Jatin Gupta

Mains Advanced Batch Notes

Self-Help Groups (SHGs)

Previous Year Questions

Q. The emergence of the Self-Help Groups (SHGs) in contemporary times points to the show
but steady withdrawal of the State from developmental activities." Examine the role of the
SHGs in developmental activities and the measures taken by the Government of India to
promote the SHGs.
Q. Can the vicious cycle of gender inequality, poverty and malnutrition be broken through the
microfinancing of women SHGs? Explain with examples.
Q.The Self Help Group (SHG) Bank Linkage Programme (SBLP), which is India’s own
innovation has proved to be one of the most effective poverty alleviation and women
empowerment programmes.Elucidate.

Q. The penetration of Self Help Groups (SHGs) in rural areas in promoting participation in
development programmes is facing socio-cultural hurdles. Examine.

Q. The legitimacy and accountability of Self Help Groups (SHGs) and their patrons, the
micro-finance outfits, need systematic assessment and scrutiny for the sustained success of
the concept. Discuss.

Definition: SHGs are small, informal groups of people, primarily women, who pool their savings
and offer microloans to members to start small businesses. Typically, these groups consist of
15-20 members. Their major functions include:

○ Promote savings and financial literacy.

○ Facilitate access to credit and formal banking services.
○ Empower members to engage in income-generating activities.
○ Address social issues like alcoholism, dowry, and education within the
community.

Key Achievments

● High Repayment Rates: The program boasts an impressive repayment rate of around
95%, indicating the reliability and success of SHG members in managing their finances.
● Empowering Women: Approximately 90% of SHG members are women, making this
program a powerful tool for women’s empowerment and financial independence.
● Reduction in Dependence on Moneylenders: After the introduction of the SHG-Bank
Linkage Program, 82% of loans were sourced from SHGs, significantly reducing reliance
on exploitative moneylenders, whose role dropped to just 15%.

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SHG Movement in India during the Early Days

The Self-Help Group (SHG) movement in India began as a grassroots effort to empower rural
women and alleviate poverty, becoming a major force for social and economic development
over time.

● 1950s Origins: The roots of the movement can be traced back to 1954 when the Textile
Labour Association (TLA) in Ahmedabad, Gujarat, created a women's wing. This
initiative aimed to help women from mill workers' families by training them in practical
skills like sewing, knitting, and stenography. This early effort was about more than just
skills—it was about giving women the tools to become economically independent.
● 1970s Formalization: In 1972, these early efforts were further systematized with the
formation of the Self Employed Women’s Association (SEWA), led by the visionary Ela
Bhatt. SEWA was established as a trade union with a clear mission: to help women
workers increase their income, improve their nutrition and living standards, and build
their leadership skills. SEWA's goal was to ensure that women could secure full
employment, meaning they could earn enough to support themselves and their families
with dignity.
● 1980s Expansion: The SHG concept gained momentum in the 1980s, particularly with
the work of Myrada, a Karnataka-based NGO. Myrada promoted the idea of small,
community-based groups where members could pool their savings and collectively
access credit. This approach enabled them to start small businesses, leading to
sustainable income generation and economic empowerment.

SHG Bank Linkage Program

● The SHG-Bank Linkage Program is a landmark initiative in India that has played a critical
role in the expansion and success of the Self-Help Group (SHG) movement, particularly
in rural areas.
● The program began as an experimental project when NABARD (National Bank for
Agriculture and Rural Development) provided seed money to Myrada, a
Karnataka-based NGO, to help form credit management groups.
● Simultaneously, the Ministry of Rural Development supported PRADAN, another NGO,
to establish SHGs in rural Rajasthan.
● Based on these initial successes, NABARD officially launched the SHG-Bank Linkage
Program in 1992. The goal was simple but revolutionary: connect SHGs with banks,
enabling these groups to access credit without needing any collateral. This was a
significant step because it allowed SHGs to borrow money for their activities, helping
members start small businesses and improve their economic conditions.
● The program started in states like Gujarat, Maharashtra, Andhra Pradesh, Rajasthan,
Tamil Nadu, and Kerala. Over time, it grew to become one of the largest microfinance
networks in the world, making financial services accessible to millions of people who
were previously excluded from the formal banking sector.

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Besides NABARD, other public sector organizations also began supporting SHGs by providing
loans through financial intermediaries. These include:

● Small Industries Development Bank of India (SIDBI): Focuses on financing

small-scale industries.
● Rashtriya Mahila Kosh (RMK): Specifically targets women’s empowerment through
financial inclusion.
● Housing and Urban Development Corporation (HUDCO): Provides loans for housing
and infrastructure projects.

Government Measures to Promote SHGs

● SHG-Bank Linkage Programme (SBLP): Initiated by NABARD in 1992, this program

has linked SHGs with banks, facilitating access to credit and financial services. The
program is instrumental in mainstreaming microfinance in India.
● National Rural Livelihoods Mission (NRLM): Launched in 2011, NRLM supports
SHGs through training, capacity building, and financial assistance, aiming to reduce
poverty by enabling self-employment and skilled wage employment. The number of
functional SHGs under the National Rural Livelihoods Mission (NRLM) increased from
1.74 million in 2015 to 2.88 million in 2016.
● Support from Various Agencies: Organizations like SIDBI, RMK, and HUDCO provide
financial assistance to SHGs, enhancing their reach and impact.

