Abstract The progress under microfinance sector in India has registered a remarkable growth in the past three decades covering more than 77 lakh SHGs and around 9 crore households of which 2.5 lakh SHGs have been promoted in Rajasthan. Microfinance in Rajasthan has also undergone a sea change in the past few years in terms of credit dispensation, financial inclusion and other services to the rural poor. The major stakeholders in Microfinance sector in Rajasthan comprises NABARD, RAJEEVIKA, Directorate of Women Empowerment, ICDS, NGOs and MFIs. The paper highlights the basic features of SHG federations and its need for social and economic development of the society. The study focuses on the role of SGHs and SHG federations, in strengthening the India’s position in relation to other countries economy. KEYWORDS: SHG, Poverty, SHG federations, Rajasthan, Microfinance