the role of ngos shgs development processes

8/12/2019 The Role of NGOs SHGS Development Processes

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1 www.visionias.in Vision IAS

G. S. PAPER II GOVERNANCE, SOCIAL JUSTICE

Development processes n! t"e !evelopment #n!$str%& t"e role o'

NGOs, S(Gs, vr#o$s )ro$ps n! ssoc#t#ons, !onors, c"r#t#es n!

ot"er st*e"ol!ers

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/. 0"% "s 1prt#c#pt#on2 n! 1empoerment2 )#ne! #!e c$rrenc% #n recent !evelopment l#tert$re3

Decades of development efforts have provoked a feeling of disenchantment with the conventional growth-oriented

strategy of development not prodcing the desired trickle-down effect. !he failres sensiti"ed the planners and

administrators to the need for drawing on the indigenos knowledge system of the local people. #nless people

themselves participate$ the programmes administrated %y e&ternal agencies remain e&ogenos to the rral

commnity there%y affecting reslts. A people-centred vision is %eing advanced %y citi"en's organisations working tocreate an alternative world order %ased on economic (stice$ environmental sta%ility and political inclsiveness.

As the )man Development *eport +#,D 1/0 commented eople's participation is %ecoming the central isse of

or times3

/. So, #s people prt#c#pt#on recent !#scover%3

4eople' as real actors in history have %een %roght forward %y the 4 S$ltern' school. easant resistances were

s%tle and effective peoples' actions against oppression. eople do act$ it is for s to appreciate it and mo%ilise it for

participatory people-centric movements. eople as development actors emerged long ago in the vision and action of

!agore at Shantiniketan and 5andhi at 6ardha. !agore e&perimented with people centred rral development in thevillages for the re(venation of rral arts and crafts and economy in general. 5andhi relied on the mo%ili"ation of

masses and their economic pliftment throgh the development of cottage and small-scale indstries

/. O*. I )et t"t prt#c#ptor% !evelopment #s #mportnt. 0"t s"pes4'orms !oes #t t*e3

Anisr*ahman has identified the following different forms of commnity organisations representing collective action

%y the nderprivileged people to improve their socio-economic conditions

5#rst$ there are grassroots organisations that are %asically economic in natre$ ndertaking income-generatingactivities with the help of internal resorce mo%ili"ation spplemented %y resorce and knowledge spport

from otside Secon!$ there are other organisations that emerge in 4pressre grop' activities. !hey resist e&ploitation or

oppression %y other grops$ assert economic$ social and hman rights inclding women's rights$ or demand

services from the p%lic agencies

T"#r!$ some of the organisations ndertake social and cltral activities in sch areas as health$ edcation$cltre and so on

5o$rt"$ some aim at the promotion of holistic life %y way of activities that integrate spirital advancementwith economic and social development

5#'t"$ commnity organisations to promote ecologically oriented socio-economic life are also growing in manyareas sch as organic agricltre$ social forestry$ coastal fishing etc.

S#6t"$ participatory action research is %eing prsed %y some organisations to develop people's own thinkinga%ot their living conditions and environment

/. T"#s prol#'ert#on o' comm$n#t% se! or)n#st#ons m$st e c*e! % some ene'#ts, r#)"t3

!he vale of participation as a facilitative development process has %een widely recognised and ma(or %enefits have

%een identified as follows

!he participatory process provides important information in the planning$ programming and implementationstages there%y ensring congrence %etween o%(ectives and commnity vales and preferences

7y rationali"ing manpower resorces tili"ation$ the process redces pro(ect cost Any change %roght a%ot throgh development is more accepta%le to the commnity if the local people are

involved$ also$ mistakes are more tolera%le if these are made %y people who have to live with them

8onitoring is %etter$ and sstaina%ility of the pro(ect is more likely even after the withdrawal of the e&ternalagent$ %e it government or ,59 agency


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!he commnity learns from its own involvement and from this point of view$ participation is a 2 way learningprocess in which the administrator and the people %ecome co-learners

Active commnity participation helps re%ild commnity cohesion and installs a sense of dignity into thecommnity. eople gain in confidence and steadily emerge as real actors in the development process.

/. Is comm$n#t% prt#c#pt#on t"en& t"e nser to ll !evelopment prolems3

:ritics of commnity participation arge participation has poplarity withot clarity and is s%(ect to growing

faddishness and a lot of lip service.

