SHG1 Federation2, an Institutional Innovation to Sustain SHGs

To address limitations of small informal SHGs, to achieve economies of scale and to sustain SHGs, the institutional innovation called SHG federation has been evolved. There are 1,63,730 SHG federations in India, most of them being primary level SHG federations functioning at village level. Majority of these federations are in the southern and eastern India. Rapid scale up of the SHG federations has been possible with the proactive role played by the State Governments implementing programmes supported by multi-lateral agencies. National Rural Livelihoods Mission plans to scale up SHG federations to all the villages of India following a saturation approach. SHG federations have gained widespread recognition among all the major stakeholders as institutions that promote financial inclusion and enable member SHGs to serve their women members more effectively. Greater attention is needed for improving the governance and systems of the SHG federations to become self-reliant and sustainable. For the SHG federation model to fully serve its purpose, promoters' capacity needs to be enhanced and appropriate legal forms need to be available. There is considerable potential for the SHG federations to evolve into "SHG banks" to serve as bridge-financing agencies to augment SHG-bank linkage. SHG federations will have to play the role of self-regulatory organisations.