Savings Mobilisation in SHGs: Opportunities and Challenges

How can self-help groups evolve as savings institutions?
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This focus note analyzes the opportunities available to leverage savings through self-help groups (SHGs) and the associated challenges. It also explains why the poor save in SHGs.

The note states that poor people consider factors such as security, convenience, liquidity, and positive returns, before accessing a savings facility. Theoretically, SHGs are secure because they comprise groups of women from the same neighborhood, who know each other. SHGs also meet the convenience requirement because the time and place of meetings, and the amount to be saved are all mutually agreed upon. SHGs also have the ability to prevent members from spending on trivial items.

Challenges to the evolution of SHGs as strong savings institutions include their desire to access external funds, and using savings just to fulfill minimum eligibility criteria to access loans from external sources. SHGs can overcome these challenges by:

  • Promoting institutions that focus on developing their capacity to offer customized and voluntary savings products;
  • Enhancing members’ confidence and addressing unhealthy practices in the group;
  • Forming a professionally run external fund from where they can withdraw and deposit cash according to need;
  • Using information technology to bring about efficiencies.

About this Publication

By Ballem, A. & Kumar, T.R.