Challenges Faced by Self-Help Groups in Employment Generation in Bihar

Self-help groups (SHGs) play an important role in providing microfinance services to the poor, along with building the functional capacity of the marginalised strata, and enhancing their employment and income-generating activities. The present study provides evidence of the impact of SHG-based financial interventions on labour market outcomes in Bihar. Bihar was the forerunner in the formation of SHGs in India, with more than 10 lakh SHGs that were run primarily by women. Therefore, Bihar provided an ideal setting for evaluation of the effectiveness of SHGs in transforming their savings into productive investments. The study used purposive sampling to collect primary data from three districts of Bihar, namely Aurangabad, Bhagalpur, and Katihar. Findings of the study indicated that the SHG members were inadequately informed of the services available to them and had little knowledge of their roles and privileges as SHG members. The sample SHGs in Bihar availed 100 per cent of their loans from commercial banks, who charged exorbitantly high rates of interest on the loans. Consequently, the SHG members availed loans in small amounts resulting in inadequate amounts to be translated into business promoting and income-generating activities. Using a difference-in-difference approach, the study finds that non-state-funded SHGs have been able to generate livelihood opportunities by providing overall financial services to rural women but when compared to the control group, where the SHGs were formed with state government initiatives, their average monthly incomes increased manifold at 99 per cent significance level. The present study has strong policy implications and recommendations. SHG members need to be adequately skilled to undertake micro-level entrepreneurial activities and eventually undertake long-term investments to generate employment.