Access to credit has historically been one of the biggest barriers women in India’s unorganized sector face. Without collateral, formal income records, or connections to the banking system, millions of women were effectively shut out of financial services. The Rashtriya Mahila Kosh (RMK), established in 1993 under India’s Ministry of Women and Child Development, was created precisely to address this gap – channeling collateral-free microcredit to poor women through a network of intermediary organizations. One of the most strategically important mechanisms RMK developed to extend its reach was the Nodal NGO Scheme, a model that uses established, experienced NGOs to train and mentor newer ones, creating a cascading effect of microfinance outreach.
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What is the Nodal NGO scheme?
The Nodal Agency (NOA) Scheme – commonly referred to as the Nodal NGO Scheme – was introduced by RMK in 1996-97 with a clearly defined purpose: to tap into the expertise of reputed and experienced organizations to identify, train, and assist newer NGOs, so those newer organizations could eventually link up with RMK and begin extending credit facilities to women for income-generating activities.
The key insight behind the scheme is practical. RMK, as a national-level apex body, cannot directly train and monitor every small NGO across India’s vast and diverse geography. Instead of trying to build that capacity centrally, the Nodal NGO Scheme delegates the mentoring function to larger, field-tested NGOs. These “nodal” organizations act as umbrella bodies – not just financial intermediaries, but knowledge and capacity hubs for smaller, emerging NGOs.
It is worth noting that nodal NGOs selected under this scheme do not have to be existing borrowing partners of RMK. This opens the door to a wider pool of qualified civil society organizations with relevant field experience but not necessarily a formal financial relationship with RMK. The focus is on institutional credibility and grassroots reach, not prior RMK affiliation.
Eligibility and responsibilities of nodal NGOs
Not every NGO can become a nodal organization. RMK sets specific eligibility standards to ensure that only those with demonstrated capability and institutional soundness take on this mentoring role.
Who qualifies as a nodal NGO?
The eligibility criteria are rooted in experience and operational stability. According to RMK’s loan scheme guidelines, organizations applying under any RMK scheme must be registered for at least three years as a society, cooperative society, voluntary organization, or a Section 25 (not-for-profit) company. They are also required to have a minimum of three years of hands-on experience in microcredit management, Self-Help Group (SHG) formation, and SHG promotion and development.
Financial health matters too. An organization must maintain a loan recovery rate of at least 90% if it has previously availed loans from other funding agencies or through internal SHG lending. The accounts of the organization must be properly audited and published every year, with no serious financial irregularities on record. Additionally, the organization’s office bearers must not be elected members of any political party – a condition that helps maintain the independence and community-oriented focus of the nodal body.
For the Nodal NGO Scheme specifically, the selection criterion also emphasizes that the organization should have been implementing socio-economic development programs over the preceding three to four years, and should have the infrastructure and human resources needed to take on a training and support function for other NGOs. Experience in formation and nurturing of SHGs is particularly valued, as the eventual goal is to help new NGOs develop the same capacity.
What nodal NGOs are expected to do
The responsibilities of a nodal NGO go well beyond financial intermediation. Their primary function is to serve as a mentoring institution for new and smaller NGOs that are just beginning their journey into microfinance. This involves identifying potential NGOs in underserved areas, assessing their institutional readiness, and providing structured training on how to form and manage SHGs, maintain proper financial records, recover loans, and comply with the reporting norms required to eventually become an RMK borrowing partner.
Nodal NGOs guide the newer organizations through the entire process of becoming microfinance-ready – from understanding thrift and credit basics to building systems for internal auditing and member accountability. They effectively reduce the learning curve for smaller NGOs by sharing field knowledge and established protocols that would otherwise take years to develop independently.
In addition to training, nodal NGOs act as a link between RMK and the ground-level organizations. They help assess the progress of new NGOs and report back to RMK on institutional development, ensuring that only adequately prepared organizations proceed to formally seek credit linkage with the Kosh.
Impact on women’s access to credit
The most significant outcome of the Nodal NGO Scheme is what happens downstream: more women in remote and underserved areas gain access to formal microfinance. By systematically expanding the ecosystem of capable NGOs, RMK effectively multiplies its own reach without overstretching its central operations.
Reaching women in underserved areas
India’s microfinance gap is most acute in rural and semi-urban areas where formal banking infrastructure is sparse. Research published in the Harvard International Review notes that NGOs play a critical role in reducing transaction costs associated with microfinance, providing on-the-ground monitoring, and offering training to SHGs – and that such partnerships can help ensure microfinance programs reach the most underserved communities. The Nodal NGO Scheme is a structured application of exactly this logic.
