Arresting Poverty through Micro-finance:

ASAs Micro-finance Programme in Tribal District of Jhabua

An Evaluation Study

May-June 2008

By Astad Pastakia
Development Consultant

Submitted to

Action for Social Advancement (ASA)

Bhopal

&
Paul Hamlyn Foundation, UK

Dr. Astad Pastakia is a fellow of Indian Institute of Management, Ahmedabad and has been in the development field for last 20 years.
1

Table of Contents
Executive Summary 1.0 2.0 3.0 Introduction Evolution of ASAs micro-finance model Progress made in Current Project Cumulative growth of SHGs Expansion within Jhabua Expansion beyond Jhabua Creation of MFI and its impact on programme Qualitative differences in the programme Capacity building efforts Planning and Monitoring Findings from Field Study Profile of sample SHGs Comparative analysis Extent to which requirements are met Convergence between MF and other livelihood programmes Performance of MFI Financial indicators Mobilisation of funds Conclusions and Recommendations

4.0

5.0

6.0

Annexures 1 Terms of Reference of the study Annexure 2 Tables Annexure 3 Balance Sheet and Profit and Loss Statement of ASA-MFI Annexure 4 Policy for Bad Debts

Executive Summary Beginning in 1998, ASAs micro-finance programme has grown substantially moving from an experimental stage, to a model-building stage and finally to a scaling-up stage. Paul Hamlyn Foundation has played a crucial role by providing financial support for the programme first in 2002 (INR 3.7 million) and later again in 2006 (INR 10.058 million). The present evaluation study has looked at the progress made in the latest project, which is for a period of three years beginning from January 2006 and targeted at the tribal population in Jhabua district of MP. The study also looks at the replicability of the model in other districts of the state. Although ASA started with micro-finance in Jhabua, given the low levels of investment in natural resources and other infrastructure, it realizes the need to adopt an area approach in the district. It hopes to achieve convergence with government schemes through investments in natural resource base. ASA also plans for introduction of new technology for agriculture and aggregation of demand for input supply. A small team to look after investments in NRM has already started functioning. This complements the work of the Micro-finance Team, which has recently been reorganized since the introduction of the MFI. The MFI is only one year old and is temporarily housed within ASA. The cumulative performance figures show impressive growth, which picked up since March05-06 and has accelerated during the past two years. The total number of members joining the SHG movement in the region increased from 355 in March 2003to 10,631 by March 08. The corresponding figures for the number of SHGs were 189 to 1032 representing a five-fold increase. Similar trends could be seen for the amount of savings, which increased from INR 0.85 m to INR 9.6 m during the same period and the total loans, which increased from INR 2.4 m to INR 36.3 m The annual credit requirement of a family ranges from about Rs. 15,000/- in interior villages dependent on forests for livelihood, to about Rs. 25,000/- in villages, which are more dependent on agriculture. At present the older SHGs (more than 5 years of age), are able to meet about 60-70% of this requirement. In spite of the accelerated growth, the quality of portfolio is quite high with the on time repayment being maintained at 98 % This has been made possible through the establishment of systems and procedures which are now written up in the form of an operations manual, and which is followed faithfully by the entire team implementing the project. Implementation is further supported by a computerized MIS, which helps to generate critical data at the project level. This data is used by the top-management to carefully follow the performance of individual SHGs and to generate information for follow up. The financial analysis of the MFI shows that it has performed fairly well on most indicators of portfolio quality, efficiency, productivity profitability and sustainability. The coming of the MFI has made the following important impacts on the system:

a) all eligible SHGs are now able to access the requisite amount of loans where as in the earlier system which relied only on bank linkages, about half of them would be denied credit. b) The quantum of lending has increased dramatically and the lending to savings ratio has gone up from about 1.5 to about 4. c) The processing time for a loan application has been brought down from 56 days to less than 20 days. There is scope to bring this down even further in future. The MFI has also introduced some significant changes in the SHG Norms and in the organizational structure. These changes have been made with a view to improve the operational efficiency of the delivery system. While the people have accepted most of these changes, the one of repayment of loans on a monthly basis through a system of EMI is a change that is being resisted. In almost all the villages visited, the people had raised this issue with the MFI management, which is currently in dialogue to find a middle path. The other developments include: Introducing micro-finance into other districts, where ASA has a presence. This has been made possible with the help of interest earned by the MFI and other resources of ASA Diversifying the portfolio to include micro-insurance Implementation of a state government watershed development programme by the NRM team in 14 villages, covering 5700 ha of land Although about 12000 families are covered under the programme, presently, ASA is able to meet the credit requirements of only about 5000 families. There is a need to increase this volume and to increase the borrower base as well, which would help also to reduce the operating expenses and the ultimate cost of capital to the borrower. ASAs approach to micro-finance stresses a revenue model wherein the operating costs are absorbed by the federations themselves. Each federation needs financial assistance for an approximate period of 18 months after which the expenses get covered from the fees generated for the services provided by it. The model as such is replicable, provided donors are willing to finance the initial period of 18 months. Given its ambitious plans to expand further there is a clear case for the MFI to be registered as an NBFC. ASA-MFI may also consider getting ISO or MCRIL certification as this would enhance its credibility in the market and help in accessing funds. Among the other ideas that hold promise but need to be studied for their feasibility are: establishment of a training academy for micro-finance to meet ASAs requirements for expansion as well as the needs of the state government which has drawn up ambitious plans for promoting micro-finance through PFTs. establishment of a remittance service for migrant workers, especially for Jhabua where the rate of migration continues to be about 65% and the main source of income constitutes remittances.

1.0

Introduction

ASAs micro-finance programme began in 1998 on an experimental basis in Dahod district of Gujarat and Jhabua district of Madhya Pradesh. In 2002 Paul Hamlyn Foundation (PHF), UK provided ASA with a grant of INR 3.7 million to help establish its model of micro-finance in the field on scale. The project, which concluded in December 2005, contributed significantly to the learning, and helped ASA draw up future plans for intensifying and scaling up the programme in Jhabua district. Satisfied with the progress made by the programme, PHF provided an additional grant of INR 10.058 million for a period of three years (January 2006 to December 2008). The present study was commissioned to make an assessment of the progress made in the latest project and the scope for replicating ASAs micro-finance programme further, especially in other tribal districts of MP. It is worth mentioning that the author had the benefit of having carried out an earlier assessment of the programme in October 2005, the findings of which serve as a benchmark for the present study. The precise objectives of the study as indicated in the TOR (see Annexure 1) are: a) to make an objective review of the progress of the project against each of the outputs mentioned in the project document b) to make recommendations/ suggestions for the replication of the programme. The methodology adopted for the study included: - desk review of project documents, project reports and other relevant literature - consultation with project staff, federation office bearers - field visit to interact with members of sample SHGs - debriefing session with senior officers of the programme The report begins with a recap of ASAs micro-finance model as it has evolved over the years. It is in this background that the present activities are reviewed in section three. Section four provides insights from the field visit while section five deals exclusively with the performance of the newly instituted MFI. The conclusions and recommendations are provided in the last section. 2.0 Evolution of ASAs micro-finance model

ASAs microfinance model has moved through three phases. The reflections and learning at the end of each stage prompted ASA to modify its strategy thus leading to a new phase. It is worth recapitulating this learning process in brief in order to get a historical perspective of the current project. Phase I: Experimentation Phase

This was an experimental phase of two years (2000-2002) during which ASA began to test the viability and usefulness of microfinance in tribal areas like Dahod and Jhabua where the population was largely illiterate, natural resources were depleted, migration rates as high as 70% and dependency for credit on traditional moneylenders high with interest rates being as high as 150%. Finding a good response to the initial efforts from the people, and looking at their dire need ASA decided to take up this activity on a larger scale and to develop a model of micro-finance suitable to the local needs. Phase II: Establishment of model This phase was supported by PHF and led to the establishment of ASAs model in the field on scale. The basic features of the model were: - given the low literacy levels of the target population, SHGs needed handholding and capacity building support on an on-going basis. - These services could be provided by a cadre of trained rural youth selected mostly from the same region. - SHGs would need to be federated in order to create a revenue model for such services - SHGs would be linked with banks through the Federations. (The option of para-banking at this stage was ruled out as it was considered both expensive and difficult to implement given the shortage of trained human resources.) While ASA succeeded in establishing this model, it also encountered certain difficulties. Progress of the SHGs was hampered due to poor linkages with banks. - While SHGs were eligible for loans 4 times the savings amount, banks were typically unwilling to give more than twice the savings even in the case of mature SHGs. Hence a savings of INR 3.78 million should have leveraged credit worth about INR 12.00 m instead of which it was able to get only INR 5.7 m. - The average processing time of the bank loans was 56 days. This delay often forced SHG members to resort to the moneylender for bridge finance, thereby defeating the very purpose of the linkage. - About half of the SHGs did not get loans from banks, thereby leading to demotivation among them. In the light of the above it was decided to reconsider the earlier decision of not going for a MFI based model. Phase III: Scaling up with revised (MFI) model This is the current phase, which began in January 2006 with continued support from PHF. The main additional feature of this stage is the creation of an MFI in order to improve access to funds at a cheaper and faster pace, thereby accelerating the pace of growth. There is also a conscious move to try and increase the investment in natural resource base (mainly land and water resources) so as to improve the prospects of

livelihoods, which are largely based on rain-fed agriculture. In fact ASAs larger vision for the region envisages a three-pronged strategy as shown in Figure 1. The third part includes improved agricultural technology and aggregation of demand so as to supply quality inputs at a reasonable price through peoples institutions.

