Life & Livelihood - Role of SHGs

Nobel Laureate Paul Romer and Harvard Provost Alan Garber explains the problem that is perplexing the nations of the world , `If we keep up our current strategy of suppression based on indiscriminate social distance for 12 to 18 months , most of us will still be alive. It is our economy that will be dead.'

Indian economy like all other economies has received a jolt. The current scenario requires the economy to be caring for nature and society. Instead of framing policies to strengthen the upper strata of the society to let the effect percolate to the bottom of the pyramid, thrust is doubly required from the villages too. It must be remembered that 68.84 per cent of the population of the country live in villages. Work force that supplemented the activities in industries including construction are back to the the villages.

Village economy which is facing the effect of the present crisis which is not only a matter of the country but of the world will have to be re-built. Self Help Groups ( 'SHGs') need to be stepped up. SHGs groups are formed by small groups of economically backward people. Such groups are formed of people who face similar problems. Through the groups members ameliorate their economic sufferings arising out of the problem. They help each other, to solve their economic problem . SHGs promote small savings among their members. The amount collected is deposited in savings bank account opened in the name of the SHG with a bank. Out of the amount in the account, members give give small loans to the members against interest between 18 to 24 per cent per annum.

SHGs are formed by like minded people. Presently SHGs are formed of people who want to develop any trade. Accordingly villages can have several SHGs consisting of people engaged in different trades. SHGs can be formed both by men and women. Banks refinance SHGs so that maximum members get the benefit of the fund. SHGs help to create entrepreneurship in the villages and lead to business ventures that generate employment. They give multiple benefits to the society. SHGs have a good track record of repayment of bank loans obtained by SHGs from banks. Banks also remain confident by re-financing SHGs. Indian villages have benefited out of the model. Bangladesh is the pioneer in the field under the leadership of Md. Yunis. To-day Bangladesh has the highest growth rate among SAARC members.

SHGs are not required to be registered under the Societies Registration Act, State Co-24operative Act or Partnership Act. ( pursuant RBI Circular RPCD.No. Plan BC.13/PL -09.22/90- 91 dated July 24th, 1991). Ideal number of members of SHGs is between 10 and 20. This was based on the concept that above 20 persons are considered illegal associations. With the Companies Act, 2013 coming into force, the number of 20 has been raised to 200 persons as the number of members above the number turns the association as one illegally constituted.

SHGs are formed for mutual benefit of the members financially. Each of the members contribute equally to a fund which is created and kept with a bank for which an account will have to be opened under a name. Since SHGs are not partnerships the account with the bank will be opened specially. Members contribute a fixed sum of money each month. If a SHG has 10 members and each member agrees to contribute Rs 200 each per month. The collection of the members each month will be Rs 2000 ( Rs 200 x 10 members ) per month. Each year the fund of the SHG will have Rs 24000 ( Rs 2000 x 12 months). The amount accumulated will receive interest from the bank being the rate of interest applicable to saving bank account. Amount can also be kept in Fixed Deposit for higher interest.

SHGs are not formed to keep the fund accumulated, idle. Portion of the fund is given out as loan to the members on which interest is paid per month. This helps to build the fund for further loan to the members. Banks give loans to SHGs which is usually re-finance of the loan disbursed by the fund. .Interest rate charged by banks, fixed by RBI, to women SHGs is 7 per cent per annum. SHGs can also have accounts with Post Office.

Formation of SHGs

Formation of SHGs need support of a reasonably educated person who can take the initiative to form a group of villagers. The person explains the benefit of formation of group and the financial implication and he is referred to as the animator or facilitator who is usually known to the villagers.

At the outset a SHG will have to be named. It will have to have an address. Detail of the SHG will be drawn up in a document which will be entered in a NJSP of Rs 10/- in West Bengal. It will be the value of stamp paper required for agreements. The document of the SHGs is required to include (i) Disciplinary ; and (ii) Financial Norms which members would have to follow. SHG will have a managing committee representing the members as all the members cannot participate in managing the affairs of the SHG. The committee would have to seek re-election each year. In the best interest of the SHG the tenure of the managing committee. SHG once formed elect office bearers. While the head of the SHG is the President, the operation is convened by the Secretary. SHG has a treasurer who is responsible for dealing with fund of the SHG.

Once the members form the SHG they contribute the first monthly contribution with an initial admission fee. A savings bank account is opened with a bank. The amount in the bank is known as the Group Revolving Fund.

For the success of the SHG, record keeping is a compulsion which has to done by the members. A member who has the knowledge of accounts should keep accounts. If the members are not capable of keeping the records they should take immediate help from some one who has knowledge. The best person in the village is the primary school head master who can guide the group.

SHGs once formed have to build up mutual trust among the members. This will lead to cohesion in the group and bring about concern for task performance of the office bearers and their accountability. Members who are not office bearers have to participate at each stage to build the morale of the SHG. Success of the group will depend on the team spirit. Each member should ensure that he is honest to the core in regularly depositing his monthly contribution and must see that interest and principal is paid regularly on the loan availed by the members.

SHGs need support of NGOs

NGOs are releted to the deveopment of society. There are a number of NGOs in the country which play a significant role in supporting the development of society through spread of education, support health of the weaker section of the society. NGO are established through the different enactments i.e.Societies Registration Act, Trust under Trust Act and Section 8 companies under the Companies Act, 2013. NGOs have a role to play in the development of SHGs. NGOs should mentor SHGs. They are to educate SHGs on group functioning with examples. Spreading knowledge on ideal functioning of SHGs is to be done. SHGs should be encouraged and supported to address larger community issues. They can be used to spread the directions on fighting COVID 19 among the villagers and also share plans for future livelihood after COVID 19 attack is thwarted. NGOs should help the SHGs to approach banks and agencies support them financially.

NGOs should work with SHGs to develop manpower to be of use to society. Skilling women need to be initiated. Such skilling is limited to the members of the SHGs and should all those living in the village. NGOs are to identify leaders and train them. Manpower of SHGs should be developed to think independently so that the SHGs can give direction to their own groups. There should be focus to develop a second line of leadership of the SHGs.

Once the SHGs develop confidence the groups function independently to reach their goals. A two year span is considered an ideal time period to establish a well organised SHG. Development of villages is being encouraged. Results have poured in and society has been benefited.

COVID 19 & Village Economy - Role of SHGs

Global Advisory Committee formed by the West Bengal Government under the leadership of Abhijit Vinyak Bannerjee , who shared the Noble Laureate in Economics for the year 2019, recommends the state of West Bengal to strengthen the SHG movement. Women are mostly members. They play a significant role. There are more than 11 lac SHGs in the state have more than 1 Cr women members. Women force was recommended to be used to fight the present menace of the disease. For economic recovery the SHGs were recommended to be activated.

Like West Bengal other states in the country have adopted SHG model. Villages have grown from strength to strength with them. The Country's development cannot be thought without them. SIDBI and NABARD re-finance Banks and Micro Finance Institutions ( MFIs) to finance SHG. Recovery of loans from SHGs is significantly on the higher side.

RBI allocation to SIDBI & NABARD

RBI has allocated Rs 50000 Cr to SIDBI and NHB to meet crisis created by COVID 19. Rural livlihood needs to be supported due to the crisis SIDBI and NHB together have aimed to provide Rs 7000 to 8000 Cr together to fund MFIs.

To survive there must be livelihood and SHGs are set play a significant role in supporting the village economy so that recovery of the economy is thrust up . The push upwards will support the much needed thrust in reviving livelihood which is a sine qua non for the society.