Role of Self-Help Groups (SHGs) in Rural Livelihood Diversification

Abstract

Self-Help Groups (SHGs) are a central component of the rural development model in India, especially in its implementation as the Deendayal Antyodaya Yojana -National Rural Livelihoods Mission (DAY-NRLM). By 2023-24 fiscal years, it has mobilised over 90 lakh SHGs (comprising over ten crore rural women in the country) generating the largest women-led community network in the world (MoRD, 2024). This growth is supported by financial indicators: SHG savings deposited with banking institutions went above 58 thousand crores, annual credit disbursement above 1.45 lakh crores, loan balances outstanding more than 1.80 lakh crores which significantly improved access to finance by rural households (NABARD, 2022–23). Empirical studies have shown that the involvement in SHGs complements the share of non-farm earnings and enables the diversification in the dairy, poultry, petty trade, tailoring, and micro-enterprises. Additional interventions, such as the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) and SVEP, have been used to strengthen the process of skills transfer and rural entrepreneurship. However, most of SHG-supported businesses are small-scale, limited by weak market connection, inadequate working capital, and strong geographical disparity. Therefore, despite the progress in the areas of financial inclusion and livelihood diversification, to maintain the impact, greater value-chain integration, enterprise support, and institutional convergence are required.