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Self-help groups and informal cooperatives

Seminar Paper

For the attainment of academic degree of post graduate program in Cooperative development and leadership, Advanced Cooperative

theory

Presented By:

Eyob Muhdin

Coopw /027/05

Presented By:Saturday, April 15, 2023Coopw

/027/05

Presented by Eyob Muhdin


The presentation has:

1. Introduction 1. Introduction

2. Literature review 2. Literature review

3. Conclusion3. Conclusion


Introduction

Text

Government or NGOs creates

organized by the people

themselves without any

external support to meet

their own needs

Cooperatives could be

categorized in to

Taking the: • Forms,• Organization, • Functions, • Management and • Characteristics of

an organization into account

Formal and informal


Introduction…

With this respect, • The Self-Help Groups [SHGs] are one form of

cooperatives enterprises which are organized voluntarily by the members themselves to meet a variety of their needs.

• The SHGs, people’s voluntary and informal institutions, are organized as viable alternative to achieve the objectives of rural development and to get community participation in rural development programs.


Introduction…

Constituency Constituency ManagementManagement Principles Principles

SHGs as an informal cooperative enterprise has the following characteristics

not less than 10 and not more

than 20 people from the poorer section of the village society

organized, owned, operated and controlled by

the members

• Democratic• Solidarity,• Common

interest • Resource

pooling


Introduction…

Major aim of SHGs:

• To build the functional capacity of its members in the field of employment and income-generation activities.

• Reducing the incidence of poverty through the provision of easy credit.

• To empower persons and their families in such a way that they may find themselves capable of playing an important role in the socio-economic development of the community.

• To prompt these groups to play an important role in enhancing the capacity of self-reliance of their members by increasing their participation in decision-making and raising the confidence of people marginalized in the course of time


Literature review

Definition

According to Dr Daman Prakash and Dr GC Shrotriya on their “self help groups hand book”, (IFFCO Foundation, 2009, p. 10)

Self-Help Group [SHG] is an unregistered group of micro-entrepreneurs having homogenous social and economic background; voluntarily coming together to save regular small sums of money, mutually agreeing to contribute to a common fund and to meet their emergency needs on the basis of mutual help.

Dr Daman Prakash and Dr GC Shrotriya, Self-Help Groups-A Handbook, ,<http://coop.carboncode.net/wp-content/uploads/.../SHGBook27May-dp.doc> (accessed date, 27 November 2012). P. 10.

http://coop.carboncode.net/wp-content/uploads/.../SHGBook27May-dp.doc


Literature review…

Origin & concept of the Self Help Group

• The poor would often have shortage of cash.

The Poor

• Give cash or raw materials to the poor and ask them to produce

Money lender & trader • Grouping

themselves to save money and give out the saved as credit.

The Poor (SHGs)



In 1976, Prof. Dr. Muhammad Yunus came up with a Group Lending Program known as the Grameen Bank (literally the Village Bank) in Bangladesh for the first time. This was an experiment in giving credit to the very poor without any collateral.

Prof. Yunus reasoned that if financial resources can be made available to millions of small people with their millions of small pursuits, it can add up to create the biggest development wonder.

The experiment was a grand success and Prof. Yunus was awarded the Nobel Prize in 2006 for his contribution to development.

‘Kindernothilfe’ 2008, The Self Help Group Approach - a Manual, <http://www.self-help-approach.com/doc/SHG_Manual.pdf>. (accessed date, 27 November 2012).

History of the Self Help Group

http://www.self-help-approach.com/doc/SHG_Manual.pdf









The Grameen Bank is based on the principles of:Mutual trustAccountabilityParticipation andCreativity

the Grameen Bank model was not flexible interims of internal lending and divers loan application.

The main reason was that the poor very often engaged in different sources of livelihood and the credit had to be more flexible and lend itself to diverse applications.

MYRADA (Mysore Resettlement and Development Agency), a development organization in South India started looking for an alternate system of micro-credit than the banking model that the Grameen bank established (kindernothilfe, 2008).

