Contribution of Self-Help Groups (SHGs) to Rural Economic Progress

Abstract

Self-Help Groups (SHGs) have emerged as one of the most effective grassroots-level institutional mechanisms for promoting rural economic development in India. These groups, typically consisting of 10–20 members from similar socio-economic backgrounds, operate on principles of mutual assistance, savings, and credit mobilization. Over the past few decades, particularly after the 1990s, SHGs have gained prominence as a key strategy for poverty alleviation, financial inclusion, and women empowerment in rural areas. The present study examines the contribution of SHGs to rural economic progress in India during the period 1995–2020 using a longitudinal analytical framework.

The study focuses on the role of SHGs in enhancing income generation, promoting entrepreneurship, improving access to credit, and strengthening social capital in rural communities. Data have been collected from government reports, NABARD publications, and research studies on SHG performance. The findings indicate that SHGs have significantly contributed to improving household income, increasing financial inclusion, and promoting sustainable livelihoods. However, challenges such as limited market access, lack of financial literacy, and institutional constraints continue to affect their effectiveness. The study highlights the importance of strengthening SHG networks, improving capacity building, and enhancing policy support to ensure long-term rural economic development.