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SOCIAL AND ECONOMICCHANGE MONOGRAPHS

MICRO-FINANCE, POVERTYALLEVIATION AND EMPOWERMENTOF WOMEN: A STUDY OF TWO NGOsFROM ANDHRA PRADESH ANDKARNATAKA

D. RAJASEKHAR

INSTITUTE FOR SOCIAL AND ECONOMIC CHANGEBANGALORE

2004

4

SOCIAL AND ECONOMIC CHANGE MONOGRAPH SERIES

Number 4 January 2004

Series Editor : G. K. KARANTH

© 2004, Copyright ReservedThe Institute for Social and Economic ChangeBangalore

Institute for Social and Economic Change (ISEC) is engaged ininterdisciplinary research in analytical and applied areas of socialsciences, encompassing diverse aspects of change and development.ISEC works with central, state and local governments as well asinternational agencies by undertaking systematic studies of resourcepotential, identifying factors influencing growth and examiningmeasures for reducing poverty. The thrust areas of research includestate and local economic policies, issues relating to sociological anddemographic transition, environmental issues and fiscal,administrative and political decentralization and governance. Itpursues fruitful contacts with other institutions and scholars devotedto social science research through collaborative research programmes,seminars, etc.

The Social and Economic Change Monograph Series provides anopportunity for ISEC faculty, visting fellows and Ph.D. scholars todisseminate their ideas and research work. Monographs in the seriespresent empirical analyses and generally deal with wider issues ofpublic policy at a sectoral, regional or national level.

Publication of this Monograph has been made possible through the generoussupport of Sir Ratan Tata Deferred Endowment Fund.

ForewordMicro-financing has attained a special role as an instrument in poverty

reduction the world over. There is a realization at both the government anddonor agency levels that micro-finance programmes in India also enableempowerment of women. However, there have been doubts about thisrole. It is in this context that a study conducted at ISEC analysed theeconomic (e.g., improvement in livelihoods and access to resources) andsocial benefits (e.g., improvement in knowledge and participation) of selectedmicro-finance programmes on members in the specific context of two NGOprogrammes in Karnataka and Andhra Pradesh. The study also looked intothe lessons from the selected micro-finance programmes, and examinedthe likely pointers on what could be the possible trends in economic andsocial benefits. This monograph is based on this major national level studyfor sharing the findings and for wider policy design applications.

The study shows that the micro-finance programmes did provideeconomic benefits to the people for whom the programmes were initiated.These economic benefits were access to credit for consumption andproduction and use of credit for undertaking income generation activities. Itis important to note here that economic benefits will be more pronouncedunder several conditions. First, institutional mechanisms and incentives shouldbe more conducive. Second, micro-finance groups should establish linkageswith banks and obtain funds in addition to their own savings. Third,infrastructure such as marketing outlets, village amenities, etc., should exist.Fourth, there should be greater decentralisation. In other words, the peopleshould take an active part in the formation and management of groups, andalso obtain the necessary infrastructure. This leads to the hypothesis thatthe ability of the micro-finance programme to provide economic benefitsdepends on whether or not several factors are conducive for members toundertake income generation with the help of credit. The policy imperativesfollowing the study, hopefully, will have much scope for designing theprogrammes for pronounced effectiveness.

An important issue raised in the study is the sustainability of theseprogrammes. Both the programmes depend somewhat heavily on donorsfor sustainability. The situation seems to be better among the KarnatakaNGO’s largely due to the presence of well-functioning federation of SHGs,and larger amount of credit fund built with the help of donors and NABARD.

On the policy front, the study concludes that micro-financeprogrammes do provide access to credit for the poor, enable them to

undertake income generation programmes and contribute to higher recoveryrates. Given that the formal banks have not succeeded very well in the pastin improving the access of the poor to credit, the strategy of supporting theformation and nurturing of micro-finance groups of poverty alleviation doesnot seem to be bad. However, the responsibilities such as development ofeconomic infrastructure and providing additional funds to micro-financegroups (through mechanisms such as assessment of the quality of the group)must be undertaken by the government as micro-finance programmes alonecannot alleviate poverty.

It is hoped that this monograph, authored by D. Rajasekhar, will beuseful for designing micro-financing in future on sound sustainability basis.

December 2003 G. K. KadekodiDirector

Institute for Social & Economic Change

ContentsList of Tables

List of Charts

Acknowledgements

CHAPTER I INTRODUCTION 1

CHAPTER II POVERTY, EMPOWERMENT AND MICRO- 10FINANCE

CHAPTER III THE STUDY AREA 28

CHAPTER IV MICRO-FINANCE PROGRAMMES OF THE NGOS 57

CHAPTER V ECONOMIC BENEFITS OF MICRO-FINANCEPROGRAMMES 82

CHAPTER VI SOCIAL BENEFITS OF MICRO-FINANCEPROGRAMMES 107

CHAPTER VII SUMMARY AND CONCLUSIONS 128

ANNEXURE 141

NOTES 142

REFERENCES 147

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List of Tables1 Educational Levels (%) in Kolar District (Excluding Children

in 0 - 6 Age Group) 302 Sources of Irrigation (%) and Proportion of Net Irrigated Area

(NIA) to Total Net Sown Area (NSA) 313 Changes in (%) Cropping Pattern in Kolar District (1970-71 to

1995-96) 324 Distribution of Landholdings (%) in Kolar District (1970-71 to

1990-91) 335 Distribution of Population (%) by Their Work Status in Kolar 346 Occupational Distribution (%) of the Workforce in Kolar District 357 Distribution of Credit (%) Provided by the Institutional Agencies

in Kolar 378 The Proportion of Achievement to the Target in Kolar District 389 Percentage of Recoveries in CBs, RRBs, CCBs and LDBs

(1995-96 to 1997-98) 4010 Educational Levels (%) in Krishna District (Excluding Children

in 0 - 6 Age Group) 4311 Sources of Irrigation in Krishna District (1998-99) 4412 Changes in Cropping Pattern (%) in Krishna District (1975-76 to

1993-94) 4513 Distribution of Landholdings in Krishna District 4614 Distribution of Population (%) by Their Work Status in Krishna 4715 Occupational Distribution (%) of the Workforce in Krishna 4816 Bank-Branch Network in Krishna District (March 1999) 5017 Flow of Ground Level Credit in Krishna District 5018 Operational Details of Grama Vikas 6019 Source-wise Funding (%) for Grama Vikas in 1997-98 6120 Savings Programme of Grama Vikas 6621 Distribution of the Total Loan Amount (%) by Source 6922 Distribution of Number of Loans (%) by Source 6923 Distribution of Number of Loans (%) from Members’ Savings 71

Fund24 Distribution of Loan Amount (%) from Members’ Savings Fund 7125 Distribution of Number of Loans (%) from Mahila Okkuta 7226 Distribution of Loan Amount (%) from Mahila Okkuta 7227 Distribution of Number of Loans (%) from Bank Linkages 7328 Distribution of Loan Amount (%) from Bank Linkages 7329 Progress of SHGs in the Project Area of Sanghamitra 7430 Sources of Funding by Different Agencies During 1997-98 7531 Savings Programme of Sanghamitra Service Society 77

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32 Distribution of Loans (%) from Member’s Savings Fund 7833 Purpose-wise Distribution (%) of the Total Revolving Credit

Fund Operated by the NGO 7934 Distribution (%) of Households by Caste and Landholding 8635 Basic Details of Member and Comparison Groups 8736 Details on Loans taken by SHG Members 9037 Distribution (%) of Households by Cumulative Savings 9238 Distribution of Households by Their Savings in Different 93

Sources39 Reason for Contribution of Savings 9340 Distribution of Households by Productive Assets 9441 Distribution of Total Income (%) by Member and Comparison 95

Groups42 Distribution (%) of Households by Number of Occupations 9543 Distribution of Households (%) by Size Class of Income 9644 Distribution of Households by Consumption Assets 9745 Households Stating (%) That Their Expenditure Had Increased

After Joining SHG 9746 Some Select Aspects of the Selected Villages 9947 Basic Details of Households from the Project Area of Sanghamitra 10048 Details of Loans Taken by the SHG Members in Sanghamitra 10149 Distribution of Assets by Households by Productive Assets 10250 Distribution (%) of Households by Number of Occupations 10351 Distribution (%) of Households by Size Class of Income 10452 Distribution (%) of Households by Consumption Assets 10453 Households Stating that Their Expenditure had Increased after

joining SHG 10554 Distribution of Households by Large Purchases Made in One Year 10955 Distribution of Household Members by their Involvement in Major

Decisions in the Last Five Years 11156 Distribution (%) of Household Members by Education and by Sex 11257 Distribution of Household Members by Education and Age Groups 11358 Household Members (%) in School or Literates in the Project

Area of Grama Vikas 11459 Reasons for Sending Children to School (The Project Area of

Grama Vikas) 11560 Perception on up to What Age Girls Should Study in Grama Vikas

Project Area 11661 Perception on up to What Age Boys Should Study in Grama Vikas

Project Area 11662 Comparison between Members and Non-Members with Regard

to Political Participation 117

iii

63 Distribution of Households (%) by Large Purchase made inOne Year (Sanghamitra) 118

64 Distribution of Members by their Involvement in Major Decisionsand by Type of Groups in the Last Five years 120

65 Distribution (%) of Household Members by Education and bySex in the Project Area of Sanghamitra 121

66 Distribution of Household Members by Education and Age Groupin the Project Area of Sanghamitra 122

67 Household Members (%) in School or Literates in the Project Areaof Grama Vikas 122

68 Reasons for Sending Children to School (The Project Area ofSanghamitra) 124

69 Perceptions on up to What Age Should Girls Study in the ProjectArea of Sanghamitra 124

70 Perceptions on up to What Age Should Boys Study in the ProjectArea of Sanghamitra 125

71 Comparison Between Member and Comparison Groups withRegard to Politial Participation (The Project Area of Sanghamitra) 126

List of Charts1 Policies on Women Development and Empowerment through

Five-Year Plans 42 Pyramid of Poverty Concepts 133 Indicators of Poverty Reduction 264 Indicators Used in the Study 131

List of Boxes1 Vulnerability to security 912 From survival to security 983 Lack of conducive environment for undertaking income

generating activities 1034 No Connection between Micro-Finance and Women Empowerment 1125 Augustine’s Fight to Educate Her Daughter 123

AcknowledgementsThis study, undertaken for the Ministry of Agriculture, New Delhi,

at ADRT unit, ISEC, could be completed with the help of resources providedfor GTZ/ SHF project on ‘Poverty Alleviation Strategies of NGOs’. I amgrateful to Ms. Gabrielle Ramm, Team Leader, GTZ/ SHG, New Delhi, forgiving us permission.

My heartfelt thanks are due to the members of the sample SHGsfor cheerfully participating in the meetings with us, and agreeing to provideinformation. Thanks are also due to Grama Vikas and Sanghamitra ServiceSociety for their co-operation and support. The clarifications and commentsof Ms. Jayalakshmi from Grama Vikas improved the study findings.

I thank Mr. V. S. Parthasarathy for the editorial support and Mr. N.Krishne Gowda for undertaking the tasks of fieldwork (along with Ms.Sujani) and data analysis. My heartfelt thanks to Ms. R. Manjula for herexcellent and dependable support in preparing the project report forpublication.

I have presented two seminars (one on proposal and the other ondraft findings) at the institute. I thank all the participants, especiallyProfessors V. M. Rao, M. Govinda Rao, R. S. Deshpande and G. K.Karanth, for their comments. I also thank three anonymous referees fortheir critical comments on the draft report, which helped in revising thestudy for publication.

At a time when I have been preoccupied with the completion oftime-bound projects, and the work assigned by the institute, Professor R. S.Deshpande constantly reminded me of the project, and provided supportand encouragement in completing the project.

Finally, I thank Professor Gopal K. Kadekodi for writing the forewordfor the study.

D. Rajasekhar

CHAPTER I

INTRODUCTION

This study examines the economic and social benefits of micro-finance programmes implemented by two NGOs in Karnataka and AndhraPradesh. Micro-finance aims at providing the rural and urban poor, especiallywomen, with savings, credit and insurance facilities to set up or expandincome generating activities, and to improve household income security.The micro-finance programmes, as we shall discuss below, are expected toalleviate poverty and empower women. This expectation is rooted in thelimited success of government policies pursued since independence inalleviating poverty in India, where about 24 per cent of the world’s poorlive. Given that India’s share of world population is only about 15 per cent,the country has a disproportionately higher share of the world’s poor.

Macro ContextBased on the poverty line approach1 , it is estimated that 35 per

cent of the country’s population (or 312 million people) lived below thepoverty line in 1993-4. While the proportion of the poor in rural areas was36.7 per cent (240.5 million), it was 30.5 per cent (71.5 million) in urbanareas2 .

During the post-independence period, poverty trends seem to haveproceeded in three distinct phases. First, the period from the early 1950s tothe mid-1970s was characterised by fluctuations in poverty without anyclear trend in either direction. Second, the incidence (severity and depth)of poverty steadily declined during the period 1971 to 1990. Third, fromthe late 1980s, poverty appears to have entered into new phase offluctuations3 probably due to macro-economic reforms introduced in 19914 .There are, however, contradictory views on the impact of reforms on poverty(Bhalla 2002; Dev 2002).

The incidence of poverty varies across the states, and within eachof the states. According to income poverty statistics, the poor areconcentrated in central and eastern states of India. If poverty is seen fromthe perspective of non-material deprivation, it spreads to many other states.For instance, Tamil Nadu, Andhra Pradesh and Karnataka, which are betteroff in terms of income, are worse-off in terms of human development andgender development indices5 .

Poverty has ethnic, caste and gender dimensions. Tribals accountfor 27 per cent of India’s poor. Fifty per cent of them belong to the categoryof poor. They also suffer from non-material deprivation such as high illiteracy

and dropout rates. Dalits (persons belonging to depressed castes), whilecomprising 11 per cent of India’s population, account for 15 per cent ofIndia’s poor. Most of the poor belonging to these communities are eitherlandless or marginal farmers.

Gender Dimension of PovertyWomen in India have improved their well-being in the last 30 years

(Annex 1). Such an improvement can be seen in terms of increasedexpectation of life at birth, increased age at marriage, gross enrolment ratioat all levels of education, work participation rate and organised employmentand less gap between infant mortality rate for girls and boys. Yet, povertyin India has gender dimension. With higher maternal and infant mortalityrates, lower age at marriage, widespread illiteracy, higher dropout rate fromschools and lower work participation rates, Indian women are one of themost disadvantaged groups in the society. While in overall terms, womenseem to have even better life expectancy and lesser death rates than men,more women die than men up to age 34. Infant and child mortality ratesare higher for girls than boys. Deprivation in literacy is significantly moreamong women. More girls drop out even at the primary stage of educationthan boys (Gopalan 2002: 330).

Further, the quality of employment leaves much to be desired. Over90 per cent of the rural women workers are unskilled and hence, they aremainly engaged in informal/ unorganised sector. Wage rates for women inagriculture have been, on an average, 30-50 per cent less than those paid tomen. Women shoulder almost the entire burden of household activities andchildcare responsibilities, and a large proportion of women’s work time isspent on such activities. This leaves little time for women to engagethemselves in income generating activities (IGAs). Female casual labourersin rural India show the highest incidence of poverty of any occupationalcategory, male or female. Women-headed households suffer from adisproportionate burden of poverty. At the same time, the structures todeliver services of credit, technical advice, etc., do not reach them becauseof their gender bias. The employment of women in the organised and publicsectors is much lower than that for men. The presence of women in decision-making positions is nowhere near parity with men. The National Commissionfor Women observes that with the shrinking development expenditure onaccount of growing debt and interest burden on both central and stategovernments, the axe generally fell on social sectors including womendevelopment (Gopalan 2002: 22).

2 Micro-Finance, Poverty Alleviation and Empowerment of Women

Overview of Policies and Programmes on Women Developmentand Empowerment

The situation of women would have been much worse but for thegovernment policies and programmes aimed at women development andempowerment, and operationalising them through its five-year plans sinceindependence. The policy framework and strategies for women developmentand empowerment gradually evolved over time (Chart 1). In this regard,the ninth plan document states that: “In the earlier phase of developmentalplanning, the concept of women’s development was mainly ‘welfare’oriented. During the sixties, women’s education received priority … Duringthe seventies, there was a definite shift in the approach from ‘welfare’ to‘development’ which started recognising women as participants ofdevelopment. The eighties adopted a multi-disciplinary approach with aspecial thrust on the three core sectors of health, education andemployment… The early nineties made a beginning in concentrating ontraining-cum-income generation programmes for women with the ultimateobjective of making them economically independent and self-reliant” (GOI2002: 315).

Such an evolution of policy framework was due to theimplementation of the programmes through government and non-government structures and constant review of these programmes andimplementation structures. The welfare programmes in the first two fiveyear plans were pursued through Community Development Programmes,and subsequently, Mahila Mandals were created to ensure betterimplementation of the programmes. The sixth and seventh plans aimed atimproving the employment status of women. As part of this objective,direct poverty alleviation programmes such as Integrated Rural DevelopmentProgramme (IRDP)6 and area development programmes such as NationalRural Employment Programme (NREP)7 were initiated. It was stipulatedthat 40 per cent of the beneficiaries under IRDP should be women.

The implementation structures were, however, not consideredappropriate for the implementation of women development activities. Priorto 1975, women’s development was not an exclusive portfolio. It was handledas an incidental subject under the Ministry of Social and Women’s Welfare.The Central Social Welfare Board, created in 1953, was undertaking welfareschemes for women. It was in 1985 that an exclusive Department of Womenand Child Development was created. It also became a political portfoliounder the Ministry of Human Resource Development handled by a separateminister.

Introduction 3

Chart 1: Policies on Women Development and EmpowermentThrough Five-Year Plans

First Five Year Plan Mainly welfare-oriented as far as women’s issues were concerned.(1951-56) The Central Social Welfare Board (CSWB) undertook a number

of welfare measures through the voluntary sector. Theprogrammes for women were implemented through the NationalNational Extension Service Programme and CommunityDevelopment Blocks.

Second Five Year Plan Efforts were made to organise Mahila Mandals (women’s groups)(1956-61) at the village level to ensure better implementation of welfare

schemes.Third, Fourth and other Accorded high priority to women’s education. Measures toInterim Plans (1961-74) improve material and child health services, and a programme

ensuring supplementary food and nutrition for children andexpectant mothers were introduced.

Sixth Five Year Plan Was regarded as a landmark for women’s development. Women(1980-85) issues, instead of treating them as welfare issues, were holistically

considered in terms of consolidated development subject. ThePlan adopted a multi-disciplinary approach with a approachwith a three-pronged thrust on health, education and employmentof women.

Seventh Five Year Plan Very significant step was taken to identify and promote(1985-90) “beneficiary-oriented programmes” to extend direct benefits to

women. The objective was to raise the economic and socialstatus of women, and bring them into the mainstream ofnational development.

Eighth Five Year Plan Promised to ensure that the benefits of development fromdifferent sectors did not bypass women. Special programmeswere implemented to complement the general developmentprogrammes. The strategy was to maximise benefits from thelatter and enhance them through the former. The flow of benefitsto women in the three core sectors of education, health andemployment were monitored vigilantly. Women were enabledto function as equal partners and participants in thedevelopmental process with reservation of membership in thelocal bodies. This approach of the Eighth Plan markeda definite shift from ‘development’ to ‘empowerment’ ofwomen.

Ninth Five Year Plan Empowerment of women (especially those belonging to sociallydisadvantaged groups) as agents of socio-economic change anddevelopment. Promoting and developing people’s participatoryinstitutions like Panchayat Raj Institutions, co-operatives andself-help groups. Strengthening efforts to build self-reliance.Convergence of services from different sectors. Womencomponent plans at the Central and State levels.

The other enabling structures such as Women Development Corporations(WDCs) were set up in 18 states to implement the new strategy of economicdevelopment of women through facilitating access to training,entrepreneurship development, credit, technical and marketing services.


The studies and evaluation reports of the area developmentprogrammes and anti-poverty programmes conclude that the targeting waspoor, people’s involvement in planning and implementation was lacking andthe impact was marginal. In cases where the target group was involved inthe selection of beneficiaries under IRDP, the targeting and the impact tendedto be better. This suggested that if the poor represented themselves in anti-poverty programmes through their own organisations, the benefits ofprogrammes such as IRDP would be enormous.

The experience of some of the NGOs in women development andempowerment started to become available by the mid-1980s. Some ofthese NGOs (such as MYRADA) organised women in small groups forproviding awareness on their rights and entitlements, education and soughtto improve their material position by enabling them to have access to credit.Small groups of women (numbering 15-20) were formed. The womenwere encouraged to contribute savings to the group, and the accumulatedsavings fund was used to meet the consumption credit needs of the women.The studies on such initiatives came with the findings that smaller groupswould help organise women, and achieve their social and economicempowerment (Fernandez 1993: Rajasekhar 1994 and 1996).

These findings resulted in important changes in approach (shift fromindividual beneficiary to groups of women) and strategy (organisation ofwomen) of women development and empowerment programmes. First,the Development of Women and Children in Rural Areas (DWCRA) wasstarted as a sub-programme of IRDP exclusively for women as it wasfound that women members of IRDP assisted households did not receiveadequate benefits. Under this programme, the staff of DWCD at the villagelevel formed a 15-member women group, which, after regular monthlysavings of Rs.30 for six months, was eligible for an interest-free loan froma local formal bank (grant in the cases of SC/ST women). Each successfulrepayment made the group eligible to borrow higher amounts. Thecommercial banks were particularly attracted to this programme becauselending was based on the savings of women members, and larger loanswere given only after the group proved itself through repayment. As aresult, the programme expanded rapidly8 .

The studies and evaluations on anti-poverty programmes came upwith the following findings. As far as DWCRA was concerned, the groupformation process became short and ad hoc and many groups becameinactive and defunct due to “lack of orientation of the project staff,inadequate staffing, poor follow-up, target chasing and insufficient linkages”

Introduction 5

(Rajakutty 1997). Limited institutional capacity (in government as well asnon-government agencies) to address the socio- economic needs of thewomen and target oriented top-down approach in the programmeimplementation with inadequate emphasis on self-reliant thrift and creditgroups also impeded women’s quest for greater economic and socialempowerment (World Bank 1997: 2-4). However, the initial success ofDWCRA together with the fact that the groups tended to function wellwhere NGOs were involved prompted the governments in various states tocome up with similar programmes which envisaged participation of variousdevelopment actors. These programmes are called Stree-Shakthi inKarnataka and Kutumbasri in Kerala. These programmes involved banks(in financing), NGOs (in capacity building) and others in the implementationof the programmes, and the linkages were built in this regard.

The evaluations conducted on programmes like IRDP, TRYSEM(Training for Rural Youth in Self- Employment and Management) revealthat these programmes did not yield development benefits9 due to lack ofco-ordination between the programmes, and involvement of the target group.The Indian government merged all the direct anti-poverty programmes(IRDP, DWCRA, TRYSEM, etc.) into one single programme calledSwarnajayanthi Gram Swarojgar Yojana (SGSY) in 1999 to promote self-employment among women and men (by forming SHGs among them) andenabling them to cross the poverty line. Women constitute at least 49 percent of the total persons assisted in the programme. SGSY sought to involveline departments, Panchayat Raj Institutions (PRIs), NGOs and CBOs inthe implementation of the programme. The involvement of PRIs at alllevels was considered to be necessary owing to the 73rd ConstitutionalAmendment which accorded substantial powers to PRIs and stipulated thatone-thirf the seats should be reserved for women.

A serious balance of payments crisis10 forced the government toadopt an economic agenda (since 1991) which saw the markets and theprivate sector as efficient in producing goods and services, and achievingrapid economic growth. The aid agencies prescribed that the Indiangovernment should gradually reduce its role in service provision anddevelopment, and leave this task to the local decentralised government andNon-Government Organisations (NGOs).

In accordance with the above, the Indian government providedfavourable conditions for the decentralisation of government through the73rd Constitutional Amendment11 in 1993. Another important developmentin the 1990s has been the assignment of an increasing role to NGOs12


(Rajasekhar 2000) by the government and external donors in service provisionand poverty alleviation. One of the poverty alleviation strategies popularisedby the NGOs (with the funding support from external donors) has been thedelivery of micro-finance services through a group-based approach. TheNGOs formed SHGs consisting of women and enabled them to undertakesavings and credit activities. Although the results of these experimentswere uneven across the regions, NGOs and types of groups (Rajasekhar2002a), their experience positively influenced the government, promotionalagencies such as NABARD and SIDBI and external donors to start similarprogrammes on a wider scale.

Since the early 1990s, NABARD has been linking SHGs formedby NGOs, banks and government to formal banking institutions with theassistance of multi-lateral and bilateral agencies through Bank-SHG linkageprogramme. Under this programme, banks provide financial assistance tothe SHGs for re-lending to members either directly or through the mediationof NGOs in the ratio of 1:4 of savings to credit13 . Small IndustriesDevelopment Bank has also started a similar programme since 2001.

Rashtriya Mahila Kosh was set up in 1993 as part of the Departmentof Women and Child Development to provide credit facility to NGOsworking with micro-finance groups. Between 1993 and 1999, it provided57.62 crores to 349,752 women in micro-finance groups formed by 688NGOs and other organisations. The recovery rate was 90 per cent (DWCD2000).

Commercial banks, Regional Rural Banks and co-operatives alsostarted to form the SHGs (consisting mostly of women) and channel thecredit under priority sector lending to members in these groups. Althoughthe aggregate picture on the efforts by the formal banks is not available, theindications14 are that the banks have found micro-finance groups as viableinstruments for lending to the poor and meeting the priority sector lendingtargets.

The World Bank and the International Fund For Agriculture andDevelopment (IFAD) initiated a Rural Women Development andEmpowerment Programme (RWDEP) with a total budget of 191.21 croresin 1999 — a five year national project for rural women’s development andempowerment, scheduled for completion in May 2004. Called as Swa-Shakthi, the project is currently implemented by DWCD in seven States,namely, Karnataka, Gujarat, Haryana, Uttar Pradesh, Bihar, Madhya Pradeshand Jharkhand. Under this programme, SHGs of women were formed,micro-finance activities were introduced and attempts were made to linkthe SHGs with banks, line department and PRIs.

Introduction 7

To conclude, poverty in India has a strong gender dimension. Inorder to develop and empower women, the government has been formulatingpolicies and programmes, which have been operationalised through five-year plans since independence. A review of the policies and programmesis undertaken during and at the end of each plan period while preparing plandocuments. Such a constant review, based on evaluation and studiesconducted on government-initiated women development and empowermentprogrammes, and the successful ‘programmes’ of civil society organisationswithin and outside the country, together with political mobilisation of women,have resulted in the following changes:

• A shift in policy focus from ‘welfare’ to ‘development’ and to‘empowerment’ during the five-year plan periods, especially after the1970s.

• Assignment of functions relating to women’s development andempowerment to different types of local organisations, line departments,local government, NGOs and others.

• Mandatory representation of women in the decentralised governmentat the district and below.

• Formation of grass roots level women’s organisations for theirdevelopment and empowerment.

• A shift in targeting strategy from ‘individual beneficiaries’ to ‘Self-Help Groups (SHGs) of women involved in micro-finance’.

• A shift in strategy from issuing loans to individual beneficiaries to usingmicro-finance as an instrument for development and empowerment ofwomen organised in SHGs.

Micro-finance programmes are expected to make a significantcontribution to poverty alleviation and empower the members in economic,social and political spheres (Rajasekhar 2002a; Mayoux 1998). Theseprogrammes are also expected to become increasingly self-reliant andindependent of donor funds. Recent studies, however, question thisenthusiasm. While one group of studies (Hashemi, Schuler and Riley 1996;Puhazhendi and Badatya 2002) argues that micro-finance has very beneficialsocial and economic impact, others caution against such optimism(Montgomery et al 1996; Goetz and Sen Gupta 1996; Buckley 1997; Rogaly1996; Mayoux 1998; Rajasekhar 2002a; Kropp and Suran 2002). Otherstudies suggest beneficial impact of micro-finance programmes; but arguethat micro-finance does not assist the poorest (Hulme and Mosley 1996)thus questioning the ability of the programmes in targeting the poor, the


sustainability of the services provided and the ability of the programmes toreduce poverty. The studies also note that there are only limited data on theimpact of NGO programmes on poverty and that NGOs’ comparativeadvantage over other service agencies needs to be investigated rather thanassumed (Kabeer and Murthy 1996). Thus, it appears that micro-financeprogrammes have not always succeeded in their objectives of sustainablepoverty alleviation and empowerment.

With this background, the study seeks to examine the functioning ofmicro-finance programmes, and analyse economic benefits (improvementin livelihoods and access to resources) and social benefits (improvement inknowledge and participation) of the selected micro-finance programmes onmembers in the specific context of two NGO programmes in Karnatakaand Andhra Pradesh. The study also looks at the lessons from the selectedmicro-finance programmes, and examines the likely pointers on what couldbe the possible trends in economic and social benefits. The policysuggestions have been provided at the end.

Introduction 9

CHAPTER II

POVERTY, EMPOWERMENT AND MICRO-FINANCE

A message that strongly comes from the discussion in Chapter Ihas been that micro-finance is viewed as an instrument of not just povertyalleviation but poverty reduction and empowerment. In this context, thefollowing key questions arise. What is poverty? What is empowerment?What is the difference between poverty alleviation and reduction? Whatfactors make the micro-finance programmes so special that they achievethe objectives of poverty reduction and empowerment? The main objectiveof the chapter is to answer these questions, and provide a conceptual andmethodological framework to analyse the social and economic benefits ofthe micro-finance programmes.

Concepts of PovertyPoverty is a concept that “describes the general condition of people

who are badly off and encompasses many aspects of want anddisadvantages” (Chambers 1988: 3). However, what precisely are thesewants and disadvantages is always debated.

Very frequently, poverty is related to inadequate incomes (povertyline). The conventional approach concentrates on income and/or consumptionof the household to describe the basic necessities. This conceptualisationof poverty suffers from the shortcomings of:• viewing market as a neutral institution to which all sections of

population have equal access and within which all sections can negotiateon an equal footing. In reality, markets reflect and perpetuateinequalities in society on the basis of class, caste, gender and othersocial relations;

• prioritising the market as the main institutional mechanism for meetingthe basic needs, and ignoring other institutional mechanisms for theseneeds. In reality, people meet their basic needs through a variety ofother resources. Poor people claim free food, clothing and shelter fromkith and kin at times of crisis, use free fruits and fodder from CommonProperty Resources (CPRs). They also avail of the nutritionprogrammes and health and education services of the governmentorganisations, however inadequate they may be. In fact, the livelihoodstrategies of the poor, particularly women, involve not just anengagement with IGAs or the labour market, but also social networking,changes in consumption pattern, labour and asset pooling, savings,borrowing, etc.;

• ignoring the institutional barriers which prevent certain sections of thepoor, like women15 , dalits16 , adivasis17 and minority groups, fromconverting enhanced income into enhanced access to basic needs; and,

• ignoring intra-household inequalities which lead to unequal distributionof household income, based on gender, age and physical ability. Kabeer(1996) argues that the conventional measures of income and well beingcan only capture male poverty as they are premised on the notion ofmale actor and of the experience of male poverty. Further, per-capitaincome emphasises on the households, and hence, the intra-householdinequality is overlooked. She identifies three disjunctures introduced bygender-translation of labour into income, income into choice and choiceinto personal well being. Whether women are able to convert labourinto income, income into choice and choice into personal well-beingdepend upon social norms and cultural contexts.

J Dreze and A Sen (1989: 15) describe poverty as a severe failureof basic capabilities. Their approach makes a distinction between ends(capabilities) and means (low incomes or other causal antecedents of failuresof basic capabilities). Robert Chambers (1988 and 1995), however, notesthat the above do not directly consider the perceptions of the ‘actors’themselves who may have a different understanding of deprivation andtheir own priorities. He suggests that the following five clusters ofdisadvantage characterise the poor in rural areas.Lack of assets is the first disadvantage faced by the poor. The poor inrural and urban areas are characterised by lack of access to productiveassets (such as land, livestock, skills, etc.) due to a combination of factorswhich include the market related such as dispossession, social and culturallydetermined practices of inheritance, etc.Physical weakness is the second disadvantage faced by the poor. Thiscan be either due to the inability to access basic necessities such as food,nutrition, medical facilities, and so on, or due to inadequate development ofhealth facilities. These may, in turn, have an adverse effect on reproductivebehaviour of the poor.Isolation refers to being peripheral or cut-off. Poor people can be isolatedgeographically (such as living in remote areas). They can also be isolated incommunication, lacking contacts and information, including not being ableto read. The isolation also extends to social services, markets, and socialand economic support (Chambers 1995: 19).

Poverty, Empowerment and Micro-Finance 11

Vulnerability is the fourth disadvantage of the poor. Most literature usesthe terms vulnerable and poor as alternating synonyms. But, vulnerability isnot the same as income poverty or poverty more broadly defined. It meansnot lack or want, but exposure to risks and defencelessness. It has twosides: the external side of exposure to shocks, stress and risk; and the internalside of defencelessness, meaning a lack of means to cope with natural andother crises without damaging loss. This loss can take many forms, becomingor being physically weaker, economically impoverished, socially dependent,humiliated or psychologically harmed (Chambers 1995: 20).

The last disadvantage of the poor is powerlessness. The poorare dispersed, and anxious about access to resources, work and income.Hence, it is difficult for them to organise or bargain. Often, physically weakand economically vulnerable, they lack influence (Chambers 1995: 21). Asthe livelihood related problems force the poor to become disperse, theoutsiders (government, NGOs and others) often find it difficult to mobilisethe poor to improve their lot.

According to Chambers (1988), the poor themselves perceive thatthere are three priorities, namely, survival, security and self-respect. Survivalneeds are met through income, access to CPRs and government resources,which, in turn, enable the poor to access basic necessities relating to food,nutrition and health. Once survival needs are met, the poor strive to achievesecurity to their livelihood, which becomes possible when they have accessto and control over productive assets. Secured livelihood implies the abilityof the poor to face vulnerability. Once the poor achieve secured livelihood,they strive for self-respect. One can state that the poor have self-respectwhen they have dignity and autonomy. According to Chambers (1988), thepoor assign highest priority to self-respect.

The above issues can be incorporated into a pyramid of povertyconcepts (Baulch 1996). Chart 2 elaborates the concept of poverty byincluding Per-capita Consumption (PC), CPRs and State ProvidedCommodities (SPC) in lines 1, 2 and 3, respectively. These imply that thepoor need to have access to income, CPRs and SPC to meet their survivalneeds. Line 4 adopts a broader definition, which aims to capture thevulnerability of the poor by including assets (like human and physical capital,etc.). These assets create a buffer between production, exchange andconsumption, which may be called upon at the time of crisis. Ownershipof, and control over assets are important for the poor to have a securedlivelihood. The addition of dignity and autonomy in lines 5 and 6 incorporatesstill broader meaning of poverty. These indicate that the poor need to havefreedom not to perform subservient activities. An example of this is the


compulsion on dalits to perform certain activities like removing carcasses,digging graves, etc. They should also be autonomous in the livelihood choices,and translation of labour into income, income into choices and choice intopersonal well-being.

