Rural Management Systems Series

1. The Concept :

The basis of the self help group exists prior to any intervention. The members are linked by a common bond like caste, sub-caste, blood, community, place of origin or activity. The intervenors, whether from the NGO, Bank, or Government must have the experience to identify these natural groups which are commonly called "affinity groups". What links together the group members, therefore, is not primarily the need for credit, but a "capital stock" of relationships built on mutual trust and confidence, on mutual interests of the group members, on a degree of social and economic homogeneity and on the gut feeling of its members that the group offers the best opportunity to realise their latent and often suppressed aspirations to develop economically and socially without creating social tensions locally, with which they cannot cope.

A recent survey in villages where self help groups of the poor are working well, indicates that the well to do to have a deep sense of respect for these groups of the poor because they have succeeded both in improving their livelihoods as well as in initiating programmes for the public good, even in settling long outstanding disputes. For example during a recent visit to a village which was some distance away from the main road, one had to walk through the fields. A group of masons were constructing an arch over the path that wound through the fields. They explained that the arch was donated by a person who had taken a vow at a the village temple. The women's SHG in the village was a vibrant and truly empowered institution. At the end of the meeting they stressed the village need for a link road to the main highway; they had made an attempt to build it but failed they said "due to lack of funds". On closer study of the path on our return, it was discovered that it wound through several fields; we suspected that the real reason was not the lack of money but the tension over the land required for the road that the plan had created. We placed this suspicion before the masons constructing the arch. They agreed. When asked how they could solve the problem, they replied: "There is only one group that can solve this; the women's group that you just visited".

As a result of several similar experiences, MYRADA has adopted the self help group as the appropriate people's institution which provides the poor with the space and support necessary to take effective steps towards greater control of their lives in private and in society. These small groups later link up together in smaller and larger associations depending on the objectives and on the roles with which the SHGs invest these apex associations.

The self help group is not a static institution, it grows on the resources and management skills of its members and their increasing confidence to get involved in issues and programmes that require their involvement in the public and private spheres.

Studies conducted periodically both by MYRADA and by outside institutions and evaluators indicate that SHGs have several positive features which are listed briefly below:

- They provide a cost effective credit delivery system, as the transaction costs of lending decrease sharply both to the banks and the borrowers; Banks which have advanced lines of credit report that the repayment rates are high ranging above 95%.

- They provide a forum for collective learning which rural people find more "friendly" and which is consequently more effective than the individual or classroom approach that is commonly adopted. The intervenor, must realise and make use of this potential.

- They promote a genuine democratic culture where rights and responsibilities are equally valued and internalised; and where sanctions are imposed and accepted.

- They provide the members with opportunities to imbibe norms of behaviour that are based on mutual respect and which can be recognised by the society.

- They foster an" intrapreneurial"(1) culture where members realise that while they need the support of the group to achieve personal objectives, their personal interests cannot be promoted at the expense of the group.

- They provide a firm and stable base for dialogue and cooperation in programmes with other institutions like Government departments, cooperatives, financial and Panchayat Raj institutions; if the groups are functioning well, they have the credibility and the power to ensure their participation in identifying, planning, budgeting, and implementing Panchayat Raj programmes for the empowerment of the poor.

- They provide the individual member with the support required to exercise control over the pace, timing, size and schedules of loans and programmes, to broaden the pattern of asset provision, to include a package which would help the individual to cover risk rather than to provide a single asset;

- They help to assess the individual member's management capacity which may fall short of what a "viable" investment package requires for optimum returns, as prescribed under regular IRDP norms, but which is manageable by a particular member.

The strategy therefore evolves around (i) the potential of the SHG to provide space and support so that each of its members can identify and use opportunities for her/his empowerment both in private and public life, and (ii) the capacity of the SHG to relate effectively with other institutions. Briefly this is what MYRADA means by describing SHGs as credit plus institutions.

