What SHG means
SHG stands for self-help group. It is a small group of people, very often women from the same village or neighbourhood, who meet regularly, save a fixed amount and keep shared records. Over time the group can lend its own savings to members. It may also borrow from a bank as a group and pass that money on to members.
The order matters. An SHG starts with saving and regular meetings. Loans come later, once the group has a record.
A savings example
Twelve women in a lane in Nashik form an SHG. Each puts in ₹200 a month at the meeting.
- The group saves ₹2,400 a month.
- After a year, the pooled savings are ₹28,800, before any interest the group charges on its own loans.
When Parvati needs ₹5,000 for her son’s school fees, the group can lend it from this pool on terms the members agreed together. If the group later borrows from a bank, the bank looks at how well it has saved, met and kept accounts.
Fictional example. Calculated by Paisavy.
Where you see the term
You’ll hear “SHG” from bank staff, government programme workers and in village meetings. Many SHGs linked to banks are part of the national rural livelihoods programme (DAY-NRLM). The group keeps its own passbook, minutes book and member ledger (a record of each person’s savings and loans). The bank loan sits in the group’s name, not in each member’s name.
SHG and JLG are different
People often mix the two up. The main differences:
| SHG | JLG | |
|---|---|---|
| Who borrows | The group, as one unit | Each member, in their own name |
| Starts with | Saving and meetings | A loan |
| If a member can’t pay | The group decides by its own rules | Your contract decides; members may have to pay |
Our guide Group loans (JLG and SHG) explains both in more detail, including interest support for some rural women’s groups. See also JLG.
What an SHG is not
- It is not a chit fund or BC committee. Those are bidding schemes with their own law and risks. See our guide on chit funds and BC committees.
- It is not a deposit scheme that promises high returns. If someone collects money in the name of an “SHG” and promises a big payout, be careful.
- A loan from a microfinance lender is not an SHG loan just because you meet in a group. Ask whether the loan is in the group’s name or yours.
What to check before you join
- Ask to see the group’s rules in writing: the monthly saving, the interest on internal loans and what happens if someone leaves.
- Check that the records are kept openly and read out at meetings.
- Find out which bank holds the group account, and who can sign for it.
- If the group takes a bank loan, ask what share each member is expected to repay, and on what dates.
A regular SHG saving can be part of your plan. Add it to your monthly budget as a fixed cost so it doesn’t squeeze other needs.