microfinance and poverty alleviation

CATALYST January 2009 Vol.VII, Issue1

Newsletter of Cyriac Elias Voluntary Association (CEVA), Kochi

CATALYST he 1.15 billion Indian population comprises approximately one sixth of the world’s population. Among this, ten percent of the population posseses a large proportion of the total wealth of India. Interestingly, four Indians were

ranked within the top ten of the world’s billionaires list in March 2008. This shows that a wide gap exists between the rich and the poor in India.

During the past few years, India has demonstrated a welcome willingness to innovate and to think afresh about financial services to alleviate poverty. Government, NGOs and other financial institutions have introduced various welfare schemes and activities to reduce poverty. Microfinance, by providing small loans and savings facilities to those who are excluded from commercial financial services has been developed as a key strategy for reducing poverty throughout the world. In South Asia, the modern microfinance movement was born in Bangladesh, as a response to the prevailing poverty conditions among its vast rural population, and in India, a substantial microfinance system based on selfhelp groups (SHGs) were developed. It allows poor people to protect, diversify and increase their sources of income, the essential path out of poverty and hunger. As a developmental and economic tool it has caught the imagination of banks, financial institutions and NGOs in India.

At this juncture we also need to analyze the limitation of Microfinance, whether it reduces poverty or aggravates the situation. The modern consumerist attitude and the accessibility to the supermarkets in the rural areas trigger the unnecessary consumption of goods among the poor people with the support of the money from MFIs. Sometimes, the exorbitant interest rates quoted by MFIs lead the poor into indebtedness and they become voiceless infront of MFIs. A synergy can be initiated and persuaded among the MFIs, banks and NGOs towards practice of good microfinance. Implementation of microfinance can be incorporated with sustainable entrepreneurial development programmes. NGOs need to assist and channelise the poor people to invest the money from the MFIs into Entrepreneurial Development programmes for better savings and returns, through which poverty can be reduced.

Microfinance and Poverty Alleviation

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Fr. Joy Vattoly Secretary, CEVA

Contents Can Microfinance alleviate Poverty in India?..........................................................................................2 Poverty Alleviation: Is Microfinance A Panacea or Palliative? ................................................................. 3 Micro Enterprise Development – A Sampada Trust Experience .................................................................. 5 Can we look beyond Microfinance? ............................................................................................................ 7 News from CEVA ............................................................................................................................................ 9 Is Micro Credit a Micro Mess or a Macro Mess in the context of Poverty Alleviation? .......................... 15 Poverty Alleviation and Microfinance........................................................................................................ 18 A Place has been established for women ................................................................................................... 19

Jan. 2009 Newsletter of Cyriac Elias Voluntary Association 2

Can Microfinance Alleviate Poverty in India? E V Murray*

“The poor ye have with you always….” Jesus (John 7:33)

ndia is one of the few countries in the developing world that has followed the model of creditled rural

development and poverty alleviation, inspired by the success of the German and Dutch rural credit systems evolved 200 years ago under the Raiffeisen model. Credit Cooperatives were first tried and when found inadequate to meet the challenge, Commercial Banks were roped in and later Rural Banks created for focused attention to rural credit. That even today, about 70% of Indians in rural areas do not possess even the basic savings bank account speaks of the distance yet to be covered.

In the late eighties, microfinance emerged on the scene as a model to accelerate the process of extending banking services to the poor. The issue is whether microfinance is the magic bullet that has the ability to alleviate widespread poverty and “make poverty history”, as famously stated by Nobel Prize Winner Mohammed Yunus of Bangladesh Grameen Bank.

Let us look at the issue on balance.

The positives:

Some of the established empirical evidences from over two decades of studying the Indian microfinance sector is that:

• Microfinance have certainly helped the poor manage their cashflow cycles better, especially considering the seasonal nature of agricultural income. This easy and convenient access to small ticket loans has eased dependence on the high cost informal sources.

• Another clear indicator is the improvement in health and nutritional status as also school attendance by children of those covered by microfinance programmes. These are important achievements because, as the structure of our economy is changing, educational attainment will be important for participation in the economy, and, among the poor in

India, a full 30% of those who enter hospitals plunge below the poverty line from the burden of medical bills due to the low preventive medicare and absence of public services.

• There has also been positive impact through collective action and social mobilization and has provided a voice to the marginalized sections of society.

• One of the key achievements of and possibly the biggest strengths of the Indian microfinance programme has been inculcating thrift and saving habit among the poor.

The other side:

On the flip side, some points of concern are:

• It is seen that even in nations that have a longer history of microfinance programmes than India (such as Bangladesh), the levels of poverty continue to be high, inspite of a majority of the poor being under the umbrella of microfinance.

• The most vulnerable and ultra poor get excluded from conventional microfinance programmes. Leading Microfinance Institutions like BRAC and ASA of Bangladesh have therefore, designed specific programmes for ultrapoor / hardcore poor, which blends nutrition and skill development with microfinance.

• In the Indian context, microfinance programmes have become an excuse for governments to abdicate their role in providing social security to the vulnerable population. The preoccupation with microfinance by government agencies has led to neglect of social safety net programmes. The insistence of routing welfare programmes through the selfhelp group has

* Deputy General Manager, NABARD Andhra Pradesh Regional Office, Hyderabad. Was earlier a Faculty Member at the Reserve Bank of India’s College of Agricultural Banking at Pune.

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Jan. 2009 CATALYST 3

Poverty Alleviation: Is Microfinance A Panacea or Palliative? E K Santha*

Introduction

The world has set an ambitious course to meet the Millennium Development Goal of cutting into half, by 2015, the proportion of people living on less than one dollar a day. Microfinance is a powerful tool to help us get there”, Mark Malloch Brown, Administrator of the United Nations Development Programme (UNDP) 2005

sing Microfinance as a tool for poverty alleviation is a relatively new concept. It originated in the 1970s in

Latin America, more precisely in Brazil. In Asia, it began in Bangladesh. Its roots can be traced back to the informal Savings and Credit groups that operated, for centuries, in some of the Asian, African and Latin American countries. Much later, in the 19 th century, the concept of micro credit/ credit cooperatives was set in motion in the world as a result of the industrial revolution and the consequent shift in the economic base from agriculture to industry.

However, the concept of microfinance or micro credit of today, is definitely different from the conventional form of credit cooperatives in its scope, form and reach. First of all, there is a shift in terms of the potential clients; from men to women. The three major factors that prompted this shift are: [1] If the feminization of poverty is a reality, then it is imperative for the feminization of Microcredit;[2] Reaching the families through women is worth the effort and it paid off in many cases; and [3] women are more creditworthy than men. This does not mean that there are no men’s groups or youth groups. However, at present, more than 90 percent of the microcredit clients are groups constituted by women.

