Women’s Access to Credit and Rural Micro-finance in · PDF fileRRB Regional Rural Banks...

The analysis and policy recommendations of this Paper do not necessarily reflect the views ofthe United Nations, its Executive Board or its Member States

Sub-Group on Sex Disaggregated Dataof the IAWG on Gender and Development

Database Issues:Women’s Access to Credit andRural Micro-finance in India

by

Dr. Joy Deshmukh-Ranadive

2002

UNDP, 55, Lodi Estate,New Delhi - 110003, India

Website - http://hdrc.undp.org.in

UNESCO HouseB-5/29, Safdarjung EnclaveNew Delhi - 110 029, India

Website - http://unescodelhi.nic.ine-mail - [email protected]

Acknowledgements

This study was carried out during June -August 2001. During the course of researching for the paper, the authorhad occasion to meet with several persons connected in important ways towards the functioning of microfinance in India. These were busy people, who were gracious enough to take time out of their schedules todiscuss and also allow access to their libraries and material, which have proved invaluable to the paper. Theauthor is grateful to them (Please refer to Annexure Four for list of persons).

The author acknowledges Mr. Niraj Kumar of Sa-Dhan, New Delhi for taking the trouble of going through aformer draft of this paper and offering helpful comments and suggestions. A special thanks to Mr. Alexander ofSa-Dhan for clarificatory help rendered.

Acknowledgements

GLOSSARYGLOSSARY

ARWIND Assistance to Rural Women in Non-farm DevelopmentASA Association for Social AdvancementCARE Co-operative for Assistance and Relief EverywhereCB Commercial BanksCDF Co-operative Development FoundationCGB Cauvery Grameena BankDHAN Development of Human ActionDRAS Debt Relief Assurance SchemeFDI Foreign Direct InvestmentFWWB Friends of Women’s World BankingHDFC Housing Development Finance CorporationHUDCO Housing and Urban Development CorporationICNW The Indian Co-operative Network For WomenIES Impact Evaluation StudiesIRDP Integrated Rural Development ProgrammeJRY Jawahar Rozgar YojanaLABs Local Area BanksLBS Lead Bank SchemeM-CRIL Micro-Credit Ratings India LimitedMCS Micro Credit SchemesMFIs Micro Finance InstitutionsMYRADA The Mysore Rehabilitation and Development AgencyNABARD National Bank for Agriculture and Rural DevelopmentNBFCs Non-Banking Finance CompaniesNBJK Nav Bharat Jagrati KendraNGOs Non-governmental OrganisationsNRI Non-Resident IndianPMTK Poverty Measurement Tool KitPRA Participatory Rural AppraisalPRADHAN Professional Assistance for Development ActionRBI Reserve Bank of IndiaPMRY Pradhan Mantri Rozgar YojanaREDPs Rural Entrepreneurship Development ProgramsRMK Rashtriya Mahila KoshROSCAS Rotating Savings and Credit Associations

RRB Regional Rural BanksSCBs Scheduled Commercial BanksSHARE Self Help Association for Rural Education and EmploymentSEWA Self Employed Women’s AssociationSHGs Self-help GroupsSIDBI Small Industrial Development Bank of IndiaSIFFS South Indian Fishermen’s Federation SocietyTPCs Training-cum Production CentresWDC Women Development CellsWWF Working Women’s ForumYCO Youth Charitable Organisation

Section I INTRODUCTION 1

1.1 The Initiative of Micro-Finance 1

1.2 Summits and Meetings on Microcredit 2

1.3 Issues Regarding Data 5

Section II THE VERTICAL APPROACH TO DATA ISSUES:

INSTITUTIONAL MAPPING 7

2.1 Data Availability 7

2.2 Judgemental Data 23

2.3 Data Requirements 26

Section III THE HORIZONTAL APPROACH: CONCEPTUAL MAPPING 28

3.1 Recommended Approach to Access Impact of Intervention on Poverty

and Empowerment 29

3.2 Recommended Approach to Assess Methods of NGOs 32

3.3 Recommended Sample of Questions to be Included in an IES 33

3.4 Recommended Methods to be Used in IES 34

Section IV SUMMARY AND CONCLUSION 36

4.1 Suggestions for Further Data Collection Efforts 36

4.2 Conclusion 38

ANNEXURES 40

BIBLIOGRAPHY 61

CONTENTSCONTENTS

LIST OF BOXES

Box 1 Credit for Women - 14 Point Action Plan 10

Box 2 Data Formats of NGO/MFIs 20

Box 3 Impact Evaluation Studies: Suggested Precautions 35

Box 4 Summary of Suggestions 38

1

SECTION I

1.1 The Initiative of Micro-Finance

The provision of micro-finance involvesinitiatives on the part of state and non-state organizations, in making availablevery small amounts of credit to poorclients. There is an acute need amongthe poor for credit that often forms thedeciding line between their survival andtheir succumbing to poverty. This needfor credit is both for consumption as wellas for production. In other words, creditis sought for basic requirements such asfood, as well as for income generationactivities1. The rationale of micro-fi-nance is based on the hypothesis thatthe poor can be relied upon to returnthe money that they borrow. Moreover,the repayment will also be on time. Ithas been proved that the poor are capa-ble of thrift and savings2. It is these ex-isting requirements and conditions thatare tapped by micro-finance initiatives.

Micro-finance as a development initia-tive has been justified on the groundsthat it is beneficial to both micro-financeinstitutions as well as clients. Since thepoor can be banked upon to return loanson time, it is believed that micro-financeand profits are not antithetical to eachother. In fact this intervention is beinghailed as the one method that will

address both development and promotemarket behavior. On the part of the cli-ents, it is believed that it is possible formicro-finance institutions to instill trustin the poor to give up their savings andto avail of micro-credit so that they canpull themselves out of the poverty trap.

The need of the poor for credit is notnew. So far, this need has been metlargely by informal sources such as mon-eylenders, support by kith and kin,friends, employers and landlords. Borrow-ing from these informal sources ofteninvolves exploitative rates of interest andresults in strengthening of systems ofoppression. The formal sources of creditin India have been banks and povertyalleviation programs promoted by thegovernment. The track record of theseformal sources has not been positive. Mi-cro-finance, in the form in which it isbeing promoted currently, circumventsthe drawbacks of both the formal andthe informal systems of credit delivery.

Among the real and potential clients ofmicro-finance, women are seen as themost reliable in terms of repayment andutilisation of loans. The gender dimen-sion of micro-finance is based on theunderstanding that the entire householdbenefits when the loans are given towomen. Further, it is argued that

1 It has been found that besides food, credit is also needed for health, housing and education. These needs arealso critical to survival. See, Stern and Stern, n.d.; Zeller, 2000

2 For a discussion of the capacity to save and the need for credit of the poor, see Rutherford, 2000

Micro-finance as adevelopment initiativehas been justified onthe grounds that it isbeneficial to bothmicro-financeinstitutions as well asclients

IntroductionIntroduction

2 WOMEN’S ACCESS TO CREDIT AND MICROFINANCE IN RURAL INDIA

micro-finance can empower womensince it instills a perception of strengthand confidence when the poverty trapis broken. Most micro-credit initiativesrequire the formation of small ‘self-help groups’ (SHGs) of 10-20 persons,who come together with the intentionof saving and rotating loans amongstthe members. Once these groups sta-bilize, they are accorded formal sup-port so as to widen their lending ca-pacities. The entire process of forminga group, of functioning in a sustainedmanner, of regulating finances, and be-ing mutually accountable, is in itself,empowering3. An important dimensionof SHGs is the peer pressure, whichthe members of a group exert amongstthemselves, which acts as a substitutefor formal collateral in that it is takenas the guarantee for loan repayment.

The initiative of providing credit to thepoor is not a new one in India. In themid-sixties, the Government set up co-operative societies to meet the creditneeds of people. Unfortunately, for avariety of reasons, this initiative did notmeet the purposes that it was supposedto fulfill. Following this, 1969 saw thenationalisation of banks in the hopethat the credit requirements of thepoor could be addressed in a more mean-ingful manner. These efforts were

supplemented with poverty alleviationprogrammes like the Integrated RuralDevelopment Programme (IRDP),Jawahar Rozgar Yojana (JRY) andPradhan Mantri Rozgar Yojana (PMRY),the results of which have also provedunsatisfactory.

Over the past three decades, women andtheir credit needs have been explicitlyaddressed by women’s organisations likeSelf Employed Women’s Association(SEWA) in Ahmedabad, Gujarat, Work-ing Women’s Forum (WWF) in Chennai,Tamil Nadu, and Annapurna MahilaMandal in Mumbai, Maharashtra. Theirefforts have resulted in far-reachingchanges in the lives of their women cli-ents. Even so, today, micro-finance isperceived as a paradigm shift in the qual-ity of micro-finance delivery4. Further,the push has come internationally, fromdonor agencies, UN organizations, andthe World Bank, all of whom are advo-cating micro-finance as the banner un-der which development can be achievedand poverty can be eradicated world-wide5.

1.2 Summits and Meetings onMicrocredit

Officially, the intervention of micro-finance has been heralded world-wideas the best cure for poverty. There have

3 The print media has particularly been highlighting the benefits of micro credit for women. NGO experiencesin this context are being reported regularly in newspapers. The library of Centre for Women’s DevelopmentStudies, New Delhi has such documentation

4 The new micro-finance initiative involves several features, such as - simple procedures for approving loanapplications; delivery of credit and related services at commercial rates of interest in a convenient and user-friendly way; quick disbursement of small and short term loans; clear recovery procedures and strategies;maintenance of high repayment rates; incentives of access to larger loans immediately following successfulrepayment of first loan; organisational culture, structure, capacity and operating systems that can support andsustain delivery to a significant and growing number of poor clients and encouraging and accepting savings inconcert with lending programmes.

5 There are several web sites available through which the international input towards micro-finance canbe located. A particularly useful one is Hari Srinivasan’s Virtual Library on Microcredit, whose address ishttp://www.gdrc.org

The initiative ofproviding credit to thepoor is not a new onein India

3

been a series of meetings and summitsthat have been held over the last fewyears, to design an approach that canbeen be followed by all countries acrossthe globe6. The meetings worked to-wards contributing inputs for the WorldMicro-Credit Summit Campaign held inFebruary 1997. The South Indian Con-sultation was held in Hyderabad, Indiaon, 23-24 August 1996. A meeting of20 practitioner NGOs, development fi-nancial institutions and developmentprofessionals arrived at a common po-sition and action plan. The Dhaka Dec-laration of the South Asian Coalition forthe Micro-credit Summit articulates thecollective consensus among 21 networksand agencies delivering financial serv-ices to over 4.5 million poor peopleacross Bangladesh, India, Nepal andPakistan. It endorsed the importance ofmicro-credit and emphasised thatmicrocredit should be approached as asocially responsible business. Prior to theWashington Summit, a group of NGOsand development finance institutionsmet in New Delhi on 23, January, 1997.The objective was to review the progressmade and to discuss modifications to thedraft documents released by the Sum-mit Secretariat in November 1996.

World Micro Credit Summit

The World Micro Credit Summit washeld in Washington DC in February1997. More than 2,900 people represent-ing 1,500 institutions from 137 coun-tries participated in the Summit. TheSummit announced a global target of

supporting 100 million of the world’spoorest families, especially women, withmicro credit for self-employment andother financial and business services bythe year 2005. This Summit receivedimpetus in the mid-1990s after theWorld Summit for Social Developmentin Copenhagen in March 1995. Four corethemes were stressed as part of a 55-page Declaration and Plan of Action.

l Reaching the poorest: 1.2 billion peo-ple - some 240 million families - inthe world are living in absolute pov-erty. This is the group that is targetedby the Microcredit Summit. The Sum-mit promotes the use of quality pov-erty measurements to identify thepoorest.

l Reaching and empowering women:Since women are supposed to be goodcredit risks, and women-run enter-prises yield benefits for their families,micro credit is seen as a tool to em-power women.

l Building financially self-sufficientinstitutions : This theme is based onthe experience of developing coun-tries which have shown that microcredit programs can improve their ef-ficiency and structure their interestrates and fees to eventually cover theiroperating and financial costs. TheCampaign offered daylong courses atglobal and regional meetings held from1999 through 2001, which trainedpractitioners in this regard.

6 There have been a series of meetings and summits that have been held to design an agenda that can been befollowed by all counties across the globe. The meetings worked towards contributing inputs for the WorldMicro Credit Summit Campaign held in February 1997.For additional information about meetings see Annex-ure One.

The World MicroCredit Summitannounced a globaltarget of supporting100 million of theworld’s poorestfamilies, especiallywomen, with microcredit for self-employment andother financial andbusiness services bythe year 2005

Introduction


l Ensuring a positive, measurable im-pact on the lives of clients and theirfamilies: Two impact evaluation stud-ies conducted by an NGO, FreedomFrom Hunger, showed that currentclients of its affiliate institutions inHonduras and Mali had experiencedpositive program impact at the indi-vidual, household and communitylevels. The studies showed the higherlevels of empowerment of clienthouseholds as compared to non-cli-ent households in terms of larger en-terprises, increases in personal incomeand household food consumption,savings and a feeling of self-esteem.

These four core themes of the SummitCampaign help to focus on both the tar-geted poor households as well as on thequality of the practitioner’s work. Pa-pers prepared for the Summit, substan-tiated these themes and have since beenupdated and used widely as guidelinesby practitioners in this sector7. After the1997 Washington Summit, by Decem-ber 1999 more than 1600 micro creditinstitutions joined the Summit’s Coun-cil of practitioners. In doing so each in-stitution had endorsed the Summit goalsand agreed to submit an Action Planwithin one year of joining the council.In November 1999, Institutional Ac-tion Plan grids were mailed for the year2000 to the 1,600 institutions. In Indiathe All India Women’s Conference wasdesignated to collect data for this sur-vey. All practitioner-Action Plans sub-mitted were reviewed by the Summitstaff. In an effort to verify the data, the

fifty largest institutions in Africa, Asia,and Latin America were asked to iden-tify donor agencies, research organiza-tions and networks that could take upthis task. The survey findings from thelarger survey of 1,065 micro credit in-stitutions and from the survey of thoseinstitutions whose data has been veri-fied are as follows:

l During the two-year period from, JanI, 1998 to December 31, 1999, therewas an increase of 82 percent morein the number of poorest clients. Thenumbers increased from 7.6 millionat the end of 1997, to 13.8 million atthe end of 1999. A total of 512 pro-grams reported a 16 percent increasein the number of poorest womenreached during January 1, to Decem-ber 31, 1999, which meant an increaseof 1.4 million women belonging tothe poorest groups.

l Two-thirds of the 512 institutions re-porting for the year January 1, 1999to December 31, 1999, used a pov-erty measurement tool other than anestimate. Of this group 102 institu-tions report using one of the two toolsfrom the Microcredit Summit Cam-paign’s Poverty Measurement ToolKit (PMTK). The first two measure-ments included in the PMTK were theCASPHOR House Index for use inrural Asia and the ParticipatoryWealth Ranking. This tool kit is sup-posed to aid institutions in assessingthe poverty levels of the clients theyserve8.

7 Visit http//www.microcreditsummit.org/papers/papers.html. See Annexure One for list of papers preparedfor Summit

8 A considerable amount of work has gone in to further the Summit Campaign’s agenda. See Simanowitz et al,2000, at above address.

The four core themesof the SummitCampaign help tofocus on both thetargeted poorhouseholds as well ason the quality of thepractitioner’s work

5

1.3 Issues Regarding Data

Availability and Requirements

The data generated by various micro-fi-nance initiatives are both quantitativeand qualitative in nature. Data can bescrutinized on the basis of two factors:-

l Availability and

l Requirements

Available data is the end product of anexercise of generation, collection andtabulation. Access to available data ismediated by the following factors:

l Genesis: The purpose behind the ex-ercise throws light on how the datahas been generated and collected.

l Method: A variety of methods and acombination of them can be used tocollect the data that is pertinent to thepurpose of the exercise. Data formatsin particular are important in under-standing the method.

l Adequacy: While methods can beevaluated individually for their con-sistency and correctness, their rel-evance to the genesis is also important.Data formats can be studied in orderto assess whether the method/s usedare adequate for the original purposeor not.

l Gaps: Ascertaining of the level of rel-evance and adequacy of data availableautomatically leads to identifying gapsthat exist in the available data. Thesegaps could emerge at any of the abovelevels, and could be due to a lack ofclarity about the purpose of data col-lection, methodological shortcomingsor inadequacies in data format/s.

The requirement(s) of generating datalinks closely to the ethos of micro-fi-nance per se. In as much as there are gapsin the available data and inadequaciesin the existing exercises, the data willfall short of enhancing an understand-ing of the intervention and its dimen-sions. This understanding is absolutelyvital if the initiative of micro-finance isto be harnessed for poverty eradication.

Wherever there are gaps, there is alsoscope for improvement both in the meth-ods of data collection as well as in theway the micro-finance initiative can becarried forward. Requirements couldinclude extensions of existing efforts,new methods of data generation andcollection for the existing purposes, andnew methods /new kinds of data fornew purposes. These issues will be high-lighted with explicit examples and ref-erences from available data efforts.

