Syllabus
GS Paper 2 – Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation. Development Processes and the Development Industry — the Role of NGOs, SHGs, various groups and associations, donors, charities, institutional and other stakeholders.
Context
In India, self-help groups for women have served as catalysts for empowerment, promoting financial self-sufficiency, societal respect, and communal resilience.
Self-Help Groups (SHGs)
Introduction
Self-Help Groups (SHGs) in India have emerged as a powerful tool for tackling rural poverty by improving access to credit and financial services. The inability to provide collateral security, poor credit absorption capacity, inadequate institutional reach, and weak community networks are the four major barriers to financial inclusion, as identified by a committee led by Dr. C. Rangarajan. However, the presence of robust community networks in villages is increasingly acknowledged as a crucial component of rural credit linkage. These networks facilitate credit access for the impoverished, playing a pivotal role in poverty reduction. They also foster social capital among the underprivileged, particularly women, empowering them and amplifying their societal influence. Furthermore, financial independence achieved through self-employment leads to numerous positive externalities, including enhanced literacy rates, improved healthcare, and more effective family planning.
Self Help Groups
- A Self-Help Group is an informal gathering of individuals united to enhance their living conditions.
- It is a self-governed and peer-controlled entity made up of individuals from similar socio-economic backgrounds.
- The group is driven by a shared desire to accomplish a common goal.
- Self-Help Groups (SHGs) are centered around enhancing the self-esteem of their members and are founded on four key pillars:
- Social Mobilization: The formation and promotion of sustainable institutions for the underprivileged.
- Financial Inclusion: Ensuring access to financial services for all.
- Livelihood: Focusing on income generation and employment opportunities.
- Social Inclusion and Convergence: Promoting integration into society and coordination of resources and services.
Functions of Self-Help Groups
- Capacity Building: Self-Help Groups aim to enhance the functional capacity of the poor and marginalized, particularly in the realm of employment and income-generating activities.
- Conflict Resolution: These groups address conflicts through collective leadership and mutual discussion, promoting harmony within the group.
- Collateral-Free Loans: They offer collateral-free loans with terms set by the group itself, reflecting market-driven rates.
- Collective Guarantee System: Self-Help Groups function as a collective guarantee system for members seeking to borrow from organized sources. The underprivileged accumulate their savings and deposit them in banks, which in turn grants them easy access to loans at a minimal interest rate to establish their micro-enterprises.
- Effective Microfinance Delivery: As a result, Self-Help Groups have emerged as the most effective mechanism for the delivery of microfinance services to the poor.
Prominent Examples of Self-Help Groups in India
| Mahila Arthik Vikas Mahamandal (MAVIM): MAVIM is a corporation in Maharashtra dedicated to women’s development. It strives for women’s economic empowerment by forming Self-Help Groups (SHGs), offering training, credit facilities, and backing various income-generating activities. |
| SEWA (Self-Employed Women’s Association): SEWA is a trade union and women’s cooperative that seeks to enhance the economic and social conditions of self-employed women workers in the informal sector. It organizes women into SHGs, provides them with training, and facilitates their access to financial services. |
| Kudumbashree: Initiated by the Government of Kerala, Kudumbashree is a program aimed at eradicating poverty and empowering women. It promotes the formation of neighborhood groups that eventually form SHGs. Kudumbashree concentrates on various income-generating activities and women’s capacity building. |
| Bandhan-Konnagar: Bandhan-Konnagar is a non-governmental organization (NGO) committed to alleviating poverty through the formation of SHGs. It focuses on providing microfinance services, training, and livelihood support to women in marginalized communities. |
| Bhagini Nivedita Gramin Vigyan Niketan (BNGVN): BNGVN is an organization for rural development that advocates for women’s empowerment and sustainable livelihoods. It aids in the formation of SHGs and provides women with training, financial services, and technical support for income-generating activities. |
Evolution of Self-Help Groups
- Historical Origin: The concept of Self-Help Groups (SHGs) originated in the 1970s, with the establishment of the Self-Employed Women’s Association (SEWA) in Gujarat being a notable event.
- Bank Linkage: In 1992, SHGs were linked to banks for the provision of small loans. This led to the inception of the SHG Bank Linkage Project (SHG-BLP), which aimed at creating livelihood opportunities.
- Swarna Jayanti Gram Swarojgar Yojana: Launched in 1999, this initiative recognized the potential of SHGs in fostering self-employment in rural areas.
- National Rural Livelihoods Mission (NRLM): In 2011, SHGs were incorporated into the NRLM, becoming key implementers of the government’s aim to secure livelihood opportunities for the poor.
- Community Investment Fund: Launched in 2014, this fund provided SHGs with up to Rs 50,000 per year for the design and implementation of local livelihood programs.
- Formal Village Groups: The integration of SHGs into the NRLM and the establishment of the Community Investment Fund marked the transformation of SHGs from informal alliances to formal village groups.
