Microfinance through Self-Help Groups (SHGs) has emerged as an effective strategy for poverty alleviation and livelihood enhancement in India, particularly in rural and semi-urban regions. Supported by institutional initiatives such as the SHG-Bank Linkage Programme and DAY-NRLM, SHGs integrate financial inclusion with socio-economic empowerment. As of 2025, nearly 90.9 lakh SHGs cover more than 10.05 crore households, making the model one of the world’s largest community-based microfinance systems. Predominantly women-oriented, SHGs have significantly expanded access to savings, credit, and income-generating opportunities. Recent statistics indicate that annual loan disbursement through SHGs exceeded ₹1.70 lakh crore, while repayment rates remained above 96%, demonstrating strong financial sustainability. The overall microfinance sector in India has also expanded rapidly, reaching approximately ₹3.93 lakh crore in 2024 due to policy support and digital financial inclusion. SHGs encourage entrepreneurship, skill development, collective participation, and livelihood diversification, thereby strengthening rural economic resilience. Government initiatives such as the “Lakhpati Didi” programme have further enabled women to achieve higher income levels and financial independence. Empirical evidence from various states highlights improvements in household income, employment opportunities, savings behaviour, and women’s participation in decision-making processes after joining SHGs. However, challenges including financial literacy gaps, regional imbalances, operational inefficiencies, and rising non-performing assets continue to affect the effectiveness of SHG-based microfinance. Despite these limitations, the SHG model remains a sustainable pathway for inclusive development by combining economic growth with social empowerment. Therefore, microfinance through SHGs plays a vital role in promoting poverty reduction, women empowerment, financial inclusion, and livelihood security in India.