THE “PROMISING PRACTICES” CASE STUDY SERIES: PROGRAMS, PRODUCTS AND SERVICES SPECIFICALLY DESIGNED TO REACH VERY POOR

PEOPLE

Activists for Social Alternatives (ASA), IndiaPrepared by: Gaamaa Hishigsuren, PhD

Activists for Social Alternatives (ASA) commenced operations in 1986 in Tamil Nadu state as a facilitating agent to empower the poor dalit women. ASA’s objective is to alleviate poverty and enhance the standard of living for rural poor women, dalits, landless labourers, small and marginal farmers on a sustained basis towards achieving a better socio-economic and political status by meeting their credit and savings needs for income generation activities, agriculture, and entrepreneurial ventures. After having seen a success in intermediating micro-financial services as one of its core activities and received a significant demand from the target poor around Tamil Nadu state, ASA decided to scale up. That is, ASA has set a goal to reach 100,000 members by 2005 and 200,000 members by 2010. More details on the country context as well as the origin, present status and future goals of ASA are discussed in the next sections.

I. Context

Country socioeconomic overview

According to World Bank, out of a total world population of 6 billion, a total of 1.2 billion people, live on less than $1 per day (World Bank, 2004). The majority of them live in Asia. Poverty is considered affecting over 40% of the population of South Asia. India alone is said to host about one third of the world’s poor. 70% of India’s over 1 billion inhabitants live in rural or semi urban areas. 26% or 260 million people live below the poverty line of $1 per day (World Bank, 2004). Poverty and rural development remains the number one issue in India.

Government estimates show that over 250 million people are left without proper access to credit despite a network of 33 thousand rural and semi urban branches of commercial banks, 14 thousand branches of Regional Rural Banks (RRBs) and 92 thousand outlets of cooperatives (Planet Finance, 2002). The poorest people very often do not comply with the norms that banks set for accessing credit. They neither have salary certificates nor the required collateral to show as security against the loan. In India, the poorest citizens access credit mostly through informal channels such as the village moneylenders who lend at very high interest rates whereby the result is that the poor therefore remain perennially debt-ridden which ultimately results in them loosing their dignity.

To date in India, over an estimated 8 million poor people (mostly rural women) benefit from microfinance services (Chakrabarti, 2004),1 thereby leaving a vast unmet demand for

1 This estimate is based on the outreach of NABARD’s bank linkage program as of 2002. At the time of the dissertation research, there was no systematic estimation of the number of poor reached by microfinance services, primarily because there were many non-governmental organizations and small projects whose total microfinance clients were not reported.

developing credit, savings and insurance activities which is termed as microfinance services targeted at what is until today referred to as the non-bankable sector. The perpetual dependence of the rural poor on various informal sources of credit, widespread unemployment, illiteracy and non-availability of technical support to such households demonstrate the high level of demand for credit. Estimates of the demand for credit in the rural areas, particularly among the unorganized workforce and the women vary from at least US$ 3.3 billion on the basis of a minimum need of US$ 44.4 per family to US$ 11.1 billion (Planet Finance, 2002). The latter estimate envisages that approximately 75 million households would need microfinance, of whom 60 million families will be in the rural areas while the remaining 15 million families would be in the urban areas. The annual credit usage by rural households is assumed to be Rs. 6,000 per household, while for the urban poor households an average of Rs. 9,000 has been estimated. In addition to the demand for credit, there is demand for other financial services, such as insurance. The credit estimates indicated above also do not include the requirement of funds for housing.

A rough estimate of the supply of credit to the poor includes about Rs. 97 billion disbursed by the banks during 1997-98 under various schemes including the government sponsored poverty alleviation programs (Planet Finance, 2002). Another Rs. 1,37 billion covering around 100 million families had been disbursed up to September 1998 through SHG linkage programs and other credit delivery channels of MFIs (Ministry of Finance, 1999). These data indicate a vast unmet demand for microfinance, and ample scope for growth of different kinds of MFIs and MF service providers.

Social development in Tamil Nadu

Poverty has been endemic and persistent in Tamil Nadu. The percentage of people below poverty line declined from mid-1950s to early/mid 1960s, but went up later. From the early 1960s to 1980s, about 50% of Tamil Nadu population was continuously below the poverty line (Tamilnadu People's Forum for Social Development, 2001). In 1993-1994, Union Planning Commission estimates, the poverty rate has come down to 35%.

Despite this positive progress, rural and urban disparities persist. While in 1973-1974, rural poverty (57%) was higher than urban poverty, in 1993-1994, urban poverty (39.8%) exceeded rural poverty (32.5%). The situation of the urban poor in slums has steadily deteriorated, leading to serious deprivations and dire lack of basic services in slums. Almost 25% of urban people in Tamil Nadu live in slums that grow at about 4.5% per annum (Tamilnadu People's Forum for Social Development, 2001).

According to the Ninth Five Year Plan of Tamil Nadu (1997-2002), Tamil Nadu is an educationally advanced state with a general literacy rate of 62.66% compared to the national average of 52.21%. It ranks third among major states with regard to general literacy and in female literacy rate. However, according to the NSS Organization survey conducted in 1998, there is disparity due to gender: 80% of the males are literate whereas only 60% of the females are literate. There is also disparity due to social status of the population. The literacy rate for the dalit, especially female dalits is lower than the state average: 39.5% for dalits and 29.5% for dalit women, while the state average is 63%.

Dalits in Tamil Nadu

In spite of decades of reservations and the government claiming to have spent millions of rupees for dalit welfare, Tamilnadu (TN) has a poor record of empowerment of dalit communities. Most of the caste clashes involving dalits, in the recent past in TN are linked to visible disparities in terms of access to productive resources like land and credit, to the disadvantage of the dalits.

Dalits, as per the 1991 census, form 19.18% of the total TN population, higher than the national average of 16.48%. Significant majority of the dalits (nearly 80%) still live in rural villages (Tamilnadu People's Forum for Social Development, 2001). Lands owned by dalits form only 7% of private lands in TN. This property is mostly unproductive and less fertile. Combining of the above two factors (80% of dalits live in rural villages and majority of them do not own land) results in most of the dalits being involved in agriculture and leading a precarious life as landless agricultural laborers. Most agricultural laborers live below the poverty line due to very low and highly seasonal income.

The right to education, like the right to own land, has been denied to dalits by the traditional caste system over the centuries. While overall in TN about 40% of the residents remain illiterate, as high as 60% of dalits are illiterate. The situation is even more tragic in the case of dalit women, vis-à-vis non dalit women. Compared to a nearly 50% literacy rate for non-dalit women in TN, not even 30% of dalit women are literate.

