FINANCIAL RELATIONSHIPS BETWEEN COMMUNITY BASED ORGANISATIONS
AND THE FORMAL BANKING SECTOR
YCO’s PERSPECTIVE
Ms. (Dr) KIMBERLY JANE REID (KIM)
VANCOUVER, CANADA
Summary:
This paper focuses on the work of a local NGO, Youth Charitable Organisation (YCO),
in Andhra Pradesh, India. Their title is deceiving for their work does not involve charity or
welfare. Instead, their focus is on developing self-sufficiency and autonomy among the rural
poor, particularly women, using a participatory approach. The paper starts at the beginning
with the gradual development and evolution of a micro finance programme. The reader is
shown the elation and many pitfalls YCO experienced with their target communities, the
formal banking sector. YCO staff has just celebrated their 21st birthday and are looking to
their future role as an NGO with great experience in development in Andhra Pradesh. Slowly
they have come to realise that self-sufficiency and autonomy are necessary for themselves
as well as the communities they advocate. The absence of dictation and conditions
demanded by outside agencies will allow YCO the freedom to implement their development
programmes according to their unique understanding of the issues facing the poor people in
Andhra Pradesh. The decisions made in the next five years will determine how successful
YCO is at becoming self- sufficient.
Evolution of YCO’s Micro finance Programme
In 1981, YCO began as a secular, non-profit, non-political and non-government rural
development agency in Yellamanchili, Andhra Pradesh. Their vision was “to create a just
society which recognises the dignity of a person through sustainable development.”
Emphasis was placed upon socio economic programmes where YCO supplied necessary
resources and services to their target groups, mainly rural villages. Agro forestry was an
early focus for YCO; providing plants for the rural backyards, setting up nurseries for
community block farming and planting trees in waste and community lands. YCO village
coordinators emphasized the importance of proper and efficient land use and cooperative
farming benefits. Additional programmes included health, sanitation and disaster
preparedness.
At an international level, important changes took place in the late 1980s in the
conception and implementation of development projects. Traditional ways of dealing with
poverty, through the planning and action of central or state governments, or private
institutions, were costly and reached only a small number of select people. Public and private
institutions in many countries began to address poverty in new ways, based on community
solutions and community involvement. This discovered that successful and sustainable
development schemes shared a common theme; the inhabitants were involved, from the
beginning, in project design and implementation.1
In the spirit of this movement, YCO had already organised the village women into
Sanghams or women groups. YCO encouraged the women to meet and discuss their common
1
Arrossi, S., Bombarolo, F. Hardoy, J. Mitin The Role of NGOs in Community Development: the work of community
organisations, chapter 3; Funding community initiatives, Earthscan Publications, London, pp.33-34
problems and come up with their own solutions. This specific focus on women came from
their essential place within Indian Society. Most rural women have multiple roles: wife,
mother, homemaker and provider and, due to sheer survival pressure, poor women usually
run their individual economic activities efficiently. Despite this, formal lending institutions
were unwilling to lend to poor women as they lacked collateral and were considered a poor
credit risk.2 The majority of poor households resorted to moneylenders who charged an
extortionate rate of interest. Many were unable to repay their loans and subsequently lost
their assets and/or became bonded labourers.3
Through consistent and meaningful contact, YCO staff slowly began to comprehend
the dire need of these rural families. A main issue was the multiple numbers of
responsibilities placed on a woman’s shoulders. Rural women remonstrated over their
inability to work in the fields and look after several young children at the same time,
especially when sickness hit the family. It was a vicious cycle, for a sick child kept the
mother at home and prevented her from earning vital income. Loss of income resulted in less
food and the children were the first to suffer. In response to this situation, YCO
introduced their first saving programme, although money was not involved. While preparing
the evening meal, each woman was encouraged to put aside evening meal, each woman was
pooled in each village and used to feed the children in a day care centre run by the women
on a rotating basis. In this way, the community shared individual burdens and the women
received their first lesson in saving.