Serios analysis of local commnity life reveals differentiation in terms of stats$ income and power. :onflicts and

rivalries are not ncommon even among the poor and nderprivileged. !he romantic vision of frictionless$

harmonios commnity life does not match grond realities

;&ternal intervention %y social workers or political activists has %een fond necessary almost everywhere to organi"e

the local commnity and mo%ili"e the local people

It has also %een o%served that there is an imaginary notion of continos activism %y the local people %ehind all

discssions on commnity participation. !otal and continos commitment to activism is more a revoltionary's

dream than the poor people's actal %ehavior

!here are critics who do%t the efficacy of commnity participation in %ringing a%ot radical change in the life of the

poor and the nderprivileged throgh atonomos local action only. Small changes are not rled ot$ %t commnity

participation$to %e really effective$ needs profond social strctral change at %oth domestic and international levels.

:ommnity mo%ili"ation cannot$ on its own$ correct the %asic social im%alances that have their roots in deeper socio-

economic layers of the society

7r6#st r)$ment participatory development within capitalistic mode is nworka%le$ the prpose of participation is

to diffse revoltionary movements and create an illsion of soltion. !he state seeks to s%vert poplar movements

throgh maniplative co-optation of the poor

/. O*%. Prt#c#ptor% !evelopment "s #ts '$lts n! s"ortcom#n)s $t #t !oes stn! 'or ct#on, e8$#t% #n reso$rce

!#str#$t#on 9 soc#l cp#tl n! "ence cnnot e #)nore!. 0"t #s t"e role o' stte #n ll t"#s3

!he state plays a fndamental role in helping or hindering participation. Different social science theories evoke

different images of state-society relationships. 6hile 8ar&ian and elite theories are pessimistic a%ot the possi%ility

of commnity participation$ li%eral-democratic and plralist theories are mch more helpfl.

State's actions depend pon the definition and prpose of commnity participation$ state's perception a%ot its role

and the political will to decentrali"e power and resorces to local instittions

Accordingly < different state's responses have emerged +ideal models to characteri"e %etter0

Ant#&prt#c#ptor% mo!e !he state in a capitalist system is interested$ not in ameliorating the conditions of the poor$%t in promoting the interests of capital and the rling class. ower is$ therefore$ concentrated and not dispersed to

facilitate accmlation of wealth

7n#p$lt#ve mo!e !he state follows a diplomatic approach and the state spport to commnity participation is

intended to ensre political and social control as well as redce local development costs and facilitate sccessfl

pro(ect implementation. State seeks to netrali"e political opposition %y co-opting atonomos movements with the

lterior motive of gaining control over them. !he rhetoric of participation is invoked to mo%ili"e local la%or in state's

development activities and to give legitimacy to the regime in power

Incrementl mo!e It is marked %y an am%ivalent approach to commnity participation. !here is no lack of

government spport to participation %t the policy is nclear and piecemeal = ad-hoc approaches are the norm. !he

state in reality is not willing to part with power and to devolve resorces to local commnity grops. Also$ the

%reacrats and the technocrats have their own ways of %ringing a%ot efficient3 local development management.

Still$ commnity participation is not$ in theory$ re(ected and decentralisation contines in an ad-hoc fashion with a

plrality of actors


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Prt#c#ptor% mo!e :haracteri"ed %y state's own initiative to create instittions of commnity participation to ensre

effective involvement at the grassroots level. !here are no lterior motives and genine poplar involvement is

ensred %y providing resorces to local %odies and sensiti"ing %reacracy throgh training and directives. 6ithin an

overall development planning framework$ the central$ regional and local development policies and activities are

harmoni"ed throgh positive political will and %reacratic spport

>5ollo&$p / 6hich of these modes is tre for India? )ave we evolved from one mode to another or is there one

particlar mode more applica%le or does the state adopt different modes at different times@places

Eno$)" o' prt#c#pt#on, lets come to vol$ntr% or)n#st#ons:

/: 0"t #s NGO3

According to the 6orld 7ank$ a ,on-governmental 9rgani"ation +,590 is a private organi"ation that prses

activities to relieve sffering$ promote the interests of the poor$ protect the environment$ provide %asic social

services$ or ndertake commnity development3. In other words$ ,59s are legally constitted organi"ations$ operate

independently from the government and are generally considered to %e non-state$ non-profit oriented grops who

prse prposes of p%lic interest3. !he primary o%(ective of ,59s is to provide social (stice$ development and

hman rights. ,59s are generally fnded totally or partly %y governments and they maintain their non-governmental

stats %y e&clding government representatives from mem%ership in the organi"ation.