Great disparity between dalits and non-dalits is also found in terms of quality health care. The higher mortality rate and death rate for the dalits in rural areas is due to lack of health, under-nutrition and lack of awareness of health care.

According to the 1991 Census, the Scheduled Castes (SC) and Scheduled Tribes (ST) comprised 16.3% and 8% of the total population in India, respectively. Out of the total SC and ST population, 62.8% and 36.3%, respectively, were landless agricultural laborers. In Tamil Nadu state, 19.2% of the state population belonged to the SC category, according to the 1991 Census. They formed 22.9% of the rural population and 11.9% of the urban population. By the same report, the literacy rate was 46.7% among SC population, in which women’s literacy was 34.9%. Jacob & Bandhu (2002) claim that at least 80% of the total dalit population is concentrated in the rural areas and that the vast majority of them are landless agricultural workers, which reveal the situation of dalits as the bottommost layer of society. More than 85% of the total SC population in Tamil Nadu remains confined to agriculture, fisheries, leather tanning, scavenging and similar manual and sometimes demeaning occupations.

Women in Tamilnadu

TN Government has consistently claimed the superiority of its schemes for women’s welfare, vis-à-vis other states. However, the ground reality is cause for a grave concern. As per the 1991 Census, women in TN constitute 49.3% of the total population. Even though female literacy rate in TN has grown considerably from 1981-1991, shooting up from 35% in 1981 to 51% in 1991, the gender gap between male and female literacy rates has continued: 51% versus

74% in 1991. Of all women, the dalit and rural women are even more disadvantaged: 35% and 44%, respectively. Drop-out rates of girls have been higher than those of boys. While the drop-out rate of girls at the primary stage has decreased from 25% in 1984-85 to 16.5% in 1998-1999, these drop-out rates accelerate sharply at the higher levels of education.

Access to health care service is another concern. There are indications that medical services for women reach rural and urban areas disproportionately. While 95.2% of the mothers in urban areas receive institutional assistance for deliveries, only 47.8% receive such assistance in rural areas.

According to the NSS survey in 1993-1994, the workforce of women in TN (rural: 47.8% and urban: 22.8%) is higher than the national average (rural: 32.8% and urban: 15.4%). The work participation of women in TN has increased over the years. However, the types of works undertaken by women demonstrate the subservient position of women at work in TN. The majority of the working women are employed in cashew nut processing, cotton spinning, match factory and alike.

The working Group on Women’s Development in 9th Five Year Plan reported that “Violence against women should be viewed as one of the most crucial social mechanisms by which they are forced into a subordinate position. It is a manifestation of unequal power relations, which has led to men’s domination over and discrimination against women. Thus violence against women, throughout their life, comes to be socially sanctified.” Over the past decade, there has been a growing awareness of this disturbing phenomenon, and its long-term impact on the development and empowerment of women. The study conducted by People’s Watch reveals that the crimes connected to women are interlinked. For example, sexual harassment, eve teasing and molestation often end in either murder or suicide. Among the total 582 instances of violence against women, 191 are related to dowry related violence.

Women and Governance

The Indian Constitution, through the instrument of adult franchise and Article 15 which prohibits discrimination on grounds of sex, guarantees political equality to women. Such political equality is hardly exercised by the women of India, including in Tamil Nadu state. The 73rd Amendment of the Indian Constitution, by legislating a compulsory 33% reservation for women in all local governing bodies, has brought about a significant change. At the village Panchayats level, women form 33.7% of members and hold 33.8% of president’s positions. At the Panchayat Union level, they form 35.3% of members and hold 36.1% of chairperson’s positions. At the District Panchayat level, they form 34.7% of members and hold 35.7% of chairpersons’ positions. But, in other levels of political power and decision making the situation of women remain dismally low, both in the country and in TN. For instance, among the 27 male ministers in the State, there are just 2 women ministers (Tamilnadu People's Forum for Social Development, 2001).

Self-help Groups (SHGs) in Tamil Nadu

Self-Help Groups (SHGs) have been promoted by the state government in recent years. Originally initiated in May 1989, in 75 blocks of 8 districts of TN, with assistance from the International Fund for Agricultural Development (IFAD), the program as of 2001 covered all the 368 blocks in the 28 districts of TN. According to Tamil Nadu Corporation for Development of Women (TCDW) data of September 2000, the total number of SHGs in TN functioning in three phases was 45, 719. The total number of women involved was 806,369 with the total amount of loans originated equaling to Rs. 1,033,541. The repayment rate was 96%. A field sample study done for IFAD in 24 SHGs of varied grades in 8 villages in the 3 districts of Dharmapuri, Ramanathapuram and Madurai, though limited in its range of analysis, reports the following trends:

a. Approximately 68% of the members of the 24 SHGs were below the poverty line at the time of group formations

b. 43% belonged to the very poor householdsc. 21.5% of the members belonged to women-headed householdsd. 21% of the members belonged to dalit households.

The study also reported some weaknesses in the SHG model.a. There is no focus on particular categories of women headed households b. Targeting, particularly to the backward households, may require greater attentionc. Since most of the Government schemes are implemented through the SHGs, villages and

households that do not belong to SHGs are deprived of the benefits.d. SHGs need to directly address geneder specific causes of poverty; otherwise the gains to

women maybe contingent upon male support and short-lived.

Child labor

“The incidence of child labor was found to be relatively high in the rural areas of Andhra Pradesh, Kamataka, Tamilnadu and Punjab…” (Ministry of Finance, 1999). Estimates of child labor in Tamilnadu have been difficult to compile, given the highly unorganized, informal and unregulated nature of the economy, and the labor market.

The 1991 Census categorized 5.78 lakhs children (age 5-14) as child workers. NSS (round 43) calculated that there were 11 lakhs child laborers in TN. Calculations based on enrolment data of the Department of School Education show that nearly 28 lakhs children in the 5-14 age group were out of school in 1996-97. Experience at both policy and grassroots levels in states like Kerala has clearly shown that the only effective answer to the problem of child labor is to ensure that all children of school going age are in schools (Development, 2001).

Summary

While TN has benefited from improved social development in terms of literacy, health care, employment and human development index, great disparities still persist across women vs. men, rural vs urban, dalit vs. non-dalit and poor vs. wealthy. Thus, it is important to look at social development by categories, as opposed to as a whole at the state level, and direct the assistances to those groups most in need. Development programs need to be designed with

specific focus and strategy for such priority sectors, such as women, dalits, rural poor and children.

