National Rural Livelihood Mission: Understanding the vulnerability of low-income groups

If NRLM has to succeed in raising the livelihood of poor rural people, where previous programmes have failed, it is necessary to involve low-income producers in the design and implementation of various programmes, as only then can the structural causes of poverty be substantively tackled

Launched in June 2011, the $ 5.1 billion National Rural Livelihoods Mission (NRLM)i  is one of the flagship programmes of the Ministry of Rural Development. It is also one of the world's largest initiatives to improve the livelihood of poor, rural people and boost the rural economy. The World Bank is supporting the programme with "credit of about $1 billion, in continuation of its long-term engagement in the sector."ii

While the NRLM promises a lot with regard to creation and strengthening of rural livelihood, it does suffer some shortcomings, which if not addressed are likely to see it move in the same path as the erstwhile Integrated Rural Development Programme (IRDP), Swarnjayanti Gram Swarozgar Yojana (SGSY) and/or other programmes.

So, what then are the critical issues that raise the risk of failure with regard to implementation of the NRLM? I present my views with all humility!

Let us understand what the National Rural Livelihoods Mission (NRLM) stands for?

"The core belief of National Rural Livelihoods Mission (NRLM) is that the poor have innate capabilities and a strong desire to come out of poverty. They are entrepreneurial, an essential coping mechanism to survive under conditions of poverty. The challenge is to unleash their capabilities to generate meaningful livelihoods and enable them to come out of poverty. The first step in this process is motivating them to form their own institutions. They and their institutions are provided sufficient capacities to manage the external environment, enabled to access finance, and to expand their skills and assets and convert them into meaningful livelihoods. This requires continuous handholding support. An external dedicated, sensitive support structure, from the national level to the sub-district level, is required to induce such social mobilization, institution building and livelihoods promotion. …Strong institutional platforms of the poor, enable them to build up their own human, social, financial and other resources. … NRLM also believes that the programme can be up scaled in a time-bound manner, only if it is driven by the poor."iii 

First, the vision of NRLM is great, but its design seems inappropriate as it talks of rural livelihoods primarily through self-help groups (SHGs). In other words, the thrust of NRLM is on building and maintaining institutions of the poor-defined as SHGs in this context and then enabling members in SHGs to access various services for better livelihoods. Several aspects deserve mention here:

  •  This whole issue of creating and maintaining grass-roots structures like SHGs is something that has been attempted regularly (with varied success) by many stakeholders over the last two decades and it is continuing. Therefore, I am not sure that we need a national flagship programme (like NRLM) of the Ministry of Rural Development, funded by a World Bank loan, exclusively just for this task.
  • Also, when the NRLM argues that to access its services, SHGs must come under the programme fold, pluralism and choice are lost, as by default all SHGs (irrespective of who nurtured them in the first place) have to become loyal to the state. This idea is fraught with danger and the chances of political abuse of SHGs cannot be ruled out.
  •  Also, while the Andhra Pradesh (Indira Kranti Patham) and Kerala (Kudumbashree) experiments of mass SHG programmes have shown positive results in many ways, the same perhaps cannot be said about other states. Both the programmes were led and supported by brilliant and committed officers who had a long tenure in their organisations/ positions and this cannot be guaranteed in other contexts, especially today.

Second, on a substantive note, SHGs have had differing degrees of success with regard to livelihoods initiatives. While they may work reasonably well for small livelihoods and consumption-related matters, I am not sure that serious livelihood interventions (in fisheries, agriculture and similar areas) can happen ONLY through these SHGs. There are several reasons for this:

  • While I very much appreciate the contribution of SHGs in financial services and development in India, relying only on them (as an institution of the poor) is fraught with danger, as not everyone in the rural areas is a member of a SHG, and not everyone may desire to become a member of a SHG. Furthermore, rural folk may perhaps like to access various services through other aggregation mechanisms (like cooperatives) and/or even individually.
  • Also, in today's fast-paced rural economy, the number of people who are likely to be actively involved in the kind of social intermediationiv  that so-called good SHGsv  have to practise, appears rather far-fetched. Given the (fast) changing nature of our society, the choices available and information explosion that is going on, the long-winding meetings of SHGs would be very difficult to sustain in the medium- and long- term. And without such preparation, the quality of SHGsvi will surely become low, and the moment we forcefully push for targets with regard to quick establishment of (such) SHGs , then, the process will start getting corrupted as numerous available examples (including one given below) are evidence. Therefore, using SHGs as the only mechanism in NRLM may become counter-productive.{break}

 Very interestingly, microfinance agents in Tamil Nadu claimed to be working with the SHG-Bank Linkage model, by taking groups to banks for the first linkage. One of them said that they received no commission from the banks, but received between 7%-10% from group members for getting the group a first loan of Rs50,000.

