CHAPTER - I

INTRODUCTION TO SELF-HELP GROUPS

Self-Help Group (SHG) is homogeneous affinity groups with common

objective of enhancing their economic conditions. Theorists view SHG as the

homogeneous group of poor village people formed with at least 5 members. In

reality, the SHG groups comprise of 12-20 members of nearly same economic

conditions and aspirations. This is not based on strict rules, even though rules are

framed for the smooth conduct of SHG meetings and the routine money regular.

The credit is provided for both consumption and other productive purposes.

SHG members can leave a small amount of money collectively and they

can lend, it as collateral-free loans to their members at a reasonable rate of interest.

All decisions are taken in collective manner by the SHG members.

The Philosopher, Fahreet1 states that the society has to be formed into small

groups and to be engaged in productive activities. The basic principles of the

SHGs are group approach, mutual trust, organization of small and manageable

groups, group cohesiveness, sprit of thrift, demand based lending, collateral free

loan, women friendly, peer group pressure in repayment, skill, training capacity

building and empowerment.

1
Fahreet as given in „Sri Aurbindo or the Adventure of consciousness‟, Mira Aditi
Centre (dist), Mysore, p. 440

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Origin and Concept of Self Help Groups (SHGs)

The origin of SHGs is the brainchild of Grameen Bank of Bangladesh,

which was founded by Prof. Mohammed Yunus. SHGs were formed in 1975. In

India, National Bank for Agricultural and Rural Development (NABARD)

initiated the starting of the SHGs in 1986-87. But the real effort was taken after

1991-92 with the linkage of SHGs with the banks. A SHG is a small, economically

homogeneous affinity group of the rural poor voluntarily coming together to save

small amount regularly, which are deposited in a common fund to meet the

emergency needs of members and to provide collateral free loans decided by the

group. It has been recognized as useful tool to help the poor and as an alternative

mechanism to meet the urgent credit needs of the poor. SHG is a media for the

development of saving habits among the women. It enhances the equality status of

women as participants, decision-makers and beneficiaries.

Self-Help Groups were formed in Mysore Resettlement and Development

Authority (MYRADA) in 1984-85 and initially called Credit Management Groups.

In 1987, NABARD sanctioned a grant to MYRADA for the institutional capacity

building of the SHGs and to match savings of the groups‟. In fact, several NGO‟s,

notably Professional Assistance for Development action (PRADHAN) working in

Rajasthan and Tamil Nadu realized that the Integrated Rural Development

Programme (IRDP) system of provision of credit to the poor was running the

banks as well as the poor. They experimented with lending to groups and

persuaded banks to lend to such groups.

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 SHGs have varied origins, mostly as part of integrated development

programmes run by Non Government Organisations (NGOs) with the support

of donor. The major programme involving financial intermediation by SHGs is

the SHG-bank linkage programme. This programme was launched in 1992 by

NABARD, the apex bank for rural development in India. By March 2002, the

programme covered 7.8 million families with 90 per cent women members on

time repayment of loans as over 95 per cent for banks participating in the

programme. It also involved 2,155 Non-Government organizations (NGOs)

and other self-help promoting institutions. NABARD‟s corporate mission is to

make available microfinance services to 20 million poor households, or one

third of the poor in the country, by 2008. However, there is at present a high

degree of concentration in the southern states, with just two states, Andhra

Pradesh and Tamil Nadu accounting for more than 66 per cent of the SHGs

linked to banks.

State and district overview

The first SHG was started in Dharmapuri district of Tamil Nadu in 1989.

Government of Tamil Nadu initiated Magilar Thittam2 in 1997 to develop the

women in Tamil Nadu. On the basis of its success from 1997 all the district

organizations receive a great benefit from World Agricultural Fund. It was

expanded to all the other districts too. On the rule of TN Government, the people

below the average line and the fitted have formed SHGs for their welfare.

