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Government of India and World Bank sign US$ 1 Billion Agreement to give a major boost to Rural Livelihoods
The Government of India and the World Bank today signed a Credit Agreement of US$1 billion (approximately Rs. 4,600 crores) for the National Rural Livelihoods Project (NRLP).The Project will strengthen the implementation of the Government of India’s newly launched National Rural Livelihoods Mission (NRLM). The NRLM is one of the world’s largest poverty reduction initiatives, aiming to reach 350 million people (almost a quarter of India’s population), with an outlay of approximately US$ 6.5 billion.
Welcoming the NRLP, Minister for Rural Development, Mr. Jairam Ramesh said “I am delighted that the NRLP is being launched. This is a critical project that will help scale up our battle against poverty across the country, through the activation of self-help groups, skill building, and other innovative livelihood interventions among BPL households. NRLP will specifically focus on 12 states which have the highest number of poor people, thereby creating a major impact on poverty. The NRLM will help us move 70 million BPL households out of poverty over the next ten years through a time-bound, demand driven process.”
Scaling-up Innovations
The NRLP will help scale up the successes of past livelihood initiatives, particularly to other lagging regions of the country. So far, World Bank supported livelihoods projects in Andhra Pradesh, Bihar, Madhya Pradesh, Rajasthan, and Tamil Nadu have mobilized some 35 million rural poor since 2000.
Under the aegis of the NRLM, the NRLP will now support specific additional investments in the 12 states that have the highest numbers of poor people. These States, namely Bihar, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal account for almost 85 percent of India’s rural poor.
NRLM: An Innovative Approach to Poverty Alleviation
Deriving lessons from the state rural livelihoods initiatives, the NRLM will adopt a saturation approach – one that aims to bring at least one member, preferably a woman member, of each of the 70 million rural BPL households under the SHG network. As of now, about 30 million rural BPL families are covered under the SHG net.
NRLM will lay special emphasis on making agriculture-related livelihoods more productive and more sustainable, given the fact that more than 70 percent of the rural populace derives their livelihoods from agriculture.
Another innovation that NRLM will be scaling up is the use of social capital created under various rural livelihoods programs; expansion of coverage of the program in a rapid and effective manner; and knowledge dissemination.
Key proposed initiatives include:
· Investing in building people’s institutions namely Self Help Groups (SHG) and Federations of SHGs at village, cluster, block and district levels;
· Promoting thrift-based groups and promoting financial discipline;
· Investing in financial literacy & business planning as a core activity of SHG formation; and
· Helping SHGs address the livelihood needs including consumption purposes (such as health emergency, child education) and income generating activities.
The two major shifts under NRLM, vis-a-vis its predecessor program, the Swarnjayanti Gram Swarozgar Yojana (SGSY) are:
(i) NRLM will be a demand driven program - States will formulate their own poverty reduction action plans based on their past experience, capacities and resources.
(ii) NRLM will provide for a professional support structure that will enable effective program implementation at all levels from State to sub-district level. Eventually, it is expected that people’s institutions will replace the external support structures by gradually taking over their roles and responsibilities.
Expanding access to finance and private sector investments in rural India
The NRLM aims to encourage thrift and prudent financial behavior, and institute mechanisms that will impart financial literacy and credit counseling. SHGs will be able to create the space for financial services providers to bring in a range of affordable financial services for the poor. Current state livelihood programs have helped open 1.5 million SHGs accounts and 4.5 million savings accounts for the poor in commercial banks; set up 3000 help desks in commercial banks to facilitate banking services for poor clients and enabled 21,200 community institutions to function as village level “banking correspondents”.
The Project will draw lessons from some of the current state livelihood programs that have, for example, enabled SHGs to access savings of more than US$1 billion which helped them make accumulated investments of US$9 billion over the last ten years in micro, small, and community enterprises. This resulted in expansion of rural markets and attracted several private sector and multinational firms to partner with these projects. Self-Help Groups (SHGs) have leveraged nearly US$7.5 billion in credit from commercial banks, and achieved annual turnover of US$500 million through collective marketing of farm and non-farm produce.
Enabling voice and accountability
The Project will help NRLM create an institutional platform by mobilizing rural poor, particularly women, into robust grassroots institutions of their own. These beneficiaries, with the strength of the group behind them, will then be able to exert their voice and enforce accountability over providers of educational, health, nutritional and financial services. This, based on past experience in several Indian states, is expected to have a transformational social impact, supporting India’s efforts to achieve the Millennium Development Goals (MDG) on Nutrition, Gender, and Poverty. Towards this end, NRLM will also focus on areas of the country such as Integrated Action Plan (IAP) districts, desert areas etc.
Building job skills
Supporting the rural poor in building their skills and capabilities for self-employment will enable them to graduate from dependence on safety nets to building productive assets of their own. Producer groups in agriculture, dairy, and the non-farm sector will be better able to upgrade technologies that will improve the productivity and quality of their products, access market information, develop value chains, attract the private and cooperative sector to do business with them, and negotiate fairer terms of trade for their products and services. As an example, about 500,000 youth from poor households were trained and placed in leading companies like Nokia, Hyundai, Samsung, HSBC, Group 4, More, Future Group etc.
NRLP will also invest in a robust Management Information System (MIS) which will help both the National and State-level Rural Livelihood Mission Management Units (i.e., NMMU and SMMUs) monitor the overall livelihood and financial performance of the SHGs and federations. The Project will also establish an e-governance architecture for NRLM with use of ICT including mobiles up to the village level.
The credit is from the International Development Association (IDA) – the World Bank’s concessionary lending arm – the Credit is on IDA terms with a maturity of 25 years, including a five year grace period.