Agents also confirmed that bankers are now actively calling them in to help them meet their various targets, including those pertaining to financial inclusion. To reconfirm some of these aspects, I met several bank managers in the same areas and two managers candidly said that since they lacked sufficient staff and were being pushed on targets, they started relying on the agents for bringing in the groups to meet the various targets.

One of them even had an interesting observation…the groups brought in by agents typically paid off their first loan within one year, whereas the loan term was around three years and then, they took the second loan of four times the savings-many of these groups accumulate as much as between Rs30,000 and Rs40,000 and therefore receive a second loan of between Rs120,000 and Rs160,000 (Rs46=US$ 1 approximately). Managers also confirmed that several groups do not repay the second loan and that, many of the members migrate to other areas and are not traceable. One manager even said that Rs40 lakh (Rs4 million) is likely to be written off in the future as the members are not traceable.

Yet another startling fact was brought up by the managers, who said that the Rs50,000 first loan taken is not used towards any income-generating activity and that this money, sans the commission paid to the agents, was used as the corpus for a local chit run by the group members, who divided the interest profit amongst themselves…"vii

In fact, the correct number of SHGs operational in the country cannot be accurately estimated. In my opinion, no one can say with certainty, how many SHGs really exist in India today? Data and MIS on SHGs and their actual working is very weak and we know only SHGs that are linked but nothing concrete about their day-to-day working and performance, especially after the bank linkage. Several stakeholders have also raised questions on whether all linked SHGs are physically there-in many cases. Apparently, data on old SHGs had been provided, whereas the members had migrated elsewhere! Much less is known about what happens to older SHGs that have been linked multiple times-it has often been mentioned that members form a fresh SHG with a newer permutation and combination of older members. Therefore, we would need to know whether all the fresh SHGs are really new and/or have they been created from members belonging to older SHGs.

There are many other issuesviii  such as SHGs either disintegrating (may not be a bad thing by itself) or being taken over by the elite among the poor. Prof Malcolm Harper notes three other aspects with regard to using SHGs:

"1. Groups take time, lots of it, and we have always said that poor women are very busy.
2. Groups tend to exclude individualists (sometimes they are called 'entrepreneurs') who dare to be different, to do 'mad' things like starting new types of businesses, which may even create jobs for others.
3. Men are generally bad at working in groups, and they take bigger risks and are less reliable than women, but when they do succeed they tend to create more jobs than women do, for the vast majority, who prefer to be employed than to be self-employed."ix 

Thus, the overemphasis of NRLM on SHGs could result in exclusion (rather than inclusion) of rural low-income people who are not inclined and/or are unable to participate through SHGs. Hence, the NRLM must focus on the household as the primary target of the programme and have flexibility in the type of institutions and aggregation mechanisms that could be used to dovetail various services. These are aspects that the NRLM must surely factor into its design and implementation before a large-scale rollout. Further, I strongly feel that NRLM's major thrust must be on helping the poor and vulnerable overcome risks associated with various (rural) livelihoods, rather than (merely) building institutions off the poor.

Third, the NRLM design probably deals with the rural economy as one unit, whereas there exist many segments within the rural low-income people as well as across the broader rural economy spectrum. In fact, if one were to look at recent studies of poverty and vulnerability, there are several categories of people who are perhaps vulnerable to becoming poor and this is especially true of rural areas. That being the case, there is a very clear need to broad-base the targeting and what seems appropriate is to ensure the delivery of a range of bundled (livelihood) services in accordance with the needs of these different vulnerable segments in rural areas. This again would mean that SHGs should not be the only vehicle for (providing) NRLM services, as not all of these segments may want to work through SHGs.

Fourth, another aspect with regard to NRLM is its lack of serious attention to value-added agriculture and rural micro, small and medium enterprises (MSMEs) which-as the experience of many countries suggests-can play a major role in enabling and sustaining inclusive growth in rural areas. MSMEs are the growth engines in emerging and developing economies and they need to have targeted interventions. The NRLM does not seem to have taken this into account.

One of the key areas that NRLM could focus on is the creation of a stronger and vibrant ecosystem for MSMEs in various agriculture value chains-an aspect that was stressed by her excellency, the President of India last week, at a function to present the MSME awards. Surely, the NRLM must work closely with the MSME ministry and ensure convergence of programmes in this regard.

Fifth, the strategy of NRLM is too broad and sweeping. Rather than attempting to do a whole lot of things across the board, it may be better if the NRLM learns from past mistakes in its past avataars (such as the IRDP or SGSY) and specially focuses on quick-win areas that could impact livelihoods of large numbers of rural people across the country. Such quick-wins will also provide the initial thrust and momentum that is so critical for medium- or long- term successes.

