Optimization and strengthening NRLM’s Community fund management

• Aug 4, 2025
• 2 min

Cluster-Level Federations (CLFs) are community-based institutions under the National Rural Livelihoods Mission (NRLM) that bring together multiple Self-Help Groups (SHGs) within a geographic area. These federations play a central role in managing and distributing Community Investment Funds (CIF)—a critical source of low-cost capital for SHG members. However, the current fund management processes at CLFs are challenged due to inefficiency, lack of transparency, and limited alignment with the evolving credit needs of SHG members. To address these issues, a strategic initiative was launched to optimize the management and delivery of community funds and support the transformation of CLFs into robust Micro-Credit Institutions (MCIs) capable of delivering need-based and timely financial services to rural women.

MSC is supporting the NRLM to enhance the effectiveness, efficiency, and relevance of community fund mechanisms. MSC’s interventions include streamlining operational processes across Community-Based Organizations (CBOs) to improve fund management and utilization and deploying digital lending systems to boost transparency and efficiency in disbursement and monitoring. The team is also optimizing the allocation of Community Funds at the CLF level to promote equitable and impactful use, while designing need-based financial products to better serve the diverse credit requirements of SHG members.

The initiative is set to transform CLFs into agile, community-led micro-credit institutions that can effectively meet the growing and varied financial needs of SHG members. The project will strengthen fund governance, digitize lending processes, and offer tailored financial solutions. This will significantly enhance the accessibility, reliability, and impact of community financing across rural India—ultimately supporting sustainable rural livelihoods and inclusive financial growth.

The Gates Foundation commissioned the project.