The paradigm shift in the approach of the public sector banks and financial institutions from insisting on collateral security for any loan to providing loans to the groups even without any collateral security played a role in the expansion of microcredit. There was also the attitudinal change among the officials from looking at the poor women as mere beneficiaries to seeing them as potential clients for the banking industry that made a difference in this context. In course of time, the public sector banks and financial

institutions began to support the groups. The strategy in the context of the microfinance institutions is to promote small enterprises (income generation activities) and achieve poverty alleviation through this. The positive interventions of NABARD, public sector banks and other MFIs and Civil Society Organisations have together resulted in the phenomenal growth in the number of savings and credit groups.

MF as a tool for poverty alleviation how does it work?

The successive governments in independent India have introduced many schemes and programmes for alleviating poverty and providing support to the poor and marginalised sections of the society. All those, however, did not yield the desired results. In many cases, the strategy had an adverse impact on those who were intended to have benefited from such schemes. The people turned more dependent on loans and this led them into a debt trap. So the genesis of micro finance, as it is made up today, can be traced to the negative outcome of the statesponsored and statesubsidised poverty alleviation measures for many decades.

Income generation activities:

Fighting poverty by providing capital in the form of loans for small entrepreneurs who cannot afford to raise the necessary capital to start an enterprise out of their existing savings was the strategy adopted by the banks and other MFIs. From the year 1992 to 2006, as many as 22, 38,565 SHGs have been linked to the public sector banks and Rs. 113,975 Million has been disbursed as loans to the groups by the banks during the same period. The volume of transaction will be enormous if one adds the loan amounts from other MFIs. This does not mean that the entire amount is spent on starting enterprises or expanding the old ones. Sometimes, loans are spent for other purposes such as repaying an existing loan or purchasing consumer durables even where the loan was meant for starting an IGP.

However, by and large, the accessibility to loans helped

* Development Consultant and Freelance Trainer, Chennai

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large number of women to start or expand their trade traditional or otherwise. Evidently, there is an increase in their income. A study done by PWDSNEERA network among 5300 women SHG members, as part of the application of impact monitoring tools, shows that there is a considerable level of income increase after they joined the group. This, in turn, helped in asset creation and opened up more employment opportunities in the rural areas.

The indirect impact were: increased access to quality education for children, access to better health facilities and access to information on the government schemes and programmes. And more importantly, the NGO supported groups concentrated on social and political empowerment along with economic empowerment. Hence it was expected that Micro credit has the potential to effectively contribute to the achievement of the Millennium Development Goals as the MDGs focus on poverty alleviation, empowerment of women and development of children.

However, there is skepticism in the air and critics of the Microcredit programmes have a few valid points against the euphoria on the success of Microcredit and its claim to be a tool for poverty alleviation. The celebration is indeed loud and sometimes ballistic in the aftermath of the Nobel Prize being conferred on Muhammad Yunus. The question that the skeptics ask is: At what cost?

First of all, it is the duty of any elected government to take care of its marginalized and the poor people by providing them with opportunities, access to quality education to the children, access to health services and other welfare schemes like old age pension. Putting this burden on the SHGs, especially women SHGs cannot be justified. In this context, the “financial self sustained paradigm” professed by the so called experts is questionable. It is not a right thing to put the burden of development on women

Secondly, there are issues involving the probity and the transparent functioning of the microfinance institutions. The abundance of loans, thanks to the enthusiasm to lend by the banks and the MFIs have led many women into the debt trap. And this is more pronounced in the context of growing consumerism. It is also found that the women end up borrowing money from local lenders at usurious rates of interest to repay the loan.

had the effect of exclusion of those not members of groups, even if they merit coverage. Further, some government agencies are transferring tasks that they should be doing to selfhelp groups without adequate compensation or the corresponding shrinkage of the department.

• Bankers have also found microfinance as a convenient excuse to deny provision of small loans directly to individuals suggesting them to approach the bank in a group mode. Further, the frequent rotation of officers in rural branches of commercial banks (on completion of the minimum rural tenure) has led to discontinuity and uneven quality of the programme.

• In countries like Kenya, when the civil society organizations diverted their attention to microfinance, even if as an add on to their other programmes, it impacted implementation of the other welfare programmes and resulted in an increase in HIV prevalence, as NGOs developed greater interest in implementing microfinance programmes.

• The promised graduation of microfinance clients to micro enterprises has also not materialized even after all these years. Infact, research scholars in this sector have shown that beyond a threshold level of Rs. 50,000 per individual, microfinance borrowers tend to face serious difficulties and in some cases fell back into a situation worse off than what they were prior to enrolling as microfinance clients.

Overall, therefore, it can be concluded that micro finance itself is a starting point for providing access to financial services to those who are at present excluded. It does not offer a long term and sustainable solution to the multi dimensional aspects of the poverty, unless blended with various other support systems including education, health care, social security and equal opportunity. Let us remember the words of Jesus which I have quoted, that the poor will always be there and poverty alleviation will have to be a continuing endeavor.

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Micro Enterprise Development – A Sampada Trust Experience * Anirudha Mirikar

Micro enterprises for SHGs through Entrepreneurship Development strategy he Self Help Group movement is changing lives of women all around the world. Income generation

activities through SHGs have helped many women to become financially independent as these activities often become the major source of income to the family. This naturally increases the status of women in their families, particularly increasing their participation in the decision making process. All this creates the environment for women to come into the mainstream of development. Income generating activities thus are important in this process of leading women towards financial security and eventually, mainstreaming them.

Entrepreneurship Development is very essential if these income generating activities are to be made sustainable. With this in mind, SAMPADA TRUST has taken the initiative of establishing a separate unit for Entrepreneurship Development.

The process of Entrepreneurship Development starts with developing of the entrepreneurial culture among the SHGs. Dr. David McClelland has rightly stated that “Entrepreneurs are not born they can be developed”. Motivation plays a crucial role in the creation of any business activity. It has been observed that “Entrepreneurs are achievement motivated” and developing this drive in a person is possible through imparting training inputs.

We begin by undertaking an area assessment survey that helps to give a picture of all the resources that are available in the area skills available with the entrepreneur, raw material and the outlets in term of markets. Selecting the business idea, product or needed service is a tough job. The perceptual and cognitive framework of the entrepreneur has to be changed if she is to identify market need. Any such need fulfilling activity will prove economically viable in the long run. Knowing basic marketing principles is also a thrust area, which has to be focused upon. Costing plays an important role in the delivery of any product/service. A person who has got core competency in the field will

naturally be able to compete better in the market. The ultimate success depends upon economic transactions in terms of profit and profitability, which ultimately decides the sustainability of the enterprise.

Often, once the enterprise is commenced, the entrepreneurs are left to manage on their own. In reality, the survival and growth of the activity depends upon the inputs received during the actual implementation of the activity. It is thus very necessary to provide noncredit inputs/escort services to entrepreneurs so as to ensure sustainability of the activities. These are the major areas where SAMPADA plans to intervene. The focus will be on helping rural women and the members of SHGs to develop micro enterprises through an Entrepreneurship Development Strategy that includes:

• Development of entrepreneurial culture in the project area

• Start up of microenterprises

• Noncredit inputs and the escort services to the entrepreneurs for a period of 3 years.

