Common Features Of Shgs Under Ikp Economics Essay
Vepalapalle is one of the fourteen hamlets in Gundlapalle village of Thamballapalle Mandal in Madanapalle Taluka of Chittoor district. Here, the formation of self-help groups for the purpose of microfinance was initiated in the year 2005 by a lady called Prema Latha as part of the activities under Velugu, which is a bundle of state government schemes. Velugu was a flagship programme of Telugu Desam Party. It was renamed as Indira Kranthi Padham (IKP) after Congress party came to power in Andhra Pradesh. However, this scheme is known better by the name Velugu by the people of this hamlet. Maintaining self-help groups is the main activity under Indira Kranthi Padham and constitutes most of their work. Prema Latha was a government employee who was an outsider to the villagers. But she gained the trust of the women of the village slowly.
Due to initial resistance among women towards formation of groups and reservations about interacting with the outside world (since they would be required to visit banks on a regular basis, at least once a month, and attend several meetings), also the lack of awareness and poor literacy rates among women, women of Vepalapalle too, like women in other parts of the world, did not readily participate in microfinance. However, Vepalapalle had and has good community bonding, thanks to Foundation for Ecological Security (FES) working in this area, they are also experienced in collective action, having worked together on the hills, planting trees, digging trenches, constructing watersheds and several other projects in which both men and women contributed equally. This helped in the mobilisation phase of the programme.
In order to build confidence among women about this concept of self-help groups for microfinance, the men of this hamlet took initiative and formed a self-help group called Raghuram SHG. This group of men is now one of the only two SHGs in Gundlapalle village having male members. They are a minority in the village organisation (VO) meetings and feel neglected as women are given more importance in these meetings. Anyway, soon after Raghuram SHG was formed, the first women's SHG in the hamlet was formed. It was named Jyoti SHG. Soon, three more SHGs were formed, one after the other, called Savitri SHG, Nandi SHG and Dandu Maramma SHG. As a result, almost every household in the hamlet has at least one woman of their family in one of the SHGs.
Today, Andhra Pradesh is known for its self-help groups (not for all the right reasons). As microfinance grew in this state, private players entered the microfinance game and some were looking for a market 'sustainable' way of catering to microfinance activities. With this tendency, more and more private players looked for profits through quick growth and charged usurious interest rates, while neglecting the practice of savings, which thankfully the government stressed upon in the groups under IKP. One such MFI called Spandana Spoorthy Private Limited operates in this area. However, it did not attract many in this hamlet. Only six families with an intention to try it out formed one SHG under this MFI. With increasing number of suicides in the neighbouring Anantapur district because of their inability to repay the loans and the tormenting private MFIs, the government passed an ordinance that no person can belong to more than one SHG and the total interest collected on any loan by an MFI should not exceed the principal. If it does, then the MFI has to pay back the amount of interest in excess of the principal.
2. PROCEDURE OF OPERATION OF AN SHG IN IKP
After saving for six months i.e. deposit of some amount of money every month by every member, the first linkage loan is disbursed, the magnitude of which is proportional to the amount of savings. The members pay a monthly interest on this loan at the bank's rate of interest (Indian bank in this case charges a 12% rate of interest). At the same time, they also pay a part of the principal every month.
The group continues to deposit a particular amount of money every month in its savings account. Every member pays the same amount of money as every other member, whether it is towards the interest or principal or savings. Also, except in exceptional cases, the linkage loan amount is equally distributed among all the members. Generally, the group can take a linkage loan only if they have proportional savings in the group's account and provided they have paid back the previous linkage loan. If any one of the conditions is not satisfied, the member may take a loan from the savings account of the group provided the savings account has enough money and provided the other members agree to loan this amount to that member from their savings account. They usually charge the member taking the loan at a rate of 2% interest. This interest that they collect is usually deposited in the group's savings account.
