Self-help Groups have been around for several years and it is only now that their true potential is being realized by players in the microfinance sector. There have been several attempts to formalize the sector in order to overcome some challenges and also to maximize the social impact of these credit and saving groups, as mentioned below.

Political Impact of Self-Help Groups

Self-help groups are beginning to exercise their political muscle, however meek it may be, according to a paper by APMAS. SHGs often interact with local civic leaders to promote their interest in community development though the establishment of roads, ration cards, construction of school buildings, etc., and they also fund the election campaigns of any group members willing to step into politics.

This is an emerging trend in India, where a majority of SHGs are formed by women, hence this trend has implications on women empowerment as well (discussed in another article).

Social Impact

SHGs promote social harmony because they are composed of community members with common interests. As group members from different ethnic group realize they are all aiming for the social and economic betterment of themselves and their families, they may be encouraged to overlook their differences.

However, the informal nature of the groups fails to guarantee total gender and ethnic equality, because certain sub-groups may still be able to dominate minorities.