Two Approaches to Data Issues

Data issues with respect to micro-fi-nance emerge in as many ways as pur-poses for which data is collected. Bothquantitative and qualitative data shouldbe examined for their availability andtheir relevance to the requirements of aspecific micro-finance initiative. Thiscan be approached through either of twomethods. The first method traces datathrough the institutional mapping in thecredit delivery system and is called the‘vertical approach’ to data issues. Thisapproach illustrates how the initiative ofmicro-finance is carried out. The datapoints to the socio-economic health andperformance of the various participantswithin the institutional mapping. Thesecond method is to trace data through

Both quantitative andqualitative datashould be examinedfor their availabilityand their relevance tothe requirements of aspecific micro-financeinitiative

Introduction


the contextual mapping of the concep-tual rationale of micro-finance, throughthe intervention, to the impact that thiseffort has had on the lives of clients.This method is called the ‘horizontal

approach’ to data issues. This approachmatches impact evaluation studies withthe philosophy behind micro-finance andhelps to ascertain whether the ends havejustified the means.

7

SECTION II

2.1 Data AvailabilityThe available data can be scrutinizedusing the vertical approach. In such case,one finds that the data emerges in sixdifferent dimensions. Data throws lighton the following aspects of each of theparticipants in the institutional mapping:

l Status of the participant ( nature,composition, socio-economic pro-files)

l Organizational working (democraticnature, nature and turnover of staffmembers, laws, bye-laws)

l Operational functions of the partici-pant (availing of funds, disbursementof loans, mobilization of savings, sav-ing-investment-credit products avail-able, repayment rules).

l Performance of participant (financialhealth, sustainability, quantitativedata about intermediaries, judgmen-tal data regarding standardization, rat-ing, regulation and monitoring of par-ticipants, especially MFIs )

l Operational dynamics (inter-partici-pant, intra-participant, both in rela-tion to conflict resolution in the for-mation of groups and their relation-ships with other participants)

l Resultant best practice norms relat-ing to 2-5

Current Structure of the Micro-fi-nance Sector in India

The rural financial system in India hasevolved through two sets of financialinstitutions - formal and informal. Theformal system consists of a multi-agency approach, comprising co-opera-tives, public sector commercial banks(CB) and regional rural banks (RRB),private sector banks. The public sectorbanks and RRBs constitute the govern-ment sector. The cooperative sectorcomprises of district cooperative banks(within which are primary societies andurban banks) and primary land develop-ment banks. Private commercial banksconstitute the third channel. Since ex-isting private banks do not do much ru-ral lending, the Reserve Bank of Indiahas provided for the setting up of LocalArea Banks in the private sector to pro-mote savings in the rural sector and toprovide credit locally. The rules andregulations within the financial sectorgovern these institutions. The informalsystem consists of rotating savings andcredit associations (ROSCAS), traders,merchants, contractors, commissionagents, moneylender’s etc. Each ofthese are governed by norms and rulesthat have been formulated by the con-cerned instituion/person.

The Vertical Approach to Data Issues:Institutional Mapping

The rural financialsystem in India hasevolved through twosets of financialinstitutions-formal andinformal

The Vertical Approach to Data Issues:Institutional Mapping


The major objective of the nationaliza-tion of banks in 1969 and 1980 was toimprove the flow of institutional creditinto rural households, especially thepoor. Commercial Banks play a domi-nant role in rural financial markets incontemporary India. Priority sector lend-ing was one of the most important ten-ets whereby the RBI stipulated commer-cial banks to ear mark 40 per cent oftheir advances for priority sector lend-ing. Of this 18 per cent was for agricul-ture and 10 per cent for weaker sections.The rural credit market expanded sig-nificantly in the post- nationalizationphase. There has been a significant im-provement in outreach due to nation-alization and social banking. Betweenmid 1970s and mid 1990s bank creditin the rural sector increased by nearly240,000 million and rural deposits in-creased by about 410,000 million.Therefore, the share of both rural creditand deposits almost doubled during thisperiod. The poverty eradication pro-grams of the government also playedimportant roles in addressing the creditneeds of the poor. The Integrated RuralDevelopment Program (IRDP) was thelargest ever anti-poverty programlaunched during the Sixth Plan. It usedthe banking channel to direct assistance,which was a combination of credit andsubsidy to those below the poverty line.(Nair, 2000)

However, trends also show that the ac-cent on development banking of com-mercial banks weakened considerably inthe 1980s and 1990s. There has beendeterioration in the pace of increase inoutreach of commercial agencies and adecline in non-institutional sources in

the 1980s. There is also a decelerationin the growth of commercial bank creditto rural areas in terms of both disbursaland outstandings in the late 1980s andearly 1990s. Further there has been rela-tive fall in the proportion of bank creditflowing to the priority sectors, especiallyagriculture, since the mid-1980s. Thereis a close connection between the com-mercial banks outreach to the ruraleconomy and the government’s commit-ment to anti-poverty programs. It maybe argued that the so-called develop-ment outlook of the banking sector isin fact a reflected one and does not byitself signify its belief in the bankabilityof the poor. The IRDP targets wereachieved because the banks were com-pelled to do so. Several relaxations weremade with respect to eligibility criteria,procedures, rate of interest, collateralsecurity and guarantee for the loan etc.However, the viability of loans is opento question and the recovery perform-ance has also not been satisfactory.(ibid.).

A dilemma seems to exist between de-veloping a sound banking system andsimultaneously dealing with poverty.There appears to be a mismatch betweendevelopment goals and what is expectedof economic/financial prudence. Bankshave generally shown disinclination toservice the poor who are distanced spa-tially and metaphorically from them andhence whose risk profile is difficult toassess. In the recent years, economic fac-tors eventually took precedence over thesocial agenda. Regional Rural Bankswhich were set up with the primary ob-jective of meeting the credit needs ofthe weaker sections, were advised to

A dilemma seems toexist betweendeveloping a soundbanking system andsimultaneouslydealing with poverty

9

lend 60 per cent of their incrementalcredit to the target population in the early1990s. This was later brought down to40 per cent and by end 1990s it was 10per cent. Further, frequent loan waiversand write-offs, which were steps takenin political interests, hastened the proc-ess of the erosion of the rural creditdelivery system9. Now there seems to bea general agreement among the bankingauthorities and development profession-als that development agencies in thenon-governmental sector should becalled upon to act as intermediaries inthe delivery and management of ruralcredit. The formal sector consequentlytook the initiative to develop a supple-mentary credit delivery mechanism byencouraging non-governmental organi-zations (NGOs) to act as facilitatorsand intermediaries10.

Currently, the rural micro-finance sec-tor is dualistic in nature. The formalstructure has a legal and regulated com-ponent, which provides credit and otherservices to the non-formal sector. Thenon-formal structure largely comprisingNGOs, SHGs, clusters and federationsof groups operate outside the legalizedstructure and have demonstrated con-siderable organizational flexibility anddynamism in responding to the demandsat the grass roots. The institutional map-ping of the participants involved in mi-cro-finance interventions spans fromregulatory bodies (like the Reserve Bankof India and NABARD), to apex bod-ies that disburse bulk credit for

onlending to intermediaries that are in-volved in providing financial services toclients, and finally to the clients them-selves who are the beneficiaries of theinitiative11.

Institutional Mapping of Micro-Finance Participants

Regulatory bodies

Apex bodies

Intermediaries

Clients

Within the institutional mapping of mi-cro-finance participants in India, theplayers constituting the regulatory bod-ies, apex bodies, and intermediaries,comprise those responsible for the sup-ply side of the intervention. The clientsconstitute the demand side of the inter-vention. The regulatory body is prima-rily the Reserve Bank of India.NABARD also performs a regulatoryrole, although this bank features amongthe suppliers of bulk credit too. The apexbodies, also called the wholesalers, arethose who supply bulk credit for on-lending purposes. Some of the majorinstitutional sources of bulk credit to theIndian micro-finance sector consist of

l NABARD, Mumbai;

l Small Industrial Development Bankof India (SIDBI), Lucknow;

l Rashtriya Mahila Kosh RMK, a

9 For an account of the rural credit delivery system in India see Karmarkar, 199910 Initially, NABARD had a pilot project in Karnataka (1991-91) whereby self-help groups were linked with

formal banks mediated through an NGO. The project was apparently successful. This led to its institutional-izing in 1996 by the RBI

11 For additional information about participants see Annexure Two

There seems to be ageneral agreementamong the bankingauthorities anddevelopmentprofessionals thatdevelopmentagencies in the non-governmental sectorshould be called uponto act asintermediaries in thedelivery andmanagement of ruralcredit

The Vertical Approach to Data Issues: Institutional Mapping


government initiated NGO under thedepartment of Women and ChildDevelopment;

l Housing and Urban DevelopmentCorporation (HUDCO), New Delhi;

l Housing Development Finance Cor-poration (HDFC), Mumbai;

l Friends of Women’s World Banking(FWWB), Ahmedabad;

(SIDBI, 2000b)

The next components of the institu-tional mapping are the intermediaryagencies, which comprise of banks ofvarious kinds-scheduled, regional ruraland co-operative, micro-finance institu-tions and facilitating NGOs.

Regulatory Bodies

Regulatory bodies like the Reserve Bankof India and NABARD, perform the roleof officially regulating micro-finance in-terventions and providing directions forpolicy. The RBI sees the provision ofmicro credit by banks as an importantinstrument for poverty alleviation,

particularly in the rural areas, as it raisesthe productive capacities of the benefi-ciaries. In keeping with this philosophy,in February 2000, banks were advisedto make micro credit an integral part oftheir corporate credit plan. Since thenmicro credit is reckoned as part of thebanks’ priority sector lending. Separatedata about credit flow to women is to begenerated by the banks and quarterly re-ports submitted to the RBI, which willcreate a separate database for women.Data are to be collected separately formicro credit, for credit to the small scale,medium scale and large scale industries.Already, most banks have started collect-ing data, as required, from the branches,on a periodic basis. The data is consoli-dated at the head offices. A 14-PointAction Plan, which concerns credit forwomen, was outlined for implementationby banks. By the end of the first year ofthe implementation of this Plan, factualdata would be available on the numberof women financed, the amount ofcredit flow extended to women as alsothe percentage to net bank credit. It isrecommended that the RBI should pre-scribe a special format for data collec-tion from the banks so that the data isavailable separately for amounts ad-vanced to women entrepreneurs for mi-cro credit, for small/medium/large scaleindustries12.

12 For details, see Bolina, 2001

NABARD is the primary agency for co-ordinating and facilitating the extensionof rural credit. Commercial banks sup-plement the efforts of NABARD andco-operative banks, in meeting thecredit requirements of rural India. In the

The RBI sees theprovision of microcredit by banks as animportant instrumentfor poverty alleviation,particularly in the ruralareas, as it raises theproductive capacitiesof the beneficiaries

l Redefining of banks’ policies/longterm plans;

l Setting up of women cells;

l Simplification of proceduralformalities;

l Orientation of bank officers on gen-der concerns/credit requirements ofwomen;

l Publicity campaigns for creatingawareness about credit facilities;

l Entrepreneurship development prog-rams/training facilities for women;

Box 1: Credit for Women - 14 Point Action Plan

l Specialized branches for women;

l Motivational strategies to enthusebank officers/staff;

l Monitoring system;

l Data collection;

l Strengthening of existing schemes;

l Increasing the limit for not obtainingcollateral security;

l Involving NGOs/SHGs/women’scooperatives;

l Mahila Rural Cooperative Bank.

11

year 2000, the RBI set up a special cellto liaise with NABARD and other insti-tutions for augmenting the flow ofcredit. A Task Force was instituted bythe Bank to evolve an organizational andregulatory framework for mainstreamingmicro-finance operations. Prior to that,the SHG – Bank linkage was introducedby NABARD in February 1992, as aPilot Project to cover 500 SHGs withpolicy back-up from the RBI. NABARDbrought together the SHGs already pro-moted by NGOs, and the banking sys-tem, to provide various financial serv-ices. The launch was tried in Karnatakaand Tamil Nadu. The pilot phase wasfollowed by the setting up of the Work-ing Group on NGOs and SHGs by theRBI in 1994. This came up with wide-ranging recommendations on the inter-nalization of the SHG concept as a po-tential intervention tool in the area ofmicro-finance.

Totally, under the linkage program,81,780 SHGs were provided microcredit by banks during 1999-2000 bring-ing the cumulative number of SHGscredit linked to 114,775 as on 31st March2000. NABARD has also introducedthe concept of bulk lending to NGOsin the form of revolving fund assistanceto be provided on a selective basis toNGOs who find it difficult to secureloans from banks for on-lending toSHGs. The amount of such assistance,cumulative upto September 1999 isRs.110.7 million. NABARD provides100 per cent refinance assistance tobanks at an interest rate of 6.4 per centper annum for financing SHGs. Cumu-latively till March 31, 2000, the bankloans disbursed to the SHGs aggregated

Rs.1929.8 million while NABARD’s re-finance availed of by the banks aggre-gated Rs.1501.3 million. NABARD hasalso been providing grants on a selec-tive basis for the capacity building ofthe NGOs that are involved in micro-finance activities. The cumulative grantassistance sanctioned till March 31,2000, for promotion and linkage ofSHGs, aggregated to Rs.24.8 million,covering 72 NGOs and 16,911 SHGs.Additionally, NABARD also providesother types of support, such as, for train-ing of bank staff, NGOs, and govern-ment agencies involved in the area ofmicro-finance. As on 31 March 2001,the regional spread of SHGs was as fol-lows - the cumulative number of SHGscredit linked in the northern region was3222, in the north-eastern region was196, in the eastern region was 9298, inthe central region was 15256, in thewestern region was 7983 and in thesouthern region was 78720. Totally inIndia 114,775 SHGs were credit linkedas on 31 March 2001.

NABARD’s credit schemes are genderneutral. Focussed attention to gender is-sues in credit and support services, isgiven through the women’s cell set up byNABARD where credit is provided in theform of refinance assistance to the bank-ing system in respect of their advancesfor agricultural, allied sectoral rural cot-tage and village industries activities.NABARD has brought out a number ofschemes exclusively for the benefit ofwomen- entrepreneurs. These are

l Assistance to Rural Women in Non-farm Development (ARWIND)

l Support for setting up women devel-opment cells (WDC)

NABARD’s creditschemes are genderneutral. Focussedattention to genderissues in credit andsupport services, isgiven through thewomen’s cell



l Assistance for Marketing of Non-farm Products of Rural Women(MAHIMA)

l Gender Sensitization Programs

NABARD has also sanctioned a numberof credit-linked promotional programsin the form of Rural EntrepreneurshipDevelopment Programs (REDPs), Ar-tisan guilds, and Training-cum Produc-tion Centres (TPCs), with the intentionof enhancing women’s entrepreneurialcapabilities and settling them into self-employment and wage employment.

The research study ‘Micro-finance Regula-tion in India’ (Sa-Dhan, 2001), unravelsthe features of a self-regulatory mecha-nism in micro-finance in India. The se-quel to the report of the National TaskForce on Supportive Policy and Regula-tory Framework for Micro-finance, hadsuggested the need to encourage thedevelopment of a self-regulatorymechanism and had also defined someof the broad parameters under whichsuch a regulatory mechanism could begiven shape. The above study after re-searching into the existing micro financescenario, recommends that regulationshould not be left to the market nor tothe government. The role of the gov-ernment is seen as one that provides anenabling environment and does notproactively direct and control the activi-ties of the participants. The potentialobjectives and benefits of self-regula-tion lie in

l Protecting the depositors,

l Offering saving services,

l Gaining access to refinance facilities

l Lower refinance costs,

l Enhancing the image of the sector,

l Helping MFIs build capacity and im-prove performance,

l Pre-empting regressive governmentintervention.

The report lists the participants thatshould come under self-regulation as -the SHGs; the Federations of the SHGs;NGO MFIs; NGO facilitators; Co-op-eratives; other formal MFIs like banks,NBFCs, and LABs. The Self-RegulatoryAuthority (SRA) is expected to verify ifthe MFIs are really serving the poor, setaccountancy rules, reporting and disclo-sure requirements, establish prudentialnorms and performance standards, andaccredit the complying MFIs. It is alsoexpected to give credit ratings and pro-vide deposit insurance financed fromcontributions of members. The studyrecommends that even if regulationnorms and standards are established bythe MFIs themselves, supervision mustbe done by an independent institution.(Sa-Dhan, 2001)

Apex Bodies/Wholesalers

Apex bodies are responsible for the dis-bursement of bulk credit for on lendingpurposes. Following are some of themajor apex bodies operating in the In-dian micro-finance sector. It must benoted here that NABARD is also anapex body along with being a regulatoryone. As examples, below are outlinedthe operations of SIDBI and RashtriyaMahila Kosh (RMK).

SIDBI had launched the Rs.1000 mil-lion SIDBI Foundation for Micro Credit

The role of thegovernment is seenas one that providesan enablingenvironment anddoes not proactivelydirect and control theactivities of theparticipants

13

(SFMC), in November 1998. It is a fullyfunctional separate department ofSIDBI since January 1999. The Foun-dation is supposed to assist NGOs andvoluntary organizations on soft terms,which would in turn extend micro creditto poor people. As of March 31 2001,the SFMC has 49 MFI clients. It has anoutstanding loan portfolio of Rs. 332million. 150,000 are ultimate clients, outof which 80 per cent are poor and 70per cent are women. (Mohan, 2001).

