All about SHGs (Self Help Groups)

Introduction

Self Help Groups are basically informal groups of poor people usually composed of 8 to 20 members (mainly local women). SHGs are formed with primary aim of uplifting women, making them self-reliant and promote savings among them so that the collected fund can be used to provide loan to the women in need.

For example, suppose there are 10 members in a SHG group and each member deposits Rs100 a month as a saving. SHG would have a total collection of Rs1000 as a saving fund in the first month. The same SHG would have a total collection of Rs2000 as a saving fund in the next month. This saving fund which is also known as Group Corpus can be used to provide loan to the members in need which is also known as Inter-Loaning.

Normally SHG members gather every month for a meeting (known as SHG meeting). These meetings are necessary for every SHG members to attend in order to understand each other pretty well so that they can connect emotionally and understand each other's problem in a better way.

Formation of Self Help Groups (SHGs)

SHGs are normally formed by a voluntary agency, local branch of bank or State government. These agencies normally appoint a local person in the village where they are planning to form SHGs because that local person would be known to these people in the village and has a good connection with them. This local person is given the designation of Village Facilitator or Animator.

Village Facilitator meets with people and make them understand the advantages of forming SHG and how this would help them financially and socially as well. Village facilitator is well trained by agency and is provided with training materials to guide and convince other people in his/her village to form SHG.

Village facilitator convince these poor people in village through training materials like brochure, videos, skits etc provided or planned by agencies. Also it is the responsibility of Village Facilitator to gather all members under one roof for a meeting & register each member. There are certain guidelines which needs to be followed while forming a SHG, like only one person from a family can become a member of SHG. SHG group normally comprises of either only men or only women, but in India mostly women's group can be found in rural areas.

Registration of SHG member takes place in the membership register where village facilitator records members' details and also take photos of their Aadhaar card. The photocopy of members details along with photos of Aadhaar card are submitted to the Agency and the membership register stays with the SHG only. In many cases there is a nominal membership fee which is a one time fee paid by each SHG member during registration.

Objectives of SHGs

1. To build strong institutions of the poor for unleashing the innate capabilities of the poor
2. To promote the habit of savings among members
3. To empower women to overcome social, economic, cultural and psychological barriers
4. To create sense of belongingness among women
5. To boost up the confidence of women and enhance their capabilities
6. To provide support to each women in financial as well as emotional terms
7. To promote self-employment among members
8. To avail loans from banks with ease

Functioning of SHGs

Once SHG is formed, regular meetings of members take place. These meeting are known as SHG meetings and it can be scheduled on weekly or monthly basis, totally depending on the common understanding of the SHG members. It is necessary for every SHG member to attend these meetings and the attendance of each member is recorded in the registers maintained. The purpose of these meetings is to understand each other very well and develop that comfort level among members. This eventually help these members to open up with each other and share their financial or any sort of emotional issues with each other.

These meetings also take place to collect fixed savings from each member as decided initially by group or as decided by agency which helped in the formation of group. This collected savings from each member is also known as saving funds through which loan can provided to a particular member of that group. Therefore, at any point of time if any member is in a need of money for any reason, that member discuss with other members in a SHG meeting regarding the need of money along with the reason. If all members agree on providing loan to that member, loan is provided to that member from saving funds at a fixed rate of interest which is also pre decided by members while forming a group. This process of providing loan to the member from saving funds is know as Inter-Loaning because money is moving inside the group only and among group members. When member repays loan with interest, that amount is pooled into the saving funds of SHG which eventually leads to a strong capital formation of a group. Generally the saving funds along with the registers maintained are kept with one of the members of SHG, normally considered as leader of the SHG.

Everything taking place in SHG meeting is recorded in a register - from depositing fixed saving to providing loan to member and loan repayment. The register can be maintained by Village Facilitator or SHG can take help from outside by hiring a boy or girl who is educated and knows how to do basic mathematical calculations. Such boy or girl is normally paid or rewarded by SHG after few months. It is necessary to maintain a register with the records of each transaction to facilitate the transparency and traceability. In some SHGs, members' passbook are maintained as well which highlights the member's savings and loan to be repaid. This member's passbook are kept by individual member of SHG.

The image attached below is from the register of SHG. It clearly displays the fixed saving done by each SHG member is of Rs200. The fixed saving of Rs200 is deposited monthly in a SHG meeting. There is a special saving of Rs20 made by each SHG member for a particular reason. On the basis of this register, there is a woman named Geeta (Sno 7) who has repaid amount of Rs400 with an interest of Rs28. The loan amount left to be repaid by Geeta is Rs1000. Also you can see a column which highlights P in front of each member, P means present and A means absent. The attendance of all the SHG members are recorded in the register.

Bank Loans

Once SHG builds up a strong capital on the basis of fixed savings and loan repayment by members, it gets very easy for SHG to take loan from bank and then distribute further to the SHG members. Agency which helped in the formation of SHG in the first place have good connection with banks and they approach bank on receiving the request for loan from SHG members. Bank official visits the SHG members in a SHG meeting, check SHG register to know about the current savings and transaction history of that SHG. Bank official helps in opening a bank account of SHG and takes the signature of each SHG member on loan request form. Normally maximum amount of loan provided by bank to SHG is 6 times (could be 4 or 5 times in some cases) of the current savings of SHG. Suppose current savings of SHG is 20,000, bank can provide a maximum loan of Rs1,20,000. The loan gets deposited in the bank account of SHG, SHG leader withdraws the loan amount from bank account and distributes cash to each SHG member.