"Rojiroti consists of members from extremely poor backgrounds and from the lowest castes. It helps the poorest of the poor"
Interview with Sudha Devi, Rojiroti Staff Member, 22nd October 2017
Below we explain how Rojiroti has consistently met its objective to reach and include women from the most marginalised communities and to design an approach which meets their needs.
The savings and loan group is a familiar concept in microfinance, but Rojiroti groups are unusual.
Group members can join through depositing very small amounts as weekly savings. Sometimes deposits have been as little as Rs 0.50 per member (agreed by the group as a whole). We believe that no other microfinance organisation would accept members depositing such small amounts but to us it is essential that no aspiring member should be excluded.
Very small loans can also be made (for example, Rs 50). This can be of critical importance for poor people whose most urgent need may be for food, for other essentials such as fuel, or for medical treatment.
"Rojiroti gives loans according to our requirements, so small loans of Rs 500 [£5] are also available. The loan amount and repayment instalment are both decided by the borrower rather than the organisation."
Interview with Savitri Devi, Rojiroti Staff Member, 21st October 2017
These small loans can be more relevant to their needs than ‘income-generating’ or ‘productive’ loans typically promoted by microfinance providers. These loans, of several thousand Rupees, are well beyond the risk-horizon of someone dependent on day labour. Loans of this type are taken by Rojiroti members (for buying a sewing machine, or a buffalo, or for setting up a small workshop) but most commonly by established rather than early-stage borrowers.
Rojiroti loans can be taken for any purpose. This is a highly important and unusual feature of the model, which distinguishes Rojiroti from most microfinance lenders.
"The purpose of loans is limited in other groups, but in Rojiroti, we can borrow for all purposes, such as illness, to pay the tuition or school fees of our children, etc."
Focus Group with Rojiroti Members, 31st October 2017.
Freedom to the borrower still requires them to state the purpose for which they need the loan when making an application. This is recorded by the group coordinator, but it is not within the power of the coordinator to approve or reject the loan. It will be paid provided that the members of the borrower’s group support the application.
This requirement for group support enables Rojiroti to manage requests for a huge range of loan purposes. A borrower’s group members know the borrower, understand the purpose for which the loan is being requested, can judge whether the outcome is likely to be successful, and know the borrower’s likely ability to repay.
It is important to borrowers whose livelihoods are precarious that applications for loans are processed quickly. A simple example is that money to be used for buying subsidised food and other necessities from a Government PDS store needs to be available to be used during the store’s limited opening times. Rojiroti therefore processes small loans (below Rs 2000) ver quickly. This is becoming easier to achieve as digital technology is increasingly used.
"Rojiroti helps its members during crises and arranges for the loan at that place, be it at the hospital or anywhere... other organisations refuse bluntly."
Interview with Rinku Devi, Rojiroti Staff Member, 6th November 2017
Loans for medical treatment are often real emergencies, and when this is the case loans can be brought into action very quickly. Technology is increasingly streamlining this process, since money can be paid directly to a hospital or clinic by bank transfer.
Rojiroti's flexible repayment mechanisms also set it apart from other microfinance providers. Often strict repayment deadlines make it difficult for poor women to invest and have time to see the benefit of their loan. Additionally, it acknowledges that many members have precarious livelihoods where income shocks may affect their ability to repay loans to a set deadline.
"We can repay Rojiroti easily as per the availability of money at home. There is no requirement in Rojiroti to pay a fixed amount at a fixed time, which allows us to repay without having any stress."
Focus Group with Rojiroti Members, 10th November 2017
The size of an average Rojiroti loan differs hugely from that of a national (India-wide) microfinance loan.
Loans taken by Rojiroti members increase steadily as their membership becomes established and their livelihood improves.
Rojiroti members make use of the scope which Rojiroti gives to use loans for a wide range of purposes. Ten categories are used by CPSL as a way of enabling them to take an overview of loan purposes and of changes in demand for different types of loan. This graph shows the typical size of loans in each category.
This shows the amounts loaned for each purpose by value. The notes below explain how loans of each of these types may be used.
To mark life events with a ceremony and social gathering involving hospitality is common practice in Rojiroti's communities (as it is worldwide). Not to invite neighbours to participate in such events is regarded as such a social dereliction that the cost of entertaining guests must somehow be borne.
To meet such costs is regarded as as a highly worthwhile purpose for a Rojiroti loan, when the alternatives are to take a high interest informal and risk long term indebtedness or - possibly even worse - to sell assets: livestock, equipment, or even land.
Launching a business is widely assumed to be the main purpose of microfinance loans. Rojiroti’s approach is different in that loans to enable small entrepreneurs to take advantage of income-generating opportunities use less than 20 percent of the budget. However, these loans are highly important in that they open secondary economic activity (i.e. other than farming) to a sizeable number of our members.
Agriculture provides livelihood for 90 percent of the households of Rojiroti members. Daily-paid labour accounts for much of this, but Rojiroti loans enable access to land members can farm themselves, via share-cropping or tenancy agreements (and sometimes land purchase); loans also provide working capital for seed and fertiliser. Some households find small-scale livestock raising an important source of income, and use loans to buy a cow or buffalo.
Access to medical treatment both in emergency and for chronic illness has a major impact on quality of life for Rojiroti members, and can be life-saving as well as life-changing. Some 70 percent of medical loans taken are for assisted childbirth, providing huge benefit to women and their families in reducing risks to mother and child. Loans requiring an emergency response can now be made very speedily by electronic payment direct to hospital or clinic.
In some villages, improved housing is a highly visible sign of Rojiroti’s activity. Many houses of traditional mud and thatch have either been replaced with buildings of brick or cement. Others have been improved by addition of framed windows and weatherproof (zinc or asbestos) roofs. Both benefit well-being by providing better ventilation, light and shelter. Rojiroti lending for this particular purpose is important in that housing improvement qualifies for a government subsidy which depends on work being complete.
Informal moneylenders provide loans that are available for very small amounts, for any purpose, and at very short notice (often on the spot). In this sense they provide an even better service to their borrowers than does Rojiroti. but in contrast to Rojiroti, moneylenders laons carry an interest rate of 60-120 percent (compared with Rojiroti’s 18 percent). Persistent debt to moneylenders can readily become part of a poverty trap and Rojiroti loans taken to clear informal debt offer liberation from this.
Children living in very poor households are often unable to attend school because of the cost of uniform, exercise books or pens and pencils. Some Rojiroti loans are used to meet these costs, but a larger proportion of the funds lent in the 'education' category of are used for private tuition of children who are attending government schools (which have notoriously low standards, particularly in rural Bihar). This represents a recognition by many parents that education can form an early stage of a route out of poverty.
Food and Clothing
Rojiroti aims to enable households to move from severe poverty to a situation in which access to basic needs is no longer at risk. But loans to meet such needs are still important. For borrowers facing a particular crisis a Rojiroti loan can help them avoid making matters worse by taking a high interest loans from a moneylender loan. And for some (those holding a card certifying they are below the poverty line) small loans make it possible to buy essential food and fuel at subsidised prices from Government PDS (Public Distribution System) stores, which accept only cash in payment.
CPSL identified life insurance as an important and cost-effective way to enhance the security of members’ families, and has negotiated a low-cost, short term policy with national provider Kotak Life, with a returnable premium. Some access the policy by taking a loan to pay the initial premium (of Rs 200-1000 depending on the level of cover chosen).
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