CREDIT: &copy; 2009 <a href="">Chaitanya</a>.
CREDIT: © 2009 Chaitanya.

Policy Innovations Digital Magazine (2006-2016): Innovations: Banking on Themselves: Self-Help Groups Empower Poor Rural Women

Sep 10, 2012

Chimbali village is only 22 kilometers away from the hustling bustling city of Pune, just off the highway that leads to Nasik. But once in the village a lot of things make it seem like it's far away from civilization, just like any far-flung village would be, removed and distant from many of the bare necessities. For starters there is no post office, police station, or fire house. There is a school up to age 12 that teaches in Marathi, the local language, but almost all the village residents send their children to English-language schools elsewhere.

Most of the villagers have small-to-marginal land holdings of one to one and a half acres per household on average. The traditional Indian set-up prevails in most households—the male member is the main breadwinner. Most men are employed either in low-paying jobs in the city or are engaged as temporary workers in nearby factories. The womenfolk remain at home and take care of the family and household needs.

The road connecting the village to the highway is a kuccha or dirt road and only in the past year or so has a branch of the State Bank of India opened up near the highway, about three kilometers from the village. Previously the nearest bank was about eight kilometers away from the village, making it time consuming to maintain and operate a savings account.

Currently there are nine self-help groups (SHGs) in the village with membership of anywhere from 10 to 20 women per group (the maximum number allowed). These nine groups were nurtured by Gramin Mahila Swayamsiddha Sangh (GMSS), an SHG federation based in Rajgurunagar. Its name translates from Marathi to mean "a federation of self-reliant rural women."

The NGO Chaitanya launched GMSS as a means to unite various SHGs under one umbrella and to make effective use of member savings by lending among the linked groups. In an SHG federation–bank linkage model, the individual SHG units form the grassroots-level organizations at the village level. These units carry out the functions of collecting regular savings from members, record keeping, organizing monthly meetings, and intra-group loan disbursements. An aggregation of many such individual SHGs forms a "cluster" that acts as the interface unit and connects the individual SHGs to the apex organization which is the federation. Larger loan requisitions are routed to the federation via the local cluster.

SHG groups choose which members will represent them on the cluster committee. The Chimbali village cluster is called Sharda Gramin Swayamsiddha, Sharda being the name of an Indian goddess.

A lot has changed at the village level and in the lives of these women since the formation of self-help groups a couple of years ago. The SHGs have fostered a culture of savings and discipline among the members. Access to microcredit has become possible in the familiar environs of the village—this has cut down on travel time to the bank that sometimes used to cost the women a day's earnings with extra costs like bus fare and food.

The members borrow at a subsidized rate of approximately 24 percent per year (reducing balance) which is far lower compared to local moneylenders who charge as high as 100–120 percent per year! The other advantage is that interest paid by the borrowing member also becomes the income of the group and hence gets partially recycled back to the borrowing member. The SHG formation, stabilization, and training costs are also managed from the spread (the cost of borrowing for GMSS and onward lending to members) and hence this lean set-up relies heavily upon leveraging member participation and initiative.

The bottom-up approach has empowered the rural women. They are actively involved in various aspects of SHG management such as conducting meetings, documentation related to the group, savings collection and remittance, credit assessment (loan request appraisals), and loan sanction. Cluster leaders review loan applications received from various SHG groups and undertake checks to verify the track record of the individual applicant as well as the SHG with which she is affiliated. The application is scrutinized for completeness and authenticity and if found satisfactory is recommended to the federation for loan disbursal. The completed application is sent to the federation office in Rajgurunagar, duly backed up by signatures of the SHG members with which the applicant member is affiliated as well as the cluster leadership committee.

GMSS ensures that procedural checks and controls are maintained by conducting intra- and inter-group audits. External auditors are engaged on a regular basis to audit the federation's books.

Larger credit requirements are met by the mother federation, GMSS. Linkage with GMSS has enabled the members to get access to trained experts who facilitate various activities such as group formation, counseling, training for record keeping and maintenance, and vocational training to foster small businesses. The SHG federation model also helps the members to leverage the economies of scale in various aspects of operation such as borrowing rate, lending rate, negotiation with vendors, and even doctors and hospitals.

