Background

The National Bank for Agriculture and Development initiated the Self-Help Group (SHG) movement across India in 1992. A SHG is a small group of micro entrepreneurs, most commonly women, with similar social and economic backgrounds. Members voluntarily come together to save small amounts, to contribute to a common fund, and to meet their immediate needs on a mutual help basis. The group members use collective wisdom and peer pressure to ensure proper end-use of credit and timely repayment. SHGs are considered the largest microfinance dispensation model in India with more than 3 million active SHGs countrywide.

Increasingly, NGOs such as Prime Trust help link SHGs to a local bank so the groups may receive a formal loan. The organization encourages SHGs to open savings accounts, and helps to set up low interest rate loans from the bank. The loans are most commonly used to establish small businesses, often run collectively by group members. When these enterprises start to turn a profit and a group successfully pays off its first loan, the bank offers a larger sum so that the enterprise may continue to grow. Prime Trust has started over 130 SHGs in the organization’s history and now works alongside over forty-five active groups. Click here to read more about our work with SHGs.

The SHG development model is based on the idea of women empowerment. It not only offers members a sustainable income and a new level of financial mobility, but it also encourages women to utilize local resources, to be more aware of their rights, and to develop leadership and confidence.

Microfinance in Practice

Mangalakhmi and her daughter Indumathy serve as a powerful example of the change SHGs and micro-loans may enable. Previously, Indumathy was unable to go to school because her mother could not afford to pay the tuition fees. On November 1st 2007, she put on her uniform and gathered her books. With a big smile on her face, she joined the other kids from her village to go to the local school. The smile on her mother’s face was even bigger. She was giving her daughter the opportunity that she had never been able to have; her daughter would gain the skills necessary for a career, and be given the opportunity to empower herself.

After the mother saw her daughter leave, she went back to her sewing machine. This sewing machine had brought about great changes in her family’s life. The women in Mangalakhmi‘s community formed a women’s SHG and received a loan with Prime Trust's guidance. With the new capital, the women bought sewing machines and started their own tailor shop. With the extra income generated, these families can afford more nutritious food, medical assistance, and as seen with Indumathy, an education for their children.