• Linkage building with resource agencies as well as inputoutput markets.

Finance is the major constraint for starting any enterprise, as the rural entrepreneurs are often not considered bankable by the formal sector, since many of them are already defaulters.

Though government and bank schemes do exist to provide capital to rural entrepreneurs, it has been found that due to various reasons these schemes do not reach the poor and the needy. There is a basic lack of confidence in poor people’s ability to repay loans. With this in mind, SAMPADA makes available credit support in the form of microfinance to rural entrepreneurs through their SHGs and we are also planning several new financial products for them as well as

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* Manger of SAMPADA TRUST, a sister organization of the Watershed Organization Trust (WOTR), Maharashtra.

for individual entrepreneurs.

Besides women, SAMPADA also plans to focus on the rural youth who are energetic, enthusiastic and hard working and who form a major part of the rural society. A small impetus in the form of entrepreneurship development and small credit to help start income generating activities will go a long way to fruitfully utilize these qualities of the youth and create selfemployment which will greatly improve the quality of their lives.

Microfinance Hand in Hand with Women’s Empowerment

Microfinance (MF) and micro enterprises (ME) plays vital role in helping the poor realize their dreams. Self employment is a basic need of every person in society in order to live a life of dignity. Individuals and institutions in society can share this collective responsibility. Institutional support in the areas of microfinance and micro enterprise development makes a significant contribution to increasing employment leading to socioeconomic enhancement of people in rural areas.

In India, women play very important role in the family and society. If her role and status is further enhanced, speed of rural development will be increased tremendously. Hence there is influx of NGOs, CBOs, and other agencies in the promotion of women SHGs.

For microfinance to be a success, we need to have the strong back up of selfhelp groups/ neighborhood groups. Formation of selfhelp groups (SHGs) is a must in order to facilitate the process of providing credit to the poor. But the SHGs main purpose is not only to route credit but also allied services. Group activities undertaken and issues addressed at a micro level help strengthen the ties between group members and generate a sense of belongingness. SHGs serve as support groups for the poor enabling them to avail of various services and benefits. The main thrust of Sampada Trust is centered on this principle ‘Help people Help Themselves’.

Since an NGO’s emphasis is on poverty alleviation interventions should not only be to promote SHGs, but also sustain them as autonomous bodies while federating them at an apex level. This would enable women to utilize their

collective and solidarity power to fight issues of inequality, injustice and exploitation, at the home, village and wider levels. Sampada’s role is in promotion and formation of SHGs into a vigilant action force Le, a pressure group to voice the opinions of the voiceless, to integrate and link these SHGs to resources available (insurance companies, banks, training institutions) and to identify various income generating opportunities to sustain the activities and enhance growth of the SHGs. As a resource organisation we provide and disseminate necessary information regarding trainings for entrepreneurs (Entrepreneurship Awareness and Skill based Programmes), feasibility and sustainability of the activity, escort services, etc.

We constantly motivate and encourage women in SHGs to move beyond credit and to view credit as only one of the means of empowerment and not an end in itself. The credit activity is seen as one element in an integrated approach of empowerment, while empowerment is viewed as a holistic approach that is influencing all spheres of a woman’s life, such as, her personal life (her fight against physical, mental torture and violence); or the domestic sphere (her decision making ability and control over resources); the political arena (her involvement in the political processes) and the economic sphere (her access to resources and control over her own income). Thus empowerment is achieved when all these aspects of a woman’s life is addressed.

Social Protection through Micro insurance

Sampada operates as a Corporate Agency on behalf of two major insurance companies in order to provide “atthe doorstep” services to women in remote rural areas who otherwise would have no security cover whatsoever. Risk coverage is provided by way of life as well as general insurance. Health insurance is now offered on a pilot basis.


“Microfinance recognizes that poor people are remarkable reservoirs of energy and knowledge. And while the lack of financial services is a sign of poverty, today it is also understood as an untapped opportunity to create markets, bring people in from the margins and give them the tools with which to help themselves.”

Kofi Annan Former UN Secretary General

Can We Look Beyond Microfinance? *Anil K Singh

Does Microfinance help to reduce poverty?

T his seems to be arguable considering the way some of the major Microfinance Institutions are operating/ functioning. Unless Microfinance Institutions understand the true value of microfinance and implement the same at the grassroot level, the fruits of microfinance are bound to have reverse effects even, sometimes. Microcredit should not leave the borrowers in a cycle of dependency or debt trap. Theoretically speaking or if implemented with controlling its side effects, microfinance is a very useful and trustworthy mechanism to reduce extreme poverty and in income generation for the poor.

Microfinance helps to improve the quality of lives of the poor through the provision of financial services because this section of the community must be served by profitable institutions but with social capital. The basic idea is that “if poor people are provided access to financial services including credit, they may very well be able to start or expand a microenterprise that will allow them to break out of poverty.” In the above background, MFIs should function in a transparent way.

However, the role that microfinance is supposed to play in reducing poverty is very small and scattered. The provision of financial services to eradicate poverty presupposes many things. For instance, the provision of credit presupposes that the individual receiving the credit will be able to use this capital in some sort of income generating activity that will be successful. This is not always the case.

Dimensions of Microfinance

There are five major dimensions of microfinance which we have identified in following lines and tried to find gaps associated with each of the dimension:

Implementation Level

At the implementation level, microfinance gets demonstrated by hardcore reality and understanding of the grassroot level.

• Some MFIs tend to charge high and abnormal interest

rates from the borrowers in the name of microfinance for generating profits from them. High rates of lending without its striking balance lead to a cycle of dependency. Then how is the microfinance going to serve its underlying purpose?

• There is no coherence in community mobilization by many of MFIs. Merely assembling the clientele in groups and distribution money in mechanistic ways looses the essence of community mobilization. Is that the microfinance which we had sought to create?

• Some MFIs do charge extra amounts in the name of some or the other fees whether it is even remotely associated with credit. The borrowers had to bear this extra burden. Why should MFIs charge any other fees from the borrowers especially when they are not doing anything extra for them?

• How does the stereotype and unparticipative functioning of MFIs in the conventional way of moneylenders segregate them from being bracketed along with the money lenders?

• How does increasing portfolio volume without having its impact downthe line help in achieving microfinance goals?

• It is true that volume of credit does not have any relationship with the number of people being made free from poverty. Then why there is so much emphasis on volume ignoring the number of people being benefited through it?

• Do MFIs have any forward strategy in own builtup operations towards linking the unorganized poor families with the existing organized formal financial institutions rather than creating a complete Behavioral Dependency Syndrome (BDS).