SIDBI has designed a number ofschemes and programs to supportwomen entrepreneurs with financial as-sistance as well as providing training andextension services. These schemes are,Mahila Udhyam Nidhi, Mahila VikasNidhi, Micro Credit Schemes (MCS).Under the MCS fund, support is pro-vided to well managed NGOs to on-lendto rural poor women to set up their ownmicro enterprises. Wherever SHGs ex-ist, the NGO lends to them, and theyin turn advance the credit to their mem-bers. The cumulative assistance underMCS for the period March 1999, aggre-gated Rs. 307.1 million, channelisedthrough 142 NGOs/ MFIs across 24states/union territories benefiting over112,000 rural poor, of which more than90% were women. In all, 97 programshave been supported with the assistanceof Rs. 6.7 million for providing trainingto 1550 NGOs in the areas of creditusage, management, monitoring and ad-ministration on credit programs.

The Government of India establishedthe Rashtriya Mahila Kosh (NationalCredit Fund for Women), in 1993, witha corpus fund of Rs. 310 million. Thisinitiative was taken since there was a

need for a quasi-formal credit deliverymechanism which was client friendly,had simple and minimal procedures, dis-bursed credit quickly and repeatedly, hadflexible repayment schedules, linkedcredit to thrift and savings, and had lowtransaction costs. The Main LoanScheme of the Kosh aims to providecredit to poor women both in the urbanand rural areas for income generationactivities (unless specifically sanctionedfor other purposes). Specifically, womenbelow the poverty line are eligible forsupport. The credit facility is channeledthrough eligible organizations to needywomen without the insistence of col-lateral. During the year 2000-2001, to-tally in the country, RMK attended to46,559 borrowers. The cumulativenumber of borrowers since inceptionupto 31, March 2001, was 406,942. Dur-ing the same period, 861 new NGOsavailed of RMK assistance and 354 re-peated previous experience. In all, theamount sanctioned by RMK wasRs.1034.73 million and the amount dis-bursed was Rs. 765.53 million for thesame period.

Intermediaries

The intermediaries consist of institu-tions that act as the link between theapex bodies and the clients. Public sec-tor banks are currently extending creditfacilities to women entrepreneurs bothunder Government sponsored schemesand under other schemes designed es-pecially for women. The credit extendedby Scheduled Commercial Banks (SCBs)primarily cover priority sector lendingand the sponsoring of Regional RuralBanks (RRBs). As reported in March2000, the total priority sector lending of

The Main LoanScheme of theRashtriya Mahila Koshaims to provide creditto poor women both inthe urban and ruralareas for incomegeneration activities



PSBs constituted 43.6% of net bankcredit. The total priority sector lendingof private sector banks as of the samedate was 38.7 % of net bank credit. TheLead Bank Scheme (LBS) of the RBI issupposed to enhance the proportion ofbank finance to the priority sector. Thisscheme co-ordinates the activities ofbanks and other developmental agen-cies. As on 31, March 2000 the LBS havecovered 575 districts. The co-operativebanking system in India is structuredalong the following lines - the urban ar-eas are served by the Primary (Urban)Co-operative Banks, whereas the ruralareas have two sets of institutions dis-pensing short term and long term creditrespectively. The former group consistsof the State Co-operative Banks at theapex levels, the District Central Co-op-erative Banks at the intermediary level,and the Primary Agricultural Credit So-cieties at the grass root level. Under thelong-term credit structure, the State Co-operative Agriculture and Rural Devel-opment Banks are at the apex level, thePrimary Co-operative Agriculture andRural Development Banks are at thebase levels. NABARD has been work-ing towards linking more self-helpgroups to the banking system alsothrough the co-operative banking sys-tem. Further, in a significant move, sinceApril 2000, micro credit/rural credit hasbeen included in the list of eligible non-banking financial companies’ (NFBC)activity for being considered for FDI/OCB/NRI investment. This wouldcover extension of credit facilities at themicro level to small producers and smallenterprises in the rural and urban areas.

Besides the data that is available withthe RBI, NABARD and SIDBI, there areindividual case studies of banks andtheir efforts to promote micro-financeamong the rural poor. For example, theCauvery Grameena Bank (CGB), a Re-gional Rural Bank (RRB) sponsored bythe State Bank of Mysore, was launchedon October 2, 1976. It now operates inthree districts in Karnataka with a net-work of 118 branches. CGB has beenactively financing SHGs prompted byNGOs since the launch of NABARD’spilot project during 1992-93. In 1995-96 CGB was identified as the first RRBin the country to participate inNABARD’s project of promoting RRBsas Self-help Promoting Institutions(SHPI). By March 1998, the bank hadformed 143 SHGs of which 92 are wom-en’s groups with a total membership of2,135. The groups were able to gener-ate savings of Rs.1,320,000 upto March1998. (Rao, 2000)13.

NGOs are the most preferred MFIs asthey are particularly good providers ofsocially oriented financial services (Nair,2001) Many of the NGOs have com-pletely changed their strategies of so-cial intermediation – from issue basedactivities to financial intermediation.Some of them are on their way to be-coming formally established, self-sus-taining commercial banks. The transitionis not a simple switching from one ac-tivity to another. There is a radical trans-formation in the way NGOs have tofunction. These require dramaticchanges in approach (from intensivearea-centric planning to extensive tar-get oriented planning); in the language

13 Also see, Sharma, 2000; Jindal, 2000; Gain, Malhotra and Dheulkar, 2001; Malhotra and Chauhan. 2001.

NGOs are the mostpreferred MFIs asthey are particularlygood providers ofsocially orientedfinancial services

15

of communication within the organiza-tion; in the language of communicationbetween the organization and the peo-ple; the skills of functionaries in the or-ganizational culture and in administrativepractices. The Government of India hasinitiated schemes that are directed to-wards extending micro credit towardsrural poor households. Some schemes areexclusively directed towards women. In-termediaries are instrumental at variouslevels and in different capacities, in im-plementing these schemes.

The SIDBI Best Practices Handbook inMicro-finance describes three types ofNGO-MFIs depending upon the amountof savings they have mobilised. The firsttype are without deposit taking or havemobilised savings of less than Rs.0.2 mil-lion. The second type are those with mo-bilised savings more than Rs. 0.2 millionand less than Rs. 2.5 million. The thirdtype of NGO-MFIs are those with mobi-lised savings more than Rs. 2.5 million.

NGO-MFIs are functioning in diversemanners thereby generating differentmodels of micro-finance interventions.The SIDBI Handbook has outlined four-teen different types of generic ap-proaches that have evolved in India.These are

l The basic SHG model and minor vari-ations thereof: Examples of these arePRADHAN (Professional Assistancefor Development Action), DHAN(Development of Human Action)Foundation, MYRADA (The MysoreRehabilitation and DevelopmentAgency), CARE (Co-operative forAssistance and Relief Everywhere)India, NBJK (Nav Bharat Jagriti). This

type mobilises clients into self-helpgroups, which are mostly of women.Shared problems of poverty, oppres-sion and gender-based discriminationare used as entry points after whichcredit and savings are introduced. TheSHG is not too large or too small andfunctions on a democratic basis. Sav-ings are a compulsory feature of theSHG activity. Only those SHGs whichhave performed well and have sus-tained, are assisted with linkages withbanks and other financial intermedi-aries like federations and clusters.Hence the NGO acts as a catalyst andperforms the role of social interme-diation. It plans, builds capacity, cre-ates linkages to donors, and MFIwholesalers.

l The Federated SHG Approach: Ex-amples of these are PRADHAN,DHAN, MYRADA, Chaitanya,SEWA (Self Employed Women’s As-sociation), etc. NGO-MFIs such asthese have federated several SHGs soas to overcome the limitations of in-dividual SHGs. Federations when reg-istered, usually come under the Soci-eties Registration Act. They have be-tween 1000-3000 members. In athree-tiered structure, the groupsform SHGs after which clusters areformed and then Federations. In thetwo-tiered structure, the SHGs are di-rectly federated.

l The Rural Industries Promotion(SHG) Framework: MYRADA is anillustration of this kind of an ap-proach, which attempts to facilitatedelivery of a total package to women.The structure is so established that it

NGO-MFIs arefunctioning in diversemanners therebygenerating differentmodels of micro-finance interventions



manages itself like a private limitedcompany for, by and of women.

l The Pure/Adapted GrameenReplicator Approach: These under-take essentially, individual lending,but all borrowers are members ofgroups within which peer pressure isthe key factor in ensuring repayment.Each borrower’s credit-worthiness isdetermined by the overall credit wor-thiness of the group. Savings are acompulsory component of the loanrepayment schedule, but do not de-termine the magnitude and timing ofthe loan. SHARE (Self Help Asso-ciation for Rural Education and Em-ployment), ASA (Association for So-cial Advancement), NBJK (NavBharat Jagrati Kendra) are examplesof this approach.

l The Urban Co-operative BankingModel: SEWA is an example of thiskind of a model which primarily lendsto the urban sector but has also ex-tended its services to rural women.Savings groups consist of 10-15members whose deposits range fromRs. 10-25 per month. These are col-lected from the women’s homes bybank staff. The ability and motivationto save is an important pre-conditionfor a woman to be able to obtaincredit.

l The Co-operative Solidarity Model:ICNW (The Indian Co-operative Net-work For Women) is an illustration ofthis model where women organisethemselves into neigbourhood-loangroups of 5-15 members. The womenare residents of the same area andhave lived there for a period of morethan 5 years.

l The Enabling Co-operative Network-ing Framework: The CDF (Co-opera-tive Development Foundation) is anexample of this approach. The CDFis a Not-for-Profit institution in-volved in promoting and supportingMFIs. This co-operative system con-sists of bringing together women’s andmen’s thrift co-operatives which con-sist of 300 members usually from thesame village.

l The Co-operative-Grameen HybridModel: Mahila Vikasa is an exampleof this kind of an approach whereinit is registered as a Mutually AidedCo-operative Society (MACS), andcovers clients in five different dis-tricts, three rural and two urban. TheSociety uses joint liability groups offive members each to provide loans.

l The Ecelectic NBFC Approach :BASIX , a group company, is an ex-ample of this model of micro-finance.The mission of BASIX is to promotea large number of sustainable liveli-hoods through the provision of finan-cial services and technical assistancein an integrated manner. The entirecommunity is viewed as an intercon-nected whole, hence this institutioninvolves the poor as well as the not-so-poor. Credit is seen as a necessarybut not a sufficient condition for gen-erating and sustaining livelihoods.BASIX consists of - a for-profitNBFC, Bharatiya Samriddhi FinanceLtd. which provides the financial serv-ices and a not-for-profit company,Indian Grameen Services, that pro-vides the technical assistance.

17

l The Training cum Production Cen-tre Approach : This approach isunique, since it provides for loans ofraw materials rather than real money.Poor women are organised into groupsof 5-10, which are then provided ex-tensive training in the specific proc-esses involved in any production ac-tivity. The members are then issuedthe raw material required for the par-ticular production process that theyare trained in. The value of the rawmaterial is credited to their name asthe loan amount.

l The Kosh NBFC Model: Sarva JanaSeva Kosh Ltd. (Kosh) is a non-bank-ing financial company and is an ex-ample of this kind of approach. It isowned by the members of villagecommunities, which provides a vari-ety of financial services to a groupof people, otherwise untouched byformal financial institutions. Thisinsitution provides support to theGram Sabha Nidhi foundations inmanaging the rural communities’ fi-nancial resources.

l The SHG Co-operative Model: YouthCharitable Organisation (YCO), is anon-profit rural development agencybased in Andhra Pradesh. This NGOworks with the poorest marginalisedrural families and promotes self-reli-ance and self-help.. Programmes in-clude micro-finance, housing, in-come-generation, water, sanitation,agriculture, health, education, agro-forestry and waste-land management.

l The Federated Society Model: SIFFSis a large network of fishermen’s

organisations and currently operatesin the states of Kerala and TamilNadu and the Union Territory ofPondicherry. It is to establish its op-erations in Andhra Pradesh too. TheNGO has three core business areas-fish marketing, technology interven-tion and credit delivery/facilitation(linkages with banks). SIFFS estab-lishes bank linkages, enables fisher-men to tap external funds and directlylends to members.

l The SECTION 25 NBFC(Sanghamitra) Model: This is a newmodel of micro-finance that attemptsto cater mainly to the needs in ma-ture SHGs. It is related to aspects ofscaling-up and sustainability. It lendsto mature SHGs with a good savingsand credit background. Loans are dis-bursed in the form of cheques onlyand repayment is also collected in theform of cheques only. ConsequentlySHGs and its members understandand utilise banking mechanisms14.

Data is available about the status, or-ganizational working, operational func-tions, performance and operational dy-namics of various MFIs in the countryin different forms.

One is through the institutions self-re-porting to various evaluatory and ratingorganizations.

Two is through the documentation andannual reports that the institutions main-tain for their own records.

Three is through the presentation of casestudies of the institutions and their suc-cesses for different audiences.

14 For an analysis of the working of different models of MFI/NGOs, see, EDA Rural Systems 1996



In addition MFIs/NGOs who are work-ing with SHGs necessarily collect infor-mation about the groups that they areworking with. As part of theoperationalising of SHGs and as a re-quirement of their functioning, the fol-lowing documentation is carried out:

Accounting Systems which generallyinclude

l Cash Books: Meant to record eachcash transaction as it occurs in ameeting;

l Member Ledger Book: A documentthat is derived from the cash bookwhich may be used to keep track ofthe current balance of each individualmember in the group-her savings,loans taken and repayments;

l Pass Books: These are given to indi-vidual members to record their indi-vidual savings and loan status. In newgroups, introducing pass books oftenencourages members to save more asthey have a personalised document oftheir net savings amount;

l The Minutes Book cum AttendanceRegister: Used to record the proceed-ings of each meeting and the namesof members present.

l Loan and Repayment Forms: To befilled each time a member takes a loan.Each form has details of the loanamount, the purpose for which theloan has been taken, the frequency ofrepayment and the amount of eachinstallment.

l General Ledger: To be maintainedalong with the member ledger for re-ceipt and payment transactions, com-mon to the whole group. (The Sav-ings and Credit Manual, PRADHAN,Resource and Research Group, !998)

The performance of the SHG is alsodocumented using indicators that areseen as relevant to the situation andregion. For example, the CooperativeDevelopment Foundation (CDF) inHyderabad, records performance withthe help of the following indicators*:

l Number of members;

l Number of Thrift Cooperatives;

l Association of Thrift Cooperatives(number);

l Regular Thrift (Rs.);

l Thrift Defaulters (number);

l Thrift Default Amount(Rs.);

l Members with recurring deposits(no.);

l Recurring Deposits (Rs.);

l Members with savings accounts (no.);

l Savings (Rs.);

l Members with fixed deposits (Rs.);

l Fixed deposits (Rs.);

l Members in DRAS15 (no.);

l DRAS deposits (Rs.);

l Other funds (Rs.);

l Total own funds;

l Borrowings (Rs.);

* CDF, 199915 Debt Relief Assurance Scheme which assures that the cooperative, the guarantor and the member’s family do

not suffer in case a member dies

19

l Borrowers (no.);

l Loan outstanding (Rs.);

l Loan defaulters (no.);

l Loan default amount (Rs.);

l Average membership in a cooperative(no.);

l Average thrift per member (Rs.);

l Average loan outstanding (Rs.);

l Loans disbursed during the year (Rs.);

l Number of loans given during theyear (Rs.);

l Average loan size during the year (Rs.)

What must be noticed here is that thevariables documented and tracked arethose which constitute the operational re-quirements of the intervention of microcredit. The process of empowerment thatthe intervention unleashes is notdocumented by the MFI/NGO. It is onlylater when outside agencies are entrustedwith the task of assessment andevaluation that indicators of empower-ment are looked into. The performanceindicators that NGOs use in order toindicate that SHGs are performing wellare more in the nature of meeting targetsand proving financial sustainability. Whilethe importance of these indicators cannotbe understated, it has to be noted thatthe purpose of the entire intervention islost sight of. The changes in the lives ofthe clients on account of the generationof livelihoods in the form of enhancedeconomic and social status, alterations

within households of structures of deci-sion-making, etc. can be captured ifchange is monitored through qualitativevariables as are used in impact evaluationstudies. Empowerment is a process andnot a goal or target to be reached. Henceimpact evaluation studies are not wellequipped to document change. They cancapture perceptions of respondents at onepoint in time. The NGOs/MFIsthemselves can build in variables that allowfor the processes of empowerment andchange to be recorded. Changes in thestandard of living, in household structuresand roles, in mobility, in confidence andsense of self-worth can be part of the docu-mentation carried out. Both the percep-tions of field staff and of the clients them-selves should be tracked. Box 2 (overleaf)is an illustration of suggested parametersand indicators, which can be incorporatedinto the data formats of MFIs/NGOsalong with existing variables andindicators.

Clients/ SHGs-Clusters-Federations

Clients within the institutional mappingconsist of the poor who are reached bymicro-finance interventions. They arereached through SHGs. Certain interme-diaries are involved in not just the for-mation and nurturing of SHGs, but alsoin organizing them to form clusters andfederations. The DHAN Foundation inTamil Nadu and the FWWB in Gujaratare such institutions16. The data on thisaccount is largely available with the in-stitutions and is both qualitative andquantitative in nature17.