Significance of Self-Help Groups
- Enhancing Functional Capacity: SHGs improve the functional capacity of the poor and marginalized by offering opportunities for skill development, employment generation, and income increase.
- Resolving Conflicts: SHGs serve as platforms for collective leadership and mutual dialogue, fostering community cohesion and shared responsibility.
- Access to Credit: SHGs play a crucial role in providing their members with collateral-free loans. The interest rates of these loans are market-driven, ensuring fairness and sustainability in financial transactions.
- Microfinance Powerhouse: SHGs are recognized as the world’s largest microfinance project, with millions of groups availing substantial loans.
- Mitigating Risk: SHGs act as a collective guarantee system, providing assurance for members seeking loans from organized sources.
- Promoting Financial Inclusion: SHGs facilitate the inclusion of marginalized individuals into the formal banking system, enabling the poor to save money in banks and promoting financial literacy and inclusion.
- Empowering Economically: Members can utilize the loans obtained through SHGs to start micro-enterprises, leading to economic empowerment.
- Alleviating Poverty: By focusing on employment generation, income enhancement, and financial inclusion, SHGs contribute to the overall goal of poverty alleviation.
- Empowering Women: Women can utilize their skills and talents to start businesses and become financially self-reliant, leading to women empowerment.
Contribution of Self-Help Groups to India
- Credit Discipline: Highlighted by a repayment rate exceeding 96%, SHGs contrast with the challenges faced by India’s commercial banks, which often grapple with substantial non-performing loans.
- Growth: According to the Economic Survey 2022-23, SHGs have demonstrated impressive growth rates, with a compound annual growth rate (CAGR) of 10.8% in credit linkages and 5.7% in credit disbursement per SHG over the past decade.
- Government Support: The government’s active engagement with SHGs is evident in their inclusion in policies and programs, reflecting a recognition of their organizational effectiveness at the grassroots level.
- Diversified Roles: SHGs undertake a variety of roles, including managing local community kitchens, running health services, overseeing slum redevelopment initiatives, and managing agri-nutri gardens.
- Political Influence: SHGs have gained significant influence in politics, with political parties incorporating them into women-focused manifestos.
- National Significance: Prime Minister Narendra Modi has emphasized the role of SHGs in transforming from “Self-Help Groups” to “Nation Help Groups,” underscoring their national significance.
- Financial Commitment from States: State governments, particularly in Uttar Pradesh, Madhya Pradesh, Bihar, Rajasthan, Tamil Nadu, Kerala, and Odisha, have provided substantial budgetary support, totaling Rs 5 lakh crore, directly to SHGs.
- Vote Bank: SHGs have become a vehicle for soliciting votes from women, reflecting their increasing participation in elections.
Advantages of Self-Help Groups
- Promoting Social Integrity: SHGs encourage collective efforts to combat practices like dowry and alcoholism.
- Fostering Gender Equity: SHGs empower women and instill leadership skills in them. Empowered women participate more actively in gram sabha and elections.
- Multiplier Effect: The formation of Self-Help Groups has a multiplier effect in improving women’s status in society and the family, leading to an improvement in their socio-economic condition and enhancing their self-esteem.
- Acting as Pressure Groups: Their participation in the governance process enables them to highlight issues such as dowry, alcoholism, the menace of open defecation, primary health care, etc., and impact policy decisions.
- Giving Voice to Marginalized Sections: Most beneficiaries of government schemes have been from weaker and marginalized communities. Hence, their participation through SHGs ensures social justice.
- Improving Government Scheme Efficiency: SHGs improve the efficiency of government schemes and reduce corruption through social audits.
- Providing Alternate Employment Sources: SHGs ease dependency on agriculture by providing support in setting up micro-enterprises, such as personalized business ventures like tailoring, grocery, and tool repair shops.
- Changing Consumption Patterns: SHGs enable participating households to spend more on education, food, and health than non-client households.
- Impacting Housing & Health: The financial inclusion attained through SHGs has led to reduced child mortality, improved maternal health, and the ability of the poor to combat disease through better nutrition, housing, and health – especially among women and children.
- Promoting Banking Literacy: SHGs encourage and motivate their members to save and act as a conduit for formal banking services to reach them.
Opportunities and Threats of Self-Help Groups
| Opportunities | Threats |
| Rural Poverty Alleviation: SHGs often play a crucial role in alleviating rural poverty. | Membership: Members of a group do not necessarily come from the poorest families. |
| Economic Empowerment: SHGs provide women with the confidence to participate in decision-making affairs at both the household and community levels. | Economic Gain: Despite social empowerment of the poor, the economic gain to bring about a qualitative change in their life has not been satisfactory. |
| Resource Mobilization: Unutilized and underutilized resources of the community can be effectively mobilized under different SHG initiatives. | Primitive Skills: Many of the activities undertaken by the SHGs are still based on primitive skills related mostly to primary sector enterprises. |
| Community Development: Leaders and members of successful SHGs have the potential to act as resource persons for different community developmental initiatives. | Lack of Qualified Personnel: There is a lack of qualified resource personnel in rural areas who could help in skill upgradation or acquisition of new skills by group members. |
| Leadership Skills: Active involvement in different SHG initiatives helps members to grow leadership skills. | Poor Accounting Practices: Poor accounting practices and incidents of misappropriation of funds are prevalent. |
| Political Influence: Women SHG leaders are often chosen as potential candidates for Panchayat Pradhans or representatives to Panchayati Raj Institution (PRI). | Marketing Resources: There is a lack of resources and means to market their goods. |
| Dependence on NGOs and Government Agencies: SHGs are heavily dependent on their promoter NGOs and government agencies. The withdrawal of support often leads to their collapse. |
Issues and Challenges
- Knowledge Gap: There is a lack of knowledge and proper orientation among SHG-members to undertake suitable and profitable livelihood options.
