Keya Sarkar: An example to follow

OUT OF FOCUS

While it is true that in India we now have the largest microfinance network in the world through over one million self-help groups (SHGs), it is amazing to learn so many entitites in the financial sector are in the dark about their importance.

Many established bankers, insurers, finance companies, brokers, and financial journalists have little or no idea ofall how many NGOs are silently working towards creating a future customer base for them.

Although figures give us an idea about the extent of work, there is no substitute for meeting people to know the intensity of the effort. It was my privilege to meet senior members of Madurai-headquartered Dhan Foundation, earlier this month.

The Dhan Foundation's Kalanjiam programme, certainly one of the largest community banking programmes in the world, was started in 1990. Since then it has touched the lives of over 200,000 women, which has benefited about a million poor. And it is now scaling up to reach a million families.

The Kalanjiam programme focuses on women and believes that localised financial institutions, owned and controlled by women, are an effective strategy to impact on poverty and gender issues.

The primary unit of community financial institution is the SHG of 15""20 women and is called the "Kalanjiam". They act as a single window at their doorsteps for savings and credit transactions. A cluster of 10""15 SHGs in a panchayat or across four to five villages form a "federation", or an institution at a higher level.

They help create linkages with banks and apex financial institutions to meet multiple credit needs of members and collaborate with other government agencies to address the social and development needs of their members

The geographical spread of the programme is over 4,249 villages/slums of 74 locations in 26 underdeveloped districts in Andhra Pradesh, Tamil Nadu, Karnataka, and the Union Territory of Pondicherry. Of the total coverage, 81 per cent are rural poor, 16 per cent urban poor, and the remaining tribal poor.

Kalanjiam members have mobilised cumulative savings of Rs 34 crore and have a cumulative reserve and surplus of over Rs10 crore, totalling Rs 44 crore.

As I said earlier, these are mere numbers. And however impressive they might be, they do not tell the whole story. What is important to know is what is involved in setting up an SHG and carrying it through until it forms part of a federation and then becomes self-reliant.

To begin with, the Foundation workers have to identify the poorer districts of a particular state. In those districts, they then have to identify the poorer blocks and finally the poorest villages.

Once this is done, a participatory process with the villagers helps identify the poorer families and 15""20 women from such families form the basis of a self-help group. The first phase of their work then begins, which is to create a bond between these women while introducing the habit of saving among them. In the first six months, these savings form the corpus for consumption loans that the women may need.

After six months, during which one of the women's children may be taught to keep accounts, the group is introduced to a bank and the SHG is granted a loan equivalent to the group savings.

Ten to fifteen such groups in a panchayat or across four/five villages are then organised into a cluster development association with its general body elected from among the members.

An office is then hired and 15""20 office-bearers selected from the general body. This takes another six months. The cluster then begins to lend for consumption and the interest income accrues to the cluster.

In about two years, 10""12 clusters are organised into a federation with its own general body and office-bearers. As of December 2003, the Dhan Foundation had organised 13,344 primary groups or SHGs into 44 federations over 26 districts.

What the Dhan Foundation endeavours to do is to handhold the federations to make them self-sustaining by linking them to banks and donor agencies.

Most importantly, however, as the federation comprises women members drawn from the building blocks""the SHGs""they can address not only the financial needs but many of the social needs as well.

Federations that have existed for more than three years have initiated social development programmes including housing, infrastructure, health, education, sanitation, drinking water, skill building, etc.

As part of this process, the federations have established direct linkages with local and district administrations, municipalities, banks, financial institutions, and even industrial houses.

It is hardly surprising that many banks like Canara Bank, ICICI Bank, and ABN Amro are recognising the Dhan Foundation's work as hugely beneficial in creating an aware customer class for a variety of financial products and are more than willing to share some of their administrative costs.

Of course, Dhan is not the only example of yeoman service, but only a case in point. The challenge is to create many more of such professional NGOs that can show the banks the path.