(English) [ELLA Community blog series] Livelihood through Self-help Groups (SHGs): Cases from Rural India

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This article has been written by Dr. Shankar Chatterjee, Former Professor & Head  of the CPME. Shankar Chatterjee is a member of the ELLA Community; he has taken part in the Learning Alliances on Informality and Inclusive Growth and Small-Scale Farming.



Importance of Self Help Group:

Poverty imposes an overbearing weight in India particularly in rural India.  In a democratic country like India poverty is undesirable as it is linked with calorie concept, which means people are not getting proper food as required for sustenance.   In India, the Ministry of Rural Development (MoRD), the Government of India has been implementing a wide spectrum of programmes/schemes/yojanas (Indian word is Yojana) which are aimed at poverty alleviation, employment generation, infrastructure development and social security. Keeping in mind of this paper, discussion is made on SHG cases, however major schemes/yojanas  in India presently functioning with full hope, hype and hoopla are  i) wage employment scheme – Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS),   ii) self-employment scheme- Deendayal Antyodaya Yojana – National Livelihoods Mission (DAY-NRLM), iii) housing scheme for rural BPL households- Pradhan Mantri Awaas Yojana –Grameen (PMAY-G), iv) infrastructure scheme (rural connectivity) Pradhan Mantri Gram Sadak Yojana (PMGSY).

Before 1999, poverty alleviation approach in rural India was mainly family oriented.  With the launching of Swarnajaynti Gram Swarozgar Yojana (SGSY), group approach (SHG) was adopted in rural India to scale up income of the families living BPL. Further by restructuring, SGSY presently DAY-NRLM/Aajeevika, a flagship Program of the Ministry of Rural Development, Government of India has been launched. It seeks to reach out to all rural poor households of the country estimated 8-10 crore and organize them into SHGs and federations at village and higher levels by 2021-22. As of January 2015, 20.95 lakh SHGs in 316 districts have been promoted under DAY-NRLM as found from MoRD’s Annual Report. And prior to that under SGSY around 44 lakh SHGs were formed indicating more than 4 crore households were benefitted. All the SHGs are meant for enhancement of income so that they can lead to quality of life. In addition, NABARD, other scheduled banks and NGOs have been promoting and nurturing SHGs. This was felt necessary as persistent poverty of a substantial portion of the population can dampen the prospects of economic growth. Evidence suggests that a highly inequitable distribution of income is not conductive to either economic growth or poverty reduction. Before discussing SHG cases, few other important rural development schemes/yojanas from rural India are presented here for the benefit of readers.

Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA):

This wage employment scheme was launched in the country under the Act known as the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA) as scheme it is known as Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

The mandate of the Act is to provide at least 100 days of guaranteed wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. The few of the important goals are:

i) Social protection for the most vulnerable people living in rural India by providing employment opportunities.
ii) Livelihood security for the poor through creation of durable assets, improved water security, soil conservation and higher land productivity
iii) Drought-proofing and flood management in rural India
iv) Empowerment of the socially disadvantaged, especially women, Scheduled Castes (SCs) and Schedules Tribes (STs), through the processes of a rights-based legislation
v) Strengthening decentralized, participatory planning through convergence of various anti-poverty and livelihoods initiatives
vi) Deepening democracy at the grass-roots by strengthening Panchayati Raj Institutions (Panchayat means local self-Government)
vii) Effecting greater transparency and accountability in governance

Thus, MGNREGA is a powerful instrument for ensuring inclusive growth in rural India through its impact on social protection, livelihood security and democratic empowerment.
( dt 4th  May 2017)

Pradhan Mantri Awaas Yojana-Grameen (PMAY-G):

As housing scheme Indira Awaas Yojana (IAY) was launched by the Government of India in 1985 and was restructured as Pradhan Mantri Awaas Yojana-Grameen (PMAY-G) in 2016. The unit cost of a house at present in plain area has been fixed as Rs. 1.20 lakh and in hill states and difficult areas (including IAP districts) it will be Rs. 1.30 lakh. The beneficiary is entitled to get 90-95 days of unskilled labour from MRNREGS fund. In PMAY-G, built up area would be 25 square meters with toilet for which additional Rs. 12,000 is given for construction of the same. Thus PMAY-G beneficiaries are provided with resources from various sources. However, under IAY since its inception up to 2014-15 altogether about 351 lakh houses were constructed by incurring an expenditure of Rs 105,816 crore.