- Patriarchal Mindset: Primitive thinking and social obligations often discourage women from participating in SHGs, thus limiting their economic opportunities.
- Rural Banking Shortage: There is a lack of rural banking facilities. With about 1.2 lakh bank branches and over 6 lakh villages, many public sector banks and micro-finance institutions are unwilling to provide financial services to the poor due to the high cost of servicing.
- Sustainability Concerns: The sustainability and the quality of operations of the SHGs have been subjects of considerable debate.
- Security Issues: SHGs operate on mutual trust and confidence among the members. However, the deposits of the SHGs are not secured or safe.
- Limited Progression: Only a minority of the Self-Help Groups are able to elevate themselves from a level of micro-finance to that of micro-entrepreneurship.
Way forward
- Expansion to Credit Deficient Areas: There is a need to expand the SHG Movement to credit deficient areas of the country, such as Madhya Pradesh, Rajasthan, and the North-Eastern states.
- Financial Infrastructure Expansion: A rapid expansion of financial infrastructure, including that of NABARD, is required. This should be accompanied by the adoption of extensive IT-enabled communication and capacity-building measures in these states.
- Extension to Urban/Peri-Urban Areas: Efforts should be made to extend Self-Help Groups to urban and peri-urban areas. This is crucial to increase the income generation abilities of the urban poor, especially given the rapid rise in urbanization and the financial exclusion of many people.
- Positive Attitude: Government functionaries should adopt a positive attitude towards the poor and marginalized, treating them as viable and responsible customers and potential entrepreneurs.
- Monitoring: There is a need to establish a separate SHG monitoring cell in every state. This cell should have direct links with district and block level monitoring systems and should collect both quantitative and qualitative information.
- Need-Based Approach: Commercial Banks and NABARD, in collaboration with the State Government, need to continuously innovate and design new financial products for these groups, following a need-based approach.
Conclusion
Self-Help Groups (SHGs) in India have demonstrated their effectiveness in alleviating poverty and empowering women. Their collective power has facilitated financial access, created livelihood opportunities, and promoted social inclusion. However, overcoming the challenges they face is vital for their sustained success. By concentrating on comprehensive mobilization, capacity enhancement, financial inclusion, diversified livelihoods, community support structures, and schematic convergence, the influence of SHGs can be amplified. This leads to sustainable and inclusive growth for the economically underprivileged segments of society.
Sources and References: Down to Earth1 | Down to Earth2
Practice Question
Examine the role of Self-Help Groups (SHGs) in poverty alleviation and women’s empowerment in India. Discuss the opportunities and challenges faced by SHGs and suggest measures to enhance their effectiveness. Use relevant examples in your answer. (250 words)
How to approach this Question?
Introduction (20 words):
- Begin by defining what Self-Help Groups (SHGs) are.
- Briefly mention their role in poverty alleviation and women’s empowerment in India.
Body (200 words):
- Discuss the role of SHGs in poverty alleviation:
- Explain how SHGs provide access to credit for the poor.
- Discuss how they help in building livelihood opportunities.
- Provide examples to substantiate your points.
- Discuss the role of SHGs in women’s empowerment:
- Explain how SHGs foster leadership skills among women.
- Discuss how they enhance women’s participation in decision-making at the household and community levels.
- Provide examples to substantiate your points.
- Discuss the opportunities and challenges faced by SHGs:
- Mention the opportunities that SHGs present, such as financial inclusion, capacity building, and diversified livelihoods.
- Discuss the challenges faced by SHGs, such as lack of knowledge, patriarchal mindset, and lack of rural banking facilities.
- Provide examples to substantiate your points.
- Suggest measures to enhance the effectiveness of SHGs:
- Suggest ways to overcome the challenges faced by SHGs.
- Discuss how these measures can enhance the effectiveness of SHGs.
Conclusion (30 words):
- Conclude by reiterating the importance of SHGs in poverty alleviation and women’s empowerment.
- Highlight the need for continuous support and measures to enhance the effectiveness of SHGs.
Remember to provide a balanced answer, incorporating relevant facts and figures, and propose feasible solutions. Structure your answer well, with a clear introduction, body, and conclusion. Also, ensure that your answer is within the word limit specified for the exam. Good luck!