Chart 2: A Pyramid of Poverty Concepts

1. ……………. PC2. ……………. PC + CPRs3. ……………. PC+CPRs+SPC4. ……………. PC+CPRs+SPC+ASSETS5. ………… PC+CPRs+SPC+ASSETS+DIGNITY6. …… PC+CPRs+SPC+ASSETS+DIGNITY+AUTONOMY

Notes: PC: Per-capita Consumption.CPRs: Common Property Resources.SPC: State Provided Commodities.

Source: Baulch (1996).

Based on this discussion, poverty can be defined as follows:• inability to obtain basic needs (food, shelter, health, etc) as a consequence

of low income and insufficient access to productive resources and assets;• lack of opportunities to exploit human resources owing to insufficient

access to education and health care;• isolation owing to physical conditions and/or inadequate education;• lack of status and power, making it difficult to influence one’s own

situation and break out of poverty; and,• a high degree of vulnerability owing to lack of productive assets, exposure

to natural disasters, etc.

It needs to be, however, noted that poverty is not a staticphenomenon, and it changes over time. The concept of poverty changeswith time and across regions. It also changes within individual economicgroups and at various economic levels within a country. It is understooddifferently by women and men at the household level. It must be mentionedhere that the poor are not a homogenous group with common interests andviews and poverty has various dimensions. A distinction can also be madebetween absolute and relative poverty. Absolute poverty refers to lack ofbasic necessities. Relative poverty implies how poverty is perceived in relationto the condition of others in society and how such a perception affects theirown actions to come out of poverty.


Poverty, conceptualised both in economic and non-economic terms,implies that interventions should aim at not only meeting the survival needsbut also enable them to secure their living conditions and achieve self-respect.The interventions should, then, focus on improving the asset base of thepoor, and address the issues relating to lack of dignity and autonomy. Suchinterventions sustain only when the people are empowered in the process.

EmpowermentDifferent perceptions exist regarding the ability of micro-finance

programmes to contribute to women’s empowerment. Mayoux (1998) statesthat three different approaches to micro-finance are followed acrosscountries: the financial self-sustainability approach, the poverty alleviationapproach, and the feminist empowerment approach. The reasons that womenare targeted are consistent with the perception on empowerment adopted ineach approach. In the financial sustainability approach, the emphasis ison access to resources, and “it is generally implicitly assumed that micro-finance will be used by women to increase their incomes through micro-enterprise and that this will increase their control over income and resources”(Mayoux 1998: 17).

In the poverty alleviation approach, empowerment is seen interms of community development and self-sufficiency. This approachprioritises targeted assistance to groups to enable them to collectively improvetheir positions, but only indirectly challenges social structures, and focuseson households and communities rather than on women alone or on genderor class relations. One of the most important underlying assumptions of thepoverty alleviation approach is that addressing women’s “practical needs”will enable them to challenge gender inequity in ways they see fit (Mayoux1998: 20).

In the feminist empowerment approach, on the other hand,empowerment is defined in terms of consciousness, control, and self-reliance(Mayoux 1998: 22). In this approach, micro-finance is seen as contributedto the process of empowerment by enhancing women’s productive role andenabling them to challenge inequities within the household. The creditprogramme becomes a useful entry point for wider mobilisation. Here, thefocus is not on access to loans as such, but rather on the provision of explicitsupport for social, economic, and political processes that will allow womento contest their subordination.

Micro-finance programmes are expected to meet the survival needsof the poor by enabling them to have access to credit for both consumptionand productive activities. They are also expected to empower the poor by


expanding the opportunities for participation in income generating activitiesand undertake social activities aimed at removing social and cultural factorscoming in the way of their empowerment. Before we look at how themicro-finance programmes will expand opportunities, it is necessary to lookat why micro-finance programmes emerged in India.

Why Micro-Finance Programmes Emerged in India?The insufficient availability of credit18 from the Formal Rural

Banking System (FRBS) for the rural poor and the consequential adverseimpact on agricultural productivity and incomes have been the concerns ofpolicymakers and academics in India. The nationalisation of banks in 1969brought an increase in the number of branches in rural areas and in thevarious policies aimed at social banking. This improved rural people’saccess to credit. Nevertheless, the inequalities, in the banking system acrossthe regions and social classes, persisted. The number of the poor (inparticular women) obtaining credit from the FRBS was lower than shouldhave been expected considering their proportion within the population. Thiswas because of the following:

• insistence on collateral, which could not be provided by thepoor and especially women.

• complicated administrative procedures.• long distances between the villages and the bank branches.• the cultural gap between bank officials and the poor.• Inconvenient and short banking hours.• political interference19 .• inflexible lending policies and procedures.• lack of credit available for consumption.• a widespread belief that the poor are non-bankable.

Although some of the rural poor obtained credit from the FRBS,they found that credit was neither timely nor adequate for their needs.Furthermore, the purpose for which an application for loan was made, andthe entrepreneurial experience of loan applicants was not considered whenloans were ultimately sanctioned. Without a sufficient understanding ofthe purposes for which loans were taken, borrowers tended to utilise theloan for purposes other than income generation. There were also problemswithin the FRBS system such as lack of complementary business support.

In the late 1980s, the FRBS began to face problems of highertransaction costs (due to lending small amounts to large numbers ofborrowers) and recurring losses. In addition, the managerial inadequacies


within the banking system caused problems, which resulted in an alarminggrowth in overdue payments. This, in turn, adversely affected the recyclingof credit, and led to lower profit margins. Many commercial banks, RegionalRural Banks (RRBs) and co-operatives were also incurring losses. Thisled to the following responses:

Firstly, there was mounting pressure on the government from Indianbankers and some outside agencies to undertake finance sector reforms sothat the banking sector could become financially viable. Yielding to thispressure, the government appointed the Narasimham Committee in 1991,which recommended measures to improve the viability of the financialsector. One recommendation was that the priority sector20 lending shouldbe gradually reduced from 40 per cent, of the total advances in 1994 by tenper cent every year until it could be removed altogether. This would havefurther reduced the availability of credit to the poor21 . However, thegovernment did not accept this recommendation, and even stipulated thatforeign banks should continue to provide credit to all social classes22 . Evenso, the proportion of credit provided to the priority sector declined from37.7 per cent in 1991, to 28.9 per cent in 199623 . Although banks attributedthis to a decreased demand for priority sector credit, a time-series analysisof trends in agricultural credit flow arrived at the conclusion that the bankswere diverting credit to more profitable areas (Sahu and Rajasekhar 2002).

Secondly, in the wake of increasing transaction costs, mountingoverdue payments and widespread criticism relating to social bankingprogrammes such as IRDP, the Indian banks started showing considerableinterest in group-based credit programme of DWCRA. The commercialbanks were particularly attracted to this programme because lending wasbased on the savings of women members, and larger loans would be givenonly after the group had proved itself through repayment. Loan assistanceto women’s groups was found to be relatively more productive than othersocial banking programme, and repayment rates were better. The governmentagencies such as District Rural Development Agency (DRDA) andIntegrated Tribal Development Agency (ITDA) provide funds to DWCRAgroups formed by both government officials and NGOs.

Thirdly, the Indian government decided that, from 1999-2000onwards, group methodology should be adopted in the case of povertyalleviation programmes. Consequently, a new programme of SGSY wasformulated to combine the erstwhile poverty alleviation programmes suchas IRDP, TRYSEM and DWCRA. This programme channelled theassistance to those poor who were part of a SHG. The SHG would select


the beneficiaries, and help the implementing agencies in monitoring theassistance provided and help in the recovery of loans, if any.

Fourthly, commercial banks tried to find ways of improving theirfinancial viability. In addition to the reduction in the amount of prioritysector lending and the provision of recycled short-term credit, banks lent tothe members of SHGs (with or without NGO intermediation) which undertookthe responsibility of selection, monitoring and recovery of loans, andrepayment to banks. Banks lending to SHGs not only obtained refinance24

from the National Bank for Agriculture and Rural Development (NABARD)but also had the advantages of a “reduction in the transaction costs, (an)improvement in recoveries and …. (profit) margins …. (lending) to widercoverage of the target group”25 . This was corroborated by studies, whichshowed that banks’ transaction costs were less, under the programme, asthe burden of selection, monitoring and recovery of loans was passed on tothe NGOs and SHGs26 . The borrowers also experienced a reduction intransaction costs27 . The banks’ financial commitments were also less inthis programme than in social banking programmes such as IRDP. In thecase of IRDP loans, the ratio of bank credit of NABARD’s refinance was3.8:1. On the other hand, in the case of credit given under SHG-bank linkageprogramme, the ratio of bank credit to NABARD’s refinance worked outto be 1.1:1 (NABARD 1997: 67-8). As the amount of NABARD refinancedepended on recovery performance, a lower ratio in the case of SHG-banklinkage programme indicated that recovery rates were high in thisprogramme. As a result, the number of SHGs linked to banks increasedrapidly from 255 in 1992-93, to 8,598 in 1996-97. In 1997, 29 commercialbanks, 79 RRBs and 12 co-operative banks participated in the programmein 18 different states. An estimated 1.5 lakh (1 lakh is equivalent to 100,000)member families were covered.

Fifth, rigid banking systems and the consequent inaccessibility ofcredit to the poor stimulated many NGOs in introducing and expanding micro-finance programmes. A majority of the estimated 30,000 NGOs in Indiastarted micro-finance programmes. The government even formedprogrammes such as Rashtriya Mahila Kosh (RMK) through which SHGgroups formulated by NGOs could access credit and other support. Quasi-government agencies, such as NABARD and the Small IndustriesDevelopment Bank of India (SIBDI), also formulated programmes to linkmicro-finance, which raised questions with regard to whether their serviceswere complementary to or substituting the FRBS. This was due to thegrowing role of NGOs, within micro-finance, which raised questions with


regard to whether their services were complementary to or substituting theFRBS. Some of the critiques argued that the total amount of credit providedby the micro-finance programmes formed only a small proportion of creditprovided by the FRBS, as the loan amounts offered by micro-financeprogrammes were smaller. Therefore, it was argued that micro-financeprogrammes could not play a significant role in poverty alleviation. Theproponents of NGO micro-finance programmes (while acknowledging thesmall size of programmes), argued that NGO credit programmes provided areliable source of credit to the poor, helped them meet their consumptioncredit requirements, reduced their dependence on moneylenders, andimproved the collective strength of the poor in approaching governmentagencies and in accessing resources from them. They argued that althoughmicro-finance programmes could not substitute the FRBS, they did enablethe poor to save, and provide the poor with the confidence to approachbanks to deposit their savings, thus allowing them to access the bank’s otherresources. The proponents argued that a linkage process between the NGO,its members and the FRBS, would not become sustainable if the poordeveloped linkages from a weak position. Therefore, micro-financeprogrammes were adopted as the strategy to strengthen the position of thepoor vis-à-vis the FRBS.

Why Micro-Finance Programme is Considered Superior?Rural credit markets in developing countries are imperfect because

there is no certainty about the completion of a credit transaction. A credittransaction is complete only when a borrower repays the loan. One cannotbe, however, sure about this repayment. It is argued that borrowers andlenders face risks in the credit market. Borrowers face the risk that theexpected increase in income from an investment project for repaymentmay or may not materialise. On the other hand, lenders’ risk has twoelements; one relates to the same risk with which the borrower is faced,and the other relates to the borrowers’ ability to pay; even if he is able topay, he may not actually repay. This poses three types of problems:

! Borrowers differ in the likelihood that they will default and it is costly toarrive at the extent of that risk for each borrower (selection problem).

! It is costly to ensure that borrowers take those actions which makerepayment most likely (monitoring problem).

! It is difficult to compel repayment (enforcing the repayment).

The lenders’ risks can be minimised if they have accurate informationon the type of borrower and the actions of the borrower relating to the


utilisation of loan and repayment. Thus, three key problems of selection,monitoring and repayment, together with the costs associated with obtaininginformation on these three aspects will determine imperfections in the creditmarkets and access of the people to credit. The imperfections in ruralcredit markets in developing countries (Hoff et al 1993) often result inhigher transaction costs, adverse selection and moral hazard and reducedvolume of transactions28 leading to welfare loss especially for the resource-poor households.

Micro-finance is widely regarded as an innovation having the potentialto minimise risks in the credit market (Ghatak 1999; Ghatak and Guinnane1999; Morduch 1999; Armendáriz de Aghion 1999). Micro-finance impliesproviding the poor with savings, credit and insurance facilities to set up orexpand Income Generating Activities (IGAs) relating to agriculture, alliedactivities and non-farm sector, and thereby, increase household incomesecurity. Micro-finance services are provided by a group29 of about 15women members. The members periodically contribute savings which areused to build a savings fund that can be revolved among the members. Themembers are encouraged to borrow from the savings fund thus created tomeet their consumption and short-term production needs. Since this fund,built entirely on the savings of members is normally insufficient to financeIGAs involving larger amounts of start-up capital, the micro-finance groupsare linked to formal banks to obtain bulk loans for on-lending to groupmembers.

The credit fund, if it comes from an outside source is disbursed toindividual members according to an agreed criteria and the group undertakesjoint liability for the debts of each member. Alternatively, funds may belent by an external agency to individual group members, in which case thegroup jointly guarantees all the loans. The joint liability provides incentivesor compels the group to undertake the tasks of selection, monitoring andenforcement of repayment in a cost-effective manner, leading to reducedtransaction costs, increased volume of transactions and improved access ofthe poor to credit. For this to happen, the group should be small andhomogenous, and have access to incentives30 (Olson 1965; Stiglitz 1990;Morduch 1999). The joint liability works better in communities characterisedby close social ties and social capital, and in remote areas not having accessto alternative sources of credit (Sharma and Zeller 1997).

The micro-finance programmes are considered to have the followingpotential to address the problems of the poor, in general and women, inparticular.


• Lending to the poor is considered to be costly and risky because of theirlow savings propensities and inability to provide collateral. Micro-financegroups, however, can target the poor better as the joint liability compelsthese groups to be small and homogenous31 so that members haveincentives to participate in selection, monitoring and ensuring the repaymentof loans (Stiglitz 1990). This implies that the groups can be formed forthe poorest as the households with similar characteristics (savings capacity,credit needs, etc.) actually contribute to their success.

• Micro-finance programmes enable the poor to save. Until about the late1980s, savings mobilisation had not been given emphasis on the assumptionthat the poor could not save. The studies, however, argue that if theinstitutions are appropriately structured and provide demand-oriented(conveniently located facilities and flexible accounts) savings products,the poor will contribute savings which help institutions to achieve a levelof outreach that cannot be achieved with credit only facility (Vogel 1994;Fiebig et al 1999 and Rutherford 1999). Savings mobilisation (focusingon voluntary savings as well) has been emphasised in micro-financeprogrammes for the following reasons:(i) it provides a relatively inexpensive source of capital for re-lending; (ii)creates a natural pool of resources; (iii) building up of savings may offerimportant advantages to low income households directly; households canbuild up assets to use as collateral, they can build up a reserve to reduceconsumption volatility over time, and they may be able to self-financeinvestments rather than always turning to creditors (Morduch 1999). Thegrowing amount of savings improves the confidence among members ininvesting and expanding the existing IGAs, and household income security.

• As the amount of members’ savings at the disposal of the group increases,the member households can withdraw savings or take credit forconsumption, which leads to reduced dependence on moneylenders, foodsecurity, and enhanced access to health and education. This helps thepoor to have confidence to invest on IGAs as the access to consumptioncredit frees them from uncertainties of how to meet consumptionemergencies.

• Micro-finance groups improve access of the poor to credit. Lending to agroup member (by the group or external agency with group providingjoint liability) is less risky because of peer selection, which, in turn, takescare of problems posed by adverse selection. Ghatak (1999) shows thatthe group lending contract provides a way to charge different effectivefees to risky and safe types, and such differential charges make risky


types to come together in one group, while the safe types join together inanother group.

• Access to production credit enables them to undertake IGAs throughwhich poverty can be reduced (Rajasekhar 2000 and 2002a). The creditto poor households in a group is considered to be less risky because ofpeer monitoring. The borrowers in each group have the ability to enforcecontracts between each other, and they jointly decide what type of activitiesto undertake. By fixing higher joint-liability payment for risky types, thegroup influences the members to choose the safe activity (Stiglitz 1990).Through exploiting the ability of neighbours to enforce contracts andmonitor each other, the micro-finance groups can offer low interest rateson loans and raise repayment rates.

• Credit for women to undertake IGAs enables them to have access toresources and income. This may lead to enhanced decision-making withinthe household, and thereby, enable them to spend the income on health,education, consumption, etc. Women involved in IGAs have to interactwith markets (for both buying and selling) located near and far from theirhomes. This implies improved mobility for women. Such mobility graduallyenables them to play an active role in social, political and economic issuesaffecting self, household and community. In this, people’s institutionspromoted by NGOs give them a helping hand. Thus, micro-finance leadingto income generating activities contribute to women’s empowerment.

• Repayment rates are expected to be high in micro-finance groups havingdynamic incentives such as each successful repayment leads to largerloan amount (Besley 1995). This improves the information between thegroup and members (thus screening out the worst borrowers before theloan size is increased), and contributes larger loan amounts and higherrepayment. Repayment is also expected to be higher because grouplending programmes influence the members to commit weekly or monthlyrepayment immediately after a loan is disbursed. Regular repaymentsgive early warnings on emerging problems, screen out undisciplinedborrowers, and allow the group to get hold of cash flows before they areconsumed or otherwise diverted. Repayment rates are known to be highdespite that no explicit collateral exists in the group. These groups go forcollateral substitutes such as savings linked to credit and group assuranceon repayment. High repayment in micro-finance groups implies higherpotential for financial sustainability and ability to serve the poor in thelong run.

• It is believed that the micro-finance programmes will help the rural poorto address the problems of the poor in undertaking IGAs such as inadequate


access to skills, raw–materials and marketing. Since these groups consistof people with similar characteristics, they realise the need to pressurisethe system for changes in policies and delivery mechanisms throughlobbying and advocacy (Olson 1965). The federations of micro-financegroups (at gram panchayat, taluk and project levels) help the poor notonly in negotiating with the market and other suppliers of the criticalinputs but also in accessing them at reduced costs. Through appropriateinputs aimed at building the capacity, such groups can access the services(extension, subsidised inputs, etc.) from other development actors suchas line departments. The rural poor also learn how to select viable andfeasible IGAs, and acquire skills on business operations.

• The IGAs enable women to have access to income, and enhanceddecision-making on health, education, consumption, etc. Women alsointeract with outside markets and the community, and this process graduallyenables them to play an active role in social, political and economic issuesaffecting self, household and the community (Mayoux 1998).

• The organisations (SHGs, etc.) promoted for the people, especially poorwomen, enable them to develop leadership qualities, enhance self-management, and facilitate them to be self-reliant. These also strengthenthe individual and collective decision-making, and bargaining.

• Regular savings by enabling the people to develop confidence andintroducing them to local banks contribute to improved creditworthinessof the poor. This would enable an improved interface between banksand people’s institutions.

Micro-Finance Programmes in India: Some IssuesThe above contributed to all-round enthusiasm for micro-finance

programmes as it was expected that these would deliver economic and non-economic benefits to the poor. The studies prepared for the Micro CreditSummit in February 1997, sector strategy papers of donor agencies, NGOproject proposals and policy statements by the government all present “anextremely attractive vision of increasing numbers of expanding, financiallyself-sustainable micro-finance programmes reaching large numbers ofwomen borrowers, making a significant contribution to global povertyalleviation and initiating an ‘upward virtuous spiral’ of women’s economic,social and political empowerment” (Mayoux 1998: 4). Recent studies(Mayoux 1998; Rajasekhar 1996, 2002a; Goetz and Sen Gupta 1996; Ebdon1995; Rogaly 1996), however, question this enthusiasm. While it is generallybelieved that NGO micro-finance programmes are qualitatively good,questions are raised about the cost-effectiveness of service delivery (Riddel


and Robinson 1992), the success of programmes in targeting the poor, thesustainability of services provided and the ability of the programmes to reducepoverty. In addition, Kabeer and Murthy (1996) note that there were onlylimited data on the impact of NGO programmes on poverty and that thecomparative advantage of NGOs over other service agencies needed to beinvestigated rather than assumed.

It has been argued (Rajasekhar 1996: 92-5) that the ability of micro-finance programmes to provide credit to the poorest was limited for bothstructural and technical reasons. The linking of savings to credit, collateralrequirements and the emphasis on short-term credit prevented the poorestfrom accessing credit and enabled the less poor with assets to access morecredit. The poorest were also discriminated against by the groups’management committees and did not have the confidence or skills to borrowfrom the groups because of the ‘minimalist approach’32 to credit that waspractised.33

Income generating activities (IGAs) undertaken with the help ofcredit provided by micro-finance programmes tended to be palliative(Namerta 1998). Riddel and Robinson (1992) argue that such a minimalimpact would be a barrier to achieving fundamental structural changes inthe ownership of principal productive assets, which are essential ifsignificant economic and political changes are to occur. Namerta (1998)states that although the programmes have, to some extent, succeeded inalleviating poverty, they failed to address the more fundamental issue of thepoor’s vulnerability.34

Namerta’s study of IGAs initiated for women in eight micro-financeprogrammes across India concludes that less than half of the sample womenborrowers were economically empowered or benefited from improvedhousehold decision-making due to micro-finance services (ibid.). And morethan half of the sample lost control of the loans and incomes from theenterprises, as they were taken over by male family members. Mayoux(1998) and Goetz and Sen Gupta (1996) also question the degree to whichmicro-finance services empowered women, and others argue that micro-finance programmes diverted the attention of women from other moreeffective empowerment strategies (Ebdon 1995), or the resources of donorsfrom more effective methods of poverty alleviation (Rogaly 1996).

Thus, it appears that micro-finance programmes have not alwayssucceeded in their objectives of sustainable poverty alleviation andempowerment. One of the reasons for this may be the tension between thegoals of sustainability and empowerment; strategies meant to enhance


programmes’ sustainability tending to decrease the likelihood that theirmembers will become empowered. Rajasekhar (2000) explores this issueby examining micro-finance programmes promoted by 15 NGOs in the statesof Andhra Pradesh and Kerala. He makes an attempt to study the impactof micro-finance programmes on poverty and gender equality, and the extentto which the characteristics of the groups contributed to achieving theseresults. After examining group formation, savings systems, conditions ofcredit delivery, poverty reach and loan repayments in three different typesof NGO programmes, he concludes that overemphasis on short-term financialsustainability can actually create conditions that make financial sustainabilityunlikely, and that lack of explicit attention to developing mechanisms forparticipation and institutional sustainability will hinder progress toward povertyreduction and empowerment.

The concerns of participation and institutional sustainability dominatethe discussion on government micro-finance programmes in AP. As a result,the collaboration between the government, banks and NGOs is fraught withseveral problems. If we take DWCRA programme, the government villagelevel staff are mostly form the groups. NGOs allege that the staff do nothave wider perception of poverty, and simply use material deprivation criteria.Furthermore, the district officials who have targets to fulfil at the end ofeach year assign targets on group formation to the village level staff. As aresult, it has been argued that the groups formed by village level governmentstaff are not of good quality. Therefore, the banks are reluctant to collaboratewith groups formed by the government. The government officialsacknowledge that group formation in the case of DWCRA is target-orientedand not process-oriented, and that some of the groups may not be of goodquality. But they argue that the process of group formation cannot be entirelyleft to the NGOs as their process-oriented approach does not lead to rapidgroup formation or reaching a large number of the poor in the specifiedperiod. NGOs argue that this target-oriented approach adversely affectstheir process-oriented approach. Their second argument is that the pumpingof money to the DWCRA programme also adversely affects the process-oriented formation and consolidation of groups, and the very outcomes ofsuch a process, namely, achievement of goals of poverty alleviation andempowerment.

Research MethodologyShould a study on the impact of micro-finance focus on poverty

alleviation or reduction? For analytical purposes, one can identify fourdimensions of poverty: lack of assets, resources, knowledge and rights.


Assets cover material possessions. Resources cover access to credit,education, health, drinking water, etc. Knowledge covers information thatshapes the cognitive world ranging from technology to political ideas. And,finally, rights embrace social, political, economic, etc., legal and traditional(Pedersen and Webster 1998:5).

The research35 suggests that there are two main groups of strategiesthrough which the poor can achieve a change in their conditions of poverty.First, there are strategies that are carried out by the poor in an attempt tochange their poverty in terms of their resources and assets. Secondly, thereare strategies through which the poor, or those representing the poor, seekto secure their interests by effecting change in the actions and policies ofothers and, in particular, bringing about change in public policy and in itsimplementation.

The former is often analysed in terms of the coping strategies ofthe poor. It is usually based upon individual or local groups of poor seekingways to offset the economic disadvantages they face by exploitingopportunities to utilise the resources and assets they possess or can access.Migration, grass roots production co-operatives, loans from relatives orcredit associations, diversification of production and entering new labourmarkets are some examples.

The second group of strategies is characterised by the need tochange the policies and practices of others in order to bring about change.In particular, it is directed at achieving a redistribution of resources in orderto change the poverty condition. Here, an important focus is upon effectinginstitutional change in terms of the formulation and implementation ofpolicies. In terms of resources, this represents an attempt to change thebasis upon which existing resources are distributed and utilised within thelocality, and upon which new resources might be introduced into the localityand distributed. The discussion of poverty reduction thereby becomes oneof mobilisation, organisation, representation, and empowerment.

A distinction between poverty alleviation and poverty reduction,therefore, becomes very pertinent. Poverty alleviation is a short-termimprovement of the capital endowment of the poor. Poverty reduction is along-term elimination of the dependency of the poor on social relations,and of vulnerability with respect to changes in their environment (Pedersen1998). While the former concentrates on those assets and resources thathave a bearing on the livelihood of the poor, the latter focuses on knowledgeand rights. Thus, while agricultural growth and better access to marketscan alleviate poverty, the involvement of poor in the development effortsbecomes crucial for poverty reduction.


This way of looking at the impact of a programme on povertynecessitates an examination of four sets of indicators. These are livelihoods,resources, knowledge and rights. These are summarised in Chart 3. It is tobe noted that these indicators need to be dis-aggregated by gender, casteand class.

Chart 3: Indicators of Poverty Reduction

Areas What to look for? Specific variables

Livelihoods Ranging from improvement • Employment of men, women and childrento impoverishment • Work-load on women

• Income generating activities (regular orseasonal)

• Quality of work• Food security (seasonal)• Ownership of assets

Resources Ranging from access • Access to productive assets, markets,to exclusion credit, land and irrigation

• Access to communication facilities, waterand sanitation

• Access to training• Dependency on CPRs• Safety nets and social networks• Distribution of resources• Affordability of school fees• Affordability of health care• Free time for women

Knowledge Ranging from expansion • Children’s school attendanceto reduction • Community health care, health and

education levels of women• Acquisition of technical, managerial,

marketing and leadership skills• Coping mechanisms

Rights Ranging from participation • Greater participation in local organisationsto alienation • Were the poor better organised or more

assertive in their access or entitlement torights

• Property rights and women’s land rights• Legal status• Reproductive rights• Respect from authorities• Personal security

Selection of NGOsThe data source for this study was primary data collected from the

project areas of two NGOs in Karnataka and Andhra Pradesh. Thenames of these NGOs are Grama Vikas and Sanghamitra Service Society(Sanghamitra, hereafter). Grama Vikas is working in Kolar district of


Karnataka, while Sanghamitra is working in Krishna district of Andhra.The time dimension plays an important role in an assessment of

social and economic benefits of a programme. To analyse the impact ofmicro-finance on poverty alleviation and empowerment, the programmeshould have been in operation for at least 3-4 years. It is difficult to collectdata over a long period of time due to time and resource constraints, andtherefore, the technique of control group may be utilised as an alternative.But, the selection of control group should be done very carefully. Thecontrol group should share similar socio-economic background as that ofmicro-finance programme participants. The control group can range fromwomen uninvolved in micro-finance to new entrants into women’s SHGs.

The study considers new entrants into SHGs as a comparison group.Accordingly, villages for the study were selected. The study was conductedin four villages in the two project areas of NGOs. T.N. Halli was selectedfrom the project area of Grama Vikas. In this village, two SHGs are present:one nearly 10 years old and the other was formed in 1999. The former wasconsidered as member group, while the latter as the comparison group.Three villages were selected from the project area of Sanghamitra; the namesof these villages are Bathinapadu, Kothapeta and S. Amaravaram. TwoSHGs in each of the villages of Bathinapadu and Kothapeta are more thannine years old. Thus, the members in these four groups were considered asthe member group. Since these two villages did not have relatively newgroups, S. Amaravaram was selected, where two groups were formed in1998. The members in these two groups were considered as the comparisongroup.

In micro-finance impact studies, fungibility and causality areimportant aspects to be taken into account while designing a study (Hulme2000). A loan borrowed for a specific purpose may be used for anotherpurpose. Thus, the data on loans may not provide reliable conclusions.Similarly, the impact that one may see need not necessarily be throughmicro-finance but because of several other factors. Hence, if oneconcentrates on income data alone, causality issues may not be resolved.For this, rigorous data collection over a long period becomes very important.Hence, the objective of the study is restricted to understand the economicand social benefits of the programme rather than rigorously studying theimpact.


CHAPTER III

THE STUDY AREA

An important factor contributing to the success of micro-finance isthe context in which these programmes are operating. Opportunities to starton-farm, off-farm and non-farm activities contribute to the demand for creditfor these activities, which will, in turn, become successful if goodinfrastructural and marketing opportunities exist. Similarly, the presenceand absence of institutional sources of credit, and the quantity of creditdisbursed by them influence the demand for micro-finance services providedby the NGOs.

This chapter, therefore, focuses on the background information onthe study area where the selected NGOs are operating. The chapter providesbackground information (covering demographic profile, land-use pattern,cropping pattern, distribution of landholdings, workforce participation rates,occupational distribution of population, banking infrastructure, and off-farmdevelopment) on Kolar district in Karnataka and Krishna district in AndhraPradesh. At the end, the similarities and dissimilarities across the districtsare discussed. In doing so, the chapter identifies the need for micro-financeservices.

Kolar DistrictKolar district is known as the golden land of India and is located in

the southern part of Karnataka state. The district headquarter Kolar, islocated 70 kms away from Bangalore City. Being very close to the city, thedistrict enjoys good marketing facilities for agricultural, horticultural andlivestock produce.

Administratively, the district is divided into two divisions (Kolar andChickballapur), and comprises eleven taluks, 307 Gram Panchayats, 3,893inhabited villages and 432 uninhabited villages.

Demographic Profile of the DistrictAccording to 2001 census (provisional figures), the total population

of the district was 2,523,406 comprising 1,281,153 males and 1,242,253females. During the decade 1991-2001, the population in the district grewat 13.83 per cent, while the growth rate in the state was 17.25 per cent. Infact, the population growth in the district in the last two decades was lowerthan that of the state. The sex ratio was 970 females to 1,000 males in2001, and was marginally higher than the state average.

The growth of population was uneven across the rural and urbanareas. Between 1981 and 1991, the population in rural areas grew at thedecadal rate of 15.04 per cent, while the population in urban areas grew atthe rate of 20.84 per cent. On the whole, the proportion of the urban populationto the total population was 16.34 per cent in the district. Of the 15 towns inthe district, four have had more than 50,000 population in 1991. Kolar is thelargest town in the district with a population of 83,287 in 1991. The densityof population in the district (270 persons per sq. km) was higher than that ofthe state (275 persons per sq. km) in 2001.

Educational Levels36

The proportion of illiterates to total population was 49.55 per centexcluding the population in the age group of 0 – 6. In general, the proportionof illiterates was higher in the case of female population as compared tothe male population. Interestingly, the proportion of illiterates was less inthe age group of 15-24, thus suggesting that literacy was spreading in thedistrict. Among the literate population, the proportion of persons who hadcompleted school education was 46.06 per cent in the district (Table 1).

As far as higher education is concerned, the proportion of populationcompleting college education was, in general, low at 4.39 per cent for thedistrict as a whole. There were, however, male-female differentials in thisregard. The proportion of population in higher education was 6.42 per centin the case of males, while it was 2.26 per cent in the case of femalepopulation.

The proportion of educated population in the age group of 15-24was much higher compared to that in the rest of the population. Table 1shows that the proportion of persons with pre-university education in theage group of 15-24 was 49.28 per cent in the case of males. Thecorresponding proportions for technical education and graduation & abovewere 34.01 and 14.10, respectively. This pattern is more striking in the caseof females. Over 50 per cent of the females completing pre-university andtechnical education were in the age group of 15-24, while the correspondingproportion for the graduation and above was 31.61 per cent. This suggeststhat, of late, considerable importance was being given for education of bothboys and girls, and the college education was spreading among youngerpopulation.

Land Use and Cropping PatternOf the 7.79 lakh ha. of total geographical area in the district, 3.63

lakh ha. (or 46.53 per cent) was Net Sown Area (NSA) in 1999-2000. Thenormal rainfall in the district is 744 mm. But, the actual rainfall was less (by

The Study Area 29

Table 1: Educational Levels (%) in Kolar District (Excluding Children in 0 - 6 Age Group)

Sex Illiterate Primary Secondary Pre-University Technical Graduate & TotalEducation Education Above

Males 37.31 30.09 26.18 3.11 0.83 2.48 100.00% in the age group of 15-24 15.09 10.72 39.64 49.28 34.01 14.10 21.40Females 62.25 21.21 14.27 1.51 0.05 0.70 100.00% in the age group of 15-24 16.89 12.40 44.39 57.56 54.00 31.61 20.59Males and Females 49.55 25.73 20.33 2.33 0.45 1.61 100.00(in figures) (922,021) (478,803) (378,370) (43,281) (8,350) (29,973) (1,860,798)% in age group of 15-24 16.20 11.40 41.28 51.93 35.21 17.85 21.00(in figures) (149,372) (54,595) (156,177) (22,474) (2,940) (5,350) (390,808)

Source: Directorate of Census Operations (1998): 164-9.

30 Micro-Finance, Poverty A

lleviation and Empow

erment of W

omen

2 to 13 per cent) than the normal in four out of six years during the period1993-1998. Thus, the rainfall has been not only scanty but also uncertain.

In this context, the importance of irrigation hardly needs to beemphasised. An analysis of data for the period 1965-66 to 1995-96 showsthat the Net Irrigated Area (NIA) was fluctuating and declining during thisperiod. As a result, the proportion of NIA to NSA declined from 28.29during the 5-year period ending with 1970-71 to 19.82 per cent during the 5-year period ending with 1980-81. In the 1980s, the NIA increased: so alsothe percentage of NIA to NSA. However, there has been a decline in theNIA as well as the proportion of NIA to NSA in the 1990s (Table 2).

As far as the sources of irrigation are concerned, wells have beena dominant source in the last three decades. In the late 1960s, tanksaccounted for 42 per cent of the NIA, and their importance has beengradually declining. Since 1970s, the farmers have been depending mainlyon well irrigation to secure agricultural production. This implies that farmersdepend on private and expensive form of irrigation to cultivate their land.The cropping intensity in the district was 108 per cent while the correspondingproportion in the state was 115 per cent.

