General Studies Paper 2 (Indian Governance): Evolution of the SHG movement in India

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Syllabus: General Studies Paper 2 (Indian Governance)


Critically evaluate the Evolution of the SHG movement in India and examine how it does impact on rural life? (15 Marks)


Self-help group is a method of organizing the poor people and the marginalized to come together to solve their individual problem. The SHG method is used by the government, NGOs and others worldwide. The poor collect their savings and save it in banks. In return they receive
easy access to loans with a small rate of interest to start their micro unit enterprise.
A Self Help Group is defined as a "self-governed, peer controlled information group of people with similar socio-economic background and having a desire to collectively perform common purpose.

Evolution of the SHG movement in India
Evolution of SHGs as a tool to empowerment in India is as old as in the development sector. The SHG movement in India has evolved as one of the largest social mobilization initiatives in the world with about 8-9 million SHGs being supported by various NGOs, the governments and banks.
 Self-help, mutuality and collective action are the core principles of SHGs. These have also guided the work of many NGOs for a long time.

 However, SHGs as a tool to address poverty became significant only when the Reserve Bank of India (RBI) issued a circular in 1992 to link about 500 groups under the NABARD-SHG bank linkage pilot program.

 This success has led to mainstreaming of SHGs into the financial landscape and especially the Indian banking system, with about 94 million poor linked with banks through 7.5 Million SHGs, availing them of collateral free credit – until then an unfulfilled dream of the poor for many decades in India.

 The poor and marginalized women who were termed as un-bankable have mobilized an amount of Rs. 33,000 crores ($5.5 Billion) as savings and issued loans to the tune of Rs 66,000 crores ($11 Billion) of which Rs 43,000 crores ($7 Billion) is an outstanding credit mobilized from banks.

 The poor women of these SHGs in India collectively control the financial business with an annual turnover of Rs 100,000 crores ($17 Billion), much larger than many multi-national corporations in India.

 Simultaneously, a handful of large Indian NGOs have demonstrated that collectivization can lead to social and economic empowerment of the poor beyond micro finance linkages, to address complex issues of poverty and development viz., access to health services, linkages with government and entitlements, addressing powerlessness, bridging caste divides and gender inequalities. Though the scale is small and robust
evidence is not yet available, these experiences are significant in demonstrating a philosophy in action in the development context of India.

 The potential of SHGs to mobilize the poor and address social development has attracted the attention of many key political leaders and bureaucrats over the years.

 The World Bank has supported a few state led initiatives on community platforms in Andhra Pradesh, Tamil Nadu and Kerala for about two decades and later expanded to Bihar, Jharkhand and Uttar Pradesh (UP). Their success led to the genesis of a massive community mobilization initiative by the Government of India as National Rural Livelihoods Mission (NRLM) in 2011.

 NRLM has a mandate to promote about 8-9 million SHGs across 640,000 villages over the next decade, with an investment of Rs 15,000 per house hold ($250/HH) to support social mobilization and livelihood promotion.

 Evolution of SHGs as a tool to empower is as long as the history of development sector in India. SHG as an organized way for poverty eradication was immerged during the 7th Five Year Plan (1985-90).

 Formation of SHGs for savings and credit, and their linkage to commercial banks was initiated in India by MYRADA (Mysore Resettlement and Development Agency), an NGO, in the mid-1980s.

 As a part of the poverty alleviation measures, the Government of India launched the Swarnjayanti Gram Swarozgar Yojna (SGSY) in April, 1999 where the major emphasis is on SHG formation, social mobilization and economic activation through micro-credit finance

 This success led to the genesis of a massive community mobilization initiative by the Government of India as National Rural Livelihoods Mission (NRLM) in 2011.


Impact Of Self-Help Group on Rural life:
Self-help group is a method of organising the poor people and the marginalized to come together to solve their individual problem. The SHG method is used by the government, NGOs and others worldwide. The poor collect their savings and save it in banks. In return they receive
easy access to loans with a small rate of interest to start their micro unit enterprise. Thousands of the poor and the marginalized population in India are building their lives, their families and their society through Self-help groups. The 9th five year plan of the government of India had given due recognition on the importance and the relevance of the Self-help group method to implement developmental schemes at the grassroots level.

Saving and Financial Decision: Making One of the primary benefits of participation in a SHG is the opportunity to save regularly, access formal savings institutions and participate in the management of these savings. They save regularly, have their own bank accounts and make deposits into these accounts. SHG is having a good impact on members, in their ability to save their hard earned money.

Access to credit: A corollary of participation in SHGs is an improvement in a woman‟s access to credit. Since the project is perhaps too early in its implementation to directly improve women‟s access to credit. The financial mobility due to participation in the SHG has led to an improvement in the quality of life, according to some of the successful groups. Overall, many families were able to address their basic needs better than before. Some of NGOs reports have shown that the record on the repayment of loans by women was often better than that of men, and that women were also more likely to spend the income earned, on their families, leading to improved health and nutrition of the poor population and for improving the quality of their lives.

