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    Micro Finance
 

After organizing women self help groups, BIRDS initiated  Micro Finance (MF) activity in the year 1998, with the credit support from Rashtriya  Mahila Kosh (RMK, a Government of India enterprise), National Minorities Development Finance Corporation (NMDFC, Government of India), The Bridge foundation (TBF, international donor, USA), Friends of World Women Bank India (FWWB-I, a financial institution) and BASIX (a Micro Finance Institution). BIRDS has facilitated the formation of two people’s banks in Midthur (1998) and Kolimigundla (1999), under the Mutually Aided Co-Operative Society Act. These banks are totally run by the community. The total loan received from MF Institutions, during 2004-2005, amounted to about three crore. Adding 4.5 crore that is revolving within the community, the total amount disbursed to the community amounted to about 7.5 crore.

Micro Finance (MF) is a term used to denote the financial services of small amounts to the poorer section of the society. Thrift, small loans, insurance belong to the category of Micro Finance. The concept of small loans has evolved to address the problems, listed in box 3.1 in the informal money-lending sector in India.

Problems addressed by Micro Finance

Poverty alleviation through saving poor   from the clutches of money lenders.

Women empowerment

Organizing poor

Large scale employment generation

Meeting the financial needs of poor

Government of India encouraged Co-Operative Societies in 1960 to meet the financial needs of the poor. However, cooperative movement could not live up to the expectations of the poor and collapsed due to several reasons. Commercial Banks were nationalized in 1969 by the Government to help poor access credit facilities, which also failed to serve the interests of the poor. Presently, the Government is extending services to the poor through programs such as Integrated  Rural Development Program (IRDP), Jawahar Rojgar Yojana (JRY) and Prime Minister Rojgar Yojana (PMRY). Micro Finance came in its present form in 1990, which incorporated the concepts of savings, loans, insurance and other financial services, Apart from these financial services, NGOs are  involved in identifying members for MF activity, training them  and

building their capacity so that they can conduct business of their people’s institution. They also help members in bringing the raw material to the reach of the poor, technology and marketing. Other handholding operations in MF include; watershed development, health and child care center. Presently, there are several types of MF institutions in the country, starting from the Self Help Groups (SHG) and extending to Solidarity Groups (SG), Joint Liability Groups (JLG). BIRDS promotes self managed MF institutions through building up women groups form the group level to the level of Mandal Federation. BIRDS has given training to several poor women on different income generating activities, under TRYSEM (DRDA), SC Corporation, BC Corporation, etc. When these women tried to approach financial institutions, including banks, the individuals they were unable to get the loan, making their skills futile. BIRDS started to thinkhow to address this problem in its operational area. It approached MF institutions for taken loan on BIRDS name and started giving loans on MF model, with the funding of FWWB, in the year 1998.

BIRDS approach in MF
Earlier, villagers use to approach local money lenders for raising small loans in the range of Rs. 2000/- to 10,000/- She/He used to give loan on security and pledging with an interest rate of five rupees per month for a loan of Rs. 100/-. For loan of 1000 rupees, She/He used to give 850/- rupees, cutting the interest amount of the entire loan period (100 days), apart from the first installment (10 rupees for every thousand).

Repayment schedules was daily, 10 rupees for every thousand rupees loan. For non-repayment there was a fine of five rupees, each day. It used to add on making the loan amount exorbitant, if the loan failed to pay for a period of 10 days, the money was recovered from the guarantor or pledged item was taken away to adjust and write-off the loan. In the event of  non-recovery through these means, muscle power was used to cease other assets. Instance of throwing out material from the house and locking the house are also not uncommon. In some cases, the families commit suicide to save face in the society. Incase a loanee dies, the money lender will coax the family members to take the responsibility of repayment, by holding the cremation of the dead body, till a person takes responsibility of repayment.

BIRDS extend loans to SHGs without guarantee or pledging with an interest Rate of Rs. 1.35 per month per every hundred Rupees. The loan period is 50 weeks. The loans can be in the range of Rs. 2000/- to  20,000/- interest is not cut at the beginning and the entire loan amount is given. First installment is recovered only after one week after disbursement. Per week payment for a loan of five thousand works out to be Rs. 116/- per week. Total interest is 16% per annum flat. Repayment schedule is weekly.

As mentioned earlier, BIRDS adopted the self-management type of MF activity, in its operational area. The building of women institutions starts from encouraging rural women to form into a SHG, with 15-20 members of SHGs at village level is in the range of 5-30, they are federated into a village federation (VF). If number of SHGs is more than 30, the necessity may arise to form two VFs. When number of VFs in a mandal exceeds 30, the need arises to form a Mandal Federation.