Table 2: Sources of Irrigation (%) and Proportion of Net IrrigatedArea (NIA) to Total Net Sown Area (NSA)

5-year average Canals Tanks Wells Tube Other Total % of NIAending with wells sources NIA (Ha) to NSA

1970 – 71 0.46 42.00 56.43 0.00 1.10 70,560 28.291975 – 76 0.00 46.53 52.84 0.00 0.63 72,141 22.201980 – 81 0.00 42.56 57.25 0.00 0.19 65,369 19.821985 – 86 0.00 35.73 60.67 3.10 0.50 78,568 23.211990 – 91 0.00 26.92 40.11 32.96 0.01 89,519 24.141995 – 96 * 0.00 13.66 32.65 53.68 0.00 70,018 20.32

Note: * One year figure.Source: Season and Crop Reports, Bureau of Economics and Statistics, Karnataka(for the relevant years).

To analyse the changes in the cropping pattern, we collected datafor the period 1970-71 to 1995-96. Table 3 shows that the area under totalfood grains accounted for nearly 85 per cent of the total cropped area,while groundnut as a principal non-food crop accounted for 14 to 23 percent of the cropped area.

The Study Area 31

Table 3: Changes in (%) Cropping Pattern in Kolar District (1970-71 to 1995-96)

5-year average Paddy Ragi Total Ground Other food Total Cropped areaending with pulses nut & non-food in 000 ha

crops

1970 – 71 11.26 47.70 11.67 14.32 15.05 100.00 262

1975 – 76 11.37 34.49 11.39 20.44 22.31 100.00 355

1980 – 81 9.50 38.61 11.27 16.10 24.52 100.00 352

1985 – 86 9.03 37.55 12.86 16.12 24.44 100.00 348

1990 – 91 9.50 30.00 10.21 21.52 28.77 100.00 393

1995 – 96 * 9.00 25.00 8.00 23.00 35.00 100.00 416

Note: * One year figureSource: Same as in Table 2

In the 1970s and 1980s, there were two important changes in thecropping pattern. The groundnut area increased at the expense of that underragi, and even paddy and pulses. Secondly, the area under mulberry, andhorticultural/plantation crops (included under other crops) went up in the1980s and 1990s at the expense of the area under ragi, paddy and pulses. In1998-1999, 8 per cent of the total geographical area was under mulberry,and 22 per cent of the area was under plantation and horticultural crops(NABARD 1999: 3).

Livelihood OpportunitiesThe data on distribution of operational landholdings for the district

were collected for five time-points 1970-71, 1975-76, 1980-81, 1985-86 and1990-91 (Table 4). The data show that the total number of landholdingsincreased from 2.09 lakhs in 1970-71 to 3.06 lakhs in 1990-91, and thegrowth was faster in the late 1980s. The total area operated also increasedfrom 3.94 lakh ha. in 1970-71 to 4.48 lakh ha. in 1990-91. Interestingly, theproportion of marginal holdings (i.e., less than one ha.) increased, while theproportions of small, medium and large holdings declined, albeit withfluctuations. One does not, however, find corresponding changes in thedistribution of total operated area. Though the proportion of the area held bythe marginal holdings increased, the average landholding in their case hascome down. The proportion of the area held by medium and largelandholdings declined, but, not at the same rate at which the proportion oflandholdings declined. The information suggests that the agrarian structurein the district has come to be characterised by larger proportion of marginal


landholdings, with the concomitant implications on viability of marginalfarming. This also suggests that the marginal holders were finding it difficultto obtain sufficient livelihood from agriculture and hence, they had to engagethemselves in non-agricultural operations and wage labour to eke out theirlivelihood.

Table 4: Distribution of Landholdings (%) in Kolar District (1970-71 to 1990-91)

Size of land- % of landholdingsholdings (ha.) 70 - 71 76 – 77 80 - 81 85 – 86 90 – 91

% of landholdings> 1 43.68 46.41 48.34 50.39 53.271 – 2 27.06 27.09 25.47 25.97 25.822 – 4 19.04 16.9 16.91 15.5 14.384 – 10 8.71 8.22 8.05 6.98 5.8810 > 1.51 1.38 1.23 1.16 0.65Total 100.00 100.00 100.00 100.00 100.00(in numbers) 209,342 212,542 230,696 258,000 306,000% of operated area > 1 12.20 12.74 13.81 15.46 18.08 1 –2 20.66 24.33 21.25 22.95 24.78 2 – 4 27.68 25.53 27.16 26.57 26.56 4 – 10 26.41 25.49 26.95 24.88 22.54 10 > 13.05 11.91 10.83 10.14 8.04 Total 100.00 100.00 100.00 100.00 100.00(Area in ha) 394,044 385,395 397,701 414,000 448,000Average size of (ha) landholding> 1 0.53 0.50 0.49 0.49 0.501 –2 1.44 1.63 1.44 1.42 1.412 – 4 2.74 2.74 2.77 2.75 2.704 – 10 5.71 5.62 5.77 5.72 5.6110 > 16.27 15.65 15.18 14.03 18.11Total 1.88 1.81 1.72 1.60 1.46

Source: Reports of World Agricultural Census for the relevant years.

About 38 per cent of the total population in the district was workersin 1991 (Table 5). The Census data classify the rest of the population asnon-workers. We have excluded those non-workers in the age group ofless than 15 years and more than 60 years and shown them as a separate

The Study Area 33

category of ‘others’. It is found in the table that non-workers formed 18.36per cent of the total population. The proportion of non-workers was higherin the case of female population while the category of ‘others’ formed44.09 per cent.

Table 5: Distribution of Population (%) by Their Work Status inKolar

Category Males Females TotalTotal popu- Age Total popu- Age Total popu- Age lation 15-24 lation 15-24 lation 15-24

Main + Marginal

Workers 47.79 23.47 26.94 26.57 37.55 24.56

Non workers

15–59 age group 8.31 81.25 28.78 35.18 18.36 45.80

Others 43.90 44.28 44.09

Total 100.00 17.97 100.00 17.28 100.00 17.63

(in numbers) 1,128,316 202,777 1,088,573 188,123 2,216,889 390,900


Table 5 shows that the proportion of workers in the total malepopulation was 47.79 per cent, while the proportion of females was 26.94per cent. The proportion of youth among the workers was almost the samefor both males and females. The proportion of youth among male non-workers was very high (81.25 per cent) compared to female non-workers(35.18). Thus, this suggests that unemployment was high among the youthin the district.

Of the 881,514 workers in the district, 48.71 per cent were cultivatorsand 26.02 per cent agricultural labourers. About 24 per cent of the totalpopulation was involved in various non-agricultural activities (Table 6).

The proportion of workers involved in non-agricultural activitieswas higher in the case of males compared to females. The proportion ofmale workers as well as female workers involved in the non-agriculturalactivities was less in rural areas than in urban areas. Among non-agriculturalactivities, trade and commerce, service and small manufacturing wereimportant. Among non-agricultural activities the proportion of cultivatorswas roughly the same in the case of both males and females whereas theproportion of agricultural labourers was high among female workers (4.0%) compared to male workers.


Table 6: Occupational Distribution (%) of the Workforce in KolarDistrict

Category Rural Urban Total

Persons Males Females Persons Males Females Persons Males Females

Cultivators 54.50 57.61 48.27 7.32 7.25 7.73 46.71 47.51 44.89

Agri. labourers 29.47 22.68 43.04 8.56 6.59 19.43 26.02 19.45 41.07

Livestock 3.74 4.31 2.61 1.60 1.62 1.45 3.39 3.77 2.51

Non agricultural

activities 12.29 15.40 6.09 82.52 84.53 71.39 23.88 29.27 11.52

1. Mining and

quarrying 0.70 0.93 0.24 6.43 7.30 1.63 1.64 2.20 0.36

2. Mfg., processing,

servicing & repairs in

HH industry 0.87 0.93 0.75 3.28 2.34 8.45 1.27 1.22 1.39

3. Mfg., processing,

servicing & repairs in

HH industry 2.39 2.87 1.43 21.15 21.95 16.75 5.49 6.70 2.71

4. Construction 0.86 1.21 0.16 4.23 4.67 1.80 1.42 1.90 0.30

5. Trade and commerce 2.97 3.79 1.31 21.37 23.57 9.19 6.00 7.76 1.97

6. Transport, storage

and communications 0.84 1.24 0.03 6.64 7.69 0.79 1.79 2.54 0.09

7. Other services 3.67 4.42 2.16 19.42 17.00 32.76 6.27 6.95 4.71

Total percentage 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Total (in numbers) 736,073 490,681 245,392 145,441 123,160 22,281 881,514 613,841 267,673


What Sectors are Financed by the Formal Banking System in theDistrict?

It is often noted that the NGO programmes on micro-finance emergebecause the institutional credit facilities are neither present nor accessibleto the poor. It is in this context that there is need to examine the bankingnetwork in the district.

There were 211 bank branches in the district in 1999. Of them, 120were branches of commercial banks (CBs), 64 were branches of RegionalRural Bank (IRRB), 11 were branches of Land Development Bank (LDB)and 12 were branches of Credit Co-operative Bank (CCB). Of the 211bank branches, 65 per cent were rural and 35 per cent semi-urban branches.Almost 81 per cent of the branches of RRB were located in the rural areas

The Study Area 35

while the corresponding proportion for CBs was 68 per cent. All the branchesof LDB and CCB were located in semi-urban areas. It needs to be notedthat there were 176 Primary Agricultural Co-operative Societies (PACS) inthe district. If one includes PACS, the number of rural outlets for institutionalcredit was much more.

In general, the average population per branch was 11,983 (onlywith respect to RRBs and CBs) in 1999. If one included 176 PACS, LDBsand CCBs, the total number of bank branches would be 387 in the district,and the population per branch would be 5,729. On the assumption that fivepersons constituted a household, each bank branch was serving about 1,000households. The findings that bank-branch network is well entrenched inthe rural areas and that the number of people covered by each bank-branchhas been low suggest that the institutional credit facilities are available tothe rural population. This is, of course, on the assumption that the spreadhas been even into all the rural areas. But, the field level insights show thatthe location of bank branches in large villages often did not help the peopleliving in remote villages.

The total credit flow from the institutional agencies increased from102.18 crores in 1995-96 to 147.18 crores in 1998-99 (Table 7). Thedistribution of total advances by sectors reveals some interesting trends.First, the proportion of advances to crop production increased from 36.15per cent in 1995-96 to 44.08 per cent in 1998-99. Same is the case withplantation and horticulture, sericulture, and animal husbandry (Table 7).These three sectors, which together accounted for over13.09 per cent ofthe total credit in 1995-96, accounted for as much as 22.43 per cent by1998-99. Thus, the four sectors, namely, crop production, plantation andhorticulture, sericulture and animal husbandry, which accounted for onlyabout half of the total advances in 1995-6, accounted for over two-thirds ofthe total advances in 1998-99. On the other hand, the proportion of totaladvances to non-farm sector and other priority sectors declined.

This is further corroborated by the evidence on the proportion ofthe achievement to the targets set for each of the sectors. On the whole,the achievement exceeded the target in 1995-6 and 1996-7, while it wasless than the target in the remaining two years. This was, however, not truefor all the sectors. The achievement exceeded 100 per cent in the case ofcrop loans, while it hovered between 200 and 300 per cent in the case ofhorticulture and plantation, during the period 1995-96 to 1996-97. On theother hand, the targets could not be achieved in the case of sericulture andanimal husbandry. The percentage targets achieved in the case of land


development, minor irrigation, non-farm sector and so on were, in general,low.

Table 7: Distribution of Credit (%) Provided by the InstitutionalAgencies in Kolar

Sector 1995-96 1996-97 1997-98 1998-99

Crop loan 36.15 35.82 37.99 44.08Minor irrigation 1.14 1.25 1.54 1.02Land development 0.79 0.64 0.72 0.49Farm mechanisation 6.84 7.22 5.36 3.90Plantation and horticulture 3.64 4.11 4.61 6.40Sericulture 2.59 3.19 6.66 6.77Animal husbandry 6.86 7.44 5.83 9.26Non-farm sector 17.02 17.75 17.56 10.93Other priority sector 23.49 21.76 18.23 16.16Others 1.47 0.83 1.49 0.99

Total 100.00 100.00 100.00 100.00Total (Rs. in lakhs) 10,218.49 12,416.54 13,305.72 14,718.32

Source: NABARD (1999)

The strategy of concentrating on crop loans, horticulture, animalhusbandry and sericulture implies that banks have become ‘risk averse’and that they all now are keen to support land-based activities. Disbursal ofabout 50 per cent of the credit to crop production implies that the banks arereluctant to support start-up enterprises. This raises the following questions.

Why are these activities becoming important? How have they becomerisk-free?

Crop ProductionFinancial innovations contribute to the evolution of credit market.

The need for financial innovation is more pronounced in the credit marketbecause “it is inherently imperfect in the sense that there is no certaintyabout the completion of a credit transaction. A credit transaction involves arelationship between a lender and a borrower in time and hence, in thecontext of uncertainty” (Bhatt 1987:M-45). The uncertainty can certainlybe reduced with better and more accurate information; but, this would involveincreased transaction costs to the lender. The financial institutions all overthe world, therefore, adopt innovations to reduce risks, and transaction costs.

The Study Area 37

Table 8: The Proportion of Achievement to the Target in KolarDistrict

Sector 1995-96 1996-97 1997-98 1998-99

Crop loan 143.32 147.52 132.30 136.53Minor irrigation 51.49 59.61 63.10 46.90Land development 78.17 85.29 95.88 50.13Farm mechanisation 77.60 79.88 49.17 32.84Plantation and horticulture 286.51 303.53 286.45 368.58Sericulture 71.77 70.54 141.80 94.35Animal husbandry 80.96 75.54 61.52 88.52Fisheries 20.32 112.00 97.84 116.15Wasteland/farm forestry 0.00 772.00 0.00 39.17Other agri & allied activities 81.57 38.96 124.95 79.48Bio-gas 21.84 51.92 167.44 86.14Non-farm sector 86.39 121.24 80.21 65.10Other priority sector 108.23 103.76 79.52 64.09Total 106.30 111.74 95.58 90.99

Source: NABARD (1999).

One of the financial innovations has been to provide short-termcredit for crop production. Under this innovation, the loan size for cropproduction is kept small in the first year. If the loan is not repaid, the creditrelationship between the bank and borrower would cease to exit. On thecontrary, if there is successful repayment, the credit is renewed with anincrease in the loan amount. Each successful repayment will enable thelender to know the borrower better, and increase the amount of loan. Throughsuch a constant interaction, information asymmetry is reduced, and transactioncosts to banks also come down.

An increase in the proportion of credit given for crop productioncould also be due to different ways in which banks are succeeding in obtainingcollateral from the borrowers. It is not uncommon to lend against jewellery,and call it as agricultural gold loan. Similarly, crop loans are issued againstdeposits, etc. Perhaps, for these reasons, the proportion of credit for cropproduction has been increasing in recent years.

HorticultureKarnataka enjoys favourable agro-climatic conditions for the

cultivation of horticulture crops, and more particularly, fruit crops. The


state occupies the fifth place in terms of area and third place in the productionof fruits in the country.

Within Karnataka, Kolar district has a significant place in horticulturalcrops and production. With 7.95 per cent of the total cropped area underfruit crops in 1992-93, the district occupied third place after Kodagu andBangalore. As far as the production of total fruits is concerned, the districtrecorded the highest production in 1993-94, accounting for about 10 percent of total fruit production in the state (40.39 lakh tons). Kolar district isalso known for the cultivation of export-oriented crop of mangoes.The districtaccounts for 30 per cent of the total mango production in the state. Withinthe district, Srinivasapura and Mulbagal taluks account for two-thirds of thetotal mango production (Satyapriya 1996).

Being close to Bangalore city and with the possibilities of exportsof horticultural crops on account of transport networks that Bangalore enjoys,there is considerable interest among farmers to go in for horticultural crops.Further, a branch of HOPCOMS is functioning in the district which providesbetter price realisation to farmers. There are seven cold storage units (4 inprivate sector and 3 controlled by the government) with a capacity of 12,200metric tonnes. These are important contributing factors for the rapid creditflow to horticulture in the district during the period 1995-96 to 1998-99.

Animal HusbandryThe Assistant General Manager of NABARD, stationed at Kolar,

writes a document called ‘Potential Linked Credit Plan’ for the districtevery year. In the document for 2000-2001, he introduced the district as“the land of silk and milk“, thus implying that milk production was significantin the district. Kolar district benefited a great deal from dairy developmentprojects undertaken by the state government since 1972. The KarnatakaDairy Development Corporation, which came into existence in 1972 underthe World Bank Aided Project, has been instrumental in initiating whiterevolution in southern Karnataka which includes Kolar district. ‘KsheeraKranti’, an integrated programme for increasing milk production, was started.A seven-year plan of action focussing on the quality crossbreeding, animalhealth development facilities, milk collection, processing and marketing wasstarted in the early 1970s. The proposal was to cover a population of 55lakhs in 8,800 villages in 68 taluks of 8 districts of the state (Mishra 1979:21).Kolar was one among them.

Since then, dairy development has made rapid progress in the state,and the district. Up to 1984-85, only 4 dairy co-operative unions had beenestablished under the World Bank Aided Project covering a few districts in

The Study Area 39

Southern Karnataka. Subsequently, 9 more unions were added. The RegionI consisting of Kolar, Bangalore, Mysore, Mandya and Tumkur districtshas been doing very well in terms of development of milk co -operativesocieties, veterinary care facilities and milk routes. Nearly 65 per cent ofthe total milk procured in the state comes from this region (Pasha andRamakrishna 1999:155).

Dairying in Kolar received a special fillip, and in terms of milkproduction, the district stood first with an average production of 316,031kgs per day (Yadav 1977:18). According to 1990 livestock census, the districthad a cattle population of 500,100 and buffalo population of 161,700. Theaverage yield of the cow in the district was 6-8 litres per day, while that ofthe buffalo was 5-6 litres per day in 1997. Kolar Milk Union Ltd (KOMUL),with a daily production capacity of 100,000 litres, was started in 1995. Thereare four chilling plants in the district. By March 1999, KOMUL organised1,230 Dairy Co-operative Societies (DCS), and procured milk through 61milk routes.

In this district, as elsewhere in the state, the milk producers havebeen organised into co-operatives. Each of the milk producers sells themilk to the society, and the amount is paid once in a fortnight or month.Banks and co-operatives have come forward to lend to the milk producersin view of better infrastructure facilities.

The foregoing discussion suggests that disbursal of credit to theactivities of crop production, horticulture and animal husbandry are relativelyrisk-free due to good marketing network, production support (such asveterinary facilities in the case of dairying) and marketing facilities. Thisseems to have had good impact on the recoveries not only for all the banksbut also in the case of CBs and RRBs, which account for a large proportionof the total advances in the district (Table 9).

Table 9: Percentage of Recoveries in CBs, RRBs, CCBs andLDBs (1995-96 to 1997-98)

Year Commercial RRBS CCBS LDBs Total

1995 – 96 43 63 69 42 481996 – 97 55 65 66 39 551997 – 98 56 72 64 21 53

Source: NABARD (1999)

To conclude the discussion on Kolar district, notwithstanding thefact that the district has been located close to Bangalore city, the illiteracy


level was high especially among women. The decline in tank irrigation andrise of well irrigation suggest that it was expensive for the poorer farmers togo in for irrigation. Hence, the changes in cropping pattern in favour ofirrigation-dependent cash crops of mulberry, horticulture, etc., that one noticedin the district may not have been helpful to the poorer farmers. This, togetherwith a rapid rise in the proportion of marginal landholdings, suggests that thehouseholds having tiny landholdings were having difficult time in ekingsufficient livelihood from agriculture. The discussion on distribution of creditby different sectors showed that the credit flowed rapidly to the cropproduction, milch-animal rearing and horticultural crops, and not to the non-agricultural activities as the bankers were concerned with profitability duringthe period of financial sector reforms since 1991. Thus, the poorer households(and women living in these households), comprising landless and marginalfarmers, did not significantly benefit from the recent improvements in thedistrict on account of its proximity to Bangalore city, introduction of cashcrops and alternative livelihood opportunities in the form of milch-animalrearing.

Krishna DistrictKrishna is one of the most prominent coastal districts in Andhra

Pradesh. Located as it is in the centre of the state, it is called as a nervecentre for all the important activities like trade, commerce, industries andculture. Machilipatnam is the headquarter of the district; but, Vijayawada isan important city not only in the district but also in the state. Administratively,the district is divided into 50 mandals, which are spread over four revenuedivisions, namely, Machilipatnam, Vijayawada, Nuzivid and Gudiwada. Thereare 937 inhabited villages in the district.

The district is naturally divided into two zones, viz., delta and uplandareas. The delta area (also called east Krishna) is along the coast, andendowed with fertile soil and assured irrigation. Here, paddy is an importantcommercial crop, and agriculture is the most important occupation. In theupland areas (called west Krishna), the lands are fertile; but do not haveassured irrigation facilities. In the upland areas, the cropping pattern isdiversified and the principal crops grown here are tobacco, chillies, vegetables,cotton, paddy, etc. In this part, agriculture, together with non-farm activities,plays an important role in providing employment to the workforce.

Demographic Profile of the DistrictAccording to the 2001 census, the total population of the district

was 42.18 lakhs comprising 21.51 lakh males and 20.67 lakh females. During

The Study Area 41

the decade 1991-01, the population in the district grew at 14.05 per cent.The population growth in the district in the last three decades was lowerthan that of the state.

The growth of population was uneven across the rural and urbanareas. Between 1981 and 1991, the population in rural areas grew at thedecadal rate of 17.31 per cent, while the population in urban areas grew atthe rate of 29.27 per cent. On the whole, the proportion of the urbanpopulation to the total population was 35.83 per cent in the district and thiswas one of the most urbanised districts in the entire state. The urbanisationhas been rapidly taking place37 in the district due to the twin process ofmigration of people to cities, and larger villages acquiring the status oftowns.

The density of population was 483 persons per sq. km. in the district.The density was higher in urban areas compared to rural areas in the district.The sex ratio (female population per every 1,000 male population) was 961in 2001, and was lower than the state figure. The proportion of SC populationto the total population in 1991 was higher in the district (16.58 per cent)compared to the state (15.93). There is, however, a difference betweenrural and urban areas. In urban areas, the proportion of SC population tothe total population was about 9 per cent, while it was nearly 21 per cent inrural areas.

Educational LevelsThe census data on educational levels show that the proportion of

illiterates to the total population was 46.80 per cent in 1991. In other words,the literacy rate for the district as a whole was 53.2 per cent excluding thepopulation in the 0-4 age group. The data show that most of the literateshad only completed school education. About seven per cent of the populationin the district had completed higher education (Table 10).

An analysis of the proportion of youth (i.e., belonging to the agegroup of 15-24) among the illiterate and each of the literate groups (Table10) shows that only 18.52 per cent of the illiterates were in the age group of15-24. On the other hand, the proportion of youth in each of the literategroups (except that which has completed primary school) was higher thanthe corresponding proportions for the district as a whole. Thus, only 3.35per cent of the population were graduates in the district: but, nearly onethird of them were in the younger age group. Similarly, less than one percent of the population had completed technical course; but, over 43 per centof them were young persons.


Table 10: Educational Levels (%) in Krishna District (ExcludingChildren in 0-6 Age Group)

Sex Educational Level

Illiterate Primary Secondary Pre-university Technical Graduation & TotalEducation Education Education above

Males 39.39 32.91 18.28 3.73 1.05 4.64 100% in the agegroup of 15-24 17.84 14.17 39.69 51.06 44.04 24.13 22.47Females 54.46 30.00 11.37 2.00 0.17 2.01 100.01% in the agegroup of 15-24 19.02 17.47 44.26 63.32 38.43 41.64 22.83

Total 46.80 31.48 14.88 2.88 0.61 3.35 100% in the agegroup of 15-24 18.52 15.72 41.41 55.24 43.30 29.30 22.65

What are the educational levels among men and women? Theproportion of literates among males was higher than that in the case offemales. Secondly, the proportion of population which had completed schooleducation was higher in the case of males compared to females. Thirdly,the proportion of population which had completed college education (pre-university, technical courses, graduation and above) was also higher in thecase of males as compared to the females.

In the case of both males and females, the younger age group formeda larger proportion of the educated in the district. A large proportion of thepopulation with technical education was in the age group of 15-24 years inthe case of both males and females. Similarly, a majority of the populationwith pre-university education was in the age group of 15-24 years in thecase of both males and females.

Land Use PatternThe total geographical area in the district was 8.73 lakh hectares in

1998-99. Of this, the NSA was 4.91 lakh hectares. In other words, over 56per cent of the total geographical area was cultivated. About 9 per cent ofthe total area was fallow, while the rest was not available for cultivation asthis land was either put to non-agricultural use or happened to be barren.

The normal rainfall in the district is 1,029 mm. The actual rainfallwas 1,216 mm in 1996-7, 872 mm in 1997-8 and 1,144 in 1998-9. Thus,the actual rainfall was less than the normal in two out of the three years.The farmers in the district often faced problems not so much with insufficientrainfall as with recurring cyclones and floods.

Largely, due to the construction of a barrage on River Krishna atVijayawada, the district has assured canal irrigation facilities since the mid-

The Study Area 43

19th century. In addition, the lands from the west-Krishna part receiveirrigation water through Nagarjuna Sagar Project. As a result, more than72 per cent of the NSA was irrigated in 1998-9. Table 11 shows that canalsaccounted for nearly 80 per cent of the irrigated area in the district, whiletanks accounted for 9.14 per cent. Other sources of irrigation were wells,tube-wells and lift-irrigation schemes.

Table 11: Sources of Irrigation in Krishna District (1998- 99)

Source of irrigation Area (in ha) %

Canals 280,490 79.23Tanks 32,338 9.14Wells 8,446 2.39Tube wells 13,715 3.87Lift irrigation schemes 9,967 2.82Others 9,044 2.55Total 354,000 100.00

With assured canal irrigation facilities, the farmers mainly preferredto grow paddy as an important crop. Table 12 shows that paddy remainedan important crop in the last three decades. In fact, paddy has been adominant crop ever since the barrage was constructed across the RiverKrishna in 1850s. Between 50.95 and 54.43 per cent of the total area wascultivated with paddy during the period 1975-6 to 1993-4. The proportion ofarea under jowar declined, while that under pulses increased. The proportionof area under green gram and black gram has been significant around 18per cent. Among the other food crops, the area under horticultural crops isone important component. In 1993-4, the area under the total cultivationconstituted 8.36 per cent of the total cropped area. About 4 per cent of thetotal sown area was cultivated with groundnut. The non-food cropsconstituted about 8 to 11 per cent of the total sown area. There are, however,marked differences between east and west Krishna as far as the croppingpattern is concerned. The predominant crop in the east Krishna is paddy,while diversified cropping pattern in favour of non-food crops such asmangoes, pulses, tobacco and chillies exists in the western part of Krishna.


Table 12: Changes in Cropping Pattern (%) in Krishna District(1975-76 to 1993-94)

Year Rice Jowar Green Black Ground- Other Tobacco Chillies Other Total Total

gram gram nut food non-food cropped

crops crops area (ha)

1975 – 76 52.21 6.20 10.10 8.22 4.28 8.22 1.91 1.21 7.66 100.00 696,052

1980 – 81 54.43 6.86 10.21 8.65 3.31 7.41 2.01 1.15 5.96 100.00 736,539

1985 – 86 52.97 1.88 5.73 14.52 4.33 8.35 1.29 2.92 8.00 100.00 726,622

1993 – 94 50.95 1.75 5.51 13.39 4.82 10.07 0.64 1.33 11.54 100.00 741,118

Livelihood OpportunitiesThe data on total number and area of operational holdings for four

time-points during the period 1970-71 to 1990-91 (Table 13) shows thatthe average size of landholding has been declining in the district due torapid increase in the number of landholdings. As far as the distribution oflandholdings was concerned, the marginal landholdings (i.e., less than oneha.) not only constituted the largest proportion of the total landholdingsbut also rapidly increased from 55.58 per cent in 1970-71 to 64.83 per centin 1990-91. The proportion of the area held by the marginal holdings morethan doubled during this period. Yet, the average landholding in the caseof marginal farmers increased only by 0.12 ha. The proportion of small (1-2 ha.) and semi-medium (2-4 ha.) holdings declined, while the area held bythem increased. Still, the average landholding in these cases remained almostthe same. The proportion of medium and large holdings in the totallandholdings declined, so also the area operated by them (Table 13). Thus,the average size of landholdings has been declining in the district. Further,the agrarian structure in the district consists predominantly of marginalholdings which has implications as far as the viability of farming is concerned.

The Census of 1991 shows that 43.29 per cent of the populationwere workers (Table 14), and the rest non-workers. Those ‘non-workers’in the age groups of less than 15 years and more than 60 years have beenshown as a separate category of ‘others’ as the work participation tends tobe low in these two age groups. The non-workers formed nearly 21 percent of the population, while ‘others’ formed 35.99 per cent. Interestinglythe youth formed a small proportion of workers, while they formed over 46per cent of the non-workers. Thus, one can suggest that unemploymentwas high among the youth in the district.

The Study Area 45

Table 13: Distribution of Landholdings in Krishna District

Land Percentage of landholdings(in hectares) 1970-71 1976-77 1980-81 1990-91

> 1 55.58 58.14 62.50 64.831 to 2 19.93 19.15 19.15 18.872 to 4 13.63 13.79 11.51 10.894 to 10 8.63 7.49 5.94 5.3710 + 2.23 1.43 0.90 0.04Total 100.00 100.00 100.00 100.00(in numbers) 304,387 350,956 413,633 466,421Percentage of area> 1 13.90 16.45 21.18 28.791 to 2 15.53 16.20 19.88 20.542 to 4 21.00 25.39 23.46 23.194 to 10 28.53 28.33 25.32 26.2510 + 21.04 13.63 10.17 1.23Total 100.00 100.00 100.00 100.00(in numbers) 553,016 584,067 568,974 601,680Average size of landholdings (ha.)> 1 0.45 0.47 0.47 0.571 to 2 1.42 1.41 1.43 1.402 to 4 2.80 3.06 2.80 2.754 to 10 6.00 6.29 5.86 5.6910 + 17.17 15.84 15.55 15.00Total 1.82 1.66 1.38 1.29

The proportion of workers in the total male population was 57.04per cent, while the corresponding proportion among females was only 21.33per cent. Such a low work participation rate among females was becauseof the problems in the definition of ‘worker’ in the census which excludesthose in the ‘household duties’ from the category of workers. Hence, onecannot conclude that the work participation rate is low among females.This is further corroborated by the field-level evidence which shows thatthe work participation rates were quite high among women.

As far as the preponderance of youth in these two categories isconcerned, the following conclusions emerge. First, the proportion of youth(i.e., belonging to 15-24 age group) among the workers was roughly thesame in the case of both females and males. Secondly, the proportion of


youth among male non-workers was very high compared to the femalenon-workers. This is also because of the problem with the definition of‘workers’ in the census.

Table 14: Distribution of Population (%) by Their Work Status inKrishna

Categories Males Females Total

% in the % in 15-24 % in the % in 15-24 % in the % in 15-24

total popu- age group total popu- age group total popu- age group

lation lation lation

Workers (main

and marginal) 57.04 21.33 29.11 24.26 43.29 22.30

Non workers

(in the 15 - 59

age group) 8.45 81.52 33.38 36.79 20.72 46.06

Others 34.51 - 37.51 - 35.99 -

Total 100 19.06 100 19.34 100 19.26

(in numbers) 1,878,789 358,025 1,820,044 352,077 3,698,833 710,102

Of the 15.47 lakh workers in the district, nearly half were agriculturallabourers, one-third were involved in various non-agricultural activities andabout 16 per cent were cultivators (Table 15). There are, however, male-female differentials in the occupational distribution. The proportion of maleworkers involved in cultivation and non-agricultural activities was as muchas 61.43 per cent, while the corresponding proportion for females was only22.81 per cent. Secondly, over three-fourths of the female workers wereobtaining their livelihood through agricultural labour. This pattern is re-inforced in rural areas as well. In fact, over 83 per cent of the femaleworkers in rural areas were involved in agricultural labour. The proportionof male-workers involved in non-agricultural activities was much less inrural areas than in the district as a whole (Table 15). In urban areas, alarger proportion of the workforce (including females) was involved in non-agricultural activities.

Among the non-agricultural activities, trade, business, services andsmall manufacturing were important. For the district as a whole, theproportion of male workers involved in these activities was as much as 29per cent. The proportion was much less in the case of female workers inthe district as a whole. The non-agricultural employment was, however,relatively less for both females and males in rural areas.

The Study Area 47

Table 15: Occupational Distribution (%) of the Workforce in Krishna

Rural Urban Total

Persons Males Females Persons Males Females Persons Males Females

Cultivators 20.49 28.31 6.80 3.02 3.42 1.07 15.73 20.12 5.95Agri. labourers 61.05 48.26 83.44 15.38 11.21 36.07 48.60 36.07 76.44Livestock rearing 2.20 3.03 0.74 1.28 1.39 0.77 1.95 2.49 0.74Non agriculturalactivities 16.26 20.39 9.03 80.31 83.99 62.10 33.73 41.31 16.861. Mining & quarrying 0.38 0.41 0.33 0.64 0.49 1.36 0.45 0.44 0.482. Mfg., processing,servicing and repairs inHH industry 2.04 2.12 1.90 3.31 2.61 6.74 2.39 2.28 2.613. Mfg., processing,servicing and repairs inother than HH industry 2.98 4.20 0.85 14.71 16.58 5.43 6.18 8.27 1.534. Construction 0.66 0.96 0.14 4.15 4.42 2.85 1.61 2.10 0.545. Trade and commerce 3.65 4.56 2.04 21.81 23.82 11.85 8.60 10.90 3.496. Transport, storageand communications 1.74 2.70 0.06 14.82 17.43 1.85 5.80 7.55 0.327. Other services 4.81 5.43 3.71 20.88 18.63 32.01 9.19 9.77 7.89Total (in numbers) 1,125,171 716,110 409,061 421,873 351,010 70,863 1,547,044 1,067,120 479,923



erment of W

omen

To conclude, the workforce participation rate was low in the district,in general, and among females, in particular. But, it is not known to whatextent this is due to limitations imposed by restrictive definitions of ‘workers’employed in the census. From the discussion on occupational distribution ofpopulation, two conclusions emerge. First, a large proportion of the femaleworkers, especially in rural areas, obtained their livelihood from agriculturallabour. Thus, feminisation of agricultural labour market (defined in terms ofgrowing proportion of female agricultural labourers to total agriculturallabourers) was taking place. Secondly, a large proportion of male workers(especially at the district level) was involved in non-agricultural activitiesand as cultivators. The non-agricultural activities of trade, business, servicesand small manufacturing were important employment providers to maleworkers at the district level and to both male and female workers in urbanareas.

