Self Help Groups (SHGs) – Meaning, Benefits, Objectives


This article intends to educate you on Self-Help Groups (SHGs). For a better understanding, we have included everything about SHGs which will make the topic clearer.

Explanation of SHGs, their characteristics, needs, functions, benefits, examples, weaknesses, and challenges, and much more is provided for you to go through.

Moreover, we have included its history and government schemes for better coverage of the topic.

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What are Self-Help Groups?

The Indian labour consists of 1/3rd of women who belong to the rural population. Due to the lack of resources, opportunities and social constraints, they are unable to elevate their living conditions.

Self-help groups are the way to pave a better opportunity for women and expand their success horizons.

Self-help groups are informal groups that people come together to overcome their common problems and improve their standard of living.

The members of such groups belong to a similar social and economic background.

SHGs are self-governed and controlled groups where the members voluntary come up with the amount they can conveniently save out of their earnings.

It acts as the mutually agreed contribution to the common fund and is used to provide loans to the members.

SHGs have emerged as an effective tool in elevating the people from below poverty line and improving their living conditions and social status by promoting self-employment.

It is an informal group and does not require registration under any Societies Act, State Cooperative Act or a Partnership firm.

The motto behind SHGs (Self Help Groups)

“Savings First – Credit Later”

Self-help groups work with this motto where every member takes their initiative towards self-dependence and starts small savings. 

Members of Self-help groups (SHGs)

  • Individuals who belong to the same social and economic background can become a member of Self-help groups
  • One person from each family can be a member of an SHG so that more families have the opportunity to be a part of it
  • The members of SHGs are generally either only men or only women
  • Generally, there are 15-20 members in a Self-help group

Meetings of SHGs

  • The members of SHGs shall meet at regular intervals. The meetings can be weekly or monthly.
  • Every member of the group shall be present at the meetings
  • The group should ensure the maintenance of a membership register, minutes register, and regular entries.

How can you form SHGs (Self Help Groups)?


Individuals belonging to the weaker section of the society and poor social and economic background can form self-help groups.

They should comply with all the guidelines and rules which are stated to form an SHG. There shall be an adequate number of members available to form a group.

No legal obligation is to be fulfilled as it is a voluntary organisation made up by individuals belonging to a similar background.

Once a group is formed and few meetings are held where everything is decided and savings are collected, a savings bank account can be opened in the name of the self-help group.

This ensures the better savings mobilization and helps in obtaining a loan by the group or its members at better interest rates and easily.

Number of Self-Help Groups (SHGs) in India

A report from 2006 by NABARD states an estimated figure of 202 million Self-help groups (SHGs) in India. They represent a total of 33 million members.

Books maintained by Self-help groups (SHGs)

All the Self-help groups have to maintain simple and clear books for all the transactions. If the members are incapable of book maintenance, they shall engage someone to fulfill this function.

  • Minutes book which holds the details of meetings, name of members and group rules etc.
  • A Weekly Register containing the summary of receipts and payments. It is done every week and updated in every meeting.
  • Savings and Loan Registers with the details of member savings separately and the group as a whole. Details of it are recorded in it.
  • Member’s Pass Book which aims to encourage regular savings.

What are the characteristics of Self-Help Groups (SHGs)?

The features and characteristics of the Self-Help groups are as follows:-

  • The ideal size of Self-help groups is 10 to 20 members. This limit is set as in bigger groups, active participation cannot be experienced by all the members.
  • Self-help groups are informal and voluntary associations. They need not be registered under any Act or law of the government.
  • Only one member from each family shall join. This ensures the participation of families in the groups.
  • Self-help groups either consist of men or women. The mixed group are not given preference. This owes to the mindset of individuals in rural areas where women participation is restricted.
  • Reports have stated that as compared to men’s groups, women’s group function and perform better.
  • Every member of the Self-help groups belongs to the same socio-economic background. This is done to ensure a hesitation-free environment and comfortable communication among the members.
  • The members of the group conduct meetings and meet regularly. Generally, they should meet weekly or monthly. This helps the member in understanding each other better and form better relations.
  • Full attendance is required during the meetings. The purpose of complete attendance is the larger and better participation of the members.
  • Self-help groups follow the principle of collective leadership. It promotes group cohesion and effective goal integration.
  • There are mutual trust and confidence among the members of the group. This is the key to successful and prolonged functioning of the groups.

What are the objectives of Self Help Groups (SHGs)?

