Self Help Groups (SHGs) - 1 | Agriculture Optional Notes for UPSC PDF Download

SHGs

• Self-Help Groups (SHGs) are informal associations formed by individuals who unite to identify ways to enhance their quality of life.
• SHGs can be described as self-regulated, peer-managed groups of people who share similar socio-economic backgrounds and are motivated to work together toward common objectives.
• In rural areas, communities grapple with various challenges such as poverty, illiteracy, a lack of skills, and limited access to formal credit. These issues are often beyond the scope of individual efforts and necessitate collective action.
• Consequently, SHGs can serve as a catalyst for positive change among impoverished and marginalized populations. They rely on the principle of "Self Help" to promote self-employment and poverty reduction.

Functions

• The primary aim is to enhance the practical capabilities of the underprivileged and economically disadvantaged individuals in areas related to employment and income generation.
• It fosters conflict resolution through shared leadership and mutual deliberation.
• SHGs offer unsecured loans with conditions determined by the group at competitive market-driven interest rates.
• These groups operate as a collective guarantee system for members who intend to secure loans from organized sources. Impoverished individuals pool their savings in banks and, in return, gain convenient access to low-interest loans for initiating their small-scale businesses.
• Consequently, Self-Help Groups have emerged as the most efficient mechanism for delivering microfinance services to the economically disadvantaged.

Need for SHGs

• A significant factor contributing to rural poverty in our nation is the limited access to credit and financial services.
• A committee, led by Dr. C. Rangarajan, was established to create a comprehensive report on 'Financial Inclusion in the Country,' and it pinpointed four primary factors for the lack of financial inclusion:
  a. The inability to provide collateral as security.
  b. Limited capacity to absorb credit.
  c. Insufficient coverage of financial institutions.
  d. Fragile community networks.
• The presence of robust community networks in villages is increasingly recognized as a crucial component in establishing credit connections in rural areas.
• These networks facilitate impoverished individuals' access to credit, and as a result, they play a pivotal role in alleviating poverty.
• Additionally, they contribute to the creation of social capital among the impoverished, particularly women. This empowerment of women grants them greater influence in society.
• Achieving financial independence through self-employment yields multiple positive effects, including improved literacy levels, enhanced healthcare, and even more effective family planning.

Benefits of SHGs

• Fostering Social Cohesion: SHGs promote collaborative efforts to address societal issues like dowry and alcoholism.
• Advancing Gender Equality: SHGs empower women, nurturing their leadership skills. Empowered women participate more actively in local self-governance (gram sabha) and elections.
• Empowering Women: The formation of Self-Help Groups, both in India and elsewhere, has a ripple effect, enhancing the status of women in society and within their families. This, in turn, leads to improvements in their socio-economic conditions and boosts their self-esteem.
• Advocacy Groups: When participating in the governance process, SHGs can bring attention to issues such as dowry, alcoholism, open defecation, and primary healthcare, influencing policy decisions.
• Amplifying the Voices of Marginalized Groups: A substantial portion of government scheme beneficiaries comes from disadvantaged and marginalized communities. Their participation through SHGs contributes to social justice.
• Financial Inclusion: Banks are incentivized to lend to SHGs due to Priority Sector Lending guidelines and the assurance of returns. The SHG-Bank linkage program initiated by NABARD has made access to credit more accessible and reduced reliance on traditional moneylenders and non-institutional sources.
• Enhancing Government Program Efficiency and Reducing Corruption: SHGs facilitate social audits, improving the efficiency of government schemes and curbing corruption.
• Diversification of Employment Opportunities: SHGs reduce reliance on agriculture by supporting the establishment of micro-enterprises, such as personalized businesses like tailoring, grocery stores, and tool repair shops.
• Altering Consumption Patterns: Participation in SHGs enables households to allocate more resources to education, food, and healthcare compared to non-participating households.
• Impact on Housing and Health: Financial inclusion through SHGs has led to reduced child mortality, improved maternal health, and the ability of economically disadvantaged individuals to combat diseases through better nutrition, housing, and healthcare, especially among women and children.
• Promoting Banking Literacy: SHGs encourage and motivate their members to save and serve as a conduit for formal banking services to reach underserved populations.

Opportunities

• Self-Help Groups (SHGs) frequently play a significant role in alleviating rural poverty.
• Economic empowerment through SHGs instills confidence in women, enabling their active participation in household-level and community-level decision-making.
• The untapped and underutilized resources within communities can be effectively mobilized through various SHG initiatives.
• Leaders and members of successful SHGs possess the capacity to serve as resource persons for various community development efforts.
• Active engagement in diverse SHG initiatives helps members develop leadership skills. Moreover, evidence suggests that women who lead SHGs are often considered as potential candidates for Panchayat Pradhans or representatives in the Panchayati Raj Institution (PRI).