Self Help Groups: A Critical Analysis

SHG Meeting in a Village

They are small economical homogenous affinity groups of rural poor, voluntarily formed to save and mutually contribute a common fund to be lent to its members as per group decision. They are community based informal microfinance institutions. It started in European countries like Germany and Britain when they started ROSCA – Rotating Savings and Credit Association.  Noble laureate Mohammad Yunus pioneered it as as Self Help Groups (SHGs) in 1970s.  NABARD’s SHG-Bank Linkage Program (SBLP) connected group members to formal financial services. In 1999, Government of India introduced Swarn Jayanti Gram Swarojgaar Yojana (SGSY) to promote self-employment in rural areas through formation and skilling of SHGs. The programme evolved as a national movement in 2011 and became National Rural Livelihoods Mission (NRLM) which was renamed in November 2015 as Deendayal Antyodaya Yojana (DAY – NRLM). Kudumbashree model of Kerala and Jeevika in Bihar are excellent example of successful Self Help Group


  1. Women become more financially independent and have decision making powers.
  2. Collective bargaining is important and Collective decision making is done.
  3. Planning and saving of assets is done.
  4. It helps in financial inclusion in rural areas.
  5. Various social issues in India e.g. dowry system, casteism, domestic violence etc are solved with the help of SHG.
  6. It also gives a boost to India’s economic growth. Women also act as a delivery mechanism for various services like entrepreneurial training, livelihood promotion activity and community development programs.
  7. They can act as an intermediary to provide financial services in their community. Workers of the Kudumbasree poverty eradication and women empowerment programme played a big role in clean-up in the Kerala’s flood hit areas.


However there are very few successful models of SHGs. Implementation is not always proper. There is no regulatory framework for the same. They lack financial support many a times. Transparency and accountability issues along with regional imbalance, escalation of nonperforming assets, low levels of literacy among the rural women etc are also found. Raising funds for start-up or accessing high-quality technical assistance etc several such issues are faced.

Way forward

Government programs can be implemented through SHGs. Frequent awareness camps can be organized and government should focus on ground level implementation of digital financial inclusion. Livelihood of members should be supported and technical assistance given too.  There should not be any discrimination among members based on caste, religion or political affiliation. Emphasizing SHG movement on women’s entrepreneurship is an engine of growth in rural India.

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