The Start of a Micro Finance Programme through revolving fund:
The women from one village realised their children were still not getting enough to eat. In
response, YCO helped them establish their own women savings and loan group in 1986. The
Swedish International Development Agency (SIDA) provided Rs. 120,000, which YCO used
to establish a revolving fund. This fund enabled 40 members of women association at
Gobburupalem village to each borrow Rs. 3000. Each woman bought a dairy buffalo and the
milk substantially increased her monthly income. The loan was repaid in 20 months at Rs. 150
per month with no added interest. The beauty behind the revolving fund was that the money
circulated within the community. Principle capital was repaid into the fund and used for
subsequent loan phases.
Eventually, women from all the 30 target villages of YCO informal savings groups
were established. Each member saved between Rs. 3 to Rs. 10 per month, which was added
to the revolving fund financed by SIDA. From 1987 to 1991, YCO used the revolving fund
scheme to provide interest free loans to the women associations and promote income
generation opportunities. YCO encouraged the women to use the money to purchase dairy
buffaloes, agriculture supplies, fish vending, palm fibre making, petty trade and vending etc.
It was clear that the women were starting to speak out against their poverty and
their children’s empty stomachs. Before these women associations were organised, rural
women would not show their faces to strangers much less shout out in anger. Initial efforts
at establishing an informal savings and credit system through the revolving fund, paved the
way to greater solidarity. In 1991, YCO hosted a discerning meeting with sixty women from
thirty villages to discuss the possibility of creating a women’s federation. This meeting
focused on the savings and credit programme as well as other community development issues.
Representatives from various commercial banks were invited as YCO and the women felt
2
3
M. S. R. Prem Kumar, YCO Savings and Loans Hand Book, Page 4
Mahon, D. Business Plan for Micro finance activities of Women’s Cooperative on behalf of YCO,
they had proved their credit worthiness through their informal savings groups. Here was an
excellent example how community involvement and implementation, through the assistance
of a motivated local NGO, can result in a successful and sustainable development programme.
The result of this notable meeting was the re-formation of the women associations.
Each village group was called a Mahila Mandal (Women Association) and was divided into
smaller savings groups called Ten (Team) Action Group (TAGs). Each TAG had ten women
members who shared a common socio-economic background. Eventually over 5500 women
belonged to this women associations with each woman savings an average of Rs. 22 per
month. Supported by YCO village coordinator, each women association monitored loan
repayments and encouraged their members to save. Peer pressure and high motivation
resulted in consistent savings and timely loan repayments. They recognised the more the
group saved, the better their chances at acquiring a loan.
YCO’s First Micro Finance Hurdle:
Most new schemes have difficulties and YCO’s revolving fund and income generation
programme was not an exception. Despite its sustainable advantages, the revolving fund was
too small to meet the loan requirements. There were long waits between loan phases and
loan sizes were restricted to a maximum of Rs. 500. This amount was not enough to make an
appreciable increase in monthly income; an average female buffalo and calf costs between
Rs. 3000 to Rs. 4000. As the individual earning power of rural women is low, they were
unable to increase their savings contribution to a degree that would meet the financial
needs of the community. A larger monetary source was necessary to meet the villager’s
financial requirements.
YCO decided to reach out to the formal banking sector. They conducted a meeting
with officials from Canara Bank, Bank of Baroda along with representatives from the women
groups. YCO proposed that the banks finance the women groups against their savings fund.
A representative from the National Bank for Agriculture and Rural Development (NABARD)
participated in this meeting and explained NABARD’s self help group scheme; a national
programme to facilitate extension of credit to women groups. The banks agreed to finance
the loans with or without the NABARD scheme using YCO as the intermediary. In 1993, the
first loan phase, amounting to Rs. 870,000, was released from the banks to distribute to 34
TAGs. Neither NABARD nor the Reserve Bank of India required a collateral deposit, yet
the local banks demanded Rs. 295,000 of the people’s savings for that purpose. This was
YCO’s first indication of the inflexibility inherent to India’s formal banking sector.
NABARD’S SELF HELP GROUP SCHEME: YCO’s first encounter with India’s formal
banking sector:
Up until 1993, YCO’s efforts were confined to the community level and all capital
revolved and benefited the community. To meet the women groups’ growing demand for
loans, YCO solicited the help of formal lending institutions. From this point on, capital left
the communities in the form of interest payments to the banks and to NABARD.
