Self Help Groups– Untapped Vehicles To Deliver Social Impact

“One for all and all for one” — the principle of sharing responsibility and benefits together behind the concept of Self Help Group (SHG) perhaps prove to be a useful corner-stone of the contemporary concept of social enterprise too.

Both the concepts aim at solving a social problem or serving a social purpose, especially at the grass root level of society through entrepreneurial approach, economic & sociocultural empowerment and self-sustainability.

Social enterprise (Socent) may be a new terminology in India to explain any enterprise that serves the above mentioned concept. However, SHG movement or mobilization has been working around the same purpose of socio-economic empowerment for last three decades.

Since SHG is a tried and tested entrepreneurial strategy, it may be relevant to find out its role, potential and limitations in the more contemporary concept of social enterprise in Indian context.

For that first we need to understand what are SHG and SOCENT as entrepreneurial concepts.

The Definition of SHG and Social Enterprise (Socent)

Self Help Group is a small economically homogeneous and affinity group of rural poor which is voluntarily ready to contribute to a common fund to be lent to its members as per group decision, which works for group’s solidarity, awareness, social and economic empowerment in the way of democratic functioning.

According to the National Bank for Agriculture and Rural Development (NABARD), a self-help group is a small economically homogeneous and affinity group of rural poor voluntarily coming together : to save small amounts regularly; to mutually agree to contribute to a common fund; to meet their emergency needs; to have collective decision-making; to solve conflicts (gender and convention related) through collective leadership and mutual discussion; to provide collateral free loans with terms decided by the group at market driven rates.

Further studies explains, “Self Help group (SHG) is a self-governed, peer-controlled small and informal association of the poor, usually from socio-economically homogeneous families who are organized around savings and credit activities. Funds for credit activities are coming through regular savings deposited by all of its members on a weekly or fortnightly basis. In the meetings they discuss common village problems and plan solution, share information; make efforts to improve their health and literacy skills.”

Now if we compare the concept of SHG with the idea of Socent, it appears there is a probable correlation.

The Social Enterprise is the enterprise that describes as an entrepreneurial venture that generates “earned-income” while serving a social mission. The income is independent from grants and subsidies.

Social entrepreneurs drive social innovation and transformation in various fields including education, health, environment and enterprise development. They pursue poverty alleviation goals with entrepreneurial zeal, business methods and the courage to innovate and overcome traditional practices.

Hence there are three important components in social entrepreneurship. — Social capital, Equity promotion and Social development which resembles the concept of SHGs.

More precisely Social Enterprises:

  • Operate as commercially run businesses
  • Aim to make profits
  • Generate the bulk of their income through sales of goods or services
  • Use good business practices and principles
  • Use majority of their profits to further social or environmental goals

The above definitions amply indicate that SHG, though having impacts beyond commercial purpose on its members lives does come under the ambit of social enterprise.

If administered well, it can help lessen poverty and it can be developed as a platform of social entrepreneur or help in developing social entrepreneur.

The History of SHG

The origin of SHG traces back to establishment of Grameen Bank of Bangladesh which was found by the economist, Prof. Mohammad Yunus of Chittagang University in the year 1975. This was exclusively established for the poor.

In India, SHG movement owes its emergence to the breakdown of the large cooperatives in the ‘Mysore Resettlement and Development Agency (MYRADA)’ in early 1980s. In order to revive the credit system, MYRADA encouraged the formation of SHGs as it was realised that SHGs are more democratic in their functioning than large cooperatives dominated by a few individuals.

In the first phase of the emergence of SHGs in 1987, National Bank for Agriculture and Rural Development (NABARD) recognized its potential in alleviating poverty and render social justice and started focusing on NGO initiatives to promote SHGs.

In the second phase from 1992 onwards, the SHG-bank linkage started as Reserve Bank of India and other multilateral agencies, particularly IFAD (the International Fund for Agricultural Development) recognized SHG strategy as an important component of the government’s overall thrust to mitigate poverty. It has been included in every annual plan since 2000.

The Role and Limitations of SHGs in Developing As Social Enterprises

SHGs have been proved more successful in developing micro enterprise opportunities in agricultural and rural cottage industry sectors than urban sectors.

