For millions of women in rural India, a Self-Help Group (SHG) is often the first formal financial institution they encounter. But forming a group is only the beginning – the bigger question is: where does the money come from to actually get started and sustain operations? The answer lies in a layered ecosystem of government schemes, bank linkage models, microcredit programmes, and skill development initiatives that have collectively transformed how the rural poor access finance. Understanding these financial provisions is essential for anyone working in community rehabilitation or grassroots development.
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Major government schemes for SHGs
The financial foundation for most SHGs in India was laid by the Swarnajayanti Grameen Swarozgar Yojana (SGSY), launched in 1999 by the Ministry of Rural Development. SGSY was later restructured to address its shortcomings and evolved into the National Rural Livelihoods Mission (NRLM), launched in 2011 with a budget of approximately $5.1 billion. The mission operates on three pillars: expanding existing livelihood options, building skills for the formal job market, and nurturing self-employed entrepreneurs.
In 2016, NRLM was renamed Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM), reflecting the philosophy of “Antyodaya” – uplifting the most marginalized. According to the Press Information Bureau, DAY-NRLM has been implemented across 7,135 blocks in 742 districts spanning 28 states and 6 Union Territories. As of June 2024, the mission has mobilized 10.05 crore women into more than 90.86 lakh SHGs. The programme goes beyond just credit access – it promotes financial inclusion through digital finance and trains SHG women as Banking Correspondent Sakhis, enabling affordable banking services even in remote areas.
Financial provisioning under DAY-NRLM
One of the most direct financial tools under the scheme is the Revolving Fund (RF) and the Community Investment Fund (CIF). Under the programme, each SHG receives a Revolving Fund of ₹10,000 and a Community Investment Fund of ₹50,000 to support their financial activities. These funds serve as seed capital, enabling groups to begin internal lending before they are formally credit-linked with banks. The objective of financial inclusion under DAY-NRLM is to bring rural women and their households into the formal banking system, achieved through strategic and operational engagement with commercial banks.
By 2024, the total amount of bank loans disbursed to SHGs under the programme crossed ₹2.9 lakh crore, and members receive training in business planning, financial management, agricultural practices, and crafts. The programme also promotes micro-enterprises through initiatives like the Start-up Village Entrepreneurship Program (SVEP) and the Women Enterprise Acceleration Fund (WEAF), which provides favourable credit terms to women entrepreneurs within SHG networks.
SHG-bank linkage models
Credit access for SHGs is operationalised through the SHG-Bank Linkage Programme (SHG-BLP), pioneered by the National Bank for Agriculture and Rural Development (NABARD). What began as a pilot to link around 500 SHGs to formal financial institutions in 1992-93 has now become the largest microfinance programme in the world in terms of client base and outreach. The model rests on the principle that poor households can manage credit responsibly when supported by appropriate group-based mechanisms.
There are three primary models through which SHGs access bank credit:
Model 1 – Direct bank loans to SHGs: Banks directly lend to SHGs that have demonstrated financial discipline through regular savings and internal lending. This is the most widely used model, accounting for the majority of linkages under SHG-BLP.
Model 2 – NGO-mediated funding: NGOs or other Self Help Group Promoting Institutions (SHPIs) act as intermediaries, facilitating credit between banks and SHGs. The NGO sector has played a prominent role as an SHPI by forming, nurturing, and enabling credit linkage of SHGs with banks, and NABARD later co-opted rural financial institutions, Farmers’ Clubs, SHG Federations, and Individual Rural Volunteers into this role.
Model 3 – Bank-promoted SHGs: Banks themselves take the initiative to form and support SHGs, directly overseeing their development before extending credit. The programme emphasises empowerment and inclusion rather than commercial profitability, offers relatively lower interest rates, and primarily targets rural women and poor households, making it a more development-oriented and participatory model than conventional MFI lending.
Scale and credit performance
The savings-led microfinance model under SHG-BLP has become the largest coordinated financial inclusion programme in the world, covering 17.75 crore households, with 83.52% of groups being exclusively women’s groups. In terms of credit performance, as of March 31, 2024, total credit-linked SHGs stood at 77.42 lakh with an outstanding loan amount of ₹2,59,663.73 crore, and the average loan outstanding per SHG reached ₹3.35 lakh. Commercial banks dominate the landscape – accounting for 60% of savings-linked SHGs and 61% of credit-linked SHGs, with the highest loan disbursement share of 68%. An evaluation by the International Initiative for Impact Evaluation in 2019 found that DAY-NRLM participation resulted in a 19% income boost and a 28% increase in household savings compared to baseline.
