How Self Help Groups Work In India

A self help group is a group of ten to twenty people who come together with the intent of supporting each other financially. The group of people come together voluntarily and regularly save small sums of money. Once the money becomes significant, the saved money is lent to one of the member in the group or to another person in the village. Banks and other non-governmental organizations (NGOs) work to bring together such self-help groups. Most of these groups link themselves to a bank as this makes the process of delivering micro credit easier. A group generally consists of only women or only men who know each other and are volunteering to support each other.

Benefits of self help groups

There are various benefits associated with self help groups. There are hundreds of SHGs in every part of our country. Each of these groups might work with different goals in mind, but all of them work towards making the village or their group self sufficient and empowered and to alleviate poverty.

• Each of the group will have a single SHG account, so that maintaining is easier.
• A poor person might gather financial strength from the group. Where a single person’s savings money might look less, the group’s overall savings might come in handy for a beneficial task or business.
• SHGs have successfully alleviated poverty from many villages across India by empowering local men and women to start some kind of small business or cottage industry.
• Borrowing and lending through SHGs is easier and the transaction costs and hassles are minimal compared to other forms of loans.

How does it work?

A Self-Help group comprises of individuals who come together voluntarily. The people who form a group are often from similar backgrounds and from the same village. The intent and objective of the group will be to help themselves by helping each other. The basic principle of a SHG is this. It encourages the members to contribute small savings to the common fund. The savings amount is deposited in a bank into a common account in the name of the group. Being in a group makes it possible for the poor citizens to be able to afford a formal banking system. The transaction charges on SHG accounts are minimal. The bank’s involvement makes the process of distributing micro credit hassle free for the members.

Support for SHG

NABARD (National Bank for Agriculture & Rural Development) supports a SHG Bank link program through which the established SHGs can borrow funds from banks. This has been found to be a most effective method of delivering micro finance to the poor people across the country in rural areas. SHGs are usually formed with the help of NGOs, social workers and other non-profitable society oriented organizations. SHGs are often formed with the objective of helping women in the rural areas use their skills and turn entrepreneurs and to become empowered. It is strongly believed that empowering each woman in the village will make the whole village prosperous and healthy. Please visit  Self-Help eBooks to get more information about Self-Help