microfinance.pdf

MICROFINANCEAN INSIGHT INTO THE WORLD OF MICROFINANCE W O R L DCOMPLIMENTARY WITH THE FINANCIAL EXPRESS APRIL-MAY-JUNE 2010

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‘WE AIM TO MAKE ASIGNIFICANTDIFFERENCETO RURALLIVELIHOODS’INTERVIEW | DR KG KARMAKAR,MANAGING DIRECTOR, NABARD

‘WE AIM TO MAKE ASIGNIFICANTDIFFERENCETO RURALLIVELIHOODS’

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With Profit Endowment plan In-built Accident BenefitIf at least two full years' premiums have been paid and any subsequent premiums are not paid, full death cover continues from the date of First un-paid premium for a period of two years. Min/Max Age at entry -18/60 yrs

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Min/Max Policy term 5/15 yrs

Min/Max Risk Cover Sum Assured

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Micro Insurance :

Term assurance plan with return of Premiums paid on Maturity.Accident Benefit Optional / available as a riderMin/Max Age at entry -18 /60 yrs

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Min/Max Risk Cover/Sum Assured Rs.10000 / 50000.

Mode of premium payment Single/ Weekly/Fortnightly/ Monthly/Qly/Half-Yly/YlyMaturity Benefit: Return of all Premiums paid (excluding Accident Benefit Rider premium and any other extra premium)Death Benefit: In case of death under natural circumstances, Basic Sum Assured will be payable. In case of death due to accident an additional amount equal to Basic Sum Assured is payable, if Accident Benefit rider is opted for.

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Micro Insurance :

Jeevan Madhur

Insurance is the subject matter of solicitation

www.licindia.inEmail : [email protected]

Jeevan Mangal

[EDITORIAL]

“'We aim to make a significantdifference to rural livelihoods'Interview—Dr KG Karmakar,managing director, Nabard

Livelihood through SHGsDr S L Kumbhare & Rashmi Darad

"Credit is a necessary but notample condition for livelihoodpromotionVijay Mahajan, chairman ofBASIX

Green livelihood support viaUPNRM-a Nabard initiativeDr D V Deshpande

Hirbaiben Lobi, an icon of women's empowermentJulius Machado

The Mission Shakti approach in OrissaDr. Pitabasa Sahoo

A new form of empowerment to support livelihoodAloysius P Fernandez

Hoping for a better lifeKumud Das

Microfinance: The ADB experience in NepalMayumi Ozaki

A powerful tool to pull the poorout of povertyNarendra Modi

MICROFINANCE WORLD | April-May-June 20104 April-May-June 2010 | MICROFINANCE WORLD 5

[CONTENTS]

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CONSULTING EDITORMONALISA SEN

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MICROFINANCE WORLDThe Indian Express Limited2nd floor, Express Towers,

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MICROFINANCE in India is no longer confinedto sleepy hamlets in inaccessible interiors, butis a fixture in the global debate on poverty alle-

viation and women empowerment. What began as babysteps by committed individuals, driven more by com-passion than money, to help out the poorest of the poorand the underprivileged has now entered level 2.0 withthe movement’s lead player, SKS Microfinance, reveal-ing an Initial Public Offering plan recently. Though theSKS adventure also raised international concernsabout the ethics of profiting from the poor—and drewsome bad press at home—a very wide spectrum of insti-tutional investors, both Indian and foreign, is lookingto join the envious march of India’s microfinanceindustry. Today India has over 6.1 million self-helpgroups—the world’s largest—touching the lives ofalmost 86 million.

All along, away from the limelight, playing the silentrole of enabler for this industry was the National Bankfor Agriculture and Rural Development (Nabard),which, fittingly, is the sponsor of this edition. In thisissue, we carry an ensemble of inspiring stories of howHirbaiben Lobi has empowered the Siddi women ofGujarat’s Junagadh, self-help affinity group Soukhyahelp ex-sex workers make new livelihood strategies,government’s Mission Shakti programme created over387,000 women self-help groups in Orissa and howNabard’s Umbrella Programme on Natural ResourcesManagement would care for the poor and Mother Earth.An edifying interview by Dr KG Karmakar, managingdirector, Nabard and an essay by Dr SL Kumbhare andRashmi Darad lend greater insight into the working ofIndia’s microfinance industry.

Enjoy reading the issue!■ MONALISA SEN

Consulting Editor

Dear Reader,

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Dr KG Karmakar managing direc-tor , Nabard, born in 1952, holds adoctorate from the Jamnalal BajajInstitute of Management Studies,Mumbai and a post graduate degreein financial management. Dr Kar-makar has penned over 60 articles onrural credit and development bank-ing. He has also authored six pioneer-ing books, including agriculturalproject management for banks, ruralcredit, microfinance and SHGs andThe Silenced Drums in Tribal Devel-opment. For over 34 years, he hasserved with various banking and fi-nancial institutions including theState Bank of India, Reserve Bank ofIndia and Nabard and is a specialistin agricultural credit, micro credit,project management, rural infra-structure development and corporateplanning. He is also finalising his sev-enth book on Financial Inclusion inIndia. He has also prepared three ma-jor reports to the government of In-dia/RBI relating to the high poweredcommittee for financial restructuringof handloom weaving industry, work-ing group on outreach of institu-tional finance and co-operative re-forms, “XI Five-Year Plan (2007-12)—

December 2006 and Task Force onEmpowering Board of Directors ofRRBs – January 2007

The SHG-Bank LinkageProgramme which waslaunched by Nabard in 1992has made spectacular expan-sion during the last 18 years.What according to you is thefuture of the programme?

The SHG-Bank Linkage Pro-gramme is a saving led credit deliv-ery mechanism for financially ex-cluded persons which was chiseledinto a business proposition forbanks through the efforts of Nabard,policy support from the ReserveBank of India and the field expertiseof NGOs. Having said that, we ac-knowledge the role played by our

partner NGOs, and other SHG-pro-moting agencies like RRBs, DCCBsand Farmers’ Clubs in nurturingSHGs upto the bank credit stage andhand-holding. Since 1992 Nabard isfacilitating the programme with pro-motional grant assistance for nur-turing SHGs and training and capac-ity building for stakeholdersincluding SHGs. CumulativelyNabard has supported the promo-tion and credit linkage of 2,06,040SHGs (as on 31 March 2009) provid-ing promotional assistance ofRs 32.75 crore as on 31 March 2009.This is approximately 6% of the32.47 lakh non-SGSY SHGs whichhad loan outstanding with the bank-ing system as on March 31, 2009 andgoes to show that the growth of theprogramme is self propelled and de-mand driven. Nabard has been sup-porting initiatives for an equitableexpansion of the programme in afew resource-poor states with a dis-advantaged distribution of SHGs.However, the focus of the pro-gramme for the years to come will beon maintaining and improving thequality of SHGs to ensure their sus-tainability and enabling their grad-

MICROFINANCE WORLD | April-May-June 20106

[COVER STORY]

INTERVIEW | DR KG KARMAKAR, MANAGING DIRECTOR , NABARD

‘We aim to make a significantdifference to rural livelihoods’

Livelihood programmesrequire huge investments

in capacity building, accessto markets and technologyand government support

for social security

uation to micro-enterprise promo-tion. Of late we observe that com-mercial banks find it easier to lendhuge sums to individual MFIs as ithelps them in achieving priority sec-tor lending targets and this has ham-pered the progress of the SHG - BankLinkage Programme. The high in-terest rates being charged by theMFIs is being ignored by the banksand is not in the interests of thepoorer sections of rural society whoare SHG members. Also multiplemembership of poor women inSHGs and taking up multiple loansfrom SHGs, have led to repaymentproblems. These issues need to besorted out at the earliest.

Several SHGs have maturedand are participating in theLivelihood Programmes. Whatis Nabard’s experience in

implementing LivelihoodProgrammes centred aroundSHGs?

There are a substantial number ofcredit-linked SHGs that are overthree years old and stabilised intheir credit and savings operations. Itis necessary that members of suchSHGs be encouraged to scale up In-come Generation Activities and di-versify their income earnings. ManyNGOs are trying to promote microenterprises among SHG membersbut as their marketing abilities,skills and experience are rather lim-ited, some hand-holding or trainingis needed. The critical constrainingfactor, besides the low level of appro-priate skills, is that SHG membersface a lot of problems in appropri-ately marketing their produce.There is a need to evolve a methodol-ogy for promoting micro enterprises

to create livelihood and employmentopportunities among SHG members,besides imparting relevant financialskills and developing their risk-tak-ing abilities. In this direction,Nabard had initiated a pilot projectin nine districts across nine statesthrough professional marketingagencies. Though the project didshow encouraging results, it was ob-served that there was a general pre-ponderance towards farm sector ac-tivities and products for localmarkets. There is a need to reviewand upscale such efforts. However, itneed be said that not every SHGmember can be an entrepreneur anda sizeable number of such people arebetter off as wage earners as theyhave no risk appetite or initiative tobecome entrepreneurs. Thereforelivelihood promotion efforts includethe need for enhancing employmentopportunities in rural areas.

SHGs experience various diffi-culties in getting market accessand other support services forpursuing livelihood activities.How can the difficulties ofSHGs be addressed?

Livelihood finance is a compre-hensive approach to promoting sus-tainable livelihoods for the poor thatincludes financial services, agricul-tural and Business DevelopmentServices (BDS) and institutional de-velopment services. Financial serv-ices should include a minimum ofsavings, funds transfer, financialcounselling, affordable credit andcomprehensive micro-insurance(health, crops and livestock) cover.As the SHG model was succeessful,most of the livelihood programmes


[COVER STORY]

which is easier said than done. Suc-cessful marketing would necessi-tate aggregation, grading and sort-ing of produce in case of farmproduce as also partnerships withprivate agencies. The success of e-Choupal by ITC and eKutir by Inteland Grameen Foundation ofBangladesh are classic examples inthis regard. In the non-farm sector,marketing becomes a more complexissue. The marketing strategies fornon-farm products required bymasses could be again through clus-ter development and appropriatepartnerships. However, the strategyfor marketing handicrafts and more

unique items have to be differentand more exclusive in nature. Toput it in simple terms, you cannotexpect handicrafts items to be soldin large retail chain outlets but youcan expect utility items like bags,slippers, etc. to be sold from theseplaces. Our focus has been and willcontinue to be multi-pronged withregard to rural livelihood promo-tion, given the extreme complexi-ties of the job in hand.

Nabard also looks forward topartnering with new generationtraining agencies and grassrootslevel NGOs/NBFCs, for identifyingand supporting state-specific initia-

tives for livelihood promotion ef-forts particularly through the SHGor micro-enterprise mode. We alsorecognise the important role playedby the corporate sector in forgingpublic private partnerships in thisregard particularly in synergisticrelations for skills upgrading and access to discerning and com-plex markets.

What are the challenges andopportunities for Nabard in the light of the UnionBudget presented this year?

