Rashtriya Mahila Kosh: A Catalyst for Women’s Financial Independence

In India, millions of women – particularly those in rural and unorganized sectors – have historically been shut out of formal financial systems. Without collateral, credit history, or access to banks, many were left with no option but local moneylenders charging exploitative interest rates. To directly address this structural gap, the Government of India established the Rashtriya Mahila Kosh (RMK), or National Credit Fund for Women, in 1993. For nearly three decades, RMK worked as a dedicated apex microfinance institution channeling affordable credit to poor and asset-less women, making it one of the most targeted financial interventions for women’s empowerment in India’s history.

Why RMK was created 🔗

The early 1990s were a turning point for India’s economic policy, but the benefits of liberalization were far from evenly distributed. Women in the informal sector – domestic workers, small traders, agricultural laborers – had virtually no access to institutional credit. Formal banks treated them as high-risk borrowers, and without land titles or other collateral, most loan applications went nowhere.

RMK was established in March 1993 as an autonomous body registered under the Societies Registration Act, 1860, under what is now the Ministry of Women and Child Development. Its founding purpose was clear: to provide low-interest, collateral-free microcredit to poor women for livelihood support and income-generating activities, in a manner that was simple, accessible, and dignified.

The broader context mattered too. It was widely recognized that formal financial institutions were not adequately addressing the credit needs of poor women, especially in the unorganized sector. RMK was the government’s answer – a dedicated institution that would fill this gap rather than expect conventional banks to adapt.

RMK’s founding objectives went beyond loan disbursement. According to its official mandate, the organization was set up to promote credit as an instrument of socio-economic change, support innovative delivery mechanisms, sensitize existing government systems to recognize poor women as viable financial clients, and build the capacity of intermediary organizations working at the grassroots. In short, RMK was never just a lender – it was designed to reshape how the state and civil society thought about women’s economic participation.

RMK’s unique approach to microfinance 🔗

What made RMK stand apart from conventional lending institutions was its deliberate design around the realities of poor women’s lives. Rather than expecting women to conform to standard banking procedures, RMK built a system that worked for them.

Client-friendly delivery with no collateral 🔗

RMK extended micro-credit in a client-friendly, non-collateral, and hassle-free manner to women in the informal sector. This was a significant departure from conventional practice. There was no requirement for third-party guarantees either, which had long been a barrier for women who lacked influential social networks. Loans were available for income-generating activities (IGAs), micro-enterprises, housing, and even family needs – covering the actual range of financial pressures that poor women face.

The interest rates charged to end-beneficiaries through intermediary organizations were capped – NGOs and intermediary organizations were not permitted to charge more than 18% per annum on loans they on-lent to women’s groups. This was substantially lower than what informal moneylenders typically charged, often running into double or triple that rate.

Participatory model and women’s agency 🔗

RMK’s approach was explicitly participatory. Women were not passive recipients of credit – they were engaged in the process of managing their groups, tracking repayments, and assessing the outcomes of their projects. This participatory structure was central to RMK’s philosophy of empowerment rather than mere financial delivery.

The RMK governing board itself included microfinance specialists alongside government representatives, reflecting the institution’s intent to stay connected to ground-level realities rather than function purely as a top-down bureaucracy. This design encouraged innovation in credit delivery and allowed for experimentation with different models suited to different communities.

Capacity building as a core function 🔗

RMK recognized early on that access to credit alone would not be sufficient if women lacked the skills to use it productively. Consequently, capacity building – financial literacy, enterprise development, leadership training – became a core part of its work. RMK actively promoted the formation and strengthening of women’s Self-Help Groups (SHGs) through its intermediary partners, and supported skills development alongside financial access.

This was grounded in evidence. Research on SHG-based microfinance in India has consistently shown that combining credit with entrepreneurial engagement has a significantly positive impact on women’s social, economic, and psychological empowerment – increasing financial independence, enhancing participation in household decision-making, and boosting self-confidence. RMK’s model was designed with this broader picture in mind.

How RMK channels funds to SHGs 🔗

The architecture of RMK’s fund-flow model is what made it operationally distinct. Rather than attempting to directly reach millions of individual women across India – an administratively impossible task – RMK operated as an apex institution, channeling funds through a structured intermediary layer.

The RMK-IMO-SHG model 🔗

RMK’s operating model works as a group-based facilitating agency: it provides loans to Non-Governmental Organizations (NGOs), Intermediary Micro-financing Organizations (IMOs), and Voluntary Organizations (VOs), which then on-lend to women’s Self-Help Groups (SHGs) and Joint Liability Groups (JLGs). This is often described as the RMK-NGO-SHG-Beneficiaries chain.

