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Self-Help Groups (SHGs)

2022 JUL 14

Mains   > Social justice   >   Development Processes & Industry   >   Self Help Groups


  • Karnataka's Self-Help Groups (SHGs), which are formed for empowerment of women, spend 60%-70% of money borrowed as loans for personal/family purposes, said the latest report of the Karnataka Evaluation Authority (KEA), a State government entity.


  • SHGs are informal associations of people with similar socio-economic background who voluntarily come together to improve their living condition
  • "One for all and all for one" i.e principle of sharing responsibility and benefits together is the concept behind SHGs.




  • According to the National Rural Livelihood Mission (NRLM), there are 77.16 lakh SHGs in India.
  • More than 10 crore people are involved on at least one SHGs. 67 million Indian women are members in SHGs and 90% of SHGs in India consist exclusively of women.
  • Aggregate bank balance of SHGs are Rs.6500 crores.


  • 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.
  • Access to formal credit:
    • The SHG-Bank linkage programme pioneered by NABARD and Priority Sector Lending norms has made access to credit easier and reduced the dependence on traditional money lenders and other non-institutional sources.
  • Capacity building:
    • It builds the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
  • Promote microfinance services to the poor:
    • SHGs use the savings amount for providing collateral free loan to members with term decided by the group.
  • Resolve conflicts
    • SHGs 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.


  • Break the vicious cycle of rural poverty:
    • SHGs play a key role in creating employment, promotion of cottage industries, development of entrepreneurs, skilling etc. These factors collectively lead to increase in disposable income and reduction of distress migration.
  • Financial inclusion:
    • SHGs create a habit of savings among the poor. SHGs work as a collective guarantee system for members who propose to borrow from organised sources at a small rate of interest.
  • Women empowerment:
    • They help to build social capital among the poor, especially women through financial inclusion and skill development. This empowers women and gives them greater voice in the society. Eg: SHGs utilising women in rural households for developing cottage industries like carpet making.
  • Better socio-economic outcomes:
    • Financial independence through self-employment has many externalities such as improved literacy levels, better health care and even better family planning.
  • Promote social justice:
    • SHGs have enabled the participating households to spend more on education, food and health than non-participating households. Also, SHGs encourages collective efforts for combating practices like dowry, alcoholism etc.
  • Alternate source of employment:
    • SHGs ease the dependency on agriculture by providing support in setting up micro-enterprises e.g. personalised business ventures like tailoring, weaving, and handicrafts.
  • Human resource development
    • SHGs aids in skill development and training and act as platform for innovative ideas and projects
  • Channel for implementing government schemes:
    • Eg: Aajeevika Grameen Express Yojana (AGEY), the sub-scheme under the National Rural Livelihoods Mission to facilitate transport facilities in the rural areas and also provide job opportunities SHGs members.

Case study: Sorath Mahila Vikas Mandali (SMVM)

  • A group of women from Gir Somnath district of Gujarat came together in 1999 to form a self-help group with the support of Ambuja Cement Foundation.
  • The SHG was started with the objective of encouraging women to get into the habit of saving. Later, the group transformed into a platform to counter stigmas and ensure social equity and justice to widowed women.
  • The first joint decision by the women was that there would be no room for caste, community and denominations. They started creating awareness among villagers about giving widows due respect and equality in society.
  • The mandali has helped more than 500 widows lead a normal life, with the acceptance and support of communities across 68 villages.
  • All the SHGs which are members of SMVM contribute Rs 1,000 annually from their savings. the SHG formed Sorath Mahila Suraksha Kavach Yojna to give them social security.



  • Poor value addition:
    • 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.
  • Challenges in banking facilities:
    • Rural areas have a deficit of formal banking systems. Also, many banks are reluctant to provide loans to SHGs over fear of defaulting.
  • Low Return:
    • The return on investment is not attractive in certain groups due to inefficient management, high cost of production, weak marketing, absence of quality consciousness etc.
  • External dependence:
    • SHGs are heavily dependent on their promoter NGOs and government agencies. The withdrawal of support often leads to their collapse.
  • Geographically skewed:
    • SHG movement is strong in some areas, such as Tamilnadu and Kerala, while it is weak in states such as Bihar, Uttar Pradesh, Madhya Pradesh, Orissa, Rajasthan and in the North-East


  • SHG-Bank linkage programme:
    • It was launched by NABARD. It is the largest microfinance programme in the world, in terms of the client base and outreach.
    • Under this programme, banks were allowed to open savings accounts for Self-Help Groups (SHGs). Banks provide loans to the SHGs against group guarantee and the quantum of loan could be several times the deposits placed by such SHGs with the banks.
  • Deen Dayal Antyodaya Yojana - National Livelihoods Mission (NRLM):
    • The scheme, under Ministry of Rural Development, is a mission mode scheme with the objective of organizing the rural poor women into SHGs.
    • It aims to ensure that atleast one woman member from each rural poor household (about 9 crore) is brought into the fold of women SHGs.
  • Social stock exchange
    • To enable social enterprises to list on exchange and raise capital
  • 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.


  • 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.


  • 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: ‘’:
    • To help the self-help groups (SHGs) of tribal and remote areas under the Bangaon Development Block, an e-commerce website was launched.