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Wednesday, December 15, 2010

Self-help Groups in Kerala

Self-help Groups in Kerala

A self-help group (SHG) is a village-based financial intermediary usually composed of between 10-20 local women. Most self-help groups are located in India, though SHGs can also be found in other countries, especially in South Asia and Southeast Asia.

Members make small regular savings contributions over a few months until there is enough capital in the group to begin lending. Funds may then be lent back to the members or to others in the village for any purpose. In India, many SHGs are 'linked' to banks for the delivery of microcredit.

SHGs are member-based microfinance intermediaries inspired by external technical support that lie between informal financial market actors like moneylenders, collectors, and ROSCAs on the one hand, and formal actors like microfinance institutions and banks on the other. Other organizations in this transitional zone in financial market development include CVECAs and ASCAs.

self help group

A Self-Help Group (SHG) is a registered or unregistered group of micro entrepreneurs having homogenous social and economic backgrounds, voluntarily coming together to save regular small sums of money, mutually agreeing to contribute to a common fund and to meet their emergency needs on the basis of mutual help. The group members use collective wisdom and peer pressure to ensure proper end-use of credit and timely repayment. This system eliminates the need for collateral and is closely related to that of solidarity lending, widely used by microfinance institutions. To make the book-keeping simple enough to be handled by the members, flat interest rates are used for most loan calculations.


Self-help groups are started by non-profit organizations (NGOs) that generally have broad anti-poverty agendas. Self-help groups are seen as instruments for a variety of goals including empowering women, developing leadership abilities among poor people, increasing school enrolments, and improving nutrition and the use of birth control. Financial intermediation is generally seen more as an entry point to these other goals, rather than as a primary objective. This can hinder their development as sources of village capital, as well as their efforts to aggregate locally controlled pools of capital through federation, as was historically accomplished by credit unions.

NABARD's 'SHG Bank Linkage' program

Many self-help groups, especially in India, under NABARD's SHG-bank-linkage program, borrow from banks once they have accumulated a base of their own capital and have established a track record of regular repayments.

This model has attracted attention as a possible way of delivery microfinance services to poor populations that have been difficult to reach directly through banks or other institutions. "By aggregating their individual savings into a single deposit, self-help groups minimize the bank's transaction costs and generate an attractive volume of deposits. Through self-help groups the bank can serve small rural depositors while paying them a market rate of interest.

NABARD estimates that there are 2.2 million SHGs in India, representating 33 million members, that have taken loans from banks under its linkage program to date. This does not include SHGs that have not borrowed. "The SHG Banking Linkage Programme since its beginning has been predominant in certain states, showing spatial preferences especially for the southern region – Andhra Pradesh, Tamil Nadu, Kerala and Karnataka. These states accounted for 57 % of the SHG credits linked during the financial year 2005-2006

Advantages of financing through SHGs

An economically poor individual gains strength as part of a group. Besides, financing through SHGs reduces transaction costs for both lenders and borrowers. While lenders have to handle only a single SHG account instead of a large number of small-sized individual accounts, borrowers as part of an SHG cut down expenses on travel (to & from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans

From pickle making to IT business,from garbage removal to operation of solid waste processing plant...The march of Kerala's neighbourhood network 'Kudumbashree' in the last 12 years is an inspiring story of social and economic empowerment of Indian women.The self-help chain, started on a modest scale in 1998,has grown over the period as one of the mighty women's movements in Asia with a full-time membership of 3.7 million, engaged in an array of gainful activities.It was initially conceived as a community based women oriented initiative with Neighbourhood Groups (NHG) as its base.

'Kudumbashree' has since then emerged as the driving force for most of the community activities at the grassroots in Kerala, where 40 per cent of plan funds are spent through the local self-government (LSG) institutions.'Self-employment and poverty eradication were set as the goals of 'Kudumbashree' when it was launched.Since then it has been able elevate the role of women in society and made them the controllers and managers of money in their family. Now, no empowerment programme at the LSG level will be carried out without it,' spokesperson for the Kudumbashree Mission,R Parvathi Devi, told PTI.

It was conceived as a collaborative venture of the state government,NABARD and State Poverty Eradication Mission.Under it economically deprived beneficiary groups were identified and a wide network of NHGs formed.Though initially it focused on the rural areas,it had over the years been extended to towns with help of municipalities and city corporations.

The units started small and micro enterprises by pooling individual savings and with support of rural or co-operative banks and civic bodies.Many of them were then like cottage industries turning out such items as chutney, pickle or curry powder, small-time snacks or household articles like broomsticks or mops.Slowly, they began to diversify and expand into initiatives like catering services, budget hotels and group farming.While engaging women, majority of them drawn from working class background with the burden of looking after their families and children on their shoulders, the organizers ensured that they would not fall into the clutches of private money lenders for raising capital for their small ventures.'Besides the social impact, the product and services of Kudumbasree has been able to achieve a brand-like status,' Parvathi said. The NHGs' number increased within a short time exceeding 2.03 lakh with their presence in all 999 village panchayats, 53 municipalities and 5 city corporations.At the grassroot are NHGs comprising 15 to 20 women,five of whom are chosen as volunteers to co-ordinate the activities.

Each group has its nominees at the ward (civic division) level Area Development Societies.The ADS sends its representatives to the Community Development Society, which completes the three-tier structure of Kudumbashree.On the whole there are 17,486 ADSs and 1,061 CDSs. 'Now almost all important developmental and empowerment projects
of civic bodies like destitute rehabilitation, Take Home Ration and computer education in schools are being implemented through Kudumbashree,' Parvathi said.Kerala has become the sole state to implement the National Rural Employment Guarantee Programme through a women network. The dry flower unit in Wayanad, bamboo products workshop in Pathanamthitta,
strawberry farming in Idukki, Caf
Canteen in Thrissur and designer jewels and foot-wear units in Kozhikode are some enterprises started as part of Kudumbashree mission.'We had to face resistance from our families when we joined Kudumbashree.But, now my family, including my bedridden husband, rely on my income,' said Smitha,a Kudumbashree worker who is part of a team that removes domestic garbage here.Another worker Sunitha, part of a tailoring unit, said besides supporting the family, being part of the movement boosts their self-respect.Kudumbashree officials said Rs 1,790 crore had been mobilised as thrift fund and loans amounting to Rs.3,483 crore to NHG members.For pooling funds,1,29,041 NHGs had been connected to banks under Linkage Banking Programme and they had already availed credit of Rs.993.65 crore to set up and run their enterprises.While 27820 individual enterprises and 2234 group (with minimum five members) units were active in urban areas, 2716 individual units and 9423 group enterprises had been organized in rural areas. Some 46,444 families took part in lease land farming to bring 62655.2 acres under cultivation.

Under Bhavanashree housing loan scheme for poor in rural areas,46,749 houses had been built.'Buds', special schools set up jointly with civic institutions, had been helping education and care of physically and mentally challenged children.To empower the younger generation and create awareness among them,Children's Neighbourhood Groups named 'Balasabhas' have been formed. Some 8.66 lakh children are active in 50220 Balasabhas in rural and urban areas,she said.A majority of Keralites, including women, are aware of their rights and strength to a great extent.'If anybody lends them a helping hand,they can easily come up and become self-reliant. Kudumbashree has just proved that in a short div of time,' she added.

Prepared by biju p r,assistant professor in political science,govt brennen college,thalassery,kerala,india.

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