In this regard the financing needs of small and medium enterprises have drawn the attention of several financial institutions. The National Bank for Agriculture and Rural Development (NABARD) has emerged as a pioneer in the field of micro finance, thereby ensuring financial inclusion for more than 5.8 crore poor households within its fold. 

Dr. K G Karmakar, Managing Director, NABARD says, “NABARD's role in the growth of the micro finance model has been multi-dimensional, i.e. policy-formulation, financial innovations, technological interventions, and institutional strengthening. Emphasis has been on improving the access of the rural poor to integrated micro finance services covering both savings and credit, rather than providing just micro credit facilities. This entails improving access of the poor to micro-finance in a sustainable manner rather than to offer credit in the form of subsidies.

In order to improve access of the poor to formal banking, NABARD launched Self help Group (SHG)  Bank linkage model in 1992. Under this scheme the poor form small groups and are encouraged to pool their savings regularly. These savings are then used to make small interest bearing loans to the members. Bank credit follows this stage.

NABARD has initiated several measures for the healthy growth of the SHG linkage programme viz.- developing a conducive policy framework through the provision of opening Saving Bank Accounts in the names of SHGs and relaxation of collateral norms, simple documentation and delegation of all credit decisions to SHGs; training and awareness building among the stakeholders; mainstreaming the SHG Linkage Programme as part of corporate planning and normal business activity of banks; encouraging Regional Rural Banks and Co-operative banks to act as SHGs promoting institutions; setting up a micro-finance development and equity fund in NABARD for meeting the promotional costs of up scaling the micro-finance interventions; dissemination of information through seminars, workshops and media and to provide support to NGOs for promotion of SHGs.

The SHG  Bank linkage programme has reportedly helped the rural sector to avail of credit facilities to set up small enterprises and even to elevate their standard of living. A study conducted in Karnataka showed that income levels per SHG member had increased substantially over a period of three years. A recent study In Tamil Nadu revealed that participation in credit and savings programmes has enabled several families to send their children to school. The SHG movement has ushered in women's empowerment and has helped reduce child mortality, improve maternal health and has enabled the poor to fight diseases due to better nutrition, housing and health.  

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