Self-Help Groups and the rural financial market in south India: a case of Tamil Nadu village

Abstract

After analyzing the process of development of the Self-Help Groups (SHGs) in a study village located in the Madurai District, Tamil Nadu, we evaluated the impacts of the SHGs and found that they had certain impacts on the alleviation of poverty in the village, although there was an apparent limitation. The major limitation was the small size of loans through the SHGs, either from savings and revolving fund or from the banks, but another major limitation lay in the fact that the poorest people were excluded from the SHGs, especially the poorest women from the female-headed households. On the other hand, there were increasing opportunities to save. Since the mid-1990s, the shift of occupation from agriculture to nonagricultural sectors has accelerated, and the income of rural households started to rise rapidly in rural Tamil Nadu, including in the study village. It was in this context that there emerged a rapid rise of surplus money in the hands of rural residents except for the poorest, which started to be saved in various forms, one of which was the savings in the SHGs.