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Consider the following statements:

  1. The Self-Help Group (SHG) programme was originally initiated by the State Bank of India by providing microcredit to the financially deprived.
  2. In an SHG, all members of a group take responsibility for a loan that an individual member takes.
  3. The Regional Rural Banks and Scheduled Commercial Banks support SHGs.
How many of the above statements are correct?
  1. Only one
  2. Only two
  3. All three
  4. None

Explanation

Statement 1 is incorrect
  • A major effort to provide banking services to the weaker and unorganised sector was the Bank Self-Help Group Linkage Programme that was launched in the early 1990s. The programme was launched by the National Bank for Agriculture and Rural Development (NABARD) in 1992 to link the unorganised sector with the formal banking sector. Under this programme, banks were allowed to open savings accounts for Self-Help Groups (SHGs). Banks provide loans to the SHGs against group guarantee, and the quantum of loan could be several times the deposits placed by such SHGs with the banks.

Additional Information

  • Self Help Groups (SHGs) (registered/unregistered entities) are small groups of poor people (usually have a membership of 15 to 20 members). The members of an SHGs face similar problems. They help each other to solve their problems. SHGs promote small savings among their members. The savings are kept with the bank. This is the common fund in the name of the SHGs. The SHGs gives small loans to its members from its common fund.
  • In India, the Self-Employed Women’s Association (SEWA) in Ahmedabad initiated the concept of self-help groups (SHGs) in 1972. These groups aim to enhance the economic and livelihood security of poor women working in the informal sector. During the 1980s, several non-governmental organisations (NGOs) started organising rural women through SHGs. The SHG programme gathered momentum during the 1990s when the National Bank for Agriculture and Rural Development (NABARD) formally launched the SHG-Bank Linkage Programme.

National Bank for Agriculture and Rural Development (NABARD)

  • NABARD was established in 1982 under an Act of Parliament as a wholly owned entity of the government of India on the recommendation of the B. Sivaraman committee.
  • RBI’s agricultural credit functions and the refinance functions of the then-Agricultural Refinance and Development Corporation (ARDC) were transferred to NABARD.
  • Its mission is to promote sustainable and equitable agriculture and rural development through participative financial and non-financial interventions, innovations, technology and institutional development.
Statement 2 is correct
  • SHG is a small group of rural poor who have voluntarily come forward to form a group for the improvement of the social and economic status of the members. The concept underlines the principle of Thrift, Credit and Self-Help. Members of SHG agree to save regularly and contribute to a common fund.
  • The members agree to use this common fund and such other funds (like grants and loans from banks), which they may receive as a group, to give small loans to needy members as per the decision of the group. The concept of joint liability plays a significant role in SHG loans. This means that all members of the group are collectively responsible for repaying the loan taken by an individual member.
Statement 3 is correct
  • In India, mainly three different models of linkage of SHGs to the financial institutions have emerged. They are:
    • Banks, themselves, form and finance the SHGs.
    • SHGs are formed by NGOs and other agencies but financed by banks.
    • Banks finance SHGs with NGOs and other agencies as financial intermediaries.
  • Scheduled Commercial Banks (SCBs) and Regional Rural Banks (RRBs) assist Self-Help Groups (SHGs) in obtaining necessary credit. As of February 2023, some 8.9 million SHGs have availed loans of Rs 2.54 lakh crore, according to DAY-NRLM data. In 2023-24 (till February 2024), these groups dispersed loans amounting to Rs 1.7 lakh crore.

Few Important initiatives for SHGs

  • The Lakhpati Didis initiative, launched in 2023, targets to uplift three crore SHG households to a minimum annual income of ₹1 lakh within three years.
    • It focuses on diversified livelihood activities, district-level planning, household support, Government department convergence, and capacity building of staff and community members.
  • Saras Aajeevika portal and eSARAS mobile App (launched in 2023) showcase a wide array of authentic handcrafted products, such as linen items, furniture, apparel, pickles, etc., made by SHGs.
    • By creating a dedicated marketplace for their indigenously crafted products, the platform thus catalyses rural women into new-age entrepreneurs
  • The ‘SARAS Mela’ by the Ministry of Rural Development helps SHG beneficiaries sell their products directly in urban markets, eliminating middlemen and improving artisans’ margins.
    • It allows rural producers to engage with buyers, tailor products to consumer preferences, and hone their marketing skills.
  • Deendayal Antyodaya Yojana-National Rural Livelihood Mission (DAY-NRLM):
    • It was launched by the Ministry of Rural Development (MoRD) in 2011.
    • In 1999, after restructuring the Integrated Rural Development Programme (IRDP), the MoRD launched the Swarnajayanti Grameen Swarojgar Yojana (SGSY) to promote self-employment.
    • SGSY is remodelled to form NRLM, thereby plugging the shortfalls of the SGSY programme.
    • DAY-NRLM is implemented through a network of SHGs & Community-Based Organizations (CBOs).
    • In 2021, the program had over 100 million members and had disbursed over ₹1 trillion in loans.
    • It provides financial services to SHGs and CBOs, such as loans, savings, and insurance.
    • It gives skill training to SHG members in entrepreneurship, business management, life skills, etc.
    • It helps SHG members to access markets for their products.
Answer: (b) Only two; Difficulty Level: Easy
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