Self-Help Groups: An Overview

When I told my Dad I was conducting a study on Self-Help Groups (SHGs), he was confused. “Why? Does that actually interest you? You mean like Weight Watchers?” In a sense, he was on point. SHGs are defined as “a group consisting of people who have personal experience of a similar issue or life situation… Sharing experiences enables them to give each other a unique quality of mutual support and to pool practical information and ways of coping.” [1] In the US, examples include Alcoholic Anonymous; groups focused on physical and mental rehabilitation; and yes, weight loss support systems. Based in India, my study would focus on economically-focused SHGs, not calorie counting. Having clarified this to my father, he now tells people that Dominique “moved to India to do Weight Watchers… but for money.” Thanks, Pops.

For readers like Dad who are less familiar with SHGs in a development context, the following article provides a brief introduction. In subsequent entries I will discuss my related fellowship project, a study that assessed the impact of microloans to tribal SHG members. Refer to entry Adivasi Access: the Impact of Microfinance on Tribal SHGs in Southern India (Parts 1 and 2) for further details.

Rise of the SHG Movement in India

At their most basic level, “SHGs are voluntary, small group structures for mutual aid and the accomplishment of a special purpose. They are usually formed by peers, who have come together for mutual assistance in satisfying a common need.” [2] SHGs emerged in India early 1980s, but have roots in Bangladesh. In the 1970s, Professor Muhammad Yunus, a Bangladeshi social entrepreneur, began experimenting with innovative ways to provide capital to women at the Bottom of the Pyramid (BOP). [3] The SHG lending mechanism that he pioneered seeks to address the feminization of poverty- the global reality that women suffer from unequal legal rights, unequal access to education and capital, and other inequities that drive and perpetuate poverty [4]:

“One way that governments, development agencies, and grassroots women’s groups have tried to address these inequalities is through women’s economic self-help groups (SHGs). The basic assumptions undergirding these income-generating group programs are that giving women access to working capital can increase their ability to “generate choices and exercise bargaining power as well as develop a sense of self-worth, a belief in one’s ability to secure desired changes, and the right to control one’s life.” [5]

Bangladeshi SHGs proved incredibly successful at capitalizing BOP women. Yunus’ strategy was lauded globally as a model for building pathways out of poverty.  The Government of India launched its first SHG program in the early 1980s via a “pilot scheme for the Development of Women and Children in Rural Areas to improve the gender component of India’s Integrated Rural Development Project.” [6] Today, Indians contains millions of SHGs. Primarily a South Asian phenomenon, the movement also has traction in sub-Saharan Africa and Latin America. [7]

What are SHGs and how do they work in India?

Typically, Indian SHGs consist of 5-15 members. Usually, participants are women of similar social and economic backgrounds. These groups convene on regular basis, at which time members make routine deposits into a joint savings account. (Source: Dominique DuTremble, IICA fieldwork 2020)

Typically, Indian SHGs consist of 5-15 members. Usually, participants are women of similar social and economic backgrounds. These groups convene on regular basis, at which time members make routine deposits into a joint savings account. As savings accumulate, SHG members can borrow from the pool. A bookkeeper or Village Organisation Assistant maintains deposit records and other administrative operations. Once a SHG establishes a track record of financial discipline (e.g., bookkeeping, audits, and stable repayment) and effective management protocols (fixed meetings, transparent elections, and quorums.) [8] it can participate in formal banking programs. “The goal is to empower the target groups socially and economically, thereby allowing them to become subjects of credit” [9] via programmes such as Bank Linkage and loans through Microfinance Institutions (MFIs).

Established in 1992, the SHG-State Bank Linkage (SHG-SBL) program currently serves more than 10 crore households. [10] The program has significantly impacted poor householders by connecting SHGs to the mainstream banking system. [11] Women’s groups comprise approximately 85% of bank-linked SHGs, making SHG-SBL a “mainstay programme for empowerment of the poor rural women in the country.” [12] Similarly, MFIs are a major source of SHGs loans. Such organisations vary in purpose: some are profit motivated and some exist to foster sustainable development. Often, public-purpose MFIs are partially capitalized through subsidized government loans. Funds from these loans are then re-lent to SHGs at nominal rates of interest. In bank linkage and MFI lending alike, SHGs typically received loans collectively; rather than going to individual members, loans are divided equally. Federation at the village, mandal, and district levels enhances SHG stability and outcomes. [13] Accordingly, lenders- state channelizing agencies especially- often foster and support SHG federations as a part of their business model.