In a democratic society$ it is the state that has the ltimate responsi%ility for shering development to its citi"ens. In

India$ throgh the progressive interpretation of the :onstittion and its laws and policies$ the scope of development

has %een significantly %roadened to inclde not (st economic progress for citi"ens$ %t also promotion of social

(stice$ gender eBity$ inclsion$ citi"en's awareness$ empowerment and improved Bality of life. !o achieve this

holistic vision of development$ the state reBires the constrctive and colla%orative engagement of the civil society in

its varios developmental activities and programs. ,on-governmental organisations +,59s0 as the operational arm of

the civil society therefore have an important role in the development processes.

/: 0"t re t"e !#''erent t%pes o' c#v#l soc#et% or)n#;t#ons3

C#v#l r#)"ts !vocc% or)n#;t#ons to promote hman rights of specific social grops e.g. women$ migrants$disa%led$ )IV$ se& workers$ Dalit people$ tri%al people$ and the likes.

C#v#l l#ert#es !vocc% or)n#;t#ons to promote individal civil li%erties and hman rights of all citi"ens$rather than focsing on particlar social grop.

Comm$n#t% se! or)n#;t#ons, c#t#;en2s )ro$ps, 'rmers2 coopert#ves to increase citi"en's participationon p%lic policy isses so as to improve the Bality of life in a particlar commnity.


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Eocal volntary organisations can %e very helpfl in mo%ili"ing poplar

spport and assistance of the people in the activities of local %ody. It is possi%le to maintain constant and close

contact with the people throgh these organisations

As"o* 7e"t Comm#ttee 9f the several volntary organisations engaged in rral welfare$ a few have helped the *Isin preparation of area development plans$ condct feasi%ility stdies and cost@%enefit analysis$ e&plore ways and

means to indce local participation in planning and implementation.

In the S#6t" 5#ve Ber Pln =>&=>?F$ the government identified new areas in which ,59s as new actors cold

participate in development

!he Sevent" 5#ve Ber Pln =>?& =>>F$ envisioned a more active role for ,59s as primary actors in the efforts

towards self-reliant commnities. !his was in tne with the participatory and empowerment ideologies$ which was

gaining crrency in the developmental discorse at that time

5overnment spport and encoragement for ,59s contined in the E#)"t" 5#ve& %er pln$ where a nation-wide

network of ,59s was soght to %e created

!he N#nt" 5#ve&%er plnproposed that ,59s shold play a role in development on the p%lic-private partnership

model. Also$ the agricltral development policies of the government and its implementation mechanisms provided

scope and space for ,59s. A case in point is the watershed development program$ which has led to the growth of

,59s working for rral development

In 8arch 2FFF$ the 5overnment declared Plnn#n) Comm#ss#on as the no!l )enc% 'or GO&NGO #nter'ce. !he

message was clear- government has to and will work with the volntary sector. A 1C#v#l Soc#et% 0#n!o2was started

in 2FF


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6omen in India +1K0$ the Indian ,ational :onference +1K0 etc. !he Society's *egistration Act +S*A0 was approved

in 1JF to confirm the legal stats of the growing %ody of non-governmental organi"ations.

In India$ it was the 1KFs which saw rapid growth in the formation of formally registered ,59s and the process

contines to this day. 8ost ,59s have created their respective thematic$ social grop and geographical priorities sch

as poverty alleviation$ commnity health$ edcation$ hosing$ hman rights$ child rights$ women's rights$ natral

resorce management$ water and sanitationC and to these ends they pt to practice a wide range of strategies and

approaches. rimarily$ their focs has %een on the search for alternatives to development thinking and practiceC

achieved throgh participatory research$ commnity capacity %ilding and creation of demonstra%le models. 6hen

we review some of the work done %y ,59s over the past / decades$ we find that they have contri%ted greatly to

nation %ilding.

8any ,59s have worked hard to inclde children with disa%ility in schools$ end caste- %ased stigma and

discrimination$ prevent child la%or and promote gender eBality reslting in women receiving eBal wages for the

same work compared to men. Dring natral calamities they have played an active role in relief and reha%ilitation

efforts$ in particlar$ providing psycho-social care and spport to the disaster affected children$ women and men.

,59s have %een instrmental in the formation and capacity %ilding of farmers and prodcers' cooperatives and

women's self- help grops. Several ,59s have worked hand in hand with the 5overnment to ensre that millions of

ot of school children are enrolled and contine their school edcation$ ths making the right to edcation a reality.

