Self-help groups (SHGs) are the self governed ,peer controlled small informal groups which is association of the poor ,mainly from socio-economically homogeneous families , it has been the most effective tools for financial inclusion which have the principle, ‘by the women, of the women and for the women’. Self-help groups are voluntary associations of people with common interests formed to achieve collective social and economic goals. Such groups are organised for mutual help and benefit. It is formed democratically without any political affiliations. It can be an association of 15’20 women and/or men, although they generally consist exclusively of women members. In India, more than 90 per cent groups are formed by women. The initial operations of SHGs start with collecting savings from members. These groups inculcate the habit of thrift among the members . By collecting small saving huge amount can be raised. These groups advance loans to the needy members. The total funds owned by the group are thus circulated in the form of loan among the members.
SHGs in India
Over the decades of planned development, which had the emphasis on women’s program solely welfare oriented, the need for an development approach was recognized, this was the time when woman were also considered first as a productive worker and contributor to the economy .The formal financial Institutions have failed to perform their role of supplying institutional credit to the women folk in our country for undertaking the income generating activities. As a result, a large segment of poverty stricken people and particularly the women who constitute a significant number of total population still remain outside now need for the emergence of a new institution to tackle the situation raised.
Motivation of Study:-
SHGs are a tool to empower the poorest of poor by them coming together and act as an whole rather individual that gives them internal strength, this motivated me to do this study that how this process goes on through different stages especially when it is related to ‘money ‘(that one thing these people as an individual do not have) what make them come together, and also holds them there, and that too in an informal group.
The identification, formation, and nurturing of groups is carried out by NGOs, other development agencies or banks with the promoters inculcating habit of thrift among members. Once the groups are trained and strengthened, they are linked to nearby banks, usually within six months of formation. Banks provide collateral-free credit in increasing proportion to the group’s accumulated savings. All the initiatives such as selection of borrowers for availing credit, identification of activity, unit cost volume of loan, management of finance, procedures for repayment are undertaken by the poor at the group level. Precisely, SHGs can be stated ‘as a plan by the people, of the people for the people. It reflects the real people’s participation in the process of development at micro level.
Rules in the group: – all the rules related to attendance in meetings, timing of meetings, saving amount, lending limits, interest rates, responsibility sharing, Rotation of responsibility and punishment for not following the rules are set by the SHG members themselves so the bylaws are evolved not enforced.
Reason for formation of SHGs: – SHGs are collective action of people who are poor and are people of mainly from socio-economically homogeneous families, who as individual lack resources to earn ,lack assets ,and financial help from any institution due to non payment capacity this make them extremely vulnerable , SHG provide a platform to these people to com together and develop a system which inculcate a habit of small saving by each member and save it collectively in the group and can use this amount for internally lending to the members on pre set very low interest rates, this whole process is possible because the benefits are grater then the previous ‘Statuesquo’ situation and also the cost is very low in comparison to the benifits.
Different Models of Self-help Group Credit Linkage
Two models of microfinance involving credit linkage with banks are
SHG-Bank Linkage Model
MFI ‘ Bank Linkage Model.
SHG – Bank Linkage Model involves the SHGs financed directly by the banks i.e Commercial Banks (Public Sector and Private Sector), Regional Rural Banks and Cooperative Banks., which started as a pilot program in 1992 has developed with rapidly over the years. SHG-Bank Linkage Programme was started on the basis of recommendation of S K Kalia Committee the SHG-bank linkage programme is now considered by the banking system as a commercial proposition, with advantages of lower transaction costs and higher coverage of rural clientele by the bank branches.three different models have emerged in this context.
Model I: SHGs promoted, guided and financed by banks.
Model II: SHGs promoted by NGOs/ Government agencies and financed by banks.