Women in the age group of 18 to 60 belong to the same village can join the

2
Potential Linked Credit Plan, NABARD, 2012-2013, p - 111

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organization. Each group consists of 12 to 20 members. These groups are

organized by the Panchayath board and self-service groups. SHG is not only for

women but also for the young and energetic men in the age group of 18 to 35.

These organizations are for the welfare of the poor.

Tamil Nadu is ranked the second in the country, after Andhra Pradesh, in

SHG-Bank Linkage Programme. Wide network of NGOs, encouraging support

of banks and government agencies helped widespread expansion of the

programme in Tamil Nadu. Regular savings, maintenance of books and accounts,

internal lending are the major factors in determining the credit absorption

capacity of the groups. The cumulative number of SHGs credit linked in Tamil

Nadu as on 31 st March 2011 stood at 9, 51,783 with an aggregate bank loan of

Rs. 10,384.36 crores. 251 programmes worth Rs. 61.80 lakhs were sanctioned

during the year 2010-11.

National Bank for Agricultural and Rural Development (NABARD),

Tamil Nadu Adi Dravidar Housing and Development Corporations (THADCO)

and other institutions conduct special training programmes for Skill

Development/Skill Upgradation for the members of SHGs to equip themselves to

set up micro enterprises. Under Swarnajayanti Gram Swarozgar Yojana Infra

scheme (SGSY) and few SHGs got assistance for infrastructure and marketing

support.

Women Empowerment

A woman is said to be empowered when proper education, health, social

status and earnings are readily available to her. Awareness about the available

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opportunities and a symbiotic approach would generate ample scope for

sustainable development of women.

Women empowerment is influenced by factors such as education, income,

job, property right, technical skills and self-decision making. The welfare

governments all over the world consider the importance of women empowerment.

By this process, the overall social development is ensured.

Swami Vivekananda is of the view that women must be imparted

education, training and they have to be left free to decide their own future. He

emphatically asks the reformers, “Hands off, who are you to decide their future”?

Women empowerment is possible with the blend of modern science education

with our traditional culture. Any development should sprout from within the group

to whom the target is fixed.

The Sixth World Conference on women that was held in Beijing in 1995

had observed the women empowerment and the full participation of women based

on equality in all spheres of society. They are fundamental for the achievement of

equality, development and peace. Human Development Report 2003 speaks about

the millennium development goals to be achieved, especially gender equality and

empowerment of women.

Women Empowerment in India

The woman is the basic fabric of any family and society. The development

of women alone would determine the success of major part of Indian workforce.

Empowerment can serve as an instrument in attaining upward social and economic

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mobility by the women members. Women empowerment is a global issue, which

has gained momentum in recent decades. The year 1975 was declared as “the Year

of Women” by the United Nations. In order to give equal status to women and

empower them on educational, economic and social frontiers

From time immemorial, women faced the challenges of coping with a male

dominated society. Even after several years of planned development in India, the

status of women in our country is low and their socio-economic conditions are

much more depressed than that of men.

Many countries have failed to ensure equality of human development for

women and men. Though in the past two decades, some countries have made

substantial inroads in the field of female health and literacy, this has not

contributed much towards raising the economic and social status of women.

Complete gender equality has remained a nightmare even in advanced countries.

Women constitute 70 per cent of the world‟s poor. They suffer from higher

unemployment rates than men and are paid lower wage and very few occupy

decision-making positions. Various dimensions of women issues involved are with

gender discrimination.

Socio- Economic and Cultural Spheres

Shinde K.H and Ramkrishna (May 2011)3 portray that women in most

societies are subjected to discrimination. The UN convention is for the elimination

3
Shinde K.H and Ramakrishna, „Women empowerment through Self-Help groups in

India‟, May, 2011

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of all forms of discrimination against women. The convention makes it binding on

the consenting nations to initiate corrective actions to have gender equitable laws,

end violence against women that are derogatory in nature. The formation of

women Self-Help Groups had its emergence in the seventies in Bangladesh and

since the early nineties in India, predominantly in the southern states. The groups

typically have a membership of between five and twenty members and are the

formal associations of women. The women elect their leaders on democratic

principles, save money, lend to each other and take higher order loans from

financial institutions. SHGs have emerged as change agents in their own village

societies.

