Revitalising India’s Self Help Groups


Moin Qazi – TRANSCEND Media Service

“Social progress can be measured by the social position of the female gender.”
— Karl Marx

10 May 2019 – We live in a world where impoverished women face gross inequalities and injustice right from their childhood. From poor education to insufficient nutrition to low-pay employment, the sequence of discrimination is endless and all too common. But there are silver strands in this dark discourse. Given an opportunity to fight hunger and poverty, a poor woman proves to be a better warrior than a man.

We have witnessed how poor women have an innate and intense desire to move forward. They are hard working, concerned about their dignity, their children, their present and future, and are willing to make personal sacrifices for the well-being of their family.

In India, the most popular model for empowering village women through financial access and provision of other services is the self-help group mechanism. It is one of India’s oldest social programmes and is already past its silvery jubilee year .It has transformed the lives of millions of women, several of whom now occupy important positions in village administration.

In the blitzkrieg of the new microfinance movement, these self-help groups have been overshadowed. Several factors have contributed to the deceleration. One of them is the parallel microfinance movement driven by capital-rich investors. Yet, in the deep crannies of the country, they continue to make ripples in social movements and rural governance. It is a case of the stars being obscured by the moon. But like the beauty of the moon   remaining incomplete without the constellation of the twinkling stars, these women collectives continue to sparkle across the Indian rural landscape. Despite early success, the growth of self-help groups had slowed in the last few years, but it is now blossoming again, thanks to the active patronage of several state governments.

The microfinance scene in the nineties was dominated entirely by these SHGs. And they became key a key armour for banks in draining the swamps of poverty before microfinance institutions (MFIs), fueled by international funding from impact investors  swarmed and courted them ,making them their   darlings for a purely business goals. They introduced a new idea of do-goodism and a touchy feely morality to smokescreen a mega business of making profits off the poor. The MFIs selectively plucked the most honeyed self-help groups to pad their portfolios and profits. These groups have actually blossomed through the efforts of public banks, government and the not for profits, and sadly no one is talking about it. MFIs had no role in either promoting or nurturing them –they just went in for the low hanging fruits ripened through efforts of non profits and their army of committed activists and volunteers.

MFIs hybridized the group mode to reduce the investment of time and manpower entailed in nurturing groups .Their groups are now just credit groups, called joint liability groups, with no place for savings, capacity building and governance MFIs made easy prey of already established pockets of these SHGs—populated areas were selected, which had a strong density of established and mature self help groups whose   members    were financially literate and already knew enough about microfinance. Groups take too long to grow and require a lot of handholding. Moreover,

It is sad that microfinance institutions cannibalized these groups and used the precious social capital composed of them for a narrow commercial agenda. The groups were enticed to switch to MFIs mid-way, owing to a loan take- over programme. The sector started witnessing a market ‘take-over’ of a hitherto social intervention, posing challenges to the institutional architecture of SHGs.

This was the point when the original character of these self help institutions got destroyed. . The focus shifted from thrift to credit .it became   an irresistible tale of chasing money .Barring some socially conscious ones, most of these institutions lapped on the Bottom of Pyramid bandwagon .Herein lies the nemesis of the great microfinance crisis of Andhra Pradesh and the obituary of the original philosophy of self help groups.

The original concept of self-help groups is being stoked up from the embers and the National Rural Livelihoods Mission (NRLM). It is a powerful programme for repositioning self- help groups as core to India’s approach to women empowerment and poverty alleviation. It focuses on the formation of institutions of the poor and the aggregation of those institutions beyond the community level. These platforms,-from villages to blocks to districts- create an ecosystem for innovation where the poor work together and with external agents to identify problems and design solutions. By using these platforms, development agencies and government departments link women farmers and non-farmers to services and finance institutions for entrepreneurial and unlikelihood activities and climate-smart agriculture, build skills for better food utilization and strengthen skills and knowledge.

Unlike in the new microfinance paradigm, where credit is the sole function of self-help groups, the emphasis of self-help groups in its pure avatar is on savings, loans come later. Savings are integral to poor households’ risk management strategies; they constitute the first line of defence to help poor households cope with the external shocks, contingencies, and life-cycle events to which they are so vulnerable.