What Sectors Did the Formal Banks Finance?Krishna district is very well developed in terms of institutional credit

agencies. Of the 386 bank branches in the district, a large proportion belongto Commercial Banks (CBs), and 179 (i.e., 46.37 per cent) were in ruralareas. While most of the RRB branches were located in rural areas, theproportion of rural co-operative banks was about 62 per cent. However,DCCB disburses most of the credit to farmers through Primary AgriculturalCo-operative Societies (PACS). In 1998-99, there were 461 PACS in thedistrict. If we consider them as outlets of formal credit in rural areas, thetotal number of outlets belonging to CBs, RRBs and DCCB works out to640. Taking the rural population figure of 1991, the rural population coveringeach outlet was 3,689. Assuming an average household size of 5, the totalnumber of households covered by each bank branch was 738. Thus, thecoverage of rural population by the rural bank branches has been fairlygood in the district.

The aggregate outstanding advances to the priority sector wereRs.1,208 crores in March, 1999. These formed 66 per cent of the totaladvances and exceeded the prescribed limit of 40 per cent. The credit depositratio, which was 73 per cent in March 1999, was more than the prescribedlevel of 60 per cent. These two ratios suggest that institutional credit agencieshave been giving considerable emphasis to providing credit to priority sectorsin rural areas, and that all the deposits mobilised in the district are lent withinthe district.

The Study Area 49

Table 16: Bank-Branch Network in Krishna District (March 1999)

Category Rural Semi-Urban Urban Total

Commercial Banks 122 60 122 304Regional Rural Banks 24 2 3 29District Central Co-operative Banks 33 13 7 53Total 179 75 132 386

The total credit for the priority sectors consisting of agriculture,allied sectors, trade, small business and services was Rs.388 crores in 1996-7. The total advances to these sectors increased to Rs.394 crores in 1997-8 and to Rs.477 crores in 1998-9 (Table 17). Thus, in nominal terms, thetotal priority sector advances increased by 23 per cent between 1996-7 and1998-9.

Table 17: Flow of Ground Level Credit in Krishna District

Proportion of credit inSectors 1996 – 97 1997 – 98 1998 - 99

Crop loan 63.91 71.68 65.09Term loan 13.03 13.45 13.92Non farm sector 7.93 6.04 4.25Other priority sector 15.13 8.83 16.74Total 100.00 100.00 100.00(Rs. in lakhs) 388,827.20 39,380 47,688

The loan amount for crop production accounted for about one-thirdof the total advances during the period 1996-7 to 1998-9. The term loans toagriculture and allied activities formed about 13 per cent of the total advancesduring this period. The components under term loans are minor irrigation,land development, farm mechanisation, plantation and horticulture,sericulture, waste land development, dairy, sheep rearing, poultry, fisheries,bullock carts, and bio-gas. Of these, four activities, namely, minor irrigation,dairy, fisheries, and plantation and horticulture are important. Bulk of thecredit given as term loan was accounted by these four activities. In fact, thepercentage of achievement to the target was 306 per cent for plantationand horticulture, 107 per cent for dairy and 202 per cent for fisheries.

The category of other priority sector has also been important in thedistrict. Under this category, loans were given to transport operators, retail


traders, housing and education. The percentage of achievement to thetarget was 117 per cent in 1998-9. About 15 per cent of the total advanceswere going to these activities. On the other hand, the credit to non-farmsector (consisting mainly of small manufacturing activities, rural artisansand small business) remained very small. Even within the non-farm sector,loan to small business (most of them happened to be the existing pettytrades) formed a bulk of the total amount.

To conclude, most of the loan amount went for crop production,other priority sectors and term loans (specifically for dairy, fisheries, minorirrigation and plantation and horticulture). The factors contributing to therapid flow of institutional credit to these activities has been taken up fordiscussion in the ensuing paragraphs.

Crop ProductionThe loan amount to crop production not only forms a bulk of the

total priority sector advances in the district but targets have also been met inthree out of four years during the period 1995-6 to 1998-9. In 1998-9, thepercentage of achievement was 83.28 and the shortage in absolute termswas Rs.62.32 crores. This was apparently due to technical problems. It wasnoted that, despite several positive features like good monsoon, disseminationof information to the farmers with regard to cultivation practices, extensionservice made available by the Agriculture Department by conducting ‘RytuSadassulu’ in which training was imparted to progressive farmers, thedisbursements had not picked up. One reason for the shortfall is that thetargets for financing of crop loans were enhanced by Rs.54.20 crores fromthe level of Rs.318.56 crores to Rs.372.76 crores. Though the Lead Bankhad communicated the revised crop loan targets to the controlling offices ofvarious financial institutions, the same had not percolated to the branches”(NABARD 2000:129). Thus, barring this ‘technical problem’, thedisbursement of credit for crop production has been significant due to thefollowing contributing factors.

First, agriculture in the district is developed. With assured canalirrigation facilities, the land productivity is high and double cropping isassured in the whole of district, in general, and in east Krishna, in particular.Hence, banks consider investment on crop production to be safe.

Second, the local banks (including the RRB and DCCB) have issuedKisan Credit Cards. These are credit card-cum-pass books, which allowfor any number of drawals and repayments within the limit. These cardsaim at adequate and timely support from the banking system to farmers fortheir cultivation needs including purchase of inputs in a flexible and cost-

The Study Area 51

effective manner. The total number of cards issued was 117,303 to farmersowning land and proven credit-worthiness (NABARD 2000:88-9).

Dairy DevelopmentDairy farming is one of the major subsidiary activities in the district.

The total number of milch animals in 1999 was 39,227 crossbred cows and277,439 graded murrah buffaloes. About 70 per cent of the agriculturalfamilies maintained one or two milch animals for additional income.

There are three dairy units in the private sector, and one in thepublic sector. Two of the private dairy units have stopped functioning. Ofthese units, the public-sector dairy unit has extended milk collection facilitythrough its own transport. Of the 496 Milk Producers’ Co-operative Societies,93 per cent were functioning in 1998-9 (NABARD 2000:56). The numberof milk collection centres was 750, which were connected by 32 milk routesand 7 milk chilling centres. Average milk production per day was 1.70 lakhlitres. This vast infrastructure for milk production has been mainly responsiblefor the flow of about 2 per cent of the total credit to the dairy sector.

Plantation and HorticultureKrishna has vast potential for the development of horticulture and

plantation crops. In 1997-8, the total area under plantation and horticulturalcrops was 98,539 ha. or 16 per cent of the total cropped area. Mango is animportant horticultural crop accounting for about 65 per cent of the totalarea under plantation and horticulture crops. While horticultural crops suchas mango, lime, guava, sapota and cashew are grown in the Western part ofthe district, banana and coconut are grown in both the parts of the district.Vegetables are grown in all parts of the district.

Banks have been showing keen interest to support horticultural andplantation crops for the following reasons. First, the district is known forgood quality of mangoes. In 1994-5, as against the orders for 600 MTs, fourprivate companies exported 476 MTs of fresh mangoes, mango products(pulp, nectar, and juice) and guava pulp to southeast and middle Asia. In thesubsequent years, the mango exports fluctuated between 20 to 60 MTs dueto reduced production on account of climatic factors. Second, four fruitprocessing units in the district are involved in the preparation of mango andguava pulp. The annual capacity of these units varies from as low as 450MTs to as high as 5,000 MTs. Third, four cold storage units in the district,with the total capacity of 24,000 MTs, extend storage facilities to horticulturalproduce. Fourth, the Horticulture Department has initiated developmentalactivities to popularise the cultivation of horticultural crops, improve their


productivity, and to introduce better techniques of production (NABARD,2000:40-1). Because of these factors, about 2 per cent of the total advancesgo for the fresh plantation of horticultural crops and installation of dripirrigation.

FisheriesBoth inland and marine fisheries are popular in the district. The

total number of ponds suitable for fish production was 2,177, of which, 60per cent would have water for almost the entire year. Banks provide financefor the construction of new ponds, purchase of pump sets and workingcapital. Brackish water prawn culture is popular in the district with 37,500farmers who have developed aqua farms on 32,861 ha. of land. This activityhas become very popular in a short span of time due to high rate of returnand export value. With the infrastructure such as 58 ice plants (with aggregatecapacity of 680 tons per day), one freezing plant, three cold storage units,and processing and packaging facilities, the fisheries activity has high marketpotential. Hence, about Rs.17 crores (or 2 per cent of the total credit) goesto this activity.

Other Priority SectorsThe important activities under this category are transport operation

and retail trade which accounted for nearly 60 per cent of the total credit tothis category. Financial institutions have been showing keen interest inproviding loans to these activities as the infrastructure is well developed,and there is enough potential in the district. NABARD (2000:106) statesthat “the loans and advances provided by the formal banking system fornon-agricultural gold loan, cash credit, and clean cash credit, loans againstdeposits and other financial requirements to support the business and trade,forms the bulk of other priority sector landing. Such advances are fully orpartly secured and also carry higher rate of interest. In view of the foregoing,the quantum of such advances issued by the banking system is growing byleaps and bounds every year”.

The discussion, thus, shows that there was considerable dynamismin agriculture in the district on account of assured irrigation facility and theintroduction of commercial crops. The proportion of agricultural labourersbelonging to SC category (in most of the villages, almost all the SC householdsfully or partially depended on wage labour in agriculture and non-agriculture)was also very high. However, the formal banks did not provide credit toimprove occupational diversification among agricultural households both onaccount of profitability considerations and the perception that those who

The Study Area 53

were unemployed and underemployed from the agricultural labourerhouseholds were lazy (Krause 2004).

Similarities and Dissimilarities between the DistrictsHaving presented the background information on the selected

districts, let us now turn to the discussion on common and diverging pointsinsofar as the context is concerned. This discussion is crucial because it isthis context which provides the need for and the success of micro-financeservices by the NGOs. It is proposed to discuss similarities and divergingpoints along the issues on which information was presented in the previoussections.! One similarity is the geographical proximity of both the districts to cities.

Kolar district is very close to Bangalore city. The study area, i.e.,Mulbagal, is 80 kms away from Bangalore City, and 20 kms away fromKolar town. Vijayawada is an important city not only in Krishna districtbut also in the entire state. The project area of the NGO is located 44kms away from Vijayawada city. In terms of geographical proximity,the project areas of both the NGOs are close to urban areas.

! The geographical area of Kolar is 8,240 sq. km, while that of Krishna is8,727 sq. km. Thus, in terms of size, both the districts are more or lesssimilar.

! The population of Kolar district was 22.16 lakhs, while that of Krishnadistrict was 36.99 lakhs in 1991. The density of population in the formerwas 270 persons per sq. km, while the same in Krishna was 424 personsper sq. km. The level of urbanisation was also higher (35.83 per cent)in Krishna District compared to Kolar (16.34 per cent). The growthrate of population was almost similar and both the districts recordedlower growth rates than the state during the last two decades.

! There is no significant difference between the districts in the levels ofilliteracy. But, female illiteracy was more in Kolar district. Highereducation was also less in Kolar district. A finding common to both thedistricts is that the youth accounted for larger proportion of the literateas well as highly educated population.

! The rainfall is more uneven and uncertain in Kolar district comparedto Krishna district. However, the latter has higher incidence of cyclonesand floods.

! Irrigation facilities are well developed in Krishna as compared to Kolar.As against 72 per cent of the irrigated area in the former, the proportionof irrigated area in the latter was only 20.32 in the mid-1990s. Further,Krishna district has assured irrigation facilities through canals. In Kolar,


wells account for over 86 per cent of the total irrigated area. This impliesthat farmers in Kolar depend on private and expensive form of irrigation.And this was beyond the reach of the marginal farmer households.

! Paddy is an important crop in Krishna district, while dry crops such asragi and groundnut are important in Kolar district. In both the districts,plantation and horticulture corps are significant.

! As far as the distribution of landholdings is concerned, both the districtswitnessed a rapid increase in the proportion of marginal holdings and adecline in the average landholding. Yet, the proportion of marginalholdings is higher in Krishna, and the average landholding is lower. Thismay not be a significant difference as the land productivity in Krishna issignificantly higher due to assured irrigation facilities.

! In general, and also for both males and females, the workforceparticipation rates were lower in Kolar as compared to Krishna. Inboth the districts, the youth accounted for a larger proportion of thenon-workers. Thus, unemployment was higher among the youth.

! There are significant differences between the districts as far asoccupational distribution is concerned. The proportion of cultivatorswas higher in Kolar. On the other hand, agricultural labour and non-farm activities provide employment to a bulk of the workforce in Krishna.In both the districts, the feminisation of agricultural labour market wastaking place. But, this phenomenon was more marked in Krishna. Inboth the districts, non-farm activities were more confined to urban areasand among men in rural areas. In both the districts, services, smallbusiness and small manufacturing were significant non-farm activities.

! Banking network was relatively more developed in Krishna with largerbank-branch network and higher level of advances. In Krishna, bulk ofthe credit went for crop production. On the other hand, although asignificant proportion of credit went to crop production in Kolar,plantation and horticulture, dairy and other priority sectors were important.Interestingly, these activities were also important in Krishna districtalthough the level was not the same as in Kolar district.

! A detailed discussion on the factors contributing to rapid flow of creditto these activities suggests that financial institutions prefer these activitiesas the infrastructure and marketing facilities were developed for theseactivities.

! An added dimension is that these were land- based activities, and werepreferred by the affluent sections in the rural areas, and better off amongthe poor. The institutional credit agencies did not deliver much credit for

The Study Area 55

start-up enterprises and for those activities that were needed for thevery poor.

Thus, the agrarian structure in both the districts was characterisedby the presence of marginal holdings with concomitant implications for theviability of small farming, and the need for subsidiary occupation. This wasparticularly important since the primary data suggested that it was thehouseholds belonging to SC categories in both the districts who werelandless or owned tiny landholdings. They were pursuing subsistentagriculture. Though illiteracy was high in these households, one or twopersons have completed either school or some college education and wereunemployed. The need to provide formal credit to such households for bothimproving the land productivity and undertaking alternative occupations shouldhave received priority given that these were poor and belonged to depressedcastes. However, as the discussion shows, the formal banks preferredthose activities which were land-based, profitable and offered collateral tothe banks. Further, there was no adequate provision for consumption credit.It was for these reasons that the micro-finance services delivered by theNGOs became very important for the poor.


CHAPTER IV

MICRO-FINANCE PROGRAMMES OF THE NGOs

As noted in the first chapter, NGOs have popularised the conceptof micro-finance in India. Of the estimated number of 30,000 NGOs inIndia, most have introduced micro-finance as one of the activities in theiroverall programme aimed at the development of the marginalised sectionsconsisting of landless and marginal farmer households belonging to depressedcastes of dalits, etc. In the micro-finance programmes sponsored by thegovernment, promotional agencies of NABARD and external fundingagencies, NGOs are preferred organisations to implement the programmedue to a number of factors. First, the quality in the formation and consolidationof groups was considered to be superior in these programmes as comparedto government programmes (Satish 2001). Second, the micro-finance groupsformed by them had the potential to adopt the strategy of micro-finance asan instrument of poverty alleviation and empowerment (Rajasekhar 2002a).Third, the NGOs introduced incentives and mechanisms to facilitate theparticipation of members in micro-finance programme. The incentives wereboth positive and negative to enable the members to participate in meetings,savings and credit operations. While the positive incentives were, forinstance, linking attendance with savings, the negative incentive wasimposition of fines on members not attending the meetings. Similarly, thepositive incentive for savings contribution was linking savings with creditand negative incentive was imposition of fines on those not contributingsavings regularly. Insofar as credit provision was concerned, the groupsadopt the positive incentive of ‘each successful repayment leads to secondloan with higher amount’. The negative incentive was that a defaulter andthe group to which she/he belonged was not eligible to obtain the loan fromthe group.

The NGO programmes had also tried to adopt the strategy of micro-finance as an instrument of poverty reduction and empowerment. Thegroup meetings were used as mechanisms for discussing the issues affectingmembers within the household, community and government, andundertaking collective action to address these issues. The institutions ofSHGs and their federations helped the members to take up these issues,represent them at the community and government levels and secure them.

The incentives and mechanisms, as the theoretical discussion showed,play an important role in enabling the participation of the people in micro-finance programme. It is for this reason that the chapter provides the

background information on Grama Vikas and Sanghamitra, the two NGOsselected for the study. An attempt has also been made to discuss the genesisof savings and credit programme, its importance in the overall programme,and progress in savings and credit operations. Further, a discussion onmechanisms and incentives in the programme to ensure participation, equityand effectiveness is attempted. The main purpose of providing backgroundinformation is to show how the systems and procedures adopted in thedelivery of micro-finance services have influenced the ability of the NGOprogrammes to address the felt needs of the members.

Grama VikasGrama Vikas is a NGO working in Mulbagal taluk of Kolar district

in Karnataka since 1979. According to the organisation, it came intoexistence in response to local problems such as recurring droughts,deteriorating environment, severe poverty and unemployment, deplorablelife of women belonging to backward castes, substantial number of childrensuffering from under-nourishment, deteriorating condition of tanks, etc.The organisation began its work with welfare approach by launching theNutrition Food Programme (NFP) aimed at Integrated Child Development(ICD). According to Grama Vikas, the needs felt by the people and issuesin the area led to a gradual shift in its approach from welfare to development.The new approach basically intended to ensure sustainable and self-manageddevelopment process, and to empower the women belonging to landlessand marginal farmer households and SC/ST categories by forming SHGsfor them. Since then, the organisation has been making efforts to accomplishintegrated sustainable rural development by initiating multi–disciplinarydevelopmental activities in the region.

The goal of Grama Vikas is ‘empowering marginalised rural womenwith special emphasis on children, natural resource management andnetworking with rural women’s associations to accomplish sustainabledevelopment through food security’. The organisation has, therefore, initiatedactivities around child, women and environment.Child Development Project: Grama Vikas believes that “the childrenare the asset for the nation and without whose integrated development thewomen empowerment would not take place”. In other words, if a child fallssick then the mother will not be able to take part in the socio-economicactivities. Under this programme, various children-related activities havebeen undertaken. Some of the important activities are providing nutritiousfood, supplementary education, support towards education and health careactivities. For this purpose, child-care centres and schools were started in


several villages, and free distribution of books to poorer households wasalso undertaken.Women Empowerment and Development: The organisation views thatwomen have been neglected in most respects especially in the decision-making process and participation in rural development. Grama Vikas believesthat “no rural development is possible unless women are given freedom toplay an active role in the socio-economic activities”. If women are notgiven the freedom to participate in economic activities, no empowermentcan be achieved and she would be overlooked from any decision taken bymen. In a bid to achieve the women empowerment and to make themparticipate in income generation activities, Grama Vikas introduced bothincome and employment intensive, and other developmental activities. Someof the activities worth mentioning are:" Savings and credit activities through the promotion of SHGs;" Income generation activities through community banking;" Linking SHGs with banks to take up individual/community based activities,

and influencing the policies of promotional agencies such as NationalBank for Agriculture and Rural Development (NABARD) in this regard.

" Social action programmes;" Awareness and skill building programmes so as to strengthen their

institutional capacity;" Dissemination of information of various government programmes;" Conducting training programmes and exposure visits;" Networking of women organisations at different levels; and" Discussing the issues related to women empowerment and development.

Natural Resource Development and ManagementFor Grama Vikas, natural resource development and management

is the third important activity. The organisation believes that “unless the soil,water and vegetation are protected, the future of rural India is very bleakand dismal”. In this context, Grama Vikas has undertaken activities like soiland water conservation, desilting of tanks, silt application on dry lands so asto promote organic farming to increase the crop yields and so on. Throughthese activities, Grama Vikas hopes to achieve sustainable development ofagriculture and food security. In the activity relating to desilting of tanks, theorganisation worked out a methodology for involving the community inplanning, implementation and monitoring38 . Viewed as a labour-intensiveactivity, the rehabilitation of tanks improved the employment opportunitiesfor the landless and marginal farmer households, and helped in applying siltto improve the productivity of the soil.

Micro-Finance Programmes of the NGOs 59

Coverage of the OrganisationGrama Vikas covers 112 villages, of which 100 are in Mulbagal

taluk, and the rest in Bangarpet taluk. These villages are divided into 15clusters. The main project office is located in Honnesettihalli, which is 15kms away from the taluk headquarters.

The organisation had a total staff of 50 members in 2000. Onlywomen were recruited for all the programme activities. Among them, 15were institutional development facilitators, 19 self-help facilitators, 11administrators, 3 internal auditors and the rest were training and sector co-ordinators. Each of the clusters had one cluster organiser and one or twocommunity organisers (depending on the size of the cluster) to carry outvarious development activities.

Grama Vikas has been working with women, children and menfrom landless and marginal households belonging mainly to SC/ST categories.In 1998, the organisation had formed 172 SHGs for 3,790 women members.Since the organisation worked with children and men belonging to thehouseholds of SHG members, the number of persons with whom theorganisation worked was more than 3,790.

Table 18: Operational Details of Grama Vikas

Year No. of villages No. of clusters No. of SHGs Target group covered (female groups) (Females)

1996 104 15 114 3,4881997 104 15 116 3,5921998 112 15 172 3,790

Source: Data furnished by Grama Vikas.

As far as the funds to undertake different programmes wereconcerned, the organisation was initially supported by OXFAM, the UKbased donor agency, for many of its activities. With a gradual shift in itsapproach from welfare to development, the organisation came into contactwith some other donor agencies such as NOVIB, OXFAM, ChristianChildren’s Fund (CCF), Community Aid Abroad (CAA) and SwissDevelopment Co-operation – Intercooperation (SDC–IC). These fundingagencies initially provided support towards both programmes and sustenanceof the organisation. Subsequently, it was decided that the NGO and thetarget group should develop self-reliance capacity. As a part of this, twodevelopments could be noticed; first, the funding agencies provided resourcesto build a revolving fund for undertaking micro-finance activities for all the


members. The NGO and the community sustained the fund by way ofadding interest income, etc. In 1997-98, such resources for long-termsustainability of the programme accounted for about 18 per cent. Second,the NGO encouraged the target group to approach the government, banks,etc., for resources. Consequently, a larger proportion of budget forundertaking development activities in 1997-98 was mobilised from thegovernment (Table 19).

Table 19: Source-wise Funding (%) for Grama Vikas in 1997-98

Name of the agency Total amount (Rs.) Percentage

NOVIB (Holland) 3,674,497 14.59CCF (America) 3,917,667 15.55SDC-IC (Switzerland) 477,350 1.89Self (GRAMA) 4,467,590* 17.73Government 12,656,440 50.23TOTAL 25,193,544 100.00

Note: * The information on funds existing with Grama Vikas pertains to the periodup to March 1999.

People’s OrganisationsThe lowest form of organising the women is called SHG. In each

SHG, 12-18 women were enrolled as members. SHGs were formed forwomen mainly from landless and marginal farmer households belonging toSC, ST and backward castes. In each of the villages, there was at least oneSHG and in some villages, there were 4-5 SHGs. The total number of SHGsin the project area of Grama Vikas increased from 114 in 1996 to 172 in1998 (Table 18).

By forming Parent’s Federation, men were also encouraged to takeup some community activities and play a supportive role to the SHGs formedby women. Men were also involved in the natural resource managementactivities. Thus, by forming organisations among men, the NGO has beenmaking efforts to involve them in development activities such as childreneducation, rehabilitation of tanks, other natural resource managementactivities, etc.

At the level of the village, Women’s Samithis were formed in all the104 villages. About 70 to 80 per cent of the target group women from thevillages were members of the Women’s Samithis. These members discussedtheir own problems relating to girl children, environment, women’s role inaccomplishing food security and finding appropriate solutions for their


development. Further, all the 104 women’s Samithis together formed apeople’s organisation at the taluk level, called Mahila Okkuta (Women’sFederation). This federation acts as an apex body to all the Women’s Samithisin the project area. It also acts as a pressure group to mobilise and implementgovernment programmes effectively through women’s solidarity. Women’sfederation was separated from the NGO, and was provided with its ownstaff, office and funds. This measure was aimed at building long-termsustainability of the programme in the region.

Genesis of the Micro-Finance ProgrammeAs noted earlier, the organisation began with the feeding programme

to rectify the nutritional imbalance among children and pregnant motherswith the help of donor funds. The sustainability of this programme was agreat challenge to the organisation in the context of uncertain donor funding.Hence, introduction of small savings programme was considered to be anessential component to sustain the feeding programme. Accordingly, poorwomen were encouraged to contribute small savings of Rs. 10 per month inthe early 1990s. Simultaneously, the organisation initiated a credit programmeunder which loans from that of revolving credit fund set up through donorfunds were given for agriculture and other income generation activities toenable the members of the target group to stabilise their income, and consumenutritious food on a sustainable basis. This programme was managed bythe NGO.

Around this time, the representatives of the organisation participatedin workshops on savings and credit organised by their principal donor agencyof NOVIB. In these workshops, issues such as the need to revolve savingsof the members as loans to enable them to develop social control mechanismwere raised. Another issue that was raised was that the capacity of themembers should be strengthened in organising their own meetings, takingdecisions on savings and credit activities and recovery of loans. In short,the need for building the capacity of members in managing micro-financeprogramme was emphasised. It was also emphasised that there was a needto mobilise local resources (from government and banks) so that the targetgroup members could obtain increased loan amounts on a regular basis.Influenced by the arguments in the workshop the organisation started savingsand credit programmes from 1992 onwards. Preliminary efforts to formwomen’s federation and entrusting it with some responsibilities in themanagement of savings and credit programme were started in 1994.Gradually, the capacity of the federation was built to take on additionalresponsibilities.


Grama Vikas facilitated the formation of mahila samithis (womenorganisations) in the initial years. These organisations were formed for thetarget group of poor women in the entire village. Typically, the size of eachmahila samithi varied from 30 members to 110 members. The average sizewas around 40. From mid-1990s, a decision was taken to divide largersamithis into smaller organisations and mould them as SHGs. This wasconsidered to be essential for the following reasons:" The size was large and consequently, not all members could effectively

participate in the group affairs. According to the organisation, 50 percent of the women in a group were normally ‘sleeping members’ whenthe size of the groups was large.

" In larger groups, members found it difficult to arrive at any consensuson important issues relating to savings and credit. The meetings at timeswitnessed conflicts and a collective decision on selection and monitoringof the borrowers was often difficult to be arrived at.

" In such groups, a few articulate members occupied the leadershippositions and cornered most of the benefits provided to the groups bythe organisation and the government.

" Since the management of a larger group required special leadershipqualities and other characteristics like assertiveness, only a few amongthe members could develop these qualities and continued to be leadersin the group. This came in the way of self-management39 of the groups.

" The NABARD programme on Bank-SHG linkage specified that a groupseeking support from banks cannot have more than 20 members.

" More importantly, the negative incentive such as ‘no fresh loan to agroup until a defaulter in a group repaid the loan’ could not be introducedas this raised the question of why many members in a large group wereto be penalised for the fault of one member.

For these reasons, the larger mahila samithis were divided into SHGsconsisting of about 20 members each. The methodology followed in thebifurcation of a larger group of 40 members was to keep the first 20 membersin the attendance register in the first group and second 20 members in thesecond group and so on. Although the members were allowed to bifurcatethe group along the lines of homogeneity in the economic status, the focus inthe above exercise was ensuring that the group was small.

As far as the formation of new groups is concerned especiallyunder the World Bank Programme of Swa-Shakthi, Grama Vikas has beenfollowing a different methodology wherein participatory techniques40 arebeing utilised and the target group members are being involved in the


formation. The Mahila Okkuta will identify the village and request thestaff to conduct PRA exercises to identify the poor in a village or a locality.Subsequently, the members of Mahila Okkuta together with people willtake active part in deciding who among the poor in a village should be inthe first SHG and who should be in the second SHG and so on.

Each of the groups in the project area was having a President andSecretary. The members elected both the leaders. The organisation admittedthat more able members with greater awareness and mobility (i.e., the womenwho could spare time to travel to taluk headquarters and NGO project area)were elected as leaders in the first year. This practice was followed as aconscious strategy of stabilising the group in the first year. The mandatoryrotation of leadership once a year was expected to enable all the membersto get an opportunity to become leaders of the group. According to theorganisation, in 99 per cent of the groups, rotation of leadership once a yearwas strictly followed. The responsibilities of leaders were to conductmeetings, resolve conflicts among members, enable the members tocontribute savings and borrow from out of savings fund, depositing the savingsin the bank and withdrawal when members needed loans from savings fundand mobilise resources from the government and loans from the banks. Theleaders also represented the group in the federation. They also acted aslink between the group and Mahila Okkuta/NGO.

MeetingsIt was expected that SHGs would have two meetings in a month.

However, SHG members normally found it difficult to attend two meetingswhen they were busy with the agricultural activities such as harvestingduring the peak season. Hence, the groups decided that members couldskip one of the meetings. But, organising at least one meeting in a monthwas essential. Whenever a new programme was to be planned and initiatedand hence, needed frequent interactions among members, the groups meteven for four or more times in a month. The meetings were normally held incommunity centres, school buildings, and prayer centres. In the villages,where these facilities were not present, the members met in the houses ofthe group members41 . In general, the staff from the NGO attended themeetings regularly, if the group happened to be young. In the case of oldergroups, the staff attended only one of the meetings in a month. It may benoted here that Grama Vikas was following a withdrawal strategy whereinthe role of the organisation gradually became facilitative, while that of SHGsand their federation was implementation. As a part of this strategy, theorganisation constantly monitored the status of SHG. If the monitoring


revealed that the group attained the self-management capacity, the staffwould not spend much time on basic aspects like facilitating the groupmeetings, etc. However, in those villages where there was a problem offinding a book writer either from among members or from the village, thestaff continued to play an active role in the preparation and maintenance ofaccounts and documents relating to the group.

Savings ProgrammeTo begin with, each member was expected to contribute Rs. 10 per

month. The amount of monthly savings gradually increased to Rs. 40 permonth. The following institutional rules were formulated to ensure that savingsamounts of individual members grew.• Savings amount of an individual member was taken into consideration

while disbursing a loan, although a strict ratio of savings to credit wasnot followed.

• The savings amount was not returned to a member so long as she waspart of the SHG. Instead, a member could borrow from out of savingsfund for consumption and short-term production needs such as workingcapital for crop production, income generation activities, etc.

• The groups had to pay 10 per cent of interest on savings calculatedonce in six months. The accumulated interest amount was credited intothe account of individual member whenever the group had funds.

The institutional rules seem to have had some impact on theaccumulated amount of savings of all the members in the programme, whichgrew from Rs. 6,173 in 1990 to Rs.52.73 lakhs in 1999. A rapid growth oftotal savings in the programme was partly due to a rapid increase in thenumber of members. As a result, the amount of savings per memberincreased only slowly and was Rs.1,225 in 1999 (Table 20).

Lending ProgrammeIn 2000, a group member was having three sources from which she

could borrow: (i) loans from savings fund, (ii) loans from Mahila Okkuta,and (iii) loans from banks through NABARD-SHG linkage programme.The strategy of making credit available from three sources for the memberswas based on the premise that credit needs of the poorer households differed.In theoretical terms, poorer households require lumpy amounts for threetypes of needs; life-cycle (education, marriage, housing, etc.), emergencies(health, crop loss, droughts, accidents, etc.) and income generation(Rutherford 1999). The strategy of Grama Vikas was to provide creditthrough savings fund for emergencies, education and, to some extent,


Table 20: Savings Programme of Grama Vikas

Year Members Savings in the Cumulative savings Average amount ofcurrent year (Rs.) (Rs.) cumulative savings (Rs.)

1990 79 6,173 6,173 781991 321 9,276 15,449 481992 1,941 233,159 248,608 1281993 2,537 320,322 568,930 2241994 3,088 512,714 1,081,644 3501995 3,183 639,986 1,721,630 5401996 3,488 903,528 2,625,158 7521997 3,562 762,076 3,387,234 950

1998 3,819 1,080,356 4,467,590 1,169

1999 4,304 805,245 5,272,835 1,225

working capital needs. Credit from Mahila Okkuta and banks was madeavailable for income generation, and certain types of life-cycle needs suchas housing and marriage.

The strategy of having three different sources of credit influencedthe organisation to formulate institutional rules to curb the tendencies offree riding. The strategy of using credit as an instrument of poverty reductionand empowerment also necessitated the institutional rules. The organisation,therefore, formulated the following rules which were roughly the sameacross the three sources of credit.• A person should have been a member in a group for a minimum period

of six months before she could access credit from any of the sources.This rule would enable the group to obtain better information on amember before a loan was sanctioned. A member completing six monthsin a group could only take consumption loan from the groups’ savingsfund as the required savings amount might be too small to enable her toobtain a larger loan. Only when a member had savings in the range ofRs.1,000 to 3,000, could she obtain loan amount sufficient to undertakean income generation activity. Thus, in practice, the new membersnormally obtained loans from group funds and as the savings amountincreased, they became gradually eligible to borrow from the federationor from a bank.

• The principle of savings linked to credit was followed. This meant thesavings amount of a member should be in a certain ratio of requestedloan amount. The ratio varied from 1:2 in the case of consumption loansto 1:3 in the case of income generation loans. In the case of loans for


house construction and purchase of land, the savings linked to creditwas not strictly followed. The principle of savings linked to credit, in away, conditioned the ability of a member to take a loan from differentsources. However, in exceptional and genuine cases, the savings linkedto credit principle were relaxed so that they could obtain credit.

• Another condition was that a member borrowing from the federationshould not have outstanding dues in the group or in a local bank.

The groups were given the central role in the selection process. Allthe members in a group together decided on who was to be given a loanbased on the following criteria. The first criterion was adequate attendancein the meetings. A member wanting to obtain a loan should have attended atleast 20 out of 24 meetings in a year. The groups gave first priority to this.The second criterion was regular savings and minimum amount of Rs.1,000in the case of members from older groups. This was given second priority.The third criterion was repayment of outstanding loans, and the fourth onewas sending children for education. Although the organisation expected thegroups to give first priority to the last criterion, the groups were reluctant todo so as sending children to a school depends on complex economic andsocial factors. The above criteria were applicable to all types of loans.However, groups were given some flexibility in the case of sudden andunavoidable consumption loans.

The decisions on who was to be provided with loans from out ofsavings fund were arrived at the group level and the leaders disbursed theamount after withdrawing the same from a local bank. In the case of loansfrom the federation and banks, groups in their meetings held throughoutthe month prepared a list of prospective beneficiaries and placed the samein cluster meetings, held on every 26th and 27th of a month. In this meeting,the representatives of SHGs and federation took part in the decision makingon new loans, review of the status of the existing loans and discussion aboutthe over-dues, if any. Once the cluster cleared the list of prospectivebeneficiaries, the same was sent to the federation for its final approval.Normally, the federation accepted all loan proposals except when therewas a shortage of funds and when it was of the opinion that the proposalfor a loan was not feasible.

The interest rate on all types of loans was 24 per cent per annum.It needs to be, however, noted that the interest rate on loans to SHGs underthe bank-SHG linkage programme was 11 per cent. The groups, in anycase, charged 24 per cent on the borrowing members and kept the differencein the interest amount for group-related developmental activities. The same


was the practice if the federation took a bulk loan from banks for on-lendingpurposes. The interest amount earned by the groups was spent ondevelopment activities such as meeting expenses in connection withorganising meetings, meeting the officials to obtain resources for the groups,purchase of stationery, etc.

The repayment period was normally one year for all types of loansand loan instalments were to be contributed once in a month. Although thebank loans were to be repaid within three years, the organisation sought toconvince the members that they needed to repay the loans within one yearand borrow another loan next year. The organisation justified the monthlyinstalments on the grounds that they became easy for the poor women inthe context of repayment from out of several livelihood activities and neednot necessarily from an activity for which loan was taken.