Pradhan Mantri Gram Sadak Yojana (PMGSY):

With a view to provide connectivity by way of all-weather road, Government launched the Pradhan Mantri Gram Sadak Yojana (PMGSY) on 25th December, 2000 to provide all-weather access to eligible unconnected habitations.

The PMGSY is a 100% Centrally Sponsored Scheme. The primary objective of the yojana is to provide connectivity, by way of an all-weather road (with necessary culverts and cross-drainage structures, which is operable throughout the year), to the eligible unconnected habitations in the rural areas with a population of 500 persons and above in plain area. In the hill states (North-East 8 states, Sikkim, Himachal Pradesh, Jammu & Kashmir and Uttarakhand), the Desert Areas (as identified in the Desert Development Programme), the Tribal (Schedule V) areas and selected tribal and backward Districts (as identified by the Ministry of Home Affairs and Planning Commission), the objective was to connect eligible unconnected habitations with a population of 250 persons and above.

From 2000 to march 2016, under PMGSY around 1.46 lakh habitations by constructing 4.78 lakh kilometers road have been completed.

Deen Dayal Antyodaya Yojana–National Rural Livelihood Mission (DAY-NRLM):

The Deen Dayal Antyodaya Yojana–National Rural Livelihood Mission (DAY-NRLM) is a self-employment yojana where women under the umbrella of SHGs carrying out income generation activities for improving their households’ economic conditions. The women under SHGs, Village Organizations (VOs) and Cluster Level Federations (CLFs) have evolved transformational social capital that is changing gender relations, access to services and participation in Gram Sabhas (village assembly) and Panchayati Raj Institutions (PRIs). The yojana has given confidence to the women to seek bank loans for economic activity after developing skills and competencies. Of course, Community Resource Persons (CRPs) have been helping them to plan and nurture the projects for livelihood diversification. It is pertinent to mention that presently around 1.50 lakh women CRPs, who themselves have come out of poverty, are the greatest agents of change in promoting sustainable agriculture, providing banking services,  book keepers and accountants to women’s collectives, and most importantly an agent for social transformation of villages.  DAY-NRLM implements its yojana along with (i) Mahila Kisan Shaskatikaran Pariyojana (MKSP) as farm sector (ii) Non-Farm Livelihoods include inter alia with Startup Village Entrepreneurship Programme (SVEP) and (iii) Self-employment through Rural Self -employment Training Institute (RSETI).

In the farm sector DAY-NRLM focuses primarily on promotion of sustainable livelihoods in agriculture, livestock (including fisheries) and non-timber forest produce (NTFP).  Convergence with MGNREGS, value chain development and creating market linkages are integral part of the intervention strategy.              In the non-farm sector, yojana focuses on enterprise development in the villages under SVEP.  Convergence with Deen Dayal Upadhaya Grameen Kaushlaya Yojana (DDU-GKY) is encouraged for earning of wages.  It may be mentioned that DDU-GKY is uniquely focused on rural youth between the ages of 15 and 35 years from poor families. As a part of the Skill India campaign, it plays an instrumental role in supporting the social and economic programs of the government like the Make in India, Digital India, Smart Cities and Start-Up India, Stand-Up India campaigns. Over 180 million or 69% of India’s youth population between the ages of 18 and 34 years, live in its rural areas. The youths from poor families with no or marginal employment are about 55 million.

Since the inception of the DAY-NRLM in 2011, women members of SHGs have gain accessed to Rs. 1.06 lakh crore as bank credit. For example, in the year 2014-15, SHGs bank credit went up from Rs. 20,000 to more than Rs. 30,000 in 2015-16. Till February 2017, a little more than Rs. 29,000 crore have been disbursed and it is expected that Rs. 35,000 crore to Rs. 38,000 crore will be mobilized as credit in 2016-17(

It is evident from the discussion that Government of India has been taking measures in all directions for developing rural India. In this paper, few cases of earning income of rural persons by forming SHGs based on rural India are presented.

Field experience: 

The author has conducted many studies across India among the SHGs and observed if beneficiaries are endowed with proper projects meticulously then BPL households can earn substantial income.  Here based on field study, few cases- both macro and micro- are presented depicting livelihood issues.


