CHAPTER 3

SELF HELP GROUPS (SHGs) - A PROFILE

3.1 Introduction

Villages are faced with problems related to poverty illiteracy, lack of skills
health care etc. These are problems that cannot be tackled individually but can be
better solved through group efforts. Today these groups known as Self help groups
have become the vehicle of change for the poor and marginalized.

Self-help group is a method of organising the poor people and the

marginalized to come together to solve their individual problem. The SHG method is
used by the government, NGOs and others worldwide. The poor collect their savings
and save it in banks. In return they receive easy access to loans with a small rate of
interest to start their micro unit enterprise. Thousands of the poor and the
marginalized population in India are building their lives, their families and their
society through Self help groups. The 9th five year plan of the government of India
had given due recognition on the importance and the relevance of the Self-help group
method to implement developmental schemes at the grassroots level.

3.1.1 What are SHG

 SHG is a development group for the poor and marginalized
 It is recognized by the government and does not require any formal registration
 The purpose of the SHG is to build the functional capacity of the poor and the
marginalized in the field of employment and income generating activities
 People are responsible for their own future by organizing themselves into SHGs

3.1.2 SHG is a basic platform for:

 Increased social interaction

 Collective bargaining
 Quality input sourcing

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 Advanced production technology and production planning
 Micro finance.
 Development of farmer market.
 Problem solving.
 Total empowerment of farmers.

3.1.3 The guiding Principles of SHGs are following:

 Effort is built on mutual trust and mutual support

 Every individual is equal and responsible1
 Every individual is committed to the cause of the group
 Decision is based on the principles of consensus
 Savings is the foundation on which to build the group for collective action.

3.1.4 Features of SHGs

A variety of group-based approaches that rely on social collateral and its many
enabling and cost-reducing effects are a feature of modern microfinance (MF). It is
possible to distinguish between,
1. Groups that are primarily geared to deliver financial services provided by
microfinance institutions (MFIs) to individual borrowers; and
2. Groups that manage and lend their accumulated savings and externally
leveraged funds to their members.
While the term ‘self-help group’ or SHG can be used to describe a wide range of
financial and non-financial associations, in India it has come to refer to a form of
Accumulating Saving and Credit Association (ASCA) promoted by government
agencies, NGOs or banks. Thus, SHGs fall within the first category of groups
described above. A distinction can be made between different types of SHGs
according to their origin and sources of funds. Several SHGs have been carved out of
larger groups, formed under pre existing NGO programmes for thrift and credit or
more broad-based activities. Some have been promoted by NGOs within the
parameters of the bank linkage scheme but as part of an integrated development
programme. Others have been promoted by banks and the District Rural Development
Agencies (DRDAs). Still others have been formed as a component of various physical

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 and social infrastructure projects. Some of the characteristic features of SHGs are
given below:
 An SHG is generally an economically homogeneous group formed through a
process of self-selection based upon the affinity of its members.
 Most of the SHGs have strength of 10 and 20 members.
 SHGs have well-defined rules and by-laws, hold regular meetings and maintain
records on savings and repayment of credit.
 SHGs are self-managed institutions characterized by participatory and collective
decision making.

In this study, we selected the SHG’s which are formed and managed under the
supervision of Vegetable and Fruit Promotion Council Keralam (VFPCK).

3.2 Vegetable and Fruit Promotion Council

Vegetable and Fruit Promotion Council Keralam (VFPCK) is a company

registered under section 25 of Indian Companies Act 1956. Established in 2001 to
bring overall development in fruit and vegetable sector of Kerala and ensure
sustainable income for farmers. The council need for the council arose out of the
European Union’s (EU) desire to experiment with the use of SHG’s, and the Kerala
government’s desire to increase fruit and vegetable production in Kerala in order to
create more self- sustaining food supply and fill the state’s supply demand gap. An
initial investment of Rs. 137 crores was made by the EU and the Government of
Kerala to start the Council.

