Self-Help Groups (SHGs) are small groups of people (10-20 members) having similar socio- economic backgrounds in a small contiguous area, who come together to improve their living conditions. They voluntarily form SHGs to save and mutually contribute to a common fund to be lent to its members as per the group members’ decision. The members of an SHG operate on the principles of self-help, solidarity and mutual interest. SHGs movement has the potential to have a substantial impact on the developmental challenges of rural poor due to following factors:

• Access to credit: SHGs can get timely loans for a variety of purposes which helps in creation of self-employment opportunities for members, such as for releasing mortgaged land, for meeting working capital needs, for housing materials, for acquiring assets like sewing machines, handlooms, cattle, etc.

• As any case of non-repayment of loan by any one member is followed up seriously by other members in the SHG, banks are willing to lend to them even without a collateral, For example, recently, the government announced to double the collateral free loans to women SHGs from Rs. 10 lakh to Rs. 20 lakh.

• Rural entrepreneurship: SHGs have engaged their members in non-farm sector income generating activities such as apparel and ready-made clothes, leather products, pottery, toys, household consumables, forest based products such as cane products, honey, bamboo products broom sticks, adda leaf, palm leaf etc.
• Poverty alleviation: SHGs can be helpful in anti-poverty schemes as they seek to empower their members. For example, Swarna Jyanti Gram Swarojgar Yojana is being implemented by organizing rural poor into SHGs, providing them with skill development training and helping them to get credit linkage with financial institutions and providing infrastructure and marketing support for the products produced by them.
• Empowerment of rural women: Women SHGs help in enabling women to be enterprising, take risks, earn financial independence and seek greater participation in the decisions taken in their homes and villages. For example Kudumbashree in Kerala, Chetna Rani Mahila SHG in Rajasthan, SEWA etc.
• Sustainable development: SHGs can also prove useful for conserving traditional resources and systems. For example, Mawkyrnot SHG was awarded 2016 India Biodiversity Award for sustainable use of 52-feet long living roots bridge in Mawkyrnot, Meghalaya.

Thus, SHGs provide many opportunities to help the rural Indian economy. However, certain ertain steps are needed to make them more effective and realize their full potential, such as, faster digitization of SHGs; providing marketing linkage to SHGs; government to play the role of facilitator and promoter; need based approach by banks by continuously innovating and designing new financial products for these groups.