• Does the existing level of MFIs create a climate of Social Pioneering Pressure Groups with social

* Ashoka Fellow, CEO NEED, Lucknow, Uttar Pradesh


discipline & responsibility?

• Can we understand the difference between too much profit maximization & profit earning with social returns?

• MFIs are intelligently utilizing insurance to protect credit amount rather than trying to give social safety net to the borrowers. Then why should not insurance be devised in such a way as to give the borrowers benefits also?

• As prudently looking into the income generating capacities of Indian villages it is observed that inhabitants have additional surplus incomes in some months when they can clear their debts. Why should then prepayment be all interest for the term for which loan was extended? Why should the borrowers be charged with extra burden of interest? Is not it unethical and unreasonable?

• Similarly, if monthly mode of repayment is most acceptable (both culturally and financially) and suitable in Indian context (particularly the rural areas), then why should the MFIs adopt weekly mode of repayment on the experiences of the Grameen Bank in Bangladesh only? MFIs can cycle their portfolio much faster but the poor borrowers, in return, can never and never at value to weekly mode credit except those whose dominant economic occupation is more based on weekly basis! We often come across from poor friends both from urban and rural slums while working in UP and Bihar that weekly mode was most inconvenient and uneconomic to the poor in comparison to monthly mode of operation.

Support/Collaborating Agency level

There is no relationship/connectivity existing between Microfinance Institutions on the one hand and support/ collaborative agencies (i.e. both public and pvt. including PRI) on the other hand considering that they are treading on the same path of development.

• Should the MFIs be left alone on their pious mission without dovetailing with local existing resources of support agencies?

• Why can not MFI unlock the huge potentialities of resources available with support agencies?

• If there is no coordination or relationship created then what remains the meaning of development?

• There are many untapped ways and means in which such though provoking relationships between MFIs and Support agencies can be developed when both work in the same area among the same people. The target group of people will also understand that these are meant for their upliftment and their motivation levels will also boost up but the question is who should initiate?

• Why MFIs should deliberately work in isolation understanding the ground reality that even a member of village council can stagnate the entire operations?

• Working at the grassroot level with creating benefits for the target people is a challenge for humankind and no ego hassles remain in the way and everybody should be a part of the development process with limited resources at disposal altogether we are supposed to be having. So, there must be a fruitful and meaningful relationship generated between MFIs and Support agencies in every field/sphere and in every region. Why should we be left to wonder and ponder as to why this is not happening?

• In case, the support agencies by attitude, do not want to come forward and have a direct and purposive relationship with MFIs. Should not we find ways and means to beckon them in the path of development?

Financial Institution level

• Many MFIs look and associate with large multinational banks and financial institutions ignoring specifically meant for institutions such as SIDBI and NABARD when they have their specifically created cells with soft interest rates. Why should not MFIs be associated with SIDBI and NABARD compulsorily for the benefits of the borrowers? Why

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NEWS FROM CEVA NEWS FROM CEVA Coordination of Projects

t present 46 projects are being coordinated by CEVA and these projects are supported by Karl Kubel Stiftung, Germany. Three new projects were sanctioned from July to December 2008. Following are the new projects: A

Evaluation of Projects

valuation of the Integrated Community Development Projects (ICDP) implemented by URMUL, Bikaner was completed in 2008. Evaluation of the project Socio Economic empowerment, Tonto implemented by Catholic

Charities has reached the final phase. Evaluation process has been started for two projects viz, Renewable Energy Project, Orissa and Sustainable Development and Resource Management project, Gujarat implemented by Dhara and Jeet Prakash Trust.

Visits of KKS Representatives

r. Ralf Tepel, Executive Director, and Mrs. Barbara Clasen, coordinator of KKS Germany visited CEVA Cochin office

on 11 th and 12 th August 2008. Mr. Tepel also visited CEVA NRO and ERO offices on 12 th and 18 th November 2008 and held discussions with the project coordination team.

Mr. Pattabhiraman, EU Delegation Office Delhi, visited the projects run by St. Joseph’s Development Trust, Batlagundu and PEACE Trust, Dindigul in Tamil Nadu along with Mr. Thomas Westermann from KKS Germany and Mr. Mathew P. Thomas from CEVA from 17 th to 20 th August 2008.

Mr.Peter Welch, consultant of EU, visited SCD Project, Shivani of VIKASANA for Result Oriented Monitoring mission.

Projects Sanctioned in 2008 Name of the Project Implementing Agency

Prevention and Eradication of child labour in Parvathipuram Jana Kalyan Samakhya, Andra Pradesh

Bridge School, Hasssan PRACHODANA, Karnataka

Strengthening of the Children’s and Women socio economical and health condition in Kadanur PRACHODANA, Karnataka

Projects Sanctioned in 2008

Name of the Project Implementing Agency

Prevention and Eradication of child labour in Parvathipuram Jana Kalyan Samakhya, Andra Pradesh

Strengthening of the Children’s and Women’s socio economic and health conditions in Kadanur PRACHODANA, Karnataka

Bridge School, Hassan PRACHODANA, Karnataka

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The project was rated highly and he hailed the excellent coordination of CEVA for the success of the project.

Dr. Boris Scharlowski, Dr. Michel Hollaender, Mrs. Barbara Clasen and Dr. Sigrid Maurer Coordinators from KKS Germany visited CEVA Cochin office on 21 st October 2008 and held discussions with executive committee and the coordination team. Dr. Michel Hollaender and Mrs. Barbara Clasen visited CEVA NRO and ERO teams at Eastern Regional Office on 31 st

October 2008.

CEVA Annual General Body meeting

nnual General Body meeting of CEVA was held on 22 nd August 2008. The patron of CEVA V. Rev. Fr. Jose Panthaplamthottiyil inaugurated

the meeting and addressed the gathering. Annual Report and Accounts of CEVA for 20072008 was presented. Members of the board of directors for the term 2008 to 2011 are: Mr. P.J Ignatius, President; Fr. Austine kalappurackal CMI, VicePresident; Fr. Varghese Kokkadan CMI, Moderator; Fr. Joy Vattoly CMI, Secretary cum Treasurer; Dr. G Antony; Mr. M.P. Antony; Fr. Joshy

Thadiyananickal CMI; Fr. Jose Payyappilly CMI; Fr. Mathew Kiriyanthan CMI; Sr. Mrudula S.D.; Sr. Subha Maria CMI; Mr. George Kadankavil; Fr. Jose Koolipurackal CMI; Fr. Winson Moyalan CMI; and Rev. Fr. Thomas Koottiyaniyil.

Ms. Mary Liya joined in CEVA as Project Officer on 1 st August 2008 in the place of Ms. Bindhu Mathew. We gratefully acknowledge the contributions made by Ms. Bindhu for CEVA and we wish her all success for future.

