Management of Self Help Groups

State Institute of Rural Development (SIRD)

G.S. Road, Khanapara
Guwahati 22
April 2011

1
 Foreword

Self Help Group (SHG) Movement in India has been recognized as an

effective strategy for mobilization and empowerment of rural people ,
particularly poor women and other marginalized groups.

Though the access to credit has been seen as a motivational factor behind
the formation of Self Help Groups, Self Help Groups have a potential that
goes beyond mere economics of loan management . Self Help Groups are
involved in various Social Activities which is very much important in their
empowerment process. Grass root level Organizations like SHGs ensure
people’s participation in the development process. They provide a forum in
which people can meet on regular basis and discuss the issues and concerns
that they face in their day to day life.

In the above background, understanding the concept, objectives and various

management techniques of Self Help Groups (SHGs) by the members is very
much important. So, for imparting training to the members of Self Help
Groups (SHGs) with trainee centered methods and media and facilitate
members to learn more about the group dynamics, the State Institute of
Rural Development (SIRD), Assam has prepared this booklet for trainees ,
officials working at different levels and Self Help Group promoting
institutions.

2
 Content
Chapters Headings Page No.
1 Strengthening Self Help Groups 4
through Capacity Building

2 Decision Making and Conflict

Resolution in Self Help Groups & 26
Village Organizations

3 Index of Sustainability of Self Help 33

Groups & Village Organizations

4 Social Capital 48
5 Frequently Asked Questions – on 51
Savings and Group Meetings

6 Financial Management of a Group 56

Reference Books 70

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 Management of Self Help Groups

This Hand Book is prepared for use in training programmes under various
subjects on Rural Development & Panchayati Raj

By
Sri A. M. M. Zakir
Head- Training and Research
SIRD, Assam

Assisted by
Smt. Nomita Baruah
Jr. Lecturer, SIRD

Under the Guidance of

Sri K. Kalita
Director & Executive Head, SIRD, Assam
April 2011

4
 CHAPTER-1

Strengthening Self Help Groups through Capacity Building

Since year 1999, a large number of rural people particularly women have been
mobilized into Self Help Groups in Assam. This has built the social capital among the
rural people in the State. SHG movement in Assam has not only provided economic
benefit to its members but more importantly created viable social capital in the form of an
empowered community. Most significant social aspects wherein rural women in Assam
has made tremendous progress are:-

Increase in overall awareness level about their status and approaches for
development.

Social empowerment in terms of improvement in their confidence, self
perception, communication skill and other behavioral changes.

Participation in developmental activities (participation of women SHGs in Gram
Sabhas have increased manifold).

Mobility of rural women has increased for various socio- economic
developmental activities.

Decision making capacity at household level as well as at community level has
increased and become more meaningful.

Bargaining and receiving capacity of rural women have increased thereby making
socio- economic programmes and facilities more accessible to rural poor.
With the above background it has become convenient to consolidate the Self Help
Groups already developed in the State into village organization and other federations.
However , critical gaps have been observed in the management of day to day activities of
the Self Help Groups relating to different group dynamics, organizational management,
financial management, arrangement of livelihood activities, internal monitoring,
accountability etc. Intensive and extensive training programmes involving community
resource persons, coordinators etc. will have to be organized existing as well as new Self

5
Help Groups, so that village level organizations (Primary Federations) can be
conveniently formed with the help of these groups.
Intensive training programmes will have to be organized in decentralized manner
covering all the aspects given below in the module. The module will also help in the
capacity building of the office bearers and members of new village organizations to be
developed.
The capacity building covering the following aspects will strengthen both old and
new groups. This will facilitate the formation of village organizations in subsequent
stages, Training will be imparted in a participatory manner through interactive process.
That is why some key questions have been prepared to facilitate the discussion during the
training process.

PRINCIPLES OF Self Help Groups:

1. Peer principle – Social Homogeneity
2. Self Determination
3. Built on inner strength
4. Services are free and reciprocal
5. Social support
6. Self Help solution
7. Internal focus rather than experts.

APPLICABILITY OF CONCEPTS:
1. Welfare dependence can be reduced.
2. Sharing- Group interaction – Self Determination
3. Resurgence of Democratic life – effect to service – vehicle for demanding the
appropriate role of the authority.

STAGES IN GROUP FORMATION :

1. Forming – Habits of coming together suspicions, fear and anxiety of members
discussed.
2. Storming :

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Individual interest and group interest surface

Procedure rules and rules established

Leadership will emerge.
3. Norming : Trust among group members will develop.
4. Performing : Group becomes operational

MOBILIZATION:
1. Essentially attitudinal commitment to action.
2. There should be a means to translate this commitment to action .
3. Existence of values and goals.
4. Collective means of achieving.

ESSENTIALS OF THE SELF HELP GROUP PHENOMENON :

1. Self Help Groups are voluntary
2. Groups are small formed for mutual help and the accomplishment of a special
task.
3. Homogeneous groups come together for a common need.
4. Emphasize face to face social interaction
5. All persons assume responsible.
6. Provide material assistance and emotional assistance.
7. Promulgate an ideology or values.
8. Members attain an enhanced sense of personal identity.

FACTORS INFLUENCING GROUP FORMATION AND SUSTAINABILITY:

1.Some “felt need” for group formation and identification with the objective on group
formation.
1. Some sort of “homogeneity” among the members.
2. Feeling of “Solidarity” among group members .
3. Existence and evolution of “Byelaws rules and regulations” and their enforcement
by members themselves.
4. Participation of all members and democracy in group functioning.

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 5. Quality of “leadership” and the procedure of selecting leaders.
6. Substantial Private net “Benefits” from collective actions vis- a vis individual
action.
7. “Transparency” in operations and functioning of groups.

Why Self Help Group is needed :

The basic idea behind forming a voluntary and homogeneous group, which is
bound by affinity, is to share responsibility and authority between members so as
to achieve their objectives and remove obstacles to progress that would be
difficult to achieve individually.
Key Questions :

What has been the benefit to each member of the Self Help Group?
What is the contribution of each member to the Group ?
What happened when people came together with similar problems?

Aims and Objectives of an Self Help Group :

Developing the Aims and objectives of the Self Help Group.

Key Questions :

What is your objective in life ?

Why have you joined this SHG ?

What do you wish to achieve through this Self Help Group?

Wow will your SHG help in the development of the village ?

Indicative Answers are :

Quick access to credit to meet our loan requirements.

To enhance our confidence and skills.

To increase our awareness on various local institutions and schemes.

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To initiate and implement village development activities.

To create awareness on the mobilization of the resources and their optimum use.

To support each other as members of a group.

To reduce poverty levels in the village.

To increase our knowledge of latest technologies in agriculture, animal husbandry
etc.

To establish linkages and networking with other institutions.
Structure of a Self Help Group:

Most SHGs which are functioning well have the following structural features:

Size-10

All are poor

Bound by affinity

Rotational leadership

Voluntary in nature

Socially viable institution

Democratic nature

Non- partisan nature

Informal nature

Rules and regulations

Books and accounts

Functions of a Self Help Group :

Conducting weekly meetings: weekly meeting are essential because :
 It is easier to save smaller amounts frequently, rather than saving a large amount
at one time
 Loans may be sanctioned more frequently
 Issues do not have wait for as long as a month or more, in order to get resolved.

Savings

Lending and repayment

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Maintaining books of accounts and records: Books and accounts are needed
because:
 They promote accountability within the SHG and to external world.
 When an SHG grows big in terms of numbers and size of transactions , it is
difficult for members to mentally keep track of all the transactions that have been
made.
 They are necessary for linkages with other institutions , such as banks.

Common action Programmes:

Linkages and Networking

Training and Capacity building

The importance of Regular / Weekly Meetings:

Regular weekly meetings are important because they :

 Provide a regular and frequent opportunity for SHG members to interact with
each other.
 Inculcate discipline
 Provide scope for regular financial transactions, such as saving, lending loan and
interest repayment.
 Allow for periodic monitoring and follow up of loan repayment
 Provide an opportunity for the capacity building of the members and for
developing their communication skills.
 Provide a forum for identifying , discussing and taking up community action
programmes.

Key Questions :

Why are regular / weekly meetings important ?

What might happen if meetings are held less frequently ?

