Published on March 12, 2014
Self Help Groups Economic Empowerment or Easy Credit?
Objectives of the Study Self Help Groups A tool for economic empowerment of women? A way to access cheap and easy credit through women ? OR
What are Self Help Groups? The underlying concept behind Self Help Groups, lies in the answers to the following questions: 1. What is Microfinance? 2. Who are the key players in Microfinance? 3. Why are women pivotal to Microfinance?
What is Microfinance? A poverty alleviation methodology A financial tool to those who are excluded from formal financial institutions due to inability to provide security Clients are essentially the poor, classified according to poverty level as upper poor, poor and very poor. Tools include loans or micro credit, savings and insurance
Objectives of Microfinance Enhance household income Will increase savings Help households manage cash flows Decrease instances of selling assets in time of need .Asset Building Invest in productive assets like cattle or land Build security through purchase of a home Enjoy the convenience of consumer durables
Objectives of Microfinance Reduce vulnerability Prevention against illnesses and malnutrition Access to adequate education Empower women Create more gender equality Enhance their position socially Give voice to their opinions and decisions
Who are the key players? Microfinance providers or MFIs (Microfinance Institutions) are primarily the following: 1. Formal – Development banks, NBFIs, Commercial banks 2. Semi formal – Financial NGOs, Credit Unions, Co- operatives 3. Informal – Rotating savings and credit unions, Self Help Groups Source: www.cgap.org
Mohammad Yunus - Founder, Grameen Bank - 2006 Nobel Peace Prize winner along with Grameen Bank for “their efforts to through microcredit create economic and social development from below” Image from flickr © Shows Grameen Checks produced by rural weavers funded by Grameen Bank and marketed by Grameen Udyog.
Are we pro women? In most poverty ridden countries, what could be worse than being poor? The answer is being a poor woman. It is an unwritten law that in a poor family that when someone has to starve it is invariably the woman of the house.
Are we pro women? Also in most developing countries, the banking system is largely male dominated. This means that if a woman were to approach a bank for a loan (even a woman not living in poverty) she would be asked the following questions: 1. Have you discussed this with your husband? 2. Is he supportive of your decision? 3. Would you please bring your husband so that we can discuss this with him? Source: Banker to the Poor – Mohammad Yunus and Alan Jolis. Penguin (2007)
So, then why lend to women? Poor women adapted quicker and better to microfinance than men. Here’s why: 1. They suffer the most from poverty and therefore are willing to work harder to get out of it. 2. They are attentive to their needs of their children and their own vulnerability, so they strive for financial security 3. They save more regularly than men, and are less likely to spend on short term, non productive uses Source: Banker to the Poor – Mohammad Yunus and Alan Jolis. Penguin (2007)
So, where do SHGs fit in? Self Help Groups are the major form of delivery of microfinance. A SHG is formed when a community of women come together and are supported by a NGO or MFI or some other local initiation. The SHG members decide to make contributions to the group which are banked. The members then borrow individually from the group on terms or rates of interest decided by the members.
PPp MFIs and SHGs 1. The Self Help Group could decide to open a savings account in the groups name in a MFI. 2. Money is deposited in this account which is not immediately required by the Group or to qualify for a loan from the MFI. 3. The MFI grants a loan to the Group which is used to supplement its own funds or lend to members. Supplementary credit Reduce transaction costs and paper work Mobilize savings Build mutual trust and confidence Decrease dependancy on money lenders
Microfinance & Empowerment So what is empowerment to a woman? It is the process by which women take control and ownership of their choices. The core elements of empowerment are: 1. Ability to define ones goals and act on them 2. Awareness of gender power structures 3. Self esteem 4. Self confidence Source: Women’s Empowerment Through Self Help Groups: A Case Study
Microfinance & Empowerment So does Microfinance promote Empowerment amongst women? Microfinance and SHGs have been touted as being a great success story in grassroot empowerment amongst women, whether it is in increasing access to money and higher incomes or in participation at decision making at the familial and community level.
Success Stories Ammajan Amina was one of th first borrowers of the Grameen Bank. A Bangladeshi widow who had lost 4 out of 6 children to and her husband to hunger and disease, she was evicted from her home. In 1976 when the Grameen Bank approached her she was old, illiterate , had never worked a day in her life and was clutching her only surviving daughter in her arms. There was no question of any money lender, let alone a bank giving her a picture. With loans from Grameen, she started making and selling bamboo baskets. She remained a member of Grameen till her last days. Today her daughter is a member of Grameen. Image flickr © The beginning of Grameen Bank, Jobra Source: Banker to the Poor – Mohammad Yunus and Alan Jolis. Penguin (2007)
Success Stories After more than 8 years of borrowing, 57.5% of Grameen borrowers were no “longer poor” Borrowers of Bank Rayat, Indonesia recorded a 112% increase in income and 90% of them graduated from poverty The Consultative Group to Assist the Poor or CGAP has found that microfinance clients suffer less malnutrition, adopt greater use of contraceptives and better breast feeding practices
Validating the Premise Study carried out in 2009 to validate the premise “Does Microfinance promote empowerment amongst women?” By looking at only two aspects of empowerment for women: 1. Are women able to identify their needs and prioritize them? 2. Do they have the ability to take decisions relating to those needs?
