Emergency loans, improving distance communication for rapid response, and enhancing CPSL field staff capacity
A member of Durga SHG in Rakasia village was suffering severe and constant bleeding from haemorrhoids (piles) and wanting urgently to get to hospital for treatment. She asked for a loan of Rs 10,000 to pay for this but faced the problem that she had an overdue debt of Rs 1,200. For this reason the Coordinator of her SHG felt that she needed to take advice on her loan application from other CPSL staff members. However the situation was critical. Although other members of the group said that they would guarantee repayment this was not a solution: SHGs are required to endorse a loan application before their coordinator passes it on for payment, but CPSLs rules do not allow loan transactions to be with a SHG as a whole: they must be with individual members. The other members of the SHG tried between them to raise the money needed in cash, but found this impossible given the amount involved.
Fortunately on Sunday 23 August CPSLs CEO Sunil Choudhary was in the village and faced with the problem. The particular SHG member, now 60, has been with CPSL since its beginnings almost 20 years ago and has taken loans in most years (several of them to improve her house) but never more than Rs 4,000 at a time. Sunil straight away agreed to the loan she needed being made, she was taken to hospital immediately, and he reported that he had visited her the following day when she was on the way to recovery.
This experience highlights changes put in place during the aftermath of the covid-19 crisis to enable CPSL to respond quickly to SHG members who have needed urgent loans that are not met by the normal rules of borrowing and lending. Some of these have been resolved by intervention of CPSLs CEO, Sunil Choudhary, who has spent most days since the end of lockdown in the Field Office and in neighbouring villages. But it has also triggered development of a process aimed at making the organisations response to emergency loan requests (always important to Rojiroti SHG members) more transparent and speedy. The two key aims of this initiative are first to facilitate direct access to CPSLs Head Office and CEO, and second to develop a process by which Coordinators can consult with more experienced colleagues and senior CPSL staff, and strengthen their own confidence.
- · Sunil has recorded and loaded onto his phone 20,000 contact numbers for SHG members i.e. approximately the current number of active members / potential borrowers. Virtually all SHG members now have access to a phone, and almost a half to a smart-phone*.
(*These are estimates based on (a) conversations with SHG members showing that frequent phone calls between each other and to relatives are very widespread, and (b) a review calls coming in to CPSL Head Office which indicates many are now made from smart phones).
- · Sunils number is now widely available to SHG members, and any SHG member can call this number and identify themselves to enable CPSL to access to their record in its management information system and respond to the problem the caller is bringing. Its preferred thatcallers do not use their Coordinators phone to speak to Sunil (although this has been a common practice).
- · A WhatsApp group has been formed consisting of the 32 Coordinators plus the 6 staff members working from the Field Office in their support, as well as the CEO. This enables a Coordinator at any time to make a call to signal that there is a problem needing consultation, and makes it possible for a consultation to begin, if urgent.
- · A briefing all staff members on Zoom is underway, as a preliminary to setting up a programme of staff training using this channel of distance communication which has become widespread during the pandemic.
Life insurance for SHG members
CPSL negotiated in 2019 a life insurance policy for SHG members with national company operating nationally: Kotak Life. This followed several years of negotiation with other insurance companies (6 in all, most operating at national level) who could not see how providing life cover to poor village people paying very small premiums fitted their business model. Kotak Life however made a positive response, as part of a corporate intention to develop products which met the needs of poor people. CPSL saw life insurance as an important and cost-effective way to enhance the security of borrowers families: since it is clear that the benefits of SHG membership extend to all in members households, so sudden death of a key household member can have a severe impact on the livelihood of those surviving. (Although in the event of a member dying, all their existing Rojiroti debts are annulled.)
Terms of the Kotak policy are:
- The premium is a single payment of INR 200 up to a maximum of INR 1,000 (an applicant can choose the amount in steps of INR 200 (thus INR 200, 400, 600, up to 1,000).
- This secures a benefit of 25 times this amount (INR 5,000 up to 25,000) in the event of death within 5 years.
- If there is no claim on the policy the original premium is repaid plus a (reducing) age-related addition (55 percent for an 18 year old, 37.5 percent for a 40 year old).
