SELF HELP GROUPs

What are SHGs?

• Self-Help Groups (SHGs) are informal associations of people who choose to come together to find ways to improve their living conditions.
• It can be defined as self governed, peer controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose.
• Villages face numerous problems related to poverty, illiteracy, lack of skills, lack of formal credit etc. These problems cannot be tackled at an individual level and need collective efforts.
• Thus SHG can become a vehicle of change for the poor and marginalized. SHG rely on the notion of ?Self Help? to encourage self-employment and poverty alleviation.

Functions

• It looks to build the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
• It resolves conflicts through collective leadership and mutual discussion.
• It provides collateral free loan with terms decided by the group at the market driven rates.
• Such groups work as a collective guarantee system for members who propose to borrow from organised sources. The poor collect their savings and save it in banks. In return they receive easy access to loans with a small rate of interest to start their micro unit enterprise.
• Consequently, Self-Help Groups have emerged as the most effective mechanism for delivery of microfinance services to the poor.

Need for SHGs

• One of the reasons for rural poverty in our country is low access to credit and financial services.
• A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a comprehensive report on 'Financial Inclusion in the Country' identified four major reasons for lack of financial inclusion:
  • Inability to provide collateral security,
  • Poor credit absorption capacity,
  • Inadequate reach of the institutions, and
  • Weak community network.
• The existence of sound community networks in villages is increasingly being recognised as one of the most important elements of credit linkage in the rural areas.
• They help in accessing credit to the poor and thus, play a critical role in poverty alleviation.
• They also help to build social capital among the poor, especially women. This empowers women and gives them greater voice in the society.
• Financial independence through self-employment has many externalities such as improved literacy levels, better health care and even better family planning.

Benefits of SHGs

• Social integrity ? SHGs encourages collective efforts for combating practices like dowry, alcoholism etc.
• Gender Equity ? SHGs empowers women and inculcates leadership skill among them. Empowered women participate more actively in gram sabha and elections.
• There is evidence in this country as well as elsewhere that formation of Self-Help Groups has a multiplier effect in improving women?s status in society as well as in the family leading to improvement in their socio-economic condition and also enhances their self-esteem.
• Pressure Groups ? their participation in governance process enables them to highlight issues such as dowry, alcoholism, the menace of open defecation, primary health care etc and impact policy decision.
• Voice to marginalized section ? Most of the beneficiaries of government schemes have been from weaker and marginalized communities and hence their participation through SHGs ensures social justice.
• Financial Inclusion ? Priority Sector Lending norms and assurance of returns incentivize banks to lend to SHGs. The SHG-Bank linkage programme pioneered by NABARD has made access to credit easier and reduced the dependence on traditional money lenders and other non-institutional sources.
• Improving efficiency of government schemes and reducing corruption through social audits.
• Alternate source of employment ? it eases dependency on agriculture by providing support in setting up micro-enterprises e.g. personalised business ventures like tailoring, grocery, and tool repair shops.
• Changes In Consumption Pattern ? It has enabled the participating households to spend more on education, food and health than non-client households.
• Impact on Housing & Health ? The financial inclusion attained through SHGs has led to reduced child mortality, improved maternal health and the ability of the poor to combat disease through better nutrition, housing and health ? especially among women and children.
• Banking literacy ? It encourages and motivates its members to save and act as a conduit for formal banking services to reach them.

For Details of SHG Annexure Click Here