The government of India since the 1970s has implemented various schemes to alleviate poverty. In 1969 the fourth five year plan introduced the first scheme to tackle poverty, which was followed by the Integrated Rural Development Program (IRDP) that was launched throughout India in 1980. This scheme provided below poverty line households with subsidies and access to credit to encourage self-employment.
Subsequently in 1999, Swarnajayanti Gram Swarozgar Yojana (SGSY) of the Ministry of Rural Development was launched to provide sustainable income through the establishment of self help groups (SHGs). SHGs are self-governed informal group of people with similar socio-economic background, who come together to save, contribute to a common fund and lend to the members.
While the SGSY made great strides in mobilizing people into 2.25 million SHGs, numerous studies showed that there were significant variations in the extent of mobilization and the quality of the scheme’s implementation. Under the scheme, capital investment was provided up-front as a subsidy, without adequate investment in social mobilization, institution and capacity building. Moreover, uneven geographical spread of SHGs, high attrition rates among members of SHGs, and lack of adequate banking sector response impeded the program performance. In fact, some states did not fully utilize the funds received under the SGSY.
Despite its many shortcomings, the scheme validated the need for the poor to be organized into SHGs and SHG federations as a route to the social and economic empowerment of rural poor.
To overcome the shortcomings of the scheme, the SGSY was restructured into the National Rural Livelihoods Mission (NRLM) in 2010. The NRLM focuses strengthening the institutions of the poor women, including the SHGs and their federations at village and higher levels. by providing them with the requisite skills to manage their institutions, create market linkages and enhance their credit worthiness.
In contrast with the SGSY, the NRLM adopted a ‘demand driven’ strategy for funding, in place of SGSY’s ‘allocation based’ strategy. Further, under the NRLM, states have greater autonomy to develop their livelihoods-based perspective plans and annual action plans. There is also a mandate for the states to ensure the time bound delivery of results, engage in continuous capacity building, impart requisite skills and create linkages with livelihoods opportunities for the poor.
NRLM and Financial Inclusion
One of the most critical aspects of the NRLM is improved bank linkages and interest subvention that is provided in the following manner:
• NRLM proposed to provide revolving fund of minimum of ₹10,000 and up to a maximum of ₹15,000 per SHG that is in existence for a minimum period of 3 to 6 months and follows the norms of good SHGs, i.e. regular meetings, regular savings, regular internal lending, regular recoveries and maintenance of proper books of accounts.
• NRLM proposed to provide a community investment support fund to the SHGs to advance loans and the fund will be routed through the village level/cluster level federations, to be maintained in perpetuity by them.
• NRLM proposed to provide for interest subvention, to cover the difference between the lending rate of the banks upto a maximum of ₹3,00,000 per SHG. This will be available in two ways ie in 250 identified districts through banks that are mandated to lend to the women SHGs at a fixed rate of 7% up to an aggregated loan amount of ₹3,00,000 and in the remaining districts through their SRLMs.
Impact of the Mission
As per a press release posted by Ministry of Rural Development , the NRLM has mobilized more than 5 crore women into 45 lakh SHGs and more than Rs. 1.64 lakh crore of bank credit has been accessed by the SHGs with non-performing assets of 2.3%.
An assessment of the NRLM was carried out by the Institute of Rural Management, Anand . The study indicated that the households covered under NRLM:
• Have a higher number of livestock assets as compared to uncovered households;
• Show a higher proclivity to save in formal institutions;
• Have a higher loan size and are more likely to borrow from formal financial sources;
• Spend less on food consumption and more on education;
• Have 22% higher net income than the households in the uncovered areas.
Overall, the report states that the program had most impact on women’s empowerment, access to microfinance, increase in livestock production and high cost debt reduction, while lesser impact on augmentation of natural resources, increase in agricultural production and infrastructure development. The Ladee Foundation is conducting research into the implementation of the NRLM on the ground to understand the gaps in the access to credit by SHGs and is also working on solutions to resolve these gaps.