A Self-Help Group (SHG) is an informal, self-governed, and peer-controlled association of 10 to 20 individuals, typically women from similar socio-economic backgrounds, who come together to improve their living conditions. The concept is a grassroots-level institution that operates on the principle of thrift, credit, and self-help. The origin of SHGs in India can be traced back to the 1970s, inspired by the microfinance model of the Grameen Bank in Bangladesh. The problem SHGs primarily solved was the lack of access to formal credit for the rural poor, who were often forced to rely on moneylenders at usurious rates.
The core mechanism is the SHG-Bank Linkage Programme (SBLP), which was initiated as an action-research project by the National Bank for Agriculture and Rural Development (NABARD) in 1989 and formalized as a pilot project in February 1992. Members of an SHG agree to save small, regular amounts into a common fund, which is then used to provide internal loans to members. After demonstrating financial discipline, usually for six months, the SHG becomes eligible for a bank loan, with the group's collective liability substituting for physical collateral. The Reserve Bank of India (RBI) gave regulatory sanction in July 1991 and brought SHG lending within the ambit of priority-sector lending in 1996.
The SHG movement is closely connected to the government's flagship poverty alleviation scheme, the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission (DAY-NRLM), which was launched in 2011 by restructuring the earlier Swarnajayanti Gram Swarozgar Yojana (SGSY) of 1999. The NRLM, renamed in March 2016, has given renewed momentum to the SBLP by promoting and nurturing women-led SHGs. Recent developments include a focus on strengthening the role of SHG members as entrepreneurs and leaders, moving beyond mere participation in livelihood programs. The government now offers collateral-free loans of up to ₹20 lakh to SHG women entrepreneurs.