avag micro finance profile 2012

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Micro Finance Profile 2012

Auroville Village Action Group


INDEX

The Micro-finance programme....................................................................................................... 3

Target Area.................................................................................................................................... 4

The aim of the micro finance programme ...................................................................................... 4

Members per year (1995-2012)...................................................................................................... 5

Micro Finance Activity (As of 1st April 2012) .................................................................................. 5

Microfinance services .................................................................................................................... 6

Types of loans by source and purpose............................................................................................ 6

Group formation and day to day work ........................................................................................... 7

Micro finance and the UWC (Udhayam Women’s Center) .............................................................. 9

Total savings 2011-2012.............................................................................................................. 10

Comparison: Amount and purpose of loans, years 2011-2012...................................................... 11


The Micro-finance programme

Microfinance is the backbone of AVAG’s development activities. The first SHG was

formed in 1995, since then slowly but firmly we have been creating an extensive network

of SHGs. In 2000 and in 2007, federations for women SHGs and men SHGs were formed

for collective decision-making and they continue to give AVAG feedback and suggestions

pertaining to the planning and implementation of the programs of AVAG. The federations

and AVAG have developed a symbiotic relationship with guidance and advice freely

exchanged in both directions. Despite the partnership, AVAG maintains formal oversight

over the federations.

Loans are offered for business development, agriculture, education, housing, consumption,

family functions, and health, at an annual interest rate of 18 %, far lower than the average

market rate in rural areas.

So far finance has been facilitated from the following sources for lending: savings

generated by SHGs, corpus funds of AVAG/Federation, Government Funds and Indian

Grameen Bank and Pallavan Grameen Bank through SHG linkage.

-The ratio between SHG’s to AVAG field staff is 35/1, which allows effective

management. AVAG collects the copies of all receipts and invoices and monitors each

transaction.

-Loan repayment rate is virtually 100 %. During the implementation of micro finance

programmes over the past 15 years, only two people have defaulted.


Target Area

The aim of the micro finance programme

-To free the poor from the clutches of the money lenders

-To inculcate the habit of saving among the villagers

-To teach them the concept of self help

-To give a sense of cooperation and mutual help among the women and men

-To help the members of the SHG to get recognition from the family and the society at

large

-To enlarge livelihood possibilities of the SHG members

-To build solidarity and a sense of belonging among the participants.


Members per year (1995-2012)

Micro Finance Activity (As of 1st April 2012)

-AVAG works with 3,708 women organised in 206 SHG’s, and 788 men organised in 45

SHG’s. -Rs. 258,69,805 of savings has been collected by SHG’s.

-Rs. 537,26,500 circulating among the groups as loans. To date all SHG’s have repaid loans

as per schedule through fixed installments.

What is special in AVAG micro-funding programme?

-Micro-funding programme is the backbone of the activities of integral rural development

of AVAG. Capacity building is of prime importance, so constant training is always

provided to the groups.

-The Federations of SHG have a core position in the decision making process of AVAG,

not only in the microfinance programme, also in the other activities of the organization,

creating a strong bounding relation materialized, among other results, in the strong vocation

of continuity of the SHG formed by AVAG.

-To avoid individual’s monopolizing the SHGs and to make sure that everyone takes up the

responsibility, AVAG encourages the change of leaders on a regular basis.


Empowering lending policies

-Loan amounts are awarded gradually, growing in relation to the proven capability of

individual member’s for repayment. Loans are offered for a wide variety of needs. By its

experience AVAG learnt that purpose depending loans drives people to cheat and would

weaken the trust and relationship between the SHGs and AVAG, and hence it encourages

people to be open and truthful with the purpose. As long as the SHG supports and it is

confident of the repayment capacity, a member can get loan easily.

-Group members are encouraged to give priority to each member’s financing needs, rather

than dividing the borrowed amount into equal shares.

-Re-lending is not dependent on the completion of a previous loan, but rather is encouraged

only when there is a genuine need. This system ensures group members will not

compulsively re-apply for a loan immediately after the previous loan has ended.

-To make sure that there is no misuse of funds, AVAG keeps track of all the financial

transactions of the SHGs, which is a uniqueness of the organization.

