The many positive impacts of self-help groups
Self-help groups (SHG) are village-based initiatives, where members regularly save up in order to start lending once the group collected enough money. Often from a homogenous economic and social backgrounds, they have the common goal to pool their resources in order to fund common or individual projects, ensuring financial stability and repayment. This kind of solidarity lending was often triggered by NGOs, organising poor communities in rural areas of India, triggering social and financial support. This micro-finance and self-managed model is often the first step to financial inclusion through the participation of the community.
Not only do SHGs uplift the livelihood of low-income householders, they also empower their social and political lives. It is a very strong instrument of economic development, creating financial habits and unleashing entrepreneurial talents. Women are particularly concerned. According to the State Bank of India, more than 91% of SHGs members are women. In 20 years, 100 million rural women have been taking part to SHGs; a very successful tool for the empowerment.
With time, SHGs got recognition from banks and the Reserve Bank of India, and became a vehicle of social sector services. When the movement started, the question of “how such an unregistered organisation could be given credit?". In 1996, a circular of the Reserve Bank of India made a SHG a normal business activity banks could lend money to.
In 1998, NABARD started linking some of these groups with banks so that they can borrow from banks once they gathered a base of their own capital. Through the Self-Help Group Linkage Programme, NABARD provided financial services to more than a third of rural India by connecting a million of SHGs in 10 years. More than 30 000 bank branches and some 5 000 NGOs participated to this immense project. The impact of SHGs on poverty is enormous and shows the huge potential of banking on the most unprivileged population. By such recognition from the banking sector and being so much on the rise, SHGs moved in 2008 from consumption credit-based to production credit-based.
The next step NABARD is particularly focused on is digitisation, through its pilot project e-Shakti. It aims at improving the quality of book-keeping of SHGs and enables banks to take informed credit decisions about each group. It also facilitates convergence of delivery system with SHGs using Aandhaar linked identity. Main-streaming SGHs members with national financial inclusion agenda should allow them to access a wider range of financial services. The project already launched in 2015 “digitized" in April 2017 120.00 SHGs, accounting for almost 1.5 million individuals. Among them, 1.455.000 are women, almost all being now linked with Aandhaar. Such initiative fits in with the goal to cut the dependence on cash transactions in India.