What happens if meetings are irregular?
Necessary conditions for conducting a meeting :
The following are the important conditions for conducting a meeting :

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A place for the meeting, accessible to all

Lighting facility in case the meeting is held at night

A fixed time when people will meet

Mats or durries o sit on.

A trunk or box to keep all the books of accounts, which may also be used as a
makeshift table by the bookkeeper.

Presence of all the members

Presence of all the representatives

Books and documents, pens and a book writer

An agenda to be discussed in the meeting
Key Questions :

What are the necessary conditions for a meeting to be successful?

How to Conduct an SHG meeting :

The following process should be followed while conducting a meeting:

Sit in a circle

Sing a prayer or group song

Select a chairperson

Welcome address

Record the attendance

Set the agenda

Review the previous meeting’s minutes.

Maintain discipline throughout – group members should ensure that rules and
regulations are followed throughout the meeting.

Complete financial transactions related to savings, repayment, lending etc.

Ensure that all issues on the agenda are discussed.

Ensure that all members participate in the decision making

During every meeting the SHG members must make it a point to discuss and act
upon at least one issue other than saving and credit

Record proceedings during the meeting itself and read them out to all members

All members must sign in the resolution book.

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Vote of thanks.

Procedure for conducting Group meeting

The members together decide the date, venue and time of the meeting.
Each meeting is presided over by a different member.

Each member should attend the meeting with her personal pass book .

When one person is speaking, another should not.

Those who want to speak should first raise their hands

Each member should get an opportunity to speak.

All members should attend the meetings.

Those who can’t should intimate in advance

Those who come late to the meetings should be fined

Members should sit in a circle.

The meeting should begin with a song or prayer.

First the attendance roll call should be taken. An agenda should be decided upon.

The meeting should be conducted as per the agenda.

First of all, the decisions taken in the previous meeting should be reviewed.

Each member should pay the savings to the Chairperson and take her signature in
the pass book.

Those who do not pay their savings should be questioned

Pending debts should be recovered

Those who have not paid their loans should be questioned.

The Chairperson should give an account of the money the Group has.

Those who need fresh loans should be sanctioned

If some problems of the village are on the agenda, these should be discussed.

The members should be observant and alert until the discussions are over. The
book keeper should record all the proceedings in the minutes book.

The minutes book should be signed, but only after the minutes are read out.

Successful Communication in the SHG :

Norms for successful communication in the SHGs :

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A circular seating arrangement helps in democratic communication

Unless only one person speaks at a time there is chaos and noise.

If people indulge in side –talk, the rest of the group is distrcted.

Everybody should be given a chance to voice his or her opinion

All important discussions and all decisions in the meeting must be documented.

Key Questions :

Why is it important to document discussions and decisions?

What will happen to a discussion if everybody is not given sunch to voice his her
own opinion?

Are there any rules and regulations in a group that support effective
communication?

What is unity? Why unity is Important :

Unity results in :

People helping each other instead of pulling each other down

Co-operation and co-ordination in a group

Respect for each other

Collective empowerment

Increased self- confidence of individuals in a group

Greater effectiveness of collective effort.

Key Questions:

What is unity?

Why do we need to stay united?

Discovering the Strength of the SHG members :

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Every human being has strengths . Therefore , every SHG will have strengths
because an SHG consist of strong human beings working together as a collective .
These strengths are inherent and are not entirely dependent on the support of the
SHG promoting institution.

Key Questions:

Tell the story of a time when you faced a challenge and achieved something you
still feel proud of

What strength did the narrator display in this story? What are the reasons for her
success?

Vision of a SHG :

A vision is what you want to achieve –just as parents have a long term goal of
what their child is going to be when he grows up-----the SHG members must also
have a vision for their future.

What is a Goal:

A Goal is what we want to achieve , a destination that we want to reach,
something we would like to have or be….

Key Questions:

What is a goal?

Indicative Answers are:

A dream

An aspiration

Future plans

Aims

Achievements

Goals Settings and Action planning for the SHGs :

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Goal setting for the SHG based on the SHG’s vision.
Key Questions :
Keeping in mind the vision of your SHG what does are the goals of your group?

Indicative Answers are :

Building up the common fund

Linkages with other institutions

Increasing member’s capacity for credit absoption

Acquiring literacy and numeracy

Gaining knowledge and awareness on the functioning of various external
institutions.

Linkages with other institutions.

Supporting each other in times of personal crisis

Improving our status in life?

Checklist of Rules by Self Help Groups :

Membership:

Economic Backgroud of Members

Physical proximity of member’s houses

Representation from each family

Membership fee

Group size

Age of members

Cancellation of membership

Meetings:

Timing of Meeting

Absence from Meetings

Late Attendance

Quorum

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 Savings and Credit :

Savings

Loans

Use of checks

Handling Cash

Maintenance of Accounts

Penalties

Interest on savings

Representatives:

Rotation of representatives

Two representatives and two co-signatories are chosen

The book writer must not be a co-signatory as this reduces her creditability.

Representatives must be responsible for the maintenance of books, reporting
and auditing.

Training Related

Attendance

Summary of the training topics should be reviewed in the SHG meetings

Ownership :

Members’ participation in and ownership of development programmes should be
ensured.

Credit Plus:

The SHG is not only concerned with savings and credit but also seeks to involve
itself in issues of health , education, justice, gender equality, environment,
community development etc. Each SHG comes up with its own priorities for
credit plus.

Sanctions:

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SHG members list out sanctions for deviations from the rules and regulations of
the group and cases when exceptions will be made . Sanctions are necessary to
ensure that group members do not take rules lightly.

Sanctions are also imposed on members violating social norms that the group
might have framed, such as not drinking or sending one’s daughter to school, not
receiving or giving dowry, owning toilets at home.

How will members ensure that sanctions are imposed without resulting in bad
blood or people leaving the group? This must be discussed before sanctions are
brought into practice.

The need of Book keeping :

Book keeping is needed in order to keep an accurate record of all transactions and
decisions taken in the group.
Key Question :

Why does one need book- keeping?

What are the Various Books and Records used in an SHG?

The following are the books used to record transactions in an SHG :

Minute book

Admission Register

Attendance Register

Member’s Individual Pass Book

Individual Savings Ledger

Individual Loan Ledger

Cash Book

General Ledger: It contains the activity wise cumulative balances

Receipt Book: It keeps track of all receipts to the SHGs.

Payment Voucher: All payments and expenditures of the SHG are routed
through the Payment Voucher

A demand Promissory Note : This Note is taken from the borrower as security
of the loan.

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Documentation File :Supporting documents, related to various financial
transactions and decisions made by the group and all correspondence should be
filed in the Documentation File.

Bank Pass Book/ Challan/ Cheque Book

Local Contribution Register : It provides information of funds mobilized at
local level either in cash or kind for various programmes.

Stock Book: It contains information of materials received or issued and balances,
along with their material value.

Control over the Common Fund :

In order for the SHG to retain control over the common fund the following practices are
usually observed:

Whoever is writing accounts never handles the money.

Members keep track , mentally of the total amount and composition of the Group
fund at any point of time.

The total amount is usually announced at the meeting or written on the board.

Members keep track of their own individual savings and credit status in the group.

Members ask the book writer to read out the day’s minute before they sign.

SHG members ensure that the books are always kept up to date.

SHG members ensure that the book writer has all the necessary equipment for
writing books such as a pen, pencil, eraser, white paper, carbon sheets, pins, glue,
rubber stamp and stamp and stamp ink-pad.

SHG members ensure that the custody of their books and records in not with the
book writer if he is the member of the group.

The Need for Leadership in an SHG :

Leadership is needed so as :

To monitor and improve upon the groups’ performance

To co- ordinate all the group’s activities.

To nurture the group’s inter –personal relationships.

To ensure that all members participate in the groups’ activities

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To take initiative in establishing linkages with external organizations.

To provide strategic direction to the group.

To represent the SHG in various bodies like federations etc

To express and interpret the group’s vision

Good Leadership helps to bring out the best in everybody.
Key Questions :

Why do we need leadership in an SHG ?

Leadership Styles :
There are several leadership styles, which a leader may exhibit :

An Autocratic leader

A Neutral or Dummy Leader

An Anarchic Leader

A Democratic or Participatory Leader

Rotating Leadership Functions

Rotational Leadership is an SHG is important because it :

Creates opportunities for all members to develop leadership qualities through
practice.

Enables the sharing of responsibilities.

Allows for the SHG to function smoothly even if some members are absent.