II. Purpose of intervention

It is in this context, the Activists for Social Alternatives (ASA) commenced operations in 1986 from Trichirappalli, which is the geographic center of Tamil Nadu state in India. ASA was founded by five social activists. It started out as a facilitating agency for poor dalit women to make them aware of the situation around them and identify solutions to address their issues through collective actions involving the women themselves. Having identified “patriarchy” as the fundamental cause of all class and caste related injustice, ASA seeks to directly work with women and empower them by mobilizing, organizing and educating them with a view to create a humane, just and alternative social order, thereby enabling overall development of the village communities. ASA believes that if women are empowered, their entire families can improve their living conditions, and when families are empowered, the entire community will prosper.

Description of target group/clients/members

ASA first identified itself with deprived sectors of the society in rural areas, including landless laborers, small and marginal farmers, quarry workers, tenant farmers, rural artisans and dalits. The target group was set as the poorest women among the rural poor as identified through Housing Index and Participatory Wealth Ranking exercises, as explained below. As of December 2004, ASA has reached 75,000 women members.

Each branch serves up to 3000 members through an administrative office staffed by seven persons - a branch manager, an accountant and the five field officers. Each field officer manages one cluster or 30 centers serving 600 women. A field officer attends weekly center meetings to monitor transactions (savings collection, loan disbursements and repayments) and discuss issues that members have. The members, themselves, make decisions regarding loan sanctions.

ASA has been using a combination of several tools for identifying the poverty level of its members. They consist of Housing Index, Participatory Wealth Ranking, level of income, asset (size of wet and dry land), caste (dalit vs. non-dalit), gender and geographical factor (poorer villages).

ASA’s expansion is both horizontally and vertically for the proper coverage of poor women.

Our Microfinance branches located for the easy accessibility to the rural poor women. Before

entering into a new area a team of ASA’s staff in the field of community development, natural

and human resources development and finance management go to the area to study the area, its

people and their economic condition. This survey is conducted through a format designed by the

experienced staff of ASA. Only, the drought prone backward villages where majority of people

living below poverty line are selected.

After selecting the area of operation the preliminary data is collected by contacting the

village leaders, government departments, Balwadies etc., to know the economic condition of the

individual family before conducting the PRA in that village. The actual economic condition of

the clients are determined after seeing the condition of their house hold and through personal

contact with them and their family members to know the particulars of the income of the family

and other details. Only clients from house holds whose land holdings are less than half acre of

wet land or one and a half acre of dry land and land less laborers are selected. After ascertaining

these criteria only poor women are selected as the target client of ASA.

To determine the poverty level of the clients the following are the specific metrics ASA is using.

Earnings: Rs. 18,000/ Annum - Below Poverty Line(BPL)Asset: The Land value of Very Poor must be

1. below 0.5 Acre wet land2. below 1.5 Acre Dry land.

Housing Condition: Below 8 points (see Appendix Housing Index)Participatory Wealth Ranking: Below 4 points (see Appendix Participatory Wealth Ranking)

These are the poverty targeting tools that have been used by ASA up to date. In order to improve the reliability of these tools, ASA is considering making modifications to its current tools and adding some new tools/indicators, such as food security. In India, the national poverty line is defined by two main indicators: income and calories intake. So, we at ASA are considering lining up our poverty assessment indicators with such national poverty assessment measures. We believe no single indicator or tool will itself be able to capture the multi-faceted nature of poverty. A combination of at least two tools/indicators will be more effective. This does not mean a complicated, long set of indicators.

ASA has been collecting the data on each member at entry. Below are results of the data from ASA member database.2

Housing Index: 52.5% of the members were very poor when they joined ASA, while 46.9% were poor and 0.6% were rich according to the housing index scores.

Household monthly income: 72.7% of the members have monthly household income below the national poverty line, while 27.2% had above poverty line at the time they joined ASA.

Caste: 77% of the total members belonged to (economically) backward caste when they joined ASA, while 19% were scheduled caste (socially) and 3% MBC.

Gender: 100% of ASA’s members are women.

Geographical distribution: 65% of ASA’s members were rural when they joined ASA, while 18% were semi-urban and 17% were urban.

2 We have also attached graphs of the member info analyses in PPT.

Age: 44% of members were at age between 21-30, whole 39% were at age between 31-40 when they joined ASA. This shows most of ASA’s members are between 21-40 when they join.

Average size of loans: Significant majority of ASA’s loans fall below $200 (almost 70%)

No. of loans taken: 76% of members have 1-3 loans, 21% new members (no loans yet) and 3% with 4-6 loans.

III. Description of Methodology

A. Summary of design concepts: Include rationale of intervention – What is your theory of change? What did you know about client behaviour that led you to this intervention? What are the intended impacts of your program? How are the inputs designed to achieve those intended impacts?

During its initial years, ASA started to form groups (sanghas) in order to facilitate participation in integrated development ventures. These ventures took into account the members’ prioritized needs and issues and facilitated access to sanghas and forging linkages both with sanghas and with external groups. However, this strategy of organizing the community members was found to have weaknesses, such as (1) the groups dissolved as soon as the particular issue around which they were organized was addressed, (2) there was no sustainable source of financial resources to keep the activities going, and (3) only a limited number of groups could be mobilized at a time as it was expensive for ASA staff to go to villages and facilitate the implementation of each project.

Having experienced the limitations of organizing women on ad-hoc basis, ASA felt that economic improvement of women would be the strongest and most sustainable base for their social and political empowerment. While still operating issue-based programs, such as watershed projects, programs for fair rural wages, alternative employment in gem-cutting, and alike, ASA observed that savings and credit program held the greatest potential for improving the economic status of large number of rural women. In 1995, ASA started adapting essentials of Grameen methodology, the microfinance program replicated all over Asia, and commenced its own microfinance program “Grama Vidyal (GV)”, meaning “Dawn of the Rural Poor”. Small amounts of credit were given to the poorest women for various income generating activities (IGAs) as well as consumption (such as funeral, holiday and wedding expenses. No collateral was required as the screening criteria are based on tradition, skills and knowledge of the particular IGA to be financed with loans from GV. Activities included cultivation, animal husbandry, petty trade, and small scale production serving local markets. ASA has grown into a major microfinance institution (MFI) that uses microfinance as an entry point for credit plus services, organizing the poor women for economic, social and political empowerment. ASA also strives to serve as a resource center and training ground for other MFIs and NGOs that desire to implement microfinance as a poverty alleviation and empowerment strategy.

Federative structure

The goal of Grama Vidiyal is to empower members and train them to become the users, managers and owners of the organization. Thus, ASA designed and put in place a federative structure which provided a venue for individual women members to voice their opinions and participate in the decisions regarding the GV program. It has also put in place a decentralized administrative structure comprised of federation, branches, clusters and centers. Women elect their own leaders and representatives at each of these levels.

