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Self Help Groups (SHGs)

Self Help Group


A Self-Help Group (SHG) is a small, economically homogeneous group. Individuals come together to address common needs. These needs primarily relate to socio-economic empowerment. Typically, SHGs consist of members who share similar backgrounds, such as income level, occupation, or locality. These groups are formed voluntarily and operate on principles of mutual support, collective decision-making, and shared responsibility. SHGs often engage in activities such as savings mobilization, microcredit lending, skill-building workshops, and collective bargaining. They play a vital role in fostering economic independence, social cohesion, and empowerment, particularly among marginalized communities.

Functions Of Self Help Groups (SHGs)

  1. Savings Mobilization: Encouraging members to save regularly, fostering a culture of thrift and financial discipline.
  2. Microcredit Provision: Offering small loans to members for income-generating activities or emergencies, promoting entrepreneurship and self-reliance.
  3. Skill Development: Facilitating training sessions and workshops to enhance members’ vocational skills, improving their earning potential.
  4. Social Support: Providing a platform for members to share experiences, offer emotional support, and address common social issues.
  5. Collective Decision-Making: Engaging in democratic decision-making processes where members jointly decide on group activities, loans, and investments.
  6. Market Linkages: Facilitating access to markets, information, and resources to help members sell their products or services competitively.
  7. Capacity Building: Offering educational programs on various topics such as financial literacy, health awareness, and women’s empowerment.
  8. Advocacy and Representation: Representing the interests of members to external stakeholders, advocating for their rights and access to resources.
  9. Community Development: Undertaking community-based initiatives such as sanitation drives, education campaigns, or infrastructure development projects.
  10. Empowerment: Promoting self-reliance, confidence, and agency among members, enabling them to become active participants in their own development.

Need For Self Help Groups (SHGs)

  1. Financial Inclusion: SHGs offer financial services. They include savings and credit. These services are for those excluded from formal banking systems.
  2. Poverty Alleviation: SHGs promote savings, entrepreneurship, and skill development. They empower members. This empowerment helps generate income. It aids in lifting members out of poverty.
  3. Women’s Empowerment: SHGs often prioritize women’s participation, providing them with a platform for decision-making, skill-building, and economic independence.
  4. Social Cohesion: SHGs foster a sense of community and solidarity among members, strengthening social bonds and mutual support networks.
  5. Local Development: SHGs undertake community-driven initiatives that address local needs and contribute to overall development in their areas.
  6. Access to Resources: SHGs provide access to information, markets, and resources. They help members improve livelihoods. They enhance quality of life.
  7. Capacity Building: SHGs offer opportunities for capacity building through training programs, workshops, and educational sessions, enhancing members’ skills and knowledge.
  8. Entrepreneurship Promotion:SHGs encourage entrepreneurship. They provide microcredit and support. They stimulate economic growth at grassroots level.
  9. Health and Education: SHGs often prioritize health and education initiatives, raising awareness and promoting preventive healthcare practices and educational opportunities.
  10. Inclusive Development: SHGs promote inclusive development. They empower marginalized groups. These include women, rural communities, and low-income individuals. They enable participation in decision-making. They help benefit from development interventions.

Genesis For Self Help Groups (SHGs)

  1. Microfinance Movement: Emerged in the 1970s and 1980s, primarily in Bangladesh and India, as a response to the lack of access to formal financial services for the people with low income.
  2. Inspiration from Grameen Bank: Founded by Muhammad Yunus in Bangladesh, Grameen Bank pioneered the concept of providing microcredit to the people with low income, which served as an inspiration for SHGs.
  3. NGO Initiatives: Non-Governmental Organizations (NGOs) played a crucial role in promoting SHGs by organizing and facilitating group formation, providing training, and linking them with financial institutions.
  4. Government Support: Recognizing the potential of SHGs for poverty alleviation and women’s empowerment, governments in many countries started promoting and supporting SHG initiatives through various schemes and programs.
  5. Community Participation: SHGs emerged from the grassroots level, driven by the needs and aspirations of communities, particularly women and marginalized groups, to address socio-economic challenges collectively.
  6. Social Mobilization: SHGs were formed based on the principles of self-help, mutual support, and collective action, emphasizing community participation and ownership of development initiatives.
  7. Adaptation and Evolution: The SHG model evolved over time, incorporating lessons learned from practice, adapting to local contexts, and expanding beyond microfinance to include social development activities and advocacy.
  8. Global Spread: The success of SHGs in poverty reduction and women’s empowerment led to their replication and adaptation in various countries across different continents, contributing to the global movement for inclusive development.