Figure 1: Strategy for Area Level Development It is worth noting that ASA pursues two approaches to development: a) Area approach: where all the three aspects of the strategy are built in over time. Since this is an intensive strategy it can be pursued only in limited areas where the need is great because of historical deprivation of almost the entire population of the region. Jhabua is one such region. b) Issue approach: where only one particular critical issue is taken up and scaled up in a big way across district and even state boundaries. Examples include Participatory Varietal Selection and Promotion (PVSP) which is aimed at improving productivity through access to improved seed and new varieties, Participatory Irrigation Management (PIM) which focuses only on improved water distribution for irrigation and Micro-finance which aims to provide cheap credit in areas where credit is a major bottleneck for development etc. In most of the cases ASA has adopted the issue approach, as it is possible to implement and demonstrate the solution on scale, thereby making an impact both at the field as well as at the policy levels. However, ASA is also acutely aware that in places like Jhabua,

poverty reduction can only be brought about through an area approach. While microfinance is seen as the minimum that needs to be done, an effort is being made to bring about convergence with Government schemes to step up the investments in natural resources. ASA also intends to introduce PVSP and other technology related interventions in the area that would help cover the other aspects of the triangle. 3.0 Progress made in Current Project

Cumulative Growth of SHGs The cumulative growth is shown in the graph in Table 1 and Figure 2. As the figure shows, the growth has picked up since March05-06 and has accelerated during the past two years. The total number of members joining the SHG movement in the region increased from 355 in March 2003to 10,631 by March 08. The corresponding figures for the number of SHGs were 189 to 1032 representing a five-fold increase. Similar trends could be seen for the amount of savings, which increased from INR 0.85 m to INR 9.6 m during the same period and the total loans, which increased from INR 2.4 m to INR 36.3 m (Table 1, Annexure 1). In spite of this accelerated growth, the on time repayment has been maintained at 98 % while the Portfolio at Risk (PAR ratio) for > 30 days is 1.17%. This has been made possible through the establishment of systems and procedures which are now written up in the form of an operations manual, and which is followed faithfully by the entire team implementing the project. The implementation is further strengthened through a Table 1 Cumulative Growth of SHGs promoted by ASA Particulars SHGs Women Members Saving (m) Loans (m) Loan SHG Repayment Port folio at risk ratio Uni t No. No. No. INR INR No -% Mar. 03 189 123 2141 8.47 la 23.89 25 100% -Mar. 04 244 209 2452 11.03 28.14 67 100% -Mar. 05 366 311 4248 23.78 56.56 92 100% -Mar. 06 519 398 5912 32.00 84.32 83 100% -Mar. 07 719 531 8601 77.70 192.48 567 100% -Mar.08 1032 772 12405 96.55 363.81 901 98% 1.17

. 12000 10000 8000 6000 4000 2000 0 No of Membs. Mar'03 Mar'04 Mar'05 Mar'06 Mar'07 Mar'08 355 814 1402 1696 4626 10631

Figure 2: Cumulative Growth in Members computerized MIS, which helps to generate critical data at the project level. This data is used by the top-management to carefully follow the performance of individual SHGs and to generate information for follow up. The process of aggregating SHGs by formation of federations was initiated in the previous project and is continued in the present project. As of March 08 three federations have come into existence, two of which have been registered under the Madhya Pradesh Societies Act. A federation consists of between 200 - 250 SHGs. SHGs pay an annual fee to the Federation in exchange for the handholding services rendered by them. The cadre of trained personnel that provides this service reports to ASAs staff but the federation pays their salaries. In this way they are held accountable to the people. Expansion within Jhabua Within Jhabua SHGs have spread in 8 different blocks. For each of these blocks ASA has set up a Branch, which is managed by a Branch Manager. The performance in each block on various parameters is shown in Table 1, Annexure 2. The total no of SHGs in Jhabua as on March 08 were 864 representing 83.7% of the total SHGs established by ASA. Of these, 71.1% are womens SHGs. As a matter of strategy ASA strives to maintain the proportion of womens SHGs at more than 80%. This is because women have been found to be more regular in payments and collaborate more easily. Also the men in the region tend to migrate more than women. At present there is a dip in the proportion of womens SHGs in Jhabua because during the current financial year, ASA accepted the State Bank of Indias offer to take over about 70 SHGs promoted by it, which it was finding difficult to support. Since the majority of these incoming SHGs were male SHGs the proportion of womens SHGs was affected.

Expansion beyond Jhabua Interestingly, the SGH movement has been taken to other districts in MP where ASA has been running different Issue based programmes. These include Ratlam block of Ratlam District (39), Rajpur Block of Badwani District (73), Nagda block of Nagda district (13) and Bizawar Block of Chattarpur district (43) (Table 1, Annexure 2). These additional 168 SHG had been established with the help of interest earned by the MFI and other resources of ASA. The proportion of womens SHGs is 94% thus taking the over all proportion of womens SHGs promoted by ASA to 74.8%. According to top management of MFI, these SHGs are getting matured more rapidly than the Jhabua SHGs, in terms of availing loans and repaying them through EMIs. For example, on time repayment rate at Barwani and Ratlam are cent percent. One possible explanation for this could be the fact that the state of natural resources in these areas, is much better in comparison to Jhabua. Creation of MFI and its impact on programme The current project has enabled the establishment of a Micro-finance Institution (MFI), which is currently housed in ASA. The rapid growth in lending has become possible largely due to the access to funds through financial institutions like ICICI Bank, HDFC Bank and FWWB (Friends of Womens World Banking), India. It is also planning to tap funds from other financial institutions. As of now the average cost of capital for the MFI is 13.30 percent per annum. With the increase of interest rate in the Prime Sector Lending this rate is unlikely to go down in near future unless ASA gets resources from public institutions like NABARD, Rastriya Mahila Kosh, which provide loan at lower interest rates. However, resources available from them will be always limited. ASAs MFI lends directly to the SHG @ 24% per annum on reducing rate of interest. The rate of interest is the same as that charged to the clients under the internal loan arrangement. The MFI meets its operating costs out of the 10% that it retains, a part of which is also used for promoting new SHGs in other districts. The coming of the MFI has made the following important impacts on the system: a) all eligible SHGs are now able to access the requisite amount of loans where as in the earlier system which relied only on bank linkages, about half of them would be denied credit. b) The quantum of lending has increased dramatically and the lending to savings ratio has gone up from about 1.5 to about 4. c) The processing time for a loan application has been brought down from 56 days to less than 20 days. There is scope to bring this down even further in future. The MFI has also introduced some changes in the SHG Norms and in the organizational structure. These changes have been made with a view to improve the operational

efficiency as discussed in the next section. The financial performance of the MFI and the challenges it is facing is discussed in a later section in more detail. Qualitative differences in the programme Changes in the SHG Norms: A number of significant changes have been made in the SHG norms during the current project. Table 2, Annexure 2 provides a comparison of the norms that existed in 2005 vs. the norms that exist now. The rational for the changes are shown in the third column of the table. Some of the significant changes are as follows: i) the minimum size of a group has now been increased from 13 to 15. This ensures that even if 2-3 members drop out, the group size does not become sub-optimal. ii) The service charge paid by the SHG to the Federation is now increased to Rs. 100/ yr/ member from the second year itself instead of from the third year. iii) The minimum monthly savings per member accepted is raised from Rs. 30 to Rs. 50/iv) SHGs are no longer expected to save Rs 5000/- before they become eligible for loans. MFI is willing to provide loans to them from the second month onwards starting with a loan amount of Rs. 2000/member. However, they are expected to go through a round of training called Continuous Group Training and to be able to pass an oral test administered by the Branch Manager called Group Recognition Test (details provided in Operations Manual). v) Earlier loans were provided for the whole year and repayment of principle amount done on an annual or six-monthly basis while interest was recovered on a monthly basis. In this system the principal was locked up for six months. Since January 2008, ASA has introduced a system of repayment through EMI which includes both principle and interest components. In this system it is expected that the money will be turned over every month, thereby leading to better utilization of funds. vi) In addition the MFI has introduced a loan processing fee of 2% and security money of 10% of the loan amount, which is adjusted in payment of loan as the last installment. This had to be introduced since the Financial Institutions also have the same terms while dealing with the MFI (although FIs like FWWB do not have such terms). vii) Earlier SHGs were meeting on monthly basis. Now the meetings have been intensified and are organized on a weekly basis. Financial transactions are carried out only during the first meeting of the month, which is held during the first week of the month. The remaining meetings are used to discuss possibilities of new loans, formation of new SHGs, capacity building etc. viii) The process of identifying potential SHG members has been simplified by using the Housing Index criterion. As a first cut, only people with kutcha

houses are considered eligible as people with concrete houses would be expected to be better off. Introduction of Micro-Insurance A qualitative improvement in the product profile has been the introduction of microinsurance product with a tie-up with the Life Insurance Corporation of India. So far 5319 SHG members have enrolled for this scheme as shown in Table 3, Annexure 2. There is scope for expanding this product profile to cover other types of insurance such as weather insurance for rainfed agriculture and health insurance especially in areas where occupational hazards are high or where medical facilities are scarce. Organisational Changes In the earlier arrangement, each block had a coordinator who reported to the programme coordinator. The Block coordinator had working under him/her a team of group workers and supervisors. He/ she also had a data operator to feed data into the MIS software. Each group worker could handle 20-22 SHGs (about 300 members) and each Supervisor could supervise the work of 6-8 group workers (about 100-120 SHGs). The Federation had a two-tier structure. However, cluster level meetings were held to monitor the repayment of loans and to assess new loans. Since the coming of the MFI, the following changes have been initiated: i) Block Coordinators have now been replaced by Branch Managers as the MFI has opened its branches in each block. In Jhabua there are 8 branches as ASA is currently working in 8 out of the 12 blocks of the district. Each branch handles about 2000 SHG members (130-150 SHGs). In addition there are 6 more branches in districts other than Jhabua so that the total no of Branches stands at 14. Each Branch office has five Center Supervisors. Each Center Supervisor handles 400 members (30-35 SHGs). The Center Supervisor reports to the Branch Manager who in turn reports to the District Manager. Since the District Manager post is yet to be filled, the Regional Coordinator (MF), who is based at Jhabua and looks after the programme in all districts, officiates the role of DM in Jhabua. At the district level there is an officer called District Accounts and MIS Manager (DAM) who reports directly to the Regional Coordinator. The Regional Coordinator works in tandem with the Manager (MF). (See Organogram shown in Figure 3). In the above system the group workers have been converted into center supervisors and they are monitored directly by the Branch Manager. The operating efficiency of the frontline worker has been improved by organizing the meetings of two SHGs at the same time and venue in the village (designated as center). Hence while this worker could in the past handle only about 20-22 SHGs, he/she can now handle about 30-35 SHGs.

ii) iii)

iv)

v) vi)

Although the Center Supervisors report to ASA staff, the Federation pays their salaries. Hence they are made accountable to the Federation and the people as well. The Federation is involved in the process of identifying and recommending loans and in ensuring recovery of loans. However the Cluster level meetings have been done away with.

Programme Leader (MF)

Regional Coordinator (MF)

Manager (MF)

District Manager

District Accounts & MIS Manager

Area Manager

This position is not occupied as of now but would eventually be occupied when the full capacity of SHG in the district is reached

Branch Manager

Centre Supervisor

Centre Supervisor

Centre Supervisor

Centre Supervisor

Centre Supervisor

Figure 3: Organogram of Micro-finance Programme

The federation charges a fee from each SHG for its services. The income from the fees is used to absorb the cost of the handholding system. In this way the system becomes selfsupporting (see Table 4., Annexure 2 for financial details of the federation). However, an initial investment is needed to establish a federation, which includes the cost of running it for 24 months. Two such federations have been established from the grant provided by the Foundation. Capacity building efforts A few changes have been introduced in the training package for SHGs as well. Earlier each SHG had to go through three one-day modules spread out over time. The first was an introductory module. The second was to be completed within three months of the formation of the group and aimed at creating an understanding of the rules and norms for running an SHG. The third module was on savings and credit, which was held before bank linkage. In the present scheme of things, each new group goes through what is known as Continuous Group Training (CGT). The center supervisor organizes this training at the village level itself for three days continuously. Each day a session of not less than 45 minutes is organized with details as shown in Table 1below:
Table1: Schedule for CGT Sr. no 1. Day 1st 2. 2nd Area to be Discussed General Introduction about Micro finance About ASA & ASAs MF programme. Recap of the 1st days session. Loan & Loan Policy and utilization of loan Recap of the 1st day & 2nd day. Question Answer session Remarks 15 minutes 30 minutes.

15 minutes. 45 minutes 30 minutes. 30 minutes

3.

3rd

The level of participation in these training sessions is expected to be 100%. A group recognition test (GRT) is conducted not later than two months. The Branch Manager carries out this oral test with the objective of verifying the level of understanding that the group has acquired after going through the training. Each member is also expected to be able to recite the Client Pledge correctly. The result of the test is announced verbally soon after completion of the test. Those SHGs who fail the test are given reasons for their failure and encouraged to undergo further training. Those who pass the test become eligible to get a loan of Rs. 2000/ (to start with) soon after they cross two months of age. Apart from this training, exposure visits are also organized as and when needed. This is done particularly for new areas where people may not have heard about SHGs from neighbouring villages.

Details of the number of trainings organized with support from the current project are provided in Tables 5 A-D of Annexure 2. It is worth mentioning that trained manpower is seen to be a major constraint for replicating the programme in other districts of the state. At the same time, the state government is also contemplating setting up of SHGs in a big way, so as to route its livelihood programmes through these groups in future. The government proposes to set up multi-disciplinary teams as PFTs for clusters of 15-20 villages. It will need hundreds of trained supervisors for micro-finance. Such a workforce just does not exist. ASA is contemplating establishing a training center, which would help to meet its own requirements and partly those of the state. Planning and Monitoring The systems and procedures for establishing new SHGs, organizing routine meetings, carrying out financial transactions, processing of loans and recovery of loans etc are all laid out in the operations manual. The fact that such a manual exists and is followed routinely by the staff members is one of the reasons why it has been able to scale up the Programme without diluting the quality. The existence of systems and procedures qualifies ASA-MFI to get ISO certification and this is something which it should explore in the near future especially as such certification raises the credibility of the institution and could make it easier to mobilize funds on a larger scale. The top management informed the author that it was considering getting certification (Credit Rating) from MCRIL (Micro-credit Ratings International, Ltd.)2, Gurgoan with the same objective in view. The first week of every month is reserved for meetings with SHGs in which financial transactions are carried out. This includes collection of savings, fees, EMIs etc. The MFI has opened bank accounts in SBI branches in every block. The branch manager deposits all the cash received on each day. On Saturday a meeting of all branch managers is held at the District office in which (about 150 monthly) collection sheets are handed over by the Branch managers along with proof of deposit in the banks to the DAM. The transactions are entered into the computerized system at the district level and supervised by the DAM. Between, 2002-04 ASA was using software called McFinancer for managing the data. However, it realized that this software does not produce DCB statement (Demand Collection Balance) as an output. This proved to be a handicap and ASA started looking for alternative software. Finally it settled for Self Help Enabler (SHE), which it procured from Dhan Foundation. This is now in use for the past three years. Micro Finance software has also been installed since the past 3-4 months and is found to be working well. In spite of this ASA still feels that a serious review of software is needed. The major problem is that no single software can handle all the different products. Hence an

MCRIL is a micro finance rating agency with over 275 ratings and assessments of MFIs across 13 countries.

agency is compelled to install different programmes for different products. Later integration becomes a problem. . As of now, the outputs generated by SHE are proving useful for monitoring the programme and taking follow up action on the recovery of loans as well as poorly performing groups. ASA continues to monitor the number of failed groups, which was about 3.5 % during the previous stage and is now less than 1% (see Table 2 below). As the table shows, the proportion of male groups failing has been much higher than that of female groups throughout.
Table 2: Monitoring of failed groups Year Number of SHGs Male/Female Total SHGs % total SHGs 2004 8 8/0 231 3.46 2005 14 11/3 454 3.08 2006 5 3/2 561 0.89 2007 11 7/4 741 1.48 2008 8 6/2 1032 0.77

4.0

Findings from Field Study

Profile of Sample SHGs The sample consisted for 13 SHGs from five villages (see Table 6, Annexure 2). Having visited a village an attempt was made to meet members from as many SHGs in the village as were present on the particular day. In some cases all the members were present since it was their regular meeting, while in other cases an informal group discussion was organized. In Bisalpur village, the women were working under a government scheme for deepening a tank and the meeting was organized during their lunch break! As the table shows, the sample had only one male SHG, which was at Kalapan village. In two out of the five villages watershed development works had taken place. The age of the SHGs ranged from about 3 to 6 years. A conscious effort was made to look at mature SHGs since the potential impact of the programme could only be gauged by looking at these. One village which was part of the sample in the previous study in 2005 was also included so that the author could get a feel of the changes if any over the past two and half years. This village was Titkikheda in Jhabua block. It is a village that is dependent on forests and is relatively inaccessible because of lack of pucca roads. Comparative analysis Details about the savings, credit and repayment etc. of the sample are provided in Table 7 of Annexure 2.

