SELF HELP GROUPS: Collective Orientation or Financial Inclusion

1. What is a Self Help Group?

• It is a small democratically formed group of not more than 20 people who come together voluntarily to attain certain collective and social goals.
• Its purpose is to build the functional capacity of the poor and the marginalized which help them to get rid of common problems such as unemployment, illiteracy, etc
• Savings is the main pillar of the SHG.
• It demands discipline and responsibility on the part of each member of society for its successful functioning.

2. When did this SHG movement started in India?

• It was started as a pilot project in 1986-87 by NABARD.
• Formal SHG-Bank linkage started in 1992 in Karnataka. 
• Today, around 60 lakh SHGs with 10 crore people and Rs 6500 crores of bank balance are linked with banks.
• Around 44% of these SHGs are in south India and only 20% in central and north east India.
• 90% of SHGs consists exclusively of women.

3. What is the structure and functioning of a SHG?

• It is a group having between 10 to 20 members.
• A member is selected as animator (2 years) and two as representatives.
• They also elect a management committee of five members.
• The group meets every week primarily to collect savings and give out loans.
• The rules and rates of interest are decided by the members itself. 
• Profit is distributes annually at the end of each year.

4.  What are the benefits of SHGs?

• Increase in assets of the members. Now they can afford to have TV, refrigerator, washing machine, etc.
• Development of savings habit among the people
• Shift from consumption loan to income generation loan.
• Employment rate increased leading to more income generation and removal of poverty.
• Increase in women's assertiveness leading to gender equality.
• Social integration among the people as they interact and understand each other's problems.
• Reduced dependency on money lenders and enhanced self esteem and self confidence.
• Increased financial inclusion has led to better nutrition levels and checked IMR, MMR, etc.
• Family spending on educating the children has increased.
• It led to socio-economic empowerment of the people from lowest strata leading to social justice.

5. What are the issues related to their proper functioning?

• To maintain their participative character: Because of the patronage and subsidies provided by the government and panchayats there occurs politicization of SHGs which hurts the basic spirit of SHGs.
• To expand the SHG movement to credit deficit areas of the country: In those areas where there is lack of financial infrastructure there is need for cooperative action and social mobilization of people into SHGs.
• Extension of SHGs to the urban areas: Most of the urban poor are migrants from the rural areas and don't have documentary evidence to benefit from financial services. So, there is need for SHGs among the rural poor.
• Issues of quality: The quality of their products doesn't match to that of corporates. Also, they lack skills, scale of operations and efficiency as compared to the corporates.
• Issues of sustainability: They are heavily dependent upon their promoters such as NGOs or government. Training must be given to them in terms of book keeping and financial management.
• Dominance of patriarchal mentality creates obstacles for the participation of women.
• Incidences of misappropriation of funds maligns the spirit and ideology of the movement. 
• They don't go for cost benefit analysis before making investment.

 6. Why there is need for Corporate-SHG linkage for rural markets?

• SHGs can act as marketing channel for the corporates as the rural areas form a big untapped market for the corporate goods.
• Other benefits are availability of raw materials in rural areas, brand awareness can be increased and business expansion.
• Benefits for SHGs are secured business and revenue, scale of production can be achieved, capital, skills and technology benefits can be achieved and social status can be improved.