To promote formation of new SHGs and strengthen existing ones in the state’s six poorest districts, the Government of AP implemented the District Poverty Initiatives Project (DPIP) over the 2001-2006 period. Supported by a US$ 110 million World Bank loan, this program had organized 2.29 million households from 316 mandals in 171,618 SHGs and federated them into 9,872 village organizations (VOs) at the village level and 316 mandal samakhyas (MSs) at the mandal (county) level by December 2006 (World Bank 2007). The main idea of this program was to link capacity building with a one-time infusion of equity capital to not only form new SHGs but also establish them as economically viable and self-reliant institutions. To do so, a three-pronged strategy was adopted.

First, efforts to induce formation of new SHGs to include poorer strata of the population who had been left out of earlier attempts were undertaken. To determine the target group, the state’s 2001 “below poverty line” census which is routinely used to determine eligibility for government programs was complemented by a large effort of “participatory identification of the poor” (PIP) that added vulnerability and social exclusion to quantitative census indicators. The resulting lists, which assigned all households to the poorest of the poor (POP), poor, middle class, or rich, were confirmed by village assemblies.<sup>1</sup> Resources, in the form of community organizers, were then made available corresponding to the number of target households, to help form new groups that would achieve near-universal coverage.

Second, existing and newly formed SHGs were to be strengthened through set up and support of a federated SHG structure at village, county (mandal), and district (zilla) levels through Village Organizations (VOs), Mandal Samakhyas (MSs), and Zilla Samakhyas (ZSs). A VO includes about 20 SHGs in the village and is governed by an executive committee to which each member SHG sends two representatives. A number of other committees, depending on need, are formed as well, and a similar pattern is followed at mandal and zilla levels. In addition to being able to obtain loans wholesale from Banks and on-lend them to members, VOs and MSs also take over implementation of government programs and provide a link between their membership and local government institutions. One important program intervention is the so-called rice credit line (RCL). This enables the VO to acquire subsidized rice under the public distribution system in bulk and make it available to SHG members as an in-kind credit with any savings from bulk purchase being passed on to members in the form of lower prices. Anecdotal accounts suggest that this allowed the poor to circumvent the well-documented problems of the public distribution system (Kochar 2005) and thus was widely popular. The prospect of reliable rice

> 1 The manual used in the process defines poorest of the poor as those who can eat only when they get work and who lack shelter, proper clothing, respect in society, and cannot send their children to school; The poor have no land, live on daily wages, and need to

> send school going children to work in times of crisis. The ‘not so poor’“middle class” have some land, proper shelter, send their children to public schools, are recognized in society, and have access to bank credit as well as public services. The non-poorrich, having land of at least 5 acres, no problem for food, shelter, clothing, can hire laborers, send children to private schools, use private hospitals, lend rather than borrow money, and have considerable social status..

5