Since a sample study was done in 2005, an attempt was made to compare the present sample with the earlier one to see if there were any significant changes in the parameters over time (see Table 3 below).
Table 3: Comparative performance over 2005 sample Particulars Size of sample (no, of SHGs) Average age (yrs) Average size of group Average Total savings per group (Rs.) Maximum amount of loan per round taken by a group Proportion of groups in sample having taken more than a lakh rupees per round as loan Use of Credit Sample of October 2005 8 3.5 11.25 34,672/1,60,000/2/8 or 12.5% Most frequent fodder(5) bullock (4) Less frequent Seed/ fertilizers etc. (2) House repair or const (2) Repayment to moneylender(2) Animal husbandry (2) Least frequent Marriage (1) Purchase of silver (1) Flour mill (1) Medical expenditure (1) 100% for all Nil Sample of May 2008 13 4.3 12.2 37,716/1,65,000/6/13 or 46.15 % Most frequent Fodder (7) Bullock (5) Seed/ fertilizer (5) Marriage / notra (5) Less frequent House repair/ const. (4) Repayment to moneylender (4) Least frequent Medical expenditure (2) Animal husbandry (2) Flour mill (1) Not reported Purchase of silver 100% for 8 and 99% for 5 SHGs Nil

On time Repayment PAR (Portfolio at risk)

The table shows that there is no significant difference in the performance on financial parameters. The savings in 2008 sample is somewhat higher, but this is largely due to the fact that the average group size is larger and age is also higher. The proportion of groups having more than a lakh rupees per round is higher in 2008 again because there are more no of older groups in this sample than the previous one. The pattern in the use of credit is also very similar. However, social expenses, consisting mainly of notra (contribution to the marriage expenses of near and dear ones) seem to have assumed higher importance in the current sample. Also purchase of silver was not reported in this years sample. It is worth mentioning that when the author visited Titkikheda village after a space of two and a half years, nothing seemed to have changed. The women still relied on carrying head-loads of firewood cut illegally from the forest, getting onto the train without tickets and selling the wood at Dahod, which had a market for it. In addition they collected sal leaves during summer and sold these to the traders at a price of Rs. 45/bundle of 100 leaves. The latter activity lasted only for about 20 days during which they could earn

about Rs. 200-300/day. The village still lacked basic amenities like access road, electricity etc. Because of their frugal lifestyle, the total credit needs at Rs. 15,000/annum was lower than other villages closer to the township. The SHGs had taken two more rounds of loans and repaid these. The only heartening news was that many of the women had stopped taking loans from the moneylender since the SHG was able to take care of their annual credit requirements. Extent to which requirements are met The annual credit requirements range from about Rs. 15,000/- in interior villages like Tikikheda to about Rs. 25,000/- in villages, which are more dependent on agriculture. At present the older SHGs (more than 5 years of age), are able to meet about 60-70% of this requirement. It is worth noting that the SHG currently addresses only the short-term credit needs. The long-term needs such as those for building a new house, meeting the expense of marriage etc. are still met through the informal sector. Sometimes SHG funds are partly diverted to cover gaps in these needs. ASA could consider introducing housing loans provided it can mobilize long term funds for such a product line. Repayment of loans through EMI Although ASA has made a concerted bid to initiate a system of EMI, the women in all the SHGs contacted brought up this issue. They felt that they would not be in a position to meet this requirement because of the nature of their cash flows. ASA estimates that more than 60% of the average income comes from cash remittances of migrant labour rather than from agriculture. Since this inflow is not seasonal, it believes that the people would be able to meet the requirement of paying on a monthly basis. The idea of introducing a remittance service (discussed later) may help to smoothen the cash inflows from remittances and in the process make it possible to meet the EMI requirements. Till then ASA may have to look for an intermediate solution, such as repaying the principle amount once in three months in place of six. Convergence between MF and other livelihood programmes Conscious of the need to stimulate investment in natural resources and agricultural technology, ASA has initiated some work with a skeletal NRM team of five. Microwatershed development has been carried out in 14 villages, covering 5700 ha of land. ASA has also been declared the nodal agency for implementing NREGA in the district. However, it is clear that ASA alone cannot hope to make the kind of investments needed to improve the natural resource base in the district. It is heartening to note that the MP state government has started investing in infrastructure and NRM in the district through various schemes. The total investment of NRM related projects during 2007-08, was INR 2228.67 million (see Table 8 of Annexure 2 for details).

In addition, ASA is contemplating introducing Participatory Varietal Selection and Promotion, which would add to the productivity of agriculture by at least 20-25 %. It is further contemplating a role for the federations in supply of quality inputs at a cheaper rate, through aggregation of demand. Once these measures are in place, and the conceptual triangle discussed in Figure 1 is completed, the tribal population of Jhabua would experience an economic lift that would be large enough to make an impact on distress migration. 5.0 Performance of MFI

As mentioned earlier currently the MFI is housed in ASA and does not have a separate identity. In due course it would be hived out as a NBFC. In March 2008 the ASA-MFI complete one year of operations. Its balance sheet and Profit and Loss Statements are shown in Appendix 3. Given the fact that it is in its first year of operation, the MFI has done fairly well on portfolio quality, efficiency, productivity profitability and sustainability as shown by the financial indicators below. The indicators are in the form of ratios calculated by ASA-MFI with the help of software provided by FWWB (see Table 4). The benchmark standards of performance are also taken from the same source. Financial indicators Portfolio Quality As on 31st March 2008 the Portfolio at Risk (PAR) ratio was 1.17%. Ideally this should be zero. On discussion with the Manager of the MFI, it was learnt that although the PAR was at that level at that point in time, by end of June 08 the arrears greater than 30 days had been brought down to 0.45 lakhs and the PAR ratio had consequently come down to 0.003%, which is very close to the ideal situation. So far ASA micro-finance programme has not written off any bad debts. The policy for bad debt has recently been formulated (please see Annexure 4). Efficiency There are three ratios related to administrative efficiency viz PCR, ACR and total ACR. On all these indicators the ratios are below the benchmark levels signifying very high efficiency levels. The personnel cost when compared to industry norms is lower perhaps because a cadre of local youth has been prepared. This cost is borne largely by the Federations of the SHGs themselves. Even the MFI currently runs on a skeleton staff of one Manager and one accountant. The administrative costs are kept low through decentralized operations and a well-oiled monitoring and follow-up machinery.

Table 4 Ratio Analysis ASA-MFI (31st March 2008)

Sl N

Name and type of ratio Portfolio Quality 1 PAR Portfolio At Risk 2 3 4 Efficiency PCR Personnel Cost Ratio ACR Administrative Cost Ratio Total ACR Total Administrative cost Cost Ratio FCR Financial Cost Ratio OCR Operating Cost Ratio YOP Yield On Portfolio Yield to APR

Calculations Port O/S for Arrears > 30 Days Gross Loan Portfolio O/S Personnel cost Average Loan Portfolio O/S Administrative cost Average Loan Portfolio O/S Total Administrative cost Average Loan Portfolio O/S Financial Cost Average Loan Portfolio O/S Total Operating cost Average Loan Portfolio O/S Total Operating revenue Average Loan Portfolio O/S YOP Annual percentage rate ( APR) Active clients Loan Officers Active clients Members Total Income Total Assets Net-worth Risk weighted assets Gross Revenue from operations Principal + Interest Paid /payable to financial agencies Total Income ( gross income ) Total Operating cost Operating Income Operating Costs + Loan Loss Provisions +Financing Costs

Rs. Lacks 1.49 126.96 3.50 95.41 1.80 95.41 5.30 95.41 14.49 95.41 19.79 95.41 20.77 95.41 21.77 13.00

Ratio 1.17

Bench Mark 0%

3.67 1.89 5.55

6-8 % 4-6% 10 -15 %

5 6 7 8

15.19 20.74 21.77 167.45

( = < , CRL ) 20-25 % (= APR) > 90

Productivity 9 Productivity Ratio 10 Active client /Members Ratio Profitability 11 ROA Return on Assets / Investments Sustainability 12 CAR Capital Adequacy Ratio 13 DSCR Debt service Coverage Ratio 14 OSS Operational Self Sufficiency 15 FSS Financial Self Sufficiency

