Role of Self-Help Groups (SHGs) in Refining Financial Literacy within Non-Working Women

Abstract

Financial literacy stands as one of the most consequential determinants of economic agency and long-term household welfare. This is especially true for non-working women in India — a demographic consistently marginalised from formal financial systems, credit markets, insurance mechanisms, and household investment decision-making. Structural barriers such as lack of collateral, limited mobility, low educational attainment, and deeply entrenched patriarchal norms collectively constrain these women from exercising meaningful financial autonomy. In this context, the deficit of financial literacy is not merely an informational gap; it is a reflection of systemic exclusion that perpetuates intergenerational poverty and economic vulnerability. Self-Help Groups (SHGs) have emerged as one of the most significant grassroots institutional innovations to address this exclusion. Functioning as small, democratically governed collectives — typically comprising 10 to 20 women from similar socioeconomic backgrounds — SHGs create a structured environment in which members pool regular savings, extend internal credit to one another, and collectively manage financial obligations. Through the nationally operationalised SHG–Bank Linkage Programme (SHG-BLP), pioneered by NABARD in 1992 and scaled to extraordinary reach under successive government missions, these groups gain formal access to institutional credit, transforming their relationship with the banking system from one of exclusion to one of structured participation. As of 2023–24, the SHG-BLP has connected over 119 million households across India to formal financial services, representing the largest microfinance programme in the world by outreach. Critically, however, the transformative potential of SHG participation extends far beyond the credit transaction itself. Through regular participation in group savings, loan management, repayment tracking, and bank-related administrative processes, women acquire a repertoire of financial knowledge, practical skills, and attitudinal orientations that constitute the building blocks of genuine financial literacy. The weekly or fortnightly group meeting functions, in effect, as an informal financial school — one in which peer-learning, experiential engagement with financial instruments, and gradual exposure to formal banking infrastructure conspire to build competencies that formal education often fails to deliver. Confidence in handling money, understanding of interest calculations, awareness of government financial schemes, familiarity with insurance products, and the self-efficacy to negotiate with bank officials are among the capabilities that SHG participation is hypothesised — and, through this study, empirically demonstrated — to cultivate. This research paper undertakes a comprehensive, rigorously designed, and empirically grounded investigation of the role played by SHGs in refining financial literacy among non-working women in Chh. Sambhajinagar (formerly Aurangabad), Maharashtra — a district in the historically underdeveloped Marathwada region that has nonetheless witnessed significant SHG network expansion under the Maharashtra State Rural Livelihoods Mission (MSRLM). The study draws on primary data collected from 250 SHG member women and 80 non-SHG women through a structured survey instrument, supplemented by in-depth qualitative interviews with 25 key informants including SHG group leaders, bank linkage officers, and NGO facilitators with direct programme experience. A central methodological contribution of the study is the development and validation of a multi-dimensional Financial Literacy Index (FLI), constructed in alignment with the OECD/INFE Financial Literacy Measurement Framework and calibrated to the local sociocultural context of Marathwada. The FLI measures financial literacy across four analytically distinct yet interrelated dimensions: financial knowledge (conceptual understanding of savings, interest, credit, and financial products); financial attitude (dispositions towards planning, saving, and risk management); financial behaviour (actual practices of budgeting, loan management, and investment); and financial confidence (self-efficacy in financial decision-making and institutional engagement). This four-dimensional framework moves well beyond the narrow knowledge-only operationalisations that dominate much of the existing literature, enabling a richer and more actionable picture of financial literacy as it exists among non-working women in semi-urban Maharashtra.

Introduction

This research examines the relationship between Self-Help Group (SHG) participation and financial literacy among non-working women in Chhatrapati Sambhajinagar (formerly Aurangabad), Maharashtra. Financial literacy is considered a key component of women’s economic empowerment because it enables women to make informed financial decisions, manage savings, access credit, and participate effectively in the formal financial system.

In India, many non-working women, including homemakers and women engaged in unpaid domestic work, face financial exclusion due to low labor force participation, limited access to banking services, and dependence on male family members for financial decisions. To address these challenges, SHGs have emerged as an important mechanism for financial inclusion. Through collective savings, internal lending, and group financial management, SHGs provide women with opportunities to develop financial knowledge and skills.

