8. Self Help through Microfinance: A paradigm shift in Orissa, India

More documents

Recommendations

Info

Microfinance & Rural FinancialProducts in OrissaAt the time of the SHG revolution, therapid introduction of a range ofsavings/credit products was made by NGObased MFIs for expanding their microcredit clientele. In the early 90s, the SHGconcept was spread by NGOs as SHGsbecame a tool for initiating developmentaland livelihood projects. NGOs weregoverned by grants and a part of that grantpercolated as a grant for SHGs. The majorfocus was initiation of internal savingsrather than provision of external credit.The external credit was generally gearedby a grant from an NGO or a bank loanfrom a commercial nationalized bank withthe support of more than six months ofinternal savings. In this system, theprovision of grants or loans focused on thegroup rather than on individual clients.MFIs largely financeclients/groups/individuals for productiveuses. In most cases, MFIs scan thegeographic location and finance locationspecificbusiness/activities. For example,NGOs/MFIs finance small business kiosks,dairy enterprises, piggery and poultryenterprises, agri-farming etc. and theyprovide insurance for each loan. In fact theinsurance deduction is done at the time ofthe loan disbursal.Micro-insuranceThe supply of insurance services to thepoor has increased substantially since2000. There are a large number of lowpremium schemes which cover againstdeath, accidents, natural calamities andloss of assets due to fire, theft, etc. MFIsalso extend insurance against crops,livestock and other businesses along withsubsidized loans. The KAS Foundation inOrissa has demonstrated its efficiency andeffectiveness by bringing all clients intolivestock insurance.1MethodologyThe study was conducted using qualitativeresearch tools – principally the case studymethodology. This was supplemented byquantitatives – through collection of bothprimary and secondary data.Various social research tools like PRA,RRA and focus group discussion wereused for the study. Rapid assessment 2was done to understand the depth of theunderlying issues. Cases were analyzedthrough social analysis tools like RLSMatrix, Nine Square Mandala and simplestatistical tools.The sampling was done through a mix of athree stage stratified sampling and Delphitechnique. In the first stage, blocks wereselected, in the second stage, GramPanchayats and in the third stage,villages. The selection of the SHGs wasdone by purposive sampling.3Results and DiscussionsThe study is an analysis of ten casesbased on self help through microfinance inOrissa. The Self Help Groups were:1 At the individual level, all group memberswere studied through pretested questionnairesand personal interviews.2 Rapid Assessment methods: Themethod involved direct observation,informal conversation, key-informantinterviews and participant observationconcerned with employment scenario,entrepreneurship scenario, potential areaswhich would involve large labour forces,entrepreneurship related behaviors,knowledge, attitudes and practices (KAP),crucial entry points for intervention andlocal responses to entrepreneurshipdevelopment. Conceptual issues includedthe structure of incentives, the complexrelationship between cognition andbehavior and how people respond to thecomponents and factors of labour andentrepreneurship issues.3International Journal of Ruralvol. 15 no. 1 AprilStudies (IJRS)2008ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 8 Page 2 of 7
1. Maa Durasuni Self Help Group(Female)2. Adam Changa Self Help Group(Male)3. Patherkata Village Committee4. Kalajhini Mahila Self Help Group(Female)5. Maa Bhagabati Sangh (Female)6. Purana Sahi Mahila Self HelpGroup (Female)7. Jay Hanuman Krushak KalyanSangh (Male)8. Maa Tarini Mahila Samiti (Female)The biggest revolution in microfinancestarted in the late 90s and early 2000 withboth national (Indian) and internationalagencies involved in bringing socialupliftment through microfinance.International donors channelisedmicrofinance through local NGOs with aproven track of working at grass root levelwhereas the Government of Indiachannelised rural financial servicesthrough nationalized banks and NGOs.The SHGs under this study were benefitedby rural financial services from bothnational and international donors.3 The group members were fined Rs. 1 fornot attending monthly meetings. In case ofdefault in repaying the loan, memberswere fined Rs. 1 for Rs. 10.Governance & PolicyAfter initiation of these SHGs, themembers decided to conduct one groupmeeting every month and made itmandatory that all members had to attend.In every group meeting, proceedings wererecorded by the secretary or president.Those absent from the meeting were fined(Rs. 1 to 3 based on the group) permeeting (except for emergencies). Bycommon consent, the groups fixed themonthly members’ saving (Rs. 10 to 20)and the interest on the loan was fixed at 4-5% per month.Formation of AssociationOrissa is one of the most backward statesin India. The backwardness is due to itstraditional forms and frames influenced bythe social environment and problems.Livelihoods are based on traditionalagriculture and wage labour. There isabsolutely no provision of credit except forvillage moneylenders, neighbors andrelatives. Rural financial services havealways been very poor. Livelihoods havebeen fully under the control of nature.Under the active influence and motivationof NGOs, villagers have formedassociations (both male and female) forself-help or thrift and credit groups. Mostgroup members are married villagers, whohave a common perception of need andimpulse towards collective action. Theywere encouraged to form mutual helpingassociations.The villagers were unable to perceive thereason behind their absolute and relativepoverty. They were unable to understandthe complexities behind rural indebtednessand poverty. The vicious circle of povertyseemed unbreakable. At that point, withthe intervention of NGOs and govt.agencies, some of the women understoodthe problem and possible solutions tomitigate it. Thus some women folk cameforward and developed SHGs.Bank LinkageWithin six months of formation, all thegroups opened accounts in commercialnationalized banks with the help of NGOswho had earlier assisted their initiation. Allthe SHGs opened their accounts as earlyas possible. There were regulartransactions between the bank and thegroup. The group deposited their savingsevery month and withdrew them whenrequired. All groups were financed by thebank with seed money loans and within sixmonths all groups had repaid the loan.The Status of SHGs by 31 Dec 2004Status of the female groups on micro-financial transactionCash in INR RupeesInternational Journal of Ruralvol. 15 no. 1 AprilStudies (IJRS)2008ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 8 Page 3 of 7
Page 1: Self Help through Microfinance: A P
Page 5 and 6: Interest perRs.100 permonthCash inB
Page 7: Improved Standard of LivingAll memb

8. Self Help through Microfinance: A paradigm shift in Orissa, India

Create successful ePaper yourself

Delete template?

Save as template?