YCO and the community groups were understandably thrilled to be finally accepted
by formal banking institutions. Up until 1993, these women and their families were
completely ignored by this sector. YCO and women wanted this new relationship to begin as
a full working partnership. The women committed themselves to building their capacity;
savings consistently and repaying small loans in a timely fashion. This would further
establish their credit worthiness and consolidate their relationship with the banks to the
point where YCO, as the intermediary, could gradually withdraw. Many as an essential step in
development consider this gradual evolution, where the community solidifies its relationship
with the formal banking sector and slowly withdraws from the protective umbrella of the
NGO.4 This axiom will be discussed later as it becomes entirely a function of the formal
banking sector environment.
Initially the women saved an average of Rs. 22 per month, which was placed in a
fixed deposit account and used as collateral security against the loans extended by the
banks. These savings were not available for loan financing. The total savings of all the
women associations came to Rs. 2222222, as of 31st January 1997.
NABARD recovered the loans over a three-year period. They advanced the capital to
the banks at an interest rate of 6.5% per annum and the banks loaned to YCO at 11%.
NABARD restricted YCO not to charge more than 12% to the women groups. To cover the
administration, managerial and capacity building costs 1% stake to YCO was not sufficient.
The ultimate women member borrowed 18% from their Women Associations. All other
default payments were the first responsibility of the TAG, followed by women association.
Overall, the NABARD’s self help group scheme worked smoothly between YCO and the
community groups. This was understandable as YCO staff clearly understood the unique
problems facing the villages and endeavored to meet their needs with flexibility and
responsiveness. In contrast, relations between YCO, the intermediary, and the formal
lending institutions were fraught with difficulties.
Problems with the formal banking sector:
The partnership between the Women Association and the formal lending institutions
must necessarily be an equal one. Where the community promises to become bank worthy,
the banks must also promise to strengthen their existing procedures. They must show
flexibility with respect to the unique circumstances of the rural poor and they must show
sensitivity to the families’ plight of poverty. Additionally, the banks must increase their
responsiveness to the poor and help build trust and confidence between their institutions
and the villagers.
The women associations fulfilled their terms and conditions of the NABARD self
help scheme by savings consistently, depositing their growing capital with the banks and
repaying their loans in a timely fashion. The banks, however, fell well short of their
responsibilities. YCO discovered that flexibility, sensitivity and responsiveness were
practically non-existent in bank vocabulary. Each new loan phase had new conditions
introduced without justification and their response to loan requests took an interminable
time. Woman had to place their loan request at least six months ahead of their demand.
Since rural income levels were highly inconsistent due to sickness, weather and natural
disasters, this was hardly responsive to the needs of the people.
In some instances, traditional banking procedures prevented the opening of savings
accounts in the name of the registered group. Many of the nationalized rural banks bluntly
refused to allow the savings accounts in their branches. Other banks permitted savings
accounts but refused to pay even simple interest. Contrary to NABARD’s own requirements,
the banks demanded the groups’ savings as a fixed deposit collateral instead of allowing
them to be used for local investment. This sort of bureaucratic response is well documented
in thrift and credit schemes around the world. Common problems cited are insistence of
regular payments with little flexibility according to income, fixed time periods for loan
4
Platt, S. R. Low cost housing finance in Andhra Pradesh, India
financing and repayment and a demand for collateral, which most households are unable to
provide.
YCO found their own relationship with the banks frustrating and patriarchal. The
banks demanded income and expenditure particulars of YCO, asset particulars of the YCO
Board members and the asset particulars of YCO as an organisation. They often made
comments on YCO’s administration expenses and demanded a monopoly holding over YCO’s
funds. YCO’s experience with the banks through NABARD self help group scheme continues
in the same fashion to this day.
Great changes transpired since the days of a community based revolving fund
managed by YCO and funded by the people and external granting organisations. YCO was
troubled by the banking sector’s reception. They were also concerned that the true
beneficiaries of the NABARD SHG scheme were not the community members, but NABARD
and the lending institutions. NABARD was earning 6.5% interest per annum on each loan
phase and the banks were acquiring 5.5% plus 0.5% interest tax.