The Union Budget for 2010-11 allo-cated a further Rs 200 crore for theMicrofinance Development andEqueity Fund (MFDEF) which ishoused and managed by Nabard asthe earlier tranche was exhausted.This will enable us to fund NGOs/NBFCs/MFIs to take up livelihoodissues in the next 2-3 years morecomprehensively.

Have you drawn any roadmapfor furtherance of the liveli-hood opportunities, speciallythrough the interventions ofNabard?

Whatever will succeed in develop-ing the rural economy, open up av-enues for gainful employment, spe-cially for the rural unemployedyounsters, promoting SHGs for ruralwomen and micro-enterprises, en-abling rural farmers to get better ac-cess to credit plus initiatives andthereby ensuring better financialmargins for them, is all part of ourroad-map. Nabard aims to make asignificant difference to the rurallivelihoods and the rural economy.Our heart beats for rural India!

chose SHGs as the preferred deliveryroute for all related services. Manyof the organisations have registeredsuccesses and introduced innovativeapproaches and practices eg.Myrada, Dhan Foundation, Sewa,SERP, etc. However, livelihood pro-grammes require huge investmentsin capacity building, access to mar-kets, technology, arrangements formonitoring and impact, assessmentand coordination, government sup-port for social security and infra-structure development. This in-volves coordination of numerousorganisational efforts particularlyfor savings in cost. Nabard is ad-dressing the issue of marketing SHGproducts in a multi - pronged man-ner. Nabard has been implementingseveral livelihood promotion pro-grammes financed under thepurview of Watershed DevelopmentFund (WDF), Tribal DevelopmentFund (TDF), Farm Innovation Fund(FIF), Umbrella Programme for Nat-ural Resource Management (UP-NRM) etc.

GOI is contemplating convert-ing SGSY into livelihood mis-sion. What do you foresee asthe impact of this proposedmission? Lastly, what roleNabard could play in thechanging scenario, particu-larly in the farm sector?

The Mahatma Gandhi NationalRural Employment Guarantee Act(MGNREGA) aims at enhancing thelivelihood security of people in ru-ral areas by guaranteeing hundreddays of wage-employment in a fi-nancial year to an adult in every ru-ral household who volunteers to do

unskilled manual work. The Na-tional Rural Livelihood Mission en-visages covering all rural house-holds (universalisation) throughSHGs by 2014-15. It is expected that160 lakh families will enter the mi-cro-enterprise stage by 2016-17 and75 lakh youth will be given place-ment support. The NRLM focusseson creating strong peoples’ associa-tions like SHG Federations, provi-sion of credit, improving access tocredit, marketing facilities andhand holding. As an institution,Nabard has been involved in allthese aspects of livelihood in thepast and would continue to do so inthe future. For the farm sector, thecreation of Joint Liability Groups,Farmers Association, Farmers’Clubs are all essential as in creationof rural jobs in agro-processing andfood processing sectors.

What are Nabard’s futureplans to upscale and deepenthe livelihood programmes,particularly in the resourcepoor regions?

It must be clarified that Nabardhas been working on livelihoods forlong. While microfinance is just onesphere of activity in which people’smobilisation through the SHG-BankLinkage Programme, was possible.Besides, we have pioneered water-shed development and Wadi develop-ment in the farm sector which fo-cuses on livelihood. The startingpoint of all these could be enablingaccess to finance which microfi-nance does but the end result is al-ways directed towards livelihood en-hancement. Similarly, in thenon-farm sector, we have managed a

host of products and processes suchas cluster development, Rudseti,REDP, Drip, etc, focusing on liveli-hood issues in rural areas.

Greater access to bank finance forthe SHGs should become the routefor livelihood promotion as the av-erage loan size per SHG member is Rs 5,500 while the per SHG borrow-ing is Rs 76,000 only. On the otherhand, it also has to be appreciatedthat micro-enterprise developmentis not just an issue of access to fi-nance. It is perhaps more importantto ensure systematic access to themarket to ensure the success oflivelihood related interventions


[COVER STORY]

put ratio (ICOR) of 4:1, the loanamount of Rs 5,856 per member wasexpected to generate income of Rs1,450 which can be adjudged asabysmally low. Although such smallvalue loans may be enough, in theinitial stages, to support small trad-ing activities like vegetable and fruitselling. Some other challenges aheadin the SHG-BLP includes equitableexpansion of the programme be-yond southern states, graduatingfrom micro-credit to micro enter-prise, improving internal controlsystems, reducing cost to clients, use of technology etc.Against this background an attempthas been made to look into some of the issues relating to livelihoodand micro-enterprises for SHGmembers.

Concepts of microfinance and livelihood

According to Marguerite S Robin-son, author of ‘The MicrofinanceRevolution: Sustainable Finance for

the Poor’ microfinance refers tosmall-scale financial services — pri-marily credit and savings—providedto people who farm or fish or herd;operate small enterprises or micro-enterprises where goods are pro-duced, recycled, repaired or sold;who provide services; who work forwages or commissions; who gain in-come from renting out smallamounts of land, vehicles, draft ani-mals or machinery and tool; and toother individuals and local groups atthe local levels of developing coun-tries, both rural and urban.”

Thus, the core and focus of microfi-nance is livelihood creation. VijayMahajan, Mona Dikshit andKaushiki Rao define Livelihood as“a set of activities a household en-gages in on a regular basis in orderto generate adequate cash and non-cash income to maintain a mini-mum desired standard of living,both on a day-to-day basis and overalonger period of time”. ThereforeConcept of livelihood for SHG mem-

bers could be viewed in terms of de-clining share of consumption loansin total loans and resorting to in-come and gainful employment gen-erating activities.

Issues related to livelihood

The graduation of SHG membersfrom “borrowing for consumption”stage to borrowing for starting orsupporting livelihood is a naturalprogression in the credit profile ofthe SHG members. An impact evalu-ation study conducted during 2006-07, covering 310 members from 56matured SHGs (which were at leastthree years old) in Chittoor, Nizam-abad and Warangal districts ofAndhra Pradesh revealed that 70%of the members had initiated orsupported Income Generating Activ-ities (IGA) but only 28% of them hadventured into micro-enterprises(MEs; An ME implied an IGA by cre-ation of an asset with or withoutcredit support). These enterpriseswere stand alone or family ownedMEs like dairy, pickle shop, flourmill, etc. Average loan amountavailed by members with MEs andIGAs was Rs.24,089 and Rs.17,171.The net income accrued and the em-ployment generated through the MEhouseholds were higher by 70% and81% respectively as compared tonon- IGA households who availedthe average loan of Rs.8,210 only.

Evaluation studies on micro-en-trepreneurship among SHG mem-bers in Gujarat and Jammu & Kash-mir also revealed that with thepassing of time, SHG membersshifted from consumption to produc-tion loans for setting up IGA/ME. InGujarat, the percentage of bank

THE institutionalisation ofself help groups (SHGs) andtheir recognition by the bank-

ing system as a saving and effectivecredit delivery mechanism in 1990swas an important step in financialinclusion of the relatively lessbanked or unbanked rural areas.More so, because it was built on apremise that the SHG mechanismwould instill credit discipline in themembers and one day empowerthem to become individual clients ofbanks. What followed was a prolifer-ation of the SHG-Bank Linkage Pro-gramme (SHG-BLP) to unprece-dented heights (albeit not equitable).After the pilot testing phase from1992 to 1995, the Reserve Bank of In-dia advised banks that lending toSHGs should be treated as a normalbanking activity in 1996. This led tothe second phase (mainstreaming) ofthe programme as banks started fi-nancing SHGs on a relatively largerscale. During 1998-99, there was aquantum jump in the number ofSHGs that had availed of loans fromthe banking system to 18,678 from

5,719 during 1997-98. This was the be-ginning of the growth and expan-sion phase (see graphic). As onMarch 31, 2009 42.24 lakh SHGs hadloans outstanding with the bankingsystem, which included 9.77 lakhSHGs under Swaranjayanti GramSwarozgar Yojana (SGSY). The loanoutstanding to the banking system,of non SGSY SHGs, was Rs 16,818crore.

Growth of SHG—Bank LinkageProgrammeThe growth period there was alsosteady rise in the quantum of loansbeing received by SHGs from banks.The average loan size of SHGs hadincreased from Rs 11,333 in 1992 to76,128 in 2009 (Table 1). However thisstill translated into a meager Rs 5,856 per member if we assumethat the bank loan was equally di-vided amongst an average of 13members. The average loan dis-bursed per SHG has hovered aroundRs 70,000 for the last four years ex-cept during 2006-07 when it wasbarely Rs 59,420.

The SHG-BLP has emerged as themajor microfinance initiative in In-dia and most of the SHGs whichhave a loan outstanding from thebanking system have come of ageand are attempting to graduate fromconsumption stage to micro-enter-prise. But it is obvious that the in-crease in bank loan over the years isnot sufficient for starting a prof-itable and viable micro-enterprises.Assuming incremental capital out-


Graduation of SHG members to

entrepreneurs requires intensive

training and handholdingon various aspects like understanding

of markets, potentialmapping

and entrepreneurshipmanagement

[FEATURE]

Livelihood promotion is a complex process and calls for acomprehensive approach to promote sustainable living in rural areas

ARTICLE

Livelihood through SHGs

DR S L KUMBHARE & RASHMI DARAD

12

been pursuing prior to the com-mencement of the ME Pilot Project.These included mainly farm and off-farm activities (dairy, goatery, veg-etable cultivation etc.) which consti-tuted approximately 77% of themicro-enterprises promoted.

e. As compared to Farm Sectorfewer Non Farm Sector Activitieswere taken up as they required moresophisticated skills, markets andmarketing skills.Micro Enterprise DevelopmentProgramme(MEDP)

Further, during 2006, the MicroEnterprise Development Pro-gramme (MEDP) was launched fordevelopment of sustainable liveli-hood for SHGs. The MEDP are shortduration (3 to 13 days), location spe-cific programmes on skill upgrada-tion / development for sustainablelivelihoods / venturing micro-enter-prises by matured SHG members. Itis a supplemental effort to upgrade/

develop skill and preliminary busi-ness acumen of SHG members in or-der to enable them to cope up withthe issues in relation to successfulenterprise for income generation/livelihood.Support to SHG Federations

Along with the increase in num-ber of SHGs, a few basic and nextgeneration issues related to SHGshave been posed for maintaining thequality of the SHGs, their continueddependence on the SHG promotinginstitutions, covering other finan-cial services than thrift and creditand making a transition from avail-ing credit to higher levels of liveli-hood activities. Some of the stategovernments and NGOs have re-sorted to promoting federations ofSHGs to address these issuesthrough empowering the SHGs andmaking them more self reliant.There are examples which haveproved that SHG Federations could

play an important role in nurturingof groups, in increasing the bargain-ing powers of group members andin livelihood promotion. Consider-ing the emerging role of the SHGFederations and their value additionto SHG functioning, Nabard sup-ports the Federations of SHGs onmodel neutral basis and on merits ofthe proposal.Micro Finance Development andEquity Fund (MFDEF)

As per announcement made inUnion Budget for 2010-11, Govern-ment of India has enhanced the cor-pus of Micro Finance Developmentand Equity Fund (MFDEF) from theexisting Rs 200 crore to Rs 400 crorein the ratio of 2:2:1 by Nabard, RBIand Commercial Banks. The Fund ishoused and managed by Nabard.Nabard has planned to upscale andconsolidate the SHG-Bank LinkageProgramme and microfinance inter-ventions.

