Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]
 GS Advanced Program 2024
Self Help Group movement in India Batch 1 - #Gov003

managed resource centre (CMRC) under MAVIM was launched to provide financial and livelihood
services to SHGs.

Issue based notes on SHG

Issue 1. Why SHG movement is more influential in South than North?
SHGs are Mostly concentrated in south(like Kutmbshree, Myrda, TANWA are famous SHG success models)
Reasons:
 Social capital in south is better, people share better sense of comradeship in comparison to
Northern India.
 Women enjoy more autonomy in South India.
 Role of NABARD has also played decisive role in making SHG movement a success in South India.
 Less patriarchy in South Indian States has facilitated smoother mobilization of women.
 High level of literacy in Southern States. Example in TN and Bihar it is 73% and 53% women literacy
rate respectively.
 Banking penetration is higher in southern States.

Issue 2. SHG and PRIs Issues of conflict:

Reasons:
 Politicization of SHG: sometimes SHG become fringe group of parties. This create tension with
rival groups.
 SHG involvement in policy implementation: Sometimes, developmental work at rural level are
delegated to SHGs rather than PRIs, PRIs start looking at SHG as usurper of their authority and a
competitor.
 Lack of goal clarity: PRIs have insufficient understanding of the constructive role that the SHGs can
play in the upliftment of the masses, they are unable to configure a working relationship with the
SHGs.

Benefit of synergy between SHGs and PRIs.

● institutional and functional linkage  each other responsiveness, accountability and
transparency.
● SGH as pressure group PRIs
● SHGs as implementing and monitoring agencies of the relevant schemes and programmes.
● SHGs can serve as a platform to generate consensus over issues being discussed by the panchayats
or the Gram Sabhas.
● GPs can utilize SHGs for strengthening gram sabhas: SHGs can pull masses for increased
participation in the meetings of the gram sabha. They can also disseminate right information and
promote informed discussions.
● Decentralized planning: GPs can utilize the unique capabilities of SHGs like outreach, extension,
service delivery and feedback.

How to achieve synergy:

● co-option of SHGs into the standing committees of the panchayats will ensure inter-operability.
● PRIs can act as counter guarantee body for SHGs in SHG-Bank linkage programme.
● GPs must design and fund programs to increase the technical capacity of SHGs through training.
● Training modules of PRIs and SHG members can be merged as both face similar skill set issues.
Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]
 GS Advanced Program 2024
Self Help Group movement in India Batch 1 - #Gov003

● Government has taken some steps to enhance synergy between SHGs and GPs through programs
like – Deendayal Antyodaya Yojana - National Rural Livelihoods Mission.
Success stories of SHG-PRIs symbiotic relationship:
 Kutumbshree in Kerla.
 Jeevika in Bihar.
 Successful models of GP-SHG partnership as seen in Kerala and Andhra Pradesh must be
explored and replicated in the rest of the country.

Issue 3. SHG-Bank linkage (SBL) program:

Considering the utility of SHGs in rural development, the SHG-Bank linkage (SBL) program was started by
NABARD in 1992.
Objective: to provide much higher quantum of loans to SHGs as compared to their deposits in the banks.
Success of SBL:
 Improved financial literacy and inclusion.
 Dependence on money lenders reduced.
 Higher loan repayment ratio.
 The number of SHGs linked to banks increased from around 33000 during 1998-99 to around 35
lakhs during 2007-08.
 Gender empowerment.
Shortcomings of SBL program:
1. Loans to SHGs account for just 1.5% of the total outstanding credit of the scheduled commercial banks.
2. SBLP was successful in southern states only, primarily Andhra Pradesh, Tamil Nadu and Karnataka. In
rest of the regions, it was a non-starter.
3. Banks have been averse to lend to SHGs considering the low interests and risks of default. Further,
their bureaucratic approach and unnecessary delay in sanctioning loans impacted the morale of SHGs.
4. SBL was designed as a top-down program forcefully pushed on SHGs. The focus of the government was
to achieve targets rather than create outcomes.

Issue 4. Issue of SHG members suicide and need for their regulation.
Malegam committee was formed which recommended for formation of regulatory framework in this
sector.
Recommendation:
Regulatory framework proper record maintenance , bring transparency and accountability is SHG.

Issue 5. Do we need SHG2.0 in globalized world?

 Today’s world is more digital and globalized than ever before thus, our overall approach towards
SHG requires major facelift.
 Major limitations which SHGs are facing is due to lack of skills related to Accounting, Branding,
Marketing, Digital and financial literacy.
 Product made by SHG is facing stiff challenges in globalized world with superior marketing and
better forward and backward linkages.
Example: suppose if we compare potato Chips made by SHG and with Lays, Lays got better technique, cost
effectiveness due to economy of sale, better packaging and marketing.

Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]
 GS Advanced Program 2024
Self Help Group movement in India Batch 1 - #Gov003

What can be done in this regard:

 Utilization of e- commerce platform like mahila e-haat etc. should also be promoted in order to
ensure SHG products to have wider outreach.
 SHG federation: SHGs are small in size and lack a proper forum to share knowledge and voice their
opinion. For this purpose idea of SHG federation is mooted. Federation is voluntary group of many
SHGs and it provide platform for different SHGs to come forward and share their knowledge and
experiences
 This help in:
 Peer group learning.
 Collective bargaining.
 Best practices.
 Deliberation.
 Collaboration and cooperation.

Issue 6. Efficacy of SHG in Pandemic:

1. Food security: SHGs have set up over 10,000 community kitchens across the country to feed stranded
workers, poor, and the vulnerable.
Example: In Jharkhand, where poverty is high, SHGs helped district administrations identify pockets of hunger
and starvation to guide efforts to ensure food security.

2. Doorstep delivery of essential services:

Example: distribution of pension, food ration and DBT.

3. Production of essential goods during COVID:

 1.96 crore masks have been produced by SHG members.
 100,000 liters of sanitizer and nearly 50,000 liters of handwash were also produced.
 Decentralized production ensured these items reach widely dispersed populations without need
for complex logistics and transportation.

4. Spreading awareness: The devastating impact of misinformation on migrant labour in wake of

lockdown shows criticality of authentic information reaching to grassroots. SHGs disseminate COVID
related messages among hard-to-reach populations.
Example: Break the Chain campaign of Kerala was led by Kudumbashree to raise awareness about
hand hygiene and social distancing through mobile phones, posters and weekly meetings.
Given this, government announced Rs 20 lakh collateral free loan to eligible women SHGs as part of
special Aatma-Nirbhar Bharat package.

Issue 7. SHG and tackling Gender based violence:

Institutionalisation
 It serves as an organisational instrument for the economic empowerment of women which enable
them to counter the incidences of domestic violence.
Civic Awareness
 Increase in awareness of basic rights and enables them to access legal recourse.

Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]
 GS Advanced Program 2024
Self Help Group movement in India Batch 1 - #Gov003

 They can do mouth publicity of governmental activities that are focusing on improving the
conditions of women in distress.
 Increase in self-confidence and enhanced social status changes the perspective of the society for
women.
Freedom from Economic Distress
 Economic empowerment and freedom from exploitation of money lenders, landlords etc.
 Enhanced decision making powers in the household affairs.
Political Empowerment
 Active participation in other organizations and political bodies like Panchayats.
 Improved political consciousness and improved awareness about electoral process, societal analysis
and gender issues.
Easy Access to Dispute Settlement
 Collective-based dispute resolution mechanisms:
o The Nari Adalats (women courts) in various States,
o Women’s Resource Centres (Rajasthan),
o Shalishi (West Bengal), and
o Mahila Panchayats (Delhi)

Issue 8. Socio-Cultural impediments for SHGs:

1. Cultural/Patriarchal Mindset:
a. Family discourage members from joining the groups especially younger women.
b. Family members dissuade in attending outstation training sessions.
c. Male dominance in membership causes hindrance towards women participation.
2. Social Problems:
a. Lack of unity and mutual trust among the members especially divided along caste, class, and
gender lines.
b. In the case of SHGs dominated by women, it is found that there is no stability of the units as
many married women are not in a position to associate with the group due to the shift of
their place of residence.

Issue 9. Changing role of SHG from symbolic to substantial role in Rural development:
Symbolic phase  substantive phase.
 Financial intermediary  micro entrepreneurship
 Delivery of public services role in policy making.
 Meeting financial needs  income generating activities.
 Breaking patriarchy  fighting social evils like alcoholism + female foeticides + child marriage etc.
ex. Chattisgadh nasha Virodhi manch.
 Rural  urban.
 Women only  men-women mix.
 BPL  middle class.
 Saving habits  budding leadership.

Forum Learning Centre: Delhi - 2nd Floor, IAPL House, 19 Pusa Road, Karol Bagh, New Delhi - 110005 | Patna - 2nd floor, AG Palace, E Boring Canal
Road, Patna, Bihar 800001 | Hyderabad - 1st & 2nd Floor, SM Plaza, RTC X Rd, Indira Park Road, Jawahar Nagar, Hyderabad, Telangana 500020
9311740400,9311740900 | https://academy.forumias.com | [email protected] | [email protected]