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THEME: Informal credit and savings groups can open the way to self-reliance and empowerment of women.
A study undertaken
in 2000 by the Asian Institute of Technology (AIT), under the auspices
of an IFAD technical assistance grant, reviewed the impact of informal
credit and savings groups in three villages in the District of Ukhrul
and in the State of Manipur, northeast India. The area there is very poor
and hilly, with inadequate infrastructure and services. The dominant tribe
is the Tangkhul, of the Naga group. Terrace and wetland farming are practised,
but most households rely on slash-and-burn cultivation, augmented by the
harvesting of edible forest plants. In the Tangkhul society, women put
in a 14–16 hour workday on agricultural tasks, domestic tasks and
weaving. Prior to the IFAD-supported project intervention, cash savings
were rare. Any small amount of cash generated tended to be spent quickly
on consumption needs.
The Fund helped to introduce informal credit and savings groups (called self-help groups or SHGs) as an alternative development strategy for directly reaching and involving area women. The project had determined that promoting formal credit was not likely to be effective. Major constraints were the lack of credit infrastructure and rigid societal barriers to providing access to women. The project introduced informal savings and credit groups by sending 15 members of the Tangkhul Shanao Long, an apex women’s organization of the community, to visit project areas in Karnataka and Madhya Pradesh, where such groups were operating. The visiting women studied group operation and learned from it. The concept spread quickly. By the time of the study, there were 69 groups operating in 22 villages. Sizes ranged between 15 and 23 members, with a total of 1 375 women members.
The informal credit and savings groups operated on the classic Rotating Savings and Credit Associations ( ROSCA) model. Women came together to pool their very small savings (about RS 10-20 bi-monthly). The accumulated group savings were lent to each member in turn. Given that the women were very poor, the savings constituted an initial hardship. But, over the longer term, the women found the sacrifice to be worthwhile. The four criteria that the groups used to determine who should get the loans first were:
- the amount of savings in hand;
- the degree of a member’s need;
- the nature of the activity for which the loan funds would be used; and
- the member’s repayment capacity.
The types of income-generating activities selected by the women were traditional activities in which the women had experience or know-how. The most popular ones were: poultry and pig-raising, growing of maize and potatoes, and weaving. Among the poorest women, poultry-raising was most popular because of its low cash and labour demands and its flexibility. When loans were taken out for weaving, some of the women found that the loan amount was too small to make the activity commercially viable.
Cooperative ventures were one of the interesting developments among the SHGs. These were created in a number of ways. For instance, one member would take out a loan to buy a pig, but give the pig to another to raise, with the understanding that the two women would share in the profit from the sale. In another case, some women got together in a type of collective farming effort, with two members pooling their credit to buy potato seeds, while a third contributed land. All three provided labour for land preparation and planting. There were other similar cooperative ventures among subgroups.
The women’s savings and credit groups were at too early a stage at the time of the study for the study to be able to assess impact on income, household food security or poverty. But other types of positive impacts were observed:
- A new attitude towards savings, with resulting changes in behaviour, including among men; A number of women reported support by husbands.
- A positive change in women’s fatalistic attitudes. The women began to make plans for the future and express interest in experimenting with new kinds of income-generating activities, such as the processing of fruit and vegetables.
- Reinforcement of women’s solidarity. The traditional cooperative spirit of the Tangkhul society has suffered with the entry of modern values and competition. Once again women began seeking common solutions to their common problems.
- An encouragement of self-reliance and entrepreneurial spirit. Self-employment came to be viewed as an alternative to government employment as the way out of poverty.
The experience with women’s informal savings and credit groups argues for their importance as a strategy for developing a savings mentality and self-reliant and sustainable development. They can also be an important precursor to establishing formal financial services because they will ensure that people have useful understanding and experience of finance.
Adapted from:
Nongbri, Tiplut. 2000. Empowering Women through Self-help Groups: A Case Study of Three Naga Villages, Manipur. Rome: IFAD.