16 For information on FWWB’s initiative see, FWWB,199817 Such data are largely available with the institutions themselves, which document and also conduct studies to

assess the extent of their intervention. The data relates to the nature of the intervention, the number ofgroups linked, their performances vis–a–vis financial, credit activities, etc

Empowerment is aprocess and not agoal or target to bereached. Henceimpact evaluationstudies are not wellequipped todocument change



Eco

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G le

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ms:

Met

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of se

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m

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com

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num

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Box

2: D

ata

For

mat

s of

NG

O/M

FIs

21

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sts: O

ther

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s of s

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deni

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f ne

eds

due

to d

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of

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s.

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Aw

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in

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irr

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and

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: Pre

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in a

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23

Individuals

Data on individuals as participants in theinstitutional mapping is usuallycollected through impact evaluationstudies18. However, case studies of MFIs,of facilitating NGOs, and of the inter-vention of micro-finance per se, also in-clude case studies of individual clients,which have benefited from the use ofmicro credit. In the process, the socio-economic profiles of the individuals aredocumented and their experiences aboutavailing of, using and repaying loans aredocumented. It must be noted here thatthe documentation is largely of ‘success’stories, and cases that have failed to ben-efit from the intervention of micro-fi-nance are rarely recorded.

2.2 Judgemental Data

Data related to the vertical approach alsotakes the form of being judgmental innature. In fact these are the most significanttypes of data that exist in the intervention ofmicro-finance. Data which ‘judges’ is nec-essary to the intervention because, on theone hand there is no one model that canbe deemed as ‘ideal’, and on the otherhand, there is a need for some kind ofconsistency in the effort because the coreneeds of the poor are similar. Conse-quently, there are efforts to gather datathat will throw light on the need for stand-ardization, for regulation, for monitoring,etc. The most important of these kindsof data, is the rating that is undertakenon the basis of the financial performanceof the MFI.

Rating

Over the past two and a half years,Micro-Credit Ratings India Limited(M-CRIL) a limited company estab-lished to facilitate the flow of commer-cial funds to the micro-finance sector hasundertaken credit ratings of about 70MFIs in South Asia. M-CRIL has com-piled the information from its ratingstudies into a database and used it toanalyze the performance of the micro-finance sector in the region. This analy-sis of data from the 51 MFIs rated untilend – November is contained in theM-CRIL Report 2000. Over the periodSeptember 1998 to November 2000,M-CRIL had completed 53 rating assign-ments, covering India, Nepal, and Bang-ladesh. MFIs are disaggregated by themethodology they adopt to function andby their age. They are classified by vir-tue of their methodology into

l Self-Help Group;

l Individual Banking model;

l Grameen model

According to their age they are classi-fied into

l New institutions, which are less thanthree years old;

l Maturing Institutions, which are be-tween 3-7 years old and;

l Mature Institutions that have under-taken micro-finance programs formore than 7 years.

18 There is substantial information on SHGs per se, which relates to the nature of the intervention, the numbersof groups linked, their performances vis–a–vis financial, credit activities, etc. See Tyagi, 1999; Kumaran,2001; Lakshmikantan, 2000

Data which ‘judges’ isnecessary to theintervention because,on the one hand thereis no one model thatcan be deemed as‘ideal’, and on theother hand, there is aneed for some kind ofconsistency in theeffort because thecore needs of the poorare similar



The MFIs in the database have also beenclassified by the size of their outstand-ing portfolios at the time of the ratingfield visit. The sample by portfolio sizeshows that there are a few large MFIsand many small ones. As per the regionaldistribution of MFIs in India the southpredominates but the west is also sig-nificantly important. M-CRIL awardsgrades to reflect the creditworthiness ofthe MFI. The data shows that relativelyfew MFIs are creditworthy enough toborrow money in excess of Rs. 2.3 mil-lion. Based on indicators of ‘best prac-tices’, data includes client outreach,productivity, efficiency, portfolio man-agement of the MFI and financial per-formance. The top ten averages indicatethat best practices are being followed inthe concerned region.

M-CRIL’s ratings are intended as a di-rect service to lenders by providing themwith an informed opinion of the creditworthiness of the MFIs. All ratings un-dertaken use a rating instrument thathas been especially developed for theassessment of MFIs. The instrumentconsists of a series of indicators thatmeasures organizational and governanceaspects, managerial and resourcestrengths, and financial performance.The indicators and standards for scor-ing on each indicator have been arrivedat after an intensive process involvingfield-testing of the instrument, discus-sions with the experts and MFI leaders,literature survey and consultative meet-ings with the MFI support institutionsthat have made pioneering efforts in thearea. Each indicator has a weight at-tached to it and is measured on a 0-10scale. The weights are used to compute

the rating score for each indicator to ar-rive at a percentage score that deter-mines the overall risk profile of the ratedMFI. In addition, the rating instrumentalso evaluates the performance of theMFIs against minimum conditions.These conditions have been developedafter an extensive analysis of M-CRIL’sMFI data base and constitute some ofthe most crucial performance indicators.Meeting these conditions is essential forthe MFI to achieve a given rating grade.An important component of the meth-odology is to construct appropriate fi-nancial statements for the micro-financeoperations of the MFI. This involvesmaking detailed calculations of the vari-ous financial account heads.

Standardization

The Handbook of Micro-Finance (Vol. II)“Design and Implementation of Micro-financePrograms-Best Practices Recommendations”,(Arunachalam, 2001) identifies the com-ponents of financial and non-financialstandards for both institutions and theprogram per se. These are relevant toMFIs and facilitating organizations thatare devoted to capacity building. Accord-ing to the guidelines, the parametersboth non-financial and financial shouldbe so selected that they can be verified.These are parameters against whichstandards will be set. Parameters areverified by studying the indicators thatshow whether standards are achieved ornot. It is important to identify thosedocuments and records that have to bemaintained by the participants so thatthe standards can be checked. Finally,the strategy and process to enforce thestandards have to be developed.

M-CRIL’s ratings areintended as a directservice to lenders byproviding them with aninformed opinion ofthe credit worthinessof the MFIs

25

The non-financial standards include gov-ernance, management practices, humanresource management, track record ofborrowing, relationship with community,local agencies, etc, outreach and impact,program design and external program.The financial standards include the trackrecord in terms of repayment, financialperformance, financial control systemand accounting and reporting. Each ofthese factors listed above is linked toappropriate parameters, which have tobe traced in order to set the best prac-tices standards.

The MicroBanking Bulletin is one of theprincipal outputs of the MicroBankingStandards Project, which is funded bythe Consultative Group to Assist thePoorest (CGAP). The purpose of thisproject is to

l Collect financial and portfolio dataprovided voluntarily by leading MFIs;

l Organize the data by peer groups;

l Report this information;

l Help through this database MFI man-agers and board members understandtheir performance in comparison withother MFIs;

l Establish industry performancestandards;

l Enhance the transparency of finan-cial reporting;

l Improve the performance of MFIs.

The Project seeks to provide customizedfinancial performance reports; theMicroBanking Bulletin; and network services.

Resultant “Best Practices”

The available data points to areas inwhich improvements can take place.“Best Practices” have been outlinedwith respect to each of the above fac-ets of the participants of micro-fi-nance19. In the context of SHGs and theirfunctioning, BASIX has formulated amethod of awarding scores while assess-ing SHGs. The interviewer has thechoice of awarding the score within arange depending on the answer given.SHGs are hence rated as very good,good, satisfactory, and not good. At theARAVALLI-FWWB Workshop onMicrocredit, certain parameters wereoutlined and deliberated upon which setstandards for SHGs. These were:

l Vision, mission and goal;

l Size of SHG;

l Group composition;

l Meetings;

l Attendance at meetings;

l Participation of members in decisionmaking;

l Participation of members in respon-sibility sharing;

l Rules and regulation;

l Savings;

l Sanctioning of loans;

l Loan repayments;

l Rotation of common fund;

l Idle capital;

19 For other examples of listed ‘Best Practices’, see, Pradhan, 1998; Swayam Shikshan Prayog, 1998; Myrada,1999; AIAMED 2000; Government of India, 2000; Government of India, 2001; ICECD, n.d



l Resource mobilization;

l Book-keeping and documentation;

l Audit training programs;

l Planning, implementation, monitoringand evaluating programs;

l Social action and community actionprogram and education, literacy andnumeric knowledge20.

Generally, Best Practices are in the ar-eas of SHG formation, nurturing, or-ganization, financial management of theparticipants, especially the MFIs andSHGs, training of members vis-à-vis fi-nancial management, etc. There do notseem to be any outlined “Best Practices” tocapture gender dimensions within micro creditinterventions. Perhaps this is so becauseby and large the SHGs comprise of allwomen groups and it is assumed thatissues related to them will automaticallysurface in the enumeration of other pa-rameters. In reality however, this as-sumption subsumes gender-relatedproblems. Even if the groups are all-women, the lives of women are not lim-ited to their identities as members ofSHGs. Household dynamics spilloverand affect functioning within and ofgroups. Further, as a class, women suf-fer from discrimination in the commu-nity. The lapse on the part of Best Prac-tices is, however understandable. Sinceavailable data does not squarely addressgender biases, data formats are notequipped to capture variables that cantrack change in gender biases. Conse-quently Best Practices which draw theirroots from available data also do notinclude gender dimensions.

2.3 Data Requirements

As per the vertical approach, data thatis generated points to the supply-sidefactors involved in the intervention ofmicro-finance. There is however a needalso to document the factors that deter-mine demand within micro-finance. Onlywhen the supply and demand factors are stud-ied together, an evaluation can be made ofwhether the intervention has been successful.In as much as there is a mismatch be-tween demand and supply, the primarygoals of the intervention per se in termsof poverty reduction and empowermentof women will be at stake. In such acase, there will be a need for modifica-tions, improvements and changes in themethods of micro-finance. The demandfactors need to be observed from theperspective of all the participants sinceeach of them has requirements thathave to be correspondingly matchedwith the supply. The data on supply re-flects information about products, serv-ices, capacity building, asset building,and training. The demand factors willsimilarly reflect the needs of partici-pants in the context of these parameters.

The second and equally important datarequirement of the vertical approach isto have data formats that are gender-sensitive. As has been suggested inBox 2, there are parameters and indica-tors which, if used, will succeed in re-cording gender biases and also trackchanges both positive and negative inthem. Since the second purpose outlinedby the Summit is to empower women, itis necessary for data collection effortsto build-in variables that address change

20ARAVALI-FWWB Workshop on Microcredit, Rajasthan, 18-19, April 2000

The demand factorsneed to be observedfrom the perspectiveof all the participantssince each of themhas requirements thathave to becorrespondinglymatched with thesupply

27

in women’s lives from disempowermentto empowerment. It is not enough toleave the task of tracking change to im-pact evaluation studies since their as-sessments are made after a lapse of timeduring which gender related change hasnot been documented.Similarly, the vertical approach needs toinclude qualitative and more detailedindicators of poverty. Micro credit hasbeen primarily aimed at economic pov-erty. However, social poverty and gen-der discrimination are intimately con-nected with economic poverty, which iswhy development initiatives that ad-dress only economic poverty do not

succeed in pulling the poor out of thepoverty trap. This is not to underesti-mate the capacity of livelihoods, incomeand assets in improving the quality oflives. If one goes back to the fourth pur-pose mentioned in the Summit of hav-ing a measureable impact in the lives ofclients, such an impact is seen by exist-ing data in the narrow sense of increasein livelihoods and incomes, which inturn are responsible for increases in selfesteem. It is however, important to as-certain whether an initiatve that is nar-row in scope as is micro credit, also hasan effect in shifting positively, socialpoverty and gender discriminationindicators.

Developmentinitiatives that onlyaddress economicpoverty do not succeedin pulling the poor outof the poverty trap



The Horizontal Approach : Conceptual MappingThe Horizontal Approach : Conceptual Mapping

SECTION III

The second approach to data issueswithin micro-finance is through what hasbeen called the ‘horizontal approach’.This approach focuses upon the linkagesbetween the conceptualization of mi-cro-finance, the intervention and the im-pact of that intervention and is calledthe ‘conceptual mapping’. The linkagesare studied so as to determine whetherthe impact has justified the interventionand has ratified the conceptual premiseson which the intervention is based.

Conceptual Premises

Intervention

Impact

The conceptual premises are given bythe four core themes of the Micro creditSummit:

l Reaching the poorest;

l Reaching and empowering women;

l Building financially self-sufficient in-stitutions; and

l Ensuring a positive and measurableimpact upon the lives of clients andtheir families.

The ‘intervention’ has been highlightedby the institutional mapping and thecorresponding data that has been gen-erated in that context. The impact of

the intervention cannot be understoodunless one focuses upon many ImpactEvaluation Studies that have been con-ducted by various organizations. The IESconstitute the judgemental data relevant to thehorizontal approach. The recommenda-tions also dovetail towards contributingto resultant best practices about thefunctioning of NGOs and MFIs.

For any IES, the first question to be an-swered is the purpose of the study. Mostoften the study is conducted by an NGO/funding organization, or academic/re-search institution. The reasons for under-taking an IES can vary from the need forpolicy formulation/modification withinthe organization, to wanting to assess thechanges in the lives of the clients, to in-fluencing policy makers, practitioners andresearchers on the basis of the findings,or a combination of these. Again IESmay be conducted by the staff of the con-cerned organization, or by an external con-sultancy firm/consultant.

Particularly important are the methodsused in IES21. It is seen that almost allthe studies definitely have a combina-tion of methods and do not rely on onemethod only. This combination ismostly one of purposive sampling, wherethe respondents are administered struc-tured questionnaires; selective samplingof beneficiaries whose case studies are

21See Annexure Three for details about several Impact Evaluation Studies

The ‘horizontalapproach’ views thelinkages between theconceptualization ofmicro-finance, theintervention and theimpact of thatintervention

29

documented, and focus group discus-sions where issues are brought out intothe open. These methods are in starkcontrast to the Participatory Rural Ap-praisal (PRA) methods that recruit lo-cal persons to appraise. While the valueof PRAs cannot be denied, it is not al-ways possible for institutions that re-quire IES to find suitable local personsto conduct PRAs. This is especially trueif the study is being conducted by an‘outside’ agency which does not havean intimate rapport with the village(s)under scrutiny. Whatever be themethod, it is important for researchersto be focussed about hypotheses andvariables that are being sought as reflec-tions of ‘impact’. The difference betweenvariable, parameter, and indicator should notbe blurred over.

3.1 Recommended Approachto Assess Impact of Inter-vention on Poverty andEmpowerment

l The IES must seek information asto whether the level of poverty of thehousehold/client has been affected.In order to have a clear picture of thisvariable of ‘reduction in poverty’, firstthe study must evaluate the level ofpoverty of the said respondent beforeany loan was taken. This must co-re-late with the poverty measure that wasused by the MFI/facilitating NGOwhen it first identified the respond-ent for a micro-finance intervention22.A different set of poverty indicatorscan be used only if the IES seeks tochallenge the relevance of the initialpoverty indicators used by the MFI

to target its beneficiaries. Most IESask questions about income levels, as-sets owned by the household,occupation(s), etc. However, in exist-ing IES the structuring of the differ-ences between the variable, the pa-rameter and the indicator are notsharp. It is important to differentiatebetween the variable, which is ‘a pos-sible reduction in the level of pov-erty’, and the parameter which is thelevel of poverty after micro credit.The indicators have to be selectedwith care after scrutinizing the pov-erty measure used to identify the ben-eficiary. These indicators can be re-lated to economic factors such as in-come and assets, but they could alsorelate to food, nutrition, health hous-ing and education. Here, the purposeof the loan is significant. Most stud-ies presume that the loans are for in-come generation purposes. In fact, thedemarcation between ‘productive pur-pose’ of loans and ‘consumption pur-pose’ (assumed to be non-produc-tive), presume that the impact has tobe only economic in nature, furtherimplying that poverty is related to in-come. However, it has been arguedthat a loan for consumption, especiallyfor food, is actually a loan towardsworking capital since it is used tomaintain and enhance the productionfactor labor. While the rich invest inland, the poor can only invest in theirlabor (Zeller and Sharma 2000)23. Italso belies women’s contribution to-wards the production of human re-sources, which entails providing forthe ‘consumption’ of her family. This

22 The poverty indicators offered by the Microcredit Summit could be explored23 Stern and Stern’s study evaluated the loan forms of respondents to identify the purposes for which loans were

taken

The indicators can berelated to economicfactors such asincome and assets,but they could alsorelate to food,nutrition, healthhousing andeducation

The Horizontal Approach : Conceptual Mapping


is in fact, a productive activity andthe loan that contributes towards thisend is also automatically used for aproductive purpose, where the con-sumption could be of food, health,education, etc.