At the foundation of ASA are the poor women. Once the women are identified as potential members, they are organized into a five-member group and elect their group leader. Homogeneity in terms of power—class, caste and gender—is ensured. The group members are not allowed to be relatives. Each member in a group shares responsibilities for her fellow members’ behavior and repayment of loans. The women in these small groups also give advice and support to each other if they face problems operating their small business or repaying their loans. Four of these five-member groups form a center. Members in each center then elect their center leaders for representation. The center leader plays an important role in monitoring the functioning of the groups as well as in encouraging members to actively participate in public activities, thereby promoting self-confidence. Members assume the leadership required to address their concerns. Four groups meet every week for center meetings, which serve as a platform for various other services targeted to set in the motion women’s empowerment, such as increasing awareness of issues related to health, nutrition, gender, political system, and government programs and alike. This is where the women get together to discuss about the issues they face in their household, business and communities, and identify ways to address those issues collectively by extending support to each other.

Programs and activities

In order to empower the dalit women socially, economically and politically, ASA believes it is crucial to provide integrated range of programs and activities. They are grouped as “Microfinance – GV” and “Credit plus – developmental” programs. Financial services are essential, but not sufficient. Thus, ASA makes sure that the members are provided with the non-financial services that they need.

Microfinance – GV programs

Credit: ASA offers three types of loan products: housing, consumption and income generating activities. Examples of income generating activities include animal husbandry, crop, trade, manufacturing and service; examples are tea stall, snack shops, cottage industries, small scale trading, basket making, crafts, milk business and alike. As of November 2003, MIS report shows that the total outstanding loan portfolio is Rp. 150 million (US$ 3.26 million) 70,000 borrowers. Regardless of the type, first loans are limited to Rp. 3000 (equivalent of US$60) and the maximum loan size is Rp. 10,000 (equivalent of US$200). The loan amount is divided in to 50 weekly installments. The loan term is one year. Interest rate was reduced from 18% in 2000 to 12% in 2003.

Savings: There are two savings products: compulsory and voluntary. In order to receive a loan, members are required to deposit a fixed amount of savings in their account. As of December

2003, the compulsory savings size is determined by the loan size. In addition, members are given an option to deposit any amount in their savings account. This is voluntary savings. Before December 2003, the voluntary savings were collected at the center meetings every week. Due to fraud and misappropriation of voluntary savings, ASA changed its policy and now, members have to make deposits at the branch office. The minimum voluntary savings amount is Rp. 10. An interest rate of 5% is paid on both types of savings. Voluntary savings can be withdrawn at any time, while compulsory savings are five year time-deposits.

Pension Scheme: The objective of this scheme was to provide financial assistance to Grama Vidiyal (GV) members in their old age, when they are not able to earn their daily livelihood. This scheme was launched in August 2002. The purpose of the program is to build security for the members and to avoid dependency on others. The members are given options to save from Rs20 to 100 every week depending on their savings capacity. They must continuously save for a minimum period of 5 years to maximum of 15 years to be eligible for a pension. In case of emergency need, a participant is allowed to withdraw the savings under pension scheme, but she loses her eligibility. If the members have continuously saved for five years, an amount equal to the total savings is given as interest. Then the pension is paid out either monthly or as one time bulk payment. The term of pension is determined based on the members’ preference.

Insurance Scheme: A poor woman’s death is a great loss to her family. In order to compensate the loss to the extent necessary to sustain the same economic standard of life and to protect the future of the family, an insurance program has been launched through partnership with private insurance companies, namely Allianz Bajaj & AMP Sanmar. The members remit their insurance premium yearly. Fifteen days after payment of the premium, the insurance takes effect. During the policy period of one year from the date of commencement, in case of death of the policy holder, the sum of Rs. 20,000 will be disbursed to the legal heirs. If the member is purposely killed in order to receive the policy amount then the amount will not be given at all to the perpetrator. Each and every year the policy has to be renewed by paying the premium. The death of the member is reported immediately to the center leader and the branch manager. The branch manager and the field officer of that center then go to the place of death and explain the rules and regulations for making a claim. The branch manager fills out the death details in the prescribed form and sends it to the Head Office. In turn, the insurance department staff informs the company. One week after the date of death of the member, the death certificate is obtained from the Village Administration Officer and sent to the branch. With the approval of Branch Manager, it is sent to the head office and from there to the respective company. The company pays the nominee within one month of receipt of a complete claim,

Developmental programs – Credit Plus:

Gender sensitization: ASA organizes workshops for the GV center leaders and their husbands on topics which include micro-credit, development of women, gender equality and empowerment processes. The focus is on creating awareness amongst women and men about women’s contribution in the productive and reproductive sectors and hence addressing important issues of sexual division of labor, inequality, and decision-making. ASA is also acting as a resource agency to impart training to other NGOs and government officials. During the fiscal year 2002-2003, ASA conducted state-level training on “Gender Sensitization” to the engineers

of Tamilnadu Water Supply and Drainage Board (TWAD) on three occasions. During February 2003, ASA also provided training on gender sensitization to students at Holy Cross College in Trichy; about 200 female students participated.

Capacity building: To move towards the full participation of the women members as users, owners and managers of the Grama Vidiyal, capable women members are elected by members, given training and are placed as Community Field Officers (CFOs). They are trained in leadership skills, financial management and accounting. The training is conducted at the branch as well as in the field under close guidance by the field officer. After completion of the training, CFOs play the role of the field officer on alternate weeks, when the field officer is scheduled to visit other centers. Their main duties are to conduct center meetings, make bi-weekly collection from the members, record transactions in the members’ passbooks, and act as facilitators to discover the rights-based issues that members are facing in their communities so that these issues are addressed collectively. Annual report 2002-2003 states there were 600 CFOs taking responsibility at their centers. Furthermore, one community leader is identified and elected by the members at each branch and is given training to act as an Additional Manager of the branch. They are responsible for carrying out the daily operations of the branch and regular field monitoring. They also facilitate other community members in identifying the socio-political and economic issues that they are facing and addressing collectively. As stated in the Annual Report 2002-2003, there were 22 such community leaders placed in the branches as Additional Manager (ASA, 2003).