6,288 571.64 11 6,288 48.84 12,876 21.53 17.79 120.96 0.00 0.00 135.64 144.49 168.74 85.63 21.42 108.24 19.79 21.53 101.6 21.18

500 100

20 > 40

>100 > 100

Another set of ratios is to do with financial and operating costs. The Financial Cost Ratio (FCR) should ideally be equal to the commercial rate of lending which is currently around 13%. The FCR for the ASA-MFI is 15.13%, which is somewhat on the higher side. This can be attributed the high cost of capital which is expected to come down in

the coming years. The OCR ratio is 20.74%, which is comparable to the best in the industry. A third set of ratios is to do with yield. The Yield on Portfolio ratio should ideally be equal to the Annual Percentage Rate (APR), which is 24%. In the case of ASA-MFI the ratio is 21.77, which falls slightly short of the ideal. Productivity The productivity ratio represents the number of active clients served by a loan officer. Ideally this should be greater than 500 clients per officer. In the case of ASA the number of clients served is much higher at 572. The active client to members ratio was rather low at less than 50%. Ideally it should have been 100%. This being the first year of operation the MFI was short of funds and was unable to reach out to all active members. By the coming financial year it expects to cover all its active members. Profitability An indicator of how profitable the proposition is relative to its total assets, Return on Assets (ROA) gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing annual earnings by its total assets (loans provided to SHGs in the present context) ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". No benchmark has been assigned but any return above 10% can be termed as satisfactory considering that the purpose of the MFI is not to make profit for its owners/ shareholders, as is the case with commercial ventures. However, it becomes important to remain profitable if it has to survive in the market place and attract funds from financial institutions. ASA MFIs ROA has been computed as 17.79%, which can be considered satisfactory. Sustainability The Capital Adequacy Ratio (CAR) is zero in the case of ASA-MFI because no capital is infused. Looking at this ratio will become meaningful only after the MFI has been registered as an independent organization and has its own net-worth (Capital) in the form of equity. Debt Service Coverage Ratio (DSCR) is a widely used indicator, which measures an income producing asset's ability to cover the payments. Annual debt service equals the total of all interest and principal paid for all loans on an asset. A ratio of less than 1 indicates that the income generated by asset is insufficient to cover the repayments and operating expenses. For example, a DSCR of 0.9 indicates a negative income. There is only enough income available after paying operating expenses to pay 90% of the repayments or debt service. In ASAs case it is 1.69 or in percentage terms it is 168.74%, i.e., enough income is available after paying operating expenses to pay off the repayments or debt service.

The Operational Self-sufficiency ratio is again health at 108%. Ideally it should be more than 100%. This once again is an indication of the good operating systems and frugal use of resources. Financial Self-Sufficiency is an important measure of sustainability for lending operations. It shows the ability of an institution to be fully sustainable by covering all operating and financial costs. Financial Self-Sufficiency indicates whether or not enough revenue has been earned to cover direct costs - including financing costs, provisions for loan losses, and operating expenses In the case of ASA-MFI the ratio is computed as 101.6 % which indicates that the operating income is just about enough to cover the operating costs, provisions made for bad debt and cost of finance. Mobilisation of funds During its first year of operation, the MFI has successfully raised funds from the market thereby releasing the credit crunch for its members to a great extent (see Table 5). As the table shows, INR 12.0 million was borrowed from different banks while an additional INR 7.6 million (shown as HDFC bank managed funds) was routed through the MFI. In this case the Bank provides loans in the name of specific SHGs while the MFI disburses the loan. For its services the MFI gets a commission of 2%. Table 5: Funds mobilized by MFI Financial Agency ICICI Bank FWWB HDFC Bank HDFC Bank Managed funds Total funds mobilized Weighted average rate of interest of borrowed funds Amount borrowed (m INR) 5.00 2.50 5.00 7.60. 20.10 Rate of Interest 14.0 % 11.5 % 13.50 % NA 13.3 %

The weighted average rate of interest on borrowed funds comes to 13.3%. Hence, the cost of capital remains a major issue. ASA is exploring the possibility of borrowing from other sources at lower interest rates. SIDBI provides loans at 10% rate of interest, however it needs a minimum scale of operations, which would be in the order of INR 20-30 m. It also takes a lot of time for processing applications. ASAs application has been lying with SIDBI for over a year now. Another prospective source is Rashtriya Mahila Kosh (RMK) a scheme of the Ministry of Women and Child Development. Under the scheme, loans at 8.5% interest can be availed for a period of one year only. Applications would have to be made every year in order to maintain a flow of credit. During the forthcoming year, ASA hopes to mobilize loans in the order of INR 75 million so as to cover all its active members with their annual credit needs. Achieving

scale of operations is also key in reducing the administrative and operating costs. Registering the MFI as an NBFC will now become a necessity because unless the MFI has net-worth of its own most FIs will not be forthcoming with loans. Another step that the MFI could take to improve its credibility in the market is to get an ISO or a MCRIL certification. Future Plans Apart from mobilizing more funds so as to achieve economics of scale, ASA-MFI is also considering diversifying its portfolio of products and services. It has made a beginning with micro-insurance. Another potential area is that of setting up a service of remittances so that the migrant labour can send home their hard earned money in an easy, safe and cost-effective way. Such a service would be extremely useful for both the migrant families which constitute about 65% of the population in the district, as well as for the MFI since flow of income would facilitate timely payments of EMIs. The prior experience of ADHIKAR (Shramik Sahjog) in Orissa would help ASA in designing a similar programme for Jhabua. The organization has remitted more than INR 150 million till date and disburses 41650 remittances covering 416 villages in three districts of Orissa (Bhoi, n.d)3. ASA is also considering the idea of replicating its model in other districts of MP. The major constraint seems to be availability of trained manpower. It plans to tackle this issue by setting up its own Training Center for Microfinance as discussed earlier under the section on Capacity Building. 6.0 Conclusions and Recommendations

ASAs micro-finance programme that began in 1998 has evolved over the years and grown to cover more than 12,000 families. The programme has spread beyond Jhabua to four other districts in MP where ASA has a presence. Presently, ASA is able to meet the credit requirements of only about 5000 families. There is a need to increase this volume and to increase the borrower base as well, which would help also to reduce the operating expenses and the ultimate cost of capital to the borrower. ASAs approach to microfinance stresses a revenue model wherein the operating costs are absorbed by the federations themselves. Each federation needs financial assistance for an approximate period of 18 months after which the expenses get covered from the fees generated for the services provided by it. The model as such is replicable, provided donors are willing to finance the initial period of 18 months. The present project has helped to improve the flow of credit with the formation of MFI, housed presently at ASA. After completing one year of financial operations, the MFIs performance indicators have shown healthy signs on all aspects including quality of portfolio, efficiency, productivity, profitability and sustainability. Given its ambitious
3

Bhoi Rajendra Kumar, Domestic Money Remittance and Micro-finance: Prospects and Challenges, Adhikar, u. d.

plans to expand further there is a clear case for the MFI to be registered as an NBFC. ASA may also consider getting ISO or MCRIL certification as this would enhance its credibility in the market and help in accessing funds. The steps taken by ASA in Jhabua to initiate NRM related activities as well as providing technological and marketing inputs following an area approach to development are in the right direction and need to be strengthened. The state governments plans to invest in infrastructure and natural resource development in the district are timely and needs to be supported. The feasibility of a remittance service for migrant workers needs to be studied as it could greatly help the MF programme while providing timely cash in the hands of the dependants of the family. One of the constraints for upscaling the programme is trained manpower. ASA is contemplating establishing a MF training center in order to meet this requirement. This seems to be an idea worthy of consideration, especially in lieu of the state governments plans for establishing SHGs of its own in a big way. The institute could meet its annual expenditure from the services provided to government. A feasibility study should be carried out before taking a decision.

