Self Help Groups

Self-Help Groups (SHGs) are micro-entrepreneurial groups, primarily composed of women, aimed at alleviating poverty and enhancing economic empowerment. Originating in the 1970s, SHGs gained prominence in India in the 1990s, particularly through initiatives like the SHG Bank Linkage Project. These groups follow a structured process of formation, capital accumulation, loan access, and income generation, engaging in various activities such as agriculture, handicrafts, and small businesses. The benefits of SHGs include improved nutrition, gender equality, and resilience against poverty. However, SHGs face challenges such as economic limitations, regional disparities, socio-cultural barriers, and accountability issues. Efforts by the government, such as National Rural Health Mission, SHG-Bank Linkage Programme, and MGNREGA engagement, aim to address these challenges and promote SHG development. In essence, while SHGs have made significant strides in empowering communities and combating poverty, concerted efforts are needed to address their challenges and maximize their potential for socio-economic development.

The concept of Self-Help Groups (SHGs) originated with Nobel laureate Mohammad Yunus in the 1970s but gained traction in India, notably with the establishment of the Self-Employed Women’s Association (SEWA) in 1972. However, it wasn't until 1992 that the movement saw significant growth, propelled by NABARD's SHG Bank Linkage Project, the world’s largest microfinance initiative. This period also saw the establishment of separate organizations by state governments in Andhra Pradesh, Tamil Nadu, Karnataka, and Kerala to combat rural poverty. A pivotal moment came in 1993 when NABARD and RBI permitted SHGs to open savings bank accounts, paving the way for greater financial inclusion. Subsequently, in 1999,the Swarn Jayanti Gram Swarojgaar Yojana (SGSY), later renamed the National Rural Livelihoods Mission (NRLM) in 2011, and Deendayal Upadhyay Antyodaya Yojana – in 2015, was introduced to promote self-employment in rural areas through SHG formation and skill-building.

A Self Help Group (SHG) is a group of micro-entrepreneurs, mostly women, who voluntarily come together to undertake an economic activity for capital and skill development with the objective of bailing themselves out of extreme poverty and misery. They decide to save small sums of money by mutually agreeing to contribute to a common fund to meet their emergency needs. A group of about 10-20 women pool their financial resources to make a fund which is available to members in times of need. The members are allowed to borrow from the pool and pay back through regular periodic installments and keep a record of all transactions.

Formation of SHGs involves four key stages:

• Group Formation: Individuals, often women from poor households, come together voluntarily or with the help of SHPIs. ( Self-Help Promoting Institutions)
• Capital Formation: Members contribute savings, forming a collective fund.
• Availing Loans: Once savings accumulate, members access loans collectively guaranteed by the group.
• Income Generation: Borrowed funds are used for income-generating activities like small businesses.

Some of the Income Generating Activities of SHGs are given below

• SHGs engage in various income-generating activities including agricultural endeavors, animal husbandry, hosiery production, candle making, crafting cane products, carpet weaving, operating chicken shops and mess services, providing mid-day meals to schools, embroidery work, stitching school uniforms, producing khadi and leather items, spinning and weaving textiles, weaving woolen blankets, vending vegetables and fruits, pottery, weaving and selling saris, making agarbatti, and pickle making.

1. Nutritional ImprovementThrough SHGs
   1. Micro Financing Impact: Microfinancing through women SHGs correlates with improved nutritional outcomes for entire families, breaking intergenerational poverty cycles.
      1. Example: The Self Employed Women’s Association (SEWA) focuses on enhancing nutrition security among women.
   2. Swabhimaan Programme: SHGs in rural Odisha, under the Swabhimaan Programme, help women combat malnutrition and prevent unwanted pregnancies.
   3. Government Initiatives: In Uttar Pradesh, the government engages 68,000 Women Self Help Groups to implement the Take Home Ration Scheme, combating malnutrition effectively.
2. Gender Inequality
   1. Empowerment Impact: Studies, such as one conducted by Ashwini Deshpande and Shantanu Khanna in Maharashtra, reveal that SHGs significantly enhance women's empowerment indicators, including political participation, financial literacy, and decision-making abilities.
   2. Economic Empowerment: Microfinance provided by SHGs enables women to start business ventures, participate actively in the economy, and contribute to decision-making processes, promoting gender equality.
3. Poverty
   1. Resilience Against Poverty: Access to credit through SHGs provides resilience against poverty, preventing individuals from falling into the poverty trap.
      1. Example: The Jay Ambe SHG in Rajasthan facilitates credit availability for its impoverished members, assisting them in alleviating poverty.
   2. Economic Contribution: Microfinancing by SHGs enhances women's ability to augment family income, contributing to gender parity and preventing women and children from falling into the cycle of malnutrition and poverty.
   3. Non-Farm Employment: Providing non-farm employment opportunities through SHGs is crucial for supporting agricultural communities during times of agricultural distress.