Microcredit and its implementation through NABARD
Microcredit refers to the provision of small loans to low-income individuals or groups who lack access to conventional banking. Within the SHG framework, it reduces transaction costs by aggregating borrowers and using group guarantee instead of individual collateral. Credit is extended based on group performance and repayment capacity rather than individual collateral, with revolving funds from NABARD or government programmes enhancing the group’s lending capacity.
NABARD supports microcredit through several focused schemes:
Women SHG (WSHG) Scheme: Launched following the Union Budget 2011-12, this scheme aims to saturate backward and Left Wing Extremism-affected districts with viable and self-sustainable WSHGs, involving anchor agencies to promote credit linkage, provide continuous handholding, and take responsibility for loan repayments.
Joint Liability Groups (JLGs): JLGs are informal groups of four to ten members engaged in similar economic activities, willing to jointly undertake liability for loans taken from banks. Introduced as a pilot in 2004-05 across eight states with 13 Regional Rural Banks, JLGs primarily serve small and marginal farmers or asset-less poor who lack formal land titles.
Livelihood and Enterprise Development Programme (LEDP): LEDP was launched in December 2015 to create sustainable livelihoods among SHG members. It covers 15 to 30 SHGs in clusters of contiguous villages and offers intensive skill-building, refresher training, backward-forward linkages, and handholding support – encompassing the complete value chain as an end-to-end solution. One notable application of LEDP is in menstrual hygiene: the LEDP channel is used to provide livelihood opportunities to SHGs through sanitary pad manufacturing, combining income generation with improved menstrual hygiene access in rural India. A total of 2,038 villages have been covered under this project, with around 7,204 pads distributed free of cost.
As of March 31, 2024, three lakh SHG members have been supported through 2,449 LEDPs with a total grant support of ₹128.41 crore. During FY2024, NABARD also revised MEDP and LEDP guidelines to enhance flexibility and accommodate JLG members as participants, with provisions for daily stipends, market linkage training, e-marketing, branding, packaging, and demonstration units.
Skill development programmes: bridging the gap between credit and capability
Access to finance is only effective when paired with the knowledge to use it productively. This is the rationale behind NABARD’s Micro Enterprise Development Programmes (MEDPs). MEDPs are short-duration skill upgradation trainings focused on specific livelihood activities – from bamboo craft and cloth bag making to bakery products and tailoring. To enable SHG members to take up livelihood activities, NABARD supports both MEDPs and LEDPs through its Micro Credit Innovations Department.
Cumulatively, 5.85 lakh SHG members have received training through 20,174 MEDPs with a total grant support of ₹52.39 crore as of March 31, 2023. However, recognising that skill training alone is insufficient, NABARD has increasingly linked these programmes to enterprise creation. Taking a demand- and outcome-based approach, NABARD runs MEDPs, LEDPs, and Skill Development Programmes (SDPs) to support wage- or self-employment in rural India.
Digital integration and market access
A newer thrust in skill development is digital and market readiness. During 2023-24, 65 training programmes covering 1,103 SHGs, JLGs, and Producer Organisations were organized, with 1,264 members onboarded to ONDC – India’s open digital commerce network – enabling rural producers to sell directly to consumers online. NABARD has also launched m-Suwidha, a pilot scheme providing sustainable livelihood solutions in farm and off-farm sectors by identifying skill gaps and matching participants to suitable professions with marketing tie-ups and credit support.
Together, these financial provisions – from government schemes and bank linkage models to microcredit programmes and skill development – form a comprehensive support architecture for SHGs. Each layer addresses a distinct barrier: the first provides seed capital, the second formalises credit access, the third enables productive borrowing, and the fourth builds the human capacity to sustain it. The result is a model of community-based financial inclusion that continues to evolve – one SHG at a time.
What do you think? If microcredit and skill training are both essential for SHGs to succeed, which do you think makes the bigger difference in the long run – financial access or livelihood capability-building? And how might the outcomes differ for SHGs that serve people with disabilities compared to the general rural poor?
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