Suranjana Mitra
In the Union budget of FY 25-26, a new initiative has been taken up by the Government of India (GoI) towards strengthening the rural people and Self-Help Groups (SHG) which comprise of poor rural women who come together to resolve their problems and improve their living standards. The SHGs are generally self-governed and peer controlled. SHGs are often described as “informal groups”. With the introduction of Grameen Credit Score, these small enterprises can be formally recognised, as a result of which they will be subject to different benefits.
A Short background of Self-Help Groups (SHGs)
- The history of Self-Help Groups officially dates back to the establishment of the Self-Employed Women’s Association (SEWA) in 1972.
- In 1992, NABARD (National Bank for Agriculture and Rural Development) formed the SHG Bank Linkage Project, the world’s largest microfinance project.
- From 1993 onwards, NABARD, along with the Reserve Bank of India (RBI) started allowing SHGs to open Savings Bank accounts in Banks.
- Swarn Jayanti Gram Swarozgar Yojana was introduced in 1999 by the Government of India to promote self-employment in rural areas, which evolved into National Rural Livelihoods Mission (NRLM) in 2011.
Reason behind the creation of Grameen Credit Score
Source : Periodic Labour Force Survey (PLFS), Annual Report (July, 2022 – June, 2023)
Through the years, SHGs have shown promising growth, some of them have reached almost 100% repayment rates. The SHGs have often faced problems in trying to get loans from banks because of the absence of facilities of providing individual credit based on group performances. Often because of this, the rural women had to borrow money through unofficial ways such as from loan sharks or money lenders who charge exorbitant rates. These would result in debt traps or the profit margin after paying the high interest rates would be negligible.
Functioning
Grameen Credit Score will be developed by Public Sector Banks (PSB) in order to assess the credit worthiness of rural individuals, facilitating them with easier access to loans. The collective credit performance of a SHG can be translated into individual credit scores. SHGs will be able to cash in strong credit reports in order to get loans.
Source: Press Information Bureau
PSBs will consider the overall credit performance of the SHG and break it down to individual member level scores. The members can approach banks with their cumulative SHG credit report to negotiate personal loans.
Banks will track the records of SHG’s credit history which are maintained at the village level by group members and verified by block-level officials. The PSBs will come up with their own standardized methods to formalize and digitize these credit scores. UPI transactions done by borrowers will also be included along with utility bill payments and benefits received in different government schemes such as Ladli Behna, Ladki Bahin Yojana among others, will also be considered for the credit score. Indian Banks’ Association will collaborate with the government to provide the credit scores. As the credit score gets assigned, individual SHG members can provide their track records as documented evidence to get credit-related benefits.
Expected impact
- Grameen Credit Score aims to help the banks in examining the ability of the borrowers from rural areas to repay a loan, helping in reducing fraud and improving repayment discipline.
- This initiative will help in increasing credit activity in the rural areas, strengthen microfinance and can be beneficial to multiple sectors like agriculture, rural development and, Micro Small and Medium Enterprises (MSMEs).
- GCS will work alongside credit scores like CIBIL and CRIF Highmark which help in assessing loans.
- The SVAMITVA (Survey of Villages and Mapping with Improvised Technology in Village Areas) scheme, launched on the National Panchayati Raj Day, April 24, 2020 which helped in providing property owners in village Abadi areas with a “Record of Rights”, which, among a range of other things, also facilitated access to bank loans. GCS will be integrated with this scheme (widen credit access even for those who may not have conventional property collateral but belong to SHGs with good repayment backgrounds).
- The programme aims to focus on catalysing enterprise development, employment and financial independence for rural women.
- It will help in the creation of new business and employment for the rural youth.
- Banks will be designing special loan products for these borrowers.
- This will further boost schemes such as Deendayal Antyodaya Yojana-National Rural Livelihood Mission, where banks have designed specific products for financing individual women entrepreneurs.
Emerging Issues
The initiative has to look after a lot of parameters to ensure the smooth functioning of the scoring system. Considering that most of the women are linked to self-help groups in the rural areas, a large number of people will apply to be a GCS beneficiary, which needs a fast-paced environment to ensure smooth delivery of service. The system will also have to go through all the necessary documents and past records of each member for an accurate score. A consistent scoring standard is very important to check any sort of bias while scoring. Any sort of bias can lead to trust deficit among people. This will enable a fair and reliable system of scoring. Strong hardware and software expertise is required in order to maintain a secure scoring system. Some additional volunteers are also required to assist the rural people.
Way Forward
With Grameen Credit Score, the developmental focus towards the rural people will get a boost. In future, it will open new avenues for the rural people and provide them with opportunities to get familiar with and rely on technology. They will be able to expand their businesses, improving their lifestyles. Gradually, they will take up new concepts such as creditworthiness, EMIs, credit cards and so on. This initiative will also be supplemented by customized credit cards for micro-enterprises, with limits of up to Rs. 5 lakh. They will be able to view their credit score, credit limit and will accordingly plan their investments.
The women-led SHGs are one of the best ways through which a woman can provide for her family in the rural areas. This way her social status and her control over herself will be enhanced, making way for more opportunities for the rural women to take part in the economic output of the country. This initiative can become a much-appreciated means of poverty alleviation. The rural women will get a safe environment, where they can come together and resolve their issues and take developmental steps towards their village. This will also help with the drives of sustainable development of the rural areas.
References
1. Download Reports | Ministry of Statistics and Program Implementation | Government of India. (n.d.). https://www.mospi.gov.in/download-reports?main_cat=ODU5&cat=All&sub_category=All
2. Ministry of Panchayati Raj. (n.d.). https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=153604&ModuleId=3®=3&lang=1
3. Tiwari, D. (2025, February 4). Grameen Credit Score to boost rural women’s access to loans, support SHGs. The Economic Times. https://economictimes.indiatimes.com/industry/banking/finance/grameen-credit-score-to-boost-rural-womens-access-to-loans-support-shgs/articleshow/117924492.cms?from=mdr
4. Shukla, S. (2025, February 4). Budget 2025: What are the benefits of Grameen credit score for self-help groups? Mint. https://www.livemint.com/money/personal-finance/budget-2025-what-are-the-benefits-of-grameen-credit-score-for-self-help-groups-11738654962367.html
5. Union Budget 2025-26
About the Contributor: Suranjana Mitra is a Research Intern at IMPRI and holds a postgraduate degree in Political Science and is passionate about policy research.
Acknowledgement: The author would like to express sincere gratitude to Ms Aasthaba Jadeja and the IMPRI team for giving the opportunity for writing the article.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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