The eligible intermediary organizations included a wide spectrum: NGOs, Women Federations, Co-operatives, Women Development Corporations, State Government agencies like DRDAs and Dairy Federations, Municipal Councils, and not-for-profit companies. This diversity allowed RMK to work across very different geographic and institutional contexts – from tribal belt organizations in central India to urban cooperative banks in metro areas.

Loan schemes and their structure 🔗

RMK offered several distinct loan products to cater to different needs and organizational capacities. According to RMK’s official loan scheme details, these included:

Loan Promotion Scheme – for newer, smaller organizations with at least six months of SHG experience, providing loans up to ₹10 lakhs to build their capacity in thrift and credit management.

Main Loan Scheme – for IMOs with a minimum of three years’ experience in credit and thrift activities, with higher loan ceilings and stricter performance benchmarks including a recovery rate of at least 90%.

Housing Loan Scheme – providing up to ₹1 lakh per beneficiary through partner organizations for construction or repair of low-cost housing for SHG members.

Refinance Scheme – offering 100% refinance to Mahila Cooperative Banks and Urban Cooperative Banks for loans they extended to poor women directly or via SHGs.

Working Capital Term Loan (WCTL) – supporting backward and forward marketing linkages for products made by women’s SHGs, including technology transfer, skill upgradation, and infrastructure development.

Nodal Agency Scheme – introduced in 1996-97, this scheme used reputed and experienced organizations to identify and mentor newer NGOs, eventually linking them to the RMK system. It was a deliberate capacity-expansion mechanism, not just a credit line.

Sustainability and accountability requirements 🔗

RMK did not dispense funds without conditions. IMOs were required to contribute 10% of the sanctioned loan amount as margin money, demonstrating financial commitment. For loan amounts above ₹1 crore, organizations had to provide 10% as a Fixed Deposit as security. Larger borrowing organizations were also required to obtain credit ratings from recognized agencies – a standard of accountability that pushed IMOs toward better financial governance.

Crucially, RMK imposed a high recovery standard. Intermediary organizations were expected to maintain loan recovery rates of at least 90%. RMK’s initial corpus grew substantially through prudent credit, investment, and recovery management, demonstrating that a model targeting the poorest women could remain financially sustainable when implemented with discipline.

Scale and reach 🔗

Over its operational lifetime, RMK disbursed ₹31,513 lakh to 1,728 IMOs, benefiting 7,41,163 women since inception. These numbers reflect not just financial transactions but households changed, small businesses started, and women who gained a degree of economic control over their lives that they had not previously held.

The broader impact of SHG-linked microfinance models like RMK’s is well-documented. Research across five Indian states found that SHG membership improved women’s financial literacy, increased their participation in household decision-making, and strengthened their social networks – outcomes that extend well beyond the loan itself.

RMK’s legacy and the shift in India’s microfinance landscape 🔗

RMK operated at a time when institutional credit for poor women was genuinely scarce. It pioneered the intermediary-based model that later became standard across India’s microfinance sector. Its emphasis on group-based lending, capacity building, and participatory design informed how subsequent institutions – including private MFIs – approached women’s credit.

By the early 2020s, however, the government concluded that the policy landscape had shifted. With the expansion of alternative credit channels like Jan Dhan Yojana and PM MUDRA Yojana, the government decided to close RMK to avoid duplication of efforts and better consolidate resources. The Principal Economic Adviser’s 2020 report on rationalization of government bodies had recommended this step.

This does not diminish what RMK accomplished. It addressed a gap that the market and conventional banking had failed to fill for decades. Its model proved that government-backed microfinance, when structured with accountability and genuine client-centricity, could reach the most marginalized women at scale. The SHG-based architecture it helped build remains one of the most significant institutional frameworks for women’s economic participation in India today. Over 90% of all SHGs in India are composed of women, and their bank linkage is now nearly universal – a landscape that organizations like RMK helped shape.

RMK’s story is ultimately about what targeted institutional design can achieve when it starts from the needs of the excluded, rather than the convenience of the system.

What do you think? Given that RMK was eventually closed because other government schemes had filled similar gaps, does the proliferation of credit programs necessarily mean better financial inclusion for poor women – or does it risk spreading support too thin without the focused, women-specific approach that RMK embodied? And how much of a difference does it make when an institution is specifically designed for women, rather than simply including women in broader poverty-alleviation programs?

References

1. https://rmk.nic.in/
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5. https://egyankosh.ac.in/bitstream/123456789/31780/1/Unit-3.pdf
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