Self-Help Group Model of Micro finance in
India: Impact and Challenges
With inspiring ideas, novel approaches and
firm determination, local institutions have successfully provided micro-credit
and saving facilities to the poor, they have evolved simple innovative lending
methodologies and loan products, established that they have financial
technologies to provide quality service on a commercially viable basis.
Written by Dipankar Chatterjee
INTRODUCTION
Since a
long time the Self Help Groups (SHGs) are in existence in the country which
registered rapid strides. Over the past two decades, serious attempts have been
made by local institutions in different parts of the world to assist the
poorest by responding to their financial needs. We know to-day how these
institutions have overcome numerous obstacles and developed innovative
mechanisms to provide financial services to such people.
They have succeeded in
reaching the segments of the population which were excluded by banks and have
demonstrated that, the poor are good credit risks and have high savings
propensity. In the developing countries, the
poor without adequate access to productive land or paid employment support
themselves through a number of self-employed activities in agriculture, trade,
crafts, etc. the financial services they require are insignificant.
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| SHG meeting at Mregbandi village, Jharkhand (Photo: Atanu Deb) |
The administrative cost per micro-finance transaction is said to be high. The poor do not qualify as suitable clients. Since they do not have sufficient assets to offer as collateral or security, lack of access to credit, for micro-enterprise or other income-generating activities prevents the poor to improve efficiency, productivity and participation in economic life.
With inspiring ideas, novel
approaches and firm determination, local institutions have successfully
provided micro-credit and saving facilities to the poor, they have evolved
simple innovative lending methodologies and loan products, established that
they have financial technologies to provide quality service on a commercially
viable basis. In spite of remarkable success of these micro-finance programmes,
the availability of such, services to the poor are limited. The challenge,
therefore, is to ensure a sustainable flow of quality financial services to the
poorest of the poor. Against this backdrop an attempt has been made here to
understand the role of micro-finance in social inclusion of the excluded
section of the rural populace with reference to women.
GENESIS AND FUNCTIONING OF
SHG
Since independence, the government
has implemented several developmental programmers for rural development and
poverty reduction. Recognizing the imperative need for upliftment of women in
society from the last two decades much importance is given for empowerment of
poor women in rural area. Once such programme is self help groups. The
emergence of SHGs has proved a panacea for the rural poor women. Empowerment
process of rural women has accelerated with the establishment of SHGs. The
women, who are below poverty line and who face situations of extreme poverty,
are benefiting through SHGs. A group of 10 to12 women of same strata and common
ideology are motivated by non-governmental organization (NGOs) in general to
form SHGs account in bank. This pooled funds from group savings is rotated
among the members of the group as group loans for meeting immediate consumption
and other purposes. In due course of time (say about 6months), under the NABARD
scheme SHG –bank linkage the bank provides loans to the group as per
requirement. For linking SHGs with banks, a pilot project was introduced by
NABARD in 1992 to encourage thrift and savings amongst rural poor and to
supplement their credit needs through banking system. Now days, the financing
of SHGs has become the main activity of banks in the formal sector are actively
delivering micro credit to women SHGs. Thus SHGs have become part and parcel of
rural economy.
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| SHG and Bank linkage (Photo: Atanu Deb) |
NABARD describes SHGs as homogeneous
affinity of rural poor, voluntarily formed to save small amounts of their
credit needs and revolving their resources among the members, both for
consumption and small productions. Thus, SHGs are a blend of non-governmental
organizations and group of individuals, basically poor women, organized
together for tackling social and community problems like unemployment, medical
issues, watershed management and livelihood generation besides group financial
management. In SHG moment, the role of facilitator is being played by voluntary
association, non-governmental organizations and other Self Help Promotion
Institutions (SHPIs) particularly for linking with the bank for channeling
micro credit to the poor women through SHGs.
OBJECTIVES OF SHGS
1)
To inculcate SHG approach among women folk so that their dependence on
other groups can be minimized.
2)
To promote the habit of savings among rural women so that they can take
loans from banks on the basis of their collected savings .
3)
To motivate women entrepreneurs and to make them capable of establishing
small and cottage industries.
4)
To enhance women’s participation in their development programmes to make
them more effective in improving their status.
5)
To help in the empowerment in their health, education, and sanitation
among rural women.
6)
To develop skills and capabilities of rural women folk in various agriculture related activities.
7)
To get NGOs involved in the empowerment of living standard of rural
women.
8)
To develop and organize collective leadership structure among rural
women.