Creates equal opportunity in the SHG.

Does not allow for domination by a few members

Key Questions :

Why should leadership be rotated in an SHG?

How frequently should leaders be rotated?

Why should new leaders be appointed six months in advance of retirement of the
old leaders?
Why Self Assessment is necessary :

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Self Assessment is important in order to :

Identify one’s strengths and weaknesses, to build on one’s strengths and reduce
weaknesses.

Identify opportunities available to the group and to make the best use of them.

Monitor one’s performance as a group.

Hold a mirror to ourselves.

Indicators for Self Assessment :

Vision and Mission :

Organizational Management :
 Group size and Composition
 Participation
 Meetings
 Rules and Regulations

Financial Management :
 Savings
 Book keeping
 Loans
 Common Fund Management :
 Auditing

Organizational Accountability :
 Rotation of Representatives
 Non partisan Nature
 Distribution of Benefits
 Sharing of Information

The Ability to Build and Sustain Linkages :

The Ability to learn and to Evaluate Organizational Performance

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STEPS IN CAPACITY BUILDING OF SELF HELP GROUPS AND VILLAGE
ORGANIZATIONS
Capacity Building of SHGs and Village Organizations:
Capacity building plays an important role in the building of the institution of rural
poors. Following steps will have to be followed in building the capacity of the SHGs and
Village Organizations, during their development as well as in their management:
1. Enabling
2. Empowering
3. Decision Making
4. Self Reliance

PROCESS OF CAPACITY BUILDING :

1. Enabling :
Involve them in group formation
Constitution
Registration
Leadership – cadre development
Team Working

Skill in * Group Action

Action

Book keeping
Meetings * Regularity

Significance
Overcome * Jealousy problems

Family Quarrel

Communication
Influence of Community :

Local

Social

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Political

Economic

2. Empowering :
Confidence
Self esteem
Power to negotiate and cooperate with

Government organizations
Plan and undertake – new activities
Higher management skills
Self Dependent
Work with authority
Independently seek

Advice

Exposure

Take administrative measures.

Own responsibility.

3. Decision Making :
Enter into formal and informal contracts to change with time and situation :

Socio

Political

Economic
Modify constitution
Change rules and take independent decisions.

4.Measures of Self Reliance :

Regularity of group meetings – high attendance of group promoter

Shared leadership . Members participation in group making

Continuous growth in group savings- financial

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High rate of loan repayment

Group problem solving in absence of group promoter

Linkages with development services.

Series of training programmes are be organized for different stake holders for
strengthening Self Help Groups.This will ultimately build the capacity of the
institutions of the poors.
Following sequence can be maintained in the process of capacity building for
different stakeholders:
 Capacity building of good NGOs, CBOs, professionals, activists officials of
line departments, bankers and PRIs to achieve for smooth rollout.
 Formation of block level trainer’s team – block level trainers team includes
officials, professionals, selected community resource persons, book keepers,
accountants, community animators, facilitators.
 Preparation of training modules and materials
 Capacity building training/ hand holding for the SHGs to achieve full
potential

Sequences of the training programmes:

Training programmes for officials, bankers, NGOs, CBOs , professionals, activists, PRIs
and other stakeholders

Training for community resource persons, coordinators, facilitators, book keepers, social
mobilizers

Handholding training programme for SHG members , members of primary federations

etc.

Broad subjects to be covered during the capacity building programmes for Self Help
Groups and Village Organizations (Primary Federations):

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Tentative modules for training programmes of community resource persons, social
mobilisers, facilitators, members of SHGs.

a. Types and causes of poverty (through exercises and games).

b. Participatory identification of poor – tools and techniques.
c. Characteristics of poor households and problems of poor families
(participatory exercises).
d. Credit requirement of poor and its sources (through matrix ranking
exercise).
e. Need for mobilising poor into SHGs and federations (video film on
best practices and group discussion).
f. Concept of SHGs and types of groups.
g. Formation and development of SHGs – stages in development
including vision and goals of SHGs (with games and stories).
h. Functions of SHGs, group dynamics and management of group
activities (with games, exercise and stories).
i. Roles and responsibility of the group leaders and members.
j. Conduct of meetings.
k. Rules and regulations of SHGs.
l. Savings and resource mobilisations, internal lending, common fund
management (group exercises).
m. Accounting, book keeping, record keeping, auditing.
n. Team spirit, team work, group cohesion, collective decisions
(games and exercises).
o. Decision making and conflict resolution (games and exercises).
p. Preparation of micro credit plans by the groups.
q. Self assessment, monitoring and evaluation.
r. Linkages with financial institutions and banks.
s. Convergence for social services.
t. Planning for livelihoods activities.
u. Concept, types and objectives of federations.

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v. Approach and rules in management of federations.
w. Best practices from Andhra Pradesh and Bihar.
x. Project formulation for development micro enterprises.
y. Support services for livelihoods activities.
z. Grading of SHGs and index of group sustainability.

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 CHAPTER- 2

Decision Making and Conflict Resolution in Self Help Groups

and Village Organizations :

Self Help Groups and Village Organizations are grass root level democratic
institutions of rural people. Decision making plays an important role in the management
of these institutions of rural poor. Being institution of people, conflict and are bound to
be there in the management of their day to day activities.
In the above background following points relating to decision making and conflict
resolution will have to be discussed with the members of SHGs and Village
Organizations for the sustainability of their institutions.

Meaning of Decision:

•A conclusion.
•An output of a discussion.
•A judgment reach about an issue.
•A choice

Decision Making :
•The unspoken: Group Decision by Omission
•The Self – Authorised: Decision by one/ individual

•The Hand –Clasp : Decision by Two

•Decision by minority/Few

•Voting: Decision by Majority

•Consensus or Collective Decision –making

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Necessities of Collective Decisions:
•To share the responsibility of the group.
•For transparency and clarity.
•To avoid conflicts.
•To increase participation of individual members in Self Help Group.
•For better relationships between members in the Self Help Group.

Importance of Recording Decisions:

•To recall all decisions taken.
•Transparency in the group.
•Accountability on the part of those who made the decision.
•Decisions to follow in the next meeting.

Conflict Resolution:
Reasons behind a Conflict:
•Differences in background, perception, needs or attitude.
•A lack of mutual trust.
•Poor Communication.
•Lack of openness to each other’s view.

Types:
Functional Conflicts: Some conflicts can support organizational goals. Clashes and
ideas about tasks also help in choosing better tasks and projects. These are “Functional
Conflict” .

Approaches to dealing with Conflicts:

1. Collaborating :
This approach can be adopted in the following situations :

When both sets of concerns are too important to be compromised

When objective is to learn.

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To merge insights from people with different perspectives

To gain commitment by incorporation concerns into a concensus

To work through feelings that have interfered with a relationship

2. Accommodating :
This approach can be adopted in the following situations :

To allow a better position to be heard and to show reasonableness .

When issues are more important to others than yourself.

To build social credit for later issues.

To minimize loss when you are outmatched and losing.

When harmony and stability are especially important

To allow subordinates to develop by learning from mistakes

3. Competing :
This approach can be adopted in the following situations :

When quick , decisive action is vital

On important issues where unpopular actions need implementing .

On issues vital to organization and when you know you are right.

Against people who take advantage of non-competitive behaviour.

5. Avoiding:
This approach can be adopted in the following situations :

When an issue is trivial, or more important issues are pressing.

When you see no change of satisfying your concerns.

To let people “cool down” and regain perspective.

Gathering information supersedes the immediate decision.

When others can resolve the conflict more effectively

6. Compromising :
This approach can be adopted in the following situations :

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When goals are important, but not worth potential disruption of more assertive
modes.

When equal power opponents are committed to mutually exclusive goals.

To find temporary settlements of complex issues

To arrive at expedient solutions under time pressure.

As a backup when collaboration or competition is unsuccessful.

Managing Conflicts:

Allow time for cooling down.

Analyse the situation.

State the problem to the other person.

Leave the person for some time.

Use a win- win approach.

Factors Affecting Conflicts:

Personality traits affect how people handle conflict.

Threats from one party in a disagreement tend to produce more threats from the
other.

Conflict decreases as goal difficulty decreases and goal clarity increases.

Men and women tend to handle conflict similarly I e. there is no “ Gender Effect”.

Steps in solving Conflict situations :

Openly discussing the conflict including what happened, who are involved and
listening to every body’s point of view.

