VO is a federation of SHGs in a habitation. Each habitation may have a Village Organization. Wherever, the number of Self Help Groups in the village is more than 15, separate VO should be formed so that the VO is managed effectively by the members. In a habitation where there is no scope for more than say 5 SHGs, then the habitation can be linked to adjacent habitation/habitations and facilitated to form a VO. In case there is a need to form a VO with more than one habitation, the willingness of the members should be taken before formation of the VO.
Once the SHGs have established a sound economic base, their consolidation into village level federations is promoted. Groups become stronger and more efficient when horizontally and vertically linked. Formation of VOs promote solidarity and economics of scale in group activities and delivery of development services and enable members to develop a broad base for action while retaining the advantage of remaining autonomous. In addition, it encourages and leads to the formation of more groups.
The VO is envisaged primarily to play the role of a financial intermediary along with providing other services to the SHGs in book keeping, auditing, bank linkages and other linkages with developmental programs, line departments, etc. The VO is also envisaged to take up social issues and other developmental issues like food security, health, education, marketing, etc. Thus the VOs will not only assist in but also lead to the overall socio-economic development of the members of the SHGs.