Total Revolving Credit FundThe detailed information on the total amount of credit disbursed to

the target group of Grama Vikas from three different sources is availablefor the period 1994-1999. During this period the members together obtainedRs. 172 lakhs. In 1994, the total amount obtained from all the sources wasonly Rs.3.63 lakhs. By 2000, the total credit amount obtained from all thesources had increased to Rs.18.87 lakhs. In the last few years, the totalcredit amount was in the range of Rs.22 lakhs to Rs.58.74 lakhs (Table 21).

The relative importance of three sources of credit provided by GramaVikas differed during the six-year period ending with 1999. Between 1994and 1995, the proportion of amount lent through savings fund ranged betweenas high as 69.79 per cent and as low as 13.92 per cent. The loans from thefederation were started in 1996. In that year, about one-third of loan amountwas provided by each of the three sources of credit. Since 1997, theproportion of loan amount provided by groups declined while that from thebanks gradually increased. With fluctuations, the banks accounted for about50 per cent of the total loan amount, the federation accounted for aboutone-third of the loan amount and the loans from groups accounted for about15 per cent of the total loan amount (Table 21).

As for the distribution of number of loans by credit sources, a majorityof the borrowing members obtained credit from their savings fund. Between22 and 46 per cent of the borrowing members obtained loans from thefederation. The proportion of members obtaining loans from banks rangedfrom as low as 7.53 per cent in 1999 to as high as 31.43 per cent in 998.


Table 21: Distribution of the Total Loan Amount (%) by Source

Year Loan amount from savings Loan amount from Loan amount from Banks Total funds Federation

Amount (Rs.) Percentage Amount (Rs.) Percentage Amount (Rs.) Percentage Amount (Rs.) Percentage

1994 253,614 69.79 0 0.00 109,800 30.21 363,414 100.001995 840,470 53.47 0 0.00 731,500 46.53 1,571,970 100.001996 1,355,730 32.72 1,153,667 27.84 1,634,500 39.44 4,143,897 100.001997 1,783,217 30.35 1,884,039 32.07 2,207,300 37.57 5,874,556 100.001998 421,843 13.92 1,125,680 37.16 1,482,000 48.92 3,029,523 100.001999 522,663 23.58 1,443,175 65.10 251,000 11.32 2,216,838 100.00

Table 22: Distribution of Number of Loans (%) by Source

Years Savings fund Mahila Okkuta Banks through NABARD TotalNumber Percentage Number Percentage Number Percentage Number Percentage

1994 360 79.12 0 0.00 95 20.88 455 100.001995 501 68.91 0 0.00 226 31.09 727 100.001996 946 46.37 705 34.56 389 19.07 2,040 100.001997 639 51.37 252 20.26 353 28.38 1,244 100.001998 148 22.80 297 45.76 204 31.43 649 100.001999 353 66.48 138 25.99 40 7.53 531 100.00

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From Table 22, it can be concluded that the groups were still relevantfor the members to take small loans for consumption while larger amountsof loans were taken from banks and federation by a smaller proportion ofmembers.

Credit from Savings FundBetween 1994 and 1999, 2,947 members had taken Rs.51.78 lakhs

from their groups (Tables 23 and 24). The distribution of number of membersby purpose of borrowing shows that most of the members had taken loansrelating to consumption, animal husbandry and agriculture. As far as thedistribution of credit from savings fund by purposes was concerned thepattern kept changing over a period of time. In the initial years, almost 98per cent of the credit from members’ saving fund was going for consumption,agriculture and animal husbandry activities. Gradually, the importance ofanimal husbandry and agricultural loans from savings fund was coming down,while consumption loans managed to retain their importance during thisperiod. Of late, loans towards housing repairs and construction, and towardsland purchase have been increasing. It can be concluded that the grouploans were relevant for the members insofar as meeting the urgent andunavoidable consumption loans was concerned.

Federation LoansBetween 1996 and 1999, 1,392 members had taken Rs.56.07 lakhs

from their federation. The distribution of members and loan amount bypurpose of borrowing shows that the pattern of federation loans kept changingover a period of time. In general, it can be stated that animal husbandry andagriculture accounted for most of the loans and bulk of the loan amount(Tables 25 and 26). In 1996, these two activities accounted for 94 per centof the total loans and 91 per cent of the total loan amount. However,gradually, the proportion of loans and loan amount to agriculture seems tohave declined, while the loans and loan amount for housing and land purchasewere on the rise. By 1999, the animal husbandry and agriculture accountedfor about 88 per cent of the total loan amount and 80 per cent of the totalloans. In terms of the number of loans, the activities such as land purchaseand housing were emerging as important ones.


Table 23: Distribution of Number of Loans (%) from Members’ Savings Fund

Year Percentage of loans for Animal Agriculture Business Land Housing Employment42 Consumption Total (no.)husbandry purchase

1994 15.28 69.44 1.67 0.00 0.00 0.00 13.61 3601995 37.33 34.93 2.40 0.00 0.00 0.00 25.35 5011996 66.38 15.86 2.33 2.43 4.02 0.42 8.56 9461997 42.25 17.53 2.97 5.01 12.83 0.94 18.47 6391998 20.95 26.35 3.38 2.03 4.73 1.35 41.22 1481999 12.46 6.52 2.27 0.85 1.70 0.00 76.20 353

Table 24: Distribution of Loan Amount (%) from Members’ Savings Fund

Year Percentage of loans for Animal Agriculture Business Land Housing Employment Consumption Totalhusbandry purchase Amount (Rs.)

1994 20.92 45.70 2.84 0.00 0.00 0.00 30.54 253,6141995 31.69 27.16 2.77 0.00 0.00 0.00 38.38 840,4701996 41.21 25.38 1.83 5.64 6.99 0.72 18.22 1355,7301997 28.71 20.69 4.42 7.19 11.19 1.23 26.55 1783,2171998 24.54 24.69 4.27 2.61 5.22 1.66 37.03 421,8431999 34.86 11.46 6.12 5.74 11.19 0.00 30.62 522,663

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Table 25: Distribution of Number of Loans (%) from Mahila Okkuta

Year Percentage of loans for Animal Agriculture Business Land Housing Employment Total (no.)husbandry purchase

1996 74.75 18.72 3.55 1.42 1.28 0.28 7051997 60.71 11.90 9.13 9.13 7.94 1.19 2521998 60.94 26.60 4.38 2.36 4.04 1.68 2971999 60.87 19.57 2.17 5.07 10.14 2.17 138

Table 26: Distribution of Loan Amount (%) from Mahila Okkuta

Year Percentage of loans for Animal Agriculture Business Land Housing Employment Total Loanhusbandry purchase Amount

1996 70.29 20.45 2.57 2.59 2.55 1.56 1,153,6671997 61.78 22.48 4.08 6.26 4.43 0.98 1,884,0391998 53.13 25.74 9.27 2.68 7.06 2.12 1,125,6801999 78.53 10.74 1.11 4.06 4.46 1.11 1,443,175



erment of W

omen

Credit from BanksBetween 1994 and 1999, 1,307 members had obtained Rs. 64.16

lakhs from local commercial banks and RRBs as part of the NABARD’sprogramme on bank–SHG linkages. It needs to be noted that some of thesemembers obtained three (and at times four) lines of credit from the sponsoringbanks. The distribution of total loans and amount by purpose of borrowingshows that there were variations over a period of time. As in the case ofother types of loans, animal husbandry and agriculture accounted for a bulkof the loans and loan amount. In 1994, nearly 99 per cent of the loans weregiven for animal husbandry. During the entire period, this activity managedto retain its importance both in terms of number of loans and total loanamount (Tables 27 and 28). The proportion of loans and loan amount toagriculture was characterised by high fluctuations during this period. In2000, a significant proportion of the loans and loan amount were given forland purchase and housing construction/repairs.

Table 27: Distribution of Number of Loans (%) from BankLinkages

Year Percentage of loans

Animal Agri- Business Land Housing Marriage Total (no.)husbandry culture purchase

1994 98.95 0.00 0.00 0.00 1.05 0.00 951995 90.71 4.42 2.65 1.33 0.88 0.00 2261996 80.46 14.65 1.54 2.31 0.77 0.26 3891997 77.05 16.71 0.85 1.42 3.97 0.00 3531998 30.88 66.18 0.98 0.98 0.98 0.00 2041999 87.50 0.00 12.50 0.00 0.00 0.00 40

Table 28: Distribution of Loan Amount (%) from Bank Linkages

Year Animal Agri- Business Land Housing Marriage Total loanhusbandry culture purchase amount (Rs.)

1994 95.45 0.00 0.00 0.00 4.55 0.00 109,800

1995 86.19 7.38 2.32 2.05 2.05 0.00 731,500

1996 86.91 8.20 0.80 3.06 0.86 0.18 1634,500

1997 57.53 35.75 0.91 1.09 4.73 0.00 2207,300

1998 35.70 60.46 1.48 1.08 1.28 0.00 1482,000

1999 94.02 0.00 5.98 0.00 0.00 0.00 251,000


Sanghamitra Service SocietySanghamitra has been working in the western part of Krishna district

since 1985 in the area of poverty alleviation and empowerment of women.In 1999, it was working in 14 villages of Kanchikacherla mandal in Krishnadistrict. The organisation had formed 138 SHGs by 1999. The total numberof members in 138 SHGs was 1,863 in 1999. On the whole, the organisationworks with 3,010 members; of them, 95 per cent are women, while the restare men and about 50 per cent belong to SC community (dalits), the rest tominority and economically backward communities.

Table 29: Progress of SHGs in the Project Area of Sanghamitra

Year No. of No. of groups Target group membersVillages Male Females Total Males Females Total

1996 9 0 37 37 0 510 5101997 11 0 86 86 0 1,163 1,1631998 12 0 118 118 0 1,416 1,4161999 14 0 138 138 0 1,863 1,863

The main activities of the organisation are:♦ self–help promotion through the formation, strengthening and

consolidation of SHGs;♦ building the capacity of target group members by conducting various

need-based training programmes; and♦ formation and strengthening of the federation of SHGs, and also working

with other NGOs.The organisation began its work with child sponsorship project of

Action Aid; subsequently, work relating to income generation programmeswith support from GPC/EZE and construction of houses for the poor withsupport from BFW was undertaken. In 1995, Sanghamitra sought funds forits ‘Antyodaya’ programme from GTZ/SHF for the formation of SHGs,building the capacity of members, and facilitating the formation of afederation of SHGs. Thus, there has been a shift in the development focusfrom child development to self-help promotion.

The total budget of the organisation was Rs. 41.50 lakhs in 1997-98, of which a significant proportion came from the government andSanghamitra. Note, however, the contribution of Sanghamitra was by wayof giving loans from the revolving credit fund built with the help of donorassistance (Table 30).


Table 30: Sources of Funding by Different Agencies During1997–98

Sl. Total amountNo. Sources mobilised (in Rs.) Percentage

1. DonorsGTZ 598,130EZE 179,080 18.73

2. SanghamitraService Society 1,633,299 39.36

3. People 226,627 5.464. Government 1,512,890 36.45

Total 4,150,026 100.00

There has also been a shift in the focus of the target group.Sanghamitra was earlier working with men and women, but, subsequentlyconcentrated more on women. Such a shift, as noted by the organisation,was in part due to the realisation that women were disadvantaged, andconcerted efforts through SHGs was to be made to develop and empowerthem. This was also in part due to their past experience of undertakingmicro-finance activities for men, who did not have discipline of attendingmeetings, participation in savings and credit and repayment. The target groupof the organisation was defined as socially, economically and backwardclasses, in general, and specifically, SCs, STs, minorities, BCs and singlewomen.

People’s OrganisationsThe earliest form used to organise women at the village level was

Mahila Mandal, an umbrella organisation for all the activities. Each MahilaMandal had an Executive Committee consisting of seven members(including President, Secretary, Treasurer, etc.). The role of the MahilaMandal was to take up issues relating to the village as a whole. The womenwere also participating in small savings activity. The Mahila Mandals existeduntil 1996.

When the organisation came into contact with GTZ, it becameinterested in self-help promotion. The need to have small groups for effectivesavings and credit programme, and to enable group members to undertakeself-help promotion activities was also realised. The organisation, therefore,wanted to bifurcate larger Mahila Mandals into smaller SHGs. Further, thelarger Mahila Mandals were considered to be inappropriate to involve all


the women in savings and credit activities. A bifurcation was also needed todevelop linkages between SHGs and the government (DWCRAprogramme)/ banks. It may be noted that the linkage was possible onlywhen the groups were small with about 15 members. From 1997 onwards,the earlier Mahila Mandals were divided into SHGs. In all the villages, themethodology of group formation was based on self-selection processwherein the selection of members in each group was left to the membersthemselves.

The size of SHGs varied from 10 to 15. In all the groups, there wasa President and Secretary. Members in a group meeting selected the leaders.According to Sanghamitra, the SHGs had to strictly follow the system ofrotation of leadership once in a year. The roles of leaders were to conductweekly meetings, attending meetings held at the NGO office, enabling themembers to contribute savings, facilitating members to borrow from out ofthe savings fund, depositing the savings in the bank and withdrawing moneyfrom the banks when members needed loans from savings fund. They alsoacted as a link between SHG and NGO.

MeetingsSHGs in the project area of Sanghamitra conducted 4 meetings in a

month. If a member was unable to attend the meeting she had to pay a fineof Rs. 5 as penalty. The meetings were normally held in the houses of theSHG members. The organisation provided training for the groups in theinitial stage of group formation relating to maintenance of accounts andrecords. Subsequently, the leaders were expected to maintain the accountson their own.

Savings Programme As per the rules formulated by SHGs and the organisation, the

monthly amount of savings contributed by each member should be Rs. 30in the project area of Sanghamitra. However, the amount varied from Rs.20to Rs.50. A savings account was opened in the bank in the name of eachSHG and operated by the leaders of SHGs. The savings were to becontributed before the 10th of every month; if somebody failed to pay, theyattracted a fine of Rs.5 per day.

Savings deposited in the bank earned an interest at the rate of 5 percent, which was passed on to the members. But, a majority of the groupsalso revolved savings for various activities and the interest earned wasequally distributed among the members and/or added to the savings amountof members. There were also special savings in the form of recurring and


fixed deposits in the banks facilitated by the organisation.Table 31 shows that while the total number of members was

increasing, the cumulative savings amount increased slowly. As aconsequence, the amount of savings per member remained virtually thesame. However, most of the groups mobilised assistance from DRDAunder DWCRA programme during 1996-1999. This contributed to anincrease in the amount available for internal lending from Rs. 561 in 1996 toRs. 1,047 in 1999. The stagnancy in the amount of savings per memberindicates that accessing the government resources seems to have adverselyaffected the incentives for the members to save.

Table 31: Savings Programme of Sanghamitra Service Society

Total Cumulative Average amount Cumulative Total (Rs.) Average amount

Year number of savings amount of savings (Rs.) amount mobilised available in the

Members (Rs.) from DRDA (Rs.) group (Rs.)

1996 510 106,410 208.65 180,000 286,410 561

1997 1,163 418,680 360.00 660,000 1,078,680 927

1998 1,416 509,760 360.00 980,000 1,489,760 1,052

1999 1,863 670,680 360.00 1,280,000 1,950,680 1,047

Lending ProgrammeThe SHG members have had access to two sources of revolving

credit fund; their own savings fund and revolving credit fund operated bySanghamitra. The revolving fund by Sanghamitra was used for the purchaseof sheep and fattening of the same, dairying, purchase of house sites,construction of houses, toilets, etc. The loans from banks in the form ofDWCRA loans and from DRDA were again used for income generation.The savings of members were revolved for emergency needs, cultivation,leasing in land, common economic programme (bulk purchase of essentialgoods and distributing at the wholesale rate).

In order to borrow from the savings fund at the SHG level, a memberhad to apply (in oral or written form) to the president and secretary of thegroup. The representatives of the group then conducted a meeting to takea decision on whether a loan is to be given or not. In the case of loans fromthe organisation, loan applications had to be in written form. In the case ofloans from the savings fund, the decision was taken by the group itself. Onthe other hand, the decision-making with regard to loans from the NGOsrested with the organisation.

An important criterion to obtain a loan from the group and NGO


was that a member should not have been a defaulter. The repayment amountand schedule was decided by the group. The rate of interest charged by thegroup on the loans to the members was 24 per cent. The minimum andmaximum amount of loans varied from Rs.500 to Rs.5,000. According tothe organisation, the group members ensured that the proposed activitywas feasible and viable by raising questions relating to marketing, raw-material, possible profit and economics, training needs, investment details,source of own contribution, possible sources from the government,knowledge, skill and experience, involvement of other members in the familyand details of veterinary services in the case of livestock.

The principle of savings linked to credit was followed, and it variedfrom 1:1 in the case of consumption loans to 1:5 in the case of incomegeneration loans. The interest rate was 12 per cent on loans given bySanghamitra, while it was 24 per cent in the case of loans taken out of theirsavings.

Credit from Savings FundBetween 1996 and 1999, Rs. 14.69 lakhs were disbursed by all the

groups in the project area of Sanghamitra. About one-third of the amountwas disbursed for agriculture and rearing of milch animals. Construction oftoilets, housing and consumption were other important activities for whichloans were given (Table 32). However, the amount available for each memberwas small around Rs. 800 in 1999. This was mainly because of slow savingsmobilisation in the project area.

Table 32: Distribution of Loans (%) from Member’s Savings Fund

Sector 1996 1997 1998 1999 Total

Agriculture 13.86 7.26 15.40 24.23 17.14Rearing of milch animals 26.83 15.39 17.44 12.92 15.49Non-farm activities 0.00 11.78 11.40 8.56 9.77Consumption 0.00 4.10 12.77 20.19 13.28Housing activities 46.94 47.92 31.92 24.72 33.32Health emergencies 11.92 7.26 4.56 6.14 6.19Education 0.45 4.36 3.76 2.42 3.19Others 0.00 1.92 2.74 0.81 1.61(in numbers) 67,097 344,295 438,543 619,000 1,468,935

As far as purpose-wise distribution of revolving credit fund operated bySanghamitra was concerned, most of the amount had gone for incomegeneration (Table 33). From 1997 onwards, the common economic


programme started to become prominent. This programme aimed to procureessential household consumption items from the wholesale market andmaking the same available to SHG member households at wholesale rates.On the whole, the importance given to each of the income generating activityhas been fluctuating and this has been attributed to the inability on the partof member households to undertake alternative economic activities in thecontext of fairly regular employment from the wage labour market in thearea.

Table 33: Purpose-wise Distribution (%) of the Total RevolvingCredit Fund Operated by the NGO

Sector 1996 1997 1998 1999 Total

Agriculture 17.95 0.00 13.37 13.00 12.58Rearing of milch animals 38.77 43.83 14.04 38.69 33.67Other livestock activities 19.71 10.55 4.45 3.64 10.82Non-farm activities 4.49 35.96 20.72 17.32 16.80Consumption 0.00 9.65 21.77 23.6 12.22Housing assistance 19.10 0.00 21.65 3.76 12.93Health emergencies 0.00 0.00 4.01 0.00 0.97Total amount (Rs.) 1,114,400 545,000 748,084 748,084 3,155,568

ConclusionsThe savings and credit programmes of Grama Vikas and

Sanghamitra have been evolving over a period of time. The notable changesin the programmes in both the project areas are as follows: (i) The earlierlarge groups were divided into small SHGs consisting of about 10 – 15members in accordance with the changes in the development perspectiveof the organisation, and the need to link the SHGs with banks and governmentprogrammes such as DWCRA. (ii) In both the cases, the donor agenciesplayed an important role in this. (iii) In both the project areas, the initialprogramme was essentially a small savings programme; but, it was graduallytransformed into somewhat larger savings and credit programme.

In both the programmes, mechanisms of incentives were providedto members for their participation in the programme. Facility to contributesmall savings to the group, savings linked to credit, taking attendance intoconsideration insofar as disbursal of loan and disallowing defaulters to borrowfrom the group were some of the incentives formulated for running theprogramme, as well as securing participation. The rule formulated by GramaVikas that households sending children to school would be accorded priorityin the loan sanction was an attempt to translate the strategy of micro-finance


as an instrument of poverty reduction into practice.The savings programme of Grama Vikas was larger than that of

Sanghamitra. The amount of savings per member was higher in the case ofGrama Vikas as compared to Sanghamitra. Though it was claimed that theDRDA assistance was added to the savings fund at the village level, therewere a few instances of members not repaying DRDA grant on the groundsthat this was not to be repaid to the government.

The lending programme of Grama Vikas was also comparativelylarger. This was mainly because of the linkages with banks underNABARD’s Bank-SHG linkage programme which was started as early asin 1992 in the district. Grama Vikas was one of the first NGOs to participatein the programme. This contributed to an increase in the amount of creditavailable for the target group.

There are also differences between the NGOs insofar as themanagement of credit funds is concerned. The systems and proceduresrelating to the people’s management of credit operations are more developedin the case of Grama Vikas. On the other hand, while people participated inthe operation of revolving credit fund of SHGs at the village level, the NGOretained the decision-making power in the case of funds operated at theNGO level.

The federation of SHGs was developed by Grama Vikas and itcontinues to function in the project area. The federation has beenparticipating in the administration of the savings and credit programme, andlobbying/ advocating the cause of the poor at cluster and project levels.This has contributed to the members accessing loans from banks under theBank-SHG linkage programme and other resources from the government.Sanghamitra was planning to form a federation at the time of the survey.

The group members in both the project areas were having accessto more than one revolving credit fund, and a particular type of credit needis met by a particular source. While savings fund at the village level wasmeeting the consumption needs of members (especially in the case of GramaVikas), the federation/ banks in the case of Grama Vikas, and the NGO inthe project area of Sanghamitra was meeting the production credit needs.

Another interesting feature is that, of late, the members have startedshowing interest in borrowing for land purchase, and house constructionand repairs. Based on the discussion on poverty concepts in Chapter II,one can suggest that the members had credit sources to meet their survivalneeds. While the members were able to access services relating to educationand health with loans from savings fund they were able to stabilise or improve


agricultural production and/ or start income generation activities with loansfrom federation and banks. After meeting the survival needs, they startedto focus on reducing the vulnerability through loans obtained for land purchaseand house construction/ repairs. These trends were more applicable toGrama Vikas as the organisation could access funds from the banks (throughNABARD programme of bank-SHG linkage) and donors to build largercredit fund for the members. Thus, the Grama Vikas laid a good foundationin terms of meeting the diverse credit needs of the members through largerrevolving credit fund, and thereby, securing economic and social benefits.


CHAPTER V

ECONOMIC BENEFITS OF MICRO-FINANCEPROGRAMMES

IntroductionMicro-finance, it is believed, contributes to poverty alleviation in

the following ways. First, the provision of savings facility to the membersenables them to contribute small savings regularly, and the savings amount,thus accumulated, provides a sense of security to them and reduce theirvulnerability. Second, the programmes make it possible for the membersto create a credit fund from which they can take loans for consumptionpurposes such as purchase of food, accessing health and education services,performing social functions and so on. This is expected to have a positiveimpact on their well-being, and access to basic needs. Third, the facility toborrow for IGAs either through savings fund or funds mobilised from donors,government and banks enables the members to undertake those activitieswhich are expected to contribute to employment generation, income increaseand asset acquisition. Fourth, the non-credit support in the form of trainingon how to undertake feasible and viable IGAs, facilitating linkages betweenthe target group and service providers in the government such as agriculturalextension service, facilitating the provision of insurance is expected tocontribute to the stability of employment and income security. This, inturn, leads to household food security. What economic benefits are obtainedby the members? How do these benefits differ from those obtained by thecomparison group? What differences are there across the project areas?

This chapter is devoted to an analysis of the economic benefits ofmicro-finance programme to both members and non-members. Afterdiscussing the participation of members in the credit programmes, the benefitsin terms of livelihoods (productive assets, sources, household income) andresources (access and affordability) in each of the project areas areexamined. A discussion of the economic benefits of the programme in theproject area of Grama Vikas is presented in the first section, while thediscussion concerning Sanghamitra is taken up in the second section. Acomparison between these two project areas is made in the last section.

Economic Benefits of Micro-Finance in the Project Area of GramaVikas

The study team, in collaboration with the NGO, selected theTimmanayakana Halli (hereafter, T.N. Halli) village for the following reasons.First, the SHG in this village existed since the early 1990s. This implies that

the target group received development inputs from the NGO for a very longtime. It is expected that such development inputs would have contributed tothe achievement of economic benefits. Second, since this group accessedloans from the banks through NABARD’s Bank-SHG linkage programme,it was felt that the comparison of a group supported by the NABARD withthose not supported would provide insights into the role of government inmicro-finance programmes.

Socio-economic Background to the Selected VillageT.N. Halli is in Mulbagal taluk, and the distance from the village

to the block headquarters is 11 kms. Of the 100 households in the village, asignificant proportion belonged to the Vokkaliga caste followed by SCs,Dhobi and Kuruba. Over half of the households in the village owned lessthan 2.5 acres of land, and about one-third owned between 2.5 and 5.0acres. The proportion of the households not owning land to the totalhouseholds was less around 10 per cent. Most of the landless came fromthe depressed castes, while all the large land-owning households belongedto the Vokkaliga caste.

A distribution of all households in the village by their principaloccupation shows that over two-thirds of them were deriving livelihoodfrom wage labour, while less than one-fourth from cultivation. The restwere depending on non-farm activities. Interestingly, most of the householdsdepending on agricultural labour came from marginal and small farmercategories. Those who depended mostly on agriculture were substantialfarmers owning more than 5 acres of land. Of those households dependingprimarily on non-farm activities, most belonged to the small farmer category.This shows that the marginal (0 – 2.5) and small farmer (2.5 – 5) householdsdepended primarily on agricultural labour and non-farm activities. Thehouseholds owning more than 5 acres of land depended fully on cultivation.

Of the 508 acres of land in the village, about 16 per cent receivedirrigation through borewells. The irrigation tank in the village did notprovide secure irrigation facilities to the farmers in the village. At the timeof this study, there was no water in the tank. Hence, Grama Vikas initiateddesiltation activities to enable the marginal and small farmer households toearn some wage income during the off-season and transport silt to theirfields.

Groundnut was the dominant crop in the village accounting for nearly70 per cent of the total cultivable area followed by horticulture, cereals andpulses, and paddy, in that order. About three per cent of the total area in thevillage was under Mulberry crop.

Economic Benefits of Micro-Finance Programmes 83

Most of the households were undertaking rearing of milch animalsas a supplementary livelihood activity. The village is located along the milkroute. There is a dairy located at the village. The milk collection takesplace twice in a day and roughly 360 litres of milk are being collected. Thevillage also has a middle school. Anganawadi centre run by the NGOprovides play home and nursery facilities to the children.

The SHGs in the Selected VillageThis village has two SHGs. One of them, which was formed in the

early 1990s, consisted of 15 members. Of the 15 members, 11 joined over8 years ago, and the remaining between 6 and 7 years ago. The secondgroup, which has 11 members, was relatively new. The first group isconsidered as the member group, while the second as the comparison group.The member group existed for over 8 years, while the comparison groupwas formed only in 1999.

Are these two groups comparable in terms of caste and landholdingstatus? In other words, how do the groups compare in terms of homogeneity?Do they consist of the poorest? These questions assume importance in thecontext of the following theoretical and empirical observations.

Micro-finance groups have the advantage of mitigating the problemsposed by adverse selection, and provide incentives for similar types (safeand risky) to group together (Ghatak 1999). Bratton (1986) notes that groupshaving members with similar characteristics are in a better position to assessthe capacity and credit-worthiness of individual borrower. This impliesthat micro-finance groups can even consist of poor women, and this maynot be disadvantageous from either the lender’s point of view or from theviewpoint of the policy maker. An important assumption in this regard isthat micro-finance groups and NGOs undertake those functions that willreduce the negative impact of socio-economic factors on the ability ofwomen to access the new and emerging opportunities.

Given that micro-finance programmes are popularised as a meansfor poverty alleviation, their accessibility to the poorest is of obvious concern.It has been often mentioned in the literature that micro-finance groupsconsisted of a few poorest and some poor43 (Krishnamurthy 1998; Rogaly1996; Kabeer and Murthy 1996; Rajasekhar 2002a; Satish 2001: 414-5;Datta and Raman 2001: 390) due to the following:" The methodologies such as including the members selected for the earlier

watershed programmes, self-selection, group formation around a coupleof better-off and/or articulate members (Rajasekhar 1998) andinadequate time spent by the staff (Satish 2001; Rajakutty 1997).


" Because of policies of target chasing, inadequate human and materialassets (Rajakutty 1997) and distorted incentive structure to the staff(Hulme and Mosley 1996), the group formation process tended to bebased on considerations such as ability to contribute savings, borrowcredit and repay the loans. This type of group formation resulted infocusing on groups other than the core poor.

" The membership requirements such as payment of registration fees,attendance at regular meetings, mandatory contribution of savings(Evans et al 1999) and the rigid discipline insisted by the micro-financegroups (Satish 2001: 415) prevented the poorest in participating in theseprogrammes. The factors such as lack of education, small householdsize and landlessness have been identified as risk factors for their non-participation (Evans et al 1999).

" Distortion of incentive structure may also result in the non-poor enteringin micro-finance groups and cornering the benefits meant for the poor.The micro-finance programmes implemented by the government andPRIs in India provide for subsidies and access to bank loans after agroup functioned for six months. Yielding to the lure of subsidies andbenefits associated with micro-finance groups, the non-poor may enterinto micro-finance groups to corner the benefits. This is especially thecase in politically, economically and socially stratified societies, andin situations where target chasing, inadequate human resources andlack of capacity (Rajakutty 1997; Dasgupta 2001: 384) have adverselyaffected the quality (in terms of homogeneity, shared understandingamong members and incentive structure) of group formation.

" The above imply that financial sustainability considerations influencethe programmes to focus on non-poor or better off among the poor.This has been theoretically justified in Conning (1999) and empiricallyargued in Rajasekhar (2002a).

The data on the distribution of households in the member andcomparison groups by caste and landholding in T.N. Halli (Table 34) showthat the proportion of households belonging to the dominant caste of Vokkaligawas higher among the comparison group as compared to the member group.In contrast, the proportion of households belonging to backward caste ofDhobi and Scheduled Tribes (Toti and Bhovi) was higher in the membergroup. Thus, it appears that the comparison group was marginally betteroff as compared to the member group in terms of caste background. Interms of landholding, the households in the member group were better thanthose in the comparison group. The landlessness was less, and the proportion


of households owning more than 5 acres of land was relatively high in thecomparison group.

Table 34: Distribution (%) of Households by Caste andLandholding

Caste Member group (n = 15) Comparison group (n = 11)

0 0 - 2.5 2.5 -5 5 > Total 0 0 - 2.5 2.5 -5 5 > Total

Vokkaliga 0.0 75.0 0.0 25.0 100.0 25.0 25.0 25.0 25.0 100.0(26.7) (36.4)

Kuruba 0.0 100.0 0.0 0.0 100.0 0.0 100.0 0.0 0.0 100.0(6.7) (9.1)

Muslim 100.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 100.0(6.7) (9.1)

Dhobi 0.0 60.0 0.0 40.0 100.0 0.0 66.7 33.3 0.0 100.0(33.3) (27.3)

Thoti 0.0 100.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0(6.7) (0.0)

Bhovi 0.0 33.3 66.7 0.0 100.0 0.0 50.0 50.0 0.0 100.0(20.0) (18.2)

Total 6.7 60.0 13.3 20.0 100.0 18.2 45.5 27.3 9.1 100.0(15) (11)

There was also a slight difference between the member andcomparison group in terms of marital status, age and education. While allthe members from the comparison group were married, a few from themember group were separated. A relatively larger proportion of membersin the comparison group was in the age group of 20 to 40 years. Theproportion of illiterate members was relatively more in the member group.Thus, there were some differences between the member and comparisongroups. Yet, it can be concluded that these two groups were similar becausemost of them were married and illiterate, and a significant proportionbelonged to the age group of 30 to 40 years (Table 35).

Although the member group was marginally better than thecomparison group in terms of landholding, one cannot conclude that theformer was significantly better than the latter because small farmersdominated both the groups. Secondly, it is possible that the initial conditionof the households in the member group may have been different. It needs tobe mentioned that three members acquired land after they joined the group.If one were to reclassify the land ownership position on the basis of landpurchase, the distribution shifts in favour of small and marginal farmers.Third, those in the member group were worse-off in terms of education andmarital status. Thus, the SHGs formed by the organisation consisted of thepoor and needy persons. This became possible due to the quality maintained


in the group formation process. The organisation approached the task ofgroup formation as process oriented one, where attempts to assess thesocio-economic situation of the villagers preceded the group formation.

However, there is one question in the group formation process.The data collected by the study team shows that of the 100 households inthe village, 50 owned less than 2.5 acres of land and 10 were landless.Thus, there were at least 60 households which needed micro-financeinterventions. However, the groups were formed only for 26 households,some of which owned more than five acres of land. Why is it that theremaining 24 households were not included in the SHGs? An answer to thiscan be found in the inability of the programme to cover all the poor in thevillage. In 2000, however, new groups were formed in the village with thesupport of the World Bank.

Table 35: Basic Details of Member and Comparison Groups

Member group Comparison group (no = 15) (no = 11)

Marital statusMarried 93.3 100.0Separated 6.7 0.0Age20 – 30 20.0 36.430 – 40 46.7 45.540 – 60 26.7 18.260 > 6.7 0.0EducationIlliterate 93.3 72.7Primary 6.7 9.1Secondary 0.0 9.1College 0.0 9.1

Access to CreditLending to a member (by the group or external agency with the

group providing joint liability) in micro-finance group is less risky because ofpeer selection, which, in turn, takes care of problems posed by adverseselection. Ghatak (1999) shows that the group lending contract provided away to charge different effective fees to risky and safe types, and suchdifferential charges made risky types to come together in one group, whilethe safe types joined together in another group. Group lending provided a


way to charge different interest rates on different types (risky and safe) ofborrowers that is impossible under the standard individual contract. Collateralsubstitutes such as savings linked to credit and social pressure could improvethe access of the poor to credit (Rajasekhar 2002a). The borrowers in eachgroup had the ability to enforce contracts between each other, and theyjointly decided which type of activities to undertake. By fixing higher joint-liability payment for risky types, the group influenced the members to choosethe safe activity (Stiglitz 1990). Through exploiting the ability of the neighboursto enforce contracts and monitor each other, the micro-finance groups hadthe potential to solve the problem of moral hazard, and offered low interestrates on loans and raised repayment rates.

However, it has been emphasised that the access of the poor to credittends to be limited (Rajasekhar 2002a) due to the following reasons.• Since borrowing for income generation exposes the poor to a greater

risk, they may be reluctant to borrow as the burden of repayment willbe high (Hulme and Mosley 1996; Rajasekhar 2002a).

• Micro-finance programmes emphasise the finance, and neglect credit-plus activities (Kropp and Suran 2002) partly due to inadequate humanand material resources. In the absence of non-credit support, the poormay not come forward to access the credit for income generation.

