Transcript Slide 1

A Study on Association of Social Capital with Microfinance and
the Local Saving Programs among the Muslim Poor in Hyderabad,
Andhra Pradesh, India
By
Rosina Nasir
University of Hyderabad
Introduction
Financial Inclusion of the poor ($0.58 and $ 0.47 per day,
Model adopted for Micro-Finance initiative in India
2011)
1.Self-Help Group- To implement Poverty Alleviation Program through
National and State Initiatives:
1979-Integrated Rural Development Program (IRDP)
1982-83- Department of Women Children in Rural Areas Program
(DWCRA)-Self employment and empowerment of rural poor women.
1992-National Bank for Agricultural and Rural Development
(NABARD)
-Capacity Building
-Social Mobilization
2.Self Help Group (SHG) Bank Linkage Programme- initiated
in 1992 by Non-Governmental Organizations (NGOs)
Started with 500 SHGs in 1992 and had grown to 8 million SHGs by
March 2012. Among the regions, southern region is highest at Rs.
10080 per SHG, (Karnataka SHGs Saving bank balance of Rs 16000
per SHG) and northeastern region recorded the lowest balance of Rs
4159 per SHG.
SHGs are the association of up to 20 women (their average size is 14)
Loan is given to the group and group decides how to allocate it to its
member
Other attributes are: Weekly group meeting, Team leader, small and regular
saving, saving account in the bank, internal lending from own saving.
Revision in the SHG-Bank Linkage guidelines-Emphasis on steady graduation
from community to individual banking with “no frill account” (Taking rural
India forward, NABARD, 2011-2012)
Creation of enterprise/livelihood based groups associated with Joint Liability
model within the SHG so that without affecting the functioning of the SHGs.
2. Microfinance Institution (MFI) Model :
MFI acts as an intermediary and borrows in much larger amounts from the banks,
mostly from the private banks who do not have rural branches to conduct SHG
lending.
Members organized into groups, either the classic five-member Grameen Banktype group or larger ‘joint liability’ groups (JLG).
Self-selection process leads to a positive assortative matching, that is, groups selfselect members of the same risk type, forming homogenous group- TRUST
Individual lending is prevalent under MFI model.
Liability in JLG is more moral than legally enforceable, and is exercised through
peer group pressure and the prospect of being denied future loans.
High Chances of repayment
No provision of saving within the group
Andhra Pradesh
Microfinance Capital.
25% of the SHGs linked to SHG bank linkage programme.
30% of all borrower accounts and the outstanding loan portfolio in case of MFIs.
From 2009 to 2010, an increase of over 7 percent is found.
National Crime Records bureau showed that suicides among farmers in 2009 had
increased with five states-Maharashtra (2,872), Andhra Pradesh (2,414),
Karnataka (2,282), Chhattisgarh (1,802) and Madhya Pradesh (1,395).
Andhra Pradesh
Suicides in Guntur in Andhra Pradesh and Kolar in Karnataka raised issue
concerning customer protection against coercive recovery practices. In reaction
of which Andhra Pradesh Ordinance came which has affected MFIs sector
tremendously.
However, No suicide case is recorded in the SHG-Bank Linkage programme.
MFIs became infamous because of the group liability, inflexibility, lack of
transparency and high interest rates. (SOS, 2012).
At this stage it is very crucial to seek a single factor which differentiates SHGBank Linkage Model from the MFI Model. Or in other words, a factor which
predicts the sustainability, particularly financial sustainability of the SHG or
SHG-Bank linkage progarmme.
Trust
Social Capital (SC):
It is popularly defined as local forms of association that express trust and norms
of reciprocity- can contribute significantly to the alleviation of poverty
worldwide.
Bourdieu saw social capital as an asset used by elite groups, particularly those
who had limited and cultural capital.
However, Coleman defined SC as a resource for the relatively disadvantage
group but Putnam has stretched the concept furthest and defined it as a resource
that functions at societal level.
Coleman and Putnam views together on social capital are taken into account to
conceptualize its functioning in the Self-Help Groups in Microfinance.
According to Coleman people choose to cooperate because it is in their interest to
do so. Establishment of self-help group is an outcome of economic need which is
the core reason of proclivity of the people to come together and trust each other.
