SELF HELP GROUPS FOR INCLUSIVE GROWTH

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International Journal of Advanced Research in Engineering and Technology (IJARET)
Volume 10, Issue 6, November – December 2019, pp. 667-675, Article ID: IJARET_10_06_067
Available online at https://iaeme.com/Home/issue/IJARET?Volume=10&Issue=6
ISSN Print: 0976-6480 and ISSN Online: 0976-6499
DOI: https://doi.org/10.17605/OSF.IO/U8W
© IAEME Publication Scopus Indexed
SELF HELP GROUPS FOR INCLUSIVE
GROWTH
Dr. M. Madhavi
Professor and Principal, Aurora’s PG College, Hyderabad, India
M. Subhashini
Faculty, Department of MBA, Aurora’s PG College, Hyderabad, India
ABSTRACT
India with 300 million people still living below the poverty line needs measures to
uplift the status of these people. Financial inclusion and provision of micro credit to
poor households has been one of such programmes which gained popularity with many
benefits. Financial inclusion is the delivery of banking services at an affordable cost to
the vast sections of disadvantaged and low income groups. Only 49% of the farmer
households in rural India are having transactions with banks which suggests the fact
that 51% are excluded from financial assistance.
Micro Finance programmes have become one of the more promising ways of
providing developmental finance to achieve the objectives of poverty eradication. One
of the most important models of micro finance models is the development of Self Help
Groups to achieve the long cherished objective of rural development and poverty
alleviation.
Through this paper it is proposed to evaluate the contribution of micro finance
programmes especially Self Help Groups to the achievement of inclusive growth. This
paper also includes two cases of SHGs working in Hyderabad and Nizamabad of
Andhra Pradesh to project the reasons for success/ failure of the groups
Key words: Patients, Preference, Hospital, Preferences and Satisfaction, Service
Quality
Cite this Article: M. Madhavi and M. Subhashini, Self Help Groups for Inclusive
Growth, International Journal of Advanced Research in Engineering and Technology
(IJARET), 10(6), 2019, pp. 667-675.
https://iaeme.com/Home/issue/IJARET?Volume=10&Issue=6
1. INTRODUCTION
1.1. Inclusive Growth
Inclusive Growth means “ growth with equal opportunities.” The importance of equal
opportunities to all lies in its intrinsic value as well as instrumental role. The intrinsic value is

Self Help Groups for Inclusive Growth
based on the belief that equal opportunities is the basic right of human being . The instrumental
role comes from the recognition that equal access to opportunities increases growth potential ,
leads to efficient utilization of human and physical resources and makes the growth sustainable.
Inclusive growth focuses on both creating opportunities and making the opportunities available
to all. Growth is inclusive when it allows all the members of a society to contribute and
participate in the growth process regardless of their circumstances and standards.
Many people view ‘Exclusiveness’ and ‘Inequality’ as being the same thing. But they are
not. In fact believing that they both are same may mislead into prescribing an entirely wrong
set of interventions to address the problem.
An effective inclusive growth strategy should have two anchors:
• High and sustainable growth to create productive and decent employment opportunities and
• Social inclusion to ensure equal access to opportunities by all.
In India also Planners Academicians and Politicians are talking about inclusive growth a
lot. The parliamentary election campaign of 2004 with its “India shining” VS “Aam Aadmi”
confrontation highlighted the perception that the benefit of economic growth were simply
passing too many people by. This orientation is most visibly manifested in the theme of the
Eleventh Five Year plan which runs from 2007-2012.
The theme is ‘ towards faster and more inclusive growth’ which clearly reflects the need to
find a sustainable balance between growth and inclusion. The strategy for inclusive growth is
not just a conventional strategy, it is a strategy which aims at achieving a particular type of
growth process which will meet the objectives of “ inclusiveness and sustainability”.
Promoting inclusive growth includes revamping of labor regulations ,improving agriculture
technology and infrastructure , helping lagging states and regions catch up and empowering
poor through proactive policies that help them to take part in the market on fair and equitable
terms .
India’s recent growth performance has been spectacular , the country remain one of the
fastest growing economies in the world. But these achievements have created new challenges :
• Improving the delivery of public services such as health care, education, power and
water supply to all its citizens ; and
• Maintaining rapid growth while spreading the benefits of this growth more widely.
Thus one of the critical challenges to India is Financial Inclusion of its population
especially that of under privileged sections. Despite continuous efforts by RBI, Financial
Inclusion appears to be far away from reality. India has been ranked poorly at 50th
place, even
below the African countries like Morocco and Kenya in the first ever Index of Financial
Inclusion prepared by Indian Council For Research on International Economic Affairs. As per
the index, the number of branches of a bank per 1 lakh adults is just 9.4. This indicates a vast
scope for expansion of banking services in the country.
2. MICRO-FINANCE
In the above context, Indian Government and planners have realized that subsidies are not the
solution to eliminate poverty. More than subsidies poor people need access to credit and
opportunity to exploit their talent. Absence of any recognizable employment and hence absence
of collateral make them non-bankable. In developing countries like India, lack of loans from
any bank leaves them with no other option but to borrow money from local moneylenders who
charge them huge interest rates. A lot of Micro Finance Institutions focus on providing
relatively small loans to poor people who have no access to formal banking services. Apart
from giving loans, Savings are also a very important part of micro-finance services.