Poverty is also contextually relevantto the place that is being scrutinized.The larger socio-cultural environmentwithin which the beneficiary is placedis important if the question of pov-erty is to be understood in its localdimensions. While there may be a gen-eral measure for rural poverty that isrelevant across the country, there arealso regional specificities that have tobe built-in while selecting indicatorsto study poverty. States within thecountry differ economically, socially,culturally, politically and geographi-cally. It is important for IES that spantheir study across different states tokeep the contextual reality in mindand thereby alter the indicators evenif the parameter and variable they areexamining are the same. For example,the indicators of poverty in Keralaand those in Bihar will be differenteven though what are being ultimatelytapped for data are levels of poverty.

l The IES should specifically addressthe issue of empowerment of women.The gender dimension is very promi-nent when the intervention of micro-finance is discussed. This is becausethe initiative is directed, in mostcases, towards poor women. Even incases where the initiative is gender-neutral more than half thebeneficiaries are women. One of thecore themes has been the empower-ment of women. Consequently, IES

do attempt to gauge whether there hasbeen any change in the lives of womenthat will indicate empowerment ofany kind. Questions are asked aboutwhether women can perceive changesin their status regarding their familiesand the community at large. Hereagain one finds that there is a blurringof parameter and indicator. Thevariable to be traced is the ‘empow-erment of women’. The parameter isthe change in status vis-a vis thefamily, community, etc. The indicatorshave to be further specified in thecontext of the lives that the womenin the concerned area are living.Again, the cultural contexts being dif-ferent in each case the indicators can-not be uniform across the country.These indicators could be

l Participation in decision making inthe family, in public life, in commu-nity programs, etc.

l Mobility of women,

l Participation in economic activitiesoutside the house,

l The capacity to educate girl children,

l The capacity to decide about fam-ily planning,

l The capacity to determine the ageof marriage of the daughter,

These are some of the indicators thatcan be used to measure an increase inthe status of women, thereby indicat-ing an empowerment process.

The understanding of empowerment inexisting IES is vague and general. The gen-der dimensions that cause intra-householddisparities among members in access and

The genderdimension is veryprominent when theintervention of micro-finance is discussed.This is because theinitiative is directed, inmost cases, towardspoor women

31

control of resources and distribution ofwork, are not accounted for in the stud-ies. Credit is seen as a tool of empower-ment, but exactly how this ‘empower-ment’ is supposed to take place is not clear.Consequently, when IES search their ben-eficiaries’ lives for empowerment, it isseen as reflected in the capacity to take,repay and use a loan. Unless the methodof IES delves into the household and thedynamics amongst male and female mem-bers, the reality of empowerment will notbe understood. There is already evidencethat indicates that micro credit can caterto the practical gender needs of womenand not to their strategic needs24. Whilestructured schedules can be used to cap-ture socio-economic profiles, it is the de-tailed case studies that can go beyonddocumenting an account of the benefici-aries’ lives. Just as for poverty, the issueof empowerment contains a ‘before’ and‘after’ perception that actually implies adocumentation of a process. Participatorymethods are more suitable for such docu-mentation. The participant could be a lo-cal villager or else a researcher who spendsa considerable amount of time in the con-cerned area observing respondents. Fur-ther, the perceptions of women are inthemselves documentation of processesof empowerment. Changes in perceptionsalso serve as indicators for changes in sta-tus at various levels-economic, social andcultural.

The value of self-perception lies inthe fact that ultimately empowermenttakes place when there is a widening ofmetaphysical mental space due to the

widening of economic, socio-cultural,political and physical spaces. Due to mi-cro credit and the successful use of loansand repeat loans, there could be an in-crease in income of the household. Butthis could not necessarily spell empow-erment for the woman. Decision mak-ing about how that income is to be uti-lized, may still not rest with her. How-ever, if the loan can generate a feelingof confidence that is enough to moti-vate her to voice protest only then canthe credit be said to be instrumental inempowerment. There is no linear rela-tionship between micro credit and wom-en’s empowerment. Similarly the mem-bership of the SHG generates processesthat are political in nature. The nature ofgroup dynamics can unleash forces thatare empowering to some and demoraliz-ing and disempowering for others. In asmuch as membership in the SHG instillsa feeling of solidarity and strength, thewoman will feel a sense of empower-ment. Again the community’s opinion ofher is of tremendous consequence to arural poor woman. When the process ofavailing of and repaying a loan generatesa positive community response, socio-cultural spaces widen and cause an ex-pansion of metaphysical space in thewoman’s mind. Lastly, mobility is a func-tion of socio-cultural norms and is con-textually different in parts of the coun-try. In the relevant context, physical mo-bility and the use of body space can beused as an indicator to capture the pa-rameter of physical space25.

24 See Goetz and Gupta, 1996; Fernando, 199725 For a conceptual framework capturing empowerment through the category of spaces, see, Deshmukh-

Ranadive, 2001. “Placing the Household in Perspective. A Framework for Research and Policy”, AsianJournal of Women’s Studies, Vol. 7, No. 1

Unless the method ofIES delves into thehousehold and thedynamics amongstmale and femalemembers, the realityof empowerment willnot be understood



3.2 Recommended Approachto Assess Methods ofNGOs

l It is imperative for the IES to ascer-tain whether the concerned mediatingNGO has managed to really reach the‘poorest’.

Existing literature on micro-finance in-terventions highlight the fact that whileit is the poorest that have to be reached,often it is not easy. The transaction costsof reaching the poorest are very high.Further, the poorest do not have thecapacity to absorb credit, especiallycredit meant to generate income throughthe starting of small enterprises. Againhere it is very important for IES to pay atten-tion to the poverty measurement indicators usedby the participating NGOs in identifying thepoorest. There should be a consistency inthe measurement used even while itencompasses the local context of pov-erty. If attention is paid to this factor thenthe IES can ascertain the extent of theimpact of the program and the efforts ofthe NGO. The effect on the poorest willbe different from that on the poor andon the not-so-poor. Hence the IES shouldfirst determine which segment of thepopulation has benefited from the initia-tive. This finding will be of particularrelevance to policy makers.

l IES should try and match the inputsof ‘best practices’ with the actualfunctioning of the NGO in determin-ing the impact upon the clients.

IES enter the field with a presumptionthat the concerned MFI/NGO has per-formed to the best of its ability. Whilethis may be true in spirit, the actual per-formance of the organization has to be

matched by the best practices outlinedin various contexts. The value of suchan exercise lies in the fact that best prac-tices deal with the supply side of theintervention and IES trace the demandrequirements of clients in the same di-rections - loans, repayments, interestrates, training, capacity building, groupformation, conflict resolution etc. In asmuch as the study can fathom whetherbest practices are being adhered to, theIES can locate matches and mismatchesof demand with supply. Many IES haveused different research methods to ex-amine not only clients but also the cor-responding NGO. However the ques-tions that are raised do not locate them-selves in any way that will assist in thestudy throwing light on whether theNGO actually delivers what is wantedby the client, and in what way are thebest practices proving to be really thebest ones to be practiced.

l IES should be willing to experimentwith new conceptual tools that couldassist them to capture poverty,sustainability and empowerment inmore relevant ways.

There are conceptual tools available thatcan lend new dimensions to the searchfor the impact of micro-finance pro-grams on client’s lives. For example, itis important to build in the concept ofthe life cycle of the household and ofthe client while considering the purposefor which the loan is taken. A ‘young’client/ household will have differentrequirements as against a mature one.Again, the concept of the ‘credit limit’is useful in studying the constraints thatthe borrower has to face while availinga loan. Somewhere, underlying all IES,

The transaction costsof reaching thepoorest are very high.Further, the poorestdo not have thecapacity to absorbcredit, especiallycredit meant togenerate incomethrough the starting ofsmall enterprises

33

is the presumption that the funds forlending and the funds available to theborrower are perennial. But in reality itis not so. There are limits to both. Fromthe borrower’s point of view, the creditlimit is the maximum that the lender iswilling to lend regardless of the interestrate that the borrower is willing to pay.Studies rarely incorporate lending andborrowing constraints into their frame-works26. The concept of social capital isalso well worth investigating for use inIES. Since the initiative of micro-financedeals primarily with the building andfostering of relationships and trust be-tween the participants, the concept ofsocial capital could be operationalizedand used in the field to be able to ascer-tain the extent of success of the imple-mentation of the concerned program27.

3.3 Recommended Sample ofQuestions to be Includedin an IES

l Questions relating to client (Woman)

l Identifying Characteristics : Name;address;

l Socio-Cultural Profile: Marital status;caste; religion, type of family

l Economic Profile: Income, assets (tan-gible and non-tangible), skills forincome generation

l Membership of SHG: When, how, sta-tus within SHG; relationship withother members; relationship withleader; experience within SHG; skillsdeveloped at book-keeping, savings,thrift, dealing with banks, etc, expe-rience of attending meetings.

l Membership within community: Statuswithin caste group, neighborhood;involvement in community devel-opment initiatives outside of microcredit.

l Membership within kin and family: Sta-tus as entitled by social norms, po-sition in family hierarchy,

l Membership within household: Rela-tionship with husband, with chil-dren, say in decision making aboutimportant issues related to house-hold.

l Micro credit: Savings, loans, repayment,use of loan, how it was used, whodecided, how it is repaid, who takesthe responsibility of repayment.

l Perceived experience of client after microcredit: (Since it is not possible todocument a ‘before-ongoing-after’situation unless one has a partici-patory observer over an extendedperiod of time, only self-perceptionscan be documented)

l Changes in relationships within SHG,community, neighborhood, kin, family,household. These changes can be interms of increased mobility, in-creased vocal expression, increasedfeeling of confidence, self-esteem.Questions could relate to significantdecisions that were taken by theclient, which would not have beenpossible earlier.

l Question relating to mobility of clientdue to participation in group activities.The perception of the womanclient is to be compared to the

26 For an exposition on the credit limit, see, Diagne.2000, Diagne et al 200027 For input on the concept of social capital, see, Srinivasan 2000, and Serra 2001

The concept of socialcapital is also wellworth investigating foruse in IES



pre-constructed concept ofempowerment that the studyadopted. In this comparison the lo-cal relevance and contextual reali-ties will emerge.

l Questions relating to SHG

l The genesis of the SHG: The processesthrough which it was formed,factors of motivation, factors thatsustain the group.

l Intra-group relationships: The interac-tion among members, the demo-cratic/non-democratic nature of thegroup, how leaders are chosen, thepolitical nature of the processeswithin the group

l Inter-group relationships: The relation-ship of the group with other SHGs,is there a learning process generatedamong groups, is the relationshipcompetitive, do groups which arediverse, say caste-wise interact andlearn from each other.

l Relationship of group with NGO: Is therelationship one as of parent-child,is there a weaning-off process, isthere a special relationship with thefield worker in particular, what is thenature of that relationship, are theremore expectations from the NGO,does the group think they will be met.

l Functioning of group: Does the groupfunction adequately, is more train-ing required, make a comparisonwith best practices, check relevanceof best practices for the particularcontext.

l Relationship of group with banks/bankers: Are the bankers seen as

culturally/class-wise alien to thegroup, is there sensitivity to povertyand gender issues among the bank-ers, what are the expectations of thegroup from the bankers, are thesemet, does the bank reach them lit-erally and metaphorically.

l Relationship of group with community:How is the group perceived ofwithin the community, what doesthe village/community expect fromthe group, does the group think itcan/will fulfill these.

l Relationship of group with other politi-cal processes: Is there any interactionbetween panchayati raj bodies andthe group, what is the nature of thatinteraction, is there any interactionof the group with political parties,what is the nature of thatinteraction.

3.4 Recommended Methods tobe Used in IES

There is no singular method that can beidentified as the perfect method. Theresearcher should check if the methodis adequate to capture the dimensionsof the intervention. Where the impactof the NGO has to be traced, it is nec-essary for the NGOs performance to bepresented. This performance should be

l Self-generated data by the NGO;

l The client’s perception;

l A comparison with the relevant rec-ommended best practices. This datawill highlight the supply side of theintervention.

The demand side should contain ques-tions directed to the client but which are

There is no singularmethod that can beidentified as theperfect method. Theresearcher shouldcheck if the method isadequate to capturethe dimensions of theintervention

35

parallel to those that emerge in the sup-ply side of the NGOs performance. Forexample

l Those related to terms and conditionsof credit availability,

l Interest rates, training,

l Capacity building,

l Formation and working of groups,etc.

Structured questionnaires are the mostconvenient method of gathering datathat reflects profiles. However in orderto gather information about percep-tions, in-depth interviews, PRA, partici-patory observatory methods are moreappropriate. Care should be taken in

case studies to ask questions that willprovide information about previously se-lected indicators for poverty and em-powerment. Otherwise the case studiesare reduced to being detailed, descrip-tive, verbal photographs.

l The indicators of poverty and em-powerment that IES use shouldmatch those that the MFI/NGOused to locate disempowered poor in-dividuals for group formation.

l Poverty should be addressed by IESin its economic and socio-cultural di-mensions.

l Empowerment of women has to beconceptualised as a process and not as

a goal. IES indicators should build ina time dimension that captures change.

l Empowerment of women is largelyrelated to an expansion of mentalspaces that allows them to effect changein their lives. Mental spaces can expandwhen physical, economic, socio-culturaland political spaces expand. IES needto have a holistic understanding of theprocess of empowerment.

Box 3: Impact Evaluation Studies: Suggested Precautions



Summary and ConclusionSummary and Conclusion

SECTION IV

4.1 Suggestions for FurtherData Collection Efforts

There is a need for consolidating theefforts of data-gathering into forming adatabase that can be used by research-ers, practitioners and policy makers. Aweb site that is open to the contribu-tions of diverse data collection exercisescould be launched.

MFIs and NGOs could build within theirsystems of documentation, qualitativeparameters that allow for data on empow-erment processes to be collected. Theseindicators have to be region and culturespecific. If such documentation is carriedout they can form a basis of comparisonwith the data generated by impactevaluation studies of the sameintervention. Besides valuable informationis lost when a process is not documentedthrough time. Perceptions of clients andfield staff should be recorded to trackchanges in the lives of the poor that arecaused by micro credit interventions.

Success stories are usually documentedwithin case studies and case histories.There is a need to document failures aswell. These will serve as lessons on thecomplexities that make for the collapseof seemingly well meaning efforts. Theliterature also points to the fact thatmicro-finance survives and sustains

more when it is linked to other largerissues of community development. Thelesson to be learnt here is that moneyalone does not cement, since, “the poormay share their poverty but need notnecessarily share their trust”28. If suchis true then it is imperative that failuresbe documented.

A census of SHGs will prove useful.There are innumerable SHGs that areformed and functioning in the country.A census will automatically collate datarelated to the age and origins of theSHG. This data would also automati-cally trace the NGO initiative behindthe SHG.

Time allocation studies of women cli-ents could be conducted to ascertain thechanges in work patterns within andoutside the household in relation toloans taken, utilized, requirements ofrepayment and participation in SHGactivities. The gender dimension ofsexual division of labor and the hypoth-esis found in literature that alludes toincrease in the work burden of womenafter micro credit, could be tested bysuch studies. The dynamics within fami-lies and household are important deter-minants of whether the ethos of micro-finance actually empowers women, orwhether it only contributes towards

28Mr. Sukhwinder Arora, DFID, New Delhi, personal communication

There is a need todocument failures aswell. These will serveas lessons on thecomplexities thatmake for the collapseof seemingly wellmeaning efforts

37

increased expectations from her andadded work burdens.

It is important for some data collectioninitiative to try and estimate the oppor-tunity costs of directing vast amountsof money into micro-finance. The otherdevelopment initiatives that are losingout to the attention given to micro-fi-nance are no less important. There ishowever no factual evidence of the op-portunity costs involved. With micro-finance one is dealing with money allthe way. Money is supposed to serve asthe means towards the end of develop-ment. Currently, since micro-finance isseen as the panacea for alleviating pov-erty, large amounts of money are beingchanneled from national and interna-tional sources. It is hence important toestimate the opportunity costs of thesefunds in the interests of developmentpolicy29.

Data should also be generated that looksinto the macro environment withinwhich micro-finance programs are be-ing implemented. The role of the state,the nature of financial markets, the ad-equacy of infrastructure, both economicand social, etc., together determinewhether the macro environment is ena-bling to the programs or not. Best prac-tices are also relevant in contributingtowards an enabling and appropriateenvironment. Efforts should be made togenerate data that can be used to listbest practices in this context.

Impact evaluation studies and existingliterature indicate conflicting findings

that are in the nature of debates. Forexample, while it is found that micro-finance initiatives reach the poor and notthe poorest, some studies/ organizationsclaim that it is possible to reach the poor-est. Or, some studies find that the for-mation of a critical mass of women inSHGs is empowering at large, other stud-ies caution that this critical mass is indanger of being co-opted by vested in-terests. Again even whilst micro creditis heralded as a tool of breaking throughthe vicious circle of poverty, there arediscussions around the fear that the debtsyndrome is being perpetuated and en-couraged among the poor. IES shouldkeep these debates in mind and shouldnow move beyond the kind of documen-tation that they have been doing so far.These debates have been generated bystudies and existing literature in the area.In the design of IES, care should betaken to address these debates by usingthem as hypotheses that can be testedin the field.