The self-help groups have their origin in the Self Help Affinity Groups facilitated by the Mysore Resettlement and Development Agency (MYRADA) that were adapted by the National Bank of Agricultural and Rural Development (NABARD) for lending by commercial banks. The adapted version, which underwent modifications to suit the needs of formal financial laws, started in 1992 as a pilot project and was soon upgraded to a regular banking programme.

The concept of self-help groups or women’s collectives has been the most powerful and robust   path for empowering women in rural India through financial access and social mobilization. 8.7 Million groups touching more than 100 Million rural households.

Self help groups owe their origin to the self-help affinity groups initiated by the Mysore Resettlement and Development Agency. The National Bank of Agricultural and Rural Development (NABARD) started the same model in 1992 as a pilot project, and later upgraded it to a regular banking programme

The Swarnajayanti Gram Swarozgar Yojana (SGSY) was the first state -driven and group- based programme for development which adopted and tweaked the SHG model was into a hybrid livelihoods promotion also introduced subsidies .All earlier SHG programmes had been market-based business models.

The group concept was further reinforced under the World Bank- supported Indira Kranthi Patham (IKP) programme in Andhra Pradesh, the Aajivika programme in Bihar; IFAD supported Women Development Progamme in Maharashtra and Tamil Nadu and similar programmes in a few other states. This model has further evolved under the National Rural Livelihoods Mission (NRLM) run by the Government of India (GOI) in which SHGs are the building bricks on which community based federations are erected.

A typical Indian self-help group consists of 10-20 poor women from similar socio-economic backgrounds-often unconnected to banks-who band together for financial services and sometimes social services. SHGs offer a safe place to save money, the chance to borrow small amounts on flexible terms, and a strong support group.

The common characteristics are: Self-selected and unrelated members, small size, and regular attendance at meetings, regular savings by members, peer pressure to enforce repayment of loans and simple and transparent procedures. Indeed, there needs to be a great emotional intensity to break through age-old barriers. This is possible only through groups, who share same emotional values and are driven by strong impulse of mutual goals .SHGs are located within proximity of members’ residences and businesses, essential for rural women with mobility constraints.

SHGs conceptually address issues that had made them non-bankable. They create a collective identity for the women in the group and give transaction aggregation. Since it is a savings-led model, it also creates a transaction trail, which could be used for establishing a financial history for the bankers. This is important in the absence of bankable collateral.

SHGs typically begin with periodic, compulsory savings and then move on to making customised loans (tailored to individual needs) on flexible terms, and a basic form of insurance. Every member contributes a fixed predetermined amount — often a few rupees — into a pool which becomes a shared resource, from which they lend out   to the members, at interest rates which they decide.

SHGs represent an important safety-net that supports low-income households to meet consumption, investment and emergency needs. The women deposit tiny sums, and they accumulate profits which they choose either to distribute to the owners, or to add to the fund at their joint disposal. It is member-owned, member-focused

.The groups don’t involve outside capital and have lower barriers to entry for members. They act as a communal commitment device, in which people make a pledge to save and then rely on their peers to ensure that the pledge is carried out .The SHG device also helps them overcome personal temptation and money management challenge, or it may help them keep a commitment to save in the face of pressure from spouses or family members.

The most significant aspect of these collectives is that they are wholly managed by the women.    Each group has a constitution or a list of rules, created and accepted by the members themselves. The rules pertain to selecting members, electing office bearers, periodicity and timing of meetings periodicity and timing of meetings monthly savings, creating their own loan fund, lending procedures, penalties for default etc. It is an amoeba model –and each group has the DNA within itself that provides built-in momentum for replication and adaption. Regular meetings are the enabling forces, giving women the courage to lean into multiple household and community settings.

