GRADE 12 ECONOMICS PROJECT
SELF-HELP
GROUPS
INDEX
S.NO TOPIC PAGE
NUMBER
1. What are Self-Help
Groups?
2. Need for SHGs
3. Genesis of SHG
4. Structure of SHG’S
5. Who helps to form SHGs?
6. How do the SHGs form
and function?
7. Working of SHG’S
8. Objectives of SHG’S
9. Benefits of SHGs
10. Challenges faced by
SHG’S
11. Benefits of SHG’S to
Society
12. Government Schemes
to promote SHG’S
13. Case-Study-Women
SHG’S and Covid-19
14. Success Stories of SHG’S
in INDIA
15. CONCLUSION
‘’We can't live alone in any society but the best way to help a society or group is to be the best
individual in it that we can be, and this is what the self-help groups in India do.’’
What are 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. Villages face numerous problems related to poverty, illiteracy, lack of skills, lack
of formal credit etc. These problems cannot be tackled at an individual level and need
collective efforts. Thus SHG can become a vehicle of change for the poor and marginalized.
SHG rely on the notion of “Self Help” to encourage self-employment and poverty alleviation.
❖ The idea is to organize rural poor, in particular women, into small Self Help Groups (SHGs)
and pool (collect) their savings. A typical SHG has 15-20 members, usually belonging to one
neighborhood, who meet and save regularly. Saving per member varies from Rs 25 to Rs 100
or more, depending on the ability of the people to save.
Need for SHGs
1. Financial Inclusion-One of the reasons for rural poverty in our country is low
access to credit and financial services. According to the NSSO data, 51.4% of the
farmer households are not able to have access to formal credit. This has led to
many negative implications such as poverty, farmer suicides Many in India are
not able to obtain loans due to the absence of collateral. SHGs can help solve
this problem.
2. 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:
a. Inability to provide collateral security,
b. Poor credit absorption capacity,
c. Inadequate reach of the institutions, and
d. Weak community network.
3. The need to solve problems at the ground level: India is a country that has a diverse culture,
traditions, historical backgrounds, etc. Therefore, it is difficult for the government to solve the
socio-economic problems by itself. Thus, bringing together the people who face similar
problems may be a game-changer for the Indian economy.
Genesis of SHG
▪ The 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 has blossomed into the world’s
largest microfinance project.
▪ NABARD along with RBI permitted SHGs to have a savings account in banks from the year of
1993. This action gave a considerable boost to the SHG movement and paved the way for the
SHG-Bank linkage program.
▪ 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.
▪ Today, State Rural Livelihood Missions (SRLMs) are operational in 29 states and 5 UTs (except
Delhi and Chandigarh).
▪ NRLM facilitated universal access to the affordable cost-effective reliable financial services
to the poor like financial literacy, bank account, savings, credit, insurance, remittance,
pension and counselling on financial services.
Structure of SHG’S
A SHG is a community-based group with 12-25 members. Members are usually women from
similar social and economic backgrounds, all voluntarily coming together to save small sums of
money, on a regular basis. They pool their resources to become financially stable, taking loans
from their collective savings in times of emergency or financial scarcity, important life events or to
purchase assets. The group members use collective wisdom and peer pressure to ensure proper
end-use of credit and timely repayment. In India, RBI regulations mandate that banks offer financial
services, including collateral free loans to these groups, on very low interest rates. This allows
poor women to circumvent the challenges of exclusion from institutional financial services. This
system is closely related to that of solidarity lending, widely used by microfinance
institutions.Beyond their function as savings and credit groups, SHGs offer poor women a platform
for building solidarity. They allow women to come together and act on issues related to their own
lives including health, nutrition, governance and gender justice.
Who helps to form SHGs?
A reasonably educated and helpful local person has to initially help the poor people to form groups.
He or She tells them about the benefits of thrift and the advantages of forming groups. This person
is called an ‘animator’ or ‘facilitator’. Usually, the animator is a person who is already known to the
community.
