MICRO CREDIT : STRATEGY FOR WOMEN’S EMPOWERMENT
B R Siwal
Deputy Director NIPCCD, NEW DELHI Emal:firstname.lastname@example.org
The micro-credit is an important means for empowerment of poor women. The availability of credit and access to them are considered important for several reasons. Credit can help women in raising the economic self-reliance and productivity. Access to credit is a key to almost every form of productive selfemployment for poor women. Micro-credit for women engaged in informal and home based production is the single most effective factor to tackle poverty and enhance their living standard. Poor women are all working women. They are engaged in a variety of occupations. These women in poverty, toil not only at home doing multifarious activities such as bearing and rearing of children, house-hold chores, collection of fuel, fodder and water but also contributing to family and economy. About 90 percent women are working in unorganised sector of economy which includes agriculture, livestock, dairy, poultry, fisheries, sericulture, handloom, handicrafts, forestery, small trading and vending, providing unskilled labour in fields, construction sites, factories, and worksheds, providing services such as cleaning, cooking, washing, child care etc. In production relation, these women are engaged in combination of own account work, piece rate work, wage labour and unpaid family work at different times of the year. The consumption and production needs of poor women for earning income are intermingled because day to day survival is the most critical aspects of their lives. The activities in which they are engaged in are small in size, using traditional labour intensive skills, generate small incomes, highly decentralised, depending on verbal transactions with few people and are based on mutual trust. They own very meager capital and assets to sustain their economic activities. They can generate very low cash and kind return from these activities. They are caught in a web of exploitative relationship with buyer, money- lender and supplier. They are to make distress sale because they do not have staying capacity and have to accept unfavourable trade terms. The multiple roles, multiple occupation, multiple production relationships, cash/kind income all these contribute to the complex reality of livelihood of poor women.
Gender Inequality in Access to Credit The availability of financial services and access to them are considered important for several reasons. First, savings provide a kind of self-insurance. Second, credit helps households maintain a certain level of consumption at those times when their income fluctuates temporarily. Third, credit can be used to fund investments in capital or other inputs that will yield relatively high returns to production, if households cannot finance such investments from their own savings. A fourth and no less important reason is the role of savings and credit in increasing household members’ options outside the home. Inequalities between women and men in access to financial services-particularly credit-are widely documented. Collateral requirements, high transaction costs, limited mobility and education, and other social and cultural barriers contribute to women’s inability to obtain credit. Lack of access to credit-both formal and informal-is a major barrier, often restricting women’s ability to smooth consumption over time and undertake productive activities. Evidence suggests that women have a lower likelihood of borrowing from formal sources and even from other individuals because of collateral requirements, high transaction costs, limited education and mobility, social and cultural barriers, and the nature of women’s businesses. Property that is acceptable as collateral, especially land, is usually in men’s names, and the valuables women own (such as jewellery) are often deemed unacceptable by formal financial institutions. The transaction costs in obtaining credit-for transport, paperwork, time spent waiting, and so on-may be higher for women because of higher opportunity costs from forgone activities. The distance to a bank is a significant determinant of women’s probability of obtaining credit. Women’s lower educational levels, coupled with social and cultural barriers, may constrain their mobility and their interaction with predominantly male credit officers. And women tend to be involved in relatively low-value crops not covered by crop-related credit programs. The barriers that women-especially poor women-face in obtaining and using financial services are closely related to their gender roles. Socially and culturally defined roles and responsibilities influence the kind of business activities that are most likely to engage women and restrict their ability to take advantage of conventional banking and credit facilities. The illiteracy, and lack of title to land or other assets reduce women’s access to formal credit. Heavy responsibilities for care and provisioning in the household restrict women’s working hours and mobility in ways that affect their choice of sector and of business practices. Women’s businesses thus tend to be smaller-and grow slower-than men’s. They are more likely to be home-based and to be in sectors that are technologically unsophisticated and overcrowded to the point of market saturation. These business characteristics mean that women entrepreneurs are perceived as poor credit risks. Because