Sustainability in itself has many dimen-sions. Data generation efforts shouldbear these in mind. As has been pointedout by Mahajan and Nagasri sus-tainability can be understood as

l Demand sustainability,

l Dustainability of mission,

l Legal and regulatory sustainability,

l Sustainability of ownership, gover-nance and organizational practices

l Financial sustainability

29 In fact, accurate impact assessment helps to attach weights to the micro-finance program vis-à-vis otherpoverty alleviation programs. See, Sharma 2000

Data should also begenerated that looksinto the macroenvironment withinwhich micro-financeprograms are beingimplemented

Summary and Conclusion


4.2 Conclusion

The paper has addressed issues relatedto data in the context of micro-financeinterventions in rural areas. The verti-cal approach has shown how the datathat has been collected, throws light onthe different dimensions of the programand the participants. Basically, the sup-ply side of the intervention is capturedthrough the vertical approach of look-

It is imperative fordata collection effortsto be focussed andsharp about variables,parameters andindicators that areused as tools tocapture reality

l There is need for a web site on micro-finance that consolidates available dataand provides direction to future ef-forts at data collection.

l The impact of micro-finance over timeshould be documented. MFIs/NGOshould track change. It will help to-wards conducting more meaningfulimpact assessments.

l Failures should be documented.

l A census of SHGs will be useful.

l Data should be collected via time allo-cation studies about changing workpatterns of women clients.

l An estimate of opportunity costs ofmoney saved, invested and of time

should be made.

l The macro environment should re-ceive attention in data collection sinceit is the backdrop against which theintervention is carried out.

l The horizontal linkages between theprinciples on which micro-financerests and the subsequent impact,should be made. Otherwise conflict-ing data across regions cannot be rec-onciled.

l The varied nuances of sustainabilityshould be documented.

l The compatibility of governmentschemes with micro-finance initiativesshould be studied.

Box 4: Summary of Suggestions

30It has been found that there are contradictions between SGSY and the SHG linkage program, (Mahajan . andNagasari , n.d.)

Efforts should be made to documentcontradictions in the microfinance ini-tiatives of MFIs/NGOs and those ini-tiated by government schemes30. Thisfurther directions of action by the gov-ernment, since within the microfinanceinitiative, the role of the government isnot one of a passive spectator. Pro-grams, which mutually cancel each otherout, even if it is at various stages ofimplementation, will be self-defeating.

ing at data issues. The demand side isaddressed in impact evaluation studieswherein the lives of clients are scruti-nized. Impact evaluation studies alsorelate the conceptual ethos of micro-fi-nance with the intervention and its im-pact. Hence, the horizontal approachtowards data issues draws out relation-ships between demand and supply, be-tween intent and effect, and betweenseemingly paradoxical findings about thesame issue. Together, the two ap-proaches have highlighted the need tointegrate supply with demand issues sothat the impact of programs can be as-certained more completely. The ap-proaches have also assisted in juxtapos-ing data availability with the require-ments of the micro-finance sector. Datarelating to micro-finance cannot beviewed through either one of the aboveapproaches. Conceptual issues, the pro-grams, their implementation, their im-pact, supply related factors, demand re-lated factors, gender dimensions, and themacro environment all act upon oneanother in a complex weave whichmanifests itself in the field. It is henceimperative for data collection efforts tobe focussed and sharp about variables,parameters and indicators that are usedas tools to capture reality.

The paper cannot conclude without theobservation that the entire exercise hasbeen based on the presumption that themandate of micro finance is based onthe philosophy outlined by the Summit’score themes. If however, this agendawere questioned, then the requirements

39

for data collection efforts would be dif-ferent. In such a case, it would be nec-essary to base studies on hypotheses thatquestion the agenda on which the ini-tiative is based. Also it is necessary thatthe intervention of micro-finance in noway belies the other efforts to correctdistributional inequalities that are thestructural causes of poverty. Hence, if

for example, loans for food are justifiedas critical, it does not undermine theimportance of investigating into thebroader reasons for the lack of food inthe client’s life. Data collection effortswould be more fruitful if they keep asthe backdrop, the larger picture of pov-erty against which the initiative of mi-cro-finance is enacted.

Summary and Conclusion


Additional Information on Meetingsand Summits

ANNEXURE I

Officially, the intervention of micro fi-nance has been heralded world-wide asthe cure for alleviating poverty. Therehave been a series of meetings and sum-mits that have been held to design anagenda that can been be followed by allcounties across the globe. The meetingsworked towards contributing inputs forthe World Micro Credit Summit Cam-paign held in February 1997. Below arethe recommendations of the variousmeetings and summits.

Voice of the Silent Majority

The South Indian Consultation was heldin Hyderabad, India, on 23-24 August1996. A meeting of 20 practitionerNGOs, development financial institu-tions and development professionalsarrived at a common position and ac-tion plan. The recommendations wereas follows:

l The Microcredit Summit documentshould be a political statement thatrecognizes the structural causes ofpoverty.

l The approach should be one of em-powerment rather than of self-em-ployment.

l Initiatives should be gender sensitive.

l There should be sufficient flexibilityin building institutions of and for the

poor since the poor demand contextspecific financial services. Target ori-entation should be discouraged.

l Resources should not be thinly spread.They should be directed where thereis a greater proportion of absolutepoor. There has to be a differentia-tion in the nature of absolute povertythat exists in developing and devel-oped countries.

l The focus should be on building col-lectives of the poor

l It should be recognized that the as-sets of the poor include their capac-ity to collectively bargain.

l The emphasis should be on the build-ing ownership of management andcontrol of structures and systems bythe poor.

l The diversity and distinct identity ofthe NGOs should be recognized.

l An emphasis on replicability of pre-determined structures can lead to uni-formity and rigidity. Hence, the focusshould be on devolving decision-mak-ing to the lowest level.

l Instead of expansion of a few organi-zations there should be a developmentof networks of small NGOs. This willbring about a greater reach and impact.

Additional Information on Meetingsand Summits

41

l It should be realized that when posi-tive factors are reported, it is oftenthe result of the sustained efforts ofNGOs at the grass roots level.

l Demand-determined delivery struc-tures should be developed.

l Development costs (of enlisting,motivating the poor, building institu-tions, infrastructure, market linkages,etc.) should be considered as a con-tinuous stream of costs, not as a onetime cost at the start.

l Training costs should cover the costof educating the borrower and train-ing in leadership.

l The criteria for organizations to takeup micro credit programs could beproactive and be based on the ideaof partnership.

l Even though saving is an importantelement, it should not be a necessarypre-condition to access external funds.The criteria should be the ability ofthe collective to manage funds.

l Alternative approaches should bedeveloped for monitoring and evalu-ation of the effectiveness of finan-cial services. These should not onlyemphasize on the conventional finan-cial ratios. (e.g. impact on livelihoods,enabling conditions to promote se-cure livelihoods, reasons for default,how institutional processes addressesthese vulnerability) but should alsofocus on the household level. (e.g. de-cision making, leadership, solidarity,awareness, improvements in qualityof life).

The Dhaka Declaration

This declaration articulates the collec-tive consensus among 21 networks andagencies delivering financial services toover 4.5 million poor people acrossBangladesh, India, Nepal and Pakistan.It was held on September 5, 1996. Thisis also called the South Asian Coalitionfor the Microcredit Summit. The mainpoints highlighted in the Declarationwere as follows:

l There are limitations of micro creditin addressing the diverse needs of thepoorest. Some manifestations of pov-erty may be addressed, but these maynot significantly alter the more en-trenched structural causes at both themicro and macro levels that result inthe transfer of resources from the richto the poor.

l Poverty should be understood in thecontext of resource constraints. Theconcept of ‘resource’ should bebroadened to include inputs such asfood, land and labour.

l There is a need to safeguard the poor-est from the adverse effects of glo-balization and the unhindered opera-tion of free markets.

l There is a need to create a flexiblemacro policy environment.

l A wide portfolio of financial servicesshould be deployed to meet the di-verse financial needs of the poorest.

l Emphasis should be placed upon de-veloping ‘Financial services for sus-tainable livelihoods’ rather than‘Credit for self-employment’.

Additional Information on Meetings and Summits


l Financial services should be an enti-tlement on which the poor can havea claim.

l The Summit’s efforts should not ne-gate or diminish the role of the statein poverty reduction, nor should itreduce people’s right to claim andsecure financial services from the state.

l Due recognition should be given tothe poverty reduction efforts and com-mitments of SAARC (South AsianAssociation for Regional Coopera-tion).

l The extent of poverty in South Asiashould be emphasized because the re-gion contains the greatest concentra-tion of poor people.

l There should be a focus on tacklingabsolute poverty rather than relativepoverty. There should be an empha-sis upon countries where absolute pov-erty is the highest.

l In order to be successful, micro-fi-nance programs for the poorest shouldbe flexible enough to include bothgroups and individuals.

l The interest rates charged should beenough to cover operational and otherrelated costs, provided that these areflexible and do not exclude the poor-est from gaining access to financialservices.

l The commitment to, and training for,democratic participation in decisionmaking should be extended to includeboth clients and agencies.

l Financial service schemes should bedesigned to treat women as partners

and not just as conduits for serviceprovision.

l Instead of stressing systems that sup-port sustained delivery of credit, ef-forts should be laid on supporting thesustained livelihood needs of thepoorest, enabling them to makechoices and thus gain access to anincreased range of livelihood oppor-tunities.

l There is a need to develop effective riskmanagement systems and insuranceschemes to protect borrowers in devel-oping countries as far as possible.

l There is a need for legislation on codesof conduct for agencies delivering fi-nancial services to ensure account-ability and client protection.

l An explicit distinction should be madebetween compulsory and voluntarysavings. There is an acknowledgementof the trade-off between lenders’ andborrowers’ need for savings. There isa need to foster diverse approachesin developing financial services forthe poorest based on local specificitiesand social relevance.

The Delhi Declaration

Prior to the Washington Summit, a groupof NGOs and development finance in-stitutions met in New Delhi on 23 Janu-ary, 1997. The objective was to reviewthe progress made so far on the microcredit front and to discuss the modifi-cations to be carried out in the draftdocuments released by the Summit Sec-retariat in November 1996 at a meetingat Surajkund near Delhi. The groupidentified the following issues:

43

l In developing countries, an enablingmacroeconomic environment is a pre-requisite for the success ofmicrocredit programmes.

l There is a need to develop and facili-tate demand-based peoples institu-tions, without merely focusing onoutreach.

l Credit reception mechanisms mustinclude social preparation of poten-tial clients. It is important to create ademand for the absorption of credit.

l There should be adequate safeguardsfor protecting the savings and riskcoverage for credit.

l There should not be a net transfer ofresources from the South to theNorth. Socially responsible privatecapital should be encouraged to par-ticipate.

l Programs should be gender sensitive.If women are seen as soft targets,there will be an excess burden onthem.

l The other members of the familyshould share equal responsibility forthe repayment of the loan.

l Evaluative criteria for performanceshould include, besides financialperformance, also the borrower’s per-spective and the impact on the lifeof the borrower.

l Funds should be created to meetemergency needs (natural and man-made). Since funds are scarce, microcredit should be made available wherethe need is acute.

Papers Prepared for theMicrocredit SummitCampaignThe following papers were prepared forthe Microcredit Summit Campaign byleaders in the field of micro creditand are available athttp//www.microcreditsummit.org/papers/papers.html.

l Building Better Lives: SustainableLinkage of Microfianace and Educa-tion in Health, Family Planning andHIV/AIDS Prevention for the Poor-est Entrepreneurs Christopher Dunford;

l Creating Autonomous National andSub-Regional Microcredit FundsSalehuddin Ahmed;

l The Microcredit Summit’s Challenge:Working Towards Institutional Finan-cial Self-Sufficiency while Maintain-ing a Commitment to Serving thePoorest Families David S. Gibbons andJennifer W. Meehan;

l Measuring Transformation: Assessingand Improving the Impact ofMicrocredit Susy Cheston and Larry Reed;

l Measuring Transformation: Assessingand Improving the Impact ofMicrocredit Part II: Implementing Im-pact Assessments and Monitoring Sys-tems: A Practitioner Perspective FromZambia Susy Cheston, Larry Reed, SusySalib, Roger Voorhies and James Copestake ;

l Measuring transformation: AssessingTransformation and Improving the Im-pact of Microcredit Part III, ImpactEvaluation Mechanism or the Associa-tion for Social Advancement (ASA) inBangladesh Md. Mustafa Kamal;

Additional Information on Meetings and Summits


l Overcoming the Obstacles of Identi-fying the Poorest Families: Using Par-ticipatory Wealth Ranking (PWR), theCASPHOR House Index (CHI), andOther Measurements to Identify andEncourage the Participation of thePoorest Families, Especially the

Women of those Families. AntonSimanowitz, Ben Nkuna and Sukor Kasim;

l How Donor Funds Could BetterReach and Support GrassrootsMicrocredit Institutions Working To-wards the Microcredit Summit’s Goaland Core Themes, Muhammad Yunus.

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Additional Information about Participants withinthe Institutional Mapping

ANNEXURE II

Currently the rural micro-finance sectoris dualistic in nature. The formal struc-ture has a legal and regulated compo-nent, which provides bulk credit andother services to the non-formal sector.The non-formal structure comprising ofNGOs, SHGs and Federations ofgroups are intermediaries, which havedemonstrated considerable organiza-tional flexibility and dynamism in re-sponding to the demands at the grassroots. Below is additional informationabout participants within the institu-tional mapping.

Regulatory Bodies

The Reserve Bank of India

According to the circular (RPCD.NO.PL.BC 62/04.09.01/99-2000)dated February 18, 2000, the RBI hasstipulated guidelines for all scheduledcommercial banks for mainstreamingmicro credit and enhancing the outreachof micro credit providers. These guide-lines are as follows:

l The interest rates given, applicable toloans given by banks to micro creditorganizations, or by the micro creditorganizations to the SHG/memberbeneficiaries, have been left to theirdiscretion. There is however an inter-est rate ceiling applicable to directsmall loans given by banks to indi-vidual borrowers.

l The banks are free to formulate their

own models or choose any interme-diary for extending micro credit. Theymay choose suitable branches/pock-ets/areas where micro credit programscan be implemented. They have beenadvised to start with small areas andto concentrate on the poor.

l There is no prescribed criterion for theselection of micro credit organiza-tions. Banks are however advised todeal with those organizations thathave proper credentials, track record,systems of maintaining accounts andrecords with proper audits in placeand manpower for close supervisionand follow-up.

l Banks are given the freedom to pre-scribe their own lending norms keep-ing in view ground realities. They candevise appropriate loan and savingsproducts and related terms and con-ditions. Maximum flexibility is pro-vided so as to accommodate the lo-cal conditions and requirements. Suchcredit will cover loans for consump-tion, production, for farm and non-farm activities, as also for housing andshelter improvements.

l Micro credit should be included in thebranch credit plan, block credit plan,district credit plan, and state creditplan of each bank. Although no targetis prescribed, micro credit is supposedto be accorded the utmost priority.

Additional Information about Participants withinthe Institutional Mapping


Micro credit should form an integralpart of the bank’s credit plan andshould be reviewed at the highest levelon a quarterly basis.

l A simple system requiring minimumprocedures and documentation is seenas a pre-condition for augmenting theflow of micro credit. Branch managersare to be delegated adequate sanction-ing powers so as to remove operationalirritants. The loan applications, forms,procedures, and documents are to bekept simple. A statement is to be fur-nished to the Rural Planning andCredit Department, RBI on a half-yearly basis indicating the amount ofmicro credit disbursed by the bank.There is also a prescribed ‘MicroCredit Progress Report’ that the banksare supposed to submit to the RBI.

National Bank for Agriculture andRural Development (NABARD)

According to NABARD, three broadmodels of SHG-bank linkage have beenidentified:

Model I: Bank-SHG-Members

In this model, the bank acts as a Self-HelpGroup Promoting Institution (SHPI). Thebank takes the initiative in forming thegroups, nurturing them, opening theirsavings accounts and then providing themwith credit. This model formed 14 per centof the cumulative number of SHGslinked upto March 31, 2001.

Model II: Bank-Facilitating Agency-SHG-Members

In this model, groups are formed by fa-cilitating agencies like NGOs, govern-ment agencies, or other community

based organizations. The groups are nur-tured and trained by these agencies. Thebank opens savings accounts and thenprovides credit directly to the SHGs af-ter observing their capacities. The shareof SHGs financed under this model dur-ing 1999-2000 was 70 per cent. Thislarge figure is attributed to the fact thatwhile more NGOs are getting involvedas facilitators, state governments arealso operating through their respectivedevelopment agencies in the same con-text.

Model III: Bank- MFI-SHG-Members

Banks in some areas are not in a posi-tion to finance SHGs themselves. Insuch cases, NGOs act as both facilitatorsand as Micro-finance Institutions (MFIs).They form, nurture and train the groups.They also avail of bulk loans from thebanks for on-lending to the SHGs. Un-der this model the MFIs are also foundto form Federations of the SHGs. Thismodel formed 16 per cent of the cumu-lative number of SHGs credit linked in1999-2000.

Apex Bodies

Small Industries Development Bankof India (SIDBI)

SIDBI had launched the Rs.1000 mil-lion SIDBI Foundation for Micro Credit(SFMC) in November 1998. It is a fullyfunctional separate department ofSIDBI since January 1999. The Foun-dation is supposed to assist NGOs andvoluntary organizations on soft terms,which would in turn extend micro creditto poor people. The purpose of theSFMC is to create a national networkof strong, viable, and sustainable

47

micro-finance institutions from theinformal and formal financial sector toprovide micro-finance services to thepoor, especially women. Its strategic intentis to expand outreach in such a way so asto bring into its ambit a wide range of MFIsthat are striving towards financialsustainability. SFMC also seeks to nurtureand equip them to deliver quality micro-finance services to the poor. Capacitiesare to be built, of MFIs, micro-financeproviders, consultants, trainers, etc, as alsothe end-users, like SHGs, clusters etc. Theintervention of SFMC takes the followingforms - loan support to MFIs, capacitybuilding support to the entire sector, policyadvocacy and action research. Withinaction research, innovative ideas areencouraged and feasible ones arecommercialized with respect to savings,leasing, investment products etc. Studieson, and experiments with, newmethodologies and practices, arepromoted.

