Are Self-Help Groups (SHGs) SGs?

Many of you are familiar with India’s self-help groups, also called SHGs. Much has been written about them and new reports seem to be streaming in by the day on their performance and impact. And news is ablaze about their problems. The question is: are savings groups self-help groups and vice versa. The answer, in our minds is yes and no.

Self-help groups began in earnest in the 1980s in the south of India as an antidote to chit funds (informal savings clubs that had grown large with problematic structures and practices) and as a kind of social movement. Many churches and NGOs fashioned SHGs out of the will owomen villagers, many of whom suffered under the hands of exploitative moneylenders and landlords. These groups, like all savings groups, made regular savings deposits and borrowed from communal funds that they watched grow from their own assets.

 In the early days SHGs were not seen as microfinance organizations, but as cells of social action and incubators of women’s empowerment. Over time, the work of NGOs like MYRADA saw that more capital into these groups might accelerate the growth of member enterprises. In the early 1990s the National Bank of Agriculture and Rural Development (NABARD) partnered with MYRADA to develop the SHG Bank Linkage Programme. SHGs could rotate their own money in much the same was as an ASCA but also could borrow funds from a local bank (backed by NABARD) to supplement the group’s own capital.

Over the course of the 1990s and 2000s, the bank linkage program blossomed. Banks were able to fulfill “Priority Sector” lending requirements mandated by the Reserve Bank of India by lending to groups. During those same years many state and local governments saw the power of SHGs and started channeling welfare benefits like rice distributions, seeds or cash through group bank accounts or rice collection points. State banks were actively lending to SHGs.

The lines between the banking system, state governments, and heated local politics became blurred as each stakeholder saw SHGs, not as catalysts of female empowerment, but as nodes of service delivery (credit in the case of banks or subsidies in the case of government) and of political gain. In states like West Bengal, SHG agendas were hijacked by political agendas. Many were formed and subsidized by politicians simply for the purposes of gaining votes. 

That said, there are many SHGs throughout India that are built on principles identical to what we call savings groups. Members meet to share problems, build social capital, start businesses together, and to save. They save regularly and take loans for household emergencies or to pay school fees. Many are not linked to banks, to government subsidies or to local politicians. They exist to help their membership. And many groups which are linked to banks borrow judiciously and often have group savings accounts where they hold surplus funds.

These are the groups I was able to observe throughout India’s tribal belt. They were the lifeblood of many communities and the inspiration of many destitute women. So yes, in these instances, SHGs are savings groups as we have defined them on this blog. 

Yet this is only part of the story. The other story – the one of SHGs being commandeered by banks, MFIs and politicians – is perhaps the dominant one in the minds of many practitioners when they conjure up SHGs in India. Yet, this story too is worthy of our attention. As CARE and others increasingly link groups in Africa to mainstream financial resources and as banks and credit unions all over world begin to see groups as a market, the lessons experienced in India take on importance. 

So to answer our question: are SHGs Savings Groups? Emphatically “yes” - when members form group rules and when they follow the principles of fairness and transparency which we attach to the phrase Savings Groups. And, emphatically “no,” - when group are formed for the purposes of commercial or political interests, or for any agenda not created by group members themselves.