• The groups relying on linkages with banks and government to improvethe access of credit for the poor may find it difficult to achieve thisobjective as the environment governing linkages (rules and staff in banksand government) may not be conducive. The staff associated with themicro-finance groups may also determine the quality of a group, which,in turn, will influence the linkage.

• When savings are linked to credit, the difficulties faced by the poor incontributing regular and adequate amounts of savings may hinder theiraccess to the credit (Rajasekhar 2002a). This principle may lead to thecapture of benefits by the non-poor as they would be in a favourableposition to contribute regular savings. This is different from elite-capture because the objective of forming the groups among the poorand the discipline (regular meetings and savings) associated with micro-finance groups may result in keeping away the rural elite from enteringinto micro-finance groups. However, the non-poor (i.e., better-off poorand middle strata) may enter into micro-finance groups and capture thebenefits.

• Even if some of the poor women want to undertake IGAs, their incomeearning opportunities may be constrained by type (small, inaccessible


and lack of marketing) of the villages, and social environment (Rajasekhar2002b).

It has been, therefore, argued that the micro-finance programmeshave limitations in meeting the credit needs of the member households, whocontinue to depend on moneylenders and resort to extreme situations likeselling of assets when it comes to important life-cycle needs44 (Rajasekhar2002c). The distribution of credit disbursed by purpose shows that most ofthe credit had been provided for either consumption or for existing activities(such as agriculture and livestock), and only a little is provided to non-agricultural activities. In this context, it would be pertinent to examine theevidence from the selected SHG.

During the last eight years or so, the members have been accessingthe loans from their own group, Mahila Okkuta and banks. Information onnumber of loans and amount for the last eight years has been analysed notonly to see the access to credit but also the purposes for which they obtainedthe credit. The information collected pertains to the member group as thecomparison group was yet to start the lending activity.

Between 1992 and 1999, 15 members in the T.N. Halli SHG took65 loans. On an average, each member took 4.3 loans since the inceptionof the group. Between 1996 and 1997, each member took at least one loan.There are no size-class wise differences in the access to credit from theSHG. The landless household in the member group accessed the maximumnumber of loans (six). The household, which accessed the maximum amountof loan, belonged to small farmer category.

In 1998, the total number of loans sharply declined as larger amountswere taken for livestock, purchase of land, borewell digging etc., in 1997could not be immediately repaid. Since the members could not access theloans when they had outstanding dues, the number of loans declined. Thenumber of loans again increased in 1999.

During the period of eight years ending with 1999, the memberstogether took a total loan amount of Rs. 268,400. The average amountobtained by each member during the period 1992 and 1999 was Rs.17,893.

The purpose-wise distribution of loans and loan amount shows thatthe loans were given for six broad groups of activities: agriculture, livestock,health, construction of house, asset building and others. Livestock has beena dominant activity accounting for maximum proportion of total loans andamount. As far as the number of loans was concerned, the next importantpurpose was asset building (storage bins, land, etc). However, in terms oftotal amount, the important activities were livestock and agriculture. Thus,


Table 36: Details on Loans Taken by SHG MembersYear Agriculture Livestock Health Construc- Asset Others Total

tion building

1992-1995 1 15 0 1 0 1 18(5.56) (83.33) (0.00) (5.56) (0.00) (5.56)

1996 1 13 0 1 0 0 15(6.67) (86.67) (0.00) (6.67) (0.00) (0.00)

1997 1 9 0 2 0 4 16(6.25) (56.25) (0.00) (12.50) (0.00) (25.00)

1998 2 0 0 0 0 1 3(66.67) (0.00) (0.00) (0.00) (0.00) (33.33)

1999 1 0 1 0 10 0 12(8.33) (0.00) (8.33) (0.00) (83.33) (0.00)

Total Loan Amount (Rs.)1992-1995 2,100 20,700 0 10,000 0 10,000 42,800

(4.91) (48.36) (0.00) (23.36) (0.00) (23.36)1996 5,100 66,750 0 3,750 0 0 75,600

(6.75) (88.29) (0.00) (4.96) (0.00) (0.00)1997 2,000 56,000 0 18,000 0 50,000 126,000

(1.59) (44.44) (0.00) (14.29) (0.00) (39.68)1998 5,400 0 0 0 0 1,000 6,400

(84.38) (0.00) (0.00) (0.00) (0.00) (15.63)1999 3,000 0 10,000 0 3,600 0 16,600

(18.07) (0.00) (60.24) (0.00) (21.69) (0.00)

Average Loan Amount (Rs.)1992-1995 2,100 1,380 0 10,000 0 10,000 2,3781996 5,100 5,135 0 3,750 0 0 5,0401997 2,000 6,222 0 9,000 0 37,500 7,8751998 2,700 0 0 0 0 1,000 2,1331999 3,000 0 10,000 0 360 0 1,383

Note: Figures in parentheses represent percentages.

most of the loans and amount were given for the purpose of livestock rearing.As the case of Kamalamma (Box 1) shows the income from differentactivities was used for various purposes, and also for diversification ofoccupations.

The evidence, thus, shows that the picture that one obtains onnumber, amount and purpose of loans in the case of member group hasbeen distinctly different as compared to the one emerging from the literature.This can be attributed to the following factors. First, the systems, proceduresand incentives incorporated into the programme have had the desired effectin enabling the members to borrow, utilise the credit and repay the loans.Second, unlike the other programmes where the members had access tocredit only from their savings fund or depended on linkages with the banks,the organisation worked out a system wherein credit to the members was


Box 1: Vulnerability to security

Kamalamma, belonging to Vokkaliga caste, lived in a tiled house along with herhusband and two sons. She did not go to school as her parents did not want tosend girl children to school, and was married at the age of 18 to an agriculturallabourer from T.N.Halli. After the marriage, she was participating in the wagelabour market and also helped in the cultivation of one acre of dry land inherited byher husband. The wage rates were low; she was getting Rs. 6 per day, while herhusband was getting Rs. 8.

She joined the SHG in 1991 and availed a loan of Rs. 700 to purchase the sheep.After six months she sold the sheep for profit and used the money for cropproduction. Another loan of Rs 1700 from Mahila Okkuta in 1995 helped her topurchase a milch animal and to undertake dairying as supplementary activity.With marketing facility present in the village, she repaid most of the loan amountthrough income earned from dairying. They sold the cow and used part of themoney for crop production and part for the purchase of an ordinary cow. In 1996,she purchased a hybrid cow with another SHG loan, and also dug a borewell. In1998, the household sold the cow for daughter’s marriage. After this, they took aloan of Rs. 35,000 from RRB and purchased 2 acres of land. With this, thehousehold moved into the position of middle farmer with two acres of irrigatedland. They were growing crops for both household consumption and for themarket. The household had three sources of income. Of Rs. 25,610 of income in1999-2000, about 80 per cent was through cultivation, 13 per cent from the sale ofmilk and the rest from wage income. Thus, the household moved into fromvulnerability to security. Though the two sons studied (one of them even going tocollege), the only daughter was married at an early age.

provided through three different sources. This improved the access tocredit.Third, the credit plus activities such as crèches for children, knowledgeand information on best practices in the farming, and integration of activitiesof desilting of the tanks and providing employment in the summer seasonwith micro-finance helped the members to undertake farming or milch-animal rearing activities through credit. Finally, the introduction of milk-route by the government to procure milk improved the marketing possibilities.

SavingsMicro-finance programmes enable the poor to save45 . Savings

mobilisation (focusing on voluntary savings as well) has been emphasised inmicro-finance programmes as savings provide an endogenous source ofcapital for lending. Savings also provide direct advantages to poorhouseholds such as building up assets to use as collateral, a reserve toreduce consumption volatility over time, improved access to consumptioncredit, reduced dependence on moneylenders and enhanced access to health,education, etc. This helps the poor to have confidence to invest on IGAs as


the access to consumption credit frees them from uncertainties of how tomeet consumption emergencies. The growing amount of savings improvesthe confidence among members in investing and expanding the existingincome generation activities. The savings contribution, thus, helps to reducevulnerability among the poor, and enable them to undertake IGAs.

The savings contribution has, however, been slow and irregular dueto limited and insecure livelihoods, frequent migration (disrupting the lifepattern of the poor), and inability of micro-finance group to provide theincentives (Rajasekhar 2002a). Further, inability of the groups to fulfil allthe credit needs of the members may act as disincentive to the poor tocontribute their savings to the group.

The evidence from the study area shows that, as can be expected,both members and those in the comparison group have been contributingsavings in self-help groups. There is, however, a difference betweenmembers and those in the comparison group in so far as cumulative amountof savings, sources of savings, savings forms and reasons for savings areconcerned. A large proportion of households in the comparison group hadsaved less than Rs.500, about 18 per cent saved between Rs.500-2,000.On the other hand, every household in the member group had saved morethan Rs.1,000. In fact, over half of them saved more than Rs. 2,000 (Table37).

Table 37: Distribution (%) of Households by Cumulative Savings

Savings (Rs.) Member group Comparison group

< 500 0.0 81.8 500 – 1,000 0.0 9.11,000 – 2,000 46.7 9.12,000 – 3,000 26.7 0.03,000 – 5,000 6.7 0.05,000 + 20.0 0.0Total 15.0 11.0

The dominant form of savings for the households in the comparisongroup was SHGs. On the other hand, less than half of the households in themember group had saved only in SHG, whereas the remaining householdsused other savings forms such as bank, insurance company, chit funds andothers. This implies that member group utilised both formal and informalsavings forms, while most of the households in the comparison group usedSHGs as the principal savings form (Table 38).


Table 38: Distribution of Households by Their Savings in DifferentSources

Member group Comparison group

SHG 46.7 90.9SHG + Bank 6.7 9.1SHG + Chit Funds 6.7 0.0SHG + Insurance 26.7 0.0SHG + Bank + Insurance 6.7 0.0SHG + Bank + Chit Funds + Others 6.7 0.0Total (no) 15 11

Households in both member and comparison groups stated thatdifferent factors motivated them to save in SHGs and other forms of savings.It is rather difficult to arrive at a single most important motive as theresponses were unspecific. One could say that three types of needsmotivated the poor households to save. These were life-cycle, emergenciesand investment. For member households, investment needs were importantaccounting for 46.7 per cent. On the other hand, the needs relating to life-cycle and emergencies accounted for most of the savings in the case ofcomparison group (Table 39).

Table 39: Reason for Contribution of Savings

Reason Member group Comparison group

For children’s education 0.0 9.1Children’s marriage 6.7 18.2Expecting loans 20.0 0.0Health purpose 6.7 0.0Future needs 20.0 27.3Marriage + health 13.3 0.0Purchase of milch animals 26.7 36.4Economic security 6.7 0.0Not known 0.0 9.1Total (No) 15 11

Economic Benefits of Micro-Finance ProgrammesAs noted earlier, micro-finance programmes enable the members

to save, set up and expand a credit fund consisting of savings and/ orresources mobilised from donors/ banks so that members can initiate orstrengthen the existing income generation activities. The discussion onpurpose-wise distribution of loans and amount suggests that most of the


member households had taken loans for livestock and agriculture. Whateconomic benefits did the borrowing members have?

One of the indicators used to examine the economic benefits wasthe purchase of productive assets. A comparison of households in memberand comparison groups by purchase of assets indicates that members werein an advantageous position as compared to those in the comparison group.Between 13 and 53 per cent of the member households had acquired milchanimals, poultry and sheep after they had become members in SHG (Table40). More importantly, one-fifth of the households purchased land afterthey had become members. It needs to be noted that not all membersreceive loans from SHG to purchase land. As Box 1 shows, Kamalammaobtained loan from the RRB to purchase the land. This became possible asher household moved from the situation of vulnerability to security. Becausea significant proportion of the households acquired productive assets afterthey had become the members, the proportion of households not owningproductive assets was less among member households. On the other hand,most of the households in the comparison group had acquired productiveassets neither before nor after joining the SHGs.

Table 40: Distribution of Households by Productive Assets

ASSETS Member group Comparison group

Acquired Acquired Not Total Acquired Acquired Not Total

before after acquired (No.) before after acquired (No.)

Land 73.33 20.00 6.67 15 72.73 9.09 18.18 11

Milch animals 20.00 13.33 66.67 15 36.36 9.09 54.55 11

Sheep/goat 0.00 53.33 46.67 15 18.18 0.00 81.82 11

Poultry 0.00 20.00 80.00 15 18.18 0.00 81.82 11

Equipment 0.00 13.33 86.67 15 9.09 0.00 90.91 11

This is further collaborated by another indicator on economicbenefits. A distribution of total income of households in the member andcomparison groups (Table 41) shows that over one-fourth of the total incomeof households in the comparison group was obtained through traditionalsources such as agricultural wage labour and agriculture. The correspondingproportion was less in the case of households in the member group. Thenew livelihood opportunities in Kolar district such as horticulture and livestockrearing accounted for a larger proportion of the income of households in themember group.


Table 41: Distribution of Total Income (%) by Member andComparison Groups

Sources of income Member group Comparison group

Agricultural wage labourer 10.74 21.21Agricultural labour 4.89 6.32Trees 10.54 2.42Cattle 19.47 20.90Petty business 5.44 15.45Service 48.93 33.70Total amount (in Rs.) 110,361 71,217

This is further corroborated by Table 42. About 60 per cent of thehouseholds in the member group had access to more than three livelihoodsources. On the other hand, a bulk of the households in the comparisongroup had access to just two sources.

Table 42: Distribution (%) of Households by Number ofOccupations

No. of occupation Member group Comparison group

One 0 0Two 40 64Three 20 9Four 13 0Five 27 27All 100 100

In terms of household income, the households in the member groupwere better-off as compared to those in the comparison group. A relativelylarge proportion of households in the comparison group were below thepoverty line earning less than Rs.10,000. About 60 per cent of the householdsin the member group were obtaining more than Rs.30,000 (Table 43).

One of the indicators often used in micro-finance literature to findout the economic benefits has been the proportion of income from the activitysupported by the programme to the total income. It is suggested in thisstudy this is not an useful indicator especially the IGAs undertaken withfinancial assistance from micro-finance programmes help the households totake up some other activities which become important in so far as thehousehold income is concerned.


Table 43: Distribution of Households (%) by Size Class of Income

Size Class (Rs.) Member group Comparison group

<10,000 6.67 36.36

10,000 – 20,000 13.33 18.18

20,000 – 30,000 20.00 27.27

30,000 – 40,000 26.67 9.09

40,000 – 50,000 6.67 0.00

50,000 + 26.67 9.09

TOTAL (no) 15 11

Box 1 shows that the livestock rearing and dairying activitiesundertaken by the households helped Kamalamma to go for well irrigationand purchase of land. Ultimately, it was income from agriculture whichwas significant to the household. If one were to look at economic benefitsfrom the viewpoint of the importance of activities supported by micro-financeprogramme in the household income, dairying becomes insignificant. But,this activity played a key role in enabling the household to move from thephase of vulnerability to security.

Acquisition of Consumer DurablesIn so far as the acquisition of consumer durable such as television,

radio, wall clock, cycle, iron box, gas stove, etc., is concerned, a few of themembers acquired these assets after they became members (Table 44).None of the households in member and comparison groups acquired cycleand gas stove. Households belonging to the comparison group had notacquired radio, TV and iron box after they had become members. In contrast,a significant proportion of households from member group had acquired TV,radio, wall clock, iron box after they had become SHG members. Interestingly,slightly less than half of the households in the member group had acquiredjewellery.

Expenditure on Health and EducationOne may expect that the households step up their expenditure on

food, clothing, health and education, functions and entertainment with araise in income through IGAs undertaken with the help of loans from SHGs.Interestingly, most of the households belonging to member group reported


Table 44: Distribution of Households by Consumption Assets

Assets Member group Comparison group

Acquired Acquired Not Total Acquired Acquired Not Total before after acquired (No.) before after acquired (No.)

Radio 20.00 13.33 66.67 15 36.36 0.00 63.64 11TV 0.00 20.00 80.00 15 18.18 0.00 81.82 11Scooter 0.00 0.00 0.00 15 0.00 0.00 0.00 11Wall clock 13.33 46.67 40.00 15 54.55 9.09 36.36 11Iron box 0.00 6.67 93.33 15 9.09 0.00 90.91 11Gas stove 0.00 0.00 0.00 15 0.00 0.00 0.00 11Jewellery 20.00 46.67 33.33 15 81.82 0.00 18.18 11

an increase in their expenditure on the above except in the case ofentertainment where the proportion of households reporting an increasewas the same in both the groups. Mention should also be made that theproportion was relatively higher in the case of child care, health care andclothing while it was less for food, housing and travel. Only 60 per cent ofthe households in member group reported an increase in expenditure oneducation (Table 45).

Table 45: Households Stating (%) That Their Expenditure HadIncreased After Joining SHG

Food Hous- Cloth- Child Health Entertain- Social Travel Educationing ing ment functions

Membergroup 86.67 80.00 93.33 93.33 93.33 26.67 73.33 86.67 60.00

Comparisongroup 27.27 9.09 9.09 18.18 18.18 27.27 9.09 18.18 18.18

Thus, the membership in the micro-finance groups resulted in positivebenefits to households in terms of expenditure on health and education.This is further supported by the qualitative evidence. Box 1 shows that themember households moved from a situation of vulnerability to security.Similarly, the case of Magbulbee shows that, prior to her joining in the group,she was depending on the community and her household for living. However,after she joined the group, she gradually acquired productive assets todiversify the livelihoods, and was earning a good income in 2000 (Box 2).From the situation of deserted woman without ownership of any productiveassets, she vastly improved her situation.


Box 2: From survival to security

Magbulbee, 35-year old illiterate women, was separated from her husband andwas living in a small hut with her daughter, mother, sister (also separated) andniece. She was married at young age to an agricultural labourer. After the birth ofa female child, her husband became interested in his niece, and ran away with her.Outraged by this incident, Magbulbee lodged a complaint. Her husband, who wasangry, returned to the village, and frequently quarrelled and tortured her. Villageleaders intervened, and thrashed him. After this incident, her husband left thevillage and did not return. Magbulbee stayed with her mother-in-law, and wasreceiving financial support from maternal home. The village leaders advised her tostay with her parents since they found that there was no security for her in herhusband’s house. She came to her native place with her daughter. She could notstay there for a long time due to lack of house, and migrated to T.N. Halli in searchof work.

Magbulbee passed through a phase of vulnerability until she joined the SHG in1992. She contributed small sums of Rs 10 to 20 per month from the wage income.She made use of the opportunities available in the SHG. She took a loan of Rs. 600in 1993 to purchase two sheep and undertook sheep rearing as supplementaryactivity. She gradually increased the number of sheep as she was earning profits.In 2000, she had 20 sheep. She also constructed a hut in 1994. In 1996, shepurchased a cow with the help of loan taken from the bank under NABARD’sbank-SHG linkage programme. She earned Rs. 18,720 from milk selling in 2000.

Her daughter who studied up to fourth standard did not continue her study sinceshe was not interested in her studies. She helps her mother Magbulbee in householdchores. The main source of income for the family is livestock, followed by incomefrom sheep and wages.

Economic Benefits in the Project Area of SanghamitraFrom the project area of Sanghamitra, information was collected

from six groups in Bathinapadu, Kothapet and S. Amaravaram villageslocated in Kanchikacherla mandal of Krishna district. All the three villagesare located in the western part of the district, which is backward as comparedto the eastern part of the district. Table 46 shows that the selected villagesare similar in the following respects: (i) though much of the cultivation inthese villages is rain-fed, a few farmers have well irrigation and/ or drawirrigation water from the river Krishna; (ii) important crops in all these villagesare tobacco, cotton, chillies, groundnut, paddy and greengram; (iii) theagricultural labourers get wage work for about nine months with demandfor labour reaching the peak for three months. During the slack season,they stay at home repairing their huts, attending marriages, visiting relatives,etc., and/ or migrate to the eastern part of the district to work in the paddyfields. The main difference across the villages is size; while Bathinapadu is


Table 46: Some Select Aspects of the Selected Villages

Particulars Bathinapadu Kothapeta S. Amaravaram

Total number of households 142 341 233Important caste groups SCs Kammas, SCs and Artisan Kammas, SCs and Artisan

castes castesImportant crops Tobacco, cotton, chillies, Paddy, tobacco, cotton, Cotton, tobacco, chillies,

greengram and groundnut chillies and greengram groundnut and paddyGovernment facilities School, Gram Panchayat, School, PDS, Public Health School, PDS, PHC and Gram

Public Distribution System Centre (PHC) and Gram Panchayat(PDS) Panchayat

Non-farm employment Petty trades such as selling Petty trades, services such Petty trades, services andopportunities of vegetables, ice and coolie as hotels, and coolie work in quarrying

work in quarrying quarrying

Economic B

enefits of Micro-Finance Program

mes 99

the smallest, Kothapeta is the largest. The second difference is that scheduledcastes (SCs) are the only community residing in Bathinapadu, while in theother villages, upper castes of Kamma and artisan castes reside along withSC households.

The primary data were collected from 53 member households infour older SHGs, in Kothapeta and Bathinapadu villages, and 23 householdshaving membership in two new groups in Seri Amaravaram village. Theold groups are referred as member groups and the new groups as comparisongroups.

Table 47: Basic Details of Households from the Project Area ofSanghamitra

Particulars Member group Comparison group (no = 53) (n = 27)

Distribution (%) of household by landholding size (in acres)Landless 67.92 88.890 - 2.5 28.3 11.112.5 – 5 1.89 0.005 - 10 1.89 0.0010 + 0.00 0.00

Distribution (%) of households by marital statusMarried 86.8 92.6Widowed 11.3 3.7Separated 1.9 3.7Age (in years)20 – 30 11.3 33.330 – 40 28.3 37.040 – 60 54.7 22.260 > 5.7 7.40EducationIlliterate 77.4 74.1Primary school 7.5 7.4Middle school 9.4 11.1High school 3.8 3.7College 1.9 3.7

Access to CreditBetween 1994 and 1999, 53 households in the member group

obtained 406 loans from the group and NGO (Table 48). This implies that,on an average, each member had taken four loans. An interesting aspect isthat the member households had taken loans for a number of activities.


Table 48: Details on Loans Taken by the SHG Members inSanghamitra

Number of loansPurpose 1994 1995 1996 1997 1998 1999 Total

Milch animals 100.0 0.0 0.0 22.7 1.4 1.5 9.4Agriculture 0.0 15.3 15.1 22.7 50.0 35.8 25.4Site purchase/registration 0.0 34.7 0.0 3.0 1.4 37.3 13.1Purchase of sheep 0.0 18.1 0.0 4.5 14.9 0.0 6.7Children’s education 0.0 8.3 4.7 4.5 1.4 1.5 3.9Current/gas 0.0 20.8 13.2 0.0 0.0 13.4 9.4Consumption 0.0 2.8 0.0 4.5 21.6 4.5 5.9Health purpose 0.0 0.0 1.9 9.1 6.8 3.0 3.7Toilet doors 0.0 0.0 52.8 0.0 0.0 1.5 14.0Marriage/functions 0.0 0.0 10.4 28.8 2.7 0.0 7.9Others 0.0 0.0 1.9 0.0 0.0 1.5 0.7Total (Nos.) 21 72 106 66 74 67 406Total loan amount (Rs.)Milch animals 100.0 0.0 0.0 55.9 3.8 0.7 28.7Agriculture 0.0 11.8 20.7 20.5 55.8 58.1 27.9Site purchase/registration 0.0 56.2 0.0 0.6 3.8 19.0 11.6Purchase of sheep 0.0 16.9 0.0 3.1 10.1 0.0 5.4Children’s education 0.0 1.1 5.1 3.6 3.1 4.4 2.8Current/gas 0.0 11.7 11.4 0.0 0.0 7.7 4.3Consumption 0.0 2.4 0.0 1.0 5.7 2.2 2.0Health purpose 0.0 0.0 3.8 5.5 12.4 1.7 4.6Toilet doors 0.0 0.0 42.3 0.0 0.0 4.8 6.7Marriage/functions 0.0 0.0 15.7 9.8 5.3 0.0 5.6Others (repayment of oldloan, house construction,petty shop) 0.0 0.0 0.9 0.0 0.0 1.5 0.3Total (Nos.) 94,500 92,501 88,313 134,142 130,596 68,900 608,952Average loan amount (Rs.)Milch animals 4,500 0 0 5,000 5,000 500 4,605Agriculture 0 991 1,144 1,833 1,970 1,667 1,647Site purchase/registration 0 2,080 0 400 5,000 522 1,337Purchase of sheep 0 1,200 0 1,400 1,200 0 1,222Children’s education 0 167 900 1,600 4,000 3,000 1,081Current/gas 0 720 719 0 0 589 689Consumption 0 1,100 0 433 464 517 520Health purpose 0 0 1,700 1,233 3,240 600 1,880Toilet doors 0 0 668 0 0 3,277 714Marriage/functions 0 0 1,259 692 3,430 0 1,058Others 0 0 400 0 0 1,000 600

Total 4,500 1,285 833 2,032 1,765 1,028 1,500

These were for both income generation and consumption. About 35 percent of the loans had been taken for agriculture, and rearing of milch animals.The purposes for which significant proportion of loans was provided includedconstruction of toilets, site purchase and registration and acquiring gasconnections.


Purchase of Productive AssetsWith access to credit from SHGs, have members improved their

asset base? Table 49 shows that the households in the member as well ascomparison groups had not acquired land after they had become SHGmembers. However, a significant proportion of households from the membergroup acquired milch animals after they had become SHG members. In thecase of other assets, the difference is not very significant.

Table 49: Distribution of Assets by Households by ProductiveAssets




Land 24.53 0.00 75.47 53 11.11 0.00 88.89 27

Milch Animals 5.66 28.30 66.04 53 7.41 0.00 92.59 27

Sheep/Goat 0.00 1.89 98.11 53 0.00 0.00 100.00 27

Poultry 0.00 0.00 100.00 53 3.70 3.70 92.59 27

Animals 0.00 0.00 100.00 53 0.00 0.00 100.00 27

Equipment 1.89 1.89 96.23 53 0.00 0.00 100.00 27

Are households in the member group better-off in terms of sourcesof income? The distribution of households by number of occupations inwhich household members were involved shows that nearly one-third of thehouseholds from the comparison group were involved only in one occupation.This happened to be agricultural labour in most of the cases. The restobtained livelihood from two sources. In contrast, only one-fifth of thehouseholds in the member group depended on one occupation. Interestingly,about one-third of the households in this group obtained livelihood from 3-4sources. This suggests that occupational diversification was more pronouncedamong member group households (Table 50). This was mainly because ofthe support provided to milch-animal rearing activities by the SHGs. Yet,many households could not continue the income generating activities due tolack of marketing facilities and frequent crises such as floods (Box 3).

With occupational diversification, household income also seems tobe higher among households belonging to the member group. Table 51shows that the proportion of the households obtaining less than Rs.20,000was much higher in the comparison group. In contrast, about two-thirds ofthe households from the member group were obtaining more than Rs.20,000of annual income in 2000.


Box 3: Lack of conducive environment for undertaking incomegenerating activities

Forty-year old Madasu Sarojini joined in SHG in 1992. With a loan of Rs. 5000from the SHG in 1997 and her own savings of Rs. 1,000, She purchased a she-buffalo. Since there was no dairy at Bathinapadu, she used to carry the milk to thenearby town. After earning about Rs. 30 per day for 3 years, she sold the buffalofor the same amount that she spent on buying as it became sick. After repayingthe loan, she took another loan of Rs. 1,100 from Sangamitra in 1995 to purchasetwo sheep. She could not retain the sheep as they were frequently facing healthproblems. She sold the sheep after 6 months and repaid the loan amount. Thelivelihood problems, therefore, continued. She had to discontinue the studies ofher son after the high school as the household, consisting of two aged dependants,could not support the education.

Ramala Sarojini joined the SHG formed by Sanghamitra in 1992. Since then sheused to take small loans for the consumption and other emergencies. She has takenRs. 4,500 in 1995 and purchased a she-buffalo. The Buffalo was giving 3 litres perday, and after retaining some milk for household consumption, she was selling 2.5litres per day in the village (on retail basis) since there was no other marketingfacility in the village. She found that the marketing arrangement was not good, andher income from the dairying was only Rs. 30 per day, equivalent to wage income.She sold the buffalo for Rs. 500 of profit and repaid the loan amount. She has alsotaken two more loans in 1995 and 1996 to purchase sheep. After 6 months ofrearing, she sold the sheep for small profit as she was undertaking the activity assupplementary, and did not find sufficient feed. After selling the sheep, she repaidthe loan. With the balance, she purchased gold ring for her grand daughter.

Fifty-year Varakuti Chennakeshavulu belongs to SC community and was living ina small house (constructed by the government) with 9 members at Kothapeta. In1992, she joined the SHG. The savings amount, which was Rs. 15 per month inthe initial stages, has increased to Rs. 30. After taking several loans from the groupfor consumption and other daily needs, she has taken Rs. 5,000 for the purchaseof she-buffalo. Income earned by milk was used for consumption. However,when there was massive floods in the village, all the inhabitants left the village andshe could not take the buffalo with her. She could only take small buffalo withthem. This seriously affected the milch rearing activity.

Table 50: Distribution (%) of Households by Number ofOccupations

No. of occupations Member group Comparison groupOne 21 63Two 43 33Three 26 4Four 10 0All 100 100


Table 51: Distribution (%) of Households by Size Class of Income

Size class(Rs.) Member group Comparison group

<10,000 13.2 7.410,000 – 20,000 20.8 51.920,000 – 30,000 28.3 22.230,000 – 40,000 18.9 14.840,000 – 50,000 9.4 0.050,000 + 9.4 3.7Total (No) 53 27

The higher average household income seems to have had positiveimpact on the households acquiring consumer durables, and incurringexpenditure on food, housing etc. Table 52 shows that none of the householdsin the comparison group acquired radio, TV, scooter, wall clock, iron box,gas stove or jewellery. On the other hand, all the households purchased gasstove through ‘Deepam’ scheme introduced by the government for SHGmembers, while one-third of the households in the member group acquiredTV, about 10 per cent acquired radio and scooter.

Table 52: Distribution (%) of Households by Consumption Assets




Radio 24.5 13.2 62.3 53 7.4 0.0 92.6 27

TV 0.0 32.1 67.9 53 7.4 0.0 92.6 27

Scooter 3.8 9.4 86.8 53 0.00 0.0 100.0 27

Wall Clock 1.9 50.9 47.2 53 40.7 0.0 59.3 27

Iron Box 0.0 5.7 94.3 53 0.00 0.0 100.0 27

Gas Stove 0.0 100.0 0.0 53 0.00 0.0 100.0 27

Jewellery 41.5 5.7 52.8 53 44.4 0.0 55.6 27

Interestingly, over 90 per cent of the households in the membergroup perceived that the expenditure on food, housing, clothing, child careand health care increased after they became SHG members. A relativelylarger proportion of households in the member group had also noted that theexpenditure on entertainment, social functions and education went up (Table53).


Table 53: Households Stating That Their Expenditure HadIncreased after Joining SHG

Food Hous- Cloth- Child Health Entertain- Social Travel Educationing ing ment functions

Member group 96.2 96.2 90.6 90.6 94.3 35.9 34.0 71.7 41.5

Comparisongroup 3.7 0.0 0.0 0.0 3.7 0.0 0.0 3.7 0.0

ConclusionsAn analysis of the economic benefits of micro-finance programmes

on members of SHGs revealed that the condition of households in themember group was better than those in the comparison group in thefollowing respects:" The households in the member group had access to credit facility." The households in the member group were different from those in the

comparison group in terms of total amount saved and number of savingsforms used.

" As far as acquisition of productive assets was concerned, a relativelylarger proportion of households from the member group had acquiredassets such as livestock and land as compared to those in the comparisongroup.

" Most of the households in the member group had access to more thantwo livelihood sources as compared to those in the comparison group.

" Most of the households in the member group obtained more than Rs.20,000 of income in a year. On the other hand, a relatively largerproportion of the households from the comparison group obtained lessthan Rs. 20,000 of annual income.

" The higher income in the case of member households had a favourableimpact on the acquisition of consumer durables and expenditure on food,education and health.

While the micro-finance programme has had positive impact onmember households, there were differences across the project areas. First,a relatively larger proportion of members has acquired productive assets inthe project area of Grama Vikas as compared to those from the projectarea of Sanghamitra. Second, most of the loans and loan amount had beentaken for agriculture and livestock in both the project areas. However, theproportion of loans and amount taken for livestock rearing and agriculturewas high in the case of households in the project area of Grama Vikas.Thus, on the whole, the economic benefits were more pronounced in the


case of households in the project area of Grama Vikas. This can be attributedto the following:

" While the average loan amount obtained by the households in themember group was Rs. 17,893, their counterparts in the Sanghamitraproject area obtained only Rs. 11,000. The low level of fund availablein the project area of Sanghamitra was due to the following: 1) savingsmobilisation had been slow and irregular, and 2) most of the groupshad not been linked to banks under NABARD’s Bank-SHG linkageprogramme. This reduced the availability of funds for the programme.

" In general, the opportunities for undertaking alternative incomegeneration activities seemed to be less in the case of households in theproject area of Sanghamitra. Most of the household members wereinvolved in agricultural labour market. The employment was availableduring a major part of the year, and wage rates were also high. Thus,opportunity cost in undertaking alternative income generating activitieswas high unless the activity happened to be large enough to provideincome offset due to withdrawal from the labour market. With lowlevels of credit fund available at the group and project levels, the memberhouseholds were unable to borrow larger amounts to undertake viablealternative economic activities.

" Improved infrastructure for dairying activity in Kolar influenced manyof the households to take up rearing of milch animals. No suchinfrastructure was available in the project area of Sanghamitra.


CHAPTER VI

SOCIAL BENEFITS OF MICRO-FINANCE PROGRAMMES

IntroductionMicro-finance programmes are expected to contribute to the

empowerment of women in the following ways. First, the credit for womento undertake IGAs enables them to have access to resources and income.This leads to enhanced decision-making within the household, and thereby,enable them to spend income on health, education, consumption, etc.Second, undertaking IGAs results in women coming into contact withorganisations providing support services (such as banks, co-operatives, milkco-operative societies, etc.), and this enhances their ability to deal with theinstitutions etc. Third, when women undertake IGAs, the process helpsthem to interact with private service providers such as input suppliers andmarketing agencies. This is expected to result in the mobility of women.Fourth, mobility gradually enables them to play an active role in social, politicaland economic spheres affecting the self, household and community. In this,the people’s institutions promoted by the NGOs give them a helping hand.Fifth, the organisations (SHGs, etc.) promoted for the people, especiallypoor women, enable them to develop leadership qualities, enhance self-management, and facilitate them to be self-reliant. These also strengthenthe individual and collective decision-making, and bargaining.

The main objective of this chapter is to examine the social benefitsaccruing to the members of micro-finance groups. The indicators chosenfor this analysis are decision-making within the households, actual outcomesrelating to education, knowledge relating to importance of education,importance of education for girl children and age at which girls should marry,etc.

