SHGs in India

• 27 Jun 2025

For Prelims: Lakhpati Didi Initiative, PM SVANidhi, MGNREGA, Panchayati Raj Institutions, SDGs, MUDRA, Government e Marketplace, SHG-Bank Linkage Programme, National Bank for Agriculture and Rural Development, Deendayal Antyodaya Yojana - National Rural Livelihoods Mission.                          

For Mains: Role of SHGs and Lakhpati Didi initiative in women empowerment, Significance and challenges associated with SHGs, Steps needed to improve the working of SHGs. 

Source: PIB  

Why in News? 

The Ministry of Rural Development (MoRD) and the Ministry of Skill Development & Entrepreneurship (MSDE) signed an MoU to strengthen the Lakhpati Didi initiative by empowering rural women from Self Help Groups (SHGs). 

• The MoU aims to create 3 crore Lakhpati Didis and future Millionaire Didis by aligning rural aspirations with institutional skills, offering customized training in emerging sectors, and formal certification. 

What is the Lakhpati Didi Initiative? 

• About Lakhpati Didi: A Lakhpati Didi is an SHG member earning Rs 1 lakh or more annually through sustainable livelihood activities. It is an outcome of Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM) under the Ministry of Rural Development, not a separate scheme. 
  • As of June 2024, 1 crore Lakhpati Didis have been created. The Interim Budget 2024–25 raised the target from 2 crore to 3 crore women. 
• Key Objectives: It aims to empower rural women through sustainable income generation, promote diversified livelihoods (agriculture, handicrafts, services, etc.), and transform SHG women into role models of economic self-reliance. 
  • Income must be sustained over at least four agricultural seasons or business cycles, i.e., Rs 10,000+ per month on average. 
• Implementation Strategy:  
  • Diversified Livelihoods: Focus on agriculture, allied sectors, services, and small enterprises for multiple income sources. 
  • Digital Tools & Training: Community Resource Persons (CRPs) use digital tools to guide SHGs in livelihood planning supported by structured skilling programs in financial literacy, market access, and compliance. 
  • 4-Pillar Support System: 
    • Assets: tools, equipment, and infrastructure. 
    • Skills: training and hands-on knowledge. 
    • Finance: easy bank linkage and access to government schemes. 
    • Market Access: branding, packaging, e-commerce, and marketing support. 
  • Convergence & Partnerships: Collaboration with government schemes (like Skill India, PM SVANidhi, MGNREGA) and the private sector ensures technical, financial, and institutional support to scale up efforts. 

What are Key Facts About Self Help Groups (SHGs)? 

• About SHGs: SHGs are informal collectives of 10–20 members, primarily women, formed to tackle shared challenges and enhance their economic well-being. 
  • Kudumbashree in Kerala, Mahila Arthik Vikas Mahamandal in Maharashtra, and Looms of Ladakh are a few examples of success stories from SHGs. 
• Evolution: The SHG concept originated from the Grameen Bank in Bangladesh, founded in 1975 by Prof. Muhammad Yunus, offering collateral-free microloans based on trust and social capital, mainly benefiting women.  
  • In India, SHGs emerged during the 7th Five Year Plan (1985–90) as a poverty eradication strategy. 
  • MYRADA (Mysore Resettlement and Development Agency) initiated SHG-bank linkage in the mid-1980s, and the Government of India launched Swarnjayanti Gram Swarozgar Yojana (SGSY) in 1999, focusing on SHG formation. 
• Functioning of SHGs:  
  • Creation and Meetings: SHGs are formed within communities with support from NGOs or government agencies, and members meet regularly to discuss issues, manage savings, and handle loans. 
  • Savings and Financing: Members regularly pool savings into a group fund, which is used for internal lending to support needs like businesses, medical emergencies, or education. 
  • Operational Planning: Decisions on savings, loans, and activities are made collectively, with one member handling record-keeping of finances and meetings. 
  • Bank Linkage: SHGs build bank linkages to access larger loans and services, supported by government schemes, while their savings and repayment history enhance creditworthiness. 
  • Training and Support: SHGs receive training in financial literacy, entrepreneurship, and other skills from NGOs, government agencies, or banks. 
• SHGs in India: As of June 2025, 10 crore women are part of 91 lakh SHGs. By February 2023, 8.9 million SHGs had availed loans worth Rs 2.54 lakh crore, and in 2023–24 (till Feb 2024), loans worth Rs 1.7 lakh crore were disbursed.  
  • As per the Economic Survey 2022–23, SHGs maintain a loan repayment rate of over 96%, highlighting their credit discipline and reliability. 