!he leprosy eradication programme was spearheaded %y ,59s and today only residal leprosy remains in or

contry. ,59s have implemented the JeevnD"r programme for creation of wells for safe drinking waterC

promoted commnity toilets for total sanitation$ and spported the p%lic health programs on immnisation and for

eliminating t%erclosis and malaria. !he mch cele%rated ,*;5A$ I:DS$ I:S$ ,irmal 5ram and Swasthya7ima of the

government have their roots in the work of many ,59s. ,59s have significantly inflenced the development of laws

and policies on several important social and developmental isses sch as the right to information$ (venile (stice$

ending corporal pnishment in schools$ anti-trafficking$ forests and environment$ wildlife conservation$ women$

elderly people$ people with disa%ility$ reha%ilitation and resettlement of development indced displaced people to

name a few. Grther$ ,59s made their modest attempts to ensre the effective implementation of these laws and

policies %y condcting and disseminating findings from participatory research$ %dget analysis$ p%lic hearings$ social

adits$ workshops$ seminars and conferences.

Smming p$ it is now well esta%lished that ,59s have an important role to play in the development processes and

that %oth the state and market need the colla%oration of credi%le$ active$ and acconta%le ,59s. 5iven their connect

with the grassroots realities$ ,59s can and shold play the game changer3 to pro-poor development throgh

leadership on participatory research$ commnity empowerment and search for development alternatives.

6ith the increasing role of the ,59s in development activities they are now attracting professionals from varios

other sectors$ and capacities are %eing %ilt in spport areas sch as financial management$ resorce mo%ili"ation$

hman resorces$ leadership development$ governance procedres and practices and instittional development. At

another level ,59s have %een addressing the social service isses and empowerment related advocacy efforts have

%een increasing. !he stdy condcted %y a ,ew Delhi %ased ,59 conclded that every fifth ,59 in India works on the

isses of commnity and social service. !he favora%le disposition of the governments and the political will to involve

,59s is more prononced in implementation of the welfare schemes addressing cases of women and children.

Grther$ the indstrial policies have inflenced the formation and relations %etween the %sinesses and ,59s. !he

:onfederation of Indian Indstries +:II0$ a leading organisation$ has %een raising the isses of corporate social

responsi%ility. !he emphasis of indstrial policies on the promotion and development of small$ cottage and village

indstries has also lead to the formation of agencies sch as the Lhadi and Village Indstries :ommission$ Small

Indstries Associations and likes.

Pro'#l#n) NGOs:

India has possi%ly the largest nm%er of active non-government$ non-profit organi"ations in the world. !here has %een

a sharp increase in the nm%er of new ,59s in the past decade in India. According to a government stdy$ there were

only 1.


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It can %e noted that a great ma(ority of the ,59s are small and a%ot three-forths of all ,59s are rn entirely %y

volnteers. A%ot 1/ percent of the ,59s have %etween 2 to employeesC a%ot percent have %etween J to 1F

employees and only a%ot . percent ,59s employ more than 1F people. According to a srvey condcted %y

society for articipatory *esearch in Asia +*IA0$ K/.< percent of ,59s have one or no paid staff$ althogh across the

contry$ more than 1 million persons work as volnteers or paid staff at an ,59. 8ore often ,59s are registered as

trsts$ societies$ or as private limited non-profit companies$ nder Section- 2 of Indian :ompanies Act$ 1J. !hey

also en(oy income ta& e&emption. Goreign contri%tions to non-profits are governed %y Goreign :ontri%tion

*eglation Act +G:*A0$ 1KJ.

/: 0"t re t"e *e% )overnnce c"llen)es 'c#n) NGOs3

In view of the emergence of a new paradigm of scaling p$ in which ,59s are seen as catalysts of policy innovations

and social capitalC as creators of programmatic knowledge that can %e spn off and integrated into government and

market instittionsC and as %ilders of vi%rant and diverse civil societies$ it's imperative to critically analy"e the role of

,59s in the process of development and nderstanding the challenges facing the sector.

!ransparency and acconta%ility are key ingredients of 5overnance in the ,59 Sector as these determine operational

efficiencies and risk mitigation. 9ver the years$ corporate sector has %een a%le to recogni"e and implement %est

governance practices throgh appropriate instittional framework. )owever$ the ,59 sector is yet to evolve anyinstittionali"ed framework$ which cold potentially play an important role in overall development of the nation.

,59s play an increasingly active role in today's political and social arenas. :ivil society organi"ations are increasing in

nm%er all over India. 9f late$ some of the local and national ,59s have %een fond involved in malpractices and

acting irresponsi%ly$ ths ndermining the credi%ility of civil society. It's a hge concern and poses a great challenge to

the development movement spearheaded %y ,59s in the contry.

