A self-help group is a small informal association of people created at the grass root level to get economic benefits on the basis of mutual help, solidarity and joint responsibility. The SHGs are formed voluntarily by the urban and rural poor for working together for social and economic upliftment. The members of SHGs save and contribute to a common fund to be lent out to its members as per the decision of the group. The basic philosophy underlying SHGs is the fact that the shortcomings and weaknesses at the individual level can be overcome by the collective responsibility and security accrued by the formation of a self help group. Hence, SHGs serve as a novel and innovative organizational instrument in India for the welfare of women and upliftment.
Evolution of Self Help Groups
SHGs have their genesis from the Gramin Bank of Bangladesh which was founded in 1975 by the economist Prof. Mohammad Yunus of Chittagong University. SHGs were established exclusively for the benefit of poor. Within a little span of time, SHGs became the vehicle for rural credit delivery system in many parts of the world. In 1997, at the World Micro Credit Summit, held at Washington, the developed and developing countries agreed to tackle the menace of rural poverty by using the tool of micro-credit. As many as 53 developing countries including India have set up SHGs to tackle rural poverty.
Evolution in India
Due to the inefficiency of banks in providing financial services to the poorer sections of the society, government in the early eighties intended to promote a new apex bank to cater to the financial needs of poor people. Further, it was considered that the government’s interference in the cooperatives attributed to their decline in the 1960s and 1970s. So, NABARD was established free from government interference and subsidies to serve poor particularly women. Decline of cooperatives paved way for the emergence of SHGs in the late 1980s and early 1990s.
Need for Self Help Groups in India
Large chunks of India’s population live in rural areas. There exists inequalities in sharing the wealth and opportunities in the country. Still many people especially in the rural areas live under the depressing shelter of adverse poverty. Despite decades of implementation, development programmes of government have failed to achieve considerable success in eradicating poverty. It is in this context that need for organizing rural poor especially women into Self Help Groups assumes significance.
Objectives
SHGs strive to achieve the following:
- To save money on regular basis.
- To mutually agree to contribute a common fund in order to meet their emergency needs.
- Takes decisions collectively.
- To solve conflicts through mutual discussion.
- To provide collateral free loan at the market driven rates based on the terms and conditions decided by the group.
Working of SHG
SHGs primarily function on the following principle:
- It acts as propagator of voluntarism.
- It acts as a purveyor of credit.
- Propagates and promotes the concept of mutual help.
- Promotes thrift and savings and provides timely emergency loans.
Features of SHGs
- SHGs consists not less than five persons and a maximum of twenty with similar economic outlook and social status.
- SHGs promotes objectives like economic empowerment. It helps in raising resources for development and freedom from exploitation.
- The nature of SHGs is mostly informal (unregistered).
- Periodical meetings of members are conducted to address their socio-economic problems and fixed savings from the members are collected at such meetings.
- Sources of funds for the SHGs accrue from member’s savings, entrance fee, interest from loans, and income from investments and so on. Funds accrued may be used for extending loans, carrying out social services etc.
- The savings of members are deposited in a bank with the name of group.
- The money lying in the bank is used for extending loan facilities to members of SHGs for 98 purposes at an interest rate decided by the group.
- Democratic, flexible and responsive in operations.
Significant impacts of SHGs on empowerment of women
The members of SHGs exhibit the following outputs:
- Improvements in literacy and numerical skills;
- Increase in awareness of basic legal rights;
- Awareness of development activities of government;
- Increase in self-confidence and enhanced social status;
- Economic empowerment and freedom from exploitation of money lenders, landlords etc.
- Enhanced decision making powers in the household affairs.
- Keenness to educate girl child;
- Active participation in other organizations and political bodies like Panchayats.
- Improved political consciousness and improved awareness about electoral process, societal analysis and gender issues.
Challenges & Shortcomings
Capacity building
Self Help Groups face challenges in terms of capacity building such as the need of support in accounting, financial management, and organisational development.
Poor maintenance of records
SHGs are required to maintain records such as loan register, cash book, individual pass book, attendance register etc. Qualities of record maintained by SHGs were often found to be poor and are not up to date.
Irregular meetings
SHGs should meet regularly once in a week/fortnight/month as per the rules decided by the members. This is to provide a platform for discussing various common problems and enable smooth functioning of SHGs. But in reality, monthly meetings are not taking place as per the rules of the SHG. This results in lack of interest in running their SHGs.
Lack of marketing facilities
District Rural Development Agencies (DRDAs) organize melas of the products of SHGs on regular basis. These exhibitions are organized at the block and district levels. But, the frequency of such melas is very less. On account of this, SHG members do not have a regular link with markets for selling their products.
Difficulty in getting loans
Banks tend to view SHG women with suspicion over their ability to return the loan to them. They do not trust the SHG members and the office bearers and to persuade them women were made to visit banks a number of times to get loan from the bank. Bank defaulters have further aggravated this problem. In some cases, some members who are running successful find it difficult to get loans due to the presence of defaulters in their family.
Lack of cooperation from bank officials
Dearth of transport facilities in rural areas makes it difficult for women to travel long distance to reach banks. This is particularly difficult for aged and child rearing women. In addition, SHG women face harassment in the hands of the bankers while opening bank accounts and getting loans. They are made to face a number of problems while opening their savings account in the banks.
Limited options for income generating activities
As a large number of SHG members have not undergone any kind of skill development training, women are confined to traditional activities like dairy farming. They do not have other options to start any non-traditional activity in which value addition may be done. Traditional activities do not always accrue profit in some cases SHGs have complained they do not get sufficient profit to sustain their activities.
Way forward
SHGs can play a significant role in realizing the vision of poverty free India if they are well developed. The following is the way forward for promoting, developing and sustaining the SHG federations:
- A national policy needs to be created recognizing SHGs as institutions of the poor.
- A suitable legal form is required for the SHG federations. As of now while many SHGs are registered under the cooperative laws, some which are engaged in social intermediation are registered under the societies/trusts. But these laws were found to be ineffective in addressing the needs of the SHG federations.
- Banks must be made to look at the SHG bank linkage as a business opportunity and not just as a social obligation.
- Continuous training and capacity building including financial literacy needs to be provided to the SHGs. For this purpose, a large cadre of community trainers need to be identified and trained. These people must have been an SHG member as they can be very effective trainers due to their experience.
- Democracy must be promoted in the functioning of SHGs. Annual elections must be held in all SHGs to elect their leader. In addition, all the members must be given a change to become office bearers of the SHGs.
- A system of internal audit needs to be put in place to make sure that SHGs audit their accounts at least once in a year. It is estimated that SHGs manage nearly Rs 50,000 crores in India.
- Women’s health, legal rights and other laws meant for the benefit of women must be made as an integral part of the training and capacity building of the SHGs to promote women empowerment.
Finally, SHG bank linkages can be facilitated with the help of Bank Mitras. As the SHGs are made to wait for prolonged time, they seek loans at higher interest rates from the Micro-financial institutions (MFIs) which may result in over indebtedness. Banks can identify active SHG members and appoint them as bank mitras to improve SHG bank linkage. A national database on SHGs need to be established to ensure effective monitoring and support for the SHG movement.