Government of India and World Bank sign US$ 1 Billion Agreement to Give Major Boost to Rural Livelihoods

July 18, 2011

New Delhi, July 18, 2011:  The Government of India and the World Bank today signed a Credit Agreement of US$1 billion (approximately Rs. 4,600 crores) for the National Rural Livelihoods Project (NRLP). The Project will strengthen the implementation of the Government of India’s newly launched National Rural Livelihoods Mission (NRLM), one of the world’s largest poverty reduction initiative aiming to reach 350 million people or almost a quarter of India’s population, with an outlay of approximately US$ 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. This Project will specifically focus on 12 states with the highest number of poor people, thereby creating a major impact on poverty.  The National Rural Livelihoods Mission (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 Past Innovations
The NRLP will help scale up the successes of past livelihoods initiatives to other lagging regions of the country. Under the aegis of the NRLM, the NRLP will now support specific additional investments in 12 states with a high number of poor people.  These states, namely Bihar, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh, and West Bengal have the highest number of absolute poor and 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, NRLM adopts a saturation approach i.e. it aims to bring at least one member, preferably a woman member, of each of the 70 million rural BPL households under the SHG net.  As of now, about 30 million rural BPL families in the country are covered under the SHG net.  This effort has been greatly helped by the World Bank supported livelihoods projects in Andhra Pradesh, Bihar, Madhya Pradesh, Rajasthan, and Tamil Nadu. NRLM will build on the valuable lessons learnt from these large scale projects and this will significantly reduce the learning curve for NRLP.

Key proposed investments include:

• Investing in building people’s institutions namely Self Help Groups (SHG) and federation 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 for consumption purposes (such as health emergency, child education) and income generating activities.

NRLM will lay special emphasis on making agriculture related livelihoods more productive and more sustainable, given the fact that more than 70 percent rural population derive their livelihoods from agriculture.

The two major shifts under NRLM, vis-a-vis its predecessor programme Swarnjayanti Gram Swarozgar Yojana (SGSY), are that (i) NRLM will be a demand driven program and the states will formulate their own poverty reduction action plans under it. This will be based on their past experience, capacities and resources; and (ii) NRLM will provide for a professional support structure for program implementation at all levels from State to sub-district level. This support structure will enable the formation of poor people’s own institutions.

The key innovation in NRLM is the focus on institutions of the poor. Eventually, it is expected that the people’s institutions will replace the external support structures by gradually taking over their roles and responsibilities. These institutions provide continuous and long term handholding support to poor households. It is this support which sees them through thick and thin, and enables them to come out of poverty. Another innovation in NRLM will be the use of social capital created under various rural livelihoods program for expansion of coverage of the program in a rapid and effective manner, and also for knowledge dissemination. This is a very sustainable and effective strategy as the community best practitioners are the best disseminators of knowledge.

Expanding access to finance and private sector investments in rural India
By encouraging thrift and prudent financial behavior, and instituting mechanisms for imparting financial literacy and credit counseling, the SHGs will 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 the self-help groups to access savings of more than US$1 billion which helped them make accumulated investment of US$9 billion over the last ten years in micro, small, and community enterprises. This resulted in expansion of rural markets and attracting 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 where, with the strength of the group behind them, they will be able to exert voice and 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 the difficult areas in the country like the Integrated Action Plan districts, desert areas etc.

Building job skills
Support for 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, dairying, and the non-farm sector will be better able to upgrade technologies to 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.  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. in the World Bank aided Andhra Pradesh and Tamil Nadu rural livelihoods projects.
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 SMMU) to monitor the overall livelihood and financial performance of the SHGs and federations. The project will 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.

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