Following statement will give you details about the stake benefits to the different
actors in promoting bank linkage of SHGs through NGOs under NABARD programme.
No Particulars
1
Total SHGs benefited
721
2
Total Individual members
7210
benefited
3
No. of phases of finance
8 phases by 2 banks
4
Total amount of SHG
Rs. 61,91,203/savings with the 2 banks
5
Total Loan received as on
Rs. 3,75,80,000/31.3.2001 from 2 banks
6
Total Principle repaid as
Rs. 2,33,96,053/on 31.3.2001 to 2 banks
7
Total Loan Outstanding as
Rs. 1,41,81,947/on 31.3.2001 to 2 banks
8
Total processing fees
Rs. 4,28,101/collected by banks
9
Total processing fees
Rs. 1,80,250/collected from SHGs
10 Total Interest Collected
Rs. 90,52,340/11
Total Interest paid to
Rs. 63,96,468/banks including NABARD
stake
12 Total
interest
stake
Rs. 35,10,647/received by NABARD’s
stake 6.5%
13 Total
Interest
stake
Rs. 28,85,821/received to banks
14 Total
interest
stake
Rs. 4,40,099/received by YCO
15 Total
interest
stake
Rs. 22,15,773/received to SHGs and
Women’s Cooperative
Without any credit risk and additional capital investment for capacity building for
the self help groups NABARD is benefited with an amount of Rs. 35,10,647/-. Cost of their
funds more or less free from SDC, KFW and GTZ etc., Under the SHG and bank linkage
programme through an NGO the first beneficiary is no doubted NABARD.
Coming to the question of bank(s), they got 75% credit risk because they are
financing 4 times more than SHG savings. Their operational costs are nil because YCO is
their borrower and it is a single loan application. So they are not incurring any costs for
recoveries. In addition to that the banks collected an additional amount of Rs. 4,28,101/towards loan processing charges. Where as the YCO was able to collect only Rs. 1,80,250/from SHGs/individual beneficiaries.
This was capital leaving the community and entering the pockets of these institutions.
To address these headaches, YCO must look elsewhere and internally.
Rastriya Mahila Kosh (RMK): By passing the formal banking sector:
Rastriya Mahila Kosh (RMK) or National Women’s Fund is a programme set up by the
Indian Government to provide loans to women through an NGO. RMK accepted YCO as an
intermediary because of their savings and loan experience and their excellent loan recovery
rate; greater than 95%. The RMK programme offered loans up to ten times the capacity of
YCO and conveniently by passed the formal banking sector by lending directly to YCO.
YCO was able to finance RMK loans directly to the Women Associations without
answering to the unresponsive bureaucracy of the formal banking sector. Today, an RMK
loan can be financed within twenty days of the loan request, meeting the unique needs of a
community vulnerable to inconsistent income.
In light of community participation in the planning and implementation of self-help
schemes, YCO reflected on its past decade of community work. They realised that the
women associations were slowly but surely moving away from autonomy and relying more on
outside financial agencies such as RMK and SIDBI. To address this particular concern and
to further by pass the uncooperative nature of the formal banking sector, YCO promoted a
Mutually Aided Cooperative Society as a Community Based Financial Institution.
Swayamkrushi Women’s Development Mutually Aided Cooperative Thrift Society: Self
Sufficiency and Autonomy:
The main aim of the Women’s Cooperative is to provide timely finance to its members
and make the women shareholders of their own institution rather than dependent on
external charity. As prescribed by the Andhra Pradesh Government Mutually Aided
Cooperative Societies Act 1995, Women’s Cooperative members must be recruited from
those households living below the poverty line. Additionally, they must either be marginal
farmers, landless labourers, artisans or fisher people and must have a perfect track record
of savings with their women’s association. At present the Women’s Cooperative
concentrates its activities in YCO’s 150 target villages in Visakhapatnam District. They hope
to increase by another 50 within the next five years.
Known colloquially as the Women’s Cooperative or Women’s Bank, this financial
institution was set up in 1996 with an authorised share capital of Rs. 500,000 and increased
to. Each member buying ten shares at Rs. 10 per share. After fully repaying any outstanding
loans from previous programmes, every women belonging to YCO’s savings and loan
programme is welcome to become a shareholder in the Women’s Cooperative.