Micro-Finance Institutions and Income Generation

The term „Self-Help Group‟ describes a wide range of financial and non-

financial associations, but in India it has come to be referred as a forum of

Accumulating Saving and Credit Association (ASCA) promoted by

Government Agencies, NGOs or Banks. These groups manage and lend their

accumulated savings and externally leveraged funds to their members.

Under the microfinance programme, loans are extended to the „Self- Help

Groups‟ that pool a part of their revenue into a common fund from which they can

borrow. The members of the group decide on the minimum amount of deposit,

which ranges from Rs.20 to Rs.100 per month depending upon the size of the

group. The group funds are deposited with a Micro Finance Institution (MFI)

against which they usually lend at a credit deposit ratio of 4:1 but the ratio

improves with account performance record i.e. prompt repayment of loans. The

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group funds is the way for „micro savings‟, though it may seem like a collateral.

The loan usually ranges from Rs. 2000/- to Rs. 15,000/-.

Indicators of Women Empowerment through Microfinance

1. Ability to save and access to loans

2. Opportunity to undertake an economic activity

3. Mobility-Opportunity to visit nearby towns

4. Awareness about local issues, Micro Finance Institution (MFI)

procedures, and Banking transactions

5. Skills development for income generation

6. Decision making within the household

7. Group mobilization in support of individual clients, action on social

issues

8. Role in community development activities

Micro-Finance and Women Empowerment

Self-Help Group is the real model to be emulated by all to change the lives

of the poorest of the poor. It is one of the potential instruments of the government

to mitigate the poverty in the rural and urban Indian households. It has a positive

impact on the family of the members of SHG.

The state of West Bengal has a dynamics where awareness and the level of

literacy have made the micro-finance interventions easier, mainly through Self-

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Help Groups. The government supported micro-finance programme under the

Swarna Jayanti Gram Swarozgar Yojana (SGSY) scheme in the West Bengal is

able to reach to the poorest of poor and vulnerable section of the rural population

of West Bengal, particularly the rural women.

Micro-Finance and Entrepreneurial Development

Micro Finance is the carrier to spread the success story of SHG and

benefitting the women in the nooks and corners of India. It helps them start

cottage industries and making them the real women entrepreneurs. The

Entrepreneurship Development Programme (EDP) model propounded by

McClelland could help the women through SHGs. This would lead to change their

lives evergreen. The main aim of the SHG is to provide the much needed credit

facility for which earlier they had to depend on the moneylender or to go through

the circuitous method of receiving the loan at the end. SHG increases the social

cohesion among the women members leading to better daring and caring

experiments in business. They borrow mainly for meeting the unexpected

expenditure and repaying the loan received from the money lenders and to start

business on their own.

Banks, Financial Institutions and SHGs

In developing countries, financing the rural poor through formal financial

services failed to meet their credit requirements. The main reason for failure was

the absence of any recognized employment and hence non-availability of collateral

with the poor. The high risk and the high transaction costs of banks associated

with small loans and savings deposits are other factors make them non-bankable.

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The lack of loans from formal institutions leaves the poor with no other option but

to borrow money from local money-lenders at huge interest rates. In different

countries including India, efforts have been made by the governments to deliver

formal credit to rural areas by setting up special agricultural banks/rural banks or

directing commercial banks to provide loans to rural borrowers.

MFI -Bank Linkage4

There are four Micro Finance Institutions viz., Sangamitra, Udjeevan,

Gramavidyal and Kaveri credit institutions functioning in Dharmapuri district.

Sangamitra, promoted by MYRDRA is working in Pennagaram, Palacode and

Dharmapuri blocks and extending financial assistance to the SHGs promoted by

MYRDRA and other NGOs. Sangamitra has extended finical assistance to Rs.

