Self Help Groups — Definition

Definition

Self Help Groups (SHGs) are voluntary associations of 10-20 people, predominantly women, from similar socio-economic backgrounds who come together to address their common problems through mutual help and collective action.

The concept is beautifully simple yet profoundly transformative: poor women pool their small savings, create a common fund, and provide small loans to group members for productive and emergent needs. What makes SHGs revolutionary is not just the financial aspect, but their role as platforms for social empowerment, skill development, and collective bargaining.

The SHG model operates on the principle of 'savings first, credit later' - members must demonstrate their commitment by regularly saving small amounts before becoming eligible for loans. This approach builds financial discipline and creates a sense of ownership among members.

The groups are typically homogeneous in terms of economic status but diverse in terms of occupation, ensuring mutual understanding while bringing varied skills to the collective. Each SHG elects office bearers including a President, Secretary, and Treasurer who manage the group's affairs democratically.

Regular meetings, usually weekly or fortnightly, serve multiple purposes: collecting savings, discussing loan applications, planning income-generating activities, and addressing social issues affecting the community.

The beauty of the SHG model lies in its organic growth from grassroots level, where women who were traditionally excluded from formal financial systems become active participants in economic activities.

Over time, successful SHGs graduate to accessing formal credit from banks, with the group serving as collateral through joint liability. This progression from informal savings circles to formal financial intermediaries represents a fundamental shift in rural financial architecture.

The social impact extends beyond economics - SHGs become platforms for discussing health, education, domestic violence, and other social issues, gradually transforming women from passive beneficiaries to active change agents.

The model's success in countries like Bangladesh through Grameen Bank inspired its adoption in India, where it has been adapted to local contexts and integrated with various government schemes. Today, SHGs represent one of the world's largest microfinance movements, with over 70 million women participating across India, making it a cornerstone of financial inclusion and women's empowerment strategies.