Conclusions

Livelihood promotion is a complexprocess and requires a comprehen-sive approach to promote sustain-able livelihoods particularly in ruralareas. Under NREGA, the Govern-ment of India assures a wage ofRs.100 for 100 days unskilled labouremployment to any person willing towork in rural areas. In this scenario,it is expected that any IGA adoptedin rural areas should at least provideRs.10,000 per annum to the entrepre-neur. Interestingly, a field experi-ence at Shimoga, Karnataka, re-vealed that handloom weaversdespite the low income (about Rs.85per day) from their activity did notwant to take up strenuous labourwork under NREGA. It was laterlearnt that strenuous labour madetheir fingers stiff and adversely af-fected their dexterity in weaving.

loans utilised in asset creation im-proved from 8% in the first linkageto 67% by the fifth linkage. The per-centage of members graduating tomicro-enterprises activities in-cluded dairy, flour mill, rickshaw,grocery shop, brick klin, mandapdecoration, etc. varied between 29%in Gujarat and 32% in Jammu &Kashmir. IGA household undertookpurchase of inputs for farm enter-prises, mushroom cultivation, etc.,and the proportion of such memberswas 35% and 39% members in Gu-jarat and Jammu & Kashmir, respec-tively.

In certain quarters it is viewedthat access to financial services, in-cluding credit may enable rural poorto start or expand a micro-enter-prise and will allow them to riseabove poverty. Experience showsthat microfinance plus is a necessityand in successful endeavours, back-ward-forward linkages were madeavailable to the group members.Graduation of SHG members intoentrepreneurs requires intensivetraining and handholding on vari-ous aspects like understanding ofmarkets, potential mapping, finetuning of skills and entrepreneur-ship management. In Gujarat and

Jammu & Kashmir, absence of rota-tion in leadership, declining mem-bership of SHG over time, lack ofproduct diversification, use of lowlevel technology, inadequate infra-structure, etc., were some of the con-straints identified in promotion ofMEs. While in Andhra Pradesh, ab-sence of strong support system forsupply of raw material, technology

upgradation, capacity building ofentrepreneurs and marketingarrangements were the major con-straints.

NABARD’s Initiatives inLivelihood creation through SHGs

Pilot project on Micro-Enter-prises

NABARD launched a Pilot Projectfor promotion of MEs among mem-bers of mature SHGs in 2005-06 innine districts across nine states ofthe country to understand theprocesses which might facilitate thepreparation of a blue print for pro-motion of MEs among members ofmatured (more than three years old)SHGs was employed by MART. Un-der the pilot project, promotion ofMEs, was proposed to be undertakenthrough suitable identified NGOshaving potential to function as Mi-cro-Enterprise Promotion Agency(MEPA) with the overall technicalassistance for the project from Mar-keting and Research Team (MART).3M model which was employed byMART addressed three basic needsof micro finance, micro market andmicro planning to help poor in start-ing economic activities for liveli-hood promotion with the help ofNGOs / development agencies. Themajor findings of the Pilot Projectwere as follows :

a. 77.45% of the micro-entrepre-neurs received training in farm andoff farm sector / activities

b. Number of IGAs/ MEs startedcovered 64% of the members trained(7,177). Evaluation studies ofNabard also revealed similar if notthe same results (See table 2)

c. 98% of the members whichstarted IGA / Micro Enterpriseswere credit linked with banks. Theaverage amount of credit per MEacross the nine States was Rs.17,080.

d. Choice of traditional activitieswas encouraged in order to build onexisting capacities and capabilities.Identified SHG members undertooktraining for improvement of skillsand started enterprises in tradi-tional activities which they have

MICROFINANCE WORLD | April-May-June 201014 April-May-June 2010 |MICROFINANCE WORLD 15

Average bank loan per SHG (including SGSY)Year Number of Amount of Average loan

SHGs financed loan disbursedduring disbursedduring the year the year (Rs. Crore) per SHG

2005-06 6,20,109 4,499.00 72,552

2006-07 11,05,749 6,570.39 59,420

2007-08 12,27,770 8,849.26 72,076

2008-09 16,09,586 12,253.51 76,128

Micro Enterprises among SHG members% of SHG members undertaking

No. Of SHG IncomeMembers generating Micro Recovery

State studied activities Enterprises@ %

Gujarat 49 35 29 93

Jammu & Kashmir 150 39 32 100

Andhra Pradesh 310 70 28 94

Overall 509 57 29 95

Source : Annual Reports of Nabard (2006-07 & 2008-09)

0

5

10

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20

1992

-93

1993

-94

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-95

1996

-97

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-98

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-99

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-00

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-01

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-02

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-03

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-04

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-05

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-06

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-09

Fig

ure

s in

lakh

Growth of SHG-Bank Linkage Programme

Number of SHGs financed during the year

In certain quarters, it isviewed that access to

financial services,including credit, may

enable the rural poor tostart or expand a micro-

enterprise and allow themto rise above poverty

Microfinance institutions havestarted offering group life insuranceto all their borrowers, as this is easy toadminister. Some have also addedgroup health insurance to this. How-ever, traditional or weather-indexbased crop insurance can be ex-tended by MFIs in collaboration withprivate insurance companies. A largeproportion of MFI customers ownlivestock and thus livestock insur-ance provided in collaboration withprivate insurance companies wouldbe a boon. Finally, insurance ofgoods, equipment, premises would beuseful for non-farm micro-enter-prises. All these reduce the financialeffect of adverse events that may hap-pen to any poor household. Onceconvinced of this, poor householdswillingly pay for these services. Theyalso reduce the portfolio risk forMFIs. However, insurance only re-duces loss, it does not enhance in-comes. That requires livelihood pro-motion services.

Examples of agricultural servicesinclude soil testing and advice on theright type of fertiliser, advice onwhich crop and variety to sow, access-

ing good quality seed, timely and ap-propriate advice on ploughing, weed-ing and pest management during thecrop cycle and training in harvestingpractices (such as “clean cotton”).Livestock services include animalhealth checkups, vaccination and de-worming, and training in feed andfodder and better dairying practices(such as “clean milk”). These inter-ventions lead to reduction in costsand risks and enhancement of yields.

To gain better prices in the mar-ket, however, farmers need to bebrought together in groups, initiallyinformally and later in formal bod-

ies like cooperatives or producercompanies. Thus farmers can buyinputs like seeds, fertilizers andagro-chemicals in bulk at a discount.Similarly, they can sell their producein bulk to agro-processors, to get bet-ter prices. They can also engage inlocal value addition, such as gettingkapas cotton to produce lint cotton.Linking dairy farmers to milk mar-keting chains of cooperatives or pri-vate dairy companies, significantlyincreases the prices they realize formilk. In case of non-farm productslike handlooms and handicrafts,linkages are established with enti-ties like Fab India.

It is possible to provide such serv-ices on a profitable basis? Experienceindicates that it is possible wherethere are a large number of farmersin a cluster of villages, serviced bypara-extension workers or para-vet-erinarians. After some free trials,farmers willingly pay for these serv-ices. Non-farm micro-entrepreneurssuch as handloom weavers in clusterslike Chanderi are supported by de-signers for a fee.

By March 2010, BASIX had two mil-lion micro-insurance and half a mil-lion customers for agriculture, live-stock, and non-farm enterprisedevelopment services. Over 20% ofits income came from insurance andlivelihood promotion services.Economies of scope added toeconomies of scale. This enabledBASIX to reduce its interest rates,even as its borrowing cost went up.

It is high time MFIs learn to go be-yond just microcredit to livelihoodprotection and promotion, therebytruly contributing to improving thelives of the poor.

April-May-June 2010 | MICROFINANCE WORLD 17

MICROFINANCE began inIndia in the 1990s as a wayof alleviating poverty, by

encouraging income generating ac-tivities by poor households. Sincethen, the outreach of microfinanceinstitutions (MFIs) in India hascrossed 30 million poor households asat the end of March 2010. This is verycommendable. However, there aretwo issues need to be addressed - howto reduce interest rates and the netimpact of microcredit.

Let me take the example of BASIX,which is working with over a millionpoor households. For the first fiveyears since inception in 1996, BASIXtook the approach of primarily deliv-ering micro-credit to its customers.After five years of pursuing this ap-proach, BASIX carried out an impactassessment the year 2001. The resultsof this were rather disappointing.Only 52% of the customers, who had

received at least three rounds of mi-cro-credit from BASIX, showed a sig-nificant increase in their income(compared to a control group), 25%reported no change in income levelsand 23% reported decline in their in-come levels. BASIX then carried outa detailed study of those who had hadno increase or even a decline in in-come and found that the reasons for

this could be clubbed into three fac-tors:

(1).un-managed risk in their livesand livelihoods

(2) low productivity, in terms ofpoor yields and higher costs, and

(3) Unfavourable terms in inputand output market transactions.

This showed that there is a need forrisk mitigation, yield enhancement,cost reduction, and bringing ruralproducers together for better bar-gaining at the market place. Hence in2002, BASIX revised its strategy, toprovide a comprehensive set of liveli-hood promotion services to ruralpoor households. BASIX reaffirmedthat credit is a necessary but not suffi-cient condition for livelihood promo-tion. Its revised “Livelihood Triad”Strategy included provision of finan-cial services beyond credit - such asinsurance; provision of agricultural,livestock and non-farm enterprise de-velopment services; and institutionaldevelopment services for producerorganisations.


[ARTICLE]

However, there are two issues that need to be addressed—how toreduce interest rates and the net impact of microcredit

BASIX VIEWS

“Credit is a necessary but not amplecondition for livelihood promotion

VIJAY MAHAJAN

Over 20% income of Basix came from insuranceand livelihood promotion

services. The economies ofscope added to the

economies of scale. Thisenabled BASIX to reduceits interest rates, even as

its borrowing cost went up

The author is chairman of BASIX

the literature in this regard and con-cluded that microfinance had posi-tive impact on poverty reduction asit relates to the first six out of sevenMillennium Development Goals.

There are other researchers likePar Verónica González Aguilar(2006) indicated that microfinancehas its limitations. It should not beseen as the only solution to povertyalleviation. In certain circum-stances other interventions could bemore effective than micro-finance.

