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.