(Source: Google Images)
The NRLM has been modeled on the current poverty alleviation program being implemented in the state of Andhra Pradesh called Indira Kranthi Patham (IKP).The main idea of the programme is to use the Self Help Group (SHG) mechanism to mobilize the rural poor and to facilitate financial inclusion. The three tier structure will have the SHG’s as the grassroots unit which will be federated into village level and ‘mandal’ level entities(clusters). The federation therefore is the apex level body in this hierarchy . To help understand the concept, some of the definitions of various terms are given as follows:
- SHG Groups: Concept & Operation:
SHG’s are informal and homogenous groups of 10-20 (maximum 20 members). They can be formed by SHPA’s (can be either by NGO/Development agencies, banks) or can be self initiated. After formation, the members elect their leaders and finalize certain basic requirements such as the amount of monthly saving, meeting date and time, rate of interest, rules and requirements for borrowing, fines and penalties if applicable etc. Bank accounts are opened in the name of the SHG and its members after completing the necessary documentation process. Once formed, the members start collecting a fixed amount of saving every month from each member. The discipline and punctuality regarding the payment of the monthly savings is the key in ensuring that the SHG group is able to build a kitty that can be used for intra group lending at the rate of interest decided by the group. The interest earned becomes an income for the group as do the fines, late fees etc. Members generally manage their own record keeping and banking transactions. This helps the members get familiar with financial intermediation, book-keeping and prioritization of needs. Once the group has reached a level of ‘stability’ it is able to access bank credit ( also referred to as linkage) provided the bank is satisfied about the genuineness of the demand for credit, repayment capacity ,credit handling ability and the record keeping ability of the group.
2. Self Help Promoting Institutions (SHPI’s): Self Help Group Federation
A SHG Federation is the apex SHG unit / mother organization that spawns the grassroots level SHG’s and nurtures them by making resources in terms of funds, counselling and guidance available to them. It is a community based institution which is owned and managed by members of the SHG’s. .The main advantages of the federation SHG model are the ease of access to formal banking channel, savings mobilization, reduction in banking transaction costs and extension of value added services like the health/medical etc
3. SHG Cluster:
Is a group of 10-15 homogenous SHG’s that is promoted and affiliated to a federation. The SHG’s from the same locality or village typically form a cluster. The size of the cluster depends upon the number of SHG’s in that cluster.
Under the aegis of the Indira Gandhi Patham (IKP) program, the staff of the SHG federations is assisted by the state level NGO called SERP- Society for Elimination of Rural Poverty. SERP was constituted to help the federations in getting access to capacity building training, bank linkages, placement services, government sponsored heath insurance and subsidized loans to groups at an effective rate of 3 per cent per annum.
The NRLM has the following key initiatives:
- Social mobilization of the poverty line families and women
- Promoting institutions that help the poor to capitalize upon the strength in numbers .Eg: clusters of SHG’s, agricultural co-operatives, producer co-operatives etc
- Helping in the capacity and skill building of the rural poor
- Provision of a revolving fund and capital subsidy in those SHG groups where 70 percent or more members are below the poverty line(BPL)
- Helping SHG’s in getting linked with banks for fostering the savings habit and to get access to formal sources of credit and with insurance companies for managing the life risks
- A subsidized interest rate not exceeding 7 per cent to be made available to SHG’s
- Study and facilitate existing livelihood options of the rural poor and help in diversifying these options.
NRLM therefore has the potential to act as a comprehensive solution to most needs of the rural poor. The programme has a mandate to reach out to 70 million below poverty line households in 600 districts of the country covering 0.25 million gram pachayats. The central government will provide 75 percent of the funds while the state government is to fork out the balance 25 percent. In case of the North East States- they need to mobilize only 10 percent of the funds while the Central Government will bear the balance 10 percent….. (to be continued in Part 2)
 For details about IKP pl see http://www.aponline.gov.in/apportal/HomePageLinks/IndiraKantiPadham.htm
 Mandal is an Indian term for clusters of SHG’s. For eg: 10 to 15 SHG groups can be clubbed to form a village cluster. A bunch of such village clusters get linked to a district / block and then are eventually linked to a mother federation
 SHPA’s: Self Help promoting Agencies
 A group generally takes 3-6 months to stabilize with respect to members, attendance at meetings etc. The interim time also helps them to appreciate the mechanics of money management and get comfortable in handling larger amounts
 Srinivasan N : Microfinance India-State of the Sector Report 2011
 For the definition of the Poverty Line ( Govt of India) pl see http://www.delhi.gov.in/DoIT/DoIT_Planning/chapt21.pdf