Sixth, the design appears far too academic and top-down and I am not sure of the extent to which real livelihood practitioners (small rural producers themselves) are directly and continually involved in design and proposed implementation arrangements. Here I am taking of practising low-income producers in various sub-sectors like agriculture, fisheries, non-farm sectors, forestry, and so on. This was among the biggest reasons for the failures of IRDP and SGSY; in fact, if these had not failed, we would not need an NRLM today.

What is worrying is that 64 years after independence, we are still talking of basic services pertaining to rural livelihoods. We seriously need to introspect as to why this is the case. With all due respect, I would like to state that one of the major reasons for this is the fact that past programmes designed to strengthen and develop rural livelihoods have failed to understand and grasp the whole range of vulnerabilities and risks faced by different low-income producers at various points in several value chains across strategic contexts. That is why they have not succeeded. Having worked in 540 of India's 600 districts, I can vouch safe that the aspect of involving actual low-income producers in design and implementation of livelihood programmes is invaluable as only then can the structural causes of poverty be substantively tackled. I hope that the NRLM adopts this strategy in significant measure going forward.

To summarise, although, the NRLM talks about value chains, it does so in a cursory manner, whereas I feel that the programme design itself should be driven by a strong focus on critical sub-sectors, value chains and related livelihoods across the geography of implementation and then, the delivery of a range of livelihood services to producers in these sub-sectors. The results would be there for everyone to see in a few years. And make no mistake, failure to do this is likely to result in wastage of precious national resources and we would then need a new programme few years later to take over the NRLM clients, just as NRLM has taken over from SGSY which, in turn, had taken over from the IRDP…I hope that such a situation does not arise in the future.



  iiiNRLM Mission Document, 031010, Ministry of Rural Development, Government of India.
 iv Long winding group meetings and the like.
  vSome of the best SHGs that I have come across are through the IFAD Tamilnadu Women's Development Program (in 1980s) and at Myrada, Dhan Foundation, IVDP etc. Other places where I have seen very good SHGs are NABARD Pilots, Kudumbashree, Velugu Initial Phase, CARE India and Pradhan in various places. However, the level of effort to achieve this quality was phenomenal and I am not sure that this can be replicated at scale and at the pace envisaged in NRLM/other programs and required in Indian today.
  viAnd mandatory membership in SHGs as a means to access various NRLM services
  viiiThere are several other issues as well: (a) What is aggregate savings to loans across SHGs all over India? I suspect that in many places SHGs would be getting same or less money than their own savings?; (b) What about use of agents in SHGs and related issues such as first loans being repaid fast to get second loans after which SHG members supposedly vanish?; and (c) What is the real delinquency in the SHG system?
 ix Quoted from e mail sent in Micro-finance Practice Yahoo E Groups
  xArjun Sengupta Committee Report (2007)

(The writer has over two decades of grassroots and institutional experience in rural finance, MSME development, agriculture and rural livelihood systems, rural/urban development and urban poverty alleviation/governance. He has worked extensively in Asia, Africa, North America and Europe with a wide range of stakeholders, from the private sector and academia to governments).

Aloysius P Fernandez
1 decade ago
Any grouping to grow into an institution requires investment in institutional capacity building(ICB). Takes time but once properly done, it sustains itself without direct support from the NGO.Myrada formed over 10,000 SAGs which today have federated into Community managed resource Centres -they are self sustaining -no Myrada support.
1 decade ago
It is also added that sincere,expreinced and honest NGOs/SHGs be involved
1 decade ago
The Livelihood scheme is restructured from SGSY.The IWMP is also in operation since 2008 implementation is not known. But sources say it howering arround preparation of PPR
/DPRs.the work is entrusted to big houses sitting in ACs.The IWMP very much cover the Livelihood &Entry Point Works. Unless the agency persons thoroughly intract the 40 to 50 %and poorest the poor of the village late in evening,early in morning preferably night stay,the exercise is futile.Changing name of scheme camoflaging the previous poor progress is no solution.
Aloysius P fernandez
1 decade ago
Fully agree. All CBOs at the base (membership instiutions) should be included:SAGs,JLGs, user groups (water , forest produce) etc. More importantly second level institutions managed by CBOs like Producer Companies should also be incolved to aggregate add value and scale. This has now been incorporated in the final draft.
1 decade ago
The NGOs and SHGs are mostly one or two men shows.People are earning lacs and crores of rupees under these banners.Most of these are family based.Instead of this corruped system
the small societies ofhonest,volunteers
seniorand experienced persons for the capacity building,implementation and monitoring of at least cluster of ten villages may be formed.
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