Who & Where Women Who are 1. employed in low paying unskilled jobs 2. earning less than minimum wage Living 1.in a low income urban area 2. in south Bangalore. Members of a Self Help Group (30) Not members of a Self Help Group (30)
Collecting Data - Questionnaire The questionnaire covered 5 objectives: 1. Which needs (physiological, safety, children and self actualization) were considered important 2. Could respondents take decisions related to these needs independently 3. Did respondents believe that SHGs could help them fulfill their needs 4. Have respondents fulfilled basic needs and moved on to higher order needs 5. Are there any sources (apart from SHGs) which help respondents fulfill their needs Questionnaire was created and administered by the researcher. 60 respondents were covered.
Findings – Respondents Profile 1. 60% employed as domestic workers 2. 8% were self employed 3. More than half earned between INR 1000 – 3000 per month 3. Self employed respondents were SHG members for around 5 – 7 years 4. 31% of respondents were members of SHG for less than a year 5. Primary reason of joining the SHG was to access cheap credit (as compared to a money lender or a pawn broker) 1. 80% employed as garment workers 2. 3% were self employed 3. 20% earned between INR 1000 – 3000 per month 4. 60% earned between INR 5000 – 7000 per month 5. More than half had completed Class 10 (as compared to 6% of SHG members who had studied up to Class 10) 6. Cleaner and more hygienic living environment (as compared to SHG members) SHG Members Not SHG Members
Findings – Ranking of Needs SHG members Not SHG members Children’s needs (milk, eggs, clothes) Very high Very high Education Very high Very high Equal no of respondents in both categories (45%) stated that educating daughters was critical . SHG members Not SHG members Constructing a latrine Very high Very high For SHG respondents, own latrine was required to avoid using paid public facilities. Non SHG respondents wanted a better latrine or did not want to share their latrine with other residents of their rented accommodation.
Findings – Ranking of Needs SHG members Not SHG members Own house Very high Medium 51% of SHG respondents were living in owned acco, but wanted to renovate existing homes. 74% of non SHG respondents were living in rented acco and were not keen on owning a house. SHG members Not SHG members Jewellery Health Religious ceremonies and pilgrimages Tuitions for children Some needs which ranked very high in each group
Findings – Role of SHGs Less than 1 year* 3 – 5 years* 5- 7 years* Helped in building of latrine Highly effective Highly effective Effective * Duration of SHG members in Self Help Groups Less than 1 year* 3 – 5 years* 5- 7 years* Helped in building or renovation of house Highly effective Highly effective Effective * Duration of SHG members in Self Help Groups
Findings – Role of SHGs Less than 1 year* 3 – 5 years* 5- 7 years* Education of children Effective Effective Effective * Duration of SHG members in Self Help Groups Less than 1 year* 3 – 5 years* 5- 7 years* Milk/eggs for children Less effective Less effective Less effective * Duration of SHG members in Self Help Groups
Findings – Role of SHGs Less than 1 year* 3 – 5 years* 5- 7 years* Purchase of clothes and jewellery Effective Less effective Less effective * Duration of SHG members in Self Help Groups Less than 1 year* 3 – 5 years* 5- 7 years* Purchase of gas stove Highly effective Highly effective Highly effective * Duration of SHG members in Self Help Groups
Findings – Decision Making Construction of latrine: Poor decision making ability Non SHG: 54% SHG: 42% Building/renovation of house Poor decision making ability SHG: 56% Non SHG: 43%
Findings – Decision Making Education of sons: Average decision making ability SHG: 22% Non SHG: 40% Education of daughters: Good decision making ability Non SHG: 22% SHG: 34%
Findings – Decision Making Purchase of milk and eggs: Average decision making ability Non SHG: 14% SHG: 19% Purchase of apparel for self and children: Good decision making ability Non SHG: 26% SHG: 36%
Findings – Decision Making Number and nature of jobs: Good decision making ability SHG: 61% Non SHG: 69% Changing of jobs: Good decision making ability SHG: 58% Non SHG: 66%
Findings – Decision Making of SHG members 67% of SHG members said they independently decided to become members of a SHG 61% of SHG members stated they could independently decide on how much to save with the SHG 58% of SHG members said that they could not independently decide on borrowing from the SHG 45% of SHG members said they felt compelled to take loans from the SHG on behalf of their spouse
Conclusions Self employment or entrepreneurship 1. Self employment among SHG members was minimal to non existent 2. Monthly income of those SHG members who were self employed was around INR 3000 p.m. 3. SHG members who were self employed did not begin their enterprises due to Intervention or aid from SHG 4. SHG operating in the area had its primary focus as lending money for purposes of construction of houses
Conclusions Shelter 1. SHG’s primary focus was to provide shelter 2. Shelter was the highest ranking need among SHG members 3. SHGs accorded priority in disbursing loans for construction of houses to those members who owned land to construct house 3. As a result, loans were largely disbursed to those members who were living in own accomodation; loans were used for renovation of homes 4. Some of the homes renovated were already in good condition; renovations covered extension or construction of additional floors
Conclusions SHG membership 1. 31% of SHG respondents have been members for less than a year 2. 36% of SHG respondents have been members between 3 – 5 years 3. SHGs seen as effective in meeting needs like construction of house and latrine, not so much other needs 4. 56% of SHG respondents saw SHGs as a means to secure additional finances 5. However, SHG members were still reaching out to other informal sources like money lenders (19%) and pawn brokers (11%) (still less than non SHG respondents)
Effectiveness of SHG - analysis SHGs policy of lending is not inclusive. As many SHG respondents stated, when they do not have the resources to meet basic needs, how can they buy land? SHG dependant on banks for credit slowing down the pace at which loans were being disbursed to members Researcher’s point of view: “The SHG is functioning along the lines of commercial banks by making distinctions between those who are credit worthy and those who are not. The slow pace of loan disbursement also means that there has been no significant improvement in quality of life of SHG respondents”
Effectiveness of SHG - analysis Significant percentage of SHG respondents have been members for more than 3 years, but have not received aid to build houses Many SHG members do not have own latrines and are forced to use public toilets which have poor hygiene and lack privacy Researcher’s point of view: “The SHG has not focused on skill building or alternate sources of income for its members. They have inadvertently built dependence amongst members on credit. This is not empowering for a majority of its members.”
