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MICROFINANCE
AN INSIGHT INTO THE WORLD OF MICROFINANCE
COMPLIMENTARY WITH THE FINANCIAL EXPRESS
WE AIM
TO MAKE A
SIGNIFICANT
DIFFERENCE
TO RURAL
LIVELIHOODS
INTERVIEW | DR KG KARMAKAR,
MANAGING DIRECTOR, NABARD
W O R L D
APRIL-MAY-JUNE 2010
Jeevan Madhur
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[CONTENTS]
[EDITORIAL]
CONSULTING EDITOR
MONALISA SEN
monalisa.sen@expressindia.com
PAGE
PAGE
10
14
PAGE
Dear Reader,
'We aim to make a significant

difference to rural livelihoods'
InterviewDr KG Karmakar,
managing director, Nabard
Livelihood through SHGs

Dr S L Kumbhare &
Rashmi Darad
"Credit is a necessary but not

ample condition for livelihood
promotion
Vijay Mahajan, chairman of
BASIX
PAGE
16
PAGE
20
PAGE
22
PAGE
26
PAGE
30
4
Green livelihood support via

UPNRM-a Nabard initiative
Dr D V Deshpande
Hirbaiben Lobi, an icon

of women's empowerment
Julius Machado
The Mission Shakti approach

in Orissa
Dr. Pitabasa Sahoo
PAGE
A new form of empowerment

to support livelihood
32
Microfinance: The ADB

experience in Nepal
Mayumi Ozaki
Aloysius P Fernandez
PAGE
Hoping for a better life

Kumud Das
MICROFINANCE WORLD | April-May-June 2010
DESIGN
FE DESIGN
36
A powerful tool to pull the poor

out of poverty
Narendra Modi
ICROFINANCE in India is no longer confined

to sleepy hamlets in inaccessible interiors, but
is a fixture in the global debate on poverty alleviation and women empowerment. What began as baby
steps by committed individuals, driven more by compassion than money, to help out the poorest of the poor
and the underprivileged has now entered level 2.0 with
the movements lead player, SKS Microfinance, revealing an Initial Public Offering plan recently. Though the
SKS adventure also raised international concerns
about the ethics of profiting from the poorand drew
some bad press at homea very wide spectrum of institutional investors, both Indian and foreign, is looking
to join the envious march of Indias microfinance
industry. Today India has over 6.1 million self-help
groupsthe worlds largesttouching the lives of
almost 86 million.
All along, away from the limelight, playing the silent
role of enabler for this industry was the National Bank
for Agriculture and Rural Development (Nabard),
which, fittingly, is the sponsor of this edition. In this
issue, we carry an ensemble of inspiring stories of how
Hirbaiben Lobi has empowered the Siddi women of
Gujarats Junagadh, self-help affinity group Soukhya
help ex-sex workers make new livelihood strategies,
governments Mission Shakti programme created over
387,000 women self-help groups in Orissa and how
Nabards Umbrella Programme on Natural Resources
Management would care for the poor and Mother Earth.
An edifying interview by Dr KG Karmakar, managing
director, Nabard and an essay by Dr SL Kumbhare and
Rashmi Darad lend greater insight into the working of
Indias microfinance industry.
Enjoy reading the issue!
MONALISA SEN
Consulting Editor
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Email: microfinance@expressindia.com
MICROFINANCE WORLD
The Indian Express Limited
2nd floor, Express Towers,
Nariman Point, Mumbai - 400 021
April-May-June 2010 | MICROFINANCE WORLD
[COVER STORY ]
INTERVIEW
| DR KG KARMAKAR, MANAGING DIRECTOR , NABARD
We aim to make a significant

difference to rural livelihoods
Dr KG Karmakar managing director , Nabard, born in 1952, holds a
doctorate from the Jamnalal Bajaj
Institute of Management Studies,
Mumbai and a post graduate degree
in financial management. Dr Karmakar has penned over 60 articles on
rural credit and development banking. He has also authored six pioneering books, including agricultural
project management for banks, rural
credit, microfinance and SHGs and
The Silenced Drums in Tribal Development. For over 34 years, he has
served with various banking and financial institutions including the
State Bank of India, Reserve Bank of
India and Nabard and is a specialist
in agricultural credit, micro credit,
project management, rural infrastructure development and corporate
planning. He is also finalising his seventh book on Financial Inclusion in
India. He has also prepared three major reports to the government of India/RBI relating to the high powered
committee for financial restructuring
of handloom weaving industry, working group on outreach of institutional finance and co-operative reforms, XI Five-Year Plan (2007-12)
Livelihood programmes
require huge investments
in capacity building, access
to markets and technology
and government support
for social security
December 2006 and Task Force on
Empowering Board of Directors of
RRBs January 2007
The
SHG-Bank
Linkage
Programme
which
was
launched by Nabard in 1992
has made spectacular expansion during the last 18 years.
What according to you is the
future of the programme?
The SHG-Bank Linkage Programme is a saving led credit delivery mechanism for financially excluded persons which was chiseled
into a business proposition for
banks through the efforts of Nabard,
policy support from the Reserve
Bank of India and the field expertise
of NGOs. Having said that, we acknowledge the role played by our
partner NGOs, and other SHG-promoting agencies like RRBs, DCCBs

and Farmers Clubs in nurturing
SHGs upto the bank credit stage and
hand-holding. Since 1992 Nabard is
facilitating the programme with promotional grant assistance for nurturing SHGs and training and capacity building for stakeholders
including SHGs. Cumulatively
Nabard has supported the promotion and credit linkage of 2,06,040
SHGs (as on 31 March 2009) providing promotional assistance of
Rs 32.75 crore as on 31 March 2009.
This is approximately 6% of the
32.47 lakh non-SGSY SHGs which
had loan outstanding with the banking system as on March 31, 2009 and
goes to show that the growth of the
programme is self propelled and demand driven. Nabard has been supporting initiatives for an equitable
expansion of the programme in a
few resource-poor states with a disadvantaged distribution of SHGs.
However, the focus of the programme for the years to come will be
on maintaining and improving the
quality of SHGs to ensure their sustainability and enabling their grad-
[COVER STORY ]
uation to micro-enterprise promotion. Of late we observe that commercial banks find it easier to lend
huge sums to individual MFIs as it
helps them in achieving priority sector lending targets and this has hampered the progress of the SHG - Bank
Linkage Programme. The high interest rates being charged by the
MFIs is being ignored by the banks
and is not in the interests of the
poorer sections of rural society who
are SHG members. Also multiple
membership of poor women in
SHGs and taking up multiple loans
from SHGs, have led to repayment
problems. These issues need to be
sorted out at the earliest.
Several SHGs have matured

and are participating in the
Livelihood Programmes. What
is Nabards experience in
implementing
Livelihood
Programmes centred around
SHGs?
There are a substantial number of
credit-linked SHGs that are over
three years old and stabilised in
their credit and savings operations. It
is necessary that members of such
SHGs be encouraged to scale up Income Generation Activities and diversify their income earnings. Many
NGOs are trying to promote micro
enterprises among SHG members
but as their marketing abilities,
skills and experience are rather limited, some hand-holding or training
is needed. The critical constraining
factor, besides the low level of appropriate skills, is that SHG members
face a lot of problems in appropriately marketing their produce.
There is a need to evolve a methodology for promoting micro enterprises
to create livelihood and employment

opportunities among SHG members,
besides imparting relevant financial
skills and developing their risk-taking abilities. In this direction,
Nabard had initiated a pilot project
in nine districts across nine states
through professional marketing
agencies. Though the project did
show encouraging results, it was observed that there was a general preponderance towards farm sector activities and products for local
markets. There is a need to review
and upscale such efforts. However, it
need be said that not every SHG
member can be an entrepreneur and
a sizeable number of such people are
better off as wage earners as they
have no risk appetite or initiative to
become entrepreneurs. Therefore
livelihood promotion efforts include
the need for enhancing employment
opportunities in rural areas.
SHGs experience various difficulties in getting market access

and other support services for
pursuing livelihood activities.
How can the difficulties of
SHGs be addressed?
Livelihood finance is a comprehensive approach to promoting sustainable livelihoods for the poor that
includes financial services, agricultural and Business Development
Services (BDS) and institutional development services. Financial services should include a minimum of
savings, funds transfer, financial
counselling, affordable credit and
comprehensive micro-insurance
(health, crops and livestock) cover.
As the SHG model was succeessful,
most of the livelihood programmes
[COVER STORY ]
chose SHGs as the preferred delivery

route for all related services. Many
of the organisations have registered
successes and introduced innovative
approaches and practices eg.
Myrada, Dhan Foundation, Sewa,
SERP, etc. However, livelihood programmes require huge investments
in capacity building, access to markets, technology, arrangements for
monitoring and impact, assessment
and coordination, government support for social security and infrastructure development. This involves coordination of numerous
organisational efforts particularly
for savings in cost. Nabard is addressing the issue of marketing SHG
products in a multi - pronged manner. Nabard has been implementing
several livelihood promotion programmes financed under the
purview of Watershed Development
Fund (WDF), Tribal Development
Fund (TDF), Farm Innovation Fund
(FIF), Umbrella Programme for Natural Resource Management (UPNRM) etc.
GOI is contemplating converting SGSY into livelihood mission. What do you foresee as
the impact of this proposed
mission? Lastly, what role
Nabard could play in the
changing scenario, particularly in the farm sector?
The Mahatma Gandhi National
Rural Employment Guarantee Act
(MGNREGA) aims at enhancing the
livelihood security of people in rural areas by guaranteeing hundred
days of wage-employment in a financial year to an adult in every rural household who volunteers to do
10
tives for livelihood promotion efforts particularly through the SHG

or micro-enterprise mode. We also
recognise the important role played
by the corporate sector in forging
public private partnerships in this
regard particularly in synergistic
relations for skills upgrading
and access to discerning and complex markets.
unskilled manual work. The National Rural Livelihood Mission envisages covering all rural households (universalisation) through
SHGs by 2014-15. It is expected that
160 lakh families will enter the micro-enterprise stage by 2016-17 and
75 lakh youth will be given placement support. The NRLM focusses
on creating strong peoples associations like SHG Federations, provision of credit, improving access to
credit, marketing facilities and
hand holding. As an institution,
Nabard has been involved in all
these aspects of livelihood in the
past and would continue to do so in
the future. For the farm sector, the
creation of Joint Liability Groups,
Farmers Association, Farmers
Clubs are all essential as in creation
of rural jobs in agro-processing and
food processing sectors.
What are Nabards future

