All about Self Help Group (SHG)

If you are new to the concept of SHGs, this will helps you to understand the subject in simple way.

What are SHGs?

Self help Group (SHGs) are small group of poor people. The members of an SHG face similar problems. They help each other, to solve their problems. SHGs promote small saving among their members. The savings are kept with the bank. This is common fund in the name of the SHG. The SHG gives small loans to its members in the name of common fund.

Size of the SHG

The ideal size of an SHG is 10 to 20 members. The group need not be registered.

Is it officially recognized to the bank with informal groups?

Yes, RBI and NABARD have approved banking with SHGs. RBI has classified loans to SHGs as priority sector lending.

Who help to form SHGs?

A reasonably educated and helpful local person has to initially help the poor people to form groups. He or She tells them about the benefits of thrift and advantages of forming groups. This person is called as ‘animator’ or ‘facilitator’. Any of the following persons can be a successful animator:

  • Retired school teacher or a retired government servant, who is well known locally.
  • A health worker/ a field officer/ staff of a development agency or department of the State Government.
  • YOU yourself! (The field officer or a staff member of a commercial bank/ regional rural bank or a field staff from the local co-operative bank or society can also help the poor in forming groups.)
  • A field level functionary of an NGO.
  • An unemployed educated local person, having an inclination to help others.
  • A member/participant in the Vikas Volunteer Vahini (VVV) Programme of NABARD.
  • Woman animators can play more effective role in organizing women SHG’s.

The animator cannot organize the groups all alone. He or she will need guidance, training, reading material, etc.

Usually, one of he following agencies help:

(i)         A voluntary agency or Non Government Organisation (NGO).

(ii)        The development department of the State Government.

(iii)       The local branch of a bank.

What does the animator do?

  • The animator talks to people in the village or at their homes.
  • He or she explains the benefits of thrift and group formation.
  • No promise of bank loan is given to any one.
  • He or she helps the group members to hold one or two initial meetings.
  • The group finds a group leader, for holding meetings, keeping books, etc.
  • The animator guides and encourages the leader and the group members.

1. Size of the SHG

*    The ideal size of an SHG is 10 to 20 members.

(Advantage: In a bigger group, members cannot actively participate. Also, legally it is required that an informal group should not be of more than 20 people.)

*    The group need not be registered.


  • From one family, only one person can become a member of an SHG.(More families can join SHG’s this way.)
  • The group normally consists of either only men or of only women. Mixed groups are generally not preferred.
  • Women’s groups are generally found to perform better. (They are better in savings and they usually ensure proper use of loans.)
  • Members should have the same social and financial background.(Advantage: This makes it easier for the members to interact freely with each other. If members are both from rich as well as poor class, the poor may hardly get an opportunity to express themselves.)

Some Common Factors for Membership in an SHG

  • Women/men from very poor households.
  • Those who depend on money lenders even for daily necessities.
  • Those with a per capita income not exceeding Rs. 250 per month.
  • Those having dry land holding not exceeding 2.5 acres.

Common living conditions for the Group Members

1    Living in kutcha houses.

2    Having no access to safe drinking water.

3    Having no sanitary latrine.

4    Those who have only one or no one employed in the family.

5    Presence of illiterate adults in the family.

6    Presence of an alcoholic or drug addict in the family or a member suffering permanently from prolonged illness.

7    Presence of children below five years in the family.

8    Family eating two meals or less a day.

9    Scheduled Caster or Scheduled Tribe families.

If a family has at least four of the above 9 common living conditions, it can be considered poor, and one member of that family can be encouraged to become a member of an SHG.

(These are only examples. You can also use locally important conditions to decide whether a family is poor.)


  • The group should meet regularly. Ideally, the meetings should be weekly or at least monthly. (Advantage: They become closer, if they meet regularly. This helps them to understand each other’s difficulties better.)
  • Compulsory attendance : Full attendance in all the group meetings will make it easy for the SHG to stabilize and start working to the satisfaction of all.
  • Membership register, minutes register etc., are to be kept up to date by the group by making the entries regularly.(Advantage: This helps you to know about the SHG easily. It also helps to build trust among the SHG members.)

Keeping of Accounts by the SHG:

  • Simple and clear books for all transactions to be maintained.
  • If no member is able to maintain the books, the SHG may take outside help. (It has been seen that a boy or girl from the village with some educational qualification does this job enthusiastically. After some months, the group can even consider giving him or her a small reward for this job.)
  • Animator can also help.
  • All registers and account books should be written during the course of the meeting.(Advantage: This creates confidence in the minds of members who are unable to read and write.)

2   What are the books kept by an SHG?

i)    Minutes Book:

The proceedings of meetings, the rules of the group, names of the members etc. are recorded in this book.

ii)   Savings and Loan Register:

Shows the savings of members separately and of the group as a whole.

Details of individual loans, repayments, interest collected, balance, etc. are entered here.

iii)  Weekly/ Fortnightly/ Monthly Register:

  • Summary of Receipts and payments.
  • Updated in every meeting.

iv)  Members’ Passbooks:

Individual members’ pass books in which individual’s savings and loan balance outstanding is regularly entered.

3   Major Functions of an SHG

a.   Savings and Thrift:

*    All SHG members regularly save a small amount. The amount may be small, but      savings have to be a regular and continuous habit with all the members.

*    “Savings first-Credit later” should be the motto of every SHG member.