Advocacy and campaign: There are two main right based programs that involve advocacy and campaigns as their instruments: (1) dalit empowerment and gender equity; and (2) land tenant and natural resource rights programs. To prevent violence and atrocities against women, especially against dalit women, ASA organizes empowerment training and workshops for the dalit NGO leaders and staff members in Tamilnadu. Gender Equity residential training was conducted to create an awareness of gender perspectives especially of dalit gender issues. Every year an international woman’s day campaign is organized in all the branch areas through the Grama Vidiyal federation. Through this program unity and integrity are strengthened and also awareness education concerning the problems relating to women, violence against women, and rights of women is provided. In terms of the second component, ASA has been organizing community members to restore the lands from the traditional land owners called zamindhars, according to the land tenant’s act, to the tenant families who cultivated the land for generations as bonded laborers. Mostly the land tenants are the poor dalits. The fore fathers of these land tenants were engaged by the zamindhars or landlords as agricultural laborers for meager wages. The wages were mostly in the form of paddy or grains, and were at a subsistence level. This would place in acute poverty and reliance on begging for more grains advances from the landlords. In turn the landlords advanced grain in return for bonding additional family members. ASA has been organizing awareness campaigns for land tenants. Many community leaders of land tenants and quarry workers in Trichy and Pudukkottai districts actively participate. Eminent lawyers and dalit leaders who were instrumental in the restoration of land tenants and panchami lands were invited to convey the legal aspects and share their experience. Other examples of ASA’s work in tenant rights advocacy include: in the Marungapuri block of Trichy District, all the tenants have formed a sangha to articulate their problems to the government. The land tenants

are given legal protection which prohibits the Zamindaries from selling their lands to third parties. The land tenancy rental is paid to the landowners through a demand draft.

Local governance: ASA’s annual report 2002-2003 states that ASA aims to increase the participation of women, especially of dalit women (ASA, 2003). ASA promotes their leadership, organizes dalit panchayat presidents and ward members for the purpose of creating space for them, helping them define and articulate their issues and enabling them to engage in existing institutions through proper guidance, training and networking. Members are trained on the operations of Panchayat Raj Institutions, local governance system and legal roles and responsibilities. They are also encouraged to participate in the local governance. Moreover, the members are provided with a loan to finance election campaigns and all the other members are motivated to support nominated members and vote for her. In this manner, the participation in the local self governance and creating the best administrators to attain sustainable development is enhanced. There is discrimination and disparity of opportunity for dalits and women in contesting in the panchayat raj election. Therefore a strong federation has been formed at the state level to bring a policy level change in the government. During the last election, 175 members stood for election; 103 members won.

Table: Elected membersWard members

Panchayat Presidents

Councilors Total SC BC

95 6 2 103 35 68

The elected dalit leaders were trained for two days on PRI. The roles and responsibilities of the panchayat leaders were also covered in the training program and 150 participants from 75 voluntary organizations participated in the program. Then, in February 2003, motivation training was organized at ASA Community College (ACC) for 157 elected Grama Vidiyal PRI leaders, including panchayat ward members, councilors, and presidents from Trichy, Pudukottai, Madurai and Dindigul districts. The goal of this session was to facilitate the empowerment of the PRI members through providing a platform sharing their achievements and strategies for overcoming the hurdles faced by them in implementing the development program in their PRIs. Apart from motivating the PRI members to function efficiently, an empowerment convention was also arranged to guide them regarding the recent legislation concerning local governance. Government programs like waste land development, drinking water provision during drought, utilization of the elected members’ fund and Prime Minister’s fund were highlighted during the convention and the PRI leaders were encouraged to fully utilize the government programs as well as other resources for the benefits of their constituents.

Networking: ASA’s Community College (ACC). ACC provides a venue for members, staff and management to undertake various group discussions, interact and network with each other, and conduct workshops and training. It provides residential training programs for members of networks of NGOs at the state level (MICNET), regional (NESA) and national level (INDNET).

Matriculation school: ASA believes in the importance of eradicating illiteracy, especially in rural communities in attaining its vision of poverty free sustainable communities. In 2001, ASA opened Vidiyal Model matriculation school, which provides an opportunity to get secondary

education to the children of the poor. Previously, education was available only to the rich and wealthy segments. Children in families who were below poverty line were not given any opportunity to go to school; instead they had to work to help support their families with living. ASA opened up a new era in this divine service “to give education to the needy children.” The enrollment of the school increased from 140 to 200 in 2002-2003. To address the constraints with transportation, ASA arranges bus service at nominal fee. The students are charged about US$1 per semester for tuition and are provided with uniforms. At the time of the field research, a bigger school building for 500 students was under construction.

Child Labor Elimination and Effective Rehabilitation Program: This program was commenced in the year 1997 with financial support of “CHEERS”, which is a government project to eliminate child labor and to educate and rehabilitate child laborers. Through this program, children who were previously working for living are given free education, stipend, vocational training, health care facility and note books. The best performing students are also identified and given assistance to continue to higher education. In 2003, ASA was running five such schools, training 140 school-aged children who were previously engaged in labor. In total, 234 children went through the schools and 203 children were admitted to regular schools. Apart from regular studies the students are also trained in skills such as basket-making, tailoring, fine arts, and computer skills. The family members of these children are also provided micro-credit to generate income to compensate for the loss in earnings engendered by sending their children to school.

Natural resource management: According to the Annual Report 2002-2003, three watershed programs were implemented in the Pudukottai district under the fund support of NABARD (ASA, 2003). Project activities are carried out in a participatory manner. Watershed committees are formed and action plans are developed by the committees. The major activities of the program include natural resource conservation and management, such as conservation of water ways, renovation of water sources, building awareness of watershed management and carrying out effective management systems. The watershed committee is formed with 30% women, 20% landless farmers, and 20% dalit members. After a complete training is provided by the project staff, all the responsibilities of implementing and running the project is given to the community watershed committee and one staff representative of ASA.

Business development services: As a strategy to achieve economic empowerment for women, ASA provides micro credit to its members and helps them to undertake micro-enterprise or income generation activities. In addition to the supply of micro credit, ASA provides business skill training, counseling through weekly center meetings, information on new business opportunities and marketing linkages. Examples of topics of business training include raw material procurement, processing, packaging, marketing, profit and loss accounts, and record keeping. To create market linkages, GV entrepreneurs participated in an exhibition conducted by the Government of Tamilnadu at Madurai. ASA has arranged a display of members’ products in all branches to create awareness and marketing their products to members and the public. At an annual International Women’s Day celebration, an exhibition of the different products of members’ businesses is held. Entrepreneurs are encouraged to build market linkages. Moreover, more successful micro entrepreneurs are invited to provide training to other members.

