INTRODUCTION TO SELF-HELP GROUPS

CHAPTER - I INTRODUCTION TO SELF-HELP GROUPS Self-Help Group (SHG) is homogeneous affinity groups with common objective of enhancing their economic conditions. Theorists view SHG as the homogeneous group of poor village people formed with at least 5 members. In reality, the SHG groups comprise of 12-20 members of nearly same economic conditions and aspirations. This is not based on strict rules, even though rules are framed for the smooth conduct of SHG meetings and the routine money regular. The credit is provided for both consumption and other productive purposes. SHG members can leave a small amount of money collectively and they can lend, it as collateral-free loans to their members at a reasonable rate of interest. All decisions are taken in collective manner by the SHG members. The Philosopher, Fahreet 1 states that the society has to be formed into small groups and to be engaged in productive activities. The basic principles of the SHGs are group approach, mutual trust, organization of small and manageable groups, group cohesiveness, sprit of thrift, demand based lending, collateral free loan, women friendly, peer group pressure in repayment, skill, training capacity building and empowerment. 1 Fahreet as given in Sri Aurbindo or the Adventure of consciousness, Mira Aditi Centre (dist), Mysore, p. 440 1

Origin and Concept of Self Help Groups (SHGs) The origin of SHGs is the brainchild of Grameen Bank of Bangladesh, which was founded by Prof. Mohammed Yunus. SHGs were formed in 1975. In India, National Bank for Agricultural and Rural Development (NABARD) initiated the starting of the SHGs in 1986-87. But the real effort was taken after 1991-92 with the linkage of SHGs with the banks. A SHG is a small, economically homogeneous affinity group of the rural poor voluntarily coming together to save small amount regularly, which are deposited in a common fund to meet the emergency needs of members and to provide collateral free loans decided by the group. It has been recognized as useful tool to help the poor and as an alternative mechanism to meet the urgent credit needs of the poor. SHG is a media for the development of saving habits among the women. It enhances the equality status of women as participants, decision-makers and beneficiaries. Self-Help Groups were formed in Mysore Resettlement and Development Authority (MYRADA) in 1984-85 and initially called Credit Management Groups. In 1987, NABARD sanctioned a grant to MYRADA for the institutional capacity building of the SHGs and to match savings of the groups. In fact, several NGO s, notably Professional Assistance for Development action (PRADHAN) working in Rajasthan and Tamil Nadu realized that the Integrated Rural Development Programme (IRDP) system of provision of credit to the poor was running the banks as well as the poor. They experimented with lending to groups and persuaded banks to lend to such groups. 2

SHGs have varied origins, mostly as part of integrated development programmes run by Non Government Organisations (NGOs) with the support of donor. The major programme involving financial intermediation by SHGs is the SHG-bank linkage programme. This programme was launched in 1992 by NABARD, the apex bank for rural development in India. By March 2002, the programme covered 7.8 million families with 90 per cent women members on time repayment of loans as over 95 per cent for banks participating in the programme. It also involved 2,155 Non-Government organizations (NGOs) and other self-help promoting institutions. NABARD s corporate mission is to make available microfinance services to 20 million poor households, or one third of the poor in the country, by 2008. However, there is at present a high degree of concentration in the southern states, with just two states, Andhra Pradesh and Tamil Nadu accounting for more than 66 per cent of the SHGs linked to banks. State and district overview The first SHG was started in Dharmapuri district of Tamil Nadu in 1989. Government of Tamil Nadu initiated Magilar Thittam 2 in 1997 to develop the women in Tamil Nadu. On the basis of its success from 1997 all the district organizations receive a great benefit from World Agricultural Fund. It was expanded to all the other districts too. On the rule of TN Government, the people below the average line and the fitted have formed SHGs for their welfare. Women in the age group of 18 to 60 belong to the same village can join the 2 Potential Linked Credit Plan, NABARD, 2012-2013, p - 111 3

organization. Each group consists of 12 to 20 members. These groups are organized by the Panchayath board and self-service groups. SHG is not only for women but also for the young and energetic men in the age group of 18 to 35. These organizations are for the welfare of the poor. Tamil Nadu is ranked the second in the country, after Andhra Pradesh, in SHG-Bank Linkage Programme. Wide network of NGOs, encouraging support of banks and government agencies helped widespread expansion of the programme in Tamil Nadu. Regular savings, maintenance of books and accounts, internal lending are the major factors in determining the credit absorption capacity of the groups. The cumulative number of SHGs credit linked in Tamil Nadu as on 31 st March 2011 stood at 9, 51,783 with an aggregate bank loan of Rs. 10,384.36 crores. 251 programmes worth Rs. 61.80 lakhs were sanctioned during the year 2010-11. National Bank for Agricultural and Rural Development (NABARD), Tamil Nadu Adi Dravidar Housing and Development Corporations (THADCO) and other institutions conduct special training programmes for Skill Development/Skill Upgradation for the members of SHGs to equip themselves to set up micro enterprises. Under Swarnajayanti Gram Swarozgar Yojana Infra scheme (SGSY) and few SHGs got assistance for infrastructure and marketing support. Women Empowerment A woman is said to be empowered when proper education, health, social status and earnings are readily available to her. Awareness about the available 4

