Bank Credit to Women Self-Help Groups

Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM) has taken steps to support women’s Self-Help Groups (SHGs) to improve their business, use of technology, and access to finances.

About Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM)

• It is the Flagship Program of the Ministry of Rural Development (MoRD).
• Objective: To reduce poverty by empowering the poor, especially women, through self-help groups (SHGs) and access to financial services and livelihoods.
• Origin: Restructured from Swarnajayanti Gram Swarojgar Yojana (SGSY) and renamed as DAY-NRLM in 2016.
• This initiative offers funds to strengthen community institutions and financial management capacity.
  • The goal is to help SHG in building their track record to attract mainstream Bank finance.
• Financial support provided by DAY-NRLM
  • Revolving Fund: SHGs receive Rs. 20,000 to Rs. 30,000. 
  • Community Investment Fund: SHGs can receive a Community Investment Fund of up to Rs. 2.50 lakh to improve their financial standing. 
  • Interest subvention: To reduce the cost of Bank loans, DAY-NRLM provides interest subvention to women SHGs, making credit more affordable.

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• Key Sub-Schemes and Initiatives
  • Start-up Village Entrepreneurship Programme (SVEP)
    • A sub-scheme under DAY-NRLM that supports SHG women or their family members to set up small businesses.
    • Key Statistics: 3.13 lakh rural enterprises were supported (as of October 2024).
  • Banking Correspondent Sakhis/Digipay Sakhis
    • SHG women are trained as Banking Correspondent Sakhis to improve access to banking services in rural areas.
    • Current Deployment: 1,35,127 Banking Correspondent Sakhis working under DAY-NRLM.

About Self-Help Groups

• SHGs are voluntary associations of economically disadvantaged individuals from similar socio-economic backgrounds.
• An SHG typically includes 5 (minimum)  to 20 (maximum) members.
  • Members collaborate to solve common problems through mutual support and community action.
• Origin of SHGs in India
  • 1984: Inspired by Prof. Yunus’s Grameen Bank model, SHGs were introduced for social mobilization.
  • NABARD’s Role: NABARD and NGOs initiated the SHG-Bank linkage program.
  • 1990: RBI recognized SHGs as an alternative credit model.   

Advantages of SHGs

• Low Transaction Costs: Beneficial for both lenders and borrowers.
• Women Empowerment: Encourages financial and social independence for women.
• Reduced Informal Borrowing: Decreases reliance on local moneylenders.
• Support by Corporates: Many companies promote SHGs for community development.

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• No Collateral Requirement: Overcomes barriers to formal credit access.
• Social Support: Platform for discussing and resolving common challenges.

Challenges Faced by SHGs

• Beneficiary Identification: Difficulty in identifying and including the poorest individuals.
• Training Gaps: Lack of quality training programs and expert trainers.
• Financial Literacy Issues: Limited access to formal financial services.
• Market Linkages: Poor integration with markets affects growth.
• Community Support: Inadequate business environment and value chain support.

Government Initiatives and Policies Supporting SHGs

• SHG-Bank Linkage Programme (SBLP): It is an initiative launched by the National Bank for Agriculture and Rural Development (NABARD) in 1992. 
  • It aims to provide financial inclusion to rural poor, especially women, by linking Self-Help Groups (SHGs) with formal banking institutions. 
• Mission for Financial Inclusion (MFI): This initiative is a broader initiative to ensure access to financial services, namely, Banking/ Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.
• Lakhpati Didi Initiative:  This initiative was launched in 2023 which  empowers women of self help groups to take multifaceted approaches to economic empowerment.
  • It encourages them to adopt sustainable livelihood practices and have annual household income exceeding Rs. 1,00,000. 

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Way Forward

• Advanced Technology:  SHG Should use better digital platforms for record-keeping, transactions, and communication 
• Less reliance on informal lenders: This group, to reduce reliance on informal lenders and promote financial inclusion, should link it with financial institutions. 
• Inclusive Approach:  SHGs should adopt an inclusive approach to ensure fair participation and benefits of members from diverse socio-economic backgrounds. 
• Community Resource Person (CRP): There should be a trained CRP to guide SHGs in identifying beneficiaries, managing finances, and scaling activities.