Access to microcredit and savings services is an essential safeguard for low-income households against the risk of slipping into poverty. While there is a large network of formal financial institutions in rural India, they often lack the capacity to provide adequate demand-orientated microfinance services. Structural obstacles hamper the sustainable development of the financial system in India.

Under Indo-German development cooperation, the Rural Finance Programme supports the National Self-Help Group (SHG)-Bank Linkage Programme and the reform process of the Cooperative Credit Structure (CCS) in India. The main objective of the programme is to create an inclusive financial system enabling more and more rural households to avail quality financial services. The National Bank for Agriculture and Rural Development (NABARD) is the implementing partner for the programme. The National SHG-Bank Linkage Programme is the largest and fastest growing microfinance programme worldwide.

The implementing partners on the German side are the KfW Development Bank and Germany's international cooperation agency GIZ. Besides working on technical issues such as management information systems (MIS), credit risk management, design of demand-oriented financial products and viability analysis, GIZ cooperates with NABARD to support strategic development of microfinance in India. Important aspects such as corporate governance, democratisation, and professionalism of staff in the cooperative banking system are also addressed.

The expertise of the German Cooperative and Raiffeisen Confederation (DGFV) and other professional institutions is utilised for the programme. Strategic collaboration with KfW and other bilateral and multilateral development organisations, in particular the Asian Development Bank (ADB), plays an important role in supporting the cooperative banking reform programme.

Under German Financial Cooperation (FC), concessional loans amounting to 130 million Euros have been extended to the Government of India for funding the Revival Package for rural cooperatives.

By contributing to the revitalisation and stabilisation of the rural cooperative credit system, German development cooperation seeks to improve access of the rural poor to financial services, thereby supporting broad-based rural growth, poverty reduction and equity.