What is SHG?

1. Self-help groups and informal cooperatives Seminar Paper For the attainment of academic degree of post graduate program in Cooperative development and leadership, Advanced Cooperative theory Presented By: Eyob Muhdin Coopw /027/05 Presented By: Saturday, December 29, 2012 Coopw /027/05 Presented by Eyob Muhdin 1

2. The presentation has: 1. Introduction 2. Literature review 3. Conclusion Presented by Eyob Muhdin

3. Introduction Text Government or NGOs creates organized by the people themselves without any external support to meet their own needs Cooperatives could be categorized in to Taking the: Forms, Organization, Functions, Management and Characteristics of an organization into account Formal and informal Presented by Eyob Muhdin

4. Introduction… With this respect, The Self-Help Groups [SHGs] are one form of cooperatives enterprises which are organized voluntarily by the members themselves to meet a variety of their needs. The SHGs, people’s voluntary and informal institutions , are organized as viable alternative to achieve the objectives of rural development and to get community participation in rural development programs. Presented by Eyob Muhdin

5. Introduction… Constituency Management Principles not less than 10 and not more than 20 people from the poorer section of the village society organized, owned, operated and controlled by the members Democratic Solidarity, Common interest Resource pooling Presented by Eyob Muhdin

6. Introduction… Major aim of SHGs: To build the functional capacity of its members in the field of employment and income-generation activities. Reducing the incidence of poverty through the provision of easy credit. To empower persons and their families in such a way that they may find themselves capable of playing an important role in the socio-economic development of the community. To prompt these groups to play an important role in enhancing the capacity of self-reliance of their members by increasing their participation in decision-making and raising the confidence of people marginalized in the course of time Presented by Eyob Muhdin

7. Literature review According to Dr Daman Prakash and Dr GC Shrotriya on their “self help groups hand book”, (IFFCO Foundation, 2009, p. 10) Self-Help Group [SHG] is an unregistered group of micro-entrepreneurs having homogenous social and economic background ; voluntarily coming together to save regular small sums of money, mutually agreeing to contribute to a common fund and to meet their emergency needs on the basis of mutual help. Dr Daman Prakash and Dr GC Shrotriya , Self-Help Groups-A Handbook, ,< http://coop.carboncode.net/wp-content/uploads/.../SHGBook27May-dp.doc > (accessed date, 27 November 2012). P. 10. Presented by Eyob Muhdin

8. Literature review… Presented by Eyob Muhdin

9. Literature review… In 1976, Prof. Dr. Muhammad Yunus came up with a Group Lending Program known as the Grameen Bank (literally the Village Bank) in Bangladesh for the first time. This was an experiment in giving credit to the very poor without any collateral . Prof. Yunus reasoned that if financial resources can be made available to millions of small people with their millions of small pursuits, it can add up to create the biggest development wonder. The experiment was a grand success and Prof. Yunus was awarded the Nobel Prize in 2006 for his contribution to development. ‘ Kindernothilfe ’ 2008, The Self Help Group Approach - a Manual, < http:// www. self - help - approach .com/doc/SHG_Manual.pdf >. (accessed date, 27 November 2012).   Presented by Eyob Muhdin

10. Literature review… The Grameen Bank is based on the principles of: Mutual trust Accountability Participation and Creativity the Grameen Bank model was not flexible interims of internal lending and divers loan application. The main reason was that the poor very often engaged in different sources of livelihood and the credit had to be more flexible and lend itself to diverse applications. MYRADA (Mysore Resettlement and Development Agency), a development organization in South India started looking for an alternate system of micro-credit than the banking model that the Grameen bank established ( kindernothilfe , 2008). Self Help Groups were thus born and made their own lending rules. MYRADA, through lobby convinced main stream financial institutions including banks to lend to Self Help Groups Presented by Eyob Muhdin