AVAG has also successfully mediated with the bankers on behalf of the SHGs to be

flexible with the rules for its members. Since the banks recognize the important role played

by AVAG, they listen to these fair demands.

The Groups have a double aim, the micro-funding activities and the debate and action about

human rights, community development and other issues

Microfinance services

-Loans

-Savings

-Life insurance

Types of loans by source and purpose

Internal Lending: Individual members can take up loans from savings of the group.

Federation Loan: An initial grant of 6 lakhs was given by AVAG to the Federation in

2003, which along with the SHGs contribution of Rs.20000 each has grown over Rs.

8,00,000. Federation members are responsible for loan approval, which depends upon

repayment history and cohesiveness of the applying SHG.

AVAG Loan: AVAG issues loans when the Federation has reached loan capacity and lacks

the sufficient funds to continue SHG lending. A SHG submits its application through

AVAG, which is later processed by Federation members. AVAG sanctions the loan only

after getting the approval of the Federation members.


Government Lending: AVAG evaluates and recommends its SHGs access to

Governmental schemes like the Revolving Fund1 Economic Assistance (E.A), Toilet

Scheme, Housing Scheme2 etc.

Direct Lending: SHG’s are linked directly to the banks for loans. Groups can get loans

from Rs. 2,00,000 up to Rs.5,00,000.

Group formation and day to day work

-Each group can have 12-20 members.

-The group has to choose its own leaders i.e. an animator and two representatives.

-The positions must be renewed every 2 years, to give equal opportunity for all members to

grow.

-The group meets at least two times a month. The first meeting of the month is to deposit

the savings, to pay back the loans and to decide upon the new loans. The second meeting is

allotted to discuss about the issues, projects, participation in the seminars and meetings,

report about the trainings and meetings etc.

-Once in a year every group participates in a Cluster meeting with other groups of the same

panchayat (local government), in this meeting the community development activities made

during the last year (fixing the road, distribution of food in health centers...), the past

discussions of community problems inside every SHG are shared with the rest of the

groups, and an attempt is made to arrive to a collective action to solve the issues.

1Eeach group can sign up for an amount of Rs. 60,000 out of which Rs. 10,000 is subsidy and Rs. 50,000 is loan to be

repaid in monthly installments. 2This scheme has a subsidy component of Rs. 1,25,000 sanctioned by the government to commence agricultural or

business activities.


-When a group is affiliated to AVAG, it is asked to join the federation by way of paying the

annual subscription which is Rs.50 per member (Rs.25 for men). The group receives from

the federation a “set of registers” to maintain the group’s accounts.

-Each SHG decides on a monthly savings amount (usually between Rs. 50-100

/month/member) which is deposited in the name of the club in the bank

-With the introduction of AVAG, each SHG opens a bank account to deposit the monthly

savings.

To be member of a SHG, a person should:

-Be aged from 18 to 55 years

-Be a resident of that village

-Not to be a member of any other SHG of any organisation.

Decision making of the Federations of Self Help Groups

The Federation functions as partners of AVAG to enable better management of the

programs. They play an active role in shaping the annual plan of AVAG. AVAG believes

that direct feedback from the participants facilitates a more organic, grass-roots approach to

development.

The Federation functions as a three tier body consisting of a general body, executive

committee and the Governing board. The general body has one member each from all

SHGs of AVAG and the members meet to select the executive members. At present there

are 35 executive members and they are divided into five sub committees for loan

approval, monitoring and evaluation, conflict resolution, public relations and community

development. The different subcommittees are formed to give specific responsibilities to

these women leaders and the members can choose to be part of any subcommittee based on

their interest and skill so that they can excel in their preferred areas. Seven members are

selected among themselves to be in the governing board.


Micro finance and the UWC (Udhayam Women’s Center)

A major function of the Federations is to transfer micro finance loan administration from

AVAG to locals. By assigning authority and decision making responsibility in their hands,

beneficiaries are engaged as active participants employed in the successful outcome of the

micro finance program. This accountability has significant implications both for technical

loan management and personal empowerment. At the moment the Men´s Federation

doesn´t have any corpus fund, and the MSHGs work mainly with the internal lendings of

every group in addition to the links provided by AVAG with the commercial banks and the

Governmental credit schemes.

