Self-Help Groups (SHGs) are an institutional concept in India, defined as informal, self-governed, and peer-controlled associations of people, typically 10 to 20 members, who share a similar socio-economic background and voluntarily come together to improve their living conditions. The concept's origin in India can be traced back to the Self-Employed Women's Association (SEWA), established in 1972. SHGs were created to address the problem of low access to formal credit and financial services for the rural poor, especially women, who lacked collateral.
The primary mechanism is the SHG-Bank Linkage Programme (SHG-BLP), formally launched by NABARD in collaboration with the Reserve Bank of India (RBI) in 1992. This programme, which is the world's largest microfinance project, integrates the rural poor into the formal banking system. SHG members regularly save small sums of money to build a common corpus, which is then used for internal lending. After demonstrating financial discipline, the SHG is linked to a bank to access formal credit, with the group's collective responsibility and peer pressure acting as a substitute for physical collateral.
The SHG movement is closely connected to the Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM), a flagship poverty alleviation programme of the Ministry of Rural Development. NRLM, launched in 2011 by remodelling the Swarnajayanti Gram Swarozgar Yojana (SGSY), focuses on mobilizing poor households into SHGs and their federations. A significant recent change occurred in 2021, when the government increased the limit for collateral-free loans to SHGs from ₹10 lakh to ₹20 lakh. As of June 2025, over 10 crore women are part of 91 lakh SHGs, which maintain a high loan repayment rate of over 96%.