Article:  SHGs as a Tool for Social & Economic Change

 Published: The Hindu 3 Feb, 2026

Very Important Topic for UPSC/PCS  Mains : GS  II /III/ (Governance & Social Justice) and (Economy & Inclusive Growth).

This article discusses the strategic roadmap for the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission (DAY-NRLM) as it enters its next appraisal cycle (2026-27 to 2030-31). It emphasizes transitioning from basic mobilization to advanced entrepreneurship, financial independence, and institutional strengthening.

NRLM Phase II (2026-2031):

Why  in the news? The program is due for a fresh appraisal for the 2026-2031 period.

• Milestones Reached: Mobilization of 10 crore households into 91 lakh SHGs; over 2 crore “Lakhpati Didis” created.
• Shift in Focus: Transitioning from “Debt-led growth” to “Entrepreneurship-led growth” and from “Group credit” to “Individual credit.”

Current Landscape of DAY-NRLM:

• Institutional Tiering: SHGs > Village Organisations (VOs) > Cluster-Level Federations (CLFs).
• Financial Health: Over 11 lakh crore bank credit mobilized; impressively low NPA of ~1.7%.
• Political/Social Impact: Empowered women are now key targets for Direct Benefit Transfer (DBT) schemes (e.g., Ladli Laxmi, Ladki Bahin).

Key Issues and Challenges:

• Institutional Autonomy: CLFs often act as “subservient” to government officials rather than independent community-owned bodies.
• Financial Management: Huge capital (~Rs 56.69 lakh crore) is lying idle or is prone to misuse without robust monitoring.
• Credit Bottlenecks: Lack of individual credit history (CIBIL scores) prevents successful entrepreneurs from scaling up beyond group loans.
• Siloed Approach: Various sub-schemes and department interventions (Agriculture, Animal Husbandry) operate in isolation.
• Marketing Gap: Rural products lack standardized packaging, branding, and consistent market links.

Strategic Steps Taken/Proposed:

• Revitalizing CLFs: Emulating successful models like Kudumbashree (Kerala) and Jeevika (Bihar) to ensure community ownership.
• Financial Innovation: Moving beyond traditional banks to partner with SIDBI, NBFCs, and Neo-banks for equity and venture capital.
• Convergence Cell: Proposed creation of a “Convergence Cell” at NITI Aayog to synchronize efforts across different ministries.
• Marketing Vertical: Establishing a dedicated national vertical for branding, logistics, and quality control.
• Business Hubs: Developing CLFs as “Business Clinics” to provide end-to-end services for entrepreneurs.

Way Forward:

• Individual Credit Empowerment: Generate CIBIL scores for SHG members to facilitate high-dosage individual loans.
• Accountability: Implement Social Audits and statutory audits to ensure the judicious use of idle funds.
• Customized Products: Develop flexible loan products (interest rates/tenure) tailored to the specific needs of rural women.
• Professional Support: Induct specialized professionals into CLFs to guide them through the “entrepreneurial” phase while respecting the community’s natural pace of growth.

Conclusion:

The “silent revolution” of DAY-NRLM has laid the foundation for financial inclusion. To reach the next level, the mission must shift from a government-led model to a community-driven entrepreneurial ecosystem. By strengthening CLFs and institutionalizing convergence, India can transform 10 crore SHG members from passive beneficiaries into active drivers of the rural economy.

Other related topics :

SHGs as a Tool for Social & Economic Change

1. Introduction

• Definition: Define SHGs as small voluntary associations of rural poor, primarily women, who come together for savings and credit.
• Context: Mention DAY-NRLM as the world’s largest poverty alleviation program, having mobilized 10 crore households into 91 lakh SHGs.
• The Vision: The transition from “subsistence” to “entrepreneurship” (The Lakhpati Didi initiative aiming for ₹1 lakh+ annual income).

2. The Economic Dimension of Empowerment:

• Financial Inclusion: SHGs have bridged the gap between the “unbankable” poor and formal banking.
  • Data: Mobilized over ₹11 lakh crore in bank credit.
  • Credit Discipline: Maintain an exceptionally low NPA of 1.7%, proving that the “poor are bankable.”
• Capitalization Support: The government has provided ₹56.69 lakh crore as capitalization support, creating a revolving fund that reduces dependence on high-interest moneylenders.
• Diversified Livelihoods: Moving beyond traditional farming into animal husbandry, food processing, and logistics.

3. The Social & Political Dimension

• Breaking the Silence: SHGs provide a platform for women to discuss social issues like health, education, and sanitation.
• Political Agency: The article notes that SHG mobilization has led to political empowerment, making women a decisive voting bloc and leading to women-centric DBT schemes (Ladli Laxmi, Ladki Bahin).
• Leadership Development: Through the 3-tier structure (SHG > VO > CLF), women take on leadership roles as “Community Resource Persons” or “Bank Sakhis.”

4. Addressing the Challenges (The “Critical” Analysis)

• The “Credit Ceiling”: Most SHG members are stuck in small-scale loans. To alleviate poverty permanently, they need individual credit histories (CIBIL scores) to access larger capital.
• Institutional Dependence: Many groups are still “government-led” rather than “community-owned.” True empowerment requires the Kudumbashree model of autonomy.
• Idle Funds: Large amounts of capital lying unused at the CLF level indicate a lack of financial planning or market opportunities.

5. The Way Forward (Strategic Shift)

• Innovative Financing: Move from debt to Equity and Venture Capital via partnerships with SIDBI.
• Business Clinics: Transform CLFs into “Business Hubs” that offer professional services (packaging, branding, quality control).
• Convergence: Use the Village Prosperity and Resilience Plan (VPRP) to integrate SHG plans with Gram Panchayat development.

Key Terms :

• Last-Mile Delivery: SHGs as the final link for government schemes.
• Social Capital: The trust and network created among rural women.
• Financial Literacy: The ability of members to manage accounts and interest.
• Agglomeration: CLFs acting as a single entity to bargain with big markets.

Conclusion

SHGs have successfully moved rural India from “poverty relief” to “poverty reduction.” However, for the next phase (2026-31), the focus must shift toward professionalization and market-linkage to ensure that “Lakhpati Didis” become sustainable rural entrepreneurs rather than just loan beneficiaries.

 

Article Based Mains Questions : UPSC/PCS/250/200 words Qn.1 “Self-Help Groups (SHGs) under the DAY-NRLM have evolved from simple savings-and-credit groups into powerful instruments of socio-economic revolution in rural India. Discuss.