A self-help group (SHG) is a village-based financial intermediary usually composed of 10–20 local women.
Members make small regular savings contributions over a few months until there is enough capital in the group to begin lending. Funds may then be lent back to the members or to others in the village for any purpose. In India, many SHGs are ‘linked’ to banks for the delivery of microcredit.
Many self-help groups, especially in India, under NABARD’s SHG-bank-linkage program, borrow from banks once they have accumulated a base of their own capital and have established a track record of regular repayments.
This model has attracted attention as a possible way of delivering microfinance services to poor populations that have been difficult to reach directly through banks or other institutions. “By aggregating their individual savings into a single deposit, self-help groups minimize the bank’s transaction costs and generate an attractive volume of deposits. Through self-help groups the bank can serve small rural depositors while paying them a market rate of interest.
VHS offers bilingual menu-driven software aimed at helping SHGs maintain their books of accounts electronically and at meeting accounting requirements of micro finance providers to the SHGs, such as banks, NGOs and other institutions. While the user interface at the data entry level would be in Marathi, reports such as balance sheets, overdue details and monthly financial reports would be in English. Features such as generation of grading reports and easy online access to financial status of each group would help minimize the time taken to process grading and economic assistance requests.