Social Benefits to Member Households in the Project Area of GramaVikas

We noted in Chapter V that the households in the member groupwere better-off as compared to those in the comparison group. This becamepossible because of access to credit, which enabled them to undertakeincome-generating activities, diversify the occupational pattern, and movefrom survival to security. The results show that the occupational diversificationwas more pronounced in the case of households belonging to member group.Further, a larger proportion of households in the member group acquiredproductive assets such as livestock and land. This enabled them to undertakeIGAs and helped them obtain income larger than those in the comparison

group. With higher household income, the members were able to step upexpenditure on food, clothing, child and health care and education. Allthese are household level indicators, and it is assumed that they have hadequal impact on all members of the household, including those in the micro-finance group. These give rise to some pertinent questions: Do the micro-finance programmes provide social benefits to the members of micro-financegroups? Do these programmes have positive influence on the decision-making capacity of women? If yes, does it get reflected in concretedevelopment outcomes such as educational levels? What do members thinkabout girl education, age at which girls should marry, participation in politicalinstitutions, etc?

Decision-Making Within the HouseholdAs a proxy of improved decision-making, we look at the control

over income. Here, two types of decisions are taken into account. Thefirst type refers to large purchases made in the last one year for the household,for children and for herself. These include purchase of kitchen utensils,clothes for children, sarees for members and provision for the household.The second type refers to important decisions relating to productive activities,education and reproductive activities made in the last five years. Theseinclude house repair/renovation, purchase of milch animals, leasing in/out ofland, buying of land and other assets, family planning, education of boys andgirls.

Control Over IncomeWhen asked whether women were able to independently decide on

the purchase of kitchen utensils, nearly 87 per cent of women in the membergroup gave affirmative answer as compared to about 65 per cent in thecomparison group (Table 54). With regard to the purchase of clothes forchildren and themselves, and provisions for the households, the proportionof women stating that they had independently decided was less in the caseof both the groups. The proportions of women independently deciding onthese purchases were relatively higher in the member group as comparedto the comparison group. This indicates that since women from the membergroup had accessed loans for the purchase of milch animals and other incomegenerating activities, their control over income seemed to have improved.It needs to be, however, noted that there was not much difference betweenmember and comparison groups in so far as the proportions of womenindependently deciding about these purchases.


Table 54: Distribution of Households by Large Purchases Made inOne Year

(in percentages)

Type of Purchase Member group Comparison groupYes No Total Yes No Total

(No.) (No.)

Kitchen utensils 86.67 13.33 15 63.64 36.36 11Cloth for children 46.67 53.33 15 45.45 54.55 11Sarees 53.33 46.67 15 45.45 54.55 11Family’s daily food 53.33 46.67 15 36.36 63.64 11

Involvement in Major DecisionsDo women involve in any decisions relating to major aspects of the

household? The literature on micro-finance suggests that with gradualeconomic improvement and years of association with micro-finance groupsresulting in empowerment process, women will be in a position to takedecisions on major events in one’s own life. These events can be houserepair/renovation, purchase of productive assets such as milch animals andother livestock, leasing in/out of land, buying land, family planning, educationof girls and boys. The data collected from members have been presented inTable 55, which shows that none of the women from the comparison grouptook independent decisions on the above expect a few in the case of familyplanning. In the case of women belonging to the comparison group, most ofthe households were not even involved in the decisions relating to houserepair/renovation, buying of land, leasing in/out of land, etc., in the last fiveyears. This, first of all, corroborates the earlier finding that the involvementof households belonging to the comparison group in the purchase of productiveassets and participation of income generating activities was not as active asit was the case with households from the member group. Whenever thehouseholds in the comparison group were involved in these decisions, it wasthe husband who took the decision. The pattern was different in the case ofwomen from the member group, albeit marginally. The proportion ofhouseholds buying milch animals, land from the market, taking decisionsrelating to family planning and sending girls to school was higher in the caseof member group as compared to the comparison group in the last fiveyears. Table 55 shows that, in the last five years, over 90 per cent of thehouseholds in the member group took decisions relating to the purchase ofmilch animals and other livestock, while 80 per cent took decisions relating

Social Benefits of Micro-Finance Programmes 109

to family planning. The proportion of households involved in decisions relatingleasing in land and education was comparatively less; but, still the proportionwas larger than that in the case of households in the comparison group.Some of the women belonging to households in the member group statedthat they themselves had taken decisions relating to family planning andpurchase of milch animals. None of the women from this group tookindependent decision with regard to house repair, leasing in land and educationof boys and girls.

Thus, while women took independent decisions with regard to largepurchases for the household, they did not get involved in major events suchas purchase of land, family planning, etc. This is interesting since themembership of women in the micro-finance programmes resulted in assetbuilding, diversification of occupations and income increase. Then, can oneconclude that the micro-finance programmes do not have any social benefitsin terms of greater control over income to women belonging to householdsin the member group? For micro-finance programmes to lead to greatersocial benefits to members, men should also be sensitised in gender relations.As discussed in Chapter IV, the organisation has been involving men in thedevelopmental activities, and also providing training on gender relations. Itappears that micro-finance programmes, though lead to economic benefits,may not lead to social benefits. As Box 4 shows, the members do notrealise the link between economic and social benefits of the micro-financeprogrammes the way it was argued at the beginning of the chapter. Thecase narrated in Box 4 suggests that the member acknowledges the rolethat micro-finance played in bringing economic security in her life. But, shedid not care about the control over income; for her, her husband was thebest person to make the decisions. She also allowed her husband to marryfor the second time. This raises two sets of issues. To what extent, this canbe interpreted as a process of dis-empowerment? Second, has this somethingto do with flaws in the implementation methodology?

Literacy Rates Between the GroupsLiteracy rates were higher in the case of household members

belonging to the comparison group. This held true for both males and females.However, there was a qualitative difference in so far as high school andhigher education was concerned. A larger proportion of household membersfrom the member group had high school and college education. Thecorresponding proportions were less in the case of those from the comparisongroup (Table 56). This suggests that it might not be methodologically soundto look at literacy rates because these were unlikely to be influenced by the


Table 55: Distribution of Household Members by Their Involvement in Major Decisions in the Last FiveYears

(in percentages)

Type of decision Member group Comparison groupOwn Husband Family Decision Total Own Husband Family Decision Total

members not taken (No.) members not taken (No.)

House Repair/renovation 0.00 26.67 13.33 60.00 15 0.00 18.18 9.09 72.73 11Milch animals/goat 13.33 40.00 40.00 6.67 15 0.00 36.36 9.09 54.55 11Leased in andleased out 0.00 26.67 20.00 53.33 15 0.00 0.00 0.00 100.00 11Buying landand other assets 6.67 0.00 13.33 80.00 15 0.00 9.09 0.00 90.91 11Family planning 26.67 40.00 13.33 20.00 15 9.09 63.64 0.00 27.27 11Girl’s education 0.00 13.33 6.67 80.00 15 0.00 36.36 0.00 63.64 11Boy’s education 0.00 26.67 20.00 53.33 15 0.00 45.45 9.09 45.45 11

Social Benefits of M

icro-Finance Programm

es 111

SHG membership especially when the membership period was not verylong, and in the event of women joining the group after certain age group. Itis, therefore, important to look at school attendance by age groups betweenmember and comparison groups.

Box 4: No Connection Between Micro-Finance and WomenEmpowerment

Thirty-five year old Sakamma joined the SHG in 1992 mainly to contribute savings,which, she hoped, would bring in development in her household. Her hopes werenot belied. She availed 3 loans - Rs. 10,000 for repair of the house, Rs. 6,000 forpurchasing hybrid cow, Rs. 3,000 to plant mango saplings in 3 acres of land andRs. 360 for purchasing a storage bin. She repaid all the loans except Rs. 3,000,taken as a long term loan and this was not overdue at the time of the survey.According to her, micro-finance benefited her both economically and socially. Anaccumulated savings amount of over Rs. 2,000 considered to be helpful to performmarriages, while the loan for purchase of cow helped the household to diversifyoccupation and in achieving increased income. According to her, “I could add anadditional cow to the one that I bought with the help of SHG loan. I will sell 18litres of milk in the local dairy”. She also felt that she could learn hygiene conditionand cleanliness. She stated that she enjoyed attending fortnightly meetings whereshe could learn different things. She also brought jewellery for herself.She did not seem to be very much interested in gaining control over income. Shestated that her husband managed the household affairs. This was all right with her.Her husband married for the second time. When asked whether she would protestif a man beating or divorcing his wife, her response was that her husband wouldnot tolerate if she interfered in such things. When asked whether SHG membershiphad any social benefit for her, she looked baffled and stated that there was noconnection between these two.

Table 56: Distribution (%) of Household Members by Educationand by Sex

Education level Member group Comparison groupMale Female Total Male Female Total

Illiterate 27.66 72.22 46.99 38.24 44.83 41.27Primary 14.89 11.11 13.25 17.65 34.48 25.40Middle school 19.15 5.56 13.25 17.65 6.90 12.70High school 23.40 2.78 14.46 11.76 3.45 7.94College 6.38 0.00 3.61 2.94 3.45 3.17Degree 4.26 0.00 2.41 0.00 0.00 0.00TCH training 0.00 2.78 1.20 0.00 0.00 0.00Children 4.26 5.56 4.82 11.76 6.90 9.52Total 100.00 100.00 100.00 100.00 100.00 100.00Total (no) 47 36 83 34 29 63


Table 57 provides a distribution of all the household members by levels ofeducation and age groups for both member and comparison groups. It canbe observed that a larger proportion of illiterates could be found in the agegroup of above 25 years in both member and comparison groups. Second,the proportion of illiterate household members was relatively high in the agegroups of 6-14 and 15-25 years in the case of comparison group. Third, asnoted earlier, the proportion of household members going to school orcompleting some school or college education seemed to higher in the caseof member groups. However, one cannot observe striking differencesbetween member and comparison groups.

Table 57: Distribution of Household Members by Education andAge Groups

Education Member group Comparison group

level < 5 6 - 14 15 - 25 25 > Total < 5 6 to 14 15 - 25 25 > Total

Illiterate 0 1 6 32 39 0 2 5 19 26

0.00 2.56 15.38 82.05 100.00 0.00 7.69 19.23 73.08 100.00

Primary 2 6 0 3 11 5 7 1 3 16

18.18 54.55 0.00 27.27 100.00 31.25 43.75 6.25 18.75 100.00

Middle school 0 4 4 3 11 0 5 2 1 8

0.00 36.36 36.36 27.27 100.00 0.00 62.50 25.00 12.50 100.00

High school 0 1 7 4 12 0 0 5 0 5

0.00 8.33 58.33 33.33 100.00 0.00 0.00 100.00 0.00 100.00

College 0 0 2 1 3 0 0 1 1 2

0.00 0.00 66.67 33.33 100.00 0.00 0.00 50.00 50.00 100.00

Degree 0 0 0 2 2 0 0 0 0 0

0.00 0.00 0.00 100.00 100.00 0.00 0.00 0.00 0.00 0.00

TCH training 0 0 1 0 1 0 0 0 0 0

0.00 0.00 100.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00

Children 4 0 0 0 4 6 0 0 0 6

100.00 0.00 0.00 0.00 100.00 100.00 0.00 0.00 0.00 100.00

Total (No.) 6 12 20 45 83 11 14 14 24 63

Total 7.23 14.46 24.10 54.22 100.00 17.46 22.22 22.22 38.10 100.00

Note: Italicised figures represent percentages.

We have, therefore, worked out the proportion of literate and thosepersons in the school/literate to total number of persons in each of the agegroups in Table 58, which shows interesting patterns. First, the proportionof household members in school/literate to total household members was 46per cent in the case of member group as against 40 per cent in the case of


the comparison group. Second, there was inverse relationship between agegroups and the proportion of household members in school/literate. Thisimplies that the households in both the groups were giving importance toeducation. The fact that the proportions for the age groups of 6-14 and 15-25 were higher for the member group suggests that the households in thisgroup gave relatively more importance to education.

Table 58: Household Members (%) in School or Literates in theProject Area of Grama Vikas

Age group Member group Comparison group

< 5 0 06 – 14 92 8615 – 25 70 6425 and above 24 17All age groups 46 40

This discussion shows that although women members were notdirectly involved in decisions relating to the education of boys and girls,the education status seems to be qualitatively different in the case of membergroup. This suggests that there were other forces which were at work inimproving the knowledge levels among the household members of themember group. In the case of Grama Vikas, the following interventionsoutside the micro-finance programmes, and linkages between micro-financeand child education contributed to giving importance to education:" First, the NGO had set up an anganawadi centre in each of the villages

to provide education and playing facilities for infants and very smallchildren. This was intended as a facility which could be availedvoluntarily by women members, so that their workload was reduced,and they were free to undertake income generating activities. However,the organisation had made it mandatory to send their children to thesecentres, and linked attendance with the provision of benefits from thegovernment and the NGO. This seems to have had a positive impacton school education.

" Second, the organisation also initiated child development programmesin the project villages. It had been made mandatory for the children ofthe member households to attend the child development programmesinitiated by the organisation. Participation in these programmes hadbeen linked to access of loans from the group, federation and banks.


" Third, awareness was continuously provided to members on theimportance of school education.

Perceptions on Importance of Education and Marriage AgeThere is a need to examine the evidence on aspects relating to the

value attached to sending children to school and whether there are anydifferences in the perception of members on sending children to the school.When asked a question on reasons why children were sent to school, amajority of the women from both the groups felt that school education wouldhelp in obtaining employment (Table 59). Only a few of them stated thatschool education brought in awareness and literacy. However, many ofthem were aware that obtaining employment was a difficult proposition.

Table 59: Reasons for Sending Children to School (The ProjectArea of Grama Vikas)

(in percentages)


To get employment 60.00 81.82Awareness 13.33 18.18Literacy 26.67 0.00Do not know 0.00 0.00Not stated 0.00 0.00Total (No) 15.00 11.00

It is in this context that the perception of up to what age boys andgirls should be sent to schools and colleges become important. Between 60and 70 per cent of the women belonging to member and comparison groupsstated that they would like to send girls up to 10th class, i.e., up to the age of14-15 years (Table 60). Only a few women from each group stated that thegirls would be sent to pursue their education as per their desire. This wasstrikingly different in so far as the statements on boys were concerned(Table 61). Most of the members stated that the boys could pursue educationaccording to their wish and up to the time that they could obtain job. Asignificant proportion of women from both the groups stated that girls shouldbe married soon after they attained puberty. It, therefore, appears thatsocietal expectations on the age at which girls should be married and whetherwomen could undertake salaried employment determined the parentaldecision on whether the girl should go to school or not. The obvious conclusion


is that the SHG membership may not have much impact on the value attachedto children’s education (especially girls). The observed differences in schoolattendance between member and comparison groups are to be, therefore,attributed to factors other than the micro-finance.

Table 60: Perception on up to What Age Girls Should Study inGrama Vikas Project Area

(in percentages)

Years Member group Comparison group

< 14 13 014 – 18 60 6419 – 21 20 1821 to 30 0 0According to their desire 7 9Do not know 0 9Total (no) 15 11

Table 61: Perception on up to What Age Boys Should Study inGrama Vikas Project Area

(in percentages)Years Member group Comparison group

< 14 13.33 0.0014 – 18 60.00 63.6419 – 21 20.00 18.18According to their desire 6.67 9.09Do not know 0.00 9.09Total (no) 15 11

RightsThe general expectation has been that SHG membership would

enable women to participate in different political institutions (such as grampanchayat) at the village level and help them move away from isolationfrom these institutions to participation and inclusion. Several questions wereasked to find out whether SHG membership had made any difference totheir perceptions on and participation in political institutions.

Almost all the women belonging to both groups were participatingin the electoral process but a majority of them were not aware for whichpolitical body did they cast their votes (Table 62). Between 60 to 80 per


cent of the members belonging to both the groups did not listen to radio orwatch TV for obtaining news. None of them was aware of the name of thePrime Minister or Chief Minister. Only one of the members could tell us thename of the Prime Minister. None of them ever thought of contesting anygrama panchayat election. However, more than half of them thought thatwomen coming to power would help women although they could not tell theexact ways in which it would help. All these qualitative statements indicatethat the SHG membership had not really contributed to gaining awarenesson rights that the women had and how to utilise these rights.

Table 62: Comparison between Members and Non-Members withRegard to Political Participation

(in percentages)

Particulars Member group Comparison group

A. Did you vote in the recent election?Yes 100.00 90.91No 0.00 9.09Total 15 11B. If yes, which election?Mandal panchayat 13.33 0.00Member’s elections 6.67 0.00Big elections 6.67 0.00Elder’s elections 0.00 9.09Grama panchayat 0.00 9.09Minister’s election 6.67 0.00Election for the parliamentand gram panchayat 0.00 9.09Do not know 66.67 72.73Total 15 11

Social Benefits to Member Households in the Project Area ofSanghamitra

In this section, we take up the same set of questions relating tosocial benefits to members in the project area of Sanghamitra. Here also,the households belonging to the member group were better-off as comparedto those in the comparison group in respect of the acquisition of assets,occupational diversification and expenditure on health and education.


Did this improve the control of women members on income? As inthe case of the project area of Grama Vikas, control over income has beentaken as a proxy of improved decision-making. Here, two types of decisionsare taken into account. The first type refers to large purchases made in thelast one year for the household, for children and for herself. Second typerefers to important decisions relating to acquisition of productive assets,education and reproductive activities made in the last five years. Between66 and 75 per cent of the women in the member group stated that they tookindependent decisions on the purchase of kitchen utensils, clothes for childrenand sarees for self as against 22 to 56 per cent of women in the comparisongroup (Table 63). Thus, the proportions of women independently decidingon these purchases were relatively higher in the member group as comparedto the comparison group. This indicates that since women from the membergroup had accessed loans for the purchase of milch animals and other incomegenerating activities, their control over income seemed to have improved.

Table 63: Distribution of Households (%) by Large PurchaseMade in One Year (Sanghamitra)

Type of purchase Member group Comparison group Yes No Total Yes No Total

Kitchen utensils 66.04 33.96 53 44.44 55.56 27Cloth for children 68.67 31.33 53 22.22 77.78 27Sarees 75.47 24.53 53 55.56 44.44 27Family’s daily food 60.38 39.62 53 51.85 48.15 27

Involvement in Major DecisionsWhen it comes to decisions on major events such as house repair/

renovation, purchase of productive assets such as milch animals and otherlivestock, leasing in/out of land, buying land, family planning, education ofgirls and boys, the pattern was more or less similar to that in Grama Vikas.Table 64 reveals that none of the women from the comparison group tookindependent decisions on the above expect a few in the case of girl education.In the case of the comparison group, most of the households were not eveninvolved in the decisions relating to house repair/renovation, purchase ofmilch animals and livestock, buying of land, leasing in/out land, and educationof boys and girls in the last five years. This corroborates the earlier findingthat the involvement of households belonging to the comparison group in thepurchase of productive assets and participation of income generating activities


was not as active as it was the case with households from the membergroup. Whenever the households in the comparison group were involved inthese decisions, it was the husband who took the decision. The pattern wasdifferent in the case of women from the member group, albeit marginally.The proportion of households involving in these decisions was relativelylarge in most of the cases except in the case of land purchase. In the lastfive years, over 60 per cent of the households in this group took decisionsrelating to family planning and about 40 per cent in the purchase of milchanimals and other livestock. Some of the women members from this groupstated that they had taken independent decisions in the case of family planning,purchase of milch animals, buying of land and house repair. None of thewomen from this group took independent decision with regard to leasing inland and education of boys and girls.

This suggests that while women took decisions with regard to largepurchases for the household, the same was not the case with regard todecisions on major events in the household. It would be, therefore, interestingto see whether this lack of autonomy had any impact on developmentoutcomes. We took education as a proxy of development outcomes.

Literacy Rates Between the GroupsOf the 244 household members belonging to the member group,

nearly 46 per cent were literate. On the other hand, the literacy rate amonghouseholds in the comparison group was nearly 54 per cent. Thus, literacyrates were higher in the case of household members belonging to thecomparison groups in the project area of Sanghamitra. This held true forboth males and females in this group. However, there was a qualitativedifference in so far as high school and higher education was concerned. Alarger proportion of household members from the member group had highschool and college education. Some of the household members in the membergroup even had technical and post-graduate education. The correspondingproportions were less in the case of those from the comparison group (Table65). As noted earlier, it may not be methodologically sound to look at literacyrates because these are unlikely to be influenced by the SHG membershipespecially when the membership period is not very long, and in the event ofwomen joining in the group after certain age group. It is, therefore, importantto look at school attendance by age groups between member and comparisongroups.


Table 64: Distribution of Members by Their Involvement in Major Decisions and by Type of Groups in theLast Five Years

(in percentages)

Type of decision Member group Comparison groupOwn Husband Family Decision Total Own Husband Decision Total

members not taken (No.) not taken (No.)

House repair/renovation 1.89 15.09 1.89 81.13 53 0.00 11.11 88.89 27Milch animals/goatfor profits 1.89 30.19 3.77 64.15 53 0.00 7.41 92.59 27Leased in and leasedout land 0.00 26.42 1.89 71.70 53 0.00 3.70 96.30 27Buying of land andother assets 1.89 3.77 0.00 94.34 53 0.00 0.00 100.00 27Family planning 7.55 52.83 0.00 39.62 53 0.00 77.78 22.22 27Girl’s education 0.00 15.09 0.00 84.91 53 3.70 7.41 88.89 27Boy’s education 0.00 18.87 0.00 81.13 53 0.00 11.11 88.89 27



erment of W

omen

Table 65: Distribution (%) of Household Members by Educationand by Sex in the Project Area of Sanghamitra

Education level Member group Comparison groupMale Female Total Male Female Total

Illiterate 31.82 62.50 45.90 46.48 63.64 53.97LKG/UKG/Primary 24.24 11.61 18.44 8.45 16.36 11.90Middle school 17.42 11.61 14.75 18.31 5.45 12.70High school 9.85 3.57 6.97 11.27 3.64 7.94College 3.03 2.68 2.87 1.41 0.00 0.79Degree 0.00 0.89 0.41 2.82 0.00 1.59TCH Training/Technical 4.55 0.00 2.46 0.00 0.00 0.00University 0.76 0.00 0.41 0.00 0.00 0.00Children 8.33 7.14 7.79 11.27 10.91 11.11Total 132 112 244 71 55 126

Table 66 provides a distribution of all the household members bylevels of education and age groups for both member and comparison groups.It is observed that a larger proportion of illiterates could be found in the agegroup of above 25 years in both member and comparison groups. Second,the proportion of illiterate household members was relatively high in the agegroups of 6-14 and 15-25 years in the case of comparison group. Third, asnoted earlier, the proportion of household members going to school orcompleting some school or college education seemed to be higher in thecase of member groups. However, one could not observe any markeddifferences between member and comparison groups in this regard.

The proportion of members in school/literate in each of the agegroups (Table 67) shows the following. First, the proportion of householdmembers in school/literate to total household members was 47 per cent inthe case of member group as against to 35 per cent in the case of comparisongroup. Second, there was inverse relationship between age groups and theproportion of household members in school/literates. This implies that thehouseholds in both the groups were giving importance to education. Thefact that the proportions for the age group of 6-14 and 15-25 were higherfor the member group suggests that the households in this group gaverelatively more importance to education.


Table 66: Distribution of Household Members by Education andAge Groups in the Project Area of Sanghamitra

Education Member group Comparison group

level < 5 6 - 14 15 - 25 25 > Total < 5 6 to 14 15 - 25 25 > Total

Illiterate 0 9 23 80 112 0 12 24 32 68

0.00 8.04 20.54 71.43 100.00 0.00 17.65 35.29 47.06 100.00

LKG/UKG/

Primary 0 28 4 13 45 0 11 2 2 15

0.00 62.22 8.89 28.89 100.00 0.00 73.33 13.33 13.33 100.00

Middle school 0 11 20 5 36 0 3 7 6 16

0.00 30.56 55.56 13.89 100.00 0.00 18.75 43.75 37.50 100.00

High school 0 1 13 3 17 0 1 4 5 10

0.00 5.88 76.47 17.65 100.00 0.00 10.00 40.00 50.00 100.00

College 0 0 6 1 7 0 0 0 1 1

0.00 0.00 85.71 14.29 100.00 0.00 0.00 0.00 100.00 100.00

Degree 0 0 1 0 1 0 0 2 0 2

0.00 0.00 100.00 0.00 100.00 0.00 0.00 100.00 0.00 100.00

TCH Training/

Technical 0 0 6 0 6 0 0 0 0 0

0.00 0.00 100.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00

University 0 0 1 0 1 0 0 0 0 0

0.00 0.00 100.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00

Children 18 1 0 0 19 14 0 0 0 14

94.74 5.26 0.00 0.00 100.00 100.00 0.00 0.00 0.00 100.00

Total (no) 18 50 74 102 244 14 27 39 46 126

Total 7.38 20.49 30.33 41.80 100.00 11.11 21.43 30.95 36.51 100.00

Note: Italicised figures represent percentages.

Table 67: Household Members (%) in School or Literates in theProject Area of Grama Vikas

Age groups Member group Comparison group

< 5 0 06 – 14 82 5615 – 25 69 3825 and above 22 30All age groups 47 35

This discussion shows that although women members were notdirectly involved in decision-making relating to education of boys and girls,


the education status seems to be qualitatively different in the case of membergroup. This suggests that there are other forces which are at work inimproving the knowledge levels among the household members of the membergroup. In the case of Sanghamitra, an important reason is awareness andeducation imparted in group meetings. This is demonstrated by the case ofAugustine (Box 5). This case highlights the need to sensitise men in mattersrelating to girl education. Further, support to education was provided by thegroup through giving loans towards school fees, uniforms, etc.

Box 5: Augustine’s Fight to Educate Her Daughter

Augustine, aged around 45 years, is an illiterate member of oldest SHG inBathinapadu village. She could not get education because of poverty of herparents, and was married at an early age. She learnt how to put her signature in thegroup. She stated that the importance of education became very evident afterjoining the group. As she was holding a leadership position in the group, she wasrequired to travel to government offices to obtain resources for the group. Shecould not read the destination of buses, felt very handicapped in her interactionswith officials (who would often say what do you illiterate know of governmentrules and regulations) and in undertaking leadership responsibilities. She, therefore,harboured the idea of providing good education to her daughter. When her daughtercompleted school education, her husband started to suggest that she be discontinuedfrom studies and married off. Augustine put her foot down, and declared that shewould provide education whatever may be the consequences. Her husband alsobecame adamant and declared that he would not support her (both financially andin other respects) in admitting the daughter into the college. Augustine discussedthe matter with group members, obtained a loan to admit her in the college and hasbeen supporting her in education only through her own earnings. When this wasbeing discussed, Augustine’s husband was also there, and was still defending hisposition.

Perceptions on Importance of Education and Marriage AgeThe parental expectations on the purpose of the education play an

important role in children education. There is, therefore, a need to examinethe evidence on aspects relating to the value attached to sending children toschool and whether there were any differences in the perception of memberson sending children to school. When asked a question on reasons whychildren were sent to school, a majority of women from both the groups feltthat school education would help in obtaining employment (Table 68). Onlya few of them stated that school education brought in awareness and literacy.However, the proportion of women stating that children should be sent toschool for education and awareness was high in the member group ascompared to their counterparts in the project area of Sanghamitra as wellas those in the comparison group. The discussions with member households


revealed that many of them were aware that obtaining employment was adifficult proposition, and this came in the way of sending children (especiallyboys) to the school.

Table 68: Reasons for Sending Children to School (The ProjectArea of Sanghamitra)

(in percentages)


To get employment 54.72 59.26Awareness 15.09 14.81Literacy 16.98 7.41Do not know 7.55 3.70Not stated 5.66 14.81Total (no) 53 27

It is in this context that the perception of up to what age boys andgirls should be sent to schools and colleges become important. Between 78and 81 per cent of the women belonging to member and comparison groupsstated that they would like to send girls up to 10th class, i.e., up to the age of14-15 years (Table 69). None of the women in either of the two groupsstated that the girls would be sent to pursue their education as per theirdesire. This was strikingly different in so far as the statements on boyswere concerned (Table 70). Most of the members stated that boys couldpursue education according to their wish and up to the time that they couldobtain job.

Table 69: Perceptions on up to What Age Should Girls Study inthe Project Area of Sanghamitra

(in percentages)


< 14 3.77 7.4114-18 81.13 77.7819-21 11.32 14.81Do not know 3.77 0.00Total (no) 53 27


Table 70: Perceptions on up to What Age Should Boys Study inthe Project Area of Sanghamitra

(in percentages)


14-20 13 1921-30 13 7According to their willand interest 56 63Until they complete thestudies 9 4Do not know 9 7Total (no) 53 27

Participation in Political Institutions in the Project Area of SanghamitraThe information on whether SHG membership had made any

difference to their perceptions on and participation in political institutions inthe project area of Sanghamitra is analysed below.

Almost all the women belonging to both groups were participatingin the electoral process but a majority of them were not aware for whichpolitical body did they cast their votes. This suggests lack of clear-cutawareness of the importance of different types of political institutions. About38 per cent of the women from the member group stated that they listenedto radio or watched TV for obtaining news as against only 4 per cent ofwomen in the comparison group. Interestingly, nearly 72 per cent of thewomen from the comparison group could tell the name of the Chief Minister,while 15 per cent could tell the names of both the Prime Minister and theChief Minister. The corresponding proportions in the case of women in thecomparison group were low at 55 and 4 per cent, respectively. About 6 percent of the women in the member group thought of contesting for the grampanchayat as against none in the case of the comparison group. A majorityof the women stated that women coming to power would help them as theyunderstood the gender issues much better than men.


Table 71: Comparison Between Member and Comparison Groupswith Regard to Political Participation (The Project Area of

Sanghamitra)(in percentages)


A. Did you vote in the recent electionYes 100.00 100.00No 0.00 0.00Total (no) 53 27B. If yes, which election?Panchayat 9.43 3.70Assembly 13.21 11.11Parliament 1.89 3.70Assembly & Parliament 3.77 0.00Panchayat & Parliament 1.89 0.00Assembly & Panchayat 3.77 3.70Do not Know 64.15 74.07Mandal 1.89 3.70

Total (no) 53 27

ConclusionsIn this chapter, we have examined the social benefits of micro-

finance programmes in the project areas of Grama Vikas and Sanghamitra.While there were significant economic benefits for members of micro-financegroups, the social benefits did not appear to be very significant. The decision-making was mostly confined to small and large purchases for the household,self and children. A majority of the women, even after years of membershipin the group, did not participate in decision-making relating to house repair,purchase of land, productive assets, education of boys and girls, etc., asthese areas were considered to be the domain of men in the household.

The educational levels of members in the households belonging tothe member group were substantially better than those in the comparisongroup. However, a significant proportion of women from both the groupsstated that girls should be married soon after they attained puberty. Mostof the women from both member and comparison groups stated that theywould give unlimited freedom for boys to pursue their education. It, therefore,appears that the societal expectations on the age at which girls should marriedand whether women could undertake salaried employment determined the


parental decision on whether the girl should go to school or not. The obviousconclusion is that the SHG membership may not have any significant bearingon the value attached to children’s education (especially girls). The observeddifferences in school attendance between member and comparison groupsare to be, therefore, attributed to factors other than the micro-finance. Further,the interventions other than the micro-finance, linkages between micro-finance and education programmes and sensitisation of men are requiredfor the micro-finance programmes to lead to substantial social benefits.

Years of membership in micro-finance groups has made onlymarginal difference in so far as the participation of women in the politicalinstitutions, and their awareness on who were important political leaders atthe time of the survey. In this respect, the women in the comparison groupfrom the project area of Sanghamitra were relatively better. But, it is notclear to what extent this could be attributed to generally higher levels ofawareness in Krishna district or to micro-finance groups. The qualitativeevidence on participation in political institutions indicates that the SHGmembership had not really contributed to gaining awareness on rights thatthe women had and how to utilise these rights.


CHAPTER VII

SUMMARY AND CONCLUSIONS

Poverty, as a concept, describes the general condition of peoplewhich encompasses many aspects of disadvantages. However, whatprecisely are these disadvantages are debated. Poverty is often related toinadequate incomes. Dreze and Sen (1989: 15) describe poverty as a severefailure of basic capabilities. Chambers (1995) notes that five clusters ofdisadvantages (lack of assets, physical weakness, isolation, vulnerabilityand powerlessness) characterise the poor in rural areas.

Thus, to be poor implies: i) an inability to obtain basic needs (food,shelter, health, etc.) as a consequence of low income and insufficient accessto productive resources and assets; ii) lack of opportunities to utilise humanresources owing to inadequate access to education and health care; iii)isolation owing to physical conditions and/or inadequate education; iv)lack of status and power, making it difficult to influence one’s own situationand break out of poverty; and v) a high degree of vulnerability owing tolack of productive assets, exposure to natural disasters, etc. Poverty inIndia has ethnic, caste and gender dimensions.

A distinction between poverty alleviation and reduction, therefore,becomes pertinent. Poverty alleviation is a short-term improvement of thepoor’s capital endowment. Poverty reduction is a long-term elimination ofthe poor’s dependency on social relations, and of vulnerability with respectto changes in their environment (Pedersen, 1998).

Four dimensions of poverty can be identified: lack of assets,resources, knowledge and rights. Assets cover material possessions, whileresources cover access to credit, extension, education, health, drinking water,etc. Knowledge is essentially information that shapes the cognitive world,ranging from technology to political ideas. And, finally, rights embrace thesocial, economic and political spheres falling in the legal and traditional domain(Pedersen and Webster 1998:5).

Poverty alleviation covers providing material possessions andopportunities to obtain income to meet the basic needs. Poverty reductionimplies sustainable alleviation of poverty, covering all the four dimensions.Poverty alleviation is an essential pre-condition required for povertyreduction. Thus, the state should provide pre-conditions required for povertyreduction (such as infrastructure covering irrigation, extension services,marketing facilities, educational and health facilities, legal environment). Atthe same time, local bodies such as NGOs, micro-finance groups, etc., are

needed to enable the poor to represent their interests to the decision-makingbodies and secure their interests.

The Indian government and donor agencies assign importance tomicro-finance in poverty reduction. Micro-finance implies providing poorpeople in rural and urban areas, especially women, with savings and creditfacilities for setting up or expanding business, for investing in self-employmentactivities and for increasing household security. The popularity of micro-finance programmes in India has been, in part, because of the belief thatthey will lead to poverty reduction and empowerment of women in thefollowing manner:

1. Micro-finance programmes enable the poor to save, and thereby,improve their confidence and household security.

2. Improved ability of the poor women to borrow for consumption andproduction purposes leads to decreased dependence on moneylenders.Increased credit availability for consumption enables them to have foodsecurity. Access to credit for health, education, etc., serves to achievethe social goals.

3. Increased credit availability for production purposes enables the poorwomen to improve their agricultural production and/or enable them toundertake income generation activities (IGAs) through which povertycan be alleviated.

4. Credit for poor women to undertake IGAs enables them to have accessto resources and income. This may lead to enhanced decision-makingwithin the household, and thereby, enable them to spend the income onhealth, education, consumption, etc. Undertaking of IGAs lead toincreased interaction between women, on the one hand, and providersof inputs such as raw materials, government, etc., and markets, on theother. This leads to improved mobility of women. Such mobilitygradually enables them to play an active role in social, political andeconomic issues affecting self, household and community. In this,people’s institutions promoted by the NGOs give them a helping hand.Thus, micro-finance leading to IGAs contributes to women’sempowerment.