Village Organization Assistants (VOAs) support their member SHGs through bookkeeping and other operational needs. (Source: Dominique DuTremble, IICA fieldwork 2020)

SHGs represent Tier 1 federations. Village Organisations, which represent Tier 2, consist of one member appointed from each of 20-30 SHGs. Mandal Samakhyas represent Tier 3 federations and consist of one official from each of 5-10 Village Organisations. Zilla Samakhyas represent Tier 4 federations, comprised of representatives from Mandal Samakhyas. Functional duties vary by level of federation. This existing literature indicates points to the role of federations in establishing effective SHGs and providing resources that complement basic credit:

“In addition to performing traditional functions of microfinance, such as obtaining loans from banks to on-lend resources to members, SHG federations assist with the implementation of government programs and aim to link membership to local government, possibly by forming specific committees. Other program interventions that may be implemented by group federations at the village or mandal level include agricultural marketing activities, insurance coverage, old age or disability benefits, and employment programs and job training.” [14]

Beyond these activities, federations conduct joint procurements in order to tap into economies of scale. In doing so, they provide essential resources to communities at a reduced cost and deferred payment. A famous example is the rice credit line. Under this scheme, federations acquire rice through government or other programmes and lend the rice to needy SHG members. Repayment is made in in-kind following harvest or according to various timetables.


SHG microloan recipient with assets from new business unit. (Source: Dominique DuTremble, IICA fieldwork 2020)

Overwhelmingly, the existing literature finds that SHGs improve socio-economic conditions. SHG connections to microfinance are shown to increase consumption, nutrition, and asset accumulation. [15] Positive impacts on household financial status are also documented. [16] Yet, findings on participation and impact distribution are mixed. A study of Key Informant Interviews and focus groups finds that SHG members perceive low participation among the very poor. [17] Related studies suggest that participation by the very poor in SHGs and SHG-BLP is low, while coverage of non-poor is considerable. [18] Other studies suggest that while the very poor may participate less than the non-poor, the marginal impact is greater. Poor women are the most likely to increase their rates of savings and income as a result of credit and bank linkage. [19]

Findings from my fellowship project are largely consistent with the above. The project consisted of a mixed-methods case control study that examined the flow of credit to tribal borrowers and the impact therein. An overview is presented in Adivasi Access: the Impact of Microfinance on Tribal SHGs in Southern India (Part 1).




Brody, C. et al. Economic self-help group programmes for improving women’s empowerment:  A systematic review. International Initiative for Impact evaluation. Systematic Review 23, 2016.

Deshmukh-Ranadive, J.  Reducing Poverty, Sustaining Growth: What Works, What Doesn’t, and Why. A Global Exchange for Scaling Up Success Scaling Up Poverty Reduction: A Global Learning Process and Conference. Shanghai, 2004

Deininger, K. and Liu, Y. Evaluating Program Impacts on Mature Self-help Groups in India. The World Bank Economic Review. VOL. 27, NO. 2, pp. 272–296, 2012

Desai, R. and Joshi, S. Collective Action and Community Development: Evidence from Self-Help Groups in Rural India. The World Bank Economic Review, 2014.

Karoly, P. and Sakshy, S.  Self Help Groups (SHGs): Micro finance in India. Network Intelligence Studies. Volume VI, Issue 11, 2018.

Reddy, A. and Pal Malak, D. A Review of SHG-Bank Linkage Programme in India. Indian Journal of Industrial Economics and Development, Vol. 7, No. 2, pp. 1-10, 2011.


[1] Sakshy and Karoly. 2018.

[2] Sakshy & Karoly. 2018.

[3] Bottom of the pyramid (BOP), also called base of the pyramid, is an economic terms that refers to the poorest two-thirds of the economic human pyramid

[4] Brody et al. 2016.

[5] Brody et al. 2016.

[6] Deininger and Liu. 2012.

[7] Brody et al. 2016.

[8] Sakshy and Karoly. 2018

[9] Deininger and Liu. 2012.

[10] NABARD. 2017.

[11] Reddy and Pal Malik. 2011.

[12] NABARD. 2017.

[13] Deininger and Liu. 2012.

[14] Deininger and Liu. 2012.

[15] Deininger and Liu. 2012.

[16] Deshmukh-Ranadive, 2004.

[17] Brody et al. 2016.

[18] Deshmukh-Ranadive, 2004.

[19] Desai and Joshi. 2013

Dominique is serving as an American India Foundation (AIF) Clinton Fellow with the Indian Institute of Corporate Affairs in Gurugram, Haryana. For her Fellowship project, she is studying the national indicators for aspirational districts, identifying possible investment areas for corporate social responsibility, and creating a framework for corporate engagement. Dominique graduated with a Bachelor’s in political science in 2013 and a Master’s in community development and planning in 2015. With focuses in comparative politics and economic development, she went on to serve six years as a regional community development planner. As a principal planner with the Central Massachusetts Regional Planning Commission, she built and managed a program to shepherd communities through state initiatives, coordinated comprehensive planning efforts, and led a variety of community engagement and economic development initiatives. In this role, she also served as a municipal circuit rider, staffing town planning and economic development offices. Prior to her career in regional planning, Dominique worked in the private sector and completed government internships at the local, federal, and quasi-governmental levels. Her mission is to build pathways out of poverty using economic growth as a vehicle for social and economic opportunity. Through the AIF Clinton Fellowship, Dominique will be working on corporate social responsibility projects. She is excited to develop a broad knowledge of India’s development ecosystem, gain new tools and perspectives in community development, and contribute to initiatives serving under-resourced areas and populations.

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