Vidiyal Information Service Provider (VISP): ASA was selected by Grameen Technology Center (GTC), USA to launch a project using developments in information and communication technology. They created six kiosks called VISPs in rural areas of Tamilnadu. VISP provides a range of information and communication services through the kiosks by establishing linkages with various resources, such as government departments, universities, research institutes, hospitals, travel agencies, markets and alike. Such linkage is expected to enable the rural masses to access resources at their doorstep and thus, save travel costs and time (opportunity cost of foregoing their daily wage). VISPs provide the following types of services: e-governance – this is in coordination with government departments to bring the rural mass closer to the government schemes and services; e-madal – the kiosk operators arrange e-mail delivery to the far off recipients; matrimonial – bride and groom database is made available in the kiosks for finding suitable matches among villagers; net-to-phone – overseas tele-talks at affordable rates, which will help the poor villagers to contact their significant ones living abroad; healthcare – online appointments, consultancy, health education and treatment information (VISPs also intend to facilitate feasible environment for rural medical camps and high quality health care at affordable cost for the target clients); agriculture, animal husbandry and allied services – updated information on animal husbandry, agricultural inputs, and current market rates is communicated to the villagers; computer education – high quality basic computer courses are provided to the members at affordable rates to bridge the digital divide; and e-commerce-online market place that connects sellers and buyers with an intention of facilitating better revenue for better products for both trading partners. In addition, VISP strives to facilitate linkages for providing services such as insurance and emergency services, such as police, fire and ambulance. Entrepreneurs are given training and loans to run the kiosks as a business in the incubation period. ASA also provides technical assistance and maintenance of the portal.

B. Process/steps in implementations: Summary of work plan, action steps and example of the typical process followed.

<Gama> I wonder if this section can be combined with the above

C. Method of measuring results: Briefly describe monitoring methodology.

ASA-GV has been among the pioneers in implementing two impact assessment tools – Internal Learning System (ILS) and Assessing the Impact of Microenterprise Services (AIMS). Furthermore, ASA has made significant commitment to institutionalize monitoring system to track the progress towards achieving its target group and social objectives, which are explained below.

ILS –Internal Learning System: ILS is a participatory impact assessment program of ASA designed to study the impact of the program by using simple pictorial diaries. This program was implemented to measure the real development of the members. Through the pictorial diaries, the women learn by themselves and make notes about how they run their enterprises successfully by getting loans from Grama Vidiyal. The aim of ILS is to create participatory monitoring and impact evaluation system that is internally-driven and responds to the on-going needs of ASA-

GV and its members to learn what is working and not working so that changes can be made in a timely manner.

Client Assessment and Monitoring System (CAMS): With an objective to institutionalize a cost-effective system to monitor and assess the members in terms of their satisfaction, impact, poverty level and desertion from the program in a participatory manner. The information is expected to assist the organization to learn the strengths and the gaps in the program and improve further. A common data base of new members was created and is updated at the time of loan disbursement. By conducting sample surveys and focus group discussions with current, former and potential members, the feedback is collected to ascertain the impact of the program and to make refinements in the program to make it more responsive to the needs of the members and ensure the poor is being reached. This is also a system to monitor the implications of ASA’s strategic decisions, such as scaling up on members and services.

Social performance management (SPM) system: Building upon these two assessment and monitoring systems, ASA is in the process of institutionalizing a comprehensive management system to manage its social performance. In this effort, ASA is collaborating with other practitioners and industry leaders in the scope of projects such as CGAP Social Indicator project and ImpAct Social Performance Management project.

IV. Results

ASA has undertaken a number of initiatives to assess and monitor the results of the program. To summarize, below are the results of three main assessments.

Exploratory assessment

In 2001, ASA, with a technical assistance from an independent consultant, carried out an exploratory assessment of its performance in terms of social objectives.3 In total, a random sample of 350 existing clients was selected from six branches which had operated for more than one year.4 Of those, 40 members were interviewed individually in order to identify the nature and dynamics of empowerment that resulted from participation in the program.5 Secondly, 24 focus group discussions were conducted to learn about the members’ satisfaction with the program as well as their recommendations for improvement.6 The average size of a focus group was nine members. The groups were formed homogeneously according to their branch locations and the length of time of their participation in the program (the number of loans was used as a proxy). While a set of indicators served as a semi-structured guide, the individual interviews and focus group discussions were exploratory in nature, and thus, sought to explore and identify other

3 For more info, contact Gaamaa Hishigsuren, PhD, at Gaamaa@ideasnet.org4 All of these are in approximately the same proximity to nearby district centers, and have similar political and socio-economic basis. It was the assumption that the level of empowerment would differ according to the number of years of participation in the program.? Therefore, the sample for both tools was selected from three major groups: 162 members taken 1-2 loans, 112 members taken 3-4 loans, and 75 members taken 5 and more loans. The number of members selected for more than 3 loans is fewer because 4 branches had been in operation for less than 4 years.? 5 16 had participated in the program for less than 2 years, 17 for 3-4 years and 7 for more than 5 years.6 90 invited members did not come due to sickness, Muslim holiday, family problems and unexpected rain. A minimum of five members was required for a focus group discussion to be conducted.

dimensions of impact that ASA’s programs had on its members’ lives (see the following tables for the list of sample indicators).

Table 1: Indicators used in the first exploratory assessment

Individual: Dreams/Plans for the futureMobilityAppearanceSavingsDecision-making

Community level empowermentParticipation in public meetings Addressing social and infrastructure issuesCaste issues

HouseholdNutritionAccess to Better HealthcareHousing condition Assets and house facilities Role transformationEconomic empowermentJobs created

Client satisfaction with:1. Loan size – 1st loan size & Maximum loan size2. Savings: – Compulsory savings weekly amount3. Insurance: – Amount of premium (Rs.500 lifetime or Rs.60 for one year4. Marketing: – Internal linkages – Vidiyal Shandi5. Federation & Networking – a) Addressing Socio economic, political and developmental issues b) Participation in local governance

The main findings were that ASA’s holistic approach to development implemented through provision of both financial and developmental services had contributed to positive changes in its members lives.7 Its micro finance services as a combination of credit, savings and insurance products have provided its members economic empowerment in terms of increased income, economic security and risk management mechanisms. On the other hand, its developmental services, such as beyond credit and credit plus led to changes in social and political lives of its members and their households, such as compared to the newer members, the longer term members were more likely to have participated and spoken in public meetings, visited important local government offices, and participated in election campaigns (Hishigsuren, 2000). As a result of both financial and non-financial programs, women’s social status has improved and members were able to contribute to successful efforts to address issues related to dowry, female child discrimination, marital issues, and alcoholism not only within their village, but also in other villages. The respondents reported that they became confident in taking collective actions to transform oppressive situations in their communities. These all contribute to the women’s increased self-confidence and ability to take control over decisions affecting all aspects of their lives.

Internal learning system

ASA has undertaken a three-year panel study of a random sample of its participants who are tracked for impact assessment purposes over a three-year period. Data gathered in the baseline period was analyzed on a cross-sectional basis comparing the results of older members

7 For more detailed information on findings, see Hishigsuren (2000).

with newly joined members. With only a few exceptions, the results show a significant level of positive socio-economic impact for ASA women participants and their households.