 

Why Are SHGs Important for Community Development and Women's Empowerment? 

• Women’s Empowerment: SHGs, predominantly female-led, promote financial independence, decision-making, and leadership skills among women.  
  • SHGs boost social status, confidence, and political participation, with many members becoming Sarpanch/Pradhan, while acting as pressure groups to ensure Gram Panchayat accountability.  
  • SHGs ensure employment, foster economic independence, and improve bank access, empowering women in decision-making and in tackling dowry, domestic violence, and alcoholism. 
• Financial Inclusion: SHGs help marginalized communities, especially women, access formal banking services, promote savings, and offer small loans at reasonable interest rates, reducing reliance on moneylenders. 
• Social Upliftment & Poverty Alleviation: SHGs raise awareness about health, education, and government schemes, and address social issues like child marriage, domestic violence, and sanitation.  
  • Through microloans, they support income-generating activities like small businesses and farming, helping break the cycle of poverty by promoting self-employment. 
• Strengthening Rural Economy: SHGs promote local entrepreneurship and agriculture-based livelihoods, enhance market linkages and bargaining power, and encourage unity and collective action for community welfare (e.g., roads, schools).  
  • They also serve as platforms for skill development and vocational training. 
• Sustainable Development & Governance: SHGs promote eco-friendly practices like organic farming and waste management, and support SDGs such as No Poverty (SDG 1), Gender Equality (SDG 5), and Decent Work & Economic Growth (SDG 8).  
  • Government programs like NRLM use SHGs for effective delivery of subsidies and welfare benefits, while banks offer loans to SHGs under priority sector lending. 

What are the Major Challenges Faced by SHGs? 

• Financial Challenges: Limited access to credit due to lack of collateral or proper documentation hinders many SHGs from securing bank loans.  
  • Some face challenges like high dependence on subsidies, irregular savings, and repayment issues, leading to fund shortages and loan defaults. 
• Managerial & Operational Issues: Many SHGs face challenges like lack of professional management (poor accounting, record-keeping, and governance), inefficient leadership causing conflicts and fund mismanagement, and overdependence on a few members, limiting overall effectiveness. 
• Social & Cultural Barriers: Gender inequality in some regions limits women’s participation in SHGs due to male dominance while caste and class divisions create internal conflicts, reducing group cohesion. 
  • A lack of awareness about rights, government schemes, and financial literacy hampers member empowerment. 
• Policy-Related Issues: Delayed bank linkages due to bureaucratic hurdles, political interference from local leaders, and inadequate government support with implementation gaps in schemes like NRLM hinder SHG operations and autonomy. 
• Sustainability Concerns: SHGs face challenges like limited market linkages, lack of business skills, and competition from large businesses, which reduce profitability and hamper income-generating activities.  
  • Additional issues include high dropout rates due to migration or financial stress, and a lack of innovation in adapting beyond traditional activities. 

What Steps can be Taken to Improve the Working of SHGs? 