Apart from creating the guidelines for the effective functioning of the clubs and the credit

and savings program, the Women’s Federation is responsible for reviewing loan

applications and gives its recommendations to AVAG for all external lending. They also act

as the eyes and ears for AVAG in implementing all its activities.

As stated above, it is the Federation members who are responsible for loan application

review. While most of AVAG’s staff live in the organization’s target area and have

extensive knowledge of conditions on the ground, the Federations have an even better

check on the pulse of village life. By employing beneficiaries in the micro finance process,

AVAG can be confident that financing is being used for pertinent village needs. AVAG’s

role is more advisory than controlling, although the organization does hold veto power over

any decisions to avoid incidents of abuse and prevent corruption.


Total savings 2011-2012

UWSHGs and MSHGs – AVAG.

Voices

Bharani, Morattandi

One year ago, Bharani, 30 years old, decided to

organise a self help group in her community,

Morattandi. She is the animator of the “Magizhampoo”

group (20 members). She applied for AVAG loan,

which allowed her to pay the school tuition fees of her

two children. Bharani thinks that the loan has been

very helpful as it enabled her children continue their

studies.

Total

Savings

Amount

in Rs Members

UWSHGs 226,32,805 3,765

MSHGs 32,37,000 788

Total 258,69,805 4,553

Loan sources Amount in Rs. in %

Internal Lending 318,39,300 54.9

Direct Lending

(Bank) 200,64,000 34.6

RF (Bank) 40,45,500 7.0

AVAG Loan 13,03,000 2.2

Udhayam Loan 7,70,000 1.3

Total 580,21,800 100%


Comparison: Amount and purpose of loans, years 2011-2012

As it is shown in table, in the year 2012, 24,10% of the total loans were used for housing

purposes (in the year 2011 only 11,44% of the loans were used for this purpose). This

change is associated with the cyclone of December 2011, which destroyed a lot of houses.

The amount of loan repayment grew from 10,11% in the year 2011 to 23,90% in the year

2012 which is an indicator of the rising credit demand in the area.

Women Federation: AMOUNT AND PURPOSE OF LOAN OF WSHGs 2011-2012

Grand Total

Type Total %

Rs.Upto

5000

Rs.5001-

10000

Rs.10001-

15000

Rs.15001-

20000

Above

20000

Education 71,62,000 13,5 3,57,500 9,17,500 6,09,500 18,62,500 34,15,000

Function 95,80,000 18,1 2,13,500 7,35,000 8,43,000 26,67,500 51,21,000

Medical 15,84,000 3,0 1,83,500 3,20,500 1,99,500

3,86,000 4,94,500

Housing 125,51,200 23,7 3,47,000 10,30,700 8,16,500 31,43,000 72,14,000

Loan Repayment 134,53,350 25,4 3,49,000 9,53,850 11,24,500 33,15,000 77,11,000

Agricultura 48,34,000 9,1 73,000 4,61,500 3,06,000 14,81,000 25,12,500

Business 27,73,000 5,2 78,000 1,43,000 2,48,000 6,72,000 16,32,000

Others 10,35,950 2,0 1,70,450 1,04,000 1,72,800 2,63,000 3,25,700

Total 529,73,500 100% 17,71,950 46,66,050 43,19,800 137,90,000 284,25,700


Men Federation: AMOUNT AND PURPOSE OF LOAN OF MSHGs 2011-2012

Grand Total

Type Total %

Rs.Upt

o 5000

Rs.5001-

10000

Rs.1000

1-15000

Rs.1500

1-20000

Above

20000

Housing 2,50,000 33,20 0 40,000 60,000 1,20,000 30,000

Function 1,79,000 23,77 0 1,14,000 15,000 20,000 30,000

Business 1,44,000 19,12 0 10,000 45,000 60,000 29,000

Agricultura 90,000 11,95 0 40,000 30,000 20,000 0

Education 48,000 6,37 8,000 0 0 40,000 0

Loan Repayment 27,000 3,59 0 27,000 0 0 0

Medical 15,000 2,00 0 0 15,000 0 0

Others 0 0 0 0 0 0 0

Total 7,53,000 100% 8,000 2,31,000 1,65,000 2,60,000 89,000

avag micro finance profile 2012

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