Self-help groups
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A savings and credit self-help group (SHG) promoted by PRADAN is an informal association of 10 to 20 socio-economically homogeneous, poor women from a single village or hamlet, who meet regularly to transact the business of savings and credit. About 15 mature SHGs in a geographically contiguous area form a cluster. The cluster is a forum for cross learning, inter-group problem solving and solidarity.
Credit is a key input for livelihood promotion and SHGs are a potentially powerful vehicle to mobilise credit from bank.Savings and credit is in itself a useful livelihood enhancing service for very poor people, and it has proven to be a highly effective way to organise women for livelihood promotion as well as broader social and political empowerment.
Most NGOs incuding PRADAN develops SHGs as independent community based associations that would be able to leverage credit from banks without its continuous support and supervision. The SHG is also a platform through which NGOs can assist poor women take up economic activities to improve their livelihoods. Inidan NGOs continued to promote SHGs during the year to expand the outreach of each project team so that in each project location there would be at least 250 to 300 SHGs to work with in a compact area.
Step by step methodology:
The following step-by-step methodology has been developed over time:
Promoting SHGs as Mutual Aid Associations: A SHG begins as a mutual aid association of poor women with similar social and existential contexts, brought together by PRADAN staff through well-developed PRA techniques. Through weekly meetings, and well-documented methodologies, NGO staff helps members decide rules of business and gain experience of functioning as a group. A local person is identified and paid by the SHG and trained by the NGO, through standardised training modules, to maintain accounts. Pooling their tiny savings, poor women meet their need for small loans to mitigate dire emergencies with dignity. Willingness and the need to participate, mutual trust, mechanisms to reinforce trust (such as a transparent and sound accounting system), equality, and rational and participatory decision making together ensure the success of such a mutual aid association.
Developing SHGs as Financial Intermediaries: As SHG experience across the country shows, such mutual aid alone does not lead to the removal of economic poverty. To make a significant impact on members' lives SHGs need to be able to leverage larger resources from banks to enable members to create viable income earning assets. The key difference between a mutual aid association and a financial intermediary is, thus, the inclusion of the banker, a third party, as a stakeholder. As members cannot offer collateral to leverage credit, a SHG has to be accepted by banks as "social collateral". It follows that SHG processes must be truly such that the group can reduce risks for the external lender, protecting them against adverse selection and moral hazard, besides reducing transaction costs (which a group automatically does when it is capable of absorbing decent sized loans). Internal group processes need also to be so well developed that the SHG can intermediate between individual members and lenders, without help and monitoring support of the promoter or the lender. Developing SHGs with such a perspective requires higher order process inputs. It is inadequate to look only at hygiene factors (such as attendance, regularity of meetings, democracy, leadership, regularity of savings repayment track record and book keeping). For that, groups must learn and adopt processes to enforce contracts and fend off irrational demands from members. They must understand the imperatives of the banking business, and tailor their behaviour to inspire confidence in a banker. This would require the SHG to ensure proper appraisal and selection of loans, and enforce contracts. Members must also learn to challenge and critique each other and use information acquired through affinity for the larger good of the group. Finally groups must develop capabilities, including by forming secondary and tertiary levels of federations to effectively negotiate with banks. These capabilities are more complex than those necessary to function as a mutual aid association.
Livelihood Planning: Prior to leveraging large scale credit members need to develop livelihood plans. In our experience, members of SHGs are by and large unable to come up with concrete livelihood plans that they would take up if credit were freely available. This is particularly in the case of the less developed and less monetised economies. Group members need to be helped to develop a vision of where they would like to reach, given their contexts and the opportunities available to them. This calls for a degree of behavioural transformation to develop a vision, set goals and assess one's risk threshold. Combining PRA techniques of livelihood and resource mapping, achievement motivation training, and area planning and visioning exercises, PRADAN has developed methodologies to help members set medium term livelihood goals for themselves, identify gaps, chart out concrete livelihood plans, estimate credit and technical assistance needs. These are integrated into pictorial diaries for members and groups, used for livelihood planning, as well as monitoring of progress at group and individual level.
Sectoral Interventions: From experience so far we find that the livelihood plans generated by SHG members cluster into a few sub-sectors with some outliers. Rarely do ready made economic opportunities exist in the poverty belt , for poor people to exploit simply with the aid of credit. There are always missing links that poor people on their own cannot build. Implementing these plans requires skill training, organisation for input and outs linkages, and access to technical services. Drawing on its extensive sub-sectoral experience, NGO staff further studies a particular sub-sector to sharpen strategies and intervention; organises exposure and training programmes, trains community based service providers (such as pump operators, suppliers of critical inputs, etc.) selected by the SHG members; promotes producers associations where necessary; develops service linkages; and leverages missing inputs from public agencies. A degree of experimentation is sometimes required to ground a technical or organisational idea locally.
To understand more visit www.pradan.net or www.nabard.org