After women institutions are formed, exposure visits are organized to build their capacity of self-management. BIRDS imparts training to groups and federations in aspects such as book keeping, accounts, finance management, group dynamics, leadership, team building, gender, peer pressure etc.

The savings in BIRDS model are weekly and compulsory. The money collected through the group savings is given as loan to members of the SHG. This not only results in rotation of the money within the group but also brings income to the group in the form of interest. A credit need of the members is identified by the group and prioritizes to extend loans to needs such as productive, emergency, housing, agriculture, etc. Group monitors the loan whether it has been used for the purpose taken for. The amount of loan is decided by the group. Apart form the interest, the group also gets income in the form of commission, fee, fine, late fee, etc.

Village as well as Mandal level MF federations raise loan from financial institutions, such as banks, at a lower rate and rotate the money in groups charging a slightly higher rate of interest.

Matching Grants and Revolving Funds are also come into groups savings and useful for loaning to the members. Insurance coverage of life of members, their children and cattle is also provided, in the BIRDS model.

 In case of non-repayment by a loanee, the group is held responsible and it has to make sure that the repayment is regular on weekly basis. If a loanee dies, not only the loan is written off, an amount of Rs. 500/- is paid to the kin of the dead for meeting the cremation expenditure. The facility is extended to even the spouse of a loanee. It is mandatory for the loanee to take life insurance (group) policy (with very low premium-five rupees per every thousand), covering both the loanee and his/her spouse. Death relief in the event of the death of loanee or his/her spouse, the insurance company will pay Rs. 20000/- for normal death Rs.50000/- for accidental death and Rs. 25000/- permanent disability.

Loans are given only for income generating activities such as petty business, buffaloes, provisional stores, tea stalls, cool drinks shops, tailor shop, carpentry, stone quarrying, vegetable/fruit/flower vending, mutton/chicken shop, tiffin center, ready made garments, rural toilet box, puffed rice vending, sarees, second hand clothes, vegetable oil vending, hair oil vending, laundry business, fish vending, etc.

Only woman are eligible for MF loans operated by BIRDS. They should not only be living within the operational area of BIRDS but also should be poor. The number of group members should be in the range of 10-15 After forming into a group, its representatives approach BIRDS with a plan of action (both as individuals as well as a group). Feasibility of the proposal is assessed through study of the physical status at the village level, which essentially includes, present business, type, place, present income, etc. after observation period of one month, the loan is either approved or rejected.
During the observation period, staff attends group meetings and explains about norms and procedures of MF funding. Willingness of the group to stick to the norms and procedures is an important determining factor for approving the loan. After approval of the loan, member take an oath to the effect that the group will take the responsibility of the repayment, if any of its member’s defaults.

Unlike the Grameen Model, all the members of the group can avail loan facility at a time. In Grameen model this is limited to only three persons at a time. The money is delivered at the community center and collected at the village level. All transactions are carried out openly in front of all the members of the group as well as any villager. Unlike, banks there is not much liaison is required. Banks also ask for sureties and guarantors, whereas BIRDS will not do it.
 
Status per March 2005

BIRDS started to extend the financial services to the members through SHGs for the self chosen Income generating activities in rural and urban parts to the poorest of the poor women in 171 villages, in 8 mandals in Kurnool district and 1 mandal in Kadapa district with membership of 11574 with 1050 groups 210 centers in four branches. The total outstanding amount is 340 lakhs of rupees.

BIRDS in total borrowed Rs.195 /- lakhs, during the reporting period (195 lakhs from FWWB) and started with in 10 additional villages in Kurnool district and 3 villages in Kadapa district . Table 3.1 gives the summary of MF activities during the reporting period. Details of borrowing, donor-wise, at the end of reporting period are furnished in table 3.2 Table 3.3 gives an account of borrowing at mandal/village level, apart from coverage in terms of number of women, groups and amount. Types of Income Generating Activities (IGAs) for which the woman borrowed money is furnished in Table 3.4.

All the member families are covered under an insurance scheme of Life Insurance Corporation (LIC)of India, which is called as Janasree Bheema Yojana (FOR MORE DETAILS SEE CHAPTER 5). Women members of a SHG are covered under group insurance, premium of which is Rs. 25/- for 5000/- per year per member. The insured amount is Rs. 5000/- for natural death and Rs. 10,000/- for accidental death: 5000, accident 10,000.