Self Help Groups were thus born and made their own lending rules.

MYRADA, through lobby convinced main stream financial institutions including banks to lend to Self Help Groups



The Reserve bank of India – the apex bank in the country came up with a new policy to this effect acknowledging the existence and functioning of Self Help Groups in 1990 (kindernothilfe, 2008) .

The main features of this lending pattern are:• Lend to unregistered, informal groups that behaved like formal group• Lend to groups without asking for the purpose of the loan.• Lend without a collateral

In most country, Self-Help Groups are started by non-profit organizations [NGOs] that generally have broad anti-poverty agenda.



SHGs CLA Federation Micro-finance

…more SHGs are

formed

…there is more Cluster

level Associations

(CLAs) established

When there are 8 to 10 CLAs, they

come together to

form a Federation( register itself

as CBO)

Thereby bringing

sustainable change

would come

The Concept of Self-Help Groups



The Concept of Self-Help Groups



SHGs as Micro-Finance InstitutionsThe idea of micro-finance is based on the philosophy of organizing poorest of the poor into Self-Help Groups and makes them realize the very basic theory of survival.

SHGs as Instruments of CohesionSince the basic philosophy of the Self-Help Group is to provide assistance and economic security to the poor people in the rural setting, it also serves as a uniting factor for the people.



Main Objective of SHGs

The main objective of the Self-Help Group is(Dr Daman Prakash and Dr GC Shrotriya, 2009): 1. To provide economic opportunities to the economically disadvantaged

groups

2. To establish and gradually improve their entrepreneurial ambitions through regular and small savings

3. To improve their socio-economic status by organizing and participating in their own voluntary and democratic association



Advantages of Self-Help Groups

The advantages of SHGs are:Low transaction cost; Effectiveness in supervision; Easy credit delivery to the poor; Minimum procedures; and, Better recycling of funds.



Characteristics &guiding principles for formation of SHGs

The guiding principles for formation of SHGs, among others, are: Mutual trust and mutual support; Every individual is equal and responsible; Every individual is committed to the cause of the

group; Decisions are based on the principle of

consensus.



Characteristics & guiding principles for formation of SHGs…

SHG characteristics are: Bottom-up approach; Homogeneous membership; Self-management; and Need-based activities.



Functions of Self-Help Groups

SavingsLoaning and Repayment Maintaining Books of Account and Records

Member-oriented Action Programs Liaison and Linkages Training and Capacity Building Activities.



Credit Management in Self-Help Groups

The groups foster thrift and promote savings;The groups encourage women’s groups in fostering thrift

and savings;Groups contribute a part of their savings earned through

group action. This strengthens the value of group action;Groups mobilize capital through: [a] Savings, [b] From

interest at rates decided by the group; and [c] From banks and cooperatives;



FINANCIAL MANAGEMENT (Books of Self-Help Groups)

Simple and clear books for all transactions to be maintained;If the group is not able to maintain the books on its own,

someone from outside can be engaged by the group for the purpose;

Minutes BooksSavings and Loan RegisterMembers’ Passbooks.Reconciliation of Accounts: A regular correspondence file to be maintained which

should have all the correspondence of the group with other agencies.



Requirements for Making SHGs Strong

Homogeneous: Small: Multipurpose: Voluntary: Selection of Functionaries: Consensus Decision-making: Non-Political: Informal and Fully Participatory


Conclusion

As we can see from above literature; Self-Help Groups are a sub-system of a cooperative institution.

Both the members form the institutions, Self-Help Groups and Cooperatives, voluntarily and the members operate and manage them on democratic lines.

‘One-Member One-Vote’ is the principle on which both the systems operate and the process of consensus rules supreme in decision-making process.

There are, however, some differences: Cooperatives are registered. Self-Help Groups are not;Cooperatives have a legal personality. Self-Help Groups have no

formal personality;Cooperatives have a larger membership. Self-Help Groups have 10-

20 members only;


December

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