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Self Help Groups 101 — Part I

National Rural Livelihood Mission

Since the independence of India, poverty has been one of the crucial challenges for inclusive growth for the country to compete with the world. Access to formal finance by the poor is an essential prerequisite for poverty alleviation and sustainable development. A report published by the Rangarajan committee in 2014 claims that India has around 363 million (21.9%) of the people living below the poverty line.

Below Poverty Line:
An individual is defined to live under below poverty line if they are unable to spend Rs. 32/day ($0.43) in rural areas or Rs. 47 ($0.63) in urban areas. Government of India has been invested actively in eradicating poverty through various measures throughout history.

Poverty in its multidimensional context is defined as hunger, lack of shelter, being sick and not being able to see a doctor, not having access to school and not knowing how to read, not having a job is the fear of the future.

National Rural Livelihood Mission (NRLM)

NRLM has been India’s most ambitious project to date to reduce poverty. NRLM was launched in 2011 with a budget of $5.1 Billion dollars with a contribution of $1 Billion dollars from the world bank, making it the world’s largest poverty alleviation scheme. NRLM has the mandate to reach out of 8–10 crore rural poor households in 2.5 lakh gram panchayats across the country and link them to sustainable livelihood opportunities, nurturing them till they come out of poverty. NRLM’s approaches financial inclusion by bringing together a homogenous group of women in the form of self-help groups and helping them access formal bank credit.

Photo Courtesy: EpiscopalRelief on Flickr

Low formal credit penetration

Lending to the poor continues to be considered risky by the banks. One of the major reasons is the lack of an effective credit delivery mechanism for the poor besides limited outreach and coverage. NRLM aims to eradicate poverty by providing the poor access to formal financial services such as credit, saving, insurances, payments and remittance facilities primarily through Self Help Groups. NRLM works both on the demand and supply sides of financial inclusion. On the demand side, it promotes financial literacy among the poor and provides catalytic capital to the SHGs and their federations. On the supply side, NRLM coordinates with the financial sector to deliver credit and related services to SHGs and their federations.

NRLM Mission

“To reduce poverty by enabling the poor households to access gainful self-employment and skilled wage employment opportunities resulting in an appreciable improvement in their livelihoods on a sustainable basis, through building strong and sustainable grassroots institutions of the poor.”

NRLM Guiding Principles

  • Poor have a strong desire to come out of poverty, and they have innate capabilities.
  • Social mobilisation and building strong institutions of the poor is critical for unleashing the innate capabilities of the poor.
  • An external dedicated and sensitive support structure is required to induce the social mobilisation, institution building and empowerment process.
  • Facilitating knowledge dissemination, skill-building, access to credit, access to marketing, and access to other livelihoods services enables them to enjoy a portfolio of sustainable livelihoods

NRLM Values:

  • Inclusion of the poorest, and meaningful role to the poorest in all the processes.
  • Transparency and accountability of all processes and institutions. Ownership and the key role of the poor and their institutions in all stages — planning, implementation and monitoring.
  • Community self-reliance and self-dependence.

There are three major themes that NRLM focuses on — universal social mobilisation, financial inclusion and livelihoods enhancement.

Eligibility under NRLM:

The target households for the scheme are identified through Participatory Identification of the Poor instead of BPL. The PIP is a community-driven process where the Community Based Organisations (CBO) like NGO and other government organisations identify the poor in the village through participatory tools. These participatory tools take reference to the SECC data and vulnerability criteria and build on these data. This process is carried out at regular intervals and the target groups are assessed until they move out of poverty. The identified women are eligible to form into Self Help Groups who get enrolled in the NRLM programme.


Self Help Groups are homogenous groups of 5–20 women who come from a similar social and economic background. These women come together and meet at regular intervals to save a small sum of money (could be as low as Rs.10 or Rs.20 per month). The collected pool of money is then lent to the group members on a need basis during the times of emergency, financial scarcity, important life events or to purchase assets. The loans borrowed from the self-help groups are collateral-free and the peer pressure of the group ensures that timely repayment of the loans happens.

In the next few articles, we would go in deep into form, structure, working and credit sources for Self Help Groups.

About D91 labs:

This research was executed and documented by D91 labs. D91 labs is an open-source initiative by setu.co to help Bharat build great fintech products. We organise and publish user research, insights, and frameworks for fintech in India. Please follow us on medium for more exciting stories and insights on Bharat.

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