Impact of Microfinance/Self-Help Groups on the Financial Stability and Economic Outcomes of Low-income Women in India | RISE Research

This paper investigates the extent to which microfinance and Self-Help Groups (SHGs) improve the financial stability and economic outcomes of low-income women in India, a country whose SHG-bank linkage program reaches roughly 17.75 crore households, the vast majority women. The study draws a central analytical distinction between short-term consumption smoothing (managing cash-flow shocks and emergencies) and long-term wealth accumulation (productive assets, durable savings, reduced dependence on informal lenders), arguing these are too often conflated in existing literature. Using a mixed-methods design combining nationally representative secondary data (NABARD, the Bharat Microfinance Report, NFHS-5, and DAY-NRLM) with an original survey of 50 women comparing SHG participants and non-participants across four measured outcomes, the study finds a strictly nested ordering of benefits: every participant reports liquidity and emergency-coping benefits, income and regular saving improvements appear for a clear majority but not all participants, and no higher-tier outcome (like asset accumulation) occurs without the lower-tier ones first being achieved. This pattern is corroborated by longitudinal literature, notably Deininger and Liu's World Bank studies, which similarly found that SHG participation drives consumption smoothing in the short-to-medium term before enabling asset accumulation with longer program exposure, indicating that household stabilization is a necessary precondition rather than competing goal for accumulation. The paper also finds that loan-quality data favor the disciplined, savings-first SHG model over more commercialized microfinance institution channels. The study concludes that microfinance reliably improves financial stability and, for most women, income and savings behavior, while asset accumulation follows more gradually and remains incompletely inclusive, cautioning against treating credit access alone as evidence of women's economic empowerment.