Definition
Self-Help Group (SHG)
A Self-Help Group is a small, member-run savings and credit group, often of rural women, linked to banks for lending under the SHG-Bank Linkage Programme.
SHGs pool members' savings and lend internally, then access bank credit collectively once they show a track record. NABARD's SHG-Bank Linkage Programme is one of the world's largest microfinance models, channelling formal credit to millions of rural households.
Unlike NBFC-MFI lending, SHG lending is largely bank-led and savings-linked, and qualifies as priority sector. SHGs build financial discipline and creditworthiness, often serving as a stepping stone to individual banking relationships for previously unbanked members.
Related terms
- Microfinance Institution (MFI)A Microfinance Institution provides small, collateral-free loans to low-income borrowers, typically women in groups, for income-generating activities.
- Joint Liability Group (JLG)A Joint Liability Group is a small group of borrowers who collectively guarantee each other's microfinance loans, substituting peer pressure for collateral.
- Priority Sector Lending (PSL)Priority Sector Lending norms require banks to direct a minimum share of their credit to sectors such as agriculture, MSMEs and weaker sections.
- Financial InclusionFinancial inclusion is the goal of ensuring all individuals and businesses, especially the underserved, have access to useful, affordable financial products like accounts, credit and payments.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.