Effectiveness of SHG - analysis SHG respondents who wanted loans for extension or renovation of homes were peeved that the SHG had not yet disbursed their loans The priorities of those members who had more critical needs was not given due credence by the more “fortunate” members of the SHG Researcher’s point of view: “The SHG has not fostered empathy amongst its members. The collective or group formation should empower women as it allows them to meet others with similar problems and discuss redressal mecahnisms. Hierarchies within the group between those who meet eligibity criteria versus those who don’t, does not create the right foundation for empowerment. So there is limited hope of these women taking on larger issues like gender/class/caste disparity”
Effectiveness of SHG - analysis 17 % of SHG respondents believed in putting aside money for the future. However, savings were made in chit funds and not through SHGs 31% of non SHG respondents claimed to be saving money for contingencies Researcher’s point of view: “The SHG has not created avenues for saving. Economic empowerment cannot be achieved without creating the awareness, infrastructure and opportunity to mobilize savings, particularly for women as vulnerable as those covered in this study.”
Effectiveness of SHG - analysis Health was not a priority for many SHG respondents, as compared to non SHG respondents who were conscious about saving money to meet health contingencies 46% of SHG respondents stated that the SHG would not be able to meet medical expenses of themselves or their family Researcher’s point of view: “The SHG needs to move beyond the role of credit providers for specific needs and begin looking at factors which increase vulnerability.”
Validating the premise – Factor 1 Ability to be aware of and prioritize one’s needs 1. Respondents in both groups prioritized were able to identify, prioritize and articulate needs 2. Well being of children, home and hygiene ranked very high in both groups of respondents 3. No difference noted between the two groups in this area
Validating the premise – Factor 2 Ability to take decisions on prioritized needs 1. Respondents in both groups had poor decision making ability with regard to construction of house and latrine 2. Non SHG respondents had better decision making ability in relation to spending on one’s health and well being and household decisions like installing a gas stove 3. Non SHG respondents had better decision making ability in relation to matters of employment like nature of jobs, changing of jobs etc
Validating the premise – Factor 2 Ability to take decisions on prioritized needs 4. SHG respondents had better decision making ability in relation to membership (should I join or not?) and amount of money to deposit with SHG 5. However, more than half stated that they could not independently decide to take loans from the SHG. Spousal permission was a pre requisite 6. 39% of SHG respondents stated that they had taken loans from the SHG on the behest of their spouse even in situations where it was not required
Recommendations 1. Integrate notions of empowerment – those of beneficiaries of SHGs and those of organizations supporting SHGs 2. Create lending rules based on needs of respondents. Eg, needs which require immediate redressal, constraints which prevent women from meeting needs like availability of land 3. Identify attitude of community in lending support to SHG members. Eg, will the men be threatened or will women require spousal approval to borrow or save
Recommendations 4. Educate SHG members on what more a SHG can do for them. Eg, empowering them to take decisions for themselves, become self reliant, improve their standing in the community 5. Involve men by educating them about the SHGs philosophy so that it is not seen as exclusionary. Create understanding that by investing in income generating assets for women and prioritizing their needs, household responsibility can be shared 6. Use SHGs as a space for women to look beyond income and share their life experiences. Allow democracy by giving members the freedom to formulate their own rules
“When a destitute mother starts earning an income, her dreams of success invariably center around her children. A woman's second priority is the household. She wants to buy utensils, build a stronger roof, or find a bed for herself and her family. A man has an entirely different set of priorities. When a destitute father earns extra income, he focuses more attention on himself. Thus money entering a household through a woman brings more benefits to the family as a whole.” - Muhammad Yunus
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