Guest Articles

August 7

Moin Qazi

India’s Self-Help Groups Need Help: How to Strengthen a Proven Model to Support Women’s Recovery From the COVID-19 Crisis

Empowering women has long been viewed as the solution to many global problems. Societies that prioritize women’s empowerment show better development indices, and are better governed, more stable and less prone to violence. In contrast, societies that constrain women’s educational and employment opportunities, and that deny women an equal political voice, are poorer and more prone to corruption.

This year marks the 25th anniversary of the United Nations’ Beijing Platform for Action, which was a ground-breaking milestone for gender equality. And in the years since then, women’s empowerment initiatives have been a growing focus in the global development sector, and in countries around the world. But with women bearing the brunt of the long-term economic and societal consequences of the COVID-19 crisis, even the limited gains and hard-won progress women have made in the past two decades are at risk of being rolled back. COVID-19 has magnified the pervasive unfairness that continues to limit women’s opportunities, acting as a great amplifier of inequality.

That’s why women’s rights and needs must be central to responses to the pandemic. Entrenched gender inequalities leave women with fewer resources to prepare for, cope with and recover from a crisis like this one. Both short- and long-term responses must recognize and address these gender differences, or else women will be left behind – not just as the crisis unfolds, but also during the recovery – reinforcing gender inequalities for years to come.


Self-Help Groups: A Proven Solution to Women’s Empowerment

While governments and global development organizations continue to explore new approaches to strengthen women’s resilience, they also need to scale up and fortify existing solutions. One such solution is the self-help group (SHG) model that’s common in India and other emerging countries, through which groups of women pool together their joint savings according to a regular schedule, for the usage of individual group members.

SHGs encourage savings, the opening of bank accounts, and inter-loaning among group members. The most significant aspect of these collectives is that they are wholly managed by the women – though in groups where most of the members are semi-literate or illiterate, there is often a promoter NGO which provides hands-on training to the group members. (Once the members become capable of running the group independently, the NGO works out a suitable exit strategy.) Each group has a constitution or a list of rules, created and accepted by the members themselves. The rules pertain to selecting members, electing office holders, creating their own loan fund, deciding on the recipient of a loan, ensuring repayment, etc. Group members manage these decisions and transactions entirely by themselves. They also make margins, as the group savings are retained in a bank where they generate interest income, and loans are made out of this savings to individual group members, which also generate interest income.

Regular meetings are the enabling force that makes the groups function, as women commit to bringing a certain amount of money to each meeting for the usage of the collective. When a group has a fair amount of capital, it starts giving small loans to its members. The women guarantee each other’s loans, and it is an astonishing fact that hardly any of these women default.

Although this financial aspect is not the only benefit for members, access to credit remains an important element. In India, self-help groups are linked with commercial banks through the Self Help Group – Bank Linkage Programme. It is the largest microfinance programme in the world, with a total membership of around 10 million groups (covering nearly 120 million households) across India, and it has extended collateral-free loans of over 870 billion rupees to more than 5 million SHGs (as of March 31, 2019). It is interesting to note that over 90% of the SHG members are women

The disciplined efforts involved in running a group make these women efficient money managers. As the women now do the work normally done by bankers, the administrative costs of banks that participate in this programme have come down drastically, enabling them to reach low-income customers who may otherwise have been impossible to serve sustainably.


The Differences Between Self-Help Groups and Microfinance

Self-help groups are the foundation of Indian microfinance, but they are different from the joint liability groups through which microfinance institutions (MFIs) provide loans to women borrowers. In the joint liability group model, women come together to promise that their group will provide 100% repayments to an MFI week after week. But unlike with SHGs, they do not develop skills or agency from their experience managing the groups, or earn returns from their risk-taking in offering loans to other group members. The institution-led model leverages the group’s collective responsibility to reduce risk to the MFI, allowing it to extend larger loans compared to SHGs. But it has no true focus on empowerment, restricting its role to lending.

In contrast, SHGs are women-led, community-owned organisations: They cater to women’s needs and are accountable to them. So the profits they generate stay within the group, while MFIs are capitalized largely by investors and shareholders, earn profits for them, and are accountable to them. Additionally, the promoter NGO undertakes capacity building, which in turn builds precious social capital. Due to these factors, the SHG model, when properly practiced, usually leads to gains in women’s and girls’ accumulation of useful skills and confidence, economic empowerment, and voice and agency in their homes and communities.


The Impact of Women as a Collective Force

Indeed, these groups have bonded women into a collective force, emerging as a powerful catalyst for their social and economic empowerment in rural India. Many of these women are now in the vanguard of their local government leadership, and are playing an influential role in rural governance. Their presence in key positions in grassroots government leadership has brought about a perceptible change in the supply of potable water, healthcare services, sanitation and education – areas of particular importance to women and girls. Women’s collectives have also put an end to the brewing of liquor in some villages, while enhancing women’s economic position in numerous ways – from successfully bidding for contracts to fish in village ponds, to developing previously fallow lands to grow fruits and vegetables.

Another key indicator of SHGs’ impact is the loss of control that local moneylenders have suffered in villages where the groups have taken root. “For four months a year when there is no work, we were forced to take a loan of Rs.300 per month from moneylenders at 100% interest,” women belonging to the Scheduled Castes at Solapur village reported, during one of my periodic field visits when I headed the state unit for microfinance at the State Bank of India. “After we formed an SHG, we don’t borrow from moneylenders, but from our own SHG.”

Equally promising is the way access to finance is empowering enterprising women to reap dividends by investing in small businesses. In the tribal villages of Dhule district, grain merchants often sell grains at a high price in times of scarcity. Thanks to self-help groups, women in the district have found a better solution, forming their own grain banks with rules that are similar to those they follow for saving money in their SHGs.


Leveraging Self-Help Groups to Address the COVID-19 Crisis

In light of this impact, self-help groups are well-suited to play a critical role in rebuilding the social and economic order damaged by COVID-19. They already serve as community resources in health, farming and nutrition programmes, and they have generated enormous social capital which can be leveraged to design effective responses to the pandemic.

However, with perennially scarce resources and a lack of funding, many NGOs are no longer able to provide capacity-building support to SHGs. As a result, the less-established SHGs are disintegrating. In response, government or development sector stakeholders like the National Bank for Agriculture and Rural Development could help sustain and strengthen SHGs by federating them and helping them access the funding they need to increase their already significant impact on rural livelihoods. Federating would imply clustering the self-help groups together, which would give them a larger pool of savings to leverage, more negotiating power, and the benefits of economies of scale. Federating SHGs would also introduce greater transparency and professionalism to the groups, while requiring the simplification of their legal structures, allowing members to manage them without the need of hiring costly professionals. SHGs have always succeeded on account of the flexibility in their operations: This flexibility should also be the norm in federations, if we are to make them self-manageable.

With the proper support, self-help groups can have an even greater impact, at a time when their women-centric, community-based approach is particularly needed. Government and development sector stakeholders should act now to strengthen this time-tested model: Women in India, and around the world, have never needed it more.


Moin Qazi is an author, researcher and development professional who has spent four decades in the development sector.


Photo courtesy of Baluda



Coronavirus, Education, Finance, Impact Assessment
COVID-19, employment, gender equality, impact measurement, microfinance