plans to upscale and deepen
the livelihood programmes,
particularly in the resource
poor regions?
It must be clarified that Nabard
has been working on livelihoods for
long. While microfinance is just one
sphere of activity in which peoples
mobilisation through the SHG-Bank
Linkage Programme, was possible.
Besides, we have pioneered watershed development and Wadi development in the farm sector which focuses on livelihood. The starting
point of all these could be enabling
access to finance which microfinance does but the end result is always directed towards livelihood enhancement. Similarly, in the
non-farm sector, we have managed a
What are the challenges and

opportunities
for
Nabard
in the light of the Union
Budget presented this year?
The Union Budget for 2010-11 allocated a further Rs 200 crore for the
Microfinance Development and
Equeity Fund (MFDEF) which is
housed and managed by Nabard as
the earlier tranche was exhausted.
This will enable us to fund NGOs/
NBFCs/MFIs to take up livelihood
issues in the next 2-3 years more
comprehensively.
host of products and processes such

as cluster development, Rudseti,
REDP, Drip, etc, focusing on livelihood issues in rural areas.
Greater access to bank finance for
the SHGs should become the route
for livelihood promotion as the average loan size per SHG member is
Rs 5,500 while the per SHG borrowing is Rs 76,000 only. On the other
hand, it also has to be appreciated
that micro-enterprise development
is not just an issue of access to finance. It is perhaps more important
to ensure systematic access to the
market to ensure the success of
livelihood related interventions
which is easier said than done. Successful marketing would necessitate aggregation, grading and sorting of produce in case of farm
produce as also partnerships with
private agencies. The success of eChoupal by ITC and eKutir by Intel
and Grameen Foundation of
Bangladesh are classic examples in
this regard. In the non-farm sector,
marketing becomes a more complex
issue. The marketing strategies for
non-farm products required by
masses could be again through cluster development and appropriate
partnerships. However, the strategy
for marketing handicrafts and more
unique items have to be different

and more exclusive in nature. To
put it in simple terms, you cannot
expect handicrafts items to be sold
in large retail chain outlets but you
can expect utility items like bags,
slippers, etc. to be sold from these
places. Our focus has been and will
continue to be multi-pronged with
regard to rural livelihood promotion, given the extreme complexities of the job in hand.
Nabard also looks forward to
partnering with new generation
training agencies and grassroots
level NGOs/NBFCs, for identifying
and supporting state-specific initia-
Have you drawn any roadmap

for furtherance of the livelihood opportunities, specially
through the interventions of
Nabard?
Whatever will succeed in developing the rural economy, open up avenues for gainful employment, specially for the rural unemployed
younsters, promoting SHGs for rural
women and micro-enterprises, enabling rural farmers to get better access to credit plus initiatives and
thereby ensuring better financial
margins for them, is all part of our
road-map. Nabard aims to make a
significant difference to the rural
livelihoods and the rural economy.
Our heart beats for rural India!
11
[FEATURE]
ARTICLE
bers could be viewed in terms of declining share of consumption loans

in total loans and resorting to income and gainful employment generating activities.
Livelihood through SHGs
Issues related to livelihood
Livelihood promotion is a complex process and calls for a

comprehensive approach to promote sustainable living in rural areas
DR S L KUMBHARE & RASHMI DARAD
HE institutionalisation of
self help groups (SHGs) and
their recognition by the banking system as a saving and effective
credit delivery mechanism in 1990s
was an important step in financial
inclusion of the relatively less
banked or unbanked rural areas.
More so, because it was built on a
premise that the SHG mechanism
would instill credit discipline in the
members and one day empower
them to become individual clients of
banks. What followed was a proliferation of the SHG-Bank Linkage Programme (SHG-BLP) to unprecedented heights (albeit not equitable).
After the pilot testing phase from
1992 to 1995, the Reserve Bank of India advised banks that lending to
SHGs should be treated as a normal
banking activity in 1996. This led to
the second phase (mainstreaming) of
the programme as banks started financing SHGs on a relatively larger
scale. During 1998-99, there was a
quantum jump in the number of
SHGs that had availed of loans from
the banking system to 18,678 from
12
Graduation of
SHG members to
entrepreneurs
requires intensive
training and handholding
on various aspects
like understanding
of markets, potential
mapping
and entrepreneurship
management
5,719 during 1997-98. This was the beginning of the growth and expansion phase (see graphic). As on
March 31, 2009 42.24 lakh SHGs had
loans outstanding with the banking
system, which included 9.77 lakh
SHGs under Swaranjayanti Gram
Swarozgar Yojana (SGSY). The loan
outstanding to the banking system,
of non SGSY SHGs, was Rs 16,818
crore.
Growth of SHGBank Linkage

Programme
The growth period there was also
steady rise in the quantum of loans
being received by SHGs from banks.
The average loan size of SHGs had
increased from Rs 11,333 in 1992 to
76,128 in 2009 (Table 1). However this
still translated into a meager
Rs 5,856 per member if we assume
that the bank loan was equally divided amongst an average of 13
members. The average loan disbursed per SHG has hovered around
Rs 70,000 for the last four years except during 2006-07 when it was
barely Rs 59,420.
The SHG-BLP has emerged as the
major microfinance initiative in India and most of the SHGs which
have a loan outstanding from the
banking system have come of age
and are attempting to graduate from
consumption stage to micro-enterprise. But it is obvious that the increase in bank loan over the years is
not sufficient for starting a profitable and viable micro-enterprises.
Assuming incremental capital out-
put ratio (ICOR) of 4:1, the loan

amount of Rs 5,856 per member was
expected to generate income of Rs
1,450 which can be adjudged as
abysmally low. Although such small
value loans may be enough, in the
initial stages, to support small trading activities like vegetable and fruit
selling. Some other challenges ahead
in the SHG-BLP includes equitable
expansion of the programme beyond southern states, graduating
from micro-credit to micro enterprise, improving internal control
systems,
reducing
cost
to clients, use of technology etc.
Against this background an attempt
has been made to look into some
of the issues relating to livelihood
and micro-enterprises for SHG
members.
Concepts of microfinance
and livelihood
According to Marguerite S Robinson, author of The Microfinance
Revolution: Sustainable Finance for
the Poor microfinance refers to

small-scale financial services primarily credit and savingsprovided
to people who farm or fish or herd;
operate small enterprises or microenterprises where goods are produced, recycled, repaired or sold;
who provide services; who work for
wages or commissions; who gain income from renting out small
amounts of land, vehicles, draft animals or machinery and tool; and to
other individuals and local groups at
the local levels of developing countries, both rural and urban.
Thus, the core and focus of microfinance is livelihood creation. Vijay
Mahajan, Mona Dikshit and
Kaushiki Rao define Livelihood as
a set of activities a household engages in on a regular basis in order
to generate adequate cash and noncash income to maintain a minimum desired standard of living,
both on a day-to-day basis and overa
longer period of time. Therefore
Concept of livelihood for SHG mem-
The graduation of SHG members

from borrowing for consumption
stage to borrowing for starting or
supporting livelihood is a natural
progression in the credit profile of
the SHG members. An impact evaluation study conducted during 200607, covering 310 members from 56
matured SHGs (which were at least
three years old) in Chittoor, Nizamabad and Warangal districts of
Andhra Pradesh revealed that 70%
of the members had initiated or
supported Income Generating Activities (IGA) but only 28% of them had
ventured into micro-enterprises
(MEs; An ME implied an IGA by creation of an asset with or without
credit support). These enterprises
were stand alone or family owned
MEs like dairy, pickle shop, flour
mill, etc. Average loan amount
availed by members with MEs and
IGAs was Rs.24,089 and Rs.17,171.
The net income accrued and the employment generated through the ME
households were higher by 70% and
81% respectively as compared to
non- IGA households who availed
the average loan of Rs.8,210 only.
Evaluation studies on micro-entrepreneurship among SHG members in Gujarat and Jammu & Kashmir also revealed that with the
passing of time, SHG members
shifted from consumption to production loans for setting up IGA/ME. In
Gujarat, the percentage of bank
13
loans utilised in asset creation improved from 8% in the first linkage

to 67% by the fifth linkage. The percentage of members graduating to
micro-enterprises activities included dairy, flour mill, rickshaw,
grocery shop, brick klin, mandap
decoration, etc. varied between 29%
in Gujarat and 32% in Jammu &
Kashmir. IGA household undertook
purchase of inputs for farm enterprises, mushroom cultivation, etc.,
and the proportion of such members
was 35% and 39% members in Gujarat and Jammu & Kashmir, respectively.
In certain quarters it is viewed
that access to financial services, including credit may enable rural poor
to start or expand a micro-enterprise and will allow them to rise
above poverty. Experience shows
that microfinance plus is a necessity
and in successful endeavours, backward-forward linkages were made
available to the group members.
Graduation of SHG members into
entrepreneurs requires intensive
training and handholding on various aspects like understanding of
markets, potential mapping, fine
tuning of skills and entrepreneurship management. In Gujarat and
Jammu & Kashmir, absence of rotation in leadership, declining membership of SHG over time, lack of
product diversification, use of low
level technology, inadequate infrastructure, etc., were some of the constraints identified in promotion of
MEs. While in Andhra Pradesh, absence of strong support system for
supply of raw material, technology
In certain quarters, it is
viewed that access to
financial services,
including credit, may
enable the rural poor to
start or expand a microenterprise and allow them
to rise above poverty
upgradation, capacity building of
entrepreneurs and marketing
arrangements were the major constraints.
NABARDs Initiatives in
Livelihood creation
through SHGs
Growth of SHG-Bank Linkage Programme

Figures in lakh
20
15
10
5
19
92
19 93
93
19 94
94
19 95
96
19 97
97
19 98
98
19 99
99
20 00
00
20 01
01
20 02
02
20 03
03
20 04
04
20 05
05
20 06
06
20 07
07
20 08
08
-0
9
Number of SHGs financed during the year
14
Pilot project on Micro-Enterprises

NABARD launched a Pilot Project
for promotion of MEs among members of mature SHGs in 2005-06 in
nine districts across nine states of
the country to understand the
processes which might facilitate the
preparation of a blue print for promotion of MEs among members of
matured (more than three years old)
SHGs was employed by MART. Under the pilot project, promotion of
MEs, was proposed to be undertaken
through suitable identified NGOs
having potential to function as Micro-Enterprise Promotion Agency
(MEPA) with the overall technical
assistance for the project from Marketing and Research Team (MART).
3M model which was employed by
MART addressed three basic needs
of micro finance, micro market and
micro planning to help poor in starting economic activities for livelihood promotion with the help of
NGOs / development agencies. The
major findings of the Pilot Project
were as follows :
a. 77.45% of the micro-entrepreneurs received training in farm and
off farm sector / activities
b. Number of IGAs/ MEs started
covered 64% of the members trained
(7,177).
Evaluation studies of
Nabard also revealed similar if not
the same results (See table 2)
c. 98% of the members which
started IGA / Micro Enterprises
were credit linked with banks. The
average amount of credit per ME
across the nine States was Rs.17,080.
d. Choice of traditional activities
was encouraged in order to build on
existing capacities and capabilities.
Identified SHG members undertook
training for improvement of skills
and started enterprises in traditional activities which they have
Average bank loan per SHG (including SGSY)

Year
Number of
SHGs financed
during the year
Amount of
loan disbursedduring
the year (Rs. Crore)
Average loan
disbursed
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
State
Gujarat
No. Of SHG
Members
studied
% of SHG members undertaking

Income
generating
Micro
activities
Enterprises@
Recovery
%
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)
been pursuing prior to the commencement of the ME Pilot Project.

