SELF HELP GROUPS

Project by : Nidhi P. Shah Roll No. 956 T.Y.B.Com G division

INTRODUCTION
In India, women Empowerment is a buzz word to-day. As a nation, India is committed to the empowerment of women. Though women is regarded as the unsung heroine who works from dawn to dusk, yet it is unfortunate that even the ignorant and worthless men had been enjoying superiority over women which they do not deserve and ought not to have. So, since Independence, Government has made concerted efforts towards removing various biases. . As majority women lack assets that help contribute to their empowerment and well-being, economic independence through self-employment and entrepreneurial development must be paid attention to. So, the Government of India has provided for Self-Help Groups (SHGs). A self-help group (SHG) is a village-based financial intermediary usually composed of 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..

Objectives of Selected topics

In India, Self Help Groups or SHGs represent a unique approach to financial intermediation. The approach combines access to low-cost financial services with a process of self management and development for the women who are SHG members. SHGs are formed and supported usually by NGOs or (increasingly) by Government agencies. Linked not only to banks but also to wider development programmes, SHGs are seen to confer many benefits, both economic and social. SHGs enable women to grow their savings and to access the credit which banks are increasingly willing to lend. SHGs can also be community platforms from which women become active in village affairs, stand for local election or take action to address social or community issues (the abuse of women, alcohol, the dowry system, schools, water supply). But there are also some questions. How effective are the groups in managing their financial transactions? Are the groups sustainable? Do they help in mobilising women to take social action? How effective are such actions? Who is really benefiting? Do the poorest benefit, do they not join at all or if they do join, are they more likely to drop out? The main objective of selecting this topic is to get answers for these questions.

Methodology of Research:
This study explores such questions, based on field research in four states of India, presenting a reality check of what is really happening. In disseminating the findings, we invite a wider discussion on the issues and the implications for optimising the SHG movement. The study is based on a sample of 214 SHGs in 108 villages of nine districts in four states: Andhra Pradesh (60 SHGs) and Karnataka (51 SHGs) in the southern region, Orissa (50 SHGs) and Rajasthan (53 SHGs) in the north. The sample represents active, older, womens groups, mostly bank linked (with a bank loan) before March 2000.

Main Contents
SHGs are formed by NGOs, Government agencies or Banks the three types of Self Help Promoting Agencies or SHPAs.1 The sample SHGs are mainly NGO promoted (137 groups); 49 are Government promoted, 28 Bank promoted matching the pattern of promotion in the study states in 2000, with NGO promoted groups in all four states (predominating in Orissa and Rajasthan), Government promoted groups predominating in AP (just a few in the other states) and most of the Bank promoted groups in Karnataka (a few in AP).2 SHPAs differ in their approaches to group promotion, with varying emphasis on microfinance (the savings and credit transactions, decisions and record-keeping), and/or microfinance + (SHGs often being part of a wider village development program, with other social development inputs). Usually, though not invariably, NGOs and Government SHPAs are mF +, Banks naturally are mf. In either case, the pattern and intensity of inputs and guidance to SHGs varies. There is variation not only between different types of SHPA but also within SHPAs due to differences between individual field workers who are the actual group promoters or facilitators.

SHG members
SHGs are expected to extend financial services to the poor, and contribute to the alleviation of rural poverty. SHG members reflect a diverse membership covering different social and economic categories, including the poor. According to an objective household wealth ranking, approximately correlated to the national poverty line, 51% of members are poor (below the poverty line); another 32% are borderline (above the poverty line but vulnerable to risk). Scheduled Castes (SC) and Scheduled Tribes (STs), recognized as structurally poor, are 55% of members. Widows, also a vulnerable and under-privileged group, were found to be 10% of SHG

members. Data on other economic and social indicators reflect the poverty profile: 38% of SHG members work as casual labourers; though 29% work in own agriculture, and 17% are engaged in a non-farm enterprise. Schooling levels of SHG members are very low: 74% had no schooling, 11% had some adult education to become neo-literate, 15% had some schooling (mainly at primary level). In this study we did not explore impact for individual households, but we used the data to look at differences in wealth rank by time of membership. The comparison does not indicate a clear shift up out of poverty by SHG members over the years of membership. Although the proportion of very poor is significantly lower for longer-term clients compared to recent clients, the data-sets are not directly comparable. It seems more significant that for women who have been an SHG member for seven years (or more), half are (still) poor, including 13% very poor. At group level, SHG membership is not homogeneous by wealth (which affects equity issues). In nearly half the groups (47%) there are some members related to each other (particularly in the family based tribal communities in Rajasthan; though this feature is also found in other communities, and can affect relations within the group). SHG leaders are of all castes, reflecting the caste composition of their group. SHG leaders are more likely to be better off and have some schooling compared to overall members. Nevertheless, the majority of leaders too are illiterate 60% compared to 74% of members overall. Fifty-one percent of the SHGs are functionally literate defined as over half the members have completed at least primary schooling. Forty-nine percent are illiterate meaning that all members have no or less than primary schooling. In as many as 30% of the SHGs, none of the members have had any schooling at all a proportion which is especially high in Rajasthan (55% of sample SHGs) and much lower in AP (5% of sample SHGs). Low literacy has implications for record keeping and accountability.