Putnam introduced a distinction between two basic form of Social Capital :
Bonding (or exclusive)- reinforces exclusive identities and maintain homogeneity.
It is analogous with Marxian/Weberian notions of bounded solidarity and
Durkheim’s mechanical solidarity which results in the formation of community
instead of society-horizontal social capital.
Bridging (or inclusive)-tends to bring together people across diverse social
divisions. . It is analogous with Bourdieu/Marx’s concepts of aggregate social
capital and Durkheim’s concept of organic solidarity – which form the society, a
complex structure composed of inter-community relationship which is not
bounded by community or national interest--- vertical social capital.
Research Question :
Conceiving self-help group as a community where both vertical social capital and
horizontal social capital are possible and together may result in solidarity and
thus reduce propensity of default and regular repayment will be high because
group emerges out of economic need based rational choice and trust becomes
secondary.
It is argued that sustainability of any self-help group does not depend only on the
social capital- trust, shared knowledge and reciprocity- important as these are –
but also on the nature and extent of social relationships among:
(a) the group members,
(b) group members and program/credit officer(s) staff
(c) pursuit of self-interest of each group member.
Methodology:
Fieldwork conducted in the month of October and September and intermittent
visits were made to different NGOs and Microfinance Institutions.
In contact with some SHGs functioning in Charminar area of the old city of
Hyderabad.
After Rapport establishment, information was collected by conducting group
discussion and non-participant observation method with an SHG located in
Yaqoob Pura in Charminar area.
Financial Inclusion and Muslims:
Muslims accounted for only 4.6% and 6.6% of the total outstanding loan
from the public and private bank sector respectively- low access to bank
credit (Sachar Report, 2005).
Low access to bank facilities with high Muslim population.
Some banks identified Muslim areas as ‘negative geographical zones’ –
where bank credit and other facilities are not provided.
Besides this, Kolar incident- Muslim populated pockets where due to over
debt some client, the Anjuman Committee declared MFI operation unIslamic.
Further added to Muslims deprivation and financial exclusion.
A Case Study of an SHG Under Roshan Vikas (RV)
A brief about Roshan Vikas:
Mutually Aided Cooperative Thrift Society (MACTS) registered under Andhra
Pradesh Mutually Aided Cooperative Societies Act (MACS)- 2001.
It emerged with the notion to empower the women in the old city area of
Hyderabad by rotating money in the form of small loans and to encourage
productive activities.
Roshan Vikas is serving approximately 1500 SHGs and each group constitutes of
15 members on an average.
RV acts as an agent of the HDFC bank, a commercial Bank, and gets 2 per cent
service charge for its efforts-1 per cent each on disbursement and recovery and
charges 16 percent interest per annum from the client.
75 percent of monthly collection is deposited to RV as a temporary deposit
instead of bank.
RV was not giving any interest on the temporary deposit but women were under
impression that their money is increasing by being with RV.
Remaining 25 percent is also deposited to RV and an SHG receive 12 percent
interest per annum on 25 percent deposit.
Along with they provide RV loan and the loan amount disbursed among the client
is 12 times of the 25 percent amount deposited by the members of a particular
SHG.
Clients’ saving (75% of the monthly deposit) is used by the group to float loan
within the group according to the needs of members and it’s the group’s
prerogative to decide imposed amount of interest rate or to decline from charging.
An SHG in Yaqoob Pura in Charminar
•Formed in 2008, women SHG.
•Constitutes 12 members now, earlier comprised of 15 members.
•Heterogeneous in age (17 to 56 years), marital and employment status.
•Homogenous in socio-religious-and-economic status.
•Four women had seven years of education and six were literate and the rest were
literate.
•Not regular in conducting monthly meeting, and so in contribution.
•Most of them belong to Joint Family.
•All of them were Below Poverty Line (BPL).
•Nine women out of twelve have no trust on the stranger in the group, 4 women
reported that they have “quite a bit of trust on family members” while all 12
women responded “no trust” on relatives and neighbors. However, only 4 women
have “ quite a bit of trust” on the SHG Team while rest have either little or no
trust in her.
Yaqoob Pura Slum’s SHG
Mrs. Saleema-Team Leader
Rehana-Drop Out
Thanks