Bharti Sharma, one of the founders of a 17 years old Navi Mubai based NGO Maharashtra Mahila Parishad that has helped form and promote 300 SHGs across Mumbai, especially in the Mumbra area, elucidates,
“For a micro enterprise in rural context infrastructure, logistics, labour, access to its market or buyers are less complex, competitive and expensive than urban sectors. Eg, for a farm produce or homemade food processing unit village houses will have ample space to spread and sundry the items, store them. They may even come to a agreement to cater to different needs of the customers and accordingly decide to venture into different businesses. Whereas in urban sectors, space, access to raw material, labour and other logistics accrue to high overhead costs; space if rented also results in uncertainty of location besides high renting cost in metro cities; access to market and margin is constrained due to dominance by big companies and big brands.”
Bharti further explains that in urban context credit facility from SHG funds or loans from NGOs especially becomes useful in helping the micro entrepreneurs avail basic amenities such as housing, health or education facilities. The SHGs thus can be empowered indirectly to start a socent project through such assistance.

Purkal Stree Shakti Samiti is one such non-profit NGO that is helping rural based cluster of SHGs of women in Uttarakhand under its guidance and hand holding to develop self-sustainable business in the field of producing and selling hand embroidered furnishing items.

The other constraining factors jeopardizing SHGs’ potential to develop as social enterprise are as below:

  • Lack of access to information, training and awareness — Members of SHGs typically come from very poor and less educated or illiterate background. Hence they remain unaware of various government and non — government schemes and aids. Secondly they need skill and employability training, training for financial and business management and awareness of their rights, responsibilities, needs and potential of growth and prosperity.
  • In some rural as well as urban sectors, gender inequality and restricting, unproductive conventions hamper in the entrepreneurial efforts, especially in the case of women entrepreneurs. SHGs are mostly formed by women from lower-income groups.
  • Parochial and unrealistic government policies offering aids and supports subjecting it to divisive caste and creed phenomenon, not taking into account the actual financial status of the recipients and thus violating the very basis of SHGs — affinity, too much of hassles in documentation and procedures slow down the entrepreneurial potentials of SHGs.
  • Banks and financial institutions still do not consider SHGs as viable entities for granting loans. The credit offers from banks and FIs are subject to pay-off of first phase of small amounts of loans over three to five years with no allocation of interim funds for scaling up. Banks and FIs often deny Cash Credit mode of funding to such enterprises by SHGs.
  • The incidences of forming SHGs only with the idea of procuring loans and then dismantling without paying back force banks to be edgy in providing loans to SHGs.
  • Many a time government funds meant for capacity building programmes for SHGs are diverted to arrange political programmes or building capacity building centres.
  • Bureaucratic mismanagement or misuse of fund disbursement to appropriate vested interests also deprive SHGs in actuating their potential to develop a social enterprise.
  • Political ownership and interference also disturbs the very essence of democratic structure and functioning of SHGs, limiting their capacity to start a social enterprise.

Silver Lining

Despite the drawbacks, SHGs are always a potential catalyst and active player in the promotion of social entrepreneurship. Social enterprises can collaborate with SHGs in identifying social issues, solving them by engaging community skills and expanding their reach to their beneficiaries.

SHGs have the ability to create social impact even outside their domain. A very good example of the above claim can be seen in a development shared by Bharti Sharma. She said the sex workers of nearby localities are approaching their NGO to solve their cash problem that has arisen out of the demonetization move of the government. “These sex workers mostly trafficked from other states or neighboring countries do not have any ID proofs and bank accounts. Hence they are unable to exchange the money in their house hold savings in old currencies. Unscrupulous people are exploiting their situation to dupe them of their hard-earned money. They also do not have much choice in accepting or rejecting their clients on the basis of payment in old or new currencies. They have appealed to us to come forward and help them.”

NABARD reports indicate as of March 2006 there were about 3 million SHGs in India — Karnataka, Andhra Pradesh, and Maharashtra being the leading states of which 1.6 million are linked to banks.

The NABARD report also indicates that bank loans to SHGs increased from Rs 2 879 million to 29 942 million from 2000 to 2005. The figure indicates an increase of some 90 per cent year-on-year for the first three years, 82 per cent in 2003/04 over the previous year and 61 per cent in 2004/05.


SHGs are untapped powerhouse of enterprise and highly potential vehicles to deliver social good. Hence more capacity building exercise and efficient utilisation of funds towards developing social enterprises in the fields of education, health, sanitation, environment and employment generation through SHGs should be considered by new social entrepreneurs.

Photo Courtesy:

Purkal Stree Shakti Samiti

The Hindu Business Line

The Depression Uk