• Strengthening Financial Support: Ensure easy credit access by simplifying SHG-Bank Linkage procedures and encouraging collateral-free, low-interest loans.  
  • Link SHGs with schemes like NRLM and MUDRA, and promote revolving funds. Introduce micro-insurance for health, crops, and life to mitigate risks. 
• Enhancing Income Opportunities: Promote SHG products on e-commerce platforms like Government e Marketplace (GeM), Amazon, and Flipkart; support branding and packaging; and ensure fair pricing through SHG-run stores, exhibitions, and supermarket tie-ups. 
• Corporate-SHG Linkages: Form corporate-SHG alliances (e.g., Google’s Women Will) to provide mentorship, technology, and market access, and mobilize Corporate Social Responsibility (CSR) funds for capacity building and infrastructure development. 
• Policy & Government Interventions: Ensure timely subsidy disbursement, promote SHG federation into clusters for greater bargaining power, and offer GST exemptions or subsidies for SHG products. 
• Social Empowerment & Inclusivity: Promote gender sensitivity through workshops, ensure inclusion of marginalized groups (SC/ST, landless, disabled), and collaborate with NGOs to raise awareness on sanitation, maternal health, and child education. 
• Reducing Regional Disparities: Launch targeted programs to expand SHGs in underserved regions (especially Northern and Eastern India) and offer policy incentives for financial institutions and development organizations to boost engagement. 

SHG-Bank Linkage Programme 

• About: SHG-Bank Linkage Programme (SHG-BLP) is a flagship initiative launched by NABARD (National Bank for Agriculture and Rural Development) in 1992 to connect SHGs with formal banking systems.  
• Objective: It aims to promote financial inclusion for the rural poor, especially women, by linking SHGs with banks for savings, credit, and other financial services, reducing reliance on high-interest informal moneylenders. 
• Working: SHGs open bank savings accounts and, after 6 months of regular savings, become eligible for collateral-free loans at reasonable interest rates. 
• Models of Linkage:  
  • Model I: Banks directly form, manage, and finance SHGs, handling savings and loan disbursement. 
  • Model II: SHGs are formed by NGOs or agencies, but financed directly by banks; these agencies also provide training and support. 
  • Model III: NGOs act as financial intermediaries, forming SHGs and linking them to banks, especially in areas with limited banking access. 
• Loan Types: Loan types include microcredit for income generation, revolving funds as seed money (e.g., under NRLM), and term loans for scaling up SHG enterprises. 

Conclusion 

The Lakhpati Didi Initiative and SHG movement are transforming rural India by empowering women economically and socially. While challenges like financial access and market linkages persist, strategic interventions in skilling, credit access, and policy support can amplify their impact, making SHGs pivotal to achieving inclusive growth and Viksit Bharat by 2047. 

Drishti Mains Question:

What are the key challenges faced by SHGs in India? Suggest policy measures to enhance their sustainability and scalability. 

UPSC Civil Services Examination Previous Year Questions (PYQs) 

Prelims

Q. How does the National Rural Livelihood Mission seek to improve livelihood options of rural poor? (2012)

1. By setting up a large number of new manufacturing industries and agribusiness centres in rural areas 
2. By strengthening ‘self-help groups’ and providing skill development 
3. By supplying seeds, fertilizers, diesel pump-sets and micro-irrigation equipment free of cost to farmers 

 Select the correct answer using the codes given below: 

(a) 1 and 2 only 

(b) 2 only 

(c) 1 and 3 only 

(d) 1, 2 and 3 

Ans: (b) 

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Mains 

Q. Discuss the contribution of civil society groups for women’s effective and meaningful participation and representation in state legislatures in India. (2023)

Q. Can the vicious cycle of gender inequality, poverty and malnutrition be broken through microfinancing of women SHGs? Explain with examples. (2021) 

Q. “Micro-Finance as an anti-poverty vaccine, is aimed at asset creation and income security of the rural poor in India”. Evaluate the role of the Self Help Groups in achieving the twin objectives along with empowering women in rural India. (2020) 

Q. “The emergence of Self Help Groups (SHGs) in contemporary times points to the slow but steady withdrawal of the State from developmental activities”. Examine the role of the SHGs in developmental activities and the measures taken by the Government of India to promote the SHGs. (2017)

Q. The Self-Help Group (SHG) Bank Linkage Programme (SBLP), which is India’s own innovation, has proved to be one of the most effective poverty alleviation and women empowerment programmes. Elucidate. (2015)