!here is a hge flow of fnds into the non-government organi"ation sector and this reBires prdence and good

practices to maintain acconta%ility and transparency to the %enefit of all stakeholders. Althogh ,59s do internal

aditing %t for more acconta%ility and transparency$ it is advisa%le to go throgh e&ternal aditing also$ especially

where p%lic fnds are involved. )ence$ isses of internal control mechanisms$ professionalism$ acconta%ility$

transparency and financial management mst %e given impets. !he challenge is mltidimensional$ and is

componded %y the4norganised' natre of the sector$ lack of reglatory frameworks and the fact that India %oasts ofmore than a million ,59s of different roles$ strctres and si"es. In particlar$ the Indian volntary sector rgently

needs self-reglatory gidelines and transparency mechanisms to increase the trst and awareness as to how the

philanthropic fnds are %eing tilised.

!his is a critical challenge that creates a %arrier to raising fnds and capital for the sector. !he general lack of

transparency in the fnctioning of a large proportion of ,59s leads to aversion in donating fnds for charita%le cases

since the general p%lic is largely cynical a%ot the 4genineness' of the non-profit spirit of the sector. !he stringent

governance standards of an ,59 will facilitate the effective management and increase the acconta%ility to its

stakeholders inclding donors$ the government and the commnity. It is in the self-interest of the ,59s to reali"e the

fact that to implement a strctre of 4corporate governance' principles wold provide the real vale to the

stakeholders.

Also$ this wold ena%le to track the potentially d%ios sorces of fnding coming in for the volntary sector M an

aspect which has gained impets in the wake of the increased nm%er of terror attacks and e&tremist activities.

*ecently$ the #nion )ome 8inistry has identified some ,59s as secrity threat to the contry. Sch secrity

considerations have nderscored the rising need of improving the governance practices in the Indian ,59s and

e&ercising %etter reglatory mechanisms$ disclosre norms$ and management processes inclding financial

management and %dgeting systems as well. 8oreover$ in the larger interest going %eyond the secrity

considerations$ the impets has to %e on inclcating a cltre of inclding performance goals$ condcting financial

and performance adits$ and reforms for increasing the operational acconta%ility and transparency in the eyes of the

p%lic$ volnteers$ donors and other stakeholders.

S$))est#ons:

!he implementation of a strategic framework is essentially important in the management of an ,59. !heendorsement of sch a framework %rings in professionalism and internal control mechanisms$ which frther makes

the organi"ation's performance more effective. Developing strategies also inclde esta%lishing a mechanism of

consistent monitoring of whether they are %eing implemented and linking the reslts to the organi"ation's goals.


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!here is need to %olster p%lic confidence in the volntary sector %y opening it p to greater p%lic scrtiny. !he

5overnment shold encorage :entral and State level agencies to introdce norms for filing %asic docments in

respect of ,59s$ which have %een receiving fnding %y 5overnment agencies and placing them in the p%lic domain

+with easy access throgh the internet0 in order to inclcate a spirit of p%lic oversight.

%lic donation is an important sorce of fnds for the ,59 sector and one that can and mst increase s%stantially.

!a& incentives play a positive role in this process. !he 5overnment cold simplify and streamline the system for

granting income ta& e&emption stats to charita%le pro(ects nder the Income !a& Act. At the same time$ the

5overnment might consider tightening administrative and penal procedres to ensre that these incentives are not

missed %y paper charities for private financial gain.

!he 5overnment shold encorage all relevant :entral and State 5overnment agencies to introdce pre-service and

in-service training modles on constrctive relations with the volntary sector. Sch agencies need to introdce time

%ond procedres for dealing with the V9s. !hese cold cover registration$ income ta& clearances$ financial

assistance$ etc. !here mst %e a formal system for registering complaints and for redressing grievances of ,59s.

!he 5overnment shold encorage setting p of Noint :onsltative 5rops @ Gorms or Noint 8achineries of

government and volntary sector representatives$ %y relevant :entral Departments and State 5overnments. It also

needs to encorage district administrations$ district planning %odies$ district rral development agencies$

"illaparishads and local governments to do so. !hese grops cold %e permanent forms with the e&plicit mandate to

share ideas$ views and information and to identify opportnities and mechanisms of working together. !he5overnment also might introdce sita%le mechanisms for involving a wide cross-section of the volntary sector in

these 5rops@Gorms.

