Self-help groups and women's collectives

Detail

1. What a self-help group is

• Self-help group (SHG): a small group of 10-20 members, mostly poor women, who live in the same area and meet regularly.
• Members save a small amount on a fixed schedule.
• They lend the pooled savings to each other (internal lending).

• Once the group has a record of saving and repaying, it borrows from a bank without collateral (collateral means property pledged as security for a loan).

• Social collateral: the group's peer pressure replaces property as security. Members make sure each person repays, because the whole group's credit depends on it.

• Roots: NGO-led credit groups of MYRADA (Karnataka, 1980s) showed that poor women could save and repay. NABARD built on this model.
• Grameen Bank is a different model. Muhammad Yunus founded it in Bangladesh, and he and the bank won the Nobel Peace Prize in 2006 (NCERT: Class 10, Political Parties, exercise). It is a microfinance bank (a bank giving very small loans to the poor). It uses joint liability: small groups of borrowers answer for each other's loans. An Indian SHG, in contrast, is a savings-first group that a bank lends to as a single unit.

2. SHG-Bank Linkage Programme (SHG-BLP)

• SHG-BLP: a programme that connects SHGs with formal banks so they can get savings accounts and loans.

Step	Year	What happened
Pilot	1991-92	NABARD launched a pilot, in consultation with RBI, to link about 500 SHGs with banks [5]
Guidelines	26 February 1992	NABARD sent banks detailed operating guidelines by circular letter [5]
Priority sector	1996	RBI made SHG lending a mainstream activity under priority-sector lending: loans to groups count as loans to "weaker sections" [4][5] (priority-sector lending = a share of bank credit that RBI requires to go to sectors such as farming, small firms and weaker sections)
Phases	1992-95, 1996-98	Pilot testing (1992-95), then mainstreaming (1996-98) [5]

• Loan rules (RBI Master Circular):
• Banks give savings-linked loans at a savings-to-loan ratio of 1:1 to 1:4. Mature groups can get more than four times their savings [4].
• The interest rate on bank loans to SHGs is left to the bank's discretion [4].

• The flexible margin and security norms of the pilot still apply [4].

• Early results: NABARD's quick studies found bigger loans, a shift from consumption loans to loans for production, nearly 100% repayment and lower transaction costs [5].

• SHG-BLP is often called the world's largest microfinance programme. NABARD's yearly Status of Microfinance in India report gives current figures for savings-linked and credit-linked groups.
• Credit terms, interest subvention (government payment of part of the interest) and NPAs (non-performing assets, meaning unpaid loans) are covered in the economy subject's note financial-inclusion-rural-credit.

3. DAY-NRLM: the national SHG mission

• DAY-NRLM (Deendayal Antyodaya Yojana-National Rural Livelihoods Mission): the Ministry of Rural Development's (MoRD) mission to organise poor rural households into SHGs for social and financial inclusion and better livelihoods.
• It was launched in June 2011 as NRLM. It replaced SGSY (Swarnjayanti Gram Swarozgar Yojana, 1999), which gave subsidies to individuals and groups.
• It was later renamed DAY-NRLM.

• It is a Centrally Sponsored Scheme (a scheme funded by both the Centre and the states and run by the states). It runs in partnership with all states and UTs except Chandigarh and Delhi [2].

• Goal: bring at least one woman from every poor rural household into an SHG.

• Structure from the bottom up:
• SHG (10-20 women) → Village Organisation (VO) (a federation of SHGs in a village) → Cluster-Level Federation (CLF) (a federation of VOs across a group of villages).

• Community resource persons, who are experienced SHG women, train and support new groups.

• Support bodies:

• The National Rural Livelihoods Promotion Society (NRLPS) is an autonomous society under MoRD, cleared by the Union Cabinet in 2013. It gives professional and technical support to NRLM and the State Rural Livelihoods Missions (SRLMs) [6].
• Examples of SRLMs are Jeevika (Bihar) and SERP (Society for Elimination of Rural Poverty; Andhra Pradesh and Telangana).

• Kudumbashree works as a National Resource Organisation, which means it helps other states set up their SHG systems.

• Scale:

• As of 30 June 2024, 10.05 crore women were in 90.86 lakh SHGs [2].
• MoRD figures released through PIB in March 2026 give about 10.05 crore households in about 90.9 lakh SHGs. SHGs have received more than ₹12 lakh crore of bank credit since 2013-14.

• "Sangathan se Samriddhi" (2023) was a national campaign to bring 10 crore rural women into SHGs [8].

• Roles in governance:

• Village Poverty Reduction Plans (VPRPs), prepared by SHG federations, feed into Gram Panchayat Development Plans (GPDPs). This links SHGs to panchayats under Part IX (Articles 243-243O; 73rd Amendment, 1992).
• SHG federations do community monitoring and social audit (a public check by local people on how a scheme's money was spent).

• Sakhis (women agents) work as bank sakhis and BC sakhis (business correspondents who provide banking services in the village).

• Namo Drone Didi (2023):

• It is a Central Sector Scheme (fully funded by the Centre) to give drones to 15,000 selected women SHGs between 2023-24 and 2025-26. The SHGs rent out the drones to farmers for farm work [7].
• The outlay is ₹1,261 crore for 2024-25 to 2025-26 [7].
• The Centre pays 80% of the drone package cost, up to ₹8 lakh [7].
• One member gets 15 days of drone-pilot training. Another member or family member gets 5 days of drone-assistant training [7].

4. Lakhpati Didi

• Lakhpati Didi: an SHG member whose annual household income is ₹1 lakh or more [2][3].

• The income must be sustained. It is counted over at least four agricultural seasons or business cycles, with an average monthly income above ₹10,000 [2][3].

