Lessons from China for SHGs-Telangana Today


Integrating China’s Township and Village Enterprises model into SHG framework will create a more robust rural economy

Published Date – 8 October 2024, 11:59 PM


Opinion: Lessons from China for SHGs


By Dr Vanishree Joseph

Indian villages are brimming with unused potential. Self-help groups (SHGs) that have sprung up across rural India are evidence of the entrepreneurial spirit and resourcefulness of the country’s rural population. Yet, despite their success, there remains vast room for growth in scale and impact. By incorporating lessons from China’s Township and Village Enterprises (TVEs) model, India can revolutionise its rural economy, creating sustainable livelihood opportunities for millions of rural women and youth.


TVE Model

The TVE model was important to China’s economic reform in the late 1970s and 1980s. These enterprises were typically collectively owned by local governments or communities and served as a bridge between state-owned enterprises and the private sector. Their primary aim was to absorb surplus labour from agriculture, promote rural industrialisation, and narrow the economic gap between rural and urban areas.

TVEs thrived by leveraging local resources, receiving financial support from formal institutions and informal networks, and benefiting from managerial autonomy. The Chinese government provided crucial support, including infrastructure development and favourable policies, which allowed TVEs to become a dynamic force in China’s economic transformation.

SHGs’ Potential

SHGs in India have become essential for empowering women and promoting economic self-reliance in rural areas. These groups typically involve 10-20 women pooling their resources to start small businesses, ranging from handicrafts to small-scale agriculture. They have been instrumental in enhancing financial inclusion, with members often receiving microloans through government schemes or microfinance institutions. However, the scale of operations and the impact of SHGs remain limited. Many struggle with issues such as inadequate market access, lack of advanced skills and limited financial support. These challenges can be addressed by integrating the TVE model into the SHG framework, leading to a more robust rural economy.

TVE principles for SHGs

• Cooperative approach: SHGs can adopt a collective ownership model akin to TVEs. This involves SHG members pooling resources to start small businesses and establish larger, collectively managed enterprises. These enterprises can operate in agro-processing, handicrafts, rural tourism or the non-farm sector, creating jobs and generating income for the entire community. The non-farm sector offers various enterprising activities for SHGs, such as small-scale manufacturing, textiles, renewable energy projects and services like food processing, care services or local logistics. SHGs can formalise their collective efforts by establishing cooperative societies where all members have equal ownership and decision-making power. This structure ensures that profits are shared equitably among members and decisions are made democratically, allowing SHGs to diversify their activities and thrive in farm and non-farm sectors.

• Enhanced financial support: As TVEs rely on formal and informal financial support, SHGs should have better access to credit facilities. This can involve expanding existing microfinance programmes, introducing low-interest loans tailored to SHG enterprises and encouraging partnerships with private investors. With a cooperative or collective entity, SHGs can access larger loans from banks and financial institutions. The collective creditworthiness of the group often enables them to secure better terms, such as lower interest rates and longer repayment periods. The government can also introduce matching funds for SHGs, demonstrating firm business plans and a track record of success.

• Government and institutional support: Local governments in India can significantly enhance the success of SHGs by focusing on developing essential infrastructure and enacting supportive policies. By improving roads and transportation networks in rural areas, local governments can make it easier for SHGs to access markets, source raw materials and distribute their products, thereby reducing costs and increasing efficiency. Reliable electricity supply is another critical area where local government intervention can make a difference. Ensuring that SHG enterprises have consistent access to power — through expanding the rural grid or supporting renewable energy initiatives — can boost productivity and enable technology adoption.

• Leveraging corporate partnerships: SHGs can significantly benefit from partnerships with large corporations, where these companies outsource the production of certain goods to SHGs at a piecemeal rate. This model allows SHGs to become part of larger supply chains, producing components or products according to the specifications provided by the corporations. By doing so, SHGs can secure a steady stream of work, ensuring consistent income for their members. In this arrangement, corporations can leverage the craftsmanship and local expertise of SHGs while benefiting from lower production costs. The corporations can then collect the finished goods, ensure they meet quality standards and sell them under their established brand names. This collaboration provides SHGs with market access and financial stability and allows corporations to enhance their brand image by promoting rural development and supporting small-scale producers. By integrating technology and digital platforms, these partnerships can be further streamlined, making it easier to manage orders, track production and ensure quality control, ultimately benefiting both SHGs and corporations involved.

• Technology and market access: SHGs stand to gain significantly by embracing new technologies, especially through partnerships with large corporations that can amplify their reach in digital marketing and sales. In today’s interconnected world, integrating SHG products into the digital ecosystems of established corporate brands can help transcend local limitations and access broader, even global, markets. Corporations can play a pivotal role by incorporating SHG products into their supply chains, branding them under their established names and marketing them through their extensive e-commerce platforms, social media channels and global retail networks. This collaboration not only provides SHGs with an expansive audience but also leverages well-known brands’ credibility and marketing prowess to elevate SHG products to new heights.

• Capacity building and training: Traditional capacity building efforts have often focused on basic skills and immediate needs, but to unlock the full potential of SHGs, training programmes must be more comprehensive and forward-looking. These programmes should go beyond rudimentary skills development and include advanced financial literacy, strategic business management and technological proficiency. SHGs need to be equipped with the strategic insight to scale their businesses, enter new markets and innovate. A more holistic approach to training, including mentorship from industry experts and continuous learning opportunities, will ensure that SHG members are not just participants in the economy but are empowered to lead sustainable, growth-oriented enterprises that can compete effectively on a larger scale.

Incorporating the TVE model into SHGs offers a pathway to transforming rural economies. By scaling up operations, improving access to finance, and integrating technology, SHGs can become powerful engines of economic growth in India’s villages. The success of this model in China provides a compelling case for its adaptation in India, promising to uplift millions from poverty and create vibrant, self-sustaining rural communities. This approach can create a new “Lakhpati Didis” generation by significantly enabling SHG members to increase their income through larger-scale, market-oriented enterprises. With the right support and a clear vision, SHGs can lead the way in a new era of rural prosperity, much like the TVEs did in China decades ago. The potential is vast, and the time to act is now.

Dr Vanishree Joseph

(The author is Head, Centre for Gender Studies and Development, National Institute of Rural Development and Panchayati Raj, Hyderabad)



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