Self-Help Groups (SHGs)

WHY IN NEWS?

• Much on the lines of self-help groups (SHG) run by women, the West Bengal government, in its bid to stop migration of rural workforce, is planning to launch SHG-like project for rural men. It is a first-of-its-kind initiative in the country and will be named as ‘Producers Groups’.

INTRODUCTION

• SHGs are informal associations of people with similar socio-economic background who voluntarily come together to improve their living condition
• SHGs are untapped powerhouse of enterprise and highly potential vehicles to deliver social good
• "One for all and all for one" i.e principle of sharing responsibility and benefits together is the concept behind SHGs
• They help to build ‘Social Capital’ among the poor, especially women.  

PRINCIPLES UNDER WHICH GOVERNED

• Democratic functioning
• Self-governed and peer controlled
• Economic homogeneity among members
• Socialistic in approach
• Collective guarantee system for members to borrow from organised sources

STATISTICS

• There are more than 80 lakh SHGs with active bank linkages in India.
• More than 10 crore people are involved on at least one SHGs
• Aggregate bank balance of SHGs are Rs.6500 crores.
• 67 million Indian women are members in SHGs and 90% of SHGs in India consist exclusively of women.

NEED FOR SHGs

• To break the vicious cycle of rural poverty:
  • One of the reasons for rural poverty in our country is low access to credit and financial services.
  • SHGs help in accessing credit to the poor and thus, play a critical role in poverty alleviation.
• Optimum utilization of resources
  • Un-utilised and underutilised resources of the community can be mobilised effectively under SHG-initiatives.
• Empower women
  • They also help to build social capital among the poor, especially women. This empowers women and gives them greater voice in the society.
• Better socio-economic conditions
  • Financial independence through self-employment has many externalities such as improved literacy levels, better health care and even better family planning.

FUNCTIONS PERFORMED

• Builds capacity:
  • It builds the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
• Savings and Thrift:
  • All SHG members regularly save a small amount. The amount may be small, but savings have to be a regular and continuous habit with all the members.
• Effective mechanism for delivery of microfinance services to the poor.
  • SHGs use the savings amount for providing collateral free loan to members with term decided by the group
  • SHGs also 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.
• Resolves conflicts
  • It resolves conflicts through collective leadership and mutual discussion.
• Role played during pandemic:
  • Women-run self-help groups (SHG) from the backward districts were instrumental in fighting pandemic
  • SHGs manufactured essential medical products such as masks, sanitisers, protective equipment and ran community kitchens, provided financial support to the vulnerable and communities.

POSITIVE IMPACTS

• Social integrity
  • SHGs encourages collective efforts for combating practices like dowry, alcoholism etc.
• Gender equity
  • Evidence suggests 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.
  • SHGs inculcate leadership skill among women.
  • SHGs also acts as a gateway to political participation
• Role in rural poverty alleviation:
  • Increased employment generation
  • Promotion of cottage industries
  • Entrepreneurship opportunities
  • Scaling up of small business
  • Reduce distress migration
  • Increased disposable income >> increases household savings
• Voice to marginalized section
  • SHGs gives collective voice to marginalized people >> 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.
  • SHGs enables collateral free loans with reasonable interest rate
• Improving efficiency of government schemes
  • SHGs facilitate last mile linkages to welfare schemes
  • Reduce corruption in execution of government projects through social audits.
• Alternate source of employment
  • SHGs 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.
• Inclusive growth
• Political empowerment
  • Emergence of local leadership
  • Increased participation in Grama Sabha and local body governance
  • Increased awareness on rights and duties
• Human resource development
  • SHGs aids in skill development and training
  • Act as platform for innovative ideas and projects

WEAKNESSES OF SHGs

• No significant economic improvement
  • Though there has been social empowerment of the poor, the economic gain to bring about a qualitative change in their life has not been satisfactory.
• Still based on primitive skills
  • Many of the activities undertaken by the SHGs are still based on primitive skills related mostly to primary sector enterprises.
  • With poor value addition per worker and prevalence of subsistence level wages, such activities often do not lead to any substantial increase in the income of group members.
• Lack of qualified resource personnel
  • There is a lack of qualified resource personnel in the rural areas who could help in skill upgradation or acquisition of new skills by group members.
  • Further, institutional mechanisms for capacity building and skill training have been lacking.
• Weak financial management:
  • Certain units face problems of poor accounting practices and incidents of misappropriation of funds.
  • Funds are often diverted for personal and domestic purposes like marriage, construction of house etc
  • In most of the cases return from the business is not properly invested further in the units.
• Low Return:
  • The return on investment is not attractive in certain groups due to inefficient management, high cost of production, absence of quality consciousness etc.
• Poor marketability:
  • Lack of resources and means to market their goods.
• External dependence:
  • SHGs are heavily dependent on their promoter NGOs and government agencies.
  • The withdrawal of support often leads to their collapse.
• May not have significant impact on poverty alleviation
  • Members of a group do not come necessarily from the poorest families.