These included mainly farm and offfarm activities (dairy, goatery, vegetable cultivation etc.) which constituted approximately 77% of the
micro-enterprises promoted.
e. As compared to Farm Sector
fewer Non Farm Sector Activities
were taken up as they required more
sophisticated skills, markets and
marketing skills.
Micro Enterprise Development
Programme(MEDP)
Further, during 2006, the Micro
Enterprise
Development
Programme (MEDP) was launched for
development of sustainable livelihood for SHGs. The MEDP are short
duration (3 to 13 days), location specific programmes on skill upgradation / development for sustainable
livelihoods / venturing micro-enterprises by matured SHG members. It
is a supplemental effort to upgrade/
develop skill and preliminary business acumen of SHG members in order to enable them to cope up with
the issues in relation to successful
enterprise for income generation/
livelihood.
Support to SHG Federations
Along with the increase in number of SHGs, a few basic and next
generation issues related to SHGs
have been posed for maintaining the
quality of the SHGs, their continued
dependence on the SHG promoting
institutions, covering other financial services than thrift and credit
and making a transition from availing credit to higher levels of livelihood activities. Some of the state
governments and NGOs have resorted to promoting federations of
SHGs to address these issues
through empowering the SHGs and
making them more self reliant.
There are examples which have
proved that SHG Federations could
play an important role in nurturing

of groups, in increasing the bargaining powers of group members and
in livelihood promotion. Considering the emerging role of the SHG
Federations and their value addition
to SHG functioning, Nabard supports the Federations of SHGs on
model neutral basis and on merits of
the proposal.
Micro Finance Development and
Equity Fund (MFDEF)
As per announcement made in
Union Budget for 2010-11, Government of India has enhanced the corpus of Micro Finance Development
and Equity Fund (MFDEF) from the
existing Rs 200 crore to Rs 400 crore
in the ratio of 2:2:1 by Nabard, RBI
and Commercial Banks. The Fund is
housed and managed by Nabard.
Nabard has planned to upscale and
consolidate the SHG-Bank Linkage
Programme and microfinance interventions.
Conclusions
Livelihood promotion is a complex
process and requires a comprehensive approach to promote sustainable livelihoods particularly in rural
areas. Under NREGA, the Government of India assures a wage of
Rs.100 for 100 days unskilled labour
employment to any person willing to
work in rural areas. In this scenario,
it is expected that any IGA adopted
in rural areas should at least provide
Rs.10,000 per annum to the entrepreneur. Interestingly, a field experience at Shimoga, Karnataka, revealed that handloom weavers
despite the low income (about Rs.85
per day) from their activity did not
want to take up strenuous labour
work under NREGA. It was later
learnt that strenuous labour made
their fingers stiff and adversely affected their dexterity in weaving.
15
[ARTICLE]
BASIX VIEWS
Credit is a necessary but not ample

condition for livelihood promotion
However, there are two issues that need to be addressedhow to
reduce interest rates and the net impact of microcredit
VIJAY MAHAJAN
ICROFINANCE began in
India in the 1990s as a way
of alleviating poverty, by
encouraging income generating activities by poor households. Since
then, the outreach of microfinance
institutions (MFIs) in India has
crossed 30 million poor households as
at the end of March 2010. This is very
commendable. However, there are
two issues need to be addressed - how
to reduce interest rates and the net
impact of microcredit.
Let me take the example of BASIX,
which is working with over a million
poor households. For the first five
years since inception in 1996, BASIX
took the approach of primarily delivering micro-credit to its customers.
After five years of pursuing this approach, BASIX carried out an impact
assessment the year 2001. The results
of this were rather disappointing.
Only 52% of the customers, who had
The author is chairman of BASIX
16
received at least three rounds of micro-credit from BASIX, showed a significant increase in their income
(compared to a control group), 25%
reported no change in income levels
and 23% reported decline in their income levels. BASIX then carried out
a detailed study of those who had had
no increase or even a decline in income and found that the reasons for
this could be clubbed into three factors:

(1).un-managed risk in their lives
and livelihoods
(2) low productivity, in terms of
poor yields and higher costs, and
(3) Unfavourable terms in input
and output market transactions.
This showed that there is a need for
risk mitigation, yield enhancement,
cost reduction, and bringing rural
producers together for better bargaining at the market place. Hence in
2002, BASIX revised its strategy, to
provide a comprehensive set of livelihood promotion services to rural
poor households. BASIX reaffirmed
that credit is a necessary but not sufficient condition for livelihood promotion. Its revised Livelihood Triad
Strategy included provision of financial services beyond credit - such as
insurance; provision of agricultural,
livestock and non-farm enterprise development services; and institutional
development services for producer
organisations.
Microfinance institutions have

started offering group life insurance
to all their borrowers, as this is easy to
administer. Some have also added
group health insurance to this. However, traditional or weather-index
based crop insurance can be extended by MFIs in collaboration with
private insurance companies. A large
proportion of MFI customers own
livestock and thus livestock insurance provided in collaboration with
private insurance companies would
be a boon. Finally, insurance of
goods, equipment, premises would be
useful for non-farm micro-enterprises. All these reduce the financial
effect of adverse events that may happen to any poor household. Once
convinced of this, poor households
willingly pay for these services. They
also reduce the portfolio risk for
MFIs. However, insurance only reduces loss, it does not enhance incomes. That requires livelihood promotion services.
Examples of agricultural services
include soil testing and advice on the
right type of fertiliser, advice on
which crop and variety to sow, access-
Over 20% income of

Basix came from insurance
and livelihood promotion
services. The economies of
scope added to the
economies of scale. This
enabled BASIX to reduce
its interest rates, even as
its borrowing cost went up
ing good quality seed, timely and appropriate advice on ploughing, weeding and pest management during the
crop cycle and training in harvesting
practices (such as clean cotton).
Livestock services include animal
health checkups, vaccination and deworming, and training in feed and
fodder and better dairying practices
(such as clean milk). These interventions lead to reduction in costs
and risks and enhancement of yields.
To gain better prices in the market, however, farmers need to be
brought together in groups, initially
informally and later in formal bod-
ies like cooperatives or producer

companies. Thus farmers can buy
inputs like seeds, fertilizers and
agro-chemicals in bulk at a discount.
Similarly, they can sell their produce
in bulk to agro-processors, to get better prices. They can also engage in
local value addition, such as getting
kapas cotton to produce lint cotton.
Linking dairy farmers to milk marketing chains of cooperatives or private dairy companies, significantly
increases the prices they realize for
milk. In case of non-farm products
like handlooms and handicrafts,
linkages are established with entities like Fab India.
It is possible to provide such services on a profitable basis? Experience
indicates that it is possible where
there are a large number of farmers
in a cluster of villages, serviced by
para-extension workers or para-veterinarians. After some free trials,
farmers willingly pay for these services. Non-farm micro-entrepreneurs
such as handloom weavers in clusters
like Chanderi are supported by designers for a fee.
By March 2010, BASIX had two million micro-insurance and half a million customers for agriculture, livestock, and non-farm enterprise
development services. Over 20% of
its income came from insurance and
livelihood promotion services.
Economies of scope added to
economies of scale. This enabled
BASIX to reduce its interest rates,
even as its borrowing cost went up.
It is high time MFIs learn to go beyond just microcredit to livelihood
protection and promotion, thereby
truly contributing to improving the
lives of the poor.
17
[VIEWPOINT]
(NRM) plays an important role in

livelihoods of the poor and therefore
it is possible to have green livelihoods if the activities are designed
in a sustainable manner. The most
critical elements here are the access
to and equitable management of local resources in a viable and sustainable way and to design suitable
livelihood interventions for the rural poor. With this in mind, National
Bank for Agriculture and Rural Development (Nabard), with assistance
from the German Development Cooperation (GDC) viz., KfW and GtZ,
has designed a unique product
named Umbrella Programme on
Natural Resources Management
(UPNRM) being discussed in following paragraphs.
NABARD INITIATIVE
Green livelihood support

through UPNRM
A flexible financial product for sustainable natural resource
management-based livelihood, UPNRM will help the poor
DR D V DESHPANDE
UPNRM Objective:
REEN livelihood: In this era

of the global concern about
climate change, everyone
wants to contribute to sustainable
development without leaving a big
carbon foot print Emission of
Green House Gases (GHG) per capita
carbon foot print by going green.
This process has added a new set of
terms to the development professionals lexicon, viz., green energy,
green buildings, green transport
and even green political parties.
In this context green livelihood
would mean what is sustainable in a
given setting. Sustainable development is defined as meeting the need
of present generation without compromising the capacity of future
generations to fulfil their own needs.
This entails sustained efforts to
raise the quality of life of rural people.
In developing countries like India,
it is generally argued that the cost of
green technologies and methodolo-
18
gies is very high, which we find difficult to afford. Due to this factor, we
feel that it might slow down the
growth rate of our economy. However, it is becoming apparent that it
is quite possible to have environmentally sustainable livelihood generation in Indian (and developing
countries) scenario also, provided
the projects are planned with appropriate methodologies and the people
are involved wholeheartedly.
Livelihood and microfinance