Self-help groups work to achieve several objectives collectively as well for its members individually which are as follows:-

  • To develop the habits of saving and banking among the members
  • To ensure the availability of loan for productive purposes
  • To help the members uplift their social in economic status and gain economic prosperity through credit facilities
  • To secure the members from financial, moral and Technical strengths
  • To initiate a group feeling among the members and enhance the confidence and capabilities of them
  • To instil the values of collective decision making and problem-solving among the members
  • To sensitize the women of the rural and urban poor areas and its relevance in their strengthening of the status
  • To make them learn the organisation and management of finance and distribution of benefits
  • To motivate the members, especially women, to take up the social responsibilities related to the development
  • To develop a forum for the members to provide them with space and support for each other

What is the need for Self-Help Groups (SHGs)?

Self-help groups have significantly emerged as a powerful way to uplift the social and economic status of the rural and poor population.

They are strongly needed in the current scenario due to the following reasons:-

  • To make the rural population accessible and available with the credit and financial services. Inadequate resources and lack of knowledge restricts them from availing the complete benefits of the same.
  • To take collective action against breaking the chain of poverty. Individually, the rural and urban poor problems cannot be solved and eradicated.
  • Develops a sound community network in the villages. Self-help groups have been increasingly recognised as one of the most crucial elements resulting in credit linkage in the rural areas.
  • It helps in poverty alleviation as it makes the rural and urban poor people access to the credit facilities of the bank.
  • To help the members of the group obtain financial Independence through self-employment opportunities and facilities.
  • To improve the literacy levels, better family planning and better Healthcare system for the members of self-help groups and other people belonging to the rural areas and similar backgrounds
  • To develop and build social capital for the women belonging to the poor socio-economic background by empowering them and furnishing them with a greater voice in the society

What are the functions of Self-Help Groups?

The members of self-help groups perform various functions. These functions ensure the successful and long-running of the groups.

They have the responsibility to perform the following functions:-

Group meetings

These are one of the most important functions of self-help groups. It forms the foundation of the groups. Also, it facilitates the flow of ideas and views or members.

Members interact with each other in meetings and make important decisions. Meetings can be held anytime at the convenience of the members.

Conflict Resolution

The members of the group face several kinds of circumstances. The self-help groups are encouraged to discuss and rule out solutions to the problems of the members.

On an individual level for poor people, it is not possible due to inadequate resources and weaknesses. 

Evaluation of Rules and Bylaws

For uninterrupted and effective functioning and performance of self-help groups, the members shall make a set of rule or bylaws.

Also, guidelines shall be laid out for decision-making in the group.

Mobilization of savings

The members have to decide the amount of savings every member has to make towards the group fund.

Also, decisions are made related to the periodicity and utilization of the savings.

Maintenance of Records

Every self-help group has to maintain a set of books. The books which a group shall maintain are savings register, attendance book, loan register, minute’s book and Member’s passbook.

Internal Lending

Another vital function of SHGs is internal lending. The groups utilize the savings fund to provide loans to the members.

The group decides everything related to the loan like duration, interest, repayment, etc.

Collective Guarantee system

These groups act as and work as a collective guarantee system. For the members who borrow from the organized resources, the group serves for them.

The members deposit their savings in the bank and gain access to loans at nominal interest rates to commence their micro-unit enterprise.

Microfinance services

Self-help groups have emerged a powerful tool or measure to uplift the status of the people belonging to a weaker background socially and economically.

Therefore, SHGs are a strong tool to deliver microfinance services to the poor.

What are the Benefits of Self-Help Groups (SHGs)?

Self help groups (SHGs)

Apart from escalating the economic and social status of the members of the groups, SHGs serves various benefits which are:-

  • Self-help groups help in women empowerment by making then independent financially as well as intellectually.
  • It has a major role to play in combating the social evils like gambling, alcoholism, drug addiction and more. It instils better habits in the members and leads them to be a responsible and better human being.
  • It helps in elevating the employment opportunities in rural India and for the rural and urban poor people. It supports micro-level entrepreneurship which reduces the dependence on a single source of income and widens income horizons for the members.
  • Being a member of SHGs, it provides easy access to government policies and schemes. The schemes are meant for the marginalized and backward section of the society from which most of the members belong.
  • It helps in improving the standard of living by providing employment opportunities through micro-finance entrepreneurship. It improves the living standard, Health Care, family planning and literacy rates of the weaker sections of the society.
  • It helps in the financial discipline as the members are encouraged to open savings bank accounts which a short marginalized Savings and improvement in living conditions by spending on education, health and more
  • It increases the active participation in the democracy of the members and all other aspects of the local government as well. The weekend marginalized section of the society would be included in the local government which would pave way for better roles and policies for their development and betterment

History of Self-Help Group (SHGs)

The history of the self-help groups can be traced back to the year 1985. It was a result of the actions undertaken by the Mysore Resettlement and Area Development Agency.

The SHG movement was initiated under the leadership of MYRADA in the Southern parts of India.

In these states, there is general awareness regarding the thrift and importance of cheap credit among the population, especially among women.