Rashtriya Mahila Kosh

RMK disburses credit through non- gov-ernmental organizations, women devel-opment organizations, co-operative so-cieties, Indira Mahila Block Samitis reg-istered under Indira Mahila Yojana, suit-able state government agencies, and re-finance to mahila/urban co-operativebanks. The loans are given for incomegeneration purposes unless specificallysanctioned for other purposes. Themaximum amount of the loan isRs.7500/- per borrower.

MFIs/NGOs

SHARE

SHARE is a MFI that is registered associety in the year 1989. Theorganization operates 12 branches in 5districts in the state of Andhra Pradesh.SHARE provides financial and supportservices to very poor rural women whoseper capita income is less than Rs. 250per month and asset-holding is less thanRs. 20,000. As on September 19, 2000,SHARE was working in 502 villagesand had 13,140 members. A sum ofRs. 86,352,400 was disbursed amongthese members with a perfect repaymentrate of 100%. Loans were provided with-out any collateral. SHARE is financiallysupported by NABARD, SIDBI,HUDCO, the World Bank, Grameentrust, the Friends of Women’s WorldBanking, Tata Trust’s Dr. Reddy’s Foun-dation, Ford Foundation and IDS.

Working Women’s Forum/ICNW

The Working Women’s Forum (WWF),is a nationally and internationally re-nowned union of women workers in theinformal sector which is a mass move-ment of over 350,000 poor women. In1978, the WWF was established at Ma-dras (Chennai). The early initiators ofWWF considered credit assistance fromformal banking institutions as a strat-egy to escape moneylenders and mid-dlemen. However, women had to put upwith conceptual and functional inad-equacies of the operations within thesemainstream banks.

Additional Information about Participants within the Institutional Mapping


In 1981, 2,500 women leaders with ashare of Rs.20 each and seed capital ofRs.50,000 initiated and established theirown Working Women’s Co-operativeSociety1. Since then a series of co-operatives have been promoted by theWWF in the states of Andhra Pradesh,Tamilnadu and Karnataka under therespective State Co-operative Acts.Since WWF’s inception in 1978 in Ma-dras (Chennai) city, its credit activitieshave grown both intensively and exten-sively in such a way that from about 800members it now has over 350,000 mem-bers. Nearly 140 million rupees havebeen loaned to women, 85% of whombelong to the indigenous communities,involved in 167 different enterprises in14 cultural contexts. (Working Women’sForum, 1995). Over time, the series of14 State Co-operatives promoted by theWWF in all the 3 southern states weremerged into a new institutional frame-work governed by central laws and calledas “The Indian Co-operative NetworkFor Women”, with the freedom for coun-try-wide operations. The ICNW is thefirst of its kind in India to affiliate creditnetworks in other states in India, espe-cially in Orissa and Uttar Pradesh whereWWF has partnerships with NGOsworking for tribal and disadvantagedgroups of women. The ICNW is nowalso a member of the InternationalRaiffeisen Union, Germany, which givesit an international status.

MYRADA

Since 1987, the Mysore Rehabilitationand Development Agency (MYRADA),Karnataka has consistently fostered the

SHG concept and strategy as the Indianmodel of banking with the poor. Withthe help of NABARD, MYRADAtrained over 3,000 bankers to assess andencourage SHGs. One of the key indi-cators that the banks apply while assess-ing SHGs is the adequacy and qualityof the finance and management systemsadopted by the SHG. This is necessarysince a majority of MYRADA’s SHGsare managing funds in excess of Rs.0.2million. MYRADA recommends an an-nual audit of all SHGs by chartered ac-countants. Initially this cost of the au-dit was shared between MYRADA andthe SHG. In 1998-99, however, most ofthe 4000 SHGs of MYRADA met theentire cost. (Myrada, 1999)

Government Schemes andProjects

Swarnajayanti Gram SwarozgarYojana (SGSY)

SGSY is a single cell self-employmentprogram for the rural poor officiallylaunched on April 1, 1999 by the Gov-ernment of India. The scheme offerscredit-cum-subsidy to the beneficiariesand banks involved in this process. Thescheme seeks to promote multiple creditrather than a one-time credit input. Ben-eficiaries are encouraged to increase theircredit intake over time. The scheme alsoprovides for skill development throughtraining courses in technology, market-ing, information, etc. Funds under thescheme are shared by the Central andstate governments in the ratio 75:25. Thescheme is implemented by the DistrictRural Development Agencies through thePanchayat Samitis2.

1 For information on another kind of thrift cooperative, see Cooperative Development Foundation 19992 See, Ghosh (2000) for an assessment of the implementation of SGSY

49

Indira Mahila Yojana (IMY)

The IMY is a program launched by theGovernment of India in August 1995 asa central project for the ‘holistic empow-erment of women’. The basic thrust ofIMY is the formation of SHGs of womenin villages at the anganwadi levels and toencourage thrift and savings activities asan entry point. A SHG is defined as agroup of 10-20 women which comestogether voluntarily around a commonobjective. All these groups including theones formed under other governmentprograms, or by NGOs are to befederated at the anganwadi or villagelevels as Indira Mahila Kendra. It isexpected that there will be 100-250women in each IMK which, it isrecommended, be registered as a society.Further, the representatives of the IMKsfrom a given block are to constitute theIndira Mahila Block /society which is alsoto be a registered body.

Mahila Samriddhi Yojana (MSY)

The MSY was implemented by the De-partment of Women and Child Devel-opment, Government of India, and hasbeen in operation since 1993. Thisscheme is aimed at women’s empower-ment through the building of confidenceby encouraging thrift and savings. At thefield level, the grassroots functionariesare most often the anganwadi workers.These functionaries motivate thewomen and liaise to bring them in con-tact with post offices in order to openaccounts and make savings deposits.Data relating to the number andamounts of the accounts opened,amounts withdrawn and the number ofaccounts closed are compiled by the

Department of Posts, disaggregated dis-trict-wise and state-wise and furnishedto the Department of Women and ChildDevelopment, Government of India.

The Swa-Shakti Project

Swa-Shakti (Rural Women’s Empower-ment Project) is a World Bank and In-ternational Fund for Agriculture Devel-opment (IFAD) assisted initiative. It wassanctioned in 1998 as a centrally spon-sored project for a period of five yearsin the states of Uttar Pradesh, MadhyaPradesh, Bihar, Haryana, Karnataka andGujarat. The Government of India im-plements the Swa-Shakti project throughthe state Women’s Development Corpo-rations, who in turn contract NGOs toform and service SHGs. The aim of theproject is to establish self- reliant SHGs,so as to improve the quality of their livesthrough greater access and control overresources. A Project Support Unit at thecentral level provides technical andmanagerial support. The project also hasa Lead Training Agency and a LeadMonitoring and Evaluation Agency atthe central level and the State TrainingAgencies and State Monitoring andEvaluation Agencies at the state levels.A Computerised Project ManagementInformation System that includes bothproject and process information and aComupterised Financial ManagementSystem, provide the necessary informa-tion and back-up for the effective im-plementation of the project.Within theabove mentioned states, as of Novem-ber 30, 2000, the Swa-Shakti project hadtotally covered 35 districts, 203 blocks,contracted 8096 groups, 88 NGOs andformed 5673 SHGs. Concurrent moni-toring and evaluation of the projects are



carried out on a periodic basis, whichfocuses on the quality of project imple-mentation at all the levels.

Maharashtra Rural Credit Program

Besides centrally sponsored schemesand projects, different states have takeninitiatives in the context of providingmicro credit to poor women. For exam-ple, in the state of Maharashtra, theMahila Arthik Vikas Mahamandal Ltd.(MAVIM) was established in 1975 by thegovernment of Maharashtra, with theintention of assisting the economicupliftment and rehabilitation of needywomen. MAVIM has been entrustedwith the responsibility of fostering wom-en’s access to credit. In this context,MAVIM focuses on, forming SHGs,developing entrepreneurship, gendersensitization, functional literacy andspreading social awareness. CurrentlyMAVIM is working in 951 villages inMaharashtra, and has succeeded informing 4850 SHGs covering 68,000poor women. Additionally, theMaharashtra Rural Credit Programme(MRCP), assisted by the InternationalFund for Agricultural Development(IFAD) is being implemented in 12 dis-tricts in Maharashtra. MAVIM is alsoappointed as a nodal agency for theRashtriya Mahila Kosh, whereby it allo-cates funds to SHGs that have provedtheir sustainability.

Federations

An Example -Kalanjiam Federations of DHANFoundation, Madurai

The efforts of DHAN Foundation aredirected towards building two streams

of institutions- financial institutions thatare involved in savings and credit relatedactivities, and activity oriented institu-tions that focus on business and eco-nomic activities. As part of promotinglocalized institutions, DHAN focuses onpromoting the following three types ofinstitutions:

l A hamlet level financial institutioncalled Kalanjiam : These are selfmanaged women’s groups which hadprimarily come into existence to gen-erate financial resources through ownsavings and revolve the same to meetthe credit needs of the members. Theprimary institution normally consistsof 15-20 poor women of a small ham-let with a population of 60-100 fami-lies. Each Kalanjiam has a unique sys-tem of organizing and managing itsown finances. Normally by the end ofthe first year the Kalanjiams are ca-pable of managing their own finan-cial resources and are ready to belinked to other financial institutionsfor absorbing additional resources.

l Cluster Nidhi: A cluster Nidhi is thefinancial wing of the Cluster Associa-tion formed by 10-15 Kalanjiams ofa particular geographical area. EachKalanjiam becomes a member andcontributes towards the corpus of theNidhi, which in turn provides fundsto the needy groups whenever theavailable funds are inadequate. TheNidhi concentrates on non-conven-tional lending to groups - the kind thatcannot be met through formal finan-cial institutions.

l Federation: A Federation is an apexorganization at the block level formed

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by the primary groups within it. EachFederation consists of at least 100-150 primary groups and is registeredunder the Societies Act. EachKalanjiam becomes an institutionalmember of the Society. Federationsare formed to give stability and con-tinuity to the program.

Rating

Following are the terms that are used asindicators in the assessment of M-CRILwhile rating MFIs.

l Financial spread: Portfolio yield mi-nus financial costs (interest paid onborrowings, interest paid on depos-its, and loan loss provision expenses)

l Loan loss provisioning ratio: Totalloan loss provisioning expense for theyear divided by the average portfolio.

l Operating cost ratio: Ratio of staff,travel, administration costs and de-preciation charges of the MFI (non-financial costs) to the average loanportfolio for the year.

l Operational self-sufficiency: Ratio oftotal income to total costs for theyear.

l Portfolio at risk (greater than orequal to 60 days): Ratio of the prin-cipal balance outstanding on all loanswith overdues greater than or equalto 60 days to the total loans outstand-ing on a given date.

l Repayment rate (cumulative): Ratioof cumulative recovered (net of pre-payments) to the cumulative princi-pal due till the date of measurement.

l Subsidy Dependence Index: This in-dex broadly measures the net subsi-

dies received as a proportion of theincome of the organization. A higherratio suggests that there is a higherlevel of dependence on subsidies.Subsidies can be in the form of grantsand savings deposits/borrowings at arate lower than the market rate.

l Yield on portfolio: Interest and feeincome from loans to clients dividedby the average loan portfolio for theyear.

The M-CRIL rating symbols are asfollows:

Alpha triple plus, implying the mosthighly recommended with the highestsafety and excellent systems;

Alpha double plus , implying, highestsafety, very good systems and mosthighly recommended;

Alpha single plus, meaning very highsafety, good systems and highly recom-mended;

Alpha, implying highly recommendedwith high safety and good systems;

Alpha minus, implying reasonable safety,good systems and recommended;

Beta plus, reasonable safety, reasonablesystems, is recommended but needsmonitoring;

Beta, implying moderate safety and mod-erate systems, is acceptable, but needsimprovements to handle large volumes;

Beta minus, implying significant risk, poorto moderate systems and is acceptableonly after improvement.

Gamma plus, meaning substantial risk,poor systems and needs considerableimprovement;



Gamma, highest risk, poor system and isnot worth considering.

(The M-CRIL Report, 2000)

Micro Banking Standards Project

In the preparation of the database, thefollowing indicators and ratios are used:

l Out-reach and institutionalindicators such as age of institution(years); number of offices; number ofstaff; number of active borrowers;percent of women borrowers.

l Macroeconomic Indicators such asGNP per capita (current prices);GDP growth rate (%); Inflation rate(%); Deposit rate (%); Financialdeepening (%).

l Profitability indicators such as Ad-justed return on assets (AROA) (%);Adjusted return on equity (AROE)(%); Operational self-sufficiency(OSS) (%); Financial self-sufficiency(FSS) (%) Profit Margin (%).

l Income and Expense ratios like Op-erating Income; Operating Expense;Net Interest Margin; Portfolio Yield

(%); Real Interest Yield (%); Total In-terest Expense; Adjustment Expense;Loan Loss Provision Expense; SalaryExpense; Other Administrative Ex-pense; Total Administrative Expense.

l Efficiency ratios such as Total Admin-istrative Expense/Loan Portfolio;Salary Expense/Loan Portfolio;Other Administrative Expense/LoanPortfolio.

l Productivity indicators like AverageSalary (multiple of GNP per capita);Cost per borrower (Rs.); Staff produc-tivity (number); Loan officer produc-tivity (number); Staff Allocation Ra-tio (%); Staff Turnover (%).

l Portfolio indicators are Portfolio atrisk >90 days (%); Total Gross Port-folio (Rs.); Average Loan Balance(Rs.); Depth (%).

l Capital and Liability Structure re-flected by Commercial Funding Li-abilities Ratio; Capital/Asset Ratio.

(The Micro Banking Bulletin, Focus onProductivity, Issue No 6, April 2001)

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Examples of Impact Evaluation Studies

ANNEXURE III

The impact of the intervention of mi-cro finance cannot be understood un-less one focuses upon many impactevaluation studies that have been con-ducted by various organizations. Thehorizontal approach stresses the impor-tance of impact evaluation studies (IES)in ascertaining the success of the inter-vention of micro finance. Below areexamples of some impact evaluationstudies.

Evaluation Study of Self-HelpGroups In Tamil Nadu,(Puhazhendhi, 2000)

This study reviews the progress of theSHG-Bank linkage program in TamilNadu and assesses the socio-economicimpact of the program on the groupmembers. The study was conducted byNABARD in Tamil Nadu and covered70 SHGs promoted by four majorNGOs. The reference period of thestudy was 1996-97. A multi-stage sam-pling technique was adopted for select-ing the SHGs and NGOs. A critical re-view of the role played by differentNGOs was made for the reference pe-riod. Four NGOs, which emerged as themajor promoters of SHGs, were se-lected. These organizations alsospanned the geographical dimensions ofthe program. Four districts were se-lected for the study. A sample of 70SHGs proportionately distributedamong the NGOs was further selected.

Primary data was collected from the se-lected SHGs which addressed extent ofsaving; level of income generation; pat-tern of lending; repayment perform-ance; socio-economic criteria. This datawas obtained using structured question-naires. In addition, detailed discussionswere conducted with banks and selectedNGOs, relating to operational issues ofproject implementation.

Keeping in mind the characteristics ofthe selected groups and their perform-ance, the sample groups were post-strati-fied into different categories based upongender and performance. The perform-ance of the groups was assessed basedon a scoring technique. The standard-ized optimum level of individual factorswas valued at score one and appropri-ate values were assigned based on dif-ferent criteria influencing these factors.These factors were determined by ho-mogeneity; regularity in meeting; regu-lar attendance by members; increasedrate of annual saving; share of produc-tion loan to total loan; adequate train-ing; involvement of NGO; effectiveleadership. Groups with a mean scoreof more than 0.67 were classified asgood performers, whereas the groupswith a mean average score in the rangeof 0.34 - 0.66 were considered to be av-erage performers. Groups with a meanscore of less than 0.33 were consideredas poor performers.



The study also attempted to estimate thecost of lending for banks through theSHG-Bank linkage program vis-à-visother general priority sector lending andIRDP. For this, time-allocation sched-ules were prepared for different types oflending from a selected commercialbank in the study area. The deliveryprocess of the bank branch wasdisaggregated into specific functions andthe time spent by different levels ofbank officials was assessed and con-verted into value terms.

Microfinance for Rural People, AnImpact Evaluation (Puhazhendhiand Satyasai, 2000)

This study was conducted by NABARDto assess the living conditions of SHGmembers after they were linked to banks.The study covered 560 member house-holds of 223 SHGs from 11 states.These states spanned the central, south-ern, northern, western and eastern re-gions of the country. Multistage strati-fied random sampling was undertaken,where the different stages were forstates, districts, SHGs and members.SHGs that had completed at least oneyear of linkage with the bank were se-lected. Primary data were collected withthe help of a structured questionnaire.The pre-SHG and post-SHG situationswere compared. To assess the impact,data were collected on various economicand social aspects such as income, sav-ings, investment, asset structure, em-ployment, borrowing, consumption pat-tern, access to public utilities, social em-powerment and behavioral changes.Impact is measured as the difference inthe magnitude of a given parameter be-tween the post and pre SHG situations.