differences in approach
Livelihood is a set of activities
through which a household meets its
basic needs and earns income. When
carried out in a repetitive basis they
tend to become a way of life. The vast
majority of people in a developing
country like India make a living
through self-employment or wageemployment in the informal sector.
Microfinance through self-help
groups (SHGs) has been a key move-
ment for the rural masses and India

is in the forefront with the highest
number of SHGs in the world at 61
lakh, touching the lives of almost 860
lakh families under the SHG-bank
linkage programme supported by
Nabard and banks.
Microfinance is often defined as financial services for poor and low-income clients and include microcredit, savings, insurance, money
transfers and other financial products targeted at poor and low-income
people. Microcredit is a sub-set of
microfinance and refers to very
small loans for generally poor borrowers with little or no collateral,
provided by legally registered institutions.
There is a debate about the efficacy of microfinance as a tool for
poverty alleviation. The large number of SHGs as a vehicle of microfinance has indeed mitigated the problems of the poor. Jonathan Morduch
and Barbara Haley have reviewed
the literature in this regard and concluded that microfinance had positive impact on poverty reduction as
it relates to the first six out of seven
Millennium Development Goals.
There are other researchers like
Par Vernica Gonzlez Aguilar
(2006) indicated that microfinance
has its limitations. It should not be
seen as the only solution to poverty
alleviation. In certain circumstances other interventions could be
more effective than micro-finance.
Nonetheless, livelihood is different from microfinance as the poor often follow a basket approach aimed
at diversifying risks. The basket of
activities generally comprises agriculture, livestock, fisheries, wage
labour, forest-based activities and
the like and some of which could be
supported through microfinance.
Microfinance and livelihood have
some commonality but at the same
time have some differences. Pictorially these two ecosystems could be
Natural resource
management (NRM) plays
an important role in the
livelihoods of the poor and
therefore, it is possible to
have green livelihoods if
the activities are designed
in a sustainable manner
depicted as given in Figure 1.
NRM-based livelihood
Despite Indias high economic
growth rate, around 37% of total
population and 41.8% of rural population is estimated to be below
poverty line as per the Tendulkar
committee report. The poor primarily are dependent upon agriculture
and other natural resource-based activities for their livelihood. Thus
natural resource management
The objective of UPNRM is to provide financial support for improving

the livelihoods of the rural poor
based on the use and management of
natural resources. The financial support comprises mainly loan on soft
terms for taking up livelihood interventions and grant for capacity
building of the community for taking up specific livelihood and also
for providing requisite linkages to
facilitating agencies. UPNRM envisages a gradual shift from grantbased to loan-based NRM projects.
The programme aims at assisting
community-managed sustainable
NRM-based livelihood projects, especially
of
the
socially
marginalised/disadvantaged groups.
Guiding principles: In order to
have a focused approach, following
guiding principles have been
evolved to assess the projects:
Pro-poor: The programme recognises the need to address socio-economic disparities by ensuring equitable access to environmental
19
[VIEWPOINT]
resources and quality for all sections

of society, particularly the poor and
the disadvantaged who are most dependent on natural resources for
their livelihoods.
Ensuring sustainability: The
programme emphasises the importance of integration with environment concerns as an essential
means for accelerating and sustaining development and human wellbeing.
Community participation: Empowerment of local communities
and their voluntary participation in
project design, implementation and
monitoring for the appropriate use
of natural resources for equitable
and sustainable development.
Good governance: Effective project implementation depends directly
on strengthening decentralised
governance to ensure participation
of the rural poor and other disadvantaged groups in local decisionmaking and achieving equity in
ownership, access and use of resources in a transparent and responsible manner.
Integrated and needs-based approach: An integrated approach
merges various disciplinary perspectives as well as achieves convergence with existing initiatives to facilitate
the
development
of
appropriate technologies/ products/
approaches that are responsive to
the needs of the local community.
This requires the programme design
to be context-sensitive and flexible.
Portfolio of activities
to be supported under the
NRM sector
The support under UPNRM is ex-
20
keting support, infrastructure support and facilitation cost in the form

of adequate margin to the facilitation agency (called channel partner) and risk mitigation strategies
like insurance of asset as well as life
of the ultimate borrower. This is expected to ensure success of the project as all the possible causes of failure are plugged.
tended to the following category of

activities:
a) Core / priority areas:
Soil and water conservation (including watershed programmes,
dryland farming systems)
Plantation and horticulture
(tree based farming, bamboo-based
farming, wadi development, organic
farming, energy plantations)
Forestry activities (rehabilitation and management /community
A majority of the clientele

falls in the most vulnerable
groups of the poorest of
the poor belonging to
scheduled castes,
scheduled tribes and
women. Through UPNRM,
it is possible to reach these
sections of people
forest management, biodiversity
conservation)
Farming systems management
(including livestock and aquaculture resources)
Climate change adaptation /
Clean Development Mechanism
b) Supplementary/support areas: These include following forward
and backward linkages and livelihood generating activities:
Processing, storage, marketing;
Critical rural infrastructure (including rural roads, minor irrigation, drinking water);
Renewable energy (micro/minihydel, biomass-based power genera-
Status of UPNRM
tion, biofuels, wind-power, solar

power);
Livelihood generating activities
(dairy, poultry, fisheries, etc);
Micro-finance
Any other activity which supports
efficient implementation of the projects covering the core areas and,
thereby, intensifying their impact.
c) Information & knowledge management (IKM) and capacity building:
In order to allow the first two
groups of activities, mentioned
above, to function effectively for sectoral impact, necessary enablers
such as capacity building, project
preparation, planning, infrastructure, IKM systems, etc. would be cov-
ered under the NRM sector.
Key strengths of UPNRM vis-avis conventional products

UPNRM envisages NRM through
augmenting and incentivising private investments which was otherwise considered primarily a government/
public
responsibility.
However, it is being realised that
people would be ready to invest in
NRM-based investments if they are
convinced of the need and viability.
Despite the vast network of mainstream banks, cooperative societies
and microfinance institutions, there
are several areas, activities and
clientele who do not fit into the eligibility criteria of these institutions.
A majority of this clientele falls in
the most vulnerable groups of

poorest of the poor belonging to
scheduled castes, scheduled tribes
and women. Through UPNRM, it is
possible to reach these sections
of people.
Under UPNRM the experience
of microfinance through SHGs has
also been combined to involve the
groups in assessing creditworthiness of the individual borrowers as
well as exerting peer pressure for repayments.
The innovative design of UPNRM
engulfs the concept of credit plus
approach, meaning, thereby, that as
against pure financial support
through conventional banking channels, UPNRM provides a package
comprising capacity building, mar-
The response to UPNRM so far has

been quite good as 27 projects have already been sanctioned which are
spread over from Tamil Nadu to Andaman and Nicobar. The portfolio of
projects comprises following areas:
Integrated animal husbandry in
tribal development fund (TDF) / watershed project areas
Medicinal & aromatic crops
Non-timber forest produce--honey and tasar silk
Agro processing & agribusiness
Livelihood interventions in watershed areas
Eco-friendly farming system
management- system of rice intensification (SRI)
Soil & water conservation
Ecotourism
Agroforestry
Value additioncoir-based
board
The above projects are sanctioned
to a variety of partners like NGOs,
producer companies, cooperatives,
companies, etc.
Information:
The details of UPNRM, including
the formats for submitting the project, list of already sanctioned projects and profile of the selected projects, are available at Nabards
website (www.nabard.org) and the
link is http://www.nabard.org/
farm_sector/ nrm_upnrm.asp.
21
[ARTICLE]
HIRBAIBEN LOBI
An icon of womens
empowerment
Hirbaiben has led the illiterate, underfed and disempowered Siddi
women of Junagadh to self-help and entrepreneurship
JULIUS MACHADO
alala, in Gujarats Junagadh

district, is a nondescript
taluka, known for its luscious
Kesar mangoes and about 15 km
ahead of Sasan, the entrance to the
Gir forest. A left turn from Talalas
central town takes one towards Madhopur and Jambhur, two adjacent villages. For a first-timer, features of the
people enroute would arouse curiosity. It would seem one is travelling in
central Africa, or a West Indian island. The distinct Afro-features of
men and women have nothing to do
with the topography of the place; it
owes solely to their origin.
Welcome to the world of Siddis. Of
Ethiopian origin, Siddis were
The author is assistant general

manager-public relations, Nabard.
He had worked as district development manager of Junagadh.
He can be reached on
juliomacho@rediffmail.com
22
brought by the Nawab of Junagadh

as workers more than 400 years ago.
Now they have been resettled by the
government in Jambhur village of
Talala taluka in Junagadh. And welcome, too, to the world of Hirbaiben
Ibrahim Lobi, a Siddi woman, whose
vision, perseverance and leadership
qualities have made her into a beacon of enlightenment. Hirbaiben is
the essence of woman power, a true
woman of substance who has transformed the lot of the illiterate, underfed and disempowered Siddi
women of her community into a universally successful model of
womens entrepreneurship.
Hirbaiben was just another hapless girl of her community, who lost
her mother at four, and father at 14.
Illiteracy, unemployment, indebtedness and alcoholism were rampant
among the menfolk, and women foraged and sold fuel wood from the
nearby Gir forests for sustenance.
Her marriage to a landless man did
not help matters much. Hirbaiben

had inherited half a hectare from her
father, on which she inherited a debt
of about Rs 1 lakh. Like all others in
the village, she too was under constant pressure to sell the land to clear
the debt. This was the starting point
in Hirbais mission to be different.
Hirbai persuaded her husband to
till the land, instead. By dint of
sheer hard work and better farming,
she managed to produce enough
over the years to repay the debt and
recycle for more. Today, Hirbais
farm stands a shining testimony to
her labour and foresight. Mango orchards, coconut trees, vegetables
and sugarcane crop adorn her land.
The land boasts of a well, too, with a
pump set, sprayer and other farm
implements.
Having reached a comfort zone in
her private life, Hirbaibens next task
was to spread education and self-help
among her community. With support
from an NGO, The Aga Khan Rural
Support Programme (AKRSP), and

