Frequently Asked Questions
What is Self Help Group?
A small group (15 to 20 members), voluntarily formed and related by affinity for specific purpose, it is a group whose members use savings, credit and social involvement as instruments of empowerment
What are the common objectives of a SHG?
The SHG is formed with the following common objectives:
- To collectively bring about the change in socioeconomic status of the poor people especially its members;
- To inculcate the habit of savings amongst villagers including village women;
- To maintain good inter-personal relationship, linkages with banks & financial institutions and build self-confidence amongst rural community;
- To save the villagers from clutches of middle men and touts and arrange for loans;
- To develop leadership qualities amongst group members;
- To manage and run collective income generating activities/ventures & common activity/commodity based groups;
- To improve literacy, general awareness level and right to equality among villagers;
- To function as an interface between the extension system and farmers for transfer of technology, sharing of market information etc.;
- To interact and exchange ideas on new initiatives.
What are the characteristics of an ideal / sustainable SHG?
It requires a great deal of skills / abilities and attributes amongst group members to form and run a strong and sustainable SHG. This includes the ability to
- Listen to each other rather than carrying on with dominance of few and non representation of others;
- Encourage group members to discuss, explore, firm up ideas and develop workable proposals;
- Communicate the ideas/opinion to others and facilitate support;
- Take along everyone/majority while taking a decision;
- Meet regularly and observe set rules/regulations while conducting the meeting;
- Record proceeding and the important decisions;
- Regular follow up of action proposed to be taken by the group;
- Draw immediate as well as long-term objective of the group;
- Select with consensus the office bearers viz. chairperson/leader, secretary and cashier/treasurer;
- Take up activities of common interest & emerge as a commodity based group.
When was it started?
During the year 1989
Which Banks are ready to lend loan to SHGs?
All nationalized banks
What is the SHG account
It is a group savings account for Self - Help and Joint Liability groups.
What is the minimum balance to be maintained in the SHG Account?
What is my "Base Branch"?
The "Base Branch" is that branch in the town / village where I have my account. Thus, if a town / village has more than one branch, the Base Branch is that one where you have opened your account.
Are ATM transactions available to SHG accounts?
No, SHG accounts cannot undertake ATM transactions
How do they work?
Although only the individual can take the actions to bring change into his/her life, there are times when it’s too much to rely solely on personal resources. There is a unique strength in group membership which can help a person to mobilize his/her energies and attain a sense of well-being.
What are the advantages of financing through SHGs ?
An economically poor individual gain strength as part of a group. Besides, financing through SHGs reduces transaction costs for both lenders and borrowers. While lenders have to handle only a single SHG account instead of a large number of small-sized individual accounts, borrowers as part of a SHG cut down expenses on travel (to & from the branch and other places) for completing paper work and on the loss of workdays in canvassing for loans.
What role does a Non-Governmental Organisation (NGO) play in provision of Micro Credit ?
A Non-Governmental Organisation (NGO) is a voluntary organization established to undertake social intermediation like organizing SHGs of micro entrepreneurs and entrusting them to banks for credit linkage or financial intermediation like borrowing bulk funds from banks for on-lending to SHGs.
What is Micro Credit ?
Micro Credit is defined as provision of thrift, credit and other financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve living standards. Micro Credit Institutions are those which provide these facilities.
What are the terms & conditions for accessing micro credit ?
Banks have been given freedom to formulate their own lending norms keeping in view ground realities. They have been asked to devise appropriate loan and savings products and the related terms and conditions including size of the loan, unit cost, unit size, maturity period, grace period, margins, etc. Such credit covers not only consumption and production loans for various farm and non-farm activities of the poor but also include their other credit needs such as housing and shelter improvements .
What is the SHG-bank linkage program of National Bank for Agriculture & Rural Development (NABARD) ?
With a view to facilitating smoother and more meaningful banking with the poor, a pilot project for purveying micro credit by linking Self-Help Groups (SHGs) with banks was launched by NABARD in 1991-92. Reserve Bank of India (RBI) had then advised commercial banks to actively participate in this linkage programme. The scheme has since been extended to RRBs and co-operative banks.
Should SHG be registered?
They may but need not. In act registration is not recommended at all because members are generally illiterate or semi-literate. Imposing the burden of statutory requirements under the companies act, the societies act or trust act would only enable some outsider to take control of the group under the pretext of helping them.
Why should membership not exceed 20?
This is for two reasons. One, too large a group could lead to less then cohesion and unity. Two, legally more than 20 members engagd in financial operations are required to be registered.
Is there a lower limit on group size?
There is no required lower limit. But clearly, one or two persons does not constitute a group. It should be large enough to generate group pressure and have a common voice so members are taken seriously,but small enough to be cohesive.
