Edvnce blog

Self-Help Groups (SHGs) in India: Empowering Communities

Self-Help Groups (SHGs) are informal associations of people, typically from rural or marginalized communities, who come together to address common social and economic issues. SHGs are a vital component of India’s microfinance and poverty alleviation efforts. These groups promote collective savings, access to credit, and various income-generating activities. They have played a significant role in empowering women and marginalized groups, reducing poverty, and promoting financial inclusion.

History of Self-Help Groups

The SHG movement in India gained momentum during the 1980s and 1990s. Several NGOs, government agencies, and microfinance institutions played a pivotal role in promoting and nurturing SHGs. The National Bank for Agriculture and Rural Development (NABARD) played a crucial role in providing financial support and guidance for the expansion of SHGs across the country.

Formation and Structure

  • SHGs typically consist of 10 to 20 members, predominantly women.
  • Members meet regularly, contribute a fixed amount of savings, and maintain a common fund.
  • SHGs encourage collective decision-making and financial discipline.
  • The group’s dynamics often include a president, secretary, and treasurer, elected from among the members.

Objectives of Self-Help Groups:

  1. Savings Mobilization: SHGs encourage members to save regularly, creating a source of emergency funds and capital for economic activities.
  2. Access to Credit: SHGs facilitate access to credit from banks and other financial institutions, which helps members start or expand businesses.
  3. Income Generation: SHGs promote various income-generating activities such as livestock rearing, small-scale agriculture, handicrafts, and microenterprises.
  4. Skill Development: They provide training and capacity-building support to enhance members’ skills and knowledge.
  5. Empowerment: SHGs empower women by boosting their confidence, decision-making ability, and participation in community affairs.

Applications of SHGs:

  1. Poverty Alleviation: SHGs contribute to poverty reduction by providing financial resources for income-generating activities and addressing the credit needs of marginalized communities.
  2. Women Empowerment: They have been instrumental in empowering women by increasing their financial independence, decision-making power, and social status.
  3. Financial Inclusion: SHGs help people in remote areas gain access to formal banking services and credit facilities.
  4. Health and Sanitation: SHGs often extend their activities to promote health awareness, sanitation, and hygiene practices within their communities.
  5. Livelihood Diversification: SHGs encourage members to diversify their sources of income, reducing their dependence on a single occupation.

Limitations of SHGs:

  1. Limited Scale: SHGs are small-scale organizations, and their impact might be limited in addressing large-scale poverty and development challenges.
  2. Dependency on External Support: Many SHGs still depend on external organizations for training, capacity-building, and initial financial support.
  3. Group Dynamics: Conflicts or issues within the group can sometimes hinder their functioning and effectiveness.
  4. Geographical Constraints: SHGs are more prevalent in rural areas, leaving urban and peri-urban populations underserved.
  5. Access to Markets: Despite income-generating activities, members may face challenges accessing markets for their products.

Government Initiatives and Support: The Indian government has actively supported the SHG movement through various schemes, including the National Rural Livelihoods Mission (NRLM) and the Deendayal Antyodaya Yojana (DAY-NRLM). These initiatives aim to strengthen and expand SHGs, particularly in rural areas.


Self-Help Groups in India have emerged as a powerful tool for social and economic transformation, especially in rural and marginalized communities. By fostering financial inclusion, entrepreneurship, and women’s empowerment, SHGs contribute significantly to poverty reduction and sustainable development. However, addressing their limitations and providing continued support is essential for maximizing their impact on society.

Previous Article
Edvnce blog

Capital Asset Pricing Model (CAPM)

Next Article
Edvnce blog

Ayushman Bharat: Revolutionizing Healthcare in India

Related Posts