Although financial aspect is not the only benefit for members, credit remains an important element. Disciplined efforts involved in running a group make the women efficient money managers. It is true that social dynamics cannot be changed without women’s involvement in the economy. Participants pay interest on their loans. Since groups they also function essentially as co-owners of a bank, they get back part of the interest that they and other group members pay into a common pot. All paid interest, therefore, remains within their community as earned income.

Once the basic structure of the savings group model is introduced to a rural community by an outside agency – usually a local nonprofit – the groups do virtually everything, including training more groups. The group is linked to a public bank which supervises it and oversees its money management. The SHG itself functions like a small bank. Meticulous accounts and records are maintained SHGs typically begin with periodic, compulsory saving, gradually increasing the pot of money-a resilience fund -available to the group.

Women act as their own bankers, create their own loan fund, and approve small loans to each other as savings accumulate and making sure loans are repaid. They are, by design, financially and institutionally sustainable, and continue to operate independently after a 9-12 month training period.  By transferring tasks normally done by well-paid bankers to poor people, the cost of administration comes down drastically.

At the end of a savings cycle, typically one year long, the fund is divided among the members, who receive not only their own savings but a portion of the profit. The end of the savings cycle is scheduled thoughtfully, usually during the beginning of the hungry season when members are more vulnerable. It changes the desire to save from a want to a need People think; ‘Now I have to put that money away because the group is counting on me.’ ”

Savings groups are a sort of hybrid of formal and informal financial systems. The money stays within a tight circle of women, but the regularity and transparency of the transactions mimic, to some extent, deposits in formal bank accounts.

One of the primary objectives is to avail loans, which the women access by cross guaranteeing each other’s liability. These loans are part of a financial philosophy called microfinance. Members take loans for a variety of reasons: To buy medicine, start a business, purchase animals, pay school fees, buy clothing and food during the lean season and invest in agriculture

Through the group mechanism, the funds become a collective asset enabling uplift of the community. They dispense small and unsecured loans at varying costs to group members as per their need. The needs may vary from business expenses to paying school fees or health-care costs, purchasing animals, or investing in start –up capital for undertaking cattle rearing and livestock breeding or tailoring. In this way they make money ‘work’. With education of children and running the household being their priority, the women utilize the borrowed money to pay for their children’s educational needs, household repairs and even monthly food ration.  With help for starting businesses, impoverished women can earn money and support their communities as well as their families. Households with access to a range of appropriate financial services are more likely to develop sustainable livelihoods, invest more in health and education, and interact with and benefit from markets.

The members of the SHG are poor and neo-literate, but they have sophisticated credit algorithms: “Does the woman own a buffalo? Some chickens? Does she have a toilet in her home? What kind of roofing material does her home have? Does she bring a shawl to the village meeting? Does she come barefoot to the meeting, or does she wear slippers? Do her children come to the school properly washed and dressed?”The women guarantee each other’s loans. The close-knit social bond  created within the group  also help to ensure loan repayment; in effect, group members pledge their social collateral to obtain a loan .On account of this stringent monitoring  and peer relations, women pay back loans like clockwork. It is astonishing that hardly any of these women default.

The prime security is trust and a social contract that holds the members accountable to each other. The repayments proceed like clockwork. Although the value for members is not just in finance, credit remains an important element. You can’t change social dynamics without women’s involvement in the economy.

Over time the bank begins to lend to the group as a unit, without collateral, relying on self-monitoring and peer pressure unleashed within the group. This mechanism helps connect group members – many of whom had never had a bank account before – to formal financial services in a sustainable and scalable manner, and is formally known   as the Self-Help Group Bank Linkage Program (SHG BLP). Joint liability is the fundamental innovation that allows financial  institution (  to service clients through  the SHGs without collateral .They would  otherwise be excluded not just on account of the risk of default  but because of the high transaction costs involved  and difficulties  in screening and  sorting more and less reliable borrowers. This is achieved through peer monitoring as the members of the group have a direct interest in ensuring that no individual member defaults. This reduces both ex ante moral hazard and adverse selection since the borrowers   will not choose to be in groups with potential defaulters.

