Micro Finance Profile 2012 Auroville Village Action Group

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

INDEX

The Micro-finance programme....................................................................................................... 3 Target Area.................................................................................................................................... 4 The aim of the micro finance programme ...................................................................................... 4 Members per year (1995-2012)...................................................................................................... 5 Micro Finance Activity (As of 1st April 2012) .................................................................................. 5 Microfinance services .................................................................................................................... 6 Types of loans by source and purpose............................................................................................ 6 Group formation and day to day work ........................................................................................... 7 Micro finance and the UWC (Udhayam Womens Center) .............................................................. 9 Total savings 2011-2012.............................................................................................................. 10 Comparison: Amount and purpose of loans, years 2011-2012 ...................................................... 11

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

The Micro-finance programme Microfinance is the backbone of AVAGs development activities. The first SHG was formed in 1995, since then slowly but firmly we have been creating an extensive network of SHGs. In 2000 and in 2007, federations for women SHGs and men SHGs were formed for collective decision-making and they continue to give AVAG feedback and suggestions pertaining to the planning and implementation of the programs of AVAG. The federations and AVAG have developed a symbiotic relationship with guidance and advice freely exchanged in both directions. Despite the partnership, AVAG maintains formal oversight over the federations. Loans are offered for business development, agriculture, education, housing, consumption, family functions, and health, at an annual interest rate of 18 %, far lower than the average market rate in rural areas. So far finance has been facilitated from the following sources for lending: savings generated by SHGs, corpus funds of AVAG/Federation, Government Funds and Indian Grameen Bank and Pallavan Grameen Bank through SHG linkage. -The ratio between SHGs to AVAG field staff is 35/1, which allows effective management. AVAG collects the copies of all receipts and invoices and monitors each transaction. -Loan repayment rate is virtually 100 %. During the implementation of micro finance programmes over the past 15 years, only two people have defaulted.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

Target Area

The aim of the micro finance programme -To free the poor from the clutches of the money lenders -To inculcate the habit of saving among the villagers -To teach them the concept of self help -To give a sense of cooperation and mutual help among the women and men -To help the members of the SHG to get recognition from the family and the society at large -To enlarge livelihood possibilities of the SHG members -To build solidarity and a sense of belonging among the participants.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

Members per year (1995-2012)

Micro Finance Activity (As of 1st April 2012) -AVAG works with 3,708 women organised in 206 SHGs, and 788 men organised in 45 SHGs. -Rs. 258,69,805 of savings has been collected by SHGs. -Rs. 537,26,500 circulating among the groups as loans. To date all SHGs have repaid loans as per schedule through fixed installments. What is special in AVAG micro-funding programme? -Micro-funding programme is the backbone of the activities of integral rural development of AVAG. Capacity building is of prime importance, so constant training is always provided to the groups. -The Federations of SHG have a core position in the decision making process of AVAG, not only in the microfinance programme, also in the other activities of the organization, creating a strong bounding relation materialized, among other results, in the strong vocation of continuity of the SHG formed by AVAG. -To avoid individuals monopolizing the SHGs and to make sure that everyone takes up the responsibility, AVAG encourages the change of leaders on a regular basis.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

Empowering lending policies -Loan amounts are awarded gradually, growing in relation to the proven capability of individual members for repayment. Loans are offered for a wide variety of needs. By its experience AVAG learnt that purpose depending loans drives people to cheat and would weaken the trust and relationship between the SHGs and AVAG, and hence it encourages people to be open and truthful with the purpose. As long as the SHG supports and it is confident of the repayment capacity, a member can get loan easily. -Group members are encouraged to give priority to each members financing needs, rather than dividing the borrowed amount into equal shares. -Re-lending is not dependent on the completion of a previous loan, but rather is encouraged only when there is a genuine need. This system ensures group members will not compulsively re-apply for a loan immediately after the previous loan has ended. -To make sure that there is no misuse of funds, AVAG keeps track of all the financial transactions of the SHGs, which is a uniqueness of the organization. AVAG has also successfully mediated with the bankers on behalf of the SHGs to be flexible with the rules for its members. Since the banks recognize the important role played by AVAG, they listen to these fair demands. The Groups have a double aim, the micro-funding activities and the debate and action about human rights, community development and other issues Microfinance services -Loans -Savings -Life insurance Types of loans by source and purpose Internal Lending: Individual members can take up loans from savings of the group. Federation Loan: An initial grant of 6 lakhs was given by AVAG to the Federation in 2003, which along with the SHGs contribution of Rs.20000 each has grown over Rs. 8,00,000. Federation members are responsible for loan approval, which depends upon repayment history and cohesiveness of the applying SHG. AVAG Loan: AVAG issues loans when the Federation has reached loan capacity and lacks the sufficient funds to continue SHG lending. A SHG submits its application through AVAG, which is later processed by Federation members. AVAG sanctions the loan only after getting the approval of the Federation members.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