1) ‘Pragathibandhu’ self-help group: A Case from Karnataka State (a province in Sothern part of India):

Pragathibandhu’ self-help group (popularly known as PBG) has been initiated with a great idea of facilitating farming process among the small and marginal farmers by an NGO viz., Shri Kshethra Dharmasthala Rural Development Project (SKDRDP, henceforth SKDRDP will be used) by forming 5-8 members in each group.  SKDRDP was started in 1982 by at Belthangady taluka (taluka constitutes number of villages), Dakshina Kannada district (district is next to province consists of many talukas. It is an administrative cum development unit) on experiment basis with the basic objective of developing marginal and small farmers by forming self-help groups under the banner of ‘Pragathibandhu’. SKDRDP adopted initially (1982) a few villages and the farmers were encouraged to develop their lands with the assurance that SKDRDP would meet all their basic needs. Working single-mindedly on their lands, the farmers soon achieved success and their confidence made others to join the movement. Initial experiment of ‘Pragathibandhu’ acted as “Demonstration Effect” as a result the ‘Pragathibandhu’ model was spread to other districts of the state. The field study reveals around 52,000 farmers consisting of 2.71 lakh households were benefitted by forming SHGs. The SHG should consist of 5-8 members having contiguous agricultural land and weekly once they work in others’ agricultural land by sharing their labour at free of cost. After forming SHG under PBG, it was observed in the field that farmers’ life has been improved to a great extent as all had TV, freeze, phone, etc. which earlier they did not imagined (Chatterjee, 2011).

2) Godavari Mahasamakhya (GMS) from Andhra Pradesh State:

Godavari Mahasamakhya, popularly known as (GMS), is a premier confederation working for poverty eradication in coastal fishermen families in East Godavari district. This Confederation is registered in 1995 and affiliated to Zilla Samakhya (district federation). The main objective of GMS is to achieve tangible development in all individual families through Community Based Organizations (CBOs) and emphasizes on social issues like health and hygiene, children education with special emphasis on girl child education. Under GMS, 19,733 households were organized into 1781 SHGs. The study evinces altogether 18,600 households were benefitted by scaling up of their earning. Interestingly all were women members of SHG.  Further, field study reveals the fact that many persons borrowed 30/40 times also.


3) SHG case from Telangana State:

The study was carried out in January, 2016 at Himyatsagar village, RR district, Telangana. Altogether nine self-help groups (SHGs) with 90 women members  were formed who were involved with various activities such as making of leaf and paper plate; jute & plastic  bag (with thread); Candle; Gift items; Small flower type cloth items for decorating sarees (Indian ladies wear); Small stools, etc. Out of nine SHGs, the six were formed in 1996 and rest three viz., were set up in 2005-06.   To carry out the activities, in local-self Government’s land, a RCC building was constructed in 2001 with an amount of Rs. 2.25 lakh. The building had a big room (14×20 feet) and two small rooms each of 7×4 feet with electricity.

The members who were initially from BPL families and mostly belong to backward community could see the new ray of hope in economic field after forming the SHG. During the course of field visit it was reported that they were paid based on working hours and products were sold nearby city. Earning of each member was in between Rs7000 and Rs. 8000 per month which was the income of each women member only and family was not taken into account here. The members of the SHGs were involved for a decade and more and thus it is the ideal case of sustainable SHGs.

4) Case from Jammu and Kashmir State:

Jammu and Kashmir is always in the news and here it was observed that if rural persons are guided properly for earning of income then many issues may be resolved.         This case portrays how the craftsmen from Kashmir valley by participating exhibition at the National Institute of Rural Development & Panchayati Raj popularly known as NIRD&PR, Hyderabad (NIRD&PR is an organization of the Government of India for research and training in rural development), which several thousand kilometers away from Jammu and Kashmir not only benefitted by earning income but also impressed with the hospitality of the officials of NIRD&PR indicating oneness feeling.  From Khag village of Budgam district, Jammu & Kashmir, Sri Ali Mohammed Bhat representing Hilal SHG participated with their goods in NIRDPR’s exhibition.  The SHG started in 2010 with 6 Muslim male persons under Swarnajayanti Gram Swarojgar Yojana (popular as SGSY, a programme sponsored by the Ministry of Rural Development, Govt. of India which continued up to 2011-12) where all the members were involved with decorating shawls, sari, suit etc. with colour threads and needle. The SHG was extended a sum of Rs.25000 (Rs.15000 loan & Rs.10000 revolving fund/one time grant) in the year 2011 for developing the business and again in 2012 a sum of Rs.1.50 lakh (Rs.1 lakh as bank loan & Rs.50000 as subsidy) was given to the SHG for scaling up their business.  With the amount they were fully involved in their activities as they were endowed with the traditional skill so with lot of hope, hype and hoopla they started producing of goods.  During the course of study in February 2014 Sri Ali Mohammed Bhat informed that after repaying loan they earn monthly in between Rs.3500 and Rs.4500 as net profit.  He further informed that around 50 percent of the loan was repaid and after fully repaying of loan they expect more income.  The goods are sold in different fairs & exhibitions across India resulting in increase in the network of business.  Sometimes some traders also put up order to them and collect their produce at their homes.

