Scaling Self-Help Group Enterprises: Socio-Economic, Financial, and Market Barriers

(Published in The Business Sandesh 01 November 2025)

By Dinesh K Kapila. CGM (Retd) NABARD.

 “Our object in the construction of the state is the greatest happiness of the whole, and not that of any one class.” In this quote, Plato asserts that the primary goal in forming a just state is to ensure the overall well-being and happiness of the entire society. This is essential to absorb when we discuss the empowerment of SHGs.

 The transition of members of Self-Help Groups (SHGs) from participation in savings and micro-livelihood activities to becoming resilient, scalable entrepreneurs represents a critical step for inclusive economic growth and poverty alleviation. This is the next frontier, the next challenge.  My recent interactions with the SACC India StartUp Accelerator Chamber of Commerce for their Udaan Programme, a programme that assists women in turning  their skills and ideas into successful businesses brought this into focus. They are coordinating with a major foundation to support and nurture women through multiple guidance points for evolving as self reliant and self confident entrepreneurs.

 Observations over a period of time do indicate that the SHG movement has successfully established effective  conduits for credit delivery and fostered social capital , however a complex array of interlocking barriers prevents entrepreneurial graduation. One major policy thought before we assess further is the question, can a significant percentage of SHGs or their members really evolve as entrepreneurs. Discounting this concern, the primary constraints are deeply rooted in socio-cultural norms, with family responsibilities and social restrictions ranking as the highest obstacle. These are compounded by deficits in business capacity, low awareness of high-value government schemes, difficulty in accessing growth capital beyond micro-loans, and pervasive market access and quality control deficiencies. As one facilitator stated, a group focused on Indian sweets faltered on quality, as the scale increased, the quantities to be exactly used as inputs, maintaining the same taste and texture day after day and in developing a mindset of adhering to a rigourous data centric units of measurement of ingredients approach were pain points.

To address these systemic hurdles, a cohesive, coordinated multi-stakeholder strategy is required, focusing on an ecosystem-led Initiative. Could the emphasizing of tailored financial products for scaling, sector-specific managerial training, robust value chain integration, the creation of a customized legal structure for nano enterprises, and targeted interventions for socio-cultural empowerment to enhance confidence and mitigate the domestic workload barrier work. Maybe, but it would require major coordinated  mechanisms.  

SHGs are designed to empower marginalized communities, primarily women in rural areas. Their success lies in enhancing access to financial resources, fostering collective action, and building essential social capital among members. This collective structure has allowed members to structure a Group Corpus, available for their financial needs. This sustained flow of credit has successfully nurtured a substantial number of women-led micro enterprises, underscoring the intrinsic entrepreneurial drive of rural women. The achievement is evident  not only through quantitative metrics like savings and income levels but also by qualitative indicators such as financial stability and  enhanced member empowerment. Despite the successes in poverty alleviation and financial inclusion, concerns do  exist regarding the long-term viability of SHGs particularly when external funding and support systems are eventually withdrawn.

 The initial thrust of policy makers was facilitating access to hassle free credit. And satisfying consumption driven needs. That now has graduated to shifting members from engaging in basic, subsistence-level micro-livelihood activities to establishing self-sustaining, viable micro, small, and medium enterprises (MSMEs). This critical transition, going entrepreneurial is complex. It requires the members of SHGs to overcome significant hurdles, including limited access to crucial technical expertise, advanced managerial guidance, and sophisticated marketing support.  

 Globally, the disparity is stark: women in developing countries demonstrate double the aspiration rate toward entrepreneurship compared to those in high-income countries (35% aspire versus 14%). Yet, these women founders—who tend to be younger, poorer, and less educated—lag significantly behind their male counterparts and women in higher-income countries in their ability to transform these aspirations into resilient, growing businesses.

Unlocking this potential is recognized as critical for economic empowerment, boosting overall economic growth, and creating more equitable societies. We need to overcome the barriers to entrepreneurship and yet understand the competitive markets in which the SHGs have to operate. The MSMEs and even major corporates have introduced varied products along the entire range of the price points, with packaging, that in itself is a reference point in competitiveness to address.    