M. Madhavi and M. Subhashini
The term MFI now refers to a wide range of organizations dedicated to providing these
services and includes Non Governmental Organizations , Credit Unions , Co-operatives, Private
Commercial banks, Non Banking Financial Institutions and Regional Rural Banks.
Dr. C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister said
‘Financial Inclusion is no longer an option but compulsion and SHGs and NGOs can play an
important role in making it a reality.’ at the India Financial Inclusion Summit, 2008.
Micro-finance is a dynamic field and hence many delivery models have been developed
over a period of time. Each delivery model has its share of problems and success. In India
various delivery models have been adopted by Micro-Finance Institutions and they can be
broadly categorized as follows :
• Self-Help Group Model (SHG)
• Federated Self-Help Group Model
• Grameena Bank Model
• Cooperative Model
Among different delivery models of micro-finance, SHGs represent the emergence of a new
paradigm in the era of poverty alleviation.
SHG : A Self-Help Group is a registered or unregistered group of micro-entrepreneurs having
homogeneous social, economic background , voluntarily coming together to save small
amounts regularly. These savings contribute to a common fund and meet their emergency needs
on mutual help basis. The group members use collective wisdom and peer pressure to ensure
proper use of funds and timely repayment there of. SHGs can be formed with 10 to 20 members.
These groups can avail themselves of financial facilities offered by financial institutions and
the government. However there are credit norms to avail these facilities. Frequently the group
should convene meetings and discuss all the issues relating to the group on a common platform.
Government organizations, VDOs and other NGOs organize regular training programmes for
educating and developing the skills among members. SHGs are required to maintain records as
directed by the monitoring authorities. SHGs are directly financed by banks and repayments
are regular and defaults are very less when compared to other types of loans.
SHGs have varied origins mostly as a part of integrated development programmes run by
NGO’s with donar support. The major programme involving financial intermediation by SHGs
is the SHG-bank linkage programme by which the formal banking system reaches the micro
entrepreneurs including farmers , launched in 1992 as a pilot project of NABARD. It has since
proved its efficiency as a mainstream programme for banking by the poor, who mainly comprise
the marginal farmers , landless laborers, artisans, and craftsmen and others engaged in small
business like hawking and vending in the rural areas.
The main advantages of the programme are:
• Timely repayment of loans to bank
• Reduction in transaction costs both to the poor and the banks
• Door step ‘saving and credit ‘facility for poor
• Exploitation of untapped business potential of the rural areas.
All 498 banks [50 commercial, 96 amalgamated RRBs, and 352 co-operative banks] are
actively participating in the programme . As on December31, 2007 bank loan of Rs.20,114cr.
was availed of by 30-51 lakh SHGs (table 1) The average bank loan availed of per SHG and
per family amounted to Rs.65,924/- and Rs.4,708/- respectively. The outreach of the
programme has enabled an estimated 427 lakh poor households to gain access to micro-finance
from the formal banking system.