Over the period of 25 years, the SHG-BLP programme has become a huge success amongst all the stake holders. As on 31 March 2018, the total number of SHGs saving linked with banks stood at 87.44 lakh and the total number of SHGs having loans was 50.20 lakh with outstanding loan of R75598 crore.

SHGs are managed by their members with varying degrees of external support. They reach out to each other with love and empathy. The groups offer both financial and social support, empowering women with a strong network of allies. .The dialogue-based education does not require that women know how to read or write, and learning together strengthens and gives confidence to the group. They soon learn to read and do math. Groups are also a place where people can learn from others, share their experience and seek advice.

Though groups are obviously formed for financial support but that is not an end in itself. They soon become a platform for education, health information and training, savings, business development, technical and marketing assistance. The mere act of leaving the isolation of family compounds and joining the periodical peer group discussions increase women’s confidence and motivation .SHGs become a comprehensive ladder of support and opportunity

SHGs conceptually addressed issues that had made them non bankable .They created a collective identity for the women in the group, and gave transaction aggregation. Since it was a savings-led model, it also created a transaction trail which could be used for establishing a financial history for the bankers. This was important in the absence of bankable collateral.

The classical SHG version of microfinance is far more empowering –it is not just lending money.  The members in the group receive skills and business training, peer mentoring, technical support, on-site follow up and on-going access to basic inputs in preparing a business plan which provides a basic roadmap for the borrowers to reach   economic goals. Group activities allow the women to understand and practice various techniques for running the business collectively. This prepares them for individual entrepreneurship .In a way the self help group is a basic entrepreneurial school. Women need privacy, security and control over their financial lives,

The SHG movement has been instrumental in mainstreaming women by-passed by the banking system .It has offered space for different stakeholders to innovate, learn and replicate The initiatives of SHGs have been diverse: some groups have helped women consolidate their savings; others have addressed domestic violence, alcoholism and caste-related issues in the public sphere.

SHGs are formed with the assistance of self-help promotion institutions (SHPIs), which include non-governmental organizations (NGOs), government agencies, banks, cooperatives, and microfinance institutions. SHPIs provide training, monitoring, and other support services. Occasionally, promoters give SHGs initial seed capital to lend, but more typically, groups begin by saving and lending out their members’ own resources.

The formation and nurturing of SHGs is an onerous process and unless a good foundation is laid, there will be a lack of solidity. If there is any disequilibrium, the default starts and there is a domino effect. It soon becomes a contagion sweeping like an epidemic. The groups need to be economically, socially and educationally homogenous. In the absence of healthy group dynamics, there are a lot of conflicts and frictions with the group leader trying to impose personal views on the group and executing decisions in an autocratic way.

The hierarchical pyramid of SHGs supports three tiers of institutions in a typical district: SHGs, village-level committees and federations. Initiatives taken by these organisations have been diverse: Some have helped women consolidate their savings, others have addressed domestic violence, alcoholism and caste-related issues in the public. They are seen as more than just a conduit for credit — they are the biggest generators of social capital in rural India and also act as a delivery mechanism for various other services ranging from entrepreneurial training, preventive health education to food security, livelihood promotion activity and community development programmes. They serve to provide formal channels for social and financial support.

These groups are obviously formed for financial support but that is not an end in itself. They soon become a platform for education, health information and training, savings, business development, technical and marketing assistance. The mere act of leaving the isolation of family compounds and joining the periodical peer group discussions increases women’s confidence and motivation. SHGs become a comprehensive ladder of support and opportunity.

The groups grow in size, they save and invest more, and they launch their own initiatives—training groups for their children, buying grain when the price is low to better survive the lean season, and launching collective enterprises as they reach out to other NGO and development programs. With their economic clout, management skills, and group solidarity, they aspire to more. Together the women create a critical mass and change the perception of what women can do. .

The relationships the women build among themselves and their shared values—and often their shared sense of identity—enhances their individual confidence. They gain much by the solidarity they share, they are able to save money, grow their businesses, and finally break out of poverty. The sisterhood is so close knit and persuasive and sorority so intense that women have begun to think of themselves in a different way. Contrary to what many believe the poor are not too poor to save, that there is enough savings potential within a group to enable people to meet the basic needs within a small community, and those small sums can make a big difference.