the state, Hirbai started a day care
centre for children and followed it up
with a primary school.
Cleaning the cobweb of superstition was another job she took on
hand. Jambhur village did not have
a flour mill because people believed
that it will invite the wrath of Peer
Geban shah, whose mausoleum was
in the village. Hirbai narrated to us.
(Siddis owe allegiance to Islam). It
took her weeks of persuasion and
scores of meetings to dispel the
myth and open a mill.
The most striking achievement of
Hirbai is the promotion of the selfhelp groups (SHGs) among the
women of her community that has
led to their social and economic empowerment. Starting with one
group of women, which addressed
health and hygiene issues, Hirbai
flitted from locality to locality, village to village, like a Florence
Nightingale, spreading the message
Hirbai today holds an

iconic status in not only
Junagadh but also most
parts of Gujarat. Not a
single women
development programme
or SHG initiative in
Saurashtra takes off
without her presence
of SHG. Today, the effort has borne

fruit with 95 women from six villages in the vicinity having formed
12 such groups known as mahila
vikas mandals (MVMs).
Hirbai, for all her rustic simplicity, is no ordinary woman. Not resting on her laurels in social awakening,
she
showed
that
in
entrepreneurial skills she was no
less gifted. Hirbai knew that eco-
nomic uplift was the key to social

change. In 1999, with the backing of
AKRSP, Hirbai started a project to
manufacture organic manure. Involving the women from her own
SHG, the Nagarchi MVM, Hirbaiben
offered her farm precincts to make
compost for the venture, and gave a
guarantee that she would buy all the
200 bags, if unsold. Mid-day meal,
tea and snacks were thrown in for
the women workers. Today, the organic manure, which has been
branded as Panchatatva, is a
household name among farmers in
the area, and brings in lakhs of rupees as turnover. Our produce is
slightly costlier than our neighboring competitors, says Hirbaiben,
but since our quality is much superior, our produce sells.
For all her achievements, Hirbaiben remains as modest as ever
and is willing to share her experiences. She shows unbridled enthusiasm in taking visitors around her
farm and the compost production
unit, sporting her trademark toothy
grin. The woman in her comes to the
fore however, when she remembers
the tribulations of her childhood and
adult days and tears well in her eyes.
Hirbai today holds an iconic status
in not only Junagadh but also most
parts of Gujarat. Not a single women
development programme or SHG
initiative in Saurashtra takes off
without her presence. A gifted orator with hands-on experience of
women empowerment, she is never
short of words at public functions.
Here is a women of substance and a
shining icon of success, whose livelihood initiatives for rural women are
worthy of emulation everywhere.
23
[FEATURE]
chayat, block and district levels;

Building up the capacity of those
institutions (from SHGs to federations);
Strengthening livelihood measures and consolidating the efforts to
ensure the sustainability of the initiatives;
Efforts to ensure market linkage
to SHG products across the state and
nation; and
Convergence with different govt.
departments in the state
The other key players for strengthening the network are NGOs, banks,
Nabard, Sidbi, financial institutions
& SLBC (state-level bankers committee).
SUSTAINABLE LIVELIHOOD PROMOTION
The Mission Shakti

approach in Orissa
Vigorous implementation and monitoring at various levels have
made the programme an astounding success in the state
DR PITABASA SAHOO
Mission Shakti structure
USTAINABILITY: Early definition of sustainability was

based on maintenance or accretions in a fixed bank of biologically renewable resources. Historically, there have been three stages of
sustainability; first, it was a physical
concept
for
a
single
resourceusually a biologically renewable resource. Second, was a
physical concept for a group of resources (ecosystem). Third, is a social-physical-economic concept--sustainability or capacity to support
(human) life at a constant or rising
level, even with a changing mix of
biophysical resources (ADB, 1991).
FAO (1990) takes a broader view of
sustainability, yet combines it with
an older, conservationist and physical approach to the biophysical resource base sustainability. It insists
that management and conservation
of the natural resource base, and the
orientation of technology and institutional change should be in a man-
24
ner that ensures the attainment and

continued satisfaction of human
needs for present and future generations. Such sustainable development
(in the agriculture, forestry and fisheries) conserves land, water, plant
and animal genetic resources in an
environmentally non-degrading,
technically appropriate, economically viable and socially acceptable
way.
Livelihood: A livelihood consists
of the capabilities, assets and activities required as a means to a living.
A livelihood is sustainable if it can
cope with and recover from stress
and shocks, maintain or enhance its
capabilities and assets. This provides net benefits to other livelihoods both now and in the future
without undermining the natural resource base. Livelihood implies systems of how people make a living
and whether their livelihoods are secure or vulnerable over time.
Livelihood situation in Orissa:
The states economy is characterised

by rural poverty and food insecurity.
Orissas primitive ethnic communities, especially women and children,
are particularly vulnerable from
subsistence-level agriculture and
non-availability of subsidiary employment opportunities. With no effective marketing system for their
agricultural and forest produces,
these communities are at the mercy
of unscrupulous traders.
Mission Shakti approach: Mission Shakti is a central government
programme for holistic empowerment of women. Launched on March
8, 2001, the programme had a target
to organise two lakh women selfhelp groups (WSHGs), covering all
revenue villages of Orissa. To its
credit, 3,87,325 WSHGs have been
formed and nurtured by Mission
Shakti in Orissa.
Mission Shakti objective was to
speed up the process of empowerment of women through SHG move-
ment, taking microfinance as a human development tool. Its goal was

to create a conducive microfinance
environment in the state (i) to maximise involvement of households in
the SHG movement, (ii) to develop
client-managed, client-controlled
and client-owned microfinance federation, and (iii) to empower the
poor by building self-managed institution of women, especially women
SHG federations at various levels.
Since its inception, Mission
Shakti has been working holistically
to encompass different aspects of
women empowerment through SHG
movements. These include expansion of credit linkage to SHGs so
that they have paid-up capital to
start economic activities. This also
requires capacity building of SHGs
in accounting, livelihood activities
and skill upgradation in employment generation activities. Products
made by WSHGs require standardisation, quality control and good mar-
keting. Mission Shakti activities focus on capacity building, livelihood

promotion, consolidation through
strengthening federation, microcredit support, convergence with other
government programmes etc.
WSHGs are categorised into priority groups depending on their potential and use of available resources.
The major areas of operation include: microcredit; entrepreneurship development; livelihood security: agriculture & allied activites;
health, hygiene & sanitation; capacity building and resource management; and IT and education
The
programme
aims
to
strengthen the WSHG movement by
forming federations and linking
them to various funding agencies.
Mission Shakti has taken up following strategies since its initiation:
Formation and strengthening of
WSHGs;
Institutionalisation of WSHGs
effort by federating them at pan-
Tier-I: As a first step all the

WSHGs formed on the principles of
viability, replicability & sustainability shall be the members of panchayat level federation called the
Panchayat Mission Shakti (PMS)
Federation.
Tier-II: All the gram panchayat
level Mission Shakti federations
shall be federated at block level
called block level federation
(BMASS).
Tier-III: The District Mission
Shakti shall be a federal body of all
block level federations at the district
level called District Federation
(DMASS).
To implement the proposed model,
there is requirement of a social infrastructure from village to the district level and finally at the state
level. It is a matter of strength that
Mission Shakti has already achieved
that. At the village level, 367000
women SHGs operate now.
Empowering women and building the future: Under a strategic decision and approach for replicating
the most successful models of
25
[FEATURE]
WSHG movements across the country, the Orissa government has been
supporting the model that envisaged
to form and strengthen the federations of WSHGs to showcase women
power, bring gender equity and promote self-reliance in povertystricken families as an institution
building step for sustainable development.
This community building approach has been key success of Mission Shakti. Each GP has a federated
body consisting of representatives
from WSHGs within the GP. Each GP
level federations sent representatives to form a block level federation.
Thus, a large number of GP level federations (GPLF) are now operational
in Orissa. Mission Shakti has meticulously engaged consultants in addition to regular staff members to
strengthen the state level operation
for the optimal utilisation of fund
and appropriateness of the programme envisaged by the government of Orissa. It also made several
convergences with different government houses and tried to empower
women under poverty and improve
their condition.
Mission Shakti cell at the

district level
To strengthen the block level
WSHG federations, the following
steps have been taken by Mission
Shakti so far:
Block level federations are registered under the Society Registration
Act;
Each block level federation is
equipped with a dedicated team of
micro-finance specialist, livelihood
special specialist, and multipurpose
26
worker;
Deployment of Mission Shakti Coordination from existing pool of
ICDS supervisors exclusively to look
into Mission Shakti affair at the
block level and strengthen the federation;
Ensured support and guidance
from block level ICDS team;
Mission Shakti has supported the
federation offices with computer,
printers and minimum infrastructure for a workable office of these
peoples organisation exclusively
run and managed by women of different SHGs.
The district social welfare officer
Mission Shakti is a central

government programme
for empowerment of
women. The programme
had a target to organise
two lakh women self-help
groups, covering all
revenue villages of Orissa
is entrusted to supervise, monitor
and guide the entire initiative and
directly intervene in the process.
The district collector plays a major
role as the authority of the programme at the district level.
All these support to federations resulted in proving their efficiency in
financial and team management, financial inclusion and micro-credit
promotion activities across the
years. In most of the districts this
support made several changes and
there have been tremendous

changes in production and promotion of SHG products.
Creating social capital and

addressing vulnerabilities
through convergence effort
Mission Shakti has been successful in playing a role of catalyst in
converging many government departments and got involved as the
implementation partner of various
projects in favour of women development. The movement has made successful convergence with different
government of Orissa departments,

institutes and missions.
Sustainability of the initiative

Since its inception, Mission
Shakti has been working holistically
to encompass different aspects of
women empowerment through SHG
movements. Mission Shakti being
the flagship initiative of the government of Orissa with full political
and administrative back up, almost
all the development departments
have become a partner at the grassroots level. These departments in-
clude panchayati raj, rural development, agriculture, horticulture, education, health, youth affairs and
fisheries and animal husbandry. The
programme is sustainable having
the technological back up to monitor
its progress through video conferencing---on each first and third Monday----with Mission Shakti state
team, along with experts at NIC,
Bhubaneswar, and discuss the matter with district level teams headed
by DSWOs.
The other key players for strengthening the network are NGOs, banks,
Nabard, Sidbi, financial institutions