Listening out possible solutions to he conflict, taking into account every body’s
idea.

Identifying the solutions.

Adopting the most effective and collective solution

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Implementing the decision taken by deciding on the time frame for
implementation and deciding on who will do what.

Review and follow up.

In few situations an external person may be called to moderate conflict resolution.
Role of the lead person to present and clarify the background of the
Conflict :

Clearly explain your problem in terms of behaviour, consequences

and feelings:

-Maintain Personal ownership of the problem.

-Use a specific incident to illustrate the expectations or standards violated.
-Stick to the facts, avoid drawing evaluative conclusions and attributing motives to the
respondent.

Persist until understood and encourage two-way discussion :

-Restate your concerns or give additional examples.

-Avoid introducing additional issues or letting your frustration and emotions grow.
-Invite the respondent to ask questions and express another perspective.

Manage the Agenda carefully :

-Approach multiple problems, proceeding from simple to complex, easy to difficult,

concrete to abstract.
-Conversely , don’t become fixed up on one issue.

Role of a Chairperson in the group conflict management:

Establish a climate for joint problem solving :

-Show genuine concern and interest .

-Respond appropriately to the lead person’s emotion.

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Seek additional information about the problem :
-Ask questions that channel the lead person’s statement from general to specific and from
evaluative to descriptive.

Agree with some aspects of the complaints :

-Signal your willingness to consider making changes by agreeing with facts, perceptions,
feelings or principles.
Role of a Mediator for Managing Conflict:

Acknowledge that a conflict exists :

-Select the most appropriate setting for coaching and fact-finding.

-Propose a problem- solving approach for resolving the dispute

Maintain a neutral posture :

-Assume role of a facilitator and judge. Do not criticize the disputants for their inability
to resolve their differences.\
-Be impartial towards the disputants and issues.
-If correction is necessary , do it in private.

Manage the discussion to ensure fairness :

-Focus discussion on the conflict ‘s impact on performance and the detrimental effect of a
continued conflict.
-Keep the discussion issue-oriented , not personality –oriented.
-Do not allow one party to dominate the discussion. Ask directed questions to maintain
balance.

Need for Leadership in a SHG:

Leadership is needed so as-

To monitor and improve upon the group’s performance.

31

To coordinate all the group’s activities.

To nurture the group’s inter-personal relationships.

To ensure that all members participate in the group’s activities.

To take initiative in establishing linkages with external organizations.

To provide strategic direction to the group.

To present the SHG in various bodies like federations.

To express and interpret the group’s vision.
Leadership Styles:

An autrocratic Leader

A nutral Leader

An anarchic Leader

A democratic or Participatory Leader.

Necessities of Rotational Leadership:

Creates opportunities for all members to develop leadership quality through
practice.

Enables the sharing of responsibilities.

Allows for the SHG to function smoothly even if some members are absent.

Creates equal opportunity in the SHG.

Does not allow for domination by a few members.

32
 CHAPTER –3

Index of Sustainability of SHGs and Village Organizations

Different indicators and variables are to be identified for the measurement of

sustainability of Self Help Groups as well as federations of SHGs. Important aspects like
institutional, managerial and financial needs to be studied. Following Index and
indicators will have to be inculcated in the minds of the members of SHGs and Village
Organizations, so that they can follow the required norms in the development and
management of the groups for their sustainability.

Institutional Sustainability Index :

Institutional sustainability Index of the SHGs was constructed with the help of Six
Indicators of Group Management:

Leadership Index.

Index of Meetings.

Decision making Mechanisms of record keeping.

Accounting and monitoring.

Networks and memberships, conflict resolution capacity.

Dropout rate of the members from the group

Leadership Index :

The Leadership Index is constructed through Three variables:

The selection procedure of the Group .

The periodical rotation of leadership in the group.

Identifying the group management capabilities of the leaders in the group.

2. Index of Meetings & Participation in Decision making :

This Index is constructed through Six variables:

33

Frequency of Group Meetings.

Regularity of the meetings.

Average attendance at the meetings.

Decision making process in the meeting.

Participation of the members in the decision making process.

Penalty imposed for irregularity attendance.

3. Index of group Record Maintenance :

This Index is constructed through Five variables:

Maintenance of Records.

Regularity in maintaining the records.

Who writes of records, the knowledge of writing the records.

Level of transparency in maintaining the records.

Auditing the group accounts.

4. Index of Capacity to Resolve conflicts :

This Index is constructed through Three variables:

The conflicts faced by the members/groups.

With project staff.

The level of capacity of the group in solving the conflicts

5. Networks and membership Index :

This Index is constructed through Three variables:

Groups having membership in federation /cluster of groups.

Membership in formal financial institutions .

Membership in local organizations, like- schools, political and religious
institutions.

34
6. Member Dropout Index :
This Index is constructed through Three variables:

Number of members that left the group after formation.

The cause for the droupout.

Default by the dropout member.
Once Independent Indexes are constructed for each of the above said indicators
of group management, all the individual indices will be used for the construction of a
composite index of SHG- Institutional Sustainability.

Financial Sustainability Index:

The Financial Sustainability Index of the group has been constructed with the help
of six indicators of financial management of the group. As the first step , an independent
index is constructed for each of these components.

1.Thrift and Savings Index:

The thrift or saving index measures the saving potential and utilization in the group

The Index has been constructed by using five variables:

The frequency of savings per month

Average savings for the group per month

Total common fund created by the group

Utilization of group savings

Mode of savings collected from the members

1.Credit Accessibility Index:

Maintaining equity and punctuality in delivering adequate credit has more impact
on the sustainability of the groups
The Index has been constructed by using four variables

The average loan amount accessed by the group .

The average number of members who accessed the credit

35

The process / procedure of credit disbursement.

3. Process of Credit Rotation Index:

Credit rotation is one of the decisive indicators of financial sustainability of the group

The Index has been constructed by using three variables:

The frequency of loans taken by members.

The criteria followed in credit rotation

Credit rotation in the group

4. Credit Repayment Index:

Repayment of loan to Financial Institution or to the group is equally important for its
sustainability

The Index has been constructed by using three variables

Repayment according to scheduled by members to the group.

Repayment according to schedule by group to the Micro Finance Institution.

The number of defaulters in the group and amount in default.

5.Index of Resource Mobilizations and Utilization :

The group’s capacity to absorb and utilize the resources will determine the financial
sustainability of the group.

The Index has been constructed by using four variables

The effort of the group members to raise resources

The capacity of the group absorb and utilize resources.

The average number of members are engaged in income generating activities.

The level of benefit distributed among the members.

6. Index of Independence from Social Parasites:

This index will explain the efficiency of group lending in rural areas to meet the credit

36
requirements of the poor.
The Index has been constructed by using three variables
 The potential of the group in fulfilling the credit requirements of the members.
 Number of group members still depending on informal lenders.
 Proportion of informal credit in total credit accessed.

In order to assess the sustainability of a SHGs, all SHGs will be ranked (ie 0, 1 or
2) individually for each sub- indexes as given below:

Leadership Index:
a. The selection procedure of the leader of the group:
Ranks:
Leader is selected by few people The leader is selected The leader is selected
by majority by all members
0 1 2

b. The periodical rotation of leadership in the group:

Ranks
No rotation of leadership Sometimes leaders are Periodically rotated
rotated
0 1 2

c. Identifying the group management capacities of the leaders in the group:

Ranks
Can not manage the group Can manage to some extent Good Management
Capacity
0 1 2

, the members will have to rank their SHG (ie. 0, 1 or 2) against each variables as
follows:

Index of Meeting and Participation in Decision Making:

a. Frequency of Group Meetings:

Ranks:
No group meetings Group meeting in a month Group meeting in every
week
0 1 2

b. Regularity of the meeting:

37
No group meetings No regular Group Meetings Group meeting in every
week
0 1 2

c. Average Attendance at the meeting:

0 to 50% 50 to 99% 100%
0 1 2

c. Decision making process in the meeting:

By minority By Majority By all
0 1 2

d. Participation of the members in the decision –making process:

No participation Participation by few Participation by all
0 1 2

e. Penalty imposed for irregularity attendance:

No penalty provisions Not so strict Strictly imposed
0 1 2

Index of Group Record Maintenance:

a. Maintenance of Records:

No one know how to Some members know how All members know how to
maintain the records to maintain group records maintain group records
0 1 2

b.Regularity in maintaining the records:

Records are not Partially maintaining Regularly mainlining
maintaining
0 1 2

c.Who writes the records/ knowledge of writing records:

Records maintained by the Records maintained by Records maintained in the
leaders some members of the group group is known by all
members
0 1 2

d.Level of transparency in maintaining the records:

Not transparent Partially transparent Always transparent
0 1 2

e.Auditing of Group Accounts:

38
Not audited Partially Audited Fully audited
0 1 2

Networks and Membership Index:

a.Group having membership in federation :

Not having membership in Passive membership Active Membership
federation
0 1 2

b. Membership in formal financial institutions:

Not having membership Passive membership Active membership
0 1 2

c. Membership in local organizations like schools, social ,political insti.:

Not having membership Passive membership Active membership
0 1 2

Index of Capacity to Resolve Conflicts:

a. The conflicts faced by the members:
Frequently faced regarding Sometimes faced regarding Faced Functional Conflicts
ordinary matters important matters
0 1 2

b. The level of capacity of the group in solving the conficts:

Could not solved/ Solved in long term Functional Conflict/
Destructed the group Smoothly solved/
constructive conflict
0 1 2

Member Dropout index:

a.Number of members that left the group after formation:
Many members Few members Zero dropout
0 1 2

b. The Cause for the Dropout:

Due to interpersonal Due to some un-avoidable Due to death
problems situation
0 1 2

c. Default by the dropout member:

Defaulter Defaulter but not affecting Not defaulter

39
 the group
0 1 2

Financial Sustsinability Index:

Thrift and Savings Index:

a.The frequency of savings per month:
No savings Irregular Savings Savings per month / regular
0 1 2

b.Average savings of the group per month:

Zero savings Less than Rs 50 per month Rs 50 or more per month
0 1 2

c.Total common fund created by the group:

Not created Irregularly created Regularly created
0 1 2

d.Utilization of group savings:

Not utilized Utilized on the basis of Decision by all
fewer’s decision
0 1 2

e.Mode of savings collected from the members:

Not collected Less than 4 times a month 4 times or more in a month
0 1 2

Credit Accessibility Index:

b. The average number of members who accessed the credit:
No one accessed the credit Many members accessed All members accessed the
the credit credit
0 1 2

c. The process / procedure of credit disbursement

Without any consideration Need based Selection of very needy one
0 1 2

Process of Credit Rotation Index:

a. The frequency of loans taken by members:
Not taken Taken Need based
0 1 2

40
 b. The criteria followed in credit rotation:

On the basis of decision by Decision by majority Decision by all

few
0 1 2

c. Credit rotation in the group:

Not Rotating Partially Rotating Frequently Rotating

0 1 2

Credit Repayment Index:

a.Repayment according to scheduled by members to the group.
Schedule not followed Schedule sometimes According to schedule
followed
0 1 2

B.Repayment according to schedule by group to the Micro Finance Institution.

Schedule not followed Schedule sometimes According to schedule
followed
0 1 2

c.The number of defaulters in the group and amount in default.

Many Few No one
0 1 2

Index of Resource Mobilizations and Utilization :

a. The effort of the group members to raise resources:
No effort Some efforts Large efforts
0 1 2

b.The capacity of the group absorb and utilize resources:

No capacity Building Capacity Have Capacity
0 1 2

c.Number of members are engaged in income generating activities:

Few engaged Many engaged All are engaged
0 1 2

d.The level of benefit distributed among the members:

Distributed among few Distributed among all on the Equally Distributed
basis of the decisions by
majority

41
0 1 2

Index of Independence from Social Parasites:

a.The potential of the group in fulfilling the credit requirements of the members:
Low Medium High
0 1 2

b.Number of group members still depending on informal lenders:

Fully depending Partially depending Not at all
0 1 2
.

In the first step, a set of variables of group management was identified from the
primary survey. All total 12 indicators were selected to measure the sustainability of the
groups. They are further divided into 2 indexes ie institutional and financial indexes.
Again each of the indicators is determined by a set of variables. 0,1 and 2 ranks are used
in each variables. All SHGs will have to assessed on the basis of each variable by putting
0, 1 or 2 rank to it. For each individual indicator, average (on the basis of the data
collected) will have to be calculated. The average Data obtained from each individual
indicator will be used for further calculation of average for the 2 indexes (ie. Institutional
and Financial indexes). In this way average scores obtained by each SHGs will have to
be calculated separately to compare the sustainability capacity of each SHG. Those SHGs
who have scored near to point 1 are considered to be a medium one and the SHGs who
scored point 1-2 will be considered as the strongest one.

Source :The article is based on the original article titled “ Index of Micro Finance Group
Sustainability & Concepts, issues and empirical evidence from Rural India”, written by Dr.
Naveen Kumar K. , Assistant Professor, Post Graduate Department of Management Studies &
Research Center, Karnataka, published in the Micro Finance Review Journal, Volume 1, January
2009.

42
Qualitative Indicators :

Short term :

Individual self-assertion

Collective resistance

Collective Action

Greater access to physical resources.

Increase in literacy skills

Increased access to information on health issues and greater awareness to utilize.

Existing health services.

Medium Term :

Reduction in women’s burdens.

Enhanced nutritional well- being of children and adolescent girls.

100 % immunization of children and pregnant women.

Higher enrolment of girls at school.

Involvement in decision making in family.

Changes in gender roles in family.

Long Term :

Reduction in maternal and infant mortality.

Higher age of marriage for girls

Acceptance of small family norms and child spacing

Perceptible changes in gender biased socialization practices, such as improvement
in discriminatory food intakes, freedom of movement of girls, participation of
boys in household work.

Quantitative Indicators :

Number of gender sensitization training programmes conducted.

Number and proportion of non- conventional economic activities taken up.

43

Range of economic activities promoted.

Number of loans procured.

Amount of savings accrued

Average increase in women’s incomes

Number of women beneficiaries.

General Indicators :
Activities / events in which a group participates : Eg. Collective economic activities ,
meetings, training sessions.

Action: Specific Action undertaken by the group to tackle a particular problem.
Eg. Action to obtain social welfare, action to defend members interest against
exploitation by a traden, action to persuade some defiant husbands to assist
members , active participation in group activities.

Change in group behaviours : The nature of group meetings , issues discussed ,
decisions taken, degree of participation, use of language.

Nature of intervention: The relationship between the community and groups or
other development workers- whether it is based on trust and mutual understanding
or suspicion and intimidation.

Relationship with other groups : Process of discussion , level of intergroup
contact , joint action etc.

Group sustainability : Number of years that the group is functioning , number of
times the revolving fund has been recouped , number of members who have
dropped out with reasons, number of new members added as replacements,
diversification of activities etc. will give some indication of group sustainability.

Economic Autonomy

Opportunities given and handled.

Increase in decision-making capacities.

Attitudinal changes.

Role perception (self and perception of the community)

Increase in quality of living.

Increase in earning and purchasing power.

44
Indicators relating to Self – generated thrift and credit:

Regularity of thrift form the members.

Rotation of atleast 90% of the thrift among the members by way of loans. With
amounts given to more number of members at a time.

Utilization of atleast 70% of the loans for income generation, agricultural
purposes, asset building, and loan repayment.

More group loans for group activity.

Prompt repayment with interest.

Regular meetings of the group members for (a) Feedback on utilization of amount
(b) Sharing on experience with amount utilized (c) Exploring various income-
generation and enterprise options .

Presence of strong committee within the group to prioritise needs.

Strong peer pressure for proper utilization of amounts. Presence and regular
update of related books namely.

Thrift Register

Loan register

Minutes book

Pass book
Indicators relating to Livelihood Activities :

Number of Programmes taken up

Range of activities taken up

Group vs individual activities.

Marketability of the produce/ product within the project area.

Direct bearing of the activity on the income levels of the people concerned.

Number of skill trainings imparted.

Number of skilled trainees taking up the activity.

Network linkages (with banks, administrative etc) built up for initiating activity.

Activity vs development of area , change/ improvement in peopl’s practices etc.

Number of activities promoting (a) indigenous technology (b) Environmental
conservation and (c) Programmes of national importance (sericulture, NPM, non-
conventional energy)

45

Number of assets of people’s utility built up in course of activity.

Number of people benefiting form sub- components of activity in quantifiable
terms , like wages etc.