Benefits Of Self Help Groups (SHGs)

  1. Access to Finance: Provide microcredit and savings facilities to members, promoting financial inclusion and access to capital for income-generating activities.
  2. Empowerment: Empower members, particularly women, through participation in decision-making, skill-building, and leadership opportunities.
  3. Poverty Alleviation: Facilitate income generation and asset accumulation among members, contributing to poverty reduction and economic resilience.
  4. Social Support: Create a supportive environment where members share experiences, offer emotional support, and address common social issues collectively.
  5. Skill Development: Offer training and capacity-building programs to enhance members’ vocational skills, improving their employability and income-earning potential.
  6. Community Development: Undertake community-driven initiatives that address local needs, fostering social cohesion and development.
  7. Health and Education: Promote health awareness and educational opportunities among members, leading to improved well-being and quality of life.
  8. Women’s Empowerment: Prioritize women’s participation and leadership, challenging traditional gender roles and enhancing women’s agency and socio-economic status.
  9. Market Linkages: Facilitate access to markets, information, and resources, enabling members to sell their products or services competitively.
  10. Sustainable Development: Promote self-reliance, resilience, and sustainability by fostering a culture of savings, entrepreneurship, and community ownership.

Opportunities Of Self Help Groups (SHGs)

  1. Access to Resources: SHGs provide access to financial services, training programs, and market linkages, enabling members to leverage resources for income generation.
  2. Entrepreneurship Promotion: SHGs offer opportunities for members to start and expand small businesses, fostering entrepreneurship and economic growth at the grassroots level.
  3. Capacity Building: SHGs conduct training sessions and workshops to enhance members’ skills and knowledge, empowering them for personal and professional development.
  4. Community Engagement: SHGs engage members in community-driven initiatives, allowing them to address local issues and contribute to social development collectively.
  5. Women’s Empowerment: SHGs prioritize women’s participation and leadership, providing opportunities for women to assert themselves, gain confidence, and improve their socio-economic status.
  6. Market Access: SHGs facilitate access to markets and information, enabling members to sell their products or services effectively and compete in the marketplace.
  7. Networking: SHGs provide a platform for members to network, collaborate, and share experiences, fostering a supportive environment for mutual learning and growth.
  8. Government Support: Many governments offer support and incentives for SHGs through various schemes and programs, providing additional opportunities for capacity building and financial assistance.
  9. Social Integration: SHGs promote social integration by bringing together individuals from diverse backgrounds and fostering solidarity and cohesion within communities.
  10. Inclusive Development: SHGs promote inclusive development by empowering marginalized groups, such as women and low-income individuals, to participate in decision-making and benefit from development initiatives.

Weakness Of Self Help Groups (SHGs)

  1. Limited Scale: SHGs often operate at a small scale, limiting their ability to address larger community or regional development issues comprehensively.
  2. Dependency on External Support: Many SHGs rely heavily on external support from NGOs or government agencies for training, funding, and capacity building, which may not be sustainable in the long term.
  3. Internal Conflicts: Internal conflicts or disagreements among SHG members can undermine group cohesion and effectiveness, impacting decision-making and project implementation.
  4. Financial Sustainability: Some SHGs struggle with financial sustainability, particularly in areas with limited market opportunities or where members face challenges in repaying loans.
  5. Skill Gaps: Members may lack adequate skills and knowledge in areas such as financial management, entrepreneurship, or marketing, hindering their ability to effectively manage group activities.
  6. Social Stigma: In certain communities, there may be social stigma associated with participating in SHGs, particularly for women, which can discourage participation and limit the reach of the group.
  7. Exclusionary Practices: SHGs may inadvertently exclude certain marginalized groups, such as the very poor or those with disabilities, due to eligibility criteria or social dynamics within the group.
  8. Limited Access to Markets: Despite efforts to facilitate market linkages, some SHGs may face challenges in accessing markets or competing with larger businesses, affecting their income-generating potential.
  9. Dependency Syndrome: In some cases, SHG members may develop a dependency syndrome, relying solely on external support without actively seeking opportunities for self-reliance and empowerment.
  10. Lack of Monitoring and Evaluation: Weak monitoring and evaluation systems can hinder the effectiveness of SHG interventions, making it difficult to assess impact, identify challenges, and improve program outcomes.

Challenges Of Self Help Groups (SHGs)

  1. Financial Sustainability: Financial sustainability is challenging in areas with limited economic opportunities or where loan repayments are difficult.
  2. Capacity Building:Ensuring members have necessary skills is a challenge. These skills include group and financial management. Also, entrepreneurship.
  3. Social Stigma: Social stigma can hinder SHG participation. This is especially true for marginalized groups like women. It affects recruitment and involvement.
  4. Group Dynamics: Managing internal conflicts, maintaining group cohesion, and addressing power imbalances among members are persistent challenges within SHGs.
  5. Market Access: SHGs face challenges in accessing markets. This is especially true in competitive environments or remote areas. Securing fair prices for products or services can be difficult.
  6. Government Support: Inconsistent government support, bureaucratic hurdles, and delays in disbursing funds or providing assistance can hinder SHG initiatives.
  7. Scaling Up: Scaling up successful SHG models is challenging. It aims to reach more communities. This includes achieving broader impact. Maintaining quality and effectiveness remains a significant challenge.
  8. Vulnerability to External Shocks: SHGs are often vulnerable to external shocks such as natural disasters, economic downturns, or changes in government policies, which can disrupt operations and affect members’ livelihoods.
  9. Access to Resources: Limited access to resources such as land, credit, technology, and infrastructure can constrain the growth and sustainability of SHG activities.
  10. Monitoring and Evaluation: Establishing robust monitoring and evaluation systems to track progress, assess impact, and identify areas for improvement requires ongoing attention and resources.