• Economic Challenges:
  • Limited awareness and inadequate publicity of SHG products.
  • Shortage of skilled manpower within SHGs.
  • Reliance on traditional, primitive skills for economic activities.
  • Poor accounting practices and mismanagement of funds.
  • Unsatisfactory performance and insufficient economic gains despite social empowerment.


• Regional Disparities:
  • Regional imbalance with a disproportionate concentration of SHGs in the southern regions, leading to uneven distribution.


• Socio-Cultural Barriers:
  • Inequality within SHGs, with literate members exploiting illiterate ones.
  • Lack of awareness due to illiteracy among rural populations.
  • Caste discrimination hinders the formation of inclusive groups.
  • Limited social mobility for women in male-dominated societies.
  • Cultural challenges, including instability in women-dominated SHGs and patriarchal norms discouraging female participation.


• Bureaucratic Mindset and Legitimacy Concerns:
  • Banks' bureaucratic mindset and lack of faith in the capabilities of weaker sections. Due to this, they charge higher interest rates from SHGs.
  • Legitimacy concerns, such as SHGs being used for vested interests or controlled by husbands of members.
• Accountability Issues:
  • Poor financial management and inadequate training.
  • Lack of transparency due to illiteracy and inaccessible records.

• National Rural Livelihood Mission (NRLM): The NRLM is a government initiative aimed at empowering rural communities by promoting self-help groups (SHGs) and facilitating their access to financial services and livelihood opportunities.
• SHG-Bank Linkage Programme: This program facilitates the linkage between self-help groups and banks, enabling SHGs to access formal financial services and markets.
• SARAS Collection on Government e-Marketplace (GeM): In collaboration with GeM, the Ministry of Rural Development (MoRD) has established the "SARAS Collection" store front to market products made by SHGs.
• MGNREGA Engagement of SHGs: Under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), SHG members actively participate in the planning process, serve as social auditors, and supervise worksites. Federations of Women Self-help Groups are also being involved in project implementation.
• Pradhan Mantri MUDRA Yojana (PMMY): PMMY, launched on April 8, 2015, provides loans up to 10 lakhs to non-corporate, non-farm small/micro enterprises. The scheme supports aspiring women entrepreneurs in starting micro-enterprises.
• E-Shakti Project by NABARD: NABARD initiated the "E-Shakti" project to digitize SHGs, enhancing transparency in bookkeeping and grading systems. This digitalization increases bankers' confidence in credit appraisal and linkage processes

• Traditional banking systems have often failed to provide credit to the poor, particularly women, leading to the emergence of microfinance as an innovative solution. Microfinance entails the provision of small loans and financial services to empower low-income individuals, helping them improve their economic situations.
• Mechanisms of Delivery
  • Microfinance Institutions (MFIs) encompass a diverse range of organizations dedicated to providing financial services to the impoverished. These include NGOs, cooperatives, private and government commercial banks, and non-banking financial institutions.
• Pioneering Models
  • Microfinance as a development tool traces back to Mohammad Yunus, who pioneered the delivery of microcredit through the Grameen model of group banking in the early 1980s. In India, among various delivery models adopted by MFIs, Self-Help Groups (SHGs) have emerged as the most popular mechanism.
• The main advantages of microfinance are:
  1. Poverty alleviation through small loans repaid with interest, fostering self-sustainability.
  2. Provision of collateral-free loans, enabling the poor to start businesses and break out of poverty.
  3. Empowerment of women by facilitating entrepreneurship and promoting gender equality.
  4. Promotion of long-term financial independence through education and proper money management.
• Main concerns related to MFIs
  • MFIs are often seen as profit-oriented entities, raising concerns about their integrity.
  • Corruption within MFIs is not uncommon, undermining their effectiveness and trustworthiness.
  • Poor record-keeping practices contribute to a growing number of defaults among borrowers.
  • Complex and time-consuming procedures hinder proper documentation, exacerbating the problem.
  • The small scale of transactions may discourage lenders from investing in thorough record-keeping.
  • The absence of proper regulatory frameworks can result in the exploitation of borrowers by MFIs