Any of the following persons can be a successful animator:
• Retired school teacher or a retired government servant, who is well known locally.
• A health worker/a field officer/staff of a development agency or department of the State
Government.
• Field officer or a staff member of a commercial bank/regional rural bank or a field staff from
the local co-operative bank or society
• A field level functionary of an NGO.
• An unemployed educated local person, having an inclination to help others.
• A member/participant in the Vikas Volunteer Vahini (VVV) Programme of NABARD.
Woman animators can play more effective role in organising women SHGs. The animator cannot
organise the groups all alone. He or she will need guidance, training, reading material, etc. Usually,
one of the following agencies help:
• A voluntary agency or Non Governmental Organization (NGO).
• The development department of the State Government.
• The local branch of a bank.
What does the animator do?
The animator talks to people in the village or at their homes. He or she explains the
benefits of thrift and group formation. No promise of bank loan is given to anyone. He or
she helps the group members to hold one or two initial meetings. The group finds a group
leader, for holding meetings, keeping books, etc. The animator guides and encourages the
leader and the group members.
How do the SHGs form and function?
Members:
An ideal SHG should have about 15 to 20 members.This is because if the group is bigger, it
will be difficult for an individual to undertake equal
participation in a large group.
The SHG shouldn’t have more than one member from a
particular family.This allows the inclusion of many families.
It should also have either only men or only women because it
is found that the mixed groups are not successful.It is also
found that the women SHGs are more successful because the
members are better at savings and that they are making use of
the loans more efficiently than men.
The members of the SHGs must have similar problems and
backgrounds for it to be successful.
• Some Common factors for Membership in an SHG
o Women/men from very poor households.
o Those who depend on moneylenders even for daily necessities.
o Those with a per capita income not exceeding Rs. 250 per month.
o Those having dry land holding not exceeding 2.5 acres.
o Common living conditions for the Group Members eg. Living in kutcha houses,
Having no access to safe drinking water, Presence of illiterate adults in the family
etc
SHG Meetings:
Ideally, the meetings should be held weekly or monthly so that the members become closer to
each other.All members must attend the meetings for it to become successful
Compulsory attendance: Full attendance in all the group meetings will make it easy for the SHG
to stabilise and start working to the satisfaction of all.
If no member is able to maintain the books, the SHG may take outside help. (It has been seen
that a boy or a girl from the village with some educational qualification does this job
enthusiastically. After some months, the group can even consider giving him or her a small
reward for this job.). Animator can also help.
All registers and account books should be written during the course of the meeting.
(Advantage: This creates confidence in the minds of members who are unable to read and
write.)
Books and Records to be kept by an SHG
SHG’S usually maintain records however If no member is able to maintain the books, the SHG
may take outside help. (It has been seen that a boy or a girl from the village with some
educational qualification does this job enthusiastically. After some months, the group can
even consider giving him or her a small reward for this job.). Animator can also help.All
registers and account books should be written during the course of the meeting. This creates
confidence in the minds of members who are unable to read and write.
Some of the records are as follows-
Minutes Book: The proceedings of meetings, the rules of the
group, names of the members etc. are recorded in this book.
Savings and Loan Register: Shows the savings of members
separately and of the group as a whole. Details of individual loans,
repayments, interest collected, balance, etc. are entered here.
Weekly /Fortnightly/Monthly Register: Summary of receipts
and payments, updated in every meeting.
Members’ Passbooks: Individual members’ pass books in
which individual’s savings and loan balance outstanding is regularly
entered. (Advantage: this encourages regular savings).
WORKING OF SHG’S AND FUNDS
❖ In SHG’S ,Members can take small loans from the group itself to meet their needs. The group
charges interest on these loans but this is still less than what the moneylender charges.
❖ After a year or two, if the group is regular in savings, it becomes eligible for availing loan
from the bank. Loan is sanctioned in the name of the group and is meant to create
selfemployment opportunities for the members.