opportunities and a symbiotic approach would generate ample scope for sustainable development of women. Women empowerment is influenced by factors such as education, income, job, property right, technical skills and self-decision making. The welfare governments all over the world consider the importance of women empowerment. By this process, the overall social development is ensured. Swami Vivekananda is of the view that women must be imparted education, training and they have to be left free to decide their own future. He emphatically asks the reformers, Hands off, who are you to decide their future? Women empowerment is possible with the blend of modern science education with our traditional culture. Any development should sprout from within the group to whom the target is fixed. The Sixth World Conference on women that was held in Beijing in 1995 had observed the women empowerment and the full participation of women based on equality in all spheres of society. They are fundamental for the achievement of equality, development and peace. Human Development Report 2003 speaks about the millennium development goals to be achieved, especially gender equality and empowerment of women. Women Empowerment in India The woman is the basic fabric of any family and society. The development of women alone would determine the success of major part of Indian workforce. Empowerment can serve as an instrument in attaining upward social and economic 5

mobility by the women members. Women empowerment is a global issue, which has gained momentum in recent decades. The year 1975 was declared as the Year of Women by the United Nations. In order to give equal status to women and empower them on educational, economic and social frontiers From time immemorial, women faced the challenges of coping with a male dominated society. Even after several years of planned development in India, the status of women in our country is low and their socio-economic conditions are much more depressed than that of men. Many countries have failed to ensure equality of human development for women and men. Though in the past two decades, some countries have made substantial inroads in the field of female health and literacy, this has not contributed much towards raising the economic and social status of women. Complete gender equality has remained a nightmare even in advanced countries. Women constitute 70 per cent of the world s poor. They suffer from higher unemployment rates than men and are paid lower wage and very few occupy decision-making positions. Various dimensions of women issues involved are with gender discrimination. Socio- Economic and Cultural Spheres Shinde K.H and Ramkrishna (May 2011) 3 portray that women in most societies are subjected to discrimination. The UN convention is for the elimination 3 Shinde K.H and Ramakrishna, Women empowerment through Self-Help groups in India, May, 2011 6

of all forms of discrimination against women. The convention makes it binding on the consenting nations to initiate corrective actions to have gender equitable laws, end violence against women that are derogatory in nature. The formation of women Self-Help Groups had its emergence in the seventies in Bangladesh and since the early nineties in India, predominantly in the southern states. The groups typically have a membership of between five and twenty members and are the formal associations of women. The women elect their leaders on democratic principles, save money, lend to each other and take higher order loans from financial institutions. SHGs have emerged as change agents in their own village societies. Micro-Finance Institutions and Income Generation The term Self-Help Group describes a wide range of financial and nonfinancial associations, but in India it has come to be referred as a forum of Accumulating Saving and Credit Association (ASCA) promoted by Government Agencies, NGOs or Banks. These groups manage and lend their accumulated savings and externally leveraged funds to their members. Under the microfinance programme, loans are extended to the Self- Help Groups that pool a part of their revenue into a common fund from which they can borrow. The members of the group decide on the minimum amount of deposit, which ranges from Rs.20 to Rs.100 per month depending upon the size of the group. The group funds are deposited with a Micro Finance Institution (MFI) against which they usually lend at a credit deposit ratio of 4:1 but the ratio improves with account performance record i.e. prompt repayment of loans. The 7

group funds is the way for micro savings, though it may seem like a collateral. The loan usually ranges from Rs. 2000/- to Rs. 15,000/-. Indicators of Women Empowerment through Microfinance 1. Ability to save and access to loans 2. Opportunity to undertake an economic activity 3. Mobility-Opportunity to visit nearby towns 4. Awareness about local issues, Micro Finance Institution (MFI) procedures, and Banking transactions 5. Skills development for income generation 6. Decision making within the household 7. Group mobilization in support of individual clients, action on social issues 8. Role in community development activities Micro-Finance and Women Empowerment Self-Help Group is the real model to be emulated by all to change the lives of the poorest of the poor. It is one of the potential instruments of the government to mitigate the poverty in the rural and urban Indian households. It has a positive impact on the family of the members of SHG. The state of West Bengal has a dynamics where awareness and the level of literacy have made the micro-finance interventions easier, mainly through Self- 8