Major Project Holders’ Gettogether 2008

EVA NRO and ERO organized the annual project partners’ meet at Hotel Palms , Jaipur on 26 th and 27 th August 2008. Twenty Nine

participants from 15 NGOs took part in the event. Rev. Fr. Dominic Thomas, Regional Secretary, CEVA, NRO inaugurated the Get Together. The event concluded with a sight seeing trip. It was organized in two groups, while one group visited Ajmer, the other visited the important places in and around Jaipur.

The major project holders’ get together of South Indian partners of KKS, Germany and CEVA was held at KKID, Coimbatore on 24 th and 25 th October 2008. Thirty two participants from 21 partner organizations participated in the gettogether. Dr. Boris Scharlowski, Head of the Department, Development Cooperation, Dr. Michel Hollaender, Mrs. Barbara Clasen and Mrs. Sigrid Maurer, Coordinators, Development Cooperation from KKS Germany were present during the gettogether. Dr. Michel Hollaender took an input session on ‘Improving Reporting Standards (KKS – Requirements of Project reports: Joint Quality Standards)’. Mrs. Barbara Clasen took a

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session on the ‘New Developments in Accounting Local Contribution’. Dr. Boris Scharlowski, took a session on ‘Child Protection Policy’.

An input session on ‘Perspectives and Challenges in SHG Management and Revolving Fund’ was held and Mr. Jayachandran was the resource person for the same. There were panel discussions on ‘Watershed Management and Environment’ and ‘Children and Education’. The seven major project holders, who will be finishing the project implementation by the end of year 2008 and beginning of 2009, presented their strategies adopted for the sustainability of their projects. The gettogether concluded with a general discussion.

CEVA’s Day Out

taff of CEVA Kochi, along with some of the executive committee mem bers of CEVA went for a one day trip to Azheekodu Marthoma Pilgrim

centre, Njarakkal Fish farm and Vallarpadam pilgrim centre. It was organized on 2 nd of September 2008.

Onam Celebrations in CEVA, Kochi

EVA, Kochi staff celebrated Onam the state festival of Kerala on 9 th September 2008. The staff members arranged a floral carpet. The

celebration was graced by the presence of the Vice president of CEVA Rev. Fr. Austine Kalapurrakkal and the president Mr. J Ignatius.

Christmas Celebration in CEVA, Kochi

he Christmas celebration at CEVA, Kochi was held on 23 rd December 2008. The executive

committee members of CEVA participated in the celebration. This celebration was graced by the presence of the Moderator of CEVA, Rev Fr. Varghese Kokkadan. Carol singing, cake cutting, and Christmas party games were part of the celebration. Santa Claus offered gifts to all the participants.

Training on Microfinance

EVA NRO & ERO organized a three days training programme on Microfinance along with its major project NGO partners from 28 th September 2008 to 1 st October 2008 at Hotel Arif Catsles in Nainital, Uttarakhand. There were


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about 20 participants from different partner NGOs of CEVA from places like Chitrakoot (M.P.), Kanpur (U.P.), Bhopal (M.P.), Pratapgarh (U.P.), Devghar (Jharkhand) etc.

Resource team was led by Mr. Anil Singh, CEO of NEED, Lucknow. The participants were enlightened on the concept of Microfinance as the right choice to alleviate poverty, legal framework of MFIs, existing provisions and constraints in India, Microfinance and Organizational Development etc. It was concluded with a short sight seeing trip in Nainital.

Kavach Project

he Kavach project which has been awarded with golden status focuses on preventive and curative aspects of HIV/AIDS. The project aims at

restricting the spread of HIV among the truck drivers and the associated high risk population. This project is supported by TCI with financial assistance from the Bill and Melinda Gates Foundation, and started in 2005. Being judged as one of the best implementing agencies, CEVA NRO has organized various health camps, truck utsav, outreach activities by involving corporate workforce of BPCL and JCB, and various community awareness programmes during the last six months.

National Child Labour Project

he Project run by CEVA NRO has completed three years and has three schools under its operation, two in Loni and one in Khoda. The

schools run by CEVA are considered among the best schools for child labourers. During the last six months the Labour Comissioner, Kanpur Shri Sita ram Meena and Deputy Labour Comissioner Shri Ram Singh made a visit to the schools and appreciated the activities of the school.

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Visit of Donors

rs. and Mr. Bernd Wahler and Mrs. & Mr. Hubert Schumacher visited Udaan Project of Right Track, Kolkata, Women Empowerment

for Child Labour Eradication and Rehabilitation project of Chaitanya Bharathi, and Jana Kalayana Samakhya along with Mr. Soumendra Roy and Mr. Anoop Jacob, project officers of CEVA, from 27 th December 2008 to 5 th January 2009.

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do not MFIs harness cheap funds available through indigenous institutions?

• Why can not we together pressurize the policy officials of formal financial institutions to land money through MFI and thereby let MFI act as bridge organization between the Scheduled/Regional Rural Banks and poor section of communities.

• Can we humanize the behavior of formal financial institutions in their delivery efficiency?

• Can the resources/opportunities available with financial institutions deharnessed at local level with the view to create a modal cluster for its replication in wider area.

• The northern region, especially the most largest and poverty stricken state like Uttar Pradesh demands a very smooth and fair value of capital flow (both credit and grant) towards pulling the poor people out of the shackles poverty.

• Financial Inclusion as an important organ of inclusive growth requires not merely credit and saving but with full range of goods of services and technology.

• BC and BF, as per the RBI circulation are largely on the paper and we as MFI meet to come together for harnessing its advantages towards reaching the unreached.

• Why can not Financial Institutions are pressurized for their broader investment like infrastructure, productivity driven technology both on agriculture and fast growing nonagri. sector in the rural areas.

• Why can not financial institutions create their professional cadre at their own for rating the MFIs directly rather than through conventional rating agencies especially when some of them do not even understand the functions of SHG, JLG?

Capacity Building

Microfinance is a blessing in disguise for the rural masses,

if properly directed and the energies are stored. We would

have to understand that the rural masses are no less enterprising and capable of managing their enterprises than the big industrialists and business tycoons. They have the wit and the courage and are prone to risk taking. They have the potential to venture into microenterprises and income generating activities through microcredit through capacity building. Simultaneously, we need to bring the capacities of the staff of MFIs with the help of everyone associated in the field to the level of efficiency and efficacy.

• The real brigade of any MFI is the team working down to the line (such as LSAs, Unit Heads etc.) and therefore, what is the use of too much English language driven manuals, symposium, conferences, workshops and many more such interventions if they do not understand nor they adopt into their daily routine who works at grassroots level. Why can not therefore, have the user friendly ways of capacity building i.e. local language.

• Too much jargon with making simple in terminology factures the basic learning drive of microfinance worker.

• To NEED experiences, hand holding way of capacity building (like BASIX Hyderabad though it is bit costly) is the only and only best way to develop the actual capacity.

