EMPOWERING THE POOR
Community-Based
Environmental & Financial
Management in Adilabad
District, India
CFI Project Goals
MAJOR GOALS
 Identify rural development investments strategies
that have a sustainable impact on target populations
& environments
 Minimize transaction costs to maximize effectiveness
of development investments
 Secure rights over assets for the beneficiary group
 Empower tribal women
 Identify Incentives and projects that support
community-based natural resource management
cont. CFI Project Goals
OPERATIONAL GOALS
 Assess how Self Help Groups (SHGs) and SHG
federations can sustain and expand benefits from
IFAD project investments
 Explore how community-based watershed
restoration projects can provide environmental
service payments for the rural poor
 Evaluate the potential of SHGs to receive and
manage environmental service payment contracts
 Examine how environmental service payments are
being utilized and reinvested
Challenges in Adilabad
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Heavy tribal dependence on natural resources
High poverty area
High levels of illiteracy (up to 85% among tribals)
Growing land and resource pressure from migrants
Increasing tribal landlessness
Lack of rights to forest resources
Rampant illegal logging
Degradation of upland watersheds
The Gond Tribals of Adilabad
Program Timeline
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1994: IFAD begins support to Andhra Pradesh Participatory
Tribal Development Project through Integrated Tribal
Development Authority (ITDA)
$25 million budget for natural resource restoration and
development, small-scale irrigation, reforestation, and soil &
water conservation - $12 million for small scale credit &
community institutions building (SHGs)
1995-2000: 500 SHGS formed in Adilabad District
2000: IFAD begins contracting with SHG for small projects
2001: World Bank funds DPIP creating Velegu and SHG
Federations
2003: IFAD-APPTDP ends
Participatory Research Design
PARTICIPATORY RESEARCH METHODS
 In-depth Interviews
-IFAD
-Integrated Tribal Development Agency (ITDA)
-Dhan Foundation
-Velegu
-SHG leadership & members
-Community members
cont. Participatory Research Methods
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Group discussions with SHGs
Process documentation of SHG federation
meetings
Spatial analysis of the increase in SHGs and
cluster patterns
cont. Participatory Research Methods
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Research Sites
-2.5 million people
-High proportion of tribal people (Gond,
Lambada, and Kolam)
-Heavy dependence on forests
-Critical watersheds
cont. Participatory Research Methods
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Case Study Sites
-SHG formation in Pittabangaram Village
-SHG clusters in the Movad Valley
-SHG federation of Kerimeri Sub-district
-SHG federation in Indravelli Sub-district
Study Areas in Adilabad District
cont. Participatory Research Methods
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Research Process
Jun - Aug 2002
Research Design
Sep 2002 – Aug 2003 Data Collection
May – Dec 2003
Analysis & Report
Development
Oct 2003 – Jan 2004
Film Production
Institution Building Process
SHG FORMATION (6-12 months)
(catalyzed by ITDA, Velegu, and the Dhan Foundation)
-8 to 18 women form an SHG
-Develop a common vision & identity leaders
-Start a savings account & begin contributing
-Develop basic accounting system
-Undertake project & market activities
cont. Institution Building Process
SHG CLUSTER DEVELOPMENT (12-24 months)
-Meeting of SHGs (2-12) within walking distance
-Form an SHG Cluster Executive Committee
-Register as cooperative society
-Open a joint bank account
-Participate in training program
-Bid on joint projects
cont. Institution Building Process
SHG FEDERATION DEVELOPMENT (24-56 months)
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Velegu and Dhan hold meetings of SHG and SHG clusters in
Kerimeri and Indravelli Sub-districts in June 2001
Sub-District SHG federations have 100 to 120 SHGs
Election of office bearers and federation accounts opened
Member SHGs pay monthly dues for federation activities
Federations are registered under the Indian Trust Act of 1882
Cont. Institution Building Process
-Federations functions:
-Provide training support to SHGs
-Represent SHGs with local government,
rural banks, line agencies and other
organizations
-Address social issues (e.g. mass
weddings, etc.)
-Resolve conflicts
Indravelli SHGs, Clusters, &
Federations
Kerimeri SHGs, Clusters, & Federation
Economic Strategies
JUSTIFICATION FOR WATERSHED MANAGEMENT PROJECTS
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Reversing watershed deterioration is a high priority in India
Over 50% of India’s land area is classified as degraded
watershed
Problems include loss of vegetation cover, soil erosion,
declining groundwater levels, decreasing crop productivity, and
out-migration
Watershed investment in the mid-1990s was over $500 million
Average cost per IFAD village watershed is $4,300 over five
years
Fast returns in terms of high crop yields from improved water
capture and higher soil moisture levels can recover costs within
4 years
cont. Economic Strategies
IMPACT OF CONTRACTING WATERSHED RESTORATION
THROUGH SHGS
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Improved design and location of structures
Greater sense of ownership and improved maintenance
Better use of improved resources (e.g. seasonal ponds,
woodlots, etc.)