Help Groups. The government supported micro-finance programme under the Swarna Jayanti Gram Swarozgar Yojana (SGSY) scheme in the West Bengal is able to reach to the poorest of poor and vulnerable section of the rural population of West Bengal, particularly the rural women. Micro-Finance and Entrepreneurial Development Micro Finance is the carrier to spread the success story of SHG and benefitting the women in the nooks and corners of India. It helps them start cottage industries and making them the real women entrepreneurs. The Entrepreneurship Development Programme (EDP) model propounded by McClelland could help the women through SHGs. This would lead to change their lives evergreen. The main aim of the SHG is to provide the much needed credit facility for which earlier they had to depend on the moneylender or to go through the circuitous method of receiving the loan at the end. SHG increases the social cohesion among the women members leading to better daring and caring experiments in business. They borrow mainly for meeting the unexpected expenditure and repaying the loan received from the money lenders and to start business on their own. Banks, Financial Institutions and SHGs In developing countries, financing the rural poor through formal financial services failed to meet their credit requirements. The main reason for failure was the absence of any recognized employment and hence non-availability of collateral with the poor. The high risk and the high transaction costs of banks associated with small loans and savings deposits are other factors make them non-bankable. 9

The lack of loans from formal institutions leaves the poor with no other option but to borrow money from local money-lenders at huge interest rates. In different countries including India, efforts have been made by the governments to deliver formal credit to rural areas by setting up special agricultural banks/rural banks or directing commercial banks to provide loans to rural borrowers. MFI -Bank Linkage 4 There are four Micro Finance Institutions viz., Sangamitra, Udjeevan, Gramavidyal and Kaveri credit institutions functioning in Dharmapuri district. Sangamitra, promoted by MYRDRA is working in Pennagaram, Palacode and Dharmapuri blocks and extending financial assistance to the SHGs promoted by MYRDRA and other NGOs. Sangamitra has extended finical assistance to Rs. 15 crores to SHG members in unbanked areas. SHG and Inclusive Growth The SHG approach of lending was introduced to banks as a new micro finance approach with innovations and flexibility in order to enjoy certain benefits to the banks. Presently, the SHG based micro finance is the main form of micro finance in India and it is well integrated into the formal banking system in India. The group based micro finance schemes have been introduced by the banks to cater to cost effective finance, which is anticipated to decrease the banker s burden of securitization based on application loan disbursals monitoring and recovery of loan accounts. 4 Micro finance in India, 2012-2013, NABARD, p.10 10

The reduction in procedures is anticipated to reduce the cost to the banks, increase profits and small savings in rural areas. It is envisaged that this SHG based Micro-Finance approach shall bring proximity and affinity between bankers and rural people. Access to finance by the poor and vulnerable groups is a pre-requisite for poverty alleviation and social cohesion. This should become an integral part of our efforts to promote inclusive growth. In fact, providing access to finance is a form of empowerment of the vulnerable groups. Financial inclusion denotes delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. The various financial services include credit, savings, insurance and payments and remittance facilities. The objective of financial inclusion is to extend the scope of activities of the organized financial system to include within its ambit of people with low income. Through graduated credit, the attempt must be to lift the poor from low level, so that they come out morass of poverty. Micro financing programmes are intended to reach poor segments of the society for their empowerment through SHG based financial inclusion. Micro financing has emerged as one of the important instruments for empowerment of poor and expansion of the banking outreach. Micro Services The main objective of Micro-Finance is to provide an umbrella of micro services to the poor so as to enhance their credit worthiness and make them bank worthy to financial institutions. SHG movement inculcates a sense of financial discipline and timely repayment among small borrowers so that they can seek 11

long-term financial assistance and banking services from the formal sector eventually. Microfinance in India has brought a number of people above the poverty line. However, the coverage is uneven with large number of people in rural area remaining out of the ambit of the outreach programs. There is an imperative for co-ordinate action among the various agencies such as the government, financial institutions, NGOs and like-minded people involve in the development of the society. Economic developmental and infrastructure issues should engage the attention of the government and other stakeholders. Involvement of women especially the rural women in SHG movement will go a long way in achieving Purna Swaraj and the inclusive growth. Statement of the Problem Dharmapuri District is a backward area. The women in Dharmapuri area is beset with socio economic problems. The Self Help Groups play a major role in enhancing the capabilities of women. The position of women in terms of education, social recognition and their contribution to the economic life of the society in general and to the family is generally underestimated and under reported. The researcher considers the questions of their capability building, skillset enhancement and improvement in their socio economic conditions. Various social ills affect women in Dharmapuri. The moot question is whether the loan provided by SHGs is alternative to open market credit or not? After becoming member of SHGs, whether the economic status of the members increases or not? or whether any changes occurred in the empowerment of women? Hence, an 12

