Telangana government is changing its microfinance system to smart finance. This new system focuses on transparency, responsible lending, and using data for better credit decisions. The goal is to create a modern, inclusive financial ecosystem that turns self help groups (SHGs) and joint liability groups (JLGs) into gateways for personal credit growth and women-led entrepreneurship. According to the Telangana Rising Vision document, this will help the state become India's most financially inclusive. Currently, about 68% of households in Telangana use formal credit. The credit-deposit ratio is among the highest in India. This strong foundation helps deepen financial power at the household level. Telangana has about 6.1 lakh SHGs that promote saving and financial discipline. But their current group lending model can improve by tracking individual repayment histories and linking them to credit bureaus. This will help unlock each person's credit potential. Most households (75%) save gold, using it sometimes as collateral. The state plans to shift from collateral-based loans to relationship-based lending that is flexible and secure. Key steps include formalising SHG members' repayment behavior so they can get affordable individual loans from formal financial institutions, replacing expensive microfinance and informal loans. A unified digital platform will link accounts to enable real-time, cashless transactions and automated paperwork. Trained NGOs and volunteers will support this change. The state will digitise up to 10 years of repayment history for strong individual credit records. SHG repayment data will be sent to credit bureaus equally with formal loan data. The State Rural Livelihoods Mission will coordinate data validation to help banks and NBFCs offer bigger loans at lower interest rates. The state aims to expand SHGs into full financial hubs with deposits, pensions, insurance, education, and housing finance in partnership with SIDBI Swavalambana Kendras. A digital marketplace will provide job safety nets, and youth programs will promote continued digital use.