Who does not join?

As well as finding out who the members are, we wanted to find out who is not joining, and, in particular, whether there are barriers to entry for poor women. SHG coverage6 of households within village communities is quite substantial, averaging 29%, and slightly above this average for structurally poor communities (SC/ST) in the north. There are barriers inherent in the conditions of membership to a group formed to mediate financial transactions through regular meetings, savings and loan repayments. Such conditions are difficult for women who migrate for seasonal wage employment, and households with variable or uncertain incomes. Both are economic characteristics of the poor and very poor. They can and do lead to self-exclusion if not exclusion by group members or by SHPA staff. It is quite common for SHPA field staff to work first with the easiest potential members (those who do not need much persuasion). Targets (number of SHGs/village), as in

Government programmes, may contribute to this. Though with substantial growth in the numbers of SHGs (as in AP), different socio-economic groups are included. Including the poor and very poor nevertheless requires more effort and more intensive follow-up by the SHPA, if SHGs are to be able to cater to their needs, accommodating more variable cash flows, for example, or different working hours.

Dropouts
Finding out about dropouts - how many? who? and why? - tells us something about whether SHGs are not always catering to the needs of all their members. In particular, we wanted to find out whether the very poor are more likely to drop out. In functioning SHGs, the drop out rate for the two regions combined is under 10% of membership. Almost 50% of the SHGs had no dropouts; one-third had two or fewer dropouts. There are dropouts in all wealth ranks. The dropout rate for the very poor is 11.1% and decreases somewhat as we go up the wealth rank (to 7.3% for the non-poor), (though the difference is not so great). Migration for employment outside the village, and financial difficulties especially in making regular savings deposits is the main reason for very poor and poor drop-outs; for the non-poor, group dynamics is an issue. Usually it seems to be the members (or her familys) decision to leave; otherwise it is a case of mutual agreement between the member and the group. Though there are cases of groups expelling a member. When a member leaves an SHG, she is in theory entitled to receive back her savings + interest (which should be a share of the net profit from interest earned from on-lending with-in the group). But in practice, in most SHPAs and SHGs, we found that this is not communicated as the norm. What is clear is that, if she drops out, a members savings can be adjusted against any outstanding loan (though whether interest due on savings is included in this adjustment is not so clear). In our sample, just under 10% of drop-outs were in default. Excluding these, we find that drop-outs do not usually lose their savings, but the majority do not receive interest due. In the absence of clear norms, or regular accreditation of accumulated interest, dropouts are not likely to obtain interest due on their savings. The impressionistic evidence from interviews with SHPA field workers and with drop-outs is that there is not much follow-up of drop-outs. Though we believe there are examples, more difficult to track, but nevertheless important, of SHPA staff successfully resolving differences between member and group, or encouraging a member not to drop out to avoid weakening of the group, provided the woman concerned is not quarrelsome, or irregular in payments.

THE SOCIAL ROLE OF SHGs

SHGs and politics
There are apparent synergies between SHGs and local politics since through membership of SHGs, or SHG clusters and federations, village women can gain experience of relevant processes (regular meetings, taking decisions, allocating money). They also become more visible in the village, which is important for campaigning.

Social harmony

Indian society is split by a hierarchical caste system that has traditionally discriminated against those at the bottom the Scheduled Castes as well as those outside it, for example the Scheduled Tribes. Within broad caste categories too there are divisions. The fact that the majority of SHGs (two-thirds in the sample) are single-caste groups is based on the principle of affinity groups and neighbourhood proximity (members living nearby can more easily get together, and village neighbourhoods are usually caste based). It also stems from government policies. Government benefits for SCs/STs, BCs and SGSY subsidies are easier to channel to the target population, if all members of a group belong to the same caste category. Otherwise, some benefits will go only to some members.

Social justice

SHGs seem uniquely placed to support their members on issues of social justice affecting women. Nevertheless, we did not find that SHGs are dealing regularly with issues of social justice. Nor did many groups report such actions: 12% of sample SHGs (with some groups mobilising together on single issues) had taken up issues such as domestic and sexual violence, bigamy, and a few cases of dowry death, prevention of child marriage, support for separated women to remarry.