As of March 2001, there were 8890 shared holders in the Women’s Cooperative. All
the monthly savings collected by the women associations are deposited with the women’s
cooperative, where it earns 9% interest per annum as a recurring deposit. As soon as the
savings are deposited they are available for loan financing through the Women’s Cooperative.
Unlike the NABARD or other programmes, the member’s funds will be primary source of
loans. The Women’s Cooperative charges 18% per annum for income generating loans, 12%
for housing and 24% for consumption loans. As of March 2001, the total savings held within
the Women’s Cooperative was Rs. 63,00,000. Like the revolving fund initially introduced by
YCO in mid 1980s, the women’s cooperative is an excellent example of a community solution
to a community problem. All capital generated within the community circulates locally and, as
the women’s cooperative grows in reputation and assets, so will the community shareholdings.
Recognising the importance of the autonomy for community members, YCO decided
to separate the Women’s Cooperative completely from YCO on January 16, 1997. Today
fifteen seconded YCO staff work in women’s cooperative but until the society becomes
completely self sufficient in March 2002. YCO would like its future role to be restricted to
advising, arranging network opportunities with other NGOs and providing training and
leadership programmes. This should ensure that the community participates in and
completely controls its own development. To be completely self-sufficient where the
primary sources for loan is community savings. Women’s Cooperative membership must
increase 25,000 by 2005 and each member must save a minimum of Rs. 50 per month.
The future for Women’s Cooperative looks extremely bright. They have come a long
way from those first few handfuls of rice. Both YCO and the community hope that the
Women’s Cooperative will become a bank in its own right where they may deposit the
women’s savings in their own account, and negotiate grants and funding directly with
agencies such as SIDBI and RMK etc. Eventually smaller and more accessible branches may
be opened within the mandals (blocks) as the area of operation cover a radius of over 100
km.
Capacity Building Needs of Women’s Cooperative:
YCO is into the multifaceted rural development programmes successfully for the last
20 years. The growth was study and the results were cost beneficial. The social capital built
painstakingly over a period of two decades has prompted the organisation to a stock taking
exercise and build up a Road map for the next three years. Obviously credit and the human
resources are the two vital components in the process of micro corporatisation of the
Social Capital.
Micro finance is the flagship of the programmes and is point of convergence for
other development activities. YCO has fast visualized the change in approach in recent time
from “grant” to “credit” and is fast readapting itself to the change.
Reasons analysed are:
i. Grant is limited in supply and scarce
ii. In consistent
iii. Unviable
And the credit is:
1. Wide based
2. Sustainable
3. Acceptable
The evolution is logical and the mutation is unstoppable as the community got
sufficiently empowered to self manage their affairs and the change in mindset is testimony
and justification for the grant flow all these yeas.
Quantum of Loan:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Short term Rs. 2500/Medium Term Rs. 4000/- to Rs. 6000/Short term production Rs. 4000/Housing low-income group: Rs. 35,000/Interest on savings for the first 6 months 4% is charged. After this period
10% is taken as fixed deposit.
The savings funds utilised as the chunk security deposit offered against the
bulk loans and the present outstanding security deposits are Rs. 50 lacs.
Withdrawal of savings is allowed on group basis if the group is not having any
outstanding loan. Inturn those who are not having any loan are only eligible for
refund of savings.
Mode of repayment is on reduced balance and there is no concept of Equated
Monthly Instalments.
Loan size is uniform.
There is no institution like Bookkeeper and the absence is conspicuous.
The groups are active in discussing the social issues and are not appeared to
be confined to thrift and credit.
YCO is a culture working in close coordination with the Government and the
groups appear to be not averse to Government linkages.
DWCRA over lap is a problem being encountered by the groups and remains
unresolved.
There are no practises of poverty ranking and the groups are inherent groups
with homogeneity.
There is no targeted approach but there are Scheduled Caste groups. But the
organisation has not taken any commitment to cover particular number of
socially downtrodden groups.
The TAGs get integrated at village level called Mahila Sangam, which are
registered under Societies Act 1860.