At that time, Kerala’s farmers had limited financing options, practiced

inefficient farming techniques due to poor training, lack of bargaining power because
of disjointed production, and did not have the knowledge to market their own
products. There for the Council focused:
 Production
 Training
 Credit provision
 Marketing
3.2.1 Organizational structure / guidance

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 VFPCK is following a decentralized structure for its operations. The Council
has around 350 employees all over Kerala; out of this only 35 are working on Cochin
headquarter office. Remaining employees are working as field managers at the district
level on planning, implementation and monitoring to ensure that decisions are made
as close the beneficiaries as possible and their needs are accurately assessed. The
Council also employs data collectors for its Market Information Centre (MIC). The
organizational structure is given below:

CEO

Director Director- Administration

Horticulture & Fund Management
Resource Centre

Production Marketing Training Credit Support Staff

Departmen Departmen Departme Support
t t nt Staff
Department

Director- Planning &

Implementation

District
Manager X14

District- Assistant
Manager
Resource Centre X
14

District- Assistant
Manager
Field Centre X 14

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 The 111,000+ farmers associated with the Council are organized
into 5,800 SHGs, the core unit behind all of the Council’s
interventions. Each SHG has between 15-20 farmers. After close
monitoring by the Council’s district level staff, groups of 7-15 SHGs are
further organized into 260 societies, all operating within the 14 districts
of Kerala that the Council also has district-level staff in. Because all
initiatives reach the farmers through the SHG and society structures, these
formations are key to the success of the Council. Therefore, the efforts
are focused into the collectivization, management of groups, and proper
mobilization is a key activity of the Council. Along with having well-
defined roles, each level has a pre defined governance structure.
Specifically, each SHG has three “Master Farmers,” responsible for
production, training, and marketing respectively, and liaising with the
district offices accordingly. They also play a role in training other
farmers within their group on skills within their portfolio.

Once SHGs are formed into societies, these master farmers form
the executive committee of the society. This executive committee is
instrumental in establishing the farmers’ markets that are further
outlined below. Furthermore, three elected officers (President, Vice
President, and Treasurer) represent each society and one paid staff or
Secretary. The three elected officers serve 2-year long rotational terms
and while they are unpaid, officers are incentivized to serve because of
the respect and recognition they gain, and because of the sense of
ownership that each farmer in the society has. The paid staff member is
responsible for accounting and administration, and is not a society
member but rather hired from within the local community.

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3.2.2 VFPCK Model

Monitored by VFPCK

District Managers

260 socities
(7-15
SHGs/society)

5800 SHGs
(15-20 farmers/SHG)

111,000 +farmers

3.2.3 Key operational areas of VFPCK

1. Mobilization

The major activities under mobilization function are described below:

1.1. Forming SHGs:

As mentioned, the most basic and important unit of the VFPCK structure are
the SHGs which have been expressly formed to undertake the horticulture marketing
activities of VFPCK. The VFPCK’s district- level field officers promote such
formations. After surveying locations for clusters of 15-20 farmers who live within a
1km radius of each together, SHGs are formed based on the “neighbourhood
principle” of having common interests, values, goals and objectives. The key goal of
this unit is not only to have a structure through which production, training, credit and

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marketing interventions can be provided, but also to create increased social
interaction, give collective bargaining power to farmers, and generally, to provide a
platform for farmers to feel empowered to make their own production and marketing
decisions.

It is important to note that farmers must meet certain strict criteria

in order to join the SHGs. Specifically; farmers must be commercial
cultivators and meet some pre-defined criteria, such as:
 Must cultivate 25 cents of land for 3 seasons
 Must cultivate 50 cents of land for 2 seasons

Features of VFPCK Self Help Groups:

The council aims to attain the objectives through the principle of “Self Help,
Participation and Prosperity”. Major innovative concepts developed and implemented
by VFPCK are as follows:

 Voluntary group of 15-20 commercial fruit and vegetable cultivators.

 Formed based on neighbourhood principle.
 Function observing a set of mutually agreed norms.
 Have regular meetings, discussions and common decisions.

1.2. Forming Societies

Once SHGs are formed, they receive training and production

interventions, which also serve as a way for farmers to meet regularly.
Through regular meetings where farmers discuss their main concerns and
issues, SHGs are encouraged to seek common solutions to their problems
and identify the areas where they would like support. District-level
managers closely monitor these meetings. It is not until SHGs prove they
are committed and aligned in their objectives, that the Council then
promotes marketing activities. When SHGs reach this stage, the Council
supports the formation of societies, whereby 7-15 SHGs are linked
together to run farmers’ markets.

