Small groups, called Pragati Bandhus, are helping marginal farmers in Karnataka plan their entire crop cycle besides giving them money.
This was a year of tears for banks and for many who banked on them. But not so for farmers in 5,000 villages of Karnataka who relied on the Pragati Bandhu model of banking developed by a microfinance institution (MFI).
Karnataka still has the largest number of farmers’ suicides, about 7,000 this year. But the model it houses is being acknowledged as the best remedy for farmer distress. Nabard says so, and more recently, it was chosen the best global model for inclusive banking at a contest sponsored by Citibank and organised by the Ashoka Changemakers.
Pragati Bandhus are groups comprising five small and marginal farmers and were formed by the Shree Kshetra Dharamsthala Rural Development Project (SKDRDP).
Their main goal is to provide hassle-free finance to small farmers up to a maximum of Rs 50,000 at 15 per cent interest on reducing balance. This is half of what other MFIs like SKS and Spandana charge.
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The second goal is to be physically by the side of the farmers to help them plan their crops and to counsel them on markets, technology, and so on.
There are 2,300 workers available to guide these groups, with one per 500 families or 50 groups.
The Pragati Bandhu model not only lends money but ensures that the farmers are able to repay.
The uniqueness of our loan is that they borrow for a major crop like sugarcane or paddy and pay in weekly instalments through minor crops, says Dr Manjunath Lingadahally, executive director, SKDRDP.
The trick is to make farmers plan vegetables, flowers, dairy farming, small-scale poultry, sericulture as these yield returns daily or on a weekly basis. When the main crop comes, the farmer is free of the loan. This way he has the confidence to face the adversities of weather as well as the market, points out Manjunath.
A committee set up by Nabard to suggest ways to stop farmers’ suicides and headed by Malcolm Harper suggested the Pragati Bandhu model as a remedy which should be replicated in 20 district on an urgent basis. The report never got implemented.
The Pragati Bandhu groups are about intense organisation. If a farmer grows jasmines in a tiny patch, he would have planned with other farmers in the village for pooling jasmines of all those who planted it and to sell it in a particular market.
The groups also function as labour exchanges. Each farmer in a group has to donate a day’s work to the group. The labour thus pooled can be used for larger development of the village.
Each farmer has a five-year plan and a short-term plan limited to the season, all made with the help of the Pragati Bandhu worker in his area, says Manjunath.
The MFI was set up in 1991, a decade after the NGO was started by a religious trust.
Manjunath says Vidarbha could have been avoided if weekly collections, coupled with help in planning, was provided. Banks don’t have the machinery to be with a farmer all the time, says Manjunath.
In the case of Pragati Bandhus, 20 groups in a village share plans and take the entire community forward rather than let one crop decide their destiny.
The MFI, which has a total outstanding portfolio of Rs 550 crore, is moving to three suicide-prone districts — Dharwad, Haveri and Gadaj — in the New Year. It aims to cover the entire state by 2011 and then may move out.
The MFI says it wants to be sustainable and not make profits. And yet they made profits of Rs 1.9 crore last year. Which is something they are feeling good about.