Building local human resources and simple financial systems at the grassroot level ensures sustainability of SHG funding activities. Belaku, an organization working for sustainable rural initiatives brings out its experience with a case.
SHG movement, one with the quickest growth in the development sector in India, has been instrumental in helping many rural women in accessing finance for meeting out their requirements. The SHGs which started small at the grass root level, mainly supported by NGOs, gradually became a channel for development interventions for the government as well.
Of late, we see that many SHGs have become defunct or have been dissolved due to combination of several factors. They have not been able to sustain beyond the project periods supported by external agencies. Strengthening local institutions and working towards their sustainability from the beginning of the project interventions is crucial. The following case is a typical example of how SHGs could be made sustainable over a period of time with planned strategies in place.
The Case
D.Upparahalli is a small village in Malur taluk of Kolar District in Karnataka consisting of 40 households. The women from these poor households were organised into a SHG in 2002, under a World Bank supported watershed project. During the project period, the members benefited through various project interventions. The project was withdrawn after five years and no specific measures were taken to ensure the continuity of the SHG institution.
In year 2009, Sir Ratan Tata Trust (SRTT) supported SRIJAN, an NGO to promote livelihood activities among these communities. The objective was to strengthen the existing community institutions and link them to credit for taking up livelihood activities. When the team visited D. Upparahalli it was found that there was no SHG functioning and people were dependant on money lenders for their financial needs. The SHG formed under the watershed project did not exist anymore.
During discussions the women quoted the following reasons for not being able to continue with the SHG institution
– No guidance on their day-to-day transactions.
– Mis-utilisation of SHG funds by the outside agencies as well as by a few of their own groups.
– Inability to maintain proper books of accounts, as most of the members are not literate.
– Banker’s resistance to link them with credit.
With the women’s consent, in 2009, SRIJAN once again formed the group called Lakshmi Mahila Raitra Sangha with 14 members. The group evolved the byelaws in a participatory mode. SRIJAN team facilitated on the systems that were necessary to strengthen the SHG. Members started saving Rs.100 per month and internal lending was started from the first meeting. In the initial meetings the loan was availed to meet the consumption as well as for health needs.
All the members belonged to farming households owning small pieces of land of about 0.5 -2 acres. Ragi is the major crop grown which had a low productivity of 6 quintals/acre. SRIJAN team guided the members on enhancing ragi crop productivity by combining sustainable agricultural practices. This resulted in increase in the yield by1-1.5 quintal/acre.
In 2010, when SRIJAN had to shift its base from Malur to Kadur, BELAKU, another NGO active in the village took the responsibility of guiding the group further in moving forward. BELAKU which has been working with 30 SHGs in Malur area strongly believes in preparing rural youth to be employed in the field of development sector. Accordingly, one rural youth was identified to maintain the books of the SHG and was sufficiently trained to handle the job. SHG members agreed to pay him Rs.100 for the service rendered by him thus building up their ownership.
Ways to improve financial efficiency
Design simpler systems – It is important to keep the operational systems at the community level simple which can be handled by the communities.
Involve Service Providers – While the group members mostly women find it difficult to access services on their own owing to limited mobility, the concept of paid service provider will help women in leveraging services and sustaining the group activities.
Build transparency in accounting systems – Majority of the members have no idea about the financial details of their individual accounts. Generating monthly consolidated statement of accounts will go a long way in building transparency and confidence among the members.
Gradually as the days progressed the members were in need of money and decided to approach banks for credit. BELAKU team members approached the local nationalized bank but the response was not encouraging initially. Meanwhile, the MFIs were prepared to give loan to the SHG but the groups refused to avail loans from MFI owing to weekly repayment, higher interest rate, no flexibility in repayment and no scope for saving. However, with continuous follow-up by Belaku team, the group was able to avail bank loan in 8 months time, from State Bank of India, Malur branch.
The loan of one lakh rupees was availed by 8 members of the group. 60% of the loan component was used for purchase of sheep and remaining 40% for other purposes like repair of house, education, repay the existing loan availed at higher interest rate.
Though the members were interested in taking up dairy activity they were made aware of the situation prevailing in the area which was not congenial for taking up dairy. There was scarcity of water and shortage for fodder. Moreover, farmers were familiar with sheep rearing and their feeding aspects. They also knew that with sheep rearing they could repay their loans in one and half years.
After making informed choices, the group is now confidently moving ahead. The group members are also planning to provide insurance to all the SHG members by the profit earned so far. Every member knows that there is a serious threat to the environment by farmers taking the eucalyptus plantation on a large scale in their village. They are also exploring alternative activities that can arrest the spread of Eucalyptus plantation.
Way forward
Belaku has a lot of lessons to share which it has gained over a period of time. At the community level, it is necessary that institutions need to be strengthened before implementing project activities. More importantly the external agencies should only be facilitators ensuring ownership among communities. This can be achieved by building capacities of local people, especially the youth by a team which is extremely committed.
D.Ranganatha Babu
Executive Director
BELAKU – an organization for sustainable rural initiatives
GPM Building, Maruthi Extension, Malur,
Kolar Dist, Karnataka
E-mail: belaku2004@gmail.com; ranganatha_babu@yahoo.co.in
