What are salient features of the micro-finance model of linking self-help groups with the scheduled…

Question

What are salient features of the micro-finance model of linking self-help groups with the scheduled commercial banks for women empowerment and poverty eradication?

Ghissu Editorial · Accepted Answer

The SHG-bank linkage model, begun by NABARD in 1992, gives poor women collateral-free group credit under priority sector norms, backed by DAY-NRLM interest subvention, training and digital records under EShakti. Repayment exceeds 96%, though low literacy, elite capture and limited digital access still constrain it.

**Introduction**

The SHG-bank linkage model, pioneered by NABARD in 1992, is central to women’s empowerment and poverty eradication, especially in rural India and states like ==Telangana==. It addresses financial exclusion by providing collateral-free credit and fostering entrepreneurship among marginalized women.

**Institutional Framework**

1. **NABARD’s Linkage Programme**: Connects informal women’s groups with banks, enabling collateral-free credit under priority sector norms, formalizing access to finance for poor women.  
2. **Government Schemes**: DAY-NRLM promotes SHGs by mobilizing millions of women, providing interest subvention (~7%) and livelihood support through Mahila Kisan Shashaktikaran Pariyojana, enhancing rural women’s economic participation.  
3. **Digital Integration**: Project EShakti digitizes SHG financial and non-financial data, enhancing transparency and scalability, though limited because only about 28% of rural women nationally have internet access, a gap also seen in rural ==Telangana==.  
4. **Capacity Building**: Financial literacy and entrepreneurship training improve SHG sustainability and effective credit management, empowering women to run micro-enterprises successfully.

**Socio-Economic Outcomes**

1. **Repayment and Trust**: SHGs maintain over 96% repayment rates, reflecting strong credit discipline and encouraging banks to continue lending.  
2. **Economic Impact**: SHGs like ==Laksh (Rajasthan)== enable micro-enterprises such as bangle production, raising incomes and reducing poverty in states like ==Telangana== through increased employment and financial inclusion.

**Way Forward**

1. **Financial Literacy**: Targeted education programmes to improve loan management and governance among SHG members.  
2. **Digital Expansion**: Enhance rural internet connectivity in ==Telangana== to support platforms like Project EShakti for seamless banking and monitoring.

**Conclusion**

SHG-bank linkage under NABARD's programme and DAY-NRLM is vital for empowering marginalized women and alleviating poverty but requires stronger digital infrastructure and regulatory frameworks to maximize its impact.

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