Jaipur: About four years back, Hemlata Devi, 27, borrowed Rs 25,000 from Jai Ambe Swayam Sahayata Samooh--a self-help group, or SHG--in Jayra village in Udaipur, a southern district in arid Rajasthan. Her family needed the money to install a motor to pump water to their farm, and there was no one else that a woman like her could approach for a loan, she told IndiaSpend. The pump has increased her farm’s productivity, enabling her to repay the SHG with 2% interest.

Hemlata Devi’s story finds echoes in the lives of millions of women who are part of SHGs under the National Rural Livelihood Mission (NRLM)--a government programme to boost rural incomes. The programme’s earliest adopters, who got a 2.5 years’ headstart over those who joined later, have seen their household income increase by, on average, 19% and savings by 28%. Easier access to loans has reduced informal credit, such as from moneylenders who typically charge high interest rates, by 20%.

Financial access and other support have enabled village women to boost their families’ incomes and educated women have benefited the most from the programme with those with more years of schooling receiving larger loans.

These are the findings of recent evaluation of NRLM across seven states by researchers from the International Initiative for Impact Evaluation (3ie) and Vrutti, a Bengaluru-based nonprofit. The evaluation was conducted for the Indian government and World Bank, which funds NRLM, and was funded by the Bill and Melinda Gates Foundation.

The mission

Women in India own fewer businesses, have lower access to finance and are less active in political affairs. NRLM aims to change that.

It was started in 2011, when it subsumed an existing programme to help SHGs, the Swarnajayanti Gram Swarozgar Yojana, which had floundered since its launch in 1999. It gave states greater autonomy to design their own programmes than its precursor, as we had reported in May 2013.

NRLM provides village-level SHGs that have existed for at least three months a one-time revolving fund of Rs 15,000 to be disbursed among members. Some SHGs also qualify for loans from banks up to Rs 3 lakh, which can be used for members’ livelihood and other needs.

NRLM took some time to take off because states did not use the budget, implementation was slow, there were local capacity constraints and SHGs did not function in poor, rural areas. The programme picked up pace after 2012-13 and several evaluations have found positive impacts on income, women’s health spending and labour force participation.

Currently, India has over 6.6 million SHGs with 72 million members, including those set up before the NRLM, according to government data. The NRLM aims to reach 70-80 million poor households by 2025, according to the government’s implementation plan.

The 3ie evaluation surveyed 1,052 villages and 18,895 households in Jharkhand, Odisha, Uttar Pradesh, Chhattisgarh, Madhya Pradesh, Maharashtra and Rajasthan. It analysed the difference between households that became part of the programme in the first phase (around 2012-13) and those that joined in the second phase (around 2015-16) of the NRLM.

“The programme increased incomes of poor households,” said Bidisha Barooah, co-author of the NRLM evaluation. “Though these might not have been the poorest households (as their sample did not include the poorest of the poor--that is, those without income or destitutes), they did include very poor households, including those dependent on daily wages and those with small landholdings.” This increase in income came through two mechanisms--better financial discipline because households saved more and because of access to finance, Barooah explained.

NRLM benefited those from the scheduled castes and scheduled tribes as much or more than those from other social groups, the evaluation found. However, it did not improve women’s agency within the household. “This shows that there are household and social norms that are very hard to change,” Barooah said. The other reason for this could also be that the size of the benefits was too small to have an impact on women’s agency, Barooah said.

The authors suggest providing more training and support through SHGs and leadership opportunities to less educated women so that education does not create inequalities in who benefits from the programme. The authors also suggest greater emphasis on livelihood generation and inclusion of the most marginalised.

What happens in an SHG?

SHGs are typically groups of 8-10 women who meet once a week to collect money from their members, connecting them to banks and loaning them money at low interest rates. In the Jai Ambe SHG, every member contributes Rs 25 a week and the money can be given to any member who needs it.

