Written by Balakrishnan Madhavan Kutty
The last few years have seen interest among policymakers in women-led rural entrepreneurship. Much of it has sought to leverage the experience gathered from the estimated 46 million rural poor women mobilised through the Self Help Group (SHG) architecture. These organisations, since their start in the 1990s, have been an effective vehicle, especially in providing financial intermediation solutions for unbanked rural women.
India has, moreover, witnessed state-led promotion of SHGs through a three-tiered architecture of community institutions at group, village and cluster levels. These have been via both Central schemes – the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission, for instance – and state government initiatives such Kudumbashree in Kerala and Jeevika in Bihar. There are today dedicated autonomous organisations – so-called State Rural Livelihoods Missions or SRLMs – which, even while bureaucrat-led, nurture SHG initiatives with the support of development sector professionals and last-mile community cadre. As the membership in SHGs has grown, there have also been attempts at thrusting new functions – including using them as a delivery channel for government projects, be it toilet construction (Swachh Bharat) or avenue tree plantations (the Haritha Haram scheme of Telangana).
All this, in a way, reflects a shift in the attitudes of the political class towards the SHG movement – from initial scepticism/suspicion of a potentially powerful parallel community structure, to a celebrated silver bullet for welfare delivery and women’s empowerment. But it would be naïve to say that these organisations have survived purely because of being co-opted by the politico-bureaucrat apparatus. Longevity of two decades is itself a good indicator of their resilience and, perhaps, adaptability for a national scale development initiative.
The current policy intent is seemingly to reinvent the SHG movement with an economic development focus, emphasising on women’s entrepreneurship as an engine of growth in rural India. That, by itself, is not new, though. Notable examples of economic development initiatives through SHGs include the Café Kudumbashree chain of women-owned and operated canteens in Kerala and a maize producer company run by women in Bihar. Yet, the shift in focus from community development to the hard metrics of a market also presents policy challenges of a different kind.
At present, the SRLMs are the primary institution responsible for promoting entrepreneurship by SHGs. But these were vehicles built for social mobilisation. An institution that seeks to promote an economic development agenda needs a different set of skill-sets. It probably calls for a new institution having a deep functional relationship with the SLRMs, to leverage the latter’s strengths of mobilisation and last-mile presence. Such a state-level institution could even be a not-for-profit company registered under Section 8 of the Companies Act, 2012. We have the example here of the NDDB Dairy Services, which, modelled as a Section 8 company, has nurtured successful rural businesses and taken them to scale. This offers rich lessons that the new SHG-led economic development initiatives can learn from.
Second, the internal management team of the proposed institution should be a combination of young business management professionals and experienced government line department staff on deputation. Besides, state governments must engage successful micro and small entrepreneurs as mentors to the new women SHG enterprises. This would mean a shift from the traditional approach of engaging only state agencies in microenterprise development initiatives.
Third, government financial support to the new promoting institution should be restricted to initial start-up costs, thus putting the onus on it to be lean in structure and generate own revenues to cover operating costs. The history of SRLMs is proof that the principle of autonomy means nothing if these bodies are financially dependent on the state.
The government needs to realise that financial inclusion and economic development are two different functions, even if the target group is the same poor rural women. Social cohesion has been the binding factor for SHGs and vital to their success in financial intermediation. But economic development is a function where collectivisation can work only if the business itself favours sharing of resources. And where business logic drives collectivisation, the member-owned institutions should not blindly adopt, but adapt, the design principles of SHGs in terms of structure, culture, governance and management processes.
It is equally important to ensure that working on rural growth via SHGs should not end up instrumentalising women. In certain states, policymakers tasked with SHGs have targeted the household as a unit in economic development initiatives. This is based on a flawed assumption that livelihoods are a household function shared by men and women, whereas savings and credit are individual-led with women better-positioned for that.
Rural micro-enterprises run by SHG members suffer from critical bottlenecks, whether in raising funds for start-up, growth and working capital or accessing high-quality technical assistance. Governments need to structure financial products addressing these needs, calling for a shift from a unit-cost based standardised budgeting approach. Evidence from the field should be used to improve access to collateral-free credit through institutions such as the Credit Guarantee Fund Trust for Micro and Small Enterprises. There is a tendency to club all micro-enterprises, including women-owned ones, into a singular category of subsistence-oriented outfits, i.e. those primarily run by households for own needs. Such categorisation blunts customised support for those entrepreneurs needing specialised support to grow. States should adopt a pyramidal strategy for financial and technical assistance, based on the stage and size of enterprises. Lastly, the success of policy should not be measured based simply on the number of enterprises promoted and expenditures incurred. Amul’s success today is read through both the 3.6 million milk producer-members in its network and an annual turnover exceeding $4 billion.
To conclude, the expansion in the SHG movement’s scope, from social mobilisation and financial inclusion objectives to economic development, is an organic step in the livelihoods chain. While this move from a producer to an entrepreneur is welcome, one mustn’t lose sight of the fact that businesses are designed differently from savings groups or social units, and governments haven’t proven their strength in promoting dhandha in rural areas. The business of entrepreneurship promotion is not the same as livelihoods promotion, as it requires treating SHG women as entrepreneurs and not just producers. Realising that is key to achieving the twin goals of rural growth and promotion of women’s entrepreneurship.