Nonetheless, livelihood is differ-ent from microfinance as the poor of-ten follow a basket approach aimedat diversifying risks. The ‘basket ofactivities’ generally comprises agri-culture, livestock, fisheries, wagelabour, forest-based activities andthe like and some of which could besupported through microfinance.

Microfinance and livelihood havesome commonality but at the sametime have some differences. Pictori-ally these two ecosystems could be

depicted as given in Figure 1.

NRM-based livelihood

Despite India’s high economicgrowth rate, around 37% of totalpopulation and 41.8% of rural popu-lation is estimated to be belowpoverty line as per the Tendulkarcommittee report. The poor prima-rily are dependent upon agricultureand other natural resource-based ac-tivities for their livelihood. Thusnatural resource management

(NRM) plays an important role inlivelihoods of the poor and thereforeit is possible to have ‘green liveli-hoods’ if the activities are designedin a sustainable manner. The mostcritical elements here are the accessto and equitable management of lo-cal resources in a viable and sustain-able way and to design suitablelivelihood interventions for the ru-ral poor. With this in mind, NationalBank for Agriculture and Rural De-velopment (Nabard), with assistancefrom the German Development Co-operation (GDC) viz., KfW and GtZ,has designed a unique productnamed “Umbrella Programme onNatural Resources Management(UPNRM)” being discussed in fol-lowing paragraphs.

UPNRM Objective:

The objective of UPNRM is to pro-vide financial support for improvingthe livelihoods of the rural poorbased on the use and management ofnatural resources. The financial sup-port comprises mainly loan on softterms for taking up livelihood inter-ventions and grant for capacitybuilding of the community for tak-ing up specific livelihood and alsofor providing requisite linkages tofacilitating agencies. UPNRM envis-ages a gradual shift from grant-based to loan-based NRM projects.The programme aims at assistingcommunity-managed sustainableNRM-based livelihood projects, espe-cially of the sociallymarginalised/disadvantaged groups.

Guiding principles: In order tohave a focused approach, followingguiding principles have beenevolved to assess the projects:

Pro-poor: The programme recog-nises the need to address socio-eco-nomic disparities by ensuring equi-table access to environmental


GREEN livelihood: In this eraof the global concern aboutclimate change, everyone

wants to contribute to sustainabledevelopment without leaving a big‘carbon foot print’ Emission ofGreen House Gases (GHG) per capita– carbon foot print by ‘going green’.This process has added a new set ofterms to the development profes-sional’s lexicon, viz., ‘green energy’,‘green buildings’, ‘green transport’and even ‘green political parties’.

In this context green livelihoodwould mean what is sustainable in agiven setting. Sustainable develop-ment is defined as meeting the needof present generation without com-promising the capacity of futuregenerations to fulfil their own needs.This entails sustained efforts toraise the quality of life of rural peo-ple.

In developing countries like India,it is generally argued that the cost of‘green’ technologies and methodolo-

gies is very high, which we find dif-ficult to afford. Due to this factor, wefeel that it might slow down thegrowth rate of our economy. How-ever, it is becoming apparent that itis quite possible to have environ-mentally sustainable livelihood gen-eration in Indian (and developingcountries’) scenario also, providedthe projects are planned with appro-priate methodologies and the peopleare involved wholeheartedly.

Livelihood and microfinance–differences in approach

Livelihood is a set of activitiesthrough which a household meets itsbasic needs and earns income. Whencarried out in a repetitive basis theytend to become a way of life. The vastmajority of people in a developingcountry like India make a livingthrough self-employment or wage-employment in the informal sector.

Microfinance through self-helpgroups (SHGs) has been a key move-

ment for the rural masses and Indiais in the forefront with the highestnumber of SHGs in the world at 61lakh, touching the lives of almost 860lakh families under the SHG-banklinkage programme supported byNabard and banks.

Microfinance is often defined as fi-nancial services for poor and low-in-come clients and include microcre-dit, savings, insurance, moneytransfers and other financial prod-ucts targeted at poor and low-incomepeople. “Microcredit” is a sub-set ofmicrofinance and refers to verysmall loans for generally poor bor-rowers with little or no collateral,provided by legally registered insti-tutions.

There is a debate about the effi-cacy of microfinance as a tool forpoverty alleviation. The large num-ber of SHGs as a vehicle of microfi-nance has indeed mitigated the prob-lems of the poor. Jonathan Morduchand Barbara Haley have reviewed


[VIEWPOINT]

A flexible financial product for sustainable natural resourcemanagement-based livelihood, UPNRM will help the poor

NABARD INITIATIVE

Green livelihood supportthrough UPNRM

DR D V DESHPANDE

Natural resourcemanagement (NRM) plays

an important role in thelivelihoods of the poor andtherefore, it is possible tohave ‘green livelihoods’ ifthe activities are designed

in a sustainable manner

ered under the NRM sector.

Key strengths of UPNRM vis-a-vis conventional products

UPNRM envisages NRM throughaugmenting and incentivising pri-vate investments which was other-wise considered primarily a govern-ment/ public responsibility.However, it is being realised thatpeople would be ready to invest inNRM-based investments if they areconvinced of the need and viability.

Despite the vast network of main-stream banks, cooperative societiesand microfinance institutions, thereare several areas, activities andclientele who do not fit into the eligi-bility criteria of these institutions.A majority of this clientele falls in

the most vulnerable groups ofpoorest of the poor belonging toscheduled castes, scheduled tribesand women. Through UPNRM, it ispossible to reach these sections of people.

Under UPNRM the experience of microfinance through SHGs hasalso been combined to involve thegroups in assessing creditworthi-ness of the individual borrowers aswell as exerting peer pressure for re-payments.

The innovative design of UPNRMengulfs the concept of ‘credit plus’approach, meaning, thereby, that asagainst pure financial supportthrough conventional banking chan-nels, UPNRM provides a packagecomprising capacity building, mar-

keting support, infrastructure sup-port and facilitation cost in the formof adequate margin to the facilita-tion agency (called ‘channel part-ner’) and risk mitigation strategieslike insurance of asset as well as lifeof the ultimate borrower. This is ex-pected to ensure success of the proj-ect as all the possible causes of fail-ure are plugged.

Status of UPNRM

The response to UPNRM so far hasbeen quite good as 27 projects have al-ready been sanctioned which arespread over from Tamil Nadu to An-daman and Nicobar. The portfolio ofprojects comprises following areas:

Integrated animal husbandry intribal development fund (TDF) / wa-tershed project areas

■ Medicinal & aromatic crops ■ Non-timber forest produce---

honey and tasar silk■ Agro processing & agribusinessLivelihood interventions in water-

shed areas■ Eco-friendly farming system

management- system of rice intensi-fication (SRI)

■ Soil & water conservation■ Ecotourism■ Agroforestry ■ Value addition—coir-based

boardThe above projects are sanctioned

to a variety of partners like NGOs,producer companies, cooperatives,companies, etc.

Information:

The details of UPNRM, includingthe formats for submitting the proj-ect, list of already sanctioned proj-ects and profile of the selected proj-ects, are available at Nabard’swebsite (www.nabard.org) and thelink is http://www.nabard.org/farm_sector/ nrm_upnrm.asp.

resources and quality for all sectionsof society, particularly the poor andthe disadvantaged who are most de-pendent on natural resources fortheir livelihoods.

Ensuring sustainability: Theprogramme emphasises the impor-tance of integration with environ-ment concerns as an essentialmeans for accelerating and sustain-ing development and human well-being.

Community participation: Em-powerment of local communitiesand their voluntary participation inproject design, implementation andmonitoring for the appropriate useof natural resources for equitableand sustainable development.

Good governance: Effective proj-ect implementation depends directlyon strengthening decentralised governance to ensure participationof the rural poor and other disad-vantaged groups in local decision-making and achieving equity inownership, access and use of re-sources in a transparent and respon-sible manner.

Integrated and needs-based ap-proach: An integrated approachmerges various disciplinary per-spectives as well as achieves conver-gence with existing initiatives to fa-cilitate the development ofappropriate technologies/ products/approaches that are responsive tothe needs of the local community.This requires the programme designto be context-sensitive and flexible.

Portfolio of activities to be supported under the NRM sector

The support under UPNRM is ex-

tended to the following category ofactivities:

■ a) Core / priority areas:■ Soil and water conservation (in-

cluding watershed programmes,dryland farming systems)

■ Plantation and horticulture(tree based farming, bamboo-basedfarming, wadi development, organicfarming, energy plantations)

■ Forestry activities (rehabilita-tion and management /community

forest management, biodiversityconservation)

■ Farming systems management(including livestock and aquacul-ture resources)

■ Climate change adaptation /Clean Development Mechanism

■ b) Supplementary/support ar-eas: These include following forwardand backward linkages and liveli-hood generating activities:

■ Processing, storage, marketing;■ Critical rural infrastructure (in-

cluding rural roads, minor irriga-tion, drinking water);

■ Renewable energy (micro/mini-hydel, biomass-based power genera-

tion, biofuels, wind-power, solarpower);

■ Livelihood generating activities(dairy, poultry, fisheries, etc);

Micro-finance

Any other activity which supportsefficient implementation of the proj-ects covering the core areas and,thereby, intensifying their impact.

c) Information & knowledge man-agement (IKM) and capacity build-ing:

In order to allow the first twogroups of activities, mentionedabove, to function effectively for sec-toral impact, necessary enablerssuch as capacity building, projectpreparation, planning, infrastruc-ture, IKM systems, etc. would be cov-


[VIEWPOINT]

A majority of the clientelefalls in the most vulnerable

groups of the poorest ofthe poor belonging to

scheduled castes,scheduled tribes and

women. Through UPNRM,it is possible to reach these

sections of people

Talala, in Gujarat’s Junagadhdistrict, is a nondescripttaluka, known for its luscious

Kesar mangoes and about 15 kmahead of Sasan, the entrance to theGir forest. A left turn from Talala’scentral town takes one towards Mad-hopur and Jambhur, two adjacent vil-lages. For a first-timer, features of thepeople enroute would arouse curios-ity. It would seem one is travelling incentral Africa, or a West Indian is-land. The distinct Afro-features ofmen and women have nothing to dowith the topography of the place; itowes solely to their origin.

Welcome to the world of Siddis. OfEthiopian origin, Siddis were

brought by the Nawab of Junagadhas workers more than 400 years ago.Now they have been resettled by thegovernment in Jambhur village ofTalala taluka in Junagadh. And wel-come, too, to the world of HirbaibenIbrahim Lobi, a Siddi woman, whosevision, perseverance and leadershipqualities have made her into a bea-con of enlightenment. Hirbaiben isthe essence of woman power, a truewoman of substance who has trans-formed the lot of the illiterate, un-derfed and disempowered Siddiwomen of her community into a uni-versally successful model ofwomen’s entrepreneurship.