When a policy expires, a new one can be taken out with the advantage that the size of the premium and of the benefit can be increased or reduced depending on the individual members circumstances.
Members take out these policies via their SHG / CPSL accounts, but CPSL does not act as a paid agent. In the early days it was reckoned that that setting up a policy (which involved filling in paper forms to make the application, then monitoring and advising on the response from Kotak) could take up to 3 days of CPSL staff time. But since July 2020 an Android app has been developed enables an application to be made by phone and to be confirmed within a few minutes, with a user i/d and password for the applicant. A neat way of certifying for records that a particular member has taken out a policy is for her photograph to be taken with her policy document (see the Facebook post on 29 August https://www.facebook.com/sunil.choudhary.7773631).
CPSL has been using the occasion of the covid19 pandemic to encourage SHG members to take out these policies: in June and July 221 policies were taken out (36 of them within 2 days of early July). The total of policies taken out now stands at 723 (so the recent surge has resulted in an increase of more than 50 percent). Almost half of those taking out policies finance this by using a loan to pay the premium.
CPSL has found that in some locations there is interest among people other than SHG members in the Kotak insurance product. CPSL staff are helping them to apply for and buy Kotak policies since it is now straightforward and not time-consuming to do this online. More than 200 policies have been completed so far in September: the August total was 272. But only about half of these have been taken by SHG members.
Information from Kotak - which is promoting this policy through a number of NGOs via which it is aiming to engage with poor people who are its target market is that by far the biggest concentration of sales is in the villages and blocks in which Rojiroti is operating.
The SHG rules require members to make weekly savings (of a very small amount Rs 1 or 2). This is an important discipline around which a newly formed group establishes its identity and an established group maintains it. The regular deposit is a requirement for a SHG member to qualify for a loan, although for an established group the weekly savings amount will be small in relation to the amounts many members will be transacting in loans and loan repayments
Recently CPSL staff identified a record-breaking saver. This is an elderly widow and SHG member in Vaanichak village of Dulkhinbazar Block who has a credit balance in her account of Rs 6,000. She has accumulated this over 15 months of work visiting houses of her clients in the village to trim finger- and toenails, and also to decorate feet and ankles with for special occasions such as weddings She takes payment of between Rs 10 and Rs 30 per client (depending on each particular treatment). Her purpose in accumulating this saving is, she says, to distribute it to her four sons so they will not have to meet her funeral costs.
The interest rate paid on savings in members accounts is 6% pa. Fewer than 1 percent of the 20,000 currently active SHG members have savings of as much of the amount mentioned here: this particular account stands out because its owner, Ms Tilki, has managed to make her savings out of a business which seems to offers rather small returns but which she has discovered meets a steady demand. Many SHG members show similar inventiveness indentifying income-generating opportunities, but mostly these involve taking loans (for example to buy a sewing machine) - which of course is an important purpose for which Rojiroti finance is used. Ms Tilkis tools and equipment are not so expensive as to need a loan.
Promotion of savings is an important item on the Rojiroti agenda in that a deposit of Rs 1,000 enables a SHG members to open a bank account an important step away from poverty and marginalisation. Members savings will also be important in CPSLs strategy to qualify and register as a non-banking finance corporation (NBFC) under Indian law.
An attempt to improve the savings rate of SHGs was made in 2012-13, by opening SHGs to people other than Rojirotis core target group (of Scheduled Caste members and those below poverty line). It was thought (realistically) that this would grow the SHG funds across the villages and blocks served by Rojiroti and help to meet the always growing demand for loans. A number of people with available funds did join SHGs and make deposits (typically of a few thousand rupees). However experience was that the distinction within groups between savers and borrowers diluted the effectiveness of the SHG as a close-knit support group for its members, and even compromised the role of the group coordinator. The move was stopped, and in 2014 about Rs 5 million (with interest) was refunded to savers who were not playing a full role in the SHG.
Independent travel by a SHG member
Rahel is a SHG member of Madhubin village in Dhulin Bazar Block. She is also a native of Assam who married her husband while he was working in Assam several years ago and came with him to Bihar on his return to his home. Her mother in law died a year and a half ago, and subsequently Rahel joined the same SHG that she had belonged to, bringing a (sizeable) deposit of Rs 100 to the group savings account.
