SHGs And Their role In Indian Economy

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India has long taken efforts to expand credit availability to rural areas. Early programs yielded disappointed results, were gradually replaced by efforts to establish Self - Help groups (SHGs) and link them to banks. This approach differs from traditional micro finance in a number of ways. SHG is a brain child of Gramin Bank of Bangladesh founded in 1975 who tried a new approach to rural credit in Bangladesh.  

In 1991-92, NABARD started promoting self-help groups on a large scale marking the real take-off point for the SHG movement. In 1993, Reserve Bank of India also allowed the SHGs to open savings accounts in banks. his facility of availing bank service was a major boost to the movement. 

SHGs  (Self Help Groups) is a financial intermediary usually consisting of 10 to 20 local men or women in between 18 to 40 years of age. It provides and growth and helps the resurgence of weaker section of the society in terms of outreach, social position and sustainability.   

The features of SHGs are :- i) People form their personal groups for the purpose of savings and also lend money among themselves. ii) Rate of interest is lower than other service providers. iii) Loans can also be availed from banks if their savings are regular. 

The self help groups approach in India has taken strong roots as an effective and viable channel to take the poor to the new domain of economic empowerment and social upliftment. It is now more than two decades old playing a major role in the country's economic development. It helps in poverty alleviation and women empowerment. It has triggered off a silent revolution in the rural credit delivery system in India.       

Post lock down, there is an imperative need for economic revival and reconstruction. Each SHG loan sanctioned or enhanced will either facilitate spending or investment- twin engines of driving an economy. These small loans with much lower defaults than industry average, covering 12 crore families, have the potential to bring in huge socio - economic transformation. 

The efforts of SHG are thus, to a very great extent, contributing to address the gender issues of economic development in India. India is poised to provide pragmatic solutions by demonstrating the success of micro finance for eliminating total poverty in the coming decade. 


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