Self Help Groups (SHGs) for the Poor
🌍 Grameen Bank of Bangladesh
The Grameen Bank is one of the biggest success stories in reaching the poor with reasonable credit. Started in the 1970s as a small project, by 2018 it had 9+ million members across about 81,600 villages in Bangladesh. Almost all borrowers are women from the poorest sections of society. They have shown that poor women are reliable borrowers and can successfully run many small income-generating activities.
“If credit can be made available to the poor people on terms and conditions that are appropriate and reasonable these millions of small people with their millions of small pursuits can add up to create the biggest development wonder.”
— Prof. Muhammad Yunus, Founder of Grameen Bank & 2006 Nobel Peace Prize Laureate
🧑🌾👩🍳 What are Self Help Groups (SHGs)?
- SHGs are groups of poor people from rural areas, especially women.
- Typically 15–20 members from the same locality.
- Members pool their savings regularly into a common fund.
- Members can take small loans from the group’s savings at a decided interest rate, without collateral.
⚙️ Working of SHGs (Micro-finance)
- 🧭 Supported by government policies; SHGs are a relatively new concept.
- 💰 Savings are collected → the common fund is used to lend small amounts to members who need it.
- 💱 Loans carry an interest charge decided by the group.
- 📉 Because loans are small and local, this arrangement is called micro-finance.
- 🛡️ SHGs have helped reduce dependence on informal lenders in rural areas.
- 🏢 Many large companies also promote SHGs in different parts of India.
🧾 Key Terms (Quick Recap)
- 💰 Money: Generally accepted for paying for goods/services or repaying debt; functions as measure of value, medium of exchange, and store of value.
- 🔁 Barter System: Direct exchange of goods/services without money.
- 🎯 Double Coincidence of Wants: Each party must want what the other offers—key feature (and difficulty) of barter.
- 🏧 Demand Deposit: Bank deposits that can be withdrawn on demand.
- 🧾 Cheque: Written instruction to a bank to pay a specified amount from the drawer’s account to a named person.
- 🏦 Credit (Loan): Lender provides money/goods/services in return for a promise of future payment.
- 🌀 Debt Trap: Borrowing to repay previous loans, creating a cycle of debt that’s hard to escape.
- 📄 Terms of Credit: Interest rate, collateral, documents, and repayment mode.
- 🏛️ Formal Sector: Banks & cooperatives, supervised by the RBI.
- 🧑💼 Informal Sector: Moneylenders, traders, employers, relatives, friends, etc.; no regulator.
- 👥 Self Help Groups (SHGs): Typically 15–20 local members (often women) who pool savings and provide collateral-free micro-loans to one another at an agreed interest rate.