• The initiative was announced in 2023 and comes out of DAY-NRLM [2].

• Each SHG household is encouraged to take up several livelihood activities linked to value chains (the stages a product passes through from producer to buyer) [2].

• Target and progress:

• The target was raised to 3 crore women in 2024 (Interim Budget).
• 2 crore women had become Lakhpati Didis since the scheme began, according to PIB [2].
• MoRD figures in March 2026 report over 2 crore.

5. Kudumbashree (Kerala)

• Kudumbashree: Kerala's State Poverty Eradication Mission, launched on 17 May 1998. It is a network of women's collectives that works through local governments.
• Three tiers:

Tier	Level	Who is in it
Neighbourhood Groups (NHGs)	Neighbourhood	About 10-20 women, one from each poor family
Area Development Societies (ADS)	Ward	Federation of NHGs
Community Development Societies (CDS)	Local body (panchayat or municipality)	Federation of ADSs

• Origins:
• Earlier community-based anti-poverty work in Alappuzha and Malappuram.

• The People's Plan Campaign (1996), which gave Kerala's local bodies a large share of plan funds after the 73rd and 74th Amendments.

• Link with local government: it works closely with panchayats and municipalities. The CDS sits at the same level as the local body.

• Activities:
• micro-enterprises (very small businesses)
• Haritha Karma Sena, the women's waste-collection teams
• community kitchens
• Ashraya, which identifies and supports destitute families
• MGNREGS work (Mahatma Gandhi National Rural Employment Guarantee Scheme)

• care-economy models such as K4 Care and Saantwanam, which create paid jobs in health and elder care [9]

• National role: its tiered model of collectives linked to local bodies became the template for NRLM. Kudumbashree's own records report membership of over 45 lakh women.

6. Significance for democracy

• Political apprenticeship: SHG meetings teach women to speak in public, keep accounts and negotiate. Many members later become panchayat representatives, often in seats reserved for women under Article 243D.
• Collective bargaining with the state: federations press officials over roads, ration shops, water and scheme benefits. This makes SHGs a form of civil society (organised citizen activity between the family and the state).
• Service delivery: SHGs run mid-day meal kitchens, ration shops, banking points and waste collection.
• NCERT gives the example of the South Manubankul panchayat, which supports SHGs (Class 9, Democracy).

7. Critiques

• Instrumentalisation: the state uses women as cheap tools for delivering schemes, so their groups stop being independent voices.
• Repayment pressure and over-indebtedness:
• Peer pressure can turn into harassment.
• Women may borrow from several lenders at once.

• The 2010 Andhra Pradesh microfinance crisis is the classic case (see the economy subject).

• Elite capture: better-off or upper-caste women take the leadership posts and most of the loans.

• Weak livelihood outcomes: access to credit does not automatically produce lasting income. Many loans are used for consumption.
• Extra unpaid work: meetings, bookkeeping and scheme duties are added to housework and care work, so women carry a double or triple burden (link: gender-religion-caste).

Prelims Hooks

• SHG-BLP: NABARD's pilot began in 1991-92 with about 500 SHGs, and operating guidelines were issued on 26 February 1992 (not RBI's and not the 1999 SGSY).
• In 1996, RBI treated bank loans to SHGs as priority-sector lending under "weaker sections".
• Under the RBI Master Circular, savings-linked SHG loans run at a savings-to-loan ratio of 1:1 to 1:4, and the interest rate is left to the bank.
• NRLM was launched in June 2011 by MoRD, replacing SGSY (1999). It was later renamed DAY-NRLM. It runs everywhere except Chandigarh and Delhi.
• NRLM structure: SHG → Village Organisation → Cluster-Level Federation. NRLPS (cleared by the Cabinet in 2013) is its national technical support society.
• Lakhpati Didi: household income of at least ₹1 lakh a year, sustained over at least four seasons or business cycles with an average monthly income above ₹10,000. The target was raised to 3 crore in 2024.
• Namo Drone Didi: 15,000 women SHGs, ₹1,261 crore, 80% of the drone cost up to ₹8 lakh. It is a Central Sector scheme, not a Centrally Sponsored one.
• Kudumbashree was launched on 17 May 1998 in Kerala. Its tiers are NHG → ADS (ward) → CDS (local body). Trap: it is a State Poverty Eradication Mission, not a central scheme.
• Grameen Bank (Muhammad Yunus, Nobel Peace Prize 2006) uses joint-liability group lending, which is different from India's savings-first SHG-bank linkage.

Mains Points

• Deepening democracy from below: SHG federations feed VPRPs into GPDPs, do social audits and produce women leaders for panchayats. This gives real substance to the 73rd Amendment's one-third reservation for women (Article 243D) and turns formal quotas into actual participation.
• Autonomy vs. instrumentalisation: state-built SHGs (DAY-NRLM) have huge reach, with 10 crore women in about 91 lakh groups. But depending on scheme targets risks turning civil-society collectives into delivery arms of the state. Kudumbashree shows a middle path: collectives linked to local bodies but managed by their own elected tiers.
• Credit is not empowerment by itself: the risks include repayment pressure, over-indebtedness (Andhra Pradesh, 2010), elite capture and unpaid workloads. Reforms include:
• judging success by livelihood outcomes (Lakhpati Didi's sustained-income test) rather than loan volumes
• building producer collectives and market links
• financial-literacy training

• rotating leadership posts so that SC/ST and poorer members also lead

• Technology and new roles: Namo Drone Didi and the banking sakhis move SHG women into skilled service jobs. Success depends on enough rental demand, maintenance and training, not just on handing out equipment.