Introduction
Micro-finance based development is a method of helping poor and low-income people improve their standard of living by giving them access to small loans and other financial services. One of the most successful models in this field is the Self Help Group (SHG). In India, SHGs have empowered rural women and communities by offering them a platform to save money, take small loans, and support each other socially and economically.
What is Micro-finance?
Micro-finance refers to the provision of small loans, savings, insurance, and other financial services to people who do not have access to traditional banking systems. It is especially useful for women, farmers, artisans, and small business owners in rural areas.
What are Self Help Groups (SHGs)?
Self Help Groups are small, voluntary groups of people—usually women—who come together to save money regularly, lend to members in need, and support each other in economic activities. SHGs are a powerful tool for poverty reduction, women empowerment, and grassroots development.
Key Features of SHGs:
- Usually made up of 10-20 members from the same village or community.
- Meet regularly to save money and discuss issues.
- Give loans to members from the group’s savings or through bank linkages.
- Focus on mutual trust, responsibility, and cooperation.
Micro-finance Based Development through SHGs
SHGs have become an important part of rural development. They are not just about money but also about empowerment. Members learn to manage money, communicate better, and gain confidence to make decisions in their families and communities.
Benefits:
- Financial independence for women.
- Improved income through small businesses and entrepreneurship.
- Better social status and decision-making power for members.
- Access to government schemes and bank credit.
Development Models of SHGs
There are several models of SHGs used in India. Each model has its own structure and method of functioning. Below are the main types:
1. SHG – Bank Linkage Model
This is the most popular model promoted by NABARD (National Bank for Agriculture and Rural Development). In this model, SHGs are linked directly to banks to get loans. The three main types under this are:
- Model I: SHGs formed and financed directly by banks.
- Model II: SHGs formed by NGOs/government agencies and financed by banks.
- Model III: NGOs act as financial intermediaries between SHGs and banks.
2. NGO Promoted SHGs
In this model, non-governmental organizations (NGOs) take the lead in forming SHGs, training members, and helping them get loans or grants. These NGOs may also support SHGs in starting income-generating activities.
3. Government-Sponsored SHGs
Government schemes like NRLM (National Rural Livelihood Mission) promote SHGs by offering financial aid, skill training, and access to credit and markets.
4. Federation Model
In this model, many SHGs are grouped into a federation or cluster. These federations act as support centers, provide training, and help members access larger markets and funds.
5. Corporate or CSR-Supported SHGs
Some companies under their Corporate Social Responsibility (CSR) programs support SHGs by providing funds, training, and helping them sell products through company supply chains.
Conclusion
Micro-finance based development through Self Help Groups has become a powerful tool for reducing poverty and empowering women in India. By encouraging savings, providing credit, and promoting entrepreneurship, SHGs play a key role in inclusive development. Different SHG models offer flexibility and adaptability to suit various local needs. For sustainable rural development, SHGs must continue to be supported by government, NGOs, and private sectors alike.