❖ For instance, small loans are provided to the members for releasing mortgaged land, for
meeting working capital needs (e.g. buying seeds, fertilisers, raw materials like bamboo and
cloth), for housing materials, for acquiring assets like sewing machine, handlooms, cattle,
etc.
❖ Most of the important decisions regarding the savings and loan activities are taken by the
group members. The group decides as regards the loans to be granted — the purpose,
amount, interest to be charged, repayment schedule etc
❖ . Also, it is the group which is responsible for the repayment of the loan. Any case of
nonrepayment of loan by any one member is followed up seriously by other members in the
group. Because of this feature, banks are willing to lend to the poor women when organised
in SHGs, even though they have no collateral as such. Thus, the SHGs help borrowers
overcome the problem of lack of collateral.
❖ They can get timely loans for a variety of purposes
and at a reasonable interest rate. Moreover, SHGs
are the building blocks of organisation of the rural
poor. Not only does it help women to become
financially self-reliant, the regular meetings of the
group provide a platform to discuss and act on a
variety of social issues such as health, nutrition,
domestic violence, etc.
❖ Many SHG’S have also benefited from NABARD's
'SHG Bank Linkage' program.Many self-help groups,
especially in India, under NABARD's 'SHG Bank
Linkage' program, borrow from banks once they
have accumulated a base of their own capital. This model has attracted attention as a possible
way of delivering micro-finance services to poor populations that have been difficult to reach
directly through banks or other institutions. "By aggregating their individual savings into a
single deposit, self-help groups minimize the bank's transaction costs and generate an
attractive volume of deposits. Through self-help groups, the bank can serve small rural
depositors while paying them a market rate of interest.
OBJECTIVES OF SHG’S
Initiate and maintain savings within the group: All members
must regularly save at least a small amount. These savings allow them to
get future credits for their group.
Lending loans to the members: The
savings made by the SHG must be used
to provide loans to members of the
group. Everything related to the loan
must be decided within the group.
Solving common problems: SHGs
mostly consist of individuals who face
similar problems. The grouping should
essentially help the individual overcome
these problems through discussions and
interactions within the group and overcoming the problems and finding a
common and united solution to the problems.
Bank Loans and Financial Discipline: SHGs must work on getting a
collective guarantee system so that they can avail of loans from official
sources.
Benefits of SHGs
Social integrity – SHGs encourages collective efforts for
combating practices like dowry, alcoholism etc.
Gender Equity – SHGs empowers women and
inculcates leadership skill among them. Empowered
women participate more actively in gram sabha and
elections. 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.
Pressure Groups – their participation in governance process enables them to
highlight issues such as dowry, alcoholism, the menace of open defecation, primary
health care etc and impact policy decision.
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.
Financial Inclusion – Priority Sector Lending norms and assurance of returns
incentivize banks to lend to SHGs. The SHG-Bank linkage programme pioneered by
NABARD has made access to credit easier and reduced the dependence on
traditional money lenders and other non-institutional sources.
Improving efficiency of government schemes and reducing
corruption through social audit
Alternate source of employment – it
eases dependency on agriculture by providing support
in setting up micro-enterprises e.g. personalised
business ventures like tailoring, grocery, and tool
repair shops.
Changes In Consumption Pattern – It has
enabled the participating households to spend more
on education, food and health than non-client households.
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.
Banking literacy – It encourages and motivates its members to save and act as
a conduit for formal banking services to reach them.
Active participation in democracy: SHGs can actively participate in the
aspects of local governance. This would mean the inclusion of weaker and
marginalised sections of the society in the local governance.
Increase employment opportunities in rural India: It allows for
micro-level entrepreneurship within the rural society and reduces too much
dependence on agriculture.
DISADVANTANGES
Too much dependence on government and NGOs: Many SHGs are
dependent on the promoter agencies for their survival. In case these agencies withdraw their
support, the SHGs are vulnerable to downfall.