and SLBC, who closely work with
the mission to encourage women
empowerment at the grassroots level
through discussions on social, environmental, agricultural issues, and
problems and conflicts such as: economic independence, dowry and domestic violence, group activities, financial inclusion, education of
children, youth issues, liquor prohibition and marketing linkage of
SHG products.
Let us compare Mission Shakti
with Kudumbasree, the poverty
eradication mission of Kerala government. Kudumbasree is a community-based self-help initiative involving poor women.
Its mission statement is to eradicate absolute poverty in ten years
through concerted community action under the leadership of local
self-governments, by facilitating organisation of the poor, combining
self-help with demand-led convergence of available services and resources to tackle the multiple dimensions and manifestations
of poverty.
Mission Shakti is a programme
for economical, social, and political
empowerment of women to eradicate poverty and ensure sustainable human development in all revenue villages of Orissa. To its
credit, 3,87,325 WSHGs have been
formed and nurtured by the programme in Orissa, covering all
backward and tribal blocks of the
state. Not only economic but also
social, environmental and cultural
issues in the villages are tackled
through Mission Shakti, which has
made it a unique initiative.
27
[FEATURE]
SAGs: FACILITATING LIVELIHOOD STRATEGIES
leaders captured all available credit

at cheap rates and on-lent to the poor
at rates ranging from 40-60%. The
poor then protested (with some help
from Myrada), and formed groups on
their own. Myrada called them credit
management groups. In 1987, when
Nabard provided Myrada with a
grant to match the savings of good
groups and to train the groups in institutional capacity building, the
name was changed to self-help
groups. When the programme became target-driven after 2000 and
members were selected on external
criteria, Myrada changed the name
to self-help affinity groups to focus
on the internal bonds that linked the
members who self-select themselves.
A new form of empowerment

to support livelihood
Members of self-help affinity groups are multi-taskers and good
managers of their livelihood strategies
ALOYSIUS P FERNANDEZ
The SAGs, if properly

trained in institutional
capacity-building,
together with their
federations, provide the
space to generate women
empowerment
HEN a young business

graduate ends his/her introduction by saying Im
good at multi-tasking, I feel like saying that all the poor in our self-help
affinity groups, soukhya groups (sex
workers, most of whom are part
time), have multi-tasked all their
lives. Unlike us, they have no fulltime jobs. In fact, they move from job
to job. They survive because they
have a livelihood strategy that comprises several jobs or income-generating activitiesmany of which
require relocation.
On the contrary, anti-poverty programmes like SGSY suffer from a
single-frame fixation they provide
one or at most two large viable assets (assets like cows and sheep)
which in many cases do not fit into
the livelihood strategies of the poor
family.
Again, the poor manage their affairs amidst scarce resources and operation of market forces. And anyone
28
surviving there must be a good manager. Years ago, when a senior official
asked me how liberalisation would
affect the rural poor; my reply was:
Sir, the poor have always lived in a
liberalised (market) situation their
wages depend on demand, they borrow at exploitative rates; their have
no secure job tenure. Rather we are
the ones who are subsidised and may
be disturbed if liberalisaton is really
implemented.
If the majority of the poor do not
rise above the poverty line, it is not
due to their inability to adjust to unexpected changes it is because they

need new skills, confidence and the
power to change the framework in
which they are trapped and which is
created by oppressive power relations and traditional practices. The
SAGs (self-help affinity groups), if
properly trained in the institutional
capacity-building (ICB not ICT), together with their federations, provide the space to generate this empowerment, which has the potential
to support their livelihood choices
and change shackling power relations.
Briefly, the three hurdles the poor
must overcome to have a sustainable
livelihood strategy are:
(a) diversity the poor are skilled
to cope with diversity; if government
and NGO interventions are to respond to this diversity, they need to
be managed by peoples institutions
at the base, standardised programmes will not work;
SAG is a group
(b) high risk of investmentsthe

risks pertain to uncertainty of monsoons, low investment, inadequate
infrastructure and poor soil. Here,
NGOs/government/private sectors
need to intervene to reduce the risk
or provide insurance, local infrastructure and technology to help the
poor to diversify their activities
within particular sectors like agriculture. For example, when Myrada
realised that a large number of loans
taken by SAG members were for investment in dryland farming, which
is a high-risk enterprise, it took up
major watershed management programmes, which reduced this risk.
(c) Power created by oppressive
power relations in production, finance and marketing. The poor need
to gain confidence and skills and a
degree of independence to take the

lead in changing these relations in
society and at home. SAGs have the
potential to provide the institutional
support that the poor, especially
women, require to achieve this degree of self-reliance. NGOs have a
role to build these institutions at the
base and to promote institutions of
the poor which hold the stick
(power) from the beginning.
However, a major note of caution is
required since today every group is
called a self-help group (SHG). This
is why Myrada changed the name of
groups from SHGs to SAGs to distinguish groups that are formed according to the original concept. Such
groups emerged in 1984-85 when the
large cooperative societies organised
by Myrada broke down because their
(a) that is formed on the basis of

affinity among members. This affinity arises from relations of mutual
trust and support, which exists before
Myrada or any NGO entered it is a
diamond in the mud, we happened to
kick it and polish it through institutional capacity building training;
(b) that starts with regular
(weekly) meetings to discuss members problemspersonal or societaland encourage regular savings
to create the habit of thrift;
(c) that is free to decide on loan eligibility, size and repayment schedule. The dynamics created by this
discussion and interaction is empowering, meaning that it generates
skills and confidence to participate
in decision-making and gradually to
take action for change in the group,
family and society. Therefore it is the
management of money savings and
credit which is important, not the
29
[FEATURE]
provision of money.
However, all these features pre-suppose investment in institutional capacity building, which means the
training is for the entire group.
Myrada has developed 24 modules in
1995 as a result of years of experience; they are collapsible into 14 and
must be given to each SAG over a period of 12-18 months. The SHGs
should be assessed periodically by
outsiders and by an internal exercise
as well as audited annually. Book
writers should be trained to maintain accounts and minutes of meetings. They are paid ad hoc by the
SAGs. Myrada has also developed a
software with the assistance of
Nabard; it is called NABYUKTI. This
software provides data on the purpose, size, repayment of all loans
taken by members. An analysis of
this data provides information on
the choice of livelihood activities of
the members. Myrada intervenes to
add value or scale, to help them to diversify and build marketing strategies and to adopt new technologies.
I have just picked up four profiles
of livelihood strategies (see table)
which emerged over a period of 10-12
years; they show that one or two
loans are not adequate for a family;
loans are required constantly and,
therefore, must be easy to access. The
families have borrowed between Rs
1.6 lakh and Rs 4.5 lakh eachmuch
more than government programmes
allocations. And finally after several
years, they have invested in gold, jewellery and land. Except for Shantammawho returned to her ancestral homeall others invested in
house sites or in repair of houses.
Nagarathammas family, however,
30
Self-help affinity group Chikkajajur, Holalkere Taluq, Chitradurga, Karnataka

(1) SHANTHAMMA*
(2) SAKAMMA
(3) KAUSAR BANU
Date of
Borrowing
Amount
(Rs)
Date of
Borrowing
Amount
(Rs.)
Date of
Borrowing
Amount
(Rs.)
1996
1996
1996
1996
1997
1997
1997
1998
1998
1999
2000
2000
2000
2001
2003
2004
2004
2005
2006
2006
2007
2008
2009
2010
Total
500
1,000
2,000
3,000
3,000
3,000
4,000
5,000
6,000
8,000
11,000
15,000
325
20,000
8,325
35,000
2,300
1,000
45,000
2,000
2,000
2,820
Nil
Nil
1,80,270
1996
1996
1996
1996
1996
1997
1997
1997
1998
1998
1999
1999
2000
2001
2003
2003
2004
2004
2005
2006
2007
2008
2009
2010
Total
500
100
445
1,000
2,000
2,000
2,000
2,500
4,000
5,000
7,000
10,000
325
15,000
8,325
22,000
2,300
40,000
1,000
2,000
5,000
9,000
Nil
20,500
1,61,995
1996
1996
1997
1997
1997
1997
1998
1998
1998
1999
1999
2000
2000
2001
2002
2003
2003
2003
2004
2005
2005
2005
2006
2007
2008
2009
2010
Total
1,000
3,000
5,000
500
5,000
300
4,000
5,000
5,000
5,000
12,000
25,000
325
2,000
40,000
325
8325
50,000
2300
58,000
6,000
1,000
2,000
2,000
53,820
Nil
500
4,59,390
Purpose
Household expenses
Cow Purchase
Education
Cow purchase
Agriculture inputs
Education
Education
Education
Agriculture land purpose
Education
For job in Railways
Business
To purchase SHG uniform
For telephone booth
Sewing machine (SGSY)
Education
LPG for home use
Jewellery loan
Agriculture land purchase
Jewellery loan
Gold
Insurance
-
Purpose
Education
Medical expenses
Medical expenses
Education
House repair
Agriculture inputs
Education
Education
Education
Agriculture inputs
House repair
House site purchase
House site purchase
LPG for home use
Jewellery loan
Jewellery loan
Health
Seeds and fertilizer
Agriculture and gold
Note: Her husband was a sweeper in the railways. After he died in service, the family spent considerable money to see if
one of the sons could get appointment in the railways.
Note: Before SAG No Land; After SAG Purchansed acre dryland. Left the SAG and moved to Davanagere to look after
and live with her mother
Note: Before SAG No Land; After SAG Purchansed acre dryland. Continuing in SAG
continued to invest in a minibus and

did not opt to invest in land, though
this family invested in gold. One cannot help but point out that Shantammas family had to borrow Rs
11,000 to get a job for one of her sons;
no bank would have provided this

loan. Shantamma, Sakamma and Nagarathamma have all placed education high on their list; they borrowed
large sums for education. Kausar
Banu family preferred to focus on
*(4) NAGARATHNAMMA
Purpose
Trading
Trading
Trading
Education
Medical expenses
Medical expenses
Trading
Trading
Trading
Trading
Trading
To release house mortgage
Education
House purchase
Household expenses
LPG for home use
To release agriculture land from mortgage
House repair
Jewellery loan
Jewellery loan
Gold
Cycle shop business and gold
Gold
Date of
Borrowing
Amount
(Rs.)
Purpose
1997
1997
1997
1998
1998
1998
1999
1999
2000
2000
2000
2001
2002
2003
2003
2004
2005
2005
2006
2007
2008
2009
2010
2,000
500
2,000
4,000
5,000
5,000
7,100
8,000
8,000
15,000
325
18,000
30,000
28,000
8,325
2,300
40,000
1000
2,000
62,000
22,820
11,000
40,500
Education
Education
Education
LPG for home use
Education
Vehicle loan repayment
House repair
Business
Vehicle repairs
LPG for home use
Vehicle repairs
Jewellery loan
Jewellery loan
Tempo purchase and gold
Tempo repair and insurance
Tempo repair
House repair and gold
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 to
repair and refurbish the vehicle.
Note: Before SAG 2 acre dryland; After SAG 2 acre dryland, Continuing in SAG
their traditional activitytrading.

