SHG is a small group of rural poors, who have voluntarily come forward to form a group for improvement of the or social and economic status of the members.

i. It can be formal (registered) or informal (unregistered).

ii. The concept underlines the principle of Thrift, Credit and Self Help.

iii. Members of SHG agree to save regularly and contribute to a common fund.


iv. The members agree to use this common fund and such other funds (like grants and loans from banks), which they may receive as a group, to give small loans to needy members as per the decision of the group.

Needs of SHGs:

The rural poor are incapacitated due to various reasons. Most of them are socially backward, illiterate,, with low motivation and poor economic base. Individually, a poor is not only weak in socio-economic term but also lacks access to the knowledge and information, which are the most important components of today’s development process. However, in a group, they are empowered to overcome many of these weaknesses. Hence, there are needs for SHGs, which in specific terms are as under:-

i. To mobilize the resources of the individual members for their collective economic development.

ii. To uplift the living conditions of the poors in rural areas.


iii. To create a habit of savings among the poors from their little earnings.

iv. Utilization of local resources which are idle through members.

v. To mobilize individual skills for group’s interest.

vi. To create awareness about the rights and duties and make people conscious for the same.


vii. To assist the members financially at the time of need and make them free from the clutch of greedy money lenders.

viii. To develop Entrepreneurship competencies by utilising the inherent talent and skill.

ix. To identify problems, encountered by the members and finding solutions for feasible implementation of the same.

x. To act as a media for socio-economic development of the village.


xi. To develop linkages with institutions of NGOs for financial and non-financial assistance and support.

xii. To organize training for skill development to generate entrepreneurial ability.

xiii. To gain mutual understanding, develop trust and self-confidence that ‘each one is for every one’.

xiv. To build up teamwork on the basic philosophy of ‘two brains are better than one’.


xv. To develop leadership qualities to lead the group and develop followers to achieve the goals.

xvi. To use as an effective delivery channel for rural credit, so that rural urban difference will be minimised.