20 October: self help groups and microfinance
Tuesday 20 October 2026
GS Paper 2 · 250 words · 15 marks
"Microfinance as an anti-poverty vaccine is aimed at asset creation and income security of the rural poor in India." Evaluate the role of Self Help Groups in achieving the twin objectives along with empowering women in rural India.
(UPSC Mains 2020, GS Paper 2, Q17)
Set a timer for 11 minutes. Write your answer before you read anything below.
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How to approach this question
What the question asks.
| Part | What to write |
|---|---|
| Evaluate | Judge how well SHGs do, with evidence on both sides |
| The twin objectives | Asset creation and income security |
| Along with empowering women | A third test: voice, control and status |
A shape that works in 250 words.
- Introduction. What SHGs are and when the bank linkage began.
- Income security, with a programme.
- Asset creation, with a case.
- Women's position, with Kudumbashree or another named example.
- Limits, three of them.
- Conclusion. A judgement and a direction.
What to avoid.
| Mistake | What to do instead |
|---|---|
| Describing how an SHG meets and saves | One line, then judge results |
| Membership figures you are not sure of | Name the programme and its year instead |
| Only success stories | Give the 2010 Andhra Pradesh crisis its place |
| Ending on "SHGs are a silver bullet" | Say what must change |
A model answer
Self Help Groups are small groups, mostly of women, who save together and borrow from banks as a group. NABARD's SHG-Bank Linkage Programme began in 1992. SHGs have done most for income security, less for assets, and a great deal for women's voice.
Income security
Group savings and bank credit smooth spending through bad seasons. They reduce reliance on moneylenders. DAY-NRLM, launched as NRLM in 2011, organises SHGs across rural India and links them to banks.
Asset creation
Results here are mixed. Loans are small. Many are used for consumption, health costs or old debts. Assets such as livestock, sewing machines and small shops appear where groups get training and market links. The Lakhpati Didi initiative aims at this. A member counts as a Lakhpati Didi once her household earns at least Rs 1 lakh a year.
Women's position
Kudumbashree in Kerala, started in 1998, links SHGs to local government. Members run enterprises and many have contested panchayat elections. Group membership gives women a bank account, a public role and a say in household spending.
Limits
- Husbands or relatives often control the loan.
- Over-lending caused the Andhra Pradesh microfinance crisis of 2010. The RBI's Malegam Committee then proposed limits on lending.
- SHGs are stronger in the south than in the north and east.
Conclusion
SHGs work well as a safety net and a platform for women. To create assets, groups need training, market access and larger enterprise loans.
Word count: 238.
Why this answer works. It judges SHGs against each of the three goals, and the judgement differs for each. Every point names a programme, a state or a committee. The limits section includes a real crisis.
Where it could be stronger. It could cite one study measuring income gains for SHG members, with its source.