Summary of  MF dealings

Description

During the year 2004-05

Cumulative Up to March 05

Disbursed Amount

62,277,000.00

137,249,500.00

Disbursed Loans

8718

19,809.00

New Members

5053

11,574.00

Total Loan Write-off amount

64,250.00

240,516.00

Outstanding Amount

34,095,250.00

 


Types of income Generating Activities(IGAs) Purpose Wise Outstanding

Purpose

Loan Amount

Out Standing

Recovery

Air Compressor

40,000.00

18,000.00

22,000.00

Arches Business

25,000.00

11,250.00

13,750.00

Auto

15,000.00

6,750.00

8,250.00

Backery

22,500.00

10,125.00

12,375.00

Bananas Business

70,000.00

31,500.00

38,500.00

Bangles Business

332,500.00

149,625.00

182,875.00

Barber Shop

25,000.00

11,250.00

13,750.00

Basket Business

1,227,000.00

552,150.00

674,850.00

Beauty Parlour

7,500.00

4,875.00

2,625.00

Bedsheets Business

310,000.00

201,500.00

108,500.00

Beedi Business

9,252,500.00

6,014,125.00

3,238,375.00

Beetle Leafs Business

10,000.00

6,500.00

3,500.00

Beetle Nut Business

7,500.00

4,875.00

2,625.00

Beetle Nut Powder Business

7,500.00

4,875.00

2,625.00

Bells Business

5,000.00

3,250.00

1,750.00

Binding Works

5,000.00

3,250.00

1,750.00

Biscuits Business

35,000.00

22,750.00

12,250.00

Blanket Business

5,000.00

3,250.00

1,750.00

Book Stall

52,500.00

34,125.00

18,375.00

Boxes Business

35,000.00

22,750.00

12,250.00

Bread Business

30,000.00

19,500.00

10,500.00

Bricks Business

12,500.00

8,125.00

4,375.00

Broom Business

25,000.00

13,750.00

11,250.00

Building Fund

1,850,000.00

1,017,500.00

832,500.00

Butchery

584,000.00

321,200.00

262,800.00

Carpentry

110,000.00

60,500.00

49,500.00

Cement Items Business

15,000.00

8,250.00

6,750.00

Centring Utensils Business

5,000.00

2,750.00

2,250.00

Chalkpiece Business

10,000.00

5,500.00

4,500.00

Chillies Business

25,000.00

13,750.00

11,250.00

Cloth Business

8,174,500.00

4,495,975.00

3,678,525.00

Coal Business

20,000.00

11,000.00

9,000.00

Coconuts Business

72,500.00

39,875.00

32,625.00

Coffee Powder Business

12,500.00

6,875.00

5,625.00

Colour Business

15,000.00

8,250.00

6,750.00

Colour Stone Business

10,000.00

5,500.00

4,500.00

Cool Drinks

207,500.00

114,125.00

93,375.00

Covers Business

22,500.00

12,375.00

10,125.00

Curd Business

25,000.00

5,000.00

20,000.00

Curry Leafs Business

7,500.00

2,250.00

5,250.00

Cut Piece Business

12,500.00

3,750.00

8,750.00

Cutting Machine

5,000.00

1,500.00

3,500.00

Cycle Seats Business

5,000.00

1,500.00

3,500.00

Cycle Shop

135,000.00

40,500.00

94,500.00

Decoration Work

15,000.00

4,500.00

10,500.00

Dhal Business

5,000.00

1,500.00

3,500.00

Diesel Business

75,000.00

22,500.00

52,500.00

Dry Cleaning

47,500.00

14,250.00

33,250.00

Eatables Business

22,500.00

6,750.00

15,750.00

Eggs Business

30,000.00

9,000.00

21,000.00

Electrical Work

107,000.00

32,100.00

74,900.00

Embroidery work

130,000.00

39,000.00

91,000.00

Fancy Business

110,000.00

33,000.00

77,000.00

Firewood Depot

990,000.00

297,000.00

693,000.00

Fish Business

72,000.00

21,600.00

50,400.00

Flowers Business

1,346,500.00

403,950.00

942,550.00

Fruits Business

1,461,500.00

438,450.00

1,023,050.00

Furniture Shop

10,000.00

3,000.00

7,000.00

Garland Business

5,000.00

1,500.00

3,500.00

Gas Welding

5,000.00

1,500.00

3,500.00

General Store

25,000.00

7,500.00

17,500.00

Ghee Business

60,000.00

18,000.00

42,000.00

Gifts & Toys Business

5,000.00

2,000.00

3,000.00

Glass Cutting Machine

5,000.00

2,000.00

3,000.00

Goats Business

50,000.00

20,000.00

30,000.00