• Why should not MFI look beyond credit, in areas like combating IMR MMR and many basic fundamental that our poor friends are, for centuries, are facing, such as education (with functional approach), safe drinking, sanitation and better environment including demystification of several economic and other issues.

• To the experiences of NEED, several and several schools, in the villages are being run wonderfully by the support of its microfinance, many houses are installed with safe drinking kit by its microfinance, the burning issues of reducing IMR and MMR are almost at minimum level in several villages by its microfinance and many more such human driven


• Micro issues like Intellectual Property Rights for their traditional knowledge, product, and wisdom including its patenting are being taken up in NEED by its micro finance services.

• The poverty being very diverse and complex correctors, microfinance with mere credit operation can never eradicate a complex poverty shackled with the poor people for centuries. Only credit driven microfinance is just like adding a drop in the ocean.

• Does MFIs ponder over for a while with regard to providing opportunities for livelihood and vocations through microcredit? It is a moot question. Does the liability of MFIs end with provision of micro credit? Should not MFIs come forward and remove the hindrances and obstacles to create micro enterprises for the youth and the women alike? Capacity building is the solution.

Policy and advocacy

There are number of conferences, workshops and seminars held time and again for microfinance. There are policy level meetings to give direction. But there needs a lot of force driven efforts in policy and advocacy and we can not leave it to the mercy and pure will of a few. Can we not take the voice and verbs from the poor masses by way of having their direct involvement rather than limiting to only MFIs?

• Microfinance does not happen in a big star of hotel (once in a while is okay but not every time) located at metro city. The actual challenge lies at the grassroots level wherein a member of village council can logically stagnate the entire operation of microfinance. Why can not therefore, such programmes be held at grassroots level across the country.

• Networking organization in the name of MFI are nowhere having any stronger connectivity at state and district level machineries, why can not we request to stop organizing such meets at metro level and request them to come down to the line?

• Networking organization with prime focus on advocacy and policy watch has nowhere been successful in percolating down any positive impacts at grassroots level of microfinance operation.

• Why can not such organization be encouraged to spend their professional time, energy and resources at field level rather than having a fancy way of organizing such meet with huge gathering wherein it becomes only speakers driven agenda, it is extremely and extremely discoursing and painful to experience it for last several and several years.

• How many state policy officials, district authorities and many such stake holders are aware of microfinance? In case they are to some extent, it is not due to the effort of networking organization of MFI but it is primarily due to the local microfinance credentials and connectivity

• Such networking microfinance driven organizations need to learn bottom up approach.

• NEED has a much focused interventions what we call it GRANITE (Grassroot Reachout and Networking in Trade and Economic in India). It is through GRANITE, NEED has been able to glow up many issues related to propoor right from district to state and even at central level. For example, National Foreign Trade Policy (NFTP) launched first time in the history of India is being currently taken up to be understood and tuned its policy more from propoor driven manner.

• Are the conferences, seminars and workshops serving the true purposes? Should not the huge amount invested for such purposes are directed to achieve the goal of serving human kind through microfinance? Let us therefore, pull out some part of energy, time and resources from these heads in order to have the similar intervention but at state or grassroot level only.

My vision for the future? Two things: to make credit a human right so that each individual human being will have the opportunity to take loans and implement his or her ideas so that selfexploration becomes possible. And second: that it will lead to a world where nobody has to suffer from poverty a world completely free from poverty.

Muhammad Yunus Nobel Peace Prize Winner


he Gospel of Micro Credit has become the part & parcel of the global legend of development. The word

“Micro Credit” has become a buzz word and a magic wand to get rid of all poverty around. The MICRO CREDIT SUMMIT held in Washington in February 1997 “marketed” the idea of Micro Credit as a viable & efficient means for Poverty Alleviation. As an idea, it is a productive instrument. But certain Myths created by certain powerful lobbies regarding the micro credit need to be demystified in order to save it from becoming a “Micro Mess or Macro Mess”.

Certain Macro & Micro Credit Myths

1. One time credit accessibility:

• It is advocated by the financial institutions controlled by the Global North, the powerful financial pundits of TNCS and the Lobby of Finance Consultants who thrive on certain models that poverty reduction can be & should be realized only by the Micro Credit. Our grass root experiential insights have thrown some light on this aspect. One time credit accessibility to the poorest participant can’t solve the deep rooted vicious cycle of poverty at one stroke. The poor participants need to be “accompanied” by the Group or NGOs or the Agent till certain levels are reached by the poor.

2. “Pumping Intensive capital” as the end:

• It is also stated that pumping the “Intensive Capital” into pockets of the middle class & poorest may resolve the poverty issue”. We feel just the opposite because poverty is the result of combined integral factors such as psychological, social, educational, economical, political, environmental, religious etc. It can be said that the capital is one of the “required means” to achieve the end of poverty reduction. It can’t be the end by itself.

Is Micro Credit a Micro Mess or a Macro Mess in the context of Poverty Alleviation?

*A Susairaj Introduction 3. Other Myths:

• Exaggerated opinions have been inflated that only “Macro technological planning, high recovery rates, Mono Models, linkages building, adhering to too many rules, only by formal groups, performance to credit functions will result in poverty reduction”

• Because the technologies need to be very much related to people & address to the specific needs of the people. They have to be culturally localized. Hence they are primarily micro leveled. From micro level, they will be replicated into Meso and Macro levels with certain mutually accepted adoptions.

• Singularly credit programmes and performance to credit functions alone will not bring about poverty reduction because poverty is related not only to credit functions but also to noncredit functions such as relating to health, hygiene, social, economic, political & spiritual literacy, education, family planning, infrastructure development, etc.

• High recovery rates do not guarantee poverty reduction. For, the women’s priorities under the public scanning are different. Recoveries are realized due to social peer group’s pressure and “gendered public image of the Good Family” among the women.

• Mono Model as antithesis to development: Mono cropping is not good for organic sustainable agriculture. It is the market force that engineered monocropping at a great loss of livelihood & survival needs of the poorest. In the same way, monomodel in development sphere is not conducive. It is the anti thesis to sustainable development. Model can’t be enforced upon, since model does have positive & negative aspects.

* Director of KRWCDS, Karwar, Karnataka

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• Poverty reduction may not be realized mechanically or automatically. Poverty dynamics needs to be studied critically. Poverty can be classified into many categories such as poorest, poorer, poor, middle class or the extreme poor, the moderate poor and the vulnerable nonpoor, poorest of the poor, the core poor, even the hard core poor. Their specific different levels require different participatory strategies, such as survival level, necessities level, maintenance level, asset creation level, crisis management level. Accordingly credit needs to be organized such as consumption loan, social loans, productive loans, asset creation loans, insurance coverage, emergencies coverage, natural calamities coverage, institution building coverage, diversification needs coverage, old age coverage, widows’ coverage because “Poverty is software as well as hardware related”. Hence software and hardware skills need to be imbibed among the poorest participants.