Commerce has a profound ability to make people put aside their differences and interact with each other. Worldwide experience shows that when accessible finance reaches women, the benefits are particularly sustainable. Savings rates are higher, group life is more intensive, repayment rates are remarkable, enterprise growth and graduation are stronger, and there are measurable improvements in child nutrition and education, family health and household sanitation, shelter and general welfare.

Women have become a lot savvier about how to marshal their forces and have a much better knowledge of the system .While the base issues are the same, how we are dealing with them is different .The running of an SHG is also a great lesson in governance. It teaches the value of discipline, both financial and procedural. It broadens the horizons and expands the capabilities of its members who have to interact with the outside world, including banks, government departments and NGOs. Since most SHGs are women’s groups, the potential for women’s empowerment is huge. Several studies have documented the positive economic impact of SHGs on indicators such as average net income per household, average value of assets per household, employment and borrowing for income generation activities.

Through exposure to various roles in these self help groups, women have become more self-confident in their activities. Previously, when government officials or the bankers interacted with the village women in the absence of their husbands, they generally responded with statements like, “I don’t know”: “What can I say””My husband has gone out”, “Let him come” or “He only knows”. These sentiments are now slowly changing.

This model generates a unique stock of social capital through the process of regular group meetings and it is this social capital that has been instrumental in transforming the status of these women, both within the home and community. SHGs have proved to be an effective instrument for changing oppressive relationships at home (gender and tradition-related) and in society. This is especially true for those relationships arising from caste, class and political power, which have made it difficult for the poor to build a sustainable base for their livelihood and to grow holistically.  Depending on the family dynamic, it would be hard to know how much a husband may be influencing or forcing a wife to sign off on something she doesn’t agree with.

With the massive social capital embodied in them, SHGs have emerged as a significant part of the development infrastructure. While credit support is at the core of the SHG movement, the social impact is much more than the economic impact. Increase in self-worth, communication skills and a collaborative effort to combat social evils are benefits that come with the formal recognition of SHGs. Best practitioners in communities become community professionals (CPs) and catalysts for mobilisation, health, literacy, financial management, agriculture, leadership ,livestock and more. Combining group-based microfinance programme with participatory training on gender norms, domestic violence and is making women better equipped to challenge discriminatory norms and raise public awareness about various other gender issues.

A vast majority of women leaders in Panchayat Raj institutions have come from SGHs and most successful sarpanches have had their grooming in these collectives. It is not that women are purer than men or immune to the pull of greed. But there is almost a certainty that women will channel money into solving more fundamental issues.

The classical Indian version of microfinance is far more empowering —it is not just lending money. The members in the group receive skills and business training, peer mentoring, technical support, on-site follow up and basic inputs in preparing a business plan, which provides a basic roadmap for the borrowers to reach economic goals. The group activities allow the women to understand and practice various techniques for running the business collectively. This prepares them for individual entrepreneurship. In a way the self-help group is a basic entrepreneurial school. Women need privacy, security and control over their financial lives.

The international MFI model is a different ballgame altogether. Here the sponsor is a profit-oriented venture capitalist, who sees the rural credit market as a powerful business opportunity. The MFI apparently brings great professionalism, innovation and technology to its enterprise of venturing to provide loans that banks do not. MFIs form no groups engaged in governance functions. Even when they operate through nonprofits, MFIs are primarily concerned with lending and recovering what they lend to cohorts of people, at rates of interest far higher than what banks charge. Basically the international model is consumerist in approach and is rooted in philosophy of Pralhad which argues that there is enormous wealth at the bottom of the pyramid.