Annexure 1 Terms of Reference Consulting Agreement between Action for Social Advancement (ASA) and Dr. Astad Pastakia for conducting impact assessment study of Micro Finance programme of ASA supported by Paul Hamlyn Foundation, U.K in the Jhabua district of Madhya Pradesh (India) This contractual agreement is entered into, between Action for Social Advancement (herein after called ASA) E-5 A, Girish Kunj, Arera Colony, Bhopal-462016, Madhya Pradesh (India) and Dr. Astad Pastakia, A-1, Satellite Apartments, Satellite Road, Jodhpur Char Rasta, Ahmedabad 390015, India, herein after called, the Consultant. Background 1. ASA with the support from Paul Hamlyn Foundation, U.K. has been implementing a SHG based micro finance project in Jhabua district of M.P. The first project support was received during January 2003 to December 2005 ans was for two districts Jhabua in the strate of Madhya Pradesh & Dahod in the state of Gujrat and the second has strarted from January 2005 and shall last in December 2008 and is being implemented in Jhabua district of Madhya Pradesh. 2. Jhabua is located within western central India one of the most climatically and geographically challenging regions of the country. The area is predominantly tribal (Bhil tribe) and is the home of over 2.5 million people, directly dependent on a rapidly degrading natural resource base for livelihoods. The primary occupation is agriculture; the production of food crops for subsistence dominates agriculture. A growing population is mounting pressure on the rapidly degrading natural resource base, which faces extensive deforestation, soil erosion and declining agricultural productivity. This coupled with a lack of social and physical capacity with which to use the available assets/ means that tribal communities struggle for an existence based on highly insecure livelihood strategies. The livelihood of Bhil is traditionally focussed on household food provision, growing staples on small plots of sloping non-irrigated land. However, with most of the households unable to meet their food needs for more than six months in a year, seasonal and long-term borrowing from local moneylenders - at exorbitant interest rates (120 to150%) - is the norm. Approximately 70 to 80% of people migrate seasonally to the nearby cities for an average period of 6-8 months in a year, mostly as casual unskilled labourer to supplement agriculture income.

3. ASA has been operating in the area since 1996 and Micro finance has been one of the central programmes adopted for the area since year 2003, with the support from Paul Hamlyn Foundation. 4. The outputs of the project as envisaged are:

Formation of additional 1600 new SHGs in 05 development blocks (subdistricts) of Jhabua, M.P. By the end of the current project it is expected that the project has developed at least 750 SHGs spread over in 5 blocks of Jhabua. The project is already operational in 07 blocks of Jhabua (namely Jobat, Udaigarh, Ranapur, Meghnagar, Jhabua, Thandla and Petlawad) Through an internal study the potential of formation of SHGs in the present operational blocks of Jhabua is estimated to be 3500, considering 60% coverage of the total households of the blocks. Hence, the expansion of the project in the extended phase will be within the existing blocks with coverage of more number of villages and households. Setting up of an alternative credit refinancing mechanism for steady flow of credit to the SHGs, due to their own limitations of banks.The most feasible option is setting up of a Micro Finance Institution (MFI) by ASA, which will receive bulk loan from the Financial Institutions (FIs) and on lend to SHGs through the federations. Role of federations shall be as intermediary. Formation of 2 new Block level federations. The project has so far formed 3 federations and the process for formation of two more Federation is going on for Thandla & Jhabua blocks which will come into existence by Agust 2008. Hence, by the end of the current project there will be 5 federations. Provision of micro insurance facilities to the SHGs. In the proposed project it is envisaged to extend this facility to the SHG members. The project will help in building tie up between SHGs through the federations and the insurance companies to extend this facility to the members of SHGs. There will no additional cost to the project. Provision of Capacity building inputs. The capacity building inputs like training, exposure visits and awareness building will be conducted for: SHG office bearers. Federation members and office bearers for all the old and new federations will be the recipient of training inputs of the project. Group workers, Supervisors and Data operators Project staff including the Project coordinator, block coordinators, Loan Officers, Data operators, MIS coordinator, Finance mangers, and support staff .

Computerised MIS system: The project has developed a computer software in the existing project which is being used currently. However there are certain limitations observed in the software. In the proposed project the present software will be further customised as per the requirement and will be implemented in all the block units. New software will be developed at the MFI level for the financial information management.

A geographic information based information management system will be implemented at the level of Project office in Jhabua for planning and monitoring of the project activities.

Objectives of the study: The study aims at answering the critical questions about the interventions like: Does ASAs model for microfinance workable/feasible? Are its basics correct? With special reference to the quantum of savings by the SHGs, amount of loans received by them are sufficient to come out of the vicious debt cycle and build capital, loan recovery cycle. (iii) Are the federations actually becoming financially independent over time? Is the model replicable on a significantly larger scale? (iv) What are the strategies needed for replication of the model. (v) How to address the issue of skilled staff required for scaling up the operations. (vi) What planning is required to address the issue of skilled staff; (vii) Which institutional framework is required at the ASA-MFI level to tackle the Micro Finance programme? (viii) What are good lessons in the MF sector (especially the institutional structure of the promoting organization) and which can be replicated in case of ASA? To answer the above questions satisfactorily the study needs to do: a. An objective review of the progress of the project against each of the outputs mentioned in the project document. b. Give recommendations/suggestions for the replication of the programme. The suggestive methodology would be: a. Desk review of project documents, progress reports, MF sector institutional model assessment b. Consultation with the Project staff, financial institutions which are lending to ASA-MFI c. Consultation with the SHGs and Federation Office bearers during field visits. Time frame: Field visits & review of documents, discussion - 4 days Report writing and prepration of PPT - 4 days To attend experience sharing workshop - 1 day (i) (ii)

Annexure 2 Tables
Table 1 Block-wise performance of SHGs (as on March 2008) Month-March-08
CHATTA RATLAM BADWANI NAGDA RPUR DISTRICT DISTRICT DISTRICT DISTRIC T Ratlam Rajpur Nagda Bizawar GRAND Block Block Block Block TOTAL 39 4 35 464 51 413 496450 566050 344000 188050 125000 378000 219000 16 14 73 5 68 880 55 825 484450 1913000 1245000 48000 0 1865000 1245000 47 14 13 0 13 155 0 155 56253 5600 5600 5600 5600 0 0 0 7 43 1 42 555 13 542 118500 0 0 0 0 0 0 0 32 1032 260 772 12405 2896 9509 9655463 36381339 21188607 1310315 670606 35071024 20518001 901 303

JHABUA DISTRICT Sr # Particular 1 1.1 1.2 2 2.1 2.2 3 4 4.1 5 5.1 6 6.1 7 8 Jobat Block Jhabua Block 90 33 57 1044 402 642 2563860 10423600 7418400 361400 131900 10062200 7286500 135 28 Meghnagar Block 102 42 60 1463 461 1002 1690453 8215550 3975700 285550 156600 7930000 3819100 190 42 Thandla Block 127 24 103 1335 312 1023 477875 2191250 1436000 0 0 2191250 1436000 74 44 Petlawad Block 41 9 32 533 108 425 477875 562500 452263 0 0 562500 452263 17 13 Ranapur Block(A) 195 79 116 2438 824 1614 477875 5403375 3403250 171500 155000 5231875 3248250 148 25 Ranapur Udaigarh Block (B) Block 27 4 23 338 52 286 477875 888250 442000 12000 12000 876250 430000 23 6 86 23 63 1075 288 787 477875 1315925 764136 154675 58366 1161250 705770 40 22 TOTAL 864 250 614 10351 2777 7574 8499810 33896689 19594007 1068665 540006 32828024 19054001 838 236

Number of SHGs 196 Male Female Members Male Female Savings Loan Outflow 36 160 2126 331 1795 1856122 4896239

Loan Outstanding 1702258 83540 Internal Loan Internal Loan Outstanding 26140 4812699 Bank Loan Bank Loan Outstanding 1676118 SHG Linkage 211 with Bank Village Covered 56

Table 2 Changes in SHG Norms

Norms before MFI Membership: single representation from a family unmarried women discouraged minimum group size 13 membership fee Rs 11/Service charge paid by SHG members < 2 yrs: Rs 75/ annum > 2 yrs: Rs 100/ annum Monthly savings: minimum Rs 30/member/month Eligibility for bank loan minimum group savings Rs 5000/Norms After MFI Membership - inimum group size increased to 15 so as to minimize the chances of group size falling below optimal Service charge - 1st year: Rs. 75/ annum - Second year onwards: Rs. 100/- annum Monthly savings minimum Rs 50/member/month Eligibility for loan - Group becomes eligible for loan from the third month onwards. Initially a loan of Rs. 2000/-member can be given. Later the amount may be raised if the repayment record is good. - Minimum group savings of Rs. 5000/Period of Loan - Norms for bank loans remain the same. - In case of loans taken from ASA-MFI, payment on monthly basis through EMIs Interest rate per annum - same as earlier, but interest calculated on reducing rate basis Other terms of loan - Loan processing fees: @ 2% of loan amount - Security money: @ 10% of loan amount, which is adjusted in the last installment

Period of Loan All loans are currently for a period of one year. Repayment is done on an annual or six-monthly basis. Interest rate per annum simple interest of 24% (normal) simple interest of 36% (in case of default for > 3m) Other terms of loan none

Table 3: Progress of Micro-Insurance Name of the Branch Jhabua Jobat Ranapur Meghnagar Thandla Petlawad Ratlam Ojhar Bizawar Badamalera Total Number of Beneficiaries Jhabua 729 Alirajpur 833 Jhabua 637 Jhabua 593 Jhabua 661 Jhabua 186 Ratlam 339 Badwani 770 Chattarpur 219 Chattarpur 172 5139 District