• The National Rural Livelihood Mission (NRLM), also called Aajeevika, began in April 1999 under the name Swarnjayanti Gram Swarozgar Yojana (SGSY). Initially, SGSY aimed to streamline different credit programs and offer financial support to the underprivileged through banking channels. In 2011, the program evolved into DAY-NRLM, extending its reach across the country and operating with a mission-oriented approach
• Under the DAY-NRLM program, there are dual objectives:
  • Mobilising rural impoverished women into Self-Help Groups (SHGs).
  • Continuously fostering and assisting them in participating in economic endeavours to secure sustainable livelihoods.
• Assistance provided under it
  • Under the DAY-NRLM program, Self-Help Groups (SHGs) benefit from financial aid, including Revolving Funds (RF) ranging from Rs. 10,000 to Rs. 15,000 per SHG and Community Investment Support Fund (CISF) with a maximum allocation of Rs. 2,50,000 per SHG
  • Additionally, SHGs have access to bank loans for various livelihood activities. The program also provides capacity building and technological support to households, enabling them to acquire the necessary skills for income generation in both agricultural and non-agricultural domains.
• Principles
  • The SHG movement operates based on five core principles, known as 'Panchasutra,' which include regular meetings, savings, inter-loaning, timely loan repayment, and maintaining up-to-date accounting records.
  • Additionally, SHGs have adopted five supplementary principles known as 'Dashasutras' under the DAY-NRLM program. These include promoting Health, Nutrition, and Sanitation; facilitating Education; encouraging Active involvement in PRIs; ensuring Access to Entitlements and Schemes; and fostering the creation of Opportunities for Sustainable Livelihoods
• Success of the programme:
  • As of January 31, 2024, approximately 10 crore women households have been organized into 90.39 lakh Self-Help Groups (SHGs).

• The SHG-Bank Linkage Programme (SBLP) was born out of an action research endeavor by the National Bank for Agriculture and Rural Development (NABARD) in 1989, which later transitioned into a pilot project in 1992. It functions as a vital tool for bridging formal financial systems with the informal sector, with a special focus on empowering rural poor individuals, especially women, through initiatives like the DAY-NRLM.
• The main elements of the SHG Bank linkage consist of:
  • Educating and raising awareness among Bank Branch Managers.
  • Training and assigning Bank Sakhi personnel at Rural Bank Branches.
  • Implementing Community-Based Repayment Mechanisms (CBRM) at Rural Bank Branches.
  • Linking SHGs with credit facilities.
• This initiative enables banks to establish savings accounts for SHGs and provide loans backed by group guarantees. Typically, these loans exceed the deposits made by SHGs. Banks are mandated to assess the holistic credit needs of SHG members, encompassing income-generating ventures, as well as social needs like housing, education, marriage, and debt consolidation.
• According to RBI's Priority Sector Lending regulations, bank loans extended to SHG members are classified as priority sector advances. These loans fall under various categories including Agriculture, Micro, Small and Medium Enterprises (MSMEs), Social Infrastructure, and Others.
• The program has substantially decreased the reliance of rural individuals on informal financial sources such as moneylenders and pawnbrokers. Membership in SHGs has facilitated the economic empowerment of women by granting them control over resources, political empowerment by involving them in decision-making processes, and social empowerment by improving their social status through enhanced economic conditions.