Lacks qualified facilitator: The facilitators do not have professional training with regard
to organising SHGs.
Lacks up-gradation of skills: Most SHGs are not making use of new technological
innovations and skills. This is because there is limited awareness with regards to new
technologies and they do not have the necessary skills to make use of the same. Furthermore,
there is a lack of effective mechanisms that promote skill development in rural areas.
SHGs are run by non-professionals: There is no professionalism within the SHGs.
This does not promote the expansion and improvement of the SHGs. This does not allow for the
increase of wages of the members and improvement in their living conditions. This also leads to
errors in accounting and mismanagement of the funds.
Lacks security: SHGs are mostly not registered. They are run based on the trust between
the members. The savings made by the SHG members may not be safe, which brings in mistrust
between the members.
Lack of knowledge and proper orientation among SHG-members to take up
suitable and profitable livelihood options.
Patriarchal mindset – primitive thinking and social obligations discourages women from
participating in SHGs thus limiting their economic avenues.
Lack of rural banking facilities – There are about 1.2 lakh bank branches and over 6
lakh villages. Moreover, many public sector banks and micro-finance institutions are unwilling to
provide financial services to the poor as the cost of servicing remains high.
Sustainability and the quality of operations of the SHGs have beena matter of
considerable debate.
inadequate Training Facilities:The training facilities given to the members of SHGs in
the specific areas of product selection, quality of products, production techniques, managerial
ability, packing, other technical knowledge are not adequate to compete with that of strong units.
Lack of Stability and Unity Especially among Women SHGs: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.
Moreover, there is no unity among women members owing to personal reasons.
BENEFITS OF THE SHG’S TO SOCIETIES
1. SHGs often appear to be instrumental in rural poverty alleviation.
2. 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.
3. Un-utilized and underutilized resources of the community can be
mobilized effectively under different SHG-initiatives.
4. Leaders and members of successful SHGs bear the potentiality to act as resource persons for
differentcommunity developmental initiatives.
5. 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).
6. SHGs have helped immensely in reducing the influence of informal
lenders in rural areas.
GOVERNMENT SCHEMES TO PROMOTE SHG’S
Swarn Jayanti Gram Swarojgaar Yojana (SGSY): It seeks to form SHGs and develop the skills of its
members to promote self-employment in rural areas. Then the national rural livelihood mission was
launched. (NRLM) is the largest poverty alleviation program in the world. It was launched by the
Ministry of Rural Development in 2011.It was succeeded by Deendayal Antyodaya Yojana (DAY) in 2015.
This scheme covers 100 million families through 8.5million SHGs.
Measures to Make SHGs Effective
SHGs are seen as drivers of rural development. However, successful SHGs are only rarely seen as the living
conditions in the rural areas remains underdeveloped. The government must take a proactive role in the
promotion of the SHGs at the grass-root level.
➢ 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.
CASESTUDY-COVID-19 AND WOMEN SHG’S
According to reports by the World Bank, Women Self Help Groups in India have risen to the
extraordinary challenge of COVID-19 (Coronavirus) pandemic. They are meeting shortfalls in
masks, sanitizers and protective equipment, running community kitchens, fighting
misinformation, and even providing banking and financial solutions to far-flung communities.
20,000 self-help groups across 27 indian states have produced 19 million masks in addition to
over one lac liters of sanitizer and nearly 50,000 litres of free hand washes. They have set-up
over 10,000 community kitchens across the country to feed stranded workers the poor and the
vulnerable. I said Gee workers also worked round the clock to meet the urgent demand for
personal protective equipment PPE for doctors and paramedics. They also worked as bank
correspondence banks sakhis in remote villages to ensure the availability of financial services
during the lockdown. In Odisha for instance poor rural women who were once engaged in
stitching school uniforms were suing masks instead over the past couple of weeks these women
had produced more than 1,000,000 cotton mask helping the police personnel and health workers.