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 These societies pass through three stages, each with its own criteria
of sustainability. These stages are mostly for the purposes of their
marketing activities. It is important to note that the society-level
groupings are not officially registered as societies, u n t i l t h e y reach

the second stage. In addition, societies have not been federalized;

Presidents within each district will meet once in 3 months, as arranged
by the Council. Once groups and societies are mobilized, the activities of
the council can be divided into four main areas as outlined below.

1.2.1. Production

The Council actively tries to enhance the productivity of its farmers

by providing various levels of support activities. One of the ways in
which productivity support is provided is through the seed processing
plant managed by the Council. This plant provides easy access to quality
seeds at a reasonable price to farmers. These high quality seeds will
provide greater yields for farmers and these seeds are sold through the
SHGs.

Other production support activities include the Council’s ongoing

research and development into new and improved technologies. Furthermore,
field-level production officers provide technical assistance to farmers,
offering advice on land management, technology use, pest surveillance, etc.
The production ‘master farmers’ at the SHG level are intensively trained in
various production techniques, which are then passed on to all the SHG
members. In this way, all 111,000+ farmers are receiving some level of
production support. The Council also prepares publications on ways to add
value, develop group marketing, etc. for the use of the broader farming and
agriculture sector. These also generate revenues for the Council.

1.2.2. Training

A separate unit of the Council is designated for the development of

training programs for farmers, society officers, and district-level field
staff. Trainings are organized by the district offices to teach farmers
about land management, technologies, seeds, and to update them on new

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farming techniques. The Council holds demonstrations, field trials, and
campaigns for farmers as well. Training sessions are given as needed by
the SHG, with the target that each will have access to 10-12 trainings per
year. The training unit employs a “train-the-trainer” model whereby SHG
‘master farmers’ are trained to train their fellow SHG farming members
across production, credit, and marketing functions. The training
department sometimes hires outside trainers to come give sessions to
groups.

1.2.3. Credit

VFPCK has tied-up with various banks and insurance companies

in Kerala to make it easier for farmers to access credit and insurance
services. While the loan contracts are between the banks and the
individual farmers, VFPCK is instrumental in forming these linkages.
VFPCK works together with the bank, acting as a credibility check for the
farmers. Specifically, VFPCK has created a financial package schedule
according to type of crop I farm to make it easier for banks to assess
the reasonable amount of credit needed. Loans are typically used by the
farmers to buy inputs. VFPCK has also liaised with banks to provide
loans up to Rs. 50,000 to leaseholders who would otherwise be ineligible
because of a lack of collateral to offer against these loans.

The Council assists in monitoring and loan recovery as well.

Because of the affiliation with VFPCK, banks feel comfortable lending
to the farmers since they have assurance that each of them is running a
commercially viable operation. Furthermore, VFPCK provides
repayment support to farmers through a 2% interest subsidy that increases
the rate of repayment of loans, and provides a further sign of security to
the banks.

The Council has also negotiated crop insurance products (on a

limited basis) to protect farmers against natural calamities. Farmers can
also opt into a medical insurance scheme that is offered in association
with the United India Insurance Company.

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1.2.4. Marketing

The combination of a well-organized and monitored group structure,

as well as the production, training, and credit supports provided has
culminated into a successful forward-linking marketing strategy consisting
of 260 farmers’ markets, each run by a ‘society’ as documented here.

2. Organization of farmers markets

Vegetable and fruit farmers are facing a problem for marketing

their agricultural produce and make benefit out of it. The main reasons are:

 Lack of bargaining power to earn good prices for their produce in

the market
 Payment and pricing policies are controlled by the trader, leaving
farmers at their mercy
 Substantial time is involved in conducting marketing activities
and organizing logistics to existing markets
 Lack of storage facilities, they face high levels of post-harvest loss
or wastage

To overcome these issues VFPCK has developed a unique group

marketing structure and bring marketing processes closer to the production
centre. So that farmers can earn greater price realization for their
products. Through this structure, farmers can take control of the
marketing process and fully participate in it. In effect, instead of
farmers having to travel to the traders, traders must now travel to the
farmers.