lack of ownership on means of production, women remain locked out of the formal financial system that again severely hamper their ability to acquire capital assets, productive resources or adequate working capital. The gap between access to credit for male and female is very high in Indian credit system. In order to facilitate women’s access to credit, it is essential to understand how they are located in the financial structure because an increasing amount of money of the global economy is being channeled through credit societies, banks and other financial institutions. Poor women’s needs for credit are closely related with the nature of their economic activities. The efforts of governmental schemes, international organisations and voluntary initiatives have been to create an institutional framework for women’s access to micro-credit. Institutional Finance Today, conventional banks function from an office where the borrower has to come and present his/her creditworthiness credentials. This is mainly in the form of security or collateral. If you are able to prove through documentary evidence that you have sufficient security/collateral acceptable to the bank, then you are creditworthy and the banker is ready to do business with you. If you are not able to present such documentary evidence, then you are not creditworthy and the banker is not willing to do business with you. Those people who have been able to involve themselves in formal systems of work are able to provide documentary evidence such as a salary certificate, fixed deposit certificate, inventory certificates, bills due; or those who own property – both moveable and immoveable – are able to provide property ownership certificate. Poor women are not able to provide such documents because they have not involved themselves in the formal system of work. They are in the informal system of work by design or by default, and find it difficult to borrow from banks. In the present system, therefore, the onus of establishing creditworthiness falls on the borrower (poor women). The borrower also has to be familiar with and have knowledge about bank procedures and formalities and has to be literate, to be able to deal with banks. The poor women are, by and large illiterate and do not know about these procedures, hence have little access in formal banking system or institutional finance. Credit through Cooperatives The promotional of cooperatives in 1904 was the first attempt at institutionalizing micro-credit. The cooperative movement received greater patronage from the government in terms of partnership, subsidy, grants and reservation. All this enabled the cooperatives to establish a broad-base in rural areas. They remain premier institutional agency of rural micro-credit till the –
nationalization of major commercial banks to serve the agricultural needs. The cooperative system spread widely in terms of membership through agriculture credit societies come about 65% of rural population. In India, though thrift is the corner stone especially at primary level, actual base of saving is small due to extreme poverty conditions. Therefore the increasing needs of agriculture came to refinanced by Reserve Bank of India and later by NABARD. The number of women cooperatives are very less, constitute only about two per cent of total cooperatives and thrift membership is about 0.5 per cent of the total membership. The growth of women cooperatives is likely to assume greater importance in the context of group approach being promoted to organize the poor women around microcredit. The cooperative movement which came into action to free the poor from the clutches of the money lenders expanded its activities with the diversified interests, cooperative services now extended to the area of dairy, handloom weavers, agriculture, fisheries sericulture etc. The participation of women in these societies is very limited except in few areas. There is exclusively women’s cooperative in dairy handloom, fisheries, cottage industries etc. While involvement of women in cooperatives movement is absolutely vital for increasing the productivity in sectors where the majority of the tasks are performed by women. Micro-Credit through Self Help Groups While recognising the micro-credit need for poor working women, some voluntary agencies have promoted credit and thrift society as a part of self- help. This has helped to fill a long felt need of the poor for an informal and non-exploitative credit facility that motivate them to save according to their ability and convenience and avail credit on terms that are suitable to them. Initially the groups are formed to mobilise the poor, create an awakening and promote collective thinking on issues of common concern. The voluntary action groups gradually establish rapport and credibility through awareness building conscientisation and extension services. The members are slowly motivated for saving schemes whereby they deposit small sums at regular or frequent intervals that make up the common fund. The mode and amount of saving vary among groups. The groups are gradually trained by the voluntary agencies to manage the funds. The funds so mobilized are used to give small loans to members to take up small economic activities, usually for short period upto one year. Every member has to save for a minimum of 3-6 months to qualify for getting loan. The voluntary agencies also use their own resources to build revolving funds or guarantee fund to supplement to group resources. The recovery performance of these groups is quite high. The whole banking business takes