When a nodal NGO successfully trains a new NGO in a district or region where RMK has no existing partners, it opens up a credit channel for women who previously had no access to formal microfinance. These women can then form SHGs or Joint Liability Groups (JLGs), begin practicing collective savings and thrift, and ultimately access loans for income-generating activities – whether that means setting up a small retail shop, investing in livestock, expanding a tailoring business, or funding agricultural inputs.
RMK’s operating model channeled its microcredit through Intermediary Micro-Finance Organizations working at the grassroots level – including NGOs, women’s federations, cooperatives, and not-for-profit companies. The Nodal NGO Scheme feeds directly into this pipeline by preparing more organizations to serve as effective IMOs over time.
Building institutional capacity, not just delivering credit
One of the more lasting effects of the scheme is the institutional capacity it builds in the NGO sector itself. A new NGO that goes through the mentoring process under a nodal body doesn’t just gain knowledge – it gains systems. It learns how to maintain transparent financial records, how to ensure high loan recovery rates, and how to foster accountability within SHG members. These are capabilities that outlast any single loan cycle.
NABARD’s experience with SHG-Bank Linkage shows that training and capacity-building programs for NGOs, government agencies, and SHG members are fundamental to sustaining microfinance growth. The Nodal NGO Scheme mirrors this approach, recognizing that expanding credit access without building organizational capacity is neither effective nor durable.
By the time a new NGO completes its development under a nodal body and links up with RMK, it is not just a credit conduit – it is a functioning microfinance institution at the community level. It can form SHGs, promote savings discipline, facilitate borrowing, and monitor repayment. This kind of bottom-up capacity building is what makes the Nodal NGO Scheme more than just a bureaucratic arrangement. It is a model for sustainable, decentralized financial inclusion.
Empowerment beyond credit
The downstream impact on women extends beyond the loans themselves. Research published in the Journal of Innovation and Entrepreneurship demonstrates that microfinance and SHG participation has a significantly positive impact on women’s social, economic, and psychological empowerment – increasing financial independence, enhancing participation in household decision-making, and building self-confidence. When the Nodal NGO Scheme successfully brings a new organization into the RMK fold and that organization begins running SHGs, these broader empowerment outcomes follow.
Women who previously relied on informal moneylenders – often at exploitative interest rates – gain access to affordable, structured credit. Studies on microfinance in India consistently show that NGOs also enhance the establishment of SHG federations, financial literacy, and internal monitoring systems, all of which improve both the quality and sustainability of credit access for women. The Nodal NGO Scheme, by multiplying the number of capable NGOs in the field, multiplies these effects at scale.
It is also important to note the scheme’s broader structural significance. Women in India – particularly in rural areas – face layered barriers to credit: lack of collateral, limited financial literacy, social restrictions on mobility, and absence of formal income documentation. The group-based SHG model, promoted by nodal-trained NGOs, circumvents many of these barriers through collective savings, peer accountability, and community trust. The Economic Survey 2025-26 notes that over 95% of microfinance borrowers in India are women, which reflects the sector’s deeply gendered design – a design that schemes like the Nodal NGO arrangement help sustain and expand.
While RMK has since been wound down as a standalone institution – a decision announced by the Ministry of Women and Child Development following a rationalization review in 2020-21, given the availability of alternative credit channels such as PM MUDRA Yojana and Jan Dhan – the Nodal NGO Scheme it pioneered remains a valuable model. It demonstrated that the most effective way to scale microfinance outreach is not just to disburse more money, but to build more capable institutions at the community level. The intermediary model – with its layers of mentoring, training, and graduated responsibility – remains directly relevant to how civil society organizations engage with microfinance today.
What do you think? If you were designing a scheme to expand microfinance access in an underserved region, would you prioritize building the capacity of existing local NGOs or establishing new purpose-built institutions – and what factors would guide that choice? And given that the Nodal NGO Scheme relies heavily on experienced organizations to mentor newer ones, how should accountability be structured to ensure the quality of training doesn’t dilute as the network grows?
References
- https://rmk.nic.in/
- https://pib.gov.in/newsite/PrintRelease.aspx?relid=101652
- https://hir.harvard.edu/financial-feminism-the-evolution-of-microfinance-and-self-help-groups-in-india/
- https://www.pib.gov.in/PressReleasePage.aspx?PRID=1742800
- https://www.nabard.org/content1.aspx?id=2799&catid=8&mid=8
- https://innovation-entrepreneurship.springeropen.com/articles/10.1186/s13731-024-00419-y
- https://acr-journal.com/article/empowered-to-choose-the-consumer-impact-of-micro-finance-on-women-in-india-1872/
- https://clarityupsc.com/economic-survey-2025-26/microfinance-india-household-welfare/
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