What does homogeneous membership mean?
If all members have the same economic status and sex, the group is considered homogeneous. Of course they should all be from the same village,making it easy foret and know each others situations well. They do not have to belong to the same caste,religion/trade or profession.
How frequently should a group meet?
At least once a month . it is better if it meets every week. This way there is more cohesion and greater likelihood of rotation through internal loans.
How to distribute the responsibilities among members?
The following office bearers in a group should be elected unanimously / nominated by the group members unanimously, who should have the responsibilities as indicated against each.
Chairperson / convener / group leader: The chairperson of the group should be such a women who is wise, has leadership qualities, has good communication skills, has the capability of keeping the group active, intact, functional and can help/ facilitate the group members to take the decisions.
Treasurer/Cashier: The Cashier of the group should be such a women who is literate and can maintain accounts. The duties of the cashier would include:
- Maintenance of savings in a group
- Opening and maintaining group members account
- Maintaining joint account and undertaking the bank transactions.
- Operating the account and undertaking the bank transactions
- Maintaining account of loans/internal lending and re-payments.
- Maintaining cashbook, ledgers, resolution book & other records in the group.
If there is no literate person in the group. The group can hire a book keeper/ community organizer for maintenance of the group accounts/records/ registers.
Secretary/ Co-Leader: The Secretary of the group should also be a literate person with following responsibilities:
- Organize meetings, if the leader is not available;
- Write the proceedings of the group meetings;
- Undertake necessary communication with banks /other local agencies;
- Sign documents on behalf of the group.
Who can be the member of SHG?
The process of development is generally focussed towards deprived and less privileged sections of the society. However, the membership to a SHG would depend upon the 'very objective' of forming a group. For example, the farm women/farmers who wish to grow a particular crop or produce a particular product can conveniently form a 'Commodity Based Group' such as Ginger Group, Turmeric Group etc.
The attention may be paid to the following facts before forming a SHG:
The individual desires to become a member.
Member is an adult.
Better to have one member from one family.
Members enjoy the same socio-economic status in the society.
Members are local residents &
Do not belong to more than one group.
Are high savings an indicator of a strong SHG?
Rather than high level of savings, it is the regularity in savings that indicates how cohesive the group is.
When should a group start internal loan?
As soon as possible. Even from the first or second month
Are NGOs needed for group formation ? Can other agencies form groups?
NGOs are strongly recommended through not required. This is because of continuity, their commitment, local knowledge and training inputs. Other agencies can come up with a list of members, but it may or may not jell in to a cohesive group with proper normsand practices.
when should bank credit start?
After the group demonstrates regular meetings, regular savings into the common fund and rotation of group savings among members for at least 6 months.
Should loan size be linked to savings?
NABARD recommends it. SHG credit guidelines recommend it for loan not exceeding four times the level of savings in the group.This is a prudential norm not compulsory.Once credit worthiness is demonstrated subsequent loans need not be tied to savings
What is mahalirthittam?
It is the scheme for the welfare of women executed by the project officer of mahalir thittam in DRDA of every district.
What is the aim of SHGs?
Women empowerment and their economic development.
What is the name of the marketing complex of SHGs product?
Poomalai vaniga valaagam
What is the difference between microfinance and microcredit?
Microfinance refers to loans, savings, insurance, transfer services and other financial products targeted at low-income clients. Microcredit refers to a small loan to a client made by a bank or other institution. Microcredit can be offered, often without collateral, to an individual or through group lending.
Are SHGs meant for both men and women?
SHGs are meant for both men and women. However, women are especially being encouraged 5 to organize themselves in groups to make then economically independent and improve thei socio-economic status in the family and society.
Who will form a SHG?
'Group Formation' is a process which initially begins with some external stimulation / help I facilitation through an extension agency/social worker/project functionaries. Alternatively, the members can form a group themselves. The process of Group Formation may vary depending upon its objectives & the situation.
Is formation of SHG a Govt. scheme programme?
No, SHG formation is not a Govt. scheme. It is rather a step to improve the socio-economic status of the members. Formation of SHG can be facilitated by the govt. or any autonomous / voluntary organization. The members may fonD. the group on their own or under any scheme / programme of the public / private sector with or without the support of a facilitator.
What support does the Govt. render in the process of formation of a SHG?
The group is initially fonned with external support / facilitation by any agency-governmental or nongovernmental or by the members themselves. However, when group becomes stronger, the members start looking for opportunities for economic activities to further build upon their collective strength. The govt. support may come in at this step and the necessary linkages between support agencies and the group can be enabled by the govt. to derive benefits of existing schemes / programmes.
Who maintains the accounts of SHG?
