Self Help Groups (SHGs)

 Self-help group is a method of organizing the poor people and the marginalized to come together to solve their individual problem.

  • The important functions of a Self-Help Groups are
    • to encourage and motivate its members to save,
    • to persuade them to make a collective plan for generation of additional income
  • SHG as an organized way for poverty eradication was immersed during the 7th Five Year Plan (1985-90).

Functioning of SHGs:

  • An SHG normally consists of not less than five persons (with a maximum of twenty) of similar economic outlook and social status.
  • A reasonably educated but helpful local person takes the lead in mobilizing these people to form a group.
  • The group savings are kept in a common bank account from which small loans are given to members.
  • SHGs function on the principle of the five ‘p’s:
    • Propagator of voluntarism
    • Practitioner of mutual help
    • Provider of timely emergency loan
    • Promoter of thrift and savings
    • Purveyor of credit

Objective of SHG


Characteristics of a SHG:

● An ideal SHG comprises 15-20 members

● All the members should belong to the same socio-economic strata of society specifically poor

● Group should have strong bond of affinity

● Rotational leadership should be encouraged for distribution of power and to provide leadership opportunities to all the members

● Members should attend meetings, save and participate in all activities voluntarily

● To provide gainful employment and to involve the poor in productive activities

● A SHG should be socially viable institution

● The procedure of decision-making in SHG should be democratic in nature

● It should be non-partisan in nature

● The group frames rules and regulations which are required for its effective functioning

● To involve women in decision making and to promote leadership qualities among them

Significance of SHGs: 

● Empowers & mobilizes women from rural areas: About 46 million rural poor women are mobilized through SHGs architecture. These organizations have been an effective vehicle, especially in providing financial intermediation solutions for unbanked rural women.

● Socio-economic benefits: It includes economic self-independence, participation in village affairs and awareness about education.

● Special Focus: special attention has been given to women living below poverty line (BPL).

● It has also focused on capacity building and institutionalization of SHGs. It has also helped in social mobilization, institution building, communization and creation of human resources.

● Improves the status of women in family & society: SHGs leads to economic empowerment of women which helps them take decision making roles in the family. Thus, help them break shackles of patriarchy.

● Helps in Improving the health & standard of living: Research has also shown 49 % reduction in maternal mortality and 33 % reduction in neonatal mortality.

Models of SHGs

SHG-Bank Linkage Model

The Self Help Group-Bank Linkage Programme (SBLP) was started in 1992 at the initiative of NABARD. The basic idea of the SBLP is to link the unorganized sector of our population to the formal banking sector.


SHG-Corporate Model

  • They have played a major role in promoting women empowerment through SHG. For eg. ITC,Hindustan Unilever Limited, Amul, Tata Group, ICICI Bank, etc.
  • ICICI Bank, India’s largest private sector bank, recently crossed a milestone of supportingone million women beneficiaries through its programme for Self Help Groups (SHG) whichaims at empowering less privileged women to become self-reliant.


  • The NGO regularly conducts skills training programs for SHGs to encourage leadership abilities and income-generating activities. These types of training carry SHGs, for their creation and work, close to NGOs.
  • Technical expertise, skills training, and marketing strategies offer to women to help develop a sustainable business.

Shortcomings of SHGs:

1] Mostly engaged in Agricultural Activities:  SHGs in rural areas should be introduced to non-agricultural businesses too and should be provided with state-of-the art machinery.

2] Credit Mobilization: A study has shown that about 48% of the members had to borrow from local money lenders, relatives and neighbors because they were getting inadequate loans from groups. In the absence of any documentary proof, this class of people do not have access to organized financial services.

3] Self-Help Groups are Developed in Rural Area only.

4] Poor Infrastructure: Most of these SHGs are situated in rural and far-reaching areas that lack connectivity via road or railways. Access to electricity remains an issue.

5] Politicization: Political affiliation and interference has become a serious problem with SHGs. Political affiliation is also a major reason for group conflicts.

6] Lack of Technology: Most of the SHGs work with rudimentary or no technology.

7] Access to market: Also the goods produced by SHGs do not have access to larger market places.

Success Story

  1. Kudumbashree in Kerala:
  • It was launched in Kerala in 1998 to wipe out absolute poverty through community action.
  • It is the largest women empowering project in the country. It has three components i.e., microcredit, entrepreneurship and empowerment.
  • Kudumbashree training courses are also quite comprehensive, and include women’s rights knowledge of constitutional and legal provisions training in banking practices training in skills to set up micro-enterprises.
  • It has thus made a huge contribution in socially empowering the women of Kerala.

2. Other famous SHGs: Lijjat papad from Maharashtra; Mahila Arthik Vikas Mahamandal (MAVIM) in Maharashtra, “BHAI BHAUNI, Odisha; Social Saheli – Uttar Pradesh, etc. 

Measures Taken by the Government to Promote the SHGs:

1] On the recommendations of SK Kalia Committee, the SHG-Bank linkage programme was started at the initiative of NABARD in 1992 to link the unorganized sector with the formal banking sector.

2] Banks were allowed to open savings accounts for Self-Help Groups (SHGs). Banks provided loans to the SHGs. 

3] GOI has included SHG as a priority sector lending group to mandate and enhance banks focus on them. 

4] SHG, have been allowed to run grain banks to secure food security in food & care regions.

5] Priyadarshini scheme: With NABARD as the nodal agency, it has aimed at women empowerment and livelihood enhancement through SHGs.

6] Mahila Kisan Sashaktikaran Pariyojana: In order to promote agro-ecological practices that increase women farmers’ income and reduce their input costs and risks, the DAY-NRLM Mission has been implementing the Mahila Kisan Sashaktikaran Pariyojana (MKSP).As of March 2018, more than 33 lakh women farmers were being supported under this scheme.

Suggestions to Improve the Working of SHGs: 

1] Simplify the process of giving loans – ease the access to credit.

2] An integrated approach is required for meeting the backward linkages with technology and forward linkages with processing and marketing organizations.

3] The delivery system has to be proactive and should respond to the financial needs of the farmers.

4] Training programmes relating to management of finances, maintaining accounts, production and marketing activities etc. should be given.

5] Provide gender sensitization training to bank staff so that they are sensitized to the needs of rural clients especially women.

6] Adequate insurance coverage should be provided to the business units promoted by SHG against the financial losses to safeguard the interest of the entrepreneurs.

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