The barriers preventing SHG members from successfully scaling their enterprises are interconnected and multifaceted, stemming from socio-cultural foundations, financial access gaps, and capacity deficiencies. Empirical analysis highlights that the most significant constraints are not purely financial but relate to time deficits and social acceptance. Often family responsibilities and social constraints limiting business activities are primarily identified  as major challenges. Social constraints often impose limitations on mobility, preventing women from interacting freely with suppliers, accessing broader markets, or receiving external training. I personally had an experience, where though we deputed a lady officer, the men of the village combined in not allowing women to attend a training in another city.

This lack of external and family support fuels internal psychological barriers, even leading to low confidence in making independent business decisions or taking risks. We have to address  these restrictive social norms and cultivating spousal and family support is a prerequisite for realizing the benefits of financial investment and business training. As is observed, If the foundation of social capital and personal empowerment is weak, the acquired skills and capital are often underutilized. Furthermore, structural limitations regarding asset ownership mean women frequently lack collateral, making them dependent on the group-based lending model. While effective for micro-credit, this dependency can inhibit the pursuit of larger, individual-level scaling opportunities. Focusing on nurturing a few women ready to evolve as entrepreneurs often leads to the pull factor.

 The SHG-BLP has the challenge to move to enterprise scaling. Data suggests that a substantial portion of enterprises continue to source funds either through their corpus or through informal sources. Borrowing from MFIs is costly and the loan quantum per group or member remains low. The barriers are not solely legal or collateral-based, but could be complex rules, limited awareness of the higher loan limits or a lack of confidence is availing them, the hesitation of banks regarding larger group-based loans, or the SHGs' own limited capacity to prepare the necessary documentation, such as a robust Micro Credit Plan.  Other factors are the lack of essential business and financial literacy, including pricing, marketing, and accurate bookkeeping skills. Without these foundational skills, enterprises cannot achieve operational efficiency or sustain financial stability. Limited experience in management and the conflict between consumption and micro enterprise and a major investment are a barrier too.

 The lack of exposure to the marketing and production chain, such as, a lack of knowledge regarding modern marketing techniques, non-existent or inadequate access to distribution channels, the absence of effective marketing and branding practices, and inadequate production facilities and quality control measures are barriers I have myself observed. Quality concerns are endemic.  The maintaining of a standard quality of products is non-negotiable and forms a key pillar of developing a market.

 One suggestion is for the Bank Sakhis to be more effective as an intermediate support system. They can assist with loan applications and the required documentation and reinforce community-based recovery mechanisms. Maybe the banks and other financial institutions could develop intermediate loan products for group enterprises and individuals that are demonstrating viability. A strategic linkage to the existing, larger entrepreneurship schemes is also vital such as the PMMY, PMEGP, PMFME etc,. Capacity Building is essential in parallel. Capacity building has to be for managerial and commercial competence and domain expertise. Training programmes have to be targeted, sector-specific, and hands-on and include digital literacy.

A diversified distribution strategy is essential for maximizing outreach and stability. The Government can facilitate and CSR Arms may enable integrating into existing Corporate Value Chains.  Mentors at the block level would be ideal for this drive. Consistently reaching the last mile is a challenge the Govt or CSR arms must facilitate. Considering the competitive scenario, some private sector mentors suggest a narrower focus on Beauty parlours, body  care, care givers, lifestyle products, food processing,  tiffin delivery etc. Meanwhile, the capacity building by NABARD for onboarding onto E-Commerce platforms, support for the physical marketing of products, the money purse initiative and the graduated rural income generation project and the rural marts are certainly sound and can be considered by CSR Arms.  

Some observors suggest distinct legal and regulatory policies for nano enterprises. Setting up self sustaining federations is another mechanism but we need to evolve along the process of marketing to reach there. Ultimately, a strategic commitment across all stakeholders is required.

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