Figure 4: Economics of a Typical Federation First year Particulars Expenses Centre supervisors' remuneration 5 Federation office over heads NA Total Receipts SHG (Average 12.50 members per SHG) Service fees Unit cost Amount Yearly Amount Particulars Second year Unit cost Amount Yearly Amount

2500 2000

12500 2000

150000 24000 174000

10 NA

2750 2500

27500 2500

330000 30000 360000

75 per member

938

SHG (Average 12.50 members 140625 per SHG)

75 per member

938

178125

SHG (Average 12.50 members per SHG) Total Surplus/Deficit 140625 -33375

100 per member

1250

187500 365625 5625

Table 5-A: Training and Exposure visits for MFI Staff (March 06-April 07)

S. No 1 2 3

Name of participant Rakesh Dhiman All the MF Staff

Trg/workshop / Exposure MIS of MF programme Two days workshop

Duration 3 days 2days 2 days

Dates 16.09.0618.09.06 5.01.076.0107 22nd and 23rd Sept

Conducted by

Venue

ASA-Bhopal ASA-Bhopal ASA ASA Krist Jyoti KendraMeghnagar JIVIKA-Jabalpur

Sanjay Khirwadker, Micro finance Abhradeep Das, programme and Raosaheb Parmer Microfinance Institution. Rakesh Dhiman MIS of MF Programme

3 days

27th Jan-29th ASA Jan-07

DHAN Foundation

Table 5-B: Training of SHGs by ASA staff (March 06-April 07)

For whom S. No (Which group) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 All the existing SHGs of Jhabua Block Group Workers Training One day Training for the SHG leaders SHG Sammelan SHG Sammelan Residential Training SHG Sammelan One day Training for the SHG leaders One day Training for the SHG leaders One day Training for the SHG leaders One day Training for the SHG leaders One day Training for the SHG leaders One day Training for the SHG leaders One day Training for No.of participants M 39 14 3 19 27 7 39 4 11 6 0 11 27 0 F 119 0 25 114 81 31 241 14 19 21 22 31 0 22 ASA' MF Model Accounting System. Loan repyment 1 day 2 days 1 day (Dates) Duration from to.. 22.05.06 16.05.06 to17.05.06 25.07.06 25.07.06 26.07.06 28.07.06 to29.07.06 22.0806 24.08.06 28.08.06 21.09.06 26.09.06 22.09.06 17.10.06 18.10.06 Community Hall- Jhabua Krist Jyoti Kendra-Meghnagar Community Hall- Jobat Community Hall- Meghnagar Community Hall-Jobat Krist Jyoti Kendra-Meghnagar Community Hall-Jhabua Community Hall-Jobat Community Hall-Jobat Training Centre- Pitol Community Hall-Jobat Krist Jyoti Kendra-Meghnagar Training Centre- Pitol Training Centre- Pitol Venue

Trg/workshop on (subject/topic/issue)

ASA' MF Model and Utilization 0of 1 day Loan. ASA' MF Model and Utilization of 2 days Loan. SHG norms, rules & regulations of 2days ASA's Mf Programme. ASA' MF Model SHG norms,rules and regulations SHG norms,rules and regulations Training on Bank loan repayment ASA' MF Model ASA' MF Model Bank Loan Repyment Bank Loan Repyment 1day 1day 1day 1day 1day 1day 1day 1day

the SHG leaders 15 16 17 18 19 20 21 22 23 24 Total One day Training for the SHG leaders One day Training for the SHG leaders SHG Sammelan SHG Sammelan One day Training for the SHG leaders SHG Leadrers Training SHG Leadrers Training SHG Sammelan One day Training for the SHG leaders One day Training for the SHG leaders 0 0 29 47 0 0 0 52 0 0 335 23 29 78 289 34 25 32 178 36 35 1499 ASA' MF Model ASA' MF Model Re formation of Block level Federation Concept of block level federation ASA' MF Model ASA's MF Model 1day 1day 1day 1day 1day 1 day 28.10.06 3.10.06 24.11.06 24.11.06 24.11.06 30.11.06 11.12.06 29.11.06 23.02.07 25.02.07 Krist Jyoti Kendra-Meghnagar Krist Jyoti Kendra-Meghnagar Pitol Training Centere Krist Jyoti Kendra-Meghnagar Community Hall-Jobat Krist Jyoti Kendra-Meghnagar Krist Jyoti Kendra-Meghnagar Community Hall-Jobat Meghnagar Training Centre- Pitol

Role of Leaders & ASA's MF Model 1 day ASA' MF Model and Utilization of Loan. ASA's MF Model HDFC Loan Reapayment 1 day 1 day 1 day

Table 5-C: Exposure visits organized by ASA for new SHGs members (March 09-April 07)
S. No 1 2 3 4 5 6 7 8 9 Total No.of participants M F 0 0 15 21 28 19 17 14 19 133 35 40 27 13 10 29 32 39 51 276 Exposure on (subject/topic/issue) Benefits of MF programme do do do do do do do do Duration (days) One One One One One One One One One Dates 28.11.06 6.12.06 15.12.06 24.12.06 5.02.07 6.02.07 11.02.07 17.02.06 21.02.07 Venue Balwan Chotti (Jhabua Block) Bisalpur (Meghnagar Block) Bisalpur (Meghnagar Block) Sulamohuda(Jhabua Block) Chota Itara(Udaigarh Block) Sewad (Udaigarh Block) Meghnagar (Bisalpur) Bisalpur (Meghnagar Block) Jobat (Jobat Block)

Table 5-D: Training details for Jan 2006- March 2006

Name of event Exposure visit to Dhan Foundation Training to GWs Exposure visit of NABARD representative Cluster level Sammelan Women Sammelan Training to GWs Training to GWs Training to GWs Training to GWs Total Date 27/01/2006 15/02/2006 16/02/06 18/02/06 8/3/06 2/3/06 6/3/06 21/03/06 24/03/06 Duration Venue 7 Madurai 5 Jhabua 2 Jobat 1 Pitol 1 Jhabua 1 Meghnagar 1 Meghnagar 1 Meghnagar 1 Ranapur Host Org. DHAN Foundation ASA ASA ASA ASA ASA ASA ASA ASA # of participant 11 25 2 120 200 17 15 20 18 428

Table 6: Profile of sample villages Sl No. Name of SHG 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Saibaba MBS Ambemata MBS Babadev MBS Puja MBS Nawdurga MBS Sawanmata MBS Sarda MBS Semal MBS Limbda MBS Village Undari Undari Undari Kedawat Bisalpur Bisalpur Bisalpur Bisalpur Bisalpur Meghnagar Meghnagar Meghnagar Meghnagar Ranapur Block Jobat Jobat Jobat Jhabua Meghnagar Gender F F F F F F F F F M F F F Age (Yrs.) >3 >3 >3 >7 >4 >4 >4 >4 >4 >6 >5 >5 >4 Watershed Intervention N N N N N Y Y N N Y N N N

Jai Gurumalik PBS Kalapan Titkimata MBS Sawanmata MBS Vaghaladev MBS

Titkikheda Jhabua Titkikheda Jhabua Titkikheda Jhabua

Table 7 Details of Sample SHGs

Saibaba Members 13 Ambemeta Babadev Puja 14 50 25,500 100% 16 50 48,250 100% 11 100 69,300 100% 6,000 x 1 7,100 x 1 Nawdurga 13 100 (50) 50,990 100% 25,000 x 1 9,000 x 1 25,000 x 3 4,000 x 1 15,000 30,000 75,000 1,30,000 Sawanmata Sarda 13 50 27,680 100% 4,000 x 1 4,000 x 1 4,000 x 1 25,000 39,000 65,000 1,04,000 13 50 24,850 100% Semal 10 50 21,050 100% 4,000 x 4 1,000 x 2 14,000 14,000 55,000 90,000 Limbda 12 50 26,880 100% Jai Gurumalik 10 50 24600 100% 3,000 x 1 1,450 x 13 26,000 50,000 92,420 Titkimata 12 50 34750 100% 2,500 x 2 2,500 x 2 14,400 32,400 60,000 1,20,000 Sawanmata Vaghaladev 11 50 33550 100% 10,000 x 2 10 100 60350 100% 20,000 x 2 5,000 x 2 7,500 x 1 20,000 40,000 80,000 1,50,000 part house, bullock, part marriage, payment to Bania(Money lender) 99%

50 Savings (pm) 42,565 Total Savings. Attendance 100% (last 6 months.) Internal loans Banks loans 16,000 30,000 65,000

16,500 26,000 27,500 52,000 55,000 80,000 1,10,000 1,65,000 22,500 Medical part house, Purchasing Use of Seeds & grass and part treatment and fertilizer. fertilizer. house, bullock, Grass, credit grass, part medical & Purchasing purchasing of grass. part Notra, marriage. payment to bullocks. Bania 100 % 100 % 100 % 100 % 100 % On time 100 % Repayment