The literature review highlights that financial literacy consists of four dimensions: financial knowledge, skills, attitudes, and behavior. Previous studies have shown that SHGs contribute to women’s empowerment by improving economic security, decision-making ability, social networks, confidence, and financial awareness. Research also suggests that SHG participation enhances financial literacy through experiential learning, peer learning, and training programs, although gains are often concentrated in basic financial concepts rather than advanced financial planning.

The study identifies a research gap in understanding how SHGs specifically improve financial literacy among non-working women. It aims to assess financial literacy levels among SHG and non-SHG women, examine the impact of SHG membership on financial literacy, identify the mechanisms responsible for literacy gains, evaluate the influence of SHG design features, and explore barriers limiting financial literacy outcomes.

To achieve these objectives, the research employs a mixed-methods approach, combining quantitative surveys and qualitative interviews. The study is conducted in Chhatrapati Sambhajinagar, a representative Tier-2 Indian city with a strong SHG presence. The sample includes 250 SHG-affiliated non-working women, 80 non-SHG women as a comparison group, and 25 key informants, including SHG leaders, bank officials, and NGO facilitators.

The research develops a Financial Literacy Index (FLI) and proposes a Self-Help Group–Financial Literacy Pathways Model (SHG-FLPM) to explain how SHG participation improves financial literacy through savings practices, loan management, banking interactions, peer learning, and training opportunities. Ultimately, the study seeks to provide evidence-based recommendations for strengthening SHG programs and enhancing the financial empowerment of non-working women in India.

Conclusion

This research has established, through robust mixed-methods evidence from a representative Tier-2 Indian city context, that SHG participation is a powerful and statistically significant predictor of financial literacy among non-working women. The composite Financial Literacy Index scores of SHG-affiliated women are, on average, 21.4 percentage points higher than those of comparable non-SHG women, with particularly large gains in the Behaviour and Confidence dimensions — precisely those dimensions most critical for real-world financial decision-making effectiveness. The SHG-Financial Literacy Pathways Model proposed in this study identifies four interconnected mechanisms through which this impact occurs: experiential financial practice, social and peer learning, facilitated learning, and the development of financial agency. Of these, experiential practice — the direct, hands-on engagement with savings, loans, interest calculation, and banking interface that SHG membership necessitates — emerges as the dominant pathway, suggesting that the most effective financial literacy interventions are those that maximise the depth and variety of members\' active financial participation rather than relying primarily on formal classroom-style instruction. The study also identifies important limitations and barriers. Financial literacy gains are concentration in basic financial knowledge and practice, and do not automatically extend to more sophisticated financial domains such as investment planning, insurance, or digital financial services. Household patriarchy remains a structural barrier that limits the translation of financial literacy into financial agency for many women, even after years of SHG participation. And the absence of structured financial literacy curricula from most SHG programmes means that significant learning potential is left unrealised. The implications of these findings extend well beyond the specific context of Chh. Sambhajinagar. India\'s national financial inclusion strategy, as embodied in the Pradhan Mantri Jan Dhan Yojana (PMJDY), the Digital India initiative, and the National Strategy for Financial Education (NSFE), has placed great emphasis on expanding access to formal financial accounts and digital payment systems. But access without literacy is insufficient: a woman who holds a Jan Dhan account but lacks the knowledge and confidence to use it independently gains little. The SHG movement, with its twelve million groups and 130 million members, represents an extraordinary existing infrastructure for financial literacy delivery — an infrastructure that is presently under-leveraged for this purpose. Systematically enhancing the financial literacy function of SHGs, through the programme design and policy reforms recommended in this study, represents one of the highest-return investments available to India\'s financial inclusion policymakers. Future research should examine the longitudinal dynamics of SHG-driven financial literacy gains — specifically, whether gains persist and compound after women exit SHGs, and whether financially literate SHG women transmit financial knowledge and attitudes to their children and communities in ways that generate intergenerational financial capability effects. The role of digital SHG operations in accelerating financial literacy gains, and the impact of SHG federation structures on financial literacy outcomes at the cluster and district levels, are also important directions for subsequent investigation.

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Copyright

Copyright © 2026 Miss. Manisha N. Choudhari, Dr. Sanvedi Rane. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.