Measures To Make Self Help Groups (SHGs) Effective

  1. Capacity Building: Provide regular training and workshops to enhance members’ skills in group management, financial literacy, entrepreneurship, and market linkages.
  2. Strong Leadership: Foster strong leadership within SHGs to facilitate decision-making, resolve conflicts, and ensure accountability and transparency.
  3. Empowerment: Empower members, especially women. Promote active participation. Encourage decision-making roles. Foster a sense of ownership and responsibility.
  4. Social Mobilization: Strengthen social mobilization efforts to increase SHG membership and engagement, particularly among marginalized communities.
  5. Financial Sustainability: Promote sustainable financial practices. This includes effective savings mobilization. Also, prudent lending practices. Additionally, income-generating activities are essential. They ensure the long-term viability of SHGs..
  6. Market Access: Facilitate market access. Provide market information. Offer training in product development and marketing strategies. Establish linkages with buyers and wholesalers.
  7. Networking and Collaboration: Encourage networking and collaboration among SHGs, fostering knowledge sharing, resource pooling, and collective action on common issues.
  8. Monitoring and Evaluation: Establish robust monitoring and evaluation mechanisms to track progress, measure impact, and identify areas for improvement in SHG activities.
  9. Government Support: Advocate for supportive government policies, funding, and technical assistance to strengthen SHG initiatives and ensure their sustainability.
  10. Adaptability: Encourage SHGs to adapt to changing circumstances, market dynamics, and community needs, fostering innovation and resilience in their approaches.

Case Studies Of Self Help Groups (SHGs)

  1. Grameen Bank, Bangladesh: Founded by Muhammad Yunus, Grameen Bank pioneered microcredit, empowering millions of low-income women in Bangladesh through small loans and group-based lending.
  2. Kudumbashree, Kerala, India: One of the largest women’s SHG networks globally, Kudumbashree has transformed the lives of women in Kerala through microenterprise development, community initiatives, and social empowerment programs.
  3. Bandhan, India: Started as an SHG in West Bengal, Bandhan transformed into a successful microfinance institution, providing financial services to millions of low-income individuals and small entrepreneurs across India.
  4. BRAC, Bangladesh: BRAC’s SHG model combines microfinance with comprehensive development programs, impacting millions of people in Bangladesh by addressing poverty, education, healthcare, and women’s empowerment.
  5. Watershed Development in Maharashtra, India: SHGs played a pivotal role in watershed development projects in Maharashtra, where communities collaborated to conserve water, enhance agriculture, and improve livelihoods sustainably.
  6. SEWA, India: Self-Employed Women’s Association (SEWA) has empowered informal sector women workers in India through SHGs, offering financial services, healthcare, childcare, and advocacy for their rights and welfare.
  7. Jeevika, Bihar, India: Jeevika, a World Bank-supported program, promoted SHGs in Bihar, enabling women to access financial services, start small businesses, and participate in community development initiatives, leading to socio-economic transformation.
  8. Praja Pragati, Andhra Pradesh, India: Praja Pragati empowered tribal communities through SHGs, facilitating collective action for sustainable forest management, income generation, and social development in the region.
  9. Women’s Dairy Cooperatives in Kenya: SHGs in Kenya have formed women’s dairy cooperatives, enabling members to collectively process and market dairy products, increasing their incomes and improving livelihoods.
  10. Savings and Credit Groups in Nepal: In Nepal, SHGs facilitate rural savings and credit, providing financial services to marginalized groups and empowering women economically.


In conclusion, Self-Help Groups (SHGs) have emerged as powerful instruments for socio-economic empowerment, particularly among marginalized communities and women. Through collective action, access to financial services, and capacity-building initiatives, SHGs facilitate poverty alleviation, entrepreneurship promotion, and community development. Despite challenges, SHGs show resilience and effectiveness. They foster self-reliance and social cohesion. They promote inclusive development. With support from governments, NGOs, and stakeholders, SHGs can create an equitable society.

Frequently Asked Questions:

Q(1) What is the scheme for SHGs?

Ans(1) SHG loan above Rs. 10.00 lakh can be cover under Credit Guarantee Fund for Micro Units (CGFMU). The difference between 7% p.a. and the rate of interest charged by the bank will be provided to beneficiaries under DAY-NULM as interest subsidy.

Q(2) What is the main aim of SHG?

Ans(2) To provide micro-finance to groups is normally the primary objective of a Self Help Group (SHG). These groups aim to facilitate the process of self-empowerment. A self-help group (SHG) is a financial intermediary committee usually composed of 10 to 20 local women or men.

Q(3) What are the three characteristics of self help group?

Ans(3) Each group should contain 15 to 20 members. The members of this group should live below the poverty line. It has identical interest/common occupation/social heritage, homogenity and affinity.

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