The Bihar Rural Livelihoods Promotion Project (BRLP), launched on October 2, 2006, with funding from the World Bank, introduced the "JEEViKA" program under the Bihar Rural Livelihoods Promotion Society, registered according to the Societies Registration Act 1860. The program's fundamental principle involved establishing a three-tier community structure comprising Self-Help Groups as primary units, Village Organizations as secondary entities, and Cluster-Level Federations at the tertiary level. Aimed at fostering economic and social advancement among rural poor, particularly women, the initiative aimed to empower them towards self-reliance. From 2008 to 2020, JEEViKA alone impacted around 12 million women in Bihar.

• Establishment and Objectives
  • Kudumbashree was established in 1997 in Kerala with the aim of eradicating poverty and empowering women, following the recommendations of a government-appointed task force. The mission received support from the Government of India and NABARD.
• Operational Structure
  • The mission operates through a Three-Tier structure consisting of Neighbourhood Groups (NHGs) at the primary level, Area Development Societies (ADS) at the ward level, and Community Development Societies (CDS) at the local government level. This structure forms a large network of Self-Help Groups (SHGs).
• Goal
  • The primary goal of Kudumbashree is to eliminate absolute poverty within a specific timeframe of 10 years, with active participation from local self-governments. It aims to uplift families and empower women to improve their socio-economic status and overall well-being.
• Significance
  • Kudumbashree has significantly focused on microfinance, empowering women, generating employment, alleviating poverty, and initiating various social initiatives.
  • It has emerged as Kerala's largest social capital, with its members becoming elected representatives in local government bodies.
  • During the Covid crisis, Kudumbashree's 'Janakeeya Hotels' provided quality, affordable food to the needy.
• Microfinance and Empowerment
  • Kudumbashree relies largely on microfinance to address poverty and empower women. Its Thrift and Credit system enables women across the state to access microfinance for entrepreneurship and financial inclusion. In weekly meetings, members contribute thrift amounts, which are used to provide loans to those unable to access traditional banking services. Repayments and interest contribute to enhancing the financial capabilities of NHGs and promoting sustainable economic growth
• Community Engagement and Political Participation
  • One of Kudumbashree's significant contributions is mobilizing women for employment creation and political participation, working closely with panchayat raj institutions. Its three-tier structure ensures grassroots involvement and facilitates effective community engagement.

The Self-Employed Women’s Association of India (SEWA) is a trade union established in 1972 by Gandhian and civil rights leader Dr. Ela Bhatt. It focuses on empowering poor self-employed women workers in India. SEWA members are women who earn a living through their own labor or small businesses. The primary objectives of SEWA are to organize women workers for full employment and self-reliance. Additionally, SEWA aims to integrate marginalized, impoverished women in the informal sector into the mainstream economy and uplift them out of poverty.

Shri Mahila Griha Udyog Lijjat Papad, commonly known as Lijjat, is an Indian women's cooperative founded in 1959 with the vision of empowering women through employment and livelihood opportunities. Conceived by Nilesh Mansata from Kolkata, Lijjat initially operated from Lohana Niwas, a cluster of five buildings in Girgaum. Although it originated as a cottage industry in urban areas, Lijjat has expanded its reach to rural regions, becoming a symbol of female empowerment in India. Notably, Lijjat's production process remains manual, reflecting its commitment to generating self-employment for women. However, certain administrative tasks and accounting procedures in some Mumbai branches have adopted computerization. Additionally, Lijjat emphasizes promoting literacy and computer education among its members and their families, aligning with its broader mission of women's empowerment.

To enhance the effectiveness of Self-Help Groups (SHGs) and advance women's empowerment, several recommendations can be considered. Firstly, implementing comprehensive capacity building, training, and skill development programs tailored specifically for women engaged in SHGs is essential. Additionally, establishing a system for thorough rating and categorization of SHGs based on their performance and impact could facilitate identifying areas for enhancement and allocating resources more effectively. Organizing frequent awareness camps by Rural Development authorities can also be beneficial in educating and mobilizing communities towards the advantages of SHGs. Moreover, incentivizing banks and Microfinance Institutions (MFIs) to increase funding for SHGs, such as offering additional credit scoring in Priority Sector Lending (PSL), can further enhance their financial sustainability and outreach. Lastly, promoting gender sensitization initiatives to challenge societal taboos and stereotypes concerning women's roles and capabilities is critical for fostering a more inclusive and supportive environment for SHGs and women's empowerment.