All these factors have empowered the rural women, some of whom have reached apex positions in the rural governing bodies and are contributing actively to improve the situation in their communities and villages.

Access to microfinance has brought about a major transformation in the confidence, status, and effectiveness of the Chimbali women. A village that was earlier fragmented on caste and class basis, and where women were hardly given a voice, now sees active participation by the SHGs in the gram panchayat or village council meetings. Women from some of these SHGs now assume important positions in the village-level SHG cluster governing committees, as well as representing the cluster committee at the SHG federation level.

Self-Help Groups Produce Broad Benefits

The fact that all nine SHGs in Chimbali work as one cohesive unit gives them the strength of numbers and a voice that is able to get things done. Recently they came out strongly against permitting a liquor store in the village. Many of them have been on the receiving end of the bad effects of liquor and hence did not want a new shop opening in their village. The village council had to accede to the demands of the women members and did not grant the store approval.

Some other areas where the SHG groups have been effective include:

  • Making safe and potable drinking water available to the entire village during the monsoon season. The village council was approached by the members who asked for alum-based treatment and were able to procure it for the village.
  • Distribution of bicycles to school-going girls to facilitate their attendance.
  • Undertaking group functions and celebrations during festivals and on important dates such as Independence Day and Republic Day.
  • Helping women members to start small businesses by providing the necessary capital and training, thus facilitating self-reliance. The popular choices have been: tailoring workshops, potato chips and savory making, and small home-based tiffin or meal businesses.

Access to health care is also available at very nominal cost. GMSS has created a health mutual for its members. By paying a very nominal amount of about three dollars per family member per year, members are able to take advantage of discounts at affiliated pharmacies, testing labs, doctors, and hospitals. Every month a doctor who has been assigned to the Chimbali village cluster attends the cluster meeting and conducts an outpatient clinic. In this forum, women are able to seek medical advice and get any queries answered. Medical prescriptions can also be obtained at that time.

This has helped to increase the focus on health and nutrition. Preventive care measures have been initiated at the village level such as disinfecting open drains, toilets, and potentially harmful sites. Women members and their families now have access to medical specialists and good hospitals for treatments and maternity services. In cases of hospitalization, the medical claim process is quite simple and a member is entitled to a maximum reimbursement of Rs. 15,000 per year upon submission of the requisite paperwork. The claim is presented to the insurance claim evaluation committee (which is made up of the SHG members belonging to different SHG groups of GMSS) at the monthly federation meeting conducted at the head office in Rajgurunagar. The committee evaluates the claim and decides upon the amount.

Prior to this affiliation with GMSS, the only affordable option for the villagers was the government hospital, which is not on par with private alternatives. The high fees made it virtually impossible for the villagers to access the private options.

SHG members are also able to avail themselves of an "emergency loan" facility through GMSS. This allows them to borrow a maximum of Rs. 20,000 per member. Members are extended this loan in order to take care of medical emergencies and illnesses. No interest is charged if the loan is repaid within three months. The loan application has to be approved by at least 25 percent members of the SHG.

The group activities and cohesiveness of the Chimbali SHG groups make them a force to be reckoned with. They are invited to every key village level meeting and their views are solicited. This is a far cry from the traditional scenario where the womenfolk were not given an opportunity to be seen or heard.

These dynamic women have bypassed the absence of a bank by developing the SHG model such that they are able to access formal sources of credit through the federation. The interest, fines, and charges earned by lending out their savings are added back to the group's kitty and serve as income for the group. Members are able to benefit in a dual way. First, they can borrow at a reasonable rate (2 percent per month, as compared to the traditional moneylender who charges as high as 10 percent per month). Second, since the interest augments the income of the group the individual member still benefits as opposed to paying it as interest to an outside party.


Microfinance interventions are well recognized the world over as an effective tool for poverty alleviation and improving the socioeconomic conditions of the poor. As is illustrated in the above case of Chimbali village, the impact of microfinance through the SHG route has been effective in making a positive difference in the lives of the members (on the micro level) as well as the village (the macro level). It has helped these women overcome the constraints of physical access to banks, lack of education, and social taboos. This has resulted in the development of a confident corps of women, and vibrant changes at the village level.

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