Small is beautiful but big is not necessarily better. With this concept self help groups are developed. The origin of SHGs is from the Grameen Bank concept of Bangladesh which was founded by Prof. Mohammed Yungs the noble prize winner of 2005. Initially SHGs were formed in the year 1975.
However, NABARD has initiated linkage of SHG with banks in 1991-02. A SHG denotes a small economically homogeneous affinity group of the rural poor voluntarily coming together to save small amount regularly, which are deposited in a common fund to meet the needs of members at the time of emergence.
When people organized in SHG, they can save borrow money from bank and can develop their economic conditions. It is a registered or unregistered group of micro entrepreneurs who voluntarily come together to contribute small amount regularly to a common fund which is mostly utilized for the benefit of its members.
The formations of SHGs are based on the basis of the following fundamental principles:
- Principles of group approach.
- Principles of mutual trust and confidence.
- Principle of organization of small and manageable groups.
- Spirit of thrift.
- Demand based lending and collateral free lending.
- Capacity building and empowerment.
- Peer group pressure on repayment of loan.