Replication of these activities within and outside the area.

Number of Grass root level extension workers developed for person- to person
transfer of skills.

Number of people directly benefiting through imparting the training as
professionals.

Number of second-line trainings taken place (through grass root level extension
workers)

Range of marketing arrangements option build up within outside the area.

Sharing of produce amongst the people.

Monitoring and Evaluating the broad areas:

Internal Cohesion

Group solidarity

Active and critical participation

Reduced dependence/ increased confidence

Self Management capability.

Democratization of power , collective responsibility.

Involvement in regular discussion with other similar groups and institutions.

Involvement in creation of similar groups and

Ability to deal with government officials.

Characteristics of a good Group :

The Group members should have a feeling of self reliance - A Self Help Group

The Group should have clearly defined goals - A Group with goals

The members should have relations of Trust, cooperation

46
& love among themselves - An Affinity Group

All members of the Group should be poor having similar

& social & economic problems/ background - A Homogeneous Group

All members of the Group should run it unitedly - A Democratic Group

All the Group members should possess leadership qualities - A Leadership Group

The Group should follow good rules and regulations - A Disciplined Group

The transactions of the Group should be transparent - A Transparent Group

The living standards of Group members should gradually
Improve - A Progressive Group

The Group members should acquire social consciousness - A Conscious Group

Index and indicators will help in grading the SHGs for formation of Village
Organization, Community resource persons will impart training on the index and
indicators and monitor the performance accordingly.

47
 CHAPTER -4
SOCIAL CAPITAL

Participatory Assessment of Social Capital:

Social Capital is an accumulation of various types of social, psychological ,
cultural , cognitive, institutional and related assets that increase the amount of mutually
beneficial cooperative behaviour. Social Capital refers in general to the glue that holds
groups and societies together through bonds of shared values, norms and institutions. The
terms – social capital, social capability, social exclusion and social engagement are inter-
related.
Self Help Groups can be graded on the following criteria before moving on to
next step/ intervention:

Criteria for Assessing Social Capital of Self Help Groups:

Criteria for Assessing Changes in Social SHG1 SHG2 SHG3 SHG4

Capital
Productivity
1. Group members keenness , leadership and 1 1 3 4
sense of responsibility
2. Group capacity and level of confidence 1 1 3 4

3. Status of growth in financial capital 1 1 1 2

48
4. External linkages- vertical and horizontal 1 1 2 2

5. Technologies and improvement 1 1 1 1

Equity

6. Broad-based understanding of group 1 2 3 4

activities and worldview
7. Group participation in decision making 1 1 2 2

8. Equity in benefit flows 1 1 4 4

9. Livelihood impacts and reduction in 1 1 5 2

vulnerabilities.

Sustainability

10.Vision/ ideas for future 1 1 3 4

11. Group- based natural resources 1 1 4 4
regeneration/conservation
12. Internal norms, mutual trust and role 1 1 3 3
clarity
13. Group attachment/ ownership 1 1 2 3
14. Ability to raise issues and resolving 1 1 2 2
conflict
15. Maintenance of Assets 1 1 3 4
16. Social inclusion and emotional well 1 2 6 4
being
17. Freedom to function as a group and 1 1 4 4
power to influence decision- making.
18.Power “within” and power “with” 1 1 3 3
19.Access to information and responsive 1 1
governance

20Transparent decision –making from 1 1 3 3

above
Total Score 20/120 22/120 57/120 63/120

Total Score on 100 16.7 22.5 47.5 52.5

49
Note:1: Qualitative Scoring : Measurement of Social opportunity is based on scoring on
20 criteria, as follows: 1=Negligible, 2=Low, 3=Medium, 4=High, and 6= Excellent.

Note 2: There are 20 criteria for measurement of Social opportunity. Each criterion with
the highest score of 6, leads to a total score of 120. Any group or village Organization ,
which scores “excellent” on all criteria has a total score of 120 (6 multiplied by 20) while
that, which scores “negligible” on all criteria has a total score of 20 (1 multiplied by 20)

Index and indicators will help in grading the SHGs for formation of Village Organization,
Community resource persons will impart training on the criteria for social capital and
monitor the performance accordingly.

50
 CHAPTER – 5

FREQUENTLY ASKED QUESTIONS:

On Savings and Group Meetings

SAVINGS:
Question No 1. Should all members pay equal savings?
Ans: Savings can be paid in 3 ways :
 Equal Savings: All members pays the minimum amount equally.
 Unequal Savings : Members save according to their capacity. The profits of the
Group are distributed in proportion to the members savings.
 Savings according to the Season: Members pay more in the seasons and less in
summer.

Question No 2: Should the savings amount be paid once a month?

Ans : Members decide how the savings be remitted . Normally it is done in three ways :
 Weekly Savings: Savings are paid for four weeks at the rate of one installment a
week.
 Monthly Savings: The whole savings installment is paid on the last day of the
month
 Once a fortnight : The savings are remitted twice a month at the rate of once a
fortnight.

51
Question No 3 : Is interest paid on savings ?
Ans: Interest is paid on the member’s savings. The rate of interest is decided by all the
members together.

Question No 4: Are savings and loan interrelated ?

Ans: Some groups sanction only twice the amount of a member’s savings as loan. Banks
too grant loans keeping in view the total savings of the Group. Any amount can be
sanctioned according to the need.
Question No 5 : To whom , when and where should the savings be paid?
Ans: A member should handover her/his savings in the presence of all other members to
the president in the savings meeting. Members should get the pass book signed
immediately after paying the savings.

Question No 6: If one withdraws midway are the savings returned immediately?

Ans: The group decides how much should be paid if a person wants to join midway.
Those who can afford to pay the whole amount may be asked to do so. The Group should
behave liberally towards those who can’t do so and accept savings from that month.
Otherwise the poor will be denied the opportunity of joining the Group.

Question 7: What will happen if the savings are paid late?

Ans: If savings are remitted late, the discipline of the Group will be affected and
sanctioning new loans will become difficult. To address this problem, the Groups should
impose fines on members who pay their savings late.

Question 8: How to pay the savings in the season when no work is available?
Ans: If more savings are paid during the work season, it would suffice for the loan
season.
Question No 9: For how much period should a member save in a Group ?
Ans: Savings are as important as breathing for an individual. People have needs
thoughout their lives. So savings should continue for the whole life.

52
Question No 10 : If a member dies, to whom are her savings paid?
Ans: The name of the heir is written on the first page of the pass book. The savings
amount is paid to the heir whose name has been entered there by the member.

Question No 11: What is the assurance that the savings money is safe ?
Ans: The savings collected in the meeting are deposited in the Group’s account at a bank.
The president shows the bank receipt to all the members at the following meeting.
Whenever money is requird, the money can be drawn from the bank but not only on
showing resolution signed by all the members. Loans from other sources are also
obtained collectively.

Question No 12: If a member wants to leave the Group , is it possible to return her
savings immediately?
Ans: Not possible . This is because in a Group, the savings amounts are given out as
loans to members . So it is necessary the members informs the members in advance that
she/he is withdrawing. Otherwise, one or two months after she has dropped out, her/his
savings will be returned to her/him.

GROUP MEETING :
1. What would happen if the date, time and venue of the meeting are not decided in
advance ?
Ans: The meetings will not be held regulary. The members will have to be informed
individually about the date and time of the meeting every time. The leader will have to go
from door to door inviting members to the meeting. Only if the members turn up on the
appointed day the meeting, discipline will be maintained in the Group.

2. What is the benefit if each meeting is presided over by a different member?

Ans: All members will develop leadership qualities.

53
3. What is the benefit achieved by holding the meetings at a different member’s
home each time?
Ans: The member will consider it as a honour to receive all the members at her/ his place.
She/he will recognize that she/he has an equal stake in the Group. Her/his family
members too will learn about what happens in a meeting.

4.What should the members sit in a circle ?

Ans: This will create a feeling that all members are equal in the Group. They can all see
each other if they sit in a circle . It is a convenient arrangement for discussions.
Everybody will be able to observe how the books are maintained and transactions made
in the meeting.
5. Why should the attendance be taken soon after the meeting begins ?
Ans: By doing so, it will be known how many members came to the meeting in time. The
discipline of the members can be assessed. Fines can be imposed, as per norms, on
members who came late.
6. Is it necessary that the loan applications are scrutinized and approved in the
meeting ?
Ans: If loan applications are examined in the presence of all members:
1. It can be decided to whom should the loan be sanctioned first.
2. It can be found out if the activity to be taken up with the loan is profitable or
not.
3. The procedure for repayment can be decided.
4. Since the decisions are taken collectively, all members will take up the
responsibility of recovering the loans .