SHGs and community action

Women in SHGs can work together to address issues that affect not only their own members, but others in the larger community. Again, the number of SHGs in the sample undertaking such action is less than hoped for, particularly given the sampling focus. Thirty percent of SHGs in the sample have been involved in community actions. These involved: improving community services (43% of the total actions, including water supply, education, health care, veterinary care, village road), trying to stop alcohol sale and consumption (31%), contributing finance and labour for new infrastructure, (12%), protecting natural resources and acts of charity (to non-members).

SUSTAINABILITY AND FINANCIAL ASPECTS

Record keeping
As a starting point for financial analysis, we had to look at group records. Based on an audit exercise at each group, we found that 15% of SHGs have good quality records - complete and up-to-date with virtually no errors, another 39% have records of moderate quality were mostly up to date, though with some errors. A significant proportion of sampled groups (40%) have weak records - over half the sample in AP, around one-third in the other three states. Over half of Government promoted groups had weak records; 36% of both NGO and Bank promoted groups. The latter appears surprising, but reflects the Bank practice of maintaining records at Bank

level, not at the group level, after loan disbursement.

Equity

All members of an SHG save the same amount at each meeting. The question of equity refers to whether access to available credit is equitable. Equitable here does not mean equal. Since, as noted earlier, all members of an SHG are not economically equal (have the same wealth rank) it follows that all members do not have equal credit absorption and repayment capacity. Group members themselves are well aware of this and generally prefer to allocate credit according to individual demand and capacity. The number of non-borrowers is quite small - 5% in the southern sample (data available for the previous year), 8% in the northern sample (data since formation of the group). Overall, the data shows relatively low standard deviation around the mean for number of loans and amount borrowed by members.

Defaults and recoveries

Loan repayment by SHGs involves two stages of recovery. The first stage is by members to the SHG, the second is by the SHG to the bank. The analysis of default in this study focuses on the first stage, in response to the research questions of what types of member fail to repay? and what happens to them? Measuring default requires careful analysis for SHGs since there are various types of repayment schedule. We have used information available at group level for repayment by members to the group as the basis for analysis of member default, adapted to the repayment norms stated by each group (monthly or seasonal repayments). For loan repayments by members to the group, the stated norm is usually regular (monthly) payment of interest and repayment of principal over the term of the loan (usually one year) as decided by the SHG. Repaymen t of principal may be in fixed equal instalments that are monthly, quarterly or seasonal. Default at 12 months was significantly higher for very poor and poor borrowers at 8-9%, compared to borderline (4%) and non-poor (1%) borrowers. In the southern sample, 28% of borrowers were more than 12 months overdue, with higher incidence (38%) amongst very poor borrowers. Group leaders and members alike default on loans (slightly higher incidence among leaders in the southern sample).

Sustainability

An assessment of financial status depends on good quality records and preparation of standardised statements. Financial statements are not being regularly prepared. In only 28% of the SHGs (22% in the south, 35% in the north) was an income and expenditure statement available, and in an equal number, a balance sheet and portfolio information. While members were usually able to provide approximate figures of total savings and total SHG loans outstanding, they were not able to provide figures for profits earned or loans outstanding to banks, for example. SHG member involvement in loan decision-making did not translate to their being reasonably well versed with the financial status of their SHGs, and In the absence of financial statements, SHGs (or SHPAs promoting them) cannot monitor

their financial position.

Conclusions
Most stakeholders present the SHG as a financially useful and sound instrument, and worry about the social and political implications. What this study indicates is that there are lights and shades on both sides. There are perhaps more social lights beginning to appear, and more financial shades. But, this study suggests that progress on either financial or social - will require greater clarity of vision and objectives and a systematic approach to building capacity and providing guidance.

Sources of Information
Research conducted by EDA rural systems Pvt. Ltd. Letter read in GLOBAL CONFERENCE OF ICSW, TOURS (FRANCE) JUNE 30TH - JULY 4TH 2008 Wikipedia.com

BIBLIOGRAPHY
Name of author: Kim Wilson The Fletcher School, Tufts University Year of Publication: June,2005 Place of Publication: APMAS (Andhra Pradesh Mahila Abhivruddhi Society) Topic Name: Self Help Groups in India A study of the lights and shades Name of author (letter reader): Prof. ANUPPALLE, R. REDDY Sri Venkateswara University, Tirupati (India) Year of Publication(reading of letter): 2008 Place of Publication(reading of letter): GLOBAL CONFERENCE OF ICSW Topic Name: Workshop n54 - Microfinance