Employment: The implementation of SHG has generated Self-employment opportunities for the rural poor. The progress of the program since inception assisted in formation of 35.7 lakh SHGs; assisted 1.24 Cr. Swarozgaris in establishing their own micro-enterprises. The
Government of India released Rs.11, 486 Crore under the program; bank credit mobilization is Rs.19, 017; Total subsidy provided is Rs.9, 318 Cr. The program helped many participants in improving their economic conditions. Another good accomplishment of the program is that it has adopted the SHG strategy.

Decision-making: within the household The social impact of the SHG program increased involvement in Decision-making, awareness about various programs and organisations, increased access to such organisations, increased expenditure on Health and Marriage events,there is a Change in the attitude of male members of the families, now they are convinced about the concept of SHG and encourage women to participate in the meetings and women reported that they have savings in their name and it gives them confidence and
increased self respect. Within family the respect and status of women has increased. Children Education has improved significantly. Especially girl education was very low but now SHG members are sending their children including girls to school. The Sanitation in members‟ households has improved and it has led to better health in members‟ families. Now women are taking treatment from qualified doctors, even if they have to travel to nearby towns. Members are now confident enough to raise social stat.

Participation in local government: Because of SHG, women know about their local political institutions such as the Gram Panchayats and have better knowledge of where to report certain types of grievances. As part of the political empowerment process, it is a pertinent fact that many women have not only been elected to the Grama Panchayats but have become the role holders too. In a majority of the cases, the women perceived themselves as now having some influence over decisions in the political life of village, and in a smaller number of cases, the women named their participation and influence in village political life as an important and note-worthy change. However, in general, the
opportunities available to the women to participate in village life were limited, as most of the village processes were still being male-dominated and patriarchal.

Communication Level of Members: Microfinance movement is having a good impact on members, in their ability to express their feelings and has made people more confident to express themselves.

Self Confidence among Members: The group formation brought out the hidden talent and leadership qualities among the members. Therefore, it can be concluded that after joining the SHG the members have improved their status in family, become helpful in family
finance and sometimes helped others too.

Change in Family Violence: Involvement with SHG has reduced this violence in 25 percent cases especially due to reduction in economic difficulties. In most of cases the members revealed that their husbands should also be involved in SHGs.

Status of Access to Amenities: since SHG programme has economic as well social implications. It can be seen that there has been an increase of 40 per cent in SHG members in terms of their status of access to amenities factors. Therefore, it can be concluded that
after joining the SHG the members have improved in getting access to amenities like medical, sanitation, education, market, water supply, transport.

Community Participation: SHG members undertook a lot of community activities which they earlier could not have imagined themself to have done. They distributed school uniforms to poor students; they undertook a plantation drive, distributed pen and notebook
sets to poor students and donated some money to a charity during a national calamity. They participated in several social initiatives like the “Clean Village Drive” and other such social upliftment programmes since their involvement in the SHG.

Increased Nutritional status: They find positive impacts on empowerment and nutritional intake. Female social and economic empowerment in program areas increased irrespective of participation status. Evidence of higher consumption is not income or asset formation. The program's main economic impact had been through consumption smoothing and diversification of income sources rather than exploitation of new income sources.


SHG Programme clearly plays a central role in the lives of the poor. The programme in various blocks all seem to be very successful in reaching poor clients Importantly; there is evidence of increased household income. This is a very significant indicator of impact. Standard
of living for the program participants have increased and also the food security is much more for the program clients. Programme loans are one of the main ways clients overcome food insecurity with sickness, disease, emergencies and crises, where programme participants seem to transfer the loan source from friends and moneylenders to SHG loans to meet these expenses.


Supplementary notes:
Socio-Cultural Hurdles in Penetration of SHGs in Rural Areas There has been uneven distribution in the spread of SHGs in India. Socio-cultural factors along with government support and presence of NGOs have been major reasons for that. In March 2001, 71% of the linked SHG, were from southern region consisting of Andhra Pradesh, Karnataka, Kerala and Tamil Naidu.
 While poor performing states are also those states which have high incidence of poverty like UP and Bihar.
 These are also the states where society is deeply entrenched in patriarchy with limited financial and social role for women.
 Also the spirit of entrepreneurship is discouraged in a feudal society. The traditional society dictate strict role for male and female members with little scope for independent decision making and economic freedom.
 Due to family responsibilities, majority of the women members cannot give their attention to their enterprises.
 One of the major hurdles in lack of support from family members.
 Due to male dominated society, women members could not uplift their business followed by lack of social mobility.
 There is no stability of the units as many married women are not in a position to associate with the group due to the shift of their place of residence.
 In many SHGs strong members try to earn a major share of the profit of the group, by exploiting the ignorance and illiterate members.


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