Self Help Groups(SHGs) Function and Importance’s

Self-Help Groups (SHGs) are informal associations formed by individuals who come together with the aim of improving their living conditions. These groups are characterized by self-governance and peer control, consisting of people with similar socio-economic backgrounds and a shared desire to work collectively towards a common purpose.

In rural areas, villages often face a multitude of challenges such as poverty, illiteracy, lack of skills, and limited access to formal credit. These issues cannot be effectively addressed at an individual level, necessitating collective efforts. SHGs serve as a vehicle for change, particularly for the poor and marginalized sections of society. By promoting the principle of “self-help,” SHGs empower individuals to engage in self-employment activities and work towards poverty alleviation.

Function of Self-Help Groups

• Building functional capacity in employment and income-generating activities for the poor and marginalized.
• Resolving conflicts through collective leadership and mutual discussion.
• Providing collateral-free loans with terms determined by the group at market-driven rates.
• Acting as a collective guarantee system for members seeking loans from formal financial institutions.
• Encouraging savings among group members, which are deposited in banks.
• Facilitating easy access to loans with low interest rates for starting micro-enterprises.
• Serving as an effective mechanism for delivering microfinance services to the poor.
• Promoting financial inclusion and empowerment among group members.
• Fostering a sense of collective responsibility and mutual support.
• Enhancing economic opportunities and improving livelihoods for participants.

Importance of Self-Help Groups

• Low access to credit and financial services contributes to rural poverty.
• Lack of collateral security, poor credit absorption capacity, inadequate institutional reach, and weak community networks are identified as reasons for financial exclusion.
• Sound community networks in villages are crucial for credit linkage in rural areas.
• Access to credit through community networks plays a critical role in poverty alleviation.
• Community networks help build social capital, particularly among women, empowering them and giving them a greater voice in society.
• Financial independence through self-employment has positive externalities such as improved literacy levels, better healthcare, and enhanced family planning.
• Improved access to credit and financial services can contribute to overall development and well-being in rural areas.

Advantages of Self-Help Groups

• SHGs promote social integrity by encouraging collective efforts to combat harmful practices like dowry and alcoholism.
• They empower women, develop their leadership skills, and increase their participation in community decision-making processes.
• The formation of SHGs improves women’s status in society and their socio-economic conditions, enhancing their self-esteem.
• SHGs act as pressure groups, advocating for issues such as dowry, alcoholism, open defecation, and primary healthcare, influencing policy decisions.
• SHGs provide a voice to marginalized communities, ensuring social justice and representation in government schemes.
• SHG-Bank linkage programs improve financial inclusion by providing easier access to credit, and reducing reliance on informal lenders.
• Social audits conducted by SHGs contribute to improving the efficiency of government schemes and reducing corruption.
• SHGs provide alternate sources of employment, reducing dependency on agriculture and supporting micro-enterprises.
• Participation in SHGs leads to changes in consumption patterns, with increased spending on education, food, and health.
• Financial inclusion through SHGs improves housing conditions, health outcomes, and child mortality rates, particularly among women and children.
• SHGs promote banking literacy, encouraging members to save and facilitating access to formal banking services.

Disadvantages of Self-Help Group

• SHGs may not exclusively comprise members from the poorest families.
• While there has been social empowerment, the economic progress of SHG members has been unsatisfactory.
• Many SHG activities are based on primitive skills, primarily in the primary sector, resulting in limited value addition and low wages.
• Skill upgradation and acquisition are hindered by a lack of qualified resource personnel and institutional mechanisms for capacity building.
• Poor accounting practices and incidents of fund misappropriation pose challenges.
• Limited resources and inadequate marketing avenues affect the sustainability of SHGs.
• Dependency on promoter NGOs and government agencies puts SHGs at risk, as withdrawal of support can lead to their collapse.

Challenges of Self-Help Groups

• Lack of knowledge and orientation hinders SHG members from pursuing profitable livelihood options.
• Patriarchal mindset and social obligations discourage women’s participation in SHGs, limiting their economic opportunities.
• Inadequate rural banking facilities hinder access to financial services for SHGs, with limited coverage and high servicing costs.
• The sustainability and quality of SHG operations are subjects of debate.
• The lack of security for SHG deposits undermines trust and confidence.
• Only a minority of SHGs are able to transition from micro-finance to micro-entrepreneurship levels.

Make Self-Help Groups Effective

• The government should act as a facilitator and promoter, creating a supportive environment for the growth and development of the SHG movement.
• Expansion of the SHG movement to credit-deficient areas of the country, such as Madhya Pradesh, Rajasthan, and states in the North-East.
• The rapid expansion of financial infrastructure, including that of NABARD, and the adoption of IT-enabled communication and capacity-building measures in these states.
• Extension of SHGs to urban and peri-urban areas, focusing on enhancing income generation opportunities for the urban poor.
• Government functionaries should have a positive attitude towards the poor and marginalized, treating them as viable customers and potential entrepreneurs.
• Establishment of a separate SHG monitoring cell in each state, with links to district and block-level monitoring systems, to collect both quantitative and qualitative information.
• Adoption of a need-based approach, with commercial banks and NABARD collaborating with state governments to innovate and design new financial products for SHGs.

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