9)
To provide access to money,
infrastructure, and marketing facilities to rural women so that their
productivity and efficiency can be increased.
IMPACT OF SHGS
SHGs have
facilitated the process of micro credit for the rural women folk. An access to
micro credit has been helpful in improving their bargaining power,
participation and decision making power. Micro Credit is helping rural poor
women to start income generating projects, take part in credit services and
planning and freedom in expenditure management at their household levels. In
addition to the financial analysis of SHGs, the non-financial areas such as
social security and gender dynamics are also effected by the SHG Movement.
Indeed, poverty reduction is much less an issue of numbers but rather ideas and
concepts. The following is an analysis of the non-financial impact of SHGs.
Political
Political
engagement includes active involvement by SHGs in government including local assemblies,
Lok Sabha or Panchayati Rai Institutions (PRIs). One of the key benefits of
SHGs is women’s empowerment and this can be seen with the number of women
involved in public affairs. While the number of women actually involved in
politics is still very low, research has indicated that of those women that
stand for election, over 70% had won their seat (APMAS, 2005). 
And, the female
contribution to civil issues ranges from issue of ration cards, laying of pucca
roads, building of school, ensuring appointments in vacant positions in schools
and health centres, recovery of river bank lands from encroachers and laying of
drinking water pipes (APMAS, 2005). As mentioned, the number of women involved
in politics is low. But, the trend is definitely moving up. A mere 5 years ago,
the likelihood of women contesting panchayat election was extremely low. Their
presence today is affecting the perception of women and their role in the
political arena. They are being recognized as an important group with serious
concerns. The role of SHGs is both as an inspiration and as a financer.
Impoverished women develop greater language and financial skills through the
SHG which provides the building blocks for higher levels of confidence to
engage the world. Also, the SHG sometimes finances the campaign of its members
that stand for election. SHGs not only empower its members but also wield a
powerful political role as a group as well. At local village meetings, the
leaders of SHGs are often invited to attend and speak (APMAS, 2005).
And, the female
contribution to civil issues ranges from issue of ration cards, laying of pucca
roads, building of school, ensuring appointments in vacant positions in schools
and health centres, recovery of river bank lands from encroachers and laying of
drinking water pipes (APMAS, 2005). As mentioned, the number of women involved
in politics is low. But, the trend is definitely moving up. A mere 5 years ago,
the likelihood of women contesting panchayat election was extremely low. Their
presence today is affecting the perception of women and their role in the
political arena. They are being recognized as an important group with serious
concerns. The role of SHGs is both as an inspiration and as a financer.
Impoverished women develop greater language and financial skills through the
SHG which provides the building blocks for higher levels of confidence to
engage the world. Also, the SHG sometimes finances the campaign of its members
that stand for election. SHGs not only empower its members but also wield a
powerful political role as a group as well. At local village meetings, the
leaders of SHGs are often invited to attend and speak (APMAS, 2005).
Social Harmony
Broadly
defined, social harmony encompasses the equality and integrity of relationships
between different social groups. To frame the following analysis, SHGs
typically consists of the following social groups:
• Schedule Caste (SC)
• Scheduled Tribe (ST)
• Minorities (MN)
• Backward Caste (BC)
• Other Caste (OC)
The compositions
of SHGs are sometimes exclusively one particular social group or a mix. The
impact of SHGs on social harmony has also been mixed. While it has been
observed that in groups with mixed membership had group leaders that came from
a variety of the social groups. In the vast majority of instances, groups
leaders were almost exclusively from the dominant social groups’ category. This
demonstrates a lack of equality and unity across caste divisions. Given the
relatively young history of SHGs, it is to be expected that their impact on
bridging centuries old divisions would be slow.
Social Justice
Social
justice is the presence of moral and ethical conduct in areas that are
historically typified with backward and abusive customs. There have been
several occurrences of SHGs resolving disputes between members and the
community at large. These instances include initiating legal action,
arbitration, divorce and others. While there has long been dispute resolution mechanisms
in villages, in the past it was controlled by men. Now, there are instances of
women, SHG members, being involved in resolving disputes. Whether or not the
women are working for their own interests or in the case for justice varies,
regardless SHGs’ impact on the political arena is certainly being seen also in
social justice, albeit in a slow and evolutionary process.