Table 1 Progress Under SHG- Bank Linkage
YEAR No. of SHGs financed by the banks
during the year
Bank loans given during the year
Number Growth(%
)
Cumulative
No.
Amount
(Rs. Cr)
Growth (%) Cumulative
Amount
2003-04 3,61,731 41 10,79,091 1855.34 81 3,904.21
2004-05 5,39,365 49 16,18,456 2994.25 62 6,898.46
2005-06 6,20,109 15 22,38,565 4499.09 50 11,397.55
2006-07 6,86,408 11 29,87,441 6643.19 47 18,040.74
2007-08 1,26,068 - 30,51,041 2072.78 - 20,113.52
SOURCE: Economic Survey 2007-0
The above table shows the number of SHGs financed by Banks from the year 2002-03 to
2007-08. The number of SHGs are increasing and till now Rs. 20,113.52 Crores were disbursed
through Banks toward loans to SHGs. Not only Public Sector Banks but Regional Rural Banks,
District Cooperative Banks are also participating in the delivery of loans to various groups
spread among rural areas of different states.
Table 2 Advances to SHGS by Public Sector Banks
Year No. of
Accounts
(in 100s)
Amount
Outstanding
(in Rs.Crs)
% to total
advances
March 2004 450 1233 0.2
March 2005 460 1843 0.3
March 2006 1067 4047 0.4
March 2007 967 3898 0.3
SOURCE: RBI website
This table shows the delivery of loans to SHGs by Public Sector Banks from 2004 to 2007
March. The disbursements were maximum in the year 2006. The public sector banks were
taking an active participation in this programme because of the maximum recovery rate on these
loans which is 98% of the loan sanctioned to the groups and prompt payments offered by the
groups.
3. SHGS IN THE STATE OF ANDHRA PRADESH
Andhra Pradesh is one of the pioneer states in encouraging self-help groups. The world bank
has said that the model of SHGs in Andhra Pradesh is remarkable and could be replicated in
other states in India. Much of micro-finance initiatives involved SHGs predominantly are
giving assistance to poor women in the villages of AP. Studies commissioned by NABARD in
2002 indicate that the programme has emerged as the largest micro-finance network in the
world. The statewide distribution of SHGs linked with banks shows a predominantly large share
of over 42% of all linked SHGs in Andhra Pradesh, Tamilnadu and Uttar Pradesh follow with
a share about 12% and 11% respectively. A.P government has made a pioneering effort in the
organization and development of SHGs in which rural women are largely involved. The role of
women in the organization and monitoring of SHG action plan has paved the way for the speedy
development of economic and productive activities of the group. Another important factor

which contributed to the development in A.P is the collective participation of various
organizations and credit institutions.
SHGs in A.P emerged as a sub-scheme of Integrated Rural Development Programme in
1982-83 with UNICEF cooperation with primary objective of focusing attention on women
members of rural families living below the poverty line. The savings and credit movement
started working in Nellore district in 1993. Later SHGs are formed into savings and credit
groups known as Podupu Lakshmi. There has been a phased expansion of SHGs which are
popularly known as DWCRA group. According to a study out of 10 million people in the world
carrying on thrift activity 2 million are in A.P. itself. With the government support , particularly
with the network of District Rural Development Agency(DRDA) and support from many
NGOs, the women’s savings and credit network is now widespread in Andhra, Rayalaseema
and Telangana regions.
Table 3 Progress of SHGs in Andhra Pradesh
Years No. of SHGs in
state
Loans delivered (Rs.Crs)
2003-04 2,31,336 752.90
2005-05 2,61,254 1017.70
2005-06 2,88,711 2001.40
2006-07 3,66,489 3063.87
2007-08 4,31,515 5882.79
Source: SAAKSHI Telugu daily
The table shows the progress of SHGs in the state of AP. We can observe a clear raise in
the number of groups as well as the amount of loans disbursed from the year 2003-04 to 2007-
08. In the state 25 commercial banks, 12 Regional Rural Banks and 12 District Central Banks
with the help of 4,600 branches are delivering loans to women self help groups.
The revolving funds of SHGs in AP amounts to an outstanding RS.3,951 Crores along with
their own thrift money of 1,755 crores. The recovery is also ideal when compared with the
recovery from other sector loans. Now in AP around 7,29,533 groups are working with
90,97,139 women members.
The city of Hyderabad is also contributing its share in the delivery of loans to the women
groups in the city and sub -urbs of the city. In Greater Hyderabad Municipal Corporation limits
as many as 37,637 groups are working with 5, 64, 555 members. The government disbursed an
amount of Rs.101.35 crores to these groups till now. Among the 41,180 urban groups working
in the state the city occupies a majority share of 21,307 groups.
The success of a group largely depends on the homogeneity and unity of purpose among
the group members. These groups help the members to concentrate on production activation.
Regular and rigid saving is invoked to achieve balance of power within the group and generate
a sense of ownership, most often result in credit discipline among members. This, in turn,
stabilize the group and help group in striving toward the objectives of micro-enterprise.
The methodology of lending loans is, groups comprising of 15-20 women from a
homogenous socio –economic background collect some amount from all the members. The
decisions will be collectively taken based on the need and replacement capacity. In case, the
group needs more amount of money they try to get the funds from various external sources such
as MFI, DRDA, banks or non-banking organizations. Due to the effectiveness of this
methodology SHG’s are encouraged to undertake thrift and credit activities.

