Self-Help Group
A Self-Help Group (SHG) in India is a community-based savings and credit collective, typically comprising 10 to 20 women from similar socio-economic backgrounds, that pools regular savings, builds internal discipline through group financial management, and accesses bank credit at scale through the NABARD-promoted SHG-Bank Linkage Programme.
The self-help group model in India was championed by NABARD (National Bank for Agriculture and Rural Development) through its SHG-Bank Linkage Programme, piloted in 1992 and scaled nationally through the 1990s and 2000s. By the mid-2020s, India had over 12 million active SHGs with over 130 million member-households, making the SHG network one of the largest grassroots financial inclusion programmes in the world. The National Rural Livelihoods Mission (NRLM), operating as Deen Dayal Antyodaya Yojana (DAY-NRLM), became the primary government programme for SHG promotion and handholding.
The structure of an SHG was straightforward. Ten to twenty members — almost universally women, as empirical evidence consistently showed that credit access for women had stronger household welfare outcomes than credit access for male household heads — met weekly or fortnightly to deposit a fixed savings amount, typically Rs 50 to Rs 500 per meeting depending on the group's affluence level. The pooled savings were maintained in a group savings account at a nearby commercial bank, regional rural bank (RRB), or cooperative bank. Internal lending from the accumulated corpus to members for small, urgent needs was a key feature, building financial discipline and creating a group credit history.
Once an SHG had demonstrated six months of regular savings and proper bookkeeping — passbook entries, meeting minutes, resolution books — it was eligible for bank linkage. Under bank linkage, the bank extended a credit facility to the SHG as a unit, rather than to individual members, at rates conforming to priority sector lending norms. The SHG on-lent to its members at a small margin over the bank rate, with the group collectively responsible for repayment. This structure meant that the bank needed to manage one account rather than twenty, and the group's social cohesion served as collateral.
The Interest Subvention Scheme for SHGs under DAY-NRLM subsidised bank lending rates, with women SHGs in specific states accessing credit at 7 percent per annum effective rate (with the government subvention making up the difference to market rates). Pradhan Mantri Mudra Yojana loans — the SHISHU, KISHORE, and TARUN categories — were also frequently accessed by SHG members upgrading from group credit to individual enterprise finance.
SHGs served a broader purpose beyond credit access. They were a platform for convergence of government schemes — PM Awas Yojana, Ujjwala Yojana, Swachh Bharat, insurance enrolment — reaching households through trusted peer networks more effectively than government or bank outreach alone. Many SHGs formed federations at the village, block, and district level, accumulating capital and negotiating with bulk buyers for the enterprise outputs of their members — handloom products, dairy, vegetables — reducing intermediary margins and improving livelihoods.