Self-Help Groups (SHGs) are small, voluntary associations of people, usually from rural or economically weaker sections of society, who come together to save money, access credit and improve their livelihoods through collective effort. They represent one of the most successful models of community empowerment and rural development in India.

An SHG is typically composed of 10 to 20 members, most often women, who share a common social or economic background. The members regularly contribute small amounts of money to a common fund — this could be as little as ₹50 or ₹100 per month. This pooled fund is then used to provide loans to members for various purposes such as starting small businesses, meeting household needs or handling emergencies.

The basic idea behind SHGs is “self-help and mutual support.” Instead of depending on moneylenders who charge high interest rates, members rely on their own savings and the collective strength of the group. Over time, these small savings grow, allowing the group to become financially independent and creditworthy.

Once an SHG develops a record of regular savings and repayments, it becomes eligible for bank linkage under programs like the National Bank for Agriculture and Rural Development (NABARD)’s Self-Help Group–Bank Linkage Programme (SHG–BLP). Through this program, banks provide credit to SHGs without the need for collateral security. This model has become the world’s largest microfinance initiative, empowering millions of rural women across India.

The working of an SHG is democratic and transparent. Members meet regularly to discuss group issues, review accounts and make collective decisions regarding loans or activities. The group selects a leader or president, a secretary and a treasurer to manage records, maintain the savings book and handle financial transactions. All decisions are taken by mutual agreement, which strengthens trust, cooperation and leadership skills among members.

SHGs have proven to be powerful tools for women’s empowerment. In many rural areas, women who were once confined to domestic roles now actively participate in financial management, entrepreneurship and community development. For example, women’s SHGs in states like Kerala (Kudumbashree Mission) and Andhra Pradesh (DWCRA groups) have successfully established small enterprises in food processing, handicrafts, tailoring and dairy farming. These ventures not only generate income but also improve the status of women in society.

Beyond financial benefits, SHGs promote social development and collective responsibility. Members often take up issues like literacy, health care, sanitation and education within their communities. They also spread awareness about social evils such as child marriage, alcoholism and domestic violence. Thus, SHGs act as catalysts for social change and grassroots democracy.

Another key advantage of SHGs is that they help integrate the informal sector with the formal financial system. By connecting rural households to banks, they encourage saving habits, reduce dependence on informal moneylenders and create a culture of financial discipline.

However, SHGs also face challenges such as lack of proper training, weak leadership, irregular savings and limited marketing support for their products. To overcome these, governments and NGOs provide capacity-building programs, skill training and market linkages.

In summary, Self-Help Groups are much more than savings collectives; they are instruments of economic empowerment, social transformation and rural development. By fostering unity, responsibility and self-reliance among the poor — especially women — SHGs have emerged as a shining example of how grassroots initiatives can bring about meaningful and sustainable change in society.