Rahel applied for a loan of Rs 3,000 so she could visit her mother-in-laws brothers son (her cousin by marriage), who has recently had a major operation. This was a fairly large amount for a travel fund and so led to a check by CPSL senior management (requested by Rahel herself) of whether the SHG as a whole supported this loan being made.
A discussion with members of the SHG showed that they supported Rahels wish to keep in touch with her husbands family and to take some responsibility for them.
We feel that the acceptance of Rahel into the SHG (probably reinforced by the long-standing SHG members respect for her mother-in-law) is an encouraging example of cross-caste (and cross-ethnic) tolerance, and that Rahels own determination in making the journey to her mother-in-laws place (at her own cost using a loan) is an indication of a growing self confidence among Rojiroti women.
Share-rearing of livestock
Parmil Devi of Madhuban Village in Dhulinbazar Block has been rearing a buffalo on a share basis for over two years. She agreed with the owner (a fairly well-off farmer who owns several buffalo) to take a 6 month old calf from his herd and to raise it until it gave birth to a calf itself. At this point she would return the buffalo or pay to its owner half of its value: she would then become the outright owner. This is an arrangement which is common in the area in which Rojiroti works.
The buffalo had its first calf 2 months ago and is now in milk. Its value - agreed between Parmil and the owner at the beginning of her care of it - was Rs 42,000. So to buy the buffalo herself now, Parmil needed to find Rs 21,000. to pay to the owner. And Parmil keeps the calf which luckily is a female.
Parmil is a wage labourer in agriculture and her husband also works as a labourer, mainly in construction. Between them they were determined to own the buffalo and had saved Rs 8,000 towards the payment that would need to be made. They had also borrowed Rs 10,000 from family members free of interest. Parmil applied for a Rojiroti loan of Rs 5,000, most of which was to be used to bring her fund up to the Rs 21,000 she needed to pay the buffalos owner, and the rest to buy feed so that the buffalos milk yield could be kept high. On being asked by Rojiroti field staff whether this would be enough for the purpose she was intending, Pamil explained how she had managed to raise the main part of the money she needed, and that the loan was a top-up. She and her husband are now the owners of a dairy buffalo and calf: a valuable assets and a source of income.
This is an example of just how careful long-term planning and saving on their part, plus a fairly small Rojiroti loan, enabled one of our borrowers to achieve an important aim.
Share-rearing of livestock is a traditional practice which is quite widespread. It has the huge advantage of enabling a poor household establish potential ownership of (usually) a buffalo or cow by undertaking to raise it to maturity. For the original owner the advantage is that at the end of the share period they either have a mature animal to re-join their herd or they receive a substantial payment from the sharer who keeps the animal. For the share-rearer, her task involves care and some expenditure of money (well spread-out) but no financial obligation to the owner up to the point of deciding to take on full ownership herself. (If a share-reared animal dies the owner bears the loss, presumably because experience shows this to be very unusual). An important benefit to a poor household of having a cow or buffalo at their home for 2 years is that it provides dung for fuel and fertiliser.
This flexible arrangement is in striking contrast to most approaches to encourage livestock keeping by poor rural people. Some of these involve asset transfer of livestock (i.e. gifting - which has its own problems). But where a conventional microfinance programme promotes livestock keeping , the loan involved is likely to be 10 or 20 times more than the amount borrowed by Parmil. Also risks to the borrower may be loaded by introducing improved or even exotic stock (less hardy under local conditions) and by encouraging borrowers to take on ownership of more stock then they can easily feed and keep healthy. Whats happened here is that Parmils 2-year period of care for the young buffalo was risk free. It gave her the opportunity to assess whether she would be able to cope with the project of keeping a buffalo and its calf beyond the share period, and also time to raise a substantial amount of the money she needed, taking only a relatively small Rojiroti loan. (More commonly borrowers do take a larger loan for this purpose - closer to the Rs 20,000 -25,000 Parmil would need to have taken to meet the full cost of her project. But this is regarded as cost effective by both Rojioti and the borrowers.) As far as we know, no local microfinance provider other than Rojiroti will lend for this purpose, even though it is well-established in local culture and clearly is an efficient way for a poor household to grow its assets and income.