SELF HELP GROUPS (SHG)

Published on 30 Jan 2025

A Self Help Group (SHG) can be defined as a self-governed, peer controlled group of people from similar socio-economic background and having a desire to collectively perform a common purpose. Economic Survey 2022-23 reveals that India has around 12 million SHGs, of which 88% are all-women-member ones.

Evolution of SHG in India

Ahmedabad Textile Labour Association (ATLA): In 1954, ATLA formed its women’s wing to organise the women belonging to mill workers households to train them primary skills like sewing, knitting etc.
Self Employed Women Association (SEWA): Formed as a trade union which organised women workers such as weavers, potters, hawkers, vendors, service providers, small producers etc.
Self Help Group: Inspired by the efforts of Mohammed Yunus in Bangladesh, NABARD initiated Self Help Groups in India in 1986-87.
Bank Linkage programme: This model got immense upthrust with the SHG-Bank linkage programme in 1992, which facilitated better access to credit for the SHG.

Significance of SHG in Indian context

Women empowerment: Majority of SHG in India are women-led, thus these groups are providing more opportunities for women to get organised, manage things, earn a living, and to get socio-economic exposure.

Example: 3 crore women from SHG shall be trained to generate annual income of at least Rs. 1 lakh under the Lakhpati Didi scheme.

Financial inclusion: SHG mostly targets women in rural areas, who are generally unemployed. Extension of financial services and employment opportunities deepens financial inclusion.

Example: As per Economic Survey 2022-23, Bank linkage programme covers 14.2 crore families with a savings deposit of 47240 crore.

Employment generation: These groups offer a platform where women can learn new skills, share their knowledge, and collectively start new ventures, thus providing employment to many women within a neighbourhood.

Example: Based on a study conducted in Maharashtra, 5.27 lakh SHG in the state have had a role to play in accounting for over 50% of all women-led small scale industrial units in India.

Poverty alleviation: Employment generation and better management of the earnings would add an extra source of income to the family, and hence would definitely reduce poverty.

Example: The Government, under the COVID stimulus package, increased the SHGs limit for collateral free loans to 20 lakhs from 10 lakhs, which benefitted around 6.3 million women SHG and 68.5 million households. (Economic Survey 2022-23)

Voice to marginalised section: SHGs bring together people of similar socio-economic background and gives them a collective voice, thus facilitating better bargaining power.
Leadership development: SHGs are self-managed, and hence gives an opportunity for members to step up, giving rise to new leaders.
Increased social cohesion: There would be connection between members of the self-help groups, which increases the cooperation and harmony within the society.

Example: The famous Kudumbashree programme covers over 41 lakh families and this enhances the social cohesion among the people.

Better management of savings: SHGs offer a mechanism for the members to pool their savings, and use them in a collective manner to reap better benefits.

Issues faced by SHGs in India

Non-professional management: These groups are self-managed and hence lack expertise in many matters. Hence, they are prone to make mistakes which could lead to loss.
Lack of upskilling: There is a lack of capacity development among the members of SHG, which restricts them to traditional jobs that are less income fetching.

Example: Increase the skilling and awareness so that SHGs could focus on future-oriented jobs like green energy entrepreneurship, rooftop gardening, circular economy initiatives etc.

Access to timely credit: Though the financial services available to SHGs has increased, there still exist gaps in the demand and supply for finance in certain states like North-western India.

Example: The NPA of loans given to SHG was 13.5% in Uttar Pradesh and 9.85% in Punjab, this limits the bank’s interest to further provide loans.

Poor management of finance: Since the members are not experienced in financial management, they tend to make poor financial decisions. Also, some members could misuse the funds in the absence of sound management.

Example: Financial irregularity and mismanagement within the Empower India SHG.

Lack of technology penetration: Rural SHG conducts operation and business manually or by using rudimentary technology. Limited access to updated technology and lack of awareness on harnessing them brings down the efficiency of their operations.

Example: Use of digital transactions reduce financial malpractices and digital exposure can open new avenues for SHG as e-commerce aggregators, digital literacy trainers etc.

Exploitation by strong members: In every SHG, the power and decision making might get concentrated to a few people, who could misuse their power for personal gains.
Lack of stability: Many women-led SHG fails to have stable operation due to lack of social participation, social stereotyping, burden of housework, limited access to credit for starting ventures etc.
Over-dependence on government or NGOs: This dependent nature of their functioning hinders self-development, thus restricting the future growth of the organization.

Government initiatives to promote the growth of SHG

SHG- Bank Linkage Programme: To make SHGs in a position to access financial services at an affordable rate.
Deendayal Antyodaya Yojana - National Rural Livelihood Mission (DAY-NRLM): Under the scheme, 74.8 lakh SHGs have been formed across the country.

Interest subvention: All women SHGs are eligible to get bank loans up to Rs. 3 lakhs at an interest rate of 7% per annum. An additional 3% subvention shall be provided on prompt repayment.
Revolving fund: Shall provide 10000 to 15000 per SHG.
Community Investment Support Fund: To extend up to 2.5 lakhs per SHG to undertake socio-economic activities as per microcredit investment plans.

Way Forward

Expanding the coverage: The SHG movement to be expanded to credit deficient areas of the country, such as Madhya Pradesh, Rajasthan, North east India etc.
Innovative financial services: Commercial banks and NABARD needs to innovate and design new financial products for these groups.
Extend to semi-urban areas: Increase the income generation ability of urban poor as many women in those areas are unemployed.
Proper upskilling: The members shall be imparted with technical, financial and management skills so that the SHGs are run in an efficient manner.

The evolution and growth of SHGs have brought revolutionary changes in the life of many Indians, especially the rural women. An even improved performance through coordinated effort between government, financial institutions and civil society groups could see more employment generation and rural development.