Self-help groups (SHGs) in India: Origin, objectives, features, history, evolution, and more

Self-help groups (SHGs) have emerged as powerful agents of social and economic transformation in India, particularly in rural areas. These small, voluntary groups—usually comprising 10 to 20 members, mostly women—serve as grassroots platforms for savings, credit access, and collective problem-solving.

The evolution of SHGs has been significantly supported by institutional frameworks and government initiatives. Notably, the National Rural Livelihood Mission (NRLM), launched in 2011, aims to reduce rural poverty by promoting SHGs and connecting them with banks and financial institutions.

Similarly, the SHG-Bank Linkage Programme (SBLP) initiated by NABARD in 1992 has played a key role in enabling SHGs to access collateral-free bank loans, thereby strengthening financial inclusion and self-reliance at the grassroots level.

Backed by such initiatives and the support of NGOs, SHGs in India continue to drive change by uplifting communities, fostering financial independence, and encouraging social solidarity.

What Are Self-Help Groups?

SHGs are small voluntary groups, typically comprising 10–20 members, who come together to save and contribute to a common fund. This pooled resource is used to provide micro-loans to members, enabling them to undertake income-generating activities or meet urgent financial needs.

The concept focuses on mutual trust, cooperation, and financial discipline, which help members improve their financial literacy and independence.

Origin of SHGs in India

The idea of SHGs gained momentum in India during the 1980s and 1990s as part of efforts to tackle poverty and promote rural development. The National Bank for Agriculture and Rural Development (NABARD) played a pivotal role in the institutionalization of SHGs through its SHG-Bank Linkage Programme (SBLP), launched in 1992.

This initiative bridged the gap between formal financial institutions and the unbanked rural population, making credit accessible without traditional collateral requirements. Today India has a total of 83,45,391 SHGs spread across 28 states and 7 union territories, reflecting their growing importance in grassroots development.

Objectives

Self-help groups (SHGs) play a crucial role in fostering socio-economic development and empowering marginalized communities, especially in rural India. These groups are formed to achieve multiple objectives, spanning financial, social, and economic domains. Below are the key objectives of SHGs in India:

1. Financial Inclusion and Savings Promotion: One of the primary goals of SHGs is to promote a culture of regular savings among members. By pooling these savings, SHGs provide their members with easy access to credit, eliminating the dependency on exploitative moneylenders.
2. Poverty Alleviation: SHGs empower individuals by offering microcredit for income-generating activities such as small-scale farming, handicrafts, tailoring, and dairy farming. This contributes to poverty reduction and improves the standard of living.
3. Women Empowerment: Many SHGs in India primarily consist of women, enabling them to achieve financial independence, develop leadership skills, and take part in household and community decision-making.
4. Promoting Entrepreneurship: SHGs encourage members to undertake small-scale entrepreneurial ventures by providing loans, training, and guidance. This not only boosts local economies but also builds self-reliance among rural communities.
5. Social Awareness and Community Development: SHGs work as platforms for spreading awareness on various social issues, such as health, sanitation, education, and gender equality. They often engage in community development activities, such as organizing health camps and environmental drives.
6. Capacity Building and Skill Development: Training and capacity-building programs are frequently conducted for SHG members to enhance their financial literacy, vocational skills, and managerial capabilities.
7. Collective Bargaining and Market Access: Through collective efforts, SHGs enable members to negotiate better prices for their goods and services, thus improving their market access and profitability.
8. Strengthening Social Cohesion: SHGs promote unity and cooperation among members by creating a support system where individuals can share their problems and seek collective solutions.
9. Improving Health and Nutrition: Many SHGs take the initiative to promote health awareness, better nutrition, and hygiene practices within their communities.
10. Crisis Management: In times of emergencies, SHGs act as a support network, providing financial assistance and emotional support to members facing crises such as illness, crop failure, or natural disasters.

History and Evolution

Self-help groups (SHGs) have grown from grassroots-level community initiatives into a nationwide movement fostering economic empowerment and social development. Their evolution is marked by significant milestones driven by government schemes, financial institutions, and non-governmental organizations (NGOs). Below is a detailed exploration of their history and evolution:

1. The Early Phase (1970s – 1980s)

The idea of forming small groups to help rural communities began in the late 1970s. NGOs such as MYRADA (Mysore Resettlement and Development Agency) in Karnataka pioneered the SHG model to help the rural poor access credit and build self-reliance. These early groups functioned informally, promoting savings and internal lending without formal linkages to banks.

