Rural Financial Services is an important sub component of the programme, which can supplement all the sub components under Production System Enhancement. It is meant to directly meet the credit gap of the poor tribal households. In general people do not get the services like saving and credit from formal financial institutions due to several reasons and are compelled to fetch the money lenders to meet the credit requirements.
No institutional facilities for savings except some hand savings or savings in the form of livestock or gold (very negligible) is an issue of concern in connection with the livelihood portfolio of the communities. The production system requires some kind of investment in terms of seeds, fertilizers, technology, raw materials, labour etc. Except home saved inputs and his family labour, the poor tribal is not able to invest anything more because of non availability of financial resources which results in low yield/ production and low income. Sometimes in critical situations, where the poor predicts the failure of assured income, he/she requires credit to protect his production and to secure the food availability round the year. Besides, the poor also needs credit on the occasion of festivals and critical illness. The programme, through the component of RFS would facilitate the poor households to meet the critical credit needs either for production and/or consumption. The component has been reflected in all categories of livelihoods option adopted by the poor. The resources under this component will be routed through the VDC to the SHGs. As an initial promoting incentives, each SHG (old as well as the existing SHGs) in the programme areas will receive a small kit of pre-designed non negotiable registers, formats, stationeries etc. not exceeding Rs.500/- per SHG. This grant will be given to the SHG after the formation of the SHG. In case of the existing SHGs the existing practice of the maintenance of records to be evaluated by the FNGOs and accordingly the preliminary support will be given, wherever required. The funds in this regard will be released to the VDCs and the VDCs will make purchase of the items to be given to the SHGs.
As a beginning of the facilitation process, Seed capital will be given as an incentive to the SHGs promoted or strengthened in the programme. Rs. 50000.00 allocation per MWS has been fixed to meet the immediate credit needs of the newly promoted groups or the very vulnerable groups strengthened by the programme. The funding should differ from group to group ranging from Rs.2000/- to Rs.5000/- per group depending upon its capacity and requirement. It is a grant component to the SHGs and should not be refunded by them to the VDC. But the members within the group will have access to the seed capital as credit and the members who will take loan from the seed money have to repay it to the group. Thus it will facilitate the internal lending within the group and will also increase the financial base of the group, which will facilitate linkages with financial institutions. The group as a whole can also take credit from this fund for small income generating activity.
Leaving aside the seed capital and initial start up grant, the major share under this component is the revolving fund. The total amount under revolving fund is Rs. 2.25 lakhs per micro watersheds, which will be given to the VDC in phases. The VDC will release the funds to the respective SHGs depending upon their livelihood plan. This will foster the community to take credit and invest it in the livelihood options as capital investment or working capital investment.

The groups will take loan from the VDC and will refund the loan with interest to the VDC. Thus the revolving fund with the VDCs will increase day by day as the SHGs will pay the interest for the loans taken by them. The SHGs will have to utilize the loan taken against the revolving funds for taking up group activities.

The individual members of the group may also take the funds as per their requirement and pursue independent activities. Effort would be made to encourage more and more group activities. It is assumed that each micro watershed will have at least 15 SHGs with an average credit of Rs.15000/- per group.