REASON FOR SUCH WEAKNESS

• Lack of knowledge and proper orientation among SHG-members
  • To take up suitable and profitable livelihood options.
  • Most of the members lack understanding about core values of business.
• Patriarchal mindset
  • Social obligations discourages women from participating in SHGs
• Lack of rural banking facilities
  • Question over sustainability and the quality of operations of the SHGs
• No Security
  • The SHGs work on mutual trust and confidence of the members. The deposits of the SHGs are not secured or safe
• Failed to develop collective bargaining power
  • SHGs are dominated by few strong members by exploiting the ignorance of few
• Political interferences in functioning
  • Ex: Kudambashree units in Kerala are largely influenced by political parties
• Lack of digital literacy
  • Unable to be updated with new information, products etc.

• Challenge of maintaining the participatory character
  • Due to lack of political awareness; poor leadership skills and organizational ability of members.
• Geographically skewed
  • SHG  movement is weak  in states such as Bihar, Uttar Pradesh, Madhya Pradesh, Orissa, Rajasthan and in the North-East

STEPS TAKEN

• Social stock exchange
  • To enable social enterprises to list on exchange and raise capital
• SHG-Bank linkage programme
• Deen Dayal Antyodaya Yojana - National Livelihoods Mission (NRLM):
  • It is a poverty alleviation project implemented by Ministry of Rural Development
  • This plan is focused on promoting self-employment and organization of rural poor.
  • The basic idea behind this program is to organize the poor into SHG (Self Help Groups) groups and make them capable for self-employment.
• Interest subvention programme:
  • Budget 2019 expanded women SHG interest subvention programme to all districts
• Village Storage Scheme
  • To provide holding capacity for farmers >> run by women SHGs
• Atmanirbhar Bharat Programme
  • The government announced financial support to over 0.4 million SHGs under Atmanirbhar Bharat.

SUGGESTIONS TO IMPROVE THE WORKING OF SHGs

• Integrated approach for meeting overall credit needs:
  • An integrated approach is required for meeting overall credit needs of a poor family in terms of backward linkages with technology and forward linkages with processing and marketing organizations.
• Monitoring
  • A framework should be implemented to monitor activities of women SHGs
• Ensure participation of NGOs
  • Non-Government Organisations (NGOs) can play a significant role in empowering women entrepreneurs by providing basic education, motivation training, and financial help and so on.
• Training:
  • Training programmes relating to management of finances, maintaining accounts, production and marketing activities etc. should be given.
  • Specialised training should be given on climate change, clean energy, disaster management, water, etc
• Facilitating capital access
  • CSR support, international funding, multilateral bank support should be given to SHGs so that they can shape themselves into a corporate entity
• Increasing banking accessibility
  • Simplify the process of giving loans to SHGs
  • Provide gender sensitization training to bank staff so that they are sensitized to the needs of rural clients especially women.
  • Utilize Banking Correspondents to deliver service to remote areas
  • Use of local language in delivering financial services
• Collaboration of SHGs and academia
  • Innovative ideas should be incubated by the top-most institutes of India
•  Insurance coverage
  • Adequate insurance coverage should be provided to the business units promoted by SHG against the financial losses to safeguard the interest of the entrepreneurs. 
• Grievance redressal:
  • A dedicated grievance resolving mechanism for SHGs should be set up.
• Awareness generation
  • Frequent awareness camps can be organised by the Rural Development department authorities to create awareness about the different schemes of assistance available to the participants in the SHGs.

BEST PRACTICES

• Kudumbashree in Kerala
  • Launched 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.
  • It has three tier structure
    • First tier: Neighborhood groups (SHG)
    • Second tier: Area development society (15-20 SHGs)
    • Third tier: Community development society (federation of all groups).
  • Kudumbashree is a government agency that has a budget and staff paid by the government. The three tiers are also managed by unpaid volunteers.
• Mission Shakti programme of Odisha
  • Under this programme women get institutional credit through the self-help group in the form of seed Money, Mission Shakti loan, and revolving funds.
• E-commerce website for SHGs in West Bengal: ‘www.shgstore.in’:
  • To help the self-help groups (SHGs) of tribal and remote areas under the Bangaon Development Block, an e-commerce website was launched.

PRACTICE QUESTION:

Q. Examine the role played by Self Help Groups (SHGs) in empowering rural women