attempt has been made to study the role of SHGs in empowering women in Dharmapuri District. Importance of the Study SHGs democratically set their own interest rates on inter-group loans ensuring the interest rate affordable to members. Members decide for what purposes they could use loans. Uses vary from investment in small businesses to purchasing needed household items. Low cost and multi-purpose loans free the group members from the clutches of local moneylenders. While the impetus for forming an SHG is economic, women soon realize that the social benefits they derive from group membership are as important as the financial ones. Mostly women in rural India do not participate fully in decision - making processes, leaving them bereft of confidence and the power to make important change in their lives and of their families limiting the potential of community s members from moving forward. SHGs by dint of intrinsic dynamics and the money that accrues to members offer women the chance to make decisions, gain power over local resources, and ultimately build confidence. This confidence is precisely the catalyst needed to move communities forward on social problems. Some members have reported reduction in the occurrence of rape, alcoholism, murder, dowry abuse, and spousal abuse in communities where strong SHGs exist. Without external inputs, Self- Help Groups find themselves managing many social issues. SHGs, when properly formed and linked to one another, would provide a broad range of social benefits to members and even to entire villages. 13

Objectives of the Study The study has the following objectives. 1. To study the growth of Self Help Groups and Micro Finance in the Dharmapuri District 2. To examine the demographic, social and economic status of the SHG members and their performances 3. To assess the impact of SHG activities on economic status of the SHG members 4. To analyze the empowerment of the women members after joining Self- help Groups 5. To offer suggestions to improve Women Empowerment through Self-help Groups Hypotheses objectives. The researcher has framed the following null hypotheses to test the above 1) There is no significant association between the demographic, social and economic variables of the respondents and their performances in SHG activities. 2) The economic status of the SHG members remains the same even after joining SHG. 14

3) The empowerment of the SHG members remains the same even after joining SHG. Sampling Technique The researcher has employed the stratified random sampling technique for collecting data from the women SHG respondents belonging to Dharmapuri district. The district has eight blocks that have been treated as eight stratums. A total of 65 respondents were selected from each block (Stratum). Therefore, respondents from each block have been contacted and cumulatively it comes to 520 samples. Pilot study The researcher has conducted the pilot study to determine the size of sample. 50 samples were selected for the pilot study. The total samples for the study were determined as 520 by applying the following formula. Sample size n = (ZS/E) 2 Where Z = Standardized value corresponding to a confidence level of 95% = 1.96 S = Sample (SD) Standard deviation from Pilot study of 50 sample = 0.5815 E = Acceptable Error = 5% = 0.05 Hence, Sample size n = (ZS/E) 2 = (1.96*0.5815/0.05) 2 = 519.603 = 520 The overall cronbach alpha is 0.6 15

Statistical Tools The statistical tools such as t test, Analysis of Variance (ANOVA), F-test, Chi-square, correlation, multiple regressions and diagrams have been deployed to carry out the research. Study area This study is carried out in Dharmapuri District, which is situated in North Western corner of Tamil Nadu and is bounded by Thiruvannamalai and Villuppuram Districts in the East, Salem district on the South, Krishnagiri District on the North and Kaveri River on the West. The Dharmapuri district is backward especially in education and health. Limitations 1. The results of the study are applicable to Dharmapuri district only. 2. All women respondents might not have given account details due to ignorance and fear. 3. The results and conclusions of this study are subject to the primary data that were supplied by the sample respondents Plan of the study The study has been organized into seven parts in a systematic manner to probe the research problem in detail. 16

The first chapter deals with the introduction of Self-Help Groups, origin and concept of Self-Help Groups, state and district overview, women empowerment in India, SHG and Inclusive growth, statement of the problem, importance of the study, objectives of the study, hypothesis, sampling techniques, pilot study, statistical tools, limitations of the study and plan of the study. The second chapter provides a detailed account of review of relevant literature to study the gap in it. It probes into SHG women empowerment, microfinance and economic development linked to SHG. The third chapter presents an overview of the study area, Women Self - Help Groups and Micro Finance. The fourth chapter analyses the performance of SHG members with relation to demographic, social and economic status. The relevant statistical tools are used to analyze the data and test the hypotheses. The fifth chapter assesses the impact of SHG activities on economic status of SHG members after joining Self-Help Groups in the study area. The sixth chapter evaluates the empowerment of the women members after joining Self-Help Groups in the study area and the seventh chapter gives the summary, findings, suggestions and conclusions of the study. 17