• Linkages building with financial institutions alone may not bring about poverty reduction, because the linkages building should be based on mutual respect, equality, win & win situation, bargaining spaces, participation in policy & management decisions. In practice, it does not happen due to multiple factors such as “Ego Complex”, institutional approach. “I am ok & others are not ok attitude”. General lack of commitment to go to the people and to their levels, excessive politicization, poor leadership at the bank & unrealistic credit norms set by the Government.

• Only by Formal Institutions : It is stated that poverty reduction may be realized only by formal institutions and not by informal groups. Self Help Groups (SHGs) approach has proved the contrary.

• It is publicly opinioned that single institution can bring about poverty reduction. We do feel that the needs of the poor are varied and a single institution can’t fulfill all the demands of the poor. Microfinance offers only a limited solution to the multiple problems of some sections of the poor.

Micro Credit & the Markets:

• Micro Credit has been legitimized by certain market forces as an effective means to open up markets by credit netting process. In this process, the developing countries are forced to open the domestic markets, natural resources, industrial sector and development policies by making consumerism as the driving force and logic. This had resulted in a situation where many of the third world nation states have become “bonded laborers”. At first sight, the middle class, then the vast majority of the poorest have been targeted to expand & to penetrate the markets into the lower economic social strata. It is the TMC Pundits and the Lobby of Financial Consultant who set the Agenda for the micro credit. It is being thrust upon the less privileged class without the empowerment of the people and their long term community well being. In this context professionalism and skills for service delivery are very much focused upon. Development is treated as a business – a profitable business by successful social marketing strategy. Micro credit in their hands embodies this basic shift. This shift treats the poorest women as credit worthy. Profits are generated for the institutions through repayment mechanism – the poor get the credit and the bank makes the profit.

A myth is created “to sell a Neoliberal market oriented ideology of development”. It is not the best medicine for the existing structural Exclusion, Deprivation & Discrimination disparities. Hence our conclusion is that the Institutional development and Financial viability of an institution do not necessarily lead to economic & social viability of the poorest and consequently of the wellbeing of the communities.

• The basic attitudinal change within the micro institutions like family, self help groups, local communities and Panchayats will eventually lead to large pattern of social development. This will be a slow process. Outsiders cannot speed up the localized process in the name of facilitative interventions.



• Conceptually sound rationales are not enough. They need to be complemented by the participatory grass root process and practices.

• At present, the output of development is measured by “highly deceptive quantitative scale” like GNP & GDP. The poorest reached a stage to measure their own development in more pragmatic and practical terms. They do become “grass root professionals” in their own ways to measure their poverty with their identified indicators.

• “We cannot canonize certain monolithic financial institutions as the new apostles of development”. Models should be inclusive not exclusive.

Conclusion

• In fine, if Poverty Reduction is to be more substance than mere procedures, then it must mean more than the one time credit accessibility, periodic exercises of just repayment, refinance, intensive capital pumping, etc. It must be a continuous process of discovering their social economical and political spaces by themselves in relation to others and to take up challenges of ownership management, accessibility, affordability, control over power centres and resources development policies. There can’t be quick fix approaches to Poverty Alleviation as desired by the many external market expansionists and market oriented Lobbies.

• Micro movement created at the grass root levels must be ensured by all of us to go beyond a Micro mess or a Macro mess. For, Poverty Alleviation has an “underlying constitutional philosophy which seeks to represent a synthesis of the urges and aspiration of “society and a quest for the good of all and for the beautiful”. Its aim is to the greater good. In a way, it is the outcome of man’s ageless struggle for a brighter morning”, to transform situational and structural status of the poorest neighbors in Need and in Deed

In the personal development front, there is no monitoring system available to see whether these women are overburdened with the new found or expanded activities along with the household chores. Any attitudinal change in the social behaviour of men is yet to be measured.

Another major question that is being posed before the civil society organizations is that whether they are including the poorest of the poor in their Microfinance programme? To tell the truth, the ability to repay the loans is still a criterion that is insisted by many NGOs to form the groups. At present, there is no comprehensive poverty assessment that is being done to say that these women who were selected for MF programme include the poorest of the poor also.

Conclusion

So far the micro credit programmes through self help groups (SHGs) have evoked mixed reactions and responses. There are two divergent views: One being the ardent supporters of the programme who celebrate the victory of micro credit programme. On the other side are the trenchant critics who fail to see anything positive in the programme. While making a conclusion one has to exercise caution. There are very few balanced impact studies done on this programme; the available micro level studies are inadequate to come to a conclusion. Hence it is not fair to generalize.

Nevertheless, it is safe to conclude that there are changes, especially in the rural areas where women are more visible and mobile. Only a thorough study based on the baseline data and the present situation can tell us how far the micro credit programme has succeeded in alleviating poverty. This is not to deny the potential that the programme has to achieve this end.


Some Institutions practice Microfinance Accion International ACDI/VOCA Enterprise Development International Five Talents International Grameen Foundation Microcredit Summit Campaign Microenterprise Access to Banking Services Tameer Microfinance Bank Ltd World Council of Credit Unions SKS BRAC

* CEO Centre for Development Alternatives, Chennai

nternational agencies focus to reduce poverty by half by 2015. Our own poverty alleviation strategies and

programmes are three decades old. The battle of poverty eradication is long drawn. On the one side, we are brimming with confidence about the accelerated economic growth and the resultant reduction in the percentage of households below poverty line. On the other we have the alarm by UN agencies about the large chunk of poor accounted in India and China. The solving of poverty puzzle largely lies in the level of understanding the true meaning and extent of poverty. The caution by Mr. D’souza; Scholar of peace fellow; with Women in Security, Conflict Management and Peace resounds the same. He says that the first and the foremost step in eradicating poverty is to understand what it means and how many are poor? So let us try to assimilate the varying definitions of Poverty so that we can be well equipped to handle it.

Poverty in simple terms, is a state in which an individual, group or population lack essential elements of life within their society. These usually connote the lack of food, clothing shelter and health care or the lack of financial means to obtain them. It also includes tangible problems like social exclusion, fear, dependency, lack of education, lack of voice, no land, no credit, inability to participate in society and political spectrum. • World Bank defines poverty line for developing

countries is U.S.$1 per person.

• Indian Govt. defines poverty on the basis of the cost of consumption of 2400 calories (rural) 2100 (urban), and it was defined in 1973 – 1974 by Lakdawala Committee.

• In the 8th, 9th, 10 th plan, Govt. of India used different criteria to define poor.

• Income was the basis in 1992

• Consumption was the basis in 1997 (Money required to purchase food to gain this nutritional

level. 10 th plan used a 13 point scale, which was stuck down by the Supreme Court for the limitations of the household survey questions.