Mahila Sangam (Women Societies)
It is intermediary structure, informal but registered and is representative in
character. Each TAG sends two representatives. There are 143 such women societies in 7
mandals with an average of 5 tags per society. But the range may be from 3 to 25 TAGs per
society. Women societies are coterminous with the village and theses are 150 such societies
in 150 villages. Cooperative has plans to cover another 15,000 families in the next three
years and organize them into TAGs and women societies.
It is the Mahila Society, which operates the Bank account and is the functional
intermediary between TAG and YCO (earlier) and cooperative now. TAG borrows money
from Mahila Sangam and disburses the loan amounts to the needy members as per the pre
plan. Mahila Society also handles range of social development activities and is really vibrant
grass roots people’s body.
YCO and the Cooperative-The Co-Habitation
YCO has developed the cooperative as its corporate wing exclusively devoted to
women to meet their credit needs. Some of the reflection on YCO and cooperative are
mentioned below.
S. No
1.
Indicator
Statutory
YCO
Registered as
Society under 1860
Act.
2.
3.
Status
Coverage
4.
5.
Gender
Corporate relation
ship
Not for profits
Holistic and entire
range of programmes
including micro
finance.
Both men and women
Bulk loan
intermediary for the
cooperative
Cooperative
Registered as
Mutually Aided
Cooperative Society
under AP MACS Act.
1995
For profits
Thrift and credit and
micro finance.
Only women
Retailer for the bulk
loan borrowed by
YCO.
Reposition Strategy:
YCO is handholding the cooperative since its inception. It has withdrawn major
support from April 2000 onwards. But the following areas of support inevitable for the
cooperative for another five years after which it becomes totally autonomous in operation.
1. Bulk loan – Financial institutions are not recognizing the cooperative under MACS Act.
(NABARD refinanced commercial Banks).
2. The Cooperative has not completed 3 years (completed 3 years in the current
financial year)
3. Securities offered as collaterals are still with the YCO and to that extent the
cooperative has to lean on YCO.
4. Staff support to the extent of 10 members with half of their time invested on the
cooperatives is not capitalized and withdrawal or capitalization is envisaged from the
current financial year on tapering basis.
5. Grant assistance especially the training and HRD component are availed by the YCO
and passed on to the cooperative to the extent of its organizational needs.
6. The underlying principle is change in role model of the actors and stakeholders from
Manager to facilitators in the path of community empowerment.
PROGRAMME EXPANSION PLAN: AREAS OF KEY RESULTS
1.
2.
3.
4.
5.
6.
7.
PHYSICAL GROWTH INDICATORS
FINANCIAL GROWTH INDICATORS
HUMAN RESOURCE INDICATORS
INFRASTRUCTURE
CAPACITY BUILDING AND HRD
MANAGEMENT INFORMATION SYSTEMS
LIVELIHOOD SUPPORT INTERVENTIONS AND ENTERPRENUERSHIP
DEVELOPMENT PROGRAMMES
8. INNOVATIONS AND RESEARCH
9. MEMBER WELFARE AND SOCIAL SECURITY
10. IMPACT ASSESSMENT, DOCUMENTATION AND PROGRAMME MONITORS
Training Needs-Who are to be trained?
I.
Members:
a) Executive Committee members
b) Group Leaders:
 TAG Leaders
 Mahila Sangam leaders
II.
Programme personnel:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
Chief Executive Officer
Senior Field Officers
Technical staff
Accounts staff
Internal auditor
Field staff
Trainers
Book writers
Broad Areas and Subjects were capacities are to be built up:






Credit Delivery Technology
Finance and Resource Management
OD and ID, Accounts Staff
Internal Auditor, Field Staff
Trainers
Book writers
Broad Areas and Subjects where capacities are to be built up:
1.
2.
3.
4.
5.
6.
7.
