SRSP Microfinance Program
Village Banking : Poverty is a complex syndrome and thus needs to be addressed with not only a holistic approach but also with innovative interventions. Lack of opportunities for livelihood as well as their denial due to socio-cultural reasons is largely seen as a major causal factor for poverty especially in NWFP. Talking of the financial services, access of rural poor to affordable credit has also recently been recognized as a major contributory factor that encourages a rise in rural poverty.
It is believed that provisions of finical services address the issue of gender disparity more adequately. A rural woman in particular from ages now is being perceived in a more traditional role in the economy (invisible contribution i.e. underpaid and unpaid) and is assumed unable to be economically productive. On the contrary, women who have an access to financial services (especially microfinance) have shown remarkable improvements in their livelihood. Field learning shows that increase in woman income has benefited the household to a greater extend as oppose to a commensurate increase in a man’s income. Because of their high sense of responsibility, women have proven themselves credit worthy borrowers thus remained more close to the hearts of microfinance practitioners.
SRSP Microfinance Village Banking
Rural poor (especially women) have generally seen accessing financial services principally to enable themselves to cope with times (life cycle events, emergencies or responding to an economic opportunity) when they need exceptionally large-sums. There are two ways through which they raise these relatively large sums. First is ‘saving-up’ wherein a poor woman accumulates savings first and takes the resulting lump sum later. Second is called ‘saving-down’ wherein the same woman takes the lump sum first as an advance against future savings. In case of ‘saving-up’ no mark-up is payable however the transaction entails opportunity or inflationary cost for a poor woman. In case of ‘saving-down’ despite paying the mark-up borrowers term it affordable because the percentage may seems large but the absolute amount payable as mark-up is much smaller. In other words, access is more important as mark-up or the cost of borrowing is being considered generally affordable compared to the income stream.
The feature of microfinance in its earlier forms was that it was purely dealt by banking sector. Even after institutional finance came into being as banking sector emerged, the need for ‘micro-credit’, characteristically for the poorer sections in the society (both urban and rural) was unmet by the formal banking sector. The nature of the formal banking sector, with its emphasis on ‘collateral based lending’, could not cater to the credit needs of the smaller borrowers, especially women who are typically resource poor and possess negligible assets to offer as collateral. Hence, for women, their friends and relatives remain the only source of credit, which has its ifs-and-buts. Resultantly, access to resources by women has remained a crucial bearer in attaining economic empowerment.
Village Bank |
Location |
No. of member COs |
Recipients (Target)* |
Nawan Sher |
Abbottabad |
11 |
300 Women |
Chamkani |
Peshawar |
12 |
300 Women |
Sawaira |
Kohat |
10 |
300 Women |
*over a period of 36 months |
|||
Each Village Bank has a general body, which has representation of a lead member (president or secretary) from each participating community organization. All interested community organizations gain membership to a VB against a one-time membership fee of Rs. 500/- only. The general body elects management committee to VB, which is comprised of a chair, vice chair and three members’ executive committee (for micro-credit approval). In addition to that each of the Village Bank has two paid staff members; one Social Organizer/Animator and the second is Treasurer. Election for Management Committee is conducted in the presence of SRSP staff. Each participating community organization is allotted voting power on the basis of how vibrant a community organization is in terms of very basis of community management. The indicators include frequency of meetings, active participation of members in these meetings, regularity in savings, state of record keeping, loan repayment behavior of the group and competency of the office bearers.
Believing in the fact that communities has the tremendous potential to help themselves, SRSP role in the whole process is of a supporting arm and NOT of a service delivery organization. Technical support is being extended to the VB management in the efficient running of Village Banking operations. Capacity of Village Bank Management is built in two ways: one is through classroom training and the second is on job coaching. Designated staff from SRSP closely interacts with these VBs by attending their general body meetings, their management committee get-together and the manager conferences that are held on quarterly basis. This whole process of coaching though time consuming but is proven extremely effective for the management of VB because this way they learn as they do. The technical assistance plan has been divided into three parts: By the end of first year, SRSP aims to have the management of VB understands and subsequently practices the basics of microfinance operations. Second year is dedicated to realize to the VB members the importance of savings and its internal mobilization in the form of extending credit to the members through Village Banks for preventing flight of capital and more profitable utilization of local funds. Having a grip on the technology (microfinance delivery) and with the availability of adequate funds for credit (both from external and internal account), Village Banks with the start of their third year of operations will aim to attain a decent level of operational self-sufficiency. The accumulated spread by the end of third year with each Village Bank will act like a credit risk mitigation fund, which will give them the confidence to expand their operations with a cushion to fall back on in case of any unforeseen risk.
The formation of VBs encourages social development and empowerment of the women-led grass root community organizations. This is ensured through democratically elected management committees, considerable self-management of groups even from the first loan cycle, a policy of decentralized problem-solving, a group guarantee mechanism and self managed internal funds. It is firmly believed that these features foster women’ solidarity, build their confidence and facilitate ownership of the locally-managed system over long term. These VBs has the tremendous potential to become genuine women’s organizations that can extend themselves beyond the simple dispersion and collection of loans to address any number of community concerns, which may also include acquisition of new skills and behavioral change in health, nutrition, literacy, gender and environmental conservations.
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