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. (UPSC 2013)

SHGs and microfinance institutions have widened financial inclusion and women’s empowerment, but their legitimacy rests on being community-led, fair and accountable, not just numerous.

• Need for scrutiny: With over 10 crore women linked to SHGs and rising microfinance credit, overdue loans, multiple borrowing and over-indebtedness are increasing.
• SHG concerns: Elite capture, weak federation oversight and diversion of loans from enterprise to consumption can weaken collective self-help.
• MFI concerns: Some MFIs have drifted from social purpose to profit, using aggressive recovery and repeated lending to the same borrowers.

Regular social audits, borrower-level credit checks, transparent pricing, grievance redress and stronger local institutions are essential to prevent debt traps, preserve trust and ensure sustained success.