Government Lending: AVAG evaluates and recommends its SHGs access to Governmental schemes like the Revolving Fund1 Economic Assistance (E.A), Toilet Scheme, Housing Scheme2 etc. Direct Lending: SHGs are linked directly to the banks for loans. Groups can get loans from Rs. 2,00,000 up to Rs.5,00,000.

Group formation and day to day work -Each group can have 12-20 members. -The group has to choose its own leaders i.e. an animator and two representatives. -The positions must be renewed every 2 years, to give equal opportunity for all members to grow. -The group meets at least two times a month. The first meeting of the month is to deposit the savings, to pay back the loans and to decide upon the new loans. The second meeting is allotted to discuss about the issues, projects, participation in the seminars and meetings, report about the trainings and meetings etc. -Once in a year every group participates in a Cluster meeting with other groups of the same panchayat (local government), in this meeting the community development activities made during the last year (fixing the road, distribution of food in health centers...), the past discussions of community problems inside every SHG are shared with the rest of the groups, and an attempt is made to arrive to a collective action to solve the issues.

Eeach group can sign up for an amount of Rs. 60,000 out of which Rs. 10,000 is subsidy and Rs. 50,000 is loan to be repaid in monthly installments. 2 This scheme has a subsidy component of Rs. 1,25,000 sanctioned by the government to commence agricultural or business activities.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

-When a group is affiliated to AVAG, it is asked to join the federation by way of paying the annual subscription which is Rs.50 per member (Rs.25 for men). The group receives from the federation a set of registers to maintain the groups accounts. -Each SHG decides on a monthly savings amount (usually between Rs. 50-100 /month/member) which is deposited in the name of the club in the bank -With the introduction of AVAG, each SHG opens a bank account to deposit the monthly savings. To be member of a SHG, a person should: -Be aged from 18 to 55 years -Be a resident of that village -Not to be a member of any other SHG of any organisation. Decision making of the Federations of Self Help Groups The Federation functions as partners of AVAG to enable better management of the programs. They play an active role in shaping the annual plan of AVAG. AVAG believes that direct feedback from the participants facilitates a more organic, grass-roots approach to development. The Federation functions as a three tier body consisting of a general body, executive committee and the Governing board. The general body has one member each from all SHGs of AVAG and the members meet to select the executive members. At present there are 35 executive members and they are divided into five sub committees for loan approval, monitoring and evaluation, conflict resolution, public relations and community development. The different subcommittees are formed to give specific responsibilities to these women leaders and the members can choose to be part of any subcommittee based on their interest and skill so that they can excel in their preferred areas. Seven members are selected among themselves to be in the governing board.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