It is, therefore, necessary that SHGs are promoted in a way that facilitates the development of a participatory and empowering culture. This in turn makes it crucial for all intervenors to empathise and be familiar with participatory management practices in their own organisations before using participatory methods to identify and form SHGs.

2. How to identify an SHG :

The means used by the intervenors to identify these affinity groups are several; a few popular ones are:

- regular visits to the village, meeting with informal groups gathered around tea shops, temples, water spots, markets, provision shops, milk collection centres; special care is given to visit and interact in areas where the poor, scheduled castes and tribes live and where women tend to gather;

- involvement in a common action like desilting a pond, or building a road also helps to identify these groups, provided people organise the action themselves; it is noticed that when encouraged to plan such projects they tend to work in affinity groups; for example when people decided to dig a trench around their fields to protect them from grazing, they were encouraged to organise into groups and to divide the work; they completed a 60 km. trench in 5 months; besides each group build up a common fund by savings from daily wages which provided adequate credit for further investments.

- participatory appraisal exercises; these are useful provided care is taken to involve all the people in various exercises which helps to identify the various groups in the village, the assets and resources of each family, the people's perceptions of who is poor, their credit needs and seasonal variations in the requirement of credit, etc.

- in recent years, several groups outside our project areas who have experienced good SHGs functioning or where families from old SHGs have migrated or married, have approached our staff; they have already identified members among whom there is strong affinity and come to MYRADA to request for group training.

3. Constraints in forming SHGs :

When MYRADA was invited to spread the strategy of "credit-plus" on the basis of self help groups, we found the following constraints:

3.1. Constraints arising from groups already formed under various other programmes:

- several programmes fostered by Government. and private institutions had established groups which were used to implement prescribed programmes; there was no effort to foster a process of self help and to build sustainable institutions on the basis of "affinity". Most of these groups were based on eligible beneficiaries - the eligibility criteria was decided by those who formulated the ":scheme". Other groups, especially those fostered by NGOs who used group pressure as a primary strategy for change, were large - with over 50 members. These groups began to be called "self help groups" since this title was considered official; no effort was made to understand d the structure of a SHG and the process required to foster one. In many cases these groups are fulfilling the role entrusted to them under a particular programme; for example , those organised by NGOs are well suited to mobilise joint action on a particular issue, but they are not self help groups as described above. Those formed under Government programmes were "implementers" of a prescribed programme. Examples of such programmes where "groups" are organised as the final link in the delivery chain are DWCRA (Development of Women and Children in Rural Areas), groups organised under the Literacy and Mahila Samakhya programmes and Milk Societies which were being entrusted with micro finance functions. A brief description of groups formed under these programmes and their potential (or lack of it) to become SHGs follows:

. Groups formed under DWCRA: are functioning well in several cases and fulfilling the roles assigned to them, but have several constraints in becoming SHGs, for example:

- in many cases women in DWCRA groups have to conform to eligibility criteria; they are brought together from several neighbouring hamlets or villages; there is no common underlying bond on which trust can be built; selection through political patronage results in similar group configurations.

- there is a strong,, almost exclusive, focus on economic activity; those groups which are described as functioning are those which are engaged in an economic activity; the most common feature of a functioning group is a common activity in which all the members are engaged , though at times in various segments of the production process. Those groups which are functioning usually produce a product which is purchased by the Government; where this is not the case, marketing is a major problem leaving goods unsold, with members losing confidence. In very few cases is the group taking the initiative to tap the open market; as a result, self help and self reliance is not the guiding culture of these groups;

- there is no initiative to foster regular savings , lending and repayments; this exercise helps to build confidence and a degree of self help.

- there is no provision for regular meetings to discuss credit needs, to establish priorities and to acquire the skills necessary to build and manage an institution.

- many women leave the DWCRA group due to several reasons, many of them personal; no one, however, is asked to leave by the group because she is not abiding by its norms and culture; in a word, there are no effective sanctions operating within the group. In general, the groups have not developed a culture of their own; those norms that guide the group derive from and are limited to an activity, and are imposed from without.

