How does a Self Help Group function?
Currently, in India, the banking system has emerged as an important link between savers and investors. The main motive of the bank is to accept the deposit and lend that deposit as a loan to investors. In a country like India, an ordinary person do not have any excess money to save as a deposit in the bank especially in rural areas. Apart from that, the banks charge the customer if a minimum balance is not maintained in the account.
Self Help Groups helps to overcome the problem of saving for the ordinary person. Self Help Group is a voluntary organization formed by the women or men to enhance the microcredit for the members in it. The members of the organization save their money by fixing an amount to be deposited weekly, the amount will be such everyone can afford that. That deposited money can be advanced as a loan to any of the member in the group who is actually in need of it, but the loan will be advanced by the consent the group members. There is transparency in the working of the organization because all the group members are from the same village and all of them will be neighbours.
When the Self Help group is registered, they can be linked to the bank through the ‘SHGs linkage programme' under NABARD. When they are linked, they can get loans with the low-interest rate from the commercial banks in which they can accumulate the capital on their own. They accumulate capital by investing the money in small enterprises in which all the members can be employed in which they get self-sustained, and their standard of living rises. Currently, there are 2.2 million SHGs, representing 33 million members according to the estimates of the NABARD. These estimates are only which have linked through the Linkage Programme, the southern region of India is well functioning in SHGs through this programme.