In addition to the above study few studies on income generation activities carried out earlier than 2014 are presented here for the benefit of readers as these are innovative one. The studies are from Pune district of Maharashtra and North Bengal region of West Bengal state.

5) Case from Maharashtra:

The study was carried out in November 2011 at Pune district of Maharashtra state.

The case is about urea briquette making for the development of marginal and small farmers in Pune district of Maharashtra state. This innovative project was grounded in 2006 by 10 women by forming a SHG at Sriramnagar village, Haveli taluka. The village is located at about 20 kilometers away from Pune city but dominated by farmers mainly by small and marginal with landholding size of 1.4 hectares (average). The villagers prefer agriculture as the village is having location advantage (close to Pune city) vis-à-vis well developed irrigation system. The important crops grown are – paddy, wheat, onion, vegetables, sugarcane, guava, castor apple etc. As agriculture was well developed in the area, one local NGO suggested the SHG to start fertilizer unit known as ‘Urea Briquette’ which in a small scale can be started in a village. The NGO organized training for the SHG. Subsequently in the year 2008 with a total cost of Rs. 3 lakh (Rs. 2.10 lakh as loan and Rs. 0.90 lakh as subsidy) the unit was grounded at the local-self Government’s land which was RCC one spread over to an area of 18 x 22 square feet. The building was provided to the SHG at free of rent to carry out the activity. With the amount of Rs 3 lakh, the SHG purchased a machine costing Rs. 1.20 lakh and rest for raw materials. The main raw materials were urea and DAP which by mixing urea briquettes were made. Each briquette weighs 2.5 grams looks like a big capsule used as manure by placing each capsule under the soil of the plant.  While the study was conducted it was observed that the product was gaining the market slowly as local dealer was trying to popularize in other villages as apart from that village there were no demand from other villages as publicity was lacking, as a sequel the briquettes were produced and sold only for 4-5 months in the village itself. During the course of discussion with SHG members, it was observed that by working for 4-5 months each member was earning in between Rs. 1400 and Rs.1500 per month. If they would have worked throughout the year they could have earned more. In the absence of demand for the product outside of the village vis-à-vis lack of well-developed marketing system production was at low ebb. Since all the members had their own agricultural land so in other month the SHG members assist their husband in the agricultural field works.


It is evident from the above discussion that because of SHG approach economic conditions of many BPL families have been improved. Because of SHG approach illiterate or literate women had the confidence to borrow and repay credit for many times.  And credits were meticulously used for the benefit of the family to fulfill home needs or for income generation activities. Thus, it is evident that if any project is meticulously planned and nurtured with pumping of micro-credit then livelihood issues of BPL households may be addressed to a great extent. Before conclusion Prof. Muhammad Yunus   from his book “Banker to the Poor”; the story of the Grameen Bank”, may be quoted, “If the goals of economic development include improved standards of living, removal of poverty, access to dignified employment and reduction in equality then it is quite natural to start women. They constitute the majority of the poor, the under-employed and the economically and socially disadvantaged. Studies undertaken by Grameen, comparing how male borrowers use their loans versus female borrowers, consistently confirm this analysis” (Muhammad Yunus, 2007).


(Crore is Indian unit which means 10 Million = 1 Crore and Lakh means 10 Lakh = 1 Million)



  1. Food and Agriculture Organization (FAO) “Glossary of terms for agricultural insurance & rural finance”, 1992.
  2. “Role of Pragathiibandhu Groups in the Development of Small & Marginal Farmers in Karnataka” ( 2011) Published by NIRD, Hyderabad
  3., dt 4th May 2017
  4. dt 4th May 2017
  5. 4th May 2017
  6. 19th May 2017
  7. Yunus Muhammad “Banker to the poor”; the story of the Grameen Bank”, (2007) Published by Penguin Books.
The opinions expressed in blog entries by ELLA Community members are theirs alone unless otherwise stated, and do not reflect the opinions of The ELLA Network. This article is part of the Research Blog Series, which focuses on current research or analysis on ELLA themes conducted by our community members.
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