The preliminary results indicate that “ASA appears to be reaching its poor target group given the high level of landlessness, few productive assets, low literacy and poor living conditions for newly joined members (Hoponen, 2003).“ The results revealed positive changes in productive activities, social status and treatment at home and community, as well as their household living conditions and consumption standards, although there were a few negative findings such as higher indebtness for longer term members and higher utilization of loans in consumptions and male productive activities than in women’s productive activities. Furthermore, ILS has been perceived by poor women members and staff as empowering and having positive impact (Noponen, 2003).

Results of client assessment and monitoring system

Poverty outreach: ASA is reaching the women of poor households: 100% of members, at entry level, had household income per capita less than the state GDP

per capita 99.9% of new members lived in housing which was scored less than 8 points on Housing

Index qualifying those members as poor 100% of ASA’s members are women 71% of the members are served by branches located in rural areas 99.6% of members are Dalits.

Impact: ASA’s mission statement reads that ASA aims to achieve empowerment of women in three areas: economic, social and political. Accordingly, specific indicators were developed and measured impact in these three areas. Overall, the findings indicate positive changes in members’ living conditions. However, when mature members (those who had received more than 3 loans or had been in the program for at least 3 years at the time of the research) were compared to new members (those who had received no loans or only one loan at the time of the research) some of the results were not statistically significant. There were a number of areas where mature members had reported more positive changes than the new members. For instance, mature members were more likely to report that loans helped their families, that they participate in International Women’s Day and organize other members to address domestic violence and abuse issues. Few areas demonstrated statistically significant differences, and they are noted as “yes” in the last column of each findings table. For instance, the mature members were more likely to experience help from loans with respect to clothing and personal items and it was statistically significant compared to new members. Also, mature members were more likely to be confident in planning for the future compared to new members. However, the differences were not statistically significant, which means the changes may not be attributable to the program intervention.

Scaling up

According to the Annual Report of 2001/2002, ASA plans to reach 100,000 members by 2005 and 200,000 by 2010 (ASA, 2002). However, the current legal status as a Public Charitable

Trust poses limitations in achieving this goal of scaling up its outreach, such as constraints in mobilizing fund necessary to support growth (in the form of public deposit as well as private investment, namely external commercial borrowing) and threat from the Income Tax Department (possible withdrawal of charity status). Therefore, ASA is planning to transform the GV microfinance program into a non-bank finance company (NBFC) and Community Mutual Benefit Trust (MBT) with the following objectives: (1) To formulate an innovative and new model of Micro Community Banking Institution, (2) To reach more poor women members through a strong governance, finance and legal structure, (3) To raise adequate capital for the financial institution from all available sources; not only for start up but to remain capitalized to fuel the anticipated growth, and (4) To deliver financial services to the poor in an effective and efficient way. The proposed administrative structure is illustrated in Appendix 4.3.1.

A new profit oriented entity, Grama Vidiyal Microfinance Limited (GVMFL), a NBFC will be formed. The existing GV branches will function independently as profit organizations called Grama Vidiyal Community Mutual Benefit Trust (GVCMBT) which will have members organized in SHGs. Each GVCMBT will have around 175 SHGs of 20 members each totaling around 3500 members. The role of the GVMFL is limited to fund raising and acting as a conduit of funds for the GVCMBTs. This way, members are empowered by giving representation to the SHGs in the board of the GVCMBTs. The expected outcome of the transformation includes (a) limited liability company limit risk, (b) more professional approach is possible as attracting skilled professionals is easier, (c) savings retained at SHGs and MBTs act as a Special Purpose Vehicle for future lending, (d) community empowerment will be attempted, and (e) problems relating to staff and losses will be localized and the administration will be more flexible.

V. Resources Required/Cost to the institution

Evaluate the Cost Effectiveness and Sustainability

VI. Challenges and Pitfalls/Lessons Learned

Challenges of scaling up

Overall, ASA has significantly expanded its coverage, increased the number and type of activities, improved organizational sustainability and scaled up its strategies. Data gathered by the author in January 2004 point out that these results have been achieved despite a number of challenges. A number of challenges have been encountered during the scaling up process. This section discusses the main challenges that were identified during the individual and group interviews with the board members (4), funders (3), and management groups (2). Also, data is drawn from the review of archival documents, including annual reports of the last two years. The most significant challenges that were identified through these sources of qualitative data are summarized below.

Unfavorable legal and regulatory environment

The most significant challenge ASA has faced during scaling up is due to its legal status and recent regulatory decisions of the national and state governments. ASA is registered as a Public Charitable Trust and thus, is not allowed to mobilize public deposits. Such legal status constrained its ability to increase financial resources necessary to fuel the rapid growth. Also, ASA was affected by the policy of the Reserve Bank of India (the central bank of India) banning the receipt of funds from abroad for re-lending. This action is primarily because microfinance activities have expanded and become visible, thus leading to concerns among regulators that led to tighter regulatory policy on cash inflows from abroad. Next, the Tamil Nadu State Government issued an ordinance placing an interest rate cap on lending and applied it to MFIs. This is also primarily because lending activities expanded all over the state and became visible, causing the government officials to become concerned about the usury interest profits drawn from the poor.

These two decisions came as a jolt to ASA’s scaling up effort because both resulted in a narrower margin and limited sources of funding. ASA like other MFIs used to enjoy the on-lending fund from abroad at a lower cost. Due to the ban, ASA had to raise on-lending funds from the domestic financial market to finance its increasing portfolio. As the demand is higher and the supply is less, ASA experienced the challenge of a higher cost of funds. On the other hand, the TN Government ordinance on the Prohibition of Charging Exorbitant Interest of 2003, which formed a part of TN Money lender’s Act of 1957 placed a 12% cap on the maximum interest rate that can be charged on loans. This was aimed at controlling the activities of moneylenders and eliminating some of the practices known locally as daily vatty, meter vatty, and other money-lending activities. Unfortunately, the Act did not specifically exclude MFIs from the definition of moneylenders and their inclusion threatened the very existence of MFIs including ASA in TN. As a result, ASA had to cut down its interest rate from 18% to 12% per annum which left them with a much narrower margin to cover the cost of its operations. In addition, this single act led to serious challenges to ASA’s scaling up from various actors in the wider environment in which ASA operates, such as government, mass media, the public, police, local district administration and financial institutions.

Insufficient financial resources

As ASA has expanded the operation into new locations and increased the number of members, the need for on-lending capital has risen rapidly. While the number of members per branch increased from 2000 to 3000, the source of on-lending capital has not increased. Yet conventional financial institutions still do not feel confident in lending to and investing in ASA since it is an unregulated, non-profit Trust. Even those who did lend had a strict frequent repayment schedule, and usually offered short-term loans. Often, the sources of funding were unstable and insufficient causing a delay in loan disbursements to members. Also as a consequence of shortage of on-lending fund, ASA reduced the maximum size of loans and limit the number of loans to be disbursed each month.

