NGOs, SHGs, MFIs and other Institutions

Role of Self Help Groups:

Self Help Groups are village intermediaries comprising a group of 10 to 15 members for providing credit to its members at moderate interest rates for financial upliftment of its members. Both men and women are involved in SHGs. The members are usually from a poor socio economic background. The membership is voluntary and opportunities are equally provided to all members.

Source of Funds:

Regular savings of small proportions were made by the members and they were lent when a sufficient pool of money is generated whereas some self help groups rely on bank credit for their Financial operations.

Benefits of SHGs:

1. They help in poverty alleviation by improving the income level of poor
2. They improve the food and nutritional requirements by means of improving the income of its members
3. They aim at improving the social standards of backward castes and aim at their inclusion in the society.
4. They also improve Women Empowerment. From a Gender perspective they aim at improving the status of women and to impart leadership qualities to them thus improving their status in society.
5. They improve the Human Resource Potential.
6. The financing of credit by banks through SHGs has lesser transaction costs for both the banks and the SHG members and reduced burden on the part of individuals for getting a loan.

SHGs in India-An Assessment:

The origin of SHGs can be traced back to the Freedom Struggle whereas a proper structure began to evolve after the formation of Self Employed Women’s Association (SEWA) in 1972. The organization harnessed all class of women workers including the small scale and manual labourers and improved their employment and income level. It later became highly networked spreading their base in many many states and through formation of separate federations. In order to improve the credit availability a separate SEWA Bank was formed. Apart from achieving the basic objectives it also focused on areas like Education, Literacy, Health Care, Childcare etc.,

Another notable initiative of SHG is Kudumbashree in Kerala formed in 1998. It is also a female based community oriented approach for reduction of poverty. They aim at improving the entrepreneurial and leadership skills of women. They work under the Community Development Society (CDS), a unit of Local Self Government thus improving decentralization. Their operations border on wide array of activities including provision of Health, Drinking water, shelter, education and skill development.

At an Institutional level, NABARD-SHG Bank Linkage program was formed in 1989. Under this scheme many SHGs that have proven track record borrow from banks. This method is seen as a viable solution to provide Micro Finance Services to the poor at a market rate of interest without affecting the profitability of banks. The program also aims at improving the accessibility of Formal Institutional credit to the SHGs.

Overall SHGs in India have become a tool for Political, Social and Economic Empowerment and has set an example for  especially in rural areas. Though there is regional disparity in the success of SHGs they have been a tool for Poverty alleviation.

Problems in the Working of SHGs:

Most of the SHGs are concentrated in the Rural areas and thus it limits their role in the development of Urban poor

The Political Interference among SHGs remains a cause for concern as the concept of self help is getting diluted

The availability of credit is also dismal due to

Role of NGOs: