The Mysore Resettlement and Development Agency, MYRADA, was established in 1968, to support the resettlement of Tibetan refugees. By 1978, they shifted focus to work with rural communities in backward and drought-prone regions across Karnataka, Andhra Pradesh, and Tamil Nadu. MYRADA is renowned for pioneering micro-finance and sustainable rural development initiatives through people-driven institutions.

The Self-Help Group (SHG) movement’s evolution, linked with MYRADA, stemmed from joint efforts by the RBI, NABARD, state entities, and thousands of voluntary organizations. They recognized the challenge of integrating informal workers into the formal financial system, and fostered the SHG-bank linkage as a transition, aiding the poor to engage with the formal financial sector while leveraging their own institutions. 

SHGs acted as a stepping stone, addressing societal disparities, involving women, and promoting financial inclusion utilizing existing bank branches and cooperatives. Acknowledging that financial provision alone wasn’t sufficient, NGOs and women’s corporations assisted in addressing social issues and empowering the poor. MYRADA focused on fostering SHGs as confident, income-enhancing institutions, circumventing hurdles to self-reliance posed by powerful entities controlling resources. 

Working with Primary Agriculture Credit Societies in the 1980s, MYRADA discovered inherent inequalities within these structures, dominated by powerful families exploiting the marginalized. Encouraging marginalized women to form Credit Management Groups (CMG), MYRADA steered away from direct confrontation with PACS. 

They facilitated the evolution of CMGs’ by harnessing traditional strengths of mutual trust and support. Recognizing these groups’ potential as institutions, MYRADA supported their development through institutional capacity building and fostering gender balance. CMGs initiated savings programs and provided a safe space for women. They faced resistance but persisted amid disruptions. This approach led Women’s Development Corporations to adopt the CMG/SHG model for women’s empowerment in various states.

Self-help to Credit Management Groups 

The periods between 1987 and 1996, was a pivotal era for the SHG movement’s policy framework. NABARD, recognizing the limitations of previous programmes, invested in the CMG approach, which emphasized savings, regular meetings, skills training and capacity building. This marked a shift from individual loans with subsidies, allowing groups to decide loan purposes and repayment schedules. Banks also extended support by opening savings accounts for unregistered CMGs. RBI’s involvement and NABARD’s strategic efforts, including naming the groups as SHGs in 1988, enabled these changes. The linkage model found early success, notably in Karnataka and Tamil Nadu, demonstrating the potential for women’s empowerment and lower transaction costs compared to traditional lending. These pioneering efforts offered insights into diverse livelihoods and the transformative impact of SHGs.

MYRADA recognized the need for comprehensive loan data to engage with banks effectively. Between 1990 and 1995, it meticulously collected and analyzed SHG loan information, revealing diverse loan types and amounts, unlike the standardized loans in the governments Integrated Rural Development Programme. SHGs empowered their members, familiar with local nuances, to allocate funds, fostering adaptability. NABARD invested in nationwide data collection, ensuring SHG expansion to remote regions, elevating it as a priority program. 

Such insights influenced MYRADA’s watershed management initiative to reduce dryland agriculture risks, demonstrating a broader ‘credit-plus’ focus for sustainable growth and empowerment. SHGs prioritized social issues, compelling decisions like girls’ education and sanitation. Studies highlighted positive societal changes due to SHG interventions, exemplified by meetings on non-financial topics and SHG members actively engaging in public initiatives. The social impact also extended to political participation, observed in SHG members’ successful panchayat election bids, chronicled in MYRADA’s ‘Rural Management Systems’ papers.

MYRADA convinced rural banks to open CMG/SHG accounts as Associations of Persons. By 2004, 573 banks, through 41,323 branches, aided 4,323 NGOs in training SHGs. This effort reached 16,18,456 SHGs and around 12 crore impoverished individuals by March 2005. Dr. C. Rangarajan, then Governor of RBI, hailed it as the world’s largest cooperative microfinance initiative, exemplifying the Atmanirbhar Bharat Abhiyan.

The SHG movement evolved from a transition strategy to a poverty eradication tool through financial inclusion. Yet, in the process of mainstreaming there was an emphasis on finance over empowerment. Despite this, SHGs succeeded in bridging the gap between banks and members who were otherwise out of the formal banking system. SHG representatives managed transactions, earning respect from bank staff, and over time members opened personal accounts. Banks relied on SHG credit history for larger personal loans. 

The spread of SHGs in India, was a slow process that did not fit into the typical five-year project time-spans of government or private donors. First set up in 1984-85, they gained recognition only in the mid-90s within banking practices.

The emergence of SHGs from grassroots initiatives prompts consideration of whether similar organic growth could occur within current government policies, given the constraints on NGOs and civil society. There’s a growing inclination in government programs toward uniformity, potentially hindering the scalability of innovative models. MYRADA’s experience reinforces the importance of gradual transitions, stakeholder involvement, and the value of local dynamics in fostering ways for poverty reduction, empowerment and sustainable growth.

This blog is a summary of a chapter written by Aloysius Prakash Fernandez in “Anchoring Change: Seventy five years of Grassroots Interventions that Made a Difference” edited by Vikram Singh Mehta, Neelima Khetan and Jayapadma RV, published by Harper Collins India. The book is a recipient of the GLF Honour Award 2023.

The chapter summary has been prepared by Jayapadma RV.

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