What are SHGs?
A self help group is defined as a “self governed, peer controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose.”
The distinguishing features of self help groups are given below.
(i) SHG usually consists of at least ten people (maximum twenty) with similar economic prospects and social status.
(ii) It promotes goals such as economic improvement and fundraising Development and freedom from exploitation.
iii) It has its own rules for the functioning of the group as well as for Compliance with certain rules by group members and regarding regulations Membership.
iv) Forms of such groups can be largely informal (unregistered).
v) Regular general meetings are held to solve their problems (economy and social) and they collect regular savings from members.
vi) Members’ savings are held in the bank under the name of the group and are authorized. A representative from the group manages the bank account. Deposits are deposited in the bank used to lend the member’s credit for the purpose of including consumption equal to the amount. Interest set by the group (usually higher than the interest charged by the bank).
vii) Sources of money are contributions from member savings, entry fees and interest from loans, income from joint ventures and income from investments.
The funds can be used for loans, social services and general investments.
Need for SHGs
One of the causes of poverty in our rural areas is poor access to credit and financial services.
A committee chaired by Dr. K. Rangaradjan for the preparation of a comprehensive report on “Financial inclusion in the country” identified four main reasons for the lack of financial inclusion:
- The impossibility of providing collateral,
- Poor borrowing capacity,
- The size of the institution is insufficient
- Weak community network.
The presence of a strong network of rural communities is increasingly recognized as one of the most important elements of credit hubs in rural areas.
They help access credit for the poor and thus play an important role in reducing poverty.
They also help build social capital among the poor, especially women. It empowers women and gives them a bigger voice in society.
Financial independence through self-employment has many external factors such as increased literacy, better health care, and even better family planning.
Benefits of SHGs
Social Integrity – SHG promotes collaborative efforts to combat practices such as dowry, alcoholism and many more.
Gender Equality – SHG empowers women and sees the leadership qualities among them. Women in authority are more actively involved in the Gramm Sabha and elections. In this country, as elsewhere, there is evidence that the formation of self-help groups has a multiplier effect on improving the status of women in society and in the family, leading to an increase in their socioeconomic status and an increase in their self-esteem.
Stakeholders – By participating in the management process, they can highlight issues such as dowry, alcoholism, risk of open defecation, primary health care, etc. and decisions about policy impact.
Voice of the Marginalized Section – Most of the beneficiaries of government programs come from weaker and marginalized communities, therefore their participation through SHG guarantees social justice.
Financial Inclusion – Loan interest rates with priority sectors and rates of return encourage banks to provide loans to SHGs. The SHG-Bank liaison program introduced by NABARD facilitates access to credit and reduces reliance on traditional lenders and other non-institutional sources.
Improve the effectiveness of government systems and reduce corruption through social audits.
Alternative sources of employment – reduce dependence on agriculture by providing support for microenterprise creation, for example personalized business activities such as sewing, grocery store and workshop.
Changes in consumption patterns – Participating households can spend more on education, nutrition and health than non-customer households.
Housing and Health Impacts – Financial inclusion achieved through SHG has resulted in reduced child mortality, improved maternal health and the ability of the poor to fight disease through better nutrition, housing and health – especially among women and children.
Banking Literacy – Encourage and motivate its members to save and act as an official banking service channel to reach them.
Weakness of SHG
- Group members do not necessarily come from the poorest families.
- Even though the poor are socially empowered, the economic benefits of qualitative changes in their lives are not satisfactory.
- Many activities carried out by SHG still rely on primitive skills, especially those related to primary sector companies. Due to low value added per employee and main livelihood, such activities often do not result in a significant increase in group members’ income.
- In rural areas there is a shortage of qualified staff who can help upgrade skills or acquire new skills from group members. In addition, there are no institutional mechanisms for capacity building and skills training.
- Bad accounting practices and cases of misuse of funds.
- Lack of resources and funds to place the goods.
- SHGs rely heavily on government agencies that sponsor them. The withdrawal of support often causes their damage.
STEPS TO ACHIEVE SHG EFFECTIVENESS
The government must act as a facilitator and organizer and create a supportive environment for the growth and development of the SHG movement.
Expansion of the SHG movement to areas with a credit deficit – such as Madhya Pradesh, Rajasthan, states in the Northeast.
Rapid expansion of financial infrastructure (including NABARD) and introduction of extensive communication and capacity building measures in these countries.
Developing Support Groups in Urban / Suburban Areas – Efforts should be made to increase the capacity of the urban poor as urbanization increases rapidly and many people remain financially isolated.
Positive Attitude – Officials must treat the poor and marginalized as worthy and responsible customers and aspiring entrepreneurs.
Surveillance – the need to have separate SHG surveillance cells in each country. The cell must have a direct connection to an area and a block level surveillance system. Cells must collect both quantitative and qualitative information.
Demand-oriented approach – commercial banks and NABARD, in collaboration with state governments, must continue to develop and innovate new financial products for this group.