This family also required the largest
total amount in loans (Rs 4.5 lakh)
and finally decided to purchase three
acres of irrigated land. However,
what emerges clearly is that the gen-
eral comment that SAG loans are

taken for consumption is not based
on an analysis of genuine SAGs but
perhaps on an analysis of groups
that were not formed on the basis of
affinity and given little or no institu-
tional capacity building training. It

is to the credit of Nabard that it has
consistently, over 20 years, given priority to providing grants for institutional capacity building, besides in
livelihood skills.
31
[CASE STUDY]
SKS LOANS: AN ENABLER FOR POOR WOMEN
Hoping for a better life

SKS is committed to alleviating poverty by extending financial
services in a sustainable manner to the poor
KUMUD DAS
OR the millions of poor

women in India who have the
capacity to work hard and are
keen on providing a better life to
their families, there is hope. They
neither have to create business plans
to convince banks to lend them
money, nor submit collaterals to support borrowing. Millions of women
across India have found microfinance as a prime resort. Small
amounts of money lent without collateral and recovered every week at
their doorsteps is a dream come true
for these women.
Take for instance, Savitha who
lives with her husband and three
children in Nanded, Maharashtra.
She runs a tailoring shop along with
her husband. Before joining SKS her
annual income was a meagre Rs
20,000-30,000 a year. Educating their
children with such limited resources
was extremely difficult.
Savitha joined SKS in 2005 and
borrowed her first income generation loan (IGL) of Rs 8,000 for buying
a sewing-and-over-locking machine,
which increased their earnings by
Rs 10,000. She later borrowed a sec-
32
Millions of women across

India have found
microfinance as a prime
resort. Small amounts of
money lent without
collateral and recovered
every week at their
doorsteps is a dream come
true for these women
ond IGL of Rs 12,000, which she used
for purchasing cut pieces and dress
material. Recently, she borrowed a
third IGL of Rs 14,000 to procure
more dress materials for her store,
and through all this she earns
around Rs 50,000 to Rs 60,000 a year.
She is amongst SKSs most satisfied customers. Today, she sends her
elder son to Science College,
Nanded, younger son to Venkateshwara public school (residential
school) and her daughter goes to
Kussum Tai Vidhyalay. She wants to
avail of a bigger loan and develop
further.
The loans have improved our financial status and helped us provide
good education to our children. We
wish to see them in higher positions,
leading a prosperous life. I will avail
of further loans to help them settle
in life, says Savitha.
Like Savitha, Vaishali Vasnta Patil
was going through a tough phase in
her life.
Vaishali hails from Bharavati,
Wardha. Having failed her 10th
grade, she did not continue with her
studies, instead she pursued with
her hobbies like tailoring, glass
painting, mehendi designing, pot
painting, embroidery & thermocol
painting. Later she married Vassanta Ramji Patil from Aashti district. After the birth of her daughter,
the family moved to Chandrapur for
the childs education. She then gave
birth to a boy. Their financial troubles started when her husband was
taken ill and had to undergo a surgery for appendicitis.
She started giving painting classes
in the morning, once that is over, she
headed to the market to sell bangles.
Along with bangles, she started sell-
ing food items.

She started making washing powder and during that stint met a salesman who gave her the address of his
company. She joined his company
and slogged day and night. She was
expected to work long hours and
sometimes, it extended until late
evenings.
The biggest challenge she faced
was handling her job and family. As
her husband was ill, he needed special attention, and so did the children. Situations started worsening
when rumours were being spread
about her illicit liaisons. This
strained the relationship with her
husband and he started torturing
her. When her husband blackmailed
her, she refused to leave her job and
decided she would rather leave him.
She worked in the company for fourfive years and earned very well from
the commissions. But the income
generated from this job was not
enough and it came to an end when

she was laid off. She then returned to
her native place.
While she was returning to her native home, she heard people talking
about SKS and the loans that are disbursed. She decided to join and revive her business. She took an IGL of
Rs 10,000 and started her business at
her hom. She also guided other
women to utilise their loans properly so that they reap the benefits of
the loan.
She started supporting other
women by purchasing homemade
chips and other products and sold it
in the market. She has employed ten
women to help her in her business.
She was able to accomplish this only
with the support of her family, especially her husband and SKS. Her life
changed completely after she joined
SKS. She is very proud that she is
able to support her family and help
them in times of crises. She has
helped a handicap to get an artificial

leg and she has also helped a blind.
She has also helped a beggar to get
shelter.
SKS has helped me believe that I
can touch the sky. I want to educate
my children and ensure they have a
bright future. SKS has helped me
dream for a better tomorrow,
Vaishali, now a successful entrepreneur.
Like Savita and Vaishali, 3.25 lakh
women across Maharashtra have accessed SKS Microfinance loans
worth Rs 661 crore. The loans are
only given for income generation activities and has made a difference to
the lives of these women who are today confident individuals contributing actively to the welfare of their
families.
SKS, which started operations in
Andhra Pradesh 12 years ago is,
committed to alleviating poverty by
extending financial services in a sustainable manner to the poor. It provides income-generation loans of Rs
16,000 for 50 weeks. The loan is disbursed in two parts, the member can
choose to take a loan of Rs 12,000 in
the first cycle and after 25 weeks the
member can opt to take the remaining amount. The average loan size is
Rs 10,779.
Today SKS is the largest MFI in
the country and the fastest growing
MFI in the world. SKS operates
across 19 states in India: Andhra
Pradesh, Karnataka, Kerala, Maharashtra, Chhattisgarh, Madhya
Pradesh, Orissa, West Bengal, Bihar,
Jharkhand, Uttar Pradesh, Uttarakhand, Delhi, Rajasthan, Himachal
Pradesh, Punjab, Haryana, Gujarat
and Tamil Nadu.
33
[ARTICLE]
THE ADB EXPERIENCE
Microfinance: the Nepal story

RMDC has helped in empowering women. Over 400,000 clients of
RMDCs partner organisations are women
MAYUMI OZAKI
The Rural Microfinance

Development Centre
(RMDC) came into
existence in Nepal in 1998
to implement the
ADB-assisted Rural
Microfinance Project
HE Asian Development Bank

(ADB) approved its first microfinance project in 1988.
Since then, ADB has provided more
than $2 billion for loans and technical assistance grants for microfinance projects in 14 of its developing
member countries (DMCs). At the
initial stage, projects, in general, focused on microcredit delivery, allowed subsidised interest rates, paid
little attention to financial viability,
and were poorly targeted. Overall
ADBs early microfinance projects
achieved only marginal or moderate
level of outreach in terms of poverty
reduction.
ADB adopted a microfinance development strategy in 2001. A key focus
of the new strategy is a financial system development approach in microfinance, in which emphasis is given
to (i) facilitating policy reform such
as liberalisation of interest rates, (ii)
building financial infrastructure including information systems and
training facilities, (iii) institutional
development with viability and susThe author is Finance Specialist
(Rural and Microfinance), ADB
34
tainability, and (iv) pro-poor innovations and social intermediation.
Building a microfinance system

in Nepal
In Nepal, though microcredit programmes had been in operation for
nearly three decades, most poor
households failed to benefit from
their services as MFIs that could provide quality services were lacking.
Many NGOs, cooperatives, or even
banks that worked as microfinance
providers confined their activities to
a limited number of poor households. As a result, access to microfinance for the poor in general and
women in particular was limited.
Since MFIs were able to provide only
a fraction of the total demand for microcredit, there was need for an apex
body which could provide wholesale
funds to retail MFIs for lending to
poor households and thus play an effective role in promoting and developing the microfinance sector.
Against this background, the Rural
Microfinance Development Centre
(RMDC) came into existence in Nepal
in 1998 to implement the ADB-assisted Rural Microfinance Project.
The Rural Microfinance Project became operational in May 1999. The
project was funded by ADB, supervised by the Ministry of Finance, and
implemented by RMDC. The term of
the project, initially set at 31 December 2004, was extended to 30 June
2007. The estimated total cost of the
project ($30.6 million) was to be covered by ADB, the Government, commercial banks (in the form of equity
in RMDC), and implementing agencies . The Government would onlend
to RMDC under a subsidiary loan
agreement. The primary objective of
the project was to improve the socioeconomic status of the poor and increase employment by enhancing
their access to quality financial serv-
ices. The activities financed by the

project included agriculture, manufacturing and services.
Under the project, RMDC had access to the $20 million loan fund from
ADB for onlending to the poor households through retail MFIs. RMDC expanded its operation to 47 out of the
75 districts in Nepal. It provided services in three areas: microcredit program, institutional development, and
support for ultimate borrowers. Its
stated goal was reaching 500,000 poor
families with credit facilities through
100 partner organisations. It has supported partner organizations in various forms such as microfinance operations, institutional development,
and monitoring and supervision.
By the time the project was completed in 2007, RMDC had made significant contributions to promoting
and developing the microfinance sector in Nepal. It developed 38 MFIs
from scratch, supported 8 for institutional strengthening, and provided
potential institutions with exposure
visits to learn best practice and provided basic orientation training. To-
day it has become the most important

onlending source for MFIs.
Empowering women through

institution development
The most noticeable impact of
RMDC has been its contribution to
empowering women. Over 400,000
clients of RMDCs partner organizations are women. Women in Nepal
have had scarce access to resources
and were largely isolated from economic activities. Womens participation in the project has changed their
lives. Women who were idle or engaged as laborers now have their own
business and are more independent. .
Womens increased access to microfinance services through RMDCs
partner organizations has enabled
them to make decisions about savings and credit use; it has given them
know-how to set up microenterprises, and increased their incomes.
The microfinance program has contributed to their social and political
empowerment through improved
confidence, leadership abilities, decision-making power, and entrepre-
neurial skills. Women now have more

respect in their homes in society.
Sanjamaya Lama is one such
woman. After she lost her husband
she took a loan of NRs 18,000. I used
some of it to rear goats and buffaloes,
and invested the rest in my childrens
education, she says. Another
woman, Sabita Lama says, Being
part of the group has honed out a
community and team spirit. It has
also trained me to speak before a
group and deal with strangers more
confidently. With the support of a
loan, she runs a caf by the highway,
and together with her husband,
makes NRs1,000 daily.
Women reported greater influence
in household decision-making as one
of the major outcomes of the project.
Women who attended literacy classes
mentioned that the ability to read
and write, enhanced their levels of
self-confidence and made them less
hesitant to voice their opinions and
speak in public. Individual women
who gain respect in their households
act as role models for other women
and spark off a wider process of
change in the communitys and
mens perceptions.
RMDC now serves 750,000 poor
women through its 79 partner organizations. Since inception, RMDC has
been maintaining 100% repayment
from its partner organizations. It
continues to provide need-based
training supports, conducts regular
monitoring and supervision as well
as provides on-site technical assistance to its partner organizations.
RDMC has helped its clients to develop occupational skills and maintain financial discipline. RMDC has
plans to expand microcredit outreach in remote hills and mountain
areas and has launched bridge and
special loan products for MFIs in
those areas.
35
[ARTICLE]
BANK OF INDIA
credits and tiny deposits - that are

provided to weaker sections who
farm or fish or herd; operate small or
micro enterprises where goods are
produced, recycled, repaired, or
traded; provide basic services; work
for wages or commissions; gain income from renting out small
amounts of land, vehicles, draft animals, or machinery and tools; and to
other individuals and local groups in
developing countries, in both rural
and urban areas.
A powerful anti-poverty tool