Hirbaiben was just another hap-less girl of her community, who losther mother at four, and father at 14.Illiteracy, unemployment, indebted-ness and alcoholism were rampantamong the menfolk, and women for-aged and sold fuel wood from thenearby Gir forests for sustenance.Her marriage to a landless man did

not help matters much. Hirbaibenhad inherited half a hectare from herfather, on which she inherited a debtof about Rs 1 lakh. Like all others inthe village, she too was under con-stant pressure to sell the land to clearthe debt. This was the starting pointin Hirbai’s mission to be different.

Hirbai persuaded her husband totill the land, instead. By dint ofsheer hard work and better farming,she managed to produce enoughover the years to repay the debt andrecycle for more. Today, Hirbai’sfarm stands a shining testimony toher labour and foresight. Mango or-chards, coconut trees, vegetablesand sugarcane crop adorn her land.The land boasts of a well, too, with apump set, sprayer and other farmimplements.

Having reached a comfort zone inher private life, Hirbaiben’s next taskwas to spread education and self-helpamong her community. With supportfrom an NGO, The Aga Khan Rural

[ARTICLE]

Hirbaiben has led the illiterate, underfed and disempowered Siddiwomen of Junagadh to self-help and entrepreneurship

HIRBAIBEN LOBI

An icon of women’sempowerment

JULIUS MACHADO


The author is assistant generalmanager-public relations, Nabard.He had worked as district develop-ment manager of Junagadh.He can be reached [email protected]

Support Programme (AKRSP), andthe state, Hirbai started a day carecentre for children and followed it upwith a primary school.

Cleaning the cobweb of supersti-tion was another job she took onhand. “Jambhur village did not havea flour mill because people believedthat it will invite the wrath of PeerGeban shah, whose mausoleum wasin the village.” Hirbai narrated to us.(Siddis owe allegiance to Islam). Ittook her weeks of persuasion andscores of meetings to dispel themyth and open a mill.

The most striking achievement ofHirbai is the promotion of the self-help groups (SHGs) among thewomen of her community that hasled to their social and economic em-powerment. Starting with onegroup of women, which addressedhealth and hygiene issues, Hirbaiflitted from locality to locality, vil-lage to village, like a FlorenceNightingale, spreading the message

of SHG. Today, the effort has bornefruit with 95 women from six vil-lages in the vicinity having formed12 such groups known as mahilavikas mandals (MVMs).

Hirbai, for all her rustic simplic-ity, is no ordinary woman. Not rest-ing on her laurels in social awaken-ing, she showed that inentrepreneurial skills she was noless gifted. Hirbai knew that eco-

nomic uplift was the key to socialchange. In 1999, with the backing ofAKRSP, Hirbai started a project tomanufacture organic manure. In-volving the women from her ownSHG, the Nagarchi MVM, Hirbaibenoffered her farm precincts to makecompost for the venture, and gave aguarantee that she would buy all the200 bags, if unsold. Mid-day meal,tea and snacks were thrown in forthe women workers. Today, the or-ganic manure, which has beenbranded as “Panchatatva”, is ahousehold name among farmers inthe area, and brings in lakhs of ru-pees as turnover. “Our produce isslightly costlier than our neighbor-ing competitors”, says Hirbaiben,“but since our quality is much supe-rior, our produce sells.”

For all her achievements, Hir-baiben remains as modest as everand is willing to share her experi-ences. She shows unbridled enthusi-asm in taking visitors around herfarm and the compost productionunit, sporting her trademark toothygrin. The woman in her comes to thefore however, when she remembersthe tribulations of her childhood andadult days and tears well in her eyes.

Hirbai today holds an iconic statusin not only Junagadh but also mostparts of Gujarat. Not a single womendevelopment programme or SHGinitiative in Saurashtra takes offwithout her presence. A gifted ora-tor with hands-on experience ofwomen empowerment, she is nevershort of words at public functions.Here is a women of substance and ashining icon of success, whose liveli-hood initiatives for rural women areworthy of emulation everywhere.

Hirbai today holds aniconic status in not onlyJunagadh but also mostparts of Gujarat. Not a

single womendevelopment programme

or SHG initiative inSaurashtra takes offwithout her presence

ment, taking microfinance as a hu-man development tool. Its goal wasto create a conducive microfinanceenvironment in the state (i) to max-imise involvement of households inthe SHG movement, (ii) to developclient-managed, client-controlledand client-owned microfinance fed-eration, and (iii) to empower thepoor by building self-managed insti-tution of women, especially womenSHG federations at various levels.

Since its inception, MissionShakti has been working holisticallyto encompass different aspects ofwomen empowerment through SHGmovements. These include expan-sion of credit linkage to SHGs sothat they have paid-up capital tostart economic activities. This alsorequires capacity building of SHGsin accounting, livelihood activitiesand skill upgradation in employ-ment generation activities. Productsmade by WSHGs require standardi-sation, quality control and good mar-

keting. Mission Shakti activities fo-cus on capacity building, livelihoodpromotion, consolidation throughstrengthening federation, microcre-dit support, convergence with othergovernment programmes etc.

WSHGs are categorised into prior-ity groups depending on their poten-tial and use of available resources.The major areas of operation in-clude: microcredit; entrepreneur-ship development; livelihood secu-rity: agriculture & allied activites;health, hygiene & sanitation; capac-ity building and resource manage-ment; and IT and education

The programme aims tostrengthen the WSHG movement byforming federations and linkingthem to various funding agencies.

Mission Shakti has taken up fol-lowing strategies since its initiation:

■ Formation and strengthening ofWSHGs;

■ Institutionalisation of WSHGseffort by federating them at pan-

chayat, block and district levels;■ Building up the capacity of those

institutions (from SHGs to federa-tions);

■ Strengthening livelihood meas-ures and consolidating the efforts toensure the sustainability of the ini-tiatives;

■ Efforts to ensure market linkageto SHG products across the state andnation; and

■ Convergence with different govt.departments in the state

The other key players for strength-ening the network are NGOs, banks,Nabard, Sidbi, financial institutions& SLBC (state-level bankers commit-tee).

Mission Shakti structure

Tier-I: As a first step all theWSHGs formed on the principles ofviability, replicability & sustainabil-ity shall be the members of pan-chayat level federation called thePanchayat Mission Shakti (PMS)Federation.

Tier-II: All the gram panchayatlevel Mission Shakti federationsshall be federated at block levelcalled block level federation(BMASS).

Tier-III: The District MissionShakti shall be a federal body of allblock level federations at the districtlevel called District Federation(DMASS).

To implement the proposed model,there is requirement of a social in-frastructure from village to the dis-trict level and finally at the statelevel. It is a matter of strength thatMission Shakti has already achievedthat. At the village level, 367000women SHGs operate now.

Empowering women and build-ing the future: Under a strategic de-cision and approach for replicatingthe most successful models of

April-May-June 2010 | MICROFINANCE WORLD 25MICROFINANCE WORLD | April-May-June 2010

[FEATURE]

Vigorous implementation and monitoring at various levels havemade the programme an astounding success in the state

SUSTAINABLE LIVELIHOOD PROMOTION

The Mission Shaktiapproach in Orissa

DR PITABASA SAHOO

SUSTAINABILITY: Early defi-nition of sustainability wasbased on maintenance or ac-

cretions in a fixed bank of biologi-cally renewable resources. Histori-cally, there have been three stages ofsustainability; first, it was a physi-cal concept for a singleresource–usually a biologically re-newable resource. Second, was aphysical concept for a group of re-sources (ecosystem). Third, is a so-cial-physical-economic concept---sustainability or capacity to support(human) life at a constant or risinglevel, even with a changing mix ofbiophysical resources (ADB, 1991).

FAO (1990) takes a broader view ofsustainability, yet combines it withan older, conservationist and physi-cal approach to the biophysical re-source base sustainability. It insiststhat management and conservationof the natural resource base, and theorientation of technology and insti-tutional change should be in a man-

ner that ensures the attainment andcontinued satisfaction of humanneeds for present and future genera-tions. Such sustainable development(in the agriculture, forestry and fish-eries) conserves land, water, plantand animal genetic resources in anenvironmentally non-degrading,technically appropriate, economi-cally viable and socially acceptableway.

Livelihood: A livelihood consistsof the capabilities, assets and activi-ties required as a means to a living.A livelihood is sustainable if it cancope with and recover from stressand shocks, maintain or enhance itscapabilities and assets. This pro-vides net benefits to other liveli-hoods both now and in the futurewithout undermining the natural re-source base. Livelihood implies sys-tems of how people make a livingand whether their livelihoods are se-cure or vulnerable over time.

Livelihood situation in Orissa:

The state’s economy is characterisedby rural poverty and food insecurity.Orissa’s primitive ethnic communi-ties, especially women and children,are particularly vulnerable fromsubsistence-level agriculture andnon-availability of subsidiary em-ployment opportunities. With no ef-fective marketing system for theiragricultural and forest produces,these communities are at the mercyof unscrupulous traders.

Mission Shakti approach: Mis-sion Shakti is a central governmentprogramme for holistic empower-ment of women. Launched on March8, 2001, the programme had a targetto organise two lakh women self-help groups (WSHGs), covering allrevenue villages of Orissa. To itscredit, 3,87,325 WSHGs have beenformed and nurtured by MissionShakti in Orissa.

Mission Shakti objective was tospeed up the process of empower-ment of women through SHG move-

24

government of Orissa departments,institutes and missions.

Sustainability of the initiative

Since its inception, MissionShakti has been working holisticallyto encompass different aspects ofwomen empowerment through SHGmovements. Mission Shakti beingthe flagship initiative of the govern-ment of Orissa with full politicaland administrative back up, almostall the development departmentshave become a partner at the grass-roots level. These departments in-

clude panchayati raj, rural develop-ment, agriculture, horticulture, ed-ucation, health, youth affairs andfisheries and animal husbandry. Theprogramme is sustainable havingthe technological back up to monitorits progress through video confer-encing---on each first and third Mon-day----with Mission Shakti stateteam, along with experts at NIC,Bhubaneswar, and discuss the mat-ter with district level teams headedby DSWOs.

The other key players for strength-ening the network are NGOs, banks,

Nabard, Sidbi, financial institutionsand SLBC, who closely work withthe mission to encourage womenempowerment at the grassroots levelthrough discussions on social, envi-ronmental, agricultural issues, andproblems and conflicts such as: eco-nomic independence, dowry and do-mestic violence, group activities, fi-nancial inclusion, education ofchildren, youth issues, liquor prohi-bition and marketing linkage ofSHG products.

Let us compare Mission Shaktiwith Kudumbasree, the povertyeradication mission of Kerala gov-ernment. Kudumbasree is a com-munity-based self-help initiative in-volving poor women.

Its mission statement is “to eradi-cate absolute poverty in ten yearsthrough concerted community ac-tion under the leadership of localself-governments, by facilitating or-ganisation of the poor, combiningself-help with demand-led conver-gence of available services and re-sources to tackle the multiple di-mensions and manifestations of poverty”.