11. Literature review… The Reserve bank of India – the apex bank in the country came up with a new policy to this effect acknowledging the existence and functioning of Self Help Groups in 1990 ( kindernothilfe , 2008) . The main features of this lending pattern are: Lend to unregistered, informal groups that behaved like formal group Lend to groups without asking for the purpose of the loan. Lend without a collateral In most country, Self-Help Groups are started by non-profit organizations [NGOs] that generally have broad anti-poverty agenda. Presented by Eyob Muhdin

12. Literature review… SHGs CLA Federation Micro- finance …more SHGs are formed …there is more Cluster level Associations (CLAs) established When there are 8 to 10 CLAs, they come together to form a Federation( register itself as CBO) Thereby bringing sustainable change would come Presented by Eyob Muhdin

13. Literature review… Presented by Eyob Muhdin

14. Literature review… SHGs as Micro-Finance Institutions The idea of micro-finance is based on the philosophy of organizing poorest of the poor into Self-Help Groups and makes them realize the very basic theory of survival. SHGs as Instruments of Cohesion Since the basic philosophy of the Self-Help Group is to provide assistance and economic security to the poor people in the rural setting, it also serves as a uniting factor for the people . Presented by Eyob Muhdin

15. Literature review… The main objective of the Self-Help Group is(Dr Daman Prakash and Dr GC Shrotriya , 2009): To provide economic opportunities to the economically disadvantaged groups To establish and gradually improve their entrepreneurial ambitions through regular and small savings To improve their socio-economic status by organizing and participating in their own voluntary and democratic association Presented by Eyob Muhdin

16. Literature review… The advantages of SHGs are: Low transaction cost; Effectiveness in supervision; Easy credit delivery to the poor; Minimum procedures; and, Better recycling of funds. Presented by Eyob Muhdin

17. Literature review… The guiding principles for formation of SHGs, among others, are: Mutual trust and mutual support; Every individual is equal and responsible; Every individual is committed to the cause of the group; Decisions are based on the principle of consensus. Presented by Eyob Muhdin

18. Literature review… SHG characteristics are: Bottom-up approach; Homogeneous membership; Self-management; and Need-based activities. Presented by Eyob Muhdin

19. Literature review… Savings Loaning and Repayment Maintaining Books of Account and Records Member-oriented Action Programs Liaison and Linkages Training and Capacity Building Activities. Presented by Eyob Muhdin

20. Literature review… The groups foster thrift and promote savings; The groups encourage women’s groups in fostering thrift and savings; Groups contribute a part of their savings earned through group action. This strengthens the value of group action; Groups mobilize capital through: [a] Savings, [b] From interest at rates decided by the group; and [c] From banks and cooperatives; Presented by Eyob Muhdin

21. Literature review… Simple and clear books for all transactions to be maintained; If the group is not able to maintain the books on its own, someone from outside can be engaged by the group for the purpose; Minutes Books Savings and Loan Register Members’ Passbooks. Reconciliation of Accounts: A regular correspondence file to be maintained which should have all the correspondence of the group with other agencies. Presented by Eyob Muhdin

22. Literature review… Homogeneous: Small: Multipurpose: Voluntary: Selection of Functionaries: Consensus Decision-making: Non-Political: Informal and Fully Participatory Presented by Eyob Muhdin

23. Conclusion As we can see from above literature; Self-Help Groups are a sub-system of a cooperative institution. Both the members form the institutions, Self-Help Groups and Cooperatives, voluntarily and the members operate and manage them on democratic lines. ‘One-Member One-Vote’ is the principle on which both the systems operate and the process of consensus rules supreme in decision-making process. There are, however, some differences: Cooperatives are registered. Self-Help Groups are not; Cooperatives have a legal personality. Self-Help Groups have no formal personality; Cooperatives have a larger membership. Self-Help Groups have 10-20 members only; Presented by Eyob Muhdin

24. k n a h T You! Presented by Eyob Muhdin

25. December 2 1 2 Presented by Eyob Muhdin