2. Formalization and NABARD’s Intervention (1990s)

In 1992, the National Bank for Agriculture and Rural Development (NABARD) launched the SHG-Bank Linkage Programme (SBLP). This program aimed to integrate SHGs with the formal banking system, enabling them to access credit without traditional collateral requirements. SBLP became a turning point in the institutionalization of SHGs, making India one of the largest microfinance markets globally.

3. Government Support and Poverty Alleviation Programs (2000s)

The Government of India formally recognized SHGs as a tool for poverty alleviation under the Swarnajayanti Gram Swarozgar Yojana (SGSY) launched in 1999. SGSY aimed to organize the rural poor into SHGs, provide them with skill development training, and connect them to markets and financial institutions.

Many state governments, such as Kerala and Andhra Pradesh, adopted SHGs as a model for rural development, leading to large-scale success stories like Kudumbashree in Kerala.

4. National Rural Livelihoods Mission (NRLM) – 2011

In 2011, the Ministry of Rural Development (MoRD) launched the National Rural Livelihoods Mission (NRLM) to promote financial inclusion and sustainable livelihoods through SHGs.

NRLM strengthened the institutional framework for SHGs by providing financial support, capacity building, and digital integration. The mission aimed to reach 70 million rural households by creating a vast network of SHGs.

5. Digital Revolution and SHGs (2015 Onwards)

With the rise of digital banking and fintech solutions, SHGs began adopting technology for financial transactions and record-keeping. Initiatives like Common Service Centres (CSCs) and e-SHG platforms helped rural groups access e-commerce opportunities.
Digital literacy training programs further empowered SHG members to adapt to modern financial systems.

6. SHGs in Urban Areas (National Urban Livelihoods Mission – NULM)

The success of SHGs in rural areas led to the launch of the Deendayal Antyodaya Yojana – National Urban Livelihoods Mission (DAY-NULM) in urban regions. This initiative aimed to create SHGs in urban slums and provide skill development, credit linkages, and social empowerment to marginalized urban communities.

7. Pandemic and Post-Pandemic Growth (2020 Onwards)

During the COVID-19 pandemic, SHGs played a crucial role in manufacturing face masks, distributing food, and supporting local healthcare efforts. The crisis highlighted the importance of SHGs as a resilient community support system.

Year	Events
1970s	Emergence of informal savings groups led by NGOs.
1992	NABARD launches SHG-Bank Linkage Programme (SBLP).
1999	Swarnajayanti Gram Swarozgar Yojana (SGSY) launched.
2011	Launch of National Rural Livelihoods Mission (NRLM).
2013	Deendayal Antyodaya Yojana (DAY) launched for urban SHGs.
2020	The emergence of informal savings groups led by NGOs.

Features of SHGs

• Democratic Functioning: Decisions are made collectively, with equal participation from all members.
• Regular Meetings: Members meet regularly to discuss financial and social matters.
• Small Group Size: Typically, SHGs consist of 10 to 20 members.
• Savings and Credit: SHGs encourage regular savings among members and provide micro-loans for productive purposes.
• Linkage with Banks: SHGs are often linked with banks for loans and savings accounts.
• Social Empowerment: SHGs address societal issues like gender inequality, domestic violence, and illiteracy.
• Capacity Building: Training programs enhance members’ skills, entrepreneurial abilities, and decision-making capacity.
• Collective Bargaining: SHGs empower communities to negotiate better terms for their products or services.
• Voluntary Membership: Members join voluntarily, sharing common socio-economic backgrounds.

The future of SHGs in India looks promising with the integration of technology and digital platforms. E-commerce can provide SHGs with access to wider markets, while digital financial services can improve transparency and efficiency.

Strengthening the capacity-building efforts and fostering public-private partnerships will further enhance the impact of SHGs. Self-help groups have proven to be a transformative force in India’s socio-economic landscape.

Promoting financial inclusion, social empowerment, and entrepreneurship, SHGs have laid the foundation for sustainable and inclusive development. With continued support and innovation, SHGs can play an even more significant role in shaping India’s future.

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