When I first got to know about being placed at Shram Sarathi for my fellowship year, I was pleasantly surprised. Wanting to work at the intersection of finance and development, this was like a dream come true. It was also like coming back to a point where I had started my journey of exploring and understanding the development sector, but this time to see it in action.
My journey started a few years back with reading the book “Banker to the Poor” by Nobel Laureate Muhammad Yunus – a story about the evolution of microfinance and how it can change the world. I was amazed at how almost five decades since its start, microfinance was still as relevant and there’s more to discover about it.
With Shram Sarathi, I am placed in Gogunda town of Udaipur district. The organization works with migrant families from the tribal belts in and around Udaipur district in South Rajasthan to provide them access to financial services such as micro loans, insurance, financial literacy programs, etc. It aims to enable financial inclusion of these communities so as to improve cash flow management and increase in incomes.
Over the last three weeks as I have been a part of the field operations and observed the organisation’s work closely, one question that kept on coming back to me was “Whom do we serve?” and “Who is our ideal client?”
At Shram Sarathi, the lead generation for a new loan client usually happens through word of mouth. People who are interested to take a loan, contact our old/existing clients who in turn get in touch with the officer to inform him/her about the demand. Alternatively, these people call the officer directly also. Every month, the form filling for fresh loans happens on pre-decided days when the loan officer meets the new applicants to assess the demand and initiate the process.
Apart from this, there were also times when we had visited the community for some other purpose and people would come up to us to enquire about the loan application process, tell us about the amount of money they need and the purpose for taking the loan. I had the opportunity to interact with the clients at a few of these form filling sessions. In these conversations, I found interesting insights about the structures within the community, their livelihoods, ideas and aspirations. As a result of this, I also came closer to understanding the core ethos of Shram Sarathi and why it does what it does.
Understanding the Prospective Clients
This geography, i.e. South Rajasthan sees particularly large numbers of migration either within the state or outside, for work. They are mainly employed as unskilled labourers at construction sites, helpers in hotels/ restaurants, repair workers, masons, security guards, etc. During the form filling phase, the field officer tries to understand the client better – his/her past and current employment status (working or retired), number of dependents, kind of migration (long distance, short distance or commuter migrant), existing loans and liabilities, proposed usage and budget for the funds being demanded, nature of work (daily wager, contractual employee, salaried or self-employed), proportion of income from migration, main beneficiary of the loan, assets owned, housing, education levels and repayment capacity. Based on the understanding of the client and the FIT with Shram Sarathi, the application moves further to the verification phase.
Determining The Right Fit
During my field visits, I discussed the cases of different clients with the field officers to understand the process of identifying the clients and reaching the right beneficiaries. I am sharing a few cases below:
Client is a middle aged man, in a family of 7 with 3 earning members out of which 2 long distance migrants who used to work at a Hotel in Gujarat have returned to the village.
Nature of work: Contractual and daily wagers
Purpose: To buy the buffalo which they have been rearing on behalf on the actual owner since the last 3-4 years
Demand: INR 20,000
Reason: The funds will be used for purchase of livestock which is an asset that will help in increasing the income of the household. If they were to buy a buffalo from the market at the current value, it would cost them anywhere from INR 35 – 40K. Because they have reared it for about 4 years to the point where it will now start earning them an income, it is effectively costing them almost half the market value.
Client is a young woman, family of 4 with 2 working members and 2 dependents; the male member is a commuter migrant i.e. he commutes to nearby cities and towns for masonry work whenever available. The female works at NREGA whenever work is available
Purpose: To buy a camel and use it for transportation of grass from the agricultural fields to the village on a per bundle rental basis
Nature of work: Daily wagers
Demand: INR 25,000
Reason: The funds will be used for purchase of livestock which is an asset that will help in creation of a new source of income for the household. In the current scenario, NREGA work is not available in their Panchayat and the male member is not getting work and wages as usual in the nearby towns.
Client is a young male member from a family of 4 with 3 working members out of which 2 are self-employed in construction materials supply business.
Nature of work: Self- employed
Purpose: To buy a tractor for existing construction materials supply business which has a turnover of INR 40-50K per month
Demand: INR 60,000
Reason: On hearing the client, initially I felt that this business model is sustainable and we can further support by helping in asset creation. However, when I discussed this case with the field officer, I was informed that since the applicant is already financially stable, generally more aware and owns significant assets already, he does not fit our client category well. I was also told that in a lot of the cases in the area, the comparatively better off people who manage to get loans from Microfinace Institutions (MFIs) at cheaper rates end up lending to the more vulnerable households in the same area at a higher interest rate.