Mission Shakti is a programmefor economical, social, and politicalempowerment of women to eradi-cate poverty and ensure sustain-able human development in all rev-enue villages of Orissa. To itscredit, 3,87,325 WSHGs have beenformed and nurtured by the pro-gramme in Orissa, covering allbackward and tribal blocks of thestate. Not only economic but alsosocial, environmental and culturalissues in the villages are tackledthrough Mission Shakti, which hasmade it a unique initiative.

WSHG movements across the coun-try, the Orissa government has beensupporting the model that envisagedto form and strengthen the federa-tions of WSHGs to showcase womenpower, bring gender equity and pro-mote self-reliance in poverty-stricken families as an institutionbuilding step for sustainable devel-opment.

This community building ap-proach has been key success of Mis-sion Shakti. Each GP has a federatedbody consisting of representativesfrom WSHGs within the GP. Each GPlevel federations sent representa-tives to form a block level federation.Thus, a large number of GP level fed-erations (GPLF) are now operationalin Orissa. Mission Shakti has metic-ulously engaged consultants in addi-tion to regular staff members tostrengthen the state level operationfor the optimal utilisation of fundand appropriateness of the pro-gramme envisaged by the govern-ment of Orissa. It also made severalconvergences with different govern-ment houses and tried to empowerwomen under poverty and improvetheir condition.

Mission Shakti cell at thedistrict level

To strengthen the block levelWSHG federations, the followingsteps have been taken by MissionShakti so far:

Block level federations are regis-tered under the Society RegistrationAct;

Each block level federation isequipped with a dedicated team ofmicro-finance specialist, livelihoodspecial specialist, and multipurpose

worker;Deployment of Mission Shakti Co-

ordination from existing pool ofICDS supervisors exclusively to lookinto Mission Shakti affair at theblock level and strengthen the feder-ation;

Ensured support and guidancefrom block level ICDS team;

Mission Shakti has supported thefederation offices with computer,printers and minimum infrastruc-ture for a workable office of thesepeople’s organisation exclusivelyrun and managed by women of dif-ferent SHGs.

The district social welfare officer

is entrusted to supervise, monitorand guide the entire initiative anddirectly intervene in the process.The district collector plays a majorrole as the authority of the pro-gramme at the district level.

All these support to federations re-sulted in proving their efficiency infinancial and team management, fi-nancial inclusion and micro-creditpromotion activities across theyears. In most of the districts thissupport made several changes and

there have been tremendouschanges in production and promo-tion of SHG products.

Creating social capital andaddressing vulnerabilitiesthrough convergence effort

Mission Shakti has been success-ful in playing a role of catalyst inconverging many government de-partments and got involved as theimplementation partner of variousprojects in favour of women develop-ment. The movement has made suc-cessful convergence with different


[FEATURE]

Mission Shakti is a centralgovernment programme

for empowerment ofwomen. The programmehad a target to organise

two lakh women self-helpgroups, covering all

revenue villages of Orissa

(b) high risk of investments—therisks pertain to uncertainty of mon-soons, low investment, inadequateinfrastructure and poor soil. Here,NGOs/government/private sectorsneed to intervene to reduce the riskor provide insurance, local infra-structure and technology to help thepoor to diversify their activitieswithin particular sectors like agri-culture. For example, when Myradarealised that a large number of loanstaken by SAG members were for in-vestment in dryland farming, whichis a high-risk enterprise, it took upmajor watershed management pro-grammes, which reduced this risk.

(c) “Power” created by oppressivepower relations in production, fi-nance and marketing. The poor needto gain confidence and skills and a

degree of independence to take thelead in changing these relations insociety and at home. SAGs have thepotential to provide the institutionalsupport that the poor, especiallywomen, require to achieve this de-gree of self-reliance. NGOs have arole to build these institutions at thebase and to promote institutions ofthe poor which hold the “stick”(power) from the beginning.

However, a major note of caution isrequired since today every group iscalled a self-help group (SHG). Thisis why Myrada changed the name ofgroups from SHGs to SAGs to distin-guish groups that are formed accord-ing to the original concept. Suchgroups emerged in 1984-85 when thelarge cooperative societies organisedby Myrada broke down because their

leaders captured all available creditat cheap rates and on-lent to the poorat rates ranging from 40-60%. Thepoor then protested (with some helpfrom Myrada), and formed groups ontheir own. Myrada called them creditmanagement groups. In 1987, whenNabard provided Myrada with agrant to match the savings of goodgroups and to train the groups in in-stitutional capacity building, thename was changed to self-helpgroups. When the programme be-came target-driven after 2000 andmembers were selected on externalcriteria, Myrada changed the nameto self-help affinity groups to focuson the internal bonds that linked themembers who self-select themselves.

SAG is a group

(a) that is formed on the basis ofaffinity among members. This affin-ity arises from relations of mutualtrust and support, which exists beforeMyrada or any NGO entered –it is adiamond in the mud, we happened tokick it and polish it through institu-tional capacity building training;

(b) that starts with regular(weekly) meetings to discuss mem-bers problems—personal or socie-tal—and encourage regular savingsto create the habit of thrift;

(c) that is free to decide on loan eli-gibility, size and repayment sched-ule. The dynamics created by thisdiscussion and interaction is empow-ering, meaning that it generatesskills and confidence to participatein decision-making and gradually totake action for change in the group,family and society. Therefore it is themanagement of money –savings andcredit – which is important, not the


WHEN a young businessgraduate ends his/her in-troduction by saying “I’m

good at multi-tasking”, I feel like say-ing that all the poor in our self-helpaffinity groups, soukhya groups (sexworkers, most of whom are parttime), have multi-tasked all theirlives. Unlike us, they have no full-time jobs. In fact, they move from jobto job. They survive because theyhave a livelihood strategy that com-prises several jobs —or income-gen-erating activities—many of whichrequire relocation.

On the contrary, anti-poverty pro-grammes like SGSY suffer from asingle-frame fixation –they provideone or at most two large “viable” as-sets (assets like cows and sheep)which in many cases do not fit intothe livelihood strategies of the poorfamily.

Again, the poor manage their af-fairs amidst scarce resources and op-eration of market forces. And anyone

surviving there must be a good man-ager. Years ago, when a senior officialasked me how liberalisation wouldaffect the rural poor; my reply was:“Sir, the poor have always lived in aliberalised (market) situation –theirwages depend on demand, they bor-row at exploitative rates; their haveno secure job tenure. Rather we arethe ones who are subsidised and maybe disturbed if liberalisaton is reallyimplemented.”

If the majority of the poor do notrise above the poverty line, it is not

due to their inability to adjust to un-expected changes –it is because theyneed new skills, confidence and thepower to change the framework inwhich they are trapped and which iscreated by oppressive power rela-tions and traditional practices. TheSAGs (self-help affinity groups), ifproperly trained in the institutionalcapacity-building (ICB not ICT), to-gether with their federations, pro-vide the space to generate this “em-powerment”, which has the potentialto support their livelihood choicesand change shackling power rela-tions.

Briefly, the three hurdles the poormust overcome to have a sustainablelivelihood strategy are:

(a) diversity – the poor are skilledto cope with diversity; if governmentand NGO interventions are to re-spond to this diversity, they need tobe managed by peoples’ institutionsat the base, standardised pro-grammes will not work;


[FEATURE]

Members of self-help affinity groups are multi-taskers and goodmanagers of their livelihood strategies

SAGs: FACILITATING LIVELIHOOD STRATEGIES

A new form of empowerment to support livelihood

ALOYSIUS P FERNANDEZ

The SAGs, if properlytrained in institutional

capacity-building,together with their

federations, provide thespace to generate women

empowerment

their traditional activity—trading.This family also required the largesttotal amount in loans (Rs 4.5 lakh)and finally decided to purchase threeacres of irrigated land. However,what emerges clearly is that the gen-

eral comment that SAG “loans aretaken for consumption” is not basedon an analysis of genuine SAGs butperhaps on an analysis of groupsthat were not formed on the basis ofaffinity and given little or no institu-

tional capacity building training. Itis to the credit of Nabard that it hasconsistently, over 20 years, given pri-ority to providing grants for institu-tional capacity building, besides inlivelihood skills.

provision of money.However, all these features pre-sup-

pose investment in institutional ca-pacity building, which means thetraining is for the entire group.Myrada has developed 24 modules in1995 as a result of years of experi-ence; they are collapsible into 14 andmust be given to each SAG over a pe-riod of 12-18 months. The SHGsshould be assessed periodically byoutsiders and by an internal exerciseas well as audited annually. Bookwriters should be trained to main-tain accounts and minutes of meet-ings. They are paid ad hoc by theSAGs. Myrada has also developed asoftware with the assistance ofNabard; it is called NABYUKTI. Thissoftware provides data on the pur-pose, size, repayment of all loanstaken by members. An analysis ofthis data provides information onthe choice of livelihood activities ofthe members. Myrada intervenes toadd value or scale, to help them to di-versify and build marketing strate-gies and to adopt new technologies.

I have just picked up four profilesof livelihood strategies (see table)which emerged over a period of 10-12years; they show that one or twoloans are not adequate for a family;loans are required constantly and,therefore, must be easy to access. Thefamilies have borrowed between Rs1.6 lakh and Rs 4.5 lakh each—muchmore than government programmes’allocations. And finally after severalyears, they have invested in gold, jew-ellery and land. Except for Shan-tamma–who returned to her ances-tral home–all others invested inhouse sites or in repair of houses.Nagarathamma’s family, however,

continued to invest in a minibus anddid not opt to invest in land, thoughthis family invested in gold. One can-not help but point out that Shan-tamma’s family had to borrow Rs11,000 to get a job for one of her sons;

no bank would have provided thisloan. Shantamma, Sakamma and Na-garathamma have all placed educa-tion high on their list; they borrowedlarge sums for education. KausarBanu family preferred to focus on


[FEATURE]

(1) SHANTHAMMA* (2) SAKAMMADate of Amount Date of Amount Borrowing (Rs) Purpose Borrowing (Rs.) Purpose

1996 500 Household expenses 1996 500 Education1996 1,000 Cow Purchase 1996 100 Medical expenses1996 2,000 Education 1996 445 Medical expenses1996 3,000 Cow purchase 1996 1,000 Education1997 3,000 Agriculture inputs 1996 2,000 House repair1997 3,000 Education 1997 2,000 Agriculture inputs1997 4,000 Education 1997 2,000 Education1998 5,000 Education 1997 2,500 Education1998 6,000 Agriculture land purpose 1998 4,000 Education1999 8,000 Education 1998 5,000 Agriculture land purchase2000 11,000 For job in Railways 1999 7,000 Agriculture inputs2000 15,000 Business 1999 10,000 House repair2000 325 To purchase SHG uniform 2000 325 To purchase SHG uniform2001 20,000 For telephone booth 2001 15,000 House site purchase2003 8,325 Sewing machine (SGSY) 2003 8,325 Sewing machine (SGSY)2004 35,000 Education 2003 22,000 House site purchase2004 2,300 LPG for home use 2004 2,300 LPG for home use2005 1,000 Jewellery loan 2004 40,000 Agriculture land purchase2006 45,000 Agriculture land purchase 2005 1,000 Jewellery loan2006 2,000 Jewellery loan 2006 2,000 Jewellery loan2007 2,000 Gold 2007 5,000 Health2008 2,820 Insurance 2008 9,000 Seeds and fertilizer2009 Nil - 2009 Nil2010 Nil - 2010 20,500 Agriculture and goldTotal 1,80,270 Total 1,61,995

