logo

Self-Help Groups (SHGs) for the Poor - CBSE Class 10 – Social Science

What are Self-Help Groups (SHGs)?

Self-Help Groups, or SHGs, are small voluntary groups formed by people—mainly women—who belong to similar economic backgrounds. Usually, these groups have 15-20 members. The members come together to support each other financially and socially.

Key points:

  • SHGs are mostly women’s groups.
  • Members save money regularly.
  • Groups provide loans from the pooled savings.
  • They decide everything together, democratically.

Examples:

  • A group of rural women in Tamil Nadu saving Rs. 100 each month.
  • Women in West Bengal pooling money to buy a sewing machine.
  • A SHG in Bihar collectively addressing local social issues.

Why is this important?
SHGs help members become financially independent and socially empowered by working together.

How Do SHGs Work?

  • Pooling Savings:
    Every member saves a small amount regularly, usually monthly. These small savings accumulate into a fund for the group.

  • Access to Credit:
    Members can borrow small loans from this fund when needed. Loans can be for emergencies, education, or starting a small business.

  • Bank Linkage:
    After showing consistent saving and repayment habits, SHGs open bank accounts. Banks then lend money to SHGs at low interest without demanding collateral.

  • Collective Decision-Making:
    All members participate in deciding the amount to save, loan conditions, interest rate and repayment.

Examples:

  • Rekha from Karnataka used SHG loan to pay for her daughter’s school fees instead of going to an expensive moneylender.
  • In Kerala’s Kudumbashree, SHGs run small businesses and get bank loans directly through a bank account opened in the group’s name.

Why Are SHGs Important?

1. Access to Credit

Many poor people cannot get bank loans due to lack of collateral. SHGs provide quick and easy loans at fair rates to their members. They reduce dependence on moneylenders who charge high interest.

Examples:

  • Women in Tamil Nadu avoided high-interest loans for marriage expenses by borrowing from SHGs.
  • A SHG in Karnataka provided loans for health emergencies, saving women from debt traps.

2. Pooling of Savings

Individual small savings become a useful fund for emergencies and investments.

Example:

  • In West Bengal, a SHG pooled their savings to purchase a sewing machine and earn income through tailoring.

3. Promoting Income-Generating Activities

SHGs encourage members to start micro-businesses such as papad-making, pickles, handicrafts, dairy farming, and tailoring.

Example:

  • The Kudumbashree Mission in Kerala helps SHGs start canteens and IT centers, generating livelihoods.

4. Building Confidence and Social Empowerment

Women get a platform to speak up, participate in decisions, and address social issues such as domestic violence and dowry.

Example:

  • A SHG in Bihar helped solve disputes related to water supply by negotiating with the local government.

5. Reduction in Exploitation

By providing access to fair loans, SHGs reduce exploitation by moneylenders charging high interest.

6. Better Loan Repayment

Due to peer pressure and democratic functioning, members repay loans on time, increasing trustworthiness.

How Are SHGs Formed?

  1. Initiated by NGOs or government programs such as National Rural Livelihoods Mission (NRLM).
  2. Members meet regularly (weekly or monthly).
  3. Records of savings, loans, and repayments are maintained systematically by a member.
  4. After 6 months to 1 year, a bank account is opened for the group.
  5. SHGs then get access to larger funds and credit from banks and microfinance institutions.

Examples of Successful SHG Initiatives

  • SEWA (Self Employed Women’s Association) in Gujarat supports thousands of women through savings and credit.
  • Mahila Arthik Vikas Mahamandal in Maharashtra helps women start micro-enterprises.
  • Dairy cooperatives in Rajasthan run by SHGs helped increase rural incomes through milk collection.

Conclusion

Self-Help Groups are a powerful tool for economic and social empowerment. They help the poor gain financial independence, encourage entrepreneurship, and build confidence especially among women. SHGs promote saving, easy credit access, and collective decision-making. Programs like NRLM and Kudumbashree show government support for SHGs, making them vital in India's fight against poverty.

Activity: Formation of a Mini SHG in Class

Objective:

Help students understand how SHGs operate by forming a small group and practicing savings and loan.

Materials Needed:

  • Small cash amounts (imaginary or real tokens)
  • A notebook for record keeping

Steps:

  1. Form groups of 10 to 15 students.
  2. Decide on a fixed monthly saving amount (e.g., Rs. 10).
  3. Each member contributes the saving and it is recorded in the register.
  4. Allow members to request small loans from the group fund for hypothetical use (like buying school supplies).
  5. Fix interest rate and repayment terms democratically by group discussion.
  6. Monitor repayments during the next meetings.

Observations to Make:

  • How pooling small amounts creates a significant fund.
  • The importance of trust in lending and repayment.
  • Group decision-making and leadership roles emerge naturally.
  • Social bonding and a sense of responsibility develop.

Scenario Based Questions

  1. Scenario: A rural woman wants to start a pickle-making business but has no money.

    • Question: How can SHGs help her?
    • Answer: The SHG can provide her a small loan from the pooled savings, and later link the group to a bank for bigger loans.

  2. Scenario: A family needs urgent money for a hospital emergency but doesn’t have a bank account.

    • Question: How can SHGs support such families?
    • Answer: SHGs give quick loans to members at low interest, avoiding delayed and expensive finance from moneylenders.

  3. Scenario: A group of women want to improve their social status and reduce domestic violence.

    • Question: How do SHGs help beyond finances?
    • Answer: SHGs promote confidence, collective strength, and negotiation skills that help address social issues jointly.

  4. Scenario: A SHG wants to expand by getting loans from the bank.

    • Question: What conditions must the SHG fulfill to get bank linkage?
    • Answer: Regular savings for 6 months to 1 year with good loan repayment track record, proper record keeping, and group meetings.

  5. Scenario: A SHG member is hesitant to repay loans on time.

    • Question: Why is loan repayment important in SHGs?
    • Answer: Timely repayment builds trust with the bank and group, allows funds to rotate, and keeps the group financially strong.

Back to Topics

Take the test