The Good, Bad And Ugly Of Micro-finance in Uttar Pradesh

SHGs gives these women a more inclusive space to voice their opinion

The people know what is best for them, rather than the government or any external social organization. Their biggest hurdle in solving these issues though is access to capital. This idea was at the heart of Self Help Group (SHG) model. It started through the work of Dr. Mohammad Yunus, when he set up the Grameen Bank in Bangladesh. During this year as an India Fellow with Shramik Bharti (SB), I got a chance to work with an SHG Federation, Chetna Mahila Samiti (CMS) and witness the impact it has on the ground. The federation has around 200 SHGs divided into sub-clusters.

The basic idea behind the SHG model is to provide the credit access to women from economically weaker sections. It can be for various purposes – ranging from personal loans to setting up a business for better livelihoods.

This has a lot of ripple effects – including positive shifts in empowerment levels and hence gender status in our society. Once the SHGs are established, they evolve into federations for inter-loaning, availability of larger amounts of capital and effective management. All this turns it into a more potent weapon of social development. Some of the SHGs of CMS, which are 8-10 years old now, have an accumulated capital ranging from Rs. 2 to 4.5 lakhs.

Devi*, an SHG member said – “I wish if this group could become our own nationalized bank”. This is a common feeling across many communities who have been a part of and benefited from SHGs. These woman, who never had access to even a single rupee of credit other than from exploitative sources, are operating a small bank of their own.

Apart from the obvious financial benefits, through the years, SHGs have created a bigger impact. They have been powerful in the evolution of personality of women as well as the social perceptions of their whole family.

“In the beginning we were scared of sitting in a group in the open. Now when we look back, we take part in discussions confidently and can give a befitting reply”

A member of the Bhim Baba SHG

Their initial mindset is reflective of how women are constantly nurtured in such a way to remain inside the house. As a result, they get frightened with the idea of their inclusion in the so called “समाज“. But the creation of SHGs, created a safe space for them to exist and belong outside the house too. Much more than just an immediate impact there is a more sustainable and inter-generational effect too. Usually mothers pass on their fears and perceptions to the daughters. As they grow up into adults, this deep conditioning becomes their nature. It is here that the SHGs have played a key role.

During one of my interactions with Kamala ji*, one of the senior most members of CMS, she said, “inititally, it was very difficult to be a part of the SHG as my husband and mother-in-law used to restrain me from going out for meetings and awareness campaigns. I used to go secretly and on being caught, face violence. But the idea of being a part of something bigger, excited me for real and kept me going. Slowly, family members understood and now they support me.” After listening to this, I asked this mother of a boy and a girl, “Has your attitude towards your daughter / daughter-in-law changed?”, to which she replied:

“It would have been the same, just like my mother-in-law but after the SHG, when we formed the federation, I saw its impact. In fact, now I would urge them to go out for jobs if they wish to.”

Kamala ji, explaining how her mindset shifted

SHG has not only made an impact in Kamala ji’s life, but also in the lives of her daughter and son by setting an example. Coming back to the importance of credit linkage in SHGs, I believe that it is only through the promise of financial independence that social liberation can even be imagined for communities which are constantly thinking about how to make ends meet. The poor are not un-intelligent. They are resource crunched and managing the dance around an unpredictable cashflow can have severe impact on cognitive abilities. Read – How Poverty Affects The Brain And Behaviour.

The SHG Federation model helps them ease out this stress and in its wake, bring in a wave of economic and subsequently social empowerment.

The terms ‘social cause’ or ‘social work’ have lost its sheen in the recent times. Whenever a person claims their conduct is associated with the above, the society looks towards them with suspicion, that they are motivated by vested interests. Similarly, another word trending in the same direction is ‘loan’. It frightens many and excites others but everyone vies for it this way or that. Loans play a crucial role in rural economy, and this is also one of the main purposes of establishing SHGs in many rural communities. But loans are considered to be a double edged sword. While loans help those who use the amount in a planned way and earn high return on investment, its a debt trap for those who default from re-paying it. There is also a larger effect on the entire SHG. In the communities we work with, in Kanpur Dehat, SHGs are marred by loan defaulters. As the number of defaulters increases, the circulation of money within the group reduces and it hits the group where it hurts the most. We educate people more about how to use the loan amount effectively or when to opt for loans. 

Still at times, things don’t go as planned and one defaults. Should the defaulter be forced to pay at any cost or his/her belongings be acquired till the amount is repaid? Is that the right way? This question is quite relevant, especially for a lot of us who associate ourselves with the word social work.

 A few years ago RangDe, a Micro Finance Institution, entered into an agreement with Shramik Bharti and CMS. The responsibility of distribution and recovery was placed on CMS. In the initial years, transactions were smooth but now, money has been stuck with defaulters. CMS persuades these defaulters, to repay these loans along with a fine for delaying payment, through home visits and one on one conversations. Through these conversations, it was found that a substantial number of people did not invest money in revenue generating activities but they spent it on household consumption expenses like health bills. This made us question if we are punishing these people because they experienced unexpected emergencies. Are we pushing them further into poverty? But there is an interesting layer of nuance to this.  

Just like in any part of India, private finance companies are also operating  in this area, and naturally a lot of members from CMS also took loans from these institutions. But about 90% of the people who are defaulters with CMS were able to pay regularly to the finance companies. The reason behind this pattern is that the rules of such companies are way more stringent and strict. In contrast to this, the empathizing attitude and leniency of CMS resulted in people taking advantage and not repaying their loans. Is keeping the context of individuals in mind, leading to the demise of SHG movement? 

The community, overtime, has come to the conclusion that repayment of loans is must and they should be persuaded towards it as it helps in building their financial credibility, or else the group will slowly cripple down and be defunct. The constant pressure of giving back keeps the person going. But there is a realization that the pressure shouldn’t reach a level where the person gets crushed. This is where the balance and policy level changes are required. Regulations like loan waivers and other subsidies can help. 

So, is it justified to pressurize them to repay despite the condition they are in? This question, when looked at just the micro community level, is easier to answer. But when you zoom out and look at this situation considering additional information and all the stakeholders, answering this question becomes challenging. From lack of access to affordable health systems to low prices for crops, high input costs and other sociopolitical factors, these communities are always under pressure. This pressure only adds on to it … how long will they hold up?

*Names changed to protect identity