• The poverty line (200405) for rural areas: Rs.356/ monthly per capita expenditure, Rs.458/ for urban areas, and using this line, poverty population is 27.5%.(This calculation did not include the costs relating to shelter, clothing and transport required for a person to survive).

• The UNDP Capability Measure (CMP) is calculated on three factors namely, percentage of children under 5 who are under weight, percentage of births unattended by trained health workers, and adult female illiteracy. On these three counts, Indian poverty line is 61.5%.

The planning commission has appointed the Tendulkar Committee, two years ago, to come out with State specific poverty lines. The committee is yet to submit the report.

Critically if we look at poverty, we can define it in both respects: One is personal poverty, where an individual lacks in income. The other is the community poverty, where a community is deprived of wealth (assets, infrastructures, utilities and services). Again the analysis of the causes of poverty reveals three vital causes of poverty: economical, social and political. The much talked about Micro credit/ Microfinance approach is about providing access to credit, on the assumption that the non availability of money is the primary cause of poverty. This may be true in the case of personal poverty where the lack of income is the primary cause. Even here, the person’s skills, experience, work culture and opportunities are also critical factors to effectively use the credit.

Poverty is concentrated in rural areas and lagging states where the community members are staggered and stumped. Poverty incidents are high when the turnover of the cash is controlled by a few in the local economy.

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Poverty Alleviation and Microfinance *Jayachandran


A Place has been Established for Women *A. Lawrence

Introduction


icrofinance plays a vital role in the development of the poorest of the poor and marginal families to

overcome from the poverty. This has eradicated many powerful people who were enjoying the earnings of the poorest of the poor for a very long time. Though the poor people had joined community based institutions, their credit needs were not met and they were not raised to the level of self reliance. The members of the SHGs took loans from the groups, but the loans they got from the groups were not fulfilling their needs. They were trapped by the high interest loans from money lenders or chits. They could not free themselves from that burden. This was also one of the reasons why the SHG members could not develop on their own and also they were unable to attend the regular meetings and trainings organized.

REAL had done one year analyses why the SHGs are defunct and not functioning and the members of the SHGs were not able to stop getting credits from the outside. Based on interactions with the members of the SHGs, REAL found that the members of the SHGs who are the poorest of the poor could not get adequate credits from the groups and often they got only one loan at a time. The urgent need would not be met by the concerned SHGs because each SHGs had only a minimum common fund to provide credits to its members. Based on the findings of the study, the micro credit system has been introduced through federation approach. The basic concept is to provide a powerful place for the women who have credit worthiness and leadership qualities.

Micro Credit Federation:

The federation was started with 68 SHGs (1210 members) at Marakanam and Vanur blocks in Villupuram district of Tamil Nadu in the year of 2006. The federation has been registered under the Trust Act and developed the yearly micro credit plan for each SHG. It also concentrated on SAP and CAP programs every year.

Objectives:

• To provide credit for the landless marginalized people for their Income Generation Programs • To change the life style of the poorest of the poor

and improve their economic status through a livelihood programme.

Problems Confronted:

As part of the Tsunami rehabilitation REAL had provided Income generation programs to 17 women SHGs in 17 second line villages’ to restore their livelihood. The income generations had provided very good result and many of the SHG members restored their livelihoods and repaid their loans to the SHGs with a minimum interest.

A few SHGs regularly collected loans from their members and they did not know what to do with that huge fund. The huge common fund had created many problems among the SHG members. At the same time REAL also had done the credit assessment in the existing areas where the SHGs were not functioning properly due to insufficient common funds to fulfill their financial needs and other problems. This helped the REAL team to find out the causes of the problems. SHGs were invited for consultation on the prospects of introduction. This consultation provided a good base to form the microfinance federation in this region.

Based on the consultation, the SHGs decided to repay the grant to the federation, the money which they got from REAL for the restoration of the livelihood. They also suggested that the Microfinance federation should maintain the micro credit activities of Marakanam block. The main condition was amended that the federation should consult the concerned SHGs while fixing the repayment schedule so that the burden of the SHGs as well as the particular families would be reduced. Based on this criteria, the federation collected Rs 34, 83,966/ from the SHGs.

Criteria of Loan Processing:

• Three members from each SHG should participate in the federation meeting every month.

• Based on the micro credit action plan, the concerned SHG should submit the application to the federation for the micro credit loans.

• The loan processing committee of the federation would scrutinize the application based on the criteria

* Director, REAL, Puducherry

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Catalyst Volume VII, Issue 1 For Private Circulation Only

Editorial Board: Fr. Joy Vattoly CMI Fr. Dominic Kunnumpurath CMI Ms. Mary Liya K A. Mr. Subodh Tandon Dr. G. Antony Mr. Aboobakkar

Published by: CEVA CEVA Bhavan, Monastry Road Karikkamuri, Cochin, Kerala Pin 682 011, India Phone: 04844070225228 Fax: 04844070225 Email: [email protected]

Regional Offices: CEVA Northern Regional Office Mariam Nagar, Meerut Road Ghaziabad, U.P.201 003 Phone: 01203242777 Fax: 01202870902 Email: [email protected]

CEVA Eastern Regional Office C/o CMI Dharma Niketan 1/1 Bonamali Ghosal Lane Behala, Kolkata, W. Bengal700 034 Phone: 03332582163 Email: [email protected]

The views expressed in this publication are those of the contributors. They do not necessarily reflect the views of CEVA

Visit us at www.cevaindia.org

However, in spite of its shortcoming in terms of stagewise capacity building, SHG approach to poverty alleviation attempts to addresses all the three causes of poverty, by providing a platform to socially mobilize, economically by mobilizing its internal resources (savings) and using the above two process to gain a political space (set goals, interact and make collective decisions).The internal lending mechanisms and the resultant arresting of cash drain in the form of high interests to money lenders has favourably increased the cash flow within the community which is a first step to boost the local economy.

It is in this context, Savings and credit operations in SHG setting is gearing towards poverty reduction. But this is only a first step. The next is the conversion of accumulated savings as the investment for livelihood which requires a different mindset for the NGOs. Since NGOs mandate is for change we hope that they too opt for a change in the way they think, work and forge ahead.

which should be followed by the SHG. They would recommend to the executive committee.

• The executive committee would approve the same

based on the recommendations of the loan processing committee and the concerned SHGs position.

The MicroCredit programme had the following results:

• 12 houses have been built through loans availing from the federation

• 29 acres of land have been purchased for five families

• The federation has earned an income of Rs.3,19,987/

• 48 members have been relieved from the shackles of the bonded labour.

• 16 OAP applications were forwarded to the Government to avail the Government benefits

• General insurance has been covered for 277 members.

• Flood relief was provided for 291 families.

• 200 women have been benefited through dairy development.

• 208 women assisted with financial support to start their small business and income generation projects.

• 35 SHG members got profit of around Rs.75000/ by involving in crop cultivation

• Green fodder is cultivated in 5 acres of land



microfinance and poverty alleviation

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