S$mm#n) Up:

6e are entering into an important phase where there are many targets that the government intends to achieve with

the active colla%oration of V9s$ in the 12th

plan. !herefore$ it is important to condct an effective review or report

card of the ,ational olicy with specific recommendations. !hese recommendations cold %ecome an agenda for all

Volntary 9rgani"ations$ lanning :ommission$ state governments and national 8inistries. ;fforts are also needed to

frther disseminate the information a%ot the policy and its intentions with small V9s as well as government

fnctionaries. !here is a need to solicit commitment from state governments and national ministries. A systematic

intervention is also needed to get ,ational olicy approved and adopted %y the Indian arliament. !he most serioschallenge faced %y India today is the conflict %etween violent and non-violent approach of development. ,eedless to

say that ma(ority of poplation of India is still deprived of %asic frits of development$ %t rather than adopting the

approach which is more inclsive and look for soltions within the constittion$ India is faced %y distr%ances in many

parts of the contry. !his not only hampers the development pro(ects %t also shrink the space for people's

participation to achieve their goals throgh peacefl means. !he volntary sector %eing present in sch locations

faces the challenge of delivering the services and even mo%ili"ing people on the development agenda. !he need of the

hor is to work closely with each other for the %enefit of the marginali"ed people$ as even today the dream of

8ahatma 5andhi has not %een achieved.

(v#n) loo*e! t NGOs, no let $s t*e loo* t S(Gs:

/: 0"t re S(Gs3

Self-)elp 5rops are informal associations of people who choose to come together to find ways to improve their living

conditions. !hey help to %ild Social :apital among the poor$ especially women. !he most important fnctions of a

Self-)elp 5rops are

to encorage and motivate its mem%ers to save to persade them to make a collective plan for generation of additional income to act as a condit for formal %anking services to reach them.

Sch grops work as a collective garantee system for mem%ers who propose to %orrow from organised sorces.

:onseBently$ Self-)elp 5rops have emerged as the most effective mechanism for delivery of micro-finance services

to the poor. !he range of financial services may inclde prodcts sch as deposits$ loans$ money transfer and

insrance.


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Rs"tr#%7"#lHos":

!he *ashtriya8ahilaLosh was set p %y the 5overnment of India in 8arch 1/ as an Atonomos 7ody registered

nder Societies *egistration Act$ 1JF nder the Department +now 8inistry0 of 6omen and :hild Development. !he

o%(ective was to facilitate credit spport to poor women for their socio-economic pliftment.It was felt that the credit

needs of poor women$ especially those in the norgani"ed sector$ were not adeBately addressed %y the formal

financial instittions of the contry. !hs *8L was esta%lished to provide loans in a Basi-formal credit delivery

mechanism$ which is client-friendly$ has simple and minimal procedre$ dis%rses Bickly and repeatedly$ has fle&i%le

repayment schedles$ links thrifts and savings with credit and has relatively low transaction costs %oth for the

%orrower and the lender. !he Losh lends with a niBe credit delivery model *8L M ,59-S)5- 7eneficiaries3. !he

spport is e&tended throgh ,59's$ 6omen Development :orporations$ State 5overnment agencies like D*DA's$

Dairy Gederations$ and 8nicipal :oncils etc.

SID


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articipation in grop activity significantly contri%ted to improvement of self-confidence among the mem%ers. In

general$ grop mem%ers and particlarly women %ecame more vocal and assertive on social and family isses.

!he strctre of the S)5 is meant to provide mtal spport to the participants in saving money$ preparing a

common plan for additional income generation and opening %ank acconts that wold help them in developing credit

relationship with a lending instittion. It ltimately spports them in setting p micro-enterprises e.g. personalised

%siness ventres like tailoring$ grocery$ and tool repair shops. It promotes the concept of grop acconta%ility

ensring that the loans are paid %ack. It provides a platform to the commnity where the mem%ers can discss and

resolve important isses of mtal concern.

6hile some of the S)5s have %een initiated %y the local commnities themselves$ many of them have come throgh

the help of a mentor 7ody +either government or an ,590 which provided initial information and gidance to them.

Sch spport often consists of training people on how to manage 7ank acconts$ how to assess small %siness

potential of the local markets and how to pgrade their skills. In the end$ it creates a local team of resorce persons.

