SHGs Full Form | What is SHG?

Updated:12 Sep, 2022

SHGs stand for Self-Help Groups. These groups are the associations formed by 15-20 people who come together from similar social and economic backgrounds. Most of the SHGs are found in India where people of age groups 18 years to 50 years form a small committee. Hence, the ideal size of Self-Help Groups is between 15 to 20 people and the ideal age limit of the members is between 18 to 50 years. 

Why Self-Help Groups (SHGs) are Formed?

These groups are formed to help each other and solve their problems. All of these people pool their savings together and small loans can be taken by any member of the group at a particular interest rate. Everything related to the loans must be decided by the group together. All the savings made by the groups are stored as common funds in the bank, and loans are given in the form of these common funds. 

These self-governed groups help those people whose collateral documents are not available due to which they are unable to take an official loan from the banks. This helps them to get loans easily from official sources and banks. Not more than 20 people should be in a group as these are informal groups and also only one member from a family is allowed to participate in a group. The groups can consist of either only men or only women. 

It's seen that women groups are more successful as they know the right way of saving. It is important to ensure that a group consists of people with the same backgrounds as a mix of rich and poor people in a group may deprive the poor of expressing themselves. Since people come from identical backgrounds they can establish proper communication with each other without any hesitation. Almost 90% of the self-help groups in India are exclusively formed by women. 

Role of (Self-Help Groups) SHGs:

SHGs pave a way for rural development and they are also facilitated and promoted by the Government to achieve their aims and objectives. The main motto of the SHGs is: "Save first and credit later" which means the saving has to be made regularly and it should be continuous even if the amount is small, saving is important. This assists them to get future credits for the group. 

This allows them to be self-dependent and it also teaches them financial discipline and helping nature as they get involved in the process of lending. SHGs give a voice to the underprivileged people of society and act as the biggest source of microfinance for poor people. It is a collective action taken by people because the individual attempts made by them are mostly unsuccessful. They promote women's empowerment by enhancing gender equality and promoting banking literacy among the people. 

It eliminates social ills such as dowry, child mortality, alcoholism, etc. It elevates the living conditions of the economically weaker sections and better health care and educational facilities are achieved thus maintaining social integrity and peace in the society. The self-help groups are very important because India has a diversified culture and many socio-economic categories are present here, due to which addressing all the issues from the ground level is very difficult.

What is the Possibility of Success in SHGs?

Statistics suggest that many people especially farmers in India are unable to secure loans owing to a lack of collateral which leads to very bad consequences like farmer suicides etc. SHGs can assist in resolving this issue by providing local financial services to poor rural people and microentrepreneurs. These members of SHGs pool up savings together and convert them into loans to members, gain profit through the interest received and reinvest them into savings. 

This is considered to be the largest microfinance program which is being expanded rapidly throughout the country making it a huge social movement. Obtaining funding or finance through SHGs can be very helpful for both lenders and borrowers as it helps in reducing transactional costs. Instead of having multiple bank accounts, one single account would be enough for the entire group. The borrowers do not have to worry about traveling the bank branches and seeking permission from people to get their loans sanctioned because the banks can directly and individually deal with each SHG. 

Characteristics of SHGs:

  • They are voluntary in nature
  • Self-sufficient, self-dependent
  • Sharing of knowledge and responsibilities
  • Solving problems
  • Increases employment
  • Inculcates financial discipline
  • Active participation of people
  • Improves standards of living
  • Teamwork and decision making

Role of SHGs During Covid-19:

During the recent Covid-19 pandemic many women SHGs played a very critical role. They formed communities and started distributing food and other required resources to the poor and stranded laborers and workers during the lockdown period. They delivered food to quarantine places and also the bedridden people. They also spread awareness among people regarding the importance of hygiene and sanitization during Covid-19. They produced masks, gloves, and other essential commodities at the doorsteps in a few places. They played a promising role which makes us believe that they truly believe in self-help and solidarity.

Comments(0)

Remember to keep comments respectful and to follow ourDiscuss Privacy Policy
Han Solo

TechnologyWork & CareerBusinessFinanceLifestyleKnowledge

@geeksforgeeks, All rights reserved