■ Note: Her husband was a sweeper in the railways. After he died in service, the family spent considerable money to see ifone of the sons could get appointment in the railways.■ Note: Before SAG No Land; After SAG Purchansed ½ acre dryland. Left the SAG and moved to Davanagere to look afterand live with her mother■ Note: Before SAG No Land; After SAG Purchansed ¾ acre dryland. Continuing in SAG

(3) KAUSAR BANU *(4) NAGARATHNAMMA Date of Amount Date of Amount Borrowing (Rs.) Purpose Borrowing (Rs.) Purpose

1996 1,000 Trading 1997 2,000 Education1996 3,000 Trading 1997 500 Education1997 5,000 Trading 1997 2,000 Education1997 500 Education 1998 4,000 LPG for home use1997 5,000 Medical expenses 1998 5,000 Education1997 300 Medical expenses 1998 5,000 Vehicle loan repayment1998 4,000 Trading 1999 7,100 House repair1998 5,000 Trading 1999 8,000 Vehicle loan repayment1998 5,000 Trading 2000 8,000 Vehicle loan repayment1999 5,000 Trading 2000 15,000 Vehicle loan repayment1999 12,000 Trading 2000 325 To purchase SHG uniform2000 25,000 To release house mortgage 2001 18,000 Business2000 325 To purchase SHG uniform 2002 30,000 Vehicle repairs2001 2,000 Education 2003 28,000 Vehicle loan repayment2002 40,000 House purchase 2003 8,325 Sewing machine (SGSY)2003 325 Household expenses 2004 2,300 LPG for home use2003 8325 Sewing machine (SGSY) 2005 40,000 Vehicle repairs2003 50,000 Agriculture land purchase 2005 1000 Jewellery loan2004 2300 LPG for home use 2006 2,000 Jewellery loan2005 58,000 To release agriculture land from mortgage 2007 62,000 Tempo purchase and gold2005 6,000 House repair 2008 22,820 Tempo repair and insurance2005 1,000 Jewellery loan 2009 11,000 Tempo repair2006 2,000 Jewellery loan 2010 40,500 House repair and gold2007 2,000 Gold2008 53,820 Cycle shop business and gold2009 Nil -2010 500 GoldTotal 4,59,390 Total 3, 22,870

■ Note: Before SAG No Land; After SAG 3 acres irrigated land, Continuing in SAG■ Note: The family purchased a used minibus on loan; she borrowed from the group to pay the loan in instalments and torepair and refurbish the vehicle.■ Note: Before SAG 2 ¾ acre dryland; After SAG 2 ¾ acre dryland, Continuing in SAG

Self-help affinity group Chikkajajur, Holalkere Taluq, Chitradurga, Karnataka

FOR the millions of poorwomen in India who have thecapacity to work hard and are

keen on providing a better life totheir families, there is hope. Theyneither have to create business plansto convince banks to lend themmoney, nor submit collaterals to sup-port borrowing. Millions of womenacross India have found microfi-nance as a prime resort. Smallamounts of money lent without col-lateral and recovered every week attheir doorsteps is a dream come truefor these women.

Take for instance, Savitha wholives with her husband and threechildren in Nanded, Maharashtra.She runs a tailoring shop along withher husband. Before joining SKS herannual income was a meagre Rs20,000-30,000 a year. Educating theirchildren with such limited resourceswas extremely difficult.

Savitha joined SKS in 2005 andborrowed her first income genera-tion loan (IGL) of Rs 8,000 for buyinga sewing-and-over-locking machine,which increased their earnings byRs 10,000. She later borrowed a sec-

ond IGL of Rs 12,000, which she usedfor purchasing cut pieces and dressmaterial. Recently, she borrowed athird IGL of Rs 14,000 to procuremore dress materials for her store,and through all this she earnsaround Rs 50,000 to Rs 60,000 a year.

She is amongst SKS’s most satis-fied customers. Today, she sends herelder son to Science College,Nanded, younger son to Venkatesh-wara public school (residentialschool) and her daughter goes toKussum Tai Vidhyalay. She wants toavail of a bigger loan and developfurther.

“The loans have improved our fi-nancial status and helped us providegood education to our children. Wewish to see them in higher positions,leading a prosperous life. I will availof further loans to help them settlein life”, says Savitha.

Like Savitha, Vaishali Vasnta Patilwas going through a tough phase inher life.

Vaishali hails from Bharavati,Wardha. Having failed her 10thgrade, she did not continue with herstudies, instead she pursued withher hobbies like tailoring, glasspainting, mehendi designing, potpainting, embroidery & thermocolpainting. Later she married Vas-santa Ramji Patil from Aashti dis-trict. After the birth of her daughter,the family moved to Chandrapur forthe child’s education. She then gavebirth to a boy. Their financial trou-bles started when her husband wastaken ill and had to undergo a sur-gery for appendicitis.

She started giving painting classesin the morning, once that is over, sheheaded to the market to sell bangles.Along with bangles, she started sell-

[CASE STUDY]

SKS is committed to alleviating poverty by extending financialservices in a sustainable manner to the poor

SKS LOANS: AN ENABLER FOR POOR WOMEN

Hoping for a better life

KUMUD DAS


Millions of women acrossIndia have found

microfinance as a primeresort. Small amounts of

money lent withoutcollateral and recovered

every week at theirdoorsteps is a dream come

true for these women

ing food items.She started making washing pow-

der and during that stint met a sales-man who gave her the address of hiscompany. She joined his companyand slogged day and night. She wasexpected to work long hours andsometimes, it extended until lateevenings.

The biggest challenge she facedwas handling her job and family. Asher husband was ill, he needed spe-cial attention, and so did the chil-dren. Situations started worseningwhen rumours were being spreadabout her illicit liaisons. Thisstrained the relationship with herhusband and he started torturingher. When her husband blackmailedher, she refused to leave her job anddecided she would rather leave him.She worked in the company for four-five years and earned very well fromthe commissions. But the incomegenerated from this job was not

enough and it came to an end whenshe was laid off. She then returned toher native place.

While she was returning to her na-tive home, she heard people talkingabout SKS and the loans that are dis-bursed. She decided to join and re-vive her business. She took an IGL ofRs 10,000 and started her business ather hom. She also guided otherwomen to utilise their loans prop-erly so that they reap the benefits ofthe loan.

She started supporting otherwomen by purchasing homemadechips and other products and sold itin the market. She has employed tenwomen to help her in her business.She was able to accomplish this onlywith the support of her family, espe-cially her husband and SKS. Her lifechanged completely after she joinedSKS. She is very proud that she isable to support her family and helpthem in times of crises. She has

helped a handicap to get an artificialleg and she has also helped a blind.She has also helped a beggar to getshelter.

“SKS has helped me believe that Ican touch the sky. I want to educatemy children and ensure they have abright future. SKS has helped medream for a better tomorrow”,Vaishali, now a successful entrepre-neur.

Like Savita and Vaishali, 3.25 lakhwomen across Maharashtra have ac-cessed SKS Microfinance loansworth Rs 661 crore. The loans areonly given for income generation ac-tivities and has made a difference tothe lives of these women who are to-day confident individuals contribut-ing actively to the welfare of theirfamilies.

SKS, which started operations inAndhra Pradesh 12 years ago is,committed to alleviating poverty byextending financial services in a sus-tainable manner to the poor. It pro-vides income-generation loans of Rs16,000 for 50 weeks. The loan is dis-bursed in two parts, the member canchoose to take a loan of Rs 12,000 inthe first cycle and after 25 weeks themember can opt to take the remain-ing amount. The average loan size isRs 10,779.

Today SKS is the largest MFI inthe country and the fastest growingMFI in the world. SKS operatesacross 19 states in India: AndhraPradesh, Karnataka, Kerala, Maha-rashtra, Chhattisgarh, MadhyaPradesh, Orissa, West Bengal, Bihar,Jharkhand, Uttar Pradesh, Uttarak-hand, Delhi, Rajasthan, HimachalPradesh, Punjab, Haryana, Gujaratand Tamil Nadu.

ices. The activities financed by theproject included agriculture, manu-facturing and services.

Under the project, RMDC had ac-cess to the $20 million loan fund fromADB for onlending to the poor house-holds through retail MFIs. RMDC ex-panded its operation to 47 out of the75 districts in Nepal. It provided serv-ices in three areas: microcredit pro-gram, institutional development, andsupport for ultimate borrowers. Itsstated goal was reaching 500,000 poorfamilies with credit facilities through100 partner organisations. It has sup-ported partner organizations in vari-ous forms such as microfinance oper-ations, institutional development,and monitoring and supervision.

By the time the project was com-pleted in 2007, RMDC had made sig-nificant contributions to promotingand developing the microfinance sec-tor in Nepal. It developed 38 MFIsfrom scratch, supported 8 for institu-tional strengthening, and providedpotential institutions with exposurevisits to learn best practice and pro-vided basic orientation training. To-

day it has become the most importantonlending source for MFIs.

Empowering women throughinstitution development

The most noticeable impact ofRMDC has been its contribution toempowering women. Over 400,000clients of RMDC’s partner organiza-tions are women. Women in Nepalhave had scarce access to resourcesand were largely isolated from eco-nomic activities. Women’s participa-tion in the project has changed theirlives. Women who were idle or en-gaged as laborers now have their ownbusiness and are more independent. .

Women’s increased access to mi-crofinance services through RMDC’spartner organizations has enabledthem to make decisions about sav-ings and credit use; it has given themknow-how to set up microenter-prises, and increased their incomes.The microfinance program has con-tributed to their social and politicalempowerment through improvedconfidence, leadership abilities, deci-sion-making power, and entrepre-

neurial skills. Women now have morerespect in their homes in society.

Sanjamaya Lama is one suchwoman. After she lost her husbandshe took a loan of NRs 18,000. “I usedsome of it to rear goats and buffaloes,and invested the rest in my children’seducation,” she says. Anotherwoman, Sabita Lama says, “Beingpart of the group has honed out acommunity and team spirit. It hasalso trained me to speak before agroup and deal with strangers moreconfidently.” With the support of aloan, she runs a café by the highway,and together with her husband,makes NRs1,000 daily.