14,000 25,000 49,000

20,000 40,000 80,000

24,000 60,000 96,000

14,400 32,400 60,000 1,10,000

Repayment grass, of old debt cow, and goat purchasing buffalo fertilizers and seeds. 100 % 100 %

Purchasing part seeds, house, bullocks seeds, use bullock, part grass, cows, fertilizers, buffalo ,grass part of loan marriage, to flour mill in Notra. payment Bania 99% 99% 99% 99%

Table 8 Expenditure on NRM related Schemes of State Government, in Jhabua District (2007-08) Sr. no 1 2 5 7 8 9 Activities Swarna Jayanti Swarojgar Yojna Rajiv Gandhi Watershed Mission NREGA Backward Region Grant Fund Kapil Dhara Yojna (for digging open wells) Nandan Falodyan Total Total Budget (Rs m) 43.38 217.90 1951.23 188.60 1333.90 142.49 3877.51 Expenditure in (Rs m) 41.25 126.77 1756.79 151.99 147.31 4.56 2228.67

Source: DRDA, Jhabua

Appendix 3 Balance Sheet and Profit and Loss Statements of ASA-MFI

Balance Sheet as at 31st March 2008 HDFC Bank Loan A/C Bank Loan A/c Sundry Creditors Security Deposits of SHGs Zahid Khan Sherwani SHG Insurance Premium Action for Social Advancement Bank Accounts HDFC Bank A/c 062180000016 Excess of Income Over Expenditure 12058456.00 Investments FDRs With ICICI Bank FDRs With HDFC Bank Loans & Advances (Asset) 1155650.00 610.00 32030.00 819399.22 0.00 Cash in Hand SHG Loan 0.00 482.00 12096380.30 527821.00 523311.33

26981.80 34295.08

Bank Accounts ICICI Bank A/c No. 005505006607 State Bank of Indore A/C No. 63021648868 State Bank of Indore A/c No. 63021359036 State Bank of Indore A/c No. 63021434141 State Bank of India A/c No. 30309141393 State Bank of Indore A/c No. 63021754933 State Bank of India A/c No. 63021326088 State Bank of India A/c No. 63023230485 State Bank of India a/c No. 63021326088 State Bank of India A/c No. 63005580022

23688.47 121039.00 23164.00 8853.00 62771.00 152535.00 7952.00 21120.00 40500.00 517805.00 14127422.10

14127422.10 Source: Audited Statement submitted to ASA by A.K.Surana & Associates

Profit and Loss of ASA-MFI

EXPENDITURE AMOUNT (Rs.)
61665.75 63220.00 12500.00 379440.00 152213.00 1449935.96

INCOME

AMOUNT (Rs.)

Bank Charges Stamp Charges Loan processing Fee to HDFC Salary to Staff Misc. Expenses Interest Paid on Bank Loan

Interest Accured on SHG Loan Processing Fees Commission on Loan Interest on Security Deposit Bank Interest Misc. Receipt

1829454.00 211258.00 47679.00 57004.11 5788.00 2086.68

Excess of Income Over Expenditure

34295.08

Total

2153269.79

Total

2153269.79

Source: Audited Statement submitted to ASA by A.K.Surana & Associates

Appendix 4 ASA-MFI Policy for Bad Debts

Bad debts are those loan in which recoveries are not possible or deferred to an indefinite period, such loans can not be termed as assets for the organization, and are transferred to bad debts account. A provision of 2% shall be made in the balance sheet. The period for declaring a loan as bad debt shall be two years from the date of over due for a short term loan. Write off policies. In extreme cases, virtually beyond control of mankind, where all efforts to recover a bad debt is exhausted, to keep the health of the port folio in good condition, because appearance of bad debts in the balance sheet only tarnishes the image of an organization. Bad debts over three years, for which all recourses of recoveries are exhausted, shall be considered for writes off. The power to write off a loan is vested with the director of the organization. He shall make himself satisfied through his own ways before taking any decision in the case. Even after write off of the loan, right to recover the loan is not ceased, it is a mere policy matter and book entry. Borrower should not be made known of the fact. Any subsequent recovery in such account shall be directly booked to income of the organization. Action of write off shall to be ratified by the board of directors of the organization.

About the Author:

Astad Pastakia
Dr. Pastakia is a freelance developmental consultant based at Ahmedabad, India. Born on 3rd January 1955, Dr. Pastakia obtained his Postgraduate Diploma in Management from IIM, Ahmedabad in 1980 and subsequently his Fellowship (doctorate) in Management from the same institute in 1996. He has a graduation in Agricultural Sciences from the G. B. Pant University of Agriculture and Technology, Pantnagar, UP. His dissertation work focused on Grassroots Innovations for Sustainable Development: the Case of Agricultural Pest Management. His thesis proposal received the Best Thesis Proposal Award from IIMA in 1994. The research work led to a paper on grassroots ecopreneurship published in the Journal of Organisational Change Management (1998). The paper which describes the challenges for grassroots innovators in converting ecofriendly innovations into viable enterprises received the Outstanding Paper of the Year Award (1999) from MCB University Press, London. His career spans a decade of developmental work at the grassroots, followed by another decade and half in developmental academics and consultancy. For the past six years he has been working as a freelance consultant in the fields of community based natural resource management and livelihood augmentation. Through documentation and research, he strives to strengthen the hands of developmental workers and their initiatives on one hand and policy makers on the other. During the eighties Dr. Pastakia worked at the grassroots level, facilitating the development and management of community plantations on coastal saline wastelands by the Vankars, a scheduled caste community in a backward region of Gujarat called the Bhal. A two-tier system of cooperatives was established which is being managed autonomously by the people since the early nineties. Six of these cooperatives received jointly, the Priadarshini Vrukshamitra Award from the Ministry of Environment and Forests, Government of India for their pioneering work in the area of community-based tree farming in 1986. This work was carried out through Ahmedabad based NGO called Behavioural Science Center. His research and consultancy work has focused on: common property resource management, sustainable natural resource management, conflicts and conflict resolution processes in community based organisations, innovations and entrepreneurship for sustainable development, rural livelihoods and community based enterpreneurship, environmental Indicators, indicators of institutional sustainability, participatory monitoring and evaluation, farmer-led participatory research etc. He has worked on assignments supported by or in collaboration with Aga Khan Foundation India, World Bank, UNDP, DFID - India, Winrock International India, Royal Haskoning, Paul Hamlyn Foundation, Gujarat Institute of Developmental Research, GEER Foundation, Sir Dorabji Tata Trust etc.

An international consultancy assignment on Participatory Research and Gender Analysis, was carried out in 1998-1999 for CIAT (International Institute for Tropical Agriculture), Columbia, in partnership with Profs. Brij Kothari and Vijay Sherry Chand, of IIMA. The initiative involved facilitating an e-group discussion with over sixty scientists from various International research institutions all over the world. A by-product of the exercise was the publication of an edited volume Farmer-led Participatory Research (Books for Change, 2002) which showcases five examples from western India where scientists have tried to validate and add value to farmers innovations. In another consultancy assignment Research and Capacity Building for Managing Conflicts Around Natural Resources supported by Aga Khan Foundation India (October 2000 November 2001) Dr. Pastakia facilitated the documentation and analysis of conflicts faced by NGOs and CBOs at the grassroots level in Western India. The initiative saw the development of 15 case studies on conflicts around land, water and forests. In the process new methods and tools for analysing conflicts in the context of CBNRM were developed. Review papers on under-researched areas were also commissioned. The outputs have been brought out in the form of a book by Books for Change (2008). He was part of the core group of consultants who helped to institutionalize Participatory Monitoring and Learning systems in three World Bank funded projects in Madhya Pradesh between June 2002 and May 2004. The action research project was supported by World Bank and anchored by Bhopal based NGO, Action for Social Advancement. Currently he is anchoring a project for Development Support Center, Ahmedabad to develop a handbook of strategies on Livelihood Augmentation in Rainfed Areas. The project draws on the experiences of developmental agencies in rainfed regions of six states of India and is being supported by the Aga Khan Foundation, New Delhi. Dr. Pastakia has published over a dozen papers in international and national journals. During the course of his career he had the opportunity to visit a number of countries to participate in international conferences and forums. These include the United States (1990, 1992, 1998), United Kingdom (1999), Germany (1996), Hungary (1996), Switzerland (1996), Costa Rica (1992) and Thailand (2001). This international exposure has also contributed significantly to his perspective on development. Contact Details Permanent Address Phone E-mail Micro-website: C-201, Suryapuja Aparts, B/s Kalasagar Towers, Satellite Road, Jodhpur Char Rasta, Ahmedabad 390015, India. 91-79-26763878 (R); 98790 22484 (M) astadp@gmail.com www.envindia.com/nandck/index.php?/consultant/astad