Self-help groups not only empower women but also increase their confidence and help them build social capital while creating an inclusive banking network
The concept of self-help groups (SHG) or women’s collectives has been the most powerful and successful tool to empower women in rural India. Over a span of 25 years, the movement has registered a tremendous growth. As on March 31, 2018, the total number of SHG savings linked with banks stood at 87.44 lakh and the total number of SHGs having loans was 50.20 lakh with an outstanding loan of Rs 75,598 crore. A typical Indian SHG consists of 10-20 poor women from similar socio-economic backgrounds, who meet once a month to pool savings and discuss issues of mutual importance. One of the key objectives of SHGs is to provide financial access to women through a system in which they cross guarantee each other’s debts. With help to start businesses, impoverished women can earn money and support their communities as well as their families.
The great authority on microfinance, Malcolm, described Indian SHGs as “on-lending groups, which collect their own equity capital and savings deposit from their owners, who are also members and customers. They lend their money to the members at interest rates, which they decide, and accumulate profits, which they choose either to distribute to the owners or to add to the fund at their joint disposal.” Indeed, there needs to be a great emotional intensity to break through age-old barriers. This is possible only through groups, who share same emotional values and are driven by strong impulse of mutual goals. One of the primary objectives is to avail loans, which the women access by cross guaranteeing each other’s liability. These loans are part of a financial philosophy called microfinance. Members take loans for a variety of reasons: To buy medicine, start a business, purchase animals, pay school fees, buy clothing and food during the lean season and invest in agriculture.
Once the groups have mastered the mechanics of savings and lending, they begin to ask: What’s next? When groups have a fair amount of capital, they can start lending portions of the money back to individual group members — at an interest. Through the group mechanism, funds become a collective asset, enabling uplift of the community. They dispense small and unsecured loans at varying costs to group members as per their need. The most significant aspect of these collectives — and which makes them innovative and durable — is that they are wholly managed by the women. They themselves plan the design, implementation and trajectory of this model. Each group has a constitution or a list of rules, created and accepted by the members themselves. The rules pertain to selecting members, electing office bearers, creating their own loan fund, deciding on the recipient of a loan, ensuring repayment of the loan and the like. Regular meetings are the enabling forces, giving women the courage to lean into multiple household and community settings.
When a collective has a fair amount of capital, the group starts giving small loans to its members. It is astonishing that hardly any of these women default. Although financial aspect is not the only benefit for members, credit remains an important element. Disciplined efforts involved in running a group make the women efficient money managers. As the women do the work that is normally done by the bankers, banks’ administration costs have come down drastically. It is true that social dynamics cannot be changed without women’s involvement in the economy.
The formation and nurturing of SHGs is an onerous process and unless a good foundation is laid, there will be a lack of solidity. If there is any disequilibrium, the default starts and there is a domino effect. It soon becomes a contagion sweeping like an epidemic. The groups need to be economically, socially and educationally homogenous. In the absence of healthy group dynamics, there are a lot of conflicts and frictions with the group leader trying to impose personal views on the group and executing decisions in an autocratic way.
These groups are obviously formed for financial support but that is not an end in itself. They soon become a platform for education, health information and training, savings, business development, technical and marketing assistance. The mere act of leaving the isolation of family compounds and joining the periodical peer group discussions increases women’s confidence and motivation. SHGs become a comprehensive ladder of support and opportunity. They conceptually address issues that had made them non-bankable. They create a collective identity for the women in the group and give transaction aggregation. Since it was a savings-led model, it also created a transaction trail, which could be used for establishing a financial history for the bankers. This was important in the absence of bankable collateral. SHGs are also an instrument for the empowerment of the poor and marginalised. They have proved to be an effective instrument for changing oppressive relationships at home (gender and tradition-related) and in society. This is especially true for those relationships arising from caste, class and political power, which have made it difficult for the poor to build a sustainable base for their livelihood and to grow holistically.
The hierarchical pyramid of SHGs supports three tiers of institutions in a typical district: SHGs, village-level committees and federations. Initiatives taken by these organisations have been diverse: Some have helped women consolidate their savings, others have addressed domestic violence, alcoholism and caste-related issues in the public sphere. They are seen as more than just a conduit for credit — they are the biggest generators of social capital in rural India and also act as a delivery mechanism for various other services ranging from entrepreneurial training, preventive health education, food security, livelihood promotion activity and community development programmes. They serve to provide formal channels for social and financial support.
This model generates a unique stock of social capital through the process of regular group meetings and it is this social capital that has been instrumental in transforming the status of these women, both within the home and community.
SHGs influence those oppressive relationships arising from caste, class and political power, which have made it difficult for the poor people to build a sustainable base for their livelihood. As with any single strategy, SHGs alone cannot put an end to poverty. How much the plan is simple, low-cost, resilient and can be carried out by non-governmental organisations, what is most important is that development can happen only when the people really want to change.
Refuting village hierarchies, women in many places hoisted the national flag in their villages, despite opposition from men. Women’s collectives have put an end to the brewing of liquor in some villages. SHG women have enhanced their economic position in numerous ways, such as successfully bidding for contracts to fish in village ponds and developing wastelands to grow fruits and vegetables.
These women are not just achieving the Gandhian ideal of self-sufficiency but also advancing modern ambitions. For poor women, empowerment is a journey towards the second freedom or real freedom, as Mahatma Gandhi said.
(The writer is Member, NITI Aayog’s National Committee on Financial Literacy and Inclusion for Women)