Credit Delivery Technology
Finance and Resource Management
OD and ID
Accounts, Audit
Human Resource Development
EDP and IGAs
MIS and Automation, Economic Data Processing
Specific Areas of Capacity Building:
Members:
A. Executive Committee members:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Cooperative Principles and sprit of cooperation
MACS Act, salient features
Conduct of Board meetings and General Body Meeting
Roles and responsibilities of the EC
Dos and Don’ts for the EC
Participatory Development skills
Government Development Programmes
Community and social capital formation skills
Performance review and progress monitoring
Cost benefit analysis of the programme components and self finance modules
Strategic business planning
Group Leaders:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Best practices of SHG and vision building exercise
MACS and its principles and objectives, role and responsibilities of the members
Ongoing government programmes
Participatory family development appraisal and micro planning process
EDP and generation of credit demand
Techniques of group portfolio building
Gender and cooperatives and conflict resolutions
Micro Credit Management
Dos and don’ts in the SHG and Cooperatives
Community asset building techniques
Members
1.
2.
3.
4.
5.
6.
7.
Orientation to MACS and SHGs
Livelihood support plans and vision building process
Gender issues
Conflict resolutions
Panchayat Raj and Women and 42nd amendment
Best practices of SHGs
Member education on cooperatives
8. Government Programmes
9. Community assets building process
10. EDP and IGAs.
Programme Personnel and Facilitators:
I. CEO and Sr.Field Managers:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Cooperative Principles and MACS
Financial Management
OD and ID
MIS
Credit Management and delivery technology
Fund mobilization techniques
Audit, Programme Monitoring and Evaluation
Strategic Business Planning
Participatory Micro Planning Process
Government Programmes
II. Technical Staff and Field Managers:
1.
2.
3.
4.
5.
Credit Appraisal and credit needs assessment
Credit Delivery technology
Self Help Group best practices
Enterprise promotion and livelihood support interventions
Strategic Business planning
III. Accounts Staff
1.
2.
3.
4.
5.
6.
7.
8.
9.
Economic Data Processing
Records and Bookkeeping, cooperative accounts
Preparation of financial returns
MIS
Audit and Monitoring
Automation
Statutory Requirements of MACS
Viability analysis techniques
Communication skills
IV. Internal Auditor
1. MACS Act and statutory requirements
2. Operational Manuals, Byelaws and business rules (subsidiary rules) and audit
rectifications
3. Financial Audit
4. Personnel Audit
5. Inspection kit and Audit rating techniques
V. Trainers:
1.
2.
3.
4.
5.
Participatory Training, Skills
Preparation of training tools
Training Planners
SHG and cooperative related issues
Reports and evaluation
VI. Book keepers:
1.
2.
3.
4.
5.
SHG Books and record writing skills
Dos and don’ts for book writers
MIS and reports
Viability Plans
Loan documentation method
FINANCIAL GROWTH INDICATORS:
1.
2.
3.
4.
5.
6.
7.
8.
Share Capital and Deposits
Loan Disbursement
Borrowing Powers
Loans Outstanding, Borrowings and Recoveries
Statement on Reserves
Profit and Loss statement
Receipts and Payments
Balance sheet
MANAGEMENT INFORMATIONS SYSTEMS
The Organization is poised to grow and the growth demands information inflow and
outflow of high accuracy and speed. Obviously the entire system of operations have to link
to information Technology. The present MIS is not up to the mark and the volume of
credit, the Institution is going to handle can never be matching with the member
information, financial flow analysis and movement of socio economic indicators.
Another key area where information management is to be modernized is the
accountancy at the group level. The group spends precious one hour in every meeting for
money transactions and their postings in their books of accounts. Hardly there is another
one hour left for them to transact other business and social issues.
Average size of loan is also likely to go up in the next three years and accurate and
up-to-date posting of the information may lead to group conflicts, lack of transparency and
seepage of income.
Livelihood Support Interventions:
The community is by and large dependent on dairy farming and agriculture labor and
requires exposure to range of livelihood support activities. The Organization has to have a
fresh look at the possible opportunities in on farm, non-farm and off farm sectors and a
strategic business plan is required with strong back ward and forward linkages. The
widening credit base also leads to capital formation at group and family levels and the
deployment of micro capital has to back up by a strong Entrepreneurship Development
Programme. The Organization should have full time team of EDP and hand hold the
community in the beginning and build capacities to sustain wide range of economic activities.