15 crores to SHG members in unbanked areas.

SHG and Inclusive Growth

The SHG approach of lending was introduced to banks as a new micro

finance approach with innovations and flexibility in order to enjoy certain benefits

to the banks. Presently, the SHG based micro finance is the main form of micro

finance in India and it is well integrated into the formal banking system in India.

The group based micro finance schemes have been introduced by the banks to

cater to cost effective finance, which is anticipated to decrease the banker‟s burden

of securitization based on application loan disbursals monitoring and recovery of

loan accounts.

4
Micro finance in India, 2012-2013, NABARD, p .10

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 The reduction in procedures is anticipated to reduce the cost to the banks,

increase profits and small savings in rural areas. It is envisaged that this SHG

based Micro-Finance approach shall bring proximity and affinity between bankers

and rural people.

Access to finance by the poor and vulnerable groups is a pre-requisite for

poverty alleviation and social cohesion. This should become an integral part of our

efforts to promote inclusive growth. In fact, providing access to finance is a form

of empowerment of the vulnerable groups. Financial inclusion denotes delivery of

financial services at an affordable cost to the vast sections of the disadvantaged

and low-income groups. The various financial services include credit, savings,

insurance and payments and remittance facilities. The objective of financial

inclusion is to extend the scope of activities of the organized financial system to

include within its ambit of people with low income. Through graduated credit, the

attempt must be to lift the poor from low level, so that they come out morass of

poverty. Micro financing programmes are intended to reach poor segments of the

society for their empowerment through SHG based financial inclusion. Micro

financing has emerged as one of the important instruments for empowerment of

poor and expansion of the banking outreach.

Micro Services

The main objective of Micro-Finance is to provide an umbrella of micro

services to the poor so as to enhance their credit worthiness and make them bank

worthy to financial institutions. SHG movement inculcates a sense of financial

discipline and timely repayment among small borrowers so that they can seek

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long-term financial assistance and banking services from the formal sector

eventually.

Microfinance in India has brought a number of people above the poverty

line. However, the coverage is uneven with large number of people in rural area

remaining out of the ambit of the outreach programs. There is an imperative for

co-ordinate action among the various agencies such as the government, financial

institutions, NGOs and like-minded people involve in the development of the

society. Economic developmental and infrastructure issues should engage the

attention of the government and other stakeholders. Involvement of women

especially the rural women in SHG movement will go a long way in achieving

“Purna Swaraj” and the inclusive growth.

Statement of the Problem

Dharmapuri District is a backward area. The women in Dharmapuri area is

beset with socio-economic problems. The Self Help Groups play a major role in

enhancing the capabilities of women. The position of women in terms of

education, social recognition and their contribution to the economic life of the

society in general and to the family is generally underestimated and under

reported. The researcher considers the questions of their capability building, skill-

set enhancement and improvement in their socio-economic conditions. Various

social ills affect women in Dharmapuri. The moot question is whether the loan

provided by SHGs is alternative to open market credit or not? After becoming

member of SHGs, whether the economic status of the members increases or not?

or whether any changes occurred in the empowerment of women? Hence, an

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attempt has been made to study the role of SHGs in empowering women in

Dharmapuri District.

Importance of the Study

SHGs democratically set their own interest rates on inter-group loans

ensuring the interest rate affordable to members. Members decide for what

purposes they could use loans. Uses vary from investment in small businesses to

purchasing needed household items. Low cost and multi-purpose loans free the

group members from the clutches of local moneylenders.

While the impetus for forming an SHG is economic, women soon realize

that the social benefits they derive from group membership are as important as the

financial ones. Mostly women in rural India do not participate fully in decision -

making processes, leaving them bereft of confidence and the power to make

important change in their lives and of their families limiting the potential of

community‟s members from moving forward.