*    SHG members take a step towards self-dependence when they start small savings. They learn financial discipline through savings and internal lending. (Advantage: This is useful when they use bank loans.)

b.   Internal lending:

*    The SHG should use the savings amount for giving loans to members.

*    The purpose, amount, rate of interest, schedule of repayment etc., are to be decided by the group itself.

*    Proper accounts to be kept by the SHG.

(Specimen formats given as an Annexure at the end of this book.)

c.   Discussing problems:

In every meeting, the SHG should be encouraged to discuss and try to find solutions to the problems faced by the members of the group. Individually, the poor people are weak and lack resources to solve their problems. When the group tries to help its members, it becomes easier for them to face the difficulties and come up with solutions.

d.   Taking bank loan:

The SHG takes loan from the bank gives it as loan to its members. (Details may be seen in the next chapter.)

Soon after an SHG is formed and one or two meetings held where the savings are collected, a savings bank account can be opened in the name of the SHG.

  • Shweta Chaudhary

    liked it… it help for for the education of todays generation.. where women needs empowerment for the betterment of there future…

  • veronica

    answers to the point. but wanted the advantages of SHG forming. wanted points to MOTIVATE people to form new groups.

  • Bharat

    can some one pls tell me how to register SHGs group?

    • It is very clearly written that no registration is required for SHG. You have to produce proof of the group as members register and minutes of the meeting.

  • ratnesh mishra

    kya SHG ko register kerwana padta hai,
    bina uske govt. koi bhi tender deal nahi karti
    agar registration karana padta hai to tax bhi dena padta hoga jabki SHG to tax free hote hain

    please reply if any buddy know

  • Gks99

    where from any shg can be registered to get any help from any govt. scheme.

    • Anonymous

      It is not required to get registered the self help group. You just
      prepare the minutes of the meeting that we have formed this group.
      Otherwise you can form an society as per society registration act 1856.

  • kiran

    any prescribed format for maintaining minutes register and saving and loan register?

  • Babu Balasingh

    How to get a PAN card for SHG? Is there any necessary for SHG to be registered for getting PAN? If so with whom?

    • Crescent2trust

      How to get a PAN card for SHG? Is there any necessary for SHG to be registered for getting PAN? If so with whom?

      • Anonymous

        Yes, if you want PAN for SHG then register it as society under society
        registration act.

  • avatharmens shg,erode

    we run a mens shg past 1year. our banking account in pallavarural bank. we keep all rules as the shg norms.but our bank say no loans to mens shg. any chance to loan us

    avathar mens shg ,erode

  • Abinash kishor Bora


  • Dipak Bora

    we have a NGO Name Federation in North Eastern SHGs Towards Society, we want to help the SHG which fromed by us , so kindly give suggestion to development them

    • Srijan_ek_asha

      We are executing the sole purpose of this sector and trying to establish a SHG namely “PRAYAS” in the governance system through reverse social engineering and almost P.R.A.Y.A.S. (Protective Rural Action for Youth and Society) is in win-win position to act as “Developmental Agency” for concerned works.

      Actually a mix complexion of public participating activities can be seen fro the extract of project wherein NGO-Srijan Ek Asha is acting as Project Investigator, DFO Jabalpur & Gram Panchayat Mohania, Tehsil & District Jabalpur are acting as “Nirman Agency” and an area of 45 Acres is to be fenced. This SHG is efficiently providing RCC Fencing Poles & Chain Link Mesh for subject project. many more to discuss.. actually due to field works there is short of time……….

  • Yay

    if SHG is required to be regiter then in which govt agency?

  • david

    How much is the first amount

  • yousuf

    can working professionals form SHG, and what is registration process to open a bank account ?

  • Amit Lakhaani

    Very Informative article!

    PRADAN believes in women empowerment and that empowering women is the first great step of impacting rural livelihoods.
    We at PRADAN begin our engagement in most new villages by promoting women’s Self-Help Groups (SHGs). PRADAN helps SHG members decide the rules of business and pool their savings for small loans, and trains them in playing a “public” role while giving them the experience of working together. For the more mature SHGs, PRADAN helps them establish collaborative linkages with banks in order to leverage credit that, in turn, meets member’s needs for larger funds.

    Please visit for more info.

  • Aditya Chaudhary

    Dear Sir ,
    I have some serious and typical queries which can only be answered by u genuinely…so plz help me n guide me for the same… as mentioned here under ..-:
    #1-can a retired govt employee also create the shg ,and hold the post of group president or Secretary or Himself ??
    And if he is already taking his pension by state govt
    I.e power corp.
    #2- if that person attached under a govt .employees welfare Union .after this can he create a SHG by holding the post of president or secretary or a earn more amount thru creating SHG…???
    #3-can an existing member who is already working under the group …creat or prepare the SHG by himself ..??

  • Durga prasad

    How to remove a member from a Shg? If the member is creating disturbance in the group.

  • Hitesh Roy


    • Select status of applicant as Association of Person (AOP) and put your SGH name in the last name filed. Fill office address and other particulars.


    Tell me about providing educatonal diploma is possible in this or by joining with other yojna/PMKVY

  • Machin Rimai

    Hi, I enjoyed reading your blog.
    I am Machin from Manipur I have a passion to start SHG, we are living in under poverty level, the only income is MGNREGA, we have plot where we can cultivate many product however our product cannot produce in market due transportation, wherein it is only 50/kms away from the Capital City Imphal, we have contact to our concern MLA’s but who cares after elected, My Question is how can I get help from GoI and successful run SHG.
    Any suggestion can email me @