Governance Systems in Self‐Help Group–Based Microfinance: A Social Systems Perspective

ABSTRACT This paper examines the governance of Self‐Help Group (SHG)–based microfinance systems through the analytical lens of Luhmann's social systems theory. It conceptualizes SHGs as communicatively constituted governance systems whose practices evolve through ongoing interaction, feedback and collective interpretation rather than through direct external control or formal institutional design alone. Drawing on constructivist grounded theory (CGT)–informed thematic analysis of qualitative data from interviews and observations, the study identifies seven interrelated governance dimensions: reflective deliberation, knowledge circulation, reasoned autonomy, shared stewardship, tech‐mediated governance, emergent leadership and adaptive oversight. From a systems‐theoretical perspective, the study contributes to microfinance and governance scholarship by demonstrating how grassroots governance operates as a semi‐autopoietic, communicatively self‐regulating system that remains structurally coupled to its institutional environment.