place without combursome formalities of verification and documentation in an atmosphere of easy and flexible approach with mutual trust. The formation of self help group fulfil the credit needs of the poor partly out of their own savings, minimise dependence on money lenders, build self-confidence in them, improve collective strength and in control their own earning, develop financial discipline and nutshell enhance the visibility of women. The voluntary agencies could enlist women’s participation in identification of their needs, choosing viable economic activities for bank credit. In some cases service charges should be paid to voluntary agencies for taking up these activities on behalf of the bank. Banks also will stand benefit even after paying service charges to the voluntary agencies as the recovery performance would remarkably improve. The banks that have undertaken greater promotional activities on their own and sponsored rural foundations have better appreciation of the role of voluntary agencies and extend greater support to them. They have taken advantage of the network of voluntary agencies operating in their areas to a limited extent. NABARD has given financial assistance to Credit Management Group sponsored by MYRADA. The participating banks in the pilot projects have simplified the procedures in financing DWCRA groups which otherwise have no legal status. NABARD has involved voluntary agencies in formulating bankable projects for wasteland development and has involved Self Help Groups in watershed for dryland farming in Gujarat and Karnataka. It has also provided financial assistance selectively to voluntary agencies in promoting Self Help Groups and marketing linkages and setting up training cum production centres. When the formal credit systems have failed to reach the women in need of microcredit services, the voluntary sector made a beginning in promoting credit services, through the active Women’s Groups like SEWA of Ahmedabad, Annapurna Mahila Mandal (AMM) of Bombay, Samakhya (TCA) of Hyderabad, Working Women’s Forum (WWF) of Madras. With a concern for the development of rural poor women, these voluntary organisations encouraged women to form into groups and use the same as the base to develop income generating activities and through them the services for extending credit facilities. Of these four organisations, AMM and WWF carry on both types of credit activities – acting as an intermediary for mobilising nationalised banks loans to poor women, as well as acting as a credit body on its own. SEWA had also played both roles, but has now confined its credit activities to its own banks. TCA started with credit through savings of women’s groups, but is planning and has already succeeded in motivating and moblilising women to avail of formal banking credit. One of the advantages of such an alternative system of credit delivery is that the formal credit structure can also become more accessible to poor women through the intermediary and catalytic role played by the women’s organisaitons.
Experiences of these four organisations have proved that the stereotype prevailing in government that poor women need ‘cheap’ credit is completely falsified by the operational results of these four organisations. Lending rates to the borrower have ranged from 12% of 18% and in the case of TCA, to 36% yet the recoveries are anything from 85% to 90%. The Tenth Five Year Plan recognises the need for a conducive credit policy to increase the access for women to credit through appropriate institutional mechanisms like Rashtriya Mahila Kosh (RMK), National Agricultural Bank for Rural Development (NABARD), Council for Advancement of People’s Action and Rural Technology (CAPART), Women’s Cooperatives, Self Help Groups (SHGs) and other financial institutions. In this context expansion of the activities of Rashtriya Mahila Kosh (RMK) needs special attention. Efforts will also be made to learn lessons from the success stories of voluntary organisations who have already established their credentials in the field of credit and encouraging them to expand their activities both within and outside the States. The Ninth Plan also envisages all states/UTs to be equipped with “Women’s Development Corporations (WDCs) to provide both ‘forward’ and ‘backward’ linkage of credit and marketing facilities to women’s entrepreneurs, besides being catalysts. In this context Ninth Plan also envisages to set up a ‘Development Bank for Women Entrepreneurs in the small sector. Problems and Constraints 1. The voluntary agencies who are providing credit services to poor women through self-help groups are not free from constraints and problems. The local power groups are usually hostile to these agencies. Some time they interfere with group by influencing some of the members who are susceptible. Banks and Government agencies have not been free with dissemination of information to voluntary agencies. The voluntary agencies describe such situation in information black out. The collective strength of the poor is probably perceived to be a threat by these agencies. It is equally essential to form a homogenous group in terms of economic status, purpose etc. to minimize conflicts and secure maximum participation of the group. The bank’s experiences reveal that in group borrowing situation, defaulting member was more often a non poor member of a homogenous group. The ultimate objective of the voluntary agencies is to empower and enable the poor women to become self reliant in due course. The former goal diluted when the agency itselfs become power centre.
The self help groups formed by voluntary agencies have developed excessive dependence on the agency. If it withdraws from scene most of these group will disintegrate. Voluntary agencies with limited number of dedicated workers find difficult to diversify their efforts into other areas of operation. The resource constraints is another problems faced by the voluntary agencies. The smaller organisations are worst sufferer in this respect. Generally government and international funding agencies prefer to give grants to well established large organisations. Most of the women’s organisations are urban based and can not fulfil the needs of rural areas. These organisations have limited coverage. Even there are many poor women work in the cities and towns where these organisations have not reached.