The question raised repeatedly is whether a DWCRA group can become a SHG; it can, provided the DWCRA group which has normally around 20 members is an affinity group, and is willing to start discussing common problems, finding solutions, encouraging regular savings, providing loans and ensuring repayments. Further each member must be free to borrow according to her individual needs whether they be consumption, trading or asset creation. Unfortunately several of the DWCRA groups have already taken loans and most have failed to repay. In such cases, if they are affinity groups, the NGO involved could turn them around, but it will take considerable time and effort. If they are less than 20 members in the group, Banks will be willing to extend a line of credit to groups that are functioning like genuine SHGs. If they are not genuine SHGs or have been formed on the basis of political patronage or merely to serve as channels for benefits which have really gone to others, then it is suggested that they be left alone; attempting to revive such groups or to make them into SHGs will be futile

3.2. Groups formed under the Literacy and Mahila Samakhya programmes: these groups can be considered together, though they may not have the same objectives; they are similar to the extent that the groups are large, often heterogeneous, including members from different castes and economic strata and even from different hamlets and villages; these are major constraints to their emergence as SHGs. On the other hand, they provide the opportunity for women to improve the skills they require to manage and maintain an institution like an SHG; examples of such skills are literacy and numeracy which they need in order to read the Minutes of their SHG meetings and the figures in their pass books. These programmes also build the confidence of women by organising them to lobby for their rights and to acquire the confidence to organise common action. These are all qualities that members of the SHGs require for the SHGs to develop into an institution. However, these large groups need to make special efforts to enable every member to participate effectively in the proceedings.

It was reported in many areas that attendance in these large groups tends to fall in programmes which focus only on literacy and awareness raising. The reasons are many but the main ones that emerge from discussions with groups are : (i) People want to go beyond literacy to programmes from which they derive some immediate benefit; "after all" they ask - "what is the point in being literate, if one cannot earn a livelihood? " (ii) It is often assumed that those who fail to attend are not interested; enquiries have shown that in many cases absentees are willing to participate in the programme but not with the members of the existing group; they do not feel comfortable to relate and work with them; they prefer to form another group of their own; in most cases this is an "affinity group".

The skills of literacy and numeracy together with the self confidence that grows through common action especially in some of the Mahila Samakhya groups are good building blocks for SHGs. SHGs therefore can emerge from these groups provided the women are allowed to form small affinity groups after the concept of the SHG is explained and discussed thoroughly; exposure visits to functioning SHGs have proved to be very effective. Discussions with such groups indicate that women are quick to see the benefits of building up a common fund in each SHG over which they have control and ready access. The major motivating factors are:- the desire to go beyond "literacy" and to use literacy to open opportunities for sustainable livelihoods and the opportunity to meet their need for quick loans for consumption trading and asset creation; they realise that the SHG gives them an opportunity to decrease their dependence on money lenders and on other families who have traditionally exploited their vulnerability .

3.3. Milk Societies : these societies at the village level are examples of a group structure which is appropriate for the collection and handling of milk but is inappropriate for the management of credit. The milk society requires the larger producer to make the route viable; the small supplier (normally belonging to the poorer sections of society) rides on the back of the large farmer; it is this heterogeneity that makes the system viable. In an SHG, on the contrary, if larger farmers and members of rich families are included with the poor, their interests will collide. Often the families of the richer women are the very money lenders against whose interests the SHG now operates both in terms of loans as well as in other areas like the demand for fair wages and payment for services which the poor sectors have traditionally rendered below market rates to the dominant families in the village. It is, however, quite feasible for the poor members of a milk society, if they have affinity linkages and are homogeneous in terms of incomes, to form an SHG. Experience with such groups of the smaller farmers and landless people owning dairy animals has shown that these members can borrow from the SHGs to meet expenses on animal health care, breeding and feed.