Self Help Groups

For Prelims: SHGs, Microfinance, Grameen Banks, NABARD, RBI.

For Mains: Significance of SHGs and Issues, its historical background and Evolution.

Why in News?

Government is aiming at raising the annual income of each woman in Self-Help Groups (SHGs) to Rs 1 lakh by 2024.

What are SHGs?

  • About:
    • Self-Help Groups (SHGs) are informal associations of people who choose to come together to find ways to improve their living conditions.
    • It can be defined as self-governed, peer-controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose.
    • SHG rely on the notion of “Self Help” to encourage self-employment and poverty alleviation.
  • Objectives:
    • To build the functional capacity of the poor and the marginalized in the field of employment and income generating activities.
    • To resolve conflicts through collective leadership and mutual discussion.
    • To provide collateral free loan with terms decided by the group at the market driven rates.
    • To work as a collective guarantee system for members who propose to borrow from organised sources.
      • The poor collect their savings and save it in banks. In return they receive easy access to loans with a small rate of interest to start their micro unit enterprise.

What is the Need for SHGs?

  • One of the reasons for rural poverty in our country is low access to credit and financial services.
  • A Committee constituted under the chairmanship of Dr. C. Rangarajan to prepare a comprehensive report on 'Financial Inclusion in the Country' identified four major reasons for lack of financial inclusion:
    • Inability to provide collateral security,
    • Poor credit absorption capacity,
    • Inadequate reach of the institutions, and
    • Weak community network.
  • The existence of sound community networks in villages is increasingly being recognised as one of the most important elements of credit linkage in the rural areas.
  • They help in accessing credit to the poor and thus, play a critical role in poverty alleviation.
  • They also help to build social capital among the poor, especially women. This empowers women and gives them greater voice in the society.
  • Financial independence through self-employment has many externalities such as improved literacy levels, better health care and even better family planning.

What is the Significance of SHGs?

  • Social integrity:
    • SHGs encourages collective efforts for combating practices like dowry, alcoholism etc.
  • Gender Equity:
    • SHGs empowers women and inculcates leadership skill among them. Empowered women participate more actively in gram sabha and elections.
    • There is evidence in this country as well as elsewhere that formation of Self-Help Groups has a multiplier effect in improving women’s status in society as well as in the family leading to improvement in their socio-economic condition and also enhances their self-esteem.
  • Voice to Marginalized Section:
    • Most of the beneficiaries of government schemes have been from weaker and marginalized communities and hence their participation through SHGs ensures social justice.
  • Financial Inclusion:
    • Priority Sector Lending norms and assurance of returns incentivize banks to lend to SHGs. The SHG-Bank linkage programme pioneered by NABARD has made access to credit easier and reduced the dependence on traditional money lenders and other non-institutional sources.
  • Alternate source of Employment:
    • It eases dependency on agriculture by providing support in setting up micro-enterprises e.g., personalised business ventures like tailoring, grocery, and tool repair shops.

What are the Issues?

  • Lacks up-gradation of skills:
    • Most SHGs are not making use of new technological innovations and skills. This is because there is limited awareness with regards to new technologies and they do not have the necessary skills to make use of the same. Furthermore, there is a lack of effective mechanisms.
  • Weak Financial Management:
    • It is also found that in certain units the return from the business is not properly invested further in the units, and the funds diverted for other personal and domestic purposes like marriage, construction of house etc.
  • Inadequate Training Facilities:
    • The training facilities given to the members of SHGs in the specific areas of product selection, quality of products, production techniques, managerial ability, packing, other technical knowledge are not adequate to compete with that of strong units.
  • Lack of Stability and Unity Especially among Women SHGs:
    • In the case of SHGs dominated by women, it is found that there is no stability of the units as many married women are not in a position to associate with the group due to the shift of their place of residence.
    • Moreover, there is no unity among women members owing to personal reasons.
  • Inadequate Financial Assistance:
    • It is found that in most of the SHGs, the financial assistance provided to them by the agencies concerned is not adequate to meet their actual requirements. The financial authorities are not giving adequate subsidies to meet even the labour cost requirements.

What is the Role of SHGs in Women Empowerment?

  • Self-help group (SHG) movement is one of the most powerful incubators of female resilience and entrepreneurship in rural areas. It is a powerful channel for altering the social construct of gender in villages.
  • Women in rural areas are now able to create independent sources of income. While there were many young semi-literate women who have home-grown skills, the absence of capital and regressive social norms prevents them from taking a full plunge in any decision-making role and setting up their own independent business.
  • Women are working in multiple sectors as Business Correspondents (BC), Bank Sakhis, Kisan Sakhis and Pashu Sakhis.

Way Forward

  • In this era of liberalization, privatization and globalization, women are more conscious for their liberty, rights and freedom, security, social status etc, but till date they are deprived from same; hence, they should be provided with their deserving rights and liberties with dignity.
  • SHGs play a very important role in the economic and social advancement of women from rural strata of society.
  • Further, government programmes can be implemented through various SHGs. This will not only improve the transparency and efficiency but also bring our society closer to 'self-governance' as envisioned by Mahatma Gandhi.

Source: IE