Socio-Economic Impact of SHGs

"SHGs substantially contribute towards the empowerment of women in rural areas and ensure
their equality of status as participants, decision-makers and beneficiaries in the democratic,
economic and social spheres of life" - Parliamentary Committee on empowerment of
women

○ Income Generation: SHGs provide members with opportunities for

entrepreneurship, leading to increased household incomes and economic
stability.
○ Financial Inclusion: SHGs have significantly increased access to financial
services for rural populations, reducing reliance on informal moneylenders.
○ Employment Generation: SHGs have created employment opportunities not
only for members but also for others in the community through various
micro-enterprises.
○ Economic Independence: Through microfinancing, SHG members gain
financial independence, improving their ability to provide better nutrition and
education for their families.
○ Contribution to GDP: SHGs, especially women-led ones, have the potential to
significantly boost India’s GDP by increasing women's participation in the labor
force​

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 ○ Economic Empowerment: SHGs have been pivotal in poverty alleviation by
enabling access to microfinance and fostering entrepreneurship among
members.
○ Women Empowerment: SHGs have led to increased participation of women in
decision-making at the household and community levels, fostering greater gender
equality.
○ Social Empowerment: SHGs empower women, improving their decision-making
abilities and increasing their participation in public life.
○ Improved Social Cohesion: SHGs build social capital by creating networks of
mutual support among members, enhancing trust and cooperation within
communities.
○ Reducing the role of Loan Sharks:: In many regions, SHGs have helped
communities escape the clutches of exploitative moneylenders, reducing the
prevalence of high-interest loans that trap families in cycles of debt​
○ Community Development: SHGs address broader community issues, fostering
social capital and collective action.

Andhra Pradesh: Women SHGs have significantly reduced poverty and improved social
outcomes, demonstrating the effectiveness of microfinance in breaking the cycle of poverty.

Kudumbashree in Kerala: This SHG-based initiative has successfully tackled issues of

malnutrition and gender inequality by empowering women economically.

Challenges W.R.T SHGs

● Socio-Cultural Hurdles:
○ Patriarchal Attitudes: In rural areas, SHGs often face resistance due to existing
gender norms and opposition from male family members.
○ Lack of Awareness: Many SHGs in less-developed regions suffer from a lack of
awareness about government schemes and financial literacy, limiting their
effectiveness.
● Issues of Legitimacy and Accountability:
○ Microfinance Institutions (MFIs): Instances of coercive recovery practices by
MFIs have led to concerns about the legitimacy and transparency of SHGs.RBI
setup Mangalam committee after 80 suicides.
○ Need for Regulation: Better regulation and oversight are necessary to ensure
that SHGs and their patrons operate fairly and sustainably.
○ Institutions offering microcredit are unable to judge the risk associated with
lending to certain borrowers.
● Credit Access Challenges: According to a National Sample Survey Office (NSSO)
report, 45.9 million farmer households (51.4% of the total) do not have access to any
form of credit, highlighting the crucial role SHGs play in financial inclusion. Overall, 73%
of households lack credit links with any financial institution.
● Skewed distribution: Andhra Pradesh has the highest concentration of functional SHGs
(23.25%), followed by Bihar (17.87%), Telangana (14.71%), and Kerala (9.24%).

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Statistics on SHGs in India

● Scale: As of 2024, India has approximately 9 million SHGs with nearly 100 million
women members, making it the world's largest microfinance project.
● Distribution: There are about 14 SHGs per village, with every eighth Indian woman
being an SHG member.
● Financial Impact: SHGs have collectively disbursed loans amounting to ₹1.7 lakh crore,
with minimal non-performing assets (NPAs), showcasing their effectiveness in financial
inclusion.

Success Stories and Impact

● Andhra Pradesh: The state’s extensive SHG network has led to significant poverty
reduction and women empowerment, with repayment rates exceeding 98%.
● Kudumbashree (Kerala): Launched in 1998, this model has become a global example
of women’s empowerment and poverty eradication, with notable achievements in
improving health, education, and social status of women.
● Lakhpati Didi Initiative: This initiative aims to empower women by helping them
achieve an annual income of at least ₹1 lakh. The target has recently been increased
from 2 crore to 3 crore women under this scheme, highlighting the program’s success
and scalability​

Recommendations and Way Forward

1. Addressing Uneven Spread: Focus should be placed on extending the SHG movement
to states that have not yet implemented mechanisms under the National Rural
Livelihoods Mission (NRLM). This will ensure a more uniform spread of SHGs across the
country, enhancing their impact on poverty alleviation and women's empowerment.
2. Awareness and Capacity Building: State Rural Livelihoods Missions (SRLMs) should
frequently organize awareness camps to educate SHG members about the functioning
of SHGs, available assistance schemes, and the importance of branding and advertising.
These camps can also cover general social issues and offer training on improving
product sales.
3. Inspirational Talks: Successful SHG members who have made significant social
impacts or established thriving businesses should be invited to share their stories during
these camps, motivating other members.
4. Enhancing Marketing: The marketing of SHG products needs focused attention.
NABARD should take proactive steps in creating a centralized data bank that tracks the
availability, quantity, and quality of SHG products across India. This database could
support the sale of SHG products through an e-portal, ensuring broader market access.
5. Integration with State Programs: A coordinated action plan should be developed in
collaboration with state governments to ensure the convergence of SHGs with other
state-sponsored programs. This convergence should follow a well-defined roadmap to
maximize the effectiveness and reach of SHGs.

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 6. Training and Sensitization of Bankers: Regular training programs, exposure visits,
and sensitization sessions should be conducted for bankers to address issues related to
SHG financing. These initiatives can help change attitudes among bank officials and
encourage more supportive interactions with SHGs. Expanding RRB Networks: Efforts
should be made to establish Regional Rural Bank (RRB) networks in the 87 districts
currently lacking RRB presence. This expansion will facilitate greater access to banking
services for SHGs, enhancing their financial inclusion.

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