Following are the procedures followed for taking a linkage loan, for withdrawals and deposits.
i. Procedure for taking a linkage loan: The SHG conducts a meeting agreeing to take a linkage loan. The minutes of the meeting are recorded. The signatures or left thumb impressions of all the members are taken on the minutes. All the members have to go to the IKP office with a photocopy of the minutes and get the linkage loan approved by the Project Director of IKP at the Mandal. All the members go to the bank with the photocopy of minutes and the Project Director's approval. Then, the loan is disbursed and a monthly interest is charged by the bank on this. Once in every year, the interest paid by the group is reimbursed by the government, excluding the amount of 0.25% monthly interest.
ii. Procedure to be followed by an individual member for taking a loan from the savings account: The member who wants the loan has to discuss this with the other members in their meeting. If all the members agree to this, the agreement is recorded in the minutes book. A photocopy of this minutes page with everyone's signatures or thumb impressions is submitted at the bank. Both the leaders of the SHG have to sign in order to withdraw money from the savings account.
iii. Procedure for depositing money in the savings or loan repayment account: Any member from the group can sign and deposit money in either of the accounts. A receipt is accordingly given to that member and an entry is made in the group's pass book. This ensures accountability of any member doing a transaction in a given month to every other member.
The members in each group take turns to deposit the monthly savings and instalment payments towards the loan every month. This is to ensure that everyone knows how to do a transaction and also, as there is cost involved in going to the bank (transportation cost and opportunity cost of time), it should not be borne by one member alone every time.
3. COMMON FEATURES OF SHGs UNDER IKP
Following are the common features of SHGs under the Bank Linkage programme of IKP. A federation of SHGs is established by IKP which works at three levels, at the village (Village Organisation), at the mandal (Mandal Samekhya) and at the district (Zilla Samekhya). All these three federations have elected representatives. The VO organises monthly meetings at the village level. The VO leader collects Rs.10 and Rs.100 per month per member of each SHG for health insurance and VO fund respectively. VO fund is used to give loans to any SHG belonging to the VO.
SHGs here have formed for the purpose of availing credit at a low interest rate without collateral. FES, since it was already working in this area, helped in spreading awareness about the benefits of forming SHGs. The requirement of loans in future makes them repay in time. In case of any conflict, they resolve it during the meetings. They believe that unity and regular repayment would help in successfully running the SHG. Minutes of the meeting are recorded during the monthly meeting of the group by the book-keeper. Also, other books of account are maintained.
A community helper called Sangamitra belonging to the village is trained by IKP to help the SHGs whenever necessary. The Sangamitra of a village is paid her/his salary from the VO fund. When any new scheme is introduced, the Sangamitra has to spread awareness about it and make people access them. In Vepalapalle, Mr.Ishvar Reddy is the Sangamitra. He looks over the meetings of SHGs. He too has to sign in the minutes book along with the members and the book-keeper to testify that the meeting was conducted. He has a moped on which he keeps shuttling almost every day between the IKP office and the various habitations in the village.
Pavala vaddi (meaning 0.25% interest) is charged for the linkage loans and the remaining interest charged by the bank is reimbursed by the government once in every year. Every SHG saves Rs.50 per month per member. The interest collected on loans taken by individual members from the group's savings is 2% per month. The book-keeper of any SHG is paid Rs.50 per year by the SHG. Since the SHG pays the book-keeper, she/he is under their control and s/he is accountable to all the members in the SHG. Meetings happen in the first week of every month and payments towards interest and savings are made by members in this meeting to one member who goes to the bank the next day to deposit this amount. Members take turns to go to the bank each month.
Women's dignity in the family and society has improved due to their contribution of credit towards the livelihood of the family and because of their greater awareness. They now go out to the bank, the market and government offices which they previously did not do. Awareness of different government programs has increased due to their regular interaction with IKP. IKP is a single point office for many schemes of the state government. Many schemes are implemented by spreading the word through SHGs. A few women actively take part in the Gram Sabha. But it is observed that these women are usually widows or those whose husbands are suffering from an illness or have left them. However, none of the women have contested in any election.
Following is in detail about each of the six self-help groups (five under IKP and one under Spandana). For the sake of clarity, it has been classified into four aspects, namely: financial aspect, social aspect, political aspect and sustainability. The political aspect and the common features among these four aspects have already been mentioned above. The following information is about the features that differ from group to group in the financial aspect, the social aspect and sustainability point of view.
4. COMPARISON OF THE SELF-HELP GROUPS
Table 1: Comparison of SHGs
SHG under Spandana
Started in the year
Linkage loans taken
NA (Rs.95000 loan)
Monthly instalments paid per member
Rs.500 to 1000
Rs.500 to 2500
Rs.500 to 750
Rs.250 to 750
Rs.500 to 1000
Source: Semi-structured interviews with the group leaders of all the SHGs
In Raghuram SHG, Mr.Tupakula Ramanayya belongs to a different hamlet called Vemareddygaripalle while all other members belong to Vepalapalle. In Jyoti SHG, two members left the group, one due to migration and the other due to her inability to pay the interest. In their place, two new members joined the group. Whenever a new member joins the group, the member has to pay towards the savings an amount equal to every other existing member's share of the group's current savings.