Micro finance and the UWC (Udhayam Womens Center) A major function of the Federations is to transfer micro finance loan administration from AVAG to locals. By assigning authority and decision making responsibility in their hands, beneficiaries are engaged as active participants employed in the successful outcome of the micro finance program. This accountability has significant implications both for technical loan management and personal empowerment. At the moment the Mens Federation doesnt have any corpus fund, and the MSHGs work mainly with the internal lendings of every group in addition to the links provided by AVAG with the commercial banks and the Governmental credit schemes. Apart from creating the guidelines for the effective functioning of the clubs and the credit and savings program, the Womens Federation is responsible for reviewing loan applications and gives its recommendations to AVAG for all external lending. They also act as the eyes and ears for AVAG in implementing all its activities. As stated above, it is the Federation members who are responsible for loan application review. While most of AVAGs staff live in the organizations target area and have extensive knowledge of conditions on the ground, the Federations have an even better check on the pulse of village life. By employing beneficiaries in the micro finance process, AVAG can be confident that financing is being used for pertinent village needs. AVAGs role is more advisory than controlling, although the organization does hold veto power over any decisions to avoid incidents of abuse and prevent corruption.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

Total savings 2011-2012 UWSHGs and MSHGs AVAG. Total Savings UWSHGs MSHGs Total Amount in Rs 226,32,805 32,37,000 258,69,805 Members 3,765 788 4,553 Loan sources Internal Lending Direct Lending (Bank) RF (Bank) AVAG Loan Udhayam Loan Total Amount in Rs. in % 318,39,300 54.9 200,64,000 40,45,500 13,03,000 7,70,000 580,21,800 34.6 7.0 2.2 1.3 100%

Voices

Bharani, Morattandi One year ago, Bharani, 30 years old, decided to organise a self help group in her community, Morattandi. She is the animator of the Magizhampoo group (20 members). She applied for AVAG loan, which allowed her to pay the school tuition fees of her two children. Bharani thinks that the loan has been very helpful as it enabled her children continue their studies.

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

10

Comparison: Amount and purpose of loans, years 2011-2012

As it is shown in table, in the year 2012, 24,10% of the total loans were used for housing purposes (in the year 2011 only 11,44% of the loans were used for this purpose). This change is associated with the cyclone of December 2011, which destroyed a lot of houses. The amount of loan repayment grew from 10,11% in the year 2011 to 23,90% in the year 2012 which is an indicator of the rising credit demand in the area. Women Federation: AMOUNT AND PURPOSE OF LOAN OF WSHGs 2011-2012
Grand Total

Type Education Function Medical Housing Loan Repayment Agricultura Business Others Total

Total 71,62,000 95,80,000

% 13,5 18,1

Rs.Upto 5000 3,57,500 2,13,500 1,83,500 3,47,000 3,49,000 73,000 78,000 1,70,450 17,71,950

Rs.5001Rs.10001- Rs.1500110000 15000 20000 9,17,500 6,09,500 18,62,500 7,35,000 8,43,000 26,67,500 3,20,500 10,30,700 9,53,850 4,61,500 1,43,000 1,04,000 46,66,050 1,99,500 3,86,000 8,16,500 31,43,000 11,24,500 33,15,000 3,06,000 14,81,000 2,48,000 6,72,000 1,72,800 2,63,000 43,19,800 137,90,000

Above 20000 34,15,000 51,21,000 4,94,500 72,14,000 77,11,000 25,12,500 16,32,000 3,25,700 284,25,700

15,84,000 3,0 125,51,200 23,7 134,53,350 25,4 48,34,000 9,1 27,73,000 5,2 10,35,950 2,0 529,73,500 100%

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

11

Men Federation: AMOUNT AND PURPOSE OF LOAN OF MSHGs 2011-2012

Grand Total

Type Housing Function Business Agricultura Education Loan Repayment Medical Others Total

Total 2,50,000 1,79,000 1,44,000 90,000 48,000 27,000 15,000 0 7,53,000

Rs.Upt Rs.5001Rs.1000 1-15000 % o 5000 10000 0 40,000 60,000 33,20 0 1,14,000 15,000 23,77 0 10,000 45,000 19,12 0 40,000 30,000 11,95 8,000 0 0 6,37 0 27,000 0 3,59 0 0 15,000 2,00 0 0 0 0 100% 8,000 2,31,000 1,65,000

Rs.1500 Above 1-20000 20000 1,20,000 30,000 20,000 30,000 60,000 29,000 20,000 0 40,000 0 0 0 0 0 0 0 2,60,000 89,000

www.villageaction.in villageactiongroup@gmail.com avagoffice@auroville.org

12