The wave of the moment was experienced by 1986- 87 when around 300 self-help groups were formed in the MYRADA’s projects.

The agency began to impart training to these groups on several Grounds. It trained the members to set agendas, maintain and keep books of accounts, organize meetings, and other essential skills.

In India, the Self-Employed Women’s Association (SEWA) is a Pioneer in this field.

Without the Grameen model, SEWA was started in 1972 as a trade union for women in the unorganized sector.

Today, the association takes pride in running the first women’s Bank in the country.

As per the statistics of the Year 2000, the association has a membership of over 2 lakh women and over 87000 depositors along with over 41000 borrowers.

Moreover, it has a loan outstanding of Rs. 887 lakh as on March 1998.

The self-help group movement rapidly spread throughout the country over the years.

Several Financial Institutions and Agencies like NABARD, RBI, leading NGOs, and various multilateral agencies came forward to help and contribute to the growth of SHGs.

What are government schemes for Self-Help Groups in India?

The government has taken measures to empower the SHG movement in India and strengthen their position.

Various financial institutions and credit-granting bodies have stepped forward to support and promote the movement.

  • In 1992, when NABARD realized its potential and started promoting the self-help groups (SHGs) moment, it gained momentum and rapidly spread across the country.
  • The state governments of Andhra Pradesh, Karnataka, Kerala and Tamilnadu established separate organisations which were led by a senior bureaucrat and managed by development professionals
  • In 1999, the Swarna Jayanti Gram Swarojgar Yojana was introduced to promote self-employment in rural areas. It aimed to promote self-employment through the formation and skill development of the members of self-help groups.
  • Later in 2011, it became a national movement as the National Rural Livelihood Mission which was the world’s largest poverty alleviation programme.
  • District versions of these programs are operational in the states and union territories and work and Leslie to form, strengthen and nurture the SHGs.
  • The mission was later renamed as Deendayal Antyodaya Yojana in November 2015.

Today, over 100 million families through 8.5 million self-help groups are covered. They have deposits of approximately 161 billion INR and 4.84 million SHGs have received credit and over 615 billion INR of the loan outstanding.

In all this, over 90% are the women who belong to the rural and urban poor social and economic background.

What are the weaknesses of Self-Help Groups?

Although self-help groups are made for the betterment of the people of the rural areas, they suffer a lot of problems and weaknesses as well.

The weaknesses and problems faced by SHGs are:-

  • Although the groups are meant for people from the poor background, the members do not necessarily come from the poorest backgrounds.
  • These groups aim for social enforcement. However, satisfactory qualitative change has not been noticed in the status of members.
  • The activities undertaken by these groups are based on primitive skills and do not add any value all substantial increase in the income of group members
  • The lack of qualified resource personnel is a hindrance in skill upgradations by the members
  • The lack of resources and poor accounting practices that prevails which leads to misappropriation of the accounts
  • Non-government organisations and other government agency supports and promotes these groups and their withdrawal could lead to their collapse

What challenges does Self-Help Groups face?

There are various challenges with the self-help groups and the SHG movement has to face which are as follows:-

  • Not a major part of members raise themselves to the level of micro-entrepreneurship
  • Improper orientation and inadequate knowledge prevail among the majority of the members. This restricts them from taking up suitable and profitable opportunities.
  • The patriarchal system in India discourages women from participating in self-help groups which limits there opportunities
  • The functioning and working of the SHGs depends on confidence and mutual trust of the members and the deposits are not safe or secured in any manner
  • There is a lack of Rural banking facilities which acts as a major hindrance for the functioning of self-help groups

What measures can be taken to make Self-Help Groups effective?

Self-help groups have a major role in poverty alleviation in the rural parts of India. The rapidly growing numbers of poor people in various parts of India have become a member of SHGs

There should be various measures which could be taken in to enhance the effectiveness of SHGs for the betterment of its members.

Few measures which can be taken are as follows:-

  • The SHG movement should be expanded to the credit deficient areas of the country. It would help the people of these areas to improve their socioeconomic status and lead a better life with better living conditions
  • The government and other authorities should work to develop a supportive environment to enable SHG moment foster and develop
  • The commercial banks and NABARD should adopt a need-based approach. Working along with the state government, they should endeavour to innovate and design new financial products for self-help group
  • The governing authorities and the government should keep a positive attitude and approach towards the poor and marginalized
  • There should be measures taken to expand the financial infrastructure of the credit deficient areas of the country
  • SHGs currently are limited to rural areas of India full stop that should be efforts made to extend them to the urban and semi-urban areas to pave the way for the urban poor people
  • There should be a special cell developed to monitor the functioning of self-help groups in every state which collects both quantitative and qualitative information

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