The leader of Nandi SHG, Mrs.Mutra Anasuyamma, whose husband passed away at a young age, earns her living by cooking mid-day meals for the primary school children and gets a pension of Rs.200 every month. She does subsistence farming on her small landholding of two acres and works as agricultural labour after cooking meals for the children. She is aware of all the government schemes. She was also sent for training for cooking meals for pregnant women as part of Janani Suraksha Yojana to Hyderabad.
Savitri SHG is led by Mrs.Kondeti Gangulamma, who belongs to a scheduled tribe called Erukula. Though she is illiterate, she is well aware of her rights and is very vocal about the corruption in government offices. She is also an active participant in the Gram Sabha.
Spandana Spoorthy Financial Ltd. does not ask the SHGs under it to save before giving a loan. One can take a loan as soon as the group is registered. However, in the SHG under Spandana in Vepalapalle, Mr.Kosuri Reddappa Reddy had to keep his land pass book as security in order to get the loan. For this, he was given a larger share of the loan disbursed to the group. While all the other members got Rs.15000, Mr.K.Redappa Reddy got Rs.20000. Mr.Golapalli Reddappa Reddy tells us that they formed this group just to see whether it would be useful and when they realised that the interest rate is too high, they asked the others not to join. Also, with the ordinance passed recently, all the private MFIs in the locality are said to have closed shop. But Mr.G.Reddappa tells us that they are still paying their instalments and that, once the loan gets cleared, they would discontinue. The ordinance clearly states two things. Firstly, an individual cannot be a part of more than one SHG. Secondly, the total interest paid by a group towards any loan should not be more than the principal and if not, the MFI has to refund the amount paid in excess of the principal. With these two rules in place, no MFI can operate in the locality since all the women are already a part of the Bank Linkage programme which disqualifies them from being members in any other SHG. Secondly, the interest rate charged by the MFI, 25% per month definitely exceeds the principal if the group is unable to repay the loan within 4 months which is very likely.
5. EXTERNAL STAKEHOLDERS
Government officials: The APM of IKP and the MDO think that a majority of these SHGs are only rotating the money but not putting it to a productive collective activity through which they can increase the money. Though IKP enables marketing of products such as pickles and processed beedi leaves, only a very few have taken up such activities.
Men of the society: Some of the men of the society feel that some women, who have now gained awareness, are trying to dominate men who studied less. Also, there is a feeling among men that women go out frequently in the name of meetings. They feel that these women lie that they are going to the meeting and go somewhere else. However, they also feel that women have started thinking as much as men about the family's problems. By this, they mean the financial problems of the family.
NGOs: FES is an active NGO in this area. They too feel that SHGs can do much better by putting the money to better use so that it can be multiplied and not just rotated.
i. Purpose of Loan Utilization
As can be seen from the bar chart, a majority of the loans are taken to buy Jersey cows while agriculture comes second followed by expenses on business and marriages. Some even use these loans to repay their other loans and some people lend out this money individually at 2% interest.
Figure 1 Bar chart showing the proportion of loan utilization for different purposes
Source: Semi-structured interviews with group leaders of all the SHGs in Vepalapalle
ii. Income Generating Activities
From the bar chart, we see that while most of the women have invested the loans in income generating activities, 16% of the loans are being utilized for consumption purposes where in they would have generated no money through these loans to pay back the interest or the principal, for which they would have to again lend money or take out money from savings or income which would be difficult for them. On the other hand 5% of the loans are being utilized for money-lending by some women.
Figure 2 Bar chart showing the proportion of loan utilization for different income generating activities
Source: Semi-structured interviews with group leaders of all the SHGs in Vepalapalle
iii. Size of Loans
Figure 3 Box plot showing the size of loan amounts taken by each woman in the SHGs
The cross mark inside the box represents the mean loan size (Rs.11455) while the line inside the box represents the median loan size (Rs.10000). One can also see that the loan size varies from Rs.6000 to Rs.18889. This means the size of the loan that an individual woman can get ranges from Rs.6000 to Rs.18889, which if we compare to their credit requirements, does not cater to all of them. For example, for the most common purpose for which they use the loan money i.e. to buy a Jersey cow, one needs at least Rs.15000 for a normal one while one needs up to Rs.30000 for one which gives 8 to 10 litres a day. So, even if one gets an amount equal to the average loan size seen here, it would not be enough to buy a Jersey cow. For the remaining money, the women borrow from money lenders.
i. Caste distribution
From the bar chart, we can see that the Reddys are a majority while the other three castes are a minority. But this is also the case with the population of Vepalapalle. However, every SHG has at least one member from the minority castes i.e. Togata (BC), Sali (BC) or Erukula (ST). So, we may say that there does not seem to be any discrimination on the basis of caste.