The sources of credit for every group are
1) Banks
2) Mandala Samakhya
3) Grama Samakhya
4) Internal savings
Banks are charging 25ps interest per 100 per month on the loans. Mandala Samakhya
charges 0.50ps per hundred/month. Grama Samakhya charges 1/- and internal sources cost them
2/-.
The authors have taken a study of Nizamabad and Hyderabad and interviewed the Leaders
of the groups. We found that the groups in the villages are more effective and the level of
awareness is more when compared with the groups working in the city. The Grama Samakhya
President Mrs. Manemma was interviewed to understand the working of SHG’s in the village.
There are around 30 groups in the village out of which 27 groups are around 10years old. Of
these we have selected a group which has been very successful .
CASE-1:
Lakshmi Devi group was started in 1998 and the name of the group leader is Manemma . There
are 10 members in the group. Each member saves 50/- per month.
This group has been given loans of Rs.20,000 in the beginning and then Rs.40,000 and now
under TFY program they got a loan of Rs. 4,00,000. This amount has been used by the members
for the upliftment of their economic status.
• Kantamma of this group had taken a loan of Rs.40,000 from the loan sanctioned to them
and purchased an auto rickshaw and thereby became self – employed.
• Lakshmi , one of the member has taken Rs.40,000 to send her husband to Muscat and
there by the earnings of the family have been improved.
• Another member Padma used 40,000 to purchase a buffalo and by this she is able to
earn an additional amount of 200/-per day.
• Manemma has taken 30,000 from the fund and spent it to dig a borewell in the field.
With the installation of the motor she is now able to harvest two crops a year and is able
to improve her income.
Under the leadership of Manemma the group is able to utilize all the benefits provided to
them because Manemma is aware of all the benefits which they can get by forming into a Self
Help Group. She is able to motivate all the members of the group, to be united and to pay the
debts in the prescribed manner. Further the group is maintaining good records of their activities
and noting of the accounting transactions is found to be perfect.
The loans are not only helping the individual members but also the group which is
collectively using the funds to cater to the needy in the group. Many times social obligations
are also met with the help of internal credit facilities.
A commendable feature of this group is the unity and co-operation prevailing amongst the
members. When a member of the group lost her husband, the remaining group helped her by
giving 5000/- from the internal sources. When another member’s son has suffered from a
fracture the group helped her in getting a loan of 20,000 from Mandala Samakhya.
The formation of a group is not only helping them in improving the economic status but
also relieving them from indebtedness as the interest rates charged on the loans granted are very
low. The group members are paying 900/- per month towards the repayment of an amount of
40,000. Had it been taken from outside sources they should pay an interest of 1,200 at the rate

of 3/- per month. This explains the burden borne by the members from outside credit before
they were formed into a group.
After going through the performance of the group we can clearly state that SHG model of
Micro financing is very successful in the achievement of inclusive growth. This was made
possible because of
• Effective leadership
• Awareness about the benefits of SHGs
• Thriftiness among the members
• Perpetual membership
• Credit discipline
• Integrity of the group
• Cooperation among the members
CASE-2:
Another group Durga Bhavani Podupu Sangham was also undertaken for the study. This group
belongs to Ramanthapur area of Hyderabad city. This group was started in the year 2000. The
group leader is Mrs. Umadevi. The group was originally started with 20 members but later on
the number was decreased to 10. This is due to non-payment of savings regularly into the group
and irresponsibility of the members towards the activities of the group. This group initially
saved Rs.30 per month and the amount was deposited in Andhra Bank. After two years this
group got a bank loan of Rs. 20,0000. But the group leader was unable to disburse the amount
because of the fear of non-payment by the members. Till today the group is having the revolving
fund with them without any utility.
Further this group also got some contract work to undertake CC road work of worth
Rs.50,000. But due lack of co-ordination in the members of the group, the work has been taken
up by the local ward counselor with out any benefit to the members of the group.
Another fact observed was the low levels of motivation rendered by the group leader to the
members of the group. The group leader is not aware of the benefits associated with the SHGs
and their contribution to the development of the members of the group. With her ignorance she
herself is away from availing the benefits of the group formation.
The reasons for the non-performance of the group are
• In-effective leadership
• Lack of awareness among the members
• Lack of credit discipline
• Absence of thriftiness
• Lack of co-ordination among the members of the group
With this study, it is observed that the SHG-Bank linkage programme has contributed
significantly towards the primary objective of poverty alleviation and empowerment of rural
India. At the same time there are some problems associated with the working of these groups
which have been observed during the study.
• The Commercial banks have been following largely 1:4 savings credit ratio prescribed
as a lending norm. The loan terms are also uniformly prescribed and strict. The groups
which are having relatively lower savings ability are finding the lending ratio highly
restrictive.