Women reported greater influencein household decision-making as oneof the major outcomes of the project.Women who attended literacy classesmentioned that the ability to readand write, enhanced their levels ofself-confidence and made them lesshesitant to voice their opinions andspeak in public. Individual womenwho gain respect in their householdsact as role models for other womenand spark off a wider process ofchange in the community’s andmen’s perceptions.

RMDC now serves 750,000 poorwomen through its 79 partner organi-zations. Since inception, RMDC hasbeen maintaining 100% repaymentfrom its partner organizations. Itcontinues to provide need-basedtraining supports, conducts regularmonitoring and supervision as wellas provides on-site technical assis-tance to its partner organizations.RDMC has helped its clients to de-velop occupational skills and main-tain financial discipline. RMDC hasplans to expand microcredit out-reach in remote hills and mountainareas and has launched bridge andspecial loan products for MFIs inthose areas.

THE Asian Development Bank(ADB) approved its first mi-crofinance project in 1988.

Since then, ADB has provided morethan $2 billion for loans and techni-cal assistance grants for microfi-nance projects in 14 of its developingmember countries (DMCs). At theinitial stage, projects, in general, fo-cused on microcredit delivery, al-lowed subsidised interest rates, paidlittle attention to financial viability,and were poorly targeted. OverallADB’s early microfinance projectsachieved only marginal or moderatelevel of outreach in terms of povertyreduction.

ADB adopted a microfinance devel-opment strategy in 2001. A key focusof the new strategy is a financial sys-tem development approach in micro-finance, in which emphasis is givento (i) facilitating policy reform suchas liberalisation of interest rates, (ii)building financial infrastructure in-cluding information systems andtraining facilities, (iii) institutionaldevelopment with viability and sus-

tainability, and (iv) pro-poor innova-tions and social intermediation.

Building a microfinance systemin Nepal

In Nepal, though microcredit pro-grammes had been in operation fornearly three decades, most poorhouseholds failed to benefit fromtheir services as MFIs that could pro-vide quality services were lacking.Many NGOs, cooperatives, or evenbanks that worked as microfinanceproviders confined their activities toa limited number of poor house-holds. As a result, access to microfi-nance for the poor in general andwomen in particular was limited.Since MFIs were able to provide only

a fraction of the total demand for mi-crocredit, there was need for an apexbody which could provide wholesalefunds to retail MFIs for lending topoor households and thus play an ef-fective role in promoting and devel-oping the microfinance sector.Against this background, the RuralMicrofinance Development Centre(RMDC) came into existence in Nepalin 1998 to implement the ADB-as-sisted Rural Microfinance Project.

The Rural Microfinance Project be-came operational in May 1999. Theproject was funded by ADB, super-vised by the Ministry of Finance, andimplemented by RMDC. The term ofthe project, initially set at 31 Decem-ber 2004, was extended to 30 June2007. The estimated total cost of theproject ($30.6 million) was to be cov-ered by ADB, the Government, com-mercial banks (in the form of equityin RMDC), and implementing agen-cies . The Government would onlendto RMDC under a subsidiary loanagreement. The primary objective ofthe project was to improve the socioe-conomic status of the poor and in-crease employment by enhancingtheir access to quality financial serv-


[ARTICLE]

RMDC has helped in empowering women. Over 400,000 clients ofRMDC’s partner organisations are women

THE ADB EXPERIENCE

Microfinance: the Nepal story

MAYUMI OZAKI

The Rural MicrofinanceDevelopment Centre(RMDC) came into

existence in Nepal in 1998to implement the

ADB-assisted RuralMicrofinance Project

The author is Finance Specialist(Rural and Microfinance), ADB

her four children in a remotest cor-ner of a village in India. Through aloan of Rs,5000 she bought a sewingmachine within her reach. Regu-larly she stitched clothes beyond herscheduled household chores, soldthem for marginal profit and repaidher principal dues plus the nominalinterest thereon. Out of the hard-earned profit, she was able to savesome money to buy books for herschool going children. This is microfinance in action”

Microfinance is a simple but pow-erful tool enabler to pull the under-privileged and deprived ones out ofpoverty. Universally, it involves pro-viding small loans to these workingunderprivileged ones in the develop-ing nations. Usually, various local or-ganization behaving as Microfi-nance Institutions offer small loans

ranging between Rs 10,000 to Rs 15,000 at a fixed rate of interestwith nominal margin sharing. Theseloans are being used by these poorsections of the society to establish orexpand their small livelihood busi-ness to generate additional incomefor their family. This extra income isbeing spent by these working-pooron buying basic food-grains, minorhealthcare products, child-educa-tion, putting aside in small-savings,thus laying the foundation for a bet-ter tomorrow.

Microfinance is based on the fun-damental principle that human be-ings are motivated to do whatever ittakes to make themselves as well offas possible. Thus it has emerged asan effective poverty alleviation tool.

Microfinance refers to small scalefinancial services for both small

credits and tiny deposits - that areprovided to weaker sections whofarm or fish or herd; operate small ormicro enterprises where goods areproduced, recycled, repaired, ortraded; provide basic services; workfor wages or commissions; gain in-come from renting out smallamounts of land, vehicles, draft ani-mals, or machinery and tools; and toother individuals and local groups indeveloping countries, in both ruraland urban areas.

Rural finance

With respect to rural finance it isvery important to note that rural fi-nance is not only agricultural, norentire microfinance and agricul-tural finance is rural. Yet, financialservice providers offering rural fi-nance (financial services tailored forthe people of all income levels in ru-ral areas), microfinance (basic fi-nancial services for the poor sec-tions of the society havinglow-income level), and agriculturalfinance (financing of agriculture-re-lated activities, from production tomarket) often having overlapping ob-jectives and opportunities. Theclients served by microfinance areoften the same clients or householdsthat would benefit from increasedrural or agricultural finance.

It is imperative to note that theloan size is not important. This can-not be better evidenced by the exem-plary performance of AryavartGramin Bank (AGB) a RegionalRural Bank sponsored by Bank of In-dia. AGB implemented a scheme forfinancing Solar Home Lights,through its branches in its opera-tional area spread over in Bara-


OFFER a wholesome feast to aman, he will enjoy for a day.Offer a microcredit to a

woman, she along with her children,husband and extended family willenjoy a lifetime.”

During the last three decades inthe world of finance the most impor-tant finding did not originate fromthe world of rich, and more impor-tant than the net-asset value of ahedge-fund running into many bil-lions of dollars or the yield on a con-vertible, callable, and putable zero-coupon bond was the finding thatthe underprivileged and deprivedpopulace can save, can borrow andwill certainly repay loans. On thisfoundation stone lies the premise ofMicro finance.

Rural India

The majority of the world's poorlive in rural areas. Yet most lack ac-cess to the range of basic & need-based financial services. Bankingand financial institutions seeking towork in rural areas primarily con-front with numerous challenges

such as poor net-worth, discrete &isolate demands, price and yieldrisks including constrained precinctof collateral security. Moreover, themain products of many Microfi-nance Institutions - may not be welltailored and well-matched to longerterm agricultural activities, nor theensuing impediment in the cashflow of rural households.

In Indian context also it is foundthat notwithstanding the profundityof the Indian Financial System and

the country's extensive network ofrural banks/branches, the country'sunderprivileged and deprivedhouseholds, who are mostly concen-trated in rural areas, are deprived oftheir access to formal banking andfinance system.

A recent world Bank-NCAER re-search survey on rural access tobanking and finance (the Rural Fi-nance Access Survey-RFAS) indi-cates that 70% of the rural unfortu-nate populace are deprived ofhaving a basic bank account and87% have no access to credit from aformal source.

Informal sector money lendersconfine a strong presence in ruralIndia, delivering finance to the un-derprivileged and deprived ones.

“the RFAS, finds that 48% of land-less and marginal farmers borrowedfrom an informal source at leastonce in the past 12 months, at hikingrates averaging 48% a year.”

What is microfinance?

“Mull over the story of Smt. SaritaBhaein, a solo mother who lives with


[ARTICLE]

Microfinance is a simple but powerful enabler to pull theunderprivileged and the deprived out of poverty

BANK OF INDIA

A powerful anti-poverty tool

NARENDRA MODI

A recent World Bank-NCAER research survey

on rural access to bankingand finance indicates that70% of the rural populace

are deprived of a basicbank account and 87%people have no access

to credit from a formal source

banki, Hardoi, Lucknow, Unnao,Farrukhabad and Kannauj districtsin Uttar Pradesh. Most of the vil-lages in the area are either not hav-ing grid power or do not get uninter-rupted supply. The cost of the systemis less than Rs 15,000.

A delight in solar home light

Lady entrepreneur seen at work at10.00 pm in a village of Hardoi Dis-trict, UP. AGB has excelled in financ-ing for Solar Home lights which canbe corroborated by the following :-

i) AGB has financed 28000 SolarHome Lights thereby benefitting1,40,000 people assuming an averagefamily size of 5.

Financing for Solar Home Lightsto the villagers of Barabanki Dis-trict (UP) at the hands of Shri MNarendra, Executive Director, Bankof India at a “Loan Mela” functionorganised by AGB, sponsored byBank of India.

ii) The Bank won prestigious “Ash-den Award” in London, Ashden So-ciety acknowledged during theaward presentation ceremony inJune 2008 that the Bank's initiativewas not only good for the planet but itwas good for business too.

iii) The Bank was also conferredwith “India Power Award” for thisinnovative financing in Nov.,2009.

iv) The women folk in these vil-lages are now elated that they areable to contribute significantly tothe family income by doing embroi-dery, zardoji, tailoring and suchother profitable jobs in the SolarHome Lights from 7.00 am to 11 pm &beyond which hitherto not possiblebecause during day time they arebusy with agriculture & other allied

activities including attending house-hold chores. The business potentialexisted immensely untapped but So-lar Home Lights have made all thedifference.

v) The students in these villagesare now able to study in better healthconditions. Hitherto, the kerosenelamps -sole illumination was notgood for the eyes and its vapour be-ing harmful to lungs. This is equallyapplicable to the housewife and theirmembers of the family.

vi) The bank has already 9 villageswith 100% solar light.

It is one of the many such initia-tives taken up by Bank of India.

Financing for Solar Home Lightsby Jamshedpur Zone of the Bank tothe villagers of Darisai village,Jamshedpur at the hands of Execu-tive Director, Shri M.Narendra,Bank of India during a loan melafunction.

What matters is the enabling andproviding the infrastructure for de-velopment of the business modelwhich may not require a large quan-tum of advance, but will benefitlarge number of persons.

Most notable among these micro-finance approaches is a nationwideattempt, pioneered by non-govern-mental organizations, and now sup-ported by the State to create links be-tween commercial banks, NGOs andinformal local groups (self-helpgroups or SHGs).

The author is Executive Director,Bank of India.


[ARTICLE]

Microfinance is based onthe fundamental principle

that human beings aremotivated to do whatever

it takes to makethemselves as well off as

possible. Thus, it hasemerged as an effectivepoverty alleviation tool

microfinance.pdf

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