5rop formation %ecomes a convenient vehicle for credit delivery in rral areas. :ommercial 7anks and other

instittions which are otherwise not receptive to the demands of marginali"ed individals$ start considering sch

grops as their potential cstomers. 9verall sch Noint-Eia%ility 5rops e&pand the otreach of the micro-finance

programme in an effective way$ reaching ot to the e&clded segments e.g. landless$ sharecroppers$ small and

marginal farmers$ women$ S:s@S!s etc.

!he ma(ority of Self-)elp 5rops comprise of women mem%ers. !here is evidence in this contry as well as elsewhere

that formation of Self-)elp 5rops has a mltiplier effect in improving women's stats in society as well as in the

family. !heir active involvement in micro-finance and related entreprenerial activities not only leads to improvement

in their socio-economic condition %t also enhances their self-esteem. 6omen in a gropenvironment %ecome more

articlate in voicing their concerns and a change occrs in their self-perception. !hey start to see themselves not only

as %eneficiaries %t also as clients @ informed citi"ens seeking %etter services. 9n the home front$ their new fond

awareness and the confidence generated ot of their entreprenerial skills make them more confident vis-P-vis their

menfolk.

!he S)5 programme has contri%ted to a redced dependency on informal money lenders and other non-

instittional sorces. It has ena%led the participating hoseholds to spend more on edcation than non- client

hoseholds. Gamilies participating in the programme have reported %etter school attendance and lower drop-otrates.

!he financial inclsion attained throgh S)5s has led to redced child mortality$ improved maternal health and the

a%ility of the poor to com%at disease throgh %etter ntrition$ hosing and health M especially among women and

children.

7t the S)5 movement has certain weaknesses as well

contrarytothevisionforS)5development$mem%ersofagropdonotcome necessarily from the poorest familiesC the S)5 model has led to definite socialempowerment of the poor %t whetherthe economic gains are

adeBate to %ring a Balitative change in their life is a matter of de%ateC

many of the activities ndertaken %y the S)5s are still %ased on primitive skills related mostly to primarysector enterprises. 6ith poor vale addition per worker and prevalence of s%sistence level wages$ schactivities often do not lead to any s%stantial increase in the income of grop mem%ers.

!here is lack of Balified resorce personnel in the rral areas who cold help in skill pgradation@acBisitionof new skills %y grop mem%ers.

/: 0"t t"en re t"e *e% #ss$es 'c#n) S(Gs to!%3

!hogh$ dring a short span of fifteen years the S)5 movement has recorded remarka%le progress mch still remains

to %e done. !he movement shows steep territorial variations. 8any areas of the contry lack adeBate %anking

strctre. #r%an and semi-r%an areas$ to a large e&tent$ stand e&clded from this mode of credit delivery. Grther

growth of this movement faces threat from inadeBacy of skills in the rral areas. And finally the pace of the

movement needs to %e accelerated. !he following eight isses of this sector deserve priority attention


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Q 7#nt#n#n) t"e prt#c#ptor% c"rcter

6e saw the cooperative sector %ecame a spring%oard for political aspirants. !hogh the S)5 movement is relatively

new$ government interventions and s%sidies have already started showing negative reslts. !he patronage and

s%sidies provided to the S)5s %y government and the anchayats often lead to their politici"ation. !herefore$ de

care mst %e taken to ensre that government initiatives do not erode the fndamental principles of self-help and

empowerment of the poor.

Q Nee! to e6pn!the S)5 movement to States sch as 7ihar$ #ttar radesh$ 8adhya radesh$ 9rissa$ *a(asthan andin the ,orth-;ast +where the S)5 movement and micro-finance entreprenership is weak0

9verall K/O of the farmer hosehold +in rral areas0 have no access to any formal sorce of credit. In 8arch$ 2FF1$

K1O of the total linked S)5s of the contry were in (st for States of the sothern region vi". Andhra radesh$

Larnataka$ Lerala and !amil ,ad. !he figre went down to O in 2FF$


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;ven after many years of e&istence$ %y and large$ S)5s are heavily dependent on their promoter ,59s or government

agencies

Q 5#nnc#l ss#stnce toS(PIs n! ot"ers$pport#nst#t$t#ons

Gorty-five per cent of the total nm%ers of women S)5s of the contry are located in Andhra radesh. !his envia%le

position of the State is primarily de to the initiative shown %y promoter ,59s often known as Self-)elp romoting

Instittions +S)Is0 @ mentor organisations. If the S)5 movement is to spread across the entire contry$ there is need

to provide ma(or incentives to S)Is @ promoter ,59s. :rrently$ the financial spport to S)Is comes from the 8icroGinance Development and ;Bity Gnd +8GD;G0 of ,A7A*D. It is limited to an amont of *s.1FF per S)5 +formed

and activated0. !o attract more and more S)Is to the rral areas$ this Bantm of spport needs to %e revised.