Godrej Lockers Business

5,000.00

2,000.00

3,000.00

Gold Works

20,000.00

8,000.00

12,000.00

Grass Business

15,000.00

6,000.00

9,000.00

Grinder

337,500.00

135,000.00

202,500.00

Gunnies Business

742,500.00

297,000.00

445,500.00

Horse

12,500.00

5,000.00

7,500.00

Hotel

1,439,000.00

512,675.00

926,325.00

Ice Business

5,000.00

1,500.00

3,500.00

Incense Sticks Business

255,000.00

76,500.00

178,500.00

Iron Business

37,500.00

15,000.00

22,500.00

Iron Shop

75,000.00

30,000.00

45,000.00

Jowar Business

82,000.00

32,800.00

49,200.00

Lab Technician

5,000.00

2,000.00

3,000.00

Lamination Work

5,000.00

2,000.00

3,000.00

Leather Business

40,000.00

16,000.00

24,000.00

Laundry

570,000.00

228,000.00

342,000.00

Leaf  Plates Making

10,000.00

2,000.00

8,000.00

Leafs Business

10,000.00

2,000.00

8,000.00

Leaves Business

12,500.00

10,000.00

2,500.00

Lighting

25,000.00

20,000.00

5,000.00

Lime Stone Business

227,500.00

182,000.00

45,500.00

Liquid Business

5,000.00

4,000.00

1,000.00

Lockers Business

35,000.00

28,000.00

7,000.00

Medical Shop

67,500.00

54,000.00

13,500.00

Milk Business

3,322,500.00

2,658,000.00

664,500.00

Miller

15,000.00

12,000.00

3,000.00

Mining

6,007,500.00

4,806,000.00

1,201,500.00

Musical Center

15,000.00

9,000.00

6,000.00

Oil Business

177,500.00

106,500.00

71,000.00

Painting

30,000.00

18,000.00

12,000.00

Pans Business

5,000.00

3,000.00

2,000.00

Papads Business

175,000.00

105,000.00

70,000.00

Pearls Business

7,500.00

4,500.00

3,000.00

Petrol Business

57,500.00

34,500.00

23,000.00

Petty Business

6,063,000.00

3,637,800.00

2,425,200.00

Photo Business

35,000.00

21,000.00

14,000.00

Pickles Business

175,000.00

105,000.00

70,000.00

Pipes Business

12,500.00

7,500.00

5,000.00

Plastic Items Business

332,500.00

199,500.00

133,000.00

Polish Business

15,000.00

9,000.00

6,000.00

Posters Business

7,500.00

4,125.00

3,375.00

Pots Business

17,500.00

9,625.00

7,875.00

Poultry

22,500.00

12,375.00

10,125.00

Provision Store

174,500.00

95,975.00

78,525.00

Public Telephone

10,000.00

5,500.00

4,500.00

Puffed Rice Business

320,000.00

176,000.00

144,000.00

Quarry

327,500.00

180,125.00

147,375.00

Rice Business

677,000.00

372,350.00

304,650.00

Rings Business

15,000.00

8,250.00

6,750.00

Rope Business

62,500.00

34,375.00

28,125.00

S.T.D.Booth

35,000.00

7,000.00

28,000.00

Sand Business

20,000.00

8,000.00

12,000.00

Seats Business

15,000.00

6,000.00

9,000.00

Seeds Business

15,000.00

6,000.00

9,000.00

Sheep Business

224,000.00

89,600.00

134,400.00

Shoe Mart

97,500.00

39,000.00

58,500.00

Silver Business

185,000.00

74,000.00

111,000.00

Skin Business

22,500.00

9,000.00

13,500.00

Slab Polish

215,000.00

86,000.00

129,000.00

Soaps Business

20,000.00

8,000.00

12,000.00

Steel Business

167,500.00

67,000.00

100,500.00

Stones Business

245,000.00

98,000.00

147,000.00

Sweets Business

541,500.00

216,600.00

324,900.00

Tailoring

4,886,000.00

1,954,400.00

2,931,600.00

Tea Stall

242,500.00

97,000.00

145,500.00

Tiffin Center

2,277,500.00

911,000.00

1,366,500.00

Tyres Business

37,500.00

15,000.00

22,500.00

Veg.Vending

3,157,500.00

1,263,000.00

1,894,500.00

Weaving

60,000.00

24,000.00

36,000.00

Wire Bags Business

45,000.00

18,000.00

27,000.00

Wire Basket Business

140,000.00

56,000.00

84,000.00

Xerox

5,000.00

2,000.00

3,000.00

Zigzag Machine

47,500.00

19,000.00

28,500.00

 

62,277,000.00

34,095,250.00

28,181,750.00




 
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