5. The micro-finance groups, consisting especially of poor women, enablethem to develop leadership qualities, enhance self-management andfacilitate them to be self-reliant. These also strengthen the individualand collective decision-making, and bargaining.

6. Regular savings by enabling the people to develop confidence andintroducing them to local banks contribute to improved creditworthiness

Summary and Conclusions 129

of the poor. This enables an improved interface between banks andpeople’s institutions.

However, the studies on micro-finance question this optimism. Thisstudy, therefore, sought to examine the functioning of micro-financeprogrammes, and analyse economic benefits (improvement in livelihoodsand access to resources) and social benefits (improvement in knowledgeand participation) of the selected micro-finance programmes derived by themembers in the specific context of two NGO programmes in Karnatakaand Andhra Pradesh. The study also looked at the lessons from the selectedmicro-finance programmes, and examined the likely pointers on what couldbe the possible trends in economic and social benefits.

Data Collection and MethodologyThe data sources for the study were primary data collected from

the project areas of two NGOs in Karnataka and Andhra Pradesh, namely,Grama Vikas and Sanghamitra Service Society (Sanghamitra, hereafter),respectively, with the help of survey method, focus group discussions andsemi-structured discussions. The study considered new entrants into SHGsas a comparison group. Accordingly, villages for the study were selected.The study was conducted in four villages in the two project areas of NGOs.T.N. Halli was selected from the project area of Grama Vikas. In this village,two SHGs were present: one nearly 10 year old and the other formed in1999. The former was considered as member group, while the latter as thecomparison group. Three villages were selected from the project area ofSanghamitra; the names of these villages are Bathinapadu, Kothapeta andS. Amaravaram. Two SHGs in each of the villages of Bathinapadu andKothapeta were more than nine years old. Thus, the members in these fourgroups were considered as the member group. Since these two villages didnot have relatively new groups, S. Amaravaram was selected, where twogroups were formed in 1998. The members in these two groups wereconsidered as the comparison group.

The economic and social benefits of the programmes were analysedwith the help of four sets of indicators. These were livelihoods, resources,knowledge and rights. The indicators examined in the study have beenprovided in the following Chart 4.


Chart 4: Indicators Used in the Study

Areas What to look for? Specific variables

Livelihoods Ranging from improvement • Occupational diversificationto impoverishment • Income levels

• Food security (seasonal)• Ownership of assets

Resources Ranging from access to exclusion • Access to productive assets,credit and savings facilities

• Affordability of school fees• Affordability of health care

Knowledge Ranging from expansion to • Children’s school attendancereduction • Girl education

• Knowledge on politicalinstitutions

Rights Ranging from participation • Greater participation in localto alienation organisations

• Were the poor betterorganised or more assertive intheir access or entitlement torights

• Reproductive rights

The DistrictsAn important factor contributing to the success of micro-finance is

the context in which these programmes are operating. Hence, an analysisof the study area was taken up in Chapter III. The main conclusions are asfollows.! Both the project areas are proximate to the cities.! In terms of size, both the districts are more or less similar. The growth

rate of population was almost similar and both the districts recordedlower growth rates than the state during the last two decades. Therewas no significant difference between the districts in the levels ofilliteracy. But, female illiteracy was more in Kolar district. Highereducation was also less in Kolar district. A finding common to both thedistricts was that the youth account for larger proportion of the literateas well as highly educated population.

! The rainfall is more uneven and uncertain in Kolar district compared toKrishna district. Irrigation facilities have been well developed in Krishnaas compared to Kolar. Further, Krishna district has assured irrigationfacilities through canals. In Kolar, wells account for over 86 per cent ofthe total irrigated area. This implies that farmers in Kolar depend onprivate and expensive form of irrigation.


! The agrarian structure in both the districts is characterised by thepresence of marginal holdings with concomitant implications for theviability of small farming, and the need for subsidiary occupation.Paddy is an important crop in Krishna district, while dry crops such asragi and, groundnut are important in Kolar district. In both the districts,plantation and horticulture corps are significant.

! In general, and also for both males and females, the workforceparticipation rates were lower in Kolar as compared to Krishna. Inboth the districts, the youth account for a larger proportion of the non-workers. Thus, unemployment was higher among the youth.

! There were significant differences between the districts as far as theoccupational distribution was concerned. The proportion of cultivatorswas higher in Kolar. On the other hand, agricultural labour and non-farm activities provided employment to a bulk of the workforce inKrishna. In both the districts, the proportion of female agriculturallabourers to total labourers increased. In both the districts, non-farmactivities were more confined to urban areas and among men in ruralareas. In both the districts, services, small business and smallmanufacturing were significant non-farm activities.

! Banking network was relatively more developed in Krishna with largerbank-branch network and higher level of advances. In Krishna, bulk ofthe credit went for crop production. On the other hand, although asignificant proportion of credit went to crop production in Kolar,plantation and horticulture, dairy and other priority sectors were important.Interestingly, these activities were also important in Krishna districtalthough the level was not the same as in Kolar district. A detaileddiscussion on the factors contributing to the rapid flow of credit to theseactivities suggests that financial institutions preferred these activities asthe infrastructure and marketing facilities were developed for theseactivities. An added dimension was that these were land based activities,and preferred by the affluent sections in the rural areas, and better offamong the poor. The institutional credit agencies did not deliver muchcredit for start-up enterprises and for those activities, which were neededfor the very poor.

Thus, the agrarian structure in both the districts was characterisedby the presence of marginal holdings with concomitant implications for theviability of small farming, and the need for subsidiary occupation. This wasparticularly important since the primary data suggested that it was thehouseholds belonging to SC categories in both the districts who were landless


and owned tiny landholdings. They were pursuing subsistent agriculture.Though illiteracy was high in these households, one or two persons hadcompleted either school or some college education and were unemployed.The need to provide formal credit to such households for both improving theland productivity and undertaking alternative occupations should havereceived priority given that these were poor and belonged to depressedcastes. However, as the discussion shows the formal banks preferred thoseactivities which were land-based, profitable and offered collateral to thebanks. Further, there was no adequate provision for consumption credit. Itwas because of these reasons that the micro-finance services delivered bythe NGOs became very important for the poor.

The NGOsThe micro-finance programmes of Grama Vikas and Sanghamitra,

which were started in the early 1990s, evolved over a period of time. Thenotable changes in the programmes in both the project areas were as follows:(i) The earlier large groups were divided on to small SHGs consisting ofabout 10 – 15 members in accordance with the changes in the developmentperspective of the organisation. (ii) In both the project areas, the initialprogramme was essentially a small savings programme but, it was graduallytransformed into somewhat larger savings and credit programme.

In both the programmes, mechanisms and incentives were providedfor members’ participation. The meetings and facility to contribute smallsavings in the group were mechanisms to facilitate the participation. Therules relating to savings linked to credit, taking attendance into considerationin so far as disbursal of loan and disallowing defaulters to borrow from thegroup were formulated to ensure the participation of members in theselection and monitoring of borrowers, and repayment of loans.

The savings programme of Grama Vikas was larger than that ofSanghamitra. The amount of savings per member was higher in the case ofGrama Vikas as compared to Sanghamitra. The lending programme of GramaVikas was also comparatively larger. This was mainly because of the linkageswith banks under NABARD’s Bank-SHG linkage programme which hadbeen started as early as in 1992 in the district. Grama Vikas was one of thefirst NGOs to participate in the programme. This contributed to an increasein the amount of credit available for the target group. Thus, Grama Vikasfollowed the strategy of having three sources of credit for the members;group funds were utilised to meet consumption and short-term productionneeds. The bank loans under bank-SHG linkage programme were utilisedto initiate or stabilise the IGAs. The loans from the federation were used as


a buffer. In other words, the federation loans were given to those groupswhich did not succeed in obtaining bank loans.

There were also differences between the NGOs in so far as themanagement of credit funds was concerned. The mechanisms and incentivesrelating to the people’s management of credit operations were moredeveloped in the case of Grama Vikas. On the other hand, while peopleparticipated in so far as operation of revolving credit fund of SHGs at thevillage level in the project area of Sanghamitra, the NGO retained decision-making power in the case of funds operated at the NGO level.

Grama Vikas developed the federation of SHGs, which wasfunctioning well in this project area. The federation has been participatingin the administration of the savings and credit programme, and lobbying/advocating the cause of the poor at cluster and project levels. Thiscontributed to the members accessing loans from banks under the Bank-SHG linkage programme and other resources from the government.Sanghamitra was planning to form a federation at the time of the survey.

The group members in both the project areas were having accessto more than one revolving credit fund, and a particular type of credit needwas met by a particular source. While savings fund at the village level wasmeeting the consumption needs of members (especially in the case of GramaVikas), the federation/ banks in the case of Grama Vikas, and the NGO inthe project area of Sanghamitra was meeting the production credit needs.

Another interesting feature was that, at the time of the survey, themembers were showing interest in borrowing for land purchase and houseconstruction and repairs. Based on the discussion on poverty concepts inChapter I, one can suggest that the members had credit sources to meettheir survival needs. With loans from savings fund, members were able toaccess services relating to education and health. With loans from federationand banks, member households were able to stabilise or improve agriculturalproduction and/ or start income generation activities especially the projectarea of Grama Vikas. After meeting the survival needs, they were focusingtheir attention on reducing the vulnerability through loans obtained for landpurchase and house construction/ repairs.

Groups were Formed for the PoorGiven that micro-finance programmes are popularised as a means

for poverty alleviation, their accessibility to the poorest is of obviousconcern. It is often mentioned in the literature that micro-finance groupsconsisted of a few poorest and some poor due to defective methodologiesadopted in the group formation, target chasing, lack of qualitative staff,


distorted incentive structure, group norms preventing the poorest toparticipate, etc.

The member group was marginally better than the comparison groupin terms of landholding in both the project areas. One cannot, however,conclude that the former was significantly better than the latter becausesmall farmers dominated both the groups. Secondly, it is possible that theinitial condition of the households in the member group may have beendifferent. It needs to be mentioned that members in the Grama Vikas projectarea had acquired land after they joined the group. If one were to reclassifythe land ownership position on the basis of land purchase, the distributionshifts in favour of small and marginal farmers. Third, those in the membergroup were worse-off in terms of education and marital status. Thus, theSHGs formed by the organisations consisted of the poor and needy persons.This became possible due to the quality maintained in the group formationprocess. The organisation approached the task of group formation as process-oriented one, where attempts to assess the socio-economic situation of thevillagers preceded the group formation.

Economic BenefitsAn analysis of the economic benefits of micro-finance programmes

revealed improved condition of households in the member group as comparedto those in the comparison group in the following respects.

Access to CreditLending to a member (by the group or external agency with the

group providing joint liability) in micro-finance group is less risky becauseof peer selection, which, in turn, takes care of problems posed by adverseselection. Collateral substitutes such as savings linked to credit and socialpressure can improve the access of the poor to credit. The borrowers ineach group have the ability to enforce contracts between each other, andthey jointly decide which types of activities to undertake. Through exploitingthe ability of neighbours to enforce contracts and monitor each other, themicro-finance groups have potential to solve the problem of moral hazard,and offer low interest rates on loans and raise repayment rates.

However, it is often mentioned in the literature that the access ofthe poor to credit tended to be limited due to factors such as inability of theprogrammes to enable the poorest to undertake IGAs and neglect of credit-plus activities. The systems and procedures such as savings linked to creditalso constrained the poor to borrow. The socio-economic environment(village, household and community) for women to undertake IGAs has been


noted to be non-conducive.The evidence from both the project areas shows that the members

were accessing loans from their own group and outside. Average numberof loans was relatively high. There was no discrimination against the landlessand small farmers. In the project area of Grama Vikas, the landless householdin the member group accessed the maximum number of loans and thehousehold, which accessed the maximum amount of loan, belonged to smallfarmer category. The members accessed loans for both consumption andproductive activities. The consumption loans were important in the projectarea of Sanghamitra.

The evidence, thus, shows that the pattern in the member group inso far as the number, amount and purpose of loans was different as comparedto the picture drawn from literature. This can be attributed to the followingfactors. First, the systems, procedures and incentives incorporated into theprogrammes have had a desired effect in enabling the members to borrow,utilise the credit and repay the loans. Second, unlike the other programmeswhere the members had access to credit only from their savings fund ordepended on linkages with the banks, the organisations worked out a systemwherein credit to members was provided through three different sources.This improved the access to credit. Third, the credit plus activities such ascrèches for children, knowledge and information on best practices in thefarming, and integration of activities of desilting of the tanks and providingemployment in the summer season with micro finance helped the members,especially the project area of Grama Vikas, to undertake IGAs throughcredit. Finally, the introduction of milk-route by the government to procuremilk improved the marketing possibilities in the project area of Grama Vikas.Absence of similar marketing facilities and frequent floods resulted in non-sustainability of the IGAs in the project area of Sanghamitra.

Other BenefitsThe households in the member group were different from those in the

comparison group in terms of total amount saved and the number of savingsforms used. As far as acquisition of productive assets was concerned, arelatively larger proportion of households from the member group hadacquired assets such as livestock and land as compared to those in thecomparison group. Most of the households in the member group had accessto more than two livelihood sources as compared to those in the comparisongroup. While a larger proportion of the households in the member groupobtained annual income of more than Rs. 20,000, those in the comparisongroup obtained less than Rs. 20,000 of annual income. The higher income


in the case of member households had a favourable impact on the acquisitionof consumer durables and expenditure on food, education and health.

While the micro-finance programme had a positive impact on memberhouseholds, there were differences across the project areas. First, a relativelylarger proportion of members had acquired productive assets in the projectarea of Grama Vikas as compared to those from the project area ofSanghamitra. Second, most of the loans and loan amount had been takenfor agriculture and livestock in both the project areas. However, theproportion of loans and amount taken for livestock rearing and agriculturewas high in the case of households in the project area of Grama Vikas.Thus, on the whole, the economic benefits were more pronounced in thecase of households in the project area of Grama Vikas. This can be attributedto the following:" While the average loan amount obtained by the households in the

member group in the project area of Grama Vikas was Rs. 17,893, theircounterparts in the Sanghamitra project area obtained only Rs. 11,000.The larger quantum of funds in the project area of Grama Vikas wasdue to the success in the bank-SHG linkage programme. The low levelof fund available in the project area of Sanghamitra was due to thefollowing. 1) Savings mobilisation had been slow and irregular; and2) Most of the groups had not been linked to banks under NABARD’sBank-SHG linkage programme. This reduced the availability of fundsfor the programme.

" In general, the opportunities for undertaking alternative incomegeneration activities seemed to be less in the case of households in theproject area of Sanghamitra. Most of the household members wereinvolved in agricultural labour market. The employment was availableduring a major part of the year, and wage rates were also high. Thus,opportunity cost in undertaking alternative income generating activitieswas high unless the activity happened to be large enough to provideincome offset due to withdrawal from the labour market. With lowlevels of credit fund available at the group and project level, memberhouseholds were unable to borrow larger amounts to undertake viablealternative economic activities.

" Improved infrastructure for dairying activity in Kolar influenced manyof the households to take up rearing of milch animals. No suchinfrastructure was available in the project area of Sanghamitra. Further,frequent floods affected the continuation of IGAs in this project area.


" More importantly, the decentralisation in the micro-finance programmewas far more pronounced in the Grama Vikas project area. Themembers and their federation were playing an active role in the formationof groups, selection of beneficiaries, monitoring the loan utilisation andrepayment. Further, the federation was in the forefront in improvingthe access of members to resources and infrastructure of the government.For instance, the federation worked for the opening of milk routes,mobilisation of government programmes, etc.

Social BenefitsAn analysis of the social impact of micro-finance programmes in

the project areas of Grama Vikas and Sanghamitra shows that while therewere significant economic benefits to members of micro-finance groups,the social benefits seem to be marginal. The decision-making is mostlyconfined to small and large purchases for the household, self and children.A majority of the women, even after years of membership in the group, donot participate in the decision-making relating to house repair, purchase ofland, productive assets, education of boys and girls, etc., as these areas areconsidered to be the domains of men in the household. Further, the womennoted that there was no connection between micro-finance and socialbenefits.

The education levels of household members in the case of membergroup were substantially better than those in the comparison group.However, a significant proportion of women from both the groups statedthat girl should be married soon after they attained puberty. Most of thewomen from both member and comparison groups stated that they wouldgive unlimited freedom for boys to pursue their education. It, therefore,appears that societal expectations on the age at which girls are to be marriedand whether women can undertake salaried employment determined theparental decision on whether girl should go to school or not. The obviousconclusion is that the SHG membership may not have any significant bearingon the value attached to children’s education (especially girls). The observeddifferences in school attendance between member and comparison groupsare to be, therefore, attributed to factors other than the micro-finance.Further, the interventions other than the micro-finance, linkages betweenmicro-finance and education programmes and sensitisation of men arerequired for the micro-finance programmes to lead to substantial socialbenefits.

Years of membership in micro-finance groups had made onlymarginal difference in so far as the participation of women in the political


institutions, and their awareness on who were important political leaders atthe time of the survey. In this respect, the women in the comparison groupfrom the project area of Sanghamitra were relatively better. But, it is notclear to what extent this can be attributed to generally higher levels ofawareness in Krishna district or to micro-finance groups. The qualitativeevidence on participation in political institutions indicates that the SHGmembership has not really contributed to gaining awareness on rights thatthe women have and how to utilise these rights.

The study, with limitations of small sample size, shows that themicro-finance programmes did provide economic benefits to the people forwhom the programmes were initiated. These economic benefits were mostlyconfined to availability of savings and credit facility, access to credit forconsumption and production and use of credit for undertaking incomegeneration activities. The finding that economic benefits were morepronounced in the project area of Grama Vikas suggests that there werefactors other than the micro-finance at work here. These are availability oflarger funds for income generation largely due to NABARD’s Bank-SHGlinkage programme and donor funds, and the existence of infrastructure(developed dairying activity in terms of well spread out marketing outlets).This leads us to hypothesise that the ability of the micro-finance programmeto provide economic benefits depends on whether the factors are conducivefor members to undertake IGAs with the help of credit.

Another important issue is the sustainability of these programmes.Both the programmes depend somewhat heavily on donors for sustainability.The situation seems to be better in the project area of Grama Vikas largelydue to the presence of well-functioning federation of SHGs, and largeramount of credit fund built with the help of donors and NABARD. Thefederation is reportedly generating some surplus in their credit operations.Yet, the federation depends on NGO staff (paid by donors) for most of theday-to-day operations, and this suggests that the sustainability is a point ofconcern if the donors withdraw the support. The option of mobilising thesupport towards the administrative expenditure from organisations such asNABARD is not currently available.

One of the indicators often used in micro-finance literature to findout the economic benefits has been the proportion of income from the activitysupported by the programme to the total income. It is suggested in thisstudy this is not an useful indicator especially the IGAs undertaken withfinancial assistance from micro-finance programmes help the households totake up some other activities which become important in so far as the


household income is concerned. For instance, undertaking of the activity ofmilch animal rearing with the help of micro-finance may help a household togo for well irrigation. In such cases, income from agriculture would becomesignificant to the household. If one looks at economic benefits from theviewpoint of the importance of activities supported by micro-financeprogramme in the household income, dairying becomes insignificant. But,this activity plays a key role in enabling the household to move from thephase of vulnerability to security.

To conclude, the micro-finance programmes do provide access tocredit for the poor, enable them to undertake income generation programmesand contribute to higher recovery rates. Given that the formal banks havenot very well succeeded in the past in improving the access to credit for thepoor, the strategy of supporting the formation and nurturing of micro-financegroups does not seem to be bad. However, the responsibilities such asdevelopment of economic infrastructure and providing bank finance to micro-finance groups must be undertaken by the government as the micro-financeprogrammes cannot alone alleviate poverty.


Annex 1: Selected Developmental Indicators Relating to Womenand Children

Indicators Total Female Male Total Female Male

DemographyPopulation (in millions) 548.1 364.1 (1971) 284.0 1,027 (2001) 495.7 531.3Decennial growth 24.6 24.9 24.4 21.34 21.79 20.93

(1971) (1991-01)Vital StatisticsSex ratio - 930 (1971) - - 933 (2001) -Expectation of life at 50.9 50.2 50.5 62.9 63.4 62.4birth (years) (1971) (1996-01)Mean age at marriage (years) - 17.2 (1971) 22.4 - 19.4 (1995) 22.0HealthBirth rate 36.9 - - 26.1 - -

(1971) (1999)Death rate 15.7 15.6 15.8 8.7 8.3 9.0

(1970) (1999)Infant mortality rate 127 131 123 71.6 72.0 70.0

(1978) (1999) (1998) (1997) (1997)Child mortality rate 127 131 123 - 36.7 24.9

(1978) (1998-99) (1998-99)Maternal mortality - 468 - - 408 (1997) -

(1990) 540 (1998-99)Literacy and EducationLiteracy rates 16.7 21.97 24.9 65.4 54.2 75.9

(1971) (2001)Gross enrolment ratiosClasses I-V 100.1 85.5 113.9 89.7 81.2 97.7Classes VI-VIII 62.1 47.8 76.6 58.5 49.5 66.5

(1990-91) (1997-98)School drop-out ratesClasses I-V 42.6 46.0 40.1 39.6 41.3 38.2Classes VI-VIII 60.9 65.1 59.1 54.1 58.6 50.7

(1990-91) (1997-98)Work and EmploymentWork participation 34.3 14.2 (1971) 52.8 37.7 22.3 (1991) 51.6Women in the organisedsector (in lakhs) 107.3 8.6 (8.0%) 155.6 283.9 44.4 (17.4%) 234.5

(1971) (1999) (1999)Women in the public 107.3 8.6 (8.0%) 98.7 194.3 28.1 (14.5%) 167.9sector (in lakhs) (1971) (1996) (1999) (1996)Women in government 109.0 11.9 (11.0%) 97.1 107.7 16.3 (15.13%) 91.4(in lakhs) (1981) (1999) (1999)Decision-MakingWomen in the administration 7102 413 (5.8%) 6689 8611 650 (7.6%) 7961(actual No. in IAS, IFS & IPS) (1987) (1997)Women in the panchayats 8.67 2.92 (33.7%) 5.75 27.21 7.25 (26.64%) 19.96(in lakhs) (1995) # (2001)Women in the parliament 768 47 (6.1%) 721 790 67 (8.4%) 723(Actual No.) (1989) (1999)Women in the central council 40 4 (10%) (1985) 36 73 8 (10.9%) 65of ministers (Actual No.) (1999)

Note: Figures in parenthesis indicate the percentage to the total, as also the year ofthe data in respective columns wherever relevant. Although, efforts were made tokeep a common ‘base’ and a common ‘comparable’ year, the same could not be keptup because of the limitations in the availability of data and other practical problems.# Data refer to 7 States, viz., Haryana, Karnataka, Madhya Pradesh, Punjab,Rajasthan, Tripura and West Bengal between 1993-95.Source: Gopalan 2002.

Annexure 141

NOTES1 In India, the official figures on poverty are based on nutritional baseline

measured in calories (food-energy method). The Planning Commission definespoverty line as per capita monthly expenditure of Rs. 49 for the rural areas andRs. 57 for the urban areas at 1973-74 all-India prices. The poverty linecorresponds to a total household per capita expenditure sufficient to provide adaily intake of 2,400 calories in rural areas and 2,100 calories in urban areas, andalso basic non-food items such as clothing and transport. Individuals who failto obtain income to meet even these basic necessities fall below the povertyline.

2 These figures have been obtained from Datt (1997).3 These are, however, around a level considerably lower than that which prevailed

in the 1970s.4 The impact on poverty of liberalisation policies introduced in 1991 is a debated

issue. It has been argued that the incidence of poverty increased in 1992 dueto the introduction of macro-economic reforms. This has been, however,disputed by others (World Bank 1996:5). While it is difficult to come to anyfirm conclusion regarding the impact of macro-economic policies on povertyat the macro-level, the micro-level reality suggests that the livelihood optionsfor the poor have come under severe stress and strain after 1991. See, Joshi etal 1997, and various articles in the Economic and Political Weekly, for moredetails.

5 The proportions of dalits (depressed castes) and adivasis (tribals) are relativelyhigher in Tamil Nadu and Andhra Pradesh. The incidence of child labour is thehighest in Andhra Pradesh.

6 IRDP was initiated on a nation-wide basis in the late 1980s to increase theincome generating assets of the poor directly through a mixture of subsidiesand credit. The programme was allocated Rs.15 billion during the period 1985-89.

7 Instituted in 1980, this nation-wide programme aimed to utilise unemployedand under-employed labour in rural areas to create productive community assetssuch as irrigation infrastructure, drainage systems, and soil conservationschemes and also basic services such as wells, village schools, health sub-centres, rural housing and roads. The total amount of expenditure was Rs.15billion during 1980-85 and Rs.22 billion in 1985-86.

8 The number of groups increased from 28,031 (with 4.69 lakh members) by theend of 1989-90 to 86,774 (with 14.96 lakh members) by November 1994. Duringthis period, the achievement exceeded the target by more than 100 per cent(Rajakutty 1997:91).

9 Sustainable poverty alleviation did not take place (Rath 1985 and Rajasekharand Vyasulu 1990) due to lack of congruence between delivery and recipientsystems, and lack of co-ordination between various government departments


implementing the anti-poverty programmes leading to overlapping andduplication.

10 This occurred in 1991 due to increased government expenditure (owing togrowing size of the government, mis-management of direct anti-povertyprogrammes, unproductive subsidies, etc.) and stagnant income (owing to arigid licensing system, unhelpful tax structure and inability to raise internalresources through progressive taxation).

11 The amendment provided positive discrimination for women, adivasis anddalits; made the five year elections mandatory; sought to provide adequateflow of funds to several tiers of the decentralised government and set upaccountability mechanisms at various levels.

12 The political space now available for the NGOs (Webster and Engberg-Pedersen2002) is the result of the growth of NGO sector, which is, to a large extent,supported by external donors. The gradual recognition by the state of thepossibilities and potential of involving the NGO sector in anti-povertyprogrammes has enhanced the legitimacy of NGOs. Interface with the stateand government agencies at different levels (Rajasekhar and Reddy 1997;Reddy and Rajasekhar 1996) has been found very useful in advocating policychanges in favour of the poor, although it is not a smooth process.

13 The programme covered 458,666 SHGs (90 per cent of which are exclusively forwomen) in 412 districts in 27 states and union territories. In all, 7.9 million poorhouseholds gained access to formal banking system through this programme.

14 For instance, the Cauvery Grameen Bank (CGB) with capacity inputs fromMYRADA promoted 398 SHGs (with over 6,000 members) by June 2000. Ofthese groups, 184 were linked to banks, and the total amount of credit disbursedwas Rs. 40.42 lakhs. The total amount of savings contributed by these groupswas Rs. 45.67 lakhs (CGB 2000: 15).

15 Intra-household inequalities in distribution of food, community norms andgender bias of the community (and also the government) reduce poor women’sability to access basic needs, even with increase in their income.

16 Caste based violence in different parts of India reveals the difficulty experiencedby poor dalits in using their increased income through new sources ofemployment to expand access to education. Increased income has also not ledto better access to drinking water for dalits where caste hierarchies restricttheir access to common wells.

17 In the case of adivasis, the barriers may not be community norms and practices,but practices of the state which have neglected infra-structural developmentof tribal areas.

18 These three paragraphs are based on the author’s work. For references, see,Rajasekhar (1996).

19 For a more thorough explanation, see, Rajasekhar and Vyasalu (1990).

Notes 143

20 The priority sector included agriculture, small industry and business in ruralareas.

21 The Committee’s view that targeted lending was the sole reason for the bankingcrisis is questionable because low profit margins were due to a host of factorswhich included structural problems and the inability of banks to diversify theirbusiness.

22 As a result, the proportion of priority sector lending from total credit providedby the foreign banks increased from 7.9 per cent in 1991-92, to 21.56 per cent in1994-95; but, this was attributed to diversion of credit from more direct prioritysector lending to new areas added to this sector (Sahu and Rajasekhar 2002).

23 This resulted in considerable controversy. Subsequently, the Finance Ministermade a statement in July 1993 that the government had no intention of reducingpriority sector credit and that commercial banks should strictly adhere to the 40per cent norm. But, this was not done.

24 Indian banks benefited from refinance as the amount lent was discounted byNABARD by approximately 6 to 8 per cent per year. NABARD’s refinancingfacility ranged from 100 per cent for banks achieving about 75 per cent recoveryto nothing where the recovery rates fell below 40 per cent.

25 Circular from NABARD, No.DPD/104, February 26, 1992.26 A study of transaction costs of banks and borrowers in rural lending with the

intermediation of NGOs and SHGs in India showed that the NGO/SHGintermediation considerably reduced the time spent by bank personnel inidentification of borrowers, documentation, follow-up and recoveries(Puhazhendhi 1995).

27 The estimated transaction cost per loan account, for the borrower, was Rs.272,of which about 40 per cent went towards cash expenditure and the remainderwent towards opportunity cost of time. The intermediation of the NGO/SHGscontributed significantly in reducing the transaction cost of borrowers to theextent of 85 per cent (Puhazhendhi 1995).

28 Credit rationing in rural credit markets with imperfect information (Stiglitz andWeiss 1981) has differential impact on different classes of borrowers. It is thepoor who suffer on account of loss of access to credit (Gonzalez-Vega 1984;Adams and Vogel 1986).

29 In India, these groups are called SHGs although the concept is wider and theSHG is not the same as the micro-finance group.

30 These are savings linked to credit, disbursing a second and larger loan afterrepaying the first one, etc.

31 Important requirements to ensure that the group members undertake collectiveaction to further the interest of members as a whole (Olson 1965). However,larger and heterogeneous groups can do well if the incentive system is notdistorted (Rajasekhar 1996).


32 Two approaches are followed. A minimalist approach aims to provide onlycredit as it is assumed that with repeated amounts of credit a household or amember would gradually be able to relieve themselves of poverty. A credit-plus approach realises that credit is not a sufficient condition for povertyalleviation, and hence, aims at providing a number of complementary servicessuch as marketing, skills, support services such as a crèche or drinking waterfacilities, to women producers.

33 Namerta (1998) argues that the NGOs did not perform better than the governmentin income generation programmes as the participation of women was minimal inprogramme planning, implementation and monitoring. They were also notbetter at providing quality support to members’ families undertaking IGAs interms of the acquisition of raw materials, skills and marketing.

34 Hulme and Mosley (1996) also make a similar point.35 Here, we refer to the research carried out by the Centre for Development

Research, Copenhagen, on Local Organisations and Rural Poverty Alleviation.36 The discussion on education levels and occupational distribution of the

population is based on 1991 census as the figures on these variables for 2001are yet to be made available.

37 There are 19 towns/cities in the district with three of them having more thanone lakh population. Vijayawada was the largest city with over 7 lakh populationin 1991, followed by Machilipatnam with 1.59 lakh population. Between 1981and 1991, four villages acquired the status of towns. The decadal growth ratein the case of 11 out of 19 towns/cities was higher than that of the district urbanpopulation.

38 In the rehabilitation of tanks, the organisation has developed good practices inenabling the people to participate in the planning, implementation andmonitoring, and these best practices were useful in preparing a larger programmeon Rehabilitation of tanks undertaken by the government of Karnataka.

39 This implies that members themselves participate in planning, implementationand monitoring of activities. In the context of micro-finance programmes, thisincludes setting the agenda for meetings, organising them, taking up issuesconcerning collective development, provision of credit facility, recovery ofloans, etc.

40 These are PRA methods covering social mapping, poverty ranking andseasonality mapping. They enable the programme to assess the situation andneeds of the villagers, and design the programme accordingly. For details, see,Rajasekhar (2002d).

41 In the past, Grama Vikas tried to encourage members to hold their meetings inthe local temple. Very often, this did not work very well as women belonging todepressed caste had some hesitation to freely enter the temple, and the womenduring the menstruation period were also reluctant to come to the temple.

Notes 145

42 Employment in Tables 23 and 24 refers to loans taken to obtain employment inthe service and urban informal sectors. These include loans to obtain training(in driving, etc), appear in examinations, etc.

43 This point is often overlooked in the Indian literature. For instance, Namboodriand Shiyani (2001: 407) note, without presenting any empirical evidence, thatthe members in groups formed by banks and NGOs ‘were the poorest of thepoor’. But, this has been an important issue in the international literature(Matin 1998; Zaman 1988; Navajas 2000).

44 A study on savings needs among 121 households, having membership inmicro-finance groups for a period of 3-10 years, in five districts in Karnatakaand Orissa comes up with interesting results on the extent to which the members’credit needs have been met. As far as the expenditure on marriages in the lastfive years was concerned, only 6 per cent of the total expenditure was metfrom SHGs, while around 47 per cent was met through borrowing frommoneylenders, chit funds and others. Between 9 and 16 per cent of theexpenditure was met by way of selling assets. The situation was even worse inthe case of health and other emergencies. SHGs met between 5.5 and 10.8 percent of expenditure on emergencies in the last three years. Moneylenders andothers met between 28.8 and 71.6 per cent of the expenditure. Similar picture isobtained with regard to other needs such as education and house constructionrepairs.

45 Until about the late 1980s, savings mobilisation had not been given emphasison the assumption that the poor could not save. The studies, however, arguethat if the institutions are appropriately structured and provided demand-oriented savings products, the poor will contribute savings which helpinstitutions to achieve a level of outreach that cannot be achieved with creditonly facility (Vogel 1994; Fiebig et al 1999 and Rutherford 1999).


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ABOUT THE AUTHOR

D. Rajasekhar is Associate Professor in the Decentralisation andDevelopment Unit, Institute for Social and Economic Change, Bangalore.At present, he is the team leader for the World Bank-funded research projecton ‘Roles of Rural Local Organisations in Development Projects’ relatingto watershed, water supply and sanitation, and women development andempowerment in Karnataka, Madhya Pradesh and Uttaranchal. He is alsodirecting a project on fiscal decentralisation in Karnataka to build up thedatabase for all the panchayats at the district, taluk and village levels forpolicy making and renewal.

D. Rajasekhar obtained his M.Phil. and Ph.D. degrees from the JawaharlalNehru University, New Delhi, through the Centre for Development Studiesin Thiruvananthapuram, in the area of economic mobility of rural householdsin historical perspective. In this area, he has published Land Transfersand Household Partitioning: A Historical Study of An Andhra Village,(Oxford and IBH: 1988), South Indian Economy: Agrarian Change,Industrial Structure and State Policy, c.1914-c.1947, (Oxford, New Delhi,1991) and Famines and Peasant Mobility: Changing Agrarian Structure inKurnool District of Andhra Pradesh, c.1860-1900 (Indian Economic andSocial History Review, 1991).

After joining the Institute for Social and Economic Change in 1990, DRajasekhar has worked on decentralisation, micro-finance, rural credit andrural non-farm sector, and has published several books and articles. His recentbooks in these areas include Decentralised Government and NGOs: Issues,Strategies and Ways Forward, Rejuvenating Tanks: A Socio-EcologicalApproach, Poverty Alleviation Strategies of NGOs, and ReluctantPartners Coming Together? Interface between People, Governmentand the NGOs.

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