Q Role o' 7#cro&5#nnce Inst#t$t#ons

8icro-credit is defined as provision of thrift$ credit$ and other financial services +sch as deposits$ loans$ payment

services$ money transfer$ insrance and related prodcts0 of very small amonts to the poor in rral$ semi-r%an and

r%an areas for ena%ling them to raise their income levels and improve living standards. 8icro-finance instittions are

those which provide sch micro-credit facilities. 8icro-credit is an instrment of %oth social as well as economic

policy. It opens p integral development processes sch as se of financial and technical resorces$ %asic services and

training opportnities to the nprivileged. Access to savings$ credit$ money- transfer$ payment$ and insrance can help

poor people take control of their financial life. It also empowers them to make critical choices a%ot investing in%siness$ sending children to school$ improving health care of the family$ covering the cost of key social o%ligations

and nforeseen sitations. 7t the most important of all$ an access to finance generates self- esteem among them.

ARC&has made the following recommendations and the 8icro Ginance Sector +Development and *eglation0 7ill$

2FFK needs to %e amended to inclde the following sggestions-

!he scope of 8icro-finance Services shold %e s%stantially widened to cover credit @ savings$ insrance$pension services$ money transfer$ isse @ discont of warehose receipts and ftre @ option contracts for

agricltral commodities and forest prodce.

!he activities of Section 2 :ompanies to the e&tent they concern micro-financial services as descri%ed nderthe proposed 7ill shold also %e %roght nder the prview of this legislation. )owever$ for their

management and other fnctions$ they will contine to %e governed %y the provisions of the :ompanies Act.

!he isse of interest rate charged %y the 8GIs shold %e left to the *eglatory Athority which is %eingcreated nder the proposed 7ill.

It shold %e ensred that if 8GIs are allowed to handle thrift @ savings and money transfer services$ theywold do so only as %siness correspondents of commercial 7anks.

/: 0#t" n e%e on t"e '$t$re, let $s e6plore Corporte&S(G l#n*)es 'or r$rl mr*ets:

*ral 8arket offers tremendos potential of growth for corporations %y making their prodcts and services availa%le

to these areas. Eot of interventions are designed %y varios companies to tap the rral market inclding designing

tailor made spply chain$ rral marketing campaigns$ prning marketing mi& elements and integrating social elements

to develop their %rand awareness and market for their prodcts. Apart from all these endeavors there is still asignificant area largely ntapped. Integration of S)5s with corporations as a part of their company policies in tackling

the isses of reach and market awareness is a win-win soltion. 6ith varios government initiatives inclding

romotion of S)5 formation$ microenterprise development$ microcredit %y GIIs and ,7G:s and skill training$ S)5s are

%ecoming via%le in their operations. Sym%iotic association of corporations and S)5s tili"ing distinctive competence

can prove to %e fritfl for %oth in the long rn %roadly in the form of market and socio-economic development. S)5s

are %roadly stdied on two %asis- 8icrofinance and 8icroenterprises. !he first aspect of S)5s +8icrofinance0 is widely

stdied and several changes have %een incorporated towards making S)5s via%le. Development of 8icro-enterprises

is relatively a new phenomenon. As per stdy of 8.Lnhaman$ 2F12$ S)5s can %etter promote 8icro-enterprises$

especially in rral areas.

!he real effort to spport S)5s in India$ however$ came in the late 1Fs when the central government of Indiaintrodced a holistic program$ S5SH- Swarna(ayanti 5ram Swaro"garHo(ana %ased on the grop approach for rral

development. !he S5SH approach was to encorage the rral poor to organise themselves into S)5s and to

independently take p via%le economic activities as micro-enterprises with spport from government s%sidies and


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%ank credit. 6ith the development of indstrial norms$ micro-enterprises are also coming p apart from large$

medim and small indstries. 8icro-enterprises can %e started and managed %y individals$ grops or S)5s. Intended

to strengthen via%le$ small %sinesses$ reslting in increased hosehold income and savings and ths alleviating the

crnch of economic poverty$ 8icro-enterprise development aims at %ilding self-esteem$ self-reliance$ encoraging

atonomy and creating a commnity atmosphere. It %ilds economic capital %y creating (o%s and generating income$

ltimately working towards commnity development in impoverished or nemployed areas.

!he report of the working committee of *7I +1

the role of ngos shgs development processes

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