Self-Help Groups (SHGs) are not just about financial emancipation, they represent a potent model of community-led change. This grassroots initiative typically comprises 5 to 20 women sharing similar socio-economic backgrounds, who come together to save modest amounts of money regularly. With savings as low as Rs. 10 to Rs. 20 per month, these groups create a financial pool to assist members during exigencies, financial scarcities, significant life events, or for asset acquisition.
A Sneak Peek into the SHG Framework
An SHG comprises 10 to 20 women who unite to foster a self-sustained financial ecosystem. These groups, identified by unique IDs and names at the block level, are informal associations, requiring no separate registrations as per the Reserve Bank of India's guidelines.
The groups elect a President, Vice President, and a bookkeeper among themselves. The bookkeeper plays a crucial role in maintaining the accounts and documenting the activities transpiring during each meeting.
The members decide on a regular meeting schedule, be it monthly or weekly, to pool in their savings. Once a substantial amount accumulates, internal lending among the members commences based on necessity. The bookkeeper meticulously records the attendance, savings, credit transactions, repayments, and meeting minutes in a ledger. This ledger subsequently helps in opening a bank account under the group's name.
Leadership within SHGs is a rotating role, ensuring each member gets an opportunity to lead. The leader motivates members to adhere to the Panchasutra principles and acts as a bridge between the SHG and external institutions like banks.
On the other hand, the bookkeeper, selected and trained by the group, maintains multiple ledgers like the member passbook, minutes book, savings book, cashbook, and loan book, ensuring transparency and trust within the group.
The Pillars of a Successful SHG
The effectiveness of an SHG is often evaluated based on -
Regular Meetings: Conducting meetings at regular intervals to ensure continuous engagement and financial planning.
Consistent Savings: Members are encouraged to save regularly, ensuring a healthy financial pool.
Internal Lending: Encouraging loans within the group to cater to members' needs.
Timely Repayments: Peer pressure ensures timely loan repayments, maintaining the group's financial health.
Accurate Bookkeeping: Keeping the books of accounts updated, reflecting the group's financial status accurately.
Banking with SHGs
For an SHG to open a bank account, they pass a resolution authorising three members to transact with the bank. Following this, an application, along with necessary KYC documents, is submitted to the nearest bank branch. The account enables the group to formalise their financial activities, fostering a professional approach towards savings and lending.
Credit Accessibility of SHGs
SHGs have a plethora of credit sources including member savings, interest income from internal lending, funds from federations like NRLM, and bank loans. Eligible SHGs can access up to Rs. 10 Lakhs over a span of 5 to 6 years from banks, catalysing their financial journey.
SHGs are more than just financial entities. They are a medium of social change, empowering women to take charge of their financial destiny, fostering a culture of savings, and promoting financial literacy at the grassroots level. To invest in rural livelihoods backed by SHGs visit rangde.in