When SHGs reach the stage where they are ready and willing to take on
marketing as a key initiative for their group, the Council supports the
formation of societies, whereby 7- 15 SHGs are linked together to run
farmers’ markets. The ‘master farmers’ of each SHG act as the executive
committee of these societies, and a President, Vice President, and
Treasurer are selected from this committee to serve 2 year terms for the

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society. Another important thing is that at least 50% of the farmers must
invest a small amount of capital for forming society and these farmers are
known as Class ‘A’ farmers.

After SHGs are banded together, they pass through the following stages:

Sufficient margin to 75% farmer participation

cover operational Rs 15 lakh turnover
costs 1 year operations
2% margin to cover costs

7-15 SHGs able to

pursue marketing Stage 1: Stage 2: Stage 3:
activities Bulking point Samithie Mandal

 Technical support  Technical support  20 cents of land

 One platform balance  Maximum of 3  Building for market
 One set of account platform balance worth approximately,
books  Telephone/ furniture 12 lakhs
reimbursement for 1
year
 Salary of paid
secretary/ accountant
for one year

The planning and implementation of the farmers markets are

conceived at the first level of society formation, or the ‘bulking point’
stage. At the ‘bulking point’ stage societies receive technical support, one
weighing scale, and a set of accounting books. The executive committee
is expected to establish a procurement plan and a marketing plan,
identify and build relationships with local traders, and plan other
logistical details needed to establish a marketplace. At this stage, a
minimum of 50% of the SHG members must take membership in the
market, as ‘A’ class members, and contribute capital to its formation.
The bulking point sites are identified at points close to the location of
production, and accounts are managed by the paid secretary or
accountant appointed by the committee.

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 Once a farmers’ market h a s been established, it is closely
overseen by VFPCK’s district level officers and passed through the stages
described above. As early mentioned these markets are owned and
managed by farmers itself and involves majority of t h e farmers in that
area. Traders in the nearby markets will be forced to come to these newly
established markets due to non-availability of agricultural produce.
Furthermore, because the produce at the markets come directly from the
farms, wholesale traders get the freshest produce and now prefer buying
from them. Traders are now also able to work with the ‘Master Farmers’
to get the produce at the quantity and quality specifications important to
them.

2.1. Process

The Council has developed an innovative and transparent auction

process employed twice a week by each society. Here, local wholesale
traders meet at the farmers’ market site managed by the farmers to buy
produce from the source in a process that ensures a fair price and payment
to farmers.

Each farmer that participates in the auction brings his produce in

lots directly to the site, usually using transportation arranged by the
SHGs themselves. Lots are graded and organized by quality, and
marked with a pink slip stating the farmer’s name and starting bid.
Members of the society’s marketing executive committee run and
document the auction in front of the farmer of each lot, and prices are
quoted per kilogram based on information received from the Market
Intelligence Centre (MIC). Because such auctions are farmer created,
operated, and managed, all trades are in favour of the farmers, and are
much fairer than other markets.

Auctions occur one crop at a time, and soon after each lot is sold,
the lot is brought to the weighing station and the total trade price is
calculated. Lots are weighed in the presence of the farmer, the trader,
and one of the VFPCK district managers, ensuring that the trader does

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not quote a lesser weight, a tactic typical of other markets. After
completing the auction (usual hours are from 1.00pm-6.00pm), the
traders will bring their own Lorries or trucks to the market and
transport their purchase on their own. Thus helps the farmer t o s a v e
prohibitive transportation costs to reach markets. Any surplus produce
will be bought and sold at the nearest wholesale market by t h e
executive committee members.

2.2. Payment

Payment of sales to farmers is received on the next trading day.

Traders are expected to pay for purchases on the next trading day, and
because of group pressure, the threat of blacklisting, and the possibility
of legal action, traders typically comply. In case of d e f a u l t b y
t r a d e r s , VFPCK supports farmers in taking legal action with the
local police until payments are made. However, the farmers don’t bear
the cost of any such issues as they are paid out regardless of whether
and when the traders pay. It is important to note that though VFPCK
does dictate a maximum trading period, due to the perishable nature of
fresh produce, it is inevitable that farmers must sometimes extend the
payment period.