SHGs by dint of intrinsic dynamics and the money that accrues to members

offer women the chance to make decisions, gain power over local resources, and

ultimately build confidence. This confidence is precisely the catalyst needed to

move communities forward on social problems. Some members have reported

reduction in the occurrence of rape, alcoholism, murder, dowry abuse, and spousal

abuse in communities where strong SHGs exist. Without external inputs, Self-

Help Groups find themselves managing many social issues. SHGs, when properly

formed and linked to one another, would provide a broad range of social benefits

to members and even to entire villages.

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Objectives of the Study

The study has the following objectives.

1. To study the growth of Self- Help Groups and Micro Finance in the

Dharmapuri District

2. To examine the demographic, social and economic status of the SHG

members and their performances

3. To assess the impact of SHG activities on economic status of the SHG

members

4. To analyze the empowerment of the women members after joining Self-

help Groups

5. To offer suggestions to improve Women Empowerment through Self-help

Groups

Hypotheses

The researcher has framed the following null hypotheses to test the above

objectives.

1) There is no significant association between the demographic, social and

economic variables of the respondents and their performances in SHG

activities.

2) The economic status of the SHG members remains the same even after

joining SHG.

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 3) The empowerment of the SHG members remains the same even after

joining SHG.

Sampling Technique

The researcher has employed the stratified random sampling technique for

collecting data from the women SHG respondents belonging to Dharmapuri

district. The district has eight blocks that have been treated as eight stratums. A

total of 65 respondents were selected from each block (Stratum). Therefore,

respondents from each block have been contacted and cumulatively it comes to

520 samples.

Pilot study

The researcher has conducted the pilot study to determine the size of

sample. 50 samples were selected for the pilot study. The total samples for the

study were determined as 520 by applying the following formula.

Sample size n = (ZS/E)2

Where Z = Standardized value corresponding to a confidence level of 95% = 1.96

S = Sample (SD) Standard deviation from Pilot study of 50 sample = 0.5815

E = Acceptable Error = 5% = 0.05

Hence, Sample size n = (ZS/E)2

= (1.96*0.5815/0.05)2

= 519.603

= 520

The overall cronbach alpha is 0.6

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Statistical Tools

The statistical tools such as t-test, Analysis of Variance (ANOVA), F-test,

Chi-square, correlation, multiple regressions and diagrams have been deployed to

carry out the research.

Study area

This study is carried out in Dharmapuri District, which is situated in North

Western corner of Tamil Nadu and is bounded by Thiruvannamalai and

Villuppuram Districts in the East, Salem district on the South, Krishnagiri District

on the North and Kaveri River on the West. The Dharmapuri district is backward

especially in education and health.

Limitations

1. The results of the study are applicable to Dharmapuri district only.

2. All women respondents might not have given account details due to

ignorance and fear.

3. The results and conclusions of this study are subject to the primary data

that were supplied by the sample respondents

Plan of the study

The study has been organized into seven parts in a systematic manner to

probe the research problem in detail.

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 The first chapter deals with the introduction of Self-Help Groups, origin

and concept of Self-Help Groups, state and district overview, women

empowerment in India, SHG and Inclusive growth, statement of the problem,

importance of the study, objectives of the study, hypothesis, sampling techniques,

pilot study, statistical tools, limitations of the study and plan of the study.

The second chapter provides a detailed account of review of relevant

literature to study the gap in it. It probes into SHG women empowerment,

microfinance and economic development linked to SHG.

The third chapter presents an overview of the study area, Women Self -

Help Groups and Micro Finance.

The fourth chapter analyses the performance of SHG members with

relation to demographic, social and economic status. The relevant statistical tools

are used to analyze the data and test the hypotheses.

The fifth chapter assesses the impact of SHG activities on economic status

of SHG members after joining Self-Help Groups in the study area.

The sixth chapter evaluates the empowerment of the women members

after joining Self-Help Groups in the study area and the seventh chapter gives the

summary, findings, suggestions and conclusions of the study.

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