7. Why should the total amount collected in the meeting be declared to everybody ?
Ans: To improve transparency in the Group and to avoid malpractices in the management
of the Group and to raise the pressure on the members.

8. Why should the book keeper read out the minutes of the meeting ?

54
Ans: Everybody will come to know of what is happening . Everyone will develop trust in
the Group.

9.Why should all members sign in the minutes book?

Ans: It shows that the members approve of all the decisions taken collectively in the
meeting. The members will thus stand committed to the decisions made.

10. What is the harm if members leave a meeting in between ?

Ans: If one person leaves, others will try to follow the same. What takes place in the
meetings will not be known to them. The meeting will come to an end abruptly. Members
leaving a meeting in-between amounts to showing disrespect to the Group.

11. What is the loss if savings & loans are not paid in the meeting?
Ans:
1. It is difficult for the leader to go to each member’s house and collect money. This
method will not last long.
2. If money transactions are held in everyone’s presence, everyone will remember
them.

3. All the members will together question those who have not paid their loans. As
the payments are made in the presence of all the members, all of them remember
all the details.

55
 CHAPTER –6
Financial Management of a Group

For Financial Management:

Common Fund Management Related
What to promote What to discourage
Frequent rotation of the common fund for Large sums of money lying unutilized
loans for long periods represent process
blocks the reasons have to be analyzed
and addressed.
A balance needs to be maintained between the Large amounts of money for
members savings and matching funds from the infrastructure, community programmes
programme (a. 1:3 ratio is the limit). (There are or even credit management should not
examples where large programmes be router through the group since this
contributions have made members take can distort the working of the group to
careless decisions which they would not have fund- monitor rather than fund
taken with their own money. In some groups managed : besides such groups spend
members have rotated only the amount most of their time and energy
received from the prgramme, keeping their implementing “our” programmes.
savings intact)
No money transaction should be
All financial transactions should take place conducted outside the meetings,

56
during a group whether it relates to loans disbursals,
collection of savings and repayments or
All accounts should be in the name of the decisions with regard to using funds for
group and not in the name of one or more community programmes, no group
members. Signatories to the group Bank member or office bearer should hold
account must be rotated periodically. cash balances at any time, several
groups however agree to place small
All decisions regarding fund management and amounts at the disposal of the office
fund utilization should be recorded and be bearers for emergencies.
verifiable through the minutes in the group.
Village Organization’s staff should not
Fund management tends to improve if groups handle group money, they should not
display charts showing lists of members loans, function as group office bearers, neither
recoveries, overdue balances and other should hey accept (even informally) to
activities. perform those functions that are
expected to be performed by the group
members (eg,. Depositing money in the
bank, making withdrawal , purchases
etc.)
SAVINGS RELATED
What to promote What to discourage
Encourage the savings habit as a value in The practice in some groups of
itself and not just as a means of increasing the requiring equal savings by all
groups fund position. It builds up the habit of members each month regardless the
thrift and controls unnecessary consumption fact that some members may at times
be in a position to save more has to be
There are seasonal variations in the amounts discouraged.
saved by a member. Many groups take such
seasonal variations into account in fixing the Several groups make a distinction
minimum amount to be saved each month. between members savings and
contributions to the common fund.

57
 Every group needs a policy on how to manage While contributions are non
the savings of members who : refundable , the practice of
a. leave the group voluntarily withholding savings of members
b. Are asked to leave for some reason. leaving the group (either voluntarily or
forcibly) should be discouraged. There
are instances where such a decisions
Payment of interest to members on savings has resulted in a drop in savings
deposited in the common fund is still not a among other members who fear the
widespread practice but one that is worth same consequences.
considering and promoting.

Many groups permit their members to save for

a particular purpose e.g. weekly savings to
build up the necessary amount to pay a Bank
Loan installment when it falls due. Such
practices should be encourages.
LOAN RELATED
What to promote What to discourage
All loan applications must be addressed to the Care should be taken to ensure that few
group or to the office bearers of the group and members do not monopolies all loans.
must be scrutinized and approved , modified
or rejected in group meeting only and minuted Large loans for a singe member must
accordingly. be avoided until the group is financially
strong and has systems of
Repayment schedules must be finalized and administration that are adequate to
minuted when loans are disbursed. motive and guide members and impose
sanctions for deviant behaviour.
Service/ interest charge on loan must be clearly
separated from repayments that rates are more The tendency to first decide on who
easily managed. should get a loan and then to assess
how much money there is in the group
Promissory notes obtained by many groups for and if there is a deficit to ask the CRPs
large loans should be between the group and to meet it, is not credit management, it
the member. should be discouraged at all costs.

Loans (cash or cheques) must be disbursed Loans must not, be disbursed to

only at group meetings persons other than the group member
who has actually applied for it.

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The practice of giving a second loan before the
first is repaid should be carefully assessed ,
particularly if there are overdue installments.

When the Banks advance loans they should be

given to the group on the basis of its
performance and not made out in the names of
the individual members. Care should be taken
to ensure that the Bank loan is considered by
the m embers as “their” money as part of their
common fund.
BOOK KEEPING RELATED
What to Promote What to discourage
All groups require training to keep basic books The practice of keeping books with
and documents, all record must be kept in a CRP staff or in the office should be
safe box with the group either in the meeting discouraged.
place or with one of the office bearers.
Money for purchase of books and
All books must be kept up to date , with stationery may come from the
transactions being recorded as soon as they programmes at the initial instance but
occur not on a continuing basis.

All groups must close the books by the end of Initially CRPs/ Book-keepers may have
the calender financial year. to assist the groups in maintaining their
books and documents but not on a
Groups must be helped to develop and permanent basis.
maintain their own systems and records for
book keeping. If a group retains a person on an
honorarium/ wage basis to keep
accounts/ minutes , the money will
have to be generated by the group and
not expected from the Programmes.
AUDIT RELATED
What to Promote What to Discourage
Accounts must be audited at least once a year Disposal of group owned assets cannot
be undertaken without the approval of
Auditors must ensure that concerned staff and members and appropriate
group representatives re present at the time of documentation.
audit.
Members who have purchased assets
Audit reports must be presented to the group in with group assistance cannot dispose
a language in which they can be understood by off the same while loan installments are
all members still due, without adequate reasons that
have the approval of other members.
Audit reports should be taken note for

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immediate and appropriate follow up action. A
regular recorded system should be established
by the project offices/ apex group to follow up
audit remarks.

Book Keeping and Accounting at Self Help Group level:

Self Help Groups and Village Organizations will mobilize resources from different
sources. Group corpus or resources at village organization level will keep on increasing
through establishment of linkages for resource mobilization. Sustainability of these
institution of poor will depend upon efficient management of their resources. For this
financil management and book keeping are very much essential. Financial Management
becomes all the more important with SHGs taking up livelihood activities through
internal and external loan.

Books of Accounts to be maintained by the Groups:-

 Cash/ Bank Book
 Ledger/Loan Ledger/ Saving Ledger
 Vouchers
 Receipt and Payment Register

Cash Book:
 The cash book is a register to record all financial transactions of the Village
Organization
 Both Bank and Cash columns are necessary in the Cash Book to show all the bank
and cash transactions.
 The transactions are either receipts or payments.
 All transactions are first recorded in receipts/ payment voucher at the time of
receiving or giving the payment.
 All payments and receipts are recorded showing the head of account
 The cash and bank balance shall be certified by the secretary and treasurer on
daily basis.

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  On the dat of the receipt/ payment itself , receipts and payment voucher are
entered into he Cash and bank loan.

The format of the Cash Book is given below:

Date Head of LF Amount (Rs) Date Head of LF Amount

Account Account (Rs)
with with
Particul Particula
ars rs
Cash Bank Cash Bank

Vouchers:

There will be two types of Vouchers at SHG level:

 Receipts Voucher
 Payment Vouchers
Receipts Vouchers:-
SHGs shall issue receipts vouchers for every receipt made by the groups against savings,
Bank loan or the receipts.