Innovations and Research:
Micro Finance is throwing open wide range of innovations to add depth and width to
the efforts of the different stakeholders. SMART Card: Is now gaining popularity with the
Micro Finance field and the YCO can emulate the system for transparent and accurate
recording of transactions. Mutual Market: A closely knitted community of 8000 families has
wide range of consumptive and productive needs and they constitute the captive buyers.
The Cooperative has to innovate the ways and means to build up a rural super bazaar and the
investment has to come from each group on each item on a continuity basis.
Member Welfare and Social Security:
The collective strength of the Cooperative throws into foray a wide range of risk
coverage and welfare. Old age pension, prenatal care, girl child endowment are some of the
examples. Innovative micro insurance are on the anvil with the insurance industry throwing
open to the multinationals. The Cooperative has to forge alliance with these insurance
companies for wide range of long-term benefits.
Impact Assessment, Documentation and Programme Monitors:
YCO has a culture of good documentation. Independent agencies have done in-depth
study of the growth process. Introspection and retrospection clearly give way for the
future and the concurrent evaluation of the programme will go a long way in helping the
organization to build a road map.
Word of Warning:
Sustainability is not only about money. A viable and self-sustaining women’s
cooperative loses its value if its programmes exclusively concern financial services.
Complementary services such as training, counseling, literacy, health, nutrition etc., are
necessary elements in development that are often forgotten in the rush to become financial
sustainable.5 When the Cooperative separated from YCO in January 1997, its mandate was
concerned only with financial services. This outlook may have to change to address other
essential development issues.
CONCLUSION:
Many academics and development professionals place great importance on the
successful integration of community-based organisations into the formal financial sector.
This axiom is in danger of becoming inflexible dogma unless the unique environment
surrounding both the low-income community and the formal financial sector is taken into
5
Congo. Y, Financial Sustainability and perennity of micro finance experience in Africa; an analysis of experiences in
Burkina Faso, from Micro enterprises, ADA, Luxembourg, pg 162.
account. The necessary conditions for a successful partnership depend on the particular
context within which the relationship is operating. While it is true there are excellent
examples of viable partnerships with the financial sector in other developing countries, this
may not be the case for Andhra Pradesh or, perhaps, India.
YCO has 20 years of experience in the unique development problems facing poor
families in Andhra Pradesh. YCO’s successes include the following:
1. The organisation of rural women into self helps groups. This have given them a
medium through which to voice their anger and frustration against poverty and to
search for their own solutions;
2. The establishment of the micro finance scheme, which permits poor families to save
and acquire loans to improve their income. This scheme reaches beyond the financial
benefits. It also teaches self-sufficiency and self- confidence.
3. The establishment of women’s cooperative, an organisation working for the benefit
of the community and not for profit. This cooperative shall eventually operate as a
bank in its own right giving control to the people over their livelihood. This last is
quite crucial. If the Women’s Cooperative becomes as a community based financial
institute in its own right and successfully meets all the financial needs of the
community shareholders, what is the need for the formal banking sector? One could
argue that once the Women’s Cooperative reaches this powerful level, the community
members, who not only run the Cooperative but also dictate its policies, will be able
to deal with the formal financial sector as an equal partner. Short of this, the
communities will always be merely clients who must suffer the insensitivity and
inflexibility of the formal banks. The context within which the scheme is operating
must determine the strategy used. In the context of formal banks in Andhra
Pradesh, an autonomous approach through the Women’s Cooperative has been far
more successful than integrating the communities directly with the formal sector.
YCO has grown to a stage where it can look back over its successes and use its
experience to skillfully map out its future. For the last twenty years, YCO has depended
upon outside funding to meet its administration and managerial costs. Now is the time for
YCO itself to become self sufficient and autonomous just as they advocate for their target
communities. Plans are in the works to establish agro industries like cashew processing,
dairy farming, cold storage etc., would earn capital to support YCO’s development efforts.
Care must be taken to ensure that management of these ventures does not encroach upon
YCO’s main raison d’etre, “to foster a sustainable process of ongoing change for the socio
economic benefit of the rural poor through their own means and effort.” In the effort to
become sustainable, moneymaking ventures have been known to eat up resources and time
previously spent on development programmes.