Community
Being a
group based organization of members of similar caste and geography, the
community resources that are shared by are affected by the SHG. Recent analysis
has shown that the impact that SHGs have on the community at large have been
minor. There have been few instances of significant contributions from SHGs to
education, family planning, eradication of child labour and hygiene. To
interpret these findings further it should be noted that such community
problems are often large financial commitments which SHGs simply do not have
the capacity to afford. Also, of the few instances where there have been
significant contributions from the SHGs to the community, the SHG demonstrated
a clear leadership role and rallied the support of the entire village. This
demonstrates that given the opportunity, SHGs, assuming they have the capacity,
can act as a director of community development. The perception of taking of a women’s
based organization taking a leading role for the betterment of the greater good
has monumental impacts on the local community. Gender dynamics begin to balance
in instances such as these.
Livelihoods
Livelihoods,
meaning a persons’ economic activity, is an area that is vitally important to SHGs.
The loans that SHG members receive are intended to improve their livelihoods so
that they can receive greater and more steadier cash flows. In rural areas,
livelihoods range from agriculture farming, animal husbandry, dairy and various
other goods and services activities. Experience has shown that SHGs have had
improved livelihoods to the extent of providing the leveraging needed to start
an enterprise. However, the interventions to introduce new livelihoods or
refine existing ones that could yield better economic results were done by external
agencies.
CHALLENGES FACED BY SHGS
Many
challenges are present in the path of successful implementation of the SHG
programme for the empowerment of poor rural women.
Inadequate
Coverage
A skewed
growth pattern of SHG programme is observed in the country. This programme has
failed to cover the whole India. It has largely concentrated in southern region
(Andhra Pradesh, Tamil Nadu, and Karnataka) of the country. The areas (U.P.
M.P. Assam, Bihar, W.B. Rajasthan, and Orissa) where poverty and unemployment
are wide spread are not adequately covered by the SHG programme. In the same
manner, the existing caste system and the poor economic condition of rural
women to contribute for saving and membership fee to SHG deprived empowerment
through SHG has suffered in terms of either exclusion of deserving poor women
or elimination of poor women in SHG system due to above constraints.
Lack of
Basic Infrastructure Facilities
It has
been experienced that because of inadequacy of basic infrastructure facilities
require for income generation activities such as training, marketing, transport
etc in rural areas, it has become difficult for women members of SHGs to make
optimum and efficient use of loans. In this situation, it has become difficult
to repay the loans of banks in time. Because of this fact, they have trapped in
debt.
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| Woman empowerment- A Myth? (at Kakdwip, West Bengal, Photo-Atanu Deb |
Lack of
Required Skills and Linkages
The
contribution of SHGs in the empowerment process of rural poor women largely
depends on the ability and willingness of women members to invest financial
resources in new, productive and innovative lines, but the reality is that these
loans has been used mainly in the traditional sector viz. agriculture, animal
husbandry and cottage industries.
Illiteracy of rural women puts a question mark on the quality of SHG’s
functioning. Inadequate training and lack of skills and capacity building in
rural women are the factors responsible for the poor performance of SHGs.
Paucity
of Affective Leadership and Governance
It is a
known fact that the quality of leadership and governance is a key factor
responsible for the success of SHGs it has been found that because of poor
quality of leadership and organizational abilities the performance of SHGs has
not been up to the mark. It is also found that as SHGs grow older, their
quality suffers. Another concern is that a large part of the benefits of SHGs
are being snatched away by the dominant leaders of rural society and the poor
needy women are deprived away from the benefits from SHGs because of weaker
position in the society, Lack of awareness and fear of exclusion from the
group. This tendency has widened the gap between rich and poor section of the
rural society. It is urgently needed that the benefits of SHGs should be percolated
to all the deserving members of SHGs particularly among poor women.
Over Burdened Rural Women
Because
of active participation in the formation and implementation of SHGs, the burden
on the shoulders of women has almost doubled. After completing different
burdensome household chores, the women members have to engage themselves in
productive and efficient utilization of loans and thus try to repay the loans.
This has caused deterioration in the health of rural women.
Conclusion
Microfinance
programmes are premised on the belief that access to financial services will
improve the ability of the poor to harness their inherent capacity. In the
process of capacity building they can uplift themselves above the poverty line.
Literature has underlined that microfinance has made significant headway in
extending low cost credit to the rural poor. Success of these programmes have
been assessed in terms of repayment rates and cost recovery. But the primary
goal of microfinance programmes is to improve client welfare. Credit delivery
should be sustainable and should lead to increase in efficiency and equity by
increasing their income and productivity boosting expenditure like those on
health and education.
**********Dipankar Chatterjee. Assistant Professor, Ramakrishna Mission Vivekananda University, Faculty Centre IRTDM, Morabadi, Ranchi-834008
Email: dipcha123@gmail.com
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