Strengthening Social Capital through Self Help Groups (SHGs) - Issues and Challenges Faced in the Indian Context

Abstract

Over the past couple of decades Microfinance through Self Help Groups (SHGs) in India has transformed into a movement from merely being a provision of finance to small businesses especially to empower rural women. With the involvement of the World Bank, it has also evolved from being a source of capital to MSMEs (Micro, Small and Medium Enterprises) to be one of the biggest institutional platforms for the poor to eradicate poverty and help them stand on their own feet. Self Help Groups are self sustainable given the fact that social cohesion in a particular area is strong. The success of the SHGs largely depends upon how firmly the social fabric is knitted in a locality. Since social capital constitutes of the resources, networks and relationships among people working together to achieve a common purpose, strength of the social capital becomes an essential prerequisite for the SHGs to work towards the successful achievement of its goal vis-à-vis poverty eradication and financial inclusion. However the reverse is also true. Usually small and economically and socially homogenous people come together to form the SHG to fulfill a common interest. This eventually strengthens the social capital among the community. Thus the relationship between generation of social capital and SHGs are complex and both influence each other. This research aims at exploring this obscure relationship in the context of India. This paper is an earnest attempt to test the hypothesis whether social capital can be developed and strengthened in terms of SHGs in India and the probable issues and challenges faced in that context with reference to some real life instances.