It has been found that groups in which women meet more often and are exposed to greater social interaction show persistent improvements relative to groups that meet less often. Regular meetings are the enabling forces, giving women the courage to lean into multiple household and community settings. Research suggests that groups generate social capital through the  focused interactions that takes place in various   encounters , i.e., group meetings and other community activities .The meetings have several cohesive and empowering features a number of features, including: (i) a single focus of attention; (ii) intense brainstorming  among group members on various domestic mattes and community issues ; (iii) the regular rigmarole  of  group meeting steered by the group  leader involving conflict resolution and building consensus (iv) peer monitoring; and (v) the rituals of song and dress that surround the group meetings, all of which produce a strong feeling of solidarity and corresponding emotional bonding .This is a very different understanding of social capital and how it is generated among women. The manner in which each group operates is unique to itself and is based on the collective creativity of the members and not imposed or borrowed from any formal system. Thus we have a humongous mass of social capital generated by these groups whose uniqueness lies n its rich diversity.

By providing a space where members can build relationships and develop a strong sense of identity and belongingness, they create a unique set of relationships and values. They show how managing money involves more than financial management, the creation of significant social value. These groups impart training in areas such as health care, nutrition, and domestic problem solving. These social services help clients profit from their loan sand also aid in the development of human capital – an important contributor to poverty alleviation.

Some of the outcomes are amazing—and also remind us why women can be powerful agents for change in their families. Cash empowers people .When targeted properly it gives people the choice of doing something that makes their life more sustainable and lifts them out of extreme poverty. For these women, the overriding sentiment is hope in humanity and in the future. The world they see is a good place.

Like termites, they have furrowed the male-dominated power-grid in villages and are pulverizing the whole patriarchal foundation. Where once participation of women in public meetings was an anathema, it has now become a ritual. SHGs have become powerful economic locomotives and have enabled women found new confidence, agency and purpose. Transcending their ascribed roles, they have dispelled the myth that women are good just for homes .These groups have become the main locomotives of economic growth in rural areas .SHGs are seen as an entry point for other social activities — school committees to watershed councils. As they mature, the group sparks and spearheads meaningful and enduring changes by addressing community issues such as abuse of women, the dowry system, alcohol, educational quality, inadequate infrastructure.

SHGs have great potential and promise, and it will be a wise investment to put greater resources for strengthening them .In particular, the following areas invite particular attention:

  • Self-help groups need to be regularly monitored, and development agencies must reinforce structures and processes so that have a template that helps them run the group entirely by themselves.
  • Resources should go toward periodic capacity-building of all members to enable members to internalize the entire concept and keep renewing their confidence and vision. The members should be able to handle all issues – financial, social and developmental – without external support.
  • Exposure to ideological discourses in socio-politico-economic spheres can help groups to graduate to institutional platforms for constructive, critical discussions on important agendas impacting their lives and help members become better community resources and citizens.
  • Regular monitoring of groups can help make the group a collective and democratic effort instead of being monopolized by few better informed members.
  • Initiation of active SHG heads into rural governance through Pachayat Raj can give them a much boarder canvas to use their potential for development of female society and the village.
  • The government has launched several innovations for digitizing SHG functions and operations. Digital financial literacy and numeracy could go a long way in ensuring a smooth transition from manual to technological platforms.
  • Government should leverage the self-help group platform to expand the financial inclusion agenda. Given the popularity and resourcefulness of self-help groups in rural India, it can act as an intermediary to provide financial services in their community. SHGs can become business correspondents of banks.
  • Some of the talented SHG leaders could be appointed as financial counselors in their villages. They are already working as Anganwadi workers and Accredited Rural Health Activists (ASHAs).

Since their initiation, self-help groups have come a long way. They have been able to empower the social, economic and political lives of millions of women. The enormous success of the Panchayat Raj is proof of the pudding on the cake. With the ever expanding scope of the self-help group channel, it is important for stakeholders to invest in providing the right kind of support so that these groups play a truly catalytic role in transforming the lives of marginalized women.


Moin Qazi, PhD Economics, PhD English, is a member of the TRANSCEND Network for Peace Development Environment  and a member of NITI Aayog’s National Committee on Financial Literacy and Inclusion for Women. He is the author of the bestselling book, Village Diary of a Heretic Banker. He has worked in the development finance sector for almost four decades in India and can be reached at

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This article originally appeared on Transcend Media Service (TMS) on 13 May 2019.

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