Microfinance Self-Help Groups in India

Living up to their promise?
ISBN 978-185339-656-4


Edited by Frances Sinha






Self-Help Groups (SHGs), a means of reaching rural women with savings and credit services, have taken off dramatically in India, where an estimated 25 million women are members. Their benefits are social as well as economic: SHGs encourage women to become active in village affairs, or take action against domestic violence, the dowry system, or the lack of schools. But some questions remain. How effective and transparent are the groups in managing their finances? Are the groups sustainable? Do the poorest benefit? What does it take for SHGs to mobilize for social action? How effective are such actions?  For the first time, detailed field research probes beneath the surface of India’s world-renowned SHGs. It explores both social and financial performance in the SHG movement. This text reveals that whilst there are important achievements, especially on the social side, without more strategic attention and more resources these are unlikely to be sustainable.


This book is honest and bold in its assessment of Self-Help Groups and their effectiveness at the community level. ...Practitioners who believe in mainstreaming the SHGs, thereby linking the poor directly with the financial institutions, will find this book very useful.
Vijayalakshmi Das, CEO, Friends of Women’s World Banking

The study was thorough, delved into many questions with a variety of techniques, and took great pains to respect the privacy of villagers as they confided their experiences. The result is a rich profile, both quantitative and qualitative, of rural self-help in India.
Within these pages are many answers, and much is left to the reader to draw his or her conclusions. The inevitable has surfaced: the more we know the more we do not, and those of us reading this study will have a growing list of brand new questions. Let us begin to ask them.
Kim Wilson, The Fletcher School, Tufts University, Formerly, Catholic Relief Services, South Asia

About the editor

Frances Sinha is a co-founding Director of EDA Rural Systems, India, a consultancy providing research and capacity building support for microfinance and enterprise development. 

About the contributors

Frances Sinha is a co-founding Director of EDA Rural Systems, a consultancy providing research and capacity building support for microfinance and enterprise development.

Ajay Tankha, former International Head, Microfinance, ActionAid UK, is a leading researcher of self-help groups.

K. Raja Reddy is Associate Vice President, Research and Advocacy Unit, of APMAS, an NGO established to provide research, training and advocacy support to SHGs.

Malcolm Harper was Professor of Enterprise Development at Cranfield School of Management, UK until 1995, and since then has worked mainly on microfinance in India.

Table of contents

Part 1 Study context and design

1 Study design: objectives and methodology
SHG numbers and trends 
Study objectives 
Research approach 
Study sample 
Data collection and the field experience 
Data analysis 

2 Sample profile: villages, SHGs, SHPAs 
Village context 
The SHGs 
The SHPAs 
Federations or networks of SHGs 
SHPAs’ support of SHGs 

Part 2 Outreach 

3 SHG members 
SHPA approaches to group formation 
Depth of outreach: inclusion of the poor 
SHG members – work and literacy 
SHG leaders 
Group homogeneity? 

4 Who does not join? 
SHG outreach within sample villages 
SHPA policy 
Exclusion by SHG members 
Do SHPAs form one or a few SHGs from the ‘easiest’ potential members in a village and then move on, thus excluding most villagers? 
Do non-joiners form their own SHGs later, or do they remain excluded? 
How are non-joiners affected by non-membership? 

5 Drop-outs 
How many members drop out? 
Reasons for dropping out 
Who decides when a member is to be expelled, and on what basis? 
How does dropping out affect those who drop out? 
Do drop-outs lose their savings, or the interest on them? 
Do SHPAs follow up or ignore drop-outs? 

Part 3 Social role 

6 SHGs and local politics
How many women SHG members ran for political office, how many were elected? 
Who was elected? 
How many elected women appear to be proxies? 
What kinds of results have these leaders produced since being in office? 
What is the role of SHGs? 
SHGs and political parties 
Stages in political empowerment 

7 SHGs and social harmony 
To what extent does SHG membership reflect or overcome communal divisions? 
If women from disadvantaged castes are not in SHGs or drop out, does this strengthen caste divisions? 
The role of SHGs in inter-caste problems  
How have men responded to the 100% domination of SHGs by women? 

8 SHGs and social justice 
What local issues do SHGs regularly deal with? 
With what results? 
Examples of SHG actions for social justice 
Domestic violence and sexual harassment 

9 SHGs and communities 
What community issues have SHGs addressed? 
With what effect? 
The process 
Do SHGs capture community resources and exclude non members from them? 
Group enterprises and contracts 

Part 4 Sustainability 

10 Group records 
Who maintains SHG records? 
Individual passbooks 
Record quality 
Accountability to group members? 

11 Equity within groups 
Comparing loan access 
Group leaders 
Lending to non-members 

12 Defaults and recoveries 
Patterns of repayment 
Which types of member fail to repay and why? 
How do other members bring pressure on defaulters? 
How do groups, SHPA, and bank workers try to ensure recovery? 

13 Group sustainability – financial value
Assessing SHGs’ financial status 

Maintaining the value of members’ capital? 
External borrowings in relation to own capital 
Cash-in-box and costs of banking 
Are SHGs maintaining the quality of their financial assets? 
Defunct and broken groups 
When SHGs break up, what happens to group funds? 
Not broken, but split or reorganized 
A traditional ROSCA approach 

Part 5 Implications 

14 Conclusions 
First theme: outreach 
Second theme: the social role of SHGs 
Third theme: financial sustainability 
Implications for Indian SHGs 
Wider implications for microfinance


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