Figure 4 Bar chart showing the caste distribution of the women belonging to the SHGs
Figure 5: Caste distribution in each SHG
Figure 6 Bar chart showing the proportion of women with different levels of education
As we can see, a majority of the women are illiterates. However, a point to be noted here is that there is at least one member in each SHG who studied at least till class V and can thus, read and write properly. Though these women who studied are a minority, they are equally distributed in every SHG.
iii. Other Issues
Men still dominate women. Women are still subjected to domestic violence. When we asked them if domestic violence was justified for reasons like not cooking properly, not taking care of children or going out of the house without informing, most of them said yes. However, since the SHGs formed, women started visiting the bank, IKP office, shops and the weekly market. They have greater awareness now. Women interact more with each other than before but within their houses unlike men who sit outside, in the common area and talk to others.
Women take part in the VO meetings but participation of women in Gram Sabha is low. There has not been any power shift from men to women in family or outside in general. No woman from Vepalapalle has contested in the ward or Gram Panchayat elections. Awareness of government schemes has considerably improved due to their direct contact with IKP on a regular basis, IKP being the single point office for various state government schemes. Women demand what they should rightfully get now that they are aware what benefits they can get. Many women have constructed houses under IAY for which though the money that was given was not sufficient, they pooled in some more money from savings and the linkage loans. One can see the terrace of one such house without a staircase which was not built due to lack of funds. However, the lady of the house, Mrs.Kantamma is happy that she at least got a single room concrete house, which is better than her hut which leaks during the rains.
If one may classify the progress of self-help groups into three levels, the SHGs in Vepalapalle can be said to be in the second level. The three levels are as follows.
i. Formation of the group
ii. Saving money collectively and rotating it
iii. Collective economic activity using the loan to finance it
While forming the SHGs, they were not encouraged enough to take up a common economic activity. Also, while asking for a loan, though all the SHGs write down in their minutes book that they would use it for an income generating activity, there are some (16%) who use it for consumption and no steps are taken by IKP to monitor loan utilization for the stated purpose. SHGs are working on their own, without much help from IKP. The book-keeper is paid by the SHG and all the members have a good understanding of the SHG functions. The only downside is that they have not made an attempt to move to the next level.
We may infer from the above that dependence on moneylenders has reduced but is not completely gone since the credit requirements of the women are insufficiently met through microfinance. The opportunity of taking up a collective economic activity has not been explored enough by the SHGs in Vepalapalle though there are a few SHGs in the other hamlets of the village taking up collective activities such as pickle making, beedi leaf processing, making sal leaf plates and extracting honey. These activities are also being promoted by IKP which provides them market linkages. IKP helped one such group in selling their tomato pickle to Priya Pickles, a well-known pickle company. The specifications of ingredients of the pickle are given to this group by Priya Pickles and they prepare the pickle accordingly. The APM, IKP says that monitoring of loan utilization is tough to do because of the large number of SHGs. Though market linkages are provided to SHGs taking up common economic activities, the SHGs are not encouraged enough by IKP to take up these activities which have the potential to take them to the next level of sustainability. Taking up collective economic activities will bind them even closer and thus, make them powerful. Together they can challenge the dominance of men, contest elections and share the decision making power even within their family. They can then even take collective action and stand for one another. But this would probably take some more time. It has been five years since the first SHG was formed here. Now, they are used to the idea of rotating money and using it for their individual income generating activities. They are now confident about handling money. Hence, the time is ripe for an initiative by the government or FES working here towards making these women aware of the benefits of collective activity which will probably make them take the next step and move to the next level of sustainability and thus, be truly empowered. To summarise, if we may define empowerment as the power to take decisions, the power within which builds one's self-confidence and the power of collective action, the formation of SHGs triggered the process of empowerment in power to take decisions and the power within but the power of collective action has not yet been realised.
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