Key Characteristics of Self-Help Groups

1. They usually start a common fund by putting aside small amounts of money on a regular basis.
2. The groups develop a flexible system of operations, frequently with the assistance of non-governmental organizations (NGOs), and democratically administer their shared pooled resource.
3. Groups meet on a regular basis to review loan requests, with conflicting claims on limited resources determined by consensus on broader requirements.
4. The majority of loans are made on the basis of mutual need and confidence, with minimal documentation and no real collateral.
5. The loans are little, frequent, and for a short period of time.
6. Interest rates vary by group, depending on the purpose of the loan, and are frequently greater than those charged by banks but lower than those charged by moneylenders.
7. Emerging rural, social, and economic concerns are discussed at periodic meetings in addition to collecting money.
8. Defaulters are uncommon owing to peer pressure and intimate awareness of the credit’s intended usage as well as the borrower’s financial circumstances.

Self-help groups are made up of disadvantaged individuals from rural areas (especially women). The objective is to assist them in organizing themselves, providing financial assistance, providing jobs, and assisting them in other areas, including domestic concerns. These groups are informal gatherings of people who are dealing with similar issues. These folks band together to form a group to solve their mutual concerns and raise their living standards. They are typically from the same socioeconomic background and are involved in little savings between themselves at banks. This sum serves as the SHGs’ fund and is utilized to make loans to its members. It is a critical instrument for lifting people out of poverty and improving social standing by encouraging self-employment.

The Self-Help Group (SHG)-Bank Linkage Program has emerged as the country’s most important microfinance program. Commercial banks, regional rural banks (RRBs), and cooperative banks are implementing it. As of March 31, 2012, the SHG-Bank Linkage Program had 79.60 lakh SHG-held savings bank accounts in operation, totaling Rs. 6,551 crore in savings.

A self-help group is a financial intermediary in a community made up of 10–20 local women. Self-help groups are most common in India, but they can also be found in other countries, especially in South and Southeast Asia. Over the course of a few months, members make tiny recurring savings contributions until the organization has enough funds to begin lending. The funds can then be re-loaned to members or others in the community for any purpose. Many SHGs in India are ‘connected’ to banks in order to receive microcredit.