The format of the receipt Voucher is given below:-

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 ------------ SHG, Village---------------

RECEIPT
Receipt No:
Received from- (Name and Address)
Membership No:

Sl. No. Particulars Amount

1 Savings Rs
s
2 Loan
Repayment
3 Membership Fees

4 Interest on
loan
5 Others to be
specified
Total

Rs in Words:
Book Keeper/CM Secretary/ Treasurer

Points to be noted in preparing receipts:

 All receipts are to be prepared in duplicate

 The duplicate copy of the receipt will be retained by the SHG and the original to
the person paying the amount to the SHG.
 All receipts must be serially numbered and dated.
 All receipts must be signed by the Treasurer.
 All receipts must be accounted for in the cash Book on the date of the receipt
itself.
 Any corrections in the receipts must be countersigned by the Treasurer.
 The amount in figure and words must agree.
Payment / Expenditure Vouchers:

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  Every payment / Expenditure must have some evidence which shows that
payments has been made.
 Vouchers are prepared for every payment/ Expenditure.
 There are two types of payment vouchers ie. Internal Vouchers and External
Vouchers.
 When the bills are received from the supplier or Shopkeeper or service provider
against any payment or expenditure , those vouchers are called External vouchers.
 When the vouchers are prepared internally against any payments/ Expenditure
those vouchers are called Internal Vouchers. In big organization internal vouchers
are prepared on the basis of external vouchers.
 In small organizations only external vouchers are kept as a proof of expenditure.
 If no external vouchers are received for any expenditure than SHG may prepare
internal vouchers duly signed by the person who has power to make the ppayment
and expenditure as a proof of expenditure. In SHG the voucher must be signed by
Secretary and Treasurer.

The format for Payment Voucher is given below:

……….SHG, Village……..
Payment Voucher No: Date:
Payment made to:
Description Head of Account Payment Towards Amount
Rs. P

Amount in words: Rs:…………………………………………………..only

We certify that supplies/services have been rendered and that the payment of
Rupees….(in words), is in accordance with the project principles and is fair and
reasonable.
……………………………….. …………………………………..
Date:……….. CM/ Book keeper Secretary/ Treasurer
Received this in payment of the account, the sum of
Rupees……………………….only

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 The details in the Payment Voucher shall be filled with the following particulars
:
 Who received the payment.
 The reason for making the payment
 The mode of payment- cash or cheque
 Particulars of the bills/ receipts enclosed to the voucher
 When payments are made by cheque, the invoice for which the payment
is made shall be attached to the voucher.
 Receipts have to be obtained for all payments and later on attached to the
Payment Voucher.
 Payment vouchers must be authenticated by the person authorize to
approve the payments.
 Whenever advance payments are made, it should be mentioned in the
Payment Voucher as “Payment of Advance for……”
 Preparation of payment voucher is optional for the SHG.

Ledger :
 The Cash book contains all transactions related to receipt or payment. So, cash
book shows mixed transactions on any particular date.
 The ledger book has one page/ folio for each head of account. All transactions
relating to a particular income or expenditure head, appearing in different places
of the Cash Book will be grouped together in that Ledger Book.

The format for a ledger folio is given below:

Date Cash book Description Debit Credit Balance
Page No

TOTAL

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Loan Ledger:
Since the maor activity in a SHG group is providing loan the members a separate
loan ledger are maintained for each and ever member. The Loan ledgers consist of
following information:
 Name and Address of the member
 Amount of Loan
 Rate of Interest
 No. of Installments for repaymen
 Purpose of loan
 Amount of Loan Given
 Amount of loan repaid.

Receipts and Payments Statements:

 The receipt and payment statement shows the funds spent.
 The receipts and payments statement will be prepared for every month and
submitted in monthly financial report
 Monthly Financial report of the Village Organization: The VO will prepare a
consolidated monthly financial report based on its Trial Balance.

Financial Report for the Month of ………… of the Village Organization

Receipt and Payment Statement

RECEIPTS PAYMENTS Rs
Opening Balance 6. Initial Loan to
the SHGs
1. Cash in hand 7. Livelihood Fund
2. Cash at bank 8. Social Fund
3. Contributions 9. Service Sector
received
-Cash

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 -Labour 10. Other
Expenditures

Initial loan to
SHGs
Livelihood Fund
Social Fund
Service Sector
5. Other Receipts Closing Balance
-Donations 11. Cash in hand
12. Cash at bank
Total Total

Date:………
Signatures………………………. ………………………..
Book keeper Treasurer
Note:……………………………..

Book keepers will be involved for hand holding training on Book keeping and
maintenance of accounts in Self Help Groups and Village Organizations. Series of
training programmes will also be organized on book keepers in the decentralized manner.

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 CHAPTER-7

CREDIT LINKAGE THROUGH FINANCIAL INCLUSION :

Criteria a Group Should fulfill to Avail of a Bank Loan :

Banks usually apply the following criteria to assess whether an SHG is eligible for a bank
loan :
 The SHGs should have credit transactions using its own common fund for at least
6 months prior to the application for a bank loan.
 The group should have no loan or interest overdue, particularly to any external
source.
 All members should have access to loans from the group’s common fund.
 There should be evidence of regular minimum savings by all members.
 The group’s minutes books and books of accounts should be properly maintained
 There should be evidence of regular meetings as per the norms established by the
group with a minimum of 80% attendance at any meeting.
 The groups’ common fund should be in regular circulation.
 There should be periodic audit of the group’s accounts and careful follow up on
the audit report.

Terms Conditions and Procedures Involved in Obtaining a Bank Loan :

The following are the terms, conditions and procedures involved in obtaining a bank
loan:
 Bank loans have a repayment period , which is fixed after the SHG negotiates
with the Bank.
 The group will pay interest to the bank on the loan amount . The interest rate will
depend upon bank norms.

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  The group may lend this money to individual members at any interest rate they
decide upon.
 The Bank loan is to the group and not to the individuals in the group., hence if
any one person is a defaulter the whole group will be held responsible.
 Banks require certain documents in order to process the loan.
 It may take a considerable amount of time to process a bank loan application,
hence the group should plan well in advance if they require a loan by a specific
month or date.
 The SHG must apply for a loan amount based on its capacity to reply the bank,
which in turn will depend on the SHG’s capacity to revolve the money and
recover it from its members.

When should Groups start giving Internal Loans :

 It is a good practice to give loans to members from the very first month after
starting the Group.
 One should not hesitate to do this just because the savings add up to a small
amount in the first month.
 The poor mostly have many small requirements.
 For instance, they need about Rs.200 /- every month to buy their rations.
 There are many benefits of giving internal loans in the very first month of a
Group .
 The members realize the benefits of the Group from the beginning and develop
fondles towards the Groups.
 The Group fund grows with the inflow of interest on loans.
 The members won’t have to depend on money lenders . On loans taken from other
sources, the interest is very high. The interest charged by the Group is convenient
for members.
 The interest received is distributed among the members in the form of bonus. This
bonus id added to the savings of the members.
 The members are forced to do bonded labour when they can’t pay outside loans.

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  The loans given by the Group come associated with two good qualities- Self
Reliance and self pride.
 The practice of internal loans is a sign of the confidence the group has in its
members.

How is an Self Help Group - a suitable Source of Credit for the poor :

A suitable credit delivery system for the poor must have the following features :

It must be based on affinity, so that members trust one another sufficiently to act
as guarantors for each other and utilize peer pressure to ensure proper loan use
and repayment.

It must be open to lend small amounts of money to service daily needs such as
food, clothing, education , health etc.

It must provide timely credit.

It must have affordable rates of interest

It must not require formal security

It must not lead to other forms of exploitation.

Action to be taken for Financial Inclusion:

 Identification of bank branches.
 Opening of accounts.
 Availing services offered by bank for total financial inclusion.
 Preparation of viable projects by helping good SHGs to prepare viable livelihood
projects for credit support.
 Exploring possibilities of linkages with alternative credit delivery sources / micro
credit plan.

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Reference Books :
o Govt. of India Manual for SHG
o Operational Manual SHGs (JEEVIKA)
O The MYRADA experience- A manual for Capacity Building of Self Help Groups
Affinity Groups – 2nd Addition.
O The Micro Finance Review Journal of the Centre for Micro Finance Research –
Bankers Institute of Rural Development, Luknow.
O A handbook for trainers on Participatory local Development – FAO Regional
Office for Asia and the Pacific, Bangkok, Thailand, August 2003

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