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SHG - Importance UPSC NOTE


  • Empowerment and Financial Inclusion: Self-help groups (SHGs) play a crucial role in empowering individuals, particularly women, by providing them with a platform to come together, collectively save money, and access credit facilities.

  • Poverty Alleviation: SHGs help in alleviating poverty by promoting entrepreneurship and income-generating activities within communities. 

  • They provide members with the opportunity to start small businesses, engage in livelihood activities, and improve their economic conditions.


  • Skill Development and Capacity Building: SHGs focus on enhancing the skills and capabilities of their members through various training programs. 

  • These programs cover areas such as financial literacy, leadership development, entrepreneurship, and vocational skills, enabling members to become self-reliant.

  • Social Cohesion and Women's Empowerment: SHGs promote social cohesion by fostering a sense of belonging and mutual support among group members. 


  • They provide a platform for women to voice their opinions, participate in decision-making processes, and challenge social norms, leading to increased gender equality and women's empowerment.

  • Access to Financial Services: SHGs enable marginalized communities, especially women, to access formal financial services such as savings accounts, loans, and insurance. 

  • This access enhances financial security and enables members to invest in education, healthcare, and productive assets.


  • Community Development: SHGs contribute to the overall development of communities by addressing social issues, promoting education and health awareness, and undertaking collective initiatives for community welfare.

  • Microfinance and Poverty Reduction: SHGs act as intermediaries for microfinance institutions, facilitating access to credit for their members. 

  • This access to microfinance helps in poverty reduction and enables members to invest in income-generating activities and improve their living standards.


  • Sustainable Development: SHGs promote sustainable development by addressing social, economic, and environmental issues at the grassroots level. 

  • Through their collective efforts, SHGs contribute to poverty reduction, women's empowerment, and overall community development.



  • Lack of knowledge and proper orientation among SHG-members to take up suitable and profitable livelihood options.

  • Patriarchal mindset – primitive thinking and social obligations discourages women from participating in SHGs thus limiting their economic avenues.

  • Lack of rural banking facilities – There are about 1.2 lakh bank branches and over 6 lakh villages. 

  • Moreover, many public sector banks and micro-finance institutions are unwilling to provide financial services to the poor as the cost of servicing remains high.


  • Sustainability and the quality of operations of the SHGs have been a matter of considerable debate.

  • No Security – The SHGs work on mutual trust and confidence of the members. 

  • The deposits of the SHGs are not secured or safe

  • Only a minority of the Self-Help Groups are able to raise themselves from a level of micro-finance to that of micro-entrepreneurship.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: SHG - Importance UPSC NOTE
SHG - Importance UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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