Microfinance is a simple but powerful enabler to pull the
underprivileged and the deprived out of poverty
NARENDRA MODI
Rural finance
FFER a wholesome feast to a

man, he will enjoy for a day.
Offer a microcredit to a
woman, she along with her children,
husband and extended family will
enjoy a lifetime.
During the last three decades in
the world of finance the most important finding did not originate from
the world of rich, and more important than the net-asset value of a
hedge-fund running into many billions of dollars or the yield on a convertible, callable, and putable zerocoupon bond was the finding that
the underprivileged and deprived
populace can save, can borrow and
will certainly repay loans. On this
foundation stone lies the premise of
Micro finance.
Rural India
The majority of the world's poor
live in rural areas. Yet most lack access to the range of basic & needbased financial services. Banking
and financial institutions seeking to
work in rural areas primarily confront with numerous challenges
36
A recent World BankNCAER research survey

on rural access to banking
and finance indicates that
70% of the rural populace
are deprived of a basic
bank account and 87%
people have no access
to credit from a
formal source
such as poor net-worth, discrete &
isolate demands, price and yield
risks including constrained precinct
of collateral security. Moreover, the
main products of many Microfinance Institutions - may not be well
tailored and well-matched to longer
term agricultural activities, nor the
ensuing impediment in the cash
flow of rural households.
In Indian context also it is found
that notwithstanding the profundity
of the Indian Financial System and
the country's extensive network of

rural banks/branches, the country's
underprivileged and deprived
households, who are mostly concentrated in rural areas, are deprived of
their access to formal banking and
finance system.
A recent world Bank-NCAER research survey on rural access to
banking and finance (the Rural Finance Access Survey-RFAS) indicates that 70% of the rural unfortunate populace are deprived of
having a basic bank account and
87% have no access to credit from a
formal source.
Informal sector money lenders
confine a strong presence in rural
India, delivering finance to the underprivileged and deprived ones.
the RFAS, finds that 48% of landless and marginal farmers borrowed
from an informal source at least
once in the past 12 months, at hiking
rates averaging 48% a year.
What is microfinance?
Mull over the story of Smt. Sarita
Bhaein, a solo mother who lives with
her four children in a remotest corner of a village in India. Through a

loan of Rs,5000 she bought a sewing
machine within her reach. Regularly she stitched clothes beyond her
scheduled household chores, sold
them for marginal profit and repaid
her principal dues plus the nominal
interest thereon. Out of the hardearned profit, she was able to save
some money to buy books for her
school going children. This is micro
finance in action
Microfinance is a simple but powerful tool enabler to pull the underprivileged and deprived ones out of
poverty. Universally, it involves providing small loans to these working
underprivileged ones in the developing nations. Usually, various local organization behaving as Microfinance Institutions offer small loans
ranging between Rs 10,000 to

Rs 15,000 at a fixed rate of interest
with nominal margin sharing. These
loans are being used by these poor
sections of the society to establish or
expand their small livelihood business to generate additional income
for their family. This extra income is
being spent by these working-poor
on buying basic food-grains, minor
healthcare products, child-education, putting aside in small-savings,
thus laying the foundation for a better tomorrow.
Microfinance is based on the fundamental principle that human beings are motivated to do whatever it
takes to make themselves as well off
as possible. Thus it has emerged as
an effective poverty alleviation tool.
Microfinance refers to small scale
financial services for both small
With respect to rural finance it is

very important to note that rural finance is not only agricultural, nor
entire microfinance and agricultural finance is rural. Yet, financial
service providers offering rural finance (financial services tailored for
the people of all income levels in rural areas), microfinance (basic financial services for the poor sections of the society having
low-income level), and agricultural
finance (financing of agriculture-related activities, from production to
market) often having overlapping objectives and opportunities. The
clients served by microfinance are
often the same clients or households
that would benefit from increased
rural or agricultural finance.
It is imperative to note that the
loan size is not important. This cannot be better evidenced by the exemplary performance of Aryavart
Gramin Bank (AGB) a Regional
Rural Bank sponsored by Bank of India. AGB implemented a scheme for
financing Solar Home Lights,
through its branches in its operational area spread over in Bara-
37
[ARTICLE]
banki, Hardoi, Lucknow, Unnao,

Farrukhabad and Kannauj districts
in Uttar Pradesh. Most of the villages in the area are either not having grid power or do not get uninterrupted supply. The cost of the system
is less than Rs 15,000.
A delight in solar home light

Lady entrepreneur seen at work at
10.00 pm in a village of Hardoi District, UP. AGB has excelled in financing for Solar Home lights which can
be corroborated by the following :i) AGB has financed 28000 Solar
Home Lights thereby benefitting
1,40,000 people assuming an average
family size of 5.
Financing for Solar Home Lights
to the villagers of Barabanki District (UP) at the hands of Shri M
Narendra, Executive Director, Bank
of India at a Loan Mela function
organised by AGB, sponsored by
Bank of India.
ii) The Bank won prestigious Ashden Award in London, Ashden Society acknowledged during the
award presentation ceremony in
June 2008 that the Bank's initiative
was not only good for the planet but it
was good for business too.
iii) The Bank was also conferred
with India Power Award for this
innovative financing in Nov.,2009.
iv) The women folk in these villages are now elated that they are
able to contribute significantly to
the family income by doing embroidery, zardoji, tailoring and such
other profitable jobs in the Solar
Home Lights from 7.00 am to 11 pm &
beyond which hitherto not possible
because during day time they are
busy with agriculture & other allied
38
Microfinance is based on
the fundamental principle
that human beings are
motivated to do whatever
it takes to make
themselves as well off as
possible. Thus, it has
emerged as an effective
poverty alleviation tool
activities including attending household chores. The business potential

existed immensely untapped but Solar Home Lights have made all the
difference.
v) The students in these villages
are now able to study in better health
conditions. Hitherto, the kerosene
lamps -sole illumination was not
good for the eyes and its vapour being harmful to lungs. This is equally
applicable to the housewife and their
members of the family.
vi) The bank has already 9 villages

with 100% solar light.
It is one of the many such initiatives taken up by Bank of India.
Financing for Solar Home Lights
by Jamshedpur Zone of the Bank to
the villagers of Darisai village,
Jamshedpur at the hands of Executive Director, Shri M.Narendra,
Bank of India during a loan mela
function.
What matters is the enabling and
providing the infrastructure for development of the business model
which may not require a large quantum of advance, but will benefit
large number of persons.
Most notable among these microfinance approaches is a nationwide
attempt, pioneered by non-governmental organizations, and now supported by the State to create links between commercial banks, NGOs and
informal local groups (self-help
groups or SHGs).
The author is Executive Director,
Bank of India.

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Read to Lead

COMPLIMENTARY WITH THE FINANCIAL EXPRESS

Insurance is the subject matter of solicitation

'We aim to make a significant

Livelihood through SHGs

"Credit is a necessary but not

Green livelihood support via

Hirbaiben Lobi, an icon

The Mission Shakti approach

A new form of empowerment

Microfinance: The ADB

Hoping for a better life

MICROFINANCE WORLD | April-May-June 2010

A powerful tool to pull the poor

ICROFINANCE in India is no longer confined

SPECIAL PROJECTS TEAM

A SPECIAL PROJECTS INITIATIVE

Mail: Monalisa Sen

April-May-June 2010 | MICROFINANCE WORLD

| DR KG KARMAKAR, MANAGING DIRECTOR , NABARD

We aim to make a significant

MICROFINANCE WORLD | April-May-June 2010

partner NGOs, and other SHG-promoting agencies like RRBs, DCCBs

Several SHGs have matured

MICROFINANCE WORLD | April-May-June 2010

to create livelihood and employment

SHGs experience various difficulties in getting market access

chose SHGs as the preferred delivery

tives for livelihood promotion efforts particularly through the SHG

What are Nabards future

MICROFINANCE WORLD | April-May-June 2010

What are the challenges and

host of products and processes such

unique items have to be different

Have you drawn any roadmap

April-May-June 2010 | MICROFINANCE WORLD

bers could be viewed in terms of declining share of consumption loans

Livelihood through SHGs

Issues related to livelihood

Livelihood promotion is a complex process and calls for a

MICROFINANCE WORLD | April-May-June 2010

Growth of SHGBank Linkage

put ratio (ICOR) of 4:1, the loan

the Poor microfinance refers to

The graduation of SHG members

April-May-June 2010 | MICROFINANCE WORLD

loans utilised in asset creation improved from 8% in the first linkage

Growth of SHG-Bank Linkage Programme

Number of SHGs financed during the year

MICROFINANCE WORLD | April-May-June 2010

Pilot project on Micro-Enterprises

Average bank loan per SHG (including SGSY)

Micro Enterprises among SHG members

% of SHG members undertaking

Jammu & Kashmir

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

been pursuing prior to the commencement of the ME Pilot Project.

play an important role in nurturing

April-May-June 2010 | MICROFINANCE WORLD

Credit is a necessary but not ample

The author is chairman of BASIX

MICROFINANCE WORLD | April-May-June 2010