In a Self-Help Groups(SHG) most of the decisions regarding savings and loan activities are taken by

The correct answer is Members.

Key Points

Self-Help Groups (SHGs):

• Self-Help Groups (SHGs) are informal associations of people who choose to come together to find ways to improve their living conditions.
• It can be defined as a self-governed, peer-controlled information group of people with similar socio-economic backgrounds and having a desire to collectively perform a common purpose.
• In an SHG most of the decisions regarding savings and loan activities are taken by its members.
• Villages face numerous problems related to poverty, illiteracy, lack of skills, lack of formal credit etc.
• These problems cannot be tackled at an individual level and need collective efforts.
• Thus SHG can become a vehicle of change for the poor and marginalized.
• SHG relies on the notion of “Self Help” to encourage self-employment and poverty alleviation.
• Functions:
  • It looks to build the functional capacity of the poor and the marginalized in the field of employment and income-generating activities.
  • It resolves conflicts through collective leadership and mutual discussion.
  • It provides collateral-free loans with terms decided by the group at market-driven rates.
  • Such groups work as a collective guarantee system for members who propose to borrow from organized sources.
  • The poor collect their savings and save them in banks.
  • In return, they receive easy access to loans with a small rate of interest to start their micro-unit enterprise.
  • Consequently, Self-Help Groups have emerged as the most effective mechanism for the delivery of microfinance services to the poor.

Additional Information

• The origin of SHGs in India can be traced back to the establishment of the Self-Employed Women’s Association (SEWA) in 1972.
• NABARD, in 1992, formed the SHG Bank Linkage Project, which is today the world’s largest microfinance project.
• From 1993 onwards, NABARD, along with the Reserve Bank of India, allowed SHGs to open savings bank accounts in banks.
• The Swarn Jayanti Gram Swarozgar Yojana was introduced in 1999 by the Government of India with the intention of promoting self-employment in rural areas through the formation and skilling of such groups.
• This evolved into the National Rural Livelihoods Mission (NRLM) in 2011.