India’s SHG journey

India’s earliest SHGs started in 1972 with the Self Employed Women’s Association (SEWA) in Ahmedabad working with poor, self-employed women in the informal sector. SEWA tried to help these women get work, income and food security.

Since 1983, the idea of microfinance--small loans to those usually out of the formal credit net--gained popularity in Bangladesh with Muhammad Yunus’ Grameen Bank.

In the 1990s, the National Bank for Agriculture and Rural Development (NABARD) in India started supporting SHGs, and the Reserve Bank of India allowed SHGs to open savings accounts with banks in 1993.

The government began a formal programme to encourage SHGs in 1999, called the Swarnajayanti Gram Swarozgar Yojana, but the programme failed to achieve its aims, and was revamped by NRLM.

“I am Hemlata Devi, husband Prakash Chandra, Jayra village, Kherwadi, Udaipur district,” said Hemlata Devi, when asked her full name. “Earlier we did not even know how to introduce ourselves but we learnt this in the SHG… We know more about the village and panchayat too,” she said. Hemlata Devi belongs to the Meena tribe--classified as a scheduled tribe in Rajasthan. “We also discuss any other problems we have in the SHG,” Hemlata Devi said.

The Jai Ambe SHG started with the help of an existing SHG in the village. “We had heard of these women meeting and collecting money and we wanted to know what this was all about,” Hemlata Devi said. A member taught them about weekly savings, loans and repayments. The SHG enabled women to step out of the house to attend meetings and to understand how banking works, Hemlata Devi and other SHG members said.

Every SHG has a president and secretary. Hemlata Devi, who is the secretary of the Jai Ambe group, has studied until grade X, she said. “You need to be a little educated [to be the secretary or president] because you have to sign at the bank and understand these matters,” she said.

NRLM linked several SHGs to village-level organisations (VOs) and several village-level organisations to a cluster-level federations (CLF). The programme also trained local women to run these organisations.

‘Power in numbers’

In the 3ie evaluation, those SHGs that were ‘federated’--linked to cluster level federations--benefited more as they had better access to banks and community investment funds. Households that were part of SHGs forming a village-level organisation also had a larger increase in household income, the study found.

“This was the USP [unique selling proposition] of the programme that made it different from the earlier programme,” said Barooah. “Federations play a crucial role. A single SHG has about 10 members; when several of them come together, there is power in numbers,” she said.

This represents “an important breakthrough in terms of institutional arrangements for delivering services to the poor”, the authors wrote in the study.

When the Jai Ambe SHG needed a loan, they approached the cluster-level federation, said Hemlata Devi.

Sometimes, these SHGs do not get support and are either shut down or do not run well. Take, for instance, the SHG in Moti Bassi village in Banswara district in Rajasthan. Mogi, 50, who goes by one name, was a member of the group for about two years and would contribute Rs 10 every Monday. “About a year back, the samooh [group] shut down and we do not know anything about the money,” said Ramnath, 58, her husband, a post-office helper.

Another member of that SHG, Savita Ishwar, said that the SHG still runs but that she had left it about two years back when she had fallen ill, taking her contribution back when she needed money to buy groceries. Both Mogi and Savita Ishwar are uneducated, they said.

“There was never anyone to guide these uneducated women and they never understood what was going on,” said Ramnath. “There should have been somebody to guide them.”

Perpetuating inequality

The probability of SHG membership is higher for members of scheduled castes and tribes, and for households with fewer consumer assets, as well as those who need to access low cost credit and have high indebtedness, the researchers found.

But overall, households with greater levels of schooling obtained larger loans from SHGs and more educated women also gained the most in terms of confidence in dealing with the community, the evaluation found. “Strikingly, our results reveal that it is the schooling of male members of the household that most affects loan amounts,” the authors wrote, highlighting that the programme was creating inequalities based on education, even as it was reducing inequalities based on social groups. The inequality was the highest in more developed gram panchayats, they found.

