Tackling Poverty

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