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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
Presented by Eyob Muhdin
The presentation has:
1. Introduction 1. Introduction
2. Literature review 2. Literature review
3. Conclusion3. Conclusion
Presented by Eyob Muhdin
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
Presented by Eyob Muhdin
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.
Presented by Eyob Muhdin
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
Presented by Eyob Muhdin
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
Presented by Eyob Muhdin
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.
Presented by Eyob Muhdin
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)
Presented by Eyob Muhdin
Literature review…
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
Presented by Eyob Muhdin
Literature review…
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
Presented by Eyob Muhdin
Literature review…
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.
Presented by Eyob Muhdin
Literature review…
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
Presented by Eyob Muhdin
Literature review…
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.
Presented by Eyob Muhdin
Literature review…
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
Presented by Eyob Muhdin
Literature review…
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.
Presented by Eyob Muhdin
Literature review…
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.
Presented by Eyob Muhdin
Literature review…
Characteristics & guiding principles for formation of SHGs…
SHG characteristics are: Bottom-up approach; Homogeneous membership; Self-management; and Need-based activities.
Presented by Eyob Muhdin
Literature review…
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.
Presented by Eyob Muhdin
Literature review…
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;
Presented by Eyob Muhdin
Literature review…
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.
Presented by Eyob Muhdin
Literature review…
Requirements for Making SHGs Strong
Homogeneous: Small: Multipurpose: Voluntary: Selection of Functionaries: Consensus Decision-making: Non-Political: Informal and Fully Participatory
Presented by Eyob Muhdin
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;