Client is a middle aged female from a family of 6 of which 4 are working and 2 are dependent. Two male members are migrant workers who have returned home during the lockdown and the female members are running a door to door sales business.
Nature of work: Self- employed and daily wagers
Purpose: To buy stock of cosmetics and clothing materials for selling door to door in nearby villages
Demand: INR 30,000
Reason: The funds will be used for an entrepreneurial activity. Purchase of stock of goods in this case is crucial for the sustenance of the business. Additionally, this is also the only source of income for the family in the current situation where the migrants have returned and are not getting enough work.
Client is a middle aged man, family of 5 with 1 earning member who is a short distance migrant.
Nature of work: Contractual
Purpose: Khet samtalikaran (Leveling of land for making it tillable)
Demand: INR 40,000
Reason: This client’s land is on an unlevelled hilly terrain on which only a small leveled portion is currently being tilled. In order to increase yield, it is important to cut some portion out of the hill and level the land and get more area under cultivation. This usually costs between INR 60,000 – 1,50,000. It is unlikely for this client to get a formal loan without mortgaging his land. Moreover, the rate of interest from informal loan sources can be as high as 7-10 percent.
Client is a teacher working in a local private school, family of 3 with one working member
Nature of work: Salaried
Purpose: To buy electronics for household consumption
Demand: INR 30,000
Reason: The household is financially stable. It is most likely in a position to borrow from other sources such as a bank.
Client used to work as a manual labourer in a construction site, family consists of 6 members with two earning members and 4 dependents. Client’s wife works at NREGA whenever the work is available.
Purpose: To pay off old debts
Demand: INR 30,000
Nature of work: Daily wagers
Reason: After the lockdown, work is not easily available. The client has an existing debt from a local moneylender to the tune of INR 30,000 at an interest rate of 10%. Some portion of the client’s land and livestock is also held as mortgage by the moneylender. Gradually, work is coming back on track but due to the existing debt condition the client is in a highly stressful situation. By repaying the highly expensive existing debt, the client will be able to reclaim his assets and escape falling into a debt trap.
Discussing these cases helped me gain clarity about the context of our work. It was interesting to discover the intricacies of the social structures and power dynamics that existed within the community. This was a perspective through which I had not analysed these cases before. The conversations with the community and team members made me re-think what I had read or known about microfinance.
My first impression of the field was mixed. No matter how much we speak about visiting a community and observing it with a tabula rasa, we end up bucketing our experiences as something that we expected or did not expect. Some of the things that I saw/ observed did fall into the “What I expected to see” category and others didn’t. In the context of Shram Sarathi’s work and understanding the core ethos, I observed some key characteristics which made the organisation stand apart from other microfinance institutions.
Firstly, the center of our universe is the migrant worker and his needs. Shram Sarathi serves anyone who is interested to borrow for a productive purpose. This includes borrowing for setting up or running a micro enterprise. However, unlike most other MFIs, entrepreneurship related loans are not the only focus area. As you might have observed from the cases above, we give loans for purposes like buying of livestock to repayment of old debt to house repairs.
Secondly, we focus more on individual lending as opposed to group based lending. Shram Sarathi realises that the community is not a homogenous entity and households have varying demands at varying times.
Thirdly, Shram Sarathi also gives loans in cases where the primary borrower is a male member. On paper, it is not compulsory for the loan to be in the name of the woman from the household. That being said, during the counseling process special attention is paid to ensuring that the female member of the household (oftentimes the wife / mother of the borrower) is aware of the amount of money being borrowed, the purpose of borrowing, repayment schedule, etc. and also is in agreement with the decision of taking the loan.
In my own experience in the field, I saw that the wife of an intending client was against the decision of taking a loan due to existing debts. In this case, the field officer tried to counsel the man and as a result, the form was not filled. Surely, these things did not fall in the “what I had expected” category due to my limited understanding and interpretation of microfinance.
The immersion into the community before formally starting to work on my projects has not only made me more comfortable with the community but also equipped me to be better at what I am set out to do in the organisation. It also leads to the realisation that what may seem an attractive loan client because of his/her existing capacities and ability to repay may or may not actually lie in the segment where the organisation wants to create impact. In some rare cases it may also be counterproductive if we focus primarily on what appears to be safe and less risky.