Farmers are paid 95% of the price of sale; the remaining 5% goes
towards the operations of the overall society. At the end of the year, the
amount not spent on overhead costs is paid out to Class ‘A’ farmers who
own a stake in the society. Typically, this second payment falls within the
2-3% range.

3. Market Intelligence Centre- Pricing

VFPCK runs a Market Information Centre, where pricing

information is collected daily from 20 major markets in and around
Kerala, and i t i s communicated to the societies’ marketing executive
committees. This will helps to ensure a minimum price level for the
agricultural produce. For each of these 20 major markets, the Council

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 employs trained data collectors to collect pricing data for each product,
according to time of sale and quality of product. By 11am of each day,
the collected information will reach the headquarters, where a team
disseminates this information to each market as they phone in. Since a
limited number of markets operate on any given day, this phone-in
process has remained manageable.

By this, the farmers particularly the auctioneers, are armed with

data from the MIC, they can set the minimum bids on their lots
competitively. This ensures that farmers can get a fair market price for
their products.

4. Other interventions

Other marketing interventions from the Council level include the

‘SASYA’ retail chain, the first of which was established in the year 2006.

Furthermore, VFPCK has ventured into the processing of farmer’s

production through the establishment of a new banana chips production
unit marketed under the brand name “VEFCO FRYS.” In its first year of
production, this business unit was able to break even with over 25000 Kg
produced and marketed.

3.2.4 Key challenges

Full economic sustainability

Though many of the societies are running fully commercial farmers

markets, the free training, technical assistance, market intelligence services
provided by VFPCK are crucial to this success. The hope of the Council is
that in the future, societies will be able to pay for such services and
therefore be fully sustainable. But it is unclear that whether the organization
would be able to charge back a sufficient amount for this free service or

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reduce subsidization costs to continue to remain both effective and
sustainable .

1. Difficult to change farmer’s cropping patterns to meet market demand

VFPCK works with Kerala’s farmers to market the crops that they
already produce, without disturbing any of their conventional farming
practices. This is because the farmers are reluctant to accept changes.
Changing patterns requires intensive training, and usually large amounts of
investment not only in terms of inputs, but also in terms of the opportunity
cost of time needed to start growing certain crops. Once habits and practices
are established, it is difficult to change these norms.

2. Limited efforts in processing or export activities

VFPCK does little in the area of processing fresh produce. This is due
to the lack of local demand for processed fruit and vegetables.
Furthermore, VFPCK has had trouble competing in export markets.
These two factors combined mean that VFPCK has limited its ability to
reach out to new markets.

Now we are going to see some details regarding the Swasrya Karshaka
Samithi (SKS) managed by VFPCK and SHGs under this SKS, which this
study has conducted.

3.3 Swasraya Karshaka Samithi Thuravoor

Swasraya Karshaka Samithi (SKS) Thuravoor has started its operation in

2001 with the support of Vegetable and Fruit Promotion Council Keralam (VFPCK).
It has 10 SHGs in the initial stage and now there are 21 SHG’s and 262 A class
members incorporating with this organization (As per Members Register maintained
by SKS). And around 500 non- member farmers has also got the benefits and services
from this organization.

For the administration of the SKS, each SHG has to send a representative to
the Council and the Council will select a President, Vice President, Joint Secretary

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and Treasurer from the nominated persons. The council has the power to appoint a
Secretary who has sufficient knowledge to deal with financial matters. The council
can select the person from inside or outside the organization and can appoint as
Secretary. The council has got the administrative power for a period of two years and
it will be replaced thereafter by a re-election. The organization structure is given
below:

3.3.1 Organization structure

President

Vice President

Secretary

Joint Secretary

Treasurer

Executive Council

SHG SHG SHG SHG

So far we were discussing about SHGs, VFPCK and its model

intended to bring overall development in fruit and vegetable sector and increased
earnings to the farmers of Kerala. Now we are moving to the next chapter, which will
to present the analysis part of this study.

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