Inspite of various constraints and problems; voluntary agencies remain a powerful medium to reach the poor women. They can act as an important link between financial institutions and women for providing efficient credit services. The banks can benefit to a large extent by reaching the poor women through them. The voluntary agencies close to the people are in better position to identify the genuine poor and their credit requirements and suggest appropriate action programmes. They are also ideally suited to closely monitor and supervise the utilisation of the loan. Through their informal and flexible ways they have an easy access to the poor and they can mobilise savings and recovery of loan very cost effective for the banks. If assistance to poor women is routed through the voluntary agencies it would be easier for banks to deal with once entity in place of number of beneficiaries. The bank could disseminate information on various saving and credit schemes through these agencies and make their communication effective. Since credit alone can not generate income, voluntary agencies are in better position to identify the other gaps and work towards filling these gaps. The voluntary agencies can organise the poor women around the group activities based on local resources and market. They can also help in project formulation, financial management etc. For the poor women their credibility can be more easily established with banks through voluntary agencies and can open the gate of vast business potential. In view of high transaction cost and lack of involvement of bank staff as also the cost-effective approach of the voluntary agencies, the half of fund of IRDP can be routed through voluntary agencies. The voluntary agencies may be more effective in discouraging poor from treating IRDP funds as charity.
Strategies For Strengthening:Micro Credit To Poor Women 1. Organising the Women :
Organisation of women before initiating any banking activities is most important. The situation of poor women in the informal system is exploitative because they are not organised as workers. Organising the women around common issues which they face enables them to come together, to gain strength from each other, to learn the ways of the formal institutions and to deal with the exploitation they face in several forms. When credit and banking facilities have been initiated with an organised group of women, they have been effective.
Build a Relationship of Mutual Trust :
Constant ongoing work with the women and a genuine effort to strengthen their situation, is the basis for building a relationship of trust. Constant contact with the women, their problems, their struggles, their lives helps to understand the reality of the women and helps the women to understand each other as well as the organisers. It releases their own creative energy and contributes to designing developmental activities that are acceptable to them. 3. Develop Systems Which Do Not Make the Women a Handicap :
Whether it is photographs for indentification or field visit to substitute for documentation or verbal information to be transferred to written formats by literate people. The onus of meeting the demands of the formal system (written transactions) is taken over by the organisers and the functionaries of the voluntary organisation.
Understand the Multiple Roles of Poor Women :
It is very important to know the various economic activities which the women are engaged in, the kind of problems they face in these activities, the nature of exploitation, the incomes they can earn and the way they combine their various roles to maximise on income. An involvement with the overall life of the women and their needs, helps to coordinate different developmental activities with them. A realistic assessment of their credit needs and capacity to repay is possible only from this knowledge.
Understand the Informal System of Work :
The credit needs of poor women are small in size. But the number of women needing such credit facilities is very large. Hence, detailed systems are important for recording all banking transactions and ensuring safety of the money. Considerable paper work is involved. Each women’s trust is sustained when all her money transactions with the organisation are meticulously updated and are accurately maintained 6. Encourage Savings of the Women :
Women have a strong need to save and they need a safe place to keep their savings. Their individual savings are small so it is important to again develop detailed systems of ensuring safety of their individual small amounts of money, accuracy of transactions, and updating of records. Collectively their small savings help them to develop a stake in the smooth running of the credit programme, because their own money is involved. 7. A Holistic Approach to the Problems of Women :
Credit alone has little impact on the economic status of poor women. A holistic approach incorporating struggle for the fair implementation of various legislations in their support, vocational skills training, access to raw materials, markets, space to work, legal aid, health and child care, maternity protection and social security, communications skills, insurance, housing, are some of the elements that go hand-in-hand with the availability of credit. The situation and problems of poor women determine the immediate priority as well as the mix of support systems that are needed. This kind of holistic approach facilities, the effective utilisation of credit and also of high recovery rates. The economic status of women as well as the collective strength of the women improves. 8. A Participatory Structure Participation :
A participatory structure participation which provides women with effective access to decision-making in the functioning of the credit mechanism evolved. A Board of Directors from the members is important and a structure that allows illiterate and literate women to help each other is encouraged. Involve the women themselves in deciding rates of interest for loans, terms of repayment, systems for maintaining records, decisions to share the surplus generated from the activity, other facilities to be created for the women, and in the ongoing work of the organisation. Suggestions : 1. The Banking Policy should be properly changed with greater amount of flexibility in favour of women. It would assist women further if banks have counter exclusively for women. Opening of women’s cooperative banks should be promoted.
