How is the concept of Self Help Groups important for the poor people?

Starting with the basic drive of providing women in underserved and unserved parts of India with basic financial services, now has become a vital part of the financial inclusion drive. The importance of self-help groups can be understood from the fact that as per the NABARD report on 31st March 2019, there are more than 1 crore self-help groups covering more than 12 crores of women in India.

What is a self-help group?

A self-help group can be defined as financial intermediaries composed of local women between the ages of 18 and 50. The ideal size of a self-help group is usually 10 to 20 women. An informal self-help group can give a maximum of 20 women. There are three main objectives of self-help groups – microcredit, entrepreneurship, and empowerment.

What is the importance of self-help groups for poor people?

Started with the objective of bringing vulnerable sections of society, especially women under the financial ambit. Not only it has brought these underserved and unserved populations under financial gambit, but it also has become an important pillar of gender equity, social integrity, and financial inclusion. 

SHGs put collective efforts to combat malpractices like dowry, alcoholism, etc, which reduces the financial burden of dowry on people and also pushes them towards a healthy lifestyle. As these SHGs consist of women, this has become an important part of women’s empowerment in rural areas and helps in enhancing the role of women not only in entrepreneurship but also in consisting elections in gram sabha. It has provided a voice to marginalized women in rural areas. It has a positive impact on improving women’s status in society as well as improving their socio-economic condition.

With the inclusion of self-help groups in priority sector lending by the Reserve Bank of India, getting credit access for these SHGs has become easier. The SHG-Bank linkage program started by NABARD has helped in accessing credit for this marginalized section, which has reduced the dependency on traditional forms of credit and brought them out of the debt trap of money lenders. It can be understood from the fact that the NPA of the SHG loan was just 2.83% as of 31st June 2021.

It has also motivated to these members to spend more on human capital forming consumption such as health and education. Lastly, it has encouraged its members to save.

Sample Questions

Question 1:  What is the basic objective of SHGs?

Answer:

The basic objective of Self Help Groups is to organize the rural poor into small groups, in an attempt to pool their savings.

Question 2: Which is the first SHGs in India?

Answer:

 The SHGs first emerged in MYRADA1 in 1995.