• The contribution of SHGs in the improvement of the socio-economic conditions of the
poor house-holds is commendable but it not uniform. The awareness in some of the
areas is relatively high and in some other areas it is very poor.
• The utilization of funds by the SHGs is not always productive. The groups are using
these funds for education, housing, health and protective needs.
• In some of the areas the groups are not having access to banking facilities because of
the location of the banks. They have to travel long distances to access the services. Due
to this some of the groups are becoming reluctant to avail the facilities of loans and
other benefits.
• Commercial banks also have been facing some problems like an increase in the
percentage of Non Performing Assets in case of non recovery of loans and loans with
out any guarantee.
• The real need of the small and marginal farmers is not funds alone but the timely
availability of a package of inputs and custom services, along with technical advice and
support services for packaging and processing and transportation.
• The absence of effective organization and promotion is leading to the failure of the
groups and the groups are unable to get the benefits of micro finance
In spite of these problems the working of the groups is observed to be commendable. The
defaults in these loans are only 2 to 3 percent when compared to other types of loans given by
the banks like personal loans, vehicle loans, mortgage loans etc. However if these problems are
reduced to the possible extent the number of groups ready to avail the loans will increase. These
problems can be overcome by some of the remedial measures which can be taken at different
levels.
• The banks should be wiling to provide loans with flexible credit norms to enhance the
coverage of the groups under bank linkage.
• Entrepreneurial developmental assistance can be provided to the people of the groups
to increase the productive utilization of funds on loans.
• The local governmental agencies can take initiative to promote awareness in their areas
to increase the number of groups.
• More number of branches of banks and other micro finance institutions can be
established to increase the accessibility of banking facilities to the groups.
• Rural development agencies can take the assistance of NGOs working in the rural areas
to provide advisory services to the micro and small farmers in the processing, storage
and marketing of their produce.
• It has been observed that where the community activists, community volunteers and
community coordinators are taking initiative to promote SHGs, the groups are able to
reap the benefits of micro finance.
4. CONCLUSION
To conclude we can say that SHGs have been successful in the achievement of the primary
objective of inclusion of the rural households in the growth process of the economy. But this
depends upon creating awareness among the people especially those who are ignorant of the
SHGs and their benefits. The financially excluded sections need to be educated about the
benefits of being a part of the formal financial system. Better financial inclusion leads to better
earnings and better standards of living. The financial inclusion summit, 2008 highlighted the
fact that mobile banking can be introduced in India to provide access to banking services. The

need of the hour is to design cheaper and innovative models of financial inclusion. A blend of
technology, physical infrastructure and utilization of the potentials of SHGs can expand the
reach of Micro Finance for Financial Inclusion.
REFERENCES
[1] Misra SK & Puri VK, 2006, “Indian Economy” Himalaya Publishing House.
[2] Dutt & Sundaram 2006, Indian Economy, S. Chand & Co. New Delhi.
[3] The Chartered Accountant, September, 2008.
[4] The Economic Times, English Daily, Hyderabad, 28th
august, 2008.
[5] Saakshi, Telugu Daily, Hyderabad, 22nd
October, 2008.
[6] Kurukshetra, January, 2005, volume 53, No.3 “The growing mission of Self-Helping” by Nava
Thakuria pp.,38-40.
[7] Kurukshetra, August 2003, Volume 51, No. 10 “Rural credit delivery, Reaching the unreached”
by G. Srinivasan, pp., 10-12.
[8] Kurukshetra, November 2002, Volume 51, No. 1 “Rural credit and women Self Help Groups”
By Dr. H.D. Dwarakanath, pp., 9-15.
[9] Yojana, May 2008, “Budget 08-09 , Rural Development” By KK Tripathy & Ishita Tripathy,
pp.,49-51.
[10] Economic survey of India, 2008.

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