2. The quantum of loans given to women should be assessed realistic, keeping in view of their needs. Giving lesser amount than the requirement is self-defeating. 3. Innovative mechanism should be evolved to provide credit services to poor women who are unfamiliar with the complexities of institutional finance. 4. The banks may be encouraged to sponsor Rural Development Trusts to enable them to get over legal constraints and imporve their involvement. It has been observed that the personnel of those banks, which have set up such Trusts have much greater level of rural orientation, empathy with poor and rapport with voluntary agencies. These are the banks which have promoted several new initiatives in rural development. 5. A master list of all voluntary agencies who are operating in each district may be prepared and eligibility criteria be prescribed for them to involve them in various antipoverty schemes in a substantial way. A Committee at national and state level comprising representatives of NABARD , commercial banks, cooperatives, Regional Rural Banks, VAs and Ministry of Rural Area and Employment and Department of Women and Child Development may be set up to work out the modalities of identifying and preparing a district wise list of eligible VAs. A credit rating system may be evolved for the VAs, which may be reviewed and revised every two years. The district wise list may be circulated to all the branches of the banks and government organisations operating in the respective district level VAs for implementing the schemes. VAs may also be involved in block and district level Banker’s Committees for effective functioning. 6. Voluntary agencies may be involved in the village, block and district level planning since they are closer to local problems and needs and thus capable of contributing effectively to action programmes. The voluntary agencies operating in service area can be associated with the survey, collection of data, beneficiary identification and formulation of bankable schemes by the respective banks. 7. The voluntary agencies need to be given adequate training by the banks and state governments to equip them with necessary professional skills. The cost may be shared between the governments, NABARD and participating banks. This will result in effective implementation of the schemes by the voluntary agencies and promote healthy competition between banks and voluntary agencies. However, the small number of voluntary agencies as compared to the extent of poverty in the country may be a constraint in achieving large scale success.
8. While providing credit, the efforts should be made to enable women to achieve economic independence and social security. It will strive to go beyond credit delivery and provide services for development of credit planning, centered towards individual needs of poor women. 9. Credit in all circumstances be linked to production and economic activity. The fund will enable a shift from unproductivity status and not be circumscribed to poverty alleviation. It will also promote thrift and savings. 10. Educational aspects of credit will be integrated with the provision of credit – literacy and skill training for individual women, leadership training among groups for selfmanagement. The voluntary agencies can play important role in this aspect. 11. The accessibility of credit to poor women will be improved in terms, simplification of procedures, flexibility of measures for loans and recovery, reduced interest rates conducive to increase utilisation etc. 12. Provision of a number of other support services (both economic as well as social) should be made to enable the women to address themselves to the complexity of the problems and deprivations arising from poverty and powerlessness. 13. Provision should be made for adequate, timely, regular flexible inputs matched to the individual needs of women, allowing for the seasonality and diversity of poor women’s work and occupations. 14. Establishment of grass-root level societies and organisations within the cooperative framework and participatory structures for providing women effective access to decisionmaking would be great help for women. 15. Voluntary agencies should develop effective channels of communication between the women and the credit/banking systems which enables the latter to adapt their procedures as required by the personal priorities and constraints of poor women. Establishement of a network for dissemination of information and experience among agencies in the government and non-government sectors in the area of credit for poor women would be helpful to overcome many.
16. Bank and voluntary agencies should identify and build up a resource base for training, project formulation and evaluation of needs at regional levels so as to promote greater outreach of services and coverage of remote areas. 17. Credit can only be effective when it is understood as one aspect of an integrated set of support services to strengthen poor women’s economic activities. When money is being given as a loan the prime concern is that it be repaid. To ensure a high rate of repayment of loans extended to poor women, demands an overall involvement with their lives. If the money available as loans leads to increase sustained income, then the person can repay the loan. Otherwise it is very difficult to repay loans. 18. Credit to poor women has to be seen as a process of enabling them to stabilise their livelihood system – be it income in cash and/or kind through one or more activities. Money alone is not enough to enable poor women to influence their incomes favourably in an economic environment which is loaded against them. Money as part of an integrated process of building collective strength is very critical in strengthening poor women’s economic activities.
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