Most importantly as surges also played a phenomenal role in curbing rumor and misinformation
the women were systematically using their vast network of WhatsApp groups or toward of chaos
and confusion providing critical support to the
government in the hour of the need women
groups are also a disseminating covert related
messages among hard to reach populations.
Their quick response to food insecurity and
shortages in goods and services shows how
this decentralized structure can be a vital resource in a time of crisis. The strength of India's
rural women will continue to be essential in building back economic momentum after the most
critical period is over.”
SUCCESS STORIES OF SHG’S IN INDIA
ASRLM
Vermicomposting is a basic biotechnological composting process in which certain
earthworm species are employed to convert
organic waste into nutrient-rich fertilizer. It
has been adopted by ASRLM as a good
practice that may be implemented as a
source of income for Self Help Groups.
ASRLM, in collaboration with Krishi Vikash
Kendras and MGNREGA, is working to expand
organic fertilizer capacity and pave the path for the production and use vermicomposting for
the future.
Chintan
It is a city-based Self Help Group that supports rag-pickers and
trash workers. At home, they manufacture masks out of discarded
bedsheets and garments to deliver to rag picker communities. The
NGO has already distributed over 1000 of these masks, with many
more on the way.
Kudumbashree-Kerala women’s Self Help Group
In 1997, The Kerala gov ernment established a self-help
organization named Kudumbashree, which means
“family prospe rity” in Malayalam, with the goals of
women e mpowerment and pove rty elimination. It now
has 43 lakh me mbers, making it one of the world’s
largest women’s organizations. Members of the
organisation recently cooked and se rved polling station workers in Kerala’s capital,
Thiruvananthapuram on 23 April.
The group adhered to the Gree n Protocol by only uti lizing steel ute nsils.Custome rs are
devoted to the group because of the high quality of their cuisine and service. With this
endeavour, the group saw tre mendous success, having cumulatively generated Rs 1.27
crores across two days. Kudumbashree is now in the process of signing pacts with 19
states to help the m set up similar programme s
Lakshmi Mahila Self Help Group
In this Self Help Group,Artefacts made of China Clay (Chini mitti), handmade goods,
cutlery, and other items are sold in the shop.These items are sourced from nearby
towns’ viz. Rajkot, Surendranagar & Junagadh. While a few members work at the
shop, the others remain associated with daily wage work and agriculture activities.
The members of the Lakshmi Mahila Self Help Group have now become pillars for
the rest of their family’s growth and sustainability. More than 4400 women in
Bhanvad Taluka are members of Self Help Group s, who have saved Rs. 80 lakhs
and completed an internal landing worth roughly Rs. 50 lakhs, proving to be a pillar
of their families.
Amba Foundation
Amba Foundation is a non-governmental organisation that has bee n mobilising women
for the battle against Coronavirus even before the
lockdown was imple mented. They are in contact with
around 30 self-help organisations in slum clusters that
are providing training to se w fabric masks using video
confe rencing. They’ve hired over 20 women to make
reusable face masks out of fabric, which the y’re
distributing locally.
Aastha Welfare Society
Ramesh Nagar in Delhi has already sewed over 4000
face masks and is working on more to help municipal
staff on duty during the lockdown. The masks were
made according to the guidelines supplied to the
trust by the NDMC commissioner, and they can be
washed and reused for up to 6 months. Over 500
masks were recently donated to the education department by the group.
CONCLUSION
Self help groups play a vital role in poverty radication in Indian villages.The SHG’S have
become exte nsive successful competent or in both rural and Urban D evelopment. In
India women band together into groups and motivate e ach other to build new
opportunities for income gene ration.M ost of these SHG’S start without any outside
financial capital by saving regular charity by the
membe rs the in India have come exte nsive ways
since its origin the spread of surges in India has
been extraordinary .t has made exciting progress
from 225 groups in 1992 to some 18,456 groups now
The syste m of SHG’S has proven to be very suitable
to the poor and v ulne rable women community in the
society and this system eke the exploitation
isolation of wome n from me n .
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