Management body comprising of Chairman, Secretary or leader and co-leader and the Cashier / Treasurer should ideally be constituted at the time of formation of group. The members of the group who hold these posts are responsible for maintaining the group accounts or they can hire the book-keeper / community organizer.
'Is it mandatory to get the SHG registered?
It is not mandatory to get the group registered; however, it is important to draw rules / regulations for its efficient functioning and to have control over its activities. In this regard, keeping in view the objectives of the group and the future plans of the group members, the group can be registered with Registrar, Cooperative Society or can function independently as a society.
Is it necessary to save money in the SHG formation process?
Developing / inculcating the habit of saving money is important in group formation. The nominal amount thus saved by the members can serve as a corpus to provide loan to the needy and desiring members to overcome his/her problems/difficulties in arranging loans at the time of crisis such as illness/accidents/death etc. Since these problems can't be foreseen, it in a way becomes essential to save money within a group & saving may at times act as a binding factor of the members within the group.
Can people involved in formation of a group run away with the saving?
People forming SHG mayor may not be the members of the group. However, the savings will only remain with the persons who are the members of the group. When the money belongs to the group and remains with its members only, no individual member or any outside person involved in the process of group formation can run away with it.
What is the need to open an account?
An account is opened for
Appropriate management and safe handling of the total savings of the group;
Earning interest on the savings which can be subsequently equally shared amongst the group members;
Establishing strong linkages/bonding with bank. The members can subsequently formulate good viable projects and seek loan/credit from the bank.
How to open an account in the bank?
Following documents are required to open an account of SHG:
Rule Book of the group detailing transactions (loan and recovery); composition of the committee and the proceedings of group meetings;
The amount (nominal) that group proposed to raise through saving;
Three photographs of the members of the Management / Executive Committee of the group or their representatives;
Group resolution nominating Management /Executive Committee to open and operate the bank account;
The introduction letter of the person who owns an account in the bank branch in which the account is proposed to be opened;
The account can also be opened through an introduction by an office bearer of the NGO or the village sarpanch.
Following can ease the process of opening of an account:
- The rubber seal/stamp of the group;
- The proceedings of the group meetings;
- The registers and records maintained by the group;
- Necessary communications made with banks / other local agencies.
What are the records required to be maintained by the group?
While the process of group formation is very informal in the beginning, however, it becomes formal and cumbersome when the group starts different activities. In order to maintain transparency and good working relationship amongst members and for further linkages with governmental and non-governmental agencies, it is essential to maintain following records:
I. Attendance Register: This register is required to record the attendance of all members of the group during the group meetings. The members may sign in this register.
II. Proceedings/Record Register: The proceedings of all the group meetings alongwith the important decisions taken in each meeting are recorded in this register for the purpose of record keeping, reference and future planning.
III. Saving Register: This register shall have details of the total/individual savings made by the group members.
IV.Ledger-cum-cash book: Total group transactions are maintained in this book/register.
V.Individual pass book: Individual pass book should be in the hands of individual members of the group. They should bring this pass book during meetings. Thrift and loan amount should be entered in the pass book by book keeper.
VI.Resolution for formation of Self Help Group: Resolution for formation of Self Help Groups should be maintained with the office bearers of the group.
What are the points to consider while maintaining accounts?
The following points may be considered while maintaining the accounts:
The account of the group should be transparent;
Each member should have clear understanding of the need and importance of maintaining group accounts on day-to-day basis;
The rules and principles of group formation be understood clearly & preferably a copy of the norm to be kept in the resolution book for ready reference;
The members responsible for maintaining the group account should exercise full control;
The group should be informed of all transactions;
Resolutions and signatures should be taken bygroup members for transactions / internal lending;
The chairperson of the Group or the office bearer of NGO/GO should be immediately informed in case of any irregularity. Outside members who maintain records should not take any decisions of the group on their awn;
The members responsible for record keeping should be changed regularly;
All ledgers/records should be examined from time to time and disciplinary proceedings to be initiated if there is any irregularity.
What kind of norms be set & maintained within a group?
It is better to set following basic norms for systematic functioning of group:
Group Management Norms: such as advance planning & notice for day/time/frequency/venue & agenda of the meeting.
Attendance Norms: to be observed to avoid thin/scanty presence and to complete the quorum.
Disqualification Norms: to be observed in the event of non-repayment of loans; regular/chronic absence from meetings; involvement in the acts of indiscipline & non-deposit of regular contribution / thrift amount.
Administrative Norms: for proper functioning! replacement of office bearers of the group.
Financial Management Norms: to decide issues such as membership fee, interest rate for loans, the minimum & maximum amount that can be given as loan to members and the repayment schedule etc.