Economic Empowerment of the Poor: A Study on the Self Help Groups (SHGs) in West Bengal

Abstract

A major cause of poverty among rural people is lack of access for both individuals and communities to productive assets and financial resources. This is caused by the fact that the formal credit institutions that function smoothly in developed urban areas cannot cater to the credit need of rural poor due to lack of information about the borrowers, lack of proper collateral among the poor people, which are acceptable to the formal financial institutions, and there are enforcement problems in case of default. The failure of formal lending institutions and the apparent success of Bangladesh's Grameen Bank in reaching the rural poor have recently inspired numerous non-governmental organizations (NGOs) and governments of less developed countries to establish group-lending schemes to deliver credit at low cost and reasonable interest rates to small scale rural entrepreneurs. India is no exception in this case. From 1 April, 1999 Government of India initiated a programme called Swarnjayanti Gram Swarojgar Yojana (SGSY) which is a self-employment programme of Ministry of Rural Development that aims at providing assistance to the BPL (Below the Poverty Line) rural poor for establishing micro-enterprises through bank credit and government subsidy to acquire an income-generating asset. Towards this end, SGSY has been designed to cover all aspects of self-employment such as organisation of the poor into self-help groups, training, credit, technology, infrastructure, marketing, and enabling the rural poor to take decisions on all issues concerning poverty eradication. This SGSY programme actually tried to link the rural poor to the formal micro finance institutions via self-help groups where groups will receive joint liability loans from formal credit institutions. A study by NABARD (National Bank for Agriculture and Rural Development) across 11 states showed many positive results on the impact of participation of rural poor in the SHGs. It shows that there have been perceptible and wholesome changes in the living standards of SHG members in terms of ownership of assets, borrowing capacities, income generating activities, income levels and increase in savings. It indicates that the average annual saving per household registered an increase over three-fold. At this backdrop, a study on the impact of SHGs in the state of West Bengal was conducted. Though the study is a desk study, it also shows satisfactory performance of SHGs in West Bengal.