Besides the increasing need for on-lending capital, ASA had to cover huge costs associated with creating capital infrastructure of 13 new branches within one year and improvements in the technology, as described in the previous section. Related to the rapid increase in the number of branches, was an increase in the number of field officers and general

staff, this required additional fund to pay for salaries and benefits. Finding money to cover such operational expenses as well as capital investment posed additional burden.

Lack of human resource

To manage the expanding portfolio and increasing array of financial and non-financial services, ASA needed to hire a greater number of new staff. However, attracting staff members who are not only competent, but also committed to ASA’s mission was most challenging. Training them to perform consistently required more staff time and higher operational expenses. During 2001-2002, ASA hired 62 additional field officers, more than double the number from previous year. This required significant time from existing staff to interview, select and then, train these new field officers. The following year, 2002-2003, ASA could not increase the number of field officers in proportion to the increase in the number of members because of several reasons: (1) difficulties in finding competent and committed candidates; (2) turnover of newly recruited staff members due to heavy workload and hard working conditions; and (3) insufficient financial resources to cover increasing operational expenses.

There are also problems with staff performance. There was a need for extensive, hands-on training. ASA had to transfer experienced staff to a new branch to train the newer staff on-site. On average, staff members were transferred every 3-4 months. Such frequent transfer led to several problems: (1) members expressed dissatisfaction because they had built a relationship with the previous field officer and now, every 3 month or so they encounter a different field officer; and (2) some staff, especially women staff were not happy because they had to leave their families behind and for married women in a conservative society like India, leaving the family and going to another village was socially unacceptable. Therefore, ASA started to promote the longer-standing members to become community field officers (CFOs). These members had been elected by the other members as a leader at their respective centers. The benefits of such strategy were perceived to be: (1) effective way to manage cost; (2) community members know the other members well because they have been in the community long enough to have more information and knowledge about them; (3) since they are required to have been ASA member at least for two years, they are familiar with ASA’s program and policy; and (4) community members are usually trustworthy and are not likely to run away with the money.

At the head office, ASA has been trying to find more professionals to manage the financial and institutional aspects of the operation, since ASA is planning to become a regulated NBFC. However, again ASA has not been able to find and keep professionals. As one of the management staff commented during the group interview:

“When professionals are recruited, they are not able to handle the workload, are not used to go to villages and work in villages with poor people, and do not know the local language.”

Since ASA operates mostly in rural areas of Tamil Nadu state, the majority of the members speak Tamil, the local language. This language requirement has restricted ASA to locate staff only from the local areas. Thus, ASA has not been able to bring in fresh new graduates or professionals from other states in India.

One interesting finding to be noted here is that despite the heavy workload and hard working conditions (such as long hours traveling to and working in villages), there seems no evidence of lower staff morale and a higher staff turnover among the existing staff. This applies to staff members who were with ASA prior to the scaling up, rather than the staff members who were recruited after the scaling up. All interviewees stated that the staff were very committed to the poverty alleviation mission of the organization and were willing to work with increased case load and hard conditions. The three front-line staff members who were interviewed said that the main motivation for them to remain working with ASA, despite the increased case load, was the personal satisfaction from the work they did and the positive impacts they see by helping the poor women. This social reward was what kept them going.

Unhealthy competition

All the stakeholders who were interviewed indicated that competition was a challenge for ASA as it attempted to expand its coverage. The three main competitors were moneylenders, other NGOs and the government. In India, particularly in the state of Tamil Nadu, the government was actively involved in delivering microfinance services. The government had set up Women Development Corporation (WDC) to provide microfinance services through Self-Help Groups. This was closely related to the policy of Reserve Bank of India and allocation of significant financial support from both national and international community to promote SHGs throughout India.

Due to such “unhealthy” competition, ASA had to close down three of the new branches and continues to face significant challenges as it strives to expand its coverage by increasing the number of branches and members. Increase in cost

The most significant increases in cost were related to investment in the capital infrastructure, improvement in technology and increase in the number of staff. Recruiting 200 staff in two years, training them in developmental and micro-credit concepts and sustaining them as a quality resource was a difficult and expensive task. The personnel cost for the 200 staff is huge for the institution to bear. In addition to the personnel cost, ASA experienced significant challenge of cutting down the expenses in order to meet the Tamil Nadu Government ordinance to keep interest rate at 12% per year. ASA reduced the interest rate to meet this requirement, but the cost of funding from financial institutions did not reduce (e.g. 14% from ICICI bank). Thus, the margin turned into negative. To address this negative margin, ASA had to reduce the number of staff. Some field staff members were degraded to other tasks with a lower salary such as looking after insurance and pension. Furthermore, as ASA increased the number of non-financial activities the cost of implementing those activities became a significant challenge especially because they were not generating revenue. On the other hand, the margin from financial services was negative due to interest rate deduction. For instance, to provide business development services, more staff time was required to give training and counseling to both members and field staff on various business skills, which implied an increasing cost but no income to cover that cost.

Incompetent management information system

Like many MFIs, ASA had rudimentary MIS and reporting systems when they started. However, as they scale up their operations and introduce new products and service, the current MIS did not have capacity to accommodate the new changes and scale. This forced ASA to seek new software, which results in an increase in cost. This not only involves the purchase price of the new software and related infrastructure, but also the fee for the developers to train ASA staff both at the head office and in the branches, staff time spent on working with the developers, and cost of implementation in the branch offices. The end result was high cost and the precious staff time foregone from regular operations.

Natural disasters

During the last several years, Tamil Nadu state experienced severe drought and shortage of rainfall in many of the districts. As a result, the purchasing power of the residents declined significantly. Those who earned their living from agriculture were most affected because of a significant decline in the harvest. As most of ASA’s members rely on agriculture as their source of living, their capacity to utilize loans effectively has deteriorated. As a result, it has become more challenging for ASA to screen the capacity of members’ investment options especially if it is related to agriculture. In the next section, the data analysis will demonstrate that there is a decline in the proportion of loans given for agriculture purposes, such as leasing or purchasing coconut trees and growing vegetables or fruits.

Summary

In summary, the respondents identified several key challenges ASA encountered during the scaling up process, namely, unfavorable legal and regulatory environment, insufficient financial resources, lack of human resources, and increasing costs. Interestingly, none of the participants in the study commented on deterioration of portfolio quality as a challenge. There were some other challenges that were mentioned but as less significant, including incompetent management and information system, and effects of natural disasters like droughts.

VII. Contact information/ sources of information

Gaamaa Hishigsuren, PhDDirector of Research and DevelopmentInstitute for Development, Evaluation, Assistance and Solutions

Email: Gaamaa@ideasnet.orgTel: (718) 309 16022833 46th street, Apt. 2Astoria, NY 11103