One of the reasons the programme created more opportunities for educated women is because they could have already had a level of agency and confidence that other women did not, reasons Barooah. Women who were already involved in low-level decision making were more likely to be part of an SHG, the study found. They were also more likely to be chosen to lead these organisations and would have been more active and received a greater share of the benefits.

In addition, SHGs with at least a few members with relatively high levels of schooling adhere better to programme rules, the researchers found.

Ensuring leadership opportunities for those with less education, along with the existing emphasis on inclusion of members of scheduled castes and tribes, may help promote women’s empowerment, the authors suggested. It is also important that community-level training and support from more experienced people continue, especially in areas with low literacy, until the local SHG becomes stronger.

Reduction in bad loans, restrictive loan criteria

In May 2016, banks were chasing targets of dispensing SHGs loans but women were finding it difficult to repay these loans, IndiaSpend had reported. Rs 9,000 crore worth of bad loans to SHGs were in danger of being written off.

Bad loans or non-performing assets (NPAs) were brought down through institutionalised community-based repayment mechanisms (CBRMs)--committees of SHG members who ensure that SHGs are linked to banks and pay loans promptly--according to this 2020 World Bank note. In 2019-20, the NRLM had NPAs worth nearly Rs 2,300 crore (involving 218,419 SHGs or 4.15% of all SHGs)--and equivalent to 2.43% of the total outstanding amount from SHGs--NRLM data show.

SHGs are eligible for loans if they practice the “panchsutras”(five rules)--regular meetings, regular savings, regular inter-loaning, timely payments and up-to-date books of accounts, the 3ie evaluation noted. But “loans and funds are available even to SHGs that clearly do not meet prescribed standards”, it said, suggesting that certain rules--such as those on weekly meetings--be eased as they have no direct bearing on an SHG’s performance. Older SHGs, for instance, were more productive and received higher loan amounts even though they were less likely to follow the panchsutras, it said.

When standards are too strict, the poorest and most vulnerable households find adherence most difficult and might have to exit the SHGs, the authors cautioned.

Moving beyond financial inclusion

Rina Devi, 24, said that she had once received Rs 25,000-Rs 35,000 from the Jai Ambe SHG when she was setting up a kirana (grocery) store. “The shop shut down when my husband fell ill and there was no one to get the supplies for the store,” she said. “When I asked the SHG for money again to buy a buffalo, they said they did not have the funds to help so now I do not go for the meetings,” she said. The SHG has once said that there would be training on livestock care but that never happened, she said.

The researchers suggested taking the focus of NRLM beyond financial inclusion to livelihood generation, including the kinds of activities that all women, irrespective of the level of education, can benefit from. “In this transition, however, we emphasise again for a programme that differentially provides inputs to regions based on their level of development, and pays specific attention to addressing local capacity constraints,” the authors said in the report.

The NRLM’s Mahila Kisan Shashaktikaran Pariyojana (programme to strengthen women farmers) tries to do this by promoting agro-ecological practices, increasing women farmers’ income and reducing input costs and risks. “This is still in the preliminary stage,” said Barooah, but is a step in the right direction to involve and benefit more women, including those with no or less education. The programme covers 3.6 million women (5% of SHG membership in the country), according to the government's December 2019 update. The NRLM dashboard does not have data on this programme.

Another way of doing this is through the National Rural Economic Transformation Project (NRETP), announced in February 2019 to “create value chains around rural products, introduce innovative models in livelihoods promotion and access to finance and scale-up initiatives on digital finance and livelihoods interventions”. This too is in the initial stages, Barooah said.

Such programmes would ensure that more women benefit and stay connected with SHGs given that the vast majority of members receive small loans, with large loans accruing only to one or two members. The need is to ensure other returns to SHG membership, in the form of convergence activities and livelihood training, the authors suggested.

(Khaitan is a writer/editor with IndiaSpend.)

We welcome feedback. Please write to respond@indiaspend.org. We reserve the right to edit responses for language and grammar.