The impact of income, savings and bor-rowings were decomposed into two ef-fects - one emanating from the spreadof income generating/savings/borrow-ings activities to a larger cross-sectionof member households and the other,originating due to an increase in the levelof income/savings/borrowing permember of the household. A compos-ite index of Standard of Living was com-puted for each household combing so-cial and economic parameters. The find-ings showed that the social impact ofthe post-SHG period was such that therewas an increase in self-worth, in com-munication, an increased awareness ofsocial evils (this was tested by askingquestions about the abuse of women infilms) and a small decrease in family vio-lence.

Study of Clients Using Micro Creditin Two South Indian States (Das,2001)

The Friends of Women’s World Bank-ing (FWWB), provides loan support tovarious NGOs who then forward micro-finance services to clients. The studyfocuses upon the NGOs - the Activistsfor Social Alternatives and People’s Soli-darity Association (PSA) from TamilNadu, and SPANDANA from AndhraPradesh were selected. Within these or-ganizations, interviews of select clientswere conducted. Twenty in-depth casestudies were conducted with the help ofan interview guide. Further, a structuredschedule was administered to 125households, each of whom had at leastone micro-finance client in the family.The sample was drawn so as to repre-sent various occupational groups. All therespondents were from the rural areas.

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In addition, the field areas of Self-HelpPromotion for Health and Rural Devel-opment (SHEPHERD), was also visitedfor conducting Focus Group Discus-sions (FGDs) among its micro-financeclients. A prolonged interview was alsoconducted with officials at the BharatiIntegrated Rural Development Society(BIRDS) in Andhra Pradesh in order tounderstand the modalities of their mi-cro-finance program as well as thesocio-economic context within whichthey provided these services. Four moreFGDs were conducted among clients ofPSA, ASA, and SPANDANA. These cli-ents were specifically neither those cov-ered under the structured schedules northose whose case studies were made.Respondents for case studies were se-lected in consultation with the fieldstaff of select NGOs. They were pickedfrom different income groups as well ason the basis of the number and amountsof loans raised by them. Most were in-terviewed at a stretch, few in a numberof sittings. On an average, each inter-view took over six hours of actual time.Wherever possible, applicable and nec-essary, discussions were held with thefield staff and the heads of the NGOs.

Individual case studies were based on aframe that was developed in a way thatthe responses would shed light on theunderstanding of the strategies that in-dividuals and families took to cope withcrisis situations over time. The inquirywas contextualised primarily aroundproblems that stemmed from financialpressures. The case studies focussedupon ‘milestone points’ in the lives ofthe respondents. These were the pastand present economic conditions of the

parental and marital households; eco-nomic condition prior to and after theloan; type of change that occurred andwas experienced by the client, othermembers of the household and thehousehold as a collective; to what fac-tors were these changes attributed to;the prevalent methods of risk manage-ment; the coping mechanism on the partof the individual and the household inthe event of crisis situations, life cycleevents and emergencies; the lending andborrowing behavior of clients and theirhouseholds; the utilization pattern ofloans raised from different sources; fun-gibility, i.e. the different uses that creditis put to in the household; financialmanagement at the household level; thecontribution of loans raised by the MFIstowards a rise in the income of the cli-ent’s household, including their percep-tions about the nature and quality ofsuch services; people’s perception re-garding the potentials of micro-financein realizing their future plans; anychange in self-esteem. With respect tomicro enterprises, the milestone pointsthat were recorded were with respect to,input, output, overall perception,change in income and expenditure, andchanges in decision making on the pur-chase of inputs, the marketing of prod-ucts, etc.

The schedule administered to clients inthe rural and urban areas focussed onthe following variables - the social back-ground of the clients and their house-hold; the economic status ascertained bythe ownership of productive and otherassets; the household income and ex-penditure pattern; the extent of depend-ency on loans from different sources;



purposes for which loans are generallyraised; the client’s and households lend-ing and borrowing behavior; reasons foropting to join the micro-finance pro-gram; the number of loans raised to in-crease the household’s earnings; antici-pated expenses on planned events and;the likely sources for raising the moneyfor such purposes.

The data generated by the schedules wascoded, scrutinized for consistency, com-pleteness and relevance in relation to thequestions asked. The subsequently tabu-lated data was also compared with thefindings from the case studies. The fo-cus groups consisted of persons who hadraised loans and also saved money. Theinquiry during these discussions re-volved around the following issues - thekey economic activities of the men andwomen; the caste structure and powerdynamics of caste politics; the group’sinformation about the NGO, its activi-ties and services offered; the group’sperception about the support of theNGO; to what extent do the FWWBloans actually help the group; the fre-quency of group meetings held and theissues discussed in them; knowledge ofthe group with respect to financial trans-actions; the savings habits and methodsadopted by the group.; the loans raised,their sources, their purposes, the link tothe annual cycle of needs, the terms onwhich these loans are raised, etc.; therelative weightage given by the group tothe loan from FWWB versus loans takenfrom other sources; information aboutother groups, social, religious, etc. work-ing in the area and the advantages re-ceived from their work; who are those

that can raise loans easily and who arethose that are excluded from the pro-gram and the reasons for this exclusion;the sense of security after availing ofthe loan from the NGO; is there a spe-cial importance of such loans to house-holds where the male head of the house-hold suddenly for some reasons cannotcontribute economically.

Data was also collected at the organiza-tional level. These were related to thefollowing factors - genesis of the organi-zation; current programs; the reasonswhy, and the ways how, the communi-ties were approached by the organiza-tion; the visualization by the organiza-tion of the concept of micro credit; theorganization’s mechanisms of collect-ing/receiving money from lending agen-cies like the FWWB, NABARD, etc.

Among the issues that were sought bythe data collection method someemerged in what has been labeled as‘General Questions’. These were whatis the influence of the market structureon the potential of credit in improvingthe economic situation of the poor; howdo household internal factors and socialenvironment influence the household’scapacity to convert potential into realincome gains; the time spent on microcredit operations vis-à-vis other pro-grams; the status of women in generaland in particular to the household, thelabor market, to wages, to work hours,to job availability, levels of literacy, ac-cess to health, education, and housing,etc.; the nature of risks, the strategiesadopted by clients to protect themselvesagainst risks, ways in which they cope

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with losses, etc; a comparison of theconditions in the lives of old clientsversus those of new clients.

From Margin to Mainstream(Menon and Gupta, 1999)

This study is an action-research initia-tive involving NGO partners, SHGs,and bankers in Maharashtra andKarnataka. The perceptions of all theconcerned participants were sought.Five districts in Maharashtra and twoin Karnataka were included in thestudy. In looking at how alliances areforged between SHGs and mainstreamfinance institutions, the study soughtto create a knowledge base that wasrelevant to the ultimate stakeholders,i.e. the SHGs and the bank BranchManagers. A questionnaire was devisedto interact with bank branch managers.The study team also interacted witharea managers, Regional Managers,Zonal Managers, and Lead Bankers. In-depth discussions were held with theNGOs and SHGs. A study tour withrepresentatives from the RBI, the LeadBank of the district (Bank of India),local bankers and NGO representa-tives was taken to SHGs. The researchdesign being action-oriented, the entirestudy was also an educative process.Dialogues that were initiated betweenparticipants, served as informationsources to them. The findings of thestudy did not remain as data to be col-lated, but it was also information to beacted upon simultaneously. Conse-quently, implementation mechanismswere re-examined during the process ofdata collection itself.

Impact of the Maharashtra RuralCredit Programme (MRCP) in PhaseI Districts, (Tata Institute of SocialSciences, 2000)

This study was conducted to assess theimpact of MRCP on credit delivery in-stitutions like banks, on project borrow-ers and the social impact of MRCP. Thesample was drawn from four districts inthe state of Maharashtra. 599 individu-als who were direct borrowers from thebank as well as the SHGs were inter-viewed with the help of an extensivesurvey using semi-structured interviewschedules. Case studies of individualborrowers were also conducted. Infor-mal discussions were conducted with 11bank officials who were also mailed in-terview schedules. Case studies weremade of villages based upon secondarydata, individual interviews and focusgroup discussions.

Participatory Rural Appraisal(Search, 1994)

Participatory Rural Appraisal (PRA) isa technique that goes beyond the stand-ard answers that emerge in structuredquestionnaires. PRAs can be dividedinto four main categories - exploratory,topical, participatory, and monitoring.The type of PRA used, depends on thepurpose of the study concerned. Ex-ploratory PRA is generally conducted todevelop a set of hypotheses, which canbe further tested by empirical surveys.Topical PRA focuses upon on area andseeks to get more detailed informationon it. Participatory PRA involves peo-ple while appraising developmentprojects and in evolving and planningprojects. Monitoring PRA asks local peo-



ple to follow the progress of certain de-velopment initiatives, observe thechanges in the lives of the target peopleand then offer their feedback. MYRADAhas been conducting PRAs extensivelysince 1989. It has conducted more than200 PRA training workshops from 1992-1994. Small and marginal farmers haveemerged as resource persons in PRAs.PRAs are conducted with the realizationthat it is necessary to understand andappreciate traditional values and skillsin ways that are relevant to other localpeople. Outsiders often carry their ownbaggage called the ‘cultural burkha’ thatprevents them from relating and seeingreality as it actually manifests to the re-spondent. Methods of assessment usedare alien to the concerned target groupthat is being studied. These methodsdemand data and not participation frompeople. In contrast, in PRA, there is asimultaneous learning process generatedwhich accounts for the flexibility of theapproach.

Rashtriya Mahila Kosh ImpactStudy (Pandey, unpublished)

This study is based in the state ofMaharashtra and was conducted to ex-amine whether the RMK has been ableto achieve its main objectives of reach-ing credit to poor women, enablingwomen to achieve economic independ-ence and becoming aware about creditfacilities and management. The study,which was exploratory in nature, had asample of 250 beneficiaries from theNGO Annapurna Mahila Mandal inMumbai, Pune and Belgaum and 50from the NGO Rani Laxmibai MahilaMandal in Chandrapur. These two

NGOs were selected since they wereimplementing the RMK scheme. Thequestionnaire for beneficiaries containedthe following information:

l Identification (name and address ofNGO through whom the loan wasprovided, respondent’s name andaddress, present position regardingloan approval status);

l Household particulars (type of house,religion, caste, language spoken athome’ type of family, income, assets);

l Details of other members living in thefamily;

l Background characteristics of the couple(age, education, l iteracy, mainoccupation age at marriage);

l Information about the borrowed loan (year,purpose, amount, mediating body, pe-riodicity of installment, procedure,security, repayment, use loan was putto, problems setting up business,income generated from business, rateof interest, who received thesanctioned loan, details of anyprevious loan taken);

l Awareness about the RMK scheme(knowledge about credit facilities, ad-equacy of loan, appropriateness of in-terest rate, savings and thrift relatedproblems, membership of SHG andits connection to RMK loan, experi-ences with the SHG, Experienceswith the NGO);

l Impact of Scheme( impact on business,income, standard of living of family,say in family matters, creating aware-ness about employment opportuni-ties, creating networks through SHGs,

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improving the status in the commu-nity)3.

Practitioner-led Impact EvaluationAssessment of ASA (Hishigsuren,2000)

The Activists for Social Alternatives hasbeen in operation from 1986 as a facili-tating agency for empowering the poor-est of poor women. These women havebeen identified through the participatorywealth ranking and housing index meth-ods that have been recommended by theSummit Campaign. An impact evalua-tion exercise was conducted in order togauge whether ASA’s integrated serviceshave brought any changes in the livesof its clients and whether the clientswere satisfied with the program. Thestudy chose the AIMS-SEEP tools forimpact assessment. The Assessing theImpact of Micro-enterprises Services(AIMS) is the outcome of a USAIDmulti-year program that seeks to under-stand better the processes by which mi-cro-enterprise programs strengthen busi-nesses and improve the welfare of theclients and their households. The AIMSset includes the following five tools:

l Impact survey to collect informationto test impact hypotheses;

l Client Exit Survey to determine whyclients left the program and whethermotivating factors were related to theinstitution or not;

l In-depth individual interviews about

loan use over time;

l In-depth individual interviews aboutempowerment (non financial impact)

Client satisfaction group or individualdiscussions about the program and theirsuggestions for improvement. In the firstround of impact assessment ASAadopted the last two tools.

In order to gather information about em-powerment, clients were asked a seriesof questions about themselves, theirenterprise, their family/households, andtheir community at different points in-tone, past and present. This tool includesa methodological option whereby therespondent draws a self-portrait. Aftera field test ASA discovered that thismethod was inappropriate, because thewomen were uncomfortable with a penin their hands. In order to find out aboutclient satisfaction, focus group discus-sions were held of small groups of 6-12persons. Finally the following combina-tion of research methods was used forthe study- review of existing documentsand reports; focus group discussions,empowerment tool; analysis of existingadministrative data and financial state-ments; key informant interviews withmanagement and the core program staff;observation. Records were obtainedabout each member and then weresorted out as per geographical area andnumber of loans, after which stratifiedrandom sampling was used to select re-spondents4.

4 For details of how the sample was selected see, Hishigsuren, 2000, pp44-46

3 As part of the same series of studies, the Centre for Women’s Development Studies conducted an evaluationof the RMK by studying the two NGOs of Sparc, Mumbai and Sewa, Bhopal. Three proformas wereprepared- one to study the socio-economic profiles of the borrowing women, the second to study theirleadership qualities, self-awareness and the third was to study the NGO implementing the program



The author is thankful to the following persons:

Dr. Deepali Pant Joshi, General Manager, Reserve Bank of India, Rural Planning and Credit Department,Mumbai; Dr. A.K. Bandopadhyay, Chief General Manager, Department of Economic Analysis and Policy(DEAP), NABARD, Mumbai; Dr. V. Puhazendhi, Deputy General Manager, Department of Economic Analysisand Policy (DEAP), NABARD, Mumbai; Mr. K.R. Nair, Deputy General Manager, Micro Credit InnovationsDepartment (MCID), NABARD, Mumbai; Ms. Lalitha Mahadevan, Deputy General Manager, Women andEnvironment Cell, NABARD, Mumbai; Dr. Chayya Datar, Director, Women’s Studies Department, TataInstitute of Social Sciences (TISS), Mumbai; Dr. Lakshmi Lingam, TISS, Mumbai; Dr. Divya Pandey,Dr. Veena Poonacha, Director, Research Centre for Women’s Studies, SNDT Women’s University, Mumbai;Ms. Kusum Balsaraf, Manager, Project and Consultancy Department, Mahila Arthik Vikas Mahamandal Ltd.,Government of Maharashtra, Mumbai; Mrs. Prema Purao, Chairperson, Annapurna Mahila Co-op CreditSociety Ltd., Mumbai; Ms. Jini Bhada, Manager-Credit, Annapurna Mahila Co-op Credit Society Ltd., Mumbai;Mrs. Jayshree Vyas, Managing Director, Shri Mahila SEWA Sahakari Bank Ltd., Ahmedabad; Ms. SmitaGhatate , Development Manager, SEWA Bank, Ahmedabad; Dr. Veena Padia, Consultant, Gujarat ReliefProgramme, Ahmedabad; Dr. Tara Nair, Gujarat Institute of Development Research, Ahmedabad;S. Rajgopalan, Programme Officer, S. Rajeshwari, Project Officer, Komal Parmar, Programme Officer,Friends of Women’s World Banking (FWWB), India, Ahmedabad; Mrs. Lalita Balakrishnan, Hon. SecretaryGeneral, All India Women’s Conference( AIWC), Mrs. Asha Gambhir , Member-in-Charge, Micro Credit,AIWC, New Delhi; Mr. S.N. Tiwari, Swa-Shakti Project, Ministry of Human Resource Development,Government of India, New Delhi; Mr. Niraj Kumar, Programme Executive, Ms. Achala Sabyasachi, Manager,Programmes, Mr. T.M. Alexander, Programme Associate Sa-Dhan, New Delhi; Mr. Adarsh Kumar, ProgrammeAssociate, Ford Foundation, New Delhi; Mr. Sukhwinder Arora, Enterprise Development Adviser, Departmentfor International Development (DFID), New Delhi; Ms. Joke Muylwijk , First Sectretary, Gender andDevelopment, Royal Netherlands Embassy, New Delhi; Mr. Sanjay Sinha, Managing Director, Micro-CreditRatings and Guarantees India. Ltd., New Delhi; Frances Sinha, Director, EDA Rural Systems Pvt. Ltd., NewDelhi; Dr. Nandini Azad, Member-Secretary, Independent Commission for People’s Rights and Development,New Delhi; Dr. Vina Majumdar, Chairperson, Dr. Kumud Sharma, Senior Fellow, Centre for Women’sDevelopment Studies (CWDS), New Delhi; Dr. Nirmala Buch, President, Mahila Chetna Manch, Bhopal;Ms. Jaya Arunachalam, Working Women’s Forum, Chennai.

ANNEXURE IV

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