SHG

Home / SHG

SHG Formation Process

Step 1: Group Formation

• Members: 10–20 members (ideally women) from the same economic background.

• Voluntary: Participation is based on mutual trust.

• Name & Objective: Group chooses a name and sets basic rules.

Step 2: Internal Savings & Lending

• Members contribute a fixed amount monthly/weekly.

• Loans are given to members from this pooled fund at a small interest rate.

Step 3: Bookkeeping & Meetings

• Regular meetings (weekly/bi-weekly).

• Maintain records: savings, loans, repayment, attendance.

• Elect group leaders (President, Secretary, Treasurer).

Step 4: Bookkeeping & Meetings

• SHG opens a joint savings account in a bank.

• Requires meeting minutes, resolution, KYC of members, PAN (if applicable).

SHG Funding Sources

A. Internal Sources

• Regular member savings.

• Interest on internal lending.

B. Government Schemes

1. DAY-NRLM (Deendayal Antyodaya Yojana – National Rural Livelihood Mission)

• Seed Capital: ₹15,000 to ₹20,000 per SHG.

• Revolving Fund (RF): ₹10,000 to ₹15,000 for early-stage SHGs.

• Community Investment Fund (CIF): ₹50,000 to ₹2.5 lakhs for matured SHGs.

• Subsidized loans under SHG Bank Linkage Programme.

2. State Rural Livelihood Missions (SRLMs)

• These operate under NRLM and implement state-specific policies and support.

C. Bank Linkage (NABARD Model)

• NABARD (National Bank for Agriculture and Rural Development) pioneered the SHG-Bank Linkage Programme (SBLP).

• SHGs rated on their performance (grading) and provided collateral-free credit.

D. CSR & NGO Funding

• Corporate Social Responsibility (CSR) projects of companies.

• NGO support: capacity building, training, grants.

3. Supporting Organizations

Government Bodies

• Ministry of Rural Development (MoRD)

• National Rural Livelihood Mission (NRLM)

• State Rural Livelihood Missions (SRLMs)

• District Rural Development Agencies (DRDAs)

Banks & Financial Institutions

• NABARD: Technical and financial support, training.

• Commercial banks, RRBs, Cooperative banks: Credit linkage, loans.

Non-Governmental Organizations (NGOs)

• NGOs like PRADAN, SEWA, MYRADA, DHAN Foundation help in SHG promotion, training, and advocacy.

CSR Partners & Development Agencies

• UNDP, World Bank, IFAD support SHG initiatives in India.

• CSR arms of corporates fund livelihood and women’s empowerment projects.

Benefits of SHGs

• Financial inclusion and access to credit.

• Women empowerment and decision-making.

• Skill development and income generation.

• Social awareness and community development.