Reduced “leakage” of small project funds
Improved employee payment
30% contractor’s commission added to SHG savings
Community Banking & Micro-Finance
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Rural indebtedness a major cause of poverty
Rural moneylenders charge 5% per month
and more for loans
Chronic indebtedness leads to loss of
agricultural land, especially among tribals
Lack of access to capital constrains small
enterprise initiatives
cont. Community Banking & MicroFinance
IMPACT OF SHG SAVINGS PROGRAMS
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19,500 SHGs involving 200,000 women in Adilabad District
have saved an average of $27
SHG members have not only learned to save, but have learned
to reinvest
Adilabad SHGs have a default rate of less than 4% with rural
banks vs 33% for all borrowers
With good credit ratings, some SHGs have been able to
leverage their savings with a 4:1 debt to savings ratio
Dependency on moneylenders is decreasing rapidly while land
security is enhanced
Co-operative Marketing
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Tribal farmers get low prices for agricultural
produce due to:
Use of future harvest as collateral for
agricultural input loans from moneylenders
Lack of storage facilities
Absence of agro-processing facilities
High transaction costs (i.e. up to 9 layers of
traders between the farmer & consumer
cont. Co-operative Marketing
SHGs and SHG clusters are using savings to:
 Buy soybeans and Lac harvests
 Establish soybean oil processing facility
 Intensify Lac production
 Purchase agricultural inputs at wholesale
rates
cont. Co-operative Marketing
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Impact of SHG cooperative marketing
initiatives:
Farmer’s soybean income increases 7-8%
Farmer is paid 100% at the time of sale
Processing adds 20% to soybean value
Lac prices increase 3-5 fold
Project Impact
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500 SHGs formed in 300 villages, Adilabad District
Of the $3.2 million spent on small projects in Adilabad,
$638,000 was for SHG contracts
SHGs saved $40,400 from contracts in Indravelli sub-district
and leveraged an additional $76,600 through bank loans
SHGs saved $31,967 from environmental service contracts in
Kerimeri sub-district creating a dramatic increase in SHG
savings accounts
SHG capital is used for loans for agricultural inputs, rapidly
displacing dependence on moneylenders
Reduced reliance on moneylenders is slowing the rate of tribal
land sales and landlessness
Risks & Recommendations
CRITICAL RISKS
RECOMMENDATIONS
Unsustained political & financial
commitment to Velegu
More SHG representatives on Velegu
executive committee
Poor inter-agency & program coordination
ITDA continues to play coordinating role.
Integration of village-level microplan.
Target orientation can rush development of
SHGs
Allow time for capacity building
External funders of SHGs may drive their
decision making
Strengthen SHG capacity for reviewing
proposed action plans
Limited financial management capacity of
SHGs
Develop simple accounting procedures for
SHGs.
Poor linkages of SHGs with banks
Facilitate SHG relationships with rural
banks
Corruption among local government
administrators & bookkeepers
SHG federations should refer complaints to
Velegu’s governing board. SHGs hire
bookkeepers.
Constraints to Environmental
Service Payments to Rural Poor
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High transaction costs of emerging international
carbon-offset and biodiversity conservation payment
systems
Lack of commitment to fund by the private sector
Lack of a channel or mechanism to transfer funds to
communities
Absence of community capacity to receive and
manage payments
Lack of “community-owned” institutions to contract
with external organizations
Advantages of SHG Approach
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SHGs enhance community capacity to receive and
manage funds from environmental service payments
Contracting directly through SHGs Clusters and
Federations dramatically reduces transactions costs
for ESP contracts
ESP project contracts empower communities as
resource managers and create incentives for
sustainable management
ESP projects encourage further investment in
resource restoration and development
Recommendations for IFAD
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Promote ESP strategies & goals through IFAD’s
community institution building, livelihoods, and
natural resource projects
Emphasize direct contracting small projects through
community-based institutions
Coordinate with bi-lateral and multi-lateral projects to
ensure continuity of strategy and support
Build an ESP alliance with major development
agencies to facilitate ESP investment by
governments and the private sector
THE END